CACI International Inc (CACI) 2004 Q3 法說會逐字稿

Good day, everyone, and welcome to the CACI International third quarter 2004 earnings conference call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Dave Dragics. Please go ahead, sir.

Thank you Melinda and good morning ladies and gentlemen. I'm Dave Dragics, Vice President of Investor Relations of CACI International. And we are pleased that you're able to participate with us today. And for those of you who are with us for the first time either by telephone or via the Internet, we welcome you to this call, and for those of you who have joined us again, welcome back and we appreciate your ongoing interest in CACI. As has been our custom on this call these calls, we're including exhibits with our presentation, and believe that will be helpful in reviewing our financial results and trends and with the discussion of our operations. And as we progress this morning, we'll make every effort to make keep all of you on the same page as we are. So let's go to the first exhibit.

As you know, yesterday after the market closed, we released our third quarter and nine month fiscal year 2004 results. And we hope that most of you have had the opportunity to review our announcement and the results. And the third quarter results are summarized on this exhibit. Moving to the next exhibit, before we begin our discussion this morning, I'd like to make our customary but important statement regarding CACI's written and oral disclosures and commentary. There will be statements in this call that do not address historical facts and as such, represent forward-looking statements under current law. These statements are subject to important factors that could cause actual results to differ materially from the statements made today. The primary factors that could cause actual results to differ materially from those anticipated are listed at the bottom of this morning's earnings release, as well as, in the company's Securities and Exchange Commission filings. And our full Safe Harbor statement is included in this exhibit and should be incorporated as part of any transcript of this call. Let's turn to the next exhibit, and to open up our discussion this morning, here's Jack London, Chairman, President and CEO of CACI International.

Thank you, Dave, and good morning, ladies and gentlemen. First, let me welcome you to our conference call this morning. I'd like to extend a personal and special welcome to those of you who are new to CACI and to our call this morning. We appreciate your interest and invite you to join us on our future conference calls as well. Last evening after the market closed, we reported record results for the third quarter of fiscal 2004. For the first time in CACI's history, our trailing 12-months revenue exceeded $1b in sale. I'm very proud to report that we achieved this significant milestone over one year earlier than we had originally planned in our fiscal year planning. It is a testimony in my opinion to our strategic planning and our outstanding people and those that are performing with CACI on our team, the management, organization, and our employees. It's our people's commitment to providing the highest quality of service to our clients along with many valuable long-term relationships we've established with our clients over the many years that has propelled us to this level. I also believe that CACI has an especially fine image and reputation within our market and business community. This past quarter was another one of our solid performance achievements and results for CACI. We experienced a 38% increase in profits and a 30% increase in growth and revenue for the third quarter compared with the same quarter last year. We've positive operating cash flow of $25.9m. We also received over $395m in contract awards. And as you know, we announced our intent to purchase the Defense and Intelligence Group of American Management Systems, which we expect would bring us approximately 1700 highly skilled employees and additional $275m to $285m in revenue in our fiscal year 2005. We expect to close the deal at least by May 3 and that is depending upon certain factors with the completion of Exon-Florio filings. Steve and Ken will provide you further details on all this and other highlights of the quarter. In our federal civilian agency market, the most important news this quarter, was our new contract award with the Social Security Administration. We'll be managing local and wide area networks in supporting data operation centers throughout the United States. We're pleased

to report that we've already started work with this new client. We gained this business through the acquisition of CMS Information Services. CMS brought us 250 highly skilled employees. These talented people enhance our capabilities in network services, financial management systems, and software engineering and integration, and they provided us with an excellent growth platform in the federal civilian agency market. That is another example, the success of our mergers and acquisitions program. The global war on terrorism is taking on a new dimension including actions in Iraq. At CACI were committed to our clients involved with that important effort. Our vigilance in support of their missions remains as strong as ever. We cannot provide the specifics, but CACI people are positioned to provide the intelligence, logistics, and communication support that coalition forces need to engage the enemy. As long as our government pursues initiatives in this region and our services are needed, we are proud to say that CACI people will be there supporting our clients. We're committed to staying the course in the global war on terrorism and in the best interest of our nation and the world. I can tell you that CACI plans to continue focusing on information technology and technology solutions, provide the greatest benefit to the federal government, for us that means IT solutions for national security, intelligence, the war on terrorism, and the reshaping of the way government agencies communicate, use and disseminate information, deliver services and conduct business. Again, we focus on providing information and technology solutions to our clients. With me today to discuss our operating results in more detail and to join me in answering your questions are Ken Johnson, President of CACI's U.S. Operations; and Steve Waechter our Chief Financial Officer; Greg Bradford, President of CACI Limited, United Kingdom is also on line ready to answer any questions that you may have about our UK operations. Now as is our custom on these calls, we'll discuss three principal items. First, Steve Waechter will discuss our financial results, second Ken Johnson will discuss our domestic operations and their outlook. Finally, I'll have some closing comments to pass along. After that we'll open up the call to your questions. So, the first item on our agenda is our financial results which we are quite proud of, so here is Steve Waechter our CFO to discuss. Over to you Steve.

Thank you Jack and good morning everyone. Lets go to exhibit number six. As Jack indicated, last evening we reported record third quarter and nine months fiscal year '04 revenue and earnings. Revenue for the third quarter increased 30% to $288m versus $222m a year ago. Net income was $15.8m or $0.53 per diluted share up 38% over last year's $11.5m or $0.39 per diluted share. We continued to experience good operating leverage with our net income growth rate exceeding our revenue growth rate. Let me give you more detail on some of these results. We move to exhibit number seven, here our federal business grew 31% during the third quarter and represented 93% of our total revenue. The internal growth rate of our federal business was just over 10%. For all of CACI internal growth was about 11%, year-to-date, however internal growth is just over 12 within our annual objective of 12% to 15%. Our overall growth continues to come from our core business, as well as from operations we've acquired and integrated over the past several years. Performance of our United Kingdom operations improved considerably in the quarter. Our operations there reported $12.8m in revenue, 33% more than the $9.6m reported a year earlier. The pre-tax profit margin was 12% compared to a 11% a year ago. These results were benefited by a favorable exchange rate on top of improvement in our operations there. Exchange rates changed by 40% compared with last year. They are experiencing better sales of higher margin software products and then improvement in the systems integration business. Also about 30% of the revenues comes from government customers compared with about a 11% a year ago. We anticipate that are UK business will continue to improve. Moving to exhibit eight, lets take a look at some of our key metrics, most of which were included in the financial exhibits in our press release. This was another very profitable quarter for us. Our operating margin was 8.7% this quarter compared to 8% in the third quarter of last year. As we indicated in our release, the growth in our operating margin continues to be driven primarily by a favorable business mix and operational efficiencies. Our acquisitions also contributed favorably to the improvement both from significant revenue growth and leverage of our infrastructure. As we anticipated last quarter, our operating cash flow improved significantly. It was $25.9b for the quarter and year-to-date operating cash flow from operating activities was 13m.

We expect a strong fourth quarter with operating cash flow for the year anticipated to be in the range of $60m to $70m. About 87%of our revenue this past quarter and for the year-to-date was earned as a prime contractor. Year-to-date, 62% of our revenue came from time and materials work, 21% from cost plus work and 17% from fixed price work. Moving to exhibit number 9, day sales outstanding at the end of the quarter were 84, down two days from the prior quarter. The March acquisition of CMS added approximately four days to the days outstanding calculation. Day sales outstanding were up seven days from last year's 77 days primarily as a result of the addition of receivables from our recent acquisition of CMS and timing of certain milestone billings. Exclusive of the AMS transaction, we anticipate day sales outstanding should be in the range of 76 to 78 days by the end of the fiscal year. We continue to focus on our cash management. This exhibit also shows our cash and marketable securities and debt at March 31.

