* Revenue: Up 31% to $296 million FAIRFAX, Va., May 1
/PRNewswire-FirstCall/ -- SRA International, Inc. (NYSE:SRX), a
leading provider of technology and strategic consulting services
and solutions to federal government organizations, today announced
operating results for the third quarter of fiscal year 2006, which
ended March 31, 2006. Revenue increased 31% from $226.0 million in
the March 2005 quarter to $296.1 million. Excluding the effect of
FAS 123R, operating income increased 15% from $22.8 million in the
March 2005 quarter to $26.2 million, and net income increased 14%
from $14.7 million in the March 2005 quarter to $16.7 million.
Excluding the effect of FAS 123R, diluted earnings per share
increased $0.03 from $0.26 in the March 2005 quarter to $0.29. On
July 1, 2005, the Company adopted Financial Accounting Standards
Board Statement No. 123R, which requires the Company to recognize
share-based payment transactions as a compensation expense in its
financial statements. Including the effect of FAS 123R, quarterly
GAAP operating income was $23.0 million, net income was $14.8
million, and diluted earnings per share were $0.26. Management
believes that excluding the effect of FAS 123R provides a better
comparison with prior results. A reconciliation of GAAP results
with results excluding the effect of FAS 123R is provided at the
end of this press release. Renny DiPentima, SRA President and Chief
Executive Officer, stated, "Seeing an abundance of near-term bid
opportunities, we invested heavily in the third quarter to capture
as much of that new business as possible. We are pleased with our
awards total for the quarter and plan to continue making smart
investments going forward." Chief Financial Officer Stephen Hughes
added, "Cash flows and new business wins were strong in the March
quarter. Though revenue and earnings were dampened in part by
heightened bid and proposal activity, our heritage and hallmark of
success has been to invest for long-term growth." New Business
Awards SRA won new business with potential value of $390 million
during the third quarter. Over the last twelve months, the Company
won new business with a potential value of $1.9 billion, if all
options are exercised. The Company's backlog of signed business
orders is $3.2 billion, a year-over-year increase of 30%. Major
highlights of competitive contract awards during the quarter
include: * U.S. Navy Military Sealift Command (MSC), Afloat
Systems. SRA was awarded a six-year, $108 million task order to
supply the MSC with services to the IT systems that support its
afloat operations. MSC provides ocean transportation of equipment,
fuel, supplies, and ammunition to sustain U.S. forces worldwide. *
Small Business Administration (SBA), Disaster Credit Management
System (DCMS). Under this five-year, $54 million contract, SRA will
continue to deliver end-to-end development and operations services
for the DCMS. This web-based system will be upgraded to support
increased activity in processing loans to families and businesses
recovering from disasters. * U.S. Air Force Battle Control System
(BCS), Single Integrated Air Picture (SIAP). The SIAP enhances the
flexibility, integration and consistency of the U.S. military's
view of battlefield airspace. For this two-year, $28 million task
order issued under the U.S. Army's CECOM Rapid Response contract,
the SRA team will support the integration of SIAP into the Air
Force's Battle Control System. * Department of Defense, Defense
Manpower Data Center (DMDC). SRA won a two-year, $17 million task
order to provide enterprise architecture and database management
support for the DMDC. An SRA client for over twenty years, DMDC
maintains DoD's archive of personnel, manpower, training, security,
and financial data. * Department of Defense, Office of the
Secretary of Defense. SRA was awarded a competitive task order to
provide program support services to the Defense Systems
Directorate, which provides oversight of military acquisition
programs with an emphasis on interoperability of systems. Under
this five-year, $10 million contract, we will deliver program
support for systems engineering and analysis, technology
identification, evaluation and demonstration, and information
integration analysis. SRA was also awarded a significant indefinite
delivery/indefinite quantity (ID/IQ) contract during the quarter.
This award's value is not included in the quarterly win total or
backlog. * Department of Homeland Security (DHS), National Exercise
Program (NEP). Under this ID/IQ contract, SRA will compete for task
orders to prepare federal, state, and local responders to prevent
and respond to acts of terrorism by providing the tools for
conducting and evaluating training exercises. This contract has a
ceiling value of $350 million. Forward Guidance The Company is
reconfirming the guidance it issued April 20, 2006 for the fourth
quarter and full fiscal year 2006. The table below represents
management's current expectations about the Company's future
financial performance, based on information available at this time.
The forward guidance in the table below does not include any effect
for acquisitions that SRA might make in the future. Measure Quarter
Ending Fiscal Year Ending June 30, 2006 June 30, 2006 Revenue (in
millions) $296-$306 $1,178-$1,188 Diluted EPS, excluding effect of
FAS 123R $0.30-$0.32 $1.18-$1.20 FAS 123R effect ($0.03) ($0.13)
Diluted EPS, including effect of FAS 123R $0.27-$0.29 $1.05-$1.07
Diluted Share Equivalents (in millions) 58.3 57.8 About SRA
International, Inc. SRA is a leading provider of technology and
strategic consulting services and solutions -- including 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, enterprise
architecture, 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 seven
consecutive years. In 2005, Business Week selected SRA as one of
its "Hot Growth" companies and as an Info Tech 100 Company. The
Company's 4,900 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 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 February 2, 2006. In addition, the
forward-looking statements included in this press release represent
our views as of May 1, 2006. 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 1, 2006.
