Science Applications International Corp SAIC
Q1 2014 Earnings Call Transcript

Transcript Call Date 06/03/2013

Operator: Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the SAIC First Quarter Fiscal Year 2014 Conference Call. During today's presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions. The conference is being recorded today, Monday, June 3, 2013.

At this time, I'd like to turn the conference over to Paul Levi, SAIC's Senior VP of Investor Relations. Please go ahead.

Paul Levi - SVP, IR: Thank you, Vince, and good afternoon. I would like to welcome you to our first quarter fiscal year 2014 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 as well.

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 can 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 - President and CEO: Thank you, Paul and welcome everyone. The first quarter of 2014 was relatively in line with our expectations with revenues of $2.71 billion for the quarter, down slightly to the prior year quarter. This represents an internal revenue decline of 4%, primarily due to the loss of the large DGS contract and ramp down on the war related OCI work on the JLI contract, which together reduced our revenues by more than $100 million.

The revenue performance also reflects the impact of sequestration, which is driving delayed decisions and imposing significant fear and caution throughout the contracting process. Operating income was lower than the prior year due mainly to $40 million of costs for the separation and preparation of two standalone companies, and our operating cash flow was negatively impacted by the earlier than expected discontinuance of an accelerated payment program by the government.

Having said that, our performance was mostly as we expected and our previous guidance anticipated many of the current challenges. Today, we are reaffirming the guidance that we outlined in our March call.

Looking forward, uncertainty over funding remains, but there is still little that our customers can tell us about what to expect and over what period of time. I, along with other CEOs in this space, have been engaged with the leadership of the Pentagon, who I must say, have gone out of their way to conduct frequent meetings with industry leadership. Along with others, I have emphasized the need to work the necessary fiscal discipline in a more reasonable way with debate and compromise rather than mindless across the board cuts. At SAIC, we are proactively responding and taking the necessary steps to manage the business in the current difficult environment.

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