As filed with the Securities and Exchange Commission on April 3, 1998
Registration No. ___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
-----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
NEWPORT NEWS SHIPBUILDING INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1358276
(State or Other 4101 Washington Avenue (I.R.S. Employer
Jurisdiction of Newport News, Virginia 23607 Identification No.)
Incorporation or (757) 380-2000
Organization)
(Address, including zip code, and telephone number,
including area code, of Registrant's principal
executive offices)
-------------------------
Stephen B. Clarkson, Esq.
Vice President, General Counsel and Secretary
Newport News Shipbuilding Inc.
4101 Washington Avenue
Newport News, Virginia 23607
(757) 380-3600
(Name, address, including zip code,
and telephone number, including
area code, of agent for service)
Copies to:
C. Porter Vaughan, III, Esq.
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
(804) 788-8200
-------------------------
Approximate date of commencement of the proposed sale to the
public:
As soon as practicable after this Registration Statement
becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment, please check the following box.
[ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
P R O S P E C T U S
481,531 Shares
Newport News Shipbuilding Inc.
Common Stock
This Prospectus covers up to 481,531 shares (the "Shares") of common
stock (the "Common Stock") of Newport News Shipbuilding Inc., a Delaware
corporation (the "Company" or "Newport News"). All of the Shares being
registered are owned by Marine Midland Bank, as trustee for and on behalf of the
Continental Maritime Industries, Inc. Employee Stock Ownership Plan and Trust,
David H. McQueary, Lee E. Wilson, Carl V. Cull, Jr., Larry E. Edwards and Kim M.
Zeledon (the "Selling Stockholders"). The Shares may be offered from time to
time by the Selling Stockholders in transactions in the over-the-counter market,
on the New York Stock Exchange (the "NYSE") or otherwise at fixed prices which
may be changed, at market prices prevailing at the time of sale, at prices
related to such market prices or at negotiated prices. The Selling Stockholders
may effect such transactions by selling the Shares to or through brokers,
dealers or agents who may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders or the purchasers of
the Shares for whom such brokers, dealers or agents may act. See "Plan of
Distribution." The Company will not receive any of the proceeds from the sale of
any of the Shares by the Selling Stockholders.
The Common Stock is listed on the NYSE under the trading symbol "NNS."
The reported closing price on the NYSE on April 2, 1998 was $26 15/16 per share.
See "Risk Factors" beginning on Page 4 for a discussion of certain risk
factors that should be considered in connection with an investment in the Common
Stock offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is ___________, 1998.
<PAGE>
PROSPECTUS SUMMARY
The following summary of certain information is qualified in its
entirety by, and should be read in connection with, the more detailed and other
information and financial statements included elsewhere in this Prospectus.
Capitalized terms used but not defined in this Prospectus Summary are defined
elsewhere in this Prospectus.
THE COMPANY
Newport News Shipbuilding Inc. ("Newport News" or the "Company") is the
largest non-government-owned shipyard in the United States. Its primary business
is the design, construction, repair, overhaul and refueling of nuclear-powered
aircraft carriers and submarines for the United States Navy. The Company
believes it currently is: (i) the only shipyard capable of building the Navy's
nuclear-powered aircraft carriers, (ii) the only non-government-owned shipyard
capable of refueling and overhauling the Navy's nuclear-powered aircraft
carriers, and (iii) one of only two shipyards capable of building
nuclear-powered submarines.
Aircraft carrier and submarine construction contracts with the U.S.
Navy have generated the majority of the Company's net sales. Overall, the
Company's core U.S. Navy business accounted for approximately 94%, 94% and 97%
of the Company's revenues for 1997, 1996 and 1995, respectively. Newport News
has built nine of the 12 active aircraft carriers in the U.S. fleet, including
all eight nuclear-powered aircraft carriers. For the last 36 years, Newport News
has been the sole designer and builder of the U.S. Navy's aircraft carriers.
Newport News currently holds contracts to build two Nimitz-class nuclear-powered
carriers, each representing approximately $2-3 billion in initial contract
revenue: the Harry S. Truman, scheduled for delivery in 1998, and the Ronald
Reagan, scheduled for delivery in 2002. Based on current U.S. Navy projections,
the Company anticipates the award in or before 2002 of a contract for the
construction of the last Nimitz-class aircraft carrier for delivery in 2009.
Under contract to the Navy, Newport News is currently performing design concept
studies for the next generation of aircraft carriers. In addition, Newport News,
as one of only two manufacturers of nuclear-powered submarines, has constructed
53 nuclear-powered submarines comprised of seven different classes. Newport News
and Electric Boat Corporation ("Electric Boat"), a wholly-owned subsidiary of
General Dynamics Corporation, have been designated by federal legislation to
build the first four of the next generation of the Navy's new nuclear attack
submarines ("NSSN's") commencing in early 1999. At the urging of the Navy, the
Company and Electric Boat have entered into a teaming agreement with respect to
the NSSN submarine construction program.
