##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 Mark One
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934[ X ]
    
    For the fiscal year ended June 30, 2008OR[     ]
    
    Transition Report Pursuant to Section 13 or 15(d) of the
 Securities Exchange Act of 1934
 
  AFFILIATED COMPUTER SERVICES, INC.
  Delaware
    
    51-0310342State or other jurisdiction of incorporation or organization
    
    (I.R.S. Employer Identification No.)
 2828 North Haskell, Dallas, Texas 75204
 214-841-6111
 Securities Registered Pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of exchange on which registeredClass A common stock, par value $.01 per share
    
    New York Stock Exchange
 Securities Registered Pursuant to Section 12(g) of the Act:
NONE
        Large accelerated filer   [X]
    
    Accelerated filer  [ ]


    
    Non-accelerated filer  [ ]

    
    Smaller reporting company  [ ](Do not check if a smaller reporting company)
    DOCUMENTS INCORPORATED BY REFERENCE:




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##### 



AFFILIATED COMPUTER SERVICES, INC.
 FORM 10-K
Fiscal Year Ended June 30, 2008
 Part IItem 1.
    
    Business
    
    1Item 1A.
    
    Risk Factors
    
    11Item 1B.
    
    Unresolved Staff Comments
    
    20Item 2.
    
    Properties
    
    20Item 3.
    
    Legal Proceedings
    
    20Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    21Part IIItem 5.
    
    Market for Our Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    22Item 6.
    
    Selected Financial Data
    
    25Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    26Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    51Item 8.
    
    Financial Statements and Supplementary Data
    
    53Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    107Item 9A.
    
    Controls and Procedures
    
    107Item 9B.
    
    Other Information
    
    107Part IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    108Item 11.
    
    Executive Compensation
    
    108Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    108Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    108Item 14.
    
    Principal Accounting Fees and Services
    
    108Part IVItem 15.
    
    Financial Statements and Exhibits
    
    108Form of Stock Option AgreementForm of Stock Option AgreementForm of Stock Option AgreementSubsidiariesConsent of PricewaterhouseCoopers LLPConsent of Value IncorporatedCertification of CEO Pursuant to Rule 13a-14(a)Certification of CFO Pursuant to Rule 13a-14(a)Certification of CEO Pursuant to Section 1350Certification of CFO Pursuant to Section 1350




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PART I
 
 ITEM 1. BUSINESS
   Market Overview
  Business Strategy
   Vertical Market Focused
 Innovate
 Operational Focus
 Nimble and Accountable Organization
 Sell
 Recruit, Train & Retain
 1




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Employees
   Segment Information
  
  2




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Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Commercial (a)
    
    $
    3,673,981
    
    
    $
    3,404,935
    
    
    $
    3,118,159Government (b)
    
    
    2,486,569
    
    
    
    2,367,544
    
    
    
    2,235,502Total revenues
    
    $
    6,160,550
    
    
    $
    5,772,479
    
    
    $
    5,353,661
 (a)
    
    Includes $14 million, $18 million and $18.8 million of revenues for fiscal years 2008,
2007 and 2006, respectively, from operations divested through June 30, 2008.(b)
    
    Includes $3.6 million, $8.8 million and $112.7 million of revenues for fiscal years
2008, 2007 and 2006, respectively, from operations divested through June 30, 2008.
 Commercial Segment
   3




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Information Technology Outsourcing (ITO)
 Data Center Outsourcing
 Midrange Server Outsourcing
 Network Outsourcing
 Remote Infrastructure Management (RIM)
 Help Desk/Service Desk Management
 Desktop Outsourcing
 Managed Storage
 Utility Computing
 Disaster Recovery
 4




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Security Services
 IT Commercial Services
 Human Capital Management Solutions (HCMS)
 Buck Consulting
 
 
 
 
 
 
 Total Benefits Outsourcing
 Human Resources Outsourcing
 5




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Learning Process Outsourcing
 Commercial Education and Financial Services
 Finance and Accounting
 
  Communications and Consumer Goods
 Healthcare Provider
 Travel, Transportation and Logistics
 6




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Financial Services
 Healthcare Payer and Insurance
 
 Government Segment
     State & Local Solutions (SLS)
 7




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IT Services
 Child Support Solutions ®
 Electronic Benefits Transfer (EBT)
 Eligibility Solutions
 Government Records Management
 Unclaimed Property
 Transportation Solutions (TS)
 Electronic Toll Collection
 Commercial Vehicle Operations ®
 Motor Vehicle Services
 8




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Photo Enforcement and Violations Processing
 Public Transport
 On-Street Parking
 Off-Street and Airport Parking
 Government Healthcare Solutions (GHS)
 Health Program Administration
 Healthcare and Quality Management
 Eligibility & Enrollment Solutions
 Pharmacy Benefits Management
 Federal Solutions
 Student Loan Processing
 9




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##### Table of Contents



Electronic Payment Card
 Administrative Services
 Customer Care
 Revenues
by Service Line
  Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Business process outsourcing (a)
    
    $
    4,792,403
    
    
    $
    4,322,164
    
    
    $
    3,996,558Information technology services
    
    
    1,041,036
    
    
    
    1,013,801
    
    
    
    971,832Systems integration services (b)
    
    
    327,111
    
    
    
    436,514
    
    
    
    385,271Total revenues
    
    $
    6,160,550
    
    
    $
    5,772,479
    
    
    $
    5,353,661
 (a)
    
    Includes $17.6 million, $26.8 million and $131.2 million of revenues for fiscal years
2008, 2007 and 2006, respectively, from operations divested through June 30, 2008.(b)
    
    Includes $0.3 million of revenues for fiscal year 2006 from operations divested through
June 30, 2008.
 Competition
   Global Production Model
  10




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Client
Base
   Geographic
Information
  Certifications
and Governance
  U.S.
Securities and Exchange Commission Reports
  
 ITEM
1A. RISK FACTORS
  We have issued debt and have a substantial uncommitted facility available to us. If interest rates
rise or if we draw additional amounts under the facility, our debt service cost could increase and
limit cash flow available to fund our operations, and limit our ability to obtain further debt or
equity financing.
  11




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A reversal, on appeal, of a lower courts determination that we have not defaulted on our Senior
Notes and that those Notes have not been accelerated could have a negative impact on our cash flow
and divert resources that could otherwise be utilized in our business operations.
  The complexity of regulatory environments in which we operate has increased and may continue to
increase our costs.
  12




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We are subject to the oversight of the SEC and other regulatory agencies and investigations by
those agencies could divert managements focus and could have a material adverse impact on our
reputation and financial condition.
  Our credit rating or further reductions of our credit rating may have an adverse impact on our
business.
  A decline in revenues from or a loss or failure of significant clients could reduce our
profitability and cash flow.
  Our ability to recover capital investments in connection with our contracts is subject to risk.
  13




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We have non-recurring revenue, which subjects us to a risk that our revenues and cash flows from
may fluctuate from period to period.
  The markets in which we operate are highly competitive and we may not be able to compete
effectively.
  Our business could be adversely affected if our clients are not satisfied with our services.
  We are dependent to a significant extent on third party providers, such as subcontractors, a
relatively small number of primary software vendors, utility providers and network providers, and
could be materially adversely affected if they cannot deliver or perform as expected or if our
relationships with them are terminated or otherwise change.
  We may not be successful at identifying, acquiring or integrating other businesses or technologies.
  14




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A failure to properly manage our operations and our growth could have a material adverse effect on
our business.
  Our Government contracts are subject to termination rights, audits and investigations, which, if
exercised, could negatively impact our reputation and reduce our ability to compete for new
contracts.
  We may incur delays in signing and commencing new business as the result of protests of government
contracts that we are awarded.
  15




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Some of our contracts contain provisions that could adversely affect our business, financial
condition, operating results and cash flows. Additionally, our inability to control costs could
adversely affect our business, financial condition, operating results and cash flows.
    Claims associated with our actuarial consulting and benefit plan management services could
negatively impact our business.
  We may be subject to claims of infringement of third-party intellectual property rights which could
adversely affect our business.
  16




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We are subject to United States and foreign jurisdiction laws relating to individually identifiable
information, and failure to comply with those laws, whether or not inadvertent, could subject us to
legal actions and negatively impact our operations.
  We are subject to breaches of our security system.
  Budget deficits and/or fluctuations in the number of requests for proposals issued by state and
local governments and their agencies may adversely impact our business.
  Our international and domestic operations are subject to a number of risks.
  17




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Our operating results may be adversely affected by fluctuations in foreign currency exchange rates.
  
    
    Because our consolidated financial statements are presented in U.S. dollars, we
must translate revenues, expenses and income, as well as assets and liabilities, into U.S.
dollars at exchange rates in effect during or at the end of each reporting period.
Therefore, changes in the value of the U.S. dollar against other currencies will affect
our revenues, operating income and the value of balance-sheet items originally denominated
in other currencies. Declines in the value of other currencies against the U.S. dollar
could cause our consolidated earnings stated in U.S. dollars to be lower than our
consolidated earnings in local currency and could affect our reported results when
compared against other periods. Conversely, increases in the value of other currencies
against the U.S. dollar could cause our consolidated earnings stated in U.S. dollars to be
higher than our consolidated earnings in local currency and could affect our reported
results when compared against other periods. There is no guarantee that our financial
results will not be adversely affected by currency exchange rate fluctuations.
    
    In some countries we could be subject to strict restrictions on the movement of
cash and the exchange of foreign currencies, which could limit our ability to use this
cash across our global operations.
    
    As we continue to leverage our global delivery model, more of our expenses are
incurred in currencies other than those in which we bill for the related services. An
increase in the value of certain currencies against the U.S. dollar could increase costs
for delivery of services at off-shore sites by increasing labor and other costs that are
denominated in local currency, and there can be no assurance that our contractual
provisions or any currency hedging activities would offset this impact. This could result
in a decrease in the profitability of our contracts that are utilizing delivery center
resources.
 A failure to attract and retain necessary technical personnel, skilled management and qualified
subcontractors may have an adverse impact on our business.
  18




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Risks associated with loans that we service may reduce our profitability and cash flow.
  Certain provisions of our certificate of incorporation, bylaws and Delaware law and our stock
ownership could deter takeover attempts.
  
    
    require an 80% vote of the stockholders to amend some provisions of our certificate of incorporation;
    
    require an 80% vote of the stockholders to amend some provisions of our bylaws;
    
    permit only our Chairman, President or a majority of the Board of Directors (calculated as if there were no
vacancies) to call stockholder meetings;
    
    authorize our Board of Directors to issue up to 3 million shares of preferred stock in series with the terms of
each series to be fixed by our Board of Directors;
    
    authorize our Board of Directors to issue Class B common stock, which shares are entitled to ten votes per share;
    
    permit directors to be removed, with or without cause, only by a vote of at least 80% of the combined voting
power; and
    
    specify advance notice requirements for stockholder proposals and director nominations to be considered at a
meeting of stockholders.
   19




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The price of our Class A common stock may fluctuate significantly, which may result in losses for
investors .
   Other Risks
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
  20




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 1.
    
    Election of Directors:
 Name
    
    For
    
    WithheldDarwin Deason
    
    
    110,950,744
    
    
    
    35,618,291Lynn R. Blodgett
    
    
    113,402,983
    
    
    
    33,166,052Robert Druskin
    
    
    119,039,731
    
    
    
    27,529,304Kurt R. Krauss
    
    
    113,838,959
    
    
    
    32,730,076Ted B. Miller, Jr.
    
    
    113,837,131
    
    
    
    32,731,904Paul E. Sullivan
    
    
    119,039,523
    
    
    
    27,529,512Frank Varasano
    
    
    113,844,671
    
    
    
    32,724,364
 Each of the directors was elected by a plurality of the vote and will serve until their
respective successors are elected and qualified.2.
    
    Approval of the fiscal year 2008 performance-based incentive compensation for ACS executive
officers.
 For
    
    Against
    
    Abstain139,290,967
    
    5,682,793
    
    1,595,274
 3.
    
    Ratification of the appointment of PricewaterhouseCoopers LLP as ACS independent registered
public accounting firm for fiscal year 2008.
 For
    
    Against
    
    Abstain143,017,423
    
    2,412,627
    
    1,138,985
 4.
    
    Approval of a stockholder proposal to adopt a policy on an annual advisory vote on executive
compensation.
 For
    
    Against
    
    Abstain
    
    Broker Non-Votes30,186,122
    
    103,389,187
    
    6,762,172
    
    6,231,554
 21




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PART II
 
 ITEM 5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
 Stock Price
 High
    
    
    LowFiscal year ended June 30, 2008First Quarter
    
    $
    58.70
    
    
    $
    45.52Second Quarter
    
    
    52.61
    
    
    
    39.46Third Quarter
    
    
    53.23
    
    
    
    40.43Fourth Quarter
    
    
    57.40
    
    
    
    49.55Fiscal year ended June 30, 2007First Quarter
    
    
    54.16
    
    
    
    47.32Second Quarter
    
    
    53.85
    
    
    
    48.06Third Quarter
    
    
    60.63
    
    
    
    47.79Fourth Quarter
    
    
    61.67
    
    
    
    56.30
  Dividends
 22




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Stock Option and Employee Stock Purchase Plans
 Number of securitiesNumber of
    
    
    
    
    
    
    remaining available forsecurities to be
    
    
    
    
    
    
    future issuance underissued upon exercise
    
    
    
    
    
    
    equity compensationof outstanding
    
    
    Weighted average
    
    
    plans (excludingoptions, warrants
    
    
    exercise price of
    
    
    securities reflected inand rights
    
    
    outstanding options,
    
    
    initial column)Plan Category
    
    as of June 30, 2008

    
    warrants and rights

    
    as of June 30, 2008Equity compensation plans
approved by security shareholdersStock options
    
    
    13,682,410
    (1)
    
    
    $ 47.82
    
    
    
    10,542,500
    (2)Employee stock purchase plan
    
    
    N/A
    
    
    
    N/A
    
    
    
    646,457Equity compensation plans not
approved by security shareholders
    
    
    -
    
    
    
    -
    
    
    
    -Total
    
    
    13,682,410
    
    
    
    $ 47.82
    
    
    
    11,188,957
 (1)
    
    This consists of the 1997 Stock Incentive Plan and the 2007 Equity Incentive Plan. Upon
exercise the holder is entitled to receive Class A common stock.
 (2)
    
    This represents the available shares under the 2007 Equity Incentive Plan. In June 2007, our
stockholders approved the 2007 Equity Incentive Plan which replaced the 1997 Stock Incentive
Plan. The remaining shares available for issuance under the 1997 Stock Incentive Plan expired
on December 31, 2007.
 Stock Option Repricing
 Share Repurchase Program
 Tender Offer
 23




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Performance Graph
 
 24




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ITEM 6. SELECTED FINANCIAL DATA
  As of and for the fiscal year ended June 30,2008
    
    
    2007(b)
    
    
    2006(c)
    
    
    2005(d)
    
    
    2004(e)Results of Operations Data:Revenues (a)
    
    $
    6,160,550
    
    
    $
    5,772,479
    
    
    $
    5,353,661
    
    
    $
    4,351,159
    
    
    $
    4,106,393Operating income
    
    $
    645,078
    
    
    $
    536,955
    
    
    $
    617,284
    
    
    $
    647,484
    
    
    $
    834,745Net income
    
    $
    329,010
    
    
    $
    253,090
    
    
    $
    358,806
    
    
    $
    409,569
    
    
    $
    521,728Earnings per share  basic
    
    $
    3.36
    
    
    $
    2.53
    
    
    $
    2.91
    
    
    $
    3.21
    
    
    $
    3.97Earnings per share  diluted
    
    $
    3.32
    
    
    $
    2.49
    
    
    $
    2.87
    
    
    $
    3.14
    
    
    $
    3.77Weighted average shares outstanding 
basic (f)
    
    
    98,013
    
    
    
    100,181
    
    
    
    123,197
    
    
    
    127,560
    
    
    
    131,498Weighted average shares outstanding 
diluted (f)
    
    
    98,993
    
    
    
    101,572
    
    
    
    125,027
    
    
    
    130,556
    
    
    
