UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 20, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12385
------------------------
NEWPORT NEWS SHIPBUILDING INC.
(Exact name of registrant as specified in its charter)
Delaware 74-1541566
- ------------------------------ -----------------
State or Other Jurisdiction of IRS Employer
Incorporation or Organization Identification No.
4101 Washington Avenue, Newport News, Virginia 23607-2770
- ---------------------------------------------- ----------
Address of Principal Executive Offices Zip Code
(757) 380-2000
Registrant's Telephone Number, Including Area Code
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, par value $.01 per share: 35,286,386 shares and associated
preferred stock purchase rights as of October 15, 1998.
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TABLE OF CONTENTS
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Part I--Financial Information
Newport News Shipbuilding Inc.
Consolidated Statements of Earnings - Third Quarter......................................... 2
Consolidated Statements of Earnings - Nine Months........................................... 3
Consolidated Balance Sheets................................................................. 4
Consolidated Statements of Cash Flows....................................................... 5
Notes to Consolidated Financial Statements.................................................. 6
Management's Discussion and Analysis of Financial Condition and Results of Operations....... 9
Part II--Other Information
Item 1. Legal Proceedings....................................................................... 13
Item 2. Changes in Securities and Use of Proceeds............................................... *
Item 3. Defaults Upon Senior Securities......................................................... *
Item 4. Submission of Matters to a Vote of Security Holders..................................... *
Item 5. Other Information....................................................................... *
Item 6. Exhibits and Reports on Form 8-K........................................................ 13
</TABLE>
*No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
THIS QUARTERLY REPORT ON FORM 10-Q SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
1
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PART I
FINANCIAL INFORMATION
NEWPORT NEWS SHIPBUILDING INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
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Quarter Ended
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September 20, September 21,
1998 1997
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Millions (Except Shares and Per Share Amounts)
Revenues............................................................... $ 462 $ 423
Operating Costs and Expenses........................................... (419) (409)
Other Income (Expense), net............................................ - 2
------------ ------------
Operating Earnings..................................................... 43 16
Interest Expense, net of interest capitalized.......................... (14) (14)
------------ ------------
Earnings Before Income Taxes........................................... 29 2
Provision for Income Taxes............................................. (12) (1)
------------ ------------
Net Earnings........................................................... $ 17 $ 1
============ ============
Weighted Average Number of Common Shares Outstanding
Basic............................................................. 34,564,034 34,907,846
Diluted........................................................... 35,571,649 35,768,708
Net Earnings Per Common Share
Basic............................................................. $ .47 $ .05
============ ============
Diluted........................................................... $ .46 $ .04
============ ============
Dividends Declared Per Common Share.................................... $ .04 $ .04
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements of
earnings.
2
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NEWPORT NEWS SHIPBUILDING INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------
September 20, September 21,
1998 1997
------------------ ------------------
Millions (Except Shares and Per Share Amounts)
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Revenues............................................................... $ 1,325 $ 1,276
Operating Costs and Expenses........................................... (1,200) (1,190)
Other Income (Expense), net............................................ - 2
------------ ------------
Operating Earnings..................................................... 125 88
Interest Expense, net of interest capitalized.......................... (41) (40)
------------ ------------
Earnings Before Income Taxes........................................... 84 48
Provision for Income Taxes............................................. (35) (20)
------------ ------------
Net Earnings........................................................... $ 49 $ 28
============ ============
Weighted Average Number of Common Shares Outstanding
Basic............................................................. 34,810,940 34,715,221
Diluted........................................................... 35,900,260 35,349,136
Net Earnings Per Common Share
Basic............................................................. $ 1.39 $ .82
============ ============
Diluted........................................................... $ 1.35 $ .80
============ ============
Dividends Declared Per Common Share.................................... $ .12 $ .12
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements of
earnings.
3
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NEWPORT NEWS SHIPBUILDING INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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<CAPTION>
September 20, December 31,
1998 1997
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Millions (Except Share Amounts)
ASSETS
Current Assets
Cash and Cash Equivalents.............................................. $ - $ 3
Accounts Receivable.................................................... 125 136
Contracts in Process................................................... 258 210
Inventory.............................................................. 71 44
Deferred Income Taxes.................................................. 124 50
Other Current Assets................................................... 12 12
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Total Current Assets................................................... 590 455
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Noncurrent Assets
Property, Plant and Equipment, net..................................... 762 816
Other Assets........................................................... 212 205
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Total Noncurrent Assets................................................ 974 1,021
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$ 1,564 $ 1,476
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade Accounts Payable................................................. $ 112 $ 151
Short-Term Debt........................................................ 38 30
Accrued Liabilities and Other.......................................... 264 175
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Total Current Liabilities.............................................. 414 356
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Noncurrent Liabilities
Long-Term Debt......................................................... 575 548
Deferred Income Taxes.................................................. 192 199
Postretirement Benefits................................................ 107 107
Other Long-Term Liabilities............................................ 68 83
Commitments and Contingencies (See Note 3).............................
