DRS RESULTS EXCEED EXPECTATIONS
03 Nov 06. DRS Technologies, Inc. (NYSE: DRS) today reported strong financial results for the second quarter and first six months of fiscal 2007 ended September 30, 2006. Results for both periods included significant increases in revenues, operating income and net earnings, and a quarterly record in new orders for products and services increased funded backlog at the end of the period to a new high.
“Higher sales and profitability were achieved for the three- and six-month periods, including approximately 17 percent organic revenue growth for the quarter, and we set a quarterly record in new orders for products and services, driving funded backlog at the end of the period to more than $2.7bn, the highest level achieved by the company to date,” said Mark S. Newman, DRS Technologies’ chairman, president and chief executive officer.
Fiscal 2007 Second Quarter Results
Fiscal 2007 second quarter revenues were a quarterly record of $711.5m, 97 percent higher than revenues of $361.9m for last year’s second quarter. The
company’s organic revenue growth was strong, accounting for approximately 17.1 percent of the sales increase, with the balance of the increase attributable to the company’s acquisition of Engineered Support Systems, Inc. (ESSI) completed in the fourth quarter of fiscal 2006.
Operating income of $71.9m in the quarter was 86 percent higher than the $38.6m reported for the second quarter of fiscal 2006 and was attributable to the higher overall sales volume and strong performance of the company’s operations, notably the company’s C4I segment. Fiscal 2007 second quarter operating income as a percentage of sales was 10.1 percent. Operating income and operating margin included the impact of $3.7m in charges for employee severance, as a result of the company’s realignment of its operations, announced on October 2, 2006. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $90.6m for the fiscal 2007 three-month period, 88 percent higher than EBITDA of $48.3m reported for the second quarter a year earlier. EBITDA as a percentage of sales was 12.7 percent. Interest and other expense (income), net for the second quarter of fiscal 2007 was $30.4m, compared with $10.6m for the same quarter a year ago. The increase was due to higher interest expense related to borrowings associated with financing the ESSI acquisition. The effective income tax rate for the fiscal 2007 second quarter was approximately 39 percent, compared with approximately 31 percent for last year’s second quarter.
Last year’s second quarter effective income tax rate reflected the benefit of a favorable tax adjustment, as a result of final resolution of a tax audit for certain previous fiscal years. Net earnings for the second quarter of fiscal 2007 were $25.2m, 33 percent above net earnings of $19.0 million for the same quarter last year. Last year’s second quarter net earnings included a $3.0m favorable tax adjustment due to the tax audit of certain previous fiscal years.
Diluted earnings per share (EPS) of $0.62 for the fiscal 2007 second quarter included $0.08 in reductions: $0.03 due to company’s implementation 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, and $0.05 due to employee severance charges related to the company’s realignment of its operations. Fiscal 2007 second quarter diluted EPS were based on weighted average diluted shares outstanding of 40.5 million, compared with 28.7 million shares for the same quarter last year. Last year’s second quarter diluted EPS were $0.56 without the favorable tax adjustment due to the tax audit of certain previous fiscal years. Including the $0.10 per diluted share tax
benefit, last year’s second quarter diluted EPS were $0.66.
Net cash provided by operating activities for the second quarter of fiscal 20