Background
CACI International Inc (the
“Registrant”) was organized as a Delaware corporation under the name of “CACI WORLDWIDE, INC.” on October 8, 1985. By a merger effected on June 2, 1986, the Registrant became the parent of CACI, Inc., a Delaware corporation, and
CACI N.V., a Netherlands corporation. Effective April 16, 2001, CACI, Inc. was merged into its wholly-owned subsidiary, CACI, INC.-FEDERAL, such that Registrant is now the corporate parent of CACI, INC.-FEDERAL, a Delaware corporation, and CACI
N.V., a Netherlands corporation.
The Registrant is a holding company and its
operations are conducted through subsidiaries, which are located in the U.S. and Europe.
The Company’s telephone number is (703) 841-7800. CACI’s internet page can be accessed at
www.caci.com
. The Company makes its web site content available for information purposes only. It should not be
relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K.
Throughout this Form 10-K, the Company incorporates by reference information from parts of other documents filed with the Securities and Exchange Commission, (“SEC”). The SEC allows the Company to disclose
important information by referring to it in this manner, and the public should review that information.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available
free of charge on our internet website at www.caci.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Overview
CACI founded its business in 1962 in simulation technology, and has strategically diversified primarily within the information technology (“IT”) and
communications industries. With fiscal year 2004 (“FY2004”) revenue of $1.15 billion, CACI serves clients in the government and commercial markets, primarily throughout North America and internationally on behalf of U.S. customers, as well
as the United Kingdom. The Company primarily delivers IT and communications-solutions to clients through four areas of expertise or service offerings: systems integration, managed network services, knowledge management and engineering services.
Through these service offerings, the Company provides comprehensive, practical IT and communications solutions by adapting emerging technologies and continually evolving legacy strengths in such areas as information assurance and security,
reengineering, logistics and engineering support, automated debt management systems and services, litigation support systems and services, product data management, software development and reuse, voice, data and video communications, simulation and
planning, financial and human resource systems and geo-demographic and customer data analysis. As a result of these broad capabilities, many of the Company’s client relationships have existed for five years or more.
The Company’s high quality service has enabled it to sustain winning repeat business and
long-term client relationships and also to compete effectively for new clients and new contracts. The Company is organized to seek competitive business opportunities and has designed its operations to support major programs through centralized
business
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development and business alliances. CACI has structured its new business development organization to respond to the
competitive marketplace, particularly within the federal government, and supports that activity with full-time marketing, sales, communications, and proposal development specialists.
The Company’s primary markets - both domestic and international - are agencies of national governments, and major corporations. The
demand for CACI’s services in large measure is created by the increasingly complex network, systems and information environments in which governments and businesses operate, and by the need to stay current with emerging technology while
increasing productivity and, ultimately, performance.
At June 30, 2004, CACI
employed approximately 9,300 people. The Company currently operates from its headquarters at Three Ballston Plaza, 1100 North Glebe Road in Arlington, Virginia. CACI has operating offices and facilities in over 123 other locations throughout the
United States and Western Europe.
Domestic Operations
CACI’s domestic operations are conducted through a number of subsidiaries, and account
for all of the domestic revenue generated by the Company. Some of the contracts performed by our domestic operations segment involve assignment of employees to international locations. The Company provides IT and communications solutions to its
Federal, Commercial and State and Local clients through all four of its major service offerings: systems integration, managed network services, knowledge management and engineering services. Generally, the solutions offered by our domestic
operations are applied by clients to improve their organizational performance by enhancing system infrastructures.
Systems integration
offerings combine current systems with new technologies or integrate hardware and software from multiple sources to enhance operations and save
time and money. Systems integration services include planning, designing, implementing and managing solutions that resolve specific technical or business needs; extracting core business logic from existing systems and preserving it for migration to
more modern environments; helping clients visualize possible changes in processes and systems before implementation; and web-enabling systems and applications, bringing the power of the Internet to clients and system users.
Managed network services
offerings include a complete suite of solutions for total
life cycle support of global networks. These offerings include planning and building voice, video and data networks; managing network communications infrastructures; operating network systems, including monitoring codes, traffic, security, and fault
isolation and resolution; and assuring that information is secure from unauthorized interception and intrusion during its storage and transmission.
Knowledge management
offerings encompass a range of information management tools and enabling technologies, including Internet-based user interfaces, commercial
off-the-shelf software, and workflow management systems. These technologies enable users to automate all aspects of document administration, including warehousing, retrieving, and sharing, while improving processes, enhancing support and allowing
organizations to achieve higher operational efficiencies and mission effectiveness.
