EX-99.1 2 b66358drexv99w1.htm EX-99.1 PRESS RELEASE DATED AUGUST 1, 2007 exv99w1
 

Exhibit 99.1
(NEWS RELEASE)
DYNAMICS RESEARCH CORPORATION
REPORTS SECOND QUARTER 2007 RESULTS
Andover, Mass.— August 1, 2007—Dynamics Research Corporation (Nasdaq: DRCO), a leading provider of innovative engineering, technical and information technology services and solutions to federal and state governments today announced operating results for the second quarter ended June 30, 2007.
Financial Results
The Company reported revenue of $58.0 million for the second quarter of 2007, compared with $67.3 million for the same period in 2006. Completion of the Company’s Air National Guard contract in May 2006 and lower subcontractor revenue resulting from the recent transition to the USAF Consolidated Acquisition and Professional Services (CAPS) contract accounted for approximately $11 million of the change in revenues for the second quarter of this year, compared with a year ago. Net income was $1.5 million, or $0.16 per diluted share, for the second quarter of 2007 compared with $0.2 million, or $0.02 per diluted share, for the same period a year ago.
For the six months ended June 30, 2007 revenue was $114.8 million, compared with $135.5 million for the same period in 2006. Net income was $2.6 million, or $0.27 per diluted share, for the six months ended June 30, 2007, compared with $1.6 million, or $0.17 per diluted share, for the first six months of 2006, before the effect of an accounting change.
Business Highlights
“We’ve just completed another solid quarter with results at the high end of the guidance ranges we provided three months ago,” said Jim Regan, DRC’s chairman and chief executive officer. “The quarter results reflect continued progress in business growth and increased earnings. Revenue growth of 3.2% on a pro-forma basis turned positive for the second quarter just ended. We’re now seeing the favorable effects from the strong base of contract wins received over the past year. We anticipate continued growth on these contracts will result in a positive pro-forma organic growth for the second half of 2007. From a profits viewpoint we saw continued improvement in operating margin, up eight-tenths of a point on a sequential basis.
Recognizing the effects of current Federal budgetary pressures on contract award delays we are cautious in our outlook for 2008, but remain confident in the long-term outlook for our industry,” Regan added.
Company Guidance
The Company estimates revenues for the calendar year 2007 to be in the range of $228 to $237 million and earnings per diluted share to be in the range of $0.65 to $0.72. For the third quarter of 2007 the Company anticipates revenues in the range of $58 to $60 million and earnings per diluted share of $0.18 to $0.20.

 

 

Conference Call
The Company will conduct a second quarter 2007 conference call on Thursday, August 2, 2007 at 10:30 a.m. ET. The call will be available via telephone at (800) 210-9006, 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 #8144644, beginning at 12:30 p.m. ET August 2, 2007 through 11:59 p.m. ET August 9, 2007.
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 forward-thinking solutions 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; Vienna, Virginia; and Fairborn, Ohio. For more information please visit our 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.
                     
CONTACTS:
  Investors:   David Keleher
SVP and Chief Financial Officer
978.289.1615 
dkeleher@drc.com 		      Media:   Duyen “Jen” Truong, Sage Communications (for DRC)
703.584.5645 
 
duyent@aboutsage.com

 

 

ATTACHMENT I
DYNAMICS RESEARCH CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
                 
    Three months ended  
    June 30,  
    2007     2006  
 
                
Contract revenue
   $ 57,030     $ 65,720  
Product sales
     980       1,558  
 
            
 
                
Total revenue
     58,010       67,278  
 
            
 
                
Cost of contract revenue
     47,460       58,353  
Cost of product sales
     1,200       1,256  
Selling, general and administrative expenses
     5,763       6,036  
Amortization of intangible assets
     651       703  
 
            
 
                
Total operating costs and expenses
     55,074       66,348  
 
            
 
                
Operating income
     2,936       930  
Interest expense, net
     (473 )     (566 )
Other income
     122       12  
 
            
 
                
Income before provision for income taxes
     2,585       376  
Provision for income taxes
     1,071       200  
 
            
 
                
Net income
   $ 1,514     $ 176  
 
            
 
                
Earnings per common share
                
Basic
   $ 0.16     $ 0.02  
Diluted
   $ 0.16     $ 0.02  
 
                
Weighted average shares outstanding
                
Basic
     9,317,297       9,079,011  
Diluted
     9,650,919       9,439,954  

 

 

ATTACHMENT II
DYNAMICS RESEARCH CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
                 
    Six months ended  
    June 30,  
    2007     2006  
 
                
Contract revenue
   $ 112,942     $ 132,479  
Product sales
     1,848       3,012  
 
            
 
                
Total revenue
     114,790       135,491  
 
            
 
