Table of Contents
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
February 7, 2002
Date of Report
 
CACI International Inc
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of incorporation)
 
0-8401
(Commission File Number)
 
54-1345888
(IRS Employer Identification No.)
 
1100 North Glebe Road
Arlington, Virginia 22201
(Address of principal executive offices)(Zip code)
 
(703) 841-7800
(Registrant’s telephone number, including area code)
 

Table of Contents
 
ITEM 5.    OTHER EVENTS AND REGULATION FD DISCLOSURE.
 
 
CACI International Inc (the “Company”) is filing this current report on Form 8-K to provide financial statements for the years ended June 30, 1999, 2000 and 2001 that reflect two previously announced events: (a) a two-for-one stock split effected in the form of a common stock dividend and (b) the disposition of its domestic Marketing Systems Group. The Company has elected to revise its “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to conform to the presentation in the restated financial statements. This disclosure supersedes the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s Annual Report on Form 10-K for the year ended June 30, 2001.
 
On November 7, 2001, the Company’s Board of Directors declared a two-for-one stock split to be effected in the form of a common stock dividend. This dividend was payable on December 6, 2001 to shareholders of record on November 30, 2001. Accordingly, the number of shares of common stock outstanding, earnings per shares, and the number of shares used in the calculation of earnings per share all have been restated to retroactively reflect the split.
 
In December 2001, the Company executed a formal plan to sell the net assets of its domestic Marketing Systems Group and entered into a letter of intent with Environmental Systems Research Institute, Inc.’s subsidiary, ESRI Business Information Solutions, for $3.5 million in cash. On January 6, 2002, the Company completed this sale. This resulted in a net-after-tax loss for the Company of $966,000 which was recorded in the quarter ended December 31, 2001. Included in the loss was a net-after-tax benefit from discontinued operations of $284,000 for the period of October 31, 2001 to January 6, 2002. As a result, in accordance with APB Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” results of operations for the years ended June 30, 1999, 2000 and 2001 have been classified as discontinued and prior years have been restated. Revenues from this discontinued operation were $6,027,000, $5,928,000 and $5,920,000 for the years ended June 30, 1999, 2000 and 2001.
 
This current report on Form 8-K includes the following items:
 
    
Page
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
2
Independent Auditors’ Report
  
F-2
Consolidated Statements of Operations for the years ended June 30, 1999, 2000, and 2001
  
  F-3
Consolidated Balance Sheets as of June 30, 2000 and 2001
  
F-4
Consolidated Statements of Cash Flows for the years ended June 30, 1999, 2000, and 2001
  
  F-5
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 1999, 2000, and 2001
  
  F-6
Consolidated Statements of Comprehensive Income for the years ended June 30, 1999, 2000 and 2001
  
F-7
Notes to Consolidated Financial Statements
  
F-8
Schedule II—Valuation and Qualifying Accounts for Years Ended June 30, 1999, 2000 and 2001
  
F-25

Table of Contents
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
We provide the following discussion and analysis to enhance your understanding of our financial statements and the related notes. You should read this discussion in conjunction with our financial statements and the related notes. Unless we note otherwise, references to years are references to our fiscal year, which ends on June 30.
 
The following table shows our revenue in dollars and as a percentage of revenue from the following client groups:
 
    
Year ended June 30,
 
    
1999
    
2000
    
2001
 
  
(dollars in thousands)
 
Department of Defense
  
$
216,573
 
50.7
%
  
$
249,776
 
51.5
%
  
$
325,118
 
58.3
%
Federal civilian agencies
  
 
130,766
 
30.6
%
  
 
141,393
 
29.2
%
  
 
149,205
 
26.8
%
Commercial
  
 
57,810
 
13.5
%
  
 
60,181
 
12.4
%
  
 
61,029
 
10.9
%
State and local government
  
 
22,273
 
5.2
%
  
 
33,195
 
6.9
%
  
 
22,538
 
4.0
%
    
 
  
 
  
 
Total
  
$
427,422
 
100.0
%
  
$
484,545
 
100.0
%
  
$
557,890
 
100.0
%
 
Results of Operations
 
The following table provides the relative percentages that certain items of expense and earnings bear to revenue:
 
    
Year ended June 30,
 
    
1999
    
2000
    
2001
 
Revenue
  
100.0
%
  
100.0
%
  
100.0
%
Costs and expenses:
                    
Direct costs
  
59.2
 
  
59.1
 
  
61.4
 
Indirect and selling expenses
  
32.1
 
  
31.8
 
  
29.5
 
Depreciation and amortization
  
1.7
 
  
1.6
 
  
1.5
 
Goodwill amortization
  
0.7
 
  
0.8
 
  
0.9
 
    
  
  
Total operating expenses
  
93.7
 
  
93.3
 
  
93.3
 
Income from operations
  
6.3
 
  
6.7
 
  
6.7
 
Interest expense
  
0.8
 
  
0.7
 
  
0.6
 
    
  
  
Income before income taxes
  
5.5
 
  
6.0
 
  
6.1
 
Income taxes
  
2.1
 
  
2.3
 
  
2.4
 
    
  
  
Income from continuing operations
  
3.4
 
  
3.7
 
  
3.7
 
Discontinued operations:
Income (loss) from discontinued operations
  
(0.1
)
  
(0.1
)
  
—  
 
Gain (loss) on disposal of discontinued operations
  
—  
 
  
4.3
 
  
0.3
 
    
  
  
Net income
  
3.3
%
  
7.9
%
  
4.0
%
    
  
  
 
Revenue . For our fiscal year ended June 30, 2001, our revenue increased by 15.1%, or $73.3 million, to $557.9 million. This increase was primarily in our managed network services business and resulted from a combination of internal growth and our acquisition of the federal services business of N.E.T. Federal, completed in December, 2000. Our total revenue in fiscal 2000 increased by 13.4%, or $57.1 million, to $484.5 million. This increase was primarily due to acquisitions we made during fiscal 2000 and to a 5% internal growth rate mainly in our revenues from sales to the Department of Defense and state and local governments.

2

Table of Contents
 
All of our acquisitions have been accounted for using the purchase method of accounting and the results of their operations have been included since the date of acquisition. Acquisitions that we made during fiscal 2001 and fiscal 2000 accounted for $52.8 million of our fiscal 2001 revenue growth. On February 1, 2000, we acquired all of the outstanding common stock of XEN. On April 1, 2000, we acquired substantially all the assets of CENTECH for $7.7 million. In fiscal 2001, the federal services business of N.E.T. Federal contributed $27.6 million in revenue, CENTECH contributed $19.5 million, XEN contributed $4.8 million and another acquired company contributed $0.9 million.
 
Our revenue from the Department of Defense increased 30.2%, or $75.3 million, to $325.1 million in fiscal 2001, as compared to fiscal 2000. In fiscal 2000, Department of Defense revenue increased 15.3%, or $33.2 million, to $249.8 million, as compared to fiscal 1999. The growth in our revenue from the Department of Defense from 1999 to 2001 is primarily due to growth in managed network services, which was derived from both internal growth and our acquisition of the federal services business of N.E.T. Federal, and growth in intelligence community work.
 
Our revenue from federal civilian agencies increased 5.5%, or $7.8 million, to $149.2 million for fiscal 2001 as compared to fiscal 2000. Our revenue from the Department of Justice was $74.4 million in fiscal 2001, $73.6 million in fiscal 2000 and $75.0 million in fiscal 1999. In fiscal 2001, our revenue from other federal civilian agencies grew by 10.3%, or $7.0 million, to $74.8 million compared to fiscal 2000. The increase was primarily due to our sales to the Department of State.
 
In fiscal 2001, our commercial revenue, which was primarily derived from our operations based in the United Kingdom, increased slightly by 1.4%, or $0.8 million, to $61.0 million, as compared to fiscal 2000. Our slower-than-anticipated growth rate was primarily due to a decrease of approximately 10% in the average foreign exchange rate for the year compared to fiscal 2000. In fiscal 2000, our commercial revenue grew by 4.1%, or $2.4 million, to $60.2 million. This increase was primarily the result of our United Kingdom’s marketing systems group’s sales of territory optimization and marketing analysis software products and services, as well as continued increased demand for systems integration services.
 
Our revenue from state and local governments decreased by 32.1% from $33.2 million in fiscal 2000 to $22.5 million in fiscal 2001. The decrease is attributable primarily to the reduction in our Y2K remediation business. Our revenue from state and local governments increased by 49.0% from $22.3 million in 1999 to $33.2 million in 2000, due to the increase in our Y2K rendition business.
 
