(By Balaseshan) SAIC Inc. (NYSE:SAI) reported a 38.2% drop in quarterly earnings due to unfavorable change in contract estimates, higher indirect spending, as well as relocation and the strategic review charges. Revenue exceeded Street's expectations.
Further, the company announced its plan to separate SAIC into two independent, publicly traded companies.
Following the announcements, shares of SAIC gained 8.81% in aftermarket.
Earnings from continuing operations were $110 million or $0.32 per share for the second quarter, compared to $112 million or $0.32 per share last year.
Revenue increased 9.7% to $2.848 billion. Internal revenue growth, which represented 8% of the total revenue gains, was driven by increased program activity in the Defense Solutions and Intelligence and Cybersecurity Solutions segments.
Analysts, on average, polled by Thomson Reuters had expected a profit of $0.33 per share on revenue of $2.65 billion for the second quarter.
Defense Solutions revenues for the quarter grew 14%, all of which was internal growth, on increased activity on a number of programs. Health, Energy and Civil Solutions revenue rose 5%.
Intelligence and Cybersecurity Solutions revenue increased 8%, all of which was internal growth, primarily due to increased activity on two airborne surveillance programs and a new intelligence gathering and analysis solution program.
Looking ahead into the fiscal 2013, the company still anticipates earnings from continuing operations of $1.26 to $1.36 per share, while Street predicts $1.34 per share. SAIC lifted revenue outlook to range of $10.9 billion to $11.4 billion from previous forecast of $10.7 billion to $11.2 billion, while Street predicts $10.90 billion.
In a separate release, the company said its board of directors has authorized management to pursue a plan to separate into two independent, publicly traded companies. The proposed separation is intended to take the form of a tax-free spin-off to SAIC stockholders of 100% shares of a newly formed company focused on government technical services and enterprise information technology (IT).
Based on current plans, the two separate businesses would be: a technical services business and a solutions-focused business. The spin-off is expected to occur in the latter half of next fiscal year, subject to final approval of the Board of Directors. The spin-off is not expected to require a vote of the stockholders of SAIC.
Although SAIC expects that the separation of its businesses, if consummated, would be completed in the second half of fiscal 2014, there can be no assurance that a separation will ultimately occur.
SAI closed Thursday's regular session up 0.08% at $11.81. The stock has been trading between $10.31 and $15.18 for the past 52 weeks.