Todd Shipyards Corp · 10-K · For 3/28/04

Filed On 5/25/04 8:52pm ET   ·   SEC File 1-05109   ·   Accession Number 98537-4-26

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 1: 10-K        Annual Report                                         77±   394K 
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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 March 28, 2004                

[ ] 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 1-5109         

TODD SHIPYARDS CORPORATION                
(Exact name of registrant as specified in its charter)          

DELAWARE                          91-1506719          
(State or other jurisdiction of       (IRS Employer I.D.No.)          
incorporation or organization)                                      

1801-16th Avenue SW, Seattle, WA               98134-1089               
(Address of principal executive offices)           (zip code)                   

Registrant's telephone number  (206) 623-1635                 

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

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

Name of each exchange on which registered: New York Stock Exchange              

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.   [X] Yes    [ ] 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 to     
this Form 10-K. [ ]                                                             

Indicate by check mark whether the registrant is an accelerated filer (as       
defined in Exchange Act Rule 12b-2).   [X] Yes    [] No                         

The aggregate market value of voting stock held by non-affiliates of the        
registrant was approximately $85.8 million as of May 21, 2004.                  

There were 5,402,656 shares of the corporation's $.01 par value common stock    
outstanding at May 21, 2004.                                                    

Documents Incorporated by Reference       

Portions of the Proxy Statement to be delivered to shareholders in connection   
with the Annual Meeting of Shareholders to be held September 17, 2004 are       
incorporated by reference into Part III of the Annual Report on Form 10-K.      

TABLE OF CONTENTS         

PART I        
                                                  Page No.
Item 1.  Business............................................. *                

Item 2.  Properties........................................... *                

Item 3.  Legal Proceedings.................................... *                

Item 4.  Submission of Matters to a Vote of Security Holders.. *                

PART II       

Item 5.  Market for the Registrant's Common Equity and                          
Related Shareholder Matters.......................... *       

Item 6.  Selected Financial Data.............................. *                

Item 7.  Management's Discussion and Analysis of Financial                      
Condition and Results of Operations.................. *       

Item 7A. Quantitative and Qualitative Disclosures About                         
Market Risk.......................................... *       

Item 8.  Consolidated Financial Statements and                                  
Supplementary Data................................... *       

Item 9.  Changes in and Disagreements with Accountants on                       
Accounting and Financial Disclosure.................. *       

PART III      

Item 10. Directors and Executive Officers of the                                
Registrant........................................... *       

Item 11. Executive Compensation............................... *                

Item 12. Security Ownership of Certain Beneficial Owners                        
and Management and Related Stockholders Matters...... *       

Item 13. Certain Relationships and Related Transactions....... *                

Item 14. Controls and Procedures.............................. *                

PART IV     

Item 15. Exhibits, Financial Statement Schedules, and                           
Reports on Form 8-K ................................. *       

Signatures.................................................... *                

PART I                                                                          

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF   
1995                                                                            

Statements contained in this Report, which are not historical facts or          
information, are "forward-looking statements."  Words such as "believe,"        
"expect," "intend," "will," "should," and other expressions that indicate       
future events and trends identify such forward-looking statements.  These       
forward-looking statements involve risks and uncertainties which could cause    
the outcome to be materially different than stated.  Such risks and             
uncertainties include both general economic risks and uncertainties and         
matters which relate directly to the Company's operations and properties and    
are discussed in Items 1, 3 and 7 below.  The Company cautions that any         
forward-looking statement reflects only the belief of the Company or its        
management at the time the statement was made.  Although the Company believes   
such forward-looking statements are based upon reasonable assumptions, such     
assumptions may ultimately prove to be inaccurate or incomplete.  The Company   
undertakes no obligation to update any forward-looking statement to reflect     
events or circumstances after the date on which the statement was made.         

ITEM 1.  BUSINESS                                                               

INTRODUCTION                                                                    

Todd Shipyards Corporation (the "Company") was organized in 1916 and has        
operated a shipyard in Seattle, Washington (the "Shipyard") since               
incorporation.  The Company is incorporated under the laws of the State of      
Delaware and operates the Shipyard through a wholly owned subsidiary, Todd      
Pacific Shipyards Corporation ("Todd Pacific").  Todd Pacific, historically,    
has been engaged in the repair/overhaul, conversion and construction of         
commercial and military ships.  The Company's general offices are located at    
1801 16th Avenue S.W., Seattle, Washington 98134-1089, and its telephone        
number is (206) 623-1635.  Information about the Company is available to the    
public on the internet at www.toddpacific.com.                                  

Throughout much of the Company's history, a substantial portion of its          
revenues and profits were attributable to long-term United States Government    
("Government") contracts.  However, in the late 1980's a significant decline    
in the annual shipbuilding budgets of the Department of the Navy (the "Navy")   
greatly reduced the Company's bidding opportunities for long-term Government    
contracts.  To offset the downturn in long-term Government contracting          
opportunities, the Company entered into several new construction projects       
beginning in the mid 1990's.  These new construction opportunities represented  
the Company's first new construction projects in 10 years.                      

As the Company neared completion on these new construction projects in fiscal   
year 2000, the Company shifted its main business focus to repair, maintenance   
and overhaul opportunities.  This strategy resulted in the award of two major   
five year cost-type contracts for phased maintenance work.  At the time, this   
work included three Navy aircraft carriers and six Navy surface combatant       
class vessels stationed in the Puget Sound area.                                

The maintenance work performed on the Navy aircraft carriers, which began       
during the first quarter of fiscal year 2000 is referred to as the Planned      
Incremental Availability ("PIA") contract.  Fiscal year 2004 was the last year  
remaining on this contract.  Subsequent to the end of fiscal year 2004, the     
Department of the Navy awarded the Company a five-year, cost-type contract for  
similar work on the NIMITZ CLASS aircraft carriers (CVN) home ported in Puget   
Sound.                                                                          

The maintenance work performed on the Navy surface combatant vessels is         
referred to as the Combatant Maintenance Team ("CMT") contract.  Work on the    
CMT contract began in the second quarter of fiscal year 2001.                   

In addition to these two long-term multi-ship contracts, in June 2001, the      
Company was awarded by the Navy, a six-year, cost-type contract, under which    
the Navy has options to have the Company perform maintenance work on the        
Auxiliary Oiler Explosive ("AOE") class vessels.  This contract represents the  
fourth consecutive, multi-year contract that the Company has been awarded by    
the Navy on the AOE class vessels.  The three previous AOE contracts, which     
were each five years in duration, were all awarded on a competitive basis.      
This cost type contract provides for phased maintenance repairs to four Navy    
AOE class supply ships stationed in the Puget Sound area. The original          
contract included options for thirteen repair availabilities to be performed    
between 2001 and 2007 and was expected to have a notional value of              
approximately $180 million if all of the options were exercised.  Since the     
award, five repair availabilities have been accomplished.                       

During the first quarter of fiscal year 2003, the Navy announced its intention  
to transfer the USS Rainier (AOE 7) and the USS Bridge (AOE 10) to the          
Military Sealift Command ("MSC") which results in five availabilities that      
will not be exercised under this contract.  AOE 7 was transferred to MSC in     
August 2003.  AOE 10 is currently scheduled to be transferred in the summer of  
2004.  The Company anticipates that MSC will contract for future work on these  
two vessels on a competitive basis.  The potential impact of these transfers    
on the Company's future revenues will depend on such factors as the             
expenditures for maintenance by MSC, the Company's capacity to bid on future    
AOE 7 and AOE 10 work, and the Company's bidding success if such bids are       
submitted.                                                                      

During the fourth quarter of fiscal year 2004, the Company announced that it    
was informed by the Navy that the USS Sacramento (AOE 1) is scheduled to be     
decommissioned on or about October 1, 2004.  Of the two remaining               
availabilities on AOE 1, one was exercised on a reduced scale as a five-week,   
pier-side availability.  The availability, originally scheduled for 12 weeks    
in duration, was to include a dry docking of the ship.  The other availability  
of AOE 1 will not occur due to its decommissioning.  The Company does not know  
at this point if it will be involved in any of the work related to the          
decommissioning of AOE 1.                                                       

The AOE contract contains options for two remaining repair availabilities on    
the USS Camden (AOE 2) before the contract expires in 2007.  There is no        
assurance that these two remaining options will be exercised by the Navy in     
whole or in part.                                                               

During the fourth quarter of fiscal year 2004, the Company was awarded by the   
United States Coast Guard, a cost plus incentive fee contract under which the   
Coast Guard has options to have the Company provide maintenance of two Polar    
class icebreakers.  This contract extends through September 2008 and marks the  
first time the Coast Guard has used a long term phased-maintenance approach on  
these icebreakers.  The Company has performed similar work for the Coast Guard  
over the past several years under individual, competitively bid, firm fixed     
price contracts.                                                                

Also during the fourth quarter of fiscal year 2004, the Company entered into a  
contract with Electric Boat Corporation of Groton, Connecticut to support work  
on the Trident submarines. The work is being performed under a cost plus        
incentive fee contract with Electric Boat for fabrication work, and a firm      
fixed price contract for the associated project management and quality          
assurance work.                                                                 

During the fourth quarter of fiscal year 2004, the Company confirmed its        
expected participation, along with Southwest Marine, Inc., San Diego Division,  
on the team lead by Bath Iron Works, a subsidiary of General Dynamics           
(NYSE:GD), to perform Post Shakedown Availability work ("PSA") on DDG-51 Aegis  
Destroyers ("Destroyers").  The U.S. Navy contract for this work, which was     
awarded to Bath Iron Works, includes options for PSA work to be accomplished    
in Navy homeports of Everett, Washington and Pearl Harbor, HI.  Any work that   
the Company performs for Bath Iron Works will be accomplished under a cost      
plus award fee subcontract still to be finalized between Bath Iron Works and    
the Company.  Work will be performed between 2005 and 2007.  The PSA work       
primarily involves the installation of system and equipment upgrades and/or     
ship alterations as required.                                                   

In addition to the above mentioned contracts and agreements, the Company        
engages in repair, overhaul and conversion work on other Navy vessels, other    
U.S. Coast Guard vessels, ferries, container vessels, tankers, fishing          
vessels, cruise ships, barges, and tug supply vessels.                          

Available Information                                                           
The Company will make available its annual reports on Form 10-K, quarterly      
reports on Form 10-Q, current reports on Form 8-K and amendments to those       
reports filed or furnished pursuant to Section 13(a) of the Exchange Act free   
of charge through the Company's internet website at www.toddpacific.com as      
soon as reasonably practicable after the Company electronically files such      
material with, or furnishes it to, the Securities and Exchange Commission.      

OPERATIONS OVERVIEW                                                             

Repair and Overhaul Operations                                                  
The Company's repair and overhaul work ranges from relatively minor repairs to  
major overhauls and often involves the dry-docking of the vessel under repair.  
Since the late 1980's, repair and overhaul opportunities available to           
domestic, private-sector shipyards have been impacted by the downsizing and     
relocation of the active Navy fleet.  The impact has had both positive and      
negative effects on domestic shipyards depending on their proximity to the      
affected Navy fleet operations.  Also affecting private shipyards is the        
impact of stationing vessels at Navy home ports, the availability and           
scheduling of maintenance and overhauls, the location of marine accidents and   
conditions within the maritime industry as a whole.                             

Commercial repair and overhaul contracts are obtained by competitive bidding,   
awarded by negotiation or assigned by customers who have a preference for a     
specific shipyard.  On jobs that are advertised for competitive bids, owners    
usually furnish specifications and plans which become the basis for an agreed   
upon contract.  Repair and overhaul jobs are usually contracted on a fixed-     
price or time and material basis.                                               

The majority of the Company's Government ship repair and overhaul contracts     
are awarded on an option basis under one of the Company's three cost-type       
contracts with the Navy and the Coast Guard.  These contracts provide for       
reimbursement of costs, to the extent allocable and allowable under applicable  
government regulations, and payment of an incentive or award fee based on the   
Company's performance with respect to certain pre-established criteria. The     
Company also performs repair and overhaul work for the Navy and the Coast       
Guard on a fixed price basis through a formal bidding process.                  

The Company's commercial and Government ship repair and overhaul contracts      
contain customer payment terms that are determined by mutual agreement.         
Typically, the Company is periodically reimbursed through progress payments     
based on the achievement of certain agreed to benchmarks less a specified       
level of retention.  Some vessel owners contracting for repair, maintenance,    
or conversion work also require some form and amount of performance and         
payment bonding, particularly state agencies.  Because of these requirements    
the Company is bonded for certain projects in the cumulative amount of $2.1     
million at March 28, 2004.                                                      

Construction Operations                                                         
During the third quarter of fiscal year 2003, the Company began work on a $5.2  
million new construction project to build two large steel structures called     
"cutting edges."  The cutting edges are barge like structures used as floating  
work platforms for the construction of the caissons which will eventually       
support the new Tacoma Narrows Bridge.  The first cutting edge was delivered    
in March 2003 and the second was delivered in April 2003.                       

Prior to the Tacoma Narrows project, the Company's last new construction        
project was completed during the first quarter of fiscal year 2000, with the    
delivery of the Margarita II, a floating electrical power plant.                

While the Company may selectively pursue new construction opportunities in the  
future, its primary focus will remain on repair, maintenance and overhaul       
business opportunities.                                                         

Distribution of Work                                                            
The approximate distribution of the Company's Shipyard revenues for each of     
the last three fiscal years is summarized as follows:                           

2004   2003   2002
Federal Government              84%    82%    79%                               
Commercial                      16%    18%    21%                               
Total                          100%   100%   100%                               

The distribution of the Company's revenues in fiscal year 2004 remains          
relatively unchanged from fiscal year 2003 and continues to be strongly         
influenced by the amount of repair, maintenance and overhaul work awarded       
under each of its three Navy cost-type contracts.                               

Future Operations                                                               
The Company plans to continue to actively pursue Government and commercial      
repair, maintenance and overhaul opportunities.  International opportunities    
are limited because shipyards in foreign countries are often subsidized by      
their governments and in some cases enjoy significantly lower labor costs.      
These subsidies allow foreign shipyards to enter into production contracts at   
prices below their actual production costs.  Competition for domestic           
construction and repair opportunities will continue to be intense as certain    
of the Company's larger competitors have more modern facilities, lower labor    
cost structures, or access to greater financial resources.  The Company         
intends to capitalize on the advantages of its geographic location, the skills  
of its experienced workforce and production efficiencies developed over the     
past several years as it competes for repair, maintenance and overhaul          
opportunities.                                                                  

Employees                                                                       
The number of persons employed by the Company varies considerably depending     
primarily on the level of Shipyard activity.  Employment averaged               
approximately 1,100 during fiscal year 2004 and totaled 867 employees on March  
28, 2004.                                                                       

During fiscal year 2004 an average of approximately 913 of the Company's        
Shipyard employees were covered by a union contract that became effective       
during the third quarter of fiscal year 2003.  At March 28, 2004 approximately  
685 Company employees were covered under this contract.                         

During the third quarter of fiscal year 2003, the Puget Sound Metal Trades      
Council (the bargaining umbrella for all unions at Todd Pacific Shipyards) and  
Todd Pacific Shipyards reached an agreement on a new collective bargaining      
agreement.  The Todd Pacific Shipyards eligible workforce ratified the          
agreement on October 22, 2002.  The parties had been operating under an         
extension of the old agreement, which expired on July 31, 2002.  The three-     
year agreement, which was effective retroactively to August 1, 2002, includes   
an annual 3.5% wage and fringe benefit increase.  Management considers its      
relations with the various unions to be stable.                                 

Availability of Materials                                                       
The principal materials used by the Company in its Shipyard are steel and       
aluminum plates and shapes, pipe and fittings, paint and electrical cable and   
associated fittings. Management believes that each of these items can           
presently be obtained in the domestic market from a number of different         
suppliers.  In addition, the Company maintains a small on-site inventory of     
various materials that are available for emergency ship repairs.                

Competition                                                                     
Competition in the domestic ship repair and overhaul industry is intense.  The  
reduced size of the Government's active duty fleet has resulted in a            
significant decline in the total amount of Government business available to     
private sector shipyards, creating excess shipyard capacity and acute price     
competition.  The Company competes for commercial and Government work with a    
number of other shipyards, some of which have more advantageous cost            
structures.  The Company's competitors for repair, maintenance and overhaul     
work include non-union shipyards, shipyards with excess capacity and foreign    
government subsidized facilities.  The Company's competitors for new            
construction work, in addition to West Coast competitors, include Gulf Coast    
and East Coast shipyards with lower wage structures, substantial financial      
resources or significant investments in productivity enhancing facilities.      

Environmental and Bodily Injury Matters                                         
The Company is subject to federal, state and local environmental laws and       
regulations that impose limitations on the discharge of pollutants into the     
environment and establish standards for the treatment, storage and disposal of  
toxic and hazardous wastes.  Fines and penalties may be imposed for non-        
compliance with these laws.  Such laws and regulations may expose the Company   
to liability for its acts, which are or were in compliance with all applicable  
laws at the time such acts were performed.                                      

Recurring costs associated with the Company's environmental compliance program  
are expensed as incurred.  Capital expenditures in connection with              
environmental compliance include a stormwater system of approximately $4.0      
million.  See Item 7. Management's Discussion and Analysis and Note 1 to the    
Consolidated Financial Statements for further discussion of these costs.        

The Company has an accrued liability of $32.0 million as of March 28, 2004 for  
environmental and bodily injury matters.  As assessments of environmental       
matters and remediation activities progress, these liabilities are reviewed     
periodically and adjusted to reflect additional technical, engineering and      
legal information that becomes available.  The Company's estimate of its        
environmental liabilities is affected by several uncertainties such as, but     
not limited to, the method and extent of remediation of contaminated sites,     
the percentage of material attributable to the Company at the sites relative    
to that attributable to other parties, and the financial capabilities of the    
other Potentially Responsible Parties ("PRP") at most sites.  The Company's     
estimate of its bodily injury liabilities is also affected as additional        
information becomes known regarding alleged damages from past exposure to       
asbestos at Company facilities.  The Company is covered under its various       
insurance policies for some, but not all, potential environmental and bodily    
injury liabilities.                                                             

As of March 28, 2004, the Company has recorded an insurance receivable of       
$29.2 million, which mitigates a major portion of its accrued environmental     
and bodily injury liability.  See Item 3. Legal Proceedings, Item 7.            
Management's Discussion and Analysis of Financial Condition and Results of      
Operations and Note 11 of the Notes to Consolidated Financial Statements for    
further information regarding the Company's environmental and bodily injury     
matters.                                                                        

Safety Matters                                                                  
The Company is also subject to the federal Occupational Safety and Health Act   
("OSHA") and similar state statutes.  The Company has an extensive health and   
safety program and employs a staff of safety inspectors whose primary           
functions are to develop Company policies that meet or exceed the safety        
standards set by OSHA, train production supervisors and make periodic           
inspections of safety procedures to insure compliance with Company policies on  
safety and industrial hygiene.  All Shipyard employees are required to attend   
regularly scheduled safety training meetings.                                   

Backlog                                                                         
At March 28, 2004 the Company's backlog consists of approximately $19 million   
of repair, maintenance, and conversion work.  This compares with backlogs of    
approximately $22 million and $46 million at March 30, 2003 and March 31,       
2002, respectively. The Company's current backlog is primarily attributable to  
firm repair, maintenance and conversion work scheduled for completion during    
fiscal year 2005.                                                               

Since work under the Company's Navy and Coast Guard phased maintenance          
contracts is at the option of the Navy and the U.S. Coast Guard, the Company    
cannot provide assurance as to the timing or level of work that may be          
performed under these contracts.  Therefore, the decrease in the backlog is     
primarily due to the timing of the availabilities for the phased maintenance    
contracts.  Projected revenues from these contracts are not included in the     
Company's backlog until contract options are exercised by these customers.      

INVESTMENTS AND ACQUISITIONS                                                    

The Company routinely evaluates suitable investment opportunities that it       
believes will appropriately utilize the Company's resources.  However, the      
Company has no present plans to make any direct investments in other            
businesses, either related or unrelated to ship repair and overhaul             
activities.                                                                     

ITEM 2. PROPERTIES                                                              

The Company is required to maintain Navy certification on its drydocks and      
cranes in order to be eligible to bid on and perform work under certain Navy    
and United States Coast Guard ("Coast Guard") contracts.  Throughout fiscal     
year 2004, the Company maintained all required certifications.                  

The design capacities of the Company's two remaining drydocks, both of which    
are located at the Shipyard, are as follows:                                    

          Year       Type      Owned Leased   Max.Design       Date of Lease
Name        Built                              Capacity(in tons)   Expiration   
Emerald Sea 1970      Steel        X              40,000               -        
YFD-70      1945      Steel              X        17,500             4/15/06    

YFD-54, a 5700 ton capacity wooden drydock built in 1943 that the Company had   
leased from the Navy since November 2, 1994, sank in heavy weather on October   
11, 2003.  After considerable effort, Todd raised YFD-54 on October 28, 2003    
but the drydock required continuous pumping to keep afloat and remains out of   
service.  Based on the estimated costs of repairing the damage sustained in     
the sinking, the drydock was declared a total constructive loss as of November  
20, 2003, and the lease was thereby terminated as of that date.  The Company    
maintained insurance coverage on YFD-54 and the costs associated with raising   
the drydock, less the applicable deductible, were covered under the insurance   
policies.  Insurance covering the total constructive loss of the drydock is     
payable to the Navy.                                                            

The Company evaluates its plans for future operations of its remaining leased   
dry dock when the lease expiration date falls within the next operating cycle.  
The lease terms on drydock YFD-70 contain a nominal annual lease payment and a  
minimum amount of annual maintenance that the Company must perform.  The lease  
also includes minimum levels of maintenance that the Company must perform       
during the life of the lease.  The Company has included the nominal annual      
lease payment and the average annual maintenance cost that must be performed    
over the life of the lease on drydock YFD-70 in Note 9 of the Notes to the      
Consolidated Financial Statements (Item 8).                                     

The Company's current Navy drydock certifications are for amounts that are      
less than the drydocks' maximum design capacity, however they are sufficient    
to allow the Company to perform work on all non-nuclear Navy vessels            
homeported in Puget Sound, as well as on all Coast Guard and Washington State   
Ferry vessels.                                                                  

The Company believes that its owned and leased properties at the Shipyard are   
in reasonable operating condition given their age and usage, although the       
Company has from time to time been required to incur substantial expenditures   
to ensure the continuing serviceability of certain owned and leased machinery   
and equipment.                                                                  

Towards the end of fiscal year 2001, the Company determined that such           
serviceability repairs would be required on the Emerald Sea to maintain Navy    
certification on a long-term basis.  Certain time sensitive repairs began       
early in fiscal year 2002, while the Company evaluated several alternative      
repair scenarios and management's plans for future operations.                  

Once the Company completed its evaluation in fiscal year 2002, a                
comprehensive, multi-year refurbishment plan was approved by management that    
would allow the Company to maintain Navy certification into the future.  This   
multi-year plan included scheduled refurbishment periods so repairs did not     
interfere with the on-going shipyard operations.  With the de-commissioning of  
the USS Sacramento, transfer of the USS Bridge and USS Rainier to the Military  
Sealift Command and the uncertainties concerning the Navy's intent to do        
future repairs on the USS Camden, the Company is re-evaluating its Emerald Sea  
refurbishment plan.  The Company will continue to assess the plan in light of   
its future drydock requirements and will make appropriate changes as needed to  
support Shipyard operations.  Also, the Company performed an impairment         
analysis of the Emerald Sea and determined that this dry dock is not impaired.  

Early in fiscal year 2004, the Company announced a special capital budget of    
approximately $13 million for planned improvements to its Seattle shipyard      
facility during its fiscal years 2004 and 2005.  These improvements include     
the replacement of a major pier, a stormwater collection and discharge system   
and significant upgrades to its electrical system and are in addition to the    
Company's routine annual capital expenditures. During fiscal year 2004, the     
Company spent approximately $10.0 million of the special facilities capital     
budget , and $4.6 million on other shipyard capital expenditures.               

