SCIENCE APPLICATIONS INTERNATIONAL CORPORATION MCLEAN, Va., Dec. 9, 2014 /PRNewswire/ -- Science Applications International Corporation (NYSE: SAIC), a leading technology integrator providing full life-cycle services and solutions in the technical, engineering and enterprise information technology markets, today announced financial results for the third quarter ended October 31, 2014. SAIC commenced its operations on September 27, 2013 (during the third quarter of fiscal 2014) following completion of a spin-off transaction from its former parent.
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"SAIC continued to deliver exceptional value to its customers and solid financial performance to shareholders," said Tony Moraco, SAIC Chief Executive Officer. "Revenue growth, improved margins and strong cash flow highlight the quarter and demonstrate SAIC's ability to be a leading technology integrator. As we celebrate our first year as an independent company, we continue to focus on executing our strategy, serving our customers and investing in our employees."
Summary Operating Results
Q3 FY15 Percent Q3 FY14
change
------
(dollars in millions, except per share
amounts)
Revenues $993 2% $974
Revenues
performed
by
former
parent 11 (67%) 33
--------- --- ---- ---
Total
revenues $1,004 0% $1,007
Operating
Income $63 70% $37
As
percentage
of
revenues
excluding
revenues
performed
by
former
parent 6.3% 3.8%
Net
Income $37 68% $22
Diluted
earnings
per
share $0.77 75% $0.44
Total revenues for the third quarter were $1,004 million compared to $1,007 million during the third quarter of the prior year. Total revenues were consistent with the prior year due to increased material volume on supply chain contracts and higher current year activity on contracts that were newly awarded in the prior year. These increases offset lower revenue caused by the loss of the DISN Global Solutions program, lower logistics program activity due to in-theater force drawdown and the expected decrease in revenues performed by former parent due to the completion of pre-separation joint work.
Operating income for the quarter was $63 million (6.3% of revenues excluding revenues performed by former parent), up from $37 million (3.8% of revenues excluding revenues performed by former parent) in the prior year period. The increase in operating income was primarily driven by the absence in the current quarter of separation transaction and restructuring expenses as well as improved current quarter contract performance.
Net income for the quarter was $37 million compared to $22 million in the prior year period. The increase in net income was primarily driven by higher operating income offset by interest expense during the quarter on long-term debt obtained in September 2013 in conjunction with the spin-off transaction.
Diluted earnings per share was $0.77 for the quarter. The weighted-average diluted shares outstanding during the quarter was 48.2 million shares.
Cash Generation and Capital Deployment
Cash flow provided by operating activities for the quarter was $82 million, which was a $72 million improvement compared to the same period in the prior year. The current year improvement over the prior year was primarily due to prior year delays in the collection of customer receivables caused by the government shutdown and anticipated billing delays from SAIC's system shutdown related to the separation. In addition, SAIC made payments for separation and restructuring costs during the prior year period.
During the quarter, SAIC deployed $63 million, consisting of $13 million in dividends and $50 million in share repurchases (approximately 1.1 million shares) under SAIC's previously announced share repurchase program. Fiscal 2015 year to date share repurchases totaled $114 million (approximately 2.7 million shares) and, since the repurchase program inception in December 2013, totaled $127 million dollars (approximately 3.1 million shares).
Quarterly Dividend Declared
Subsequent to quarter end, the Board of Directors declared a regular quarterly cash dividend of $0.28 per share payable on January 30, 2015 to stockholders of record on January 15, 2015. SAIC intends to continue paying dividends on a quarterly basis, although the declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements and other factors.
New Business Awards
Net bookings for the third quarter were $967 million, which reflects a book-to-bill ratio of approximately 1.0.
As announced previously, SAIC was awarded the following notable contracts:
Fleet Readiness Centers Industrial Product Support Vendor (FRC IPV) Program: SAIC was awarded an indefinite delivery/indefinite quantity contract by the Defense Logistics Agency to provide the U.S. Navy with industrial hardware used in the repair, maintenance and overhaul of aviation equipment. The single-award contract includes a three-year base contract, two two-year options, one three-year option, and a total contract value of $190 million if all options are exercised. Work will be performed primarily in California, Florida, North Carolina and Virginia.
