<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-K

            |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 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
--------                                                 ----------
State or Other Jurisdiction of                           IRS Employer
Incorporation or Organization                            Identification No.

4101 Washington Avenue, Newport News, Virginia           23607
----------------------------------------------           -----
Address of Principal Executive Offices                   Zip Code

        Registrant's Telephone Number, Including Area Code (757) 380-2000
                                                           --------------

                                   ----------

           Securities registered pursuant to Section 12(b) of the Act:

                                                         Name of Each Exchange
Title of Each Class                                       on Which Registered
-------------------                                      -----------------------
Common Stock, $0.01 Par Value                            New York Stock Exchange
(and associated Preferred Stock Purchase Rights)         Chicago Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:
                                      None

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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. |_|

The aggregate market value of the voting stock held by nonaffiliates of the
registrant was $1.91 billion at March 1, 2001.

34,933,238 shares of the registrant's Common Stock and associated preferred
stock purchase rights were outstanding at March 1, 2001.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Part III incorporates information from certain portions of the registrant's
definitive Proxy Statement in connection with its Annual Meeting of Stockholders
to be held on May 18, 2001.
<PAGE>

                                     PART I

ITEM 1. BUSINESS

The Company is the largest non-government-owned shipyard in the U.S., as
measured by each of revenues, size of facilities, and number of employees. Its
primary business is the design, construction, repair, maintenance, overhaul, and
refueling of nuclear-powered aircraft carriers and submarines for the U.S. Navy.
The Company believes it currently is: (i) the only shipyard capable of building
the U.S. Navy's nuclear-powered aircraft carriers, (ii) the only
non-government-owned shipyard capable of refueling and overhauling the U.S.
Navy's nuclear-powered aircraft carriers, and (iii) one of only two shipyards
capable of building the U.S. Navy's nuclear-powered submarines. Since its
inception in 1886, the Company has developed a preeminent reputation through the
construction of naval ships and commercial vessels.

U.S. Navy contracts for aircraft carrier and submarine construction and carrier
refuelings and overhauls have generated the majority of the Company's revenues.
Overall, the Company's U.S. Navy business accounted for approximately 98% of the
Company's revenues for 2000 and 1999, and 92% for 1998. Newport News
Shipbuilding has built 10 of the 12 active aircraft carriers in the U.S. fleet,
including all nine nuclear-powered aircraft carriers. For the last 40 years,
Newport News Shipbuilding has been the sole designer and builder of the U.S.
Navy's aircraft carriers.

For a summary of the Company's revenues and operating earnings by classes of
products and service, see Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

CONSTRUCTION

Construction activities generated approximately 46%, 38%, and 45% of revenues
for the years ended December 31, 2000, 1999, and 1998, respectively. In recent
history, the Company has principally been engaged in designing, constructing,
overhauling, and repairing aircraft carriers and submarines for the U.S. Navy,
and the Company's strategy is to improve this focus on its core business while
growing its U.S. Navy fleet maintenance, repair, and support business.

The Company is currently constructing Ronald Reagan, the ninth Nimitz-class
carrier, with delivery scheduled for 2003. In January 2001, the Company was
awarded a $3.6 billion contract modification for the construction of CVN 77,
increasing the total value of the contract to $4.1 billion. CVN 77 will serve as
a transition ship to the next class of carriers and is scheduled for delivery in
2008. The Company will assume an expanded construction role on CVN 77 by serving
as the systems integrator for the warfare system, a task previously performed by
the U.S. Navy.

As part of its continuing efforts to provide value and attract future work, the
Company established its Innovation Center (the "Center") in 1996. The Center
provides a state-of-the-art venue for design and systems solutions to reduce
both acquisition and life-cycle costs of vessels. The Center seeks to develop
the most innovative and cost-effective designs for future aircraft carriers and
submarines built at the Company, while also providing an optimum setting for
integrated product and process development teams.

In June 1998, the Commonwealth of Virginia ("the State") approved $98 million in
funding comprised of $58 million for the Company to construct and up to $40
million for the Company to operate the Virginia Advanced Shipbuilding and
Carrier Integration Center ("VASCIC"). The cost to build VASCIC approximates $58
million. Full funding of the $58 million construction cost has been provided by
the State through bonds issued by the Newport News Industrial Development
Authority. VASCIC is expected to begin operations in the third quarter of 2001.
The proposed authorization of operations grant funds (up to $40 million by 2004)
is uncertain due to the inability of the Virginia General Assembly to pass a
budget for 2001. As of March 6, 2001, the General Assembly adjourned for the
year without a budget, and it is unclear whether the Governor will convene a
special session to reconsider the matter. Operations grant funding may be
approved by future General Assembly sessions.


                                       1
<PAGE>

VASCIC will serve as the focal point for the Company to advance the integration
of systems, promote the application of emerging technology into current and
future carriers, and position the Company as the technology and design leader
for the next class of nuclear-powered aircraft carriers, CVNX. VASCIC will
enhance and promote the quality and competitiveness of Virginia's shipbuilding
industry through testing and integration development projects, research, and
training of workers in the shipbuilding industry.

The Company is currently performing design concept studies for the next
generation of aircraft carriers, CVNX. The first aircraft carrier in this new
class, CVNX1, is expected to be awarded in 2006. In September 1998, the Defense
Acquisition Board announced that future aircraft carriers will be large-deck and
nuclear. Due to its position as the only shipyard capable of building the U.S.
Navy's nuclear-powered aircraft carriers, the Company believes it is in a strong
competitive position to be awarded these contracts, although no assurances can
be given that it will receive any award, that the project will not be delayed,
or that the project will be funded by Congress.

The Company is also one of two U.S. manufacturers of U.S. Navy nuclear-powered
submarines. The Company has constructed 53 nuclear-powered submarines, including
39 fast attack submarines and 14 of the larger, fleet ballistic missile
submarines. The Company delivered its final Los Angeles-class submarine in
August 1996.

At the urging of the U.S. Navy, the Company and Electric Boat Corporation
("Electric Boat"), a wholly-owned subsidiary of General Dynamics Corporation,
reached an agreement in February 1997 to cooperatively build the first four new
nuclear attack submarines of the Virginia-class ("NSSNs"). With Electric Boat
serving as the prime contractor and lead designer, each company will construct
certain portions of each submarine, with final assembly, testing, outfitting,
and delivery alternating between the two yards.

In September 1998, under the teaming arrangement, the Company participated in
the negotiation of a $4.2 billion contract for co-production of the first four
NSSNs. Design, development, and planning work took place over the course of
1998, with the Company initiating significant NSSN construction in 1999 and
2000. The Company estimates that the NSSN program could total up to 30
submarines, although no assurances can be given as to the number of NSSNs that
ultimately will be procured and built by the Company, either alone or in
cooperation with Electric Boat.

FLEET SERVICES

The Company provides ongoing maintenance for the U.S. Navy's vessels through
overhaul, refueling, and repair work, representing approximately 38%, 49%, and
39% of revenues for the years ended December 31, 2000, 1999, and 1998,
respectively. The Company possesses unique expertise in servicing nuclear naval
systems, and believes it is the only private shipyard presently capable of
refueling nuclear-powered aircraft carriers.

In an effort to enhance the Company's operations in this segment, the Company
completed a $20 million Consolidated Refueling Facility ("CRF") in 1997, and
will finish construction of a $27 million Radiological Support Facility ("RSF")
in the first quarter of 2001. The RSF will relocate radiological support
activities from 23 sites in the shipyard to a single facility. The facility will
house a liquid waste treatment plant, various laboratory functions, and
capabilities for handling hazardous/radioactive material.

Aircraft carrier work is generally assigned by the U.S. Navy based on the type
of work, location, and cost. In May 1998, the Company began refueling work on
the Nimitz, the first refueling of a Nimitz-class aircraft carrier. The Nimitz
refueling is in the final testing stage and is on track for re-delivery to the
Navy in mid-2001. At the same time, the Company has been performing planning
work on the next carrier refueling, Dwight D. Eisenhower, in preparation for its
arrival in the second quarter of 2001. Each Nimitz-class aircraft carrier will
be refueled once in its 50-year life. The Company estimates that up to ten
Nimitz-class aircraft carriers could be refueled over the next 30 to 40 years,
although no assurances can be given as to the number of Nimitz-class carriers
that will be refueled and that the Company will receive any award.


                                       2
<PAGE>

The Company also performs Post Shake-Down Availabilities ("PSA") on carriers and
submarines, which consist of repairs and maintenance after original delivery of
a vessel to the U.S. Navy, as well as short-duration government and commercial
ship repair work. During 2000, the Company completed the successful overhaul of
the Ticonderoga-class guided missile cruiser, Gettysburg, and a number of other
small repair jobs.

ENGINEERING

The Company provides engineering, planning, and design services primarily to the
U.S. Navy, representing approximately 15%, 12%, and 15% of revenues for the
years ended December 31, 2000, 1999, and 1998, respectively. The Company
maintains a stable level of funded engineering support services for the U.S.
Navy, which includes new aircraft carrier research and development, reactor
plant planning, and aircraft carrier and submarine engineering support. The
Company is a leader in aircraft carrier design, performing a majority of the
ship integration and related design development work for the Naval Sea Systems
Command. The Company has been able to apply its engineering capabilities in a
variety of projects for the U.S. Navy, including being the lead design yard and
planning yard for the Los Angeles-class submarine and lead design yard for the
Seawolf-class submarine.

COMPETITION

The reduced level of shipbuilding activity by the U.S. Navy during the past
decade has resulted in fewer contracts and workforce reductions in the industry,
but little infrastructure consolidation. The general result has been fewer
contracts awarded to the same fixed number of large shipyards. Based on the
President's 2001 budget, the Company believes the number of programs currently
planned by the U.S. Navy over the next several years will remain relatively
steady.

The Company believes an existing government-owned U.S. West Coast shipyard could
refuel nuclear-powered carriers if it made substantial investments in its
facilities, personnel, and training. An existing government-owned U.S. East
Coast shipyard is presently involved in nuclear refueling, overhaul, and
de-activation of Los Angeles-class submarines. With respect to the market for
U.S. military contracts for other types of vessels, there are principally six
major private U.S. shipyards, including the Company, that compete for contracts
to construct, overhaul, repair or convert other types of vessels.

In addition to competition from other shipyards, the Company competes for
project approval and funding with firms providing other defense products and
services, such as tanks and aircraft, to other branches of the armed forces, and
with other, non-defense demands on the U.S. budget. The Company also competes in
the engineering, planning, and design market with other companies that provide
engineering support services.

GOVERNMENT CONTRACTING, CLAIMS, AND INVESTIGATIONS

More than 95% of the Company's sales involve contracts entered into with the
U.S. Government. The Company's principal U.S. Government business is currently
performed under fixed price, fixed price plus incentive fee, cost plus incentive
fee, and cost plus fixed fee contracts. The risk to the Company of not being
reimbursed for its costs varies with the type of contract.

o     Fixed Price ("FP") - the contractor retains all cost savings on completed
      contracts, but is liable for the full amount of all expenditures in excess
      of the contract price.

o     Fixed Price Plus Incentive Fee ("FPIF") - the U.S. Government is liable
      for all allowable costs up to a ceiling price, with the contractor's fee
      increased or decreased according to a formula set forth in the contract
      that generally compares the amount of cost incurred to the contract target
      cost.

o     Cost Plus Incentive Fee ("CPIF") - the contractor's profit is determined
      by a contractually specified formula, which essentially compares allowable
      incurred costs to the contract target cost.

o     Cost Plus Fixed Fee ("CPFF") - the fee is the same without regard to the
      amount of cost incurred.


                                       3
<PAGE>

The Company currently constructs aircraft carriers pursuant to FPIF contracts,
and refuels carriers and constructs submarines pursuant to CPIF contracts.

Contracting with the U.S. Government may also result in the Company filing
Requests for Equitable Adjustments ("REA") in connection with its contracts.
REA's represent claims against the U.S. Government for changes in the original
contract requirements and resulting delays and disruption in contract
performance. In December 1999, the Company issued five REAs claiming entitlement
to certain allowable costs as a result of the impact to the Company's
performance due to a 1999 labor force strike. The settlement of these REAs is
not expected to have a material impact on the financial position, results of
operations, or cash flows of the Company.

The U.S. Government has the right to suspend or debar a contractor from
government contracting for violations of certain statutes or government
procurement regulations. The U.S. Government may also unilaterally terminate
contracts at its convenience with compensation for work completed.

As a general practice within the defense industry, the Defense Contract Audit
Agency (the "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.

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 made
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. Although the eventual outcome of these
audits and investigations cannot be determined at this time, management
believes, based on current information, that the ultimate resolution of these
matters will not have a material adverse effect on the financial condition,
results of operations, or cash flows of the Company (See Note 13 "Commitments
and Contingencies" to the Consolidated Financial Statements of the Company).

REGULATION

The Company is subject to stringent environmental laws and regulations in all
jurisdictions in which it operates. Management believes that the Company is in
substantial compliance with all applicable environmental laws and regulations.
Historically, environmental compliance costs incurred by the Company have not
been material. Like all of its U.S. competitors, the Company will be required to
upgrade its air emission control facilities pursuant to recently drafted
regulations under the Clean Air Act Amendments of 1990. These regulations call
for a phased-in compliance program such that the Company will continue to incur
such costs through 2001. Environmental compliance costs for the year ended
December 31, 2000 were not material to the Company's financial position, results
of operations, or cash flows. Although there can be no assurances, management
does not believe that future environmental compliance costs will have a material
adverse effect on the Company's financial position, results of operations, or
cash flows.

The Nuclear Regulatory Commission, the Department of Energy, and the Department
of Defense regulate and control various matters relating to nuclear materials
handled by the Company. Subject to certain requirements and limitations, the
Company's government contracts generally provide for indemnity by the U.S.
Government for any loss arising out of or resulting from certain nuclear risks
(See also "Government Contracting, Claims, and Investigations" on pages 3 and
4).


                                       4
<PAGE>

BACKLOG

The Company's funded backlog at December 31, 2000 and 1999 was $2.2 billion and
$3.2 billion, respectively. Backlog levels can change and U.S. Government
contracts can be unilaterally terminated for the convenience of the U.S.
Government at any time with compensation for work completed. More than 99% of
the Company's backlog at December 31, 2000 continued to be U.S. Navy-related.
The portion of 2000's backlog expected to remain at December 31, 2001 is $0.8
billion.

Subsequent to year-end 2000, significant additions have been made to the funded
backlog. These additions include $256 million of additional funding for
construction of the second, third, and fourth Virginia-class submarines, and
$3.6 billion for construction of the next Nimitz-class aircraft carrier, CVN 77.

MATERIALS AND SUPPLIES

All major materials, parts, and components for the Company's products are
currently available in adequate supply from domestic and/or foreign sources.
Through the cost escalation provisions contained in some of its U.S. Government
contracts, the Company is generally protected from increases in material costs
to the extent that the increases in the Company's costs are in line with
industry indices. In connection with its government contracts, the Company is
required to procure certain materials and component parts from supply sources
approved by the U.S. Government. The Company has not generally been dependent
upon any single-supply source; however, due largely to the consolidation of the
defense industry, there are currently several components for which there is only
one supplier. The Company believes that these sole source suppliers as well as
its overall supplier base are adequate to meet its foreseeable future needs.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to operating costs and expenses as
incurred. The amounts charged during the years ended December 31, 2000, 1999,
and 1998 were $4 million, $9 million, and $24 million, respectively. Under
current regulations, research and development costs can be charged to the U.S.
Government as allowable overhead allocated across all of the Company's
contracts. The actual amount of research and development costs allowed to pass
through U.S. Navy contracts is reviewed annually. Additionally, research and
development costs can also be directly funded by the U.S. Government through
specific contracts. These contracts produce quantifiable deliverables for the
U.S. Navy, for example, certain research and development projects on aircraft
carriers. Such research and development costs incurred under specific customer
contracts during the years ended December 31, 2000, 1999, and 1998 were $79
million, $33 million, and $57 million, respectively.

