DYNAMICS RESEARCH CORPORATION 
By
May 1, 2013
--- Adjusted EBITDA of 8.3 Percent on Revenue of $74 Million ---
ANDOVER, Mass., May 1, 2013 (GLOBE NEWSWIRE) -- Dynamics Research Corporation (Nasdaq:DRCO), a leading technology and management consulting company focused on driving performance and process improvement for government clients, today announced operating results for the first quarter ended March 31, 2013.
Financial Results
Net income for the quarter ended March 31, 2013 was $1.2 million, or $0.12 per diluted share, as compared with $1.8 million,
or $0.17 per diluted share, for the first quarter of 2012. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter of 2013 was $6.1 million, or 8.3 percent of revenue, as compared with $7.9 million, or 9.2 percent of revenue, for the same period a year ago. Revenue for the first quarter of 2013 was $73.6 million compared with $85.9 million for the same period in 2012.
During the first quarter, the Company used $6.8 million of cash from operations as compared to a use of $1.6 million in the same period a year ago. While seasonally the first quarter normally shows cash outflows, a slowdown in federal government payments, including the suspension of the Department of Defense Quick Pay program in February 2013, resulted in additional delayed invoice payments.
"First quarter results were consistent with our expectations in the current operating environment," said Jim Regan, DRC's chairman and chief executive officer. "Revenue in our priority markets was $53 million, three percent below last year's first quarter, reflecting lower homeland security sales. In the defense readiness, logistics and C3 market sectors, which are primarily legacy businesses for DRC, revenue for the first quarter just ended was down 43 percent versus the first quarter of 2012, driven by various defense cost-reduction initiatives and movement toward small business set aside contracts. While we had a seasonal net use of cash in the quarter, as is typical, we expect much stronger cash generation during the balance of 2013.
"We won 100 percent of the re-compete decisions made by our clients in the first quarter and booked $6 million of new business - up from the same period a year ago. However, our current qualified pipeline of $619 million is down from our previously reported pipeline of $1.1 billion, primarily due to recent customer decisions on two large procurements, totaling $425 million, which were awarded to other firms. As we enter the busiest period of the government fiscal year, we are replenishing
the pipeline and are well positioned to win our share of these opportunities.
"Funded bookings were seasonally soft, while the trailing twelve month book-to-bill was maintained at 1.0 to one. As we reported at the end of 2012, we terminated our participation in a ten-year Department of Defense research program which generated mostly pass-through revenue and, as a result, removed the $109 million unused ceiling value of the contract from backlog during the quarter. In addition, a $19 million contract awarded to DRC in 2012 and protested was recently canceled and, thus, de-booked from our backlog as well. Longer term, we are encouraged by apparent movement in Washington toward budget prioritization and policy decision-making. As this process moves forward, we anticipate greater market visibility and stability, leading to an improved operating environment heading into 2014."
For the second quarter 2013 the Company anticipates revenue in the range of $71 to $74 million and earnings of $0.10 to
$0.12 per diluted share. Considering current uncertainties regarding federal government expenditure decisions, the Company continues to refrain from providing financial guidance for the balance of the calendar year 2013.
The Company will conduct a first quarter 2013 conference call tomorrow, May 2, 2013 at 10:00 a.m. ET. The call will be available via telephone at 877-303-4382 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.comand by telephone at 800-
585-8367, replay passcode # 34448767, beginning at 1:00 p.m. ET on May 2, 2013.
Dynamics Research Corporation (DRC) provides technology and management consulting solutions focused on driving performance, process and results for government clients. DRC offers innovative solutions and delivers rock solid results. DRC has large company capabilities and small company agility. 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. region. For more information please visit our website at www.drc.com.
Safe HarborCertain statements contained in this news release, which are not historical facts or are related to future plans, events, revenues and earnings expectations, objectives and outlooks are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and, by their nature, are uncertain and subject to a number of risks and uncertainties that could adversely affect the Company's results. We can provide no assurance that these statements will prove to be correct. Consequently, actual results could materially differ from these statements. For more detailed information concerning how these risks and uncertainties could affect the Company's financial results, please refer to DRC's most recent forms 10-K and 10-Q and other documents filed with the Securities and Exchange Commission. Further, the Company is under no duty or obligation to update or revise any forward looking statements as a result of events or new information.
