DRS Technologies Reports Record Second Quarter and Six-Month Results.Business Editors PARSIPPANY, N.J.--(BUSINESS WIRE)--Nov. 7, 2003 Quarter's Revenues, Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and Net Earnings Advance 28%, 27% and 23%, Respectively; Bookings and Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. at New Highs DRS Technologies DRS Technologies, Inc. (commonly known as DRS; formerly known as Diagnostic/Retrieval Systems, Inc.) is a supplier of defense electronic products and systems to the United States Air Force, Army, Coast Guard, Marine Corps, Navy, aerospace and defense prime , Inc. (NYSE NYSE See: New York Stock Exchange : DRS DRS Drives (street suffix) DRS Dispute Resolution Service DRS Doctorandus DRS Department of Rehabilitative Services DRS Direct Registration System (securities) DRS Department of Rehabilitation Services ) today reported record financial results for the second quarter and first six months of fiscal 2004. Results for both periods included significant gains in revenues, operating income and net earnings. Second quarter record new orders for products and services increased funded backlog at the end of the period to the highest level in the company's history. Fiscal 2004 Second Quarter Results For the second quarter ended September September: see month. 30, 2003, revenues were $206.2 million, a 28 percent increase over revenues of $161.2 million for last year's second quarter. Record revenues for the fiscal 2004 three-month period were attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to solid organic growth and acquisitions completed in fiscal 2003. Operating income of $21.2 million was 27 percent higher than the $16.7 million reported for the same quarter of fiscal 2003. Fiscal 2004 second quarter record operating income was attributable to the higher overall sales volume. Operating income as a percentage of sales was 10.3 percent. Net earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Net earnings for the three-month period were 23 percent higher than a year ago at $9.4 million, or $0.41 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, on 23.0 million diluted shares outstanding. Second quarter net earnings last year were $7.7 million, or $0.44 per diluted share, on 17.6 million diluted shares outstanding. Free cash flow (cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses less capital expenditures) for the second quarter was strong at $19.2 million. "DRS's fiscal 2004 second quarter operating results were excellent," said Mark S. Newman, chairman, president and chief executive officer of DRS Technologies. "The company achieved new records for the period in sales and profitability, and robust new order flow produced record backlog, positioning the company for a strong second half." New Contract Awards and Backlog DRS secured a second quarter record of $220.5 million in new orders for products and services during the period, reflecting an increase of 69 percent above $130.6 million in bookings for the comparable prior-year period. For the first half of fiscal 2004, the company was awarded $413.9 million in new contracts, 53 percent higher than the same six-month period in the previous year. Funded backlog at September 30, 2003 climbed to $899.8 million, 38 percent above backlog of $651.5 million at the end of the second quarter of fiscal 2003. New contract awards during the second quarter included: -- $46 million in awards for computers and peripheral Any input, output or storage device connected externally or internally to the computer's CPU, such as a monitor, keyboard, printer, disk, tape, graphics tablet, scanner, joy stick, paddle or mouse. equipment supporting battlefield digitization dig·i·tize tr.v. dig·i·tized, dig·i·tiz·ing, dig·i·tiz·es To put (data, for example) into digital form. dig efforts for U.S. Army, international military and U.S. intelligence operations The variety of intelligence and counterintelligence tasks that are carried out by various intelligence organizations and activities within the intelligence process. Intelligence operations include planning and direction, collection, processing and exploitation, analysis and production, . The largest contract was associated with the United Kingdom's BOWMAN program; -- $45 million in new orders for infrared An invisible band of radiation at the lower end of the visible light spectrum. With wavelengths from 750 nm to 1 mm, infrared starts at the end of the microwave spectrum and ends at the beginning of visible light. sighting and targeting systems supporting the U.S. Army and U.S. Navy. The most significant bookings related to the Mast Mounted Sight, Javelin Anti-Tank Weapon System and Improved Bradley Acquisition Subsystem A unit or device that is part of a larger system. For example, a disk subsystem is a part of a computer system. A bus is a part of the computer. A subsystem usually refers to hardware, but it may be used to describe software. programs; -- $43 million in funding for power generation, distribution, motor control and propulsion systems Noun 1. propulsion system - a system that provides a propelling or driving force system - instrumentality that combines interrelated interacting artifacts designed to work as a coherent entity; "he bought a new stereo system"; "the system consists of a motor and a primarily for U.S. Navy surface ships and submarines, including significant orders supporting the Navy's next generation DD(X) destroyer destroyer, class of warship very fast relative to its length, generally equipped with torpedos, antisubmarine equipment, and medium-caliber and antiaircraft guns. The newest destroyers are equipped with guided missiles as their chief offensive weapon. , and ship control systems and nuclear products for Navy ships, carriers and submarines; -- $26 million in contracts for infrared sensors