Direct costs. Direct costs include labor and other direct costs such as equipment purchases, subcontract costs and travel expenses. As a percentage of revenue, our total direct costs were 61.4% in fiscal 2001, 59.1% in fiscal 2000 and 59.2% in fiscal 1999. Direct labor was $171.4 million in fiscal 2001, $146.0 million in fiscal 2000 and $125.0 million in fiscal 1999. Our other direct costs were $170.8 million in fiscal 2001, $140.4 million in fiscal 2000 and $127.9 million in fiscal 1999. Our other direct costs grew over the three-year period as we obtained a higher number of prime contracts that experience an increased level of other direct costs.
 
Indirect costs and selling expenses . Indirect costs and selling expenses include fringe benefits, marketing and bid and proposal costs, indirect labor, and other discretionary costs. Most of our indirect costs and selling expenses were highly variable and grew in proportion with our growth in revenue. As a percentage of revenue, our indirect costs were 29.5% in fiscal 2001, 31.8% in fiscal 2000 and 32.1% in fiscal 1999. That continued decline is due to the impact of higher other direct costs on revenue.
 
Depreciation and amortization. Depreciation and amortization of our property and equipment increased 9.6%, or $0.7 million, to $8.5 million in fiscal 2001. Depreciation and amortization increased by 7.7%, or $0.6 million, to $7.8 million in fiscal 2000 from fiscal 1999 primarily due to property and equipment acquired for our Vision and Solution Center, our new financial software system and certain leasehold improvements.
 

3

Table of Contents
Goodwill . Our goodwill amortization increased by 36.9%, or $1.4 million, to $5.2 million in fiscal 2001 as a result of acquisitions. Our acquisition of the federal services business of N.E.T. Federal resulted in incremental goodwill expense of $0.7 million. The remaining $0.7 million increase in our goodwill amortization came from acquisitions we made in fiscal 2000. In fiscal 2001, CENTECH contributed $0.6 million of additional goodwill amortization expense and XEN contributed $0.1 million. In fiscal 2000, goodwill amortization increased $0.7 million due to our acquisitions of QuesTech, IDS and Government Systems, Inc.
 
Income from operations . Our income from operations increased 14.5%, or $4.7 million, to $37.4 million for fiscal 2001, as compared to fiscal 2000. This was due to a 15.1% growth in revenue and a relative reduction in indirect expenses as a percentage of revenue. In fiscal 2000, our income from operations increased 20.2%, or $5.5 million, to $32.6 million, which was primarily due to a 13.4% growth in revenue and a relative reduction in indirect expenses.
 
Interest expense. Our interest expense for fiscal 2001 remained the same as fiscal 2000, at $3.3 million. Although our borrowings increased by $20.6 million in fiscal 2001 as compared to fiscal 2000, our interest rates decreased, thus resulting in no significant change in our interest expense in fiscal 2001.
 
Income taxes . Our effective income tax rates were 39.0% in fiscal 2001, 39.0% in fiscal 2000 and 39.1% in fiscal 1999.
 
Effects of Inflation
 
In fiscal 2001, we conducted approximately 59.7% of our business under time-and-material contracts, where labor rates are often fixed for several years. We generally have been able to price these contracts in a manner to accommodate the rates of inflation experienced in recent years. In that year, we conducted approximately 21.0% of our business under cost-reimbursable contracts, which automatically adjust revenue to cover costs increased by inflation. We conduct the remaining portion of our business under fixed-price contracts, which generally have not been adversely affected by inflation.
 
Liquidity and Capital Resources
 
Historically, our positive cash flow from operations and our available credit facilities have provided us adequate liquidity and working capital to fund our operational needs and support our acquisition activities.
 
Our working capital was $82.0 million as of June 30, 2001 and $62.5 million as of June 30, 2000. The $19.5 million increase in our working capital from fiscal 2000 to fiscal 2001 was primarily due to higher accounts receivable attributable to revenue growth.
 
Our operating activities provided cash of $31.3 million in fiscal 2001 and $19.9 million in fiscal 2000. The increase in cash provided by our operating activities was due to growth in income from continuing operations of $2.9 million combined with lower tax payments in fiscal 2001. We made tax payments of $12.1 million in fiscal 2000 relating to the sale of our COMNET product business.
 
We used $39.2 million of cash in investing activities in fiscal 2001 compared to net cash provided by investing activities of $10.9 million in fiscal 2000. This change was due primarily to investments made in the acquisitions of the federal services business of N.E.T. Federal and another company. In fiscal 2000, the sale of our COMNET products business generated $37.0 million in available funds. In fiscal 2001, we also increased our investment activity in internally developed software for external sale by approximately $2.5 million. Our purchases of office and computer-related equipment of $8.7 million in fiscal 2001, $8.1 million in fiscal 2000 and $7.5 million in fiscal 1999 accounted for a significant portion of the remaining cash used in investing activities.

4

Table of Contents
 
During fiscal 2001, we financed our investing activities from operating cash flow and from a net increase in borrowings of $20.6 million under our line of credit. In fiscal 2000, we had a decrease of $33.8 million in our borrowings due primarily to the cash generated from the sale of our COMNET products business.
 
During fiscal 2001, we repurchased 715,332 shares of our common stock at an aggregate price of $7.3 million.
 
At June 30, 2001, we had an unsecured revolving line of credit that permitted borrowings of up to $125.0 million with an annual sublimit of $40.0 million on amounts borrowed for acquisitions. We also pay a fee on the unused portion of the facility. Our United Kingdom subsidiary also maintains a £0.5 million unsecured line of credit, which expires in November 2002. At June 30, 2001, we had approximately $48.9 million outstanding under our lines of credit.
 
We believe that cash on hand, cash generated by operations and amounts available under our lines of credit will provide the required liquidity and capital resources for the foreseeable future.
 
Our ability to generate cash from operations depends to a significant extent on winning new contracts and recompeted contracts from our government customers in competitive bidding processes. If a significant portion of our government contracts were terminated or if our win rate on new contracts or recompeted contracts were to decline significantly, our operating cash flow would decrease, which would adversely affect our liquidity.
 
Historically, we have relied on borrowings under our credit facility and cash generated from operations to finance our acquisitions. Under our credit facility, we will be able to borrow up to $40.0 million for acquisitions, but only if we comply with specified financial ratios and other covenants under that facility. For example, at the end of each fiscal quarter our consolidated leverage ratio, or the ratio of our consolidated debt to our consolidated earnings before interest, taxes, depreciation and amortization, or EBITDA, for the previous four quarters may not exceed 3.0x. Our inability to finance acquisitions for any prolonged period of time would seriously affect our ability to execute our growth strategy and would harm our financial condition and results of operations.

5

Table of Contents
 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
    
Page
Independent Auditors’ Report
  
F-2
Consolidated Statements of Operations for the years ended June 30, 1999, 2000, and 2001
  
F-3
Consolidated Balance Sheets as of June 30, 2000 and 2001
  
F-4
Consolidated Statements of Cash Flows for the years ended June 30, 1999, 2000, and 2001
  
F-5
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 1999, 2000, and 2001
  
F-6
Consolidated Statements of Comprehensive Income for the years ended June 30, 1999, 2000 and 2001
  
F-7
Notes to Consolidated Financial Statements
  
F-8

F-1

Table of Contents
 
INDEPENDENT AUDITORS’ REPORT
 
To The Board of Directors and Shareholders
CACI International Inc
Arlington, Virginia
 
We have audited the accompanying consolidated balance sheets of CACI International Inc and subsidiaries (the Company) as of June 30, 2001 and 2000, and the related consolidated statements of operations, shareholders’ equity, cash flows, and comprehensive income for each of the three years in the period ended June 30, 2001. Our audits also included the financial statement schedule listed in the Index at Item 5. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth herein.
 
