R
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2009
|
|
OR
|
|
£
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
FOR
THE TRANSITION PERIOD
FROM
TO
|
MASSACHUSETTS
|
04-2211809
|
(State
or other jurisdiction of Incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
Large
accelerated filer
|
£
|
Accelerated
filer R
|
Non-accelerated
filer
|
£ (Do not
check if a smaller reporting company)
|
Smaller
reporting company £
|
Page
|
|||
Part
I. Financial Information
|
|||
Item
1.
|
Financial
Statements
|
||
3
|
|||
4
|
|||
5
|
|||
6
|
|||
7
|
|||
8
|
|||
Item
2.
|
18
|
||
Item
3.
|
26
|
||
Item
4.
|
27
|
||
Part
II. Other Information
|
|||
Item
1.
|
27
|
||
Item
1A.
|
27
|
||
Item
2.
|
28
|
||
Item
4.
|
28
|
||
Item
6.
|
29
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June
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Assets
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 6,622 | $ | 7,111 | ||||
Contract
receivables, net
|
73,044 | 71,438 | ||||||
Prepaid
expenses and other current assets
|
3,326 | 2,491 | ||||||
Total
current assets
|
82,992 | 81,040 | ||||||
Noncurrent
assets
|
||||||||
Property
and equipment, net
|
8,596 | 9,349 | ||||||
Goodwill
|
97,641 | 97,641 | ||||||
Intangible
assets, net
|
5,434 | 7,379 | ||||||
Deferred
tax asset
|
10,298 | 10,396 | ||||||
Other
noncurrent assets
|
3,028 | 3,125 | ||||||
Total
noncurrent assets
|
124,997 | 127,890 | ||||||
Total
assets
|
$ | 207,989 | $ | 208,930 | ||||
Liabilities
and stockholders' equity
|
||||||||
Current
liabilities
|
||||||||
Current
portion of long-term debt
|
$ | 8,000 | $ | 8,000 | ||||
Accounts
payable
|
16,611 | 18,095 | ||||||
Accrued
compensation and employee benefits
|
16,082 | 13,644 | ||||||
Deferred
taxes
|
3,248 | 2,670 | ||||||
Other
accrued expenses
|
22,384 | 24,760 | ||||||
Total
current liabilities
|
66,325 | 67,169 | ||||||
Long-term
liabilities
|
||||||||
Long-term
debt
|
26,000 | 30,000 | ||||||
Other
long-term liabilities
|
29,695 | 30,286 | ||||||
Total
long-term liabilities
|
55,695 | 60,286 | ||||||
Total
liabilities
|
122,020 | 127,455 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders'
equity
|
||||||||
Preferred
stock, $0.10 par value; 5,000,000 shares authorized; no shares issued and
outstanding
|
- | - | ||||||
Common
stock, $0.10 par value; 30,000,000 shares authorized; 9,761,807 and
9,674,512 shares issued and outstanding at June 30, 2009 and December 31,
2008, respectively
|
976 | 967 | ||||||
Capital
in excess of par value
|
52,433 | 51,919 | ||||||
Accumulated
other comprehensive loss, net of taxes
|
(22,118 | ) | (22,268 | ) | ||||
Retained
earnings
|
54,678 | 50,857 | ||||||
Total
stockholders' equity
|
85,969 | 81,475 | ||||||
Total
liabilities and stockholders' equity
|
$ | 207,989 | $ | 208,930 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Contract
revenue
|
$ | 68,128 | $ | 53,708 | $ | 135,331 | $ | 108,481 | ||||||||
Product
sales
|
1,520 | 1,585 | 2,856 | 3,290 | ||||||||||||
Total
revenue
|
69,648 | 55,293 | 138,187 | 111,771 | ||||||||||||
Cost
of contract revenue
|
57,015 | 45,599 | 112,958 | 91,811 | ||||||||||||
Cost
of product sales
|
1,572 | 1,393 | 3,090 | 2,998 | ||||||||||||
Total
cost of revenue
|
58,587 | 46,992 | 116,048 | 94,809 | ||||||||||||
Gross
profit on contract revenue
|
11,113 | 8,109 | 22,373 | 16,670 | ||||||||||||
Gross
profit (loss) on product sales
|
(52 | ) | 192 | (234 | ) | 292 | ||||||||||
Total
gross profit
|
11,061 | 8,301 | 22,139 | 16,962 | ||||||||||||
Selling,
general and administrative expenses
|
6,388 | 5,147 | 12,845 | 10,548 | ||||||||||||
Provision
for litigation
|
- | - | - | 8,819 | ||||||||||||
Amortization
of intangible assets
|
972 | 510 | 1,945 | 1,019 | ||||||||||||
Operating
income (loss)
|
3,701 | 2,644 | 7,349 | (3,424 | ) | |||||||||||
Interest
expense, net
|
