DRS posts record third quarter and nine-month results.

PARSIPPANY, N.J.--(BUSINESS WIRE)--Feb. 4, 1997--Diagnostic/Retrieval Systems Inc. (ASE:DRS)("DRS") today reported record third quarter results and record results for the nine-month period ended Dec. 31, 1996.

Net earnings for the third quarter of fiscal 1997 were up 52 percent to a third quarter record of $1,406,000 versus $924,000 earned for the same period last year. Fully diluted earnings per share were $.21, compared with $.16 earned for the same three-month period in fiscal 1996. Revenues increased 50 percent to a third quarter record of $38,379,000, up from $25,563,000 for the third quarter a year ago.

For the first nine months of fiscal 1997 ended Dec. 31, 1996, DRS reported a 57 percent increase in net earnings to $3,922,000, a record for the period, above $2,495,000 posted for the same period a year earlier. Fully diluted earnings per share climbed 90 percent to $.59, versus $.31 for the same nine-month period last year. Revenues jumped 51 percent to a nine-month record of $99,242,000 from $65,628,000 reported for the first three quarters of the previous fiscal year.

The substantial revenue growth during the third quarter and nine-month period was attributable primarily to shipments relating to the company's display workstation and electro-optical system product lines, as well as to increases in certain commercial product sales, which include revenues from businesses acquired within the last year.

Third quarter operating income increased 49 percent to $3,254,000, compared with $2,181,000 reported in the prior year. For the first nine months of the fiscal year, DRS reported a record $8,754,000 in operating income, 64 percent higher than $5,339,000 posted for the same period last year. The improvement in operating income during both periods was due primarily to the overall increase in revenues and to higher profits generated by certain of the company's commercial product lines.

DRS booked approximately $25 million in new business during the third quarter and approximately $69 million year-to-date, resulting in a backlog of funded orders amounting to $119 million at Dec. 31, 1996.

Mark S. Newman, DRS's chairman, president and chief executive officer, stated: "The company's results in the third quarter and year-to-date extend our four-year record of solid performance. The strategic acquisitions completed during this fiscal year in the specialty magnetic tape head business area have enhanced our leadership position in this industry sector and are expected to continue to favorably impact operating results in the fourth quarter and beyond. Our strategy for growth by securing new program awards while pursuing follow-on business in the defense electronics marketplace, coupled with the acquisition of companies that complement our core technologies in both the defense and commercial industries, continues to be validated."

DRS is a diversified, high-technology company serving global government and commercial markets. Principally a developer and manufacturer of a variety of sophisticated, leading edge systems used for the processing, display and storage of data, DRS provides its customers with a broad range of products, including electronic sensor, electronic imaging and electro-optical systems, and offers a full complement of technical support services. Its commercial and industrial products are used mainly by the airline, banking, computer disk drive, security, transportation, retail sales and broadcast industries. -0-

           Diagnostic/Retrieval Systems Inc. and Subsidiaries
              Condensed Consolidated Statements of Earnings
                                (Unaudited)

                                 Three Months Ended Dec. 31
                                    1996              1995

Revenues                        $38,379,000       $25,563,000
Operating Income                $ 3,254,000       $ 2,181,000
Earnings before Income Taxes    $ 2,304,000       $ 1,514,000
Net Earnings                    $ 1,406,000       $   924,000
Net Earnings per Share
 of Common Stock
   Primary                      $       .24       $       .16
   Fully Diluted                $       .21       $       .16
Weighted Average Number
 of Shares of Common Stock
 Outstanding
  Primary                         5,774,000         5,677,000
  Fully diluted                   8,970,000         8,303,000

                                 Nine Months Ended Dec. 31,
                                    1996             1995

Revenues                        $99,242,000       $65,628,000
Operating Income                $ 8,754,000       $ 5,339,000
Earnings before Income Taxes    $ 6,429,000       $ 4,089,000
Net Earnings                    $ 3,922,000       $ 2,495,000
Net Earnings per Share
  of Common Stock
   Primary                      $       .68       $       .31
   Fully Diluted                $       .59       $       .31
Weighted Average Number
 of Shares of Common Stock
 Outstanding
   Primary                        5,733,000         5,681,000
   Fully Diluted                  8,918,000         6,271,000

CONTACT: Diagnostic/Retrieval Systems, Inc.

Patricia M. Williamson, 201/898-1500

or

Kehoe, White, Savage & Co., New York

John P. Kehoe/Van Negris, 212/888-1616