Dynamics Research Corp. (DRCO) filed Quarterly Report for the period ended 2010-06-30.
Dynamics Research Corp. has a market cap of $95.1 million; its shares were traded at around $9.58 with a P/E ratio of 8.6 and P/S ratio of 2.1. DRCO is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Effective July 19, 2010, DRC sold Metrigraphics for consideration of $2.5 million, which consisted of $1.75 million in cash and $0.75 million in the form of a subordinated note. In connection with this transaction, we recorded an immaterial loss from the sale in the second quarter of 2010.
We are cognizant of funding challenges and changing priorities of the federal government. TechAmerica, a leading trade association in the industry, estimates that the total federal IT budget will grow at 3.1% annually over the next five years, down from the 4.9% in the prior five years, from $77.8 billion to $90.7 billion.
We reported total revenue of $65.3 million and $68.1 million in the three months ended June 30, 2010 and 2009, respectively. Total revenues for the second quarter of 2010 represent a decrease of $2.8 million, or 4.1%, from the same period in 2009. Total revenues for the six months ended June 30, 2010 and 2009 were $133.9 million and $135.3 million, respectively, a decrease of $1.4 million, or 1.1%.
Federal revenue included $0.4 million and $1.1 million of revenue derived from 8(a) contracts received with the Kadix acquisition in the second quarter of 2010 and 2009, respectively, and $0.7 million and $3.9 million, respectively, for the first half then ended. Absent the effect of 8(a) contract expirations, federal revenue grew by 3.4% in the first half of 2010 over the comparable periods in 2009. In the first six months of 2010 we lost 44 billable positions to the government s in-sourcing and related cost reduction initiatives reducing revenues. We anticipate these initiatives will continue through 2010 and into 2011. In all, we estimate in-sourcing effects for the year could approach 80 to 100 positions with a $14 to $16 million effect in annualized revenues.
Revenues from state and local government agencies declined in the second quarter and first half of 2010 compared to the same periods in 2009 primarily due to our child welfare system contract with the State of Tennessee. As our Tennessee contract nears completion, revenues were $2.0 million and $4.0 million in the second quarter of 2010 and 2009, respectively, and $4.4 million and $7.6 million, respectively, for the first half then ended.
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