As Newport News has built all the active Nimitz-class aircraft carriers
and believes it currently is the only non-government-owned shipyard capable of
refueling and overhauling nuclear-powered aircraft carriers, the Company has had
the leading share of the refueling and overhaul market for aircraft carriers. A
Nimitz-class aircraft carrier must be refueled at approximately the midpoint of
its estimated 50-year life. The Navy often commissions a major overhaul of each
carrier to coincide with a refueling. It normally takes two years to complete a
refueling and overhaul. Currently the Company is working on the overhaul of the
USS Theodore Roosevelt (an approximately $200 million contract) and in 1998 will
begin the refueling and overhauling of the USS Nimitz (which contract could
approximate $1 billion). In addition, the Navy has announced its schedule to
begin the refueling of the USS Eisenhower in 2001, the USS Carl Vinson in 2006
and the USS Roosevelt in 2009 at an estimated cost of approximately $1 billion
each. Supported by its new Carrier Refueling Complex, the Company believes it is
well-positioned to be awarded future refueling contracts, although there can be
no assurances as to the number or value of contracts awarded.
The Company's principal executive offices are located at 4101
Washington Avenue, Newport News, Virginia 23607; telephone: (757) 380-2000.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995:
This Prospectus contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 concerning, among other
things, the Company's prospects, developments and
2
<PAGE>
business strategies for its operations, all of which are subject to risks and
uncertainties. These forward-looking statements are identified by their use of
such words as "intend," "intends," "intended," "goal," "estimate," "estimates,"
"expect," "expects," "expected," "project," "projects," "projected,"
"projections," "plans," "anticipate," "anticipates," "anticipated," "should,"
"designed to," "foreseeable future," "believe," "believes" and "scheduled," or
derivatives thereof, and in many cases are followed by a cross reference to
"Risk Factors."
When a forward-looking statement includes a statement of the
assumptions or basis underlying the forward-looking statement, the Company
cautions that, while it believes such assumptions or basis to be reasonable and
makes them in good faith, assumed facts or basis almost always vary from actual
results, and the differences between assumed facts or basis and actual results
can be material, depending upon the circumstances. Where, in any forward-looking
statement, the Company or its management expresses an expectation or belief to
the future results, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance that the
statement of expectation or belief will result or be achieved or accomplished.
The Company's actual results may differ materially from the results
discussed in the forward-looking statements. Factors that might cause such a
difference include (i) the factors discussed under "Risk Factors" and
particularly, in cases where the forward-looking statement is followed by a
cross reference to "Risk Factors," the factors discussed in the section or
sections under "Risk Factors" that are referred to in the cross reference and
(ii) the following factors: (a) the general political, economic and competitive
conditions in the United States and other markets where the Company operates;
(b) initiatives to reduce the federal budget deficit and reductions in defense
spending; (c) reductions in the volume of U.S. Navy contracts awarded to the
Company; (d) unanticipated events affecting delivery or production schedules and
design and manufacturing processes thus impairing the Company's efforts to
deliver its products on time or to reduce production costs and cycle time or
realize in a timely manner some or all of the benefits of such reductions; (e)
changes in capital availability or costs, such as changes in interest rates,
market perceptions of the industry in which the Company operates, or securities
ratings; (f) employee workforce factors, including issues relating to collective
bargaining agreements or work stoppages; and (g) authoritative generally
accepted accounting principles or policy changes from such standard-setting
bodies as the Financial Accounting Standards Board and the Securities and
Exchange Commission (the "Commission").
3
<PAGE>
RISK FACTORS
Holders should carefully consider the risk factors described below and
elsewhere in this Prospectus prior to making a decision to purchase the Common
Stock of the Company.
Recent Developments
During 1997, the Company recorded additional charges against operating
earnings of approximately $207 million (net of previously established reserves
of $57 million) on the Double Eagle product tanker construction program (the
"Charges"). Originally, this program involved the planned construction of nine
commercial product tankers to be delivered under fixed price contracts entered
into from 1994 to 1996. During 1997, one of these ships was delivered to Mobil
Oil Corporation for use in the domestic market. In March of 1998, the Company
announced a revised strategy for this program that will result in only five of
the remaining eight ships being built, after which the Company will withdraw
from the market. Work is substantially complete on the first three of the
remaining five ships which are scheduled to be delivered in 1998. The final two
ships are expected to be delivered by the middle of 1999.
