CACI International Inc (CACI) 2006 Q4 法說會逐字稿

Good day, everyone, and welcome to the CACI International fourth quarter fiscal 2006 earnings conference call.

Today's call is being recorded. At this time all lines are in a listen-only mode. Later, we will announce the opportunity for questions and instructions will be given at that time. [OPERATOR INSTRUCTIONS]

A special reminder to our media guests who are listening in. Please remember that during the question-and-answer portion of this call, we are only taking questions from the analysts.

For opening remarks, I'd like to turn the conference over to CACI's Vice President of Investor Relations, Mr. David Dragics. Please go ahead, sir.

Thanks, Felicia, and good morning, ladies and gentlemen. I'm Dave Dragics, Vice President of Investor Relations of CACI International and we're very pleased that you're able to participate with us today.

We are providing presentation slides during our conference call. We'll also make every effort to keep all of you on the same page as we are.

Moving to the newt 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. And there will be statements in this call that do not address historical fact and as such constitute forward-looking statements under current law.

These statements reflect our views as of today and are subject to important factors that could cause our actual results to differ materially from what we say today and the primary factors that could cause our actual results to differ materially from those we anticipate are listed at the bottom of last evening's earnings release and are described in the Company's Securities and Exchange Commission filings. And our Safe Harbor statement is included on this exhibit and should be incorporated as part of any transcript of this call.

And moving to the next exhibit to open up our discussion this morning, here is Jack London, Chairman, President and CEO of CACI International. Jack?

Thank you, Dave. Good morning, ladies and gentlemen and thank you for joining us today.

I'd also like to extend a personal 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.

With me today to discuss our results and answers to your questions are Paul Cofoni, President of our U.S. Operations, Steve Waechter, our Chief Financial Officer, Bill Fairl, Chief Operating Officer of our U.S. Operations, and by phone from the United Kingdom Greg Bradford, Chief Executive Officer of CACI Limited, U.K.

We'll begin with a look of our fourth quarter and full fiscal year accomplishments. For the fourth quarter of fiscal year 2006 CACI reported revenue of $477.3 million, which is a growth of 11% over the fourth quarter of fiscal year 2005. Our net income was $22.1 million, or $0.71per diluted share.

For the full year CACI reported record revenue of $1.76 billion, a growth of 8% over fiscal year 2005. Our net income was $84.8 million, or $2.72 per diluted share, a growth of 6% over net income for fiscal year 2005.

The second half of fiscal year '06 CACI's success rate in defending our business base was very strong. We retained our incumbencies and won new and larger Tier 1 awards such as the Strategic Service Sourcing, or S3 award with the United States Army with a ceiling of $19.25 billion.

In addition, we announced close to $2 billion in contract awards during fiscal year 2006, an increase of 63% over the prior year.

Next exhibit, please. Today CACI is a leading strategic consolidator in our market space. In fiscal year '06 we completed three important domestic acquisitions that now strengthen our position with existing clients and brought us new clients in the national security arena.

We also completed two acquisitions for our U.K. operations. All of these acquisitions provide a solid foundation for our future growth in fiscal year '07 and beyond.

Looking forward, we have excellent indicators of long-term growth. Our pipeline of qualified opportunities over the next 24 months is nearly $13 billion. This includes $7 billion in Tier 1 deals worth more than $100 million each.

In addition, our services and offerings are sharply focused in sectors of the federal market space that we believe will receive priority funding and provide outstanding potential for long-term growth. These critical areas include intelligence community solutions, modernizing defense and security systems, and supporting the war fighter.

And here at CACI, solutions are aligned with the nation's highest priorities. Providing the information technology resources for the United States government that it needs to prevail in the war on terrorism, to secure our homeland, and to improve government services.

Furthermore, as the fight against terrorism and the islamofascists continues, technologies will keep evolving to collect, analyze, and disseminate vital intelligence to support the war fighter and the national security authorities. Information and intelligence is where the growth is likely to be for the simple reason that in the final analysis, accurate information from quality sources communicated through secure channels to the right people will trump all other weapons of war.

In this environment CACI is at the forefront. We're working side by side with the intelligence community and our war fighters to deliver innovative solutions that meet information, systems, and network needs when and where they are required worldwide. We are supporting our nation during dangerous times and we will continue to support our clients wherever and whenever needed.

So that's how things look at CACI as we begin another year. I'd be happy to your respond to your questions later in the call but now for the details of our financial and operational metrics, I'm pleased to turn over the microphone to Chief Financial Officer, Steve Waechter, who will be followed then by Paul Cofoni, our President of U.S. Operations. Steve, over to you.

Thank you, Jack, and good morning, everyone.

As a brief reminder, our results reflect the adoption of FAS 123R and the resulting non-cash charges. The fourth quarter and the full year results of fiscal year '05 have been adjusted to reflect the retrospective application of FAS 123R. Also, we have separately included stock option expense data in our earnings release for those of you who care to compute results without this expense.

Let's move to Exhibit Number 7. Our revenue in the fourth quarter was up 11% over the same period of the previous year and was attributable primarily to our acquisitions of ISS and AlphaInsight. Our federal business grew about 12% during the quarter and represented over 94% of our total revenue.

For all of fiscal year '06, our revenue increased 8% over fiscal year '05. As we indicated in our January conference call with regard to our growth in fiscal year '06, acquired revenue provided the majority of this growth, about 5% this year with organic growth at about 3%. Our federal business grew just over 8% for the full year.

Our operating income in the quarter was $40.7 million, up 7.2% over last year's $38 million. For the year operating income increased almost 6% to $150.3 million.

Our net income for the quarter was $22.1 million, or $0.71per diluted share compared with the prior year's net income of $22 million, or also flat with the $0.71per diluted share in '05. Our net income this quarter reflects higher interest in intangible amortization resulting from our recent acquisitions.

For all of fiscal year '06, net income was $84.8 million, or $2.72 per diluted share, up 6% compared with net income of $79.7 million, or $2.61 per diluted share for fiscal year '05.

Funding orders of $495 million were up 14% during the quarter over the prior year. Year-to-date our total funding orders were $1.76 billion.

Our United Kingdom revenue in the quarter was $17.2 million,10% more than the $15.7 million reported in the year earlier quarter. For the year, our U.K. operation reported revenue of $62.8 million, an increase of 13% over fiscal year '05 and pretax profit margin of 8.6%, up from 6.9% for all of FY '05.

The increase in revenue and the pretax margins are primarily attributable to the acquisitions form the fiscal year on their accretive margins.

Moving to Exhibit 8. Our operating margin was 8.5% compared to 8.8% in the fourth quarter of last year. Our operating margin for the year was 8.6% compared to 8.8% in the prior year.

The decrease in margin rate leads primarily to a higher mix of subcontractor costs, or ODCs, compared with CACI's direct professional services costs. These ODCs generally deliver lower gross margins.

