Q1 2009 Earning Report of Affiliated Computer Services

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Q1 2009 Earning Report of Affiliated Computer Services

  1. 1. Third Quarter Fiscal Year 2009 April 30, 2009 This presentation may contain “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). These statements are based on a number of assumptions concerning future events and are subject to numerous risks, uncertainties and other factors, many of which are outside the Company’s control. The anticipated results described in the forward- looking statements could be materially different from the actual events and results. For a description of these risks, uncertainties and other factors, see the Company’s prior filings with the Securities and Exchange Commission, including the most recent Annual Report on Form 10-K for the fiscal year ended June 30, 2008 filed August 28, 2008 under Item 1A. “Risk Factors”. ACS disclaims any intention or obligation to revise any forward-looking statements, whether as a result of new information, future event, or otherwise. © Affiliated Computer Services, Inc. (ACS) 2007, 2008
  2. 2. Lynn Blodgett Chief Executive Officer © Affiliated Computer Services, Inc. (ACS) 2007, 2008
  3. 3. Third quarter recap New business signings (ARR) $342 million Total revenue growth (a) 5% Internal revenue growth 3% Adjusted operating margins 11.3% Adjusted EPS (b) $1.00 (a) Excluding divestitures. (b) Includes $3.7 million of costs related to Project Compete, or $0.02 diluted earnings per share. Slide 3 © Affiliated Computer Services, Inc. (ACS) 2007
  4. 4. Looking forward Improving operating margins Investment in sales Investment in innovation Perfecting global production model Recession-resistant business model Slide 4 © Affiliated Computer Services, Inc. (ACS) 2007
  5. 5. Tom Burlin Chief Operating Officer © Affiliated Computer Services, Inc. (ACS) 2007, 2008
  6. 6. Record new business signings Q3FY09 Signings Q3FY09 Signings Annual recurring revenue: $342 million Total contract value: $1.6 billion 71% Total contract value of all signings: $2.7 billion 29% Trailing Twelve Months Annual recurring revenue: $957 million Commercial Government Total contract value: $4.0 billion Total contract value of all signings: $8.8 billion 95% 5% Areas of Strength Healthcare Payer Government Healthcare BPO ITO Communications & Consumer Goods Slide 6 © Affiliated Computer Services, Inc. (ACS) 2007
  7. 7. Renewal rates Renewal rates (FYTD) 85% Q3FY09 Annual recurring revenue $324 million Total contract value $890 million Trailing Twelve Months Annual recurring revenue $1.4 billion Total contract value $4.2 billion Slide 7 © Affiliated Computer Services, Inc. (ACS) 2007
  8. 8. New business pipeline remains strong Q3FY09 Pipeline Q3FY09 Pipeline Annual recurring revenue: $2.0 billion 54% 46% Areas of Strength ITO Commercial Government State & Local Transportation Solutions 20% 80% Transactional BPO Government Healthcare BPO ITO Slide 8 © Affiliated Computer Services, Inc. (ACS) 2007
  9. 9. Commercial Segment © Affiliated Computer Services, Inc. (ACS) 2007, 2008
