<PAGE>
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 17, 2000
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
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State or Other Jurisdiction of IRS Employer
Incorporation or Organization Identification No.
4101 Washington Avenue, Newport News, Virginia 23607-2770
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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: 35,304,684 shares and associated
preferred stock purchase rights as of October 16, 2000.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
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....... 10
Quantitative and Qualitative Disclosures About Market Risk ................................. 11
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 Matters........................................................................... 13
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, 1999.
<PAGE>
PART I
FINANCIAL INFORMATION
NEWPORT NEWS SHIPBUILDING INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------
September 17, September 19,
2000 1999
------------------ ------------------
<S> <C>
Millions (Except Shares and Per Share Amounts)
Revenues............................................................... $ 493 $ 451
Operating Costs and Expenses........................................... (445) (405)
Other Income (Expense), net............................................ 2 1
------------ ------------
Operating Earnings..................................................... 50 47
Interest Expense, net of interest capitalized.......................... (13) (13)
------------ ------------
Earnings Before Income Taxes........................................... 37 34
Provision for Income Taxes............................................. (16) (14)
------------ ------------
Net Earnings........................................................... $ 21 $ 20
============ ============
Weighted Average Number of Common Shares Outstanding
Basic............................................................. 30,359,834 34,132,786
============ ============
Diluted........................................................... 32,143,996 35,474,413
============ ============
Net Earnings Per Common Share
Basic............................................................. $ .71 $ .60
============ ============
Diluted........................................................... $ .67 $ .58
============ ============
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 17, September 19,
2000 1999
------------------ ------------------
<S> <C>
Millions (Except Shares and Per Share Amounts)
Revenues............................................................... $ 1,494 $ 1,325
Operating Costs and Expenses........................................... (1,346) (1,178)
Other Income (Expense), net............................................ 3 16
------------ ------------
Operating Earnings..................................................... 151 163
Interest Expense, net of interest capitalized.......................... (38) (37)
------------ ------------
Earnings Before Income Taxes........................................... 113 126
Provision for Income Taxes............................................. (47) (53)
------------ ------------
Net Earnings........................................................... $ 66 $ 73
============ ============
Weighted Average Number of Common Shares Outstanding
Basic............................................................. 31,124,574 34,614,703
============ ============
Diluted........................................................... 32,539,751 35,939,862
============ ============
Net Earnings Per Common Share
Basic............................................................. $ 2.12 $ 2.11
============ ============
Diluted........................................................... $ 2.03 $ 2.03
============ ============
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
<TABLE>
<CAPTION>
September 17, December 31,
2000 1999
---------------- ------------------
(Unaudited) (Audited)
<S> <C>
Millions (Except Share Amounts)
ASSETS
Current Assets
Cash and Cash Equivalents.................................................... $ 2 $ 2
Accounts Receivable.......................................................... 145 93
Contracts in Process......................................................... 271 317
Inventory.................................................................... 57 55
Deferred Income Taxes........................................................ 113 108
Other Current Assets......................................................... 14 17
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Total Current Assets......................................................... 602 592
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Noncurrent Assets
Property, Plant, and Equipment, net.......................................... 682 716
Other Assets................................................................. 222 204
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Total Noncurrent Assets...................................................... 904 920
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$ 1,506 $ 1,512
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade Accounts Payable....................................................... $ 51 $ 73
Short-Term Debt.............................................................. 29 29
Postretirement Benefits...................................................... 131 124
Deferred Income Taxes........................................................ 2 -
Other Accrued Liabilities.................................................... 260 220
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Total Current Liabilities.................................................... 473 446
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Noncurrent Liabilities
Long-Term Debt............................................................... 508 525
Deferred Income Taxes........................................................ 234 233
Other Long-Term Liabilities.................................................. 29 35
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Total Noncurrent Liabilities................................................. 771 793
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Commitments and Contingencies (See Note 3)