(477 | ) | (142 | ) | (1,096 | ) | (281 | ) | ||||||||
Other
income, net
|
282 | 239 | 321 | 168 | ||||||||||||
Income
(loss) before provision for income taxes
|
3,506 | 2,741 | 6,574 | (3,537 | ) | |||||||||||
Provision
for income taxes
|
1,456 | 1,112 | 2,753 | 90 | ||||||||||||
Net
income (loss)
|
$ | 2,050 | $ | 1,629 | $ | 3,821 | $ | (3,627 | ) | |||||||
Earnings
(loss) per common share
|
||||||||||||||||
Basic
|
$ | 0.21 | $ | 0.17 | $ | 0.40 | $ | (0.38 | ) | |||||||
Diluted
|
$ | 0.21 | $ | 0.17 | $ | 0.39 | $ | (0.38 | ) | |||||||
Weighted
average shares outstanding
|
||||||||||||||||
Basic
|
9,610,428 | 9,443,347 | 9,611,783 | 9,430,607 | ||||||||||||
Diluted
|
9,729,721 | 9,724,839 | 9,727,387 | 9,430,607 |
Capital
|
Accumulated
|
|||||||||||||||||||||||
Common
Stock
|
in
Excess
|
Other
|
||||||||||||||||||||||
Issued
|
of
Par
|
Comprehensive
|
Retained
|
|||||||||||||||||||||
Shares
|
Par
value
|
Value
|
Loss
|
Earnings
|
Total
|
|||||||||||||||||||
Balance
at March 31, 2009
|
9,729 | $ | 973 | $ | 52,102 | $ | (22,227 | ) | $ | 52,628 | $ | 83,476 | ||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||
Net
income
|
- | - | - | - | 2,050 | 2,050 | ||||||||||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||||||||||
Changes
in unrealized loss on derivative instruments
|
- | - | - | 109 | - | 109 | ||||||||||||||||||
Comprehensive
income
|
- | - | - | - | - | 2,159 | ||||||||||||||||||
Issuance
of common stock through stock plan transactions
|
24 | 2 | 182 | - | - | 184 | ||||||||||||||||||
Issuance
of restricted stock
|
22 | 2 | (2 | ) | - | - | - | |||||||||||||||||
Forfeiture
of restricted stock
|
(10 | ) | (1 | ) | 1 | - | - | - | ||||||||||||||||
Release
of restricted stock
|
(3 | ) | - | (22 | ) | - | - | (22 | ) | |||||||||||||||
Share-based
compensation
|
- | - | 163 | - | - | 163 | ||||||||||||||||||
Tax
benefit from stock plan transactions
|
- | - | 9 | - | - | 9 | ||||||||||||||||||
Balance
at June 30, 2009
|
9,762 | $ | 976 | $ | 52,433 | $ | (22,118 | ) | $ | 54,678 | $ | 85,969 | ||||||||||||
Capital
|
Accumulated
|
|||||||||||||||||||||||
Common
Stock
|
in
Excess
|
Other
|
||||||||||||||||||||||
Issued
|
of
Par
|
Comprehensive
|
Retained
|
|||||||||||||||||||||
Shares
|
Par
value
|
Value
|
Loss
|
Earnings
|
Total
|
|||||||||||||||||||
Balance
at March 31, 2008
|
9,558 | $ | 956 | $ | 50,775 | $ | (6,853 | ) | $ | 46,791 | $ | 91,669 | ||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||
Net
income
|
- | - | - | - | 1,629 | 1,629 | ||||||||||||||||||
Comprehensive
income
|
- | - | - | - | - | 1,629 | ||||||||||||||||||
Issuance
of common stock through stock plan transactions
|
22 | 2 | 178 | - | - | 180 | ||||||||||||||||||
Issuance
of restricted stock
|
14 | 2 | (2 | ) | - | - | - | |||||||||||||||||
Forfeiture
of restricted stock
|
(3 | ) | (1 | ) | 1 | - | - | - | ||||||||||||||||
Release
of restricted stock
|
(29 | ) | (3 | ) | (292 | ) | - | - | (295 | ) | ||||||||||||||
Share-based
compensation
|
- | - | 322 | - | - | 322 | ||||||||||||||||||
Tax
benefit from stock plan transactions
|
- | - | 13 | - | - | 13 | ||||||||||||||||||
Balance
at June 30, 2008
|
9,562 | $ | 956 | $ | 50,995 | $ | (6,853 | ) | $ | 48,420 | $ | 93,518 |
Capital
|
Accumulated
|
|||||||||||||||||||||||
Common
Stock
|
in
Excess
|
Other
|
||||||||||||||||||||||
Issued
|
of
Par
|
Comprehensive
|
Retained
|
|||||||||||||||||||||
Shares
|
Par
value
|
Value
|
Loss
|
Earnings
|
Total
|
|||||||||||||||||||
Balance
at December 31, 2008
|
9,675 | $ | 967 | $ | 51,919 | $ | (22,268 | ) | $ | 50,857 | $ | 81,475 | ||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||
Net
income
|
- | - | - | - | 3,821 | 3,821 | ||||||||||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||||||||||
Changes
in unrealized loss on derivative instruments
|