  10. 10. Commercial segment results ($ in millions) Operating Margins Revenues Reported Adjusted (b) 12.0% $1,000 $974 $963 11.1%11.1% $922 8.0% 9.3% 9.1% 8.4% 8.4% $500 4.0% 0.0% $0 Q3FY08 Q2FY09 Q3FY09 Q3FY08 Q2FY09 Q3FY09 Total Revenue Growth (a): 6% Project Compete costs $ 14 $ 2 Internal Revenue Growth: 3% Deferred Compensation benefit $ 2 $ 1 Y/Y revenue increase: Margin increase: Healthcare Payer New business ramp Finance & Accounting Financial Services & Mortgage Finance & Accounting Human Resources Acquisitions in Communication & Consumer Communication & Consumer Goods Goods Healthcare Payer Impact of Project Compete (a) Excluding divestitures. (b) See reconciliation of reported GAAP results and adjusted non-GAAP results in Supplemental Schedules. Slide 10 © Affiliated Computer Services, Inc. (ACS) 2007
  11. 11. e-Services Group expands geographic presence Rationale Financial Metrics Trailing twelve month revenue: $65 million Adds pure-play, near-shore BPO and customer care centers Purchase price: $85 million Strong base of recurring revenue Operating margins: Corporate average Talented leadership team with local Year 1 earnings accretion: Modest market expertise Provides BPO cross-selling opportunities Slide 11 © Affiliated Computer Services, Inc. (ACS) 2007
  12. 12. Government Segment © Affiliated Computer Services, Inc. (ACS) 2007, 2008
  13. 13. Government segment results ($ in millions) Revenues Operating Margins $750 Reported Adjusted (b) 20% $649 $637 $620 17.6% 17.6% 15% $500 16.4% 16.4% 15.3% 15.3% 10% $250 5% $0 0% Q3FY08 Q2FY09 Q3FY09 Q3FY08 Q2FY09 Q3FY09 Total Revenue Growth (a): 3% Project Compete costs $ 3 $ 0 Internal Revenue Growth: 1% Y/Y revenue increase: Y/Y margin decrease: Government related services performing as Lower transportation projects and volumes expected Federal Solutions Electronic Payment Services Sequential margin decrease: Federal Solutions Transportation impacted by delayed projects Federal Solutions and lower volumes (a) Excluding divestitures. (b) See reconciliation of reported GAAP results and adjusted non-GAAP results in Supplemental Schedules. Slide 13 © Affiliated Computer Services, Inc. (ACS) 2007
  14. 14. Kevin Kyser Chief Financial Officer © Affiliated Computer Services, Inc. (ACS) 2007, 2008
  15. 15. Third quarter highlights ($ in millions, except EPS) Revenues Operating Margins Reported Adjusted (b) 12% $1,600 $1,612 $1,610 $1,542 10.8% 11.3% 10.6% 11.2% 10.5% 10.7% $1,200 8% $800 4% $400 $0 0% Q3FY08 Q2FY09 Q3FY09 Q3FY08 Q2FY09 Q3FY09 Project Compete costs $ 17 $4 Total Revenue Growth (a): 5% Deferred Compensation benefit $ 13 $ 3 Internal Revenue Growth: 3% Diluted EPS Reported Adjusted (b) $1.00 $0.95 $1.00 $0.91 $0.75 $0.85 $0.85 $0.77 $0.50 $0.25 $0.00 Q3FY08 Q2FY09 Q3FY09 Project Compete costs $ 0.11 $ 0.02 (a) Excluding divestitures. (b) See reconciliation of reported GAAP results and adjusted non-GAAP results in Supplemental Schedules. Slide 15 © Affiliated Computer Services, Inc. (ACS) 2007
  16. 16. Condensed cash flow statement ($ in millions) Q3FY08 Q3FY09 FYTD08 FYTD09 Operating cash flow $ 229 $ 142 $ 560 $ 451 % of revenues 15% 9% 12% 9% Capex / intangibles $ 69 $ 96 $ 218 $ 262 % of revenues 4% 6% 5% 5% Free cash flow $ 161 $ 46 $ 342 $ 188 % of revenues 10% 3% 8% 4% FYTD09 cash taxes paid $75 million higher than FYTD08 Capex increased due to ramp of new business signings Expect FY09 free cash flow at the low end of 6% to 8% of revenues Differences in schedule due to rounding Slide 16 © Affiliated Computer Services, Inc. (ACS) 2007
