- Revenue up 18% year-over-year to $376 million - Operating income
up 30% to $29.6 million - Diluted EPS up $0.04 to $0.30 - $503
million of contract awards - $17 million of shares repurchased
during the quarter FAIRFAX, Va., May 6 /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
third quarter of fiscal year 2008, which ended March 31, 2008.
Revenue for the quarter was $376.0 million, up 18% from $317.6
million in the March 2007 quarter. Operating income for the quarter
was $29.6 million, for an operating margin of 7.9%. Net income was
$18.0 million, for a net margin of 4.8%. Diluted earnings per share
for the quarter were $0.30, up $0.04 year-over-year. SRA President
and CEO Stan Sloane said, "We were pleased to win nearly three
times the volume of contract awards that we won in the same quarter
last year. Some of these programs will take time to ramp up because
of protested award decisions, but they are a positive indicator for
future growth." "We're also enthusiastic about our agreement to
acquire Era Corporation, which we announced last week. Era fits
nicely into our plan to increase the product-based component of our
business and continue to expand our international footprint. We
look forward to completing the transaction and joining forces with
an air surveillance market leader." CFO and Executive Vice
President for Operations Steve Hughes added, "Third quarter revenue
grew 18% year-over-year, while the low-margin rebillable component
declined as planned. This improvement in the business mix led to
better operating margins. Operating margin increased to 7.9% in the
quarter, 70 basis points better than a year ago." New Business
Awards The Company won new business in the third quarter with
potential value of $503 million, if all options are exercised. As
of March 31, 2008, the Company's backlog of signed business orders
was $3.9 billion, an increase of 11% year-over-year. Major
highlights of competitive contract awards in the quarter include:
-- Joint Tactical Radio System (JTRS), Network Enterprise Domain
(NED). The Defense Department awarded SRA a five-year, $108 million
task order to perform management support services for the JTRS NED
program office. A consolidation of work previously being performed
separately by SRA and several other contractors, this win
represents the second significant expansion of the Company's San
Diego presence in the last six months. -- Drug Enforcement
Administration (DEA), Enterprise Management Services (EMS). SRA was
awarded a five-year, $78 million contract to provide IT
infrastructure services to the DEA. This award has been protested
by the incumbent contractor, and a decision is expected in the June
quarter. -- Department of Defense (DoD), Defense Manpower Data
Center (DMDC). The Company won a five-year, $48 million contract to
continue supporting the DMDC, which serves as the DoD's human
resource information archive for more than 28 million current and
former service men and women. Under the contract, SRA will deliver
database design and management, software support and identity
management solutions. -- Food and Drug Administration (FDA), FDA
Adverse Event Reporting System (FAERS). The FDA awarded SRA a
five-year, $27 million contract to develop the FAERS system for
collecting and monitoring reports of adverse events related to
FDA-regulated products. -- Office of Personnel Management (OPM),
Network Services. SRA won a 2.5-year, $24 million recompete
contract to perform network services for OPM. The contract will
involve the full lifecycle of network design, management and
operations support. The Company was also awarded several
multiple-award, indefinite delivery/indefinite quantity (ID/IQ)
contracts in the March quarter. ID/IQ vehicles are not included in
the Company's quarterly bookings total, but they provide a solid
foundation for future growth. -- Environmental Protection Agency
(EPA), Office of Research and Development (ORD). SRA was awarded a
prime contract on the seven-year, $200 million Software Engineering
and Specialized Scientific Support (SES3) blanket purchase
agreement (BPA) for the EPA. The Company has since won two task
orders under the BPA, with a combined value of $32 million. -- U.S.
Army, Program Executive Office Enterprise Information Systems (PEO
EIS). PEO EIS named SRA one of five awardees of the Program
Management Support Services-2 (PMSS-2) contract, which has a total
value of approximately $478 million over five years. The award
decision has been protested, and task order activity will not begin
until the protest has been resolved. Share Repurchase In accordance
with a repurchase authority established by its Board of Directors
in 2007, SRA executed an open market share buyback during the March
quarter. The Company repurchased about 754,000 shares of its stock
in the quarter, deploying a total of $17.3 million in cash. The
average share price for repurchased shares was $22.91. Although the
Company's acquisition program remains its top priority for capital
deployment, management may elect to continue opportunistic use of
its repurchase authority in the future. Forward Guidance The
Company is updating its forward guidance for the fourth quarter and
full fiscal year 2008. 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 the
pending acquisition of Era Corporation or any acquisitions SRA
might make in the future. Measure Quarter Ending Fiscal Year Ending
June 30, 2008 June 30, 2008 Revenue (in millions) $370-$390
$1,492-$1,512 Diluted EPS $0.31-$0.33 $1.23-$1.25 Diluted Share
Equivalents (in millions) 59.4 59.4 The updated revenue guidance is
lower than previously issued guidance primarily because of a
reduced direct material revenue forecast. Given the consistent June
quarter Diluted EPS range, the implied profit margins are higher in
this revised guidance. These changes are consistent with the higher
labor services component of revenue in the latest forecast.