- | - | - | 150 | - | 150 | ||||||||||||||||||
Comprehensive
income
|
- | - | - | - | - | 3,971 | ||||||||||||||||||
Issuance
of common stock through stock plan transactions
|
36 | 3 | 262 | - | - | 265 | ||||||||||||||||||
Issuance
of restricted stock
|
77 | 8 | (8 | ) | - | - | - | |||||||||||||||||
Forfeiture
of restricted stock
|
(12 | ) | (1 | ) | 1 | - | - | - | ||||||||||||||||
Release
of restricted stock
|
(14 | ) | (1 | ) | (104 | ) | - | - | (105 | ) | ||||||||||||||
Share-based
compensation
|
- | - | 354 | - | - | 354 | ||||||||||||||||||
Tax
benefit from stock plan transactions
|
- | - | 9 | - | - | 9 | ||||||||||||||||||
Balance
at June 30, 2009
|
9,762 | $ | 976 | $ | 52,433 | $ | (22,118 | ) | $ | 54,678 | $ | 85,969 | ||||||||||||
Capital
|
Accumulated
|
|||||||||||||||||||||||
Common
Stock
|
in
Excess
|
Other
|
||||||||||||||||||||||
Issued
|
of
Par
|
Comprehensive
|
Retained
|
|||||||||||||||||||||
Shares
|
Par
value
|
Value
|
Loss
|
Earnings
|
Total
|
|||||||||||||||||||
Balance
at December 31, 2007
|
9,510 | $ | 951 | $ | 50,251 | $ | (6,745 | ) | $ | 52,047 | $ | 96,504 | ||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||
Net
loss
|
- | - | - | - | (3,627 | ) | (3,627 | ) | ||||||||||||||||
Other
comprehensive loss, net of tax:
|
||||||||||||||||||||||||
Reclassification
adjustment for realized gain on sale of investments
|
- | - | - | (108 | ) | - | (108 | ) | ||||||||||||||||
Comprehensive
loss
|
- | - | - | - | - | (3,735 | ) | |||||||||||||||||
Issuance
of common stock through stock plan transactions
|
50 | 5 | 409 | - | - | 414 | ||||||||||||||||||
Issuance
of restricted stock
|
48 | 5 | (5 | ) | - | - | - | |||||||||||||||||
Forfeiture
of restricted stock
|
(5 | ) | (1 | ) | 1 | - | - | - | ||||||||||||||||
Release
of restricted stock
|
(41 | ) | (4 | ) | (410 | ) | - | - | (414 | ) | ||||||||||||||
Share-based
compensation
|
- | - | 724 | - | - | 724 | ||||||||||||||||||
Tax
benefit from stock plan transactions
|
- | - | 25 | - | - | 25 | ||||||||||||||||||
Balance
at June 30, 2008
|
9,562 | $ | 956 | $ | 50,995 | $ | (6,853 | ) | $ | 48,420 | $ | 93,518 |
Six
Months Ended
|
||||||||
June
30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income (loss)
|
$ | 3,821 | $ | (3,627 | ) | |||
Adjustments
to reconcile net cash provided by operating activities:
|
||||||||
Depreciation
|
1,536 | 1,419 | ||||||
Amortization
of intangible assets
|
1,945 | 1,019 | ||||||
Share-based
compensation
|
354 | 724 | ||||||
Investment
income from equity interest
|
(223 | ) | (171 | ) | ||||
Tax
benefit from stock plan transactions
|
(9 | ) | (25 | ) | ||||
Provision
for litigation
|
- | 8,819 | ||||||
Deferred
income taxes
|
578 | (2,719 | ) | |||||
Other
|
(391 | ) | (380 | ) | ||||
Change
in operating assets and liabilities:
|
- | |||||||
Contract
receivables, net
|
(1,606 | ) | (669 | ) | ||||
Prepaid
expenses and other current assets
|
(552 | ) | (549 | ) | ||||
Accounts
payable
|
(1,484 | ) | 1,463 | |||||
Accrued
compensation and employee benefits
|
2,438 | 24 | ||||||
Other
accrued expenses
|
1,778 | 476 | ||||||
Other
long-term liabilities
|
(77 | ) | (307 | ) | ||||
Net
cash provided by operating activities
|
8,108 | 5,497 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of business
|
(4,250 | ) | - | |||||
Additions
to property and equipment
|
(827 | ) | (813 | ) | ||||
Proceeds
from sale of investments and long-lived assets
|
3 | 275 | ||||||
Dividends
from equity investment
|
289 | 311 | ||||||
Payments
related to the sale of building
|
- | (35 | ) | |||||
Increase
in other assets
|
(86 | ) | (427 | ) | ||||
Net
cash used in investing activities
|
(4,871 | ) | (689 | ) | ||||
Cash
flow from financing activities:
|
||||||||
Repayments
under term loan
|
(4,000 | ) | - | |||||
Borrowings
under revolving credit agreement
|
28,024 | 55,037 | ||||||
Repayments
