DYNAMICS RESEARCH CORPORATION
REPORTS THIRD QUARTER 2008 RESULTS
--- Record Bookings, Rising Organic Growth, Strong Cash Flow and Improving Earnings
Create Positive Outlook ---
Andover, Mass.—November 3, 2008—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, 2008.
Financial Results
The Company reported revenue of $63.5 million for the third quarter of 2008 as compared with $58.3 million for the same period in 2007. Reported revenue rose 8.9%, which included organic revenue growth of 1.5%. The reported net loss for the quarter of $0.2 million, or $0.02 per diluted share, included an incremental pre-tax provision for litigation of $6.0 million, which reduced diluted earnings per share by $0.24 per diluted share. Excluding the litigation provision, net income was $2.1 million, or $0.22 per diluted share, for the third quarter of 2008 compared with $1.9 million, or $0.20 per diluted share, for the third quarter of 2007.
For the nine months ended September 30, 2008 revenue was $175.3 million compared with $173.1 million for the same period in 2007. The year-to-date net loss was $3.9 million, or $0.41 per diluted share, which included first and third quarter after-tax provisions for litigation totaling $9.1 million, or $0.94 per diluted share, net of $5.8 million in tax benefits related to these provisions. Excluding the litigation provisions in 2008 and 2007, net income would have been $5.2 million, or $0.53 per diluted share, for the nine months ended September 30, 2008, compared with $4.7 million, or $0.48 per diluted share, for the same period in 2007.
Business Highlights
“Leading indicators for top-line growth continued to be very positive this quarter,” said Jim Regan, DRC’s chairman and chief executive officer. “Our book-to-bill ratio was 1.2-to-1 for the period and 1.1-to-1 for 2008 year-to-date. As previously reported, we booked record new business contracts of $103 million during the third quarter, bringing the year-to-date total to $176 million – far surpassing all previous comparable periods. These reliable positive indicators support our expectations that the Company’s improving trend in organic growth will continue into 2009.
“The acquisition of Kadix Systems on August 1, 2008 further strengthens our position heading into 2009. Kadix, a rapidly growing, high-end management consulting firm, maintains practice specialties in organizational change, human capital, information technology, public and environmental health, and organizational development and is focused on the U.S. Department of Homeland Security (DHS), Marine Corps information technology, military medical health, and federal civilian markets. These growth markets are not expected to be materially impacted by current economic conditions – no matter who wins the presidential election.
“Cash flow was also very strong this quarter. Cash generated from operating activities was $14.6 million, as receivable days sales outstanding dropped by fifteen days during the period; we ended the quarter with nearly $11 million in cash and cash equivalents.
“In addition, I am able to report that we are nearing finalization of a settlement agreement with the U.S Attorney regarding the outstanding civil suit previously reported. Accordingly, in the third quarter we recorded an additional provision for this matter of $2.4 million, net of estimated tax benefits. This provision brings the pre-tax total to $15 million which, subject to finalization of terms and conditions, we anticipate will be the all-encompassing settlement amount. We expect the final settlement agreement to be executed in the fourth quarter of this year and will be pleased to have this matter behind us going forward.
“With another strong quarter of operating performance and record order levels, the company is very well positioned for continued revenue growth and margin expansion in 2009.”
Company Guidance
The Company’s estimate for revenue for 2008 is in the range of $242 to $245 million. Regarding earnings for the year, excluding the $0.94 per diluted share in litigation provisions taken in the first and third quarters, the Company anticipates results to be in the range of $0.76 to $0.78 per diluted share. For the fourth quarter of 2008 the Company anticipates revenue in the range of $67 to $70 million and earnings per diluted share of $0.23 to $0.25.
Conference Call
The Company will conduct a third quarter 2008 conference call on Tuesday, November 4, 2008 at 10:30 a.m. ET. The call will be available via telephone at (877) 856-1964, 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 #8708647, beginning at 1:30 p.m. ET November 4, 2008 through 11:59 p.m. ET November 11, 2008.
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; Reston, Virginia; and Fairborn, Ohio. 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 November 4, 2008.