    139,880Balance Sheet Data:Working capital
    
    $
    1,017,977
    
    
    $
    839,662
    
    
    $
    704,158
    
    
    $
    405,983
    
    
    $
    406,854Total assets
    
    $
    6,469,399
    
    
    $
    5,982,429
    
    
    $
    5,502,437
    
    
    $
    4,850,838
    
    
    $
    3,907,242Total long-term debt (g) (less current
portion)
    
    $
    2,357,541
    
    
    $
    2,342,272
    
    
    $
    1,614,032
    
    
    $
    750,355
    
    
    $
    372,439Stockholders equity
    
    $
    2,308,374
    
    
    $
    2,066,168
    
    
    $
    2,456,218
    
    
    $
    2,811,712
    
    
    $
    2,569,678Other Data:Net cash provided by operating
activities (h)
    
    $
    826,777
    
    
    $
    738,378
    
    
    $
    638,710
    
    
    $
    739,348
    
    
    $
    476,209
 (a)
    
    Revenues from operations divested through June 30, 2008 were $17.6 million, $26.8 million,
$131.5 million, $260 million and $551.0 million for fiscal years 2008, 2007, 2006, 2005 and
2004, respectively. Please see Significant Developments  Fiscal Year 2008, 2007 and 2006 in
MD&A and Note 6 to our Consolidated Financial Statements for a discussion of divestiture
activity.
 (b)
    
    During fiscal year 2007 we recorded a non-cash impairment charge of approximately $76.4
million ($48.3 million, net of income tax) related to a change in terms on our contract with
the Department of Education. Please see Significant Developments  Fiscal Year 2007 in MD&A
for further discussion.
 (c)
    
    Please see Significant Developments  Fiscal Year 2006 in MD&A and the Notes to our
Consolidated Financial Statements for discussion of significant items which impacted fiscal
year 2006 results of operations.
 (d)
    
    During fiscal year 2005, we acquired the human resources consulting and outsourcing business
of Mellon Financial Corporation.
 (e)
    
    During fiscal year 2004 we completed the sale of the majority of our federal business. We
recognized a pretax gain of $285.3 million ($182.3 million, net of income tax) in fiscal year
2004.
 (f)
    
    Please see Note 16 to our Consolidated Financial Statements for a discussion of our share
repurchase programs and Tender Offer (defined in Significant Developments  Fiscal Year 2006
in MD&A).
 (g)
    
    During fiscal year 2005, we issued $500 million of Senior Notes (defined in Item 1A. Risk
Factors) and during fiscal year 2006 we entered into a new $800 million Term Loan Facility and
$1 billion Revolving Facility (each as defined in Item 1A. Risk Factors). Please see
Liquidity and Capital Resources in MD&A and Note 12 to our Consolidated Financial Statements
for a discussion of our credit arrangements.
 (h)
    
    Please see Liquidity and Capital Resources in MD&A for a discussion of items affecting
fiscal years 2008, 2007 and 2006 cash flow from operating activities.
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FORWARD-LOOKING AND CAUTIONARY STATEMENTS
    
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
   New Business Pipeline
 26




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New Business Signings
  Internal Revenue Growth
 Client Renewal Rates
 Capital Intensity
  27




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Employees
 Other
  Fiscal Year 2009 Outlook
     28




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Significant Developments  Fiscal Year 2008
 New Business
 Deason/Cerberus Proposal
 Board of Directors
 Acquisitions
 Divestitures
  Share Repurchase Programs
 29




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Adoption of FIN 48
 Stock Option Repricing
 Review of Stock Option Grant Practices
 Subsequent Events
  Significant Developments  Fiscal Year 2007
 New Business
 Acquisitions
 Departure of Executive Officers
 Credit Arrangements
  Sale of Minority Interests in a Professional Services Business
 Share Repurchase Programs
 30




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Stock Option Repricing
 Contract with the Department of Education
  Government Healthcare Contract
 Restructuring Activities
 Significant Developments  Fiscal Year 2006
 Review of Stock Option Grant Practices
 New Business
 Acquisitions
 Sale of Government Welfare-to-Workforce Services Business
 Share Repurchase Programs
 31




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Tender Offer
 Voting Rights of Our Chairman
 Departure of Executive Officer
 Credit Agreement
 Restructuring Activities
 Other
 32




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Revenue Growth
    Fiscal year ended
    
    
    
    
    
    
    
    
    
    
    Fiscal year endedJune 30,
    
    
    Growth
    
    
    June 30,
    
    
    Growth2008
    
    
    2007
    
    
    $
    
    
    %

    
    2007
    
    
    2006
    
    
    $
    
    
    %ConsolidatedTotal Revenues
    
    $
    6,160,550
    
    
    $
    5,772,479
    
    
    $
    388,071
    
    
    
    7
    %
    
    $
    5,772,479
    
    
    $
    5,353,661
    
    
    $
    418,818
    
    
    
    8
    %Less: Divestitures
    
    
    (5,077
    )
    
    
    (10,613
    )
    
    
    5,536
    
    
    
    
    
    
    
    (914
    )
    
    
    (104,524
    )
    
    
    103,610Adjusted
    
    $
    6,155,473
    
    
    $
    5,761,866
    
    
    $
    393,607
    
    
    
    7
    %
    
    $
    5,771,565
    
    
    $
    5,249,137
    
    
    $
    522,428
    
    
    
    10
    %Acquired revenues
    
    $
    115,614
    
    
    $
    4,094
    
    
    $
    111,520
    
    
    
    2
    %
    
    $
    272,049
    
    
    $
    22,437
    
    
    $
    249,612
    
    
    
    5
    %Internal revenues
    
    
    6,039,859
    
    
    
    5,757,772
    
    
    
    282,087
    
    
    
    5
    %
    
    
    5,499,516
    
    
    
    5,226,700
    
    
    
    272,816
    
    
    
    5
    %Total
    
    $
    6,155,473
    
    
    $
    5,761,866
    
    
    $
    393,607
    
    
    
    7
    %
    
    $
    5,771,565
    
    
    $
    5,249,137
    
    
    $
    522,428
    
    
    
    10
    %CommercialTotal Revenues (a)
    
    $
    3,673,981
    
    
    $
    3,404,935
    
    
    $
    269,046
    
    
    
    8
    %
    
    $
    3,404,935
    
    
    $
    3,118,159
    
    
    $
    286,776
    
    
    
    9
    %Less: Divestitures
    
    
    (5,077
    )
    
    
    (5,487
    )
    
    
    410
    
    
    
    
    
    
    
    -
    
    
    
    -
    
    
    
    -Adjusted
    
    $
    3,668,904
    
    
    $
    3,399,448
    
    
    $
    269,456
    
    
    
    8
    %
    
    $
    3,404,935
    
    
    $
    3,118,159
    
    
    $
    286,776
    
    
    
    9
    %Acquired revenues
    
    $
    82,426
    
    
    $
    -
    
    
    $
    82,426
    
    
    
    2
    %
    
    $
    174,947
    
    
    $
    7,103
    
    
    $
    167,844
    
    
    
    5
    %Internal revenues
    
    
    3,586,478
    
    
    
    3,399,448
    
    
    
    187,030
    
    
    
    6
    %
    
    
    3,229,988
    
    
    
    3,111,056
    
    
    
    118,932
    
    
    
    4
    %Total
    
    $
    3,668,904
    
    
    $
    3,399,448
    
    
    $
    269,456
    
    
    
    8
    %
    
    $
    3,404,935
    
    
    $
    3,118,159
    
    
    $
    286,776
    
    
    
    9
    %GovernmentTotal Revenues (b)
    
    $
    2,486,569
    
    
    $
    2,367,544
    
    
    $
    119,025
    
    
    
    5
    %
    
    $
    2,367,544
    
    
    $
    2,235,502
    
    
    $
    132,042
    
    
    
    6
    %Less: Divestitures
    
    
    -
    
    
    
    (5,126
    )
    
    
    5,126
    
    
    
    
    
    
    
    (914
    )
    
    
    (104,524
    )
    
    
    103,610Adjusted
    
    $
    2,486,569
    
    
    $
    2,362,418
    
    
    $
    124,151
    
    
    
    5
    %
    
    $
    2,366,630
    
    
    $
    2,130,978
    
    
    $
    235,652
    
    
    
    11
    %Acquired revenues
    
    $
    33,188
    
    
    $
    4,094
    
    
    $
    29,094
    
    
    
    1
    %
    
    $
    97,102
    
    
    $
    15,334
    
    
    $
    81,768
    
    
    
    4
    %Internal revenues
    
    
    2,453,381
    
    
    
    2,358,324
    
    
    
    95,057
    
    
    
    4
    %
    
    
    2,269,528
    
    
    
    2,115,644
    
    
    
    153,884
    
    
    
    7
    %Total
    
    $
    2,486,569
    
    
    $
    2,362,418
    
    
    $
    124,151
    
    
    
    5
    %
    
    $
    2,366,630
    
    
    $
    2,130,978
    
    
    $
    235,652
    
    
    
    11
    %
 (a)
    
    The Commercial segment includes revenues from operations divested through June 30, 2008
of $14 million, $18 million and $18.8 million for fiscal years 2008, 2007 and 2006, respectively.
 (b)
    
    The Government segment includes revenues from operations divested through June 30, 2008
of $3.6 million, $8.8 million and $112.7 million for fiscal years 2008, 2007 and 2006,
respectively.
 33




---



##### Table of Contents



Results of Operations
  Percentage of RevenueFiscal year ended June 30,2008

    
    2007

    
    2006Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Cost of revenues:Wages and benefits
    
    
    47.2
    
    
    
    47.6
    
    
    
    48.0Services and supplies
    
    
    22.5
    
    
    
    21.9
    
    
    
    21.8Rent, lease and maintenance
    
    
    12.1
    
    
    
    12.2
    
    
    
    12.1Depreciation and amortization
    
    
    6.2
    
    
    
    6.0
    
    
    
    5.4Software impairment charge
    
    
    -
    
    
    
    1.3
    
    
    
    -Other
    
    
    0.4
    
    
    
    0.5
    
    
    
    0.7Cost of revenues
    
    
    88.4
    
    
    
    89.5
    
    
    
    88.0Gain on sale of business
    
    
    -
    
    
    
    -
    
    
    
    (0.6
    )Other operating expenses
    
    
    1.1
    
    
    
    1.2
    
    
    
    1.1Total operating expenses
    
    
    89.5
    
    
    
    90.7
    
    
    
    88.5Operating income
    
    
    10.5
    
    
    
    9.3
    
    
    
    11.5Interest expense
    
    
    2.6
    
    
    
    3.2
    
    
    
    1.3Other non-operating income, net
    
    
    (0.2
    )
    
    
    (0.5
    )
    
    
    (0.2
    )Pretax profit
    
    
    8.1
    
    
    
    6.6
    
    
    
    10.4Income tax expense
    
    
    2.8
    
    
    
    2.2
    
    
    
    3.7Net income
    
    
    5.3
    %
    
    
    4.4
    %
    
    
    6.7
    %
 Comparison of Fiscal Year 2008 to Fiscal Year 2007
 Revenues
   34




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##### Table of Contents



Operating Expenses
    35




---



##### Table of Contents



Fiscal year ended June 30,2008

    
    2007Commercial segment:Litigation settlement
    
    $
    3.0
    
    
    $
    -Gain on sale of UPRR
    
    
    (1.0
    )
    
    
    -Litigation settlement related to pre-acquisition activities
of the Acquired HR Business (as defined in Note 5 to our Consolidated Financial Statements) and subsequent recovery from
seller
    
    
    (1.8
    )
    
    
    4.5Provision for uncollectible accounts receivable related to
the bankruptcy of a sub-prime lending client
    
    
    -
    
    
    
    1.5Government segment:Gain on sale of our decision support business
    
    
    (2.4
    )
    
    
    -Gain on settlement of indemnification and other claims with
Lockheed Martin Corporation
    
    
    (2.2
    )
    
    
    -Corporate segment:Legal costs associated with the ongoing stock option
investigations and stockholder derivative lawsuits, net of
insurance recovery
    
    
    30.1
    
    
    
    30.1Legal costs associated with the potential sale of the
Company and stockholder derivative lawsuits
    
    
    6.3
    
    
    
    3.1Reversal of penalties related to Section 162(m) disallowances
    
    
    -
    
    
    
    (0.9
    )Total
    
    $
    32.0
    
    
    $
    38.3As a percentage of revenue
    
    
    0.5
    %
    
    
    0.7
    %Change as a percentage of revenue explained above
    
    
    (0.2
    )%Other net change as a percentage of revenue
    
    
    0.1
    %Total change as a percentage of revenue
    
    
    (0.1
    )%
 36




---



##### Table of Contents



Operating Income
 Fiscal year ended June 30,2008

    
    2007Commercial segment:Litigation settlement
    
    $
    (3.0
    )
    
    $
    -Impairment charge related to the termination of a Commercial client that was
acquired
    
    
    (1.6
    )
    
    

    -Gain on sale of UPRR
    
    
    1.0
    
    
    

    -Costs related to our fiscal year 2007 restructuring activities
    
    

    -
    
    
    
    (8.9
    )Litigation settlement related to pre-acquisition activities of the Acquired HR
Business and subsequent recovery from seller
    
    
    1.8
    
    
    
    (4.5
    )Provision for uncollectible accounts receivable and other charges related to the
loss of a sub-prime lending client to bankruptcy
    
    

    -
    
    
    
    (1.7
    )Asset impairments and other charges
    
    

    -
    
    
    
    (1.3
    )Costs related to our efforts to relocate domestic functions to offshore facilities
    
    

    -
    
    
    
    (1.2
    )Government segment:Gain on sale of our decision support business
    
    
    2.4
    
    
    

    -Gain on settlement of indemnification and other claims with Lockheed Martin
Corporation
    
    
    2.2
    
    
    

    -Software impairment charge related to the CSB contract
    
    

    -
    
    
    
    (76.4
    )Revenue related to the settlement of the North Carolina Department of Health and
Human Services contract dispute
    
    

    -
    
    
    
    3.4Cost related to our restructuring activities
    
    

    -
    
    
    
    (1.3
    )Corporate segment:Legal and other costs associated with the ongoing stock option investigations and
stockholder derivative lawsuits, net of insurance recovery
    
    
    (32.5
    )
    
    
    (32.3
    )Legal costs and other costs associated with the potential sale of the Company and
stockholder derivative lawsuits
    
    
    (9.9
    )
    
    
    (5.9
    )Cost related to amending certain employees stock options
    
    
    (1.2
    )
    
    

    -Cost related to certain former employees stock options
    
    
    (1.4
    )
    
    

    -Reversal of accrued penalties related to the Section 162(m) disallowances
    
    

    -
    
    
    
    0.9Total
    
    $
    (42.2
    )
    
    $
    (129.2
    )As a percentage of revenue
    
    
    (0.7
    )%
    
    
    (2.2
    )%Change as a percentage of revenue explained above
    
    
    1.5
    %Other net change as a percentage of revenue
    
    
    (0.3
    )%Total change as a percentage of revenue
    
    
    1.2
    %
 Interest Expense
 Other Non-Operating Income, Net
 Income Tax Expense
 37




---



##### Table of Contents



Comparison of Fiscal Year 2007 to Fiscal Year 2006
 Revenues
   Operating Expenses
   38




---



##### Table of Contents




  39




---



##### Table of Contents



Fiscal year ended June 30,2007
    
    2006Commercial segment:Litigation settlement related to pre-acquisition activities
of the Acquired HR Business
    
    $
    4.5
    
    
    $
    -Provision for uncollectible accounts receivable related to
the bankruptcy of a sub-prime lending client
    
    
    1.5
    
    
    
    -Provision for doubtful accounts for an assessment of risk
related to the bankruptcies of certain airline clients
    
    
    -
    
    
    
    3.0Government segment:Provision for estimated legal settlement and uncollectible
accounts receivable related to the WWS Divestiture
    
    
    -
    
    
    
    3.3Provision for uncollectible accounts receivable retained in
connection with the Divested Federal Business (as defined in Item 1. Business)
    
