Exhibit 99
[ESSI logo]
ENGINEERED SUPPORT SYSTEMS, INC.----------------------------------------------
201 Evans Lane o St. Louis, MO 63121-1126
For further information, please contact
Gary C. Gerhardt
(314) 553-4982
ENGINEERED SUPPORT POSTS
FOURTH QUARTER AND FISCAL 2005 RESULTS
o QUARTERLY REVENUES UP 2% TO $262.3 MILLION; EXCEED $1 BILLION FOR
YEAR
o QUARTERLY NET EARNINGS FROM CONTINUING OPERATIONS UP 12% TO $24.0
MILLION
o FOURTH QUARTER EPS FROM CONTINUING OPERATIONS OF $.55 VS. $.51 IN
2004
ST. LOUIS, MO. - DECEMBER 13, 2005 - ENGINEERED SUPPORT SYSTEMS,
INC. (Nasdaq: EASI) reported record quarterly net earnings from continuing
operations of $24.0 million, or $.55 per diluted share, for the fourth
quarter ended October 31, 2005, compared to $21.3 million, or $.51 per
diluted share, for the fourth quarter of last year. Net revenues increased
2% to $262.3 million compared to the fourth quarter of last year.
Fourth quarter operating income from continuing operations of $38.1 million
increased 13% above the $33.7 million reported for the fourth quarter of the
prior year. As a percentage of net revenues, operating income from
continuing operations was 14.5% for the most recently completed quarter as
compared to 13.1% for the fourth quarter of 2004. Reported operating results
for the fourth quarter of 2005 included legal, accounting and other costs
totaling $1.7 million, or $.02 per diluted share after-tax, related to the
Company's pending merger with DRS Technologies, Inc. (NYSE: DRS), a global
provider of defense electronics products and systems, which was announced on
September 22, 2005. Pending required shareholder and regulatory approvals,
the merger transaction is expected to be completed during the first calendar
quarter of 2006.
The Company's operating results for the fourth quarter of 2005 were also
negatively impacted by temporary production delays on its Deployable Power
Generation and Distribution System (DPGDS) program. However, the program was
returned to full rate production during the latter half of the most recently
completed quarter as previously reported by the Company. Revenue
contributions from the DPGDS program totaled $12.2 million and $37.9
million, respectively, for the fourth quarters of 2005 and 2004. It should
also be noted that the fourth quarter's results in the prior year included
an after-tax charge of $3.1 million, or $.07 per diluted share, related to
the departure of a former executive in August of 2004.
Quarterly net revenues for the fourth quarter of 2005 also were impacted by
variations at existing business units primarily due to the completion of
certain long-term production programs during the current year. The Company's
most recently acquired subsidiaries, Prospective Computer Analysts (PCA),
Spacelink International, LLC (Spacelink) and Mobilized Systems, Inc. (MSI)
added a combined $29.5 million of incremental revenues during the fourth
quarter of 2005.
2
Net income from continuing operations for the fourth quarter advanced 12% to
$24.0 million (9.1% of net revenues) compared to $21.3 million (8.3% of net
revenues) for the fourth quarter of the prior year. Profit contributions in
the fourth quarter of 2005 from the Company's most recently acquired
businesses combined with the inclusion of the aforementioned one-time
severance costs in the fourth quarter of the prior year were primarily
responsible for the increase in reported earnings for the most recently
completed quarter. In addition, as a result of the Company's ongoing income
tax savings initiatives, its overall effective income tax rate was reduced
to 37.5% for fiscal 2005 during the fourth quarter generating a cumulative
benefit of $0.5 million, or $0.01 per share during the period.
As reported previously, during the second quarter of 2005, the Company
settled its arbitration with the purchasers of its discontinued Plastics
business unit disposed of in April 2003, resulting in the modification of
the terms of the Company's note receivable from the buyers. Due to these
developments, the Company recorded an after-tax, non-cash charge of $1.0
million, or $.02 per diluted share, during the second quarter of 2005 to
establish a valuation allowance for potential uncollectibility of the
restructured note. During the fourth quarter of 2005, the Company was
notified that the buyers of its discontinued Plastics unit were insolvent.
