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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 Mark One
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the fiscal year ended June 30, 2007
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the transition period from  to .
 Commission file number 1-12665
 AFFILIATED COMPUTER SERVICES, INC.
  Delaware
    
    51-0310342State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization
 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
    
    New York Stock Exchangevalue $.01 per share
 Securities Registered Pursuant to Section 12(g) of the Act:
NONE
 o þ
 o þ
 þ o
 o
  þ o o
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE:




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##### 



AFFILIATED COMPUTER SERVICES, INC.
 FORM 10-K
for the Fiscal Year Ended June 30, 2007
 Part IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    7Item 1B. Unresolved Staff Comments
    
    
    13Item 2. Properties
    
    
    13Item 3. Legal Proceedings
    
    
    13Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14Part IIItem 5. Market for Our Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    15Item 6. Selected Consolidated Financial Data
    
    
    18Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    19Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    56Item 8. Financial Statements and Supplementary Data
    
    
    58Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    120Item 9A. Controls and Procedures
    
    
    120Part IIIItem 10. Directors, Executive Officers and Corporate Governance of the Registrant
    
    
    121Item 11. Executive Compensation
    
    
    121Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    121Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    121Item 14. Principal Accounting Fees and Services
    
    
    121Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    121Subsidiaries of the CompanyConsent 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 Rule 13a-14(b)Certification of CFO Pursuant to Rule 13a-14(b)




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PART I
 
 ITEM 1. BUSINESS
 General
     Market Overview
  §
    
    the desire of organizations to focus on their core competencies;§
    
    the desire of organizations to drive process improvements by improving service quality and the speed of execution;§
    
    the increasing acceptance by commercial organizations to utilize offshore resources for
business process outsourcing;§
    
    the increasing complexity of information technology systems and the need to connect
electronically with citizens, clients, suppliers, and other external and internal systems;
 1




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§
    
    the increasing requirements for rapid processing of information and the communication or
dissemination of large amounts of data to multiple locations; and§
    
    the desire by organizations to take advantage of the latest advances in technology
without the cost and resource commitment required to maintain in-house systems.
 Business Strategy
  Expand Client Base 
 Expand Existing Client Relationships
 Build Recurring Revenues
 Consulting Services
 Provide Flexible Solutions
 Invest in Technology
 Maximize Economies of Scale
 Complete Strategic and Tactical Acquisitions
 Attract, Train and Retain Employees 
 2




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Segment Information
  Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Commercial
    
    $
    3,436,501
    
    
    $
    3,167,630
    
    
    $
    2,175,087Government (1)
    
    
    2,335,978
    
    
    
    2,186,031
    
    
    
    2,176,072Total Revenues
    
    $
    5,772,479
    
    
    $
    5,353,661
    
    
    $
    4,351,159
 
 (1)
    
    Includes $0.9 million, $104.5 million and $218.6 million of revenues for fiscal years 2007,
2006 and 2005, respectively, from operations divested through June 30, 2007.  Commercial
  Business Process Outsourcing
  Administration
-
 Human
Resources -
 Finance and
Accounting -
 Customer Care
 Payment Services
  3




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##### Table of Contents



Information Technology Services
   Systems Integration Services
  Consulting Services
  Government
    U.S. Department of Education
  4




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Transportation Solutions
  Government Healthcare Solutions
  Unclaimed Property
  Government and Community Solutions
      5




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##### Table of Contents



Revenues by Service Line
  Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Business process outsourcing (1)
    
    $
    4,322,164
    
    
    $
    3,996,558
    
    
    $
    3,237,981Information technology services
    
    
    1,013,801
    
    
    
    971,832
    
    
    
    858,639Systems integration services (2)
    
    
    436,514
    
    
    
    385,271
    
    
    
    254,539Total
    
    $
    5,772,479
    
    
    $
    5,353,661
    
    
    $
    4,351,159
 
 (1)
    
    Includes $0.9 million, $104.2 million and $218 million of revenues for fiscal years
2007, 2006 and 2005, respectively, from operations divested through June 30, 2007.(2)
    
    Includes $0.3 million and $0.6 million of revenues for fiscal years 2006 and 2005,
respectively, from operations divested through June 30, 2007. Client Base
   Geographic information
  Competition
   6




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##### Table of Contents



Employees
   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. Our debt service
cost could limit cash flow available to fund our operations, and may limit our ability to obtain
further debt or equity financing.
 Credit Facilities
 7




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Senior Notes
  Alleged defaults and purported acceleration of our Senior Notes, if upheld in litigation, 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.
  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.
  8




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Reductions of our credit rating may have an adverse impact on our business.
  A decline in revenues from or a loss 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.
  We have non-recurring revenue, which subjects us to a risk that our revenues from year to year may
fluctuate.
  The markets in which we operate are highly competitive and we may not be able to compete
effectively.
  We may not be able to make acquisitions that will complement our growth.
  9




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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.
  The exercise of contract termination provisions and service level penalties may have an adverse
impact on our business.
  10




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Some of our contracts contain pricing provisions that could adversely affect our operating results
and cash flow.
  Claims associated with our actuarial consulting and benefit plan management services could
negatively impact our business.
  The loss of or change in our significant software vendor relationships could have a material
adverse effect on our business.
  We may be subject to claims of infringement of third-party intellectual property rights which could
adversely affect our business.
  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.
  11




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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 operations are subject to a number of risks.
  Armed hostilities and terrorist attacks may negatively impact the countries in which we operate.
  A failure to attract and retain necessary technical personnel, skilled management and qualified
subcontractors may have an adverse impact on our business.
  12




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Risks associated with loans that we service may reduce our profitability and cash flow.
  A disruption in utility or network services may have a negative impact on our business.
  Our indemnification obligations may have a material adverse effect on our business.
  Other Risks
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
  13




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Election of Directors:
 Name
    
    For
    
    WithheldDarwin Deason
    
    
    103,732,446
    
    
    
    44,053,383Lynn R. Blodgett
    
    
    103,648,387
    
    
    
    44,137,442John H. Rexford
    
    
    103,577,212
    
    
    
    44,208,617Joseph P. ONeill
    
    
    103,027,875
    
    
    
    44,757,954Frank A. Rossi
    
    
    103,260,228
    
    
    
    44,525,601J. Livingston Kosberg
    
    
    103,223,203
    
    
    
    44,562,626Dennis McCuistion
    
    
    103,444,677
    
    
    
    44,341,152Robert B. Holland, III
    
    
    103,075,039
    
    
    
    44,710,790
  2.
    
    Approval of the fiscal year 2007 performance-based incentive compensation provisions
for certain of ACS executive officers.
 For
    
    Against
    
    Abstain126,863,358
    
    6,233,679
    
    779,843
 3.
    
    Approval of the Special Executive FY07 Bonus Plan for certain of ACS executive
officers.
 For
    
    Against
    
    Abstain128,899,380
    
    4,181,992
    
    792,418
 4.
    
    Ratification of the appointment of PricewaterhouseCoopers LLP as ACS Independent
Registered Public Accounting Firm of Fiscal Year 2007.
 For
    
    Against
    
    Abstain144,714,978
    
    2,374,117
    
    696,734
 5.
    
    Approval and adoption of the 2007 Equity Incentive Plan.
 For
    
    Against
    
    Abstain96,559,178
    
    37,670,402
    
    662,963
 6.
    
    Approval of a policy on an annual advisory vote on executive compensation.
 For
    
    Against
    
    Abstain31,973,748
    
    98,212,485
    
    3,690,482
 14




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PART II
 
 ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  Year ended June 30, 2007
    
    High
    
    LowFirst Quarter
    
    $
    54.16
    
    
    $
    47.32Second Quarter
    
    
    53.85
    
    
    
    48.06Third Quarter
    
    
    60.63
    
    
    
    47.79Fourth Quarter
    
    
    61.67
    
    
    
    56.30Year ended June 30, 2006First Quarter
    
    
    55.10
    
    
    
    48.46Second Quarter
    
    
    61.16
    
    
    
    46.91Third Quarter
    
    
    63.66
    
    
    
    55.14Fourth Quarter
    
    
    60.39
    
    
    
    46.50
   15




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Number of securitiesNumber of
    
    
    
    
    
    remaining available forsecurities to be
    
    
    
    
    
    future issuance underissued upon exercise
    
    Weighted average
    
    equity compensationof outstanding
    
    exercise price of
    
    plans (excludingoptions, warrants
    
    outstanding options,
    
    securities reflected inand rights
    
    warrants and rights
    
    initial column)Plan Category
    
    as of June 30, 2007
    
    (3)
    
    as of June 30, 2007Equity compensation plans
approved by security shareholdersStock options
    
    
    12,622,560
    (1)
    
    $
    44.88
    
    
    
    16,164,736
    (2)Employee stock purchase plan
    
    
    N/A
    
    
    
    N/A
    
    
    
    805,938Equity compensation plans not
approved by security shareholders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    12,622,560
    
    
    $
    44.88
    
    
    
    16,970,674
 
 (1)
    
    These plans consist 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)
    
    In June 2007, our stockholders approved the 2007 Equity Incentive Plan which is
intended to replace the 1997 Stock Incentive Plan. The shares remaining available as of
June 30, 2007 include 14.6 million shares under the 2007 Equity Incentive Plan and 1.5
million shares under the 1997 Stock Incentive Plan, which was discontinued upon approval of the
2007 Equity Incentive Plan, and which shares will expire on December 31, 2007.(3)
    
    Weighted average exercise price of outstanding options, warrants, and rights of $44.88
per share is prior to the repricing of certain options that occurred in the first quarter
of fiscal year 2008, as discussed in Notes 21 and 29 to our Consolidated Financial
Statements. Stock option repricing
 Stock Option Repricing
 Stock option grants
 Stock Option Grants
 Tender Offer
  Share Repurchase Programs
 Share Repurchase Programs
 16




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Total number of
    
    Maximum number (orshares
    
    approximate dollarTotal
    
    
    
    
    
    purchased as
    
    value) of shares thatnumber of
    
    Average
    
    part of publicly
    
    may yet be purchasedshares
    
    price paid
    
    announced plans
    
    under the plans orPeriod
    
    purchased
    
    per share
    
    or programs
    
    programsApril 1  April 30, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    1,000,000,000May 1  May 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000,000June 1- June 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000,000For the quarter ended June 30, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    1,000,000,000
 Performance graph
  
 17




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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
  As of and for the fiscal year ended June 30,2007(b)
    
    2006(c)
    
    2005(d)(h)
    
    2004(e)
    
    2003Results of Operations Data:Revenues (a)
    
    $
    5,772,479
    
    
    $
    5,353,661
    
    
    $
    4,351,159
    
    
    $
    4,106,393
    
    
    $
    3,787,206Operating income
    
    $
    536,955
    
    
    $
    617,284
    
    
    $
    647,484
    
    
    $
    834,745
    
    
    $
    508,784Net income
    
    $
    253,090
    
    
    $
    358,806
    
    
    $
    409,569
    
    
    $
    521,728
    
    
    $
    298,270Earnings per share  basic
    
    $
    2.53
    
    
    $
    2.91
    
    
    $
    3.21
    
    
    $
    3.97
    
    
    $
    2.25Earnings per share  diluted
    
    $
    2.49
    
    
    $
    2.87
    
    
    $
    3.14
    
    
    $
    3.77
    
    
    $
    2.13Weighted average shares
outstanding  basic (f)
    
    
    100,181
    
    
    
    123,197
    
    
    
    127,560
    
    
    
    131,498
    
    
    
    132,445Weighted average shares
outstanding  diluted (f)
    
    
    101,572
    
    
    
    125,027
    
    
    
    130,556
    
    
    
    139,880
    
    
    
    143,598Balance Sheet Data:Working capital
    
    $
    839,662
    
    
    $
    704,158
    
    
    $
    405,983
    
    
    $
    406,854
    
    
    $
    422,022Total assets
    
    $
    5,982,429
    
    
    $
    5,502,437
    
    
    $
    4,850,838
    
    
    $
    3,907,242
    
    
    $
    3,698,705Total long-term debt (g)
(less current portion)
    
    $
    2,342,272
    
    
    $
    1,614,032
    
    
    $
    750,355
    
    
    $
    372,439
    
    
    $
    498,340Stockholders equity
    
    $
    2,066,168
    
    
    $
    2,456,218
    
    
    $
    2,811,712
    
    
    $
    2,569,678
    
    
    $
    2,416,503Other Data:Net cash provided by
operating activities (h)
    