electro-optical technology development supporting weapons, remote surveillance, soldier SOLDIER. A military man; a private in the army. 2. The constitution of the United States, amend. art. 3, directs that no soldier shall, in time of peace, be quartered in any house, without the 'consent of the owner; nor in time of war, but in a manner to be systems and electronic countermeasures That form of military science that, by the employment of devices and/or techniques, has as its objective the impairment of the operational effectiveness of enemy activity. See also electronic warfare. ; -- $23 million in new orders to provide engineering and manufacturing services for combat display systems associated with the U.S. Navy's AN/UYQ-70 Advanced Display Systems program supporting ships, aircraft and submarines; and -- $22 million in new contracts for communications systems In telecommunication, a communications system is a collection of individual communications networks, transmission systems, relay stations, tributary stations, and data terminal equipment (DTE) usually capable of interconnection and interoperation to form an integrated whole. , high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. digital imaging systems, avionics avionics (ā'vēŏn`ĭks), electronic instruments used in air or space flight; also the design and production of such instruments. Early planes had few instruments, but as aviation and aircraft became more complex, so did instrumentation. and mission recording systems for U.S. and international military, scientific and industrial applications. Balance Sheet Highlights At September 30, 2003, the company had $102.7 million in cash and cash equivalents. Total debt on September 30, 2003 was $223.3 million, slightly lower than total debt of $225.1 million at the end of fiscal 2003. Segment Results DRS's Electronic Systems Group reported substantial increases in all major metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. for the second quarter of fiscal 2004. Sales of $108.5 million were up 57 percent from a year ago, and operating income of $10.8 million improved by 154 percent over operating income of $4.3 million for the same prior-year period. The increases were due primarily to the company's power systems businesses and the addition of programs associated with its November November: see month. 2002 acquisition of a tactical computer systems business, coupled with improved program performance at the group's United Kingdom DRS Tactical Systems unit, which posted an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the same period last year. The group's 10.0 percent operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: was a 61 percent improvement over the 6.2 percent operating margin reported for the second quarter in the prior year. Bookings of $122.8 million were 77 percent higher than last year and contributed to record funded backlog of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $461.3 million at September 30, 2003, 98 percent above backlog at the same time last year. DRS's Electro-Optical Systems Group generated revenues of $74.6 million for the second quarter, 10 percent higher than sales of $68.0 million in the prior year. Revenues were led by ground-based and airborne airborne /air·borne/ (ar´born) suspended in, transported by, or spread by air. airborne, adj carried through the air. In health care settings, viruses or bacteria may become airborne, e.g. electro-optical sighting system product lines. Operating income of $8.2 million reflected a healthy 11.0 percent operating margin. Last year's exceptionally strong second quarter operating margin of 14.6 percent was the result of a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. contract mix. The group's fiscal 2004 second quarter operating margins were positively influenced by the completion in fiscal 2003 of the transfer and integration of certain ground vehicle and airborne sighting system programs with existing company facilities, resulting in decreased costs. A 108 percent increase in new orders totaling $73.7 million contributed to funded backlog of $308.5 million at the end of the period, 7 percent higher than the same time last year. The company's Flight Safety and Communications Group reported $23.1 million in revenues and $2.2 million in operating income, reflecting a 9.4 percent operating margin for the second quarter of fiscal 2004, compared with $24.2 million in sales and $2.7 million in operating income for the same quarter a year ago. The slight decline in sales, due primarily to reduced volume in commercial satellite component contract manufacturing services and decreases in surface ship surveillance systems, was partially offset by stronger sales in secure communications, international radar and domestic digital imaging products. Slightly lower operating income was due to the decreased revenues in commercial contract manufacturing services. Bookings of $24.0 million contributed to funded backlog of $130.0 million at the end of the quarter, essentially the same as last year. Fiscal 2004 Six-Month Results For the first six months of fiscal 2004, DRS posted record revenues