SRX Sra International

- Revenue up 6% year over year to $417 million - Diluted EPS up $0.04 year over year to $0.31 - Record quarterly contract awards of $933 million FAIRFAX, Va., Nov. 4 /PRNewswire-FirstCall/ -- SRA International, Inc. (NYSE:SRX), a leading provider of technology and strategic consulting services and solutions to government organizations and commercial clients, today announced operating results for the first quarter of fiscal year (FY) 2010, which ended September 30, 2009. Revenue for the quarter was $417.5 million, up 6.4% from $392.4 million in the September 2008 quarter. Organic revenue growth was 8.4%. Operating income for the quarter was $30.0 million, for an operating margin of 7.2%. Net income was $18.1 million, for a net margin of 4.3%. Diluted earnings per share (DEPS) for the quarter were $0.31, up $0.04 as compared to the September 2008 quarter. SRA President and CEO Stan Sloane said, "We're pleased with our continued progress in business execution and cost management. Investments in business development have helped drive stronger organic growth, and our new contract award total is a company record." Executive Vice President and CFO Rick Nadeau added, "Our first quarter financial results reflected solid operating performance in the core federal business. Our balance sheet continues to be strong with essentially zero net debt." Contract Awards SRA won new business in the first quarter with potential value of $933 million, if all option years are exercised, for a book to bill ratio of 2.2. As of September 30, 2009, the company's backlog of signed business orders was $4.5 billion, up 9% year-over-year, and the funded portion of backlog was $832 million. Major highlights of competitive contract awards in the quarter include: -- Federal Deposit Insurance Corporation (FDIC). SRA was awarded a recompete of our contract, under which we provide comprehensive enterprise-wide IT services for the FDIC. This represents the company's largest contract, providing about 6% of revenue. The value of the new award is estimated at $457.8 million over five years, if all options are exercised. -- Department of Homeland Security, Transportation Security Administration (TSA). The company won a task order under the EAGLE contract vehicle to monitor TSA's IT enterprise and assess IT security threats. The task order value is $53.5 million over five years, if all options are exercised, and will provide core primary and failover security operations center (SOC) services for up to five years. -- Cancer Prevention and Research Institute of Texas (CPRIT). The company was awarded a contract to provide scientific peer review support and grants management services. This is a new client for SRA and the contract is worth $16.2 million over five years, if all options are exercised. Forward Guidance The company is updating revenue and earnings guidance for Fiscal Year 2010 originally provided on August 12, 2009. 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 or divestitures that SRA might make in the future. The guidance assumes a FY 2010 diluted share count of 58.6 million. Measure Fiscal Year (FY) Ending Change from ------- June 30, 2010 FY 2009 to 2010 ------------- --------------- Revenue $1.6 billion to $1.645 billion 4% to 7% ------- ------------------------------ ---------- Diluted earnings per share $1.15 to $1.25 14% to 24% ---------------------------------------------------------------------- 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 888-603-9639 (U.S./Canada) or 312-470-0140 (Other) with passcode SRX. 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 Nov. 4 through Nov. 18 by dialing 866-428-3808 (U.S./Canada) or 203-369-0909 (Other) and entering passcode 1978. About SRA International, Inc. SRA and its subsidiaries are dedicated to solving complex problems of global significance for government organizations serving the national security, civil government and global health markets. Founded in 1978, the company and its subsidiaries have expertise in such areas as air surveillance and air traffic management; contract research organization (CRO) services; cyber security; disaster response planning; enterprise resource planning; environmental strategies; IT systems, infrastructure and managed services; logistics; public health preparedness; public safety; strategic management consulting; systems engineering; and wireless integration. FORTUNE® magazine has chosen SRA as one of the "100 Best Companies to Work For" for ten consecutive years. The company and its subsidiaries employ more than 6,900 employees serving clients from headquarters in Fairfax, Va., 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 statements about the estimated value of the contract 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. In addition, the forward-looking statements included in this press release represent our views as of Nov. 4, 2009. 