Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
All statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations that are not
based on historical fact are 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 Private Securities Litigation Reform Act of 1995). While
management has based any forward looking statements contained herein on its current expectations, the information on which
such expectations were based may change. These forward looking statements rely on a number of assumptions concerning
future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of our control, that
could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are
not necessarily limited to, those set forth under the caption Risks Related to our Business. In addition, we operate in a highly
and rapidly changing environment, and new risks may arise. Accordingly, investors should not place any reliance on forward
looking statements as a prediction of actual results. We disclaim any intention to, and undertake no obligation to, update or
revise any forward looking statement.
We derive our revenues from delivering comprehensive business process outsourcing and information technology
outsourcing solutions as well as system integration services to commercial, state and local, and federal government clients.
A substantial portion of our revenues is derived from recurring monthly charges to our customers under service contracts
with initial terms that vary from one to ten years. For the fiscal year ended June 30, 2003, approximately 91% of our
revenues were recurring. We define recurring revenues as revenues derived from services that are used by our clients each
year in connection with their ongoing businesses, and accordingly, exclude conversion and deconversion fees, software
license fees, short term contract programming engagements, product installation fees, and hardware sales. Since inception,
our acquisition program has resulted in geographic expansion, growth and diversification of our client base, expansion of
services offered, and increased economies of scale. All share and per share information is presented giving effect to the two
for one stock split of our Class A and Class B common shares that occurred February 22, 2002.
We report our financial results in accordance with generally accepted accounting principles ( 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 and Item 10
of Regulation S K adopted by the SEC. We have presented herein a reconciliation of these measures to the most directly
comparable GAAP financial measure. The presentation of this additional information is not meant to be considered in
isolation or as a substitute for comparable amounts determined in accordance with generally accepted accounting principles
in the United States.
Significant Developments Fiscal Year 2003
During fiscal 2003, we signed contracts with new clients and increased business with existing clients representing $701
million of annual recurring new revenue, an increase of 47% over the prior year. The state and local segment contributed
50% of new business signings, including new contracts with the Texas Health and Human Services Commission to provide
fiscal agent and administrative services and New Jersey E ZPass to provide electronic toll collection services. The
commercial segment contributed 42% of new business signings, including new contracts with Motorola to provide human
resource outsourcing and Ingram Micro to manage their IT infrastructure. We define new business signings as recurring
revenue from new contracts, including the incremental portion of renewals signed during the period and represent the
estimated annual recurring revenues, as measured under GAAP, to be recorded under that contract after full implementation.
We use new business signings as a measure of estimated recurring revenues represented by contractual commitments both to
forecast prospective revenues and to estimate capital commitments.