    
    -
    
    
    
    2.4Legal settlements and related costs
    
    
    -
    
    
    
    0.5Corporate segment:Legal costs associated with the ongoing stock option
investigations and stockholder derivative lawsuits
    
    
    30.1
    
    
    
    2.7Legal costs associated with the potential sale of the
Company and stockholder derivative lawsuits
    
    
    3.1
    
    
    
    -Reversal of penalties related to Section 162(m) disallowances
    
    
    (0.9
    )
    
    
    -Aircraft impairment
    
    
    -
    
    
    
    4.7Legal costs associated with the review of certain
recapitalization options related to our dual class structure
and an unsolicited offer regarding a potential sale of the
Company
    
    
    -
    
    
    
    4.0Legal settlements and related costs
    
    
    -
    
    
    
    2.7Total
    
    $
    38.3
    
    
    $
    23.3As a percentage of revenue
    
    
    0.7
    %
    
    
    0.4
    %Change as a percentage of revenue explained above
    
    
    0.3
    %Other net change as a percentage of revenue
    
    
    (0.2
    )%Total change as a percentage of revenue
    
    
    0.1
    %
 40




---



##### Table of Contents



Operating Income
 Fiscal year ended June 30,2007
    
    
    2006Commercial segment:Costs related to our restructuring activities
    
    $
    (8.9
    )
    
    $
    (10.2
    )Litigation settlement related to pre-acquisition activities of the Acquired HR
Business
    
    
    (4.5
    )
    
    
    -Provision for uncollectible accounts receivable and other charges related to the
bankruptcy of a sub-prime lending client
    
    
    (1.7
    )
    
    
    -Costs related to our efforts to relocate domestic functions to offshore facilities
    
    
    (1.2
    )
    
    
    -Other impairments and severance charges
    
    
    (1.3
    )
    
    
    (2.2
    )Incremental transaction costs related to the Acquired HR Business
    
    
    -
    
    
    
    (5.7
    )Provision for doubtful accounts for an assessment of risk related to the
bankruptcies of certain airline clients
    
    
    -
    
    
    
    (3.0
    )Government segment:Software impairment charge related to the CSB contract
    
    
    (76.4
    )
    
    
    -Revenue related to the settlement of the North Carolina Department of Health and
Human Services contract dispute
    
    
    3.4
    
    
    
    -Cost related to our restructuring activities
    
    
    (1.3
    )
    
    
    (2.6
    )Gain on sale of Government WWS Divestiture
    
    
    -
    
    
    
    32.9Charge related to the North Carolina Department of Health and Human Services
contract
    
    
    -
    
    
    
    (4.0
    )Provision for estimated legal settlement and uncollectible accounts receivable
related to the WWS Divestiture
    
    
    -
    
    
    
    (3.4
    )Provision for uncollectible accounts receivable retained in connection with
Divested Federal Business
    
    
    -
    
    
    
    (2.4
    )Other impairments and severance charges
    
    
    -
    
    
    
    (1.5
    )Legal settlements and related costs
    
    
    -
    
    
    
    (0.5
    )Corporate segment:Legal and other costs associated with the ongoing stock option investigations and
stockholder derivative lawsuits
    
    
    (32.3
    )
    
    
    (2.9
    )Legal costs and other costs associated with the potential sale of the Company and
stockholder derivative lawsuits
    
    
    (5.9
    )
    
    
    -Reversal of accrued penalties related to the Section 162(m) disallowances
    
    
    0.9
    
    
    
    -Compensation expense related to the departure of Jeffrey A. Rich, former Chief
Executive Officer
    
    
    -
    
    
    
    (5.4
    )Aircraft impairment
    
    
    -
    
    
    
    (4.7
    )Legal costs associated with the review of certain recapitalization options
related to our dual class structure and an unsolicited offer regarding a
potential sale of the Company
    
    
    -
    
    
    
    (4.0
    )Legal settlements and related costs
    
    
    -
    
    
    
    (2.7
    )Total
    
    $
    (129.2
    )
    
    $
    (22.3
    )As a percentage of revenue
    
    
    (2.2
    )%
    
    
    (0.4
    )%Change as a percentage of revenue explained above
    
    
    (1.8
    )%Other net change as a percentage of revenue
    
    
    (0.4
    )%Total change as a percentage of revenue
    
    
    (2.2
    )%
  41




---



##### Table of Contents



Interest Expense
 Other Non-Operating Income, Net
 Income Tax Expense
 Liquidity and Capital Resources
 Cash Flows
 Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Cash paid for interest on outstanding debt
    
    $
    (157.7
    )
    
    $
    (169.6
    )
    
    $
    (56.3
    )Cash paid for legal fees and other costs
related to the investigations into our
stock option grant practices, derivative
lawsuits related to our stock option
grant practices and the potential sale of
the Company
    
    
    (41.4
    )
    
    
    (30.3
    )
    
    
    -Cash received for interest income
    
    
    8.9
    
    
    
    8.0
    
    
    
    3.4Cash paid to certain current and former
employees related to stock options
    
    
    (6.8
    )
    
    
    -
    
    
    
    -Cash paid on tax, interest and penalties
related to our stock option grant
practices
    
    
    -
    
    
    
    (35.0
    )
    
    
    -Cash paid for final settlement of the
Mellon Financial Corporation (Mellon)
transition services agreement (a)
    
    
    -
    
    
    
    -
    
    
    
    (85.8
    )Cash paid for incentive compensation to
employees of the Acquired HR Business (a)
    
    
    -
    
    
    
    -
    
    
    
    (26.3
    )Cash flow used by items listed above
    
    $
    (197.0
    )
    
    $
    (226.9
    )
    
    $
    (165.0
    )
 (a)
    
    During fiscal year 2006, we paid approximately $85.8 million related to the final settlement
of the Mellon transition services agreement. Under the transition services agreement, Mellon
provided certain accounting, treasury and payroll services for an interim period while we
integrated the Acquired HR Business. As part of these services, Mellon was also paying certain
operational costs on our behalf, such as employee related expenses and accounts payable. This
agreement and the related timing of payments to Mellon had a favorable impact on our net cash
provided by operating activities and free cash flow (defined below) in fiscal year 2005 of
$75.9 million and a negative impact on our net cash provided by operating activities and free
cash flow in fiscal year 2006 of $85.8 million when the Acquired HR Business was fully
integrated. During fiscal year 2006, we also paid approximately $26.3 million to employees of
the Acquired HR Business related to incentive compensation that was earned prior to the date
that we acquired the business.
 42




---



##### Table of Contents



Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Net cash provided by operating activities
    
    $
    826,777
    
    
    $
    738,378
    
    
    $
    638,710Purchases of property, equipment and software, net
    
    
    (267,948
    )
    
    
    (316,843
    )
    
    
    (394,467
    )Additions to other intangible assets
    
    
    (40,358
    )
    
    
    (43,187
    )
    
    
    (35,831
    )Free cash flow
    
    $
    518,471
    
    
    $
    378,348
    
    
    $
    208,412
  43




---



##### Table of Contents



Credit Arrangements
   Credit Ratings
 44




---



##### Table of Contents



Derivative Instruments and Hedging Activities
 Share Repurchase Programs
 Stock Option Repricing
 Other
  Related
Party Transactions
   45




---



##### Table of Contents



Disclosures about Contractual Obligations and Commercial Commitments as of June 30, 2008 (in
thousands):
 Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsLong-term debt (1)
    
    $
    1,852,253
    
    
    $
    18,764
    
    
    $
    36,077
    
    
    $
    1,797,343
    
    
    $
    69Senior Notes, net of unamortized
discount (1)
    
    
    499,529
    
    
    
    -
    
    
    
    249,967
    
    
    
    -
    
    
    
    249,562Capital lease obligations (1)
    
    
    53,132
    
    
    
    28,609
    
    
    
    22,985
    
    
    
    1,538
    
    
    
    -Operating leases (2)
    
    
    1,100,369
    
    
    
    340,334
    
    
    
    535,733
    
    
    
    167,402
    
    
    
    56,900Purchase obligations (3) (4)
    
    
    48,449
    
    
    
    17,369
    
    
    
    31,080
    
    
    
    -
    
    
    
    -Total Contractual Cash Obligations
    
    $
    3,553,732
    
    
    $
    405,076
    
    
    $
    875,842
    
    
    $
    1,966,283
    
    
    $
    306,531
 Amount of Commitment Expiration per PeriodTotalAmounts
    
    
    Less than
    
    
    
    
    
    
    
    

AfterOther Commercial Commitments
    
    Committed
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsStandby letters of credit
    
    $
    117,289
    
    
    $
    117,289
    
    
    $
    -
    
    
    $
    -
    
    
    $
    -Surety bonds
    
    
    662,358
    
    
    
    627,847
    
    
    
    30,825
    
    
    
    3,686
    
    
    
    -Total Commercial Commitments
    
    $
    779,647
    
    
    $
    745,136
    
    
    $
    30,825
    
    
    $
    3,686
    
    
    $
    -
 (1)
    
    Excludes accrued interest of $5.3 million at June 30, 2008.(2)
    
    We have various contractual commitments to lease hardware and software and for the
purchase of maintenance on such leased assets with varying terms through fiscal year 2013,
which are included in operating leases in the table.(3)
    
    We have entered into various contractual agreements to purchase telecommunications
services. These agreements provide for minimum annual spending commitments, and have
varying terms through fiscal year 2011, and are included in purchase obligations in the
table.(4)
    
    In June 2006, we entered into a two year agreement with Rich Capital, LLC, an M&A
advisory firm owned by Jeffery A. Rich, former Chief Executive Officer, to provide us with
advisory services in connection with potential acquisition candidates. This contractual
obligation is included in purchase obligations in the table above. However, we have
currently suspended payment under this agreement pending determination whether Rich
Capital, LLC is capable of performing its obligations under the contract in view of the
internal investigations conclusions regarding stock options awarded to Mr. Rich.
       46




---



##### Table of Contents



Critical Accounting Policies
   Revenue Recognition
      47




---



##### Table of Contents



Cost of Revenues
 Contingencies
  Valuation of Goodwill and Intangibles
 48




---



##### Table of Contents



Valuation of Property, Equipment and Software
 Stock-Based Compensation
 
    
    Expected volatility of our stock price based on historical monthly volatility over the
expected term.
    
    Expected term of the option based on historical employee stock option exercise behavior
and the vesting and contractual terms of the respective option.
    
    Risk-free interest rate for periods within the expected term of the option.
    
    Expected dividend yield.
   Pension and Post-Employment Benefits
 49




---



##### Table of Contents



Assumptions for calculating benefit obligations and net periodic benefit cost
 As of June 30,2008
    
    
    2007Non-U.S. PlansDiscount rate
    
    
    5.20% - 6.00
    %
    
    
    5.20% - 5.67
    %Rate of increase in compensation levels
    
    
    3.00% - 5.45
    %
    
    
    4.25% - 4.80
    %U.S. PlanDiscount rate
    
    
    6.80
    %
    
    
    6.40
    %Rate of increase in compensation levels
    
    
    3.80
    %
    
    
    3.40
    %
  Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Pension
    
    
    Pension
    
    
    PensionPlans
    
    
    Plans
    
    
    PlansNon-U.S. PlansDiscount rate
    
    
    5.20% - 6.00
    %
    
    
    5.20% - 5.67
    %
    
    
    5.00% - 5.75
    %Long-term rate of return on assets
    
    
    7.00% - 7.25
    %
    
    
    6.50% - 7.00
    %
    
    
    7.00% - 7.50
    %Rate of increase in compensation levels
    
    
    3.00% - 4.80
    %
    
    
    4.25% - 4.60
    %
    
    
    4.25% - 4.40
    %U.S. PlanDiscount rate
    
    
    6.40
    %
    
    
    6.50
    %
    
    
    5.75
    %Long-term rate of return on assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    N/ARate of increase in compensation levels
    
    
    3.40
    %
    
    
    3.50
    %
    
    
    3.00
    %
  Fiscal year ended June 30,2008
    
    
    2007Plus .25%
    
    
    Less .25%
    
    
    Plus .25%
    
    
    Less .25%Non-U.S. PlansEffect on pension benefit obligation
    
    $
    (7,297
    )
    
    $
    7,827
    
    
    $
    (5,786
    )
    
    $
    5,841Effect on service and interest cost
    
    $
    (582
    )
    
    $
    569
    
    
    $
    (485
    )
    
    $
    488U.S. PlanEffect on pension benefit obligation
    
    $
    (441
    )
    
    $
    467
    
    
    $
    (316
    )
    
    $
    336Effect on service and interest cost
    
    $
    (144
    )
    
    $
    152
    
    
    $
    (145
    )
    
    $
    153
    50




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##### Table of Contents



Allowance for Doubtful Accounts
 Income Taxes
   New Accounting Pronouncements
 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rates
 51




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##### Table of Contents



Foreign Currency
   52




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    PAGEReport of Independent Registered Public Accounting Firm
    
    54Consolidated Balance Sheets
    
    55Consolidated Statements of Income
    
    56Consolidated Statements of Changes in Stockholders Equity
    
    57Consolidated Statements of Cash Flows
    
    58Notes to Consolidated Financial Statements
    
    59
 53




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
  Internal Control - Integrated Framework
     
 54




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands)
 June 30,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    461,883
    
    
    $
    307,286Accounts receivable, net
    
    
    1,378,285
    
    
    
    1,257,108Income taxes receivable
    
    
    7,076
    
    
    
    13,268Prepaid expenses and other current assets
    
    
    255,872
    
    
    
    232,872Total current assets
    
    
    2,103,116
    
    
    
    1,810,534Property, equipment and software, net
    
    
    920,637
    
    
    
    897,319Goodwill
    
    
    2,785,164
    
    
    
    2,612,368Other intangibles, net
    
    
    444,479
    
    
    
    481,378Other assets
    
    
    216,003
    
    
    
    180,830Total assets
    
    $
    6,469,399
    
    
    $
    5,982,429LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    198,191
    
    
    $
    97,951Accrued compensation and benefits
    
    
    244,888
    
    
    
    246,742Other accrued liabilities
    
    
    338,861
    
    
    
    400,238Deferred taxes
    
    
    82,017
    
    
    
    14,418Current portion of long-term debt
    
    
    47,373
    
    
    
    47,039Current portion of unearned revenue
    
    
    173,809
    
    
    
    164,484Total current liabilities
    
    
    1,085,139
    
    
    
    970,872Senior Notes, net of unamortized discount
    
    
    499,529
    
    
    
    499,449Other long-term debt
    
    
    1,858,012
    
    
    
    1,842,823Deferred taxes
    
    
    411,836
    
    
    
    367,565Other long-term liabilities
    
    
    306,509
    
    
    
    235,552Total liabilities
    
    
    4,161,025
    
    
    
    3,916,261Commitments and contingencies (See Notes 12 and 20)Stockholders equity:Class A common stock, $.01 par value, 500,000
shares authorized, 111,660 and 113,960 shares
issued, respectively
    
    
    1,116
    
    
    
    1,139Class B convertible common stock, $.01 par
value, 14,000 shares authorized, 6,600 shares
issued and outstanding
    
    
    66
    
    
    
    66Additional paid-in capital
    
    
    1,702,340
    
    
    
    1,642,900Accumulated other comprehensive income, net
    
    
    18,830
    
    
    
    15,916Retained earnings
    
    
    1,641,990
    
    
    
    1,462,115Treasury stock at cost, 21,002 shares
    
    
    (1,055,968
    )
    
    
    (1,055,968
    )Total stockholders equity
    
    
    2,308,374
    
    
    
    2,066,168Total liabilities and stockholders equity
    
    $
    6,469,399
    
    
    $
    5,982,429
 The accompanying notes are an integral part of these consolidated financial statements.
 55




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (In thousands except per share amounts)
 Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Revenues
    
    $
    6,160,550
    
    
    $
    5,772,479
    
    
    $
    5,353,661Operating expenses:Cost of revenues:Wages and benefits
    
    
    2,908,290
    
    
    
    2,748,717
    
    
    
    2,568,042Services and supplies
    
    
    1,383,801
    
    
    
