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 Second Quarter Fiscal Year 2010 Results
DALLAS,
Texas: January 21, 2010 – Affiliated Computer Services, Inc.
(NYSE: ACS)
Key
highlights from the second quarter of fiscal year 2010:
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Adjusted
diluted earnings per share of $1.07
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New
business signings of $275 million of annual recurring
revenue
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Revenue
of $1.66 billion representing total revenue growth of
3%
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Free
cash flow of $252 million, or 15% of
revenue
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ACS today
announced second quarter fiscal year 2010 revenues of $1.66 billion, a 3%
increase compared to the prior year quarter. Second quarter fiscal year 2010
adjusted non-generally accepted accounting principles (“GAAP”) diluted earnings
per share was $1.07. Adjusted non-GAAP diluted earnings per share for
the comparable prior year period was $0.85. See “Reconciliation of
Reported GAAP Results to Adjusted Non-GAAP Results” below.
Second
quarter new business signings totaled $275 million of annual recurring revenue
with an estimated total contract value of $1.7 billion. Total contract value of
all signings, including new business signings, renewals and non-recurring
revenue, was $3.4 billion. Trailing twelve month total contract value
of all signings was $9.8 billion.
Fiscal
year-to-date revenues were $3.33 billion, a 4% increase over the prior
comparable period. Fiscal year-to-date adjusted non-GAAP diluted earnings per
share was $2.02. Adjusted non-GAAP diluted earnings per share for the
comparable prior year-to-date period was $1.74. See “Reconciliation
of Reported GAAP Results to Adjusted Non-GAAP Results” below.
“This was
a busy quarter at ACS as we worked towards finalizing the Xerox transaction and
I’m proud of the operating results our team delivered,” said Lynn Blodgett, ACS
president and chief executive officer. “We grew revenue, operating
profit and earnings per share. We generated the second highest
quarterly operating cash flow and signed the second highest quarter of new
business in our history. Additionally, we renewed one of our most
significant client relationships. I appreciate our employees’
commitment to the success of ACS.”
- 1
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Additional
highlights from the second quarter of fiscal year 2010:
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Commercial
signings represented 47% of new business signings and Government
contributed 53%. From a service line perspective, business process
outsourcing contributed 88% of new business signings and 12% were
information technology outsourcing.
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The
Commercial segment contributed 61% of revenues and grew 5%. The
Government segment contributed 39% of
revenues.
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Adjusted
non-GAAP operating income was $183 million with an adjusted operating
margin of 11%. See “Reconciliation of Reported GAAP Results to
Adjusted Non-GAAP Results” below.
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●
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Operating
cash flow for the second quarter of fiscal year 2010 was $367 million, or
22% of revenues. Capital expenditures and additions to intangible assets
was $114 million, or 7% of revenues. Free cash flow was $252
million, or 15% of revenues. The Company’s cash balance was
$825 million at December 31, 2009.
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Additional
highlights from the fiscal year-to-date period of 2010:
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●
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New
business signings for the fiscal year-to-date period were $487 million of
annual recurring revenue, a 20% increase over the prior comparable
period. Commercial signings represented 58% of new business
signings and Government contributed 42%. From a service line
perspective, business process outsourcing generated 84% of new business
signings and 16% were information technology outsourcing. Total contract
value of all signings for the fiscal year-to-date period was an estimated
$4.9 billion.
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For
the fiscal year-to-date period, the Commercial segment accounted for 61%
of revenues and grew 6%. The Government segment accounted for
39% of revenues and grew 1%.
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Cash
flow from operating activities for the fiscal year-to-date period was $346
million, or 10% of revenues, and free cash flow was $103 million, or 3% of
revenues. Capital expenditures and additions to intangible assets were
$243 million, or 7% of revenues.
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On
September 27, 2009, ACS and Xerox Corporation executed an Agreement and Plan of
Merger (which was amended on December 13, 2009) 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
approval of ACS and Xerox Corporation stockholders. Both companies
have scheduled shareholders meetings for February 5, 2010.
