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ACS Announces Second Quarter Fiscal Year 2008 ResultsCompany Delivers Strong Signings and Cash Flow
DALLAS, Jan. 31 /PRNewswire-FirstCall/ -- Affiliated Computer Services, Inc., (NYSE: ACS) , today announced second quarter fiscal year 2008 revenues of $1.51 billion, an increase of 6% compared to the second quarter of the prior year. Second quarter fiscal year 2008 adjusted non-GAAP diluted earnings per share was $0.90, an 11% increase over the prior year second quarter adjusted non-GAAP diluted earnings per share of $0.81. See "Reconciliation of Reported GAAP Results to Adjusted Non-GAAP Results" below. Second quarter fiscal year 2008 free cash flow was approximately $248 million, or 16% of revenues. Second quarter new business signings were approximately $205 million of annual recurring revenue, a 24% increase over the prior year second quarter new business signings. Fiscal year-to-date revenues were approximately $3 billion, an increase of approximately 7% from the prior year period. Adjusted non-GAAP earnings per share for the fiscal year-to-date period was $1.67, a 15% increase over the prior period adjusted non-GAAP earnings per share. Year-to-date free cash flow was approximately $181 million, or 6% of revenues. Fiscal year-to-date new business signings were approximately $346 million of annual recurring revenue, a 16% increase over the prior year-to-date period new business signings. "I am very pleased with our second quarter results. With the uncertainty of ownership behind us we were able to focus on selling more business, collecting our cash and growing earnings per share," said Lynn Blodgett, ACS President and Chief Executive Officer. "Our financial goal is to deliver consistent, good growth in revenue, signings and earnings. I feel we made very positive progress toward those goals this quarter. We need to continue improving our revenue growth rates and I am confident that our improved signings this quarter and in the future will be the main catalyst for accelerating our growth. We also demonstrated we can manage our collections and capital expenditures. I'm proud of the results our great team delivered this quarter."
Key highlights from ACS' fiscal year 2008 second quarter:
-- During the quarter, the Company generated new business signings of
approximately $205 million of annual recurring revenue with an
estimated total contract value of approximately $750 million. In
terms of annual recurring revenue, the Commercial segment signed
approximately 74% of second quarter new business signings and
approximately 26% were Government segment signings. Approximately
77% of second quarter new business signings were business process
outsourcing signings and approximately 23% were information
technology solutions signings.
-- Total revenues were $1.51 billion and represented 6% growth, of
which 5% was internal. The Commercial segment grew 6%, all of which
was internal growth. The Government segment grew 5% with 4%
internal revenue growth. The Commercial segment accounted for 60% of
revenues in the quarter and the Government segment accounted for the
remaining 40%.
-- Second quarter fiscal 2008 adjusted non-GAAP diluted earnings per
share was $0.90, an 11% increase over the prior year second quarter
adjusted non-GAAP diluted earnings per share of $0.81. Second
quarter fiscal year 2008 reported GAAP diluted earnings per share
was $0.81 as compared to $0.72 in the prior year second quarter.
See "Reconciliation of Reported GAAP Results to Adjusted Non-GAAP
Results" below.
-- Cash flow from operations during the second quarter was
approximately $323 million, or 21% of revenues. Free cash flow
during the quarter was $248 million, or 16% of revenues. This
quarter's cash flow results benefited from improved collections on
accounts receivable. Capital expenditures and additions to
intangible assets were approximately $74 million, or 5% of revenues.
-- During the quarter, the Company's Board of Directors endorsed a
$1 billion share repurchase program and authorized a $200 million
share repurchase program. The Company used free cash flow to
complete the $200 million share repurchase program during the second
quarter, purchasing approximately 4.5 million shares at an average
price of $44 per share.
