DRC Reports Second Quarter 2010 Results

ANDOVER, Mass., July 28, 2010 (GLOBE NEWSWIRE) -- 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 second quarter ended June 30, 2010.

Financial Results

The Company reported income from continuing operations for the second quarter of 2010 of $2.6 million, or $0.26 per diluted share, up 18.6 percent from $2.2 million, or $0.22 per diluted share, for the second quarter of 2009. Revenue for the second quarter of 2010 was $65.3 million compared with $68.1 million for the same period in 2009. Excluding the expiration of restricted 8(a) contracts assumed with the Kadix acquisition in 2008, second quarter 2010 revenue for the Federal business was down 0.8% compared with the same period a year ago. 

For the six month period ended June 30, 2010 income from continuing operations was $5.3 million, or $0.53 per diluted share, compared with $4.1 million, or $0.42 per diluted share, for the same period in 2009. For the six months ended June 30, 2010 revenue was $133.9 million compared with $135.3 million for the same period in 2009. Excluding the expiration of restricted 8(a) contracts assumed with the Kadix acquisition in 2008, revenue for the Federal business during the six month period rose 3.4% compared with the same period a year ago.

Business Highlights

"We remain well positioned in growth sectors of the Federal market and are aggressively pursuing new business in these target markets, as evidenced by $63 million in new business contract awards for the first half of the year and $377 million in submitted new business bids awaiting award – a record for DRC. Although top line growth is lower than we had anticipated primarily due to insourcing and a delay in contract awards, the prospects for accelerated revenue growth are strong. We also are pleased with the nearly one-and-a-half points of operating margin expansion reported this quarter versus a year ago," said Jim Regan, DRC's chairman and chief executive officer. "We continued to generate solid positive cash flow, as our federal business receivables days outstanding dropped to 65, down another three days from the first quarter of 2010." 

In other matters the Company reported the sale of the Metrigraphics unit effective July 19, 2010, which was classified as a discontinued operation for financial reporting purposes as of December 31, 2009. The financial effect of the sale is reflected in second quarter 2010 operating results.

Also, the Company noted that an agreement in principle had been reached regarding an outstanding Fair Labor Standards Act claim, the effect of which was accrued on the Company's June 30, 2010 balance sheet. 

Company Guidance

The Company's estimate for revenue for 2010 is in the range of $271 to $278 million. Regarding earnings from continuing operations for 2010, the Company anticipates results to be in the range of $1.18 to $1.24 per diluted share.  For the third quarter of 2010 the Company anticipates revenue in the range of $67 to $69 million and earnings from continuing operations per diluted share of $0.27 to $0.30.

Conference Call

The Company will conduct a second quarter 2010 conference call tomorrow, July 29, 2010 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) 642-1687, passcode #87022919, beginning at 1:00 p.m. ET on July 29, 2010.

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 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.
ATTACHMENT I    
     
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
     
   
  Three Months Ended  June 30,
  2010 2009
Revenue  $ 65,308  $ 68,128
Cost of revenue  55,111  57,015
Gross profit  10,197  11,113
     
Selling, general and administrative expenses  5,080  6,211
Amortization of intangible assets  386  972
Operating income   4,731  3,930
Interest expense, net  (367)  (477)
Other income (expense), net  (30)  282
Income from continuing operations before provision for income taxes  4,334  3,735
Provision for income taxes  1,755  1,561
Income from continuing operations  2,579  2,174
Effect of discontinued operations, net of tax  173  (124)
Net income  $ 2,752  $ 2,050
     
Earnings per share (1)    
Basic    
Income from continuing operations  $ 0.26  $ 0.23
Effect of discontinued operations, net of tax  0.02  (0.01)
Net income  $ 0.28  $ 0.21
Diluted    
Income from continuing operations  $ 0.26  $ 0.22
Effect of discontinued operations, net of tax  0.02  (0.01)
Net income  $ 0.27  $ 0.21
     
Weighted average shares outstanding    
Basic  9,896,738  9,610,428
Diluted  10,070,809  9,729,721
     
(1) Totals may not add due to rounding    
     
ATTACHMENT II    
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
     
   
  Six Months Ended  June 30,
  2010 2009
Revenue  $ 133,892  $ 135,331
Cost of revenue  112,938  112,958
Gross profit  20,954  22,373
     
