SAIC Announces Fourth Quarter and Full Fiscal Year 2017 Results

MCLEAN, Va.–(BUSINESS WIRE)–Science Applications International Corporation (NYSE: SAIC), a leading technology integrator providing full life cycle services and solutions in the technical, engineering, intelligence, and enterprise information technology markets, today announced results for the fourth quarter and full fiscal year ended February 3, 2017.

“SAIC’s fourth quarter and full fiscal year 2017 results demonstrate continued execution of the business strategy and although revenue growth was a challenge, we are positioned well against an improving market backdrop,” said SAIC CEO Tony Moraco. “Program performance, margin improvement, strong cash flow generation and disciplined capital deployment continue to be the hallmarks of the SAIC shareholder value proposition.”

 

Fourth Quarter and Full Fiscal Year 2017: Summary Operating Results

   
Three Months Ended Year Ended
   

February 3,
2017

 

Percent
change

 

January 29,
2016

 

February 3,
2017

 

Percent
change

 

January 29,
2016

    (in millions, except per share amounts)  
Revenues $ 1,026   (4 %)   $ 1,071 $ 4,450   3 %   $ 4,315
Operating income 61 13 % 54 271 19 % 227
Operating income as a percentage of revenues 5.9 % 90 bps 5.0 % 6.1 % 80 bps 5.3 %
Adjusted operating income(1) 61 (5 %) 64 281 11 % 253
Adjusted operating income as a percentage of revenues     5.9 %   -10 bps     6.0 %     6.3 %   40 bps     5.9 %
Net income     36     29 %     28       148     26 %     117  
EBITDA(1) 73 0 % 73 322 13 % 286
EBITDA as a percentage of revenues 7.1 % 30 bps 6.8 % 7.2 % 60 bps 6.6 %
Adjusted EBITDA(1) 73 (9 %) 80 330 7 % 309
Adjusted EBITDA as a percentage of revenues     7.1 %   -40 bps     7.5 %     7.4 %   20 bps     7.2 %
Diluted earnings per share $ 0.79 32 % $ 0.60 $ 3.22 30 % $ 2.47
Adjusted diluted earnings per share(1)   $ 0.79     7 %   $ 0.74     $ 3.35     18 %   $ 2.85  
Cash flows provided by operating activities $ 62 (43 %) $ 108 $ 273 21 % $ 226
Free cash flow(1)   $ 58     (41 %)   $ 99     $ 258     25 %   $ 206  
 

(1)

 

Non-GAAP measure, see Schedule 5 for information about this measure.

 

Revenues for the quarter decreased $45 million, or 4%, compared to the prior year primarily due to lower subcontractor activity within our AMCOM contract portfolio ($12 million), the re-compete loss of an IT integration program for the Department of Homeland Security ($8 million), customer driven delays on a Marine Corp IT services program ($12 million), various other decreases across our contract portfolio and one less productive day in the quarter ($17 million). These decreases were partially offset by revenues on newly awarded programs including the Amphibious Combat Vehicle (ACV) and GSA Enterprise Operations programs ($47 million).

Revenues for the fiscal year increased $135 million, or 3% compared to the prior year, primarily due to revenues earned on contracts obtained through the acquisition of Scitor (which occurred in the second quarter of the prior year period), revenues on newly awarded programs including the ACV and GSA Enterprise Operations programs ($138 million) and revenues due to one additional week in the current year period ($88 million). These increases were partially offset by lower activity on our supply chain and logistics services programs as the result of the loss of two contracts in the prior year ($75 million), the expected decline on the Assault Amphibious Vehicle program as we near completion of the prototyping phase ($25 million), and various other decreases across our contract portfolio due to programs that have ended or have experienced lower activity. Revenues from work performed jointly with our former parent company also decreased, as expected, as we complete pre-separation joint work ($22 million).

Operating income for the quarter increased $7 million to 5.9% of revenues, up from 5.0% for the prior year quarter. This increase was primarily due to lower acquisition and integration expenses ($10 million), lower intangible asset amortization ($5 million) and cost savings initiatives ($6 million). These increases were partially offset by higher bid and proposal (B&P) activity to address a strong pipeline of opportunities ($6 million), lease exit costs ($5 million) and lower revenue volume ($4 million).

Operating income for the fiscal year increased $44 million to 6.1% of revenues, up from $227 million, or 5.3% of revenues, in the prior fiscal year. The increase in operating income was primarily due to a decrease in acquisition and integration costs ($16 million), higher net favorable changes in estimates on contracts accounted for using the percentage-of-completion method ($9 million), cost savings initiatives ($10 million), lower intangible asset amortization ($8 million) and increased revenue volume ($12 million). These increases were partially offset by higher B&P activity ($9 million) and lease exit costs ($5 million).

Net income for the quarter increased $8 million from the comparable prior year period primarily due to increased operating income ($5 million, net of tax), lower effective tax rate ($1 million), higher other income ($1 million, net of tax), and lower interest expense primarily due to lower principal outstanding ($1 million, net of tax).

Net income for the fiscal year increased $31 million from the prior fiscal year primarily due to increased operating income ($28 million, net of tax) and a lower effective tax rate ($7 million), partially offset by increased interest expense primarily due to one additional quarter of interest in the current year on additional borrowings.

EBITDA(1) for the quarter increased to 7.1% of revenues, compared to EBITDA(1) of 6.8% for the comparable prior year quarter. The increase was primarily due to lower acquisition and integration expenses and cost savings initiatives, partially offset by higher B&P activity and lease exit costs.

EBITDA(1) for the fiscal year increased to 7.2% of revenues, compared to EBITDA(1) of 6.6% in the prior fiscal year. The increase was primarily due to an increase in net favorable changes in estimates on contracts accounted for under the percentage-of-completion method, cost savings initiatives, and lower costs related to the acquisition and integration of Scitor.

Diluted earnings per share was $0.79 for the quarter. The weighted-average diluted shares outstanding during the quarter was 45.3 million shares. Diluted earnings per share was $3.22 for the year. The weighted-average diluted shares outstanding during the year was 45.9 million shares.

Cash Generation and Capital Deployment

Total cash flows provided by operating activities for the fourth quarter were $62 million, which represented a decrease from the comparable prior year quarter. This decrease was primarily due to one more payroll payment in the current quarter and a net increase in working capital investments in Marine Corps platform integration and IT services programs ($7 million). These decreases were partially offset by cost savings initiatives in the current quarter ($6 million) and lower interest payments ($4 million). —

Total cash flows provided by operating activities for the year were $273 million, an increase from the prior year, primarily due to a net reduction in working capital investments in Marine Corps platform integration and IT services programs ($34 million), strong customer receipts, and lower payments for acquisition and integration costs ($13 million) and income taxes ($7 million). Cash flows also were higher due to one additional quarter of operating activities of Scitor. These increases were partially offset by higher interest payments due to one additional quarter of interest incurred on additional borrowings ($13 million) and one extra payroll payment in the current year.

During the quarter SAIC deployed $51 million of capital, consisting of $13 million in cash dividends and $38 million in plan share repurchases (457 thousand shares) under SAIC’s previously announced share repurchase program. For the year, cash dividends were $54 million and share repurchases totaled $149 million (approximately 2.4 million shares), with total share repurchases since the inception of the program in 2013 totaling $349 million (approximately 7.1 million shares).

Quarterly Dividend Declared

Subsequent to fiscal year-end, the Company’s Board of Directors declared a cash dividend of $0.31 per share of the Company’s common stock payable on April 28, 2017 to stockholders of record on April 14, 2017. SAIC intends to continue paying dividends on a quarterly basis, although the declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements and other factors.

New Business Awards

Net bookings for the quarter were approximately $0.8 billion, which reflects a book-to-bill ratio of approximately 0.8. Net bookings for the year were approximately $5.3 billion, which reflects a book-to-bill ratio of approximately 1.2, our strongest annual book to bill to date, achieved as a result of our go-to-market strategy against an expanding pipeline of contract opportunities. SAIC’s estimated backlog of signed business orders at the end of fiscal 2017 was approximately $8.0 billion of which $1.8 billion was funded.

SAIC was awarded the following notable contracts during the quarter:

U.S. Army – Human Resources Command (HRC): SAIC was awarded a bridge contract to continue to provide the U.S. Army HRC with full life-cycle information technology support, including maintenance, enhancement and development support for systems, programs, applications and databases that are vital to managing the Army’s personnel in peacetime and at war. The bridge contract has a one-year period of performance and a total contract value of $73 million.

U.S. Navy – Space and Naval Warfare Systems Center (SSC) Pacific: SAIC was awarded an indefinite delivery, indefinite quantity (IDIQ) contract by the SSC Pacific to continue to provide network service solutions and engineering support to U.S. Navy and joint Department of Defense shore units worldwide. The multiple-award contract has a three-year base period of performance with two one-year option ordering periods and a total potential value of $84 Million. SAIC is one of four awardees.

Defense Logistics Agency (DLA): SAIC was awarded a new IDIQ contract by the DLA to provide a variety of information technology support services. The multiple-award contract has a five-year base period of performance and one three-year option for a potential contract award ceiling of $6 billion. SAIC is one of 142 awardees.

