7/25/2003 - The Titan Corporation (NYSE: TTN - News), reported results for the second quarter and six months ended June 30, 2003, which reflected strong growth in revenue, operating margins, and earnings per share.
Titan reported record quarterly revenues for the second quarter of 2003 of $438 million, an increase of 27% from $346 million in the second quarter of 2002. The increase was a result of 29% organic revenue growth generated by Titan's core national security solutions business.
Net income for the second quarter of 2003 was $5.9 million, or $0.07 per share, compared with a net loss of $11.8 million or ($0.16) per share for the second quarter of 2002. Included in the net income for the second quarter of 2003 is a charge of $12.4 million for debt extinguishment costs and income from discontinued operations of $0.8 million. Included in the net loss for the second quarter of 2002 is a charge of $9.4 million for debt extinguishment costs and a loss from discontinued operations of $16.5 million.
Pro forma net income for the second quarter of 2003 was $14.9 million, or $0.18 per share, compared with $12.8 million, or $0.15 per share, for the second quarter of last year. Pro forma net income in the second quarter of 2003 was up 43% sequentially from pro forma net income of $10.4 million in the first quarter of the year.
Bookings in the second quarter of 2003 totaled $700 million, building backlog to a record $4.65 billion. The book-to-bill ratio for the second quarter was a strong 1.6 to 1.
"Titan is on track for a record year of growth and profits," said Gene W. Ray, Chairman, President and CEO. "We are particularly proud of the 29% year-over-year revenue increase in our core national security business, which now accounts for over 99% of our revenues. We were also able to ramp up quickly on new contracts, which accelerated program execution and revenue growth.
"Our operating margins improved on a pro forma basis to 7.5% in the second quarter, from 6.6% in the first quarter, as a direct result of our focus on operational efficiencies. In addition, we reduced our Days Sales Outstanding (DSO) to 69 days from 82 days in the prior quarter, which contributed to strong operating cash flow.
"Most important to Titan is our customers' high level of satisfaction, which resulted in Titan being awarded several add-ons to existing contracts as well as several new contract wins. These new wins include a number of substantial, long-term contracts, which we believe will generate sustainable, predictable growth for Titan," added Ray.
Second Quarter 2003 Operational Highlights
The company attributed the revenue growth in large part to the continued ramp-up of its existing large contracts with the intelligence community. In particular, these contracts included the Enterprise Architecture and Decision Support contract with the National Security Agency; the Linguists contract with the Army Intelligence and Security Command; and the Enterprise IT contract with the Special Forces Operational Command. These contracts helped drive the 29% year-over-year organic revenue growth and 16% sequential organic revenue growth in the company's National Security Solutions business.
The Company also recorded increased revenues during the second quarter from a wide range of technical, engineering, systems integration and acquisition support services for all the Armed Services. There was also revenue growth in the Company's Affordable Weapon and X-Craft development contracts with the Office of Naval Research.
Titan continued to see strong growth in its Homeland Security and Homeland Defense market areas, and the company anticipates additional growth opportunities as a result of significant contracts awarded by the Defense Threat Reduction Agency (DTRA) in the second quarter of 2003.
Additionally, Titan reported that the exit from its former commercial businesses is progressing according to the Company's previously announced plan.
Company Increases Guidance for 2003
The Company is increasing its guidance for fiscal 2003 by announcing that it expects revenue to be between $1.725 billion and $1.775 billion. Earlier guidance had been for revenues in the range of $1.59 billion to $1.61 billion.
The Company is also increasing its guidance by announcing that it expects fiscal 2003 pro forma earnings per share from continuing operations to be $0.70 to $0.72. Previous guidance had been $0.63. GAAP earnings per share, including the charge for debt extinguishment costs of $12.4 million, are expected to be in the range of $0.52 to $0.54. Previous guidance for GAAP earnings per share was $0.46.
Guidance for free cash flow from continuing operations, defined as net cash flow from continuing operations less capital expenditures, remains at $54 million to $64 million. Cash flow from higher earnings is projected to equally offset use of additional working capital associated with increased revenue.
Guidance for 2004
The Company's guidance for fiscal 2004 revenue is $2.0 billion to $2.1 billion, representing a year-over-year growth rate of 16% to 18%. Earnings per share on a GAAP basis is expected to be in the range of $0.84 to $0.88.
"The improved outlook for the remainder of 2003 and for 2004 reflects our record backlog, large program execution expertise, our bid and proposal pipeline and our proven ability to execute our business development initiatives," Ray said. "In today's environment of continuing geopolitical threats, we believe there will be increasing demand for Titan's proven capabilities in providing National Security Solutions."
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