- Strong Bookings, Pending Kadix Acquisition Prompt Company to Raise Projections - ANDOVER, Mass., July 31
ANDOVER, Mass., July 31 /PRNewswire-FirstCall/ -- Dynamics Research
Corporation (Nasdaq: DRCO), a leading provider of innovative engineering,
technical and information technology services and solutions to federal and
state governments, today announced operating results for the second quarter
ended June 30, 2008.
Financial Results
The Company reported revenue of $55.3 million and earnings of $0.17 per
diluted share for the second quarter of 2008, compared with revenue of $58.0
million and earnings of $0.16 per diluted share for the same period in 2007.
For the six months ended June 30, 2008 revenue was $111.8 million compared
with $114.8 million for the same period in 2007. For the six month period
ended June 30, 2008 the net loss was $3.6 million, or $0.38 per diluted share,
which included a first quarter 2008 provision for litigation of $8.8 million,
which reduced earnings by $0.70 per diluted share. Excluding the litigation
provisions in 2008 and 2007, net income would have been $3.1 million, or $0.32
per diluted share for the six months ended June 30, 2008, compared with $2.7
million, or $0.29 per diluted share for the same period in 2007.
Business Highlights
"The second quarter 2008 results mark the eighth consecutive quarter of
year-over-year earnings increases," said Jim Regan, DRC's chairman and chief
executive officer. "We continue to transition our business mix away from
lower-end small business set-aside advisory and assistance services work to
higher-end value added services. Revenue growth in the first half of the year
has been strong in the military training, homeland security, and state child
welfare system businesses. The profit increase generated from this shift to a
more favorable mix fully offsets the on-going loss of Advisory & Assistance
Services work of approximately $5 million per quarter on the year-over-year
comparisons with the prior year."
"In the business development area we have had another very successful
quarter," Regan continued. "Our book-to bill ratio was 1.2 to 1, and our new
business wins for the quarter were $26 million in total contract value. For
the first half of the year the annual revenue value of our new business wins
totaled an estimated $60 million, surpassing the $54 million total for all of
2007."
"Looking forward the outlook for growth in the military training, homeland
security, federal civilian agency and state businesses remains strong.
Further, the pending acquisition of Kadix Systems, LLC, announced today, which
we plan to complete in the next few days, significantly strengthens our
presence in a large high-growth market and will accelerate our market
penetration with the Department of Homeland Security," Regan concluded.
Company Guidance
The Company's estimate for revenue for 2008, including the acquired Kadix
operations from the expected date of acquisition, is in the range of $240 to
$250 million. Regarding earnings for the year, excluding the $0.70 litigation
provision taken in the first quarter, the Company anticipates results to be in
the range of $0.72 to $0.78 per diluted share. For the third quarter of 2008
the Company anticipates revenue in the range of $63 to $65 million and
earnings per diluted share of $0.17 to $0.20.
Conference Call
The Company will conduct a second quarter 2008 conference call on
Thursday, July 31, 2008 at 4:30 p.m. ET. The call will be available via
telephone at (877) 741-4251, and accessible via Web cast at www.drc.com.
Recorded replays of the conference call will be available on Dynamics Research
Corporation's investor relations home page at www.drc.com and by telephone at
(888) 203-1112, passcode #4038479, beginning at 7:30 p.m. ET July 31, 2008
through 11:59 p.m. ET August 7, 2008.
About Dynamics Research Corporation
Dynamics Research Corporation (DRC) is a leading provider of
mission-critical technology management services and solutions for government
programs. DRC offers forward-thinking solutions backed by a history of
excellence and customer satisfaction. Founded in 1955, DRC is a publicly held
corporation (Nasdaq: DRCO) and maintains more than 25 offices nationwide with
major offices in Andover, Massachusetts; Reston, Virginia; and Fairborn, Ohio.
For more information please visit our website at www.drc.com.
