DRS Technologies Posts Record First Quarter Results; Revenues, Operating Income and Net Earnings Advance 27%, 31% and 39%, Respectively; Backlog Climbs to a New High.

Business Editors

PARSIPPANY, N.J.--(BUSINESS WIRE)--Aug. 8, 2002

DRS Technologies, Inc. (NYSE: DRS) today reported record financial results for the first quarter ended June 30, 2002.

Results included significant increases in revenues, operating income and net earnings. New orders received by DRS brought funded backlog at the end of the period to the highest level in the company's history.

Fiscal 2003 first quarter revenues were $131.2 million, a 27 percent increase over revenues of $103.4 million for the same period last year.

First quarter operating income of $12.7 million was 31 percent higher than the $9.7 million reported for the same three-month period in fiscal 2002. Operating income as a percentage of sales was 9.7 percent, versus 9.4 percent for the previous year.

Earnings before net interest, taxes, depreciation and amortization (EBITDA) were $15.0 million for the first quarter of fiscal 2003, 22 percent higher than EBITDA of $12.3 million for the comparable period a year earlier.

Net earnings for the first three months of the new fiscal year were $5.4 million, or $0.31 per diluted share, on 17.6 million diluted shares outstanding. First quarter net earnings were 39 percent higher than the $3.9 million, or $0.30 per diluted share, in net earnings on 13.0 million diluted shares outstanding, reported a year earlier. The 35 percent increase in diluted shares outstanding for the first quarter of fiscal 2003 was principally due to the equity offering completed by the company in the third quarter of fiscal 2002, which placed approximately 3.8 million additional shares in the marketplace.

"DRS completed the first quarter of fiscal 2003 with excellent results," said Mark S. Newman, chairman, president and chief executive officer of DRS Technologies. "New records were established for first quarter sales and profitability, and backlog reached an all time high of $610.4 million. This positive outcome was driven by strong performance in our electro-optical systems segment and significantly improved results in our flight safety and communications operations."

Record revenues for the first quarter were primarily attributable to the addition of sales generated by electro-optical system programs associated with the acquisition of Boeing's Sensors and Electronic Systems business at the end of the second quarter of fiscal 2002, coupled with higher shipments of electro-optical systems for military ground vehicles. Greater sales from the company's flight safety and communications segment also contributed to the increase. Higher sales were partially offset by lower shipments in the company's Electronic Systems Group, relating to rugged computers and TEMPEST products for government agency and international military customers, timing of shipments for combat display systems, and the sale of the company's DRS Ahead Technology unit on May 27, 2002.

First quarter record operating income was primarily due to higher sales volume overall, increased profitability on electro-optical system programs and improved program performance in the company's flight safety and communications segment. Higher operating income was partially offset by charges in the electronic systems segment primarily for restructuring efforts at a U.K. facility.

"After the close of the first quarter, we completed the acquisition of Eaton's Navy Controls Division," Mr. Newman continued. "Renamed DRS Power & Control Technologies, this operating unit positions DRS as a total ship computing systems provider, expanding our presence in combat information systems to include ships' hull and mechanical equipment. DRS Power & Control Technologies has an experienced management team and a focus on ship networking and automation capabilities, which are strategically significant to our long-term goals for growth in the defense electronic systems business. Contributing a sizable revenue base, core defense programs, strong customer relationships and healthy operating margins, this addition to the Electronic Systems Group is a major step in our growth."

During the first quarter, DRS secured $139.2 million in new orders for products and services, bringing funded backlog at June 30, 2002 to a record $610.4 million, 24 percent above the $494.2 million in backlog reported at the same time last year. Higher backlog at the end of the first quarter of fiscal 2003 reflected the addition of two acquisitions completed by the company in the second quarter of fiscal 2002, offset slightly by the sale of the company's DRS Ahead Technology unit.