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 third quarter or fiscal year 2010.
ACS, a
global FORTUNE 500 company with approximately 78,000 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.
- 2
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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
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.
- 3
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Additional
Information
The
proposed merger transaction involving ACS and Xerox will be submitted to a vote
of the respective stockholders of ACS and Xerox for their
consideration. In connection with the proposed merger, Xerox filed
with the SEC, and the SEC declared effective on December 23, 2009, a
registration statement on Form S-4 that included a joint proxy statement of
Xerox and ACS that also constitutes a prospectus of Xerox and each of the
companies may be filing with the SEC other documents regarding the proposed
transaction. ACS and Xerox have mailed the joint proxy
statement/prospectus to their stockholders. ACS and Xerox urge investors and
security holders to read the joint proxy statement/prospectus regarding the
proposed transaction because it contains 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 definitive joint proxy
statement/prospectus and the filings with the SEC that will be incorporated by
reference in the definitive 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
were set forth in the joint proxy statement/prospectus 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.
- 4
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AFFILIATED
COMPUTER SERVICES, INC. AND SUBSIDIARIES
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Consolidated
Statements of Income
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|
In
thousands, except per share amounts
|
|
(Unaudited)
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|
|
Three
Months Ended
|
|||||||
|
December
31,
|
||||||||
|
2009
|
2008
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|||||||
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Revenues
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$ | 1,656,311 | $ | 1,612,070 | ||||
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Operating
expenses:
|
||||||||
|
Cost
of revenues:
|
||||||||
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Wages
and benefits
|
740,834 | 731,948 | ||||||
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Services
and supplies
|
402,431 | 403,365 | ||||||
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Rent,
lease and maintenance
|
208,974 | 196,491 | ||||||
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Depreciation
and amortization
|
99,372 | 95,616 | ||||||
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Other
|
10,553 | 9,686 | ||||||
|
Cost
of revenues
|
1,462,164 | 1,437,106 | ||||||
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Other
operating expenses
|
27,449 | 6,425 | ||||||
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Total
operating expenses
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1,489,613 | 1,443,531 | ||||||
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Operating
income
|
166,698 | 168,539 | ||||||
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Interest
expense
|
29,429 | 35,896 | ||||||
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Other
non-operating expense, net
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654 | 3,200 | ||||||
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Pretax
profit
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136,615 | 129,443 | ||||||
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Income
tax expense
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40,615 | 53,926 | ||||||
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Net
income
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$ | 96,000 | $ | 75,517 | ||||
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Earnings
per share:
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Basic
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$ | 0.98 | $ | 0.77 | ||||
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Diluted
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$ | 0.97 | $ | 0.77 | ||||
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Shares
used in computing earnings per share:
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Basic
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97,830 | 97,548 | ||||||
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Diluted
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99,051 | 97,811 | ||||||
- 5
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AFFILIATED
COMPUTER SERVICES, INC. AND SUBSIDIARIES
|
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Consolidated
Statements of Income
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In
thousands, except per share amounts
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(Unaudited)
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Six
Months Ended
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|||||||
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December
31,
|
||||||||
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2009
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2008
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|||||||
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Revenues
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$ | 3,333,307 | $ | 3,216,524 | ||||
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Operating
expenses:
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Cost
of revenues:
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Wages
and benefits
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1,508,349 | 1,465,964 | ||||||
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Services
and supplies
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830,808 | 776,870 | ||||||
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Rent,
lease and maintenance
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414,065 | 398,634 | ||||||
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Depreciation
and amortization
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196,259 | 193,222 | ||||||
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Other
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22,109 | 20,034 | ||||||
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Cost
of revenues
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2,971,590 | 2,854,724 | ||||||
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Other
operating expenses
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64,709 | 20,513 | ||||||
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Total
operating expenses
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3,036,299 | 2,875,237 | ||||||
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Operating
income
