EX-99.1 2 b62921drexv99w1.htm EX-99.1 PRESS RELEASE DATED NOVEMBER 1, 2006 exv99w1
 

Exhibit 99.1
 
     
(DYNAMICS RESEARCH LOGO)
  NewsRelease
         
60 FRONTAGE ROAD, ANDOVER, MASSACHUSETTS 01810
  TEL. 978/475-9090   FAX: 978/474-9204
 
DYNAMICS RESEARCH CORPORATION
REPORTS THIRD QUARTER 2006 RESULTS
Andover, Mass.—November 1, 2006—Dynamics Research Corporation (Nasdaq: DRCO), a 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, 2006.
Financial Results
The company reported revenue for the third quarter of 2006 of $63.2 million, compared with $79.1 million for the same period a year ago. Net income was $0.9 million, or $0.10 per diluted share, for the quarter ended September 30, 2006, compared with $3.1 million, or $0.34 per diluted share, for the third quarter of 2005. Diluted earnings per share includes a $0.02 effect of FAS 123R for the third quarter of 2006. For the nine months ended September 30, 2006 revenue was $198.7 million, compared with $228.8 million for the same period in 2005. Net income was $2.6 million, or $0.27 per diluted share, for the nine months ended September 30, 2006, compared with $8.5 million, or $0.92 per diluted share, for the first nine months of 2005. Lower than expected subcontracted revenues under the Aeronautical Systems Center and Electronics Systems Center contracts resulted in third quarter revenues lower than previously provided guidance.
Business Highlights
“I am pleased to report that leading indicators of revenue growth have continued to trend very positively in the most recently ended period. Our new business wins for the quarter, measured in revenue value for the first contract year, were $24 million, up 53% over the third quarter of 2005, bringing the year-to-date total to $55 million. Key wins since we last reported our financial results include new or expanded contracts with the Air Force Tanker Program, Air Force Depots, Lockheed Martin and the Air Force’s Air Operations Center, the NAVAIR AIRSpeed program and the FDIC. Adding to our confidence in these positive developments for the quarter just ended our new business win rate was very strong at 45 percent.
“From a profits viewpoint, we expected and saw a significant improvement in results for the third quarter, compared with the second quarter of this year. Earnings results were at the high end of our guidance for the quarter and investments in business development activities continued at a high level,” reported James P. Regan, DRC chairman and chief executive officer.
Company Guidance
For the year 2006, the company estimates revenues in the range of $258 to $261 million and earnings per diluted share in the range of $0.40 to $0.43. For the fourth quarter of the year the company expects to book revenues in the range of $59 to $62 million and report earnings per diluted share of $0.13 to $0.16.

 

 

Conference Call
The company will conduct a third quarter 2006 conference call on Thursday, November 2, 2006 at 10:30 a.m. ET. The call will be available via telephone at (800) 319-9003, 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 #2492094, beginning at 1:30 p.m. ET November 2, 2006 through 11:59 p.m. ET November 9, 2006.
About Dynamics Research Corporation
DRC is headquartered in Andover, Massachusetts and has major offices in Vienna, Virginia and Fairborn, Ohio. The company has 27 additional field offices throughout the United States providing direct support to all branches of the Department of Defense and several state government agencies.
Dynamics Research Corporation is an innovative solutions provider that partners with its customers to apply proven processes and technologies. For more than 50 years, DRC has delivered technical and information technology services that enhance the performance and cost effectiveness of its customers’ mission critical systems. For additional information about DRC please visit our 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:   David Keleher, Senior Vice President and Chief Financial Officer
(978) 289-1615

 

 

ATTACHMENT I
DYNAMICS RESEARCH CORPORATION
RESULTS OF OPERATIONS (unaudited)
 
(in thousands, except share and per share data)
                 
    Three months ended  
    September 30,  
    2006     2005  
 
                
Contract revenue
   $ 61,547     $ 77,334  
Product sales
     1,614       1,779  
 
            
 
                
Total revenue
     63,161       79,113  
 
            
 
                
Cost of contract revenue
     53,756       64,174  
Cost of product sales
     1,217       1,242  
Selling, general and administrative expenses
     5,559       6,722  
Amortization of intangible assets
     702       760  
 
            
 
                
Total operating costs and expenses
     61,234       72,898  
 
            
 
                
Operating income
     1,927       6,215  
Interest expense, net
     (558 )     (1,061 )
Other income
     78       119  
 
            
 
                
Income before provision for income taxes
     1,447       5,273  
Provision for income taxes
     526       2,136  
 
            
 
                
Net income
   $ 921     $ 3,137  
 
            
 
                
Earnings per common share
                
Basic
   $ 0.10     $ 0.35  
Diluted
   $ 0.10     $ 0.34  
 
                
Weighted average shares outstanding
                
Basic
     9,133,552       8,846,245  
Diluted
     9,395,360       9,264,137  

 