  17. 17. Selected balance sheet categories ($ in millions) Assets 12/31/08 3/31/09 Comment Cash $ 567 $ 497 Acquisition of e-Services Accounts receivable 1,493 1,473 Cash collections Goodwill 2,760 2,804 Acquisition of e-Services Liabilities & Equity Accounts payable and other accrueds $ 612 $ 601 Timing of payments to vendors Accrued compensation 201 176 Timing of payroll cycles Unearned revenue (current and long-term) 307 284 Timing of client billings Debt (current and long-term) 2,371 2,340 Slide 17 © Affiliated Computer Services, Inc. (ACS) 2007
  18. 18. Financial update on Project Compete ($ in millions) Actual Remaining FYTD09 Severance $ 10 FYTD09 Transition 10 Total actual costs to date $ 20 Estimated remaining costs of Project Compete $ 11 - 14 Estimated costs: Q4FY09 $ 6-8 Slide 18 © Affiliated Computer Services, Inc. (ACS) 2007
  19. 19. Q&A © Affiliated Computer Services, Inc. (ACS) 2007, 2008
  20. 20. Supplemental Schedules Third Quarter Fiscal Year 2009 April 30, 2009 © Affiliated Computer Services, Inc. (ACS) 2007, 2008
  21. 21. Non-GAAP Measures 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. Slide 21 © Affiliated Computer Services, Inc. (ACS) 2007
  22. 22. Non-GAAP Measures (continued) 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 quot;Description of Non-GAAP Adjustmentsquot; 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. 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. Slide 22 © Affiliated Computer Services, Inc. (ACS) 2007
  23. 23. Non-GAAP Measures (continued) 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 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 Investigation Related Costs”) and has made and will continue to make claims under its directors’ and officers’ insurance policies for reimbursement of these costs, although the Company cannot predict the timing or amount, if any, of any insurance reimbursements. Management believes that these costs and related insurance reimbursements, if any, 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 to evaluate our strategic alternatives, including the proposal from Darwin Deason, Chairman of the Board of Directors (“Chairman”), 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 (collectively, “Buyout Related Costs”). 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. Slide 23 © Affiliated Computer Services, Inc. (ACS) 2007
  24. 24. Non-GAAP Measures (continued) Description of Non-GAAP Adjustments: The following items are included in our presentation of Non-GAAP adjustments: 3. Cost related to amending certain employee stock options: During 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 revised accounting measurement date to avoid adverse tax consequences to individual holders under Section 409(a) of the Internal Revenue Code (“Section 409(a)”). 