EMPLOYEES

At the end of 2000, the Company had approximately 17,000 employees, of whom
approximately 48% were covered by collective bargaining agreements with various
unions. The Company has entered into three collective bargaining agreements
covering nearly all of the Company's approximately 8,600 hourly employees. A new
agreement with the United Steelworkers of America that covers approximately
8,000 employees was ratified on July 30, 1999. This agreement ended a strike
that began when the Company's previous labor agreement expired on April 4, 1999.
Management believes that the financial terms of the new contract will not have a
material impact on the financial position or results of operation of the
Company. A labor agreement covering approximately 25 fire fighters expires in
2006. The Company is currently negotiating a new contract that will cover
approximately 110 plant guards. Management believes that the results of these
negotiations will not have a material impact on the financial position or
results of operations of the Company.


                                       5
<PAGE>

CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

This Annual Report on Form 10-K contains forward-looking statements concerning,
among other things, the Company's prospects, anticipated developments and
business strategies. These forward-looking statements are identified by terms
such as "intends," "estimates," "expects," "projects," "anticipates," "goal,"
"plan," "should," "believes," "assumed," "seeks," and "scheduled." The Company's
actual results may differ materially from the results discussed in these
forward-looking statements. Factors that might cause such a difference include
(i) the factors discussed in this Item 1 above, Item 2, Item 3, Item 7, Item 7A,
and in Notes 2, 10, and 13 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 further 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.

ITEM 2. PROPERTIES

The Company's principal facilities are located in Newport News, Virginia on
approximately 550 acres owned by the Company at the mouth of the James River.
Its facilities include seven graving docks, a floating dry dock, two outfitting
berths, five outfitting piers, a module outfitting facility, and various other
shops. Dry Dock 12 is the largest in the Western Hemisphere, and has been
extended to 662 meters. Dry Dock 12 is serviced by a 900 metric ton capacity
gantry crane that spans the dry dock and work platen. The Company believes that
substantially all of its productive assets are, in general, well maintained, in
good operating condition, considered adequate for present needs, and, as
supplemented by planned construction, expected to remain adequate for the near
future.

ITEM 3. LEGAL PROCEEDINGS

The information set forth in Item 1 under the caption "Government Contracting,
Claims and Investigations" appearing on pages 3 and 4, and in Note 13 -
"Commitments and Contingencies - Government Contracting" to the Consolidated
Financial Statements of the Company appearing on pages 36 and 37, of this Annual
Report on Form 10-K is incorporated herein by reference in response to this
item.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 4.1 EXECUTIVE OFFICERS OF THE REGISTRANT

The information as to executive officers of the Company, set forth in Item 10,
appearing on pages 42 and 43 of this Annual Report on Form 10-K, is hereby
incorporated in this Item 4.1 by reference.

                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The common stock, par value $.01 per share (the "Common Stock"), of the Company
is listed on the New York and Chicago Stock Exchanges. Options in the Company's
stock are traded on the American Stock Exchange.


                                       6
<PAGE>

The following table reflects the range of high and low selling prices of the
Company's common stock by accounting quarter for 2000 and 1999 based on selling
prices as reported by the New York Stock Exchange.

                                                                    2000
                                                             -------------------
                                                              High          Low
                                                             ------       ------
First Quarter ........................................       $30.75       $24.94
Second Quarter .......................................        36.13        26.63
Third Quarter ........................................        45.56        34.38
Fourth Quarter .......................................        57.69        41.88

                                                                    1999
                                                             -------------------
                                                              High          Low
                                                             ------       ------
First Quarter ........................................       $34.00       $27.00
Second Quarter .......................................        34.25        25.69
Third Quarter ........................................        32.94        29.44
Fourth Quarter .......................................        33.00        24.75

Dividends of $5.6 million were paid on the common stock during each of 2000 and
1999. As of December 31, 2000, the Company had 35,350,491 shares of common stock
outstanding. As of March 1, 2001, there were approximately 32,000 holders of
record of common stock. The Company's long-term debt obligations contain certain
customary restrictive covenants, including a limitation on the payment of
dividends (See Note 7 - "Long-Term Debt and Financing Arrangements" to the
Consolidated Financial Statements of the Company).

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                              --------------------------------------------------------
                                                               2000(a)    1999(a)     1998(a)     1997          1996
                                                              --------    --------    --------    --------    --------
<S>                                                           <C>         <C>         <C>         <C>         <C>
Millions, except per share data
STATEMENTS OF EARNINGS DATA:
Revenues..................................................    $  2,072    $  1,863    $  1,862    $  1,707    $  1,870
                                                              ========    ========    ========    ========    ========

Net earnings (loss).......................................    $     90    $     97    $     66    $   (48)    $     55
                                                              ========    ========    ========    =======     ========

Net earnings  (loss) per common share (b)
     Basic................................................    $   2.91    $   2.83    $   1.91    $ (1.39)    $   1.60
                                                              ========    ========    ========    =======     ========

     Diluted..............................................    $   2.77    $   2.72    $   1.85    $ (1.39)    $   1.60
                                                              ========    ========    ========    =======     ========

BALANCE SHEET DATA:
Total assets..............................................    $  1,476    $  1,512    $  1,600    $  1,515    $  1,535
                                                              ========    ========    ========    ========    ========

Long-term obligations.....................................    $    498    $    525    $    591    $    548    $    596
                                                              ========    ========    ========    ========    ========

Cash dividends declared per common share (c)..............    $    .16    $    .16    $    .16    $    .16         N/A
                                                              ========    ========    ========    ========    ========
</TABLE>

(a)   For a discussion of significant items affecting comparability of the
      financial information as of and for the years ended December 31, 2000,
      1999, and 1998, see Item 7 - "Management's Discussion and Analysis of
      Financial Condition and Results of Operations."

(b)   Basic net earnings (loss) per common share is based on net earnings (loss)
      divided by the weighted average number of common shares outstanding for
      the years ended December 31, 2000, 1999, 1998, 1997 and the period from
      December 12, 1996 through December 31, 1996. Prior to December 12, 1996,
      the Company was a wholly owned subsidiary. (See Note 1 - "Basis of
      Presentation and Description of Business" to the Consolidated Financial
      Statements of the Company).


                                       7
<PAGE>

(c)   Cash dividends declared per common share were four cents per share for
      each quarter in 2000, 1999, 1998, and 1997. Since the Company was a wholly
      owned subsidiary prior to December 12, 1996, there are no comparable
      results for prior periods (See Note 1 - "Basis of Presentation and
      Description of Business" to the Consolidated Financial Statements of the
      Company).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following review of the results of operations and financial condition of the
Company should be read in conjunction with the Consolidated Financial Statements
and related notes contained herein.

The U.S. Navy accounted for approximately 98% of the Company's revenues in 2000
and 1999, and 92% in 1998. One-third of the Company's principal U.S. Navy
business is currently being performed under firm fixed price or fixed price
incentive contracts, which wholly or partially cause the risk of construction
costs that exceed the contract target cost to be borne by the Company. The
accompanying table summarizes the percentage of revenues by contract type.

                                                 For the Year Ended December 31,
--------------------------------------------------------------------------------
Contract Type                                       2000      1999      1998
--------------------------------------------------------------------------------
Firm Fixed Price/Fixed Price Incentive .......       33%       33%       50%
Cost Based ...................................       67        67        50
                                                    ----      ----      ----

Total ........................................      100%      100%      100%
                                                    ====      ====      ====

The Company reports revenues and profits on its long-term contracts using the
percentage-of-completion method of accounting, determined on the basis of
incurred costs to estimated final total costs. Anticipated losses on contracts
are reported when first identified by the Company. The performance of contracts
usually extends over several years, requiring periodic reviews and revisions of
estimated final contract prices and costs. The effect of revisions to estimates
is included in earnings in the period the revisions are made.

2000 COMPARED TO 1999

RESULTS OF OPERATIONS

                                                 For the Year Ended December 31,
--------------------------------------------------------------------------------
Revenues                                              2000             1999
--------------------------------------------------------------------------------
Millions
Construction .................................       $  959           $  710
Fleet Services ...............................          791              913
Engineering ..................................          305              228
Related Business & Other .....................           17               12
                                                     ------           ------
Total ........................................       $2,072           $1,863
                                                     ======           ======

The Company's revenues increased 11.2% during 2000, improving from $1.86 billion
to $2.07 billion. The higher revenue level, as detailed in the following
discussion of operations, was driven by the Construction and Engineering
segments.

Construction - The $249 million increase in revenues was primarily attributable
to increased Virginia-class submarine activity, volume growth on the aircraft
carrier Reagan, and higher advanced planning revenues on CVN 77, the transition
ship to the next class of aircraft carriers.

Fleet Services - The $122 million decrease in revenues was primarily due to
lower activity on the refueling and overhaul of Nimitz as it approaches its
mid-2001 redelivery to the Navy, as well as lower post-delivery work on the


                                       8
<PAGE>

aircraft carriers Truman and Enterprise. Increased ship repair activity and
planning work on the aircraft carrier Eisenhower partially offset these
decreases.

Engineering - Revenues increased $77 million in 2000. The majority of the
increase was attributable to growth in propulsion plant design work on the next
generation of aircraft carriers, CVNX.

Related Business & Other - Revenues from Related Business & Other increased $5
million in 2000. The higher level of activity was due to miscellaneous services
for valve and pump repairs, and consulting and technical services.

                                              For the Year Ended December 31,
-----------------------------------------------------------------------------
Operating Earnings                                   2000       1999
-----------------------------------------------------------------------------
Millions
Construction ...................................     $111       $102
Fleet Services .................................       73         85
Engineering ....................................       18         15
Related Business & Other .......................        4         16
                                                     ----       ----
Total ..........................................     $206       $218
                                                     ====       ====

Operating earnings in 2000 increased $13 million to $206 million after adjusting
1999 results for non-recurring gains of $25 million associated with merger
break-up fees and option proceeds, and the settlement of insurance claims on
construction contracts. The increased operating earnings, as detailed below,
were primarily driven by higher Construction and Engineering revenues, partially
offset by lower Fleet Services volume.

Construction - Operating earnings in the Construction segment increased $19
million to $111 million after adjusting 1999 results for $10 million in
non-recurring gains related to insurance claim settlements on construction
contracts. The improvement was primarily driven by volume gains on the aircraft
carrier Reagan, higher advanced planning revenues on CVN 77, and an increase in
Virginia-class submarine activity.

Fleet Services - The $12 million decrease in operating earnings was primarily
due to lower refueling and overhaul activities on the aircraft carrier Nimitz,
as well as lower post-delivery work on the aircraft carriers Truman and
Enterprise. These decreases were partially offset by increased planning work on
the aircraft carrier Eisenhower and increased ship repair activity.

Engineering - The $3 million increase in operating earnings from Engineering
work was primarily driven by growth in propulsion plant design work on the next
generation of aircraft carriers, CVNX.

Related Business & Other - Operating earnings increased $3 million after
adjusting 1999 results for $15 million of non-recurring gains related to merger
break-up fees and option proceeds. The increase was primarily driven by improved
earnings on the Company's equity investments in Abu Dhabi Ship Building and
AMSEC LLC.

LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
                                                         For the Year Ended December 31,
----------------------------------------------------------------------------------------
Cash Flows                                                      2000       1999
----------------------------------------------------------------------------------------
<S>                                                            <C>        <C>
Millions
Net cash provided by operating activities ................     $ 202      $ 174
Capital expenditures .....................................       (35)       (29)
Other investing cash flows ...............................        (4)       (15)
                                                               -----      -----

Subtotal .................................................       163        130
Financing activities .....................................      (162)      (131)
                                                               -----      -----

Net increase (decrease) in cash and cash equivalents .....     $   1      $  (1)
                                                               =====      =====
</TABLE>


                                       9
<PAGE>

Net Cash Provided by Operating Activities - The $28 million increase in the 2000
comparative cash flows from operating activities was primarily due to a
reduction in working capital as a result of management initiatives and normal
timing fluctuations with respect to billings, accounts receivable collections,
the recognition of contract costs, and the payment of trade accounts payable.
Additionally, 2000 reflects lower tax payments as compared to 1999.

Capital Expenditures - Capital expenditure increases in 2000 were attributable
to the continuation of strategic capital improvement programs such as the
construction of a dedicated refueling complex to support carrier and submarine
refueling and overhaul activities.

Other Investing Cash Flows - Other investing cash flow activities in 2000 relate
to an investment in AMSEC LLC, partially offset by a $1 million dividend
received from Abu Dhabi Ship Building. The 1999 investing activities reflect a
$13 million investment in AMSEC LLC, as well as $2 million in net investments in
five vessel-owning limited liability companies which own and operate five
commercial product tankers built by the Company. In January 2001, the Company
sold its remaining interest in these limited liability companies at book value.

Financing Activities - The 2000 financing activities reflect the purchase of
company stock on the open market, pay-down of debt, outlays for exercised stock
options, and the payment of an annual dividend of sixteen cents per share. These
outflows were partially offset by increased revolver borrowings. In 1999, the
Company received $23 million from issuances of stock. These funds, as well as
those generated from operations, enabled the Company to pay off long-term debt,
reduce revolver borrowings, purchase company stock on the open market, and pay
an annual dividend of sixteen cents per share.

Capital Requirements and Resources - The Company requires that adequate working
capital be available at all times. While construction and conversion contracts
provide for progress payments, they generally require extensive investments in
contracts in process because of contract progress payment retentions and change
orders. Retentions generally due upon completion or acceptance of the contracted
work were immaterial as of December 31, 2000. Change orders, which make up an
appreciable portion of the Company's work, sometimes require extended periods of
negotiation during which time the expended funds are not available for other
uses. In addition, the Company estimates that expenditures aggregating
approximately $33 million will be required after December 31, 2000 to complete
planned capital projects for which substantial commitments have been made. It is
anticipated that the Company will utilize cash generated from operations or
borrowings under existing credit facilities to meet these commitments.

On November 4, 1996, the Company entered into a $415 million senior credit
facility ("Credit Agreement") which includes a $215 million six-year revolving
credit facility, of which $125 million may be used for advances and letters of
credit and $90 million may be used for standby letters of credit. This Credit
Agreement contains customary financial and restrictive covenants which limit
borrowing capacity under the credit facility. As of December 31, 2000, the
Company had used $14 million of the credit facility for standby letters of
credit and utilized $34 million of the $125 million for advances (See Note 7 -
"Long-Term Debt and Financing Arrangements" to the Consolidated Financial
Statements of the Company).

In June 1998, the Commonwealth of Virginia ("the State") approved $98 million in
funding comprised of $58 million for the Company to construct and up to $40
million for the Company to operate the Virginia Advanced Shipbuilding and
Carrier Integration Center ("VASCIC"). The cost to build VASCIC approximates $58
million. Full funding of the $58 million construction cost has been provided by
the State through bonds issued by the Newport News Industrial Development
Authority. VASCIC is expected to begin operations in the third quarter of 2001.
The proposed authorization of operations grant funds (up to $40 million by 2004)
is uncertain due to the inability of the Virginia General Assembly to pass a
budget for 2001. As of March 6, 2001, the General Assembly adjourned for the
year without a budget, and it is unclear whether the Governor will convene a
special session to reconsider the matter. Operations grant funding may be
approved by future General Assembly sessions.


                                       10
<PAGE>

Off-Balance Sheet Financing Arrangements - The Company has certain off-balance
sheet financing arrangements in the form of long-term operating leases and
service agreements (See Note 13 - "Commitments and Contingencies" to the
Consolidated Financial Statements of the Company).

INTEREST AND INCOME TAXES

Interest expense is principally generated from the Company's senior notes and
Credit Facility (See Note 7 - "Long-Term Debt and Financing Arrangements" to the
Consolidated Financial Statements of the Company). Expense levels for 2000 were
consistent with 1999.

The effective tax rate for both 2000 and 1999 was approximately 41%. The
difference between the Company's effective tax rate in 1999 and 2000 as compared
to the U.S. federal statutory rate of 35% was principally due to state income
taxes and miscellaneous permanent differences for tax.

