Good day ladies and gentlemen, and welcome to the SAIC fourth quarter, fiscal year 2009 earnings conference call. My name is Shamica and I will be your coordinator for today. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Stuart Davis, Senior Vice President for Investor Relations; please proceed.

Thank you Shamica and welcome everyone. Here today are Ken Dahlberg, our Chairman and CEO; Mark Sopp, our CFO; and Larry Prior will join us in the Q-and-A portion. 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 could cause actual events to differ materially, and I refer you to our SEC filings for a discussion of these risks. In addition, the statements made 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. Also on this call we’ll discuss our internal revenue growth percentage. Beginning this quarter our definition of internal revenue growth and a table showing our calculation of it appear in our press release, which you can get from our website. With that I’ll turn the call over to Ken.

Thank you, Stuart. Good afternoon everyone. As has become customary in these calls, I’ll provide some introductory remarks; update you on the government services market and business development; and then Mark will provide a lot of color on the financial details. By now I presume you would have read our press release and certainly in my view, the fourth quarter was a terrific finish to a great year; reaching the $10 billion revenue milestone as we celebrate our 40th anniversary; well, it’s just icing on the cake. I feel that we really hit our stride as a public company. In this past fiscal year, we executed on all the commitments that we made as part of our initial public offering. Our major financial results, including revenue, operating margin, earnings per share, and cash flow, were strong for the quarter and the year. We make no mistake; this performance was no accident. We laid out our approach for transforming the company, creating more focus in the marketplace, collaborating as one SAIC, making bigger bets on emerging strategic trends, and that approach is paying off. Since our performance has been steady and predictable, most of the questions that we’re getting from investors deal with the federal budget and the federal contracting environment. There have been major changes to both, but our overall financial outlook is essentially unchanged. On the budget front, the President signed the $410 billion omnibus, that provides an average 8% increase for non-defense agencies, and he signed a $787 billion stimulus package. Our largest customers and programs are in national security, but we see potential upside in the stimulus package, especially around our energy efficiency, border and port security, and healthcare IT offerings. We are taking a measured approach. We do not want to distract the focus of our…

Thank you, Ken. Our financial performance was indeed strong and balanced for the quarter and also for the year. I do want to emphasize some of the elements, not readily apparent in the earnings release today. Then I’ll of course address our current financial position and our financial expectations going forward. Let me start with the year as a whole. With revenue of $10.1 billion, total revenue growth was 13% for the year, and internal revenue growth was 10%, which translates to about $1 billion of internal growth. Operating margin ended the year at 7.7%, up 20 basis points from fiscal ‘08. The improvement came from two basic sources. We contained SG&A expense; that is selling, general and administrative expenses, to a much lower growth rate compared to our revenue growth rate and we also had stronger performance from an improved mix of work, including integrated products and systems integration contracts. For the year, SG&A grew only 6%, less than half the rate of revenue growth. Within that 6%, growth oriented bid and proposal and internal research and development costs were collectively up 11%, whereas core general and administrative expenses were up only 4%. Within that 4% of core G&A expense increase, a substantial portion was project-oriented IT modernization costs, which we expect to start tapering off next fiscal year, fiscal year ‘11. This balance of spend allowed us to concurrently improve profitability, build a pipeline and backlog for future growth and position our infrastructure for greater efficiency in the years ahead; all being key drivers for generating shareholder value over the long term. Diluted earnings per share from continuing operations were $1.10 for the year, up 17% over last year. Simply stated, the growth in EPS was essentially fueled by our revenue growth, coupled with our operating margin improvement.…

Thanks Mark. As I think about the company today, 40 years young, $10 billion in revenue and growing, I want to give credit first to Dr. Beyster for founding the company, guiding it through most of its history, and in viewing it with a set of core values and purpose that endure it today. Second, I want to thank the current management team and all our employees, who have taken the company to this new level. I’ve asked a lot from you this past year and in every way you’ve delivered. As I look forward, fiscal 2010 should be another strong year for the company. We are focused on the financial goals that Mark has described, but I wanted to share with you some of our other priorities for this year. In terms of our support organizations, we must continue to simplify our business processes, successfully complete the implementation of cost-point Deltek for all of our federal business, and further mature the shared services function. In terms of our people, we must build on our success with employee engagement, and continue to drive down voluntary turnover, in order to sustain and grow our scientific and technical leadership. In terms of business, I’d like us to capture a reasonable amount of the stimulus spending. Not for the one-time revenue or earnings but to help cement our position and brand us in the growing areas of energy management and healthcare. We want to remain at the forefront of solving our customers’ most important problems. Shamica, we are now ready to take questions.

