SRX Sra International

- Revenue up 19% year over year to $382 million FAIRFAX, Va., Feb. 5 /PRNewswire-FirstCall/ -- SRA International, Inc. (NYSE:SRX), a leading provider of technology and strategic consulting services and solutions to government organizations, today announced operating results for the second quarter of fiscal year 2008, which ended December 31, 2007. Revenue for the quarter was $382.0 million, up 19% from $321.0 million in the December 2006 quarter. Revenue grew 3% organically, and the acquisitions of RABA Technologies and Constella Group added 16%. Operating income for the quarter was $29.7 million, for an operating margin of 7.8%. Net income was $18.0 million, for a net margin of 4.7%. Diluted earnings per share for the quarter were $0.30, up $0.05 year over year excluding the one-time gain from the sale of the Company's interest in Mantas Inc. in the December 2006 quarter. SRA President and CEO Stan Sloane said, "We won several strategically valuable contracts in the December quarter, and we're optimistic that our expanding pipeline will yield additional opportunities for growth in the coming months. We are also pleased to have been selected by FORTUNE(R) magazine as one of the '100 Best Companies to Work For' for the ninth consecutive year. Our employees and culture remain the foundation of our success." CFO and Executive Vice President for Operations Steve Hughes added, "Our margins were strong again this quarter, given solid labor services revenue growth and good cost management. At the same time, we were able to continue investing more in marketing and sales to drive future growth." New Business Awards The Company won new business in the second quarter with potential value of $328 million, if all options are exercised. As of December 31, 2007, the Company's backlog of signed business orders was $3.9 billion, an increase of 5% year over year. Major highlights of recent competitive contract awards include: -- National Institutes of Health (NIH), Center for Information Technology (CIT). SRA won a four-year, $48 million contract to provide network support services for NIH. Under the contract, SRA will continue to perform network and systems engineering, operations and maintenance, software development, network security and maintenance support. -- Department of Homeland Security (DHS), Immigration and Customs Enforcement (ICE). The Company was awarded a three-year, $18 million contract to continue providing law enforcement analysis and information technology support services to the DHS ICE Office of Investigations. The contract involves analytical support, as well as database development and sustainment. -- U.S. Agency for International Development (USAID). USAID awarded the Company three contracts in the December quarter to perform HIV/AIDS policy and advocacy research for countries around the world. The programs, two of which were task orders under the Health Policy Initiative contract vehicle, have a total value of $39 million. SRA's largest contract award in the December quarter was a $67 million task order for a Civil government customer. A more detailed announcement will be provided pending customer approval. The Company was also awarded several multiple-award, indefinite delivery/indefinite quantity (ID/IQ) contracts in the December quarter. ID/IQ vehicles are not included in the Company's quarterly bookings total, but they provide a solid foundation for future growth. The largest ID/IQ award that SRA received in the quarter was a five-year, multiple-award vehicle with a $1 billion ceiling to provide IT services for an intelligence customer. Other Highlights FORTUNE(R) magazine selected SRA as one of the "100 Best Companies to Work For" for the ninth consecutive year. The list is based on the most extensive employee survey in corporate America, with responses from nearly 100,000 employees from more than 400 companies. SRA's nine-year tenure on the FORTUNE(R) list is the longest of any company in its industry. Forward Guidance The Company is issuing initial guidance for the third and fourth quarters of fiscal year 2008 and updating its forward guidance for fiscal year 2008 provided on November 7, 2007. 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 this table does not include any effect for acquisitions SRA might make in the future. Measure Quarter Ending Quarter Ending Fiscal Year Ending March 31, 2008 June 30, 2008 June 30, 2008 Revenue (in millions) $380-$395 $385-$400 $1,511-$1,541 Diluted EPS $0.30-$0.31 $0.31-$0.33 $1.22-$1.25 Diluted Share Equivalents (in millions) 59.9 60.3 59.7 Conference Call SRA senior management will hold a conference call to discuss these operating results and forward guidance today at 5:00 PM Eastern. Interested parties may listen to the conference call by dialing 888-287-9905 (U.S./Canada) or 706-643-7540 (Other) with passcode 30691168. The conference call will be Webcast simultaneously through a link on the SRA Web site (http://www.sra.com/). A replay of the conference call will be available approximately two hours after the conclusion of the call from February 5 through February 19, 2008 by dialing 800-642-1687 (U.S./Canada) or 706-645-9291 (Other) and entering passcode 30691168. 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 nine consecutive years. The Company's 6,400 employees serve clients from its headquarters in Fairfax, Virginia, and offices around the world. 