RECENTLY ISSUED STANDARDS

In June 1998, the Financial Accounting Standards ("FAS") 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 on 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.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No.101, Revenue Recognition in Financial Statements (SAB 101), which,
among other guidance, clarifies certain conditions to be met in order to
recognize revenue. In June 2000, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101B which delayed the implementation of SAB 101
until the fourth quarter of fiscal years beginning after December 15, 1999. The
implementation of SAB 101 did not have a material impact on the Company's
financial position, results of operations, or cash flows.

1999 COMPARED TO 1998

RESULTS OF OPERATIONS

                                                 For the Year Ended December 31,
--------------------------------------------------------------------------------
Revenues                                              1999             1998
--------------------------------------------------------------------------------
Millions
Construction .................................       $  710           $  839
Fleet Services ...............................          913              724
Engineering ..................................          228              286
Related Business & Other .....................           12               13
                                                     ------           ------
Total ........................................       $1,863           $1,862
                                                     ======           ======

The Company's 1999 revenues of $1.86 billion were comparable to 1998. The 1999
revenues, as detailed in the following discussion of operations, were driven by
higher volume in Fleet Services, offset by lower volume in Construction and
Engineering.

Construction - The $129 million decrease in revenues was primarily due to lower
carrier construction and commercial shipbuilding activity. The lower carrier
construction activity was due to the delivery of the aircraft carrier Truman in
June 1998, as well as lower volume on the aircraft carrier Reagan. The lower
commercial shipbuilding revenue reflected the delivery of the sixth and final
commercial product tanker in June 1999. These


                                       11
<PAGE>

decreases were partially offset by increased construction activity on the
Virginia class of nuclear attack submarines, as well as planning activity on CVN
77, the transition ship to the next class of aircraft carriers.

Fleet Services - The $189 million increase in revenues was due to higher levels
of refueling and overhaul activity on the aircraft carrier Nimitz. Other
improvements were generated by post-delivery work on the aircraft carrier Truman
and overhaul work on the aircraft carrier Enterprise. These increases were
partially offset by the delivery of the aircraft carrier Roosevelt in July 1998
after successful completion of an extended dry-docking selected restricted
availability ("EDSRA").

Engineering - Revenues decreased $58 million in 1999. The majority of the
decrease was attributable to reduced activity associated with submarine
engineering programs.

Related Business & Other - Revenues from Related Business & Other was consistent
with 1998 levels.

                                                 For the Year Ended December 31,
--------------------------------------------------------------------------------
Operating Earnings                                     1999            1998
--------------------------------------------------------------------------------
Millions
Construction ..................................       $ 102           $  87
Fleet Services ................................          85              70
Engineering ...................................          15              19
Related Business & Other ......................          16              (1)
                                                      -----           -----
Total .........................................       $ 218           $ 175
                                                      =====           =====

Operating earnings of $218 million in 1999 included non-recurring gains of $25
million consisting of merger break-up fees and option proceeds and the
settlement of insurance claims on construction contracts. Excluding these
one-time items, operating earnings of $193 million reflected a 10% increase over
1998 operating earnings of $175 million.

Construction - The $15 million increase in operating earnings was primarily
attributable to $10 million in non-recurring gains related to insurance claim
settlements on construction contracts, as well as lower period costs associated
with the completion of the Double Eagle product tanker construction program.
These increases were partially offset by lower construction activity on the
aircraft carriers Truman and Reagan.

Fleet Services - The $15 million increase in operating earnings was primarily
due to higher levels of refueling and overhaul activity on the aircraft carrier
Nimitz. Other improvements were generated by PSA work on the aircraft carrier
Truman and planning work on the aircraft carrier Eisenhower. These improvements
were partially offset by the re-delivery of the aircraft carrier Roosevelt in
July 1998.

Engineering - The $4 million decrease in operating earnings for Engineering work
primarily reflected reduced activity associated with submarine engineering
programs.

Related Business & Other - The majority of the $17 million increase is a result
of $15 million of non-recurring gains related to merger break-up fees and option
proceeds.


                                       12
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
                                                         For the Year Ended December 31,
----------------------------------------------------------------------------------------
Cash Flows                                                      1999        1998
----------------------------------------------------------------------------------------
<S>                                                            <C>        <C>
Millions
Net cash provided by operating activities ................     $ 174      $   3
Capital expenditures .....................................       (29)       (26)
Other investing cash flows ...............................       (15)       (10)
                                                               -----      -----

Subtotal .................................................       130        (33)
Financing activities .....................................      (131)        33
                                                               -----      -----

Net increase (decrease) in cash and cash equivalents .....     $  (1)     $  --
                                                               =====      =====
</TABLE>

Net Cash Provided by Operating Activities - The $171 million increase in the
1999 comparative cash flows from operating activities was primarily due to a
reduction in working capital, as well as improved earnings as discussed above in
"1999 compared to 1998 - Results of Operations, Operating Earnings." The
reduction in working capital was due to normal timing fluctuations with respect
to billings, accounts receivable collections, the recognition of contract costs,
and the payment of trade accounts payable. Additionally, 1999 reflected lower
tax payments as compared to 1998 due to the recognition in 1998 of income
previously deferred for tax purposes on the contract for the aircraft carriers
Stennis and Truman.

Capital Expenditures - Capital expenditure increases in 1999 were attributable
to the continuation of strategic capital improvement programs, such as the
construction of a dedicated refueling complex to support carrier and submarine
refueling and overhaul activities.

Other Investing Cash Flows - Other investing cash flow activities in 1999
related to a $13 million investment in AMSEC LLC. The Company owns 45% of this
new low-cost fleet services organization. In addition, the Company also made $2
million of net investments related to its equity ownership interest in five
vessel-owning limited liability companies which now own and operate five
commercial product tankers delivered by the Company. The Company currently owns
approximately 24% of these limited liability companies. The 1998 investing
activities primarily relate to investments in the five vessel-owning limited
liability companies.

Financing Activities - In 1999, the Company received $23 million from issuances
of stock. These funds, as well as those generated from operations, enabled the
Company to pay off long-term debt, reduce revolver borrowings, purchase company
stock on the open market, and pay an annual dividend of sixteen cents per share.
In 1998, the Company received $79 million of net proceeds from borrowing
activities and $9 million from issuances of stock. These proceeds were utilized
to purchase company stock, pay off long-term debt, and pay dividends.

INTEREST AND INCOME TAXES

Interest expense is principally generated from the Company's senior notes and
term loan (See Note 7 - "Long-Term Debt and Financing Arrangements" to the
Consolidated Financial Statements of the Company). Expense for 1999 was lower
than the previous year due to lower revolver borrowings.

The effective tax rates for 1999 and 1998 were approximately 41% and 42%,
respectively. The difference between the Company's effective tax rates as
compared to the U.S. federal statutory rate of 35% was principally due to state
income taxes and miscellaneous permanent differences for tax.

CHANGES IN ACCOUNTING PRINCIPLES

During 1998, the Company adopted Financial Accounting Standards Board statement
("FAS") No. 130, "Reporting Comprehensive Income". FAS No. 130 establishes
standards for reporting and the display of comprehensive


                                       13
<PAGE>

income and its components in a full set of general purpose financial statements.
The Company did not have any material comprehensive income required to be
reported in 1998.

During 1998, the Company adopted FAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". FAS No. 131 establishes standards for
reporting information about operating segments in annual consolidated financial
statements and requires selected information about operating segments in interim
financial reports issued to stockholders (See Note 15 - "Reportable Segments" to
the Consolidated Financial Statements of the Company).

In December 1997, the AICPA issued Statement of Position ("SOP") 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments". The SOP provides, among other things, that an entity recognize a
liability for the present value of estimated future guaranty-fund and other
insurance-related assessments. As the Company has ceded certain workers'
compensation claims to a second-injury fund administered by the U.S. Department
of Labor and is subject to an annual assessment, the Company elected early
adoption of SOP 97-3 in 1998. The adoption of SOP 97-3 did not have a material
impact on the Company's financial position, results of operations, or cash
flows.

During the fourth quarter of 1998, the Company adopted FAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits". FAS No. 132
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practical, requires additional information on changes in
the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures required in the past (See
Note 10 - "Employee Benefit Plans" to the Consolidated Financial Statements of
the Company).

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's short-term investment portfolio and the debt
outstanding under the Credit Agreement (See Note 7 - "Long-Term Debt and
Financing Arrangements" and Note 8 - "Financial Instruments" to the Consolidated
Financial Statements of the Company).

The maturity, credit quality, and security class of the Company's short-term
investment portfolio are limited by both the Credit Agreement and the Company's
investment policy. The Company limits default risk by investing in only the
safest and highest credit quality securities limited to the following: direct
obligations of the United States of America including any governmental entity or
agency, commercial paper with a rating of A-1/P-1 or better, certificates of
deposit issued by major financial institutions, repurchase agreements
collateralized 102% by the aforementioned securities, and money market funds
rated AAAm by Standard & Poors. As stated in its policy, the Company is averse
to principal loss and ensures the safety and preservation of its invested funds
by limiting default risk and market risk. Additionally, the Company's investment
policy guidelines limit the credit exposure to any one issue, issuer, and type
of instrument. The Company's Credit Agreement limits the maturity of investments
held in the Company's portfolio to one year or less.

The Company's policy is to manage interest rate risk associated with its
outstanding debt obligations through the use of a combination of fixed and
floating rate debt. With the exception of the Company's Term Loan and Revolving
Credit Facilities (See Note 7 - "Long-Term Debt and Financing Arrangements" to
the Consolidated Financial Statements of the Company), all other outstanding
debt obligations are fixed. As of December 31, 2000, approximately 76% of the
Company's outstanding debt was fixed-rate debt. Interest rate swaps may be used
to adjust interest exposure when appropriate, based upon market conditions.
Additionally, the Company may use interest rate CAPs to limit the interest rate
risk on its floating-rate debt. All of the Company's outstanding debt
obligations are denominated in U. S. Dollars. As of December 31, 2000, the
Company had no interest-rate derivative contracts outstanding.


                                       14
<PAGE>

Foreign Currency Risk

Although the majority of the Company's transactions are in U. S. Dollars, the
Company periodically enters into foreign currency forward exchange contracts to
hedge certain specific transactions associated with the purchase of raw
materials and machinery denominated in a foreign currency. The purpose of
entering into these hedge transactions is to minimize the impact of foreign
currency fluctuations on the results of operations. Such contracts generally
mature in one year or less and the cost of replacing these contracts in the
event of nonperformance by counter parties is not significant. The Company does
not enter into foreign currency contracts for trading purposes. The Company
attempts to minimize the effects of currency risk by hedging its purchases made
in foreign currencies when practical. As of December 31, 2000, the Company had
no foreign currency contracts outstanding.


                                       15
<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                                                                                                            Page
                                                                                                            ----
<S>                                                                                                           <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants................................................................      17
Consolidated Statements of Earnings for each of the three years in the
     period ended December 31, 2000.....................................................................      18
Consolidated Balance Sheets as of December 31, 2000 and 1999............................................      19
Consolidated Statements of Cash Flows for each of the three years in the
     period ended December 31, 2000.....................................................................      20
Statements of Changes in Consolidated Stockholders' Equity for each of the three years in
     the period ended December 31, 2000.................................................................      21
Notes to Consolidated Financial Statements..............................................................      22
</TABLE>


                                       16
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Newport News Shipbuilding Inc.:

We have audited the accompanying consolidated balance sheets of Newport News
Shipbuilding Inc. (a Delaware corporation) as of December 31, 2000 and 1999, and
the related consolidated statements of earnings, cash flows, and changes in
stockholders' equity for the three years ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Newport News
Shipbuilding Inc. as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for the three years ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.


                                        ARTHUR ANDERSEN LLP

Vienna, Virginia
February 2, 2001


                                       17
<PAGE>

                         NEWPORT NEWS SHIPBUILDING INC.

                       CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                            ------------------------------------------------
                                                                2000              1999              1998
                                                            ------------      ------------      ------------
<S>                                                         <C>               <C>               <C>
Millions (Except Shares and Per Share Amounts)
Revenues ..............................................     $      2,072      $      1,863      $      1,862
Operating Costs and Expenses ..........................           (1,870)           (1,661)           (1,687)
Other Income, net .....................................                4                16                --
                                                            ------------      ------------      ------------

Operating Earnings ....................................              206               218               175
Interest Expense .....................................               (53)              (54)              (61)
                                                            ------------      ------------      ------------

Earnings Before Income Taxes ..........................              153               164               114
Provision for Income Taxes ............................              (63)              (67)              (48)
                                                            ------------      ------------      ------------

Net Earnings ..........................................     $         90      $         97      $         66
                                                            ============      ============      ============

Weighted Average Number of Common Shares Outstanding
    Basic .............................................       30,842,676        34,115,713        34,677,706
                                                            ============      ============      ============
    Diluted ...........................................       32,403,121        35,451,766        35,794,090
                                                            ============      ============      ============

Net Earnings Per Common Share
    Basic .............................................     $       2.91      $       2.83      $       1.91
                                                            ============      ============      ============
    Diluted ...........................................     $       2.77      $       2.72      $       1.85
                                                            ============      ============      ============

Dividends Declared Per Common Share ...................     $        .16      $        .16      $        .16
                                                            ============      ============      ============
</TABLE>

The accompanying notes are an integral part of these consolidated statements of
                                   earnings.


                                       18
<PAGE>

                         NEWPORT NEWS SHIPBUILDING INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                                --------------------
Millions (Except Shares and Per Share Amounts)                                    2000         1999
                                                                                -------      -------
<S>                                                                             <C>          <C>
ASSETS
Current Assets
Cash and Cash Equivalents .................................................     $     3      $     2
Accounts Receivable .......................................................         135           93
Contracts in Process ......................................................         265          317
Inventory .................................................................          50           55
Deferred Income Taxes .....................................................          90          108
Other Current Assets ......................................................          13           17
                                                                                -------      -------

Total Current Assets ......................................................         556          592
                                                                                -------      -------

Noncurrent Assets
Property, Plant, and Equipment, net .......................................         692          716
Other Assets ..............................................................         228          204
                                                                                -------      -------

Total Noncurrent Assets ...................................................         920          920
                                                                                -------      -------

                                                                                $ 1,476      $ 1,512
                                                                                =======      =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade Accounts Payable ....................................................     $    51      $    73
Short-Term Debt ...........................................................          29           29
Postretirement Benefits ...................................................         134          124
Other Accrued Liabilities .................................................         223          220
                                                                                -------      -------

Total Current Liabilities .................................................         437          446
                                                                                -------      -------

Noncurrent Liabilities
Long-Term Debt ............................................................         498          525
Deferred Income Taxes .....................................................         245          233
Other Long-Term Liabilities ...............................................          38           35
                                                                                -------      -------

Total Noncurrent Liabilities ..............................................         781          793
                                                                                -------      -------

Commitments and Contingencies (See Note 13)

Stockholders' Equity
Common Stock, $.01 par value -
     authorized 70,000,000 shares; issued 35,352,730 shares at
     December 31, 2000, and 35,290,652 shares at December 31, 1999 ........           1            1
Paid-In Capital ...........................................................         384          264
Retained Earnings .........................................................         168           84
Unearned/Deferred Compensation ............................................          (1)          (3)
Stock Employee Compensation Trust (SECT) - shares held of 5,655,695 and
     2,661,926 at December 31, 2000 and December 31, 1999, respectively ...        (294)         (73)
                                                                                -------      -------
Total Stockholders' Equity ................................................         258          273
                                                                                -------      -------
                                                                                $ 1,476      $ 1,512
                                                                                =======      =======
</TABLE>

   The accompanying notes are an integral part of these consolidated balance
                                    sheets.


