SRX Sra International

SRA Announces Financial Results for Third Quarter Fiscal Year 2005 * Revenue $226.0 Million, up 41% from Third Quarter Fiscal Year 2004 FAIRFAX, Va., May 2 /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 third quarter of fiscal year 2005, which ended March 31, 2005. Revenue increased 41% from $160.0 million in the March 2004 quarter to $226.0 million. Operating income increased 41% from $16.2 million in the March 2004 quarter to $22.8 million. Net income increased 44% from $10.2 million in the March 2004 quarter to $14.7 million. Diluted earnings per share increased 41% from $0.37 in the March 2004 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. Our backlog of signed business orders grew and our pipeline of new opportunities increased significantly. Since the quarter's close, we acquired Touchstone Consulting Group, Inc., a growing and trusted provider of management consulting services to senior officials throughout the federal government." Chief Financial Officer Stephen Hughes added, "We are very pleased with the March quarter results. Year over year earnings were up sharply again, even as we continue to invest in the business. Cash flow from operations was 1.8 times net income for the quarter and 1.5 times net income for the fiscal year to date. We ended the quarter with $230 million of cash and investments and no debt. Subsequently, we were pleased to deploy some of this capital to acquire Touchstone, which we expect to be accretive to earnings per share." The Company also announced that its board of directors today declared a two-for-one stock split in the form of a 100 percent stock dividend on the Company's common stock. The dividend is payable on May 27, 2005 to shareholders of record May 13, 2005. New Business Awards During the third quarter, SRA won new business across its diversified customer portfolio with potential value of $359 million. The Company backlog of signed business orders is $2.5 billion. Major highlights of competitive contract awards during the quarter include: * Missile Defense Agency (MDA) Enterprise Information Management System (EIMS). SRA will provide program management, information architecture, and engineering and technical support service to support an EIMS for MDA. The system enables MDA to better organize, retrieve, secure, and store business and mission information and data to aid in collaboration and decision making. The task order has an estimated value of $86.4 million over five years if all options are exercised. * Office of Child Support Enforcement (OCSE) Federal Parent Locator Service (FPLS) Support. SRA will provide a broad range of program management, technical monitoring, and technical and operational support for the FPLS program, which is managed by the OCSE within the Department of Health and Human Services. In 2003, FPLS systems helped to collect more than $21 billion in child support payments, defaulted education loans, and grant overpayments. The task order has an estimated value of $59.9 million over five years if all options are exercised. * Department of Justice (DOJ) U.S. Trustee Program (USTP) Support. SRA will provide database management systems and services to support USTP systems for managing and enforcing the nation's bankruptcy laws and regulations. The task order has an estimated value of $24.6 million over seven years if all options are exercised. Forward Guidance SRA is raising forward guidance for the fourth quarter and fiscal year 2005 as shown in the table below. These amounts represent management's current expectations about the Company's future financial performance, based on information available at this time. The forward guidance reflects the expected financial contribution of the Touchstone acquisition for about two months, but does not include any effect for additional acquisitions SRA might undertake in the future. Pro-Forma Guidance as if No Split Measure Quarter Ending Fiscal Year Ending June 30, 2005 June 30, 2005 Revenue (in millions) $227-$232 $868-$873 Diluted Earnings Per Share $0.51-$0.53 $2.00-$2.02 Diluted Share Equivalents (in millions) 28.6 28.3 Previously, the Company provided guidance for the fourth quarter of fiscal year 2005 revenue of $220-$227 million and diluted earnings per share of $0.50-$0.52 based on 28.6 million diluted share equivalents and fiscal year 2005 revenue of $848-$860 million and diluted earnings per share of $1.95- $1.99 based on 28.3 million diluted share equivalents. Guidance Following 2:1 Split Measure Quarter Ending Fiscal Year Ending June 30, 2005 June 30, 2005 Revenue (in millions) $227-$232 $868-$873 Diluted Earnings Per Share $0.26-$0.27 $1.00-$1.01 Diluted Share Equivalents (in millions) 57.2 56.6 Fiscal year-to-date net income is $41.9 million, yielding pre-split diluted earnings per share of $1.49 and post-split diluted earnings per share of $0.74. 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 managed services -- to clients in national security, civil government, and health care and public health markets. The Company also delivers business solutions for text and data mining, contingency and disaster response planning, information assurance, environmental strategies, enterprise systems management, and wireless integration. FORTUNE(R) magazine has chosen SRA as one of the "100 Best Companies to Work For" for six consecutive years. In 2004, SRA was named Large Government Contractor of the Year by the Northern Virginia Government Contractors Council, the Professional Services Council, and Washington Technology. The Company's 4,000 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 January 31, 2005. In addition, the forward-looking statements included in this press release represent our views as of May 2, 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 May 