8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)  July 31, 2008

DYNAMICS RESEARCH CORPORATION

(Exact name of registrant as specified in its charter)

Commission file number 000-02479

MASSACHUSETTS	04-2211809
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

60 FRONTAGE ROAD, ANDOVER, MASSACHUSETTS 01810-5498

(Address of principal executive offices) (Zip Code)

978-289-1500

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition

 Financial Results

 On July 31, 2008, Dynamics Research Corporation issued a press release announcing financial results as of and for the three and six months ended June 30, 2008.  A copy of the press release is attached hereto as Exhibit 99.1.

 The information in this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the company under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 Non-GAAP Financial Measures

 The attached press release contains non-GAAP financial measures. In evaluating the Company’s performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under generally accepted accounting principles in the United States (“GAAP”).

 More specifically, the Company uses the following non-GAAP financial measures: non-GAAP operating profit, non-GAAP income before income taxes, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP earnings per share.

 The Company uses these measures in its public statements. Management believes these non-GAAP measures help indicate the Company’s operating performance before charges that are considered by management to be outside on-going operating results. Accordingly, management uses these non-GAAP measures to gain a better understanding of the Company’s comparative operating performance from period-to-period and as a basis for planning and forecasting future periods. Management believes these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide useful information to investors by offering:

• the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;

• the ability to better identify trends in the Company’s underlying business and perform related trend analysis;

• a higher degree of transparency for certain expenses (particularly when a specific charge impacts multiple line items);

• a better understanding of how management plans and measures the Company’s underlying business; and

• an easier way to compare the Company’s most recent results of operations against investor and analyst financial models.

 The non-GAAP measures used by the Company excludes the provision for litigation charge and related tax effect that management believes is unusual and outside of the Company’s on-going operations for the period presented in the press release.

 These non-GAAP measures have limitations, however, because they do not include all items of income and expense that impact the Company’s operations. Management compensates for these limitations by also considering the Company’s GAAP results. The non-GAAP financial measures the Company uses are not prepared in accordance with, and should not be considered an alternative to, measurements required by GAAP, such as operating loss, net loss and loss per share, and should not be considered measures of the Company’s liquidity. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, these non-GAAP financial measures may not be comparable to similar measures reported by other companies.

Item 9.01.  Financial Statements and Exhibits.

(c)	Exhibits
	Number
	99.1	Press release dated July 31, 2008.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DYNAMICS RESEARCH CORPORATION
	(Registrant)
Date:  July 31, 2008	/s/ David Keleher
	Senior Vice President, Chief Financial Officer and Treasurer

Exhibit Index

Exhibit Number	Exhibit Name	Location
99.1	Press release dated July 31, 2008.	Furnished herewith*

__________________________

*   Exhibit 99.1 attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

EX-99.1

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 2008 RESULTS

--- Strong Bookings, Pending Kadix Acquisition Prompt Company to Raise Projections - ---

Andover, Mass.—July 31, 2008—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 second quarter ended June 30, 2008.

Financial Results

The Company reported revenue of $55.3 million and earnings of $0.17 per diluted share for the second quarter of 2008, compared with revenue of $58.0 million and earnings of $0.16 per diluted share for the same period in 2007.

For the six months ended June 30, 2008 revenue was $111.8 million compared with $114.8 million for the same period in 2007.  For the six month period ended June 30, 2008 the net loss was $3.6 million, or $0.38 per diluted share, 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 provisions in 2008 and 2007, net income would have been $3.1 million, or $0.32 per diluted share for the six months ended June 30, 2008, compared with $2.7 million, or $0.29 per diluted share for the same period in 2007.

Business Highlights

“The second quarter 2008 results mark the eighth consecutive quarter of year-over-year earnings increases,” said Jim Regan, DRC’s chairman and chief executive officer.  “We continue to transition our business mix away from lower-end small business set-aside advisory and assistance services work to higher-end value added services.  Revenue growth in the first half of the year has been strong in the military training, homeland security, and state child welfare system businesses.  The profit increase generated from this shift to a more favorable mix fully offsets the on-going loss of Advisory & Assistance Services work of approximately $5 million per quarter on the year-over-year comparisons with the prior year.”

