Good afternoon. My name is Deanna, and I'll be the conference facilitator today. Welcome to the SAIC's First Quarter Fiscal Year 2013 Earnings Conference Call. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Paul Levi, Senior Vice President of Investor Relations. Please proceed.

Thank you, Deana, and good afternoon. I would like to welcome you to our First Quarter Fiscal Year 2013 Earnings Conference Call. Joining me today are John Jumper, our CEO; Stu Shea, our COO; and Mark Sopp, our CFO, along with 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 discussion of these risks. In addition, these 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 CEO.

Thank you, Paul, and good afternoon, everyone. During today's call, I'll start by covering some of our quarterly performance, discuss market conditions, make some comments about my first 90 days in the seat. After that, I'll turn it over to our COO, Stu Shea, who will talk about business development results and project progress in our strategic growth areas, and he'll be followed by Mark Sopp who'll go into the financial details. As reflected in our earnings release today, our performance reflects the dynamics of our marketplace, plus the impact of steps we are taking to prepare for the future. Even with market pressures, we are able to report revenue growth of 3%, of which 2% is internal growth. As we get deeper into these challenging times, our ability to leverage our strategic growth areas, while optimizing the performance and stress segments of our portfolio to generate internal growth, is a positive sign, especially when compared with our peer group. Our team's ability to leverage our wide range of technical capabilities across more and more of our client base is paying off. Our strategic growth areas of intelligence, surveillance reconnaissance, cybersecurity, energy, environment and infrastructure, logistics, readiness and sustainment and health grew internally by 7% in aggregate, with the remainder of our business contracting about 3%. In these last few years, we've become adept at managing market uncertainties. We have a wide-ranging access to many contract -- wide-ranging business and access to many contract vehicles in a large and diverse customer base. We believe we can react to market pressures with greater agility than our competition, especially those with ties to specific platforms. As we face government fiscal year '13 and the looming potential of some form of sequestration, we'll be prepared to take timely and appropriate action to deal…

Thanks, John. One of the questions I get asked most often in my new role is to describe what I'm focused on each day. And my answer has consistently been "Everything that matters." As John Jumper and I have transitioned into our new roles over these past few months, he and I have focused a huge amount of our collective energy on a number of key items related to increasing shareholder value. Although some of that energy has been focused around gaining overhead efficiencies and improving program execution, first and foremost, it has been for us to confirm and then accelerate the implementation of our strategy and to drive SAIC through these budgetary headwinds. I can tell you that we are ever more convinced that our strategic focus on our high-growth markets of health, energy, environment and infrastructure, ISR, cybersecurity and logistics, readiness and sustainment is working. Under difficult market conditions this quarter, we've been able to deliver just short of double-digit growth rates in these strategic areas. Our strategic focus is the right one and gaining momentum. Likewise, our emphasis on pursuing and winning larger, $100 million-and-above programs is also working. We've seen a significant increase in the numbers of these large contract wins over the last couple of years, going from just 29 2 years ago to 40 last fiscal year. We currently have over 50 proposals in excess of $100 million that have been submitted and are awaiting award this year. Our ability to bid and win these programs has been the result of our multiyear efforts to leverage the enterprise and trim overhead. The redeployment of reduced overhead and G&A has allowed us to accommodate a 12% year-over-year increase in IR&D and B&P while generally maintaining our profit margins. Finally, our emphasis on the strategic growth…

Great. Thanks, Stu. Building on what John and Stu discussed, positive internal revenue growth paved the way for delivering overall financial performance that was in line with our expectations for the first quarter. I’d say it's particularly encouraging to see our strategy delivering internal growth at a time when the government market overall has been contracting. As Stu said, we attribute our growth to actions we started taking a couple of years ago in light of the difficulties we saw emerging in the federal services space. Investments we have made in products, high-technology solutions and commercial market access in the energy, engineering and health information technology market areas have expanded our overall portfolio concentration in these more attractive business areas. Having multi-hundred million dollar businesses in these attractive markets allows us to compete at scale, and that's moving the needle on consolidated growth. This differentiates us from those purely focused on federal services where recent peer results suggest growth is difficult to achieve. Revenues grew 3% during the first quarter with internal growth, as John said, at 2%. Our high-growth areas led the way and mostly -- most significantly in our ISR solutions, energy engineering, logistics and commercial health technology consulting services. In terms of specific programs driving growth, the ongoing ramp-up of the Vanguard program with the Department of State, several mission-oriented airborne ISR and cybersecurity programs with the intelligence community and our joint logistics integration and military tires logistics programs were all key revenue growth contributors. Also of note, our commercial health information technology business with Vitalize as the centerpiece is growing organically, as Stu said, over 20%. And the overall energy, environment and infrastructure business is growing in excess of 5%. As expected, we saw revenue contraction in our pure services-oriented defense and fed sales [ph] business…

