SAIC Announces Financial Results for Third Quarter of Fiscal Year 2011

MCLEAN, Va., Dec. 8, 2010 /PRNewswire-FirstCall/ -- SAIC, Inc. (NYSE: SAI), a scientific, engineering, and technology applications company, today announced financial results for the third quarter of fiscal year 2011, which ended October 31, 2010.  

"Our employees continue to deliver effectively in support of mission critical customer programs.  Strong program execution and improved returns on fixed-price contracts contributed to operating profit and earnings per share growth over the same period last year," said Walt Havenstein, SAIC chief executive officer.  

Summary Operating Results

Revenues for the quarter were $2.87 billion, up 4 percent from $2.77 billion in the third quarter of fiscal year 2010.  Internal revenue growth, which includes year-over-year performance of acquisitions, represented 2 percent of the consolidated revenue growth for the quarter. Internal revenue growth was driven by increased activity on certain intelligence and command, control and communications contracts.

Operating income for the quarter was $258 million (9.0 percent of revenue), up 11 percent from $233 million (8.4 percent of revenue) in the third quarter of fiscal year 2010.  The improvement in operating income was the result of strong program performance, particularly on certain fixed-price contracts, and increased cost recovery on cost reimbursable contracts.  Income from continuing operations for the quarter was $154 million, up 14 percent from $135 million in the third quarter of fiscal year 2010.

Diluted earnings per share (EPS) from continuing operations for the quarter were $0.41, up 21 percent from $0.34 in the third quarter of fiscal year 2010, driven by the increase in income from continuing operations and a lower share count compared to the prior year quarter.  The diluted share count for the quarter was 360 million, down 7 percent from 388 million in the third quarter of fiscal year 2010, due primarily to share repurchases in prior quarters.  Diluted earnings per share, which include discontinued operations, were $0.46 for the quarter, up from $0.34 in the third quarter of fiscal year 2010.  Discontinued operations for the quarter benefited from the resolution of certain contingencies related to the sale of the company's former Telcordia subsidiary.

Cash Generation and Capital Deployment

Cash flow provided by operations for the quarter was $315 million, compared to $250 million in the third quarter of fiscal year 2010.  Days sales outstanding were 69 days in the quarter compared to 70 days in the third quarter of fiscal year 2010.  

During the quarter, the company used $218 million to fund the acquisition of Reveal Imaging Technologies, Inc., a leading threat detection products and services company serving customers in the transportation safety industry.  As of October 31, 2010, the company had $644 million in cash and cash equivalents and $1.1 billion in long-term debt.

New Business Awards

Net business bookings totaled $3.1 billion in the third quarter, representing an increase of 4 percent from the third quarter of the prior year and contributing to a 14 percent increase on a year-to-date basis over the prior year.  The book-to-bill ratio was 1.1 for the third quarter and 1.1 for the first nine months of fiscal year 2011.  Large, competitive definite delivery contract awards received during the quarter include:

• National Aeronautics and Space Administration (NASA) Information Technology (IT) Support. SAIC received a five-year, single-award $321 million contract from NASA to provide a broad range of IT services.  Under the contract, which includes an indefinite-delivery/indefinite-quantity (ID/IQ) component, SAIC will provide all services necessary to operate and maintain NASA's set of integrated enterprise application systems supporting all ten NASA field centers, NASA Headquarters, and the NASA Shared Services Center. The contract is a follow-on effort for the enterprise applications work performed under the Unified NASA Information Technology Services (UNITeS) contract held by SAIC since January 2004.
• U.S. Citizenship and Immigration Services (USCIS) IT Support. SAIC was awarded two task orders totaling $233 million by the U.S. Department of Homeland Security (DHS) to support the USCIS.  Under the first task order, valued at $183 million over five years, SAIC will continue to provide a range of IT services to help USCIS maintain and operate its infrastructure, enhance security, migrate to consolidated data centers and assist in the transformation of USCIS to modern business and infrastructure standards.  Under the second task order, valued at $50 million over 57 months, SAIC will continue to help USCIS transition from a decentralized application environment to a service-oriented architecture environment for enterprisewide applications and systems.  
• Naval Surface Warfare Center (NSWC) Engineering Support.  Under a five-year, $45 million task order awarded by the NSWC – Crane Division, SAIC will provide engineering, scientific, logistics and data management services to the Spectrum Warfare Systems Department.
• U.S. Environmental Protection Agency (EPA) Data Center Support.  SAIC received a six-year, $42 million task order to provide hosting services to the EPA's National Computer Center.  The server, storage, high-performance computing operations, facility management and disaster recovery services SAIC delivers will support data centers that collect, process and disseminate environmental data used by EPA researchers and enforcement personnel, state and local governments and the public.  
• U.S. Customs and Border Protection (CBP) Tactical Communications Support.  Under a two-year, $45 million task order awarded by DHS, SAIC will work with CBP to upgrade Land Mobile Radio communications systems used by law enforcement agents and officers protecting the nation's borders. The modernization work will include encryption technology to help ensure secure communications, Global Positioning System technology to track agent and officer location, and interoperable digital technology that will allow for greater coverage and user capacity.  
• Geothermal Power Plant Design-Build Support.  SAIC was awarded two contracts totaling $36 million to design and build geothermal power plants in Nevada.  The first contract, valued at more than $14 million, was awarded by Terra Gen Sierra Holdings, LLC, to design and build a new 6.6 megawatt binary geothermal plant by January of 2012.  Under the second contract, awarded by USG Nevada LLC and valued at $22 million over 15 months, SAIC will provide engineering, procurement and construction services for phase one of the San Emidio project – relocation and replacement of an existing geothermal power plant in northwest Nevada.  