Safe Harbor
Safe harbor statements under the Private Securities Litigation Reform Act
of 1995: Some statements contained or implied in this news release, may be
considered forward-looking statements, which by their nature are uncertain.
Consequently, actual results could materially differ. For more detailed
information concerning how risks and uncertainties could affect the Company's
financial results, please refer to DRC's most recent filings with the SEC. The
Company assumes no obligation to update any forward-looking information.
The non-GAAP measures used by the Company exclude the provision for
litigation charges and related effect for income taxes. The required
reconciliations and other disclosures for the non-GAAP measures used by the
Company are set forth later in this press release and/or the Current Report on
Form 8-K furnished with the SEC on July 31, 2008.
CONTACTS: Investors: Dave Keleher
SVP and Chief Financial Officer
978. 289.1615
dkeleher@drc.com
Media: Duyen "Jen" Truong,
Sage Communications (for DRC)
703.584.5645
duyent@aboutsage.com
ATTACHMENT I
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
Three Months Ended
June 30,
2008 2007
Contract revenue $53,708 $57,030
Product sales1,585 980
Total revenue 55,29358,010
Cost of contract revenue45,59947,460
Cost of product sales1,393 1,200
Total cost of revenue 46,99248,660
Gross profit on contract revenue 8,109 9,570
Gross profit (loss) on product sales 192 (220)
Total gross profit 8,301 9,350
Selling, general and administrative
expenses5,147 5,763
Amortization of intangible assets 510 651
Operating income 2,644 2,936
Interest expense, net (142) (473)
Other income, net 239 122
Income before provision for income
taxes 2,741 2,585
Provision for income taxes 1,112 1,071
Net income $1,629$1,514
Earnings per common share
Basic $0.17 $0.16
Diluted$0.17 $0.16
Weighted average shares outstanding
Basic 9,443,347 9,317,297
Diluted9,724,839 9,650,919
ATTACHMENT II
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
Six Months Ended
June 30,
2008 2007
Contract revenue $108,481 $112,942
Product sales3,290 1,848
Total revenue111,771 114,790
Cost of contract revenue91,81194,393
Cost of product sales2,998 2,348
Total cost of revenue 94,80996,741
Gross profit on contract revenue16,67018,549
Gross profit (loss) on product sales 292 (500)
Total gross profit16,96218,049
Selling, general and administrative
expenses 10,54811,361
Provision for litigation 8,819 181
Amortization of intangible assets1,019 1,301
Operating income (loss) (3,424)5,206
Interest expense, net (281) (929)
Other income, net 168 255
Income (loss) before provision for
income taxes (3,537)4,532
Provision for income taxes 90 1,895
Net income (loss) $(3,627) $2,637
Earnings (loss) per common share
Basic $(0.38)$0.28
Diluted $(0.38)$0.27
Weighted average shares outstanding
Basic 9,430,607 9,308,558
Diluted9,430,607 9,609,575
ATTACHMENT III
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
June 30, December 31,
2008 2007
Assets
Current assets
Cash and cash equivalents $108$2,006
Contract receivables, net 64,23963,570
Prepaid expenses and other current assets2,723 2,508
Total current assets 67,07068,084
Noncurrent assets
Property and equipment, net9,57610,182
Goodwill 63,05563,055
Intangible assets, net 2,050 3,069
Deferred tax asset 1,484 1,484
Other noncurrent assets4,303 4,079
Total noncurrent assets 80,46881,869
Total assets$147,538 $149,953
Liabilities and stockholders' equity
Current liabilities
Accounts payable $13,626 $12,163
Accrued compensation and employee
benefits 13,43313,409
Deferred taxes 5,696 8,486