Thank you. (Operator Instructions)

Looks like we have some questions queued up Shamica?

You have a question from the line of Joseph Vafi of Jefferies & Co. Please proceed. Joseph Vafi - Jefferies & Co.: Hi gentlemen, good afternoon. Terrific results here for the end of your fiscal year. I was wondering if we could talk a little bit about the products business and the outlook there for VACIS for fiscal ‘10, an update there, and if you could throw out at this point, if there’s a forecast for that business this year, that would be helpful.

Joe I want to point out; this is Larry Prior, a couple of things. First and foremost you saw the announcement in Q4 for the military VACIS win that we showed you. It was stated for $90 million approximately, and they had the ability to order additional sets. So think of that as the firm foundation for Alex Preston and his team and to really deliver on the promise of the business. You probably noticed in the last couple of days with Janet Napolitano and the Department of Homeland Security, really expressing a need and a desire for increased security with our southern borders. You and most of the folks are aware how much business Alex Preston does in Mexico, as well as specifically a lot of the inspection work we do on rail cargo and are highlighting that the initiative includes really checking most of the things heading south, as well as what heads north across our own borders. We expect he’ll continue to have double-digit growth on the revenue side and still really provide for us double-digit margins. What we’re all waiting for is how the administration treats the Secure Freight Initiative, which seems to have great support across the administration and Congress. Joseph Vafi - Jefferies & Co.: Okay great, that’s very helpful and then, maybe just one other quick one. I know Mark you were talking about cash uses in fiscal ’10; accretive uses of cash, obviously share buybacks and then also acquisitions. Does that mean that any acquisitions that we would see in 2010, even if they were a little bit larger would be accretive to earnings? Is that one of the philosophies in the acquisition program here?

Joe, as we’ve talked before, it’s very difficult to make acquisition accretive in the first year. So, we are not counting on that with respect to our guidance and our goals. The share repurchases if made at attractive prices are accretive as we’ve demonstrated. So, that said, we have made some acquisitions from time to time that have been accretive out of the gate, and we certainly like to have that benefit us. As we all know, the new accounting rules provide a little bit of headwind against that with the expensing of the transaction costs, but actually for us, it hasn’t been very significant in the past, we do a lot of that work internally.

As I said Joe, if we really come across a really strategic property, I don’t mind the deal being mildly dilutive, because it’s long term growth for the company. So we’re going to do what’s prudent for the long term. Joseph Vafi - Jefferies & Co.: Alright, that’s helpful. Thanks gentlemen.

Your next question comes from the line of Laura Lederman of William Blair & Co. Please proceed. Laura Lederman - William Blair & Co.: Yes, my congratulations on the quarter as well, and thank you for taking my questions. One, can you give a fuller sense of the timing and potential magnitude of the stimulus; kind of when and where? I’m not quite sure how to frame that. I know what areas that it would fit, but I don’t have a sense of when those monies would potentially start coming to you. Also, could you give us a little bit of framework on FCS, and you mentioned you expect the funding for that to come under some pressure. Can you kind of given us a sense of that as well; frame it for us. Third and final question, acquisition pricing. Have they started to come down now or are the expectations in general still too high? If you could put some color on that as well. Thank you.

