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The failure to comply with any of these covenants would cause a default under ourthe 2004 Credit Facility. A default, if not waived, could cause our debt to become immediately due and payable. In such a situation,situations, we may not be able to repay our debt or borrow sufficient funds to refinance it, and even if new financing is available, it may not contain terms that are acceptable to us.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in default on our debt obligations.

Despite our substantial debt, we may incur additional indebtedness.

The 2004 Credit Facility consists of a $200 million revolving credit facility and a $350 million term loan. In addition, we have $300 million outstanding under our convertible senior subordinated notes due 2014 (the Notes). We are able to incur additional debt in the future and have flexibility under the 2004 Credit Facility to increase the revolving credit facility to $300 million. If new debt is added to our current debt levels, the risks related to our ability to service that debt could increase.

A change in control or fundamental change may adversely affect us.

The 2004 Credit Facility provides that certain change in control events with respect to us will constitute a default. A fundamental change, as defined under the Notes, will constitute a change of control under the 2004 Credit Facility, and therefore will constitute a default under such facility. If investors in the Notes exercise the repurchase right for a fundamental change, it may cause a default under the 2004 Credit Facility, even if the fundamental change itself does not cause a default on the 2004 Credit Facility, due to the financial effect of such a repurchase on us. Furthermore, the fundamental change provisions, including the provisions requiring the increase to the conversion rate for conversions in connection with certain fundamental changes, may in certain circumstances make more difficult or discourage a takeover of our company and the removal of incumbent management.

The conditional conversion features of the Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion features of the Notes are triggered, holders of the Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their notes, we would be required to settle any converted principal through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital. We currently have approximately $200 million available under our revolving credit facility, which we could use to satisfy payment obligations arising from conversions of the Notes. However, there can be no assurance that all or any portion of this facility will be available at the time any such conversion obligations arise. Our failure to pay the required cash upon conversion as required under the Notes would constitute an event of default which, if not waived, would result in the immediate acceleration of our payment obligations under all of the Notes. Any such default would also result in an event of default under the 2004 Credit Facility. In such a situation, we may not be able to repay our debt or borrow sufficient funds to refinance it, and, even if new financing is available, it may be available on terms less favorable than the terms of our existing debt and, potentially, on terms that are unacceptable to us. A material deterioration in our financial condition or operating results could inhibit our access to additional investment capital and may cause the price of our common stock to decline.

The Financial Accounting Standards Board (FASB) is currently contemplating changes to the accounting standards applicable to financial instruments such as the Notes. If those changes were to be implemented and became applicable to the Notes, we would have to report interest expense for the Notes higher than the interest expense we are required to report under current accounting standards.

The FASB is currently evaluating the accounting standards applicable to convertible debentures, like the Notes, that may be settled with a combination of cash and stock. The proposed changes, if implemented, would require us to recognize the estimated fair value of the conversion option as an original issue discount, and to amortize the discount ratably over the seven year term of the Notes. Generally accepted accounting principles currently applicable to the Notes require us to report interest expense based on the stated coupon rate and transaction expenses. If the proposed changes were to be adopted and made applicable to the Notes, we would be required to include, as a component of interest expense, a portion of the estimated fair value of the conversion option for each year the securities remain outstanding. The total interest rate to be recognized under such modified accounting standards could be more than twice the stated coupon rate of the Notes. If they occur, these changes would reduce our earnings and could adversely affect the price at which our common stock trades, but would have no effect on the amount of cash interest paid to Notes holders, or on our cash flow. We are unable to estimate the likelihood that the proposed changes will be adopted, whether they will apply to the Notes, or the date they would be effective if adopted.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of June 30, 2006, CACI2007, we leased office space at 124117 U.S. locations containing an aggregate of approximately 2,277,0002.2 million square feet located in 2931 states and the District of Columbia. In fourthree countries outside the U.S., CACIwe leased office space at tensix locations containing an aggregate of approximately 34,00035,000 square feet. CACI’sOur leases expire primarily within the next five years, with the exception of sixfour leases in Northern Virginia and seventwo leases outside of Northern Virginia, which will expire within the next 5seven to 11ten years. CACI anticipatesWe anticipate that most of these leases will be renewed or replaced by other leases.

All of CACI’sour offices are in reasonably modern and well-maintained buildings. The facilities are substantially utilized and adequate for present operations.

As of June 30, 2006, CACI International Inc2007, we maintained itsour corporate headquarters in approximately 118,000 square feet of space at 1100 North Glebe Road, Arlington, Virginia. See Note 15,note 14, Leases, in the Notes to Consolidated Financial Statements contained in this Annual Report on Form 10-K for additional information regarding the Company’sour lease commitments.

CACIWe acquired certain real estate in Dayton, Ohio in connection with the purchase of MTL Systems, Inc. in January, 2004. The real estate consists of 2.6 acres, a 7,110 square foot garage, and a 36,360 square foot two-story office building.

Item 3. Legal Proceedings

Saleh, et al.v. Titan Corp., et al, Case No. 05 CV 1165 (D.D.C.)

On June 9, 2004, seven named plaintiffsPlaintiffs filed a twenty-six count class-action complaint on June 9, 2004, originally on behalf of seven named Plaintiffs and a class of similarly situated Plaintiffs, against a number of corporate Defendants and individual corporate employees. The complaint, originally filed in the U.S. District Court for the Southern District of California, againstnamed CACI International Inc; CACI, INC.-FEDERAL, and CACI N.V. as Defendants. The complaint also named CACI Premier Technology, Inc. employee Stephen A. Stefanowicz as a number of corporate defendants and individual corporate employees alleging,Defendant.

Plaintiffs alleged, inter alia, that defendantsDefendants formed a conspiracy to increase demand for interrogation services in Iraq. The complaint named CACI International Inc, CACI, INC.-FEDERAL, CACI N.V., as well as a CACI employee, Stephen A. Stefanowicz, among the defendants in the case.

Iraq and violated U.S. domestic and international law. Plaintiffs seek, inter alia, declaratory relief, a permanent injunction against contracting with the government, compensatory damages, treble damages and attorney’s fees. Thereafter,

Plaintiffs subsequently amended their complaint several times and the action was ultimately transferred to the U.S. District Court for the District of Columbia. In March 2006, Plaintiffs filed a Third Amended Complaint adding several new counts, adding CACI Premier Technology, Inc. as a Defendant, dropping CACI, N.V. as a Defendant, and adding two former CACI Premier Technology employees, Timothy Dugan and Daniel Johnson, as Defendants.