under revolving credit agreement
|
(28,024 | ) | (62,167 | ) | ||||
Proceeds
from the exercise of stock plan transactions
|
265 | 414 | ||||||
Tax
benefit from stock plan transactions
|
9 | 25 | ||||||
Payments
of deferred financing costs
|
- | (15 | ) | |||||
Net
cash used in financing activities
|
(3,726 | ) | (6,706 | ) | ||||
Net
decrease in cash and cash equivalents
|
(489 | ) | (1,898 | ) | ||||
Cash
and cash equivalents, beginning of period
|
7,111 | 2,006 | ||||||
Cash
and cash equivalents, end of period
|
$ | 6,622 | $ | 108 |
Three
|
Six
|
|||||||
Months
|
Months
|
|||||||
Ended
|
Ended
|
|||||||
June
30, 2008
|
June
30, 2008
|
|||||||
Revenue
|
$ | 66,863 | $ | 132,380 | ||||
Gross
profit
|
$ | 12,615 | $ | 24,673 | ||||
Operating
income
|
$ | 4,987 | $ | 432 | ||||
Net
income (loss)
|
$ | 2,378 | $ | (2,683 | ) | |||
Earnings
(loss) per common share:
|
||||||||
Basic
|
$ | 0.25 | $ | (0.28 | ) | |||
Diluted
|
$ | 0.24 | $ | (0.28 | ) |
June
30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Contract
receivables, net
|
||||||||
Billed
receivables
|
$ | 30,688 | $ | 35,423 | ||||
Unbilled
receivables(1):
|
||||||||
Revenues
recorded in excess of milestone billings on fixed price contracts with the
States of Ohio and Tennessee
|
14,439 | 8,907 | ||||||
Retainages
and fee withholdings
|
991 | 1,179 | ||||||
Other
unbilled receivables
|
27,824 | 26,858 | ||||||
Total
unbilled receivables
|
43,254 | 36,944 | ||||||
Allowance
for doubtful accounts
|
(898 | ) | (929 | ) | ||||
Contract
receivables, net
|
$ | 73,044 | $ | 71,438 | ||||
Prepaid
expenses and other current assets:
|
||||||||
Inventory
|
$ | 909 | $ | 766 | ||||
Restricted
cash
|
34 | 150 | ||||||
Other
|
2,383 | 1,575 | ||||||
Prepaid
expenses and other current assets
|
$ | 3,326 | $ | 2,491 | ||||
Property
and equipment, net:
|
||||||||
Production
equipment
|
$ | 11,588 | $ | 11,530 | ||||
Software
|
11,616 | 11,602 | ||||||
Furniture
and other equipment
|
8,123 | 7,644 | ||||||
Leasehold
improvements
|
3,054 | 2,949 | ||||||
Property
and equipment
|
34,381 | 33,725 | ||||||
Less
accumulated depreciation
|
(25,785 | ) | (24,376 | ) | ||||
Property
and equipment, net
|
$ | 8,596 | $ | 9,349 |
June
30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Other
noncurrent assets:
|
||||||||
Deferred
compensation plan investments
|
$ | 1,182 | $ | 1,107 | ||||
Equity
investments
|
1,030 | 1,180 | ||||||
Other
|
816 | 838 | ||||||
Other
noncurrent assets
|
$ | 3,028 | $ | 3,125 | ||||
Accrued
compensation and employee benefits:
|
||||||||
Accrued
compensation and related taxes
|
$ | 7,407 | $ | 7,504 | ||||
Accrued
vacation
|
5,481 | 4,391 | ||||||
Accrued
pension liability
|
626 | - | ||||||
Other
|
2,568 | 1,749 | ||||||
Accrued
compensation and employee benefits
|
$ | 16,082 | $ | 13,644 | ||||
Other
accrued expenses:
|
||||||||
Accrued
litigation reserve
|
$ | 15,000 | $ | 15,000 | ||||
Accrued
acquisition costs
|
- | 4,265 | ||||||
Accrued
income taxes
|
3,901 | 2,042 | ||||||
Deferred
gain on sale of building
|
676 | 676 | ||||||
Other
|
2,807 | 2,777 | ||||||
Other
accrued expenses
|
$ | 22,384 | $ | 24,760 | ||||
Other
long-term liabilities:
|
||||||||
Accrued
pension liability
|
$ | 22,755 | $ | 22,570 | ||||
Deferred
gain on sale of building
|
3,719 | 4,057 | ||||||
Deferred
compensation plan liability
|
1,182 | 1,107 | ||||||
Other
|
2,039 | 2,552 | ||||||
Other
long-term liabilities
|
$ | 29,695 | $ | 30,286 |
(1)
|
At
June 30, 2009 and December 31, 2008, $531 and $495, respectively, of
unbilled retainages and fee withholdings are not anticipated to be billed
within one year. Additionally, at June 30, 2009 and December
31, 2008, $9,585 and $4,557, respectively, of the unbilled balance under
the Company’s contract with the State of Tennessee is not scheduled to be
invoiced within one year.