New contract awards during the first quarter included:

- $37.3 million in new orders for Second Generation Forward Looking Infrared (SG FLIR) ground vehicle sighting, targeting and weapons systems, soldier systems and electro-optical technology development, primarily supporting the U.S. Army;

- $27.0 million in new contracts for electronic and electro-optical manufacturing services for domestic and international defense, commercial and space-related applications;

- $23.7 million in funding for advanced infrared aircraft sighting, targeting and weapons systems, remote sensing and maritime infrared sensor systems;

- $13.9 million in bookings for rugged computers and peripheral equipment in support of the U.S. Army, intelligence and international military programs;

- $13.8 million in new awards from Lockheed Martin to manufacture and provide engineering development for combat display systems associated with the U.S. Navy's AN/UYQ-70 Advanced Display Systems program in support of ships, aircraft and submarines; and

- $11.1 million in new orders for communications systems, avionics, high-speed digital cameras and mission recording systems for U.S. and international military and industrial applications.

At June 30, 2002, the company had $114.5 million in cash and cash equivalents. Total debt on June 30, 2002 was $139.9 million, compared with $80.6 million at June 30, 2001, reflecting utilization of the company's credit facility for acquisitions. Net debt was $25.4 million, compared with $78.8 million at the end of the first quarter last year.

Free cash flow (cash flow from operations less capital expenditures) for the first quarter was a negative $3.1 million, reflecting higher capital expenditures related to the integration of DRS's acquisition of Boeing's Sensors and Electronic Systems business during last year's second quarter and the payment of $2.5 million in litigation costs associated with the company's settlement entered into and accrued in the fourth quarter of fiscal 2002.

DRS's Electro-Optical Systems Group turned in outstanding performance for the first quarter of fiscal 2003, establishing new records in revenues, operating income, operating margin and backlog. Revenues of $69.0 million were 65 percent above last year's first quarter, primarily due to the addition of sales generated by programs associated with DRS Sensors & Targeting Systems, as a result of the acquisition of this business from Boeing in the second quarter of fiscal 2002. Also contributing to the rise were higher sales from ground vehicle sighting and targeting systems product lines. Operating income was $9.9 million, a 121 percent increase over last year, reflecting a strong operating margin of 14.3 percent. Contributing to the increase in operating income was solid performance in the company's ground and airborne infrared sighting, targeting and sensor systems product lines, as well as commercial electro-optical manufacturing services. New orders valued at $70.9 million in the quarter contributed to record backlog of $327.4 million at June 30, 2002, up 44 percent from the same time a year ago.

The company's Electronic Systems Group generated $34.9 million in revenues and $1.3 million in operating income for the first quarter, compared with $38.1 million and $4.8 million, respectively, for the same period last year. Lower sales of rugged computers and peripheral products for government agencies and international customers, coupled with costs relating to operational efficiencies implemented at the Group's United Kingdom unit, were the primary factors impacting growth and profitability. Operating results were favorably influenced by DRS Surveillance Support Systems, due to the acquisition of this operation in the second quarter of fiscal 2002. The Group received new orders for products and services valued at $34.1 million and posted backlog of $148.9 million at the end of the quarter. For the remainder of fiscal 2003 and beyond, the Electronic Systems Group stands to benefit from the addition of DRS Power & Control Technologies, as a result of the acquisition of Eaton's Navy Controls Division on July 15.

This acquisition is expected to contribute a sizable backlog, approximately $60 million in revenues to the Group's sales in the current fiscal year and be immediately accretive to earnings.

DRS's Flight Safety and Communications Group achieved solid results for the first quarter. Revenues were up 20 percent to $25.5 million. Operating income of $2.3 million reflected an improved margin of 8.9 percent, compared with 3.8 percent last year. Higher sales and profitability were due primarily to an increase in electronic manufacturing services associated with military products, as well as increased shipments and improved operating margins on mission recorder system programs. Higher profits also reflected the benefit of reduced expenses and operating efficiencies, as a result of facility consolidations last year. Strong demand for products and services resulted in $32.3 million in new contract awards, and the Group closed the first quarter with record backlog of $131.6 million, 15 percent higher than the same time last year.

"DRS is well positioned to continue to provide vital support for U.S. and allied forces for the unique challenges facing today's military," Mr. Newman concluded. "With increases realized in this year's defense budget, in addition to those proposed for 2003, funding supporting initiatives of interest to us should create solid opportunities for business growth."

DRS Technologies provides leading edge products and services to government and commercial customers worldwide. Focused on defense electronics, the company develops and manufactures a broad range of mission critical systems and components in the areas of communications, combat systems, rugged computers, electro-optics, power conversion, data storage, digital imaging, flight safety and space.

