Good day, ladies and gentlemen, and welcome to the first quarter fiscal year 2010 earnings conference call. My name is [Shamika] 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, Mr. Stuart Davis, Senior Vice President for Investor Relations. Please proceed.

Thank you, Shamika, and welcome, everyone. Here today with prepared remarks are Ken Dahlberg, our Chairman and CEO; Mark Sopp, our CFO; and our COO, Larry Prior, will join us in the Q&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. With that, I will turn the call over to Ken.

Thanks, Stuart and good afternoon, everyone. By now I presume you have read our press release and you can see that we started out fiscal year 2010 superbly. We had better-than-expect revenue, op margin, earnings per share, and cash flow. What was especially rewarding to me was that all of our groups and virtually all of our business units met or exceeded their operating plans. But we are seeing broad-based success throughout the organization and Mark will provide additional color on the financial details in a minute. The last three months have certainly been eventful ones for the government services market, so let me run through my assessment of what’s happening in our primary market segment. First, the FY09 supplemental was in conference to reconcile the House and Senate versions of the $90 billion plus bill. And despite the rhetoric surrounding Guantanamo Bay, we do expect this bill to pass likely this month and it will provide sufficient funding for the war efforts, including key programs for us in [MRAP] and ISR. Second, President Obama recently signed a weapons systems acquisition reforms act. The DOD still needs to define specific language around conflict of interest and other matters but we view it as a positive step for platform independent services providers with a focus on program mission execution like us. Third, the administration’s proposed fiscal year 2010 budget is now out and it calls for some dramatic changes, especially for the DOD. The headlines focus on the high profile weapons systems cuts but frankly the overall defense budget and the ops and maintenance component are both up about 4%, so we should have solid funding through at least September 2010. Details on out-year budgets are still pending the results of the ongoing quadrennial defense review but we expect the growth…

Great, thanks, Ken. We posted another strong quarter financially, with double-digit internal revenue growth, improved operating margins, and excellent cash flow. The well-rounded results are particularly encouraging in light of the new challenges in our marketplace posed by the new administration and the difficult economic conditions that we are living in. For the quarter, we posted revenue of $2.65 billion, up 12% in total and 11% internally from the first quarter of last year. In our last conference call, we cautioned that this quarter’s internal growth rate may be below our targeted long-term growth rate range of 6% to 9%. We were facing a tough year-over-year comparison and we expected that there would be some pause in customer demand for materials with the change in the administration and/or transition of war activities from Iraq to Afghanistan. Given our vast contract base, there were a number of contributors as to why we exceeded those expectations for the first quarter. First, growth on existing contracts was strong, particularly on materials requested under some of our systems integration contracts. The most significant were a few -- task orders on our army aviation and missile command express contract vehicle down in Huntsville; task orders on our army [ITESS] 2S contract vehicle -- that’s IT work we do for the army; and also activities under a number of new intelligence and cyber security contracts. Second, growth accelerated on several new contracts, most notably our [Polcam] contract, now running at a greater-than $100 million annualized revenue run-rate; our new U.S. [Sencom] IT contract, and again several intelligence and cyber contracts won late last year. Revenue for the first quarter was composed of 59% from SAIC labor and 41% from materials and subcontractor sources, what we call M&S. The 41% M&S was more than we expected in…

Thanks, Mark. Before turning to your questions, let me address the items that are up for vote at our upcoming annual shareholders meeting later this month. In addition to the standard board election and accounting firm motions, we submitted a proposal to convert our class A preferred stock into common stock. The two classes have the same economic value but the preferred shares currently have 10-to-one voting rights over the common. We understand this is a tough vote for our preferred shareholders in that we are asking them to give up the extra voting rights but we believe that the proposal is in every shareholders’ best long-term interest. Our company strives to be a world-class company that observes corporate governance best practices, which we believe are correlated with higher long-term returns to stockholders. In the past few years, we have implemented one-year terms for our directors, designated an independent lead director, and majority voting requirement for election of directors. These actions give our stockholders a stronger voice to hold us accountable. We now want to build on this foundation of good governance by giving all stockholders one vote per share, which will equally align voting rights with economic risk for all stockholders. In addition, simplifying our capital structure will reduce the cost complexity and investor confusion, frankly, associated with our existing dual-class structure. I only ask that all of our shareholders carefully consider the proposal and make their voice heard by voting on this important proposal. Shamika, we are now ready to take questions.

(Operator Instructions) You have a question from the line of Joseph Vafi of Jefferies & Company. Joseph A. Vafi - Jefferies & Company: Good afternoon. Good results here. Maybe we could start on the security products business. You know, last quarter it sounded like there wasn’t a tremendous amount of visibility to the year in terms of security product sales. I was wondering if you could give us a little update on your visibility to those product sales here in the second half of the year and the kind of strength in the products business say versus your performance in the last fiscal year.

