DRCO Dynamics Research Corp. (MM)

Increase of 17% year over year ANDOVER, Mass., Aug. 2 /PRNewswire-FirstCall/ -- Dynamics Research Corporation (NASDAQ:DRCO) today reported revenues of $76.2 million and net income of $3.3 million, including $1.2 million of gain from the sale of stock, for the second quarter ended June 30, 2005. Earnings per diluted share were $0.36, including $0.13 attributable to the sale of stock, for the second quarter ended June 30, 2005. This compares with revenues of $65.0 million and net income of $2.2 million, or $0.24 per diluted share, for the same period in 2004. Regarding performance for the quarter, James P. Regan, President, Chairman and CEO, said, "I am pleased that the operating results were consistent with our expectations, demonstrating further progress towards the achievement of our business objectives." "During the second quarter we received several strategically important contract awards that will fuel organic growth. Our pipeline is up sharply, our win rate is strong and the outlook remains positive," Regan added. Given the uncertainty of timing of awards under the recently awarded DESP II contract, DRC revised guidance for 2005. The company currently estimates revenues in the range of $312 to $318 million and earnings per diluted share in the range of $1.28 to $1.33 including the $0.13 per share impact of the sale of stock during the second quarter. For the third quarter of the year the company expects to book revenues in the range of $80 to $82 million and report earnings per diluted share of $0.31 to $0.33. The company will conduct a conference call tomorrow, August 3, 2005 at 8:30 a.m. ET to discuss its second quarter results and the outlook for 2005 in more detail. The call will be available via telephone at (800) 946-0744, 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 #6487550, beginning at 10:30 a.m. August 3, 2005 through 11:59 p.m. August 10, 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. CONTACT: Elise Caffrey, Vice President & Treasurer (978) 289-1545, ATTACHMENT I DYNAMICS RESEARCH CORPORATION RESULTS OF OPERATIONS (unaudited) (in thousands, except share and per share data) Three months ended June 30, 2005 2004 Contract revenue $74,539 $63,065 Product sales 1,649 1,885 Total revenue 76,188 64,950 Cost of contract revenue 62,947 54,158 Cost of product sales 1,297 1,359 Selling, general and administrative expenses 6,686 4,935 Amortization of intangible assets 765 381 Total operating costs and expenses 71,695 60,833 Operating income 4,493 4,117 Interest expense, net (1,046) (361) Other income 2,077 56 Income before provision for income taxes 5,524 3,812 Provision for income taxes 2,251 1,613 Net income $3,273 $2,199 Earnings per common share Basic $0.37 $0.26 Diluted $0.36 $0.24 Weighted average shares outstanding Weighted average shares outstanding - basic 8,743,516 8,461,945 Dilutive effect of options and restricted stock grants 458,497 557,194 Weighted average shares outstanding - diluted 9,202,013 9,019,139 ATTACHMENT II DYNAMICS RESEARCH CORPORATION RESULTS OF OPERATIONS (unaudited) (in thousands, except share and per share data) Six months ended June 30, 2005 2004 Contract revenue $146,378 $123,702 Product sales 3,352 3,316 Total revenue 149,730 127,018 Cost of contract revenue 123,753 105,995 Cost of product sales 2,706 2,500 Selling, general and administrative expenses 12,707 10,270 Amortization of intangible assets 1,519 762 Total operating costs and expenses 140,685 119,527 Operating income 9,045 7,491 Interest expense, net (2,132) (574) Other income 2,102 437 Income before provision for income taxes 9,015 7,354 Provision for income taxes 3,651 3,111 Net income $5,364 $4,243 Earnings per common share Basic $0.62 $0.50 Diluted $0.58 $0.47 Weighted average shares outstanding Weighted average shares outstanding - basic 8,719,577 8,428,105 Dilutive effect of options and restricted stock grants 487,458 570,234 Weighted average shares outstanding - diluted 9,207,035 8,998,339 ATTACHMENT III DYNAMICS RESEARCH CORPORATION CONDENSED BALANCE SHEETS (in thousands) June 30, December 31, 2005 2004 (unaudited) (audited) Assets Cash and cash equivalents $814 $925 Accounts receivable, net 36,986 45,978 Unbilled expenditures and fees on contracts in process 53,031 48,119 Prepaid expenses and other current assets 3,821 5,668 Total current assets 94,652 100,690 Property, plant and equipment, net 22,655 22,139 Goodwill 63,055 63,055 Intangible assets, net 10,000 11,519 Unbilled expenditures and fees on contracts in process 6,489 2,203 Other noncurrent assets 3,148 5,528 Total assets $199,999 $205,134 Liabilities and stockholders' equity Current portion of long-term debt $8,357 $8,357 Notes payable and revolver 3,013 10,000 Accounts payable 19,920 20,550 Accrued payroll and employee benefits 19,069 17,914 Deferred income taxes 16,321 15,418 Other accrued expenses 3,102 4,447 Discontinued operations 106 422 Total current liabilities 69,888 77,108 Long-term debt 47,306 51,485 Deferred income taxes 1,015 591 Accrued pension liability 8,409 11,336 Other long-term liabilities 6,529 3,296 Stockholders' equity 66,852 61,318 Total liabilities and stockholders' equity $199,999 $205,134 ATTACHMENT IV DYNAMICS RESEARCH CORPORATION SUPPLEMENTAL INFORMATION (unaudited) (dollars in thousands) Three months ended Six months ended June 30, June 30, 2005 2004 2005 2004 Capital expenditures $1,208 $1,025 $2,426 $2,182 Depreciation $966 $898 $1,908 $1,772 Bookings $44,191 $41,941 June 30, 2005 2004 Funded backlog $154,277 $123,369 Employees 1,905 1,653 DATASOURCE: Dynamics Research Corporation CONTACT: Elise Caffrey, Vice President & Treasurer of Dynamics Research, +1-978-289-1545, Web site: http://www.drc.com/

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