ANDOVER, Mass., Oct. 27, 2009 (GLOBE NEWSWIRE) -- Dynamics Research Corporation (Nasdaq:DRCO), a leading provider of innovative management consulting, engineering, technical and information technology services and solutions to federal and state governments, today announced operating results for the third quarter ended September 30, 2009.
Financial Results
The Company reported revenue of $69.2 million for the third quarter of 2009 as compared with $63.5 million for the same period in 2008. Reported revenue rose 9 percent on a year-over-year basis, including organic revenue growth of 2.4 percent. Net income for the third quarter of 2009 was $3.0 million, or $0.30 per diluted share, compared with a net loss of $0.2 million for the same period in 2008, which included a 2008 provision for litigation of $2.4 million, which reduced earnings by $0.24 per diluted share. Excluding the litigation provision, net income would have been $2.1 million, or $0.22 per diluted share, for the three months ended September 30, 2008. The results for the third quarter of 2009 included $0.05 of non-recurring tax benefits.
For the nine months ended September 30, 2009 revenue was $207.4 million compared with $175.3 million for the same period in 2008. For the nine month period ended September 30, 2009 net income was $6.8 million, or $0.69 per diluted share, compared with a net loss of $3.9 million for the same period in 2008, which included a 2008 provision for litigation of $9.1 million, which reduced earnings by $0.94 per diluted share. Excluding the litigation provision net income would have been $5.2 million, or $0.53 per diluted share for the nine months ended September 30, 2008.
Business Highlights
"We're extremely pleased with the record level of bookings and contract awards this quarter. Clearly, our diversification strategy into the high growth markets we have selected is working," said Jim Regan, DRC's chairman and chief executive officer. "Our mix of prime contracts, at eighty-five percent, is also a strong indicator that the company's focus on winning large agency-wide contract vehicles is meeting with success. While delays in contract awards this quarter have dampened our revenue expectations for 2009, strong bookings in the quarter have strengthened our outlook for 2010. In summary, it has been another solid quarter of execution, our thirteenth consecutive quarter of earnings improvement."
Company Guidance
The Company's estimate for revenue for 2009 is in the range of $277 to $280 million. Regarding earnings for 2009 the Company anticipates results to be in the range of $1.00 to $1.02 per diluted share. For the fourth quarter of 2009 the Company anticipates revenue in the range of $69 to $72 million and earnings per diluted share of $0.31 to $0.33.
Conference Call
The Company will conduct a third quarter 2009 conference call tomorrow, October 28, 2009 at 10:00 a.m. ET. The call will be available via telephone at (877) 856-1955, 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 #7127440, beginning at 12:00 p.m. ET October 28, 2009 through 11:59 p.m. ET November 11, 2009.
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 the capabilities of a large company and the responsiveness of a small company, 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 and the Washington, D.C. area. 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 to be filed with the SEC on October 28, 2009.
ATTACHMENT I
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
Three Months Ended
September 30,
---------------------------
2009 2008
------------- -------------
Contract revenue $ 67,504 $ 62,300
Product sales 1,733 1,191
------------- -------------
Total revenue 69,237 63,491
------------- -------------
Cost of contract revenue 56,882 52,256
Cost of product sales 1,491 1,271
------------- -------------
Total cost of revenue 58,373 53,527
------------- -------------
Gross profit on contract revenue 10,622 10,044
Gross profit (loss) on product sales 242 (80)
------------- -------------
Total gross profit 10,864 9,964
Selling, general and administrative
expenses 5,911 5,529
Provision for litigation -- 6,000
Amortization of intangible assets 809 718
------------- -------------
Operating income (loss) 4,144 (2,283)
Interest expense, net (434) (424)
Other income, net 264 39
------------- -------------
Income (loss) before provision for income
taxes 3,974 (2,668)
Provision (benefit) for income taxes 1,019 (2,436)
------------- -------------
Net income (loss) $ 2,955 $ (232)
============= =============
Earnings (loss) per common share
Basic $ 0.31 $ (0.02)
Diluted $ 0.30 $ (0.02)
Weighted average shares outstanding
Basic 9,678,983 9,487,155
Diluted 9,983,825 9,487,155
ATTACHMENT II
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
Nine Months Ended
September 30,
---------------------------
2009 2008
------------- -------------
Contract revenue $ 202,835 $ 170,781
Product sales 4,589 4,481
------------- -------------
Total revenue 207,424 175,262
------------- -------------
Cost of contract revenue 169,840 144,067
Cost of product sales 4,581 4,269
------------- -------------
Total cost of revenue 174,421 148,336
------------- -------------
Gross profit on contract revenue 32,995 26,714
Gross profit on product sales 8 212
------------- -------------
Total gross profit 33,003 26,926
Selling, general and administrative
expenses 18,756 16,077
Provision for litigation -- 14,819
Amortization of intangible assets 2,754 1,737
------------- -------------
Operating income (loss) 11,493 (5,707)
Interest expense, net (1,530) (705)
Other income, net 585 207
------------- -------------
Income (loss) before provision for income
taxes 10,548 (6,205)
Provision (benefit) for income taxes 3,772 (2,346)
------------- -------------
