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) February 23, 2005

DYNAMICS RESEARCH CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Massachusetts

(State or Other Jurisdiction of Incorporation)

000-023479	04-2211809
(Commission File Number)	(IRS Employer Identification No.)
60 Frontage Road Andover, Massachusetts	01810
(Address of Principal Executive Offices)	(Zip Code)

(978) 475-9090

(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))

TABLE OF CONTENTS

Section 2 – Financial Information
	Item 2.02. Results of Operations and Financial Condition
Section 9 – Financial Statements and Exhibits
	Item 9.01. Financial Statements and Exhibits.
SIGNATURES
Exhibit Index
Ex-99.1 Press Release dated February 23, 2005

Section 2 – Financial Information

Item 2.02. Results of Operations and Financial Condition

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.

On February 23, 2005, Dynamics Research Corporation issued a press release announcing financial results as of and for the three months and year ended December 31, 2004. A copy of the press release is attached hereto as Exhibit 99.1.

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

     (c)      Exhibits

Number

99.1     Press release dated February 23, 2005.

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)
By:	/s/ David Keleher
	David Keleher
	Senior Vice President and Chief Financial Officer

February 23, 2005

Exhibit Index

Exhibit Number	Exhibit Name	Location
99.1	Press release dated February 23, 2005.	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

60 FRONTAGE ROAD, ANDOVER, MASSACHUSETTS 01810 TEL. 978/475-9090 FAX: 978/474-9204

DYNAMICS RESEARCH CORPORATION
REPORTS PRELIMINARY UNAUDITED
FOURTH QUARTER AND FULL YEAR 2004 RESULTS

Record Fourth Quarter Revenues up 27% Year over Year

Andover, Mass.—February 23, 2005—Dynamics Research Corporation (Nasdaq: DRCO) today reported preliminary unaudited revenues of $78.2 million and preliminary unaudited earnings from continuing operations of $2.9 million, or $0.31 per diluted share for the fourth quarter ended December 31, 2004. This compares with revenues of $61.6 million and earnings from continuing operations of $2.7 million, or $0.30 per diluted share for the same period in 2003.

Revenues for the full year 2004, which are preliminary and unaudited, were $275.7 million, compared with $244.8 million for 2003. Preliminary unaudited net income from continuing operations was $9.4 million, or $1.03 per diluted share for 2004, compared with $8.7 million, or $0.98 per diluted share for 2003.

“I am pleased to report record revenue and earnings for the fourth quarter and full year 2004. Building on our steadily improving results of the first three quarters, services revenue grew by 27% in the fourth quarter of 2004 compared with the same period in 2003 and full year services revenue increased by 13% in 2004 from 2003. We are clearly delivering on our commitment to growth as evidenced by our average annual growth rate of 22% over the past two years,” said James P. Regan, DRC chairman and chief executive officer.

Regarding 2005, Regan said, “I continue to be optimistic about the strong business trends in our industry. Our opportunities for growth in the national priority markets we serve continue to be significant. This year marks a major milestone for DRC, the 50^th anniversary of its founding in 1955. Few companies today can match our 50-year record of highly satisfied government customers. While we have undergone many changes during this proud history, one constant has remained: a commitment to building strong, enduring partnerships with our customers by providing the best possible technology-driven solutions for their success.”

DRC projects revenues for 2005 in the range of $330 to $340 million and earnings per diluted share from continuing operations of between $1.20 and $1.30 for the year. For the first quarter of the year the company anticipates revenues in the $73 to $75 million range and earnings per diluted share from continuing operations of $0.20 to $0.22.

The company awaits the completion of its financial statements and internal control audits. Accordingly, the results reported today are unaudited and considered preliminary, as they are subject to changes that may be identified in connection with or during completion of the audits.

The company will conduct a conference call tomorrow, February 24, 2005 at 8:30 a.m. ET to discuss its preliminary unaudited 2004 results and 2005 outlook in more detail. The call will be available via telephone at (800) 946-0705, and accessible via Web cast at www.drc.com. A replay of the call will be available on the company’s Web site at www.drc.com and by telephone at (888) 203-1112, passcode #124790, beginning at 10:30 a.m. ET, February 24, 2005 through 11:59 p.m. March 3, 2005.

CONTACT:  Elise Caffrey, Vice President & Treasurer
(978) 475-9090, Ext. 1309

About Dynamics Research Corporation

Dynamics Research Corporation is an innovative solutions provider that partners with its customers in government and commercial sectors to apply proven processes and technologies. DRC’s solutions include design, development, operation and maintenance of business intelligence systems, business transformation services, defense program acquisition management services, training and performance support systems and services, automated case management systems and information technology infrastructure services. DRC strives to apply these processes and technologies to enhance the performance and cost effectiveness of its customers’ mission critical systems. For additional information about DRC please visit the website at 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.

###

CONTACT:  Elise Caffrey, Vice President & Treasurer
(978) 475-9090, Ext. 1309

ATTACHMENT I.

