SUBJECT COMPANY:
Engineered Support Systems, Inc.
Commission File No. 000-13880
DRS Technologies Reports Record Second Quarter Results; Record New Orders for
Products and Services Increase Backlog to a New High
PARSIPPANY, N.J.--(BUSINESS WIRE)--Nov. 4, 2005--DRS Technologies,
Inc. (NYSE: DRS) today reported record financial results for the
second quarter and first six months of fiscal 2006 ended September 30,
2005. Results for the quarter included higher revenues, operating
income, earnings and diluted earnings per share than last year's
second quarter. A quarterly record in new orders for products and
services increased funded backlog at the end of the period to a new
high.
"DRS's second quarter results were excellent," said Mark S.
Newman, chairman, president and chief executive officer of DRS
Technologies. "Higher sales and profitability were achieved for the
three- and six-month periods, and bookings set a new quarterly record.
At September 30th, funded backlog was at $1.73 billion, the highest
level ever achieved by the company, and our outlook for the second
half of fiscal 2006 is very positive."
Fiscal 2006 Second Quarter Results
Fiscal 2006 second quarter revenues were $361.9 million, 14
percent higher than revenues of $318.1 million for last year's second
quarter. Organic revenue growth accounted for approximately 5.6
percent of the increase, with the balance of revenue growth
attributable to acquisitions completed during fiscal 2005 and the
first quarter of fiscal 2006.
Operating income of $38.6 million was 14 percent above the $33.8
million reported for the second quarter of fiscal 2005. Record
operating income for the second quarter of fiscal 2006 was
attributable to higher sales volume and the strong performance of the
company's operating segments. Operating income as a percentage of
sales was 10.7 percent, slightly above 10.6 percent reported for the
same quarter in the prior fiscal year.
Net earnings before interest, taxes, depreciation and amortization
(EBITDA) were $48.3 million for the fiscal 2006 three-month period, 10
percent higher than EBITDA from continuing operations of $43.9 million
reported for the second quarter a year earlier. Fiscal 2006 second
quarter EBITDA as a percentage of sales was 13.3 percent.
Net earnings for the second quarter of fiscal 2006 were $19.0
million, or $0.66 per diluted share, on weighted average diluted
shares outstanding of 28.7 million(1). For the second quarter last
year, earnings from continuing operations were $14.0 million, or $0.50
per diluted share, on 27.8 million weighted average diluted shares
outstanding.
Free cash flow (net cash provided by operating activities of
continuing operations less capital expenditures) was $39.6 million for
the second quarter, compared with $21.7 million for the same quarter
of fiscal 2005. Net cash provided by operating activities was $49.5
million, and capital asset expenditures were $9.9 million in the
second quarter of fiscal 2006.
"In addition to reporting strong financial results, important
milestones during the second quarter included our announcement of a
definitive agreement to acquire Engineered Support Systems, Inc.
(Nasdaq: EASI) for $43.00 per share in cash and stock, and our
successful competition for the Tactical Range Thermal Imagers
program," said Mr. Newman.
"The acquisition of Engineered Support Systems will create a
strong, diverse company, adding a significant business base in
technical and logistics support services, integrated military
electronics and support equipment with broad access to a variety of
government funding accounts, including procurement and operations and
maintenance (O&M)." The company said the acquisition is expected to
close by March 31, 2006, the company's fiscal year-end.
"During the quarter, DRS booked $46 million in initial funding on
the Tactical Range Thermal Imagers program, an indefinite
delivery/indefinite quantity (IDIQ) contract valued at $660 million
over five years," he continued. "Our successful bid for this program
affirms our position as an industry leader in uncooled,
high-performance thermal imaging solutions. The Tactical Range Thermal
Imagers contract builds on our success with the Thermal Weapon Sights
II program, establishing a significant hand-held infrared sensor
product line and extending our soldier systems customer base to
include the Marine Corps.
"This new contract, in addition to several other key awards
received during the quarter, resulted in the achievement of record
bookings, boosting funded backlog to over $1.7 billion for the first
time."
New Contract Awards and Backlog
DRS secured a quarterly record of $598.0 million in new orders for
products and services during the fiscal 2006 second quarter, 78
percent above bookings for the comparable prior-year period. Funded
backlog at September 30, 2005 climbed to a record $1.73 billion, 37
percent above funded backlog of $1.27 billion at the same time last
year and 32 percent higher than funded backlog recorded at March 31,
2005, the company's fiscal 2005 year-end.