On June 27,29, 2006, the court dismissed several counts ofCourt entered an Order granting the complaint. Defendants’ have other motions to dismiss pending with respect to numerous claims, and granting the Court.motions of the three individual Defendants to dismiss for lack of personal jurisdiction. The parties are in discovery.Court then invited the corporate Defendants to file summary judgment motions. Finally, the Court consolidated theSaleh andIbrahim actions for discovery purposes only.

19On August 4, 2006, the CACI Defendants filed a summary judgment motion. Plaintiffs thereafter engaged in document and deposition discovery for purposes of opposing CACI’s summary judgment motion. Plaintiffs subsequently filed a memorandum in opposition to CACI’s summary judgment motion, and in August 2007, CACI filed a reply memorandum in support of its summary judgment motion. That motion is pending.

Ibrahim, et al. v. Titan Corp. et al., Case No. 1:04-CV-01248-JR (D.D.C. 2004)

OnPlaintiffs filed a nine-count complaint on July 27, 2004 a lawsuit was filed in the U.S. District Court for the District of Columbia on behalf ofColumbia. Plaintiffs are five Iraqis who claimedclaim they suffered significant physical injury, emotional distress, and/or

wrongful death while they or their family members were held at Abu Ghraib prison in Iraq. The lawsuit names CACI International Inc, CACI, INC.-FEDERAL, and CACI N.V. andas Defendants, along with Titan Corporation as defendants. The court has dismissed several countsCorporation.

On August 12, 2005, the U.S. District Court for the District of Columbia issued a Memorandum Opinion dismissing many of the complaint, andclaims. The Court invited the parties are conducting discovery in connection with Defendants’Defendants to submit a motion for summary judgment on several outstanding counts. Plaintiffs seek, inter alia, treble damageswith respect to the remaining claims. Subsequently, CACI Premier Technology, Inc. was substituted as a Defendant in lieu of CACI International Inc, CACI, INC.-FEDERAL and attorneys fees and disgorgement of profits.CACI N.V.

The CompanyIn December 2005, CACI filed a motion for summary judgment. Plaintiffs, in conjunction with theSaleh Plaintiffs, thereafter engaged in document and deposition discovery for purposes of opposing the summary judgment motion. Subsequently, Plaintiffs filed a memorandum in opposition to CACI’s summary judgment motion. In August 2007, CACI filed a reply memorandum in support of its summary judgment motion. That motion is pending.

We are vigorously defending the above-described legal proceedings, and, in the Company’s opinion, based on itsour present knowledge of the facts, we believe the likelihood of plaintiffs success on the merits is remote.lawsuits are completely without merit.

Item 4. Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of security holders during the fourth quarter of the Registrant’sour fiscal year ended June 30, 2006,2007, through the solicitation of proxies or otherwise.

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PART II

Item 5. Market for the Registrant’s Common Equity, and Related Stockholder Matters and Issuer Purchases of Equity Securities

The Registrant’s Common StockOur common stock is listed on the New York Stock Exchange.Exchange under the ticker symbol “CAI”.

The ranges of high and low sales prices of theour common stock of the Registrant quoted on the New York Stock Exchange under the ticker symbol of “CAI”, for each quarter during the fiscal yearyears ended June 30, 20062007 and 20052006 were as follows:

The Registrant hasWe have never paid a cash dividend. TheOur present policy of the Registrant is to retain earnings to provide funds for the operation and expansion of itsour business. The Registrant doesWe do not intend to pay any cash dividends at this time. The Board of Directors will determine whether to pay dividends in the future based on conditions then existing, including our earnings, financial condition and capital requirements, as well as economic and other conditions as the board may deem relevant. In addition, our ability to declare and pay dividends on our common stock is restricted by the provisions of Delaware law and covenants in our Credit Facility.

At September 8, 2006,As of August 24, 2007, the number of stockholders of record of the Registrant’s Common Stockour common stock was approximately 434.412. The number of stockholders of record is not representative of the number of beneficial stockholders due to the fact that many shares are held by depositories, brokers, or nominees.

The Company administersWe administer an employee stock purchase plan under which eligible employees may purchase shares of common stock at a discount as provided by the plan. To provide the shares purchased under the plan, the Company repurchaseswe repurchase outstanding shares on the open market. Shares are repurchased on a quarterly basis, generally within two weeks of the end of each Company quarter, and are distributed within three days thereafter to employees purchasing shares. Quarterly information regarding the number of shares repurchased for this plan during the year ended June 30, 2006,2007, and the weighted-average price paid per share, is as follows:

In May 2007, we used $45.5 million of the net proceeds from the issuance of the Notes to purchase one million shares of our common stock at a price of $45.54 per share. Also, to provide shares to a participant under a director stock purchase plan whose restricted grants vested during the fiscal year, the Company repurchased 907we issued 1,032 shares of common stock on the open marketfrom treasury that were originally purchased at an average price of $59.30. These shares were repurchased during$45.85.

The graph below matches the three months ended March 31, 2006.cumulative 5-year total return of holders of CACI’s common stock with the cumulative total returns of the Russell 1000 index and the DJ Wilshire Computer Services index. The graph assumes that the value of the investment in our common stock and in each of the indexes (including reinvestment of dividends) was $100 on June 30, 2002 and tracks it through June 30, 2007.

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

Item 6. Selected Financial Data

The selected financial data set forth below is derived from theour audited financial statements of the Company for each of the fiscal years in the five year period ended June 30, 2006.2007. This information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations, and theour consolidated financial statements of the Company and the notes thereto included in Part II in this Annual Report on Form 10-K.

During the fiscal year ended June 30, 2002, the Company reported results from a discontinued business. On January 6, 2002, the Company sold its domestic Marketing Systems Group to Environmental Research Systems

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Institute, Inc.’s subsidiary, ESRI Business Information Solutions. Effective with this sale, the results of the Marketing Systems Group have been reflected as discontinued operations in the statement of operations for the fiscal year ended June 30, 2002. The Company reported a loss from discontinued operations of $0.01 per basic and diluted share, and a loss on the disposal of discontinued operations of $0.05 per basic and diluted share, related to the disposal of the Marketing Systems Group, Inc., for the fiscal year ended June 30, 2002.

All of the selected financial data except for revenue, working capital, and the weighted-average number of basic shares outstanding have been restated to reflect the retrospective application of the Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Standard (SFAS) No. 123R,Share Based Payment (FAS 123R). The revenue, working capital and the weighted-average number of basic shares outstanding are amounts not affected by FAS 123R. The adoption of FAS 123R, together with the impacts on the Company’s financial position and results of operations, are discussed more fully in Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

Income Statement Data

Balance Sheet Data

Item 7. Management’s Discussion and Analysis of Financial Condition & Results of Operations

The following discussion and analysis of our financial condition and results of operations is provided to enhance the understanding of, and should be read together with, our consolidated financial statements and the notes to those statements that appear elsewhere in this Annual Report on Form 10-K. This discussion contains

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forward-looking statements that involve risks and uncertainties. For additional information regarding some of the risks and uncertainties that affect our business and the industry in which we operate, please read “Risk Factors,” included elsewhere in this Annual Report on Form 10-K. Unless otherwise specifically noted, all years refer to the Company’sour fiscal year which ends on June 30.

