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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
COMMISSION FILE NUMBER 1-8533
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DRS TECHNOLOGIES, INC.
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DELAWARE 13-2632319
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 SYLVAN WAY, PARSIPPANY, NEW JERSEY 07054
(973) 898-1500
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.01 par value American Stock Exchange
9% Senior Subordinated Convertible Debentures due October 1, 2003 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K. [ ]
The market value of shares of common stock held by non-affiliates, based on
the closing prices for such stock on the American Stock Exchange on June 21,
1999, was approximately $85,000,000. The number of shares of common stock
outstanding as of June 21, 1999 was 9,231,669 (exclusive of 385,164 shares of
common stock held in the treasury.)
DOCUMENTS INCORPORATED BY REFERENCE
1. 1999 Annual Report (for the fiscal year ended March 31, 1999), incorporated
in Part II.
2. Definitive Proxy Statement, dated June 28, 1999, for the Annual Meeting of
Stockholders, incorporated in Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
DRS Technologies, Inc. (DRS) is a leading supplier of defense electronic
systems. We provide advanced technology products and services to government and
commercial niche markets worldwide. Our company develops and manufactures a
broad range of mission critical products--from rugged computers and peripherals
to systems and components in the areas of communications, data storage, digital
imaging, electro-optics, flight safety and space. Our defense electronics
systems and subsystems are sold to all branches of the U.S. military, selected
U.S. Government intelligence agencies, major aerospace/defense prime
contractors, international military forces and a wide range of commercial
customers. We also offer a full complement of technical support and advanced
manufacturing services.
DRS was incorporated in 1968 and has served the defense industry for over
thirty years. We have increased our annual revenues at a compound annual growth
rate of approximately 36% over the last five years, and are currently a leading
provider of infrared night vision devices, combat display workstations,
electronic sensor systems, mission recorders and deployable flight incident
recorders. Our operating results directly reflect our strategies of maintaining
our reputation for technical excellence, focusing on the development of
long-term contracts and acquiring businesses that complement or extend our
product lines.
We design and manufacture electronic systems for several of the U.S.
military's well-funded programs and high-profile platforms. We are organized
into four operating groups, three of which compete in the defense industry:
o The Electronic Systems Group (ESG) is the leading provider of naval
computer workstations used to process and display integrated combat
information. ESG produces rugged computers and peripherals,
surveillance, radar and tracking systems, acoustical signal processing
and display equipment, and combat control systems for U.S. and
international military organizations. ESG products are used on
front-line platforms, including Aegis destroyers and cruisers,
aircraft carriers, submarines and surveillance aircraft. ESG's
products are also used in the U.S. Army's ongoing battlefield
digitization programs.
o The Electro-Optical Systems Group (EOSG) produces systems and
subsystems for infrared night vision and targeting products used in
some of the U.S. Army's most important battlefield platforms,
including the Abrams Main Battle Tank, Bradley Infantry Fighting
Vehicle and the High-Mobility Multipurpose Wheeled Vehicle (HMMWV)
scout vehicle. EOSG designs, manufactures and markets products that
allow operators to detect, identify and target objects based upon
their infrared signatures regardless of the ambient light level. The
effectiveness of the previous generation of these products was
recognized in Operation Desert Storm. This Group is also a
leading designer and manufacturer of eye-safe laser range finders and
multiple-platform weapons calibration systems for such diverse air
platforms as the Apache attack helicopter and AC-130U gunship. EOSG is
leveraging its technology base by expanding into related non-defense
markets and is a leading producer of ultra high-speed digital imaging
systems.
o The Flight Safety and Communications Systems Group (FSCG) is a
leading manufacturer of deployable flight emergency or "black box"
recording equipment used by military and search and rescue aircraft.
FSCG also manufactures shipboard communications and infrared
surveillance systems for the U.S., Canadian and other navies. This
Group uses advanced commercial technology in the design and
manufacture of multi-sensor digital, analog and video data capture and
recording products, as well as high-capacity data storage devices for
the harsh environments of aerospace and defense applications. FSCG,
recognized for its technical expertise and capabilities, also provides
advanced manufacturing services for international military and space
customers. FSCG products are used on such platforms as the F/A-18
fighter, A-10 attack plane, P-3 reconnaissance aircraft and EH-101
helicopter for surveillance, target verification and battle damage
assessment.
o Consistent with our goal of utilizing our technology in the commercial
sector, the Data Systems Group produces consumable magnetic heads used
in the production of hard disk drives by some of the world's
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largest computer manufacturers. Other commercial products provide data
retrieval capability for devices such as airplane phones, credit card
readers and other electronic scanning equipment.
Our profitability in the defense electronics industry is due in part to our
focus on managing our financial risk with respect to the development and
fabrication of new products. Many of our research and development projects are
performed with funding obtained from the military customer under development
contracts. In fact, in fiscal year 1999, we received approximately $15,400,000
in research and development funding from our customers. In addition, when a
system enters into full production, the terms of many of our production
contracts provide for progress payments or milestone payments. This allows us to
fund a portion of our working capital requirements from external sources and
reduce our financial risk.
STRATEGY
Our goal is to secure our emerging position as a mid-tier defense
technology supplier by maintaining our reputation for technical excellence,
focusing on the development of profitable long-term contracts and acquiring
businesses that complement or extend our product lines.
o LEVERAGE EXISTING CONTRACTS TO WIN NEW BUSINESS. Our experience has
shown that high levels of performance on existing contracts provide
contractors with valuable exposure to decision makers within the
government procurement staff and greatly enhance the prospects of
obtaining new or follow-on contracts. We intend to continue to
leverage our high level of performance on our extensive range of
existing contracts across entire program life cycles to help us obtain
new and follow-on contracts.
o OBTAIN NEW DEVELOPMENT CONTRACTS. Customer-funded development
contracts offer us the opportunity to work with our military customers
to design and manufacture new systems and components that provide
highly customized solutions to our customers' procurement needs, while
minimizing our financial risk. An important element of our success
will continue to be our ability to win new development contracts to
maintain our backlog of funded programs.
o PURSUE SELECTIVE ACQUISITIONS. Historically, we have pursued
acquisitions of complementary businesses with leading positions in
niche product or market areas that are synergistic with our existing
business. We believe that such acquisitions offer the opportunity to
acquire new technologies and customers, thereby leveraging our core
strengths. The acquisition of existing contracts provides us with both
current income and the opportunity for future contract awards based
upon our performance.
RECENT ACQUISITIONS
Our financial results for the year ended March 31, 1999 do not reflect the
full impact of two important acquisitions completed in the latter half of the
fiscal year:
On October 20, 1998, we acquired certain assets of the Second
Generation Ground-Based Electro-Optical and Focal Plane Array businesses of
Raytheon Company for approximately $45.0 million in cash. As a result of
this acquisition, we have become a leading provider of Forward Looking
Infra-Red (FLIR) technology. This technology enables an operator to detect,
identify and acquire targets in complete darkness and other limited
visibility conditions. For fiscal year 1999, these businesses generated
approximately $45.6 million in revenue, and as of March 31, 1999 had a
funded backlog of approximately $159.5 million, 50% of which is expected to
be recognized as revenue during fiscal 2000.
On February 19, 1999, we completed our acquisition of NAI
Technologies, Inc. (NAI) for approximately 2.9 million shares of DRS
common stock. NAI designs, manufactures and markets rugged computer
systems, advanced peripheral products, intelligent terminals,
radiation-suppressant TEMPEST computer terminals and other electronic
equipment. For fiscal year 1999, NAI generated approximately $7.0 million
in revenue and as of March 31, 1999, had a funded backlog of approximately
$28.5 million, 81% of which is expected to be recognized as revenue during
fiscal 2000.
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COMPANY ORGANIZATION
ELECTRONIC SYSTEMS GROUP
ESG consists of DRS Electronic Systems, Inc. (DRS ESI), located in
Gaithersburg, Maryland, DRS Laurel Technologies (DRS Laurel), located in
Johnstown, Pennsylvania, DRS Technical Services, Inc., located in San Diego,
California, DRS Technical Services, located in Chesapeake, Virginia, DRS Rugged
Systems, Inc., (DRS Rugged Systems) located in Longmont, Colorado, DRS Rugged
Systems (Europe) Ltd. (DRS Rugged Systems (Europe)), located in Farnham,
Surrey, United Kingdom, DRS Advanced Programs, Inc. (DRS Advanced Programs),
located in Columbia, Maryland, and DRS Rugged Systems (Australia) PTY. Ltd.
located in Fyshwick, Australia.
ESG is a leading provider of naval computer workstations used to process
and display integrated combat information. ESG produces rugged computers and
peripherals, surveillance, radar and tracking systems, acoustical signal
processing and display equipment, and combat control systems for U.S. and
international military organizations. ESG products are used on front-line
platforms, including Aegis destroyers and cruisers, aircraft carriers,
submarines and surveillance aircraft. ESG's products also are used in the U.S.
Army's ongoing battlefield digitization programs.
DRS ESI. DRS ESI designs, manufactures and integrates electronic systems
using advanced commercial technology to meet the performance and environmental
requirements of military customers. Current products include tactical processing
and combat information systems for naval ships, submarines and aircraft,
surveillance systems for coastal and harbor regions, radar systems for surface
ships, and low-cost emulators of legacy military systems for test and training
support. Major products and contracts include:
o AN/UYQ-70: AN/UYQ-70 Advanced Display Systems are advanced,
open-architecture display systems designed for widespread application
through software and hardware modification, ultimately for deployment
on Aegis and other surface ships, submarines and airborne platforms.
