EX-99.1 2 d38652exv99w1.htm PRESS RELEASE exv99w1
 

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
Affiliated Computer Services, Inc.
  Affiliated Computer Services, Inc.
214-841-8082
  214-841-8028
warren.edwards@acs-inc.com
  lesley.pool@acs-inc.com
ACS Announces Fourth Quarter and Fiscal Year 2006 Results
—Also Announces New $1 Billion Share Repurchase Program—
DALLAS, TEXAS: August 9, 2006 — Affiliated Computer Services, Inc., (NYSE: ACS), a premier provider of business process outsourcing and information technology solutions, announced fourth quarter fiscal year 2006 revenues of $1.38 billion, an increase of 14% compared to the fourth quarter of the prior year. The Company’s internal revenue growth rate accelerated to 8% for the quarter. Fourth quarter fiscal year 2006 reported diluted earnings per share was $0.73, and included certain restructuring charges and other items.
Fiscal year 2006 revenues were $5.35 billion, a 23% increase compared to the prior year. Internal revenue growth was 7% for the year, adjusted for the divestiture of the Government Welfare to Workforce Services business. Reported diluted earnings for fiscal 2006 were $2.90, and included certain restructuring charges and other items.
The Company signed $144 million of annual recurring revenue during the quarter resulting in total fiscal year new business signings of $762 million. This represents the highest annual total of new business signings in ACS history and 13% growth over fiscal year 2005, adjusted for the divestiture of the Government Welfare to Workforce Services business.
The Company’s Board of Directors has authorized a new repurchase program of up to $1 billion of its Class A common stock. This new repurchase authorization is incremental to the $1 billion program announced June 12, 2006. The new program, which is open ended, will allow the Company to repurchase its shares on the open market, from time to time, in accordance with the requirements of the Securities and Exchange Commission, including shares that could be purchased pursuant to Rule 10b5-1. The number of shares repurchased and the timing of purchases will be based upon the level of cash and debt balances, general business conditions, and other factors, including alternative investment opportunities. “We are pleased that the Company is extending its previously announced open market repurchase program by increasing its authorization by $1 billion”, said Darwin Deason, ACS’ Founder and Chairman of the Board of Directors. “ACS continually looks for opportunities to enhance shareholder value and this new repurchase program reflects our confidence in ACS’ long-term prospects.”
“Fiscal year 2006 was an extremely active year. Our major initiatives netted positive results in client renewals, revenue and sales pipeline growth, and expansion of capabilities and geographic reach. We exit

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the year with a great foundation for growth,” said Mark King, ACS’ President and Chief Executive Officer. “We signed record new business, significantly improved our government sales process and our new business pipelines increased throughout the year and at year-end were at record levels. We also restructured certain operations and we will continue our efforts in the coming year as we look to further improve our overall competitive position for fiscal year 2007 and beyond. We acquired several companies that increased our capabilities in important markets such as global transportation, customer care and human resource outsourcing and also divested our underperforming Government Welfare to Workforce Services business. I would like to thank our 55,000 employees for their significant contributions in fiscal year 2006 and their continued support of our clients.”
Key highlights from the fourth quarter of fiscal year 2006 include:
    Total revenue growth was 14% over the prior year quarter. Revenue growth was 19% after adjusting for the divestiture of the Government Welfare to Workforce Services (“WWS”) business, substantially all of which was sold in the second quarter of fiscal year 2006 (“WWS Divestiture”). The Commercial segment revenue grew 26% and accounted for 60% of revenues this quarter. Commercial internal revenue growth was 13%. The Government segment had 1% internal revenue growth and accounted for 40% of revenues this quarter.
 
    Reported diluted earnings per share was $0.73 for the fourth quarter of fiscal year 2006. Reported results include $0.04 per diluted share related to restructuring activities and asset impairments, a $0.02 per diluted share charge related to the North Carolina Medicaid contract, $0.02 per diluted share of legal expenses related to the on-going stock option investigation and shareholder derivative lawsuits, $0.01 per diluted share related to incremental transaction costs related to the HR business we acquired from Mellon, a $0.02 per diluted share tax benefit primarily related to certain Federal tax deductions, and $0.01 per diluted share benefit related to a residual gain on the WWS Divestiture.
 
