-- Revenue of $321 Million FAIRFAX, Va., Jan. 31
/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 second quarter of fiscal year 2007, which
ended December 31, 2006. Revenue for the quarter was $321.0
million, up 5% from $305.3 million in the December 2005 quarter.
Operating income for the quarter was $22.1 million, and net income
was $16.7 million. Diluted earnings per share for the quarter were
$0.29, including a 3.8 cent gain from the sale of the Company's
interest in Mantas Inc. Renny DiPentima, SRA President and Chief
Executive Officer, stated, "While December quarter revenue exceeded
our previous guidance, earnings per share was a penny below
guidance. Challenging market conditions have led to contract delays
and pricing pressure in both our Defense and Civil businesses,
which in turn have significantly affected our growth outlook and
profitability for the next two quarters." Chief Financial Officer
Stephen Hughes added, "In the current environment, we continue to
bid and pursue new opportunities, but contract awards and revenues
have been pushed out and, as a result, near term operating margins
and earnings are now below previous expectations." New Business
Awards The Company won new business in the second quarter with
potential value of $281 million, if all options are exercised. The
Company's backlog of signed business orders is $3.7 billion, an
increase of 16% over the December 2005 quarter. Major highlights of
competitive contract awards during the quarter include: *
Department of Agriculture, Web-Based Supply Chain Management
System. Under this five-year, $91 million contract, SRA will
develop and maintain a system to support food assistance programs
operated across the world. Services will include commercial
off-the-shelf software integration, information security,
operations and maintenance. * Environmental Protection Agency
(EPA), Brownfields Program. SRA won two major recompete contracts
for the EPA in the December quarter, both in support of the
Brownfields Program. The contracts have a combined value of $51
million and involve technology and professional services such as
enterprise architecture, systems development, program planning and
communications. * Internal Revenue Service (IRS). The IRS awarded
three recompete contracts and one new contract to SRA as a
subcontractor under the Total Information Processing Support
Services (TIPSS-3) vehicle. With a combined value over $26 million,
these task orders involve technology services such as network and
systems management. * Department of Defense (DoD), TRICARE
Management Activity. Under this 5- year, $14 million contract, SRA
will deliver technical and analytical services to the Office of
Business and Economic Analysis (BEA). For the past 13 years, the
Company has supported the BEA in its management of the Military
Health System. * United States Forest Service (USFS), NIST-800
Implementation. SRA will implement a new system to ensure USFS's
adherence to information security guidelines dictated by the
National Institute of Standards and Technology under this 15-month,
$10 million contract. SRA was also awarded several multiple-award,
indefinite delivery, indefinite quantity (ID/IQ) contracts in the
December quarter. These wins do not contribute to the Company's
quarterly bookings figure, but they provide a solid foundation for
future growth. * Department of Veterans Affairs (VA). SRA is a
teammate of Perot Systems, one of three large businesses awarded
this Blanket Purchase Agreement (BPA) by the VA. With a total
ceiling value of $1 billion, the BPA will cover information
technology services in support of the Veterans Health Information
Systems and Technology Architecture. In addition, as of December
31, 2006, the Company has approximately $1.4 billion of pending
bids outstanding. Other Highlights FORTUNE(R) magazine selected SRA
as one of the "100 Best Companies to Work For" for the eighth
consecutive year. The list is based on an evaluation of the
policies and culture of each company and the opinions of the
company's employees. SRA is the highest-ranked publicly traded firm
in the Washington, DC area on this year's list. Forward Guidance
The Company is issuing initial guidance for the third and fourth
quarters of fiscal year 2007 and updating its forward guidance for
fiscal year 2007 provided on November 1, 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 SRA might make in the future. Measure
Quarter Ending Quarter Ending Fiscal Year Ending March 31, 2007
June 30, 2007 June 30, 2007 Revenue (in millions) $310-$325
$325-$340 $1,260-$1,290 Diluted EPS $0.25-$0.26 $0.26-$0.27
$1.06-$1.08 Diluted Share Equivalents (in millions) 58.5 59.0 58.5
On November 1, 2006, the company issued fiscal year 2007 revenue
guidance of $1.330 to $1.370 billion and Diluted EPS guidance of
$1.20 to $1.28. At its midpoints, the new guidance represents a 6%
reduction in revenue and a 14% reduction in Diluted EPS from the
guidance issued November 1. 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
contingency and disaster response planning, information assurance,
business intelligence, environmental strategies, enterprise
architecture, infrastructure management, and wireless integration.