ITEM 3.  LEGAL PROCEEDINGS                                                      

The Company is subject to federal, state and local environmental laws and       
regulations that impose limitations on the discharge of pollutants into the     
environment and establish standards for the treatment, storage and disposal of  
toxic and hazardous wastes.  Fines and penalties may be imposed for non-        
compliance with these laws.  Such laws and regulations may expose the Company   
to liability for acts of the Company, which are or were in compliance with all  
applicable laws at the time such acts were performed. The Company faces         
potential liabilities in connection with the alleged presence of hazardous      
waste materials at its Seattle shipyard and at several sites used by the        
Company for disposal of alleged hazardous waste.                                

The Company is identified as a potentially responsible party ("PRP") by the     
Environmental Protection Agency ("EPA") under the Comprehensive Environmental   
Response, Compensation and Liability Act ("CERCLA," commonly known as the       
"Superfund") in connection with matters pending at two Superfund sites.         
Additionally, the Company has received information requests in two Superfund    
cases where the Company has asserted that its liability was discharged when it  
emerged from bankruptcy in 1990.                                                

Generally these environmental claims relate to sites used by the Company for    
disposal of alleged hazardous waste.  The Company has also been named as a      
defendant in a number of civil actions alleging damages from past exposure to   
toxic substances, generally asbestos, at closed former Company facilities.      

At March 28, 2004, the Company maintained aggregate reserves of $32.0 million   
for pending claims and assessments relating to environmental matters,           
including $23.1 million associated with the Harbor Island Superfund Site (the   
"Harbor Island Site") and $8.1 million for asbestos related claims.             

Funding for costs and payments of claims represented by such reserves is        
expected to be provided to a significant extent by receivables due from         
insurance companies under policies and insurance in place agreements described  
below.  At March 28, 2004, such receivables aggregated $29.2 million.           

Included in the reserves are sediment remediation costs for Harbor Island of    
$13.5 million that are expected to occur in fiscal year 2005.  These costs are  
reflected in the Company's balance sheet under current liabilities.  Likewise,  
the insurance receivable of $13.5 million relating to these reserves is         
reflected in the Company's balance sheet under current assets.                  

For more information, see Note 11 of the Notes to the Consolidated Financial    
Statements (Item 8.) below and to the discussion under the heading              
"Environmental Matters and Contingencies" in Management's Discussion and        
Analysis of Financial Condition and Results of Operations (Item 7.) below.      

Harbor Island Site                                                              

The Company and several other parties have been named as potentially            
responsible parties ("PRPs") by the Environmental Protection Agency (the        
"EPA") pursuant to the Comprehensive Environmental Response, Compensation, and  
Liability Act ("CERCLA" also known as "Superfund") in connection with the       
documented release or threatened release of hazardous substances, pollutants    
and contaminants at the Harbor Island Superfund Site (the "Harbor Island        
Site"), upon which the Shipyard is located.                                     

Harbor Island Site Insurance                                                    
In the fourth quarter of fiscal year 2001, the Company entered into a 30-year   
agreement with an insurance company that provides the Company with broad-based  
insurance coverage for the remediation of all of the Company's operable units   
at the Harbor Island Superfund Site.                                            

The agreement provides coverage for the known liabilities in an amount          
exceeding the Company's current booked reserves of $23.1 million.               
Additionally, the Company  entered into a 15-year agreement for coverage of     
any new environmental conditions discovered at the Seattle shipyard property    
that would require environmental remediation.                                   

The Company funded this insurance premium from cash reserves in two             
installments.  The first payment was made in the Company's fourth quarter of    
fiscal year 2001 and the second payment was made in the first quarter of        
fiscal year 2002.  The Company recorded a non-current asset in the form of an   
insurance receivable in accordance with its environmental accounting policies   
at the time it entered into this agreement.  This transaction did not have a    
material effect on the Company's results of operations, nor did the             
transaction have a material effect on stockholders' equity.                     

Harbor Island Site History                                                      

To date, the EPA has separated the Harbor Island Site into three operable       
units that affect the Company: the Soil and Groundwater Unit (the "Soil         
Unit"), the Shipyard Sediments Operable Unit (the "SSOU") and the Sediments     
Operable Unit (the "SOU").  The Company, along with a number of other Harbor    
Island PRPs, received a Special Notice Letter from the EPA on May 4, 1994       
pursuant to section 122 (e) of CERCLA.  The Company entered into a Consent      
Decree for the Soil Unit in September 1994 under which the Company has agreed   
to remediate the designated contamination on its property. Removal of floating  
petroleum product from the water table began in October 1998 and is             
anticipated to continue through fiscal year 2009.  The Company and the EPA are  
currently negotiating the extent and methodology of the soil remediation.       

During the third quarter of fiscal year 1997, the EPA issued its Record of      
Decision ("ROD") for the SSOU.  The ROD identifies four alternative solutions   
for the SSOU remediation and identifies the EPA's selected remedy. During the   
third quarter of fiscal year 2000, the EPA expanded the boundaries of the SSOU  
issuing their Phase 1B Data Report and resulting Explanation of Significant     
Differences outlining the changes to the ROD. During the fourth quarter of      
fiscal year 2000, the Company and the EPA entered into an Administrative Order  
on Consent for the development of the remedial design for the SSOU.             

During the fourth quarter of fiscal year 2003, the company and the EPA entered  
into a Consent Decree for the cleanup of the SSOU, which, along with the        
associated Remedial Design Statement of Work for Remedial Action ("SOW"), was   
subsequently approved by the Department of Justice.  The Consent Decree         
provides for the submittal of the Remedial Action Work Plan to the EPA          
subsequent to the approval by the EPA of the final design.  The Remedial        
Action Work Plan will provide for construction and implementation of the        
remedy set forth in the ROD, the two Explanation of Significant Differences     
(issued in fiscal years 2000 and 2003), the SOW, and the design plans and       
specifications developed in accordance with the Remedial Action Work Plan and   
approved by the EPA.  During the fourth quarter of fiscal year 2004 the         
Company submitted its Final Design Report to the EPA for the SSOU.  The Final   
Design Report provides for the following actions to take place at the SSOU:     

Piers 2 and 4 South (located on the Duwamish Waterway) will be                  
demolished and removed from the site to achieve more complete cleanup in        
those areas.                                                                    

Dredging of all contaminated sediments and shipyard waste in the open           
areas of the SSOU (surrounding the shipyard) and in the areas beneath           
Piers 2 and 4 South.  The total estimated volume of sediments to be             
removed is 195,200 cubic yards.                                                 

Disposal of all recovered sediment and shipyard waste at an appropriate         
upland disposal facility.                                                       

Backfilling of portions of the areas dredged to create inter-tidal              
habitat where feasible.                                                         

Capping of areas beneath the piers that are not scheduled for demolition        
to an average thickness of one foot.                                            

Pursuant to the current schedule, remediation of the SSOU is expected to begin  
in the second quarter of fiscal 2005.  Current environmental regulations limit  
the period of time during the year that dredging may occur.  Given these        
limits, dredging in the SSOU will require several years to complete.  The       
current estimated cost of the SSOU cleanup is included in the environmental     
reserve.                                                                        

During January 1998, the Company was notified by the EPA that testing would be  
required in the West Waterway of the Duwamish River outside the borders of the  
SSOU as part of the SOU.  During May 1998, the Company entered into an          
Administrative Order on Consent to perform certain limited testing as part of   
the SOU investigation.  After an evaluation of the results, the EPA issued a    
draft "no action" ROD on the SOU for public comment which if issued in final    
form would end the investigation of the SOU, requiring no remedial action.      
The public comment period closed during the Company's fourth quarter of fiscal  
year 2000.  In September 2003, the EPA issued the final "no action" ROD on the  
SOU.  Given the EPA's issuance of the draft "no action" ROD in fiscal year      
2000, the Company had not established a reserve for any remediation on the      
SOU.                                                                            

Under the Federal Superfund law, potentially responsible parties may have       
liability for damages to natural resources in addition to liability for         
remediation.  During the second quarter of fiscal year 2003, the Company began  
discussions with the natural resource trustees ("Trustees") for the Harbor      
Island Superfund Site ("Site") and continued these discussions during the       
remainder of fiscal year 2003.  The Company anticipates that the Trustees will  
file a claim against the Company at some future date alleging damages to the    
natural resources at the Site caused by the release of hazardous substances.    
The best estimate of a potential natural resource damage claim has been         
included in the environmental reserve.  The payment of any eventual claim is    
covered by the aforementioned insurance policy, except for the policy           
deductible, provided that aggregate policy limits have not been exceeded.  The  
amount of the policy deductible payment is reflected in the Company's           
environmental reserve at March 28, 2004.                                        

Other Environmental Remediation Matters                                         

In January 2001, the EPA issued Special Notice letters naming the PRPs on the   
Hylebos Waterway Operable Unit of the Commencement Bay Superfund Site in        
Tacoma, Washington.  The Company was not included on the EPA's list.  Todd has  
been notified by other PRPs of their intent to bring a contribution action      
against the Company.  Subsidiaries of the Company had a presence on the site    
from 1917-1925 and again from 1939-1946, for the most part, coinciding with     
World Wars I and II when the Company built war ships at the direction of the    
United States government.  Several parties in 2000 hired an allocator to        
assign percentages of responsibility to all parties, historical and present,    
notwithstanding potential defenses or contractual claims.  While the Company    
did not participate in the allocation process, the allocator's findings were    
taken into account in including an estimate of potential liability in the       
Company's reserve discussed below.                                              

The Company has further been notified by the Commencement Bay Natural Resource  
Trustees ("Trustees") that the parties occupying the aforementioned property    
subsequent to 1946 have been allocated liability for natural resource damages.  
While the Trustees have not submitted a claim against the Company for natural   
resource damages, they have invited the Company to participate in a mediation   
with the PRPs to resolve intra-facility allocation issues.  The Company is      
investigating the potential of any liability it may currently have for its      
presence on the site during World Wars I and II when it built war ships at the  
direction of the United States government.                                      

The Company entered into a Consent Decree with the EPA for the clean up of the  
Casmalia Resources Hazardous Waste Management Facility in Santa Barbara         
County, California under the Resource Conservation and Recovery Act. The        
Company has included an estimate of the potential liability for this site in    
environmental reserves as discussed below.  Immaterial payments began in        
fiscal year 1997 and will extend for up to ten years.                           

Asbestos Related Claims and Insurance                                           

The Company has been named as a defendant in civil actions by parties alleging  
damages from past exposure to toxic substances, generally asbestos, at closed   
former Company facilities.                                                      

The cases generally include as defendants, in addition to the Company, other    
ship builders and repairers, ship owners, asbestos manufacturers, distributors  
and installers, and equipment manufacturers and arise from injuries or          
illnesses allegedly caused by exposure to asbestos or other toxic substances.   
The Company assesses claims as they are filed and as the cases develop,         
dividing them into two different categories based on severity of illness.       
Based on current fact patterns, certain diseases including mesothelioma, lung   
cancer and fully developed asbestosis are categorized by the Company as         
"malignant" claims.  All other claims of a less medically serious nature are    
categorized as "non-malignant".  The Company is currently defending             
approximately 25 "malignant" claims and approximately 563 "non-malignant"       
claims.                                                                         

The relief sought in all cases varies greatly by jurisdiction and claimant.     
Included in the approximate 409 cases open as of March 28, 2004 are             
approximately 588 claimants.  The exact number of claimants is not              
determinable as approximately 150 of the open cases include multiple claimant   
filings against 30-100 defendants.  The filings do not indicate which           
claimants allege liability against the Company.  The previously stated 588      
claimants is the Company's best estimate taking known facts into                
consideration.                                                                  

     Approximately 373 claimants do not assert any specific amount of relief
sought.                                                           

Approximately 160 claims contain standard boilerplate language    
   asserting on behalf of each claimant a claim for compensatory damages
     of $2 million and punitive damages of $20 million against approximately
     100 defendants.  Approximately 20 claims set forth the same boilerplate
    language asserting $10-$20 million in compensatory and $10-$20 million
  in punitive damages on behalf of each claimant against approximately
 30-100 defendants.  Approximately 20 cases assert $1-$15 million in
   compensatory and $5-$10 million in punitive damages on behalf of each
claimant against approximately 30-100 defendants.                 

Approximately 10 claimants seek compensatory damages of less than 
$100,000 per claim and approximately 5 claimants seek compensatory
     damages between $1 million and $15 million.  The claims involved in the
  foregoing cases do not specify against which defendants which claims
are made or alleged dates of exposure.                            

 Based upon settled or concluded claims to date, the Company has not
   identified any correlation between the amount of the relief sought in
  the complaint and the final value of the claim.  The Company and its
insurers are vigorously defending these actions.                  

As a result of claims resolution during fiscal year 2004, bodily injury         
reserves declined from $9.4 million at March 30, 2003 to $8.1 million at March  
28, 2004.  Likewise, bodily injury insurance receivables declined from $7.1     
million to $5.8 million.  These bodily injury liabilities and receivables are   
classified within the Company's Consolidated Balance Sheets as environmental    
and other reserves, and insurance receivables, respectively.                    

The Company has entered into agreements with several of its insurers to         
provide coverage for a significant portion of settlements and awards related    
to these bodily injury claims.  These agreements have aggregate limits on       
amounts to be paid overall and formulas for amounts of payment on individual    
claims.  The two most significant agreements provide coverage applicable to     
claims of exposure to asbestos occurring between 1949 and 1976 and occurring    
between 1976 through 1987.  Insurance coverage for exposures to asbestos was    
no longer available from the insurance industry after 1987.  Due to changes in  
federal regulations in the 1970's that resulted in the swift decline in         
commercial and military application of asbestos and increased regulation over   
the handling and removal of asbestos, there exists minimal risk of claims       
arising from exposure after 1987.  Contractual formulas are utilized to         
determine the amount of coverage from each agreement on each claim settled or   
litigated.  Once the initial date of alleged exposure to asbestos is            
determined, all contractual years subsequent to that date participate in the    
settlement.  Since all known claims involve alleged exposure prior to 1976,     
the 1976 through 1987 agreement will participate in the settlement or judgment  
of all outstanding claims that are settled or litigated.  As a result, and as   
the years remaining calculation set forth below indicates, the 1976 through     
1987 agreement will exhaust prior to the 1949 through 1976 agreement.  Based    
on historical claims settlement data only, the Company projects that at March   
28, 2004, the 1949 through 1976 agreement will provide coverage for an          
additional 21.6 years and the 1976 through 1987 agreement will provide          
coverage for an additional 5.4 years.  At March 30, 2003, the Company           
projected that these agreements would provide coverage for an additional 20.4   
years and 5.2 years, respectively. The Company resolved 15 malignant claims in  
2004 compared with 13 in 2003 and 20 in 2002.  If historical settlement         
patterns or the rate of filing for new cases change in future periods, these    
estimated coverage periods could be shorter or longer than anticipated.         
Moreover, if one or both of these coverages are exhausted at some future date,  
the Company's costs related to subsequent claims and for legal expenses         
previously covered by these insurance agreements may increase.  In addition to  
providing coverage for assessments or settlements of claims, the agreements     
also provide for costs of defending and processing such claims.                 

The following chart indicates the number of claims filed and resolved in the    
past three fiscal years, including the number of claims yet to be resolved at   
the end of each fiscal year.  (Resolution includes settlements, adjudications   
and dismissals).  The claims are further categorized as either malignant or     
non-malignant.                                                                  

                          Bodily Injury Claims
                          Non-
                          Malignant    Malignant       Total

Outstanding, April 1, 2001               35          551          586           
Claims filed                           20           52           72         
Claims resolved                       (20)         (68)         (88)        
Outstanding, March 31, 2002              35          535          570           
Claims filed                           14           72           86         
Claims resolved                       (13)         (73)         (86)        
Outstanding, March 30, 2003              36          534          570           
Claims filed                            4           70           74         
Claims resolved                       (15)         (41)         (56)        
Outstanding, March 28, 2004              25          563          588           

Due to uncertainties of the number of cases, the extent of alleged damages,     
the population of claimants and size of any awards and/or settlements, there    
can be no assurance that the current reserves will be adequate to cover the     
costs of resolving the existing cases.  Additionally, the Company cannot        
predict the eventual number of cases to be filed against it or their eventual   
resolution and does not include in its reserve amounts for cases that may be    
filed in the future.  However, it is probable that if future cases are filed    
against the Company it will result in additional costs arising either from its  
share of costs under current insurance in place arrangements or due to the      
exhaustion of such coverage.  The Company reviews the adequacy of existing      
reserves periodically based upon developments affecting these claims,           
including new filings and resolutions, and makes adjustments to the reserve     
and related insurance receivable as appropriate.                                

As the Company is not able to estimate its potential ultimate exposure for      
filed and unfiled claims against the Company, it cannot predict whether the     
ultimate resolution of the bodily injury cases will have a material effect on   
the Company's results of operations or stockholders' equity.                    

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

No matters were submitted to a vote of security holders, through solicitation   
of proxies or otherwise during the fourth quarter of the fiscal year ended      
March 28, 2004.                                                                 

PART II                                                                         

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

The Company's stock is listed on the New York Stock Exchange (the "NYSE").      
The following table sets forth, by quarter, the high and low composite sales    
prices of the stock as reported by the NYSE.                                    

Quarter Ended                               High        Low                     
June 30, 2002                              17.12      11.10                     
September 29, 2002                         15.20      11.45                     
December 29, 2002                          15.85      11.65                     
March 30, 2003                             14.43      12.70                     
June 29, 2003                              16.03      12.56                     
September 28, 2003                         17.24      14.90                     
December 29, 2003                          18.26      15.82                     
March 28, 2004                             17.80      17.70                     

On May 21, 2004 the high and low prices of the Company's common stock on the    
NYSE were $17.40 and $17.10, respectively.                                      

At May 21, 2004 there were 1,658 holders of record of 5,402,656 outstanding     
shares of common stock.  During fiscal year 2004, the Company declared a ten    
cents ($0.10) per share cash dividend to be paid each quarter.  The first       
dividend payment commenced on June 23, 2003 to shareholders of record as of     
June 2, 2003.  Subsequent dividend payments were made each quarter, on          
September 23, 2003, December 23, 2003 and March 23, 2004.                       

On March 19, 2004, the Company declared a dividend of ten cents ($0.10) per     
shared to be paid June 23, 2004 to all shareholders of record as of June 8,     
2004.  On May 21, 2004, the Company declared a dividend of ten cents ($0.10)    
per share to be paid September 23, 2004 to all shareholders of record as of     
September 8, 2004.                                                              

It is the intent of the Company to consider and act upon the payment of future  
dividends on a regular quarterly basis.  Future dividend declarations will      
depend, among other factors, on the Company's earnings and prospects, its cash  
position and investment needs.                                                  

ITEM 5C. TREASURY STOCK                                                         

The following table summarizes the purchases of the Company's common stock to   
be held in treasury for the past two fiscal years.                              
                                                                 Maximum
                                              Total Shares       Number of
                                               Purchased as      Shares that
Period    Total Number of    Average Price     part of publicly     may yet be  
      Shares Purchased    Paid per Share     announced plan      purchased
Authorized                                                           500,000    
Oct 2002     10,000            $12.04             10,000             490,000    
Jan 2003        400             12.84                400             489,600    
Feb 2003      7,200             12.84              7,200             482,400    
Mar 2003      1,900             12.98              1,900             480,500    
Apr 2003     22,400             12.94             22,400             458,100    

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA                                   
(In thousands of dollars, except for share data)                                

The following table summarizes certain selected consolidated financial data of  
the Company, which should be read in conjunction with the accompanying          
consolidated financial statements of the Company included in Item 8.            

           March 28,    March 30,   March 31,    April 1,   April 2,
               2004         2003        2002        2001        2000

Operations:                                                                     
Revenue          $147,794     $151,811    $121,945    $116,545(6)  $123,851     
Operating                                                                       
income             2,166(1)     5,098(4)    6,902      11,950(7)     5,610(8) 
Net income          4,032(2)     4,110(4)    7,018      16,727        8,132     

Net income                                                                      
per share of                                                                  
common stock                                                                  

Basic EPS           0.76        0.78         1.05        1.74         0.83    
Diluted EPS         0.72        0.74         1.03        1.73         0.82    

Financial position:                                                             
Working capital    36,362(3)   42,525       37,129(5)   59,293       64,880     
Fixed assets       28,244(3)   16,634       16,595      17,358       17,356     
Total assets      147,902     141,580      133,680(5)  164,900      139,209     

Stockholders'                                                                   
equity          $ 71,371    $ 69,534     $ 65,997(5) $ 93,081     $ 76,185    

(1)  Operating income was impacted unfavorably by reduced commercial and        
other non-Navy volumes, higher direct costs on a fixed priced project,
a non-cash charge arising from the provision for anticipated workers  
 compensation claims costs due to the bankruptcy of one of the Company's
previous insurance carriers, and higher overhead expenses.            

(2)  Net income was favorably impacted by a decrease in federal income tax      
expense due to the decrease in income before income taxes and the     
decrease in income tax expense of $1.1 million resulting from the     
resolution in the fourth quarter of certain income tax contingencies  
that were established in previous years.                              

(3)  Early in fiscal year 2004, the Company announced a special capital         
budget of approximately $13 million for improvements to its Seattle   
shipyard facility during its fiscal years 2004 and 2005.  These       
improvements include the replacement of a major pier, a stormwater    
collection and discharge system and significant upgrades to its       
electrical system and are in addition to the Company's routine annual 
capital expenditures. During fiscal year 2004, the Company spent      
approximately $10.0 million of the special facilities capital budget  
and $4.6 million on other shipyard capital expenditures.              

(4)  Operating income was impacted unfavorably by a non-recurring, non-cash     
charge of $0.8 million arising from the settlement of a portion of the
  Company's pension liabilities.  This settlement transferred a portion of
the Company's pension liability to an international labor union       
   organization.  Under the provisions of pension accounting, the settlement
of these liabilities triggered recognition of certain cumulative      
differences between pension plan assumptions and actual results.      

(5)  In fiscal year 2002, the Company repurchased an aggregate of 4,136,124     
shares of its common stock at a price of $8.25 per share through its  
tender offer ("Dutch Auction") that was completed as of July 31, 2001.
The Company's working capital, total assets, and stockholders' equity 
 declined approximately $34 million as a result of the share repurchases
and related transactions.                                             

(6)  The Company's 2001 revenues were impacted favorably by an agreement        
reached with the U.S. Navy to share in certain environmental insurance
   costs.  Under terms of the agreement, the Company was able to invoice and
 record revenue of $3.9 million during the fourth quarter of fiscal year
2001.  The agreement also allowed the Company to invoice and recognize
an additional $1.7 million in fiscal years 2002, 2003 and 2004,       
  respectively.  In addition, the Company received a favorable arbitration
award on the Margarita II, a floating electrical power plant that was 
completed in fiscal year 2000.  The award allowed the Company to      
recognize $1.9 million of revenue in the fourth quarter of fiscal year
2001.                                                                 

(7)  During fiscal year 2001, the Company recorded a net insurance settlement   
of $2.1 million, which was partially offset by a $1.5 million         
environmental and other reserve charge, resulting in an increase to   
income from operations of $0.6 million.                               

(8)  During fiscal year 2000, the Company recorded an additional $5.6 million   
 operating charge for environmental and other reserves.  This charge was
partially offset by a $0.9 million insurance settlement the Company   
reached with one of its insurance carriers.                           

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

The Notes to the Consolidated Financial Statements are an integral part of      
Management's Discussion and Analysis of Financial Condition and Results of      
Operations and should be read in conjunction herewith.  The following           
discussion and analysis of financial condition and results of operations        
contain forward-looking statements, which involve risks and uncertainties.      
The Company's actual results in future periods may differ significantly from    
the results discussed in or anticipated by such forward looking statements.     
Certain factors, which may impact results for future periods, are discussed     
below under the captions "Overview - Profitability," and "Environmental         
Matters."  Readers should also consider the statements and factors discussed    
under the caption "Operations Overview" in Item 1 and the discussion of         
environmental matters and related bodily injury claims set forth in Item 3 of   
this Annual Report on Form 10-K filed with the Securities and Exchange          
Commission for the fiscal year ended March 28, 2004, together with the Notes    
to the Company's Consolidated Financial Statements for the fiscal year then     
ended.                                                                          

Overview                                                                        

Fiscal year 2004 started slowly, primarily because the Company's scheduled      
work for the Navy during the first quarter was postponed by ship deployments    
in support of military operations in Iraq.  However, the Company's revenue      
increased significantly during the second quarter of the year.  This increase   
was primarily attributable to a large concentration of repair, maintenance and  
overhaul work that was awarded under each of the Company's three U.S. Navy      
phased maintenance contracts as the previously deployed ships returned home.    
During this same period, the Company's commercial and non-Navy repair business  
was somewhat reduced, in part due to drydock maintenance projects that removed  
two of the company's docks from service for approximately 30 days each.         