Thanks for the question. Our visibility is very good for this business area. The pattern, as I said in my remarks, is very consistent with [last]. However, the business is growing roughly 10%, profitability is growing as well, and you know it’s already quite profitable, and so we are pleased with the plan we have this year. I would say there’s a little bit of delivery risk in the second half. We are counting on some inputs in order to get our outputs out the door, but we have managed those problems in the past and done quite well, so we have an optimistic view toward our outlook this year on the revenue and profit side for that business, and in addition a pretty good pipeline for the year after already in place.

Most of our revenue for this year is already in the backlog so now it’s just performing to the contracts that we have. Joseph A. Vafi - Jefferies & Company: Okay, that’s very helpful. Thanks. And then secondly, maybe you could talk a little bit about the supplemental and how that at this point is kind of playing into your outlook. It seems like supplemental has probably been delayed just a little bit longer than people have been hoping for. Obviously you have some exposure there. Is there really -- I guess if a supplemental gets delayed, maybe passed being signed before the summit recesses, is that something that we should be worried about?

As we talked about in the last call, our expectations were the supplemental to not be signed before the Memorial Day recess. We do expect it will be signed before the July 4th recess. They are actually making pretty good progress on the hill. You will see a couple of things happening where they are in conference and it looks like they will have a formal session tomorrow. Both the House and the Senate are looking to schedule a vote for Friday. Part of the drama is there’s more dollars added to it, so the President asked for an additional $2.2 billion over the last 24 hours, so now the dynamic range has increased to almost $99 billion, so it looks fairly positive. There’s a couple of outstanding issues that really don’t affect SAIC, so we think they will get resolution. Again, [as Ken said, this month] and it basically catalyzes a lot of O&M spending -- remember the supplemental spins out between now and the end of September. Joseph A. Vafi - Jefferies & Company: Right. Okay, very good. Thanks, I’ll turn it over. Good quarter.

Your next question comes from the line of Jason Kupferberg of UBS.

Thanks. Good afternoon. A couple of questions -- first of all on the book-to-bill front, I know you were at about 1.0 for the quarter, and I think in the past you said to get to the 6% to 9% organic revenue growth, you probably need something a little bit north of that, maybe 1.1, 1.2, somewhere in that neighborhood. So I wanted to get a sense of your comfort level in terms of achieving a book-to-bill along those lines for the full fiscal year, given some of the challenges that you outlined in your end markets and the fact that more procurement seems to be getting done on IDIQ basis, which I don’t believe you guys count in your bookings typically until you get the task orders.

Right now it looks like it’s keeping with our historical trends, consistent with last year and with our historical pattern. We were all happy to see the book-to-bill of 1 this time and noticed the year-to-year increase in our backlog, which was very positive. As Ken highlighted, the initiative to just grow the number of $100 million opportunities that are submitted, as well as in the pipeline, is pretty dramatic and it’s done a great job at shifting the culture at SAIC to one SAIC to collaborate for those large jobs. So right now we are fairly bullish but realizing a lot of uncertainty in this marketplace and the dynamic range between the quality of our pipeline and some of the unknowns in the market tends to lead to the conservatism of some of our forecasts.

Okay. All right, so we’ll stay tuned on that front. And then a follow-up on the projected in-sourcing trend that you guys described -- are you seeing any signs of the government more aggressively trying to hire folks from SAIC or from your competitors? And if so, is the government doing anything different to make that potential move more attractive to your employees?

The answer is yes. I mean, we are seeing across-the-board not just our company but all companies are getting, whatever the right word is, bitten by selectively inducing contractor employees to move over. Frankly, the main reason when we do exit interviews and talk to our people, it’s the economy and they care about security, long-term, and that seems to be the cause. It’s not because we are not competitive in wage rates and other benefits but with the uncertain economy, we see certain employees that would rather secure their long-term pay by joining the government. Having said that, it’s still focusing more on the acquisition and policy side, which is not our gig. We are still in the strong mission support, so it’s affected us but not to the point where I’ve got high concerns.

Okay. Thanks for the color.

Your next question comes from the line of James Friedman of Susquehanna.

Thank you. I wanted to start with the operating margins, Mark. You described in some of your commentary that some of the lift, the 40 basis points, the 7.7% was decomposed between improvements in the SG&A and the [Polcam] contract in fixed pricing. I was hoping you could share with us maybe the relative contribution of those basically as fixed price contracts are rising as a percentage of the revenue, what the potential lift to the margins could be?

