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SAIC (SAI)

Q3 2013 Earnings Call

December 05, 2012 5:00 pm ET

Executives

Paul E. Levi - Senior Vice President of Investor Relations

John P. Jumper - Chairman, Chief Executive Officer, President, Member of Classified Business Oversight Committee and Member of Ethics & Corporate Responsibility Committee

K. Stuart Shea - Chief Operating Officer

Mark W. Sopp - Chief Financial Officer and Executive Vice President

Analysts

William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division

George A. Price - BB&T Capital Markets, Research Division

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Cai Von Rumohr - Cowen and Company, LLC, Research Division

Richard Eskelsen - Wells Fargo Securities, LLC, Research Division

Christopher Sands - JP Morgan Chase & Co, Research Division

Matthew Hill

Presentation

Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to the SAIC Fiscal Year 2013 Third Quarter Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, December 5, 2012.

I would now like to turn the conference over to Mr. Paul Levi, SAIC's Senior VP of Investor Relations. Please go ahead, sir.

Paul E. Levi

Thank you, Camille, and good afternoon. I would like to welcome you to our third quarter fiscal year 2013 earnings conference call. Joining me today are John Jumper, our Chairman and CEO; Stu Shea, our COO; and Mark Sopp, our CFO, and other members of our leadership team.

During this call, we will make forward-looking statements to assist you in understanding the company and our expectations about its future financial performance. These statements are subject to a number of risks that could cause actual events to differ materially, and I refer you to our SEC filings for a discussion of these risks.

In addition, the statements represent our views as of today. We anticipate that subsequent events and developments will cause our views to change. We may elect to update the forward-looking statements at some point in the future, but we specifically disclaim any obligation to do so.

I would now like to turn the call over to John Jumper, our Chairman and CEO.

John P. Jumper

Thank you, Paul, and good afternoon, everyone. During the call today, we'll start with a look at our quarterly performance, discuss the market conditions, update you on a recent acquisition and discuss the recently announced leadership teams of our 2 companies that will emerge from the planned separation we announced last quarter. Following that, our COO, Stu Shea, will update you on separation planning, provide details about our performance and will conclude with business development results. Stu will be followed by our CFO, Mark Sopp, who will go into details on the financial results, and then we'll open the lines to your questions.

Our dedicated team of 40,000 employees delivered solid results in the third quarter even in the face of strong market headwinds and while addressing significant changes within the company. As shown in today's press release, our revenue growth, accompanied by strong bookings, demonstrate that SAIC is performing for our customers and delivering for our shareholders.

In the quarter, we grew revenue by a positive 3%, fueled by the addition of maxIT, with internal growth relatively flat. We are also pleased to see some momentum in the market by recording future business at a book-to-bill ratio of 1.7.

While headwinds in the industry remain strong, we're proud of our performance and we continue to take actions to shape our future. As we continue to accelerate toward the fiscal cliff, from our perspective, the fog is getting thicker. In several sessions with high-ranking officials in the executive branch, we and industry have had ample opportunity to make our opinions known. I must say that our senior defense officials do understand the industry's concern and have applied ample energy to encourage a legislative compromise we know must prevail in the end.

While those of us who are engaged in this dialogue hope that the most onerous scenario of mindless slashing will be avoided, there's little doubt that any scenario will -- in the future will include additional cuts to the federal budget, hopefully decided through reasoned debate and compromise. We anxiously await progress on these -- on this ongoing political debate.

Since the seasoned management team began our journey together in March, we have emphasized the steady pace of preparation for the budget pressures that surround us now. In previous calls, Stu Shea has reminded us of actions that date back more than 2 years to consolidate activities and realign functions to achieve a more competitive posture.

In the last call, we announced Project Gemini, the planned separation of SAIC into 2 great companies, more focused and more differentiated, free of debilitating conflicts of interest and designed from the start to be fiercely competitive. Stu will say more about Gemini later.

But there are near-term actions that are also required. Some of these are process and structural actions that we announced earlier in the week. It is still necessary to reduce our workforce by about 700 people as part of the initial steps to get to a more competitive posture required to achieve meaningful growth through the depressed budget cycle and to emerge as a powerful competitor on the other side of this downturn.

The reductions we announced were primarily indirect overhead functions affecting both the corporate and line operation support staff and designed to accommodate a leaner organization with larger business units, increased back-office efficiency and increasingly effective customer interface. The more efficient structure will provide focus for more timely decisions on research priorities, repeatable capabilities, business development and acquisitions.

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