-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OxMDRR7t0xtSf09QatmJRMnOjC0tIhU8mU4OtNMFUFop7vmuhcAbT45h9V/L2rfF Z3dIJWfooNZzCgJWG0YWiw== 0000950134-02-008246.txt : 20020709 0000950134-02-008246.hdr.sgml : 20020708 20020708171821 ACCESSION NUMBER: 0000950134-02-008246 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020702 ITEM INFORMATION: FILED AS OF DATE: 20020708 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFFILIATED COMPUTER SERVICES INC CENTRAL INDEX KEY: 0000002135 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 510310342 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12665 FILM NUMBER: 02698148 BUSINESS ADDRESS: STREET 1: 2828 N HASKELL AVE STREET 2: PO BOX 219002 CITY: DALLAS STATE: TX ZIP: 75204 BUSINESS PHONE: 2148416111 MAIL ADDRESS: STREET 1: 2828 N HASKELL CITY: DALLAS STATE: TX ZIP: 75204 FORMER COMPANY: FORMER CONFORMED NAME: AFFILIATED COMPUTER SYSTEMS INC DATE OF NAME CHANGE: 19721130 FORMER COMPANY: FORMER CONFORMED NAME: ACS INVESTORS INC DATE OF NAME CHANGE: 19940603 8-K 1 d98203e8vk.txt FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 2, 2002 Affiliated Computer Services, Inc. (Exact name of registrant as specified in its charter) DELAWARE 0-24787 51-0310342 (State of other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 2828 NORTH HASKELL AVENUE, DALLAS, TEXAS 75204 (Address of principal executive offices) (Zip code) Registrant's telephone number including area code: (214) 841-6111 NOT APPLICABLE (Former name or former address if changed from last report) ================================================================================ ITEM 9. REGULATION FD DISCLOSURE Affiliated Computer Services, Inc. ("ACS") hereby furnishes the following information under this Item 9. Pursuant to the rules and regulations of the Securities and Exchange Commission, such information is not deemed to be filed thereunder. ACS hereby confirms recent newspaper articles, including quotes by ACS officers, that it is in on-going discussions with Procter & Gamble Co. ("P&G") concerning the possible acquisition by ACS of P&G's shared services division, which currently provides certain back office services to P&G, including information technology, employee services, workplace services, and some parts of purchasing and accounting operations, and a possible long-term outsourcing contract with P&G pursuant to which ACS would provide such services to P&G on a post-acquisition basis. Notwithstanding the foregoing, ACS and P&G have not entered into a letter of intent or agreement in principle concerning any such transaction and agreement and there can be no assurance that any such transaction or agreement will occur. If ACS and P&G determine to proceed with any such transaction or agreement, the definitive documentation would not be finalized for several months. Furnished herewith as Exhibits 99.1, 99.2, 99.3 and 99.4 are certain news articles that have recently appeared concerning the foregoing matters.
Exhibit Number Description - ------- ----------- 99.1 Article titled "EDS Withdraws Bid for Contract From P&G, Citing Heavy Risks" in the Wall Street Journal, dated July 2, 2002. 99.2 Article titled "Affiliated Computer Services in Talks to Buy P&G's Back-Office Operations" in the Wall Street Journal, dated July 3, 2002. 99.3 Article titled "Procter & Gamble pact with ACS likely" in the Dallas Morning News, dated July 4, 2002. 99.4 Article titled "Affiliated Is Nearing Deal to Buy P&G's Back-Office Operations" in the Wall Street Journal, dated July 5, 2002.
2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. AFFILIATED COMPUTER SERVICES, INC. By: /s/ Warren D. Edwards -------------------------------------- Name: Warren D. Edwards Title: Executive Vice President and Chief Financial Officer Date: July 8, 2002 3 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 99.1 Article titled "EDS Withdraws Bid for Contract From P&G, Citing Heavy Risks" in the Wall Street Journal, dated July 2, 2002. 99.2 Article titled "Affiliated Computer Services in Talks to Buy P&G's Back-Office Operations" in the Wall Street Journal, dated July 3, 2002. 99.3 Article titled "Procter & Gamble pact with ACS likely" in the Dallas Morning News, dated July 4, 2002. 99.4 Article titled "Affiliated Is Nearing Deal to Buy P&G's Back-Office Operations" in the Wall Street Journal, dated July 5, 2002.
