Newport News Shipbuilding reported net earnings of $20 million, or $.58 per diluted share for the third quarter of 1999. Earnings before interest and taxes (EBIT) for the quarter were $47 million, up nine percent from EBIT of $43 million in the same period last year.
"This was another excellent quarter for Newport News. We were able to deliver solid earnings gains, exceed our cash flow target and negotiate a new five-year labor agreement," said William P. Fricks, chairman and CEO. "We also demonstrated our significant capabilities in fleet services with carrier life-cycle support activity in Newport News, San Diego and Seattle. Overall, we see our continued strong performance in 1999 as providing a solid foundation for 2000.
NNS posted third quarter revenues of $451 million, versus $462 million in the third quarter last year. Increased revenues in Fleet Services continued the momentum established in the segment over the past several quarters. Virginia class submarine revenues also grew as activity on that program increased. These gains were offset by lower aircraft carrier construction revenues.
EBIT in the quarter rose to $47 million from $43 million last year. The volume gains in Fleet Services, coupled with improved margins in the Construction segment, contributed to the advance in EBIT.
Free cash flow totaled $21 million for the quarter bringing the year-to-date free cash flow to $117 million. "The strength of our business is most evident in the strong free cash flow, which has allowed us to accelerate our share repurchase program
," Fricks said. "Cash flow continues to exceed our original target for the year owing to ongoing cash initiatives and favorable working capital requirements."
One of the most significant events of the third quarter for Newport News was the arrival of the nuclear-powered aircraft carrier USS Enterprise for an $85 million overhaul. The ship arrived in August and will remain at Newport News for the remainder of the year.
Newport News is also supporting the continuous maintenance program for the carrier USS John C. Stennis in San Diego. Having successfully managed the performance of the non-propulsion overhaul work on Stennis, Newport News is now planning for the carrier's October 2000 availability. Additionally, a Newport News led team in Seattle recently completed repair work on USS Abraham Lincoln, and began an eleven-month docking availability on USS Carl Vinson
The quarter also brought significant ship repair to Newport News. The company won a competitive contract award for the planning and overhaul of the Navy's USS Gettysburg, a Ticonderoga class guided missile cruiser. The work consists of upgrades to the weapons systems, installation of new generators, and modernization of berthing spaces. With respect to commercial ship repair
, the company performed maintenance work on the Carnival cruise ships Inspiration and Paradise.
Final Congressional Action on the fiscal year 2000 federal defense budget is anticipated to provide funding for all of Newport News' key platforms. Advanced procurement funding for the ninth Nimitz class carrier
, CVN 77, and research and development on the next class of carriers, CVN (X), are both included in the budget plan. In addition to the carrier construction programs, the budget plan contains advanced funding for the refueling and complex overhaul of the carrier USS Dwight D. Eisenhower. The Virginia class submarine program is also targeted for advanced procurement funding. "It is important to note that Congress is fully supporting all of our programs with funding in the current year's budget plan," said Fricks. "This should provide additional stability and visibility to our core programs."