Q3 2012 Earnings Call
December 06, 2011 5:00 pm ET
Mark W. Sopp - Chief Financial Officer and Executive Vice President
Previous Statements by SAI
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Paul E. Levi - Senior Vice President of Investor Relations
George A. Price - BB&T Capital Markets, Research Division
Erik R. Olbeter - Pacific Crest Securities, Inc., Research Division
Michael S. Lewis - Lazard Capital Markets LLC, Research Division
Jason Kupferberg - Jefferies & Company, Inc., Research Division
Richard Eskelsen - Wells Fargo Securities, LLC, Research Division
William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division
Cai Von Rumohr - Cowen and Company, LLC, Research Division
Good afternoon. My name is Stacy, and I will be your conference facilitator for today. Welcome to SAIC's Third Quarter Fiscal Year 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, to Mr. Paul Levi, Senior Vice President of Investor Relations. Please proceed.
Paul E. Levi
Thank you, Stacy, and good afternoon. I would like to welcome you to our Third Quarter Fiscal Year 2012 Earnings Conference Call. Joining me today are Walt Havenstein, our CEO; 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 and operating 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 could 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 like to turn the call over to Walt Havenstein, our CEO.
Walter P. Havenstein
Thank you, Paul, and good afternoon, everyone. For the call today, I'll cover market conditions, speak to the ongoing CityTime investigation, highlight recent business development results, review acquisitions and share several special recognitions, then Mark will provide the financial details and then we will take your questions.
While uncertainty in the markets continue to present challenges to our financial performance this quarter, I am encouraged by our business development results, including our increasing pipeline of new opportunities, record level of submitted proposals awaiting decision, increasing number of large wins, uptick in awards and targeted strategic growth areas and improvement in book-to-bill performance.
I am also very proud of our employees who continue to deliver outstanding value to our customers. One of the great strengths of SAIC is our culture of focusing on customer success. Our culture is one of strong customer affinity for more than 40 years and an unparalleled understanding of customer mission.
The overall federal government acquisition process continues to be negatively impacted by the uncertainty caused by the government budget situation. As a result, revenues remained flat in the quarter. Looking ahead, our expectation for the year are for revenues to meet the outlook we shared with you during last quarter's earnings call.
I would next like to update you on CityTime, the workforce management system that is currently being used by more than 65 New York City municipal agencies. As we've disclosed previously, the U.S. Attorney's office is conducting a criminal investigation relating to the CityTime program. Two former SAIC employees, along with other contractors on this program, have been charged with conspiring to defraud the City of New York for their own profit by taking kickbacks and increasing the cost of the program. The 2 former SAIC employees have also been charged with defrauding SAIC by depriving it of their honest services.
One of these former SAIC employees has pleaded guilty to multiple charges, including taking millions of dollars in kickbacks from an SAIC subcontractor. The company is continuing to cooperate with the U.S. Attorney's investigation, but cannot predict its outcome.
After a comprehensive review of the CityTime program, including a review of management performance, a group president, a deputy group president and a business unit general manager responsible for management and oversight of the CityTime program were removed and are no longer with the company. The company is not aware of any evidence that these individuals had any personal involvement in the CityTime fraud.
In addition to taking these personnel actions, the company engaged an outside law firm to assist company leadership in conducting a comprehensive review of key policies and practices and to recommend enhancement to strengthen the company's culture of ethics, accountability and compliance. As a result of this systemic review, the implementation of process improvements and control enhancements by the company is now underway.
In addition, a special committee of the Board of Directors that is overseeing the company's response to CityTime has engaged an independent company, Guidepost Solutions, and specifically its chairman, Bart Schwartz, to undertake its own review and monitor the efforts the company is making in response to this matter.
Based on developments related to the CityTime matter since our last quarterly filing, the company now estimates that its loss relating to the CityTime program will be at least $232 million. Accordingly, we have taken a loss provision for that amount this quarter. An updated description of the CityTime matter will be included in the 10-Q, which we will file this week.