##### Table of Contents



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, 2005
 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:
 Name of exchange onTitle of each class
    
    which registeredClass A common stock, par
    
    New York Stock Exchangevalue $.01 per share
 Securities Registered Pursuant to Section 12(g) of the Act:
NONE
 
 þ o
 o
  þ o
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE:




---



AFFILIATED COMPUTER SERVICES, INC.
 FORM 10-K
June 30, 2005
 Part IItem 1.
    
    Business
    
    1Item 2.
    
    Properties
    
    8Item 3.
    
    Legal Proceedings
    
    8Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    10Part IIItem 5.
    
    Market for Our Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    10Item 6.
    
    Selected Consolidated Financial Data
    
    13Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    14Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    41Item 8.
    
    Financial Statements
    
    42Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial   Disclosure
    
    81Item 9A.
    
    Controls and Procedures
    
    81Part IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    82Item 11.
    
    Executive Compensation
    
    82Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    82Item 13.
    
    Certain Relationships and Related Transactions
    
    82Item 14.
    
    Principal Accounting Fees and Services
    
    82Part IVItem 15.
    
    Financial Statements and Exhibits
    
    82Executive Benefit PlanForm of Stock Option AgreementForm of Stock Option Agreement (UK Grant)SubsidiariesConsent 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)




---



##### Table of Contents



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 desire of organizations to have a workforce that is able to expand and contract in
relation to their business volumes;§
    
    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




---



##### Table of Contents



§
    
    the increasing requirements for rapid processing of information and the instantaneous
communication 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
 Provide Flexible Solutions
 Invest in Technology
 Maximize Economies of Scale
 Complete Strategic and Tactical Acquisitions
 Attract, Train and Retain Employees 
 2




---



##### Table of Contents



Segment Information
  Year ended June 30,2005
    
    
    2004
    
    
    2003Commercial (1)
    
    $
    2,175,087
    
    
    $
    1,678,364
    
    
    $
    1,242,908Government (2)
    
    
    2,176,072
    
    
    
    2,428,029
    
    
    
    2,544,298Total Revenues
    
    $
    4,351,159
    
    
    $
    4,106,393
    
    
    $
    3,787,206
 
 (1)
    
    Includes $6.9 million and $30.2 million of revenues for fiscal years 2004 and 2003,
respectively, from operations divested through June 30, 2004.(2)
    
    Includes $0.6 million, $251.1 million and $679.3 million of revenues for fiscal years 2005,
2004 and 2003, respectively, from operations divested through June 30, 2004.  Commercial
  Business Process Outsourcing
  Administration 
 Human Resources 
 Finance and Accounting 
 Customer Care
 Payment Services
 3




---



##### Table of Contents



Information Technology Outsourcing
   Systems Integration Services
  Government
    Government and Community Solutions
  4




---



##### Table of Contents



Government Healthcare Solutions
  Transportation Solutions
   U.S. Department of Education
  5




---



##### Table of Contents



Finance and Revenue Solutions
  Revenues by Service Line
  Year ended June 30,2005
    
    
    2004
    
    
    2003Business process outsourcing (1)
    
    $
    3,237,981
    
    
    $
    3,017,699
    
    
    $
    2,582,773Information technology outsourcing
    
    
    858,639
    
    
    
    694,890
    
    
    
    492,848Systems integration services (2)
    
    
    254,539
    
    
    
    393,804
    
    
    
    711,585Total
    
    $
    4,351,159
    
    
    $
    4,106,393
    
    
    $
    3,787,206
 
 (1)
    
    Includes $39.4 million and $123.7 million of revenues for fiscal years 2004 and 2003,
respectively, from operations divested through June 30, 2004.(2)
    
    Includes $0.6 million, $218.6 million and $585.8 million of revenues for fiscal years
2005, 2004 and 2003, respectively, from operations divested through June 30, 2004. Client Base
   Geographic information
  Competition
  6




---



##### Table of Contents



Employees
   Certifications and Governance
   7




---



##### Table of Contents



U.S. Securities and Exchange Commission Reports
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
   8




---



##### Table of Contents



9




---



##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Fiscal year ended June 30, 2005
    
    High
    
    
    LowFirst Quarter
    
    $
    57.84
    
    
    $
    49.11Second Quarter
    
    
    61.23
    
    
    
    52.31Third Quarter
    
    
    60.82
    
    
    
    49.52Fourth Quarter
    
    
    53.86
    
    
    
    45.81Fiscal year ended June 30, 2004First Quarter
    
    
    54.36
    
    
    
    42.10Second Quarter
    
    
    55.08
    
    
    
    45.89Third Quarter
    
    
    57.96
    
    
    
    47.72Fourth Quarter
    
    
    55.16
    
    
    
    46.01
    10




---



##### Table of Contents



Number of securitiesremaining available forNumber of securities
    
    
    
    
    
    
    future issuance underto be issued upon
    
    
    
    
    
    
    equity compensation plansexercise of
    
    
    Weighted average
    
    
    (excluding securitiesoutstanding options,
    
    
    exercise price of
    
    
    reflected in initialwarrants and rights
    
    
    outstanding options,
    
    
    column)Plan Category
    
    as of June 30, 2005
    
    
    warrants and rights
    
    
    as of June 30, 2005Equity compensation plans approved by security shareholdersStock options
    
    
    15,356,700
    (1)
    
    $
    39.61
    
    
    
    1,736,141
    (2)Employee stock purchase plan
    
    
    N/A
    
    
    
    N/A
    
    
    
    1,197,493Equity compensation plans not approved
by security shareholders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    15,356,700
    
    
    $
    39.61
    
    
    
    2,933,634
 
 (1)
    
    These plans consist of the 1988 Stock Option Plan and the 1997 Stock Incentive Plan. No
additional shares can be issued under the 1988 Stock Option Plan. Upon exercise the holder
is entitled to receive Class A common stock.(2)
    
    Under our 1997 Stock Incentive Plan, as authorized by our shareholders pursuant to our
November 14, 1997 Proxy Statement, the number of shares of our Class A common stock
available for issuance is subject to increase by approval of our Board of Directors
pursuant to a formula that limits the number of shares optioned, sold, granted or otherwise
issued under the 1997 Stock Incentive Plan to current employees, consultants and
non-employee directors to no more than 12.8% of our issued and outstanding shares of common
stock. Consequently, any share repurchases (as discussed below) reduce the number of
options to purchase shares that we may grant under the 1997 Stock Incentive Plan.   11




---



##### Table of Contents



Total number of
    
    
    Maximum number (orshares purchased
    
    
    approximate dollarTotal number
    
    
    Average
    
    
    as part of publicly
    
    
    value) of shares thatof shares
    
    
    price paid per
    
    
    announced plans
    
    
    may yet be purchased underPeriod
    
    purchased
    
    
    share
    
    
    or programs
    
    
    the plans or programsInception through March 31, 2005
    
    
    17,438,714
    
    
    $
    50.14
    
    
    
    17,438,714
    
    
    $
    375,681,777April 1  April 30, 2005
    
    
    250,000
    
    
    
    48.30
    
    
    
    250,000
    
    
    
    363,606,502May 1  May 31, 2005
    
    
    1,930,800
    
    
    
    48.05
    
    
    
    1,930,800
    
    
    
    270,832,433June 1  June 30, 2005
    
    
    295,000
    
    
    
    50.25
    
    
    
    295,000
    
    
    
    256,010,038Total  Quarter ended June 30, 2005
    
    
    2,475,800
    
    
    
    48.34
    
    
    
    2,475,800
    
    
    
    256,010,038Inception through June 30, 2005
    
    
    19,914,514
    
    
    $
    49.91
    
    
    
    19,914,514
    
    
    $
    256,010,038
 12




---



##### Table of Contents



ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
  As of and for the year ended June 30,2005(b)
    
    
    2004(c)
    
    
    2003
    
    
    2002(d)
    
    
    2001(f)Results of Operations Data:Revenues (a)
    
    $
    4,351,159
    
    
    $
    4,106,393
    
    
    $
    3,787,206
    
    
    $
    3,062,918
    
    
    $
    2,063,559Operating income
    
    $
    654, 481
    
    
    $
    843,711
    
    
    $
    519,281
    
    
    $
    400,632
    
    
    $
    223,726Net income
    
    $
    415,945
    
    
    $
    529,843
    
    
    $
    306,842
    
    
    $
    229,596
    
    
    $
    134,292Earnings per
share  diluted
    
    $
    3.19
    
    
    $
    3.83
    
    
    $
    2.20
    
    
    $
    1.76
    
    
    $
    1.23Weighted average shares
outstanding  diluted (e)
    