The next exhibit, number 10, contains our guidance and revenue, net income and diluted shares for the fourth quarter and the full fiscal year 2004, exclusive of the pending AMS transaction. This is the third time that we have increased our guidance this fiscal year to reflect our accelerated growth. As can be seen on this exhibit, we estimate that our revenue for the quarter will range between $295m and $305m, an increase of 29% to 33% over the fourth quarter of fiscal year '03. Also for the next quarter, we expect our operating margins to be in the 9% range. We anticipate that our net income will range between $16.5m and $17.1m, 24% to 29% higher than a year ago. We expect diluted earnings per share to be between $0.55 and $0.57 per share, up 22% to 27% over the year earlier period. We believe that our internal growth in the fourth quarter will be in the range of 12% to 14%. Finally, we estimate that the diluted weighted average shares for the fourth quarter will be 30.1m. For the full year, we now estimate that our revenue will range between $1.83b and $1.93b, 28% to 30% above fiscal year '03. We now anticipate that net income for the year will be between $59.5m and $60.1m, 33% to 34% higher than the $44.7m reported for fiscal year '03. Diluted earnings per share will range between $1.99 to $2.01 per share, which represents an increase of 31% to 32% over the $1.52 per share reported last fiscal year. We are pleased with the results of our recent financing activities related to the acquisition of AMS' Defense and Intelligence Group and pleased to report that we have a fully committed $550m credit facility consisting of a $200m revolver and a $350m term loan. The financing was extremely well received by the marketplace. Finally, we are in the process of preparing our operating financial plans for fiscal year '05. We anticipate finalizing and reviewing our plans with our Board of Directors in June. We are very excited about the prospects for fiscal year '05 with our current run rate coupled with the anticipated acquisition of the higher-margin AMS transaction, our revenue is approaching $1.5b for the fiscal year FY05. Even though Dave mentioned in the Safe Harbor statement at the beginning of this call, I want to again state that these projections are forward-looking and that the listeners on the call and the readers of the transcript should be advised that our actual results may differ materially from the statements we're making today. At this time, that completes my financial review, and now here's Ken Johnson, who will cover our domestic operations. Ken?

Thanks, Steve and good morning everyone. Let's go to exhibit number 11, please. As was the case when we last spoke to you in January, our domestic operations in the third quarter continued to grow mainly as a result of faster staffing on several of the new contract awards that we announced during the first six months of our fiscal year. Additionally, we continued to experience expansion on many of our existing contracts. In short, our operations continued at a strong pace driven by events outside of our borders and filling the increasing demands of our customers here at home. Staffing in our domestic operations in the quarter including the acquisition of CMS increased by approximately 550 people, just over 6,800 at the end of December to just under 7,400 at the end of March. And the trend we noted last quarter, that of revenue growth coming from national security clientele for both national and military intelligence customers continue.

Over three quarters of the 37% increase in DoD revenue came primarily from higher levels of C4ISR work for customers such as the Army's Intelligence and Security Command or INSCOM, national intelligence customers and tactical military intelligence organizations deployed around the world. Growth in our Federal Civilian Agency revenue came from new and current contracts across many clients and agencies. This past quarter we generated approximately $26m in revenue from the Department of Justice as we continued to perform a wide variety of task orders under the Mega 2 contract. This work continues to be involved with major tobacco litigation as well as work for the Securities and Exchange Commission and projects for several other unnamed government agencies. Also like last quarter, almost two-thirds of our Federal Civilian Agency revenue was from agencies other than the justice department. We expect that trend to continue, because you might recall that we just recently announced the new award with the Social Security Administration, a new Federal Civilian Agency customer for us. So, we continue to be quite pleased with our progress in this area. You already heard Steve mention that internal growth this past quarter was about 11%, I would add that we anticipate that our internal growth will accelerate in the fourth quarter. As we have indicated here and at many meetings our acquisition last May of PTG Incorporated has been extremely successful. Through it we have greatly broadened our footprint in supporting the tactical intelligence needs of The United States Army, the continued growth of that business, what we refer to as acquired organic growth, will roll into our internal growth calculation this next quarter.

Moving to the next exhibit, please. Here is a recap of the revenue we generated from our federal, commercial and state and local customers through our various services offerings. These percentages as always are approximate. Systems integration work, which, as you know, includes our UK operation, still represents over 50% of our revenue. Engineering services is in the 20% to 23% range, network services represents between 15% and 17% of that revenue, and knowledge management approximately 9% to 11%.

Now, let's move to the next exhibit, number 13 please. Let's take a look at our pipeline of qualified opportunities. When we spoke to you in January, we were looking at about $6.4b of business in our pipeline. That estimate now is approximately the same at $6.6b. When we look at what is reflected in many of those opportunities, we are seeing procurement in acquisition offices in both the Department of Defense and amongst our federal civilian customers making strong efforts to issue by the May-June time frame RFPs planned for this fiscal year. By working to get those RFPs out to the contractor community by then, that gives them sufficient time to evaluate the responses, make awards prior to the end of the government's fiscal year in September and as anyone who is familiar with our marketplace knows the passing and signing of the law of all thirteen appropriations bills by September 30 rarely occurs. Our customers know that and it appears as though they are taking steps to plan accordingly.

As these opportunities play out and we look out to FY05, we expect to see competition increase in that the same number of competitors are bidding for fewer opportunities from our government clientele. That being said, national priorities, that is national defense, intelligence and defense of the homeland will continue to be funded at levels that will support our growth strategy. As we all know and have recently seen, the world we live in is still a very dangerous place. In addressing this reality our strategy is to continually position our domestic operations, those service and solutions that we offer to support those national priorities. That is where our growth for the foreseeable future will continue to come from. One thing that is woven into those national priorities and where we believe we are well positioned is the transformation of

The Department of Defense as it changes from a threat base to a capabilities strategy to counter and deal with the threats present in today's world. The funding of the transformation is and continues to be a challenge. The new capabilities are expensive, at the same time provisioning the labor force is becoming increasingly expensive. The quality and professionalism of that force however has never been higher. This professional fighting force is required to operate and support thousands of sophisticated systems from complex aircraft to wide area networks, network censors and Laptop computers, but with manpower cost becoming a budgetary constraint, the opportunity exists for company's like CACI to leverage our portfolio of IT services and varied solutions. Overall, we are very pleased with what we've been able to accomplish so far this fiscal year. We are looking forward to a solid fourth quarter, which we believe will provide us a strong launch point for our FY05 plan. Jack that concludes my remarks.