|
June
30, 2009
|
December
31, 2008
|
|||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
Cost
|
Amortization
|
Net
|
Cost
|
Amortization
|
Net
|
|||||||||||||||||||
Customer
relationships
|
$ | 13,400 | $ | (11,314 | ) | $ | 2,086 | $ | 14,700 | $ | (11,769 | ) | $ | 2,931 | ||||||||||
Customer
contracts
|
3,500 | (1,378 | ) | 2,122 | 3,500 | (522 | ) | 2,978 | ||||||||||||||||
Non-competition
agreements
|
1,400 | (174 | ) | 1,226 | 1,400 | - | 1,400 | |||||||||||||||||
8(a)
contract transition
|
130 | (130 | ) | - | 130 | (60 | ) | 70 | ||||||||||||||||
Total
|
$ | 18,430 | $ | (12,996 | ) | $ | 5,434 | $ | 19,730 | $ | (12,351 | ) | $ | 7,379 |
Remainder
of 2009
|
$ | 1,360 | ||
2010
|
$ | 1,542 | ||
2011
|
$ | 1,188 | ||
2012
|
$ | 492 | ||
2013
|
$ | 349 | ||
2014
and thereafter
|
$ | 503 |
Fair
Value Measurements
|
|||||||||||||||||
At
June 30, 2009 Using
|
|||||||||||||||||
Balance
Sheet Location
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
Assets:
|
|||||||||||||||||
Investments
held in Rabbi Trusts
|
Other
noncurrent assets
|
$ | 1,182 | $ | - | $ | - | $ | 1,182 | ||||||||
Liabilities:
|
|||||||||||||||||
Interest
rate swap
|
Other
long-term liabilities
|
$ | - | $ | 612 | $ | - | $ | 612 | ||||||||
Fair
Value Measurements
|
|||||||||||||||||
At
December 31, 2008 Using
|
|||||||||||||||||
Balance
Sheet Location
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
Assets:
|
|||||||||||||||||
Investments
held in Rabbi Trusts
|
Other
noncurrent assets
|
$ | 1,107 | $ | - | $ | - | $ | 1,107 | ||||||||
Liabilities:
|
|||||||||||||||||
Interest
rate swap
|
Other
long-term liabilities
|
$ | - | $ | 860 | $ | - | $ | 860 |
June
30,
2009
|
December
31,
2008
|
Three
Months
Ended
June
30, 2009
|
Six
Months
Ended
June
30, 2009
|
|||||||||||||
Other
long-term liabilities
|
$ | 612 | $ | 860 | ||||||||||||
Gain
recognized in other comprehensive income, net of tax
|
$ | 109 | $ | 150 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Interest
cost on projected benefit obligation
|
$ | 1,066 | $ | 959 | $ | 2,133 | $ | 1,918 | ||||||||
Expected
return on plan assets
|
(964 | ) | (1,396 | ) | (1,928 | ) | (2,792 | ) | ||||||||
Recognized
actuarial loss
|
303 | 137 | 606 | 274 | ||||||||||||
Net
periodic pension expense (income)
|
$ | 405 | $ | (300 | ) | $ | 811 | $ | (600 | ) |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Cost
of products and services
|
$ | 67 | $ | 133 | $ | 147 | $ | 296 | ||||||||
Selling,
general and administrative
|
96 | 189 | 207 | 428 | ||||||||||||
Total
share-based compensation expense
|
$ | 163 | $ | 322 | $ | 354 | $ | 724 |
Weighted
|
||||||||||||||||
Average
|
||||||||||||||||
Weighted
|
Remaining
|
|||||||||||||||
Average
|
Contractual
|
Aggregate
|
||||||||||||||
Number
of
|
Exercise
|
Term
|
Intrinsic
|
|||||||||||||
Shares
|
Price
|
(in
years)
|
Value
|
|||||||||||||
Outstanding
and exercisable at December 31, 2008
|
889,108 | $ | 8.42 | 2.1 | $ | 729 | ||||||||||
Granted
|
- | $ | - | |||||||||||||
Exercised
|
(13,214 | ) | $ | 7.47 | ||||||||||||
Cancelled
|
(5,884 | ) | $ | 12.38 | ||||||||||||
Outstanding
and exercisable at June 30, 2009
|
870,010 | $ | 8.40 | 1.6 | $ | 1,841 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Amounts
realized or received from stock option exercises:
|
||||||||||||||||
Cash
proceeds received
|