The company's C4I segment booked $215.8 million in new contracts
during the second quarter of fiscal 2006, including:
-- $60 million to provide electronic manufacturing services,
primarily associated with the U.S. Army's Bradley vehicles,
international F/A-18 aircraft and the U.S. Navy's AN/UYQ-70
Advanced Display Systems for installation on ships, submarines
and aircraft;
-- $48 million for battlefield digitization systems, the largest
orders associated with a multi-year, indefinite
delivery/indefinite quantity (IDIQ) U.S. Army contract to
produce rugged Applique Computer Systems for the Force XXI
Battle Command, Brigade and Below (FBCB2) program;
-- $44 million to provide data collection and processing
equipment, including receivers, tuners, signal processing
systems and recorders supporting U.S. intelligence operations;
-- $34 million to provide Naval nuclear control products, other
ship controls, power generation, distribution and propulsion
systems supporting U.S. Navy ships, carriers and submarines;
and
-- $14 million for data link, ship telephone products and other
secure and non-secure communications systems.
New contracts for DRS's Surveillance & Reconnaissance segment were
$382.2 million for the second quarter and included:
-- $126 million for ground-based thermal imaging systems, the
largest orders associated with the U.S. Army's Improved
Bradley Acquisition Subsystems (IBAS), Javelin missile systems
and Horizontal Technology Integration (HTI) program, which
incorporate Second Generation Forward Looking Infrared (FLIR)
technology;
-- $87 million for weapons and sensor products utilizing uncooled
infrared technology, the largest awards related to the new,
competitively-awarded multi-year Tactical Range Thermal
Imagers program for the U.S. Marine Corps and the U.S. Army's
Thermal Weapon Sights II program;
-- $40 million for weapons, cable and test manufacturing, air
combat training, range support and control electronics, the
largest contract for the U.S. Navy's MK 41 Vertical Launch
System;
-- $31 million for advanced electro-optical technology programs,
the largest awards related to infrared assemblies supporting
HTI ground thermal sighting systems. Other bookings included
orders for remote sensing supporting advanced military and
space surveillance applications;
-- $22 million to produce airborne thermal imaging systems and
FLIR sensors, including support of the Mast Mounted Sight on
the U.S. Army's OH-58D Kiowa Warrior helicopters and infrared
countermeasures for aircraft;
-- $18 million for electronic warfare, ship network systems and
avionics, the most significant contract related to unmanned
threat emitters used in electronic warfare training; and
-- $10 million for embedded test and diagnostic systems, the
largest award for Direct Support Electrical System Test Sets
(DSESTS) used on the Abrams Main Battle Tanks and the Bradley
Fighting Vehicles.
Balance Sheet Highlights
At September 30, 2005, DRS had $257.3 million in cash and cash
equivalents. The company prepaid $10.0 million of its term loan debt
during the second quarter and $20.0 million during the first half of
fiscal 2006.
Total debt at September 30, 2005 was $708.4 million, compared with
$730.3 million at March 31, 2005, the company's fiscal 2005 year-end,
and net debt (total debt less cash) was $451.1 million at the end of
the second quarter, compared with $423.4 million at fiscal 2005
year-end. Stockholders' equity increased to $716.5 million at the end
of the second quarter of fiscal 2006 from $671.4 million at March 31,
2005.
Second Quarter Segment Results
DRS's C4I Group achieved second quarter record results, reporting
higher revenues, operating income, bookings and funded backlog for the
three-month period ended September 30, 2005, compared with the same
prior-year period. Revenues of $194.4 million for the second quarter
of fiscal 2006 were up 16 percent from $168.1 million in sales for the
second quarter a year ago. The increase in revenues for the group was
primarily attributable to higher shipments of tactical computer
systems, partially offset by lower sales in Naval power systems.
Operating income of $19.7 million was a 12 percent increase over
operating income of $17.5 million for last year's second quarter. The
Group reported a 10.1 percent operating margin. Bookings of $215.8
million during the three-month period were 21 percent higher than the
comparable period a year earlier and contributed to a record funded
backlog of $692.1 million at September 30, 2005, compared with $623.6
million at the same time last year.