    
    130,382
    
    
    
    139,646
    
    
    
    143,430
    
    
    
    137,464
    
    
    
    116,456Balance Sheet Data:Working capital
    
    $
    405,983
    
    
    $
    406,854
    
    
    $
    422,022
    
    
    $
    388,476
    
    
    $
    528,563Total assets
    
    $
    4,850,838
    
    
    $
    3,907,242
    
    
    $
    3,698,705
    
    
    $
    3,403,567
    
    
    $
    1,891,687Total long-term debt (g)
(less current portion)
    
    $
    750,355
    
    
    $
    372,439
    
    
    $
    498,340
    
    
    $
    708,233
    
    
    $
    649,313Stockholders equity
    
    $
    2,838,428
    
    
    $
    2,590,487
    
    
    $
    2,429,188
    
    
    $
    2,095,420
    
    
    $
    885,515Other Data:Cash flow from operating
activities (h)
    
    $
    739,348
    
    
    $
    476,209
    
    
    $
    545,305
    
    
    $
    372,014
    
    
    $
    141,914
 
 (a)
    
    Revenues from operations divested through June 30, 2004 were $0.6 million, $258 million,
$709.5 million, $697.1 million and $692.6 million for fiscal years 2005, 2004, 2003, 2002
and 2001, respectively. Please see the discussion in
Significant Developments  Fiscal
Year 2004 in Managements Discussion and Analysis of Financial Condition and Results of
Operations and Note 3 of our Consolidated Financial Statements for a discussion of
divestiture activity.(b)
    
    During fiscal year 2005, we acquired the human resources consulting and outsourcing
business of Mellon Financial Corporation. 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.(c)
    
    Please see the discussion in Significant Developments
 Fiscal Year 2004 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 2004 results of operations, including the divestiture of a
majority of our Federal business.(d)
    
    During fiscal year 2002, we acquired Lockheed Martin IMS Corporation and AFSA Data
Corporation.(e)
    
    Please see Item 5 and Note 11 of our Consolidated Financial Statements for a discussion
of our share repurchase programs.(f)
    
    During fiscal year 2001, we had after-tax goodwill amortization expense of $20.7
million which, beginning July 1, 2001, were no longer expensed under Statement of Financial
Accounting Standards No. 142 Goodwill and Other Intangible Assets.(g)
    
    During fiscal year 2005, we issued $500 million of Senior Notes (defined below).
Please see the discussion in Liquidity and Capital Resources in Managements Discussion
and Analysis of Financial Condition and Results of Operations and Note 9 of our
Consolidated Financial Statements for discussion of the Senior Notes.(h)
    
    Please see Liquidity and Capital Resources in Managements Discussion and Analysis of
Financial Condition and Results of Operations for a discussion of items affecting fiscal
year 2005 and 2004 cash flow from operating activities. 13




---



##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
   General
  2006 Outlook
  14




---



##### Table of Contents



Significant
Developments  Fiscal Year 2005
 New Business
  Acquisitions
   15




---



##### Table of Contents



Government Healthcare Contract
  16




---



##### Table of Contents



Credit Arrangements
    Share Repurchases
  Subsequent Events
   17




---



##### Table of Contents



Significant
Developments  Fiscal Year 2004
 New Business
  Acquisitions
      Divestitures
  18




---



##### Table of Contents



U.S. Department of Education
  Commercial Contract
  Convertible Notes
  Government Healthcare Contract
  19




---



##### Table of Contents



Other
  Significant Developments  Fiscal Year 2003
 New Business
  Acquisitions
   20




---



##### Table of Contents



Revenue Growth
  Consolidated
 Year ended June 30,
    
    
    
    
    
    
    
    
    
    
    Year ended June 30,2005
    
    
    2004
    
    
    $ Growth
    
    
    Growth %
    
    2004
    
    
    2003
    
    
    $ Growth
    
    
    Growth %Total Revenues
    
    $
    4,351,159
    
    
    $
    4,106,393
    
    
    $
    244,766
    
    
    
    6
    %
    
    $
    4,106,393
    
    
    $
    3,787,206
    
    
    $
    319,187
    
    
    
    8
    %Less: Divestitures
    
    
    (589
    )
    
    
    (258,037
    )
    
    
    257,448
    
    
    
    
    
    
    
    (258,037
    )
    
    
    (709,512
    )
    
    
    451,475Adjusted
    
    $
    4,350,570
    
    
    $
    3,848,356
    
    
    $
    502,214
    
    
    
    13
    %
    
    $
    3,848,356
    
    
    $
    3,077,694
    
    
    $
    770,662
    
    
    
    25
    %Acquired revenues
    
    $
    398,427
    
    
    $
    44,977
    
    
    $
    353,450
    
    
    
    9
    %
    
    $
    259,596
    
    
    $
    668
    
    
    $
    258,928
    
    
    
    8
    %Internal revenues
    
    
    3,952,143
    
    
    
    3,803,379
    
    
    
    148,764
    
    
    
    4
    %
    
    
    3,588,760
    
    
    
    3,077,026
    
    
    
    511,734
    
    
    
    17
    %Total
    
    $
    4,350,570
    
    
    $
    3,848,356
    
    
    $
    502,214
    
    
    
    13
    %
    
    $
    3,848,356
    
    
    $
    3,077,694
    
    
    $
    770,662
    
    
    
    25
    %
 Commercial
 Year ended June 30,
    
    
    
    
    
    
    
    
    
    
    Year ended June 30,2005
    
    
    2004
    
    
    $ Growth
    
    
    Growth %
    
    2004
    
    
    2003
    
    
    $ Growth
    
    
    Growth %Total Revenues (a)
    
    $
    2,175,087
    
    
    $
    1,678,364
    
    
    $
    496,723
    
    
    
    30
    %
    
    $
    1,678,364
    
    
    $
    1,242,908
    
    
    $
    435,456
    
    
    
    35
    %Less: Divestitures
    
    
    
    
    
    
    (6,915
    )
    
    
    6,915
    
    
    
    
    
    
    
    (6,915
    )
    
    
    (30,172
    )
    
    
    23,257Adjusted
    
    $
    2,175,087
    
    
    $
    1,671,449
    
    
    $
    503,638
    
    
    
    30
    %
    
    $
    1,671,449
    
    
    $
    1,212,736
    
    
    $
    458,713
    
    
    
    38
    %Acquired revenues
    
    $
    365,711
    
    
    $
    44,977
    
    
    $
    320,734
    
    
    
    19
    %
    
    $
    228,763
    
    
    $
    
    
    
    $
    228,763
    
    
    
    19
    %Internal revenues
    
    
    1,809,376
    
    
    
    1,626,472
    
    
    
    182,904
    
    
    
    11
    %
    
    
    1,442,686
    
    
    
    1,212,736
    
    
    
    229,950
    
    
    
    19
    %Total
    
    $
    2,175,087
    
    
    $
    1,671,449
    
    
    $
    503,638
    
    
    
    30
    %
    
    $
    1,671,449
    
    
    $
    1,212,736
    
    
    $
    458,713
    
    
    
    38
    %
 Government
 Year ended June 30,
    
    
    
    
    
    
    
    
    
    
    Year ended June 30,2005
    
    
    2004
    
    
    $ Growth
    
    
    Growth %
    
    2004
    
    
    2003
    
    
    $ Growth
    
    
    Growth %Total Revenues (b)
    
    $
    2,176,072
    
    
    $
    2,428,029
    
    
    $
    (251,957
    )
    
    
    (10
    )%
    
    $
    2,428,029
    
    
    $
    2,544,298
    
    
    $
    (116,269
    )
    
    
    (5
    )%Less: Divestitures
    
    
    (589
    )
    
    
    (251,122
    )
    
    
    250,533
    
    
    
    
    
    
    
    (251,122
    )
    
    
    (679,340
    )
    
    
    428,218Adjusted
    
    $
    2,175,483
    
    
    $
    2,176,907
    
    
    $
    (1,424
    )
    
    
    
    %
    
    $
    2,176,907
    
    
    $
    1,864,958
    
    
    $
    311,949
    
    
    
    17
    %Acquired revenues
    
    $
    32,716
    
    
    $
    
    
    
    $
    32,716
    
    
    
    2
    %
    
    $
    30,833
    
    
    $
    668
    
    
    $
    30,165
    
    
    
    2
    %Internal revenues
    
    
    2,142,767
    
    
    