One Acquisition Solution for Integrated Services (OASIS): SAIC was awarded the OASIS contract, a government-wide, indefinite delivery/indefinite quantity acquisition agreement that includes program management, management consulting, logistics, as well as engineering, scientific, and financial services. Awarded by the U.S. General Services Administration (GSA), the multiple-award contract has a five-year period of performance, with one five-year option. SAIC is one of six awardees named in all seven pools to perform work both domestically and globally.
General Purpose Commercial Information Technology Equipment, Software and Services (Schedule 70): SAIC was awarded a multiple-award, indefinite delivery/indefinite quantity contract to support federal agencies and state, local and tribal entities through the GSA's Cooperative Purchasing Program. The multi-award contract has a five-year base period of performance and three five-year options. SAIC will provide information technology professional services.
Prime Vendor Maintenance Repair and Operations Hawaii Region: The Defense Logistics Agency (DLA) awarded SAIC an indefinite delivery/indefinite quantity contract to provide maintenance repair and operations (MRO) tailored logistics support (TLS) to Department of Defense (DoD) and federal installations located in Hawaii, Guam and Kwajalein Atoll. The single-award, firm-fixed-price contract has a five-year period of performance and an estimated total contract value of more than $282 million. The MRO TLS program allows its customers to order supplies and equipment in order to fulfill their facilities' missions. Under the contract, SAIC will employ commercial business practices to reduce total MRO logistics cost to DLA Troop Support and its customers. SAIC will provide sourcing, procurement and delivery of MRO supplies and incidental services to DoD and other federal entities in the Hawaii region.
SAIC's estimated backlog of signed business orders at the end of the quarter was approximately $6.5 billion of which $2.0 billion was funded. Negotiated backlog does not include any estimate of future task orders expected to be awarded under indefinite-delivery/indefinite-quantity, U.S. General Services Administration schedules or other master agreement contract vehicles.
Special Recognition
SAIC was recognized by Military Training Technology as a 2014 Top Simulation and Training Company in the September 2014 edition. Military Training Technology, a publication of KMI Media Group, is America's longest established simulation and training magazine. Along with this recognition, SAIC received further acknowledgment with a green ribbon award signifying "High Revenue." This award recognizes SAIC as a company that has made significant contributions on the military training and simulation industries across a vast array of technologies and has allowed U.S. airmen, Marines, sailors, soldiers and Coast Guardsmen to train and rehearse for missions in theater, or to prepare for deployment at home stations.
Conference Call Information
SAIC management will discuss operations and financial results in an earnings conference call beginning at 8 a.m. EST on December 9, 2014. A live audio broadcast of the conference call along with a supplemental presentation will be available to the public through links to the Investor Relations section of the SAIC website (http://investors.saic.com). Interested parties may listen to the conference call by dialing +1.888.430.8701 (toll-fee U.S.) or +1.719.325.2261 (International/Local) and entering passcode 1065689.
About SAIC
SAIC is a leading technology integrator providing full life-cycle services and solutions in the technical, engineering, and enterprise information technology markets. SAIC's deep domain knowledge and customer relationships enable the delivery of systems engineering and integration offerings for large, complex government and commercial projects. SAIC's approximately 13,000 employees serve customers in the U.S. federal government, state/local, and global commercial markets, specializing in providing a broad range of higher-end, differentiated technical capabilities. Headquartered in McLean, Va., SAIC has annual revenues of about $4 billion.
For more information, visit http://www.saic.com. For ongoing news, please visit our newsroom.