Accordingly, the Company recorded an additional after-tax, non-cash charge
of $1.0 million, or $.02 per diluted share, in the fourth quarter of 2005 to
establish a full valuation allowance for the note. These charges are
reflected within the discontinued operations section of the Company's
statements of income in the financial information accompanying this release.
As a result of the foregoing, net income for the fourth quarter of 2005
totaled $23.0 million compared to $21.3 million for the fourth quarter of
the prior year resulting in diluted earnings per share of $.53 and $.51 for
these respective periods.
O FISCAL 2005 REVENUES UP 15% TO $1.02 BILLION
O NET EARNINGS FROM CONTINUING OPERATIONS GREW 15% TO $87.2 MILLION
FOR YEAR
O FISCAL 2005 EPS FROM CONTINUING OPERATIONS OF $2.02 VS. $1.82 FOR
FISCAL 2004
O CASH FLOW FROM CONTINUING OPERATIONS OF $107.8 MILLION FOR FISCAL 2005
For the year ended October 31, 2005, net revenues grew by 15% to a record
$1.02 billion compared to $883.6 million last year. Fiscal 2005 operating
income from continuing operations of $141.4 million from continuing
operations increased by 15% compared to fiscal 2004. Net income from
continuing operations for 2005 totaled a record $87.2 million, or $2.02 per
diluted share, compared to $75.9 million, or $1.82 per diluted share, for
fiscal 2004.
Revenue contributions from the three business units acquired during 2005
totaled a combined $85.1 million, with organic revenue growth accounting for
$49.7 million of the year-over-year increase.
The Company generated record cash flow from continuing operations of $107.8
million during 2005 compared to operating cash flow of $66.6 million in the
prior year. Higher net earnings and improved working capital management were
responsible for the increase in free cash flow year over year.
3
BUSINESS SEGMENT RESULTS
For the fourth quarter of 2005, the Support Systems segment reported net
revenues of $121.4 million compared to $138.0 million (prior to the
elimination of inter-segment revenues in each period) for the fourth quarter
of the prior year, a 12% decrease. Overall organic revenues for the segment
declined by 19%, partially offset by the inclusion of PCA and MSI which
contributed net revenues of $9.4 million during the most recently completed
quarter. During the fourth quarter of 2005, the segment experienced
significantly reduced revenues on the Tunner 60-K Aircraft Cargo Loader as
the production phase of that long-term program wound down during the first
half of the year. In addition, the segment had reduced deliveries of MSTAR
perimeter security systems in the most recently completed quarter as a large
base security subcontract with Northrop Grumman was completed during the
latter portion of fiscal 2004. The Systems segment also performed less
intersegment work on the production of vehicle add-on armor kits in 2005
compared to the fourth quarter of 2004. Additional production activity
involving the refurbishment of M1000 Heavy Equipment Transporters and
revenue gains at various other business operations within the segment
partially offset these revenue decreases for the quarter.
Fourth quarter operating income for the Support Systems segment was $20.6
million (17.0% of segment net revenues) compared to $21.3 million (15.5% of
segment net revenues) for the fourth quarter of last year. The decrease in
segment net revenues and the related gross profit contributions led to the
overall lower operating profit for the Support Systems segment. Segment
profit margins in the fourth quarter of the prior year were negatively
impacted by the allocation of $3.1 million in pre-tax severance costs
related to the departure of a former executive in August 2004.
Net revenues of the Support Services segment for the fourth quarter of 2005
increased 3% to $152.8 million compared to $148.8 million (prior to the
elimination of inter-segment revenues in each period) for the fourth quarter
of 2004. This was primarily due to the inclusion of Spacelink in 2005, which
contributed net revenues of $20.2 million for the most recently completed
quarter. The resulting decline in quarter-over-quarter Services segment
revenues at existing business units reflects reduced revenues on the DPGDS
program in 2005 as noted above combined with the fulfillment of orders for
add-on vehicle armor during the most recently completed quarter. This trend
was partially offset by increased revenues for satellite telecommunications
support work and related areas.
