UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Mark One

[  X  ]		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the fiscal year ended June 30, 2009
		or
[     ]		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

(Exact name of registrant as specified in its charter)

Delaware		51-0310342
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class		Name of exchange on which registered
Class A common stock, par value $.01 per share		New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements the past 90 days. Yes [X ] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer		[X]				Accelerated filer		[  ]
Non-accelerated filer		[   ]		(Do not check if a smaller reporting company)		Smaller reporting company		[  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X ]

As of August 20, 2009, 91,042,152 shares of Class A common stock and 6,599,372 shares of Class B common stock were outstanding. The aggregate market value of the Class A common voting stock held by nonaffiliates of Affiliated Computer Services, Inc. as of the last business day of the second quarter of fiscal year 2009 approximated $4,081,054,213.

DOCUMENTS INCORPORATED BY REFERENCE: None

 

 

AFFILIATED COMPUTER SERVICES, INC.

FORM 10-K
Fiscal Year Ended June 30, 2009

Part I
Item 1.		Business		1
Item 1A.		Risk Factors		11
Item 1B.		Unresolved Staff Comments		19
Item 2.		Properties		20
Item 3.		Legal Proceedings		20
Item 4.		Submission of Matters to a Vote of Security Holders		20
Part II
Item 5.		Market for Our Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		21
Item 6.		Selected Financial Data		23
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		48
Item 8.		Financial Statements and Supplementary Data		50
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		98
Item 9A.		Controls and Procedures		98
Item 9B.		Other Information		98
Part III
Item 10.		Directors, Executive Officers and Corporate Governance		99
Item 11.		Executive Compensation		103
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		126
Item 13.		Certain Relationships and Related Transactions, and Director Independence		127
Item 14.		Principal Accounting Fees and Services		128
Part IV
Item 15.		Exhibits, Financial Statement Schedules		129
EX-21.1
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

ITEM 1. BUSINESS

Affiliated Computer Services, Inc. (“ACS” or the “Company”), is a provider of business process outsourcing and information technology services to commercial and government clients. We provide non-core, mission critical services that our clients need to run their day-to-day business. Our services are focused on vertical markets and centered on our clients’ needs. The services we provide enable our clients to concentrate on their core operations, respond to rapidly changing technologies and reduce expenses associated with their business processes and information processing. We typically service our clients through long-term contracts and leverage our global production model with approximately 74,000 employees worldwide. We support client operations in more than 100 countries.

We were incorporated in Delaware on June 8, 1988. Our corporate headquarters is located in Dallas, Texas. We are a Fortune 500 and S&P 500 company.

Business Strategy

The cornerstone of our business strategy is our focus on vertical markets and technology solutions that we can leverage across our business and client base. We have significant subject matter expertise and experience in the vertical markets we serve, which, combined with our business strategy, provides us with capabilities to deliver innovative solutions that enable our clients to achieve better outcomes through outsourcing.

The key elements of our business strategy include the following:

Focus on Vertical Markets– Our strategy is to continue to identify common vertical markets where we can leverage technology solutions across our existing client base and to attract new clients within the vertical markets. In addition, we seek to expand our services into new vertical markets where we can leverage our technology solutions, existing subject matter expertise or process expertise. Our ability to identify vertical markets provides us additional opportunities for growth and our ability to leverage our technology solutions provides us with opportunities to achieve economies of scale.

Innovate – We strive to continue to improve our technology and business process solutions through innovation and acquisitions. Our ability to innovate allows us to provide our clients with additional opportunities to reduce their operating expenses and to focus on their core operations, which deepens our client relationships, as we invest in their long-term success. Acquisitions allow us to expand our service offerings with proven innovative solutions and technology platforms.

Leverage our Operational Excellence Model – We believe that our long-term success is dependent upon our ability to apply our operational excellence model to our client contracts and internal processes. Our operational excellence model leverages our global production model, our incentive based compensation process, our proprietary systems and our financial discipline. Our ability to leverage our operational excellence model also helps us maintain a competitive cost structure.

Stay Nimble and Accountable– Our goal is to remain nimble and accountable by keeping our business units small and responsive. We believe our organizational structure provides us with better opportunities for growth.

Invest in our Sales Force and Processes – We intend to invest in our sales force and sales processes in order to generate incremental new business signings. Our ability to grow our new business signings is a critical element to growing our total and internal revenues.

Recruit, Train & Retain –We seek to hire motivated individuals with strong character and leadership traits and provide them with ongoing technological and leadership skills training. We believe that attracting, training, and retaining high quality employees is essential to our growth.

Complete Strategic and Tactical Acquisitions - Our acquisition strategy is to acquire companies and technology to expand the products and services we offer to existing clients, to obtain a presence in new, complementary markets and to expand our geographic presence.

Employees

As of June 30, 2009, we had approximately 74,000 employees, including approximately 42,000 employed domestically, with the balance employed in our international operations. Of our domestic employees, less than 1% are represented by a union. Approximately 1,900 of our international employees are represented by unions, primarily in Mexico, Ghana and Brazil. Approximately 1,400 of our European employees are subject to collective bargaining agreements. Employment arrangements for our international employees are often governed by works or labor council arrangements. We have had no work stoppages or strikes by our employees. Management considers its relations with employees and union officials to be good.

As of June 30, 2009, approximately 59,000 domestic and international employees support our commercial clients, approximately 14,000 primarily domestic employees support our government clients and approximately 1,000 primarily domestic employees are in our Corporate segment.

Segment Information

Our business is structured around two reportable operating segments – Commercial and Government. These segments are comprised of businesses that are focused on specific vertical markets or horizontal solutions. Our Commercial and Government segments are comprised of the following:

Commercial Reportable Operating Segment		Government Reportable Operating Segment
Commercial Services		Government Solutions
Human Capital Management Solutions		State & Local Solutions
Commercial Education and Financial Services		Federal Solutions
Finance and Accounting		Government Healthcare Solutions
Information Technology Outsourcing		Transportation Solutions
		Electronic Toll Collections
Business Process Outsourcing		Photo Enforcement and Violations Processing
Communications and Consumer Goods		Public Transport
Healthcare Payer and Insurance		Parking
Healthcare Provider
Travel, Transportation and Logistics
Mortgage and Financial Services

Our focus on vertical markets and horizontal solutions provides us with subject matter expertise which allows us to deliver innovative and leveragable solutions that drive better outcomes for our clients.

During the last three fiscal years, our revenues by segment were as follows (in thousands):

		Fiscal Year Ended June 30,
		2009				2008				2007
Commercial (a)		$	3,909,293			$	3,673,981			$	3,404,935
Government (b)			2,613,871				2,486,569				2,367,544
Total revenues		$	6,523,164			$	6,160,550			$	5,772,479

(a)		Includes $0.1 million, $14.0 million and $18.0 million of revenues for fiscal years 2009, 2008 and 2007, respectively, from operations divested through June 30, 2009.
(b)		Includes $0.2 million, $17.9 million and $21.9 million of revenues for fiscal years 2009, 2008 and 2007, respectively, from operations divested through June 30, 2009.

Commercial Segment

Our Commercial segment accounted for approximately $3.9 billion, or 60% of our fiscal year 2009 revenues. Our Commercial segment provides business process outsourcing, information technology solutions, systems integration services and consulting services to our commercial clients. This segment is focused on both vertical markets and horizontal solutions. Vertical markets focus considers opportunities for growth and vertical market subject matter expertise including telecommunications, manufacturing, healthcare, transportation, consumer goods and retail, and financial services, which includes education services. Within the vertical markets we serve, we develop or acquire technology solutions that we leverage across our client base and each vertical market which provides us with economies of scale. Our horizontal solutions include information technology outsourcing, human capital management, finance and accounting, customer care, transaction processing and payment services.

Pricing for our services in the commercial market varies by type of service. For business process outsourcing services, we typically price these services on the basis of the number of accounts, resources utilized or transactions processed. Our information technology services are normally priced on a resource utilization basis. Resources utilized include processing time, the number of desktops managed, professional services and consulting time and materials, data storage and retrieval utilization, client accounts, client employee headcount and output media utilized. Our systems integration services are generally offered on a time and materials basis to clients under short-term contractual arrangements. For consulting services, we typically price these services on a time and materials or fixed fee basis.

The Commercial segment is organized to leverage our horizontal solutions and vertical market focus. Finance and Accounting, together with Human Capital Management Solutions and Commercial Education and Financial Services, comprise the Commercial Services operations within our Commercial segment.

Our significant horizontal solutions include the following:

Human Capital Management Solutions (“HCMS”)

We provide a comprehensive portfolio of human resources solutions that allows our clients to benefit from best practices, our subject matter expertise, including consulting, and technological solutions. Our human resources services allow our clients to focus on their core competencies while improving the function and performance of their human resources departments. Our HCMS services include the following:

Buck Consulting – Buck is a global human resources consulting firm that helps our clients develop, deploy, and manage their human capital. We develop long-term client relationships based on our core values of innovation, service and professional standards. We deliver solutions to our clients based on their unique human resources and business challenges. Buck is organized into the following integrated practice areas:

Retirement – We offer retirement solutions that focus on financial planning, risk management, and fiduciary effectiveness, including actuarial services to determine funding and expense; defined benefit and defined contribution plan design; nonqualified plan design, funding, and administration; assistance with mergers, spin-offs, and plan terminations; tax and legal compliance; corporate governance and global retirement services.

Health and Productivity – Our health and productivity consultants provide a variety of health care strategies that result in competitive benefits and increased productivity. We provide comprehensive plan management services and specialize in several areas including clinical, pharmacy, wellness, absence management, communication, actuarial, legal, and plan design, as well as consumer-driven health care plan design, administration, and communication.

Global Human Resources (“HR”) Technology and Administration – Our technology consultants work with our clients to assess their current HR structure, processes, underlying technology, and service providers; develop integrated web-based solutions and flexible co-sourcing and outsourcing options tailored to our clients’ unique challenges and needs; and design and implement user-friendly, client-branded human resources portals.

Human Capital Management Consulting – We offer an end-to-end process that helps our clients restructure their human resources organization, staff deployment, and service delivery models that align our clients’ current and future business needs with their organization.

Compensation – Our compensation consultants provide comprehensive solutions to motivate high performance, develop executive and director compensation programs, address complex nonqualified deferred compensation plans, and optimize sales force effectiveness.

Communication – Our communication consultants develop comprehensive strategies to support our clients’ organizational goals, principles, and issues.

Total Benefits Outsourcing – Our Total Benefits Outsourcing solution allows our clients to analyze and manage benefit programs including access to emerging trends, best practices and industry expertise. We leverage technology and best practices to deliver process efficiencies and cost savings to our clients. Our services include administration of the following types of plans: defined contribution, defined benefit and health and welfare plans. We also offer complete employee service center capabilities.

Human Resources Outsourcing – We help our clients redesign, redeploy and restructure their human resources organization, staff and service delivery model. Our comprehensive service offerings include benefits administration, compensation management and administration, learning services, on-boarding, payroll administration, performance management and administration, processing services, reporting and analytics, self-service tools, succession planning and workflow tools.

Learning Process Outsourcing – Our learning process outsourcing (“LPO”) team helps clients analyze, transform and improve their learning processes and capabilities. We provide a full range of LPO services to our clients including learning administration and operations, a flexible, scalable, and extensible learning platform, content development services and management services.

Commercial Education and Financial Services

We are dedicated to helping higher education institutions improve quality of service, streamline internal processes, reduce costs and enhance overall productivity by leveraging our technology, support, best practices and subject matter expertise. Our loan servicing system provides a comprehensive range of loan services including inbound and outbound call center services, payment processing, entitlement processing, claim filing, pre-default collections, skip tracing and originations.

We also provide student financial aid office outsourcing services, including student financial aid counseling, online self-service tools, application processing, and disbursement of funds; student enrollment services; tax credit reporting services, including data collection, transmission, management, reporting, fulfillment and mailing and our document imaging solution which allows us to process, scan and image borrower correspondence, entitlement forms and other records so they may be available online without the need for special software or hardware.

Finance and Accounting

Our Finance and Accounting (“F&A”) services allow our clients to benefit from our global delivery model and our quality management systems, resulting in better accuracy, timeliness and reduced risk for our clients. Our F&A solutions utilize our proprietary workflow tools, allow us to leverage our clients’ existing technology and help our clients avoid investments in additional technology.

Our broad F&A services include order-to-cash services (order management and billing, credit analysis, dispute and deduction, accounts receivable and collections), procure-to-pay services (sourcing services, order management, settlement of invoices, reconciliation of transactions, control/audit services and reporting), payroll processing, travel and expense accounting services, general accounting services (overseeing, coordinating and controlling the accounting records and closing activities of an organization such as intercompany consolidations and close, account reconciliations, fixed assets, inventory/cost accounting and general ledger services), and treasury and cash management services (including sales and use tax compliance services, other tax compliance activities and several treasury support services that include bank account management and reconciliation, cash forecasting and tax processing).

Information Technology Outsourcing (“ITO”)

Our ITO services allow our clients to focus on their core competencies while cost-effectively managing the quality of service delivery, infusing thought leadership and innovation to transform our clients’ IT organization. Our ITO services include the following:

Data Center Outsourcing - We provide a 24x7 support organization that maintains a unified set of tools and processes to support our clients’ information technology (“IT”) environments including: systems administration, database administration, systems monitoring, batch processing, data backup and capacity planning. We have 14 data centers and three enterprise command centers (“ECC”) in Dallas, Bangalore, India and Monterrey, Mexico. The Dallas facility operates as both a data center and an ECC. Our ECCs offer 24x7 access to operations analysts, service desk teams and systems programmers who deliver practices and procedures established to support and monitor our clients’ processing environment. Our data centers perform various processing activities with network monitoring and problem escalation supported by the ECCs.

Midrange Server Outsourcing - We support our clients’ need for adaptable computing environments and their potential growth. We provide comprehensive systems support services, including systems administration, database administration, systems monitoring, batch processing, data backup and capacity planning for midrange server environments. We leverage our integrated toolsets and procedures while providing our clients with a scalable and automated processing environment.

Network Outsourcing - We provide telecommunications management services for voice and data networks including routers, switches, firewalls, VPN concentrators, channel extension nodes, telephone equipment, circuits and satellite earth stations. We are able to leverage our enterprise agreements, proprietary tools, procedures and skilled personnel to provide our clients with a scalable and automated processing environment.

Remote Infrastructure Management (RIM) - We provide RIM services that allow our clients to retain control of their IT assets but outsource the day-to-day IT operations management.

Help Desk/Service Desk Management - We deliver specialized service desk support from self-service to remote management and diagnostics. Our approach leverages real-time monitoring tools and techniques to ensure the quality and effectiveness of our service.

Desktop Outsourcing - Our desktop services provide our clients with a comprehensive approach to managing their end user platforms and devices. We design and execute desktop management strategies that address and resolve issues such as enterprise bandwidth constraints, unstable computing environments, areas of insecurity and unavailable network resources. Our desktop management services focus heavily on preventive and remedial maintenance in conjunction with proactive programs.

Managed Storage - Data storage requirements have become increasingly larger and more complex. We help our clients define, monitor and optimize their data storage requirements while reducing the complexity of their storage environments and associated costs.

Utility Computing - We support large corporations with our utility computing model. Utility computing provides “pay for use” pricing for midrange server clients, which provides variability in resource pricing and relieves our clients from the burden of asset ownership. We have teamed up with strategic partners to provide innovative utility computing solutions that are available to execute enterprise applications and support data needs in a way that maximizes client value and we are able to provide computing, storage and software as a service.

Disaster Recovery - We approach disaster recovery as a multidisciplinary function. We assess our clients’ specific enterprise requirements and then deploy solutions based on these requirements. Our solutions encompass routine off-site storage of backup data to full-scale duplicate sites that can be hot-switched on with little lead time.

Security Services - Our solutions provide security from the desktop to LAN/WAN and internet levels. We leverage a combination of mature methodologies and industry best practices that afford increased ability to protect valuable data while also satisfying industry audit requirements.

IT Commercial Services - We possess category knowledge and tools and processes that allow us to reduce IT and telecommunication costs for our clients. We support a wide range of platforms, software packages and technology operations and have alliances with major suppliers.

The key vertical markets, which comprise the Business Process Outsourcing operations within our Commercial segment, are as follows:

Communications and Consumer Goods

We deliver business process outsourcing (“BPO”) and information technology (“IT”) solutions to the communications industry, including voice, data, broadband, telephone, wireless, cable, entertainment, and satellite service providers. We operate customer care centers that provide client support services, help desk services, and third-party verification of service changes. We also provide client relationship management services, finance and accounting functions, and information technology solutions. Our communications and consumer goods vertical market includes our relationship with our largest client, Sprint Nextel Corporation, which represents 4% of our fiscal year 2009 revenues. With our acquisitions of Grupo Multivoice and e-Services Group International, we provide clients throughout the Americas and Europe a suite of cost competitive bilingual services in English and Spanish for their business process outsourcing solutions.

Healthcare Payer and Insurance

We deliver administrative efficiencies to our healthcare payer clients through our scalable and flexible transactional business solutions which encompass our global delivery model and domestic payer service centers. We offer an open technology solution that can be based on our technology or leverage our clients’ existing technology infrastructure. Our transactional business provides solutions for operational towers including claims, membership and billing, provider maintenance and eligibility.

We also provide cost-of-care efficiencies through our cost recovery and cost avoidance services. We assist our clients in avoiding and ultimately recovering dollars related to inappropriately paid claims. Utilizing our data mining and business rule engines, we identify, track, and audit healthcare claims to help our clients recover or avoid inappropriately paid claims.

Healthcare Provider

Our healthcare provider business offers services and solutions to meet the critical financial, operational, and clinical needs of the healthcare provider industry. We offer a full range of consulting services, analytic solutions, revenue cycle management, and outsourcing services and solutions.

Travel, Transportation and Logistics

Our travel, transportation and logistics business helps our clients improve client service, reduce operating costs, access technology and processes, and increase accuracy and timeliness. Through our comprehensive administration services, including customer care, marketing, consulting and advertising services, we help our clients maintain control of mission critical processes.

Mortgage and Financial Services

Our end-to-end business process solutions are flexible and leverage our broad global footprint. We help our clients improve turn-around time in mailroom operations, streamline customer care departments, upgrade IT platforms, improve client retention, reduce cycle time, and drive revenue streams. Our services include credit application processing (mailroom, data capture, fraud detection) and credit card client care (activations, client service, welcome calls, credit protection, collections). We provide mortgage imaging services as well as audit processing and review, legal description text extraction via U.S.-based and offshore processes and electronic final document recordation for the mortgage industry.

Government Segment

During fiscal year 2009, our Government segment generated revenues of approximately $2.6 billion, or 40% of our revenues. Our services help domestic and international government agencies reduce their operating costs, increase their revenue streams and improve the quality of services that they deliver to their constituents. We provide services to four broad government markets which include state and local government, government healthcare, federal government and transportation solutions, which provides services to both domestic and international clients. Our services include technology

and business process based services with a focus on transaction processing, child support payment processing, electronic toll collection, traffic violations processing, program management services, such as Medicaid fiscal agent services, and student loan processing services.