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 and cash payments are not related to the Company’s ongoing operations and that excluding them helps to provide a more meaningful representation of our 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 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 and nine month periods ended March 31, 2009, the Company recorded a charge (credit) of approximately $0.2 million and ($0.6) million, respectively, based on the market price of ACS common stock. During the three and nine month periods ended March 31, 2008, the Company recorded a charge of approximately $0.5 million and $1.0 million, respectively, 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 our operating performance. Slide 24 © Affiliated Computer Services, Inc. (ACS) 2007
  25. 25. Non-GAAP Measures (continued) Description of Non-GAAP Adjustments: The following items are included in our presentation of Non-GAAP adjustments: 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 and an after tax gain of $1.6 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. 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 our continuing operations. 7. Litigation settlement: In fiscal year 2007, we recorded charges for a pre-acquisition claim related to our fiscal year 2005 acquisition of the human resources consulting business of Mellon Financial Corporation. In the third quarter of fiscal year 2008, we recovered approximately $1.8 million of this settlement. We believe that the settlement and subsequent recovery of this pre-acquisition claim is not related to our ongoing operations and that excluding them helps to provide a more meaningful representation of the performance from our continuing operations. Slide 25 © Affiliated Computer Services, Inc. (ACS) 2007
  26. 26. Non-GAAP Measures (continued) Description of Non-GAAP Adjustments: The following items are included in our presentation of Non-GAAP adjustments: 8. Cost related to terminating the Supplemental Executive Retirement Agreement (“SERP Agreement”) between the Company and its Chairman: During the second quarter of fiscal 2009,at the request of the Company, the Chairman agreed to terminate the SERP Agreement and the stock options issued to the Chairman in 2003 in connection with the SERP Agreement due to the complex requirements of Section 409(a) of the Internal Revenue Code. As a result, the Company incurred a charge of $8.9 million, as determined pursuant to Amendment No. 3 to the SERP Agreement, and the Company has no further obligations to the Chairman pursuant to the SERP Agreement (“SERP Termination”). The SERP Termination removes the potential future liability the Company might incur under the SERP Agreement. 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 our operating performance. Slide 26 © Affiliated Computer Services, Inc. (ACS) 2007
  27. 27. Non-GAAP Measures (continued) AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES RECONCILIATION OF OPERATING INCOME (GAAP) TO ADJUSTED OPERATING INCOME (Non-GAAP) (UNAUDITED) (In millions) Three Months Ended Nine Months Ended December 31, March 31, March 31, 2008 2009 2008 2009 2008 Operating Income (GAAP) $ 168.5 $ 174.3 $ 163.9 $ 515.6 $ 467.2 Adjusting items, pre-tax: Option investigation related costs, net of recoveries (4.7) 7.3 9.8 7.0 34.0 Buyout related costs 0.4 (0.4) 0.2 0.8 8.9 Amended options (409(a)) - - - - 1.2 Income tax reimbursements, net of recoveries (0.5) 0.2 0.5 (0.6) 1.0 Sale of decision support business - - - - (2.4) Sale of bindery business - - - (0.2) - Legal settlement - - (1.8) - (1.8) SERP termination 8.9 - - 8.9 - Adjusted operating income (Non-GAAP)* $ 172.6 $ 181.4 $ 172.7 $ 531.6 $ 508.2 * Differences in schedule due to rounding SEE quot;USE OF NON-GAAP FINANCIAL MEASURESquot; FOR A DISCUSSION OF THIS INFORMATION Slide 27 © Affiliated Computer Services, Inc. (ACS) 2007