Overview

We are a leading provider of information-based systems, integrated solutions and services to the U.S. government. We derived approximately 94%94.2% of our revenues during the year ended June 30, 20062007 from contracts with U.S. government agencies, including approximately 73 percent71.9% from DoD customers, and approximately 21 percent22.3% from U.S. federal civilian agencies customers including the Department of Homeland Security. We also provide services to state and local governments and commercial customers.

For the year ended June 30, 2006,2007, approximately 83%82.1% of our U.S. government revenue was from contracts where we were the lead, or “prime,” contractor. Our diverse contract base has approximately 600 active contracts and more than 2,2002,500 active task orders. For the year ended June 30, 2006,2007, no single task order or contract accounted for more than 10 percent of our revenue.revenues. We have a diverse mix of contract types, with approximately 51%52.7%, 29%27.4%, and 20%19.9% of our revenues for the year ended June 30, 2006,2007, derived from time-and-materials, cost-plus and fixed-price contracts, respectively. We generally do not pursue fixed-price software development contracts that may create financial risk.

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Application of these policies is particularly important to the portrayal of our financial condition and results of operations. The following are considered our critical accounting policies:

Revenue Recognition/Contract Accounting

The Company generates essentiallyWe generate almost all of itsour revenue from three different types of contractual arrangements: cost-plus-fee contracts;contracts, time-and-materials contracts;contracts, and fixed-price contracts. Revenue on cost-plus-fee contracts is recognized to the extent of allowable costs incurred plus an estimate of the applicable fees earned. The Company considersWe consider fixed fees under cost-plus-fee contracts to be earned in proportion to the allowable costs incurred in performance of the contract. For cost-plus-fee contracts that include performance based fee incentives, and that are subject to the provisions of Statement of Position 81-1,Accounting for Performance of Construction-Type and Certain Production-Type Contracts (SOP(SOP 81-1), the Company recognizeswe recognize the relevant portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such as the Company’sour prior award experience and communications with the customer regarding performance. For such cost-plus-fee contracts subject to the provisions of U.S. Securities &and Exchange Commission Staff Accounting Bulletin No. 104,Revenue Recognition (SAB 104), the Company recognizeswe recognize the relevant portion of the fee upon customer approval. Revenue on time-and-material contracts is recognized to the extent of billable rates times hours delivered plus allowable expenses incurred.

The Company hasWe have four basic categories of fixed price contracts;contracts: fixed unit price;price, fixed price-level of effort;effort, fixed price-completion;price-completion, and fixed price-license. Revenue on fixed unit price contracts, where specified units of output under service arrangements are delivered, is recognized as units are delivered based on the specified price per unit. Revenue on fixed unit price maintenance contracts is recognized ratably over the length of the service period. Revenue for fixed price levelprice-level of effort contracts is recognized based upon the number of units of labor actually delivered multiplied by the agreed rate for each unit of labor.

A significant portion of the Company’sour fixed price-completion contracts involve the design and development of complex client systems. For these contracts that are within the scope of SOP 81-1, revenue is

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recognized on the percentage of completion method using costs incurred in relation to total estimated costs. For fixed price-completion contracts that are not within the scope of SOP 81-1, revenue is generally recognized ratably over the service period. The Company’sOur fixed price licenseprice-license agreements and related services contracts are primarily executed in itsour international operations. As the agreements to deliver software require significant production, modification or customization of software, revenue is recognized using the contract accounting guidance of SOP 81-1. For agreements to deliver data under license and related services, revenue is recognized as the data is delivered and services are performed. Except for losses on time-and-material contracts accounted for under SAB 104, provisions for estimated losses on uncompleted contracts are recorded in the period such losses are determined. Projected losses on time-and-material contracts accounted for under SAB 104 are recognized as the services and materials are provided.

Our contracts may include the provision of more than one of our services. In these situations, we recognize revenue in accordance with FASB’s Emerging Issues Task Force (EITF) Issue 00-21,Revenue Arrangements with Multiple Deliverables. Accordingly, for applicable arrangements, revenue recognition includes the proper

identification of separate units of accounting and the allocation of revenue across all elements based on relative fair values, with proper consideration given to the guidance provided by other authoritative literature.

Contract accounting requires judgment relative to assessing risks, estimating contract revenues and costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is complicated and subject to many variables. Contract costs include material, labor, subcontracting costs, and other direct costs, as well as an allocation of allowable indirect costs. Assumptions have to be made regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials. For contract change orders, claims or similar items, we apply judgment in estimating the amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is considered probable. Incentives or penalties related to performance on contracts are considered in estimating sales and profit rates, and are recorded when there is sufficient information for us to assess anticipated performance. Estimates of award fees for certain contracts may also be a factor in estimating revenue and profit rates based on actual and anticipated awards.

Products and services provided under long-termLong-term development and production contracts make up a large portion of our business, and therefore the amounts we record in our financial statements using contract accounting methods and cost accounting standards are material. For our federal contracts, we follow U.S. Governmentgovernment procurement and accounting standards in assessing the allowability and the allocability of costs to contracts. Due to the significance of the judgments and estimation processes, it is likely that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. We closely monitor compliance with, and the consistent application of, our critical accounting policies related to contract accounting. Business operations personnel conduct thorough periodic contract status and performance reviews. When adjustments in estimated contract revenues or costs are required, any significant changes from prior estimates are generally included in earnings in the current period. Also, regular and recurring evaluations of contract cost, scheduling and technical matters are performed by management personnel who are independent from the business operations personnel performing work under the contract. Costs incurred and allocated to contracts with the U.S. Governmentgovernment are scrutinized for compliance with regulatory standards by our personnel, and are subject to audit by the Defense Contract Audit Agency (DCAA).DCAA.

From time to time, we may proceed with work based on client direction prior to the completion and signing of formal contract documents. We have a formal review process for approving any such work. Revenue associated with such work is recognized only when it can be reliably estimated and realization is probable. We base our estimates on previous experiences with the client, communications with the client regarding funding status, and our knowledge of available funding for the contract or program.