Results for DRS's Surveillance & Reconnaissance Group set a new
quarterly record in revenues, operating income, operating margin,
bookings and backlog, with funded backlog for the group exceeding $1.0
billion for the first time. Revenues of $167.5 million were up 12
percent from $150.0 million for same quarter in the previous year.
Higher operating income of $21.1 million was a 29 percent increase
over the $16.3 million in operating income reported for the same
quarter a year earlier and reflected a strong 12.6 percent operating
margin, compared with 10.9 percent for last year's second quarter. The
increases in sales and profitability were due primarily to the
addition of operating results from an acquisition completed in the
third quarter last year. Exceptionally strong new orders of $382.2
million in the second quarter were 143 percent above the comparable
period a year ago and contributed to a quarterly record in funded
backlog of $1.04 billion at September 30, 2005, 62 percent higher than
backlog at the same time a year earlier.
Fiscal 2006 Six-Month Results
For the first six months of fiscal 2006, DRS posted record
revenues of $700.4 million, 15 percent above revenues of $609.2
million for the same period last year. Higher revenues for the first
half were primarily attributable to the addition of sales from
acquisitions completed last year and in the first quarter of fiscal
2006, as well as to organic growth, especially in the company's
tactical systems product line. Organic revenue growth accounted for
approximately 7.3 percent of the increase in the six-month period.
Operating income was a first-half record at $73.6 million, an 18
percent increase above the $62.3 million reported for the same period
a year earlier. Six-month operating income as a percentage of sales
was 10.5 percent, compared with 10.2 percent a year ago. Record
operating income during the first half of fiscal 2006 was primarily
due to higher sales volume and improved operating margins on
international contract manufacturing services and communications
products.
The company posted record EBITDA of $93.2 million for the first
six months of the fiscal year, 14 percent higher than the $81.9
million reported for the first half of last year.
Record earnings for the first six months of fiscal 2006 were up 32
percent to $33.0 million, or $1.15 per diluted share, on 28.6 million
weighted average diluted shares outstanding(1). Earnings from
continuing operations for the same six-month period a year earlier
were $25.0 million, or $0.90 per diluted share, on 27.6 million
weighted average diluted shares outstanding.
Free cash flow for the first half of fiscal 2006 was approximately
$18.7 million, compared with $35.0 million for the same period last
year. The decrease in the six-month period was due to the effect of
negative free cash flow in the first quarter of fiscal 2006, which
resulted from higher tax payments, a $7.5 million payment in
connection with the settlement of litigation(2) and higher interest
expense as a result of the company's fiscal 2005 $200 million debt
offering of 6-7/8 percent senior subordinated notes due 2013. Net cash
provided by operating activities was $35.0 million, and capital asset
expenditures were $16.3 million.
Outlook
DRS issued initial guidance for the third quarter of fiscal 2006,
indicating it anticipates revenues of $370 million to $380 million,
compared with $338.2 million in sales for the third quarter of fiscal
2005. For the quarter ending December 31, 2005, DRS expects diluted
earnings per share of $0.63 to $0.65 on approximately 29.0 million
weighted average diluted shares outstanding, compared with $0.60 in
diluted earnings per share from continuing operations on 28.0 million
shares outstanding for the third quarter last year.
For fiscal 2006, the company upwardly adjusted guidance, which
does not include the impact from the acquisition of Engineered Support
Systems (ESSI), expected to close some time during the company's
fiscal fourth quarter ending March 31, 2006. The company's new
guidance included revenues of $1.50 billion to $1.53 billion,
approximately 16 percent higher than fiscal 2005 sales. DRS continued
to target an operating margin of approximately 11.0 percent. Without
consideration for the ESSI acquisition, the company expects full-year
diluted earnings per share of $2.55 to $2.60, based on weighted
average diluted shares outstanding of approximately 28.8 million, an
increase of approximately 23 percent over the $2.09 in diluted
earnings per share from continuing operations in fiscal 2005. The
company reiterated its guidance for fiscal 2006 free cash flow of $40
million to $50 million.
"The strong performance achieved in the first half bodes well for
the accomplishment of our objectives for the full fiscal year," stated
Mr. Newman.
DRS Technologies, headquartered in Parsippany, New Jersey,
provides leading edge products and services to defense, government
intelligence and commercial customers. Focused on defense technology,
DRS develops and manufactures a broad range of mission critical
systems. The company employs 6,000 people worldwide.