During the first half of fiscal year 2004, the Company recorded $65.6 million,  
or 44% of its full year revenue.  The Company's operating and net income        
during the six month period were unfavorable because of the limited amount of   
Navy work in the first quarter, the impact of the reduced work on the           
Company's commercial and non-Navy results, and the impact of the $2.5 million   
provision for workers compensation claims arising from the bankruptcy of        
Fremont Indemnity Company, the Company's former workers compensation insurance  
carrier.                                                                        

The financial results for the third and fourth quarters of this year were       
significantly stronger as revenues for the second half of the year increased    
to $82.2 million, an increase of 25% from the volumes experienced during the    
first half of the year.  A significant portion of the increased revenues,       
operating income and net income experienced in the second half of the year was  
attributable to the high volume of Navy work that had been previously deferred  
due to military operations in Iraq.  In spite of the improvement in the         
financial results for the second half, the Company's results were somewhat      
diminished by the Navy's decision to reduce the scope of work the Company       
performed on the USS Sacramento because of the ship's pending decommissioning.  
In addition, the Company experienced higher direct costs than planned on a      
fixed priced project that commenced in the third quarter and was completed      
early in the Company's fiscal year 2005.  The impact of these cost increases,   
which had no corresponding revenue associated with them, reduced operating      
income by approximately $0.8 million.                                           

For the full year ended March 28, 2004, the Company recorded revenue of $147.8  
million, a decrease of $4.0 million, or approximately 3%, from fiscal year      
2003 reported revenue of $151.8 million.  This revenue decrease is primarily    
attributable to reduced commercial and other non-Navy work volumes.             

During fiscal year 2004, the Company recorded operating income of $2.2 million  
on revenue of $147.8 million, or approximately 1% of revenue.  This represents  
a decrease in operating income of $2.9 million, or approximately 58% from       
fiscal year 2003 operating income of $5.1 million.  The decline in operating    
income was due to the previously mentioned reduced commercial and other non-    
Navy volumes, higher direct costs on a fixed priced project, a non-cash charge  
arising from the provision for anticipated workers compensation claim costs     
due to the bankruptcy of the Company's former workers compensation insurance    
carrier, and higher overhead expenses.                                          

In addition, the Company recognized a $0.6 million gain on available for sale   
securities and $1.7 million in non-operating investment income for the year     
ended March 28, 2004.  These amounts in addition to the operating income        
reported, resulted in fiscal year 2004 income before income tax expense of      
$4.5 million.                                                                   

Auxiliary Oiler Explosive ("AOE") Contract                                      

In June 2001, the Company was awarded by the Navy, a six-year, cost-type        
contract, under which the Navy has options to have the Company perform          
maintenance work on the Auxiliary Oiler Explosive ("AOE") class vessels.  This  
contract represents the fourth consecutive, multi-year contract that the        
Company has been awarded by the Navy on the AOE class vessels.  The three       
previous AOE contracts, which were each five years in duration, were all        
awarded on a competitive basis.  This cost type contract provides for phased    
maintenance repairs to four Navy AOE class supply ships stationed in the Puget  
Sound area. The original contract included options for thirteen repair          
availabilities to be performed between 2001 and 2007 and was expected to have   
a notional value of approximately $180 million if all of the options were       
exercised.  Since the award, five repair availabilities have been               
accomplished.                                                                   

During the first quarter of fiscal year 2003, the Navy announced its intention  
to transfer the USS Rainier (AOE 7) and the USS Bridge (AOE 10) to the          
Military Sealift Command ("MSC") which results in five availabilities that      
will not be exercised under this contract.  AOE 7 was transferred to MSC in     
August 2003.  AOE 10 is currently scheduled to be transferred in the summer of  
2004.  The Company anticipates that MSC will contract for future work on these  
two vessels on a competitive basis.  The potential impact of these transfers    
on the Company's future revenues will depend on such factors as the             
expenditures for maintenance by MSC, the Company's capacity to bid on future    
AOE 7 and AOE 10 work, and the Company's bidding success if such bids are       
submitted.                                                                      

During the fourth quarter of fiscal year 2004, the Company announced that it    
was informed by the Navy that the USS Sacramento (AOE 1) is scheduled to be     
decommissioned on or about October 1, 2004.  Of the two remaining               
availabilities on AOE 1, one was exercised on a reduced scale as a five-week,   
pier-side availability.  The availability, originally scheduled for 12 weeks    
in duration, was to include a dry docking of the ship.  The other availability  
of AOE 1 will not occur due to its decommissioning.  The Company does not know  
at this point if it will be involved in any of the work related to the          
decommissioning of AOE 1.                                                       

The AOE contract contains options for two remaining repair availabilities on    
the USS Camden (AOE 2) before the contract expires in 2007.  There is no        
assurance that these two remaining options will be exercised by the Navy in     
whole or in part.                                                               

Combatant Maintenance Team ("CMT") Contract                                     

During the first quarter of fiscal year 2001, the Company was awarded, by the   
Department of the Navy on a sole source basis, a five year, cost-type contract  
for the repair and maintenance which at the time included six surface           
combatant class vessels (frigates and destroyers) stationed in the Puget Sound  
area.  Although the Navy has not released a notional value of the maintenance   
work, the Company believes that the value may be approximately $60 million to   
$75 million if all options are exercised.  Work on this contract is being       
performed primarily in the Company's Seattle shipyard.                          

Planned Incremental Availability ("PIA")                                        

Subsequent to the end of fiscal year 2004, the Department of the Navy awarded   
the Company a five-year, cost-type contract with the long-term overhaul and     
maintenance to the NIMITZ CLASS aircraft carriers (CVN) home ported in Puget    
Sound.  The contract consists of multiple contract options for planned          
incremental availabilities (PIA's), docking planned incremental availabilities  
(DPIA's) and continuous maintenance and upkeep for the USS LINCOLN (CVN-72),    
USS STENNIS (CVN-74), USS NIMITZ (CVN-68) and USS VINSON (CVN-70) when they     
are in Puget Sound. The work includes all types of non-nuclear ship repair,     
alteration and maintenance.  All on-board work is accomplished by the Company   
workforce at Puget Sound Naval Shipyard in Bremerton, Washington, or Naval      
Station Everett.                                                                
The work is performed under a cost plus award fee with performance incentive    
fee contract and represents the second contract for aircraft carrier            
maintenance awarded to the Company.  The first such contract, recently          
expired, was awarded in 1999.  The Company is supported in this effort by       
various regional suppliers and subcontractors.  Significant support is          
provided by the Company's two teaming partners for this contract, Pacific Ship  
Repair and Fabrication ("PacShip") and AMSEC LLC ("AMSEC"). The notional value  
for this five-year contract is approximately $133 million if all options are    
exercised.  There is no assurance that all options will be exercised, in whole  
or in part.                                                                     
United States Coast Guard - Multi-ship; Multi-options (MSMO contract).          

During the fourth quarter of fiscal year 2004, the United States Coast Guard    
awarded the Company a contract to provide maintenance of two Polar Class        
icebreakers.  The contract consists of multiple contract options for planned    
maintenance availabilities (PMA's) and docking planned maintenance              
availabilities (DPMA's) for the POLAR STAR (WAGB-10) and POLAR SEA (WAGB-11).   
The availabilities, and their companion planning options, extend through the    
last DPMA ending August 2008, and the last PMA ending on September 2008. The    
work to be performed includes availability planning and generalized ship        
maintenance and repairs as needed, with emphasis on propulsion and deck         
machinery work. The Company expects to team with the Coast Guard to identify    
the appropriate best value work scope and technical solutions for support of    
the two icebreakers. The Company will be supported in this effort by various    
regional suppliers and subcontractors.                                          
The work will be performed under a cost plus incentive fee contract. The        
Company has performed similar work for the Coast Guard over the past several    
years under individual, competitively bid, firm fixed priced contracts. This    
current award marks the first time the Coast Guard has used a long term         
phased-maintenance approach on the two Polar Class icebreakers home ported in   
Seattle. The notional value of all options, if exercised by the Coast Guard,    
is approximately $50 million. There is no assurance that all options will be    
exercised, in whole or in part.                                                 
Electric Boat                                                                   

During the fourth quarter of fiscal year 2004, the Company entered into a       
contract with Electric Boat Corporation of Groton, Connecticut ("Electric       
Boat") to support work on Trident submarines.  During the period from May to    
September 2003, the Company completed planning and preparation work for         
Electric Boat.  The Company has begun work on a follow-on contract to           
fabricate components and to accomplish associated steel outfitting, project     
management and quality assurance functions.  This contract is associated with   
the retrofit work being accomplished by Electric Boat on the USS OHIO (SSBN     
726) at the Puget Sound Naval Shipyard.                                         

The Company's work is being performed under a cost plus incentive fee contract  
with Electric Boat for the fabrication work, and a firm fixed price contract    
for the associated project management and quality assurance work. The total     
value of these contracts is approximately $5.3 million and the work is          
scheduled to be completed in May 2004.                                          

Bath Iron Works                                                                 

During the fourth quarter of fiscal year 2004, the Company confirmed its        
expected participation, along with Southwest Marine, Inc., San Diego Division,  
on the team lead by Bath Iron Works, a subsidiary of General Dynamics           
(NYSE:GD), to perform Post Shakedown Availability work ("PSA") on DDG-51 Aegis  
Destroyers ("Destroyers").  The U.S. Navy contract for this work, which was     
awarded to Bath Iron Works, includes options for PSA work to be accomplished    
in Navy homeports of Everett, Washington and Pearl Harbor, HI.                  

The Company's expected participation will include the performance of the PSA    
work on between one and three Destroyers that are expected to be home ported    
in Everett, Washington.  The first option, if exercised by the Navy, is         
anticipated to require work in the first quarter of calendar 2005 and would     
have a value of approximately $9 million.  Any work that the Company performs   
for Bath Iron Works will be accomplished under a cost plus award fee            
subcontract still to be finalized between Bath Iron Works and the Company.  If  
the Navy stations the second and third Destroyers at Everett, Washington and    
exercises options for PSA work on those ships, the anticipated contract value   
to the Company for its expected work on all three ships will be approximately   
$30 million between 2005 and 2007.  The PSA work primarily involves the         
installation of system and equipment upgrades and/or ship alterations as        
required.                                                                       

Business Volume and Backlog                                                     

At March 28, 2004 the Company's backlog consists of approximately $19 million   
of repair, maintenance, and conversion work.  This compares with backlogs of    
approximately $22 million and $46 million at March 30, 2003 and March 31,       
2002, respectively. The Company's current backlog is primarily attributable to  
firm repair, maintenance and conversion work scheduled for completion during    
fiscal year 2005.                                                               

Since work under the Company's Navy and Coast Guard phased maintenance          
contracts is at the option of the Navy and the U.S. Coast Guard, the Company    
cannot provide assurance as to the timing or level of work that may be          
performed under these contracts.  Therefore, the decrease in the backlog is     
primarily due to the timing of the availabilities for the phased maintenance    
contracts.  Projected revenues from these contracts are not included in the     
Company's backlog until contract options are exercised by these customers.      

Profitability                                                                   

The Company's future profitability depends largely on the ability of the        
Shipyard to maintain an adequate volume of ship repair, overhaul and            
conversion business to augment its longer-term contracts.  The variables        
affecting the Company's business volume include public support provided to      
competing Northwest shipyards, excess west coast and industry-wide shipyard     
capacity, foreign competition, governmental legislation and regulatory issues,  
activity levels of the U.S. Navy, competitors' pricing behavior, and Company    
labor efficiencies, work practices and estimating abilities.  Other factors     
that can contribute to future profitability include the amounts of annual       
expenditures needed to ensure continuing serviceability of the Company's owned  
and leased machinery and equipment.                                             

The Company continues to respond aggressively to the increasingly competitive   
shipbuilding and repair industry.  In addition to management's focus on the     
profitability of existing Shipyard operations through reduced operating costs,  
improved production efficiencies, customer needs and the pursuit of new         
business volume, management continues to evaluate options for deployment of     
assets with a view to improving the Company's return on investment.             

Critical Accounting Policies                                                    

The Company's established accounting policies are outlined in the footnotes to  
the Consolidated Financial Statements (contained in Part II, Item 8. of this    
Form 10-K) entitled "Principal Accounting Policies."  As part of its reporting  
responsibilities, management continually evaluates and reviews the adequacy of  
its accounting policies and methods as new events occur.  Management believes   
that its policies are applied in a consistent manner that provides the user of  
the Company's financial statements with a current, accurate and complete        
presentation of information in accordance with accounting principles generally  
accepted in the United States.                                                  

The preparation of financial statements requires the use of judgments and       
estimates.  The Company's critical accounting policies are described below to   
provide a better understanding of how these judgments and estimates can impact  
the Company's financial statements.  A critical accounting policy is one that   
management believes may contain difficult, subjective or complex estimates and  
assessments and is fundamental to the Company's results of operation.  The      
Company has identified its most critical accounting policies as those which     
relate to: 1) Revenue Recognition, 2) Environmental Remediation, Bodily         
Injury, Other Reserves, and Insurance Receivable and 3) Deferred Pension Asset  
and Accrued Post Retirement Health Benefits.  This discussion and analysis      
should be read in conjunction with the consolidated statements and related      
notes included elsewhere in this report.                                        

Revenue Recognition                                                             
The Company recognizes revenue, contract costs, and profit on the percentage-   
of completion method based upon direct labor hours incurred.  Using the         
percentage-of-completion method requires the Company to make certain estimates  
of the total cost to complete a project, estimates of project schedule and      
completion dates, estimates of the percentage at which the project is           
complete, estimates of annual overhead rates and estimates of amounts of any    
probable unapproved claims and/or change orders.  These estimates are           
continuously evaluated and updated by experienced project management and        
accounting personnel assigned to these activities, and senior management also   
reviews them on a periodic basis.  When adjustments in contract value or        
estimated costs are determined, any changes from prior estimates are generally  
reflected in revenue in the current period.                                     

The Company has considerable experience in managing multiple projects           
simultaneously and in preparing accurate cost estimates, schedules and project  
completion dates.  However, many factors, including but not limited to          
weather, fluctuations in material prices, labor shortages, and timely           
availability of materials can affect the accuracy of these estimates and may    
impact future revenues either favorably or unfavorably.                         

U.S. Government procurement standards are followed to determine the             
allowability as well as the allocability of costs charged to Government         
contracts.  Costs incurred and allocated to contracts with the U.S. Government  
are closely scrutinized for compliance with underlying regulatory standards by  
Shipyards personnel, and are subject to audit by the Defense Contract Audit     
Agency ("DCAA").  Other than normal cost accounting issues raised by the DCAA   
as a result of their regular, ongoing reviews, the Company is not aware of any  
outstanding issues with the DCAA.                                               

Environmental Remediation, Bodily Injury, Other Reserves and Insurance          
Receivable                                                                      
The Company faces potential liabilities in connection with the alleged          
presence of hazardous waste materials at its Seattle shipyard and at several    
sites used by the Company for disposal of alleged hazardous waste.  The         
Company has also been named as a defendant in a number of civil actions         
alleging damages from past exposure to toxic substances, generally asbestos,    
at former Company facilities that are now closed.  At March 28, 2004, the       
Company maintained aggregate reserves of $32.0 million for pending claims and   
assessments relating to these environmental matters, including $23.1 million    
associated with the Company's Seattle shipyard site and $8.1 million for        
asbestos or bodily injury related claims.                                       

The Company has various insurance policies and agreements that provide          
coverage on the costs to remediate these environmental sites and for the        
defense and settlement of bodily injury claims.  At March 28, 2004, the         
Company had recorded an insurance receivable of $29.2 million relating to       
these environmental and bodily injury matters, including $23.1 million          
associated with the Company's Seattle shipyard site and $5.8 million for        
bodily injury related claims.                                                   

Included in the reserves are sediment remediation costs for Harbor Island of    
$13.5 million that are expected to occur in fiscal year 2005.  These costs are  
reflected in the Company's balance sheet under current liabilities.  Likewise,  
the insurance receivable of $13.5 million relating to these reserves is         
reflected in the Company's balance sheet under current assets.                  

The Company reviews these matters on a continual basis and revises its          
estimates of known liabilities and insurance recoveries when appropriate.  The  
Company follows guidance provided in Statement of Position 96-1,                
"Environmental Remediation Liabilities" for recording its environmental         
liabilities and recoveries.  The Company accounts for bodily injury             
liabilities in accordance with Financial Accounting Standards Board No. 5,      
"Accounting for Contingencies."                                                 

Estimating environmental remediation liabilities requires judgments and         
assessments based upon independent professional knowledge, the experience of    
Company management and legal counsel.  Environmental liabilities are based on   
judgments that include calculating the cost of alternative remediation methods  
and disposal sites, changes in the boundaries of the remediation areas, and     
the impact of regulatory changes.  Bodily injury liabilities are based on       
judgments that include the number of outstanding claims, the expected outcome   
of claim litigation and anticipated settlement amounts for open claims based    
on historical experience.  The Company does not accrue liabilities for unknown  
bodily injury claims that may be asserted in the future due to uncertainties    
of the number of cases that may be filed and the extent of damages that may be  
alleged.                                                                        

The development of liability estimates that support both environmental          
remediation and bodily injury reserves involve complex matters that include     
the development of estimates and the use of judgments.  The actual outcome of   
these matters may differ from Company estimates.  To the extent not covered by  
insurance, increases to environmental remediation and bodily injury             
liabilities would unfavorably impact future earnings.                           

The Company's insurance recoveries for environmental remediation and bodily     
injury claims are estimated independently from the associated liabilities and   
are based on insurance coverages or contractual agreements negotiated with its  
former insurance companies.  These policies and agreements are primarily with   
two insurance companies.  Based upon the current credit rating of both of       
these companies, the Company anticipates that both insurance companies will be  
able to satisfy their respective obligations under the policy or agreement.     
However, if this assumption is incorrect and either of these companies is       
unable to meet its future financial commitments, the Company's financial        
condition and results of operation could be adversely affected.                 

Pension Asset and Accrued Post Retirement Health Benefits                       
The Company's employee pension and other post retirement benefit costs and      
obligations are governed by Financial Accounting Standards No.87 and No. 106.   
Under these rules, management determines appropriate assumptions about the      
future, which are used by actuaries to estimate net costs and liabilities.      
These assumptions include discount rates, health care cost trends, inflation    
rates, long-term rates of return on plan assets, retirement rates, mortality    
rates and other factors.  Management bases these assumptions on historical      
results, the current environment and reasonable expectations of future events.  
Actual results that differ from the assumptions are accumulated and amortized   
over future periods and, therefore, generally affect the recognized expense     
and recorded obligation in such future periods.  While management believes the  
assumptions used are appropriate, significant differences in actual experience  
or significant changes in assumptions would affect pension and other post       
retirement benefits costs and obligations.  See Note 7. To the Financial        
Statements for more information regarding costs and assumptions for employee    
pension and other post retirement benefits.                                     

YEAR TO YEAR COMPARISONS                                                        
2004 COMPARED WITH 2003                                                         

Net income for fiscal year 2004 decreased by $0.1 million, or 2% from fiscal    
year 2003 levels.  This decrease was attributable to the reduced volume of      
commercial and non-Navy work, higher overhead expenses, and the non-cash        
charge arising from the provision for anticipated workers compensations claims  
due to the bankruptcy of one of the Company's previous insurance carriers.      
This decrease was mostly offset by a decrease in federal income tax expense of  
$1.1 million resulting from the resolution in the fourth quarter of certain     
income tax contingencies that were established in previous years.               

Revenues                                                                        
The Company recorded revenue of $147.8 million during fiscal year 2004, which   
represents a decrease of $4.0 million, or approximately 3%, from fiscal year    
2003 reported revenue of $151.8 million.  This is primarily attributable to     
reduced commercial and other non-Navy work volumes.                             

Cost of Revenues                                                                
Cost of revenues for fiscal year 2004 decreased by $1.6 million, or             
approximately 2% from fiscal year 2003.  The majority of this decrease was      
attributable to decreases in work volumes experienced in fiscal year 2004 when  
compared to fiscal year 2003.  Cost of revenues as a percentage of revenues     
was 73% and 72% for fiscal years 2004 and 2003, respectively.                   

The increase in cost of revenues as a percentage of revenue in fiscal year      
2004 is primarily attributable to a charge recorded in the first quarter        
related to the unanticipated bankruptcy of one of the Company's previous        
insurance carriers.  This charge, which reflects the Company's best estimate    
of the known liabilities associated with unpaid workers compensation claims     
arising from the two-year coverage period commencing October 1, 1998 is         
subject to change as additional facts are uncovered.  Although the Company      
expects to recover a least a portion of these costs from the liquidation and    
other sources, the amount and the timing of any such recovery cannot be         
estimated currently and therefore no estimate of amounts recoverable is         
included in the current financial results.                                      

Administrative and Manufacturing Overhead                                       
Overhead costs for administrative and manufacturing activities increased by     
$1.3 million, or 3% from fiscal year 2003. Administrative and manufacturing     
overhead as a percentage revenue was approximately 26% and 24% for fiscal       
years 2004 and 2003, respectively.  The increase in administrative and          
manufacturing overhead costs and as a percentage of revenue is attributable to  
increases in repair and maintenance expenses for the Company's dry docks, and   
expenses associated with recovery and maintaining the condition of the smaller  
of the Company's two dry docks that are leased from the U.S. Navy.              

Provision for Environmental Reserves and Other                                  
During fiscal year 2004 and fiscal year 2003, the Company received partial      
reimbursement of $0.2 million and $0.1 million, respectively from another       
Harbor Island potentially responsible party for certain past environmental      
costs incurred by the Company.  This partial reimbursement is reflected in      
other insurance settlements in the Consolidated Statement of Income for the     
years ended March 28, 2004 and March 30, 2003.                                  

During fiscal year 2003, the Company estimated that the expected remediation    
costs associated with the Company's operable units at the Harbor Island         
Superfund Site would increase by approximately $9.1 million.  This increase in  
environmental reserves was offset by a $8.5 million increase in the Company's   
insurance receivable.  The net amount of $0.6 million is reflected in the       
Company's operating results for fiscal year 2003 and is shown in the            
Consolidated Statements of Income under Provision for environmental and other   
reserves.                                                                       

Investment and Other Income                                                     
Investment and other income in fiscal year 2004 increased by $0.5 million or    
approximately 38% when compared to fiscal year 2003.  The increase in           
investment and other income reported during fiscal year 2004 is primarily       
attributable to accelerated lease payments of $0.8 million received by the      
Company from one of its warehouse tenants under the terms of a negotiated       
lease buyout initiated by the tenant.                                           

In both fiscal year 2004 and fiscal year 2003, the Company's average funds      
available for investment purposes were $36.6 million.                           

Gain on Sale of available-for-sale securities                                   
During fiscal year 2004, the Company reported a net gain of $0.6 million on     
the sale of available-for-sale securities, which is an increase of $0.6         
million.  The significant increase in gains on the sale of available-for-sale   
securities reported in fiscal year 2004 is primarily attributable to market     
conditions that were more favorable during fiscal year 2004 as compared to      
fiscal year 2003.                                                               

Income Taxes                                                                    
In fiscal year 2004, the Company recognized federal income tax expense of $0.5  
million.  This represents a decrease of $1.7 million, or approximately 79% in   
federal tax expense when compared to fiscal year 2003.  This decrease is        
attributable to the decrease in income before taxes in fiscal year 2004 and     
the decrease in income tax expense of $1.1 million resulting from the           
resolution in the fourth quarter of certain income tax contingencies that were  
established in previous years.                                                  

The effective income tax rates recorded in fiscal years 2004 and 2003 were 10%  
and 35%, respectively.  The statutory income tax rates for both fiscal years    
2004 and 2003 were 34% and 34%, respectively.                                   

