ANOTHER SET OF SPARKLING RESULTS FROM DRS
By Julian Nettlefold, Editor, BATTLESPACE
11 May 07. DRS Technologies, Inc. (NYSE: DRS) today reported record financial results for the fiscal 2007 fourth quarter and year, which ended March 31, 2007. Results for both periods included substantial increases in revenues, operating income, net earnings and earnings per share.
“Fiscal 2007 was our best year yet,” said Mark S. Newman, DRS Technologies’ chairman, president and chief executive officer. “We generated record operating results, including strong organic growth, excellent free cash flow and the highest ever funded year-end backlog. Our fourth quarter also set new records in operational performance. These results position the company well, as we enter the new fiscal year.”
Fiscal 2007 Results
Revenues for fiscal 2007 were $2.82bn, 63 percent higher than revenues of $1.74bn for last fiscal year. The increase was attributable to the benefit of a full year of revenues generated by the company’s acquisition of Engineered Support Systems, Inc. (ESSI), completed during the fourth quarter of fiscal 2006, and the company’s organic revenue growth, which accounted for approximately 13.9 percent of the sales increase.
Operating income of $307.6m for the year ended March 31, 2007 was 60 percent higher than the $192.7m reported for fiscal 2006. The increase was attributable to the higher overall sales volume. The operating margin (operating income as a percentage of revenues) for fiscal 2007 was 10.9 percent, compared with an operating margin of 11.1 percent for fiscal 2006. The fiscal 2007 decrease reflected the sales mix, which included a greater portion of sales generated by typically lower-margin services businesses associated with the company’s Technical Services Segment. Excluding the sales of the Technical Services Segment from both fiscal years, the company’s operating margin for its other three segments improved to 12.1 percent, compared with 11.5 percent a year ago.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $382.5m for fiscal 2007, 60 percent higher than EBITDA of $239.4m reported a year earlier. EBITDA as a percentage of revenues for fiscal 2007 were 13.6 percent. Interest and related expenses for fiscal 2007 were $119.9m, compared with $64.2m a year ago. The increase was due to higher average borrowings outstanding associated with financing the ESSI acquisition in the last quarter of fiscal 2006.
The effective income tax rate for fiscal 2007 was approximately 32 percent, compared with approximately 39 percent for last fiscal year. The lower fiscal 2007 tax rate was due to the recording of $11.6m in discrete cumulative tax benefits throughout the year, primarily related to the company’s export sales under the Extra-Territorial Income (ETI) exclusion. The lower tax rate also reflected the reinstatement of the Research and Development Credit, a reduction in certain state income tax expense, resulting from the company’s internal integration and operational realignment announced October 2006, as well as other individually insignificant items.
Fiscal 2007 net earnings were $127.1m, 56 percent above net earnings of $81.5m for fiscal 2006. Fiscal 2006 net earnings included a $3.0m favorable tax adjustment due to the final resolution of a tax audit of certain previous fiscal years.
Diluted earnings per share (EPS) for fiscal 2007 were $3.12, 17 percent above diluted EPS of $2.67 reported for the prior fiscal year. Fiscal 2007 diluted EPS were reduced by $0.09 per share from the application of the provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 123R (SFAS 123R), “Share-Based Payment,” effective April 1, 2006. Fiscal 2007 diluted EPS were favorably impacted by $0.28 per share in discrete tax benefits, discussed above. Fiscal 2006 diluted EPS of $2.67 included a $0.10 per sh