SAIC [SAIC] on Tuesday reported lower sales and a loss in earnings in its fourth quarter largely due to a settlement related to the company’s automated workforce management contract with New York City.
Despite the sour end to its fiscal year 2012, SAIC initiated a quarterly dividend of 12 cents per share and also announced a new share repurchase program of up to 40 million shares. The start of a dividend payment coincides with SAIC’s new CEO taking the helm of the company.
“Our decision to initiate a quarterly dividend reflects our confidence in SAIC’s financial strength and our commitment to deploying capital to maximize shareholder value for the long-term,” John Jumper, SAIC’s president and CEO, said in a statement. “The dividend will augment our capital deployment strategy, which will continue to include strategic acquisitions and share repurchases while retaining and attractive credit rating profile.”
The net loss in the quarter was $161 million, 49 cents earnings per share (EPS), versus $127 million (35 cents EPS) a year ago. Excluding the $308 million loss provision from the CityTime contract with New York City, operating income was $197 million (31 cents EPS), a penny below consensus estimates.
Sales in the quarter were $2.5 billion versus $2.7 billion a year ago and were also dinged by the CityTime settlement which lopped about $360 million from the top line. Excluding the contract settlement, organic sales were up 3 percent in the quarter.
SAIC last week agreed to a $500 million settlement with the federal government and New York City related to fraud charges on the workforce management contract (Defense Daily, March 15).
SAIC’s Defense Solutions segment, which bore the brunt of the contract loss, posted a 27 percent decline in sales to $852 million and lost $216 million versus $90 million in operating income a year ago. Excluding the CityTime provision, the segment grew 3 percent on work on the Mine Resistant Ambush Protected vehicle program, a systems and software maintenance program for the Army and a program to operate the network information technology infrastructure for the State Department.
The Intelligence and Cybersecurity Solutions segment posted a 2 percent rise in sales, essentially all organic, to $877 million and a $15 million decline in operating income to $64 million as margins slipped on higher research and development (R&D) costs and a tough comparison with a year ago when the segment benefited from strong program performance.
Sales in the Health, Energy and Civil Solutions segment increased 10 percent to $764 million, with just 4 percent of the gain organic, as the business benefited from new design-build programs for renewable energy plant construction, higher deliveries of cargo inspection systems, and increased consulting services for healthcare information technology. Operating income slipped $8 million to $61 million due to higher R&D spending and a loss provision related to a data privacy litigation matter.
For the year, SAIC’s net income was $59 million (18 cents EPS) versus $599 million ($1.64 EPS) while sales fell 3 percent to $10.6 billion from $10.9 billion.
For its fiscal year 2013, SAIC expects sales to be between $10.7 billion and $11.2 billion and EPS between $1.26 and $1.36.
Bookings in the fourth quarter were $2.1 billion, representing a book-to-bill ratio of 0.7, while total backlog at fiscal year-end was $18 billion, up 5 percent from a year ago.