2003 COMPARED WITH 2002                                                         

Net income for fiscal year 2003 decreased by $2.9 million, or 42% from fiscal   
year 2002 levels.  This decrease was primarily attributable to a decrease in    
income before taxes of $4.6 million offset by a decrease in income taxes        
payable of $1.7 million.  Net income for fiscal year 2003 was influenced as a   
result of the following components:                                             

Revenues                                                                        
The Company recorded revenue of $151.8 million during fiscal year 2003, which   
represents an increase of $29.9 million, or approximately 24%, over fiscal      
year 2002 reported revenue of $121.9 million.  U.S. Navy phased maintenance     
contracts accounted for approximately $16.0 million of this increase, while     
increases in other commercial and government repair and overhaul activities,    
and new construction activities accounted for $8.9 million and $4.9 million,    
respectively.                                                                   

Cost of Revenues                                                                
Cost of revenues for fiscal year 2003 increased by $24.6 million, or            
approximately 29% from fiscal year 2002.  The majority of this increase was     
attributable to increases in work volumes experienced in fiscal year 2003 when  
compared to fiscal year 2002.  Cost of revenues as a percentage of revenues     
was 72% and 70% for fiscal years 2003 and 2002, respectively.  The increase in  
cost of revenues as a percentage of revenue in fiscal year 2003 is primarily    
attributable to higher direct costs on two fixed priced projects that           
commenced and were completed in the third quarter, as well as underestimating   
the direct costs to complete a third project that commenced later in the third  
quarter but was not completed until April 2003.  The impact of these cost       
increases, which had no corresponding revenue, increased cost of revenues by    
approximately $3.7 million.                                                     

Also contributing, but to a lesser extent, was a non-recurring, non-cash        
charge of $0.8 million arising from the settlement of a portion of the          
Company's pension liabilities.  This settlement transferred a portion of the    
Company's pension liability to an international labor union organization.       
Under the provisions of pension accounting, the settlement of these             
liabilities triggered recognition of certain cumulative differences between     
pension plan assumptions and actual results.                                    

Administrative and Manufacturing Overhead                                       
Administrative and manufacturing overhead increased $6.1 million, or            
approximately 20% from fiscal year 2002.  This increase was attributable to an  
overall increase in production volumes as well as planned maintenance expenses  
and Company initiated process improvement costs.  Administrative and            
manufacturing overhead as a percentage of revenue was approximately 24% in      
fiscal year 2003, which was consistent with the 25% rate experienced in the     
prior fiscal year.                                                              

Provision for Environmental Reserves and Other                                  
During fiscal year 2003, the Company estimated that the expected remediation    
costs associated with the Company's operable units at the Harbor Island         
Superfund Site would increase by approximately $9.1 million.  This increase in  
environmental reserves was offset by a $8.5 million increase in the Company's   
insurance receivable.  The net amount of $0.6 million is reflected in the       
Company's operating results for fiscal year 2003 and is shown in the            
Consolidated Statements of Income under Provision for environmental and other   
reserves.                                                                       

Also, in fiscal year 2003 the Company received partial reimbursement from       
another Harbor Island potentially responsible party for certain past            
environmental costs incurred by the Company.  This partial reimbursement in     
the amount of $0.1 million is reflected in other insurance settlements in the   
Consolidated Statement of Income for the year ended March 30, 2003.             

In fiscal year 2002, the Company estimated that the remediation costs           
associated with its Harbor Island site would increase approximately $3.2        
million.  This amount was fully offset by a similar increase in the Company's   
insurance receivable.  The Company also received $0.5 million in                
reimbursements from another potentially responsible party during fiscal year    
2002.                                                                           

Investment and Other Income                                                     
Investment and other income in fiscal year 2003 decreased by $0.6 million or    
approximately 32% when compared to fiscal year 2002.  The decrease in           
investment and other income reported during fiscal year 2003 primarily          
reflects the reduction in the average funds available for investment purposes   
during the fiscal year, as well as lower investment yields generally available  
in the market.                                                                  

In fiscal year 2002, the Company's average funds available for investment       
purposes were $44.8 million.  In fiscal year 2003, the average funds available  
for investment purposes declined $8.2 million, or 18%, to $36.6 million.  This  
decline reflects the results of the Company's Dutch Auction share repurchase    
of 4.1 million shares of its common stock that occurred during the second       
quarter of fiscal year 2002.  This repurchase only affected a portion of the    
average funds available for investment purposes in fiscal year 2002, but        
affected the average funds available for the entire fiscal year 2003.           

Gain on Sale of available-for-sale securities                                   
During fiscal year 2003, the Company reported a net loss of $9 thousand on the  
sale of available-for-sale securities, which is a decrease of $2.2 million, or  
approximately 100% from fiscal year 2002.  The significant decrease in gains    
on the sale of available-for-sale securities reported in fiscal year 2003 is    
primarily attributable to market conditions that were more favorable during     
fiscal year 2002. .                                                             

Income Taxes                                                                    
In fiscal year 2003, the Company recognized federal income tax expense of $2.2  
million.  This represents a decrease of $1.7 million, or approximately 43% in   
federal tax expense when compared to fiscal year 2002.  This decrease is        
attributable to the decrease in income before taxes in fiscal year 2003.  The   
effective income tax rates recorded in fiscal years 2003 and 2002 remained      
relatively unchanged at 35% and 36%, respectively.  The statutory income tax    
rates for fiscal years 2003 and 2002 were 34% and 35%, respectively.            
Differences between effective rates and statutory rates reflect certain non-    
deductible expenses in both years.                                              

Environmental Matters and Other Contingencies                                   

The Company has provided total aggregate reserves of $32.0 million as of March  
28, 2004 for its contingent environmental and bodily injury liabilities.  Due   
to the complexities and extensive history of the Company's environmental and    
bodily injury matters, the amounts and timing of future expenditures is         
uncertain.  As a result, there can be no assurance that the ultimate            
resolution of these environmental and bodily injury matters will not have a     
material adverse effect on the Company's financial position, cash flows or      
results of operations.                                                          

The Company has various insurance policies and agreements that provide          
coverage of the costs to remediate environmental sites and for the defense and  
settlement of bodily injury cases.  These policies and agreements are           
primarily with two insurance companies.  Based upon the current credit rating   
of both of these companies, the Company anticipates that both parties will be   
able to perform under their respective policy or agreement.  As of March 28,    
2004, the Company has recorded an insurance receivable of $29.2 million to      
reflect the contractual arrangements with several insurance companies to share  
costs for certain environmental and other matters.                              

Included in the reserves are sediment remediation costs for Harbor Island of    
$13.5 million that are expected to occur in fiscal year 2005.  These costs are  
reflected in the Company's balance sheet under current liabilities.  Likewise,  
the insurance receivable of $13.5 million relating to these reserves is         
reflected in the Company's balance sheet under current assets.                  

The Company continues to negotiate with its insurance carriers and certain      
prior landowners and operators for past and future remediation costs. The       
Company has not recorded any receivables for any amounts that may be            
recoverable from such negotiations or other claims.                             

Ongoing Operations                                                              
Recurring costs associated with the Company's environmental compliance program  
are not material and are expensed as incurred.  Capital expenditures in         
connection with environmental compliance are not material to the Company's      
financial statements.                                                           

Past Activities - Environmental                                                 
The Company faces significant potential liabilities in connection with the      
alleged presence of hazardous waste materials at its Seattle shipyard (the      
"Harbor Island Site") and at several sites used by the Company for disposal of  
alleged hazardous waste.  The Company has also been named as a defendant in     
civil actions by parties alleging damages from past exposure to toxic           
substances at Company facilities.  Information with respect to these            
contingencies and claims is provided in Item 3 in this report.                  

The Company's policy is to accrue costs for environmental matters in the        
accounting period in which the responsibility is established and the cost is    
estimable.  The Company's estimates of its liabilities for environmental        
matters are based on evaluations of currently available facts with respect to   
each individual situation and take into consideration factors such as existing  
technology, presently enacted laws and regulations, and the results of          
negotiations with regulatory authorities.  The Company does not discount these  
liabilities.                                                                    

In fiscal year 2004, the Company spent $0.3 million for environmental site      
remediation.  All of these costs are reimbursable to the Company through its    
insurance coverages.  An additional $1.1 million in environmental site          
remediation was spent by third party vendors under the direction of the         
Company's management.  These costs were paid directly to the third party        
vendors under the Company's insurance policies.  Most of these expenditures     
were related to the Harbor Island Site.                                         

The Company spent approximately $0.5 million and $0.2 million on environmental  
site remediation in fiscal years 2003 and 2002, respectively.  Of these         
amounts, approximately $0.5 million and $0.2 million, respectively, were        
reimbursable to the Company under the Company's insurance policies.             

In addition to environmental site remediation costs, the Company spent a net    
$2 thousand on bodily injury cases after reimbursement under the Company's      
insurance policies in fiscal year 2004.  In fiscal year 2003 and 2002, the      
Company spent $25 thousand and $0.5 million, respectively for bodily injury     
cases after reimbursement under the Company's insurance policies.               

Actual costs to address the Harbor Island Site and other environmental sites    
and matters will depend upon numerous factors, including the number of parties  
found liable at each environmental site, the method of remediation, outcome of  
negotiations with regulatory authorities, outcome of litigation, technological  
developments and changes in environmental laws and regulations.  The Company    
entered into a Consent Decree with the EPA during the fourth quarter of fiscal  
year 2003.  As a result the company increased its Harbor Island Site reserves   
by an additional $9.1 million at the end of fiscal year 2003.                   

In the fourth quarter of fiscal year 2001, the Company entered into a 30-year   
agreement with an insurance company that will provide the Company with broad-   
based insurance coverage for the remediation of the Company's operable units    
at the Harbor Island Superfund Site.                                            

The agreement provides coverage for the known liabilities in an amount          
exceeding the Company's current booked reserves of $23.1 million.               
Additionally, the Company has entered into a 15-year agreement for coverage of  
any new environmental conditions discovered at the Seattle shipyard property    
that would require environmental remediation.                                   

The Company funded this insurance premium from cash reserves in two             
installments.  The first payment was made in the Company's fourth quarter of    
fiscal year 2001 and the second payment was made in the first quarter of        
fiscal year 2002.  The Company recorded a non-current asset in the form of an   
insurance receivable in accordance with its environmental accounting policies   
at the time it entered into this agreement.  This transaction did not have a    
material effect on the Company's results of operations, nor did the             
transaction have a material effect on stockholders' equity.                     

Past Activities - Asbestos and Related Claims                                   
The Company has been named as a defendant in civil actions by parties alleging  
damages from past exposure to toxic substances, generally asbestos, at closed   
former Company facilities.                                                      

The cases generally include as defendants, in addition to the Company, other    
ship builders and repairers, ship owners, asbestos manufacturers, distributors  
and installers, and equipment manufacturers and arise from injuries or          
illnesses allegedly caused by exposure to asbestos or other toxic substances.   
The Company assesses claims as they are filed and as the cases develop,         
dividing them into two different categories based on severity of illness.       
Based on current fact patterns, certain diseases including mesothelioma, lung   
cancer and fully developed asbestosis are categorized by the Company as         
"malignant" claims.  All other claims of a less medically serious nature are    
categorized as "non-malignant".  The Company is currently defending             
approximately 25 "malignant" claims and approximately 563 "non-malignant"       
claims.                                                                         

The relief sought in all cases varies greatly by jurisdiction and claimant.     
Included in the approximate 409 cases open as of March 28, 2004 are             
approximately 588 claimants.  The exact number of claimants is not              
determinable as approximately 150 of the open cases include multiple claimant   
filings against 30-100 defendants.  The filings do not indicate which           
claimants allege liability against the Company.  The previously stated 595      
claimants is the Company's best estimate taking known facts into                
consideration.                                                                  

Approximately 373 claimants do not assert any specific amount of relief         
sought.                                                                         

Approximately 160 claims contain standard boilerplate language asserting        
on behalf of each claimant a claim for compensatory damages of $2               
million and punitive damages of $20 million against approximately 100           
defendants.  Approximately 20 claims set forth the same boilerplate             
language asserting $10-$20 million in compensatory and $10-$20 million          
in punitive damages on behalf of each claimant against approximately 30-        
100 defendants.  Approximately 20 cases assert $1-$15 million in                
compensatory and $5-$10 million in punitive damages on behalf of each           
claimant against approximately 30-100 defendants.                               

Approximately 10 claimants seek compensatory damages of less than               
$100,000 per claim and approximately 5 claimants seek compensatory              
damages between $1 million and $15 million.  The claims involved in the         
foregoing cases do not specify against which defendants which claims are        
made or alleged dates of exposure.                                              

Based upon settled or concluded claims to date, the Company has not identified  
any correlation between the amount of the relief sought in the complaint and    
the final value of the claim.  The Company and its insurers are vigorously      
defending these actions.                                                        

As a result of claims resolution during fiscal year 2004, bodily injury         
reserves declined from $9.4 million at March 30, 2003 to $8.1 million at March  
28, 2004.  Likewise, bodily injury insurance receivables declined from $7.1     
million to $5.8 million.  These bodily injury liabilities and receivables are   
classified within the Company's Consolidated Balance Sheets as environmental    
and other reserves, and insurance receivables, respectively.                    

The Company has entered into agreements with several of its insurers to         
provide coverage for a significant portion of settlements and awards related    
to these bodily injury claims.  These agreements have aggregate limits on       
amounts to be paid overall and formulas for amounts of payment on individual    
claims.  The two most significant agreements provide coverage applicable to     
claims of exposure to asbestos occurring between 1949 and 1976 and occurring    
between 1976 through 1987. Insurance coverage for exposures to asbestos was no  
longer available from the insurance industry after 1987.  Due to changes in     
federal regulations in the 1970's that resulted in the swift decline in         
commercial and military application of asbestos and increased regulation over   
the handling and removal of asbestos, there exists minimal risk of claims       
arising from exposure after 1987.  Contractual formulas are utilized to         
determine the amount of coverage from each agreement on each claim settled or   
litigated.  Once the initial date of alleged exposure to asbestos is            
determined, all contractual years subsequent to that date participate in the    
settlement.  Since all known claims involve alleged exposure prior to 1976,     
the 1976 through 1987 agreement will participate in the settlement or           
judgement of all outstanding claims that are settled or litigated.  As a        
result, and as the years remaining calculation set forth below indicates, the   
1976 through 1987 agreement will exhaust prior to the 1949 through 1976         
agreement.  Based on historical claims settlement data only, the Company        
projects that at March 28, 2004, the 1949 through 1976 agreement will provide   
coverage for an additional 21.6 years and the 1976 through 1987 agreement will  
provide coverage for an additional 5.4 years.  At March 30, 2003, the Company   
projected that these agreements would provide coverage for an additional 20.4   
years and 5.2 years, respectively. The Company resolved 15 malignant claims in  
2004 compared with 13 in 2003 and 20 in 2002.  If historical settlement         
patterns or the rate of filing for new cases change in future periods, these    
estimated coverage periods could be shorter or longer than anticipated.         
Moreover, if one or both of these coverages are exhausted at some future date,  
the Company's share of responsibility will increase for any subsequent claims   
and for legal expenses previously covered by these insurance agreements.  In    
addition to providing coverage for assessments or settlements of claims, the    
agreements also provide for costs of defending and processing such claims.      

Due to uncertainties of the number of cases, the extent of alleged damages,     
the population of claimants and size of any awards and/or settlements, there    
can be no assurance that the current reserves will be adequate to cover the     
costs of resolving the existing cases.  Additionally, the Company cannot        
predict the eventual number of cases to be filed against it or their eventual   
resolution and does not include in its reserve amounts for cases that may be    
filed in the future.  However, it is probable that if future cases are filed    
against the Company it will result in additional costs arising either from its  
share of costs under current insurance in place arrangements or due to the      
exhaustion of such coverage.  The Company reviews the adequacy of existing      
reserves periodically based upon developments affecting these claims,           
including new filings and resolutions, and makes adjustments to the reserve     
and related insurance receivable as appropriate.                                

As the Company is not able to estimate its potential ultimate exposure for      
filed and unfiled claims against the Company, it cannot predict whether the     
ultimate resolution of the bodily injury cases will have a material effect on   
the Company's results of operations or stockholders' equity.                    

Other Reserves                                                                  
During the first quarter of fiscal year 2004, the Company recorded a reserve    
of $2.5 million related to the unanticipated bankruptcy of one of its previous  
insurance carriers.  The reserve, which reflects the Company's best estimate    
of the known liabilities associated with unpaid workers compensation claims     
arising from the two-year coverage period commencing October 1, 1998, is        
subject to change as additional facts are uncovered.  These claims have         
reverted to the Company due to the liquidation of the insurance carrier.        
Although the Company expects to recover at least a portion of these costs from  
the liquidation and other sources, the amount and the timing of any such        
recovery cannot be estimated currently and therefore no estimate of amounts     
recoverable is included in the current financial results.                       

Since establishing the reserve during the first quarter, the Company has paid   
approximately $0.2 million in claims, which have been charged against the       
reserve.                                                                        

Liquidity, Capital Resources and Working Capital                                

At March 28, 2004, the Company's cash and cash equivalents, and securities      
available-for-sale balances were $1.3 million and $30.7 million, respectively,  
for a total of $32.0 million.  At March 30, 2003 the Company's cash and cash    
equivalents, and securities available for sale balances were $9.1 million and   
$32.1 million, respectively, for a total of $41.2 million.                      

The Company anticipates that its cash, cash equivalents and marketable          
securities position, anticipated fiscal year 2005 cash flow, access to credit   
facilities and capital markets, taken together, will provide sufficient         
liquidity to fund operations for fiscal year 2005.  Accordingly, shipyard       
capital expenditures are expected to be financed from working capital.  A       
change in the composition or timing of projected work could cause planned       
capital expenditures and repair and maintenance expenditures to change.         

Net Cash Provided by Operating Activities                                       
Net cash provided by operating activities was $7.0 million for the year ended   
March 28, 2004.  This amount was primarily attributable to fiscal year net      
income adjusted for depreciation, an increase in accounts payable and           
accruals, a decrease in the insurance receivable offset by an increase in       
costs and estimated profits in excess of billings on incomplete contracts and   
a decrease in environmental and other reserves.                                 

Net cash provided by operating activities was $13.1 million for the year ended  
March 30, 2003 and was primarily attributable to fiscal year net income         
adjusted for environmental and other reserves and accounts receivable, offset   
by increases in insurance receivables.                                          

Investing Cash Flows                                                            
Net cash used in investing activities was $13.2 million for the year ended      
March 28, 2004 and consisted primarily of purchases of marketable securities    
and capital expenditures offset by sales and maturities of marketable           
securities.                                                                     

Net cash used in investing activities was $21.6 million for the year ended      
March 30, 2003 and consisted primarily of purchases of marketable securities    
and capital expenditures offset by sales and maturities of marketable           
securities.                                                                     

Capital Expenditures                                                            
Early in fiscal year 2004, the Company announced a special capital budget of    
approximately $13.0 million for planned improvements to its Seattle shipyard    
facility during its fiscal years 2004 and 2005.  These improvements include     
the replacement of a major pier, a stormwater collection and discharge system   
and significant upgrades to its electrical system and are in addition to the    
Company's routine annual capital expenditures. During fiscal year 2004, the     
Company spent approximately $10.0 million of the special facilities capital     
budget and $4.6 million on other shipyard capital expenditures.                 

The Company plans to finance these capital projects from its projected future   
cash flows and existing working capital.                                        

During fiscal year 2003, the Company spent approximately $2.8 million on new    
capital assets.                                                                 

The capital expenditures for fiscal year 2004 are in addition to ongoing        
repair and maintenance expenditures in the Shipyard of $4.8 million, $5.4       
million, and $3.9 million in fiscal years 2004, 2003, and 2002, respectively.   
The decrease in fiscal year 2004 repair and maintenance costs when compared to  
fiscal year 2003 is primarily attributable to a decrease in direct labor costs  
associated with the Company's multi-year refurbishment plan of its owned dry    
dock.                                                                           

Financing Activities                                                            
Net cash used in financing activities for fiscal year 2004 was $1.5 million.    
This consisted primarily of dividends paid on common stock, offset by proceeds  
from the exercise of stock options.                                             

On March 19, 2004, the Company declared a dividend of ten cents ($0.10) per     
share, payable on June 23, 2004, to shareholders of record as of June 8, 2004.  
Based on the current number of outstanding shares, the impact of this dividend  
will be approximately $0.5 million.                                             

Net cash provided by financing activities for fiscal year 2003 was $14          
thousand.  This consisted primarily of a reduction in restricted cash and       
proceeds from the exercise of stock options, offset by the purchase of          
treasury stock.                                                                 

Credit Facility                                                                 
In fiscal year 2002, Todd Pacific Shipyards Corporation, a wholly owned         
subsidiary of the Company, negotiated a $10.0 million revolving credit          
facility with interest payable at the prime rate.  The credit facility, which   
is renewable on a bi-annual basis, provides Todd Pacific with greater           
flexibility in funding its operational cash flow needs.  Todd Pacific had no    
outstanding borrowings as of March 28, 2004 and March 30, 2003, respectively.   

Commitments                                                                     
The Company is subject to certain minimum operating lease payments on one of    
its dry docks that are charged to expense.  These operating leases contain      
renewal options and minimum annual maintenance requirements.  The minimum       
lease commitments are summarized in Note 9 of the Notes to Consolidated         
Financial Statements.                                                           

A surety company has issued contract bonds totaling $2.1 million for current    
repair, maintenance and conversion jobs as of March 28, 2004.  Todd Pacific's   
trade accounts receivable on certain bonded jobs secure these various contract  
bonds.                                                                          

Stock Repurchase                                                                
During the third quarter of fiscal year 2003, the Board of Directors approved   
the repurchase of up to 500,000 shares of the Company's common stock from time  
to time in open market or negotiated transactions.  Under this authorization,   
the Company repurchased during the first quarter of fiscal year 2004 an         
aggregate of 22,400 shares in open market transactions.  The shares were        
purchased at an average price of $12.94 per share for total consideration of    
$289,887.                                                                       

Also during fiscal year 2004, 154,000 shares of treasury stock were reissued    
pursuant to the exercise of stock options held by four officers of the          
Company.  6,553,377 shares were held as treasury stock as of March 28, 2004.    

The Company repurchased an aggregate of 19,500 shares during fiscal year 2003   
in open market transactions at an average price of $12.44 per share for total   
consideration of $242,592.  Also during fiscal year 2003, 7,334 shares of       
treasury stock were reissued pursuant to the exercise of stock options held by  
two officers of the Company.  6,684,977 shares were held as treasury stock as   
of March 30, 2003.                                                              

Labor Relations                                                                 
Todd Pacific Shipyards currently operates under the terms and conditions of a   
collective bargaining agreement with the Puget Sound Metal Trades Council (the  
bargaining umbrella for all unions at Todd Pacific Shipyards).  The three-year  
agreement is in effect from August 1, 2002 to July 31, 2005.  The Company       
believes its relationship with its labor unions to be stable.                   

Accounting Changes                                                              
Beginning in fiscal year 2003, the Company elected to apply the expense         
recognition provisions of FAS No. 123.  The recognition provisions are applied  
to stock option grants awarded subsequent to March 31, 2002.  The Company has   
adopted FAS No. 123 as it is designated as the preferred method of accounting   
for stock-based compensation.                                                   

Previously, the Company had applied the disclosure only provisions of FAS No.   
123 and accounted for stock-based compensation using the intrinsic value        
method prescribed by Accounting Principles Board Opinion No. 25 (APB No. 25),   
"Accounting for Stock Issued to Employees" and related interpretations.  Under  
APB No. 25, compensation cost for stock options is measured as the excess, if   
any, of the fair value of the Company's common stock at the date of grant over  
the stock option price.                                                         

Note 1, item (J) to the Consolidated Financial Statements includes pro forma    
information as if the expense recognition provisions of FAS No. 123 were        
applied to stock option grants for all periods presented, based on the          
valuation of the option as of the date of the grants.                           

