ITEM 1. BUSINESS
GENERAL
The registrant, DRS Technologies, Inc. (hereinafter the "Company" or "DRS") was incorporated in 1968 and is a diversified, high-technology company serving government and commercial niche markets worldwide. DRS develops and manufactures a variety of leading edge systems and components used for the processing, display and storage of data. These include combat display workstations, electronic sensor systems, mission recording systems, digital imaging systems, electro-optical systems, ship communications and flight safety systems. The Company also provides a wide range of technical support and depot level services. DRS's defense electronics products serve all branches of the U.S. Armed Services and certain international military forces. The Company's commercial and industrial products are used by the airline, banking, computer disk drive, security, transportation, retail sales and broadcast industries.
STRATEGY
The Company believes that the nature of modern warfare has changed, dictating increasing reliance on real-time, accurate battlefield information derived from increasingly sophisticated defense systems and electronics. Additionally, the nature of military procurement programs has changed, requiring suppliers to become more efficient and adaptable to current and future market needs. In recent years, the Company has implemented strategies to exploit the changing nature of military procurement programs brought on by the end of the Cold War and military budget constraints. In response to a 1992 mandate by the Joint Chiefs of Staff, the Company focuses on "Commercial Off-The-Shelf" ("COTS") product designs, whereby commercial electronic components are integrated, adapted, upgraded and "ruggedized "for application in harsh military environments. In addition to winning contracts for new programs and supporting existing military programs, the Company's strategies include:
o designing new products and adapting existing products for use by all branches of the military;
o transferring technologies developed in the defense sector to commercial and industrial markets; and
o acquiring businesses that provide a strategic complement to the Company's existing products, services and technological capabilities in both the defense and commercial marketplaces.
To effect these strategies, the Company has (i) made several acquisitions in recent years, adding complementary military and commercial products and technologies; (ii) entered into strategic relationships with other defense suppliers, such as Lockheed Martin Tactical Defense Systems and Northrop-Grumman, among others; (iii) emphasized the development of COTS-based products, as well as products and systems that are easily adapted to similar weapons platforms used by all branches of the military; and (iv) implemented cost reduction initiatives to reduce its fixed-cost base to allow for growth and to maintain the flexibility of its operations. The implementation of these strategies has resulted in increased revenues and profits over the last five fiscal years. Acquisitions and Related Activities: In July 1995, the Company acquired substantially all of the assets of Opto-Mechanik, Inc., now known as DRS Optronics, Inc. ("DRS Optronics"), located in Palm Bay, Florida. This acquisition enabled the Company to expand its electro-optical targeting products, add backlog in complementary product areas and consolidate certain manufacturing activities in a lower-cost facility.
In February 1996, the Company acquired a 90% interest in DRS Medical Systems, a partnership formed to develop, manufacture and market medical ultrasound imaging equipment. Due to the fact that DRS Medical Systems did not complement the Company's on-going strategies, on September 12, 1997, the Company sold substantially all the net assets of DRS Medical Systems to United States Surgical Corporation.
As part of the Company's strategy to diversify into non-defense markets, the Company made four acquisitions that expanded its presence and existing capabilities in the magnetic head marketplace. In February 1996, the Company acquired substantially all of the assets of Mag-Head Engineering Company, Inc., a manufacturer of audio and flight recorder heads. In addition, in June 1996, the Company acquired substantially all of the assets of Vikron, Inc. ("Vikron"). Located in St. Croix Falls, Wisconsin, Vikron manufactures data and recording heads. In October 1996, the Company acquired certain assets of Nortronics Company, Inc. ("Nortronics"), which also manufactures magnetic data recording head products. Nortronics is located in Dassel, Minnesota. Effective February 26, 1997,
these operations were merged with and into DRS Ahead Technology, Inc. to form a single legal entity. In May 1997, the Company acquired 80% of the outstanding equity of Magnetic Heads Company Ltd. ("MHC"). Located in Razlog, Bulgaria, MHC, now known as DRS Ahead Technology--Bulgaria, is a manufacturer and supplier of magnetic recording heads used primarily for commercial applications. The Company currently is integrating these operations to further streamline its manufacturing operations.
In October 1996, Pacific Technologies, Inc. merged with and into a subsidiary of the Company. Based in San Diego, California, and renamed DRS Technical Services, Inc., it provides systems and software engineering support to the U.S. Navy for the testing of shipboard combat systems.
In October 1997, the Company acquired the assets of the Applied Systems Division of Spar Aerospace Limited, a Canadian corporation, and 100% of the stock of Spar Aerospace (UK) Limited, incorporated under the laws of England and Wales. Headquartered in Carleton Place, Ontario, Canada, and operating under the name DRS Flight Safety and Communications, the Applied Systems Division has been an international provider of aviation and defense systems for over 30 years. It designs, manufactures and markets sophisticated flight safety systems, naval communications systems and other advanced electronics for government and commercial customers around the world. It also provides custom manufacturing services for complex electronic assemblies and systems.
In March 1998, the Company acquired Hadland Photonics Ltd., headquartered in Tring, Hertfordshire, the United Kingdom, currently known as DRS Hadland Ltd. ("DRS Hadland"). The company has been a leader in ultra high-speed image capture and analysis for over 40 years. It designs, manufactures and markets ultra high-speed digital imaging cameras and avionics systems, including airborne video recording and ground replay systems, for government and commercial customers worldwide.