    Cash flow from operations and free cash flow for the fourth quarter was $167 million and $55 million, respectively. Capital expenditures and additions to intangible assets were $112 million, or 8% of revenues.
 
    Annualized recurring new business sold was $144 million and was split evenly between our Commercial and Government segments.
 
    During the fourth quarter, ACS completed the acquisition of Intellinex, LLC for approximately $75 million. Intellinex is a leader in integrated learning solutions. Intellinex’s proven technology content delivery platform and methodology is used by some of the largest companies in the world. Intellinex had trailing twelve month revenues of approximately $84 million.
 
    Subsequent to June 30, the Company acquired Primax Recoveries, Inc. for $40 million, plus contingent payments of up to $10 million based on future performance. Primax, with trailing twelve month revenues of approximately $39 million, is one of the industry’s oldest and largest health care recovery firms providing subrogation and overpayment recovery services to help its clients improve their profitability.
Key highlights from ACS’ fiscal year 2006 results include:
    Total revenue growth and internal revenue growth for the fiscal year ended June 30, 2006, excluding the WWS Divestiture, were 27% and 7%, respectively.

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    Annualized recurring new business signings were a Company record at $762 million for fiscal year 2006, representing 13% growth over the prior year after adjusting for closed new business related to the WWS Divestiture. These new business signings represent over $2.8 billion of total contract value.
 
    During fiscal year 2006, the Company repurchased approximately 15.0 million shares for an aggregate purchase price of $849 million before transaction costs, or an average share purchase price of approximately $56.69. During the fourth quarter, the Company repurchased approximately 5.5 million shares for approximately $269 million before transaction costs, or an average purchase price per share of $49.39 pursuant to the June 12, 2006 $1 billion share repurchase program (the “Prior Program”). Since July 1, 2006, the Company repurchased an additional 9.7 million shares at an average price of $50.71 per share before transaction costs. As of August 9, 2006, the Company has approximately $238 million of availability remaining under the Prior Program.
 
    Cash flow from operations for the year was $635 million, or 12% of revenue, and free cash flow was $205 million, or 4% of revenue. However, cash flow from operations and free cash flow during the third quarter were adversely impacted by final settlement payments of $86 million related to the Mellon transition services agreement, of which $76 million benefited our fourth quarter fiscal year 2005 results, and Mellon pre-acquisition bonus payments of $26 million. Capital expenditures and additions to intangibles were $430 million, or 8% of revenues.
 
    Diluted earnings per share for the fiscal year ended June 30, 2006 was $2.90. Reported results included:
    $0.11 per diluted share related to restructuring activities and asset impairments,
 
    $0.03 per diluted share related to incremental transaction expenses related to the HR business we acquired from Mellon,
 
    $0.02 per diluted share related to the write-off of debt issue costs related to our previous credit facility,
 
    $0.01 per diluted share related to the on-going stock option investigation and shareholder derivative lawsuits,
 
    $0.03 per diluted share related to legal expenses associated with the activities of our Special Committee of the Board of Directors, and for legal fees associated with the unsolicited offer regarding a potential sale of the Company and the possible recapitalization of the Class B shares, and for legal settlements and related legal fees,
 
    $0.03 per diluted share write-down of accounts receivable retained from the fiscal year 2004 divestiture of the majority of our Federal government business and the assessment of risk related to bankruptcies of certain airline clients,
 
    $0.02 per diluted share charge related to the North Carolina Medicaid contract,
 
    $0.03 per diluted share charge for compensation expense related to the departure of the former Chief Executive Officer,
 
    $0.14 per diluted share gain related to the WWS Divestiture.
    The Company’s results for both the fourth quarter and total fiscal year 2006 do not take into consideration the resolution of the stock option investigation or the stock-based compensation charge related to the investigation.
ACS will discuss these results on a conference call and webcast on www.acs-inc.com at 3:30 p.m. Central Time today. During the conference call, management will refer to a presentation provided on the Investor Relations page of ACS’ website which will contain certain non-generally accepted accounting principles

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(“GAAP”) financial measures, some of which are included herein as well as reconciliations to the most directly comparable GAAP financial measures.
ACS, a FORTUNE 500 company with more than 55,000 people supporting client operations in nearly 100 countries, provides business process outsourcing and information technology 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 www.acs-inc.com.
All statements in this news release that are not based on historical fact are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of our control, that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth in the Company’s prior filings with the Securities and Exchange Commission, including those set forth under the caption “Risk Factors” in the most recent quarterly report on Form 10-Q filed on May 15, 2006. In addition, we operate in a highly competitive and rapidly changing environment, and new risks may arise. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results. We disclaim any intention to, and undertake no obligation to, update or revise any forward-looking statement.