During the past several months, events occurred with respect to this
program which led to increased cost estimates and the revised strategy as
described above. A majority of the estimated cost growth occurred in the
materials area, and reflects the impact of supplier services, emergent material,
and schedule changes for the recently designed domestic ships. Supplier services
cost increases were driven by significant increases in coating and painting
costs and failures by several suppliers. Emergent material costs related to
finalized design specifications, as well as unanticipated costs associated with
the extension of construction schedules, including warranty and preservation
costs and additional inspection requirements, contributed to the cost growth. In
addition, the December 1997 change in the regulation of and use by the industry
of paints containing Volatile Organic Hazardous Air Pollutants in shipbuilding
and ship repair, mandated that the paint applied to product tankers and the
application methodology be amended thereby increasing material and labor costs
even further.
In addition to the material problems enumerated above, the labor estimates
for the undelivered ships have also been revised upward reflecting the fact that
productivity improvements are not being achieved at the levels previously
anticipated. As a result, man-hour estimates for the ships have been increased
and learning curve projections have been modified as well. Factors contributing
to the productivity shortfall include the material issues described above,
emergent design changes, and revised ship construction and delivery schedules.
The Company is currently conducting internal reviews and has engaged a
leading consulting firm to evaluate and make recommendations regarding
engineering, sourcing, materials management, manufacturing, and overall program
management. Management cannot currently predict the outcome of these reviews or
their impact on the Company.
Reliance on Major Customer and Uncertainty of Future Work
Reliance on Major Customer
The Company's business is primarily dependent upon the design,
construction, repair, overhaul and refueling of nuclear-powered aircraft
carriers and submarines for the U.S. Navy. The Navy accounted for approximately
94% of the Company's net sales for the year ended December 31, 1997. More than
90% of the Company's backlog continued to be U.S. Navy-related as of December
31, 1997. Major additions are anticipated in 1998 with expected awards for the
Nimitz refueling and new attack submarine. The portion of 1997's backlog
expected to remain at December 31, 1998 is $1.6 billion.
4
<PAGE>
Uncertainty of Future Work
Although U.S. Government cuts in naval shipbuilding have continued to
put pressure on the Company's backlog, the Company was successful in adding
approximately $1 billion in new work during 1997. The Company's total backlog,
however, decreased from $3.5 billion at December 31, 1996 to $2.8 billion at
December 31, 1997. Because much of the Company's business consists of
constructing aircraft carriers, which historically have been purchased by the
Navy every four to six years, the Company's backlog has typically declined
following each carrier contract, and peaked again when the Navy orders a new
aircraft carrier. The continuing effort of the U.S. Government to reduce the
federal budget deficit and the restructuring of U.S. Naval forces in the post
Cold War environment, however, will affect the level of funding for shipbuilding
programs, which can be revised at any time. The Report on the Bottom-Up Review
by the U.S. Department of Defense in 1993 stated a need for a fleet of 12
aircraft carriers (down from 15 in 1992), creating demand for a new aircraft
carrier every four to six years. The Department of Defense reiterated its
intention to maintain 12 carrier battle groups in its May 1997 Report of the
Quadrennial Defense Review. Re-evaluation of this need will continue by
both the Department of Defense and the Congress. Current Navy plans call for the
award of a contract for the construction of a new nuclear-powered aircraft
carrier ("CVN-77") beginning in or before 2002 for delivery in 2009. The Navy
has not determined whether subsequent aircraft carriers will be nuclear-powered.
If there is an eventual shift towards building smaller, non-nuclear-powered
aircraft carriers, it is possible that the Company may have to compete with
other shipyards in the future to build such aircraft carriers. Furthermore, in
response to the need for cheaper alternatives and the proliferation of "smart
weapons," it is also possible that future strategy reassessments by the
Department of Defense may result in the need for fewer aircraft carriers. The
Company is currently performing design concept studies for the next generation
of aircraft carriers, which is expected to help the Company in maintaining its
role as the Navy's only aircraft carrier builder. For the year ended December
31, 1997, aircraft carrier construction accounted for approximately 49% of the
Company's revenues. In addition, aircraft carrier programs and other government
projects can be delayed, and such delays typically cause loss of income during
the period of delay and retraining costs when work resumes. Any significant
reduction in the level of government appropriations for aircraft carrier or
other shipbuilding programs, or a significant delay of such appropriations,
could have a material adverse effect on the Company's financial position and
results of operations.
The prospects of U.S. shipyards, including the Company, can be
materially affected by their success in securing significant U.S. Navy contract
awards. In 1987, the Company was awarded the lead design contract for the
Seawolf submarine. However, the collapse of the former Soviet Union Navy has
greatly reduced the underwater threat to U.S. and allied vessels. As a result,
there was a dramatic cutback in the Seawolf program (to three submarines), and
the Company did not construct any Seawolf submarines. Construction of the three
Seawolf submarines was awarded to Electric Boat.