                
Cost of contract revenue
     94,393       115,298  
Cost of product sales
     2,348       2,554  
Selling, general and administrative expenses
     11,361       12,669  
Amortization of intangible assets
     1,301       1,405  
 
            
 
                
Total operating costs and expenses
     109,403       131,926  
 
            
 
                
Operating income
     5,387       3,565  
Interest expense, net
     (929 )     (1,135 )
Other income
     74       351  
 
            
 
                
Income before provision for income taxes
     4,532       2,781  
Provision for income taxes
     1,895       1,215  
 
            
 
                
Income before cumulative effect of accounting change
     2,637       1,566  
Cumulative effect of accounting change (1)
     —       84  
 
            
 
                
Net income
   $ 2,637     $ 1,650  
 
            
 
                
Earnings per common share
                
Basic
                
Income before cumulative effect of accounting change
   $ 0.28     $ 0.17  
Cumulative effect of accounting change
     —       0.01  
 
            
Net income per common share
   $ 0.28     $ 0.18  
 
            
 
                
Diluted
                
Income before cumulative effect of accounting change
   $ 0.27     $ 0.17  
Cumulative effect of accounting change
     —       0.01  
 
            
Net income per common share
   $ 0.27     $ 0.18  
 
            
 
                
Weighted average shares outstanding
                
Basic
     9,308,558       9,057,556  
Diluted
     9,609,575       9,426,269  
 
(1)   Due to the adoption of SFAS 123R on January 1, 2006.

 

 

ATTACHMENT III
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
                 
    June 30,     December 31,  
    2007     2006  
            (Restated) (1)  
Assets
                
Cash and cash equivalents
   $ 286     $ 7,887  
Accounts receivable, net
     33,238       27,072  
Unbilled expenditures and fees on contracts in process
     33,723       36,174  
Prepaid expenses and other current assets
     3,686       2,933  
 
            
 
                
Total current assets
     70,933       74,066  
 
                
Property, plant and equipment, net
     10,673       11,509  
Goodwill
     63,055       63,055  
Intangible assets, net
     4,370       5,671  
Deferred tax asset
     1,507       1,507  
Other noncurrent assets
     3,594       4,044  
 
            
 
                
Total assets
   $ 154,132     $ 159,852  
 
            
 
                
Liabilities and stockholders’ equity
                
Accounts payable
   $ 14,051     $ 18,195  
Accrued compensation and employee benefits
     13,585       14,473  
Deferred income taxes
     8,039       9,864  
Other accrued expenses
     4,369       5,201  
 
            
 
                
Total current liabilities
     40,044       47,733  
 
                
Long-term debt
     13,027       15,000  
Other long-term liabilities
     12,673       12,805  
 
                
Stockholders’ equity
     88,388       84,314  
 
            
 
                
Total liabilities and stockholders’ equity
   $ 154,132     $ 159,852  
 
            
 
(1)   The December 31, 2006 balance sheet has been adjusted to correct certain tax liabilities, which resulted in an increase in stockholders’ equity of $549, which was more fully described in the Company’s first quarter 2007 Form 10-Q filing with the Securities and Exchange Commission.

 

 

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,  
    2007     2006     2007     2006  
National defense and intelligence agencies
   $ 45,219     $ 53,474     $ 89,850     $ 108,416  
Federal civilian agencies
     7,924       9,038       15,487       16,349  
State and local government agencies
     3,767       2,994       7,315       7,270  
Other
     120       214       290       444  
 
                        
 
   $ 57,030     $ 65,720     $ 112,942     $ 132,479  
 
                        
Revenues by contract type as a percentage of contract revenue were as follows:
                                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2007   2006   2007   2006
Time and materials
     56 %     61 %     56 %     61 %
Cost reimbursable
     22 %     20 %     22 %     20 %
Fixed price, including service-type contracts
     22 %     19 %     22 %     19 %
 
                                
 
     100 %     100 %     100 %     100 %
 
                                
 
                                
Prime contract
     57 %     69 %     56 %     68 %
Sub-contract
     43 %     31 %     44 %     32 %
 
                                
 
     100 %     100 %     100 %     100 %
 
                                
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2007     2006     2007     2006  
 
                                
Net cash provided by (used in) operating activities
   $ 11,562     $ 2,904     $ (5,753 )   $ 1,346  
 
                                
Capital expenditures
   $ 231     $ 510     $ 740     $ 1,571  
 
                                
Depreciation
   $ 751     $ 830     $ 1,576     $ 1,620  
 
                                
Bookings
   $ 56,557     $ 60,944     $ 135,119     $ 131,787  
                 
    June 30,
    2007   2006
 
                
Funded backlog
   $ 113,230     $ 128,866  
 
                
Employees
     1,501       1,610