Costs of Revenue

Costs of revenue include all direct contract costs as well as indirect overhead costs and selling, general and administrative expenses that are allowable and allocable to contracts under federal procurement standards. Costs of revenue also include costs and expenses that are unallowable under applicable procurement standards, and thus are not allocable to contracts for billing purposes. Such costs and expenses do not directly generate revenues, but are necessary for business operations.

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Allowance For Doubtful Accounts

Management establishes bad debt reserves against certain billed receivables based upon the latest information available to determine whether invoices are ultimately collectible. Whenever judgment is involved in determining the estimates, there is the potential for bad debt expense and the fair value of accounts receivable to be misstated. Given that we primarily serve the U.S. Governmentgovernment and that, in our opinion, we have sufficient controls in place to properly recognize revenue, we believe the risk to be relatively low that a misstatement of accounts receivable would have a material impact on our financial results. Accounts receivable balances are written-off when the balance is deemed uncollectible after exhausting all reasonable means of collection.

Goodwill Valuation

AcquisitionsGoodwill represents the excess of costs over fair value of assets of businesses have constituted a major portion of the Company’s historical growth, and as a result goodwill has increased over the years to represent a significant portion of both our long-term and total assets. We account for our goodwill underacquired. Effective July 1, 2001, we adopted SFAS No. 142,Goodwill and Other Intangible Assets, (FAS(SFAS No. 142), which establishes financial accounting and reporting for acquired goodwill and other intangible assets. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires anthat intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment only approach to accountingin accordance with SFAS No. 144,Accounting for goodwill.Impairment or Disposal of Long-Lived Assets(SFAS No. 144).

The FAS 142 goodwill impairment model is a two-step process. First, it requires a comparison of the book value of net assets to the fair value of the related operations that have goodwill assigned to them. If the fair value is determined to be less than book value, a second step is performed to compute the amount of the impairment. In this process, a fair value for goodwill is estimated, based in part on the fair value of the operations used in the first step, and is compared to its carrying value. The shortfall of the fair value below carrying value represents the amount of goodwill impairment. FASSFAS No. 142 requires that goodwill be tested annually for impairment at the same date every year, and also when an event occurs or circumstances changereporting unit level at least annually, utilizing a two-step methodology. The initial step requires us to assess whether indications of impairment exist. If indications of impairment are determined to exist, the second step of measuring impairment is performed, wherein the fair value of the relevant reporting unit is compared to the carrying value, including goodwill, of such that itunit. If the fair value exceeds the carrying value, no impairment loss is reasonably possible that an impairment may exist. The Company has selected June 30 asrecognized. However, if the carrying value of the reporting unit exceeds its annual testing date.fair value, the goodwill of the reporting unit is impaired.

We estimate the fair valuesperform our annual testing for impairment of the Company’s operations using discounted cash flows. Forecasts of future cash flows are based on our estimates of future revenuesgoodwill and operating costs related to contract backlog and fundings, historical operating margins, recompete win rates, the length of customer relationships, and assessments of the market conditions surrounding the government information technology services industry. These estimates are subject to review and approval by our senior management. Changes in these forecasts could cause the Company to either pass or fail the first step in the FAS 142 goodwill valuation model, which could result in impairment.

The cash flow forecasts are adjusted by an appropriate discount rate derived from our market capitalization plus a suitable control premium at the date of evaluation. Therefore, changes in the stock price may also affect the requirement to recognize an impairment, and the amount of such impairment, if any. Asother intangible assets as of June 30 2006, a 10 percent increase or decrease in the value of our common stock would have hadeach year. Based on testing performed as of June 30, 2007, there were no impact on the consolidated financial statements.indications of impairment.

Stock-Based Compensation

Effective July 1, 2005,We issue stock settled stock appreciation rights (SSARs) (non-qualified stock options (NQSOs) through May 2007) and shares of restricted stock, on an annual basis to our directors and key employees under our 2006 Stock Incentive Plan. We also issue equity instruments in the Company adopted FAS 123Rform of restricted stock units (RSUs) under our Management Stock Purchase Plan and Director Stock Purchase Plan. With the exception of SSARs that are granted with a market-based vesting feature, compensation expense attributable to SSARs and NQSOs is generally computed using the modified retrospective application transition method. PriorBlack-Scholes valuation model. SSARs containing market-based vesting features are valued with a binomial lattice model. Assumptions relating to July 1, 2005,volatility are based on an analysis of our historical volatility. Through June 30, 2007, assumptions related to the Company had accounted for stock-based compensation usingexpected term of NQSOs were based on a safe-harbor approach which allowed companies to assume an expected term at the intrinsic method, under Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees (APB No 25), as amended by FASB Interpretation No. 44,Accounting for Certain Transactions Involving Stock Compensation.mid-point between the end of the vesting period and the final expiration of the NQSOs. Beginning with SSARs issued during the year ending June 30, 2008, the safe harbor is no longer permissible and the expected term of SSARs issued during the year ending June 30, 2008 that do not contain market-based features will be based on an analysis of our historical NQSO exercises. The Company also followed the disclosure provisionsexpected lives of SFAS No. 123,Accounting for Stock Based Compensation (FAS 123)SSARs containing market-based vesting features will be based on both historical exercise trends and reported the pro-forma impact ofexpected exercise rates at various stock option expense in the footnotes to its consolidated financial statements.price levels.

Under the modified retrospective application method, the Company has restated its consolidated statements of operations, comprehensive income, and cash flows for eachterms of the yearsSSAR/stock option and RSU/restricted stock agreements, grantees retiring at or after age 65 will vest in 100 percent of their awards. We recognize the three-year period ended June 30, 2005,expense associated with stock options, SSARs, restricted stock and its consolidated balance sheets as of June 30, 2005 and 2004. Restatements of selected footnote disclosuresRSUs granted to the consolidated financial statements included with the Company’s Annual Report on Form 10-K/A as filed with the U.S. Securities and Exchange Commission on September 21, 2005,employees who have also been made. These restated consolidated financial statements and notes were filed under a Form 8-K with the Securities and Exchange Commission on June 6, 2006. The accompanying consolidated financial statements as of and for each yearreached age 65 in the two-year period ended June 30, 2005, and affected footnotes therewith, reflect the impact of the retrospective application of FAS 123R.