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: Except for historical information contained herein, the matters set forth in this news release are forward-looking statements The forward-looking statements set forth above involve a number of risks and uncertainties that could cause actual results to differ materially from any such statement, 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.

Note to investors:

DRS Technologies will host a conference call, which will be simultaneously broadcast live over the internet. Mark S. Newman, chairman, president and chief executive officer, Richard A. Schneider, executive vice president, chief financial officer and treasurer, and Patricia M. Williamson, vice president, corporate communications/ investor relations, will host the call, which is scheduled for today, Thursday, August 8, 2002 at 4:00 p.m. EDT. Listeners can access the call live and archived at DRS's site on page http://www.drs.com/investorinfo/index.cfm or at CCBN's institutional investor site at http://www.street events.com or individual investor center at http://www.companyboardroom.com. Please allow 15 minutes prior to the call to visit these sites and download and install any necessary audio software.

(See attached tables.)

                DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
       CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
                 (Millions Except Earnings per Share)

                                        Three Months Ended June 30,
                                         2002(1),(2)          2001
                                         ----                 ----
Revenues                             $  131.2             $  103.4

Operating Income                     $   12.7             $    9.7

Interest and Related Expenses        $    2.3             $    2.1

Earnings before Income Taxes         $   10.1             $    7.4

Net Earnings                         $    5.4             $    3.9

Net Earnings per Share
 of Common Stock:
    Basic                            $    .32             $    .32
    Diluted                          $    .31             $    .30

Weighted Average Number of
 Shares of Common Stock
 Outstanding:
    Basic                                16.8                 12.1
    Diluted                              17.6                 13.0


    (1) Fiscal 2003 first quarter results include the operations
        of DRS Surveillance Support Systems, Inc., as a result of the
        acquisition of Electro Mechanical Systems, Inc., a unit of
        Lockheed Martin Corporation, on August 22, 2001, DRS Sensors &
        Targeting Systems, Inc., as a result of the acquisition of
        Sensors and Electronic Systems, a business of The Boeing
        Company, on September 28, 2001, and DRS Unmanned Technologies,
        Inc., as a result of the acquisition of the U.S.-based
        Unmanned Aerial Vehicle business of Meggitt Defense Systems -
        Texas, Inc., a unit of Meggitt Defense Systems, plc., on April
        11, 2002.

    (2) Fiscal 2003 first quarter results reflect the operations
        of the Company's DRS Ahead Technology unit through the date of
        sale on May 27, 2002.


                DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
                  SELECTED FINANCIAL DATA (UNAUDITED)
                             ($ Millions)


                                        Three Months Ended June 30,
                                         2002(1)              2001
                                         ----                 ----

EBITDA                               $   15.0             $   12.3

Depreciation and Amortization        $    3.2             $    2.9

Capital Expenditures                 $    4.2             $    3.5

Bookings                             $  139.2             $  139.7


                                      June 30,            March 31,
                                         2002(1)              2002
                                         ----                 ----

Backlog(2),(3)                       $  610.4             $  595.3

Cash and Cash Equivalents            $  114.5             $  117.8

Total Debt                           $  139.9             $  139.7

Stockholders' Equity                 $  265.8             $  257.2


    (1) Fiscal 2003 first quarter results include the operations
        of DRS Surveillance Support Systems, Inc., as a result of the
        acquisition of Electro Mechanical Systems, Inc., a unit of
        Lockheed Martin Corporation, on August 22, 2001, DRS Sensors &
        Targeting Systems, Inc., as a result of the acquisition of
        Sensors and Electronic Systems, a business of The Boeing
        Company, on September 28, 2001, and DRS Unmanned Technologies,
        Inc., as a result of the acquisition of the U.S.-based
        Unmanned Aerial Vehicle business of Meggitt Defense Systems -
        Texas, Inc., a unit of Meggitt plc., on April 11, 2002.

    (2) Backlog at June 30, 2002 includes approximately $2.5
        million from DRS Unmanned Technologies, Inc., as a result of
        the acquisition of the U.S.-based Unmanned Aerial Vehicle
        business of Meggitt Defense Systems - Texas, Inc., a unit of
        Meggitt plc., on April 11, 2002.

    (3) Backlog at March 31, 2002 includes approximately $0.8
        million from DRS Ahead Technology, which was sold on May 27,
        2002.