Engineering services
offerings enable clients to standardize and improve the way they manage the logistical life cycles of systems, products, and material assets, resulting in cost savings and increased productivity. They also
provide acquisition support, prototype development and integration, software design and integration, systems life extension and training in the use of analytical and collaboration tools for the U.S. intelligence community. The solutions provided are
often coupled with the Company’s simulation and programming services to deliver advanced logistics planning solutions.
In fashioning solutions utilizing the technologies of each of these service offerings, the Company makes extensive use of its wide array of modeling and simulation
products and services, thereby enabling clients to visualize the impact of proposed changes or new technologies before implementation. The Company’s simulation offerings address client needs in the areas of military training and war-gaming,
logistics, manufacturing, wide area networks, including satellites and land lines, local area networks, the study of business processes, and the design of distributed computer systems architecture.
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International Operations
CACI’s international operations are conducted primarily through the Company’s operating subsidiary in Europe, CACI Limited, and account for all revenue
generated from international clients and over 83 percent of the Company’s commercial revenue. CACI Limited is headquartered in London, England, and operates primarily in support of the Company’s systems integration line of business.
The Company’s international systems integration offerings focus primarily
on planning, designing, implementing and managing solutions that resolve specific technical or business needs for commercial and government clients in the telecommunications, financial services, healthcare services and transportation sectors. The
international operations also concentrate on combining data and technology in software products and services that provide strategic information on customers, buying patterns and market trends for clients who are engaged in retail sales of consumer
products, direct marketing campaigns, franchise or branch site location projects, and similar endeavors.
Major Markets and Significant Activities
CACI operates in a highly competitive industry that includes many firms, some of which are larger in size and have greater financial resources. The Company obtains much of its business on the basis of proposals submitted in response to
requests from potential and current customers, who may also receive proposals from other firms. Additionally, the Company faces indirect competition from certain government agencies that perform services for themselves similar to those marketed by
CACI. The Company knows of no single competitor that is dominant in its fields of technology. The Company has a relatively small share of the available worldwide market for its products and services and intends to achieve growth in part through
increasing market share.
Although the Company is a supplier of proprietary
computer-based simulation technology products and marketing systems products in both domestic and international operations, CACI is not primarily focused on being a software product developer-distributor (see discussion following on Patents,
Trademarks, Trade Secrets and Licenses).
CACI offers substantially all of its
entire range of information systems, technical and communications services and proprietary products to defense and civilian agencies of the U.S. Government. In order to do so, the Company must maintain expert knowledge of agency policies and
operations. The Company’s work for U.S. Government agencies may combine a wide range of skills drawn from its major service offerings, including information systems design, development and maintenance, systems engineering, telecommunications,
logistics sciences, information assurance and security, military systems engineering, simulation, automated document management, litigation support and debt management. The Company occasionally contracts through both its domestic and international
operations to supply services and/or products for governments of other nations.
The Company’s commercial client base consists primarily of large corporations in the UK. This market is the primary target of the Company’s proprietary software and database products.
Decisions regarding contract awards by the Company’s government clients typically are
based on assessment of the quality of past performance, responsiveness to proposal requirements, price, and other factors.
The Company has the capability to combine comprehensive knowledge of client challenges with significant expertise in the design, integration, development and
implementation of advanced information technology and communications solutions. This capability provides CACI with opportunities either to compete directly for, or to support other bidders in competition for multi-million dollar and multi-year award
contracts from the U.S. Government.
CACI has strategic business relationships
with many companies associated with the information technology industry. These strategic partners have business objectives compatible with those of the Company, and offer products and services that complement CACI’s. The Company intends to
continue development of these kinds of relationships wherever they support its growth objectives.
4
Marketing and new business development for the Company is conducted by virtually all officers and managers of the
Company, including the Chief Executive Officer, executive officers, vice presidents, and division managers. The Company employs marketing professionals who identify and qualify major contract opportunities, primarily in the federal government
market. The Company’s proprietary software and marketing systems are sold primarily by full time sales people. The Company also has established agreements for the resale of certain third party software and data products.
Much of the Company’s business is won through submission of formal competitive bids.