Selling, general and administrative expenses  11,036  12,522
Amortization of intangible assets  771  1,945
Operating income   9,147  7,906
Interest expense, net  (743)  (1,096)
Other income, net  83  321
Income from continuing operations before provision for income taxes  8,487  7,131
Provision for income taxes  3,171  3,000
Income from continuing operations  5,316  4,131
Effect of discontinued operations, net of tax  305  (310)
Net income  $ 5,621  $ 3,821
     
Earnings per share    
Basic    
Income from continuing operations  $ 0.54  $ 0.43
Effect of discontinued operations, net of tax  0.03  (0.03)
Net income  $ 0.57  $ 0.40
Diluted    
Income from continuing operations  $ 0.53  $ 0.42
Effect of discontinued operations, net of tax  0.03  (0.03)
Net income  $ 0.56  $ 0.39
     
Weighted average shares outstanding    
Basic  9,858,538  9,611,783
Diluted  10,042,916  9,727,387
     
ATTACHMENT III    
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
     
     
  June 30, 2010 December 31, 2009
Assets    
Current assets    
Cash and cash equivalents  $ 7,411  $ 55
Contract receivables, net  61,928  72,569
Prepaid expenses and other current assets  5,104  5,702
Discontinued operations  2,026  2,058
Total current assets  76,469  80,384
Noncurrent assets    
Property and equipment, net  13,053  13,915
Goodwill  97,641  97,641
Intangible assets, net  3,303  4,074
Deferred tax asset  4,129  4,252
Other noncurrent assets  3,057  3,335
Total noncurrent assets  121,183  123,217
Total assets  $ 197,652  $ 203,601
     
Liabilities and stockholders' equity    
Current liabilities    
Current portion of long-term debt  $ 8,000  $ 8,000
Accounts payable  14,986  18,299
Accrued compensation and employee benefits  15,426  16,357
Deferred taxes  4,638  7,046
Other accrued expenses  4,381  3,708
Discontinued operations  300  186
Total current liabilities  47,731  53,596
Long-term liabilities    
Long-term debt  18,000  23,973
Other long-term liabilities  30,988  31,936
Total stockholders' equity  100,933  94,096
Total liabilities and stockholders' equity  $ 197,652  $ 203,601
 
ATTACHMENT IV
         
DYNAMICS RESEARCH CORPORATION
SUPPLEMENTAL INFORMATION (unaudited)
(dollars in thousands)
         
         
Contract revenues were earned from the following sectors:    
         
  Three Months Ended Six Months Ended
   June 30,   June 30, 
  2010 2009 2010 2009
National defense and intelligence agencies  $ 40,406  $ 39,722  $ 84,481  $ 78,783
Homeland security  13,209  13,674  26,140  26,762
Federal civilian agencies  6,406  7,864  12,573  16,793
Total revenue from federal agencies  60,021  61,260  123,194  122,338
State and local government agencies  5,285  6,487  10,679  12,304
Other  2  381  19  689
Total revenue  $ 65,308  $ 68,128  $ 133,892  $ 135,331
         
Revenues by contract type as a percentage of contract revenue were as follows:    
         
  Three Months Ended Six Months Ended
   June 30,   June 30, 
  2010 2009 2010 2009
Fixed price, including service-type contracts 44% 38% 45% 37%
Time and materials  35  44  34  45
Cost reimbursable  21  18  21  18
  100% 100% 100% 100%
         
Prime contract 72% 71% 72% 71%
Sub-contract  28  29  28  29
  100% 100% 100% 100%
         
         
  Three Months Ended Six Months Ended
   June 30,   June 30, 
  2010 2009 2010 2009
Net cash provided by operating activities - continuing operations  $ 1,963  $ 5,086  $ 15,050  $ 8,532
Capital expenditures  $ 1,111  $ 545  $ 3,581  $ 768
Depreciation  $ 878  $ 703  $ 1,764  $ 1,440
Bookings  $ 52,922  $ 66,324  $ 130,143  $ 122,151
         
         
  June 30, December 31,    
  2010 2009    
Total backlog  $ 362,304  $ 434,475    
Funded backlog  $ 150,609  $ 158,518    
Employees  1,369  1,469    
CONTACT:  Darrow Associates, Inc.          Investors:          Chris Witty          646.438.9385          cwitty@darrowir.com          Sage Communications (for DRC)          Media:          Duyen "Jen" Truong          703.584.5645          duyent@aboutsage.com

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