                                       19
<PAGE>

                         NEWPORT NEWS SHIPBUILDING INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                                ---------------------------
                                                                2000        1999       1998
                                                                -----      -----      -----
<S>                                                             <C>        <C>        <C>
Millions
Cash Flows from Operating Activities:
Net Earnings ..............................................     $  90      $  97      $  66
Adjustments to Reconcile Net Earnings to
     Net Cash Provided by Operating Activities -
         Depreciation and Amortization ....................        55         66         62
         Deferred Income Taxes ............................        30          6        (30)
         Loss on Asset Dispositions .......................         4         10         17
         (Gain) Loss On Equity Investments ................        (5)        (1)         1
         Changes in Components of Working Capital -
              Decrease (Increase) in -
                  Accounts Receivable .....................       (42)        50         (7)
                  Contracts in Process ....................        52         17        (75)
                  Inventory ...............................         5         (3)        (8)
                  Other Current Assets ....................         4         (5)        --
              Increase (Decrease) in -
                  Trade Accounts Payable ..................       (22)       (56)       (22)
                  Other Accrued Liabilities ...............        20         (9)        27
         Other, net .......................................        11          2        (28)
                                                                -----      -----      -----
Net Cash Provided by Operating Activities .................       202        174          3
                                                                -----      -----      -----

Cash Flows from Investing Activities:
Capital Expenditures ......................................       (35)       (29)       (26)
Other .....................................................        (4)       (15)       (10)
                                                                -----      -----      -----
Net Cash Used by Investing Activities .....................       (39)       (44)       (36)
                                                                -----      -----      -----

Cash Flows from Financing Activities:
Increase (Decrease) in Revolving Credit Facilities, net ...         2        (49)        79
Payments on Long-Term Debt ................................       (29)       (26)       (29)
Issuance of Common, Treasury and SECT Shares ..............        --         23          9
Purchase of Common Stock ..................................      (100)       (77)       (29)
Dividends Paid on Common Stock ............................        (6)        (6)        (5)
Stock Options Exercised ...................................       (27)        (5)        (5)
Other .....................................................        (2)         9         13
                                                                -----      -----      -----
Net Cash (Used) Provided by Financing Activities ..........      (162)      (131)        33
                                                                -----      -----      -----

Net Increase (Decrease) in Cash and Cash Equivalents ......         1         (1)        --
Cash and Cash Equivalents at Beginning of Period ..........         2          3          3
                                                                -----      -----      -----

Cash and Cash Equivalents at End of Period ................     $   3      $   2      $   3
                                                                =====      =====      =====

Cash Paid During the Period for Income Taxes ..............     $  41      $  52      $  78
                                                                =====      =====      =====

Cash Paid During the Period for Interest ..................     $  54      $  55      $  55
                                                                =====      =====      =====
</TABLE>

The accompanying notes are an integral part of these consolidated statements of
                                  cash flows.


                                       20
<PAGE>

                         NEWPORT NEWS SHIPBUILDING INC.

           STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                          Common Stock                  Retained      Unearned/
                                                      -------------------    Paid-In     Earnings/     Deferred
                                                        Shares        Par    Capital    (Deficit)   Compensation
                                                      ----------     ----    -------    ---------   ------------
Millions, except for shares
<S>                                                   <C>            <C>      <C>        <C>            <C>
Balance - January 1, 1998 .......................     34,948,663     $  1     $ 256      $  (68)        $ (4)
Net Earnings ....................................             --       --        --          66           --
Cash Dividends Paid - Common Stock ..............             --       --        --          (5)          --
Performance Share Grants / Other ................             --       --         8          --           --
Purchase of Common Stock ........................             --       --        --          --           --
Issuance of Common, Treasury, and SECT Shares ...        337,723       --         7          --           --
Adjustment of SECT to Market Value ..............             --       --         5          --           --
                                                      ----------     ----     -----      ------         ----
Balance - December 31, 1998 .....................     35,286,386        1       276          (7)          (4)
Net Earnings ....................................             --       --        --          97           --
Cash Dividends Paid - Common Stock ..............             --       --        --          (6)          --
Performance Share Grants / Other ................             --       --         4          --           --
Purchase of Common Stock ........................             --       --        --          --           --
Issuance of Common and SECT Shares ..............          4,266       --        (4)         --           --
Unearned ESOP/Deferred Compensation .............             --       --        (1)         --            1
Adjustment of SECT to Market Value ..............             --       --       (11)         --           --
                                                      ----------     ----     -----      ------         ----
Balance - December 31, 1999 .....................     35,290,652        1       264          84           (3)
Net Earnings ....................................             --       --        --          90           --
Cash Dividends Paid - Common Stock ..............             --       --        --          (6)          --
Performance Share Grants / Other ................             --       --        13          --           --
Purchase of Common Stock ........................             --       --        --          --           --
Issuance of Common and SECT Shares ..............         62,078       --         2          --           --
Stock Options Exercised .........................             --       --       (27)         --           --
Tax Benefit of Stock Options Exercised ..........             --       --        11          --           --
Unearned ESOP/Deferred Compensation .............             --       --        --          --            2
Adjustment of SECT to Market Value ..............             --       --       121          --           --
                                                      ----------     ----     -----      ------         ----
Balance - December 31, 2000 .....................     35,352,730     $  1     $ 384      $  168         $ (1)
                                                      ==========     ====     =====      ======         ====
<CAPTION>
                                                                      Treasury Stock
                                                                    -------------------
                                                       SECT          Shares      Amount
                                                      ------        --------     ------
Millions, except for shares
<S>                                                   <C>           <C>           <C>
Balance - January 1, 1998 .......................     $   --          84,069      $ (2)
Net Earnings ....................................         --              --        --
Cash Dividends Paid - Common Stock ..............         --              --        --
Performance Share Grants / Other ................         --              --        --
Purchase of Common Stock ........................        (25)        178,443        (4)
Issuance of Common, Treasury, and SECT Shares ...         (4)       (262,512)        6
Adjustment of SECT to Market Value ..............         (5)             --        --
                                                      ------        --------      ----
Balance - December 31, 1998 .....................        (34)             --        --
Net Earnings ....................................         --              --        --
Cash Dividends Paid - Common Stock ..............         --              --        --
Performance Share Grants / Other ................         --              --        --
Purchase of Common Stock ........................        (77)             --        --
Issuance of Common and SECT Shares ..............         27              --        --
Unearned ESOP/Deferred Compensation .............         --              --        --
Adjustment of SECT to Market Value ..............         11              --        --
                                                      ------        --------      ----
Balance - December 31, 1999 .....................        (73)             --        --
Net Earnings ....................................         --              --        --
Cash Dividends Paid - Common Stock ..............         --              --        --
Performance Share Grants / Other ................         --              --        --
Purchase of Common Stock ........................       (100)             --        --
Issuance of Common and SECT Shares ..............         --              --        --
Stock Options Exercised .........................         --              --        --
Tax Benefit of Stock Options Exercised ..........         --              --        --
Unearned ESOP/Deferred Compensation .............         --              --        --
Adjustment of SECT to Market Value ..............       (121)             --        --
                                                      ------        --------      ----
Balance - December 31, 2000 .....................     $ (294)             --      $ --
                                                      ======        ========      ====
</TABLE>

     The accompanying notes are an integral part of changes in consolidated
                             stockholders' equity.


                                       21
<PAGE>

                         NEWPORT NEWS SHIPBUILDING INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Basis of Presentation

Newport News Shipbuilding Inc. (the "Company") became an independent, publicly
traded company on December 12, 1996. Previously, on December 11, 1996, in
connection with a corporate reorganization, the Company's former parent and its
subsidiaries undertook and completed various intercompany transfers and
distributions designed to restructure, divide, and separate their then existing
businesses, assets, liabilities, and operations so that, among other things, the
shipbuilding business of the former parent would be owned by the Company. The
former parent subsequently distributed pro rata to holders of the parent
company's common stock all of the outstanding common stock of the Company.

Investments in 20% to 50% owned companies where the Company has the ability to
exert significant influence over operating and financial policies are carried at
cost plus equity in undistributed earnings since the date of acquisition.
Earnings recognized and distributions received from equity method investees were
not significant during any of the periods presented in the accompanying
consolidated financial statements. All significant intercompany transactions and
balances have been eliminated.

Description of Business

The Company is the largest non-government-owned shipyard in the United States.
Its principal business is designing, constructing, repairing, overhauling, and
refueling nuclear-powered aircraft carriers and submarines for the U.S. Navy.
The Company's largest single customer is the U.S. Navy. Revenues from contracts
with the U.S. Navy were $2.0 billion (98%), $1.8 billion (98%), and $1.7 billion
(92%), in 2000, 1999, and 1998, respectively.

2. SUMMARY OF ACCOUNTING POLICIES

Risks and Uncertainties

Newport News Shipbuilding Inc., which is principally engaged in supplying
defense-related products and services to the U.S. Government, is subject to
certain business risks specific to the industry. Sales to the U.S. Government
may be affected by changes in procurement policies, budget considerations,
changing concepts of national defense, political developments abroad, and other
factors. The Department of Defense ("DoD") budgets have been subject to
increasing pressure resulting in uncertainty as to the future effects of DoD
budget cuts. The Company has nonetheless maintained a steady backlog of
contracts with its primary customer, the U.S. Navy. These factors lead
management to believe that there is a high probability that the Company's
current major defense program initiatives will continue.

Use of Estimates

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions in determining the reported amounts
of the Company's assets, liabilities, revenues, and expenses. Reference is made
to the "Revenue Recognition" section of this footnote and Notes 10 and 13 for
additional information on certain estimates included in the Company's
consolidated financial statements. Actual results may differ from estimates.


                                       22
<PAGE>

Classification

The Company's construction contracts range in duration up to a period of eight
years from the signing of the contract until delivery. Because of the varying
nature of the Company's operating cycle, and consistent with industry practice,
assets and liabilities relating to long-term contracts are classified as
current, although a portion of these amounts is not expected to be realized or
paid within one year (See Note 3).

Reclassifications

The December 31, 1999 balance sheet and the statements of cash flows for 1999
and 1998 include certain reclassifications to conform to the 2000 presentation.

Revenue Recognition

The Company reports revenues and profits on its long-term contracts using the
percentage-of-completion method of accounting, determined on the basis of total
costs incurred to date to estimated final total costs. Anticipated losses on
contracts are reported when first identified by the Company. Costs on long-term
contracts in process represent recoverable costs incurred for production,
allocable overhead, and, where appropriate, general and administrative expenses.
The performance of contracts usually extends over several years, requiring
periodic reviews and revisions of estimated final contract revenues, costs, and
profits during the terms of the contracts. The effect of these revisions to
estimates is included in earnings in the period the revisions are made. Revenue
arising from the claims process is not recognized either as income or as an
offset against a potential loss until it can be reliably estimated and its
realization is probable.

General and Administrative Expenses

General and administrative expenses of $271 million, $304 million, and $294
million in 2000, 1999, and 1998, respectively, are included in the "Operating
Costs and Expenses" caption in the accompanying consolidated statements of
earnings. General and administrative expenses related to commercial products and
services essentially under commercial terms and conditions are expensed as
incurred. In 1999 and 1998, such charges amounted to $4 million and $22 million,
respectively. Amounts attributable to 2000 were immaterial.

Research and Development Costs

Research and development costs are charged to "Operating Costs and Expenses" as
incurred. The amounts charged to operations during the years ended December 31,
2000, 1999, and 1998 were $4 million, $9 million, and $24 million, respectively.

Income Taxes

The Company utilizes the asset and liability method of accounting for income
taxes whereby it recognizes deferred tax assets and liabilities for the future
tax consequences of temporary differences between the tax basis of assets and
liabilities and their reported amounts in the consolidated financial statements.
Deferred tax assets are reduced by a valuation allowance when, based upon
management's estimates, it is more likely than not that a portion of the
deferred tax assets will not be realized in a future period. No deferred tax
valuation allowances were recorded by the Company as of December 31, 2000 and
1999.

Cash and Cash Equivalents

The Company considers highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.


                                       23
<PAGE>

Accounts Receivable and Contracts In Process

Only amounts billed and currently due from customers are included in the
"Accounts Receivable" caption in the accompanying consolidated balance sheets.
Recoverable costs and accrued earnings related to long-term contracts on which
revenue has been recognized, but for which billings have not been made to the
customer, are included in the "Contracts in Process" caption (See Note 3). No
significant allowance for doubtful accounts existed as of December 31, 2000 and
1999.

Inventory

Inventory principally consists of raw materials and supplies which have not been
allocated to specific contracts. Inventory is stated at the lower of cost or
market. Substantially all inventory is costed using the "last-in, first-out"
method. If the first-in, first-out or average cost method of inventory
accounting had been used by the Company for all inventory, inventory would have
been approximately $8 million higher as of December 31, 2000 and 1999.

Property, Plant, and Equipment, net

Property, plant, and equipment is carried at cost, net of accumulated
depreciation. The Company provides for depreciation on a straight-line basis in
amounts which, in the opinion of management, are adequate to allocate the cost
of depreciable assets over their estimated useful lives. Estimated useful lives
for significant classes of assets are as follows:

Buildings .................................................       30 to 60 years
Machinery and equipment ...................................        8 to 45 years

Total depreciation and amortization expense was $55 million, $66 million, and
$62 million for 2000, 1999, and 1998, respectively. Depreciation expense is
included as a component of "Operating Costs and Expenses" in the consolidated
statements of earnings.

Interest capitalized during 2000, 1999, and 1998 was not material.

Stock-Based Compensation

The Company utilizes several stock-based compensation plans as an incentive to
its employees (See Note 11). Pursuant to these plans, the Company may grant
stock options, restricted stock, performance shares, stock appreciation rights,
stock equivalent units, and dividend equivalent awards. Stock options are
generally awarded with exercise prices equal to the fair value of the Company
stock on the date of grant. As such, the Company does not record compensation
expense with respect to the award of such stock options. All other awards
generally result in the Company recognizing a pro rata portion of compensation
expense based on the vesting period of the award. The compensation expense
recognized generally varies based on the amount by which the current fair value
of the award exceeds the exercise price, if any, of such award.

Stockholders' Equity

At December 31, 2000, the Company had authorized (a) 70 million shares of Common
Stock, $.01 par value, of which 35.4 million were issued and outstanding, along
with associated preferred stock purchase rights, (b) 10 million shares of
preferred stock, $.01 par value, none of which had been issued, and (c) 700,000
shares of Series A Participating Cumulative Preferred Stock, $.01 par value,
none of which had been issued.

Changes in Accounting Principles

In June 1998, the Financial Accounting Standards ("FAS") Board issued FAS No.
133, (as amended by FAS No. 137) "Accounting for Derivative Instruments and
Hedging Activities." This statement establishes accounting and


                                       24
<PAGE>

reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on 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.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No.101, Revenue Recognition in Financial Statements (SAB 101), which,
among other guidance, clarifies certain conditions to be met in order to
recognize revenue. In June 2000, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101B which delayed the implementation of SAB 101
until the fourth quarter of fiscal years beginning after December 15, 1999. The
implementation of SAB 101 did not have a material impact on the Company's
financial position, results of operations, or cash flows.

Risk Management Activities

The Company periodically utilizes foreign currency contracts to hedge its
exposure to changes in foreign currency exchange rates for firm purchase
commitments. Unrealized gains and losses on these contracts are deferred and
recognized in the results of operations in the period in which the hedged
transaction is consummated. Cash receipts or payments related to these financial
instruments are classified consistent with the cash flows from the transactions
being hedged. As of December 31, 2000, the Company had no foreign-exchange
derivative contracts outstanding.

Foreign Currency Translation

Consolidated financial statements of equity investments in international
entities are translated into U.S. Dollars using the exchange rate at each
balance sheet date for assets and liabilities and the weighted-average exchange
rate for each applicable period for amounts included in the consolidated
statements of earnings. The amount of cumulative translation adjustments as of
December 31, 2000 is not material.

Stock Employee Compensation Trust (SECT)

In December 1997, the Company established a SECT to fund a portion of its
obligations arising from its various employee compensation and benefit plans.
The Company issued shares to the SECT from treasury stock and the SECT engages
in open market purchases. The SECT terminates in 2015. As of December 31, 2000,
the SECT held 5.7 million shares of the Company's common stock.

