Good day ladies and gentlemen and welcome to the SAIC fourth quarter fiscal year 2008 earnings conference call. (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 and Employee Owner Relations.

Welcome everyone to our fourth quarter FY08 earnings conference call. Here today are Kenneth Dahlberg, our Chairman and CEO and Mark Sopp, our CFO. Lawrence Prior, our COO will join us for the Q&A session. During this conference 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 during this earnings call 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. Ken?

Thank you Stuart and good afternoon everyone. In my judgment the fourth quarter marked a strong finish to a terrific year. For the quarter and the year we accelerated organic growth and expanded operating margin ahead of our internal plan while building a strong foundation for continued growth. The operating model that we laid out at the IPO is working well. We have doubled our organic growth rate and significantly grown our profitability since going public. Consistent with our strategy, we won and are building out large systems integration and engineering work. During the year we won 17 $100 million plus contracts including IDIQ vehicles with an expected value above $8 billion. Moreover, based on the current funding environment we expect that our fiscal year 2009 to be a good year for our company. Turning to the market, whenever we’re talking with investors the first questions we’re inevitably asked are, “What’s going on with the Federal Budget and what will happen with a new administration?” The short answer to both questions in my opinion is, funding for our type of work is solid and we expect it to remain so regardless of who is in the White House next February. This is because since our last call, we had a $70 billion wartime supplemental and appropriations for all non-defense agencies approved and President Bush has submitted a fiscal year 2009 budget request that shows growth in our core markets. There will undoubtedly be continued drama but we expect reasonable funding when it is needed including the remaining supplemental funding for this year. Moreover, the next President will be in office about two weeks before the fiscal year 2010 budget is submitted so we would not expect significant changes to the budget that is being prepared now, especially for Defense. Thereafter,…

Thanks Ken. On the financial fronts we continued our momentum and finished fiscal year ’08 with excellent performance in revenue, operating profit and earnings per share. As Ken said in these areas we accelerated ahead of the pace we set out to achieve coming out of last year’s IPO and into this fiscal year. Our revenue and profit performance is a testament to the enterprise getting quickly aligned on our long term strategy and delivering consistent execution and financial performance across our entire business base throughout the year. An element of this execution was an aggressive business development and technology development campaign which brought substantial new work to our portfolio during the year and retained our existing contracts base through a number of re-competes. This performance not only helped drive improving internal revenue growth as the year progressed but provides solid foundation and visibility for continued revenue growth in fiscal ’09 and beyond. Despite our success on these fronts, an area where our results did not meet expectations was our operating cash flow performance, so I’d like to hit this right up front. As we signaled during our third quarter earnings conference call last December, collection of receivables from one intelligence customer continued to be substantially behind through our year end stemming from their systems conversion. In addition we experienced billing problems of our own related to our systems conversion which I’ll discuss a little bit more later on. More positively revenue accelerated above our expectations and this also caused a temporary net use of cash in the quarter. These factors were the main contributors to ending the year at 73 days sales outstanding above our expectations and four days ahead or above where we finished last fiscal year. That said we finished the year with about $1.1 billion of…

Thanks Mark. Before turning to your questions I want to offer some of my goals for the enterprise this year over and above the financial objectives that Mark just laid out. This year I want us to improve our employee communications and on boarding programs with a goal towards building employee engagement and driving down the voluntary attrition rate. If we are successful here, we will of course lower recruiting expenses but more importantly we’ll be able to maintain and grow our scientific and technical leadership and provide more value to our customers. This year I want us to create significant business in our strategic areas of cyber security, space superiority, energy and health. All four areas offer substantial challenges and represent significant business opportunities going forward. We want to remain at the forefront of solving our customers’ most important problems. And finally this year I want us to finish laying the groundwork for creating more nimble and efficient back office organizations and processes. If we meet our financial commitments and accomplish these goals, and I think we can, fiscal year 2009 will be another strong one for our company. With that we are now ready to take questions.

Your first question comes from Joseph Nadol - JP Morgan

Just wanted to ask a couple of questions, on the [Deltec] implementation you talked about the problem, it seemed like it was only lasting two months and it has passed, is that the case and is the rest of the implementation on schedule which I guess was to do another six to ten business units this year and the remainder in the following fiscal year?