SAIC was awarded the following notable contracts subsequent to the end of the quarter:

U.S. Army Contracting Command-Redstone: SAIC was awarded a new position on an IDIQ contract in support of the Army Space and Missile Defense Command/Army Forces Strategic Command’s Design, Development, Demonstration and Integration, or D3I, Domain 1 – space, high altitude and missile defense program. The multiple-award contract has a five-year base period of performance and two consecutive two-year options for a total value of more than $3 billion for all awardees. SAIC is one of eight awardees.

Webcast Information

SAIC management will discuss operations and financial results in an earnings conference call beginning at 8 a.m. Eastern time on March 30, 2017. The conference call will be webcast simultaneously to the public through a link on the Investor Relations section of the SAIC website (http://investors.saic.com). We will be providing webcast access only – “dial-in” access is no longer available. Additionally, a supplemental presentation will be available to the public through links to the Investor Relations section of the SAIC website. After the call concludes, an on-demand audio replay of the webcast can be accessed on the Investor Relations website.

(1)

 

Non-GAAP measure, see Schedule 5 for information about this measure.

 

About SAIC

SAIC is a premier technology integrator providing full life cycle services and solutions in the technical, engineering, intelligence, and enterprise information technology markets. SAIC is Redefining Ingenuity through its deep customer and domain knowledge to enable the delivery of systems engineering and integration offerings for large, complex projects. SAIC’s approximately 15,500 employees are driven by integrity and mission focus to serve customers in the U.S. federal government. Headquartered in McLean, Virginia, SAIC has annual revenues of approximately $4.5 billion. For more information, visit saic.com. For ongoing news, please visit our newsroom.

Forward-Looking Statements

Certain statements in this release contain or are based on “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “guidance,” and similar words or phrases. Forward-looking statements in this release may include, among others, estimates of future revenues, operating income, earnings, earnings per share, charges, total contract value, backlog, outstanding shares and cash flows, as well as statements about future dividends, share repurchases and other capital deployment plans. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Actual performance and results may differ materially from the guidance and other forward-looking statements made in this release depending on a variety of factors, including: developments in the U.S. government defense budget, including budget reductions, implementation of spending cuts (sequestration) or changes in budgetary priorities; delays in the U.S. government budget process or approval to raise the U.S. debt ceiling; delays in the U.S. government contract procurement process or the award of contracts; delays or loss of contracts as a result of competitor protests; changes in U.S. government procurement rules, regulations and practices; our compliance with various U.S. government and other government procurement rules and regulations; governmental reviews, audits and investigations of our company; our ability to effectively compete and win contracts with the U.S. government and other customers; our ability to retain key employees and customers of recently acquired Scitor Holdings, Inc. and its subsidiaries (collectively, Scitor); our ability to successfully integrate Scitor, including implementing IT and other control systems relating to Scitor’s operations; our ability to generate sufficient earnings to meet the required leverage ratio under our credit facilities, which if unsuccessful would give lenders the right to, among other things, foreclose on all of our assets; our ability to attract, train and retain skilled employees, including our management team, and to obtain security clearances for our employees; our ability to accurately estimate costs associated with our firm-fixed price and other contracts; cybersecurity, data security or other security threats, systems failures or other disruptions of our business; resolution of legal and other disputes with our customers and others or legal or regulatory compliance issues; our ability to effectively deploy capital and make investments in our business; our ability to maintain relationships with prime contractors, subcontractors and joint venture partners; our ability to manage performance and other risks related to customer contracts, including complex engineering projects; the adequacy of our insurance programs designed to protect us from significant product or other liability claims; our ability to declare future dividends based on our earnings, financial condition, capital requirements and other factors, including compliance with applicable laws and contractual agreements; and our ability to execute our business plan and long-term management initiatives effectively and to overcome these and other known and unknown risks that we face. These are only some of the factors that may affect the forward-looking statements contained in this release. For further information concerning risks and uncertainties associated with our business, please refer to the filings we make from time to time with the U.S. Securities and Exchange Commission, including the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Legal Proceedings” sections of our Annual Report on Form 10-K, which may be viewed or obtained through the Investor Relations section of our website at www.saic.com.

All information in this release is as of March 30, 2017. SAIC expressly disclaims any duty to update any forward-looking statement provided in this release to reflect subsequent events, actual results or changes in SAIC’s expectations. SAIC also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.

 
Schedule 1:
 
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONDENSED AND CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
Three Months Ended Year Ended
   

February 3,
2017

 

January 29,
2016

 

February 3,
2017

 

January 29,
2016

 

(in millions, except per share amounts)

Revenues $ 1,026   $ 1,071 $ 4,450   $ 4,315
Cost of revenues 919 965 4,003 3,904
Selling, general and administrative expenses 46 42 166 158
Acquisition and integration costs         10     10     26
Operating income     61     54     271     227
Interest expense 11 13 52 44
Other income (expense), net     1         1    
Income before income taxes 51 41 220 183
Provision for income taxes     (15 )     (13 )     (72 )     (66 )
Net income   $ 36   $ 28   $ 148   $ 117
Weighted-average number of shares outstanding:
Basic     43.9     45.4     44.5     45.8
Diluted     45.3     47.0     45.9     47.4
Earnings per share:
Basic   $ 0.82   $ 0.61   $ 3.33   $ 2.55
Diluted   $ 0.79   $ 0.60   $ 3.22   $ 2.47
Cash dividends declared and paid per share   $ 0.31   $ 0.31   $ 1.24   $ 1.21
 
 
Schedule 2:
 
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONDENSED AND CONSOLIDATED BALANCE SHEETS
(Unaudited)
     
   

February 3,
2017

   

January 29,
2016

(in millions)
ASSETS
Current assets:
Cash and cash equivalents $ 210 $ 195
Receivables, net 539 635
Inventory, prepaid expenses and other current assets     152       122
Total current assets 901 952
Goodwill 863 860
Intangible assets, net 200 224
Property, plant and equipment, net 60 71
Other assets     18       15
Total assets   $ 2,042     $ 2,122
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 432 $ 447
Accrued payroll and employee benefits 158 184
Long-term debt, current portion     25       57
Total current liabilities 615 688
Long-term debt, net of current portion 1,022 1,013
Other long-term liabilities 51 41
Total equity     354       380
Total liabilities and equity   $ 2,042     $ 2,122
 
 
Schedule 3:
 
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   
Three Months Ended Year Ended
   

February 3,
2017

 

January 29,
2016

 

February 3,
2017

 

January 29,
2016

(in millions)
Cash flows from operating activities:    
Net income $ 36 $ 28 $ 148 $ 117
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 12 20 53 62
Deferred income taxes 1 3 1 3
Stock-based compensation expense 6 8 31 33
Excess tax benefits from stock-based compensation (3 ) (1 ) (18 ) (10 )
Loss on disposal of property, plant, and equipment 1 1 1 1
Loss on extinguishment of debt 2
Increase (decrease) resulting from changes in operating assets and liabilities net of the effect of the acquisition:
Receivables 77 39 96 (5 )
Inventory, prepaid expenses and other current assets (23 ) (6 ) (36 ) (11 )
Other assets 1 (1 )
Accounts payable and accrued liabilities 12 8 16 44
Accrued payroll and employee benefits (59 ) 11 (26 ) (4 )
Other long-term liabilities     1       (2 )     5       (4 )
Total cash flows provided by operating activities 62 108 273 226
Cash flows from investing activities:
Change in restricted cash 2 2 6 (14 )
Expenditures for property, plant, and equipment (4 ) (9 ) (15 ) (20 )
Asset acquisition (2 )
Cash paid for acquisition, net of cash acquired                       (764 )
Total cash flows used in investing activities (2 ) (7 ) (11 ) (798 )
Cash flows from financing activities:
Dividend payments to stockholders (13 ) (14 ) (54 ) (55 )
Principal payments on borrowings (43 ) (236 ) (72 )
Issuances of stock 2 1 5 4
Stock repurchased and retired or withheld for taxes on equity awards (43 ) (33 ) (180 ) (69 )
Excess tax benefits from stock-based compensation 3 1 18 10
Disbursements for obligations assumed from Scitor acquisition (2 ) (2 ) (7 ) (5 )
Proceeds from borrowings 209 670
Deferred financing costs                 (2 )     (17 )
Total cash flows (used in) provided by financing activities     (53 )     (90 )     (247 )     466  
Total increase (decrease) in cash and cash equivalents 7 11 15 (106 )
Cash and cash equivalents at beginning of period     203       184       195       301  
Cash and cash equivalents at end of period   $ 210     $ 195     $ 210     $ 195  
 
 
Schedule 4:
 
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
BACKLOG
(Unaudited)
 

The estimated value of our total backlog as of the dates presented was:

     
   

February 3,
2017

 

November 4,
2016

 

January 29,
2016

(in millions)
Funded backlog $ 1,811 $ 2,044 $ 1,879
Negotiated unfunded backlog     6,209       6,189       5,319
Total backlog   $ 8,020     $ 8,233     $ 7,198
 

Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts and task orders as work is performed and excludes contract awards which have been protested by competitors until the protest is resolved in our favor. SAIC segregates backlog into two categories, funded backlog and negotiated unfunded backlog. Funded backlog for contracts with government agencies primarily represents contracts for which funding is appropriated less revenues previously recognized on these contracts, and does not include the unfunded portion of contracts where funding is incrementally appropriated or authorized by the U.S. government and other customers even though the contract may call for performance over a number of years. Funded backlog for contracts with non-government agencies represents the estimated value of contracts which may cover multiple future years under which SAIC is obligated to perform, less revenues previously recognized on these contracts. Negotiated unfunded backlog represents the estimated future revenues to be earned from negotiated contracts for which funding has not been appropriated or authorized, and unexercised priced contract options. Negotiated unfunded backlog does not include any estimate of future potential task orders expected to be awarded under indefinite delivery, indefinite quantity (IDIQ), U.S. General Services Administration (GSA) schedules or other master agreement contract vehicles.