Equity Investments

In March 1999, the Company announced the formation of a worldwide business
partnership with Science Applications International Corp. ("SAIC"). The
partnership is a limited liability company ("LLC") comprised of SAIC's
subsidiary, AMSEC, and the Company's life cycle engineering department. The
organization is named AMSEC LLC and has created a low cost fleet services
organization capable of providing logistics and life cycle services for aircraft
carriers, submarines, surface combatants, and amphibious and auxiliary ships
from 20 locations, including every major U.S. Navy port. The Company owns 45%
and SAIC 55% of the new organization.


                                       25
<PAGE>

3. CONTRACTS IN PROCESS

Contracts in process consist of the following:               December 31,
                                                       ------------------------
                                                         2000             1999
                                                       -------          -------
Millions
Contract costs and estimated profits .........         $ 4,519          $ 3,311
Other costs ..................................              83               85
Less advances and progress payments ..........          (4,337)          (3,079)
                                                       -------          -------
                                                       $   265          $   317
                                                       =======          =======

Contracts in process includes production costs and related overhead, including
general and administrative expenses allocable to U.S. Government contracts, net
of progress payments of $4.3 billion and $3.1 billion as of December 31, 2000
and 1999, respectively. Other costs include amounts recorded under U.S.
generally accepted accounting principles ("GAAP") that are not currently
allocable to contracts, such as a portion of the Company's postretirement and
postemployment benefits, and workers' compensation related costs. These costs
have been deferred because their recognition under government contracts is
considered probable based on existing backlog. If the level of backlog in the
future does not support the continued deferral of these costs, profitability of
the Company's remaining contracts could be affected. Also included in other
costs are provisions established for certain government contract and other
matters. Retainages were immaterial as of December 31, 2000. Approximately $11
million of retainages included in contracts in process as of December 31, 1999
were not expected to be billed and collected within one year.

4. PROPERTY, PLANT, AND EQUIPMENT, NET

The major classes of property, plant, and equipment are
as follows:                                                   December 31,
                                                         ----------------------
                                                           2000           1999
                                                         -------        -------
Millions
Land and improvements ............................       $    29        $    28
Buildings and improvements .......................         1,160          1,152
Machinery and equipment ..........................           412            420
                                                         -------        -------
     Property, plant, and equipment at cost ......         1,601          1,600
Less accumulated depreciation ....................          (909)          (884)
                                                         -------        -------
     Net property, plant, and equipment ..........       $   692        $   716
                                                         =======        =======

5. ACQUISITION

On December 18, 1997, the Company acquired all of the outstanding capital stock
of Continental Maritime Industries, Inc. ("CMI"), a ship repair yard in San
Diego, California. The acquisition was accounted for as a purchase, and
accordingly, the results of operations of CMI for the period from the date of
the acquisition through December 31, 2000 are included in the accompanying
consolidated statements of earnings. The purchase price was allocated to assets
and liabilities based on estimated fair values at the date of acquisition. At
closing, as defined in the agreement and plan of reorganization, CMI was
acquired through the issuance of 497,031 shares of the Company's common stock.
The excess of purchase price over the fair value of net tangible assets acquired
of $3.9 million was recorded as goodwill and is being amortized over 15 years.


                                       26
<PAGE>

6. DETAIL OF OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following:             December 31,
                                                            --------------------
                                                            2000            1999
                                                            ----            ----
Millions
Workers' compensation ..........................            $ 88            $ 79
Postemployment benefits ........................              57              55
Employee payroll and benefits ..................              31              30
Other ..........................................              47              56
                                                            ----            ----
                                                            $223            $220
                                                            ====            ====

7. LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-Term Debt

A summary of long-term debt obligations of the Company at December 31, 2000 and
1999 is set forth in the following table:

                                                                 December 31,
                                                               ----------------
Millions                                                        2000       1999
                                                               -----      -----
8.625% Senior Notes due December 1, 2006                       $ 200      $ 200
9.25% Senior Subordinated Notes due December 1, 2006             200        200
Term Loan due November 4, 2002                                    90        118
Six Year Revolving Credit Facility due November 4, 2002           34         32
Note for Real Property due May 17, 2005                            2          2
Bank Notes due April 30, 2002                                      1          2
Less Current Maturities                                          (29)       (29)
                                                               -----      -----
                                                               $ 498      $ 525
                                                               =====      =====

Senior and Senior Subordinated Notes

On November 26, 1996, the Company issued $200 million of 8.625% Senior Notes and
$200 million of 9.25% Senior Subordinated Notes which both pay interest
semi-annually. The Company is obligated to repay these notes on December 1,
2006.

Senior Credit Facility

On November 4, 1996, the Company entered into a $415 million senior credit
facility (the "Senior Credit Facility") consisting of a $200 million six-year
amortizing term loan (the "Term Loan") and a $215 million six-year revolving
credit facility (the "Six Year Revolving Credit Facility"). The Term Loan will
amortize in 24 quarterly installments, commencing March 31, 1997, with an annual
aggregate payment amount of $27.5 million in each of 1997 through 2001, and
$62.5 million in 2002. Of the Six Year Revolving Credit Facility, $125 million
may be used for advances and letters of credit and $90 million may be used only
for standby letters of credit. Generally, each of the Company's present and
future subsidiaries having consolidated assets exceeding $10 million, excluding
foreign subsidiaries and NNS Tanker Holding Corporation (each, a "Guarantor" and
collectively, the "Guarantors") guarantee the Senior Credit Facility. The
security interest in the collateral was released as the Company met specific
financial and other conditions at the end of the second quarter of 1999.

Term Loan

The interest rates on the Term Loan vary based on the one, two, three, six,
nine, and twelve month LIBOR plus 1.000% or a base rate. The base rate is
defined as the higher of prime (as defined in the credit facility) or the
federal funds rate. The weighted-average Term Loan interest rate at December 31,
2000 was 7.58%.


                                       27
<PAGE>

Bank Notes

The Company also has bank notes maturing through April 30, 2002 totaling $1
million. These notes are secured by the consolidated assets of CMI and its
subsidiary, and at December 31, 2000, accrued interest at a rate of 7.32%. The
aggregate maturities applicable to the outstanding bank notes are approximately
$1 million in 2001, with a small balance due in 2002.

Revolving Credit Facilities

<TABLE>
<CAPTION>
                                                                       Committed Credit Facility
                                                    --------------------------------------------------------------
Millions                                              Term           Commitments        Utilized         Available
                                                    ---------        -----------        --------         ---------
<S>                                                 <C>                 <C>                <C>             <C>
(As of December 31, 2000)
Six Year Revolving Credit Facility                  1996-2002           $215               $48             $167
</TABLE>

The Six Year Revolving Credit Facility requires the payment of commitment fees
of .225% on the unused portion of the credit facility. The interest rate for the
Six Year Revolving Credit Facility can vary as described above with respect to
the Term Loan. The weighted-average six year revolver interest rate at December
31, 2000 was 8.22%. At December 31, 2000, $14 million was utilized for standby
letters of credit and $34 million was borrowed to fund operating needs.

Note for Real Property

On March 23, 1999, the Company entered into a $2.3 million contract to purchase
a parcel of real property in Newport News, Virginia. Payments of $0.4 million
will be made annually for three years and $0.28 million for the next four years.
The note will be paid in full in 2005.

Debt Covenants and Restrictions

The Senior Credit Facility, Senior Notes, Senior Subordinated Notes, and Bank
Notes contain customary covenants, including financial ratios and limitations on
dividend payments, share repurchases, indebtedness, liens, and corporate
transactions. The Company is in compliance with all applicable covenants and
restrictions.

8. FINANCIAL INSTRUMENTS

The carrying amount and estimated fair values of the Company's financial
instruments by class are as follows:

<TABLE>
<CAPTION>
                                                               December 31,
                                                 ---------------------------------------
                                                        2000                  1999
                                                 -----------------     -----------------
                                                 Carrying    Fair      Carrying    Fair
Millions                                          Amount     Value      Amount     Value
                                                 -------     -----     -------     -----
<S>                                               <C>        <C>        <C>        <C>
Asset (liability) instruments:
     Cash and cash equivalents                    $   3      $   3      $   2      $   2
     Accounts receivable                            135        135         93         93
     Trade accounts payable                         (51)       (51)       (73)       (73)
     Debt (including current maturities)
         Senior and Senior Subordinated Notes      (400)      (404)      (400)      (399)
         Term Loan                                  (90)       (90)      (118)      (118)
         Bank Notes                                  (1)        (1)        (2)        (2)
         Six Year Revolving Credit Facility         (34)       (34)       (32)       (32)
         Note for Real Property                      (2)        (2)        (2)        (2)
</TABLE>

The fair value of cash and cash equivalents, accounts receivable, and accounts
payable in the above table was considered to be the same as, or determined not
to be materially different from, the carrying amount. The fair value


                                       28
<PAGE>

of short-term and long-term debt reflected in the December 31, 2000 and 1999
balance sheets are based on the market value of debt with the same or similar
maturities and interest rates.

The Company periodically utilizes foreign currency contracts to hedge certain
specific foreign currency transactions, principally the purchase of raw
materials and machinery denominated in a foreign currency. Such contracts
generally mature in one year or less and the cost of replacing these contracts
in the event of nonperformance by counterparties is not significant. At December
31, 2000 and 1999, the Company had no significant foreign currency contracts
outstanding.

9. INCOME TAXES

The effective tax rates for 2000, 1999, and 1998 were approximately 41%, 41%,
and 42%, respectively. The difference between the Company's effective tax rate
in each year as compared to the U.S. federal statutory rate of 35% is
principally due to state income taxes and miscellaneous permanent differences
for tax.

The Company's earnings before income taxes were principally domestic for all
years presented in the accompanying consolidated financial statements. Following
is a comparative analysis of the components of the (provision) benefit for
income taxes:

                                                         Year Ended December 31,
                                                         -----------------------
Millions                                                 2000     1999     1998
                                                         ----     ----     ----
Current-
         Federal ....................................    $(18)    $(58)    $(62)
         State ......................................      (4)      (4)     (10)
                                                         ----     ----     ----
              Total Current Tax (Provision) Benefit .     (22)     (62)     (72)
                                                         ----     ----     ----
Deferred-
         Federal ....................................     (32)      (3)      23
         State ......................................      (9)      (2)       1
                                                         ----     ----     ----
              Total Deferred Tax (Provision) Benefit      (41)      (5)      24
                                                         ----     ----     ----

Total Income Tax (Provision) Benefit ................    $(63)    $(67)    $(48)
                                                         ====     ====     ====

The following is a reconciliation of income taxes computed using the statutory
U.S. federal income tax rate (35% for all years presented) to the (provision)
benefit for income taxes reflected in the consolidated statements of earnings:

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                                         -----------------------
                                                                         2000     1999     1998
                                                                         ----     ----     ----
<S>                                                                      <C>      <C>      <C>
Millions
Tax expense computed at the statutory U.S. federal income tax rate ..    $(53)    $(57)    $(40)
State and local taxes on income, net of federal benefit .............      (6)      (7)      (4)
Permanent differences ...............................................      (4)      (3)      (4)
                                                                         ----     ----     ----
                                                                         $(63)    $(67)    $(48)
                                                                         ====     ====     ====
</TABLE>

Actual tax liabilities are lower than tax expense reflected above for 2000,
1999, and 1998 by $11 million, $2 million, and $6 million, respectively, as a
result of stock option deduction benefits recorded as a credit to stockholders'
equity. The 1999 amount was offset by a $3 million settlement associated with
the Company's former parent. The components of the Company's net deferred tax
liability are as follows:


                                       29
<PAGE>

                                                                    December 31,
                                                                    ------------
Million                                                             2000    1999
                                                                    ----    ----
Deferred tax assets-
         Long-term shipbuilding contracts ......................    $ 12    $ 28
         Postretirement benefits ...............................      10       9
         Postemployment benefits ...............................      15      15
         Accrued vacation ......................................       5       7
         Workers' compensation .................................       4      10
         Other .................................................      48      43
                                                                    ----    ----
              Total deferred tax assets ........................      94     112
                                                                    ----    ----

                                                                    December 31,
                                                                    ------------
                                                                    2000    1999
                                                                    ----    ----
Deferred tax liabilities-
         Tax over book depreciation ............................    $144    $153
         Pension ...............................................      62      51
         Other .................................................      43      33
                                                                    ----    ----
              Total deferred tax liabilities ...................     249     237
                                                                    ----    ----

Net deferred tax liabilities ...................................    $155    $125
                                                                    ====    ====

10. EMPLOYEE BENEFIT PLANS

The Company provides defined pension benefits and postretirement benefits to
employees. The following is a reconciliation of the benefit obligations, plan
assets, and funded status of the Company's plans:

<TABLE>
<CAPTION>
                                                                                     Other
                                                     Pension Benefits      Postretirement Benefits
                                                     ----------------      -----------------------
Change in benefit obligation (in millions)            2000      1999            2000      1999
                                                      -----     -----           -----     -----
<S>                                                   <C>       <C>             <C>       <C>
Benefit obligation - beginning of period              $ 474     $ 476           $ 312     $ 194
Service costs                                            34        39               4         3
Interest costs                                           34        32              23        15
Actuarial (gains) losses                                (40)      (57)            (36)      124
Benefits paid                                           (13)      (11)            (24)      (20)
Plan amendments                                          18        --              --        (4)
Business combination/divestitures                        --        (6)             --        --
Curtailments/settlements                                 --         1              --        --
                                                      -----     -----           -----     -----

Benefit obligation - end of period                    $ 507     $ 474           $ 279     $ 312
                                                      =====     =====           =====     =====
<CAPTION>
                                                                                     Other
                                                     Pension Benefits      Postretirement Benefits
                                                     ----------------      -----------------------
Change in plan assets (in millions)                   2000      1999            2000      1999
                                                      -----     -----           -----     -----
<S>                                                   <C>       <C>             <C>       <C>
Fair value of plan assets - beginning of period       $ 532     $ 448           $  --     $  --
Actual return on plan assets                             83        64              --        --
Employer contributions                                   50        33              --        --
Benefits paid                                           (13)      (11)             --        --
Business combination/divestitures                        --        (2)             --        --
                                                      -----     -----           -----     -----

Fair value of plan assets - end of period             $ 652     $ 532           $  --     $  --
                                                      =====     =====           =====     =====
</TABLE>


                                       30
<PAGE>

<TABLE>
<CAPTION>
                                                                                     Other
                                                     Pension Benefits      Postretirement Benefits
                                                     ----------------      -----------------------
Funded status reconciliation (in millions)            2000      1999            2000      1999
                                                      -----     -----           -----     -----
<S>                                                   <C>       <C>             <C>       <C>
Funded status of the plans                            $ 145     $  58           $(279)    $(312)
Contribution adjustment                                  --        11              --        --
Unrecognized net actuarial (gains)/losses               (95)      (21)            189       237
Unrecognized prior service costs                         84        75             (44)      (49)
Unrecognized transition obligation                      (13)      (16)             --        --
                                                      -----     -----           -----     -----

Prepaid (accrued) benefit costs                       $ 121     $ 107           $(134)    $(124)
                                                      =====     =====           =====     =====
</TABLE>

<TABLE>
<CAPTION>
                                                                          Other
                                       Pension Benefits           Postretirement Benefits
                                  -------------------------      ------------------------
Assumptions at December 31,        2000      1999      1998      2000      1999      1998
                                  -----     -----     -----      ----      ----      ----
<S>                               <C>       <C>       <C>        <C>       <C>       <C>
Discount rate                      7.75%     7.50%     6.75%     7.75%     7.50%     6.75%
Expected return on plan assets    10.00%    10.00%    10.00%       N/A       N/A       N/A
Rate of compensation increase      3.65%     3.68%     4.50%     3.65%     3.68%     4.50%
</TABLE>

Net periodic pension and other postretirement benefit costs include the
following components:

<TABLE>
<CAPTION>
                                                                               Other
                                            Pension Benefits          Postretirement Benefits
                                        ------------------------      ------------------------
Millions                                2000      1999      1998      2000      1999      1998
                                        ----      ----      ----      ----      ----      ----
<S>                                     <C>       <C>       <C>       <C>       <C>       <C>
Service cost                            $ 34      $ 39      $ 30      $  4      $  3      $  2
Interest cost                             34        32        27        23        15        15
Expected return on plan assets           (50)      (43)      (37)       --        --        --
Amortization of transition assets         (3)       (3)       (3)       --        --        --
Amortization of prior service costs        9         8         8        (5)       (5)       (3)
Amortization of loss                      --         4         1        12         8         5
                                        ----      ----      ----      ----      ----      ----

Net periodic cost                       $ 24      $ 37      $ 26      $ 34      $ 21      $ 19
                                        ====      ====      ====      ====      ====      ====
</TABLE>

Pension Benefits

The Company has various defined benefit plans which cover substantially all of
its hourly and salaried employees. The hourly plan benefits are based primarily
on service with the Company as an hourly employee. The salaried plan benefits
are based on years of participation and final average compensation. The
Company's funding policies are to contribute to the plans amounts necessary to
satisfy the funding requirements of federal laws and regulations. Plan assets
consist principally of listed equity and fixed income securities.

