DRS Technologies Posts Record Fourth Quarter and Fiscal Year Results; Revenues, Operating Income and Net Earnings Up 21%, 33% and 70% for the Year.

Business Editors

PARSIPPANY, N.J.--(BUSINESS WIRE)--May 20, 2002

Record New Orders Increase Backlog to a New High

DRS Technologies, Inc. (NYSE:DRS) today reported record financial results for the fourth quarter and fiscal year ended March 31, 2002. Results for both periods included significant increases in revenues, operating income and net earnings. A record amount of new orders received by DRS during both periods brought funded backlog at year-end to the highest level in the company's history.

Fiscal 2002 revenues were $517.2 million, a 21 percent increase over revenues of $427.6 million for last year, exceeding analysts' expectations.

Record operating income of $49.8 million was 33 percent higher than the $37.5 million reported for fiscal 2001. Operating income as a percentage of sales was 9.6 percent, versus 8.8 percent for the previous year, a 9 percent improvement.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $62.0 million for fiscal 2002, 18 percent higher than EBITDA of $52.5 million for the prior year.

Net earnings for the twelve-month period were $20.3 million, or $1.41 per diluted share, 70 percent higher than net earnings of $12.0 million, or $1.01 per diluted share, a year earlier.

Free cash flow (cash flow from operations less capital expenditures) for the fiscal year was approximately $13.7 million. At March 31, 2002, the company had $117.8 million in cash and cash equivalents, compared with $2.3 million at the same time last year, reflecting cash received from the company's equity offering completed on December 19, 2001. Total debt on March 31, 2002 was $139.7 million, compared with $83.1 million at March 31, 2001, reflecting utilization of the company's credit facility for acquisitions. Net debt (long-term debt less cash on hand) was $21.7 million, compared with $80.0 million at the end of fiscal 2001.

"Fiscal 2002 was a great year for DRS," said Mark S. Newman, chairman, president and chief executive officer of DRS Technologies. "We completed a sizable acquisition, achieved record financial results, including sales that surpassed a half-billion for the first time, and captured a large amount of new contract awards, several of which are multi- year awards on new programs with long-term potential and strategic significance for our future. We also completed an equity offering that placed approximately 3.8 million additional shares of DRS common stock in the marketplace and resulted in $113.6 million in net proceeds for the company. This transaction, in addition to an expanded $240 million credit facility secured at favorable rates in the second quarter, strengthened the company, significantly enhancing our cash position and providing the resources to continue our acquisition program - a key component of our plans for growth."

Record revenues for the fiscal year were primarily attributable to the addition of sales generated by programs associated with the acquisition of the Sensors and Electronic Systems business of The Boeing Company (NYSE: BA) at the end of the second quarter. Higher sales from each of the company's operating segments also contributed to the increase, led by shipments of second generation infrared ground vehicle electro-optical sighting systems.

Fiscal year record operating income was primarily due to higher sales overall, as well as improved program performance in the company's flight safety and communications segment. In addition, the company's adoption of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," effective April 1, 2001, contributed $4.7 million to operating income, $2.5 million to net earnings and $0.17 to earnings per share in fiscal 2002. Had the company adopted SFAS No. 142 a year earlier, fiscal 2001 operating income, net earnings and earnings per share would have increased $5.3 million, $2.8 million and $0.23, respectively.

"After the close of the fiscal year, we announced the asset acquisition of the U.S.- based Unmanned Aerial Vehicle (UAV) business of Meggitt Defense Systems - Texas, Inc.," Mr. Newman continued. "This acquisition positions us in the growing UAV market supporting special military operations and civil applications. It also provides the company with an opportunity to build platforms and leverage our role in leading edge information superiority initiatives. While not expected to make a big contribution to operating earnings in the near term, we are excited about the long-term prospects of this business area."

He added, "Effective April 30, we also were pleased to announce our move to the New York Stock Exchange, which has increased the company's visibility in domestic and worldwide investment communities, providing access to a broader investor base."

