DRCO Dynamics Research Corp. (MM)

Dynamics Research Corporation Reports Record Fourth Quarter and Full Year 2003 Results Quarterly revenues up 22% year over year ANDOVER, Mass., Feb. 24 /PRNewswire-FirstCall/ -- Dynamics Research Corporation today reported revenues of $61.6 millionand earnings from continuing operations of $2.7 million, or $0.30 per diluted share, for the fourth quarter ended December 31, 2003. This compares with revenues of $50.6 million and earnings from continuing operations of $1.7 million, or $0.20 per diluted share, for the same period in 2002. Revenues for the full year 2003 were $244.8 million, compared with $192.6 million for 2002. Net income from continuing operations was $8.7 million, or $0.98 per diluted share, for 2003, compared with $7.4 million, or $0.83 per diluted share, for 2002. For the fourth quarter, the company reported net income of $2.3 million, or $0.26 per diluted share, which includes a loss from discontinued operations of $0.4 million, or $0.04 per diluted share, reflecting the accrual of remaining Encoder facility lease expenses. For the full year 2003, net income was $6.7 million, or $0.76 per diluted share. "In addition to delivering record revenue and earnings for the quarter and the year, I am pleased to report that bookings and backlog are also at historically high levels," said James P. Regan, DRC chairman and chief executive officer. "Equally as important as our top line growth was the margin improvement we were able to achieve while we continued to further invest in business development functions, administrative systems and processes. Operating margin for the fourth quarter was 7.6%, the highest in my four years at the company. I am pleased with these results and our momentum. We are poised to carry it forward into 2004," Regan added. Regarding 2004, Regan said, "the fundamentals of our industry remain strong and the long-term outlook is bright. There is continued momentum in DRC's work relating to national priority markets -- national defense, public safety/homeland security and legislated citizen services. These markets, we expect, will be funded regardless of economic cycle or administration." DRC projects revenues for 2004 in the range of $260 to $268 million and earnings per diluted share fromcontinuing operations of between $1.02 and $1.08 for the year, excluding potential effects of possible future acquisitions. For the first quarter of the year the company anticipates revenues in the $62 to $64 million range and earnings per diluted share from continuing operations of $0.22 to $0.24. The company will conduct a conference call tomorrow, February 25, 2004 at 8:30 a.m. ET to discuss its 2003 results and 2004 outlook in more detail. The call will be available via telephone at (800) 915-4836, and accessible via Web cast at http://www.drc.com/. A replay of the call will be available on the company's Web site at http://www.drc.com/ and by telephone at (800) 428-6051, passcode #338164, beginning at 10:30 a.m. ET, February 25, 2004 through 11:59 p.m. March 3, 2004. About Dynamics Research Corporation Dynamics Research Corporation is an innovative solutions provider that partners with its customers in government and commercial sectors to apply proven processes and technologies. DRC delivers engineering, logistics, training, simulation & modeling and information technology services and precision manufactured products 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, Treasurer & Director, Investor Relations (978) 475-9090, Ext. 1309 ATTACHMENT I. DYNAMICS RESEARCH CORPORATION RESULTS OF OPERATIONS (unaudited) (in thousands, except share and per share data) Three months ended December 31, 2003 2002 Contract revenue $60,036 $48,937 Product sales 1,596 1,655 Total revenue 61,632 50,592 Cost of contract revenue 49,258 40,580 Cost of product sales 1,223 1,402 Selling, engineering and administrative expenses 6,040 5,357 Amortization of intangible assets 423 171 Total operating costs and expenses 56,944 47,510 Operating income 4,688 3,082 Interest expense, net (158) (235) Other income 323 7 Income from continuingoperations before provision for income taxes 4,853 2,854 Provision for income taxes 2,175 1,170 Income from continuing operations 2,678 1,684 Loss from discontinued operations, net of taxes (275) (534) Loss on disposal