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297,008 | 341,287 | ||||||
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Interest
expense
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58,683 | 71,104 | ||||||
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Other
non-operating expense, net
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(8,442 | ) | 6,900 | |||||
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Pretax
profit
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246,767 | 263,283 | ||||||
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Income
tax expense
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81,973 | 104,131 | ||||||
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Net
income
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$ | 164,794 | $ | 159,152 | ||||
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Earnings
per share:
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Basic
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$ | 1.69 | $ | 1.63 | ||||
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Diluted
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$ | 1.67 | $ | 1.62 | ||||
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Shares
used in computing earnings per share:
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Basic
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97,736 | 97,428 | ||||||
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Diluted
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98,571 | 97,951 | ||||||
- 6
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AFFILIATED
COMPUTER SERVICES, INC. AND SUBSIDIARIES
|
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Condensed
Consolidated Balance Sheets
|
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In
thousands
|
|
(Unaudited)
|
|
December
31,
|
June
30,
|
|||||||
|
2009
|
2009
|
|||||||
|
ASSETS
|
||||||||
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Current
assets:
|
||||||||
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Cash
and cash equivalents
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$ | 824,577 | $ | 730,911 | ||||
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Accounts
receivable, net
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1,424,804 | 1,415,707 | ||||||
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Income
taxes receivable
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- | 19,210 | ||||||
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Prepaid
expenses and other current assets
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242,584 | 249,257 | ||||||
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Total
current assets
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2,491,965 | 2,415,085 | ||||||
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Property,
equipment and software, net
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1,018,534 | 955,158 | ||||||
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Goodwill
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2,896,583 | 2,894,189 | ||||||
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Other
intangibles, net
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438,041 | 436,383 | ||||||
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Other
assets
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194,930 | 200,158 | ||||||
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Total
assets
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$ | 7,040,053 | $ | 6,900,973 | ||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
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$ | 273,096 | $ | 272,889 | ||||
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Accrued
compensation and benefits
|
156,055 | 251,510 | ||||||
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Other
accrued liabilities
|
365,483 | 388,262 | ||||||
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Income
taxes payable
|
6,690 | - | ||||||
|
Deferred
taxes
|
93,136 | 90,798 | ||||||
|
Current
portion of long-term debt
|
295,885 | 295,172 | ||||||
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Current
portion of unearned revenue
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199,413 | 187,349 | ||||||
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Total
current liabilities
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1,389,758 | 1,485,980 | ||||||
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Long-term
debt
|
2,036,039 | 2,041,529 | ||||||
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Deferred
taxes
|
504,665 | 469,606 | ||||||
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Other
long-term liabilities
|
269,289 | 281,726 | ||||||
|
Total
liabilities
|
4,199,751 | 4,278,841 | ||||||
|
Total
stockholders' equity
|
2,840,302 | 2,622,132 | ||||||
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Total
liabilities and stockholders' equity
|
$ | 7,040,053 | $ | 6,900,973 | ||||
- 7
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Frequently Used
Terms
New business signings - while
there are no third party standards or requirements governing the calculation of
new business signings, 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.
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.
- 8
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Description
of Non-GAAP Adjustments:
The
following items are included in our presentation of Non-GAAP
adjustments:
|
1.
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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.
|
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2.
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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 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 and six month periods
ended December 31, 2009, the Company recorded charges of approximately
$0.5 million and $1.3 million, respectively, based on the market price of
ACS common stock. During the three and six month periods ended
December 31, 2008, the Company recorded credits of approximately $0.5
million and $0.8 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 the
Company’s operating performance.
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- 9
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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 were recorded at their fair market value of approximately
$4.0 million, and agreed to a dismissal, with prejudice, of the
case. During the three and six months ended December 31, 2009, we
recorded a credit of $0.6 million and a charge of $7.5 million 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.
|
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.
|
|
7.
|
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 during the three and six month periods we recorded
charges of $14.4 million and $32.5 million related to certain legal and
transactional costs and includes $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.