Operating cash flow, excluding the non-cash charge for stock option expenses for all of FY '06 was $107.1 million compared with $126 million a year ago. Our cash position at June 30th was $24.7 million and our outstanding debt was approximately $368 million.

Including our recent acquisitions days sales outstanding at the end of the quarter were 74 compared with last year's 70. Excluding the impact of the acquisitions, days sales outstanding were 71.

Moving to the next Exhibit, Number 9. In setting the stage for our fiscal year '07 guidance, I'd like to provide some general underlying assumptions.

During July we divested of the assets supporting the port engineered services portion of the service ship maintenance improvement program contract. The port engineered services we provided aboard Navy ships could have resulted in the potential for a conflict with services that CACI performs under one or more of its other Navy contracts. CACI reported approximately $20 million in revenue from this work in fiscal year '06.

Assuming that the government will pass new legislation to extend tax credits for R&D efforts, our tax rate for next year should range between 36.5 and 37.5% for the year.

I should point out that our guidance does not include any assumptions for additional acquisitions we may make during the course of the year. And as a reminder, our general practice is to issue most of our stock options at the beginning of each fiscal year and for certain brands, the full value of the underlying grant is expensed immediately on the grant date rather than amortized over a period of time, which is the typical treatment.

As a result, the effect of our stock option expense for the first quarter of any fiscal year will tend to be higher than the effect for the entire fiscal year.

We believe that the forthcoming fiscal year will bring continued budget pressures, challenging agencies to do more with less. Short-term aberrations in funding patterns, the government budget process, covered with the overall political environment and continued issues with the hiring of cleared high-tech personnel and the retention of employees will continue.

We do feel strongly about a return to higher organic growth next year. We are entering 2007 with a backlog of $4.6 billion, up 35% over last year. Our funded backlog of $983 million is up 11% and our fundings of $495 million for the fourth quarter are up 14% over last year.

Our first quarter presents some tough year-over-year comparables due to the sale of the SSMIP contract, curtailment of tobacco litigation support work and loss of some recompete work, we believe organic growth for the back half of the year will climb back to double-digit growth. This growth will be led by our intel business, which grew about 17% in fiscal year '07.

Let's go to the next exhibit, our guidance. For fiscal year 2007 revenue will range between $2 billion and $2.1 billion, up 19.6 at the upper end of the range. EPS will range between $2.91 per diluted share and $3.15 per diluted share, up 15.7% at the upper end of the range.

For the first quarter revenue will range between $454 million and $473 million, up 11.7% at the upper end of the range. When compared with the fourth quarter, our first quarter revenue projection assumes fewer billable hours reflecting the impact of employee summer vacations and lost revenue from the sale of the SSMIP assets.

EPS will range between $0.57 per diluted share and $0.61 per diluted share, down 1% at the upper end of the range. The EPS year-over-year decrease primarily reflects the sale of the surface ship maintenance improvement contract, loss of recompete work we experienced at the end of Q1 fiscal year 2006, and lower support services work related to tobacco litigation.

That completes my financial review and now here's Paul Cofoni who will cover the details of our domestic operations. Paul?

Thanks, Steve, and good morning, everyone.

I'll start by discussing some of the key operating metrics. I'm delighted to report that CACI's U.S.-based operations delivered record contract awards in FY '06.

Our $2 billion in contract awards surpassed our fiscal year '05 awards by 63%. Contract awards in the fourth quarter totaled $329 million. Additionally, we received one of four large contractor awards on the $19.25 billion ceiling S3 contract.

On the S3 contract, the Army awarded the very first task orders to CACI. To date we've received five S3 task orders that have a total value of more than $82 million. And that's just in the first four-and-a-half months of a 10-year contract.

Our revenue with the intelligence community grew by 17% for all of FY '06. This intel revenue was 28% of our base totaling $483 million.

Revenue from our defense customers was up 10% for the quarter and 9% for the year. Our defense work compromises of 73% of our base revenue.

Our federal civilian revenue grew about 16% for the quarter and about 7% for all of FY '06 and it represents 21% of our total for the quarter and for the full year.

Next exhibit please. Now let me update you on some of our business development metrics.

Overall win rate on new business over the year was excellent. In Q4 the majority of our awards were recompetes and we won them all.

Throughout the year, we stepped up to the Tier 1 level on multiple large bids. In addition to the S3 contract, the largest in our history, we also won our recompete to support the Army's $450 million ETOSS program.

These awards support the Army's intelligence needs including C4ISR, the enabling technology of net centric warfare. These awards provide a significant long-term opportunity for CACI.

Other key awards I'd like to mention are a recompete, multiple award contract awarded in June with a ceiling value of $2.4 billion to help the Office of Personnel Management provide faster background investigations. Our work for OPM is increasing as we help reduce the large backlog of security clearance applications.

A new multi-award contract also in June with a ceiling value of $200 million. This award is our first prime contract with the National Geospatial Intelligence Agency to help modernize its IT infrastructure and provide support services.

A $156 million new award in March to support the U.S. Army Intelligence Center and School at Fort Wachuka, Arizona. A new customer for CACI, this contract is a result of our acquisition of Information System Support. It complements our S3 and ETOSS awards to give CACI a prominent and multi-faceted role with the Army supporting everything from training through deployment.

A $188 million new award in September to support Navy mine countermeasures programs that protect shorelines and marine landings. This win consolidates more than a dozen existing contracts placing these efforts and more than 20 subcontractors under CACI's leadership.

Let's move to Exhibit 13. Our proposal activity continued at a vigorous pace, increasing in both volume and size the bids we are targeting.

At the end of FY '06 fourth quarter we had $2.9 billion in submitted proposals under evaluation, both new and recompete. We expect that at least 75% of these will be awarded by the end of the calendar year.

During our first and second quarters of FY '07, we expect that we will submit more than $3 billion in additional proposals, again, both new and recompete, and we anticipate that 80% of those will be $100 million or more.

Finally, our fourth quarter contract funding orders were up, a good indicator of future growth. We booked $495 million in business in fourth quarter of FY '06, a 14.4% increase over the same period in FY '05.

We accelerated our strategic consolidation plan in FY '06 adding National Security Research, Inc., Information Systems Support, and AlphaInsight Corporation. These transactions are growing our presence with our key clients like the Department of State and the Defense Intelligence Agency and bringing important new clients like the Army Intelligence Center.

These acquisitions also added new capabilities and brought 1400 talented employees with security clearances to our corporation. As Jack said earlier, these acquisitions provide a solid foundation for our growth in FY '07.

Let's move to the next exhibit. As we look at our FY '07 objectives of 2 to $2.1 billion of revenue in the context of our addressable market space of $150 billion, it's clear we have plenty of room to grow.

We also anticipate that all national security related appropriations for fiscal year '07 will be passed by the end of September. They represent priority funding for the war fighter and [inaudible], both core business areas for CACI.