/s/ Deloitte & Touche LLP
 
McLean, Virginia
August 14, 2001, except for paragraphs 2 and 3
of Note 13, as to which the dates are November 7, 2001
and January 6, 2002, respectively

F-2

Table of Contents
 
CACI INTERNATIONAL INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
 
    
Year ended June 30,
 
    
1999
    
2000
    
2001
 
Revenue
  
$
427,422
 
  
$
484,545
 
  
$
557,890
 
Costs and expenses
                          
Direct costs
  
 
252,872
 
  
 
286,433
 
  
 
342,235
 
Indirect costs and selling expenses
  
 
137,114
 
  
 
153,951
 
  
 
164,620
 
Depreciation and amortization
  
 
7,224
 
  
 
7,779
 
  
 
8,523
 
Goodwill amortization
  
 
3,080
 
  
 
3,766
 
  
 
5,157
 
    
  
  
Total operating expenses
  
 
400,290
 
  
 
451,929
 
  
 
520,535
 
    
  
  
Income from operations
  
 
27,132
 
  
 
32,616
 
  
 
37,355
 
Interest expense
  
 
3,631
 
  
 
3,290
 
  
 
3,315
 
    
  
  
Income before income taxes
  
 
23,501
 
  
 
29,326
 
  
 
34,040
 
Income taxes
  
 
9,184
 
  
 
11,435
 
  
 
13,275
 
    
  
  
Income from Continuing Operations
  
 
14,317
 
  
 
17,891
 
  
 
20,765
 
Discontinued Operations
                          
(Loss) income from operations from discontinued COMNET products business and Marketing Systems Group (less applicable income taxes (benefit) of ($93), ($421) and ($6)
  
 
(147
)
  
 
(613
)
  
 
(9
)
Gain (Loss) on disposal of COMNET products business and Marketing Systems Group including provision of $118 and $284 for operating losses during phase-out period (less applicable income taxes (benefit) of $0, $13,512 and $855
  
 
—  
 
  
 
21,134
 
  
 
1,545
 
    
  
  
Net Income
  
$
14,170
 
  
$
38,412
 
  
$
22,301
 
    
  
  
Earnings per common and common equivalent share:
                          
Average shares outstanding
  
 
21,792
 
  
 
22,620
 
  
 
22,634
 
Basic:
                          
Income from continuing operations
  
$
0.66
 
  
$
0.79
 
  
$
0.92
 
(Loss) income from discontinued operations
  
 
(0.01
)
  
 
(0.03
)
  
 
0.00
 
Gain (Loss) on disposal
  
 
—  
 
  
 
0.94
 
  
 
0.07
 
    
  
  
Net Income
  
$
0.65
 
  
$
1.70
 
  
$
0.99
 
    
  
  
Average shares and equivalent shares outstanding
  
 
22,440
 
  
 
23,154
 
  
 
23,056
 
Diluted:
                          
Income from continuing operations
  
$
0.64
 
  
$
0.77
 
  
$
0.90
 
(Loss) income from discontinued operations
  
 
(0.01
)
  
 
(0.03
)
  
 
0.00
 
Gain (Loss) on disposal
  
 
—  
 
  
 
0.92
 
  
 
0.07
 
    
  
  
Net Income
  
$
0.63
 
  
$
1.66
 
  
$
0.97
 
    
  
  
 
See Notes to Consolidated Financial Statements.

F-3

Table of Contents
 
CACI INTERNATIONAL INC
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 
    
June 30,
 
    
2000
    
2001
 
ASSETS
Current assets
                 
Cash and equivalents
  
$
4,931
 
  
$
14,842
 
Accounts receivable
                 
Billed
  
 
98,178
 
  
 
114,953
 
Unbilled
  
 
12,404
 
  
 
11,038
 
    
  
Total accounts receivable
  
 
110,582
 
  
 
125,991
 
Deferred income taxes
  
 
235
 
  
 
407
 
Deferred contract costs
  
 
1,488
 
  
 
1,456
 
Prepaid expenses and other
  
 
7,372
 
  
 
8,562
 
    
  
Total current assets
  
 
124,608
 
  
 
151,258
 
Property and equipment, net
  
 
15,039
 
  
 
15,685
 
Accounts receivable, long-term
  
 
11,136
 
  
 
13,686
 
Goodwill
  
 
75,402
 
  
 
88,895
 
Other assets
  
 
7,024
 
  
 
12,898
 
Deferred income taxes
  
 
2,788
 
  
 
2,309
 
    
  
Total assets
  
$
235,997
 
  
$
284,731
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
                 
Notes payable
  
$
—  
 
  
$
—  
 
Accounts payable
  
 
7,087
 
  
 
7,532
 
Other accrued expenses
  
 
23,843
 
  
 
28,322
 
Accrued compensation and benefits
  
 
24,458
 
  
 
26,866
 
Income taxes payable
  
 
1,707
 
  
 
156
 
Deferred income taxes
  
 
5,021
 
  
 
6,421
 
    
  
Total current liabilities
  
 
62,116
 
  
 
69,297
 
Note payable, long-term
  
 
28,263
 
  
 
48,888
 
Deferred rent expenses
  
 
1,025
 
  
 
1,286
 
Deferred income taxes
  
 
125
 
  
 
116
 
Other long-term obligations
  
 
2,500
 
  
 
4,940
 
Shareholders’ equity
                 
Common stock
                 
$.10 par value, 40,000,000 shares authorized, 30,014,000 and 30,572,000 shares issued
  
 
3,001
 
  
 
3,057
 
Capital in excess of par
  
 
18,216
 
  
 
23,269
 
Retained earnings
  
 
136,997
 
  
 
159,298
 
Accumulated other comprehensive loss
  
 
(2,584
)
  
 
(4,486
)
Treasury stock, at cost (7,052,000 and 7,768,000 shares)
  
 
(13,662
)
  
 
(20,934
)
    
  
Total shareholders’ equity
  
 
141,968
 
  
 
160,204
 
    
  
Total liabilities and shareholders’ equity
  
$
235,997
 
  
$
284,731
 
    
  
 
See Notes to Consolidated Financial Statements.
 

F-4

Table of Contents
 
CACI INTERNATIONAL INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 
    
Year ended June 30,
 
    
1999
    
2000
    
2001
 
CASH FLOWS FROM OPERATING ACTIVITIES
                          
Net income
  
$
14,170
 
  
$
38,412
 
  
$
22,301
 
Reconciliation of net income to net cash provided by operating activities
                          
Depreciation and amortization
  
 
10,878
 
  
 
11,967
 
  
 
14,143
 
(Gain) loss on sale of property and equipment
  
 
30
 
  
 
108
 
  
 
(15
)
Provision for deferred income taxes
  
 
1,512
 
  
 
4,008
 
  
 
1,837
 
(Gain) loss from sale of COMNET product business and Marketing Systems Group business
  
 
—  
 
  
 
(21,252
)
  
 
(1,545
)
Changes in operating assets and liabilities
                          
Accounts receivable
  
 
(10,023
)
  
 
1,007
 
  
 
(9,870
)
Prepaid expenses and other assets
  
 
(1,726
)
  
 
(1,381
)
  
 
(1,415
)
Accounts payable and accrued expenses
  
 
2,169
 
  
 
1,505
 
  
 
2,820
 
Accrued compensation and benefits
  
 
4,589
 
  
 
(3,161
)
  
 
1,986
 
Deferred rent expenses
  
 
(466
)
  
 
332
 
  
 
153
 
Income taxes
  
 
(1,993
)
  
 
(11,082
)
  
 
(1,604
)
Deferred contract costs
  
 
331
 
  
 
1,045
 
  
 
31
 
Other long-term obligations
  
 
(750
)
  
 
(1,601
)
  
 
2,498
 
    
  
  
Net cash provided by operating activities
  
 
18,721
 
  
 
19,907
 
  
 
31,320
 
    
  
  
CASH FLOWS FROM INVESTING ACTIVITIES
                          
Acquisitions of property and equipment
  
 
(7,507
)
  
 
(8,090
)
  
 
(8,717
)
Purchase of businesses
  
 
(44,418
)
  
 
(17,474
)
  
 
(29,404
)
Proceeds from sale of business
  
 
—  
 
  
 
37,000
 
  
 
1,481
 
Proceeds from sale of property and equipment
  
 
9
 
  
 
16
 
  
 
19
 
Capitalized software costs and other
  
 
(195
)
  
 
(521
)
  
 
(2,547
)
    
  
  
Net cash provided by (used in) investing activities
  
 
(52,111
)
  
 
10,931
 
  
 
(39,168
)
    
  
  
CASH FLOWS FROM FINANCING ACTIVITIES
                          
Proceeds under line of credit
  
 
200,630
 
  
 
168,614
 
  
 
208,763
 
Payments under line of credit
  
 
(168,361
)
  
 
(202,420
)
  
 
(188,138
)
Proceeds from stock options
  
 
1,601
 
  
 
5,836
 
  
 
5,109
 
Purchase of common stock for treasury
  
 
—  
 
  
 
—  
 
  
 
(7,272
)
    
  
  
Net cash provided by (used in) financing activities
  
 
33,870
 
  
 
(27,970
)
  
 
18,462
 
Effect of exchange rates on cash and equivalents
  
 
(158
)
  
 
(340
)
  
 
(703
)
    
  
  
Net increase in cash and equivalents
  
 
322
 
  
 
2,528
 
  
 
9,911
 
Cash and equivalents, beginning of year
  
 
2,081
 
  
 
2,403
 
  
 
4,931
 
    
  
  
Cash and equivalents, end of year
  
$
2,403
 
  
$
4,931
 
  
$
14,842
 
    
  
  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                          
Cash paid during the year for income taxes, net of refunds
  
$
7,909
 
  
$
15,933
 
  
$
8,768
 
    
  
  
Cash paid during the year for interest
  
$
3,160
 
  
$
3,599
 
  
$
3,304
 
    
  
  
 
See Notes to Consolidated Financial Statements.