    2,176,907
    
    
    
    (34,140
    )
    
    
    (2
    )%
    
    
    2,146,074
    
    
    
    1,864,290
    
    
    
    281,784
    
    
    
    15
    %Total
    
    $
    2,175,483
    
    
    $
    2,176,907
    
    
    $
    (1,424
    )
    
    
    
    %
    
    $
    2,176,907
    
    
    $
    1,864,958
    
    
    $
    311,949
    
    
    
    17
    %
 
 (a)
    
    The Commercial segment includes revenues from operations divested through June 30, 2004
of $6.9 million and $30.2 million for fiscal years 2004 and 2003, respectively.(b)
    
    The Government segment includes revenues from operations divested through June 30, 2004
of $0.6 million, $251.1 million and $679.3 million for fiscal years 2005, 2004 and 2003,
respectively. 21




---



##### Table of Contents



Results of Operations
  Percentage of RevenuesYear ended June 30,2005
    
    2004
    
    2003Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Wages and benefits
    
    
    42.9
    
    
    
    43.6
    
    
    
    45.3Services and supplies
    
    
    24.0
    
    
    
    26.5
    
    
    
    26.3Rent, lease and maintenance
    
    
    11.6
    
    
    
    10.1
    
    
    
    9.3Depreciation and amortization
    
    
    5.4
    
    
    
    4.5
    
    
    
    4.0Gain on sale of business
    
    
    
    
    
    
    (6.9
    )
    
    
    Other operating expenses
    
    
    1.1
    
    
    
    1.7
    
    
    
    1.4Total operating expenses
    
    
    85.0
    
    
    
    79.5
    
    
    
    86.3Operating income
    
    
    15.0
    
    
    
    20.5
    
    
    
    13.7Interest expense
    
    
    0.4
    
    
    
    0.4
    
    
    
    0.6Other non-operating expense (income), net
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    0.1Pretax profit
    
    
    14.7
    
    
    
    20.2
    
    
    
    13.0Income tax expense
    
    
    5.1
    
    
    
    7.3
    
    
    
    4.9Net income
    
    
    9.6
    %
    
    
    12.9
    %
    
    
    8.1
    %
 Comparison of Fiscal Year 2005 to Fiscal Year 2004
 Revenues
    22




---



##### Table of Contents



Operating Expenses
    23




---



##### Table of Contents



Interest expense
  Income tax expense
  Comparison of Fiscal Year 2004 to Fiscal Year 2003
 Revenues
   ,
 24




---



##### Table of Contents



Operating Expense
       Interest Expense
  Other Non-Operating Expense (Income), net
  25




---



##### Table of Contents



Tax Expense
  Liquidity and Capital Resources
  Cash Flows
      26




---



##### Table of Contents



Year ended June 30,2005
    
    
    2004
    
    
    2003Net cash provided by operating
activities (a)
    
    $
    739,348
    
    
    $
    476,209
    
    
    $
    545,305Purchases of property, equipment
and software, net
    
    
    (253,231
    )
    
    
    (224,621
    )
    
    
    (205,673
    )Additions to other intangible assets
    
    
    (35,518
    )
    
    
    (33,329
    )
    
    
    (47,967
    )Free cash flow (a)
    
    $
    450,599
    
    
    $
    218,259
    
    
    $
    291,665
 
 (a)
    
    Fiscal year 2005 net cash provided by operating activities and free cash flow is
positively impacted by a $75.9 million benefit of the Acquired HR Business operating
expenses funded by Mellon Financial Corporation offset by a payment of $19.3 million
related to the settlement of the interest rate hedges. Fiscal year 2004 net cash provided
by operating activities and free cash flow includes a tax payment of approximately $88.1
million related to the gain from the sale of the Divested Federal Business.    27




---



##### Table of Contents



Senior Notes
    Credit Facilities
      28




---



##### Table of Contents



Other credit arrangements
   Derivatives
  Share Repurchase Programs
  Convertible Notes
  29




---



##### Table of Contents



Other
   Related Party Transactions
    30




---



##### Table of Contents



Disclosures about Contractual Obligations and Commercial Commitments as of June 30, 2005 (in
thousands):
 Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    5 YearsSenior Notes, net of unamortized
discount (1)
    
    $
    499,288
    
    
    $
    
    
    
    $
    
    
    
    $
    249,916
    
    
    $
    249,372Long-term debt (1)
    
    
    244,082
    
    
    
    682
    
    
    
    
    
    
    
    243,400
    
    
    
    Capital lease obligations (1)
    
    
    13,177
    
    
    
    5,510
    
    
    
    7,147
    
    
    
    520
    
    
    
    Operating leases
    
    
    680,576
    
    
    
    221,020
    
    
    
    265,752
    
    
    
    107,047
    
    
    
    86,757Purchase obligations
    
    
    26,621
    
    
    
    8,291
    
    
    
    16,580
    
    
    
    1,750
    
    
    
    Total Contractual Cash
Obligations
    
    $
    1,463,744
    
    
    $
    235,503
    
    
    $
    289,479
    
    
    $
    602,633
    
    
    $
    336,129Amount of Commitment Expiration per PeriodTotalAmounts
    
    Less than
    
    
    
    
    
    
    
    
    
    After 5Other Commercial Commitments
    
    Committed
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    YearsStandby letters of credit
    
    $
    100,891
    
    
    $
    100,891
    
    
    $
    
    
    
    $
    
    
    
    $
    Surety Bonds
    
    
    269,206
    
    
    
    255,427
    
    
    
    13,779
    
    
    
    
    
    
    
    Total Commercial Commitments
    
    $
    370,097
    
    
    $
    356,318
    
    
    $
    13,779
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Excludes accrued interest of $2.6 million at June 30, 2005.       31




---



##### Table of Contents



Critical Accounting Policies
   Revenue recognition
      32




---



##### Table of Contents



Contingencies
   Valuation of goodwill and intangibles
  33




---



##### Table of Contents



Pension and post-employment benefits
     Pension Plans
    
    Other Benefit PlanDiscount rate
    
    
    5.00% - 5.25
    %
    
    
    5.25
    %Rate of increase in compensation levels
    
    
    4.25% - 4.40
    %
    
    
    N/A
  Pension Plans
    
    Other Benefit PlanDiscount rate
    
    
    5.25% - 5.75
    %
    
    
    5.75
    %Long-term rate of return on assets
    
    
    7.00% - 7.50
    %
    
    
    N/ARate of increase in compensation levels
    
    
    4.25% - 4.40
    %
    
    
    N/A
  Plus .25%
    
    
    Less .25%Effect on pension benefit obligation
    
    $
    4,490
    
    
    $
    (4,692
    )Effect on service and interest cost
    
    $
    380
    
    
    $
    (399
    )
  34




---



##### Table of Contents



Plus 1%
    
    Less 1%Effect on post-employment benefit obligation
    
    $
    55
    
    
    $
    (48
    )Effect on service and interest cost
    
    $
    7
    
    
    $
    (6
    )
 Allowance for doubtful accounts
  Income taxes
   35




---



##### Table of Contents



New Accounting Pronouncements
     Risks Related To Our Business
  36




---



##### Table of Contents



Loss of, or reduction of business from, significant clients
  Impairment of investments made to attract clients
  Competition
   Difficulties in executing our acquisition strategy
  Failure to properly manage our operations and our growth
  Government clients  termination rights, audits and investigations
  37




---



##### Table of Contents



Government clients  protests of contract awards
  Exercise of contract termination provisions and service level penalties
  Pricing risks
  Actuarial consulting services and benefit plan management  potential claims
  Loss of significant software vendor relationships
  38




---



##### Table of Contents



Intellectual property infringement claims
  Rapid technological changes
  United States and Foreign Jurisdiction laws relating to individually identifiable information
  Security
  Budget deficits at, or fluctuations in the number of requests for proposals issued by, state
and local governments and their agencies
  International risks
  39




---



##### Table of Contents



Armed hostilities and terrorist attacks
  Failure to attract and retain necessary technical personnel, skilled management and qualified
subcontractors
  Servicing Risks
  Disruption in Utility or Network Services
  Indemnification Risk
  40




---



##### Table of Contents



Other Risks
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     41




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS
 PAGEReport of Independent Registered Public Accounting Firm
    
    43Consolidated Balance Sheets
    
    45Consolidated Statements of Income
    
    46Consolidated Statements of Changes in Stockholders Equity
    
    47Consolidated Statements of Cash Flows
    
    48Notes to Consolidated Financial Statements
    
    49
 42




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
  Consolidated financial statements
  Internal control over financial reporting
 Internal
Control  Integrated Framework Internal
Control  Integrated Framework
  43