    $
    738,378
    
    
    $
    638,710
    
    
    $
    739,348
    
    
    $
    476,209
    
    
    $
    545,305
 
 (a)
    
    Revenues from operations divested through June 30, 2007 were $0.9 million, $104.5
million, $218.6 million, $495.4 million and $966.1 million for fiscal years 2007, 2006,
2005, 2004 and 2003, respectively. Please see the discussion in Significant Developments 
Fiscal Year 2006 in Managements Discussion and Analysis of Financial Condition and
Results of Operations 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 Managements Discussion and Analysis of Financial Condition and Results of Operations
for further discussion.(c)
    
    Please see Significant Developments  Fiscal Year 2006 in Managements Discussion and
Analysis of Financial Condition and Results of Operations and the Notes to our Consolidated
Financial Statements for discussion of significant items which impacted fiscal year 2006
results of operations, including the adoption of SFAS 123(R) (defined in Item 7) and the
WWS Divestiture (defined in Item 7).(d)
    
    Please see Significant Developments  Fiscal Year 2005 in Managements Discussion and
Analysis of Financial Condition and Results of Operations and the Notes to our Consolidated
Financial Statements for discussion of significant items which impacted fiscal year 2005
results of operations. 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 Notes 16 and 17 to our Consolidated Financial Statements for a discussion of
our share repurchase programs and Tender Offer.(g)
    
    During fiscal year 2005, we issued $500 million of Senior Notes (defined in Item 7) and
during fiscal year 2006 we entered into a new $800 million Term Loan Facility and $1
billion Revolving Facility (each defined in Item 7). Please see the discussion in
Liquidity and Capital Resources in Managements Discussion and Analysis of Financial
Condition and Results of Operations and Note 12 to our Consolidated Financial Statements
for discussion of our credit arrangements.(h)
    
    Please see Liquidity and Capital Resources in Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations for a discussion of items
affecting fiscal years 2007, 2006 and 2005 cash flow from operating activities. 18




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
    
    We have issued debt and have a substantial uncommitted facility available to us. Our
debt service cost could limit cash flow available to fund our operations, and may limit our
ability to obtain further debt or equity financing;
    
    Alleged defaults and purported acceleration of our Senior Notes, if upheld in
litigation, 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;
    
    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;
    
    Reductions of our credit rating may have an adverse impact on our business;
    
    A decline in revenues from or a loss 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;
    
    We have non-recurring revenue, which subjects us to a risk that our revenues from year to year may fluctuate;
    
    The markets in which we operate are highly competitive and we may not be able to compete effectively;
    
    We may not be able to make acquisitions that will complement our growth;
    
    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;
    
    The exercise of contract termination provisions and service level penalties may have an
adverse impact on our business;
    
    Some of our contracts contain fixed pricing or benchmarking provisions that could
adversely affect our operating results and cash flow;
    
    Claims associated with our actuarial consulting and benefit plan management services
could negatively impact our business;
    
    The loss of or change in our significant software vendor relationships could have a
material adverse effect on our business;
    
    We may be subject to claims of infringement of third-party intellectual property rights
which could adversely affect our business;
    
    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 systems;
    
    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 operations are subject to a number of risks;
    
    Armed hostilities and terrorist attacks may negatively impact the countries in which we operate;
    
    A failure to attract and retain necessary technical personnel, skilled management and
qualified subcontractors may have an adverse impact on our business;
    
    Risks associated with loans that we service may reduce our profitability and cash flow;
    
    A disruption in utility or network services may have a negative impact on our business;
    
    Our indemnification obligations may have a material adverse effect on our business.
  19




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Overview
     20




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2008 Outlook
  21




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Significant Developments
 Review of Stock Option Grant Practices
  Restructuring Activities
   22




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Fiscal year ending June 30,2007
    
    
    2006Beginning balance
    
    $
    899
    
    
    $
    Accruals
    
    
    7,185
    
    
    
    6,500Payments
    
    
    (7,191
    )
    
    
    (5,601
    )Ending balance
    
    $
    893
    
    
    $
    899
   Fiscal year ending June 30,2007
    
    
    2006
    
    
    2005Beginning balance
    
    $
    3,521
    
    
    $
    20,495
    
    
    $
    Accrual recorded at acquisition
    
    
    
    
    
    
    
    
    
    
    22,264Excess accrual credited to goodwill
    
    
    (1,678
    )
    
    
    (3,116
    )
    
    
    Payments
    
    
    (1,441
    )
    
    
    (13,858
    )
    
    
    (1,769
    )Ending balance
    
    $
    402
    
    
    $
    3,521
    
    
    $
    20,495
   23




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Significant Developments  Fiscal Year 2007
 Potential Sale of the Company
       New Business
  Acquisitions
   24




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Departure of Executive Officers
  Credit Arrangements
 Credit Facility
 Senior Notes
 Sale of Minority Interests in a Professional Services Business
  Share Repurchase Programs
 Share Repurchase Programs
 Stock Option Grants
  Subsequent Events
 Stock Option Repricing
 Stock Option Repricing
 25




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Contract with the Department of Education
   Government Healthcare Contract
   Subsequent Events
 Stock Option Repricing
 Stock Option Repricing
 26




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Stock Option Grants
  Significant Developments  Fiscal Year 2006
 Review of Stock Option Grant Practices
  New Business
  Stock-based Compensation
     27




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Acquisitions
      Sale of Government Welfare-to-Workforce Services Business
   28




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Share Repurchase Programs
 Share Repurchase Programs
 Tender Offer
  Voting Rights of Our Chairman
       29




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Departure of Executive Officer
  Credit Agreement
   Other
  Significant Developments  Fiscal Year 2005
 New Business
  Acquisitions
   30




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Credit Arrangements
    Derivative and Hedging Activities
 Derivatives and
hedging activities
 Share Repurchases
 Share Repurchase Programs
 Stock-based Compensation
  31




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Revenue Growth
  Fiscal year ended June 30,
    
    
    
    
    
    
    
    
    
    
    Fiscal year ended June 30,2007
    
    
    2006
    
    
    $ Growth
    
    
    Growth %
    
    
    2006
    
    
    2005
    
    
    $ Growth
    
    
    Growth %ConsolidatedTotal Revenues
    
    $
    5,772,479
    
    
    $
    5,353,661
    
    
    $
    418,818
    
    
    
    8
    %
    
    $
    5,353,661
    
    
    $
    4,351,159
    
    
    $
    1,002,502
    
    
    
    23
    %Less: Divestitures
    
    
    (914
    )
    
    
    (104,524
    )
    
    
    103,610
    
    
    
    
    
    
    
    (104,524
    )
    
    
    (218,616
    )
    
    
    114,092Adjusted
    
    $
    5,771,565
    
    
    $
    5,249,137
    
    
    $
    522,428
    
    
    
    10
    %
    
    $
    5,249,137
    
    
    $
    4,132,543
    
    
    $
    1,116,594
    
    
    
    27
    %Acquired revenues
    
    $
    272,049
    
    
    $
    22,437
    
    
    $
    249,612
    
    
    
    5
    %
    
    $
    948,500
    
    
    $
    128,111
    
    
    $
    820,389
    
    
    
    20
    %Internal revenues
    
    
    5,499,516
    
    
    
    5,226,700
    
    
    
    272,816
    
    
    
    5
    %
    
    
    4,300,637
    
    
    
    4,004,432
    
    
    
    296,205
    
    
    
    7
    %Total
    
    $
    5,771,565
    
    
    $
    5,249,137
    
    
    $
    522,428
    
    
    
    10
    %
    
    $
    5,249,137
    
    
    $
    4,132,543
    
    
    $
    1,116,594
    
    
    
    27
    %CommercialTotal Revenues
    
    $
    3,436,501
    
    
    $
    3,167,630
    
    
    $
    268,871
    
    
    
    8
    %
    
    $
    3,167,630
    
    
    $
    2,175,087
    
    
    $
    992,543
    
    
    
    46
    %Less: Divestitures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjusted
    
    $
    3,436,501
    
    
    $
    3,167,630
    
    
    $
    268,871
    
    
    
    8
    %
    
    $
    3,167,630
    
    
    $
    2,175,087
    
    
    $
    992,543
    
    
    
    46
    %Acquired revenues
    
    $
    174,947
    
    
    $
    7,103
    
    
    $
    167,844
    
    
    
    5
    %
    
    $
    836,811
    
    
    $
    127,923
    
    
    $
    708,888
    
    
    
    33
    %Internal revenues
    
    
    3,261,554
    
    
    
    3,160,527
    
    
    
    101,027
    
    
    
    3
    %
    
    
    2,330,819
    
    
    
    2,047,164
    
    
    
    283,655
    
    
    
    13
    %Total
    
    $
    3,436,501
    
    
    $
    3,167,630
    
    
    $
    268,871
    
    
    
    8
    %
    
    $
    3,167,630
    
    
    $
    2,175,087
    
    
    $
    992,543
    
    
    
    46
    %GovernmentTotal Revenues (a)
    
    $
    2,335,978
    
    
    $
    2,186,031
    
    
    $
    149,947
    
    
    
    7
    %
    
    $
    2,186,031
    
    
    $
    2,176,072
    
    
    $
    9,959
    
    
    
    Less: Divestitures
    
    
    (914
    )
    
    
    (104,524
    )
    
    
    103,610
    
    
    
    
    
    
    
    (104,524
    )
    
    
    (218,616
    )
    
    
    114,092Adjusted
    
    $
    2,335,064
    
    
    $
    2,081,507
    
    
    $
    253,557
    
    
    
    12
    %
    
    $
    2,081,507
    
    
    $
    1,957,456
    
    
    $
    124,051
    
    
    
    6
    %Acquired revenues
    
    $
    97,102
    
    
    $
    15,334
    
    
    $
    81,768
    
    
    
    4
    %
    
    $
    111,689
    
    
    $
    188
    
    
    $
    111,501
    
    
    
    5
    %Internal revenues
    
    
    2,237,962
    
    
    
    2,066,173
    
    
    
    171,789
    
    
    
    8
    %
    
    
    1,969,818
    
    
    
    1,957,268
    
    
    
    12,550
    
    
    
    1
    %Total
    
    $
    2,335,064
    
    
    $
    2,081,507
    
    
    $
    253,557
    
    
    
    12
    %
    
    $
    2,081,507
    
    
    $
    1,957,456
    
    
    $
    124,051
    
    
    
    6
    %
 
 (a)
    
    The Government segment includes revenues from operations divested through June 30, 2007
of $0.9 million, $104.5 million and $218.6 million for fiscal years 2007, 2006 and 2005,
respectively. 32




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##### Table of Contents



Results of Operations
  Percentage of RevenueFiscal year ended June 30,2007
    
    2006
    
    2005Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Cost of revenues:Wages and benefits
    
    
    47.6
    
    
    
    48.0
    
    
    
    43.1Services and supplies
    
    
    21.9
    
    
    
    21.8
    
    
    
    24.0Rent, lease and maintenance
    
    
    12.2
    
    
    
    12.1
    
    
    
    11.6Depreciation and amortization
    
    
    6.0
    
    
    
    5.4
    
    
    
    5.4Software impairment charge
    
    
    1.3
    
    
    
    
    
    
    
    Other
    
    
    0.5
    
    
    
    0.7
    
    
    
    0.5Cost of revenues
    
    
    89.5
    
    
    
    88.0
    
    
    
    84.6Gain on sale of business
    
    
    
    
    
    
    (0.6
    )
    
    
    Other operating expenses
    
    
    1.2
    
    
    
    1.1
    
    
    
    0.5Total operating expenses
    
    
    90.7
    
    
    
    88.5
    
    
    
    85.1Operating income
    
    
    9.3
    
    
    
    11.5
    
    
    
    14.9Interest expense
    
    
    3.2
    
    
    
    1.3
    
    
    
    0.5Other non-operating income, net
    
    
    (0.5
    )
    
    
    (0.2
    )
    
    
    (0.1
    )Pretax profit
    
    
    6.6
    
    
    
    10.4
    
    
    
    14.5Income tax expense
    
    
    2.2
    
    
    