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In applying the new accounting standard retrospectively, the Company has calculated the cumulative impact of stock-based compensation expense as though it had adopted the provisions of FAS 123 effective July 1, 1995. The impact of stock-based compensation expense on net earnings, comprehensive income, deferred income taxes, additional paid-in-capital, and cash flows for all equity grants made since this date have been calculated. The impacts on the statements of operations, cash flows and comprehensive income for the years ended June 30, 2005 and 2004, are as follows:

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The Company also restated its consolidated balance sheet as of June 30, 2005. The cumulative effects on deferred tax assets, additional paid-in-capital, and retained earnings as of these dates are as follows:

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the following assumptions:

The expected term of the option grants represents the period of time options are expected to be outstanding and is based on the contractual term of the grant, vesting schedules, and past exercise behavior. The risk-free rates for periods within the contractual life of the option are based on the U.S. treasury yield curve in effectfull at the time of the respective grant.

In conjunction with its adoption of FAS 123R, the Company began recognizing We recognize the expense associated with stock options, SSARs restricted stock units (RSUs) and non-qualified stock options granted to employees that have reached, or are close to reaching, age 65, in accordance with Issue No. 19 of the FASB’s Emerging Issue Task Force (EITF) Bulletin No. 00-23,Issues Related to the Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44, (EITF 00-23, Issue 19). EITF 00-23 became effective in September 2000, and Issue 19 requires that the value of equity instruments awarded to employees that are eligible for retirement, and that contain terms which provide for immediate vesting upon retirement, be recognized in full upon grant. Issue 19 of EITF 00-23 also requires that the value of such equity instrumentsRSUs granted to employees nearing retirement age be recognized ratably over the period from the date of grant to the date the grantee is eligible for retirement. Immediate recognition of expense (theThis treatment is referred to as the non-substantive vesting method)method and is required under Issue 19 of EITF 00-23applied even whenif the granteeemployee has remained or plans to remain an employee of the Company beyond the eligible retirement age.

The Company did not, however, apply the non-substantive vesting method in recognizing stock-based compensation expense in its consolidated financial statements for the fiscal year ended June 30, 2005.

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Had the Company applied the provisions of Issue 19 of EITF 00-23 to its stock compensation expense, its net income and basic and diluted earnings per share for the fiscal year ended June 30, 2005, would have been affected as follows:

Issue 19 would have had no effect on the results of operations for the fiscal year ended June 30, 2004 as the provision granting full vesting to those retiring at or after age 65 has been included in grants made only since July 1, 2004.

For all RSU and stock option grants made on or after July 1, 2005, the Company is applying the non-substantive vesting method for stock-based compensation expense recognition purposes.

Information regarding the stock options and restricted stock unit activity during each of the years in the three-year period ended June 30, 2006, and information about assumptions underlying the valuation of equity instruments, and methods of expense recognition, are discussed in Note 20, Stock Plans and Stock Based Compensation, in the Notes to Consolidated Financial Statements contained in this Annual Report on Form 10-K.

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Results of Operations

The following table sets forth the relative percentages that certain items of expense and earnings bear to revenue.

Consolidated Statements of Operations

Years ended June 30, 2007, 2006, 2005, and 20042005

Revenue

For the fiscal year ended June 30, 2006, the Company’sFY2007, our total revenue increased by $132.3$182.6 million, or 8.110.4 percent. Approximately 3.41.2 percent, or $55.5$21.9 million, of revenue growth was organic and resulted from an increase in services provided to a broad base of Department of Defense (DoD), intelligence, and federal civilian agency customers. The remaining 4.79.2 percent increase, or $76.8$160.7 million, was from acquisitions completed in FY2006.FY2006 and FY2007.

During FY2005,FY2006, total revenue increased by $477.3$132.3 million, or 41.78.1 percent. Approximately $183.13.4 percent or $55.5 million of this growth was organic and resulted primarily from increases in services and solutions provided to our DoD customers. The remaining $294.24.7 percent or $76.8 million of the FY2005FY2006 revenue growth was generated by four businesses that were acquiredacquisitions completed in FY2004.FY2006.

Revenue generated from the date a business is acquired through the first anniversary of that date is considered acquired revenue growth. The Company’s acquisitionrevenue. Our acquired revenue for FY2006FY2007 and FY2005,FY2006 is as follows:follows (in millions):

Business Acquired		2007			2006
Information Systems Support, Inc. (ISS)		$	96.0		$	49.0
AlphaInsight			40.0			8.1
National Security Research, Inc. (NSR)			6.3			14.6
Others			18.4			5.1
Total		$	160.7		$	76.8

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The following table summarizes revenuesrevenue earned by each of the customer groups for the three most recent fiscal years:

Revenue from DoD customers increased 8.88.7 percent, or $103.3$111.2 million, to approximately $1,283 million$1.4 billion for FY2006FY2007 as compared to FY2005.FY2006. The aforementioned acquisitions accounted for approximately 52.781.6 percent of this growth, contributing $54.5$90.7 million. DoD revenue includes that earned for services provided to the USU.S. Army, itsour largest customer, where Companyour services focus on supporting readiness, tactical military intelligence, and communications of the warfightercombat operations in Iraq and Afghanistan. DoD revenue also includes work with the U.S. Navy, such as services to support the Navy’s automatic identification technologies and a mine countermeasure program that protects its fleet.

Revenue from DoD customers increased 8.8 percent, or $103.3 million, to approximately $1.3 billion for FY2006 as compared to FY2005. The aforementioned acquisitions accounted for approximately 52.7 percent of this growth, contributing $54.5 million.

Revenue from federal civilian agencies increased $57.3 million, or 15.3 percent, to $431.8 million during FY2007 as compared to FY2006. The primary revenue growth drivers in FY2005 compared to FY2004 was $407.3 million, or 52.8 percent. This growth was driven by the above referencedthis area came from acquisitions, and included $187.9 million attributed to the May 1, 2004, acquisitionwhich accounted for 83.1 percent of the D&IG. This growth is also attributed to increased demandsincrease. Approximately 15.4 percent of federal civilian agency revenue for the year was derived from the Company’s U.S. Army customers, particularlyDepartment of Justice (DoJ), for whom we provide litigation support services. Revenue from DoJ was $66.6 million in supportFY2007 versus $79.0 million in FY2006. The decrease in revenue earned from DoJ resulted primarily from the reduced level of tactical military intelligence, communications and logistical services provided to support both DoJ litigation efforts involving the Army missions in Iraqtobacco industry and Afghanistan. Work with the U.S. Navy remained strong during FY2005, with increased levelsDepartment of work coming from the growing presence in supporting naval aviation.Energy. Federal civilian agency revenue also includes services provided to non-DoD national intelligence agencies.