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 Nov. 4, 2009. Consolidated Statements of Operations (Unaudited) (in thousands, except per share amounts) Three Months Ended 30-Sep-09 30-Sep-08 --------- --------- Revenue $417,499 $392,355 Operating costs and expenses: Cost of services 317,540 295,465 (a) Selling, general and administrative 62,828 63,565 (a) Depreciation and amortization 7,144 6,878 Gain on sale of Constella Futures Holding, LLC - (1,939) Acquired in-process research and development - 1,100 --- ----- Total operating costs and expenses 387,512 365,069 ------- ------- Operating income 29,987 27,286 Interest expense (483) (1,780) Interest income 408 772 --- --- Income before income taxes 29,912 26,278 Provision for income taxes 11,862 10,864 ------ ------ Net income $18,050 $15,414 ======= ======= Earnings per share: Basic $0.32 $0.27 ===== ===== Diluted $0.31 $0.27 ===== ===== (a) During the quarter the Company reclassified the portion of rent and facility costs, as well as stock-based compensation expense related to the employees who perform work directly for the Company's clients from the caption "selling, general and administrative expenses" to the caption "cost of services." All prior period balances have been reclassified to conform to the current period presentation in the Form 10-Q Quarterly Report filed today. Condensed Consolidated Balance Sheets (Unaudited) (in thousands) As of 30-Sep-09 30-Jun-09 --------- --------- Current assets: Cash and cash equivalents $70,478 $74,683 Accounts receivable, net 369,947 356,261 Inventories, net 8,402 6,786 Prepaid expenses and other 34,626 37,707 Deferred income taxes, current 17,478 13,924 ------ ------ Total current assets 500,931 489,361 ------- ------- Property, plant and equipment, net 39,049 38,130 ------ ------ Other assets: Goodwill 490,481 490,481 Identified intangibles, net 40,578 43,235 Deferred income taxes, noncurrent - 1,272 Deferred compensation trust 7,349 6,494 Other assets 23,661 25,320 ------ ------ Total other assets 562,069 566,802 ------- ------- Total assets $1,102,049 $1,094,293 ========== ========== Current liabilities: Accounts payable and accrued expenses $131,305 $137,443 Accrued payroll and employee benefits 105,406 111,296 Billings in excess of revenue recognized 15,885 16,598 Short-term borrowings 4,933 - ----- --- Total current liabilities 257,529 265,337 ------- ------- Long-term liabilities: Long-term debt 65,000 75,000 Deferred compensation liability 7,349 6,494 Deferred income taxes, noncurrent 3,717 - Other long-term liabilities 5,461 5,842 ----- ----- Total long-term liabilities 81,527 87,336 ------ ------ Total liabilities 339,056 352,673 ------- ------- Stockholders' equity 762,993 741,620 ------- ------- Total liabilities and stockholders' equity $1,102,049 $1,094,293 ========== ========== Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended 30-Sep-09 30-Sep-08 --------- --------- Cash flows from operating activities: Net income $18,050 $15,414 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,144 6,878 Stock-based compensation 2,466 2,696 Deferred income taxes 1,788 (456) Gain on sale - (1,939) Acquired in-process research and development - 1,100 Gain realized from forward exchange contracts (398) - Changes in assets and liabilities, net of the effect of acquisitions and divestitures (24,718) (9,593) ------- ------ Net cash provided by operating activities 4,332 14,100 ----- ------ Cash flows from investing activities: Capital expenditures (5,190) (4,042) Payments to Spectrum Solutions Group, Inc. shareholders - (7,016) Acquisitions, net of cash acquired - (132,194) Proceeds from sale of Constella Futures Holding, LLC - 14,320 Proceeds from note receivable 2,000 - Net proceeds from forward exchange contracts 398 - --- --- Net cash used in investing activities (2,792) (128,932) ------ -------- Cash flows from financing activities: Issuance of common stock 1,287 1,557 Excess tax benefit of stock option exercises 25 176 Net borrowings (repayments) under short-term credit facilities 4,715 (986) Borrowings under credit facility 35,000 50,000 Repayments under credit facility (45,000) (50,000) Purchase of treasury stock (857) (21,756) ---- ------- Net cash used in financing activities (4,830) (21,009) ------ ------- Effect of exchange rate changes on cash and cash equivalents (915) - ---- --- Net decrease in cash and cash equivalents (4,205) (135,841) Cash and cash equivalents, beginning of period 74,683 229,260 ------ ------- Cash and cash equivalents, end of period $70,478 $93,419 ======= ======= Supplemental disclosures of cash flow information: Cash paid during the period: Interest $426 $1,909 ==== ====== Income taxes $4,388 $4,074 ====== ====== Cash received during the period: Interest $385 $1,058 ==== ====== Income taxes $171 $328 ==== ==== Reconciliation Between Total Revenue and Organic Revenue (Unaudited) (in thousands) Organic revenue, as presented, is computed by comparing our reported revenue for the current period to revenue for the same period in the prior year adjusted to include revenue of acquired businesses for the pre- acquisition period of the prior year. In arriving at prior-year revenue, we include the revenue of acquired companies and remove the revenue of divested companies for the prior-year periods comparable to the current- year periods for which the companies are included in our reported revenue. The resulting rate is intended to represent our organic, or non- acquisitive, growth or decline year-over-year, including comparable period growth or decline attributable to acquired companies. We believe that this non-GAAP financial measure provides useful information because it allows investors to better assess the underlying growth rate of our business, including the post-acquisition activity of acquired companies. This non- GAAP financial measure is not used for any other purpose and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Three Months Ended 30-Sep-09 30-Sep-08 % Increase --------- --------- ---------- Total Revenue, as reported $417,499 $392,355 6.4% Plus: Revenue from acquired companies for the comparable prior year period 4,752 Less: Revenue from divested companies for the comparable prior year period (11,940) ------- Organic Revenue $417,499 $385,167 8.4% ======== ======== ==== DATASOURCE: SRA International, Inc. CONTACT: David Mutryn, Director of Investor Relations, SRA International, Inc., +1-703-502-7731, Web Site: http://www.sra.com/

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