DRC Reports First Quarter 2013 Results

--- Adjusted EBITDA of 8.3 Percent on Revenue of $74 Million ---

Andover, Mass. - May 1, 2013 - 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.

CONTACTS:     Investors:	Chris Witty	Media:	Ilina Dimitrova
	Darrow Associates, Inc.		Sage Communications (for DRC)
	646.438.9385		703.531.8256
	cwitty@darrowir.com		ilinad@aboutsage.com

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.