Good day, ladies and gentlemen. Thank you for standing by. Welcome to the second quarter fiscal year 2013 earnings conference call. [Operator Instructions] This conference is being recorded today, Thursday, August 30, 2012. I would now like to turn the conference over to Mr. Paul Levi. Please go ahead, sir.

Thank you, Camille, and good afternoon. I'd like to welcome you to our second quarter fiscal 2013 earnings call. Joining me today are John Jumper, our Chairman and CEO; Stu Shea, our COO; and Mark Sopp, our CFO, and other members of our leadership team. 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 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. I would now like to turn the call over to John Jumper, our Chairman and CEO.

Thank you, Paul, and good afternoon, everyone. During the call today, we'll start with a look at our quarterly performance, followed by a quick comment on market conditions and then highlight the next step in our ongoing strategy execution. Following that, our COO, Stu Shea, will amplify to you details about our performance in the future. He will also cover our recent acquisition, the planned divestiture of our test and evaluation business, and we will conclude with the business development results and progress in some of our growth areas. Stu will be followed by our CFO, Mark Sopp, who will go into details on the financial results. And then we'll open the lines and take your questions. As reflected in our earnings release today, our revenue performance reflects a strong market position, the disciplined execution of our strategy and the dedicated efforts of 40,000 remarkable employees who share our pride in SAIC. The fundamental strength of our core business and intensified efforts in business development have enabled us to grow in markets that are uncertain and, in many areas, declining. During the quarter, we were able to report revenue growth of 10%, of which 8% is internal growth. While 8% revenue growth this quarter stands tall among our competitors, our market faces significant uncertainty, and we're being cautious on revenue expectations for the coming quarters, as Washington deals with the fiscal situation and the specter of sequestration. In the previous earnings call, we discussed the potential impacts of sequestration, and I commented that it's hard to imagine a situation where automatic triggers replace debate and compromise with regard to critical government programs. Since that time, I have engaged senior government officials and industry partners to help make our government leaders aware of the profound consequences of automatic program cuts that…

Thanks, John. As you can see from John's introduction, we have a number of important topics to cover today, not the least of which is our strong performance in the face of difficult market conditions. Frankly, it's a testament to the strong, disciplined planning that we've done over the past 2 years to prepare for these tougher times. We have worked methodically to tighten our strategic focus, increase our investments in differentiated capabilities, significantly increase our R&D and B&P investments, deploy our capital for a number of key acquisitions and deliver to our shareholders a track record of performance. As we position SAIC for the future, we will continue to deliberately shape our portfolio along strategic lines. The divestiture of our operational test and evaluation business, as well as the continued expansion of our health offering, are both solid examples of that focus going forward. But clearly, our decision to separate SAIC into 2 companies is a significant step in taking our strategy to the next level. The entire management team is excited and committed to this change, to be more focused and better aligned with our markets with the needs of our end customers, with the interests of our investors and with the growth opportunities for our employees. So let me offer some observations about what this means. First, the separation provides greater portfolio clarity for our investors and allows the market to gain greater insight into the performance of our diversified businesses. Clarity into our financial performance in each market we serve is important to our investors. Second, separation enables us to unlock substantial shareholder value by removing organizational conflicts of interest that have prevented our pursuit of new business in both the services and the solutions markets. Third, by managing these 2 distinct businesses differently going forward,…

Great. Thank you, Stu. 8% internal growth was the primary financial highlight for the second quarter. The major drivers of that performance were scope increases and new contract ramp-ups on several large programs within our Defense Solutions and our intelligence and cyber security operating segments. This included increased demand from our Army customer down in Huntsville for a systems and software development program that's called AMCOM, the ongoing ramp-up of both the Vanguard contract with the Department of State and the expanded U.S. military tires logistics contract and increases in several mission-critical ISR and cyber seeking [ph] programs, providing advanced technologies and life-saving solutions to our warfighters. In addition, internal growth continues to be strong in our commercial health area focused on electronic health records. While our 5 strategic growth areas: cyber, ISR, engineering, health and logistics, collectively produced 10% of internal growth, it is important to note that our C4 business area, within the Defense Solutions Group, posted double-digit internal growth as well. This underscores what John said earlier, our strategy to be more aggressive in business development, particularly on large programs, would provide new sources of growth despite the headwinds in the government market. Further, we have been more aggressive partnering with small business and are finding this a positive discriminator in today's procurement dynamic. Our revenue performance in the first half of the year, our large pipeline of outstanding bids and our acquisition of maxIT, are foundations for our increased revenue guidance for the year, which I'll touch on later on. Operating margin was 6.7% in the second quarter. That's significantly down from Q2 of last year, which was 8.1%. Part of this reduction pertains to performance, part pertains to issues surrounding government funding and a significant amount from discretionary costs we've undertaken to benefit the company…

