Filed by Affiliated
Computer Services, Inc.
Pursuant to Rule 425
under the Securities Act of 1933
and deemed filed
pursuant to Rule 14a-12 under
the Securities
Exchange Act of 1934
Subject Company:
Affiliated Computer Services, Inc.
Commission File No.:
1-12665
FOR
IMMEDIATE RELEASE
ACS
Announces First Quarter Fiscal Year 2010 Results
DALLAS,
Texas: October 22, 2009 – Affiliated Computer Services, Inc.
(NYSE: ACS)
Key
highlights from the first quarter of fiscal year 2010:
| ● |
Adjusted
diluted earnings per share of $0.95
|
|
| ● |
Total
revenue growth of 5%
|
|
| ● |
Internal
revenue growth of 2%
|
|
| ● |
New
business signings of $212 million of annual
recurring revenue
|
ACS today
announced first quarter fiscal year 2010 revenues of $1.68 billion, a 5% increase, compared to the prior year quarter.
Internal revenue growth was 2%. First quarter fiscal year 2010 adjusted
non-generally accepted accounting principles (“GAAP”) diluted earnings per share
was $0.95. Adjusted non-GAAP diluted earnings per share for the
comparable prior year period was $0.89. See “Reconciliation of
Reported GAAP Results to Adjusted Non-GAAP Results” below.
First
quarter new business signings totaled $212 million of annual recurring revenue
with an estimated total contract value of $833 million. Total contract value of
all signings, including new business signings, renewals and non-recurring
revenue, was $1.5 billion.
“ACS
continued to deliver strong performance in the first quarter,” said Lynn
Blodgett, ACS president and chief executive officer. “Our ability to
grow revenue and adjusted earnings per share in this environment is a tribute to
our dedicated employees who remained focused on delivering excellent service to
our clients. I am very proud of our team and excited about our
future.”
Additional
highlights from the first quarter of fiscal year 2010:
| ● |
Commercial
signings represented 71% of new business signings and Government
contributed 29%. From a service line perspective, business
process outsourcing contributed 79% of new business signings and 21% were
information technology outsourcing.
|
| ● |
The
Commercial segment contributed 61% of revenues and grew 6%, with 2%
internal growth. The Government segment contributed 39% of
revenues and grew 2%, all of which was internal.
|
|
| ● |
Adjusted non-GAAP operating income was $162
million with an adjusted operating margin of 9.7%. These
results were negatively impacted by deferred compensation costs of
approximately $9 million, or 50 basis points. These costs are included in
the Company’s adjusted non-GAAP operating income and are offset in the
Company’s other non-operating expense. See “Reconciliation of Reported
GAAP Results to Adjusted Non-GAAP Results” below.
|
|
| ● |
The
first quarter of the Company’s fiscal year is typically the lowest quarter
of cash flow due to the payment of prior year management
bonuses. Operating cash flow for the first quarter of fiscal
year 2010 was negative $21 million, or -1% of revenues. Capital
expenditures and additions to intangible assets was $128 million, or 8% of
revenues. Free cash flow was negative $149 million, or -9% of
revenues. The Company’s cash balance was $559 million at
September 30, 2009.
|
On
September 27, 2009, ACS and Xerox Corporation executed an Agreement and Plan of
Merger pursuant to which ACS would be acquired by Xerox. The
agreement was approved by the Board of Directors (and recommended by a special
committee of independent directors) and is subject to certain closing
conditions. Those conditions include the expiration of the waiting
period under the Hart Scott Rodino Antitrust Improvements Act of 1976 and
approval of ACS stockholders.
Due to
ACS’ proposed merger with Xerox, ACS will not host an earnings conference call
and will not be updating prior financial guidance or providing financial
guidance for the second quarter or fiscal year 2010.
ACS, a
global FORTUNE 500 company with approximately 76,000 people supporting client
operations reaching more than 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." Learn more about ACS at www.acs-inc.com.