From IOC we implemented successfully with a couple of our business units as well as corporate. We’re in the process…what were our lessons learned from that…how does it affect our financial concept of ops and what lessons were learned across the rest of the enterprise, we’ll be doing another wave of somewhere around six of our operating entities this next fiscal year and then we’ll finish off the rest of the core company the year after that. So we’re on plan. We learned a lot from IOC. And it has the fairly classic symptoms of any large ERP implementation and we’re happy with it.

That’s great. I’m just wondering about the margin guidance for next year. You talked about higher R&D spending, if there was anything that was going to be sort of a headwinds to meeting the 20 to 30 basis points that you expect from margin guidance next year, what would it be? Would it be higher R&D spending, would it be costs associated with other…the Deltec implementation or other efforts to take out G&A expenses, what sort of the biggest risk on the margin front?

I don’t see any particular risk with respect to IR&D or the systems implementation; those are very controllable costs that we constantly monitor. I think we’re right on track with what we’ve set out to do in our IPO at the 20 to 30 basis points per year. We did a little bit better in the last fiscal year ’08 for a few reasons but all of the elements of that program are in tact. We are counting on with respect to contribution in those margin improvements…some migration to better mix in the business which would translate to higher contract fees across the board. Number one is always program execution. We did a great job on that in fiscal ’08, we need to continue that and not have any surprise write-downs. We’ve managed our internal rate structure extremely well and we’re pretty much in parody on that. There’s not a whole lot of upside there in the out years but we do see contribution from better fee performance, economies of scale in absorbing our fixed costs in the business and again continued strong execution on each and every contract.

And then obviously as we continue to grow and if we keep our G&A and indirect costs fixed, there’s incremental lift across the entire spectrum of our contracts.

And just last quick clarification from Mark, the amount of cash you said you had on the balance sheet that you said that you could deploy this year, without impacting your credit rating or anything like that…

I think the question pertains to what is the definition of excess cash if you will and so finished the year at $1.1 billion we think we have comfortably $500 million of excess deployable cash that would not have any impact to our credit rating as we understand today’s credit markets which are constantly changing.

Great, thanks very much.

Your next question comes from Joseph Vafi - Jefferies & Company Joseph Vafi - Jefferies & Company: Good quarter, I was wondering if we could talk a little bit on the security products business, the outlook for that in fiscal ’09. I know that’s a good higher margin business for you and then secondly on the margin front any real change there in how we should be looking at some of the drivers for margin improvement in fiscal ’09?

We had a solid year not only in development of our high energy but we shipped some 40 units this year of various configurations and our forecast is to be up 20% to 25% above that. We think we’re in the order of 50 units that we’ll be shipping this year.

Not a whole lot to add from my last point Joe; we’re just focusing on contract execution, growing the business and achieving economies of scale. We do expect some mix affects that are favorable to margins which are contributors to the 20 to 30 basis points. We’re picking up a little bit in more efficient absorption of unallowable expenses as a contributor this year and then as we get beyond this year, we’re thinking more on a G&A side about taking in some benefit from some of the operational improvements that we’ve talked about, whether it’s the financial systems conversion or other efficiencies that we’re working on. Joseph Vafi - Jefferies & Company: Okay, that’s helpful. And then I know a lot of the new business activity in fiscal ’08 was what we were focused on and the single award IDIQ business, I was wondering if that kind of level of award activity there has been consistent just so we can kind of relate that to the bookings numbers that you posted here this afternoon.

When you look at the overall book-to-bill of the 1.0 a little bit better and you look at how we built our backlog, not included within that $15 billion of backlog that Ken referenced was either the single award IDIQs or the multiple award IDIQs. So if you added those two up there’d be another $6.8 billion almost $7 billion of room for us to compete and win business to really meet the 6% to 9% revenue growth that our groups Presidents are very confident in achieving. So that shift IDIQ is still significant in the market place and that’s where we really put our size and capability to work in bidding and winning the task orders under those. And our group Presidents, like Deb Alderson are just the best in the market place at doing that.