At the urging of the U.S. Navy, the Company and Electric Boat reached an
agreement in February 1997 to cooperatively build the first four new NSSNs
included in the President's defense budget. The teaming agreement calls for each
company to construct certain portions of each submarine, with final assembly,
testing, outfitting, and delivery alternating between the two yards. Electric
Boat will act as the prime contractor and lead designer under the agreement. In
September 1997, Congress approved the Company's teaming arrangement for
co-production of the first four NSSNs as part of the 1998 fiscal year defense
authorization and appropriations processes. The teaming arrangement ensures the
Company's early and ongoing participation in this important program. Design,
development, and planning work will take place over the course of 1998, with the
Company initiating significant NSSN construction in early 1999. The Company
estimates that the NSSN program could total up to 30 submarines, although no
assurances can be given as to the number of NSSNs that ultimately will be
procured and built by the Company, either alone or in cooperation with Electric
Boat.
With a substantial portion of the Company's current firm backlog
scheduled for completion in 1998 and 2002, the failure of the Company to receive
the contract for the construction of the CVN-77 on a timely basis and other
significant naval work could have a material adverse effect on the Company's
financial position and results of operations.
5
<PAGE>
Profit Recognition; Government Contracting
Similar to other companies principally engaged in long-term
construction projects, the Company recognizes profits under the percentage of
completion method of accounting, with profit recognition commencing when costs
are incurred under the contract, and loss recognition commencing immediately
upon identification of such loss without regard to percentage of completion.
Because contract profit recognition is dependent upon reliable estimates of the
costs to complete the contract, profits recognized upon completion of the
contract may be significantly less than anticipated, or the Company may incur a
loss with respect to the contract, if it proves necessary to revise cost
estimates.
More than 90% of the Company's sales involve contracts entered into with
the U.S. Government. The Company's principal U.S. Government business is
currently performed under fixed price ("FP"), fixed price plus incentive fee
("FPIF"), cost plus incentive fee ("CPIF"), and cost plus fixed fee ("CPFF")
contracts. The risk to the Company of not being reimbursed for its costs varies
with the type of contract. Under FP contracts, the contractor retains all cost
savings on completed contracts, but is liable for the full amount of all
expenditures in excess of the contract price. FPIF contracts, on the other hand,
provide for cost sharing between the U.S. Government and the contractor. The
contractor's fee is increased or decreased according to a formula set forth in
the contract, which generally compares the amount of cost incurred to the
contract target cost. The Government is liable for all allowable costs up to a
ceiling price. Under CPIF contracts, the contractor's profit is determined by a
contractually specified formula, which essentially compares allowable incurred
costs to the contract target cost. Under CPFF contracts, with few exceptions,
the fee is the same without regard to the amount of cost incurred. The Company
currently constructs aircraft carriers pursuant to FPIF contracts, but it
performs work for the U.S. Government under all the types of contracts described
above.
The costs of performing all such types of contracts include those for
labor, material and overhead. Therefore, unanticipated increases in any such
costs as well as delays in product delivery, poor workmanship requiring
correction, and all other factors which affect the cost of performing contracts,
many of which are long term in nature, affect the profitability of most
contracts held or anticipated by the Company.
In certain circumstances, the Company may submit Requests for Equitable
Adjustment ("REAs") to the U.S. Navy seeking adjustments to contract prices to
compensate the Company when it incurs costs for which it believes the U.S.
Government is responsible. Although the Company pursues REAs and all other
contractual disputes vigorously, there is no assurance that the U.S. Navy will
resolve the REAs or any of these disputes in a manner favorable to the Company.
Under U.S. Government regulations, certain costs, including certain financing
costs and marketing expenses, are not allowable contract costs. These costs can
be substantial. The Government also regulates the methods by which all costs,
including overhead, are allocated to government contracts.
In cases where there are multiple suppliers, contracts for the
construction and conversion of U.S. Navy ships and submarines are subject to
competitive bidding. As a safeguard to anti-competitive bidding practices, the
U.S. Navy sometimes employs the concept of "cost realism," which requires that
each bidder submit information on pricing, estimated costs of completion and
anticipated profit margins. The U.S. Navy uses this and other data to determine
an estimated cost for each bidder. The U.S. Navy then re-evaluates the bids by
using the higher of the bidder's and the U.S. Navy's cost estimates.
6
<PAGE>
The U.S. Government has the right to suspend or debar a contractor from
government contracting for violations of certain statutes or government
procurement regulations. See "--Government Claims and Investigations." The U.S.
Government may also unilaterally terminate contracts at its convenience with
compensation for work completed.
Competition and Regulation
The Company believes it currently is (i) the only shipyard capable of
building the Navy's nuclear-powered aircraft carriers, (ii) the only
non-government-owned shipyard capable of refueling and overhauling the Navy's
nuclear-powered aircraft carriers and (iii) one of only two U.S. shipyards
capable of building nuclear-powered submarines. However, with respect to the
market for U.S. military contracts for other types of vessels, there are
principally six major private U.S. shipyards, including the Company, that
compete for contracts to construct, overhaul or convert other types of surface
combatant vessels. Competition for these vessels is extremely intense.