Forward-Looking
Statements
This news
release contains “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). Such
forward-looking statements and assumptions include, among other things,
statements with respect to our financial condition, results of operations, cash
flows, business strategies, operating efficiencies, indebtedness, litigation,
competitive positions, growth opportunities, plans and objectives of management,
and other matters. Such forward-looking statements are based upon management’s
current knowledge and assumptions about future events and are subject to
numerous assumptions, risks, uncertainties and other factors, many of which are
outside of our control, which could cause actual results to differ materially
from the anticipated results, prospects, performance or achievements expressed
or implied by such statements. Such risks and uncertainties include,
but are not limited to: (a) the cost and cash flow impact of our debt and our
ability to obtain further financing; (b) the complexity of the legal and
regulatory environments in which we operate, including the effect of claims and
litigation; (c) our oversight by the SEC and other regulatory agencies and
-2-
investigations
by those agencies; (d) our credit rating or further reductions of our credit
rating; (e) a decline in revenues from or a loss or failure of significant
clients; (f) our ability to recover capital investments in connection with our
contracts; (g) possible period-to-period fluctuations in our non-recurring
revenues and related cash flows; (h) competition and our ability to compete
effectively; (i) dissatisfaction with our services by our clients; (j) our
dependency to a significant extent on third party providers, such as
subcontractors, a relatively small number of primary software vendors, utility
providers and network providers; (k) our ability to identify, acquire or
integrate other businesses or technologies; (l) our ability to manage our
operations and our growth; (m) termination rights, audits and investigations
related to our Government contracts; (n) delays in signing and commencing new
business; (o) the effect of some provisions in contracts and our ability to
control costs; (p) claims associated with our actuarial consulting and benefit
plan management services; (q) claims of infringement of third-party intellectual
property rights; (r) laws relating to individually identifiable information; (s)
potential breaches of our security system; (t) the impact of budget deficits
and/or fluctuations in the number of requests for proposals issued by
governments; (u) risks regarding our international and domestic operations; (v)
fluctuations in foreign currency exchange rates; (w) our ability to attract and
retain necessary technical personnel, skilled management and qualified
subcontractors; (x) risks associated with loans that we service; (y) the effect
of certain provisions of our certificate of incorporation, bylaws and Delaware
law and our stock ownership; (z) the price of our Class A common stock; (aa) the
risk that we will not realize all of the anticipated benefits from our proposed
transaction with Xerox; (bb) the risk that customer retention and revenue
expansion goals for the proposed Xerox transaction will not be met and that
disruptions from the proposed Xerox transaction will harm relationships with
customers, employees and suppliers; (cc) the risk that unexpected costs will be
incurred in connection with the proposed Xerox transaction; (dd) the outcome of
litigation, including with respect to the proposed Xerox transaction; (ee)
antitrust and other regulatory proceedings to which we may be a party in
connection with the proposed Xerox transaction; and (ff) the risk that the
proposed Xerox transaction will not close or that our or Xerox’s shareholders
fail to approve the proposed Xerox transaction. For more details on
factors that may cause actual results to differ materially from such
forward-looking statements, please see Item 1A. Risk Factors of our Annual
Report on Form 10-K for the fiscal year ended June 30, 2009 and other reports
from time to time that we file with or furnish to the SEC. Forward-looking
statements contained or referenced in this news release speak only as of the
date of this release. We disclaim, and do not undertake any obligation to,
update or release any revisions to any forward-looking statement.
Additional
Information
The
proposed merger transaction involving ACS and Xerox will be submitted to the
respective stockholders of ACS and Xerox for their consideration. In
connection with the proposed merger, ACS will file a joint proxy statement with
the SEC (which such joint proxy statement will form a prospectus of a
registration statement on Form S-4 that will be filed by Xerox with the
SEC). ACS and Xerox will each mail the joint proxy
statement/prospectus to its stockholders. ACS and Xerox urge
investors and security holders to read the joint proxy statement/prospectus
regarding the proposed transaction when it becomes available because it will
contain important information. You may obtain a free copy of the
joint proxy statement/prospectus, as well as other filings containing
information about ACS and Xerox, without charge, at the SEC’s Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus
and the filings with the SEC that will be incorporated by reference in the joint
proxy statement/prospectus can also be obtained, when available, without charge,
from ACS’s website, www.acs-inc.com, under the heading “Investor Relations” and
then under the heading “SEC Filings”. You may also obtain these
documents, without charge, from Xerox’s website, www.xerox.com, under the tab
“Investor Relations” and then under the heading “SEC Filings”.
ACS,
Xerox and their respective directors, executive officers and certain other
members of management and employees may be deemed to be participants in the
solicitation of proxies from the respective stockholders of ACS and Xerox in
favor of the merger. Information regarding the persons who may, under
the rules of the SEC, be deemed participants in the solicitation of the
respective stockholders of ACS and Xerox in connection with the proposed merger
will be set forth in the joint proxy statement/prospectus when it is filed with
the SEC. You can find information about ACS’s executive officers and
directors in its Form 10-K filed with the SEC on August 27, 2009. You
can find information about Xerox’s executive officers and directors in its
definitive proxy statement filed with the SEC on April 6, 2009. You
can obtain free copies of these documents from ACS and Xerox websites using the
contact information above.