I'd like to conclude my comments by reminding everyone that SAIC will hold its annual meeting of stockholders at 9:00 a.m. Eastern Time on June 15, 2012, at the SAIC Conference Center, 1710 SAIC Drive, McLean, Virginia. Also, as announced last quarter, SAIC paid a $0.12 per share dividend on April 30, 2012. The Board of Directors will meet on June 15, at which time they will address the next quarterly dividend payment. With that said, we'll turn it back over to Deanna for questions.

[Operator Instructions] The first question will come from the line of George Price, BB&T Capital Markets. George A. Price - BB&T Capital Markets, Research Division: Wanted to ask you just a couple of questions, if I could, on -- just on backlog in bookings. Funded backlog was a little bit better than expected. Bookings also, given the environment, were definitely solid. I was wondering if you could maybe talk about the funding trends you've seen over the past few months. And had -- did you see contract award activity pick up materially in April? Because certainly, competitors generally reported pretty weak bookings in general for the March quarter. And I recognize you pointed out some differentiating factors, but just wondering if maybe we've seen some improvement more recently in the environment.

George, Mark here. Thanks for the question. I would say we have seen a pretty flat level of activity in contracts for our first quarter, which ended April 30. We did not see him a noticeable change in the month of April, at least for us, for all contract activity. But we'd also say, at least compared to last year, the funding environment is more stable. We don't have the continuing resolutions going back and forth this fiscal year. So we're pleased to see that. And we see customers funding the business in a pretty healthy basis and consistent, albeit in shorter and smaller increments than the good, old days. But nonetheless, across our contract base, pretty healthy at this time.

And the next question will come from the line of Tim McHugh, William Blair. Timothy McHugh - William Blair & Company L.L.C., Research Division: Oh, yes. Can you give some numbers about how much of the business would you say now is in those strategic growth areas versus the other ones? And as we think about the margins in general, talk about the margin trends between the kind of more strategic growth areas and the rest of the business.

Well, the mix in the strategic growth areas is 55% to almost 60%. As we finish up this fiscal year, I think we will be closer to that 60% with the higher growth we're seeing in that area. So this is what we would have expected when we started laying out our strategic growth strategy a couple of years ago. And in general, the margins are more attractive in this area for a variety of reasons. There’s some higher technology involved on one hand, but there's also more of our products in the strategic growth areas and also a little bit more fixed price mix as well. So those are all factors that I think are favorable with respect to that part of the business. That said, this is the area where we're investing. IR&D, which you saw go up substantially last year and will continue to be strong this year, and the M&A side as well, that's where you'll see all of our focus. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then -- and in terms of the capital structure, you didn't repurchase any stock this quarter and you said you'll pay off the debt when it comes due. Are you awaiting more clarity on the government budget environment to kind of finalize your plans with that? Or is it just the timing of -- you're just not ready yet to make a conclusion on what you want to do?

I think the salient points on our capital structure, capital deployment is we've initiated a very meaningful dividend, and that's our first priority for capital deployment, with roughly 1/3 of our annual free cash flow, if you will. The remaining 2/3 is up for grabs for M&A and repurchases as opportunities are presented to us. And I'd say we have a bias toward growth and, therefore, M&A. But stars have to line up on the M&A front. You have to have strategic fit, you have to have cultural fit and you have to have economic attractiveness, which, sitting here at $10, $11, the hurdle rate from M&A becomes a little bit more challenging, appropriately, vis-à-vis repurchases. So we evaluate that continuously, and a lot depends on what opportunities are available to us in the M&A pipeline and from those things that kind of dictates our overall capital structure.

Your next question comes from the line of Jason Kupferberg, Jefferies. Jason Kupferberg - Jefferies & Company, Inc., Research Division: I wanted to talk a little bit about bookings as well. Obviously, the environment is what it is. I think the last quarter, you had suggested that the book-to-bill for the full year fiscal '13 could be in the 1.1 to 1.2 range. Obviously we're starting the year off a little bit lower than that. Are you still comfortable with that 1.1 to 1.2 for the year just given the size of the pipeline?