Thank you Ken, and thank you Steve also for your updates. It's actually a pleasure to hear you review some of the exciting things that are going on at CACI these days, and how we see things as we look forward. We successfully completed our third quarter fiscal 04 with a very strong operational results, and quite frankly I believe that confirms our ongoing business strategy and strategic plan. We're following that plan to achieve continued growth, to achieve client benefits and increase shareholder value. Our position as a major IT and technology solutions provider in the defense, intelligence and federal, civilian markets remain strong and committed. We believe that position will be even stronger with the completion of the purchase of the Defense and Intelligence group of AMS. We're extremely excited and enthusiastic about welcoming the almost 1700 highly skilled employees of that organization into the CACI organization and over a half of those employees posses security clearances as well, which puts our count on a current basis of some 61% of our current staff having the appropriate types of domestic security clearances. We look forward to the contribution of these fine people and the efforts and the progress they'll make in developing and enhancing CACIs business and profitability going forward. And we're enthusiastic about working with the customers that they have and we're already made some customer contacts and visits, and are very delighted and pleased with the results of those interactions. We look forward to a long relationship with our new employees and with their new customers. Looking ahead we see continued growth in the areas of work we perform for the defense, intelligence and national security arenas in fighting and winning the global war on terrorism. We also believe our core capabilities position us extremely well with solutions for the intelligence community, in systems integration, network communication, secured networks, engineering and logistics, and knowledge management. The nature of this work achieved through our strong relationships with our customers over the many years, we believe provides a dynamic environment for our existing and prospective employees to grow their careers. Government also intends to transform and continues to transform the way it does business as we've already indicated and that trend line and movement is coming at us. CACI solutions, we believe are positioned and provide a great match for that effort in requirement. We now also provide proven technologies and expertise in financial management systems and in government streamlining to set these anticipated and future needs. Certainly the acquisition of AMS fits in our strategy in that direction. Enabling business management by our government clients and enables them to focus on mission critical functions from enterprise wide financial management solutions to information sharing solutions, all are going to be needed in the transformation of the security and defense agencies going forward, and also we'll continue to grow the opportunities we believe for our capabilities in this market niche. To sum up, we're really quite proud to report another quarter of record growth and results. We believe our strategic plan has been extremely successful in anticipating and guiding us into opportunity in priority areas and to revive the record profits and revenue that we have set as our objectives. We believe we can continue into this coming fiscal year in the same vein. We continue to remain focused and vigilant in providing the highest quality, extremely important quality service to our clients, while continuing to enhance the value for our shareholders. So at this moment we're ready to open up our discussion for your questions. We think we had an interesting quarter and we'll be delighted to take your questions at this point. So Melinda, I'll turn the microphone back over to you for the first question and we'll see where we go.

Thank you Mr. London. Today's question and answer session will be conducted electronically. If you would like to ask a question, please press star one on your touchtone telephone. Also if you are on a speakerphone, please remove your mute function to allow your signal to reach our equipment. Again that is star one if you would like to ask a question. We'll pause for just for a moment. Our first question will come from Tom Meagher of BB&T Capital Markets.

Yeah. Good morning. Congratulations on the quarter. I guess Steve I will start with you as always.

25.095, so if you could round it to 26.

Okay, and that's the DoJ portion or the other.

That's the DoJ.

DoJ, okay and then, Ken I think you touched on this in your remarks but if you look at the FY '05 IP budget request it was relatively flat compared to FY '04. But if you dig down bellow the numbers you see The Air force, and Navy got plused up, while the Army got cut back, and you saw the same thing I think for the civilian agencies as well. Within the context of the budget deficit, is it a fair assessment in your opinion that barring a change in administration if we do see some spending cut back that the civilian agencies would bear the brunt of that as opposed to say DoD or the intelligence community.

I think great observation Tom. If the - kind of a portfolio theory, if we had a huge book of business across the federal civilian space, we would certainly have some concerns about the delivering at the growth levels that we have been delivering and that which we are projecting to deliver. Because their showing budget levels that are growth at sufferings somewhat from as when compared to the defense budgets in the homeland security budgets. It just that the set of customers that we have relationship with the combination of the veterans of various organization or the Social Security Administration in Department of Justice seems to so far at least and for what we think to be at the foreseeable future to be insulated from that downturn in the programs, call them mission critical, call them mainline, mainstream kind of programs. We are quite comfortable projecting the kind of growth that we're projecting but I thing your observation is fairly accurate.

Moving on to Bill Loomis of Legg Mason.

Hi, Thank you, good quarter guys. Looking at CMS, what was the revenue contribution in the quarter and the break up between defense and civilian at CMF?

It was about three a little more than $3m dollars Bill in the quarter and contributed about a penny to the bottom line, starting at March 1. I don't have this split, David I don't know if, move on slightly -- you know DoD was about $2.8m of that $3.1m or $3.2m so predominantly DoD.

So that, social security there that really was a big new win right after you acquired CMF.

Yes, absolutely.

Looking back at the second quarter call, you had a couple of goals one was internal growth of 12% to15% for the March quarter and the other was DSOs of 75 to 77. I know that DSOs minus the 4 from CMS was about 80, so still above that range and internal growth was 11% a little below that range, what were the factors that happened in the quarter to drive those two?

Bill, kind of to draw attention to it. We don't project growth quarter to quarter, what we have indicated in the past is, our goal is to achieve 12% to 15% organic growth over the course of the year. You will find as we exit this fourth quarter there will be well inside of that range, in any given quarters very very difficult to project with that level of granularity inside of a 3-point projection. So actually nothing at all has happened that concerns us in any way shape or form, I'll let Steve take on the DSO portion of that question.

Yes, the days Bill we are still anticipating by the end of the year to be in 75, 76 to 78 days and we will continue to get improvement on receivables, we have some milestone payments that are due and sometimes they can slip from month to month if you will, but we are still very optimistic that we are going to get our days exclusive of any of the acquired receivables if you will down into that target of mid 70's is where we would like to be, but I think in the fourth quarter we should be looking at the 76 to 78 days something like that.

I would like to say as point of emphasis also on the CMS transition that brings us into the new customer sets which is high value. Brings in some additional strength in financial management systems arena Bill, and also our net work services, so our short- term financial members always resisting but the strategic implication for leverage on that business base I think is what we are really after and I think we are going to see that very nicely over the next say three or four quarters.

`Thank you sir, moving on to Julie Santoriello Morgan Stanley.

Thanks, good morning. Seems as though the white house is going over some increases in Iraqs funding, I am wondering, want to get your thoughts on the possibility of another supplemental bill by year-end and perhaps what this could mean for our CAI?

Well let me just address that one and of course it's not our practice to speculate on the activities per se of the White House, but let me just say that I would believe if they'd come out with that kind of supplemental push there is a likelihood that we could be going after it. In terms of the business perspective per se for CACI the areas of business that we are in that arena, I believe or I won't say independent of those kinds of supplementals, but the need in requirement that we are facing I think is that we support, is one that's going to be continuing, we'll have a continuing level of support in activity post June 31. So we are focusing on more what I would call an operational aspect rather than perhaps say broad-based supplemental and may include for example the bringing in of an additional division level of military personal. So, I would say to answer your question, perhaps a little bit indirectly but to the point for CACI, that we do not anticipate any trailing back of our business base and including the potential perhaps for some expansion in the near term meaning in the next six to eight or nine months.

Thanks. And if I can just get a quick follow up on more a company-specific question. I wanted to just get a gauge of the hiring environment. I know that acquisitions are certainly helping your headcount numbers and the people that you have with the security clearances, but could you give us an update on the level of hiring in the Washington marketplace? It is getting more competitive and are you starting to see any signs of wage inflation?