For more information about DRS Technologies, please visit the
company's web site at www.drs.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995: This press release contains forward-looking
statements, within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, that are based on management's beliefs and
assumptions, current expectations, estimates and projections. Such
statements, including statements relating to DRS Technologies'
expectations for future financial performance, are not considered
historical facts and are considered forward-looking statements under
the federal securities laws. These statements may contain words such
as "believes," "anticipates," "plans," "expects," "intends,"
"estimates" or similar expressions. These statements are not
guarantees of the Company's future performance and are subject to
risks, uncertainties and other important factors that could cause
actual performance or achievements to differ materially from those
expressed or implied by these forward-looking statements and include,
without limitation, demand and competition for the Company's products
and other risks or uncertainties detailed in the Company's Securities
and Exchange Commission filings. Given these uncertainties, you should
not rely on forward-looking statements. Such forward-looking
statements speak only as of the date on which they were made, and the
Company undertakes no obligations to update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT: DRS
Technologies and Engineered Support Systems intend to file with the
Securities and Exchange Commission one or more registration statements
on Form S-4 that will include a joint prospectus and proxy statement
to stockholders of DRS Technologies, Inc. and Engineered Support
Systems, Inc. and other relevant documents in connection with the
proposed transaction. INVESTORS AND SECURITY HOLDERS OF DRS
TECHNOLOGIES AND ENGINEERED SUPPORT SYSTEMS ARE URGED TO READ THE
JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT MATERIALS IF AND
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT DRS TECHNOLOGIES, ENGINEERED SUPPORT SYSTEMS AND THE
PROPOSED TRANSACTION. Investors and security holders may obtain a free
copy of these materials (when they are available) and other documents
filed with the Securities and Exchange Commission at the Securities
and Exchange Commission's web site at www.sec.gov. A free copy of the
joint proxy statement/prospectus, when it becomes available, also may
be obtained from Engineered Support Systems, Inc., 201 Evans Lane, St.
Louis, MO 63121, Attn: Investor Relations, and from DRS Technologies,
Inc., 5 Sylvan Way, Parsippany, NJ 07054, Attn: Investor Relations. In
addition, investors and security holders may access copies of the
documents filed with the Securities and Exchange Commission by
Engineered Support Systems on its web site at
http://www.engineeredsupport.com, and investors and security holders
may access copies of the documents filed with the Securities and
Exchange Commission by DRS Technologies on its web site at
http://www.drs.com. Engineered Support Systems, DRS Technologies and
their respective executive officers and directors may be deemed to be
participants in the solicitation of proxies from their respective
stockholders with respect to the proposed transaction. Information
regarding DRS Technologies' directors and executive officers is
available in its proxy statement filed with the Securities and
Exchange Commission by DRS Technologies on June 30, 2005, and
information regarding Engineered Support Systems' directors and
executive officers is available in its proxy statement filed with the
Securities and Exchange Commission by Engineered Support Systems on
January 31, 2005. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained the
joint proxy statement/prospectus and other relevant materials to be
filed with the Securities and Exchange Commission when they become
available.
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any
sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
(1) Fiscal 2006 second quarter and six-month earnings and earnings per
share reflect a favorable tax adjustment of $3.0 million and
$0.10, respectively, primarily due to the final resolution of an
audit by taxing authorities of the results of certain of the
Company's previous fiscal years.
(2) On May 4, 2005, the Company entered into a settlement agreement
with plaintiffs Miltope Corporation and IV Phoenix Group, Inc.,
pursuant to which the Company agreed to pay $7.5 million to the
plaintiffs, and litigation involving the parties was resolved to
their satisfaction, with the elimination of all outstanding
claims. The Company recorded a $6.5 million charge during fiscal
2005 and a $1.0 million charge during fiscal 2004 related to the
settlement. The settlement was paid during the first quarter of
fiscal 2006.
Note to Investors:
DRS Technologies will host a conference call, which simultaneously
will be broadcast live over the Internet. Mark S. Newman, chairman,
president and chief executive officer, Richard A. Schneider, executive
vice president and chief financial officer, and Patricia M.
Williamson, vice president, corporate communications and investor
relations, will host the call, which is scheduled for today, Friday,
November 4, 2005 at 1:30 p.m. EST. Listeners can access the call live
and archived by visiting DRS's web site at
http://www.shareholder.com/drs or by visiting Thomson CCBN's
institutional investor site at http://www.streetevents.com or
individual investor center at http://www.fulldisclosure.com. Please
allow 15 minutes prior to the call to visit one of these sites and
download and install any necessary audio software.
