--- Adjusted EBITDA of 8.3
Percent on Revenue of $74 Million ---
Dynamics Research Corporation (Nasdaq:DRCO), a leading technology
and management consulting company focused on driving performance
and process improvement for government clients, today announced
operating results for the first quarter ended March 31, 2013.
Financial Results
Net income for the quarter ended March 31, 2013 was $1.2
million, or $0.12 per diluted share, as compared with $1.8 million,
or $0.17 per diluted share, for the first quarter of 2012. Adjusted
earnings before interest, taxes, depreciation and amortization
(EBITDA) for the first quarter of 2013 was $6.1 million, or 8.3
percent of revenue, as compared with $7.9 million, or 9.2 percent
of revenue, for the same period a year ago. Revenue for the first
quarter of 2013 was $73.6 million compared with $85.9 million for
the same period in 2012.
During the first quarter, the Company used $6.8 million of cash
from operations as compared to a use of $1.6 million in the same
period a year ago. While seasonally the first quarter normally
shows cash outflows, a slowdown in federal government payments,
including the suspension of the Department of Defense Quick Pay
program in February 2013, resulted in additional delayed invoice
payments.
Business Highlights
"First quarter results were consistent with our expectations in
the current operating environment," said Jim Regan, DRC's chairman
and chief executive officer. "Revenue in our priority markets was
$53 million, three percent below last year's first quarter,
reflecting lower homeland security sales. In the defense readiness,
logistics and C3 market sectors, which are primarily legacy
businesses for DRC, revenue for the first quarter just ended was
down 43 percent versus the first quarter of 2012, driven by various
defense cost-reduction initiatives and movement toward small
business set aside contracts. While we had a seasonal net use of
cash in the quarter, as is typical, we expect much stronger cash
generation during the balance of 2013.
"We won 100 percent of the re-compete decisions made by our
clients in the first quarter and booked $6 million of new business
– up from the same period a year ago. However, our current
qualified pipeline of $619 million is down from our previously
reported pipeline of $1.1 billion, primarily due to recent customer
decisions on two large procurements, totaling $425 million, which
were awarded to other firms. As we enter the busiest period of the
government fiscal year, we are replenishing the pipeline and are
well positioned to win our share of these opportunities.
"Funded bookings were seasonally soft, while the trailing twelve
month book-to-bill was maintained at 1.0 to one. As we reported at
the end of 2012, we terminated our participation in a ten-year
Department of Defense research program which generated mostly
pass-through revenue and, as a result, removed the $109 million
unused ceiling value of the contract from backlog during the
quarter. In addition, a $19 million contract awarded to DRC in 2012
and protested was recently canceled and, thus, de-booked from our
backlog as well. Longer term, we are encouraged by apparent
movement in Washington toward budget prioritization and policy
decision-making. As this process moves forward, we anticipate
greater market visibility and stability, leading to an improved
operating environment heading into 2014."
Company Guidance
For the second quarter 2013 the Company anticipates revenue in
the range of $71 to $74 million and earnings of $0.10 to $0.12 per
diluted share. Considering current uncertainties regarding federal
government expenditure decisions, the Company continues to refrain
from providing financial guidance for the balance of the calendar
year 2013.
Conference Call
The Company will conduct a first quarter 2013 conference call
tomorrow, May 2, 2013 at 10:00 a.m. ET. The call will be available
via telephone at 877-303-4382 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 800-585-8367, replay
passcode # 34448767, beginning at 1:00 p.m. ET on May 2, 2013.
About Dynamics Research Corporation
Dynamics Research Corporation (DRC) provides technology and
management consulting solutions focused on driving performance,
process and results for government clients. DRC offers innovative
solutions and delivers rock solid results. DRC has large company
capabilities and small company agility. 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. region. For more information please visit our
website at www.drc.com.
Safe Harbor
Certain statements contained in this news release, which are not
historical facts or are related to future plans, events, revenues
and earnings expectations, objectives and outlooks are forward
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and, by their nature, are uncertain
and subject to a number of risks and uncertainties that could
adversely affect the Company's results. We can provide no assurance
that these statements will prove to be correct. Consequently,
actual results could materially differ from these statements. For
more detailed information concerning how these risks and
uncertainties could affect the Company's financial results, please
refer to DRC's most recent forms 10-K and 10-Q and other documents
filed with the Securities and Exchange Commission. Further, the
Company is under no duty or obligation to update or revise any
forward looking statements as a result of events or new
information.
Non-GAAP Financial Information
DRC discloses adjusted earnings before interest, taxes,
depreciation and amortization, which is not a recognized measure
under GAAP. We have provided a reconciliation of adjusted EBITDA,
adjusted to conform to the definition used in our loan agreements,
to net income in Attachment IV of this announcement. When
evaluating DRC's financial results investors should evaluate each
adjustment to reported GAAP financial measures in the
reconciliation as additional information and not use this non-GAAP
financial measure as alternatives to reported GAAP financial
measures. DRC presents these financial measures because the Company
believes they provide investors with important supplemental
information to assist them in assessing DRC's financial
results.