In addition, SAIC also won several ID/IQ contracts that are not included in net bookings.  Awards during the quarter include:

• Defense Logistics Agency (DLA) Supply Chain Management Support. SAIC received a single-award ID/IQ contract from the DLA to support the Anniston Army Depot in Alabama and the Red River Army Depot in Texas. SAIC will provide supply chain management of industrial hardware and repair parts required for the repair of military vehicles for the U.S. Army, Navy, Air Force and Marine Corps.  The eight-year contract has a ceiling value of $241 million.
• U.S. Army Intelligence Operations Support. Under a multiple award ID/IQ contract, SAIC will provide a full range of multi-discipline intelligence services to the Army Intelligence and Security Command.  The five-year contract has a ceiling value of $492 million for all awardees.  
• Centers for Disease Control and Prevention (CDC) IT Support. SAIC received a multiple award ID/IQ contract from the CDC to provide technical services to help the agency optimize its IT investments, ensure data protection, and share information enterprisewide.  The ten-year contract has a ceiling value of $3 billion for all awardees of the information management domain.  

The company's backlog of signed business orders at the end of the third quarter of fiscal year 2011 was $16.3 billion, of which $6.3 billion was funded.  As compared to the end of the second quarter of fiscal year 2011, total backlog increased 2 percent while funded backlog increased 9 percent.  The negotiated unfunded backlog of $10.0 billion is the estimated amount of revenue to be earned in the future from negotiated contracts for which funding has not been authorized and unexercised priced contract options.  Negotiated unfunded backlog does not include any estimate of future potential task orders expected to be awarded under ID/IQ, GSA Schedule or other master agreement contract vehicles.

Forward Guidance

Given its operating performance and outlook through the third quarter of the fiscal year, the company is revising its expectations for internal revenue growth and operating profit margin for fiscal year 2011.  The revised fiscal year 2011 guidance is:

• Internal revenue growth of zero percent to two percent compared to fiscal year 2010;
• Operating income margin up 30 to 50 basis points over fiscal year 2010; and
• Diluted earnings per share from continuing operations up 14 percent to 18 percent over fiscal year 2010 (unchanged from previous guidance).

With respect to fiscal year 2012, starting on February 1, 2011, the company is simplifying its guidance policy going forward such that the company will provide an outlook of the expected revenue range and the expected range of diluted earnings per share from continuing operations.  The company will also provide its expected minimum level of cash flows from continuing operations.  The company's outlook for fiscal year 2012 is:

• Revenues of $11.2 billion to $11.7 billion;
• Diluted earnings per share from continuing operations of $1.35 to $1.46; and
• Cash flows from continuing operations at or above $500 million.

Fiscal year 2011 and 2012 guidance excludes any future charges from the previously announced expiration of the Scottish Power IT outsourcing contract and excludes the impact of potential future acquisitions. 

About SAIC

SAIC is a FORTUNE 500® scientific, engineering, and technology applications company that uses its deep domain knowledge to solve problems of vital importance to the nation and the world, in national security, energy and the environment, critical infrastructure, and health.  The company's approximately 45,000 employees serve customers in the U.S. Department of Defense, the intelligence community, the U.S. Department of Homeland Security, other U.S. Government civil agencies and selected commercial markets.  Headquartered in McLean, Va., SAIC had annual revenues of $10.8 billion for its fiscal year ended January 31, 2010.  For more information, visit www.saic.com.  SAIC:  From Science to Solutions®

Forward-Looking Statements

Certain statements in this release contain or are based on "forward-looking" information within the meaning of the Private Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as "expects," "intends," "plans", "anticipates," "believes," "estimates," "guidance," and similar words or phrases. Forward-looking statements in this release include, among others, estimates of future revenues, operating income, earnings, earnings per share, charges, backlog, outstanding shares and cash flows. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Actual performance and results may differ materially from the guidance and other forward-looking statements made in this release depending on a variety of factors, including: changes in the U.S. Government defense budget or budgetary priorities or delays in contract awards or the U.S. budget process; changes in U.S. Government procurement rules, regulations and practices; our compliance with various U.S. Government and other government procurement rules and regulations; U.S. Government reviews, audits and investigations of our company; our ability to win contracts with the U.S. Government and others; our ability to attract, train and retain skilled employees, including our management team; our ability to maintain relationships with prime contractors, subcontractors and joint venture partners; our ability to obtain required security clearances for our employees; our ability to accurately estimate costs associated with our firm-fixed-price and other contracts; resolution of legal and other disputes with our customers and others or legal compliance issues; our ability to effectively acquire businesses and make investments; our ability to manage risks associated with our international business; our ability to compete with others in the markets in which we operate; and our ability to execute our business plan and long-term management initiatives effectively and to overcome these and other known and unknown risks that we face. These are only some of the factors that may affect the forward-looking statements contained in this release. For further information concerning risks and uncertainties associated with our business, please refer to the filings we make from time to time with the U.S. Securities and Exchange Commission, including the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Legal Proceedings" sections of our latest annual report on Form 10-K and quarterly reports on Form 10-Q, which may be viewed or obtained through the Investor Relations section of our Web site at www.saic.com.

All information in this release is as of December 8, 2010. SAIC expressly disclaims any duty to update the guidance or any other forward-looking statement provided in this release to reflect subsequent events, actual results or changes in the company's expectations. SAIC also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.

SOURCE SAIC

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