 

Schedule 5:

 

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NON-GAAP FINANCIAL MEASURES

(Unaudited)

 
This schedule describes the non-GAAP financial measures included in this earnings release. While we believe that these non-GAAP financial measures may be useful in evaluating our financial information, they should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP. Reconciliations, definitions, and how we believe these measures are useful to management and investors are provided below. Other companies may define similar measures differently.
       

Internal revenue growth

 

Three
Months
Ended

Year
Ended

       

February 3,
2017

(in millions)
Prior year period’s revenues, as reported $ 1,071 $ 4,315
Prior year period’s revenues performed by former Parent (3 ) (31 )
Revenues of acquired business for the pre-acquisition prior year period               154  
Prior year period’s revenues, as adjusted 1,068 4,438
Current year revenues, as reported 1,026 4,450
Revenues performed by former Parent (1 ) (9 )
Estimated impact of 53rd week               (88 )
Current year period’s revenues, as adjusted         1,025       4,353  
Internal revenue growth (contraction)(1)       $ (43 )   $ (85 )
Internal revenue growth (contraction) percentage (4.0 %) (1.9 %)
 

We utilize internal revenue growth (or internal revenue contraction if negative) to evaluate revenue growth after the completion of acquisitions. Internal revenue growth is calculated by comparing our reported revenues for the current year to the reported revenues for the prior year comparable period adjusted to include any pre-acquisition historical revenues of acquired businesses. We also adjust current and prior year revenue to exclude the impact of revenue performed by our former parent company, Leidos Holdings, Inc. (“former Parent”) since revenues on pre-separation joint work are recorded equal to cost and are expected to decline over time. For fiscal 2017, a 53-week fiscal year, we have also adjusted revenue to exclude the estimated impact of the additional week in order to facilitate comparison to the prior year period. We estimate the revenue impact of the additional week by dividing the current year’s revenues for the first quarter by the number of days in the first quarter and multiplying that amount by the number of additional days in the first quarter. We believe that adjusting current year revenues to reflect the impact of the additional week improves comparability since differences in the number of days generally have a direct impact on the amount of revenues earned during the respective periods. We believe that internal revenue growth provides management and investors with useful information in assessing trends on how successful the Company has been in growing revenues as we develop our base business and access new markets and capabilities provided by acquisitions.

(1)

 

Non-GAAP measure, see above for definition.

 
 
Schedule 5 (continued):
 
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NON-GAAP FINANCIAL MEASURES (continued)
(Unaudited)
 
 

Adjusted operating income, EBITDA, Adjusted EBITDA, and Adjusted diluted earnings per share

 

   
Three Months Ended Year Ended
   

February 3,
2017

 

January 29,
2016

 

February 3,
2017

 

January 29,
2016

(in millions, except per share amounts)
                                 
Net income $ 36   $ 28 $ 148   $ 117
Interest expense 11 13 52 44
Provision for income taxes 15 13 72 66
Depreciation and amortization     11       19       50       59  
EBITDA(1) 73 73 322 286
EBITDA as a percentage of revenues 7.1 % 6.8 % 7.2 % 6.6 %
Acquisition and integration costs 10 10 26
Depreciation included in acquisition and integration costs           (3 )     (2 )     (3 )
Adjusted EBITDA(1) $ 73 $ 80 $ 330 $ 309
Adjusted EBITDA as a percentage of revenues     7.1 %     7.5 %     7.4 %     7.2 %
                                 
Operating income $ 61 $ 54 $ 271 $ 227
Operating income as a percentage of revenues 5.9 % 5.0 % 6.1 % 5.3 %
Acquisition and integration costs           10       10       26  
Adjusted operating income(1) $ 61 $ 64 $ 281 $ 253
Adjusted operating income as a percentage of revenues     5.9 %     6.0 %     6.3 %     5.9 %
       
Diluted earnings per share $ 0.79 $ 0.60 $ 3.22 $ 2.47
Acquisition and integration costs, divided by diluted weighted-average number of shares outstanding $ $ 0.21 $ 0.22 $ 0.55
Acquisition and integration costs tax benefit, divided by diluted weighted-average number of shares outstanding   $     $ (0.07 )     (0.09 )     (0.17 )
Adjusted diluted earnings per share(1)   $ 0.79     $ 0.74     $ 3.35     $ 2.85  
 

EBITDA is a performance measure that is calculated by taking net income and excluding interest expense, provision for income taxes, and depreciation and amortization. Adjusted EBITDA, adjusted operating income, and adjusted diluted earnings per share are performance measures that exclude acquisition and integration costs that we do not consider to be indicative of our ongoing operating performance as they relate to the Company’s significant acquisition of Scitor. Adjusted EBITDA and adjusted operating income are calculated by excluding acquisition and integration costs from EBITDA and operating income, respectfully. Adjusted diluted earnings per share is calculated by excluding the impact of acquisition and integration costs from diluted earnings per share. In order to calculate the impact on diluted earnings per share, we use the effective income tax rates for each period excluding the negative effect of certain non-deductible acquisition and integration costs included in net income. We believe that these performance measures provide management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding the long-term financial performance of the Company.

(1)

 

Non-GAAP measure, see above for definition.

 
 
Schedule 5 (continued):
 
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NON-GAAP FINANCIAL MEASURES (continued)
(Unaudited)
 
 

Free Cash Flow

   
Three Months Ended Year Ended
   

February 3,
2017

 

January 29,
2016

 

February 3,
2017

 

January 29,
2016

    (in millions)
Cash flows provided by operating activities $ 62   $ 108 $ 273   $ 226
Expenditures for property, plant, and equipment     (4 )     (9 )     (15 )     (20 )
Free cash flow(1)   $ 58     $ 99     $ 258     $ 206  
 

Free cash flow is calculated by taking cash flows provided by operating activities less expenditures for property, plant, and equipment. We believe that free cash flow provides management and investors with useful information in assessing trends in our cash flows and in comparing them to other peer companies, many of whom present a similar non-GAAP liquidity measure. This measure should not be considered as a measure of residual cash flow available for discretionary purposes.

(1)

 

Non-GAAP measure, see above for definition.

 

NioCorp Developments Ltd. (NIOBF: OTCQX International) | NioCorp Files Permit Application with U.S. Army Corps of Engineers for its Elk Creek Project Waterline

Mar 30, 2017

OTC Disclosure & News Service

CENTENNIAL, Colo., March 30, 2017 (GLOBE NEWSWIRE) — NioCorp Developments Ltd. (“NioCorp” or the “Company”) (TSX:NB) (OTCQX:NIOBF) (FSE:BR3) announces that it has submitted a Pre-Construction Notification (PCN) permit application to the U.S. Army Corps of Engineers (“USACE”) for its proposed waterline from its Elk Creek Superalloy Materials Project (the “Project”) to the Missouri River.

The PCN filed by NioCorp with the USACE covers the outfall structure portion of the Project’s waterline in the Missouri River.  Under current federal law (40CFR330.1 (e)), NioCorp may presume that the PCN qualifies for the USACE’s Nationwide Permit 12 (Utility Line Activities) unless it is notified by the USACE within 45 calendar days.  If the USACE notifies NioCorp that the notification is incomplete, one additional 45-day period commences upon receipt of the revised notification.

The remainder of the proposed 33-mile waterline is able to move forward under non-notifying parameters of Nationwide Permit 12, given that it involves no permanent impacts to wetlands and stream channels and will have only temporary impacts during construction.  Additionally, NioCorp’s proposed underground mine, surface processing facilities, and tailings impoundment are estimated to result in zero permanent impacts to any federally jurisdictional waters, and thus will need no discretionary permit from the USACE.

The fact that most of the Elk Creek Project can be constructed under a non-notifying USACE Nationwide Permit is due to the Company’s success in recent months in reducing the Project’s projected impacts on federally regulated waters.  Those advances include:  (1) using less water to recover the facility’s primary commercial product (Niobium), which reduces the size of a number of major pieces of equipment in the facility; (2) recycling a portion of process remains that normally would go to tailings into useful materials needed for superalloy metal manufacturing; (3) elimination of a previously planned railroad spur line and associated infrastructure.  These and other advances were previously announced by the Company and are summarized here.

“Scott Honan and his team have worked very hard to continue reducing the environmental footprint of the Elk Creek Project, and that’s why we qualify for this more rapid and streamlined permitting process from the U.S. Army Corps of Engineers,” said Mark A. Smith, CEO and Executive Chairman of NioCorp.  “We want to do the right thing for the environment, and that is a key reason why we invested more time and resources into further optimizing our plans for the Elk Creek mine and processing facility and the waterline.  Those optimizations are resulting in a more efficient permitting process, and that is a win for the Project, for the environment, and for southeast Nebraska.”

The Elk Creek Project must still obtain a number of state and local permits prior to construction and operation.  These include water, air quality, and other permits from the Nebraska Department of Environmental Quality and other agencies.  Local permits also will be required.  A number of these state and local permitting processes are already underway.

