AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value of each option grant was estimated at the date of grant using a separate Black Scholes option pricing calculation
for each grant. The following weighted average assumptions were used for grants in fiscal 2003, 2002 and 2001: dividend
yield of 0% in all years for all plans; volatility of 34.65%, 34.94% and 35.84%, for fiscal 2003, 2002, and 2001, respectively,
for all plans; risk free interest rates of 3.74%, 4.36% and 4.76% for fiscal 2003, 2002, and 2001, respectively, for all plans;
and weighted average expected option life of 5.5 years for the 1997 and 1988 Plans and 3 years for the 1991 Plan for all years
presented. The average fair values of the options granted during fiscal 2003, 2002, and 2001 are estimated at $14.49, $16.01
and $9.93 respectively, for the combined plans. The fair values have been adjusted to reflect the February 2002 two for one
Certain reclassifications have been made to prior period financial statements to conform to current presentation.
From our inception through June 30, 2003, we have acquired several businesses in the information technology services and
business process outsourcing industries. Our recent acquisition activity is summarized as follows (excluding transaction costs):
Year ended June 30,
Purchase consideration (in thousands):
Net cash paid
Amounts due to seller
Fair value of assets acquired
During fiscal 2003, we acquired five companies, the most significant of which was the acquisition of CyberRep, Inc.
( CyberRep ) in January 2003. CyberRep, which is included in our commercial segment, provides customer care and
customer relationship management services for the telecommunications, wireless communications, technology, and consumer
products industries. The transaction was valued at approximately $42 million plus transaction costs, with assets acquired of
$56.6 million and liabilities assumed of $14.9 million. We recorded goodwill of $33.6 million, which is expected to be fully
deductible for tax purposes, and $5.5 million in customer related intangible assets, which are attributable to customer
relationships with an aggregate anticipated useful life of approximately 7 years. CyberRep's operating results are included in
our consolidated financial statements from the effective date of the acquisition, January 1, 2003. We believe this transaction
expands our suite of business process outsourcing solutions for commercial clients worldwide by enhancing high volume,
customer care center capability and CRM business process outsourcing solutions for Fortune 500 companies. We also
completed four other acquisitions during fiscal 2003, all of which were included in our state and local government segment.
These acquisitions are not considered material to our results of operations, either individually or in the aggregate; therefore, no
pro forma information is presented.
During fiscal year 2002, we acquired eight companies, the most significant of which were the acquisitions of Lockheed Martin
IMS Corporation ( IMS ) in August 2001 and AFSA Data Corporation ( AFSA ) in June 2002.
We acquired 100% of the stock of IMS, a wholly owned subsidiary of Lockheed Martin Corporation, (now known as ACS
State and Local Solutions), for approximately $825 million plus related transaction costs. The acquisition was funded from a
$550 million 18 month interim credit facility, borrowings from our then existing revolving credit facility, and existing cash on
hand. This interim credit facility was repaid in October 2001 with the proceeds from the equity offering of 18.4 million shares
of our Class A common stock at $40.50 per share (see Note 9). IMS' results have been included in our consolidated financial
statements from the effective date of the acquisition, August 1, 2001. IMS provides business process outsourcing services to
more than 230 state and local government agencies in 45 U.S. states, the District of Columbia, Canada, Australia, and Europe.
IMS specializes in child support enforcement, welfare and community services, electronic toll collection, and other intelligent
transportation services involving the trucking industry, photo enforcement of red light and speeding violations, parking
management, and information technology outsourcing. We believe the acquisition of IMS solidifies ACS as a leader in
technology based outsourcing solutions to state and local government agencies.