of $373.4 million, 28 percent above revenues of $292.4 million for the same period last year. Higher sales for the six-month period were primarily attributable to the company's power systems and tactical systems businesses, combined with increased shipments in the company's electro-optical systems segment. Operating income was a first-half record at $37.6 million, a 28 percent increase above the $29.4 million reported for the same period a year earlier. Six-month operating income as a percentage of sales was 10.1 percent, the same as the comparable period a year ago. Record operating income during the first half of fiscal 2004 was primarily the result of significantly higher sales in the company's electronic systems segment. For the first six months of the fiscal year, the company posted record EBITDA of $47.6 million, 32 percent higher than the $35.9 million reported for the first half of the prior year. Record net earnings for the first six months of fiscal 2004 were up 28 percent to $16.7 million, or $0.73 per diluted share, on 23.0 million diluted shares outstanding. Net earnings for the six-month period a year earlier were $13.1 million, or $0.74 per diluted share, on 17.6 million diluted shares outstanding. The 30 percent increase in diluted shares outstanding for the first six months of fiscal 2004 was principally due to the equity offering completed by the company in the third quarter of fiscal 2003. Free cash flow for the first half of fiscal 2004 was approximately $15.2 million. "DRS reported very strong results for the six-month period," said Mr. Newman. "For the remainder of the fiscal year, we are well positioned to continue the solid performance achieved in the first half and turn in another record year." Acquisition On November 4, 2003, the company acquired all of the outstanding stock of Integrated Defense Technologies, Inc. (formerly NYSE: IDE (1) (Integrated Development Environment) A set of programs run from a single user interface. For example, programming languages often include a text editor, compiler and debugger, which are all activated and function from a common menu. ). In the transaction, each share of Integrated Defense Technologies, Inc. (IDT IDT Integrated Device Technology, Inc. (Santa Clara, CA, USA) IDT I Don't Think IDT Identity Theft IDT Interrupt Descriptor Table IDT Integrated DNA Technologies IDT Inactive Duty Training IDT Instructional Design & Technology ) common stock was converted into the right to receive a combination of $12.25 in cash and 0.2027 of a share of DRS common stock, or $17.29 per IDT share based on the closing price of DRS's common stock on November 3, 2003. The cash portion of the acquisition, together with $175 million of IDT's net debt that was refinanced, aggregated approximately $436 million at closing. Total consideration for the acquisition, including the value of approximately 4.3 million shares of DRS common stock issued, was approximately $543 million before transaction expenses. The purchase was financed by utilizing existing excess cash on hand, bank borrowings in the form of a $236 million amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and restated credit facility, and the issuance of 6.875 percent senior subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes due 2013 in an aggregate principal amount of $350 million. The company said IDT will be immediately accretive to earnings and cash flow. Mr. Newman commented, "During the first six months of fiscal 2004, we continued to make progress toward our long-term goals Long-term goals Financial goals expected to be accomplished in five years or longer. for growth, and this week, we announced the completion of our acquisition of Integrated Defense Technologies. The addition of IDT is a milestone “Milemarker” redirects here. For the American indie rock band, see Milemarker (band). A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. achievement in the implementation of our business strategy, extensively diversifying our product base and expanding our customer relationships. This transaction has enhanced our content on key U.S. Army and Navy weapons programs, contributed a significant new base of U.S. Air Force programs and greatly expanded DRS's intelligence agency business, creating a formidable, defense electronics industry competitor. We look forward to integrating this new operation with DRS and to building stockholder value by fully leveraging the strengths and synergies this combination offers." Fiscal 2004 and Third Quarter Guidance The company provided guidance for the third quarter of fiscal 2004, indicating it expects revenues to increase by approximately 55 percent above last year's third quarter to range between $255 million and $265 million. The new company guidance pointed to the continuance The adjournment or postponement of an action pending in a court to a later date of the same or another session of the court, granted by a court in response to a motion made by a party to a lawsuit. of a healthy operating margin, with diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.40 to $0.42 anticipated on approximately 25.7 million weighted average diluted shares outstanding, compared with 18.2 million diluted shares in last year's third quarter. For the fiscal year ending March 31, 2004, the company firmed up its earlier guidance, which was based on a closing date assumption of September 30, 2003 for its acquisition of Integrated Defense Technologies. With the completion of the transaction