SAIC Announces Financial Results for Third Quarter of Fiscal Year 2012
MCLEAN, Va., Dec. 6, 2011 /PRNewswire/ -- SAIC, Inc. (NYSE: SAI), a scientific, engineering, and technology applications company, today announced financial results for the third quarter of fiscal year 2012, which ended October 31, 2011.
Results for the quarter were significantly impacted by a $232 million loss provision taken by the Company relating to the investigations concerning the CityTime workforce management contract with the City of New York. Excluding this provision, results from operations in the third quarter were consistent with the Company's expectations.
"Our actions taken in the third quarter in connection with the CityTime situation, including taking the loss provision, were significant and appropriate. During this time, our employees have consistently remained focused on continuing to deliver operational excellence and new capabilities for our customers. Strong new business bookings, generation of cash flow, and other positive milestones this quarter reflect this focus and teamwork," said Walt Havenstein, SAIC chief executive officer.
Summary Operating Results
Revenues for the third quarter of fiscal 2012 were $2.81 billion.
Operating loss for the quarter was $17 million (-0.6 percent of revenue). Operating income excluding the CityTime loss provision was $215 million (7.5 percent of revenue), compared to $252 million (8.9 percent of revenue) in the third quarter of fiscal year 2011. The decline in operating income, as adjusted, was primarily due to a $19 million impairment of certain intangible assets associated with the acquisition of CloudShield Technologies, Inc. completed in 2010, and increased expenditures on internal research and development.
Loss from continuing operations for the quarter was $90 million. Income from continuing operations excluding the CityTime loss provision was $119 million compared to $151 million in the third quarter of fiscal year 2011. This decline in income from continuing operations, as adjusted, was attributable to the reduction in operating income described above and additional interest expense from the $750 million of debt issued in December 2010.
Diluted earnings per share from continuing operations for the quarter were $(0.27). Diluted earnings per share from continuing operations excluding the CityTime loss provision were $0.35 compared to $0.41 in the third quarter of fiscal year 2011. The diluted share count for the quarter was 329 million, down 9 percent from 360 million in the third quarter of fiscal year 2011, due to share repurchases over the past year.
Segment Operating Results
Effective in fiscal year 2012, the Company redefined its reportable segments into the segments referenced in the chart below. The segment information for the prior year periods has been recast to give effect to the change in reportable segments and for discontinued operations.
Three Months Ended
October 31 Revenue Growth (%)
---------- ------------------
2011 2010 Total Internal
---- ---- ----- --------
($ in millions)
Revenues:
Defense Solutions $1,117 $1,215 -8% -8%
Health, Energy and
Civil Solutions 758 718 6% 1%
Intelligence and
Cybersecurity
Solutions 936 888 5% 5%
Corporate and Other 1 2 n/a n/a
Intersegment
Elimination (1) (2) n/a n/a
--- --- --- ---
Total $2,811 $2,821 0% -2%
====== ====== === ===
Operating Margin
----------------
Operating Income
(Loss): 2011 2010
---- ----
Defense Solutions $(133) $113 -11.9% 9.3%
Health Energy and Civil
Solutions 80 62 10.6% 8.6%
Intelligence and
Cybersecurity
Solutions 52 78 5.6% 8.8%
Corporate and Other (16) (1) n/a n/a
--- --- --- ---
Total $(17) $252 -0.6% 8.9%
==== ==== ==== ===
Nine Months Ended
October 31 Revenue Growth (%)
---------- ------------------
2011 2010 Total Internal
---- ---- ----- --------
($ in millions)
Revenues:
Defense Solutions $3,339 $3,484 -4% -4%
Health, Energy and Civil
Solutions 2,094 2,095 0% -4%
Intelligence and
Cybersecurity Solutions 2,663 2,565 4% 4%
Corporate and Other 2 58 n/a n/a
Intersegment Elimination (3) (5) n/a n/a
--- --- --- ---
Total $8,095 $8,197 -1% -3%
====== ====== === ===
Operating Margin
----------------
Operating Income (Loss): 2011 2010
---- ----
Defense Solutions $45 $290 1.3% 8.3%
Health Energy and Civil
Solutions 197 189 9.4% 9.0%
Intelligence and
Cybersecurity Solutions 211 209 7.9% 8.1%
Corporate and Other (31) 42 n/a n/a
--- --- --- ---
Total $422 $730 5.2% 8.9%
==== ==== === ===
Defense Solutions
Defense Solutions revenues for the quarter were $1.117 billion. The entire CityTime loss provision was recorded within the Defense Solutions segment. Defense Solutions revenues excluding the revenue portion of the loss provision were $1.169 billion, and decreased 4 percent from the third quarter of fiscal year 2011. The decline in revenues, as adjusted, was due to the termination of the U.S. Army Brigade Combat Team Modernization contract, the June 2011 completion and delivery of the CityTime system, and reduced activity on an infrastructure support services program for the Department of Defense (DoD). These declines were partially offset by increased activity on a systems and software maintenance/upgrade program for the U.S. Army and ramp up of a new program to operate and maintain the enterprise network information technology (IT) infrastructure for the U.S. Department of State.