    1,262,435
    
    
    
    1,168,540Rent, lease and maintenance
    
    
    746,077
    
    
    
    701,620
    
    
    
    646,474Depreciation and amortization
    
    
    380,571
    
    
    
    346,199
    
    
    
    289,852Software impairment charge
    
    
    -
    
    
    
    76,407
    
    
    
    -Other
    
    
    27,967
    
    
    
    33,440
    
    
    
    39,629Cost of revenues
    
    
    5,446,706
    
    
    
    5,168,818
    
    
    
    4,712,537Gain on sale of business
    
    
    -
    
    
    
    -
    
    
    
    (32,907
    )Other operating expenses
    
    
    68,766
    
    
    
    66,706
    
    
    
    56,747Total operating expenses
    
    
    5,515,472
    
    
    
    5,235,524
    
    
    
    4,736,377Operating income
    
    
    645,078
    
    
    
    536,955
    
    
    
    617,284Interest expense
    
    
    161,935
    
    
    
    182,665
    
    
    
    68,367Other non-operating income, net
    
    
    (13,076
    )
    
    
    (29,123
    )
    
    
    (9,396
    )Pretax profit
    
    
    496,219
    
    
    
    383,413
    
    
    
    558,313Income tax expense
    
    
    167,209
    
    
    
    130,323
    
    
    
    199,507Net income
    
    $
    329,010
    
    
    $
    253,090
    
    
    $
    358,806Earnings per share:Basic
    
    $
    3.36
    
    
    $
    2.53
    
    
    $
    2.91Diluted
    
    $
    3.32
    
    
    $
    2.49
    
    
    $
    2.87Shares used in computing earnings per share:Basic
    
    
    98,013
    
    
    
    100,181
    
    
    
    123,197Diluted
    
    
    98,993
    
    
    
    101,572
    
    
    
    125,027
 The accompanying notes are an integral part of these consolidated financial statements.
 56




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (In thousands)
 AccumulatedCommon Stock

    
    Additional
    
    
    
    
    
    
    Other
    
    
    Treasury StockClass A

    
    
    Class B
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    SharesShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss), Net
    
    
    Held
    
    
    Amount
    
    
    TotalBalance at June 30, 2005
    
    
    137,886
    
    
    $
    1,379
    
    
    
    6,600
    
    
    $
    66
    
    
    $
    1,812,474
    
    
    $
    1,969,636
    
    
    $
    (10,910
    )
    
    
    (19,255
    )
    
    $
    (960,933
    )
    
    $
    2,811,712Comprehensive income:Foreign currency
translation losses
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,305
    )
    
    
    -
    
    
    
    -
    
    
    
    (1,305
    )Foreign currency hedges(a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (316
    )
    
    
    -
    
    
    
    -
    
    
    
    (316
    )Interest rate hedges (a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,588
    
    
    
    -
    
    
    
    -
    
    
    
    1,588Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    358,806
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    358,806Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    358,773Share repurchases
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (7,611
    )
    
    
    (385,116
    )
    
    
    (385,116
    )Shares purchased in Tender
Offer
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (7,365
    )
    
    
    (475,993
    )
    
    
    (475,993
    )Retired shares
    
    
    (10,585
    )
    
    
    (106
    )
    
    
    -
    
    
    
    -
    
    
    
    (141,592
    )
    
    
    (491,592
    )
    
    
    -
    
    
    
    10,585
    
    
    
    633,290
    
    
    
    -Stock-based compensation
expense
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    33,589
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    33,589Tax benefit on stock option
exercises
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    25,772
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    25,772Employee stock transactions
and related tax benefits
    
    
    2,547
    
    
    
    26
    
    
    
    -
    
    
    
    -
    
    
    
    69,535
    
    
    
    -
    
    
    
    -
    
    
    
    357
    
    
    
    17,920
    
    
    
    87,481Balance at June 30, 2006
    
    
    129,848
    
    
    
    1,299
    
    
    
    6,600
    
    
    
    66
    
    
    
    1,799,778
    
    
    
    1,836,850
    
    
    
    (10,943
    )
    
    
    (23,289
    )
    
    
    (1,170,832
    )
    
    
    2,456,218Comprehensive income:Foreign currency
translation gains
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    16,955
    
    
    
    -
    
    
    
    -
    
    
    
    16,955Foreign currency hedges(a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    693
    
    
    
    -
    
    
    
    -
    
    
    
    693Interest rate hedges (a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    6,837
    
    
    
    -
    
    
    
    -
    
    
    
    6,837Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    253,090
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    253,090Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    277,575Share repurchases
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (14,429
    )
    
    
    (730,688
    )
    
    
    (730,688
    )Retired shares
    
    
    (16,659
    )
    
    
    (167
    )
    
    
    -
    
    
    
    -
    
    
    
    (214,712
    )
    
    
    (627,825
    )
    
    
    -
    
    
    
    16,659
    
    
    
    842,704
    
    
    
    -Stock-based compensation
expense
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    27,968
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    27,968Tax benefit on stock option
exercises
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    7,203
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    7,203Employee stock transactions
and related tax benefits
    
    
    771
    
    
    
    7
    
    
    
    -
    
    
    
    -
    
    
    
    22,663
    
    
    
    -
    
    
    
    -
    
    
    
    57
    
    
    
    2,848
    
    
    
    25,518Adjustment to initially
apply SFAS 158 (a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    2,374
    
    
    
    -
    
    
    
    -
    
    
    
    2,374Balance at June 30, 2007
    
    
    113,960
    
    
    
    1,139
    
    
    
    6,600
    
    
    
    66
    
    
    
    1,642,900
    
    
    
    1,462,115
    
    
    
    15,916
    
    
    
    (21,002
    )
    
    
    (1,055,968
    )
    
    
    2,066,168Comprehensive income:Foreign currency
translation gains
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    25,473
    
    
    
    -
    
    
    
    -
    
    
    
    25,473Foreign currency hedges(a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,278
    
    
    
    -
    
    
    
    -
    
    
    
    1,278Interest rate hedges (a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (12,600
    )
    
    
    -
    
    
    
    -
    
    
    
    (12,600
    )Prior service cost (a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    136
    
    
    
    -
    
    
    
    -
    
    
    
    136Change in funded status
of pension plans (a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (11,490
    )
    
    
    -
    
    
    
    -
    
    
    
    (11,490
    )Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    329,010
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    329,010Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    331,807Share repurchases
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,527
    )
    
    
    (200,000
    )
    
    
    (200,000
    )Retired shares
    
    
    (4,527
    )
    
    
    (45
    )
    
    
    -
    
    
    
    -
    
    
    
    (60,764
    )
    
    
    (139,191
    )
    
    
    -
    
    
    
    4,527
    
    
    
    200,000
    
    
    
    -Stock-based compensation
expense
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    25,402
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    25,402Tax benefit on stock option
exercises
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    12,446
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    12,446Employee stock transactions
and related tax benefits
    
    
    2,227
    
    
    
    22
    
    
    
    -
    
    
    
    -
    
    
    
    77,840
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    77,862Adjustment to initially
apply SFAS 158 to pension
acquired(a)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    117
    
    
    
    -
    
    
    
    -
    
    
    
    117Settlement of FIN 48 tax
position
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    4,516
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    4,516Adoption of FIN 48
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (9,944
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (9,944
    )Balance at June 30, 2008
    
    
    111,660
    
    
    $
    1,116
    
    
    
    6,600
    
    
    $
    66
    
    
    $
    1,702,340
    
    
    $
    1,641,990
    
    
    $
    18,830
    
    
    
    (21,002
    )
    
    $
    (1,055,968
    )
    
    $
    2,308,374
 (a)  Net of income tax
 The accompanying notes are an integral part of these consolidated financial statements.
 57




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    329,010
    
    
    $
    253,090
    
    
    $
    358,806Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    380,571
    
    
    
    346,199
    
    
    
    289,852Contract inducement amortization
    
    
    14,304
    
    
    
    14,634
    
    
    
    15,332Deferred financing fee amortization
    
    
    6,261
    
    
    
    6,292
    
    
    
    2,850Deferred contract cost amortization
    
    
    7,494
    
    
    
    -
    
    
    
    -Provision for uncollectible accounts receivable
    
    
    3,138
    
    
    
    (290
    )
    
    
    8,462Provision for default loan liability
    
    
    -
    
    
    
    (218
    )
    
    
    (1,144
    )Software impairment charge
    
    
    -
    
    
    
    76,407
    
    
    
    -Other asset impairments
    
    
    1,560
    
    
    
    1,351
    
    
    
    19,132Gain on sale of business units
    
    
    (3,630
    )
    
    
    (2,459
    )
    
    
    (32,907
    )(Gain)/loss on long-term investments
    
    
    2,462
    
    
    
    (19,345
    )
    
    
    (6,787
    )Deferred income tax expense
    
    
    131,248
    
    
    
    19,626
    
    
    
    84,701Excess tax benefit on stock-based compensation
    
    
    (3,907
    )
    
    
    (3,763
    )
    
    
    (14,318
    )Stock-based compensation expense
    
    
    26,737
    
    
    
    28,491
    
    
    
    35,035Loss on early extinguishment of long-term debt
    
    
    -
    
    
    
    -
    
    
    
    4,104Other non-cash activities
    
    
    3,767
    
    
    
    3,384
    
    
    
    3,790Changes in assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    (72,601
    )
    
    
    10,882
    
    
    
    (112,601
    )Prepaid expenses and other current assets
    
    
    (17,928
    )
    
    
    (42,023
    )
    
    
    (34,379
    )Other assets
    
    
    (11,642
    )
    
    
    (2,085
    )
    
    
    16,090Accounts payable
    
    
    86,787
    
    
    
    (11,349
    )
    
    
    25,943Accrued compensation and benefits
    
    
    (5,903
    )
    
    
    63,233
    
    
    
    (3,676
    )Other accrued liabilities
    
    
    (55,615
    )
    
    
    12,493
    
    
    
    (132,238
    )Income taxes receivable/payable
    
    
    1,135
    
    
    
    4,312
    
    
    
    18,093Other long-term liabilities
    
    
    (7,036
    )
    
    
    (29,085
    )
    
    
    (920
    )Unearned revenue
    
    
    10,565
    
    
    
    8,601
    
    
    
    95,490Total adjustments
    
    
    497,767
    
    
    
    485,288
    
    
    
    279,904Net cash provided by operating activities
    
    
    826,777
    
    
    
    738,378
    
    
    
    638,710Cash flows from investing activities:Purchases of property, equipment and software, net
    
    
    (267,948
    )
    
    
    (316,843
    )
    
    
    (394,467
    )Additions to other intangible assets
    
    
    (40,358
    )
    
    
    (43,187
    )
    
    
    (35,831
    )Payments for acquisitions, net of cash acquired
    
    
    (219,480
    )
    
    
    (182,724
    )
    
    
    (250,317
    )Proceeds from divestitures, net of transaction costs
    
    
    6,345
    
    
    
    -
    
    
    
    67,665Intangibles acquired in subcontract termination
    
    
    -
    
    
    
    -
    
    
    
    (16,530
    )Purchases of investments
    
    
    (9,820
    )
    
    
    (6,532
    )
    
    
    (25,462
    )Proceeds from sale of investments
    
    
    2,975
    
    
    
    20,283
    
    
    
    3,167Other
    
    
    (6,500
    )
    
    
    -
    
    
    
    -Net cash used in investing activities
    
    
    (534,786
    )
    
    
    (529,003
    )
    
    
    (651,775
    )Cash flows from financing activities:Proceeds from issuance of long-term debt, net
    
    
    218,526
    
    
    
    1,847,719
    
    
    
    3,681,205Payments of long-term debt
    
    
    (240,685
    )
    
    
    (1,150,972
    )
    
    
    (2,867,995
    )Purchase of treasury shares
    
    
    (200,000
    )
    
    
    (730,688
    )
    
    
    (385,116
    )Excess tax benefit on stock-based compensation
    
    
    3,907
    
    
    
    3,763
    
    
    
    14,318Proceeds from stock options exercised
    
    
    81,184
    
    
    
    24,523
    
    
    
    83,190Proceeds from issuance of treasury shares
    
    
    -
    
    
    
    2,923
    
    
    
    19,927Purchase of shares in Tender Offer
    
    
    -
    
    
    
    -
    
    
    
    (475,959
    )Stock option settlement with Jeffrey A. Rich, former Chief
Executive Officer
    
    
    -
    
    
    
    -
    
    
    
    (18,353
    )Other, net
    
    
    (326
    )
    
    
    (194
    )
    
    
    -Net cash provided by (used in) financing activities
    
    
    (137,394
    )
    
    
    (2,926
    )
    
    
    51,217Net increase in cash and cash equivalents
    
    
    154,597
    
    
    
    206,449
    
    
    
    38,152Cash and cash equivalents at beginning of year
    
    
    307,286
    
    
    
    100,837
    
    
    
    62,685Cash and cash equivalents at end of year
    
    $
    461,883
    
    
    $
    307,286
    
    
    $
    100,837
  The accompanying notes are an integral part of these consolidated financial statements.
 58




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Description of Business and Basis of Presentation
    Cash and Cash Equivalents
 Allowance for Doubtful Accounts
 Property, Equipment and Software, Net
   59




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Goodwill and Other Intangible Assets
  Other Assets
 60




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Derivative Instruments
  Revenue Recognition
      61




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Contingencies
  Income Taxes
  62




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Sales Taxes
 Earnings Per Share
 Stock-based Compensation
  
    
    Expected volatility of our stock price based on historical monthly volatility over the
expected term.
    
    Expected term of the option based on historical employee stock option exercise behavior
and the vesting and contractual terms of the respective option.
    
    Risk-free interest rate for periods within the expected term of the option.
    