Cost-Reduction and Other Initiatives. During fiscal 1998 the Company integrated the administrative and support functions of its magnetic head manufacturing facilities into an operation in Plymouth, Minnesota. In addition, the Company restructured certain operations by moving various display workstation product lines from the Company's facility in Oakland, New Jersey to its operation in Gaithersburg, Maryland and by relocating its multi-platform boresighting equipment product lines, formerly located in Hauppauge, New York, to Oakland, New Jersey. In connection with this restructuring, the Company sold the land and building owned in Hauppauge, New York. The Company continues to focus on opportunities to streamline its operations.
COTS Designs. The COTS concept was developed and mandated in response to both decreasing military budgets and the increasing pace of technology. The use of COTS designs entails the purchasing, refitting, upgrading and "ruggedization" (repackaging, remounting and stress testing to ensure readiness for use in harsh military environments) of available commercial components. Using COTS designs, the Company develops and delivers its products with significantly less development time and expense compared with traditional military product cycles, generally resulting in shorter lead times, lower costs and the employment of the latest information and computing technologies. The Company strives to apply COTS designs to most of its new products. Management believes that the adaptation of available commercial components to existing and newly developed military systems offers three primary advantages over traditional military systems development and procurement cycles: (i) it has the potential to save significant amounts of time and cost with respect to product research and development; (ii) the adaption of commercial technology to battlefield systems has the potential to shorten military product cycles, as commercial product development and production cycles are shorter than their military equivalents; and (iii) use of COTS designs should ensure that the latest information and computing technologies are employed in the design and manufacture of defense electronics systems.
Adaptable Product Designs. The Company has focused on the design and development of new products and the redesign of existing products for use by all branches of the military. This has enabled the Company to increase revenues using its existing product and technology base, reduce overall product development costs and decrease reliance on U.S. Navy procurement programs. For instance, the Company's display systems, originally designed under a U.S. Navy development contract, are open-architecture information processing workstations that can be adapted for use in other branches of the military. Similarly, the Company's boresight products, originally designed for use with the U.S. Army's Apache attack helicopter, were designed to be adaptable to other air, sea or land-based weapons platforms. The boresight system has been applied successfully to the U.S. Marine Corps' Cobra helicopter and to the U.S. Air Force's AC-130 Spectre Gunship platforms.
COMPANY ORGANIZATION
DRS is organized into four principal operating segments on the basis of products and services offered: the Electronic Systems Group ("ESG"), the Data Systems Group ("DSG"), the Electro-Optical Systems Group ("EOSG"), and Flight Safety and Communications ("FS&C"). See Note 12 of Notes to Consolidated Financial Statements for selected financial information by segment.
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., based in San Diego, California and a division of DRS ESI known as DRS Technical Services, located in Chesapeake, Virginia.
ESI designs, manufactures and integrates complex systems using advanced commercial technology to meet the performance and environmental requirements of military customers. Current products include tactical processing and display systems for military ships and aircraft, surveillance systems for coastal and harbor regions, radar and acoustic sensor systems, and low-cost emulators of legacy military systems for test and training support. ESG also provides manufacturing services and technical support services for both DRS products and those of other suppliers. Major products and contracts include:
o AN/UYQ-65: The AN/UYQ-65 is the first COTS-based tactical workstation to be qualified by the U.S. Navy and was designed to comply with the stringent requirements of the Aegis (DDG-51) shipbuilding program. Replacing the sensor displays in the SQQ-89 ASW combat suite, it 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.
o AN/SQR-17A(V)3: The Mobile In-shore Undersea Warfare (MIUW) system is 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. This system currently is being procured for utilization in 22 field installations. The Company is under contract to provide various upgrades to these field installations.
DRS ESI also produces tactical (e.g., combat/attack) information systems and training systems. Major products and contracts include:
o AN/UYQ-70: The AN/UYQ-70 is an advanced, open-architecture display system designed for widespread application through software and hardware modification, and for deployment on Aegis and other surface ships, submarines and airborne platforms. This system was developed for the U.S. Navy under subcontract with Lockheed Martin Tactical Defense Systems. The AN/UYQ-70 is a self-contained, microprocessor-based unit complete with mainframe interface software and offers 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 older units. Based upon the size of the Naval surface fleet and the average number of workstations to be deployed on each ship, the Company believes that the potential market for this workstation product may be in excess of 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 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. The Company currently is delivering these Military Display Emulators for use at land-based training sites for the Aegis and other U.S. Navy programs.
o AN/SPS-67: The AN/SPS-67 Radar Systems are deployed on the U.S. Navy's new DDG-51 Aegis class ships and 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 the Company believes 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.
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, which is 80% owned by DRS through a partnership formed in December 1993 with Sunburst Management, Inc., serves as a cost-efficient manufacturing operation for the Company. 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 that are involved in the military and commercial aerospace industries. DRS Laurel currently produces both the AN/UYQ-65 and AN/UYQ-70 workstations.
DRS Technical Services, Inc. and DRS Technical Services 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. Both 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.
Data Systems Group
DSG consists of DRS Precision Echo, Inc. ("DRS Precision Echo"), located in Santa Clara, California, and DRS Ahead Technology, Inc. ("DRS Ahead Technology"), with locations in San Jose, California, Plymouth, Minnesota, St. Croix Falls, Wisconsin, Dassel, Minnesota, and Razlog, Bulgaria.
DSG utilizes advanced commercial technology to design and manufacture multisensor 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. Through its commercial operations, DSG also provides a variety of magnetic head products and services used in the commercial aviation, airline, television and audio broadcast, computer disk drive, security, transportation and retail sales industries that test or write and read information on magnetic data storage media.