Defense Solutions operating loss for the quarter was $133 million (-11.9 percent of revenue). Defense Solutions operating income excluding the expense portion of the CityTime loss provision was $99 million, or 8.5 percent of revenue, down from 9.3 percent of revenue in the third quarter of fiscal year 2011, due to the conclusion of certain contracts having relatively higher profit levels.
Health, Energy and Civil Solutions
Health, Energy and Civil Solutions revenues for the quarter increased 6 percent from the third quarter of fiscal year 2011. Internal revenues increased 1 percent due to increased deliveries of non-intrusive cargo inspection systems, increased healthcare IT consulting services, design-build projects for geothermal plant construction, and an increase in disaster recovery support services. These increases were partially offset by reduced activity on certain U.S. federal civilian agency programs, including those in support of NASA.
Health, Energy and Civil Solutions operating income for the quarter was 10.6 percent of revenue, up from 8.6 percent of revenue in the third quarter of fiscal year 2011, driven by the increased volume of non-intrusive cargo inspection system deliveries, healthcare IT consulting services, and disaster recovery support services, all of which have relatively higher operating margins; strong program performance; and reduced infrastructure costs arising from cost efficiency efforts; partially offset by increased investment in internal research and development spending.
Intelligence and Cybersecurity Solutions
Intelligence and Cybersecurity Solutions revenues for the quarter increased 5 percent from the third quarter of fiscal year 2011, substantially all of which was attributable to internal growth, primarily resulting from increases in airborne surveillance, intelligence analysis, and cybersecurity programs as well as increased material deliveries on an intelligence processing, exploitation and dissemination contract.
Intelligence and Cybersecurity Solutions operating income for the quarter was 5.6 percent of revenue, down from 8.8 percent of revenue in the third quarter of fiscal year 2011. The decline in operating margin was the result of a $19 million impairment of certain intangible assets associated with the CloudShield Technologies acquisition completed in 2010, and an increase in internal research and development spending.
Corporate and Other
Corporate and Other segment operating income returned to a more normative level during the quarter.
Cash Generation and Capital Deployment
Cash flow provided by operations for the quarter was $423 million, compared to $321 million in the third quarter of fiscal year 2011. The increase in cash flows from operations was due to an improvement in days sales outstanding to 71 days from 74 days at the end of the second quarter, compared to a 3 day increase in days sales outstanding during the prior year quarter.
During the quarter, the Company used $190 million of cash to acquire Vitalize Consulting Solutions, Inc., a leading provider of clinical, business and IT services for healthcare enterprises. Also during the quarter, the Company used $53 million to repurchase approximately 3 million shares of stock, including shares under the Company's stock repurchase program. As of October 31, 2011, the Company had $1.46 billion in cash and cash equivalents and $1.85 billion in long-term debt.
New Business Awards
Net business bookings totaled $3.8 billion in the third quarter, representing a book-to-bill ratio of 1.3. Notable awards received during the quarter include:
-- Defense Logistics Agency Tire Successor Initiative. SAIC was awarded a
prime contract by the Defense Logistics Agency to provide supply chain
management, including forecasting, procurement, inventory management,
and worldwide distribution of military aircraft and ground tires
directly to U.S. Armed Services and Foreign Military Sales customers.
The single-award indefinite-delivery/indefinite-quantity contract has a
five-year base period of performance, one two-year option, and an
estimated contract value of more than $1 billion if the option is
exercised.
