SRX Sra International

- Fiscal Fourth Quarter Revenue: Up 18% to $385 Million FAIRFAX, Va., Aug. 12 /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 fourth quarter and fiscal year (FY) 2008, which ended June 30, 2008. Revenue for the quarter increased 18% from $326.2 million in the June 2007 quarter to $384.8 million. Revenue for the year increased 19% from $1.269 billion in FY 2007 to $1.507 billion. Operating income for the quarter was $30.3 million, and full-year operating income was $119.4 million. Net income for the quarter was $18.8 million, and full-year net income was $73.3 million. Diluted earnings per share for the quarter were $0.32, and full-year diluted earnings per share were $1.24. Fourth quarter diluted earnings per share included about $0.01 from the release of the final escrow related to the 2006 sale of the Company's remaining interest in Mantas, Inc. SRA President and CEO Stan Sloane said, "Given our ongoing focus on accelerating organic growth, we're pleased to have increased our opportunity pipeline to $28.3 billion, including a record $2.2 billion of pending bids. We've also repurchased $23 million of shares since the start of the June quarter, and our Board has authorized an additional $100 million stock buyback for the future." "We're enthusiastic about our July acquisitions of Era Corporation and Interface & Control Systems, as both companies give us product capabilities and intellectual property in strategically important market segments. Their technologies are valuable differentiators as we move farther into large-scale systems integration. We're pleased to welcome their employees to SRA." CFO and Executive Vice President of Operations Steve Hughes added, "The more profitable labor services component of revenue grew faster than total revenue again in FY 2008. We expect this trend to continue in FY09, leading to further margin expansion. In light of the AITS re-compete decision, we are pleased with the FY08 results and growth prospects for FY09." New Business Awards The Company won new business in the fourth quarter with potential value of $405 million, if all options are exercised. As of June 30, 2008, the Company's backlog of signed business orders was $3.9 billion, an increase of 15% year-over-year. Major highlights of competitive contract awards in the quarter include: -- Federal Energy Regulatory Commission (FERC), Information Technology Support Services (ITSS). SRA won a five-year, $77 million contract to provide a range of technical services for FERC, including network and data center support, software engineering, records management, and information security. The award has been protested, and a decision is expected in the next few months. -- Environmental Protection Agency (EPA), Office of Emergency Management (OEM). The EPA awarded SRA a seven-year, $56 million contract to continue delivering program analysis and management support to the OEM. This recompete contract includes an expansion of the Company's services into technical and regulatory development. -- National Geospatial-Intelligence Agency (NGA), New Campus East Deployment Planning and Execution (NDPE). NGA awarded the Company a five-year, $34 million contract to support the movement of all of its Washington, DC area missions and personnel to its New Campus East property on Fort Belvoir in Springfield, VA. -- National Institute of Environmental Health Science (NIEHS), Information Technology Support Services (ITSS). SRA won a 3.5-year, $26 million contract to provide enterprise-wide IT services for NIEHS. The Company will deliver infrastructure operations and application development services, as well as IT security and bioinformatics systems support. Share Buyback In June and July, the Company repurchased more than one million shares of SRA stock, deploying about $22.7 million in cash, completing the $40 million buyback authorized by the Board of Directors in 2007. The Board has authorized an additional $100 million buyback at management's discretion over time. Forward Guidance The Company is providing initial forward guidance for the full FY 2009. In the past, the Company has provided both quarterly and annual guidance. Management believes that annual guidance is more consistent with building long-term value, so the Company will not provide quarterly guidance going forward. 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 includes the Interface and Control Systems acquisition for the full year, and it accounts for the Era Corporation acquisition as of July 30. It does not include any effect for acquisitions that SRA might make in the future. Measure Fiscal Year Ending Growth from June 30, 2009 FY 2008 to 2009 Revenue $1.60 billion to $1.66 billion 6% to 10% Diluted earnings per share $1.30 to $1.35 6% to 10% Please note that the growth calculation for the diluted earnings per share excludes the Company's $0.01 non-operating gain in FY 2008 from the Mantas escrow release. 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 54846682. 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 on August 12 through August 26, 2008 by dialing 800-642-1687 (U.S./Canada) or 706-645-9291 (Other) and entering passcode 54846682. 