The 1998 results include several nonrecurring items. First, net income included an income tax benefit of $9.6 million ($0.72 and $0.69 per diluted share for the quarter and year ended December 31, 1998, respectively) to recognize for financial reporting purposes the tax benefit associated with certain prior year tax deductions and income tax credits. No similar benefit or credits were recorded in 1997.

Second, the results for the full year 1998 included an after-tax charge of $2.0 million related to the early adoption of AICPA Statement of Position (SOP) 97-3 that prescribes certain accounting practices for insurance-related charges. Finally, the Company recorded a $2.2 million write down of certain steel inventories related to its wholesale steel sales operation. This write down reflects the influx of foreign steel into the U.S., which primarily resulted from the devaluation of certain Far East currencies.

"The growth in operating income for 1998 highlights a very successful year for Avondale," said Albert L. Bossier, Jr., Chairman and Chief Executive Officer. "We accomplished meaningful gains in both our military and commercial shipbuilding initiatives. This marked the first full year of our role as prime contractor on the Navy's major LPD-17 shipbuilding program. During the course of 1998, our work on this important project helped support the award to our alliance of a contract for the second ship in this series. We also were awarded a Naval contract for the seventh ship in the Strategic Sealift program that was begun in 1993 and a third crude oil carrier for ARCO. Our total backlog at the close of 1998 totaled $2.8 billion, $2.0 billion of which was funded. This includes military-related contracts as well as the largest ever commercial contract for Avondale, represented by three crude carriers for ARCO."

"Our financial gains are related directly to the programs we have implemented to increase productivity and raise efficiency. Our intent is to continue this positive momentum throughout our organization. During 1998, the opening of our new Maritime Technology Center of Excellence highlighted our commitment to fully capitalize on technological advances in the design and production of future ships. Our working partnership with the University of New Orleans School of Naval Architecture and Marine Engineering is reflected in this revolutionary new complex that is already serving a key function in the LPD-17 program."

Bossier added, "We ended 1998 with a strong financial position that included long-term debt totaling $51.9 million and total shareholders' equity in excess of $200 million. Avondale's financial resources enabled us to repurchase 1,250,000 common shares in June, and the reduced number of shares contributed to the year-to-year gain in earnings per share for the fourth quarter and full year. Also, on January 19, 1999, we announced a proposed merger of Avondale with Newport News Shipbuilding. This combination will create an entity that has greater resources and the capability of building or repairing any ship in the Navy, Coast Guard and commercial fleets."

Cautionary Statement for Purposes of "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

Certain statements, other than statements of historical fact, contained in this Press Release are forward-looking statements. These forward-looking statements are generally accompanied by such terms and phrases as "anticipates," "estimates," "expects," "believes," "should," "projects," "scheduled," or similar statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause the Company's results to differ materially from the results discussed in such forward-looking statements include the Company's reliance on U.S. Navy contracts, including its ability to replenish its backlog by securing additional contracts from the U.S. Navy, profit recognition on government contracts, the outcome of the Company's litigation involving efforts to unionize the Company's production workers and the competitive impact of a resolution in favor of the union, the importance of obtaining commercial contracts, the Company's ability to complete its contracts within its cost estimates, intense competition for government and commercial contracts, labor, regulatory and other risks in the shipbuilding and marine construction industries and other unanticipated events affecting the Company's efforts and the efforts of its suppliers, subcontractors, and customers (including the U. S. Navy) to timely correct Year 2000 problems inherent in essential computer systems, which could impair the Company's operations or the ability of its customers to timely pay for products and services provided. All forward-looking statements in this Press Release are expressly qualified in their entirety by the cautionary statements in this paragraph.