-- U.S. Army Information Systems Engineering Command Award. SAIC was
awarded a prime contract by the U.S. Army Information Systems
Engineering Command to provide information systems engineering and
information technology services in support of the United States Army
Information Systems Engineering Command and federal agency communication
systems worldwide. The multiple award,
indefinite-delivery/indefinite-quantity contract has a five year period
of performance with a total contract ceiling value of $892 million.
-- National Institute of Allergy and Infectious Diseases Award. SAIC was
awarded a contract by the National Institute of Allergy and Infectious
Diseases, part of the National Institutes of Health, to provide
preclinical services for the development of biopharmaceutical products
for infectious diseases. The total funding could be up to $102 million
over the ten year period of performance, subject to availability of
annual appropriations.
The Company's backlog of signed business orders at the end of the third quarter of fiscal year 2012 was $18.7 billion, of which $6.3 billion was funded. As compared to the end of the third quarter of fiscal year 2011, total backlog increased 16 percent while funded backlog increased 2 percent. The negotiated unfunded backlog of $12.4 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 task orders expected to be awarded under ID/IQ, GSA Schedule or other master agreement contract vehicles.
Forward Guidance
Due to the CityTime loss provision, the Company has revised its GAAP guidance for fiscal 2012. The company is also presenting guidance on a non-GAAP basis, which excludes the CityTime loss provision. The Company's updated guidance for fiscal 2012 is as follows:
Non-GAAP Guidance,
excluding CityTime loss
provision
GAAP Guidance
Revenues $10.6 billion to $11.0 billion $10.6 billion to $11.0 billion
Diluted
earnings
per
share
from
continuing
operations $0.70 to $0.80 $1.30 to $1.40
----------- -------------- --------------
Cash
flows
from
continuing
operations
(assumes
no
CityTime
related
payments) At or above $600 million
----------- ------------------------
Fiscal year 2012 guidance excludes the impact of potential future acquisitions and other non-ordinary course items.
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 41,000 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 approximately $11 billion for its fiscal year ended January 31, 2011. 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: the outcome of or future developments related to the CityTime investigation; developments in the U.S. Government defense budget, including budget reductions, implementation of spending caps or changes in budgetary priorities, or delays in funding or contract awards; delays in the U.S. Government 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; 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 and our Registration Statement on Form S-4 (File No. 333-176896), as amended, filed on October 4, 2011, all of 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 6, 2011. 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.
CONTACTS:
Investor Relations:
Paul Levi
703-676-2283
Media Relations:
Vernon Guidry
703-676-6255
guidryjrv@saic.com
SAIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in millions, except per share amounts)
Three Months Ended Nine Months Ended
October 31 October 31
---------- ----------
2011 2010 2011 2010
---- ---- ---- ----
(As Adjusted) (As Adjusted)
Revenues $2,811 $2,821 $8,095 $8,197
Costs and expenses:
Cost of revenues 2,495 2,445 7,110 7,101
Selling, general and
administrative expenses 333 124 563 366
--- ---
Operating income (loss) (17) 252 422 730
Non-operating income (expense):
Interest income 2 - 3 1
Interest expense (29) (19) (85) (56)
Other income (expense), net (2) 7 3 5
--- ---
Income (loss) from continuing
operations before income taxes (46) 240 343 680
Provision for income taxes (44) (89) (191) (248)
--- --- ---- ----
Income (loss) from continuing
operations (90) 151 152 432
Discontinued operations:
Income from discontinued
operations before income
taxes 1 33 118 87
Provision for income taxes - (11) (50) (31)
--- ---
Income from discontinued operations 1 22 68 56
--- --- --- ---
Net income (loss) $(89) $173 $220 $488
==== ==== ==== ====
Earnings per share (EPS):
Income (loss) from continuing
operations, as reported $(90) $151 $152 $432
Less: earnings allocated to
participating securities - (5) (5) (14)
--- --- --- ---
Income (loss) from continuing
operations, for computing EPS $(90) $146 $147 $418
==== ====
Net income (loss), as reported $(89) $173 $220 $488
Less: earnings allocated to
participating securities - (6) (8) (15)
--- --- --- ---
Net income (loss), for
computing EPS $(89) $167 $212 $473
==== ====
Basic:
Income (loss) from
continuing operations $(0.27) $0.41 $0.43 $1.14
Income from discontinued
operations - 0.06 0.20 0.15
--- ---- ---- ----
$(0.27) $0.47 $0.63 $1.29
====== ===== ===== =====
Diluted:
Income (loss) from
continuing operations $(0.27) $0.41 $0.43 $1.14
Income from discontinued
operations - 0.05 0.20 0.15
--- ---- ---- ----
$(0.27) $0.46 $0.63 $1.29
====== ===== ===== =====
Weighted average number of
shares outstanding:
Basic 329 359 338 366
=== === === ===
Diluted 329 360 339 368
=== === === ===
On February 1, 2011, the Company changed its method of recognizing pension expense. This
change in accounting has been reported through retrospective application of the new method to
all periods presented, with prior year amounts labeled "as adjusted".
SAIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions)
October 31, January 31,
2011 2011
---- ----
ASSETS (As Adjusted)
Current assets:
Cash and cash equivalents $1,463 $1,367
Receivables, net 2,219 2,069
Inventory, prepaid expenses
and other current assets 309 382
Assets of discontinued
operations - 49
Total current assets 3,991 3,867
Property, plant and equipment, net 349 359
Intangible assets, net 186 211
Goodwill 1,827 1,664
Deferred income taxes 34 51
Other assets 76 71
--- ---
$6,463 $6,223
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $1,534 $1,205
Accrued payroll and employee
benefits 611 511
Notes payable and long-term
debt, current portion 553 3
Liabilities of discontinued
operations - 29
Total current liabilities 2,698 1,748
Notes payable and long-term debt, net
of current portion 1,299 1,849
Other long-term liabilities 140 135
Stockholders' equity:
Common stock, $.0001 par
value, 2 billion shares
authorized, 341 million and
362 million
shares issued and outstanding
at October 31, 2011 and
January 31, 2011,
respectively - -
Additional paid-in capital 2,003 2,090
Retained earnings 326 408
Accumulated other
comprehensive loss (3) (7)
Total stockholders' equity 2,326 2,491
$6,463 $6,223
====== ======
SAIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Three Months Ended Nine Months Ended
October 31 October 31
2011 2010 2011 2010
---- ---- ---- ----
Cash flows from continuing operations: (As Adjusted) (As Adjusted)
Net income (loss) $(89) $173 $220 $488
Income from discontinued
operations (1) (22) (68) (56)
Adjustments to reconcile net
income (loss) to net cash
provided by continuing
operations:
Depreciation and
amortization 31 29 86 80
Stock-based compensation 21 26 64 76
Excess tax benefits from
stock-based compensation - - - (13)
Impairment losses 19 2 19 2
Net gain on sales and
disposals of assets (4) (4) (32) (3)
Other items (1) - - 1
Increase (decrease) in cash
and cash equivalents,
excluding effects of
acquisitions and
divestitures, resulting
from changes in:
Receivables (45) (156) (93) (146)
Inventory, prepaid expenses
and other current assets 24 46 38 30
Deferred income taxes (12) 8 (11) 4
Other assets (3) 1 (21) 2
Accounts payable and accrued
liabilities 320 81 322 (15)
Accrued payroll and employee
benefits 158 137 103 115
Income taxes payable 8 7 10 9
Other long-term liabilities (3) (7) (4) (12)
--- --- --- ---
Total cash flows provided by
continuing operations 423 321 633 562
Cash flows from investing activities
of continuing operations:
Expenditures for property,
plant and equipment (18) (17) (48) (52)
Acquisitions of businesses,
net of cash acquired (190) (218) (216) (358)
Net payments for purchase
price adjustments related to
prior year acquisitions (1) - (4) -
Proceeds from sale of assets 5 - 84 7
Other items - 5 (1) (1)
--- ---
Total cash flows used in investing
activities of continuing operations (204) (230) (185) (404)
Cash flows from financing activities
of continuing operations:
Payments on notes payable and
long-term debt (1) (1) (3) (2)
Sales of stock and exercises
of stock options 7 8 21 30
Repurchases of stock (53) (3) (470) (448)
Excess tax benefits from
stock-based compensation - - - 13
Other items - - (2) -
--- ---
Total cash flows provided by (used in)
financing activities of continuing
operations (47) 4 (454) (407)
--- --- ---- ----
Increase (decrease) in cash and cash
equivalents from continuing
operations 172 95 (6) (249)
--- --- --- ----
Cash flows from discontinued
operations:
Cash used in operating
activities of discontinued
operations (47) (28) (67) (20)
Cash provided by (used in)
investing activities of
discontinued operations 2 (28) 168 53
--- ---
Increase (decrease) in cash and cash
equivalents from discontinued
operations (45) (56) 101 33
--- --- --- ---
Effect of foreign currency exchange
rate changes on cash and cash
equivalents - 1 1 (1)
--- --- --- ---
Total increase (decrease) in cash and
cash equivalents 127 40 96 (217)
--- --- --- ----
Cash and cash equivalents at beginning
of period 1,336 604 1,367 861
----- --- ----- ---
Cash and cash equivalents at end of
period $1,463 $644 $1,463 $644
====== ==== ====== ====
SAIC, INC.