F-5

Table of Contents
 
CACI INTERNATIONAL INC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(amounts in thousands)
 
 
    
 
 
 
 
Common stock
  
Capital in excess of par
  
Retained earnings
    
Accumulated other comprehensive loss
    
Treasury stock
    
Total shareholders’ equity
 
    
Share
  
Amount
             
Shares
  
Amount
    
BALANCE, July 1, 1998
  
28,742
  
$2,874
  
$10,907
  
 
$ 84,415
    
$
(207
)
  
7,052
  
$
(13,662
)
  
$ 84,327
 
Net income
  
—  
  
—  
  
—  
  
 
14,170
    
 
—
 
  
—  
  
 
—  
 
  
14,170
 
Currency translation adjustments
  
—  
  
—  
  
—  
  
 
—  
    
 
(1,161
)
  
—  
  
 
—  
 
  
(1,161
)
Exercise of stock options (including $834 income tax benefit)
  
256
  
26
  
1,575
  
 
—  
    
 
—
 
  
—  
  
 
—  
 
  
1,601
 
    
  
  
  
    
  
  
  
BALANCE, June 30, 1999
  
28,998
  
2,900
  
12,482
  
 
98,585
    
 
(1,368
)
  
7,052
  
 
(13,662
)
  
98,937
 
Net income
  
—  
  
—  
  
—  
  
 
38,412
    
 
—
 
  
—  
  
 
—  
 
  
38,412
 
Currency translation adjustments
  
—  
  
—  
  
—  
  
 
—  
    
 
(1,216
)
  
—  
  
 
—  
 
  
(1,216
)
Exercise of stock options (including $436 income tax benefit)
  
1,016
  
101
  
5,734
  
 
—  
    
 
—
 
  
—  
  
 
—  
 
  
5,835
 
    
  
  
  
    
  
  
  
BALANCE, June 30, 2000
  
30,014
  
3,001
  
18,216
  
 
136,997
    
 
(2,584
)
  
7,052
  
 
(13,662
)
  
141,968
 
Net income
  
—  
  
—  
  
—  
  
 
22,301
    
 
—  
 
  
—  
  
 
—  
 
  
22,301
 
Currency translation adjustments
  
—  
  
—  
  
—  
  
 
—  
    
 
(1,902
)
  
—  
  
 
—  
 
  
(1,902
)
Exercise of stock options (including $1,967 income tax benefit)
  
558
  
56
  
5,053
  
 
—  
    
 
—  
 
  
—  
  
 
—  
 
  
5,109
 
Purchase of common stock for Treasury
  
—  
  
—  
  
—  
  
 
—  
    
 
—  
 
  
716
  
 
(7,272
)
  
(7,272
)
    
  
  
  
    
  
  
  
BALANCE, June 30, 2001
  
30,572
  
$3,057
  
$23,269
  
 
$159,298
    
$
(4,486
)
  
7,768
  
$
(20,934
)
  
$160,204
 
    
  
  
  
    
  
  
  
 
See Notes to Consolidated Financial Statements.
 

F-6

Table of Contents
 
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
 
    
Year ended June 30,
 
    
1999
    
2000
    
2001
 
Net income
  
$
14,170
 
  
$
38,412
 
  
$
22,301
 
Currency translation adjustment
  
 
(1,161
)
  
 
(1,216
)
  
 
(1,902
)
    
  
  
Comprehensive income
  
$
13,009
 
  
$
37,196
 
  
$
20,399
 
    
  
  
 
See Notes to Consolidated Financial Statements.
 

F-7

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Business Activities
 
The Company is an international information systems and high technology services corporation. It delivers information technology and communications solutions through four areas of expertise or lines of business: systems integration, managed network services, document technology and engineering services. The Company provides these services in support of U.S. national defense and civilian agencies, agencies of foreign governments, state and local governments, and commercial enterprises.
 
Principles of Consolidation
 
The consolidated financial statements include the statements of CACI International Inc and its wholly–owned subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.
 
Revenue Recognition
 
Revenue on cost–plus–fee contracts is recognized to the extent of costs incurred plus a proportionate amount of the fee earned. Revenue on fixed–price contracts is recognized on the percentage-of-completion method based on costs incurred in relation to total estimated costs. Revenue on time-and-material contracts is recognized to the extent of billable rates times hours delivered plus expenses incurred. Revenue from software license sales under agreement is recognized upon delivery when there is no significant obligation to perform after the sale, but is recognized under the percentage-of-completion method when there is significant obligation for production, modification or customization after the sale. Revenue from maintenance support services is nonrefundable and is generally recognized on a straight–line basis over the term of the service agreement. Provisions for estimated losses on uncompleted contracts are recorded in the period such losses are determined.
 
The Company’s U.S. Government contracts (approximately 85% of total revenue in 2001) are subject to subsequent government audit of direct and indirect costs. The majority of such incurred cost audits have been completed through June 30, 1999. Management does not anticipate any material adjustment to the consolidated financial statements in subsequent periods for audits not yet completed.
 
Property and Equipment
 
Property and equipment is recorded at cost. Depreciation of equipment has been provided over the estimated useful life of the respective assets of three to seven years, using the straight–line method. Leasehold improvements are generally amortized using the straight–line method over the respective remaining lease term or the useful life of the improvements, whichever is shorter.
 
 
    
June 30,
 
    
2000
    
2001
 
    
(dollars in thousands)
 
Equipment and furniture
  
$
47,868
 
  
$
37,337
 
Leasehold improvements
  
 
5,946
 
  
 
6,059
 
    
  
Property and equipment, at cost
  
 
53,814
 
  
 
43,396
 
Less accumulated depreciation and amortization
  
 
(38,775
)
  
 
(27,711
)
    
  
Total property and equipment, net
  
$
15,039
 
  
$
15,685
 
    
  

F-8

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
During 2001, the Company wrote off $10.6 million of fully depreciated assets and the related accumulated depreciation.
 
Deferred Contract Costs
 
Deferred contract costs include the cost of equipment acquired by the Company to provide communications services under contract. The costs are charged to expense as the associated service revenue is billed to the customer. As of June 30, 2001, total deferred costs of approximately $1.5 million are classified as a current asset, because this amount is expected to be recovered within the next twelve months.
 
Capitalized Software Costs
 
Costs incurred internally in creating a computer software product to be sold or licensed are charged to expense when incurred as research and development until technological feasibility has been established for the product. Technological feasibility is established upon completion of a detailed program design or, in its absence, completion of a working model. Thereafter, all such software development costs are capitalized and subsequently reported at the lower of unamortized cost or estimated net realizable value. Capitalized costs are amortized based on current and future revenue for each product with annual minimum amortization equal to the straight-line amortization over the remaining estimated economic life of the product, which ranges from three to eight years.
 
Goodwill
 
The excess of cost over fair market value of net assets acquired is being amortized using the straight-line method, generally over 10 to 30 years. Accumulated amortization was $12,140,000 and $17,082,000 at June 30, 2000, and June 30, 2001, respectively. As of July 1, 2001, the Company adopted the Financial Accounting Standards Board (“FASB”) Statement No. 142, “Goodwill and Other Intangible Assets”.
 
Income Taxes
 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as operating loss and tax credit carry forwards.
 
U.S. income taxes have not been provided on $29,387,000 in undistributed earnings of foreign subsidiaries that have been permanently reinvested outside the United States. If such earnings were distributed to the United States, certain foreign tax credits would be available to reduce the associated tax liability.
 
Currency Translation
 
The assets and liabilities of the Company’s foreign subsidiaries whose functional currency is other than the U.S. dollar are translated at the exchange rates in effect on the reporting date, and income and expenses are translated at the weighted average exchange rate during the period. The Company’s primary practice is to negotiate contracts in the same currency in which the predominant expenses are incurred, thereby mitigating the exposure to foreign currency exchange fluctuations. The net effect of such translation gains and losses is not included in determining net income, but is accumulated as a separate component of shareholders’ equity. Foreign currency transaction gains and losses are included in determining net income.