Thank you, Mark. First, I realized we've used more time than usual with the expanded content of today's call. Thank you for the extra time to process today's announcement. We look forward to answering your questions today, and we're committed to providing open and timely communications to you throughout this process. With this announcement, we plan to enhance our overall investment community outreach so the new SAIC story can be better understood. We have also filed a briefing with the SEC that covers the major points of our planned separation, which we hope you'll find useful. Second, for the record, I'd like to mention that SAIC paid a $0.12 per share dividend on the 30th of March, 2012, and that our Board of Directors will meet next on September 14 to address the next quarterly dividend payment. Finally, please allow me to acknowledge the diligence of our Board of Directors, who have vigorously engaged and challenged the leadership team and devoted many additional hours of deliberation and counsel to help our team arrive at these necessary but complex decisions about SAIC's future. I'll speak for both Stu and myself in thanking the leadership team for a work ethic that only comes with true selfless devotion to the task at hand. There are too many to mention, but starting with my own wingman, Stu, our leaders have been the models of diligence and professionalism. I'd like to assure everyone on this call that the leadership team is fully aware of the task that lies before us in executing the planned separation. We will execute that task with the greatest respect for our customers, our employees, our shareholders and our investors. What will emerge are 2 powerful companies of significant scale. Our new groups and business units will be able to leverage existing market power and they will be more recognizable from the outside. Our line leaders and proposal teams, all really -- already feeling the margin pressures and bare knuckles recompetes, will operate in cost-conscious organizations, all unconstrained by potential conflicts. In our growth markets, we will design organizations to leverage our ample technical skills in ways that embrace our customers' growing concern about cyber security in government and commercial markets, even as we help define the next level of information security and performance in a cyber world. Thank you all very much. Now I'm going to turn it back over to Paul to answer your questions.

Thank you, John. Camille, we'd like to begin with the questions.

[Operator Instructions] Our first question is from the line of Mike Lewis with Lazard Capital Markets.

Actually it's Mike Smith in for Mike Lewis. Just a couple of quick ones. On the 2 separate businesses, thanks for providing the pro forma revenue, but do you have a pro forma operating income for '13?

Mike, Mark Sopp here. We will provide that later on when we get down the road. We've got a lot of design ahead of us. The team is going to be very focused on cost efficiency. And so it's just premature until we get further down the road to provide that, but we will be very transparent in those expectations at the right time.

Okay, great. And then secondly, on the -- on GSM, that's, from my understanding, still on the protest, I think you guys submitted a couple of protests on that particular program. But how is that factored into the guidance at this point?

We have eliminated revenue from that program in our guidance as a cautionary measure, but we're certainly hopeful that we get a better outcome.

Okay. And from -- and if I understand it right, you guys are still collecting revenue under the program right now, or is there a stop work?

We are still collecting revenue today, correct.

And our next question is from the line of Jason Kupferberg with Jefferies & Company. Jason Kupferberg - Jefferies & Company, Inc., Research Division: I just wanted to ask a follow-up on one of the prior questions, just coming back to the margins. I understand it's premature to give us a target margin for the individual 2 new companies, but in aggregate, should we still be thinking about the collective margin structure being in the 7.5% to 8% range, or do you see it being higher because of some of the cost efficiencies that I think you talked about in your prepared remarks? Just directionally, would the combined margins be higher or more similar to what SAI looks like today?

