- Double-Digit Revenue and Earnings Growth Projected for 2009 -
ANDOVER, Mass., March 2 /PRNewswire-FirstCall/ -- 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 fourth quarter and year
ended December 31, 2008. Financial Results The Company reported
revenue of $67.6 million for the fourth quarter of 2008 as compared
with $56.5 million for the same period in 2007. Reported revenue
rose 20 percent on a year-over-year basis, including organic
revenue growth of 6.7 percent. Net income for the fourth quarter of
2008 was $2.6 million, or $0.27 per diluted share, up from $2.5
million, or $0.26 per diluted share, for the fourth quarter of
2007. For the year ended December 31, 2008 revenue was $242.8
million compared with $229.6 million for 2007. The net loss for the
year ended December 31, 2008 was $1.3 million, or $0.13 per diluted
share, which included an after-tax provision for litigation
totaling $9.1 million, or $0.93 per diluted share, net of $5.8
million in expected tax benefits related to the provision.
Excluding the litigation provisions in 2008 and 2007, net income
would have been $7.8 million, or $0.80 per diluted share, for the
year ended December 31, 2008, compared with $7.2 million, or $0.75
per diluted share, for 2007. Business Highlights "We are pleased
with this quarter's financial result's and continue to see an
increasing percentage of revenues coming from our targeted,
higher-margin growth markets. The positive effects of this
fundamental change in our business base are clearly evident in our
financial results," said Jim Regan, DRC's chairman and chief
executive officer. "In the quarter just ended internally generated
revenue growth was up 350 basis points over the prior year period,
while the Company's direct margin remained strong at 42.3 percent
and operating margin reached 7.6 percent. For the full year 2008
the book-to-bill ratio was 1.1 to 1; our operating margin was 5.9
percent, up 40 basis points over 2007; and DRC generated $20
million of earnings before interest, taxes, depreciation,
amortization and the litigation provision." "Having just completed
our tenth consecutive quarter of improving operating performance
and with strong backlog," Regan continued "DRC remains on track for
solid organic revenue growth and margin expansion in 2009." On
August 1, 2008 the Company acquired Kadix Systems, LLC. At the
acquisition date, the annualized Kadix revenue base was in excess
of $40 million. Kadix, a rapidly growing high-end management
consulting firm, maintains practice specialties in organizational
change, human capital, information technology, public and
environmental health and learning and organization development and
is focused on the U.S. Department of Homeland Security (DHS),
Marine Corps information technology, military medical health, and
federal civilian markets. Company Guidance As previously announced,
the Company's estimate for revenue for 2009 is in the range of $280
to $290 million. Regarding earnings for 2009 the Company
anticipates results to be in the range of $0.90 to $1.00 per
diluted share. For the first quarter of 2009 the Company
anticipates revenue in the range of $66 to $68 million and earnings
per diluted share of $0.15 to $0.17. Conference Call The Company
will conduct a fourth quarter and year-end 2008 conference call
today, March 2, 2009 at 10:00 a.m. ET. The call will be available
via telephone at (877) 856-1958, 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 #6218438, beginning at 1:00 p.m. ET March 2,
2009 through 11:59 p.m. ET March 9, 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 http://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 March 2, 2009. CONTACTS: Investors: Chris Witty
Media: Marisa Hagerman Darrow Associates, Inc. Sage Communications
646.438.9385 703.584.5637 ATTACHMENT I DYNAMICS RESEARCH
