SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
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|X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12385
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
NEWPORT NEWS SHIPBUILDING
Savings (401(k)) Plan for Union Eligible Employees
4101 Washington Avenue
Newport News, Virginia 23607
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Newport News Shipbuilding Inc.
4101 Washington Avenue
Newport News, Virginia 23607
<PAGE>
Newport News Shipbuilding Savings (401(k)) Plan
For Union Eligible Employees
Financial Statements
As of December 31, 1997 and 1996
Together With Report of Independent Public Accountants
<PAGE>
Report of Independent Public Accountants
To Newport News Shipbuilding Inc.:
We have audited the accompanying statements of net assets available for benefits
of the Newport News Shipbuilding Savings (401(k)) Plan for Union Eligible
Employees (the "Plan") as of December 31, 1997 and 1996, and the related
statement of changes in net assets available for benefits for the year ended
December 31, 1997. These financial statements and the supplemental schedules
referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Newport News
Shipbuilding Savings (401(k)) Plan for Union Eligible Employees as of December
31, 1997 and 1996, and the changes in net assets available for benefits for the
year ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and loans or fixed income obligations as of December 31,
1997, and schedule of reportable transactions for the year ended December 31,
1997, are presented for purposes of additional analysis and are not a required
part of the basic financial statements but are supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedules have been subjected to the auditing procedures applied in
our audits of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
Washington, D.C.
June 5, 1998
<PAGE>
Newport News Shipbuilding Savings (401(k)) Plan
For Union Eligible Employees
As of December 31, 1997 and 1996
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Statements of Net Assets Available for Benefits
As of December 31, 1997 and 1996 1
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 1997 2
Notes to Financial Statements
As of December 31, 1997 and 1996 and for the Year Ended December 31, 1997 3
Item 27(a) - Schedule of Assets Held for Investment Purposes
As of December 31, 1997 8
Item 27(b) - Schedule of Loans or Fixed Income Obligations
As of December 31, 1997 9
Item 27(d) - Schedule of Reportable Transactions
For the Year Ended December 31, 1997 10
Schedules Omitted Because There Were No Such Items For the Year Ended December
31, 1997:
Item 27(c) - Schedule of Leases in Default or Classified as Uncollectible
Item 27(e) - Schedule of Nonexempt Transactions
</TABLE>
<PAGE>
Newport News Shipbuilding Savings (401(k)) Plan
For Union Eligible Employees
Statements of Net Assets Available for Benefits
As of December 31, 1997 and 1996
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
----------- ----------
<S> <C>
Assets:
Cash $ 513 $ -
Investments, at fair market value:
Signet Investment Money Market Account 3,611,964 2,932,631
Shares of Registered Investment Companies-
Fidelity Spartan U.S. Equity Index Portfolio 7,278,828 4,367,570
Fidelity Spartan U.S. Bond Index Portfolio 1,583,900 1,267,086
Common stock-
Tenneco Inc. Common Stock 601,269 770,780
Newport News Shipbuilding Inc. Common Stock 500,034 80,284
El Paso Natural Gas Company Common Stock 94,563 50,775
Participant Loans 553,723 390,908
----------- ----------
Total investments 14,224,281 9,860,034
----------- ----------
Receivables:
Participants' contributions 235,320 99,844
Dividends receivable 9,681 7,337
Interest receivable 26,208 30,206
----------- ----------
Total assets 14,496,003 9,997,421
Liabilities:
Management fees payable 3,985 1,716
----------- ----------
Net assets available for benefits $14,492,018 $9,995,705
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Newport News Shipbuilding Savings (401(k)) Plan
For Union Eligible Employees
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 1997
Additions:
Participants' contributions $ 2,904,982
Net appreciation in fair value of investments 1,572,394
Dividends 272,878
Interest 207,425
------------
Total additions 4,957,679
------------
Deductions:
Benefits paid to participants 453,570
Other payments 7,796
------------
Total deductions 461,366
------------
Net additions 4,496,313
Net assets available for benefits, December 31, 1996 9,995,705
-----------
Net assets available for benefits, December 31, 1997 $14,492,018
===========
The accompanying notes are an integral part of this financial statement.