“In the business development area we have had another very successful quarter,” Regan continued.  “Our book-to bill ratio was 1.2 to 1, and our new business wins for the quarter were $26 million in total contract value.  For the first half of the year the annual revenue value of our new business wins totaled an estimated $60 million, surpassing the $54 million total for all of 2007.”

“Looking forward the outlook for growth in the military training, homeland security, federal civilian agency and state businesses remains strong.  Further, the pending acquisition of Kadix Systems, LLC, announced today, which we plan to complete in the next few days, significantly strengthens our presence in a large high-growth market and will accelerate our market penetration with the Department of Homeland Security,” Regan concluded.

Company Guidance

The Company’s estimate for revenue for 2008, including the acquired Kadix operations from the expected date of acquisition, is in the range of $240 to $250 million.  Regarding earnings for the year, excluding the $0.70 litigation provision taken in the first quarter, the Company anticipates results to be in the range of $0.72 to $0.78 per diluted share.  For the third quarter of 2008 the Company anticipates revenue in the range of $63 to $65 million and earnings per diluted share of $0.17 to $0.20.

Conference Call

The Company will conduct a second quarter 2008 conference call on Thursday, July 31, 2008 at 4:30 p.m. ET.  The call will be available via telephone at (877) 741-4251, 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 #4038479, beginningat 7:30 p.m. ET July 31, 2008 through 11:59 p.m. ET August 7, 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 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; 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 furnished with the SEC on July 31, 2008.

CONTACTS:	Investors:	Dave Keleher	Media:	Duyen "Jen" Truong,
		SVP and Chief Financial Officer		Sage Communications (for DRC)
		978.289.1615		703.584.5645
		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
	June 30,
	2008			2007
Contract revenue	$	53,708		$	57,030
Product sales		1,585			980
Total revenue		55,293			58,010
Cost of contract revenue		45,599			47,460
Cost of product sales		1,393			1,200
Total cost of  revenue		46,992			48,660
Gross profit on contract revenue		8,109			9,570
Gross profit (loss) on product sales		192			(220	)
Total gross profit		8,301			9,350
Selling, general and administrative expenses		5,147			5,763
Amortization of intangible assets		510			651
Operating income		2,644			2,936
Interest expense, net		(142	)		(473	)
Other income, net		239			122
Income before provision for income taxes		2,741			2,585
Provision for income taxes		1,112			1,071
Net income	$	1,629		$	1,514
Earnings per common share
Basic	$	0.17		$	0.16
Diluted	$	0.17		$	0.16
Weighted average shares outstanding
Basic		9,443,347			9,317,297
Diluted		9,724,839			9,650,919

ATTACHMENT II
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
	Six Months Ended
	June 30,
	2008			2007
Contract revenue	$	108,481		$	112,942
Product sales		3,290			1,848
Total revenue		111,771			114,790
Cost of contract revenue		91,811			94,393
Cost of product sales		2,998			2,348
Total cost of  revenue		94,809			96,741
Gross profit on contract revenue		16,670			18,549
Gross profit (loss) on product sales		292			(500	)
Total gross profit		16,962			18,049
Selling, general and administrative expenses		10,548			11,361
Provision for litigation		8,819			181
Amortization of intangible assets		1,019			1,301
Operating income (loss)		(3,424	)		5,206
Interest expense, net		(281	)		(929	)
Other income, net		168			255
Income (loss) before provision for income taxes		(3,537	)		4,532
Provision for income taxes		90			1,895
Net income (loss)	$	(3,627	)	$	2,637
Earnings (loss) per common share
Basic	$	(0.38	)	$	0.28
Diluted	$	(0.38	)	$	0.27
Weighted average shares outstanding
Basic		9,430,607			9,308,558
Diluted		9,430,607			9,609,575

ATTACHMENT III
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
	June 30,		December 31,
	2008		2007
Assets
Current assets
Cash and cash equivalents	$	108	$	2,006
Contract receivables, net		64,239		63,570
Prepaid expenses and other current assets		2,723		2,508
Total current assets		67,070		68,084
Noncurrent assets
Property and equipment, net		9,576		10,182
Goodwill		63,055		63,055
Intangible assets, net		2,050		3,069
Deferred tax asset		1,484		1,484
Other noncurrent assets		4,303		4,079
Total noncurrent assets		80,468		81,869
Total assets	$	147,538	$	149,953
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	13,626	$	12,163
Accrued compensation and employee benefits		13,433		13,409
Deferred taxes		5,696		8,486
Other accrued expenses		12,727		3,078
Total current liabilities		45,482		37,136
Long-term liabilities
Long-term debt		607		7,737
Other long-term liabilities		7,931		8,576
Total stockholders' equity		93,518		96,504
Total liabilities and stockholders' equity	$	147,538	$	149,953

