SRX Sra International

SRA Announces Financial Results for First Quarter Fiscal Year 2005 * Revenue $203.5 Million, Up 54% From First Quarter Fiscal Year 2004 FAIRFAX, Va., Nov. 1 /PRNewswire-FirstCall/ -- SRA International, Inc. (NYSE:SRX), a leading provider of information technology services and solutions to the federal government, today announced operating results for the first quarter of fiscal year 2005, which ended September 30, 2004. Revenue increased 54% from $132.0 million in the September 2003 quarter to $203.5 million. Operating income increased 59% from $12.4 million in the September 2003 quarter to $19.8 million. Operating income margin was 9.7% compared to 9.4% last year. Net income increased 59% from $7.8 million in the September 2003 quarter to $12.4 million. Diluted earnings per share increased 55% to $0.45 from $0.29 for the September 2003 quarter. Ernst Volgenau, SRA Chairman and CEO, stated, "We are pleased to begin our fiscal year with such a strong quarter. We continue to grow and execute well across all our business markets. We also had a notable number of contract awards this quarter, which provides an excellent basis for future growth." Chief Financial Officer Stephen Hughes added, "Revenue, earnings, and cash flows were up sharply compared to last year. Cash flows from operations were $29.6 million or nearly 2.4 times net income. We reduced days sales outstanding another two days to 72 and ended the quarter with approximately $195 million in cash and investments with no debt." New Business Awards During the first quarter, SRA won new business across its diversified customer portfolio with potential value of $638 million. The Company backlog of signed business orders is now more than $2.4 billion, an increase of 42% over the last twelve months. A description follows of six competitive contract awards during the quarter: * Federal Deposit Insurance Corporation (FDIC) Infrastructure Support Services. SRA will be the single systems integrator providing enterprise-wide IT services to support the FDIC technology infrastructure. The performance-based task order, awarded under the Millennia contract, consolidates 36 existing contracts and has an estimated value of $341 million over five years if all options are exercised. * Environmental Protection Agency (EPA) Climate Protection Partnerships Division (CPPD) BPA. SRA will provide a broad range of IT services to support the Office of Air and Radiation. The single award, five-year, time-and-materials contract has a maximum dollar value of $29 million. Through voluntary programs that promote cost-effective energy efficiency and greenhouse gas emissions reductions, CPPD establishes partnerships with private and public organizations. Since 2001, SRA has worked with CPPD to consolidate, upgrade, and modernize the EPA IT infrastructure to reduce cost and improve performance. * Defense Manpower Data Center (DMDC) Human Resources Strategic Assessment Program IDIQ. Under a single-award indefinite delivery, indefinite quantity contract with a maximum value of $20 million over five years, SRA will provide design, data collection, data management, and statistical analysis services to support the DMDC Human Resources Strategic Assessment Program, which includes evaluations, research, and studies related to DoD personnel policies and programs. * DoD Logistics Automation Identification Technology (AIT) Office Program Management Support. SRA will resolve standardization issues, identify emerging technologies, and evaluate potential integration of AIT throughout the defense supply chain. Awarded under the Chief Information Officer Solutions and Partners 2 Innovations contract, the task order has an estimated value of $19.2 million over five years if all options are exercised. Since 1998, SRA has assisted DoD to employ Radio Frequency Identification (RFID) Tags and other AIT devices to improve data collection; reduce processing time; and enhance the ability to identify, track, and control deploying forces and supplies. * Department of Health and Human Services (HHS) Public-Key Infrastructure (PKI). SRA will provide operations and maintenance support for an enterprise PKI program that enables HHS to securely transmit and receive sensitive information. The contract has an estimated value of $18.5 million over five years if all options are exercised. Since 2002, SRA has assisted in the design, development, installation, and support of the HHS PKI System. * Small Business Administration (SBA) Disaster Credit Management System (DCMS). SRA will provide IT services to support DCMS, which is a Web- enabled electronic loan application processing system used in assisting disaster victims. The task order has an estimated value of $13.9 million over 42 months if all options are exercised and continues the work SRA has performed for SBA since 2002. Under this new contract, SRA will support the DCMS team in implementing software changes, maintaining software and hardware architecture, updating system documentation, providing ongoing support to DCMS users, and supporting all IT operations associated with the system. Forward Guidance The Company is issuing initial guidance for the second quarter of fiscal year 2005 and raising its forward guidance for fiscal year 2005. 