We also know that intelligence gathering and sharing is an important tool in America's antiterrorism arsenal. In this environment, CACI's intelligence offerings remain the solution of choice for many intel clients.

In addition, we are poised to increase our business with the Department of Homeland Security. This is through our recent prime contract award to support DHS' multi-billion dollar Eagle program to provide IT services and support.

We are encouraged by the recent actions of Congress to augment defense funding. We believe that we are strategically positioned for growth in the crucial areas of the federal market space.

The opportunities in our pipeline are plentiful, and our solutions are definitively aligned with our customers priorities for national defense, intelligence, homeland security and the transformation of government.

Jack, that concludes my remarks.

Thanks, Paul and thanks, Steve for the updates.

Ladies and gentlemen, let's move to the last Exhibit, Number 16. As we look forward to fiscal 2007, CACI will continue to implement its successful strategy to win new business, win all of our recompetes, and acquire companies in our market space that are accretive to our bottom line and position us for future growth.

Our efforts during fiscal year 2006 established an excellent foundation for fiscal 2007. We have a large, solid backlog of business and a tremendous pipeline of opportunities in our market space as we began fiscal year 2007. We're optimistic about our long-term growth and success.

CACI is a valuable asset to our federal clients in meeting their highest priorities and government transformation and information technology services that ensure readiness for the war fighter and provide solutions for national security, the war in Iraq and Afghanistan. The various conflicts in the Middle East and the continuing concerns with Iran and North Korea will no doubt drive the need for increased federal spending in these areas in which we provide high value solutions.

Additionally, increasing numbers of government employees in the federal IT workforce are eligible to retire over the next five years, which we believe will drive a continuing need to outsource in those market positions we are located.

As we begin fiscal year 2007, I also want to thank and note that this marks the beginning of CACI's 45th year in business. Throughout our history, White House administrations has changed nine times, often bringing in new leadership with different political parties with differing agendas and priorities.

I have seen seven of them in my career here at CACI and regardless of the political power and place at the time, CACI has remained steadfast in supporting our nation, our government, throughout the cold war and the many conflicts that came along the way such as Vietnam, and now into the long war on global terrorism. We believe this vitality is a sign of the strength of our Company and of our people and reflects our sustained customer loyalty, understanding, and successful business strategies.

I'm also proud of all of our CACI employees for providing the client relationships that enable our success and the success of their programs and those of our customers. And I thank our investors for their continued support, as well. We look forward to continuing our growth and success in fiscal 2000 and beyond.

At this point, we're ready to open our discussion up to your questions. So, Felicia, I'll turn the microphone back over to you to talk about fiscal year 2007 and how we closed up 2006.

Thank you, sir. [OPERATOR INSTRUCTIONS] We'll go to Tom Meagher at Friedman, Billings, Ramsey.

Yeah, good morning. Congratulations on the quarter.

Could you talk a little bit about, you mentioned the fact that you expect the national security bills to be signed by the President by September 30th. Could you talk a little bit about what you're seeing on the civilian agency side? Are we looking at a CR-type of situation there where we may see an extension of the discussions if you will out to the, perhaps the beginning of next year?

Well, of course, we're always interested in the progress of the Congress and signing up any these areas. David watches that very closely for the organization. I'm going to ask him to give us some insight. David?

Thanks, Jack. Tom, this is Dave Dragics.

We believe, really believe that the national security bills are going to be passed by Congress. The Republican leadership in both the House and the Senate are on record of saying that they want to get them done by the end of September before they go on recess in October. So that will put the rest of the government, so to speak, federal civilian agencies on a continued resolution.

And based on the votes we've seen so far in the House and in what the Senate have talked about before they went on recess, there are strong votes for all of the bills that they're considering. So, you know, I agree, I think the federal civilian agencies will be on a CR. Congress will come back on the 13th of November for a lame duck session and finish up after that.

So we're pretty confident of that and even, as I said, the votes are such that if there's any talk of a veto from the White House, they've got enough to override that.

Okay. Thanks very much, I appreciate it.

We'll go next to Cai Von Rumohr of Cowen and Company.

Thank you.

You mentioned you have $82 million in task orders under S3. Could you comment on your task order activity on ETOSS, Eagle and OPM and give some color on kind of the trend and task orders so far in this quarter?

It's important, obviously, as we light off in these areas. And I'll ask Paul to pitch in here on this one and give a little feedback if you would please.

Sure. On S3, first of all, on S3, we have $82 million in total contract value that's been awarded on five task orders in the last four-and-a-half months and we got the very first task order on that vehicle.

For our business with turning to ETOSS for a second, we had $154 million in task orders, 24 task orders with a value of $154 million and of that $154 million, $45 million already funded. $45 million already funded on that.

Does that help guide? Does that answer your question?

Yes, and Eagle and OPM?

Eagle, of course, we just won the, what's called the Functional Area Five, which has to do with general support services for program management, IT services and support and there have not been any task orders awarded at this time. But we anticipate a pick up in the activity in '07 on Eagle. And what was the other one? Did you have another one?

OPM.

OPM, we just won our recompete. We're delighted with our recompete win there. And what happened in that recompete process is that one of the incumbents dropped out of there and therefore there are new open positions to be picked up and therefore will allow us to increase our revenue.

We've added 26 people in July alone to the OPM contract doing background investigations. And this is one of those beautiful opportunities where, unfortunately, the backlog of security investigations is so high that we can hire as many people as we can hire, they're qualified, we can put to work.

So this is going to be a nice little growth area for us in '07 and beyond.

Okay.

The follow up is that, as we look at your guidance, you really assume a very slow start to the year and a significant ramp in the second half. Could you give us a little color on why we kind of have this hyper back-end loaded pattern to the year?

I think you've seen some funding patterns as we've gone along. We're anticipating, as David indicated, some movement in the defense budget and we feel like that there will be some clearing of the air in the first part of this year. But I'd like to ask Steve if he would visit on that [inaudible].

I'd be happy to, Jack, and I'll ask Paul here, to also add to this.

But first half of the year, Cai, some tough year-over-year comparables. As you know, we had a couple of loss recompetes in last year that's affecting our performance this year on a comparable basis.

We had the slowdown in our Department of Justice work where the tobacco litigation ended, and then, of course, we sold this, our SSMIP OCI contract. So that's about $25 million plus of revenue that's out of that base of $423 million from the prior year.

We're very confident here in now in terms of returning to what we believe is double-digit organic growth in the second half and that's going to be driven by a number of different things. As we said, our contract awards are up $2 billion this year over last year. More recently here, $495 million in funded orders in the fourth quarter which is up 14% year-over-year.

And as Paul kind of talked to, some of the key drivers that are going to grow that organic growth second half of the year, if you will, is going to be the S3, ETOSS, the OPM, Department of Homeland Security.

