- Double-Digit Revenue and Earnings Growth Projected for 2009 -
ANDOVER, Mass., March 2 /PRNewswire-FirstCall/ -- 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
SOURCE Dynamics Research Corporation
For further information: Investors, Chris Witty of Darrow Associates, Inc., +1-646-438-9385, cwitty@darrowir.com; or Media, Marisa Hagerman of Sage Communications, +1-703-584-5637, marisah@aboutsage.com, both for Dynamics Research Corporation
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