Having said that, our pipeline for 100 million plus opportunities is north of 130 and 45% of those are non-IDIQs. So we’re seeing a better balance going forward of IDIQ work and non-IDIQ. Joseph Vafi - Jefferies & Company: Okay that’s very helpful, thank you very much.

Your next question comes from Jason Kupferberg - UBS Securities

I wanted to ask a little bit about the cash flow and just to start with a clarification Mark if you could, the extra payroll in fiscal ’09 you had made reference to that last call and if I recall at the time we thought it would be $75 million if I’m not mistaken and I think you just mentioned $125. Can you just clarify that?

Sure Jason, we had expected the need for funding a payroll tax payment of roughly $35 million or so on the last day of fiscal ’08. We later determined that was not necessary so that’s now into fiscal ’09 so that adding to the previous $75 million plus growth in the business gets you to the $125 that going to be out in ’09. So we got a pickup if you will in ’08 from that but we offset that with growth in the business, particularly fourth quarter revenues being ahead of planned which was a net cash outflow of a similar number in terms of offsetting that benefit. And then the rest was all DSO driven the three days up where we wanted to be which was unfavorable on a temporary basis for the fourth quarter.

Okay so just building off that, just so we’re clear, you weighed out some of the parameters around free cash flow for fiscal ’09 and I think the way it nets out, correct me if I’m wrong, is all those being equal free cash flow should approximate net income but the two things that aren’t equal if you will in fiscal ’09 are the $125 of extra payroll, outflow and then the $75 million pickup from a three day improvement in DSO, so net net you’re talking roughly $50 million below net income, if I’ve got the pieces right?

Yes.

Okay. And on our recent trip to DC some folks kind of looking out at the fiscal ’09 budget process obviously given the elections were potentially concerned that the defense department could end up possibly without a base budget getting approved at all and maybe just being funded via supplementals for all of fiscal ’09. Obviously we’re still six months away from the start of the government’s fiscal ’09, but as you look ahead here is that something that has you guys worried at all?

Well you always…I guess we naturally worry. But we’re pretty comfortable that there will be another supplemental in the May/June timeframe and there will be another request in October, probably for an additional $70 billion that I believe both sides of the House will approve. Certainly there’s every opportunity that there will be a continuing resolution with the fact that we’ll probably have a new Administration in place but as we stated before, that has a potential impact in our FY2010 but very little modest, if any, in 2009. That’s why we feel the funding environment is pretty solid for our fiscal 2009.

Is there a bookings target or a range that you might point us to for fiscal ’09 in the context of achieving let’s say the mid point of your organic growth target for fiscal ’09?

When you look at the nature of our business and how much of it is tied for example to the logistics work that has such a quick turn to it, whenever we’re doing better than one, we’re growing the business. To get the kind of organic growth that we want to see we want to start seeing a 1.1, 1.2 but the 1.1 will get us to where we need to be.

Okay fair enough, thanks.

Your next question comes from George Shapiro - Citigroup Global Markets

I wanted to ask a couple of things, organic growth and 9% in the quarter, what slows in this fiscal year that you’re keeping the range of 6 to 9 rather than just moving it up towards the higher end?

Well I think to a degree a bit of conservatism. As we just talked about we think the funding is reasonably solid but being a bit conservative, we feel like we should state it within that 6% to 9% range based on the second half…I wouldn’t say uncertainty but just cautious and perhaps as we migrate through the year George, the funding environment becomes much, much more robust and understood we might change that expectation. So I think it’s just a degree of conservatism just based on the unknown unknowns.

Okay and then is there any of your revenues that get booked on a percentage of completion basis or is it all just straight as you book the revenues?

George, virtually all of the revenue is booked on percentage of completion. We do have some areas on what we call a service contract basis which is more tied to the billings in the particular period. But generally speaking its percentage of completion.

Okay and then one more Mark, you mentioned that you had a $35 million less cash impact in ’08 because of this deferral, this payroll tax, if you can go through again why you missed the cash flow because it seems like I would have missed this $35 million in your prior explanation.