Key year-to-date highlights for fiscal 2008:
-- Year-to-date fiscal 2008 new business signings were approximately
$346 million of annual recurring revenue, with an estimated total
contract value of approximately $1.4 billion. In terms of annual
recurring revenue, the Commercial segment signed approximately 68%
of year-to-date fiscal 2008 signings and approximately 32% were
Government segment signings. Approximately 77% of new business
signings were business process outsourcing signings and
approximately 23% were information technology solutions signings.
-- Year-to-date fiscal 2008 revenues were approximately $3 billion.
Total revenue growth was 7% with internal growth of 6%. The
Commercial segment grew 6% with 5% internal revenue growth. The
Government segment grew 8% with 7% internal revenue growth. The
Commercial segment accounted for 59% of revenues in the year-to-date
period and the Government segment accounted for the remaining 41%.
-- Year-to-date fiscal 2008 adjusted non-GAAP diluted earnings per
share was $1.67, a 15% increase over the prior year adjusted
non-GAAP diluted earnings per share of $1.45. Year-to-date fiscal
2008 reported GAAP diluted earnings per share was $1.47 as compared
to $1.30 in the prior year. See "Reconciliation of Reported GAAP
Results to Adjusted Non-GAAP Results" below.
-- Cash flow from operations for year-to-date fiscal 2008 was
approximately $331 million, or 11% of revenues, and free cash flow
was $181 million, or 6% of revenues. Capital expenditures and
additions to intangibles were approximately $150 million, or 5% of
revenues.
Events subsequent to ACS' fiscal 2008 second quarter:
-- In January 2008, the Company acquired Syan Holdings Limited, a
U.K.-based provider of information technology outsourcing (ITO)
services, for a purchase price of approximately $60 million. Syan,
with trailing twelve-month revenue of approximately $75 million,
strengthens the Company's global ITO presence by adding a solid base
of U.K. operations, including two data centers, and expands its
global reach.
ACS will discuss its financial results on a conference call and web cast on http://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 and will use certain non-generally accepted accounting principles ("GAAP") financial measures for which reconciliations to the most directly comparable GAAP financial measures will also be provided. ACS, a FORTUNE 500 company with approximately 62,000 people supporting client operations in 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." Visit ACS on the Internet at http://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 Item 1A "Risk Factors" in the most recent Annual Report on Form 10-K filed on August 29, 2007. 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.
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Dollars in thousands, except per share amounts
(Unaudited)
Three months ended
December 31,
2007 2006
Revenues $1,511,442 $1,426,761
Operating expenses:
Cost of revenues:
Wages and benefits 717,047 667,852
Services and supplies 326,457 317,618
Rent, lease and maintenance 185,203 177,099
Depreciation and amortization 94,358 85,228
Other 6,982 9,141
Total cost of revenues 1,330,047 1,256,938
Other operating expenses 23,501 19,495
Total operating expenses 1,353,548 1,276,433
Operating income 157,894 150,328
Interest expense 43,049 48,085
Other non-operating income, net (5,509) (9,686)
Pretax profit 120,354 111,929
Income tax expense 38,758 39,855
Net income $81,596 $72,074
Earnings per share:
Basic $0.82 $0.73
Diluted $0.81 $0.72
Shares used in computing earnings per share:
Basic 99,505 98,914
Diluted 100,310 100,152
Note: See "Summary Reconciliation of Reported GAAP Results to Adjusted Non-GAAP Results" for certain items impacting the reported numbers above.
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Dollars in thousands, except per share amounts
(Unaudited)
Six months ended
December 31,
2007 2006
Revenues $3,004,525 $2,812,199
Operating expenses:
Cost of revenues:
Wages and benefits 1,416,996 1,334,468
Services and supplies 668,223 608,980
Rent, lease and maintenance 370,121 356,155
Depreciation and amortization 185,182 166,866
Other 13,897 19,755
Total cost of revenues 2,654,419 2,486,224
Other operating expenses 46,811 34,789
Total operating expenses 2,701,230 2,521,013
Operating income 303,295 291,186
Interest expense 87,019 94,098
Other non-operating income, net (6,189) (12,304)
Pretax profit 222,465 209,392
Income tax expense 74,725 75,935
Net income $147,740 $133,457
Earnings per share:
Basic $1.48 $1.32
Diluted $1.47 $1.30
Shares used in computing earnings per share:
Basic 99,613 101,183
Diluted 100,648 102,457
Note: See "Summary Reconciliation of Reported GAAP Results to Adjusted Non-GAAP Results" for certain items impacting the reported numbers above.