Certain salaried employees of the Company participated in the former parent's
retirement plan ("FPRP") prior to the December 1996 spin-off. In connection with
the spin-off, the Company's former parent became the sole sponsor of the FPRP.
The benefits accrued by Company employees in the FPRP were frozen as of December
31, 1996, and the Company's former parent amended the FPRP to provide that all
benefits accrued through that day by Company employees were fully vested,
non-forfeitable, and the responsibility of the Company's former parent.

Assets of one plan may not be utilized to pay benefits of other plans.
Additionally, the pension cost has been recorded based upon certain actuarial
estimates. These estimates are subject to revision in future periods given new
facts or circumstances. The net prepaid pension cost at December 31, 2000 is
composed of a $154 million prepaid


                                       31
<PAGE>

hourly pension plan asset and a $33 million accrued salaried pension plan
liability. The net balance at December 31, 1999 represents a $139 million
prepaid hourly pension plan asset and an $32 million accrued salaried pension
plan liability.

The Company measures pension costs according to independent actuarial
valuations. The projected unit credit actuarial cost method is used to determine
pension cost for financial accounting purposes consistent with the provisions of
FAS No. 87, "Employers' Accounting for Pensions." Unrecognized prior service
obligations are being amortized on a straight-line basis over the average
remaining estimated service period of employees expected to receive benefits
under the plans.

Other Postretirement Benefits

The Company has postretirement health care and life insurance plans, which cover
its employees who meet certain eligibility requirements. For salaried employees,
the plans cover employees retiring from the Company on or after attaining age 55
who have had at least 10 years of service with the Company after attaining age
45. For hourly employees, the postretirement benefit plans generally cover
employees who retire pursuant to one of the Company's hourly employee retirement
plans. All of these benefits may be subject to deductibles, co-payment
provisions, and other limitations, and the Company has reserved the right to
modify or cancel these benefits. The Company's postretirement benefit plans are
funded on a pay-as-you-go basis.

The initial weighted average assumed health care cost trend rate used in
determining the 2000 accumulated postretirement benefit obligation was 8%,
gradually declining to 5.25% in 2007 and remaining at that level thereafter. The
initial weighted average assumed health care cost trend rate used in determining
the 1999 accumulated postretirement benefit obligation was 8.5%, declining to 5%
in 2006 and remaining at that level thereafter.

Increasing the assumed health care cost trend rate by one percentage point in
each year would increase accumulated postretirement benefit obligations by
approximately $14 million in 2000, $19 million in 1999, and $7 million in 1998.
It would also increase the aggregate of the service cost and interest cost
components of the net periodic postretirement benefit cost by approximately $2
million in 2000, and $1 million in 1999 and 1998.

Decreasing the assumed health care cost trend rate by one percentage point in
each year would decrease accumulated postretirement benefit obligations by
approximately $12 million in 2000, $16 million in 1999, and $6 million in 1998.
It would also decrease the aggregate of the service cost and interest cost
components of the net periodic postretirement benefit cost by approximately $2
million in 2000 and $1 million in 1999 and 1998.

The accrued postretirement benefits cost has been recorded based upon certain
actuarial estimates. These estimates are subject to revision in future periods
given new facts or circumstances.

401(k) Plans

The Company sponsors the Newport News Shipbuilding Savings (401(k)) Plan for
Union Eligible Employees (the "Savings Plan") for certain of its hourly
employees. Contributions are made to the Savings Plan by participants, with the
Company providing for administration of the Savings Plan.

Subsequent to the December 1996 spinoff, the Company established the Newport
News Shipbuilding Inc. 401(k) Investment Plan for Salaried Employees ("Salaried
Plan"). Beginning in 1997, the Company matched one half of the first 8% of a
participant's contribution in either cash or Common Stock at the Company's
discretion. In addition, the Company contributes a fixed percentage of each
salaried employee's salary per pay period in either cash or Common Stock, also
at the Company's discretion. The expense related to this plan was $24 million
for both 2000 and 1999, and $22 million for 1998. The Company has authorized
10,400,000 shares of Common Stock for


                                       32
<PAGE>

possible Salaried Plan contributions. Matching contributions will vest after two
years of service as defined in the Salaried Plan.

ESOP

CMI (See Note 5) maintains a leveraged Employee Stock Ownership Plan ("ESOP")
for substantially all of its employees. CMI makes annual contributions to the
ESOP equal to the ESOP's debt service. The ESOP Series A Preferred stock shares
initially were pledged as collateral for its debt. The ESOP Series A Preferred
stock was exchanged for the Company's common stock concurrent with the
acquisition of CMI. As the debt is repaid, shares are released from collateral
and allocated to active employees based on the proportion of debt service paid
in the year. As shares are released from collateral, CMI reports compensation
expense equal to the current market price of the shares. ESOP compensation
expense was immaterial for the period subsequent to the acquisition in 1997 and
for 2000, 1999, and 1998. The ESOP shares on December 31, 2000 were as follows:

Allocated shares                                                         269,872
Unallocated shares                                                        22,575
                                                                      ----------

Total ESOP shares                                                        292,447
                                                                      ==========

Fair value of unallocated shares at December 31, 2000                 $1,173,900
                                                                      ==========

11. STOCK COMPENSATION PLANS

The Company established the Newport News Shipbuilding Inc. Employee Stock
Purchase and Accumulation Plan ("Employee Stock Purchase Plan") to provide
eligible employees of the Company an opportunity to purchase shares of the
Company at a 15% discount, not to exceed $21,250 in payroll deductions per
employee per calendar year. The Employee Stock Purchase Plan became effective
January 1, 1998, as an amended and restated version of a predecessor plan, the
Newport News Shipbuilding Inc. 1997 Employee Stock Purchase Plan. The Employee
Stock Purchase Plan authorizes a maximum aggregate of 2,600,000 shares to be
issued under the plan. Of these shares, 1,650,000 shares have been approved for
issuance by the shareholders. The remaining 950,000 shares will not be issued
under the plan until shareholder approval is sought and obtained. The Company
plans to seek approval for the issuance of up to an additional 400,000 shares
under the Employee Stock Purchase Plan at its 2001 Annual Meeting of
shareholders. During 2000, employees purchased approximately 176,000 shares
under the Employee Stock Purchase Plan.

The Company established the Newport News Shipbuilding Inc. Stock Ownership Plan
("Stock Ownership Plan") for the benefit of officers and key employees. At the
Company's discretion, restricted stock, performance shares, stock options, stock
appreciation rights, stock equivalent units and dividend equivalents can be
granted to eligible employees pursuant to this plan. The Company has authorized
5,250,000 shares of Common Stock for issuance under this plan. In 2000,
approximately 81,000 stock options were granted. Further, approximately 24,000
performance shares, stock incentive grants, and restricted shares were awarded
in 2000. As of December 31, 2000, approximately 426,000 shares remained
available for issuance under this plan.

The Company established the 1997 Stock Plan for Directors of Newport News
Shipbuilding Inc. ("1997 Stock Plan for Directors"). Under the plan as
originally adopted, one-half of the annual retainer of non-employee directors is
to be paid in restricted stock. In addition, non-employee directors receive an
initial grant of 2,000 stock options and 1,000 shares of restricted stock upon
joining the Board of Directors, and an annual grant of 1,000 stock options. The
1997 Stock Plan for Directors was amended, effective December 15, 1998, to
increase the annual grant of stock options to 2,000, and to make 50% of the
first $25,000 of the annual retainer payable in restricted stock and any annual
retainer amounts in excess of $25,000 payable in either restricted stock or
cash, as determined by the Compensation Committee. The Company initially
authorized 75,000 shares for issuance under the plan. The shareholders approved
an additional 125,000 shares for issuance under the plan at the 2000 Annual
Meeting.


                                       33
<PAGE>

During 2000, approximately 14,000 stock options and 3,700 shares of restricted
stock were granted under the plan. As of December 31, 2000, nearly 131,000
shares remained available for issuance.

The Company established stock option plans for its active hourly employees
("Hourly Option Plans") to provide eligible employees of the Company an
opportunity to purchase shares of the Company. The Company authorized 1,100,000
shares of Common Stock for issuance under the Hourly Option Plans. During 1997,
approximately 985,000 stock options were granted under the plans.

The Company established the Newport News Shipbuilding Inc. 1998 Stock Incentive
Plan ("1998 Stock Incentive Plan"), effective October 12, 1998. The Company, at
its discretion, may select any employee of the Company for an award of
restricted stock, performance shares, or stock options under the Plan. In
addition, the 1998 Stock Incentive Plan assumed the obligations of the Hourly
Option Plans. The options granted under the Hourly Option Plans continue to be
exercisable subject to the same terms and conditions as prescribed by those
plans. The Company has authorized 4,000,000 shares for issuance under the 1998
Stock Incentive Plan. This authorization includes 1,000,000 of the shares
originally reserved for issuance under the Hourly Options Plans and reflects the
transfer of the stock options previously granted under those plans to the 1998
Stock Incentive Plan. In 2000, approximately 509,000 stock options were granted
under the plan. Further, approximately 129,000 performance shares, stock
incentive grants, and restricted shares were awarded in 2000. As of December 31,
2000, approximately 1,965,000 shares remained available for issuance under this
plan.

Stock options and restricted shares applicable to the plans above vest in
accordance with vesting periods set forth in the governing award agreements and
plan documents. The performance shares vest after specified periods and after
attaining certain performance measures, both of which vary with each grant.

Stock option activity and exercise prices for the Stock Ownership Plan, the 1997
Stock Plan for Directors, and the 1998 Stock Incentive Plan are summarized as
follows:

<TABLE>
<CAPTION>
                                                For the Year Ended December 31,
                                          ------------------------------------------
                                              2000            1999            1998
                                          ----------       ---------       ---------
<S>                                       <C>              <C>             <C>
Number of shares under stock options:
Outstanding at beginning of year           3,726,923       3,667,243       3,562,663
       Granted                               603,916         515,900         629,663
       Exercised                          (1,409,929)       (378,104)       (467,833)
       Options canceled                     (128,837)        (78,116)        (57,250)
                                          ----------       ---------       ---------

Outstanding at end of year                 2,792,073       3,726,923       3,667,243
                                          ----------       ---------       ---------

Exercisable at end of year                 1,735,845       1,681,694       1,254,328
                                          ==========       =========       =========
</TABLE>

                                                 For the Year Ended December 31,
                                                 -------------------------------
                                                   2000       1999       1998
                                                  ------     ------     ------
Weighted average exercise price:
Outstanding at beginning of year                  $21.22     $19.12     $17.54
       Granted                                     25.48      32.39      24.85
       Exercised                                   20.15      15.57      14.78
       Options canceled                            25.91      23.64      19.39

Outstanding at end of year                         22.46      21.22      19.12

Exercisable at end of year                         19.47      15.90      14.63


                                       34
<PAGE>

                            Number         Weighted Average
    Range of            Outstanding at        Remaining         Weighted Average
Exercise Prices       December 31, 2000    Contractual Life      Exercise Price
---------------       -----------------    ----------------     ----------------
$ 12.95 - 19.88               1,034,618       5.1 years             $ 14.71
$ 24.81 - 27.68               1,298,374       7.9 years               25.13
$ 29.44 - 36.75                 459,081       8.0 years               32.41
                              ---------
                              2,792,073       6.9 years               22.46
                              =========

                            Number
    Range of           Exercisable at      Weighted Average
Exercise Prices       December 31, 2000     Exercise Price
---------------       -----------------    ----------------
$ 12.95 - 19.88               1,034,618        $ 14.71
$ 24.81 - 27.68                 548,959          24.87
$ 29.44 - 36.75                 152,268          32.39
                              ---------
                              1,735,845          19.47
                              =========

In 1996, the Company adopted the disclosure-only option of FAS No. 123,
"Accounting for Stock-Based Compensation," for its stock option plans. As of
December 31, 1996, the Company's employees held certain options in stock of the
former parent that were converted to the Company's Common Stock in early 1997
(See Note 14). For 2000, 1999, and 1998 had the compensation costs for stock
options and the Employee Stock Purchase Plan been determined based on the fair
value at the grant dates for awards under these plans consistent with the method
of FAS No. 123, the Company's net income, basic net earnings per share, and
diluted net earnings per share would have been reduced to the pro forma amounts
indicated below:

                                                 For the Year Ended December 31,
                                                 -------------------------------
Millions                                           2000        1999        1998
                                                 -------     -------     -------
Net Earnings
     As reported ............................    $    90     $    97     $    66
     Pro forma ..............................         86          92          60

Basic Net Earnings per share
     As reported ............................    $  2.91     $  2.83     $  1.91
     Pro forma ..............................       2.78        2.70        1.74
Diluted Net Earnings per share
     As reported ............................    $  2.77     $  2.72     $  1.85
     Pro forma ..............................       2.65        2.59        1 69

All options issued by the Company were issued at the estimated fair value in
effect at the date of issuance, vest ratably over the applicable vesting period,
and expire ten years after the grant date with the exception of one plan under
which the options vest two years after the award date. The fair value for
options granted in 2000, 1999, and 1998 are estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used:
dividend yield of .63%, .49%, and .48% in 2000, 1999, and 1998, respectively;
expected volatility of 25% in 2000, 1999, and 1998; risk-free interest rates
ranging from 6.09% to 6.41% in 2000, 4.7% to 5.2% in 1999, and 4.6% to 5.4% in
1998; and, expected life of one year after the vesting period for 2000, 1999,
and 1998. The assumptions used for the fair value of the employee purchase
rights from the Employee Stock Purchase Plan are the same as above with the
exception that the dividend yield calculated at the date of grant is .58%, .60%,
and .48% for 2000, 1999, and 1998, respectively, and the average life of each
purchase right was assumed to be 90 days for the three years.


                                       35
<PAGE>

12. EARNINGS PER COMMON 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 year.
Diluted earnings per share is calculated based on the basic weighted average
number of common shares outstanding, plus additional shares representing stock
distributable under stock-based plans computed using the treasury stock method.

<TABLE>
<CAPTION>
                                                            For the Year Ended December 31, 2000
                                                            -------------------------------------
                                                                Net                   Per Share
Millions, except for shares and per share data                Earnings     Shares      Amount
                                                            ----------   ----------   -----------
<S>                                                             <C>      <C>            <C>
Basic Earnings per Share
Income available to common stockholders                         $ 90     30,842,676     $2.91
                                                                                        =====
Stock Options and Other Common
     Stock Equivalents                                            --      1,560,445
                                                                ----     ----------
Diluted Earnings per Share
Income available to common stockholders                         $ 90     32,403,121     $2.77
                                                                ====     ==========     =====
<CAPTION>
                                                            For the Year Ended December 31, 1999
                                                            -------------------------------------
                                                                Net                   Per Share
Millions, except for shares and per share data                Earnings     Shares      Amount
                                                            ----------   ----------   -----------
<S>                                                             <C>      <C>            <C>
Basic Earnings per Share
Income available to common stockholders                         $ 97     34,115,713     $2.83
                                                                                        =====
Stock Options and Other Common
     Stock Equivalents                                            --      1,336,053
                                                                ----     ----------
Diluted Earnings per Share
Income available to common stockholders                         $ 97     35,451,766     $2.72
                                                                ====     ==========     =====
<CAPTION>
                                                            For the Year Ended December 31, 1998
                                                            -------------------------------------
                                                                Net                   Per Share
                                                              Earnings     Shares      Amount
                                                            ----------   ----------   -----------
<S>                                                             <C>      <C>            <C>
Millions, except for shares and per share data
Basic Earnings per Share
Income available to common stockholders                         $ 66     34,677,706     $1.91
                                                                                        =====
Stock Options and Other Common
     Stock Equivalents                                            --      1,116,384
                                                                ----     ----------
Diluted Earnings per Share
Income available to common stockholders                         $ 66     35,794,090     $1.85
                                                                ====     ==========     =====
</TABLE>

13. 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.