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 Fiscal Year Ending December 31, 2004 June 30, 2005 Revenue (in millions) $197-$202 $800-$830 Diluted EPS $0.44-$0.46 $1.82-$1.92 Diluted Share Equivalents (in millions) 27.9 27.9 Previously, the Company provided guidance for fiscal year 2005 revenue of $720-$750 million and diluted earnings per share of $1.65-$1.75 based on 27.9 million shares. About SRA International, Inc. SRA is a leading provider of information technology services and solutions -- including strategic consulting; systems design, development and integration; and outsourcing and operations management -- to clients in national security, civil government markets, and health care and public health. The Company also develops business solutions for text and data mining, contingency and disaster response planning, information assurance, environmental strategies, conflict management and dispute resolution, enterprise architecture, network operations and management, enterprise systems management, and wireless integration services. FORTUNE(R) magazine has chosen SRA as one of the "100 Best Companies to Work For" for five consecutive years. The Company's 3,500 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 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 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, and other factors discussed in our latest annual report on Form 10-K filed with the SEC on September 13, 2004. In addition, the forward-looking statements included in this press release represent our views as of November 1, 2004. 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 November 1, 2004. Consolidated Statements of Operations (Unaudited) (in thousands, except share and per share amounts) Three Months Ended 9/30/03 9/30/04 Revenue $ 131,978 $ 203,474 Operating costs and expenses: Cost of services 94,119 151,546 Selling, general, and administrative 23,147 29,276 Depreciation and amortization 2,267 2,882 Total operating costs and expenses 119,533 183,704 Operating income 12,445 19,770 Interest income 393 523 Income before taxes 12,838 20,293 Provision for income taxes 5,007 7,853 Net income $ 7,831 $ 12,440 Earnings per share: Basic $ 0.31 $ 0.48 Diluted $ 0.29 $ 0.45 Weighted-average shares: Basic 25,185,472 25,993,011 Diluted 27,088,038 27,770,389 Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except per share amounts) As of 6/30/04 9/30/04 Current assets: Cash and cash equivalents $ 143,367 $ 169,991 Short-term investments 9,076 17,307 Accounts receivable, net 164,162 177,942 Prepaid expenses and other 23,053 15,489 Deferred income taxes, current 4,442 5,036 Total current assets 344,100 385,765 Property and equipment, net 23,498 24,597 Other assets: Goodwill 62,747 62,747 Identified intangibles, net 13,168 12,714 Investments 13,719 7,355 Deferred compensation trust 4,661 4,701 Total other assets 94,295 87,517 Total assets $ 461,893 $ 497,879 Current liabilities: Accounts payable and accrued expenses $ 66,230 $ 77,875 Accrued payroll and employee benefits 39,798 48,897 Billings in excess of revenue recognized 8,276 6,730 Total current liabilities 114,304 133,502 Long-term liabilities: Deferred income taxes, noncurrent 1,612 1,250 Other long-term liabilities 6,709 6,269 Total long-term liabilities 8,321 7,519 Total liabilities 122,625 141,021 Stockholders' equity: Preferred stock, $0.20 par value - - Class A common stock, $0.004 par value 97 98 Class B common stock, $0.004 par value 39 39 Additional paid-in capital 241,831 246,898 Treasury stock, at cost (46,560) (46,560) Deferred stock-based compensation (716) (634) Retained earnings 144,577 157,017 Total stockholders' equity 339,268 356,858 Total liabilities and stockholders' equity $ 461,893 $ 497,879 Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended 9/30/03 9/30/04 Cash flows from operating activities: Net income $ 7,831 $ 12,440 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,267 2,882 Stock-based compensation 52 82 Tax benefits of stock option exercises 3,069 2,658 Deferred income taxes (212) (956) Working capital changes (5,349) 12,502 Net cash provided by operating activities 7,658 29,608 Cash flows from investing activities: Capital expenditures (2,608) (3,527) Purchases of investments - (1,867) Proceeds from sale of investments 1,083 - Net cash used in investing activities (1,525) (5,394) Cash flows from financing activities: Issuance of common stock 1,992 2,410 Purchase of treasury stock (145) - Repayment of term loan (400) - Net cash provided by financing activities 1,447 2,410 Net increase in cash and cash equivalents 7,580 26,624 Cash and cash equivalents, beginning of period 158,264 143,367 Cash and cash equivalents, end of period $ 165,844 $ 169,991 Supplemental disclosures of cash flow information: Cash paid during the period: Income taxes $ 6 $ 1,391 Cash received during the period: Interest $ 248 $ 769 Income taxes $ - $ 176 Reconciliation Between Total Revenue Growth and Organic Revenue Growth (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 9/30/03 9/30/04 Growth Total Revenue, as reported $ 131,978 $ 203,474 54% Plus: Orion revenue for July 1, 2003 through September 30, 2003 8,900 - - Organic Revenue $ 140,878 $ 203,474 44% DATASOURCE: SRA International, Inc. CONTACT: Stuart Davis, Vice President and Director, Investor Relations, +1-703-502-7731, , or Stephen Hughes, Senior Vice President and CFO, +1-703-227-7010, , both of SRA International, Inc. Web site: http://www.sra.com/

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