BACKLOG BY REPORTABLE SEGMENT
(Unaudited, $ in millions)
Backlog represents the estimated amount of future revenues to be recognized under negotiated
contracts as work is performed. SAIC, Inc. segregates its backlog into two categories: funded
backlog and negotiated unfunded backlog. Funded backlog for contracts with government agencies
primarily represents contracts for which funding is appropriated less revenues previously
recognized on these contracts, and does not include the unfunded portion of contracts where
funding is incrementally appropriated or authorized on a quarterly or annual basis by the U.S.
Government and other customers, even though the contract may call for performance over a
number of years. Funded backlog for contracts with non-government agencies represents the
estimated value on contracts, which may cover multiple future years, under which SAIC, Inc. is
obligated to perform, less revenues previously recognized on these contracts. Negotiated
unfunded backlog represents the estimated amounts of revenue to be earned in the future from
(1) negotiated contracts for which funding has not been appropriated or otherwise authorized
and (2) unexercised priced contract options. Negotiated unfunded backlog does not include any
estimate of future potential task orders expected to be awarded under IDIQ, GSA Schedule, or
other master agreement contract vehicles.
The estimated value of backlog as of the dates presented was as follows:
October 31, July 31, April 30, January 31,
2011 2011 2011 2011
---- ---- ---- ----
Defense Solutions:
Funded backlog $2,630 $2,025 $2,005 $2,272
Negotiated unfunded backlog 4,980 4,948 5,214 5,400
----- -----
Total Defense Solutions
backlog $7,610 $6,973 $7,219 $7,672
Health, Energy and Civil Solutions:
Funded backlog $1,943 $1,742 $1,685 $1,780
Negotiated unfunded backlog 3,423 3,264 3,462 2,131
----- -----
Total Health, Energy and Civil
Solutions backlog $5,366 $5,006 $5,147 $3,911
Intelligence and Cybersecurity
Solutions:
Funded backlog $1,685 $1,511 $1,329 $1,330
Negotiated unfunded backlog 4,070 4,234 4,341 4,207
----- -----
Total Intelligence and
Cybersecurity Solutions
backlog $5,755 $5,745 $5,670 $5,537
Total:
Funded backlog $6,258 $5,278 $5,019 $5,382
Negotiated unfunded backlog 12,473 12,446 13,017 11,738
------ ------
Total backlog $18,731 $17,724 $18,036 $17,120
======= =======
SAIC, INC.
INTERNAL REVENUE GROWTH (CONTRACTION) PERCENTAGE CALCULATIONS (NON-GAAP RECONCILIATION)
(Unaudited, $ in millions)
In this release, SAIC, Inc. refers to internal revenue growth (contraction) percentage, which
is a non-GAAP financial measure that is reconciled to the most directly comparable GAAP
financial measure. The Company calculates its internal revenue growth (contraction) percentage
by comparing reported revenue for the current year period to the revenue for the prior year
period adjusted to include the actual revenue of acquired businesses for the comparable prior
year period before acquisition. This calculation has the effect of adding revenue for the
acquired businesses for the comparable prior year period to the company's prior year period
reported revenue.
SAIC, Inc. uses internal revenue growth (contraction) percentage as an indicator of how
successful it is at growing its base business and how successful it is at growing the revenues
of the businesses that it acquires. The integration of acquired businesses allows current
management to leverage business development capabilities, drive internal resource
collaboration, utilize access to markets and qualifications, and refine strategies to realize
synergies, which benefits both acquired and existing businesses. As a result, the performance
of the combined enterprise post-acquisition is an important measurement. In addition, as a
means of rewarding the successful integration and growth of acquired businesses, and not
acquisitions themselves, incentive compensation for executives and the broader employee
population is based, in part, on achievement of revenue targets linked to internal revenue
growth.