I don’t have a particular number of the contribution from the incremental fixed price going from 19% to 21%. It’s across a very wide contract base and [Polcam] is at its infancy and it is not a major contributor to improved operating margins, but the overall logistics business, back to my comments, is better than we had expected when we got into this business a couple of years ago. But I would lay a specific number on it.

No, I mean, I would -- we’ve said in times past that cost type contracts with weighted guidelines allow you to get to the 8% to 9%. The fixed price weighted guidelines allow you to get to the 12% to 15%, so there is a significant fee increase potential if you perform well and negotiate good contract fees.

But we definitely had some upside from the fees but the larger driver for our operating margin enhancement was on the SG&A side. Mark talked about how it was running at 5.7% of revenue this quarter.

And SG&A absorption will continue to be a margin driver, although in the latter half of the year it will be more accentuated toward gross margin as we ship our security products business products deliveries.

Okay, so maybe that’s a good segue into the cyber security subject and what I think is referred to as the national cyber security initiative. I think in prior public forums, you described the end markets for that between military, defense, federal, and private sector. I guess my question is -- well, for one thing, I think you’ve also mentioned -- you’ve to some extent quantified the opportunities in each of those -- I think specifically what you said publicly is that you were pursuing numerous opportunities in cyber security between I think two contracts at DHS and one at the defense industrial base and -- maybe if you could update us as to the status of those opportunities and to what extent they may have contributed to the upside and the --

I think what we said last call is that we were pursuing and have actively won several key classified cyber security programs, new contracts for us, and that we were focused right now on the military. And over time, the initiative would eventually get to dot.gov and then over time it would eventually get to dot.commercial and we gave no expectations as to what the revenue profiles would be for that, only I think they’ll be huge. And I like our position and where we are in the current dot.mil space and we are continuing to actively pursue RFPs in that venue.

Okay, thank you. And then the last thing for me -- any commentary or observations about the vehicle and container inspection? Any progress there with regard to port security?

You’re mentioning the secure freight initiative, is that what you mean?

Thank you, yes.

We just recently have heard that this is becoming more of a hot button in congress, so we are cautiously optimistic that we can transition from the test demo phase to really exploiting multiple ports, but your guess is as good as mine until we see that in writing and it starts the procurement process. But I would say we are a little bit more optimistic about that today than we were last call.

Okay. Thanks for the color. Great job.

Your next question comes from the line of Laura Lederman of William Blair.

Thank you for taking the questions and very nice job in executing in the quarter. Turning a little bit to ‘011, given the pressures from FSC and also in-sourcing, would it be difficult or more difficult to be in the 6% to 9% range? And I realize you’re not giving guidance for ‘011 but just to talk about it at a high level. Thank you.

I’ll let the others chime in -- of course I am going to say that we are not in a position to provide financial estimates for fiscal ’09 but this company is resilient and creative and I am confident that we will build a good book of business over the course of this year but we are not in a position to place bets on fiscal ’11 and hopefully our expectations on FSC will come true and we’ll continue to have a strong position there and not have too much of an adverse effect.

I would also just add that all of us recognize that the budget constraints will be tougher going forward. I just said that in my statement again. That’s why we are focusing on the higher growth sub-markets like cyber, like energy, like health. And I do expect over time a rebound on our commercial business as well.

I could give you two numbers that might help -- if you think of the growth of our pipeline, it was at this time last year about $65 billion. It’s about $81 billion this time and there is another large number in track that we are following. A more granular number that Ken pointed to was just the number of $100 million opportunities. This time last year it was 138. Today it’s 161. So there’s a robust pipeline that all of our group presidents and teams are pursuing but we are all cautious given how much market uncertainty there is in the marketplace today.

One final question -- if you look at the logistics business and [Polcam] being more [profitable] than expected, what is it that you are doing that is leading to that better-than-expected profit? And I guess a related question on fixed price contracts is they are more profitable if we execute them well but what are you doing to make sure that you don’t run into problem projects there? Thanks.

Well, we put a heavy emphasis ever since I’ve been here on program execution and I just am really proud of our team. We do rigorous risk reviews, ops reviews, and I think the proof is the last seven or eight quarters of solid performance, so I actually welcome more fixed price business as long as we balance the risk versus reward. As far as the logistics business, we finished the inventorying of the government’s old products. That was -- that caused us a lot of delay and a lot of uncertainty going forward. We really have got good algorithms to determine the needs and right now we are hitting all cylinders and that’s reflected in our results. We hope it continues.

Thank you so much. Once again, very nice quarter.