                                       36
<PAGE>

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 Ronald 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 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, results of operations, or cash flows
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. In June 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 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 adverse effect on the
financial position, results of operations, or cash flows of the Company.

Capital Commitments

The Company estimates that expenditures aggregating approximately $33 million
will be required after December 31, 2000, to complete facilities and projects
authorized at such date.


                                       37
<PAGE>

Lease Commitments

The Company holds certain equipment under long-term operating leases. Future
minimum lease payments under existing noncancelable operating leases as of
December 31, 2000, are as follows:

                               Year                 Payment
                            ----------           -------------
                               2001              $  20 million
                               2002                 15 million
                               2003                 11 million
                               2004                  9 million
                               2005                  7 million
                            Thereafter              79 million
                                                 -----
                                                 $ 141 million
                                                 =====

Rent expense recognized for the years ended December 31, 2000, 1999, and 1998,
was $16 million, $12 million, and $19 million, respectively.

Other Commitments

The Company's commitments under long-term service agreements for hardware,
software, and related services as of December 31, 2000 are as follows:

                               Year                 Payment
                            ----------           -------------
                               2001              $  44 million
                               2002                 47 million
                               2003                 18 million
                               2004                 18 million
                               2005                 11 million
                            Thereafter               1 million
                                                 -----
                                                 $ 139 million
                                                 =====

14. TRANSACTIONS WITH FORMER PARENT COMPANY

Employee Benefits

Certain employees of the Company participated in the employee stock ownership
and employee stock purchase plans offered by its former parent prior to the
December 1996 spinoff. The employee stock ownership plan provided for grants of
a variety of awards, including stock options and restricted stock to officers
and key employees of the Company. In connection with the spinoff, all options
held by employees of the Company were canceled as of December 11, 1996 and were
replaced in January 1997 with approximately 2.1 million options granted under
the Newport News Shipbuilding Inc. Stock Ownership Plan (See Note 11).

Certain employees of the Company also participated in a pension plan provided by
its former parent. Reference is made to Note 10 for a further discussion of the
Company's pension plan.

Ancillary Agreements

In order to assist in the orderly transition of the Company to a separate,
publicly held company, the former parent modified, amended, or entered into
certain contractual agreements with the Company in 1996. Such agreements include
a tax sharing agreement, an employee benefits agreement, an insurance agreement,
an administrative services agreement, and other ancillary agreements.


                                       38
<PAGE>

15. REPORTABLE SEGMENTS

Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. The operating segments are
managed separately because each operating segment represents a strategic
business unit that offers different products and services.

The Company's reportable operating segments include three areas involving U.S.
Naval and commercial ships: (i) Construction; (ii) Fleet Services; and (iii)
Engineering. Revenues from contracts with the U.S. Navy represent approximately
98%, 98%, and 92% of the Company's consolidated revenues for the years ended
December 31, 2000, 1999, and 1998, respectively. Essentially all reportable
segments operate out of the Company's facilities located in Newport News,
Virginia.

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 one month to three
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 accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on profit or loss from operations before income taxes and interest, not
including nonrecurring gains and losses. A brief description of each reportable
operating segment follows:

Construction

The Company's major construction efforts currently include the aircraft carrier
Ronald Reagan, the Virginia-class attack submarine construction program, and CVN
77, the transition ship to the next generation of aircraft carriers.

Fleet Services

The Company provides ongoing maintenance for the U.S. Navy's vessels through
overhaul, refueling, and repair work. The Company possesses unique expertise in
servicing nuclear naval systems, and believes it currently is the only private
shipyard capable of refueling nuclear-powered aircraft carriers. Additionally,
the Company provides repair services for commercial vessels.

Engineering

The Company provides engineering planning and design services primarily for U.S.
Government customers. The Company maintains a stable level of funded engineering
support contracts for the U.S. Navy. Support services provided by the Company
include: new aircraft carrier research and development, aircraft carrier
non-nuclear overhaul planning, reactor plant engineering, aircraft carrier
engineering support, and training and logistics. The Company is a leader in
aircraft carrier design, accounting for the majority of ship integration and
related design development for the Naval Sea Systems Command.


                                       39
<PAGE>

<TABLE>
<CAPTION>
Information about Operating Earnings and Assets
For the Year Ended December 31, (in millions)                  Fleet                   All
                                               Construction  Services  Engineering  Others (1)    Total
                                               ------------  --------  -----------  ----------    -----
<S>                                               <C>         <C>         <C>         <C>         <C>
2000
----
Revenues ....................................     $  959      $  791      $  305      $   17      $2,072
Segment Operating Earnings ..................        111          73          18           4         206
Segment Assets at December 31, 2000(2) ......        236         122          30          12         400

1999
----
Revenues ....................................     $  710      $  913      $  228      $   12      $1,863
Segment Operating Earnings ..................        102          85          15          16         218
Segment Assets at December 31, 1999(2) ......        190         164          40          16         410

1998
----
Revenues ....................................     $  839      $  724      $  286      $   13      $1,862
Segment Operating Earnings ..................         87          70          19          (1)        175
Segment Assets at December 31, 1998(2) ......        265         160          26          26         477
</TABLE>

1.    Other business activities include valve and pump repair and technical
      services, equity investments, and corporate activities. Other operating
      earnings for 1999 primarily relate to non-recurring gains associated with
      merger break-up fees and option proceeds.

2.    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.

A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is as follows:

<TABLE>
<CAPTION>
Reconciliation of Segment Information to Consolidated Amounts
For the Year Ended December 31, (in millions)
                                                          2000        1999        1998
                                                        -------     -------     -------
<S>                                                     <C>         <C>         <C>
Revenues
--------
Total revenues for reportable segments ............     $ 2,055     $ 1,851     $ 1,849
Other revenues ....................................          17          12          13
                                                        -------     -------     -------
         Total consolidated revenues ..............     $ 2,072     $ 1,863     $ 1,862
                                                        =======     =======     =======

Operating Earnings
------------------
Total operating earnings for reportable segments ..     $   202     $   202     $   176
Other operating earnings ..........................           4          16          (1)
                                                        -------     -------     -------
         Total consolidated operating earnings ....     $   206     $   218     $   175
                                                        =======     =======     =======

Assets
------
Total A/R and CIP for reportable segments .........     $   388     $   394     $   451
Other unallocated A/R and CIP .....................          12          16          26
Other unallocated amounts .........................       1,076       1,102       1,123
                                                        -------     -------     -------
         Total consolidated assets ................     $ 1,476     $ 1,512     $ 1,600
                                                        =======     =======     =======
</TABLE>


                                       40
<PAGE>

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        Net Earnings
                                                              Earnings                  Per Share (a)
                                                Operating      Before        Net      ----------------
Millions (except share amounts)       Revenues   Earnings   Income Taxes   Earnings   Basic    Diluted
                                      --------   --------   ------------   --------   -----    -------
<S>                                     <C>        <C>          <C>          <C>      <C>       <C>
2000
1st Quarter    .......................  $469       $ 47         $ 36         $ 21     $ .65     $ .63
2nd Quarter    .......................   532         54           40           24       .77       .74
3rd Quarter    .......................   493         50           37           21       .71       .67
4th Quarter    .......................   578         55           40           24       .79       .74

1999
1st Quarter    .......................   $430       $ 44         $ 32         $ 18     $ .52     $ .50
2nd Quarter(b) .......................    444         72           60           35       .99       .95
3rd Quarter    .......................    451         47           34           20       .60       .58
4th Quarter    .......................    538         55           38           24       .71       .69
</TABLE>

(a)   The sum of net earnings per share for the four quarters in both years
      differs from the annual earnings per share due to the required method of
      computing the weighted average number of shares in the interim period.

(b)   Operating earnings for the second quarter of 1999 included $25 million of
      non-recurring gains associated with merger break-up fees and option
      proceeds. These gains contributed $15 million in net earnings and $.41 to
      diluted earnings per share for both the 2nd quarter of 1999 and the full
      year.

17. SUBSEQUENT EVENTS

Share Repurchase Programs

On February 1, 2001, the Company announced a $100 million share repurchase
program. The new plan is a follow-on to previous programs under which the
Company purchased 5.6 million shares at a cost of $184 million since the middle
of 1999. The new plan will be accomplished through open market and privately
negotiated transactions.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.


                                       41
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth a list of executive officers of Newport News
Shipbuilding Inc. at March 1, 2001. During the preceding five years each such
officer has served with the Company since the dates indicated below. Unless
otherwise indicated all offices are held with the Company. The information
required by this Item concerning the Company's directors is included under the
captions "Election of Directors" and "Directors Continuing in Office" of the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with its 2001 Annual Meeting of Shareholders,
which information is incorporated herein by reference. Certain information
concerning director and executive officer compliance with the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as
amended, is included under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's definitive Proxy Statement to be filed
with the Securities and Exchange Commission in connection with the 2001 Annual
meeting of Shareholders, which information is incorporated herein by reference.

<TABLE>
<CAPTION>
                                                                                                            Effective
Name (Age at March 1, 2001)      Offices Held                                                               Date of Term
---------------------------      ------------                                                               ------------
<S>                              <C>                                                                        <C>
William P. Fricks (56)           Chairman and Chief Executive Officer                                       May 1998
                                 Chairman, President, and Chief Executive Officer                           January 1997
                                 President and Chief Executive Officer                                      November 1995
                                 President and Chief Operating Officer                                      September 1994
Thomas C. Schievelbein (47)      Executive Vice President and Chief Operating Officer                       March 1999
                                 Executive Vice President                                                   October 1995
                                 Vice President - Human Resources and Administration                        January 1995
Charles S. Ream (57)             Senior Vice President and Chief Financial Officer                          October 2000
Stephen B. Clarkson (63)         Vice President - General Counsel and Secretary                             January 1991
William G. Cridlin, Jr. (54)     Vice President and General Manager - Submarines                            July 1998
                                 Vice President - Marketing                                                 January 1995
M. Roger Eshelman (61)           Vice President - Aircraft Carrier Overhaul and Nuclear Services            October 2000
                                 Vice President - Nuclear Engineering                                       July 1998
                                 Director and Chief Nuclear Engineer                                        January 1995
Alfred Little, Jr. (54)          Vice President - Human Resources and EH&S                                  July 1996
C. Michael Petters (41)          Vice President - Contract Management                                       October 2000
                                 Vice President and General Manager - Aircraft Carriers                     July 1998
                                 Vice President - Aircraft Carriers                                         December 1997
                                 Director - Carrier Program                                                 January 1995
D. Scott Stabler II (41)         Vice President - Carrier Construction                                      October 2000
                                 Vice President - Assembly                                                  September 1999
                                 Program Director - Carrier Construction                                    September 1998
                                 Director - Business Development                                            November 1997
                                 Program Manager - Arsenal Ship                                             January 1997
                                 Program Manager - LPD-17                                                   September 1995
                                 Director - Integrated Logistic Support                                     October 1994
Charles P. Wingfield, Jr. (47)   Vice President and Controller                                              July 1998
                                 Director - Operations Finance                                              May 1998
                                 Director - Corporate Finance                                               September 1996
                                 Controller and Treasurer                                                   January 1995
D. R. Wyatt (42)                 Treasurer                                                                  September 1996
                                 Assistant Treasurer                                                        August 1995
                                 Manager - Finance                                                          April 1989
</TABLE>


                                       42
<PAGE>

Each of the executive officers of the Company has been continuously engaged in
the business of the Company, its affiliates or predecessor companies during the
past five years except for:

<TABLE>
<CAPTION>
Name                                     Previous Employment Office Held                                    Period
----                                     -------------------------------                                    ------
<S>                           <C>                                                                           <C>
Charles S. Ream               Raytheon Systems Company
                              - Senior Vice President, Strategic Initiatives, Mergers and Acquisitions      April 1999
                              - Senior Vice President, Finance                                              January 1998
                              Hughes Aircraft Company
                              - Senior Vice President and Chief Financial Officer                           September 1994

Alfred Little, Jr.            Sun Company, Inc.
                              - Vice President, Human Resources                                             1992 to 1996
</TABLE>

ITEM 11.  EXECUTIVE COMPENSATION

The information required by this Item is included under the caption
"Compensation of Directors," and "Executive Compensation," of the Company's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission in connection with its 2001 Annual Meeting of Shareholders, which
information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is included under the caption "Security
Ownership of Certain Beneficial Owners and Management" of the Company's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission in connection with its 2001 Annual Meeting of Shareholders, which
information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is included under the caption "Certain
Transactions," of the Company's definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with its 2001 Annual Meeting of
Shareholders, which information is incorporated herein by reference.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)   1.  Consolidated Financial Statements

          Consolidated Financial Statements required by this Item have been
          included in Item 8. Refer to the "Consolidated Financial Statements
          And Supplementary Data" set forth in Item 8.

      2.  Financial Statement Schedules

          No financial statement schedules are submitted because they are
          either not applicable, not required, or not material.

      3.  Exhibits - See Index on pages 46 to 49.


                                       43
<PAGE>

(b)   Reports on Form 8-K

      During the fourth quarter, the Company filed the following current reports
      on Form 8-K.

      December 14, 2000       Announcing the appointment of Irwin F. Edenzon and
                              Stephen C. Hassell to positions of Vice President.

      September 25, 2000      Announcing internal organizational changes.

      September 20, 2000      Regarding presentation to securities analysts.

      September 18, 2000      Announcing the appointment of Charles S. Ream as
                              Senior Vice President and Chief Financial Officer,
                              effective October 2, 2000.


                                       44
<PAGE>

                                   SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, NEWPORT NEWS SHIPBUILDING INC., A DELAWARE CORPORATION, HAS DULY
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.

                                         NEWPORT NEWS SHIPBUILDING INC.


Date: March 22, 2001                    By:       /s/ William P. Fricks
                                           -------------------------------------
                                                      William P. Fricks
                                                         Chairman and
                                                   Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATES INDICATED.

                 SIGNATURE                                      TITLE


Date: March 22, 2001     /s/ William P. Fricks           Chairman and
--------------------     ------------------------------  Chief Executive Officer
                             William P. Fricks


Date: March 22, 2001     /s/ Charles S. Ream             Senior Vice President
--------------------     ------------------------------  and Chief Financial
                             Charles S. Ream             Officer


Date: March 22, 2001     /s/ Charles P. Wingfield, Jr.   Vice President and
--------------------     ------------------------------  Controller
                             Charles P. Wingfield, Jr.


Date: March 22, 2001     /s/ Gerald L. Baliles           Director
--------------------     ------------------------------
                             Hon. Gerald L. Baliles


Date: March 22, 2001     /s/ Leon A. Edney               Director
--------------------     ------------------------------
                             Leon A. Edney, Admiral (Ret.)