These systems are self-contained, microprocessor-based units complete
with mainframe interface software and offer advanced computing and
graphic capabilities. These units replace previous generation units
that are dependent upon a shipboard mainframe computer at
approximately 25% of the cost of the legacy systems. These systems
were developed for the U.S. Navy under a subcontract with Lockheed
Martin Tactical Defense Systems. Based upon the size of the Naval
surface fleet and the average number of workstations to be deployed on
each ship, we believe that the potential market for these workstations
may exceed 5,000 units over the next decade.
o Military Display Emulators: These workstations are functionally
identical to existing U.S. Navy shipboard display consoles built to
military specifications, but are manufactured using low-cost
commercial off-the-shelf (COTS) components suitable for land-based
laboratory environments. These Military Display Emulators are used in
U.S. Navy development, test and training sites as plug-compatible
replacements for the more expensive shipboard qualified units. We
currently deliver these Military Display Emulators for use at
land-based training sites for the Aegis and other U.S. Navy programs.
o AN/SPS-67: AN/SPS-67 Radar Systems are being deployed on the U.S.
Navy's new DDG-51 Aegis class ships and Spanish Navy's F-100 class
ships. They provide ocean surveillance and navigation data, including
detection and tracking of low flying aircraft and other targets. An
integral part of the ships' command and control combat system, the
AN/SPS-67 is a below-deck system which we believe has a potential
market application on other surface ships in the Navy's fleet, as well
as on aircraft carriers and amphibious operation assault ship
platforms.
o AN/UYQ-65: AN/UYQ-65 Data Processing and Display Sets were the first
COTS-based tactical workstations to be qualified by the U.S. Navy and
were designed to comply with the stringent
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requirements of the Aegis shipbuilding program. Replacing the sensor
displays in the SQQ-89 anti-submarine warfare (ASW) combat suite, the
AN/UYQ-65 employs dual processors enabling simultaneous I/O and
graphics processing. This new approach allows for required high
bandwidth processing, while maintaining response times for
operator/machine interfaces. The system architecture can be adapted to
meet various interface, cooling, memory, storage and processing
requirements. These systems currently are provided to EDO Corporation
under subcontract for international allied navies.
o AN/SQR-17A(V)3: The Mobile In-shore Undersea Warfare (MIUW) systems
are multi-sensor processing systems that are deployed in land-based
vans, utilizing sonobuoys and anchored passive detectors for harbor
defense, coastal defense and amphibious operations surveillance, as
well as for the enhancement of drug interdiction efforts. These
systems currently are being procured for use in 22 field
installations. We are under contract to provide the system's
underwater sensor string arrays and other upgrades to these field
installations.
DRS ESI also produces a line of lightweight portable display workstations
for the collection, display, storage and communication of data in the field,
replacement data storage systems for program loading and data archiving on P-3C
aircraft, and flat panel display products, display subsystems and other computer
peripherals for integration primarily with military tactical display
workstations.
DRS LAUREL. We own 80% of DRS Laurel through a partnership formed in
December 1993 with Sunburst Management, Inc. DRS Laurel serves as a
cost-efficient manufacturing operation for us and other prime defense
contractors. DRS Laurel primarily manufactures and integrates electronic
systems, providing turn-key production, and performs related electronic and
electromechanical assembly and associated test services. In addition, DRS Laurel
specializes in cable and wire harness interconnect products, primarily for large
industrial customers involved in the military and commercial aerospace
industries. DRS Laurel currently produces both the AN/UYQ-65 and AN/UYQ-70
workstations and provides electronic manufacturing services to Northrop Grumman
for the Air Force's E-8C Joint STARS aircraft and to United Defense for the M-2
Bradley fighting vehicles.
DRS TECHNICAL SERVICES, INC. AND DRS TECHNICAL SERVICES. These units
perform field service and depot level repairs for ESG products, as well as other
manufacturers' systems, and also provide systems and software engineering
support to the U.S. Navy for the testing of shipboard combat systems. The
facilities are located in close proximity to U.S. Naval bases in Norfolk,
Virginia and San Diego, California. Services, including equipment and field
change installation, configuration audit, repair, testing and maintenance, are
performed for the U.S. Navy and, to a lesser extent, commercial customers. DRS
Technical Services also has performed work for foreign navies, including those
of Australia, Egypt, Greece, the Republic of China and Turkey.
DRS RUGGED SYSTEMS. DRS Rugged Systems designs, develops and manufactures
rugged high-performance computer workstation systems and associated peripherals
for customers that require operation in severe environment situations. In
addition to supplying products such as flat panel displays, portable and
transportable integrated workstations, rack-mounted computer systems and mass
storage expansion units, DRS Rugged Systems also provides rugged integrated
computer systems for specific rugged requirement applications, including ground
mobile, airborne, naval surface and underwater applications. DRS Rugged Systems
participates in the U.S. Army's Common Hardware/Software (CHS-2) program, which
is providing the basic hardware/software infrastructure for the Force XXI
"digitization of the battlefield" initiative.
DRS RUGGED SYSTEMS (EUROPE). DRS Rugged Systems (Europe) specializes in the
design, development and implementation of rugged COTS hardware for land, sea and
airborne forces. DRS Rugged Systems (Europe) is the rugged hardware systems
integrator for the British Army Attack Helicopter (Apache) ground support
system, and it also supplies the integrated rugged hardware solution in support
of the Royal Air Force Chinook Helicopter Fleet's generic health and usage
monitoring system. It is also a primary supplier of rugged COTS systems to the
Swedish Army, which utilizes rugged multi-platform computers in different
configurations, in related mobile tactical communications and information
systems, TS9000 and ATLE IS, respectively. The Flat Panel Rugged (FPR) 20-inch
rugged flat panel display is utilized in the Royal Navy's Command Support System
(CSS), and the rugged hardware for the Royal Navy's Submarine Fleet's DCG
Re-host tactical support system was designed, developed, tested and installed
under contract to BAeSEMA.
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The Explorer (often referred to as the CCU, Compact Computer Unit) provides
the full capabilities of the CHS-2 products in a portable, self-contained unit
with its own power source and an integrated flat panel display. The unit uses
the same exchangeable media (hard disks and tape units) and provides total
compatibility of all information and system security. The unit shares its design
with the DRS Rugged Systems (Europe's) Explorer 2 and is being complemented with
an upgraded version with a larger display and greater upgrade capabilities.
The Genesis 300 rugged multi-platform computer, a variant of the Genesis SR
(short rack), will feature an integrated 12-inch screen and keyboard. Since its
launch in 1997, the Genesis SR, which supports applications such as mission
planning, tactical communications, combat support and logistics support, has
been sold into military programs in Europe, Scandinavia and Southeast Asia. The
OPUS 16 rugged flat panel with computer, a 16-inch flat panel display with a
single board Intel(TM) computer housed in a rugged rackmount or portable
enclosure, will join the extensive FPR range of rugged flat panel color
displays. DRS Rugged Systems (Europe)'s fixed, rackmount or portable FPR panels
with 12-, 13-, 16- and 20-inch displays currently operate in a variety of land,
airborne, surface vessel and submarine environments.
DRS RUGGED SYSTEMS (AUSTRALIA) PTY. LTD. DRS Rugged Systems (Australia)
PTY. Ltd., a subsidiary of DRS Rugged Systems (Europe), was established in
1997. The division is under contract to provide maintenance support to the
Australian Army Tactical Command Support System (AUSTACSS) and to manufacture
Explorer II workstations for a U.S. defense company.
DRS ADVANCED PROGRAMS. DRS Advanced Programs provides custom-packaged
integrated computer systems for deployment in land vehicles, ships, shelters and
other demanding environments, including unique physical packaging requirements
such as compact size, low weight, specialized air flow and rack mounting. DRS
Advanced Programs markets directly to various U.S. Government agencies,
primarily in the intelligence community and has teamed with leading
corporations, such as GTE and Booz-Allen.
DRS Advanced Programs designs and integrates special purpose systems
configured specifically for a variety of target applications, including:
communications processing; data acquisition, storage and forwarding; digital
signal processing; and client/server systems and embedded processing. DRS
Advanced Programs also provides specially packaged monitors, keyboards, printers
and peripheral subsystems that are used in conjunction with its computer
systems. DRS Advanced Programs now also provides support services such as
configuration management, testing, sparing, maintenance and life cycle support.
ELECTRO-OPTICAL SYSTEMS GROUP
EOSG consists of DRS Infrared Technologies, LP (DRS Infrared), located in
Dallas, Texas, DRS Sensor Systems, Inc. (DRS Sensor), located in El Segundo,
California, DRS Photronics, Inc. (DRS Photronics), located in Oakland, New
Jersey, DRS Optronics, Inc. (DRS Optronics) located in Palm Bay, Florida, and
DRS Hadland Ltd. (DRS Hadland), based in Tring, Hertfordshire, the United
Kingdom.
EOSG produces systems and subsystems for infrared night vision and
targeting products used in some of the U.S. Army's most important battlefield
platforms, including the Abrams Main Battle Tank, Bradley Infantry Fighting
Vehicle and the HMMWV scout vehicle. EOSG designs, manufactures and markets
products that allow operators to detect, identify and target objects based upon
their infrared signatures regardless of the ambient light level. The
effectiveness of the previous generation of these products was recognized in
Operation Desert Storm. This Group is also a leading designer and manufacturer
of eye-safe laser range finders and multiple-platform weapons calibration
systems for such diverse air platforms as the Apache attack helicopter and
AC-130U gunship. EOSG is leveraging its technology base by expanding into
related non-defense markets and is a leading producer of ultra high-speed
digital imaging systems.
DRS INFRARED. DRS Infrared produces infrared scanning Focal Plane Arrays
(FPAs), staring FPAs, and linear coolers (designed to maintain optimal operating
temperatures for infrared scanning) for military electro-optical systems
applications. An FPA is a two-dimensional assembly of electro-optical detecting
pixels used to generate night vision capability. FPAs are also used in
heat-seeking missile guidance systems and missile warning systems, applications
for which no pictorial image is required. DRS Infrared is a leading global
supplier of cryogenic linear coolers for infrared devices.