F-9

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
Earnings Per Share
 
Statement of Financial Accounting Standards (“SFAS”) No. 128 requires dual presentation of basic and diluted earnings per share on the face of the income statement. Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per share includes the incremental effect of stock options calculated using the treasury stock method.
 
Statement of Cash Flows
 
For purposes of the Statement of Cash Flows, short–term investments with an original maturity of three months or less are considered cash equivalents.
 
Fair Value of Financial Instruments
 
The carrying amounts of the Company’s accounts payable and accrued expenses approximate their fair value. The lines of credit have floating interest rates that vary with current indices and, as such, the recorded value approximates fair value.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
Reclassifications
 
Certain reclassifications have been made to the prior years’ financial statements in order for them to conform to the current presentation.
 
New Accounting Pronouncements
 
On June 29, 2001, the FASB issued Statement No. 141, “Business Combinations”, and Statement No. 142, “Goodwill and Other Intangible Assets”, that amend APB Opinion No. 16, “Business Combinations”, and supersede APB Opinion No. 17, “Intangible Assets”. The two statements modify the method of accounting for

F-10

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

business combinations entered into after June 30, 2001 and address the accounting for intangible assets. The Company has elected to implement FASB No. 141 and No. 142 as of July 1, 2001.
 
NOTE 2. CAPITALIZED SOFTWARE DEVELOPMENT COSTS
 
The costs for software development capitalized and amortized for the years ended June 30, 1999, 2000 and 2001, included on the Consolidated Balance Sheets as other assets, were as follows:
 
    
1999
    
2000
    
2001
 
    
(dollars in thousands)
 
Annual activity
                          
Balance, beginning of year
  
$
1,863
 
  
$
1,548
 
  
$
4,269
 
Capitalized during year
  
 
501
 
  
 
4,504
 
  
 
4,383
 
Amortized during year
  
 
(816
)
  
 
(1,783
)
  
 
(1,534
)
    
  
  
Balance, end of year
  
$
1,548
 
  
$
4,269
 
  
 $
7,118
 
    
  
  
 

F-11

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
NOTE 3. ACCOUNTS RECEIVABLE
 
Total accounts receivable are net of allowance for doubtful accounts of $2,817,000 and $4,301,000 at June 30, 2000 and 2001, respectively. Accounts receivable are classified as follows:
 
    
2000
  
2001
    
(dollars in thousands)
Billed receivables
             
Billed receivables
  
$
85,165
  
$
100,095
Billable receivables at end of period
  
 
13,013
  
 
14,858
    
  
Total billed receivables
  
 
98,178
  
 
114,953
Unbilled receivables
             
Unbilled pending receipt of documents for billing
  
 
12,404
  
 
11,038
Unbilled retainages and fee withholdings expected to be billed beyond the next 12 months
  
 
11,136
  
 
13,686
Total unbilled receivables
  
 
23,540
  
 
24,724
    
  
Total accounts receivable
  
$
121,718
  
$
139,677
    
  
 

F-12

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
 
NOTE 4. NOTE PAYABLE
 
On June 19, 1998, the Company replaced an existing credit facility with a new five-year unsecured credit agreement which permits borrowings of up to $125 million with a sublimit of $55 million of borrowings in the first year for acquisitions and a sublimit of $40 million per year for acquisitions in subsequent years. The existing agreement permits similar borrowing options and interest rates as those offered by the prior agreement. The current LIBOR option is at the applicable period rate plus 0.375%. In addition, the Company pays a fee on the unused portion of the facility. The interest rate and unused portion fee are determined quarterly based on debt leverage ratio thresholds. The agreement contains customary financial covenants and ratios related to debt leverage, fixed charges coverage and net worth. Under this agreement, the Company had outstanding borrowings of $48,888,000 and $28,263,000 at June 30, 2001 and 2000, respectively. The applicable interest rate was 4.4% and 7.0% at June 30, 2001 and 2000, respectively.
 
On January 8, 2001, the Company entered into an interest rate swap agreement with a notional amount of $25.0 million under which the Company will pay a fixed interest rate of 5.15% plus the applicable spread, currently 0.375% and receive the prevailing LIBOR interest rate, plus applicable spread over the two year term of the swap agreement without the exchange of the underlying notional amounts. Of the outstanding borrowings of $48,888,000 at June 30, 2001, $25,000,000 is covered by this swap agreement.
 

F-13

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 5. INCOME TAXES
 
The provision (benefit) for income taxes for the years ended June 30, consists of:
 
    
1999
    
2000
    
2001
    
(dollars in thousands)
Current
                        
Federal
  
$
5,806
 
  
$
5,243
 
  
$
9,146
State and local
  
 
713
 
  
 
487
 
  
 
498
Foreign
  
 
1,153
 
  
 
1,697
 
  
 
1,794
    
  
  
Total current
  
 
7,672
 
  
 
7,427
 
  
 
11,438
    
  
  
Deferred
                        
Federal
  
 
1,626
 
  
 
4,066
 
  
 
1,481
State and local
  
 
(129
)
  
 
152
 
  
 
287
Foreign
  
 
15
 
  
 
(210
)
  
 
69
    
  
  
Total deferred
  
 
1,512
 
  
 
4,008
 
  
 
1,837
    
  
  
                Total
  
$
9,184
 
  
$
11,435
 
  
$
13,275
    
  
  
 
A reconciliation of the income tax provision (benefit) and the amount computed by applying the statutory U.S. income tax rate of 35% for the years ended June 30, 1999, 2000, and 2001 is as follows:
 
    
1999
    
2000
    
2001
 
    
(dollars in thousands)
 
Amount at statutory U.S. rate
  
$
8,209
 
  
$
10,283
 
  
$
11,915
 
State taxes, net of U.S. income tax benefit
  
 
351
 
  
 
415
 
  
 
499
 
Taxes on foreign earnings at different effective rates
  
 
(39
)
  
 
(106
)
  
 
(126
)
Non-deductible goodwill
  
 
667
 
  
 
449
 
  
 
704
 
Other
  
 
(4
)
  
 
394
 
  
 
283
 
    
  
  
Total
  
$
9,184
 
  
$
11,435
 
  
$
13,275
 
    
  
  
Effective tax rate
  
 
39.1
%
  
 
39.0
%
  
 
39.0
%
    
  
  

F-14

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
The tax effects of temporary differences that give rise to significant deferred tax assets and deferred tax liabilities at June 30, 2000 and 2001, are as follows:
 
    
2000
    
2001
 
    
(dollars in thousands)
 
Deferred tax assets
                 
Accrued vacation and other expenses
  
$
3,494
 
  
$
4,284
 
Appreciation of options
  
 
1,606
 
  
 
1,606
 
Accrued post-retirement obligations
  
 
421
 
  
 
228
 
Deferred rent
  
 
552
 
  
 
609
 
Other long-term obligations
  
 
367
 
  
 
—  
 
Foreign transactions
  
 
109
 
  
 
291
 
Pension
  
 
31
 
  
 
41
 
Depreciation
  
 
413
 
  
 
300
 
Other
  
 
11
 
  
 
13
 
    
  
        Total deferred tax assets
  
 
7,004
 
  
 
7,372
 
    
  
Deferred tax liabilities
                 
Unbilled revenues
  
 
(4,746
)
  
 
(4,930
)
401(k)
  
 
(2,614
)
  
 
(3,510
)
Capitalized software
  
 
(1,348
)
  
 
(2,481
)
Goodwill
  
 
(368
)
  
 
(398
)
Other
  
 
(51
)
  
 
126
 
    
  
                Total deferred tax liabilities
  
 
(9,127
)
  
 
(11,193
)
    
  
Net deferred tax asset (liability)
  
$
(2,123
)
  
$
(3,821
)
    
  
 
NOTE 6. STOCK INCENTIVE PLAN
 
In 1996, the Company’s shareholders approved an Employee Stock Incentive Plan (the “1996 Plan”), which replaced a 1986 Plan that expired. The 1996 Plan permits the award of incentive and non-qualified stock options, and stock grants to officers and employees of the Company. The 1996 Plan limited total awards and stock grants to 3,000,000 shares over the life of the 1996 Plan. In November 2000, the Board adopted, and the shareholders approved, an amendment to add 1,100,000 more shares to the 1996 Plan. Options for 3,746,000 shares have been granted under the 1996 Plan through June 30, 2001 and, with certain exceptions, one-third of the shares become exercisable each year over a three year period, beginning one year from the date of grant.
 
