updated 2/16/2011 6:18:32 PM ET 2011-02-16T23:18:32

Fourth Quarter Earnings From Continuing Operations Up 21 Percent

Federal Business Revenue Grew 11 Percent  

ANDOVER, Mass., Feb. 16, 2011 (GLOBE NEWSWIRE) -- Dynamics Research Corporation (Nasdaq:DRCO), a leading provider of innovative management consulting, engineering and information technology services and solutions to federal and state governments, today announced operating results for the fourth quarter and year ended December 31, 2010.

Financial Results

The Company reported net income from continuing operations for the fourth quarter of 2010 of $4.0 million, up 21 percent from $3.3 million for the same period in 2009. Earnings from continuing operations per diluted share for the fourth quarter of 2010 were $0.39, up 18 percent from $0.33 for the same period in 2009.

For the full year 2010 net income from continuing operations was $12.3 million, up 19 percent from $10.3 million for 2009. Earnings from continuing operations per diluted share were $1.22, up 15 percent from $1.06 for 2009. Net Income for 2010, including discontinued operations, was $12.7 million, or $1.26 per diluted share.

For the fourth quarter of 2010 revenue was $69.8 million, up 6 percent from $65.8 million in the fourth quarter of 2009. Federal revenue was $66.4 million for the fourth quarter of 2010, up 11 percent from $60 million for the same period a year ago.

For the year 2010 revenue was $272.1 million, as compared with $268.7 million for 2009. Federal revenue for 2010 of $254.1 million was up 4 percent over 2009 revenue of $244.3 million.

Business Highlights

"We're very pleased with our performance in the quarter, ending the year with strong momentum heading into 2011," said Jim Regan, DRC's chairman and chief executive officer. "We saw double-digit growth in federal sector revenue during the period and continued to bid on a significant number of new business opportunities. Our raw pipeline of $1.7 billion has risen 30% in the past 12 months, and we currently have $373 million in bids submitted and awaiting award. In addition, we ended the year with $30 million in cash, driven by federal DSO's of 55 days, and generated cash flow from operating activities of over $40 million.  We look forward to another year of improved performance in 2011."

Company Guidance

The Company reaffirms guidance issued on February 8, 2011.

Earnings for the full year 2011 are estimated to be in the range of $1.25 to $1.32 per diluted share, reflecting an increase of 5 to 10 percent over 2010 excluding a one-time tax benefit of 3 cents received in the first quarter of 2010. Earnings per diluted share are forecast to be between $0.25 and $0.27 for the first quarter of 2011, up 4 to 13 percent over the first quarter of 2010 excluding the one-time tax benefit received in the prior-year period. The Company's estimate of revenue for 2011 is in the range of $281 to $289 million, reflecting anticipated top-line growth for DRC's federal business of 5 to 8 percent. For the first quarter of 2011, revenue is projected at $68 to $70 million, reflecting growth in the Company's federal business of 3 to 6 percent. These projections exclude the effects of future acquisitions and assume a tax rate of approximately 40 percent.

Conference Call

The Company will conduct its fourth quarter and year-end 2010 conference call on Thursday, February 17, 2011 at 10:00 a.m. ET. The call will be available by telephone at 877-303-4382, and accessible by webcast 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 800-642-1687, replay passcode #41431225, beginning at 1:00 p.m. ET on February 17, 2011.

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 the capabilities of a large company and the responsiveness of a small company, 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 and the Washington, D.C. area. 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.

 
Attachment I
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
     
     
   Three Months Ended 
  December 31,
  2010 2009
Revenue  $ 69,753  $ 65,826
Cost of revenue  57,607  53,854
Gross profit  12,146  11,972
     
Selling, general and administrative expenses  5,301  5,477
Amortization of intangible assets  385  551
Operating income   6,460  5,944
Interest expense, net  (2)  (494)
Other income, net  219  106
Income from continuing operations before provision for income taxes  6,677  5,556
Provision for income taxes  2,686  2,270
Income from continuing operations  3,991  3,286
Effect of discontinued operations, net of tax  --  110
Net income  $ 3,991  $ 3,396
     
Earnings per share    
Basic    
Income from continuing operations  $ 0.40  $ 0.34
Effect of discontinued operations, net of tax  --   0.01
Net income  $ 0.40  $ 0.35
Diluted    
Income from continuing operations  $ 0.39  $ 0.33
Effect of discontinued operations, net of tax  --   0.01
Net income  $ 0.39  $ 0.34
     
Weighted average shares outstanding    
Basic  9,975,884  9,753,555
Diluted  10,137,032  9,981,292
 
Attachment II
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except share and per share data)
     
