NEWPORT NEWS, Va., February 2, 2001 – Newport News Shipbuilding (NYSE: NNS) today reported net earnings of $24 million, or $0.74 per diluted share, for the fourth quarter of 2000. Earnings before interest and taxes (EBIT) for the quarter were $55 million.

For the full year, diluted EPS was $2.77, increasing 20 percent over the prior year’s recurring EPS of $2.31. Full year EBIT was $206 million, up from $193 million in 1999.

"2000 was an exceptional year," said Chairman and Chief Executive Officer William P. Fricks. "We exceeded our top line growth objectives, achieved targeted operating margins in our major programs, and delivered improved EPS performance through earnings gains as well as our successful share repurchase program. Significantly, these positive results were reflected in our free cash flow, underscoring the strength of our financials and quality of our earnings."

Newport News posted revenues of $578 million in the quarter, up 7.4 percent from $538 million in the prior year’s quarter. The revenue growth was primarily driven by the Construction segment, which benefited from a ramp-up in activity on the Virginia-class submarine program and advance work on CVN 77. The operating margin for the quarter was impacted by the increased percentage of this early-stage construction that is initially booked at lower margins. EBIT for the quarter totaled $55 million, consistent with last year’s fourth quarter.

For the year, revenues grew to $2.07 billion. This 11 percent increase over the $1.86 billion reported in the prior year surpasses the company’s revenue growth goal of 3 to 5 percent annually. EBIT was $206 million in 2000, up from $193 million in the prior year. The higher EBIT was directly attributable to the increased volume reported for the year.

Newport News generated $52 million of free cash flow during the quarter, bringing full year free cash flow to $163 million. The cash flow benefited from continued working capital and cash management initiatives implemented during the year. In addition, the deferral of a tax payment scheduled in the fourth quarter added about $20 million to cash flow. This cash performance allowed the company to repurchase nearly three million shares of its stock during the year for approximately $100 million, while also reducing net debt by about $28 million.

Throughout 2000, Newport News experienced robust activity across all business segments. In November, a newly designed island house was lifted atop the flight deck of the aircraft carrier Ronald Reagan. Reagan, the ninth Nimitz-class carrier, is on track to be christened in March 2001 and is scheduled for delivery in early 2003. In addition, the company made solid progress in the Virginia-class submarine construction program, including the initial completion and transfer of modules between Newport News and its teaming partner.

Fleet Services continued to benefit from aircraft carrier refueling activity as well as naval and commercial ship repair work. Nimitz, the first aircraft carrier in the class to undergo its mid-life refueling and maintenance period, is in the final testing stage and is on track for re-delivery to the Navy in mid-2001. At the same time, the company has been performing planning work on the next carrier refueling, Dwight D. Eisenhower, in preparation for its arrival in the second quarter of 2001. Other notable ship repair activity included the successful overhaul on the Ticonderoga-class guided missile cruiser, Gettysburg.

During the year, the company’s Engineering segment supported existing programs and at the same time was active designing future classes of ships for the Navy. Most significantly, design work was performed on the propulsion plant for the next generation of aircraft carriers under a two-year $161 million research and development contract awarded to the company in October.

Subsequent to the end of the year, Newport News was awarded a $3.8 billion contract for the construction of the next aircraft carrier, CVN 77. CVN 77 will serve as the transition ship to the next class of carriers and is scheduled for delivery in 2008. Newport News will assume an expanded construction role on CVN 77 as the company will act as the systems integrator for the warfare system, a task previously performed by the Navy.

"With the addition of this significant award to our year-end backlog we have about $7 billion of work under contract," said Fricks. "This includes a healthy mix of both mature and early-stage programs that will provide a visible and predictable revenue stream for the next 5 to7 years. And we expect to add another significant contract to the backlog in mid-2001 with the signing of the Eisenhower refueling contract."

For 2001, Newport News expects full year revenues to approximate levels reported in 2000, with first quarter revenues slightly impacted by the Virginia-class volume reported in the fourth quarter of 2000. Importantly, operating margins for the full year and first quarter of 2001 should return to double digits. The company estimates 2001 EPS will increase 10 to 12 percent over 2000, with free cash generation in the $110 million range after the $20 million tax payment deferred from the fourth quarter of 2000. "These estimates reaffirm our expectations for a superb year in 2001," said Fricks. "Moreover, the Board’s recent approval of another $100 million share repurchase authorization reflects confidence in the company’s ability to generate healthy cash in the future, and to effectively re-deploy that cash."

Newport News Shipbuilding designs and constructs nuclear powered aircraft carriers and submarines for the U.S. Navy and provides life-cycle maintenance services for ships in the Navy fleet. The company employs 17,000 people and has annual revenues of approximately $2 billion.