Alright Laura, this is Ken, I’ll try and take them in the order you asked. The timing of the stimulus still is a work in process. I will say that we have aggressively critiqued the bill. We understand the opportunities in the energy efficiency and the healthcare IT, and I think we’re appropriately positioned to gain some benefit of those stimulus initiatives once the money is deployed. Obviously, President Obama and the administration would like to get that moving as quickly as possible and I think that helps and benefits a company like us, with a broad range of contract vehicles that we have. Number two, on Future Combat Systems; as we reported, I think Secretary Gates along with the administration are doing a tooth-to-tail review of all major weapons systems, programs and certainly Future Combat Systems comes under their purview. Nothing official yet; we’ve got strong support inside the Army. Progress has been demonstrably moved in the right direction over the last year with the entire FCS-1 team. I’m really proud of the efforts to-date, but I would expect that there will be some restructuring of the program going forward. I think the odds of it being canceled are slimmer than it being restructured, but we’re ready and prepared to dialogue with the army once they’re prepared to tell us what the impacts will be. It’s anticipated that we would hear it as early as April-May time frame. Third, acquisitions; are they coming down in price? Not yet. We still have a pretty strong, robust acquisition pipeline, but there tend to be more in the smaller revenue base. Many of them more privately held, as opposed to public companies, but I would suspect over time, the realities of the economy and the long enduring recession that we are in and will probably be in, might bring more reality to the prices of businesses; more to follow. Laura Lederman - William Blair & Co.: Thank you.

Your next question comes from the line of William Loomis of Stifel Nicolaus & Co. Please proceed. William Loomis - Stifel Nicolaus & Co.: Thank you. Mark if you could just talk about the revenue guidance. You mentioned first quarter, internal growth would be below your low end of 6%, and can you just walk us through some of the puts and takes of what; looking through the second, third, fourth. I know you’re not giving quarterly guidance, but just any headwinds or positives that you see outstanding that we could factor into our modeling for the remaining quarters, to get a full year number that’s in your guidance range.

Bill I’ll start with the first quarter that I’ve addressed. We have a pretty static growth profile for the rest of the year, other than the seasonality that we typically have, but we don’t expect as much of a growth during the year or variability. So, we think we will be in that range for the rest of the year after the first quarter, as far as we can see today. William Loomis - Stifel Nicolaus & Co.: Okay and then just looking through that July quarter, the second quarter, so is that factoring in business you’ve already won or does that include some things you’re anticipating like the stimulus?

There’s always a degree of work to be won, but the profile of that coming into the year was very strong in terms of the go-find elements that we typically share. So, the backlog position coming into this year was slightly stronger than it was last year. The unidentified business is very small at this point in time, so we have very good visibility into those quarters that lie ahead. William Loomis - Stifel Nicolaus & Co.: And on the stimulus, I didn’t hear you mention the opportunities around the border security that was in the stimulus, can you talk about that?

Yes Bill, this is Larry Prior. Let me just break down the stimulus to a certain extent. Of the total amount, only about $300 billion of it is new appropriations that are directly funding initiatives; $267 billion of it is for entitlements; about $200 billion of it is for tax relief, and when you start to think of what’s addressable by ourselves and by our competitors, it’s about a $50 billion funding level. Now mind you, we’re excited about that, but it’s a long way from the $700 billion that the President started with. We’ve spent a lot of time slicing and dicing the opportunity. We think directly addressable by our company is about $20 billion and we’re off to the races on about $5 billion of that. Some of the monies have begun to flow, and it’s very situational by agency and the contracting vehicles and the initiatives they’ve already identified. As you rightly pointed out, the initiatives on the Mexican border, some of that is already monies that have been flowing to DHS, as well as through the State Department Initiative and that’s a most recent example of initiative by Napolitano, had actually more to do with current funding than stimulus. You’ll see some more of that as well when you think of the Port Security Initiatives. So, we’re tracking all of those. We believe some of it will flow in this year’s funding, but it will extend for several years to come. William Loomis - Stifel Nicolaus & Co.: And the $100 million that was in the stimulus specifically for scanners and equipment, how do you see that as playing out?

You’re going to see it play-out, both there as well as in the core funding, where you’re seeing both commerce, as well as the Department of Homeland Security working to craft what ports by when and in the recent testimony, you’ve seen some discussion and dialogue between Congress and the administration over the Secured Freight Initiative, whether or not it should happen, but what numbers and in what magnitude and when.

I think honestly, we’ll have a lot more color on this, probably by the second quarter. Things are just starting and stand by. William Loomis - Stifel Nicolaus & Co.: Okay, sounds good. Thank you.