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,
	2008			2007			2008			2007
National defense and intelligence agencies	$	37,217		$	45,219		$	78,245		$	89,850
Federal civilian agencies		8,362			7,924			16,240			15,487
State and local government agencies		7,365			3,767			12,609			7,315
Other		764			120			1,387			290
	$	53,708		$	57,030		$	108,481		$	112,942
Revenues by contract type as a percentage of contract revenue were as follows:
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Time and materials		46	%		56	%		50	%		56	%
Cost reimbursable		21			22			20			22
Fixed price, including service-type contracts		33			22			30			22
		100	%		100	%		100	%		100	%
Prime contract		64	%		57	%		62	%		56	%
Sub-contract		36			43			38			44
		100	%		100	%		100	%		100	%
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Net cash provided by (used in) operating activities	$	3,873		$	11,562		$	5,497		$	(5,753	)
Capital expenditures	$	411		$	231		$	813		$	740
Depreciation	$	719		$	751		$	1,419		$	1,576
Bookings	$	65,200		$	56,557		$	128,250		$	135,119
	June 30,			December 31,
	2008			2007
Funded backlog	$	115,414		$	116,471
Employees		1,272			1,414

ATTACHMENT V
DYNAMICS RESEARCH CORPORATION
RECONCILIATION OF NON-GAAP MEASURES (unaudited) (continued)
(in thousands, except share and per share data)
	Six Months Ended
	June 30,
	2008			2007
Contract revenue	$	108,481		$	112,942
Product sales		3,290			1,848
Total revenue		111,771			114,790
Cost of contract revenue		91,811			94,393
Cost of product sales		2,998			2,348
Total cost of  revenue		94,809			96,741
Gross profit on contract revenue		16,670			18,549
Gross profit (loss) on product sales		292			(500	)
Total gross profit		16,962			18,049
Selling, general and administrative expenses		10,548			11,361
Amortization of intangible assets		1,019			1,301
Non-GAAP operating income		5,395			5,387
Interest expense, net		(281	)		(929	)
Other income, net		168			255
Non-GAAP income before provision for income taxes		5,282			4,713
Non-GAAP provision for income taxes		2,214			1,967
Non-GAAP net income	$	3,068		$	2,746
Non-GAAP Earnings per common share
Basic	$	0.33		$	0.29
Diluted	$	0.32		$	0.29
Weighted average shares outstanding
Basic		9,430,607			9,308,558
Diluted (Non-GAAP for 2008)		9,721,165			9,609,575

DYNAMICS RESEARCH CORPORATION
RECONCILIATION OF NON-GAAP MEASURES (unaudited)
(in thousands, except share and per share data)
	Six Months Ended
	June 30,
	2008			2007
GAAP operating income (loss)	$	(3,424	)	$	5,206
Provision for litigation		8,819			181
Non-GAAP operating income	$	5,395		$	5,387
GAAP income (loss) before provision for income taxes	$	(3,537	)	$	4,532
Provision for litigation		8,819			181
Non-GAAP income before provision for income taxes	$	5,282		$	4,713
GAAP provision (benefit) for income taxes	$	90		$	1,895
Tax benefit for provision for litigation		2,124			72
Non-GAAP provision for income taxes	$	2,214		$	1,967
GAAP net income (loss)	$	(3,627	)	$	2,637
Provision for litigation, net of tax benefit		6,695			109
Non-GAAP net income	$	3,068		$	2,746
Earnings (loss) per common share
GAAP Basic	$	(0.38	)	$	0.28
Per share effect of provision for litigation		0.71			0.01
Non-GAAP Basic	$	0.33		$	0.29
GAAP Diluted	$	(0.38	)	$	0.27
Per share effect of provision for litigation		0.70			0.02
Non-GAAP Diluted	$	0.32		$	0.29
Weighted average shares outstanding
GAAP and Non-GAAP Basic		9,430,607			9,308,558
GAAP Diluted		9,430,607			9,609,575
Non-GAAP Diluted		9,721,165			9,609,575