 

ATTACHMENT II
DYNAMICS RESEARCH CORPORATION
RESULTS OF OPERATIONS (unaudited)
 
(in thousands, except share and per share data)
                 
    Nine months ended  
    September 30,  
    2006     2005  
 
                
Contract revenue
   $ 194,026     $ 223,712  
Product sales
     4,626       5,131  
 
            
 
                
Total revenue
     198,652       228,843  
 
            
 
                
Cost of contract revenue
     168,985       187,927  
Cost of product sales
     3,771       3,948  
Selling, general and administrative expenses
     18,151       19,429  
Amortization of intangible assets
     2,107       2,279  
 
            
 
                
Total operating costs and expenses
     193,014       213,583  
 
            
 
                
Operating income
     5,638       15,260  
Interest expense, net
     (1,693 )     (3,193 )
Other income
     429       2,221  
 
            
 
                
Income before provision for income taxes
     4,374       14,288  
Provision for income taxes
     1,803       5,787  
 
            
 
                
Net income (1)
   $ 2,571     $ 8,501  
 
            
 
                
Earnings per common share
                
Basic (1)
   $ 0.28     $ 0.97  
Diluted (1)
   $ 0.27     $ 0.92  
 
                
Weighted average shares outstanding
                
Basic
     9,079,601       8,761,800  
Diluted
     9,424,170       9,208,054  
(1)   Includes $84, or $0.01 per common share, attributable to the cumulative effect of the change in accounting principle for the adoption of SFAS 123R in 2006.

 

 

ATTACHMENT III
DYNAMICS RESEARCH CORPORATION
CONDENSED BALANCE SHEETS
 
(in thousands)
                 
    September 30,     December 31,  
    2006     2005  
    (unaudited)     (audited)  
 
                
Assets
                
Cash and cash equivalents
   $ 584     $ 1,020  
Accounts receivable, net
     35,372       32,894  
Unbilled expenditures and fees on contracts in process
     41,070       60,210  
Prepaid expenses and other current assets
     2,308       1,483  
 
            
 
                
Total current assets
     79,334       95,607  
 
                
Property, plant and equipment, net
     11,869       12,252  
Goodwill
     63,055       63,055  
Intangible assets, net
     6,373       8,480  
Other noncurrent assets
     7,046       8,359  
 
            
 
                
Total assets
   $ 167,677     $ 187,753  
 
            
 
                
Liabilities and stockholders’ equity
                
Current portion of long-term debt
   $ —     $ 10,170  
Accounts payable
     20,268       25,668  
Deferred income taxes
     12,420       19,825  
Accrued payroll and employee benefits
     15,094       18,761  
Other accrued expenses
     3,741       6,392  
 
            
 
                
Total current liabilities
     51,523       80,816  
 
                
Long-term debt
     21,692       15,242  
Other long-term liabilities
     14,524       17,508  
 
                
Stockholders’ equity
     79,938       74,187  
 
            
 
                
Total liabilities and stockholders’ equity
   $ 167,677     $ 187,753  
 
            

 

 

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,  
    2006     2005     2006     2005  
National defense and intelligence agencies
   $ 50,579     $ 63,970     $ 158,995     $ 179,961  
Federal civilian agencies
     6,634       6,785       22,983       24,560  
State and local government agencies
     3,966       5,946       11,236       16,996  
Other
     368       633       812       2,195  
 
                        
 
   $ 61,547     $ 77,334     $ 194,026     $ 223,712  
 
                        
Revenues by contract type as a percentage of contract revenue were as follows:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2006     2005     2006     2005  
Time and materials
     64 %     55 %     62 %     56 %
Cost reimbursable
     17 %     21 %     19 %     20 %
Fixed price, including service-type contracts
     19 %     24 %     19 %     24 %
 
                        
 
     100 %     100 %     100 %     100 %
 
                        
 
                                
Prime contact
     67 %     68 %     68 %     68 %
Sub-contract
     33 %     32 %     32 %     32 %
 
                        
 
     100 %     100 %     100 %     100 %
 
                        
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2006     2005     2006     2005  
 
                                
Net cash provided by (used in) operating activities
   $ 2,026     $ (2,585 )   $ 3,372     $ 7,835  
 
                                
Capital expenditures
   $ 492     $ 947     $ 2,063     $ 3,373  
 
                                
Depreciation
   $ 805     $ 915     $ 2,425     $ 2,823  
 
                                
Bookings
   $ 60,205     $ 72,305     $ 191,992     $ 210,938  
                                 
    September 30,  
    2006     2005  
 
                
Funded backlog
   $ 97,911     $ 147,470  
 
                
Employees
     1,541       1,829