     
   Twelve Months Ended 
  December 31,
  2010 2009
Revenue  $ 272,065  $ 268,661
Cost of revenue  228,175  223,694
Gross profit  43,890  44,967
     
Selling, general and administrative expenses  21,534  23,754
Amortization of intangible assets  1,541  3,305
Operating income   20,815  17,908
Interest expense, net  (1,084)  (2,024)
Other income, net  453  691
Income from continuing operations before provision for income taxes  20,184  16,575
Provision for income taxes  7,871  6,262
Income from continuing operations  12,313  10,313
Effect of discontinued operations, net of tax  392  (141)
Net income  $ 12,705  $ 10,172
     
Earnings per share (1)    
Basic    
Income from continuing operations  $ 1.24  $ 1.08
Effect of discontinued operations, net of tax  0.04  (0.01)
Net income  $ 1.28  $ 1.06
Diluted    
Income from continuing operations  $ 1.22  $ 1.06
Effect of discontinued operations, net of tax  0.04  (0.01)
Net income  $ 1.26  $ 1.04
     
Weighted average shares outstanding    
Basic  9,893,322  9,551,614
Diluted  10,078,937  9,772,722
     
     
(1) Amounts may not add due to rounding.    
 
Attachment III
DYNAMICS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
     
     
  December 31, December 31,
  2010 2009
Assets    
Current assets    
Cash and cash equivalents  $ 30,163  $ 55
Contract receivables, net  48,394  72,569
Prepaid expenses and other current assets  2,924  5,702
Discontinued operations  --  2,058
Total current assets  81,481  80,384
Noncurrent assets    
Property and equipment, net  12,219  13,915
Goodwill  97,641  97,641
Intangible assets, net  2,533  4,074
Deferred tax asset  585  4,252
Other noncurrent assets  3,757  3,335
Total noncurrent assets  116,735  123,217
Total assets  $ 198,216  $ 203,601
     
Liabilities and stockholders' equity    
Current liabilities    
Current portion of long-term debt  $ 8,000  $ 8,000
Accounts payable  16,883  18,299
Accrued compensation and employee benefits  18,046  16,357
Deferred taxes  2,418  7,046
Other accrued expenses  4,617  3,708
Discontinued operations  --  186
Total current liabilities  49,964  53,596
Long-term liabilities    
Long-term debt  14,000  23,973
Other long-term liabilities  27,067  31,936
Total stockholders' equity  107,185  94,096
Total liabilities and stockholders' equity  $ 198,216  $ 203,601
 
Attachment IV
DYNAMICS RESEARCH CORPORATION
SUPPLEMENTAL INFORMATION (unaudited)
(dollars in thousands)
         
         
Contract revenues were earned from the following sectors:        
         
  Three Months Ended Twelve Months Ended
   December 31,   December 31, 
  2010 2009 2010 2009
National defense and intelligence agencies  $ 49,344  $ 40,402  $ 179,704  $ 163,244
Homeland security  10,762  13,124  50,468  54,627
Federal civilian agencies  6,337  6,446  23,901  26,475
Total revenue from federal agencies  66,443  59,972  254,073  244,346
State and local government agencies  3,257  5,744  17,915  23,990
Other  53  110  77  325
Total revenue  $ 69,753  $ 65,826  $ 272,065  $ 268,661
         
Revenues by contract type as a percentage of contract revenue were as follows:        
         
  Three Months Ended Twelve Months Ended
   December 31,   December 31, 
  2010 2009 2010 2009
Fixed price, including service-type contracts 50% 45% 47% 40%
Time and materials  29  36  32  42
Cost reimbursable  21  19  21  18
  100% 100% 100% 100%
         
Prime contract 74% 71% 73% 71%
Sub-contract  26  29  27  29
  100% 100% 100% 100%
         
         
  Three Months Ended Twelve Months Ended
   December 31,   December 31, 
  2010 2009 2010 2009
Net cash provided by operating activities - continuing operations  $ 9,860  $ 7,614  $ 41,331  $ 8,208
Capital expenditures  $ 183  $ 2,989  $ 4,449  $ 5,185
Depreciation  $ 904  $ 807  $ 3,564  $ 2,987
Bookings  $ 46,555  $ 73,736  $ 272,143  $ 282,311
         
         
  December 31, December 31,    
  2010 2009    
Total backlog  $ 400,881  $ 434,475    
Funded backlog  $ 133,516  $ 158,518    
Employees  1,298  1,469    
CONTACT:  Investors:
          Chris Witty
          Darrow Associates, Inc. 
          646.438.9385
          cwitty@darrowir.com 

          Media:
          Matt Warnock 
          Sage Communications 
          703.207.0941
          mattw@aboutsage.com

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