Pricing for our services in the government market varies by the type of service. For business process outsourcing services, we typically price our services based on the number of transactions processed or the number of human services cases managed. Our information technology services are normally priced on a resource utilization basis. Resources utilized include processing time, the number of desktops managed, professional services and consulting time and materials, data storage and retrieval utilization, client accounts, client employee headcount and output media utilized. For services where a development project is required, pricing is generally on a fixed price basis.

In connection with the sale of the majority of our federal business in November 2003 (the “Divested Federal Business”), we entered into a five-year non-competition agreement with Lockheed Martin Corporation that generally prohibited us from offering services or products that were previously provided by the Divested Federal Business. This non-competition agreement expired in November 2008. The expiration of this agreement allows us to compete for federal government contracts, beyond our current relationships with the Department of Education and other federal agencies.

State and Local Solutions, Federal Solutions and Government Healthcare Solutions comprise the Government Solutions key vertical markets within our Government segment as discussed below:

State & Local Solutions (“SLS”)

We help state and local government agencies by providing services that improve agencies’ operating efficiency, increase the level of service provided to their constituents, increase agencies’ revenue streams and reduce overall operating costs of service delivery. Our service offerings include the following:

IT Services – We provide information technology services to state and local governments throughout the United States. Our information technology services include full data center management, application integration and maintenance, network management and security, seat management, helpdesk services, and disaster recovery services.

Child Support Solutions – We provide child support payment processing services, including high volume remittance processing and disbursements, as well as associated employer outreach and client service activities. Our services include e-Childcare Solutions^®, a paperless, web-based time and attendance system. States that use e-Childcare can document and pay for child care at the point of service, verify eligibility in real time and compensate providers for actual services rendered.

Electronic Benefits Transfer (“EBT”) – We provide electronic payment services to our clients, including EBT programs under which we deliver food stamp and cash benefits using a debit-type electronic card rather than paper checks or food coupons. We also provide our clients with a secure online Women, Infants and Children (“WIC”) EBT system. Our solution provides our clients with online, real-time access to WIC information through a browser-based administrative application, automating the distribution of benefits. We also leverage our debit or electronic payment card solutions to disburse government benefits, including unemployment insurance, Temporary Assistance for Needy Families (“TANF”), child support and employee payroll.

Eligibility Solutions – We offer a range of services and solutions to assist governments in their efforts to modernize their human services eligibility process that range from an enterprise-wide transformation using our @dvtantage proprietary software product to modernizing their eligibility systems with a commercial off-the-shelf solution.

Government Records Management – We provide electronic recording, internet hosting and web delivery services, custom data conversions, land record re-indexing, index verification and re-creation services, Kodak-recognized archival film laboratories, security microfilming, tape storage and duplication services, and secure underground storage for county and municipal clerks, recorders of deeds, registers, and title companies.

Unclaimed Property – We provide unclaimed property management services and help our clients identify and collect on property, maintain records databases, and manage claims and customer service. We also help our clients with compliance, operations, systems and policy matters.

Federal Solutions

Our services benefit federal agencies and their constituents by leveraging our subject matter expertise, technology solutions and performance-based resource management which improves the federal government’s operating efficiency, increases the level of service provided to its constituents and reduces the federal government’s overall operating costs. Our federal solutions service offerings include the following:

Student Loan Processing – We provide comprehensive loan servicing for the Department of Education’s Direct Student Loan program, including consolidation loan processing, debt collection services on delinquent accounts, IT infrastructure operations and support, maintenance and development of information systems, and portfolio management services.

Electronic Payment Card – We leverage our debit or electronic payment card solutions to disburse federal government benefits to unbanked Social Security recipients under a subcontract with Comerica, Inc. to the Department of the Treasury.

Administrative Services – We provide mail handling, scanning, electronic document management, government records management and other administrative services to the Social Security Administration and other federal government agencies.

Customer Care – We offer call management, public service dispatch, online services, emergency incident reporting, project management and IT integration skills to governmental organizations, as well as data centralization and trend analysis.

Government Healthcare Solutions (“GHS”)

GHS provides our state government clients with health program management solutions to help them administer their programs and control the cost of healthcare. We support the full healthcare continuum including member enrollment, claims processing, health management and eHealth solutions.  Our GHS service offerings include the following:

Health Program Administration – We provide Medicaid program administration and operate customized systems as of June 30, 2009 for 13 states and the District of Columbia and offer a comprehensive set of services, including managed care enrollment, eligibility administration, claims processing, provider relations and third-party liability services. We provide business process transformation services, systems development and implementation services, program and policy consulting, analytic and clinical consulting services, customer care operations, health information exchange solutions, claims processing and mailroom operations. Our GHS proprietary, service oriented architecture, next generation Enterprise Medicaid Management Information System is in implementation for three state Medicaid programs.

Healthcare and Quality Management – We offer a suite of modeling, profiling, reporting and health risk prediction tools including Medical Utilization Management, Medical Case Management, Disease Management, and Workers’ Compensation Case Management. We hold Utilization Review Accreditation Commission (“URAC”) certifications for utilization management, case management, disease management, and workers’ compensation case management.

Eligibility & Enrollment Solutions – We offer solutions that assist our government healthcare clients expand their constituents’ access to care, maximize voluntary enrollment, and help consumers navigate their healthcare choices. Our services include web-based eligibility determination, choice counseling, enrollments and transfers, customer care operations, outreach and education and quality assurance. We help government agencies implement and manage highly configurable solutions that meet their program needs.

Pharmacy Benefits Management – We provide state governments with customized solutions to meet their pharmacy program goals. We help our clients to contain costs, improve drug therapy, and deliver value to their healthcare-dependent constituents. We serve 28 pharmacy benefits management programs in 24 states and the District of Columbia as of June 30, 2009.

Transportation Solutions (“TS”)

We help transportation agencies worldwide address their unique challenges with revenue collection and regulation compliance services. From fare collection to toll solutions and from back-office processing to infrastructure installation, we provide systems and services that help governments with their transportation problems. We serve domestic and international clients, helping them address common problems around the world, including traffic management and congestion and the desire to improve efficiency of fare collections systems. Our TS business serves an international client base including clients in the United States, Canada, Mexico, France, Switzerland, Italy, Latvia, Saudi Arabia and Australia. Our service offerings include the following:

Electronic Toll Collection (“ETC”) – Our ETC solution supports all aspects of ETC operations, including account maintenance, autoload, transponder distribution and replacement, and violations processing. We also provide lane integration solutions, including Open Road Tolling, which allows drivers to pay tolls at highway speeds.

Commercial Vehicle Operations – PrePass^® is a sophisticated, nationwide intelligent transportation system that enables motor carriers to comply electronically with state weight and operating requirements before passing weigh stations at highway speeds. There are more than 412,000 trucks enrolled in the program, which operates in 28 states as of June 30, 2009.

Motor Vehicle Services – Our offerings include systems for processing and tracking fuel taxes and registrations across states, as well as service centers for state departments of motor vehicles to handle vehicle registration, titling, driver licensing and permit issuance.

Photo Enforcement and Violations Processing – We offer a variety of photo enforcement solutions, including red light, speeding, work zone, school zone, and railroad crossing enforcement, each built on our subject matter expertise and supported by our back-end violations processing systems.

Public Transport – Our customized fleet management and fare collection systems are used by municipal, regional and national transit agencies around the world to improve their operation and increase their revenue. From paper tickets to the most advanced contactless smart cards,  from automatic ticket vending machines to Web purchase, from small private companies to multimodal interoperable systems with clearing facilities, from Houston to Hong Kong; our systems are used by millions of passengers every day in more than 30 countries as of June 30, 2009.

On-Street Parking – We provide convenient payment options for on-street parking such as web and phone interfaces, improved parking management tools including new devices for ticket issuance and more effective ticket collections programs. We also integrate multiple functions into a single responsibility center that increases accountability and leads directly to improved performance.

Off-Street and Airport Parking – We design off-street parking applications to meet our clients’ unique requirements and provide solutions that include parking guidance systems that direct patrons to open facilities, access and payment options that facilitate entering and exiting a parking facility, automatic license plate recognition tools that help avert revenue shrinkage and comprehensive back office management solutions that ease reporting and facility management.

Revenues by Service Line

Our revenues by service line over the past three years are shown in the following table (in thousands):

		Fiscal Year Ended June 30,
		2009				2008				2007
Business process outsourcing (a)		$	5,148,750			$	4,792,403			$	4,322,164
Information technology services			1,025,469				1,041,036				1,013,801
Systems integration services			348,945				327,111				436,514
Total revenues		$	6,523,164			$	6,160,550			$	5,772,479

(a)		Includes $0.3 million, $31.9 million and $39.9 million of revenues for fiscal years 2009, 2008 and 2007, respectively, from operations divested through June 30, 2009.

Competition

The markets for our services are intensely competitive and highly fragmented. We believe our competitive advantage comes from our use of world-class technology, subject matter expertise, process reengineering skills, proprietary software, our global production model and activity-based compensation.

We compete with a variety of companies in the markets we serve, as well as in-house departments performing the functions that we are seeking to outsource. Competition can be large multi-national corporations, accounting or consulting companies, smaller niche service providers and offshore service providers in low-cost locations.

Global Production Model

We believe our global production model is one of our key competitive advantages. This model encompasses employees in production centers around the world including India, Mexico, the Philippines, Jamaica, Ghana, Brazil, Guatemala, Chile, Argentina, Spain, Poland and Ireland, among others. Our global production model is enabled by our use of technology, including our workflow technology, which allows us to securely distribute discreet portions of client deliverables within data privacy limits across our global workforce and reassemble the finalized deliverable once each discreet portion is complete. Our global production model allows us to leverage lower cost production locations, consistent methodology and processes, and time zone advantages. During fiscal 2009, we increased the headcount in our global production model and anticipate further increases in the future.

Client Base

Our five largest clients accounted for approximately 14%, 13% and 13% of our fiscal years 2009, 2008 and 2007 revenues, respectively. Our largest client, Sprint Nextel Corporation, represented approximately 4%, 4% and 3% of our consolidated revenues for fiscal years 2009, 2008 and 2007, respectively.

Factors that clients consider when determining whether to outsource a function and the choice of service provider include the following: service offerings, service delivery approach, subject matter expertise, technological innovations, value-add propositions, reputation, references and price.

Geographic Information

Approximately 92%, 92% and 93% of our revenues for fiscal years 2009, 2008 and 2007, respectively, were derived from domestic clients. As of both June 30, 2009 and 2008, approximately 88% of our long-lived assets were located in the United States. As of June 30, 2009 and 2008, the largest concentrations of our long-lived assets located outside the United States were in France, the United Kingdom and Mexico, with approximately 2% of our total long-lived assets in each country.

Certifications and Governance

We have included the CEO and CFO certifications required by Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended, as Exhibits 31.1 and 31.2, respectively, to this fiscal year 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The Annual CEO Certification, as required by Section 303A.12(a) of the New York Stock Exchange’s (“NYSE”) listing rules, regarding our compliance with the corporate governance listing standards of the NYSE, was submitted to the NYSE on May 29, 2009.

U.S. Securities and Exchange Commission Reports

All of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and all amendments to those reports, filed with or furnished to the SEC on or after May 14, 1996, are available free of charge through the Investor Relations page of our internet website, www.acs-inc.com, as soon as reasonably practical after we have electronically filed such material with, or furnished it to, the SEC. Information contained on our internet website is not incorporated by reference in this Annual Report on Form 10-K. In addition, the SEC maintains an internet website containing reports, proxy and information statements, and other information filed electronically at www.sec.gov. You may also read and copy this information, for a copying fee, at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room.

ITEM 1A. RISK FACTORS

The risks described below should not be considered to be comprehensive or all-inclusive. If any events occur that give rise to the following risks, our business, financial condition, cash flow, prospects or results of operations could be materially and adversely affected, and as a result, the trading price of our Class A common stock could be materially and adversely impacted. Additional risks that we do not yet know of or that we currently believe are immaterial may also impair our business, financial condition, cash flow, prospects or results of operations. These risk factors should be read in conjunction with other information set forth in this report, including our Consolidated Financial Statements and the related Notes.

We have issued debt and have a substantial uncommitted facility available to us. With respect to the debt, we have $250 million in Senior Notes due on June 1, 2010 which requires us to have sufficient funds or credit available to repay or refinance that amount to avoid a default under those notes and a potential cross default under our other debt and credit facility or other debt instruments. If interest rates rise or if we draw additional amounts under the facility, our debt service cost could increase and limit cash flow available to fund our operations, and limit our ability to obtain further debt or equity financing.

As of June 30, 2009, we have outstanding $250 million aggregate principal amount of 4.70% Senior Notes due June 1, 2010 and $250 million aggregate principal amount of 5.20% Senior Notes due June 1, 2015 (collectively, the “Senior Notes”) and approximately $1.79 billion is drawn under our Credit Facility (defined below). If we do not have sufficient funds or credit available to repay or refinance the Senior Notes due on June 1, 2010 on that date, we will be in default under those notes (which may cause a cross default under our other Senior Notes and Credit Facility).

The Credit Facility provides for a senior secured term loan facility of $1.8 billion (the “Term Loan Facility”) and a senior secured revolving credit facility of $1 billion (the “Revolving Facility”) (collectively, the “Credit Facility”). The Credit Facility includes an uncommitted accordion feature of up to $750 million in the aggregate allowing for future incremental borrowings under the Revolving Facility or the Term Loan Facility, which may be used for general corporate purposes. An additional uncommitted accordion feature which allowed for incremental borrowings to be used to fund additional purchases of our equity securities or extinguishment of our Senior Notes expired on March 20, 2009.

Based on the current leverage ratios under our Credit Facility, we had approximately $483.0 million available for current draw under this revolving facility. Obligations under the Credit Facility are guaranteed by us and substantially all of our domestic subsidiaries and certain of our foreign subsidiaries (but only to the extent such guarantees would not result in materially adverse tax consequences). In addition, Credit Facility obligations are secured under certain pledge agreements by (i) a first priority perfected pledge of all notes owned by us and the guarantors and the capital stock of substantially all of our domestic subsidiaries and certain of our foreign subsidiaries (subject to certain exceptions, including to the extent the pledge would give rise to additional SEC reporting requirements for our subsidiaries or result in materially adverse tax

consequences), and (ii) a first priority perfected security interest in all other assets owned by us and the guarantors, subject to certain exceptions.

The interest rates under the Credit Facility fluctuate with changes in the market rates and with changes in our leverage ratio. Thus, our debt service cost will increase as market interest rates increase and as our leverage ratio increases. It will be necessary to utilize cash flow from operating activities to fund debt service cost related to our indebtedness. If we fail to have sufficient cash flow to satisfy the debt service cost of our indebtedness, then we could default on our indebtedness, resulting in foreclosure on the assets used to conduct our business. In addition, reduction of our available cash flow may negatively impact our business activities, including our ability to make future acquisitions, our ability to compete for client contracts requiring upfront capital costs, and our ability to meet our other obligations. Further, the amount of our indebtedness and our reduction in available cash flow may limit our ability to obtain further debt or equity financing. In addition, if we are fully drawn under our Credit Facility (including the increase resulting from the accordion features of the Revolving Facility), the book value of our equity may be in a deficit position.

The complexity of regulatory environments in which we operate has increased and may continue to increase our costs.

Our business is subject to increasingly complex corporate governance, public disclosure, accounting and tax requirements and environmental legislation that have increased both our costs and the risk of noncompliance. Because our Class A common stock and Senior Notes are publicly traded, we are subject to certain rules and regulations for federal, state and financial market exchange entities (including the Public Company Accounting Oversight Board, the SEC and the NYSE). We have implemented policies and procedures and continue developing additional policies and procedures in response to recent corporate scandals and laws enacted by Congress. Without limiting the generality of the foregoing, we have made a significant effort to comply with the provisions of the Sarbanes-Oxley Act of 2002 (including, among other things the development of policies and procedures to satisfy the provisions thereof regarding internal control over financial reporting, disclosure controls and procedures and certification of financial statements appearing in periodic reports). Our effort to comply with these new regulations has resulted in, and is likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from revenue generating activities to compliance activities.

We are subject to the oversight of the SEC and other regulatory agencies. Investigations by those agencies could divert management’s focus and could have a material adverse impact on our reputation and financial condition.

As a result of the regulation and oversight of the SEC and other regulatory agencies, we may be subject to legal and administrative proceedings. We are currently the subject of an ongoing SEC and Department of Justice (“DOJ”) investigation related to our historical stock option grant practices. As a result of these investigations, several derivative lawsuits were filed in connection with our stock option grant practices generally alleging claims related to breach of fiduciary duty and unjust enrichment by certain of our directors and senior executives. The shareholder derivative lawsuits have been resolved. However, as a result of these investigations and shareholder actions, we have incurred and could continue to incur significant legal costs and a significant amount of time of our senior management has been focused on these matters that otherwise would have been directed toward the growth and development of our business. The SEC and DOJ investigations are continuing and until these investigations of our stock option grant practices are complete, we are unable to predict the effect, if any, that these investigations and lawsuits will have on our business and financial condition, results of operations and cash flow. We cannot assure that the SEC and/or DOJ will not seek to impose fines or take other actions against us that could have a significant negative impact on our financial condition. In addition, publicity surrounding the SEC’s and DOJ’s investigations, or any enforcement action, even if ultimately resolved favorably for us, could have a material adverse impact on our cash flows, financial condition, results of operations or business.

Our credit rating or further reductions of our credit rating may have an adverse impact on our business.

The ratings on our current outstanding obligations currently established by the ratings agencies are below investment grade. Below investment grade ratings could negatively impact our ability to renew contracts with our existing clients, limit our ability to compete for new clients, result in increased premiums for surety bonds to support our clients contracts, and/or result in a requirement that we provide collateral to secure our surety bonds. Further, certain of our commercial outsourcing contracts provide that, in the event our credit ratings are downgraded to specified levels, the client may elect to terminate its contract with us and either pay a reduced termination fee or, in some limited instances, no termination fee. A credit rating reduction or downgrade could adversely affect these client relationships. There may be reductions in our ratings if we incur additional indebtedness, including amounts that may be drawn under our Credit Facility.

A decline in revenues from or a loss or failure of significant clients could reduce our profitability and cash flow.

Our revenues, profitability, financial condition and cash flow could be materially adversely affected by the loss or failure of significant clients. Some of our clients are in business sectors which have experienced significant financial difficulties or consolidation, and/or the reduction of volumes or their inability to make payments to us, as a result of, among other things, their merger or acquisition, divestiture of assets or businesses, contract expiration, non-renewal or early termination (including termination for convenience) or business or financial failure or deterioration. Economic and political conditions could affect our clients’ businesses and the markets they serve. A prolonged economic downturn, continued high energy prices or a negative or uncertain political climate could, or could continue to, adversely affect our clients’ financial conditions and the level of business activity of our clients and the industries we serve, which may reduce our clients’ demand for our services or depress pricing of those services and have a material adverse affect on our business, prospects, results of operations, revenues and cash flow. In addition, we incur certain fixed costs related to providing our information technology and business process outsourcing services to our clients. Therefore the loss or failure of any one of our significant clients could leave us with a significantly higher level of fixed costs than is necessary for some period of time to serve our remaining clients, thereby reducing our profitability and cash flow.