Fourth quarter operating income for the Support Services segment was $17.5
million (11.4% of segment net revenues) compared to $12.3 million (8.3% of
segment net revenues) last year. Services segment operating profit levels
for the most recently completed quarter reflect the contribution from
Spacelink as well as overall improved profit margins within the segment.
Segment profit margins in the fourth quarter of the prior year were
negatively impacted by the allocation of $1.9 million in pre-tax severance
costs related to the departure of a former executive in August 2004 as noted
above.
ENTERED ORDERS AND BACKLOG
Bookings during the fourth quarter were $346 million while entered orders
for 2005 totaled a record of nearly $1.1 billion, yielding a book-to-bill
ratio for the year of 1.04 to 1. These orders resulted in a record year-end
funded contract backlog of $690 million and a total backlog including
primarily unfunded options on long-term production contracts of $2.2
billion.
4
In light of the Company's pending merger with DRS Technologies, Inc.,
Engineered Support Systems has suspended the issuance of any financial
forecast data. Likewise, it has also suspended periodic shareholder
conference calls held in conjunction with the release of its quarterly
earnings results.
Engineered Support Systems, Inc. designs, manufactures and supplies
integrated military electronics, support equipment and technical and
logistics services for all branches of America's armed forces and certain
foreign militaries, homeland security forces and selected government and
intelligence agencies. The Company also produces specialized equipment and
systems for commercial and industrial applications. For additional
information, please visit the Company's website at
www.engineeredsupport.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Except for historical information contained herein, the matters set
forth in this news release are forward-looking statements. The
forward-looking statements set forth above involve a number of risks and
uncertainties that could cause actual results to differ materially from any
such statement. Important factors which could cause the Company's actual
results to differ materially from those projected in, or inferred by,
forward-looking statements include, but are not limited to, the following:
the decision of any of the Company's key customers, including the U.S.
government, to reduce or terminate orders with the Company; cutbacks in
defense spending by the U.S. government; increased competition in the
Company's markets; the Company's ability to achieve and integrate
acquisitions; and other risks discussed in the Company's reports filed with
the Securities and Exchange Commission from time to time.
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT: DRS and the
Company intend to file, or have filed, with the Securities and Exchange
Commission one or more registration statements on Form S-4 that will include
a joint prospectus and proxy statement to stockholders of DRS and the
Company and other relevant documents in connection with the proposed
transaction. YOU ARE URGED TO READ THE JOINT PROXY STATEMENT/ PROSPECTUS AND
OTHER RELEVANT MATERIALS IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT DRS, THE COMPANY AND THE PROPOSED
TRANSACTION.
You can obtain a free copy of these materials (when they are available) and
other documents filed with the Securities and Exchange Commission at the
Securities and Exchange Commission's web site at www.sec.gov. A free copy of
the joint proxy statement/prospectus, when it becomes available, also may be
obtained from Engineered Support Systems, Inc. 201 Evans Lane, St. Louis, MO
63121, Attn: Investor Relations, and from DRS Technologies, Inc., 5 Sylvan
Way, Parsippany, NJ 07054, Attn: Investor Relations. In addition, you may
access copies of the documents filed with the Securities and Exchange
Commission by the Company on its web site at
http://www.engineeredsupport.com, and you may access copies of the documents
filed with the Securities and Exchange Commission by DRS on its web site at
http://www.drs.com. The Company, DRS and their respective executive officers
and directors may be deemed to be participants in the solicitation of
proxies from their respective stockholders with respect to the proposed
transaction. Information regarding DRS's directors and executive officers is
available in its proxy statement filed with the Securities and Exchange
Commission by DRS on June 30, 2005, and information regarding the Company's
directors and executive officers is available in its proxy statement filed
with the Securities and Exchange Commission by Engineered Support Systems on
January 31, 2005. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interest, by
security holdings or otherwise, will be contained
5
by joint proxy statement/prospectus and other relevant materials to be filed
with the Securities and Exchange Commission when they become available.