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 guidance about future financial results and statements about the estimated value of 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; the market price of the company's stock prevailing from time to time; the nature of other investment opportunities presented to the company from time to time; the company's cash flows from operations; and other factors discussed in our latest quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2007. In addition, the forward-looking statements included in this press release represent our views as of February 5, 2008. 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 February 5, 2008. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except share and per share amounts) Three Months Ended Six Months Ended 31-Dec-07 31-Dec-06 31-Dec-07 31-Dec-06 Revenue $382,015 $321,045 $746,142 $625,079 Operating costs and expenses: Cost of services 286,029 244,742 560,998 472,801 Selling, general and administrative 59,872 48,929 112,990 97,333 Depreciation and amortization 6,424 5,310 12,591 10,050 Total operating costs and expenses 352,325 298,981 686,579 580,184 Operating income 29,690 22,064 59,563 44,895 Interest expense (752) (10) (1,605) (20) Interest income 889 1,481 2,488 3,334 Gain on sale of Mantas, Inc. - 3,674 - 3,674 Income before taxes 29,827 27,209 60,446 51,883 Provision for income taxes 11,836 10,526 23,996 20,079 Net income $17,991 $16,683 $36,450 $31,804 Earnings per share: Basic $0.31 $0.30 $0.63 $0.57 Diluted $0.30 $0.29 $0.61 $0.55 Weighted-average shares: Basic 57,663,214 56,221,091 57,475,124 56,101,361 Diluted 59,599,737 58,436,359 59,376,343 58,200,431 Condensed Consolidated Balance Sheets (Unaudited) (in thousands) As of 31-Dec-07 30-Jun-07 Current assets: Cash and cash equivalents $104,577 $212,034 Restricted funds 293 - Accounts receivable, net 344,631 262,409 Prepaid expenses and other 28,157 26,370 Deferred income taxes, current 10,454 5,860 Total current assets 488,112 506,673 Property and equipment, net 41,471 36,685 Other assets: Goodwill 388,375 256,530 Identified intangibles, net 41,844 30,849 Deferred income taxes, noncurrent 9,746 8,163 Deferred compensation trust 8,507 8,784 Other assets 12,163 - Total other assets 460,635 304,326 Total assets $990,218 $847,684 Current liabilities: Accounts payable and accrued expenses $130,514 $110,897 Accrued payroll and employee benefits 86,072 81,711 Billings in excess of revenue recognized 15,163 16,980 Total current liabilities 231,749 209,588 Long-term liabilities: Long-term debt 50,000 - Other long-term liabilities 27,651 12,641 Total long-term liabilities 77,651 12,641 Total liabilities 309,400 222,229 Stockholders' equity 680,818 625,455 Total liabilities and stockholders' equity $990,218 $847,684 Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Six Months Ended 31-Dec-07 31-Dec-06 Cash flows from operating activities: Net income $36,450 $31,804 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,591 10,050 Stock-based compensation 4,886 5,923 Deferred income taxes (4,542) 539 Gain on sale of Mantas, Inc. - (3,674) Loss on disposal of property and equipment 744 - Working capital changes, net of the effect of acquisitions (28,632) (9,844) Net cash provided by operating activities 21,497 34,798 Cash flows from investing activities: Capital expenditures (6,650) (6,102) Sales and maturities of investments - 9,764 Acquisition of RABA Technologies, net of cash acquired - (94,237) Acquisition of Constella Group, LLC, net of cash acquired (185,955) - Proceeds from sale of Mantas, Inc. - 3,674 Net cash used in investing activities (192,605) (86,901) Cash flows from financing activities: Issuance of common stock 10,063 5,976 Tax benefits of stock option exercises 4,184 3,106 Borrowings (repayments) under credit facility, net of associated financing costs 49,676 - Purchase of treasury stock (272) (44) Net cash provided by financing activities 63,651 9,038 Net decrease in cash and cash equivalents (107,457) (43,065) Cash and cash equivalents, beginning of period 212,034 173,564 Cash and cash equivalents, end of period $104,577 $130,499 Supplemental disclosures of cash flow information: Cash paid during the period: Interest $1,185 $20 Income taxes $34,466 $26,659 Cash received during the period: Interest $2,761 $3,297 Income taxes $729 $370 Reconciliation Between Reported Net Income and Net Income Excluding Gain On Sale of Mantas Inc. (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. Three Months Ended 31-Dec-07 31-Dec-06 Net income, as reported $17,991 $16,683 Gain on sale of Mantas, Inc. - (3,674)(1) Tax effect from the gain on sale of Mantas, Inc. - 1,433 (2) Net income excluding gain on sale of Mantas, Inc. $17,991 $14,442 Adjusted earnings per share: Basic $0.31 $0.26 Diluted $0.30 $0.25 Adjusted weighted-average shares: Basic 57,663,214 56,221,091 Diluted 59,599,737 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 31-Dec-07 31-Dec-06 % Increase Total Revenue, as reported $382,015 $321,045 19.0% Plus: Revenue from acquired companies for the comparable prior year period - 51,415 - Organic Revenue $382,015 $372,460 2.6% DATASOURCE: SRA International, Inc. CONTACT: Dave Keffer, Vice President, Investor Relations, +1-703-502-7731, , or Steve Hughes, CFO and Executive VP, Operations, +1-703-502-7732, , both of SRA International, Inc. Web site: http://www.sra.com/

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