Our ability to recover capital investments in connection with our contracts is subject to risk.

In order to attract and retain large outsourcing contracts, we sometimes make significant capital investments to perform our services under the contract, such as purchases of information technology equipment and costs incurred to develop and implement software. The net book value of such assets recorded, including a portion of our intangible assets, could be impaired, and our earnings and cash flow could be materially adversely affected in the event of the early termination of all or a part of such a contract or the reduction in volumes and services thereunder for reasons such as, among other things, a client’s merger or acquisition, divestiture of assets or businesses, business failure or deterioration, or a client’s exercise of contract termination rights.

We have non-recurring revenue, which subjects us to a risk that our revenues and cash flows from operations may fluctuate from period to period.

Revenue generated from our non-recurring services, including our consulting services, unclaimed property escheatment services and transportation projects, may fluctuate due to factors both within and outside of our control. Our mix of non-recurring and recurring revenues is impacted by acquisitions as well as growth in our non-recurring lines of business. There is less predictability and certainty in the timing and amount of revenue generated by our non-recurring services and, accordingly, our revenues, results of operations and cash flow may be significantly impacted by the timing and amounts of revenues generated from our non-recurring services.

The markets in which we operate are highly competitive and we may not be able to compete effectively.

We expect to encounter additional competition as we address new markets and new competitors enter our existing markets. If we are forced to lower our pricing or if demand for our services decreases, our business, financial condition, results of operations, and cash flow may be materially and adversely affected. Some of our competitors have substantially greater resources, and they may be able to use their resources to adapt more quickly to new or emerging technologies, to devote greater resources to the promotion and sale of their products and services, or to obtain client contracts where sizable asset purchases, investments or financing support are required. In addition, we must frequently compete with a client’s own internal business process and information technology capabilities, which may constitute a fixed cost for the client. In the future, competition could continue to emerge from large computer hardware or software providers as they shift their business strategy to include services. Competition has also emerged from European and Indian offshore service providers seeking to expand into our markets and from large consulting companies seeking operational outsourcing opportunities.

Our business could be adversely affected if our clients are not satisfied with our services.

Our business model depends in large part on our ability to attract new work from our base of existing clients. Our business model also depends on relationships we develop with our clients so that we can understand our clients’ needs and deliver solutions and services that are tailored to those needs. If a client is not satisfied with the quality of work performed by us or a subcontractor, or with the type of services or solutions delivered, then we could incur additional costs to address the situation, the profitability of that work might be impaired, and the client’s dissatisfaction with our services could damage our ability to

obtain additional work from that client. In particular, clients that are not satisfied might seek to terminate existing contracts prior to their scheduled expiration date and could direct future business to our competitors. In addition, negative publicity related to our client relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new contracts with current and prospective clients.

We are dependent to a significant extent on third party providers, such as subcontractors, a relatively small number of primary software vendors, utility providers and network providers, and could be materially adversely affected if they cannot deliver or perform as expected or if our relationships with them are terminated or otherwise change.

Our ability to service our clients and deliver and implement solutions depends to a large extent on third party providers such as subcontractors, a relatively small number of primary software vendors and utility providers and network providers meeting their obligations to us and our expectations in a timely, quality manner. Our business, revenues, profitability and cash flows could be materially and adversely affected and we might incur significant additional liabilities if these third party providers do not meet these obligations or our expectations or if they terminate or refuse to renew their relationships with us or were to offer their products to us with less advantageous prices and other terms than we previously had. In addition, many of our facilities are located in jurisdictions outside of the United States where the provision of utility services, including electricity and water, may not be consistently reliable and, while there are backup systems in many of our operating facilities, an extended outage of utility or network services may have a material adverse effect on our operations, revenues, cash flow and profitability.

We may not be successful at identifying, acquiring or integrating other businesses or technologies.

Historically, we have made a significant number of acquisitions that have expanded the products and services we offer, provided a presence in a complementary business or expanded our geographic presence. We intend to continue our acquisition strategy. We cannot, however, make any assurances that we will be able to identify any potential acquisition candidates or consummate any additional acquisitions or that any future acquisitions will be successfully integrated or will be advantageous to us. If the businesses or technologies we acquire fail to perform in accordance with our expectations or if their liabilities exceed our expectations, our cash flow, financial condition and results of operations may be adversely affected. Without additional acquisitions, we are unlikely to maintain historical total growth rates.

A failure to properly manage our operations and our growth could have a material adverse effect on our business.

We have expanded our operations in recent years. We intend to continue expansion in the foreseeable future to pursue existing and potential market opportunities. Some market opportunities require that we develop software to perform the services we become contractually obligated to perform, such as our Medicaid activities. This growth places a significant demand on our management and operational resources. In order to manage growth effectively, we must design, develop, implement and improve our operational systems, which may include the design, development and implementation of software and timely development and implementation of procedures and controls. If we fail to design, develop and implement and improve these systems, we may not be able to service our clients’ needs, hire and retain new employees, pursue new business opportunities, complete future acquisitions or operate our businesses effectively. We could also trigger contractual credits to clients or a contractual default. Failure to properly transition new clients to our systems, properly budget transition costs or accurately estimate new contract operational costs could result in delays in our contract performance, trigger service level penalties, impair fixed or intangible assets or result in contracts whose profit margins did not meet our expectations or our historical profit margins. Failure to properly integrate acquired operations could result in increased cost. As a result of any of these problems associated with expansion, our business, financial condition, results of operations and cash flow could be materially and adversely affected. In addition, our success depends on our ability to develop and implement services and solutions that anticipate and respond to continuing changes in technology, industry developments and client needs. We may not be successful in anticipating or responding to these developments on a timely basis, and our offerings may not be successful in the marketplace. Also, services, solutions and technologies offered by current or future competitors may make our service or solution offerings uncompetitive or obsolete.

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.

Approximately 40% of our fiscal year 2009 revenues were derived from contracts with federal, state and local governments and their agencies, including our contract with the Department of Education as well as international governments and their

agencies. Governments and their agencies may have the right to terminate many of these contracts at any time, without cause. These contracts, upon their expiration or termination, are typically subject to a bidding process in which we may not be successful. Also, our Department of Education contract and our other federal contracts are subject to the approval of appropriations by the United States Congress to fund the expenditures of the federal government under this contract. Additionally, government contracts are generally subject to audits and investigations by government agencies. If the government finds that we improperly charged any costs to a contract, the costs are not reimbursable or, if already reimbursed, the cost must be refunded to the government. If the government discovers improper or illegal activities in the course of audits or investigations, we may be subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with the government. Any resulting penalties or sanctions could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, the negative publicity that arises from findings in such audits, investigations or the penalties or sanctions therefore could have an adverse effect on our reputation in the industry and reduce our ability to compete for new contracts and may also have a material adverse effect on our business, financial condition, results of operations and cash flow.

We may incur delays in signing and commencing new business as the result of protests of government contracts that we are awarded.

After a government contract is awarded, depending on the applicable law, a competing bidder may protest the award. If we are awarded a contract and it is protested, it will be necessary to incur costs to defend the award of the contract. Costs to defend an award may be significant and could include hiring experts to defend the basis for the contract award. Some contract protests may take years to resolve. In some instances where we are awarded a contract, the contracting government entity may request that we sign a contract and commence services, even though the contract award has been protested. If the protest is upheld, then our contract would be terminated and the amounts due to us for services that have been performed to date would be subject to payment pursuant to the terms of the terminated contract. Such terms may not provide for full recovery of our incurred costs. In addition, if the government agency requests that we make changes to our contractual agreement during a protest period, but the government agency is unable or unwilling to modify the contract at the end of the protest period (whether or not we are successful in defending the protest), we may be unable to recover the full costs incurred in making such changes. In addition, we may suffer negative publicity as the result of any contract protest being upheld and our contract being terminated. Further, if the contract is re-bid, we could incur additional costs associated with the re-bid process and be subject to a potential protest if we are awarded a subsequent contract.

Some of our contracts contain provisions that could adversely affect our business, financial condition, operating results and cash flows. Additionally, our inability to control costs could adversely affect our business, financial condition, operating results and cash flows.

Most of our contracts permit termination in the event our performance is not consistent with the service levels specified in those contracts, or require us to provide credits to our clients for failure to meet those service levels. The invoking of those termination or service level penalty provisions by clients, or the seeking of damages by clients permitted under those contracts or the loss of our reputation if clients are not satisfied with our level of performance, could materially adversely affect our business, financial condition, operating results and cash flow.

Other contracts contain pricing provisions requiring that our services be priced based on a fixed price or a fixed price per transaction. Our pricing is dependent on our internal forecasts and predictions about our projects and the marketplace, which might be based on limited data and could turn out to be inaccurate. If we do not accurately estimate the costs and timing for completing projects, or if we encounter increased or unexpected costs, delays, failures or risks, including those outside our control, our contracts could prove unprofitable for us or yield lower profit margins than anticipated. In addition, some contract provisions permit a client to request that their pricing be established by reference to a pre-established standard or benchmark and some of our contracts contain re-pricing provisions which can result in reductions of our fees for performing our services. In such situations, we are exposed to the risk that we may be unable to price our services to levels that will permit recovery of our costs, and may adversely affect our operating results and cash flow.

Our inability to control our costs and improve our efficiency would also materially adversely affect our business, financial condition, operating results and cash flow. Our cost reduction initiatives might not be sufficient to respond to all pressures on our pricing and, even if we achieve some cost savings, we could experience erosion of operating income as a percentage of revenues before reimbursements if current pricing pressures accelerate.

Claims associated with our actuarial consulting and benefit plan management services could negatively impact our business.

In May 2005, we acquired the human resources consulting business of Mellon Financial Corporation, which includes actuarial consulting services related to commercial, governmental and Taft-Hartley pension plans. Providers of these types of consulting services have experienced frequent claims, some of which have resulted in litigation and significant settlements or judgments, particularly when investment markets have performed poorly and pension funding levels have been adversely impacted. In addition, our total benefits outsourcing business unit manages and administers benefit plans on behalf of its clients and is responsible for processing numerous plan transactions for current and former employees of those clients. We are subject to claims from our client and its current and former employees if transactions are not properly processed. If any claim is made against us in the future related to our actuarial consulting services or benefit plan management services, our business, financial condition, results of operations and cash flows could be materially and adversely affected as a result of the time and cost required to defend such a claim, the cost of settling such a claim or paying any judgments resulting therefrom, or the damage to our reputation in the industry that could result from the negative publicity surrounding such a claim.

We may be subject to claims of infringement of third-party intellectual property rights which could adversely affect our business.

We rely heavily on the use of intellectual property. We do not own the majority of the software that we use to run our business; instead we license this software from a small number of primary vendors. If these vendors assert claims that we or our clients are infringing on their software or related intellectual property, we could incur substantial costs to defend these claims, which could have a material effect on our profitability and cash flow. In addition, if any of our vendors’ infringement claims are ultimately successful, our vendors could require us (1) to cease selling or using products or services that incorporate the challenged software or technology, (2) to obtain a license or additional licenses from our vendors, or (3) to redesign our products and services which rely on the challenged software or technology. In addition, we may be exposed to claims for monetary damages. If we are unsuccessful in defending an infringement claim and our vendors require us to initiate any of the above actions, or we are required to pay monetary damages, then such actions could have a material adverse effect on our business, financial condition, results of operations, prospects and cash flow.

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 process, transmit and store information relating to identifiable individuals, both in our role as a service provider and as an employer. As a result, we are subject to numerous United States (both federal and state) and foreign jurisdiction laws and regulations designed to protect individually identifiable information, including social security numbers, financial and health information. For example, in 1996, Congress passed the Health Insurance Portability and Accountability Act and as required therein, the Department of Health and Human Services established regulations governing, among other things, the privacy, security and electronic transmission of individually identifiable health information. We have taken measures to comply with each of those regulations on or before the required dates. Another example is the European Union Directive on Data Protection, entitled “Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data.” We have also taken steps to address the requirements of that Directive. Other United States (both federal and state) and foreign jurisdiction laws apply to the processing of individually identifiable information as well, and additional legislation may be enacted at any time. Failure to comply with these types of laws may subject us to, among other things, liability for monetary damages, fines and/or criminal prosecution, unfavorable publicity, restrictions on our ability to process information and allegations by our clients that we have not performed our contractual obligations, any of which may have a material adverse effect on our profitability and cash flow.

We are subject to breaches of our security systems.

We have implemented security systems with the intent of maintaining the physical security of our facilities and protecting our, our clients’ and our suppliers’ confidential information and information related to identifiable individuals against unauthorized access through our information systems or by other electronic transmission or through the misdirection, theft or loss of physical media.  These include, for example, the encryption of information. Despite such efforts, we are subject to breach of security systems which may result in unauthorized access to our facilities and/or the information we are trying to

protect. If unauthorized parties gain physical access to a Company facility or electronic access to our information systems or such information is misdirected, lost or stolen during transmission or transport, any theft or misuse of such information could result in, among other things, unfavorable publicity, governmental inquiry and oversight, difficulty in marketing our services, allegations by our clients that we have not performed our contractual obligations, litigation by affected parties and possible financial obligations for damages related to the theft or misuse of such information, any of which may have a material adverse effect on our profitability and cash flow.

Budget deficits and/or fluctuations in the number of requests for proposals issued by governments and their agencies may adversely impact our business.

Approximately 40% of our fiscal year 2009 revenues were derived from contracts with federal, state and local governments and their agencies, as well as international governments and their agencies. From time to time, government clients may face budget deficits. This is particularly true as a result of the recent economic conditions. Also, the number of requests for proposals issued by government agencies are subject to fluctuation. A significant number of our government contracts have provisions permitting termination by the contracting government agency for convenience. If government budgets were reduced, then services we provide could become non-essential and our contracts could be terminated and future contracting opportunities for government contracts could be limited. Such an event could cause the net book value of the investments we made to obtain and service the contract to become impaired. In addition, the loss of existing government contracts and future contracting opportunities could reduce our revenue and profitability.

Our international and domestic operations are subject to a number of risks.

We have expanded our international operations and continually evaluate the acquisition of companies formed and operating in foreign countries. As of June 30, 2009, we had approximately 32,000 employees in Mexico, India, Jamaica, the Philippines, Argentina, Chile, Ghana, Guatemala, the Dominican Republic, Malaysia, the United Kingdom, Colombia, Spain, Canada, and France, as well as a number of other countries, that primarily support our commercial business process and information technology services. Our international operations and acquisitions are subject to a number of risks. These risks include the possible impact on our operations of the laws of foreign countries where we may do business including, among others, data privacy, laws regarding licensing and labor council requirements. In addition, we may experience difficulty integrating the management and operations of businesses we acquire internationally, and we may have difficulty attracting, retaining and motivating highly skilled and qualified personnel to staff key managerial positions in our ongoing international operations. Our international operations may also be impacted by trade restrictions, such as tariffs and duties or other trade controls imposed by the United States or other jurisdictions, as well as other factors that may adversely affect our business, financial condition and operating results. Because of these foreign operations we are subject to regulations, such as those administered by the Department of Treasury’s Office of Foreign Assets Controls (“OFAC”) and export control regulations administered by the Department of Commerce. Violation of these regulations could result in fines, criminal sanctions against our officers, and prohibitions against exporting, as well as damage to our reputation, which could adversely affect our business, financial condition and operating results.

In addition, our international and domestic operations and facilities and those of our clients are subject to a number of risks related to general economic, social and political conditions in the countries where we or they operate, including, among others, fluctuations in cultural differences, political instability, acts of violence, armed hostilities or natural disasters, employee work stoppages or strikes and the additional expenses and risks inherent in conducting worldwide operations across geographically distant locations.

Our operating results may be adversely affected by fluctuations in foreign currency exchange rates.

Although we report our operating results in U.S. dollars, a percentage of our revenues are denominated in currencies other than the U.S. dollar. Approximately 8% of our revenues for fiscal year 2009 were derived from internationally based clients. As of June 30, 2009, approximately 12% of our long-lived assets were located outside the United States.

Fluctuations in foreign currency exchange rates can have a number of adverse effects on us.

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Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, expenses and income, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each

			reporting period. Therefore, changes in the value of the U.S. dollar against other currencies will affect our revenues, operating income and the value of balance sheet items originally denominated in other currencies. Declines in the value of other currencies against the U.S. dollar could cause our consolidated earnings stated in U.S. dollars to be lower than our consolidated earnings in local currency and could affect our reported results when compared against other periods. Conversely, increases in the value of other currencies against the U.S. dollar could cause our consolidated earnings stated in U.S. dollars to be higher than our consolidated earnings in local currency and could affect our reported results when compared against other periods. There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations.
	•		In some countries we could be subject to strict restrictions on the movement of cash and the exchange of foreign currencies, which could limit our ability to use this cash across our global operations.
	•		As we continue to leverage our global delivery model, more of our expenses are incurred in currencies other than those in which we bill for the related services. An increase in the value of certain currencies against the U.S. dollar could increase costs for delivery of services at off-shore sites by increasing labor and other costs that are denominated in local currency, and there can be no assurance that our contractual provisions or any currency hedging activities would offset this impact. This could result in a decrease in the profitability of our contracts that are utilizing delivery center resources.

A failure to attract and retain necessary technical personnel, skilled management and qualified subcontractors may have an adverse impact on our business.

Because we operate in intensely competitive markets, our success depends to a significant extent upon our ability to attract, retain and motivate highly skilled and qualified personnel and to subcontract with qualified, competent subcontractors. If we fail to attract, train, and retain sufficient numbers of qualified engineers, technical staff and sales and marketing representatives or are unable to contract with qualified, competent subcontractors, our business, financial condition, and results of operations will be materially and adversely affected. Experienced and capable personnel in the technology industry remain in high demand, and there is continual competition for their talents. Additionally, we may be required to increase our hiring in geographic areas outside of the United States, which could subject us to increased geopolitical and exchange rate risk. Our success also depends on the skills, experience, and performance of key members of our management team. The loss of any key employee or the loss of a key subcontractor relationship could have an adverse effect on our business, financial condition, cash flow, results of operations and prospects.

Risks associated with loans that we service may reduce our profitability and cash flow.

Our Commercial Education line of business services (for various lenders and under various service agreements) a portfolio of approximately 5.0 million loans with an outstanding principal balance of approximately $55.6 billion as of June 30, 2009 made under the Federal Family Education Loan Program, which loans are guaranteed by a federal government agency. If a loan is in default, then a claim is made upon the guarantor. If the guarantor denies the claim because of a servicing error, then under certain of the servicing agreements we may be required to purchase the loan from the lender. Upon purchase of the loan, we attempt to cure the servicing errors and either sell the loan back to the guarantor (which must occur within a specified period of time) or sell the loan on the open market to a third party. We are subject to the risk that we may be unable to cure the servicing errors or sell the loan on the open market. Our reserves, which are based on historical information, may be inadequate if our servicing performance results in the requirement that we repurchase a substantial number of loans, which repurchase could have a material adverse impact on our cash flow and profitability.

Certain provisions of our certificate of incorporation, bylaws and Delaware law and our stock ownership could deter takeover attempts.