---



##### Table of Contents



44




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands)
 June 30,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    62,685
    
    
    $
    76,899Accounts receivable, net
    
    
    1,061,590
    
    
    
    873,471Prepaid expenses and other current assets
    
    
    119,822
    
    
    
    94,054Total current assets
    
    
    1,244,097
    
    
    
    1,044,424Property, equipment and software, net
    
    
    677,241
    
    
    
    521,772Goodwill
    
    
    2,334,655
    
    
    
    1,969,326Other intangibles, net
    
    
    466,312
    
    
    
    283,767Other assets
    
    
    128,533
    
    
    
    87,953Total assets
    
    $
    4,850,838
    
    
    $
    3,907,242LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    62,788
    
    
    $
    61,749Accrued compensation and benefits
    
    
    175,782
    
    
    
    133,530Other accrued liabilities
    
    
    471,577
    
    
    
    342,648Income taxes payable
    
    
    2,310
    
    
    
    10,628Deferred taxes
    
    
    34,996
    
    
    
    25,426Current portion of long-term debt
    
    
    6,192
    
    
    
    2,048Current portion of unearned revenue
    
    
    84,469
    
    
    
    61,541Total current liabilities
    
    
    838,114
    
    
    
    637,570Senior Notes, net of unamortized discount
    
    
    499,288
    
    
    
    Other long-term debt
    
    
    251,067
    
    
    
    372,439Deferred taxes
    
    
    240,210
    
    
    
    234,183Other long-term liabilities
    
    
    183,731
    
    
    
    72,563Total liabilities
    
    
    2,012,410
    
    
    
    1,316,755Commitments and contingencies (See Note 17)Stockholders equity:Class A common stock, $.01 par value, 500,000 shares authorized,
137,886 and 135,981 shares issued, respectively
    
    
    1,379
    
    
    
    1,360Class B convertible common stock, $.01 par value, 14,000 shares authorized,
6,600 shares issued and outstanding
    
    
    66
    
    
    
    66Additional paid-in capital
    
    
    1,792,629
    
    
    
    1,730,783Accumulated other comprehensive loss, net
    
    
    (10,910
    )
    
    
    (3,381
    )Retained earnings
    
    
    2,016,197
    
    
    
    1,600,252Treasury stock at cost, 19,255 and 14,900 shares, respectively
    
    
    (960,933
    )
    
    
    (738,593
    )Total stockholders equity
    
    
    2,838,428
    
    
    
    2,590,487Total liabilities and stockholders equity
    
    $
    4,850,838
    
    
    $
    3,907,242
  45




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (In thousands except per share amounts)
 Year ended June 30,2005
    
    
    2004
    
    
    2003Revenues
    
    $
    4,351,159
    
    
    $
    4,106,393
    
    
    $
    3,787,206Operating expenses:Wages and benefits
    
    
    1,867,983
    
    
    
    1,790,479
    
    
    
    1,716,946Services and supplies
    
    
    1,046,341
    
    
    
    1,090,207
    
    
    
    994,410Rent, lease and maintenance
    
    
    503,132
    
    
    
    416,394
    
    
    
    351,855Depreciation and amortization
    
    
    232,779
    
    
    
    183,796
    
    
    
    152,128Gain on sale of business
    
    
    
    
    
    
    (285,273
    )
    
    
    Other operating expenses
    
    
    46,443
    
    
    
    67,079
    
    
    
    52,586Total operating expenses
    
    
    3,696,678
    
    
    
    3,262,682
    
    
    
    3,267,925Operating income
    
    
    654,481
    
    
    
    843,711
    
    
    
    519,281Interest expense
    
    
    18,596
    
    
    
    17,037
    
    
    
    25,194Other non-operating expense (income), net
    
    
    (5,186
    )
    
    
    (2,509
    )
    
    
    3,140Pretax profit
    
    
    641,071
    
    
    
    829,183
    
    
    
    490,947Income tax expense
    
    
    225,126
    
    
    
    299,340
    
    
    
    184,105Net income
    
    $
    415,945
    
    
    $
    529,843
    
    
    $
    306,842Earnings per share:Basic
    
    $
    3.26
    
    
    $
    4.03
    
    
    $
    2.32Diluted
    
    $
    3.19
    
    
    $
    3.83
    
    
    $
    2.20Shares used in computing earnings per share:Basic
    
    
    127,560
    
    
    
    131,498
    
    
    
    132,445Diluted
    
    
    130,382
    
    
    
    139,646
    
    
    
    143,430
  46




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (In thousands)
 AccumulatedOtherCommon Stock
    
    Additional
    
    
    
    
    
    Comprehensive
    
    Treasury StockClass A
    
    Class B
    
    Paid-in
    
    Retained
    
    Income (Loss),
    
    SharesShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Earnings
    
    Net
    
    Held
    
    Amount
    
    TotalBalance at June 30, 2002
    
    
    125,424
    
    
    $
    1,254
    
    
    
    6,600
    
    
    $
    66
    
    
    $
    1,330,533
    
    
    $
    763,567
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    2,095,420Comprehensive income:Foreign currency
translation losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (971
    )
    
    
    
    
    
    
    
    
    
    
    (971
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    306,842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    306,842Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    305,871Employee stock
transactions and
related tax benefits
    
    
    1,183
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    27,776
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,788Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109Balance at June 30, 2003
    
    
    126,607
    
    
    
    1,266
    
    
    
    6,600
    
    
    
    66
    
    
    
    1,358,418
    
    
    
    1,070,409
    
    
    
    (971
    )
    
    
    
    
    
    
    
    
    
    
    2,429,188Comprehensive income:Foreign currency
translation losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,410
    )
    
    
    
    
    
    
    
    
    
    
    (2,410
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    529,843
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    529,843Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527,433Share repurchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,992
    )
    
    
    (743,198
    )
    
    
    (743,198
    )Employee stock
transactions and
related tax benefits
    
    
    2,082
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    59,167
    
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    4,605
    
    
    
    63,793Conversion of 3.5%
Convertible
Subordinated Notes
    
    
    7,292
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    313,198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313,271Balance at June 30, 2004
    
    
    135,981
    
    
    
    1,360
    
    
    
    6,600
    
    
    
    66
    
    
    
    1,730,783
    
    
    
    1,600,252
    
    
    
    (3,381
    )
    
    
    (14,900
    )
    
    
    (738,593
    )
    
    
    2,590,487Comprehensive income:Foreign currency
translation gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,260
    
    
    
    
    
    
    
    
    
    
    
    4,260Interest
rate hedges, net of income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,789
    )
    
    
    
    
    
    
    
    
    
    
    (11,789
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    415,945
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    415,945Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    408,416Share repurchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,922
    )
    
    
    (250,793
    )
    
    
    (250,793
    )Employee stock
transactions and
related tax benefits
    
    
    1,905
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    61,846
    
    
    
    
    
    
    
    
    
    
    
    567
    
    
    
    28,453
    
    
    
    90,318Balance at June 30, 2005
    
    
    137,886
    
    
    $
    1,379
    
    
    
    6,600
    
    
    $
    66
    
    
    $
    1,792,629
    
    
    $
    2,016,197
    
    
    $
    (10,910
    )
    
    
    (19,255
    )
    
    $
    (960,933
    )
    
    $
    2,838,428
  47




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Year ended June 30,2005
    
    2004
    
    2003Cash flows from operating activities:Net income
    
    $
    415,945
    
    
    $
    529,843
    
    
    $
    306,842Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    232,779
    
    
    
    183,796
    
    
    
    152,128Contract inducement amortization
    
    
    14,309
    
    
    
    10,981
    
    
    
    7,346Provision for uncollectible accounts receivable
    
    
    763
    
    
    
    1,461
    
    
    
    4,838Deferred financing fee amortization
    
    
    1,436
    
    
    
    3,142
    
    
    
    4,172Provision for default loan liability
    
    
    (188
    )
    
    
    2,685
    
    
    
    2,540Gain on sale of business units
    
    
    (70
    )
    
    
    (291,967
    )
    
    
    (1,585
    )(Gain) loss on long-term investments
    
    
    (2,967
    )
    
    
    (820
    )
    
    
    3,375Deferred income tax expense
    
    
    85,540
    
    
    
    66,155
    
    
    
    100,851Tax benefit of stock options
    
    
    24,179
    
    
    
    26,263
    
    
    
