Welcome to the second quarter fiscal year 2010 earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Stuart Davis, Senior Vice President for Investor Relations. Please proceed.

Thank you, Operator, and welcome everyone. Here on today’s call are Ken Dahlberg, our Chairman and CEO and Mark Sopp, our CFO. 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. As you can see from our press release for our second quarter it marked another quarter of steady, solid execution that I firmly believe has become our hallmark. We are navigating well in a relatively tough environment based on our good positioning and aggressive posture in the market. Mark will provide color on the financial details in a few minutes after I describe the market dynamics and our key business drivers. We are reasonably optimistic about the prospects for passage of the government’s FY10 budget with only minimal periods of a continuing resolution. With other pressing topics such as the healthcare debate there is a lot on the Congress’ agendas when they return next week but the appropriations process seems to be on track and the mark ups are generally consistent with the President’s submission earlier this year. Earlier this summer Congress passed the FY09 supplemental. Although the bill was somewhat delayed which pushed back some awards the funds are now flowing. That supplement supports our critical work in MRAP as well as intelligence, surveillance and reconnaissance. Besides the overall level of spending, the two biggest potential market drivers are the evolving trends on organizational conflict of interest (OCI) and government in-sourcing. On the OCI matter, the DOD should issue guidance in response to the Weapons Systems Acquisition Reform Act shortly. Some customer organizations such as the National Reconnaissance Office are moving out aggressively to define their own OCI guidelines. We expect this will leave some companies who have significant businesses with these customers to divest work that creates conflicts with their strategic direction. Most of our customers and competitors are taking a wait-and-see approach until the final DOD guidance is published. So it is still too early to tell the ultimate impact for…

Thanks Ken. Second quarter results were in line with our expectations with balanced performance in revenue growth, strong operating margin improvement and generation of cash flows. As today’s earning release indicates, compared to the second quarter of last fiscal year internal revenue growth totaled 7%. Operating margins grew 60 basis points and operating cash flow decreased about $120 million. Now I will get into some color on those results. Revenue growth was particularly strong in our Defense Logistics area and our Traditional Defense Solutions area. Our largest single contributor to growth was the continued ramp up of our PolCam logistics contract which is now running at an annualized rate of around $150 million. Revenues under our Future Combat Systems (FCS) contract held stronger than expected due to a delay in the partial termination associated with the Manned Ground Vehicle effort and heavy material buys on continuing parts of the program. We saw continued strong internal growth in other systems engineering, integration and IT programs in the Defense community and benefited from the ramp up of recent cyber awards in the intelligence area and the IT integration work we are doing for the U.S. Central Command. In addition, we are now seeing more growth in IT infrastructure work for the Department of Homeland Security and more work in our Military Health Technology Services area. Despite these growth areas, as expected our aggregate internal growth rate came off the double digit pace we have seen in recent quarters. The there were three primary contributors to the slower growth pace. First, our MRAP communications integration contract slowed in the second quarter as deliveries on that program were completed. We expect to avoid further erosion in growth on that operation by new work integrating electronics gear on the new MATVs, the all-terrain MRAPs. Second,…

Thank you Mark. Before turning to your questions I just wanted to say how pleased I am that we have found the right leader to succeed me. This will be my last call and I look forward to transitioning to the Chairman role when CEO Walt Havenstein joins the team on September 21. I am sure you are all looking forward to meeting Walt whose first exposure to the street will be at our annual Institutional Investor Conference set for the 13th and 14th of October at our offices in Maclean. The feedback from past events has been universally positive and this event promises to be even better. The conference will follow the same basic schedule as past years. On Tuesday afternoon we will have a technical demonstration of some of our main products and solutions followed by dinner with the senior management team. On Wednesday morning we will have management presentations with a special focus on our capability, positioning and strategy in the energy market. Now we all recognize the full event requires a substantial time commitment on all your parts but the two theme session is especially rewarding. The demos showcase our technical discriminators and most of our senior team will attend the dinner. If you are at all interested in attending this year’s conference just give Stuart a call or send him an email. With that, operator, we are ready to take questions.

