Other Non Operating Expense (Income)
Other non operating expense in fiscal year 2002 includes $8.4 million of write downs of long term cost basis investments,
and a $2.3 million loss on the sale of business unit. Other non operating income in fiscal 2001 consisted of a $12.8 million
gain on sale of an investment, a gain on a note receivable and decrease in interest income as a result of the use of excess cash
held at June 30, 2001 to fund in part the IMS acquisition in early fiscal year 2002.
Our effective tax rate of approximately 36.3% exceeded the federal statutory rate of 35% due primarily to the net effect of
state income taxes offset by certain tax benefits of approximately $4.3 million resulting primarily from recently enacted
federal income tax rules that provide for a larger tax deduction associated with our June 2000 divestitures and deferred tax
adjustments to reflect realization of tax deductions for which their probability is no longer uncertain. Our effective tax rate
decreased 3.0% from 39.3% in fiscal 2001 due to the application of SFAS 142.
Liquidity and Capital Resources
We finance our business through cash flows from operations and utilize excess cash flow combined with the issuance of debt,
borrowings under our existing credit facility and the issuance of equity to finance our acquisition strategy. One of our primary
financial goals is to maintain an adequate level of liquidity through active management of assets and liabilities.
During the year ended June 30, 2003, we generated approximately $545.3 million in cash flow from operations versus the
fiscal year 2002 amount of approximately $372.0 million. Fiscal year 2003 cash flow from operations increased 47% over
fiscal year 2002.
We believe free cash flow provides another measure of available cash flow after we have satisfied the capital requirements of
our operations. Free cash flow before additions to other intangible assets was approximately $339.6 million for fiscal year
2003 versus approximately $227.6 million for fiscal year 2002, an increase of 49%. Free cash flow before additions to other
intangible assets is measured as operating cash flow (net cash provided by operating activities, as reported in our
consolidated statements of cash flow), less capital expenditures (purchases of property, equipment and software, net of sales,
as reported in our consolidated statements of cash flow). Free cash flow after additions to other intangible assets was $291.7
million in fiscal year 2003 compared to $208.3 million in fiscal year 2002, an increase of 40%. The following table sets forth
the calculations of free cash flow (in thousands):
Year ended June 30,
Net cash provided by operating activities
Purchases of property, equipment and software, net
Free cash flow before additions to other intangible assets
Additions to other intangible assets
Free cash flow after additions to other intangible assets
During the fiscal year 2003, we used $320.1 million in investing activities. Investing activities included the purchase of
property, equipment and software, net, which increased from approximately $144.4 million in fiscal year 2002 to
approximately $205.7 million in fiscal year 2003. Our capital expenditures were 5.4% of total revenues, compared to 4.7%
in fiscal year 2002, which we believe is adequate to support our growing business and to meet contractual requirements. Our
investing activities also included acquisition payments, net of cash acquired, of $76.8 million and $1.4 billion in fiscal years
2003 and 2002, respectively, and additions to other customer related intangible assets of $48.0 million and $19.3 million in
fiscal years 2003 and 2002, respectively.
During fiscal year 2003, approximately $207.9 million was used by financing activities, primarily to pay down debt.
Financing activities from fiscal year 2002 included the issuance of 18.4 million shares of our Class A common stock
(adjusted for stock split). The shares were issued at $40.50 per share yielding proceeds of $714.3 million (net of
underwriters' fees and other costs), which were used to repay the $550 million 18 month interim credit facility incurred to
fund the IMS acquisition and a portion of the amount outstanding under our then existing revolving credit facility.