Stockholders' Equity
Common Stock, $.01 par value -
authorized 70,000,000 shares; issued 35,342,314 shares at
September 17, 2000, and 35,290,652 shares at December 31, 1999.......... 1 1
Paid-In Capital.............................................................. 332 264
Retained Earnings............................................................ 146 84
Unearned/Deferred Compensation .............................................. (1) (3)
Stock Employee Compensation Trust (SECT) - shares held of 5,098,426 and
2,661,926 at September 17, 2000 and December 31, 1999, respectively..... (216) (73)
------- -------
Total Stockholders' Equity................................................... 262 273
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$ 1,506 $ 1,512
======== =======
</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)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------
September 17, September 19,
2000 1999
------------------ ------------------
<S> <C>
Millions
Cash Flows from Operating Activities:
Net Earnings ........................................................... $ 66 $ 73
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities -
Depreciation and Amortization................................... 41 43
Deferred Income Taxes........................................... (2) 5
(Gain) on Equity Investments.................................... (4) -
Loss on Asset Dispositions...................................... 6 11
Changes in Components of Working Capital -
Decrease (Increase) in -
Accounts Receivable........................................ (50) 36
Contracts in Process....................................... 46 30
Inventory.................................................. (2) (2)
Other Current Assets....................................... 3 (1)
Increase (Decrease) in -
Trade Accounts Payable..................................... (22) (52)
Accrued Liabilities and Other.............................. 49 (13)
Other, net...................................................... (3) 11
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Net Cash Provided by Operating Activities................................ 128 141
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Cash Flows from Investing Activities:
Capital Expenditures..................................................... (13) (10)
Other.................................................................... (4) (15)
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Net Cash Used by Investing Activities.................................... (17) (25)
------ -------
Cash Flows from Financing Activities:
Decrease in Revolving Credit Facility.................................... (2) (54)
Payments on Long-Term Debt............................................... (15) (15)
Payments on Short-Term Debt.............................................. - (9)
Issuance of SECT Shares/Common Stock..................................... - 22
Treasury Stock /SECT Purchases........................................... (73) (56)
Dividends Paid........................................................... (4) (4)
Stock Options Exercised.................................................. (16) (2)
Other.................................................................... (1) 2
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Net Cash Used by Financing Activities.................................... (111) (116)
------ -------
Net Increase (Decrease) in Cash and Cash Equivalents..................... - -
Cash and Cash Equivalents at Beginning of Period......................... 2 3
------ -------
Cash and Cash Equivalents at End of Period............................... $ 2 $ 3
====== =======
Cash Paid During the Period for Income Taxes............................. $ 41 $ 51
====== =======
Cash Paid During the Period for Interest................................. $ 32 $ 31
====== =======
</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. Operating results for the three and nine month periods
ended September 17, 2000 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2000. 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, 1999.
The Company is reporting quarterly results on an accounting-month basis
consistent with the prior year. In order to more effectively match revenues,
costs, and profits with operating segments, certain amounts for 1999 have been
reclassified to conform with the 2000 presentation. The December 31, 1999
balance sheet includes certain reclassifications to conform with the 2000
presentation. 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
Basic earnings per common share is computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the period.
Diluted earnings per common share is computed assuming the terms and conditions
for the contingent shares and common stock options were met and converted on
September 17, 2000 and September 19, 1999, respectively.
3. COMMITMENTS AND CONTINGENCIES
Government Contracting
As a general practice in 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. In some cases,
recognition of the inherent uncertainties and costs of litigation may cause
management to decide to settle a matter.
As with other government contractors, the U.S. 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 on occasion
agreed to 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 settlement discussions on certain matters and has filed a
lawsuit concerning specific cost accounting issues.
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 it concluded that the cost or pricing
data supplied by the Company to the U.S. Navy was not current, accurate, and
complete and, therefore, projected labor and overhead costs were overstated for
the Reagan contract. Accordingly, the DCAA recommended
6
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to the U.S. Navy's contracting officer that the contract price for Reagan
be reduced by approximately $135 million. After giving consideration to the cost
sharing provisions in the contract, the proposed price reduction could generate
an operating income adjustment of approximately $47 million over the life of the
contract.
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
U.S. Navy seeking to reduce the Reagan contract price and intends to pursue its
defenses in response to any attempt by the U.S. Navy to make such a reduction.