Additionally the Company's products, such as aircraft carriers, submarines and
other ships, compete with each other for defense monies.
The Company is also directly dependent upon allocation of defense
monies to the U.S. Navy. In addition to competition from other shipyards, the
Company competes for project approval and funding with firms providing other
defense products and services, such as tanks and aircraft, to other branches of
the armed forces, and with other, non-defense demands on the U.S. budget.
The Company faces competition in the engineering, planning and design
market from other companies which provide lower cost engineering support
services and are located closer to the Washington, D.C. area. The Company has
established a Carrier Innovation Center for the development of the Navy's next
generation of aircraft carriers. The Company believes the Carrier Innovation
Center will offset the geographic and cost advantages of its competitors. There
can be no assurance, however, that the Company will be the successful bidder on
future U.S. Navy engineering work, including new aircraft carrier research and
development funding.
Substantial Leverage
As of December 31, 1997, the Company, on a consolidated basis, had
outstanding $578 million of total indebtedness, and stockholders' equity of $183
million.
On November 4, 1996, the Company entered into a $415 million senior
credit facility ("Senior Credit Facility") which includes a $215 million
six-year Revolving Credit Facility, of which $125 million may be used for
advances and letters of credit and $90 million may be used for standby letters
of credit. This Agreement contains customary financial and restrictive covenants
which limit borrowing capacity under the credit facility. As of December 31,
1997 the Company had used $87 million of the credit facility for standby letters
of credit and utilized no portion of the $125 million for advances.
The degree to which the Company is leveraged could have important
consequences to holders of the Common Stock including the following: (i) the
Company's ability to obtain financing in the future for working capital, capital
expenditures and general corporate purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness; and (iii) the high degree
of leverage may limit the Company's ability to react to changes in the industry,
make the Company more vulnerable to economic downturns and limit its ability to
withstand competitive pressures.
The Company's ability to service its debt obligations will depend upon
its future operating performance, which will be affected by prevailing economic
conditions and financial and business factors, many of which are beyond the
Company's control. If the Company cannot generate sufficient cash flow from
operations to meet its obligations, then the Company may be required to attempt
to restructure or refinance its debt, raise additional capital or take other
actions such as selling assets or reducing or delaying capital expenditures.
There can be no assurance, however, that any of such actions could be effected
on satisfactory terms, if at all, or would be permitted by the terms of the
Company's credit and contractual arrangements.
The Company's credit arrangements contain restrictive covenants that,
among other things, limit the Company's ability to incur additional
indebtedness, create liens and make investments and capital expenditures. The
Senior Credit Facility requires the Company to comply with certain financial
ratios and tests, under which the Company is required to achieve certain
financial and operating results. The Company's ability to meet these financial
ratios and tests may be affected by events beyond its control, and there can be
no assurance that they will be met. In the event of a default under the Senior
Credit Facility, the lenders thereunder may terminate their lending commitments
and declare the indebtedness immediately due and payable. There can be no
assurance that the Company would have sufficient assets to pay indebtedness then
outstanding thereunder and under the Company's other credit arrangements.
7
Due to the Charges, the Company was technically in default with respect
to its covenants under the Senior Credit Facility; however, a waiver was granted
by the Company's lenders in March 1998 to reinstate the Company's compliance
with the provisions of the Senior Credit Facility. The waiver leaves the terms
of its Senior Credit Facility essentially unchanged.
Government Claims and Investigations
More than 90% of the Company's sales involve contracts entered into
with the U.S. Government. These contracts are subject to possible termination
for the convenience of the government, to audit and to possible adjustments
affecting cost-type and certain fixed-price-type contracts.
As a general practice within the defense industry, the Defense Contract
Audit Agency (the "DCAA") and other government agencies continually review the
cost accounting and other practices of government contractors, including the
Company, conduct other investigations, and make specific inquiries. In the
course of those reviews and investigations, cost accounting and other issues
are identified, discussed and settled, or resolved through legal proceedings.
As with many government contractors, the government has from time to
time recommended that certain of the Company's contract prices be reduced, or
costs allocated to its government contracts be disallowed. Some of these
recommendations involve substantial amounts. In the past, as a result of such
audits and other investigations and inquiries, the Company has made adjustments
to its contract prices and the costs allocated to its government contracts.
The Company is currently involved in several such audit and other
investigative proceedings with the U.S. Government. The Company is also engaged
in such settlement discussions and has filed a lawsuit concerning certain cost
accounting questions. Although the eventual outcome of these discussions,
audits and investigations, and such lawsuit, cannot be determined at this time,
management believes, based on current information, that the ultimate resolution
of these matters will not have a material adverse effect on the Company's
financial position or results of operations.