Your next question comes from the line of William Loomis of Stifel, Nicolaus & Company. William R. Loomis - Stifel, Nicolaus & Company: Thanks. When you talk about the guidance for the year and then you walked through the quarters, Mark, were you trying to tell us that for the second quarter, organic growth may be below the 6% to 9% because of the lower pass-throughs and the MRAP business dropping, and then being within that range or at the upper end in the back-half of the year?

That’s possible. I am not trying to be too specific on one quarter, but overall for the rest of the year, a slowing growth due to the reasons mentioned. There are known reductions -- MRAP, FSC, et cetera -- that I’ve talked about, the commercial weakness that Ken talked about. There are overall uncertainties we’ve talked about. On the other hand, we had some upside too and we’ll call those as we see them. But on balance, we would say quarters two through four will be moderately less in internal growth than what we saw in the first quarter, and that’s it. William R. Loomis - Stifel, Nicolaus & Company: And then the 11% to 18% EPS goal, if you did no more buy-backs and no more acquisitions today, would you still be comfortable with that range?

That is the basis of that estimate, that assumption. William R. Loomis - Stifel, Nicolaus & Company: Okay. And then finally on FDS, so you are -- just to be clear on the $50 million, so you are saying it’s going to go on a run-rate basis roughly from $300 million to about $250 million a year, is that -- did I understand that correctly?

You’ve got it correct. That run-rate reduction starts in the second quarter. William R. Loomis - Stifel, Nicolaus & Company: And then does that imply that the fee on the man-ground vehicle portion was the bulk of that $50 million decline?

A significant portion, yes. William R. Loomis - Stifel, Nicolaus & Company: Okay. Thanks a lot.

Your next question comes from the line of Cai von Rumohr of Cowen and Company.

Thank you very much, gentlemen. Ken, you mentioned strong bookings in Q2 and 3 before slowing in Q4. Are you talking about book-to-bill over one? And does that kind of expectation include de-booking of the remainder of FDS?

We seasonally grow our book-to-bill from the first quarter to a stronger second and then a stronger third and then seasonally, our Q4 is lower. In order to achieve a 3% to 5%, 6% to 9% organic growth rate, we do have to have a book-to-bill that’s north of one, 1.1 to 1.2.

Got it.

We’re largely referring in that comment to new business bookings. We would have to honestly say that there could be some volatility once the new FDS contracts let and whatever those look like and however that compares to our existing backlog, so that -- that could create a small -- you know, the [inaudible] of some kind and it’s too early to predict what that would be.

Got it. And you mentioned FDS -- could you tell us about how much were the revenues in the quarter? And given that about 90% of your work is direct labor, should we assume that under the restructured contract you would have an equivalent profitability opportunity?

The revenue in the first quarter was in the $75 million range, and I think it’s too early to tell what the split outs would be in the restructured program to the second part of your question.

Yeah, I think the real message is that the government at all would like to see more incentives around the fee structure without saying that they are going to lower it, just put more at-risk. So we probably have an opportunity to get to almost the same fee that we are currently getting but we would have to meet certain performance criterias that we haven’t had to to date.

Okay, and given that you should know how big the man-ground vehicles are, how much, if you retain the stuff you expect to retain, if we’re going from $300 million, what do we go to -- about 150 to 200? Is that the run-rate, more or less?

Well, for fiscal ’10, we are projecting 250. The run-rate after that gets into fiscal ’11 and I would just rather wait until we see how this shakes out before we start guiding you there, Cai.

Terrific, and last one -- could you give us an update please on project alignment and how that is coming?

Sure, Cai. James Morgan and the team have done just a phenomenal job in last year, for FY09, they achieved a run-rate of about $38 million in savings. They’ve got a plan to do about 30 this year -- you realize we are finishing cost point [delta] for all of the national security side of the business, which will be a great enabler for us in FY11. So the group presidents have taken it to heart and in these economic times, everybody is tuning up their overhead. We just were lucky enough to have good leadership and a process in place to get out of the gate well.

Terrific. Thank you.

Your next question comes from the line of Joseph Nadol of JPMorgan.

Thanks. Good afternoon and good quarter. My first question is on, Mark, on the material buys in the first quarter. I was wondering if you could in any shape quantify what you think was I guess excess over your expectations.

We expected a material component of 39% to 40% and we ended up at 41%.

I meant in dollar terms -- absolute dollars. I guess I can do the math, but --

-- million.

I’m sorry?

$25 million to $50 million ahead of what we might have expected, maybe even north of that.

Okay. And on intel, Ken, you mentioned you had seen some signs of in-sourcing there. I’m wondering if your intel sales grew year over year and if some of your competitors have seen some slowing growth here, I’m wondering what I guess what you are seeing. It obviously didn’t impact your quarter.