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DRS Infrared is the sole source supplier of the Detector Dewar Cooler
(DDC) module for the U.S. Army's Javelin Commanders Launch Unit (CLU) for a
Lockheed Martin-Raytheon joint venture. DRS Infrared is delivering the initial
units of a three-year multi-year contract with an ordered total of 1,385 units.
DRS Infrared has a 40% share of the current contract for the SADA (Standard
Advanced Dewar Assembly) II Detector procured by the U.S. Army and supplied to
the HTI (Horizontal Technology Integration) program for use in the Second
Generation night vision equipment upgrades provided by DRS Sensor for the
Abrams, Bradleys and HMMWV scout vehicles.
Prior to its acquisition, DRS Infrared had provided approximately 6,000
linear drive coolers to a wide cross-section of electro-optics system vendors.
The business base represented by the Javelin and SADA II programs is expected to
consist of over 10,000 coolers, or $54 million in revenues over the next ten
years.
DRS Infrared also supplies a 256 x 256 midwave infrared module for Lockheed
Martin's Joint Air-to-Surface Stand-off Missile (JASSM) program. It also
supplies 240x480 DDC modules for several programs and has exclusive rights of
supply for certain of these items through calendar year 2000 in support of
Raytheon system sales.
DRS SENSOR. DRS Sensor designs and manufactures the second generation FLIR
sighting systems for the U.S. Army's Abrams, Bradleys and HMMWV scout vehicles.
Second generation FLIR technology enables an operator to detect, identify and
acquire targets in complete darkness. Current programs of DRS Sensor include:
o HTI Second Generation FLIR thermal imaging systems (HTI SGF Thermal
Imaging Systems) installed on the U.S. Army's Abrams, Bradleys and
HMMWV Scouts. In January, 1999, DRS Sensor was awarded a total of
$55.9 million to provide HTI SGF Thermal Imaging Systems for the
sighting systems of Abrams and Bradleys, a result of the exercise of
an option on a multiple-year contract with a total post-acquisition
value of $92 million;
o Improved Bradley Acquisition System (IBAS), which provides the
thermal imaging and fire control system installed on Bradleys. In
November 1998, DRS Sensor was awarded a $24.2 million contract to
provide IBAS systems for the Bradleys, a result of the exercise of an
option on an acquired contract; and
o Long Range Advanced Scout Surveillance System (LRAS3), a development
program which provides the thermal image sighting systems to be
installed on the HMMWV scouts.
DRS OPTRONICS. DRS Optronics designs and manufactures electro-optical
targeting, sighting and fire control systems and various missile components. DRS
Optronics provides certain manufacturing services to DRS Sensor in connection
with the HTI SGF Thermal Imaging Systems and IBAS.
DRS Optronics also provides:
o Night Vision Binoculars: DRS Optronics is currently under contract to
develop and manufacture these units for the Israeli military. The
Nightstar(TM) night vision binocular is a hand-held viewing binocular
that incorporates an image intensifier tube, laser range finder and
digital compass in a compact lightweight system suited for infantry
units, special forces and night operations involving forward observers
and reconnaissance patrols. Nightstar(TM) displays range and azimuth
data in the soldier's eyepiece, allowing identification of targets and
providing essential fire support data for nighttime engagement. These
units have a range of 20 to 2,000 meters.
o Gunners' Auxiliary Sight: This is an electro-optical device used as a
primary or secondary sighting system on Abrams M1 Main Battle Tanks
and contains a very sophisticated electro-optical device and a laser
protective filter. DRS Optronics has produced more than 2,000 of these
instruments and continues to operate as a repair and retrofit facility
for the M1A2 upgrade program. Options for additional units under this
program may be exercised through fiscal 2000.
o Tube-launched Optically-tracked Wire-guided (TOW) Optical Sight: DRS
Optronics is currently the only U.S. qualified producer of two of the
three critical assemblies in this device. This complex electro-optical
system is the main component of the U.S.'s premier ground antitank
weapons system.
o TOW Traversing Unit: This unit provides target tracking accuracy for
the TOW antitank weapon, acting as the mount for the TOW Optical Sight
and the associated missile launch tube. DRS Optronics is
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currently the only qualified manufacturer of this tightly toleranced
assembly and is involved in working on modification and retrofit
programs. DRS Optronics also has been contracted to modify a version
for use by an overseas customer.
o Eye-Safe Laser Range Finder: DRS Optronics competed against the U.S.
Army's historical primary laser supplier for this contract and was
awarded an initial contract for preproduction units. DRS Optronics
also is currently manufacturing a laser range finder/target designator
for airborne use in the Modular Integrated Laser Engagement System
Air/Ground Engagement System II program. This effort includes
redesigning the target designator unit to accommodate DRS Optronics'
laser components.
o Missile Components: DRS Optronics provides the primary, secondary,
tertiary and fold mirrors, housing and nose dome for Sidewinder and
Stinger missiles. It is currently under contract to produce infrared
components and subassemblies on many of the next-generation infrared
missile systems.
DRS PHOTRONICS. DRS Photronics produces weapons calibration, or
boresighting equipment, used to align and harmonize the navigation, targeting
and weapons systems on rotary- and fixed-wing aircraft. Multiple Platform
Boresighting Equipment (MPBE) is DRS Photronics' main product line. MPBE
currently is used on the Army's Apache helicopters and Apache Longbow
helicopters, the Marine Corps' Cobra helicopters, and the Air Force's AC-130
Spectre gunship radar. This technology is proprietary to the company.
The company is the prime contractor on a tri-service (Army, Navy and Air
Force) program to develop the Airborne Digital Imaging System (ADIS) for the
test and evaluation of weapons separation events on board Navy F/A-18 aircraft.
The system, which also can be used on various other fixed- and rotary-wing
military aircraft, includes an electronically-shuttered, fast-frame,
high-resolution, digital imaging camera and a high-density, digital data storage
device. Upon completion, the ADIS will incorporate a color readiness capability
and will include a miniaturized high-speed electronic camera to assure
compatibility with multiple air platforms.
DRS HADLAND. DRS Hadland designs, manufactures and markets products for
ultra high-speed image capture and analysis. Products include a comprehensive
range of equipment for the visual analysis of events lasting from hundreds of
femtoseconds to milliseconds. Many of these systems are used for multiple
applications by international military forces, ballistic test ranges, university
and other research institutes, laboratories and large corporations. DRS Hadland
also integrates airborne monitors and Computer-Controlled Device (CCD) cameras
with airborne video tape recording devices from DRS Precision Echo, Inc.,
another DRS subsidiary. DRS Hadland products include:
o Framing Cameras: Framing cameras have the ability to take a sequence
of pictures at the same location at very high speeds. These cameras
are designed to produce images at equivalent speeds of several million
pictures per second, although in practice 4-8 frames are taken.
Framing cameras are used primarily for research in the areas of
electrical breakdown/discharge, ballistics, detonics and combustion.
o Electronic Ballistic Range Cameras: These cameras use digital imaging
to capture a single picture of a projectile in flight. Slower than
framing cameras but with better resolution, these cameras are used in
the development and proof testing of ballistics.
o Streak Cameras: These cameras are designed to capture images of quick
events analyzed over a very short, continuous period. Faster than
framing or range cameras, streak cameras are used to produce
continuous cross section images in one dimension, rather than full
images, and are used for applications such as laser development and
testing.
FLIGHT SAFETY AND COMMUNICATIONS GROUP
FSCG consists of DRS Flight Safety and Communications, with locations in
Carleton Place and Nepean, Ontario, Canada, DRS Technologies (UK) Ltd., located
in Hayes, Middlesex, the United Kingdom, and DRS Precision Echo, Inc. (DRS
Precision Echo), located in Santa Clara, California.
FSCG is a leading manufacturer of deployable flight emergency or "black
box" recording equipment. These complete emergency avionics systems combine the
functionality of a crash locator beacon with a flight incident recorder for
search, recovery and crash analysis. This Group uses advanced commercial
technology in the design and manufacture of multi-sensor digital, analog and
video data capture and recording products, as well as high-
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capacity data storage devices for harsh aerospace and defense environments. FSCG
also manufactures shipboard communications and infrared laser warning and range
finder displays for Canadian and other foreign navies.
DRS FLIGHT SAFETY AND COMMUNICATIONS. DRS Flight Safety and Communications'
major products and services include:
o Emergency Avionics System 3000 (EAS3000): The EAS3000 is an
integrated in-flight data recorder, cockpit voice recorder and
emergency locator beacon system constructed in a modular, deployable
and crash-survivable package, designed to withstand intensive
destructive forces. Mounted on the outside of a helicopter, the
EAS3000 provides the immediate location of an accident site, allowing
early rescue of survivors and recovery of vital flight and cockpit
voice data. DRS Flight Safety and Communications provides the EAS3000
for use on UK EH-101 helicopters and its variants, as well as on the
Italian MMI, Canadian Cormorant, Tokyo Metropolitan Police and other
military and search and rescue helicopters. DRS Flight Safety and
Communications also developed a version of the EAS3000, known as
EAS3000F, for use on fixed-wing aircraft.
o Deployable Flight Incident Recorders: Designed to withstand the
intense destructive forces associated with an aircraft crash,
deployable flight incident recorders are mounted beneath the airframe
skin. Deployment commands provided by switch activation trigger
release of the unit and activation of the recorder. These systems also
contain crash locator beacons. They have been installed successfully
on fighter aircraft, such as the German Tornado and the U.S. Navy
F/A-18 Hornet, and are used to record both flight and voice data.
o Aircraft Crash Locator Beacons: Consisting of a composite airfoil
which encloses a radio transmitter and power source, crash locator
beacons are designed to deploy and activate either before or upon
impact. Used primarily on fixed-wing military aircraft, these crash
position locators enable the rapid location of downed aircraft and
timely rescue of survivors.
o Integrated Shipboard Communications Systems: Using the latest
available technology and COTS-based designs, FSCG produces integrated
digital shipboard communications systems which provide single-button
access to tactical interior, exterior and secured channels for joint
operations. These Shipboard Integrated Communications (SHINCOM)
systems improve communication efficiency by eliminating the need for
multiple single-purpose communications systems, thus providing a
comprehensive system solution. FSCG's SHINCOM systems are capable of
handling shipboard interior communications; communications with other
aircraft, surface and undersea vessels; and UHF/VHF and broadband
communications via satellite with shore stations and cooperating
units. These systems are used aboard the Canadian Iroquois class
ships, the U.S.S. George Washington aircraft carrier and are being
manufactured for the Armada of Venezuela under a contract with Ingalls
Shipbuilding.
o Electronic Manufacturing and Systems Integration Services: FSCG is an
experienced provider of manufacturing, test and product support
services and performs contract manufacturing services for various
aerospace, military and space applications. FSCG's manufacturing
expertise and capabilities include:
o surface mount and through-hole multi-layer computer circuit
assemblies (CCAs);
o harness fabrication;
o power supply assembly and testing;
o motherboard assembly and testing; and
o systems integration services.