Recent Accounting Pronouncements                                                
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement    
Obligations" ("FAS No. 143), which is effective for fiscal years beginning      
after June 15, 2002 (fiscal year 2004 for the Company).  FAS No. 143 provides   
accounting and reporting standards for recognizing obligations related to       
asset retirement costs associated with the retirement of tangible long-lived    
assets.  Under FAS No. 143, legal obligations associated with the retirement    
of long-lived assets are to be recognized at fair value in the period in which  
they are incurred if a reasonable estimate of fair value can be made.  The      
fair value of the asset retirement costs is capitalized as part of the          
carrying amount of the long-lived asset and expensed using a systematic and     
rational method over the assets' useful lives.  Any subsequent changes to the   
fair value of the liability will be expensed.  The adoption of FAS No. 143 did  
not have a material impact on the Company's financial position, results of      
operations, or cash flows.                                                      

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated    
with Exit or Disposal Activities" ("FAS No. 146"), which is effective for exit  
or disposal activities that are initiated after December 31, 2002.  Under FAS   
No. 146, a liability for a cost associated with an exit or disposal activity    
will be recognized and measured initially at fair value only when the           
liability is incurred.  FAS No. 146 nullifies Emerging Issues Task Force        
(EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination  
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred  
in a Restructuring) ("Issue 94-3").  The principal difference between FAS No.   
146 and Issue 94-3 relates to its requirements for recognition of a liability   
for a cost associated with an exit or disposal activity.  FAS No. 146 will      
only impact the Company if it incurs exit or disposal activities.  If and when  
an exit or disposal activity occurs, management will record such activity       
under the rules of FAS No. 146.                                                 

In January 2003, the FASB issued Interpretation No. 46, Consolidation of        
Variable Interest Entities, an Interpretation of Accounting Research Bulletin   
No. 51 ("FIN 46"). FIN 46 establishes accounting guidance for consolidation of  
variable interest entities that function to support the activities of the       
primary beneficiary. The consolidation requirements of FIN 46 apply             
immediately to variable interest entities created after January 31, 2003.  The  
consolidation requirements of FIN 46 apply to older entities in the first       
fiscal year or interim period ending after December 15, 2003. Disclosure        
requirements apply to financial statements issued after January 31, 2003. FIN   
46 applies to any business enterprise, public or private, that has a            
controlling interest, contractual relationship or other business relationship   
with a variable interest entity. Since the Company has no contractual           
relationship or other business relationship with a variable interest entity,    
the adoption of FIN 46 did not have any effect on its consolidated financial    
position or results of operations.                                              

On May 15, 2003, the FASB issued SFAS No. 150 (FAS No. 150), Accounting for     
Certain Financial Instruments with Characteristics of both Liabilities and      
Equity.  FAS No. 150 requires that certain financial instruments, which under   
previous guidance could be accounted for as equity, be classified as            
liabilities in statements of financial position. FAS No. 150 represents a       
significant change in practice in accounting for a number of financial          
instruments, including mandatorily redeemable equity instruments and certain    
equity derivatives that frequently are used in connection with share            
repurchase programs.  FAS No. 150 is effective for financial instruments        
entered into or modified after May 31, 2003, and was effective for the Company  
at the beginning of our second quarter ended September 28, 2003.  The adoption  
of SFAS No. 150 had no material impact on the Company's financial position,     
results of operations, or cash flows.                                           

Organizational Change                                                           
On May 27, 2003, the Company announced the resignation of Roland H. Webb,       
President and Chief Operating Officer of Todd Pacific Shipyards Corporation, a  
wholly owned subsidiary of Todd Shipyards Corporation.  Mr. Webb's resignation  
was effective May 30, 2003.  The Company also announced on June 4, 2003, that   
Thomas V. Van Dawark would succeed Mr. Webb as President and Chief Operating    
Officer of Todd Pacific Shipyards Corporation.                                  

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK             

INTEREST RATE RISK                                                              

The Company does not own any derivative financial instruments as of March 28,   
2004, nor does it presently plan to in the future.  However, the Company is     
exposed to interest rate risk.  The Company's interest income is most           
sensitive to changes in the general level of U.S. interest rates.  In this      
regard, changes in U.S. interest rates affect the interest earned on the        
Company's cash equivalents and certain marketable securities.  The Company's    
marketable securities are also subject to the inherent market risks and         
exposures of the related debt and equity securities in both U.S. and foreign    
markets.  The Company employs established policies and procedures to manage     
its exposure to changes in the market risk of its marketable securities.  The   
Company believes that the risk associated with interest rate and market         
fluctuations related to these marketable securities is not a material risk      
based on a 1% sensitivity analysis.                                             

The Company is exposed to potential interest rate risk on its revolving credit  
facility.  Interest charged on the Company's credit facility is based on the    
prime lending rate, which may fluctuate based on changes in market  interest    
rates.  Increases in the prime lending rate could increase the Company's        
borrowing costs under its existing credit facility.  The Company believes that  
the risk associated with interest rate fluctuations related to its credit       
facility is not a material risk.                                                

The Company is also exposed to potential increases in future health care cost   
trend rates.  Increases in these trend rates could have a significant affect    
on the amounts reported by the Company for its health care plans.  The Company  
reports in Note 7 to the financial statements the effects of a 1% change in     
the health care cost trend rates.                                               

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                

REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      

The Board of Directors and Stockholders                                         
Todd Shipyards Corporation                                                      

We have audited the accompanying consolidated balance sheets of Todd Shipyards  
Corporation and subsidiaries (the "Company") as of March 28, 2004 and March     
30, 2003, and the related consolidated statements of income, cash flows and     
stockholders' equity, for each of the three years in the period ended March     
28, 2004.  Our audits also included the financial statement schedule listed in  
the index at item 15(a).  These financial statements and schedule are the       
responsibility of the Company's management.  Our responsibility is to express   
an opinion on the financial statements and schedule based on our audits.        

We conducted our audits in accordance with the standards of the Public Company  
Accounting Oversight Board (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 financial statements referred to above present fairly, in   
all material respects, the consolidated financial position of Todd Shipyards    
Corporation and subsidiaries at March 28, 2004 and March 30, 2003 and the       
consolidated results of their operations and their cash flows for each of the   
three years in the period ended March 28, 2004 in conformity with U.S.          
generally accepted accounting principles.  Also, in our opinion, the related    
financial statement schedule, when considered in relation to the basic          
financial statements taken as a whole, presents fairly in all material          
respects the information set forth therein.                                     

As discussed in Note 16 to the financial statements, beginning March 31, 2002,  
the Company changed its method of accounting for stock-based employee           
compensation.                                                                   

Seattle, Washington                           /s/Ernst & Young LLP              
May 14, 2004                                                                    

REPORT OF MANAGEMENT                                                            

The management of Todd Shipyards Corporation is responsible for the             
preparation, fair presentation, and integrity of the information contained in   
the financial statements in this Annual Report on Form 10-K.  These statements  
have been prepared in accordance with accounting principles generally accepted  
in the United States of America and include amounts determined using            
management's best estimates and judgments.                                      

The company maintains a system of internal controls to provide reasonable       
assurance that assets are safeguarded and that transactions are recorded        
properly to produce reliable financial records.  The system of internal         
controls includes appropriate divisions of responsibility, established          
policies and procedures (including a code of conduct to promote strong ethics)  
that are communicated throughout the company, and careful selection, training   
and development of our people.  The company conducts a corporate audit program  
to provide assurance that the system of internal controls is operating          
effectively.                                                                    

Our independent registered public accounting firm has performed audit           
procedures deemed appropriate to obtain reasonable assurance that the           
financial statements are free of material misstatement.                         

The Board of Directors provides oversight to the financial reporting process    
through its Audit and Compliance Committee, which meets regularly with          
management, corporate audit, and the independent registered public accounting   
firm to review the activities of each and to ensure that each is meeting its    
responsibilities with respect to financial reporting and internal controls.     

Finally, each of the undersigned has personally certified that the information  
contained in this Annual Report on Form 10-K is accurate and complete in all    
material respects, and that there are in place sound disclosure controls        
designed to gather and communicate material information to appropriate          
personnel within the company.                                                   

/s/ Stephen G. Welch                                                            
Stephen G. Welch                                                                
President and Chief Executive Officer                                           

/s/ Scott H. Wiscomb                                                            
Scott H. Wiscomb                                                                
Chief Financial Officer                                                         

TODD SHIPYARDS CORPORATION                                                      
CONSOLIDATED BALANCE SHEETS                                                     
MARCH 28, 2004 and MARCH 30, 2003                                               
(In thousands of dollars)                                                       
                                           2004         2003
ASSETS                                                                          
Cash and cash equivalents                         $  1,328     $  9,053         
Securities available-for-sale                       30,682       32,126         
Accounts receivable, less allowance for                                         
doubtful accounts of $48 and $98                                              
U.S. Government                                    5,591        4,322       
Other                                              2,039        3,928       
Costs and estimated profits in excess of                                        
billings on incomplete contracts                   14,367        6,251        
Inventory, less obsolescence reserve                                            
of $139 and $237                                    1,223        1,434        
Insurance receivable - current                      13,500            -         
Other current assets                                 1,233        1,268         
Deferred taxes                                         867            -         
Total current assets                                70,830       58,382         

Property, plant and equipment, net                  28,244       16,634         

Restricted cash                                      2,936        3,030         
Deferred pension asset                              28,725       29,709         
Insurance receivable                                15,748       32,427         
Other long-term assets                               1,419        1,398         
Total assets                                      $147,902     $141,580         

LIABILITIES AND STOCKHOLDERS' EQUITY:                                           
Accounts payable and accruals                     $ 14,616     $  9,244         
Accrued payroll and related liabilities              2,032        2,606         
Billings in excess of costs and estimated                                       
profits on incomplete contracts                     1,924        1,357        
Environmental and other reserves - current          13,500            -         
Taxes payable other than income taxes                2,298        1,417         
Income taxes payable                                    98          787         
Deferred taxes                                           -          446         
Total current liabilities                           34,468       15,857         

Environmental and other reserves                    18,511       35,055         
Accrued post retirement health benefits             15,791       16,588         
Deferred taxes                                       4,930        3,025         
Other non-current liabilities                        2,831        1,521         
Total liabilities                                   76,531       72,046         

Stockholders' equity:                                                           
Common stock $.01 par value-authorized                                          
19,500,000 shares, issued 11,956,033                                        
shares at March 28, 2004 and March 30, 2003,                                
and outstanding 5,402,656 at March 28, 2004                                 
and 5,271,056 at March 30, 2003                      120          120       
Paid-in capital                                     38,114       38,405         
Retained earnings                                   79,918       78,573         
Accumulated other comprehensive income                 393          429         
Treasury stock (6,553,377 shares at March 28, 2004                              
and 6,684,977 shares at March 30, 2003)          (47,174)     (47,993)      
Total stockholders' equity                          71,371       69,534         
Total liabilities and stockholders' equity        $147,902     $141,580         

The accompanying notes are an integral part of this statement.                  
TODD SHIPYARDS CORPORATION                                                      
CONSOLIDATED STATEMENTS OF INCOME                                               
Years Ended March 28, 2004, March 30, 2003, and March 31, 2002                  
(in thousands, except per share amounts)                                        

                                2004        2003        2002
Revenues                               $147,794    $151,811    $121,945         

Operating Expenses:                                                             
Cost of revenues                       107,758     109,406      84,787        

Administrative and                                                            
manufacturing overhead                 38,115      36,832      30,721       

Provision for environmental                                                   
and other reserves                          -         600           -       

Other insurance settlements               (245)       (125)       (465)       

Total operating expenses                145,628     146,713     115,043         

Operating income                          2,166       5,098       6,902         

Investment and other income               1,717       1,240       1,816         

Gain (loss) on available-for-sale                                               
securities                                 619          (9)      2,216        

Income before income tax expense          4,502       6,329      10,934         

Income tax expense                         (470)     (2,219)     (3,916)        

Net income                             $  4,032    $  4,110    $  7,018         

Net income per Common Share:                                                    

Basic                                $   0.76    $   0.78    $   1.05       
Diluted                              $   0.72    $   0.74    $   1.03       

Dividends declared, per common share   $   0.50    $   0.00    $   0.00         

Weighted Average Shares Outstanding                                             
Basic                                   5,306       5,283       6,677       
Diluted                                 5,569       5,553       6,827       

The accompanying notes are an integral part of this statement.                  
TODD SHIPYARDS CORPORATION                                                      
CONSOLIDATED STATEMENTS OF CASH FLOWS                                           
Years Ended March 28, 2004, March 30, 2003, and March 31, 2002                  
(in thousands of dollars)                                                       
                                              2004      2003      2002
OPERATING ACTIVITIES:                                                           
Net income                                       $ 4,032   $ 4,110   $ 7,018    
Adjustments to reconcile net income to net                                      
cash provided by (used in) operating activities:                              
Depreciation                                     2,996     2,774     3,020  
Deferred pension asset                             984     1,114       (65) 
Post retirement health benefits                   (797)     (816)     (783) 
Deferred income taxes                              592       951     3,339  
Decrease (increase) in operating assets:                                        
Costs and estimated profits in excess of                                    
billings on incomplete contracts               (8,116)     (603)    3,971 
Inventory                                          211        55        42  
Accounts receivable                                620     7,574       321  
Insurance receivable                             3,179    (5,629)     (696) 
Other (net)                                        219      (787)        6  
Increase (decrease) in operating liabilities:                                   
Accounts payable and accruals                    4,590        88    (9,691) 
Accrued payroll and related liabilities            736       295     1,377  
Billings in excess of costs and estimated                                   
profits on incomplete contracts                   567    (1,507)    1,231 
Environmental and other reserves                (3,044)    6,588       737  
Income taxes payable                              (689)   (1,130)      263  
Other (net)                                        881        20       475  
Net cash provided by operating                                                  
activities                                        6,961    13,097    10,565   

INVESTING ACTIVITIES:                                                           
Purchases of marketable securities               (11,435)  (29,741)   (9,491)   
Sales of marketable securities                     5,504     7,663    35,863    
Maturities of marketable securities                7,339     3,300     5,550    
Capital expenditures                             (14,606)   (2,825)   (2,171)   
Net cash provided by (used in) investing                                        
activities                                      (13,198)  (21,603)   29,751   

FINANCING ACTIVITIES:                                                           
Restricted cash                                       94       210       878    
Purchase of treasury stock                          (290)     (243)  (34,631)   
Proceeds from exercise of stock options              853        47       246    
Dividends paid on common stock                    (2,145)        -         -    
Collection of notes receivable from                                             
officers for common stock                             -         -       415   
Net cash provided by (used in)                                                  
financing activities                             (1,488)       14   (33,092)  

Net increase (decrease) in cash and cash                                        
equivalents                                      (7,725)   (8,492)    7,224   
Cash and cash equivalents at beginning of year     9,053    17,545    10,321    
Cash and cash equivalents at end of year        $  1,328  $  9,053  $ 17,545    
Supplemental disclosures of cash flow information:                              
Cash paid during the year for:                                              
Interest                                      $     23  $      -   $     5  
Income taxes                                       950     2,133       319  
Non-cash investing and financing activities:                                    
Impairment of available-for-sale securities   $      -  $    260   $     -  
The accompanying notes are an integral part of this statement.                  

TODD SHIPYARDS CORPORATION                                                      
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                                 
Years Ended March 28, 2004, March 30, 2003, and March 31, 2002                  
(in thousands of dollars, except for shares)                                    

                  2004                2003                2002

                  Shares    Amount    Shares    Amount    Shares    Amount
Common Stock                                                                    
Balance at beginning                                                            
of the year      5,271,056 $   120    5,283,222 $    120   9,362,680 $   120  
Purchase of                                                                     
treasury stock     (22,400)      -      (19,500)       -  (4,136,124)      -  
Exercise of                                                                     
stock options      154,000       -        7,334        -      56,666       -  
Balance at end                                                                  
of the year      5,402,656 $   120    5,271,056 $    120   5,283,222 $   120  

Paid-in Capital                                                                 
Balance at beginning                                                            
of the year              - $38,405            -  $38,295           - $38,186  
Stock based                                                                     
compensation             -     205            -      116           -     217  
Proceeds from                                                                   
exercise of                                                                   
stock options            -    (256)           -       (6)          -    (108) 
Reclass of put                                                                  
option liability         -    (240)           -        -           -       -  
Balance at end                                                                  
of the year              - $38,114            -  $38,405           - $38,295  

Retained Earnings                                                               
Balance at beginning                                                            
of the year              - $78,573            -  $74,463           - $67,445  
Net income for the                                                              
year                     -   4,032            -    4,110           -   7,018  
Dividends declared        -  (2,687)           -        -           -       -   
Balance at end                                                                  
of the year              - $79,918            -  $78,573           - $74,463  

Accumulated Other                                                               
Comprehensive                                                                 
Income                                                                        
Balance at beginning                                                            
of the year              - $   429            - $   922            - $ 1,271  
Net change in                                                                   
unrealized gains (losses)                                                     
on available-for-sale                                                         
securities, (net of tax) -     (36)           -    (493)           -    (349) 
Balance at end                                                                  
of the year              - $   393            - $   429            - $   922  

Treasury Stock                                                                  
Balance at beginning                                                            
of the year             - $(47,993)           -$(47,803)           -$(13,526) 
Purchase of                                                                     
treasury stock          -     (290)           -    (243)           - (34,631) 
Exercise of                                                                     
stock options           -    1,109            -      53            -     354  
Balance at end                                                                  
of the year             - $(47,174)           -$(47,993)           -$(47,803) 

Notes from Officers                                                             
Balance at beginning                                                            
of the year               - $     -           - $     -           - $   (415) 
Notes Receivable                                                              
from officers                                                                 
for common stock          - $     -           - $     -           - $    415  
Balance at end                                                                  
of the year                - $     -           - $     -           - $      -   

Comprehensive Income                                                            
Net income                 - $ 4,032           - $ 4,110           - $  7,018   
Other comprehensive                                                             
income (loss) per                                                             
above                     - $   (36)          - $  (493)          - $   (349) 
Total comprehensive                                                             
income                    - $ 3,996           - $ 3,617           - $  6,669  

The accompanying notes are an integral part of this statement.                  
TODD SHIPYARDS CORPORATION                                                      
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
Years Ended March 28, 2004, March 30, 2003, and March 31, 2002                  

1.  PRINCIPAL ACCOUNTING POLICIES                                               

(A) Basis of Presentation - The Consolidated Financial Statements include the   
accounts of Todd Shipyards Corporation (the "Company") and its wholly owned     
subsidiaries Todd Pacific Shipyards Corporation ("Todd Pacific") and TSI        
Management, Inc. ("TSI").  All inter-company transactions have been             
eliminated.  The Company's policy is to end its fiscal year on the Sunday       
nearest March 31. Certain reclassifications of prior year amounts in the        
Consolidated Financial Statements have been made to conform to the current      
year presentation, including the classification of certain other reserves and   
the related insurance receivable.                                               

(B) Business - The Company's primary business is ship overhaul, conversion and  
repair for the United States Government, state ferry systems, and domestic and  
international commercial customers.  The majority of the Company's work is      
performed at either its Seattle, Washington facility (the "Shipyard") or at     
the Puget Sound Naval Shipyard in Bremerton, Washington, by a unionized         
production workforce.                                                           

(C) Property, Plant and Equipment - Property, plant and equipment is carried    
at cost, net of accumulated depreciation.  The Company capitalizes certain      
major overhaul activities when such activities are determined to increase the   
useful life or operating capacity of the asset.  Depreciation and amortization  
are determined on the straight-line method based upon estimated useful lives    
(5-31 years) or lease periods; however, for income tax purposes, depreciation   
is determined on both the straight-line and accelerated methods, and on         
shorter periods where permitted.                                                

(D) Revenue Recognition - The Company recognizes revenue, costs, and profit on  
construction contracts in accordance with Statement of Position No. 81-1 (SOP   
No. 81-1), "Accounting for Performance of Construction-Type and Certain         
Production-Type Contracts".  Revenue, costs, and profit on contracts are        
recognized on the percentage-of-completion method (determined based on direct   
labor hours).  Revenue, costs, and profits on time-and-material contracts are   
recorded based upon direct labor hours at fixed hourly rates and cost of        
materials as incurred.  Certain contracts provide for rights of audit of costs  
by the customer.  Estimated inputs of pending audits are included in the        
estimates of contract revenue.  When the current estimates of total contract    
revenue and contract cost indicate a loss, a provision for the entire loss on   
the contract is recorded.  Revisions to contract estimates are recorded as the  
estimating factors are refined.  The effect of these revisions is included in   
income in the period the revisions are identified.                              

(E) Estimates - The preparation of financial statements in conformity with      
accounting principles generally accepted in the United States requires          
management to make estimates and assumptions that affect the reported amounts   
of assets and liabilities and disclosure of contingent assets and liabilities   
at the date of the financial statements and the reported amounts of revenues    
and expenses during the reporting period.  Actual results could differ from     
those estimates.                                                                

(F) Income Taxes - Income taxes are determined in accordance with an asset and  
liability approach for financial accounting and reporting of income taxes.  A   
valuation allowance is recorded to reduce deferred tax assets when realization  
of the tax benefit is uncertain.                                                

(G) Inventory - Inventories, consisting of materials and supplies, are valued   
at lower of cost (principally average) or market.  The Company has many         
available sources of supply for its commonly used materials.                    

(H) Cash and Cash Equivalents - The Company considers all highly liquid debt    
instruments with a stated maturity of three months or less to be cash           
equivalents. Cash equivalents consist primarily of money market instruments,    
investment grade commercial paper and U.S. Government securities. The carrying  
amounts reported in the balance sheet are stated at cost, which approximates    
fair value.                                                                     

(I) Securities Available-for-Sale - The Company includes all debt instruments   
purchased with a maturity of more than three months as securities available-    
for-sale.  Securities available-for-sale consist primarily of U.S. Government   
securities, investment grade commercial paper and equities and are valued       
based upon market quotes.                                                       

Company management determines the appropriate classification of debt and        
equity securities at the time of purchase and reevaluates such designation as   
of each balance sheet date.  All of the Company's investments are classified    
as available-for-sale as of the balance sheet date and are reported at fair     
value, with unrealized gains and losses, excluded from earnings and presented   
as accumulated other comprehensive income or loss, net of related deferred      
income taxes.  Realized gains and losses are recorded based on historical cost  
of individual securities                                                        

The Company continually monitors its investment portfolio for other than        
temporary impairment of securities.  When an other than temporary decline in    
the value below cost or amortized cost is identified, the investment is         
reduced to its fair value, which becomes the new cost basis of the investment.  
The amount of reduction is reported as a realized loss in the Consolidated      
Statements of Income.  Any recovery of value in excess of the investment's new  
cost basis is recognized as a realized gain only on sale, maturity or other     
disposition of the investment.                                                  

Factors that the Company evaluates in determining the existence of an other     
than temporary decline in value include (1) the length of time and extent to    
which the fair value has been less than cost or carrying value, (2) the         
circumstances contributing to the decline in fair value (including a change in  
interest rates or spreads to benchmarks), (3) recent performance of the         
security, (4) the financial strength of the issuer, and (5) the intent and      
ability of the Company to retain the investment for a period of time            
sufficient to allow for anticipated recovery.  Additionally, for asset-backed   
securities, the Company considers the security rating and the amount of credit  
support available for the security.                                             

(J) Stock Based Compensation - Beginning in fiscal year 2003, the Company       
elected to apply the expense recognition provisions of FAS No. 123.  The        
recognition provisions are applied to stock option grants awarded subsequent    
to March 31, 2002.  The Company has adopted FAS No. 123 as it is designated as  
the preferred method of accounting for stock-based compensation.                