Some provisions in our certificate of incorporation and bylaws could delay, defer, prevent or make more difficult a merger, tender offer, or proxy contest involving our capital stock. Our stockholders might view transactions such as these as being in their best interests because, for example, a change of control might result in a price higher than the market price for shares of the Class A common stock. Among other things, these provisions:

•

require an 80% vote of the stockholders to amend some provisions of our certificate of incorporation;

	•		require an 80% vote of the stockholders to amend some provisions of our bylaws;
	•		permit only our Chairman, President or a majority of the Board of Directors (calculated as if there were no vacancies) to call stockholder meetings;
	•		authorize our Board of Directors to issue up to 3.0 million shares of preferred stock in series with the terms of each series to be fixed by our Board of Directors;
	•		authorize our Board of Directors to issue Class B common stock, which shares are entitled to ten votes per share;
	•		permit directors to be removed, with or without cause, only by a vote of at least 80% of the combined voting power; and
	•		specify advance notice requirements for stockholder proposals and director nominations to be considered at a meeting of stockholders.

Further, Section 203 of the Delaware General Corporation Law also generally restricts mergers and other business combinations between us and any holder of 15% or more of our voting stock. Further, we have entered into change of control agreements with certain of our executive officers, which may have the effect of discouraging an unsolicited takeover proposal.

In addition, as of August 20, 2009, Darwin Deason beneficially owns 6,599,372 shares of Class B common stock and 2,140,884 shares of the Class A common stock and controls approximately 43.6% of our total voting power (based on shares of both classes of common stock outstanding). As a result, Mr. Deason has the requisite voting power to significantly affect many of our significant decisions, including the power to block corporate actions such as an amendment to most provisions of our certificate of incorporation. Mr. Deason has an employment agreement, with a term that currently ends on May 18, 2010, provided that such term shall automatically be extended for an additional year on May 18 of each year, unless thirty days prior to May 18 of any year, Mr. Deason gives notice to us that he does not wish to extend the term or our Board of Directors (upon a unanimous vote of the directors, except for Mr. Deason) gives notice to Mr. Deason that it does not wish to extend the term.

The price of our Class A common stock may fluctuate significantly, which may result in losses for investors.

The market price for the Class A common stock has been and may continue to be volatile. For example, during the 52-week period ended August 20, 2009, the closing prices of our Class A common stock as reported on the NYSE ranged from a high of $53.62 per share to a low of $35.72 per share. We expect our stock price to be subject to fluctuations as a result of a variety of factors, including factors beyond our control. Because of this volatility, we may fail to meet the expectations of our stockholders or of securities analysts at some time in the future, and our stock price could decline as a result.

In addition, the stock market has experienced significant price and volume fluctuations that have particularly affected the trading prices of equity securities of many high technology companies. These fluctuations have often been unrelated or disproportionate to changes in the operating performance of these companies. Any negative change in the public’s perception of information technology companies could depress our stock price regardless of our operating results.

Other Risks

We have attempted to identify material risk factors currently affecting our business and company. However, additional risks that we do not yet know of, or that we currently believe are immaterial, may occur or become material. These risks could impair our business operations or adversely affect revenues, cash flow or profitability.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of June 30, 2009, we have 316 locations in the United States, of which 156 locations are occupied by Commercial operations, 159 locations are occupied by Government operations, and our company-owned facility in Dallas, Texas, which is occupied by primarily Commercial and Corporate functions. We also have 108 locations in 28 other countries, of which 79 locations are occupied by Commercial operations and 29 locations are occupied by Government operations. In addition, we also have employees in client-owned locations. We own approximately 1.1 million square feet of real estate space and lease approximately 9.2 million square feet. The leases expire from calendar years 2009 to 2021 and we do not anticipate any significant difficulty in obtaining lease renewals or alternate space. Our executive offices are located in Dallas, Texas at a company-owned facility of approximately 630,000 square feet, which also houses a host data center and other operations. We believe that our current facilities are suitable and adequate for our current business.

ITEM 3. LEGAL PROCEEDINGS

Information regarding legal proceedings is incorporated by reference from Note 19 to our Consolidated Financial Statements set forth in Part I. Item 8 of this report.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At our 2008 Annual Meeting of Stockholders held on May 28, 2009, the following actions were taken:

1.

Election of Directors:

Name		For				Withheld
Darwin Deason			134,490,772				12,012,590
Lynn R. Blodgett			133,430,034				13,073,328
Robert Druskin			135,130,575				11,372,727
Kurt R. Krauss			135,135,983				11,367,379
Ted B. Miller, Jr.			129,838,836				16,664,526
Paul E. Sullivan			129,836,548				16,666,814
Frank Varasano			129,659,941				16,843,421

Each of the directors was elected by a plurality of the vote and will serve until their respective successors are elected and qualified.

2.

Approval of the Senior Executive Annual Incentive Plan:

For		Against		Abstain
139,402,154		7,016,377		84,830

3.

Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2009:

For		Against		Abstain
144,008,555		2,446,272		48,354

PART II

ITEM 5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stock Price
Our Class A common stock is traded on the NYSE under the symbol “ACS.” The following table sets forth the high and low sales prices of our Class A common stock for the last two fiscal years as reported on the NYSE.

Fiscal Year Ended June 30, 2009		High				Low
First Quarter		$	54.39			$	45.32
Second Quarter			51.38				34.84
Third Quarter			50.30				42.10
Fourth Quarter			50.95				43.37
Fiscal Year Ended June 30, 2008
First Quarter		$	58.70			$	45.52
Second Quarter			52.61				39.46
Third Quarter			53.23				40.43
Fourth Quarter			57.40				49.55

On August 20, 2009, the last reported sales price of our Class A common stock as reported on the NYSE was $44.81 per share. As of that date, there were approximately 90,000 record holders of our Class A common stock and one record holder of our Class B common stock.

Dividends
Under the terms of our Credit Facility and Senior Notes (each as defined in Item 1A. Risk Factors), we are allowed to pay cash dividends. Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and such other factors as the Board of Directors deems relevant. We intend to retain earnings for use in the operation of our business and, therefore, did not pay cash dividends in the fiscal years ended June 30, 2009, 2008 and 2007 and do not anticipate paying any cash dividends in the foreseeable future.

Stock Option and Employee Stock Purchase Plans
The following table summarizes certain information related to our stock option and employee stock purchase plans.

Number of securities

Number of

remaining available for

securities to be

future issuance under

issued upon exercise

equity compensation

of outstanding

Weighted average

plans (excluding

options, warrants

exercise price of

securities reflected in

and rights

outstanding options,

initial column)

Plan Category

as of June 30, 2009

warrants and rights

as of June 30, 2009

Equity compensation plans approved by security shareholders

Stock options

14,415,910

$

48.43

8,690,200

Employee stock purchase plan

N/A

N/A

534,457

Equity compensation plans not approved by security shareholders

-

-

-

Total

14,415,910

$

48.43

9,224,657

Stock Option Repricing
Please see Note 14 to our Consolidated Financial Statements for a discussion of the December 2006 repricing of certain outstanding stock options, our tender offer to amend certain options and results of the tender offer, as well as our offer to former employees.

Share Repurchase Programs
Please see Note14 to our Consolidated Financial Statements for a discussion of our Share Repurchase Programs.

Performance Graph
The graph below compares the total cumulative return of our Class A common stock from June 30, 2004 through June 30, 2009 with the Standard & Poor’s 500 Software & Services Index and the Standard & Poor’s 500 Stock Index. The graph assumes the investment of $100 on June 30, 2004 and the reinvestment of all dividends. The stock price performance shown on the graph is not necessarily indicative of future stock performance.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data is qualified by reference to and should be read in conjunction with our Consolidated Financial Statements and Notes thereto and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included elsewhere in this document. Please see the discussions “Significant Developments – Fiscal Years 2009, 2008 and 2007” in MD&A for a description of the more significant events, including business combinations, that impact comparability, as well as the Notes to our Consolidated Financial Statements (in thousands, except per share amounts).

		As of and for the Fiscal Year Ended June 30,
		2009				2008				2007(b)				2006				2005
Results of Operations Data:
Revenues (a)		$	6,523,164			$	6,160,550			$	5,772,479			$	5,353,661			$	4,351,159
Operating income		$	685,943			$	645,078			$	536,955			$	617,284			$	647,484
Net income		$	349,943			$	329,010			$	253,090			$	358,806			$	409,569
Earnings per share – basic		$	3.59			$	3.36			$	2.53			$	2.91			$	3.21
Earnings per share – diluted		$	3.57			$	3.32			$	2.49			$	2.87			$	3.14
Weighted average shares outstanding – basic (c)			97,510				98,013				100,181				123,197				127,560
Weighted average shares outstanding – diluted (c)			98,006				98,993				101,572				125,027				130,556
Balance Sheet Data:
Working capital		$	929,105			$	1,017,977			$	839,662			$	704,158			$	405,983
Total assets		$	6,900,973			$	6,469,399			$	5,982,429			$	5,502,437			$	4,850,838
Total long-term debt (d) (less current portion)		$	2,041,529			$	2,357,541			$	2,342,272			$	1,614,032			$	750,355
Stockholders’ equity		$	2,622,132			$	2,308,374			$	2,066,168			$	2,456,218			$	2,811,712

(a)		Revenues from operations divested through June 30, 2009 were $0.3 million, $31.9 million, $39.9 million, $144.7 million and $273.4 million for fiscal years 2009, 2008, 2007, 2006 and 2005, respectively. Please see “Significant Developments – Fiscal Year 2009, 2008 and 2007” in MD&A and Note 20 to our Consolidated Financial Statements for a discussion of divestiture activity.
(b)		During fiscal year 2007 we recorded a non-cash impairment charge of approximately $76.4 million ($48.3 million, net of income tax) related to a change in terms on our contract with the Department of Education. Please see “Significant Developments – Fiscal Year 2007” in MD&A for further discussion.
(c)		Please see Note 14 to our Consolidated Financial Statements for a discussion of our share repurchase programs.
(d)		During fiscal year 2005, we issued $500 million of Senior Notes (defined in Item 1A. Risk Factors) and during fiscal year 2006 we entered into a new $800 million Term Loan Facility and $1 billion Revolving Facility (each as defined in Item 1A. Risk Factors). During fiscal year 2009, $250 million of Senior Notes due June 1, 2010 were reclassified to current liabilities. Please see “Liquidity and Capital Resources” in MD&A and Note 10 to our Consolidated Financial Statements for a discussion of our credit arrangements.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

All statements and assumptions contained in this Annual Report on Form 10-K and in the documents attached or incorporated by reference that are not based on historical facts constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Such forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results, performance or achievements to be materially different from anticipated results, prospects, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking information contained in these statements include, among other things, statements with respect to our financial condition, results of operations, cash flows, business strategies, operating efficiencies, indebtedness, litigation,  competitive positions, growth opportunities, plans and objectives of management, and other matters. Such statements are subject to numerous assumptions, risks, uncertainties and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results described in such statements. These factors include without limitation those listed herein under Item 1A. Risk Factors and other reports from time to time filed with or furnished to the SEC. 

Forward-looking statements in this Annual Report on Form 10-K speak only as of the date of this Annual Report on Form 10-K, and forward-looking statements in documents attached or incorporated by reference speak only as to the date of those documents. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events, except as required by law.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We provide non-core, mission critical services that our clients need to run their day-to-day business. The cornerstone of our business strategy is our focus on vertical markets and technology solutions that we can leverage across our business and client base.

We enter into long-term relationships with clients to provide services that support their mission critical business process or information technology needs. We derive our revenues from delivering comprehensive business process outsourcing and information technology solutions to commercial and government clients.  A substantial portion of our revenues is derived from recurring monthly charges to our clients under service contracts with initial terms that vary from one to ten years. The recurring nature of our revenue provides us with predictable revenue streams during various economic cycles. We define recurring revenues as revenues derived from services that our clients use each year in connection with their ongoing businesses, and accordingly, exclude non-recurring revenue sources such as software license fees, short-term contract programming and consulting engagements, product installation fees, and hardware and software sales. If we add consulting or other services to enhance the value delivered and offered to our clients that are primarily short-term in nature, we may experience variations in our mix of recurring versus non-recurring revenues.

New Business Pipeline
Management focuses on various metrics in analyzing our business, its performance and its outlook. One such metric is our sales pipeline, which was approximately $2.0 billion of annual recurring revenues as of June 30, 2009.  Our sales pipeline includes potential business opportunities that will be contracted within the next six months and excludes business opportunities with estimated annual recurring revenue that are in excess of $100 million. Both the Commercial and Government pipelines have significant, quality opportunities within our vertical markets and horizontal solutions. As of June 30, 2009, the Commercial segment comprised approximately 55% of our pipeline and the Government segment comprised the remaining 45%. By service line, approximately 87% of our pipeline is business process outsourcing and approximately 13% of the pipeline is information technology solutions as of June 30, 2009. The Commercial segment pipeline includes opportunities in transactional business process outsourcing, information technology outsourcing, commercial healthcare, benefits outsourcing and finance and accounting outsourcing. The Government segment pipeline includes opportunities in government healthcare, child support and electronic payment services and transportation.

While the magnitude of our sales pipeline is an important indicator of potential new business signings and potential future internal revenue growth, actual new business signings and internal revenue growth depend on a number of factors, including the effectiveness of our sales pursuit teams, competition for a deal, deal pricing and the cash flow generation qualities of each deal which are subject to risks described further in Item 1A. Risk Factors of this Annual Report on Form 10-K.

New Business Signings
We define new business signings as estimated annual recurring revenue from new contracts and the incremental portion of renewals that are signed during the period, which represents the estimated first twelve months of revenue to be recorded under the contracts after full implementation. We use new business signings to forecast prospective revenues and to estimate capital commitments.  There are no third party standards or requirements governing the calculation of new business signings and our measure may not be comparable to similarly titled measures of other companies. We define total contract value as the estimated total revenues from contracts signed during the period. We use total contract value as an additional measure of estimating total revenue represented by contractual commitments, both to forecast prospective revenues and to estimate capital commitments.  Revenues for new business signings, annual recurring revenue and total contract value are measured under GAAP (defined below).

During fiscal year 2009, we signed contracts with new clients and incremental business with existing clients representing $1.0 billion of annual recurring revenue with an estimated $4.5 billion in total contract value. The Commercial segment contributed 61% of the new contract signings and the Government segment contributed 39% of the new contract signings (based on annual recurring revenue).

Internal Revenue Growth
We use internal revenue growth as a measure of the organic growth of our business. Internal revenue growth is measured as total revenue growth less revenues from acquisitions and revenues from divested operations.  At the date of an acquisition, we identify the trailing twelve months of revenue of the acquired company as the “pre-acquisition revenue of acquired companies.”  Pre-acquisition revenue of the acquired companies is considered “acquired revenues” in our calculation, and actual revenues from the acquired company, either above or below “acquired revenues” are components of “internal growth” in our calculation.    Revenues from divested operations are excluded from the internal revenue growth calculation in the periods following the effective date of the divestiture.  We believe these adjustments to historical reported results are necessary to accurately reflect our internal revenue growth. Prior period internal revenue growth calculations are not restated for current period divestitures. Our measure of internal revenue growth may not be comparable to similarly titled measures of other companies. In fiscal year 2009, total revenue grew 6% over the prior fiscal year and internal revenue grew 3% over the prior fiscal year.

Client Renewal Rates
We focus on the performance of our contractual obligations and continually monitor client satisfaction. Renewal rates are the best indicator of client satisfaction. We calculate our renewal rate based on the total annual recurring revenue of renewals won as a percentage of total annual recurring revenue of all renewals sought. In fiscal year 2009, we renewed approximately 85% of total renewals sought, totaling $1.4 billion of annual recurring revenue with a total contract value of approximately $4.1 billion. In fiscal year 2008, we renewed approximately 92% of total renewals sought, totaling $752.7 million of annual recurring revenue with a total contract value of approximately $2.7 billion. Average contract life for renewals varies between our government and commercial segments. The average contract life of renewals in the Government segment is often longer than those in the Commercial segment.

Capital Intensity
We respond to technological advances and the rapid changes in the requirements of our clients by committing substantial amounts of our resources to the operation of multiple hardware platforms, the customization of products and services that incorporate new technology on a timely basis and the continuous training of our personnel. Management continually assesses the capital intensity of these technological advances and client requirements, addressing the challenge to stay ahead of the competition for innovative solutions and provide a lower cost solution for clients.

We monitor the capital intensity, defined as the total of capital expenditures and additions to intangible assets, as a percentage of revenue, of new business signings. Understanding the capital intensity of new business signings is critical in determining the future free cash flow generating levels of our business. Historically, the capital intensity in our business has ranged between 5% and 7% of revenue. During fiscal years 2009 and 2008, the overall capital intensity of our business was approximately 6% and 5% of revenues, respectively. We expect that as our new business signings ramp, we will incur capital expenditures associated with the new business, which could result in increased capital intensity over the fiscal year 2009 percentage. We expect that capital intensity will remain within our historical range.

Employees
Attracting, retaining and training our employees has been a key component to our historical success and will continue to be a major factor in our future success.  Because we operate in intensely competitive markets, our success depends to a significant extent on our ability to attract, retain and motivate highly skilled and qualified personnel. We consistently review our employee retention rates on a regional and global basis to ensure that we are competitive in hiring, retaining and motivating our employees. We perform benchmarking studies in some markets in which we compete to ensure our competitiveness in compensation and benefits and utilize employee surveys to gauge our employees’ level of satisfaction. We provide our employees ongoing technological, management, financial and leadership training and will continue to do so to develop our employees and remain competitive. We utilize activity based compensation as a means to motivate certain of our employees in both segments of our business and believe our use of activity based compensation is a competitive advantage for ACS.

Other
We identified a number of risk factors in Item 1A. Risk Factors of this Annual Report on Form 10-K. Management continually monitors the general economic conditions, changes in technology and other developments in the markets we serve, competitive pricing trends and contractual terms for future impact on the Company in order to be able to respond effectively and on a timely basis to these developments.

We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). However, we believe that certain non-GAAP financial measures and ratios, used in managing our business, may provide users of this financial information with additional meaningful comparisons between current results and prior reported results. Certain of the information set forth herein and certain of the information presented by us from time to time (including free cash flow and internal revenue growth) may constitute non-GAAP financial measures within the meaning of Regulation G adopted by the SEC which are reconciled to the most comparable GAAP financial measure. The presentation of this non-GAAP information is not meant to be considered in isolation or as a substitute for comparable amounts determined in accordance with GAAP.

Fiscal Year 2010 Outlook

Our goals for fiscal 2010 include increasing shareholder value by improving our financial metrics, including growth in revenues, both from internal sources and acquisitions, operating income and margins, net income and earnings per share. Our fiscal year 2009 new business signings of $1.0 billion of annual recurring revenue will, when ramped, help us achieve these goals. Additionally, we have set a goal to increase the fiscal year 2010 new business signings over fiscal year 2009 levels. To that end, we have added approximately 100 sales people and the support structure associated with them during fiscal year 2009, and intend to continue expanding the sales organization into fiscal year 2010.

During fiscal year 2009, we have worked with many of our clients who have faced unprecedented budgetary pressures due to the current economic environment, and have provided discounts through contract amendments to assist these clients. We have done this because we believe it’s the proper strategic decision in this environment, and we have received valuable goodwill and increased contract terms or other valuable consideration that benefits us long-term. We intend to continue this program into fiscal year 2010.

