DRS Technologies to Acquire Eaton Corporation's Navy Controls Division.

Business Editors

PARSIPPANY, N.J.--(BUSINESS WIRE)--May 28, 2002

DRS Technologies, Inc. (NYSE: DRS) announced today that it has signed a definitive agreement to acquire the assets and certain liabilities of the Navy Controls Division of Eaton Corporation (NYSE: ETN) for $92.2 million in cash.

The transaction is expected to close by June 30 and will be accretive to earnings in DRS's current fiscal year ending March 31, 2003.

The Navy Controls Division (NCD), located in Milwaukee, Wisconsin, and Danbury, Connecticut, is a leading supplier of high-performance power conversion and instrumentation and control systems for the U.S. Navy's combatant fleet, including nuclear-powered and conventionally-powered ships, in addition to specialized industrial customers. Products include ship electric propulsion equipment, power electronics equipment, high-performance networks, shipboard control equipment and control panels, tactical displays and specialty reactor plant instrumentation and control equipment.

"In its first twelve months of operation under DRS ownership, NCD is expected to contribute approximately $90 million to annual sales and $0.20 to diluted earnings per share," said Mark S. Newman, DRS Technologies' chairman, president and chief executive officer. "We view this transaction as a major step in our growth, reinforcing DRS's commitment as a leading defense electronics systems industry consolidator."

He added, "Few companies have the customer relationships, requisite technical capabilities and market presence as Eaton's Navy Controls Division. With a major installed base of electronic equipment in the fleet, NCD stands to benefit from the Navy's backfit, transformational conversion and modernization initiatives, as well as from new ship installation. The addition of NCD to our Electronic Systems Group strongly complements our own presence in Naval advanced command and control computer display and other ship systems."

NCD has an outstanding reputation and the most diverse variety of power electronics equipment deployed or under development in Naval propulsion systems. NCD has captured key positions on next generation programs, including the Virginia class submarine and the CVNX future aircraft carrier, and has played a significant role in promoting electric drive propulsion for the Navy's next new ship design, the DD-X. NCD designed and built the power electronics equipment for the Navy's highly successful LSV2 scale model submarine. LSV2 is the first vessel to operate with modern high-performance electric drive equipment. The business employs approximately 600 people and is comprised of four major product lines: Navy Nuclear Systems, Ship Control Systems/Networks, Propulsion Systems and Industrial Systems.

The Division's heritage stems from the combination of two legacy companies, Cutler-Hammer, Inc. (Cutler-Hammer) and Consolidated Controls Corporation (Consolidated Controls). NCD's present operations consist of the combined Navy product lines from these two entities. NCD has provided products to the Navy for nearly a century. The propulsion plants of every nuclear-powered ship ever sailed by the Navy have utilized NCD products, and it has a substantial incumbent position, with an installed base of products on virtually every U.S. Naval surface ship and submarine. NCD is the only supplier to the nuclear Navy for flat panel displays and specialty detector equipment. Many NCD products are replaced a number of times over a ship's life through retrofit, backfit and spares programs, including field service. NCD's replacement business, coupled with NCD's incumbent position for new surface ship and submarine platforms, is expected to provide DRS with an annuity-like business base for many years to come.

NCD has created solid positions on emerging and potentially significant program opportunities with the U.S. Navy, as well. The Navy's transformational shift to electric-drive propulsion systems, which will be completely dependent on advanced power conversion equipment to create a more stealthy, capable combat fleet, allows NCD to capitalize on this emerging initiative. This combination will uniquely position DRS as a total ship computing systems provider. NCD's annuity-like business, significant intellectual property, experienced management team, and focus on ship networking and automation capabilities are expected to be strategically significant to DRS's long-term goals for growth in the defense-related electronic systems business.

DRS expects to acquire NCD by utilizing existing cash currently invested in short-term securities. The transaction is subject to the satisfaction of customary closing conditions. Bear, Stearns & Co. Inc. is serving as financial advisor to DRS on the transaction.

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.