DRS Precision Echo manufactures a variety of digital and analog recording systems utilized for military applications, including reconnaissance, antisubmarine warfare (ASW) and other information warfare data storage requirements and is a predominant U.S. manufacturer of Hi-8 millimeter military recorders supplied to the U.S. armed forces. DRS Precision Echo's products include:
o AN/USH-42: DRS Precision Echo is currently under contract to manufacture these recording systems for use on the Navy's S-3B ASW aircraft. The AN/USH-42 are used to record radar, infrared, bus, navigation and voice data.
o WRR-818: This ruggedized video recorder uses certain components from commercial video recording equipment and has been selected for use on the U.S. Navy's F/A-18 and on the U.S. Air Force's A/OA-10 aircraft. It also has been selected by the U.S. Army for use in its Kiowa Warrior reconnaissance helicopters. A similar recorder, the WRR-812, has been adapted for use in the Canadian Army's Light Armored Reconnaissance Vehicles.
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.
DRS Ahead Technology manufactures burnish, glide and test 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, DRS Ahead Technology 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.
Electro-Optical Systems Group
EOSG consists of DRS Photronics, Inc. ("DRS Photronics"), located in Oakland, New Jersey, DRS Optronics, located in Palm Bay, Florida, and DRS Hadland, based in Tring, Hertfordshire, the United Kingdom.
EOSG integrates advanced commercial technology with military requirements to design and manufacture advanced electro-optical sighting, targeting, weapons and aircraft optical alignment systems, assemblies and components used primarily in the aerospace and defense industries. The Group is a leader in aircraft boresighting equipment and high-speed digital imaging systems. EOSG also produces night vision and directional devices, as well as eye-safe, laser-based products for military applications.
DRS Photronics produces 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.
In fiscal 1996, the Company was selected as the prime contractor on a tri-service (Army, Navy and Air Force) program to develop the Advanced Digital Imaging System ("ADIS") for the test and evaluation of weapons separation events on board various fixed- and rotary-wing military aircraft. The system includes an electronically-shuttered, fast-frame, high-resolution, digital imaging camera and a high-density, digital data storage device. Upon completion of development, the ADIS will incorporate a color readiness capability and will include a miniaturized high-speed electronic camera to assure compatibility with multiple air platforms, such as the Air Force's.
DRS Optronics designs and manufactures electro-optical targeting and sighting systems and various missile components. Major programs of DRS Optronics include:
o Night Vision Binoculars: DRS Optronics is currently under contract to develop and manufacture these units for the Israeli military. The 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. The Night Vision Binocular 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 back-up sighting system on M-1 Abrams battle tanks and contains a very sophisticated electro-optical train 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 M-1A2 upgrade program. Options for additional units under this program may be exercised through fiscal 2000.
o 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 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 currently is the only qualified manufacturer of this tightly toleranced assembly, and currently is 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 MILES AGES program. This effort includes redesigning the target designator unit to accommodate DRS Optronics' laser components.
o Missile Components: EOSG originally provided only the primary mirrors used in the nose-mounted infrared seeker of Sidewinder and Stinger missiles. Development efforts have resulted in the ability to provide increased content to include the secondary, tertiary and fold mirrors, housing and nose dome. The Company is currently under contract to produce infrared components and subassemblies on many of the next-generation infrared missile systems.
DRS Hadland designs, manufactures and markets products for 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 provides qualified airborne monitors, CCD cameras and airborne video tape recording devices. Major 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 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 such applications as laser development and testing.
Flight Safety and Communications
FS&C is headquartered in Carleton Place, Ontario, Canada, with locations in Nepean, Ontario, Canada and Hayes, Middlesex, the United Kingdom. FS&C designs and manufactures advanced flight safety systems, naval communications systems and other advanced electronics primarily for defense and commercial aerospace applications. Major products and services include:
o Aircraft Flight Incident Recorders: Designed to withstand the intense destructive forces associated with an aircraft crash, deployable flight incident recorders are flush-mounted to or located beneath the airframe skin. Deployment commands provided by switch activation trigger release of the unit and activation of the recorder. These systems 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 rapid location of downed aircraft and the timely rescue of survivors. FS&C also produces complete emergency avionics systems, combining the functionality of a crash locator beacon with a flight incident recorder for search, recovery and crash analysis.
o Integrated Shipboard Communications Systems: Using the latest available technology and COTS-based designs, FS&C 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. FS&C's SHINCOM systems are capable of handling shipboard interior communications; communications with other aircraft, surface and undersea vessels; and satellite, UHF/VF, HF and broadband communications with shore stations and cooperating units.
o Electronic Manufacturing and Systems Integration Services: FS&C is an experienced provider of manufacturing, test and product support services and currently performs contract manufacturing services for various aerospace and military applications. FS&C's manufacturing expertise and capabilities include: surface mount and through-hole multi-layer CCA assembly; harness fabrication; power supply assembly and testing; motherboard assembly and testing; and systems integration services.
CUSTOMERS
A significant portion of the Company's products are sold to agencies of the U.S. Government, primarily the Department of Defense, to foreign government agencies or to prime contractors or subcontractors thereof. Approximately 74%, 71% and 78% of total consolidated revenues for fiscal 1998, 1997 and 1996, respectively, were derived directly or indirectly from defense contracts for end use by the U.S. Government and its agencies, principally the U.S. Navy. See "Foreign Operations and Export Sales" below for information concerning sales to foreign governments.
BACKLOG
The following table sets forth the Company's backlog by major product group (including enhancements, modifications and related logistics support) at the dates indicated:
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 -------------- -------------- -------------- Government Products: U.S. Government ............ $141,500,000 $ 85,900,000 $120,000,000 Foreign Government ......... 24,900,000 23,000,000 21,200,000 ------------ ------------ ------------ 166,400,000 108,900,000 141,200,000 Commercial Products ......... 11,000,000 9,500,000 4,400,000 ------------ ------------ ------------ $177,400,000 $118,400,000 $145,600,000 ============ ============ ============
"Backlog" refers to the aggregate revenues remaining to be earned at a specified date under contracts held by the Company, 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.