  28. 28. Non-GAAP Measures (continued) AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES RECONCILIATION OF NET INCOME (GAAP) TO ADJUSTED NET INCOME (Non-GAAP) (UNAUDITED) (In millions) Three Months Ended Nine Months Ended December 31, March 31, March 31, 2008 2009 2008 2009 2008 Net Income (GAAP) $ 75.5 $ 93.2 $ 82.6 $ 252.4 $ 230.4 Adjusting items, net of tax: Option investigation related costs, net of recoveries (3.0) 4.7 6.3 4.6 21.9 Buyout related costs 0.2 (0.3) 0.1 0.5 5.8 Amended options (409(a)) - - - - 0.8 Income tax reimbursements, net of recoveries (0.3) 0.1 0.3 (0.4) 0.7 Sale of decision support business - - - - (1.6) Sale of bindery business - - - 0.8 - Legal settlement - - (1.1) - (1.1) SERP termination 10.4 - - 10.4 - Adjusted Net income (Non-GAAP)* $ 83.0 $ 97.8 $ 88.3 $ 268.3 $ 256.8 * Differences in schedule due to rounding SEE quot;USE OF NON-GAAP FINANCIAL MEASURESquot; FOR A DISCUSSION OF THIS INFORMATION Slide 28 © Affiliated Computer Services, Inc. (ACS) 2007
  29. 29. Non-GAAP Measures (continued) AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES RECONCILIATION OF DILUTED EARNINGS PER SHARE (GAAP) TO ADJUSTED DILUTED EARNINGS PER SHARE (Non-GAAP) (UNAUDITED) Three Months Ended Nine Months Ended December 31, March 31, March 31, 2008 2009 2008 2009 2008 Diluted Earnings Per Share (GAAP) $ 0.77 $ 0.95 $ 0.85 $ 2.58 $ 2.32 Adjusting items, net of tax: Option investigation related costs, net of recoveries (0.03) 0.05 0.06 0.05 0.22 Buyout related costs - - - 0.01 0.06 Amended options (409(a)) - - - - 0.01 Income tax reimbursements, net of recoveries - - - - 0.01 Sale of decision support business - - - - (0.02) Sale of bindery business - - - 0.01 - Legal settlement - - (0.01) - (0.01) SERP termination 0.11 - - 0.11 - Adjusted Diluted Earnings Per Share (Non-GAAP)* $ 0.85 $ 1.00 $ 0.91 $ 2.74 $ 2.58 * Differences in schedule due to rounding SEE quot;USE OF NON-GAAP FINANCIAL MEASURESquot; FOR A DISCUSSION OF THIS INFORMATION Slide 29 © Affiliated Computer Services, Inc. (ACS) 2007
  30. 30. Non-GAAP Measures (continued) AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION REVENUE GROWTH CALCULATIONS FISCAL YEAR 2009 (UNAUDITED) (Dollars in millions) (Totals based on actual amounts, not rounded amounts) Quarter Ended Nine Months Ended September 30, December 31, March 31, March 31, 2008 2007 Growth % 2008 2007 Growth % 2009 2008 Growth % 2009 2008 Growth % CONSOLIDATED Total Revenues $ 1,604 $ 1,493 7% $ 1,612 $ 1,511 7% $ 1,610 $ 1,542 4% $ 4,827 $ 4,547 6% Less: Divested - (8) - (9) - (6) - (24) Adjusted $ 1,604 $ 1,485 8% $ 1,612 $ 1,502 7% $ 1,610 $ 1,536 5% $ 4,827 $ 4,523 7% Acquired Revenues $ 48 $ - 3% $ 51 $ - 3% $ 41 $ 4 2% $ 140 $ 4 3% Internal Revenues 1,556 1,485 5% 1,561 1,502 4% 1,569 1,532 3% 4,687 4,519 4% Total $ 1,604 $ 1,485 8% $ 1,612 $ 1,502 7% $ 1,610 $ 1,536 5% $ 4,827 $ 4,523 7% COMMERCIAL Total Revenues $ 959 $ 879 9% $ 963 $ 903 7% $ 974 $ 922 6% $ 2,897 $ 2,704 7% Less: Divested - (3) - (3) - (2) - (9) Adjusted $ 959 $ 876 10% $ 963 $ 900 7% $ 974 $ 920 6% $ 2,897 $ 2,695 7% Acquired Revenues $ 34 $ - 4% $ 37 $ - 4% $ 27 $ 4 3% $ 97 $ 4 3% Internal Revenues 925 876 6% 926 900 3% 947 916 3% 2,800 2,691 4% Total $ 959 $ 876 10% $ 963 $ 900 7% $ 974 $ 920 6% $ 2,897 $ 2,695 7% GOVERNMENT Total Revenues $ 645 $ 614 5% $ 649 $ 608 7% $ 636 $ 620 3% $ 1,930 $ 1,843 5% Less: Divested - (5) - (6) - (4) - (15) Adjusted $ 645 $ 609 6% $ 649 $ 602 8% $ 636 $ 616 3% $ 1,930 $ 1,828 6% Acquired Revenues $ 14 $ - 2% $ 14 $ - 3% $ 14 $ - 2% $ 43 $ - 3% Internal Revenues 631 609 4% 635 602 5% 622 616 1% 1,887 1,828 3% Total $ 645 $ 609 6% $ 649 $ 602 8% $ 636 $ 616 3% $ 1,930 $ 1,828 6% SEE quot;USE OF NON-GAAP FINANCIAL MEASURESquot; FOR A DISCUSSION OF THIS INFORMATION Slide 30 © Affiliated Computer Services, Inc. (ACS) 2007
  31. 31. Non-GAAP Measures (continued) Affiliated Computer Services, Inc. and Subsidiaries Supplemental Financial Information Segment Information (Unaudited) (Dollars in millions) (Percentages and totals based on actual amounts, not rounded amounts) FY 2008 FY 2009 Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 YTD 9/30/2007 12/31/2007 3/31/2008 6/30/2008 6/30/2008 9/30/2008 12/31/2008 3/31/2009 3/31/2009 Commercial: Revenue $ 878.9 $ 903.0 $ 922.4 $ 969.7 $ 3,674.0 $ 959.4 $ 963.4 $ 973.8 $ 2,896.6 Operating Expenses 730.3 748.1 767.1 801.4 3,046.8 798.2 813.5 797.5 2,409.3 Depreciation and amortization expense 65.9 69.5 70.0 73.4 278.7 70.6 68.6 68.6 207.8 Operating Income $ 82.7 $ 85.4 $ 85.3 $ 95.0 $ 348.5 $ 90.6 $ 81.2 $ 107.8 $ 279.5 Operating Margin 9.4% 9.5% 9.3% 9.8% 9.5% 9.4% 8.4% 11.1% 9.7% Government: Revenue $ 614.2 $ 608.4 $ 620.0 $ 644.0 $ 2,486.6 $ 645.0 $ 648.7 $ 636.6 $ 1,930.4 Operating Expenses 480.7 464.8 484.7 504.8 1,935.1 511.2 515.9 513.7 1,540.8 Depreciation and amortization expense 24.5 24.5 26.0 25.2 100.3 26.4 26.2 25.8 78.4 Operating Income $ 109.0 $ 119.1 $ 109.2 $ 113.9 $ 451.2 $ 107.5 $ 106.6 $ 97.2 $ 311.3 Operating Margin 17.7% 19.6% 17.6% 17.7% 18.1% 16.7% 16.4% 15.3% 16.1% Corporate: Revenue $ - $ - $ - $ - $ - $ - $ - $ - $ - Operating Expenses (excluding impact of SFAS 123(R) expense) 38.3 39.5 24.1 24.4 126.3 19.0 11.8 23.2 54.7 Stock-based compensation expense 7.6 6.7 6.1 6.3 26.7 5.7 6.7 6.5 18.1 Depreciation and amortization expense 0.4 0.4 0.4 0.4 1.6 0.6 0.8 1.0 2.4 Operating Income $ (46.3) $ (46.6) $ (30.6) $ (31.0) $ (154.6) $ (25.3) $ (19.3) $ (30.6) $ (75.2) Consolidated: Revenue $ 1,493.1 $ 1,511.4 $ 1,542.4 $ 1,613.7 $ 6,160.6 $ 1,604.4 $ 1,612.1 $ 1,610.4 $ 4,827.0 Operating Expenses (excluding impact of SFAS 123(R) expense) 1,249.3 1,252.4 1,275.9 1,330.6 5,108.2 1,328.4 1,341.2 1,334.3 4,004.7 Stock-based compensation expense 7.6 6.7 6.1 6.3 26.7 5.7 6.7 6.5 18.1 Depreciation and amortization expense 90.8 94.4 96.4 99.0 380.6 97.6 95.6 95.3 288.6 Operating Income $ 145.4 $ 157.9 $ 163.9 $ 177.9 $ 645.1 $ 172.7 $ 168.5 $ 174.3 $ 515.6 Operating Margin 9.7% 10.4% 10.6% 11.0% 10.5% 10.8% 10.5% 10.8% 10.7% SEE quot;USE OF NON-GAAP FINANCIAL MEASURESquot; FOR A DISCUSSION OF THIS INFORMATION Slide 31 © Affiliated Computer Services, Inc. (ACS) 2007