This communication shall not constitute an offer to sell or the solicitation
of an offer to buy any securities, nor shall there by any sale of securities
in any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such jurisdiction. No offering of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended.
6
ENGINEERED SUPPORT SYSTEMS, INC.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31
------------------------------------ -------------------------------------
2005 2004 2005 2004
---- ---- ---- ----
(UNAUDITED)
-----------
Net Revenues from Continuing Operations $ 262,337 $ 256,373 $ 1,018,373 $ 883,630
================ ================= ================ =================
Operating Income from Continuing
Operations $ 38,073 $ 33,654 $ 141,422 $ 123,296
Net Interest (Expense) Income (520) 46 (1,823) (862)
Income Tax Provision (13,572) (12,363) (52,350) (46,525)
---------------- ----------------- ---------------- -----------------
Net Income from Continuing Operations 23,981 21,337 87,249 75,909
Net Loss on Discontinued Operations (1,025) - (2,073) -
---------------- ----------------- ---------------- -----------------
Net Income $ 22,956 $ 21,337 $ 85,176 $ 75,909
================ ================= ================ =================
Basic Earnings per Share (1):
Continuing Operations $ 0.57 $ 0.53 $ 2.11 $ 1.95
Discontinued Operations (0.02) - (0.05) -
---------------- ----------------- ---------------- -----------------
Total $ 0.55 $ 0.53 $ 2.06 $ 1.95
================ ================= ================ =================
Diluted Earnings per Share (1):
Continuing Operations $ 0.55 $ 0.51 $ 2.02 $ 1.82
Discontinued Operations (0.02) - (0.05) -
---------------- ----------------- ---------------- -----------------
Total $ 0.53 $ 0.51 $ 1.97 $ 1.82
================ ================= ================ =================
<FN>
(1) All share and per share amounts have been adjusted to reflect a 3-for-2
stock split as of April 15, 2005.
7
ENGINEERED SUPPORT SYSTEMS, INC.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31
------------------------------------- ---------------------------------------
2005 2004 2005 2004
---- ---- ---- ----
(UNAUDITED)
-----------
Net Income from Continuing Operations $ 23,981 $ 21,337 $ 87,249 $ 75,909
Depreciation and Amortization 4,912 3,457 18,286 12,991
Net Decrease (Increase) in Working
Capital and Other Assests 19,785 22,789 2,306 (22,331)
----------------- ----------------- ----------------- -----------------
Net Cash Provided By Continuing
Operations $ 48,678 $ 47,583 $ 107,841 $ 66,569
================= ================= ================= =================
8
ENGINEERED SUPPORT SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31
----------------------- -------------------------
2005 2004 % CHANGE 2005 2004 % CHANGE
---- ---- -------- ---- ---- --------
(UNAUDITED)
Net revenues $262,337 $256,373 2.3% $1,018,373 $883,630 15.2%
Cost of revenues 198,619 190,195 4.4% 773,337 660,940 17.0%
-------- -------- ---------- --------
Gross profit 63,718 66,178 (3.7%) 245,036 222,690 10.0%
Selling, general and administrative expense 25,607 32,523 (21.3%) 103,590 98,042 5.7%
Restructuring expense - (1) - (62)
Loss on sale of assets (38) - (24) (1,290)
-------- -------- ---------- --------
Operating income from continuing operations 38,073 33,654 13.1% 141,422 123,296 14.7%
Net interest (expense) income (520) 46 (1,823) (862)
-------- -------- ---------- --------
Income from continuing operations 37,553 33,700 11.4% 139,599 122,434 14.0%
Income tax provision 13,572 12,363 9.8% 52,350 46,525 12.5%
-------- -------- ---------- --------
Net income from continuing operations 23,981 21,337 12.4% 87,249 75,909 14.9%
Loss on discontinued operations,
net of income tax 1,025 - 2,073 -
-------- -------- ---------- --------
Net income $ 22,956 $ 21,337 7.6% $ 85,176 $ 75,909 12.2%
======== ======== ========== ========
Basic earnings per share (1):
Continuing operations $ 0.57 $ 0.53 7.5% $ 2.11 $ 1.95 8.2%
Discontinued operations (0.02) - (0.05) -
-------- -------- ---------- --------
Total $ 0.55 $ 0.53 3.8% $ 2.06 $ 1.95 5.6%
======== ======== ========== ========
Diluted earnings per share (1):
Continuing operations $ 0.55 $ 0.51 7.8% $ 2.02 $ 1.82 11.0%
Discontinued operations (0.02) - (0.05) -
-------- -------- ---------- --------
Total $ 0.53 $ 0.51 3.9% $ 1.97 $ 1.82 8.2%
======== ======== ========== ========
Weighted average common shares outstanding (1):
Basic 41,829 39,947 4.7% 41,329 38,987 6.0%
======== ======== ========== ========
Diluted 43,617 42,006 3.8% 43,232 41,799 3.4%
======== ======== ========== ========
<FN>
(1) All share and per share amounts have been adjusted to reflect a 3-for-2
stock split as of April 15, 2005.