4 EX-99.1 3 d98203exv99w1.txt WALL STREET ARTICLE - EDS EXHIBIT 99.1 JULY 2, 2002 TECHNOLOGY EDS WITHDRAWS BID FOR CONTRACT FROM P&G, CITING HEAVY RISKS BY ELLIOT SPAGAT Staff Reporter of THE WALL STREET JOURNAL Electronic Data Systems Corp., facing increasing concerns about the risks and accounting issues tied to super-size contracts, said it withdrew its bid for a giant outsourcing contract from Procter & Gamble Co. The Plano, Texas, computer-services firm has been under scrutiny since WorldCom Inc., one of its largest customers, revealed last week that it inflated its financial results with improper accounting. Monday, EDS detailed its exposure to WorldCom for the first time, saying that it expects to have booked about $150 million in WorldCom revenue at June 30 for which it hasn't been paid. EDS said that $60 million of that figure hasn't yet been billed. Worries about WorldCom and EDS's other big contracts sent the company's shares down 18% Monday, or $6.70, to $30.45 in 4 p.m. New York Stock Exchange trading. EDS shares have plummeted 35% since WorldCom disclosed the accounting debacle last week. Shares of International Business Machines Corp. fell on investor concern over some of Big Blue's long-term contracts with major customers that are in financial straits. Like EDS, IBM often signs large, multiyear contracts with big corporate customers to manage their computer networks or provide some other information-technology service. IBM spokeswoman Carol Makovich declined to comment on the stock activity or specific customer relationships. At 4 p.m. in New York Stock Exchange composite trading, IBM shares were off $4.40, or 6.1%, at $67.60. EDS got a boost from Standard & Poor's, which said Monday that the WorldCom issue won't have an impact on EDS's investment-grade debt rating. However, the WorldCom blowup has focused more attention on how EDS books revenue and expenses from big projects. Under percentage-of-completion accounting, EDS books some revenue before it is billed, and spreads some expenses out during several years. That way, it doesn't post outsized losses in the early years, when costs are high, or lopsided gains in the final years, when money pours in. Karl Keirstead, an analyst at Lehman Brothers, said it is impossible to gauge the actual profits on EDS's massive deals. "Ultimately, however, it comes down to a question of trust," Mr. Keirstead wrote in a note Monday to investors in which he raised his rating on EDS to strong buy from buy. "We are prepared to put a stake in the ground and declare that we believe in the integrity of the EDS management team and that the CFO and his reports are not playing accounting games to boost reported earnings." The P&G deal, an unusually large project that is valued at about $1 billion a year, has been up for grabs since late last year. Withdrawing from the bidding will make it more difficult this year for EDS and its chief executive, Richard Brown, to reach his target of surpassing last year's contract signings of $31.4 billion. P&G, the maker of Tide, Pampers and Crest, is asking its outsourcing partner to buy part of its operations and to take over about 80% its back-office functions, such as human resources, accounting, payroll and travel services, as well as computer services. "The risk profile was just too high," said EDS spokesman Jeff Baum. A P&G spokesman said the company was "surprised" by EDS's withdrawal but that it still hopes to decide on a partner in the fall. ACS will continue to pursue the project as long as it doesn't erode profits, said Mark King, ACS's chief operating officer. Massive contracts have fueled revenue growth at EDS in recent years, but they require big upfront expenses, which cut into cash flow. Among EDS's big contracts are its October 1999 deal with WorldCom, in which EDS was to receive $6.4 billion over 11 years for running WorldCom computers and WorldCom was to get $6 billion over the same time for providing telecom services to EDS and its customers. - -------------------------------------------------------------------------------- WORLDCOM'S FALL See complete coverage of WorldCom's troubles at wsj.com/WorldCom, including related articles, a clickable stock chart and an online discussion. EDS's Outsourcing Deals Deliver Big Revenue Growth and Big Risks 07/01/02 - -------------------------------------------------------------------------------- EDS said it is required to pay WorldCom as much as $600 million a year, depending on the services it uses. EDS said WorldCom's woes will hurt its ability to meet its obligations to WorldCom, because EDS sells WorldCom services to it customers. EDS said it believes it is entitled to relief from its contractual obligations and plans to talk to WorldCom about that. A WorldCom spokesman, Brad Burns, said the company had no plans to renegotiate the pacts. EDS said WorldCom, under existing agreements, was expected to account for $160 million to $175 million in revenue and per-share earnings of three cents to four cents in each of the last two quarters of this year. EDS posted $21.54 billion in revenue last year. Shares of other computer-services firms also slid Monday. Computer Sciences Corp. was off 13% at $41.68, and Perot Systems was down 13% to $9.50, all on the New York Stock Exchange. - -- Emily Nelson and Jerry Guidera contributed to this article. WRITE TO Elliot Spagat at elliot.spagat@wsj.com EX-99.2 4 d98203exv99w2.txt WALL STREET JOURNAL ARTICLE - AFFILIATED COMPUTER EXHIBIT 99.2 WEDNESDAY JULY 3, 5:42 PM EASTERN TIME AFFILIATED COMPUTER SERVICES IN TALKS TO BUY P&G'S BACK-OFFICE OPERATIONS By: Elliot Spagat, Staff Reporter Of The Wall Street Journal DALLAS -- Affiliated Computer Services Inc. is the sole candidate to buy Procter & Gamble Co .'s back-office operations and it is in serious discussions to buy those operations for equity as part of an outsourcing deal valued at up to $8 billion over 10 years, people familiar with the matter said Wednesday. P&G and Affiliated officials emphasized that key details still must be negotiated, but a P&G spokesman said the company isn't talking with any of Affiliated's rivals after considering "virtually every player in the industry." The two companies have been in discussions for about 15 months. "We are focusing solely on [Affiliated]," said the P&G spokesman, Damon Jones. "We haven't made a final decision and things change, but that's where we're focused." P&G, the maker of Tide, Pampers and Crest, would become one of Affiliated's largest shareholders, said Mark King, chief operating officer of Dallas -based Affiliated. T. Rowe Price Group Inc. (TROW) is currently the largest holder with about a 10% stake, he said. P&G would also pay Affiliated $700 million to $800 million a year for 10 years to manage about 80% of its back-office operations -- ranging from payroll and human resources to accounting and travel services, said one person close to the matter. About 5,700 P&G employees in some 60 countries would move to Affiliated, which posted $2.21 billion in revenue for fiscal nine months ended March 31 . The deal would add to Affiliated's earnings immediately, Mr. King said. Affiliated was competing against its much-larger, cross-town rival, Electronic Data Systems Corp. , which withdrew its bid Monday, saying the acquisition price and initial costs were too high. P&G said it was "surprised" by EDS' move. Affiliated denied that that the initial costs were high, saying it would keep capital spending at about 5% of revenue. "If EDS believed it was going to be capital-intensive, then they must have been offering a different solution, Mr. King said. "This deal is not capital-intensive." Mr. Jones, the P&G spokesman, agreed that capital expenses would be "very low." The deal would accelerate a trend among outsourcing companies to expand from the traditional work of running computer networks and phone systems to more labor-intensive jobs like processing expenses and answering employee questions about stock options. It would rank as one of the largest outsourcing deals ever. Affiliated employs 35,000 people, including 16,000 that were added in the last year, Mr. King said. About 5,500 joined the company in its recent acquisition of Lockheed Martin (NYSE: LMT - News) Corp.'s subsidiary. Write to Elliot Spagat at elliot.spagat@wsj.com EX-99.3 5 d98203exv99w3.txt DALLAS MORNING NEWS ARTICLE - ACS EXHIBIT 99.3 Procter & Gamble pact with ACS likely Multibillion-dollar deal would raise the profile of the Dallas company 07/04/2002 By CRAYTON HARRISON / The Dallas Morning News Affiliated Computer Services Inc. took a step toward the big leagues Wednesday, confirming that it's negotiating to sign a