Your next question comes from the line of Ed Caso of Wachovia Securities. Please proceed.

Hi, good evening, congratulations. Mark, can you clarify on the Danet disposition, when was the timing of that? When did it hit the numbers? Is that a Q4, Q1 event?

The entire effect Ed was in the fourth quarter. We actually closed the transaction in February, but the numbers you’ll see in the 10-K to be filed will fully reflect that transaction through its closing.

That’s the $13 million that’s referred to or are there other things in there?

Well, the remaining book value that I referred to for a combination of VCC Venture Capital and Danet which is now zero, is $5 million sitting here today and exiting the year, so we’re well positioned there. The hit on Danet over the course of the year was about $15 million consumed in our fiscal ‘09 results.

Ken, can you talk a little bit about sort of the in-sourcing trend, how real is it? We hear chatter that particularly some of the Intel agencies are moving forward on bringing some people back in that may previously have been gone to contractors?

We hear that also Ed; I think it’s certainly an initiative that the administration is trying to take on. I think it’s inherently a governmental approach and again as I said, we’ve been pretty purposeful in the business that we pursue, staying clear of that. So I think the impact on us will be rather minimal.

Any thoughts on the cap and trade here, how you might benefit? Is that just a small ticket consulting or could there be larger opportunities?

I think it’ll be a bit of both. We’ve had a long history of thought leadership in and around energy, so we can do the cap and trade consulting, as well as actually provide energy efficiency proposals, as well as deliver design and build production. So, we really have the full value chain now with the acquisition of Benham.

Thank you. Congratulations.

Thank you.

You have a question from Joe Nadol of JP Morgan. Please proceed.

Thanks, good afternoon. First question is on the margins. Mark, I think you mentioned two of the three drivers of the margin expansion this year are going to be the security products, and then just some of the margins on some of the newer contracts. You walked through a little bit double digit top line growth on the security products, but I’m wondering, since it’s so important to margins if you could give a sense of what your backlog is, and what the timing of the deliveries might be? Generally, what the profile is going to be over the course of the year? Is it going to be Q4 heavy again, etc, and then maybe develop a flush around the other, the third category you mentioned of new contracts and margin expansions?

Joe, we cited that we’ll have double digit growth or expect to have double digit growth from our security products business. The delivery sequencing is similar we expect, in fiscal ‘10 as it was in ‘09, which means it’s back end loaded and we also expect similar margins in that business than we’ve seen in the past. So healthy growth, good margins, a little back end weighted in terms of timing. The third element that is driving our margin improvement, you mentioned security products, is really G&A absorption. So we are working very hard to find any and of our cost savings out of our G&A infrastructure through project alignment and everywhere in the enterprise and holding that number as steady as we possibly can, finding opportunities to reduce it if we can and growing in the top line; has delivered for us in fiscal ‘09 and will contribute quite healthy in fiscal ‘10 as well.

Mark I think the first one you mentioned was G&A absorption, the second one was security products, what was the third driver again?

There’s some element of mix if you will. So, as we have moved up the food chain in systems integration, cyber security, energy efficiency hopefully, we hope to have a stronger mix of contracts which should help margins as well.

Okay and then on the bookings, you mentioned that this quarter is seasonally lower and that’s why the book-to-bill was below one. When do you expect, as we look through this year, what are your bookings expectations for the year overall if you have a book-to-bill view, and how is the first quarter shaping up?

Joe, this is Larry. We continue to see that we need about a 1.1, 1.2 to maintain the growth rate of the business. As you saw, we grew backlog year-to-year by about $2 billion. Pipeline continues to be very strong. So, we would expect again, to finish the year around 1.2. Generally Q2, Q3, are the big quarters for us with seasonality around Q1 and Q4.

Okay and then just one more. On the MRAP, sales for last year ended up in the $200 and something range and we’re still looking for a $100 million headwind; are those about right?

That’s about right with the two contracts together, Joe.

Alright. Okay, thank you.

You have a question from the line of Cai von Rumohr of Cowen & Co. Please proceed. Cai von Rumohr - Cowen & Co.: Thank you, great quarter guys. Could you give us some color on commercial? Where was the volume for the year and what do you expect in 2010?

