SAIC [SAI] yesterday reported strong first quarter earnings and sales and maintained its guidance for the rest of its fiscal year despite the Army’s plans to restructure one of its marquis programs, the Future Combat System (FCS).
The FCS program accounts for about 3 percent of SAIC’s revenues and the company said it expects to still have a significant role in the restructured program. SAIC’s work and the terms and conditions of that work are being negotiated, the company said.
Net income increased 13 percent to $116 million, 28 cents earnings per share (EPS), from $103 million (24 cents EPS), a year ago. Earnings per share were up 17 percent, a higher rate than net income, due to a lower share count stemming from SAIC stock repurchase program. Margins increased 30 basis points to 7.7 percent due to improved cost efficiencies and contract fees.
Revenues in the quarter increased 12 percent to $2.7 billion from $2.4 billion a year ago, with 11 percent of the gain organic. SAIC said the key organic growth drivers were the ramp of recent wins in defense logistics, information technology, cyber security, and intelligence support, combined with more work on existing defense and intelligence programs.
Backlog at the end of the quarter was $16.7 billion, including $5.7 billion in funded orders, representing increases of 11 percent and 6 percent respectively from a year ago. The FCS program accounts for $100 million of the funded backlog and $1 billion in unfunded backlog through the contract end date of Dec. 31, 2014.
SAIC said that it expects to soon stop work related to the manned ground vehicle portion of FCS but keep working on systems integration and new technology spin-outs under a new or modified contract.
Guidance for the remainder of the fiscal year remains intact with EPS up between 11 and 18 percent and organic revenue growth up between 6 and 9 percent. Margins are expected to be up 20 to 30 basis points before reaching a sustainable level between 8 and 9 percent.