Management believes that the final resolution of this matter will not have a
material impact on the financial position or results of operations of the
Company.
In addition to the DCAA audit, a civil investigation, also focused on the cost
or pricing data that the Company supplied to the U.S. 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 first quarter of 1999, the Company received a letter from the U.S.
Navy Supervisor of Shipbuilding forwarding a DCAA final audit report questioning
approximately $83 million of costs allocated to U.S. Government contracts as
Independent Research and Development ("IR&D"). The letter requested additional
comments regarding why NNS considers its existing cost accounting practice to be
compliant with the Cost Accounting Standards. The Company provided such comments
in the second quarter of 1999. On June 20, 2000, the Department of Defense
Inspector General's Office issued a subpoena to the Company for certain records
pertaining to this matter. The Company is in the process of responding to that
subpoena. Management believes that the final resolution of this matter will not
have a material impact on the financial position, results of operations, or cash
flows of the Company.
Litigation
The Company is both a plaintiff and a defendant in matters of 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 effect on the financial
position, results of operations, or cash flows of the Company.
4. REPORTABLE SEGMENTS
The Company's reportable operating segments represent strategic initiatives
supporting the entire lifecycle of U.S. Navy ships - Construction, Fleet
Services, and Engineering, as well as a logical linking of similar contracts
based on funding provisions. Engineering contracts generally receive funding on
an annual basis, Fleet Services contracts typically span between one month and
two years, and Construction contracts generally span a period of two or more
years. The reportable segments are managed separately because each business has
differing customer requirements based on the nature of the services provided.
The Company evaluates performance based on profit or loss from operations before
interest and income taxes, not including nonrecurring gains and losses.
7
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Information about Revenues and Operating Earnings
For the Quarters Ended September 17, 2000 and September 19, 1999, respectively
(in millions)
<TABLE>
<CAPTION>
Reportable
Fleet Segments All
Construction Services Engineering Subtotal Others (1) Total
------------ -------- ----------- ---------- ---------- -----
<S> <C>
2000
----
Revenues..................... $ 222 $ 188 $ 80 $ 490 $ 3 $ 493
Segment Operating Earnings... 27 17 5 49 1 50
1999
----
Revenues..................... $ 150 $ 228 $ 72 $ 450 $ 1 $ 451
Segment Operating Earnings... 22 21 5 48 (1) 47
</TABLE>
1. Other business activities include valve and pump repair and technical
services, equity investments, and corporate activities.
Information about Revenues and Operating Earnings
For the Nine Months Ended September 17, 2000 and September 19, 1999,
respectively (in millions)
<TABLE>
<CAPTION>
Reportable
Fleet Segments All
Construction Services Engineering Subtotal Others (1) Total
------------ -------- ----------- ---------- ---------- -----
<S> <C>
2000
----
Revenues..................... $ 655 $ 599 $ 228 $ 1,482 $ 12 $1,494
Segment Operating Earnings... 78 56 14 148 3 151
1999
----
Revenues..................... $ 495 $ 650 $ 174 $ 1,319 $ 6 $1,325
Segment Operating Earnings... 75 62 12 149 14 163
</TABLE>
1. Other business activities include valve and pump repair and technical
services, equity investments, and corporate activities.
Information about Assets (in millions)
<TABLE>
<CAPTION>
Fleet All
Construction Services Engineering Others (1) Total
------------ -------- ----------- ---------- -----
<S> <C>
September 17, 2000.............. $ 260 $ 107 $ 39 $ 10 $ 416
December 31, 1999............... 190 164 40 16 410
</TABLE>
8
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1. As the Company has a fully integrated production facility, its fixed
assets are commingled and not identified with specific profit centers.
Therefore, segment assets consist only of accounts receivable ("A/R") and
contracts in process ("CIP") balances applicable to identified segments.
Reconciliation of Segment Assets to Consolidated Amounts (in millions)
<TABLE>
<CAPTION>
September 17, December 31,
2000 1999
----------------- ------------------
<S> <C>
Assets
------
Total A/R and CIP for reportable segments........ $ 406 $ 394
Other unallocated A/R and CIP.................... 10 16
Other unallocated amounts........................ 1,090 1,102
--------- ----------
Total consolidated assets........................ $ 1,506 $ 1,512
========= ==========
</TABLE>
9
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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 fleet services for other U.S. Navy vessels
through work in overhauling, lifecycle engineering, and repair. The U.S.