    Expected dividend yield.
    Pensions and other post-employment benefits
 63




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   2. STOCK-BASED COMPENSATION PLANS
   Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Stock-based compensation expense, net of $9.2,
$10.2 and $12.1 of deferred income tax benefits
    
    $
    16.2
    
    
    $
    17.8
    
    
    $
    22.9Stock-based compensation expense per basic share
    
    $
    0.17
    
    
    $
    0.18
    
    
    $
    0.19Stock-based compensation expense per diluted share
    
    $
    0.16
    
    
    $
    0.18
    
    
    $
    0.18
    64




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Expected volatility
    
    
    18.46
    %
    
    
    21.10
    %
    
    
    22.20
    %Expected term
    
    4.3 years
    
    4.25 years
    
    4.21 yearsRisk-free interest rate
    
    
    4.03
    %
    
    
    4.74
    %
    
    
    3.49
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    Intrinsic ValueOptions
    
    
    Price
    
    
    Term
    
    
    (in thousands)Outstanding as of June 30, 2007
    
    
    12,622,560
    
    
    $
    44.88Granted
    
    
    4,555,000
    
    
    
    50.20Exercised
    
    
    (2,227,050
    )
    
    
    36.45Forfeited
    
    
    (1,268,100
    )
    
    
    50.46Outstanding as of June 30, 2008
    
    
    13,682,410
    
    
    $
    47.82
    
    
    
    7.03
    
    
    $
    81,147,030Vested and exercisable at June 30, 2008
    
    
    5,305,330
    
    
    $
    43.58
    
    
    
    4.97
    
    
    $
    53,215,031
  Employee Stock Purchase Plan
 3. DEASON/CERBERUS PROPOSAL
  65




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   4. BOARD OF DIRECTORS
    5. BUSINESS COMBINATIONS
  Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Purchase consideration (in thousands):Net cash paid
    
    $
    209,035
    
    
    $
    164,330
    
    
    $
    225,024Amounts due to seller
    
    
    3,303
    
    
    
    5,931
    
    
    
    4,638Liabilities assumed
    
    
    85,268
    
    
    
    40,588
    
    
    
    119,984Fair value of assets acquired (including intangibles)
    
    $
    297,606
    
    
    $
    210,849
    
    
    $
    349,646
 Fiscal Year 2008 Acquisitions
 66




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       Fiscal Year 2007 Acquisitions
 67




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       Fiscal year 2006 Acquisitions
 68




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Contingent Consideration
 6. DIVESTITURES
 Sale of Unclaimed Property Reporting and Recovery Business
 69




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Sale of Government Decision Support Business
   Sale of Government Welfare-to-Workforce Services Business
    7. ACCOUNTS RECEIVABLE
  As of June 30,2008
    
    
    2007Amounts Billed or Billable:Commercial
    
    $
    526,691
    
    
    $
    526,584Government
    
    
    421,951
    
    
    
    399,271948,642
    
    
    
    925,855Unbilled Amounts
    
    
    434,225
    
    
    
    336,326Total accounts receivable
    
    
    1,382,867
    
    
    
    1,262,181Allowance for doubtful accounts
    
    
    (4,582
    )
    
    
    (5,073
    )$
    1,378,285
    
    
    $
    1,257,108
 70




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Balance at beginning of period
    
    $
    5,073
    
    
    $
    10,447
    
    
    $
    5,399Provision for uncollectible accounts receivable
    
    
    3,138
    
    
    
    (290
    )
    
    
    8,462Losses sustained, net of recoveries and other
    
    
    (3,629
    )
    
    
    (5,084
    )
    
    
    (3,414
    )Balance at end of period
    
    $
    4,582
    
    
    $
    5,073
    
    
    $
    10,447
  8. PROPERTY, EQUIPMENT AND SOFTWARE
  As of June 30,2008
    
    
    2007Land
    
    $
    25,142
    
    
    $
    20,177Buildings and improvements
    
    
    223,411
    
    
    
    177,453Computer equipment
    
    
    988,049
    
    
    
    901,493Computer software
    
    
    860,475
    
    
    
    742,271Furniture and fixtures
    
    
    119,562
    
    
    
    107,5562,216,639
    
    
    
    1,948,950Accumulated depreciation and amortization
    
    
    (1,296,002
    )
    
    
    (1,051,631
    )$
    920,637
    
    
    $
    897,319
  71




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9. GOODWILL AND OTHER INTANGIBLE ASSETS
  Commercial
    
    
    Government
    
    
    TotalBalance as of June 30, 2006
    
    $
    1,282,053
    
    
    $
    1,174,601
    
    
    $
    2,456,654Acquisition activity during the year
    
    
    127,624
    
    
    
    19,461
    
    
    
    147,085Foreign currency translation adjustments
    
    
    5,638
    
    
    
    2,991
    
    
    
    8,629Balance as of June 30, 2007
    
    
    1,415,315
    
    
    
    1,197,053
    
    
    
    2,612,368Acquisition activity during the year
    
    
    129,487
    
    
    
    32,460
    
    
    
    161,947Divestiture activity during the year
    
    
    (2,091
    )
    
    
    (965
    )
    
    
    (3,056
    )Foreign currency translation adjustments
    
    
    4,159
    
    
    
    9,746
    
    
    
    13,905Balance as of June 30, 2008
    
    $
    1,546,870
    
    
    $
    1,238,294
    
    
    $
    2,785,164
   As of June 30,2008
    
    
    2007Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortizable intangible assets:Acquired customer-related intangibles
    
    $
    445,753
    
    
    $
    (184,400
    )
    
    $
    419,853
    
    
    $
    (147,872
    )Customer contract costs
    
    
    251,837
    
    
    
    (130,319
    )
    
    
    247,840
    
    
    
    (101,217
    )All other
    
    
    19,121
    
    
    
    (12,401
    )
    
    
    17,248
    
    
    
    (9,362
    )$
    716,711
    
    
    $
    (327,120
    )
    
    $
    684,941
    
    
    $
    (258,451
    )Non-amortizable intangible assets:Title plant
    
    $
    51,045
    
    
    
    
    
    
    $
    51,045Tradename
    
    
    3,843
    
    
    
    
    
    
    
    3,843$
    54,888
    
    
    
    
    
    
    $
    54,888
 Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Amortization:Contract inducements
    
    $
    14,304
    
    
    $
    14,634
    
    
    $
    15,332Acquired customer-related intangibles
    
    
    45,061
    
    
    
    42,390
    
    
    
    37,380All other intangibles
    
    
    28,078
    
    
    
    22,573
    
    
    
    18,641Total amortization
    
    $
    87,443
    
    
    $
    79,597
    
    
    $
    71,353
  72




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Estimated amortization for the years ended June 30,
    
    (in thousands)2009
    
    $
    84,7702010
    
    
    71,4032011
    
    
    60,9082012
    
    
    42,8222013
    
    
    29,801
 10. OTHER ASSETS
  As of June 30,2008
    
    
    2007Long-term investments related to our deferred compensation plans (please
see Note 13)
    
    $
    82,840
    
    
    $
    80,253Long-term investments accounted for using the cost method and equity method
    
    
    25,910
    
    
    
    21,443Deferred debt issuance costs
    
    
    21,919
    
    
    
    28,099Deferred contract costs
    
    
    28,760
    
    
    
    -Other assets
    
    
    56,574
    
    
    
    51,035$
    216,003
    
    
    $
    180,830
 11. OTHER ACCRUED LIABILITIES
  As of June 30,2008
    
    
    2007Accrued payments to vendors and contract related accruals
    
    $
    205,676
    
    
    $
    228,250Software and equipment lease and maintenance
    
    
    49,944
    
    
    
    57,283Accruals related to acquisitions and divestitures
    
    
    11,518
    
    
    
    46,455Other
    
    
    71,723
    
    
    
    68,250$
    338,861
    
    
    $
    400,238
  12. LONG- TERM DEBT
  As of June 30,2008
    
    
    2007Term Loan Facility due in March 2013
    
    $
    1,760,000
    
    
    $
    1,778,000Revolving Facility due in March 2012
    
    
    91,257
    
    
    
    52,1024.70% Senior Notes due in June 2010, net of unamortized discount
    
    
    249,967
    
    
    
    249,9505.20% Senior Notes due in June 2015, net of unamortized discount
    
    
    249,562
    
    
    
    249,499Capitalized lease obligations at various interest rates, payable through 2013
    
    
    53,132
    
    
    
    57,853Other
    
    
    996
    
    
    
    1,9072,404,914
    
    
    
    2,389,311Less current portion
    
    
    (47,373
    )
    
    
    (47,039
    )$
    2,357,541
    
    
    $
    2,342,272
 73




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Year ending June 30,2009
    
    $
    47,3732010
    
    
    284,8412011
    
    
    24,1882012
    
    
    110,4602013
    
    
    1,688,421Thereafter
    
    
    249,631Total
    
    $
    2,404,914
 Credit Agreement
    74




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          75




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1)
    
    Consent to the delivery, on or prior to February 14, 2007, of (i) the financial
statements, accountants report and compliance certificate for the fiscal year ended June
30, 2006 and (ii) financial statements and related compliance certificates for the fiscal
quarters ended June 30, 2006 and September 30, 2006, and waiver of any default arising from
the failure to deliver any such financial statements, reports or certificates within the
applicable time period provided for in the Credit Agreement, provided that any such failure
to deliver resulted directly or indirectly from the previously announced investigation of
the Companys historical stock option grant practices (the Options Matter).(2)
    
    Waiver of any default or event of default arising from the incorrectness of
representations and warranties made or deemed to have been made with respect to certain
financial statements previously delivered to the agent as a result of any restatement,
adjustment or other modification of such financial statements resulting directly or
indirectly from the Options Matter.(3)
    
    Waiver of any default or event of default which may arise from the Companys or its
subsidiaries failure to comply with reporting covenants under other indebtedness that are
similar to those in the Credit Agreement (including any covenant to file any report with
the SEC or to furnish such reports to the holders of such indebtedness), provided such
reporting covenants are complied with on or prior to February 14, 2007.(4)
    
    Amendments to provisions relating to the permitted uses of the proceeds of revolving
loans under the Credit Agreement that (i) increase to $500 million from $350 million the
aggregate principal amount of revolving loans that may be outstanding, the proceeds of
which may be used to satisfy the obligations under the Companys 4.70% Senior Notes due
2010 or 5.20% Senior Notes due 2015 and (ii) until June 30, 2007, decrease to $200 million
from $300 million the minimum liquidity (i.e., the aggregate amount of the Companys
unrestricted cash in excess of $50 million and availability under the Revolving Facility)
required after giving effect to such use of proceeds.
  Senior Notes
    76




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Other
 Interest
 13. PENSION AND OTHER POST-EMPLOYMENT PLANS
     77




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Benefit obligations
 As of June 30,2008
    
    
    2007Non-U.S.
    
    
    U.S.
    
    
    Non-U.S.
    
    
    U.S.Reconciliation of benefit obligation:Obligation at beginning of period
    
    $
    112,234
    
    
    $
    7,600
    
    
    $
    98,537
    
    
    $
    3,731Acquisition of sds
    
    
    16,509
    
    
    
    -
    
    
    
    -
    
    
    
    -Service cost
    
    
    6,148
    
    
    
    3,401
    
    
    
    5,841
    
    
    
    3,395Interest cost
    
    
    6,644
    
    
    
    500
    
    
    
    5,662
    
    
    
    251Plan amendments
    
    
    -
    
    
    
    34
    
    
    
    300
    
    
    
    (2
    )Actuarial (gain) loss
    
    
    4,030
    
    
    
    (292
    )
    
    
    (3,408
    )
    
    
    225Employee contribution
    
    
    89
    
    
    
    -
    
    
    
    -
    
    
    
    -Benefit payments
    
    
    (4,102
    )
    
    
    -
    
    
    
    (3,529
    )
    
    
    -Settlements
    
    
    -
    
    
    
    (2
    )
    
    
    -
    
    
    
    -Foreign currency exchange rate changes
    
    
    1,723
    
    
    
    -
    
    
    
    8,831
    
    
    
    -Obligation at end of period
    
    $
    143,275
    
    
    $
    11,241
    
    
    $
    112,234
    
    
    $
    7,600
 Costs (income) of plans
 Fiscal year ended June 30,2008
    
    

2007
    
    
    2006Non-Non-U.S.
    
    
    U.S.
    
    
    Non-U.S.
    
    
    U.S.
    
    
    U.S.
    
    
    U.S.Components of net periodic benefit cost:Defined benefit plans:Service cost
    
    $
    6,148
    
    
    $
    3,401
    
    
    $
    5,841
    
    
    $
    3,395
    
    
    $
    5,195
    
    
    $
    2,266Interest cost
    
    
    6,644
    
    
    
    500
    
    
    
    5,662
    
    
    
    251
    
    
    
    4,725
    
    
    
    68Expected return on assets
    
    
    (7,089
    )
    
    
    (686
    )
    
    
    (5,465
    )
    
    
    (111
    )
    
    
    (4,952
    )
    
    
    -Recognized net actuarial gain
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (11
    )
    
    
    -
    
    
    
    -Amortization of prior service costs
    
    
    -
    
    
    
    217
    
    
    
    -
    
    
    
    217
    
    
    
    -
    
    
    
    128Net periodic benefit cost for defined
benefit plans
    
    $
    5,703
    
    
    $
    3,432
    
    
    $
    6,038
    
    
    $
    3,741
    
    
    $
    4,968
    
    
    $
    2,462
  78




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Plan assets
 Fiscal year ended June 30,2008
    
    
    2007Non-U.S.
    
    
    U.S.
    
    
    Non-U.S.
    
    
    U.S.Reconciliation of fair value of plan assets:Fair value of plan assets at beginning of period
    
    $
    98,009
    
    
    $
    6,802
    
    
    $
    77,704
    
    
    $
    1Actual return on plan assets
    
    
    (4,548
    )
    
    
    (211
    )
    
    
    8,784
    
    
    
    59Amendments
    
    
       -
    
    
    
       -
    
    
    
    300
    
    
    
       -Employer contributions
    
    
    10,510
    
    
    
    3,567
    
    
    
    7,137
    
    
    
    6,742Employee contribution
    
    
    89
    
    
    
       -
    
    
    
       -
    
    
    
       -Benefit payments
    
    
    (3,899
    )
    
    
       -
    
    
    
    (3,529
    )
    
    
       -Settlement
    
    
       -
    
    
    
    (2
    )
    
    
       -
    
    
    
       -Foreign currency exchange rate changes
    
    
    1,134
    
    
    
       -
    
    
    
    7,613
    
    
    
       -Fair value of plan assets at end of period
    
    $
    101,295
    
    
    $
    10,156
    
    
    $
    98,009
    
    
    $
    6,802
   Fiscal year endedJune 30,2008
    
    
    2007Mutual fund  equity securities
    
    
    50
    %
    
    
    52
    %Mutual fund  debt securities
    
    
    38
    %
    
    
    35
    %Mutual fund  real estate
    
    
    6
    %
    
    
    7
    %Other
    
    
    6
    %
    
    
    6
    %Total
    
    
    100
    %
    
    
    100
    %
  Funded status of defined benefit pension plans
 As of June 30,2008
    
    
    2007Funded
    
    
    Unfunded
    
    
    Funded
    
    
    UnfundedPlans
    
    
    Plan
    
    
    Plans
    
    
    PlanNon-U.S. PlansAccumulated benefit obligation (ABO)
    
    $
    88,132
    
    
    $
    24,973
    
    
    $
    79,103
    
    
    $
    11,070Projected benefit obligation (PBO)
    
    
    116,286
    
    
    
    26,989
    
    
    
    99,921
    
    
    
    12,313Fair value of assets
    
    
    101,295
    
    
    
       -
    
    
    
    98,009
    
    
    
       -U.S. PlanAccumulated benefit obligation (ABO)
    
    $
    8,742
    
    
    $
    226
    
    
    $
    5,865
    
    
    $
    145Projected benefit obligation (PBO)
    
    
    10,922
    
    
    
    319
    
    
    
    7,392
    
    
    
    208Fair value of assets
    
    
    10,156
    
    
    
       -
    
    
    
    6,802
    
    
    
       -
 79




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 As of June 30,2008
    
    
    2007Non-U.S. PlansFunded status
    
    $
    (41,980
    )
    
    $
    (14,225
    )Unrecognized (gain) loss
    
    
    11,200
    
    
    
    (4,358
    )Net amount recognized
    
    $
    (30,780
    )
    
    $
    (18,583
    )U.S. PlanFunded status
    
    $
    (1,085
    )
    
    $
    (798
    )Unrecognized prior service cost
    
    
    1,495
    
    
    
    1,678Unrecognized (gain) loss
    
    
    267
    
    
    
    (338
    )Net amount recognized
    
    $
    677
    
    
    $
    542
  As of June 30,2008
    
    
    2007Non-U.S. PlansAccrued
benefit liability  short term
    
    $
    (1,416
    )
    
    $
    (1,333
    )Accrued
benefit liability  long term
    
    
    (40,564
    )
    
    
    (12,892
    )Accumulated other comprehensive (income) loss, net
    
    
    11,200
    
    
    
    (4,358
    )Net amount recognized
    
    $
    (30,780
    )
    
    $
    (18,583
    )U.S. PlanAccrued
benefit liability  short term
    
    $
    (47
    )
    
    $
    (9
    )Accrued
benefit liability  long term
    
    
    (1,038
    )
    
    
    (789
    )Accumulated other comprehensive (income) loss, net
    
    
    1,762
    
    
    
    1,340Net amount recognized
    
    $
    677
    
    
    $
    542
  AdjustmentChange in
    
    
    
    
    
    
    to initiallyNet periodic
    
    
    net actuarial
    
    
    Plan
    
    
    apply SFASJune 30, 2007

    
    benefit cost

    
    (gain)/loss

    
    amendments

    
    158

    
    June 30, 2008Non-U.S. PlansNet actuarial (gain)/loss
    
    $
    (4,693
    )
    
    $
    -
    
    
    $
    15,757
    
    
    $
    -
    
    
    $
    (176
    )
    
    $
    10,888(4,693
    )
    
    
    -
    
    
    
    15,757
    
    
    
    -
    
    
    
    (176
    )
    
    
    10,888U.S. PlanNet actuarial (gain)/loss
    
    
    (338
    )
    
    
    -
    
    
    
    605
    
    
    
    -
    
    
    
    -
    
    
    