    16,124Settlement of interest rate hedges
    
    
    (19,267
    )
    
    
    
    
    
    
    Other non-cash activities
    
    
    225
    
    
    
    5,000
    
    
    
    5,575Changes in assets and liabilities, net of effects from acquisitions:Increase in accounts receivable
    
    
    (21,945
    )
    
    
    (156,063
    )
    
    
    (100,643
    )(Increase) decrease in prepaid expenses and other current assets
    
    
    (16,540
    )
    
    
    (3,596
    )
    
    
    6,263(Increase) decrease in other assets
    
    
    3,234
    
    
    
    (18,362
    )
    
    
    (19,631
    )Increase (decrease) in accounts payable
    
    
    (11,483
    )
    
    
    14,194
    
    
    
    (15,867
    )Increase (decrease) in accrued compensation and benefits
    
    
    (5,362
    )
    
    
    11,502
    
    
    
    787Increase in other accrued liabilities
    
    
    2,414
    
    
    
    52,711
    
    
    
    61,962Increase (decrease) in income taxes payable
    
    
    (8,277
    )
    
    
    16,182
    
    
    
    (3,350
    )Increase in other long-term liabilities
    
    
    10,755
    
    
    
    12,047
    
    
    
    1,468Increase in unearned revenue
    
    
    33,868
    
    
    
    11,055
    
    
    
    12,110Total adjustments
    
    
    323,403
    
    
    
    (53,634
    )
    
    
    238,463Net cash provided by operating activities
    
    
    739,348
    
    
    
    476,209
    
    
    
    545,305Cash flows from investing activities:Purchases of property, equipment and software, net
    
    
    (253,231
    )
    
    
    (224,621
    )
    
    
    (205,673
    )Payments for acquisitions, net of cash acquired
    
    
    (626,858
    )
    
    
    (251,727
    )
    
    
    (76,838
    )Proceeds from divestitures, net of transaction costs
    
    
    87
    
    
    
    583,133
    
    
    
    4,093Additions to other intangible assets
    
    
    (35,518
    )
    
    
    (33,329
    )
    
    
    (47,967
    )Purchases of investments
    
    
    (8,607
    )
    
    
    (7,690
    )
    
    
    Proceeds from sale of investments
    
    
    1,713
    
    
    
    1,196
    
    
    
    466Additions to notes receivable
    
    
    
    
    
    
    (3,015
    )
    
    
    (3,478
    )Proceeds from notes receivable
    
    
    425
    
    
    
    6,452
    
    
    
    9,314Net cash provided by (used in) investing activities
    
    
    (921,989
    )
    
    
    70,399
    
    
    
    (320,083
    )Cash flows from financing activities:Proceeds from issuance of long-term debt, net
    
    
    2,790,016
    
    
    
    1,459,600
    
    
    
    927,762Payments of long-term debt
    
    
    (2,437,635
    )
    
    
    (1,274,238
    )
    
    
    (1,146,561
    )Purchase of treasury shares
    
    
    (250,793
    )
    
    
    (743,198
    )
    
    
    Employee stock transactions
    
    
    66,839
    
    
    
    39,038
    
    
    
    14,243Other, net
    
    
    
    
    
    
    (2,081
    )
    
    
    (3,310
    )Net cash provided by (used in) financing activities
    
    
    168,427
    
    
    
    (520,879
    )
    
    
    (207,866
    )Net increase (decrease) in cash and cash equivalents
    
    
    (14,214
    )
    
    
    25,729
    
    
    
    17,356Cash and cash equivalents at beginning of year
    
    
    76,899
    
    
    
    51,170
    
    
    
    33,814Cash and cash equivalents at end of year
    
    $
    62,685
    
    
    $
    76,899
    
    
    $
    51,170Supplemental information of non-cash financing activities:Conversion of 3.5% Convertible Subordinated Notes to Class A Common Stock
    
    $
    
    
    
    $
    316,725
    
    
    $
    
   48




---



##### Table of Contents



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
    49




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Goodwill
  Other intangible assets
  Other assets
  Derivative Instruments
  Revenue recognition
  50




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
         51




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Contingencies
   Income taxes
   Earnings per share
  Stock-based compensation
  For the year ended June 30,2005
    
    
    2004
    
    
    2003Net incomeAs reported
    
    $
    415,945
    
    
    $
    529,843
    
    
    $
    306,842Less: Pro forma employee
compensation cost of
stock-based compensation
plans, net of income tax
    
    
    23,493
    
    
    
    20,480
    
    
    
    17,570Pro forma
    
    $
    392,452
    
    
    $
    509,363
    
    
    $
    289,272Basic earnings per shareAs reported
    
    $
    3.26
    
    
    $
    4.03
    
    
    $
    2.32Pro forma
    
    $
    3.08
    
    
    $
    3.87
    
    
    $
    2.18Diluted earnings per shareAs reported
    
    $
    3.19
    
    
    $
    3.83
    
    
    $
    2.20Pro forma
    
    $
    3.03
    
    
    $
    3.70
    
    
    $
    2.09
 52




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Pensions and other postretirement benefits
    Reclassifications
  2. BUSINESS COMBINATIONS
  Year ended June 30,
    
    2005
    
    
    2004
    
    
    2003Purchase consideration (in thousands):Net cash paid
    
    $
    620,382
    
    
    $
    242,402
    
    
    $
    65,395Amounts due to seller
    
    
    28,254
    
    
    
    22
    
    
    
    325Liabilities assumed
    
    
    254,174
    
    
    
    68,040
    
    
    
    17,089Fair value of assets acquired
(including intangibles)
    
    $
    902,810
    
    
    $
    310,464
    
    
    $
    82,809
 53




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Fiscal year 2005 acquisitions
    54




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Fiscal year 2004 acquisitions
    55




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Fiscal year 2003 acquisitions
    Contingent consideration
  3. SALE OF THE MAJORITY OF OUR FEDERAL BUSINESS
    56




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   4. ACCOUNTS RECEIVABLE
  June 30,2005
    
    
    2004Amounts Billed or Billable:Commercial
    
    $
    461,128
    
    
    $
    283,341Government
    
    
    381,794
    
    
    
    377,619842,922
    
    
    
    660,960Unbilled Amounts
    
    
    224,067
    
    
    
    217,267Total accounts receivable
    
    
    1,066,989
    
    
    
    878,227Allowance for doubtful accounts
    
    
    (5,399
    )
    
    
    (4,756
    )$
    1,061,590
    
    
    $
    873,471
    For the year ended June 30,2005
    
    
    2004
    
    
    2003Balance at beginning of period
    
    $
    4,756
    
    
    $
    7,240
    
    
    $
    6,956Provision for uncollectible accounts receivable
    
    
    763
    
    
    
    1,461
    
    
    
    4,838Losses sustained, net of recoveries and other
    
    
    (120
    )
    
    
    (2,913
    )
    
    
    (4,554
    )Sale of Divested Federal Business
    
    
    
    
    
    
    (1,032
    )
    
    
    Balance at end of period
    
    $
    5,399
    
    
    $
    4,756
    
    
    $
    7,240
 57




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 5. PROPERTY, EQUIPMENT AND SOFTWARE
  June 30,2005
    
    
    2004Land
    
    $
    19,239
    
    
    $
    19,089Buildings and improvements
    
    
    125,574
    
    
    
    106,003Computer equipment
    
    
    548,623
    
    
    
    532,450Computer software
    
    
    470,091
    
    
    
    236,188Furniture and fixtures
    
    
    84,699
    
    
    
    77,2851,248,226
    
    
    
    971,015Accumulated depreciation and amortization
    
    
    (570,985
    )
    
    
    (449,243
    )$
    677,241
    
    
    $
    521,772
  6. GOODWILL AND OTHER INTANGIBLE ASSETS
  Commercial
    
    
    Government
    
    
    TotalBalance as of June 30, 2003
    
    $
    690,287
    
    
    $
    1,215,591
    
    
    $
    1,905,878Acquisition activity during the year
    
    
    202,937
    
    
    
    3,024
    
    
    
    205,961Divestiture activity during the year
    
    
    (6,434
    )
    
    
    (136,079
    )
    
    
    (142,513
    )Balance as of June 30, 2004
    
    
    886,790
    
    
    
    1,082,536
    
    
    
    1,969,326Acquisition activity during the year
    
    
    330,937
    
    
    
    34,392
    
    
    
    365,329Balance as of June 30, 2005
    
    $
    1,217,727
    
    
    $
    1,116,928
    
    
    $
    2,334,655
   June 30,2005
    
    
    2004GrossGross Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortized intangible assets:Acquired customer-related
intangibles
    