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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Dollars in thousands, except per share amounts
(Unaudited)
                         
    Three months ended     Proforma three  
    June 30     months ended  
    2006 (1)     2005     June 30, 2005 (6)  
Revenues
  $ 1,380,702     $ 1,214,392     $ 1,214,392  
Cost of revenues:
                       
Wages and benefits
    661,249       547,371       557,423  
Services and supplies
    298,889       268,448       268,448  
Rent, lease and maintenance
    171,272       138,968       138,968  
Depreciation and amortization
    78,437       65,073       65,073  
Other expenses
    7,568       10,649       10,649  
 
                 
Total cost of revenues
    1,217,415       1,030,509       1,040,561  
Gain on sale of business
    (425 )            
Other operating expenses
    13,469       5,179       5,179  
 
                 
Total operating expenses
    1,230,459       1,035,688       1,045,740  
 
                 
Operating income
    150,243       178,704       168,652  
Interest expense
    24,913       8,084       8,084  
Other non-operating income, net
    (3,610 )     (3,378 )     (3,378 )
 
                 
Pretax profit
    128,940       173,998       163,946  
Income tax expense
    42,040       63,021       59,388  
 
                 
Net income
  $ 86,900     $ 110,977     $ 104,558  
 
                 
Earnings per common share:
                       
Basic
  $ 0.74     $ 0.88     $ 0.83  
 
                 
Diluted
  $ 0.73     $ 0.87     $ 0.82  
 
                 
Shares used in computing earnings per common share:
                       
Basic
    118,131       126,087       126,087  
Diluted
    119,479       128,279       127,248  

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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Dollars in thousands, except per share amounts
(Unaudited)
                         
    Fiscal Year ended     Proforma Fiscal  
    June 30     Year ended  
    2006 (1,2,3,4)     2005 (5)     June 30, 2005 (6)  
Revenues
  $ 5,353,661     $ 4,351,159     $ 4,351,159  
Cost of revenues:
                       
Wages and benefits
    2,565,908       1,867,983       1,904,686  
Services and supplies
    1,168,540       1,046,341       1,046,341  
Rent, lease and maintenance
    646,474       503,132       503,132  
Depreciation and amortization
    289,852       232,779       232,779  
Other expenses
    39,629       23,687       23,687  
 
                 
Total cost of revenues
    4,710,403       3,673,922       3,710,625  
Gain on sale of business
    (32,907 )            
Other operating expenses
    56,747       22,756       22,756  
 
                 
Total operating expenses
    4,734,243       3,696,678       3,733,381  
 
                 
Operating income
    619,418       654,481       617,778  
Interest expense
    65,341       18,596       18,596  
Other non-operating income, net
    (9,396 )     (5,186 )     (5,186 )
 
                 
Pretax profit
    563,473       641,071       604,368  
Income tax expense
    201,377       225,126       211,916  
 
                 
Net income
  $ 362,096     $ 415,945     $ 392,452  
 
                 
Earnings per common share:
                       
Basic
  $ 2.94     $ 3.26     $ 3.08  
 
                 
Diluted
  $ 2.90     $ 3.19     $ 3.03  
 
                 
Shares used in computing earnings per common share:
                       
Basic
    123,197       127,560       127,560  
Diluted
    124,979       130,382       129,616  

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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(1)   During the fourth quarter of fiscal year 2006, the Company recorded the following:
    Restructuring charges and asset impairments of $6.5 million ($4.3 million after tax), or $0.04 per diluted share.
 
    A charge of $4.0 million ($2.7 million after tax), or $0.02 per diluted share, related to the North Carolina Medicaid contract.
 
    Legal fees of $2.9 million ($2.0 million after tax), or $0.02 per diluted share, related to the on-going stock option investigation and shareholder derivative lawsuits.
 
    Incremental transaction expenses related to the HR business we acquired from Mellon of $2.8 million ($1.9 million after tax), or $0.01 per diluted share.
 