$ | 99 | $ | 73 | $ | 99 | $ | 186 | ||||||||
Intrinsic
value realized
|
$ | 23 | $ | 36 | $ | 23 | $ | 70 | ||||||||
Income
tax benefit realized
|
$ | 8 | $ | 13 | $ | 8 | $ | 24 |
Weighted
|
||||||||
Average
|
||||||||
Number
of
|
Grant-Date
|
|||||||
|
Shares
|
Fair
Value
|
||||||
Nonvested
at December 31, 2008
|
158,476 | $ | 10.61 | |||||
Granted
|
77,272 | $ | 7.92 | |||||
Vested
|
(53,301 | ) | $ | 11.99 | ||||
Cancelled
|
(12,000 | ) | $ | 9.08 | ||||
Nonvested
at June 30, 2009
|
170,447 | $ | 9.06 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Weighted
average shares outstanding - Basic
|
9,610,428 | 9,443,347 | 9,611,783 | 9,430,607 | ||||||||||||
Diluted
effect of stock options and restricted stock grants
|
119,293 | 281,492 | 115,604 | - | ||||||||||||
Weighted
average shares outstanding - Diluted
|
9,729,721 | 9,724,839 | 9,727,387 | 9,430,607 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues
from external customers
|
||||||||||||||||
Systems
and Services
|
$ | 68,128 | $ | 53,708 | $ | 135,331 | $ | 108,481 | ||||||||
Metrigraphics
|
1,520 | 1,585 | 2,856 | 3,290 | ||||||||||||
$ | 69,648 | $ | 55,293 | $ | 138,187 | $ | 111,771 | |||||||||
Gross
profit (loss)
|
||||||||||||||||
Systems
and Services
|
$ | 11,113 | $ | 8,109 | $ | 22,373 | $ | 16,670 | ||||||||
Metrigraphics
|
(52 | ) | 192 | (234 | ) | 292 | ||||||||||
$ | 11,061 | $ | 8,301 | $ | 22,139 | $ | 16,962 | |||||||||
Operating
income (loss)
|
||||||||||||||||
Systems
and Services
|
$ | 4,073 | $ | 2,755 | $ | 8,190 | $ | (3,086 | ) | |||||||
Metrigraphics
|
(372 | ) | (111 | ) | (841 | ) | (338 | ) | ||||||||
$ | 3,701 | $ | 2,644 | $ | 7,349 | $ | (3,424 | ) |
•
|
the
ability to make more meaningful period-to-period comparisons of our
ongoing operating results;
|
||
•
|
the
ability to better identify trends in our underlying business and perform
related trend analysis;
|
||
•
|
a
higher degree of transparency for certain expenses (particularly when a
specific charge impacts multiple line items);
|
||
•
|
a
better understanding of how management plans and measures our underlying
business; and
|
||
•
|
an
easier way to compare our most recent results of operations against
investor and analyst financial
models.
|
Six
Months Ended
|
||||||||||||||||||
June
30,
|
||||||||||||||||||
2009
|
2008
|
|||||||||||||||||
(in
millions)
|
$
|
% (2)
|
$ (1)
|
% (2)
|
||||||||||||||
GAAP
operating income (loss)
|
$ | 7.3 | 5.3 | % | $ | (3.4 | ) | (3.1 | )% | |||||||||
Provision
for litigation
|
8.8 | 7.9 | % | |||||||||||||||
Non-GAAP
operating income
|
$ | 5.4 | 4.8 | % | ||||||||||||||
GAAP
income (loss) before provision for income taxes
|
$ | 6.6 | 4.8 | % | $ | (3.5 | ) | (3.2 | )% | |||||||||
Provision
for litigation
|
8.8 | 7.9 | % | |||||||||||||||
Non-GAAP
income before provision for income taxes
|
$ | 5.3 | 4.7 | % | ||||||||||||||
GAAP
provision for income taxes
|
$ | 2.8 | 41.9 | % | (3) | $ | 0.1 | (2.5 | )% |
(3)
|
||||||||
Tax
benefit for provision for litigation
|
2.1 | 24.1 | % |
(3)
|
||||||||||||||
Non-GAAP
provision for income taxes
|
$ | 2.2 | 41.9 | % |
(3)
|
|||||||||||||
GAAP
net income (loss)
|
$ | 3.8 | 2.8 | % | $ | (3.6 | ) | (3.2 | )% | |||||||||
Provision
for litigation, net of tax benefit
|
6.7 | 6.0 | % | |||||||||||||||
Non-GAAP
net income
|
$ | 3.1 | 2.7 | % |
(1)
|
Totals
may not add due to rounding.