DRS TECHNOLOGIES (UK) LTD. DRS Technologies (U.K.) Ltd. provides emergency
avionics and flight recorders to international military customers.
DRS PRECISION ECHO. DRS Precision Echo designs and manufactures a variety
of COTS digital, analog and video recording systems used for military
applications, including reconnaissance, antisubmarine warfare (ASW) and other
information warfare data storage requirements. DRS Precision Echo is a leading
U.S. manufacturer of
8
Hi-8 millimeter military recorders supplied to the U.S. and international armed
forces. DRS Precision Echo's products include:
o WRR-818: This ruggedized airborne video recorder captures various
sensor and video data on the U.S. Navy's F/A-18 and on the U.S. Air
Force's A/OA-10A aircraft. The U.S. Army also has selected it for use
in its Kiowa Warrior attack helicopters. A similar recorder, the
WRR-812, has been adapted for use in the Canadian Army's Light Armored
Reconnaissance Vehicles.
o DCMR-24 and 100. These are digital cassette mission recorders that use
high-capacity digital tape formats under license by Sony Corporation.
DRS Precision Echo produces the DCMR-24 for U.S. Navy P-3C patrol
aircraft.
DRS Precision Echo also provides a line of high-capacity digital tape
drives and automated library systems for the archiving and back-up of very large
amounts of digital data, ranging from 378 gigabytes to 2.6 petabytes of
uncompressed data.
DATA SYSTEMS GROUP
DSG consists of DRS Ahead Technology, Inc. (DRS Ahead), with locations in
San Jose, California, Plymouth, Minnesota, St. Croix Falls, Wisconsin, and
Razlog, Bulgaria. DRS Ahead manufactures burnish, glide, test and certification
heads used in the production of computer disk drives. These consumable products
are used by many U.S. disk drive manufacturers to hone the surface and ensure
the quality of magnetic disks used in computer hard drives. In addition, the
company specializes in the manufacture and refurbishment of broadcast video and
audio heads, heads used in commercial flight data recorders and in a variety of
industries for reading, writing and verifying data on magnetic cards, tapes and
inks.
CUSTOMERS
We sell a significant portion of our products to agencies of the U.S.
Government, primarily the Department of Defense, to foreign government agencies
or to prime contractors or their subcontractors. Approximately 78%, 74% and 71%
of total consolidated revenues for fiscal 1999, 1998 and 1997, respectively,
were derived directly or indirectly from defense contracts for end use by the
U.S. Government and its agencies. See "Foreign Operations and Export Sales"
below for information concerning sales to foreign governments.
BACKLOG
The following table sets forth our backlog by major product group
(including enhancements, modifications and related logistics support) at the
dates indicated.
"Backlog" refers to the aggregate revenues remaining to be earned at a
specified date under contracts held by us, including, for U.S. Government
contracts, the extent of the funded amounts thereunder which have been
appropriated by Congress and allotted to the contract by the procuring
Government agency. Backlog also includes all firm orders for commercial
products. Fluctuations in backlog generally relate to the timing and amount of
defense contract awards.
9
MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1997
-------------- -------------- --------------
Government Products:
U.S. Government............ $293,300,000 $141,500,000 $ 85,900,000
Foreign Government......... 48,400,000 24,900,000 23,000,000
------------ ------------- -------------
341,700,000 166,400,000 108,900,000
Commercial Products.......... 24,100,000 11,000,000 9,500,000
------------ ------------- -------------
$365,800,000 $177,400,000 $118,400,000
============ ============ ============
At March 31, 1999, our backlog of orders was approximately $365.8 million
compared with $177.4 million at March 31, 1998. The increase in backlog was due
primarily to $140.4 million of acquired backlog from the acquisition of NAI and
the Raytheon electro-optical businesses. New contract awards of approximately
$322.3 million were booked during the fiscal year ended March 31, 1999.
Approximately 66% of backlog as of March 31, 1999 is expected to result in
revenues during fiscal 2000.
RESEARCH AND DEVELOPMENT
The defense electronics sector is subject to rapid technological changes,
and the our future success will depend in large part upon our ability to improve
existing product lines and to develop new products and technologies in the same
or related fields. Thus, our technological expertise is an important factor
affecting our growth. A portion of our research and development activities take
place in connection with customer-sponsored research and development contracts.
We recorded revenues for customer-sponsored research and development of
approximately $15,400,000, $11,800,000 and $13,000,000 for fiscal 1999, 1998 and
1997, respectively. All such customer-sponsored activities are primarily the
result of contracts directly or indirectly with the U.S. Government. We also
invest in internal research and development (IR&D). Such expenditures were
approximately $5,200,000, $4,000,000, and $3,900,000 for fiscal 1999, 1998 and
1997, respectively.
CONTRACTS
Our contracts are normally for production, service or development.
Production and service contracts are typically of the fixed-price variety with
development contracts currently of the cost-type variety. Because of their
inherent uncertainties and consequent cost overruns, historically, development
contracts have been less profitable than production contracts.
Fixed-price contracts may provide for a firm fixed price or they may be
fixed-price incentive contracts. Under the firm fixed-price contracts, we agree
to perform for an agreed-upon price. Accordingly, we derive benefits from cost
savings, but bear the risk of cost overruns. Under the fixed-price incentive
contracts, if actual costs incurred in the performance of the contracts are less
than estimated costs for the contracts, the savings are apportioned between the
customer and us. If actual costs under such a contract exceed estimated costs,
however, excess costs are apportioned between the customer and us, up to a
ceiling. We bear all costs that exceed the ceiling, if any.
Cost-type contracts typically provide for reimbursement of allowable costs
incurred plus a fee (profit). Unlike fixed-price contracts in which we are
committed to deliver without regard to performance cost, cost-type contracts
normally obligate us to use our best efforts to accomplish the scope of work
within a specified time and a stated contract dollar limitation. In addition,
U.S. Government procurement regulations mandate lower profits for cost-type
contracts because of our reduced risk. Under cost-plus-incentive-fee contracts,
the incentive may be based on cost or performance. When the incentive is based
on cost, the contract specifies that we are reimbursed for allowable incurred
costs plus a fee adjusted by a formula based on the ratio of total allowable
costs to target cost. Target cost, target fee, minimum and maximum fee and
adjustment formulae are agreed upon when the contract is negotiated. In the case
of performance-based incentives, we are reimbursed for allowable incurred costs
plus an incentive, contingent upon meeting or surpassing stated performance
targets. The contract provides for increases in the fee to the extent that such
targets are surpassed and for decreases to the extent that such targets are not
met. In some instances, incentive contracts also may include a combination of
both cost and performance incentives. Under cost-plus-fixed-fee contracts, we
are reimbursed for costs and receive a fixed fee, which is negotiated and
specified in the contract. Such fees have statutory limits.
10
The percentages of revenues during fiscal 1999, 1998 and 1997 attributable
to our contracts by contract type were as follows:
FISCAL YEARS ENDED MARCH 31,
----------------------------
1999 1998 1997
------ ------ ------
Firm fixed-price................... 84% 85% 85%
Cost-plus-incentive fee............ 2% 4% 5%
Cost-plus-fixed fee................ 14% 11% 10%
The consistent percentage and continued predominance of firm fixed-price
contracts are reflective of the fact that production contracts comprise a
significant portion of our U.S. Government contract portfolio.
We negotiate for and generally receive progress payments from our customers
of between 75-90% of allowable costs incurred on the previously described
contracts. Included in our reported revenues are certain amounts which we have
not billed to customers. These amounts, approximately $14.8 million, $7.6
million, and $3.8 million as of March 31, 1999, 1998 and 1997, respectively,
consist of costs and related profits, if any, in excess of progress payments for
contracts on which sales are recognized on a percentage-of-completion basis.
Under generally accepted accounting principles, all U.S. Government
contract costs, including applicable general and administrative expenses, are
charged to work-in-progress inventory and are written off to costs and expenses
as revenues are recognized. The Federal Acquisition Regulations (FAR),
incorporated by reference in U.S. Government contracts, provide that internal
research and development costs are allowable general and administrative
expenses. To the extent that general and administrative expenses are included in
inventory, research and development costs also are included. Unallowable costs,
pursuant to the FAR, are excluded from costs accumulated on U.S. Government
contracts. Work-in-process inventory included general and administrative costs
(which include internal research and development costs) of $13.6 million and
$9.9 million at March 31, 1999 and 1998, respectively.
Our defense contracts and subcontracts are subject to audit, various profit
and cost controls, and standard provisions for termination at the convenience of
the customer. Multiyear U.S. Government contracts and related orders are subject
to cancellation if funds for contract performance for any subsequent year become
unavailable. In addition, if certain technical or other program requirements are
not met in the developmental phases of the contract, then the follow-on
production phase may not be realized. Upon termination other than for a
contractor's default, the contractor normally is entitled to reimbursement for
allowable costs, but not necessarily all costs, and to an allowance for the
proportionate share of fees or earnings for the work completed.