this week, the company's guidance for fiscal 2004 reflects revenues between $940 million and $965 million, an increase of approximately 43 percent over prior-year sales, and includes organic revenue growth of 5 to 7 percent. The company anticipates an operating margin of 10 percent or greater, and diluted earnings per share between $1.68 and $1.71 on approximately 24.7 million weighted average diluted shares outstanding. The company said it expects to generate $28 million to $38 million in free cash flow for the current fiscal year. Outlook "Our outlook for the second half of fiscal 2004 remains very positive, having reported two strong quarters," Mr. Newman concluded. "With the addition of IDT to our solid core operations and an increased defense budget, we anticipate greater momentum over the next half. Long term, we have full confidence that we can play an increasingly greater role in the key interests of the defense community." 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 5,700 people worldwide. For more information about DRS Technologies, please visit the company's web site at www.drs.com. SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. : This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , within the meaning of Section 27A of the Securities Act of 1933 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company's 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 our actual performance or achievements to differ materially from those expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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. The Company undertakes no obligations to update any forward-looking statements, whether as a result of new information, future events or otherwise. Note to Investors: DRS Technologies will host a conference call, which will be simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics broadcast live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . Mark S. Newman, chairman, president and chief executive officer, Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a A. Schneider Schnei·der , Vreni Born 1964. Swiss alpine skier. She won the overall World Cup in 1989, 1994, and 1995, was a four-time world champion, and earned five Olympic medals. , executive vice president and chief financial officer, and Patricia M. Williamson Wil·liam·son , Mount A peak, 4,382.9 m (14,370 ft) high, in the Sierra Nevada of east-central California. , vice president, corporate communications/investor relations, will host the call, which is scheduled for today, Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , November 7, 2003, at 9:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . Listeners can access the call live and archived by visiting DRS's web site at http://www.shareholder.com/drs or at CCBN's institutional investor Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. site at http://www.streetevents.com or individual investor center at http://www.companyboardroom.com. Please allow 15 minutes prior to the call to visit one of these sites and download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. 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,
-------------------
2003(1) 2002(2)
------- -------
Revenues $ 206.2 $ 161.2
Operating Income $ 21.2 $ 16.7
Interest and Related Expenses $ 4.1 $ 2.5
Earnings before Income Taxes $ 16.9 $ 14.2
Income Tax Expense $ 7.4 $ 6.5
Net Earnings $ 9.4 $ 7.7
Net Earnings per Share of Common Stock:
Basic $ .42 $ .45
Diluted $ .41 $ .44
Weighted Average Number of Shares of
Common Stock Outstanding:
Basic 22.5 16.9
Diluted 23.0 17.6
Six Months Ended
September 30,
-----------------
2003(1) 2002(2,3)
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Revenues $ 373.4 $ 292.4
Operating Income $ 37.6 $ 29.4
Interest and Related Expenses $ 7.2 $ 4.8
Earnings before Income Taxes $ 29.9 $ 24.3
Income Tax Expense $ 13.2 $ 11.2
Net Earnings $ 16.7 $ 13.1
Net Earnings per Share of Common Stock:
Basic $ .75 $ .78
Diluted $ .73 $ .74
Weighted Average Number of Shares of
Common Stock Outstanding:
Basic 22.5 16.9
Diluted 23.0 17.6
(1) Fiscal 2004 second quarter and six-month results include the operations of DRS Nytech Imaging Systems, Inc., as a result of the acquisition of Nytech Integrated Infrared Systems on October October: see month. 15, 2002, DRS Tactical Systems, Inc., DRS Tactical Systems (West), Inc., DRS Engineering Development Labs, Inc., DRS Signal Technologies, Inc. and DRS Signal Recording Technologies, Inc., as a result of the acquisition of Paravant Par´a`vant` adv. 1. 1. In front; publicly. 2. Beforehand; first. Inc. on November 27, 2002, DRS Electric Power Technologies, Inc., as a result of the acquisition of Kaman Coordinates:
electromagnetism natural philosophy, physics - the science of matter and energy and their interactions; "his favorite subject was physics" Development Center on January January: see month. 15, 2003, and DRS Power Technology, Inc., as a result of the acquisition of Power Technology Incorporated on February February: see month. 14, 2003. (2) Fiscal 2003 second quarter and six-month results reflect the operations of the Company's DRS Advanced Programs unit, which was sold on November 22, 2002. (3) Fiscal 2003 six-month 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
NON-GAAP FINANCIAL DATA (UNAUDITED)
($ Millions)
Three Months Ended
September 30,
-------------------
Reconciliation of Non-GAAP 2003(1) 2002(2)
------- -------
Financial Data:
Net Earnings $ 9.4 $ 7.7
Income Taxes 7.4 6.5