|
(2)
|
Represents
a percentage of total revenue of $138.2 million and $111.8 million for the
six months ended June 30, 2009 and 2008, respectively, excluding the
percentages for provision for income taxes and the tax benefit for
provision for litigation.
|
(3)
|
These
amounts represent a percentage of GAAP income (loss) before provision for
income taxes, provision for litigation and non-GAAP income before
provision for income taxes,
respectively.
|
Three
Months Ended June 30,
|
||||||||||||||||||
2009
|
2008
|
|||||||||||||||||
(in
millions)
|
$ (1)
|
%
|
$ (1)
|
%
|
||||||||||||||
Contract
revenue
|
$ | 68.1 | 97.8 | % | $ | 53.7 | 97.1 | % | ||||||||||
Product
sales
|
1.5 | 2.2 | 1.6 | 2.9 | ||||||||||||||
Total
revenue
|
$ | 69.6 | 100.0 | % | $ | 55.3 | 100.0 | % | ||||||||||
Gross
profit on contract revenue (3)
|
$ | 11.1 | 16.3 | % | $ | 8.1 | 15.1 | % | ||||||||||
Gross
profit (loss) on product sales (3)
|
(0.1 | ) | (3.4 | )% | 0.2 | 12.1 | % | |||||||||||
Total
gross profit (3)
|
11.1 | 15.9 | % | 8.3 | 15.0 | % | ||||||||||||
Selling,
general and administrative
|
6.4 | 9.2 | % | 5.1 | 9.3 | % | ||||||||||||
Amortization
of intangible assets
|
1.0 | 1.4 | % | 0.5 | 0.9 | % | ||||||||||||
Operating
income
|
3.7 | 5.3 | % | 2.6 | 4.8 | % | ||||||||||||
Interest
expense, net
|
(0.5 | ) | (0.7 | )% | (0.1 | ) | (0.3 | )% | ||||||||||
Other
income, net
|
0.3 | 0.4 | % | 0.2 | 0.4 | % | ||||||||||||
Provision
for income taxes
|
1.5 | 41.5 | % |
(2)
|
1.1 | 40.6 | % |
(2)
|
||||||||||
Net
income
|
$ | 2.1 | 2.9 | % | $ | 1.6 | 2.9 | % |
Six
Months Ended June 30,
|
||||||||||||||||||
2009
|
2008
|
|||||||||||||||||
(in
millions)
|
$ (1)
|
%
|
$ (1)
|
%
|
||||||||||||||
Contract
revenue
|
$ | 135.3 | 97.9 | % | $ | 108.5 | 97.1 | % | ||||||||||
Product
sales
|
2.9 | 2.1 | 3.3 | 2.9 | ||||||||||||||
Total
revenue
|
$ | 138.2 | 100.0 | % | $ | 111.8 | 100.0 | % | ||||||||||
Gross
profit on contract revenue (3)
|
$ | 22.4 | 16.5 | % | $ | 16.7 | 15.4 | % | ||||||||||
Gross
profit (loss) on product sales (3)
|
(0.2 | ) | (8.2 | )% | 0.3 | 8.9 | % | |||||||||||
Total
gross profit (3)
|
22.1 | 16.0 | % | 17.0 | 15.2 | % | ||||||||||||
Selling,
general and administrative
|
12.8 | 9.3 | % | 10.5 | 9.4 | % | ||||||||||||
Provision
for litigation
|
- | 0.0 | % | 8.8 | 7.9 | % | ||||||||||||
Amortization
of intangible assets
|
1.9 | 1.4 | % | 1.0 | 0.9 | % | ||||||||||||
Operating
income (loss)
|
7.3 | 5.3 | % | (3.4 | ) | (3.1 | )% | |||||||||||
Interest
expense, net
|
(1.1 | ) | (0.8 | )% | (0.3 | ) | (0.3 | )% | ||||||||||
Other
income, net
|
0.3 | 0.2 | % | 0.2 | 0.2 | % | ||||||||||||
Provision
for income taxes
|
2.8 | 41.9 | % | (2) | 0.1 | (2.5 | )% |
(2)
|
||||||||||
Net
income (loss)
|
$ | 3.8 | 2.8 | % | $ | (3.6 | ) | (3.2 | )% |
(1)
|
Totals
may not add due to rounding.
|
(2)
|
The
percentage of provision for income taxes relates to a percentage of income
(loss) before income taxes.
|
(3)
|
These
amounts represent a percentage of contract revenues, product sales and
total revenues, respectively.