Great question. We do believe our normative margins today are indeed in that 7.5% to 8% range before nonrecurring expenses that I described in my remarks as an example. Some of those will continue. But in terms of the pure business, that's the baseline today, and we will have to see what the market forces dictate in the shorter term. But we will be designing to be maximizing financial performance, and we will be endeavoring to improve that number given the portfolio positions we have. So that's the challenge to the team. Jason Kupferberg - Jefferies & Company, Inc., Research Division: Okay. And just your thoughts as we head into the last month of the government fiscal year here, what are you thinking in terms of potential for budget flush? Would it be something on the order of kind of a normal intensity of spend here, or not, just given some of the macro uncertainties?

Jason, this is Stu. We're seeing a steady increase in the award decisions each period, and the beginning of Q3 was particularly strong in terms of those awards. So when we start looking at our bookings performance, we're seeing an uptick in that towards the end of Q2 and beginning to accelerate as well into Q3. So when you translate that into strong Q3 book-to-bill, we see Q3 being very strong and it's still expected on a year-to-year basis to be at 1.0 or better. So that really is -- not really as much of a flush as more of a decision-making process on the part of the government. Jason Kupferberg - Jefferies & Company, Inc., Research Division: So just to clarify that, the 1.0 plus, is that what you're now thinking for full year fiscal '13? I know you're running about 0.8 through the first half of the year, and I think you had been targeting something a little north of 1, maybe 1.1 plus. Is it more likely to be kind of the lower end of that range just given where you are year-to-date?

Yes. So it is at 0.8 now. And we're looking to see it get to year end at 1.0 and above, and how much above depends on how the pace of awards continues towards the end of the fiscal year, including the impact of sequestration. But the book-to-bill, it should be noted, it doesn't account for ID/IQ programs, and our ID/IQ programs are about $5 billion year-to-date. That's a growth of almost 50% over last year. And many of those ID/IQs are single-award ID/IQs, which also contributes to our performance. And when you couple that with roughly 50 non ID/IQ programs that we have in the pipeline that we expect to be decided this year in excess of $100 million, recognizing the slow historical nature of some of those awards, that's why we're remaining bullish on the 1.0 in the book-to-bill.

Our next question is from the line of Cai Von Rumohr with Cowen and Company.

So your technical services about $4 billion. Could you give us an approximate breakdown of where that -- what percent of the $4 billion comes from defense, what comes from the health and civil and what comes, if any, from intel?

I think the -- Cai, it's Mark Sopp. Ballpark, I think the contribution for the Defense Solutions Group toward that $4 billion is roughly 75%, and the remaining 25% exclusively from the health, engineering and civil solutions segment.

Okay, terrific. And then you made the comment that the solutions business will do lots of M&A. I think that was the word you said. And you have an engineering component. Given that you had a write-off on your engineering project in the first quarter, last year you had a write-off on the engineering project and now here in the second quarter, we have another engineering project. Do you -- are you looking to do more acquisitions there? I mean, there is this rumor out there of SKM, is that in the area of where you're looking to expand? And maybe flesh out the idea of lots of M&A.

Well, I said -- I didn't say lots of M&A. It will continue its course, if you will, as we have been on, and will need to be structured in order to support meaningful M&A going forward in the Solutions business. We did have some performance issues, as I directly stated in the engineering area, and we are working hard to remediate them. I would consider them growing pains, but we're also introducing some very interesting new technology on those projects, and these sort of things happen. But that has not dampened our positive view toward this space. We believe we are a capable provider and will continue to be one, and we will continue to look for M&A opportunities in that space.

And then the last one. By my numbers, by the time you do the spin, excluding additional M&A, you'll have about $1 billion of cash. Any thoughts about increasing the share buyback?

Our standard philosophy on that remains, Cai. So if you do the math on the existing cash balance plus what will be departing the treasury in the third quarter to pay for maxIT, we will not have excess cash for the short term, i.e. the rest of this fiscal year, above $500 million. We'll probably finish around $500 million for this fiscal year. And our philosophy remains that if we have excess cash above that level, and if we don't have M&A properties that are foreseeably ahead of us than we have in the past, then we'll continue to consider buybacks. But I don't see that in the immediate short term given our cash balance projected for the rest of this year. But that does remain a vital option as deployment of our cash, yes.