major, multibillion-dollar contract with Procter & Gamble Co. by the end of this year. Dallas-based ACS had been competing with cross-town rival Electronic Data Systems Corp. for the deal, worth about $8 billion to $10 billion over 10 years. But EDS said Monday that it was walking away from the deal. The pact would be the most high-profile contract ever for ACS, which had revenue of about $2 billion last year. "Such a large opportunity sets the stage, definitely, for them to really go up a notch to the category of the largest outsourcers in the country," said Joseph Vafi, an analyst at Robertson Stephens. That category includes International Business Machines Corp., the largest computer services firm, and EDS, the second largest, Mr. Vafi said. In negotiations, ACS hasn't run into the problems that EDS said it experienced, ACS chief operating officer Mark King said. P&G wants to sell its business operations, including human resources, finance, accounting and information technology, then pay for each service in an outsourcing deal. EDS, based in Plano, said P&G's asking price was too high. ACS included an equity stake in its bid for the business operations, Mr. King said. "We wanted the long-term prospects of ACS to be closely aligned with those of P&G," Mr. King said. The equity stake was fine with P&G, said the company's spokesman, Damon Jones. "ACS stock is very attractive. They've been outperforming their competitors," Mr. Jones said. ACS shares rose $1.87 to $45.35 Wednesday. The stock is down 15 percent this year. EDS shares are down more than 50 percent this year. On Wednesday, they rose $2.25 TO $32.37. E-mail charrison@dallasnews.com EX-99.4 6 d98203exv99w4.txt WALL STREET JOURNAL ARTICLE - AFFILIATED COMPUTER EXHIBIT 99.4 JULY 5, 2002 TECHNOLOGY AFFILIATED IS NEARING DEAL TO BUY P&G'S BACK-OFFICE OPERATIONS BY ELLIOT SPAGAT Staff Reporter of THE WALL STREET JOURNAL DALLAS -- Affiliated Computer Services Inc. is nearing a deal to buy Procter & Gamble Co.'s back-office operations and manage the operations under a 10-year contract valued at up to $8 billion. Affiliated would pay for the operations entirely in stock, making P&G, the maker of Tide, Pampers and Crest, one of its largest shareholders, said Mark King, chief operating officer. P&G would pay Affiliated $700 million to $800 million a year for 10 years to manage about 80% of its back-office operations -- ranging from payroll and human resources to accounting and travel services, said one person close to the matter. About 5,700 P&G employees in some 60 countries would move to Affiliated. ==================================== OUTSOURCED o Procter & Gamble to Outsource About 80% of Back-Office Work 06/14/02 o P&G Narrows Outsourcing Field; J.P. Morgan Is Down to 2 as Well 05/14/02 ==================================== An increasing number of companies are farming out back-office operations such as human resources in an effort to lower costs. P&G and Affiliated said key details still must be negotiated, but a P&G spokesman, Damon Jones, said the Cincinnati company isn't talking with anyone else after considering "virtually every" Affiliated rival. The two companies have been in discussions for about 15 months. Affiliated, which posted $2.21 billion in revenue for the nine months ended March 31, said the P&G deal would add to earnings immediately. Electronic Data Systems Corp., the world's No. 2 computer-services company after International Business Machines Corp., withdrew its bid Monday, saying the acquisition price was too high. EDS has been under sharp investor scrutiny since WorldCom Inc., one of its largest customers and suppliers, was accused of accounting fraud. Affiliated said its upfront costs won't be unusually high. "This deal is less capital-intensive than almost any of the big deals that we're aware of," said Mr. King. Mr. King said Affiliated will book revenue when it is to be paid, rather than recording unbilled revenue. EDS, under generally accepted accounting principles, uses "percentage of completion" accounting, which allows it to record some revenue during the early stages of large contracts, before even sending a bill. Such "unbilled revenue" at the Plano, Texas, company doubled to $2.18 billion at March 31 from a year earlier. WRITE TO Elliot Spagat at elliot.spagat@wsj.com -----END PRIVACY-ENHANCED MESSAGE-----