ANDOVER, Mass., Oct. 27, 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 third quarter ended September 30, 2010.

Financial Results

The Company reported income from continuing operations for the third quarter of 2010 of $3.0 million, or $0.30 per diluted share, up 3.8 percent from $2.9 million, or $0.29 per diluted share, for the third quarter of 2009, which included $0.05 of non-recurring tax benefits. Revenue for the third quarter of 2010 was $68.4 million compared with $67.5 million for the same period in 2009. Excluding the expiration of restricted 8(a) contracts assumed with the Kadix acquisition in 2008, third quarter 2010 revenue for the Federal business was up 5.9 percent compared with the same period a year ago. Reflecting our improved business mix and reduced overhead, operating margins rose to 7.6 percent, up 40 basis points sequentially from the second quarter and representing a 160 basis point increase over the prior year period. The Company also posted free cash flow of $15.7 million for the quarter and 61 days sales of receivables outstanding for the federal business, down from 73 days at December 31, 2009.

For the nine month period ended September 30, 2010 income from continuing operations was $8.3 million, or $0.83 per diluted share, compared with $7.0 million, or $0.71 per diluted share, for the same period in 2009. For the nine months ended September 30, 2010 revenue was $202.3 million compared with $202.8 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 nine month period rose 3.9 percent compared with the same period a year ago.

As previously reported, the Company received new business awards having a total contract value of $80 million in the third quarter, bringing the 2010 year-to-date total to $142 million. Measured on the basis of first year value, the 2010 year-to-date new business contract awards totaled $77 million, an increase of more than 30 percent over the first nine months of 2009.

Business Highlights

"DRC posted impressive results again this quarter, with solid organic revenue growth and continued margin expansion," said Jim Regan, DRC's chairman and chief executive officer. "Our performance this quarter demonstrates our strengths across the board – solid organic growth, expanded operating margins, strong cash flow, and strong leading indicators of growth in strategic markets. We're pleased with our performance, and our outlook for the future is bright."

Company Guidance

The Company's estimate for revenue for 2010 is in the range of $271 to $274 million. Regarding earnings from continuing operations for 2010, the Company anticipates results to be in the range of $1.19 to $1.22 per diluted share.  For the fourth quarter of 2010 the Company anticipates revenue in the range of $69 to $72 million and earnings from continuing operations per diluted share of $0.36 to $0.39.

Conference Call

The Company will conduct a third quarter 2010 conference call tomorrow, October 28, 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 #11328524, beginning at 1:00 p.m. ET on October 28, 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.
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
     
     
   Three Months Ended 
  September 30,
  2010 2009
Revenue  $ 68,420  $ 67,504
Cost of revenue  57,630  56,882
Gross profit  10,790  10,622
     
Selling, general and administrative expenses  5,197  5,755
Amortization of intangible assets  385  809
Operating income   5,208  4,058
Interest expense, net  (339)  (434)
Other income, net  151  264
Income from continuing operations before provision for income taxes  5,020  3,888
Provision for income taxes  2,014  992
Income from continuing operations  3,006  2,896
Effect of discontinued operations, net of tax  87  59
Net income  $ 3,093  $ 2,955
     
Earnings per share    
Basic    
Income from continuing operations  $ 0.30  $ 0.30
Effect of discontinued operations, net of tax  0.01  0.01
Net income  $ 0.31  $ 0.31
Diluted    
Income from continuing operations  $ 0.30  $ 0.29
Effect of discontinued operations, net of tax  0.01  0.01
Net income  $ 0.31  $ 0.30
     
Weighted average shares outstanding    
Basic  9,937,470  9,678,983
Diluted  10,060,980  9,983,825
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
     
     
   Nine Months Ended 
  September 30,
  2010 2009
Revenue  $ 202,312  $ 202,835
Cost of revenue  170,568  169,840
Gross profit  31,744  32,995
     
Selling, general and administrative expenses  16,233  18,277
Amortization of intangible assets  1,156  2,754
Operating income   14,355  11,964
Interest expense, net  (1,082)  (1,530)
Other income, net  234  585
Income from continuing operations before provision for income taxes  13,507  11,019
Provision for income taxes  5,185  3,992
Income from continuing operations  8,322  7,027
Effect of discontinued operations, net of tax  392  (251)
Net income  $ 8,714  $ 6,776
     
Earnings (loss) per share    
Basic    
Income from continuing operations  $ 0.84  $ 0.73
Effect of discontinued operations, net of tax  0.04  (0.03)
Net income  $ 0.88  $ 0.70
Diluted    
Income from continuing operations  $ 0.83  $ 0.71
Effect of discontinued operations, net of tax  0.04  (0.03)
Net income  $ 0.87  $ 0.69
     
Weighted average shares outstanding    
Basic  9,879,905  9,631,659
Diluted  10,057,211  9,840,605
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
     
     
  September 30, December 31,
  2010 2009
Assets    
Current assets    
Cash and cash equivalents  $ 22,539  $ 55
Contract receivables, net  52,071  72,569
Prepaid expenses and other current assets  2,965  5,702
Discontinued operations  --  2,058
Total current assets  77,575  80,384
Noncurrent assets    
Property and equipment, net  12,843  13,915
Goodwill  97,641  97,641
Intangible assets, net  2,918  4,074
Deferred tax asset  4,133  4,252
Other noncurrent assets  3,751  3,335
Total noncurrent assets  121,286  123,217
Total assets  $ 198,861  $ 203,601
     
Liabilities and stockholders' equity    
Current liabilities    
Current portion of long-term debt  $ 8,000  $ 8,000
Accounts payable  17,473  18,299
Accrued compensation and employee benefits  15,057  16,357
Deferred taxes  467  7,046
Other accrued expenses  9,329  3,708
Discontinued operations  --  186
Total current liabilities  50,326  53,596
Long-term liabilities    
Long-term debt  16,000  23,973
Other long-term liabilities  28,138  31,936
Total stockholders' equity  104,397  94,096
Total liabilities and stockholders' equity  $ 198,861  $ 203,601
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, 
  2010 2009 2010 2009
National defense and intelligence agencies  $ 45,464  $ 41,501  $ 130,360  $ 122,842
Homeland security  13,533  13,935  39,706  41,503
Federal civilian agencies  5,438  6,004  17,564  20,029
Total revenue from federal agencies  64,435  61,440  187,630  184,374
State and local government agencies  3,980  5,951  14,658  18,246
Other  5  113  24  215
Total revenue  $ 68,420  $ 67,504  $ 202,312  $ 202,835
         
Revenues by contract type as a percentage of contract revenue were as follows:    
         
  Three Months Ended Nine Months Ended
   September 30,   September 30, 
  2010 2009 2010 2009
Fixed price, including service-type contracts 45% 40% 45% 38%
Time and materials  34  41  34  43
Cost reimbursable  21  19  21  19
  100% 100% 100% 100%
         
Prime contract 73% 70% 72% 71%
Sub-contract  27  30  28  29
  100% 100% 100% 100%
         
         
  Three Months Ended Nine Months Ended
   September 30,   September 30, 
  2010 2009 2010 2009
Net cash provided by (used in) operating activities - continuing operations  $ 16,421  $ (7,938)  $ 31,471  $ 594
Capital expenditures  $ 685  $ 1,428  $ 4,266  $ 2,196
Depreciation  $ 896  $ 740  $ 2,660  $ 2,180
Bookings  $ 95,445  $ 86,424  $ 225,588  $ 208,575
         
         
  September 30, December 31,    
  2010 2009    
Total backlog  $ 426,211  $ 434,475    
Funded backlog  $ 158,046  $ 158,518    
Employees  1,393  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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