|
Three
Months Ended
|
Three
Months Ended June 30,
|
|||||||||||||||||||||||
March 31, 2009 (1)
|
2009
|
2008
|
||||||||||||||||||||||
(in
millions)
|
$ (2)
|
% (2)
|
$ (2)
|
% (2)
|
$ (2)
|
% (2)
|
||||||||||||||||||
National
defense and intelligence agencies
|
$ | 37.2 | 55.3 | % | $ | 36.5 | 53.6 | % | $ | 37.2 | 69.2 | % | ||||||||||||
Federal
civilian agencies
|
10.8 | 16.1 | 11.0 | 16.2 | 6.8 | 12.7 | ||||||||||||||||||
Homeland
Security
|
13.1 | 19.5 | 13.7 | 20.1 | 1.6 | 3.0 | ||||||||||||||||||
State
and local government agencies
|
5.8 | 8.7 | 6.5 | 9.5 | 7.4 | 13.7 | ||||||||||||||||||
Other
|
0.3 | 0.5 | 0.4 | 0.6 | 0.8 | 1.4 | ||||||||||||||||||
Total
contract revenues
|
$ | 67.2 | 100.0 | % | $ | 68.1 | 100.0 | % | $ | 53.7 | 100.0 | % |
Six
Months Ended June 30,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
(in
millions)
|
$ (2)
|
% (2)
|
$ (2)
|
% (2)
|
||||||||||||
National
defense and intelligence agencies
|
$ | 73.7 | 54.5 | % | $ | 78.1 | 72.0 | % | ||||||||
Federal
civilian agencies
|
21.8 | 16.1 | 13.4 | 12.4 | ||||||||||||
Homeland
Security
|
26.8 | 19.8 | 2.9 | 2.7 | ||||||||||||
State
and local government agencies
|
12.3 | 9.1 | 12.6 | 11.6 | ||||||||||||
Other
|
0.7 | 0.5 | 1.4 | 1.3 | ||||||||||||
Total
contract revenues
|
$ | 135.3 | 100.0 | % | $ | 108.5 | 100.0 | % |
(1)
|
Amounts
for the three months ended March 31, 2009 have been reclassified to
conform to current period presentation.
|
(2)
|
Totals
may not add due to rounding.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Time
and materials
|
44 | % | 46 | % | 45 | % | 50 | % | ||||||||
Cost
reimbursable
|
18 | 21 | 18 | 20 | ||||||||||||
Fixed
price, including service type contracts
|
38 | 33 | 37 | 30 | ||||||||||||
100 | % | 100 | % | 100 | % | 100 | % | |||||||||
Prime
contract
|
71 | % | 64 | % | 71 | % | 62 | % | ||||||||
Sub-contract
|
29 | 36 | 29 | 38 | ||||||||||||
100 | % | 100 | % | 100 | % | 100 | % |
Total Number
|
Approximate
|
|||||||||||||||
of
Shares
|
Dollar
Value
|
|||||||||||||||
Purchased
as
|
of Shares that
|
|||||||||||||||
Part
of
|
May
Yet Be
|
|||||||||||||||
Total Number
|
Average
Price
|
Publicly
|
Purchased
|
|||||||||||||
of
Shares
|
Paid
Per
|
Announced
|
Under
the
|
|||||||||||||
Period
|
Purchased
|
Share
|
Programs
|
Programs
|
||||||||||||
April
1, 2009 to April 30, 2009
|
2,750 | $ | 7.70 | - | $ | - | ||||||||||
May
1, 2009 to May 31, 2009
|
119 | $ | 9.02 | - | - | |||||||||||
June
1, 2009 to June 30, 2009
|
- | $ | - | - | - | |||||||||||
Total
|
2,869 | $ | 7.76 | - | $ | - |
Number
of Shares Voted For
|
Number
of
Shares Withheld
|
|||||||
Class
I Directors:
|
||||||||
Lieutenant
General Charles P. McCausland (U.S.A.F., retired)
|
4,705,760 | 2,806,490 | ||||||
General
George T. Babbitt (U.S.A.F., retired)
|
4,712,020 | 2,800,230 |
Class
II Directors:
|
Dr.
Francis J. Aguilar
|
Mr.
John S. Anderegg, Jr.
|
Mr.
Nickolas Stavropoulos
|
Class
III Directors:
|
Mr.
Kenneth F. Kames
|
Mr.
James P. Regan
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
DYNAMICS
RESEARCH CORPORATION
|
|
(Registrant)
|
|
Date: August
10, 2009
|
/s/
David Keleher
|
Senior
Vice President, Chief Financial Officer and Treasurer
|
|
(Principal
Financial Officer)
|
|
Date: August
10, 2009
|
/s/
Shaun N. McCarthy
|
Vice
President, Corporate Controller and Chief Accounting
Officer
|
|
(Principal
Accounting Officer)
|
|