Dynamics Research 8-K Reports Second Quarter 2009 Results

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 SECOND QUARTER 2009 RESULTS

--- Growth in Existing Business Drives Margin Expansion, Earnings Improvement ---

Andover, Mass. - July 29, 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 second quarter ended June 30, 2009.

Financial Results

The Company reported revenue of $69.6 million for the second quarter of 2009 as compared with $55.3 million for the same period in 2008.  Reported revenue rose 26 percent on a year-over-year basis, including organic revenue growth of 4.2 percent.  Net income for the second quarter of 2009 was $2.1 million, or $0.21 per diluted share, up 31 percent from $1.6 million, or $0.17 per diluted share, for the second quarter of 2008.

For the six months ended June 30, 2009 revenue was $138.2 million compared with $111.8 million for the same period in 2008.  For the six month period ended June 30, 2009 net income was $3.8 million, or $0.39 per diluted share, compared with a net loss of $3.6 million for the same period in 2008, which included a first quarter 2008 provision for litigation of $8.8 million, which reduced earnings by $0.70 per diluted share.  Excluding the litigation provision net income would have been $3.1 million, or $0.32 per diluted share for the six months ended June 30, 2008.

Business Highlights

“Our positive financial performance, resulting from growth within our existing business base, continues to provide evidence of the Company’s improved market positioning,” said Jim Regan, DRC’s chairman and chief executive officer.  “Revenue rose four percent organically, operating profit climbed 40 percent over the second quarter of 2008, and EBITDA of $5.7 million improved 39% on a year-over-year basis, while our federal business receivable days outstanding dropped to 79 from 84 last quarter – driving stronger than anticipated free cash flow of $4.2 million.

“In addition, Federal services procurement and proposal activity is high, and we anticipate winning our share of these competitions in the coming quarter, particularly in our targeted growth markets – Homeland Security, the Federal Financial Civilian Agencies, Health Care, Human Capital Management and Training, Business Transformation, and Cyber-Security.  As the new administration executes its agenda, we look forward to further growth within these critical areas this year and next.”

Company Guidance

The Company’s estimate for revenue for 2009 is in the range of $281 to $286 million.  Regarding earnings for 2009 the Company anticipates results to be in the range of $0.94 to $0.98 per diluted share.  For the third quarter of 2009 the Company anticipates revenue in the range of $69 to $71 million and earnings per diluted share of $0.23 to $0.25.

Conference Call

The Company will conduct a second quarter 2009 conference call tomorrow, July 30, 2009 at 10:00 a.m. ET.  The call will be available via telephone at (888) 397-5350, 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 #9435179, beginningat 12:01 p.m. ET July 30, 2009 through 11:59 p.m. ET August 13, 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 July 29, 2009.

ATTACHMENT I
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
	Three Months Ended
	June 30,
	2009			2008
Contract revenue	$	68,128		$	53,708
Product sales		1,520			1,585
Total revenue		69,648			55,293
Cost of contract revenue		57,015			45,599
Cost of product sales		1,572			1,393
Total cost of  revenue		58,587			46,992
Gross profit on contract revenue		11,113			8,109
Gross profit (loss) on product sales		(52	)		192
Total gross profit		11,061			8,301
Selling, general and administrative expenses		6,388			5,147
Amortization of intangible assets		972			510
Operating income		3,701			2,644
Interest expense, net		(477	)		(142	)
Other income, net		282			239
Income before provision for income taxes		3,506			2,741
Provision for income taxes		1,456			1,112
Net income	$	2,050		$	1,629
Earnings per common share
Basic	$	0.21		$	0.17
Diluted	$	0.21		$	0.17
Weighted average shares outstanding
Basic		9,610,428			9,443,347
Diluted		9,729,721			9,724,839

ATTACHMENT II
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
	Six Months Ended
	June 30,
	2009			2008
Contract revenue	$	135,331		$	108,481
Product sales		2,856			3,290
Total revenue		138,187			111,771
Cost of contract revenue		112,958			91,811
Cost of product sales		3,090			2,998
Total cost of  revenue		116,048			94,809
Gross profit on contract revenue		22,373			16,670
Gross profit (loss) on product sales		(234	)		292
Total gross profit		22,139			16,962
Selling, general and administrative expenses		12,845			10,548
Provision for litigation		-			8,819
Amortization of intangible assets		1,945			1,019
Operating income (loss)		7,349			(3,424	)
Interest expense, net		(1,096	)		(281	)
Other income, net		321			168
Income (loss) before provision for income taxes		6,574			(3,537	)
Provision for income taxes		2,753			90
Net income (loss)	$	3,821		$	(3,627	)
Earnings (loss) per common share
Basic	$	0.40		$	(0.38	)
Diluted	$	0.39		$	(0.38	)
Weighted average shares outstanding
Basic		9,611,783			9,430,607
Diluted		9,727,387			9,430,607