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(Millions Except Earnings per Share)
Three Months Ended
September 30,
------------------
2005(1) 2004
------ ----
Revenues $ 361.9 $ 318.1
Operating Income $ 38.6 $ 33.8
Interest and Related Expenses $ 12.3 $ 9.0
Earnings from Continuing Operations
before Income Taxes $ 27.5 $ 24.3
Income Tax Expense $ 8.6 $ 10.4
Earnings from Continuing Operations(3) $ 19.0 $ 14.0
Earnings from Discontinued Operations(2) $ - $ 0.4
Net Earnings(3) $ 19.0 $ 14.4
Basic Earnings per Share from
Continuing Operations(3) $ .68 $ .52
Diluted Earnings per Share from
Continuing Operations(3) $ .66 $ .50
Weighted Average Number of Shares of
Common Stock Outstanding:
Basic 27.7 27.1
Diluted 28.7 27.8
Six Months Ended
September 30,
------------------
2005(1) 2004
------- ----
Revenues $ 700.4 $ 609.2
Operating Income $ 73.6 $ 62.3
Interest and Related Expenses $ 24.5 $ 18.0
Earnings from Continuing Operations
before Income Taxes $ 51.7 $ 43.5
Income Tax Expense $ 18.7 $ 18.6
Earnings from Continuing Operations(3) $ 33.0 $ 25.0
Earnings from Discontinued Operations(2) $ - $ 1.2
Net Earnings(3) $ 33.0 $ 26.2
Basic Earnings per Share from
Continuing Operations(3) $ 1.20 $ .92
Diluted Earnings per Share from
Continuing Operations(3) $ 1.15 $ .90
Weighted Average Number of Shares of
Common Stock Outstanding:
Basic 27.6 27.0
Diluted 28.6 27.6
(1) Fiscal 2006 second quarter and six-month results include the
operations of Night Vision Equipment Co., Inc., DRS Codem Systems,
Inc. and WalkAbout Computers, Inc., as a result of acquisitions by
the Company on December 14, 2004, April 15, 2005 and June 27,
2005, respectively.
(2) Fiscal 2005 second quarter and six-month results reflect earnings
from discontinued operations from the Company's DRS Broadcast
Technology and DRS Weather Systems units, which were sold on March
10, 2005.
(3) Fiscal 2006 second quarter and six-month earnings and earnings per
share reflect a favorable tax adjustment of $3.0 million and
$0.10, respectively, primarily due to the final resolution of an
audit by taxing authorities of the results of certain of the
Company's previous fiscal years.
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
($ Millions)
Three Months Ended
September 30,
--------------------
2005(1) 2004
------- ----
Reconciliation of Non-GAAP Financial Data:
Earnings from Continuing Operations(2) $ 19.0 $ 14.0
Income Taxes 8.6 10.4
Interest Income (2.1) (0.2)
Interest and Related Expenses 12.3 9.0
Amortization and Depreciation 10.5 10.7
--------- ---------
EBITDA(3) $ 48.3 $ 43.9
Income Taxes (8.6) (10.4)
Interest Income 2.1 0.2
Interest and Related Expenses (12.3) (9.0)
Deferred Income Taxes - 0.5
Changes in Assets and Liabilities, Net of
Effects from Business Combinations and
Divestitures 18.5 0.7
Other, Net 1.5 2.0
--------- ---------
Net Cash Provided by Operating Activities of
Continuing Operations $ 49.5 $ 27.9
Capital Expenditures (9.9) (6.2)
--------- ---------
Free Cash Flow(4) $ 39.6 $ 21.7
Six Months Ended
September 30,
--------------------
2005(1) 2004
------- ----
Reconciliation of Non-GAAP Financial Data:
Earnings from Continuing Operations(2) $ 33.0 $ 25.0
Income Taxes 18.7 18.6
Interest Income (3.9) (0.3)
Interest and Related Expenses 24.5 18.0
Amortization and Depreciation 20.9 20.6
--------- ---------
EBITDA(3) $ 93.2 $ 81.9
Income Taxes (18.7) (18.6)
Interest Income 3.9 0.3
Interest and Related Expenses (24.5) (18.0)
Deferred Income Taxes (0.5) (0.4)
Changes in Assets and Liabilities, Net of
Effects from Business Combinations and
Divestitures (22.1) (0.7)
Other, Net 3.7 4.1
--------- ---------
Net Cash Provided by Operating
Activities of Continuing Operations $ 35.0 $ 48.6
Capital Expenditures (16.3) (13.6)
--------- ---------
Free Cash Flow(4) $ 18.7 $ 35.0
(1) Fiscal 2006 second quarter and six-month results include the
operations of Night Vision Equipment Co., Inc., DRS Codem Systems,
Inc. and WalkAbout Computers, Inc., as a result of acquisitions by
the Company on December 14, 2004, April 15, 2005 and June 27,
2005, respectively.
