Dynamics Research 8-K DRC Reports Third Quarter 2009 Results

Exhibit 99.1

   NewsRelease

DYNAMICS RESEARCH CORPORATION
60 FRONTAGE ROAD, ANDOVER, MASSACHUSETTS 01810-5423	TEL. 978/289-1500	www.drc.com

DRC REPORTS THIRD QUARTER 2009 RESULTS

--- Strong Bookings and Contract Awards Support Positive Outlook for 2010 ---

Andover, Mass. - October 27, 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 third quarter ended September 30, 2009.

Financial Results

The Company reported revenue of $69.2 million for the third quarter of 2009 as compared with $63.5 million for the same period in 2008.  Reported revenue rose 9 percent on a year-over-year basis, including organic revenue growth of 2.4 percent.  Net income for the third quarter of 2009 was $3.0 million, or $0.30 per diluted share, compared with a net loss of $0.2 million for the same period in 2008, which included a 2008 provision for litigation of $2.4 million, which reduced earnings by $0.24 per diluted share.  Excluding the litigation provision, net income would have been $2.1 million, or $0.22 per diluted share, for the three months ended September 30, 2008.  The results for the third quarter of 2009 included $0.05 of non-recurring tax benefits.

For the nine months ended September 30, 2009 revenue was $207.4 million compared with $175.3 million for the same period in 2008.  For the nine month period ended September 30, 2009 net income was $6.8 million, or $0.69 per diluted share, compared with a net loss of $3.9 million for the same period in 2008, which included a 2008 provision for litigation of $9.1 million, which reduced earnings by $0.94 per diluted share.  Excluding the litigation provision net income would have been $5.2 million, or $0.53 per diluted share for the nine months ended September 30, 2008.

Business Highlights

“We’re extremely pleased with the record level of bookings and contract awards this quarter. Clearly, our diversification strategy into the high growth markets we have selected is working,” said Jim Regan, DRC’s chairman and chief executive officer.  “Our mix of prime contracts, at eighty-five percent, is also a strong indicator that the company’s focus on winning large agency-wide contract vehicles is meeting with success.  While delays in contract awards this quarter have dampened our revenue expectations for 2009, strong bookings in the quarter have strengthened our outlook for 2010.  In summary, it has been another solid quarter of execution, our thirteenth consecutive quarter of earnings improvement.”

Company Guidance

The Company’s estimate for revenue for 2009 is in the range of $277 to $280 million.  Regarding earnings for 2009 the Company anticipates results to be in the range of $1.00 to $1.02 per diluted share.  For the fourth quarter of 2009 the Company anticipates revenue in the range of $69 to $72 million and earnings per diluted share of $0.31 to $0.33.

Conference Call

The Company will conduct a third quarter 2009 conference call tomorrow, October 28, 2009 at 10:00 a.m. ET.  The call will be available via telephone at (877) 856-1955, 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 #7127440, beginningat 12:00 p.m. ET October 28, 2009 through 11:59 p.m. ET November 11, 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 October 28, 2009.

ATTACHMENT I
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
	Three Months Ended
	September 30,
	2009			2008
Contract revenue	$	67,504		$	62,300
Product sales		1,733			1,191
Total revenue		69,237			63,491
Cost of contract revenue		56,882			52,256
Cost of product sales		1,491			1,271
Total cost of  revenue		58,373			53,527
Gross profit on contract revenue		10,622			10,044
Gross profit (loss) on product sales		242			(80	)
Total gross profit		10,864			9,964
Selling, general and administrative expenses		5,911			5,529
Provision for litigation		-			6,000
Amortization of intangible assets		809			718
Operating income (loss)		4,144			(2,283	)
Interest expense, net		(434	)		(424	)
Other income, net		264			39
Income (loss) before provision for income taxes		3,974			(2,668	)
Provision (benefit) for income taxes		1,019			(2,436	)
Net income (loss)	$	2,955		$	(232	)
Earnings (loss) per common share
Basic	$	0.31		$	(0.02	)
Diluted	$	0.30		$	(0.02	)
Weighted average shares outstanding
Basic		9,678,983			9,487,155
Diluted		9,983,825			9,487,155

ATTACHMENT II
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
	Nine Months Ended
	September 30,
	2009			2008
Contract revenue	$	202,835		$	170,781
Product sales		4,589			4,481
Total revenue		207,424			175,262
Cost of contract revenue		169,840			144,067
Cost of product sales		4,581			4,269
Total cost of  revenue		174,421			148,336
Gross profit on contract revenue		32,995			26,714
Gross profit on product sales		8			212
Total gross profit		33,003			26,926
Selling, general and administrative expenses		18,756			16,077
Provision for litigation		-			14,819
Amortization of intangible assets		2,754			1,737
Operating income (loss)		11,493			(5,707	)
Interest expense, net		(1,530	)		(705	)
Other income, net		585			207
Income (loss) before provision for income taxes		10,548			(6,205	)
Provision (benefit) for income taxes		3,772			(2,346	)
Net income (loss)	$	6,776		$	(3,859	)
Earnings (loss) per common share
Basic	$	0.70		$	(0.41	)
Diluted	$	0.69		$	(0.41	)
Weighted average shares outstanding
Basic		9,631,659			9,471,420
Diluted		9,840,605			9,471,420