Yes, Jason, this is Stu. We are comfortable with that. That's our plan going forward. I think we saw some delays in some of the awards, but I think given the pipeline that we have that's under review right now and the pace at which we're submitting and expect decisions, I think we're all comfortable with the 1.1. Jason Kupferberg - Jefferies & Company, Inc., Research Division: Okay. Okay, that's certainly good to know. And maybe just talk a little bit about your visibility for the last 4 months of the government fiscal year. As you mentioned before, we obviously have appropriations bills and puts, which is a good thing. I guess there's been some talk about despite that, there could be some hesitation in sales cycles just given the uncertainty related to next fiscal year's budget and funding picture. But how do you guys feel about the last 4 months of the fiscal year?

I think we feel pretty good about -- this is John. I think we feel pretty good about it right now. As we head into the end of the year, we've got not only sequestration and continuing resolution, but we got debt ceiling all coming to a head at about the same time. So there's no doubt there's going to be some dynamics associated with this. But so far so good. And of course, one of the outcomes of a continuing resolution is it keeps us going at current rates, although we are, as Stu said, experiencing the attendant delays in decision making, which I think those delays in decision making I expect to accelerate toward the end of the year as people try to obligate the funds that they do have. Jason Kupferberg - Jefferies & Company, Inc., Research Division: So the delays should lessen?

I would think so. I would think so going towards the end of the year, yes.

Your next question comes from the line of Joe Nadol, JPMorgan. Joseph Nadol - JP Morgan Chase & Co, Research Division: Want to dig into the Health, Energy and Civil Solutions segment. The first 2 of those 3 descriptors of the segment are part of your strategic growth areas, and you had the negative organic growth. So I -- could you just maybe speak to how much of that business is part of the strategic growth, what percentage of the -- of that segment specifically? And I guess is federal health really the headwind there? And how big of a deal is that?

Joe, Mark Sopp here. About 1/3 of that segment is not in the strategic or higher-growth areas. And this is our federal civilian business primarily. And we saw some contraction there in the quarter, as I mentioned in my remarks. But the Energy business, the Health business and the security products is clearly the part that we're very excited about in the strategic growth area, and we expect good results on the growth side and, over the long term, the profitability side all of those areas, which has historically been very strong for us. Joseph Nadol - JP Morgan Chase & Co, Research Division: So Mark, logic or math tells me that, that's probably a negative double-digit growth for the part that's not in the strategic growth areas. So is that timing? Is it something that's going to persist there or get better? Or what kind of color can you give on that?

I would say that it was -- it contracted in the minus 5% to minus 10% in the first quarter, and that was largely concentrated by, as I said, in the fed health and in the civil -- fed civ areas. I would say the fed civ, we probably expect to see more of the same foreseeably, whereas on the federal health side, we're more optimistic. We lost a little business, and we've had some delays, but we have a strong pipeline and a strong team that has a lot of activity in the business development phase that we hope will bring, if not lower contraction, perhaps even growth for the longer term for that area of the business. Joseph Nadol - JP Morgan Chase & Co, Research Division: Okay. And then just you had the strategic review going on, and you're going to report to the board, I guess, in the next month or so on that and I -- we'll to wait for all the details. But I was just wondering if you could tell us if there's any significant portfolio changes that are on the table.

Well, we've been through a very thorough review. And of course, we -- we haven’t talked to the board about any of this yet. So there's nothing we can talk to. But we've looked end to end at the whole business, and we'll be rolling it out to the board and we'll be talking to you as soon as we can after the board has a chance to deliberate what we present to them.

The next question comes from the comes from the line of Cai Von Rumohr, Cowen and Company.

So Stu, you mentioned you have book-to-bill target of 1.1. I assume you mean orders to revenues. What's your target for fundings to revenues?

Funded backlog, I guess.

Yes, we're -- can you try that question again, please?

Yes, I mean, it's just...

Yes, no. I mean...

[Indiscernible] all the time.

There are 2 issues you talked about. I think in response to George's question, you indicated that while you did a 0.77 book-to-bill or orders to revenues in the first quarter, your target for the full year was still about 1.1. Well, what's your target, because obviously, fundings -- funded orders -- funded backlog is what they -- is a bigger driver of where the revenue for the federal...

He's asking for funded federal backlog.

Are you comfortable that fundings also can be about 1.1x the revenues?

I would say it needs to be at least in the single-digit growth area. 10% might be strong in this environment, and it's very hard to predict what's going to happen in our fourth quarter and the governments first fiscal next year when a lot of things are happening. So the funding could be interesting in the December, January, February time frame. But we really need to keep pace over a given period of time for -- in the positive territory on funded backlog growth. And it's -- it'll be much to expect more than 5%, but we're certainly going to target to do so.