  32. 32. Non-GAAP Measures (continued) Affiliated Computer Services, Inc. and Subsidiaries Supplemental Financial Information Segment Information (Unaudited) (Dollars in millions) (Percentages and totals based on actual amounts, not rounded amounts) FY 2008 FY 2009 Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 YTD 9/30/2007 12/31/2007 3/31/2008 6/30/2008 6/30/2008 9/30/2008 12/31/2008 3/31/2009 3/31/2009 (1) Calculation of Adjusted Commercial operating margin: Operating income as reported $ 82.7 $ 85.4 $ 85.3 $ 95.0 $ 348.5 $ 90.6 $ 81.2 $ 107.8 $ 279.5 Pre-acquisition legal claim settlement and recovery - - (1.8) - (1.8) - - - - Sale of UPRR - - - (1.0) (1.0) - - - - Adjusted operating income $ 82.7 $ 85.4 $ 83.5 $ 94.0 $ 345.7 $ 90.6 $ 81.2 $ 107.8 $ 279.5 Adjusted operating margin 9.4% 9.5% 9.1% 9.7% 9.4% 9.4% 8.4% 11.1% 9.7% (2) Calculation of Adjusted Government operating margin: Operating income as reported $ 109.0 $ 119.1 $ 109.2 $ 113.9 $ 451.2 $ 107.5 $ 106.6 $ 97.2 $ 311.3 Sale of decision support business - (2.4) - - (2.4) - - - - Sale of bindery business - - - - - (0.2) - - (0.2) Adjusted operating income $ 109.0 $ 116.7 $ 109.2 $ 113.9 $ 448.8 $ 107.3 $ 106.6 $ 97.2 $ 311.1 Adjusted operating margin 17.7% 19.2% 17.6% 17.7% 18.0% 16.6% 16.4% 15.3% 16.1% (3) Calculation of Adjusted Corporate operating income: Operating income as reported $ (46.3) $ (46.6) $ (30.6) $ (31.0) $ (154.6) $ (25.3) $ (19.3) $ (30.6) $ (75.2) Option investigation related costs 11.2 13.0 9.8 (1.4) 32.6 4.4 (4.7) 7.3 7.0 Buyout related costs 4.9 3.8 0.2 1.0 9.9 0.8 0.4 (0.4) 0.8 Amended options (409(a)) 1.2 - - - 1.2 - - - - Income tax reimbursements 0.8 (0.4) 0.5 0.3 1.4 (0.3) (0.5) 0.2 (0.6) SERP Termination - - - - - - 8.9 - 8.9 Adjusted operating income $ (28.2) $ (30.2) $ (20.1) $ (31.1) $ (109.6) $ (20.4) $ (15.2) $ (23.5) $ (59.1) (4) Calculation of Adjusted Consolidated operating margin: Operating income as reported $ 145.4 $ 157.9 $ 163.9 $ 177.9 $ 645.1 $ 172.7 $ 168.5 $ 174.3 $ 515.6 Option investigation related costs 11.2 13.0 9.8 (1.4) 32.6 4.4 (4.7) 7.3 7.0 Buyout related costs 4.9 3.8 0.2 1.0 9.9 0.8 0.4 (0.4) 0.8 Amended options (409(a)) 1.2 - - - 1.2 - - - - Income tax reimbursements 0.8 (0.4) 0.5 0.3 1.4 (0.3) (0.5) 0.2 (0.6) Sale of decision support business - (2.4) - - (2.4) - - - - Sale of bindery business - - - - - (0.2) - - (0.2) Pre-acquisition legal claim settlement and recovery - - (1.8) - (1.8) - - - - Sale of UPRR - - - (1.0) (1.0) - - - - SERP Termination - - - - - - 8.9 - 8.9 Rounding - - 0.1 - - - - - - Adjusted operating income $ 163.5 $ 171.9 $ 172.7 $ 176.8 $ 685.0 $ 177.5 $ 172.6 $ 181.4 $ 531.6 Adjusted operating margin 11.0% 11.4% 11.2% 11.0% 11.1% 11.1% 10.7% 11.3% 11.0% SEE quot;USE OF NON-GAAP FINANCIAL MEASURESquot; FOR A DISCUSSION OF THIS INFORMATION Slide 32 © Affiliated Computer Services, Inc. (ACS) 2007
