SRX Sra International

SRA Announces Financial Results for Second Quarter Fiscal Year 2005 * Revenue $211.2 Million, Up 48% From Second Quarter Fiscal Year 2004 * Net Income $14.7 Million, Up 63% From Second Quarter Fiscal Year 2004 * Diluted EPS $0.52, Up 58% From Second Quarter Fiscal Year 2004 * Raising Guidance for Fiscal Year 2005 FAIRFAX, Va., Jan. 31 /PRNewswire-FirstCall/ -- SRA International, Inc. (NYSE:SRX), a leading provider of information technology services and solutions to the federal government, today announced operating results for the second quarter of fiscal year 2005, which ended December 31, 2004. Revenue increased 48% from $143.0 million in the December 2003 quarter to $211.2 million. Operating income increased 59% from $14.0 million in the December 2003 quarter to $22.3 million. Operating income margin was 10.5% compared to 9.8% last year. Net income increased 63% from $9.0 million in the December 2003 quarter to $14.7 million. Diluted earnings per share increased 58% from $0.33 for the December 2003 quarter to $0.52. Renny DiPentima, SRA CEO, stated, "We are pleased to announce another outstanding quarter marked by strong growth in revenue and earnings and excellent project execution. We are gratified by our selection this month by FORTUNE(R) magazine as one of the '100 Best Companies to Work For' for the sixth consecutive year. Our ethic of 'Honesty and Service' remains the foundation for our success." Chief Financial Officer Stephen Hughes added, "Revenue and earnings were up sharply compared with last year as hiring accelerated and attrition declined. Cash flows from operations year to date were $38.4 million or 1.4 times net income." New Business Awards During the second quarter, SRA won new business across its diversified customer portfolio with potential value of $231 million. The Company backlog of signed business orders is $2.4 billion. Major highlights of competitive contract awards during the quarter include: * Drug Enforcement Administration (DEA) Firebird Information Technology Services (FITS). SRA will provide comprehensive IT engineering services for Firebird, which is the core DEA local-area network/wide- area network providing access to mission-critical business applications and information to over 15,000 users throughout the world. The performance-based contract has an estimated value of $47 million over five years if all options are exercised. * Navy Military Sealift Command (MSC) Afloat Operations and Maintenance. SRA has been awarded a competitive task order to provide operations and maintenance services for the IT systems that support ocean transportation of equipment, fuel, supplies, and ammunition to sustain U.S. forces worldwide. Awarded under the Millennia contract, the performance-based task order has an estimated value of $18 million over one year. * Air Force Distributed Common Ground System (DCGS) Formal Training Unit (FTU). SRA will develop Web-based course technology, interactive courseware, and e-learning solutions for the DCGS, which is the Air Force's multi-intelligence, network-centric weapon system that provides decision quality information to the Joint Task Force and the Air Operations Center. Awarded under the Millennia Lite contract, the task order has an estimated value of $19 million over five years if all options are exercised. The Company also won two major Indefinite Delivery Indefinite Quantity (IDIQ) contracts during the quarter. None of the $1.8 billion in contract ceiling from these awards is included in the quarterly win total or backlog. * Department of Justice Information Technology Support Services (ITSS- 3). SRA is one of twelve companies selected as prime contractor under the ITSS-3 IDIQ contract. Virtually any IT service can be performed under this multiple-agency contract, which has a $980 million ceiling over seven years. * Air Force Center for Environmental Excellence (AFCEE) Global Engineering, Integration and Technical Assistance (GEITA). SRA is one of five companies selected as prime under the GEITA program at the AFCEE. Under this $850 million, five-year, IDIQ contract, the Air Force will procure a broad range of environmental engineering, management, technical, and analytic services. Forward Guidance The Company is issuing initial guidance for the third and fourth quarters of fiscal year 2005 and raising its forward guidance for the full fiscal year 2005. The table below represents management's current expectations about the Company's future financial