SAIC Announces Financial Results for Second Quarter of Fiscal Year 2010

*Revenues: Up 8 percent (7 percent internal) to $2.75 billion - Operating Income: Up 17 percent to $221 million - Diluted EPS from Continuing Operations: Up 19 percent to $0.31 - Reaffirming guidance for fiscal year 2010
SAN DIEGO and MCLEAN, Va., Sept. 3, 2009 /PRNewswire-FirstCall/ -- SAIC, Inc. (NYSE: SAI - News), a scientific, engineering, and technology applications company, today announced financial results for the second quarter of fiscal year 2010, which ended July 31, 2009.
"SAIC delivered another quarter of solid program execution and financial performance in the second quarter of fiscal year 2010," said Ken Dahlberg, SAIC chairman and chief executive officer. "As we look forward to the transition to Walt Havenstein's leadership later this month, the company's employees and capabilities have created a strong foundation for continued growth."
Summary Operating Results
Revenues for the quarter were $2.75 billion, up 8 percent from $2.55 billion in the second quarter of fiscal year 2009. Internal, or non-acquisition, growth represented 7 percentage points of the consolidated growth for the quarter. Key drivers of internal growth included recent wins in defense logistics, information technology, and cyber-security as well as increased tasking on existing defense programs.
Operating income for the quarter was $221 million (8.0 percent of revenue), up 17 percent from $189 million (7.4 percent of revenue) in the second quarter of fiscal year 2009. Growth in quarterly operating income margin percentage was driven by continued improvements in cost efficiency and program performance. Income from continuing operations for the quarter was $125 million, up 19 percent from $105 million in the second quarter of fiscal year 2009. Income from continuing operations benefited from a year-over-year improvement in the effective tax rate from 40.7 percent to 38.1 percent.
Diluted earnings per share (EPS) from continuing operations for the quarter were $0.31, up 19 percent from $0.26 in the second quarter of fiscal year 2009, 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 388 million, down 3 percent from 400 million in the second quarter of fiscal year 2009, due primarily to share repurchases made over the last four quarters. Diluted earnings per share, which include discontinued operations, were $0.31 for the quarter, up 15 percent from $0.27 in the second quarter of fiscal year 2009.
Cash Generation and Capital Deployment
Cash flow from operations for the quarter was $109 million (or 0.9 times income from continuing operations) compared to $230 million in the second quarter of fiscal year 2009. The drop in cash flow from operations primarily resulted from an additional payroll cycle in the current quarter, accounting for approximately $150 million of the year-over-year difference. Cash collections continued to be strong as days sales outstanding were 64 days, an improvement of four days sequentially and two days year-over-year.
The company acquired Atlan, Inc., a small cyber-security product testing firm, during the quarter. In addition, the company acquired R.W. Beck Group, Inc., a leading provider of business and technical consulting services in engineering, energy and infrastructure, after the close of the second quarter.
During the quarter, the company used $53 million to repurchase approximately 3 million shares including 2 million under the company's stock repurchase program and the remainder in recurring repurchases from employees in settlement of withholding taxes associated with stock option exercises and vesting events. Whether any future repurchases are made and the timing and actual number of shares repurchased under the stock repurchase program will depend on a variety of factors, including share price, corporate capital requirements, and other market conditions. As of July 31, 2009, the company had $951 million in cash and cash equivalents and $1.1 billion in long-term debt.
New Business Awards
Net new business bookings totaled $2.3 billion in the second quarter, representing a book-to-bill ratio of 0.8, reflecting an industry-wide slow down in contract awards and an increase in proposals awaiting adjudication. Net bookings are calculated as the period's ending backlog plus the period's revenue less the prior period's ending backlog and backlog obtained in acquisitions. No bookings value is assigned unless the company has received a signed contract for a priced statement of work.
Large, competitive definite delivery contract awards received during the quarter include:
Mine Resistant Ambush Protected (MRAP) Joint Logistics Integrator (JLI) Support. SAIC was awarded a thirty-month, $357 million task order to provide JLI and operational readiness services for MRAP vehicles in Iraq, Afghanistan, and Kuwait. SAIC will provide logistics planning, management, and analytical support to maximize fleet readiness and sustainment.
Army Chief Information Officer (CIO) Support. Under a three-year, $55 million task order, SAIC will provide technical, analytical, and management support services to the U.S. Army's CIO in the areas of enterprise architecture, portfolio management, strategy and technology assessment and operations.
Army Director of Information Management (DOIM) Support. SAIC received a five-year, $30 million task order from the U.S. Army's DOIM at Fort Polk, La., to provide a variety of information technology and network support services, including information assurance; automation and network support; and telephone, wireless and data communications services.
In addition, SAIC also won several indefinite-delivery/indefinite-quantity (IDIQ) contracts that are not included in net bookings. The most notable IDIQ awards during the quarter were:
U.S. Department of Homeland Security (DHS) National Communications System (NCS) Support. SAIC was awarded a prime contract by the U.S. DHS Office of Cybersecurity and Communication to provide scientific, engineering and technical services in support of the NCS, a cornerstone of the country's ability to provide key communications services to support government functions during emergencies. The new multiple-award contract has a five-year period of performance and a combined ceiling value of $388 million for all awardees.
U.S. Joint Forces Command (USJFCOM) Joint Concept Development and Experimentation Directorate (J-9) Support. SAIC was awarded a five-year, $284 million contract by USJFCOM J-9 to provide research, development, engineering and technical services. Under the contract, SAIC will conduct studies and simulation, and provide concept definition, research, analysis and technological assessments.
Space and Naval Warfare (SPAWAR) Systems Center Atlantic Support. SAIC was awarded a prime contract by SPAWAR to provide command and control integration support. The multiple-award contract has a five-year period of performance and a potential value of more than $196 million. SAIC will provide engineering and technical support services for the development, test and evaluation, and life cycle support of command, control, communications, computer, intelligence, surveillance and reconnaissance systems and related equipment and subsystems.
The company's backlog of signed business orders at the end of the second quarter of fiscal year 2010 was $16.3 billion, of which $5.6 billion was funded. As compared to the end of the second quarter of fiscal year 2009, total backlog increased 2 percent and funded backlog increased 4 percent. The negotiated unfunded backlog of $10.7 billion is the estimated amount to be earned in the future from negotiated contracts for which funding has not been authorized and priced but unexercised contract options. Negotiated unfunded backlog does not include any estimate of future expected task orders to be awarded under IDIQ or other master agreement contract vehicles.
Forward Guidance
The company currently expects to achieve all of its long-term financial goals in fiscal year 2010:
Growing revenue internally in the six percent to nine percent range;
Improving operating income margin by 20 to 30 basis points until reaching a sustainable level between eight percent and nine percent; and
Growing earnings per share from 11 percent to 18 percent.
Mark Sopp, SAIC chief financial officer commented, "The company's continued strong execution enables us to reaffirm our expectation that we will achieve our long-term financial growth goals again in fiscal year 2010. We are positioned to see increased contract awards in the second half of the year, which should provide a strong foundation as we head into fiscal year 2011."
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. SAIC had annual revenues of $10.1 billion for its fiscal year ended January 31, 2009. For more information, visit www.saic.com
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