EX-99.1 2 ex99-1.htm FOURTH QUARTER 2008 RESULTS NEWS RELEASE ex99-1.htm
 
 
Exhibit 99.1
   NewsRelease
DYNAMICS RESEARCH CORPORATION
 
60 FRONTAGE ROAD, ANDOVER, MASSACHUSETTS 01810-5423                                    TEL. 978/289-1500                                        www.drc.com
 

DYNAMICS RESEARCH CORPORATION
REPORTS FOURTH QUARTER AND YEAR-END 2008 RESULTS

--- Double-Digit Revenue and Earnings Growth Projected for 2009 ---


Andover, Mass. - March 2, 2009 - 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 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 (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 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
   
cwitty@darrowir.com
  
marisah@aboutsage.com
 

 
 
 

 
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