ANDOVER, Mass., Nov. 1 /PRNewswire-FirstCall/ -- Dynamics Research
Corporation (NASDAQ:DRCO), a provider of innovative engineering,
technical and information technology services and solutions to
federal and state governments today announced operating results for
the third quarter ended September 30, 2006. Financial Results The
company reported revenue for the third quarter of 2006 of $63.2
million, compared with $79.1 million for the same period a year
ago. Net income was $0.9 million, or $0.10 per diluted share, for
the quarter ended September 30, 2006, compared with $3.1 million,
or $0.34 per diluted share, for the third quarter of 2005. Diluted
earnings per share includes a $0.02 effect of FAS 123R for the
third quarter of 2006. For the nine months ended September 30, 2006
revenue was $198.7 million, compared with $228.8 million for the
same period in 2005. Net income was $2.6 million, or $0.27 per
diluted share, for the nine months ended September 30, 2006,
compared with $8.5 million, or $0.92 per diluted share, for the
first nine months of 2005. Lower than expected subcontracted
revenues under the Aeronautical Systems Center and Electronics
Systems Center contracts resulted in third quarter revenues lower
than previously provided guidance. Business Highlights "I am
pleased to report that leading indicators of revenue growth have
continued to trend very positively in the most recently ended
period. Our new business wins for the quarter, measured in revenue
value for the first contract year, were $24 million, up 53 percent
over the third quarter of 2005, bringing the year-to-date total to
$55 million. Key wins since we last reported our financial results
include new or expanded contracts with the Air Force Tanker
Program, Air Force Depots, Lockheed Martin and the Air Force's Air
Operations Center, the NAVAIR AIRSpeed program and the FDIC. Adding
to our confidence in these positive developments for the quarter
just ended our new business win rate was very strong at 45 percent.
"From a profits viewpoint, we expected and saw a significant
improvement in results for the third quarter, compared with the
second quarter of this year. Earnings results were at the high end
of our guidance for the quarter and investments in business
development activities continued at a high level," reported James
P. Regan, DRC chairman and chief executive officer. Company
Guidance For the year 2006, the company estimates revenues in the
range of $258 to $261 million and earnings per diluted share in the
range of $0.40 to $0.43. For the fourth quarter of the year the
company expects to book revenues in the range of $59 to $62 million
and report earnings per diluted share of $0.13 to $0.16. Conference
Call The company will conduct a third quarter 2006 conference call
on Thursday, November 2, 2006 at 10:30 a.m. ET. The call will be
available via telephone at (800) 319-9003, 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 #2492094, beginning at 1:30 p.m. ET
November 2, 2006 through 11:59 p.m. ET November 9, 2006. About
Dynamics Research Corporation DRC is headquartered in Andover,
Massachusetts and has major offices in Vienna, Virginia and
Fairborn, Ohio. The company has 27 additional field offices
throughout the United States providing direct support to all
branches of the Department of Defense and several state government
agencies. Dynamics Research Corporation is an innovative solutions
provider that partners with its customers to apply proven processes
and technologies. For more than 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
our 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: David Keleher, Senior Vice President and Chief Financial
Officer (978) 289-1615 DYNAMICS RESEARCH CORPORATION RESULTS OF
OPERATIONS (unaudited) (in thousands, except share and per share
data) Three months ended September 30, 2006 2005 Contract revenue
$61,547 $77,334 Product sales 1,614 1,779 Total revenue 63,161