And our intel business just in general is up 17% and that we believe is going to drive about 75%, the intel alone. 75% of the back half growth is going to be related to the intel.

Excellent, Steve.

Cai, what I would add to that is if you look at the makeup of that back half increase that might concern people when you first look at it, when you get down and analyze that, what you find in the back half, 55% of the growth in the back half is firm work. That means we have the contract and we're actually getting started on getting prepared to start the work.

And so the rest of it is highly likely. So 55% is firm and 45% is highly likely. Means we have a high, high probability of winning.

Secondly, 75% of that back half growth is intel related. And as Steve said, intel is our fastest growing area in the business and the balance is 25% is for national defense.

And finally, I'd say that nearly two-thirds of that back half growth is work that we will not have to -- it won't be a competition for it, it's sort of follow on, add on work, continuing work from our existing contract vehicles. So that gives us good confidence and that doesn't mean it's risk-free, but it gives us excellent confidence in our ability to achieve that ramp.

And we'll go next to Edward Caso of Wachovia.

All right. Thank you very much.

Can you just repeat for us what your long-term growth expectations are? I think you used to quote 10 to 15% organic and 20 to 25% total.

Be delighted to.

Over a long period of time if you reflect on CACI's goals and performance objectives, I'll just pluck all five years, I think the last five years has exceeded 20% plus the low 20s on a compound annual, we were a little slower this last year. We believe that the market space that we're in, a couple hundred billion dollars worth of government services and technology support that talking about a $2 billion, $3 billion company in the next tow or three years is not unrealistic at all, it's, in fact, reasonable.

Our goal of about 12 to 15% organic and 5 to 8, which combined to a 20% annual growth rate is still what we're looking for. We intend to see some improvement this year after a little bit of a slow last year. And frankly, I think that the telling factor is that we are right smack in the heart of the high priority area, the challenging areas of the United States and the American people going forward in the worldwide security environment.

We believe there are excellent opportunities and we have a, we're a strategic consolidator, we've been very effective at doing that. We have a strong balance sheet and the representation in the markets and we feel like there's every likelihood of being able to sustain that as we go forward.

Thanks. Last question.

Steve, what's the implied organic growth rate in the guidance for this year?

For the full year, it's about, somewhere between 5 to 7%. As I indicated in my comments there, the first half is low, in fact, we're in a minus position in the first quarter, we see that going back to double- digit organic growth in the third and fourth, beginning in the third and fourth quarters and then that should get us to an average of about 5 to 7 for the year.

And we'll go next to Sandra Notardonato of Robert W. Baird.

Thank you. Good morning.

Somewhat of a follow-up question to Ed's, but more on the acquisition side. Acquisitions were a main growth driver in FY '06 but if we look at the current M&A environment in terms of private company valuation expectations not adjusting with the equities market as well as large companies that are still private that are able to more aggressively bid on companies that are selling out there currently, how do you see your ability to augment the organic growth in the near-term? Essentially 2007?

Well, certainly we have a large number of contracts as we've tried to indicate that have been won this last year.

No, no, no. I'm sorry, I mean on the acquisition side. How are you going to augment that organic growth with acquisitions based on the current environment?

Organic growth is not -- I don't think that acquiring companies does not augment organic growth except in the out years. If I'm understanding your question [inaudible].

You're saying that organic growth this year is going to be 5 to 7%, right?

Yeah.

And what I'm asking is on top of that in 2007, what do you think the capability is in terms of additional growth that will come from acquisitions? Particularly given what we're seeing in terms of the small private companies not adjusting their valuation expectation with the equities market and the large companies that are still private that can be more aggressive than you can as a public company to buy companies that are currently for sale.

Maybe Steve will share some perspective on that.

Yeah, Sandra, we are still very actively engaged in the acquisition market. We're having number of discussions with a lot of different companies, a lot of these private companies.

I think your comments on in terms of there have been some private equity firms that have come in and paid some lofty premiums for some of these companies. We will not do a diluted deal and so we are, you know, still looking.

There are -- there's 83,000 contractors to the federal government. So I mean there's a lot of opportunity out there. So I don't see it as a risk area in terms of our ability to get something done. There are plenty of targets there.

The question is ultimately going to be at what premium. I think we can do it. We've demonstrated last year we can find them and we can close them and I think we'll be successful.

We talk about overall growth in that case, not just organic.

Right.

I'm not sure how exactly we split that out in accordance with her questions, but the idea is we're still going to be shooting for combination of growth that we represented here only our organic opportunities. There's no acquisitions in our projections at this point.

That's correct.

What's next, please?

We'll go to Brian Gesuale of Raymond James.

Good morning, guys.

Nice to see the investments in bid and proposal really pay off in award numbers and backlog this quarter. I wanted to dig in little bit here on your pipeline.

Paul, I think you mentioned that you had $2.9 billion of contracts pending adjudication and that you thought 75% would be adjudicated, I think you said September. I wanted to just verify that.

And also, if you could give some color if you've seen that happen in the first two months of this quarter and maybe give some color, additional color on that sole source arrangement that you kind of alluded to in one of the prior questions.

Okay. That's three questions.

The answer to the first is that the expectation of 75% being awarded would be by the end of December, by the end of the calendar year.

And the second, remind me the second question again. The second question was what? What's the second question, Brian?

And sir, could you reprompt by pressing star one? And Mr. Gesuale, your line is open, sir.

Okay. I guess they cut me off pretty quick last time.

The second part of my first question was if you've seen any award activity pick up in the two months of this quarter? And then also, if you could allude to some of the sole source work that might be embedded in that $2 billion number? $2.9 billion.

Yeah, the pace of awards in the current quarter is about what we expected and it's on pace for our fiscal year plan, I would say.

And in terms of the non-competitive work that I alluded to in the back half of the year, there's a lot of contracts we have where our customers are getting increased funding and they'll be giving us additional contract funding orders without going through a competition. Does that answer your question?

Yeah, it sure does. Thank you. And then my follow-up question really just a housekeeping item.

Steve, do you have the 123 expense embedded into the Q1 numbers?

The forecast?

Yes.

It's in there. It is about, it's less than last year. I want to say it's about, hold on one second, let me just grab my book here. Bear with me. Got to get to a page here, Brian.

It's about $0.05 a share, excuse me, $5 million is what we have in there as an operating expense.

Okay. Terrific. Thanks a lot, guys.

I need to make an input here. CACI's business in terms of sole source and new initiative work is a very small percentage. Most of the work that we're really relating to here is what we would call continuing work or additional tasking on existing contracts with follow-on continuity-based business. So I want to clarify that a little bit.

The use of the word "sole source" has a very special meaning in the contracting arena. I hope that's helpful.

And we will go next to Mark Jordan of A.G. Edwards.

Good morning, gentlemen.

Good morning.