On Behalf of the Board of Directors,

„Mark Smith”

Mark Smith
Executive Chairman, CEO, and Director

Qualified Persons: Brian Osborn, BSc., CHMM, of Olsson Associates, a Qualified Person as defined by National Instrument 43-101, is responsible for the environmental permitting of the Elk Creek project, and has read and approved the technical information contained in this news release.

@NioCorp $NB $NIOBF #Niobium #Scandium #ElkCreek

For More Information:

Contact Jim Sims, VP of External Affairs, NioCorp Developments Ltd., 720-639-4650, jim.sims@niocorp.com

About NioCorp

NioCorp is developing a superalloy materials project in Southeast Nebraska that will produce Niobium, Scandium, and Titanium. Niobium is used to produce superalloys as well as High Strength, Low Alloy („HSLA”) steel, which is a lighter, stronger steel used in automotive, structural, and pipeline applications.  Scandium is a superalloy material that can be combined with Aluminum to make alloys with increased strength and improved corrosion resistance.  Scandium also is a critical component of advanced solid oxide fuel cells.  Titanium is used in various superalloys and is a key component of pigments used in paper, paint and plastics and is also used for aerospace applications, armor and medical implants.

Cautionary Note Regarding Forward-Looking Statements

Neither TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this document.  Certain statements contained in this document may constitute forward-looking statements, including but not limited to NioCorp’s ability to secure permits necessary to enable the Project to be constructed and to operate, and the scope and timing of such permits. Such forward-looking statements are based upon NioCorp’s reasonable expectations and business plan at the date hereof, which are subject to change depending on economic, political and competitive circumstances and contingencies. Readers are cautioned that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause a change in such assumptions and the actual outcomes and estimates to be materially different from those estimated or anticipated future results, achievements or position expressed or implied by those forward-looking statements. Risks, uncertainties and other factors that could cause NioCorp’s plans or prospects to change include changes in demand for and price of commodities (such as fuel and electricity) and currencies; changes or disruptions in the securities markets; legislative, political or economic developments; the need to obtain permits and comply with laws and regulations and other regulatory requirements; the possibility that actual results of work may differ from projections/expectations or may not realize the perceived potential of NioCorp’s projects; risks of accidents, equipment breakdowns and labor disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in development programs; operating or technical difficulties in connection with exploration, mining or development activities; the speculative nature of mineral exploration and development, including the risks of diminishing quantities of grades of reserves and resources; and the risks involved in the exploration, development and mining business and the risks set forth under the heading “Risk Factors” in the Company’s S-1 registration statement and other filings with the SEC at www.sec.gov. NioCorp disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

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The above news release has been provided by the above company via the OTC Disclosure and News Service. Issuers of news releases and not OTC Markets Group Inc. are solely responsible for the accuracy of such news releases.

NioCorp Files Permit Application with U.S. Army Corps of Engineers for its Elk Creek Project Waterline

CENTENNIAL, Colo., March 30, 2017 (GLOBE NEWSWIRE) — NioCorp Developments Ltd. (“NioCorp” or the “Company”) (TSX:NB) (OTCQX:NIOBF) (FSE:BR3) announces that it has submitted a Pre-Construction Notification (PCN) permit application to the U.S. Army Corps of Engineers (“USACE”) for its proposed waterline from its Elk Creek Superalloy Materials Project (the “Project”) to the Missouri River.
The PCN filed by NioCorp with the USACE covers the outfall structure portion of the Project’s waterline in the Missouri River.  Under current federal law (40CFR330.1 (e)), NioCorp may presume that the PCN qualifies for the USACE’s Nationwide Permit 12 (Utility Line Activities) unless it is notified by the USACE within 45 calendar days.  If the USACE notifies NioCorp that the notification is incomplete, one additional 45-day period commences upon receipt of the revised notification.The remainder of the proposed 33-mile waterline is able to move forward under non-notifying parameters of Nationwide Permit 12, given that it involves no permanent impacts to wetlands and stream channels and will have only temporary impacts during construction.  Additionally, NioCorp’s proposed underground mine, surface processing facilities, and tailings impoundment are estimated to result in zero permanent impacts to any federally jurisdictional waters, and thus will need no discretionary permit from the USACE.The fact that most of the Elk Creek Project can be constructed under a non-notifying USACE Nationwide Permit is due to the Company’s success in recent months in reducing the Project’s projected impacts on federally regulated waters.  Those advances include:  (1) using less water to recover the facility’s primary commercial product (Niobium), which reduces the size of a number of major pieces of equipment in the facility; (2) recycling a portion of process remains that normally would go to tailings into useful materials needed for superalloy metal manufacturing; (3) elimination of a previously planned railroad spur line and associated infrastructure.  These and other advances were previously announced by the Company and are summarized here.“Scott Honan and his team have worked very hard to continue reducing the environmental footprint of the Elk Creek Project, and that’s why we qualify for this more rapid and streamlined permitting process from the U.S. Army Corps of Engineers,” said Mark A. Smith, CEO and Executive Chairman of NioCorp.  “We want to do the right thing for the environment, and that is a key reason why we invested more time and resources into further optimizing our plans for the Elk Creek mine and processing facility and the waterline.  Those optimizations are resulting in a more efficient permitting process, and that is a win for the Project, for the environment, and for southeast Nebraska.”The Elk Creek Project must still obtain a number of state and local permits prior to construction and operation.  These include water, air quality, and other permits from the Nebraska Department of Environmental Quality and other agencies.  Local permits also will be required.  A number of these state and local permitting processes are already underway.On Behalf of the Board of Directors,„Mark Smith”Mark Smith
Executive Chairman, CEO, and Director
Qualified Persons: Brian Osborn, BSc., CHMM, of Olsson Associates, a Qualified Person as defined by National Instrument 43-101, is responsible for the environmental permitting of the Elk Creek project, and has read and approved the technical information contained in this news release.@NioCorp $NB $NIOBF #Niobium #Scandium #ElkCreekFor More Information:Contact Jim Sims, VP of External Affairs, NioCorp Developments Ltd., 720-639-4650, jim.sims@niocorp.comAbout NioCorpNioCorp is developing a superalloy materials project in Southeast Nebraska that will produce Niobium, Scandium, and Titanium. Niobium is used to produce superalloys as well as High Strength, Low Alloy („HSLA”) steel, which is a lighter, stronger steel used in automotive, structural, and pipeline applications.  Scandium is a superalloy material that can be combined with Aluminum to make alloys with increased strength and improved corrosion resistance.  Scandium also is a critical component of advanced solid oxide fuel cells.  Titanium is used in various superalloys and is a key component of pigments used in paper, paint and plastics and is also used for aerospace applications, armor and medical implants.Cautionary Note Regarding Forward-Looking StatementsNeither TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this document.  Certain statements contained in this document may constitute forward-looking statements, including but not limited to NioCorp’s ability to secure permits necessary to enable the Project to be constructed and to operate, and the scope and timing of such permits. Such forward-looking statements are based upon NioCorp’s reasonable expectations and business plan at the date hereof, which are subject to change depending on economic, political and competitive circumstances and contingencies. Readers are cautioned that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause a change in such assumptions and the actual outcomes and estimates to be materially different from those estimated or anticipated future results, achievements or position expressed or implied by those forward-looking statements. Risks, uncertainties and other factors that could cause NioCorp’s plans or prospects to change include changes in demand for and price of commodities (such as fuel and electricity) and currencies; changes or disruptions in the securities markets; legislative, political or economic developments; the need to obtain permits and comply with laws and regulations and other regulatory requirements; the possibility that actual results of work may differ from projections/expectations or may not realize the perceived potential of NioCorp’s projects; risks of accidents, equipment breakdowns and labor disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in development programs; operating or technical difficulties in connection with exploration, mining or development activities; the speculative nature of mineral exploration and development, including the risks of diminishing quantities of grades of reserves and resources; and the risks involved in the exploration, development and mining business and the risks set forth under the heading “Risk Factors” in the Company’s S-1 registration statement and other filings with the SEC at www.sec.gov. NioCorp disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

News Services Group Reçoit un Prix de Reconnaissance du Président d’AURAK

DUBAÏ, Émirats Arabes Unis–(BUSINESS WIRE)–News Services Group (NSG), représenté par son PDG M. Tony AbiHanna, a reçu aujourd’hui un prix d’appréciation du Président de l’Université Américaine de Ras Al Khaimah (AURAK), le Professeur Hassan Hamdan Al Alkim, pour ses services parfaits de traduction et de distribution des nouvelles rendus à l’université.

Cet reconnaissance est soutenue par le succès continu d’AURAK en tant que l’une des premières institutions d’enseignement supérieur dans les Émirats Arabes Unis (ÉAU) et la région.

M. Tony AbiHanna, Directeur Général de NSG, a reçu le prix du professeur Al Alkim dans son bureau en présence de M. Abdulla Abdullatif Al Shahin, Vice-président des Affaires Administratives d’AURAK et M. Joseph AbiHanna, Directeur des Relations Régionales de ME NewsWire, le bras de distribution des nouvelles de NSG.

Expliquant les raisons du décernement de ce prix, le Professeur Al Alkim a souligné : « Dans le cadre de nos efforts inlassables d’obtenir une reconnaissance et une accréditation internationales accrues, NSG nous a aidés, par ses services de distribution et de traduction de nouvelles internationales, à mieux illustrer notre compétitivité mondiale et à nous rapprocher d’un public plus large. AURAK offre des programmes de haut niveau, emploie des membres du corps professoral très expérimentés et assure une approche holistique pour équiper les étudiants par les bons outils pour devenir des citoyens responsables et des professionnels hautement compétents dans l’ensemble de la société ».