ATTACHMENT III
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
	June 30,		December 31,
	2009		2008
Assets
Current assets
Cash and cash equivalents	$	6,622	$	7,111
Contract receivables, net		73,044		71,438
Prepaid expenses and other current assets		3,326		2,491
Total current assets		82,992		81,040
Noncurrent assets
Property and equipment, net		8,596		9,349
Goodwill		97,641		97,641
Intangible assets, net		5,434		7,379
Deferred tax asset		10,298		10,396
Other noncurrent assets		3,028		3,125
Total noncurrent assets		124,997		127,890
Total assets	$	207,989	$	208,930
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term debt	$	8,000	$	8,000
Accounts payable		16,611		18,095
Accrued compensation and employee benefits		16,082		13,644
Deferred taxes		3,248		2,670
Other accrued expenses		22,384		24,760
Total current liabilities		66,325		67,169
Long-term liabilities
Long-term debt		26,000		30,000
Other long-term liabilities		29,695		30,286
Total stockholders' equity		85,969		81,475
Total liabilities and stockholders' equity	$	207,989	$	208,930

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,
	2009			2008			2009			2008
National defense and intelligence agencies	$	36,542		$	37,159		$	73,735		$	78,105
Federal civilian agencies		11,044			6,798			21,841			13,432
Homeland security		13,674			1,622			26,762			2,948
State and local government agencies		6,487			7,365			12,304			12,609
Other		381			764			689			1,387
	$	68,128		$	53,708		$	135,331		$	108,481
Revenues by contract type as a percentage of contract revenue were as follows:
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Time and materials		44	%		46	%		45	%		50	%
Cost reimbursable		18			21			18			20
Fixed price, including service-type contracts		38			33			37			30
		100	%		100	%		100	%		100	%
Prime contract		71	%		64	%		71	%		62	%
Sub-contract		29			36			29			38
		100	%		100	%		100	%		100	%
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Net cash provided by operating activities	$	4,742		$	3,873		$	8,108		$	5,497
Capital expenditures	$	561		$	411		$	827		$	813
Depreciation	$	752		$	719		$	1,536		$	1,419
Bookings	$	68,087		$	65,200		$	125,479		$	128,250
	June 30,			December 31,
	2009			2008
Funded backlog	$	138,325		$	149,201
Employees		1,477			1,503

ATTACHMENT V
DYNAMICS RESEARCH CORPORATION
NON-GAAP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
	Six Months Ended
	June 30, 2008
Contract revenue	$	108,481
Product sales		3,290
Total revenue		111,771
Cost of contract revenue		91,811
Cost of product sales		2,998
Total cost of  revenue		94,809
Gross profit on contract revenue		16,670
Gross profit on product sales		292
Total gross profit		16,962
Selling, general and administrative expenses		10,548
Amortization of intangible assets		1,019
Non-GAAP operating income		5,395
Interest expense, net		(281	)
Other income, net		168
Non-GAAP income before provision for income taxes		5,282
Non-GAAP provision for income taxes		2,214
Non-GAAP net income	$	3,068
Earnings per common share
Basic	$	0.33
Diluted	$	0.32
Weighted average shares outstanding
Basic		9,430,607
Diluted		9,721,165

 

ATTACHMENT VI
DYNAMICS RESEARCH CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except share and per share data)
	Six Months Ended
	June 30, 2008
GAAP operating loss	$	(3,424	)
Provision for litigation		8,819
Non-GAAP operating income	$	5,395
GAAP loss before provision for income taxes	$	(3,537	)
Provision for litigation		8,819
Non-GAAP income before provision for income taxes	$	5,282
GAAP provision for income taxes	$	90
Tax benefit for provision for litigation		2,124
Non-GAAP provision for income taxes	$	2,214
GAAP net loss	$	(3,627	)
Provision for litigation, net of tax benefit		6,695
Non-GAAP net income	$	3,068
Earnings (loss) per common share
GAAP Basic	$	(0.38	)
Per share effect of provision for litigation		0.71
Non-GAAP Basic	$	0.33
GAAP Diluted	$	(0.38	)
Per share effect of provision for litigation		0.70
Non-GAAP Diluted	$	0.32
GAAP Weighted average shares outstanding
Basic and diluted		9,430,607
Weighted average shares outstanding
Basic and GAAP diluted		9,430,607
Non-GAAP Diluted		9,721,165

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