(2) Fiscal 2006 second quarter and six-month earnings and earnings per
share reflect a favorable tax adjustment of $3.0 million and
$0.10, respectively, primarily due to the final resolution of an
audit by taxing authorities of the results of certain of the
Company's previous fiscal years.
(3) The Company defines EBITDA as net earnings from continuing
operations before net interest and related expenses (primarily
amortization of debt issuance costs), income taxes, depreciation
and amortization. The Company believes that the most directly
comparable GAAP financial measure to EBITDA is net cash provided
by operating activities of continuing operations. The preceding
tables present the components of EBITDA and a reconciliation of
EBITDA to net cash provided by operating activities of continuing
operations. EBITDA is presented as additional information because
we believe it to be a useful indicator of an entity's debt
capacity and its ability to service its debt. EBITDA is not a
substitute for operating income, net earnings or net cash flows
provided by operating activities of continuing operations, as
determined in accordance with generally accepted accounting
principles. EBITDA is not a complete net cash flow measure because
EBITDA is a measure of liquidity that does not include reductions
for cash payments for an entity's obligation to service its debt,
fund its working capital, business acquisitions and capital
expenditures, pay its income taxes and fund its discontinued
operations. Rather, EBITDA is one potential indicator of an
entity's ability to fund these cash requirements. EBITDA also is
not a complete measure of an entity's profitability because it
does not include costs and expenses for depreciation and
amortization, interest and related expenses, income taxes and the
results of operations of discontinued operations. EBITDA, as we
define it, may differ from similarly named measures used by other
entities and, consequently, could be misleading unless all
entities calculate and define EBITDA in the same manner.
(4) The Company discloses free cash flow because the Company believes
that it is a measurement of cash flow generated that is available
for investing and financing activities. Free cash flow is defined
as net cash provided by operating activities of continuing
operations less capital expenditures. Free cash flow represents
cash generated after paying for interest on borrowings, income
taxes, capital expenditures and changes in working capital, but
before repaying outstanding debt and investing cash to acquire
businesses, making other strategic investments and funding
discontinued operations. Thus, key assumptions underlying free
cash flow are that the Company will be able to refinance its
existing debt when it matures with new debt, and that the Company
will be able to finance any new acquisitions it makes by raising
new debt or equity capital. Free cash flow, as we define it, may
differ from similarly named measures used by other entities and,
consequently, could be misleading unless all entities calculate
and define free cash flow in the same manner.
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ----------------
2005(1) 2004 2005(1) 2004
------- ---- ------- ----
Organic Growth Calculation:
Total Revenues $ 361.9 $318.1 $ 700.4 $609.2
Less Revenues from Acquisitions
Owned Less Than One Year (25.9) - (47.0) -
--------- ------ -------- -------
Organic Revenues $ 336.0 $318.1 $ 653.4 $609.2
Organic Revenue Growth(2) 5.6% 7.3%
(1) Fiscal 2006 second quarter and six-month results include the
operations of Night Vision Equipment Co., Inc., DRS Codem Systems,
Inc. and WalkAbout Computers, Inc., as a result of acquisitions by
the Company on December 14, 2004, April 15, 2005 and June 27,
2005, respectively.
(2) Certain investors consider organic revenue growth to be an
important metric in assessing a company's reported revenues from
period to period. We define organic revenues as revenues recorded
by DRS's subsidiaries once they are owned by the Company for at
least twelve months and exclude revenues of divested and
discontinued subsidiaries for all periods. Organic growth, as we
define it, may differ from similarly named measures used by other
entities and, consequently, could be misleading, unless all
entities calculate and define organic growth in the same manner.