    3.7
    
    
    
    5.1Net income
    
    
    4.4
    %
    
    
    6.7
    %
    
    
    9.4
    %
 Comparison of Fiscal Year 2007 to Fiscal Year 2006
 Revenues
    33




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Operating expenses
      
  34




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##### Table of Contents



Fiscal year endedJune 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
    
    
    
    
    
    
    2.4Legal settlements and related costs
    
    
    
    
    
    
    0.5Corporate segment:Legal costs associated with the ongoing stock option investigations and shareholder
derivative lawsuits
    
    
    30.1
    
    
    
    2.7Legal costs associated with the potential sale of the Company and shareholder
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
    %
  35




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##### Table of Contents



Operating income
  Fiscal year endedJune 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 MMIS 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 MMIS 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
shareholder derivative lawsuits
    
    
    (32.3
    )
    
    
    (2.9
    )Legal costs and other costs associated with the potential sale of the Company and
shareholder 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, our 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
    )%
  36




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##### Table of Contents



Interest expense
  Other non-operating income, net
  Income tax expense
  Comparison of Fiscal Year 2006 to Fiscal Year 2005
 Revenues
    37




---



##### Table of Contents



Operating expenses
     38




---



##### Table of Contents



Commercial segment:Provision for doubtful accounts for an assessment of risk
related
to the bankruptcies of certain airline clients
    
    $
    3.0Government segment:Provisions 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
    
    
    2.4Legal settlements and related costs
    
    
    0.5Corporate:Aircraft impairment
    
    
    4.7Legal settlements and related costs
    
    
    2.7Legal costs associated with the ongoing stock option
investigations and shareholder derivative lawsuits
    
    
    2.7Legal 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
    
    
    4.0Total
    
    $
    23.3As a percentage of revenues
    
    
    0.4
    %
  39




---



##### Table of Contents



Operating income
  Commercial segment:Costs related to our restructuring activities
    
    $
    (10.2
    )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
    )Other impairments and severance charges
    
    
    (2.2
    )Government segment:Gain on sale of WWS Divestiture
    
    
    32.9Costs related to our restructuring activities
    
    
    (2.6
    )Other impairments and severance charges
    
    
    (1.5
    )Charge related to the North Carolina MMIS contract
    
    
    (4.0
    )Provisions for estimated legal settlement, uncollectible accounts
receivable related to the WWS Divestiture
    
    
    (3.4
    )Provision for uncollectible accounts receivable retained in
connection with Divested Federal Business
    
    
    (2.4
    )Legal settlements and related costs
    
    
    (0.5
    )Corporate:Stock-based compensation expense per SFAS 123(R)
    
    
    (35.0
    )Compensation expense related to the departure of Jeffrey A.
Rich, our 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 and other costs associated with the ongoing stock option
investigations and shareholder derivative lawsuits
    
    
    (2.9
    )Legal settlements and related costs
    
    
    (2.7
    )Total
    
    $
    (57.3
    )As a percentage of revenues
    
    
    (1.1
    )%
  Interest expense
  Other non-operating income, net
  40




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##### Table of Contents



Income tax expense
  Liquidity and Capital Resources
 Cash Flows
  Fiscal year ended June 30,2007
    
    
    2006Cash paid for interest on outstanding debt, which was higher in fiscal year 2007 primarily due to
our share repurchase program
    
    $
    (169.6
    )
    
    $
    (56.3
    )Cash paid for final settlement of the Mellon Financial Corporate (Mellon) transition services
agreement (a)
    
    
    
    
    
    
    (85.8
    )Cash paid for incentive compensation to employees of the Acquired HR Business (a)
    
    
    
    
    
    
    (26.3
    )Cash received for interest income
    
    
    8.0
    
    
    
    3.4Cash 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 as discussed above
    
    
    (30.3
    )
    
    
    Cash paid on tax, interest and penalties related to our stock option grant practices as discussed
above
    
    
    (35.0
    )
    
    
    $
    (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.     41




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##### Table of Contents



Derivative instruments and
hedging activities
  Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Net cash provided by operating activities
    
    $
    738,378
    
    
    $
    638,710
    
    
    $
    739,348Purchases of property, equipment and software, net
    
    
    (316,843
    )
    
    
    (394,467
    )
    
    
    (253,231
    )Additions to other intangible assets
    
    
    (43,187
    )
    
    
    (35,831
    )
    
    
    (35,518
    )Free cash flow
    
    $
    378,348
    
    
    $
    208,412
    
    
    $
    450,599
     42




---



##### Table of Contents



Credit Facilities
       43




---



##### Table of Contents



Derivatives
and Hedging Activities
   (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.
 44




---



##### Table of Contents



(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
       45




---



##### Table of Contents



Other Credit Arrangements
  Credit Ratings
  46




---



##### Table of Contents



Derivatives and Hedging Activities
     Share Repurchase Programs
  47




---



##### Table of Contents



Stock Option Repricing
     48




---



##### Table of Contents



Other
   Related Party Transactions
 Potential Sale of the Company
  49




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##### Table of Contents



Disclosures about Contractual Obligations and Commercial Commitments as of June 30, 2007 (in
thousands):
 Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    5 YearsLong-term debt (1)
    
    $
    1,832,009
    
    
    $
    19,651
    
    
    $
    36,067
    
    
    $
    88,177
    
    
    $
    1,688,114Senior Notes, net of unamortized
discount (1)
    
    
    499,449
    
    
    
    
    
    
    
    249,950
    
    
    
    
    
    
    
    249,499Capital lease obligations (1)
    
    
    57,853
    
    
    
    27,388
    
    
    
    29,100
    
    
    
    1,365
    
    
    
    Operating leases (2)
    
    
    1,127,317
    
    
    
    337,537
    
    
    
    518,758
    
    
    
    205,271
    
    
    
    65,751Purchase obligations (3) (4)
    
    
    30,107
    
    
    
    16,797
    
    
    
    13,310
    
    
    
    
    
    
    
    Total Contractual Cash
Obligations
    
    $
    3,546,735
    
    
    $
    401,373
    
    
    $
    847,185
    
    
    $
    294,813
    
    
    $
    2,003,364
 Amount of Commitment Expiration per PeriodTotalAmounts
    
    Less than
    
    
    
    
    
    
    
    
    
    After 5Other Commercial Commitments
    
    Committed
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    YearsStandby letters of credit
    
    $
    113,205
    
    
    $
    113,205
    
    
    $
    
    
    
    $
    
    
    
    $
    Surety Bonds
    
    
    525,836
    
    
    
    445,113
    
    
    
    52,726
    
    
    
    26,135
    
    
    
    1,862Total Commercial Commitments
    
    $
    639,041
    
    
    $
    558,318
    
    
    $
    52,726
    
    
    $
    26,135
    
    
    $
    1,862
 
 (1)
    
    Excludes accrued interest of $8.9 million at June 30, 2007.(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 2012,
which are included in operating leases in the table. (3)
    
    We have various contractual agreements to purchase telecommunications services. These
agreements provide for minimum annual spending commitments, and have varying terms through
fiscal year 2010, and are included in purchase obligations in the table.(4)
    
    We entered into a two year agreement with Rich Capital LLC, an M&A advisory firm owned
by Jeffrey A. Rich, our former Chief Executive Officer, to provide us with advisory
services in connection with potential acquisition candidates. This contractual obligation
is included in the table above. However, we have currently suspended payment under this
agreement pending a 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. 50




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##### Table of Contents



Critical Accounting Policies
   Revenue Recognition
  51




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52




---



##### Table of Contents



Cost of revenues
  Contingencies
   Valuation of goodwill and intangibles
  Valuation of property, equipment and software
  Stock-Based Compensation
  53




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##### Table of Contents




    
    Expected volatility of our stock price based on historical monthly volatility over the
expected term based on daily closing stock prices.
    
    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
  Assumptions for calculating benefit obligations and net periodic benefit cost
  June 30,2007
    
    2006Other
    
    
    
    
    
    Other BenefitPension Plans
    
    Benefit Plan
    
    Pension Plans
    
    PlanNon-U.S. PlansDiscount rate
    
    
    5.20% - 5.67
    %
    
    
    5.60
    %
    
    
    5.00% - 5.75
    %
    
    
    5.75
    %Rate of increase in compensation levels
    
    
    4.25% - 4.80
    %
    
    
    N/A
    
    
    
    4.25% - 4.40
    %
    
    
    N/AU.S. PlanDiscount rate
    
    
    6.40
    %
    
    
    N/A
    
    
    
    6.50
    %
    
    
    N/ARate of increase in compensation levels
    
    
    3.40
    %
    
    
    N/A
    
    
    
    3.50
    %
    
    
    N/A
 54




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##### Table of Contents



Fiscal year ended
    
    Fiscal year ended
    
    Fiscal year endedJune 30, 2007
    
    June 30, 2006
    
    June 30, 2005Other
    
    
    
    
    
    Other
    
    
    
    
    
    OtherPension
    
    Benefit
    
    Pension
    
    Benefit
    
    Pension
    
    BenefitPlans
    
    Plan
    
    Plans
    
    Plan
    
    Plans
    
    PlanNon-U.S. PlansDiscount rate
    
    
    5.20% - 5.67
    %
    
    
    5.60
    %
    
    
    5.00% - 5.75
    %
    
    
    5.75
    %
    
    
    5.25% - 5.75
    %
    
    
    5.75
    %Long-term rate of return on assets
    
    
    6.50% - 7.00
    %
    
    
    N/A
    
    
    
    7.00% - 7.50
    %
    
    
    N/A
    
    
    
    7.00% - 7.50
    %
    
    
    N/ARate of increase in compensation
levels
    
    
    4.25% - 4.60
    %
    
    
    N/A
    
    
    
    4.25% - 4.40
    %
    
    
    N/A
    
    
    
    4.25% - 4.40
    %
    
    
    N/AU.S. PlanDiscount rate
    
    
    6.50
    %
    
    
    N/A
    
    
    
    5.75
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ALong-term rate of return on assets
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ARate of increase in compensation
levels
    
    
    3.50
    %
    
    
    N/A
    
    
    
    3.00
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  Fiscal year ended
    
    Fiscal year endedJune 30, 2007
    
    June 30, 2006Plus .25%
    
    Less .25%
    
    Plus .25%
    
    Less .25%Non-U.S. PlansEffect on pension benefit obligation
    
    $
    (5,786
    )
    
    $
    5,841
    
    
    $
    (5,055
    )
    
    $
    5,155Effect on service and interest cost
    
    $
    (485
    )
    
    $
    488
    
    
    $
    (432
    )
    
    $
    450U.S. PlanEffect on pension benefit obligation
    
    $
    (316
    )
    
    $
    336
    
    
    $
    (164
    )
    
    $
    174Effect on service and interest cost
    
    $
    (145
    )
    
    $
    153
    
    
    $
    (104
    )
    
    $
    110
     55




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##### Table of Contents



Fiscal year ended
    
    Fiscal year endedJune 30, 2007
    
    June 30, 2006Plus 1%
    
    Less 1%
    
    Plus 1%
    
    Less 1%Effect on pension benefit obligation
    
    $
    34
    
    
    $
    (31
    )
    
    $
    30
    
    
    $
    (27
    )Effect on service and interest cost
    
    $
    5
    
    
    $
    (4
    )
    
    $
    4
    
    
    $
    (4
    )
 Allowance for doubtful accounts
  Income taxes
   New Accounting Pronouncements
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rates
  56




---



##### Table of Contents



Foreign Currency
    57




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 PAGEReport of Independent Registered Public Accounting Firm
    
    59Consolidated Balance Sheets
    
    60Consolidated Statements of Income
    
    61Consolidated Statements of Changes in Stockholders Equity
    
    62Consolidated Statements of Cash Flows
    
    63Notes to Consolidated Financial Statements
    
    64
 58




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal Control  Integrated Framework
     
 59




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands)
 June 30,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    307,286
    
    
    $
    100,837Accounts receivable, net
    
    
    1,257,108
    
    
    
    1,231,846Income taxes receivable
    
    
    13,268
    
    
    
    8,090Prepaid expenses and other current assets
    
    
    232,872
    
    
    
    188,490Total current assets
    
    
    1,810,534
    
    
    
    1,529,263Property, equipment and software, net
    
    
    897,319
    
    
    