Steven, could you talk about your cash flow outlook, cash flow from operations, Cap Ex, and therefore free cash flow profile that you should see in the coming year?

Yes, be happy to do that.

From a Cap Ex standpoint, as you know, we just are not a big user of a lot of capital. We did slightly under $10 million this past year and I think we'll probably be in that same, or 10 to $12 million would be a comparable kind of a range for us.

As far as the operating cash flow, I would remind everybody under FAS 123, some of the stock option expense items that used to be reported up on the operating expense line are now down in the financing activity. But excluding that, I think on the operating cash flow side we should be between a 120 to $130 million of operating cash flow.

Okay.

And secondly, could you give a little more detail on the outlook on your litigation support in the work you do for the Department of Justice? What that looks like this year versus '06?

Well, we've had a long relationship of the Department of Justice and that does float up and down depending on the intensity of their litigation activities. But Paul would you like to add?

Yes. As you know, and we mentioned throughout the year our DOJ work drifted down in FY '06 about $20 million annual basis lower than FY '05. And looking into FY '07 it has now -- and the reason for that was the primarily the wind up of the tobacco litigation. And looking into FY '07, it's now stabilized and we expect it to be about the same as it was in FY '06 into FY '07.

Thank you. And one more if I may.

What's the full year 123R charge expected for '07?

For '07? I just had that page here, Mark, and now I closed my book so hold on. We are looking at about, between 14 and $15 million. That's a pretax basis.

And we will go next to Bill Loomis of Stifel Nicolaus.

Hi, thank you.

Can you talk about, on the 329, the 329 in contract wins, Paul, you mentioned most of them were recompetes. What was that figure and were the S3 tasks that you mentioned that you've won so far, as you win those tasks, are you including them in contract figure like the 329 for example?

Recompetes were 66% of the awards that we had in the fourth quarter and we -- S3 task orders as we get them, we are announcing them and the values. Because when we won the S3 IDIQ, we announced no value with it at that time so we will announce as we go. Not every single task order, but the larger ones and then maybe a roll-up of the smaller ones at some point.

So to meet the strong second half, you know, potentially up to 17, 20% organic growth in the back half, we would have to see contract awards, including tasks you've won under the IDIQs that you've mentioned being significantly higher than the fourth quarter. Is that accurate? Like more than twice that level?

No, no. I think a good part of that back half growth, a good part of that back half growth are the awards we received already on S3, just the ramp-up of those awards. We don't need to see a quickening of pace on awards on S3 to achieve our back half.

So the 55% that you said of that back half that's firm work. You're saying the other 45% is also won?

I'm saying there'll be some additional S3 task orders we expect that will contribute, but the bulk of what's in that back half, we've already got the awards on.

We've already got the contract in hand that will support that 55% and there's tasking afoot being worked and planned and anticipated. Budget numbers are being rolled into place that will support the balance.

It's a work in progress and we're telling you that 55% of the way is pretty well covered and there's a lot of work in process to build the rest of it out. I hope that --

And I would say no more than we would see in any year at this point. No more --

About the same.

No more risk in that back half than we would see in any given year, I would say.

And we'll go next to Alex Hamilton of The Benchmark Company.

Hi, good morning.

First question I have for you is can you please quantify the amount of R&D tax credits that are included in your fiscal '07 guidance?

Is that a -- I'm sorry. Embedded in that tax rate there is some R&D tax credit and I want to say it's in the range of about $1.2 million to $1.3 million in that kind of range.

Okay. Also, and if this was answered, I apologize for repeating the question.

Your top line guidance seems pretty solid. I know it's been addressed that there's a pretty large range on the EPS guidance. Can we talk about what those differences are potentially between the low and high end? I'm assuming that's some timing of funding issues, but I guess a lot that, driving that would be a business contract mix issue, as well.

I think that's right, Alex. The mix of what comes in throughout the year would drive that range to the high or low end.

We have a significant variability because CACI is configured now to do a lot of integration support work, which has a drag through of -- or a carry through of some ODC work from time to time and it's not totally clear at any one given point looking forward what that will be.

So I think in being responsible in our best estimate, we need to have a pretty good bandwidth on that because of the issue I just addressed.

And we'll go next to Jason Kupfenberg of UBS.

Hi, guys. Good morning.

Just wanted to ask a question on the operating margins. The guidance you've laid out for fiscal '07 earnings, obviously, not growing as fast as revenues even after we factor in a divestiture here. I think last quarter, if I recall correctly, you pointed to a target of 8.5 to 9% operating margins for the full year fiscal '07 but this latest guidance would seem to imply maybe flat to down year-over-year operating margins. Can you clarify that please?

Let me just start off by saying that we have a, our guidance out and projection and I'm going to ask Steve to talk to it, but it will be our intent to keep working hard to improve that throughout the years. But this is our opening development of the information we have to date. Steve would you follow up on that for me?

You're correct in the range of guidance that we've given you that operating margins in the 8.3 to 8.5%. As Jack indicated, however, we are, number of initiatives to get that up first and foremost is, I know Bill and Paul are working very hard to get more direct labor content into our mix of revenue and, as you know, that drives higher margins for the Company.

Additionally, as we look to target acquisitions, we will look for those higher margin businesses like AlphaInsight which is a double-digit margin business. That mix will certainly drive the margins closer to that goal of the 9%.

And finally, we've established here what we call our cost hawk program, and we are looking very hard at driving down our indirect costs and we're literally recompeting a lot of our infrastructure kinds of costs, facilities, et cetera. So I think those initiatives should help us to drive toward that goal of 9%.

Okay.

And what do you guys think at the end of the day will be really the catalyst or the set of catalysts that will drive a healthier funding environment for the industry? Everybody's talking about the fact that it's slow right now, it's a little choppy, appropriations are on the horizon. But what are you guys really looking for to kind of say, all right, here's what we need to see to really get the funds flowing to the contract vehicles?

Always a bit of a crystal -- a foggy crystal ball in that regard. I'd say that some settling down on the Army budget planning process. You've seen probably in the press about that.

Clearly, the continuing, avoiding the continuing resolution that David spoke to and quite frankly, I think the settling down the issues, perhaps in the political arena that we're, easy to see what's happening in the public right now and the Congressional area. I think as that begins to settle down, we should have better visibility on that, probably by winter.

And we'll go next to Laura Lederman of William Blair.

Yes, thank you so much.

Can you talk a little bit about the pricing environment you're seeing out there in terms of the contracts? There's been a lot of discussion on they're being aggressive, companies out there willing to low bid to try to get business.

And also, can you talk about the ability to hire and what your churn looked like in the quarter in terms of your turnover?

Well, obviously, two very important issues in the business platform that CACI operates. That being the concerns on the pricing, price competition, pressures in this environment. Also, the recruiting retention of skilled folks in our organization.