9
ENGINEERED SUPPORT SYSTEMS, INC.
BUSINESS SEGMENT RESULTS
(IN THOUSANDS)
THREE MONTHS ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31
----------------------- -------------------------
2005 2004 % CHANGE 2005 2004 % CHANGE
---- ---- -------- ---- ---- --------
(UNAUDITED)
Net Revenues:
Support Systems $121,420 $137,967 (12.0)% $ 501,013 $ 514,702 (2.7)%
Support Services 152,815 148,822 2.7% 592,691 442,821 33.8%
Intersegment Revenues (11,898) (30,416) (75,331) (73,893)
-------- -------- ---------- ---------
Total $262,337 $256,373 2.3% $1,018,373 $ 883,630 15.2%
======== ======== ========== =========
Operating Income from Continuing Operations:
Support Systems $20,584 $21,332 (3.5)% $ 87,490 $ 92,966 (5.9)%
Support Services 17,489 12,322 41.9% 53,932 30,330 77.8%
-------- -------- ---------- ---------
38,073 33,654 13.1% 141,422 123,296 14.7%
Net Interest (Expense) Income (520) 46 (1,823) (862)
-------- -------- ---------- ---------
Income from Continuing Operations
before Income Taxes $ 37,553 $ 33,700 11.4% $ 139,599 $ 122,434 14.0%
======== ======== ========== =========
10
ENGINEERED SUPPORT SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
OCTOBER 31 OCTOBER 31
2005 2004
---- ----
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 13,064 $ 33,153
ACCOUNTS RECEIVABLE 151,210 139,191
CONTRACTS IN PROCESS AND INVENTORIES 77,193 61,009
OTHER CURRENT ASSETS 10,898 9,767
----------- -----------
TOTAL CURRENT ASSETS 252,365 243,120
PROPERTY, PLANT AND EQUIPMENT 54,550 46,946
GOODWILL 332,109 167,358
ACQUIRED CUSTOMER-RELATED INTANGIBLES 51,868 38,314
OTHER ASSETS 11,265 15,396
----------- -----------
TOTAL ASSETS $ 702,157 $ 511,134
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE $ 45,000 $
CURRENT MATURITIES OF LONG-TERM DEBT 187 340
ACCOUNTS PAYABLE 79,705 71,796
OTHER CURRENT LIABILITIES 55,541 58,936
----------- -----------
TOTAL CURRENT LIABILITIES 180,433 131,072
LONG-TERM DEBT 1,952 781
OTHER LIABILITIES 46,463 42,325
SHAREHOLDERS' EQUITY 473,309 336,956
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 702,157 $ 511,134
=========== ===========
FUNDED BACKLOG OF ORDERS $ 689,796 $ 588,061
OPTIONS ON EXISTING ORDERS 1,487,127 849,157
----------- -----------
$ 2,176,923 $ 1,437,218
=========== ===========
* * * *