RevenueDuring FY2006 as compared to FY2005, revenue from federal civilian agencies increased $23.6 million, or 6.7 percent, to $374.5 million during FY2006 as compared to FY2005.million. The primary revenue growth drivers in this area came from acquisitions, which accounted for almost 60 percent of the increase. Approximately 21.1 percent of federal civilian agency revenue for the year was derived from the Department of Justice (DoJ), for whom the Company provides litigation support services and maintains a debt collection system.DoJ. Revenue from the DoJ was $79.0 million in FY2006 versus $92.7 million in FY2005. The decrease in revenue earned from the DoJ resulted from the conclusion, early in FY2006, of services provided to support DoJ litigation efforts involving the tobacco industry.

During FY2005Commercial revenue increased 24.9 percent, or $18.3 million, to $91.9 million in FY2007 as compared to FY2004, federal civilian agencyFY2006. Commercial revenue increased $49.2 million, or 16.3 percent. Acquisitionsis derived from both international and domestic operations. In FY2007, international operations accounted for all87.6 percent, or $80.5 million, of the growth during FY2005, withtotal commercial revenue, while the majority of growth contributeddomestic operations accounted for 12.4 percent, or $11.4 million. The increase in Commercial revenue was primarily from our operations in the United Kingdom (U.K.), which increased by systems28.2 percent, or $17.7 million. Growth in the U.K. was generated by two acquisitions completed in FY2006 and analysis services provided by the D&IG to various intelligence agencies.favorable exchange rates.

Commercial revenue increased 8.1 percent, or $5.5 million, to $73.6 million in FY2006 as compared to FY2005. Commercial revenue is derived from both international and domestic operations. In FY2006, international operations accounted for 85.3 percent, or $62.8 million, of the total commercial revenue, while the domestic operations accounted for 14.7 percent, or $10.8 million. The increase in Commercialcommercial revenue was primarily from our U.K. operations, which increased by 12.5 percent, or $7.0 million.

Growth in the U.K. was generated by two acquisitions completed in FY2006, and from increased sales by its marketing systems group that supplies demographic software and data services. This increase was partly offset by a downturn in domestic Commercialcommercial revenue primarily from a decrease in the level ofdue to software sales and services.

During FY2005 Commercial revenue increased 22.3Revenue from state and local governments decreased by 16.5 percent, or $12.4$4.1 million during FY2007, as compared to FY2004.FY2006. The increase was primarilydecrease is attributable to international operations within the U.K., which showed growtha decreased demand for our information technology services that were provided across a number of states. In FY2006 as compared to FY2005, revenue from its marketing systems group that supplies demographic softwarestate and data services. Growth in the U.K. during FY2005 was also attributed to increased sales of its software services business to customers in the retail and telecommunications industries.

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Revenue from State and Local Governmentslocal governments decreased by 0.7 percent, or $0.2 million during FY2006, as compared to FY2005.million. The main driver of the decrease was the downturn of contract work withwithin two state contracts during the fourth quarter of FY2006. In FY2005 as compared to FY2004, revenue from State and Local Governments increased by 50.6 percent, or $8.3 million. Approximately one-third of this increase, or $2.7 million, was related directly to the March 2004 acquisition of CMS. The balance of the growth resulted from increased demand for information technology services provided across a number of states. Revenue from Statestate and Local Governmentslocal governments represented 1.1 percent and 1.4 percent and 1.5 percent of the Company’sour total revenue in FY2007 and FY2006, and FY2005, respectively. The Company’sOur continued and expanded focus on DoD and federal civilian agency opportunities has resulted in a relatively reduced emphasis on Statestate and Local Governmentlocal government business.

Income from Operations. Operating income decreased 2.9 percent, or $4.4 million, in FY2007 as compared to FY2006. Our operating margin in FY2007 was 7.5 percent compared to 8.6 percent a year earlier. The decline in income from operations as a percentage of revenue was due primarily to an increase in subcontract labor and materials as a percent of total direct costs. These generate a lower margin than our direct labor. In FY2006 as compared to FY2005, operating income increased 5.7 percent, or $8.1 million, in FY2006 as compared to FY2005. The Company’smillion. Our operating margin in FY2006 was 8.6 percent compared to 8.8 percent a year earlier. TheThis decrease in margin rate also relates primarily to an increase in subcontract labor and materials as a higher mixpercent of othertotal direct costs (ODCs) including equipment purchases and subcontractor services, relative to direct professional service costs. These ODCs produce lower gross margins as compared to services provided directly by Company employees. In FY2005 as compared to FY2004, operating income increased 49.5 percent, or $47.0 million. Operating margin in FY2005 improved to 8.8 percent from 8.3 percent a year earlier. This improvement was driven by the higher margins provided by the D&IG acquisition, economies of scale related with acquisitions, and the growth in high-margin national security and intelligence services.

During the fiscal years ended June 30, 2007, 2006 2005 and 2004,2005, as a percentage of revenue, total direct costs were 65.4 percent, 64.6 percent 62.8 percent and 61.862.8 percent, respectively. The year-to-year increases in direct costs as a percentage of revenue have been driven primarily by an increase in cost-plus contract content as a percent of revenue earned from all contract types, and an increase in the use of subcontractors. DirectThese costs include direct labor and “other direct costs” such as equipment purchases, subcontract costs and travel expenses. Other direct costs, which are common in our industry, are typically are incurred in response to specific client tasks and may vary from period to period.

The single largest component of direct costs, direct labor, was $548.5 million, $507.5 million and $490.4 million in FY2007, FY2006 and $346.2 million in FY2006, FY2005, and FY2004, respectively. The increase in direct labor during the last three fiscal years is attributable to the internal growth in the Company’sour federal government business both in the DoD and federal civilian agencies, and to acquisitions. Other direct costs, which include, among other costs, subcontractor labor and materials along with equipment purchases and travel expenses, were $719.1 million, $627.4 million, and $529.1 million in FY2007, FY2006 and $362.2 million in FY2006, FY2005, and FY2004, respectively. The year over year increase was primarily the result of increased volume of tasking across system integration, knowledge management and engineering services including the aforementioned acquisitions.

Indirect costs and selling expenses include fringe benefits, marketing and bid and proposal costs, indirect labor and other discretionary costs. Many of these expenses are highly variable and have grown in dollar volume generally in proportion to the growth in revenue. As a percentage of revenue, indirect costs and selling expenses were 25.1 percent, 24.9 percent 26.4 percent and 28.2 percent26.4percent for FY2007, FY2006 FY2005 and FY2004,FY2005, respectively. The decreasefluctuation in percentage experienced during the two most recentthese fiscal years is primarily the result of the Company’s success in integrating acquired businesses while controlling itsour various indirect and general and administrative expenses in these periods of growth.

