Dynamics Research Corporation Completes Acquisition of Kadix Systems


Revenue Base of More Than $40 Million Strengthens DRC's Position in Growth Markets

ANDOVER, Mass., Aug. 11 - Dynamics Research Corporation (NASDAQ:DRCO), a leading provider of innovative engineering, technology and information technology services and solutions to federal and state governments, today announced it has completed the acquisition of Kadix Systems, LLC, effective August 1, 2008. As previously reported, the purchase price of Kadix Systems by DRC was $42 million with the potential for additional consideration of up to $5 million, based on the achievement of certain conditions. For tax purposes, the transaction will be treated as an asset purchase resulting in tax benefits to DRC, which have an estimated value of $10 million.

Kadix, a rapidly growing, high-end management consulting firm, maintains practice specialties in organizational change, human capital, information technology and public and learning and organizational development and is focused on the U.S. Department of Homeland Security (DHS), Marine Corps information technology, military medical health, and federal civilian markets. Kadix is currently providing services, which generate more than $20 million of revenue annually through task orders under the DHS Enterprise Acquisition Gateway for Leading Edge Solutions (EAGLE) contract (functional area 5 - Program Management and functional area 3 - Independent Verification & Validation Services) and DHS Program Management Strategic Sourcing (PMSS) contract. New task orders received in 2008 include a five-year $22 million order, providing IT strategic planning for the ICE Strategic Development Division at DHS and a $9.9 million, four-year order providing financial systems services to the Transportation Security Administration.

"Kadix Systems' customer presence significantly increases the percentage of our business mix focused on high-growth markets, a key strategic focus for DRC. In addition, Kadix high-end services carry strong margins, facilitating margin expansion," said Jim Regan, DRC's chairman and chief executive officer.

Kadix had annual revenues and earnings before interest, taxes, depreciation and amortization (EBITDA) of $23.0 million and $3.8 million, respectively, for the year ended December 31, 2007. Revenue reported on an unaudited basis was $33.6 million for the twelve months ended June 30, 2008. Revenue for the three months ended June 30, 2008, March 31, 2008 and December 31, 2007 was $11.6 million, $9.0 million and $6.8 million, respectively, and revenue for the two months ended September 30, 2007 was $4.2 million.

With rapid expansion in the past six months, the annualized Kadix revenue base is currently in excess of $40 million, with an estimated EBITDA margin of 15 percent and approximately 40 percent of the current estimated annualized revenue base to be recognized in the last five months of 2008. More than 90 percent of its work is derived from prime contracts. Employment has expanded from 207 at December 31, 2007 to approximately 270 employees at July 31, 2008. Kadix funded backlog at June 30, 2008 was $26.0 million.

With the addition of Kadix, DRC currently has 109 bids awaiting award with an estimated contract value of $233 million. The inclusion of Kadix in DRC's operating results for the last five months of 2008 is anticipated to contribute $0.02 to $0.03 to earnings, after taking into account an estimated $2.2 million of interest, taxes, depreciation and amortization related to the Kadix acquisition for the five-month period. The financial benefits of the acquisition are expected to be more fully realized in 2009 from the inclusion in DRC results of a full year of Kadix operations with incremental contributions of more than $24 million in revenue and earnings of at least $0.12 per diluted share.

About Dynamics Research Corporation

Dynamics Research Corporation (DRC) is a leading provider of mission-critical technology management services and solutions for government programs. DRC offers forward-thinking solutions backed by a history of excellence and customer satisfaction. Founded in 1955, DRC is a publicly held corporation (NASDAQ:DRCO) and maintains more than 25 offices nationwide with major offices in Andover, Massachusetts; Reston, Virginia; and Fairborn, Ohio.

For more information please visit our website at http://www.drc.com/.

FCMN Contact: ppheng@drc.com

Source: Dynamics Research Corporation

CONTACT:
Investors,
Dave Keleher of Dynamics Research Corporation,
SVP and Chief Financial Officer,
+1-978-289-1615,
dkeleher@drc.com;

or Media,
Duyen "Jen" Truong of Sage Communications for Dynamics Research Corporation,
+1-703-584-5645,
duyent@aboutsage.com

Web site: http://www.drc.com/

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