Let me just start off by saying that we did a numbers count, I think we reported 7,400 in the script today or just short of 7,700 employees. So that number has moved up even since the end of the quarter. The AMS transaction at 1,670 round numbers would take CACI just to short of 9,400 employees by the first part of May. We find inside the corporation with the acquisition of, with AMS its some 940 different clearances that we will windup with some 60% of our corporate operating base with security clearance, 60% meaning around 5,500 employees. In terms of the recruiting issue, it's I think a challenge especially if you are talking about the high-security clearance, the TS/SCI special stuff, when the high-tech people always a challenge and provides them a bit of an effort for us to be able to achieve our goals. But maybe Ken could add a few little details on that that would amplify and give you some perspective.

I really can't add too much Jack. It clearly is, its always a challenge hiring quality people with the kinds of technical skills that we require and then when you overlay security clearances on top of that, it continues to be a very, very competitive market. The one point, you've brought up was that there are new people in this space, we haven't in the past and don't expect in to see anyone new in this space. But the competition amongst the quality companies around town and around the country for that set of people has been as tough as it has always been. But we've clearly more than held our own and we are cautiously optimistic that we are going to be able to continue that growth into the future.

Thank you. Moving on to Meir Ukeles of SG Cowen.

Good morning, and congratulations on a good quarter.

Good morning.

In terms of the guidance for the remainder of FY04 can you give us any detail on how much of that of the change in guidance for Q4 comes from CMS versus the pickup in organic growth?

Yes. CMS has a run rate of about $10m and should add $0.02 to $0.03 a share on the bottom line with rough order of magnitude.

Okay. So given, with some of the out performance this quarter and the contribution for CMS that pretty much accounts for the change in Q4 expectations, right?

That's correct.

In your comments you mentioned an acceleration in organic growth in the fourth quarter. Can you give us any sense for where that could be or kind of where you feel like you are likely to end up the year in that 12 to 15 range?

Yes. Ken, go ahead with that.

Yes this is Ken Johnson. Thank you very much for asking that question it allows me to get back upon my platform and explain our acquired organic growth. As we've been indicating over the course of the past year this wonderful growth that we've gotten as a result of this acquisition of PTG Incorporated, where the company has more than doubled in size since May 16, last year when we closed on that transaction. We dutifully reported all of that growth as acquired growth, well around May 15 of this coming quarter that acquired growth will turn into organic growth, interestingly enough nothing will change in our management team and our leadership team and the way we manage the enterprise, but we will have the benefit of reporting that as organic growth. So, the preponderance of that change merely occurs out of the continued success, and we expect that success for PTG to continue into, through, and beyond the fourth quarter.

Sure, but thanks for the question.

Next we'll hear from S. Caso of Wachovia Securities.

Thank you. Just wondering if you could talk a little bit about your people in sort of war-zone site. I understand, in the New York Times today they said that General Electric and Siemens were pulling their people out. I assume they're a little bit more insulated from the fighting than maybe some of you're people. So could you talk about you're commitment to having people in arms way. What the financial costs are to you and to the organs of CACI and also your abilities of recruiting people to go there?

Let me just start off by talking up to the point, the issue I think that you're addressing and rightfully so, is the fact that there is a - - we have a significant number of our people in these warmer zones, hotter, hot-spot areas. The kind of work we're doing in some cases is more on the edge than others, than other types of work. We have approximately 10% of our people overseas at this time and that of course is around the world. In the locale in the Iraq area where really the hot engagement combatant operations are going on. Of course that percentage is a lot less. We do have a policy in place of supporting our people and in terms of the kinds of business risk coverages, insurance policies and so on, and is quite a careful and the constant reminders about the security implications. They do go through a training process here in the in the country. But in terms of the cost and risk, most of those are expenses, a great percentage of - - a great proportion of them. If I'm not mistaken, I asked Steve here and meant to confirm that, are covered by our contractual price to the government for these kinds of work. In other words, the extra-extended expenses for their compensation, the risk profile, the insurance coverage and so forth is all priced into it now. Obviously we're in the process of reviewing some of these things, given the tragedies in Iraq that we all know with contractors being killed and mutilated, and burned on bridges and all the other god awful things that are going on in that area. But we have reviewed our procedures and processes, perhaps we're extracting people, and I think we're in pretty good shape on it.

The thing I want to stress with you is that the people, they're signing up, so to speak or volunteering or deciding this is what they want to do or doing so because they want to do it. I think that's an extremely important point that we've been able to recruit and eager people are eager to take on these kinds of assignments for the compensation and for the participation in those zones, and so you have really confident people, with lot of experience, with a lot of knowledge working in environment that they decided they want to work in and I think that all of that seems to fit pretty well in our business strategy and I don't see any extraordinary risks. Of course, we're always sensitive to the potential for someone being getting napped, or hurt or killed. But in the price and the cost aspect, Steve would you talk to the risk aspect because I think that's part of the gentleman's question.

I think very simply what Jacky stated is, it's covered under the contractual agreements that we have with our clients.

So the risk is mitigated in that regard, notwithstanding our sensitivity and to the people themselves, obviously, which is our current model issue.

Gentleman we'll be moving on to Tim Quillin of Stephens Inc.

Good morning.

Morning, Tim.

Morning.

Is there any possibility that a year or two down the road, you're PTG's business drops off dramatically because of rotation of troops out or Iraq?

Well, there's certainly, I guess anything is conceivably possible although the likelihood are different issues. If you were to see for example, some kind of radical change of administrative policy or change of administrations would deem it the, some kind of a different format would be or policy would be implemented in that area of the world, conceivably that would be the case. I think I'd like to point out to you though that what we've been doing and I will emphasize this, is we've been expanding our strategy in terms of the outsourcing and transformation and settled the CMS acquisition which moves us over into the area of financial systems, budget support and network services for civilian agencies. And also what we've been doing and plan to do with the acquisition of the Defense Intelligence Business Group of AMS moves us also into frontline outsourcing procurements for systems and the technologies that will support outsourcing and transformation. So what we've been endeavoring to do in a strategic sense is to broaden our business base and capabilities in areas we anticipate will receive significant business interest and priorities going forward that would mitigate some kind of contingent situation where the staffing levels around the world of PTG for example, the PTG acquisition would be a broader back. Although, let me just say that's not what I anticipate, quite frankly I see every likelihood of just the opposite. The world is a more dangerous place, it's going to be more dangerous place in my opinion. And from a strategic perspective to CACI and our business platform, we anticipate the likelihood of expanded requirements, but we also have a mitigation plan -- a risk mitigation plan in place if that eventuality doesn't unfold.

Let me ask that just a little bit different way. It's my understanding that PTG primarily supports V Corps and I think the first armored division is rotating out, and I think the first infantry division is rotating in, but presumably there will be point when V Corps is no longer involved in Iraq and would PTG's business be impacted just by a change in the type of troops over there, not necessarily the number?

Tim, really as a point of clarification at the time of the acquisition the preponderance support this small business company was providing was to V Corps and it was -- in Garrison over in Europe. As they deployed there was interest in having the PTG people continue with them. We support a whole host of tactical units in country and in other theaters of operation. So, we are not tied to the V Corps mission. We are providing support across tactical units and in a variety of theaters around the country.

I think that's an important point because I don't want to draw attention to PTG as a singular element of our business strategy. The kinds of work we are doing now is frankly in a number of areas, the Balkans this last year, and the business in Korea. We were seeing a wider distribution of our activity, a wider geographic distribution of our activity in support of these forward based intelligence allied units. So, again just to emphasize it's not a narrow singular contract relationship of one army unit. That is a big change perhaps from what we have initially started off for that company. The next question please?

