28630--5/30/2007--DRS_TECHNOLOGIES

related topics

{debt, indebtedness, cash}

{financial, litigation, operation}

{acquisition, growth, future}

{regulation, government, change}

{customer, product, revenue}

{cost, contract, operation}

{product, market, service}

{cost, regulation, environmental}

{property, intellectual, protect}

{personnel, key, retain}

{operation, international, foreign}

{competitive, industry, competition}

{stock, price, operating}

Our revenues depend on our ability to maintain our level of government business. The loss of our contracts with domestic and non-U.S. government agencies could adversely affect our revenues. Our revenues will be adversely affected if we fail to receive renewal or follow-on contracts. Our operating results may fluctuate. We may not be successful in implementing our growth strategy if we are unable to identify , acquire and finance suitable acquisition targets. Integration of the operations of businesses we may acquire is complex, time consuming and expensive and may adversely affect the results of our operations after the acquisition. If we are unable to successfully integrate companies we acquire into our operations on a timely basis, our profitability could be negatively affected. Failure to anticipate technical problems, estimate costs accurately or control costs during performance of a fixed-price contract may reduce our profit or cause a loss. We may experience production delays if suppliers fail to deliver materials to us. Our backlog is subject to reduction and cancellation, which could negatively impact our revenues and results of operations. Our international operations expose us to risks of losses. We operate in highly competitive markets. We are dependent in part upon our relationships and alliances with industry participants in order to generate revenue. The U.S. government s right to use technology developed by us limits our intellectual property rights. We are subject to environmental laws and regulations, and our ongoing operations may expose us to environmental liabilities. ESSI currently is subject to investigations by the Enforcement Division of the SEC and the Office of the U.S. Attorney for the Eastern District of Missouri, each of which could require significant management attention and legal and financial resources and could have a material adverse effect on us. We are subject to an ongoing investigation by the Antitrust Division of the U.S. Department of Justice, which could require significant management attention and legal resources and have a material adverse effect on the Company. We are involved in a number of legal proceedings, each of which could have a material adverse affect on our business. We cannot predict the outcome of litigation and other contingencies with certainty. In addition to the investigations noted above, various legal lawsuits, claims and demands are pending against us and certain of our subsidiaries. Although we believe that we have meritorious defenses to the claims made in the litigation matters in which we have been named a party and intend to contest each lawsuit vigorously, no assurances can be given that the results of these matters will be favorable to us. An adverse resolution or outcome of any of these lawsuits, claims or demands could have a negative impact on our financial condition, results of operations and liquidity. A failure to attract and retain technical and other key personnel could reduce our revenues and our operational effectiveness. As a U.S. government contractor, we are subject to a number of procurement rules, regulations, and procedures, including routine audits. Our operations involve rapidly evolving products and technological change. Our level of indebtedness could limit cash flow available for our operations and could adversely affect our ability to service our debt or obtain additional financing, if necessary. We may incur substantial additional indebtedness in the future. Despite current indebtedness levels, we and our subsidiaries still may be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage. Our ability to service our debt and meet our cash requirements depends on many factors, some of which are beyond our control. The covenants in our amended and restated senior secured credit facility and the indentures governing our notes impose restrictions that may limit our ability and the ability of most of our subsidiaries to take certain actions. Some of our debt, including borrowings under our amended and restated senior secured credit facility, is based on variable rates of interest, which could result in higher interest expenses in the event of an increase in interest rates.

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28630--5/30/2007--DRS_TECHNOLOGIES_INC