--------- ---------
Total Noncurrent Liabilities........................................... 942 937
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Stockholders' Equity
Common Stock, $.01 par value -
authorized 70,000,000 shares; issued 35,286,386 shares at
September 20,1998, and 34,948,663 shares at December 31, 1997..... 1 1
Paid-In Capital........................................................ 262 256
Accumulated Deficit.................................................... (23) (68)
Unearned Compensation.................................................. (32) (4)
Treasury Stock (zero shares at September 20,1998 and
84,069 shares at December 31, 1997)............................... - (2)
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Total Stockholders' Equity............................................. 208 183
--------- ---------
$ 1,564 $ 1,476
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
4
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NEWPORT NEWS SHIPBUILDING INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
Nine Months Ended
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September 20, September 21,
1998 1997
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Millions
Cash Flows from Operating Activities:
Net Earnings ........................................................... $ 49 $ 28
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities -
Depreciation and Amortization................................... 48 51
Deferred Income Taxes........................................... (81) 9
Loss on Equity Investments...................................... 1 -
Changes in Components of Working Capital -
Decrease (Increase) in -
Accounts Receivable........................................ 11 73
Contracts in Process....................................... (48) (20)
Inventory ................................................. (27) 4
Other Current Assets....................................... (1) (3)
Increase (Decrease) in -
Trade Accounts Payable..................................... (39) (11)
Accrued Liabilities and Other.............................. 90 31
Other, net...................................................... 4 (27)
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Net Cash Provided by Operating Activities................................ 7 135
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Cash Flows from Investing Activities:
Capital Expenditures..................................................... (9) (16)
Other.................................................................... (5) (3)
------ -------
Net Cash Used by Investing Activities.................................... (14) (19)
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Cash Flows from Financing Activities:
Net Increase (Decrease) in Revolving Credit Facility..................... 41 (24)
Increase in Short-Term Debt.............................................. 7 -
Payments on Long-Term Debt............................................... (15) (21)
Proceeds from Issuance of Common Stock................................... 8 9
Treasury Stock Purchases................................................. (36) -
Proceeds from Issuance of Treasury Stock................................. 3 -
Disbursements for Employee Stock Plans................................... - (4)
Dividends Paid........................................................... (4) (4)
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Net Cash Provided (Used) by Financing Activities......................... 4 (44)
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Net Increase in Cash and Cash Equivalents................................ (3) 72
Cash and Cash Equivalents at Beginning of Period......................... 3 1
------ -------
Cash and Cash Equivalents at End of Period............................... $ - $ 73
====== =======
Cash Paid During the Period for Income Taxes............................. $ 20 $ 1
====== =======
Cash Paid During the Period for Interest................................. $ 32 $ 32
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</TABLE>
The accompanying notes are an integral part of these consolidated statements of
cash flows.
5
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NEWPORT NEWS SHIPBUILDING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PREPARATION
Unless the context otherwise requires, the term "Company" refers to Newport News
Shipbuilding Inc. ("NNS") and its consolidated subsidiaries. Although certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to SEC rules and regulations, the Company believes
that the disclosures included herein are adequate to make the information
presented not misleading. The Company is reporting quarterly results on an
accounting-month basis consistent with the prior year. Operating results for the
three and nine month periods ended September 20, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. These unaudited financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. In the opinion
of the Company's management, the unaudited financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation.
2. EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards ("FAS")
No. 128, "Earnings per Share". Basic earnings per common share was computed by
dividing net earnings by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per common share was computed
assuming the terms and conditions for the contingent shares and common stock
options were met and converted on September 20, 1998 and September 21, 1997,
respectively.
3. COMMITMENTS AND CONTINGENCIES
Government Contracting
As a general practice within the defense industry, the Defense Contract Audit
Agency ("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, investigations, and inquiries, the Company has on occasion made
adjustments to its contract prices and the costs allocated to its government
contracts. The Company is currently involved in several such audits 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 issues.
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.