    $
    377,314
    
    
    $
    (76,515
    )
    
    $
    191,517
    
    
    $
    (49,425
    )Customer contract costs
    
    
    175,571
    
    
    
    (74,336
    )
    
    
    142,802
    
    
    
    (53,334
    )All other
    
    
    12,708
    
    
    
    (3,318
    )
    
    
    2,854
    
    
    
    (1,447
    )Total
    
    $
    565,593
    
    
    $
    (154,169
    )
    
    $
    337,173
    
    
    $
    (104,206
    )Unamortized intangible assets:Title plant
    
    $
    51,045
    
    
    
    
    
    
    $
    50,800Tradename
    
    
    3,843
    
    
    
    
    
    
    
    $
    54,888
    
    
    
    
    
    
    $
    50,800
 58




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Aggregate amortization:For the year ended June 30, 2005
    
    $
    57,721For the year ended June 30, 2004
    
    
    46,600For the year ended June 30, 2003
    
    
    36,889Estimated amortization for the years ended June 30:2006
    
    $
    65,8372007
    
    
    60,4142008
    
    
    55,6612009
    
    
    47,6212010
    
    
    38,506
  7. OTHER ASSETS
  8. OTHER ACCRUED LIABILITIES
  June 30,2005
    
    2004Accrued payments to vendors and contract related accruals
    
    $
    311,842
    
    
    $
    213,027Accruals related to acquisitions and divestitures
    
    
    67,481
    
    
    
    28,937Software and equipment lease and maintenance
    
    
    50,795
    
    
    
    42,836Accrual for
GSA/FTSA settlement (see Note 17)
    
    
    
    
    
    
    10,000Accrual for Georgia Contract settlement (see Note 18)
    
    
    
    
    
    
    10,000Other
    
    
    41,459
    
    
    
    37,848Total
    
    $
    471,577
    
    
    $
    342,648
 59




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 9. LONG-TERM DEBT
  June 30,2005
    
    
    20044.70% Senior Notes due in June 2010, net of unamortized discount
    
    $
    249,916
    
    
    $
    5.20% Senior Notes due in June 2015, net of unamortized discount
    
    
    249,372
    
    
    
    Unsecured $1.5 billion Competitive Advance and Revolving Credit Agreement
due in October 2009
    
    
    243,400
    
    
    
    Unsecured $875 million revolving credit agreement payable to banks, due in
December 2005
    
    
    
    
    
    
    370,000Capitalized lease obligations at various interest rates, payable through 2010
    
    
    13,177
    
    
    
    4,487Other notes payable through 2006
    
    
    682
    
    
    
    756,547
    
    
    
    374,487Less current portion
    
    
    (6,192
    )
    
    
    (2,048
    )$
    750,355
    
    
    $
    372,439
  Year ending June 30,2006
    
    $
    6,1922007
    
    
    4,1492008
    
    
    2,9972009
    
    
    4812010
    
    
    493,356Thereafter
    
    
    249,372Total
    
    $
    756,547
 Senior Notes
    60




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Credit Facilities
        Convertible Notes
  61




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Interest
  10. INCOME TAXES
  Year ended June 30,2005
    
    
    2004
    
    
    2003Current:U.S. Federal
    
    $
    117,743
    
    
    $
    202,797
    
    
    $
    71,420State
    
    
    18,249
    
    
    
    25,285
    
    
    
    8,334Foreign
    
    
    3,594
    
    
    
    5,103
    
    
    
    3,500Total current expense
    
    
    139,586
    
    
    
    233,185
    
    
    
    83,254Deferred:U.S. Federal
    
    
    76,736
    
    
    
    60,121
    
    
    
    92,182State
    
    
    8,593
    
    
    
    5,767
    
    
    
    9,517Foreign
    
    
    211
    
    
    
    267
    
    
    
    (848
    )Total deferred expense
    
    
    85,540
    
    
    
    66,155
    
    
    
    100,851Total income tax expense
    
    $
    225,126
    
    
    $
    299,340
    
    
    $
    184,105
  June 30,2005
    
    
    2004Deferred tax assets:Accrued expenses not yet deductible for tax purposes
    
    $
    39,756
    
    
    $
    31,955Unearned revenue
    
    
    14,436
    
    
    
    8,366Tax credits and loss carryforwards
    
    
    66,931
    
    
    
    6,319Divestiture-related accruals
    
    
    5,826
    
    
    
    6,909Forward interest rate agreements
    
    
    7,084
    
    
    
    Subtotal
    
    
    134,033
    
    
    
    53,549Deferred tax assets valuation allowance
    
    
    (14,475
    )
    
    
    (3,695
    )Total deferred tax assets
    
    
    119,558
    
    
    
    49,854Deferred tax liabilities:Goodwill amortization
    
    
    (208,975
    )
    
    
    (160,809
    )Depreciation and amortization
    
    
    (101,030
    )
    
    
    (83,834
    )Unbilled revenue
    
    
    (54,187
    )
    
    
    (52,976
    )Prepaid and receivables
    
    
    (26,741
    )
    
    
    (10,221
    )Other
    
    
    (3,831
    )
    
    
    (1,623
    )Total deferred tax liabilities
    
    
    (394,764
    )
    
    
    (309,463
    )Net deferred tax liabilities
    
    $
    (275,206
    )
    
    $
    (259,609
    )
  62




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Year ended June 30,2005
    
    
    2004
    
    
    2003Statutory U.S. Federal income tax
    
    $
    224,375
    
    
    $
    290,214
    
    
    $
    171,831State income taxes, net
    
    
    19,472
    
    
    
    19,873
    
    
    
    11,603Basis difference on sales of subsidiaries
    
    
    (9,594
    )
    
    
    (5,595
    )
    
    
    Research and development tax credits
    
    
    (4,674
    )
    
    
    (6,068
    )
    
    
    Foreign benefits
    
    
    (2,734
    )
    
    
    (701
    )
    
    
    (619
    )Other
    
    
    (1,719
    )
    
    
    1,617
    
    
    
    1,290Total income tax expense
    
    $
    225,126
    
    
    $
    299,340
    
    
    $
    184,105
      63




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 11. COMMON STOCK
    12. STOCK-BASED COMPENSATION PLANS
 Stock Options
   64




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   WeightedAverageOptions
    
    
    Option PriceOutstanding at June 30, 2002
    
    
    11,130,500
    
    
    $
    22.88Granted
    
    
    3,439,500
    
    
    
    37.45Exercised
    
    
    (1,182,800
    )
    
    
    12.04Canceled
    
    
    (427,400
    )
    
    
    32.34Outstanding at June 30, 2003
    
    
    12,959,800
    
    
    
    27.42Granted
    
    
    3,167,000
    
    
    
    45.09Exercised
    
    
    (2,077,890
    )
    
    
    16.46Canceled
    
    
    (593,200
    )
    
    
    33.12Outstanding as of June 30, 2004
    
    
    13,455,710
    
    
    
    33.04Granted
    
    
    4,522,000
    
    
    
    51.24Exercised
    
    
    (1,905,460
    )
    
    
    19.24Canceled
    
    
    (715,550
    )
    
    
    43.95Outstanding as of June 30, 2005
    
    
    15,356,700
    
    
    
    39.61Vested and exercisable at June 30, 2005
    
    
    4,932,950
    
    
    $
    29.25
  Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRange of
    
    Number
    
    Remaining
    
    Average
    
    Number
    
    AverageExercise Prices
    
    Outstanding
    
    Contractual Life
    
    Exercise Price
    
    Exercisable
    
    Exercise Price$10.31  $20.94
    
    
    2,105,650
    
    
    
    4.26
    
    
    $
    15.95
    
    
    
    1,806,650
    
    
    $
    16.27$27.56  $38.66
    
    
    4,994,700
    
    
    
    6.52
    
    
    
    35.31
    
    
    
    2,506,400
    
    
    
    34.76$40.62  $50.81
    
    
    6,141,600
    
    
    
    8.63
    
    
    
    46.75
    
    
    
    619,900
    
    
    
    44.77$51.90  $55.55
    
    
    2,114,750
    
    
    
    9.20
    
    
    
    52.55
    
    
    
    
    
    
    
    15,356,700
    
    
    
    7.42
    
    
    $
    39.61
    
    
    
    4,932,950
    
    
    $
    29.25
 65




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Employee Stock Purchase Plan
  SFAS 123(R)
   13. PENSION AND OTHER POST-EMPLOYMENT PLANS
    66