    Tax benefit primarily related to certain Federal tax deductions resulting in a benefit to net income of approximately $2.8 million, or $0.02 per diluted share.
 
    A net residual divestiture gain of $0.3 million ($0.5 million after tax), or $0.01 per diluted share.
(2)   During the third quarter of fiscal year 2006, the Company recorded the following:
    Restructuring charges and related asset impairments of $4.3 million ($2.7 million after tax), or $0.02 per diluted share.
 
    Incremental transaction expenses related to the HR business we acquired from Mellon of $2.9 million ($1.8 million after tax), or $0.01 per diluted share.
 
    Charges for debt issue costs related to our previous credit facility of $4.1 million ($2.6 million after tax), or $0.02 per diluted share.
 
    Legal fees of $1.3 million ($0.8 million after tax), or $0.01 per diluted share, related to activities of the Special Committee of the Board of Directors.
 
    A retained Federal accounts receivable write-down of $2.4 million ($1.5 million after tax), or $0.01 per diluted share.
 
    A residual WWS Divestiture gain of $2.8 million ($1.7 million after tax), or $0.01 per diluted share.
(3)   During the second quarter of fiscal year 2006, the Company recorded the following:
    A net benefit before tax of $26.5 million ($15.8 million after tax), or $0.12 per diluted share, for the gain and charges related to the WWS Divestiture.
 
    Restructuring charges and related asset impairments totaling $10.4 million ($6.6 million after tax), or $0.05 per diluted share.
 
    Charges for legal settlements and related legal fees, and for legal fees associated with the unsolicited offer regarding a potential sale of the Company and the possible recapitalization of the Class B shares totaling $5.9 million ($3.7 million after tax), $0.03 per diluted share.
(4)   During the first quarter of fiscal year 2006, the Company recorded the following:
    A $5.4 million charge ($3.4 million after tax), or $0.03 per diluted share, for the departure of the former Chief Executive Officer.
 
    A $3.0 million charge ($1.9 million after tax), or $0.02 per diluted share, for the assessment of risk related to the bankruptcies of certain airline clients.
(5)   During the third quarter of fiscal year 2005, the Company recognized an income tax benefit related to the 2004 divestiture of the majority of our Federal business, resulting in a benefit to net income of approximately $9.4 million, or $0.07 per diluted share.

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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(6)   The prior year proforma results reflect the impact of Statement of Financial Accounting Standards No. 123(R), which requires companies to measure all employee stock-based compensation awards using a fair value method and recognize compensation costs in its financial statements. The Company adopted SFAS 123(R) on a prospective basis on July 1, 2005 and, as a result, we have presented proforma results of operations for the prior year periods for comparative purposes. ($ in thousands)
                                                   
    Three months ended       Fiscal Year ended  
    June 30, 2005       June 30, 2005  
            Pro Forma                       Pro Forma        
            Stock                       Stock        
            Compensation                       Compensation        
    As Reported     Expense     Pro Forma       As Reported     Expense     Pro Forma  
Revenues
  $ 1,214,392     $     $ 1,214,392       $ 4,351,159     $     $ 4,351,159  
Cost of revenues:
                                                 
Wages and benefits
    547,371       10,052       557,423         1,867,983       36,703       1,904,686  
Services and supplies
    268,448             268,448         1,046,341             1,046,341  
Rent, lease and maintenance
    138,968             138,968         503,132             503,132  
Depreciation and amortization
    65,073             65,073         232,779             232,779  
Other expenses
    10,649             10,649         23,687             23,687  
 
                                     
Total costs of revenues
    1,030,509       10,052       1,040,561         3,673,922       36,703       3,710,625  
Other operating expenses
    5,179             5,179         22,756             22,756  
 
                                     
Total operating expenses
    1,035,688       10,052       1,045,740         3,696,678       36,703       3,733,381  
 
                                     
 
                                                 
Operating income
    178,704       (10,052 )     168,652         654,481       (36,703 )     617,778  
 
                                                 
Interest expense
    8,084             8,084         18,596             18,596  
Other non-operating income, net
    (3,378 )           (3,378 )       (5,186 )           (5,186 )
 
                                     
 
                                                 
Pretax profit
    173,998       (10,052 )     163,946         641,071       (36,703 )     604,368  
 
                                                 
Income tax expense
    63,021       (3,633 )     59,388         225,126       (13,210 )     211,916  
 