(Operator Instructions) The first question comes from the line of William R. Loomis - Stifel, Nicolaus & Company. William R. Loomis - Stifel, Nicolaus & Company: You are talking about future combat starting to decline in the second half and then you have the headwind with RW Beck optics hurting organic growth by 3% and you are keeping the metric in place. Can you quantify what kind of drop off, in terms of revenues what was FCS revenue in the quarter and have you seen that progressing over the next few quarters? It seems like it was less of a hit than I would have thought or you are winning more business or ramping up more than I anticipated as well.

We like the latter.

The FCS did hold much stronger through the second quarter. Revenues were in the $80 million range to give you a sense of that. We project once the full effect of the reduction in scope takes effect we are on a pace of roughly $250 million per year, down from roughly $300 million per year today and there is some variability quarter-to-quarter based on [inaudible] order of magnitude. That is really consistent with what we said in our last call. William R. Loomis - Stifel, Nicolaus & Company: How complete are the negotiations with the Army? How confident are you in that $250 million number?

We certainly I think are confident about it for this year and into next year yet negotiations are just getting under way. We did receive that acquisition decision memorandum and we are fully cooperative with Boeing as well as ourselves as we attempt to restructure the contract or create a new contract it is still on a TBD condition. William R. Loomis - Stifel, Nicolaus & Company: This assumes no role in the restructured Manned Ground Vehicle?

The manned ground vehicle won’t be part of the restructured or new contract. It will be a separate contract that the Army is working diligently on right now. William R. Loomis - Stifel, Nicolaus & Company: Do you plan to participate or bid on that or bid on portions of that or team on portions of that as well?

It is doubtful we would participate in the manned ground vehicle effort.

The next question comes from the line of Jason A. Kupferberg – UBS.

I wanted to start with a question on the margins here. I know you are reiterating the 20-30 bips of year-over-year improvement but half way through the year you are up I think about 50 basis points and that implies kind of flattish year-over-year performance in the back half. I know you have the [VACA] sales teed up to accelerate in the second half probably similarly as you did last year. Are there other factors here that would leave margins just flat year-over-year in the second half and kind of flattish with where they are in the second quarter especially since the product sales are picking up or is there just a little bit of conservatism there given we are going into a new fiscal year and some of those factors?

We are doing well in the first half this year versus the first half of last year for all the reasons we have articulated on both calls. The margins in the second half of the year are fairly consistent year-over-year and there was similar effect of the improvement in margins the second half versus the first half for the security products business. We are expecting a tiny bit of dilution in the margins from the acquisitions. That always happens with the purchased intangibles getting started. We also expect heavier [BMT] in the second half of this fiscal year compared to the second half last fiscal year.

We have always said we built our strong logistics business as that revenue climbs that is not as high a profitability as the products business. So blended we do believe we are on a 20-30 basis point improvement year-over-year.

Just to circle back on the lawsuit that the Department of Justice jumped in on as you highlighted, how should investors think about potential worst case scenarios here understanding that legal situations are very hard to handicap but everyone always wants to get a sense of just what the downside risk is here understanding that from your perspective the case seems to be without merit.

I think it is too early for us to make any kind of predictions. As we progress if we can garner more information we can provide more color on that. At this point our internal review and due diligence believe the case has no merit. Having said that the process has to unfold.

Can you update us on the expected growth in net savings from project alignment and from the Deltech implementation in fiscal 2011 and have either either of these initiatives been disrupted at all by the COO departure you had back in June?

The projects continue on schedule as planned. There is no disruption from the departure of the COO. The aggregate cost structure savings annualized for project alignment is $100 million. We have been consistent with that and we think we are tracking with that. We actually think there is some up side to that. We are doing well on those initiatives. I don’t think we get the full effect of that in fiscal 2011 but we get a good chunk of it. Those activities will continue into fiscal 2012. By and large we will be done at some point in that year.

The next question comes from the line of Laura J. Lederman - William Blair.