Previously, the Company had applied the disclosure only provisions of FAS No.   
123 and accounted for stock-based compensation using the intrinsic value        
method prescribed by Accounting Principles Board Opinion No. 25 (APB No. 25),   
"Accounting for Stock Issued to Employees" and related interpretations.  Under  
APB No. 25, compensation cost for stock options is measured as the excess, if   
any, of the fair value of the Company's common stock at the date of grant over  
the stock option price.                                                         

If the Company had elected to apply the expense recognition provision of FAS    
No. 123 to options granted prior to March 31, 2002, then the net income would   
have been adjusted as follows (the estimated fair value of the options is       
amortized to expense over the options' vesting period):                         

(in thousands,                                 Year Ended                       
except per share data)               2004        2003        2002           
Net income:                                                                     
As reported                      $  4,032    $  4,110    $  7,018           
add: Stock Compensation                                                     
as recorded                           205         116         217           
Deduct:  Total stock-based                                                  
employee compensation expense                                               
determined under fair value                                                 
based method for all awards,                                                
net of related tax effects           (407)       (340)       (445)          
Pro forma                        $  3,830    $  3,886    $  6,790           

Net income per share:                                                           
Basic                                                                         
As reported                      $   0.76    $   0.78    $   1.05           
Pro forma                            0.72        0.73        1.02           

Diluted                                                                       
As reported                          0.72        0.74        1.03           
Pro forma                        $   0.69    $   0.70    $   0.99           

(K) Environmental Remediation, Bodily Injury, Other Reserves, and Insurance     
Receivable - The Company accounts for environmental remediation liabilities in  
accordance with Statement of Position 96-1, "Environmental Remediation          
Liabilities," which provides the accounting and reporting standards for the     
recognition and disclosure of environmental remediation liabilities.            

For current operating activities, costs of complying with environmental         
regulations are immaterial and expensed as incurred.  Environmental costs are   
capitalized if the costs extend the life of the property and/or increase its    
capacity.                                                                       

For matters associated with past practices and closed operations, accruals for  
environmental matters are recorded when it is probable that a liability has     
been incurred and the amount of the liability can be reasonably estimated,      
based upon the projected scope of the remediation, current law and existing     
technologies.  These accruals are adjusted periodically as assessment and       
remediation efforts progress or as additional technical or legal information    
becomes available.  As applicable, accruals include the Company's share of the  
following costs: engineering costs to determine the scope of the work and the   
remediation plan, testing costs, project management costs, removal of           
contaminated material, disposal of contaminated material, treatment of          
contaminated material, capping of affected areas and long term monitoring       
costs.                                                                          

Accruals for environmental liabilities are not discounted and exclude legal     
costs to defend against claims of other parties.  Insurance or other third      
party recoveries for environmental liabilities are recorded separately at       
undiscounted amounts in the financial statements as insurance receivables when  
it is probable that a claim will be realized.                                   

The Company accounts for bodily injury liabilities and other reserves in        
accordance with Financial Accounting Standards Board No.5, "Accounting for      
Contingencies".  Accruals for bodily injury liabilities are recorded when it    
is probable that a liability has been incurred and the amount of the liability  
can be reasonably estimated based on the known facts.  Civil actions relating   
to toxic substances vary according to the case's fact patterns, jurisdiction    
and other factors.  Accordingly, any potential expenses for claims that may be  
filed in the future related to alleged damages from past exposure to toxic      
substances are not estimable and as such are not included in the Company's      
reserves.                                                                       

Accruals for bodily injury liabilities are adjusted periodically as new         
information becomes available.  Such accruals are included in the               
environmental and other reserves at undiscounted amounts and exclude legal      
costs to defend against claims of other parties.  Insurance or other third      
party recoveries for bodily injury liabilities are recorded undiscounted in     
the financials statements as insurance receivables when it is probable that a   
claim will be realized.                                                         

(L) Earnings per Share - Basic earnings per share is computed based on          
weighted average shares outstanding.  Diluted earnings per share includes the   
effect of dilutive securities (options and warrants) except where their         
inclusion is antidilutive.                                                      

(M) Comprehensive Income - Unrealized gains or losses on the Company's          
available-for-sale securities, are reported as other comprehensive income       
(loss) in the Consolidated Balance Sheets and Statement of Stockholders'        
Equity.                                                                         

(N) Long-lived Assets - The Company's policy is to recognize impairment losses  
relating to long-lived assets in accordance with Financial Accounting           
Standards Board No.144, "Accounting for the Impairment or Disposal of Long-     
Lived Assets" based on several factors, including, but not limited to,          
management's plans for future operations, recent operating results and          
projected cash flows.  To date no such impairment has been indicated.           

(O) Concentration of Risk -The Company is subject to concentration of credit    
risk from investments and cash balances on hand with banks and other financial  
institutions, which may be in excess of the Federal Deposit Insurance           
Corporation's insurance limits.  Risk for investments is managed by purchase    
of investment grade securities and diversification of the investment portfolio  
among issuers and maturities.                                                   

2.  RECENT ACCOUNTING PRONOUNCEMENTS                                            

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement    
Obligations" ("FAS No. 143), which is effective for fiscal years beginning      
after June 15, 2002 (fiscal year 2004 for the Company).  FAS No. 143 provides   
accounting and reporting standards for recognizing obligations related to       
asset retirement costs associated with the retirement of tangible long-lived    
assets.  Under FAS No. 143, legal obligations associated with the retirement    
of long-lived assets are to be recognized at fair value in the period in which  
they are incurred if a reasonable estimate of fair value can be made.  The      
fair value of the asset retirement costs is capitalized as part of the          
carrying amount of the long-lived asset and expensed using a systematic and     
rational method over the assets' useful lives.  Any subsequent changes to the   
fair value of the liability will be expensed.  The adoption of FAS No. 143 did  
not have a material impact on the Company's financial position, results of      
operations, or cash flows.                                                      

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated    
with Exit or Disposal Activities" ("FAS No. 146"), which is effective for exit  
or disposal activities that are initiated after December 31, 2002.  Under FAS   
No. 146, a liability for a cost associated with an exit or disposal activity    
will be recognized and measured initially at fair value only when the           
liability is incurred.  FAS No. 146 nullifies Emerging Issues Task Force        
(EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination  
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred  
in a Restructuring) ("Issue 94-3").  The principal difference between FAS No.   
146 and Issue 94-3 relates to its requirements for recognition of a liability   
for a cost associated with an exit or disposal activity.  FAS No. 146 will      
only impact the Company if it incurs disposal activities.  If and when a        
disposal activity occurs, management will record such activity under the rules  
of FAS No. 146.                                                                 

In January 2003, the FASB issued Interpretation No. 46, Consolidation of        
Variable Interest Entities, an Interpretation of Accounting Research Bulletin   
No. 51 ("FIN 46"). FIN 46 establishes accounting guidance for consolidation of  
variable interest entities that function to support the activities of the       
primary beneficiary. The consolidation requirements of FIN 46 apply             
immediately to variable interest entities created after January 31, 2003. The   
consolidation requirements of FIN 46 apply to older entities in the first       
fiscal year or interim period ending after December 15, 2003. Disclosure        
requirements apply to financial statements issued after January 31, 2003. FIN   
46 applies to any business enterprise, public or private, that has a            
controlling interest, contractual relationship or other business relationship   
with a variable interest entity. Since the Company has no contractual           
relationship or other business relationship with a variable interest entity,    
the adoption of FIN 46 did not have any effect on its consolidated financial    
position or results of operations.                                              

On May 15, 2003, the FASB issued SFAS No. 150 (FAS No. 150), Accounting for     
Certain Financial Instruments with Characteristics of both Liabilities and      
Equity.  FAS No. 150 requires that certain financial instruments, which under   
previous guidance could be accounted for as equity, be classified as            
liabilities in statements of financial position. FAS No. 150 represents a       
significant change in practice in accounting for a number of financial          
instruments, including mandatorily redeemable equity instruments and certain    
equity derivatives that frequently are used in connection with share            
repurchase programs.  FAS No. 150 is effective for financial instruments        
entered into or modified after May 31, 2003, and was effective for the Company  
at the beginning of our second quarter ended September 28, 2003. The adoption   
of SFAS No. 150 had no material impact on the Company's financial position,     
results of operations, or cash flows.                                           

3.  RESTRICTED CASH AND SURETY LINE                                             

A surety company has issued contract bonds totaling $2.1 million for current    
repair, maintenance and conversion jobs as of March 28, 2004.  Todd Pacific's   
trade accounts receivable on certain bonded jobs secure these various contract  
bonds.                                                                          

The long-term restricted cash relates primarily to the Harbor Island Superfund  
site clean up and will be released upon the Company satisfying certain          
remediation provisions.  Also included is $0.2 million and $0.3 million as of   
March 28, 2004 and March 30, 2003, respectively, of restricted cash which will  
be released upon completion or acceptance of the contracted work and            
completion of related warranty periods and consists primarily of amounts        
related to work for the Washington State Ferry System.                          

4.  SECURITIES AVAILABLE FOR SALE                                               

Securities available-for-sale are carried at fair value.  The following is a    
summary of available-for-sale securities:                                       

Amor-    Gross       Gross  
       tized  Unrealized  Unrealized    Fair
(In thousands)            Cost     Gains      Losses      Value                 

March 28, 2004                                                                  

Debt securities:                                                                

U.S. Treasury securities                                                      
and agency obligations  $ 2,865  $   18      $    -     $ 2,883               

U.S. corporate                                                                
securities              20,197     297         (12)     20,482              

Mortgage-backed                                                               
securities               6,288      98           -       6,386              

Total debt securities     29,350     413         (12)     29,751                

Equity securities:                                                              

U.S. securities             360      76           -         436               

Foreign stock               366     129           -         495               

Total equity securities      726     205           -         931                

Total securities         $30,076  $  618     $   (12)    $30,682                

March 30, 2003                                                                  

Debt securities:                                                                

U.S. Treasury securities                                                      
and agency obligations  $ 4,949  $   53      $    -     $ 5,002               

U.S. corporate                                                                
securities              14,122     354           -      14,476              

Mortgage-backed                                                               
securities               9,876     166           -      10,042              

Total debt securities     28,947     573           -      29,520                

Equity securities:                                                              

U.S. securities           2,153     186        (200)      2,139               

Foreign stock               365     102           -         467               

Total equity securities    2,518     288        (200)      2,606                

Total securities         $31,465  $  861     $  (200)    $32,126                

The Company had gross realized gains of $683 thousand, $255 thousand, and $2.4  
million on sales of available-for-sale securities for fiscal years 2004, 2003   
and 2002 respectively.                                                          

The Company had gross realized losses of $64 thousand, $264 thousand, and       
$156.6 thousand on sales of available-for-sale securities for fiscal year       
2004, 2003 and 2002, respectively.                                              

The amortized cost and estimated fair value of the Company's available-for-     
sale debt, mortgage-backed and equity securities are shown below:               

                           Amortized      Fair
(In thousands)                                Cost         Value                
March 28, 2004                                                                  

Debt securities:                                                                
Due in one year or less                    $  4,957      $ 5,048              
Due after one year through three years       18,105       18,317              
Subtotal                                      23,062       23,365               

Mortgage-backed securities                     6,288        6,386               
Equity securities                                726          931               
Total                                       $ 30,076     $ 30,682               

March 30, 2003                                                                  

Debt securities:                                                                
Due in one year or less                    $  4,025     $  4,090              
Due after one year through three years       15,046       15,388              
Subtotal                                      19,071       19,478               

Mortgage-backed securities                     9,876       10,042               
Equity securities                              2,518        2,606               
Total                                       $ 31,465     $ 32,126               

5.  CONTRACTS                                                                   

Auxiliary Oiler Explosive ("AOE") Contract                                      
In June 2001, the Company was awarded by the Navy, a six-year, cost-type        
contract, under which the Navy has options to have the Company perform          
maintenance work on the Auxiliary Oiler Explosive ("AOE") class vessels.  This  
contract represents the fourth consecutive, multi-year contract that the        
Company has been awarded by the Navy on the AOE class vessels.  The three       
previous AOE contracts, which were each five years in duration, were all        
awarded on a competitive basis.  This cost type contract provides for phased    
maintenance repairs to four Navy AOE class supply ships stationed in the Puget  
Sound area. The original contract included options for thirteen repair          
availabilities to be performed between 2001 and 2007 and was expected to have   
a notional value of approximately $180 million if all of the options were       
exercised.  Since the award, five repair availabilities have been               
accomplished.                                                                   

During the first quarter of fiscal year 2003, the Navy announced its intention  
to transfer the USS Rainier (AOE 7) and the USS Bridge (AOE 10) to the          
Military Sealift Command ("MSC") which results in five availabilities that      
will not be exercised under this contract.  AOE 7 was transferred to MSC in     
August 2003.  AOE 10 is currently scheduled to be transferred in the summer of  
2004.  The Company anticipates that MSC will contract for future work on these  
two vessels on a competitive basis.  The potential impact of these transfers    
on the Company's future revenues will depend on such factors as the             
expenditures for maintenance by MSC, the Company's capacity to bid on future    
AOE 7 and AOE 10 work, and the Company's bidding success if such bids are       
submitted.                                                                      

During the fourth quarter of fiscal year 2004, the Company announced that it    
was informed by the Navy that the USS Sacramento (AOE 1) is scheduled to be     
decommissioned on or about October 1, 2004.  Of the two remaining               
availabilities on AOE 1, one was exercised on a reduced scale as a five-week,   
pier-side availability.  The availability, originally scheduled for 12 weeks    
in duration, was to include a dry docking of the ship.  The other availability  
of AOE 1 will not occur due to its decommissioning.  The Company does not know  
at this point if it will be involved in any of the work related to the          
decommissioning of AOE 1.                                                       

The AOE contract contains options for two remaining repair availabilities on    
the USS Camden (AOE 2) before the contract expires in 2007.  There is no        
assurance that these two remaining options will be exercised by the Navy in     
whole or in part.                                                               

Combatant Maintenance Team ("CMT") Contract                                     
During the first quarter of fiscal year 2001, the Company was awarded, by the   
Department of the Navy on a sole source basis, a five year, cost-type contract  
for the repair and maintenance which at the time included six surface           
combatant class vessels (frigates and destroyers) stationed in the Puget Sound  
area.  Although the Navy has not released a notional value of the maintenance   
work, the Company believes that the value may be approximately $60 million to   
$75 million if all options are exercised.  Work on this contract is being       
performed primarily in the Company's Seattle shipyard, as well as at Naval      
Station Everett, depending on the type of work to be performed.                 

Planned Incremental Availability ("PIA")                                        
Subsequent to the end of fiscal year 2004, the Department of the Navy awarded   
the Company a five-year, cost-type contract with the long-term overhaul and     
maintenance to the NIMITZ CLASS aircraft carriers (CVN) home ported in Puget    
Sound.  The contract consists of multiple contract options for planned          
incremental availabilities (PIA's), docking planned incremental availabilities  
(DPIA's) and continuous maintenance and upkeep for the USS LINCOLN (CVN-72),    
USS STENNIS (CVN-74), USS NIMITZ (CVN-68) and USS VINSON (CVN-70) when they     
are in Puget Sound. The work includes all types of non-nuclear ship repair,     
alteration and maintenance.  All on-board work is accomplished by the Company   
workforce at Puget Sound Naval Shipyard in Bremerton, Washington, or Naval      
Station Everett.                                                                

The work is performed under a cost plus award fee with performance incentive    
fee contract and represents the second contract for aircraft carrier            
maintenance awarded to the Company.  The first such contract, recently          
expired, was awarded in 1999.  The Company is supported in this effort by       
various regional suppliers and subcontractors.  Significant support is          
provided by the Company's two teaming partners for this contract, Pacific Ship  
Repair and Fabrication ("PacShip") and AMSEC LLC ("AMSEC"). The notional value  
for this five-year contract is approximately $133 million if all options are    
exercised.                                                                      

United States Coast Guard - Multi-ship; Multi-options (MSMO contract)           
During the fourth quarter of fiscal year 2004, the United States Coast Guard    
awarded the Company a contract to provide maintenance of two Polar Class        
icebreakers.  The contract consists of multiple contract options for planned    
maintenance availabilities (PMA's) and docking planned maintenance              
availabilities (DPMA's) for the POLAR STAR (WAGB-10) and POLAR SEA (WAGB-11).   
The availabilities, and their companion planning options, extend through the    
last DPMA ending August 2008, and the last PMA ending on September 2008. The    
work to be performed includes availability planning and generalized ship        
maintenance and repairs as needed, with emphasis on propulsion and deck         
machinery work. The Company expects to team with the Coast Guard to identify    
the appropriate best value work scope and technical solutions for support of    
the two icebreakers. The Company will be supported in this effort by various    
regional suppliers and subcontractors.                                          
The work will be performed under a cost plus incentive fee contract. The        
Company has performed similar work for the Coast Guard over the past several    
years under individual, competitively bid, firm fixed priced contracts. This    
current award marks the first time the Coast Guard has used a long term         
phased-maintenance approach on the two Polar Class icebreakers home ported in   
Seattle. The notional value of all options, if exercised by the Coast Guard,    
is approximately $50 million. There is no assurance that all options will be    
exercised, in whole or in part.                                                 
Electric Boat                                                                   
During the fourth quarter of fiscal year 2004, the Company entered into a       
contract with Electric Boat Corporation of Groton, Connecticut ("Electric       
Boat") to support work on Trident submarines.  During the period from May to    
September 2003, the Company completed planning and preparation work for         
Electric Boat.  The Company has begun work on a follow-on contract to           
fabricate components and to accomplish associated steel outfitting, project     
management and quality assurance functions.  This contract is associated with   
the retrofit work being accomplished by Electric Boat on the USS OHIO (SSBN     
726) at the Puget Sound Naval Shipyard.                                         

The Company's work is being performed under a cost plus incentive fee contract  
with Electric Boat for the fabrication work, and a firm fixed price contract    
for the associated project management and quality assurance work. The total     
value of these contracts is approximately $5.3 million and the work is          
scheduled to be completed in May 2004.                                          

Unbilled Receivables - Certain unbilled items on completed contracts (costs     
and estimated profits in excess of billings) included in accounts receivable    
were approximately $2.5 million at March 28, 2004 and $1.0 million at March     
30, 2003.                                                                       

Customers - Revenues from the U.S. Government were $123.8 million (84%),        
$123.9 million (82%) and $96.1 million (79%) in fiscal years 2004, 2003, and    
2002, respectively.  Revenues from the Washington State Ferry System were $4.4  
million (3%), $4.9 million (3%) and $10.3 million (8%) in fiscal year 2004,     
2003 and 2002, respectively.                                                    

6.  PROPERTY, PLANT AND EQUIPMENT                                               

Property, plant, and equipment and accumulated depreciation at March 28, 2004   
and March 30, 2003 consisted of the following (in thousands):                   

                              2004        2003
Land                                        $  1,151    $  1,151                
Buildings                                     13,457      12,151                
Piers, shipways and drydocks                  29,326      24,516                
Machinery and equipment                       46,881      38,492                
Total plant and equipment, at cost            90,815      76,310                

Less accumulated depreciation                (62,571)    (59,676)               
Plant, property and equipment, net          $ 28,244    $ 16,634                

The Company recognized $3.0 million, $2.8 million, and $3.0 million of          
depreciation expense in fiscal years 2004, 2003 and 2002, respectively.         

7.  PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANS                             

The Company provides defined pension benefits and postretirement benefits to    
employees as described below.                                                   

Nonunion Pension Plans - The Company sponsors the Todd Shipyards Corporation    
Retirement System (the "Retirement System"), a noncontributory defined benefit  
plan under which all nonunion employees are covered.  The benefits are based    
on years of service and the employee's compensation before retirement.  The     
Company's funding policy is to fund such retirement costs as required to meet   
allowable deductibility limits under current Internal Revenue Service           
regulations.  The Retirement System plan assets consist principally of common   
stocks and Government and corporate obligations.                                

Under a provision of the Omnibus Budget Reform Act of 1990 ("OBRA `90") the     
Company transferred approximately $1.6 million and $1.7 million in excess       
pension assets from its Retirement System into a fund to pay fiscal year 2004   
and 2003 retiree medical benefit expenses, respectively.  OBRA `90 was          
modified by the Work Incentives Improvement Act of 1999 to extend annual        
excess asset transfers through the fiscal year ending April 2, 2006.            

Post Retirement Group Health Insurance Program - The Company sponsors a         
defined benefit retirement health care plan that provides post retirement       
medical benefits to former full-time exempt employees, and their spouses, who   
meet specified criteria.  The Company terminated post retirement health         
benefits for any employees retiring subsequent to May 15, 1988.  The            
retirement health care plan contains cost-sharing features such as deductibles  
and coinsurance.  These benefits are funded monthly through the payment of      
group health insurance premiums.                                                

Because such benefit obligations do not accrue to current employees of the      
Company, there is no current year service cost component of the accumulated     
post retirement health benefit obligation.                                      

On July 1, 2002, the Todd Galveston Metal Trades Council Pension Fund           
liability and assets were transferred from the Todd Shipyards Corporation       
Retirement System to an international labor union organization.  This transfer  
resulted in a non-recurring, non-cash charge of $0.8 million.                   

The following is a reconciliation of the benefit obligation, plan assets, and   
funded status of the Company's sponsored plans.                                 
                                                           Other
                                                            Postretirement
                                      Pension Benefits      Benefits
                                          2004    2003      2004    2003
Change in Benefit Obligation                                                    
(in thousands of dollars)                                                       
Benefit obligation at beginning of year   $27,870 $33,376  $15,396   $15,592  
Service cost                                  562     550        -         -  
Interest cost                               1,701   1,887      961     1,046  
Actuarial (gain)/loss                       1,093    (109)   4,679       474  
Benefits paid                              (1,923) (2,086)  (1,634)   (1,716) 
Plan Settlement                                  - (5,748)       -         -  
Benefit obligation at end of year         $29,303 $27,870  $19,402   $15,396  

                                                           Other
                                                            Postretirement
                                      Pension Benefits      Benefits
                                           2004    2003     2004      2003
Change in Plan Assets                                                           
(in thousands of dollars)                                                       
Fair value of plan assets at beginning                                        
of year                                 $48,824 $60,799   $    -  $      -
Actual gain (loss) on plan assets           7,103  (2,268)       -         -  
Employer contribution                            -       -       51        48   
Asset transfer                             (1,634) (1,668)   1,634     1,668  
Benefits paid                              (1,923) (2,086)  (1,685)   (1,716) 
Plan Settlement                                 -  (5,953)       -         -  
Fair value of plan assets at end of year  $52,370 $48,824   $    -  $      -  

                                                           Other
                                                            Postretirement
                                      Pension Benefits      Benefits
                                          2004    2003     2004     2003
Funded Status Reconciliation                                                    
(in thousands of dollars)                                                       
Funded status of plans                    $23,067 $20,954 $(19,402) $(15,396) 
Unrecognized prior service cost               126     363        -         -  
Unrecognized (gain)/loss                    5,532   8,392    2,095   (2,684)  
Deferred pension asset                                                        
(accrued liability)                       28,725  29,709  (17,307)  (18,080)
Less: current portion included in                                               
"Accounts payable and accruals"                 -       -    1,516     1,492  
Long-term accrued postretirement                                                
health benefits                           $     - $     - $(15,791) $(16,588) 

                                                         Other
                                                            Postretirement
                                      Pension Benefits      Benefits
                                           2004    2003      2004     2003
Weighted Average Assumptions                                                    
Discount rate (1)                            5.75%   6.50%     5.75%    6.50% 
Expected return on plan assets(2)            7.25%   7.50%        -        -  
Rate of compensation increase                4.50%   4.50%        -        -  
Medical trend rate (retirees) (3)               -       -     10.50%    9.00% 

(1) The Company reduced its discount rate assumption in fiscal year 2004 to     
reflect the overall decrease in long term interest rates generally available    
in the market.                                                                  

(2) The Company reduced its expected return on plan assets assumption in 2004   
to reflect the overall decrease in the expected performance of its plan assets  
due to market conditions.                                                       

(3) Postretirement benefit medical trend rate in fiscal year 2004 is 10.5%      
graded to 6.00% over 9 years.  Fiscal year 2003 is 9.00% graded to 6.00% over   
3 years.  The increase in the medical trend rate is due to the increasing cost  
of prescription drugs and the age of the plan participants.                     