Our next question is from the line of Glenn Fodor with Morgan Stanley.

Can you give us some order of -- on this whole concept of the OCI, can you give us a magnitude -- order of magnitude on what impact to total revenue growth you think may -- your whole business would have incurred because of this OCI? I mean, is it a percent, 2% drag to revenue growth? And secondly, is there something about your business line-up that may have given you more OCI-related pressures versus, say, your competitors?

George -- Glenn, this is Stu. I think we -- the basis of our OCI in the past has been -- we didn't have hard OCI issues that we had to contend with, but we have lots of churn in the system because of our desire to navigate through them. So there was a lot of transactional reviews of growth. And in many cases, we just walked away from business lines because we couldn't pursue them. And that's really reflected in the size of the market expansion that we see after the separation. I don't know if I can attribute a percentage increase that we would have gone to, but as we look at the future of the split, we really expect growth to be higher than it would be if we didn't do the separation. That's a fundamental belief that we have. And when you look at the fact that the solutions company has access to $37 billion annually of addressable market and the services with maybe $5 billion annually, our revenue assumptions reflect the capture of a very small amount of that market share from the expansion. And so when we think about incremental annual revenue, it's close to $1 billion by the time ramp-up is completed, nominally, number of years from now. And that's really because in post-separation, it takes a little bit of time for us to begin to capture the proposals and get them in place. And when you think about the allocation of that growth between the solutions and the services company, we see still a meaningful amount of that to accrued it to the services side as well, maybe 25%, but most of it going in the solutions side.

That's great. That really helps out. Just second question, if I may. You had solid organic growth in Defense Solutions. Could you just remind us how much of this business line is in your strategic growth areas like surveillance and reconnaissance, et cetera?

There is about 1/3 of that business is logistics, readiness and sustainment area, which is one of the strategic growth areas. And there is a part of our -- what we call cyber area, a good half of our cyber area are contracts that provide that sort of solution set that's in the Defense Solutions Group. So that gives you a rough idea of the size.

Our next question is from the line of Robert Spingarn with Crédit Suisse. Robert Spingarn - Crédit Suisse AG, Research Division: A couple of questions. Could you characterize -- I don't know, General Jumper if this is for you or maybe for Stu, but could you characterize who you see as your peer companies in each of the 2 businesses going forward?

I'm sure there are.

No, I am not sure I'm going to acknowledge that there is, but let me…

There are many that would claim. Robert Spingarn - Crédit Suisse AG, Research Division: But you know what I mean.

Yes, I think if you look at the services segment, you would think of Booz Allen, CACI, The SI, TASC, Cytor [ph], ManTech, et cetera. When you look at the solutions side, it's a broader mix because of the 3 lines of business. So think on the C4ISR side, you have the Northrop, General Dynamics, Lockheed Boeing, L-3, et cetera. In the health area, you have CST, Accenture. And in the engineering side, you'd have Black & Veatch, Jacobs, Hatch, ECOM and others. So it's a little different spin between them. Robert Spingarn - Crédit Suisse AG, Research Division: Okay. Mark, I don't mean to revisit a question that's been asked earlier a couple of different ways. But given that you've been able to divvy up the company on the revenue side, why wouldn't you have a general sense of how the margins differ between the 2? Why couldn't you disclose that here?

I do have a general sense in today's business, but I don't want to limit our thinking as we design going forward. And so as you would expect, given all the remarks we've made heretofore, the solutions business piece with more products and higher technology areas does have higher margins relative to the services business. But we believe that when we are engaged in our redesigning efforts, then we want to think openly and to free the teams up to do something different. And so, again, we would prefer to provide more color on that down the road when we have developed those thoughts to a greater degree.

We also have a different allocation of commercial businesses between the 2 sides.

