EX-99.1 3 d07764exv99w1.txt PRESS RELEASE Exhibit 99.1 (ACS LOGO) FOR IMMEDIATE RELEASE ANALYST CONTACT MEDIA CONTACT --------------- ------------- Warren Edwards Lesley Pool Executive Vice President/ Senior Vice President/ Chief Financial Officer Chief Marketing Officer ACS, Inc. ACS, Inc. 214-841-8082 214-841-8028 warren.edwards@acs-inc.com lesley.pool@acs-inc.com ACS ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2003 RESULTS AND POSSIBLE DIVESTITURE AND ACQUISITION ACTIVITY DALLAS, TEXAS - July 29, 2003 - ACS (NYSE: ACS), a leading full-service provider of business process and technology outsourcing solutions, announced today record diluted earnings per share of $0.60 for the fourth quarter ended June 30, 2003. This represents an increase of 22% compared to $0.49 per share for the same quarter last fiscal year. Net income for the fourth quarter was $83.9 million, an increase of 23% over net income of $68.1 million for the same quarter last year. Revenues for the fourth quarter ended June 30, 2003 increased 18% to $1.014 billion, compared to $857 million for the same period last year. For the year ended June 30, 2003, diluted earnings per share was $2.20, a 25% increase compared to $1.76 for the prior year. Net income for the year ended June 30, 2003 was $306.8 million, an increase of 34% compared to net income of $229.6 million for the prior year. Revenues for the year ended June 30, 2003 increased 24% to $3.8 billion compared to revenues of $3.1 billion for the prior year. ACS is in late stage discussions regarding the possible divestiture of its federal government business, excluding the education services business and certain other assets, and the purchase of a commercial information technology business. The Company is in the process of negotiating the related definitive documentation and finalizing necessary due diligence. Before executing such definitive documentation each party must obtain board of directors' approval. Pending announcement of these potential transactions, the Company will delay providing updated fiscal year 2004 guidance during its earnings conference call scheduled for 10:00 am, CDT on Tuesday, July 29, 2003. However, based upon presently available information, the Company believes that, if these transactions are consummated, the impact will be non- dilutive to previous fiscal year 2004 earnings per share guidance of $2.57 to $2.66 per share and should enable the Company to achieve earnings toward the upper-end of this range. "Fiscal year 2003 was a great year for ACS", said Jeff Rich, ACS' Chief Executive Officer. "We continued to solidify our position as a leading provider of business process outsourcing services with new business signings exceeding $700 million of annualized new revenues for the year. In addition, we delivered solid financial results with strong revenue growth, improved margins, and record cash flow. In fiscal 2004, we will continue to focus on our clients and build our core business." ACS' FOURTH QUARTER RESULTS INCLUDE THE FOLLOWING KEY HIGHLIGHTS: o Revenue for the fourth quarter of fiscal 2003 approximated $1.014 billion and resulted in total revenue growth of 18% when compared to the prior year quarter. Internal revenue growth for the quarter was 14% with the remainder from acquisitions. During the fourth quarter, and after considering accounting guidance and current trends in similar reporting methods by other public companies, which indicate gross presentation of revenue for billings of costs reimbursed under a cost reimbursable arrangement is appropriate only when there are sufficient elements of control over the provision of the underlying services or costs incurred, the Company determined that expenses under two state and local cost reimbursable contracts should be presented as a reduction in gross billings. These cost reimbursable contracts were included as new business signings in the fourth quarter of fiscal year 2002 and the Company began operating these contracts in the first quarter of fiscal year 2003. While ACS has certain risks, including credit risk, under these two arrangements and is contractually the primary payment obligor, the Company concluded that it did not have sufficient control over the underlying services. As a result, fourth quarter 2003 results reflect $26.6 million of expenses netted against revenue. For comparability, expenses of the prior three quarters of fiscal 2003 in the amount of $59.8 million have been reclassified in our full year results. This reclassification has no impact on historical, current or future operating income or earnings per share. o Diluted earnings per share of $0.60 increased 22% when compared to the prior year quarter. o New business signings for the fourth quarter totaled $145 million of annualized revenue. o Operating and free cash flow were company records this quarter. Cash flow from operations for the fourth quarter was approximately $175 million. Free cash flow (defined as operating cash flow less $52 million in capital expenditures) for the quarter was $123 million. As a result, the Company paid down approximately $78 million of debt outstanding under its credit facility during the quarter. The Company's debt to capitalization ratio at June 30, 2003 was 17%, decreasing from 25% at June 30, 2002. 