DRS secured a record $193.4 million and $577.2 million in new orders for products and services during the fourth quarter and fiscal year, respectively, reflecting increases of 48 percent and 21 percent, respectively, over bookings for the comparable prior-year periods. Funded backlog at March 31, 2002 climbed to $595.3 million, 30 percent above $456.5 million in backlog at the end of fiscal 2001. Record fiscal 2002 backlog reflected the addition of two acquisitions completed by the company in the second quarter.

New contract awards during the fourth quarter included:

- $91.1 million in new contracts 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;

- $29.8 million in new orders 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;

- $26.0 million in new awards for advanced infrared aircraft

sighting, targeting and weapons systems, and maritime infrared

sensor systems;

- $15.4 million in funding for electronic and electro-optical

manufacturing services for domestic and international defense,

commercial and space- related applications;

- $15.0 million in new contracts for communications systems,

avionics, high- speed digital cameras and mission recording

systems for U.S. and international military and industrial

applications;

- $10.3 million in orders for rugged computers and peripheral

equipment in support of the U.S. Army, intelligence and

international military programs;

- $6.3 million in awards for surface search radar and other

surface ship sensor systems.

The company's Electronic Systems Group achieved strong operating results for the fiscal year, posting increases in revenues, operating income and operating margin. Revenues increased 11 percent to a record $206.6 million, driven by the addition of part- year sales from DRS Surveillance Support Systems, as a result of the acquisition of this operation in the second quarter. Operating income was $18.1 million, an 18 percent rise over the prior year, reflecting an operating margin of 8.7 percent, a 6 percent improvement from a year ago. Notable performance was achieved on programs associated with U.S.-based rugged computers for the U.S. Army. Progress on engineering development contracts related to U.S. Navy tactical display systems and radar support systems programs also were important factors driving the increases in sales and operating income. Strong demand for products and services resulted in $194.9 million in new contract awards, and the group ended the year with backlog of $148.5 million.

DRS's Electro-Optical Systems Group turned in solid performance for fiscal 2002, establishing new records in revenues, operating income, bookings and backlog. Revenues of $208.2 million were 41 percent above the prior-year level. Higher revenues were primarily due to the addition of approximately six months of sales generated by programs associated with DRS Sensors & Targeting Systems, as a result of the acquisition of this business from Boeing at the end of the second quarter. Operating income was $27.4 million, a 16 percent increase over last year, reflecting a healthy operating margin of 13.1 percent. Contributing to increases in sales and operating income was strong performance in the company's ground and airborne infrared sighting, targeting and sensor systems product lines, as well as electro-optical technology development. Record new orders valued at $264.2 million were 61 percent higher than last year, boosting backlog at year end to a record $324.6 million, up 66 percent from the same time a year ago.

The company's Flight Safety and Communications Group achieved solid performance for fiscal 2002. Revenues were up 12 percent to $93.2 million. Operating income of $5.1 million reflected a margin of 5.5 percent, compared with a loss last year. Higher sales and profitability were due primarily to increased shipments of data communications products and ultra high-speed digital cameras, as well as increased demand for manufacturing services associated with space-related products. Higher profits also reflected the benefit of reduced expenses and operating efficiencies, as a result of facilities consolidations during the year. Strong demand for products and services resulted in $109.2 million in new contract awards, and the group ended the year with record backlog of $121.3 million, 15 percent higher than last year.

For the fourth quarter of fiscal 2002, DRS reported record operating results. Revenues of $156.4 million were 20 percent above revenues of $129.9 million for the same period last year. Higher sales during the period were primarily attributable to acquisition- related revenues, coupled with increased sales volume in the company's Electronic Systems Group and Electro-Optical Systems Group.

Operating income was $15.5 million, 32 percent higher than $11.8 million reported for the fourth quarter a year ago. Operating income as a percentage of sales was 9.9 percent, versus 9.1 percent for the same three-month period a year ago, a 9 percent improvement. Higher operating income for the fourth quarter of fiscal 2002 was the result of the overall increase in sales, a reduction in operating expenses as a result of facilities consolidation and improved program performance, primarily in the company's flight safety and communications segment.

EBITDA was a new quarterly record at $19.2 million, a 26 percent rise above the $15.2 million for the same three months in the previous fiscal year.