<PAGE>
Newport News Shipbuilding Savings (401(k)) Plan
For Union Eligible Employees
Notes to Financial Statements
As of December 31, 1997 and 1996 and for the
Year Ended December 31, 1997
1. Description of the Plan:
General
The Newport News Shipbuilding Savings (401(k)) Plan for Union Eligible Employees
(the "Plan"), was adopted on July 1, 1992, by Newport News Shipbuilding Inc.
(the "Company" or "NNS"). The Plan is intended to constitute a defined
contribution 401(k) plan that provides for tax-deferred savings for
participants. The Company and Signet Trust Company (the "Trustee") have executed
the Newport News Shipbuilding Savings 401(k) Plan Trust Agreement, which
provides for the investment and reinvestment of the assets of the Plan. The Plan
is administered by the Company's Benefits Committee (the "Committee"). The
members of the Committee are appointed by the Company's Board of Directors (the
"Board").
Eligibility and Contributions
All union employees with at least 90 days of continuous service are eligible to
participate in the Plan. Participants may elect to voluntarily contribute a
percentage of their annual before-tax compensation, not to exceed IRS-imposed
limitations, through equal pay period deductions. Contributions can range from 1
percent to 15 percent of annual compensation.
Participant Accounts
Each participant's account is credited with the participant's contribution and
an allocation of the Plan's earnings or losses. Allocations are based on the
participant's account balance, as defined in the Plan document. Participants are
immediately vested in their accounts.
Payment of Benefits
Upon termination of employment, including layoff, distributions to participants
are generally made via single lump sum payments. Participants whose account
balances exceed $3,500 (or have ever exceeded this amount at the time of a
previous distribution) have the right to defer the distribution of their account
balances until they reach the age of 62.
Investment Options
Upon enrollment in the Plan, participants may direct their contributions in 10
percent increments in any of the four investment options that are selected by
the Committee. The Committee has currently selected the following options:
<PAGE>
Signet Investment Money Market Account - A money market fund insured by the
Federal Deposit Insurance Corporation up to $100,000 and pays interest at a
variable rate.
Fidelity Spartan U.S. Equity Index Portfolio - A diverse common stock fund
that attempts to duplicate the Standard and Poor's Index of 500 common
stocks.
Fidelity Spartan U.S. Bond Index Portfolio - A diverse portfolio of
mortgage-backed obligations and corporate debt issues. The fund attempts to
duplicate an aggregate bond index.
Newport News Shipbuilding Inc. Common Stock Fund - Contributions are
invested in the common stock of the Company.
Participants may change their investment options on a daily basis.
The Plan holds investments in the Tenneco Inc. Common Stock Fund and El Paso
Natural Gas Company Common Stock Fund, as a result of a stock split that
occurred on the date the Company was spun-off from its former parent, Tenneco
Inc. Investments in these stocks may be held or sold and reinvested by
participants. However, participants cannot purchase additional shares of
Tenneco Inc., and El Paso Natural Gas Company Common Stock Funds.
Investments in the Tenneco Inc. Common Stock Fund, Newport News Shipbuilding
Inc. Common Stock Fund, and El Paso Natural Gas Company Common Stock Fund
are assigned units of participation. The unit value is determined daily
upon the fair market value of the underlying net assets. The total units
assigned to participants and the unit values at December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
Units Unit Value
------------------------- ---------------------------
1997 1997
------------------------- ---------------------------
<S> <C>
Tenneco Inc. Common Stock Fund 79,658 $ 7.74
Newport News Shipbuilding Inc. Common 53,784 $10.22
Stock Fund
El Paso Natural Gas Company Common Stock 8,587 $11.20
Fund
</TABLE>
Loans to Participants:
A participant may borrow up to 50 percent of his or her account balance with a
minimum loan amount of $500. Loans are repayable through payroll deductions for
a period no longer than 4 1/2 years. Interest on loans to participants is
charged at a rate of prime (rate of interest charged by commercial banks on
loans to preferred customers) plus 1 percent. The interest rates at December 31,
1997 and 1996 were 9.5 percent and 9.3 percent, respectively.
