Comparison of Fiscal Year 2002 to Fiscal Year 2001
Revenues increased $1.0 billion, or 48%, to $3.1 billion in fiscal year 2002 from $2.1 billion in fiscal year 2001. Internal
revenue growth for fiscal year 2002 was 14%, and the remainder from acquisitions.
Revenues in our state and local government segment increased $907.8 million to $1.3 billion in fiscal year 2002 from $386.4
million in fiscal year 2001. Internal revenue growth was 62% due primarily to increased revenue in new and existing
contracts in Georgia, Mississippi, and Florida, and increased revenues from transportation systems and services and welfare
and community services contracts. Acquisition growth is primarily due to the IMS acquisition in early fiscal 2002 (see
Significant Developments Fiscal Year 2002).
Revenues in our commercial segment increased $27.9 million, or approximately 3% primarily due to acquisition growth
related to the AFSA, Andersen and NPC acquisitions in fiscal year 2002 (see Significant Developments Fiscal Year 2002).
Revenues in our federal government segment increased $63.7 million, or approximately 9%, primarily due to internal growth
related to increases in new and existing defense and desktop services contracts as well as the Department of Education.
As a percentage of revenue, operating expenses decreased 2.1% to 86.9% in fiscal year 2002 from 89.0% in fiscal year 2001.
Operating expenses increased $822.5 million to $2.7 billion in fiscal year 2002. Included in operating expenses in fiscal year
2001 were the effects of $10.4 million of termination costs included in rent, lease and maintenance; $2.1 million of litigation
costs and the writedown of property held for sale included in other operating expense. In fiscal year 2002, we ceased the
amortization of goodwill pursuant to the application of SFAS 142.
Wages and benefits increased $445.4 million, or 49%. As a percentage of revenues, wages and benefits increased 0.3% to
44.1% in fiscal year 2002 from 43.8% in fiscal year 2001 due to increased business process outsourcing services in our
revenue mix. BPO services have a higher component of wages and benefits than traditional technology outsourcing. BPO
services accounted for approximately 63% of our fiscal year 2002 revenues as compared to 47% in fiscal year 2001.
Services and supplies increased $289.7 million, or 48%, and remained constant as a percentage of revenue.
Rent, lease and maintenance expense increased $54.9 million to $278.6 million in fiscal year 2002. The increase in rent lease
and maintenance expense was due to increased revenue from BPO services in our revenue mix which has a lower component
of rent, lease and maintenance than traditional technology outsourcing. Included in rent, lease and maintenance in fiscal year
2001 was a $10.4 million charge related to the termination of certain hardware leases and disaster recovery contracts.
Depreciation and amortization increased $16.9 million in fiscal year 2002. As a percentage of revenue, depreciation and
amortization decreased 0.9% due to the application of SFAS 142, offset by increased amortization of customer related
intangible assets. Goodwill amortization was $24.5 million, or 1.2% of revenue, in fiscal year 2001.
Other operating expenses increased $15.6 million to $34.6 million in fiscal year 2002. As a percentage of revenue other
operating expenses increased 0.2% due to increased marketing efforts and legal expenses in fiscal year 2002. Included in
other operating expense in fiscal year 2001 was $2.1 million of litigation costs and the writedown of property held for sale.
Our operating margins increased 2.1% to 13.1% in fiscal year 2002 due to the items discussed above.
Interest expense increased $6.9 million due primarily to the full year impact of our new issue 3.5% Notes (see Significant
Developments Fiscal Year 2001) offset by a decrease in interest expense on the 4% Notes that were converted in the third
quarter of fiscal year 2002 (see Significant Developments Fiscal Year 2002).