At March 31, 1998, the Company's backlog of orders was approximately $177.4 million compared with $118.4 million at March 31, 1997. The increase in backlog was due primarily to a significant increase in bookings, most notably for display workstations, offset, in part, by the effect of increased revenues. The change in backlog also reflects approximately $23.4 million of acquired backlog from the FS&C and DRS Hadland acquisitions. New contract awards of approximately $228.6 million were booked during the fiscal year ended March 31, 1998. Approximately 80% of backlog as of March 31, 1998 is expected to result in revenues during fiscal 1999.
RESEARCH AND DEVELOPMENT
The defense electronics sector is subject to rapid technological changes, and the Company's future success will depend in large part upon its ability to improve existing product lines and to develop new products and technologies in the same or related fields. Thus, the Company's technological expertise is an important factor affecting its growth. A portion of its research and development activities has taken place in connection with customer-sponsored research and development contracts. Revenues recorded by the Company for customer-sponsored research and development were approximately $12,000,000, $13,000,000 and $12,100,000 for fiscal 1998, 1997 and 1996, respectively. All such customer-sponsored activities are the result of contracts directly or indirectly with the U.S. Government. The Company also invests in internal research and development ("IR&D"). Such expenditures were approximately $4,000,000, $3,900,000 and $600,000 for fiscal 1998, 1997 and 1996, respectively. The increase in IR&D expenditures in fiscal 1998 and 1997 reflects the Company's investment in new technology and the diversification of its products.
CONTRACTS
The Company's 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, development contracts historically 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, the Company agrees to perform for an agreed-upon price and, accordingly, derives benefits from cost savings, but bears the entire 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 the Company. However, if actual costs under such a contract exceed estimated costs, excess costs are apportioned between the customer and the Company up to a ceiling. The Company bears all costs that exceed the ceiling.
Cost-type contracts typically provide for reimbursement of allowable costs incurred plus a fee (profit). Unlike fixed-price contracts in which the Company is committed to deliver without regard to performance cost, cost-type contracts normally obligate the Company to use its 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 the Company's 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 the Company is 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 formula are agreed upon when the contract is negotiated. In the case of performance-based incentives, the Company is 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, the Company is reimbursed for costs and receives a fixed fee, which is negotiated and specified in the contract. Such fees have statutory limits.
The percentages of revenues during fiscal 1998, 1997 and 1996 attributable to the Company's contracts by contract type were as follows:
FISCAL YEARS ENDED MARCH 31, ------------------------------------------ 1998 1997 1996 ------ ------ ----- Firm-fixed-price ................... 85% 85% 87% Cost-plus-incentive-fee ............ 4% 5% -- Cost-plus-fixed-fee ................ 11% 10% 13%
The consistent percentage and continued predominance of firm-fixed-price contracts are reflective of the fact that production contracts comprise a significant portion of the Company's U.S. Government contract portfolio.
The Company negotiates for and generally receives progress payments from its customers of between 75-90% of allowable costs incurred on the previously described contracts. Included in its reported revenues are certain amounts which the Company has not billed to customers. These amounts, approximately $7.6 million, $3.8 million and $8.7 million as of March 31, 1998, 1997 and 1996, 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, have been 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 $10.1 million and $9.4 million at March 31, 1998 and 1997, respectively.
Defense contracts and subcontracts to which the Company is a party 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
The defense electronics sector is characterized by rapid technological change. The Company's products are sold in markets containing a number of competitors which are substantially larger than the Company, devote substantially greater resources to research and development and generally have greater financial resources. Certain competitors also are customers of and suppliers to the Company. 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. The Company believes that
it competes on the basis of the performance of its products, its reputation for prompt and responsive contract performance, and its accumulated technical knowledge and expertise. The Company's future success will depend in large part upon its ability to improve existing product lines and to develop new products and technologies in the same or related fields.
In the military sector, the Company competes with many 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, there has been an increase in the number of consolidations and mergers of defense suppliers, and this trend is expected 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 the Company has benefited from this trend, as evidenced by the formation of strategic alliances with several large suppliers.
PATENTS
The Company has patents on certain of its commercial and data recording products. The Company does not believe patent protection to be significant to its current operations; however, future products and programs may generate the need for patent protection. Similarly, the Company and its subsidiaries have certain registered trademarks, none of which are considered significant to current operations. Further, the Company does not believe that the loss, impairment or expiration of any existing patents would have a material effect on the Company's financial position or future results of operations.
MANUFACTURING AND SUPPLIERS
The Company's manufacturing process for its products, excluding optical products, consists primarily of the assembly of purchased components and testing of the product 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 the Company's products use machined castings and housings, motors and recording and reproducing heads. Many of the purchased components are fabricated to Company designs and specifications. The manufacturing process for the Company's optics products includes the grinding, polishing and coating of various optical materials and machining of metal components.
Although materials and purchased components generally are available from a number of different suppliers, several suppliers are the Company's 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. The Company has not experienced significant production delays attributable to supply shortages, but occasionally experiences quality and other related problems with respect to certain components, such as semiconductors and connectors. In addition, with respect to the Company's optical products, certain exotic materials, such as germanium, zinc sulfide and cobalt, may not always be readily available.