We expect demand for commercial business process and information technology solutions to remain strong during fiscal year 2010. We also anticipate our existing commercial clients will seek to increase their use of outsourcing as a means to increase their operating efficiency and reduce their costs in the future. We believe the Commercial segment will experience strong demand in fiscal year 2010 for transactional business process outsourcing, finance and accounting outsourcing, customer care outsourcing and traditional information technology services.

We anticipate strong demand for our government services. In addition to the areas that we have marketed historically, such as government healthcare, municipal services, electronic payment services and transportation services and solutions, we continue to believe that government entities could benefit from our commercial best practices in such areas as eligibility administration, human resources outsourcing, customer care and finance and accounting outsourcing. We anticipate growth in certain areas of the government business such as revenue generating services and entitlement programs, that have historically grown when government clients have experienced budget pressure.

We currently have projects underway that are changing the way we deliver our services to our clients and make them more competitive in their markets. We will continue to invest in innovation during fiscal year 2010, yet keep our capital intensity within historical ranges.

In the Government segment, we expect to expand our technology solutions and platforms, including our Enterprise Medicaid Management Information System in the state Medicaid market. We expect to leverage our existing broad international presence and subject matter expertise in the transportation market to markets beyond transportation. We believe we can expand our existing domestic solutions into solutions that we can market globally.

Our non-compete agreement with Lockheed Martin Corporation expired in November 2008.  The expiration of this agreement allows us to compete for federal government contracts, beyond our current relationships with the Department of Education and other federal agencies.

From a geographic perspective, we believe that there will continue to be strong demand in the United States and expect to see more business process outsourcing opportunities in Europe and abroad. Our acquisitions of Grupo Multivoice (“Multivoice”) and e-Services Group International (“e-Services”) expanded our customer care offering and will help us provide clients throughout the Americas and Europe a suite of cost competitive bilingual services in English and Spanish for their business process outsourcing solutions. Our acquisitions of sds business services GmbH, Syan Holdings Limited and VBHG Limited (“Anix”) strengthen our global information technology outsourcing presence in Europe and the United Kingdom.

We also intend to pursue strategic acquisitions in certain vertical markets that will enhance our existing service capabilities, expand our service offerings and increase our service innovation through technology solutions that we can leverage. We expect to strengthen our organization by promoting leaders from within the Company as well as recruiting top industry talent.

In both segments, we also plan to increase our penetration of low-cost delivery locations outside the United States and to deepen our use of incentive based compensation. We intend to expand our global delivery model and continue to explore cost-savings opportunities as we move higher tier work to lower cost locations.

Significant Developments – Fiscal Year 2009

Global Production Initiative
In October 2008, we announced plans to implement a global production initiative to lower future labor costs. Under this initiative, we intend to hire approximately 4,200 full-time employees in locations outside of the United States and reduce corresponding positions within the United States and Europe by the end of the first quarter of fiscal year 2010. The total pre-tax cost to reduce these employee positions under this initiative is estimated to be approximately $24 million to $26 million, of which severance costs are estimated to be approximately $7 million and transition and other expenses are estimated to be approximately $17 million to $19 million. The transition costs consist primarily of duplicate labor costs as a result of job training and work shadowing, as well as related travel, retention and facility costs during the transition. Substantially all of these expenses to date, and substantially all of the expected expenses, have been or will be cash expenditures. The following table reflects the estimated charges over the term of the initiative for each of our segments (in thousands):

		Commercial				Government				Corporate				Total
Severance costs		$	6,000			$	1,000			$	-			$	7,000
Transition and other expenses			12,000 -   13,000				2,500 -   3,000				2,500 -   3,000				17,000 -   19,000
Total costs		$	18,000 - $19,000			$	3,500 - $4,000			$	2,500 - $3,000			$	24,000 - $26,000
As of June 30, 2009, we added approximately 3,600 positions outside the United States and Europe and reduced corresponding positions in the United States and Europe as a result of this initiative. During fiscal year 2009, we recorded severance costs of $7.3 million, ($4.3 million, net of income tax) and incurred $14.1 million, ($9.1 million, net of income tax) for transition and other expenses in cost of revenues in our Consolidated Statements of Income. During fiscal year 2009, we announced a plan to assist displaced employees who are experiencing financial hardships during these difficult economic times. We made contributions of approximately $1.4 million, ($0.9 million, net of income tax), related to this plan during fiscal year 2009, which are included in the transition costs discussed above. The following table reflects charges recorded in each of our segments (in thousands):
		Fiscal Year Ended June 30, 2009
		Commercial				Government				Corporate				Total
Accrued severance costs		$	5,967			$	1,306			$	-			$	7,273
Transition and other expenses			10,223				1,914				1,942				14,079
Total costs		$	16,190			$	3,220			$	1,942			$	21,352

We anticipate using a substantial portion of the savings generated from this initiative to invest in innovation, sales and other client opportunities. Upon completion, we estimate the full annual run rate pre-tax savings will be approximately $40 million after these investments.

We opened new facilities and expanded current facilities globally in order to accommodate the increased offshore headcount. Capital expenditures related to these facilities are currently estimated at approximately $9.5 million. During fiscal year 2009, we incurred $8.8 million in capital expenditures related to these facilities.

The following table reflects the activity for the accruals for involuntary termination of employees related to this initiative during fiscal year ended June 30, 2009 (in thousands):

Balance at beginning of period		$	-
Accruals, net of reversals			7,273
Payments			(5,024	)
Balance at end of period		$	2,249

New Business
During fiscal year 2009, we signed contracts with new clients and incremental business with existing clients representing $1.0 billion of annualized recurring revenue and an estimated $4.5 billion in total contract value. The Commercial segment contributed 61% of the new contract signings and the Government segment contributed 39% of the new contract signings (based on annual recurring revenues).

Acquisitions
During fiscal year 2009, we completed three acquisitions in our Commercial segment, Multivoice, e-Services, Anix and two other small aquisitions. Please see Note 3 to our Consolidated Financial Statements for a discussion of these acquisitions.

Supplemental Executive Retirement Agreement
Please see Note 11 to our Consolidated Financial Statements for a discussion of the termination of the Supplemental Executive Retirement Plan Agreement (the “SERP Termination”) with the Chairman of our Board of Directors.

Evaluation of Strategic Alternatives 
We have incurred costs to evaluate our strategic alternatives, including the 2007 proposal from Darwin Deason, Chairman of the Board of Directors, and Cerberus Capital Management, L.P. (“Cerberus”).  In addition, several lawsuits were filed in connection with the announced Cerberus buyout transaction, generally alleging claims related to breach of fiduciary duty, and seeking class action status. Those lawsuits have been resolved. Please see Note 19 to our Consolidated Financial Statements for further discussion of these lawsuits. We expect that we may continue to incur costs related to our evaluation of strategic alternatives.

During fiscal years 2009, 2008 and 2007, we recognized approximately $0.2 million, $8.3 million and $4.0 million, respectively, in legal and other costs related to the evaluation of strategic alternatives, and $0.6 million, $1.5 million and $1.9 million, respectively, related to lawsuits discussed above.

Divestitures
Please see Note 20 to our Consolidated Financial Statements for a discussion of the sale of our bindery business during fiscal year 2009.

Significant Developments – Fiscal Year 2008

New Business
During fiscal year 2008, we signed contracts with new clients and incremental business with existing clients representing $800.5 million of annualized recurring revenue and an estimated $3.2 billion in total contract value. The Commercial segment contributed 60% of the new contract signings and the Government segment contributed 40% of the new contract signings (based on annual recurring revenues).

Acquisitions
We completed seven acquisitions during fiscal year 2008. Please see Note 3 to our Consolidated Financial Statements for a discussion of these acquisitions.

Divestitures
During fiscal year 2008, we completed the sale of our decision support business in our Government segment and recorded a gain on the sale of approximately $2.4 million ($1.6 million, net of income tax) in other operating expense in our Consolidated Statements of Income. We believe that the decision support business was not strategic to our ongoing operations.

During fiscal year 2008, we completed the sale of our Unclaimed Property Reporting and Recovery (“UPRR”) business in our Commercial segment. We recorded a gain on the sale of approximately $1.1 million ($0.7 million, net of income tax) and $1.0 million ($0.6 million, net of income tax) during fiscal years 2009 and 2008, respectively, in other operating expense in our Consolidated Statements of Income. We believe that the UPRR business was not strategic to our ongoing operations.

Share Repurchase Programs
Please see Note 14 to our Consolidated Financial Statements for a discussion of our share repurchases during fiscal year 2008.

Adoption of FIN 48
Effective July 1, 2007, we adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for and disclosure of uncertainty in tax positions. Please see Note 12 to our Consolidated Financial Statements for a discussion of our adoption of FIN 48.

Stock Option Repricing
Please see Note 14 to our Consolidated Financial Statements for a discussion of the repricing of certain outstanding stock options, our tender offer to amend certain options and results of the tender offer, as well as our offer to former employees.

Review of Stock Option Grant Practices
Please see Note 19 to our Consolidated Financial Statements for a discussion of the review of our stock option grant practices.

Significant Developments – Fiscal Year 2007

New Business
During fiscal year 2007, we signed contracts with new clients and incremental business with existing clients representing $607.0 million of annualized recurring revenue and an estimated $2.8 billion in total contract value. The Commercial segment contributed 64% of the new contract signings and the Government segment contributed 36% of the new contract signings (based on annual recurring revenues).

Acquisitions
We completed six acquisitions during fiscal year 2007. Please see Note 3 to our Consolidated Financial Statements for a discussion of these acquisitions.

Sale of Minority Interests in a Professional Services Business
In fiscal year 2007, we sold our minority interests in a professional services company, which was accounted for under the equity method, for approximately $19.0 million. We recorded a gain on the sale of our minority interests of approximately $8.2 million ($5.3 million, net of income tax) in other non-operating expense (income), net.

Share Repurchase Programs
Please see Note 14 to our Consolidated Financial Statements for a discussion of our share repurchases during fiscal year 2007.

Stock Option Repricing
Please see Note 14 to our Consolidated Financial Statements for a discussion of the December 2006 repricing of certain outstanding stock options, our tender offer to amend certain options and results of the tender offer, as well as our offer to former employees.

Contract with the Department of Education
We provide comprehensive loan servicing for the Department of Education’s (the “Department”) Direct Student Loan program under the Common Services for Borrowers contract. Annual revenues from this contract represented approximately 3%, 3% and 4% of our fiscal year 2009, 2008 and 2007 revenues, respectively. We expect the contract to continue through the middle of fiscal year 2012 under the remaining two performance based periods. The Department may also exercise two additional option years at their discretion.

In May 2007, we and the Department agreed to cease development of certain software contemplated under the Common Services for Borrowers contract. At that time, we had implemented approximately $39.0 million of internally developed software into the current production system. As a result of the decision to cease development, we recorded a non-cash impairment charge of approximately $76.4 million (approximately $48.3 million, net of income tax) related to in-process capitalized development costs.

Government Healthcare Contract
During fiscal year 2007, we settled a dispute involving our contract with the North Carolina Department of Health and Human Services and recognized $3.4 million in revenue during fiscal year 2007 related to this settlement.

Restructuring Activities
During fiscal year 2006, we assessed our operations, including our overall cost structure, competitive position, technology assets and operating platform and foreign operations. As a result, we undertook certain restructuring initiatives and activities in order to enhance our competitive position in certain markets, and recorded certain restructuring charges and asset impairments arising from our discretionary decisions. As of June 30, 2007, approximately 2,500 employees were involuntarily terminated as a result of these initiatives, consisting primarily of offshore processors and related management.

In our Commercial segment, we assessed the cost structure of our global production model, particularly our offshore processing activities. We identified offshore locations in which our labor costs were no longer competitive or where the volume of work processed by the site no longer justifies retaining the location, including one of our Mexican facilities. We recorded restructuring charges for involuntary termination of employees related to the closure of those duplicative facilities or locations of $6.5 million for the fiscal year ended June 30, 2007, which is reflected in wages and benefits in our Consolidated Statements of Income, and $2.4 million for the fiscal year ended June 30, 2007, for impairments of duplicative technology equipment and facility costs, facility shutdown and other costs, which are reflected as part of total operating expenses in our Consolidated Statements of Income.

In our Government segment, we assessed our competitive position, evaluated our market strategies and the technology used to support certain of our service offerings. We implemented operating practices that we utilize in our Commercial segment, including leveraging our proprietary workflow technology and implementing activity based compensation, in order to reduce our operating costs and enhance our competitive position. We recorded restructuring charges for involuntary termination of employees of $0.7 million for the fiscal year ended June 30, 2007, which is reflected in wages and benefits in our Consolidated Statements of Income. In fiscal year 2007, we recorded $0.5 million of costs related to the consolidation of solution development groups within the Government segment, which is reflected in total operating expenses in our Consolidated Statements of Income.

The following table summarizes the activity for the accrual for involuntary termination of employees exclusive of the Acquired HR Business (defined below) for the periods presented (in thousands):

		Fiscal Year Ended June 30,
		2008				2007
Beginning balance		$	893			$	899
Accruals			-				7,185
Reversals			(401	)			-
Payments			(492	)			(7,191	)
Ending balance		$	-			$	893

We acquired the human resources consulting and outsourcing business of Mellon Financial Corporation (the “Acquired HR Business”) during fiscal year 2005. In connection with this acquisition, we recorded approximately $22.3 million in involuntary employee termination costs for employees of the Acquired HR Business in accordance with Emerging Issues Task Force Issue No. 95-3 “Recognition of Liabilities in Connection with a Purchase Business Combination.” The following table summarizes the activity for the accrual for involuntary termination of employees of the Acquired HR Business for the periods presented (in thousands):

		Fiscal Year Ended June 30,
		2009				2008				2007
Beginning balance		$	82			$	402			$	3,521
Excess accrual credited to goodwill			-				(209	)			(1,678	)
Payments			(82	)			(111	)			(1,441	)
Ending balance		$	-			$	82			$	402

Revenue Growth

We use internal revenue growth as a measure of the organic growth of our business. Internal revenue growth is measured as total revenue growth less revenues from acquisitions and revenues from divested operations.  At the date of an acquisition, we identify the trailing twelve months of revenue of the acquired company as the “pre-acquisition revenue of acquired companies.”  Pre-acquisition revenue of the acquired companies is considered “acquired revenues” in our calculation, and actual revenues from the acquired company, either above or below “acquired revenues” are components of “internal growth” in our calculation.    Revenues from divested operations are excluded from the internal revenue growth calculation in the periods following the effective date of the divestiture.  We believe these adjustments to historical reported results are necessary to accurately reflect our internal revenue growth. Prior period internal revenue growth calculations are not restated for current period divestitures. Our measure of internal revenue growth may not be comparable to similarly titled measures of other companies.

The following table sets forth the calculation of internal revenue growth (in millions):

		Fiscal Year Ended												Fiscal Year Ended
		June 30,								Growth				June 30,								Growth
		2009				2008				%				2008				2007				%
Consolidated
Total Revenues		$	6,523			$	6,161				6	%		$	6,161			$	5,772				7	%
Less: Divestitures			-				(32	)							(5	)			(11	)
Adjusted		$	6,523			$	6,129				6	%		$	6,156			$	5,761				7	%
Acquired revenues		$	188			$	11				3	%		$	116			$	4				2	%
Internal revenues			6,335				6,118				3	%			6,040				5,757				5	%
Total		$	6,523			$	6,129				6	%		$	6,156			$	5,761				7	%
Commercial
Total Revenues (a)		$	3,909			$	3,674				6	%		$	3,674			$	3,405				8	%
Less: Divestitures			-				(14	)							(5	)			(6	)
Adjusted		$	3,909			$	3,660				7	%		$	3,669			$	3,399				8	%
Acquired revenues		$	132			$	6				4	%		$	83			$	-				2	%
Internal revenues			3,777				3,654				3	%			3,586				3,399				6	%
Total		$	3,909			$	3,660				7	%		$	3,669			$	3,399				8	%
Government
Total Revenues (b)		$	2,614			$	2,487				5	%		$	2,487			$	2,367				5	%
Less: Divestitures			-				(18	)							-				(5	)
Adjusted		$	2,614			$	2,469				6	%		$	2,487			$	2,362				5	%
Acquired revenues		$	56			$	5				2	%		$	33			$	4				1	%
Internal revenues			2,558				2,464				4	%			2,454				2,358				4	%
Total		$	2,614			$	2,469				6	%		$	2,487			$	2,362				5	%

(a)		The Commercial segment includes revenues from operations divested through June 30, 2009 of $0.1 million, $14.0 million and $18.0 million for fiscal years 2009, 2008 and 2007, respectively.
(b)		The Government segment includes revenues from operations divested through June 30, 2009 of $0.2 million, $17.9 million and $21.9 million for fiscal years 2009, 2008 and 2007, respectively.

Results of Operations

The following table sets forth the items from our Consolidated Statements of Income expressed as a percentage of revenues. Please refer to the comparisons below for discussion of items affecting these percentages.

		Fiscal Year Ended June 30,
		2009				2008				2007
Revenues			100.0	%			100.0	%			100.0	%
Operating expenses:
Cost of revenues:
Wages and benefits			45.6	%			47.2	%			47.6	%
Services and supplies			24.5	%			22.5	%			21.9	%
Rent, lease and maintenance			12.0	%			12.1	%			12.2	%
Depreciation and amortization			6.1	%			6.2	%			6.0	%
Software impairment charge			-				-				1.3	%
Other			0.5	%			0.4	%			0.5	%
Cost of revenues			88.7	%			88.4	%			89.5	%
Other operating expenses			0.8	%			1.1	%			1.2	%
Total operating expenses			89.5	%			89.5	%			90.7	%
Operating income			10.5	%			10.5	%			9.3	%
Interest expense			2.0	%			2.6	%			3.2	%
Other non-operating expense (income), net			-				-0.2	%			-0.5	%
Pretax profit			8.5	%			8.1	%			6.6	%
Income tax expense			3.1	%			2.8	%			2.2	%
Net income			5.4	%			5.3	%			4.4	%

Comparison of Fiscal Year 2009 to Fiscal Year 2008

Revenues
Revenue increased $362.6 million, or 6%, to $6.5 billion during fiscal year 2009 from $6.2 billion during fiscal year 2008. Excluding revenues related to operations divested through June 30, 2009, our revenues increased $394.3 million, or 6%. Internal revenue growth was 3% and the remainder of the growth was related to acquisitions. Fiscal years 2009 and 2008 include revenues related to the operations divested through June 30, 2009 of $0.3 million and $31.9 million, respectively.

Revenue in our Commercial segment, which represented approximately 60% of our consolidated revenue for fiscal year 2009, increased $235.3 million to $3.9 billion in fiscal year 2009 compared to fiscal year 2008. Revenue growth from acquisitions was 4% and internal revenue growth was 3%. Internal revenue growth was due to growth in healthcare payer, business commercial education and financial services business and finance and accounting services business. We also had growth in information technology outsourcing related to deliveries of hardware and software. Our Commercial segment revenues for fiscal years 2009 and 2008 includes revenues related to our UPRR business, which was divested in the fourth quarter of fiscal year 2008, of $0.1 million and $14.0 million, respectively.