COMPETITION
Our products are sold in markets containing competitors which are
substantially larger than we are, devote substantially greater resources to
research and development and generally have greater financial resources. Certain
competitors are also our customers and suppliers. The extent of competition for
any single project generally varies according to the complexity of the product
and the dollar volume of the anticipated award. We believe that we compete on
the basis of the performance of our products, our reputation for prompt and
responsive contract performance, and our accumulated technical knowledge and
expertise. Our future success will depend in large part upon our ability to
improve existing product lines and to develop new products and technologies in
the same or related fields.
In the military sector, we compete with large and mid-tier defense
contractors on the basis of product performance, cost, overall value, delivery
and reputation. As the size of the overall defense industry has decreased in
recent years, the number of consolidations and mergers of defense suppliers has
increased. We expect this consolidation trend to continue. As the industry
consolidates, the large defense contractors are narrowing their supplier base
and awarding increasing portions of projects to strategic mid- and lower-tier
suppliers, and, in the process, are becoming oriented more toward system
integration and assembly. Management believes that we have benefited from this
trend, as evidenced by the formation of strategic alliances with several large
suppliers.
11
PATENTS AND LICENSES
We have patents on certain of our commercial and data recording products
semi-conductor devices, rugged computer related items, and electro-optical and
focal plane array products. DRS and its subsidiaries have certain registered
trademarks, none of which are considered significant to current operations. We
believe our patent position and intellectual property portfolio, in the
aggregate, is valuable to our operations. We do not believe that the conduct of
our business as a whole is materially dependent on any single patent, trademark
or copyright.
MANUFACTURING AND SUPPLIERS
Our manufacturing processes for our products, excluding certain
electro-optical products, includes the assembly of purchased components and
testing of products at various stages in the assembly process. Purchased
components include integrated circuits, circuit boards, sheet metal fabricated
into cabinets, resistors, capacitors, semiconductors, silicon wafers and other
conductive materials, insulated wire and cables. In addition, many of our
products use machined castings and housings, motors and recording and
reproducing heads. Many of the purchased components are fabricated to our
designs and specifications. The manufacturing process for certain of our optics
products includes the grinding, polishing and coating of various optical
materials and the machining of metal components.
Although materials and purchased components generally are available from a
number of different suppliers, several suppliers are our sole source of certain
components. If a supplier should cease to deliver such components, other sources
probably would be available; however, added cost and manufacturing delays might
result. We have not experienced significant production delays attributable to
supply shortages, but occasionally experienced quality and other related
problems with respect to certain components, such as semiconductors and
connectors. In addition, with respect to our optical products, certain exotic
materials, such as germanium, zinc sulfide and cobalt, may not always be readily
available.
FOREIGN OPERATIONS AND EXPORT SALES
We currently sell several of our products and services in the international
marketplace to Canada, Israel, the Republic of China, Spain, Australia, and
other countries in Europe, Scandinavia, and Southeast Asia. Foreign sales are
derived under export licenses granted on a case-by-case basis by the United
States Department of State. Our foreign contracts generally are payable in
United States dollars. Export sales accounted for 10% or less of total revenues
in the fiscal years ended March 31, 1998 and 1997.
We operate outside the United States through FSCG, in Canada and the United
Kingdom, and through ESG and EOSG primarily in the United Kingdom. The
information required by this item with respect to revenues and long-lived assets
by geographic area is incorporated by reference herein to page 49 of the DRS
1999 Annual Report (for the fiscal year ended March 31, 1999).
The addition of international businesses involves additional risks for us,
such as exposure to currency fluctuations, future investment obligations and
changes in foreign economic and political environments. In addition,
international transactions frequently involve increased financial and legal
risks arising from stringent contractual terms and conditions and widely
different legal systems, customs and practices in foreign countries.
12
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The names of our executive officers, their positions and offices with us,
and their ages are set forth below:
NAME AGE POSITION
- ---- --- --------
Mark S. Newman............. 49 Chairman of the Board, President
and Chief Executive Officer
Paul G. Casner, Jr......... 61 Executive Vice President, Operations
Nina Laserson Dunn......... 52 Executive Vice President, General Counsel
and Secretary
Richard Ross............... 45 Vice President; President of DRS
Electro-Optical Systems Group
Richard A. Schneider....... 46 Executive Vice President, Chief Financial
Officer and Treasurer
MARK S. NEWMAN has been employed by us since 1973. He was named Vice
President, Finance, Chief Financial Officer and Treasurer in 1980 and Executive
Vice President in 1987. Mr. Newman became a Director of DRS in 1988. In May
1994, Mr. Newman became the President and Chief Executive Officer of DRS and in
August 1995 became Chairman of the Board.
PAUL G. CASNER, JR. joined DRS in 1993 as President of Technology
Applications and Service Company, now DRS Electronic Systems, Inc. In 1994, he
became President of the DRS Electronic Systems Group and a Vice President of
DRS. In 1998, he became our Executive Vice President, Operations. Mr. Casner has
over 30 years of experience in the defense electronics industry and has held
positions in engineering, marketing and general management.
NINA LASERSON DUNN joined us as Executive Vice President, General Counsel
and Secretary in July 1997. Prior to joining DRS, Ms. Dunn was a director in the
corporate law department of Hannoch Weisman, a Professional Corporation, where
she served as our outside legal counsel. Ms. Dunn is admitted to practice law in
New York and New Jersey and is a member of the American, New York State and New
Jersey State Bar Associations.
RICHARD ROSS joined us as Assistant Vice President and Director of Sales in
1986 and became Assistant Vice President, Corporate Development in 1987. In
1988, he became a Vice President of DRS, and in 1990, he became President of DRS
Photronics, Inc. Mr. Ross also serves as President of the DRS Electro-Optical
Systems Group.
RICHARD A. SCHNEIDER joined us in 1999 as Executive Vice President, Chief
Financial Officer and Treasurer of DRS. He held similar positions at NAI and was
a member of its Board of Directors prior to its acquisition by DRS in February
1999. Mr. Schneider has over 20 years of experience in corporate financial
management, including ten years with NAI.
EMPLOYEES
At March 31, 1999, we had approximately 2,180 employees, 1,503 of which
were located in the United States. None of our employees are represented by
labor unions, and we have experienced no work stoppages. There is a continuing
demand for qualified technical personnel, and we believe that its future growth
and success will depend upon its ability to attract, train and retain such
personnel.
13
ITEM 2. PROPERTIES
We lease the following properties:
SUBSIDIARY APPROXIMATE
OR SQUARE
DIVISION LOCATION ACTIVITIES FOOTAGE EXPIRATION
---------------------------- -------------------------- -------------------- ---------------- -----------------
CORPORATE
DRS Technologies, Inc. Parsippany, New Jersey Corporate 10,800 Fiscal 2003
Headquarters
ESG
DRS Electronic Systems, Inc. Gaithersburg, Maryland Administrative, 45,500 Fiscal 2006
Engineering and
Manufacturing
DRS Electronic Systems, Inc. Arlington, Virginia Administrative and 2,000 Fiscal 2002
Marketing
DRS Laurel Technologies Johnstown, Pennsylvania Administrative and 38,000 Fiscal 2004
Manufacturing
DRS Laurel Technologies Davidsville, Manufacturing 65,800 Fiscal 2000
Pennsylvania
DRS Technical Services, Inc. San Diego, California Engineering 5,000 Fiscal 2000
Support Services
DRS Technical Services Chesapeake, Virginia Field Service and 22,000 Fiscal 2005
Engineering Support
DRS Advanced Programs, Inc. Columbia, Maryland Administrative, 25,000 Fiscal 2002
Engineering and
Manufacturing
DRS Rugged Systems Farnham, Surrey, Administrative, 26,000 Fiscal 2015
(Europe) Ltd. United Kingdom Engineering and
Manufacturing
DRS Rugged Systems Gateshead, Newcastle, Administrative 500 Fiscal 2001
(Europe) Ltd. United Kingdom
DRS Rugged Systems Fyshwick, Australia Sales 1,200 Fiscal 2000
(Australia) PTY. Ltd.
DRS Rugged Systems, Inc. Longmont, Colorado Administrative, 43,300 Fiscal 2005
Engineering and
Manufacturing
EOSG
DRS Photronics, Inc. Oakland, New Jersey Administrative and 25,400 Fiscal 2003
Engineering
DRS Photronics, Inc. Oakland, New Jersey Administrative and 36,000 Fiscal 2003
Manufacturing
DRS Optronics, Inc. Palm Bay, Florida Administrative, 85,200 Fiscal 2006
Engineering and
Manufacturing
DRS Hadland, Inc. Cupertino, California Sales and Field 1,200 Fiscal 2000
Service
DRS Hadland GmbH Munich, Germany Sales and Field 200 (1)
Service
- ----------
(1) Lease has no set expiration date. Three months notice is required to
terminate lease.
14
SUBSIDIARY APPROXIMATE
OR SQUARE
DIVISION LOCATION ACTIVITIES FOOTAGE EXPIRATION
---------------------------- -------------------------- -------------------- ---------------- -----------------
DRS Hadland Ltd. Tring, Hertfordshire, Storage 2,000 Fiscal 2000
United Kingdom
DRS Infrared Technologies, Dallas, Texas Administrative, 109,600 Fiscal 2003
LP Engineering and
Manufacturing
DRS Sensor Systems, Inc. El Segundo, California Administrative, 17,400 Fiscal 2000
Engineering and
Manufacturing
DSG
DRS Ahead Technology, Inc. San Jose, California Administrative, 32,000 Fiscal 2001
Product
Development and
Manufacturing
DRS Ahead Technology, Inc. Plymouth, Minnesota Administrative and 13,700 Fiscal 2003
Manufacturing
DRS Ahead Technology, Inc. St. Croix Falls, Administrative and 20,000 Fiscal 2000
Wisconsin Manufacturing
FSCG
DRS Flight Safety and Nepean, Ontario, Administrative and 8,000 Fiscal 2004
Communications Canada Engineering
DRS Precision Echo, Inc. Santa Clara, California Administrative, 32,700 Fiscal 2006
Engineering and
Manufacturing
DRS Technologies (UK) Ltd. Hayes, Middlesex, Administrative and 6,800 Fiscal 2001
United Kingdom Manufacturing
On October 20, 1998, upon the closing of the acquisition of the
electro-optical businesses of Raytheon, DRS Sensor Systems entered into a lease
agreement for approximately 17,400 square feet of space partitioned from the
Raytheon facility in El Segundo, California, and DRS Infra-Red entered into two
sub-lease agreements for Raytheon facilities in Dallas, Texas for (1) a
stand-alone 48,000 square foot research facility and (2) a partition measuring
61,600 square feet of a neighboring Texas Instruments building. DRS Sensor
Systems is currently in the process of relocating to its newly leased facility
in Torrance, California.