The limitation of this non-GAAP financial measure as compared to the most directly comparable
GAAP financial measure is that internal revenue growth (contraction) percentage is one of two
components of the total revenue growth (contraction) percentage, which is the most directly
comparable GAAP financial measure. The company addresses this limitation by presenting the
total revenue growth (contraction) percentage next to or near disclosures of internal revenue
growth (contraction) percentage. This financial measure is not meant to be considered in
isolation or as a substitute for comparable GAAP measures and should be read only in
conjunction with SAIC, Inc.'s consolidated financial statements prepared in accordance with
GAAP. The method that the Company uses to calculate internal revenue growth (contraction)
percentage is not necessarily comparable to similarly titled financial measures presented by
other companies.
Internal revenue growth (contraction) percentages for the three and nine months ended October
31, 2011 were calculated as follows:
Three Months Nine Months
Ended Ended
October 31 October 31
2011 2011
---- ----
Defense Solutions:
Prior year period's revenues,
as reported $1,215 $3,484
Revenues of acquired
businesses for the comparable
prior year period 1 5
Prior year period's revenues,
as adjusted $1,216 $3,489
Current year period's
revenues, as reported 1,117 3,339
Internal revenue contraction $(99) $(150)
Internal revenue contraction
percentage -8% -4%
Health, Energy and Civil Solutions:
Prior year period's revenues,
as reported $718 $2,095
Revenues of acquired
businesses for the comparable
prior year period 35 96
Prior year period's revenues,
as adjusted $753 $2,191
Current year period's
revenues, as reported 758 2,094
Internal revenue growth
(contraction) $5 $(97)
Internal revenue growth
(contraction) percentage 1% -4%
Intelligence and Cybersecurity
Solutions:
Prior year period's revenues,
as reported $888 $2,565
Revenues of acquired
businesses for the comparable
prior year period 1 5
Prior year period's revenues,
as adjusted $889 $2,570
Current year period's
revenues, as reported 936 2,663
Internal revenue growth $47 $93
Internal revenue growth
percentage 5% 4%
Total*:
Prior year period's revenues,
as reported $2,821 $8,197
Revenues of acquired
businesses for the comparable
prior year period 37 106
Prior year period's revenues,
as adjusted $2,858 $8,303
Current year period's
revenues, as reported 2,811 8,095
Internal revenue contraction $(47) $(208)
Internal revenue contraction
percentage -2% -3%
*Total revenues include amounts related to Corporate and Other and intersegment eliminations.
SAIC, INC.
CONDENSED CONSOLIDATED INCOME STATEMENT EXCLUDING THE CITYTIME LOSS PROVISION
(NON-GAAP RECONCILIATION)
(Unaudited, $ in millions, except per share amounts)
In this release, SAIC, Inc. refers to operating income, operating margin, income from continuing
operations and diluted earnings per share (EPS) from continuing operations excluding the CityTime
loss provision, which are non-GAAP financial measures. The Company calculates these measures by
excluding the CityTime loss provision from operating income, operating margin, income from continuing
operations and diluted EPS from continuing operations, the most directly comparable GAAP financial
measures.
The Company uses these non-GAAP financial measures to provide investors with visibility to how its
business performed excluding the CityTime loss provision. The limitation of these non-GAAP
financial measures as compared to the most directly comparable GAAP financial measures is that the
Company has recorded the CityTime loss provision which is not reflected in these non-GAAP financial
measures. The Company addresses this limitation by presenting this reconciliation to the most
directly comparable GAAP financial measures. These financial measures are not meant to be considered
in isolation or as a substitute for comparable GAAP financial measures and should be read only in
connection with the Company's consolidated financial statements prepared in accordance with GAAP.
