ex99-1.htm

Exhibit 99.1

NewsRelease

60 FRONTAGE ROAD, ANDOVER, MASSACHUSETTS 01810 TEL. 800-522-4321 FAX: 978-474-9204

DYNAMICS RESEARCH CORPORATION

REPORTS THIRD QUARTER 2007 RESULTS

Andover, Mass.— October 31, 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 third quarter ended September 30, 2007.

Financial Results

The Company reported revenue of $58.3 million for the third quarter of 2007, compared with $63.2 million for the same period in 2006. Revenues for the third quarter of 2006 included approximately $7 million of subcontractor revenue, which is not reflected in results for the third quarter of this year as a result of the recent transition to the USAF Consolidated Acquisition and Professional Services (CAPS) contract. Absent the effect of this transition, revenues for the third quarter of this year grew by 4.0 percent on a year-over-year comparison. Net income was $1.9 million, or $0.20 per diluted share, for the third quarter of 2007 compared with $0.9 million, or $0.10 per diluted share, for the same period a year ago.

For the nine months ended September 30, 2007 revenue was $173.1 million, compared with $198.7 million for the same period in 2006. Lower subcontractor revenues related to the transition to the CAPS contract and the completion of the Air National Guard contract in May 2006 accounted for $21 million and $6 million, respectively, of the change in revenue from 2006 to 2007. Net income was $4.6 million, or $0.47 per diluted share, for the nine months ended September 30, 2007, compared with $2.6 million, or $0.26 per diluted share, for the first nine months of 2006, before the effect of an accounting change.

Business Highlights

“We’re pleased with our continued progressive improvement in revenue and earnings growth, resulting from a strong flow of new contract wins and indirect cost reductions taken over the past year. While we are pleased with the progress we have made, we are now looking to build further on the strength of our improving financial results. With the objective to improve organic growth, we have focused our business development activities on selected federal market opportunities, which will be 2008 spending priorities for our customers. Nevertheless, we remain cautious in our outlook due to continued federal spending constraints and uncertainties,” said Jim Regan, DRC’s chairman and chief executive officer.

Company Guidance

For the fourth quarter of 2007 the Company anticipates revenues in the range of $55 to $58 million and earnings per diluted share of $0.20 to $0.23. The Company estimates revenues for the calendar year 2007 to be in the range of $228 to $231 million and earnings per diluted share to be in the range of $0.68 to $0.70.

Conference Call

The Company will conduct a third quarter 2007 conference call on Thursday, November 1, 2007 at 11:00 a.m. ET. The call will be available via telephone at (800) 500-3170, 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 #4644659, beginningat 2:00 p.m. ET November 1, 2007 through 11:59 p.m. ET November 8, 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 Media: Duyen “Jen” Truong, Sage Communications (for DRC)

SVP and Chief Financial Officer 703.584.5645

978.289.1615

dkeleher@drc.com duyent@aboutsage.com

ATTACHMENT I

DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)


	Three Months Ended
	September 30,
	2007			2006
Contract revenue	$	57,180		$	61,547
Product sales		1,148			1,614
Total revenue		58,328			63,161

Cost of contract revenue		47,808			53,756
Cost of product sales		1,212			1,217
Selling, general and administrative expenses		5,262			5,559
Amortization of intangible assets		650			702
Total operating costs and expenses		54,932			61,234

Operating income		3,396			1,927
Interest expense, net		(373	)		(558	)
Other income		323			78
Income before provision for income taxes		3,346			1,447
Provision for income taxes		1,427			526
Net income	$	1,919		$	921

Earnings per common share
Basic	$	0.21		$	0.10
Diluted	$	0.20		$	0.10

Weighted average shares outstanding
Basic		9,354,332			9,133,552
Diluted		9,702,910			9,395,360

ATTACHMENT II

DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)


	Nine Months Ended
	September 30,
	2007			2006

Contract revenue	$	170,122		$	194,026
Product sales		2,996			4,626
Total revenue		173,118			198,652

Cost of contract revenue		142,201			169,054
Cost of product sales		3,560			3,771
Selling, general and administrative expenses		16,623			18,228
Amortization of intangible assets		1,951			2,107
Total operating costs and expenses		164,335			193,160

Operating income		8,783			5,492
Interest expense, net		(1,302	)		(1,693	)
Other income		397			429
Income before provision for income taxes		7,878			4,228
Provision for income taxes		3,322			1,741
Income before cumulative effect of accounting change		4,556			2,487
Cumulative effect of accounting change ⁽¹⁾		-			84
Net income	$	4,556		$	2,571

Earnings per common share
Basic
Income before cumulative effect of accounting change	$	0.49		$	0.27
Cumulative effect of accounting change		-			0.01
Net income per common share	$	0.49		$	0.28

Diluted
Income before cumulative effect of accounting change	$	0.47		$	0.26
Cumulative effect of accounting change		-			0.01
Net income per common share	$	0.47		$	0.27

Weighted average shares outstanding
Basic		9,326,367			9,079,601
Diluted		9,644,760			9,424,170


(1) Due to the adoption of SFAS 123R on January 1, 2006.

ATTACHMENT III

DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)


	September 30,		December 31,
	2007		2006
			(Restated) ⁽¹⁾
Assets
Cash and cash equivalents	$	1,323	$	7,887
Accounts receivable, net		34,676		27,072
Unbilled expenditures and fees on contracts in process		31,496		36,174
Prepaid expenses and other current assets		3,543		2,933
Total current assets		71,038		74,066
Property and equipment, net		10,400		11,509
Goodwill		63,055		63,055
Intangible assets, net		3,720		5,671
Deferred tax asset		1,680		1,507
Other noncurrent assets		3,963		4,044
Total assets	$	153,856	$	159,852

Liabilities and stockholders' equity
Accounts payable	$	13,060	$	18,195
Accrued compensation and employee benefits		14,727		14,473
Deferred income taxes		6,748		9,864
Other accrued expenses		4,959		5,201
Total current liabilities		39,494		47,733
Long-term debt		11,748		15,000
Other long-term liabilities		11,634		12,805
Stockholders' equity		90,980		84,314
Total liabilities and stockholders' equity	$	153,856	$	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						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
National defense and intelligence agencies	$	45,511		$	50,579		$	135,360		$	158,995
Federal civilian agencies		7,921			6,634			23,408			22,983
State and local government agencies		3,522			3,966			10,837			11,236
Other		226			368			517			812
	$	57,180		$	61,547		$	170,122		$	194,026


Revenues by contract type as a percentage of contract revenue were as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Time and materials		59	%		64	%		57	%		62	%
Cost reimbursable		21			17			22			19
Fixed price, including service-type contracts		20			19			21			19
		100	%		100	%		100	%		100	%

Prime contract		54	%		67	%		55	%		68	%
Sub-contract		46			33			45			32
		100	%		100	%		100	%		100	%


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Net cash provided by (used in) operating activities	$	2,526		$	2,026		$	(3,227	)	$	3,372
Capital expenditures	$	445		$	492		$	1,185		$	2,063
Depreciation	$	718		$	805		$	2,294		$	2,425
Bookings	$	43,705		$	60,205		$	178,824		$	191,992


	September 30,
	2007			2006
Funded backlog	$	98,610		$	97,911
Employees		1,496			1,541