During July 1998, in connection with the expiration of the lease for the
Kanata, Ontario, Canada facility, FSCG relocated a substantial portion of the
Kanata operations to its facility in Carleton Place, Ontario, Canada and the
remainder to a leased facility in Nepean, Ontario, Canada.
We lease the building in Oakland, New Jersey from LDR Realty Co., a
partnership established by the co-founders of DRS. We believe that this lease
was consummated on terms no less favorable than those that could have been
obtained by us from an unrelated third party in a transaction negotiated on an
arms-length basis.
We own the following properties:
SUBSIDIARY APPROXIMATE
OR SQUARE
DIVISION LOCATION ACTIVITIES FOOTAGE
---------------------------- -------------------------- -------------------- -------------------
DSG
DRS Ahead Technology, Inc. Razlog, Bulgaria Manufacturing 64,100
15
SUBSIDIARY APPROXIMATE
OR SQUARE
DIVISION LOCATION ACTIVITIES FOOTAGE
---------------------------- -------------------------- -------------------- -------------------
EOSG
DRS Hadland Ltd. Tring, Hertfordshire, Administrative, 7,500
United Kingdom Engineering and
Manufacturing
FSCG
DRS Flight Safety and Carleton Place, Ontario, Administrative and 128,500
Communications Canada Manufacturing
We believe that all our facilities are in good condition, adequate for our
intended use and sufficient for our immediate needs. It is not certain whether
we will negotiate new leases as existing leases expire. Such determinations will
be made as existing leases approach expiration and will be based on an
assessment of our requirements at that time. Further, we believe that we can
obtain additional space, if necessary, based on prior experience and current
real estate market conditions.
Substantially all of our assets, including those properties identified
above, are pledged as collateral on our borrowings (see Note 7 of Notes to
Consolidated Financial Statements).
ENVIRONMENTAL PROTECTION
We believe that our manufacturing operations and properties are, in all
material respects, in compliance with existing federal, state and local
provisions enacted or adopted to regulate the discharge of materials into the
environment or otherwise protect the environment. Such compliance has been
achieved without material effect on our earnings or competitive position.
ITEM 3. LEGAL PROCEEDINGS
We are a party to various legal actions and claims arising in the ordinary
course of our business. In our opinion, we have adequate legal defenses for each
of the actions and claims and we believe that their ultimate disposition will
not have a material adverse effect on our consolidated financial position or
results of operations.
In the first quarter of fiscal 1999, subpoenas were issued to the Company
by the United States Attorney for the Eastern District of New York seeking
documents related to certain equipment manufactured by DRS Photronics. These
subpoenas were issued in connection with United States v. Tress, a case
involving a product substitution allegation against an employee of DRS
Photronics. On June 26, 1998, the complaint against the employee is dismissed
without prejudice. To date, no claim has been made or threatened against the
Company or DRS Phototronics. DRS Phototronics is currently unable to ship
certain equipment related to the case, resulting in delays in the Company's
recognition of revenues. At this time, the Company is unable to quantify the
effect of the delayed shipments on its future results of operations or financial
position, or to predict when such shipments ultimately will be made, although
the delays are expected to impact fiscal 2000 first quarter results.
We are presently involved in a dispute in arbitration with Spar Aerospace
Limited ("Spar") with respect to the working capital adjustment, if any,
provided for in the purchase agreement between the Company and Spar dated as of
September 19, 1997, pursuant to which we acquired, through certain of our
subsidiaries, certain assets of Spar (see Note 2 of Notes to Consolidated
Financial Statements.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 11, 1999 at a special meeting, DRS stockholders approved the
merger of NAI Technologies, Inc. with and into a wholly-owned subsidiary of DRS.
There were 4,202,205 votes in favor of the merger, 32,500 votes against, and
7,107 abstentions. The merger successfully was consummated on February 19, 1999.
At the same meeting, the stockholders approved an amendment to our 1996 Omnibus
Plan to increase the number of shares of our Common Stock reserved for issuance
under this Plan by 900,000 shares, for an aggregate of 1,400,000. There were
3,989,677 votes in favor of the Plan amendment, 232,318 votes against and 19,817
abstentions. No other matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year ended March 31, 1999.
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
We have not paid any cash dividends since 1976. We intend to retain future
earnings for use in our business and do not expect to declare cash dividends on
our Common Stock in the foreseeable future. The indenture relating to the our 9%
Senior Subordinated Convertible Debentures and our bank lines of credit restrict
our ability to pay dividends or make other distributions on our Common Stock.
See Note 7 of Notes to Consolidated Financial Statements for information
concerning restrictions on the declaration or payment of dividends. Any future
declaration of dividends will be subject to the discretion of our Board of
Directors. The timing, amount and form of any future dividends will depend,
among other things, on our results of operations, financial condition, cash
requirements, plans of expansion and other factors deemed relevant by our Board
of Directors.
The information required by this item with respect to the market prices for
and number of holders of our common equity securities is incorporated herein by
reference to page 50 of the DRS 1999 Annual Report (for the fiscal year ended
March 31, 1999).
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference herein
to page 20 of the DRS 1999 Annual Report (for the fiscal year ended March 31,
1999).
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information required by this item is incorporated by reference herein
to pages 21 through 31 of the DRS 1999 Annual Report (for the fiscal year ended
March 31, 1999).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company is exposed to market risks
relating to fluctuations in interest rates and foreign currency exchange risk.
The Company does not enter into derivatives or other financial instruments for
trading or speculative purposes.
INTEREST RATE RISK
As the Company seeks debt financing to maintain its ongoing operations and
sustain its growth, it is exposed to interest rate risk. Borrowings under the
Company's $150 million secured credit facility with Mellon Bank, N.A are
sensitive to changes in interest rates as such borrowings bear interest at
variable rates. In January 1998, the Company entered into an interest rate
collar agreement (expiring on January 8, 2001) to limit the impact of interest
rate fluctuations on cash flow and interest expense. As of March 31, 1999
approximately $6.6 million of the Company's $101.5 million of interest rate
sensitive obligations outstanding have been limited to the "ceiling" rate of
5.75% and the "floor" rate 4.77%.
FOREIGN CURRENCY EXCHANGE RISK
DRS operates and conducts business in foreign countries and as a result is
exposed to movements in foreign currency exchange rates. More specifically, our
net equity is impacted by the conversion of the net assets of foreign
subsidiaries for which the functional currency is not the U.S. Dollar for U.S.
reporting purposes. The Company's exposure to foreign currency exchange risk
related to its foreign operations is not material to the Company's results of
operations, cash flows or financial position. The Company, at present, does not
hedge this risk but continues to evaluate such foreign currency translation risk
exposure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference herein
to pages 32 through 50 of the DRS 1999 Annual Report (for the fiscal year ended
March 31, 1999).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
PART III
The information required by Items 10. through 13. of this Part is
incorporated herein by reference to our Definitive Proxy Statement, dated June
28, 1999, for the 1999 Annual Meeting of Stockholders. Reference also is made to
the information under "Executive Officers of the Registrant" in Part I of this
report.
18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report
1. Financial Statements
The following financial statements of DRS and its
subsidiaries have been incorporated by reference to the DRS 1999
Annual Report (for the fiscal year ended March 31, 1999),
pursuant to Item 8 of this report:
1999 ANNUAL REPORT PAGE(S)
------------------ -------
Independent Auditors' Report 51
Consolidated Balance Sheets--March 31, 1999 and 1998 32
Consolidated Statements of Earnings--Years Ended March 31,
1999, 1998 and 1997 33
Consolidated Statements of Stockholders' Equity and Comprehensive
Earnings--Years Ended March 31, 1999, 1998 and 1997 34
Consolidated Statements of Cash Flows--Years Ended March 31,
1999, 1998 and 1997 35
Notes to Consolidated Financial Statements 36-50
2. Financial Statement Schedules See Appendix A hereto.
3. Exhibits filed as part of this report are listed in the Exhibit
Index at the end of this report.
(b) Reports on Form 8-K
1. Filed as of January 4, 1999; Amendment No. 1 to Current Report on
Form 8-K dated November 4, 1998, containing financial statements
of assets to be acquired and liabilities to be assumed pursuant
to the Company's acquisition of certain assets of the Second
Generation Ground-Based Electro-Optical and Focal Plane Array
businesses of Raytheon Company.
2. Filed as of January 6, 1999; Amendment No. 2 to Current Report on
Form 8-K dated November 4, 1998, containing consent of
independent auditors.
3. Filed as of March 5, 1999; Current Report on Form 8-K, describing
the Company's acquisition of NAI Technologies, Inc.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DRS TECHNOLOGIES, INC.