Could you talk a little bit about how much of the business conceptually would be at risk from in-sourcing? I’m not sure how to view that and can’t get my head around it from let’s say a 3 year and 5 year perspective. Can you also talk a little bit about the stimulus and what positives you are seeing there as well? My final question, acquisition pricing where is that trending versus let’s say a year ago?

As I stated in my earlier comments I think we are getting our arms around a customer by customer what side of the business we want to be on and what do we currently have. It would be premature for us to talk about that until we see what the DOD’s interpretation of the Reform Act. Be advised we are being prepared. We will be ready to react once that guidance comes out. As I said we could be an acquirer or a divestiture depending on what side of the business we want to be on; advisory or development. Stimulus, we are now starting to see and we have been bidding very actively mainly in the energy arena through DOE and other agencies. Energy efficiency type contracts that we expect I think I said in my opening comments to get roughly $100 million in awards by the end of the year. I think the administration has metrics on every agency as to how much of the stimulus money they are responsible for, where is that in the pipeline. Is it ordered for RFP’s etc? We are just starting to see more of a pent up amount of activity in that area and that is why our expectation is next year we could have significantly more stimulus related awards. Acquisitions, I think you meant by that are people now becoming more realistic about what their businesses are worth? Is that correct?

Yes.

I think it is spotty. Certainly we feel like we got a fair deal with Atlan and RW Beck and we continue to pursue vigorously to leverage our balance sheet when we believe we have deals that are strategic as well as neutral or positive as far as earnings per share. The trend I think is getting a little better but it is a little early.

The next question comes from the line of Joseph B. Nadol III – JPMorgan.

My first question is I want to flesh out in your introductory comments some of the deals you spoke about. The real reason you attributed it to was slow nomination for confirmation for some of the major positions. Is there any reason to believe the outlook for that is going to change enough in the second half where you are going to see some of these contracts come through or do you think other factors are going to help clear the [inaudible] here a little bit?

I think it is going to be a combination. I think clearly the administration is doing their best going through the vetting process. It doesn’t help when Congress is out but the activity should pick up again and frankly the healthcare debate is taking a bit more front and center of Congress’ time as with regard to concerning candidates. I do think there will be some more momentum there because the administration does have to fill those vacant slots. The other thing is there could be potentially some expiring monies. I don’t think there is any agency that doesn’t want to commit to funds that if they don’t would expire by the end of the fiscal year. In all categories we have begun seeing that early in Q3. The log jam seems to be breaking and we are seeing more adjudications of these contracts.

Is it fair to say that the next couple of months, in other words the remainder of this quarter, is sort of the make or break of the log jam breaking up in order to achieve your long-term organic growth expectations for next fiscal year?

I think it is very important so we will evaluate our success on that front in our next conference call and that will be baked into our forward view. Clearly the end of the government fiscal here we are expecting decisions to be made in the third quarter. We could handle it if it leaks into the fourth quarter as long as the budgets are in place and recover from there and still have our hard target attainable in the next fiscal year. A lot will be decided in these next forward six months for sure.

Remember in the last two years we have had book to bill in Q3 in the kind of 1.5 to 1.6 range and we would certainly expect that kind of behavior again.

That is why we have been saying that seasonally Q3 is one of our largest book to bill quarters.

On the OCI front some of the new rules are getting interpreted and some of the customers are starting to put down the rules as to how they are interpreting the new law on conflicts of interest and there are rumblings that some businesses, at least one potentially coming for sale. What are your thoughts on what kind of opportunities there might be as the landscape shifts here for SAIC?

As I think I said in my remarks overall I think it is a positive for our company once it gets sorted out because we are not a big iron provider. We are a platform independent but we do cover the gamut from seeded to solutions provider. Depending on the customer, our strategy and the market size and the guidelines come back you have to be either fish or fowl we decide what side of that fence we want to go on and prosecute.

Where I am going is you have been waiting for the strategic acquisition opportunity for a few years and you have done a lot of smaller ones. You haven’t done the bigger ones. Do you think this might be the opportunity that is the catalyst that finally drives an opportunity into your lap?

It could be one of them. The other is they were just too damned expensive.

Right but if supply increases presumably pricing would take a hit as well?

That is if you are normal.