6
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NEWPORT NEWS SHIPBUILDING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
As previously reported, the DCAA conducted a post-award audit of the contract to
build the aircraft carrier Reagan. In April 1998 the DCAA issued its official
audit report ("Audit Report") in which they concluded that the cost or pricing
data supplied by the Company to the Navy was not current, accurate, and complete
and, therefore, that projected labor and overhead costs were overstated for the
Reagan contract. Accordingly, the DCAA recommended to the Navy's contracting
officer that the contract price for Reagan be reduced.
The Company disagrees with the conclusions of the Audit Report and the DCAA's
recommendation to the contracting officer. Management believes that the Company
has substantial and meritorious grounds on which to contest any action by the
Navy seeking to reduce the Reagan contract price and intends to pursue its
defenses to any attempt by the Navy to make such a reduction.
In addition to the DCAA audit, a civil investigation, also focused on the cost
or 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. Management believes the
Company complied with all applicable laws.
During the second quarter, the Company received a draft audit report from the
DCAA questioning costs allocated and billed to government contracts as
Independent Research and Development ("IR&D"). The Company has responded to the
DCAA by communicating its disagreement with the draft audit report's conclusions
and recommendations.
Although the ultimate outcome of these issues cannot be predicted, should a
successful claim be made in any such 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 matter, management believes that the final resolution of these matters
will not have a material impact on the financial position or results of
operations of the Company. Management continues to assess the IR&D matter and
believes, based on current information, that it would be premature to express
any opinion as to whether or not the eventual outcome may have a material impact
on the financial position or results of operations of the Company.
7
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NEWPORT NEWS SHIPBUILDING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
Significant Estimates
From 1994 to 1996, the Company entered into fixed price contracts to construct a
total of nine Double Eagle product tankers. The first of the nine ships was
delivered at the end of September 1997. 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. As of September 20, 1998 and December 31, 1997, the cumulative
provision for losses recorded on undelivered ships is in the range of $320 to
$325 million. The Company intends to continue to review this program at the end
of each quarter. There can be no assurance that the estimate of costs to be
incurred on these contracts will not be revised at that time based on the facts
then known to the Company.
The first two of the five remaining ships were delivered shortly after the end
of the third quarter. Work is substantially complete on one of the now remaining
three ships which is on schedule to be delivered in 1998, while the final two
ships should be delivered by the middle of 1999.
Litigation
The Company is a defendant in matters of a varying nature related to the normal
conduct of its business. In the opinion of management, the outcome of these
proceedings should not have a material adverse effect on the financial position
or results of operations of the Company.
8
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NEWPORT NEWS SHIPBUILDING INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS OVERVIEW
The Company's primary business is the design, construction, repair, overhaul and
refueling of nuclear powered aircraft carriers and submarines for the U.S. Navy.
The Company also provides ongoing maintenance for other U.S. Navy vessels
through work in overhauling, life cycle engineering, and repair. The U.S.
Government accounted for approximately 94% and 90% of the Company's revenues for
the periods ended September 20, 1998 and September 21, 1997, respectively.
Results of Operations
For the Third Quarter Ended
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
Millions
Revenues........................... $ 462 $ 423
Operating Earnings................. 43 16
Revenues for the third quarter of 1998 increased $39 million to $462 million
compared with the same period in 1997. The improvement is attributable to
increased work on the refueling and overhaul of the aircraft carrier Nimitz, as
well as increased engineering activity on the new attack submarine and
contributions from the Company's new wholly-owned subsidiary, Continental
Maritime Industries, Inc. ("CMI"). The growth in revenue was partially offset by
the decline in carrier construction stemming from the June 1998 delivery of the
aircraft carrier Truman and a decrease in Overhaul and Repair activity on the
aircraft carrier Roosevelt.
Third quarter 1998 operating earnings increased $27 million over the prior year
third quarter primarily due to improved Overhaul and Repair volume associated
with the carrier Nimitz as mentioned above and the recognition of certain events
in 1997. In the third quarter of 1997, operating earnings reflected a charge to
increase loss reserves for Double Eagle product tankers, partially offset by
improvements in the carrier construction area and improved recoverability of
postretirement and postemployment benefits expense under the Company's
government contracts.
For the Nine Months Ended
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
Millions
Revenues............................ $1,325 $ 1,276
Operating Earnings.................. 125 88
Revenues for the first nine months of 1998 increased $49 million to $1.33
billion compared with the 1997 period primarily due to improved Overhaul and
Repair and submarine engineering activity, as well as contributions from CMI.