Of various stages of development, so there's 20% of the solutions business pro forma today is commercial. That's pretty substantial. And part of that, significant part of that is growing very significantly. And then we have some products businesses and solutions that are in various stages of their life cycle, some very early, some more mature. And that has a pretty significant impact on profitability today. So as we get closer to the spin, we'll have greater clarity on where those product margins are heading at that time, which will greatly inform, I think, the solutions margins. Robert Spingarn - Crédit Suisse AG, Research Division: Okay. And then just quickly, if I could ask just another one on guidance. And you may have mentioned this earlier, but to what extent is your guidance, or how much absorption did you have to do here with regard to the amortization and the separation costs you mentioned earlier? What does that cost? And how much of the revenue increase is the acquisition -- is maxIT?

Let me start with the latter question. The revenue piece is greater than $100 million, but less than $200 million, even though we bumped up the range by $200 million, as you saw. On the margin front, there's about $10 million of new amortization expense related to maxIT that we have to absorb in operating margins in the second half. And with respect to expenses, we have about $5 million more to go on the corporate relocation for the rest of this year, and we have roughly $20 million we expect in terms of the expenses related to the separation process. So those are incremental expenses that we will need to absorb in the second half and are implicit in our EPS guidance. Robert Spingarn - Crédit Suisse AG, Research Division: Okay. And then just lastly, Stu, on bookings. On bookings, how much of your third quarter bookings strength will be derived from DoD trying to deploy unobligated funds from prior years? Because I understand those get lost. I don't know if it's in October or January, but they're subject to sequester.

A lot of it is. It's hard to put a number, but significant percentage. Robert Spingarn - Crédit Suisse AG, Research Division: In other words, we're going to get the fiscal '12 flush along with some funding. Do you have access to funding from prior years?

It's relatively small in the scheme of things.

Our next question is from the line of Tim McHugh with William Blair & Company. Timothy McHugh - William Blair & Company L.L.C., Research Division: First, I just want to ask the maxIT and the general, the commercial health business. Is that going with the services or the solutions side of the split?

That goes with the solutions side. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And can you give -- if you can't talk about the margins, can you talk at all -- or are you willing to talk at all about the growth rates of the 2 businesses, if we look back at the last year?

The current year, do you mean, Tim? Timothy McHugh - William Blair & Company L.L.C., Research Division: Yes, that's fine. I mean, whatever time horizon you're willing to share.

Well, I'll provide it by strategic growth area, if I could. So a number of our strategic growth areas are running between 5% and 10%. As we said all along, one or 2 of them are south of that for various reasons, including some singular contract reductions. The core area has contracted all year, and that's just single-digit contraction, but nonetheless a contraction. I think the solutions business is -- they kind of balance each other out when you think about it. You got to give your -- tip your hat to the Defense Solutions Group for a very strong year-to-date performance, driven by growth in programs like Tires and Vanguard and others. Some will taper off in the second half, and we've baked that in, like the Joint Logistics integration contract. So there's a mixed performance this year because there are significant singular contracts that move the needle one way or the other. And what we'd really like to do is get down the road and evaluate recent developments including sequestration. As we get closer to the spin, provide you a better view forward of our revenue expectations at that time. Timothy McHugh - William Blair & Company L.L.C., Research Division: But there isn't one that's growing just substantially better than the other one, solutions versus the services?

They are not dramatically different, sitting here today. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then just one last question on the -- are you -- have you -- do you have any sense, I guess, of the extra overhead, if you will, because now you'll have 2 separate companies, there'll be some additional overhead and then I imagine that will be offset by just trying to be more efficient. But if we try and think through the math of the additional kind of corporate overhead you'll have to have for the second business, I'm just trying to get a sense of how much additional efficiency then you'll need to offset that?

Our going-in position that if you think of it as 1 plus 1 has to equal a lot less than 2. We're not looking to have additional. We're looking to see a reduction, net reduction, in the combination with the creation of the 2 independent entities. We're going for -- the real focus of the overhead structure and it gets down to the construct about the organizational structure, the nature of the processes, the way we're designing the 2 companies is to have an overhead structure rightsized for the kind of business that they're in. So not just taking SAIC and replicating it in 2 different places, but to create an efficient, agile organizational construct with the appropriate structure for the business and markets they support.