    870,020Goodwill
    
    
    2,612,368
    
    
    
    2,456,654Other intangibles, net
    
    
    481,378
    
    
    
    475,701Other assets
    
    
    180,830
    
    
    
    170,799Total assets
    
    $
    5,982,429
    
    
    $
    5,502,437LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    97,951
    
    
    $
    104,473Accrued compensation and benefits
    
    
    246,742
    
    
    
    172,853Other accrued liabilities
    
    
    400,238
    
    
    
    354,632Deferred taxes
    
    
    14,418
    
    
    
    18,047Current portion of long-term debt
    
    
    47,039
    
    
    
    23,074Current portion of unearned revenue
    
    
    164,484
    
    
    
    152,026Total current liabilities
    
    
    970,872
    
    
    
    825,105Senior Notes, net of unamortized discount
    
    
    499,449
    
    
    
    499,368Other long-term debt
    
    
    1,842,823
    
    
    
    1,114,664Deferred taxes
    
    
    367,565
    
    
    
    331,433Other long-term liabilities
    
    
    235,552
    
    
    
    275,649Total liabilities
    
    
    3,916,261
    
    
    
    3,046,219Commitments and contingencies (Please see Notes 12, 21 and 29)Stockholders equity:Class A common stock, $.01 par value, 500,000 shares authorized,
113,960 and 129,848 shares issued, respectively
    
    
    1,139
    
    
    
    1,299Class B convertible common stock, $.01 par value, 14,000 shares authorized,
6,600 shares issued and outstanding
    
    
    66
    
    
    
    66Additional paid-in capital
    
    
    1,642,900
    
    
    
    1,799,778Accumulated other comprehensive income (loss), net
    
    
    15,916
    
    
    
    (10,943
    )Retained earnings
    
    
    1,462,115
    
    
    
    1,836,850Treasury stock at cost, 21,002 and 23,289 shares, respectively
    
    
    (1,055,968
    )
    
    
    (1,170,832
    )Total stockholders equity
    
    
    2,066,168
    
    
    
    2,456,218Total liabilities and stockholders equity
    
    $
    5,982,429
    
    
    $
    5,502,437
  60




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (In thousands except per share amounts)
 Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Revenues
    
    $
    5,772,479
    
    
    $
    5,353,661
    
    
    $
    4,351,159Operating expenses:Cost of revenues:Wages and benefits
    
    
    2,748,717
    
    
    
    2,568,042
    
    
    
    1,874,044Services and supplies
    
    
    1,262,435
    
    
    
    1,168,540
    
    
    
    1,046,341Rent, lease and maintenance
    
    
    701,620
    
    
    
    646,474
    
    
    
    503,132Depreciation and amortization
    
    
    346,199
    
    
    
    289,852
    
    
    
    232,779Software impairment charge
    
    
    76,407
    
    
    
    
    
    
    
    Other
    
    
    33,440
    
    
    
    39,629
    
    
    
    23,687Cost of revenues
    
    
    5,168,818
    
    
    
    4,712,537
    
    
    
    3,679,983Gain on sale of business
    
    
    
    
    
    
    (32,907
    )
    
    
    Other operating expenses
    
    
    66,706
    
    
    
    56,747
    
    
    
    23,692Total operating expenses
    
    
    5,235,524
    
    
    
    4,736,377
    
    
    
    3,703,675Operating income
    
    
    536,955
    
    
    
    617,284
    
    
    
    647,484Interest expense
    
    
    182,665
    
    
    
    68,367
    
    
    
    20,186Other non-operating income, net
    
    
    (29,123
    )
    
    
    (9,396
    )
    
    
    (5,186
    )Pretax profit
    
    
    383,413
    
    
    
    558,313
    
    
    
    632,484Income tax expense
    
    
    130,323
    
    
    
    199,507
    
    
    
    222,915Net income
    
    $
    253,090
    
    
    $
    358,806
    
    
    $
    409,569Earnings per share:Basic
    
    $
    2.53
    
    
    $
    2.91
    
    
    $
    3.21Diluted
    
    $
    2.49
    
    
    $
    2.87
    
    
    $
    3.14Shares used in computing
earnings per share:Basic
    
    
    100,181
    
    
    
    123,197
    
    
    
    127,560Diluted
    
    
    101,572
    
    
    
    125,027
    
    
    
    130,556
  61




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (In thousands)
 Common Stock
    
    
    Additional
    
    
    
    
    
    
    Accumulated OtherClass A
    
    
    Class B
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury StockShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss), Net
    
    
    Shares Held
    
    
    Amount
    
    
    TotalBalance at June 30, 2004
    
    
    135,981
    
    
    $
    1,360
    
    
    
    6,600
    
    
    $
    66
    
    
    $
    1,750,159
    
    
    $
    1,560,067
    
    
    $
    (3,381
    )
    
    
    (14,900
    )
    
    $
    (738,593
    )
    
    $
    2,569,678Comprehensive income:Foreign currency
translation gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,260
    
    
    
    
    
    
    
    
    
    
    
    4,260Interest rate
hedges, net of
income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,789
    )
    
    
    
    
    
    
    
    
    
    
    (11,789
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    409,569
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    409,569Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402,040Share repurchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,922
    )
    
    
    (250,793
    )
    
    
    (250,793
    )Stock-based
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,061
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,061Tax benefit on stock
option exercises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,587
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,587Employee stock
transactions and
related tax benefits
    
    
    1,905
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    37,667
    
    
    
    
    
    
    
    
    
    
    
    567
    
    
    
    28,453
    
    
    
    66,139Balance 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, net of
income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (316
    )
    
    
    
    
    
    
    
    
    
    
    (316
    )Interest rate
hedges, net of
income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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, net of
income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    693
    
    
    
    
    
    
    
    
    
    
    
    693Interest rate
hedges, net of
income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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, net of
income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    )
    
    $
    2,066,168
  62




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    253,090
    
    
    $
    358,806
    
    
    $
    409,569Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    346,199
    
    
    
    289,852
    
    
    
    232,779Contract inducement amortization
    
    
    14,634
    
    
    
    15,332
    
    
    
    14,309Provision for uncollectible accounts receivable
    
    
    (290
    )
    
    
    8,462
    
    
    
    763Deferred financing fee amortization
    
    
    6,292
    
    
    
    2,850
    
    
    
    1,436Provision for default loan liability
    
    
    (218
    )
    
    
    (1,144
    )
    
    
    (188
    )Software impairment charge
    
    
    76,407
    
    
    
    
    
    
    
    Other asset impairments
    
    
    1,351
    
    
    
    19,132
    
    
    
    Gain on sale of business units
    
    
    (2,459
    )
    
    
    (32,907
    )
    
    
    (70
    )Gain on long-term investments
    
    
    (19,345
    )
    
    
    (6,787
    )
    
    
    (2,967
    )Deferred income tax expense
    
    
    19,626
    
    
    
    84,701
    
    
    
    84,817Excess tax benefits on stock-based compensation
    
    
    (3,763
    )
    
    
    (14,318
    )
    
    
    Stock-based compensation expense
    
    
    28,491
    
    
    
    35,035
    
    
    
    6,061Tax benefit of stock options
    
    
    
    
    
    
    
    
    
    
    20,059Loss on early extinguishment of long-term debt
    
    
    
    
    
    
    4,104
    
    
    
    Settlement of interest rate hedges
    
    
    
    
    
    
    
    
    
    
    (19,267
    )Other non-cash activities
    
    
    3,384
    
    
    
    3,790
    
    
    
    225Changes in assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    10,882
    
    
    
    (112,601
    )
    
    
    (21,945
    )Prepaid expenses and other current assets
    
    
    (42,023
    )
    
    
    (34,379
    )
    
    
    (16,540
    )Other assets
    
    
    (2,085
    )
    
    
    16,090
    
    
    
    3,234Accounts payable
    
    
    (11,349
    )
    
    
    25,943
    
    
    
    (11,483
    )Accrued compensation and benefits
    
    
    63,233
    
    
    
    (3,676
    )
    
    
    (5,362
    )Other accrued liabilities
    
    
    12,493
    
    
    
    (132,238
    )
    
    
    2,414Income taxes receivable/payable
    
    
    4,312
    
    
    
    18,093
    
    
    
    (8,277
    )Other long-term liabilities
    
    
    (29,085
    )
    
    
    (920
    )
    
    
    15,913Unearned revenue
    
    
    8,601
    
    
    
    95,490
    
    
    
    33,868Total adjustments
    
    
    485,288
    
    
    
    279,904
    
    
    
    329,779Net cash provided by operating activities
    
    
    738,378
    
    
    
    638,710
    
    
    
    739,348Cash flows from investing activities:Purchases of property, equipment and software, net
    
    
    (316,843
    )
    
    
    (394,467
    )
    
    
    (253,231
    )Additions to other intangible assets
    
    
    (43,187
    )
    
    
    (35,831
    )
    
    
    (35,518
    )Payments for acquisitions, net of cash acquired
    
    
    (182,724
    )
    
    
    (250,317
    )
    
    
    (626,858
    )Proceeds from divestitures, net of transaction costs
    
    
    
    
    
    
    67,665
    
    
    
    87Intangibles acquired in subcontractor termination
    
    
    
    
    
    
    (16,530
    )
    
    
    Purchases of investments
    
    
    (6,532
    )
    
    
    (25,462
    )
    
    
    (8,607
    )Proceeds from sale of investments
    
    
    20,283
    
    
    
    3,167
    
    
    
    1,713Proceeds from notes receivable
    
    
    
    
    
    
    
    
    
    
    425Net cash used in investing activities
    
    
    (529,003
    )
    
    
    (651,775
    )
    
    
    (921,989
    )Cash flows from financing activities:Proceeds from issuance of long-term debt, net
    
    
    1,847,719
    
    
    
    3,681,205
    
    
    
    2,790,016Payments of long-term debt
    
    
    (1,150,972
    )
    
    
    (2,867,995
    )
    
    
    (2,437,635
    )Purchase of treasury shares
    
    
    (730,689
    )
    
    
    (385,116
    )
    
    
    (250,793
    )Excess tax benefits on stock-based compensation
    
    
    3,763
    
    
    
    14,318
    
    
    
    Proceeds from stock options exercised
    
    
    24,523
    
    
    
    83,190
    
    
    
    36,596Proceeds from issuance of treasury shares
    
    
    2,923
    
    
    
    19,927
    
    
    
    30,243Purchase of shares in Tender Offer
    
    
    
    
    
    
    (475,959
    )
    
    
    Stock option settlement with Jeffrey A. Rich, former Chief Executive Officer
    
    
    
    
    
    
    (18,353
    )
    
    
    Other, net
    
    
    (193
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (2,926
    )
    
    
    51,217
    
    
    
    168,427Net increase (decrease) in cash and cash equivalents
    
    
    206,449
    
    
    
    38,152
    
    
    
    (14,214
    )Cash and cash equivalents at beginning of year
    
    
    100,837
    
    
    
    62,685
    
    
    
    76,899Cash and cash equivalents at end of year
    
    $
    307,286
    
    
    $
    100,837
    
    
    $
    62,685
   63




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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
    64




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Goodwill and other intangible assets
   Other assets
  65




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Derivative Instruments
   Revenue recognition
       66




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Contingencies
   Income taxes
   67




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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 based on daily closing stock prices.
    