Cai, commercial was down in revenue year-over-year; not by a huge amount, but it was down. What was the other part of your question? Cai von Rumohr - Cowen & Co.: What are you expecting for 2010?

We’re expecting a flat year right now.

Flat to maybe modest decline. Cai von Rumohr - Cowen & Co.: And I’m a little confused on your guidance, because you seem to imply that sales are going to be down sequentially and yet you should by my calculations pick up two to three working days. You had a difficult calendar with Christmas and New Year’s were the Inauguration and you didn’t have particularly heavy M&S ratio. So, I don’t really understand why the first quarter is as light as you seem to be saying it is.

Cai, we’re predicting roughly a flat sequential result at this time. Cai von Rumohr - Cowen & Co.: In light of those factors, because normally the seasonality is against you in the January quarter, particularly this year with the calendar late.

Understood, but the MRAP effect is significant coming down from the fourth quarter to the first; and also we had a very successful M&S, materials and subs result in the fourth quarter which is timing; harder to predict. Cai von Rumohr - Cowen & Co.: Okay and could you tell me, what were net hires in the fourth quarter and what’s the plan for Q1?

I’ve got the numbers for the year; I don’t have the Q4 number in front of me in terms of net hires. So, we think for the year Cai, we added net about 1,600 employees. As of Monday we had 45,587. The mix was we added about 2,000 employees in the line, about 1,400 of them are organic growth and corporate was down about 400 year-to-year, and I’ll have to get back to you with the Q4 number. Cai von Rumohr - Cowen & Co.: That’s excellent and Larry while I have you, maybe you could update us first on project alignment and secondly Mark, maybe you could comment on some color on where we are with the Greek contract and how much, if any recovery is in your guidance for fiscal ‘10?

So first on alignment, actually I hope you saw some of the press release. We did the ribbon cutting of the Shared Services Center with James Morgan and his team down in Tennessee. Ken was there along with a lot of local dignitaries and got to walk the facility. I think we’re pretty much on plan where we expected to be in our goal of getting $100 million a year. Again, a year two of our multi-year plan, and I’ll let Ken offer any color from his trip to Tennessee.

Well, it’s up and running. We’ve got accounts payable; we’ve got procurement; we’ve got HR data records, and things are moving along well. In fact, we’ve asked James and Larry to see what’s possible to accelerate and put more into the Shared Service Center this year.

Cai, we do not have expressly in our guidance, in our expectations, any recoveries on the Greek contracts. That said, we think there’s a very good chance that we do see some in the fiscal year ’10, so it does represent upside. The amount would be very hard to predict at this time, and the timing would be hard, but the developments by the team over there led by Don Foley has been really fantastic for us, and we’ll hopefully deliver some good news on that front here pretty soon. Cai von Rumohr - Cowen & Co.: Terrific, thank you very much.

Good day.

You have a question from the line of Jason Kupferberg of UBS Securities. Please proceed.

Thanks and good afternoon guys. I wanted to ask a question on the competitive landscape and get your view on how you might think that the big defense primes could behave in the IT space, given some of the expected pressure on their large weapons programs, which are obviously much bigger part of their revenue streams than it is for you guys. Could they end up representing an even more competitive threat for contracts and for M&A targets? They’re obviously always out there in the landscape, but do you look at them now with perhaps even a little more concern?

Well, let’s just say that most of the large platform primes have a significant IT services business, as big if not bigger than we, and we’ve been competing against them for years and our win rates for our total contracts are still greater than 60%, and our re-competes are hovering right around 90%. So, we don’t have to compete against this environment and we’re going against the small contractors as well as the large defense primes.

Okay, so you haven’t seen any signs yet that they might get even more aggressive in the IT arena?

This is Larry Prior. We watched and we tracked closely, when we tried to take away one of their incumbent positions or they go after one of ours. We had one that we lost this year in the logistics realm, where we lost on price. If I look at the five big takeaways in the last 18 months, we took four of them away from big primes, each case it was a technical, superior proposal that won it for us. So, it’s something we’re used to doing each and every day, and we’ll continue to fight the good fight.

