DRS REPORTS RECORD RESULTS AND RECORD ORDER BACKLOG

08 Feb 08. DRS Technologies, Inc. (NYSE: DRS) today reported record financial results for the third quarter and first nine months of fiscal 2008, which ended December 31, 2007. Results for both periods included higher revenues, operating income, net earnings and earnings per share than the same periods a year earlier. The company’s funded backlog reached a new high of $3.60bn.

“DRS reported solid financial results across the board for the fiscal 2008 third quarter, including exceptionally strong double-digit organic revenue growth,” said Mark S. Newman, chairman, president and chief executive officer of DRS Technologies. “The company also generated robust free cash flow, which we continued to apply to debt reduction. Nine-month results also advanced year over year, demonstrating the strength of the corporation. The results year to date place the company in a strong position to turn in another record fiscal year.”

Fiscal 2008 Third Quarter Results

Consolidated revenues of $836.6m for the third quarter of fiscal 2008 were 23 percent higher than revenues of $680.4m for the same quarter last fiscal year. The increase was attributable entirely to strong organic growth in each of the company’s four operating segments.

Fiscal 2008 third quarter operating income of $91.7m was 20 percent above the $76.6m reported for the same quarter in the previous fiscal year. The increase was due to higher overall revenue generation. The operating margin (operating income as a percentage of revenues) for the fiscal 2008 three-month period was 11.0 percent.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $111.6m for the fiscal 2008 third quarter, 17 percent higher than EBITDA of $95.3m for the third quarter of fiscal 2007. EBITDA as a percentage of revenues was 13.3 percent. Interest and related expenses for the third quarter of fiscal 2008 decreased to $27.4m, 9 percent lower than $30.3m a year ago. The decrease was due to lower average borrowings outstanding.

The effective income tax rate for the third quarter of fiscal 2008 was approximately 34 percent, compared with approximately 25 percent for the same period last fiscal year. The substantially lower effective income tax rate in the fiscal 2007 period primarily related to the company’s export sales under the Extraterritorial Income (ETI) exclusion.

Net earnings of $42.6m for the fiscal 2008 three-month period were 21 percent higher than net earnings of $35.1m reported for the third quarter of fiscal 2007 and included approximately $1.0m in discrete cumulative tax benefits. Last year’s third quarter included $5.5m in discrete cumulative tax benefits.
Excluding the discrete tax benefits from the third quarter of both years, the company would have reported net earnings of $41.6m in the fiscal 2008 third quarter, 41 percent above net earnings of $29.6m for same quarter last year.

Diluted earnings per share (EPS) of $1.03 for the fiscal 2008 third quarter were 20 percent above diluted EPS of $0.86 posted for last year’s third quarter and were based on 41.5m weighted average diluted shares outstanding, compared with 40.7 shares for the same period a year earlier. Third quarter EPS in both years included discrete cumulative tax benefits: $0.02 for the fiscal 2008 third quarter and $0.13 for the fiscal 2007 third quarter. Excluding these discrete tax benefits from the third quarter of both years, the company would have reported diluted EPS of $1.01 for the fiscal 2008 third quarter, 38 percent above diluted EPS of $0.73 for the same quarter last year.

Net cash provided by operating activities for the third quarter of
fiscal 2008 was $57.8m, 97 percent higher than $29.3m reported for the fiscal 2007 third quarter. Free cash flow (net cash provided by operating activities less capital