CORPORATION CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited) (in thousands, except share and per share data) Three
Months Ended December 31, ------------ 2008 2007 ---- ---- Contract
revenue $66,015 $54,554 Product sales 1,547 1,905 ----- ----- Total
revenue 67,562 56,459 ------ ------ Cost of contract revenue 53,735
45,315 Cost of product sales 1,589 1,394 ----- ----- Total cost of
revenue 55,324 46,709 ------ ------ Gross profit on contract
revenue 12,280 9,239 Gross profit (loss) on product sales (42) 511
--- --- Total gross profit 12,238 9,750 Selling, general and
administrative expenses 6,219 5,203 Amortization of intangible
assets 883 651 --- --- Operating income 5,136 3,896 Interest
expense, net (718) (239) Other income (172) 249 ---- --- Income
before provision for income taxes 4,246 3,906 Provision for income
taxes 1,642 1,360 ----- ----- Net income $2,604 $2,546 ======
====== Earnings per common share Basic $0.27 $0.27 Diluted $0.27
$0.26 - Weighted average shares outstanding Basic 9,553,546
9,390,205 Diluted 9,638,969 9,717,968 ATTACHMENT II DYNAMICS
RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited) (in thousands, except share and per share data) Twelve
Months Ended December 31, ------------ 2008 2007 ---- ---- Contract
revenue $236,796 $224,676 Product sales 6,028 4,901 ----- -----
Total revenue 242,824 229,577 ------- ------- Cost of contract
revenue 197,802 187,516 Cost of product sales 5,858 4,954 -----
----- Total cost of revenue 203,660 192,470 ------- ------- Gross
profit on contract revenue 38,994 37,160 Gross profit (loss) on
product sales 170 (53) --- --- Total gross profit 39,164 37,107
Selling, general and administrative expenses 22,296 21,826
Provision for litigation 14,819 181 Amortization of intangible
assets 2,620 2,602 ----- ----- Operating income (loss) (571) 12,498
Interest expense, net (1,423) (1,541) Other income 35 827 -- ---
Income (loss) before provision (benefit) for income taxes (1,959)
11,784 Provision (benefit) for income taxes (704) 4,682 ---- -----
Net income (loss) $(1,255) $7,102 ======= ====== Earnings (loss)
per common share Basic $(0.13) $0.76 Diluted $(0.13) $0.74 Weighted
average shares outstanding Basic 9,493,495 9,326,907 Diluted
9,493,495 9,649,897 ATTACHMENT III DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands)
December 31, December 31, 2008 2007 ---- ---- Assets Current assets
Cash and cash equivalents $7,111 $2,006 Contract receivables, net
71,438 63,570 Prepaid expenses and other current assets 2,491 2,508
----- ----- Total current assets 81,040 68,084 ------ ------
Noncurrent assets Property and equipment, net 9,349 10,182 Goodwill
97,641 63,055 Intangible assets, net 7,379 3,069 Deferred tax asset
10,396 1,484 Other noncurrent assets 3,125 4,079 ----- ----- Total
noncurrent assets 127,890 81,869 ------- ------ Total assets
$208,930 $149,953 ======== ======== Liabilities and stockholders'
equity Current liabilities Current portion of long-term debt $8,000
$- Accounts payable 18,095 12,163 Accrued compensation and employee
benefits 13,644 13,409 Deferred taxes 2,670 8,486 Other accrued
expenses 24,760 3,078 ------ ----- Total current liabilities 67,169
37,136 ------ ------ Long-term liabilities Long-term debt 30,000
7,737 Other long-term liabilities 30,286 8,576 Total stockholders'
equity 81,475 96,504 ------ ------ Total liabilities and
stockholders' equity $208,930 $149,953 ======== ======== ATTACHMENT
IV DYNAMICS RESEARCH CORPORATION SUPPLEMENTAL INFORMATION
(unaudited) (dollars in thousands) Contract revenues were earned
from the following sectors: Three Months Ended Twelve Months Ended
December 31, December 31, ------------ ------------ 2008 2007 2008
2007 ---- ---- ---- ---- National defense and intelligence agencies
$38,830 $44,236 $156,812 $179,067 Federal civilian agencies 9,874
6,020 32,899 27,457 Homeland security 10,226 1,350 19,280 3,870