    267Unrecognized prior
service cost
    
    
    1,678
    
    
    
    (217
    )
    
    
    -
    
    
    
    34
    
    
    
    -
    
    
    
    1,4951,340
    
    
    
    (217
    )
    
    
    605
    
    
    
    34
    
    
    
    -
    
    
    
    1,762Sub-total
    
    
    (3,353
    )
    
    
    (217
    )
    
    
    16,362
    
    
    
    34
    
    
    
    (176
    )
    
    
    12,650Tax effect
    
    
    979
    
    
    
    81
    
    
    
    (4,894
    )
    
    
    (12
    )
    
    
    59
    
    
    
    (3,787
    )Total
    
    $
    (2,374
    )
    
    $
    (136
    )
    
    $
    11,468
    
    
    $
    22
    
    
    $
    (117
    )
    
    $
    8,863
  80




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Assumptions for calculating benefit obligations and net periodic benefit cost
 As of June 30,2008
    
    
    2007Non-U.S. PlansDiscount rate
    
    
    5.20% - 6.00
    %
    
    
    5.20% - 5.67
    %Rate of increase in compensation levels
    
    
    3.00% - 5.45
    %
    
    
    4.25% - 4.80
    %U.S. PlanDiscount rate
    
    
    6.80
    %
    
    
    6.40
    %Rate of increase in compensation levels
    
    
    3.80
    %
    
    
    3.40
    %
  Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Pension
    
    
    Pension
    
    
    PensionPlans
    
    
    Plans
    
    
    PlansNon-U.S. PlansDiscount rate
    
    
    5.20% - 6.00
    %
    
    
    5.20% - 5.67
    %
    
    
    5.00% - 5.75
    %Long-term rate of return on assets
    
    
    7.00% - 7.25
    %
    
    
    6.50% - 7.00
    %
    
    
    7.00% - 7.50
    %Rate of increase in compensation levels
    
    
    3.00% - 4.80
    %
    
    
    4.25% - 4.60
    %
    
    
    4.25% - 4.40
    %U.S. PlanDiscount rate
    
    
    6.40
    %
    
    
    6.50
    %
    
    
    5.75
    %Long-term rate of return on assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    N/ARate of increase in compensation levels
    
    
    3.40
    %
    
    
    3.50
    %
    
    
    3.00
    %
  Fiscal year ended June 30,2008

    
    2007Plus .25%

    
    Less .25%

    
    Plus .25%

    
    Less .25%Non-U.S. PlansEffect on pension benefit obligation
    
    $
    (7,297
    )
    
    $
    7,827
    
    
    $
    (5,786
    )
    
    $
    5,841Effect on service and interest cost
    
    $
    (582
    )
    
    $
    569
    
    
    $
    (485
    )
    
    $
    488U.S. PlanEffect on pension benefit obligation
    
    $
    (441
    )
    
    $
    467
    
    
    $
    (316
    )
    
    $
    336Effect on service and interest cost
    
    $
    (144
    )
    
    $
    152
    
    
    $
    (145
    )
    
    $
    153
    81




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Expected Cash Flows
  Non-U.S.Plans

    
    U.S. Plan2009
    
    $
    4,305
    
    
    $
    2152010
    
    
    4,040
    
    
    
    1972011
    
    
    4,179
    
    
    
    3202012
    
    
    4,105
    
    
    
    4812013
    
    
    4,420
    
    
    
    6782014-2018
    
    
    31,082
    
    
    
    6,588
 Supplemental Executive Retirement Plan
 82




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Deferred Compensation Plans
  Other Contributory Plans
 14. INCOME TAXES
  Fiscal year ended June 30,2008

    
    2007

    
    2006Current:U.S. federal
    
    $
    5,383
    
    
    $
    79,953
    
    
    $
    92,090State
    
    
    6,491
    
    
    
    12,134
    
    
    
    11,508Foreign
    
    
    24,087
    
    
    
    18,610
    
    
    
    11,208Total current expense
    
    
    35,961
    
    
    
    110,697
    
    
    
    114,806Deferred:U.S. federal
    
    
    120,588
    
    
    
    17,588
    
    
    
    75,168State
    
    
    14,544
    
    
    
    5,070
    
    
    
    10,010Foreign
    
    
    (3,884
    )
    
    
    (3,032
    )
    
    
    (477
    )Total deferred expense
    
    
    131,248
    
    
    
    19,626
    
    
    
    84,701Total income tax expense
    
    $
    167,209
    
    
    $
    130,323
    
    
    $
    199,507
  83




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  As of June 30,2008

    
    2007Deferred tax assets:Accrued expenses not yet deductible for tax purposes
    
    $
    40,661
    
    
    $
    39,815Unearned revenue
    
    
    32,015
    
    
    
    36,266Tax credits and loss carryforwards
    
    
    58,585
    
    
    
    56,677Stock-based compensation
    
    
    29,017
    
    
    
    25,529Divestiture-related accruals
    
    
    430
    
    
    
    4,617Forward agreements
    
    
    8,797
    
    
    
    2,124Other
    
    
    12,424
    
    
    
   -Subtotal
    
    
    181,929
    
    
    
    165,028Deferred tax assets valuation allowance
    
    
    (20,185
    )
    
    
    (17,184
    )Total deferred tax assets
    
    
    161,744
    
    
    
    147,844Deferred tax liabilities:Goodwill amortization
    
    
    (381,944
    )
    
    
    (334,065
    )Depreciation and amortization
    
    
    (147,118
    )
    
    
    (123,722
    )Unbilled revenue
    
    
    (103,087
    )
    
    
    (41,634
    )Prepaid and receivables
    
    
    (23,448
    )
    
    
    (27,403
    )Other
    
    
   -
    
    
    
    (3,003
    )Total deferred tax liabilities
    
    
    (655,597
    )
    
    
    (529,827
    )Net deferred tax liabilities
    
    $
    (493,853
    )
    
    $
    (381,983
    )
    Fiscal year ended June 30,2008

    
    2007

    
    2006Statutory U.S. federal income tax
    
    $
    173,677
    
    
    $
    134,194
    
    
    $
    195,410State income taxes, net
    
    
    12,471
    
    
    
    12,188
    
    
    
    13,505Section 162(m) disallowance
    
    
    (5,128
    )
    
    
    (4,610
    )
    
    
   -Net reversal of tax reserves, penalties and interest
    
    
    (8,513
    )
    
    
   -
    
    
    
   -Foreign benefits
    
    
    (5,934
    )
    
    
    (6,287
    )
    
    
    (5,259
    )Other
    
    
    636
    
    
    
    (5,162
    )
    
    
    (4,149
    )Total income tax expense
    
    $
    167,209
    
    
    $
    130,323
    
    
    $
    199,507
   84




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Balance at July 1, 2007
    
    $
    54,531Gross increases on tax positions in prior period
    
    
    575Gross decreases on tax positions in prior period
    
    
    (6,930
    )Gross increases on tax positions in current period
    
    
    1,604Decreases due to lapse of statute of limitations
    
    
    -Settlements
    
    
    (15,456
    )Balance at June 30, 2008
    
    $
    34,324
     85




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. OTHER LONG-TERM LIABILITIES
  As of June 30,2008
    
    
    2007Deferred compensation, pension and other post-retirement obligations
    
    $
    125,270
    
    
    $
    97,974Unearned revenue
    
    
    104,732
    
    
    
    89,759Income taxes payable and estimated penalties and interest on
Section 162(m) underpayment deficiencies (Please see Note 20)
    
    
       -
    
    
    
    3,201FIN 48 tax reserves (Please see Note 14)
    
    
    42,710
    
    
    
    -Other
    
    
    33,797
    
    
    
    44,618Total
    
    $
    306,509
    
    
    $
    235,552
 16. EQUITY
  Share Repurchase Programs
   86




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Tender Offer
 Stock Option Repricing
  Voting Rights of Our Chairman
   87




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    17. EARNINGS PER SHARE
  Fiscal year ended June 30,2008
    
    
    2007
    
    
    2006Numerator:Numerator for earnings per share -

Net Income
    
    $
    329,010
    
    
    $
    253,090
    
    
    $
    358,806Denominator:Weighted average shares outstanding (basic)
    
    
    98,013
    
    
    
    100,181
    
    
    
    123,197Effect of dilutive securities:Stock options
    
    
    980
    
    
    
    1,391
    
    
    
    1,830Total potential common shares
    
    
    980
    
    
    
    1,391
    
    
    
    1,830Denominator for earnings per share assuming dilution
    
    
    98,993
    
    
    
    101,572
    
    
    
    125,027Earnings per share (basic)
    
    $
    3.36
    
    
    $
    2.53
    
    
    $
    2.91Earnings per share assuming dilution
    
    $
    3.32
    
    
    $
    2.49
    
    
    $
    2.87
   18. COMPREHENSIVE INCOME
  88




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal year ended June 30,2008

    
    2007

    
    2006Net income
    
    $
    329,010
    
    
    $
    253,090
    
    
    $
    358,806Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    25,473
    
    
    
    16,955
    
    
    
    (1,305
    )Unrealized gains (losses) on foreign exchange forward
agreements (net of income tax of $727, $958 and ($193),
respectively)
    
    
    1,278
    
    
    
    693
    
    
    
    (316
    )Amortization of unrealized loss on forward interest rate
agreements (net of income tax of $958, $958 and $956,
respectively)
    
    
    1,586
    
    
    
    1,586
    
    
    
    1,588Unrealized gain/(loss) on interest rate swap agreement (net of
income tax of $(8,997) and $2,819, respectively)
    
    
    (15,475
    )
    
    
    5,251
    
    
    
    -Unrealized gain on interest rate collar agreements (net of
income tax of $779)
    
    
    1,289
    
    
    
    -
    
    
    
    -Amortization of prepaid pension cost (net of income tax of $81)
    
    
    136
    
    
    
    -
    
    
    
    -Change in funded status of pension and other benefit plans
(net of income tax of $(4,906))
    
    
    (11,490
    )
    
    
    -
    
    
    
    -Comprehensive income
    
    $
    331,807
    
    
    $
    277,575
    
    
    $
    358,773
  As of June 30,2008
    
    2007Foreign currency gains (losses)
    
    $
    42,002
    
    
    $
    16,529Unrealized gains (losses) on foreign exchange forward agreements (net of
income tax of $953 and $226, respectively)
    
    
    1,655
    
    
    
    377Unrealized loss on forward interest rate agreements (net of income tax of
$(4,212) and $(5,170), respectively)
    
    
    (7,029
    )
    
    
    (8,615
    )Unrealized gains (losses) on interest rate swap agreement (net of income tax
of $(6,178) and $2,819, respectively)
    
    
    (10,224
    )
    
    
    5,251Unrealized gain on interest rate collar agreements (net of income tax of $779)
    
    
    1,289
    
    
    
    -Unrecognized prior service costs (net of income tax of $(528) and $(609),
respectively)
    
    
    (933
    )
    
    
    (1,069
    )Unrealized gains (losses) on funded status of pension and other benefit plans
(net of income tax of $(3,259) and $1,588, respectively) (a)
    
    
    (7,930
    )
    
    
    3,443Total
    
    $
    18,830
    
    
    $
    15,916
 
 (a)
    
    Balances as of June 30, 2008 and 2007 include adjustments to initially apply SFAS 158 of $0.1
million (net of income tax of $59,000) and $2.4 million (net of income tax of $1 million). 19. FINANCIAL INSTRUMENTS
 Long-Term Debt
  Interest Rate Hedges
 89




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Foreign Currency Forward Agreements
   Notional Amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    Cumulativein $US
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    Unrealized(Functional
    
    
    Functional
    
    
    
    
    
    
    
    
    
    
    Contract
    
    
    Gain inHedged Transaction
    
    currency in $US)
    
    
    Currency
    
    
    Counter Currency
    
    
    Rate
    
    
    $USReceipt of revenue
    
    $
    1,969
    
    
    EUR
    
    
    1,246
    
    
    CAD
    
    
    1,714
    
    
    
    0.727
    
    
    $
    262Payment of operating expenses
    
    
    26,075
    
    
    USD
    
    
    26,075
    
    
    MXN
    
    
    292,000
    
    
    
    11.198
    
    
    
    1,694Receipt of revenue
    
    
    3,967
    
    
    CHF
    
    
    4,038
    
    
    NOK
    
    
    20,284
    
    
    
    0.199
    
    
    
    97Receipt of revenue
    
    
    7,433
    
    
    CHF
    
    
    7,567
    
    
    EUR
    
    
    4,662
    
    
    
    1.623
    
    
    
    93Payment for merchandise
    
    
    3,157
    
    
    USD
    
    
    3,157
    
    
    CHF
    
    
    3,697
    
    
    
    1.171
    
    
    
    462Total
    
    $
    42,601
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,608
  90




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Investments
  20. COMMITMENTS AND CONTINGENCIES
  Fiscal year ending June 30,2009
    
    $
    340,3342010
    
    
    291,2902011
    
    
    244,4432012
    
    
    126,4262013
    
    
    40,976Thereafter
    
    
    56,900$
    1,100,369
   Regulatory Agency Investigations Relating to Stock Option Grant Practices
  91




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       92




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Lawsuits Related to Stock Option Grant Practices
 Dallas County Texas State District Court
 
    
    Merl Huntsinger, Derivatively on Behalf of Nominal Defendant
Affiliated Computer Services, Inc., Plaintiff, v. Darwin Deason, Mark
A. King, J. Livingston Kosberg, Dennis McCuistion, Joseph P. ONeill,
Jeffrey A. Rich and Frank A. Rossi, Defendants, and Affiliated
Computer Services, Inc., Nominal Defendant, Cause No. 06-03403 in the
District Court of Dallas County, Texas, 193rd Judicial
District filed on April 7, 2006.
    
    Robert P. Oury, Derivatively on Behalf of Nominal Defendant Affiliated
Computer Services, Inc., Plaintiff, v. Darwin Deason, Mark A. King, J.
Livingston Kosberg, Dennis McCuistion, Joseph P. ONeill, Jeffrey A.
Rich and Frank A. Rossi, Defendants, and Affiliated Computer Services,
Inc., Nominal Defendant, Cause No. 06-03872 in the District Court of
Dallas County, Texas, 193rd Judicial District filed on
April 21, 2006.
    
    Anchorage Police & Fire Retirement System, derivatively on behalf of
nominal defendant Affiliated Computer Services Inc., Plaintiff v.
Jeffrey Rich; Darwin Deason; Mark King; Joseph ONeill; Frank Rossi;
Dennis McCuistion; J. Livingston Kosberg; Gerald Ford; Clifford
Kendall; David Black; Henry Hortenstine; Peter Bracken; William
Deckelman; and Affiliated Computer Services Inc. Cause No. 06-5265-A
in the District Court of Dallas County, Texas, 14th
Judicial District filed on June 2, 2006.
 93




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Huntsinger Oury Anchorage In Re Affiliated Computer Services, Inc. Derivative
Litigation rd
 Court of Chancery for the State of Delaware
 
    
    Jan Brandin, in the Right of and for the Benefit of Affiliated Computer Services, Inc.,
Plaintiff, v. Darwin Deason, Jeffrey A. Rich, Mark A. King, Joseph ONeill and Frank Rossi,
Defendants, and Affiliated Computer Services, Inc., Nominal Defendant, Civil Action No.
2123-VCL, pending before the Court of Chancery of the State of Delaware in and for New Castle
County, filed on May 2, 2006.
  United States District Court for the Northern District of Texas
 
    
    Alaska Electrical Fund, derivatively on behalf of Affiliated Computer
Services Inc. v. Jeffrey Rich; Joseph ONeill; Frank A. Rossi; Darwin
Deason; Mark King; Lynn Blodgett; J. Livingston Kosberg; Dennis
McCuistion; Warren Edwards; John Rexford and John M. Brophy,
Defendants, and Affiliated Computer Services, Inc., Nominal Defendant,
Cause No. 3-06CV1110-M, in the United States District Court for the
Northern District of Texas, Dallas Division, filed on June 22, 2006.
    