performance, based on information available at this time. These amounts do not include any effect for acquisitions SRA might make in the future. Measure Quarter Ending Quarter Ending FY Ending March 31, 2005 June 30, 2005 June 30, 2005 Revenue (in millions) $213-$218 $220-$227 $848-$860 Diluted EPS $0.48-$0.50 $0.50-$0.52 $1.95-$1.99 Diluted Share Equivalents (in millions) 28.5 28.6 28.3 Previously, the Company provided guidance for fiscal year 2005 revenue of $800-$830 million and diluted earnings per share of $1.82-$1.92 based on 27.9 million shares. About SRA International, Inc. SRA is a leading provider of information technology services and solutions -- including strategic consulting; systems design, development and integration; and outsourcing and operations management -- to clients in national security, civil government markets, and health care and public health. The Company also develops business solutions for text and data mining, contingency and disaster response planning, information assurance, environmental strategies, conflict management and dispute resolution, enterprise architecture, network operations and management, enterprise systems management, and wireless integration services. FORTUNE(R) magazine has chosen SRA as one of the "100 Best Companies to Work For" for six consecutive years. The Company's 3,800 employees serve clients from its headquarters in Fairfax, Virginia, and offices across the country. For additional information on SRA, please visit http://www.sra.com/. Any statements in this press release about future expectations, plans, and prospects for SRA, including statements about the estimated value of the contract and work to be performed, and other statements containing the words "estimates," "believes," "anticipates," "plans," "expects," "will," and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: our dependence on our contracts with federal government agencies, particularly within the U.S. Department of Defense, for substantially all of our revenue, our dependence on our GSA schedule contracts and our position as a prime contractor on government-wide acquisition contracts to grow our business, and other factors discussed in our latest quarterly report on Form 10-Q filed with the SEC on November 1, 2004. In addition, the forward-looking statements included in this press release represent our views as of January 31, 2005. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to January 31, 2005. Consolidated Statements of Operations (Unaudited) (in thousands, except share and per share amounts) Three Months Ended Six Months Ended 12/31/03 12/31/04 12/31/03 12/31/04 Revenue $ 143,002 $ 211,212 $ 274,980 $ 414,686 Operating costs and expenses: Cost of services 103,065 155,942 197,184 307,488 Selling, general, and administrative 23,457 29,846 46,604 59,122 Depreciation and amortization 2,460 3,155 4,727 6,037 Total operating costs and expenses 128,982 188,943 248,515 372,647 Operating income 14,020 22,269 26,465 42,039 Interest income 421 754 814 1,277 Other income 153 - 153 - Income before taxes 14,594 23,023 27,432 43,316 Provision for income taxes 5,560 8,300 10,567 16,153 Net income $ 9,034 $ 14,723 $ 16,865 $ 27,163 Earnings per share: Basic $ 0.36 $ 0.56 $ 0.67 $ 1.04 Diluted $ 0.33 $ 0.52 $ 0.62 $ 0.97 Weighted-average shares: Basic 25,389,111 26,300,719 25,287,291 26,146,865 Diluted 27,378,314 28,238,454 27,233,176 28,004,422 Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except per share amounts) As of 6/30/04 12/31/04 Current assets: Cash and cash equivalents $ 143,367 $ 169,138 Short-term investments 9,076 11,178 Accounts receivable, net 164,162 193,070 Prepaid expenses and other 23,053 42,494 Deferred income taxes, current 4,442 5,448 Total current assets 344,100 421,328 Property and equipment, net 23,498 26,040 Other assets: Goodwill 62,747 62,747 Identified intangibles, net 13,168 12,260 Investments 13,719 21,618 Deferred compensation trust 4,661 5,143 Total other assets 94,295 101,768 Total assets $ 461,893 $ 549,136 Current liabilities: Accounts payable and accrued expenses $ 66,230 $ 93,837 Accrued payroll and employee benefits 39,798 56,208 Billings in excess of revenue recognized 8,276 11,085 Total current liabilities 114,304 161,130 Long-term liabilities: Deferred income taxes, noncurrent 1,612 1,051 Other long-term liabilities 6,709 6,488 Total long-term liabilities 8,321 7,539 Total liabilities 122,625 168,669 Stockholders' equity: Preferred stock, $0.20 par value - - Class