of discontinued operations, net of taxes (115) - Net income $2,288 $1,150 NET INCOME PER COMMON AND EQUIVALENT SHARE Basic Income from continuing operations $0.32 $0.21 Loss from discontinued operations (0.05) (0.07) Net income per common share $0.27 $0.14 Diluted Income from continuing operations $0.30 $0.20 Loss from discontinued operations (0.04) (0.07) Net income per common share $0.26 $0.13 Weighted average shares outstanding Weighted average shares outstanding - basic 8,328,003 8,066,307 Dilutive effect of options 721,754 548,692 Weighted average shares outstanding - diluted 9,049,757 8,614,999 ATTACHMENT II. DYNAMICS RESEARCH CORPORATION RESULTS OF OPERATIONS (unaudited) (in thousands, except share and per share data) Year ended December 31, 2003 2002 Contract revenue $237,876 $184,994 Product sales 6,932 7,616 Total revenue 244,808 192,610 Cost of contract revenue 199,647 156,441 Cost of product sales 5,100 5,238 Selling, engineering and administrative expenses 22,948 17,910 Amortization of intangible assets 1,724 374 Total operating costs and expenses 229,419 179,963 Operating income 15,389 12,647 Interest expense, net (854) (421) Other income 454 67 Income from continuing operations before provision for income taxes 14,989 12,293 Provision for income taxes 6,334 4,936 Income from continuing operations 8,655 7,357 Loss from discontinued operations (1,635) (1,124) Loss on disposal of discontinued operations (348) - Net income $6,672 $6,233 NET INCOME PER COMMON AND EQUIVALENT SHARE Basic Income from continuing operations $1.05 $0.92 Loss from discontinued operations, net of taxes (0.24) (0.14) Net income per common share $0.81 $0.78 Diluted Income from continuing operations $0.98 $0.83 Loss from discontinued operations, net of taxes (0.22) (0.13) Net income per common share $0.76 $0.70 Weighted average shares outstanding Weighted average shares outstanding - basic 8,226,225 7,989,793 Dilutive effect of options 615,818 887,376 Weighted average shares outstanding - diluted 8,842,043 8,877,169 ATTACHMENT III. DYNAMICS RESEARCH CORPORATION CONDENSED BALANCE SHEETS (unaudited) (in thousands) December 31, 2003 2002 Assets Cash and cash equivalents $2,724 $1,076 Receivables 28,251 29,819 Unbilled expenditures and fees on contracts in process 31,847 26,614 Prepaid expenses and other current assets 2,145 1,727 Current assets of discontinued operations - 3,432 Total current assets 64,967 62,668 Property, plant and equipment, net 20,672 15,608 Deferred income tax asset 2,337 1,559 Goodwill 26,711 26,169 Intangible assets, net 2,343 4,066 Other noncurrent assets 1,630 1,275 Noncurrent assets of discontinued operations - 331 Total assets $118,660 $111,676 Liabilities and stockholders' equity Current portion of long-term debt $500 $500 Notes payable and revolver 8,500 14,644 Current deferred income taxes 9,698 6,524 Accounts payable 10,941 12,334 Accrued payroll and employee benefits 15,657 11,898 Other accrued expenses 2,371 3,531 Current liabilities of discontinued operations 778 1,009 Total current liabilities 48,445 50,440 Long-term debt 7,750 8,250 Accrued pension liability 12,030 11,778 Other long-term liabilities 1,386 1,399 Long-term liabilities of discontinued operations 398 - Stockholders' equity 48,651 39,809 Total liabilities and stockholders' equity $118,660 $111,676 ATTACHMENT IV. DYNAMICS RESEARCH CORPORATION SUPPLEMENTAL INFORMATION (unaudited) (dollars in thousands) Three Months Ended Year ended December 31, December 31, 2003 2002 2003 2002 Capital expenditures - continuing operations $2,747 $1,016 $8,163 $3,347 Capital expenditures - total company $2,747 $1,063 $8,163 $3,505 Depreciation - continuing operations $759 $945 $3,007 $3,192 Depreciation - total company $759 $982$3,060 $3,415 Bookings - continuing operations $74,506 $50,943 $255,756 $171,248 Bookings - total company $74,506 $52,890 $257,697 $179,342 Funded backlog - continuing operations $123,895 $111,070 Funded backlog - total company $123,895 $112,025 December 31, 2003 2002 Employees - continuing operations 1,714 1,765 Employees - total company 1,714 1,858 DATASOURCE: Dynamics Research Corporation CONTACT: Elise Caffrey, Treasurer & Director, Investor Relations of Dynamics Research Corporation, +1-978-475-9090, Ext. 1309 Web site: http://www.drc.com/

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