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- 10
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|
8.
|
Change in accounting
principle: 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.
|
- 11
-
AFFILIATED
COMPUTER SERVICES, INC. AND SUBSIDIARIES
|
RECONCILIATION
OF OPERATING INCOME (GAAP)TO ADJUSTED OPERATING INCOME
(Non-GAAP)
|
||||||||||||||||
|
(UNAUDITED)
(IN MILLIONS)
|
||||||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Operating
Income (GAAP)
|
$ | 166.7 | $ | 168.5 | $ | 297.0 | $ | 341.3 | ||||||||
|
Adjusting
items, pre-tax:
|
||||||||||||||||
|
Option
investigation related costs, net of recoveries
|
1.7 | (4.7 | ) | 3.2 | (0.3 | ) | ||||||||||
|
Buyout
related costs
|
- | 0.4 | (0.1 | ) | 1.2 | |||||||||||
|
Income
tax reimbursement, net of recoveries
|
0.5 | (0.5 | ) | 1.3 | (0.8 | ) | ||||||||||
|
Sale
of bindery business
|
- | - | - | (0.2 | ) | |||||||||||
|
Legal
settlement
|
(0.6 | ) | - | 7.5 | - | |||||||||||
|
SERP
termination
|
- | 8.9 | - | 8.9 | ||||||||||||
|
Xerox
transaction cost
|
14.4 | - | 32.5 | - | ||||||||||||
|
Change
in accounting principle
|
- | - | 3.8 | - | ||||||||||||
|
Adjusted
Operating Income (Non-GAAP)*
|
$ | 182.8 | $ | 172.6 | $ | 345.2 | $ | 350.1 | ||||||||
|
RECONCILIATION
OF OPERATING INCOME (GAAP)TO ADJUSTED OPERATING INCOME
(Non-GAAP)
|
||||||||||||||||
|
(UNAUDITED)
(IN MILLIONS)
|
||||||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
|
Net
Income (GAAP)
|
$ | 96.0 | $ | 75.5 | $ | 164.8 | $ | 159.2 | ||||||||
|
Adjusting
items, net of tax:
|
||||||||||||||||
|
Option
investigation related costs, net of recoveries
|
1.1 | (3.0 | ) | 2.0 | (0.2 | ) | ||||||||||
|
Buyout
related costs
|
- | 0.2 | - | 0.8 | ||||||||||||
|
Income
tax reimbursement, net of recoveries
|
0.3 | (0.3 | ) | 0.8 | (0.5 | ) | ||||||||||
|
Sale
of bindery business
|
- | - | - | 0.8 | ||||||||||||
|
Legal
settlement
|
(0.3 | ) | - | 4.6 | - | |||||||||||
|
SERP
termination
|
- | 10.4 | - | 10.4 | ||||||||||||
|
Xerox
transaction cost
|
8.9 | - | 24.4 | - | ||||||||||||
|
Change
in accounting principle
|
- | - | 2.4 | - | ||||||||||||
|
Adjusted
Net Income (Non-GAAP)*
|
$ | 106.0 | $ | 83.0 | $ | 199.0 | $ | 170.5 | ||||||||
|
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
|
Six
Months Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
|
Diluted
Earnings Per Share (GAAP)
|
$ | 0.97 | $ | 0.77 | $ | 1.67 | $ | 1.62 | ||||||||
|
Adjusting
items, net of tax:
|
||||||||||||||||
|
Option
investigation related costs, net of recoveries
|
0.01 | (0.03 | ) | 0.02 | - | |||||||||||
|
Buyout
related costs
|
- | - | - | 0.01 | ||||||||||||
|
Income
tax reimbursement, net of recoveries
|
- | - | 0.01 | - | ||||||||||||
|
Sale
of bindery business
|
- | - | - | 0.01 | ||||||||||||
|
Legal
settlement
|
- | - | 0.05 | - | ||||||||||||
|
SERP
termination
|
- | 0.11 | - | 0.11 | ||||||||||||
|
Xerox
transaction cost
|
0.09 | - | 0.25 | - | ||||||||||||
|
Change
in accounting principle
|
- | - | 0.02 | - | ||||||||||||
|
Adjusted
Diluted Earnings Per Share (Non-GAAP)*
|
$ | 1.07 | $ | 0.85 | $ | 2.02 | $ | 1.74 | ||||||||
|
*Differences
in schedule due to rounding.