If you look at the full year, you’ve got roughly $100 million of where we want it to be versus where we ended up. And you got three days of DSO, that’s about $75 million and inventory grew by about $25 million more than we were projecting, that’s basically the $100 million. The pickup we got from the payroll tax deferral was offset by higher growth in the business. That was about a push, that’s the simplest way to look at it in my mind.

Okay. And can you just mention the growth in the intelligence business and potential awards this year that you might be able to talk about?

We don’t break down growth by the various areas but when we look at the budget and we looked at what Bush submitted for FY2010, the intelligence area was low double-digit and we do have some very interesting awards that we just announced in Q1 and we have some pending significant intelligence bids yet outstanding that need to be adjudicated so given our win rates, 60% to 70% overall for the business we’re pretty bullish about our intelligence business going forward.

Okay and the $25 million lower interest income you talked about was that net of the little lower interest expense that you’ll have because of the payment of the $100 million in debt, down payment of the debt?

Just talking about interest income, so interest expense is a separate item and that’s down about $10 million year over year due in large part due to that pay down on February 1st.

Thanks very much.

Your next question comes from Laura Lederman - William Blair & Company Laura Lederman - William Blair & Company: Just a few quick questions, one following up on the Deltec implementation what are your thoughts on whether or not you’d end up with potential DSO problems in those units, in other words is what happened in the units that went up and running avoidable in terms of rolling it out throughout the organization and secondly could you talk a little bit about the acquisition environment out there. How are prices looking, how’s your pipeline looking, looking at a lot of businesses and then I have one follow-up.

First on the Deltec implementation, that was a key lesson learned for us as we did the two business units. And it was understanding the mix of complexity of a business unit that had benefited from some movement, reorganization within the company. It won a new contract that had some added complexity to it and frankly had a lot of customized processes so as we think about taking this enterprise wide, that was our key and one of our toughest pilots. We did it on purpose to learn and we do not believe we’ll replicate that stress to our DSO as we go down with the other business units.

I would actually compliment the team. We picked a couple of the most complex business units and IOC means Initial Operating Capability. We meant it to be a beta test. Probably the only thing we could have done better would probably accelerate IOC so we weren’t at the year end crush because we quickly solved the billings problem in the following quarter. As for acquisitions we announced the two just recently here and our pipeline continues to be relatively strong in the mid range acquisition value. Read that $100 million, $200 million revenues. The larger ones we continue to look for and dialogue about but yet we have no one that’s really interested yet in selling at what I think is a reasonable price. So we’re continuing to find terrific opportunities in our modeling and simulation, intelligence, logistics, now we have thrust in energy, health, cyber, so I believe that you’ll see the company continue to deploy capital to make strong, significant acquisitions in those spaces. Laura Lederman - William Blair & Company: Final question is the trade-off between share buybacks and acquisitions, can you share a little bit of your thinking on that front, thank you.

It’s in three priorities which we’ve always said. We want to fund our internal growth because that’s the easiest way to grow top line, bottom line and earnings per share. And then use our capital for augmenting with acquisitions and then to do share repurchase. And as Mark said we think we have ample cash reserves frankly to do all three. And we’ve shown that in the past that we’ve done all three and when we don’t have acquisitions that are in the pipeline and our price of our stock is we think undervalued, we’ll be aggressive in share repurchasing. Laura Lederman - William Blair & Company: Thank you.

Your next question comes from Edward Caso - Wachovia Securities

Just a clarification, you mentioned sort of $500 million in excess cash, now is that before or after the $100 million debt pay down?

That’s after Ed.

Thank you. Can you talk a little bit about what visibility you have in the forward year and maybe reference it to say maybe a year ago, percent in your backlog, percent you have to obtain from new business and so forth?

I think this year we’ve had better visibility in our backlog and to-go effort than we’ve had in the ensuing years I’ve been here.

One of the metrics we look at is the amount of unidentified revenue as we enter a year. Last year coming into the year we had about 10% of our planned revenue unidentified to specific opportunities and you see we exceeded our expectations on revenue performance in fiscal ’08 with that number coming in. in this year’s plan we have 4% to 5% of unidentified that is consistent with that previous number so that gives us better visibility, better confidence at this point in the year. That said we’re just at the start of the year.