Under the 1996 Plan, options lapse and are no longer exercisable if not exercised within ten years of the date of grant. Grantees who terminate their CACI employment have 60 days after their termination date to exercise options that are then exercisable or risk forfeiture of their right to the options. Options that would have been exercisable at a future date are forfeited by the terminating employee and become available to the pool for future grants under the plan.
 
All awards granted under the 1996 Plan have been non-qualified stock options. The stock option exercises prices were at fair market value on the date of grant. Accordingly, no compensation cost has been recognized for stock option grants. Had compensation cost for the Company’s stock-based compensation plans been determined based on the fair value at grant dates for awards under those plans consistent with the method of

F-15

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

accounting under SFAS No. 123, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:
 
    
1999
  
2000
  
2001
    
(dollars in thousands, except per share)
Net income
                    
As reported
  
$
14,170
  
$
38,412
  
$
22,301
Pro forma
  
 
13,697
  
 
37,018
  
 
20,393
Diluted earnings per share
                    
As reported
  
$
.63
  
$
1.66
  
$
.97
Pro forma
  
 
.61
  
 
1.60
  
 
.88
 
The fair value of each option is estimated on the date of grant using the Black-Sholes option-pricing model with the following additional assumptions:
 
    
Year ended June 30,
 
    
1999
      
2000
      
2001
 
Dividend yield
  
0
%
    
0
%
    
0
%
Volatility rate
  
36.4
%
    
26.3
%
    
36.4
%
Discount rate
  
6.0
%
    
5.3
%
    
4.8
%
Expected term (years)
  
5
 
    
5
 
    
5
 
 
Stock option activity and price information regarding the Plans follows:
 
    
Number of Shares
    
Exercise Price
  
Weighted Average Exercise Price
    
(shares in thousands)
Shares under option, July 1, 1998
  
2,366
 
  
$
.94
 
—
 
$
10.14
  
$
5.07
Granted
  
750
 
  
 
7.71
 
—
 
 
9.41
  
 
8.64
Exercised
  
(256
)
  
 
.94
 
—
 
 
7.50
  
 
4.62
Forfeited
  
(102
)
  
 
1.75
 
—
 
 
9.66
  
 
6.88
    
                       
Shares under option, June 30, 1999
  
2,758
 
  
 
.94
 
—
 
 
10.14
  
 
6.04
Granted
  
1,278
 
  
 
10.00
 
—
 
 
12.72
  
 
10.91
Exercised
  
(1,016
)
  
 
.94
 
—
 
 
12.72
  
 
4.73
Forfeited
  
(606
)
  
 
7.50
 
—
 
 
11.19
  
 
9.82
    
                       
Shares under option, June 30, 2000
  
2,414
 
  
 
.94
 
—
 
 
12.72
  
 
8.31
Granted
  
818
 
  
 
8.47
 
—
 
 
19.10
  
 
10.16
Exercised
  
(558
)
  
 
.94
 
—
 
 
11.19
  
 
5.62
Expired
  
(8
)
  
 
.94
 
—
 
 
9.41
  
 
5.23
Forfeited
  
(440
)
  
 
.94
 
—
 
 
12.72
  
 
6.58
    
                       
Shares under option, June 30, 2001
  
2,226
 
  
$
7.50
 
—
 
$
19.10
  
$
10.07
    
                       

F-16

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
    
Number of Shares
  
Exercise Price
  
Weighted Average Exercise Price
    
Weighted Average Remaining Contractual Life
    
(shares in thousands)
Shares under option, June 30, 2001
  
350
  
$
7.50
 
—
 
$
8.44
  
$
7.87
    
7.26
    
364
  
 
8.47
 
—
 
 
9.41
  
 
9.11
    
7.54
    
1,140
  
 
9.94
 
—
 
 
11.00
  
 
10.42
    
8.60
    
192
  
 
11.07
 
—
 
 
11.25
  
 
11.22
    
8.76
    
180
  
 
11.88
 
—
 
 
19.10
  
 
12.81
    
8.95
    
                              
    
2,226
                              
    
                              
Options exercisable, June 30, 2001
  
156
  
 
7.50
 
—
 
 
8.44
  
 
7.82
      
    
82
  
 
8.47
 
—
 
 
9.41
  
 
9.38
      
    
54
  
 
9.94
 
—
 
 
11.00
  
 
10.93
      
    
46
  
 
11.07
 
—
 
 
11.25
  
 
11.22
      
    
102
  
 
11.88
 
—
 
 
19.10
  
 
12.67
      
    
                              
    
440
                              
    
                              
 
NOTE 7. PENSION PLAN
 
The Company maintains a defined contribution plan under Section 401(k) of the Internal Revenue Code, the CACI $MART PLAN. Employees can contribute up to 15% (subject to certain statutory limitations) of their total compensation. The Company provides matching contributions equal to 50% of the amount of the employee’s contribution, up to 6% of the employee’s total fiscal year cash compensation. In addition, the Company may also make discretionary profit sharing contributions to the plan. Employer contributions vest to the employees according to a schedule entitling full vesting after five years of employment. The CACI $MART PLAN is qualified under the Internal Revenue Code, as determined by the Internal Revenue Service.
 
The Company maintains a non-qualified, defined contribution plan, the CACI International Inc Group Executive Retirement Plan, which is available to certain executives participating in the CACI $MART PLAN whose annual compensation exceeds the statutory limit of the qualified plan. The Company contributes 5% of such excess eligible compensation to eligible participants in the Group Executive Retirement Plan. Each participant is fully vested immediately in his account balance. The Company contributions vest 20% per year over a five year period.
 
The total consolidated expense for pension and Company contribution to the 401(k) plan and the Group Executive Retirement Plan for the years ended June 30, 1999, 2000 and 2001 was $5,401,000, $5,909,000 and $4,820,000, respectively. The Company funds the costs of the qualified plans as they accrue.
 

F-17

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 8. OTHER LONG-TERM OBLIGATIONS
 
The Company has established a retirement benefit plan for certain executives. At June 30, 2001 the balance of the obligations by category are as follows:
 
      
2001
      
(dollars in thousands)
Accrued post-retirement obligations:
        
Group Health Plan
    
$
258
Executive Life
    
 
250
Deferred Compensation
    
 
4,022
      
Total accrued post-retirement obligations
    
 
4,530
Other long-term obligations
    
 
410
      
Total
    
$
4,940
      
 
Group Health Plan. CACI has provided for extended medical and dental benefit coverage to eligible employees, both former and active, and their dependents. The accumulated post-retirement benefit obligation represents the estimated present value of future claims by participants under this plan.
 
Executive Life . The Company maintains life insurance policies, covering certain officers, both former and active, through their lifetimes, in accordance with their respective employment agreements. The cost of the insurees’ premiums is treated as compensation expense.
 
Deferred Compensation . Effective July 1, 2000, CACI established the CACI International Inc Group Executive Retirement Plan. This plan is available to certain executives under which they may defer compensation. Upon termination or retirement, account balances are paid to participants as taxable income. A corresponding investment asset representing an offset to the Deferred Compensation amount is recorded on the Company’s books.
 
Other Long-Term Obligations . These consist primarily of amounts due to certain founders of QuesTech (no longer affiliated with Company as employees) under confidential settlement agreements. Payments under the agreements will continue through 2004.
 
NOTE 9. COMMITMENTS AND CONTINGENCIES
 
The Company conducts its operations from leased office facilities, all of which are classified as operating leases and expire primarily over the next nine years.
 
The following is a schedule of future minimum lease payments under non–cancelable leases with a remaining term greater than one year as of June 30, 2001:
 
Year ended June 30
    
Operating Leases
(dollars in thousands)
2002
    
$
13,954
2003
    
 
13,011
2004
    
 
10,300
2005
    
 
7,382
2006
    
 
6,503
Thereafter
    
 
18,554
      
                Total minimum lease payments
    
$
69,704
      

F-18

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
Operating leases reflect the minimum lease payments net of a minimal amount of sub-lease income. Rent expense incurred from operating leases for the years ended June 30, 1999, 2000 and 2001 amounted to $13,383,000, $15,579,000, and $13,750,000, respectively.
 
