DRS TECHNOLOGIES REPORTS RECORD FOURTH QUARTER AND FISCAL YEAR RESULTS
12 May 06. DRS Technologies, Inc. (NYSE: DRS) today reported record financial results for the fiscal 2006 fourth quarter and year ended March 31, 2006.
“Results for both periods set new records with substantial increases in key metrics across the board, including double-digit organic growth,” said Mark S. Newman, chairman, president and chief executive officer of DRS Technologies. “Fourth quarter performance was exceptionally strong, with record new orders during the period bringing funded backlog at year end to a new high of approximately $2.40bn, which provides a solid outlook for fiscal 2007.”
Fiscal 2006 Results
Fiscal 2006 revenues were $1.74bn, 33 percent higher than revenues of $1.31bn for fiscal 2005. Organic revenue growth accounted for approximately 13.0 percent of the increase, with the balance of revenue growth primarily attributable to the company’s acquisition of Engineered Support Systems, Inc. (ESSI) in the fourth quarter of fiscal 2006. Operating income of $192.7m in fiscal 2006 was 35 percent above the $143.1m reported for the prior year. As a percentage of sales, operating income was 11.1 percent, compared with 10.9 percent for the previous year. Record operating income for fiscal 2006 was attributable to the higher sales volume, primarily as a result of the company’s January 31, 2006 acquisition of ESSI, now known as the Sustainment Systems & Services (S3) Group, as well as the strong performance of the company’s other two operating segments.
Fiscal 2006 net earnings before interest, taxes, depreciation and amortization
(EBITDA) were $239.4m, 32 percent higher than EBITDA from continuing operations of $181.2m reported a year earlier. Fiscal 2006 EBITDA as a percentage of sales was 13.8 percent, the same as fiscal 2005. Net earnings for fiscal 2006 were up 34 percent to $81.5m, or $2.67 per diluted share, on 10 percent higher weighted average diluted shares outstanding of 30.6m, compared with 27.8 million weighted average diluted shares outstanding a year ago.1 Fiscal 2005 earnings from continuing operations were $58.1m, or $2.09 per diluted share. Net cash provided by operating activities for fiscal 2006 was $156.6m, up 15 percent from $136.2m in net cash provided by operating activities of continuing operations reported the year before. Free cash flow (net cash provided by operating activities
of continuing operations less capital expenditures) was strong at $113.4 million
for fiscal 2006, up 12 percent from a year earlier and exceeding the company’s targeted ratio of 1:1 of free cash flow to net earnings. Fiscal 2006 free cash flow included the impact of higher tax payments and higher interest expense as a result of bank borrowings, primarily to finance acquisitions and the company’s fiscal 2006 and 2005 debt offerings. DRS financed the cash portion of the acquisition of ESSI on January 31, 2006 by utilizing existing cash on hand, bank borrowings and $945 million in new debt securities, including options exercised later by debt security holders. Fiscal 2006 capital expenditures were $43.2m.
“In addition to our excellent financial performance, we accomplished a number of
important initiatives in fiscal 2006 that are expected to continue to benefit the company in fiscal 2007 and beyond,” said Mr. Newman. “These include:
• Completion of the acquisition of Engineered Support Systems and progress
achieved toward the integration of this operation with DRS;
• Completion of our offering of $945m of new debt securities, including $350m aggregate principal amount of 6.625 percent senior notes due 2016, $250m aggregate principal amount of 7.625 percent senior subordinated notes due 2018, and $345m aggregate principal amount of 2 percent convertible senior notes due 2026;
• Completion of two other acquisitions – one that broadened our intelligence technologies capabilities and customer base worldwide, and another