                                                     Other
                                                    Postretirement
                       Pension Benefits             Benefits
                           2004     2003     2002   2004     2003     2002
Components of Net Periodic                                                      
Benefit Cost                                                                  
(in thousands of dollars)                                                     
Service Cost              $  562   $  550   $  480 $    -    $   -    $   - 
Interest cost on                                                            
projected benefit                                                         
obligation                1,701    1,887    2,283    961    1,046    1,046
Expected return on                                                          
plan assets              (3,538)  (4,004)  (4,660)     -        -        -
Amortization of prior                                                       
service cost                238      233      245      -        -        -
Recognized actuarial                                                        
 (gain)/loss                 388        -        -   (100)    (162)    (174)
Plan Settlement                -      780        -      -        -        - 
Net periodic (benefit)                                                      
cost before OBRA '90       (649)    (554)  (1,652)   861      884      872
Transfer of assets for                                                      
payment of retiree                                                        
medical benefits                                                          
 (401(h) Plan)             1,634    1,668    1,587 (1,634)  (1,668)  (1,587)
Net periodic cost (benefit)$   985  $ 1,114  $   (65) $(773)   $(784) $  (715)  

Assumed health care cost trend rates have a significant effect on the amounts   
reported for the health care plans.  A one-percentage point change in assumed   
health care cost trend rates would have the following effects:                  
                                                             Other
                                                              Postretirement
                                                              Benefits
                                                            2004    2003
Effect of a 1% Increase in the Health Care Cost Trend On:                       
(in thousands of dollars)                                                       
Service cost plus interest cost                             $    76  $    83  
Accumulated postretirement benefit obligation                 1,466    1,165  

Effect of a 1% Decrease in the Health Care Cost Trend On:                       
(in thousands of dollars)                                                       
Service cost plus interest cost                                 (67)     (73) 
Accumulated postretirement benefit obligation               $(1,308) $(1,040) 

Union Pension Plans - Operating Shipyard - The Company participates in several  
multi-employer plans, which provide defined benefits to the Company's           
collective bargaining employees.  The expense for these plans totaled $3.8      
million, $3.4 million and $2.6 million, for fiscal years 2004, 2003 and 2002,   
respectively.                                                                   

Union Pension Plans - Previously Operated Shipyards - The Company no longer     
sponsors union pension plans attributable to the prior operation of other       
shipyards.  The ongoing operation and management of these plans has either      
been terminated or transferred to other parties.                                

Savings Investment Plan - The Company sponsors a Savings Investment Plan (the   
"Savings Plan"), under Internal Revenue Code Section 401, covering all non-     
union employees.  Under the terms of the Savings Plan, which were modified in   
fiscal year 2001, the Company now contributes an amount up to 2.4% of each      
participant's annual salary depending on the participant's Savings Plan         
contributions.  These Company contributions are subject to a two-year cliff-    
vesting.  The Company incurred expenses related to this plan of $0.2 million,   
$0.1 million, and $0.1 million in fiscal years 2004, 2003, and 2002,            
respectively.                                                                   

Asset allocations - The weighted-average asset allocations for the pension      
plan by asset categories are as follows.                                        

Fiscal year ending              2004          2003        

Asset Category                                            
Equity Securities               29%           23%       
Fixed Income                    32            40        
Convertible Securities          39            37        

Total                           100%          100%        

Investment strategy - The general investment objective is to obtain a rate of   
return and sufficient liquidity that will allow the plan to meet required       
benefit payments.  Emphasis is placed on long-term performance and not short-   
term market aberrations.  The assets are diversified among the following asset  
categories within allocation ranges approved by the Company's Board of          
Directors.  These asset categories and respective allocation ranges are as      
follows.                                                                        

Equities                    15-35%          
Fixed Income                30-50%          
Convertible Securities      20-40%          

Future Cash Flow Information - Due to the well-funded status of the Company's   
pension plan, no contributions are required for the subsequent plan year.  No   
funding of the Company's post-retirement benefit plan is anticipated in the     
subsequent plan year except to pay premium costs which are covered by the       
transfer of excess pension assets.                                              

The estimated pension benefit payments and post-retirement premiums are as      
follows.                                                                        
                                               Other
                                                 Post-retirement
Plan Year         Pension Benefits                Benefits  
7/03-6/04            $2,523                        $1,712   
7/04-6/05             2,360                         1,744   
7/05-6/06             2,336                         1,782   
7/06-6/07             2,411                         1,798   
7/07-6/08             2,444                         1,809   
7/08-6/13            11,799                         8,562   

Medicare Drug Act - On December 8, 2003, the Medicare Prescription,             
Improvement and Modernization Act of 2003 (Medicare Drug Act) was signed into   
law.  The Act introduces a prescription drug benefit under Medicare Part D as   
well as a Federal subsidy to sponsors of retiree health care benefit plans      
that provide a benefit that is at least actuarially equivalent to Medicare      
Part D.  Specific authoritative guidance on the accounting for the Federal      
subsidy was not finalized until May 19, 2004..  Therefore, at this time the     
Company has elected to not recognize the impact of the Federal subsidy on our   
accumulated postretirement benefit obligation and net postretirement benefit    
costs.  The future impact of this subsidy is estimated to be an actuarial gain  
of approximately $2.0 million to be amortized over the average service life of  
the plan participants.                                                          

8.  INCOME TAXES                                                                

Components of the income tax expense (benefit) are as follows (in thousands)    

                      2004      2003      2002

Current tax expense                 $ (141)   $ 1,002   $   390                 
Deferred tax expense (benefit)         611      1,217     3,526                 
Total income tax expense (benefit)  $  470    $ 2,219   $ 3,916                 

The provision for income taxes differs from the amount of tax determined by     
applying the federal statutory rate and is as follows (in thousands):           
(percentages represent income tax expense (benefit) as a percent of income      
before income tax expense):                                                     

                            2004            2003            2002
Tax provision at                                                                
federal statutory tax rate  $ 1,531  34.0%  $ 2,152  34.0%  $ 3,827  35.0%  
Reduction in                                                                    
current tax liability        (1,128)(25.1)%       -   0.0%        -   0.0%  
Other - net                        67   1.5%       67   1.1%       89   0.8%    
Income tax expense (benefit)  $   470  10.4%  $ 2,219  35.1%  $ 3,916  35.8%    

This decrease in valuation allowance of $1.1 million is due to the resolution   
in the fourth quarter of certain income tax contingencies that were             
established in prior years.                                                     

Deferred income taxes reflect the net tax effects of temporary differences      
between the carrying amounts of assets and liabilities for financial reporting  
purposes and the amounts used for income tax purposes.  Significant components  
of the Company's deferred income tax assets and liabilities at March 28, 2004   
and March 30, 2003  were as follows (in thousands):                             

                     2004             2003
Deferred income tax assets:                                                     

Alternative minimum tax credit                                                  
carryforwards                     $    835        $  1,597                  
Accrued employee benefits              7,750           7,174                    
Environmental and other reserves      11,204          12,269                    
Inventory reserves                        49              83                    
Reserve for doubtful accounts             15              34                    
Other                                    559             610                    
Total deferred income tax assets      20,412          21,767                    

Deferred income tax liabilities:                                                
Insurance receivable                 (10,233)        (11,349)                   
Deferred pension income              (10,054)        (10,398)                   
Accelerated depreciation              (3,591)         (1,740)                   
Contract deferrals                       145          (1,020)                   
Securities available-for-sale           (192)           (231)                   
Other                                   (550)           (500)                   
Total deferred income tax                                                       
liabilities                         (24,475)        (25,238)                  

Net deferred tax liability          $ (4,063)      $  (3,471)                   

The realization of deferred income tax assets is dependent upon the ability to  
generate taxable income in future periods.  The Company has evaluated evidence  
supporting the realization of its deferred income tax assets and determined it  
is more likely than not that its deferred income tax assets will be realized.   

During fiscal year 2004, the Company utilized approximately, $0.8 million in    
alternative minimum tax credits.  The Company has approximately $0.8 million    
in remaining alternative minimum tax credit carryforwards that can be used in   
the future and have no expiration date.                                         

9.  LEASES                                                                      

Operating lease payments charged to expense were $0.8 million, $0.8 million     
and $0.9 million for fiscal years 2004, 2003 and 2002, respectively.  Certain   
leases contain renewal options and minimum amounts of annual maintenance        
clauses.  Minimum lease commitments at March 28, 2004 are summarized below (in  
thousands):                                                                     

                                     Operating
                                      Leases
2005                                                 $    823                   
2006                                                      794                   
2007                                                       71                   
2008                                                       43                   
2009                                                       42                   
Thereafter                                                157                   

Total minimum lease commitments                      $  1,930                   

10.  FINANCING ARRANGEMENTS                                                     

During fiscal year 2002, the Company negotiated a $10.0 million revolving       
credit facility with interest payable at the prime rate.  The credit facility,  
which is renewable on a bi-annual basis, provides the Company with greater      
flexibility in funding its operational cash flow needs.  The Company had no     
outstanding borrowings as of March 28, 2004 and March 30, 2003, respectively.   

11.  ENVIRONMENTAL AND OTHER RESERVES                                           

The Company faces potential liabilities in connection with the alleged          
presence of hazardous waste materials at its Seattle shipyard and at several    
sites used by the Company for disposal of alleged hazardous waste. The Company  
continues to analyze environmental matters and associated liabilities for       
which it may be responsible. No assurance can be given as to the existence or   
extent of any environmental liabilities until such analysis has been            
completed. The eventual outcome of all environmental matters cannot be          
determined at this time, however, the analysis of some matters have progressed  
sufficiently to warrant establishment of reserve provisions in the              
accompanying consolidated financial statements.                                 

Harbor Island Site                                                              

The Company and several other parties have been named as potentially            
responsible parties ("PRPs") by the Environmental Protection Agency (the        
"EPA") pursuant to the Comprehensive Environmental Response, Compensation, and  
Liability Act ("CERCLA" also known as "Superfund") in connection with the       
documented release or threatened release of hazardous substances, pollutants    
and contaminants at the Harbor Island Superfund Site (the "Harbor Island        
Site"), upon which the Shipyard is located.                                     

Harbor Island Site Insurance                                                    

In the fourth quarter of fiscal year 2001, the Company entered into a 30-year   
agreement with an insurance company that will provide the Company with broad-   
based insurance coverage for the remediation of the Company's operable units    
at the Harbor Island Superfund Site.                                            

The agreement provides coverage for the known liabilities in an amount          
exceeding the Company's current booked reserves of $23.1 million.               
Additionally, the Company has entered into a 15-year agreement for coverage of  
any new environmental conditions discovered at the Seattle shipyard property    
that would require environmental remediation.                                   

The Company recorded a non-current asset in the form of an insurance            
receivable in accordance with its environmental accounting policies at the      
time it entered into this agreement.  This transaction did not have a material  
effect on the Company's results of operations, nor did the transaction have a   
material effect on stockholders' equity.                                        

Harbor Island Site History                                                      

To date, the EPA has separated the Harbor Island Site into three operable       
units that affect the Company: the Soil and Groundwater Unit (the "Soil         
Unit"), the Shipyard Sediments Operable Unit (the "SSOU") and the Sediments     
Operable Unit (the "SOU").  The Company, along with a number of other Harbor    
Island PRPs, received a Special Notice Letter from the EPA on May 4, 1994       
pursuant to section 122 (e) of CERCLA.  The Company entered into a Consent      
Decree for the Soil Unit in September 1994 under which the Company has agreed   
to remediate the designated contamination on its property. Removal of floating  
petroleum product from the water table began in October 1998 and is             
anticipated to continue through fiscal year 2006.  The Company and the EPA are  
currently negotiating the extent and methodology of the soil remediation.       

During the third quarter of fiscal year 1997, the EPA issued its Record of      
Decision ("ROD") for the SSOU.  The ROD identifies four alternative solutions   
for the SSOU remediation and identifies the EPA's selected remedy. During the   
third quarter of fiscal year 2000, the EPA expanded the boundaries of the SSOU  
issuing their Phase 1B Data Report and resulting Explanation of Significant     
Differences outlining the changes to the ROD. During the fourth quarter of      
fiscal year 2000, the Company and the EPA entered into an Administrative Order  
on Consent for the development of the remedial design for the SSOU.             

During the fourth quarter of fiscal year 2003, the company and the EPA entered  
into a Consent Decree for the cleanup of the SSOU, which, along with the        
associated Remedial Design Statement of Work for Remedial Action ("SOW"), was   
subsequently approved by the Department of Justice.  The Consent Decree         
provides for the submittal of the Remedial Action Work Plan to the EPA          
subsequent to the approval by the EPA of the final design.  The Remedial        
Action Work Plan will provide for construction and implementation of the        
remedy set forth in the ROD, the two Explanation of Significant Differences     
(issued in fiscal years 2000 and 2003), the SOW, and the design plans and       
specifications developed in accordance with the Remedial Action Work Plan and   
approved by the EPA.  During the fourth quarter of fiscal year 2004 the         
Company submitted its Final Design Report to the EPA for the SSOU.  The Final   
Design Report provides for the following actions to take place at the SSOU:     

Piers 2 and 4 South (located on the Duwamish Waterway) will be                  
demolished and removed from the site to achieve more complete cleanup in        
those areas.                                                                    

Dredging of all contaminated sediments and shipyard waste in the open           
areas of the SSOU (surrounding the shipyard) and in the areas beneath           
Piers 2 and 4 South.  The total estimated volume of sediments to be             
removed is 195,200 cubic yards.                                                 

Disposal of all recovered sediment and shipyard waste at an appropriate         
upland disposal facility.                                                       

Backfilling of portions of the areas dredged to create intertidal               
habitat where feasible.                                                         

Capping of areas beneath the piers that are not scheduled for demolition        
to an average thickness of one foot.                                            

Pursuant to the current schedule, remediation of the SSOU is expected to begin  
in the second quarter of fiscal 2005.  Current environmental regulations limit  
the period of time during the year that dredging may occur.  Given these        
limits, dredging in the SSOU will require several years to complete.  The       
current estimated cost of the SSOU cleanup is included in the environmental     
reserve resulting in an increase in that reserve of $6.1 million during fiscal  
year 2003.  $5.7 million of that reserve is covered by the environmental        
insurance policy procured by the Company in fiscal year 2001.                   

During January 1998, the Company was notified by the EPA that testing would be  
required in the West Waterway of the Duwamish River outside the borders of the  
SSOU as part of the SOU.  The Company in May 1998 entered into an Order on      
Consent to perform certain limited testing as part of the SOU investigation.    
After an evaluation of the results, the EPA issued a draft "no action" ROD on   
the SOU for public comment which if issued in final form would end the          
investigation of the SOU requiring no remedial action.  The public comment      
period closed during the Company's fourth quarter of fiscal year 2000.  In      
September 2003, the EPA issued the final "no action" ROD on the SOU.  Given     
the EPA's issuance of the draft "no action" ROD in fiscal year 2000, the        
Company had not established a reserve for any remediation on the SOU.           
The Company's environmental reserves for the entire Harbor Island Site          
aggregated $23.1 million at March 28, 2004.                                     

Under the Federal Superfund law, potentially responsible parties may have       
liability for damages to natural resources in addition to liability for         
remediation.  During the second quarter of fiscal year 2003, the Company began  
discussions with the natural resource trustees ("Trustees") for the Harbor      
Island Superfund Site ("Site") and continued these discussions during the       
third quarter.  The Company anticipates that the Trustees will file a claim     
against the Company at some future date alleging damages to the natural         
resources at the Site caused by the release of hazardous substances.  The best  
estimate of a potential natural resource damage claim has been included in the  
environmental reserve.  The payment of any eventual claim is covered by the     
aforementioned insurance policy, provided that aggregate policy limits have     
not been exceeded.                                                              

Other Environmental Remediation Matters                                         

In January 2001, the EPA issued Special Notice letters naming the PRPs on the   
Hylebos Waterway Operable Unit of the Commencement Bay Superfund Site in        
Tacoma, Washington.  The Company was not included on the EPA's list.  Todd has  
been notified by other PRPs of their intent to bring a contribution action      
against the Company.  Subsidiaries of the Company had a presence on the site    
from 1917-1925 and again from 1939-1946, for the most part, coinciding with     
World Wars I and II when the Company built war ships at the direction of the    
United States government.  Several parties in 2000 hired an allocator to        
assign percentages of responsibility to all parties, historical and present,    
notwithstanding potential defenses or contractual claims.  While the Company    
did not participate in the allocation process, the allocator's findings were    
taken into account in including an estimate of potential liability in the       
Company's reserve discussed below.                                              

The Company has further been notified by the Commencement Bay Natural Resource  
Trustees ("Trustees") that the parties occupying the aforementioned property    
subsequent to 1946 have been allocated liability for natural resource damages.  
While the Trustees have not submitted a claim against the Company for natural   
resource damages, they have invited the Company to participate in a mediation   
with the PRPs to resolve intra-facility allocation issues.  The Company is      
investigating the potential of any liability it may currently have for its      
presence on the site during World Wars I and II when it built war ships at the  
direction of the United States government.                                      

The Company entered into a Consent Decree with the EPA for the clean up of the  
Casmalia Resources Hazardous Waste Management Facility in Santa Barbara         
County, California under the Resource Conservation and Recovery Act. The        
Company has included an estimate of the potential liability for this site in    
its below stated reserves.  Immaterial payments began in fiscal year 1997 and   
will extend for up to ten years.                                                

Asbestos-Related Claims and Insurance                                           

The Company has been named as a defendant in civil actions by parties alleging  
damages from past exposure to toxic substances, generally asbestos, at closed   
former Company facilities.                                                      

The cases generally include as defendants, in addition to the Company, other    
ship builders and repairers, ship owners, asbestos manufacturers, distributors  
and installers, and equipment manufacturers and arise from injuries or          
illnesses allegedly caused by exposure to asbestos or other toxic substances.   
The Company assesses claims as they are filed and as the cases develop,         
analyzing them in two different categories based on severity of illness.        
Based on current fact patterns, certain diseases including mesothelioma, lung   
cancer and fully developed asbestosis are categorized by the Company as         
"malignant" claims.  All others of a less medically serious nature are          
categorized as "non-malignant".  The Company is currently defending             
approximately 25 "malignant" claims and approximately 563 "non-malignant"       
claims.                                                                         

The relief sought in all cases varies greatly by jurisdiction and claimant.     
Included in the approximate 409 cases open as of March 28, 2004 are             
approximately 588 claimants.  The exact number of claimants is not              
determinable as approximately 150 of the open cases include multiple claimant   
filings against 30-100 defendants.  The filings do not indicate which           
claimants allege liability against the Company.  The previously stated 599      
claimants is the Company's best estimate taking known facts into                
consideration.                                                                  

Approximately 373 claimants do not assert any specific amount of relief         
sought.                                                                         

Approximately 160 claims contain standard boilerplate language asserting        
on behalf of each claimant a claim for damages of $2 million                    
compensatory and $20 million punitive against approximately 100                 
defendants.  Approximately 20 claims set forth the same boilerplate             
language asserting $10-$20 million in compensatory and $10-$20 million          
in punitive damages on behalf of each claimant against approximately 30-        
100 defendants.  Approximately 20 cases assert $1-$15 million in                
compensatory and $5-$10 million in punitive damages on behalf of each           
claimant against approximately 30-100 defendants.                               

Approximately 10 claimants seek compensatory damages of less than               
$100,000 per claim and approximately 5 claimants seek compensatory              
damages between $1 million and $15 million.  The claims involved in the         
foregoing cases do not specify against which defendants which claims are        
made or alleged dates of exposure.                                              

Based upon settled or concluded claims to date, the Company has not identified  
any correlation between the amount of the relief sought in the complaint and    
the final value of the claim.  The Company and its insurers are vigorously      
defending these actions.                                                        

As a result of claims resolution during fiscal year 2004, bodily injury         
reserves declined from $9.4 million at March 30, 2003 to $8.1 million at March  
28, 2004.  Likewise, bodily injury insurance receivables declined from $7.1     
million to $5.8 million.  These bodily injury liabilities and receivables are   
classified within the Company's Consolidated Balance Sheets as environmental    
and other reserves, and insurance receivables, respectively.                    

The Company has entered into agreements with several of its insurers to         
provide coverage for a significant portion of settlements and awards related    
to these bodily injury claims.  These agreements have aggregate limits on       
amounts to be paid overall and formulas for amounts of payment on individual    
claims.  The two most significant agreements provide coverage applicable to     
claims of exposure to asbestos occurring between 1949 and 1976 and occurring    
between 1976 through 1987. Insurance coverage for exposures to asbestos was no  
longer available from the insurance industry after 1987.  Due to changes in     
federal regulations in the 1970's which resulted in the swift decline in        
commercial and military application of asbestos and increased regulation over   
the handling and removal of asbestos, there exists minimal risk of claims       
arising from exposure after 1987.  Contractual formulas are utilized to         
determine the amount of coverage from each agreement on each claim settled or   
litigated.  Once the initial date of alleged exposure to asbestos is            
determined, all contractual years subsequent to that date participate in the    
settlement.  Since all known claims involve alleged exposure prior to 1976,     
the 1976 through 1987 agreement will participate in the settlement or           
judgement of all outstanding claims that are settled or litigated.  As a        
result, and as the years remaining calculation set forth below indicates, the   
1976 through 1987 agreement will exhaust prior to the 1949 through 1976         
agreement.  Based on historical claims settlement data only, the Company        
projects that at March 28, 2004, the 1949 through 1976 agreement will provide   
coverage for an additional 21.6 years and the 1976 through 1987 agreement will  
provide coverage for an additional 5.4 years.  At March 30, 2003, the Company   
projected that these agreements would provide coverage for an additional 20.4   
years and 5.2 years, respectively. The Company resolved 15 malignant claims in  
2004 compared with 13 in 2003 and 20 in 2002.  If historical settlement         
patterns or the rate of filing for new cases change in future periods, these    
estimated coverage periods could be shorter or longer than anticipated.         
Moreover, if one or both of these coverages are exhausted at some future date,  
the Company's share of responsibility will increase for any subsequent claims'  
and legal expense previously covered by these insurance agreements.  In         
addition to providing coverage for assessments or settlements of claims, the    
agreements also provide for costs of defending and processing such claims.      

Due to uncertainties of the number of cases, the extent of alleged damages,     
the population of claimants and size of any awards and/or settlements, there    
can be no assurance that the current reserves will be adequate to cover the     
costs of resolving the existing cases.  Additionally, the Company cannot        
predict the eventual number of cases to be filed against it or their eventual   
resolution and does not include in its reserve amounts for cases that may be    
filed in the future.  However, it is probable that if future cases are filed    
against the Company it will result in additional costs arising either from its  
share of costs under current insurance in place arrangements or due to the      
exhaustion of such coverage.  The Company reviews the adequacy of existing      
reserves periodically based upon developments affecting these claims,           
including new filings and resolutions, and makes adjustments to the reserve     
and related insurance receivable as appropriate.                                

As the Company is not able to estimate its potential ultimate exposure for      
filed and unfiled claims against the Company, it cannot predict whether the     
ultimate resolution of the bodily injury cases will have a material effect on   
the Company's results of operations or stockholders' equity.                    

The Company has recorded $0, $0.6 million and $0 in charges against earnings    
in fiscal years 2004, 2003, and 2002, respectively relating to additional       
reserves for environmental and bodily injury matters.  These charges are        
classified in the Company's Consolidated Statements of Income as a Provision    
for environmental and other reserves.  The Company's remediation costs and      
bodily injury claims paid are charged against the reserves recorded when paid.  
In certain cases, amounts paid by the Company are reimbursable under its        
existing contractual arrangements with several insurance companies.  These      
reimbursements are recorded against the environmental insurance asset when      
collected.  In other cases, the Company manages work conducted by third party   
vendors and submits invoices to its insurance companies for reimbursement on    
behalf of the third party vendor.  In these cases, the insurance companies      
reimburse the third party vendor directly.  These expenses and payments         
associated with third party vendors are taken into consideration when           
estimating the Company's environmental and bodily injury liabilities and        
amounts available for reimbursement under its contractual arrangements.  In     
addition to providing coverage for assessments or settlements of claims, the    
agreements also provide for costs of defending and processing such claims.      