                                     
 
                                                 
Net income
  $ 110,977     $ (6,419 )   $ 104,558       $ 415,945     $ (23,493 )   $ 392,452  
 
                                     

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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Dollars in Thousands
(Unaudited)
                 
    June 30, 2006     June 30, 2005  
ASSETS:
               
Cash and cash equivalents
  $ 100,837     $ 62,685  
Accounts receivable, net
    1,231,846       1,061,590  
Other current assets
    196,580       119,822  
 
           
Total current assets
    1,529,263       1,244,097  
Property, equipment and software, net
    870,020       677,241  
Goodwill, net
    2,456,654       2,334,655  
Other intangible assets, net
    475,701       466,312  
Other long-term assets
    170,799       128,533  
 
           
TOTAL ASSETS
  $ 5,502,437     $ 4,850,838  
 
           
LIABILITIES:
               
Accounts payable
  $ 104,473     $ 62,788  
Accrued compensation
    172,853       175,782  
Other accrued liabilities
    354,632       471,577  
Income taxes payable
          2,310  
Deferred taxes
    18,047       34,996  
Current portion of long-term debt
    23,074       6,192  
Current portion of unearned revenue
    152,026       84,469  
 
           
Total current liabilities
    825,105       838,114  
Long-term debt
    1,614,032       750,355  
Long-term deferred taxes
    336,544       240,210  
Other long-term liabilities
    237,807       183,731  
 
           
TOTAL LIABILITIES
    3,013,488       2,012,410  
 
           
TOTAL STOCKHOLDERS’ EQUITY
    2,488,949       2,838,428  
 
           
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY
  $ 5,502,437     $ 4,850,838  
 
           

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Frequently Used Terms
New business signings — While there are no third party standards or requirements governing the calculation of new business signings, new business signings are defined as recurring revenue from new contracts, including the incremental portion of renewals, signed during the period and represent the estimated first twelve months of revenue to be recorded under that contract after full implementation. We use new business signings as a measure of estimated recurring revenues represented by contractual commitments, both to forecast prospective revenues and to estimate capital commitments. Revenues are measured under GAAP.
Annual new business — is the preceding twelve months of new business signings at a point in time expressed in annual revenue, not total contract value.
Supplemental Information
We have provided the impact on pre-tax profit, net income and diluted earnings per share of certain transactions and events included in our reported results of operations, which management believes enhances the understanding of our financial results and the impact of those events and transactions on our results. Management believes this information provides additional information related to factors impacting our reported financial performance which may be useful to investors. The amount of the transaction or event is presented on a basis determined in accordance with generally accepted accounting principles as reflected in our reported consolidated results of operations. All per share measures are calculated on the same diluted per share basis as our reported diluted earnings per share. The per share impacts are not intended to reflect a per share amount that accrues directly to an investor’s benefit as a result of the particular transaction or event.
Use of Non-GAAP Financial Information
The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP financial measures and ratios, used in managing the Company’s business, may provide users of this financial information with additional meaningful comparisons between current results and prior reported results. Certain of the information set forth herein and certain of the information presented by the Company from time to time including free cash flow and internal revenue growth may constitute non-GAAP financial measures within the meaning of Regulation G adopted by the Securities and Exchange Commission. We have presented herein and we will present in other information we publish that contains any of these non-GAAP financial measures a reconciliation of these measures to the most directly comparable GAAP financial measure. The presentation of this additional information is not meant to be considered in isolation or as a substitute for comparable amounts determined in accordance with GAAP in the United States.
Internal Revenue Growth
Internal revenue growth is measured as total revenue growth less acquired revenue from acquisitions and revenues from divested operations. At the date of acquisition, we identify the trailing twelve months of revenue of the acquired company as the “pre-acquisition revenue of acquired companies.” Pre-acquisition revenue of the acquired companies is considered “acquired

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revenues” in our calculation, and revenues from the acquired company, either above or below that amount are components of “internal growth” in our calculation. We use the calculation of internal revenue growth to measure revenue growth excluding the impact of acquired revenues and the revenue associated with divested operations and we believe these adjustments to historical reported results are necessary to accurately reflect our internal revenue growth. Revenues from divested operations are excluded from the internal revenue growth calculation in the periods following the effective date of the divestiture. Our measure of internal revenue growth may not be comparable to similarly titled measures of other companies. (unaudited, $ in millions)
                         
