DRCO Dynamics Research Corp. (MM)

Dynamics Research Corporation Reports Higher Revenues For First Quarter 2005 Increase of 18% Year Over Year ANDOVER, Mass., May 3 /PRNewswire-FirstCall/ -- Dynamics Research Corporation (NASDAQ:DRCO) today reported revenues of $73.5 million and net income of $2.1 million, or $0.23 per diluted share, for the first quarter ended March 31, 2005. This compares with revenues of $62.1 million and net income of $2.0 million, or $0.23 per diluted share, for the same period in 2004. Regarding operating results for the quarter, James P. Regan, chairman and chief executive officer, said, "I am pleased that both the top and bottom lines were consistent with our expectations. I'm encouraged by strong first quarter leading indicators. Our new business win rate was in excess of our 35% benchmark for both the quarter and on a rolling 12 month basis. Further, our qualified pipeline of opportunities continues to be robust. Funded backlog of $186 million at quarter end represents approximately seven months of revenue and first year revenue awaiting award was $65 million at the end of the first quarter." "Our first quarter results, combined with the leading new business development indicators, underlie my confidence in the sound fundamentals of our business. There are two factors impacting our outlook for the year: delays in contract award decisions and hiring. We have intensified recruitment efforts to accelerate our hiring," Regan added. DRC's revised guidance for 2005 is for revenues in the range of $315 to $323 million and earnings per diluted share in the range of $1.15 to $1.23. For the second quarter of the year the company expects to book revenues in the range of $76 to $78 million and report earnings per diluted share of $0.23 to $0.25. The company will conduct a conference call tomorrow, May 4, 2005 at 8:30 a.m. ET to discuss its first quarter results and the outlook for 2005 in more detail. The call will be available via telephone at (800) 946-0722, and accessible via Web cast at http://www.drc.com/. Recorded replays of the conference call will be available on Dynamics Research Corporation's investor relations home page at http://www.drc.com/ and by telephone at (888) 203-1112, passcode #2695647, beginning at 10:00 a.m. May 4, 2005 through 11:59 p.m. May 11, 2005. About Dynamics Research Corporation Dynamics Research Corporation is an innovative solutions provider that partners with its customers to apply proven processes and technologies. For 50 years, DRC has delivered technical and information technology services that enhance the performance and cost effectiveness of its customers' mission critical systems. For additional information about DRC please visit the website at http://www.drc.com/. 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. DYNAMICS RESEARCH CORPORATION RESULTS OF OPERATIONS (unaudited) (in thousands, except share and per share data) Three months ended March 31, 2005 2004 Contract revenue $71,839 $60,637 Product sales 1,703 1,431 Total revenue 73,542 62,068 Cost of contract revenue 60,806 51,837 Cost of product sales 1,409 1,141 Selling, general and administrative expenses 6,021 5,335 Amortization of intangible assets 754 381 Total operating costs and expenses 68,990 58,694 Operating income 4,552 3,374 Interest expense, net (1,086) (213) Other income 25 381 Income before provision for income taxes 3,491 3,542 Provision for income taxes 1,400 1,498 Net income $2,091 $2,044 Earnings per common share Basic $0.24 $0.24 Diluted $0.23 $0.23 Weighted average shares outstanding Weighted average shares outstanding -- basic 8,695,638 8,394,265 Dilutive effect of options and restricted stock grants 524,465 608,862 Weighted average shares outstanding -- diluted 9,220,103 9,003,127 DYNAMICS RESEARCH CORPORATION CONDENSED BALANCE SHEETS (in thousands) March 31, December 31, 2005 2004 (unaudited) (audited) Assets Cash and cash equivalents $556 $925 Accounts receivable, net 37,290 45,978 Unbilled expenditures and fees on contracts in process 51,773 48,119 Prepaid expenses and other current assets 4,999 5,668 Total current assets 94,618 100,690 Property, plant and equipment, net 22,413 22,139 Goodwill 63,055 63,055 Intangible assets, net 10,765 11,519 Unbilled expenditures and fees on contracts in process 5,385 2,203 Other noncurrent assets 4,920 5,528 Total assets $201,156 $205,134 Liabilities and stockholders' equity Current portion of long-term debt $8,357 $8,357 Notes payable and revolver 9,550 10,000 Accounts payable 18,690 20,550 Accrued payroll and employee benefits 15,575 17,914 Deferred income taxes 14,553 15,418 Other accrued expenses 3,694 4,447 Discontinued operations 264 422 Total current liabilities 70,683 77,108 Long-term debt 49,396 51,485 Deferred income taxes 1,113 591 Accrued pension liability 10,457 11,336 Other long-term liabilities 5,563 3,296 Stockholders' equity 63,944 61,318 Total liabilities and stockholders' equity $201,156 $205,134 DYNAMICS RESEARCH CORPORATION SUPPLEMENTAL INFORMATION (unaudited) (dollars in thousands) Three Months Ended March 31, 2005 2004 Capital expenditures $1,218 $1,157 Depreciation $942 $874 Bookings $94,442 $78,264 March 31, 2005 2004 Funded backlog $186,273 $145,766 Employees 1,933 1,641 CONTACT: Elise Caffrey, Vice President & Treasurer (978) 475-9090, Ext. 1309 DATASOURCE: Dynamics Research Corporation CONTACT: Elise Caffrey, Vice President & Treasurer of Dynamics Research Corporation, +1-978-475-9090 ext. 1309, Web site: http://www.drc.com/

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