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 42439207. 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 May 6 through May 20, 2008 by dialing 800-642-1687
(U.S./Canada) or 706-645-9291 (Other) and entering passcode
42439207. 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 February 7, 2008. In
addition, the forward-looking statements included in this press
release represent our views as of May 6, 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 May 6, 2008. Condensed Consolidated Statements of
Operations (Unaudited) (in thousands, except share and per share
amounts) Three Months Ended Nine Months Ended 31-Mar-08 31-Mar-07
31-Mar-08 31-Mar-07 Revenue $376,002 $317,586 $1,122,144 $942,665
Operating costs and expenses: Cost of services 276,708 237,684
837,706 710,485 Selling, general and administrative 63,508 51,588
176,498 148,921 Depreciation and amortization 6,230 5,535 18,821
15,585 Total operating costs and expenses 346,446 294,807 1,033,025
874,991 Operating income 29,556 22,779 89,119 67,674 Interest
expense (611) (7) (2,216) (27) Interest income 886 1,180 3,374
4,514 Gain on sale of Mantas, Inc. - - - 3,674 Income before taxes
29,831 23,952 90,277 75,835 Provision for income taxes 11,788 8,979
35,784 29,058 Net income $18,043 $14,973 $54,493 $46,777 Earnings
per share: Basic $0.31 $0.26 $0.95 $0.83 Diluted $0.30 $0.26 $0.92
$0.80 Weighted-average shares: Basic 57,852,369 56,696,382
57,600,872 56,299,701 Diluted 59,468,955 58,383,305 59,407,213
58,261,389 Condensed Consolidated Balance Sheets (Unaudited) (in
thousands) As of 31-Mar-08 30-Jun-07 Current assets: Cash and cash
equivalents $136,517 $212,034 Restricted cash 1,126 - Accounts
receivable, net 341,450 262,409 Prepaid expenses and other 21,029
26,370 Deferred income taxes, current 10,764 5,860 Total current
assets 510,886 506,673 Property and equipment, net 37,875 36,685
Other assets: Goodwill 394,153 256,530 Identified intangibles, net
39,314 30,849 Deferred income taxes, noncurrent 6,266 8,163
Deferred compensation trust 7,650 8,784 Other assets 16,185 - Total
other assets 463,568 304,326 Total assets $1,012,329 $847,684
Current liabilities: Accounts payable and accrued expenses $118,699
$110,897 Accrued payroll and employee benefits 85,566 81,711
Billings in excess of revenue recognized 14,224 16,980 Total
current liabilities 218,489 209,588 Long-term liabilities:
Long-term debt 80,000 - Other long-term liabilities 26,861 12,641
Total long-term liabilities 106,861 12,641 Total liabilities
325,350 222,229 Stockholders' equity 686,979 625,455 Total
liabilities and stockholders' equity $1,012,329 $847,684 Condensed
Consolidated Statements of Cash Flows (Unaudited) (in thousands)
Nine Months Ended 31-Mar-08 31-Mar-07 Cash flows from operating
activities: Net income $54,493 $46,777 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization 18,821 15,585 Stock-based compensation 7,322 8,451
Deferred income taxes (1,372) (625) 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 (38,453) 7,708
Net cash provided by operating activities 41,555 74,222 Cash flows
from investing activities: Capital expenditures (6,754) (10,289)
Sales and maturities of investments - 9,749 Acquisition of Spectrum
Solutions Group, net of cash acquired - (8,000) Acquisition of RABA
Technologies, net of cash acquired - (94,237) Acquisition of
Constella Group, LLC, net of cash acquired (189,714) - Proceeds
from sale of Mantas, Inc. - 3,674 Net cash used in investing
activities (196,468) (99,103) Cash flows from financing activities:
Issuance of common stock 11,916 8,057 Tax benefits of stock option
exercises 4,725 6,004 Borrowings (repayments) under credit
facility, net of associated financing costs 79,676 - Reissuance of
treasury stock 679 1,245 Purchase of treasury stock (17,600) (84)
Net cash provided by financing activities 79,396 15,222 Net
decrease in cash and cash equivalents (75,517) (9,659) Cash and
cash equivalents, beginning of period 212,034 173,564 Cash and cash
equivalents, end of period $136,517 $163,905 Supplemental
disclosures of cash flow information: Cash paid during the period:
Interest $1,885 $27 Income taxes $40,970 $30,820 Cash received
during the period: Interest $3,670 $4,617 Income taxes $757 $438
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-Mar-08
31-Mar-07 % Increase Total Revenue, as reported $376,002 $317,586
18.4% Plus: Revenue from acquired companies for the comparable
prior year period - 49,604 Organic Revenue $376,002 $367,190 2.4%
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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