Net income (loss) $ 6,776 $ (3,859)
============= =============
Earnings (loss) per common share
Basic $ 0.70 $ (0.41)
Diluted $ 0.69 $ (0.41)
Weighted average shares outstanding
Basic 9,631,659 9,471,420
Diluted 9,840,605 9,471,420
ATTACHMENT III
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
September 30, December 31,
2009 2008
------------- -------------
Assets
Current assets
Cash and cash equivalents $ 213 $ 7,111
Contract receivables, net 71,925 71,438
Prepaid expenses and other current
assets 4,622 2,491
------------- -------------
Total current assets 76,760 81,040
------------- -------------
Noncurrent assets
Property and equipment, net 9,238 9,349
Goodwill 97,641 97,641
Intangible assets, net 4,625 7,379
Deferred tax asset 10,314 10,396
Other noncurrent assets 3,146 3,125
------------- -------------
Total noncurrent assets 124,964 127,890
------------- -------------
Total assets $ 201,724 $ 208,930
============= =============
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term debt $ 8,000 $ 8,000
Accounts payable 15,659 18,095
Accrued compensation and employee
benefits 17,121 13,644
Deferred taxes 9,670 2,670
Other accrued expenses 2,720 24,760
------------- -------------
Total current liabilities 53,170 67,169
Long-term liabilities
Long-term debt 28,298 30,000
Other long-term liabilities 30,611 30,286
Total stockholders' equity 89,645 81,475
------------- -------------
Total liabilities and stockholders'
equity $ 201,724 $ 208,930
============= =============
ATTACHMENT IV
DYNAMICS RESEARCH CORPORATION
SUPPLEMENTAL INFORMATION (unaudited)
(dollars in thousands)
Contract revenues were earned from the following sectors:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
National defense and
intelligence agencies $ 36,874 $ 39,878 $ 110,609 $ 117,983
Federal civilian
agencies 10,731 9,592 32,572 23,024
Homeland security 13,540 6,106 40,302 9,054
State and local
government agencies 5,947 6,215 18,251 18,824
Other 412 509 1,101 1,896
---------- ---------- ---------- ----------
$ 67,504 $ 62,300 $ 202,835 $ 170,781
========== ========== ========== ==========
Revenues by contract type as a percentage of contract revenue were as
follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Time and materials 41% 49% 43% 50%
Fixed price, including
service-type contracts 40 33 38 31
Cost reimbursable 19 18 19 19
---------- ---------- ---------- ----------
100% 100% 100% 100%
==== ==== ==== ====
Prime contract 70% 68% 71% 61%
Sub-contract 30 32 29 39
---------- ---------- ---------- ----------
100% 100% 100% 100%
==== ==== ==== ====
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net cash provided by (used
in) operating activities $ (8,219) $ 14,564 $ (111) $ 20,061
Capital expenditures $ 1,456 $ 696 $ 2,283 $ 1,509
Depreciation $ 790 $ 768 $ 2,326 $ 2,187
Bookings $ 88,547 $ 73,505 $ 214,026 $ 201,755
Sept. 30, Dec. 31,
2009 2008
---------- ----------
Funded backlog $ 153,691 $ 149,201
Employees 1,506 1,503
ATTACHMENT V
DYNAMICS RESEARCH CORPORATION
NON-GAAP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
Three Months Nine Months
Ended Ended
September 30, September 30,
2008 2008
------------- -------------
Contract revenue $ 62,300 $ 170,781
Product sales 1,191 4,481
------------- -------------
Total revenue 63,491 175,262
------------- -------------
Cost of contract revenue 52,256 144,067
Cost of product sales 1,271 4,269
------------- -------------
Total cost of revenue 53,527 148,336
------------- -------------
Gross profit on contract revenue 10,044 26,714
Gross profit (loss) on product sales (80) 212
------------- -------------
Total gross profit 9,964 26,926
Selling, general and administrative
expenses 5,529 16,077
Provision for litigation -- --
Amortization of intangible assets 718 1,737
------------- -------------
Non-GAAP operating income 3,717 9,112
Interest expense, net (424) (705)
Other income, net 39 207
------------- -------------
Non-GAAP income before provision for
income taxes 3,332 8,614
Non-GAAP provision for income taxes 1,197 3,411
------------- -------------
Non-GAAP net income $ 2,135 $ 5,203
============= =============
Earnings per common share
Basic $ 0.23 $ 0.55
Diluted $ 0.22 $ 0.53
Weighted average shares outstanding
Basic 9,487,155 9,471,420
Diluted 9,683,035 9,728,707
ATTACHMENT VI
DYNAMICS RESEARCH CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except share and per share data)
Three Months Nine Months
Ended Ended
September 30, September 30,
2008 2008
------------- -------------
GAAP operating loss $ (2,283) $ (5,707)
Provision for litigation 6,000 14,819
------------- -------------
Non-GAAP operating income $ 3,717 $ 9,112
============= =============
GAAP loss before provision for income
taxes $ (2,668) $ (6,205)
Provision for litigation 6,000 14,819
------------- -------------
Non-GAAP income before provision for
income taxes $ 3,332 $ 8,614
============= =============
GAAP benefit for income taxes $ (2,436) $ (2,346)
Tax benefit for provision for litigation 3,633 5,757
------------- -------------
Non-GAAP provision for income taxes $ 1,197 $ 3,411
============= =============
GAAP net loss $ (232) $ (3,859)
Provision for litigation, net of tax
benefit 2,367 9,062
------------- -------------
Non-GAAP net income $ 2,135 $ 5,203
============= =============
Earnings (loss) per common share
GAAP Basic $ (0.02) $ (0.41)
Per share effect of provision for
litigation 0.25 0.96
------------- -------------
Non-GAAP Basic $ 0.23 $ 0.55
============= =============
GAAP Diluted $ (0.02) $ (0.41)
Per share effect of provision for
litigation 0.24 0.94
------------- -------------
Non-GAAP Diluted $ 0.22 $ 0.53
============= =============
Weighted average shares outstanding
Basic (GAAP diluted for 2008) 9,487,155 9,471,420
Diluted (Non-GAAP for 2008) 9,683,035 9,728,707