NEWPORT
NEWS SHIPBUILDING EPS UP 16 PERCENT
- Quarterly
revenues increased to $493 million, advancing 9 percent
from the comparable period in 1999.
- Diluted earnings
per share (EPS) of $.67 for the third quarter grew
16 percent over EPS of $.58 from the prior year’s
quarter.
- Free cash
flow of $34 million for the third quarter brought
year-to-date cash flow to $111 million.
- Annual EPS
and cash flow estimates being increased as a result
of year-to-date performance.
NEWPORT
NEWS, Va., October 19, 2000 – Newport News Shipbuilding
(NYSE: NNS) today reported net earnings of $21 million,
or $0.67 per diluted share, for the third quarter of
2000. EBIT for the quarter was $50 million, up from
$47 million in last year’s third quarter.
"We’re
pleased to report another strong quarter," commented
Chairman and Chief Executive Officer William P. Fricks.
"Revenues, EBIT and EPS all showed impressive quarter-over-quarter
gains for the period. Moreover, our cash generation
continues to be outstanding, as cash flows exceeded
our earlier estimates."
Third
Quarter Results
Newport
News posted third quarter revenues of $493 million versus
$ million in the same period in 1999. The revenue growth
was driven by the Construction and Engineering segments.
Construction revenues increased by $72 million to $222
million, led by increased activity on the Virginia-class
submarine program and higher volume on the aircraft
carrier Ronald Reagan. Engineering posted
revenues of $80 million, up 11 percent from last year’s
third quarter, benefiting from advanced design work
for the next class of aircraft carriers. Fleet Services’
revenues were $188 million for the quarter, down from
$228 million in the prior year. This segment’s revenues
reflect a planned shift of resources as the carrier
Nimitz refueling and overhaul nears completion.
Partially offsetting the reduced volume on Nimitz
was advanced planning activity for the refueling and
overhaul of the carrier USS Dwight D. Eisenhower.
Eisenhower is due to arrive at Newport News for
this three-year project in the second quarter of 2001.
EBIT
in the quarter rose to $50 million from $47 million
in the third quarter of 1999 as a result of the strong
volume in the Construction segment. In addition, the
company reached agreement on a simplified overhead allocation
system during the quarter. The agreement results in
no overall funding increase to the Navy, has no impact
on the company’s overall profit or cash projections,
but does result in timing differences in the recognition
of profits on the company’s programs. The reallocation
of costs associated with this agreement, together with
the company’s ongoing assessment of program opportunities
and risks, resulted in increased operating earnings
in the Fleet Services segment of $9 million with a corresponding
$6 million decrease in the Construction segment. The
operating margins reported by segment for the quarter
are consistent with the estimated margins to contract
completion for current programs.
Free
cash flow for the quarter of $34 million brought year-to-date
cash flow to $111 million. The Company repurchased over
330 thousand shares of its stock during the quarter,
bringing year-to-date repurchases to over 2.4 million
shares or roughly 8 percent of the outstanding shares.
2000
Estimates Being Increased
Newport
News is increasing its full year outlook to reflect
solid volume gains across core platforms and positive
benefits from continued cash flow initiatives. For 2000,
the company now expects revenues to be in the range
of $2 billion while EPS should improve to about $2.70.
Likewise, the free cash flow estimate is being raised
to about $120 million for the year reflecting the strong
year-to-date performance.
"In
addition to 2000, our long-term outlook is promising
as well," said Fricks. "We are reaffirming
our previously stated goals of organic top line growth
of 3-5 percent and annual EPS growth of 12 percent.
Achievement of these earnings goals will allow us to
deliver free cash flow in the range of $120 million
annually."
Third
Quarter Highlights
In
July, sections of Cutthroat, the quarter-scale
version of the Virginia-class submarine, were
shipped to the research facility in Idaho to undergo
final assembly and testing. This Newport News designed
vessel will be the largest autonomous unmanned submarine
in the world and will be used to develop and test new
submarine technologies. The vehicle is on track for
launch in the fourth quarter.
The fiscal year
2001 Defense Appropriations Bill was signed into law
during the quarter and contains over $7 billion in funding
for Newport News’ programs. The bill fully funds CVN
77, the next aircraft carrier, and contains advanced
procurement for the follow on carrier. Additionally,
advanced procurement is provided for the refueling and
overhaul of Eisenhower. And the Virginia-class
program received strong support as well with full funding
for Hawaii and advanced procurement on the fourth
and fifth submarines in the class. The bill also includes
substantial research and development for aircraft carrier
and submarine programs.
"We’re very
pleased with the support our programs are receiving
in both the Navy and Congress," said Fricks. "Once
under contract, these programs will more than double
our current backlog. Furthermore, the substantial research
and development funding allocated to our programs will
ensure that we continue to play a leading role in the
design and development of aircraft carriers and submarines."
Subsequent
to the quarter’s end, Newport News announced the appointment
of Charles (Chuck) S. Ream to the post of senior vice
president and chief financial officer. Ream is an experienced
defense executive and has most recently held senior
positions in both Strategy and Finance at Raytheon Company.
*
* * * * * * *
Newport
News Shipbuilding designs and constructs nuclear powered
aircraft carriers and submarines for the U.S. Navy and
provides lifecycle services for ships in the Navy fleet.
The Company employs about 17,000 people, and has revenues
of approximately $2.0 billion.
CAUTIONARY
STATEMENT FOR PURPOSES OF "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This
news release contains forward-looking statements concerning,
among other things, the Company’s prospects, expectations
and business objectives and strategies. In this release,
these forward-looking statements are identified by terms
and phrases such as, but not limited to, "outlook,"
"estimates," "expects," "future,"
"goal," "anticipation," "will
ensure," "will be," "once under
contract," and "scheduled." Readers are
cautioned that these statements are based on assumptions
that are subject to risks and uncertainties. No assurance
can be given that the Company’s actual results will
not differ materially from the results discussed in
these statements. Factors that might cause such a difference
include, but that are not limited to, those discussed
in the Company’s 1999 Annual Report to Stockholders
and in Item 1 of the Company’s most recently filed Form
10-K (under the caption "Government Contracting,
Claims and Investigations") and in Note 13 ("Commitments
and Contingencies - Government Contracting and – Significant
Estimates") and Note 3("Commitments and Contingencies
– Government Contracting") to the Consolidated
Financial Statements of the Company contained in its
most recently filed Forms 10-K and 10-Q, respectively.
(financial
information attached)
* Nonrecurring items include transaction break-up fees
and commercial settlements which contributed $25 million
in EBIT and $.40 per share in EPS in the second quarter
of 1999.