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Benefit obligations
  OtherPension
    
    
    BenefitPlans
    
    
    PlanReconciliation
of benefit obligation:Obligation at June 30, 2004
    
    $
    
    
    
    $
    Obligations assumed in business combinations
    
    
    84,434
    
    
    
    342Service cost
    
    
    751
    
    
    
    3Interest cost
    
    
    739
    
    
    
    3Actuarial (gain) loss
    
    
    6,536
    
    
    
    21Foreign currency exchange rate changes
    
    
    (2,443
    )
    
    
    9Benefit payments
    
    
    (289
    )
    
    
    (2
    )Obligation at June 30, 2005
    
    $
    89,728
    
    
    $
    376
 Costs
(income) of plans
  OtherPension
    
    
    BenefitPlans
    
    
    PlanComponents of
net periodic benefit cost:Defined benefit plans:Service cost
    
    $
    751
    
    
    $
    3Interest cost
    
    
    739
    
    
    
    3Expected return on assets
    
    
    (536
    )
    
    
    Net periodic benefit cost for defined benefit plans
    
    $
    954
    
    
    $
    6
 Plan
assets
  OtherPension
    
    
    BenefitPlans
    
    
    PlanReconciliation
of fair value of plan assets:Fair value of plan assets at June 30, 2004
    
    $
    
    
    
    $
    Assets assumed in business combinations
    
    
    67,621
    
    
    
    Actual return on plan assets
    
    
    2,330
    
    
    
    Foreign currency exchange rate changes
    
    
    (2,395
    )
    
    
    Employer contributions
    
    
    928
    
    
    
    Benefit payments
    
    
    (289
    )
    
    
    Fair value of plan assets at June 30, 2005
    
    $
    68,195
    
    
    $
    
  Mutual fund  equity securities
    
    
    40
    %Mutual fund  debt securities
    
    
    23
    %Cash and cash equivalents
    
    
    32
    %Mutual fund  real estate
    
    
    5
    %Total
    
    
    100
    %
  67




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Funded
status of defined benefit pension plans
  Funded
    
    
    UnfundedPlans
    
    
    PlanAccumulated benefit obligation (ABO)
    
    $
    62,965
    
    
    $
    9,963Projected benefit obligation (PBO)
    
    
    78,819
    
    
    
    10,909Fair value of assets
    
    
    68,195
    
    
    
    
 OtherPension Plans
    
    
    Benefit PlanFunded status at June 30, 2005
    
    $
    (21,533
    )
    
    $
    (376
    )Unrecognized (gain) loss
    
    
    4,690
    
    
    
    21Net amount included in long-term
liabilities in our consolidated balance
sheet
    
    $
    (16,843
    )
    
    $
    (355
    )
  Assumptions
for calculating benefit obligations and net periodic benefit
cost
  OtherPension Plans
    
    Benefit PlanDiscount rate
    
    
    5.00%  5.25
    %
    
    
    5.25
    %Rate of increase in compensation levels
    
    
    4.25%  4.40
    %
    
    NA
  OtherPension Plans
    
    Benefit PlanDiscount rate
    
    
    5.25%  5.75
    %
    
    
    5.75
    %Long-term rate of return on assets
    
    
    7.00%  7.50
    %
    
    NARate of increase in compensation levels
    
    
    4.25%  4.40
    %
    
    NA
  Plus .25%
    
    
    Less .25%Effect on pension benefit obligation
    
    $
    4,490
    
    
    $
    (4,692
    )Effect on service and interest cost
    
    $
    380
    
    
    $
    (399
    )
 68




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     Plus 1%
    
    
    Less 1%Effect on post-employment benefit obligation
    
    $
    55
    
    
    $
    (48
    )Effect on total of service and interest cost
    
    $
    7
    
    
    $
    (6
    )
 Expected Cash Flows
   OtherPension
    
    
    BenefitPlans
    
    
    Plan2006
    
    $
    2,488
    
    
    $
    172007
    
    
    2,586
    
    
    
    192008
    
    
    2,616
    
    
    
    212009
    
    
    2,674
    
    
    
    222010
    
    
    2,488
    
    
    
    222011-2015
    
    
    14,520
    
    
    
    125
 69




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Supplemental executive retirement plan
  Deferred compensation plans
   Other contributory plans
  70




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 14. EARNINGS PER SHARE
   Year ended June 30,2005
    
    
    2004
    
    
    2003Numerator:Numerator
for earnings per share (basic) 
income available to common stockholders
    
    $
    415,945
    
    
    $
    529,843
    
    
    $
    306,842Effect of dilutive securities:Interest on Convertible Notes (net of income tax)
    
    
    
    
    
    
    5,196
    
    
    
    8,218Numerator for earnings per share assuming dilution-income available to common stockholders
    
    $
    415,945
    
    
    $
    535,039
    
    
    $
    315,060Denominator:Weighted average shares outstanding (basic)
    
    
    127,560
    
    
    
    131,498
    
    
    
    132,445Effect of dilutive securities:Convertible Notes
    
    
    
    
    
    
    4,750
    
    
    
    7,298Stock options
    
    
    2,822
    
    
    
    3,398
    
    
    
    3,687Total potential common shares
    
    
    2,822
    
    
    
    8,148
    
    
    
    10,985Denominator for earnings per share assuming dilution
    
    
    130,382
    
    
    
    139,646
    
    
    
    143,430Earnings per share (basic)
    
    $
    3.26
    
    
    $
    4.03
    
    
    $
    2.32Earnings per share assuming dilution
    
    $
    3.19
    
    
    $
    3.83
    
    
    $
    2.20
  15. FINANCIAL INSTRUMENTS
 Long-term Debt
   Derivatives
  Investments in mutual funds
  71




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 16. RELATED PARTY TRANSACTIONS
    17. COMMITMENTS AND CONTINGENCIES
  Year ending June 30,2006
    
    $
    221,0202007
    
    
    154,8722008
    
    
    110,8802009
    
    
    68,3642010
    
    
    38,683Thereafter
    
    
    86,757$
    680,576
    72




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    73




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
       74




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    18. GEORGIA CONTRACT
  75




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 19. COMPREHENSIVE INCOME
   Year ended June 30,2005
    
    2004
    
    2003Net income
    
    $
    415,945
    
    
    $
    529,843
    
    
    $
    306,842Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    4,260
    
    
    
    (2,410
    )
    
    
    (971
    )Unrealized loss on hedging instruments
(net of income tax of $7,083)
    
    
    (11,789
    )
    
    
    
    
    
    
    Comprehensive income
    
    $
    408,416
    
    
    $
    527,433
    
    
    $
    305,871
   20. SEGMENT INFORMATION
     76




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Commercial
    
    Government
    
    Corporate
    
    ConsolidatedFiscal year 2005Revenues (a)
    
    $
    2,175,087
    
    
    $
    2,176,072
    
    
    $
    
    
    
    $
    4,351,159Operating expenses (excluding
depreciation and amortization)
    
    
    1,727,358
    
    
    
    1,682,001
    
    
    
    54,540
    
    
    
    3,463,899Depreciation and amortization expense
    
    
    145,859
    
    
    
    85,016
    
    
    
    1,904
    
    
    
    232,779Operating income (loss)
    
    $
    301,870
    
    
    $
    409,055
    
    
    $
    (56,444
    )
    
    $
    654,481Total assets
    
    $
    2,608,617
    
    
    $
    2,160,297
    
    
    $
    81,924
    
    
    $
    4,850,838Capital expenditures
    
    $
    149,406
    
    
    $
    102,560
    
    
    $
    1,265
    
    
    $
    253,231Fiscal year 2004Revenues (a)
    
    $
    1,678,364
    
    
    $
    2,428,029
    
    
    $
    
    
    
    $
    4,106,393Operating expenses (excluding
depreciation and amortization)
    
    
    1,308,411
    
    
    
    1,989,392
    
    
    
    66,356
    
    
    
    3,364,159Gain on sale of Divested Federal
Business
    
    
    
    
    
    
    (285,273
    )
    
    
    
    
    
    
    (285,273
    )Depreciation and amortization expense
    
    
    109,382
    
    
    
    72,286
    
    
    
    2,128
    
    
    
    183,796Operating income (loss)
    
    $
    260,571
    
    
    $
    651,624
    
    
    $
    (68,484
    )
    