2 ACS' FISCAL YEAR 2003 RESULTS INCLUDE THE FOLLOWING KEY HIGHLIGHTS: o Revenue for the year ended June 30, 2003 was $3.8 billion, reflecting the new revenue presentation and represents an increase of 24% when compared to prior year period. Internal revenue growth during the fiscal year was 15%. The remaining growth was from acquisitions. o Diluted earnings per share for the year ended June 30, 2003 was $2.20, up 25% versus the prior year. o Annual recurring new business signings in fiscal year 2003 represented over $700 million of annual recurring revenue. This represents an increase of nearly 47% when compared to fiscal year 2002. o Cash flow from operations for the year ended June 30, 2003 was $545 million, an increase of 47% over the prior year. Free cash flow (defined as operating cash flow less capital expenditures of $205 million) during the year was $340 million, an increase of approximately 49% versus fiscal year 2002. The Company will host a conference call on its website at www.acs-inc.com at 10:00 a.m. CDT today to discuss fourth quarter and fiscal year 2003 results and will refer to a presentation provided on the Investor Relations page of the ACS website. During the conference call, management will discuss certain non-generally accepted accounting principles ("GAAP") financial measures for which reconciliations to the most directly comparable GAAP financial measures will also be provided on the Investor Relations page of ACS' website. ACS, a Fortune 500 company with more than 40,000 people supporting operations in nearly 100 countries, provides business process and technology outsourcing solutions to world-class commercial and government clients. The Company's Class A common stock trades on the New York Stock Exchange under the symbol "ACS". ACS makes technology work. Visit ACS on the Internet at http://www.acs-inc.com. Statements about the Company's outlook and all other statements in this release other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all references to financial estimates rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside the Company's control, that could cause actual results to differ materially from such statements. While the Company believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors, especially the finalization of the pending divestiture and acquisition transactions discussed above; the timing and magnitude of technological advances; the performance of recently acquired businesses; the prospects for future acquisitions; the possibility that a current customer could be acquired or otherwise be affected by 3 a future event that would diminish their information technology requirements; the competition in the information technology industry and the impact of such competition on pricing, revenues and margins; the degree to which business entities continue to outsource information technology and business processes; uncertainties surrounding budget reductions or changes in funding priorities or existing government programs and the cost of attracting and retaining highly skilled personnel. These factors, when applicable, are discussed in the Company's filings with the Securities and Exchange Commission, including the most recent Form 10-Q and Form 10-K, a copy of which may be obtained through the Company without charge. ACS disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future event, or otherwise. USE OF NON-GAAP FINANCIAL INFORMATION The Company reports its financial results in accordance with GAAP. However, the Company uses certain non-GAAP performance measures, including free cash flow and internal revenue growth, to provide both management and investors a more complete understanding of the Company's underlying operational results. These non-GAAP measures are indicators management uses to provide additional meaningful comparisons between current results and prior reported results, and as a basis for planning and forecasting for future periods. For example, the Company believes free cash flow provides another measure of cash flow available for operations, after the Company has satisfied the capital expenditure requirements of its operations. In the consolidated statements of cash flow, the Company reports year-to-date net cash provided by operating activities (cash flow from operations) and capital expenditures (purchases of property, equipment and software, net of sales), and does not adjust those reported amounts in deriving the measure of free cash flow. The Company uses the calculation of internal revenue growth to measure the revenue growth of the Company excluding the acquired revenue from acquisitions. The Company determines acquired revenues based on pre-acquisition normalized revenues of acquired companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for comparable metrics prepared in accordance with GAAP in the United States. 