Government accounted for approximately 97% of the Company's revenues for the
quarterly periods ended September 17, 2000 and September 19, 1999.
Results of Operations
For the Third Quarter Ended
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
Millions
Revenues................................ $ 493 $ 451
Operating Earnings...................... 50 47
Revenues for the third quarter of 2000 increased $42 million to $493 million
compared with the same period in 1999. The revenue improvement was attributable
to gains in the Construction and Engineering segments. Construction revenues
increased as a result of advanced planning work on the next aircraft carrier
(CVN 77), increased activity on the Virginia-class submarine program, as well as
higher activity on the carrier Reagan. Engineering revenues increased due to
development work on the propulsion plant for the next generation of aircraft
carriers. These volume gains were partially offset by lower Fleet Services
revenues as the refueling and overhaul of the carrier Nimitz enters its final
stages.
Third quarter 2000 operating earnings increased $3 million to $50 million
compared with the same period in 1999. The earnings improvement was driven by
volume gains in the Construction segment, which were partially offset by lower
activity on Nimitz as explained above. In addition, the Company reached a
preliminary agreement with the Navy during the quarter regarding the
simplification of its overhead allocation system. The agreement results in no
overall funding increase to the Navy, has no impact on overall contract profit
projections at completion, but does result in timing differences in the
recognition of profits on the Company's programs. The reallocation of costs
between programs affected by the cost allocation changes, together with the
Company's ongoing assessment of program opportunities and risks, resulted in
increased operating earnings in the Fleet Services segment of $9 million with a
corresponding $6 million decrease in the Construction segment. Overall there was
no material impact on revenues, operating earnings or cash flows of the Company.
The operating margins reported by segment for the quarter are consistent with
the estimated margins to contract completion for current programs.
For the Nine Months Ended
--------------------------------------------------------------------------------
2000 1999
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Millions
Revenues................................ $ 1,494 $ 1,325
Operating Earnings...................... 151 163
Revenues for the first nine months of 2000 increased $169 million to $1,494
million compared with the same period in 1999. The revenue improvement was
primarily attributable to gains in the Construction and Engineering segments
due to increased planning work on CVN 77, increased activity on the Virginia-
class submarine program and increased activity on the carrier Reagan. Increased
engineering development work on the propulsion plant for the next generation of
aircraft carriers also contributed to the growth in revenue. These volume gains
were partially offset by lower Fleet Services revenues as the refueling and
overhaul of the carrier Nimitz enters its final stages.
10
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Operating earnings for the first nine months of 2000 increased $13 million to
$151 million after adjusting 1999 results for non-recurring gains of $25 million
associated with the terminated Avondale merger and the settlement of insurance
claims on construction contracts. The improvement was primarily driven by volume
gains in the Construction segment on Reagan, CVN 77, and Virginia-class
submarines. These gains were partially offset by lower activity on Nimitz in the
Fleet Services segment.
The Company's funded backlog was $2.4 billion at September 17, 2000,
substantially all of which was U.S. Navy-related.
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
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
Millions
Net cash provided by operating activities...... $ 128 $ 141
Capital expenditures........................... (13) (10)
Other investing cash flows..................... (4) (15)
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Subtotal....................................... 111 116
Financing activities........................... (111) (116)
------- -------
Net increase (decrease) in cash and cash
equivalents.......... $ - $ -
======= =======
NET CASH PROVIDED BY OPERATING ACTIVITIES
The $13 million decrease in 2000's comparative cash flows from operating
activities was primarily due to lower earnings and an increase in working
capital resulting from normal timing fluctuations with respect to billings,
accounts receivable collections, the recognition of contract costs, and the
payment of trade accounts payable. These variances were partially offset by
lower tax payments in 2000 as compared to 1999.