    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
  68




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Before
    
    
    
    
    
    
    AfterApplication of
    
    
    
    
    
    
    Application ofSFAS 158
    
    
    Adjustments
    
    
    SFAS 158Other assets
    
    $
    182,508
    
    
    $
    (1,678
    )
    
    $
    180,830Total Assets
    
    
    5,984,107
    
    
    
    (1,678
    )
    
    
    5,982,429Accrued compensation and benefits
    
    
    245,382
    
    
    
    1,360
    
    
    
    246,742Total current liabilities
    
    
    969,512
    
    
    
    1,360
    
    
    
    970,872Deferred taxes
    
    
    366,585
    
    
    
    980
    
    
    
    367,565Other long-term liabilities
    
    
    241,944
    
    
    
    (6,392
    )
    
    
    235,552Total liabilities
    
    
    3,920,313
    
    
    
    (4,052
    )
    
    
    3,916,261Accumulated other comprehensive income (loss), net
    
    
    13,542
    
    
    
    2,374
    
    
    
    15,916Total stockholders equity
    
    
    2,063,794
    
    
    
    2,374
    
    
    
    2,066,168Total liabilities and stockholders equity
    
    
    5,984,107
    
    
    
    (1,678
    )
    
    
    5,982,429
   2. STOCK-BASED COMPENSATION PLANS
   69




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fiscal year endedJune 30, 2005Net income
    
    $
    409,569Add: Recorded employee compensation cost of
stock-based compensation plans, net of income tax
of $2,195
    
    
    3,866Less: Pro forma employee compensation cost of
stock-based compensation plans,
net of income tax of $14,705
    
    
    (26,124
    )Pro forma
    
    $
    387,311Basic earnings per shareAs reported
    
    $
    3.21Pro forma
    
    $
    3.04Diluted earnings per shareAs reported
    
    $
    3.14Pro forma
    
    $
    2.99
  Fiscal year endedJune 30, 2005Expected volatility
    
    
    24.58
    %Expected term
    
    4.77 yearsRisk-free interest rate
    
    
    3.91
    %Expected dividend yield
    
    
    0
    %Weighted average fair value of
options granted
    
    $
    14.22
    70




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Fiscal year ended June 30,2007
    
    2006Expected volatility
    
    
    21.10
    %
    
    
    22.20
    %Expected term
    
    4.25 years
    
    4.21 yearsRisk-free interest rate
    
    
    4.74
    %
    
    
    3.49
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
   71




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    Intrinsic ValueOptions
    
    Price (1)
    
    Term
    
    (in thousands)Outstanding as of June 30, 2006
    
    
    11,638,410
    
    
    $
    42.30Granted
    
    
    3,288,500
    
    
    
    50.78Exercised
    
    
    (770,550
    )
    
    
    31.83Forfeited (2)
    
    
    (1,533,800
    )
    
    
    49.63Expired
    
    
    
    
    
    
    Outstanding as of June 30, 2007
    
    
    12,622,560
    
    
    $
    44.88
    
    
    
    6.73
    
    
    $
    150,355Vested and exercisable at June 30, 2007
    
    
    5,516,600
    
    
    $
    38.45
    
    
    
    5.00
    
    
    $
    100,764
 
 (1)
    
    Weighted average exercise price of outstanding options, warrants, and rights of $44.88
per share is prior to the repricing of certain options that occurred in the first quarter
of fiscal year 2008, as discussed in Notes 21 and 29.(2)
    
    Includes 355,000 stock options terminated due to the departure of our executive
officers during fiscal year 2007. Please see Note 23 for further discussion of the
departure of our executive officers.   Employee Stock Purchase Plan
  72




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3. POTENTIAL SALE OF THE COMPANY
      4. BUSINESS COMBINATIONS
  Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Purchase consideration (in thousands):Net cash paid
    
    $
    164,330
    
    
    $
    225,024
    
    
    $
    620,382Amounts due to seller
    
    
    5,931
    
    
    
    4,638
    
    
    
    28,254Liabilities assumed
    
    
    40,588
    
    
    
    119,984
    
    
    
    254,174Fair value of assets acquired
(including intangibles)
    
    $
    210,849
    
    
    $
    349,646
    
    
    $
    902,810
 Fiscal Year 2007 acquisitions
   73




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Fiscal year 2006 acquisitions
  74




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Fiscal year 2005 acquisitions
   75




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Contingent consideration
  76




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5. RESTRUCTURING ACTIVITIES
     Fiscal year ending June 30,2007
    
    
    2006Beginning balance
    
    $
    899
    
    
    $
    Accruals
    
    
    7,185
    
    
    
    6,500Payments
    
    
    (7,191
    )
    
    
    (5,601
    )Ending balance
    
    $
    893
    
    
    $
    899
   77




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fiscal year ending June 30,2007
    
    
    2006
    
    
    2005Beginning balance
    
    $
    3,521
    
    
    $
    20,495
    
    
    $
    Accrual recorded at acquisition
    
    
    
    
    
    
    
    
    
    
    22,264Excess accrual credited to goodwill
    
    
    (1,678
    )
    
    
    (3,116
    )
    
    
    Payments
    
    
    (1,441
    )
    
    
    (13,858
    )
    
    
    (1,769
    )Ending balance
    
    $
    402
    
    
    $
    3,521
    
    
    $
    20,495
   6.
    
    DIVESTITURES
 Sale of Government welfare-to-workforce services business
      Assets held for saleIntangible assets related to the WWS
Divestiture, net
    
    $
    634Goodwill related to the WWS Divestiture
    
    
    1,096Total assets held for sale
    
    $
    1,730
 78




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7.
    
    ACCOUNTS RECEIVABLE
  June 30,2007
    
    
    2006Amounts Billed or Billable:Commercial
    
    $
    526,584
    
    
    $
    534,569Government
    
    
    399,271
    
    
    
    419,905925,855
    
    
    
    954,474Unbilled Amounts
    
    
    336,326
    
    
    
    287,819Total accounts receivable
    
    
    1,262,181
    
    
    
    1,242,293Allowance for doubtful accounts
    
    
    (5,073
    )
    
    
    (10,447
    )$
    1,257,108
    
    
    $
    1,231,846
    Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Balance at beginning of period
    
    $
    10,447
    
    
    $
    5,399
    
    
    $
    4,756Provision for uncollectible accounts receivable
    
    
    (290
    )
    
    
    8,462
    
    
    
    763Losses sustained, net of recoveries and other
    
    
    (5,084
    )
    
    
    (3,414
    )
    
    
    (120
    )Balance at end of period
    
    $
    5,073
    
    
    $
    10,447
    
    
    $
    5,399
  79




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8.
    
    PROPERTY, EQUIPMENT AND SOFTWARE
  June 30,2007
    
    
    2006Land
    
    $
    20,177
    
    
    $
    20,167Buildings and improvements
    
    
    177,453
    
    
    
    155,503Computer equipment
    
    
    901,493
    
    
    
    743,516Computer software
    
    
    742,271
    
    
    
    645,242Furniture and fixtures
    
    
    107,556
    
    
    
    97,8031,948,950
    
    
    
    1,662,231Accumulated depreciation and amortization
    
    
    (1,051,631
    )
    
    
    (792,211
    )$
    897,319
    
    
    $
    870,020
   9.
    
    GOODWILL AND OTHER INTANGIBLE ASSETS
  Commercial
    
    
    Government
    
    
    TotalBalance as of June 30, 2005
    
    $
    1,217,727
    
    
    $
    1,116,928
    
    
    $
    2,334,655Acquisition activity during the year
    
    
    64,506
    
    
    
    73,823
    
    
    
    138,329Divestiture activity during the year
    
    
    
    
    
    
    (16,656
    )
    
    
    (16,656
    )Held for sale as of June 30, 2006
    
    
    
    
    
    
    (1,096
    )
    
    
    (1,096
    )Foreign currency translation adjustments
    
    
    (180
    )
    
    
    1,602
    
    
    
    1,422Balance 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
    
    
    $
    2,612,368
  80




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  June 30,2007
    
    
    2006Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortizable intangible assets:Acquired customer-related
intangibles
    
    $
    419,853
    
    
    $
    (147,872
    )
    
    $
    384,738
    
    
    $
    (104,901
    )Customer contract costs
    
    
    247,840
    
    
    
    (101,217
    )
    
    
    222,268
    
    
    
    (90,326
    )All other
    
    
    17,248
    
    
    
    (9,362
    )
    
    
    15,147
    
    
    
    (6,113
    )Total
    
    $
    684,941
    
    
    $
    (258,451
    )
    
    $
    622,153
    
    
    $
    (201,340
    )Non-amortizable intangible
assets:Title plant
    
    $
    51,045
    
    
    
    
    
    
    $
    51,045Tradename
    
    
    3,843
    
    
    
    
    
    
    
    3,843$
    54,888
    
    
    
    
    
    
    $
    54,888Aggregate amortization:For the year ended June 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    79,597For the year ended June 30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,353For the year ended June 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,721Estimated amortization for the years
ended June 30,2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,6432009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,6122010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,8282011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,8412012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,363
  81




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    OTHER ASSETS
  June 30,2007
    
    2006Long-term investments related to our deferred compensation plans (please
see Note 13)
    
    $
    80,253
    
    
    $
    64,383Long-term investments accounted for using the cost method and equity method
    
    
    21,443
    
    
    
    31,289Deferred debt issuance costs
    
    
    28,099
    
    
    
    31,242Other assets
    
    
    51,035
    
    
    
    43,885Total
    
    $
    180,830
    
    
    $
    170,799
  11. OTHER ACCRUED LIABILITIES
  June 30,2007
    
    
    2006Accrued payments to vendors and contract related accruals
    
    $
    228,250
    
    
    $
    223,841Software and equipment lease and maintenance
    
    
    57,283
    
    
    
    42,824Accruals related to acquisitions and divestitures
    
    
    46,455
    
    
    
    29,247Other
    
    
    68,250
    
    
    
    58,720Total
    
    $
    400,238
    
    
    $
    354,632
  82




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12.
    
    LONG- TERM DEBT
  June 30,2007
    
    
    2006Term Loan Facility due in March 2013
    
    $
    1,778,000
    
    
    $
    796,000Revolving Facility due in March 2012
    
    
    52,102
    
    
    
    310,3364.70% Senior Notes due in June 2010, net of unamortized discount
    
    
    249,950
    
    
    
    249,9335.20% Senior Notes due in June 2015, net of unamortized discount
    
    
    249,499
    
    
    
    249,435Capitalized lease obligations at various interest rates, payable through 2010
    
    
    57,853
    
    
    
    29,677Other notes payable through 2015
    
    
    1,907
    
    
    
    1,7252,389,311
    
    
    
    1,637,106Less current portion
    
    
    (47,039
    )
    
    
    (23,074
    )$
    2,342,272
    
    
    $
    1,614,032
  Year ending June 30,2008
    
    $
    47,0392009
    
    
    40,1562010
    
    
    274,9612011
    
    
    18,9002012
    
    
    70,642Thereafter
    
    
    1,937,613Total
    
    $
    2,389,311
 Credit Agreement
   83




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         84




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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
    85




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        86




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Other
  Interest
  13. PENSION AND OTHER POST-EMPLOYMENT PLANS
     87




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Benefit obligations
  June 30,2007
    
    
    2006Non-U.S.
    
    
    U.S.
    
    
    Other
    
    
    Non-U.S.
    
    
    U.S.
    
    
    OtherPension
    
    
    Pension
    
    
    Benefit
    
    
    Pension
    
    
    Pension
    
    
    BenefitPlans
    
    
    Plan
    
    
    Plan
    
    
    Plans
    
    
    Plan
    
    
    PlanReconciliation of benefit obligation:Obligation at beginning of period
    
    $
    98,537
    
    
    $
    3,731
    
    
    $
    266
    
    
    $
    89,728
    
    
    $
    
    
    
    $
    376Service cost
    
    
    5,841
    
    
    
    3,395
    
    
    
    13
    
    
    
    5,195
    
    
    
    2,266
    
    
    
    21Interest cost
    
    
    5,662
    
    
    
    251
    
    
    
    15
    
    
    
    4,725
    
    
    
    68
    
    
    
    21Plan amendments
    
    
    300
    
    
    
    (2
    )
    
    
    
    
    
    
    72
    
    
    
    2,024
    
    
    
    Actuarial (gain) loss
    
    
    (3,408
    )
    
    
    225
    
    
    
    14
    
    
    
    (2,256
    )
    
    
    (627
    )
    
    
    (169
    )Foreign currency exchange rate
changes
    
    
    8,831
    
    
    
    
    
    
    
    (1
    )
    
    
    3,492
    
    
    
    
    
    
    
    30Benefit payments
    
    
    (3,529
    )
    
    
    
    
    
    
    
    
    
    
    (2,419
    )
    
    
    
    
    
    
    (13
    )Obligation at end of period
    
    $
    112,234
    
    
    $
    7,600
    
    
    $
    307
    
    
    $
    98,537
    
    
    $
    3,731
    
    
    $
    266
 Costs (income) of plans
  Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Non-Non-U.S.
    
    
    U.S.
    
    
    Other
    
    
    Non-U.S.
    
    
    U.S.
    