Revenue in our Government segment, which represented approximately 40% of our consolidated revenue for fiscal year 2009, increased $127.3 million, or 5%, to $2.6 billion in fiscal year 2009 compared to fiscal year 2008. Internal revenue growth was 4%. We experienced internal revenue growth in the following areas: (i) our state and local business with growth in our electronic payment services, unemployment benefits and children and youth services; (ii) our government healthcare line of business; and (iii) our federal business with incremental student loan volumes. This growth was offset by declines in our transportation line of business due to a decline in volumes in our violations processing business.

Operating expenses
Wages and benefits increased $69.3 million, or 2.4%, to $3.0 billion. As a percentage of revenues, wages and benefits decreased 1.6% to 45.6% in fiscal year 2009 from 47.2% in fiscal year 2008. During fiscal years 2009 and 2008, we recorded benefits to wages and benefits of approximately $(13.8 million) and $(3.1 million), respectively, related to our deferred compensation plans as a result of changes in the market value of the liability to employees. Increased revenue related to deliveries of hardware and software contributed approximately 0.7% of the decrease in wages and benefits as a percentage of revenue, due to a lower component of wages and benefits as a percentage of revenue than our other operations. During fiscal year 2009, we recorded $7.3 million in net severance costs and $7.6 million in other labor and benefit costs related to our global production initiative as discussed in Significant Developments above and Note 4 to our Consolidated Financial Statements. During fiscal year 2009, we recorded an $8.9 million charge associated with the SERP Termination as discussed in Note 11 to our Consolidated Financial Statements. During fiscal years 2009 and 2008, we recorded a (benefit) charge of approximately $(0.9 million) and $1.4 million, respectively, for estimated costs related to certain former employees’ stock options as discussed in Note 14 to our Consolidated Financial Statements. During fiscal year 2008, we recorded a charge of approximately $1.2 million of compensation expense related to amending certain employee stock options as discussed in Note 14 to our Consolidated Financial Statements.

Services and supplies increased $213.9 million, or 15.5%, to $1.6 billion in fiscal year 2009 from fiscal year 2008. As a percentage of revenues, services and supplies increased 2.0% to 24.5% in fiscal year 2009 from 22.5% in fiscal year 2008. Increased revenue related to deliveries of hardware and software contributed approximately 1.5% of the change in services and supplies as a percentage of revenue. During fiscal year 2009, we recorded $2.3 million in costs related to our global production initiative. During fiscal year 2009, we recorded $0.5 million in costs related to our ongoing stock option investigation. During fiscal years 2009 and 2008, we recorded $0.3 million and $3.5 million, respectively, in costs related to the evaluation of strategic alternatives of the Company and stockholder derivative lawsuits.

Rent, lease and maintenance increased $39.1 million, or 5.2%, to $785.2 million. As a percentage of revenues, rent, lease and maintenance decreased 0.1% to 12.0% in fiscal year 2009 from 12.1% in fiscal year 2008. During fiscal year 2009, we recorded $2.8 million in costs related to our global production initiative. During fiscal years 2009 and 2008, we recorded $2.9 million and $2.4 million, respectively, for electronic data storage costs related to our ongoing stock option investigation.

Other operating expenses decreased $20.0 million to $48.8 million. As a percentage of revenues, other operating expenses decreased 0.3% to 0.8%. The table below reflects some of the items impacting other operating expenses during fiscal years 2009 and 2008 (in millions):

		Fiscal Year Ended June 30,
		2009				2008
Commercial segment:
Cost related to our global production initiative		$	1.0			$	-
Litigation settlement			-				3.0
Gain on sale of UPRR			(1.1	)			(1.0	)
Litigation settlement related to pre-acquisition activities of the Acquired HR Business and subsequent recovery from seller							(1.8	)
Government segment:
Cost related to our global production initiative			0.4				-
Gain on sale of bindery business			(0.2	)
Gain on sale of our decision support business							(2.4	)
Gain on settlement of indemnification and other claims with Lockheed Martin Corporation							(2.2	)
Corporate segment:
Legal costs associated with the ongoing stock option investigations and stockholder derivative lawsuits, net of insurance recovery			3.3				30.1
Legal costs associated with the evaluation of strategic alternatives and stockholder derivative lawsuits			0.5				6.3
Total		$	3.9			$	32.0
As a percentage of revenue			0.1	%			0.5	%
Change as a percentage of revenue explained above			-0.4	%
Other net change as a percentage of revenue			0.1	%
Total change as a percentage of revenue			-0.3	%

Operating income
Operating income increased $40.9 million, or 6.3%, in fiscal year 2009 compared to the prior year. As a percentage of revenues, operating income remained flat.  The table below reflects some of the items impacting operating income during fiscal years 2009 and 2008 (in millions):

		Fiscal Year Ended June 30,
		2009				2008
Commercial segment:
Benefit related to our deferred compensation plans		$	3.2			$	0.9
Costs related to our global production initiative			(16.2	)			-
Litigation settlement			-				(3.0	)
Impairment charge related to the termination of a Commercial client that was acquired			-				(1.6	)
Gain on sale of UPRR			1.1				1.0
Litigation settlement related to pre-acquisition activities of the Acquired HR Business and subsequent recovery from seller			-				1.8
Government segment:
Costs related to our global production initiative			(3.2	)			-
Gain on sale of bindery business			0.2				-
Gain on sale of our decision support business			-				2.4
Gain on settlement of indemnification and other claims with Lockheed Martin Corporation			-				2.2
Corporate segment:
Benefit related to our deferred compensation plans			10.6				2.2
SERP Termination			(8.9	)			-
Legal and other costs associated with the ongoing stock option investigations and stockholder derivative lawsuits, net of insurance recovery			(6.7	)			(32.5	)
Legal costs and other costs associated with the evaluation of strategic alternatives and stockholder derivative lawsuits			(0.8	)			(9.9	)
Cost related to amending certain employees stock options			-				(1.2	)
Cost (credits) related to certain former employees’ stock options			0.9				(1.4	)
Costs related to our global production initiative			(1.9	)			-
Total		$	(21.7	)		$	(39.1	)
As a percentage of revenue			-0.3	%			-0.6	%
Change as a percentage of revenue explained above			0.3	%
Other net change as a percentage of revenue			-0.3	%
Total change as a percentage of revenue			0.0	%

Interest expense
Interest expense decreased $31.6 million to $130.3 million, primarily due to lower interest rates on outstanding balances on our Credit Facility during fiscal year 2009 as compared to the same period of the prior year.

Other non-operating expense (income), net
Other non-operating expense (income), net increased $14.5 million, to $1.4 million from $(13.1 million) in the same period in the prior year. During fiscal years 2009 and 2008, we recorded losses on the investments supporting our deferred compensation plans of approximately $13.9 million and $4.0 million, respectively, lower interest income and lower gains on our hedging instruments in fiscal year 2009 as discussed in Note 17 to our Consolidated Financial Statements offset by higher gains on foreign currency and marketable securities during fiscal year 2009.

Income tax expense
Our effective income tax rate increased to 36.9% during fiscal year 2009 from 33.7% during fiscal year 2008.  The effective tax rate for fiscal year 2008 included interest credits on tax refunds which were netted against our tax liability, resulting in a $4.0 million reduction of interest expense calculated in accordance with FIN 48. Our effective income tax rate for fiscal year 2009 is higher than the 35% federal statutory rate primarily due to the effect of state income taxes, the tax impact of the cash lump sum payment related to the SERP Termination, as discussed in Note 11 to our Consolidated Financial Statements, and the change in cash surrender value of life insurance policies underlying certain of our deferred compensation obligations.

Comparison of Fiscal Year 2008 to Fiscal Year 2007

Revenues
Revenue increased $388.1 million, or 7%, to $6.2 billion during fiscal year 2008 from $5.8 billion during fiscal year 2007. Excluding revenues related to operations divested through June 30, 2008, our revenues increased $393.6 million, or 7%. Internal revenue growth was 5% and the remainder of the growth was related to acquisitions. Fiscal years 2008 and 2007 include revenues related to the operations divested through June 30, 2008 of $5.1 million and $10.6 million, respectively.

Revenue in our Commercial segment, which represented approximately 60% of our consolidated revenue for fiscal year 2008, increased $269.0 million, or 8%, to $3.67 billion in fiscal year 2008 compared to fiscal year 2007. Internal revenue growth was 6% and growth from acquisitions was 2%. Internal revenue growth was due to growth in the following areas: (i) business process outsourcing, particularly in our customer care and healthcare payer lines of business; (ii) commercial services with growth in our human resources outsourcing and consulting, learning process outsourcing and our commercial education and financial services lines of business; and (iii) information technology outsourcing business. Our Commercial segment revenues for fiscal years 2008 and 2007 includes revenues related to our UPRR business, which was divested in the fourth quarter of fiscal year 2008, of $5.1 million and $5.5 million, respectively.

Revenue in our Government segment, which represented approximately 40% of our consolidated revenue for fiscal year 2008, increased $119.0 million, to $2.49 billion in fiscal year 2008 compared to fiscal year 2007. Internal revenue growth was 4% and growth from acquisitions was 1%. We experienced internal revenue growth in the following areas: (i) our state and local business with growth in our eligibility determination offset by lower revenues from unclaimed property services; and (ii) our transportation line of business due to growth in our urban and airport parking services, as well as tolling and parking project work. Our Government segment revenues for fiscal year 2007 include revenues of approximately $5.1 million related to the our decision support business, which was divested in the second quarter of fiscal year 2008, and residual revenue from business divested in the prior year.

Operating expenses
Wages and benefits increased $159.6 million, or 5.8%, to $2.9 billion. As a percentage of revenues, wages and benefits decreased 0.4% to 47.2% in fiscal year 2008 from 47.6% in fiscal year 2007. During fiscal years 2008 and 2007, we recorded a (benefit) charge to wages and benefits of approximately $(3.1 million) and $11.7 million, respectively, related to our deferred compensation plans as a result of changes in the market value of the liability to employees. During the fiscal year 2008, we recorded $1.2 million of compensation expense related to amending certain employee stock options and $1.4 million for estimated costs related to certain former employees’ stock options as discussed in Note 14 to our Consolidated Financial Statements. Lower incentive compensation accruals during fiscal year 2008 contributed 0.2% of the decrease as a percentage of revenue. During fiscal year 2007, we recorded $7.2 million of compensation expense related to our fiscal year 2007 restructuring activities and $1.1 million for duplicate costs related to our efforts to relocate domestic functions to offshore facilities.

Services and supplies increased $121.4 million, or 9.6%, to $1.4 billion in fiscal year 2008 from fiscal year 2007. As a percentage of revenues, services and supplies increased 0.6% to 22.5% in fiscal year 2008 from 21.9% in fiscal year 2007. An increase in revenues for our transportation contracts as discussed above contributed 0.4% to the increase in services and supplies as a percentage of revenues. These contracts have a higher component of services and supplies than our other operations. During fiscal year 2008 and 2007, we recorded $3.5 million and $2.8 million, respectively, in other costs associated with the potential buyout of the Company. During fiscal year 2007, we recorded $1.3 million related to our ongoing stock option investigation and shareholder derivative lawsuits, $0.5 million for our fiscal year 2007 restructuring activities and $0.2 million for other impairment charges.

Rent, lease and maintenance increased $44.5 million, or 6.3%, to $746.1 million. As a percentage of revenues, rent, lease and maintenance decreased 0.1% to 12.1% in fiscal year 2008 from 12.2% in fiscal year 2007. During fiscal year 2008 and 2007, we recorded $2.4 million and $0.9 million, respectively, for electronic data storage costs related to our ongoing stock option investigation. During fiscal year 2007, we recorded $2.1 million related to our fiscal year 2007 restructuring activities.

During fiscal year 2007, we recorded a non-cash impairment charge to in-process capitalized software related to our Department of Education contract of approximately $76.4 million as discussed above in “Significant Developments 2007 - Contract with the Department of Education.”

Other operating expenses increased $2.1 million to $68.8 million. As a percentage of revenues, other operating expenses decreased 0.1%, to 1.1%. The table below reflects some of the items impacting other operating expenses during fiscal years 2008 and 2007 (in millions):

		Fiscal Year Ended June 30,
		2008				2007
Commercial segment:
Litigation settlement		$	3.0			$	-
Gain on sale of UPRR			(1.0	)			-
Litigation settlement related to pre-acquisition activities of the Acquired HR Business and subsequent recovery from seller			(1.8	)			4.5
Provision for uncollectible accounts receivable related to the bankruptcy of a sub-prime lending client			-				1.5
Government segment:
Gain on sale of our decision support business			(2.4	)			-
Gain on settlement of indemnification and other claims with Lockheed Martin Corporation			(2.2	)			-
Corporate segment:
Legal costs associated with the ongoing stock option investigations and stockholder derivative lawsuits, net of insurance recovery			30.1				30.1
Legal costs associated with the evaluation of strategic alternatives and stockholder derivative lawsuits			6.3				3.1
Reversal of penalties related to Section 162(m) disallowances			-				(0.9	)
Total		$	32.0			$	38.3
As a percentage of revenue			0.5	%			0.7	%
Change as a percentage of revenue explained above			-0.2	%
Other net change as a percentage of revenue			0.1	%
Total change as a percentage of revenue			-0.1	%

Operating income
Operating income increased $108.1 million, or 20.1%, in fiscal year 2008 compared to the prior year. As a percentage of revenues, operating income increased 1.2%.  The table below reflects some of the items impacting operating income during fiscal years 2008 and 2007 (in millions):

		Fiscal Year Ended June 30,
		2008				2007
Commercial segment:
Benefit (charge) related to our deferred compensation plans		$	0.9			$	(3.6	)
Litigation settlement			(3.0	)			-
Impairment charge related to the termination of a Commercial client that was acquired			(1.6	)			-
Gain on sale of UPRR			1.0				-
Costs related to our fiscal year 2007 restructuring activities			-				(8.9	)
Litigation settlement related to pre-acquisition activities of the Acquired HR Business and subsequent recovery from seller			1.8				(4.5	)
Provision for uncollectible accounts receivable and other charges related to the loss of a sub-prime lending client to bankruptcy			-				(1.7	)
Asset impairments and other charges			-				(1.3	)
Costs related to our efforts to relocate domestic functions to offshore facilities			-				(1.2	)
Government segment:
Gain on sale of our decision support business			2.4				-
Gain on settlement of indemnification and other claims with Lockheed Martin Corporation			2.2				-
Software impairment charge related to the CSB contract			-				(76.4	)
Revenue related to the settlement of the North Carolina Department of Health and Human Services contract dispute			-				3.4
Cost related to our restructuring activities			-				(1.3	)
Corporate segment:
Benefit (charge) related to our deferred compensation plans			2.2				(8.1	)
Legal and other costs associated with the ongoing stock option investigations and stockholder derivative lawsuits, net of insurance recovery			(32.5	)			(32.3	)
Legal costs and other costs associated with the evaluation of strategic alternatives and stockholder derivative lawsuits			(9.9	)			(5.9	)
Cost related to amending certain employees stock options			(1.2	)			-
Cost related to certain former employees’ stock options			(1.4	)			-
Reversal of accrued penalties related to the Section 162(m) disallowances			-				0.9
Total		$	(39.1	)		$	(140.9	)
As a percentage of revenue			-0.6	%			-2.4	%
Change as a percentage of revenue explained above			1.8	%
Other net change as a percentage of revenue			-0.6	%
Total change as a percentage of revenue			1.2	%

Interest expense
Interest expense decreased $20.7 million, to $161.9 million, primarily due to lower interest rates on outstanding balances on our Credit Facility during fiscal year 2008 as compared to the same period of the prior year. Interest expense in fiscal year 2007 includes $2.6 million in charges related to a waiver fee on our Credit Facility.

Other non-operating expense (income), net
Other non-operating expense (income), net decreased $16.0 million to $(13.1 million) in fiscal year 2008 from $(29.1 million) in fiscal year 2007. Fiscal year 2007 includes a gain of $8.2 million on the sale of a minority interest in a professional services business. During fiscal years 2008 and 2007, we recorded losses (gains) on the investments supporting our deferred compensation plans of approximately $4.0 million and $(10.6 million), respectively. In addition, other income, net included higher foreign currency transaction gains and gains on our foreign currency forward agreements during fiscal year 2008.

Income tax expense
Our effective income tax rate decreased to 33.7% in fiscal year 2008 from 34% in fiscal year 2007. During fiscal year 2008 we reversed $5.9 million in income tax expense related to amounts previously accrued for Internal Revenue Code Section 162(m) deductions due to settlements with taxing authorities (please see Note 19 to our Consolidated Financial Statements for further discussion). During fiscal year 2007 we reversed $4.5 million in income tax expense related to amounts previously accrued for cash-based compensation related issues associated with Section 162(m) deductions.  Our effective income tax rate on operations is lower than the 35% federal statutory rate primarily due to the impact of refunds and additional settlements with taxing authorities resulting in a reduction of expenses calculated in accordance with FIN 48, offset by state income taxes.

Liquidity and Capital Resources

Cash Flows
We generated approximately $877.1 million, $826.8 million and $738.4 million in cash flows provided by operating activities in fiscal years 2009, 2008 and 2007, respectively.

Fiscal year 2009 cash flows provided by operating activities, compared to fiscal year 2008, were positively impacted by increased collection of accounts receivable and timing of payments to vendors, offset by higher payments to taxing authorities during fiscal year 2009 compared to the prior year. For fiscal year 2009, our tax payments were approximately $101.0 million higher than for the same period in fiscal year 2008. During fiscal year 2008, we received a favorable ruling from the Internal Revenue Service that resulted in our recording a refund of prior year taxes paid, which reduced payments due for then current income tax obligations.

Fiscal year 2008 cash flows provided by operating activities, compared to fiscal year 2007, were positively impacted by higher operating income, excluding the $76.4 million non-cash software impairment charge, lower income tax payments in fiscal year 2008, compared to fiscal year 2007, and favorable timing of vendor payments, offset by cash paid on tax, interest and penalties related to our stock option grant practices, the growth in our accounts receivable and increased incentive compensation payments made in fiscal year 2008, but which were earned and accrued in fiscal year 2007. The growth in our accounts receivable was caused by increases in unbilled accounts receivable, primarily in our Government segment, where revenues recognized under a cost plus contract and also under certain percentage-of-completion contracts were higher than the related billings and collections during the fiscal year.

Accounts receivable fluctuations may have a significant impact on our cash flows provided by operating activities. Accounts receivable can be negatively impacted by growth in revenues in one fiscal year compared to the prior fiscal year, where collections typically lag behind the related client billings, resulting in a use of cash for operating activities. Conversely, when revenue growth slows, then accounts receivable is positively impacted, resulting in a source of cash for operating activities. Additionally, accounts receivable is impacted by contracts where we apply percentage-of-completion accounting in the recognition of revenues. Under such contracts we may receive a different amount of payments from the clients during that fiscal year than the amount that we record as revenues during the same period. Such payments are typically dependent on original contract negotiations as to the timing of when such payments are due, and based on actual operational performance in the delivery of the contract milestones and associated client acceptance required under the contracts.