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
SECOND QUARTER SEGMENT RESULTS (UNAUDITED)
($ Millions)
Three Months Ended
September 30,
-------------------
2005 2004
--------- ---------
C4I Group(1) $ 194.4 $ 168.1
Surveillance & Reconnaissance Group(2) 167.5 150.0
----------------------------------------------------------------------
Consolidated $ 361.9 $ 318.1
----------------------------------------------------------------------
Operating Income
C4I Group(1) $ 19.7 $ 17.5
Surveillance & Reconnaissance Group(2) 21.1 16.3
Other (2.2) -
----------------------------------------------------------------------
Consolidated $ 38.6 $ 33.8
----------------------------------------------------------------------
Operating Margin
C4I Group(1) 10.1% 10.4%
Surveillance & Reconnaissance Group(2) 12.6% 10.9%
Consolidated 10.7% 10.6%
----------------------------------------------------------------------
Bookings
C4I Group(1) $ 215.8 $ 178.1
Surveillance & Reconnaissance Group(2) 382.2 157.6
----------------------------------------------------------------------
Consolidated $ 598.0 $ 335.7
----------------------------------------------------------------------
Backlog
C4I Group(1) $ 692.1 $ 623.6
Surveillance & Reconnaissance Group(2) 1,039.9 641.5
----------------------------------------------------------------------
Consolidated $1,732.0 $1,265.1
----------------------------------------------------------------------
(1) Fiscal 2006 second quarter results include the operations of DRS
Codem Systems, Inc. and WalkAbout Computers, Inc., as a result of
acquisitions by the Company on April 15, 2005 and June 27, 2005,
respectively.
(2) Fiscal 2006 second quarter results include the operations of Night
Vision Equipment Co., Inc., as a result of its acquisition by the
Company on December 14, 2004.
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
SIX-MONTH SEGMENT RESULTS (UNAUDITED)
($ Millions)
Six Months Ended
September 30,
-------------------
2005 2004
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Revenues
C4I Group(1) $ 384.9 $ 326.7
Surveillance & Reconnaissance Group(2) 315.5 282.5
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Consolidated $ 700.4 $ 609.2
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Operating Income
C4I Group(1) $ 39.2 $ 32.6
Surveillance & Reconnaissance Group(2) 36.8 29.7
Other (2.4) -
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Consolidated $ 73.6 $ 62.3
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Operating Margin
C4I Group(1) 10.2% 10.0%
Surveillance & Reconnaissance Group(2) 11.7% 10.5%
Consolidated 10.5% 10.2%
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Bookings
C4I Group(1) $ 451.7 $ 326.9
Surveillance & Reconnaissance Group(2) 666.8 352.1
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Consolidated $1,118.5 $ 679.0
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Backlog
C4I Group(1) $ 692.1 $ 623.6
Surveillance & Reconnaissance Group(2) 1,039.9 641.5
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Consolidated $1,732.0 $1,265.1
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(1) Fiscal 2006 six-month results include the operations of DRS Codem
Systems, Inc. and WalkAbout Computers, Inc., as a result of
acquisitions by the Company on April 15, 2005 and June 27, 2005,
respectively.
(2) Fiscal 2006 six-month results include the operations of Night
Vision Equipment Co., Inc., as a result of its acquisition by the
Company on December 14, 2004.
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET DATA (UNAUDITED)
($ Thousands)
September 30, March 31,
2005 2005
----------- -----------
Assets
Cash and Cash Equivalents $ 257,254 $ 306,852
Other Current Assets 517,645 488,187
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Total Current Assets 774,899 795,039
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Property, Plant and Equipment, Net 144,062 143,264
Goodwill, Intangibles and Other Assets 953,007 948,338
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Total Assets $1,871,968 $1,886,641
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Liabilities and Stockholders' Equity
Current Installments of Long-Term Debt $ 2,600 $ 2,652
Accounts Payable and Other Current Liabilities 381,969 412,583
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Total Current Liabilities 384,569 415,235
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Long-Term Debt, Excluding Current Installments 705,775 727,611
Other Liabilities 65,167 72,367
Stockholders' Equity 716,457 671,428
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Total Liabilities and Stockholders' Equity $1,871,968 $1,886,641
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CONTACT: DRS Technologies, Inc.
Patricia M. Williamson, 973-898-1500