Gentlemen, we'll be moving on to Joseph Vafi of Jeffries & Company.

Hi good morning, great results. A question for Ken, In your prepared comments you were talking about some of these large contracts that you have recently won or I guess this fiscal years contracts staffing up, and that was part of the reason we are seeing a double-digit organic growth here. If you could comment a little bit on where we are in staffing levels on those larger pieces of business and if we expect them still to be growing and are we reaching a steady state on them?

Yes, thanks Joe, Ken. Joe on one of the contracts, we actually thought that we had reached steady stay and then because of the up-tempo around, and not just in the Middle East, but in the number of different locations around the world, we're increasing staffing. On the second contract, we are sort of in the -- we are really in the spring of our years. We knew and I think we dutifully reported in support of Night Vision Laboratory that we expected growth to start occurring in the April, May time frame. It actually started occurring here this past quarter and we expect that, that will continue to grow, and quite possibly grow at a more attractive rate than we have seen here over the course of last quarter. So, I guess the bottom line is -- we think we've got some meaningful runway on several of those new contracts, and those are just a couple of examples. So, security administration most recently, we are off to a great start, but we're definitely not at the end of the runway for the source of security administration. So, we think that there are several vehicles that have upside potential force.

Okay and then just a quick follow-up, it sounds like PTG turning organic and June quarter is going to be one of the big bumps to -- kind of where you see the organic revenue growing versus March. What -- if you can kind of ballpark -- maybe looking at that contribution versus other organic contributions kind of the mix there in the bump up for June versus March?

I have got to tell you Joe somebody might have it here, we actually don't - we don't measure, we probably spend it inordinately at the time of the PTG. We don't measure organic growth by individual divisions or certainly acquired companies. The reason we brought it up and the reason we have reflected a bit on PTG is because it is very attractive growth that we have seen come from that organization, to kind of point out to the analytical community, the overemphasis that we believe on organic growth versus acquired growth. I actually don't know of that bump up how much of that is coming. I don't know what that math is and I don't think anybody here has done the math.

It just doesn't make sense for me, or the team. the management team, to manage our business by whether it is organic growth or not, and what we were looking for is business opportunities and synergistic relationships with our customers. That's how our growth and I would say across the board, all the overall major elements of CACI International, the UK group, the Systems Integration group, the logistics and engineering group, the knowledge management, the network services. We had good performance, strong performance in all aspects of our business base. Our bid volume is up. We see significant opportunities. We feel like where in the priority niches. We feel like we're in the strategic positions, where national priorities are focused, in fact, we know we are and we were very optimistic about having positioned the company very adroitly in my opinion with a lot of hard work over the last two or three years to position ourselves through these ongoing and enhancing our and expanding opportunities, given the world situation. I might just make another point. The world situation we have got out there, it is not simply Iraq. You've got to reflect on what is happening in Iran, what's happening in the Arab League. I been made three trips down in that area recently in the last four or five months. You have got significant issues out in Asia with China situation and we have got the nuclear power weaponry situation in Afghanistan and Pakistan, and we have got South Korea-North Korea complex. Taiwan, there is a whole range of international issues that are pushing the national priorities in this direction and I think, there is a strong trend that can be argued, we'll continue this emphasis of our business and how it fits in the national priorities and flow of issues around the world. Next question please.

Chris Penny of Friedman, Billings, Ramsey

Good morning. Actually it is Mollie Sandusky on for Chris.

Hi Molly.

I was wondering if we could may be go back and revisit the civilian agency budget a little more and I know that things are kind of, you know the budget levels are where they would like to be and I was just - can you comment on, if you are seeing things being pushed to the right and slipping and procurement activities slowing down in general and also specifically with the program that you are on?

No, as I had attempted to indicate earlier Molly, the opportunities appear as though, the requirements for the opportunities, the RFPs appear be coming out - we are always overly optimistic as federal contractors, but the RFPs appears though they are going to issued imminently and our customers are kind of signaled that with those federal civilian customers that we have and kind of signaled the notion of getting them out, getting them evaluated, and getting them awarded before September 30. So in those - that customer said that we have meaningful levels of activity, where we've focused our time and attention and allocated some resources. We don't see any huge slow down. Now, we are mindful of the fact that they have tight budgets across the federal civilians space, but those that we focus on, at least to date Molly has not been problematic.

Okay, great. Just one more question. I know, you guys have your hands full with , can you talk a little about plans for additional acquisitions, just kind of what you are seeing today?

Yes, this is Jack. I think that our basic business strategy - this will be our 28th acquisition in about 14 years. I am pleased to report that with AMS, it was obviously our largest one, the most significant if you will or will not proportionally close back when we acquired QuesTec back in the late 80's, proportionally speaking it was about the same order of magnitude and the integration issues were similar. I think that we are going to continue to look at the market spaces. There are lots of properties, we enjoy a reputation now with a lot of people coming to us, expressing their interest in affiliation alignment. We have been successful in integrating all of our acquisitions. Every single acquisition has been accretive, obviously not all to the same extent, but I think that we will begin to continue to look especially to what we call, smaller tuck in type or some people are calling tuck in, I am not too chided about that term, but special strategic relationships, we have, I think, been very careful about that, taken a lot of time and effort to designing our business strategy, to emphasize through acquisitions, synergistic acquisitions, the enhancement of CACIs business platforms going forward. We reinforced areas over and over that have become augment areas and significant performers for and we will continue to do the same, granted if there is going to be a little bit of time here for the need to successfully integrate the AMS organization, which we intend to bring over on to our infrastructure on day one and we have a lot of good planning going on. Our top-flight team here at CACI that's has got a lot of experience in terms of not only due diligence but acquisition integration. This is an asset deal, so we would be able to pull these people right over into our organization. And so, you can channel CACI after a bit of a pause, maybe a quarter so or maybe not even that one, depending on how successful and how rapidly we are able to bring in AMS looking at other business opportunities out there because that is a significant piece of our strategic model, it has worked very nicely for us. I hope that gave you a little perspective. There are a lot of properties and we are still in the market.

Gentlemen, next we will hear from Mark Jordan of AG Edwards.

Good morning. I would like to go a little bit further on that point. Could you give us an overview of where your debt position will be, assuming the close of AMS in May at fiscal year-end, and what type of debt paydown capability you believe you would have in fiscal '05?

Let me just start off and I will turn it obviously over to Steve. We've looked at very carefully our debt considerations, there's a lot of advice to the Senior Counsel from the banking industry and the investment banking community. Our board has looked at it very carefully. We are not a bet-your-company, risk-oriented organization, we tend to be very conservative. We feel like we've got a good plan, a good financial and fiscal management plan going forward, in terms of some of the details. And I will turn it over to Steve because he has been doing an excellent job of positioning our financial and capital structure.

Mark, as we indicated, we have a - - we will have the transaction and it will be signed at the time we do the deal here. With $550m credit facility, it's going to involve a $200m revolver and a $350m seven-year term loan. So, that term will be out there. We anticipate at day one, it's a $415m purchase price. So we will draw the whole $350m on the term obviously and we will probably take some where between $70m to $85m on the revolver, which will leave us about somewhere $100m to $120m left on revolver. We have about $25m and so in cash also. We anticipate that by the end of our fiscal year '05 June that we should be able to pay down the amount outstanding on the revolver and so we should have a $200m available for continued acquisitions. And again that assumes that we do no other acquisitions between now and the end of June '05. But as you heard Jack say, we are in the hunt for other acquisitions.