NOTE 10. BUSINESS ACQUISITIONS
 
  2001 Acquisitions
 
On December 2, 2000, the Company completed its acquisition of the federal services business and related assets (the “Federal Services Business”) of N.E.T. Federal, Inc., a subsidiary of Network Equipment Technologies, Inc., doing business as net.com. The total consideration paid by the Company was $25.0 million in cash plus an additional $1.0 million paid within six months after closing and an additional $1.0 million to be held in an escrow fund for one year. Additional payments of up to $13 million may also be made based upon achievement of specific milestones of which $2.5 million has been paid as of June 30, 2001. The purchase was financed from the Company’s line of credit with a group of banks. The acquired business provides secure network services offerings including network engineering and design, implementation, installation and integration, as well as network maintenance and management. As part of this acquisition, approximately 185 employees transferred to CACI. Approximately $19.3 million of the purchase consideration has been allocated to goodwill based upon the excess of the purchase price over the estimated fair value of net assets acquired. The Federal Services Business contributed revenue of $27.6 million for the period from December 2, 2000 to June 30, 2001.
 
On October 6, 2000, the Company acquired the contracts and selected assets of the special projects division (“Special Projects Business”) of Radian International, LLC (“Radian”), a subsidiary of URS Corporation, for $1.3 million in cash. The purchase was financed from the Company’s line of credit with a group of banks. Approximately $0.6 million of the purchase price has been allocated to goodwill. The Special Projects Business, which provides services to the intelligence community, contributed revenue of $0.9 million for the period from October 6, 2000 to June 30, 2001.
 
  2000 Acquisitions
 
On February 1, 2000, the Company acquired all of the common stock of XEN Corporation (“XEN”) for cash in the amount of $4.3 million. XEN specialized in providing systems engineering, engineering design, distance learning, training development, multimedia support, and data security services to national intelligence organizations, the Department of Defense, and the U.S. Navy. The transaction was funded through borrowings under the Company’s existing line of credit. Approximately $2.4 million of the purchase consideration has been allocated to goodwill based upon the excess of the purchase price over the estimated fair value of net assets acquired. XEN contributed $3.6 million of revenue for the period from February 1, 2000 to June 30, 2000.
 
On September 23, 1999, the Company purchased the assets of MapData Online International Ltd. and Digital MapData Online Ltd. (collectively, “MapData”) for $0.6 million in cash. MapData provided demographic software which, when bundled with existing products and services, enhanced the Company’s capabilities in geo-demographic and customer data analysis. The purchase price has been allocated based on the fair market value of the assets acquired. No goodwill has been recognized in connection with this transaction. Since the acquisition, the operations acquired from MapData have contributed $.1 million in revenue through June 30, 2000.
 
  1999 Acquisitions
 
On November 13, 1998, the Company acquired all of the common stock of QuesTech, Inc., a company that specialized in the development and application of information technology, scientific research and

F-19

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

management support services for the defense and national security communities. The total consideration paid by the Company, including the assumption of liabilities, was approximately $42 million. The transaction was funded through borrowings under the Company’s existing line of credit. Approximately $31 million of the purchase consideration has been allocated to goodwill based upon the excess of the purchase price over the estimated fair value of net assets acquired. QuesTech (renamed CACI Technologies, Inc.) contributed revenues of $56.1 million for the period from November 13, 1998 to June 30, 1999.
 
On August 13, 1998, the Company purchased the assets of Information Decision System (“IDS”) for $2.6 million in cash. IDS provided internet access to demographic site information and enhanced the Company’s capabilities in geo-demographic and customer data analysis. Approximately $2.4 million has been allocated to goodwill based upon the excess of the purchase price over the estimated fair value of net assets acquired. IDS contributed approximately $1.2 million in revenue for the period August 13, 1998 to June 30, 1999.
 
  Pro Forma Information (unaudited)
 
The following unaudited pro forma combined condensed statements of operations set forth the consolidated results of operations of the Company for the years ended June 30, 1999, 2000 and 2001 as if the above-mentioned acquisitions had occurred at the beginning of both the year of acquisition and the year prior to the acquisition. This unaudited pro forma information does not purport to be indicative of the actual financial position or the results that would actually have occurred if the combinations had been in effect for the years ended June 30:
 
    
1999
  
2000
  
2001
    
(dollars in thousands, except per share amounts)
Revenue
  
$
489,325
  
$
510,692
  
$
578,004
Net income
  
 
14,683
  
 
38,900
  
 
26,041
Diluted earnings per share
  
 
0.65
  
 
1.68
  
 
1.13
 
NOTE 11. BUSINESS SEGMENT INFORMATION
 
The Company reports operating results and financial data in two segments: domestic operations and international operations. The domestic operations provide information technology and communications solutions through all four of the Company’s major lines of business: systems integration, managed network services, document technology and engineering services. Its customers are primarily U.S. federal agencies, however, it does serve a number of agencies of foreign governments and customers in the commercial, and state and local sectors. The international operations offer services to both commercial and government customers through the Company’s systems integration line of business. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in Note 1 to the financial statements. The Company evaluates the performance of its operating segments based on income (loss) before income taxes. Summarized financial information concerning the Company’s reportable segments is shown in the following tables. The “Other” column includes the elimination of intersegment revenue and corporate related items. Corporate assets, primarily consisting of property and equipment, are reported in the “Other” column. The operating segments’ income (loss) and corporate related amounts total the amount presented as income before taxes in the “Consolidated Statements of Operations”. Prior year segment information has been restated in order to provide for consistent presentation with the current year and the information related to the discontinued operations has been excluded from this presentation.

F-20

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
    
Domestic Operations
    
International Operations
  
Other
    
Total
    
(dollars in thousands)
Year Ended June 30, 1999
                               
Revenue from external customers
  
$
383,509
    
$
43,913
  
$
—  
 
  
$
427,422
Pre-tax income (loss)
  
 
22,975
    
 
3,441
  
 
(2,915
)
  
 
23,501
Total assets
  
 
192,363
    
 
28,621
  
 
728
 
  
 
221,712
Capital expenditures
  
 
5,730
    
 
1,509
  
 
769
 
  
 
8,008
Depreciation and amortization
  
 
8,381
    
 
1,616
  
 
307
 
  
 
10,304
Year Ended June 30, 2000
                               
Revenue from external customers
  
$
439,355
    
$
45,104
  
$
86
 
  
$
484,545
Pre-tax income (loss)
  
 
28,254
    
 
4,876
  
 
(3,804
)
  
 
29,326
Total assets
  
 
199,119
    
 
30,587
  
 
6,291
 
  
 
235,997
Capital expenditures
  
 
6,182
    
 
767
  
 
1,665
 
  
 
8,614
Depreciation and amortization
  
 
8,360
    
 
2,110
  
 
1,075
 
  
 
11,545
Year Ended June 30, 2001
                               
Revenue from external customers
  
$
510,995
    
$
46,702
  
$
193
 
  
$
557,890
Pre-tax income (loss)
  
 
33,222
    
 
5,791
  
 
(4,973
)
  
 
34,040
Total assets
  
 
241,200
    
 
32,832
  
 
10,699
 
  
 
284,731
Capital expenditures
  
 
11,696
    
 
790
  
 
1,711
 
  
 
14,197
Depreciation and amortization
  
 
10,169
    
 
1,688
  
 
1,823
 
  
 
13,680
 
The loss in the “other” column primarily represents unallocated corporate costs.
 
Major Customers. The Company earned approximately 81%, 81% and 85% of its revenue from the U.S. Government for the years ended June 30, 1999, 2000, and 2001, respectively. Revenue by customer sector for the three years ended June 30, 2001 is as follows:
 
    
1999
 
%
  
2000
 
%
  
2001
 
%
    
(dollars in thousands)
Department of Defense
  
$
216,573
 
50.7%
  
$
249,776
 
51.5%
  
$
325,118
 
58.3%
Federal Civilian
  
 
130,766
 
30.6%
  
 
141,393
 
29.2%
  
 
149,205
 
26.8%
Commercial
  
 
57,810
 
13.5%
  
 
60,181
 
12.4%
  
 
61,029
 
10.9%
State & local
  
 
22,273
 
5.2%
  
 
33,195
 
6.9%
  
 
22,538
 
4.0%
    
 
  
 
  
 
Total
  
$
427,422
 
100.0%
  
$
484,545
 
100.0%
  
$
557,890
 
100.0%
    
 
  
 
  
 

F-21

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
Geographic Information .    Revenue is attributed to geographic areas based on the location of the assets producing the revenue. The international operation amounts consist primarily of product and systems integration sales in the United Kingdom. Financial information relating to the Company’s operations by geographic area is as follows:
 
    
1999
  
2000
  
2001
    
(dollars in thousands)
Revenue
                    
Domestic Operations
  
$
383,509
  
$
439,441
  
$
511,188
International Operations
  
 
43,913
  
 
45,104
  
 
46,702
    
  
  
    
$
427,422
  
$
484,545
  
$
557,890
    
  
  
Identifiable Assets
                    
Domestic Operations
  
$
193,091
  
$
205,410
  
$
251,301
International Operations
  
 
28,621
  
 
30,587
  
 
33,430
    
  
  
    
$
221,712
  
$
235,997
  
$
284,731
    
  
  
 
NOTE 12. DISCONTINUED OPERATIONS
 
On December 15, 1999, the Company completed the sale of the net assets of the COMNET products business for $37 million in cash and $3 million in escrow all of which has been received. Net income (loss) from the Company’s discontinued operations has been segregated from continuing operations and reported as a separate line item on the consolidated statements of operations. Prior year reported results have been restated in order to provide for consistent presentation.
 
