SAIC blames 2Q earnings drop on ‘challenging government environment’

SAIC Inc. saw revenues decline 6 percent to $2.60 billion in the second quarter of fiscal 2012 compared to $2.75 billion in the corresponding quarter of 2011, the company announced in an earnings report released August 31.

"Our overall results for the quarter were disappointing," said Walt Havenstein, SAIC chief executive officer, in the statement.

"In this challenging government contracting environment, the lack of funding for ongoing programs and for ramping up new work drove a shortfall in revenues and earnings per share,” he said.

“However, we continue to believe there will be areas of growth as evidenced by the encouraging performance in our health, energy and intelligence, surveillance and reconnaissance businesses," Havenstein added.

SAIC’s operating income for the quarter was $209 million, or 8.1 percent of revenue, compared to $272 million, or 9.9 percent of revenue, in the second quarter of fiscal year 2011.

Income from continuing operations for the second quarter was $112 million compared to $157 million in the same quarter 2011.

The decline in income from continuing operations was due to the reduction in operating income and additional interest expense from $750 million of debt issued in December 2010, the statement said.

In the Defense Solutions business, revenues for the quarter decreased 6 percent from the second quarter of fiscal year 2011. The unit’s operating income for the quarter was 8.1 percent of revenue, up from 8.0 percent of revenue in the second quarter of fiscal year 2011, due to effective cost management, SAIC said.

Internal revenues fell 7 percent, primarily due to reduced activity on an infrastructure support services program for the Defense Department, reduced activity on the Army Brigade Combat Team Modernization contract, and the completion of a systems development and implementation contract for certain New York City agencies.

Health, Energy and Civil Solutions business unit revenues decreased 2 percent from the second quarter of fiscal 2011. Internal revenues contracted 7 percent, reflecting reduced activity on certain federal civilian agency programs, including those in support of NASA.

These declines were partially offset by growth in the areas of energy, which benefited from new design-build projects for geothermal plant construction, and healthcare IT, which saw new programs and expanded program scope with DOD military health system customers.

Intelligence and Cybersecurity Solutions revenues for the quarter decreased 1 percent from the second quarter of fiscal year 2011. Internal revenues contracted 1 percent, primarily due to the conclusion of a forward operating base integrated security equipment contract, although it was partially offset by growth on certain intelligence analysis and airborne surveillance programs with DOD customers.

Intelligence and Cybersecurity Solutions operating income for the quarter was 8.9 percent of revenue, up from 8.1 percent of revenue in the second quarter of fiscal year 2011.

New bookings totaled $2.3 billion in the second quarter, including:

• $45 million Naval Air Systems Command task order for technical, engineering, and logistics services
• $30 million Marine Corps Management Systems Support award for systems integration support
• $20 million San Diego Regional Airport Authority for security, network and management services
• $19 million Air Force Mobility Command Planning System Support for software sustainment and development.

SAIC, of McLean, Va., ranks No. 6 on Washington Technology’s 2011 Top 100 list of the largest federal government contractors.