SAIC Earnings Call Insights: Programs Review and Acquisitions Outlook
SAIC, Inc. (NYSE:SAI) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Cai von Rumohr – Cowen and Company: Could you give us a little more color on the specific problems on the four problem programs? Secondly, you mentioned you’re going to be a little pickier, but you know, (take) price development with new customers particularly foreign, and state and local are kind of like for many analyst a red flag. How many other contracts of that sort still are in your backlog?
K. Stuart Shea – COO: Cai, this is Stu, good morning. We have a very rigorous process, a review of all of our programs and we have a watchlist that we pay particular attention to. Of the 9,000 contracts that we have within the Company today, we have about 25 programs that are on that white – on that watchlist and all four of the contracts that we noted in our call just a moment ago, were on that watchlist. But based upon our Q2 testing, our customer interaction, and scheduled requirements, we really determined that our two foreign contracts needed to be redesigned and we had to increase our cost and resourcing to meet schedules for the other two contracts. So we adjusted the EAC’s accordingly. These types of estimates at completion or estimates to complete are a standard process in any quarter and there is a lots of ups and downs. They just all happened that have happened at the same time, because of technical or customer milestones in Q2, which bore out new information. So we feel pretty confident in the overall process of review, but we did use the opportunity to do a deep dive on a much of a contract baseline this quarter to take a look and see whether or not we had any other issues. Right now, we don’t see any that confront us with the same level of concern that we have than any other ones.
Cai von Rumohr – Cowen and Company: Then you had mentioned that going forward, you’re going to be a little bit more, I guess, picky about looking at what you do? Are you going to continue to take fixed price development contracts with state and local and foreign customers? Or are you going to basically have a policy where you kind of stick to customers you know a little better?