Mark, you gave FCS numbers and I’m just wondering on MRAP you mentioned a pick up in the MATV. I’m just wondering if you could quantify what you did in the quarter on MRAP all-in and then what you are looking at for the back half of the year.

What I said was that the MAP would help or prevent further erosion of the decrease we are seeing in our original MRAP communications integration contract. I think we have said in previous discussions that our peak revenue under the original program was in the neighborhood of $40 million and going forward under just the MATV program should we win that it is in the order of $20-30 million at its best as far as we can tell now. So roughly a halving of the pace on an apples-to-apples basis, one program versus the other.

That is something you are still waiting on here?

We have not had an official notification of any award on MATV at this time.

Having said that, this whole MRAP effort that started with getting those protected vehicles in the hands of our soldiers has really built a tremendous clout for our company and platform integration and especially quick react capabilities. So we are taking those kinds of tenets and hopefully trying to find ways where we can expand knowing the kind of capabilities that we have built.

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

A quick question to maybe clarify you talked about 6-9% organic growth in the second half. Refresh my memory, that is including acquisitions pro formed for last year or excluding acquisitions?

Good question. What I was trying to articulate was we would have 6-9% of our core business before the acquisitions in the second half. The new acquisition, Beck in particular, would dilute that by the numbers I shared but that all said, on a full year basis we still expect to achieve our target 6-9% range all-in.

If you are 6-9% before the acquisition whether the acquisitions are up or down year-over-year they are not in the prior year results. So what you are telling us is the reported revenue growth is likely to be better than 6-9% in the second half. Is that correct?

I’m not sure I follow. What I would ask you to do is the last page of our release shows the calculation of internal growth. When you see how we reflect newly made acquisitions into our base period you would see how the effect of a decreasing revenue scenario would occur when you acquire a company that came off of a hot year and were expecting to lower going forward how it would reverse the effect of our internal revenue growth rate this year. I wanted to clarify that our core business still is performing strongly in the second half at 6-9% with some dilution from the acquisition but still on pace for the year as we said.

But the total revenue growth would be higher with the [FY].

Your tax rate was lower again in this quarter. I think your guidance last time I remember was something like 38.8%. What do you expect the tax rate to be for the year this year?

We expect it to be 38% flat to 38.5%.

Taking your comments on direct labor, it looks like direct labor was relatively flat sequentially in the second quarter from the first. Normally that is up. Is that reflective of the delay in new starts?

Absolutely.

Are you seeing, I assume by what you are saying, you are starting to see the pick up so what kind of direct labor ratio should we expect in the second half?

We expect improvement but I don’t want to quantify that number. The materials and subs are more volatile over a shorter period of time. We do expect improvement on labor as the new wins come in and as Ken said we have had a nice pace out of the gate here in the quarter which will drive labor growth.

The next question comes from the line of Tim Quillin – Stephens Inc. Tim Quillin – Stephens Inc. : I just have three detailed questions. On the FCS contract I understand you expect it to go on a quarterly basis from $80 million to let’s say $62.5 million. How should we expect the timing of that quarterly progression? In other words when would we see that quarterly drop off?

We expect to see it during the course of the third and fourth quarters. Tim Quillin – Stephens Inc. : Just throughout that period and getting to that…

Some in the third, more in the fourth.

A real run rate probably in the fourth quarter. Tim Quillin – Stephens Inc. : You talked about the comparisons on RW Beck but what is the revenue contribution you expect from that acquisition as well as what is the revenue contribution you expect from Atlan?

Atlan is not significant at all. The Beck acquisition is on the order of $100 million annually on the lower base of hurricane activity which is implicit in this year’s projection. Tim Quillin – Stephens Inc. : Lastly, you may have mentioned this somewhere along the line, I think you mentioned the margins in commercial were about 10%. What was the revenue level on the commercial business?

About $120 million.

There are no further questions at this time. I would like to turn the call back over to management for closing remarks.

Thank you. As there are no more questions I guess that will conclude the call. If any of you do have interest in attending the conference as Ken mentioned just give me a shout. With that, again I would like to thank you for your participation.

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