ANDOVER, Mass., Nov. 1 /PRNewswire-FirstCall/ -- Dynamics Research Corporation , 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 percent 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 http://www.drc.com/. Recorded replays of the conference call will be available on Dynamics Research Corporation's investor relations home page at http://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 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.
CONTACT:
David Keleher, Senior Vice President and Chief Financial Officer
(978) 289-1615
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
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.
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
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