FOREIGN OPERATIONS AND EXPORT SALES
The Company currently sells several of its products and services in the international marketplace to countries such as Canada, Israel, the Republic of China and Spain. Foreign sales are derived under export licenses granted on a case-by-case basis by the United States Department of State. The Company's foreign contracts generally are payable in United States dollars. Export sales were 10% or less of total revenues in each of the fiscal years in the three-year period ended March 31, 1998.
Through the FS&C, the Company operates outside the United States, primarily in Canada. Information on revenues, operating income and identifiable assets is presented in Note 12 of Notes to Consolidated Financial Statements. Foreign operations other than those of FS&C are not material to the financial position or results of operations of the Company.
The addition of international businesses involve additional risks for the Company, 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 (see Management's Discussion & Analysis of Financial Condition and Results of Operations--Business Considerations).
EXECUTIVE OFFICERS OF THE REGISTRANT
The names of the executive officers of the Company, their positions and offices with the Company, and their ages are set forth below:
NAME POSITIONS WITH THE COMPANY AGE ---- -------------------------- ---
Mark S. Newman ........ Chairman of the Board, President, Chief Executive 48 Officer and Director
Nina L. Dunn .......... Executive Vice President, General Counsel 51 and Secretary
Nancy R. Pitek ........ Vice President, Finance and Treasurer 41
Paul G. Casner, Jr. ... Vice President; President of DRS Electronic 60 Systems Group
Stuart F. Platt ....... Vice President and Director; President of DRS Data 64 Systems Group
Richard Ross .......... Vice President; President of DRS Electro-Optical 43 Systems Group
Mark S. Newman has been employed by the Company since 1973, was named Vice President, Finance, Chief Financial Officer and Treasurer in 1980 and Executive Vice President in 1987. Mr. Newman became a Director of the Company in 1988. In May 1994, Mr. Newman became the President and Chief Executive Officer of the Company and in August 1995 became Chairman of the Board.
Nina L. Dunn joined the Company 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, since 1993, where she served as the Company's 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.
Nancy R. Pitek joined the Company in 1984 as Manager of Accounting. She became Assistant Controller in 1985 and Director of Internal Audit in 1988. Ms. Pitek became Director of Corporate Finance in 1990 and Controller in 1993. In May 1994, she was appointed to the position of Treasurer and in May 1996 was named Vice President, Finance.
Paul G. Casner, Jr. joined the Company in 1993 as President of Technology Applications and Service Company ("TAS"), now DRS Electronic Systems, Inc. In 1994, he also became President of the DRS Electronic Systems Group and a Vice President of the Company. Mr. Casner has over 30 years of experience in the defense electronics industry and has held positions in engineering, marketing and general management.
Stuart F. Platt has been a director of the Company since 1991 and became the President of DRS Precision Echo, Inc. in July 1992. He was named Vice President of the Company in May 1994 and also serves as President of the DRS Data Systems Group. Rear Admiral Platt held various high level positions as a military officer in the Department of the Navy, retiring as Competition Advocate General of the Navy in 1987.
Richard Ross joined the Company as Assistant Vice President and Director of Sales in 1986 and Assistant Vice President, Corporate Development in 1987. In 1988, he became a Vice President of the Company, and in 1990, he became President of DRS Photronics, Inc. Mr. Ross also serves as President of the DRS Electro-Optical Systems Group.
EMPLOYEES
As of March 31, 1998, the Company had approximately 1,470 employees, 1,045 of which were located in the United States. None of the Company's employees are represented by labor unions, and the Company has experienced no work stoppages. There is a continuing demand for qualified technical personnel, and the Company believes that its future growth and success will depend upon its ability to attract, train and retain such personnel.
ITEM 2.
ITEM 2. PROPERTIES
The Company leases the following properties:
During July 1998, in connection with the expiration of the lease for the Kanata, Ontario, Canada facility, FS&C will relocate 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.
The Company leases the building in Oakland, New Jersey from LDR Realty Co., a partnership wholly-owned by Leonard Newman and David E. Gross, co-founders of the Company. The Company believes that this lease was consummated on terms no less favorable than those that could have been obtained by the Company from an unrelated third party in a transaction negotiated on an arms-length basis.
The Company owns the following properties:
In fiscal 1998, the Company sold its 45,000 square foot building in Hauppauge, New York, which previously housed DRS Photronics' administrative, engineering and manufacturing operations (see Note 10 of Notes to Consolidated Financial Statements).
Management believes that all of the Company's facilities are in good condition, adequate for their intended use and sufficient for the Company's immediate needs. It is not certain as to whether the Company will negotiate new leases as existing leases expire. Determinations to that effect will be made as existing leases approach expiration and will be based on an assessment of the Company's capacity requirements at that time. Further, the Company believes that it can obtain additional space, if necessary, based on prior experience and current real estate market conditions.
Substantially all assets of the Company, including those properties identified above, are pledged as collateral on borrowings of the Company (see Note 6 of Notes to Consolidated Financial Statements).
ENVIRONMENTAL PROTECTION
The Company believes that its 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 the Company's earnings or competitive position.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal actions and claims arising in the ordinary course of its business. In the Company's opinion, the Company has adequate legal defenses for each of the actions and claims and believes that their ultimate disposition will not have a material adverse effect on the Company's consolidated financial position or results of operations.