2. Significant Accounting Policies:
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of
accounting.
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions in
determining the reported amounts of the Company's assets, liabilities, revenue,
and expenses. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
All investments are recorded at fair market value based on quoted market prices.
Purchases and sales transactions are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
Payment of Benefits
Benefit payments are recorded when paid.
3. Investments:
The fair market value of individual investments that represent five percent of
the Plan's net assets as of December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
---------- ----------
<S> <C>
Signet Investment Money Market Account $3,611,964 $2,932,631
Fidelity Spartan U.S. Equity Index Portfolio 7,278,828 4,367,570
Fidelity Spartan U.S. Bond Index Portfolio 1,583,900 1,267,086
Tenneco Inc. Common Stock -- 770,780
</TABLE>
4. Tax Status:
The Plan obtained its most recent determination letter on March 6, 1996, in
which the Internal Revenue Service stated that the Plan, as then designated, was
in compliance with the applicable requirements of the Internal Revenue Code. The
Plan's administrator and the Plan's legal counsel believe that the Plan is
currently designed and being operated in compliance with requirements of the
Internal Revenue Code. Therefore, no provision for income taxes has been
included in the Plan's financial statements.
5. Plan Termination:
The Company does not plan to terminate the Plan, however it has the right to do
so at any time, subject to a basic labor agreement, by action of the Board.
6. Administrative Expenses:
The Trustee's fees, the expenses of administration of the trust fund and the
expenses incidental to the operation and management of the Plan are paid by the
Company. These fees totaled $101,795 and $88,413 in 1997 and 1996, respectively.
Investment management and similar fees directly related to the return to
participants on amounts invested in the various investment funds are charged
against the Plan's funds as other payments.
<PAGE>
7. Related Party Transactions:
The Plan includes the Company's stock as an investment option. Therefore, any
investments in the Company's stock represent related party transactions. Certain
Plan investments are shares of a mutual fund managed by the Trustee. Therefore,
these transactions qualify as related-party transactions.
8. Reconciliation of Financial Statements to Form 5500:
Amounts allocated to withdrawing participants are recorded as liabilities on
Form 5500 for benefit claims that have been processed and approved for payment
prior to December 31, but not yet paid as of that date.
The following is a reconciliation of net assets available for benefits per the
financial statements to Form 5500.
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
----------- ----------
<S> <C>
Net assets available for benefits per the financial
statements $14,492,018 $9,995,705
Amounts allocated to withdrawing participants - (1,189)
----------- ----------
Net assets available for benefits per Form 5500 $14,492,018 $9,994,516
=========== ==========
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to Form 5500.
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Benefits paid to participants per the financial statements $453,570
Add: Amounts allocated to withdrawing participants at December 31,
1997 -
Less: Amounts allocated to withdrawing participants at
December 31, 1996 1,189
--------
Benefits paid to participants per Form 5500 $452,381
========
</TABLE>
<PAGE>
9. Participant Directed Investment Programs:
Statement of Changes in Net Assets by Investment With Fund Information
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Newport
Signet Fidelity Fidelity News El Paso
Investment Spartan Spartan Tenneco Shipbuilding Natural Gas
Money U.S. Equity U.S. Bond Inc. Inc. Company
Market Index Index Common Common Common Participant
Account Portfolio Portfolio Stock Stock Stock Loans
----------- ----------- ---------- -------- ------------ ----------- -----------
<S> <C>
Net assets, December 31, 1996 $2,932,631 $4,367,570 $1,267,086 $770,780 $ 80,284 $50,775 $390,908
Additions:
Participants' contributions 728,027 1,357,518 321,957 - 362,004 - -
Net realized and unrealized - 1,459,224 34,379 (22,727) 68,079 33,439 -
gains (losses)
Dividends 22,206 150,993 97,232 103 - - -
Interest 183,117 16,515 3,694 - - - -
Fund Transfers (93,251) 256,521 (42,934) (106,778) 2,733 15,699 -
Loan repayments 70,859 81,775 22,737 - 3,506 - 395,045
Deductions:
Benefits paid to participants 110,928 246,676 67,818 18,029 7,881 2,238 -
Other payments 2,983 1,750 - 408 184 202 -
Loans distributed 117,714 162,862 52,433 21,672 8,507 2,910 232,230
---------- ---------- ---------- -------- -------- ------- --------
Net assets, December 31, 1997 $3,611,964 $7,278,828 $1,583,900 $601,269 $500,034 $94,563 $553,723
========== ========== ========== ======== ======== ======= ========
</TABLE>
Other Total
--------- -----------
Net assets, December 31, 1996 $ 135,671 $ 9,995,705
Additions:
Participant contributions 135,476 2,904,982
Net realized and unrealized - 1,572,394
gains (losses)
Dividends 2,344 272,878
Interest 4,099 207,425
Fund Transfers (31,990) -
Loan repayments (573,922) -
Deductions:
Benefits paid to participants - 453,570
Other payments 2,269 7,796
Loans distributed (598,328) -
--------- -----------
Net assets, December 31, 1997 $ 267,737 $14,492,018
========= ===========
<PAGE>
Newport News Shipbuilding Savings (401(k)) Plan
For Union Eligible Employees
Item 27(a) - Schedule of Assets Held for Investment Purposes
As of December 31, 1997
<TABLE>
<CAPTION>
Current
Identity of Issue Asset Description Cost Value
----------------- ----------------- ---- -------
<S> <C>
Signet Investment Money Market Account* Mutual Fund Shares $ 3,611,964 $ 3,611,964
Fidelity Spartan U.S. Equity Index Portfolio Mutual Fund Shares 4,980,591 7,278,828
Fidelity Spartan U.S. Bond Index Portfolio Mutual Fund Shares 1,552,515 1,583,900
Tenneco Inc. Common Stock Common Stock Shares 644,208 601,269
Newport News Shipbuilding Inc. Common Stock* Common Stock Shares 387,075 500,034
El Paso Natural Gas Company Common Stock Common Stock Shares 61,078 94,563
Participant Loans (interest rates varied from 7.0%
to 10.0% during 1997) Participant Loans 553,723 553,723
----------- -----------
Total assets held for investment purposes $11,791,154 $14,224,281
=========== ===========
</TABLE>
* Represents a party-in-interest
<PAGE>
Newport News Shipbuilding Savings (401(k)) Plan
For Union Eligible Employees
Item 27(b) - Schedule of Loans or Fixed Income Obligations
As of December 31, 1997
<TABLE>
<CAPTION>
Loan Payments
in 1997 Unpaid
Loan --------------------- Balance at
Name Amount Principal Interest 12/31/97
- -------------------- --------- --------- -------- ----------
<S> <C>
Edmonds, Robert $1,100.00 $ - $ - $1,026.24
Trollinger, John 500.00 - - 243.76
Wales, Patrick J. 2,000.00 - - 1,377.52
Dunn, Jack 700.00 - - 13.79
Payton, Ronald 900.00 - - 1,104.75
Jones, William 1,900.00 - - 368.88
Tice, Jerry 6,000.00 - - 6,682.50
Pritchett, Walter 500.00 - - 618.13
Ford, Howard 1,100.00 - - 245.03
Martin, Marilyn 1,200.00 - - 554.17
Macpherson, Christopher 1,000.00 - - 329.22
Mills, Louis 500.00 - - 200.88
Wilson, Mary 1,600.00 - - 1,986.67