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 6,800 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 a substantial majority 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 annual report on Form 10-K filed with the Securities and Exchange Commission on August 16, 2007. In addition, the forward-looking statements included in this press release represent our views as of August 12, 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 August 12, 2008. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except share and per share amounts) Three Months Ended Year Ended 30-Jun-08 30-Jun-07 30-Jun-08 30-Jun-07 Revenue $384,789 $326,207 $1,506,933 $1,268,872 Operating costs and expenses: Cost of services 284,207 244,171 1,121,913 954,656 Selling, general and administrative 63,842 51,283 240,340 200,204 Depreciation and amortization 6,442 5,602 25,263 21,187 Total operating costs and expenses 354,491 301,056 1,387,516 1,176,047 Operating income 30,298 25,151 119,417 92,825 Interest expense (1,072) (8) (3,288) (35) Interest income 887 1,797 4,261 6,311 Gain on sale of Mantas, Inc. 892 - 892 3,674 Income before taxes 31,005 26,940 121,282 102,775 Provision for income taxes 12,234 10,287 48,018 39,345 Net income $18,771 $16,653 $73,264 $63,430 Earnings per share: Basic $0.33 $0.29 $1.27 $1.12 Diluted $0.32 $0.28 $1.24 $1.09 Weighted-average shares: Basic 57,463,961 57,008,604 57,566,645 56,476,927 Diluted 58,886,594 58,742,984 59,277,059 58,381,788 Condensed Consolidated Balance Sheets (Unaudited) (in thousands) As of 30-Jun-08 30-Jun-07 Current assets: Cash and cash equivalents $229,260 $212,034 Restricted funds 1,194 - Accounts receivable, net 344,800 262,409 Prepaid expenses and other 65,240 26,370 Deferred income taxes, current 11,979 5,860 Total current assets 652,473 506,673 Property and equipment, net 37,949 36,685 Other assets: Goodwill 395,766 256,530 Identified intangibles, net 36,813 30,849 Deferred income taxes, noncurrent 3,217 8,163 Deferred compensation trust 7,747 8,784 Other assets 3,892 - Total other assets 447,435 304,326 Total assets $1,137,857 $847,684 Current liabilities: Accounts payable and accrued expenses $165,443 $110,897 Accrued payroll and employee benefits 99,742 81,711 Billings in excess of revenue recognized 14,937 16,980 Total current liabilities 280,122 209,588 Long-term liabilities: Long-term debt 150,000 - Other long-term liabilities 14,799 12,641 Total long-term liabilities 164,799 12,641 Total liabilities 444,921 222,229 Stockholders' equity 692,936 625,455 Total liabilities and stockholders' equity $1,137,857 $847,684 Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Year Ended 30-Jun-08 30-Jun-07 Cash flows from operating activities: Net income $73,264 $63,430 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,263 21,187 Stock-based compensation 10,148 11,496 Deferred income taxes (1,173) (5,722) Gain on sale of Mantas, Inc. (892) (3,674) Loss on disposal of property and equipment 788 - Working capital changes, net of the effect of acquisitions (23,601) 35,727 Net cash provided by operating activities 83,797 122,444 Cash flows from investing activities: Capital expenditures (10,763) (12,624) 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 - (94,005) Acquisition of Constella Group, LLC, net of cash acquired (189,714) - Proceeds from sale of Mantas, Inc. 892 3,674 Net cash used in investing activities (199,585) (101,206) Cash flows from financing activities: Issuance of common stock 15,027 9,550 Tax benefits of stock option exercises 4,667 6,521 Borrowings (repayments) under credit facility, net of associated financing costs 148,919 - Reissuance of treasury stock 679 1,245 Purchase of treasury stock (36,278) (84) Net cash provided by financing activities 133,014 17,232 Net increase in cash and cash equivalents 17,226 38,470 Cash and cash equivalents, beginning of period 212,034 173,564 Cash and cash equivalents, end of period $229,260 $212,034 Supplemental disclosures of cash flow information: Cash paid during the period: Interest $2,656 $35 Income taxes $51,390 $38,012 Cash received during the period: Interest $4,376 $6,103 Income taxes $961 $938 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 30-Jun-08 30-Jun-07 Net income, as reported $18,771 $16,653 Gain on sale of Mantas, Inc. (892) - (1) Tax effect from the gain on sale of Mantas, Inc. 348 - (2) Net income excluding gain on sale of Mantas, Inc. $18,227 $16,653 Adjusted earnings per share: Basic $0.32 $0.29 Diluted $0.31 $0.28 Adjusted weighted-average shares: Basic 57,463,961 57,008,604 Diluted 58,886,594 58,742,984 (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 30-Jun-08 30-Jun-07 % Increase Total Revenue, as reported $384,789 $326,207 18.0% Plus: Revenue from acquired companies for the comparable prior year period - 54,299 Organic Revenue $384,789 $380,506 1.1% DATASOURCE: SRA International, Inc. CONTACT: David Keffer, VP, Investor Relations, +1-703-502-7731, , or Steve Hughes, CFO and EVP, Operations, +1-703-502-7732, , both of SRA International, Inc. Web site: http://www.sra.com/

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