AFFILIATED COMPUTER SERVICES, INC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
Dollars in thousands
(Unaudited)
December 31, June 30,
2007 2007
Assets
Cash and cash equivalents $297,791 $307,286
Accounts receivable, net 1,338,886 1,257,108
Income taxes receivable 16,689 13,268
Other current assets 237,561 232,872
Total current assets 1,890,927 1,810,534
Property, equipment, and software, net 888,975 897,319
Goodwill 2,620,932 2,612,368
Other intangible assets, net 435,250 481,378
Other assets 195,537 180,830
Total Assets $6,031,621 $5,982,429
Liabilities:
Accounts payable $157,812 $97,951
Accrued compensation and benefits 185,666 246,742
Other accrued liabilities 330,550 400,238
Deferred taxes 67,430 14,418
Current portion of long-term debt 46,350 47,039
Current portion of unearned revenue 172,688 164,484
Total current liabilities 960,496 970,872
Long-term debt 2,364,855 2,342,272
Deferred taxes 351,449 367,565
Other long-term liabilities 304,889 235,552
Total Liabilities 3,981,689 3,916,261
Total Stockholder's Equity 2,049,932 2,066,168
Total Liabilities and Stockholder's
Equity $6,031,621 $5,982,429
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. Restatement of Operating Segment Results During the first quarter of fiscal year 2008, the Company reorganized the internal operating and reporting structures in its Commercial and Government segments to more formally align our sales, service delivery and financial organizations under its appropriate leadership. As a result, the Company has restated its Commercial and Government segment results for the three and six months ended December 31, 2006 to reflect its current operating and reporting structure. The restatement has no impact on the Company's consolidated results for the period of restatement. 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 attached financial schedules titled "Reconciliation of Reported Results to Income Adjusted for Certain Non-GAAP Items" 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. 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 past periods. 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. The Company has incurred costs related to our internal
investigation, as well as those of the SEC and DOJ. In addition,
several derivative lawsuits have been 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. Management expects that the Company will
continue to incur costs related to the ongoing investigations and
derivative lawsuits (collectively, "Option Related Costs").
Management believes that these costs, although material and
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.
2. Costs related to buyout offers and related shareholder derivative
suits. The Company has incurred costs in fiscal years 2008 and 2007
to evaluate our strategic alternatives, including the proposal from
Mr. Deason and Cerberus. In addition, several lawsuits have been
filed in connection with the announced buyout transaction, generally
alleging claims related to breach of fiduciary duty, and seeking
class action status ("Buyout Related Cost"). Management expects that
the Company may continue to incur costs related to our evaluation of
strategic alternatives and these lawsuits. 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 amending certain employee stock options. During
fiscal year 2007 and the first quarter of fiscal year 2008, the
Company amended the exercise price of certain outstanding stock
options in order to reprice all, or a portion, of the respective
stock option grants to the correct accounting measurement date to
avoid adverse tax consequences to individual holders under Section
409A of the Internal Revenue Code ("Section 409A"). During the
third quarter of fiscal year 2008, the Company paid approximately
$6.7 million in accordance with the terms of the amended stock
options. During the first quarter of fiscal year 2008, the Company
expensed approximately $1.2 million related to these amended stock
options ("Amended Options"). 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.
4. 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 409A if a triggering
event occurs and if the employee is required to recognize and report
W-2 income under Section 409A, subject to certain limitations.
During the three and six months ended December 31, 2007, the Company
accrued approximately ($0.4) million and $0.5 million based on the
market price of ACS common stock at December 31, 2007 and 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.