In April and May of 1998, 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. The subpoenas were issued in connection with United States v. Tress, a case involving a DRS Photronics employee and related to the accuracy of test data for the equipment. To date, no claim has been made or threatened against the Company in connection with this matter. At this time, the Company is unable to determine if any such claim will be made. DRS Photronics currently is 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 results of operations or financial position, or to predict when such shipments ultimately will be made, although the delays are expected to impact fiscal 1999's first quarter results.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended March 31, 1998.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company has not paid any cash dividends since 1976. The Company intends to retain future earnings for use in its business and does not expect to declare cash dividends on its Common Stock in the foreseeable future. The indentures relating to the Company's 8-1/2% Convertible Subordinated Debentures and 9% Senior Subordinated Convertible Debentures and the Company's bank lines of credit restrict the Company's ability to pay dividends or make other distributions on its Common Stock. See Note 6 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 the Board of Directors of the Company. The timing, amount and form of any future dividends will depend, among other things, on the Company's results of operations, financial condition, cash requirements, plans of expansion and other factors deemed relevant by the Board of Directors.
The information required by this item with respect to the market prices for the Company's common equity securities is incorporated herein by reference to page 41 of the DRS 1998 Annual Report (for the fiscal year ended March 31, 1998).
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference herein to page 14 of the DRS 1998 Annual Report (for the fiscal year ended March 31, 1998).
ITEM 7.
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 15 through 23 of the DRS 1998 Annual Report (for the fiscal year ended March 31, 1998).
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference herein to pages 24 through 41 of the DRS 1998 Annual Report (for the fiscal year ended March 31, 1998).
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The information required by Items 10. through 13. of this Part is incorporated herein by reference to the Definitive Proxy Statement of the Company, dated July 2, 1998, for the 1998 Annual Meeting of Stockholders. Reference also is made to the information under "Executive Officers of the Registrant" in Part I of this report.
PART IV
ITEM 14.
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 Technologies, Inc. and subsidiaries have been incorporated by reference to the DRS 1998 Annual Report (for the fiscal year ended March 31, 1998), pursuant to Item 8 of this report:
1998 ANNUAL REPORT PAGE(S) --------------
Independent Auditors' Report 42 Consolidated Balance Sheets--March 31, 1998 and 1997 24 Consolidated Statements of Earnings--Years Ended March 31, 1998, 1997 and 1996 25 Consolidated Statements of Stockholders' Equity--Years Ended March 31, 1998, 1997 and 1996 25 Consolidated Statements of Cash Flows--Years Ended March 31, 1998, 1997 and 1996 26 Notes to Consolidated Financial Statements 27-41 2. Financial Statement Schedules See Appendix A hereto. 3. Exhibits Incorporated by reference to the Exhibit Index at the end of this report. (b) Reports on Form 8-K
Filed as of January 12, 1998: Amendment No. 1 to Current Report on Form 8-K dated as of October 29, 1997, with respect to the acquisition of the net assets of the Applied Systems Division of Spar Aerospace Limited, a Canadian corporation, and 100% of the stock of Spar Aerospace (UK) Ltd.
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 26, 1998
/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 26, 1998 - ----------------------- Chief Executive Officer and Director Mark S. Newman
/s/ NANCY R. PITEK Vice President, Finance and Treasurer June 26, 1998 - ----------------------- Nancy R. Pitek
/s/ IRA ALBOM Director June 26, 1998 - ----------------------- Ira Albom
/s/ THEODORE COHN Director June 26, 1998 - ----------------------- Theodore Cohn
/s/ DONALD C. FRASER Director June 26, 1998 - ----------------------- Donald C. Fraser
/s/ WILLIAM F. HEITMANN Director June 26, 1998 - ----------------------- William F. Heitmann
/s/ MARK N. KAPLAN Director June 26, 1998 - ----------------------- Mark N. Kaplan
/s/ STUART F. PLATT Vice President, President of DRS Data June 26, 1998 - ----------------------- Systems Group and Director Stuart F. Platt
/s/ JACK RACHLEFF Director June 26, 1998 - ----------------------- Jack Rachleff
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.
A-1
INDEPENDENT AUDITORS' REPORT ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
The Board of Directors and Stockholders DRS Technologies, Inc.:
Under date of May 11, 1998, we reported on the consolidated balance sheets of DRS Technologies, Inc. and subsidiaries as of March 31, 1998 and 1997, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended March 31, 1998, as contained in the 1998 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 1998. 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 Peat Marwick LLP
Short Hills, New Jersey May 11, 1998
(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.
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.