The Company and its former parent have received letters from the DCAA
inquiring about certain aspects of the spinoff, including the disposition of the
former parent's retirement plan (the "FPRP"), which covers salaried employees of
the Company. In the event there is a determination that an amount is due to the
U.S. Government related to the FPRP, the Company and its former parent will
share the obligation for such amount, plus the amount of related defense
expenses, in the ratio of 20% and 80%, respectively. In May 1997, the DCAA
concluded a post-award audit of the contract to build the aircraft carrier
Reagan. The audit concerned whether the Company's submission to the U.S. Navy of
cost and pricing data in connection with the contract was current, accurate, and
complete. The Company responded in January 1998 to a DCAA request for comments
on a draft audit report, which the DCAA is currently finalizing.
In addition to the DCAA audit, a civil investigation, also focused on
the cost and pricing data that the Company supplied to the Navy in connection
with the Reagan contract, is being conducted jointly by the Department of
Defense, the Department of Justice, the U.S. Attorney's Office for the Eastern
District of Virginia, and the Naval Criminal Investigative Service. The Company
has previously responded to demands for documents in connection with the inquiry
and is now in the process of responding to Department of Justice Civil
Investigative Demands for documents and testimony from present and former
Company officers and employees. The Government has not asserted any formal
claims against the Company related to these Reagan contract matters.
Although the ultimate outcome of the FPRP and Reagan contract issues
cannot be predicted, should a successful claim be made in either matter, it
could entail an amount material to the Company's financial position and results
of operations; however, based on the Company's present understanding of the
claims the Government might assert, together with the sharing arrangement with
its former parent in connection with the FPRP, and defenses believed to be
available in connection with the Reagan contract, management believes that the
final resolution of these matters will not have a material adverse effect on the
financial position or results of operations of the Company.
8
<PAGE>
Collective Bargaining Agreements
At the end of 1997, the Company had approximately 18,400 employees, of
whom approximately 55% were covered by collective bargaining agreements with
various unions. The Company has entered into four collective bargaining
agreements covering nearly all of the Company's approximately 10,300 hourly
employees. The agreement with the United Steelworkers of America covers
approximately 9,600 employees and expires April 4, 1999. The agreement with the
United Plant Guard Workers of America and its Amalgamated Local No. 451 covers
approximately 100 employees and expires February 11, 2001. The other agreements
cover approximately 300 employees and expire by 2001. Although the Company
believes that its relationships with these unions are good, there can be no
assurance that the Company will not experience labor disruptions associated with
the collective bargaining agreements.
Environmental Matters
The Company is subject to various federal, state and local
environmental laws and regulations that impose limitations on the discharge of
pollutants into the environment and establish standards for the transportation,
storage and disposal of toxic and hazardous wastes. Stringent fines and
penalties may be imposed for non-compliance and certain environmental laws
impose joint and several "strict liability" for remediation of spills and
releases of oil and hazardous substances rendering a person liable for
environmental damage, without regard to negligence or fault on the part of such
person. Such laws and regulations may expose the Company to liability for the
conduct of or conditions caused by others, including, without limitation, its
former parent, or for acts of the Company which are or were in compliance with
all applicable laws at the time such acts were performed.
The nature of shipbuilding operations requires the use of hazardous
materials. The Company's shipyard also generates significant quantities of
wastewater which it treats before discharging pursuant to various permits. In
order to handle these materials, the shipyard has an extensive network of
above-ground and underground storage tanks, some of which have leaked and
required remediation in the past. In addition, the extensive handling of these
materials sometimes results in spills on the shipyard and occasionally in the
adjacent James River. The shipyard also has extensive waste handling programs
which it maintains and, periodically, must close in accordance with applicable
regulations. The cumulative cost of these normal operations are not expected to
have a material adverse effect on the Company's financial condition or results
of operations.
USE OF PROCEEDS
Proceeds from the sale of the Shares will be received directly by the
Selling Stockholders. See "Selling Stockholders."
SELLING STOCKHOLDERS
The Selling Stockholders own the Shares as follows:
<TABLE>
<CAPTION>
Name Amount of Shares Position with ContinentalMaritime Industries, Time Period
Owned and to be Inc.(1) Position Held
Offered
- -------------------------- --------------------- ----------------------------------------------- ---------------
<S> <C>
Marine Midland Bank(2) 381,296
David H. McQueary 52,086 Vice President 5/90-4/95
Director and President 4/95-present
Lee E. Wilson 16,610 General Counsel 8/86-present
Secretary 6/88-present
Executive Vice President 4/95-present
Director 4/95-12/97
Carl V. Cull, Jr. 14,930 Chief Financial Officer 10/90-present
Treasurer, Vice President 4/95-present
Director 4/95-12/97
Larry D. Edwards 12,757 Vice President 10/97-present
Kim M. Zeledon 3,852 Former Vice President 4/95-5/97
</TABLE>
<PAGE>
- -------------------
1. The Company acquired Continental Maritime Industries, Inc. on
December 18, 1997 (the "Acquisition"). The Selling Stockholders received the
Shares pursuant to the Acquisition and were granted
9
<PAGE>
registration rights with respect to the shares pursuant to a Registration
Agreement dated December 18, 1997 between the Company and the Selling
Stockholders (the "Registration Agreement").