Any significant re-competes this year or I know you have no large contracts early, but this a bigger re-compete year or a softer re-compete year?

I wouldn’t characterize it as a bigger re-compete year. We over fulfilled the plan last year with that and did well. This year, look to Guardian as a re-compete. Its roughly $250 million around our chem-bio work and we’re very comfortable with our position there. National Cancer Institute work that we do, that would be something that should be on our radar screen. PEO [Strie], [Bebcie] and all the great work we do on simulation and training is on our list this year. I think those are the highlights as well as maybe customs and enforcement, looking at the [eye tests] re-compete. So I’d say those are our top four.

And our re-compete win rate is still way north of 90% plus.

Thank you.

Your next question comes from William Loomis - Stifel, Nicolaus & Company William Loomis - Stifel, Nicolaus & Company: Just looking at Mark, just on the quarterly guidance on operating margin for fiscal ’09, are we kind of looking at the same pattern this year as last where the first quarter will be kind of the lowest and then you’re higher in second and third, I guess in the eight or low eights and then it dips down a little bit in the fourth quarter?

Actually that’s generally the case due to economies of scale. I don’t expect it to be as drastic on the high and the low. I expect it a little flatter slope in fiscal ’09 but still generally starting lower and then being higher with fourth quarter being somewhat conditioned on the amount of M&S which can come through from the government in that quarter. But generally speaking same trend, flatter slope. William Loomis - Stifel, Nicolaus & Company: Okay and then Ken when you talk about going from 40 to 50 units, were you just focusing on the all terrain mobile [inaudible] to the military or was that also system sales, sales to ports?

That’s our total mix of products. It’s going from 40 to 50 and actually the mix is moving more towards some of our higher energy products. We still don’t have much in the way of understanding how the secure freights initiative is really going to roll out. That’s certainly not an FY2009 event. We’re hoping it will be a 2010. William Loomis - Stifel, Nicolaus & Company: Thank you.

Your next question comes from James Kissane - Bear, Stearns & Co. James Kissane - Bear, Stearns & Co.: Mark can you provide a little more color on the intelligence customer conversion issues and maybe when that’ll be resolved?

This is probably the second agency we’ve gone through this with. They’re several months into it. They’re telling us it’s a month away. We think the system conversion is going okay but there’s always a training, human side to any one of these conversions. They’re paying us interest on the money that they owe us and we’re hoping to see some resolution in Q1 but this is one of those times that we’re glad we have a very strong balance sheet as well as a great relationship with our customer and part of the reason its challenging to us is we have so much great business with this customer. But we’ll look for a Q1 resolution. James Kissane - Bear, Stearns & Co.: Is it an execution issue on your side or is it….

Negative, this one’s pretty much all customer-side. James Kissane - Bear, Stearns & Co.: And provide a little insight into the commercial business, maybe revenue performance, margin performance, thanks.

It’s down from what we’ve previously experienced. We’ve seen a softening in our UK markets, actually a strengthening in our energy business so they’re in a transformational mode right now. We’re seeing the traditional IT services business waning and we’re moving more into consulting and higher noble work in our commercial business.

There have been several good recent wins with the Association of Courts in the State of California. We’re negotiating with LA Unified School District and then some energy wins with New Mexico Power. So when you think of kind of the down turn in some of the UK business, we’re seeing some up turn in some of the state and local and they’re in a transitory phase. James Kissane - Bear, Stearns & Co.: At the Analyst Day I think back in October you talked a little bit more about state and local opportunities, is that something to think about from an M&A perspective?

Its not as high on our strategic areas as the ones that I talked about cyber and in space and so on but having said that, energy is a big part and health, we see transitioning and transcending both government and commercial and that’s areas that [inaudible] and his business unit executives actually shine and do very well in. James Kissane - Bear, Stearns & Co.: Thank you very much.

Your next question comes from Timothy Quillin - Stephens Inc.

Three questions, one question interest, what interest rate are you getting on cash right now and do you have any auction rate securities?