The COMNET sale resulted in a net after tax gain for the Company of $21.1 million and $1.5 million for the years 2000 and 2001, respectively. Included in the gain was a net after tax loss from discontinued operations of $118 thousand for the period from November 3, 1999 to December 15, 1999. Revenues from discontinued operations were $8.3 million and $3.1 million, for the years ended June 30, 1999 and 2000, respectively.
 
NOTE 13. SUBSEQUENT EVENTS
 
On August 13, 2001, the Company announced that it had signed a letter of intent to acquire all of the shares of Digital Systems International Corporation (“DSIC”), a privately held information technology (“IT”) company headquartered in Arlington, Virginia. It is expected that the acquisition, which will be financed through the Company’s existing credit facility, will be completed within ninety days.
 

F-22

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
On November 7, 2001, the Company’s Board of Directors declared a two-for-one stock split to be effected in the form of a common stock dividend. This dividend was payable on December 6, 2001 to shareholders of record on November 30, 2001. Accordingly, the number of shares of common stock outstanding, earnings per shares, and the number of shares used in the calculation of earnings per share all have been restated to retroactively reflect the split.
 
In December 2001, the Company executed a formal plan to sell the net assets of its domestic Marketing Systems Group and entered into a letter of intent with Environmental Systems Research Institute, Inc’s subsidiary, ESRI Business Information Solutions for $3.5 million in cash. On January 6, 2002, the Company completed this sale. This resulted in a net-after-tax loss for the Company of $966 thousand, which will be recorded in the quarter ended December 31, 2001. Included in the loss will be a net-after-tax benefit from discontinued operations of $284 thousand for the period of October 31, 2001 to January 6, 2002. As a result, in accordance with APB Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” results of operations for the years ended June 30, 2001, 2000 and 1999 have been classified as discontinued and prior years have been restated. Revenues from this discontinued operation were $5,920,000, $5,928,000 and $6,027,000 for the years ended June 30, 2001, 2000 and 1999.
 
NOTE 14. COMMON STOCK DATA (UNAUDITED)
 
The Company’s stock trades on the Nasdaq National Market System. The ranges of high and low sales prices for each quarter during fiscal years 2000 and 2001 were as follows:
 
    
2000
  
2001
Quarter
  
High
  
Low
  
High
  
Low
1st
  
$
11.813
  
$
10.125
  
$
12.750
  
$
8.375
2nd
  
$
12.000
  
$
9.875
  
$
12.250
  
$
9.563
3rd
  
$
15.125
  
$
10.375
  
$
14.063
  
$
11.094
4th
  
$
15.063
  
$
9.125
  
$
23.500
  
$
13.313

F-23

Table of Contents

CACI INTERNATIONAL INC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
The quarterly financial data is unaudited, but in the opinion of management, all adjustments necessary for a fair presentation of the selected data for these interim periods have been included.
 
    
First
    
Second
    
Third
  
Fourth
 
    
(dollars in thousands, except per share)
 
Year ended June 30, 2000
                         
Revenue
  
$
117,440
 
  
$
119,790
 
  
$
120,671
  
$
126,644
 
Income from operations
  
 
7,768
 
  
 
8,297
 
  
 
7,846
  
 
8,705
 
Income from continuing operations
  
 
4,075
 
  
 
4,435
 
  
 
4,465
  
 
4,916
 
    
  
  
  
Net Income
  
$
3,817
 
  
$
25,354
 
  
$
4,419
  
$
4,822
 
    
  
  
  
Basic Shares
                                 
Income from continuing operations
  
$
.18
 
  
$
.20
 
  
$
.19
  
$
.21
 
Loss from discontinued operations
  
 
(.01
)
  
 
(.02
)
  
 
.00
  
 
.00
 
Gain on disposal
  
 
—  
 
  
 
.94
 
  
 
—  
  
 
—  
 
    
  
  
  
Net Income
  
$
.17
 
  
$
1.12
 
  
$
.19
  
$
.21
 
    
  
  
  
Diluted Shares
                                 
Income from continuing operations
  
$
.18
 
  
$
.19
 
  
$
.19
  
$
.21
 
Loss from discontinued operations
  
 
(.01
)
  
 
(0.01
)
  
 
.00
  
 
.00
 
Gain on disposal
  
 
—  
 
  
 
.92
 
  
 
—  
  
 
—  
 
    
  
  
  
Net Income
  
$
.17
 
  
$
1.10
 
  
$
.19
  
$
.21
 
    
  
  
  
Weighted average shares used in per share computation
                                 
Basic
  
 
21,978
 
  
 
22,616
 
  
 
22,856
  
 
23,032
 
Diluted
  
 
22,722
 
  
 
23,074
 
  
 
23,386
  
 
23,436
 
Year ended June 30, 2001
                                 
Revenue
  
$
124,806
 
  
$
133,812
 
  
$
146,655
  
$
152,617
 
Income from operations
  
 
7,781
 
  
 
8,543
 
  
 
9,890
  
 
11,141
 
Income from Continuing Operations
  
 
4,349
 
  
 
4,644
 
  
 
5,433
  
 
6,339
 
    
  
  
  
Net Income
  
$
4,352
 
  
$
4,766
 
  
$
5,561
  
$
7,622
 
    
  
  
  
Basic Shares
                                 
Income from continuing operations
  
$
.19
 
  
$
.21
 
  
$
.24
  
$
.28
 
Gain (loss) from discontinued operations
  
 
.00
 
  
 
.01
 
  
 
.00
  
 
(.01
)
Gain on disposal
  
 
—  
 
  
 
—  
 
  
 
—  
  
 
.07
 
    
  
  
  
Net Income
  
$
.19
 
  
$
.22
 
  
$
.24
  
$
.34
 
    
  
  
  
Diluted Shares
                                 
Income from continuing operations
  
$
.19
 
  
$
.20
 
  
$
.24
  
$
.27
 
Gain (loss) from discontinued operations
  
 
.00
 
  
 
.01
 
  
 
.00
  
 
(.01
)
Gain on disposal
  
 
—  
 
  
 
—  
 
  
 
—  
  
 
.07
 
    
  
  
  
Net Income
  
$
.19
 
  
$
.21
 
  
$
.24
  
$
.33
 
    
  
  
  
Weighted average shares used in per share computation
                                 
Basic
  
 
22,708
 
  
 
22,482
 
  
 
22,602
  
 
22,740
 
Diluted
  
 
23,046
 
  
 
22,790
 
  
 
23,014
  
 
23,372
 

F-24

Table of Contents

CACI INTERNATIONAL INC
 

 
 
SCHEDULE II
 
CACI INTERNATIONAL INC AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR YEARS ENDED JUNE 30, 1999, 2000 AND 2001
(dollars in thousands)
 
Description
  
Balance at Beginning of Period
  
Additions at Cost
  
Deductions
    
Other Changes Add (Deduct)
  
Balance at End of Period
1999
                                    
Reserves deducted from assets to which they apply:
                                    
Allowances for doubtful accounts
  
$
3,637
  
$
789
  
$
(2,409
)
  
$
1,033
  
$
3,050
    
  
  
  
  
2000
                                    
Reserves deducted from assets to which they apply:
                                    
Allowances for doubtful accounts
  
$
3,050
  
$
770
  
$
(1,322
)
  
$
319
  
$
2,817
    
  
  
  
  
2001
                                    
Reserves deducted from assets to which they apply:
                                    
Allowances for doubtful accounts
  
$
2,817
  
$
1,343
  
$
(1,491
)
  
$
1,632
  
$
4,301
    
  
  
  
  

F-25

Table of Contents
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
CACI International Inc
Registrant
 
By:
 
/s/    Jeffrey P. Elefante
   
Jeffrey P. Elefante
Executive Vice President
General Counsel and Secretary

1 of 2