Okay. One additional question, if I may. You've given some general guidance as to the GAAP accretiveness of the AMS acquisition. Could you tell us what you - - for fiscal '05 what you might be looking for in terms of the purchase intangibles amortization charge that would be reflected in that GAAP earnings?

We gave out for the AMS acquisition was a $275m to $285m revenue range. The amortization of intangibles somewhere between $16m to $17m. And in the bottom line what we gave you was a $0.14 to $0.17 EPS kind of a number.

Next we will hear from John Ptak of William Blair.

Hello John.

Hi guys, a great quarter. If you look at the AMS transaction, could you give me your thoughts on what the internal growth rate of that business is? And then secondly, if you look out a couple of years, where do margins go and margins of the AMS acquisition?

Well, first I would like to start of by saying again we are quite delighted with the prospects of the AMS transaction. We intend to see a growth profile evolve in terms of the complemental nature of that business. In our institution it was a sort of a stand-alone piece if you will. Don't want to over emphasize that but within the AMS organization here it will be an organization that is committed to this market sector. So, the synergistic and the complementary business opportunities, I think will be major and significant. But let me turn that over to Steve, who has been working with some of the detailed numbers in that regard.

Yes, with respect to the growth rates, we try to be conservative in what we looked at for our modeling purposes and for what we gave our bankers, if you will, for the financing. We've assumed a very modest 5% growth on that business as we looked out over the time horizon. A part of that is driven by one of their large programs, the SPS program actually will be lower next year. So, obviously there is other things that would be driving that up. And it's lower because of the timing of the rollout of SPS Increment 3. So, with regard to the margins, they do have a much higher margin business than we do, and so as you roll that into our numbers, we would anticipate that you would see our EBITDA and EBIT numbers also inching up over the kind of 9% margins that we are looking at right now.

I know Ken has been looking at some of the future implications, maybe he could share a few thoughts, at least preliminary at this point, Ken on design points going forward for that piece of business integrated here?

Sure. John as you know, we're fairly conservative from a financial management and a projection standpoint. So, 5% obviously is not going to be satisfactory to anybody sitting around this table. So, you are looking at that kind of number, but we believe from a transformation standpoint and given their footprint in the intelligence space that there are some opportunities that the Defense and Intelligence Group plus CACI will be much more than this one plus one equals two thing that we tend to look at when we acquire anyone of these companies, and that was the attraction in this particular acquisition. We believe the combination of some of their functional and technical skill sets along with ours, their customer relationships along with ours really provide us a very attractive growth platform and once again, hopefully a couple of quarters down the road we will substitute AMS for PTG and explain all over again this notion of acquired organic growth and how wonderful it is, but we do -- we're cautiously optimistic that things are going to work very, very well for us.

Thanks Ken.

Gentlemen, next we are hearing from Cynthia Houlton of RBC Capital Market.

Hi, just a quick ODCs for the quarter?

Steve you will handle that.

The ODCs -- hold on one second here Cynthia. About --

Of course on business, with the system integration business we are going to continue to have a -- with our vendors and suppliers, and equipment providers, a healthy rate on that, Steve do you have the number available at this point?

Just give you the ODC cost -- the direct cost we are in the about $91m. Total direct cost we are about $179m and about $91m of that was ODC. Did that answer your question, Cynthia?

Yes.

Which include sub contractors, equipment, various sources and other costs.

Okay, and then the assumptions for the UK business, it seems like you saw some pretty good sequential improvement there, should we assume kind of similar growth quarter-over-quarter or should we assume kind of flat revenue or how should we -- it seems like that business continues to improve, just want to make sure making the right assumptions for next quarter?

Cynthia, we are optimistic -- guardedly optimistic as we've indicated, but we do have Greg Bradford the Chief Executive Officer of the UK operation on the line and if our connections and technology is working right here, I think Greg is going to respond and give us a little perspective on where he is headed at this point. Greg over to you, please.

Thank you Jack. Cynthia, we are looking for continued improved performance here in the UK. We're seeing an uplift in our government business, with the UK government spending quite a bit in IT, particularly within the Health Service over here. And we are winning more than our fair share I believe. So, I would expect certainly in quarter four they will see that kind of percentage growth in revenue terms and then both looking for improved growth going into next year. And we are also seeing an uplift in our commercial business, I think kind of the commercial IT services business. The decline has bottomed out and I think it's starting to creep upward, and so we saw some very good commercial product sales in quarter three and I'm anticipating that the same will happen in quarter four. So, fingers crossed, we are seeing a much improving performance and that should continue.

Thank you. Next question please.

Sandra Notardonato of Adams Harkness & Hill.

Thanks. I was wondering if you could provide some detail on the steps you'll be taking to integrate the AMS unit. I'm particularly interested in your assessment of the unit's forecasting capabilities and how that compares and meshes with yours?

Okay, I'll lead off, then I think we have some, our information will be provided by both Ken and Steve here. We have set up a major project office to conduct the activities and a full-time project leader to implement the many to many necessary activities of the transition and integration, transition being the period between the announcements and the closing period and the integration of course obviously after closing. The emphasis of course is on people. People and customers making sure all of the issues associated with the people that benefits, getting the work breakdown structure for the invoicing, for the ability to do time cards, make sure the quality of performance continues. Again, I mentioned earlier, in several significant customer calls that Ken and I have made, and other executives for CACI on the AMS customer side. I'm very pleased with that side of it. We have an internal Web site that we put up and made available for the employees of AMS to be able to take a look at some of the plans we have going forward. So, there are number of things we've done in that regard and we will be looking for a day one, bring them aboard as an asset purchase, bring them completely aboard CACI's infrastructure on day one of the transaction. So those are kind of overview points, but some of the other aspects of the synergies and so on Ken have obviously been focusing a lot with the senior leadership and I'll turn it over to him.

Yes. Sandra in terms of visibility into the forecasting they pay a lot of attention to recompete, so we are very comfortable with how they do that and what they do there. They've actually shared with us and we glean from a very detailed due diligence process. In terms of contract growth with internal customers they've got a really nice handle on that and they do a particularly good job, and they actually have far fewer on a per capita basis of contract relationships than we do. So, not only do they do a good job but the population is a bit smaller. In the area of new businesses, the one area that as you would expect given that we are acquiring the company and we kind of have to stay out of the current management's way in so far as getting involved in their day-to-day operations. We don't have today as good a handle as to the number of deals, the quality of deals, where they are in the process, but that's job number one post close. And given the attributes and the rigor that they've shown in recompetitions in internal contract growth, we are comfortable with, that they look at these opportunities in a very similar fashion to that which we look at ours. So we are comfortable with it.

Okay. Just a couple more questions. A follow up to an earlier question on hiring. Do you find yourself competing at all with the commercial IT services firms for technical people now that commercial is seeing a little bit of a tickup in their business and they are more aggressively hiring, and are you seeing any change in the cost associated with recruiting talent?

Let me just open up on a broad gauge. I'm not sure I see that strong a pickup in the commercial sector in terms of the areas that we deal or the interface or the implications, the interactive areas that we deal, but we have been very aggressive, our turnover rate is very manageable. We haven't seen any dramatic change in that. But I'd rather let Ken talk to it. he keeps a closer eye on it, and Ken would you respond to it?