5. Gain related to sale of our decision support business. In the
second quarter of fiscal year 2008, the Company divested its
decision support business and recognized a pre-tax gain of $2.4
million. Management believes that the decision support 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 our continuing operations.
6. Waiver fee on our Credit Facility. The Company received an
amendment, consent and waiver from the lenders under our Credit
Facility with respect to, among other provisions, waiver of any
default or event of default arising under the Credit Facility as a
result of our failure to comply with certain reporting covenants
("Waiver Fee"). Management believes that our delayed filings of our
Annual Report on Form 10-K for the year ended June 30, 2006 and
Quarterly Report on Form 10-Q for the period ended September 30,
2006, which necessitated the waiver, are infrequently occurring
events and excluding the Waiver Fee provides a more meaningful
representation of our results of operations for the first quarter of
fiscal year 2007.
Reconciliation of Reported Results to Income Adjusted for Certain Non-GAAP Items (Dollars in millions, except per share amounts) Summary Reconciliation of Reported GAAP Results to Adjusted Non-GAAP Results:
Second Quarter Fiscal Year 2008:
-- Second quarter fiscal year 2008 reported GAAP diluted earnings per
share was $0.81. Second quarter fiscal year 2008 adjusted non-GAAP
diluted earnings per share was $0.90 and excluded the following:
* $0.08 per diluted share of legal and other expenses related to
the ongoing stock option investigations, and shareholder
derivative lawsuits described further in item 1 of non-GAAP
adjustments above
* $0.02 per diluted share of legal and other expense related to
the former Special Committee's ongoing review of strategic
alternatives for the Company described further in item 2 of
non-GAAP adjustments above
* Less than one cent per diluted share benefit due to the
reversal of a portion of the accrual related to former employee
income tax reimbursements described further in item 4 of the
non-GAAP adjustments above
* $0.02 gain related to the sale of our decision support business
described further in item 5 of non-GAAP adjustments above
Three Months Ended December 31, 2007 ($ in millions, except EPS) *
Income Sale
Tax of
Option Buyout Reimb- Decision
As Related Related urse- Support As
Reported Costs Costs ments Business Adjusted
Revenues $1,511.4 $- $- $- $- $1,511.4
Cost of revenues 1,330.0 (0.7) 0.2 0.4 - 1,329.9
Other operating
expenses 23.5 (12.3) (4.0) - 2.4 9.6
Total operating
expenses 1,353.5 (13.0) (3.8) 0.4 2.4 1,339.5
Operating income 157.9 13.0 3.8 (0.4) (2.4) 171.9
Interest expense 43.0 - - - - 43.0
Other non-operating
income, net (5.5) - - - - (5.5)
Pretax profit 120.4 13.0 3.8 (0.4) (2.4) 134.4
Income tax expense 38.8 4.6 1.4 (0.1) (0.9) 43.8
Net income $81.6 $8.4 $2.4 $(0.3) $(1.5) $90.6
Earnings per share:
Basic $0.82 $0.08 $0.02 $- $(0.02) $0.91
Diluted $0.81 $0.08 $0.02 $- $(0.02) $0.90
Shares used in computing
earnings per common
share:
Basic 99.5 99.5 99.5 99.5 99.5 99.5
Diluted 100.3 100.3 100.3 100.3 100.3 100.3
* Differences in schedule due to rounding.