Commercial bids are frequently negotiated as to terms and conditions for schedule, specifications, delivery and payment. With respect to bids for government work, however, in most cases the client specifies the terms and conditions and form of
contract. In situations where the client-imposed contract type and/or terms appear to expose the Company to inappropriate risk, the Company may seek alternate arrangements or opt not to bid for the work. Essentially all contracts with the United
States Government, and many contracts with other government entities, permit the government client to terminate the contract at any time for the convenience of the government or for default by the contractor. Although the Company operates under the
risk that such terminations may occur and have a material impact on operations, throughout the Company’s 40+ years in business such terminations have been rare and, generally, have not materially affected operations. As with other government
contractors, the Company’s business is subject to government client funding decisions and actions that are beyond its control. CACI’s contracts and subcontracts are composed of a wide range of contract types, including firm fixed-priced,
cost reimbursement, time-and-materials, indefinite delivery/indefinite quantity (“IDIQ”) and government wide acquisition contracts (known as “GWACS”) such as General Services Administration (“GSA”) schedule contracts.
By Company policy, fixed-price contracts require the approval of at least two senior officers of the Company.
At any one time, the Company may have more than a thousand separate active contracts and/or task orders. In 2004, the ten top revenue-producing contracts accounted for 47.2% of CACI’s revenue, or $540.3 million;
however, no single contract accounted for more than 10% of the Company’s total revenue.
In 2004, 93.7% of CACI’s revenue came from U.S. Government prime or subcontracts. Of CACI’s total revenue, 67.4% came from U.S. Department of Defense (“DoD”) contracts, 9.4% from contracts with
Department of Justice (“DoJ”), and 16.9% from other civilian agency government clients. The remaining 6.3% of revenue came from commercial business, both domestic and international, and state and local contracts.
Although the Company is continuously working to diversify its client base, it will continue
to aggressively seek additional work from the DoD. In 2004, DoD revenue grew by 43.9%, or $235.7 million. The acquisitions of Acton Burnell, Inc., (“Acton Burnell”) in October 2002, substantially all of the assets of Premier Technology
Group, Inc., (“PTG”) in May 2003, C-CUBED Corporation (“C-CUBED) in October 2003, CMS Information Services, Inc. (“CMS”) in March 2004 and certain assets of the Defense and Intelligence Group of American Management Systems,
Inc. (“D&IG”) in May 2004 and other acquisitions accounted for approximately 61.8% of the revenue growth within DoD. Internal growth accounted for the remaining 38.2% of the DoD revenue growth.
Recent Significant Acquisitions
During the past three fiscal years, the Company examined a number of opportunities and
completed multiple acquisitions. Set forth below is a description of some of the most significant acquisitions during this period:
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On May 1, 2004, the Company completed the purchase of certain assets of the D&IG for $420.7 million, including transaction costs. The D&IG provides the U.S. Government with
business consulting services and solutions, including information technology and software design, for defense, intelligence and homeland security agencies in support of acquisition, financial management, logistics, war-fighting and intelligence
missions. The D&IG provides CACI with a broad range of consulting services to support the modernization of DoD business operations.
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On March 1, 2004, the Company acquired all of the outstanding shares of CMS for $28.2 million. CMS specializes in enterprise network solutions, enterprise financial management
systems and software and integration services primarily in the national defense sector.
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On January 16, 2004, the Company purchased all of the outstanding stock of MTL Systems, Inc. (“MTL”) for $4.4 million. MTL provides engineering and integration services
for the Department of Defense, including advanced imagery technology, remote sensing, algorithm development, modeling and simulation and rapid change detection.
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On October 16, 2003, the Company acquired all of the outstanding stock of C-CUBED for $36.2 million of which $34.7 million has been paid. C-CUBED provides specialized services in
support of C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) initiatives to clients in the DoD, federal, civilian, and intelligence communities, including network enterprise solutions, systems
integration, integrated logistics support, combat systems and deep submergence engineering.
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On June 6, 2003, the Company acquired all of the outstanding capital stock of Rochester Information Systems, Ltd. (“RISys”), an United Kingdom company, for $1.9 million of
which $1.7 million has been paid. Under the terms of the agreement, the Company will pay the balance of the consideration provided that certain agreed performance targets are met within 24 months following the acquisition. RISys specializes in the
development and implementation of enterprise information solutions for the UK Public Sector, especially Health, Education and Local Governments.
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On May 15, 2003, the Company acquired substantially all of the assets of PTG for $48.8 million of which $46.2 million has been paid. The balance of $2.6 million will be paid in the
form of earn out payments tied to the continuation of existing business. PTG provides professional services to clients in the DoD and the intelligence community, including intelligence analysis and security services, information technology training,
program management and logistics.
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On February 28, 2003, the Company purchased all of the outstanding capital stock of Applied Technology Solutions of Northern Virginia, Inc. (“ATS”) for $13.1 million. ATS
is an information technology company providing knowledge management, program management, network engineering and training to clients in the national intelligence community.