Our next question is from the line of George Price with BB&T Capital Markets. George A. Price - BB&T Capital Markets, Research Division: A number of my questions have been answered, but I still had a couple more. First, I'm assuming that all the product revenue is going to go with solutions. I just wanted to confirm that, and if you can just kind of talk about, I guess, what that assumption would be as a percentage of the solutions business?

The answer is correct, it does go in the solutions business.

In terms of proprietary products, the part of the $7 billion solutions business would still be less than 10% for proprietary products, but obviously a greater portion than today. So it will move the needle more in that business, but still between 5% and 10% would be the proprietary revenues within the solutions group. George A. Price - BB&T Capital Markets, Research Division: And is that -- I guess, is that a -- just in thinking about products specifically, or all product-related services?

Services would be on top of that?

Yes.

But we're -- We're sort of just trying to digest the question here. Just give us a second. George A. Price - BB&T Capital Markets, Research Division: I guess I was just trying to get a better feel for how much of that size for that new business would be really being driven by the product even just beyond the product itself.

Well, for example, the number I provided of 10 -- or 5% to 10% would include, for example, the maintenance revenue stream we get on the Bacchus product line. That's part of that business with similar profit profile, I may add. So we consider that one and the same. With respect to pure services contracts that deal with supporting platforms, then that's a very different matter and that will largely be in the services business with the exception of those services that are supporting platforms in the intelligence market, which would be in the solutions business. Maybe that's where you're heading, but does that help clarify your question? George A. Price - BB&T Capital Markets, Research Division: Yes, that did. The second question is, I know you talked about kind of going through the end of the government fiscal year in terms of what you're expecting for award flow. Any thoughts, I guess, in how you see things shaping up for the first quarter of GFY '13, your fourth fiscal quarter, given everything that's going on? I know there's a lot...

Well, that gets to the sort of the strategic budget issue that I don't think anybody is able to predict. But we're in a continuing resolution. We have the whole mystery of sequestration still before us and all the dynamics sort of the end of the year, it all piles up, I think just to contribute to an atmosphere of uncertainty. But we got the continuing resolution through the 31st of March, and that means that when the Congress comes back at the end of September, they got to start dealing with the next fiscal year budget. How they're going to reconcile that with FY '13 and how they're going to do the pro forma spread of the sequestration through a fiscal year that has already got part of it in a continuing resolution is all sort of unknown right now. And contributes to a bit of uncertainty. What we can report though is what we have observed. It's what Stu said, a slight acceleration in our government business, government revenue here in the end of the second quarter and continuing into the third quarter. We just don't know where that's going to mean with regard to how this all ends up with regard to flush, with regard to the caution of contracting officers toward the end of the year. These things all add to the uncertainty. George A. Price - BB&T Capital Markets, Research Division: Okay. Last quick question is, when, I guess, can we expect more specific information on the 2 businesses, historicals, more detail on your go-forward expectations and so forth to kind of fill in the blanks that people have asked about? Do you have a particular time line or manner in which you expect to disclose that?

Well, we do promise to keep you all informed. That's the main thing. As we go forward, we have a few things that are on our plate early on, naming the companies, the leadership of the companies, et cetera. And Mark has undertaken significant efforts on the financial side to try and wrestle to the ground how we're going to do the capital structure, et cetera. But these things, as we progress and as we have things that we can tell you that we are certain of or more or less certain of, we will be revealing these things as we go forward.

I think we're going to work as quickly, as methodically as we can, but the one thing that we have as a precursor to all those decisions is not letting go of the existing performance. We are very, very focused on execution today, and so that remains a kind of a preeminent position for us.

That does conclude the question-and-answer session. I would now like to turn the call back over to Mr. Levi for closing remarks.

I'd like to thank everyone on the call for your interest in SAIC, and we look forward to speaking to you in the future. Have a good evening.

Ladies and gentlemen, this concludes the second quarter fiscal year 2013 Earnings Conference Call. You may now disconnect. Thank you for using ACT conferencing.