PAGE NO. EXHIBIT NO. DESCRIPTION OF PAPER FILING ----------- ----------- ---------------
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]
PAGE NO. EXHIBIT NO. DESCRIPTION OF PAPER FILING ----------- ----------- ---------------
10.1 -- Stock Purchase Agreement, dated as of August 6, 1993, among TAS Acquisition Corp., Technology Applications and Service Company, Paul G. Casner, Jr. and Terrence L. DeRosa [Form 10-Q, quarter ended December 31, 1993, File No. 1-8533, Exhibit 6(a)(1)]
10.2 -- Waiver Letter, dated as of September 30, 1993, among TAS Acquisition Corp., Technology Applications and Service Company, Paul G. Casner, Jr. and Terrence L. DeRosa [Form 10-Q, quarter ended December 31, 1993, File No. 1-8533, Exhibit 6(a)(2)]
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)]
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]
PAGE NO. EXHIBIT NO. DESCRIPTION OF PAPER FILING ----------- ----------- ---------------
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 -- 1991 Stock Option Plan of the Company [Registration Statement No. 33-42886, Exhibit 28.1]
10.22 -- Contract No. N00024-92-C-6102, dated September 28, 1992, between the Company and the Navy [Form 10-K, fiscal year ended March 31, 1993, File No. 1-8533, Exhibit 10.45]
10.23 -- Modification No. P00005, dated August 24, 1994, to Contract No. N00024-92-C-6102 [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.22]
10.24 -- Modification No. P00006, dated September 7, 1994, to Contract No. N00024-92-C6102 [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.23]
10.25 -- Contract No. N00024-92-C-6308, dated April 1, 1992, between the Company and the Navy [Form 10-K, fiscal year ended March 31, 1993, File No. 1-8533, Exhibit 10.46]
10.26 -- Modification No. P00001, dated July 30, 1992, to Contract No. N00024-92-C-6308 [Form 10-K, fiscal year ended March 31, 1993, File No. 1-8533, Exhibit 10.47]
10.27 -- Modification No. P00002, dated September 25, 1992, to Contract No. N00024-92-C-6308 [Form 10-K, fiscal year ended March 31, 1993, File No. 1-8533, Exhibit 10.48]
10.28 -- Modification No. P00003, dated October 22, 1992, to Contract No. N00024-92-C-6308 [Form 10-K, fiscal year ended March 31, 1993, File No. 1-8533, Exhibit 10.49]
PAGE NO. EXHIBIT NO. DESCRIPTION OF PAPER FILING ----------- ----------- ---------------
10.29 -- Modification No. P00004, dated February 24, 1993, to Contract No. N00024-92-C-6308 [Form 10-K, fiscal year ended March 31, 1993, File No. 1-8533, Exhibit 10.50]
10.30 -- Modification No. P00005, dated June 11, 1993, to Contract No. N00024-92-C-6308 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.26]
10.31 -- Modification No. P00006, dated March 26, 1993, to Contract No. N00024-92-C-6308 [Form 10-K, fiscal year ended March 31, 1993, File No. 1-8533, Exhibit 10.51]
10.32 -- Modification No. P00007, dated May 3, 1993, to Contract No. N00024-92-C-6308 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.28]
10.33 -- Modification No. PZ0008, dated June 11, 1993, to Contract No. N00024-92-C-6302 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.29]
10.34 -- Contract No. N39998-94-C-2228, dated November 30, 1993, between the Company and the Navy [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.30]
10.35 -- Order No. 87KA-SG-51484, dated December 10, 1993, under Contract No. N00024-93-G-6336, between the Company and Westinghouse Electric Corporation Oceanic Division [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.31]
10.36 -- Purchase Order Change Notice Order No. 87KA-SX-51484-P, dated April 21, 1994, under Contract No. N00024-93-G-6336, between the Company and Westinghouse Electric Corporation Oceanic Division [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.35]
10.37 -- Letter Subcontract No. 483901(L), dated February 18, 1994, under Contract No. N00024-94-D-5204, between the Company and Unisys Government Systems Group [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.32]
10.38 -- 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, File No. 1-8533, Exhibit 10.37]
10.39 -- Contract No. N00019-90-G-0051, dated March 1, 1990, between Precision Echo, Inc. and the Navy [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.35]
10.40 -- Amendment 1A, dated February 26, 1992, to Contract No. N00019-90-G-0051 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.36]
10.41 -- Amendment 1B, dated April 23, 1993, to Contract No. N00019-90-G-0051 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.37]
10.42 -- Contract No. N00019-93-C-0041, dated January 29, 1993, between Photronics Corp. and the Navy [Form 10-K, fiscal year ended March 31, 1993, File No. 1-8533, Exhibit 10.54]
10.43 -- Modification No. P00001, dated March 29, 1993, to Contract No. N00019-93-C-0041 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.39]
PAGE NO. EXHIBIT NO. DESCRIPTION OF PAPER FILING ----------- ----------- ---------------
10.44 -- Modification No. PZ0002, dated November 12, 1993, to Contract No. N00019-93-C-0041 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.40]
10.45 -- Modification No. P00003, dated February 1, 1994, to Contract No. N00019-93-C-0041 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.41]
10.46 -- Modification No. P00004, dated January 29, 1993, to Contract No. N00019-93-C-0041 [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.46]
10.47 -- Modification No. P00005, dated January 29, 1993, to Contract No. N00019-93-C-0041 [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.47]
10.48 -- Modification No. P00006, dated March 20, 1996, to Contract No. N00019-93-C-0041 [Form 10-K, fiscal year ended March 31, 1996, File No. 1-8533, Exhibit 10.48]
10.49 -- Contract No. N00019-93-C-0202, dated August 30, 1993, between Photronics Corp. and the Navy [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.42]
10.50 -- Modification No. P00001, dated March 30, 1994, to Contract No. N00019-93-C-0202 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.43]
10.51 -- Modification No. P00002, dated April 29, 1994, to Contract No. N00019-93-C-0202 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.44]
10.52 -- Modification No. P00003, dated August 9, 1994, to Contract No. N00019-93-C-0202 [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.55]
10.53 -- Modification No. P00004, dated March 30, 1994, to Contract No. N00019-93-C-0202 [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.56]
10.54 -- Modification No. P00005, dated August 30, 1993, to Contract No. N00019-93-C-0202 [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.53]
10.55 -- Modification No. P00006, dated August 30, 1993, to Contract No. N00019-93-C-0202 [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.54]
10.56 -- Contract No. N00024-93-C-5204, dated November 18, 1992, between Technology Applications and Service Company and the Navy [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.53]