Other accrued expenses 12,727 3,078
Total current liabilities 45,48237,136
Long-term liabilities
Long-term debt 607 7,737
Other long-term liabilities 7,931 8,576
Total stockholders' equity93,51896,504
Total liabilities and
stockholders' equity $147,538 $149,953
ATTACHMENT IV
DYNAMICS RESEARCH CORPORATION
SUPPLEMENTAL INFORMATION (unaudited)
(dollars in thousands)
Contract revenues were earned
from the following sectors:
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
National defense and intelligence
agencies $37,217 $45,219 $78,245 $89,850
Federal civilian agencies8,3627,92416,24015,487
State and local government
agencies7,3653,76712,609 7,315
Other 764 120 1,387 290
$53,708 $57,030 $108,481 $112,942
Revenues by contract type as a
percentage of contract revenue
were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Time and materials 46% 56% 50% 56%
Cost reimbursable21 22 20 22
Fixed price, including
service-type contracts 33 22 30 22
100% 100% 100% 100%
Prime contract 64% 57% 62% 56%
Sub-contract 36 43 38 44
100% 100% 100% 100%
Three Months Ended Six Months Ended
June 30,June 30,
2008 2007 2008 2007
Net cash provided by (used in)
operating activities$3,873 $11,562$5,497 $(5,753)
Capital expenditures $411 $231 $813 $740
Depreciation $719 $751$1,419$1,576
Bookings$65,200 $56,557 $128,250 $135,119
June 30, December 31,
2008 2007
Funded backlog $115,414 $116,471
Employees 1,272 1,414
ATTACHMENT V
DYNAMICS RESEARCH CORPORATION
RECONCILIATION OF NON-GAAP MEASURES (unaudited) (continued)
(in thousands, except share and per share data)
Six Months Ended
June 30,
2008 2007
Contract revenue $108,481 $112,942
Product sales3,290 1,848
Total revenue111,771 114,790
Cost of contract revenue91,81194,393
Cost of product sales2,998 2,348
Total cost of revenue 94,80996,741
Gross profit on contract revenue16,67018,549
Gross profit on product sales 292 (500)
Total gross profit (loss) 16,96218,049
Selling, general and administrative
expenses 10,54811,361
Amortization of intangible assets1,019 1,301
Non-GAAP operating income5,395 5,387
Interest expense, net (281) (929)
Other income, net 168 255
Non-GAAP income before provision for
income taxes5,282 4,713
Non-GAAP provision for income taxes 2,214 1,967
Non-GAAP net income $3,068$2,746
Non-GAAP Earnings per common share
Basic $0.33 $0.29
Diluted$0.32 $0.29
Weighted average shares outstanding
Basic 9,430,607 9,308,558
Diluted (Non-GAAP for 2008)9,721,165 9,609,575
DYNAMICS RESEARCH CORPORATION
RECONCILIATION OF NON-GAAP MEASURES (unaudited)
(in thousands, except share and per share data)
Six Months Ended
June 30,
2008 2007
GAAP operating income (loss) $(3,424) $5,206
Provision for litigation 8,819 181
Non-GAAP operating income $5,395$5,387
GAAP income (loss) before provision
for income taxes $(3,537) $4,532
Provision for litigation 8,819 181
Non-GAAP income before provision for
income taxes $5,282$4,713
GAAP provision for income taxes$90$1,895
Tax benefit for provision for
litigation 2,12472
Non-GAAP provision for income taxes $2,214$1,967
GAAP net income (loss) $(3,627) $2,637
Provision for litigation, net of tax
benefit 6,695 109
Non-GAAP net income $3,068$2,746
Earnings (loss) per common share
GAAP Basic$(0.38)$0.28
Per share effect of provision for
litigation 0.71 0.01
Non-GAAP Basic $0.33 $0.29
GAAP Diluted $(0.38)$0.27
Per share effect of provision for
litigation$0.70 0.02
Non-GAAP Diluted $0.32 $0.29
Weighted average shares outstanding
GAAP and Non-GAAP Basic 9,430,607 9,308,558
GAAP Diluted 9,430,607 9,609,575
Non-GAAP Diluted 9,721,165 9,609,575
SOURCE Dynamics Research Corporation