And there's a strong complement of those programs that are non-ID/IQ, that we expect the standard contracts to be fully funded.

Great. And then just a quick follow-up to Joe's question. Your strategic review, I mean, can you tell us a little bit about what's the date of a board meeting? What's the format in which you'll tell us what review is going to decide? And I guess, Mark, you kind of intimated that you're going to pay off the debt and there are no plans to kind of issue more debt, but you're still focused on growth. So does that mean you're unlikely to ever issue debt to toss out some of the maturing debt or you just haven't decided?

On the first part, the board meeting next month is in the middle of the month. And we'll be laying out an execution plan to the board, and we expect this to be the subject of lively discussions. So it's hard to say. This is a very independent board that we have. It's hard to say how long the deliberation -- their deliberation will take. But we are anxious to get moving. So we'll be to you as soon as we have something we can talk about to you. So I can't give you a date because the board has got to go through their process as we have gone through ours.

Cai, this is Mark on the capital structure question. Let me apologize as my earlier remarks we're not clear. But given what we are discussing with the strategic review, I don't believe it's appropriate to issue public debt until we complete that process. And that is why my current plan is to pay that down on July 1. But that is not to say that we will not have a leverage level that is either consistent with our past or even more -- a bit -- more aggressive than our past in light of what that strategy beholds. And so as I try to say, once we have laid out our strategy, we will remark then on our targeted capital structure to support what that strategy is. And I would expect that will involve putting some of that leverage back on the balance sheet that we're paying off on July 1 to get to leverage levels that you would accept for a company that has a predictable cash flow that we have to undertake.

Your next question comes from the line of Edward Caso, Wells Fargo.

It's actually Rick Eskelsen on for Ed. Just a question on some of the ramp-ups you talked about, that -- the 2 large deals. When is -- are Vanguard and the tires contracts expected to be fully ramped up?

The Vanguard program will ramp up, I think, in each of our 4 quarters this fiscal year and then plateau off at that point in time, whereas tires, I think, will probably ramp in or finish ramping in Q3 and then level off at that point.

Okay. And then just in terms of the margins in the Health, Energy and Civil and the intel segments, Mark, you talked about them being below sort of the normalized level. So I was just wondering if you could give sort of what your expectations are for those margins going forward if you think it's going to be a sort of a snapback. And what -- maybe a little bit of color on what drove that down in the quarter.

Sure. For the Health, Energy and Civil Solutions segment, we expect margins in the 8% to 9% range for a couple of quarter period of time or a full year fiscal basis. The reason why it was down in the first quarter was, I said we are undertaking some investment in our health and energy area, and we did have some write-downs on a few contracts in the first quarter that we don't normally see and I don't expect to recur. So those are the primary reasons there. On the intelligence group, I'd also say the margins would be in the 8% to 9% range, and we were south of that in the first quarter. Very heavy investments in bid and proposal costs and, to a lesser degree, IR&D for the first quarter. And also, they had, as I said, strong product sales in the first quarter of last year. While there were some this quarter, they weren't as high this quarter and in the first quarter. And so that depressed them a little bit on a quarter-to-quarter basis. But we expect that group to be solidly in the 8% to 9% range for a year or several quarters when you add them up.

Your next question comes from the line of Michael Lewis, Lazard.

So if the strategic focus areas are 60% of revenue, Mark, assuming the midpoint of the guidance of about -- of around $11 billion, that's $6.6 billion in positive growth, you’re almost double-digit growth. Now if you look at the non-core areas, we have about $4 billion that's falling under your -- or I guess minus 3% right now. So is that -- is my math right saying this is about a 40% drag to organic growth off these non-core areas?

I would say that the strategic growth areas are more toward the middle range of single digits. So they're collectively doing 5%, 6-ish for the year. And otherwise, I think your math is correct.

Okay. So what would be the rationale to -- you're not investing in these non-core, non-strategic areas. It sounds like you're kind of deemphasizing them. What would be the rationale for the business to be held on to over the long term?

Well, first of all -- this is Stu. We're -- it's not that we're not investing. I think it's an appropriate allocation between the high-growth markets and the slower-growth markets. And I think there's a lot of benefit to those businesses in the context of other -- or as we look at the strategy and the strategic review that John mentioned before, we really have to think about the linkages between those various programs, solutions, services and the nature of the contracting environments and the customer intimacy that we have. And all that kind of comes to a head in the context of the strategy because some things are slow growth. They may be high cash generation, and they may be strong, stable businesses, overhead absorption. There's a range of things that we look at when we think about the benefit to a business.