Dated: June 29, 1999
/s/ MARK S. NEWMAN
--------------------------------------
Mark S. Newman, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MARK S. NEWMAN Chairman of the Board, President, June 29, 1999
- -------------------------------------- Chief Executive Officer and Director
Mark S. Newman
/s/ RICHARD A. SCHNEIDER Executive Vice President, Chief June 29, 1999
- -------------------------------------- Financial Officer and Treasurer
Richard A. Schneider
/s/ IRA ALBOM Director June 29, 1999
- --------------------------------------
Ira Albom
/s/ DONALD C. FRASER Director June 29, 1999
- --------------------------------------
Donald C. Fraser
/s/ WILLIAM F. HEITMANN Director June 29, 1999
- --------------------------------------
William F. Heitmann
/s/ STEVEN S. HONIGMAN Director June 29, 1999
- --------------------------------------
Steven S. Honigman
/s/ MARK N. KAPLAN Director June 29, 1999
- --------------------------------------
Mark N. Kaplan
/s/ C. SHELTON JAMES Director June 29, 1999
- --------------------------------------
C. Shelton James
/s/ STUART F. PLATT Director June 29, 1999
- --------------------------------------
Stuart F. Platt
/s/ ERIC J. ROSEN Director June 29, 1999
- --------------------------------------
Eric J. Rosen
20
APPENDIX A
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
Independent Auditors' Report
Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
All other financial statement schedules have been omitted because they are
either not required, not applicable or the required information is shown
in the consolidated financial statements or the notes thereto.
INDEPENDENT AUDITORS' REPORT ON CONSOLIDATED
FINANCIAL STATEMENT SCHEDULE
The Board of Directors and Stockholders,
DRS Technologies, Inc.:
Under date of May 11, 1999, we reported on the consolidated balance sheets
of DRS Technologies, Inc. and subsidiaries as of March 31, 1999 and 1998, and
the related consolidated statements of earnings, stockholders' equity and
comprehensive earnings, and cash flows for each of the years in the three-year
period ended March 31, 1999, as contained in the 1999 Annual Report to
stockholders. These consolidated financial statements and our report thereon are
incorporated by reference in the Annual Report on Form 10-K for the fiscal year
1999. In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedule as listed in the accompanying index. The consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statement
schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG LLP
Short Hills, New Jersey
May 11, 1999
21
DRS TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
COL. A COL. B COL. C COL. D COL. E
ADDITIONS (A) DEDUCTIONS (B)
--------------------------- ---------------------------
(1) (2) (1) (2)
CHARGED TO CREDITED TO
BALANCE AT CHARGED TO OTHER CREDITED TO OTHER BALANCE AT
BEGINNING OF COSTS ACCOUNTS-- COSTS ACCOUNTS-- END OF
DESCRIPTION PERIOD AND EXPENSES DESCRIBE AND EXPENSES DESCRIBE PERIOD
----------- ------------ ------------ ---------- ------------ ---------- ----------
INVENTORY RESERVE
Year ended March 31, 1999 $1,695,000 $3,484,000 $ 440,000(c) $1,461,000 $ 797,000(d) $3,361,000
Year ended March 31, 1998 $ 741,000 $ 664,000 $ 988,000(c) $ 532,000 $ 166,000(d) $1,695,000
Year ended March 31, 1997 $1,069,000 $ 44,000 $2,166,000(c) $ 400,000 $2,138,000(d) $ 741,000
LOSSES & FUTURE COSTS
ACCRUED ON UNCOMPLETED
CONTRACTS
Year ended March 31, 1999 $4,120,000 $2,717,000 $5,784,000(c) $1,197,000 $3,305,000(e) $8,119,000
Year ended March 31, 1998 $2,204,000 $4,834,000 $ 166,000(c) $2,346,000 $ 738,000(e) $4,120,000
Year ended March 31, 1997 $3,850,000 $1,564,000 $ 16,000(c) $1,060,000 $2,166,000(e) $2,204,000
ALLOWANCE FOR DOUBTFUL
ACCOUNTS
Year ended March 31, 1999 $ 486,000 $ 564,000 $ 258,000(c) $ 48,000 $ 6,000(d) $1,254,000
Year ended March 31, 1998 $ 136,000 $ 313,000 $ 71,000(c) $ 34,000 $ -- $ 486,000
Year ended March 31, 1997 $ 136,000 $ -- $ -- $ -- $ -- $ 136,000
- ----------------------
(a) Represents, on a full-year basis, net credits to reserve accounts.
(b) Represents, on a full-year basis, net charges to reserve accounts.
(c) Represents amounts reclassified from related reserve accounts.
(d) Represents amounts utilized and credited to related asset accounts.
(e) Represents amounts reclassified to related reserve accounts.
22
EXHIBIT INDEX
Certain of the following exhibits, designated with an asterisk (*) are
filed herewith. Certain of the following exhibits, designated with a "P", are
being filed on paper, pursuant to a hardship exemption under Rule 202 of
Regulation S-T. The exhibits not so designated have been previously filed with
the Commission and are incorporated herein by reference to the documents
indicated in brackets following the descriptions of such exhibits.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 -- Restated Certificate of Incorporation of the Company
[Registration Statement No. 2-70062-NY, Amendment No. 1, Exhibit
2(a)]
3.2 -- Certificate of Amendment of the Restated Certificate of
Incorporation of the Company, as filed July 7, 1983 [Registration
Statement on Form 8-A of the Company, dated July 13, 1983,
Exhibit 2.2]
3.3 -- Composite copy of the Restated Certificate of Incorporation of
the Company, as amended [Registration Statement No. 2-85238,
Exhibit 3.3]
3.4 -- Amended and Restated Certificate of Incorporation of the Company,
as filed April 1, 1996 [Registration Statement No. 33-64641,
Post-Effective Amendment No. 1, Exhibit 3.4]
3.5 -- By-laws of the Company, as amended to November 7, 1994 [Form
10-K, fiscal year ended March 31, 1995, File No. 1-8533,
Exhibit 3.4]
3.6 -- Certificate of Amendment of the Certificate of Incorporation of
Precision Echo Acquisition Corp., as filed March 10, 1995 [Form
10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit
3.5]
3.7 -- Form of Advance Notice By-Laws of the Company [Form 10-Q, quarter
ended December 31, 1995, File No. 1-8533, Exhibit 3]
3.8 -- Amended and Restated By-Laws of the Company, as of April 1, 1996
[Registration Statement No. 33-64641, Post-Effective Amendment
No. 1, Exhibit 3.8]
4.1 -- Indenture, dated as of September 22, 1995, between the Company
and The Trust Company of New Jersey, as Trustee, in respect of
the Company's 9% Senior Subordinated Convertible Debentures Due
2003 [Registration Statement No. 33-64641, Amendment No. 1,
Exhibit 4.1]
4.2 -- Form of 9% Senior Subordinated Convertible Debenture Due 2003
(included as part of Exhibit 4.1) [Registration Statement No.
33-64641, Amendment No. 1, Exhibit 4.2]
4.3 -- Registration Rights Agreement, dated as of September 22, 1995
between the Company and Forum Capital Markets L.P.
[Registration Statement No. 33-64641, Amendment No. 1, Exhibit
4.3]
10.1 -- 1991 Stock Option Plan of the Company [Registration Statement
No. 33-42886, Exhibit 28.1]
10.2 -- 1996 Omnibus Plan of the Company [Registration Statement No.
333-14487, Exhbit 99.1]
10.3 -- Joint Venture Agreement, dated as of November 3, 1993, by and
between DRS Systems Management Corporation and Laurel
Technologies, Inc. [Form 10-Q, quarter ended December 31, 1993,
File No. 1-8533, Exhibit 6(a)(3)]
10.4 -- Waiver Letter, dated as of December 13, 1993, by and between
DRS Systems Management Corporation and Laurel Technologies, Inc.
[Form 10-Q, quarter ended December 31, 1993, File No. 1-8533,
Exhibit 6(a)(4)]
10.5 -- Partnership Agreement, dated December 13, 1993, by and between
DRS Systems Management Corporation and Laurel Technologies, Inc.
[Form 10-Q, quarter ended December 31, 1993, File No. 1-8533,
Exhibit 6(a)(5)]
10.6 -- Lease, dated June 28, 1979, between the Company and J.L. Williams
& Co., Inc. ("Williams") [Registration Statement No. 2-70062-NY,
Exhibit 9(b)(4)(i)]
23
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.7 -- Lease, dated as of June 1, 1983, between LDR Realty Co. and the
Company [Form 10-K, fiscal year ended March 31, 1984, File No.
1-8533, Exhibit 10.7]
10.8 -- Renegotiated Lease, dated June 1, 1988, between LDR Realty Co.
and the Company [Form 10-K, fiscal year ended March 31, 1989,
File No. 1-8533, Exhibit 10.8]
10.9 -- Lease, dated July 20, 1988, between Precision Echo, Inc. and Bay
511 Corporation [Form 10-K, fiscal year ended March 31, 1991,
File No. 1-8533, Exhibit 10.9]
10.10 -- Amendment to Lease, dated July 1, 1993, between Precision Echo,
Inc. and Bay 511 Corporation [Form 10-K, fiscal year ended March
31, 1994, File No. 1-8533, Exhibit 10.12]
10.11 -- Second Amendment to Lease, dated October 17, 1995 between
Precision Echo, Inc. and Bay 511 Corporation [Registration
Statement No. 33-64641, Amendment No. 1, Exhibit 10.11]
10.12 -- Lease Modification Agreement, dated February 22, 1994, between
Technology Applications and Service Company and Atlantic Real
Estate Partners II [Form 10-K, fiscal year ended March 31, 1994,
File No. 1-8533, Exhibit 10.13]
10.13 -- Amendment to Lease Modification, dated June 1, 1994, between
Technology Applications and Service Company and Atlantic Estate
Partners II [Form 10-K, fiscal year ended March 31, 1995, File
No. 1-8533, Exhibit 10.11]
10.14 -- Triple Net Lease, dated October 22, 1991, between Technology
Applications and Service Company and Marvin S. Friedberg [Form
10-K, fiscal year ended March 31, 1994, File No. 1-8533,
Exhibit 10.14]
10.15 -- Lease, dated November 10, 1993, between DRS Systems Management
Corp. and Skateland Roller Rink, Inc. [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-8533, Exhibit 10.17]
10.16 -- Lease, dated March 23, 1992, between Ahead Technology
Corporation and Vasona Business Park [Form 10-K, fiscal year
ended March 31, 1995, File No. 1-8533, Exhibit 10.15]
10.17 -- Amendment to Lease, dated May 21, 1992, between Ahead
Technology Corporation and Vasona Business Park [Form 10-K,
fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.16]
10.18 -- Revision to Lease Modification, dated August 25, 1992, between
Ahead Technology Corporation and Vasona Business Park [Form 10-K,
fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.17]
10.19 -- Lease, dated January 13, 1995, between the Company and Sammis
New Jersey Associates [Form 10-K, fiscal year ended March 31,
1995, File No. 1-8533, Exhibit 10.18]
10.20 -- Lease, dated April 3, 1996, by and between the Company and Los
Alamos Economic Development Corporation [Form 10-K, fiscal year
ended March 31, 1996, File No. 1-8533, Exhibit 10.20]
10.21 -- Employment, Non-Competition and Termination Agreement, dated
July 20, 1994, between Diagnostic/Retrieval Systems, Inc. and
David E. Gross [Form 10-Q, quarter ended June 30, 1994, File No.
