
DATE: Saturday, July 12, 1997               TAG: 9707120337

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER 

                                            LENGTH:   87 lines

SHIPYARD'S PRODUCTION SLUMP MEANS EARNINGS DROP

Without a submarine to build and in between aircraft carrier overhauls, Newport News Shipbuilding reported dips in second quarter income and revenue on Friday.

The big Peninsula shipyard, an independent company since December, did match the earnings expectations of Wall Street analysts with income of $14 million, or 39 cents a share. If it had been independent last year, it would have made $18 million in last year's second quarter.

``We are establishing a record of consistency for meeting our financial targets, and our strategic focus remains concentrated on enhancing our core business, improving our cost structure and adding low-risk growth work,'' said Chairman and CEO William P. Fricks. ``We believe that this model will provide consistent, long-term performance improvements, creating value for our shareholders.''

The shipyard, which employs 18,000 people, is the Navy's only builder of aircraft carriers and one of two yards that can build submarines. It is also building nine commercial petroleum product tankers. The order book at the end of the second quarter amounted to $3.1 billion.

Newport News Shipbuilding's stock had risen 43.75 cents to $20.1875 a share in Friday trading on the New York Stock Exchange. The stock, which had been trading in the $14 to $16 a share range most of the year, has been rising since the end of May.

Fricks attributed the rise in large part to the reduction in selling pressure from shareholders who wanted to own stock in the yard's former parent, Tenneco, but not in a stand-alone defense company.

The shipyard's operating income, which yard executives called a better measure to compare performance, slipped 7.5 percent to $37 million in the quarter, down from $40 million a year ago. Operating income doesn't take into account the cost of interest on the shipyard's debt or income taxes.

Revenues at the yard fell 5.7 percent to $450 million, compared to $477 million a year earlier.

So far this year Newport News Shipbuilding has made $27 million, or 77 cents a share, on revenues of $853 million.

In the second half of 1997, the yard expects to post results that show improvements over comparable periods last year, said Dave Anderson, chief financial officer.

The decline in income and revenue can be traced to the absence of submarine construction and a break between carrier overhauls.

Newport News Shipbuilding delivered the last Los Angeles-class submarine to the Navy last August. Since then it has negotiated an agreement with the Navy and its competitor General Dynamics Corp.'s Electric Boat for team-building of the next generation of subs, known as the New Attack Submarine.

The Navy and the yards are seeking Congressional approval of the teaming plan. Newport News Shipbuilding won a preliminary engineering contract on the new sub on Monday worth $118 million.

It is constructing two carriers, the Harry S. Truman and the Ronald Reagan. The Truman, scheduled for delivery next June, is being outfitted and tested, and the structural units of the Reagan, slated for 2002, are in fabrication.

The Roosevelt arrived in the yard for a yearlong overhaul on July 8, not in time to affect the second quarter, except for planning and advance procurement. The yard is also preparing for the refueling and complex overhaul of the Nimitz, due to arrive early next year.

The last carrier overhaul, on the Eisenhower, ended in January.

Newport News Shipbuilding completed work in May on the second of two conversions of commercial cargo ships for use by the Military Sealift Command.

The first of the commercial tankers it is building, the American Progress, is undergoing final modifications for delivery to Mobil Oil Corp. in late summer. The second tanker in the series, the Agathonissos, was launched in June and is being outfitted for a late 1997 delivery. Construction of the third is well underway in Dry Dock 12 and the keel of the fourth will be laid in mid-summer.

Newport News Shipbuilding has lost about $100 million on the tanker order, but sees the losses as a necessary cost of re-entering commercial ship construction. Fricks also sees some risk of losses on the second order of five ships, citing the steep learning curve.

However, he said, ``We are seeing good progress ship over ship.''

The yard doesn't plan to take any new commercial orders until early next year, when it should have a handle on costs for the next five tankers, Fricks said.

``I think we will be back in commercial shipbuilding,'' he added. ILLUSTRATION: CURRENT WORKS

The Navy's only authorized carrier builder and one of two that

builds submarines, Newport News Shipbuilding, has plenty in store

for the third quarter.

Construction of two carriers, Harry S. Truman and Ronald Reagan

Overhauling the carrier Roosevelt

Seeking Congressional approval of a team-building plan for the next

generation of subs.