10.57 -- Modification No. P00001, dated May 6, 1993, to Contract No. N00024-93-C-5204 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.54]
10.58 -- Modification No. P00002, dated August 24, 1993, to Contract No. N00024-93-C-5204 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.55]
10.59 -- Modification No. PZ0003, dated September 30, 1993, to Contract No. N00024-93-C-5204 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.56]
PAGE NO. EXHIBIT NO. DESCRIPTION OF PAPER FILING ----------- ----------- ---------------
10.60 -- Contract No. N00174-94-D-0006, dated February 17, 1994, between Technology Applications & Service Company and the Navy [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.57]
10.61 -- Modification No. P00001, dated March 7, 1994, to Contract No. N00174-94-D-0006 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.58]
10.62 -- Modification No. P00003, dated May 19, 1994, to Contract No. N00174-94-D-0006 [Form 10-K, fiscal year ended March 31, 1994, File No. 1-8533, Exhibit 10.59]
10.63 -- Purchase Order No. 2285, dated June 6, 1994, between Photronics Corp. and International Precision Products N.V. [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.73]
10.64 -- Amendment No. 1, dated January 30, 1996, to Purchase Order No. 2285 [Form 10-K, fiscal year ended March 31, 1996, File No. 1-8533, Exhibit 10.64]
10.65 -- Purchase Order No. 2286, dated June 6, 1994, between Photronics Corp. and International Precision Products N.V. [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.75]
10.66 -- Purchaser Order No. CN74325, dated December 14, 1994, between Precision Echo and Lockheed Aeronautical Systems Company [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.76]
10.67 -- Amendment, dated February 14, 1995, to Purchase Order No. CN74325, between Precision Echo and Lockheed Aeronautical Systems Company [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.67]
10.68 -- Amendment, dated April 4, 1995, to Purchase Order No. CN74325, between Precision Echo and Lockheed Aeronautical Systems Company [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.68]
10.69 -- Amendment, dated June 20, 1995, to Purchase Order No. CN74325, between Precision Echo and Lockheed Aeronautical Systems Company [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.69]
10.70 -- Amendment, dated September 28, 1995, to Purchase Order No. CN74325, between Precision Echo and Lockheed Aeronautical Systems Company [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.70]
10.71 -- Amendment, dated November 7, 1995, to Purchase Order No. CN74325, between Precision Echo and Lockheed Aeronautical Systems Company [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.71]
10.72 -- Contract No. N39998-94-C-2239, dated July 26, 1993, between the Company and the Navy [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.77]
10.73 -- Contract No. N00019-95-C-0057, dated December 16, 1994, between Precision Echo, Inc. and Naval Air Systems Command [Form 10-K, fiscal year ended March 31, 1995, File No. 1-8533, Exhibit 10.78]
10.74 -- 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]
10.75 -- 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]
PAGE NO. EXHIBIT NO. DESCRIPTION OF PAPER FILING ----------- ----------- ---------------
10.76 -- 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]
10.77 -- 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]
10.78 -- Contract No. N00421-95-D-1067, dated September 30, 1995, between the Company and the Navy [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.78]
10.79 -- 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]
10.80 -- Contract No. DAAH01-95-C-0308, dated July 21, 1995, between Photronics Corp. and the Army [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.80]
10.81 -- Modification No. PZ0001, dated January 24, 1996, to Contract No. DAAH01-95-C-0308 [Form 10-K, fiscal year ended March 31, 1996, File No. 1-8533, Exhibit 10.81]
10.82 -- Modification No. P00002, dated February 24, 1996, to Contract No. DAAH01-95-C-0308 [Form 10-K, fiscal year ended March 31, 1996, File No. 1-8533, Exhibit 10.82]
10.83 -- Modification No. P00003, dated March 28, 1996, to Contract No. DAAH01-95-C-0308 [Form 10-K, fiscal year ended March 31, 1996, File No. 1-8533, Exhibit 10.83]
10.84 -- 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]
10.85 -- Contract No. 2025, dated December 20, 1993, between Opto Mechanik, Inc. and the Government of Israel, Ministry of Defense [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.82]
10.86 -- Amendment to Contract No. 2025, dated August 31, 1995 between Opto Mechanik, Inc. and the Government of Israel, Ministry of Defense [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.83]
10.87 -- 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]
10.88 -- 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]
10.89 -- 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]
10.90 -- 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]
PAGE NO. EXHIBIT NO. DESCRIPTION OF PAPER FILING ----------- ----------- ---------------
10.91 -- Master Lease, dated August 31, 1995, between OMI Acquisition Corp. and General Electric Capital Corp. [Registration Statement No. 33-64641, Post-Effective Amendment No. 1, Exhibit 10.88]
10.92 -- Schedule No. 001, dated September 1, 1995, to Master Lease between OMI Acquisition Corp. and General Electric Capital Corp. [Registration Statement No. 33-64641, Post-Effective Amendment No. 1, Exhibit 10.89]
10.93 -- Schedule No. 002, dated October 20, 1995, to Master Lease between OMI Acquisition Corp. and General Electric Capital Corp. [Registration Statement No.33-64641, Amendment No. 1, Exhibit 10.90]
10.94 -- 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]
10.95 -- 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]
10.96 -- 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]
10.97 -- 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]
10.98 -- Contract No. N00024-95-G-5609, dated January 25, 1996, between Technology Applications and Service Company and the Navy [Form 10-K, fiscal year ended March 31, 1996, File No. 1-8533, Exhibit 10.98]
10.99 -- 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]
10.100 -- 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]
10.101 -- 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]
10.102 -- 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]
10.103 -- Revolving Credit Loan and Term Loan Agreement, dated as of October 29, 1997, by and among DRS Technologies, Inc., DRS Technologies Canada Company/Compagnie DRS Technologies Canada, DRS Technologies Canada, Inc. and Mellon Bank, N.A. [Form 8-K, October 27, 1997, File No. 1-8533, Exhibit 2]
*11 -- Computation of earnings per share
*13 -- Portions of the 1998 Annual Report to Stockholders of the Company
*21 -- List of subsidiaries of the Company as of March 31, 1998
*23.1 -- Consent of KPMG Peat Marwick LLP
*27 -- Financial Data Schedule