2. Trustee, Continental Maritime Industries, Inc. Employee Stock
Ownership Plan and Trust
The Shares are being registered pursuant to the terms of the
Registration Agreement. The Company has agreed to bear the expenses in
connection with the registration of the Shares and to maintain the effectiveness
of the Registration Statement until the Selling Stockholders have sold all of
the Shares or have disposed of the Shares pursuant to Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act").
PLAN OF DISTRIBUTION
The Selling Stockholders, or their pledgees, donees, transferees or
other successors in interest, may sell their Shares in public transactions from
time to time through brokers, dealers or agents or through privately negotiated
transactions. The distribution of the Shares may be effected from time to time
in one or more transactions (which may involve crosses or block transactions)
(i) in the over-the-counter market, (ii) on the NYSE, (iii) in transactions
otherwise than in the over-the-counter market or (iv) through the writing of
options on the securities (whether such options are listed on an options
exchange or otherwise). Any of such transactions may be effected at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices or at fixed prices. If the Selling
Stockholders effect such transactions by selling Shares to or through brokers,
dealers or agents, such brokers, dealers or agents may receive compensation in
the form of discounts, concessions or commissions from the Selling Stockholders
or commissions from purchasers of Shares for whom they may act as agent (which
discounts, concessions or commissions as to particular brokers, dealers or
agents might be in excess of those customary in the types of transactions
involved). The Selling Stockholders and any brokers, dealers or agents that
participate in the distribution of the Shares might be deemed to be underwriters
and any profit on the sale of Shares by them and any discounts, concessions or
commission received by any such brokers, dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act. The Company
will not receive any of the proceeds from the sale of any of the Shares by the
Selling Stockholders.
At the time a particular offer of Shares is made, a Prospectus
Supplement, to the extent required, will be distributed which will set forth the
aggregate amount of Shares being offered, the names of the Selling Stockholders,
the purchase price, the amount of expenses of the offering and the terms of the
offering, including the name or names of any brokers, dealers or agents, any
discounts, commissions and other items constituting compensation from the
Selling Stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers.
10
<PAGE>
Under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and applicable rules and regulations promulgated thereunder, any person
engaged in a distribution of any of the Shares may not simultaneously engage in
market making activities with respect to the Shares for a period, depending upon
certain circumstances, of either two days or nine days prior to the commencement
of such distribution. In addition and without limiting the foregoing, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations promulgated thereunder, including without
limitation Regulation M (Rules 100-106), which provisions may limit the timing
of purchases and sales of any of the Shares by the Selling Stockholders.
Under the securities laws of certain states, the Shares may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in certain states the Shares may not be sold unless the Shares have been
registered or qualify for sale in such state or an exemption from registration
or qualification is available and is complied with.
All of the foregoing may affect the marketability of the Shares and the
ability of broker-dealers to engage in market-making activities with respect to
the Shares.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed
upon for the Company by Stephen B. Clarkson, Esq., Vice President, General
Counsel and Secretary of the Company. Mr. Clarkson beneficially owns 40,028
shares of Company Common Stock.
EXPERTS
The audited financial statements incorporated by reference in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's Restated Certificate of Incorporation and Amended and
Restated By-laws provide that the Company shall, to the full extent permitted by
the law of the State of Delaware, indemnify its directors and officers.
Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Registrant has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
AVAILABLE INFORMATION
Newport News is subject to the informational requirements of the
Exchange Act, and in accordance therewith files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information filed by Newport News may be inspected and copied at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices:
Seven World Trade Center, 13th Floor, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and copies
of such material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, such material can also be obtained from the
Commission's Web site at http://www.sec.gov. Newport News' Common Stock is
traded on the NYSE under the symbol "NNS."
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act for the offering of the Securities made by
this Prospectus. This Prospectus, filed as part of the Registration Statement,
does not contain all the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information about the Company
and the Securities offered pursuant to this Prospectus, refer to the
Registration Statement and the exhibits and schedules thereto, all of which may
be inspected without charge or copied at the Commission's offices (at the
locations described above) and copies of which may be obtained at prescribed
rates from the Public Reference Section of the Commission (at the locations
described above). Statements made in this Prospectus about the contents of any
contract, agreement or document are not necessarily complete and in each
instance reference is made to the copy of such contract, agreement or document
filed as an exhibit to the Registration Statement and each such statement is
qualified in its entirety by such reference.