Free cash flow is measured as cash flow provided by operating activities (as reported in our Consolidated Statements of Cash Flows), less capital expenditures (purchases of property, equipment and software, net, as reported in our Consolidated Statements of Cash Flows) less additions to other intangible assets (as reported in our Consolidated Statements of Cash Flows). We believe this free cash flow metric provides an additional measure of available cash flow after we have satisfied the capital expenditure requirements of our operations, and should not be taken in isolation to be a measure of cash flow available for us to satisfy all of our obligations and execute our business strategies. We also rely on cash flows from financing activities which, together with free cash flow, are expected to be sufficient for us to execute our business strategies. Our measure of free cash flow may not be comparable to similarly titled measures of other companies. The following table sets forth the calculations of free cash flow (in thousands):

		Fiscal Year Ended June 30,
		2009				2008				2007
Net cash provided by operating activities		$	877,094			$	826,777			$	738,378
Purchases of property, equipment and software, net			(320,267	)			(267,948	)			(316,843	)
Additions to other intangible assets			(42,480	)			(40,358	)			(43,187	)
Free cash flow		$	514,347			$	518,471			$	378,348

During fiscal years 2009, 2008 and 2007, cash used in investing activities was $526.5 million, $534.8 million and $529.0 million, respectively. Net cash used in investing activities includes the following:

	•		During fiscal year 2009, we used $172.5 million for acquisitions, net of cash acquired, primarily for the acquisitions of Multivoice, e-Services, Anix and contingent consideration and a working capital settlement related to prior year acquisitions. We used $219.5 million in fiscal year 2008 for acquisitions, including Syan, sds, CompIQ and TMS. We used $182.7 million in fiscal year 2007 for acquisitions, including Systech, Primax, Albion and CDR. (Each as defined in Note 3 to our Consolidated Financial Statements).
	•		During fiscal year 2009, we received $10.9 million related to our divestiture activities, including the sale of our bindery business. During fiscal year 2008, we received $6.3 million related to the sale of our decision support business.
	•		Cash used for the purchase of property, equipment and software, net and additions to other intangible assets was $362.7 million, $308.3 million and $360.0 million during fiscal years 2009, 2008 and 2007, respectively. Historically, the capital intensity of our business has ranged between 5% and 7% of revenue. During fiscal years 2009, 2008 and 2007, the overall capital intensity of our business was approximately 6%, 5% and 6% of revenues, respectively. We expect that as our new business signings ramp, we will incur capital expenditures associated with the new business but we expect that the capital intensity will remain within our historical range.
	•		During fiscal years 2009 and 2008, we received $13.3 million and $3.0 million, respectively, in proceeds primarily for investments which matured during the period. During fiscal year 2007, we received $20.3 million related to a minority investment which was sold during the year. During fiscal years 2009, 2008 and 2007, we purchased $15.1 million, $9.8 million and $6.5 million, respectively, of investments primarily to support our deferred compensation plans.
	•		During fiscal year 2008, we paid Lockheed Martin Corporation $6.5 million to settle all claims related to the sale of the majority of our federal business and our acquisition of Lockheed Martin Corporation’s commercial information technology services business in fiscal year 2004.

During fiscal year 2009, we used approximately $81.6 million in financing activities, primarily for the repayment of outstanding debt. During fiscal year 2008, we used approximately $137.4 million in financing activities, including $200.0 million to purchase shares under our share repurchase program. We received proceeds from stock option exercises of $81.2 million. During fiscal year 2007, approximately $2.9 million was used in financing activities. Such financing activities included $696.7 million net borrowings of debt and the repurchase of shares of $730.7 million.

We entered into capital lease agreements of an aggregate of $25.7 million, $26.9 million and $47.8 million for the purchase of equipment during fiscal years 2009, 2008 and 2007, respectively.

Credit Arrangements
Draws made under our Credit Facility are made to fund cash acquisitions and share repurchases and for general working capital requirements. During the last twelve months, the balance outstanding under our credit facilities for borrowings ranged from $1.79 billion to $1.85 billion. At June 30, 2009, we had approximately $865.5 million of unused commitment under our revolving credit facility after giving effect to outstanding indebtedness of $43.5 million and $91.0 million of outstanding letters of credit that secure certain contractual performance and other obligations. Based on the current leverage ratios under our Credit Facility, we had approximately $483.0 million available for current draw under this revolving facility. At June 30, 2009, we had $1.79 billion outstanding under our Credit Facility, of which $1.77 billion is reflected in long-term debt and $18 million is reflected in current portion of long-term debt. At June 30, 2009, $1.74 billion of our outstanding balances under our Credit Facility bore interest at approximately 2.31% and another $43.5 million of our outstanding balance bore interest from 1.44% to 2.20%. Please see Note 17 to our Consolidated Financial Statements for a discussion of the interest rate swap and interest rate collar agreements related to interest rates on our Credit Facility.

We have $250 million in Senior Notes due on June 1, 2010 which we intend to repay from cash on hand.

Please see Note 10 to our Consolidated Financial Statements for a discussion of the terms of our Credit Facility and our outstanding surety bonds and letters of credit.

Debt Covenants
The Credit Facility contains customary covenants, including but not limited to, restrictions on our ability, and in certain instances, our subsidiaries’ ability, to incur liens, merge or dissolve, make certain restricted payments, or sell or transfer assets. The Credit Facility also limits the Company’s and our subsidiaries’ ability to incur additional indebtedness. The Credit

Agreement includes financial covenants relating to our financial performance. The two most significant financial covenants are a Maximum Senior Leverage Ratio covenant that requires us to maintain a ratio of Senior Indebtedness to consolidated EBITDA, as defined in the Credit Agreement, of not greater than 2.25 to 1.00 and a Minimum Interest Coverage Ratio covenant that requires us to maintain a ratio of Consolidated EBITDA to Consolidated Interest Expense, as defined in the Credit Agreement, of not less than 4.50 to 1.00.  At June 30, 2009 these ratios were 1.84 and 10.24, respectively. Our Senior Notes do not contain financial covenants.

While we do not believe any of these credit covenants to which we are subject presently materially restrict our operations, our ability to meet any one particular financial covenant can be affected by events beyond our control and could result in material adverse consequences that could negatively impact our business, results of operations and financial condition. Such adverse consequences could include defaults under our Credit Agreement or Senior Notes, the acceleration of repayment of amounts outstanding under these agreements, termination of existing unused commitments by our lenders, refusal by our lenders to extend further credit under the Credit Agreement, or the lowering or modification of our credit ratings. As of June 30, 2009, we were in compliance with the covenants of our Credit Facility, as amended.

Capital and Credit Market Risk
Due to the tightening of the capital and credit markets, we have performed assessments to determine the impact, if any, of recent market developments on our financial statements. Our additional assessment has included a review of access to liquidity in the credit market, counterparty creditworthiness, and operational risk. While we believe that the defensive nature of our business model provides us with a certain level of predictability in our revenue streams during differing economic cycles, the current market volatility may create additional risks in the future.

Credit ratings
On December 3, 2007, Fitch removed us from Rating Watch Negative and on December 20, 2007 affirmed our rating at BB with a Stable outlook, except for our Senior Notes which remain at BB-.  Fitch upgraded our outlook to Positive in March 2009. On January 3, 2008, S&P removed us from CreditWatch with negative implications and confirmed our credit rating at BB with a negative outlook.   On January 28, 2008, Moody’s concluded their review of ACS for potential downgrade and confirmed our rating at Ba2 with a Stable outlook.  On August 8, 2008, S&P confirmed our BB rating and revised our outlook to stable. There may be additional reductions in our ratings depending on the timing and amounts that may be drawn under our Credit Facility. As a result, the terms of any financings we choose to enter into in the future may be adversely affected. In addition, as a result of these downgrades, the sureties which provide performance bonds backing our contractual obligations could reduce the availability of these bonds, increase the price of the bonds to us or require us to provide collateral such as a letter of credit. However, we believe that we will continue to have sufficient capacity in the surety markets and liquidity from our cash flow and Credit Facility to respond to future requests for proposals.  In addition, certain of our commercial outsourcing contracts provide that, in the event our credit ratings are downgraded to certain specified levels, the client may elect to terminate its contract with us and either pay a reduced termination fee or in some limited instances, no termination fee.  While we do not anticipate that the downgrading of our credit ratings will result in a material loss of commercial outsourcing revenue due to the client’s exercise of these termination rights, there can be no assurance that such a credit ratings downgrade will not adversely affect these client relationships.

Derivative Instruments and Hedging Activities
Please see Note 17 to our Consolidated Financial Statements for a discussion of our derivative instruments and hedging activities.

Share Repurchase Programs
Please see Note 14 to our Consolidated Financial Statements for a discussion of our share repurchase programs.

Stock Option Repricing
Please see Note 14 to our Consolidated Financial Statements for a discussion of the repricing of certain outstanding stock options, our tender offer to amend certain options and results of the tender offer, as well as our offer to former employees.

Other
At June 30, 2009 and 2008, we had cash and cash equivalents of $730.9 million and $461.9 million, respectively. Our working capital (defined as current assets less current liabilities) decreased to $929.1 million at June 30, 2009 from $1.02 billion at June 30, 2008. Our current ratio (defined as total current assets divided by total current liabilities) was 1.6 and 1.9 at June 30, 2009 and 2008, respectively. Our debt-to-capitalization ratio (defined as the sum of short-term and long-term debt divided by the sum of short-term and long-term debt and equity) was 47% and 51% at June 30, 2009 and 2008, respectively.

We believe that available cash and cash equivalents, together with cash generated from operations and available borrowings under our Credit Facility, will provide adequate funds for our anticipated internal growth and operating needs, including

capital expenditures and the repayment of our $250 million of Senior Notes due June 1, 2010, and will meet the cash requirements of our contractual obligations. Should interest rates rise, our interest expense could increase and impact our results of operations and cash flows. In addition, we intend to continue our growth through acquisitions, which could require significant commitments of capital. In order to pursue such opportunities we may be required to incur debt or to issue additional potentially dilutive securities in the future. No assurance can be given as to our future acquisitions and expansion opportunities and how such opportunities will be financed.

Related Party Transactions

Please see Note 22 to our Consolidated Financial Statements for a discussion of transactions with related parties.

Disclosures about Contractual Obligations and Commercial Commitments as of June 30, 2009 (in thousands):

						Payments Due by Period
						Less than												After
Contractual Obligations		Total				1 Year				1-3 Years				4-5 Years				5 Years
Long-term debt (1)		$	1,786,863			$	19,209			$	43,553			$	1,724,078			$	23
Senior Notes, net of unamortized discount (1)			499,609				249,984				-				-				249,625
Capital lease obligations (1)			50,229				25,979				22,930				1,320				-
Operating leases (2)			1,012,187				369,490				406,447				144,017				92,233
Purchase obligations (3)			24,925				12,720				12,205				-				-
Total Contractual Cash Obligations		$	3,373,813			$	677,382			$	485,135			$	1,869,415			$	341,881
						Amount of Commitment Expiration per Period
		Total
		Amounts				Less than												After 5
Other Commercial Commitments		Committed				1 Year				1-3 Years				4-5 Years				Years
Standby letters of credit		$	91,001			$	91,001			$	-			$	-			$	-
Surety bonds			643,456				579,528				60,638				1,993				1,297
Total Commercial Commitments		$	734,457			$	670,529			$	60,638			$	1,993			$	1,297

(1)		Excludes accrued interest of $4.8 million at June 30, 2009.
(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 2015, which are included in operating leases in the table.
(3)		We have entered into various contractual agreements to purchase telecommunications services. These agreements provide for minimum annual spending commitments, and have varying terms through fiscal year 2011, and are included in purchase obligations in the table.

We made contributions of approximately $12.8 million to our pension plans during fiscal year 2009. We expect to contribute approximately $14.6 million to our pension plans in fiscal year 2010. Minimum pension funding requirements are not included in the table above as such amounts are zero for our pension plans as of June 30, 2009. Please see “Critical Accounting Policies” below for discussion of our pension plans.

Please see Note 10 to our Consolidated Financial Statements for a discussion of our outstanding surety bonds and letters of credit.

Please see Note 3 to our Consolidated Financial Statements for a discussion of our obligation to make contingent payments to former shareholders of acquired entities upon satisfaction of certain contractual criteria in conjunction with certain acquisitions.

As discussed in Note 14 to our Consolidated Financial Statements, as of June 30, 2009, we have accrued approximately $0.4 million to be paid to current and former employees related to stock option repricing as the result of our internal investigation of our stock option grant practices.

As of June 30, 2009, we had gross reserves for uncertain tax positions totaling $38.9 million, which excludes $7.7 million of offsetting tax benefits recorded in accordance with FIN 48 (defined in Critical Accounting Policies – Income Taxes below).  We

anticipate a change in the next 12 months to the total amount of FIN 48 unrecognized benefits due as a result of final settlements with tax authorities.  An estimate of the range of the cash settlement is between $8.0 million and $19.0 million.

Please see Note 19 to our Consolidated Financial Statements for a discussion of our exposure under our Commercial contract to perform third party student loan servicing in the Federal Family Education Loan program (“FFEL”) on behalf of various financial institutions.

Critical Accounting Policies

The preparation of our financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. We base our estimates on historical experience and on various other assumptions or conditions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and may result in materially different results under different assumptions and conditions. We believe that the following critical accounting policies used in the preparation of our Consolidated Financial Statements involve significant judgments and estimates.

Use of Estimates
We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to: (i) allocation of revenues based upon fair values in multiple element arrangements; (ii) allowance for doubtful accounts; (iii) restructuring and related charges; (iv) asset impairments; (v) depreciable lives of assets; (vi) useful lives of intangible assets; (vii) pension and post-retirement benefit plans; (viii) income tax reserves and valuation allowances and (ix) contingency and litigation reserves. Future events and their effects cannot be predicted with certainty; accordingly, our accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of our Consolidated Financial Statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Actual results could differ from those estimates.

Revenue Recognition
A significant portion of our revenue is recognized based on objective criteria that do not require significant estimates or uncertainties. For example, transaction volumes and time and material and cost reimbursable arrangements are based on specific, objective criteria under the contracts. Accordingly, revenues recognized under these contracts do not require the use of significant estimates that are susceptible to change. Revenue recognized using the percentage-of-completion accounting method does require the use of estimates and judgment as discussed below.

Our policy follows the guidance from SEC Staff Accounting Bulletin 104, “Revenue Recognition,” (“SAB 104”) unless the transaction is within the scope of other specific authoritative guidance. SAB 104 provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. We recognize revenues when persuasive evidence of an arrangement exists, the services have been provided to the client, the fee is fixed or determinable, and collectibility is reasonably assured.

During fiscal year 2009, approximately 74% of our revenue was recognized based on transaction volumes, approximately 7% was fixed fee based, wherein our revenue is earned as we fulfill our performance obligations under the arrangement, approximately 6% was related to cost reimbursable contracts, approximately 5% of our revenue was recognized using percentage-of-completion accounting and the remainder is related to time and material contracts. Our revenue mix is subject to change due to the impact of acquisitions, divestitures and new business.

Revenues on cost reimbursable contracts are recognized by applying an estimated factor to costs as incurred, such factor being determined by the contract provisions and prior experience. Revenues on unit-price contracts are recognized at the contractual selling prices of work completed and accepted by the client. Revenues on time and material contracts are recognized at the contractual rates as the labor hours and direct expenses are incurred.

Revenues for business process outsourcing services are recognized as services are rendered, generally on the basis of the number of accounts or transactions processed. Information technology processing revenues are recognized as services are provided to the client, generally at the contractual selling prices of resources consumed or capacity utilized by our clients. Revenues from annual maintenance contracts are deferred and recognized ratably over the maintenance period. Revenues

from hardware sales are recognized upon delivery to the client and when uncertainties regarding client acceptance have expired.

Revenues on certain fixed price contracts where we provide information technology system development and implementation services are recognized over the contract term based on the percentage of development and implementation services that are provided during the period compared with the total estimated development and implementation services to be provided over the entire contract using Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”). SOP 81-1 requires the use of percentage-of-completion accounting for long-term contracts that are binding agreements between us and our clients in which we agree, for compensation, to perform a service to the client’s specifications. These services require that we perform significant, extensive and complex design, development, modification and implementation activities for our clients’ systems. Performance will often extend over long periods, and our right to receive future payment depends on our future performance in accordance with the agreement.

The percentage-of-completion methodology involves recognizing probable and reasonably estimable revenue using the percentage of services completed, on a current cumulative cost to estimated total cost basis, using a reasonably consistent profit margin over the period. Due to the longer term nature of these projects, developing the estimates of costs often requires significant judgment. Factors that must be considered in estimating the progress of work completed and ultimate cost of the projects include, but are not limited to, the availability of labor and labor productivity, the nature and complexity of the work to be performed, and the impact of delayed performance. If changes occur in delivery, productivity or other factors used in developing the estimates of costs or revenues, we revise our cost and revenue estimates, which may result in increases or decreases in revenues and costs, and such revisions are reflected in income in the period in which the facts that give rise to that revision become known.

At times, we may contract with a client to provide more than one service; for instance, we may contract for an implementation or development project and also provide services or operate the system over a period of time. In these situations, we follow the guidance of Emerging Issues Task Force Issue (“EITF”) No. 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). EITF 00-21 provides the methodology for separating the contract elements and allocating total arrangement consideration to the contract elements but does not stipulate the revenue recognition methodology that should be applied to these separate elements. Once the contract has been separated under the guidance of EITF 00-21 and arrangement consideration allocated, revenue recognition for each of the elements follows the applicable revenue recognition method, as described above. In certain instances where revenue cannot be allocated to a contract element delivered earlier than other elements, costs of delivery are deferred and recognized as the subsequent elements are delivered. Costs deferred do not exceed the relative fair value of the related element and are tested for impairment regularly.

We follow the guidance of EITF No. 99-19, “Reporting Revenues Gross as a Principal versus Net as an Agent,” (“EITF 99-19”) whereby we evaluate transactions on a case by case basis to determine whether the transaction should be recorded on a gross or net basis. This evaluation includes, but is not limited to, assessing whether the Company (1) acts as a principal in the transaction; (2) has risks and rewards such as the risk of loss for collections, delivery or returns; (3) takes title to products where applicable; and (4) acts as an agent or broker with compensation on a commission or fee basis.

Revenues earned in excess of related billings are accrued, whereas billings in excess of revenues earned are deferred until the related services are provided. We recognize revenues for non-refundable, upfront implementation fees on a straight-line basis over the period between the initiation of the ongoing services through the end of the contract term.

Cost of Revenues
We present cost of revenues in our Consolidated Statements of Income based on the nature of the costs incurred. Substantially all these costs are incurred in the provision of services to our clients. The selling, general and administrative costs included in cost of revenues are not material and are not separately presented in the Consolidated Statements of Income.

Contingencies
We account for claims and contingencies in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies” (“SFAS 5”). SFAS 5 requires that we record an estimated loss from a claim or loss contingency when information available prior to issuance of our financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for claims and contingencies requires us to use our judgment. We consult with legal counsel on those issues related to litigation and seek input from other experts and advisors with respect to matters in the ordinary course of business.