Another A component of indirect costs and selling expenses is stock compensation. Under its 1996 Stock Incentive Plan, the Company grants non-qualified stock options, shares of restricted stock, and restricted stock units to senior executives and officers as a form of long-term incentive compensation. Total stock compensation expense was $13.0 million, $15.5 million, $11.2 million, and $9.8$11.2 million for the fiscal years ended June 30, 2007, 2006, and 2005, and 2004, respectively.

The $4.3 million increasedecrease in stock compensation expense from FY2005FY2006 to FY2006FY2007 was due primarily to the accelerated expense recognition for certainfewer grants issued in which employees become fully vested in the award upon retirement at or after

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age 65. The increased expense is also attributedFY2007 as compared to a greater value of options and RSUs granted in FY2006 versus FY2005. The increase of $1.4 million from FY2004 to FY2005 was primarily the result of a greater level of RSU grants issued.FY2006.

Depreciation and amortization expense increased $1.4$5.6 million, or 4.416.9 percent, in FY2006FY2007 as compared to FY2005.FY2006. The increase was primarily attributable to the amortization of the identifiable intangible assets acquired with the five business combinations completed during FY2006.FY2006 and one completed during May of FY2007. In FY2005FY2006 as compared to FY2004,FY2005, depreciation and amortization expense increased $13.0$1.4 million or 68.2 percent. This4.4 percent primarily from the amortization of acquired intangible assets.

Net interest expense increased $3.3 million, or 19.1 percent in FY2007, as compared to FY2006. The primary driver for the increase was attributable to an $11.0 millionapproximate 1.0 percent increase in intangible asset amortization, primarily that pertaining to the May 2004 acquisitionweighted-average interest rate, excluding the effects of two interest rate swap agreements, of our average borrowings. Net interest expense also increased as a result of the D&IG.issuance of $300 million of convertible notes in May 2007. The remaining increasehigher interest expense was partially offset by interest income generated from cash on hand. We had outstanding borrowings of approximately $2.0$643.4 million was for new capital expenditures and building improvements made in supportat June 30, 2007. We are required to repay a minimum of on-going business operations.$3.5 million annually through FY2010 under the terms of our credit facility.

InterestNet interest expense increased $2.5 million or 17.0 percent in FY2006 as compared to FY2005. The primary driver for the increase was due to an approximate 1.5 percent increase in the weighted-average interest rate, excluding the effects of two interest rate swap agreements, as it applies to the Company’sof our average borrowings. Higher interest expense also resulted from borrowings of $25 million to supplement available cash necessary to complete the acquisition of ISS.AlphaInsight. The higher interest expense was partially offset by interest income generated from cash on hand. The Company had outstanding borrowings of $367.1 million at June 30, 2006. The Company is required to repay a minimum of $3.5 million annually under the terms of its credit facility.

Interest expense increased $13.0 million in FY2005 as compared to FY2004. The majority of this increase was due to a full year of interest costs relating to the Company’s borrowings in May 2004 of $422.6 million under its credit facility which was used to finance the purchase of the D&IG. For FY2004, the Company incurred approximately two months of interest under the credit facility described above. Prior to May 2004, the Company was able to fund its operations from proceeds received from its March 2002 secondary offering, available cash and equivalents and operating cash flows.

The effective income tax rates in FY2007, FY2006 and FY2005, and FY2004, were 37.3 percent, 36.2 percent 37.4 percent and 38.137.4 percent, respectively. The lowerhigher tax rate in FY2006FY2007 as compared to the prior two fiscal yearsFY2006 reflects thea reduction in benefits realized from increasing research and development credits and lowerhigher state taxes. The research and development credits were generated primarily from activities of the D&IG business.taxes based upon recently filed tax returns.

Quarterly Financial Information

Quarterly financial data for the two most recent fiscal years is provided in Note 23,note 24, Quarterly Financial Data, in the Notes to Consolidated Financial Statements contained in this Annual Report on Form 10-K.10-K.

Effects of Inflation

Based on the Company’sour contract mix reported for FY2006,FY2007, approximately 2927 percent of the Company’sour business is conducted under cost-reimbursable contracts which automatically adjust revenue to cover costs that are affected by inflation. Approximately 5153 percent of our revenue is earned under time-and-material contracts, where labor rates for many of the services provided under time-and-material contracts, are often fixed for several years. Under certain time-and-material contracts containing indefinite-delivery, indefinite-quantity procurement arrangements, the Company doeswe do adjust labor rates annually as permitted. The remaining portion of the Company’sour business is fixed-price and may span multiple years. The CompanyWe generally hashave been able to price itsour time-and-materials and fixed-price contracts in a manner that accommodates the rates of inflation experienced in recent years.

Liquidity and Capital Resources

Historically, the Company’sour positive cash flow from operations and itsour available credit facilities have provided adequate liquidity and working capital to fund the Company’sour operational needs. Cash flows from

operations totaled $168.0 million, $107.1 million $126.6 million and $71.7$126.6 million for the years ended June 30, 2007, 2006 2005 and 2004,2005, respectively.

32Effective May 16, 2007, we issued an aggregate of $300.0 million of 2.125% convertible senior subordinated notes (the Notes) that mature on May 1, 2014 in a private placement pursuant to Rule 144A of the Securities Act of 1933. The Notes are subordinate to our senior secured debt, and interest on the Notes is payable on May 1 and November 1 of each year. We have filed a registration statement with the SEC to register resales of the Notes and the common stock issuable upon conversion of the Notes, and expect that the registration statement will be effective no later than November 12, 2007, 180 days from the date of closing.

Holders may convert their notes at a conversion rate of 18.2989 shares of CACI common stock for each $1,000 of note principal (an initial conversion price of $54.65 per share) under the following circumstances: 1) if the last reported sale price of CACI stock is greater than or equal to 130% of the conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; 2) during the five consecutive business day period immediately after any five consecutive trading day period (the note measurement period) in which the average of the trading price per $1,000 principal amount of

Between March 2002convertible note was equal to or less than 97% of the average product of the closing price of a share of our common stock and May 2004,the conversion rate of each date during the note measurement period; 3) upon the occurrence of certain corporate events, as defined; or 4) during the last three-month period prior to maturity. We are required to satisfy 100% of the principal sourceamount of liquiditythese notes solely in cash, with any amounts above the principal amount to be satisfied in common stock. As of June 30, 2007, none of the conditions permitting conversion of the Notes had been satisfied.

In the event of a fundamental change, as defined, holders may require us to repurchase the Notes at a price equal to the principal amount plus any accrued interest. Also, if certain fundamental changes occur prior to maturity, we will in certain circumstances increase the conversion rate by a number of additional shares of common stock or, in lieu thereof, we may in certain circumstances elect to adjust the conversion rate and capitalrelated conversion obligation so that these notes are convertible into shares of the acquiring or surviving company. We are not permitted to fund business acquisitions wereredeem the Notes.