Fiscal 2002 fourth quarter net earnings were 51 percent higher at $6.6 million, or $0.38 per diluted share, compared with $4.4 million, or $0.34 per diluted share, for the last three months in the prior year.

The favorable effect of the company's adoption of SFAS No. 142 on fourth quarter operating income, net earnings and earnings per share was $1.1 million, $0.6 million and $0.03, respectively. Had the company adopted SFAS No. 142 a year earlier, fiscal 2001 fourth quarter operating income, net earnings and earnings per share would have increased $1.3 million, $0.7 million and $0.05, respectively.

Free cash flow for the fourth quarter of fiscal 2002 was approximately $10.8 million.

"DRS completed fiscal 2002 with an excellent fourth quarter, establishing new records in sales, operating income, EBITDA and earnings," Mr. Newman commented. "We met or exceeded our performance targets, delivering steadily improved margins while continuing to grow our top line. DRS captured $193 million in new orders for the three- month period, 48 percent higher than last year's fourth quarter, reflecting strong customer demand for DRS's products and services and boosting year-end backlog to a new high. These record bookings are clear evidence that the battle-proven performance provided by our systems is being sought to support U.S. and allied forces for the unique challenges facing today's military operations, especially in ground, sea and air combat, surveillance, reconnaissance and intelligence gathering missions. In light of the steady increase in defense spending projected over the long term, with particular concentration in high-end defense electronics systems, the prospects for DRS Technologies in fiscal 2003 and beyond remain excellent."

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, 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, Monday, May 20, 2002 at 10:00 a.m. EDT. Listeners can access the call live and archived at DRS's site on page http://www.drs.com/ investorInfo/quarterly.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.

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

                                        Three Months Ended March 31,
                                           2002 (1)        2001
                                          ---------      --------

Revenues                                 $   156.4    $    129.9
Operating Income                         $    15.5    $     11.8
Interest and Related Expenses            $     2.6    $      2.2
Earnings before Income Taxes             $    12.4    $      9.2
Net Earnings                             $     6.6    $      4.4
Net Earnings per Share of Common Stock:
         Basic                           $     .40    $      .37
         Diluted                         $     .38    $      .34
Weighted Average Number of Shares of
 Common Stock Outstanding:
         Basic                                16.6          11.9
         Diluted                              17.5          12.7

                                            Year Ended March 31,
                                             2002 (1)      2001
                                            --------     --------
Revenues                                 $   517.2    $    427.6
Operating Income                         $    49.8    $     37.5
Interest and Related Expenses            $     9.8    $     11.5
Earnings before Income Taxes             $    38.4    $     25.0
Net Earnings                             $    20.3    $     12.0
Net Earnings per Share of Common Stock:
         Basic                           $    1.52    $     1.14
         Diluted                         $    1.41    $     1.01
Weighted Average Number of Shares of
 Common Stock Outstanding:
         Basic                                13.4          10.5
         Diluted                              14.5          12.4

(1) Fiscal 2002 and fourth 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, and 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.

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


                   Three Months Ended March 31,  Year Ended March 31,
                   ----------------------------  --------------------
                        2002 (1)      2001        2002 (1)    2001
                       ---------    --------     ---------  --------

EBITDA                $    19.2    $   15.2     $   62.0   $   52.5

Depreciation and
 Amortization         $     4.2    $    3.8     $   13.8   $   16.2

Capital Expenditures  $     3.1    $    5.8     $   13.6   $   16.2

Bookings              $   193.4    $  130.8     $  577.2   $  478.8


                                       March 31,       March 31,
                                        2002 (1)         2001
                                       ---------       ---------

Backlog (2)                         $    595.3      $    456.5

Cash and Cash Equivalents           $    117.8      $      2.3

Total Debt                          $    139.7      $     83.1

Stockholders' Equity                $    257.2      $    111.9


(1) Fiscal 2002 and fourth 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, and 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.

(2) Backlog at March 31, 2002 includes approximately $94.4 million
from DRS Sensors & Targeting Systems, Inc., as a result of the
acquisition of the Sensors and Electronic Systems business of The
Boeing Company on September 28, 2001, and $16.6 million from 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.