The Company continues to negotiate with its insurance carriers and prior        
landowners and operators for certain past and future remediation costs.  The    
Company has reached various agreements with its insurance carriers regarding    
the carriers' obligations for property damage occurring in previous fiscal      
years.  These settlements were recorded as income and totaled $0.2 million,     
$0.1 million and $0.5 million in fiscal years 2004, 2003 and 2002,              
respectively.  These settlements are classified in the Company's Consolidated   
Statements of Income as Other insurance settlements.                            

The Company has provided total aggregate reserves of $32.0 million as of March  
28, 2004 for the above, described contingent environmental and bodily injury    
liabilities.  Due to the complexities and extensive history of the Company's    
environmental and bodily injury matters, the amounts and timing of future       
expenditures is uncertain.  As a result, there can be no assurance that the     
ultimate resolution of these environmental and bodily injury matters will not   
have a material adverse effect on the Company's financial position, cash flows  
or results of operations.                                                       

The Company has various insurance policies and agreements that provide          
coverage on the costs to remediate environmental sites and for the defense and  
settlement of bodily injury cases.  These policies and agreements are           
primarily with two insurance companies.  Based upon the current credit rating   
of both of these companies, the Company anticipates that both parties will be   
able to perform under the policy or agreement.  As of March 28, 2004, the       
Company has recorded an insurance receivable asset of $29.2 million to reflect  
contractual arrangements with several insurance companies to share costs for    
certain environmental matters.                                                  

Included in the reserves are sediment remediation costs for Harbor Island of    
$13.5 million that are expected to occur in fiscal year 2005.  These costs are  
reflected in the Company's balance sheet under current liabilities.  Likewise,  
the insurance receivable of $13.5 million relating to these reserves is         
reflected in the Company's balance sheet under current assets.                  

Other Reserves                                                                  
During the first quarter of fiscal year 2004, the Company recorded a reserve    
of $2.5 million related to the unanticipated bankruptcy of one of its previous  
insurance carriers.  The reserve, which reflects the Company's best estimate    
of the known liabilities associated with unpaid workers compensation claims     
arising from the two-year coverage period commencing October 1, 1998, is        
subject to change as additional facts are uncovered.  These claims have         
reverted to the Company due to the liquidation of the insurance carrier.        
Although the Company expects to recover at least a portion of these costs from  
the liquidation and other sources, the amount and the timing of any such        
recovery cannot be estimated currently and therefore no estimate of amounts     
recoverable is included in the current financial results.                       

Since establishing the reserve during the first quarter, the Company has paid   
approximately $0.2 million in claims, which have been charged against the       
reserve.                                                                        

12.  OTHER CONTINGENCIES                                                        

The Company is subject to various risks and is involved in various claims and   
legal proceedings arising out of the ordinary course of its business.  These    
include complex matters of contract performance specifications, employee        
relations, union proceedings, tax matters and Government procurement            
regulations.  In addition, the Company is subject to various risks from         
natural disasters such as the earthquake that struck the Puget Sound area       
during fiscal year 2001.  Only a portion of these risks and legal proceedings   
involving the Company are covered by insurance, because the availability and    
coverage of such insurance generally has declined or the cost has become        
prohibitive.                                                                    

The Company does not believe these risks or legal matters will have a material  
adverse impact on its financial position, results of operations, or cash        
flows.  However, the Company continues to evaluate its exposures in each of     
these areas and may revise its estimates as necessary.                          

As a general practice within the defense industry, the Defense Contract Audit   
Agency ("DCAA") and other government agencies continually review the cost       
accounting practices of Government contractors.  In the course of these         
reviews, cost accounting issues are identified, discussed and settled or        
resolved through agreements with the government's authorized contracting        
officer or through legal proceedings.  Other than normal cost accounting        
issues raised by the DCAA as a result of their regular, ongoing reviews, the    
Company is not aware of any outstanding issues with the DCAA.                   

13.  COLLECTIVE BARGAINING AGREEMENT                                            

Todd Pacific Shipyards currently operates under the terms and conditions of a   
collective bargaining agreement with the Puget Sound Metal Trades Council (the  
bargaining umbrella for all unions at Todd Pacific Shipyards).  The three-year  
agreement is in effect from August 1, 2002 to July 31, 2005.  The Company       
believes its relationship with its labor unions to be stable.                   

During fiscal year 2004, an average of approximately 913 of the Company's       
Shipyard employees were covered by the collective bargaining agreement.  At     
March 28, 2004 approximately 685 Company employees were covered under this      
contract.                                                                       

14.  TREASURY STOCK                                                             

During the third quarter of fiscal year 2003, the Board of Directors approved   
the repurchase of up to 500,000 shares of the Company's common stock from time  
to time in open market or negotiated transactions.  Under this authorization,   
during the first quarter of fiscal year 2004, the Company repurchased an        
aggregate of 22,400 shares in open market transactions.  The shares were        
purchased at an average price of $12.94 per share for a total consideration of  
$289,887.                                                                       

The Company repurchased an aggregate of 19,500 shares during fiscal year 2003   
in open market transactions at an average price of $12.44 per share for total   
consideration of $242,592.                                                      

During the first quarter of fiscal year 2002, the Company announced a tender    
offer for up to 4.0 million shares of the Company's Common Stock at a price of  
not in excess of $8.25 or less than $7.00 per share.  The exact price was       
determined by a procedure commonly referred to as a "Dutch Auction."  This      
offer to repurchase up to 4.0 million shares from existing stockholders was     
approximately 42.7% of the total number of shares outstanding at that time.     

Following verification of the tenders and receipt of shares tendered subject    
to guarantees of delivery, an aggregate of 4,136,124 shares were validly        
tendered at a price of $8.25 per share.  The Company elected to increase the    
number of shares to be purchased in order to avoid proration procedures         
otherwise applicable to the offer, resulting in an aggregate purchase price of  
$34.1 million.  The Company incurred expenses in connection with this offer of  
approximately $0.5 million.  The Company utilized available cash and proceeds   
from available-for-sale securities to fund the share repurchases completed      
through the offer.                                                              

The following table summarizes the total number of common shares outstanding,   
held in treasury and issued by the Company during the past three fiscal years.  

        Total Shares of Common Stock
           Held in
        Outstanding   Treasury      Issued
As of April 1, 2001         9,362,680    2,593,353   11,956,033                 
Shares Repurchased                                                              
Through Dutch Auction     (4,136,124)   4,136,124            -                
Options Exercised              56,666      (56,666)           -                 
As of March 31, 2002        5,283,222    6,672,811   11,956,033                 
Shares repurchased            (19,500)      19,500            -                 
Options Exercised               7,334       (7,334)           -                 
As of March 30, 2003        5,271,056    6,684,977   11,956,033                 
Shares repurchased            (22,400)      22,400            -                 
Options Exercised             154,000     (154,000)           -                 
As of March 28, 2004        5,402,656    6,553,377   11,956,033                 

15.  INCOME PER SHARE                                                           

The following table sets forth the computation of basic and diluted net income  
per share:                                                                      

                                           March 28,   March 30,   March 31,
                                             2004        2003       2002
(in thousands, except per share amount)                                         
Numerator:                                                                      
Numerator for basic and diluted net                                         
income per share:                                                       
Net income                               $  4,032    $  4,110   $  7,018

Denominator:                                                                    
Denominator for basic net income per                                        
share - weighted average                                                
common shares outstanding                   5,306       5,283      6,677
Effect of dilutive securities                                               
Stock options based                                                         
on the treasury stock method using                                        
average market price                           263         270        150 
Denominator for diluted net income per share    5,569       5,553      6,827    

Basic income per share                       $   0.76    $   0.78   $   1.05    
Diluted income per share                     $   0.72    $   0.74   $   1.03    

16.  STOCK BASED COMPENSATION                                                   

The Company's Incentive Stock Compensation Plan (the "Plan"), approved by the   
Board of Directors in 1993 and subsequently ratified by the shareholders,       
provided for the granting of incentive stock options, non-qualified stock       
options, and restricted stock or any combination of such grants to directors,   
officers and key employees of the Company.  An aggregate of 1,000,000 shares    
of common stock had been authorized for issuance under the Plan.  Options       
issued under that Plan generally vest ratably over three years and expire not   
more than ten years from the date of grant and were granted at prices equal to  
the fair value on the date of grant.  The Plan expired in 2003.  At the time    
of expiration, there were 135,000 options that had not been granted under the   
Plan and they expired as well.                                                  

In anticipation of the expiration of the Plan, the Board of Directors approved  
the Todd Shipyards Corporation 2003 Incentive Stock Option Plan ("2003 Plan")   
in 2003 and it was ratified by the shareholders at the 2003 Annual Meeting.     
The 2003 Plan provides for the granting of incentive stock options, non-        
qualified stock options, performance share awards and restricted stock grants   
or any combination of such grants or awards to directors, officers and key      
employees of the Company to purchase shares of the Class A Common Stock of the  
Company.  An aggregate of 250,000 shares of common stock has been authorized    
for issuance under the 2003 Plan.                                               

A summary of stock option transactions for the years ended March 28, 2004,      
March 30, 2003 and March 31, 2002 is as follows:                                
                                                        Weighted
                                                       Average
                     Shares   Number    Option Price  Exercise
                 Exercisable of Shares    Per Share    Price
Outstanding, April 1, 2001             625,000   4.25  to  7.94   6.01          
Exercisable, April 1, 2001    218,333        -   4.25  to  7.94   4.85          
Exercised                           (116,666)  4.25  to  6.00   4.61        
Outstanding, March 31, 2002            508,334   4.25  to  7.94   6.33          
Exercisable, March 31, 2002   245,001        -   4.25  to  7.94   6.00          
Exercised                             (7,334)  4.38  to  7.94   6.32        
Outstanding, March 30, 2003            501,000   4.25  to  7.94   6.33          
Exercisable, March 30, 2003   374,335        -   4.25  to  7.94   6.22          
Granted                              100,000            14.19  14.19        
Exercised                           (154,000)  4.25  to  7.94   5.53        
Outstanding, March 28, 2004            447,000   6.55  to 14.19   8.37          
Exercisable, March 28, 2004   347,000        -   6.55  to  7.94   6.69          

At March 28, 2004, the Company has reserved 697,000 shares of its common stock  
for issuance under the Plan and the 2003 Plan.                                  

As described in Note 1, the Company accounts for stock-based compensation to    
its employees and directors based on the expense recognition provisions of      
Financial Accounting Standards Board (FASB) Statement No. 123 (FAS No. 123),    
"Accounting for Stock-Based Compensation."  The recognition provisions are      
applied to stock option grants awarded subsequent to March 31, 2002.            

The outstanding stock options have a contractually weighted-average life of     
4.8 years as of March 28, 2004.  No options were granted during fiscal year     
2002 or fiscal year 2003.  The weighted average fair value of options granted   
in 2004 was $3.94.                                                              

The fair value of options granted in 2004 was calculated using a Black-Scholes  
option pricing model with the following weighted-average assumptions on the     
option grant date:                                                              
Pa                                                                              
                 Employee Stock Option
                Year Ended
              2004
Expected life (years)                         4                                 
Expected volatility                          38%                                
Risk-free interest rate                       4%                                
Expected dividend yield                       3%                                

17.  SUBSEQUENT EVENTS                                                          

On April 1, 2004, the Company announced the U.S. Navy had awarded to its        
wholly owned subsidiary, Todd Pacific Shipyards, a five-year contract under     
which the Navy has options to have the Company provide long-term overhaul and   
maintenance to the NIMITZ CLASS aircraft carriers (CVN) homeported in Puget     
Sound.                                                                          

18.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)                                

Financial results by quarter for the fiscal years ended March 28, 2004 and      
March 30, 2003 and are as follows.  Each quarter is 13 weeks in length.         
(in thousands, except per share data):                                          

                Operating     Net       Net income(loss)
             income     income         per Share
     Revenues    (loss)     (loss)      Basic    Diluted

1st Qtr 2004    $ 21,138   $ (3,720)  $ (2,220)   $ (0.42)    $(0.42)           
2nd Qtr 2004      44,433      2,619      1,980       0.37       0.35            
3rd Qtr 2004      40,305      1,518      1,736       0.32       0.31            
4th Qtr 2004      41,918      1,749      2,536       0.47       0.45            

1st Qtr 2003      49,260      3,240      2,306       0.44       0.41            
2nd Qtr 2003      40,583      2,743      1,973       0.37       0.36            
3rd Qtr 2003      31,840       (613)      (117)     (0.02)     (0.02)           
4th Qtr 2003      30,128       (272)       (52)     (0.01)     (0.01)           

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                           
ON ACCOUNTING AND FINANCIAL DISCLOSURE                          
None                                                                            

PART III                                                                        

** The information for the below items will be provided in, and is              
incorporated by reference to the 2004 Proxy Statement.                          

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                     
**                                                                              

ITEM 11. EXECUTIVE COMPENSATION                                                 
**                                                                              

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT         
**       AND RELATED STOCKHOLDERS MATTERS                                       

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                         
**                                                                              

ITEM 14. CONTROLS AND PROCEDURES                                                

The Company, under the supervision and with the participation of its            
management, including the Chief Executive Officer and the Chief Financial       
Officer, evaluated the effectiveness of the design and operation of the         
Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e)    
under the Securities Exchange Act of 1934 (the Exchange Act)) as of the end of  
the period covered by this report.  Based on that evaluation, the Chief         
Executive Officer and the Chief Financial Officer concluded that the Company's  
disclosure controls and procedures are effective in timely making known to      
them material information relating to the Company and the Company's             
consolidated subsidiaries required to be disclosed in the Company's reports     
filed or submitted under the Exchange Act.                                      

There has been no change in the Company's internal control over financial       
reporting.                                                                      

PART IV                                                                         

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND                           
REPORTS ON FORM 8-K                                           

(a)  1 & 2. Financial Statements                                                

The financial statements and financial statement schedule                       
listed in the accompanying index to financial statements and financial          
statement schedules are filed as part of this annual report.                    

TODD SHIPYARDS CORPORATION                                                      
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE                  

Report of Ernst & Young LLP, Independent Registered Public                      
Accounting Firm.................................................*             

Report of Management ............................................*              

Consolidated Balance Sheets at March 28, 2004                                   

and March 30, 2003 ............................................*            

Consolidated Statements of Income                                               
For the years ended March 28, 2004,                                             
March 30, 2003 and March 31, 2002. .............................*             

Consolidated Statements of Cash Flows                                           
For the years ended March 28, 2004,                                             
March 30, 2003 and March 31, 2002. .............................*             

Consolidated Statements of Stockholders' Equity                                 
For the years ended March 28, 2004,                                             
March 30, 2003 and March 31, 2002. .............................*             

Notes to Consolidated Financial Statements                                      
For the years ended March 28, 2004,                                             
March 30, 2003 and March 31, 2002. .............................*             

Consolidated Financial Statement Schedule                                       
II-Valuation and Qualifying Reserves.......................... *            

All other schedules have been omitted because the required information is       
included in the Consolidated Financial Statements, or the notes thereto, or is  
not applicable or required.                                                     

3.  Exhibits                                                          

The exhibits listed below are filed as part of, or furnished with, this         
annual report.  Exhibits 32.1, 32.2, 99.1 are furnished rather than filed for   
purposes of the Securities Exchange Act of 1934 and shall not be deemed         
incorporated into any other filing by the Registrant unless such filing         
specifically provides for such incorporation.                                   

Exhibit                                                                         
Number                                                                          
3-1   Certificate of Incorporation of the Company                       *       
dated November 29, 1990 filed in the Company's                    
Form 10-K Report for 1997 as Exhibit 3-1.                         

3-2   By-Laws of the Company dated November 29, 1990,                   *       
as amended October 1, 1992 filed in the Company's                 
Form 10-K Report for 1993 as Exhibit 3-2.                         

10-1   Savings Investment Plan of the Company effective                 *       
April 1, 1989 filed in the Company's Form 10-K                    
Report for 1995 as Exhibit 10-9.                                  

10-2   Todd Shipyards Corporation Retirement System Plan                *       
and Amendments thereto filed in the Company's Form                
10-K Report for 1995 as Exhibit 10-10.                            

10-3   Todd Shipyards Corporation Incentive Stock                       *       
Compensation Plan effective September 12, 2003, approved          
by the shareholders of the Company at the 2003 Annual             
Meeting of Shareholders filed as an appendix in the Company's     
definitive proxy statement for 2003 Annual Meeting of the         
shareholders.                                                     

10-4   Employment contract between the Company and Stephen G.           *       
Welch dated February 7, 2001.                                     

10-5   Grant of Incentive Stock Option dated February 7, 2001           *       
to Stephen G. Welch pursuant to the Incentive Stock               
Compensation Plan                                                 

10-6   Put Agreement between the Company and Stephen G.                 *       
Welch dated February 7, 2001.                                     

10-7   Todd Shipyards Corporation Incentive Stock                       *       
Compensation Plan effective October 1, 1993, approved             
by the shareholders of the Company at the 1994 Annual             
Meeting of Shareholders filed in the Company's Form 10-K          
Report for 1995 as Exhibit 10-19.                                 

10-8   Employment contract between the Company and Thomas V             *       
dated June 4, 2003 filed in the Company's 10-K Report             
for 2003.                                                         

10-9   Todd Shipyards Corporation Executive Incentive                   #       
Compensation Plan effective March 31, 2003. (filed herewith)      

22-1   Subsidiaries of the Company.                                     *       

23     Consent of Ernst & Young LLP, Independent Registered                     
Public Accounting Firm                                           #

31.1    Certification of Chief Executive Officer pursuant               #       
to Rule 13a-14 (filed herewith)                 

31.2     Certification of Chief Financial Officer pursuant               #      
to Rule 13a-14a(filed herewith)                                 

32.1    Certification of Chief Executive Officer pursuant to Rule 13a-  #       
14(b) and section 906 of the Sarbanes-Oxley Act of 2002 
         (subsections (a) and (b) of section 1350, chapter 63 of title 18,
United States Code. (furnished herewith)                

32.2    Certification of Chief Financial Officer pursuant to Rule 13a-  #       
14(b) and section 906 of the Sarbanes-Oxley Act of 2002 
         (subsections (a) and (b) of section 1350, chapter 63 of title 18,
United States Code. (furnished herewith)                

99.1    Press Release dated May 25, 2004 announcing financial results   #       
 for the Company's quarterly and nine month periods ending
March 28, 2004. (furnished herewith)                    

Note:  All Exhibits are in SEC File Number 1-5109.                              
*  Incorporated herein by reference.                              
#  Filed or furnished herewith.                                   

(b) Reports on Form 8-K                                                         

On December 29, 2003, the Registrant filed a form 8-K, item 5, announcing that  
the U.S. Navy has reduced the scope of work requested to be performed by its    
wholly owned subsidiary, Todd Pacific Shipyards, on the AOE 1 during an         
upcoming availability.                                                          

On December 30, 2003, the Registrant filed a form 8-K, item 5, announcing that  
the U.S. Navy has awarded to its wholly owned subsidiary, Todd Pacific          
Shipyards, a $7,084,130 modification to previously awarded contract (N00024-    
00-C-8514).                                                                     

On January 14, 2004, the Registrant filed a form 8-K, item 5, announcing that   
it had been informed by the US Navy that the AOE 1 is scheduled to be           
decommissioned on or about October 1, 2004.                                     

On January 29, 2004, the Registrant filed a form 8-K, item 5, announcing that   
its wholly owned subsidiary, Todd Pacific Shipyards, had entered into a         
contract with Electric Boat Corporation to support their work on Trident        
submarines.                                                                     

On February 6, 2004, the Registrant filed a form 8-K, item 5, announcing that   
its wholly owned subsidiary, Todd Pacific Shipyards, confirmed its expected     
participation, along with Southwest Marine, Inc., San Diego Division, on the    
team lead by Bath Iron Works, a subsidiary of General Dynamics (NYSE:GD), to    
perform Post Shakedown Availability work on DDG-51 Aegis Destroyers.            

On March 1, 2004, the Registrant filed a form 8-K, item 5, announcing that it   
had been notified that its wholly owned subsidiary, Todd Pacific Shipyards,     
had been awarded a contract with the United States Coast Guard to provide       
long-term maintenance of two Polar Class icebreakers.                           

On April 1, 2004, the Registrant filed a form 8-K, item 5, announcing that its  
wholly owned subsidiary, Todd Pacific Shipyards, had been awarded a five-year   
contract with the United States Navy to provide long-term maintenance to the    
NIMITZ CLASS aircraft carriers (CVN) home ported in the Puget Sound.            

SIGNATURES                                                                      

Pursuant to the requirements of Section 13 or 15 (d) of the Securities          
Exchange Act of 1934 the registrant has duly caused this Annual Report to be    
signed on its behalf by the undersigned, thereunto duly authorized.             

TODD SHIPYARDS CORPORATION                                                      
Registrant                                                                      

By: /s/ Scott H. Wiscomb                                                        
Scott H. Wiscomb                                                        
Chief Financial Officer,                                                
Principal Financial Officer,                                            
Principal Accounting Officer,                                           
and Treasurer                                                           
May 21, 2004                                                            

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:                    

/s/ Brent D. Baird                 /s/ Steven A. Clifford                       
Brent D. Baird, Director           Steven A. Clifford, Director                 
May 21, 2004                       May 21, 2004                                 

/s/ Patrick W.E. Hodgson           David F. Jeremiah                            
Patrick W.E. Hodgson,              /s/David F. Jeremiah, Director               
Chairman,                          May 21, 2004                                 
and Director                                                                    
May 21, 2004                                                                    

/s/ Joseph D. Lehrer              /s/ Philip N. Robinson                        
Joseph D. Lehrer, Director            Philip N. Robinson, Director              
May 21, 2004                          May 21, 2004                              

/s/ Stephen G. Welch                                                            
Stephen G. Welch                                                                
President,                                                                      
Chief Executive Officer,                                                        
and Director                                                                    
May 21, 2004                                                                    

Todd Shipyards Corporation                                                      
Schedule II - Valuation and Qualifying Reserves                                 
For years ending March 28, 2004, March 30, 2003 and March 31, 2002              
(in thousands)                                                                  

Reserves deducted from assets to which they apply - Allowance for doubtful      
accounts:                                                                       
                          Year Ended
                          March 28,     March 30,     March 31
                             2004          2003         2002
Balance at beginning of period       $   98        $  150       $  100          
Charged to costs and expenses             -             -           13          
(Deductions) recoveries                                                         
from reserves (1)                      (55)          (52)          37         
Balance at close of period           $   43        $   98       $  150          

Reserves deducted from assets to which they apply - Allowance for obsolete      
inventory:                                                                      

Balance at beginning of period       $  237        $  280       $  280          
Charged to costs and expenses             -             -            -          
(Deductions) recoveries                                                         
from reserves (2)                      (98)          (43)           -         
Balance at close of period           $  139        $  237       $  280          

Notes:                                                                          
(1) Deductions from reserves represent uncollectible accounts written off less  
recoveries.                                                                     

(2) Deductions from reserves represent obsolete inventory written off.          

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-K Filing		Date		Other Filings
		10/1/92
		10/1/93
		5/4/94
		11/2/94		10-Q
		10/1/98
		2/7/01
		7/31/01
		3/31/02		10-K
		6/15/02
		7/1/02
		7/31/02
		8/1/02
		10/22/02
		12/31/02
		1/31/03		10-Q
		3/30/03		10-K, DEF 14A
		3/31/03
		5/15/03
		5/27/03		8-K
		5/30/03
		5/31/03
		6/2/03
		6/4/03		8-K
		6/23/03
		9/12/03
		9/23/03
		9/28/03		10-Q
		10/11/03
		10/28/03		10-Q
		11/20/03		4
		12/8/03
		12/15/03		4
		12/23/03
		12/29/03		8-K
		12/30/03		8-K
		1/14/04		8-K
		1/29/04		8-K
		2/6/04		SC 13G/A, 8-K
		3/1/04		8-K
		3/19/04
		3/23/04
For The Period Ended		3/28/04		DEF 14A, PREM14A
		4/1/04		8-K
		5/14/04
		5/19/04
		5/21/04
		5/25/04
Filed On / Filed As Of		5/26/04
		6/8/04
		6/23/04
		9/8/04
		9/17/04		3
		9/23/04		3
		10/1/04
		7/31/05
		4/2/06
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