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On October 16, 2002, the Company acquired all of the outstanding capital stock of Acton Burnell, Inc., for $29.4 million. Acton Burnell is an information technology company that
provides systems integration, knowledge management, manpower readiness and training, and financial systems solutions to the federal government.
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On August 16, 2002, the Company acquired substantially all of the assets of the Government Solutions Divisions of Condor Technology Solutions, Inc. (“Condor”) for $16.2
million. The acquired Condor business complements the Company’s systems integration, knowledge management, data mining and purchasing systems solutions for federal clients.
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On November 1, 2001, the Company purchased all of the outstanding capital stock of DSIC for $47.0 million. The acquired business implements enterprise resource planning
(“ERP”) systems, including large-scale financial and human resource systems, and e-procurement applications; develops client/server and web-enabled applications; operates an enterprise networking and information assurance practice; solves
complex business problems with a recognized process modeling and simulation methodology; and provides acquisition/program management consulting services, primarily to the U.S. Government.
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Over the past several years, the U.S. government has organized the armed services so that
military personnel focus on combat and war-fighter roles, while some non-combatant roles are filled by personnel provided by contractors. The acquisitions completed by CACI, as described above, have positioned CACI to respond to certain aspects of
this departmental transformation of the U.S. Department of Defense, and deliver contract personnel to fill some of these non-combatant roles including logistics, intelligence gathering and analysis, organizational realignment and training.
6
Interrogation Services
The interrogation services CACI performs in Iraq are a recent extension of CACI’s tactical intelligence and field services line of business for information
collection, data analysis and decision support. CACI began providing interrogation services in August of 2003 with the issuance of orders to provide a wide variety of information technology services for security, intelligence and logistics support
to the Coalition Joint Task Force in Iraq, under a Blanket Purchase Agreement (“BPA”) CACI acquired when it purchased the assets of PTG in May 2003. CACI received the opportunity to propose personnel for these services because of the
relationship established through the tactical intelligence business base acquired from PTG. As described below, the task orders issued under that BPA have been replaced by contracts directly with the U.S. Army.
The work performed by CACI’s interrogators in Iraq is performed under the monitoring and
supervision of the U.S. military chain of command in Iraq. The military assigns them to specific interrogation cases and projects. The interrogators perform IT related tasks such as entering interrogation information into a database, analyzing the
intelligence data and information available to determine how the “pieces” may fit together, and disseminating the information resulting from their analysis. They participate on interrogation teams composed of an interpreter, an analyst and
an interrogator under supervision of a non-commissioned officer, warrant officer or commissioned officer. The interrogator’s role on the team is to propose the plan for interviewing the detainee, the questions to ask, when to ask the questions
and how to support the task of finding out intelligence information that will assist the command in its military mission.
All interrogators hired by CACI are qualified as required by the applicable contract statement of work. The statement of work, which was issued by the military, provides
specific qualifications for interrogators. A report of the Army Inspector General, dated July 21, 2004, confirmed that all interrogators provided by CACI satisfied the Army’s statement of work criteria.
Under CACI’s BPA for U.S. Army work in Iraq, 11 delivery orders were issued for a total
maximum value of $66 million (to be billed only as work was performed and services delivered). The delivery orders for intelligence services (6 each) have been terminated, and replaced with a bridge contract for a 120 day term, and two 30 day
options. The other remaining delivery orders for logistics services (5 each) have been terminated and replaced with a letter contract. CACI is currently negotiating the terms of a definitive bridge contract to cover this work. From the start of the
first delivery orders in August 2003, through the end of June 2004, CACI has billed the U.S. Army a total of $23.5 million for work and services under these 11 orders. CACI has received $17 million in payments for this work to date. Less than 1% of
CACI revenue for the year ended June 30, 2004 was for interrogator support at Abu Ghraib.
Given the extensive coverage of the events at Abu Ghraib prison in Iraq, CACI management is focused, in the short term, on ensuring that inaccuracies contained in the media accounts regarding CACI’s role in the
matter are immediately corrected. The company posts on its website:
www.caci.com
additional information, news releases, and FAQs on CACI’s Iraq Business at the section entitled “The Truth Will Out”.
Seasonal Nature of Business
The Company’s business in general is not seasonal, although the summer and winter
holiday seasons affect Company revenue because of the impact of holidays and vacations on the Company’s labor sales and on product and service sales by the Company’s international operations. Variations in the Company’s business also
may occur at the expiration of major contracts until such contracts are renewed or new business obtained.