Pro Forma Condensed Consolidated Statement of Operations for the
Three Months Ended March 31, 2006 (Unaudited) (in thousands, except
share and per share amounts) The Company has presented net income,
as adjusted, to show the effect that the adoption of FAS 123R had
on the Company's earnings per share. The Company believes that
these non-GAAP financial measures provide useful information to
investors because they allow investors to compare the Company's
current performance to prior performance and to the performance of
companies that have not yet adopted FAS 123R. 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-Mar-06 31-Mar-06 3 months 3 months
ended Adjustments ended Revenue $296,098 $- $296,098 Operating
costs and expenses: Cost of services 220,256 - 220,256 Selling,
general and administrative 48,134 (3,162) 44,972 (1) Depreciation
and amortization 4,689 - 4,689 Total operating costs and expenses
273,079 (3,162) 269,917 Operating income 23,019 3,162 26,181
Interest income, net 826 - 826 Pro forma income before taxes 23,845
3,162 27,007 Pro forma provision for taxes 9,062 1,233 10,295 (2)
Pro forma net income $14,783 1,929 $16,712 Pro forma earnings per
share: Basic $0.27 $0.03 $0.30 Diluted $0.26 $0.03 $0.29
Weighted-average shares Basic 55,371,625 - 55,371,625 Diluted
57,947,723 37,234 57,984,957 (1) Adjusted to eliminate the FAS 123R
stock compensation expense resulting from the adoption of FAS 123R
on July 1, 2005. (2) Adjusted to eliminate the tax effect of the
adjustment described in Note 1 at the consolidated marginal tax
rate of 39.0%. Condensed Consolidated Statements of Operations
(Unaudited) (in thousands, except share and per share amounts)
Three Months Ended Nine Months Ended 3/31/06 3/31/05 3/31/06
3/31/05 Revenue $296,098 $226,018 $882,106 $640,704 Operating costs
and expenses: Cost of services 220,256 168,299 661,500 475,787
Selling, general and administrative 48,134 31,659 137,237 90,781
Depreciation and amortization 4,689 3,308 13,342 9,345 Total
operating costs and expenses 273,079 203,266 812,079 575,913
Operating income 23,019 22,752 70,027 64,791 Interest income, net
826 970 2,596 2,247 Income before taxes 23,845 23,722 72,623 67,038
Provision for income taxes 9,062 9,028 27,547 25,181 Net income
$14,783 $14,694 $45,076 $41,857 Earnings per share: Basic $0.27
$0.28 $0.82 $0.79 Diluted $0.26 $0.26 $0.78 $0.74 Weighted-average
shares: Basic 55,371,625 53,409,298 54,815,017 52,665,586 Diluted
57,947,723 56,882,406 57,627,037 56,300,030 Condensed Consolidated
Balance Sheets (Unaudited) (in thousands, except per share amounts)
As of 3/31/06 6/30/05 Current assets: Cash and cash equivalents
$154,469 $162,973 Short-term investments 5,113 20,156 Accounts
receivable, net 272,389 206,995 Prepaid expenses and other 19,092
19,931 Deferred income taxes, current 3,812 6,506 Total current
assets 454,875 416,561 Property and equipment, net 33,171 34,754
Other assets: Goodwill 169,334 89,214 Identified intangibles, net
26,825 17,661 Investments - 5,172 Deferred income taxes, noncurrent
1,986 - Deferred compensation trust 7,800 5,755 Total other assets
205,945 117,802 Total assets $693,991 $569,117 Current liabilities:
Accounts payable and accrued expenses $103,255 $75,383 Accrued
payroll and employee benefits 66,667 49,486 Billings in excess of
revenue recognized 3,756 6,616 Total current liabilities 173,678
131,485 Long-term liabilities: Deferred income taxes, noncurrent -
106 Other long-term liabilities 9,649 8,434 Total long-term
liabilities 9,649 8,540 Total liabilities 183,327 140,025
Stockholders' equity 510,664 429,092 Total liabilities and
stockholders' equity $693,991 $569,117 Condensed Consolidated
Statements of Cash Flows (Unaudited) (in thousands) Nine Months
Ended 3/31/06 3/31/05 Cash flows from operating activities: Net
income $45,076 $41,857 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization 13,342 9,345 Stock-based compensation 9,742 239 Tax
benefits of stock option exercises - 14,344 Deferred income taxes
602 (3,754) Working capital changes, net of the effect of
acquisitions (12,487) 2,709 Net cash provided by operating
activities 56,275 64,740 Cash flows from investing activities:
Capital expenditures (7,782) (12,175) Sales and maturities of
investments 20,696 12,791 Purchases of investments - (18,516)
Acquisition of Galaxy Scientific Corporation, net of cash acquired
(95,645) - Acquisition of Spectrum Solutions Group, net of cash
acquired (8,802) - Net cash used in investing activities (91,533)
(17,900) Cash flows from financing activities: Issuance of common
stock 11,053 8,130 Tax benefits of stock option exercises 11,711 -
Reissuance of treasury stock 3,990 3,488 Net cash provided by
financing activities 26,754 11,618 Net (decrease) increase in cash
and cash equivalents (8,504) 58,458 Cash and cash equivalents,
beginning of period 162,973 143,367 Cash and cash equivalents, end
of period $154,469 $201,825 Supplemental disclosures of cash flow
information: Cash paid during the period: Income taxes $22,229
$15,461 Cash received during the period: Interest $2,966 $2,493
Income taxes $766 $556 Reconciliation Between Total Revenue Growth
and Organic Revenue Growth (Unaudited) (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
3/31/06 3/31/05 Growth Total Revenue, as reported $296,098 $226,018
31.0% Plus: Revenue from acquired companies for the comparable
prior year period 36,148 Organic Revenue $296,098 $262,166 12.9%
DATASOURCE: SRA International, Inc. CONTACT: David Keffer, Director
of Investor Relations, +1-703-502-7731, , or Stephen Hughes,
Executive VP and CFO, +1-703-227-8350, , both of SRA International,
Inc. Web site: http://www.sra.com/
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