ATTACHMENT I |
|
|
|
DYNAMICS RESEARCH
CORPORATION |
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS (unaudited) |
(in thousands, except
share and per share data) |
|
|
|
|
Three Months
Ended |
|
March
31, |
|
2013 |
2012 |
Revenue |
$ 73,562 |
$ 85,869 |
Cost of revenue |
62,684 |
72,273 |
Gross profit on revenue |
10,878 |
13,596 |
|
|
|
Selling, general and administrative
expenses |
5,737 |
6,891 |
Amortization of intangible assets |
931 |
1,031 |
Operating income |
4,210 |
5,674 |
Interest expense, net |
(2,175) |
(2,779) |
Other income, net |
67 |
135 |
Income before provision for income taxes |
2,102 |
3,030 |
Provision for income taxes |
864 |
1,239 |
Net income |
$ 1,238 |
$ 1,791 |
|
|
|
Earnings per common share |
|
|
Basic |
$ 0.12 |
$ 0.17 |
Diluted |
$ 0.12 |
$ 0.17 |
|
|
|
Weighted average shares outstanding |
|
|
Basic |
10,507,163 |
10,419,343 |
Diluted |
10,525,327 |
10,464,125 |
|
|
|
ATTACHMENT II |
|
|
|
DYNAMICS RESEARCH
CORPORATION |
CONDENSED CONSOLIDATED
BALANCE SHEETS (unaudited) |
(in
thousands) |
|
|
|
|
March 31, |
December 31, |
|
2013 |
2012 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 5 |
$ 2 |
Contract receivables, net |
56,214 |
48,112 |
Prepaid expenses and other current
assets |
4,200 |
2,538 |
Total current assets |
60,419 |
50,652 |
Noncurrent assets |
|
|
Property and equipment, net |
13,540 |
12,511 |
Goodwill |
163,205 |
163,205 |
Intangible assets, net |
13,686 |
14,617 |
Deferred tax asset |
13,235 |
14,678 |
Other noncurrent assets |
4,210 |
4,388 |
Total noncurrent assets |
207,876 |
209,399 |
Total assets |
$ 268,295 |
$ 260,051 |
|
|
|
Liabilities and stockholders' equity |
|
|
Current liabilities |
|
|
Current portion of long-term debt |
$ 15,813 |
$ 15,125 |
Accounts payable |
25,561 |
24,847 |
Accrued compensation and employee
benefits |
15,013 |
14,933 |
Deferred tax liability |
2,302 |
3,009 |
Other accrued expenses |
4,070 |
5,307 |
Total current liabilities |
62,759 |
63,221 |
Long-term liabilities |
|
|
Long-term debt |
80,833 |
74,018 |
Other long-term liabilities |
35,190 |
34,941 |
Total stockholders' equity |
89,513 |
87,871 |
Total liabilities and stockholders'
equity |
$ 268,295 |
$ 260,051 |
|
|
|
ATTACHMENT
III |
|
|
|
DYNAMICS RESEARCH
CORPORATION |
SUPPLEMENTAL
INFORMATION (unaudited) |
(dollars in
thousands) |
|
|
|
Contract revenues were earned from the
following sectors: |
|
|
|
|
|
|
Three Months
Ended |
|
March
31, |
|
2013 |
2012 |
Healthcare |
$ 15,297 |
$ 15,130 |
Homeland Security |
10,037 |
12,313 |
Research and Development |
11,372 |
11,915 |
Intelligence, Surveillance and
Reconnaissance |
10,373 |
9,511 |
Federal Regulation and Reform |
6,136 |
6,236 |
Priority Markets |
53,215 |
55,105 |
Defense Readiness, Logistics, and Command,
Control and Communication |
15,302 |
26,627 |
State Government and Other |
5,045 |
4,137 |
Total Markets |
$ 73,562 |
$ 85,869 |
|
|
|
Revenues by contract type as a percentage of
contract revenue were as follows: |
|
|
|
|
|
|
Three Months
Ended |
|
March
31, |
|
2013 |
2012 |
Fixed price, including service-type
contracts |
43% |
46% |
Time and materials |
39 |
34 |
Cost reimbursable |
18 |
20 |
|
100% |
100% |
|
|
|
Prime contract |
80% |
85% |
Sub-contract |
20 |
15 |
|
100% |
100% |
|
|
|
|
|
|
|
Three Months
Ended |
|
March
31, |
|
2013 |
2012 |
Net cash used in operating activities |
$ (6,758) |
$ (1,620) |
Capital expenditures |
$ 284 |
$ 92 |
Depreciation |
$ 900 |
$ 1,014 |
Bookings |
$ 44,703 |
$ 58,335 |
|
|
|
|
|
|
|
March 31, |
December 31, |
|
2013 |
2012 |
Total backlog |
$ 560,593 |
$ 731,676 |
Funded backlog |
$ 130,515 |
$ 163,645 |
Employees |
1,205 |
1,255 |
|
|
|
ATTACHMENT IV |
|
|
|
DYNAMICS RESEARCH
CORPORATION |
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES |
ADJUSTED EARNINGS
BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (ADJUSTED
EBITDA) (unaudited) |
(Dollars in
thousands) |
|
|
|
As presented, adjusted EBITDA is defined as
follows: |
|
|
|
Three Months
Ended |
|
March
31, |
|
2013 |
2012 |
Net income (loss) |
$ 1,238 |
$ 1,791 |
Add: |
|
|
Interest expense, net |
2,175 |
2,779 |
Provision for income taxes |
864 |
1,239 |
Depreciation expense |
900 |
1,014 |
Amortization expense |
931 |
1,031 |
Share-based compensation |
133 |
176 |
Less: amortization of deferred gain on
sale of building |
(169) |
(169) |
Adjusted EBITDA(1) |
$ 6,072 |
$ 7,861 |
Adjusted EBITDA, as a percent of revenue |
8.3% |
9.2% |
|
|
|
(1) We have calculated
adjusted EBITDA to conform with the definition of EBITDA provided
in our loan agreements to help investors understand that component
of our debt covenant calculations. We may have calculated
EBITDA differently than it is calculated by other
companies. |
CONTACT: Investors:
Chris Witty
Darrow Associates, Inc.
646.438.9385
cwitty@darrowir.com
Media:
Ilina Dimitrova
Sage Communications (for DRC)
703.531.8256
ilinad@aboutsage.com
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