We’re in the low 2% range on idle cash and we do not have auction rate securities.

Congratulations on that.

We’ve been very conservative in our investments. That shows in our rate but we’re preserving our principal.

Okay, second question is where would the share count go in…as you model it if you didn’t do buybacks in the fiscal year?

Let me try it this way Tim, our annual creed we’ve said before with respect to equity comp programs is roughly 3% of shares outstanding but we’ve actually taken some actions that we expect will reduce that pace somewhat. Towards 2 but not quite all the way down to 2. We made some repurchases at the end of the fiscal year ’08 which we’ll get full benefit of in the share count in fiscal ’09. And when you look at share count creed if you will, excluding repurchases its lower than you might expect, it’s on the order of 3, 4, 5 million from where we ended ’08 and then the repurchases may offset those is they are made from this point forward.

That’s helpful. And the last question is now that you’ve gone through a careful process can you give us some sense of your breakdown of your back office personnel by business unit group and corporate and how that at least in broad terms, compares to the overall workforce. Thank you.

No we can’t. All we can say is as I’ve said on other conference calls is that we think there’s 100 million plus of opportunity for us to save in those type of business functions and processes, much of which we want to use to reinvest in our business.

Thank you.

Your next question comes from Cai von Rumohr - Cowen and Company

Could you give us some sense in terms of the outstanding bids you have going into the fiscal year and given the pickup in wins early in the year, do you expect to be at the 1.1 plus book-to-bill rate in the first quarter?

So when you’re looking at the $100 million bids, there are 25 that are submitted as we speak. And when you look at what we’ve done in period one, we’ve already won close to a billion dollars in increase to our top line. So coming out, generally Q3, Q2 are very strong for us. Usually there’s a downturn in Q4 and then Q1. It looks like we’re having a healthy Q1 out of the gate so we’ll have to see where it goes. But I’d expect we’d be towards that 1.0.

And would you expect that the M&S ratio stays about 39% in terms of your guidance for the year?

Yes we would Cai. Too early to come off of that. It’s ranged from 36 to 40 over the last several years so that’s kind of the range we continue to see ourselves in.

You know, if you kind of look at your comments about concern about the second part of the year, we’re looking at you know…normally the April quarter has some more days than the January quarter and if the M&S ratio is 39% I mean kind of on paper, it looks like the revenue growth should be again kind of 12% and 10% organic so is it possible that you’re at [inaudible] is there something wrong in that logic, you also hired 500 to 600 people in the fourth quarter so your kind of net hiring momentum looks like its pretty good going into the year.

Well again you’re diligently going through your detailed analysis, we just said that we feel comfortable that we’re in the 6% t0 9% range and due to some of the uncertainties in the second half, we’re just being cautious. But if everything went well, certainly we’d be more in line with where you think we’re heading. It’s just too early to tell Cai.

Weren’t there any kind of ….you know you’d mentioned in the third quarter call that there were going to be I think you know the vista moving from 3 to 1 facilities and layoffs in the UK, how much were those kind of quasi non-recurring items in the fourth quarter and are there any kind of on tap going into the year?

Cai, the affect in the fourth quarter that hit part of our, mostly our commercial segment actually, so when you look at commercial margins back to Jim Kissane’s question, part of the answer is that the fourth quarter we had a hit in the commercial segment for consolidating those three areas in our security products business into one that did occur on schedule. That coupled with some severance in the UK was about $5 million of affect to operating profit in the fourth quarter. And we have no continuance of those items that we foresee in fiscal ’09.

Given your inventory buildup should we assume we come out of the gate with some pretty good product shipments in the first quarter?

It’s not substantially strong, no.

Quarters two and three are the bigger product shipments as we see the pace right now, but delivery schedules can always change.

Excellent, thank you very much.

Your final question comes from Greg Wowkun - Banc of America Securities

Any updates on the AITS contract?

No, other than we heard that there’s going to be an amended RFP that will be coming out in the next couple of weeks. Other than that, we’ve heard nothing.

Thank you.

That’s all the time we have for today. On behalf of the SAIC team, I want to thank you all for your interest in the company.