Larry is right. I think where we’re trying to discriminate ourselves is not just price, it’s through real science and technical innovation and having the kind of mission knowledge really helps us in winning and competing against the larger primes.

And if you just look at the playing fields in the future and you think of the current debate within the Department of Defense, where Secretary Gates highlights the MRAP and things like the Predator, well think how much work SAIC does around the MRAP and the Predator op centers that we support. We think we’re postured for Secretary Gates’ vision of defense for the future, and it’s a good playing field for us.

Okay, that’s helpful, and if we think longer term here, I know you have talked about the “long-term guidance” on an annual basis to have 6% to 9% organic growth. How far into the future is that feasible? Now that you’ve hit $10 billion in revenue, the law of large numbers starts to catch up to you a little bit. Is this something you’re very comfortable with the next couple years, and then it’s kind of a wait-and-see beyond that? I wanted to just get a sense of your thinking on that.

Look, we said that the market; and I don’t think it’s changed; is going to grow in the 3% to 5%. Why we expect to grow 6% to 9% is because we’re targeting the more enduring high growth markets in that segment; cyber, logistics, intelligence. Now we’re doubling down on energy managements and health IT services. We really think that’s going to give us a lot of revenue lift for the foreseeable future. Your crystal ball and mine gets cloudy after the first year or so, but we feel pretty comfortable with our 6% to 9% projection over the next couple of years.

Okay and just a last question. Since the new administration took over a couple months ago, have you seen any noticeable change in sales cycles, just as new decision makers get into their seats?

Actually, over the last years or so, because of the retiring federal workforce, there’s just been a protracting out in time in the whole acquisition process. We’ve kind of built that into our time lines quarter-by-quarter, year-over-year. One might expect, without everybody sitting in the right seats, you would expect to see some additional delays. Right now we haven’t seen much in that regard, so time will tell. I’m really impressed. This administration is ahead of many of the prior ones in filling those key positions. So, knock on wood; so far, so good.

Great. Thanks for the color.

You’re welcome.

You have a question from the line of Elan Gore of Picton Mahoney. Please proceed.

Hello. Congratulations on another solid quarter. Just a quick question; one of your peers which is positioned, perhaps slightly lower on the value chain, recently highlighted on their conference call that they’re preparing for a fixed price contract world and that they see T&M and pass-throughs as something of a thing of the past. So, we’re just wondering if could share your views on the subject. Do you still see SAIC’s business mix as better positioned on the value chain with over-archingly mission critical exposure such that the mix of fixed price and P&M would actually remain pretty stable through the cycle?

We’ve seen over time a greater mix of fixed price in our business space. So if you track from ‘07 to ‘09, we’ve seen fixed price increase from about 6% of our mix into about 18% right now and it’s been at the expense of time and materials. The government still uses a lot of cost plus when they’re pushing R&D and development. They really will have to do acquisition reform if we’re going to shift cost plus to some other contracting vehicle. Much of it is going to performance based, where you need earn value management systems. SAIC is very good at that and we like the discipline. So if the government’s acquisition workforce is capable of really locking down the discipline of requirements in defining the systems, we’re comfortable in making that transition. We do see however, it’s really challenging for them to move away from the flexibility that the government loves around T&M.

Having said that which is accurate, I believe this administration and probably rightfully so, is really going to ensure that even in cost type contracts, that we do everything that we can to deliver what we said we were promising with the costs that we estimated. So, I keep preaching to our employees, many of our cost type contracts, we really should and we do view them as almost fixed price and if we continue to do that that will continue to help us long term grow our business.

Shamica, I think we have time for one more question.

Thank you. You have a question from the line of Matt Bugarin of Raymond James. Please proceed.

Hi, this is Matt speaking in for Brian. So real quick, a housekeeping question on what the assumption is for the tax rate for fiscal ‘10. Thank you.

Matt, the assumed tax rate going forward is 39% flat.

Okay, thank you.

Welcome.

Shamica, I think that’s all the time we have. I want to thank everyone for joining and your participation on this call on behalf of the whole team. Good evening.

Thank you for your participation in today’s conference. That concludes the presentation. You may now disconnect.