11
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed with the Commission by the
Company and are hereby incorporated by reference into this Prospectus: (i)
Newport News' Annual Report on Form 10-K for the fiscal year ended December 31,
1997 and (ii) the description of Newport News' Common Stock contained in Newport
News' Registration Statement on Form S-4, as amended, dated as of January 23,
1997 and filed with the Commission pursuant to Section 12 of the Exchange Act.
All other documents filed by Newport News with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and shall be deemed to be a part hereof from
the date of filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Newport News will provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents referred to above which have been or may be
incorporated by reference into this Prospectus, other than certain exhibits to
such documents. Requests for such copies should be directed to: Investor
Relations, Newport News Shipbuilding Inc., 4101 Washington Avenue, Newport News,
Virginia 23607 (telephone: (757) 380-2000).
12
<PAGE>
No dealer, salesperson, or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company, or any Selling
Stockholder. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, to any person in any jurisdiction in which such
offer or solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any date
subsequent to the date hereof.
TABLE OF CONTENTS
Page
Prospectus Summary..................................2
The Company.........................................2
Risk Factors........................................4
Use of Proceeds.....................................9
Selling Stockholders................................9
Plan of Distribution...............................10
Legal Matters......................................11
Experts............................................11
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities...11
Available Information..............................11
Incorporation of Certain Information by Reference..12
NEWPORT NEWS SHIPBUILDING INC.
481,531 Shares
Common Stock
PROSPECTUS
____________ __, 1998
<PAGE>
Item 16. Exhibits.
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
4.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Company's
Registration Statement on Form S-4, dated January 23, 1997 as
amended (Registration No. 333-20285).
4.2 By-laws of the Company, Amended and Restated as of January 30,
1998 (incorporated by reference to Exhibit 3.1 of the Company's
Current Report on Form 8-K dated February 12, 1998).
4.3 Specimen Certificate of the Company's Common Stock
(incorporated by reference to the Company's Registration
Statement on Form 10 dated October 30, 1996, as amended
(Registration No. 1-12385).
4.4 Rights Agreement dated as of December 11, 1996 between the
Company and First Chicago Trust Company of New York, as Rights
Agent (incorporated by reference to the Company's Registration
Statement on Form S-8 dated February 27, 1997 (Registration No.
333-22503).
4.5 Amendment No. 1 to Rights Agreement, dated as of March 25, 1997
(incorporated by reference to the Company's Current Report on
Form 8-K, dated April 1, 1997).
4.6 Amendment No. 2 to Rights Agreement, dated as of October 9,
1997 (incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 21, 1997).
5.1 Opinion of Stephen B. Clarkson, Esq. regarding the legality of
the securities being registered.*
23.1 Consent of Independent Public Accountants.
23.2 Consent of Stephen B. Clarkson, Esq. (included in Exhibit 5.1).*
24.1 Power of Attorney (included on the signature page of this
Registration Statement).
*Previously filed
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in Newport
News, Virginia, on April 3, 1998.
NEWPORT NEWS SHIPBUILDING INC.
By: /s/ William P. Fricks
-------------------------
William P. Fricks
Chairman of the Board, President and Chief
Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by or on behalf of
the following persons on behalf of the Registrant and in the capacities
indicated on April 3, 1998.
<TABLE>
<CAPTION>
Signature Title
- ----------- -------
<S> <C>
/s/ William P. Fricks
- -------------------------- Chairman of the Board, President and
William P. Fricks Chief Executive Officer
/s/ David J. Anderson
- -------------------------- Senior Vice President and Chief
David J. Anderson Financial Officer
/s/ Thomas J. Bradburn
- -------------------------- Vice President-Finance and Corporate
Thomas J. Bradburn Controller
- -------------------------- Director
Dr. William R. Harvey
/s/ Stephen R. Wilson*
- -------------------------- Director
Stephen R. Wilson
/s/ Leon A. Edney*
- -------------------------- Director
Leon A. Edney, Admiral (Ret.)
/s/ Joseph J. Sisco*
- -------------------------- Director
Dr. Joseph J. Sisco
/s/ Gerald L. Baliles*
- -------------------------- Director
Hon. Gerald L. Baliles
- -------------------------- Director
Dana G. Mead
</TABLE>
*By /s/ Stephen B. Clarkson
-------------------------------------------
Stephen B. Clarkson, as Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- ------------
23.1 Consent of Independent Public Accountants.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated March 31, 1998,
included in Newport News Shipbuilding Inc.'s Form 10-K for the year ended
December 31, 1997, and to all references to our Firm included in or made a part
of this registration statement.
/s/ARTHUR ANDERSEN LLP
Washington, D.C.,
April 3, 1998