ATTACHMENT III
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
	September 30,		December 31,
	2009		2008
Assets
Current assets
Cash and cash equivalents	$	213	$	7,111
Contract receivables, net		71,925		71,438
Prepaid expenses and other current assets		4,622		2,491
Total current assets		76,760		81,040
Noncurrent assets
Property and equipment, net		9,238		9,349
Goodwill		97,641		97,641
Intangible assets, net		4,625		7,379
Deferred tax asset		10,314		10,396
Other noncurrent assets		3,146		3,125
Total noncurrent assets		124,964		127,890
Total assets	$	201,724	$	208,930
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term debt	$	8,000	$	8,000
Accounts payable		15,659		18,095
Accrued compensation and employee benefits		17,121		13,644
Deferred taxes		9,670		2,670
Other accrued expenses		2,720		24,760
Total current liabilities		53,170		67,169
Long-term liabilities
Long-term debt		28,298		30,000
Other long-term liabilities		30,611		30,286
Total stockholders' equity		89,645		81,475
Total liabilities and stockholders' equity	$	201,724	$	208,930

ATTACHMENT IV
DYNAMICS RESEARCH CORPORATION
SUPPLEMENTAL INFORMATION (unaudited)
(dollars in thousands)
Contract revenues were earned from the following sectors:
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
National defense and intelligence agencies	$	36,874		$	39,878		$	110,609		$	117,983
Federal civilian agencies		10,731			9,592			32,572			23,024
Homeland security		13,540			6,106			40,302			9,054
State and local government agencies		5,947			6,215			18,251			18,824
Other		412			509			1,101			1,896
	$	67,504		$	62,300		$	202,835		$	170,781
Revenues by contract type as a percentage of contract revenue were as follows:
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2009			2008			2009			2008
Time and materials		41	%		49	%		43	%		50	%
Fixed price, including service-type contracts		40			33			38			31
Cost reimbursable		19			18			19			19
		100	%		100	%		100	%		100	%
Prime contract		70	%		68	%		71	%		61	%
Sub-contract		30			32			29			39
		100	%		100	%		100	%		100	%
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2009			2008			2009			2008
Net cash provided by (used in) operating activities	$	(8,219	)	$	14,564		$	(111	)	$	20,061
Capital expenditures	$	1,456		$	696		$	2,283		$	1,509
Depreciation	$	790		$	768		$	2,326		$	2,187
Bookings	$	88,547		$	73,505		$	214,026		$	201,755
	September 30,			December 31,
		2009			2008
Funded backlog	$	153,691		$	149,201
Employees		1,506			1,503

ATTACHMENT V
DYNAMICS RESEARCH CORPORATION
NON-GAAP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
	Three Months Ended			Nine Months Ended
	September 30,			September 30,
	2008			2008
Contract revenue	$	62,300		$	170,781
Product sales		1,191			4,481
Total revenue		63,491			175,262
Cost of contract revenue		52,256			144,067
Cost of product sales		1,271			4,269
Total cost of  revenue		53,527			148,336
Gross profit on contract revenue		10,044			26,714
Gross profit (loss) on product sales		(80	)		212
Total gross profit		9,964			26,926
Selling, general and administrative expenses		5,529			16,077
Provision for litigation		-			-
Amortization of intangible assets		718			1,737
Non-GAAP operating income		3,717			9,112
Interest expense, net		(424	)		(705	)
Other income, net		39			207
Non-GAAP income before provision for income taxes		3,332			8,614
Non-GAAP provision for income taxes		1,197			3,411
Non-GAAP net income	$	2,135		$	5,203
Earnings per common share
Basic	$	0.23		$	0.55
Diluted	$	0.22		$	0.53
Weighted average shares outstanding
Basic		9,487,155			9,471,420
Diluted		9,683,035			9,728,707

ATTACHMENT VI
DYNAMICS RESEARCH CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except share and per share data)
	Three Months Ended			Nine Months Ended
	September 30,			September 30,
	2008			2008
GAAP operating loss	$	(2,283	)	$	(5,707	)
Provision for litigation		6,000			14,819
Non-GAAP operating income	$	3,717		$	9,112
GAAP loss before provision for income taxes	$	(2,668	)	$	(6,205	)
Provision for litigation		6,000			14,819
Non-GAAP income before provision for income taxes	$	3,332		$	8,614
GAAP benefit for income taxes	$	(2,436	)	$	(2,346	)
Tax benefit for provision for litigation		3,633			5,757
Non-GAAP provision for income taxes	$	1,197		$	3,411
GAAP net loss	$	(232	)	$	(3,859	)
Provision for litigation, net of tax benefit		2,367			9,062
Non-GAAP net income	$	2,135		$	5,203
Earnings (loss) per common share
GAAP Basic	$	(0.02	)	$	(0.41	)
Per share effect of provision for litigation		0.25			0.96
Non-GAAP Basic	$	0.23		$	0.55
GAAP Diluted	$	(0.02	)	$	(0.41	)
Per share effect of provision for litigation		0.24			0.94
Non-GAAP Diluted	$	0.22		$	0.53
Weighted average shares outstanding
Basic (GAAP diluted for 2008)		9,487,155			9,471,420
Diluted (Non-GAAP for 2008)		9,683,035			9,728,707

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