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09 Feb 05. DRS Technologies, Inc. (NYSE: DRS – News) today reported record financial results for the third quarter and nine months ended December 31, 2004. Fiscal 2005 third quarter results included significant gains in revenues, operating income, net earnings and diluted earnings per share. A quarterly record in new orders for products and services increased funded backlog at the end of the period to a new high.

“DRS reported an outstanding third quarter,” said Mark S. Newman, chairman, president and chief executive officer of DRS Technologies.

“Higher sales and profitability were achieved for the three- and nine-month periods, and free cash flow was exceptionally strong. We set a quarterly record in new orders, driving funded backlog at the end of the period to the highest level ever achieved by the company.”

Fiscal 2005 Third Quarter Results

DRS’s results for the reported periods of fiscal 2005 and 2004 reflect discontinued operations relating to the company’s decision to sell its DRS Broadcast Technology and DRS Weather Systems units. Fiscal 2005 third quarter revenues from continuing operations were $338.2m, a 23 percent increase over revenues from continuing operations of $274.4m for last year’s third quarter. The increase was primarily attributable to strong organic growth in the company’s power and tactical systems businesses and to the benefit of a full quarter of sales from the company’s acquisition of Integrated Defense Technologies, Inc. (IDT) completed on November 4, 2003. Organic revenue growth accounted for approximately 14.3 percent of the increase in the quarter. Operating income of $39.2m was 41 percent higher than the $27.9m reported for the same quarter of fiscal 2004. The increase was attributable to the higher overall sales volume and the strong performance of both of the company’s operating segments. Operating income as a percentage of sales was 11.6 percent, compared with 10.2 percent for the same three-month period in the prior fiscal year.

Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were $48.1 million for the third quarter ended December 31, 2004, 34 percent higher than EBITDA from continuing operations of $35.8m reported for the comparable period a year earlier. EBITDA as a percentage of sales was 14.2 percent, compared with 13.0 percent for the same period a year earlier. Earnings from continuing operations for the third quarter of fiscal 2005 were 50 percent higher than a year ago at $16.8 million, or $0.60 per diluted share, on weighted average diluted shares outstanding of 28.0m. Third quarter net earnings were $17.5m, or $0.62 per diluted share. Last year’s earnings from continuing operations for the same quarter were $11.2, or $0.44 per diluted share, on 25.7 million weighted average diluted shares outstanding. The 9 percent increase in diluted shares outstanding for the fiscal 2005 third quarter was principally due to the issuance of shares in connection with company’s acquisition of IDT in the third quarter of fiscal 2004.

Net cash provided by operating activities of continuing operations for the third quarter of fiscal 2005 increased to $34.0m from $12.7m for the comparable quarter the year before. Free cash flow (net cash provided by operating activities less capital expenditures) was strong at $26.8m, significantly higher than free cash flow of $6.1m for the same quarter a year ago.

New Contract Awards and Backlog

DRS secured $359.8m in new orders for products and services from continuing operations for the three-month period, slightly higher than the comparable prior-year period. For the first nine months of fiscal 2005, the company was awarded a record $1.04bn in new contracts, 35 percent higher than the same nine-month period in the previous year.

Funded backlog from continuing operations at December 31, 2004 climbed to $1.31bn, 4 percent above

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