These increases were partially offset by lower construction activity due to the
delivery of the carrier Truman and the commercial product tanker program nearing
completion.
Operating earnings for the first nine months of 1998 increased $37 million over
the prior year primarily due to variations in the revenue mix and 1997 third
quarter events as described above. Year-to-date results also reflect
approximately $20 million of expenses associated with restructuring the
Company's interest in five vessel-owning limited liability companies as part of
its commercial exit strategy. These expenses were offset by previously
established reserves resulting in no net impact to the Company.
The Company's backlog was $3.0 billion at September 20, 1998, substantially all
of which was U.S. Navy-related.
9
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NEWPORT NEWS SHIPBUILDING INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
The following table reflects the summarized components of the Company's cash
flows for the periods indicated:
For the Nine Months Ended
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
Millions
Net cash provided by operating activities............... $ 7 $ 135
Capital expenditures.................................... (9) (16)
Other investing cash flows.............................. (5) (3)
------- -------
Subtotal................................................ (7) 116
Financing activities.................................... 4 (44)
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Net (decrease) increase in cash and cash equivalents.... $ (3) $ 72
======= =======
NET CASH PROVIDED BY OPERATING ACTIVITIES
The $128 million decrease in 1998's comparative cash flows from operating
activities is primarily due to an increased investment in working capital and
higher income tax payments, partially offset by higher operating earnings as
compared to the prior year. The increase in working capital as compared to the
prior year is due to normal timing fluctuations with respect to billings,
accounts receivable collections, and the recognition of contract costs.
Additionally, 1998 reflects higher tax payments due to the recognition of income
previously deferred for tax purposes on the aircraft carriers Stennis and
Truman. The higher operating earnings are attributable to the factors discussed
above in "Results of Operations."
CAPITAL EXPENDITURES
The $7 million decrease in capital expenditures for the period ended September
20, 1998 compared to the period ended September 21, 1997 is attributable to
expenditures related to capital improvement programs completed in 1997, such as
the development of a state-of-the-art automated steel cutting and fabrication
facility.
OTHER INVESTING CASH FLOWS
The 1998 and 1997 investing activities primarily relate to investments in five
vessel-owning limited liability companies in partnership with a U.S. shipping
firm, which will own and operate five commercial product tankers, three of which
are under construction by the Company. The first two ships were delivered by the
Company shortly after the end of the third quarter.
FINANCING ACTIVITIES
For the nine months ended September 20, 1998, the Company borrowed funds under
its revolving credit facilities. These proceeds were partially offset by the
purchase of Company stock, payments on long-term debt, and the payment of
quarterly dividends of four cents per share. The financing activities in 1997
reflect the receipt of $9 million from the issuance of common stock related to
the Company's benefit plans, payments on the revolving credit facility and
long-term debt, the purchase of Company stock on the open market for employee
benefit plans, and the payment of quarterly dividends of four cents per share.
10
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NEWPORT NEWS SHIPBUILDING INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YEAR 2000
The Company continues to evaluate the potential impact of the "Year 2000"
problem on its systems and operations. A Year 2000 plan has been developed
addressing Year 2000 awareness, specific problem identification, risk and
potential impact assessment (including the risk and potential impact of
noncompliance by the Company's suppliers, subcontractors and customers,
including the United States Navy), resource allocation, remediation work
required, and a completion timetable.
The Company's Year 2000 analysis and remediation plan is dual faceted, focusing
on both information technology ("IT") systems as well as imbedded, non-IT
systems that are integral to specific operating and support functions. The
Company is also installing new hardware and software as part of the
implementation of its new shared data environment which is expected to help
mitigate potential Year 2000 problems.
An oversight committee consisting of members of senior management has been
established. An outside consultant completed a study in July 1998 of the non-IT
component of the Company's Year 2000 exposure. The results of that study have
been reported to senior management.
The Company's Year 2000 effort began at the end of 1994 with the identification
and remediation of systems using long lead-time dates. Such work was completed
in the middle of 1996. Remediation of the Company's critical IT systems is
expected to be completed in the fourth quarter, with comprehensive, off-site
integration tests of the corrected systems scheduled for the first quarter of
1999. It is currently anticipated that remediation and testing of non-IT
systems, and certain IT systems that will be replaced, will be finished by
mid-year 1999.