OTHER INVESTING CASH FLOWS
Other investing cash flow activities in 2000 primarily relate to an additional
$5 million investment in AMSEC LLC, partially offset by a $1 million dividend
received from Abu Dhabi Ship Building. The 1999 investing activities primarily
relate to the Company's investment in AMSEC LLC. The Company owns 45% of this
low-cost fleet services organization.
FINANCING ACTIVITIES
The financing activities for the period ended September 17, 2000 reflect the
purchase of Company stock on the open market, decreased revolver borrowings, pay
down of debt, the impact of exercised stock options, and the payment of three
quarterly dividends of four cents per share. The 1999 financing activities
reflect the receipt of proceeds from the issuance of SECT shares related to the
Company's benefit plans, the purchase of Company stock under the stock
repurchase program, payments on long-term debt, payments on short-term debt,
pay-down of the revolving credit facility, and the payment of three quarterly
dividends of four cents per share.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes with respect to this item from the disclosure
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
11
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RECENTLY ISSUED STANDARDS
In June 1998, the Financial Accounting Standards Board issued FAS No. 133, (as
amended by FAS No. 137) "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. FAS No. 133 requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. FAS No. 133 is effective for
fiscal years beginning after June 20, 2000. The Company engages in minimal
derivative activity and therefore the adoption of this new standard is not
expected to have a material impact on the Company's financial position, results
of operations, or cash flows.
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 terms
such as"projections," "intends," "estimates," "expects," "projects,"
"anticipates," "goal," "plan," "should," "could," "believes," "assumed," 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
Consolidated 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 U. S. and international political,
economic and competitive conditions; (b) initiatives to reduce the federal
budget, including reductions in defense spending, or the failure of anticipated
increases in defense spending to materialize in whole or in part; (c) reductions
in the number or size of U.S. Navy contracts awarded to the Company; and (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.
12
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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 5. OTHER MATTERS.
Share Repurchase Programs
On February 1, 2000, the Company announced a $100 million share repurchase
program adding to a $100 million share repurchase program authorized in June
1999. The new plan will be implemented over the 2000-2001 time period and will
be accomplished through open market and privately negotiated transactions. The
Company has purchased 3.4 million shares at a cost of $100 million completing
the June 1999 authorization. As of October 16, 2000 the Company has also
purchased an additional 1.9 million shares at a cost of $64.6 million under the
February 1, 2000 share repurchase program.
Stockholder Proposals
In order for a stockholder to nominate a candidate for election as a director of
the Company or to propose other business to come before the Company's 2001
Annual Meeting of Stockholders, such nomination or proposal must be received by
the Secretary of the Company at its principal executive offices at 4101
Washington Avenue, Newport News, Virginia 23607, not later than March 9, 2001,
in accordance with the Company's Bylaws. Any proposal submitted by a stockholder
for inclusion in the proxy materials for the Company's Annual Meeting of
Stockholders in 2001 must be delivered to the Secretary of the Company at the
foregoing address, in accordance with Securities and Exchange Commission Rule
14a-8, not later than December 12, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit Number:
Exhibit 10.1 Newport News Shipbuilding Inc. Amended and Restated Stock
Employee Compensation Trust Agreement, dated as of August 1,
2000.
Exhibit 27.1 Financial Data Schedule
Except as indicated, during the third quarter, the Company filed the following
current reports on Form 8-K.
September 25, 2000* Newport News Shipbuilding's Chairman and Chief
Executive Officer announced internal organizational
changes.
September 20, 2000* Disclosure regarding Newport News Shipbuilding's
Chairman and Chief Executive Officer, William P.
Fricks presentation to securities analysts and other
attendees at the Morgan Stanley Dean Witter
Aerospace and Defense Conference.
September 18, 2000* Announcing the appointment of Charles (Chuck) S. Ream
as Senior Vice President and Chief Financial Officer
effective October 2, 2000.
June 20, 2000 Announcing the issuance by the Department of
Defense Inspector General's Office of a subpoena
to the Company for certain records pertaining to
IR&D expenditures.
* Filed subsequent to the end of the third quarter.
13
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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: /s/ Charles S. Ream
-----------------------
Senior Vice President and
Chief Financial Officer
Date: 10/31/00
14