Interest Income (0.2) (0.2)
Interest and Related Expenses 4.1 2.5
Amortization and Depreciation 5.7 4.4
----- -----
EBITDA(4) $ 26.4 $ 20.9
Income Taxes (7.4) (6.5)
Interest Income 0.2 0.2
Interest and Related Expenses (4.1) (2.5)
Deferred Income Taxes (0.1) 0.2
Changes in Assets and Liabilities,
Net of Effects from Business
Combinations and Divestitures 7.8 11.2
Other, Net 1.3 0.1
----- -----
Net Cash Provided by
Operating Activities $ 24.1 $ 23.6
Capital Expenditures (4.9) (5.2)
Free Cash Flow(5) $ 19.2 $ 18.4
----- -----
Six Months Ended
September 30,
-----------------
Reconciliation of Non-GAAP 2003(1) 2002(2,3)
------ ---------
Financial Data:
Net Earnings $ 16.7 $ 13.1
Income Taxes 13.2 11.2
Interest Income (0.5) (0.7)
Interest and Related Expenses 7.2 4.8
Amortization and Depreciation 11.0 7.5
----- -----
EBITDA(4) $ 47.6 $ 35.9
Income Taxes (13.2) (11.2)
Interest Income 0.5 0.7
Interest and Related Expenses (7.2) (4.8)
Deferred Income Taxes 0.1 -
Changes in Assets and Liabilities,
Net of Effects from Business
Combinations and Divestitures (6.2) 2.9
Other, Net 2.7 1.1
----- -----
Net Cash Provided by
Operating Activities $ 24.3 $ 24.6
Capital Expenditures (9.1) (9.3)
----- -----
Free Cash Flow(5) $ 15.2 $ 15.3
(1) Fiscal 2004 second quarter and six-month results include the operations of DRS Nytech Imaging Systems, Inc., as a result of the acquisition of Nytech Integrated Infrared Systems on October 15, 2002, DRS Tactical Systems, Inc., DRS Tactical Systems (West), Inc., DRS Engineering Development Labs, Inc., DRS Signal Technologies, Inc. and DRS Signal Recording Technologies, Inc., as a result of the acquisition of Paravant Inc. on November 27, 2002, DRS Electric Power Technologies, Inc., as a result of the acquisition of Kaman Corporation's Electromagnetics Development Center on January 15, 2003, and DRS Power Technology, Inc., as a result of the acquisition of Power Technology Incorporated on February 14, 2003. (2) Fiscal 2003 second quarter and six-month results reflect the operations of the Company's DRS Advanced Programs unit, which was sold on November 22, 2002. (3) Fiscal 2003 six-month results reflect the operations of the Company's DRS Ahead Technology unit through the date of sale on May 27, 2002. (4) The Company defines EBITDA as net earnings 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial measure to EBITDA is net cash from operating activities. The table above presents the components of EBITDA and a reconciliation of EBITDA to net cash provided by operating activities. EBITDA is presented as additional information because we believe it to be a useful indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. 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, as determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . 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 and capital expenditures and pay its income taxes. 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, and income taxes. EBITDA, as we defined 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. (5) 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 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 and make other strategic investments. Thus, key assumptions underlying free cash flow are that the Company will be able to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. 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.
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
SECOND QUARTER SEGMENT RESULTS (UNAUDITED)
($ Millions)
Three Months Ended
September 30,
-------------------
2003 2002
------ ------
Revenues
Electronic Systems Group(1,3) $108.5 $ 69.0
Electro-Optical Systems Group(2) 74.6 68.0
Flight Safety and Communications Group 23.1 24.2
------- -------
Consolidated $206.2 $161.2
------- -------
Operating Income
Electronic Systems Group(1,3) $ 10.8 $ 4.3
Electro-Optical Systems Group(2) 8.2 9.9
Flight Safety and Communications Group 2.2 2.7
------- -------
Consolidated $ 21.2 $ 16.7
------- -------
Operating Margin
Electronic Systems Group(1,3) 10.0% 6.2%
Electro-Optical Systems Group(2) 11.0% 14.6%
Flight Safety and Communications Group 9.4% 11.3%
Consolidated 10.3% 10.4%
------- -------
Bookings
Electronic Systems Group(1,3) $122.8 $ 69.2
Electro-Optical Systems Group(2) 73.7 35.4
Flight Safety and Communications Group 24.0 26.0
------- -------
Consolidated $220.5 $130.6
------- -------
Backlog
Electronic Systems Group(1,3) $461.3 $232.4
Electro-Optical Systems Group(2) 308.5 288.1
Flight Safety and Communications Group 130.0 131.0
Other - -
------- -------
Consolidated $899.8 $651.5
------- -------
(1) Fiscal 2004 second quarter results include the operations of DRS Tactical Systems, Inc., DRS Tactical Systems (West), Inc., DRS Engineering Development Labs, Inc., DRS Signal Technologies, Inc. and DRS Signal Recording Technologies, Inc., as a result of the acquisition of Paravant Inc. on November 27, 2002, DRS Electric Power Technologies, Inc., as a result of the acquisition of Kaman Corporation's Electromagnetics Development Center on January 15, 2003, and DRS Power Technology, Inc., as a result of the acquisition of Power Technology Incorporated on February 14, 2003. (2) Fiscal 2004 second quarter results include the operations of DRS Nytech Imaging Systems, Inc., as a result of the acquisition of Nytech Integrated Infrared Systems on October 15, 2002. (3) Fiscal 2003 second quarter results reflect the operations of the Company's DRS Advanced Programs unit, which was sold on November 22, 2002.