  33. 33. Non-GAAP Measures (continued) Affiliated Computer Services, Inc. and Subsidiaries Supplemental Financial Information Condensed Consolidated Statements of Cash Flows (Unaudited) (Dollars in millions) (Totals based on actual amounts, not rounded amounts) FY2008 FY2009 Q1 Q2 Q3 Q4 FY2008 Q1 Q2 Q3 FY2009 Cash Flows from operating activities: Net Income $ 66.1 $ 81.6 $ 82.6 $ 98.6 $ 329.0 $ 83.6 $ 75.5 $ 93.2 $ 252.4 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 90.8 94.4 96.4 99.0 380.6 97.6 95.6 95.3 288.6 Gain on sale of business units - (2.4) (0.2) (1.0) (3.6) (0.4) (1.4) (0.3) (2.2) Gain (loss) on investments 1.9 (2.2) 2.7 0.2 2.5 6.0 13.0 2.8 21.8 Impairments charges - 1.6 - - 1.6 - - - - Excess tax benefit on stock-based compensation (2.0) - (0.6) (1.3) (3.9) (0.1) (1.4) (0.2) (1.6) Stock-based compensation expense 7.6 6.7 6.1 6.3 26.7 5.7 6.7 6.3 18.7 Deferred income tax expense 46.4 15.1 39.6 30.2 131.2 14.3 13.7 9.5 37.5 Other non-cash adjustments 6.3 5.6 7.1 16.0 35.0 12.1 10.1 10.8 33.0 Change in assets and liabilities, net of effects from acquisitions (209.1) 122.2 (4.2) 18.6 (72.3) (156.2) 34.3 (75.6) (197.5) Total adjustments (58.1) 241.0 146.8 168.0 497.8 (21.0) 170.6 48.6 198.2 Net cash provided by operating activities 8.0 322.6 229.5 266.7 826.8 62.6 246.1 141.9 450.6 Cash Flows from investing activities: Purchases of property, equipment and software, net (65.8) (66.6) (60.2) (75.4) (267.9) (64.6) (84.0) (83.7) (232.3) Additions to other intangible assets (9.5) (7.9) (8.4) (14.5) (40.4) (9.5) (8.3) (12.1) (29.9) Payments for acquisitions, net of cash acquired (23.7) (0.1) (126.6) (69.0) (219.5) (4.8) (14.2) (80.7) (99.7) Proceeds from divestitures, net of transaction costs - 4.0 - 2.3 6.3 9.3 1.0 0.3 10.6 Proceeds from investments - 1.0 1.9 0.1 3.0 10.6 2.1 0.6 13.3 Purchase of investments - - (8.5) (1.3) (9.8) (2.6) (5.0) - (7.6) Other - (6.5) - - (6.5) - - - - Net cash used in investing activities (99.0) (76.1) (201.8) (157.9) (534.8) (61.6) (108.4) (175.7) (345.7) Cash Flows from financing activities: Proceeds from issuance of long-term debt 23.0 174.1 16.6 4.8 218.5 - 30.7 0.4 31.1 Repayments of long-term debt (22.4) (170.9) (24.5) (23.0) (240.7) (33.7) (39.1) (38.2) (111.0) Purchase of treasury shares - (200.0) - - (200.0) - - - - Excess tax benefit on stock options per SFAS 123(R) 2.0 - 0.6 1.3 3.9 0.1 1.4 0.2 1.6 Proceeds from stock options exercised 27.3 2.1 10.7 41.1 81.2 5.6 1.8 1.0 8.4 Other, net (0.1) - - (0.1) (0.3) (0.1) (0.1) (0.1) (0.2) Net cash provided by (used in) financing activities 29.7 (194.7) 3.4 24.2 (137.4) (28.1) (5.3) (36.7) (70.1) Net change in cash and cash equivalents (61.3) 51.8 31.1 133.0 154.6 (27.1) 132.4 (70.5) 34.8 Cash and cash equivalents at beginning of period 307.3 246.0 297.8 328.9 307.3 461.9 434.8 567.2 461.9 Cash and cash equivalents at end of period $ 246.0 $ 297.8 $ 328.9 $ 461.9 $ 461.9 $ 434.8 $ 567.2 $ 496.7 $ 496.7 Free Cash Flow: Net cash provided by operating activities $ 8.0 $ 322.6 $ 229.5 $ 266.7 $ 826.8 $ 62.6 $ 246.1 $ 141.9 $ 450.6 Less: Purchases of property, equipment and software, net (65.8) (66.6) (60.2) (75.4) (267.9) (64.6) (84.0) (83.7) (232.3) Additions to other intangible assets (9.5) (7.9) (8.4) (14.5) (40.4) (9.5) (8.3) (12.1) (29.9) Free Cash Flow $ (67.3) $ 248.1 $ 160.9 $ 176.8 $ 518.5 $ (11.5) $ 153.8 $ 46.0 $ 188.4 SEE quot;USE OF NON-GAAP FINANCIAL MEASURESquot; FOR A DISCUSSION OF THIS INFORMATION Slide 33 © Affiliated Computer Services, Inc. (ACS) 2007

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