State and local government agencies 6,976 2,765 25,800 13,602 Other
109 183 2,005 680 --- --- ----- --- $66,015 $54,554 $236,796
$224,676 ======= ======= ======== ======== Revenues by contract
type as a percentage of contract revenue were as follows: Three
Months Ended Twelve Months Ended December 31, December 31,
------------ ------------ 2008 2007 2008 2007 ---- ---- ---- ----
Time and materials 45% 58% 49% 57% Cost reimbursable 16 21 18 22
Fixed price, including service-type contracts 39 21 33 21 -- -- --
-- 100% 100% 100% 100% === === === === Prime contract 69% 59% 63%
56% Sub-contract 31 41 37 44 -- -- -- -- 100% 100% 100% 100% ===
=== === === Three Months Ended Twelve Months Ended December 31,
December 31, ------------ ------------ 2008 2007 2008 2007 ----
---- ---- ---- Net cash provided by (used in) operating activities
$(2,663) $6,172 $17,398 $2,945 Capital expenditures $501 $603
$2,010 $1,788 Depreciation $961 $787 $3,148 $3,081 Bookings $68,371
$74,322 $270,126 $253,146 December 31, December 31, 2008 2007 ----
---- Funded backlog $149,201 $116,471 Employees 1,503 1,414
ATTACHMENT V DYNAMICS RESEARCH CORPORATION NON-GAAP CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) (in thousands,
except share and per share data) Twelve Months Ended December 31,
------------ 2008 2007 ---- ---- Contract revenue $236,796 $224,676
Product sales 6,028 4,901 ----- ----- Total revenue 242,824 229,577
------- ------- Cost of contract revenue 197,802 187,516 Cost of
product sales 5,858 4,954 ----- ----- Total cost of revenue 203,660
192,470 ------- ------- Gross profit on contract revenue 38,994
37,160 Gross profit (loss) on product sales 170 (53) --- --- Total
gross profit 39,164 37,107 Selling, general and administrative
expenses 22,296 21,826 Provision for litigation - - Amortization of
intangible assets 2,620 2,602 ----- ----- Non-GAAP operating income
14,248 12,679 Interest expense, net (1,423) (1,541) Other income,
net 35 827 -- --- Non-GAAP income before provision for income taxes
12,860 11,965 Non-GAAP provision for income taxes 5,053 4,754 -----
----- Non-GAAP net income $7,807 $7,211 ====== ====== Earnings per
common share Basic $0.82 $0.77 Diluted $0.80 $0.75 Weighted average
shares outstanding Basic 9,493,495 9,326,907 Diluted 9,704,789
9,649,897 ATTACHMENT VI DYNAMICS RESEARCH CORPORATION
RECONCILIATION OF NON-GAAP MEASURES (unaudited) (in thousands,
except share and per share data) Twelve Months Ended December 31,
------------ 2008 2007 ---- ---- GAAP operating income (loss)
$(571) $12,498 Provision for litigation 14,819 181 ------ ---
Non-GAAP operating income $14,248 $12,679 ======= ======= GAAP
income (loss) before provision for income taxes $(1,959) $11,784
Provision for litigation 14,819 181 ------ --- Non-GAAP income
before provision for income taxes $12,860 $11,965 ======= =======
GAAP provision (benefit) for income taxes $(704) $4,682 Tax benefit
for provision for litigation 5,757 72 ----- -- Non-GAAP provision
for income taxes $5,053 $4,754 ====== ====== GAAP net income (loss)
$(1,255) $7,102 Provision for litigation, net of tax benefit 9,062
109 ----- --- Non-GAAP net income $7,807 $7,211 ====== ======
Earnings (loss) per common share GAAP Basic $(0.13) $0.76 Per share
effect of provision for litigation 0.95 0.01 ---- ---- Non-GAAP
Basic $0.82 $0.77 ===== ===== GAAP Diluted $(0.13) $0.74 Per share
effect of provision for litigation 0.93 0.01 ---- ---- Non-GAAP
Diluted $0.80 $0.75 ===== ===== Weighted average shares outstanding
Basic (GAAP diluted for 2008) 9,493,495 9,326,907 Diluted (Non-GAAP
for 2008) 9,704,789 9,649,897 DATASOURCE: Dynamics Research
Corporation CONTACT: Investors, Chris Witty of Darrow Associates,
Inc., +1-646-438-9385, ; or Media, Marisa Hagerman of Sage
Communications, +1-703-584-5637, , both for Dynamics Research
Corporation Web Site: http://www.drc.com/
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