    Bennett Ray Lunceford and Ann M. Lunceford, derivatively on behalf of
Affiliated Computer Services Inc. v. Jeffrey Rich; Joseph ONeill;
Frank A. Rossi; Darwin Deason; Mark King; Lynn Blodgett; J. Livingston
Kosberg; Dennis McCuistion; Warren Edwards; John Rexford and John M.
Brophy, Defendants, and Affiliated Computer Services, Inc., Nominal
Defendant, Cause No. 3-06CV1212-M, filed on July 7, 2006, in the
United States District Court for the Northern District of Texas,
Dallas Division.
 Alaska Electrical Lunceford In Re Affiliated Computer Services Federal Derivative
Litigation
 94




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    United States District Court of Texas for the Northern District of Texas
 
    
    Terri Simeon, on behalf of Herself and All Others Similarly Situated, Plaintiff, vs.
Affiliated Computer Services, Inc., Darwin Deason, Mark A. King, Lynn R. Blodgett, Jeffrey A.
Rich, Joseph ONeill, Frank Rossi, J. Livingston Kosberg, Dennis McCuistion, The Retirement
Committee of the ACS Savings Plan, and John Does 1-30, Civil Action No. 306-CV-1592P, in
the United States District Court for the Northern District of Texas, Dallas Division, filed
August 31, 2006.
 
    
    Kyle Burke, Individually and on behalf of All Others Similarly Situated, Plaintiff, vs.
Affiliated Computer Services, Inc., the ACS Administrative Committee, Lora Villarreal, Kellar
Nevill, Gladys Mitchell, Meg Cino, Mike Miller, John Crysler, Van Johnson, Scott Bell, Anne
Meli, David Lotocki, Randall Booth, Pam Trutna, Brett Jakovac, Jeffrey A. Rich, Mark A. King,
Darwin Deason, Joseph P. ONeill and J. Livingston Kosberg, Case No. 306-CV-02379-M,
United States District Court for the Northern District of Texas, Dallas Division, filed on
September 15, 2006.
 Simeon Burke In re Affiliated Computer Systems [sic] ERISA Litigation In re Affiliated Computer Systems [sic] ERISA Litigation
  Litigation Arising from Buy-Out Offer
 95




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
    
    Momentum Partners v. Darwin Deason, Lynn R. Blodgett, Joseph P. ONeill, Frank A.
Rossi, J. Livingston Kosberg, Robert B. Holland, Dennis McCuistion, Affiliated Computer
Services, Inc., and Cerberus Capital Management, L.P., Civil Action No. 2814-VCL, in the
Court of Chancery of the State of Delaware in and for New Castle County, filed on March 20,
2007.
 
    
    Mark Levy v. Darwin Deason, Lynn Blodgett, John Rexford, Joseph P. ONeill, Frank A.
Rossi, J. Livingston Kosberg, Dennis McCuistion, Affiliated Computer Services, Inc., and
Cerberus Capital Management, L.P., Civil Action No. 2816-VCL, in the Court of Chancery of
the State of Delaware in and for New Castle County, filed on March 21, 2007.
 
    
    St. Clair Shores Police and Fire Retirement System v. Darwin Deason, Lynn Blodgett,
Joseph P. ONeill, Frank A. Rossi, J. Livingston Kosberg, Dennis McCuistion, Robert B.
Holland, Cerberus Capital Management, L.P., Citigroup Global Markets Inc., and Affiliated
Computer Services, Inc., Civil Action No. 2821-VCL, in the Court of Chancery of the State
of Delaware in and for New Castle County, filed on March 22, 2007.
 
    
    Louisiana Municipal Police Employees Retirement System v. Darwin Deason, Joseph P.
ONeill, Frank A. Rossi, J. Livingston Kosberg, Dennis McCuistion, Robert B. Holland,
Affiliated Computer Services, Inc., and Cerberus Capital Management, L.P., Civil Action
No. 2839-VCL, in the Court of Chancery of the State of Delaware in and for New Castle County,
filed on March 26, 2007.
 
    
    Edward R. Koller v. Darwin Deason, Frank A. Rossi, J. Livingston Kosberg, Robert B.
Holland, Affiliated Computer Services, Inc., and Cerberus Capital Management, L.P., Civil
Action No. 2908-VCL, in the Court of Chancery of the State of Delaware in and for New Castle
County, filed on April 20, 2007.
 
    
    Suzanne Sweeney Living Trust v. Darwin Deason, Lynn R. Blodgett, John H. Rexford,
Joseph P. ONeill, Frank A. Rossi, J. Livingston Kosberg, Dennis McCuistion, Robert B.
Holland, Affiliated Computer Services, Inc., and Cerberus Capital Management, L.P., Civil
Action No. 2915-VCL, in the Court of Chancery of the State of Delaware in and for New Castle
County, filed on April 24, 2007.
 In Re Affiliated Computer Services, Inc. Shareholder
Litigation
  
    
    Steamship Trade Association/International Longshoremans Association Pension Fund v
Affiliated Computer Services, Inc., Darwin Deason, Lynn Blodgett, John Rexford, Joseph P.
ONeill, Gerardo I. Lopez, Frank A. Rossi, J. Livingston Kosberg, Dennis McCuistion, Robert B.
Holland, and Cereberus [sic] Capital Management, L.P., Cause No. 07-02691 in the District
Court of Dallas County, Texas, 44th Judicial District,
filed on March 22, 2007.
 
    
    The City of Birmingham, Alabama Retirement and Relief System v. Darwin Deason, Robert
B. Holland, III, J. Livingston Kosberg, Frank A. Rossi, Joseph P. ONeill, Lynn R. Blodgett,
John H. Rexford, Dennis McCuistion, Affiliated Computer Services, Inc., and Cerberus Capital
Management, L.P., Cause No. 07-02768 in the District Court of Dallas, Texas,
160th Judicial District, filed on March 28, 2007.
 Texas State Court Consolidated stock option derivative case
 96




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Texas State Court Consolidated stock option derivative
case
 Texas Federal Court Consolidated stock option derivative case
   Declaratory Action with Respect to Alleged Default and Purported Acceleration of our Senior Notes
and Amendment, Consent and Waiver for our Credit Facility
 Investigation Concerning Procurement Process at Hanscom Air Force Base
 97




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Investigation Regarding Florida Workforce Contracts
  Other
 98




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      99




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   21. RESTRUCTURING ACTIVITIES
     Fiscal year ending June 30,2008

    
    2007

    
    2006Beginning balance
    
    $
    893
    
    
    $
    899
    
    
    $
      -Accruals
    
    
      -
    
    
    
    7,185
    
    
    
    6,500Reversals
    
    
    (401
    )
    
    
      -
    
    
    
      -Payments
    
    
    (492
    )
    
    
    (7,191
    )
    
    
    (5,601
    )Ending balance
    
    $
      -
    
    
    $
    893
    
    
    $
    899
 100




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal year ending June 30,2008

    
    2007

    
    2006Beginning balance
    
    $
    402
    
    
    $
    3,521
    
    
    $
    20,495Excess accrual credited to goodwill
    
    
    (209
    )
    
    
    (1,678
    )
    
    
    (3,116
    )Payments
    
    
    (111
    )
    
    
    (1,441
    )
    
    
    (13,858
    )Ending balance
    
    $
    82
    
    
    $
    402
    
    
    $
    3,521
   22. CONTRACT WITH THE DEPARTMENT OF EDUCATION
   23. DEPARTURE OF EXECUTIVE OFFICERS
  101




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     24. RELATED PARTY TRANSACTIONS
   102




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    25. SEGMENT INFORMATION
     103




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Commercial

    
    Government

    
    Corporate (c)

    
    ConsolidatedFiscal year ended June 30, 2008Revenues (a)
    
    $
    3,673,981
    
    
    $
    2,486,569
    
    
    $
    -
    
    
    $
    6,160,550Operating expenses (excluding
impairment charge and depreciation
and amortization)
    
    
    3,046,826
    
    
    
    1,935,066
    
    
    
    153,009
    
    
    
    5,134,901Depreciation and amortization expense
    
    
    278,688
    
    
    
    100,283
    
    
    
    1,600
    
    
    
    380,571Operating income (loss)
    
    $
    348,467
    
    
    $
    451,220
    
    
    $
    (154,609
    )
    
    $
    645,078Total assets
    
    $
    3,271,316
    
    
    $
    2,728,796
    
    
    $
    469,287
    
    
    $
    6,469,399Capital expenditures, net
    
    $
    151,689
    
    
    $
    112,243
    
    
    $
    4,016
    
    
    $
    267,948Fiscal year ended June 30, 2007Revenues (a)
    
    $
    3,404,935
    
    
    $
    2,367,544
    
    
    $
       -
    
    
    $
    5,772,479Operating expenses (excluding gain
on sale of business and depreciation
and amortization)
    
    
    2,844,545
    
    
    
    1,820,006
    
    
    
    148,367
    
    
    
    4,812,918Software impairment charge
    
    
       -
    
    
    
    76,407
    
    
    
       -
    
    
    
    76,407Depreciation and amortization expense
    
    
    247,363
    
    
    
    97,348
    
    
    
    1,488
    
    
    
    346,199Operating income (loss)
    
    $
    313,027
    
    
    $
    373,783
    
    
    $
    (149,855
    )
    
    $
    536,955Total assets
    
    $
    3,174,031
    
    
    $
    2,601,765
    
    
    $
    206,633
    
    
    $
    5,982,429Capital expenditures, net (b)
    
    $
    202,283
    
    
    $
    112,851
    
    
    $
    1,709
    
    
    $
    316,843Fiscal year ended June 30, 2006Revenues (a)
    
    $
    3,118,159
    
    
    $
    2,235,502
    
    
    $
       -
    
    
    $
    5,353,661Operating expenses (excluding
depreciation and amortization)
    
    
    2,661,497
    
    
    
    1,704,404
    
    
    
    113,531
    
    
    
    4,479,432Gain on sale of business
    
    
       -
    
    
    
    (32,907
    )
    
    
       -
    
    
    
    (32,907
    )Depreciation and amortization expense
    
    
    191,241
    
    
    
    97,051
    
    
    
    1,560
    
    
    
    289,852Operating income (loss)
    
    $
    265,421
    
    
    $
    466,954
    
    
    $
    (115,091
    )
    
    $
    617,284Total assets
    
    $
    2,923,485
    
    
    $
    2,546,229
    
    
    $
    32,723
    
    
    $
    5,502,437Capital expenditures, net
    
    $
    242,980
    
    
    $
    153,550
    
    
    $
    (2,063
    )
    
    $
    394,467
 
 (a)
    
    Revenues in our Commercial segment for fiscal years 2008, 2007 and 2006 include revenues from
operations divested through June 30, 2008 of $14 million, $18 million and $18.8 million,
respectively. Revenues in our Government segment for fiscal years 2008, 2007 and 2006 include
revenues from operations divested through June 30, 2008 of $3.6 million, $8.8 million and
$112.7 million, respectively.(b)
    
    Fiscal year 2006 corporate capital expenditures, net includes proceeds of $3.4 million
related to the sale of the corporate aircraft.(c)
    
    Corporate segment operating expenses include $25.4 million ($16.2 million, net of income
tax), $28.5 million ($18.2 million, net of income tax) and $35 million ($22.9 million, net of
income tax) of stock-based compensation expense in fiscal years 2008, 2007 and 2006,
respectively. 104




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 26. REVENUES BY SERVICE LINE
  Fiscal year ended June 30,2008
    
    2007
    
    2006Business process outsourcing (a)
    
    $
    4,792,403
    
    
    $
    4,322,164
    
    
    $
    3,996,558Information technology services
    
    
    1,041,036
    
    
    
    1,013,801
    
    
    
    971,832Systems integration services (b)
    
    
    327,111
    
    
    
    436,514
    
    
    
    385,271Total
    
    $
    6,160,550
    
    
    $
    5,772,479
    
    
    $
    5,353,661
 
 (a)
    
    Includes $17.6 million, $26.8 million and $131.2 million of revenues for fiscal
years 2008, 2007 and 2006, respectively, from operations divested through June 30,
2008.(b)
    
    Includes $0.3 million of revenues for fiscal year 2006 from operations divested
through June 30, 2008. 27. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
  June 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,Fiscal year ended June 30,2008
    
    2008

    
    2008

    
    2007

    
    2007Revenues
    
    $
    1,613,655
    
    
    $
    1,542,370
    
    
    $
    1,511,442
    
    
    $
    1,493,083Operating income
    
    $
    177,872
    
    
    $
    163,911
    
    
    $
    157,894
    
    
    $
    145,401Net income
    
    $
    98,632
    
    
    $
    82,638
    
    
    $
    81,596
    
    
    $
    66,144Earnings per
share  basic
    
    $
    1.02
    
    
    $
    0.86
    
    
    $
    0.82
    
    
    $
    0.66Weighted average shares outstanding
    
    
    96,703
    
    
    
    96,089
    
    
    
    99,505
    
    
    
    99,721Earnings per
share  diluted
    
    $
    1.01
    
    
    $
    0.85
    
    
    $
    0.81
    
    
    $
    0.65Weighted
average shares outstanding  diluted
    
    
    97,719
    
    
    
    96,921
    
    
    
    100,310
    
    
    
    100,986
 June 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,Fiscal year ended June 30, 2007
    
    2007

    
    2007
    
    2006
    
    2006Revenues
    
    $
    1,519,734
    
    
    $
    1,440,546
    
    
    $
    1,426,761
    
    
    $
    1,385,438Operating income
    
    $
    83,178
    
    
    $
    162,591
    
    
    $
    150,328
    
    
    $
    140,858Net income
    
    $
    37,574
    
    
    $
    82,059
    
    
    $
    72,074
    
    
    $
    61,383Earnings per
share  basic
    
    $
    0.38
    
    
    $
    0.83
    
    
    $
    0.73
    
    
    $
    0.59Weighted average shares outstanding
    
    
    99,378
    
    
    
    98,945
    
    
    
    98,914
    
    
    
    103,452Earnings per
share  diluted
    
    $
    0.37
    
    
    $
    0.82
    
    
    $
    0.72
    
    
    $
    0.59Weighted
average shares outstanding  diluted
    
    
    101,039
    
    
    
    100,300
    
    
    
    100,152
    
    
    
    104,761
 28. NEW ACCOUNTING PRONOUNCEMENTS
   105




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      29. SUBSEQUENT EVENTS
  
 106




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Managements
Evaluation of Disclosure Controls and Procedures
  Managements
Report on Internal Control over Financial Reporting
    Internal Control  Integrated Framework .
  Changes in Internal Control over Financial Reporting
 
 ITEM 9B. OTHER INFORMATION
  107




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PART III
 Items 10 through 14
 
 PART IV
 
 ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
   Report of Independent Registered Public Accounting Firm
    
    54Consolidated Balance Sheets
    
    55Consolidated Statements of Income
    
    56Consolidated Statements of Changes in Stockholders Equity
    
    57Consolidated Statements of Cash Flows
    
    58Notes to Consolidated Financial Statements
    
    59
   108




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##### Table of Contents



SIGNATURES
  Affiliated Computer Services, Inc.Date: August 28, 2008
    By:
    /s/ Kevin KyserKevin KyserExecutive Vice President and
Chief Financial Officer  Signature
    
    Title/s/ Darwin Deason

(Darwin Deason)
    
    Director, Chairman of the Board/s/ Lynn R. Blodgett
    
    Director, President and Chief Executive Officer(Lynn R. Blodgett)/s/ Kevin Kyser
    
    Executive Vice President and Chief Financial Officer(Kevin Kyser)/s/ Laura Rossi
    
    Senior Vice President and Chief Accounting Officer(Laura Rossi)/s/ Kurt Krauss
    
    Director(Kurt Krauss)/s/ Ted Miller
    
    Director(Ted Miller)/s/ Frank Varasano
    
    Director(Frank Varasano)/s/ Paul E. Sullivan
    
    Director(Paul E. Sullivan)/s/ Robert Druskin
    
    Director(Robert Druskin)
 109




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Index to Exhibits
 ExhibitNumber
    