Forward-Looking Statements
Certain statements in this release contain or are based on "forward-looking" information within the meaning of the Private Securities 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, as well as statements about future dividends, share repurchases and other capital deployment plans. 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: developments in the U.S. government defense budget, including budget reductions, implementation of spending cuts (sequestration) or changes in budgetary priorities; delays in the U.S. government budget process or approval to raise the U.S. debt ceiling; delays in the U.S. government contract procurement process or the award of contracts; delays or loss of contracts as result of competitor protests; changes in U.S. government procurement rules, regulations and practices; our compliance with various U.S. government and other government procurement rules and regulations; governmental reviews, audits and investigations of our company; our ability to effectively compete and win contracts with the U.S. government and other customers; our ability to attract, train and retain skilled employees, including our management team, and to obtain security clearances for our employees; our ability to accurately estimate costs associated with our firm-fixed-price and other contracts; cybersecurity, data security or other security threats, systems failures or other disruptions of our business; resolution of legal and other disputes with our customers and others or legal or regulatory compliance issues; our ability to effectively deploy capital and make investments in our business; our ability to maintain relationships with prime contractors, subcontractors and joint venture partners; our ability to manage performance and other risks related to customer contracts, including complex engineering projects; the adequacy of our insurance programs designed to protect us from significant product or other liability claims; our ability to declare future dividends based on our earnings, financial condition, capital requirements and other factors, including compliance with applicable laws and contractual agreements; risks associated with our recently completed spin-off transaction from our former parent, such as disruption to business operations, unanticipated expenses or a failure to realize the expected benefits of the spin-off; 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 Annual Report on Form 10-K 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 9, 2014. SAIC expressly disclaims any duty to update any forward-looking statement provided in this release to reflect subsequent events, actual results or changes in SAIC'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.
Schedule 1:
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
October 31, November 1, October 31, November 1,
2014 2013 2014 2013
---- ---- ---- ----
(dollars in millions, except per share amounts)
Revenues $993 $974 $2,894 $3,086
Revenues performed by former Parent 11 33 39 94
----------------------------------- --- --- --- ---
Total revenues 1,004 1,007 2,933 3,180
Cost of revenues 906 892 2,645 2,833
Cost of revenues performed by former
Parent 11 33 39 94
------------------------------------ --- --- --- ---
Total cost of revenues 917 925 2,684 2,927
Selling, general and administrative
expenses 24 22 68 69
Separation transaction and
restructuring expenses - 23 - 57
-------------------------- --- --- --- ---
Operating income 63 37 181 127
As a percentage of revenues excluding
revenues
performed by former parent 6.3% 3.8% 6.3% 4.1%
Interest expense 4 3 13 3
---------------- --- --- --- ---
Income before income taxes 59 34 168 124
Provision for income taxes (22) (12) (63) (44)
-------------------------- --- --- --- ---
Net income $37 $22 $105 $80
========== === === ==== ===
Weighted-average number of shares
outstanding:
Basic 46.5 48.6 47.4 48.6
----- ---- ---- ---- ----
Diluted 48.2 49.7 48.8 49.7
------- ---- ---- ---- ----
Earnings per share:
Basic $0.80 $0.45 $2.22 $1.63
----- ----- ----- ----- -----
Diluted $0.77 $0.44 $2.15 $1.60
------- ----- ----- ----- -----
Cash dividends declared
and paid per share $0.28 $0.28 $0.84 $0.28
----------------------- ----- ----- ----- -----
The unaudited condensed consolidated
and combined statements of income
presented for the three and nine
months ended November 1, 2013
assumes that SAIC completed a
separation transaction from its
former parent on February 1, 2013,
which actually occurred on September
27, 2013. The statements of income
for the three and nine months ended
November 1, 2013 are provided for
illustrative and informational
purposes only and are not intended
to represent what SAIC's results of
operations would have been had the
separation been completed on
February 1, 2013.