    Three months ended June 30, (a)  
    2006     2005     Growth %  
Consolidated
                       
Total Revenues
  $ 1,381     $ 1,214       14 %
Less: Divested
          (53 )        
 
                 
Adjusted
  $ 1,381     $ 1,161       19 %
 
                 
 
                       
Acquired Revenues*
  $ 238     $ 106       11 %
Internal Revenues
    1,143       1,055       8 %
 
                 
Total
  $ 1,381     $ 1,161       19 %
 
                 
 
                       
Commercial
                       
Total Revenues
  $ 827     $ 658       26 %
Less: Divested
                   
 
                 
Adjusted
  $ 827     $ 658       26 %
 
                 
 
                       
Acquired Revenues*
  $ 192     $ 106       13 %
Internal Revenues
    635       552       13 %
 
                 
Total
  $ 827     $ 658       26 %
 
                 
 
                       
Government
                       
Total Revenues
  $ 554     $ 556       0 %
Less: Divested
          (53 )        
 
                 
Adjusted
  $ 554     $ 503       10 %
 
                 
 
                       
Acquired Revenues*
  $ 46     $       9 %
Internal Revenues
    508       503       1 %
 
                 
Total
  $ 554     $ 503       10 %
 
                 
 
*   Acquired revenues are based on pre-acquisition normalized revenues of acquired companies.
 
(a)   Based on actual amounts, not rounded.

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    Fiscal Year ended June 30, (a)  
    2006     2005     Growth %  
Consolidated
                       
Total Revenues
  $ 5,354     $ 4,351       23 %
Less: Divested
    (105 )     (219 )        
 
                 
Adjusted
  $ 5,249     $ 4,132       27 %
 
                 
 
                       
Acquired Revenues*
  $ 948     $ 128       20 %
Internal Revenues
    4,301       4,004       7 %
 
                 
Total
  $ 5,249     $ 4,132       27 %
 
                 
 
                       
Commercial
                       
Total Revenues
  $ 3,168     $ 2,175       46 %
Less: Divested
                   
 
                 
Adjusted
  $ 3,168     $ 2,175       46 %
 
                 
 
                       
Acquired Revenues*
  $ 837     $ 128       33 %
Internal Revenues
    2,331       2,047       13 %
 
                 
Total
  $ 3,168     $ 2,175       46 %
 
                 
 
                       
Government
                       
Total Revenues
  $ 2,186     $ 2,176       0 %
Less: Divested
    (105 )     (219 )        
 
                 
Adjusted
  $ 2,081     $ 1,957       6 %
 
                 
 
                       
Acquired Revenues*
  $ 111     $       5 %
Internal Revenues
    1,970       1,957       1 %
 
                 
Total
  $ 2,081     $ 1,957       6 %
 
                 
 
*   Acquired revenues are based on pre-acquisition normalized revenues of acquired companies.
 
(a)   Based on actual amounts, not rounded.

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Free Cash Flow
Free cash flow — is measured as operating cash flow (net cash provided by operating activities, as reported in our consolidated statements of cash flows) less capital expenditures (purchases of property, equipment and software, net of sales, as reported in our consolidated statements of cash flows) less additions to other intangible assets (as reported in our consolidated statements of cash flows). We believe this free cash flow metric provides an additional measure of available cash flow after we have satisfied the capital expenditure requirements of our operations, and should not be taken in isolation to be a measure of cash flow available for us to satisfy all our obligations and execute our business strategies. We also rely on cash flows from investing and financing activities which, together with free cash flow, are expected to be sufficient for us to execute our business strategies. Our measure of free cash flow may not be comparable to similarly titled measures of other companies. (unaudited, $ in millions)
                                 
    Three months ended     Fiscal Year ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
Free Cash Flow
                               
Net cash provided by operating activities
  $ 167     $ 267     $ 635     $ 739  
Less:
                               
Purchases of property, equipment and software, net of sales
    (104 )     (83 )     (394 )     (253 )
Additions to other intangible assets
    (7 )     (6 )     (36 )     (36 )
 
                       
 
                               
Free Cash Flow
  $ 55     $ 178     $ 205     $ 451  
 
                       
 
*   Based on actual amounts, not rounded.
—end—

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