William Fricks News

Military ship and submarine builder Newport News Shipbuilding Inc. on Friday posted flat fourth-quarter earnings, but beat targets in part on a ramp-up in activity on the Virginia-class submarine and a stock buyback that cut the number of shares outstanding. For 2001, the company said revenues would be even with last year, as first-quarter revenues are hurt by submarine volume reported in the last quarter of 2000. Still, per-share profits should grow due to improved margins. Virginia-based Newport News, maker of the world's largest warships, reported fourth-quarter net income of $24 million, unchanged from a year ago. On a per share basis…

General Dynamics Corp. said it would buy rival Newport News Shipbuilding Inc. for $2.1 billion in cash, creating the only U.S. builder of aircraft carriers and submarines for the U.S. Navy. General Dynamics' bid comes amid renewed consolidation in the defense industry, following Northrop Grumman Corp.'s $3.8 billion purchase last year of shipbuilder Litton Industries. The deal, if approved by regulators, would leave only two major U.S. contractors for naval military ships. Under terms of the transaction, General Dynamics will pay $67.50 for each of Newport News' 31.9 million shares outstanding and assume about $500 million in Newport News debt. The offer represents a 23 percent premium to Newport News' closing stock price of $55.05 on Tuesday.

In a move that could possibly trigger the final slowdown in naval shipbuilding corporate asset consolidation, General Dynamics late last month made a $2.6 billion (a total which includes nearly $500 million of current debt takeover) bid to buy Newport News Shipbuilding. The move — while hardly a shock to defense insiders who have witnessed the proliferation of fewer, larger corporate entities serving the military markets — in essence provides the Pentagon a one-stop shop for the purchase of nuclear submarines and nuclear aircraft carriers. Just two years ago a similar attempt by General Dynamics was thwarted, largely because the bid in 1999 was hostile in nature and because of concerns regarding a monopoly of nuclear newbuilding capability.

Newport News Shipbuilding Inc. reported a 16 percent increase in second-quarter operating profits on strength in its construction segment. The company, which is at the center of an ongoing hostile takeover battle between rivals General Dynamics Corp. and Northrop Grumman Corp. posted net earnings of $21 million, or 69 cents per share, for the quarter, including merger-related charges of about $0.17 per share. Adjusted for nonrecurring items, Newport News reported earnings of 86 cents per share compared with 74 cents per share a year ago. Revenues totaled $576 million versus $532 million in the second quarter of 2000 on strong gains in its construction segment due to the ramp up in activity on the Virginia-class submarine program and build-up on the new CVN77 carrier construction project.