    
    Other
    
    
    U.S.
    
    
    U.S.
    
    
    OtherPension
    
    
    Pension
    
    
    Benefit
    
    
    Pension
    
    
    Pension
    
    
    Benefit
    
    
    Pension
    
    
    Pension
    
    
    BenefitPlans
    
    
    Plan
    
    
    Plan
    
    
    Plans
    
    
    Plan
    
    
    Plan
    
    
    Plans
    
    
    Plan
    
    
    PlanComponents of net
periodic benefit cost:Defined benefit plans:Service cost
    
    $
    5,841
    
    
    $
    3,395
    
    
    $
    13
    
    
    $
    5,195
    
    
    $
    2,266
    
    
    $
    21
    
    
    $
    751
    
    
    $
    
    
    
    $
    3Interest cost
    
    
    5,662
    
    
    
    251
    
    
    
    15
    
    
    
    4,725
    
    
    
    68
    
    
    
    21
    
    
    
    739
    
    
    
    
    
    
    
    3Expected return on assets
    
    
    (5,465
    )
    
    
    (111
    )
    
    
    
    
    
    
    (4,952
    )
    
    
    
    
    
    
    
    
    
    
    (536
    )
    
    
    
    
    
    
    Recognized net actuarial gain
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior
service costs
    
    
    
    
    
    
    217
    
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic
benefit cost for
defined benefit
plans
    
    $
    6,038
    
    
    $
    3,741
    
    
    $
    28
    
    
    $
    4,968
    
    
    $
    2,462
    
    
    $
    42
    
    
    $
    954
    
    
    $
    
    
    
    $
    6Other changes in plan
assets and benefit
obligations recognized
in other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total recognized in
net periodic benefit
cost and other
comprehensive income
    
    $
    6,038
    
    
    $
    3,741
    
    
    $
    28
    
    
    $
    4,968
    
    
    $
    2,462
    
    
    $
    42
    
    
    $
    954
    
    
    $
    
    
    
    $
    6
 88




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Plan assets
  Fiscal year ended June 30,2007
    
    
    2006Non-U.S.
    
    
    U.S.
    
    
    Other
    
    
    Non-U.S.
    
    
    U.S.
    
    
    OtherPension
    
    
    Pension
    
    
    Benefit
    
    
    Pension
    
    
    Pension
    
    
    BenefitPlans
    
    
    Plan
    
    
    Plan
    
    
    Plans
    
    
    Plan
    
    
    PlanReconciliation of fair
value of plan assets:Fair value of plan assets
at beginning of period
    
    $
    77,704
    
    
    $
    1
    
    
    $
    
    
    
    $
    68,195
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    8,784
    
    
    
    59
    
    
    
    
    
    
    
    5,093
    
    
    
    
    
    
    
    Amendments
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    Foreign currency exchange
rate changes
    
    
    7,613
    
    
    
    
    
    
    
    
    
    
    
    2,204
    
    
    
    
    
    
    
    Employer contributions
    
    
    7,137
    
    
    
    6,742
    
    
    
    
    
    
    
    4,559
    
    
    
    1
    
    
    
    Benefit payments
    
    
    (3,529
    )
    
    
    
    
    
    
    
    
    
    
    (2,419
    )
    
    
    
    
    
    
    Fair value of plan
assets at end of
period
    
    $
    98,009
    
    
    $
    6,802
    
    
    $
    
    
    
    $
    77,704
    
    
    $
    1
    
    
    $
    
   Fiscal year endedJune 30,2007
    
    2006Mutual fund  equity securities
    
    
    52
    %
    
    
    62
    %Mutual fund  debt securities
    
    
    35
    %
    
    
    30
    %Mutual fund  real estate
    
    
    7
    %
    
    
    7
    %Other
    
    
    6
    %
    
    
    1
    %Total
    
    
    100
    %
    
    
    100
    %
  89




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Funded status of defined benefit pension plans
  June 30,2007
    
    2006Funded
    
    Unfunded
    
    Funded
    
    UnfundedPlans
    
    Plan
    
    Plans
    
    PlanNon-U.S. PlansAccumulated benefit obligation (ABO)
    
    $
    79,103
    
    
    $
    11,070
    
    
    $
    68,318
    
    
    $
    10,673Projected benefit obligation (PBO)
    
    
    99,921
    
    
    
    12,313
    
    
    
    86,689
    
    
    
    11,848Fair value of assets
    
    
    98,009
    
    
    
    
    
    
    
    77,704
    
    
    
    U.S. PlanAccumulated benefit obligation (ABO)
    
    $
    5,865
    
    
    $
    145
    
    
    $
    
    
    
    $
    2,926Projected benefit obligation (PBO)
    
    
    7,392
    
    
    
    208
    
    
    
    
    
    
    
    3,731Fair value of assets
    
    
    6,802
    
    
    
    
    
    
    
    
    
    
    
    1
 June 30,2007
    
    
    2006Other
    
    
    
    
    
    
    OtherPension
    
    
    Benefit
    
    
    Pension
    
    
    BenefitPlans
    
    
    Plan
    
    
    Plans
    
    
    PlanNon-U.S. PlansFunded status
    
    $
    (14,225
    )
    
    $
    (307
    )
    
    $
    (20,833
    )
    
    $
    (266
    )Unrecognized (gain) loss
    
    
    (4,358
    )
    
    
    (135
    )
    
    
    2,424
    
    
    
    (152
    )Net amount recognized
    
    $
    (18,583
    )
    
    $
    (442
    )
    
    $
    (18,409
    )
    
    $
    (418
    )U.S. PlanFunded status
    
    $
    (798
    )
    
    $
    
    
    
    $
    (3,730
    )
    
    $
    Unrecognized prior service cost
    
    
    1,678
    
    
    
    
    
    
    
    1,896
    
    
    
    Unrecognized (gain) loss
    
    
    (338
    )
    
    
    
    
    
    
    (627
    )
    
    
    Net amount recognized
    
    $
    542
    
    
    $
    
    
    
    $
    (2,461
    )
    
    $
    
  June 30,2007
    
    
    2006Other
    
    
    
    
    
    
    OtherPension
    
    
    Benefit
    
    
    Pension
    
    
    BenefitPlans
    
    
    Plan
    
    
    Plans
    
    
    PlanNon-U.S. PlansAccrued benefit liability  short term
    
    $
    (1,333
    )
    
    $
    (18
    )
    
    $
    
    
    
    $
    Accrued benefit liability  long term
    
    
    (12,892
    )
    
    
    (289
    )
    
    
    (18,409
    )
    
    
    (418
    )Accumulated other comprehensive (income) loss, net
    
    
    (4,358
    )
    
    
    (135
    )
    
    
    
    
    
    
    Net amount recognized
    
    $
    (18,583
    )
    
    $
    (442
    )
    
    $
    (18,409
    )
    
    $
    (418
    )U.S. PlanAccrued benefit liability  short term
    
    $
    (9
    )
    
    $
    
    
    
    $
    
    
    
    $
    Accrued benefit liability  long term
    
    
    (789
    )
    
    
    
    
    
    
    (2,925
    )
    
    $
    Intangible asset
    
    
    
    
    
    
    
    
    
    
    464
    
    
    
    Accumulated other comprehensive (income) loss, net
    
    
    1,340
    
    
    
    
    
    
    
    
    
    
    
    Net amount recognized
    
    $
    542
    
    
    $
    
    
    
    $
    (2,461
    )
    
    $
    
 90




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  June 30, 2007OtherPension
    
    
    BenefitPlans
    
    
    PlanNon-U.S. PlansNet actuarial gain
    
    $
    (4,358
    )
    
    $
    (135
    )$
    (4,358
    )
    
    $
    (135
    )U.S. PlanNet actuarial gain
    
    $
    (338
    )
    
    $
    Unrecognized prior service cost
    
    
    1,678
    
    
    
    $
    1,340
    
    
    $
    
   Assumptions for calculating benefit obligations and net periodic benefit cost
  June 30,2007
    
    2006Other
    
    
    
    
    
    Other BenefitPension Plans
    
    Benefit Plan
    
    Pension Plans
    
    PlanNon-U.S. PlansDiscount rate
    
    
    5.20% - 5.67
    %
    
    
    5.60
    %
    
    
    5.00% - 5.75
    %
    
    
    5.75
    %Rate of increase in compensation levels
    
    
    4.25% - 4.80
    %
    
    
    N/A
    
    
    
    4.25% - 4.40
    %
    
    
    N/AU.S. PlanDiscount rate
    
    
    6.40
    %
    
    
    N/A
    
    
    
    6.50
    %
    
    
    N/ARate of increase in compensation levels
    
    
    3.40
    %
    
    
    N/A
    
    
    
    3.50
    %
    
    
    N/A
 91




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal year ended
    
    Fiscal year ended
    
    Fiscal year endedJune 30, 2007
    
    June 30, 2006
    
    June 30, 2005Other
    
    
    
    
    
    Other
    
    
    
    
    
    OtherPension
    
    Benefit
    
    Pension
    
    Benefit
    
    Pension
    
    BenefitPlans
    
    Plan
    
    Plans
    
    Plan
    
    Plans
    
    PlanNon-U.S. PlansDiscount rate
    
    
    5.20% - 5.67
    %
    
    
    5.60
    %
    
    
    5.00% - 5.75
    %
    
    
    5.75
    %
    
    
    5.25% - 5.75
    %
    
    
    5.75
    %Long-term rate of return on assets
    
    
    6.50% - 7.00
    %
    
    
    N/A
    
    
    
    7.00% - 7.50
    %
    
    
    N/A
    
    
    
    7.00% - 7.50
    %
    
    
    N/ARate of increase in compensation levels
    
    
    4.25% - 4.60
    %
    
    
    N/A
    
    
    
    4.25% - 4.40
    %
    
    
    N/A
    
    
    
    4.25% - 4.40
    %
    
    
    N/AU.S. PlanDiscount rate
    
    
    6.50
    %
    
    
    N/A
    
    
    
    5.75
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ALong-term rate of return on assets
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ARate of increase in compensation levels
    
    
    3.50
    %
    
    
    N/A
    
    
    
    3.00
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  Fiscal year ended
    
    Fiscal year endedJune 30, 2007
    
    June 30, 2006Plus .25%
    
    Less .25%
    
    Plus .25%
    
    Less .25%Non-U.S. PlansEffect on pension benefit obligation
    
    $
    (5,786
    )
    
    $
    5,841
    
    
    $
    (5,055
    )
    
    $
    5,155Effect on service and interest cost
    
    $
    (485
    )
    
    $
    488
    
    
    $
    (432
    )
    
    $
    450U.S. PlanEffect on pension benefit obligation
    
    $
    (316
    )
    
    $
    336
    
    
    $
    (164
    )
    
    $
    174Effect on service and interest cost
    
    $
    (145
    )
    
    $
    153
    
    
    $
    (104
    )
    
    $
    110
     92




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Fiscal year ended
    
    Fiscal year endedJune 30, 2007
    
    June 30, 2006Plus 1%
    
    Less 1%
    
    Plus 1%
    
    Less 1%Effect on pension benefit obligation
    
    $
    34
    
    
    $
    (31
    )
    
    $
    30
    
    
    $
    (27
    )Effect on service and interest cost
    
    $
    5
    
    
    $
    (4
    )
    
    $
    4
    
    
    $
    (4
    )
 Expected Cash Flows
   Pension PlansOtherNon-U.S.
    