4 AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------------- ---------------------------- 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Revenues $1,014,178 (1) $ 856,785 $3,787,206 (1) $3,062,918 Expenses: Wages and benefits 472,490 373,877 1,716,946 1,350,057 Services and supplies 256,973 250,223 994,410 888,497 Rent, lease and maintenance 90,441 71,946 351,855 278,621 Depreciation and amortization 42,370 31,682 152,128 110,486 Other operating expenses 12,333 12,729 52,586 34,625 ---------- ---------- ---------- ---------- Total operating expenses 874,607 740,457 3,267,925 2,662,286 Operating income 139,571 116,328 519,281 400,632 Interest expense 5,942 4,648 25,194 30,619 Other non-operating (income) expense, net (593) 2,732 3,140 9,557 ---------- ---------- ---------- ---------- (3) Pretax profit 134,222 108,948 490,947 360,456 Income tax expense 50,330 40,855 184,105 130,860 (4) ---------- ---------- ---------- ---------- Net income $ 83,892 $ 68,093 $ 306,842 $ 229,596 ========== ========== ========== ========== Earnings per common share: Basic $ 0.63 $ 0.52 $ 2.32 $ 1.94 ========== ========== ========== ========== Diluted (2) $ 0.60 $ 0.49 $ 2.20 $ 1.76 ========== ========== ========== ========== Shares used in computing earnings per common share: Basic 132,998 131,871 132,445 118,646 Diluted (2) 143,791 143,215 143,430 137,464
5 AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT AS NOTED OTHERWISE) (1) For the three months and year ended June 30, 2003, the Company generated internal revenue growth of 14% and 15%, respectively. Internal revenue growth is measured as follows ($ in millions):
QUARTER ENDED JUNE 30, YEAR ENDED JUNE 30, ------------------------------------------ --------------------------------------- 2003 2002 $ Growth Growth % 2003 2002 $ Growth Growth % -------- -------- -------- -------- -------- -------- -------- -------- Total revenues $1,014.2 $ 856.8 $ 157.4 18% $3,787.2 $3,062.9 $ 724.3 24% Less: divestitures -- (6.7) 6.7 (37.3) 37.3 -------- -------- -------- -------- -------- -------- -------- -------- Adjusted revenues $1,014.2 $ 850.1 $ 164.1 19% $3,787.2 $3,025.6 $ 761.6 25% Acquired revenues * $ 72.2 $ 23.2 $ 49.0 5% $ 451.7 $ 146.3 $ 305.4 10% Internal revenues 942.0 826.9 115.1 14% 3,335.5 2,879.3 456.2 15% -------- -------- -------- -------- -------- -------- -------- -------- Total $1,014.2 $ 850.1 $ 164.1 19% $3,787.2 $3,025.6 $ 761.6 25% ======== ======== ======== ======== ======== ======== ======== ========
* Acquired revenues are based on pre-acquisition normalized revenues of acquired companies. (2) The diluted earnings per share calculations includes the after-tax impact of interest and amortization of offering costs on convertible notes in the amount of $2,055 and $2,054 for the three months ended June 30, 2003 and 2002, respectively, and $8,218 and $12,610 for the years ended June 30, 2003 and 2002, respectively. In addition, the diluted weighted shares include 7,298 shares for the three months and year ended June 30, 2003, and 7,298 and 14,851 shares for the three months and year ended June 30, 2002, representing shares that would be issued upon conversion of the notes. (3) Fiscal year 2002 includes a $7.4 million charge, or approximately 3 cents per share, net of tax effect, on a fully diluted basis, associated with the write-down of a cost basis investment to its estimated realizable value. (4) Fiscal year 2002 includes certain tax benefits based on tax events that occurred during the third quarter of fiscal year 2002. Due to new IRS regulations, $2.1 million of tax benefit has been recognized for additional deductions associated with the summer 2000 divestiture program. Also included is $1.0 million for valuation of deferred state tax liabilities and $1.2 million for the full realization of tax deductions related to previous transaction costs. The aggregate tax benefit of $4.3 million increased fully diluted earnings per share by approximately 3 cents. 6 AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, JUNE 30, 2003 2002 (UNAUDITED) (AUDITED) ----------- ----------- ASSETS: Current assets Cash and cash equivalents $ 51,170 $ 33,814 Accounts receivable, net 835,478 736,471 Inventory 6,245 9,740 Other current assets 86,605 94,464 ----------- ----------- Total current assets 979,498 874,489 Property, equipment and software, net 478,212 394,830 Goodwill 1,905,878 1,846,482 Other intangible assets, net 265,091 234,287 Other long-term assets 70,026 53,479 ----------- ----------- Total assets $ 3,698,705 $ 3,403,567 =========== =========== LIABILITIES: Current liabilities: Accounts payable $ 58,376 $ 72,858 Accrued compensation 132,027 125,290 Other accrued liabilities 272,578 210,003 Income taxes payable 17,057 20,452 Deferred taxes 26,054 7,344 Current portion of long-term debt 1,764 1,330 Current portion of unearned revenue 49,620 48,636 ----------- ----------- Total current liabilities 557,476 485,913 Convertible notes 316,990 316,990 Other long-term debt 181,350 391,243 Long-term deferred taxes 176,484 95,394 Other long-term liabilities 37,217 18,607 ----------- ----------- Total liabilities $ 1,269,517 $ 1,308,147 ----------- ----------- STOCKHOLDERS' EQUITY Total stockholders' equity 2,429,188 2,095,420 ----------- ----------- Total liabilities and stockholders' equity $ 3,698,705 $ 3,403,567 =========== ===========
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