Okay, that's fair. And then just one follow-up. Mark, if you look at the full year for total consolidated margin, I guess that based on the numbers that you gave for health and energy and IR&C, you're looking at around 8%?

I would say, Mike, that this year, I would expect a little south of that. And the reason for that is what I would call primarily related to some of the investments we're making to improve the business to include the corporate move and some other things we're working on to include the strategic review, and things like that. So I would say that when you look at the pure contribution of the groups, then it would be consistent with your number. And I would think that would be a fair number that we'll use going forward. But this year, in light of the investments we're making, I expect that we'll be south of that. But important to understand that they are nonrecurring in nature in terms of those investments.

Your next question comes from the line of Robert Spingarn, Credit Suisse. Robert Spingarn - Crédit Suisse AG, Research Division: I was hoping I could approach this booking question in the more immediate time frame and, just based on Stu's confidence in the book-to-bill for the year, Mark, your comments that funding trends are actually a little bit more orderly and stable than last year. I'd like to ask you how you feel about Q2. Can you get the first half to 1.1, which will be in line with your full year target and last year's first half, in the second quarter, just based on what you've seen so far in May perhaps?

No. The answer is no. Robert Spingarn - Crédit Suisse AG, Research Division: Okay. So this is going to trend up throughout the year, we're just not there yet?

That would be our execution. We're counting on a pretty big Q3. We certainly have the pipeline to do that. And to John Jumper's remarks, hopefully, the government will be in the mode of spending their obligated funds before the fiscal year's done. Robert Spingarn - Crédit Suisse AG, Research Division: So you're looking for a traditional type of budget flush as we go forward here? Actually yes, that would be the end of the year, the first.

Right. Robert Spingarn - Crédit Suisse AG, Research Division: Okay. And then the -- now, just as a follow-on, how would you divvy up the $2.1 billion in orders in Q1, by segment?

Stand by, Robert.

I'm not quite ready for that one. Why don't we take a pass on that one, Robert, and we'll get...

Yes, I'll get back to you again. Robert Spingarn - Crédit Suisse AG, Research Division: Yes.

Robert, I'll come back to you in the morning with that.

[Operator Instructions] Your next question comes from the line of Bill Loomis, Stifel, Nicolaus. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: Just looking at -- staying with the Health, Energy and Civil Solutions group with the -- on the cargo side. So can you talk a little bit more about the cargo inspection systems and the Reveal or the baggage inspection systems? How do -- how were they in the quarter? Was that double-digit revenue growth for that group in the quarter? And where do you see that playing out? Kind of if you can talk about the 2 differently or separately, the cargo versus the baggage?

Let me correct first, we did not have double-digit growth in those areas in the first quarter. So that being said, the businesses are still performing well for us. VACIS is more mature, I would say, and is continuing to perform very well, particularly with respect to profitability, and is on track for its plan this fiscal year. And as has often happened, there's more sales in the back half of the year than the front half. So that's not unusual. As for Reveal, we're expecting good things this year. We're expecting growth that's in excess of 20%. And we're expecting to perform well on profitability side there as well. And that part is also back-end loaded but nonetheless quite secure and visible, and we attribute that to our CT-80 modernized fleet that's hitting the market through the Transportation Security Agency and, hopefully, elsewhere in the future. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So on the Reveal, on those TSA contracts, is that funded and actually going through right now? Or is that something over the next couple of quarters?

Well, yes, we're actually good for the rest of this fiscal year on Reveal through TSA, absolutely. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: And then just on the civil side, you had mentioned a couple of write-downs, contract write-downs, and the growth was slower in that segment. What gives you confidence that we're not going to kind of see the same issues crop up on the, say, the defense IT side or continuing in the segments? What's changed to not make this occur again next quarter?

The contract write-downs we had in this segment were focused in the -- in some of our energy projects. And we're at the early stages of some of those projects where we had a few technical issues, some of which were out of our control. I can only say that we have a strong team that is very focused on those issues. And we're confident that they are remediated and will not be recurring in nature. And that's a very specialized area that really has nothing to do with the defense and the IT part of our operations. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: So it’s in the DesignBuild area?

Yes, that's a fair statement. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And those are all fixed-price programs, right?

They are.

There are no more questions at this time.

Thank you, Deanna. On behalf of the SAIC team, we want to thank everyone on the call today for their participation and their interest in the company. We'll speak to you again next quarter. Thank you.

Ladies and gentlemen, this concludes today's presentation. Thank you once again for participating. You may now disconnect, and have a great day.