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DRS REPORTS RECORD THIRD QUARTER PROFITS

11 Feb 03. DRS Technologies, Inc. (NYSE:DRS – News) reported record financial results for the third quarter and nine-month period ended December 31, 2002.

Results for both periods included significant gains in revenues, operating income, net earnings and bookings. Strong new orders for products and services, combined with acquisition-related backlog, increased funded backlog at the end of the period to the highest level in the company’s history.

For the third quarter of fiscal 2003, revenues were $167.5m, a 19 percent increase, (2002: $141.2m). Fiscal 2003 third quarter operating income of $16.6m was 19 percent higher, (2002: $13.9m). Operating income as a percentage of sales was 9.9 percent, versus 9.8 percent for the previous year. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $20.6m for the third quarter of fiscal 2003, 21 percent higher, (2002: $17.0m). EBITDA as a percentage of sales was 12.3 percent, versus 12.0 percent for last year’s third quarter.

Net earnings for the three-month period were 38 percent higher than a year ago at $7.4 million, or $0.41 per diluted share, on 18.2 million diluted shares outstanding, (2002: $5.4m , or $0.38 per diluted share, on 14.1 million diluted shares outstanding).

“DRS turned in another excellent quarter, posting strong top- and bottom-line financial results for the period,” said Mark S. Newman, chairman, president and chief executive officer of DRS Technologies. “New records were achieved in revenues, operating income, earnings, bookings and backlog. Results included strong operating margins in each of our business segments. A high level of new contract awards, combined with backlog from Paravant acquired during the third quarter, increased funded backlog at December 31st to an all time high, well positioning the company for the remainder of the fiscal year and beyond.”

Record revenues for the third quarter of fiscal 2003 were primarily attributable to the addition of sales from the acquisition of the Navy Controls Division of Eaton Corporation (NYSE:ETN – News) on July 15, 2002, as well as revenues from the acquisition of Paravant Inc., which was completed on December 2, 2002. Last year’s third quarter results included $5.2m in revenues from the company’s DRS Advanced Programs and DRS Ahead Technology units, which were sold by the company during the third quarter and first quarter of fiscal 2003, respectively.

Third quarter record operating income was due primarily to higher sales volume overall, as well as improved profitability in the company’s flight safety and communications segment, continued solid operating performance in the electro-optical systems segment and stronger margins in the electronic systems segment due to acquisition-related operations.

Newman continued, “During the third quarter, we completed an equity offering that resulted in approximately 5.5 million additional shares of DRS common stock in the marketplace and $145.3m in net proceeds for the company. This transaction, coupled with an expanded credit facility secured in the third quarter, enhanced our cash position and our ability to further implement our strategic plans for long-term growth. These plans include acquiring businesses with complementary technologies that will help us achieve our stated goals for double-digit annual revenue growth.

“In line with this strategy, during the third quarter we successfully completed our tender offer for Paravant Inc., a leading producer of computers, controllers and communications systems serving military C4ISR initiatives. Paravant’s business is highly compatible with our core rugged computer systems product base supporting our interests in Army and international military initiatives and has increased our presence in Air Force and intelligence programs, as well. Contributing a strong backlog of orders to our Electronic Systems Group, including contracts assoc

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