SM&A; Corp. Says Earnings Won’t Meet Expectations

Newport Beach-based SM&A; Corp. said Thursday that it will post lower-than-expected earnings and launch a reorganization plan in an effort to improve operating results.

The provider of management services said it expects to report earnings of $2.1 million, or 13 cents a share, on revenue of about $27.2 million for the third quarter.

A year ago, the company earned $1.6 million, or 10 cents a share, including a charge of about 2 cents a share, on $22.3 million in revenue.

SM&A; said third-quarter revenue fell short of expectations primarily because of the Proposal Management group. The company said revenue was also hurt by software product sales that have been temporarily delayed to future quarters because of testing and quality issues.

SM&A; said it will have narrower than expected gross margins due to a higher mix in revenue of lower margin services and its inability to pass annual merit-cost increases for its workers to certain contracts.

The company expects gross margins for the three months ended Sept. 30 will be about 37.4%, compared with 41.2% for the third quarter of 1998.

As part of its reorganization, SM&A; will place several existing activities within a new division to be named Strategic Studies & Analysis and complete its customer care center in Colorado Springs.