    
    
    
    
    BenefitPlans
    
    U.S. Plan
    
    Plan2008
    
    $
    3,314
    
    
    $
    75
    
    
    $
    192009
    
    
    3,431
    
    
    
    108
    
    
    
    202010
    
    
    3,307
    
    
    
    182
    
    
    
    192011
    
    
    3,552
    
    
    
    309
    
    
    
    142012
    
    
    3,507
    
    
    
    466
    
    
    
    132013-2017
    
    
    23,957
    
    
    
    5,374
    
    
    
    63
 Supplemental executive retirement plan
  93




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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 30,2007
    
    
    2006
    
    
    2005Current:U.S. federal
    
    $
    79,953
    
    
    $
    92,090
    
    
    $
    116,334State
    
    
    12,134
    
    
    
    11,508
    
    
    
    18,170Foreign
    
    
    18,610
    
    
    
    11,208
    
    
    
    3,594Total current expense
    
    
    110,697
    
    
    
    114,806
    
    
    
    138,098Deferred:U.S. federal
    
    
    17,588
    
    
    
    75,168
    
    
    
    76,051State
    
    
    5,070
    
    
    
    10,010
    
    
    
    8,555Foreign
    
    
    (3,032
    )
    
    
    (477
    )
    
    
    211Total deferred expense
    
    
    19,626
    
    
    
    84,701
    
    
    
    84,817Total income tax expense
    
    $
    130,323
    
    
    $
    199,507
    
    
    $
    222,915
 94




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  June 30,2007
    
    
    2006Deferred tax assets:Accrued expenses not yet deductible for tax purposes
    
    $
    39,815
    
    
    $
    50,454Unearned revenue
    
    
    36,266
    
    
    
    22,548Tax credits and loss carryforwards
    
    
    56,677
    
    
    
    57,361Stock-based compensation
    
    
    25,529
    
    
    
    16,515Divestiture-related accruals
    
    
    4,617
    
    
    
    4,845Forward agreements
    
    
    2,124
    
    
    
    6,321Other
    
    
    
    
    
    
    872Subtotal
    
    
    165,028
    
    
    
    158,916Deferred tax assets valuation allowance
    
    
    (17,184
    )
    
    
    (14,594
    )Total deferred tax assets
    
    
    147,844
    
    
    
    144,322Deferred tax liabilities:Goodwill amortization
    
    
    (334,065
    )
    
    
    (280,830
    )Depreciation and amortization
    
    
    (123,722
    )
    
    
    (135,908
    )Unbilled revenue
    
    
    (41,634
    )
    
    
    (41,835
    )Prepaid and receivables
    
    
    (27,403
    )
    
    
    (35,229
    )Other
    
    
    (3,003
    )
    
    
    Total deferred tax liabilities
    
    
    (529,827
    )
    
    
    (493,802
    )Net deferred tax liabilities
    
    $
    (381,983
    )
    
    $
    (349,480
    )
    Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Statutory U.S. federal income tax
    
    $
    134,194
    
    
    $
    195,410
    
    
    $
    221,369State income taxes, net
    
    
    12,188
    
    
    
    13,505
    
    
    
    19,396Section 162(m) disallowance
    
    
    (4,610
    )
    
    
    
    
    
    
    870Basis difference on sales of subsidiaries
    
    
    
    
    
    
    (449
    )
    
    
    (9,594
    )Research and development tax credits
    
    
    (385
    )
    
    
    
    
    
    
    (4,674
    )Foreign benefits
    
    
    (6,287
    )
    
    
    (5,259
    )
    
    
    (2,734
    )Other
    
    
    (4,777
    )
    
    
    (3,700
    )
    
    
    (1,718
    )Total income tax expense
    
    $
    130,323
    
    
    $
    199,507
    
    
    $
    222,915
   95




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   15. OTHER LONG-TERM LIABILITIES
  June 30,2007
    
    
    2006Deferred compensation, pension and other post-retirement obligations
    
    $
    97,974
    
    
    $
    95,911Unearned revenue
    
    
    89,759
    
    
    
    95,870Income taxes payable and estimated penalties and interest on income
tax underpayment deficiencies resulting from certain disallowed
Section 162(m) executive compensation deductions
    
    
    3,201
    
    
    
    37,842Other
    
    
    44,618
    
    
    
    46,026Total
    
    $
    235,552
    
    
    $
    275,649
  16. COMMON STOCK
  Share repurchase programs
   96




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Stock options grants
    Stock option repricing
   97




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17. TENDER OFFER
  Voting Rights of Our Chairman
      98




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18. EARNINGS PER SHARE
  Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Numerator:Numerator for earnings per share -Net Income
    
    $
    253,090
    
    
    $
    358,806
    
    
    $
    409,569Denominator:Weighted average shares outstanding (basic)
    
    
    100,181
    
    
    
    123,197
    
    
    
    127,560Effect of dilutive securities:Stock options
    
    
    1,391
    
    
    
    1,830
    
    
    
    2,996Total potential common shares
    
    
    1,391
    
    
    
    1,830
    
    
    
    2,996Denominator for earnings per share assuming dilution
    
    
    101,572
    
    
    
    125,027
    
    
    
    130,556Earnings per share (basic)
    
    $
    2.53
    
    
    $
    2.91
    
    
    $
    3.21Earnings per share assuming dilution
    
    $
    2.49
    
    
    $
    2.87
    
    
    $
    3.14
   99




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 19. COMPREHENSIVE INCOME
   Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Net income
    
    $
    253,090
    
    
    $
    358,806
    
    
    $
    409,569Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    16,955
    
    
    
    (1,305
    )
    
    
    4,260Unrealized gains (losses) on foreign exchange
forward agreements (net of income tax of $958
and ($193), respectively)
    
    
    693
    
    
    
    (316
    )
    
    
    Unrealized loss on forward interest rate agreements
(net of income tax of $7,150)
    
    
    
    
    
    
    
    
    
    
    (11,899
    )Amortization of unrealized loss on forward interest
rate agreements (net of income tax of $958,
$956 and $66)
    
    
    1,586
    
    
    
    1,588
    
    
    
    110Unrealized gain on interest rate swap agreement
(net of income tax of $2,819)
    
    
    5,251
    
    
    
    
    
    
    
    Comprehensive income
    
    $
    277,575
    
    
    $
    358,773
    
    
    $
    402,040
  June 30,2007
    
    
    2006Foreign currency gains (losses)
    
    $
    16,529
    
    
    $
    (426
    )Unrealized gains (losses) on
foreign exchange forward
agreements (net of income
tax of $226 and ($193),
respectively)
    
    
    377
    
    
    
    (316
    )Unrealized loss on forward
interest rate agreements (net
of income tax of $5,170 and
$6,128, respectively)
    
    
    (8,615
    )
    
    
    (10,201
    )Unrealized gain on interest
rate swap agreement (net of
income tax of $2,819)
    
    
    5,251
    
    
    
    Adjustment to initially apply
SFAS 158 (net of income tax of
$980)
    
    
    2,374
    
    
    
    Total
    
    $
    15,916
    
    
    $
    (10,943
    )
 100




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 20. FINANCIAL INSTRUMENTS
 Long-term Debt
   Derivatives and hedging instruments
     Investments
  101




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  21. COMMITMENTS AND CONTINGENCIES
  Year ending June 30,2008
    
    $
    337,5372009
    
    
    282,3122010
    
    
    236,4462011
    
    
    150,2622012
    
    
    55,009Thereafter
    
    
    65,751$
    1,127,317
   Regulatory Agency Investigations Relating to Stock Option Grant Practices
    102




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




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      
    
    The stock options held by our employees (other than Messrs. King and Edwards and one
management employee) will be adjusted as necessary, with the optionees consent, to avoid
adverse tax consequences to the employee, and we will compensate such employees for any
increase in exercise price resulting from the matters which were the subject of the
internal investigation.
    
    Our non-employee directors, to avoid the appearance of inappropriate gain, voluntarily
agreed that with respect to any historical option grants to them which require incremental
compensation expense as a result of revised measurement dates, the exercise price will be
increased to equal the fair market value of the stock on the revised measurement date,
regardless of whether such increase is necessary to avoid adverse tax consequences to the
director. The non-employee directors will not be reimbursed to offset any individual loss
of economic benefit related to such repriced stock options.
    
    Another employee (not an officer as defined in Rule 16a-1(f) under the Securities
Exchange Act of 1934) will be reassigned and all of such employees stock options will be
repriced so that the exercise price equals the fair market value of our stock on the proper
measurement date.
    
    We will consider whether to recover certain profits from Jeffrey A. Rich, former Chief
Executive Officer, which relate to stock options awarded to Mr. Rich which the internal
investigation concluded were awarded through a process in which favorable grant dates were
selected after the fact.
    
    We implemented a number of changes to our internal controls, including:
 104




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 o
    
    After reviewing the results of the investigation to date, our Board of
Directors determined that it would be appropriate to accept the resignations of Mr.
King and Mr. Edwards. Our Board of Directors has since appointed a new Chief
Executive Officer and Chief Financial Officer.o
    
    Designating internal legal and accounting staffs to oversee the
documentation and accounting of all grants of stock options or restricted stock.o
    
    Monitoring industry and regulatory developments in stock option and
restricted stock awards and implementing and maintaining best practices with respect
to grants of stock options or restricted stock.o
    
    Adhering to the practice of making annual grants on a date certain and
through board or committee meetings, and not through a unanimous written consent
process.
     105




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Lawsuits Related to Stock Option Grant Practices
  Dallas County TX 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, 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; 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.
 Huntsinger Oury Anchorage In Re Affiliated Computer Services, Inc. Derivative
Litigation rd
 106




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  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,
in the United States District Court for the Northern District of
Texas, Dallas Division, Cause No. 3-06CV1110-M, 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, in the United States District Court for the Northern
District of Texas, Dallas Division, Cause No. 3-06CV1212-M, filed on
July 7, 2006.
 Alaska Electrical Lunceford In Re Affiliated Computer Services Federal Derivative
Litigation Strauss
  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, in the United States District Court for the
Northern District of Texas, Dallas Division, Civil Action No.
306-CV-1592P 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
 107




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 A. Rich, Mark A. King, Darwin Deason, Joseph P. ONeill and J. Livingston Kosberg,
United States District Court for the Northern District of Texas, Dallas Division, Case No.
306-CV-02379-M.
 Simeon Burke In re Affiliated Computer Systems [sic] ERISA Litigation
  Litigation arising from buy-out offer
   
    
    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, 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, 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
  108




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
    
    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.
 TX State Court Consolidated stock option derivative case
 TX 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 Regarding Photo Enforcement Contract in Edmonton, Alberta, Canada
  109




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Investigation Concerning Procurement Process at Hanscom Air Force Base
  Investigation Regarding Certain Child Support Payment Processing Contracts
  110




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Investigation regarding Florida Workforce Contracts
   Other
  111




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      112




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   22. CONTRACT WITH THE DEPARTMENT OF EDUCATION
   23. DEPARTURE OF EXECUTIVE OFFICERS
   113




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     24. RELATED PARTY TRANSACTIONS
   114




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    25. SEGMENT INFORMATION
    115




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Commercial
    
    
    Government
    
    
    Corporate (c)
    
    
    ConsolidatedFiscal year 2007Revenues (a)
    
    $
    3,436,501
    
    
    $
    2,335,978
    
    
    $
    
    
    
    $
    5,772,479Operating expenses (excluding
impairment charge and depreciation
and amortization)
    
    
    2,842,147
    
    
    
    1,822,404
    
    
    
    148,367
    
    
    
    4,812,918Software impairment charge
    
    
    
    
    
    
    76,407
    
    
    
    
    
    
    
    76,407Depreciation and amortization expense
    
    
    250,760
    
    
    
    93,951
    
    
    
    1,488
    
    
    
    346,199Operating income (loss)
    
    $
    343,594
    
    
    $
    343,216
    
    
    $
    (149,855
    )
    
    $
    536,955Total assets
    
    $
    3,187,763
    
    
    $
    2,588,033
    
    
    $
    206,633
    
    
    $
    5,982,429Capital expenditures, net
    
    $
    205,744
    
    
    $
    109,390
    
    
    $
    1,709
    
    
    $
    316,843Fiscal year 2006Revenues (a)
    
    $
    3,167,630
    
    
    $
    2,186,031
    
    
    $
    
    
    
    $
    5,353,661Operating expenses (excluding gain
on sale of business and depreciation
and amortization)
    
    
    2,657,353
    
    
    
    1,708,548
    
    
    
    113,531
    
    
    
    4,479,432Gain on sale of business
    
    
    
    
    
    
    (32,907
    )
    
    
    
    
    
    
    (32,907
    )Depreciation and amortization expense
    
    
    195,621
    
    
    
    92,671
    
    
    
    1,560
    
    
    
    289,852Operating income (loss)
    
    $
    314,656
    
    
    $
    417,719
    
    
    $
    (115,091
    )
    
    $
    617,284Total assets
    
    $
    2,940,693
    
    
    $
    2,529,021
    
    
    $
    32,723
    
    
    $
    5,502,437Capital expenditures, net (b)
    