    $
    843,711Total assets
    
    $
    1,718,115
    
    
    $
    2,088,841
    
    
    $
    100,286
    
    
    $
    3,907,242Capital expenditures
    
    $
    112,519
    
    
    $
    110,649
    
    
    $
    1,453
    
    
    $
    224,621Fiscal year 2003Revenues (a)
    
    $
    1,242,908
    
    
    $
    2,544,298
    
    
    $
    
    
    
    $
    3,787,206Operating expenses (excluding
depreciation and amortization)
    
    
    954,762
    
    
    
    2,117,025
    
    
    
    44,010
    
    
    
    3,115,797Depreciation and amortization expense
    
    
    80,111
    
    
    
    69,195
    
    
    
    2,822
    
    
    
    152,128Operating income (loss)
    
    $
    208,035
    
    
    $
    358,078
    
    
    $
    (46,832
    )
    
    $
    519,281Total assets
    
    $
    1,338,728
    
    
    $
    2,241,799
    
    
    $
    118,178
    
    
    $
    3,698,705Capital expenditures
    
    $
    93,912
    
    
    $
    109,819
    
    
    $
    1,942
    
    
    $
    205,673
 
 (a)
    
    Revenues in our Commercial segment for fiscal years 2004 and 2003 include revenues from
operations divested as of June 30, 2004 of $6.9 million and $30.2 million, respectively.
Revenues in our Government segment for fiscal years 2005, 2004 and 2003 include revenues
from operations divested through June 30, 2004 of $0.6 million, $251.1 million and $679.3
million, respectively.
 77




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 21. REVENUE BY SERVICE LINE
  Year ended June 30,2005
    
    
    2004
    
    
    2003Business process outsourcing (1)
    
    $
    3,237,981
    
    
    $
    3,017,699
    
    
    $
    2,582,773Information technology outsourcing
    
    
    858,639
    
    
    
    694,890
    
    
    
    492,848Systems integration services (2)
    
    
    254,539
    
    
    
    393,804
    
    
    
    711,585Total
    
    $
    4,351,159
    
    
    $
    4,106,393
    
    
    $
    3,787,206
 
 (1)
    
    Includes $39.4 million and $123.7 million of revenues for fiscal years 2004 and 2003,
respectively, from operations divested through June 30, 2004.(2)
    
    Includes $0.6 million, $218.6 million and $585.8 million of revenues for fiscal years
2005, 2004 and 2003, respectively, from operations divested through June 30, 2004.
 78




---



##### Table of Contents



AFFILIATED
COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 22. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
  June 30,
    
    March 31,
    
    December 31,
    
    September 30,Fiscal Year 2005
    
    2005
    
    2005
    
    2004
    
    2004Revenues
    
    $
    1,214,392
    
    
    $
    1,063,299
    
    
    $
    1,027,286
    
    
    $
    1,046,182Operating income
    
    $
    178,704
    
    
    $
    165,812
    
    
    $
    154,924
    
    
    $
    155,041Net income
    
    $
    110,977
    
    
    $
    114,666
    
    
    $
    96,145
    
    
    $
    94,157Earnings per share  basic
    
    $
    0.88
    
    
    $
    0.90
    
    
    $
    0.75
    
    
    $
    0.74Weighted average shares outstanding
    
    
    126,087
    
    
    
    127,568
    
    
    
    128,619
    
    
    
    127,948Earnings per share  diluted
    
    $
    0.87
    
    
    $
    0.88
    
    
    $
    0.73
    
    
    $
    0.72Weighted average shares outstanding  diluted
    
    
    128,279
    
    
    
    130,229
    
    
    
    131,933
    
    
    
    131,070
 June 30,
    
    March 31,
    
    December 31,
    
    September 30,Fiscal Year 2004
    
    2004
    
    2004
    
    2003
    
    2003Revenues
    
    $
    1,062,447
    
    
    $
    1,009,432
    
    
    $
    997,879
    
    
    $
    1,036,635Operating income
    
    $
    142,981
    (a)
    
    $
    153,820
    (a)
    
    $
    402,981
    (a)
    
    $
    143,929Net income
    
    $
    90,259
    (a)
    
    $
    99,746
    (a)
    
    $
    253,030
    (a)
    
    $
    86,808Earnings per share  basic
    
    $
    0.69
    (a)
    
    $
    0.76
    (a)
    
    $
    1.93
    (a)
    
    $
    0.65Weighted average shares outstanding
    
    
    130,216
    
    
    
    131,503
    
    
    
    131,001
    
    
    
    133,235Earnings per share  diluted
    
    $
    0.68
    (a)
    
    $
    0.72
    (a)
    
    $
    1.80
    (a)
    
    $
    0.62Weighted average shares outstanding  diluted
    
    
    133,304
    
    
    
    139,348
    
    
    
    141,880
    
    
    
    143,960
 
 (a)
    
    During the second quarter of fiscal year 2004, we completed the sale of our Divested
Federal Business. As a result of this transaction, we recognized a pretax gain of $284.3
million ($181.7 million, net of income tax) in the second quarter of fiscal year 2004. We
recognized additional pretax gains of $0.5 million ($0.3 million, net of income tax) and
$0.4 million ($0.3 million, net of income tax) in the third and fourth quarters of fiscal
year 2004, respectively, primarily due to our final working capital settlement with
Lockheed Martin Corporation. Please see Note 18 for discussion of other significant items,
which impacted fiscal year 2004 results of operations.
 23. NEW ACCOUNTING PRONOUNCEMENTS
   79




---



##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  24. SUBSEQUENT EVENTS
   80




---



##### 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
  81




---



##### 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:
 Report of Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of IncomeConsolidated Statements of Changes in Stockholders EquityConsolidated Statements of Cash FlowsNotes to Consolidated Financial Statements
 (b)
    
    ExhibitsReference is made to the Index to Exhibits beginning on page 84 for a list of all
exhibits filed as part of this report.
 82




---



##### Table of Contents



SIGNATURES
  Affiliated Computer Services, Inc.Date: September 13, 2005By:
    /s/ Warren D. EdwardsWarren D. EdwardsExecutive Vice President and

Chief Financial Officer  Signature
    
    Title/s/ Darwin Deason

(Darwin Deason)
    
    Director, Chairman of the Board/s/ Jeffrey A. Rich

(Jeffrey A. Rich)
    
    Director and Chief Executive Officer/s/ Mark A. King

(Mark A. King)
    
    Director, President and Chief Operating Officer/s/ Warren D. Edwards

(Warren D. Edwards)
    
    Executive Vice President and Chief Financial Officer/s/ Charles E. McDonald

(Charles E. McDonald)
    
    Senior Vice President and 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
 83




---



##### 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).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
Notes due 2015 (filed as Exhibit 4.3 to our Current Report on Form 8-K, filed June 6, 2005 and
incorporated herein by reference).
 84




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit Name4.8
    
    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).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
    
    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).10.4
    
    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 Jeffrey A. Rich, Mark A. King, Warren D. Edwards, Lynn
Blodgett, Harvey Braswell (September 14, 2004), John Brophy and William L. Deckelman, Jr. (filed as
Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed May 17, 2004 and incorporated herein by
reference).10.5
    
    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 Jeffrey A. Rich, 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).10.6
    
    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).10.7
    
    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).10.8
    
    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).10.9
    
    Amendment to Supplemental Executive Retirement Agreement, dated as of November 13, 2003, by and
between Affiliated Computer Services, Inc. and Darwin Deason (filed as Exhibit 10.1 to our Quarterly
Report on Form 10-Q, filed February 17, 2004 and incorporated herein by reference).10.10
    
    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).10.11
    
    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).10.12
    
    Affiliated Computer Services, Inc. 401(k) Supplemental Plan, effective as of July 1, 2000, as amended
(filed as Exhibit 10.15 to our Annual Report on Form 10-K, filed September 13, 2004 and incorporated
herein by reference).10.13
    
    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
 85




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit NameFargo 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).10.14
    
    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).10.15*
    
    Affiliated Computer Services, Inc. Executive Benefit Plan, effective as of January 1, 2002, as amended.10.16
    
    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)10.17*
    
    Form of Stock Option Agreement10.18*
    
    Form of Stock Option Agreement (UK grant)21*
    
    Subsidiaries of the Company23.1*
    
    Consent of PricewaterhouseCoopers LLP23.2*
    
    Consent of Value Incorporated31.1*
    
    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 SEC Release 34-47551, 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 SEC Release 34-47551, this Exhibit is
furnished to the SEC and shall not be deemed to be filed.
 
 *
    
    Filed herewith.
    
    Management contract or compensatory plan or arrangement.
 86