-3-
AFFILIATED
COMPUTER SERVICES, INC. AND SUBSIDIARIES
Consolidated
Statements of Income
In thousands, except per share
amounts
(Unaudited)
|
|
Three
Months Ended
|
|||||||
|
September
30,
|
||||||||
|
2009
|
2008
|
|||||||
|
Revenues
|
$ | 1,676,996 | $ | 1,604,454 | ||||
|
Operating
expenses:
|
||||||||
|
Cost
of revenues:
|
||||||||
|
Wages
and benefits
|
767,515 | 734,016 | ||||||
|
Services
and supplies
|
428,377 | 373,505 | ||||||
|
Rent,
lease and maintenance
|
205,091 | 202,143 | ||||||
|
Depreciation
and amortization
|
96,887 | 97,606 | ||||||
|
Other
|
11,556 | 10,348 | ||||||
|
Cost
of revenues
|
1,509,426 | 1,417,618 | ||||||
|
Other
operating expenses
|
37,260 | 14,088 | ||||||
|
Total
operating expenses
|
1,546,686 | 1,431,706 | ||||||
|
Operating
income
|
130,310 | 172,748 | ||||||
|
Interest
expense
|
29,254 | 35,208 | ||||||
|
Other
non-operating expense (income), net
|
(9,096 | ) | 3,700 | |||||
|
Pretax
profit
|
110,152 | 133,840 | ||||||
|
Income
tax expense
|
41,358 | 50,205 | ||||||
|
Net
income
|
$ | 68,794 | $ | 83,635 | ||||
|
Earnings
per share:
|
||||||||
|
Basic
|
$ | 0.70 | $ | 0.86 | ||||
|
Diluted
|
$ | 0.70 | $ | 0.85 | ||||
|
Shares
used in computing earnings per share:
|
||||||||
|
Basic
|
97,642 | 97,307 | ||||||
|
Diluted
|
98,091 | 98,091 | ||||||
-4-
AFFILIATED
COMPUTER SERVICES, INC AND SUBSIDIARIES
Consolidated
Balance Sheet
In
thousands
(unaudited)
|
September
30,
|
June
30,
|
|||||||
|
2009
|
2009
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 558,761 | $ | 730,911 | ||||
|
Accounts
receivable, net
|
1,524,199 | 1,415,707 | ||||||
|
Income
taxes receivable
|
- | 19,210 | ||||||
|
Prepaid
expenses and other current assets
|
252,196 | 249,257 | ||||||
|
Total
current assets
|
2,335,156 | 2,415,085 | ||||||
|
Property,
equipment and software, net
|
979,123 | 955,158 | ||||||
|
Goodwill
|
2,896,593 | 2,894,189 | ||||||
|
Other
intangibles, net
|
446,190 | 436,383 | ||||||
|
Other
assets
|
190,822 | 200,158 | ||||||
|
Total
assets
|
$ | 6,847,884 | $ | 6,900,973 | ||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 218,940 | $ | 272,889 | ||||
|
Accrued
compensation and benefits
|
177,061 | 251,510 | ||||||
|
Other
accrued liabilities
|
395,634 | 388,262 | ||||||
|
Income
taxes payable
|
3,524 | - | ||||||
|
Deferred
taxes
|
91,567 | 90,798 | ||||||
|
Current
portion of long-term debt
|
293,088 | 295,172 | ||||||
|
Current
portion of unearned revenue
|
171,365 | 187,349 | ||||||
|
Total
current liabilities
|
1,351,179 | 1,485,980 | ||||||
|
Long-term
debt
|
2,030,287 | 2,041,529 | ||||||
|
Deferred
taxes
|
479,009 | 469,606 | ||||||
|
Other
long-term liabilities
|
284,960 | 281,726 | ||||||
|
Total
liabilities
|
4,145,435 | 4,278,841 | ||||||
|
Total
stockholders' equity
|
2,702,449 | 2,622,132 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 6,847,884 | $ | 6,900,973 | ||||
-5-
Frequently Used
Terms
New business signings - while
there are no third party standards or requirements governing the calculation of
new business signings, we define new business signings as annual recurring
revenue from new contracts and the incremental portion of renewals that are
signed during the period, which represents the estimated first twelve months of
revenue to be recorded under the contracts 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.