Bill oversees that in a direct sense I'm going to ask him to amplify a bit in how we're approaching these issues and the price competition and the recruiting retention arena. Bill?

Thanks, Jack. Laura, it's Bill Fairl.

Yes, first off from the pricing environment standpoint, you know, it's clear that the environment's tight out there and so we, like others, are very sensitive to cost control. Steve mentioned the cost hawk program that we're implementing here. We look at that as one key element in our cost control, but quite frankly, that's always been part of CACI's personality around here to be very efficient in its use of customer funds.

Moving to the recruiting and retention aspects, as you know, we brought in a new head of our human resources organization in our third quarter. And with that gentleman in place and he getting his team organized, we took some steps with our recruiting team to organize those in a very efficient manner and we've seen a fairly significant up-kick in our hiring activity in the last four months of fiscal '06 so we're encouraged by that, by some new efficiencies that we've entered into there and our number of openings have gone up too. So it's good news all around there.

On the retention side of the house, we, in fiscal '06, we recognized that as a key element in our execution plan and took a number of steps to bring about improvements in our retention statistics and we're pleased as we look back over fiscal '06 to see that we generated real improvement in that. So we're continuing that program into fiscal '07 to look for even further improvement.

I'd say we're right with, in the middle where industry is there and I think maybe even a little bit better and getting better, which is the best news of all.

Thank you.

We'll go next to Colin Gillis of Canaccord.

Hi, good morning, everyone.

Morning, Colin.

On [inaudible] ETOSS, are you bidding on every task order that comes up or could you give us a sense as to what percent are being passed over?

Hey, Colin, this is Bill Fairl.

Yes, on ETOSS we generally bid on all of the task orders. As you know, ETOSS is the follow-on to our TFOS contract, and then we had a contract before that.

It's typically been a -- there's been two contract awards there and so we typically compete with one other party there. And over the years we win the lions share of the task orders there, depending on whether you count by number of task orders or revenue, it's a number up in the 75, 80% is what our win rate is. So with those kinds of statistics, we bid just about everything that comes out of ETOSS.

On S3, Paul and Jack mentioned earlier that we're just really pleased with the win streak we've had so far. Winning the very first one awarded to anybody, went to CACI. Five to date over $82 million.

I would tell you on both ETOSS and S3, we've worked with that customer set for a long time. We have a presence where they are and we're familiar through our long-range, long-term engagements with that client, with what their plans are, what their procurement plans are, where we see the tasking come out.

We have a pretty good idea of what we might want to compete against and we don't necessarily bid them all under S3, but we bid those ones that are look to be in our sweet spot and we feel we have a good understanding of what the client wants. We're very, very pleased with our win rate to date in just the first four-and-a-half months of a 10-year contract. So I'm very excited about that.

And just a follow-up, Bill.

Clearly background investigations, that's something that you're looking to ramp people on. Can you give us a sense as to when we might see any type of acceleration in the processing time for clearances?

Colin, on the OPM contract, just to set the stage, that's not a task order contract, that's a contract where essentially as many investigators as we hire, we get that much work. For the foreseeable future, there's virtually, with this backlog of clearances that need to be done, there is a lot of work for us to do.

So to kind of go back to the earlier question about hiring, we've got a full court press on right now to go out and hire as many of these investigators as we can to get the lions share of that background investigation work that needs to be done there. We're limited only by our ability to hire those investigators.

I think Paul alluded to the fact that we brought on over 20 investigators in the July timeframe alone. So that is a real focus area for our recruiting team.

So if you can do the eight-day training course we should go to the Web site and check out the opportunities. Is that right?

There we go.

Thank you.

A lot of opportunities worldwide.

Looking for good help.

We'll go next to Joseph Vafi of Jeffries & Company.

Hi gentlemen, and good morning.

On Laura's question previously, I might have missed it. Did you say what an attrition rate was or turnover rate was for the year or for the quarter of personnel?

Yeah, Joe, this is Bill Fairl again.

We don't give our actual attrition rate. I will tell you that it improved significantly FY '06 over FY '05 and we're looking for even further improvement in FY '07.

Okay.

We're very competitive industry-wide, too, is the good news on that.

Sure.

Maybe talk a little bit about the overall kind of, let's call it like the pace of activity, clearly a good bidding and a good contract win quarter here for CACI and just kind of given some of the tightness in the overall budget environment, do you think, or are you seeing any kind of change in the pace at a high level relative to conversion of backlog into revenue that might be a little bit different than we've seen in the past or, I guess, or are we seeing that tightening or loosening here at this point?

Well, we certainly saw a strong fourth quarter compared to the previous quarters in the year. We'd like to think that as the year moves to a close, the fiscal year here in September that there should be strong funding. We're hoping that that will begin to move. To be determined yet, of course.

We also, as I've indicated, are looking for a Defense Department closure out of Congress and avoiding the continued resolution. I would say guardedly optimistic, but in particular, you see anything Bill or Paul that would indicate any trend differences?

Yeah, I think that there are two things in particular. The first thing we mentioned already, the contract funding orders in the fourth quarter were up, I think 14% and that is a leading indicator for us about how things, what's happening.

And also, our openings. The number of job openings has, in the last month or so, started to move upward and that's another positive indicator. We think the other, obviously, at a higher level if you look at recent activity to augment the Army funding-wise, it's going on in Congress in the last month or so, we see that as a very positive indicator, as well.

It was another 8 to 13 [inaudible] the last piece of the supplemental just a few weeks ago. So those are all positive indicators, obviously at the macro level. Next question, please.

We'll go to Julie Santoriello of Morgan Stanley.

Thank you. Good morning.

Morning.

Question on the acquisition revenue in the fourth quarter. It was a bit lower than I had expected. I was looking at basically the revenue you acquire at the time you made those acquisitions. Was there [inaudible] on a, with those acquisitions since being acquired and they have slowed things down a bit?

Steve, would you pick up on [overlapping speakers]?

Yes, Julie, they're a little lighter than we had anticipated. I would tell you some of the ODCs related to the timing on those acquisitions is down a little bit from what we thought.

And then also, one of the contract awards that we had here with the University of Military Intelligence, we had kind of anticipated a faster ramp for that. That's kind of pushed to the right, but again, that's one of the, what we see as one of the key drivers for the back half of '07 and that's now, I think we think springing and starting up here.

Having said that, we did about $51 million, I believe, in acquired growth in the quarter, we're looking at somewhere between 55 to $65 million in the first quarter, and for the full year, our acquisitions revenue should be in the range of 170 to $190 million of revenue for next year.

Thanks, That's helpful.

And could you add what the, how much the backlog was contributed from those acquisitions?

I can't break that out for you. Once we integrate these things, they're part of the pile and I just don't have that statistic for you.

And we'll go next to Cindy Shaw of Moors & Cabot.

Thanks. A couple of questions.