Yes. Sandra, I think Jack hit the nail on the head with it. Here, this is a government town and as you would expect it. We haven't seen any incursion, any recovery, any meaningful recovery of the commercial IT space. So, it's coming, we know its coming at some point in time, but we heard there has been no evidence of the fact that there has been an increased competition. So, there is always competition, financial completion for hiring quality people and given that there is growth opportunities, we are constantly looking at what we have to pay people to get them in, and more importantly, what we have to pay people who have security clearances to get them to come aboard now. So far so good, knock wood, we're holding our own, but that's only some evidence of that occurring where it's increased competition amongst us in that small set of peer companies that we have around town. But commercial IT, its kind of, so far at least here it's sort of a no-show.

Gentlemen, next we will here from John Mahoney of Raymond James.

Hi guys, great quarter. Almost all my questions have been answered. I don't why I get in the queue into so late. I just follow-on to that question, I guess about the labor rates. You know, putting aside the issues and trying to find good qualified people and on the commercial side they are able to more flexibly adjust the rate they are getting paid. What kind of flexibility do you have in your contracts, do you have wage pressures? Can you go to the client or it seems that there might be a little more inflexible with the government.

John, we really don't have - - don't get me wrong, there is always significant pressure when you are dealing with the federal customers who you are dealing with, spending your money, and given to believe, spending your money, your tax dollars wisely. But there's just a fair amount of flexibility. There are very large longing list of rate schedules that are available. So, if somebody needs to make a little more money and they - - you are thinking of them as an example as a senior systems analyst, they very well may qualify as a senior scientist at $5 more an hour, and it is a question of the desires and the needs of the customers. Quite often they will say that he or she definitely qualifies in that category of labor, so it eliminates all the wage pressure. So, we have a fair amount of flexibility and it goes to vigilant or management that's looking at these kinds of issues on a day-to-day basis, and it is not problematic for us today.

Okay, thanks a lot.

You are welcome.

Gentlemen, we have a follow-up from Bill Loomis of Legg Mason.

Hi Bill.

Hi, trying to set a record here by getting the thing going on till 10'O clock today. One question, a lot of talk about PTG, but haven't heard much about C-CUBED. Can you talk about how that one is doing relative to your expectations in the last quarter? And maybe also ATS, I guess you're about to, next quarter you will come year-over-year on that one. How is that one worked out?

Sure. Good question, Bill. C-CUBED, its moving along as planned, its as a result of the acquisition, we are finding - - I think, we indicated to you that at the outset, one of the real attractions there was, they put us in a position with a customer out in the West Coast. There were several opportunities of some consequence coming down the road. We have actually prepared and submitted proposals in conjunction with the C-CUBED, lead in fact by the C-CUBED team. So, we have got an opportunity at their being evaluated as we speak. So, we are delighted with the contribution. It hasn't been the same kind of explosive growth, but it has actually delivered exactly what we thought it would deliver when we did the deal. As far as ATS is concerned, we're actually starting to see some growth of some consequence with that sensitive customer and customers that they deal with. So, we are pleased with that acquisition, it has been very profitable and continues to be very profitable. And so we are, again on a relative basis, we would love to have them all be like PTG, but we are delighted with what we acquired.

They have all done pretty good.

MTL, any comments?

MTL, more of the same, obviously. It's is a little too soon. We've established some relationships with some customers, it made some - - affected some dialogue interaction with a couple of their sensitive customers out there in the area of sensors that play quite nicely with what we do for a couple of our customers like, up at Fort Monmouth. They have won about a $0.5m in new business. So it's really too soon to tell, but we are cautiously optimistic that small little acquisition will be everything we thought it would be.

Ken, is it fair that we could make the claim these days of being one of the premier providers of special services in the area in terms of the niches we play and in the skill sets, in the representation with our clients?

Yes, sir. It continues to be a very, very fair observation and we do in fact get recognition from our customers today in .

Exceedingly favorable. Next question, please.

Gentlemen, Meir Ukeles of SG Cowen has the next question.

All right Meir, good morning.

now and obviously the deal hasn't closed, but you've had a little bit more time to take, of course look at the AMS, until Any kind of change in your thoughts in terms of the margin rate. Do you think that that can come in at after the close, you talked about, you know, 15% to 17% EBITDA margin on that acquisition. Is that still feel comfortable?

Well, let me just say, we have no indications of any issues on that regard, but there may be some things that Steve would like to emphasize. He continues to look at it from his perspective, quite carefully obviously.

I think that we are very comfortable with the 15 to 17 range that we put out there, and remain optimistic that it is everything that we think it can be and with that some indication of their recent performance here on a thin line with our

Terrific thanks.

Gentlemen, George Price of Legg Mason also has a question.

Good morning George.

Good morning. Thanks very much it's all part of Bill's master plan. Now very quick question Ken. I wanted to follow up on one comment that you made on the competition more competitors bidding your DoD opportunities, maybe you could give us a little bit more in terms of your thoughts what that might result in, if anything, is there are anyone new from the outside kind of coming in that respect or is it all players? What could be the impact of that in the competition?

Okay George. to kind of shed a little bit of light on the statement, we continue to see consolidation in our space. We continue to see the customer take opportunities from a multiplicity of providers ourselves and our competitors lump in together and conduct a single acquisition, and then making a word. Obviously what that tends to do is it tends to shrink but not the addressable market in terms of size, but it shrinks the number of swings of the back that one would take so, it makes the winning of those programs all that more important, and I believe it accelerates or steps up the competition for that. Because in some cases for the small piece parts of that we may not bid or one of our competitors might not bid. But when they take our program and lump it together with incumbencies from several other contractors, it makes it a much more competitive deal. Now, knock wood again, over the course of the last nine months we've been notably successful in fact as a contributor to this organic growth, and we've indicated this organic growth that we've indicated. This organic growth has been achieved from re-winning those combination, those consolidation times of jobs, and we've been very successful in our track record making that happen, but that will continue in the future, and all I intend to do is to signal to each of you that notion of consolidation is I think it is a continuing fact of life and one that we have to be, that we have to watch very, very carefully.

Hey George this is Dave Dragics, If you go back and look at Kim's comments, they were not, when he is talking about RFP's, and going after opportunities, he did not limit himself or limit us to just the DoD. That was the federal market as a whole.

Got you. That was helpful . Thank you.

I would like to make one point in our response here because I think it fits our overall business strategy, and that is the high-extremely high priority we place on recompete efforts. It's a related issue in your question, and is our intent virtually never ever to lose a current customer. 100% recompete success rate is our long-standing goal. We have a terrifically high percentage of recompete successes and we intend to hold that as a means of protecting our business base, and our growth opportunity, like retaining current customers, and attacking these consolidated efforts as Ken is talking about, it obviously as you could clearly see amplifies our opportunities continue to grow. Next question please.

Gentlemen, Steve of .

Good morning gentlemen. Forgive me if you have covered this on prior calls. But I just like to get some insight into how the AMS division is going to be managed, and whether the various personal there are going to be integrated into existing divisions of your company or whether they are going to stand alone, and who is going to be in charge, and just how that's all going to work?