Trailing twelve month new business
- is the preceding twelve months of new business signings at a point in
time expressed in annual revenue, not total contract value.
Total contract value -
represents estimated total revenue over the term of the
contract.
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 adjusted non-GAAP earnings per share, free cash flow and
internal revenue growth to provide both management and investors a more complete
understanding of the Company’s underlying operational trends and
results.
Management
uses these non-GAAP measures to provide additional meaningful comparisons
between current results and prior results, and as a basis for planning and
forecasting for future periods.
Reconciliation of Reported GAAP
Results to Adjusted Non-GAAP Results – In addition to reporting operating
income, pretax income, net income and earnings per share on a GAAP basis, the
Company has also made certain non-GAAP adjustments which are described in
"Description of Non-GAAP Adjustments" and are reconciled to the corresponding
GAAP measures in the financial schedules included in this earnings release. In
making these non-GAAP adjustments, the Company takes into account the impact of
items that are infrequently occurring or that are non-operational in nature.
Management believes that the exclusion of these items provides a useful basis
for evaluating underlying business performance, but should not be considered in
isolation and is not in accordance with, or a substitute for, evaluating
business unit performance utilizing GAAP financial information. Management uses
non-GAAP measures in its budgeting and forecasting processes and to further
analyze its financial trends, as well as making financial comparisons to prior
periods presented on a similar basis. The Company's management uses
each of these non-GAAP financial measures in its own evaluation of the Company's
performance, particularly when comparing performance to prior periods, and the
Company believes that providing such adjusted results allows investors and other
users of the Company's financial statements to better understand the Company's
comparative operating performance for the periods presented.
-6-
The
Company's non-GAAP measures may differ from similar measures by other companies,
even if similar terms are used to identify such measures. Although the Company's
management believes non-GAAP measures are useful in evaluating the performance
of its business, the Company acknowledges that items excluded from such measures
may have a material impact on the Company's income from operations, pretax
income, net income and earnings per share calculated in accordance with GAAP.
Therefore, management uses non-GAAP measures in conjunction with GAAP results.
Investors and users of our financial information should also consider the above
factors when evaluating the Company's results.
Description
of Non-GAAP Adjustments:
The
following items are included in our presentation of Non-GAAP
adjustments:
| 1. |
Costs related to our internal
investigation of our stock option grant practices, investigations begun by
the Securities and Exchange Commission and Department of Justice, and
shareholder derivative suits, net of insurance
reimbursements: The Company incurred costs related to
our internal investigation, as well as those of the SEC and DOJ. In
addition, several derivative lawsuits were filed in connection with our
stock option grant practices, generally alleging claims related to breach
of fiduciary duty and unjust enrichment by certain of our directors and
senior executives and the Company has incurred costs related to these
lawsuits. The derivative suits were settled during fiscal
2009. The Company made claims under its directors’ and
officers’ insurance policies for reimbursement of these costs and has
received a significant reimbursement from the insurance carriers.
Management believes that these costs and related insurance reimbursements,
although material, are not related to the Company’s ongoing operations and
that excluding them helps to provide a more meaningful representation of
the Company's operating performance.
|
|
| 2. |
Costs related to buyout offers
and related shareholder derivative suits: The Company
has incurred costs to evaluate our strategic alternatives, including the
proposal from Darwin Deason, Chairman of the Board of Directors
(“Chairman”), and Cerberus. In addition, several lawsuits were filed in
connection with the announced buyout transaction, generally alleging
claims related to breach of fiduciary duty, and seeking class action
status (collectively, “Buyout Related Costs”). Those lawsuits have been
resolved. Management expects that the Company may continue to
incur costs related to our evaluation of strategic
alternatives. Management believes that these costs, although
material and possibly recurring, are not related to the Company’s ongoing
operations and that excluding them helps to provide a more meaningful
representation of the Company's operating performance.
|
|
| 3. |
Cost related to certain former
employees’ stock options: The exercise price of certain
former employees’ vested, unexercised and outstanding stock options were
less than the fair market value per share of ACS stock on the revised
measurement dates for such stock options. During the first
quarter of fiscal year 2008, the Company notified certain former employees
that the Company will pay them the additional 20% income tax imposed by
Section 409(a) if a triggering event occurs and if the employee is
required to recognize and report W-2 income under Section 409(a), subject
to certain limitations. During the three month period ended
September 30, 2009, the Company recorded a charge of approximately $0.8
million, based on the market price of ACS common stock. During
the three month period ended September 30, 2008, the Company recorded a
credit of approximately $0.3 million, based on the market price of ACS
common stock. The Company will adjust this accrual to the fair
market value of ACS stock each quarter until the options are exercised
(“Income Tax Reimbursements”). Management believes that these
costs are not related to the Company’s ongoing operations and that
excluding them helps to provide a more meaningful representation of the
Company's operating performance.