First, going to the guidance for this coming fiscal year, you stated last quarter you were looking for 20%. The guidance we're getting today of 14 to 20%. I'm wondering is it just that it does not include the acquisitions or has there been some other change?

The guidance we put out does not include acquisitions, new initiative acquisitions. Obviously, we have whatever's in the base carries forward into the next year that we acquired and will be recorded as an acquired part of our revenue and grows organic. But none, we do not have any acquired business anticipated in that growth statistic for next year. Is that the summary of it, Steve?

That's correct.

And is the reason for the change from three months ago when you were looking for 20% for the fiscal year and now you've backed away from that a little bit, is that because you've decided not to include the acquisitions in guidance?

Cindy, we've never really included new acquisitions in that number. Again, that 20% is a goal that we've established for the Company to try and drive each year as we go out and as Jack indicated earlier in his remarks, we've done better than that.

Over the last five years, I think our compound annual growth rate's 25%. About half of that growth over that time period has been organic and half has come from acquisitions. We would expect that to continue.

But the range of guidance we have there, that's our best look, our best professional guess as we look at the numbers today in terms of where we're going.

But without any assumed new acquisitions I think would help our point.

I think the subtlety here is, that you may be referring to the fact in our last earnings call, Jack gave a broad goal target of 20, he estimated around, roughly 20% in our FY '07 period. And I'm sure in that comment we were thinking in terms of overall growth not just--.

Our goal is always an overall goal.

Cindy, I'd just add to that, you know, at the upper end of the range, we are at like 19.7%, and that's the $2.1 billion. And to give you some confidence factor in that, as I look at our funded backlog as a percent of next year's revenues, we are well in line with the historic metric, if you will, that we've always looked at. There's some degree of confidence that I take from that metric that that's an achievable kind of number.

And let us punctuate that commentary by saying we are aggressively looking for acquisitions so we would anticipate being able to bring in a couple of deals this year in our portfolio.

We'll go next to Cynthia Houlton of RBC Capital Markets.

Hi, just a couple quick. Just one item on ODCs, what was that in the quarter?

Steve, do you have a statistic for us, please?

Hold on one second. I've got to get the chart.

Look at the ratio of our direct costs, if you will for the quarter, about 44% was direct labor and 56% were ODCs.

Okay. And then just a follow-up.

It seems like turnover and hiring and all of that seems to be, given some of the other companies in this sector seems like there's a lot of companies seem to have, are struggling a little bit more recently. And could you just help us understand kind of what's different over more recently in terms of what's driving kind of the turnover and why that's such kind of more of a broader industry phenomenon? Is there something that's new or incremental or kind of help us out a little bit more in terms of [inaudible].

I can help you with a general comment. There may be a couple of other points here that we'd like to share with you.

Clearly, this industry is, broadly speaking, focused in security work, obviously, in the intelligence community, the credentialing is much more stringently [inaudible] required. So we're going to see increased competition in the sector. There's only so many people in that pool out there that are available. So that's part of the competition right now is for that available pool.

Bill, you might want to shed some -- you watch it very closely, amplify [inaudible] for us on that.

Will, do, Jack.

Cynthia, first of all, I want to comment that I think what you're commenting on is the general industry trend. What we've seen in fiscal '06 is we were able to improve our retention statistics. Okay? So in other words, our turnover went down and we took some specific actions to work that and we're continuing those forward, so we're very encouraged by that.

As far as the hiring goes, especially here in the metropolitan, D.C. Northern Virginia area, we're basically in a full employment economy here. So it's competitive, but I'll go back to what I said earlier through some actions we took to further organize our recruiting staff, we've actually seen an uptick, an increase in our ability to hire, particularly in the last quarter of fiscal '06.

So we're encouraged by that and really focusing on that going forward. That, coupled with more openings that we have that were alluded to earlier, pretty excited about it.

And we'll go next to Tim Quillin of Stephens, Inc.

Good morning.

Morning, Tim.

I may have missed this detail, but what was the DOJ contribution in the quarter or year, or as a percent of the federal civilian business?

Tim, in the quarter we did, it was pretty much flat with last quarter, $19.2 million, down about 16% from the prior year which was about $23 million.

Okay. That's helpful.

And on the acquisition contribution, specifically, what was the contribution from ISS in 4Q?

Well, it's in the 35 plus range, $37 million, something like that. I don't have the exact number on that. We'll publish some of that in our 10-K when that comes out. We'll have the acquired growth. In that range of $37 million, roughly, 35 to 37.

Okay.

And you expect contribution from acquisitions to be 170 to 190, I guess that presumes a pretty big ramp-up there. Is there other specific things you're expecting besides the intelligence contract or is that the main driver of growth for ISS?

In the back half, you're referring to the growth in the back half of the year '07?

Well, I'm just specifically referring to ISS just growing off that $35 million base throughout '07.

Yeah, I think there is a component of that back half growth that's attributable to ISS. The specific item is the UMI contract that they had one just before they integrated with us and that is a good piece of the growth in the back half coming from that contract.

Does that answer your question?

And, sir, please press star one.

Okay.

To get this [sofron] could you tell me what the annual revenue is from that acquisition? Thank you.

[Sofron] will do about $10 million a year.

Okay. Thank you.

We'll go next to Erik Olbeter of Stanford Financial Group.

Yeah, hi guys. A couple of questions.

On the total backlog figure, Steve, we've got -- you report $4.6 billion, up from 3.4, which is a big jump. Can you walk me through the math a little bit on that because we're counting about $2 million in new contracts and about the same amount, a little bit less in sales. So what accounting for that large jump in total backlog?

We'd have to go through an analysis for you. I'd be happy to take that offline with you and do some reconciliations. I don't have something for you

Okay. That's great. And just a clean up work.

Employee count at the end of the quarter? Or end of the year?

Erik, this is Dave Dragics.

It's in the tag line of the release. It's 10,200 people, approximately.

Okay. Great.

And what was, just in the fourth quarter, what was the uptick in intelligence growth? I know that it had been trending down in the first three quarters of the fiscal year and then popping back up to 17% growth.

Was there any particular contract that really contributed that, was it sort of across the board, you know, what's kind of your sense of how the intelligence customer is going to perform moving forward? Is it one contract or is it just across the board you're seeing more spending?

One thing I think we've been looking for qualified people with credentials in the polygraph testing and we've been able to bring more of those on board [inaudible] staffing.

But maybe in terms of the deals, Bill, could you talk to that, perhaps?

I will, Jack.

Erik, you know for our intelligence community clients we often don't break out specific contracts because of the nature of the work we're doing. But I will say that in the back half of the year, that we were successful in winning a number of new deals, some of which featured CACI leading a much larger team, in other words, a consolidation sort of effort that brought sort of an instant sort of bump up to us that we see continuing on in fiscal '07. So that's a big contributor to what you saw.

That and an increase off of our kind of task order work we have going in that community, as well.

