THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Saturday, February 1, 1997 TAG: 9702010302
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: 62 lines
The end of submarine construction, continuing losses in its tanker construction program and losses on two military cargo ships depressed 1996 and fourth-quarter earnings at newly independent Newport News Shipbuilding.
Friday marked the first time since 1968 that the big James River shipyard, which employs nearly 18,000 workers, reported earnings as an independent firm.
Interest payments on the debt it took on as part of its December spinoff from Tenneco Inc. also reduced the yard's earnings. The spinoff itself cost about $5 million in investment banking, legal and accounting fees.
``Clearly, 1996 has been a year of transition,'' said William P. Fricks, the shipyard's chairman and chief executive.
Newport News Shipbuilding made $55 million in 1996, 25 percent less than the $73 million it made in 1995. Fourth-quarter earnings were $3 million, compared with $15 million a year earlier. Per share earnings were 9 cents a share in the quarter and $1.60 for the year.
Construction and repair work generated $1.87 billion of revenues in 1996, up from $1.76 billion the year before. Fourth-quarter revenues dipped 7.1 percent to $433 million.
The shipyard reported that it had $3.5 billion of work on order at the end of the year.
Employment at the yard should only dip slightly to between 17,000 and 17,500 this year, Fricks said.
The construction and overhaul of Navy aircraft carriers accounts for 85 percent of the shipyard's backlog. Work continued last year on the construction and overhaul of three carriers. It also completed construction of a $25 million nuclear refueling complex for the carriers in 1996.
While the yard will eventually resume submarine construction, it delivered the last two Los Angeles-class attack subs to the Navy last year. It's scheduled to begin construction of the second in a new generation of attack subs in 1999. The first will be started by General Dynamics Corp.'s Electric Boat unit in Connecticut in 1998.
There have been Pentagon-coordinated talks between the two yards about building the subs together. The Defense Department wants to slow the program to free up money for other projects.
``There is no teaming agreement yet,'' said Fricks, who declined to speculate on whether there will be.
Meanwhile, the losses in the petroleum-product tanker construction program mounted to about $100 million.
``Commercial work continues to be a challenge,'' he said. ``We knew it would be, and it is.''
The shipyard re-entered commercial shipbuilding in 1995 after a 15-year hiatus to diversify, sustain jobs and learn money-saving commercial techniques.
On Thursday, the yard announced the sale of the first tanker to Mobil Corp. instead of the original buyer, the Greek shipping firm Eletson Corp.
Fricks estimated that Newport News Shipbuilding will not turn a profit on the tankers until it nears the end of current orders. In the meantime, the shipyard isn't taking any more orders for tankers until it gets a handle on the process and the losses, he said.
The shipyard also lost $50 million last year on the conversion of two military cargo ships. One was delivered last year; the second will be delivered in the second quarter.
``Fortunately that program is behind us,'' Fricks said.