« La diversité et le multiculturalisme constituent des facteurs essentiels qui rendent d’AURAK une université mondiale. NSG le comprend bien et elle est en mesure de répondre à nos besoins en termes de transmettre le bon message grâce à sa traduction sophistiquée et de transmettre notre message à travers le monde via ses réseaux étendus de distribution de nouvelles » a-t-il ajouté

Suite à la remise du prix, M. AbiHanna a souligné : « nous acceptons avec reconnaissance le prix d’une institution académique prestigieuse comme AURAK. C’est un privilège et un honneur d’être leur entreprise de choix pour la traduction et la distribution de communiqués de presse. Le prix sert de certificat de validation de notre engagement permanent envers nos principes ; à savoir « Rapidité, Qualité et Précision. Quand il s’agit de ces aspects, NSG reste intransigeante. »

Il a ajouté que NSG continuera à aider AURAK à diffuser son objectif et sa mission visant à cultiver les normes les plus élevées en matière d’éducation dans la région et de préparer l’avenir de ses étudiants pour bien jouer leur rôle dans la construction de l’avenir de leur pays.

NSG est le représentant exclusif de Business Wire dans la région du Moyen-Orient et en Afrique du Nord (MENA) ; pour plus d’informations, rendez-vous aux :
www.nsg-me.net / www.me-newswire.net / www.transhouse-me.com

* Source: ME NewsWire

News Services Group Reçoit un Prix de Reconnaissance du Président d’AURAK

DUBAÏ, Émirats Arabes Unis–(BUSINESS WIRE)–News Services Group (NSG), représenté par son PDG M. Tony AbiHanna, a reçu aujourd’hui un prix d’appréciation du Président de l’Université Américaine de Ras Al Khaimah (AURAK), le Professeur Hassan Hamdan Al Alkim, pour ses services parfaits de traduction et de distribution des nouvelles rendus à l’université.

Cet reconnaissance est soutenue par le succès continu d’AURAK en tant que l’une des premières institutions d’enseignement supérieur dans les Émirats Arabes Unis (ÉAU) et la région.

M. Tony AbiHanna, Directeur Général de NSG, a reçu le prix du professeur Al Alkim dans son bureau en présence de M. Abdulla Abdullatif Al Shahin, Vice-président des Affaires Administratives d’AURAK et M. Joseph AbiHanna, Directeur des Relations Régionales de ME NewsWire, le bras de distribution des nouvelles de NSG.

Expliquant les raisons du décernement de ce prix, le Professeur Al Alkim a souligné : « Dans le cadre de nos efforts inlassables d’obtenir une reconnaissance et une accréditation internationales accrues, NSG nous a aidés, par ses services de distribution et de traduction de nouvelles internationales, à mieux illustrer notre compétitivité mondiale et à nous rapprocher d’un public plus large. AURAK offre des programmes de haut niveau, emploie des membres du corps professoral très expérimentés et assure une approche holistique pour équiper les étudiants par les bons outils pour devenir des citoyens responsables et des professionnels hautement compétents dans l’ensemble de la société ».

« La diversité et le multiculturalisme constituent des facteurs essentiels qui rendent d’AURAK une université mondiale. NSG le comprend bien et elle est en mesure de répondre à nos besoins en termes de transmettre le bon message grâce à sa traduction sophistiquée et de transmettre notre message à travers le monde via ses réseaux étendus de distribution de nouvelles » a-t-il ajouté

Suite à la remise du prix, M. AbiHanna a souligné : « nous acceptons avec reconnaissance le prix d’une institution académique prestigieuse comme AURAK. C’est un privilège et un honneur d’être leur entreprise de choix pour la traduction et la distribution de communiqués de presse. Le prix sert de certificat de validation de notre engagement permanent envers nos principes ; à savoir « Rapidité, Qualité et Précision. Quand il s’agit de ces aspects, NSG reste intransigeante. »

Il a ajouté que NSG continuera à aider AURAK à diffuser son objectif et sa mission visant à cultiver les normes les plus élevées en matière d’éducation dans la région et de préparer l’avenir de ses étudiants pour bien jouer leur rôle dans la construction de l’avenir de leur pays.

NSG est le représentant exclusif de Business Wire dans la région du Moyen-Orient et en Afrique du Nord (MENA) ; pour plus d’informations, rendez-vous aux :
www.nsg-me.net / www.me-newswire.net / www.transhouse-me.com

* Source: ME NewsWire

News Services Group Reçoit un Prix de Reconnaissance du Président d’AURAK

DUBAÏ, Émirats Arabes Unis–(BUSINESS WIRE)–News Services Group (NSG), représenté par son PDG M. Tony AbiHanna, a reçu aujourd’hui un prix d’appréciation du Président de l’Université Américaine de Ras Al Khaimah (AURAK), le Professeur Hassan Hamdan Al Alkim, pour ses services parfaits de traduction et de distribution des nouvelles rendus à l’université.

Cet reconnaissance est soutenue par le succès continu d’AURAK en tant que l’une des premières institutions d’enseignement supérieur dans les Émirats Arabes Unis (ÉAU) et la région.

M. Tony AbiHanna, Directeur Général de NSG, a reçu le prix du professeur Al Alkim dans son bureau en présence de M. Abdulla Abdullatif Al Shahin, Vice-président des Affaires Administratives d’AURAK et M. Joseph AbiHanna, Directeur des Relations Régionales de ME NewsWire, le bras de distribution des nouvelles de NSG.

Expliquant les raisons du décernement de ce prix, le Professeur Al Alkim a souligné : « Dans le cadre de nos efforts inlassables d’obtenir une reconnaissance et une accréditation internationales accrues, NSG nous a aidés, par ses services de distribution et de traduction de nouvelles internationales, à mieux illustrer notre compétitivité mondiale et à nous rapprocher d’un public plus large. AURAK offre des programmes de haut niveau, emploie des membres du corps professoral très expérimentés et assure une approche holistique pour équiper les étudiants par les bons outils pour devenir des citoyens responsables et des professionnels hautement compétents dans l’ensemble de la société ».

« La diversité et le multiculturalisme constituent des facteurs essentiels qui rendent d’AURAK une université mondiale. NSG le comprend bien et elle est en mesure de répondre à nos besoins en termes de transmettre le bon message grâce à sa traduction sophistiquée et de transmettre notre message à travers le monde via ses réseaux étendus de distribution de nouvelles » a-t-il ajouté

Suite à la remise du prix, M. AbiHanna a souligné : « nous acceptons avec reconnaissance le prix d’une institution académique prestigieuse comme AURAK. C’est un privilège et un honneur d’être leur entreprise de choix pour la traduction et la distribution de communiqués de presse. Le prix sert de certificat de validation de notre engagement permanent envers nos principes ; à savoir « Rapidité, Qualité et Précision. Quand il s’agit de ces aspects, NSG reste intransigeante. »

Il a ajouté que NSG continuera à aider AURAK à diffuser son objectif et sa mission visant à cultiver les normes les plus élevées en matière d’éducation dans la région et de préparer l’avenir de ses étudiants pour bien jouer leur rôle dans la construction de l’avenir de leur pays.

NSG est le représentant exclusif de Business Wire dans la région du Moyen-Orient et en Afrique du Nord (MENA) ; pour plus d’informations, rendez-vous aux :
www.nsg-me.net / www.me-newswire.net / www.transhouse-me.com

* Source: ME NewsWire

News Services Group Reçoit un Prix de Reconnaissance du Président d’AURAK

DUBAÏ, Émirats Arabes Unis–(BUSINESS WIRE)–News Services Group (NSG), représenté par son PDG M. Tony AbiHanna, a reçu aujourd’hui un prix d’appréciation du Président de l’Université Américaine de Ras Al Khaimah (AURAK), le Professeur Hassan Hamdan Al Alkim, pour ses services parfaits de traduction et de distribution des nouvelles rendus à l’université.

Cet reconnaissance est soutenue par le succès continu d’AURAK en tant que l’une des premières institutions d’enseignement supérieur dans les Émirats Arabes Unis (ÉAU) et la région.

M. Tony AbiHanna, Directeur Général de NSG, a reçu le prix du professeur Al Alkim dans son bureau en présence de M. Abdulla Abdullatif Al Shahin, Vice-président des Affaires Administratives d’AURAK et M. Joseph AbiHanna, Directeur des Relations Régionales de ME NewsWire, le bras de distribution des nouvelles de NSG.

Expliquant les raisons du décernement de ce prix, le Professeur Al Alkim a souligné : « Dans le cadre de nos efforts inlassables d’obtenir une reconnaissance et une accréditation internationales accrues, NSG nous a aidés, par ses services de distribution et de traduction de nouvelles internationales, à mieux illustrer notre compétitivité mondiale et à nous rapprocher d’un public plus large. AURAK offre des programmes de haut niveau, emploie des membres du corps professoral très expérimentés et assure une approche holistique pour équiper les étudiants par les bons outils pour devenir des citoyens responsables et des professionnels hautement compétents dans l’ensemble de la société ».