Non-GAAP Financial InformationDRC discloses adjusted earnings before interest, taxes, depreciation and amortization, which is not a recognized measure under GAAP. We have provided a reconciliation of adjusted EBITDA, adjusted to conform to the definition used in our loan agreements, to net income in Attachment IV of this announcement. When evaluating DRC's financial results investors should evaluate each adjustment to reported GAAP financial measures in the reconciliation as additional information and not use this non-GAAP financial measure as alternatives to reported GAAP financial measures. DRC presents these financial measures because the Company believes they provide investors with important supplemental information to assist them in assessing DRC's financial results.
ATTACHMENT I DYNAMICS RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) (in thousands, except share and per share data) Three Months Ended March 31, 2013 2012Revenue $ 73, $ 85, Cost of revenue 62,6872,27
Gross profit on revenue 10,87 13,59
Selling, general and administrative expenses | 5,73 6,89 |
Amortization of intangible assets | 93 1,03 |
Operating income | 4,21 5,67 |
Interest expense, net | (2,17 (2,77 |
Other income, net | 6 13 |
Income before provision for income taxes | 2,10 3,03 |
Provision for income taxes | 86 1,23 |
Net income | $ 1, $ 1, |
Earnings per common share Basic | $ 0 $ 0 |
Diluted $ 0 $ 0
Weighted average shares outstanding
Basic | 10,507,16 | 10,419,34 |
Diluted | 10,525,32 | 10,464,12 |
Assets
Current assets
March 31, December 31,Cash and cash equivalents $ $ Contract receivables, net 56,21 48,11
Prepaid expenses and other current assets 4,202,53
Total current assets 60,4150,65
Noncurrent assets
Property and equipment, net 13,54 12,51
Goodwill 163,20 163,20
Intangible assets, net 13,68 14,61
Deferred tax asset 13,23 14,67
Other noncurrent assets 4,214,38
Total noncurrent assets 207,87209,39
Total assets $ 268,$ 260,
Liabilities and stockholders' equity
Current liabilities | ||
Current portion of long-term debt | $ 15, | $ 15, |
Accounts payable | 25,56 | 24,84 |
Accrued compensation and employee benefits | 15,01 | 14,93 |
Deferred tax liability | 2,30 | 3,00 |
Other accrued expenses | 4,07 | 5,30 |
Total current liabilities | 62,75 | 63,22 |
Long-term liabilities | ||
Long-term debt | 80,83 | 74,01 |
Other long-term liabilities | 35,19 | 34,94 |
Total stockholders' equity | 89,51 | 87,87 |
Total liabilities and stockholders' equity | $ 268, | $ 260, |
Contract revenues were earned from the following sectors:
Revenues by contract type as a percentage of contract revenue were as follows:
Three Months EndedFixed price, including service-type contracts 43% 46% Time and materials 3 3
Cost reimbursable 12
100% 100%
Prime contract 80% 85% Sub-contract 21
100% 100%
2013 | 2012 | |
Net cash used in operating activities Capital expenditures | $ (6,7 $ | $ (1,6 $ |
Depreciation | $ | $ 1, |
Bookings | $ 44, | $ 58, |
March 31, 2013 | December 31, 2012 | |
Total backlog | $ 560, | $ 731, |
Funded backlog | $ 130, | $ 163, |
Employees | 1,20 | 1,25 |
As presented, adjusted EBITDA is defined as follows:
Three Months Ended March 31,Net income (loss) $ 1, $ 1, Add:
Interest expense, net 2,17 2,77
Provision for income taxes 86 1,23
Depreciation expense 90 1,01
Amortization expense 93 1,03
Share-based compensation 13 17
Less: amortization of deferred gain on sale of building | (16 (16 |
Adjusted EBITDA(1) | $ 6, $ 7, |
Adjusted EBITDA, as a percent of revenue | 8.3% 9.2% |
(1) We have calculated adjusted EBITDA to conform with the definition of EBITDA provided in our loan agreements to help investors understand that component of our debt covenant calculations. We may have calculated EBITDA differently than it is calculated by other companies.
CONTACT: Investors:
Chris Witty
Darrow Associates, Inc.
646.438.9385 cwitty@darrowir.com
Media:
Ilina Dimitrova
Sage Communications (for DRC)
703.531.8256 ilinad@aboutsage.com
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