Remediation work and systems testing will be accomplished using a combination of
existing internal Company resources and outsourcing and will be funded with cash
generated from operations or existing credit facilities. Expenditures, including
consulting fees and expenses, have so far totaled approximately $2 million since
the inception of the Company's Year 2000 effort in 1994. Approximately $1
million has been expended in 1998. It is currently projected that aggregate
expenditures for both IT and non-IT systems remediation and testing will total
approximately $5 to $10 million, although, based on the results of the
consultant's study and the Company's continuing risk assessment and remediation
planning, the budget in the non-IT area continues to be developed and may
undergo future adjustment as more systems functions requiring remediation are
identified, ranked as to criticality, and appropriate resources are allocated.
In addition to addressing its own computer systems, the Company has surveyed and
continues to work with its principal subcontractors, suppliers, and customers
(including the U.S. Navy) to promote their Year 2000 compliance, as it may
impact on the financial position or results of operations of the Company.
Nevertheless, the Company does not control, and can give no assurances as to the
substance or success of the Year 2000 compliance efforts of such independent
third parties.
Management believes that the Company will successfully implement its Year 2000
remediation plan on schedule and will be Year 2000 compliant before the end of
1999. Nevertheless, management believes that there is a risk that certain of its
principal customers, subcontractors, suppliers, and others on whom the Company's
finances and operations depend to a large extent will experience Year 2000
problems that could affect the financial position or results of operations of
the Company.
11
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NEWPORT NEWS SHIPBUILDING INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Without intending to be exhaustive, these risks include the potential inability
of key subcontractors and suppliers to correctly or timely provide necessary
services, materials, and components for the Company's operations; the inability
of its customers to timely or correctly process and pay the Company's invoices;
the inability of lenders, lessors, or other sources of the Company's necessary
capital and liquidity to make funds available to the Company when required; and
the inability of computer systems service providers to maintain the Company's
essential systems due to excessive demand for their services from other clients
experiencing unanticipated or more severe than anticipated Year 2000 problems.
In case the Company does experience severe Year 2000 financial and operating
problems, notwithstanding its efforts to avoid or mitigate problems inherent in
its own computer systems or the adverse effects of Year 2000 problems
experienced by third parties on whom it is substantially reliant, the Company
is developing appropriate contingency plans.
Although no assurances can be given, based on the information presently
available to it, management does not expect the overall costs of the Company's
efforts to correct the Year 2000 problems inherent in its IT and non-IT systems,
or a failure by some of its suppliers, subcontractors and customers to timely
anticipate and correct their Year 2000 computer systems problems, to have a
material effect on the financial position or the results of operations of the
Company.
As implementation of the Company's Year 2000 remediation plan progresses, and
more information becomes available to it, the Company expects to periodically
reassess the content of, as well as its strategy for implementing, that plan.
There can be no assurance that the currently estimated costs of implementing its
Year 2000 remediation plan or the currently estimated impact of the Year 2000
problem on the Company's financial position and results of operations will not
be revised at that time based on the facts then known to the Company.
CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-Q contains forward-looking statements
concerning, among other things, the Company's prospects, developments and
business strategies. These forward-looking statements are identified by their
use of such terms as "intends," "estimates," "expects," "projects,"
"anticipates," "should," "believes" and "scheduled." 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 in Note 3 to the Company's Financial Statements, (ii) the factors
addressed in Management's Discussion and Analysis of Financial Condition and
Results of Operations, and (iii) the following factors: (a) general political,
economic and competitive conditions; (b) initiatives to reduce the federal
budget deficit and further reductions in defense spending; (c) reductions in the
volume of U.S. Navy contracts awarded to the Company; (d) unanticipated events
affecting delivery and production schedules or design and manufacturing
processes, which could impair 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, if any, of such reductions; and (e) unanticipated
events affecting the Company's efforts and the efforts of its suppliers,
subcontractors, and customers (including the U.S. Navy) to timely correct Year
2000 problems inherent in essential computer systems, which could impair the
Company's operations or the ability of its customers to timely pay for products
and services provided.
12
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to Note 3, "Commitments and Contingencies" to the Company's
Financial Statements contained herein, which is incorporated in this Item 1 of
Part II by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit 27.1 Financial Data Schedule
During the third quarter, the Company did not file any current reports on Form
8-K.
13
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Newport News Shipbuilding Inc.
By David J. Anderson
------------------
Senior Vice President and
Chief Financial Officer
Date: November 4, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from the Newport News Shipbuilding Inc. Balance Sheet
as of September 20, 1998, and the related Statement of Earnings
for the nine months ended September 20, 1998 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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0
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