    $
    250,531
    
    
    $
    145,999
    
    
    $
    (2,063
    )
    
    $
    394,467Fiscal year 2005Revenues (a)
    
    $
    2,175,087
    
    
    $
    2,176,072
    
    
    $
    
    
    
    $
    4,351,159Operating expenses (excluding
depreciation and amortization)
    
    
    1,727,358
    
    
    
    1,682,001
    
    
    
    61,537
    
    
    
    3,470,896Depreciation and amortization expense
    
    
    145,859
    
    
    
    85,016
    
    
    
    1,904
    
    
    
    232,779Operating income (loss)
    
    $
    301,870
    
    
    $
    409,055
    
    
    $
    (63,441
    )
    
    $
    647,484Total assets
    
    $
    2,608,617
    
    
    $
    2,160,297
    
    
    $
    81,924
    
    
    $
    4,850,838Capital expenditures, net
    
    $
    149,406
    
    
    $
    102,560
    
    
    $
    1,265
    
    
    $
    253,231
 
 (a)
    
    Revenues in our Government segment for fiscal years 2007, 2006 and 2005 include
revenues from operations divested through June 30, 2007 of $0.9 million, $104.5 million and
$218.6 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 $28.5 million ($18.2 million, net of
income tax), $35 million ($22.9 million, net of income tax) and $6.1 million ($3.9 million,
net of income tax) of stock-based compensation expense in fiscal years 2007, 2006 and 2005,
respectively. 116




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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 26. REVENUES BY SERVICE LINE
  Fiscal year ended June 30,2007
    
    
    2006
    
    
    2005Business process outsourcing (1)
    
    $
    4,322,164
    
    
    $
    3,996,558
    
    
    $
    3,237,981Information technology services
    
    
    1,013,801
    
    
    
    971,832
    
    
    
    858,639Systems integration services (2)
    
    
    436,514
    
    
    
    385,271
    
    
    
    254,539Total
    
    $
    5,772,479
    
    
    $
    5,353,661
    
    
    $
    4,351,159
 
 (1)
    
    Includes $0.9 million, $104.2 million and $218 million of revenues for fiscal years
2007, 2006 and 2005, respectively, from operations divested through June 30, 2007.(2)
    
    Includes $0.3 million and $0.6 million of revenues for fiscal years 2006 and 2005,
respectively, from operations divested through June 30, 2007. 27. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
  June 30,
    
    March 31,
    
    December 31,
    
    September 30,Fiscal Year 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
 June 30,
    
    March 31,
    
    December 31,
    
    September 30,Fiscal Year 2006
    
    2006
    
    2006
    
    2005
    
    2005Revenues
    
    $
    1,380,702
    
    
    $
    1,314,455
    
    
    $
    1,347,587
    
    
    $
    1,310,917Operating income
    
    $
    149,798
    
    
    $
    137,867
    
    
    $
    175,422
    
    
    $
    154,197Net income
    
    $
    86,061
    
    
    $
    77,000
    
    
    $
    102,370
    
    
    $
    93,375Earnings per share  basic
    
    $
    0.73
    
    
    $
    0.62
    
    
    $
    0.82
    
    
    $
    0.74Weighted average shares outstanding
    
    
    118,131
    
    
    
    124,347
    
    
    
    124,849
    
    
    
    125,429Earnings per share  diluted
    
    $
    0.72
    
    
    $
    0.61
    
    
    $
    0.81
    
    
    $
    0.73Weighted average shares outstanding  diluted
    
    
    119,484
    
    
    
    126,381
    
    
    
    126,926
    
    
    
    127,286
 117




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28. NEW ACCOUNTING PRONOUNCEMENTS
      118




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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 29. SUBSEQUENT EVENTS
 Stock option repricing
   Potential sale of the Company
   Stock option grants
  119




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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
  120




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##### Table of Contents



PART III
 Items 10 through 14
 
 PART IV
 
 ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
 (a)
    
    Financial StatementsThe following Consolidated Financial Statements of Affiliated Computer Services, Inc. and
Subsidiaries are included in Part II, Item 8:
 
 (b)
    
    Exhibits
  121




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##### Table of Contents



SIGNATURES
  Affiliated Computer Services, Inc.Date: August 29, 2007By:
    
    /s/ John H. Rexford

John H. RexfordExecutive Vice President andChief Financial Officer
  Signature
    
    Title/s/ Darwin Deason

(Darwin Deason)
    
    Director, Chairman of the Board/s/ Lynn R. Blodgett

(Lynn R. Blodgett)
    
    Director, President and Chief Executive Officer/s/ John H. Rexford

(John H. Rexford)
    
    Director, Executive Vice President and Chief Financial Officer/s/ Laura Rossi

(Laura Rossi)
    
    Senior Vice President, Corporate Controller and Interim Chief
Accounting Officer/s/ J. Livingston Kosberg

(J. Livingston Kosberg)
    
    Director/s/ Joseph P. ONeill

(Joseph P. ONeill)
    
    Director/s/ Frank A. Rossi

(Frank A. Rossi)
    
    Director/s/ Dennis McCuistion

(Dennis McCuistion)
    
    Director/s/ Robert B. Holland, III

(Robert B. Holland, III)
    
    Director
 122




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##### Table of Contents



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
    
    
    Bylaws of Affiliated Computer Services, Inc., as amended and in
effect on September 11, 2003 (filed as Exhibit 3.3 to our
Quarterly Report on Form 10-Q, filed February 17, 2004 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
    
    
    Amended and Restated Rights Agreement, dated April 2, 1999,
between Affiliated Computer Services, Inc. and First City
Transfer Company, as Rights Agent (filed as Exhibit 4.1 to our
Current Report on Form 8-K, filed May 19, 1999 and incorporated
herein by reference).4.3
    
    
    Amendment No. 1 to Amended and Restated Rights Agreement, dated
as of February 5, 2002, by and between Affiliated Computer
Services, Inc. and First City Transfer Company (filed as Exhibit
4.1 to our Current Report on Form 8-K, filed February 6, 2002
and incorporated herein by reference).4.4
    
    
    Form of Rights Certificate (included as Exhibit A to the Amended
and Restated Rights Agreement (Exhibit 4.3)).4.5
    
    
    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).4.6
    
    
    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).4.7
    
    
    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
 123




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit NameNotes due 2015 (filed as Exhibit 4.3 to our Current
Report on Form 8-K, filed June 6, 2005 and incorporated herein
by reference).4.8
    
    
    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).4.9
    
    
    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 dated February 9, 2006 by and between
Affiliated Computer Services, Inc. and Darwin Deason (filed as
Exhibit 9.1 to our Quarterly Report on Form 10-Q filed February
9, 2006 and incorporated herein by reference).10.1
    
    
    Amended Stock Option Plan of the Company (filed as Exhibit 10.1
to Amendment No. 1 to our Registration Statement on Form S-1,
filed July 15, 1994, File No. 33-79394 and incorporated herein
by reference).10.2
    
    
    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).10.3
    
    
    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).10.4
    
    
    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).10.5
    
    
    Form of Directors Indemnification Agreement (filed as Exhibit
10.20 to Amendment No. 3 to our Registration Statement on Form
S-1, filed August 23, 1994, File No. 33-79394 and incorporated
herein by reference).10.6
    
    
    Form of Severance Agreement, each dated as of March 1, 2004
except as otherwise noted, by and between Affiliated Computer
Services, Inc. and each of Mark A. King, Warren D. Edwards, Lynn
Blodgett, Harvey Braswell (September 14, 2004), John Brophy,
William L. Deckelman, Jr. and Ann Vezina (May 25, 2006) (filed
as Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed May
17, 2004 and incorporated herein by reference).10.7
    
    
    Form of Amendment No. 1 to Severance Agreement, each dated as of
February 2, 2005, by and between Affiliated Computer Services,
Inc. and each of Mark A. King, Warren D. Edwards, Lynn Blodgett,
Harvey Braswell, John Brophy and William L. Deckelman, Jr.
(filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q,
filed February 8, 2005 and incorporated herein by reference).10.8
    
    
    Severance Agreement, dated as of February 2, 2005, by and
between Affiliated Computer Services, Inc. and John Rexford
(filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q,
filed February 8, 2005 and incorporated herein by reference).10.9
    
    
    Amendment No. 2 to Severance Agreement, dated as of April 30,
2007, by and between Affiliated Computer Services, Inc. and John
H. Rexford (filed as Exhibit 10.1 to our Current Report
on Form 8-K, filed May 2, 2007 and incorporated herein by
reference).10.10
    
    
    Severance Agreement, dated as of June 13, 2005, by and between
Affiliated Computer Services, Inc. and Tom Burlin (filed as
Exhibit 10.1 to our Current Report on Form 8-K, filed June 16,
2005 and incorporated herein by reference).10.11
    
    
    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).10.12
    
    
    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).
 124




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit Name10.13
    
    
    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).10.14
    
    
    Employment Agreement, dated February 16, 1999 between the
Company and Darwin Deason (filed as Exhibit 10(iii)(A) to our
Quarterly Report on Form 10-Q, filed May 17, 1999 and
incorporated herein by reference).10.15
    
    
    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).10.16
    
    
    Five Year Competitive Advance and Revolving Credit Facility
Agreement, dated as of October 27, 2004, by and among Affiliated
Computer Services, Inc., other Borrowers from time to time party
thereto, the Lender Parties from time to time party thereto,
JPMorgan Chase Bank, as Administrative Agent, Wells Fargo Bank,
National Association, as Syndication Agent, and others (filed as
Exhibit 10.1 to our Current Report on Form 8-K, filed October
29, 2004 and incorporated herein by reference).10.17
    
    
    Guaranty, dated as of October 27, 2004, by Affiliated Computer
Services, Inc. for the benefit of JPMorgan Chase Bank, as
Administrative Agent for the benefit of the Lender Parties
(filed as Exhibit 10.2 to our Current Report on Form 8-K, filed
October 29, 2004 and incorporated herein by reference).10.18
    
    
    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).10.19
    
    
    Summary of Independent Director Compensation (filed as Item 1.01
of our Current Report on Form 8-K, filed August 29, 2005 and
incorporated herein by reference).10.20
    
    
    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).10.21
    
    
    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).10.22
    
    
    Named Executive Officer Compensation (filed as Item 1.01 of our
Current Report on Form 8-K, filed September 14, 2005 and
incorporated herein by reference).10.23
    
    
    Named Executive Officer Compensation (filed as Item 1.01 of our
Current Report on Form 8-K, filed October 3, 2005 and
incorporated herein by reference).10.24
    
    
    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).10.25
    
    
    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).10.26
    
    
    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).10.27
    
    
    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).10.28
    
    
    Amendment No. 3, Consent and Waiver to Credit Agreement, by and
among Affiliated Computer Services,
 125




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit NameInc., 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).10.29
    
    
    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).10.30
    
    
    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).10.31
    
    
    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).10.32
    
    
    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).10.33
    
    
    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).10.34
    
    
    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).10.35
    
    
    Form of Stock Option Agreement (Switzerland, Canton of Fribourg)
(filed as Exhibit 10.8 to our Quarterly Report on Form 10-Q,
filed May 15, 2006 and incorporated herein by reference).10.36
    
    
    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 15, 2006 and
incorporated herein by reference).10.37
    
    
    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).10.38
    
    
    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).10.39
    
    
    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).10.40
    
    
    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).10.41
    
    
    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).10.42
    
    
    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).10.43
    
    
    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).10.44
    
    
    Exclusivity Agreement dated as of March 20, 2007 between Darwin
Deason and Cerberus Capital Management, L.P. (filed as Exhibit
99.3 to our Current Report on Form 8-K, filed June 11, 2007 and
 126




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit Nameincorporated herein by reference).10.45
    
    
    Waiver Agreement dated as of June 10, 2007 between Affiliated
Computer Services, Inc., Darwin Deason and Cerberus Capital
Management, L.P. (filed as Exhibit 99.2 to our Current Report on
Form 8-K, filed June 11, 2007 and incorporated herein by
reference).21.1
    *
    
    Subsidiaries of the Company.23.1
    *
    
    Consent of PricewaterhouseCoopers LLP.23.2
    *
    
    Consent of Value Incorporated.31.1
    *
    
    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 compensatory plan or arrangement. 127