« La diversité et le multiculturalisme constituent des facteurs essentiels qui rendent d’AURAK une université mondiale. NSG le comprend bien et elle est en mesure de répondre à nos besoins en termes de transmettre le bon message grâce à sa traduction sophistiquée et de transmettre notre message à travers le monde via ses réseaux étendus de distribution de nouvelles » a-t-il ajouté

Suite à la remise du prix, M. AbiHanna a souligné : « nous acceptons avec reconnaissance le prix d’une institution académique prestigieuse comme AURAK. C’est un privilège et un honneur d’être leur entreprise de choix pour la traduction et la distribution de communiqués de presse. Le prix sert de certificat de validation de notre engagement permanent envers nos principes ; à savoir « Rapidité, Qualité et Précision. Quand il s’agit de ces aspects, NSG reste intransigeante. »

Il a ajouté que NSG continuera à aider AURAK à diffuser son objectif et sa mission visant à cultiver les normes les plus élevées en matière d’éducation dans la région et de préparer l’avenir de ses étudiants pour bien jouer leur rôle dans la construction de l’avenir de leur pays.

NSG est le représentant exclusif de Business Wire dans la région du Moyen-Orient et en Afrique du Nord (MENA) ; pour plus d’informations, rendez-vous aux :
www.nsg-me.net / www.me-newswire.net / www.transhouse-me.com

* Source: ME NewsWire

Acting Assistant Attorney General Mary B. McCord for National Security Delivers Keynote Remarks at Second Annual Billington International Cybersecurity Summit Dinner

Thank you for inviting me to speak with you today. The topics on tap for this summit are precisely the questions that corporate leaders like you must address as we collectively face the ever-evolving threat of malicious cyber activity.

 

I’m here to speak about protecting our national assets from nation-state threats. You may be wondering why I say “our” national assets. Certainly there are government secrets that the government must protect. But I’m talking about the national assets that are largely in private-sector hands. These assets include our critical infrastructure — the telecommunications systems, financial systems, electric grids and mass transit systems that sustain our way of life — as well as the technology, innovations and other crown jewels that drive our economy and help secure our global leadership.

 

These assets are targets not just for criminals, but also for nation-states and terrorist groups that seek to exploit vulnerabilities in our networks to probe our critical infrastructure, plan destructive attacks, steal our personal information and intellectual property, threaten violence, and extort money much like hostage takers seeking a ransom. 

 

Today I’d like to talk to you about the risks to your business from threats to our national security, how the Department of Justice is working to address them, and the ways that you can manage them. 

 

As the head of the Department of Justice’s National Security Division, my job is to carry out the Department’s highest priority — combatting threats to our national security. I lead more than 350 professionals dedicated to this mission — whether the threats come in the form of terrorists, spies and weapons proliferators; or national security-related cyber-attacks and other threats against our national assets. Our broad-based approach reflects our philosophy that our national security priorities must include not only the physical safety of all Americans, but also helping you defend against corrupt insiders, hackers and others who would harm your companies and your customers.

 

The National Security Division

 

First, I want to provide some brief background about what our experience with other national security threats, like international terrorism, has taught us about combatting cyber and other threats to our national assets, and how the National Security Division came to be.

It’s no surprise that 9/11 was a watershed moment in our approach to countering terrorism as a government. It both highlighted weaknesses in our government’s approach to addressing the terrorist threat and threw into stark relief how significant that threat had become. In particular, it spurred the government to recognize that, if we are to defeat this threat, we must bring to bear the full complement of the federal government’s resources. So, while we used military force, we also recognized that law enforcement is a valuable tool for disrupting plots and neutralizing terrorists, and we leveraged economic sanctions and diplomatic measures to attack this global problem.

Before we could integrate our efforts, we had to bring down the wall that previously existed between the intelligence community and law enforcement — a wall that stood most firmly in the Department of Justice, where some attorneys prosecuted national security crimes and others interfaced with the intelligence community, always from within separate offices. To end that divide, Congress in 2006 created the Department’s first new litigating division in almost half a century, the National Security Division. As a Division, we unite prosecutors and law enforcement officials with intelligence attorneys and the intelligence community to ensure that we approach national security threats using every tool and resource available to the federal government.

Since the National Security Division’s creation, it has become increasingly clear that the factors that motivated our creation and guided our efforts to combat terrorism are equally applicable to our efforts to protect our valuable national assets. In recent years, we have seen more and more attempts by foreign nation-states to acquire sensitive technologies and proprietary information from U.S. companies and to disrupt and destroy critical infrastructure. 

Economic Espionage

NSD’s commitment to protecting national assets has grown in proportion to the threat that we are now facing. As with combatting international terrorism, the federal government has developed a broad-ranging suite of tools to tackle these threats — including criminal prosecutions, sanctions, trade pressure and diplomatic options — and, together with our interagency partners, we have the ability to pick the best tool or combination of tools to get the job done under the rule of law. 

For example, we seek to mitigate national security threats posed by foreign nation-state actors by reviewing foreign acquisitions — which can give the acquiring company access to critical technologies and increase its reach within the U.S. — and by imposing export controls on U.S. businesses to protect sensitive technologies from reaching the wrong hands.

But when certain foreign entities eager for sensitive and valuable intellectual property can’t acquire it legally and don’t want to spend the time or money to develop it on their own, they may take another approach: they may try to steal it. This poses a significant threat to national security — and a major business risk to the victim company. Economic espionage can take a number of forms.

 

Perhaps the most salient form for this audience is theft by cyber intrusion. In May 2014, in a first-of-its kind case, DOJ indicted five Chinese military hackers for stealing trade secrets and sensitive business information from U.S. companies for the benefit of Chinese competitors. The indictment alleged numerous and specific instances in which uniformed officers of the Third Department of the Chinese People’s Liberation Army (PLA) hacked into the computer systems of American nuclear power, metals and solar-products companies to steal trade secrets and sensitive internal communications, such as pricing information and trade litigation strategy, that could be used by Chinese companies for commercial advantage. This was the military officers’ full-time day job: our indictment alleged that their activity peaked between 9 a.m. and 12 p.m., their time, stopped for an hour — a healthy lunch break — and then picked up again from 1 p.m. to 6 p.m. No company can expect to always successfully defend against these kinds of organized campaigns.

 

In another case from last year, Su Bin, a Chinese businessman, pleaded guilty to participating in a conspiracy to hack into the computer networks of U.S. defense contractors to steal sensitive information, including data related to military transport aircraft and fighter jets. Su would tell his co-conspirators, military officers in China, what companies to target. When those co-conspirators had successfully gained access, they would send him the directory file listings and folders so that Su could tell them exactly what to steal and why. Su Bin was indicted, found in Canada, transferred to the U.S., and ultimately sentenced to nearly four years in prison for his crimes. But criminal prosecution wasn’t the only tool we used. When Su was first arrested, the Commerce Department listed his companies on the Entity List, making it practically impossible for them to obtain goods and services from the United States.

 

Cyber intrusions may be the newest form of economic espionage, but they are not the only method of stealing important business secrets. As we have seen over and over again, you should never underestimate insider threats. In 2014, DOJ successfully prosecuted a former DuPont employee and his co-conspirator for stealing trade secrets and selling them to Chinese state-owned companies. The stolen trade secret was the formula for producing the color white (chloride-route titanium dioxide production technology). Its applications are too numerous to list, but needless to say that proprietary process, which took decades to develop and perfect, essentially is priceless to DuPont.

 

You also can never be too cautious about the physical security of the facilities in which your most sensitive information is stored — even if it is outside. This past year, a Chinese national, Mo Hailong, was convicted and sentenced to three years in prison for stealing inbred corn seeds, the valuable intellectual property of U.S. agricultural products companies, for the benefit of a China-based seed company. As part of its five-year plan, China is openly seeking to develop a self-sustaining food supply through the acquisition of the most cutting-edge agricultural technology. And to show you that IP theft can be a decidedly low tech endeavor, Mo literally stole the corn seeds from the ground: company employees discovered his scheme when he was observed in the fields, on his hands and knees, digging up the seeds.

 

The Importance of Attribution in Responding to Cyber Attacks

Companies must be ready for all of these varied vulnerabilities, but the threat to your company and our national security is broader than the theft of your intellectual property. We know that state-sponsored actors also exploit vulnerabilities in cyber security for destructive and malicious purposes.

For many years, when acting in cyber space, nation-states and their affiliates enjoyed what they perceived to be a cloak of anonymity — a cloak they hid behind to break our laws and to threaten our security and economic well-being. They had this perceived cover because they thought we couldn’t figure out who did it and, if we did figure it out, we would keep it a secret. But in responding to the cyber threat posed by state-sponsored actors, the government has recognized the importance of attribution to name those responsible for online intrusions with confidence, down to the country, government agency, organization or even individuals involved.

Public attribution alone can have an important deterrent effect. Being publicly identified creates a risk of detention or arrest abroad. It restricts liberty and travel. But perhaps most importantly, hackers, like other thieves, are valued for their ability to get in and get out without getting caught. Anonymity is key for their livelihood and the exposure of public attribution can chill the marketplace for the hacker’s services. Public attribution also raises awareness of the threats we face, thereby encouraging resilience and hardened defenses, and it validates victims’ sense of violation and loss.

Moreover, attribution facilitates the use of so many other tools that promote deterrence.  Law enforcement agencies and the Department of Justice are particularly skilled at these kinds of investigations, and, in some cases, attribution leads to public charges and a criminal prosecution. In other cases, prosecution may not be possible, but attribution opens the door for other tools that can change our adversaries’ calculus by increasing the costs of their activities.