A common stock, $0.004 par value 97 101 Class B common stock, $0.004 par value 39 38 Additional paid-in capital 241,831 255,705 Treasury stock, at cost (46,560) (46,580) Deferred stock-based compensation (716) (537) Retained earnings 144,577 171,740 Total stockholders' equity 339,268 380,467 Total liabilities and stockholders' equity $ 461,893 $ 549,136 Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Six Months Ended 12/31/03 12/31/04 Cash flows from operating activities: Net income $ 16,865 $ 27,163 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,727 6,037 Stock-based compensation 105 159 Tax benefits of stock option exercises 4,155 8,816 Deferred income taxes 541 (1,567) Working capital changes 6,141 (2,226) Net cash provided by operating activities 32,534 38,382 Cash flows from investing activities: Capital expenditures (5,047) (7,671) Sales and maturities of investments 1,083 8,515 Purchases of investments - (18,516) Net cash used in investing activities (3,964) (17,672) Cash flows from financing activities: Issuance of common stock 2,778 5,061 Purchase of treasury stock (145) - Repayment of term loan (400) - Net cash provided by financing activities 2,233 5,061 Net increase in cash and cash equivalents 30,803 25,771 Cash and cash equivalents, beginning of period 158,264 143,367 Cash and cash equivalents, end of period $ 189,067 $ 169,138 Supplemental disclosures of cash flow information: Cash paid during the period: Income taxes $ 53 $ 14,209 Cash received during the period: Interest $ 753 $ 1,264 Income taxes $ 77 $ 513 Reconciliation Between Total Revenue Growth and Organic Revenue Growth (in thousands) Organic revenue growth, as presented, measures revenue growth adjusted for the impact of acquisitions. The Company believes that this non-GAAP financial measure provides useful information because it allows investors to better assess the underlying growth rate of the Company's existing business. This non-GAAP financial measure should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Three Months Ended 12/31/03 12/31/04 Growth Total Revenue, as reported $ 143,002 $ 211,212 47.7% Plus: Orion revenue for October 1, 2003 through December 31, 2003 8,068 - - Organic Revenue $ 151,070 $ 211,212 39.8% Six Months Ended 12/31/03 12/31/04 Growth Total Revenue, as reported $ 274,980 $ 414,686 50.8% Plus: Orion revenue for July 1, 2003 through December 31, 2003 16,968 - - Organic Revenue $ 291,948 $ 414,686 42.0% Pro Forma Statement Of Operations For The Three Months Ended December 31, 2004 (in thousands) The Company has presented net income, as adjusted, to show the effect that one-time items had on the Company's earnings per share for the quarter ended December 31, 2004. The Company believes that this non-GAAP financial measure provides useful information to investors because it allows investors to compare the Company's current performance to prior year performance, excluding the one-time items, on a consistent basis. This non-GAAP financial measure should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. As Reported Pro Forma 31-Dec-04 31-Dec-04 3 months 3 months ended Adjustments ended Revenue $ 211,212 $ - $ 211,212 Operating costs and expenses: Cost of services 155,942 - 155,942 Selling, general and administrative 29,846 478 30,324(1) Depreciation and amortization 3,155 - 3,155 Total operating costs and expenses 188,943 478 189,421 Operating income 22,269 (478) 21,791 Interest income 754 - 754 Pro forma income before taxes 23,023 (478) 22,545 Pro forma provision for taxes 8,300 391 8,691(2) Pro forma net income $ 14,723 (869) $ 13,854 Pro forma earnings per share: Basic $ 0.56 $ (0.03) $ 0.53 Diluted $ 0.52 $ (0.03) $ 0.49 Pro forma weighted-average shares Basic 26,300,719 - 26,300,719 Diluted 28,238,454 - 28,238,454 (1) Adjusted to eliminate a one-time reduction in expenses as a result of resolving two vendor issues during the quarter ended December 31, 2004. (2) Adjusted to eliminate the tax effect of the adjustment described in Note 1 at the consolidated effective tax rate of 36.1% and to eliminate the one-time tax benefits from Virginia job creation tax credits and a refund from a prior federal tax return. DATASOURCE: SRA International, Inc. CONTACT: Stuart Davis, Vice President and Director, Investor Relations, +1-703-502-7731, , or Stephen Hughes, Senior Vice President and CFO, +1-703-227-7010, , both of SRA International, Inc. Web site: http://www.sra.com/

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