FORTUNE(R) magazine has chosen SRA as one of the "100 Best
Companies to Work For" for eight consecutive years. The Company's
5,200 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 contracts 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; our
ability to attract and retain skilled employees; any reductions in
or reallocations of the U.S. defense budget or the budgets for
civil government agencies; and other factors discussed in our
latest quarterly report on Form 10-Q filed with the Securities and
Exchange Commission on November 3, 2006. In addition, the
forward-looking statements included in this press release represent
our views as of January 31, 2007. 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, 2007. Condensed Consolidated Statements of Operations
(Unaudited) (in thousands, except share and per share amounts)
Three Months Ended Six Months Ended 31-Dec-06 31-Dec-05 31-Dec-06
31-Dec-05 Revenue $321,045 $305,313 $625,079 $586,008 Operating
costs and expenses: Cost of services 244,742 231,004 472,801
441,244 Selling, general and administrative 48,929 45,446 97,333
89,103 Depreciation and amortization 5,310 4,643 10,050 8,653 Total
operating costs and expenses 298,981 281,093 580,184 539,000
Operating income 22,064 24,220 44,895 47,008 Interest income, net
1,471 1,037 3,314 1,770 Gain on sale of Mantas, Inc. 3,674 - 3,674
- Income before taxes 27,209 25,257 51,883 48,778 Provision for
income taxes 10,526 9,354 20,079 18,485 Net income $16,683 $15,903
$31,804 $30,293 Earnings per share: Basic $0.30 $0.29 $0.57 $0.56
Diluted $0.29 $0.28 $0.55 $0.53 Weighted-average shares: Basic
56,221,091 54,809,608 56,101,361 54,536,713 Diluted 58,436,359
57,525,356 58,200,431 57,466,695 Condensed Consolidated Balance
Sheets (Unaudited) (in thousands) As of 12/31/06 6/30/06 Current
assets: Cash and cash equivalents $130,499 $173,564 Short-term
investments 70 9,834 Accounts receivable, net 291,392 266,160
Prepaid expenses and other 38,314 23,382 Deferred income taxes,
current 1,984 4,839 Total current assets 462,259 477,779 Property
and equipment, net 37,493 37,462 Other assets: Goodwill 248,762
169,334 Identified intangibles, net 34,657 26,169 Deferred income
taxes, noncurrent 5,778 3,462 Deferred compensation trust 8,103
7,768 Total other assets 297,300 206,733 Total assets $797,052
$721,974 Current liabilities: Accounts payable and accrued expenses
$124,980 $115,545 Accrued payroll and employee benefits 77,072
59,463 Billings in excess of revenue recognized 3,010 3,204 Total
current liabilities 205,062 178,212 Long-term liabilities: Other
long-term liabilities 11,928 10,465 Total long-term liabilities
11,928 10,465 Total liabilities 216,990 188,677 Stockholders'
equity 580,062 533,297 Total liabilities and stockholders' equity
$797,052 $721,974 Condensed Consolidated Statements of Cash Flows
(Unaudited) (in thousands) Six Months Ended 12/31/06 12/31/05 Cash
flows from operating activities: Net income $31,804 $30,293
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 10,050 8,653
Stock-based compensation 5,923 6,488 Deferred income taxes 539
(2,333) Gain on sale of Mantas, Inc. (3,674) - Working capital
changes (9,844) (25,894) Net cash provided by operating activities
34,798 17,207 Cash flows from investing activities: Capital
expenditures (6,102) (4,960) Sales and maturities of investments
9,764 13,072 Acquisition of Galaxy Scientific Corporation, net of
cash acquired - (95,645) Acquisition of Spectrum Solutions Group,
net of cash acquired - (8,802) Acquisition of RABA Technologies,
net of cash acquired (94,237) - Proceeds from sale of Mantas, Inc.
3,674 - Net cash used in investing activities (86,901) (96,335)
Cash flows from financing activities: Issuance of common stock
5,976 6,401 Tax benefits of stock option exercises 3,106 7,078
Reissuance of treasury stock - 2,266 Purchase of treasury stock
(44) - Net cash provided by financing activities 9,038 15,745 Net
decrease in cash and cash equivalents (43,065) (63,383) Cash and
cash equivalents, beginning of period 173,564 162,973 Cash and cash
equivalents, end of period $130,499 $99,590 Supplemental
disclosures of cash flow information: Cash paid during the period:
Income taxes $26,659 $17,596 Cash received during the period:
Interest $3,297 $1,927 Income taxes $370 $53 Pro Forma Condensed
Consolidated Statement of Operations (Unaudited) (in thousands,
except share and per share amounts) The Company has presented net
income, as adjusted, to show the effect that the gain on the sale
of Mantas, Inc. 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.
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 3 months ended 3
months ended 31-Dec-06 Adjustments 31-Dec-06 Revenue $321,045 $-
$321,045 Operating costs and expenses: Cost of services 244,742 -
244,742 Selling, general and administrative 48,929 - 48,929
Depreciation and amortization 5,310 - 5,310 Total operating costs
and expenses 298,981 - 298,981 Operating income 22,064 - 22,064
Interest income, net 1,471 - 1,471 Gain on sale of Mantas, Inc.
3,674 (3,674) - (1) Pro forma income before taxes 27,209 (3,674)
23,535 Pro forma provision for income taxes 10,526 (1,433) 9,093
(2) Pro forma net income $16,683 (2,241) $14,442 Pro forma earnings
per share: Basic $0.30 (0.04) $0.26 Diluted $0.29 (0.04) $0.25 Pro
forma weighted-average shares: Basic 56,221,091 - 56,221,091
Diluted 58,436,359 - 58,436,359 (1) Adjusted to eliminate the gain
resulting from the sale of Mantas, Inc. (2) Adjusted to eliminate
the tax effect of the adjustment described in Note 1 at the
consolidated marginal tax rate of 39.0%. 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 12/31/06 12/31/05 % Increase Total
Revenue, as reported $321,045 $305,313 5.2% Plus: Revenue from
acquired companies for the comparable prior year period - 11,670
Organic Revenue $321,045 $316,983 1.3% DATASOURCE: SRA
International, Inc. CONTACT: David Keffer, Director, Investor
Relations, +1-703-502-7731, , or Stephen Hughes, Executive Vice
President and CFO, +1-703-227-8350, , both of SRA International,
Inc. Web site: http://www.sra.com/
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