DYNAMICS RESEARCH CORPORATION

RESULTS OF OPERATIONS (unaudited)

(in thousands, except share and per share data)

	Three months ended
	December 31,
	2004			2003
Contract revenue	$	76,273		$	60,036
Product sales		1,964			1,596
Total revenue		78,237			61,632
Cost of contract revenue		63,492			49,258
Cost of product sales		1,440			1,223
Selling, engineering and administrative expenses		6,741			6,040
Amortization of intangible assets		989			423
Total operating costs and expenses		72,662			56,944
Operating income		5,575			4,688
Interest expense, net		(1,092	)		(158	)
Other income		(125	)		323
Income from continuing operations before provision for income taxes		4,358			4,853
Provision for income taxes		1,496			2,175
Income from continuing operations		2,862			2,678
Loss from discontinued operations, net of taxes		—			(275	)
Loss on disposal of discontinued operations, net of taxes		—			(115	)
Net income	$	2,862		$	2,288
NET INCOME PER COMMON AND EQUIVALENT SHARE
Basic
Income from continuing operations	$	0.33		$	0.32
Loss from discontinued operations		—			(0.05	)
Net income per common share	$	0.33		$	0.27
Diluted
Income from continuing operations	$	0.31		$	0.30
Loss from discontinued operations		—			(0.04	)
Net income per common share	$	0.31		$	0.26
Weighted average shares outstanding
Weighted average shares outstanding — basic		8,601,489			8,328,003
Dilutive effect of options		547,209			721,754
Weighted average shares outstanding — diluted		9,148,698			9,049,757

ATTACHMENT II.

DYNAMICS RESEARCH CORPORATION

RESULTS OF OPERATIONS

(in thousands, except share and per share data)

	Year ended
	December 31,
	2004			2003
	(unaudited)			(audited)
Contract revenue	$	268,634		$	237,876
Product sales		7,072			6,932
Total revenue		275,706			244,808
Cost of contract revenue		227,509			199,647
Cost of product sales		5,214			5,100
Selling, engineering and administrative expenses		23,152			22,948
Amortization of intangible assets		2,324			1,724
Total operating costs and expenses		258,199			229,419
Operating income		17,507			15,389
Interest expense, net		(2,225	)		(854	)
Other income		360			454
Income from continuing operations before provision for income taxes		15,642			14,989
Provision for income taxes		6,269			6,334
Income from continuing operations		9,373			8,655
Loss from discontinued operations, net of taxes		—			(1,635	)
Loss on disposal of discontinued operations, net of taxes		—			(348	)
Net income	$	9,373		$	6,672
NET INCOME PER COMMON AND EQUIVALENT SHARE
Basic
Income from continuing operations	$	1.10		$	1.05
Loss from discontinued operations, net of taxes		—			(0.24	)
Net income per common share	$	1.10		$	0.81
Diluted
Income from continuing operations	$	1.03		$	0.98
Loss from discontinued operations, net of taxes		—			(0.22	)
Net income per common share	$	1.03		$	0.76
Weighted average shares outstanding
Weighted average shares outstanding — basic		8,499,013			8,226,225
Dilutive effect of options		563,618			615,818
Weighted average shares outstanding — diluted		9,062,631			8,842,043

ATTACHMENT III.

DYNAMICS RESEARCH CORPORATION

CONDENSED BALANCE SHEETS

(in thousands)

	December 31,
	2004		2003
	(unaudited)		(audited)
Assets
Cash and cash equivalents	$	925	$	2,724
Accounts receivable, net		45,978		28,251
Unbilled expenditures and fees on contracts in process		50,322		34,257
Prepaid expenses and other current assets		5,668		2,145
Total current assets		102,893		67,377
Property, plant and equipment, net		22,139		20,672
Deferred income tax asset		—		2,337
Goodwill		63,055		26,711
Intangible assets, net		11,519		2,343
Other noncurrent assets		5,528		1,630
Total assets	$	205,134	$	121,070
Liabilities and stockholders’ equity
Current portion of long-term debt	$	8,357	$	500
Notes payable and revolver		10,000		8,500
Current deferred income taxes		15,418		9,698
Accounts payable		21,778		13,351
Accrued payroll and employee benefits		17,914		15,657
Other accrued expenses		4,447		2,371
Current liabilities of discontinued operations		422		778
Total current liabilities		78,336		50,855
Long-term debt		51,485		7,750
Accrued pension liability		11,336		12,030
Deferred income taxes		591		—
Other long-term liabilities		2,068		1,386
Long-term liabilities of discontinued operations		—		398
Stockholders’ equity		61,318		48,651
Total liabilities and stockholders’ equity	$	205,134	$	121,070

ATTACHMENT IV.

DYNAMICS RESEARCH CORPORATION

SUPPLEMENTAL INFORMATION (unaudited)

(dollars in thousands)

	Three Months Ended				Year ended
	December 31,				December 31,
	2004		2003		2004		2003
Capital expenditures (total company)	$	1,213	$	2,747	$	4,544	$	8,163
Depreciation
Continuing operations	$	976	$	759	$	3,624	$	3,007
Total company	$	976	$	759	$	3,624	$	3,060
Bookings
Continuing operations	$	92,061	$	74,506	$	282,260	$	255,756
Total company	$	92,061	$	74,506	$	282,260	$	257,697
Funded backlog (total company)					$	165,017	$	123,895

	December 31,
	2004		2003
Employees (total company)		1,960		1,714