We're very delighted with the trend of our work in the intelligence community business. I think our recognition is being gained. We have more opportunities, our performance has been outstanding, and I think you will see continued growth in that area, at least that's how we see it going forward.

And we'll go next to Cai Von Rumohr of Cowen and Company.

Yes, a quick technical follow-up.

You mentioned, I think, that stock option expense would be 14 to $15 million in '07. Does that compare to the 10.5? Because at one point you said that would be down and you'd also mentioned that it tends to start the year off at a higher clip. If it's 14 to 15, what should it be in the first quarter?

Well, the first quarter, Cai, is going to be around, somewhere between 5 to $6 million on a pretax basis.

Okay. And that's FAS 123, so that 14 to 15 compares with the 10.5?

On the 10.5 you're referring to, I'm not sure I understand what period you're looking at.

Fiscal '06 actual.

Fiscal year, oh, I'm sorry, you're looking at the, I'm looking at a total stock comp kind of a number.

Right. So what I'm looking at is the stock option expense. What's the number that's comparable?

I've got you. I'm sorry. I apologize. The $10.5 million for '07 is about, somewhere between 8 and 8.5.

Thank you.

We'll go next to Sandra Notardonato of Robert W. Baird.

Hi, thank you. Just a follow-up question.

What was the reason you didn't provide guidance prior to this Q4 call and should we be expecting any change to your approach on giving the Street guidance?

Not for the moment, Sandra. We had a fairly extensive complication just happened in the area of our OCI guidance and our dialogue and discussions with the Navy and didn't feel confident on how that was going to come out. It could have made a significant difference in the numbers we projected and we felt like if we came out with those and then wrapped around within six weeks and came out with some other numbers that it wouldn't really benefit anybody.

But our general pattern would be to anticipate the fiscal year by coming out with guidance earlier as we have in the past and we would have done that probably this year if it hadn't been with the [inaudible] complications with the Navy. And they're very sensitive, I think we handled it very satisfactory as we've already reported and our guidance was affected to that extent. Probably not as much as it might have been if things hadn't gone a little better our way.

So you can anticipate continuing annual guidance coming out a bit ahead of the August annual report.

And we can expect regular quarterly guidance, as well?

Well, you can expect guidance for this year. We are continuing to look at it, as many corporations, we hold our options out as to what might be best for the shareholders and the community at large.

Okay. And if I can ask another question to Steve.

If you look at funding through mid August, what is the, and kind of extrapolate that to the end of the quarter, what's the difference in what funding would look like in the September quarter versus the June quarter? At least directionally if you can give us --

I'm not sure, Sandra. I can say that what we've seen through August here, relative to last year, we're up significantly on our funding versus last year. I don't know if that addresses your question.

What we'd say is we're off to a strong start.

We're off to a strong start, right.

That is star one for questions. We'll go to Tim Quillin of Stephens, Inc.

Sorry, just following up with Cai's question regarding FAS 123 expense. With the 5 to 6 in the first quarter, is that a FAS 123 or a total stock compensation?

That was the total stock compensation. This includes stock options, RSUs, and some other equity-related kinds of things. Those numbers are in that 14 to $14.5 million range. That's total.

The actual stock option piece, which would be the FAS is in the 8 to $8.5 million.

And what's that in 1Q?

In the first quarter, the stock option expense is between 3 to $3.5 million.

Thank you.

We'll go to Cindy Shaw of Moors & Cabot.

Yeah, another question for you.

Looking back to a few years ago, your pipeline used to run wound up being 3 to 4 times the next 12 months revenue. So, you know, you might be able to draw some conclusions looking at the pipeline from that on where the next 12 months revenue going.

It's now greater than six times, but of course, you're really playing in a bit of a different arena with these larger deals. I'm wondering how we should think about that?

Is that a real positive indicator here or is this playing in a larger deal arena rejiggerd those numbers and we shouldn't look at it the same way?

I think we're clearly moving into a different plateau of operations and feel very good about that. In terms of the aspects of deal source, maybe, Bill, would you emphasize a bit on our strategy there?

You bet, Jack.

Cindy, we're in a great spot in the market right now. We're, we just have a wealth of opportunities to look at and the pipeline numbers we give you, you know, are really just the top opportunities, the most qualified ones we're looking at.

Paul mentioned earlier during his comments that during our fiscal '06, we had just an excellent win rate on these opportunities. So we're very, very happy with our ability to compete with the top players out there, and I would point as an example to our win on S3 where we were one of seven award winners, one of only four large businesses, and I know everybody's aware of some of the folks that got shut out of that.

So we're just, couldn't be happier with our ability, with the great pipeline we have and our terrific ability to compete and win in there.

With the larger deals, they do take longer, right? So in terms of the ability to win them, it sounds like the ability is there but it just may take a little bit longer to hit the revenue line?

I think that the, that's case-by-case basis, if you will. I'm, again, we're very pleased with what's happened with SQ of winning the first one, having $82 million in the first four months. You start to extrapolate that over 10 years and you can see why we're so darned excited around here.

Start with ETOSS, as well?

Right. The ETOSS, man, just hit the ground running right where we were before. No change of pace there.

On the other hand, one of the things you do see and we've still got this [I2S] deal going here is that because these terms are so darn long that some folks, you know, when they don't win, they're going to protest these things and sometimes that slows things down a little bit.

It didn't on SQ, they kept going with performance and we just kept right on rolling. $82 million so far. So it's kind of a deal-by-deal thing but so far really good for us.

Okay. Thank you.

And at this time, I'll turn the conference back to Dr. London for any additional remarks.

All right. Well, Felicia, thank you very much for your help. We certainly appreciate it. And thanks to everyone for your questions and answers today, I think we've had a very vigorous exchange, hopefully it's been very valuable and provided you with a clearer picture of CACI, not only through our fourth quarter results and what we turned in for the fiscal year 2006, but, more importantly, in what we're doing in the way of looking ahead to the exciting year of 2007.

I will also know that some of you may have questions you'd like to discuss a little bit later so our team is going to be available here in a few minutes, 15 to 20 minutes to take your calls and questions and so I do want to thank you.

I'd like to close by emphasizing CACI focuses in a market sector and a market domain that we believe to be really the highest national priority arena, being national security, defense systems, and infrastructure. We're in the intelligence community, both in the tactical and field deployed arena as well as the national positioning and the national systems architectures.

Homeland security challenges are all out there and we also are very active in the e-government and government IT transition arenas and transformation efforts. So I [couldn't] emphasize that we believe that CACI is extremely well positioned given the challenges and the world around us and with our long reputation in dealing on a high confidential and high credibility basis with the United States government, we're very optimistic and enthusiastic about the years to come.

So thank you for coming on board with us this morning and best of wishes. That concludes our conference call for the 2006 results.

Thank you for your participation. You may disconnect at this time.