1-8533, Exhibit 1]
10.22 -- Stock Purchase Agreement, dated as of July 20, 1994, between
Diagnostic/Retrieval Systems, Inc. and David E. Gross [Form 10-Q,
quarter ended June 30, 1994, File No. 1-8533, Exhibit 2]
10.23 -- Asset Purchase Agreement, dated October 28, 1994, Acquisition
by PE Acquisition Corp., a subsidiary of Precision Echo, Inc. of
all of the Assets of Ahead Technology Corporation [Form 10-Q,
quarter ended December 31, 1994, File No. 1-8533, Exhibit 1]
10.24 -- Amendment to Agreement for Acquisition of Assets, dated July 5,
1995, between Photronics Corp. and Opto Mechanik, Inc. [Form 8-K,
Amendment No. 1, July 5, 1995, File No. 1-8533, Exhibit 1]
24
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.25 -- Lease, dated August 17, 1995, between Ahead Technology, Inc. and
South San Jose Interests [Registration Statement No. 33-64641,
Amendment No. 1, Exhibit 10.79]
10.26 -- Lease, dated May 25, 1995, between Technology Applications and
Service Company and Sports Arena Village, Ltd., L.P.
[Registration Statement No. 33-64641, Amendment No. 1, Exhibit
10.81]
10.27 -- Lease, dated August, 1995, by and between OMI Acquisition Corp.
and Fred E. Sutton and Harold S. Sutton d/b/a Sutton Properties
[Registration Statement No. 33-64641, Amendment No. 1,
Exhibit 10.84]
10.28 -- Lease, dated August, 1995, by and between OMI Acquisition Corp.
and Fred E. Sutton and Harold S. Sutton d/b/a Sutton Properties
[Registration Statement No. 33-64641, Amendment No. 1,
Exhibit 10.85]
10.29 -- Lease, dated August, 1995, by and between OMI Acquisition Corp.
and Fred E. Sutton and Harold S. Sutton d/b/a Sutton Properties
[Registration Statement No. 33-64641, Amendment No. 1,
Exhibit 10.86]
10.30 -- Memorandum of Lease, dated August, 1995, by and between OMI
Acquisition Corp. and Fred E. Sutton and Harold S. Sutton d/b/a
Sutton Properties [Registration Statement No. 33-64641,
Amendment No. 1, Exhibit 10.87]
10.31 -- Joint Venture Agreement, dated as of February 6, 1996, by and
among DRS/MS, Inc., Universal Sonics Corporation, Ron Hadani,
Howard Fidel and Thomas S. Soulos [Registration Statement No.
33-64641, Amendment No. 1, Exhibit 10.91]
10.32 -- Partnership Agreement, dated as of February 6, 1996, by and
between DRS/MS, Inc. and Universal Sonics Corporation
[Registration Statement No. 33-64641, Amendment No. 1, Exhibit
10.92]
10.33 -- Asset Purchase Agreement, dated as of February 9, 1996, by and
among Mag-Head Engineering, Company, Inc. and Ahead Technology
Acquisition Corporation, a subsidiary of Precision Echo, Inc.
[Registration Statement No. 33-64641, Post-Effective Amendment
No. 1, Exhibit 10.93]
10.34 -- Employment, Non-Competition and Termination Agreement, dated
March 28, 1996, between the Company and Leonard Newman
[Registration Statement No. 33-64641, Post-Effective Amendment
No. 1, Exhibit 10.94]
10.35 -- Asset Purchase Agreement, dated June 17, 1996, by and among
Vikron, Inc., Northland Aluminum, Inc., Ahead Wisconsin
Acquisition Corporation, a third-tier subsidiary of the Company,
and Ahead Technology, Inc., a second-tier subsidiary of the
Company [Form 10-K, fiscal year ended March 31, 1997, File No. 1-
8533, Exhibit 10.99]
10.36 -- Agreement and Plan of Merger, dated September 30, 1996, by and
among PTI Acquisition Corp., a subsidiary of the Company, Pacific
Technologies, Inc., David A. Leedom, Karen A. Mason, Robert T.
Miller, Carl S. Ito and Barry S. Kindig [Form 10-K, fiscal year
ended March 31, 1997, File No. 1-8533, Exhibit 10.101]
10.37 -- Asset Purchase Agreement, dated October 22, 1996, by and among
Ahead Technology, Inc., a second-tier subsidiary of the Company,
Nortronics Acquisition Corporation, a third-tier subsidiary of
the Company, Nortronics Company, Inc., Alan Kronfeld, Thomas
Philipich and Robert Liston [Form 10-K, fiscal year ended March
31, 1997, File No. 1- 8533, Exhibit 10.102]
10.38 -- Purchase Agreement, dated as of September 19, 1997, between
DRS Technologies, Inc. and Spar Aerospace Limited. [Form 8-K,
October 27, 1997, File No. 1-8533, Exhibit 1]
10.39 -- Asset Purchase Agreement, dated July 28, 1998, by and among
the Company, Raytheon TI Systems, Inc., Raytheon Company and
Raytheon Systems Georgia, Inc. [Form 8-K, November 4, 1998, File
No. 1-8533, Exhibit 1]
25
EXHIBIT NO. DESCRIPTION
10.40 -- Letter Amendment by and among the Company, Raytheon TI Systems,
Inc., Raytheon Company and Raytheon Systems Georgia, Inc., dated
October 20, 1998, amending the Asset Purchase Agreement. [Form
8-K, November 4, 1998, File No. 1-8533, Exhibit 2]
10.41 -- Amended and Restated Revolving Credit Loan and Term Loan
Agreement, dated October 20, 1998, by and among the Company, DRS
Technologies Canada Company, DRS Technologies Canada, Inc., DRS
EO, Inc., DRS FPA, L.P. and Mellon Bank, N.A. [Form 8-K, November
4, 1998, File No. 1-8533, Exhibit 3]
10.42 -- Agreement and Plan of Merger dated August 26, 1998, as amended,
among DRS Technologies, Inc., DRS Merger Sub, Inc. and NAI
Technologies, Inc. [Registration Statement No. 333-69751, Post
Effective Amendment No. 1, Exhibit 2.1]).
10.43 -- Amendment to Agreement and Plan of Merger, dated February 17,
1999, among DRS Technologies, Inc., DRS Merger Sub, Inc. and NAI
Technologies, Inc. [Form 8-K, March 5, 1999, File No. 1-8533,
Exhibit 2]
10.44 -- 1991 Stock Option Plan of NAI Technologies, Inc. [Registration
Statement No. 333-69751, Post Effective Amendment No. 1 on Form
S-8, Exhibit 4.4]
10.45 -- 1993 Stock Option Plan for Directors of NAI Technologies, Inc.
[Registration Statement No. 333-69751, Post Effective Amendment
No. 1 on Form S-8, Exhibit 4.5]
10.46 -- 1996 Stock Option Plan of NAI Technologies, Inc. [Registration
Statement No. 333-69751, Post Effective Amendment No. 1 on Form
S-8, Exhibit 4.6]
10.47* -- Employment Agreement, dated as of November 20, 1996, by and
between the Company and Mark S. Newman
10.48* -- Employment Agreement, dated as of April 30, 1997, by and between
the Company and Nina Laserson Dunn
10.49* -- Employment Agreement, dated as of February 19, 1999, by and
between the Company and Richard A. Schneider
10.50[P]-- Subcontract No. 483901(D), dated June 24, 1994, under Contract
No. N00024-94-D-5204, between the Company and Unisys Corporation
Government Systems Group [Form 10-K, fiscal year ended March 31,
1995, 1995, File No. 1-8533, Exhibit 10.37]
10.51[P]-- Purchase Order No. 10606321 1, dated October 28, 1998, between
the Company and Raytheon TI Systems, Inc.
10.52[P]-- Contract DAAH01-97-C-0390, dated September 24, 1997, between
Hughes Georgia, Inc. and the U.S. Army
10.53[P]-- Modification P00001, dated January 16, 1998, to Contract
DAAH01-97-C-0390
10.54[P]-- Modification P00008, dated October 30, 1998, to Contract
DAAH01-97-C-0390
10.55[P]-- Contract DAAB07-97-C-J430, dated April 1, 1997, between Hughes
Aircraft Co. and the U.S. Army
10.56[P]-- Modification P00037, dated March 31, 1999, to Contract
DAAB07-97-C-J430
*13 -- Portions of the 1999 Annual Report to Stockholders of the Company
*21 -- List of subsidiaries of the Company as of March 31, 1999
*23.1 -- Consent of KPMG LLP
*27 -- Financial Data Schedule
26