Let me start off that putting on a kind of a general proposition. It's been our policy and indeed turned out I believe to be a successful way to go about this and that is not to have any preconceived notion of how we want to integrate or implement or bring about an acquired organization. So there is a variety of means, and mechanisms that we go about this, one of and not the least of which is a careful review and analysis of the business profile compared to our existing business platform. But for the particular details I will turn it over to Ken, but I want to set that sort of a stage, there is no pattern, formula, we do it every single instance is a custom, integration of custom examination, and tailor made to the circumstances, to amplify the business prospects of the combined entities. Ken, maybe you could - -

Yes Steve, as a result of our due diligence what we have determined so far and we're a couple of weeks away from this potential close early to mid-May, it is our intention to integrate it into my US operation in its totality to bring the defense and intelligence group across in its entirety and have it managed much the same way that it's being managed today. Now that is always subject to change. Jack has already indicated this. I'm delighted to reinforce, our due diligence has actually gone considerably better and faster and in a more detailed fashion than we could ever have hoped given the size of this opportunity. So, we'll look even between now and close and even post-close, whether or not it makes sense to take some part of my US operation that currently exists and tuck it in under the defense and intelligence group or take some part of the defense and intelligence group and move it to one of the existing business groups. That will stay in a state of fluidity as far as moving those pieces but it's our intent today right now as we speak to bring it over in its entirety although it will be fully integrated into my operation.

So what kinds of things are you doing with the really key project leaders over at AMS to give them comfort about the transitional phase and sort of what the ultimate framework, the whole thing is going to look like.

Great question. Yes, the same thing that we have dealt within the previous 26 or 27 acquisitions. One, obviously they are very interested in especially the senior folks, their top leadership. Their management is obviously very interested in where they fit in our organization and the prospective contribution that we believe that they personally can make and that they organizationally can make. They are clearly very interested in incentive compensation, they are very interested in salary structures, they remain quite interested in how we will deal with their people from an HR personnel standpoint and an accounting standpoint. They are quite interested in how we deal with their customers. Jack has already touched on that and in fact, in many cases we have done a very nice job introducing ourselves to their customers and in many cases introducing ourselves with them at the meeting. So, we've established a nice rapport with the senior leadership of the defense and intelligence group. But, as the quality leaders that they are, given how successful the defense and intelligence group has been inside AMS, they are interested in all the same kinds of things that the people from CMS and CQ, then PTG and ATS and I could go on and on, have been interested over the course of the last four or five or ten years of this company being in the acquisition business. But so far it's been a very pleasant and a very productive experience over the course of this due diligence.

Gentlemen, before we take our next question, I would like to remind today's telephone audience that if you would like to ask a question, it's star one on your touchtone telephone. Next we'll hear from Julie Santoriello of Morgan Stanley.

Hi Julie.

Hello, just a quick follow up. I may have missed this, but have you given the number for proposals under consideration in the quarter?

No, we have not Julie. We actually don't do that, we don't do that by year, leave alone the quarter, my goodness. We'd have a hard time. We write about the dozens Julie and write them and submit them in, as you know because of the amount of work that we do due to a variety of schedules. We are writing a large task orders and proposals, so we don't comment on that number.

Okay. than there's a dollar amount that you had given the last few quarters, think you are at last quarter is around $500m or so, will be in October. That ring a bell at all?

I think in Jack's prepared remarks he indicated that we won about $395m worth of business during this quarter, but I hope we haven't, I don't think we have indicated the amount or the number of proposals that we write.

We did that in the August and October phone calls, Julie. This is Dave Dragics. Because at that time there was a huge influx of RFP's that came out at the end of the fiscal year we want to show and illustrate to people that business was there and of course we had the bigger wins. But we really didn't do that with the intention of posting that metric every quarter. I think we want to show that lots of ups and downs we said it's lumpy. But in that particular instance, if you recall, just in the first two quarters reporting $1.1b in awards.

I think it's a fair representation saying though that we continue to have an ample and robust debt opportunity package and we managed to assure ourselves that the key opportunities get high priority attention so we can sustain our win rate at the level we need to continue the internal growth matrix.

Okay, and just on the pipeline, you said it was 6.6b, is that quite substantially from the end of the last fiscal year, but looks as though it may be flattening out, is there any sort of trend to read into or is it just sort of continuing --?

Sure Julie, you talk about double-digits, I think I indicated back when it was $3.1b here about nine months ago, that I couldn't be more delighted with $3.1b, as we get bigger and the addressable marketplace continues to grow. We could actually have a feeding frenzy on $6.6b worth of opportunities, Julie, and I wouldn't concern myself with the flattening out of that pipeline of opportunities, I'd look at a year - where I you, I'd look at it year-over-year and to make sure that as the company grows that the pipeline of opportunities doesn't seem to be diminishing in any meaningful way, but that's a lot of billions and that's a very attractive addressable marketplace for us and that will more than support this 12% to 15% organic growth that we profess as being the direction we are going in.

Gentlemen at this time, there are no further questions. Mr. London, I'll turn the conference back over to you for any additional or closing remarks.

All right, well, thank you very much. I especially say thank you for your help as well and certainly thanks to everyone who has dialed in this morning and especially for your questions and your interest, obviously it's most important to us. I want to thank you for your participation in the call today, clearly I appreciate that. We hope we've provided you, we think you have at least a good and clear picture of our third quarter results and certainly, hopefully our expectations were balanced to this fiscal year and beyond. I think we've talked a little bit about fiscal '05 and some of the ideas and implications we see moving into that realm. This quarter we will be participating in several investor conferences as we go forward here between now and the end of June and with investors around the company, and certainly look forward to seeing many of you out in those locations, and perhaps have the opportunity to bring you up to date at those times on the progress we are making here at CACI and obviously you are welcome to call in at anytime. And if you are in the Washington area, certainly we like to advice you to stop-by here. Please contact David, David Dragics Vice President for Investor Relations and he'll help you set up any call or visit you might have in mind. We certainly like to have folks stop-by and visit with us, we think we have an interesting business, interesting strategic plan and business taste to discuss with you, so we appreciate that as well. We will also be available in 10 to 15 to 20 minutes for some additional calls you like to do so. I would like to close of with several comments and maybe some, just some slight fixtures.

I think with the information we've been providing you today is I'd like to call to it on a conservative side, I think it's our style and our practice to be reasonably conservative and how we look at the future, obviously with the idea of being very successful in our business enterprise, we pay a lot of attention to our planning, our financial analysis, and our projections to be most responsible as we possibly can to the public. On a couple of tick details, we talked about 17% of our work being in fixed price arena. The crucial kinds of fixed price work is the completion style contracts and we have at this point less than 1% in that arena, it may change a little bit with the AMSN transaction. So, our risk profile is greatly been reduced in the fixed price aspects of our business over the last, let's say, since the beginning of this fiscal year and I'm delighted to relate that to you as a risk mitigation issue. In terms of our overseas operation, a lot of our people, I did not mention but meant to do so, that lot of those folks in those locations are ex-military, some of them are combat veterans, so we are not dealing with people that quite frankly don't understand the arena we are in, I didn't make that clear enough, let me amplify that and emphasize that here in my closing. We like to thank in closing that CACI has now moved into the lead performer in our market sector, we believe that we are certainly in the upper tier of the performing companies in the pier play federal government and information technology and technology solutions companies. We focus again in the national security arena, the defense sector, the intelligence community, the homeland security arena, areas that I have to do with related emphasis, security-related emphasis in the civil sector as well, the FAA department of state which I didn't mention for example, obviously the litigation activities of the department of justice. We have a business package, we have a strategy, we have a game plan, we think it's working very successfully. We think we are moving in the directions of national priority and we have been delighted to have you with us today and I thank you for calling in. There being no further business we will be disconnecting at this time and again thank you for calling in.

That does conclude today's conference. We do thank you for your participation.