|
||||||||||||||||
- 12
-
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, 2009, the Company generated internal revenue
growth of 0%. Internal revenue growth is measured as follows
(unaudited, in millions):
|
Three
Months Ended December 31,
|
||||||||||||
|
2009
|
2008
|
Growth
%(a)
|
||||||||||
|
Consolidated
|
||||||||||||
|
Acquired
Revenues*
|
$ | 45 | $ | 2 | 3 | % | ||||||
|
Internal
Revenues
|
1,611 | 1,610 | 0 | % | ||||||||
|
Total
|
$ | 1,656 | $ | 1,612 | 3 | % | ||||||
|
Commercial
|
||||||||||||
|
Acquired
Revenues*
|
$ | 44 | $ | 2 | 4 | % | ||||||
|
Internal
Revenues
|
965 | 961 | 1 | % | ||||||||
|
Total
|
$ | 1,009 | $ | 963 | 5 | % | ||||||
|
Government
|
||||||||||||
|
Acquired
Revenues*
|
$ | 1 | $ | - | 0 | % | ||||||
|
Internal
Revenues
|
646 | 649 | 0 | % | ||||||||
|
Total
|
$ | 647 | $ | 649 | 0 | % | ||||||
*
Acquired revenues are based on pre-acquisition normalized revenues of acquired
companies.
(a)
Differences in schedule due to rounding.
- 13
-
For the
six months ended December 31, 2009, the Company generated internal revenue
growth of 1%. Internal revenue growth is measured as follows
(unaudited, in millions):
|
Six
Months Ended December 31,
|
||||||||||||
|
2009
|
2008
|
Growth
%(a)
|
||||||||||
|
Consolidated
|
||||||||||||
|
Acquired
Revenues*
|
$ | 90 | $ | 3 | 3 | % | ||||||
|
Internal
Revenues
|
3,243 | 3,213 | 1 | % | ||||||||
|
Total
|
$ | 3,333 | $ | 3,216 | 4 | % | ||||||
|
Commercial
|
||||||||||||
|
Acquired
Revenues*
|
$ | 87 | $ | 3 | 5 | % | ||||||
|
Internal
Revenues
|
1,942 | 1,920 | 1 | % | ||||||||
|
Total
|
$ | 2,029 | $ | 1,923 | 6 | % | ||||||
|
Government
|
||||||||||||
|
Acquired
Revenues*
|
$ | 3 | $ | - | 0 | % | ||||||
|
Internal
Revenues
|
1,301 | 1,293 | 1 | % | ||||||||
|
Total
|
$ | 1,304 | $ | 1,293 | 1 | % | ||||||
*
Acquired revenues are based on pre-acquisition normalized revenues of acquired
companies.
(a)
Differences in schedule due to rounding.
- 14
-
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,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Free
Cash Flow
|
||||||||||||||||
|
Net
cash provided by operating activities
|
$ | 367 | $ | 246 | $ | 346 | $ | 309 | ||||||||
|
Less:
|
||||||||||||||||
|
Purchase
of property, equipment and software, net of sales
|
(99 | ) | (84 | ) | (193 | ) | (149 | ) | ||||||||
|
Additions
to other intangible assets
|
(15 | ) | (8 | ) | (49 | ) | (18 | ) | ||||||||
|
Free
Cash Flow*
|
$ | 252 | $ | 154 | $ | 103 | $ | 142 | ||||||||
|
*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—
- 15 -