We grew. I don’t know what our competitors did.

Okay. Any feel for -- anymore color you can give on what the agencies are doing in terms of the in-sourcing? Do you think it’s going to pick up pace? Where are you seeing it? What types of contracts, et cetera?

Again, I think in the areas where we are mainly focused, which is in mission support intelligence, analysts, et cetera, I see that continuing to be strong for our company. I think it’s on the fringes where you get more into policy and the like that they be pulling back.

Okay. And then just one last one -- you were expecting some MRAP headwind and you talked about coming a little bit later in the year. I’m wondering if your MRAP was down year over year?

Oh, yes, as we had projected before and I think we mentioned on our last call. You know, our basic MRAP programs that are currently under contract and pretty much by the end of our first half and we are waiting for potentially a contract award on MRAP light to continue to sustain that. So year over year, we are down probably about $100 million.

For the quarter?

For the full year.

Oh, for the full year -- so for the quarter, you were -- this quarter, you were down $20 million, something like that?

Something like that.

I think it was a little less than that, Joe, about 10 -- 10 to 15.

Okay. All right. Thank you.

Your next question comes from the line of Erik Olbeter of Pacific Crest Securities.

Let me add to the chorus -- nice quarter. Real quick, just two questions sort of looking forward -- one on sort of M&A. The firm has been fairly cautious on M&A looking out for good properties at a good price. That’s something that the market hasn’t afforded many firms over the last year. How does your strategy on M&A and your metrics change as you go to pursue your M&A strategy this year? Do they change? Do you stick to the same thing? Are you willing to pass up deals now? Give us a walk-through.

Oh, for sure. I mean, I pass up deals almost monthly because they are just in a rarified area and we just won’t overpay. But having said that, we see a renewed interest in many companies now considering selling, especially when they look at the outlook and it looks flat to moderately declining and in most cases, the companies we are looking at are quite a bit smaller than we, so they are too small and they need to make a move. So we -- I’m kind of excited. We are starting to see some honestly good properties at -- I’ll never say reasonable price, but good prices.

That’s helpful. And maybe a question for Mark on bid and proposal -- it looks like -- I think you said it was up 13% year over year. That’s roughly $40 million in the quarter. What can we expect -- I mean, it looks like you guys are going to bid on a significant amount of new opportunities this year. Is that a number we should sort of expect to sort of continue to increase as we go through 2010 and 2011?

First, Erik, the combined B&P and IR&D was up 13% year over year, so it’s not as high on the B&P front as the number you stated. But it was up consistent with our revenue growth rate, and in fact we are seeing risk, if you will, that B&P cost will grow faster than our revenue growth in light of the unbundling of procurements, if you will, to meet the lower thresholds. And so we are expecting to have as much as $20 million, $30 million more of B&P costs this year in aggregate than last year, and that would represent a growth rate above what we were expecting on the top line.

Okay, that’s helpful. Thanks, guys.

(Operator Instructions) You have a question from the line of Edward Caso of Wachovia Securities. Please proceed.

Good evening. Mark, can you give us a sense whether the tax rate for the full year will be about what we saw in the first quarter?

First quarter you saw being 38.1 -- the actual rate was about 30 basis points higher than that due to rounding, so it wasn’t as good as it looks but -- and that was due to, you know, we started really compiling and preparing our tax return in the first quarter and we compare that to previous estimates and we make our true-ups during first quarter and second until we file it, so there are some adjustments and that’s the reason why it was slightly below in the first quarter. The bottom line is we still would say 39 is the notional rate, or normal rate but we have a chance at being in the 38 to 39 range when it’s all said and done to those -- due to those adjustments.

Great. Can you give us a sense -- I mean, you talked about taking money, the $50 million out, for FCS. In the 6 to 9 range and the 11 to 18 range, has your -- have you moved from the middle to the top, top to the middle to the bottom -- any sense for where in that range, you’ve done that in the past where you’ve given us a sense sort of where in the range you may have moved to and from.

We would like to just stick to our ranges as stated, Ed.

Okay, and my last question is for Ken -- there’s some upcoming deadlines here for your role as CEO. Can you just sort of remind us what those deadlines are and any update you can offer us?

The deadline for my departure can be no later than June of 2010, the annual meeting. And so the board is in the process of going through the CEO succession process. That’s about all I can say.

Okay. Thank you. Great quarter.

There are no further questions in the queue. I would like to turn the call back over to management for closing remarks.

Thank you, Shamika. On behalf of the whole team, we want to thank everybody on the call for their participation and their interest in the company and we hope to see you out on the road sometime in the near future.

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