    Exhibit Name2.1
    
    Stock Purchase Agreement, dated as of July 31, 2003 between
Lockheed Martin Corporation and Affiliated Computer Services,
Inc. (filed as Exhibit 10.1 to our Quarterly Report on Form
10-Q, filed November 14, 2003 and incorporated herein by
reference).2.2
    
    Asset Purchase Agreement, dated as of July 31, 2003 between
Lockheed Martin Service, Inc. and Affiliated Computer Services,
Inc. (filed as Exhibit 10.2 to our Quarterly Report on Form
10-Q, filed November 14, 2003 and incorporated herein by
reference).2.3
    
    Purchase Agreement, dated as of March 15, 2005, among Mellon
Financial Corporation, Mellon Consultants European Holdings
Limited, Affiliated Computer Services, Inc., ACS Business
Process Solutions Limited and Affiliated Computer Services of
Germany GmbH (filed as Exhibit 2.1 to our Current Report on Form
8-K, filed March 17, 2005 and incorporated herein by reference).2.4
    
    Amendment No. 1 to Purchase Agreement, dated as of May 25, 2005,
among Mellon Financial Corporation, Mellon Consultants European
Holdings Limited, Affiliated Computer Services, Inc., ACS
Business Process Solutions Limited and Affiliated Computer
Services of Germany GmbH (filed as Exhibit 2.1 to our Current
Report on Form 8-K, filed June 1, 2005 and incorporated herein
by reference).2.5
    
    Amendment No. 2 to Purchase Agreement, dated as of November 11,
2005, among Mellon Financial Corporation, Mellon Consultants
European Holdings Limited, Affiliated Computer Services, Inc.,
ACS Business Process Solutions Limited and Affiliated Computer
Services of Germany GmbH (filed as Exhibit 2.1 to our Current
Report on Form 8-K, filed November 16, 2005 and incorporated
herein by reference).3.1
    
    Certificate of Incorporation of Affiliated Computer Services,
Inc. (filed as Exhibit 3.1 to our Registration Statement on Form
S-3, filed March 30, 2001, File No. 333-58038 and incorporated
herein by reference).3.2
    
    Certificate of Correction to Certificate of Amendment of
Affiliated Computer Services, Inc., dated August 30, 2001 (filed
as Exhibit 3.2 to our Annual Report on Form 10-K, filed
September 17, 2003 and incorporated herein by reference).3.3
    
    Certificate of Elimination of the Series A Cumulative Redeemable
Preferred Stock of Affiliated Computer Services, Inc. dated
August 20, 2001 (filed as Exhibit 4.3 to our Registration
Statement on Form S-8, File No. 333-42385, filed June 13, 2007
and incorporated herein by reference).3.4
    
    Bylaws of Affiliated Computer Services, Inc., as amended and in
effect on August 21, 2008 (filed as Exhibit 3.2 to our Current
Report on Form 8-K, filed August 27, 2008 and incorporated
herein by reference).4.1
    
    Form of New Class A Common Stock Certificate (filed as Exhibit
4.3 to our Registration Statement on Form S-1, filed May 26,
1994, File No. 33-79394 and incorporated herein by reference).4.2
    
    Indenture, dated as of June 6, 2005, by and between Affiliated
Computer Services, Inc. as Issuer and The Bank of New York Trust
Company, N.A. as Trustee (filed as Exhibit 4.1 to our Current
Report on Form 8-K, filed June 6, 2005 and incorporated herein
by reference).
 110




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##### Table of Contents



Index to Exhibits
 ExhibitNumber
    
    Exhibit Name4.3
    
    First Supplemental Indenture, dated as of June 6, 2005, by and
between Affiliated Computer Services, Inc. as Issuer and The
Bank of New York Trust Company, N.A. as Trustee, relating to our
4.70% Senior Notes due 2010 (filed as Exhibit 4.2 to our Current
Report on Form 8-K, filed June 6, 2005 and incorporated herein
by reference).4.4
    
    Second Supplemental Indenture, dated as of June 6, 2005, by and
between Affiliated Computer Services, Inc. as Issuer and The
Bank of New York Trust Company, N.A. as Trustee, relating to our
5.20% Senior Notes due 2015 (filed as Exhibit 4.3 to our Current
Report on Form 8-K, filed June 6, 2005 and incorporated herein
by reference).4.5
    
    Specimen Note for 4.70% Senior Notes due 2010 (filed as Exhibit
4.4 to our Current Report on Form 8-K, filed June 6, 2005 and
incorporated herein by reference).4.6
    
    Specimen Note for 5.20% Senior Notes due 2015 (filed as Exhibit
4.5 to our Current Report on Form 8-K, filed June 6, 2005 and
incorporated herein by reference).9.1
    
    Voting Agreement, as amended December 7, 2007, by and between
Affiliated Computer Services, Inc. and Darwin Deason (filed as
Exhibit 99.1 to our Current Report on Form 8-K filed December
10, 2007 and incorporated herein by reference).10.1
    
    1997 Stock Incentive Plan of the Company (filed as Appendix D to
our Joint Proxy Statement on Schedule 14A, filed November 14,
1997 and incorporated herein by reference).10.2
    
    Amendment No.1 to Affiliated Computer Services, Inc. 1997 Stock
Incentive Plan, dated as of October 28, 2004 (filed as Exhibit
4.6 to our Registration Statement on Form S-8, filed December 6,
2005 and incorporated herein by reference).10.3
    
    2007 Equity Incentive Plan of the Company (filed as Appendix C
to our Proxy Statement on Schedule 14A, filed April 30, 2007 and
incorporated herein by reference).10.4
    
    Form of Directors Indemnification Agreement (filed as Exhibit
10.1 to our Current Report on Form 8-K, filed June 5, 2008 and
incorporated herein by reference).10.5
    
    Form of Change in Control Agreement, dated as of June 9, 2008
(June 6, 2008, in the case of Ann Vezina), by and between
Affiliated Computer Services, Inc. and each of Tom Burlin, Kevin
Kyser, Tom Blodgett and Ann Vezina (filed as Exhibit 10.1 to our
Current Report on Form 8-K, filed June 11, 2008 and
incorporated herein by reference).10.6
    
    Change in Control Agreement, dated as of June 9, 2008, by and
between Affiliated Computer Services, Inc. and John Rexford
(filed as Exhibit 10.2 to our Current Report on Form 8-K, filed
June 11, 2008 and incorporated herein by reference).10.7
    
    Supplemental Executive Retirement Agreement, dated as of
December 15, 1998, by and between Affiliated Computer Services,
Inc. and Darwin Deason (filed as Exhibit 10.13 to our Annual
Report on Form 10-K, filed September 29, 1999 and incorporated
herein by reference).10.8
    
    Amendment to Supplemental Executive Retirement Agreement, dated
as of November 13, 2003, by and between Affiliated Computer
Services, Inc. and Darwin Deason (filed as Exhibit 10.1 to our
Quarterly Report on Form 10-Q, filed February 17, 2004 and
incorporated herein by reference).10.9
    
    Amendment No. 2 to Supplemental Executive Retirement Agreement,
dated as of June 30, 2005, by and between Affiliated Computer
Services, Inc. and Darwin Deason (filed as Exhibit 10.1 to our
Current Report on Form 8-K, filed July 1, 2005 and incorporated
herein by reference).10.10
    
    Amended and Restated Executive Employment Agreement, effective
as of May 1, 2008, by and between Affiliated Computer Services,
Inc. and Lynn Blodgett (filed as Exhibit 10.3 to our Current
Report on Form 8-K, filed June 11, 2008 and incorporated herein
by reference).
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##### Table of Contents



Index to Exhibits
 ExhibitNumber
    
    Exhibit Name10.11
    
    Employment Agreement, as amended December 7, 2007, between the
Company and Darwin Deason (filed as Exhibit 99.2 to our Current
Report on Form 8-K, filed December 10, 2007 and incorporated
herein by reference).10.12
    
    Affiliated Computer Services, Inc. 401(k) Supplemental Plan,
effective as of July 1, 2000, as amended (filed as Exhibit 10.15
to our Annual Report on Form 10-K, filed September 13, 2004 and
incorporated herein by reference).10.13
    
    Affiliated Computer Services, Inc. Executive Benefit Plan,
effective as of January 1, 2002, as amended (filed as Exhibit
10.15 to our Annual Report on Form 10-K, filed September 13,
2005 and incorporated herein by reference).10.14
    
    Form of Stock Option Agreement (filed as Exhibit 10.17 to our
Annual Report on Form 10-K, filed September 13, 2005 and
incorporated herein by reference).10.15
    
    Form of Stock Option Agreement (UK grant) (filed as Exhibit
10.18 to our Annual Report on Form 10-K, filed September 13,
2005 and incorporated herein by reference).10.16
    
    Form of Stock Option Agreement (Switzerland, Canton of Fribourg)
(filed as Exhibit 10.8 to our Quarterly Report on Form 10-Q
filed May 16, 2006 and incorporated herein by reference.10.17
    
    Form of Stock Option Agreement (Switzerland, Cantons of Aargau,
Basel-Landschaft, Bern & Zurich) (filed as Exhibit 10.9 to our
Quarterly Report on Form 10-Q filed May 16, 2006 and
incorporated herein by reference.10.18
    
    1997 Stock Incentive Plan for Employees in France (filed as
Exhibit 10.35 to our Annual Report on Form 10-K filed January
23, 2007 and incorporated herein by reference.)10.19
    
    Form of Stock Option Agreement (France) (filed as Exhibit 10.36
to our Annual Report on Form 10-K filed January 23, 2007 and
incorporated herein by reference.)10.20*
    
    Form of Stock Option Agreement (Canada, other than Quebec)10.21*
    
    Form of Stock Option Agreement (Quebec)10.22*
    
    Form of Stock Option Agreement (Germany)10.23
    
    Agreement, dated as of September 30, 2005, between Affiliated
Computer Services, Inc. and Jeffrey A. Rich (filed as Exhibit
10.1 to our Current Report on Form 8-K, filed October 3, 2005
and incorporated herein by reference).10.24
    
    Credit Agreement, dated March 20, 2006, by and among Affiliated
Computer Services, Inc., and certain subsidiary parties thereto,
as Borrowers, Citicorp USA, Inc., as Administrative Agent,
Citigroup Global Markets Inc., as Sole Lead Arranger and Book
Runner, and various other agents, lenders and issuers (filed as
Exhibit 10.1 to our Current Report on Form 8-K, filed March 21,
2006 and incorporated herein by reference).10.25
    
    Amendment No. 1 to Credit Agreement dated as of March 30, 2006,
by and among Affiliated Computer Services, Inc., and certain
subsidiary parties thereto, as Borrowers, and Citicorp USA,
Inc., as Administrative Agent (filed as Exhibit 10.24 to our
Annual Report on Form 10-K, filed January 23, 2007 and
incorporated herein by reference).10.26
    
    Amendment No. 2 to Credit Agreement dated as of July 6, 2006, by
and among Affiliated Computer Services, Inc., and certain
subsidiary parties thereto, as Borrowers, and Citicorp USA,
Inc., as Administrative Agent (filed as Exhibit 10.1 to our
Current Report on Form 8-K, filed July 7, 2006 and incorporated
herein by reference).
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##### Table of Contents



Index to Exhibits
 ExhibitNumber
    
    Exhibit Name10.27
    
    Amendment No. 3, Consent and Waiver to Credit Agreement, by and
among Affiliated Computer Services, Inc., and certain subsidiary
parties thereto and Citicorp USA, Inc., as Administrative Agent
(filed as Exhibit 10.1 to our Current Report on Form 8-K, filed
September 28, 2006 and incorporated herein by reference).10.28
    
    Amendment No. 4, Consent and Waiver to Credit Agreement, by and
among Affiliated Computer Services, Inc., and certain subsidiary
parties thereto and Citicorp USA, Inc., as Administrative Agent
(filed as Exhibit 10.1 to our Current Report on Form 8-K, filed
December 22, 2006 and incorporated herein by reference).10.29
    
    Pledge and Security Agreement, dated March 20, 2006, by and
among Affiliated Computer Services and certain of its
subsidiaries, and Citicorp USA, Inc., as Administrative Agent
(filed as Exhibit 10.2 to our Current Report on Form 8-K, filed
March 21, 2006 and incorporated herein by reference).10.30
    
    Deed of Assignment, dated March 20, 2006, by and among the
companies listed on Schedule thereto, as Assignors, and Citicorp
USA, Inc., as Security Agent (filed as Exhibit 10.3 to our
Current Report on Form 8-K, filed March 21, 2006 and
incorporated herein by reference).10.31
    
    Assignment of Receivables, dated March 20, 2006, by and among
the entities listed in Schedule 1 thereto, as Assignors, and
Citicorp USA, Inc. as Security Agent (filed as Exhibit 10.4 to
our Current Report on Form 8-K, filed March 21, 2006 and
incorporated herein by reference).10.32
    
    Agreement and Deed of the Creation of a First Ranking Right of
Pledge of Shares in Affiliated Computer Services International
B.V., dated March 20, 2006 (filed as Exhibit 10.5 on Form 8-K,
filed March 21, 2006 and incorporated herein by reference).10.33
    
    Agreement and Deed of the Creation of a First Ranking Right of
Pledge of Receivables of Affiliated Computer Services
International B.V., dated March 20, 2006 (filed as Exhibit 10.6
to our Current Report on Form 8-K, filed March 21, 2006 and
incorporated herein by reference).10.34
    
    Affirmation of Liens and Guaranties, dated as of July 6, 2006,
by and among Affiliated Computer Services, Inc. and certain of
its subsidiaries, and Citicorp USA, Inc., as Administrative
Agent (filed as Exhibit 10.2 to our Current Report on Form 8-K,
filed July 7, 2006 and incorporated herein by reference).10.35
    
    Confirmation Deed, dated as of July 6, 2006, by and among the
entities listed on the Schedule thereto and Citicorp USA, Inc.,
as Security Agent (filed as Exhibit 10.3 to our Current Report
on Form 8-K, filed July 7, 2006 and incorporated herein by
reference).10.36
    
    Engagement Letter between Rich Capital, LLC and Affiliated
Computer Services, Inc. dated June 9, 2006 (filed as Exhibit
10.1 on Form 8-K, filed June 12, 2006 and incorporated herein by
reference).10.37
    
    Separation Agreement dated as of November 26, 2006 between
Affiliated Computer Services, Inc. and Mark A. King (filed as
Exhibit 10.1 to our Current Report on Form 8-K, filed November
27, 2006 and incorporated herein by reference).10.38
    
    Separation Agreement dated as of November 26, 2006 between
Affiliated Computer Services, Inc. and Warren D. Edwards (filed
as Exhibit 10.2 to our Current Report on Form 8-K, filed
November 27, 2006 and incorporated herein by reference).21.1*
    
    Subsidiaries of the Company.23.1*
    
    Consent of PricewaterhouseCoopers LLP.23.2*
    
    Consent of Value Incorporated.
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##### Table of Contents



Index to Exhibits
 ExhibitNumber
    
    Exhibit Name31.1*
    
    Certification of Chief Executive Officer of Affiliated Computer
Services, Inc. pursuant to Rule 13a-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.31.2*
    
    Certification of Chief Financial Officer of Affiliated Computer
Services, Inc. pursuant to Rule 13a-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.32.1*
    
    Certification of Chief Executive Officer of Affiliated Computer
Services, Inc. pursuant to Rule 13a-14(b) promulgated under the
Securities Exchange Act of 1934, as amended and Section 1350 of
Chapter 63 of Title 18 of the United States Code. Pursuant to
Item 601(b)(32)(ii) of Regulation S-K, this Exhibit is furnished
to the SEC and shall not be deemed to be filed.32.2*
    
    Certification of Chief Financial Officer of Affiliated Computer
Services, Inc. pursuant to Rule 13a-14(b) promulgated under the
Securities Exchange Act of 1934, as amended and Section 1350 of
Chapter 63 of Title 18 of the United States Code. Pursuant to
Item 601(b)(32)(ii) of Regulation S-K, this Exhibit is furnished
to the SEC and shall not be deemed to be filed.
 
 *
    
    Filed herewith
    
    Management contract or compensation plan or arrangement 114