In 2015, President Obama issued a new Executive Order specifically aimed at cyber threats. Pursuant to this Executive Order, the Department of the Treasury can sanction individuals or entities who use cyber operations to harm or compromise critical infrastructure or system networks; those who conduct cyber intrusions to steal information for commercial advantage or private financial gain; or those who merely benefit from knowingly receiving such stolen information.

The availability of this tool has proved useful in forging diplomatic solutions to address the threat of cyber theft for commercial gain. Numerous cyber security experts agree that, coupled with the threat of possible U.S. sanctions, our indictment of the Chinese military hackers resulted in a historic agreement in the fall of 2015 by Chinese President Xi Jinping and other leaders of the G20, that nations should not conduct or support cyber-enabled theft of trade secrets or confidential business information with the intent to provide commercial advantage to companies or commercial entities. This kind of meeting of the minds of the community of nations drives bilateral negotiations and U.N. Security Council actions.

Disruptive Cyber Attacks

Although cyber security experts have noted an apparent reduction in cyber-enabled economic espionage by China since that agreement — and it remains to be seen whether that will continue — if anything, we are witnessing a rise in malicious cyber operations conducted by a variety of nation-states and their affiliates. Most recently, in 2016, President Obama amended the cyber Executive Order to allow the Treasury Department to impose sanctions for tampering with or misappropriating information in order to interfere with or undermine election processes. This was of course in response to Russian efforts to interfere with the 2016 presidential election.  Along with two Russian intelligence services, three Russian companies and four individuals that provided material support to those agencies were sanctioned.

We must remain vigilant against malicious cyber operations aimed at disruption and destruction, which have sowed chaos and imposed substantial costs across a number of economic sectors. In the past few years, we have attributed attacks to state-sponsored actors who seek to harm U.S. companies and infrastructure for their own strategic gain, and we have been able to bring charges against those responsible and enable the use of other tools in order to deter future attacks.

 

In the Sony Pictures hack in 2014, for example, we saw North Korea wage a destructive cyber attack intended to chill the speech of U.S. citizens and a company in the U.S. The attackers destroyed computer systems, stole valuable information, released corporate data and intellectual property at significant cost, and threatened employees and customers. Based on the FBI’s attribution, the U.S. government added new sanctions against North Korea.

In March 2016, DOJ unsealed an indictment charging seven Iranian hackers for an extensive campaign of distributed denial-of-service attacks against 46 major financial institutions in 2011 and 2012. These attacks cut customers off from online access to their bank accounts and cost the victim companies tens of millions of dollars. These hackers had ties to the Iranian government, including the Islamic Revolutionary Guard Corps.

One of the hackers was also charged with obtaining unauthorized access into the industrial control systems of the Bowman Dam, located in Rye, New York. Had the dam not been disconnected from the system for maintenance, the intrusion could have given the hacker control of the dam’s water levels and flow rates.

The same week that the Iranian DDOS indictment was unsealed, we unsealed a complaint against members of the Syrian Electronic Army — a pro-Syrian regime hacker group — charging them with using spear-phishing and other techniques to collect information used to deface websites, publish pro-Syrian regime propaganda and exfiltrate valuable information. As one of the complaints alleged, the hackers extorted money from victims by threatening further intrusions, defacements and sales of propriety information. In one of these attacks, the Syrian hackers posted a fake news feed on Twitter stating that a bomb had gone off in the White House, injuring the President. In another, the hackers gained access to a recruiting website for the U.S. Marine Corps and posted a defacement encouraging U.S. marines to “refuse ‘their’ orders.”

Just this month, we indicted four individuals responsible for the 2014 hack into Yahoo’s network, which involved the theft of information about at least 500 million Yahoo accounts and the use of that information to obtain the contents of accounts at Yahoo and other email providers. Two of the defendants named in the indictment are officers of the Russian Federal Security Service (FSB), one of the Russian intelligence agencies sanctioned in 2016 by President Obama, who are alleged to have directed their co-conspirators, two criminal hackers, to collect information through computer intrusions in the United States and elsewhere. The FSB unit that the defendants worked for is also the FBI’s point of contact in Moscow for cyber-crime matters. The involvement and direction of FSB officers with law enforcement responsibilities makes this conduct that much more egregious.

Lest you think that we will never be able to bring foreign hackers to justice, our international law enforcement partners have often assisted us in making arrests and extradited those we have indicted for cybercrimes. One of the SEA hackers was arrested at our request in Germany, extradited to the U.S. and pleaded guilty in a U.S. federal court. And one of the alleged co-conspirators involved in the Yahoo hack, Karim Baratov, was arrested in Canada on a U.S. provisional arrest warrant; we are seeking to have him brought to the United States to face charges.

Evolving Threats

These examples show that we will find and expose those who threaten our national assets through cyber-attacks or theft. But those who would do us harm are able to reach further than ever before. I am particularly troubled by efforts to take advantage of companies’ vulnerabilities in order to victimize those businesses’ customers

We now see ISIS crowdsourcing terrorism using cyber intrusions to obtain information or resources that, when placed in the hands of terrorists, could prove deadly. Ardit Ferizi, the leader of a Kosovar hacking group, hacked into the computer system of a major U.S. retailer, stole the personally identifiable information of thousands of customers, and culled through it to locate the PII of approximately 1,300 American military and government personnel. Ferizi then provided that information to a Syria-based ISIS member, Junaid Hussain, known for calling on aspiring terrorists around the world to commit terrorist attacks at home. Hussain subsequently posted a tweet that linked to a document containing the stolen PII, and threatened:

We are in your emails and computer systems, watching and recording your every move, we have your names and addresses . . . we are passing on your personal information to the soldiers of the khilifah, who soon . . . will strike at your necks in your own lands!

Ferizi was found in Malaysia, transferred to U.S. custody and was sentenced to 20 years’ imprisonment after pleading guilty to providing material support to ISIS. Hussain was killed in a U.S. military airstrike.

The Ferizi case also highlights the importance of working with law enforcement even in light of what might appear to the victim company to be an unsophisticated cyber intrusion. Fortunately, the targeted retailer cooperated with law enforcement, which was able to investigate the incident and identify the terrorists behind the keyboards. Even more fortunately, no physical harm came to any Americans as a result of this breach.

 

Most recently, we’ve come to appreciate the vulnerabilities presented by “smart” consumer products. While the connectivity of the “Internet of Things” provides immense technological opportunity, convenience and efficiency, it also opens up significant vulnerabilities.

Just a few months ago, we saw massive DDOS attacks against the website of a security researcher, a French ISP, and a U.S. DNS registrar, as well as the disruption of internet access for nearly a million users in Germany. All four attacks have been linked to a growing botnet composed of cameras, DVRs, and other devices infected with the Mirai malware. And as we learned, attacks like this one, approaching one terabit per second, can destabilize the core infrastructure of the Internet itself.

Most of those in attendance today probably are familiar, as well, with the vulnerability in auto vehicle control systems exposed by cyber security researchers in 2015, who were able to hack into the system of a sports utility vehicle, gaining the ability to shut down the engine, disable the brakes, affect steering, and control turn signals, door locks, the tachometer, radio, HVAC, and GPS.  This incident resulted in the recall of nearly 1.4 million vehicles.

Given the dynamic intent of our foreign adversaries — who seek to use cyber operations to cause damage as a foreign policy tool, and not just to access sensitive information — we are concerned about new national security risks due to the combination of the Internet of Things’ vulnerabilities and an increased ability to remotely access systems.

It is my hope that companies will respond to the threat posed by the Internet of Things in the same vein as social media companies have begun to respond to terrorist use of their platforms. Terrorist groups have leveraged social media tools and mainstream technology to facilitate their operational planning through encrypted communications and to call for sympathizers to conduct their own attacks. After seeing their networks used in ways they neither desired nor even contemplated, social media companies have begun taking steps to reduce the ability to exploit their products. Smart products — also developed with the best of intentions but without adequate consideration of vulnerabilities — demand a similar private sector response. Through our outreach efforts, we are trying to raise awareness about the national security threats interconnectivity poses and to encourage IoT developers and manufacturers to prioritize device security early in the design and manufacturing process, rather than after devices have entered into wide commercial use.

Partnering with the Private Sector

So what does this mean for you?  When it comes to threats to our national assets, you are on the front lines. In many cases, your adversaries have the full backing of their foreign governments and so should you. We are here to help.

We work with U.S. companies, across all industry sectors, to ensure that our national security interests are protected. NSD and the FBI stand ready to help you understand:

  • the vulnerabilities that might exist for your organization,
  • how to minimize them, and
  • how to respond when those vulnerabilities lead to the wrongful theft, exfiltration, or exportation of your sensitive technologies and information, no matter what the means including, in some instances, raising costs to those who may benefit from the theft.

We have spent significant time and energy in face-to-face sit-downs so that we may better understand the concerns and challenges facing U.S. companies, share guidance and information, and assist with protection, detection, attribution and response.

We can warn companies that manufacture or sell targeted U.S. technology when certain bad actors are seeking the particular technology they make. We hope to prepare industry for these threats and help you stem the flow of sensitive technology out of the United States.  In the Iowa seeds case, for example, due to the quick action of security staff, the FBI was able to disrupt the threat and hold the perpetrator accountable.

In the case of cross-border transactions, we can share information with you on the types of technology and intellectual property nation-states are targeting to help you assess your vulnerabilities from asset sales, joint ventures and research collaborations.