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
SIX-MONTH SEGMENT RESULTS (UNAUDITED)
($ Millions)
Six Months Ended
September 30,
-----------------
2003 2002
------ ------
Revenues
Electronic Systems Group(1,3) $190.5 $103.9
Electro-Optical Systems Group(2) 140.2 137.6
Flight Safety and Communications Group 42.7 49.7
Other(4) - 1.3
------- -------
Consolidated $373.4 $292.4
------- -------
Operating Income
Electronic Systems Group(1,3) $ 19.3 $5.6
Electro-Optical Systems Group(2) 14.4 19.7
Flight Safety and Communications Group 3.9 5.0
Other(4) - (0.9)
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Consolidated $ 37.6 $ 29.4
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Operating Margin
Electronic Systems Group(1,3) 10.1% 5.4%
Electro-Optical Systems Group(2) 10.3% 14.3%
Flight Safety and Communications Group 9.2% 10.1%
Other(4) - NM
Consolidated 10.1% 10.1%
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Bookings
Electronic Systems Group(1,3) $223.3 $103.3
Electro-Optical Systems Group(2) 148.6 107.1
Flight Safety and Communications Group 42.0 58.3
Other(4) - 1.1
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Consolidated $413.9 $269.8
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Backlog
Electronic Systems Group(1,3) $461.3 $232.4
Electro-Optical Systems Group(2) 308.5 288.1
Flight Safety and Communications Group 130.0 131.0
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Consolidated $899.8 $651.5
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(1) Fiscal 2004 six-month results include the operations of DRS Tactical Systems, Inc., DRS Tactical Systems (West), Inc., DRS Engineering Development Labs, Inc., DRS Signal Technologies, Inc. and DRS Signal Recording Technologies, Inc., as a result of the acquisition of Paravant Inc. on November 27, 2002, DRS Electric Power Technologies, Inc., as a result of the acquisition of Kaman Corporation's Electromagnetics Development Center on January 15, 2003, and DRS Power Technology, Inc., as a result of the acquisition of Power Technology Incorporated on February 14, 2003. (2) Fiscal 2004 six-month results include the operations of DRS Nytech Imaging Systems, Inc., as a result of the acquisition of Nytech Integrated Infrared Systems on October 15, 2002. (3) Fiscal 2003 six-month results reflect the operations of the Company's DRS Advanced Programs unit, which was sold on November 22, 2002. (4) Fiscal 2003 six-month results reflect the operations of the Company's DRS Ahead Technology unit through the date of sale on May 27, 2002. NM = Not meaningful
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET DATA (UNAUDITED)
($ Thousands)
September 30, March 31,
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2003 2003
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Assets
Cash and Cash Equivalents $ 102,651 $ 95,938
Other Current Assets 294,201 293,361
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Total Current Assets 396,852 389,299
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Property, Plant and Equipment, Net 87,585 87,610
Intangibles and Other Assets 496,645 495,212
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Total Assets $ 981,082 $ 972,121
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Liabilities and Stockholders' Equity
Short-Term Debt $ 195 $ 521
Current Installments of Long-Term Debt 7,615 7,717
Accounts Payable and Other Current Liabilities 269,540 281,037
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Total Current Liabilities 277,350 289,275
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Long-Term Debt, Excluding Current Installments 215,529 216,837
Other Liabilities 28,237 27,829
Net Stockholders' Equity 459,966 438,180
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Total Liabilities and Stockholders' Equity $ 981,082 $ 972,121
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