Our contracts with clients typically span several years. We continuously review and reassess our estimates of contract profitability. If our estimates indicate that a contract loss will occur, a loss accrual is recorded in the Consolidated Financial

Statements in the period it is first identified, if allowed by relevant accounting guidance. Circumstances that could potentially result in contract losses over the life of the contract include variances from expected costs to deliver our services, and other factors affecting revenues and costs.

Valuation of Goodwill and Intangibles
Because we are primarily a services company, our business acquisitions typically result in significant amounts of goodwill and other intangible assets, which affect the amount of future period amortization expense and possible expense we could incur as a result of an impairment.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred between annual testing dates. Such indicators may include, among others: a significant decline in expected future cash flows; a sustained, significant decline in stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and reductions in growth rates.  Any adverse change in these factors could have a significant impact on the recoverability of goodwill.

In the fourth quarter of fiscal year 2009, we tested the recoverability of goodwill as part of our annual review with no indication of impairment. The goodwill impairment test involves a two-step process. The first step is a comparison of each reporting unit’s fair value to its carrying value.  If a reporting unit’s carrying value exceeds its fair value, an impairment of goodwill may exist.  We estimate the fair value of each reporting unit utilizing an income approach, which incorporates the use of a discounted cash flow method. This requires us to use significant judgment including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, the useful life over which cash flows will occur, determination of our weighted average cost of capital, and relevant market data. Based on the results of our annual test, there was no indication that an impairment of goodwill existed after the first step test.  Therefore, we were not required to perform the second step test discussed below. 

The fair values of reporting units estimated using the income approach were assessed for reasonableness by comparing those values to fair value estimates derived using a market approach. A market approach estimates fair value by applying performance metric multiples to the reporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting units.  If the fair value of the reporting unit derived using the market approach were significantly different from the fair value estimated in the income approach, we would reevaluate and adjust the assumptions used in the income approach.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step test must be performed to measure the amount of impairment loss. The amount of impairment loss is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. Specifically, fair value is allocated to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, an impairment charge would be recorded for the difference.

Other intangible assets consist primarily of acquired customer-related intangibles, and contract and migration costs related to new business activity, both of which are recorded at cost and amortized using the straight-line method over the contract terms. In connection with our revenue arrangements, we incur costs to originate long-term contracts and to perform the transition and setup activities necessary to enable us to perform under the terms of the arrangement. We capitalize certain incremental direct costs which are related to the contract origination or transition, implementation and setup activities and amortize them over the term of the arrangement. From time to time, we also provide certain inducements to clients in the form of various arrangements, including contractual credits, which are capitalized and amortized as a reduction of revenue over the term of the contract. The amortization period of customer-related intangible assets ranges from 1 to 17 years, with a weighted average of approximately 10 years. The amortization period for all other intangible assets, excluding title plants and tradenames with indefinite useful lives, ranges from 1 to 20 years, with a weighted average of 5 years. For the acquisitions in all periods presented, except one small acquisition in our Commercial segment in fiscal year 2009, one small acquisition in our Commercial segment in fiscal year 2008 and one small acquisition in our Government segment during fiscal year 2007, we obtained a third-party valuation of the intangible assets from Value Incorporated. The determination of the value of other intangible assets requires us to make estimates and assumptions about estimated asset lives, future business trends and growth. In addition to our annual impairment testing, we continually evaluate whether events and circumstances have occurred that indicate the balance of intangible assets may not be recoverable. In evaluating impairment, we compare the estimated fair value of the intangible asset to its underlying book value. Such evaluation is significantly impacted by estimates and assumptions of future revenues, costs and expenses and other factors. If an event occurs which would cause us

to revise our estimates and assumptions used in analyzing the value of our other intangible assets, such revision could result in a non-cash impairment charge that could have a material impact on our financial results.

Valuation of Property, Equipment and Software
We continually evaluate whether events and circumstances have occurred that indicate the balance of our property, equipment and software may not be recoverable. Such evaluation is significantly impacted by estimates and assumptions of future revenues, costs and expenses and other factors. If an event occurs which would cause us to revise our estimates and assumptions used in analyzing the value of our property, equipment and software, such revision could result in a non-cash impairment charge or an acceleration of depreciation or amortization expense that could have a material impact on our financial results.

Stock-Based Compensation
SFAS No. 123 (revised 2004), “Share-based Payment” (“SFAS 123(R)”), requires us to recognize compensation expense for all stock-based payment arrangements based on the fair value of the stock-based payment on the date of grant. In determining the fair value of stock options, we use the Black-Scholes option pricing model that employs the following assumptions:

	•		Expected term of the option based on historical employee stock option exercise behavior and the vesting and contractual terms of the respective option.
	•		Expected volatility of our stock price based on historical monthly volatility over the expected term.
	•		Risk-free interest rate for periods within the expected term of the option.
	•		Expected dividend yield.

Expected option lives and our stock price volatility are based on management’s best estimates at the time of grant, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the vesting term of the option.

SFAS 123(R) requires that we recognize compensation expense for only the portion of stock-based payment arrangements that are expected to vest. Therefore, we apply estimated forfeiture rates that are based on historical employee termination behavior. We periodically adjust the estimated forfeiture rates so that only the compensation expense related to stock-based payment arrangements that vest are included in wages and benefits. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.

Pension and Post-Employment Benefits
SFAS No. 87, “Employers’ Accounting for Pensions” (“SFAS 87”), establishes standards for reporting and accounting for pension benefits provided to employees. SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”), requires recognition of the funded status of a defined benefit plan in the statement of financial position as an asset or liability if the plan is overfunded or underfunded, respectively. Changes in the funded status of a plan are required to be recognized in the year in which the changes occur, and reported in comprehensive income as a separate component of stockholders’ equity. Further, certain gains and losses that were not previously recognized in the financial statements are required to be reported in comprehensive income, and certain disclosure requirements were changed. SFAS 158 also requires the measurement date of the plan’s funded status to be the same as the company’s fiscal year end.

Assumptions for calculating benefit obligations and net periodic benefit cost
The following table summarizes the weighted-average assumptions used in the determination of our benefit obligation:

		As of June 30,
		2009				2008
Non-U.S. Plans
Discount rate			5.75% - 6.74	%			5.20% - 6.00	%
Rate of increase in compensation levels			3.00% - 4.05	%			3.00% - 5.45	%
U.S. Plan
Discount rate			7.00	%			6.80	%
Rate of increase in compensation levels			3.90	%			3.80	%

The following table summarizes the assumptions used in the determination of our net periodic benefit cost of our pension plans:

		Fiscal Year Ended June 30,
		2009				2008				2007
Non-U.S. Plans
Discount rate			5.20% - 5.75	%			5.20% - 6.00	%			5.20% - 5.67	%
Long-term rate of return on assets			7.00% - 7.25	%			7.00% - 7.25	%			6.50% - 7.00	%
Rate of increase in compensation levels			3.00% - 5.45	%			3.00% - 4.80	%			4.25% - 4.60	%
U.S. Plan
Discount rate			6.80	%			6.40	%			6.50	%
Long-term rate of return on assets			8.00	%			8.00	%			8.00	%
Rate of increase in compensation levels			3.80	%			3.40	%			3.50	%

Our discount rate is determined based upon high quality corporate bond yields as of the measurement date. The table below illustrates the effect of increasing or decreasing the discount rates by 25 basis points (in thousands):

		Fiscal Year Ended June 30,
		2009								2008								2007
		Plus .25%				Less .25%				Plus .25%				Less .25%				Plus .25%				Less .25%
Non-U.S. Plans
Effect on pension benefit obligation		$	(4,115	)		$	4,681			$	(7,297	)		$	7,827			$	(5,786	)		$	5,841
Effect on service and interest cost		$	(479	)		$	482			$	(582	)		$	569			$	(485	)		$	488
U.S. Plan
Effect on pension benefit obligation		$	(617	)		$	653			$	(441	)		$	467			$	(316	)		$	336
Effect on service and interest cost		$	(143	)		$	151			$	(144	)		$	152			$	(145	)		$	153

We estimate the long-term rate of return on UK, Canadian, and U.S. plan assets will be 7.0%, 6.75%, and 7.75%, respectively, based on the long-term target asset allocation. Expected returns for the following asset classes used in the plans are based on a combination of long-term historical returns and current and expected market conditions.

The UK pension scheme’s target asset allocation is 50% equity securities, 40% debt securities and 10% in real estate. External investment managers manage all of the asset classes. The target asset allocation has been set by the plan’s trustee board with a view to meeting the long-term return assumed for setting the employer’s contributions while also reducing volatility relative to the plan’s liabilities. The managers engaged by the trustees manage their assets with a view to seeking moderate out-performance of appropriate benchmarks for each asset class. At this time, the trustees do not engage in any alternative investment strategies, apart from investments in funds holding UK commercial property.

The Canadian funded plan’s target asset allocation is 35% Canadian federal, provincial and corporate bonds, 30% larger capitalization Canadian stocks, 30% developed and larger capitalization global ex Canada stocks (mainly U.S. and international stocks) and 5% cash and cash equivalents. An external investment manager actively manages all of the asset classes. This manager uses an equal blend of large cap value and large cap growth for stocks in order to participate in the returns generated by stocks in the long-term, while reducing year-over-year volatility. The bonds are managed using a core approach where multiple strategies are engaged such as interest rate anticipation, credit selection and yield curve positioning to mitigate overall risk. At this time, the manager does not engage in any alternative investment strategies.

The U.S. pension plan’s target asset allocation is 30% large capitalization U.S. equities, 5% small capitalization U.S. equities, 25% developed market non-U.S. equities, 30% long duration U.S. Treasury bonds and 10% in alternative investments. The asset allocation was set considering asset class expected returns and volatility relative to the duration of the liabilities of the pension plan.

The asset allocation is reviewed annually. The assets are held in a separate pension trust account at a custodian bank. External registered investment advisors manage the assets in active and passive strategies that are well diversified, investment grade, liquid and unleveraged.

Allowance for Doubtful Accounts
We make estimates of the collectibility of our accounts receivable. We specifically analyze accounts receivable and historical bad debts, client credit-worthiness, current economic trends, and changes in our client payment terms and collection trends when evaluating the adequacy of our allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which the change occurs.

Income Taxes
We account for income taxes in accordance with SFAS No. 109 “Accounting for Income Taxes.” The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions may be challenged and that we may not succeed. We adjust these reserves in light of changing facts and circumstances. Our provision for income taxes includes the impact of these reserve changes. In the event that there is a significant unusual or one-time item recognized in our operating results, the taxes attributable to that item would be separately calculated and recorded at the same time as the unusual or one-time item.

Deferred income taxes are determined based on the difference between financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which such differences are expected to reverse. We routinely evaluate all deferred tax assets to determine the likelihood of their realization.

Effective July 1, 2007, we adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for and disclosure of uncertainty in tax positions. Additionally, FIN 48 provides guidance on the recognition, measurement, de-recognition, classification and disclosure of tax positions and on the accounting for related interest and penalties. Please see Note 12 to our Consolidation Financial Statements for a discussion of the adoption of FIN 48 and its impact on our financial condition and results of operations.

New Accounting Pronouncements

Please see Note 26 to our Consolidated Financial Statements for a discussion of recent accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk resulting from changes in interest rates and foreign currency exchange rates, partially offset by changes in the market value of hedging instruments related to these risks. Sensitivity analysis is one technique available to measure the impact that changes in these rates could have on our results of operations or financial position. The following analysis provides an indication of our sensitivity to changes in interest rates and foreign currency exchange rates as of June 30, 2009.

Interest Rates
During fiscal year 2006, we entered into the Credit Facility (please see Note 10 to our Consolidated Financial Statements for more discussion).  The Term Loan Facility and Revolving Facility are variable rate instruments and are subject to market risk resulting from changes in interest rates.  Risk can be estimated by measuring the impact of a near-term adverse movement of 100 basis points in short-term market interest rates.  If interest rates had increased by 100 basis points at June 30, 2009, and the amount outstanding as of June 30, 2009 under our Credit Facility had been outstanding for the entire fiscal year, net of $975 million under our interest rate swap and interest rate collar discussed below, our results of operations would have decreased approximately $8.1 million ($5.1 million, net of income tax).

In January 2008, we entered into a two-year amortizing interest rate collar with an interest rate cap of 3.281% and a floor of 2.425%. The collar is structured so that we receive a floating rate equal to one month LIBOR, and pay a floating rate, subject to the cap and floor, equal to one month LIBOR. The notional amount of the collar is $500 million executed in two transactions each having two year terms, $300 million of which expires on January 30, 2010 and $200 million of which expires February 11, 2010. In March 2007, we entered into a five-year amortizing interest rate swap agreement structured so that we pay a fixed interest rate of 4.897%, and receive a floating interest rate equal to the one-month LIBOR rate. At June 30, 2009, the notional amount of the rate swap was $475 million. The interest rate collar and rate swap are designated as a cash flow hedge of forecasted interest payments on up to $975 million of outstanding floating rate debt. The transactions had a fair market value of zero at inception. The unrealized loss on the transactions as of June 30, 2009 of $36.6 million ($22.8 million, net of income tax) is reflected in accumulated other comprehensive income, net and the fair market value of ($36.6 million) is reflected in other current and long-term liabilities. The unrealized loss on the transactions as of June 30, 2008 of $14.3 million ($8.9 million, net of income tax) is reflected in accumulated other comprehensive income, net and the fair market value of ($14.3 million) is reflected in other long term liabilities. Over the next 12 months, we expect to reclassify $24.7 million of deferred losses from accumulated other comprehensive income to interest expense as interest payments related to the designated interest rate swap and collars are recognized. The impact of changing interest rates on the amortization of interest expense related to our interest rate hedges qualified under Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and hedging Activities,” (SFAS 133) is expected to approximately offset the impact of changing interest rates on our floating rate debt.

We entered into $500 million of fixed rate Senior Notes during fiscal year 2005. The Senior Notes are subject to market risk from changes in interest rates. Risk can be estimated by measuring the impact of a near-term adverse movement of 100 basis points in market interest rates. The fair value of the Senior Notes as of June 30, 2009 and 2008 was $455.0 million and $455.9 million, respectively, based on quoted market prices. If these rates were 100 basis points higher or lower at June 30, 2009, the fair value of the Senior Notes would be approximately $442.0 million and $467.3 million, respectively. Changes in the fair value of our fixed rate Senior Notes would not impact our results of operations or cash flows, unless redeemed prior to maturity.

Foreign Currency
We conduct business in the U.S. and in foreign countries and are exposed to foreign currency risk from changes in the value of underlying assets and liabilities of our non-U.S. denominated foreign investments and foreign currency transactions. We utilize derivative financial instruments to manage our exposure to foreign currencies related to our domestic and international operations. We enter into foreign currency forward agreements in order to hedge the exchange rate risk associated with specific forecasted transactions, including payments and receipts from clients and suppliers, and funding of operating expenses of our offshore operations. We use sensitivity analysis to determine the effects that market risk exposures may have on the fair value of our foreign exchange forward agreements. The foreign exchange risk is computed based on the market value of the forward agreements as affected by changes in the corresponding foreign exchange rates. The sensitivity analysis represents the hypothetical changes in the value of the foreign exchange forward agreements and does not reflect the offsetting gain or loss on the underlying exposure. Fluctuations in the fair value of the foreign exchange forward agreements that qualify for hedge accounting treatment under SFAS 133 are recorded in accumulated other comprehensive income, net. As of June 30, 2009, a 10% adverse movement in the foreign currency exchange rate with all other variables held constant would have resulted in a decrease in the fair value of our qualified foreign exchange forward agreements of $8.0 million.  Gains and losses related to our SFAS 133 qualified hedges are expected to approximately offset the foreign currency gains and losses on the hedged transactions.

As part of the acquisition of the Transport Revenue division of Ascom AG in December 2005, we acquired foreign exchange forward agreements that hedge our French operation’s Euro foreign exchange exposure related to its Canadian dollar and U.S. dollar revenues. These agreements do not qualify for hedge accounting under SFAS 133. In addition, we have entered into certain other foreign currency contracts not designated as hedges for accounting purposes, although management believes they are essential economic hedges. As of June 30, 2009, a 10% adverse movement in the foreign currency exchange rate with all other variables held constant would have resulted in a decrease in the fair value of our non-qualified foreign exchange forward agreements of approximately $2.8 million. Changes in the fair value of these foreign exchange forward agreements are recorded in other non-operating expense (income), net in our Consolidated Statements of Income.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		PAGE
Report of Independent Registered Public Accounting Firm			51
Consolidated Balance Sheets			52
Consolidated Statements of Income			53
Consolidated Statements of Changes in Stockholders’ Equity			54
Consolidated Statements of Cash Flows			55
Notes to Consolidated Financial Statements			56

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Affiliated Computer Services, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, changes in stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Affiliated Computer Services, Inc. and its subsidiaries at June 30, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Notes 1 and 12 to the consolidated financial statements, the Company changed the manner in which it accounts for uncertain income tax positions in fiscal year 2008.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Grupo Multivoice (“Multivoice”), e-Services Group International (“e-Services”) and VBHG Ltd (“Anix”) from its assessment of internal control over financial reporting as of June 30, 2009 because they were acquired by the Company in purchase business combinations during fiscal year 2009. We have also excluded Multivoice, e-Services and Anix from our audit of internal control over financial reporting. Multivoice, e-Services and Anix are wholly-owned subsidiaries whose total assets and total revenues represent 0.9% and 3.5%, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2009.

PricewaterhouseCoopers LLP

Dallas, Texas
August 27, 2009

AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		June 30,
		2009				2008
ASSETS
Current assets:
Cash and cash equivalents		$	730,911			$	461,883
Accounts receivable, net			1,415,707				1,378,285
Income taxes receivable			19,210				7,076
Prepaid expenses and other current assets			249,257				255,872
Total current assets			2,415,085				2,103,116
Property, equipment and software, net			955,158				920,637
Goodwill			2,894,189				2,785,164
Other intangibles, net			436,383				444,479
Other assets			200,158				216,003
Total assets		$	6,900,973			$	6,469,399
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	272,889			$	198,191
Accrued compensation and benefits			251,510				244,888
Other accrued liabilities			388,262				338,861
Deferred taxes			90,798				82,017
Current portion of Senior Notes, net of unamortized discount			249,984				-
Current portion of other long-term debt			45,188				47,373
Current portion of unearned revenue			187,349				173,809
Total current liabilities			1,485,980				1,085,139
Senior Notes, net of unamortized discount			249,625				499,529
Other long-term debt			1,791,904				1,858,012
Deferred taxes			469,606				411,836
Other long-term liabilities			281,726				306,509
Total liabilities			4,278,841				4,161,025
Commitments and contingencies (See Note 19)
Stockholders’ equity:
Class A common stock, $.01 par value, 500,000 shares authorized, 112,044 and 111,660 shares issued, respectively			1,120				1,116
Class B convertible common stock, $.01 par value, 14,000 shares authorized, 6,600 shares issued and outstanding			66				66
Additional paid-in capital			1,729,995				1,702,340
Accumulated other comprehensive (loss) income, net			(45,014	)			18,830
Retained earnings			1,991,933				1,641,990
Treasury stock at cost, 21,002 shares			(1,055,968	)			(1,055,968	)
Total stockholders’ equity			2,622,132				2,308,374
Total liabilities and stockholders’ equity		$	6,900,973			$	6,469,399