Date: March 22, 2001     /s/ Dr. William R. Harvey       Director
--------------------     ------------------------------
                             Dr. William R. Harvey


Date: March 22, 2001     /s/ Charles A. Bowsher          Director
--------------------     ------------------------------
                             Hon. Charles A. Bowsher


Date: March 22, 2001     /s/ Dr. Joseph J. Sisco         Director
--------------------     ------------------------------
                             Dr. Joseph J. Sisco


Date: March 22, 2001     /s/ Stephen R. Wilson           Director
--------------------     ------------------------------
                             Stephen R. Wilson


Date: March 22, 2001     /s/ Dr. Shirley Ann Jackson     Director
--------------------     ------------------------------
                             Dr. Shirley Ann Jackson


                                       45
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT
NUMBER                       DESCRIPTION
------                       -----------

3.1            Restated Certificate of Incorporation of the Company dated as of
               December 11, 1996. (Incorporated herein by reference to the
               Company's Registration Statement on Form S-4 dated January 23,
               1997, as amended (Registration No. 333-20285)).
3.2            Amended and Restated By-laws of the Company dated as of October
               12, 1998. (Incorporated herein by reference to the Company's
               Current Report on Form 8-K, filed on January 22, 1999 (File No.
               1-12385)).
4.1            Specimen Certificate of the Company's Common Stock. (Incorporated
               herein by reference to the Company's Registration Statement on
               Form 10 dated October 30, 1996, as amended (Registration No.
               1-12385)).
4.2            Form of Rights Agreement dated as of June 10, 1998, between the
               Company and First Chicago Trust Company of New York, as Rights
               Agent. (Incorporated herein by reference to the Company's
               Registration Statement on Form 8A dated June 10, 1998, (File No.
               001-12385)).
4.3            Form of Certificate of Voting Powers, Designations, Preferences
               and Relative Participating, Optional and Other Special Rights and
               Qualifications, Limitations or Restrictions of Series A
               Participating Cumulative Preferred Stock of the Company.
               (Attached as Exhibit A to the Rights Agreement incorporated
               herein by reference as Exhibit 4.2 hereto).
4.4            Form of Right Certificate. (Attached as Exhibit B to the Rights
               Agreement incorporated herein by reference as Exhibit 4.2
               hereto).
4.5            Certificate of Elimination of Newport News Shipbuilding Inc.'s
               Series A Participating Junior Preferred Stock (filed in
               connection with the expiration of the Company's previous Rights
               Agreement), dated June 4, 1998. (Incorporated herein by reference
               to the Company's Registration Statement on Form 8A dated June 10,
               1998, (File No. 001-12385)).
4.6            Form of Senior Note issued on March 13, 1997 including
               Guarantees. (Incorporated herein by reference to the Company's
               Registration Statement on Form S-4 dated January 23, 1997, as
               amended (Registration No. 333-20285)).
4.7            Form of Senior Subordinated Note issued on March 13, 1997
               including Guarantees. (Incorporated herein by reference to the
               Company's Registration Statement on Form S-4 dated January 23,
               1997, as amended (Registration No. 333-20285)).
4.8            Senior Note Indenture dated as of November 26, 1996.
               (Incorporated herein by reference to the Company's Registration
               Statement on Form S-4 dated January 23, 1997, as amended
               (Registration No. 333-20285)).
4.9            Senior Subordinated Note Indenture dated as of November 26, 1996.
               (Incorporated herein by reference to the Company's Registration
               Statement on Form S-4 dated January 23, 1997, as amended
               (Registration No. 333-20285)).
4.10           First Supplemental Senior Note Indenture dated as December 11,
               1996. (Incorporated herein by reference to the Company's
               Registration Statement on Form S-4 dated January 23, 1997, as
               amended (Registration No. 333-20285)).
4.11           First Supplemental Senior Subordinated Note Indenture dated as of
               December 11, 1996. (Incorporated herein by reference to the
               Company's Registration Statement on Form S-4 dated January 23,
               1997, as amended (Registration No. 333-20285)).


                                       46
<PAGE>

10.1           Distribution Agreement dated as of November 1, 1996 among Tenneco
               Inc., New Tenneco Inc. and the Company. (Incorporated herein by
               reference to the Company's Registration Statement on Form S-4
               dated January 23, 1997, as amended (Registration No. 333-20285)).
10.2           Amendment No. 1 to Distribution Agreement dated as of December
               11, 1996 by and among Tenneco Inc., New Tenneco Inc. and the
               Company. (Incorporated herein by reference to the Company's
               Registration Statement on Form S-4 dated January 23, 1997, as
               amended (Registration No. 333-20285)).
10.3           Amended and Restated Agreement and Plan of Merger, dated as of
               June 19, 1996, among El Paso Natural Gas Company, El Paso Merger
               Company and Tenneco Inc. (Incorporated herein by reference to the
               Company's Registration Statement on Form S-4 dated January 23,
               1997, as amended (Registration No. 333-20285)).
10.4           Debt and Cash Allocation Agreement, dated as of December 11, 1996
               among Tenneco Inc., New Tenneco Inc. and the Company.
               (Incorporated herein by reference to the Company's Registration
               Statement on Form S-4 dated January 23, 1997, as amended
               (Registration No. 333-20285)).
10.5           Benefits Agreement, dated as of December 11, 1996 among Tenneco
               Inc., New Tenneco Inc. and the Company. (Incorporated herein by
               reference to the Company's Registration Statement on Form S-4
               dated January 23, 1997, as amended (Registration No. 333-20285)).
10.6           Insurance Agreement, dated as of December 11, 1996 among Tenneco
               Inc., New Tenneco Inc. and the Company. (Incorporated herein by
               reference to the Company's Registration Statement on Form S-4
               dated January 23, 1997, as amended (Registration No. 333-20285)).
10.7           Tax Sharing Agreement, dated as of December 11, 1996 among
               Tenneco Inc., the Company, New Tenneco Inc. and El Paso Natural
               Gas Company. (Incorporated herein by reference to the Company's
               Registration Statement on Form S-4 dated January 23, 1997, as
               amended (Registration No. 333-20285)).
10.8           First Amendment to the Tax Sharing Agreement, dated as of
               December 11, 1996 among Tenneco Inc., the Company, New Tenneco
               Inc., and El Paso Natural Gas Company. (Incorporated herein by
               reference to the Company's Registration Statement on Form S-4
               dated January 23, 1997, as amended (Registration No. 333-20285)).
10.9           Employment agreement dated February 4, 1999, between the Company
               and William P. Fricks, Chairman and Chief Executive Officer of
               the Company. (Incorporated by reference to the Company's Annual
               Report on Form 10-K for the year ended December 31, 1998 (File
               No. 1-12385)).
10.10*         Modification to Employment Agreement dated February 4, 1999,
               between the Company and William P. Fricks, Chairman and Chief
               Executive Officer, effective January 1, 2001.
10.11          Employment Agreement between the Company and Mr. Thomas C.
               Schievelbein, Executive Vice President - Chief Operating Officer
               of the Company, dated June 1, 1998. (Incorporated herein by
               reference to the Company's Quarterly Report on Form 10-Q for the
               quarter ended June 21, 1998 (File No. 1-12385)).
10.12          Newport News Shipbuilding Inc. Stock Ownership Plan.
               (Incorporated herein by reference to the Company's Annual Report
               on Form 10-K for the year ended December 31, 1996 (File No.
               1-12385)).
10.13          Amendment No. 1 to Newport News Shipbuilding Inc. Stock Ownership
               Plan, effective as of July 1, 1997. (Incorporated herein by
               reference to the Company's Quarterly Report on Form 10-Q for the
               quarter ended September 21, 1997 (File No. 1-12385)).
10.14          Amendment No. 2 to Newport News Shipbuilding Inc. Stock Ownership
               Plan, effective as of October 8, 1997. (Incorporated herein by
               reference to the Company's Quarterly Report on Form 10-Q for the
               quarter ended September 21, 1997 (File No. 1-12385)).
10.15          Amendment No. 3 to Newport News Shipbuilding Inc. Stock Ownership
               Plan, effective as of May 16, 1997. (Incorporated herein by
               reference to the Company's Quarterly Report on Form 10-Q for the
               quarter ended September 21, 1997 (File No. 1-12385)).
10.16          1997 Stock Plan for Directors of Newport News Shipbuilding Inc.
               and First Amendment. (Incorporated herein by reference to the
               Company's Annual Report on Form 10-K for the year ended December
               31, 1996 (File No. 1-12385)).


                                       47
<PAGE>

10.17          Amendment No. 2 to 1997 Stock Plan for Directors of Newport News
               Shipbuilding Inc., effective as of October 9, 1997. (Incorporated
               herein by reference to the Company's Quarterly Report on Form
               10-Q for the quarter ended September 21, 1997 (File No.
               1-12385)).
10.18          Third Amendment to the 1997 Stock Plan for Directors of Newport
               News Shipbuilding Inc. (Incorporated by reference to the
               Company's Annual Report on Form 10-K for the year ended December
               31, 1998 (File No. 1-12385)).
10.19*         Fourth Amendment to the 1997 Stock Plan for Directors of Newport
               News Shipbuilding Inc., effective May 18, 2000.
10.20          Deferred Compensation Plan for Non-employee Directors.
               (Incorporated herein by reference to the Company's Annual Report
               on Form 10-K for the year ended December 31, 1996 (File No.
               1-12385)).
10.21          First Amendment to Newport News Shipbuilding Inc. Deferred
               Compensation Plan for Non-employee Directors. (Incorporated by
               reference to the Company's Annual Report on Form 10-K for the
               year ended December 31, 1998 (File No. 1-12385)).
10.22          Deferred Compensation Plan. (Incorporated herein by reference to
               the Company's Annual Report on Form 10-K for the year ended
               December 31, 1996 (File No. 1-12385)).
10.23          First Amendment to the Newport News Shipbuilding Inc. Deferred
               Compensation Plan, effective December 15, 1998. (Incorporated by
               reference to the Company's Annual Report on Form 10-K for the
               year ended December 31, 1998 (File No. 1-12385)).
10.24          Second Amendment to Newport News Shipbuilding Inc. Deferred
               Compensation Plan (effective September 1, 1999). (Incorporated by
               reference to the Company's Annual Report on Form 10-K for the
               year ended December 31, 1999 (File No. 1-12385)).
10.25          Third Amendment to Newport News Shipbuilding Inc. Deferred
               Compensation Plan (effective December 14, 1999). (Incorporated by
               reference to the Company's Annual Report on Form 10-K for the
               year ended December 31, 1999 (File No. 1-12385)).
10.26*         Fourth Amendment to the Newport News Shipbuilding Inc. Deferred
               Compensation Plan, effective October 10, 2000.
10.27*         Newport News Shipbuilding Inc. Annual Incentive Plan, effective
               January 1, 1997.
10.28          First Amendment to Newport News Shipbuilding Inc. Annual
               Incentive Plan (effective January 1, 2000). (Incorporated by
               reference to the Company's Annual Report on Form 10-K for the
               year ended December 31, 1999 (File No. 1-12385)).
10.29          Newport News Shipbuilding Inc. Change in Control Severance
               Benefit Plan for Key Executives as amended and restated effective
               March 23, 1999. (Incorporated by reference to the Company's
               Annual Report on Form 10-K for the year ended December 31, 1998
               (File No. 1-12385)).
10.30          Newport News Shipbuilding Inc. Amended and Restated Stock
               Employee Compensation Trust Agreement, dated as of August 1,
               2000. (Incorporated by reference to the Company's Quarterly
               Report on Form 10-Q for the quarter ended September 17, 2000).
10.31          Newport News Shipbuilding Inc. Retirement Benefit Restoration
               Plan, effective as of January 1, 1998. (Incorporated by reference
               to the Company's Annual Report on Form 10-K for the year ended
               December 31, 1998 (File No. 1-12385)).
10.32          Newport News Shipbuilding Inc. Supplemental Executive Retirement
               Plan. (Incorporated by reference to the Company's Annual Report
               on Form 10-K for the year ended December 31, 1998 (File No.
               1-12385).
10.33          First Amendment to Newport News Shipbuilding Inc. Retirement
               Benefit Restoration Plan. (Incorporated by reference to the
               Company's Annual Report on Form 10-K for the year ended December
               31, 1998 (File No. 1-12385).
10.34          Newport News Shipbuilding Inc. 1998 Stock Incentive Plan.
               (Incorporated herein by reference to the Company's Registration
               Statement on Form S-8 filed on October 19, 1998 (Registration No.
               333-65877)).
10.35          Subcontract EB-96-2100-010 between the Company and Electric Boat
               Corporation, a subsidiary of General Dynamics Inc., concerning
               the construction of four Virginia Class attack submarines for the
               U.S. Navy (without schedules, appendices or exhibits thereto).
               Incorporated by reference to the Company's Annual Report on Form
               10-K for the year ended December 31, 1998 (File No. 1-12385)


                                       48
<PAGE>

10.36          Award/Contract N00024-95-C-2106, issued by Naval Sea Systems
               Command to Newport News Shipbuilding for Aircraft Carrier CVN-76.
               (Incorporated herein by reference to the Company's Registration
               Statement on Form 10 dated October 30, 1996, as amended
               (Registration No. 1-12385)).
10.37*         Amendment/Modification No. P00031 to Contract No. N00024-98-C2104
               issued by Naval Sea Systems Command to Newport News Shipbuilding
               for Aircraft Carrier CVN 77.
10.38          Contract (N00024-94-C-2105) between the Company and the United
               States Navy for work necessary to prepare and make ready for the
               refueling, overhaul, alteration, repair, and maintenance of the
               USS Nimitz (CVN 68) and its reactor plants (without schedules,
               appendices or exhibits thereto). (Incorporated by reference to
               the Corporation's Quarterly Report on Form 10-Q for the quarter
               ended June 21, 1998 (File No.1-12385)).
10.39          Modification No. P00016 of Contract (N00024-94-C-2105), effective
               April 16, 1998, between the Company and the United States Navy
               (without schedules, appendices or exhibits thereto).
               (Incorporated by reference to the Company's Quarterly Report on
               Form 10-Q for the quarter ended June 21, 1998 (File No.
               1-12385)).
10.40          Agreement and Plan of Merger dated as of January 19, 1999, among
               the Company, Ares Acquisition Corporation, a wholly-owned
               subsidiary of the Company, and Avondale Industries, Inc.
               (Incorporated herein by reference to the Company's Current Report
               on Form 8-K, filed on January 22, 1999 (File No. 1-12385)).
10.41          Parent Stock Option Agreement dated as of January 19, 1999,
               between the Company and Avondale Industries, Inc. (Incorporated
               herein by reference to the Company's Current Report on Form 8-K,
               filed on January 22, 1999 (File No. 1-12385)).
10.42          Company Stock Option Agreement dated as of January 19, 1999,
               between Avondale Industries, Inc. and the Company (Incorporated
               herein by reference to the Company's Current Report on Form 8-K,
               filed on January 22, 1999 (File No. 1-12385)).
10.43          Contract (N00024-98-C-2107) between the Company and the U.S. Navy
               for work necessary to prepare for the alterations, repairs,
               maintenance and routine work on the USS Dwight D. Eisenhower (CVN
               69) and its reactor plants (without schedules, appendices, or
               exhibits thereto). (Incorporated by reference to the Company's
               Annual Report on Form 10-K for the year ended December 31, 1999
               (File No. 1-12385)).
10.44          Modification No. P00005 of Contract (N00024-98-C-2107) effective
               February 12, 1999, between the Company and the U.S. Navy (without
               schedules, appendices or exhibits thereto). (Incorporated by
               reference to the Company's Annual Report on Form 10-K for the
               year ended December 31, 1999 (File No. 1-12385)).
10.45          Modification No. P00012 of Contract (N00024-98-C-2107) effective
               January 21, 2000, between the Company and the U.S. Navy (without
               schedules, appendices or exhibits thereto). (Incorporated by
               reference to the Company's Annual Report on Form 10-K for the
               year ended December 31, 1999 (File No. 1-12385)).

21.1*          Subsidiaries of the Registrant.
24.1*          Powers of Attorney.

*     Filed herewith.

Exhibits 10.9, 10.10, 10.11, 10.12, 10.13, 10.14, 10.15, 10.16, 10.17, 10.18,
10.19, 10.20, 10.21, 10.22, 10.23, 10.24, 10.25, 10.26, 10.27, 10.28, 10.29,
10.30, 10.31, 10.32, 10.33, and 10.34 hereto constitute management contracts or
compensatory plans or arrangements within the meaning of Item 14(a)(3) of Form
10-K.


                                       49