Second Quarter Fiscal Year 2007:
-- Second quarter fiscal year 2007 reported GAAP diluted earnings per
share was $0.72. Second quarter fiscal year 2007 adjusted non-GAAP
diluted earnings per share was $0.81 and excluded the following:
* $0.09 per diluted share of legal expenses related to the
ongoing stock option investigations and shareholder derivative
lawsuits described further in item 1 of non-GAAP adjustments
above
Three Months Ended December 31, 2006 ($ in millions, except EPS) *
Option
Related
As Reported Costs As Adjusted
Revenues $1,426.8 $- $1,426.8
Cost of revenues 1,256.9 (0.5) 1,256.4
Other operating expenses 19.5 (13.3) 6.2
Total operating expenses 1,276.4 (13.8) 1,262.6
Operating income 150.3 13.8 164.1
Interest expense 48.1 - 48.1
Other non-operating income, net (9.7) - (9.7)
Pretax profit 111.9 13.8 125.7
Income tax expense 39.8 4.9 44.7
Net income $72.1 $8.9 $81.0
Earnings per common share:
Basic $0.73 $0.09 $0.82
Diluted $0.72 $0.09 $0.81
Shares used in computing earnings
Basic 98.9 98.9 98.9
Diluted 100.2 100.2 100.2
* Differences in schedule due to rounding.
-- Second quarter fiscal year 2007 adjusted non-GAAP diluted earnings
per share also included the following:
* $0.02 per diluted share gain related to foreign currency
hedging activities
Year-to-Date Fiscal 2008:
-- Year-to-date fiscal 2008 reported GAAP diluted earnings per share
was $1.47. Year-to-date fiscal 2008 adjusted non-GAAP diluted
earnings per share was $1.67 and excluded the following:
* $0.21 per diluted share of legal and other expenses related to
the ongoing stock option investigations, shareholder derivative
lawsuits and the former Special Committee's ongoing review of
strategic alternatives for the Company described further in
items 1 and 2 of non-GAAP adjustments above
* $0.01 per diluted share charge related to employee amended
stock options and former employee income tax reimbursements
described further in items 3 and 4 of the non-GAAP adjustments
above
* $0.02 gain related to the sale of our decision support
technologies described further in item 5 of non-GAAP
adjustments above
Six Months Ended December 31, 2007 ($ in millions, except EPS) *
Income Sale
Tax of
Option Buyout Reimb- Decision
As Related Related Amended urse- Support As
Reported Costs Costs Options ments Business Adjusted
Revenues $3,004.5 $- $- $- $- $- $3,004.5
Cost of
revenues 2,654.4 (1.1) (3.5) (1.2) (0.5) - 2,648.1
Other
operating
expenses 46.8 (23.0) (5.2) - - 2.4 21.0
Total
operating
expenses 2,701.2 (24.1) (8.7) (1.2) (0.5) 2.4 2,669.1
Operating
income 303.3 24.1 8.7 1.2 0.5 (2.4) 335.4
Interest
expense 87.0 - - - - - 87.0
Other non-
operating
income, net (6.2) - - - - - (6.2)
Pretax profit 222.5 24.1 8.7 1.2 0.5 (2.4) 254.6
Income tax
expense 74.7 8.6 3.1 0.4 0.2 (0.9) 86.1
Net income $147.7 $15.6 $5.6 $0.8 $0.3 $(1.5) $168.5
Earnings
per share:
Basic $1.48 $0.16 $0.06 $0.01 $- $(0.02) $1.69
Diluted $1.47 $0.15 $0.06 $0.01 $- $(0.02) $1.67
Shares used in
computing
earnings per
common share:
Basic 99.6 99.6 99.6 99.6 99.6 99.6 99.6
Diluted 100.6 100.6 100.6 100.6 100.6 100.6 100.6
* Differences in schedule due to rounding.
