SAIC Announces Financial Results for Fourth Quarter and Fiscal Year 2008

SAN DIEGO and MCLEAN, Va., March 25 /PRNewswire-FirstCall/ -- SAIC, Inc. (NYSE: SAI), a leading provider of research, engineering, and technology services and solutions, today announced financial results for the fourth quarter and fiscal year 2008, which ended January 31, 2008 .

"As we enter our 40th year, our company is stronger than ever," said Ken Dahlberg , SAIC chairman and chief executive officer. "This year we accelerated revenue growth, significantly expanded our operating margins, and built a strong foundation for continued growth. Our success is a testament to our employees and their dedication to solving our customers' most critical global problems."

Summary Operating Results

Revenues for the quarter were $2.34 billion, up 12 percent from $2.09 billion in the fourth quarter of fiscal year 2007. Revenues for the year were $8.94 billion, up 11 percent from $8.06 billion in fiscal year 2007. Internal, or non-acquisition, growth represented 9 percentage points of the consolidated growth for the quarter and 7 percentage points of the consolidated growth for the fiscal year. Key drivers of internal growth for the quarter included new and expanding programs in the intelligence and defense markets.

Operating income for the quarter was $171 million (7.3 percent of revenue), up 20 percent from $142 million (6.8 percent of revenue) in the fourth quarter of fiscal year 2007. Growth in quarterly operating margin percentage was driven by stronger program performance, improved contract fees, and greater recovery of indirect costs. Full-year operating income was $666 million (7.5 percent of revenue), up 16 percent from $572 million (7.1 percent of revenue) in fiscal year 2007.

Income from continuing operations for the quarter was $103 million, up 23 percent from $84 million in the fourth quarter of fiscal year 2007. Full-year income from continuing operations was $386 million, up 6 percent from $365 million in fiscal year 2007. Full-year income from continuing operations was up less than full-year operating income because of a $60 million decline in interest income due primarily to lower fiscal year 2008 cash balances after paying the $2.45 billion special dividend in November 2006 .

Diluted earnings per share from continuing operations for the quarter were $0.25, up 25 percent from $0.20 in the fourth quarter of fiscal year 2007. The diluted share count for the quarter was 416 million, down 1 percent from 420 million in the fourth quarter of fiscal year 2007, due primarily to share repurchases made throughout the year. Diluted earnings per share from continuing operations for the year were $0.93, down 7 percent from $1.00 in fiscal year 2007, as the diluted share count increased from 364 million to 417 million as a result of the 86 million shares issued in the October 2006 initial public offering (IPO).

Diluted earnings per share, which include discontinued operations, were $0.24 for the quarter, up 20 percent from $0.20 in the fourth quarter of fiscal year 2007. Diluted earnings per share for the year were $1.00, down 7 percent from $1.07 in fiscal year 2007. Discontinued operations include: the divisions of the former majority-owned subsidiary AMSEC LLC, which were divested in the second quarter of fiscal year 2008; the majority-owned subsidiary ANXeBusiness Corp., which was sold in the third quarter of fiscal year 2007; and Telcordia Technologies, Inc., which was sold in the first quarter of fiscal year 2006.

Cash Generation and Capital Deployment

Cash flow from operations for the quarter was $122 million, down 39 percent from $199 million in the fourth quarter of fiscal year 2007. Cash flow from operations was below the company's expectation due to a three-day increase in days sales outstanding to 73 days, coupled with increased working capital needs to support revenue growth acceleration. For the year, cash flow from operations was $345 million, down 50 percent from $693 million in fiscal year 2007. As of January 31, 2008 , the company had $1.1 billion in cash and cash equivalents and $1.2 billion in long-term debt. On February 1, 2008 , the first day of fiscal year 2009, the company repaid $100 million of long-term debt, as scheduled.

During the quarter the company used $39 million to repurchase 2.0 million shares, including 1.3 million shares under the 40 million share stock repurchase program and the remainder in recurring repurchases from employees in settlement of withholding taxes associated with stock option exercises and vesting events. Given the share repurchase activity since the program's inception in December 2006 , the SAIC Board of Directors recently increased the authorized amount for future repurchases under the program back to 40 million shares. 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 price, corporate and regulatory requirements, and other market conditions.

Mark Sopp , SAIC chief financial officer commented, "In fiscal year 2008, our core business showed strong growth and improved profitability. Although cash flow did not meet our expectations, our overall ability to produce cash flow remains strong, and we are committed to driving down DSOs and deploying cash flow and other capital wisely to strengthen our company and increase its value."

New Business Awards

Net new business bookings totaled $1.5 billion in the fourth quarter and $8.8 billion for the fiscal year, representing a book-to-bill ratio of 0.7 and 1.0 for the fourth quarter and fiscal year, respectively. Net bookings are calculated as the current period ending backlog plus the current period's revenue less prior period 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 contracts received during the quarter include:

In addition, SAIC also won several indefinite delivery/indefinite quantity (IDIQ) contracts that are not included in the bookings total. The most notable IDIQ award during the quarter was:

The company's backlog of signed business orders at the end of fiscal year 2008 was $15.0 billion, of which $5.1 billion was funded. The negotiated unfunded backlog of $10.0 billion represents the estimated amount to be earned in the future from firm orders for which funding has not been appropriated or otherwise authorized and unexercised priced contract options. Negotiated 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 continues to expect that its long-term outlook will remain consistent with the financial goals articulated as part of the IPO:

The company expects its revenue and operating margin performance to be consistent with its long-term goals in fiscal year 2009. However, the company expects that recent reductions in market interest rates will reduce interest income significantly, which could cause the company to fall short of achieving the long-term EPS growth rate goal in fiscal year 2009.

About SAIC

SAIC is a leading provider of scientific, engineering, systems integration and technical services and solutions to all branches of the U.S. military, agencies of the Department of Defense, the intelligence community, the U.S. Department of Homeland Security and other U.S. Government civil agencies, as well as to customers in selected commercial markets. With about 44,000 employees in over 150 cities worldwide, SAIC engineers and scientists solve complex technical challenges requiring innovative solutions for customers' mission-critical functions.


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 sales, earnings, 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 the U.S. budget process; changes in U.S. Government procurement rules and regulations; our compliance with various U.S. Government and other government procurement rules and regulations; the outcome of U.S. Government audits of our company; our ability to win contracts with the U.S. Government and others; our ability to attract, train and retain skilled employees; 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; our ability to successfully acquire and integrate businesses; 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 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 SEC, 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 report on Form 10-Q, which may be viewed or obtained through the Investor Relations section of our Web site at

All information in this release is as of March 25, 2008 . 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.