The U.S. Government’s fiscal year ends on September 30 of each year. It is not uncommon for government agencies to award extra tasks or complete other contract actions in the weeks before the end of the fiscal
year in order to avoid the loss of unexpended fiscal year funds. Moreover, in years when the U.S. Government does not complete its budget process before the end of its fiscal year, government operations typically are funded pursuant to a
“continuing resolution” that authorizes agencies of the government to continue to operate, but traditionally does not authorize new spending initiatives. When the government operates pursuant to a continuing resolution, delays can occur in
procurement of products and services, and such delays can affect the Company’s revenue and profit during the period of delay.
CACI Employment and Benefits
The Company’s employees are its most valuable resource. It is in continuing competition for highly skilled professionals in virtually all of its business areas. The
success and growth of CACI’s business are significantly correlated with its ability to recruit, train, promote and retain high quality people at all levels of the organization.
7
For these reasons, the Company endeavors to maintain competitive salary structures, incentive compensation programs,
fringe benefits, opportunities for growth, and individual recognition and award programs. Fringe benefits are generally consistent across the Company’s subsidiaries, and include paid vacations and holidays, medical, dental, disability and life
insurance, tuition reimbursement for job-related education and training, and other benefits under various retirement savings and stock purchase plans.
The Company has published policies that set high standards for the conduct of its business. It requires all of its employees, consultants, officers, and directors
annually to execute and affirm a code of ethics applicable to their activities.
Patents, Trademarks, Trade Secrets and Licenses
The Company owns 21 patents in the United States and 1 patent in Canada. While the Company believes its patents are valid, it does not
consider that its business is dependent on patent protection in any material way. CACI claims copyright, trademark and other proprietary rights in a variety of intellectual property, including each of its proprietary computer software and data
products and the related documentation. The Company presently owns 29 registered trademarks and service marks in the U.S. and 57 registered trademarks and service marks in other countries, primarily the U.K. All of the Company’s registered
trademarks and service marks may be renewed indefinitely. In addition, the Company asserts copyrights in essentially all of its electronic and hard copy publications, its proprietary software and data products and in software produced at the expense
of the U.S. Government, which rights can be maintained for up to 75 years. Because most of the Company’s business involves providing services to government entities, the Company’s operations generally are not substantially dependent upon
obtaining and/or maintaining copyright or trademark protections, although its operations make use of such protections and benefit from them as discriminators in competition. CACI is also a party to agreements that give it the right to distribute
computer software, data and other products owned by other companies, and to receive income from such distribution. As a systems integrator, it is important that the Company maintain access to software, data and products supplied by such third
parties, but the Company generally has experienced little difficulty in doing so. The durations of such agreements vary according to the terms of the agreements themselves.
The Company maintains a number of trade secrets that contribute to its success and competitive distinction and endeavors to accord such
trade secrets protection adequate to ensure their continuing availability to the Company. While retaining protection of its trade secrets and vital confidential information is important, the Company is not materially dependent on maintenance of any
specific trade secret or group of trade secrets.
Backlog
The Company’s backlog as of June 30, 2004 was
$3.4 billion, of which $745 million was funded for orders believed to be firm. Total backlog as of June 30, 2003 was $2.5 billion, of which $469 million was for funded orders. The source of backlog is primarily contracts with the U.S. Government. It
is presently anticipated, based on current revenue projections, the majority of the funded backlog will be filled during the fiscal year ending June 30, 2005.
Business Segments, Foreign Operations, and Major Customer
The business segment, foreign operations and major customer information is provided in the Company’s Consolidated Financial Statements
contained in this Report. In particular, see Note 14, Business Segment Information, in the Notes to Consolidated Financial Statements.
Revenue by Contract Type
The following information is provided on the amounts of revenue attributable to firm fixed-price contracts (including proprietary software product sales),
time-and-materials contracts, and cost reimbursable contracts of the Company during each of the last three fiscal years:
(dollars in thousands)
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Fiscal Year
Ended June
30,
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Firm
Fixed-Price
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%
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Time-and-
Materials
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%
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Cost
Reimbursable
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%
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Total
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2004
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$
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194,914
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17.0
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%
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$
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708,801
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61.9
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%
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$
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242,070
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21.1
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%
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$
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1,145,785
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2003
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$
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157,759
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18.7
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%
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$
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543,857
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64.5
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%
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$
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141,522
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16.8
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%
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$
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843,138
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2002
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$
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132,697
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19.5
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%
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$
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418,438
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61.3
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%
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$
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130,807
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19.2
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%
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$
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681,942
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