|
-7-
| 4. |
Gain related to sale of our
bindery business: In the first quarter of fiscal year
2009, the Company divested its bindery business and recognized a pre-tax
gain of $0.2 million and an after-tax loss of $0.8 million. Management
believes that the bindery business is not strategic to our ongoing
operations and its sale is an isolated event. Management
believes excluding the gain on its sale better reflects the performance of
the Company's continuing operations.
|
|
| 5. |
Legal
settlement: In a tentative agreement to settle in
September 2009 which was finalized on October 9, 2009, the Company settled
an action 4KS Aviation III, Inc. v.
Darwin A. Deason, DDH Aviation, LLC, and Affiliated Computer Services,
Inc. As part of the settlement, the Company paid the plaintiff
approximately $12.0 million which included the acquisition of three
airplanes which will be recorded at their fair market value of
approximately $4.0 million, and agreed to a dismissal, with prejudice, of
the case. We recorded a charge of $8.0 million during the three
months ended September 30, 2009 related to the settlement. All other
defendants in the case were voluntarily dismissed with prejudice by the
plaintiff. Management believes this settlement is not related
to the Company’s ongoing operations and that excluding it provides a more
meaningful representation of the Company's operating
performance.
|
|
| 6. |
Xerox transaction
cost: On September 27, 2009, Xerox and the Company
entered into an Agreement and Plan of Merger (the “Merger Agreement”)
which has been approved by the Board for Directors of the Company and
Xerox. As a result of the Merger Agreement, we recorded a charge of $18.1
million in costs related to this transaction including legal costs and
$11.2 million pursuant to the terms of an Employment Agreement between
Darwin Deason, Chairman of our Board of Directors, and the Company. The
payment was made to Mr. Deason during October 2009. Management
believes these costs are not related to the Company’s ongoing operations
and that excluding them helps to provide a more meaningful representation
of the Company's operating performance.
|
|
| 7. |
Change in accounting
principles: In December 2007, the Financial Accounting
Standards Board revised principles and requirements for how an acquirer
accounts for business combinations. The revised
guidance is applied prospectively and became effective for the Company for
business combinations occurring on or after July 1, 2009. In
association with these changes, we recorded a write-down of costs incurred
for proposed acquisitions of approximately $3.8 million ($2.4 million, net
of income tax) during the first quarter of fiscal 2010. Management
believes these costs are not related to the Company’s ongoing operations
and that excluding them helps to provide a more meaningful representation
of the Company's operating
performance.
|
-8-
AFFILIATED
COMPUTER SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION
OF OPERATING INCOME (GAAP)TO ADJUSTED OPERATING INCOME
(Non-GAAP)
(UNAUDITED)
(IN MILLIONS)
|
Three
Months Ended
|
||||||||
|
September
30,
|
||||||||
|
2009
|
2008
|
|||||||
|
Operating
Income (GAAP)
|
$ | 130.3 | $ | 172.7 | ||||
|
Adjusting
items, pre-tax:
|
||||||||
|
Option
investigation related costs, net of recoveries
|
1.5 | 4.4 | ||||||
|
Buyout
related costs
|
- | 0.8 | ||||||
|
Income
tax reimbursement, net of recoveries
|
0.8 | (0.3 | ) | |||||
|
Sale
of bindery business
|
- | (0.2 | ) | |||||
|
Legal
settlement
|
8.0 | - | ||||||
|
Xerox
transaction cost
|
18.1 | - | ||||||
|
Change
in accounting principle
|