Year-to-Date Fiscal 2007:
-- Year-to-date fiscal 2007 reported GAAP diluted earnings per share
was $1.30. Year-to-date fiscal 2007 adjusted non-GAAP diluted
earnings per share was $1.45 and excluded the following:
* $0.14 per diluted share of legal expenses related to the
ongoing stock option investigations and shareholder derivative
lawsuits described further in item 1 of non-GAAP adjustments
above
* $0.01 per diluted share charge related to a waiver fee on our
credit facility described further in item 6 of non-GAAP
adjustments above
Six Months Ended December 31, 2006 ($ in millions, except EPS) *
Option
As Related Waiver As
Reported Costs Fee Adjusted
Revenues $2,812.2 $- $- $2,812.2
Cost of revenues 2,486.2 (0.7) - 2,485.5
Other operating expenses 34.8 (21.0) - 13.8
Total operating expenses 2,521.0 (21.7) - 2,499.3
Operating income 291.2 21.7 - 312.9
Interest expense 94.1 - (2.6) 91.5
Other non-operating income, net (12.3) - - (12.3)
Pretax profit 209.4 21.7 2.6 233.7
Income tax expense 75.9 7.8 1.0 84.7
Net income $133.5 $13.9 $1.6 $149.0
Earnings per common share:
Basic $1.32 $0.14 $0.01 $1.47
Diluted $1.30 $0.14 $0.01 $1.45
Shares used in computing earnings
Basic 101.2 101.2 101.2 101.2
Diluted 102.5 102.5 102.5 102.5
* Differences in schedule due to rounding.
-- Year-to-date fiscal 2007 adjusted non-GAAP diluted earnings per
share also included the following:
* $0.03 per diluted share net charge related to restructuring
activities, asset impairments and other charges partially
offset by a gain related to foreign currency hedging activities
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 December 31, 2007, the Company generated internal revenue growth of 5%. Internal revenue growth is measured as follows (unaudited, $ in millions):
Three months ended December 31,
Growth
2007 2006 %(a)
Consolidated
Total Revenues $1,511 $1,427 6%
Less: Divested - (1)
Adjusted Base $1,511 $1,426 6%
Acquired Revenues* $11 $- 1%
Internal Revenues 1,500 1,426 5%
Total $1,511 $1,426 6%
Commercial
Total Revenues $903 $850 6%
Less: Divested - -
Adjusted Base $903 $850 6%
Acquired Revenues* $4 $- -
Internal Revenues 899 850 6%
Total $903 $850 6%
Government
Total Revenues $608 $577 5%
Less: Divested - (1)
Adjusted Base $608 $576 5%
Acquired Revenues* $7 $- 1%
Internal Revenues 601 576 4%
Total $608 $576 5%
* Acquired revenues are based on pre-acquisition normalized revenues of
acquired companies.
(a) Based on actual amounts, not rounded.
For the six months ended December 31, 2007, the Company generated internal
revenue growth of 6%. Internal revenue growth is measured as follows
(unaudited, $ in millions):
Six months ended December 31,
Growth
2007 2006 %(a)
Consolidated
Total Revenues $3,005 $2,812 7%
Less: Divested - (1)
Adjusted Base $3,005 $2,811 7%
Acquired Revenues* $38 $- 1%
Internal Revenues 2,967 2,811 6%
Total $3,005 $2,811 7%
Commercial
Total Revenues $1,782 $1,681 6%
Less: Divested - -
Adjusted Base $1,782 $1,681 6%
Acquired Revenues* $24 $- 1%
Internal Revenues 1,758 1,681 5%
Total $1,782 $1,681 6%
Government
Total Revenues $1,223 $1,131 8%
Less: Divested - (1)
Adjusted Base $1,223 $1,130 8%
Acquired Revenues* $14 $- 1%
Internal Revenues 1,209 1,130 7%
Total $1,223 $1,130 8%
* Acquired revenues are based on pre-acquisition normalized revenues of
acquired companies.
(a) Based on actual amounts, not rounded.
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 Six months ended
December 31, December 31,
2007 2006 2007 2006
Free Cash Flow*
Net cash provided by operating
activities $323 $132 $331 $305
Less:
Purchase of property, equipment
and software, net of sales (67) (69) (132) (170)
Additions to other intangible assets (8) (6) (17) (15)
Free Cash Flow $248 $57 $181 $119
Certain cash flow items (included
above):
Cash interest paid on debt $50 $50 $85 $82
Cash paid on stock option
investigations, potential buyout and
derivative lawsuits 20 17 29 19
Cash interest received (2) (3) (5) (5)
Total $68 $64 $109 $96
* Based on actual amounts, not rounded.
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