Three Months Ended October 31, 2011 As Reported City Time As Adjusted
----------------------------------- ----------- Loss Provision -----------
--------------
Revenues $2,811 $52 $2,863
Cost of revenues 2,495 2,495
Selling, general and administrative expenses 333 (180) 153
--- ---- ---
Operating income (loss) (17) 232 215
Non-operating expenses, net (29) (29)
--- ---
Income (loss) from continuing operations before
income taxes (46) 232 186
Provision for income taxes (44) (23) (67)
--- --- ---
Income (loss) from continuing operations (90) 209 119
Income from discontinued operations, net of tax 1 1
--- ---
Net Income (loss) $(89) $209 $120
==== ==== ====
Operating Margin -0.6% 7.5%
==== ===
Diluted EPS from continuing operations $(0.27) $0.35
====== =====
Nine Months Ended October 31, 2011 As Reported City Time As Adjusted
---------------------------------- ----------- Loss Provision -----------
--------------
Revenues $8,095 $52 $8,147
Cost of revenues 7,110 7,110
Selling, general and administrative expenses 563 (180) 383
--- ---- ---
Operating income 422 232 654
Non-operating expenses, net (79) (79)
--- ---
Income from continuing operations before income
taxes 343 232 575
Provision for income taxes (191) (23) (214)
---- --- ----
Income from continuing operations 152 209 361
Income from discontinued operations, net of tax 68 68
--- ---
Net Income $220 $209 $429
==== ==== ====
Operating Margin 5.2% 8.0%
=== ===
Diluted EPS from continuing operations $0.43 $1.03
===== =====
SAIC, INC.
DEFENSE SOLUTIONS SEGMENT
CONDENSED CONSOLIDATED INCOME STATEMENT EXCLUDING THE CITYTIME LOSS PROVISION
(NON-GAAP RECONCILIATION)
(Unaudited, $ in millions)
In this release, SAIC, Inc. refers to revenue, operating income and operating margin of the Defense
Solutions segment excluding the CityTime loss provision, which are non-GAAP financial measures. The
Company calculates these measures by excluding the CityTime loss provision from Defense Solutions
revenue, operating income and operating margin, the most directly comparable GAAP financial measures.
The Company uses these non-GAAP financial measures to provide investors with visibility to how its
business performed excluding the CityTime loss provision. The limitation of these non-GAAP
financial measures as compared to the most directly comparable GAAP financial measures is that the
Company has recorded the CityTime loss provision which is not reflected in these non-GAAP financial
measures. The Company addresses this limitation by presenting this reconciliation to the most
directly comparable GAAP financial measures. These financial measures are not meant to be considered
in isolation or as a substitute for comparable GAAP financial measures and should be read only in
connection with the Company's consolidated financial statements prepared in accordance with GAAP.
Three Months Ended October 31, 2011 As Reported City Time As Adjusted
----------------------------------- ----------- Loss Provision -----------
--------------
Revenues 1,117 52 1,169
Operating income (loss) (133) 232 99
---- --- ---
Operating margin -11.9% 8.5%
===== ===
Nine Months Ended October 31, 2011 As Reported City Time As Adjusted
---------------------------------- ----------- Loss Provision -----------
--------------
Revenues 3,339 52 3,391
Operating income 45 232 277
--- --- ---
Operating margin 1.3% 8.2%
=== ===
SAIC, INC.
FISCAL YEAR 2012 GUIDANCE EXCLUDING THE CITYTIME LOSS PROVISION
(NON-GAAP RECONCILIATION)
(Unaudited)
In this release, SAIC, Inc. refers to expectations of diluted earnings per share (EPS) from continuing
operations excluding the CityTime loss provision, which is a non-GAAP financial measure. The Company
calculates this measure by excluding the CityTime loss provision recognized through October 31, 2011
from expected diluted EPS from continuing operations, the most directly comparable GAAP financial
measure.
The Company uses this non-GAAP financial measure to provide investors with visibility to how it
expects its business to perform excluding the CityTime loss provision. The limitation of this non-
GAAP financial measure as compared to the most directly comparable GAAP financial measure is that the
Company has recorded the CityTime loss provision which is not reflected in this non-GAAP financial
measure. The Company addresses this limitation by presenting this reconciliation to the most
directly comparable GAAP financial measure. This financial measures is not meant to be considered in
isolation or as a substitute for comparable GAAP financial measures and should be read only in
connection with the Company's consolidated financial statements prepared in accordance with GAAP.
Reconciliation of Expected Diluted Earning per Share from Continuing Operations for the
Year Ended January 31, 2012:
Low End High End
Expected diluted EPS from continuing operations on
a GAAP basis $0.70 $0.80
Impact of CityTime loss provision 0.60 0.60
Expected diluted EPS from continuing operations
excluding CityTime loss provision $1.30 $1.40
===== =====
SOURCE SAIC