3.8 | - | ||||||
|
Adjusted
Operating Income (Non-GAAP)*
|
$ | 162.4 | $ | 177.5 | ||||
RECONCILIATION
OF OPERATING INCOME (GAAP)TO ADJUSTED OPERATING INCOME (Non-GAAP)
(UNAUDITED)
(IN MILLIONS)
|
Three
Months Ended
|
||||||||
|
Septermber
30,
|
||||||||
| 2009 | 2008 | |||||||
|
Net
Income (GAAP)
|
$ | 68.8 | $ | 83.6 | ||||
|
Adjusting
items, net of tax:
|
||||||||
|
Option
investigation related costs, net of recoveries
|
0.9 | 2.8 | ||||||
|
Buyout
related costs
|
- | 0.5 | ||||||
|
Income
tax reimbursement, net of recoveries
|
0.5 | (0.2 | ) | |||||
|
Sale
of bindery business
|
- | 0.8 | ||||||
|
Legal
settlement
|
5.0 | - | ||||||
|
Xerox
transaction cost
|
15.4 | - | ||||||
|
Change
in accounting principle
|
2.4 | - | ||||||
|
Adjusted
Net Income (Non-GAAP)*
|
$ | 93.0 | $ | 87.6 | ||||
RECONCILIATION
OF DILUTED EARNINGS PER SHARE (GAAP)TO ADJUSTED DILUTED EARNINGS PER SHARE
(Non-GAAP)
TO
ADJUSTED DILUTED EARNINGS PER SHARE (Non-GAAP)
(UNAUDITED)
|
Three
Months Ended
|
||||||||
|
September
30,
|
||||||||
| 2009 | 2008 | |||||||
|
Diluted
Earnings Per Share (GAAP)
|
$ | 0.70 | $ | 0.85 | ||||
|
Adjusting
items, net of tax:
|
||||||||
|
Option
investigation related costs, net of recoveries
|
0.01 | 0.03 | ||||||
|
Buyout
related costs
|
- | 0.01 | ||||||
|
Income
tax reimbursement, net of recoveries
|
0.01 | - | ||||||
|
Sale
of bindery business
|
- | 0.01 | ||||||
|
Legal
settlement
|
0.05 | - | ||||||
|
Xerox
transaction cost
|
0.16 | - | ||||||
|
Change
in accounting principle
|
0.02 | - | ||||||
|
Adjusted
Diluted Earnings Per Share (Non-GAAP)*
|
$ | 0.95 | $ | 0.89 | ||||
|
*Differences
in schedule due to rounding.
|
||||||||
-9-
Internal revenue growth - is
measured as total revenue growth less acquired revenue from acquisitions and
revenues from divested operations. Acquired revenue from acquisitions
is based on pre-acquisition normalized revenue of acquired
companies. 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.
For the
three months ended September 30, 2009, the Company generated internal revenue
growth of 2%. Internal revenue growth is measured as follows
(unaudited, in millions):
|
Three
Months Ended September 30,
|
||||||||||||
|
2009
|
2008
|
Growth
%(a)
|
||||||||||
|
Consolidated
|
||||||||||||
|
Acquired
Revenues*
|
$ | 45 | $ | - | 3 | % | ||||||
|
Internal
Revenues
|
1,632 | 1,604 | 2 | % | ||||||||
|
Total
|
$ | 1,677 | $ | 1,604 | 5 | % | ||||||
|
Commercial
|
||||||||||||
|
Acquired
Revenues*
|
$ | 43 | $ | - | 4 | % | ||||||
|
Internal
Revenues
|
977 | 959 | 2 | % | ||||||||
|
Total
|
$ | 1,020 | $ | 959 | 6 | % | ||||||
|
Government
|
||||||||||||
|
Acquired
Revenues*
|
$ | 2 | $ | - | 0 | % | ||||||
|
Internal
Revenues
|
655 | 645 | 2 | % | ||||||||
|
Total
|
$ | 657 | $ | 645 | 2 | % | ||||||
* Acquired
revenues are based on pre-acquisition normalized revenues of acquired
companies.
(a)
Differences in schedule due to rounding.
-10-
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
|
||||||||
|
September
30,
|
||||||||
|
2009
|
2008
|
|||||||
|
Free
Cash Flow
|
||||||||
|
Net
cash provided by operating activities
|
$ | (21 | ) | $ | 63 | |||
|
Less:
|
||||||||
|
Purchase
of property, equipment and software, net of sales
|
(94 | ) | (65 | ) | ||||
|
Additions
to other intangible assets
|
(34 | ) | (10 | ) | ||||
|
Free
Cash Flow*
|
$ | (149 | ) | $ | (11 | ) | ||
*Differences in schedule due
to rounding.
Contacts
Investors
Jon
Puckett, Vice President Investor Relations
214-841-8281
jon.puckett@acs-inc.com
Media
Kevin
Lightfoot, Vice President Corporate Communications
214-841-8191
kevin.lightfoot@acs-inc.com
—end—
-11-