2, 2005. Consolidated Statements of Operations (Unaudited) (in thousands, except share and per share amounts) Three Months Ended Nine Months Ended 3/31/04 3/31/05 3/31/04 3/31/05 Revenue $159,962 $226,018 $434,942 $640,704 Operating costs and expenses: Cost of services 114,364 168,299 311,548 475,787 Selling, general, and administrative 26,624 31,659 73,228 90,781 Depreciation and amortization 2,786 3,308 7,513 9,345 Total operating costs and expenses 143,774 203,266 392,289 575,913 Operating income 16,188 22,752 42,653 64,791 Interest income 391 970 1,205 2,247 Other income - - 153 - Income before taxes 16,579 23,722 44,011 67,038 Provision for income taxes 6,383 9,028 16,950 25,181 Net income $10,196 $14,694 $27,061 $41,857 Earnings per share: Basic $0.40 $0.55 $1.07 $1.59 Diluted $0.37 $0.52 $0.99 $1.49 Weighted-average shares: Basic 25,631,969 26,704,649 25,402,184 26,332,793 Diluted 27,457,409 28,441,203 27,307,920 28,150,015 Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except per share amounts) As of 6/30/04 3/31/05 Current assets: Cash and cash equivalents $143,367 $201,825 Short-term investments 9,076 15,646 Accounts receivable, net 164,162 201,683 Prepaid expenses and other 23,053 19,433 Deferred income taxes, current 4,442 7,367 Total current assets 344,100 445,954 Property and equipment, net 23,498 27,690 Other assets: Goodwill 62,747 62,747 Identified intangibles, net 13,168 11,806 Investments 13,719 12,874 Deferred compensation trust 4,661 5,110 Total other assets 94,295 92,537 Total assets $461,893 $566,181 Current liabilities: Accounts payable and accrued expenses $66,230 $89,276 Accrued payroll and employee benefits 39,798 54,191 Billings in excess of revenue recognized 8,276 8,144 Total current liabilities 114,304 151,611 Long-term liabilities: Deferred income taxes, noncurrent 1,612 783 Other long-term liabilities 6,709 6,461 Total long-term liabilities 8,321 7,244 Total liabilities 122,625 158,855 Stockholders' equity: Preferred stock, $0.20 par value - - Class A common stock, $0.004 par value 97 103 Class B common stock, $0.004 par value 39 37 Additional paid-in capital 241,831 267,471 Treasury stock, at cost (46,560) (46,262) Deferred stock-based compensation (716) (457) Retained earnings 144,577 186,434 Total stockholders' equity 339,268 407,326 Total liabilities and stockholders' equity $461,893 $566,181 Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine Months Ended 3/31/04 3/31/05 Cash flows from operating activities: Net income $27,061 $41,857 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 7,513 9,345 Stock-based compensation 177 239 Tax benefits of stock option exercises 5,840 14,344 Deferred income taxes (465) (3,754) Working capital changes (418) 2,709 Net cash provided by operating activities 39,708 64,740 Cash flows from investing activities: Capital expenditures (7,759) (12,175) Sales and maturities of investments 1,083 12,791 Acquisition of ORION Scientific Systems, net of cash acquired (32,927) - Purchases of investments - (18,516) Net cash used in investing activities (39,603) (17,900) Cash flows from financing activities: Issuance of common stock 4,470 8,130 Purchase of treasury stock (145) - Reissuance of treasury stock 3,134 3,488 Repayment of term loan (400) - Net cash provided by financing activities 7,059 11,618 Net increase in cash and cash equivalents 7,164 58,458 Cash and cash equivalents, beginning of period 158,264 143,367 Cash and cash equivalents, end of period $165,428 $201,825 Supplemental disclosures of cash flow information: Cash paid during the period -- Income taxes $5,289 $15,461 Cash received during the period -- Interest $1,057 $2,493 Income taxes $583 $556 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 3/31/04 3/31/05 Growth Total Revenue, as reported $159,962 $226,018 41.3% Plus: Orion revenue for January 1, 2004 through January 31, 2004 2,424 - - Organic Revenue $162,386 $226,018 39.2% Nine Months Ended 3/31/04 3/31/05 Growth Total Revenue, as reported $434,942 $640,704 47.3% Plus: Orion revenue for July 1, 2003 through January 31, 2004 19,392 - - Organic Revenue $454,334 $640,704 41.0% Pro Forma Statements Of Operations For The Three Months Ended December 31, 2004 and March 31, 2005 (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 quarters ended December 31, 2004 and March 31, 2005. The Company believes that these non-GAAP financial measures provide useful information to investors because it allows investors to compare the Company's current performance to the prior quarter performance, excluding the one-time items, on a consistent basis. These non- GAAP financial measures 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 Ended Adjustments 3 Months 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 Weighted-average shares Basic 26,300,719 - 26,300,719 Diluted 28,238,454 - 28,238,454 As Reported Pro Forma 31-Mar-05 31-Mar-05 3 Months Ended Adjustments 3 Months Ended Revenue $226,018 $- $226,018 Operating costs and expenses: Cost of services 168,299 - 168,299 Selling, general and administrative 31,659 - 31,659 Depreciation and amortization 3,308 - 3,308 Total operating costs and expenses 203,266 - 203,266 Operating income 22,752 - 22,752 Interest income 970 - 970 Pro forma income before taxes 23,722 - 23,722 Pro forma provision for taxes 9,028 105 9,133(3) Pro forma net income $14,694 105 $14,589 Pro forma earnings per share: Basic $0.55 $(0.01) $0.55 Diluted $0.52 $(0.01) $0.51 Weighted-average shares Basic 26,704,649 - 26,704,649 Diluted 28,441,203 - 28,441,203 (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. (3) Adjusted to eliminate net one-time tax benefits primarily from prior years state tax refund claims. 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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