79,113 Cost of contract revenue 53,756 64,174 Cost of product sales
1,217 1,242 Selling, general and administrative expenses 5,559
6,722 Amortization of intangible assets 702 760 Total operating
costs and expenses 61,234 72,898 Operating income 1,927 6,215
Interest expense, net (558) (1,061) Other income 78 119 Income
before provision for income taxes 1,447 5,273 Provision for income
taxes 526 2,136 Net income $921 $3,137 Earnings per common share
Basic $0.10 $0.35 Diluted $0.10 $0.34 Weighted average shares
outstanding Basic 9,133,552 8,846,245 Diluted 9,395,360 9,264,137
DYNAMICS RESEARCH CORPORATION RESULTS OF OPERATIONS (unaudited) (in
thousands, except share and per share data) Nine months ended
September 30, 2006 2005 Contract revenue $194,026 $223,712 Product
sales 4,626 5,131 Total revenue 198,652 228,843 Cost of contract
revenue 168,985 187,927 Cost of product sales 3,771 3,948 Selling,
general and administrative expenses 18,151 19,429 Amortization of
intangible assets 2,107 2,279 Total operating costs and expenses
193,014 213,583 Operating income 5,638 15,260 Interest expense, net
(1,693) (3,193) Other income 429 2,221 Income before provision for
income taxes 4,374 14,288 Provision for income taxes 1,803 5,787
Net income (1) $2,571 $8,501 Earnings per common share Basic (1)
$0.28 $0.97 Diluted (1) $0.27 $0.92 Weighted average shares
outstanding Basic 9,079,601 8,761,800 Diluted 9,424,170 9,208,054
(1) Includes $84, or $0.01 per common share, attributable to the
cumulative effect of the change in accounting principle for the
adoption of SFAS 123R in 2006. DYNAMICS RESEARCH CORPORATION
CONDENSED BALANCE SHEETS (in thousands) September 30, December 31,
2006 2005 (unaudited) (audited) Assets Cash and cash equivalents
$584 $1,020 Accounts receivable, net 35,372 32,894 Unbilled
expenditures and fees on contracts in process 41,070 60,210 Prepaid
expenses and other current assets 2,308 1,483 Total current assets
79,334 95,607 Property, plant and equipment, net 11,869 12,252
Goodwill 63,055 63,055 Intangible assets, net 6,373 8,480 Other
noncurrent assets 7,046 8,359 Total assets $167,677 $187,753
Liabilities and stockholders' equity Current portion of long-term
debt $- $10,170 Accounts payable 20,268 25,668 Deferred income
taxes 12,420 19,825 Accrued payroll and employee benefits 15,094
18,761 Other accrued expenses 3,741 6,392 Total current liabilities
51,523 80,816 Long-term debt 21,692 15,242 Other long-term
liabilities 14,524 17,508 Stockholders' equity 79,938 74,187 Total
liabilities and stockholders' equity $167,677 $187,753 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, 2006 2005 2006 2005 National defense and intelligence
agencies $50,579 $63,970 $158,995 $179,961 Federal civilian
agencies 6,634 6,785 22,983 24,560 State and local government
agencies 3,966 5,946 11,236 16,996 Other 368 633 812 2,195 $61,547
$77,334 $194,026 $223,712 Revenues by contract type as a percentage
of contract revenue were as follows: Three Months Ended Nine Months
Ended September 30, September 30, 2006 2005 2006 2005 Time and
materials 64% 55% 62% 56% Cost reimbursable 17% 21% 19% 20% Fixed
price, including service-type contracts 19% 24% 19% 24% 100% 100%
100% 100% Prime contact 67% 68% 68% 68% Sub-contract 33% 32% 32%
32% 100% 100% 100% 100% Three Months Ended Nine Months Ended
September 30, September 30, 2006 2005 2006 2005 Net cash provided
by (used in) operating activities $2,026 $(2,585) $3,372 $7,835
Capital expenditures $492 $947 $2,063 $3,373 Depreciation $805 $915
$2,425 $2,823 Bookings $60,205 $72,305 $191,992 $210,938 September
30, 2006 2005 Funded backlog $97,911 $147,470 Employees 1,541 1,829
DATASOURCE: Dynamics Research Corporation CONTACT: David Keleher,
Senior Vice President and Chief Financial Officer of Dynamics
Research Corporation, +1-978-289-1615 Web site: http://www.drc.com/
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