Schedule 2:
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
(Unaudited)
October 31, January 31,
2014 2014
---- ----
(in millions)
ASSETS
Current assets:
Cash and cash
equivalents $254 $254
Receivables, net 629 621
Inventory, prepaid expenses and
other current assets 82 119
------------------------------- --- ---
Total current assets 965 994
Goodwill 379 379
Property, plant, and equipment,
net 58 60
Other assets 12 14
------------ --- ---
Total assets $1,414 $1,447
============ ====== ======
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $392 $387
Accrued payroll and employee
benefits 146 149
Long-term debt and capital
lease obligations, current
portion 29 13
Other current liabilities 19 15
------------------------- --- ---
Total current liabilities 586 564
Long-term debt and capital
lease obligations, net of
current portion 466 489
Other long-term liabilities 22 17
Total equity 340 377
------------ --- ---
Total liabilities and
equity $1,414 $1,447
===================== ====== ======
Schedule 3:
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
October 31, November 1, October 31, November 1,
2014 2013 2014 2013
---- ---- ---- ----
(in millions)
Cash flows from operating activities:
Net income $37 $22 $105 $80
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6 6 16 10
Deferred income taxes (1) 13 - 13
Stock-based compensation expense 8 10 26 25
Excess tax benefits from stock-based
compensation - - (2) -
Increase (decrease) in cash resulting from
changes in:
Receivables 10 (38) (8) (31)
Inventory, prepaid expenses and other current
assets 5 2 32 23
Other assets - 1 - 1
Accounts payable and accrued liabilities 18 (4) 7 (48)
Income taxes payable 6 5 6 5
Accrued payroll and employee benefits (8) - (3) (20)
Other long-term liabilities 1 (7) 2 -
--------------------------- --- --- --- ---
Total cash flows provided by operating
activities 82 10 181 58
Cash flows from investing activities:
Expenditures for property, plant and equipment (5) (8) (15) (10)
---------------------------------------------- --- --- --- ---
Total cash flows used in investing activities (5) (8) (15) (10)
Cash flows from financing activities:
Dividend payments to stockholders (13) (14) (40) (14)
Principal payments on borrowings (7) (1) (7) (1)
Issuances of stock 1 - 2 -
Stock repurchased and retired or withheld for
taxes on equity awards (51) - (123) -
Excess tax benefits from stock-based
compensation - - 2 -
Proceeds from borrowings under term loan
facility - 500 - 500
Dividend paid to former Parent - (295) - (295)
Net transfers to former Parent - (63) - (103)
Capital contribution from former Parent - 26 - 26
Deferred financing costs - - - (5)
------------------------ --- --- --- ---
Total cash flows (used in) provided by
financing activities (70) 153 (166) 108
-------------------------------------- --- --- ---- ---
Total increase in cash and cash equivalents 7 155 - 156
------------------------------------------- --- --- --- ---
Cash and cash equivalents at beginning of
period 247 2 254 1
----------------------------------------- --- --- --- ---
Cash and cash equivalents at end
of period $254 $157 $254 $157
================================ ==== ==== ==== ====
The unaudited condensed consolidated
and combined statements of cash
flows presented for the three and
nine months ended November 1, 2013
assumes that SAIC completed a
separation transaction from its
former parent on February 1, 2013,
which actually occurred on September
27, 2013. The statements of cash
flows for the three and nine months
ended November 1, 2013 are provided
for illustrative and informational
purposes only and are not intended
to represent what SAIC's cash flows
would have been had the separation
been completed on February 1, 2013.
Schedule 4:
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
BACKLOG
(Unaudited)
The estimated value of our total backlog was as follows:
October 31, August 1, January 31,
2014 2014 2014
---- ---- ----
(in millions)
Funded
backlog $2,036 $1,751 $1,639
Negotiated
unfunded
backlog 4,426 4,748 5,012
---------- ----- ----- -----
Total
backlog $6,462 $6,499 $6,651
======== ====== ====== ======
Backlog represents the estimated amount of
future revenues to be recognized under
negotiated contracts as work is performed and
excludes contract awards which have been
protested by competitors. SAIC 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 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 is
obligated to perform, less revenues
previously recognized on these contracts.
Negotiated unfunded backlog represents the
estimated revenue to be earned in the future
from (1) negotiated contracts for which
funding has not been appropriated or
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 indefinite-delivery/indefinite-
quantity (IDIQ), U.S. General Services
Administration (GSA) schedule or other master
agreement contract vehicles.
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