SAIC Announces Financial Results for Second Quarter Fiscal Year 2009

SAN DIEGO and MCLEAN, Va. , Sept. 3 /PRNewswire-FirstCall/ -- SAIC, Inc. (NYSE: SAI), a leading provider of research, engineering, and technology services and solutions, today announced financial results for the second quarter of fiscal year...


SAN DIEGO and MCLEAN, Va. , Sept. 3 /PRNewswire-FirstCall/ -- SAIC, Inc. (NYSE: SAI), a leading provider of research, engineering, and technology services and solutions, today announced financial results for the second quarter of fiscal year 2009, which ended July 31, 2008 .

"Our company continued its strong operating momentum in the second quarter of fiscal year 2009," said Ken Dahlberg , SAIC chairman and chief executive officer. "Internal revenue growth, contract execution, and cash collections were all excellent. Our employees' dedicated work is delivering excellent contract execution and critical support to our customers. Our growing labor base and improving business discipline gives us increasing confidence that we can achieve our financial goals for fiscal year 2009."

Summary Operating Results

Revenues for the quarter were $2.56 billion, up 15 percent from $2.22 billion in the second quarter of fiscal year 2008. Internal, or non-acquisition, growth represented 10 percentage points of the consolidated growth for the quarter. Key drivers of internal growth for the quarter included new and expanding programs in the intelligence and defense markets, including systems integration and logistics support activities for mine resistant ambush protected (MRAP) vehicles.

Operating income for the quarter was $186 million (7.3 percent of revenue), up 8 percent from $173 million (7.8 percent of revenue) in the second quarter of fiscal year 2008. Contract fees were slightly higher year-over-year, but operating income was reduced by $6 million as a result of the civil judgment in favor of the Nuclear Regulatory Commission, most of which is not deductible for tax purposes, and $3 million due to severance costs associated with efforts to reduce infrastructure in the commercial business segment and preparations to move certain corporate support functions to a shared services center.

Income from continuing operations for the quarter was $104 million, up 5 percent from $99 million in the second quarter of fiscal year 2008. Diluted earnings per share from continuing operations for the quarter were $0.26, up 8 percent from $0.24 in the second quarter of fiscal year 2008, driven by the increase in income from continuing operations and a lower share count compared to the prior year. The diluted share count for the quarter was 403 million, down 4 percent from 418 million in the second quarter of fiscal year 2008, due primarily to share repurchases made over the course of fiscal year 2008 and continuing into the second quarter of fiscal year 2009.

Diluted earnings per share, which include discontinued operations, were $0.27 for the quarter, down 13 percent from $0.31 in the second quarter of fiscal year 2008, which included a $31 million pre-tax gain in discontinued operations on the portion of the business disposed in the AMSEC reorganization transaction.

Cash Generation and Capital Deployment

Cash flow from operations for the quarter was $229 million (or 2.2 times income from continuing operations), down 11 percent from $257 million during the second quarter of fiscal year 2008. The strong cash collections were driven primarily by the improvement in days sales outstanding (DSO) from 73 days in the first quarter of fiscal 2009 to 66 days in the second quarter of fiscal 2009. The year-over-year decline in cash flow from operations primarily results from an exceptional reduction in DSO -- from 73 days to 64 days -- in the second quarter of fiscal year 2008.

During the quarter, the company used $65 million to fund the acquisition of SM Consulting, Inc. In addition, the company used $157 million to repurchase approximately 8.0 million shares, including 7.3 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. 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, 2008 , the company had $692 million in cash and cash equivalents and $1.1 billion in long-term debt.

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