And in the case of a cyber-attack, if an organization works with law enforcement, it puts both in the best possible position to find out exactly what happened and to remediate and prevent further damage. The evidence is often fleeting, so early notification and access to the data is extremely important. For example, it was Yahoo’s valuable cooperation that allowed us to identify the nation-state-affiliated actors responsible for the attack and build our case.

Law enforcement also may be able to use legal authorities and tools that are unavailable to nongovernmental entities, or enlist the assistance of international partners to locate and take down stolen data or identify a perpetrator.

Early cooperation has many benefits. When we are notified of an intrusion, we share information with other potential victims. In the case of the DDOS attacks on the financial sector, with the cooperation of the private sector, the FBI regularly provided updated information regarding the identity of systems that had been infected with the defendants’ malware and were operating as bots within malicious botnets, aiding in the effort to remove the malware to protect customers and other potential victims. One organization’s vulnerability is everyone’s vulnerability, and it is critical that we work together.

We recognize that there are a variety of reasons that the private sector may be wary of reporting a possible breach to law enforcement. Concerns about regulators, reputational harm and potential shareholder lawsuits are all legitimate. We are willing to talk through a company’s concerns at the outset and work with the company and its counsel to address them. A victim of a cyber-attack is not so different from victims of other crimes, and we seek to treat them that way, respecting their boundaries and concerns. 

Thank you again for inviting me here today. Our nation is most secure, and our privacy and economic vitality are best protected, when the government and the private sector work together to develop strategies to secure information access, detect threats and respond when incidents do happen.

Last year’s El Niño waves battered California shore to unprecedented degree


Discovery

Last year’s El Niño waves battered California shore to unprecedented degree

2015-2016 El Niño resulted in severe erosion along Pacific coastline

February 14, 2017

Last winter’s El Niño may have felt weak to residents of Southern California, but it was one of the most powerful weather events of the last 145 years, scientists say.

If severe El Niño events become more common in the future, as some studies suggest, the California coast — home to more than 25 million people — may become increasingly vulnerable to coastal hazards, independently of projected sea level rise.

A new study conducted by scientists at the University of California Santa Barbara (UCSB) and colleagues at several other institutions found that during the 2015-2016 El Niño, winter beach erosion on the Pacific coast was 76 percent above normal. Most beaches in California were eroded beyond historical extremes, the study found.

The results appear this week in the journal Nature Communications.

“Infrequent and extreme events can be extremely damaging to coastal marine habitats and communities,” said David Garrison, a program director in the National Science Foundation’s Division of Ocean Sciences, which funded the research. “While this paper stresses the effect of waves and sediment transport on beach structure, organisms living on and in the sediment will also be profoundly affected.”

Added David Hubbard, a UCSB marine ecologist and paper co-author: “This study illustrates the value of broad regional collaboration using long-term data for understanding coastal ecosystem responses to environmental change. We really need this scale of data on coastal processes to understand what’s going on with the ecology of the coast.”

While winter beach erosion — the removal and loss of sand from the beach — is a normal seasonal process, during El Niño events the extent of erosion can be more severe.

The research team assessed seasonal beach behavior for 29 beaches along more than 1,200 miles of the Pacific coast. They made 3-D surface maps and cross-shore profiles using aerial LIDAR (Light Detection and Ranging), GPS topographic surveys and direct measurements of sand quantities. They then combined that information with wave and water-level data from each beach between 1997 and 2016.

“Wave conditions and coastal response were unprecedented for many locations during the winter of 2015-16,” said Patrick Barnard, lead author of the paper and a geologist with the U.S. Geological Survey. “The winter wave energy equaled or exceeded measured historical maximums along the West Coast, corresponding to extreme beach erosion across the region.”

The 2015-2016 El Niño was one of the strongest ever recorded.

However, that most recent El Niño was largely considered a dud from a water resources perspective due to unusually low rainfall, particularly in Southern California, which received 70 percent less rain than during the last two big El Niño events.

“The waves that attacked our coast, generated from storms across the North Pacific, were exceptional and among the largest ever recorded,” Hubbard said. “But the lack of rainfall means that coastal rivers produced very little sand to fill in what was lost from the beaches, so recovery has been slow.”

Rivers are the primary suppliers of sand to California beaches, despite long-term water reductions in the 20th century due to extensive dam construction. California’s extreme drought resulted in lower river flows, which in turn equated to less sand being carried to the coast to help sustain beaches.

While most beaches in the survey eroded beyond historical extremes, some fared better than others. The condition of the beach before the winter of 2015 strongly influenced the severity of the erosion and the ability to recover afterward through natural replenishment processes.

Mild wave activity in the Pacific Northwest as well as artificial augmentation of beaches (adding sand) in Southern California prior to the winter of 2015-2016 prevented some areas from eroding beyond historical extremes.

“We need to understand these challenges, which include rising sea level and the fact that most of the problems occur during these peak El Niño events,” Hubbard said. “Then we need to restore and manage our coasts in ways that will enable us to deal with these events and conserve beach ecosystems.”

The U.S. Army Corps of Engineers, the California Department of Parks and Recreation, the Division of Boating and Waterways, the U.S. Geological Survey and the Northwest Association of Networked Ocean Observing Systems also funded the research.

Investigators
Jenifer Dugan
Robert Miller
Carter Ohlmann

Related Institutions/Organizations
University of California-Santa Barbara

Related Awards
#1458845 Linking nearshore kelp forest dynamics to sandy beach ecosystems

Total Grants
$1,007,537

Last year’s El Niño waves battered California shore to unprecedented degree


Discovery

Last year’s El Niño waves battered California shore to unprecedented degree

2015-2016 El Niño resulted in severe erosion along Pacific coastline

February 14, 2017

Last winter’s El Niño may have felt weak to residents of Southern California, but it was one of the most powerful weather events of the last 145 years, scientists say.

If severe El Niño events become more common in the future, as some studies suggest, the California coast — home to more than 25 million people — may become increasingly vulnerable to coastal hazards, independently of projected sea level rise.

A new study conducted by scientists at the University of California Santa Barbara (UCSB) and colleagues at several other institutions found that during the 2015-2016 El Niño, winter beach erosion on the Pacific coast was 76 percent above normal. Most beaches in California were eroded beyond historical extremes, the study found.

The results appear this week in the journal Nature Communications.

“Infrequent and extreme events can be extremely damaging to coastal marine habitats and communities,” said David Garrison, a program director in the National Science Foundation’s Division of Ocean Sciences, which funded the research. “While this paper stresses the effect of waves and sediment transport on beach structure, organisms living on and in the sediment will also be profoundly affected.”

Added David Hubbard, a UCSB marine ecologist and paper co-author: “This study illustrates the value of broad regional collaboration using long-term data for understanding coastal ecosystem responses to environmental change. We really need this scale of data on coastal processes to understand what’s going on with the ecology of the coast.”

While winter beach erosion — the removal and loss of sand from the beach — is a normal seasonal process, during El Niño events the extent of erosion can be more severe.

The research team assessed seasonal beach behavior for 29 beaches along more than 1,200 miles of the Pacific coast. They made 3-D surface maps and cross-shore profiles using aerial LIDAR (Light Detection and Ranging), GPS topographic surveys and direct measurements of sand quantities. They then combined that information with wave and water-level data from each beach between 1997 and 2016.

“Wave conditions and coastal response were unprecedented for many locations during the winter of 2015-16,” said Patrick Barnard, lead author of the paper and a geologist with the U.S. Geological Survey. “The winter wave energy equaled or exceeded measured historical maximums along the West Coast, corresponding to extreme beach erosion across the region.”

The 2015-2016 El Niño was one of the strongest ever recorded.

However, that most recent El Niño was largely considered a dud from a water resources perspective due to unusually low rainfall, particularly in Southern California, which received 70 percent less rain than during the last two big El Niño events.

“The waves that attacked our coast, generated from storms across the North Pacific, were exceptional and among the largest ever recorded,” Hubbard said. “But the lack of rainfall means that coastal rivers produced very little sand to fill in what was lost from the beaches, so recovery has been slow.”

Rivers are the primary suppliers of sand to California beaches, despite long-term water reductions in the 20th century due to extensive dam construction. California’s extreme drought resulted in lower river flows, which in turn equated to less sand being carried to the coast to help sustain beaches.

While most beaches in the survey eroded beyond historical extremes, some fared better than others. The condition of the beach before the winter of 2015 strongly influenced the severity of the erosion and the ability to recover afterward through natural replenishment processes.

Mild wave activity in the Pacific Northwest as well as artificial augmentation of beaches (adding sand) in Southern California prior to the winter of 2015-2016 prevented some areas from eroding beyond historical extremes.

“We need to understand these challenges, which include rising sea level and the fact that most of the problems occur during these peak El Niño events,” Hubbard said. “Then we need to restore and manage our coasts in ways that will enable us to deal with these events and conserve beach ecosystems.”

The U.S. Army Corps of Engineers, the California Department of Parks and Recreation, the Division of Boating and Waterways, the U.S. Geological Survey and the Northwest Association of Networked Ocean Observing Systems also funded the research.

Investigators
Jenifer Dugan
Robert Miller
Carter Ohlmann

Related Institutions/Organizations
University of California-Santa Barbara

Related Awards
#1458845 Linking nearshore kelp forest dynamics to sandy beach ecosystems

Total Grants
$1,007,537