Harris, Renith 800.00 - - 990.00
Stanley, James 600.00 - - 552.57
Henry, Aaron 1,000.00 - - 1,237.50
Johnson, John 500.00 - - 284.15
McNair, Gregory 500.00 - - 454.68
Freeman, Mark 2,000.00 - - 1,896.76
Nicholson, Howard 1,400.00 - - 1,682.92
</TABLE>
<TABLE>
<CAPTION>
Amount Overdue
---------------------
Name Loan Terms Principal Interest
- ------------------- ---------------------------------------------- --------- --------
<S> <C>
Edmonds, Robert 4.5 yr., 10%, made - 5/2/95 maturity - 11/2/99 $ 892.38 $133.86
Trollinger, John 2 yr., 7%, made - 6/6/94 maturity - 8/6/94 210.07 33.69
Wales, Patrick J. 1 yr., 9.7%, made - 9/13/95 maturity - 10/13/95 1,177.62 199.90
Dunn, Jack 1 yr., 7%, made - 4/8/94 maturity - 5/8/94 13.77 0.02
Payton, Ronald 1 yr., 7%, made - 9/26/94 maturity - 9/26/95 900.00 204.75
Jones, William 1 yr., 7%, made - 10/20/94 maturity - 10/20/95 338.30 30.58
Tice, Jerry 4.5 yr., 9.75% made - 11/27/95 maturity - 5/27/00 6,000.00 682.50
Pritchett, Walter 2 yr., 7%, made - 6/28/94 maturity - 6/28/96 500.00 118.13
Ford, Howard 1 yr., 10%, made - 6/27/95 maturity - 6/27/96 220.17 24.86
Martin, Marilyn 2 yr., 8.7%, made - 12/01/94 maturity - 12/01/96 509.82 44.35
Macpherson, Christopher 2 yr., 8%, made - 2/8/95 maturity - 2/8/97 304.14 25.08
Mills, Louis 1 yr., 9.5%, made - 2/7/96 maturity - 2/7/97 197.88 3.00
Wilson, Mary 2 yr., 10%, made - 6/12/95 maturity - 6/12/97 1,600.00 386.67
Harris, Renith 2 yr., 10%, made - 7/3/95 maturity - 7/3/97 800.00 190.00
Stanley, James 2 yr., 9.7%, made - 12/6/95 maturity - 12/6/97 552.57 -
Henry, Aaron 3 yr., 10%, made - 7/5/95 maturity - 7/5/98 1,000.00 237.50
Johnson, John 4.5 yr., 7%, made - 5/27/94 maturity - 11/27/94 263.55 20.60
McNair, Gregory 4.5 yr., 8.7%, made - 10/18/94 maturity - 5/18/99 389.70 64.98
Freeman, Mark 4.5 yr., 8.7%, made - 12/8/94 maturity - 7/8/99 1,620.76 276.00
Nicholson, Howard 4.5 yr., 9.7%, made - 11/20/95 maturity - 5/20/00 1,400.00 282.92
</TABLE>
<PAGE>
Newport News Shipbuilding Savings (401(k)) Plan
For Union Eligible Employees
Item 27(d) - Schedule of Reportable Transactions
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Number Number Total Cost
of of Total Amount Amount of
Purchase Sales of of Assets Gain
Transactions Transactions Description Purchases (a) Sales (b) Sold (Loss)
------------ ------------ ----------- ------------ --------- ------ ------
<S> <C>
328 526 Signet Investment Money
Market Account* $1,626,262 $946,929 $946,929 $
-
313 142 Fidelity Spartan U.S.
Equity Index Portfolio 2,104,359 652,325 464,347 187,978
174 138 Fidelity Spartan U.S.
Bond Index Portfolio 579,840 297,405 297,912 (508)
</TABLE>
Note: This schedule presents all transactions or series of transactions of
the same issue during the period January 1, 1997 through December 31,
1997, in excess of 5 percent of the fair value of the Plan's assets as
of the beginning of the year.
(a) Purchase price includes expenses incurred with transactions.
(b) Selling price is net of transaction expenses.
* Represents a party-in-interest
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Newport News Shipbuilding Inc. Benefits Committee has caused this annual
report to be signed on its behalf by the undersigned thereunto duly authorized.
NEWPORT NEWS SHIPBUILDING
SAVINGS (401(k)) PLAN FOR UNION
ELIGIBLE EMPLOYEES
Date: June 29, 1998 By: Robert H. Walker
----------------------------- -----------------------------
Manager, Employee Benefits
Newport News Shipbuilding Inc.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 11-K, into Newport News
Shipbuilding Inc.'s previously filed Registration Statements on Form S-8, File
Nos. 333-17447 and 333-22539.
Washington, D.C.
June 29, 1998