The contingently issuable shares are not included in our diluted share count for the fiscal year ended June 30, 2007, because our average stock price during that period was below the conversion price. Debt issuance costs of approximately $7.3 million are being amortized to interest expense over seven years. Upon closing of the sale of the Notes, approximately $45 million of the net proceeds was used to concurrently repurchase one million shares of our common stock.

In connection with the issuance of the Notes, we purchased in a private transaction at a cost of $84.4 million call options (the Call Options) to purchase approximately 5.5 million shares of our common stock at a price equal to the conversion price of $54.65 per share. The Call Options allow us to receive shares of our common stock from the counterparties equal to the amount of common stock related to the excess conversion value that we would pay the holders of the Notes upon conversion.

For income tax reporting purposes, the Notes and the Call Options are integrated. This creates an original issue discount for income tax reporting purposes, and therefore the cost of the Call Options will be accounted for as interest expense over the term of the Notes for income tax reporting purposes. The associated income tax benefit of $32.8 million to be realized for income tax reporting purposes over the term of the Notes has been reflected as an increase in additional paid-in-capital and a long-term deferred tax asset.

In addition, we sold warrants (the Warrants) to issue approximately 5.5 million shares of CACI common stock at an exercise price of $68.31 per share. The proceeds from the Company’s March 2002 offeringsale of 4.9 million sharesthe Warrants totaled $56.5 million.

On a combined basis, the Call Options and the Warrants are intended to reduce the potential dilution of CACI’s common stock. The Company raised $161.5 million from this offering, and during the period between March 2002 and May 2004, invested approximately $170.2 millionstock in the acquisition of eight businesses. Operating cash flows and borrowings under credit facilities were used to supplementevent that the offering proceeds, as necessary, to fundNotes are converted by effectively increasing the acquisitionconversion price of these eight businesses.notes from $54.65 to $68.31. The Call Options are anti-dilutive and are therefore excluded from the calculation of diluted shares outstanding. The Warrants will result in additional diluted shares outstanding if our average common stock price exceeds $68.31. The Call Options and the Warrants are separate and legally distinct instruments that bind us and the counterparties and have no binding effect on the holders of the Notes.

To fund the acquisition of the D&IG, the Company entered intoWe also maintain a $550 million credit facility (the 2004 Credit Facility), which includes a $200 million revolving credit facility (the revolving facility)Revolving Facility), and a $350 million institutional term loan (the term loan)Term Loan). The initial borrowings under the 2004 Credit Facility were $422.6 million, of which $367.1$338.6 million was outstanding under the term loanTerm Loan at June 30, 2006. During the fiscal year ended June 30, 2006, the Company received $25.0 million in advances from borrowings under the revolving facility.2007.

The revolving facilityRevolving Facility is a five-year, secured facility that permits continuously renewable borrowings of up to $200 million, with annual sublimits on amounts borrowed for acquisitions. The revolving facilityRevolving Facility also contains an accordion feature under which the Company may borrow up to an additional $100 million with prior lender approvals. The revolving facilityRevolving Facility permits one, two, three and six month interest rate options, and repayment of any outstanding balances is due in full May 2, 2009. The Company paysWe pay a fee on the unused portion of the

facility. During the year ended June 30, 2007, we paid down borrowings of $25.0 million under the Revolving Facility and there was no outstanding balance under the Revolving Facility at June 30, 2007.

The term loanTerm Loan portion of the 2004 Credit Facility is a seven-year secured facility under which principal payments are due in quarterly installments of $0.875$0.9 million at the end of each fiscal quarter through March 2011, and the balance of $325.5 million is due in full on May 2, 2011.

Interest rates for both the revolving creditRevolving Facility and term-loanTerm Loan borrowings are based on LIBOR, or the higher of the prime rate, or federal funds rate, plus applicable margins. Margin and unused fee rates are determined quarterly based on the Company’sour leverage ratios. The Company isWe are expected to operate within certain limits on leverage, net worth and fixed-charge coverage ratios throughout the term of the 2004 Credit Facility. The total costs associated with securing the 2004 Credit Facility, as amended, were approximately $8.2$8.7 million, and are being amortized over the life of the 2004 Credit Facility.

In May 2005, the Company amended the 2004 Credit Facility by reducing the margins applicable to the LIBOR and prime and federal funds rate factors, and in June 2005 entered an interest rate swap agreement covering a portion of the outstanding term loan balance. The Company incurred approximately $0.5 million of fees to amend the 2004 Credit Facility, which has been capitalized and is being amortized over the remaining term of the 2004 Credit Facility.

The Company also hasWe have amounts due under a lease agreementsagreement classified as a capital leaseslease for reporting purposes and amounts due under a mortgage note payable, and maintainspayable. We also maintain a line of credit facility in the United Kingdom. The total amount of reported principal due under the capital lease agreementsagreement and the mortgage note payable was $1.6$0.7 million at June 30, 2006.2007. The total amount available under the line-of-credit facility in the U.K., which is scheduled to expire in December 2006,2007, is approximately $0.9$1.0 million. As of June 30, 2006,2007, the Company had no borrowings under this facility.

Cash and cash equivalents were $24.7$285.7 million and $133.0$24.7 million as of June 30, 2007 and 2006, respectively. Cash and 2005, respectively.cash equivalents at June 30, 2007 includes $49.0 million of cash paid in July 2007 in connection with the acquisition of WGI. Working capital was $238.5$414.0 million and $284.2$238.5 million as of June 30, 2007 and 2006, and 2005, respectively. The Company’sOur operating cash flow was $107.1$168.0 million for FY2006,FY2007, compared to $126.6$107.1 million for the same period a year ago. The current year decreaseincrease in operating cash flow results in partfrom both strong collection activity from receivables billed during the year and the timing of certain large dollar subcontractor payments. Days-sales outstanding improved to delays in contract fundings by the U.S. government. Including the Company’s recent acquisitions, days-sales-outstanding were 7466 at June 30, 2006,2007, compared to 7074 for the same period a year ago. Excluding the impact of the acquisitions, days-sales-outstanding were 71 as of June 30, 2006.

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The CompanyWe used $259.1$116.2 million and $16.6$259.1 million of cash in investing activities during FY2006FY2007 and FY2005,FY2006, respectively. The significant increasedecrease in FY2004FY2007 was attributed to $244.3 million used to complete fivedecreased acquisitions during the year. During FY2005, the Company paid $3.7 millionWe completed two acquisitions, IQM and WGI, in FY2007 as compared to acquire a company within its U.K. operations and also made a $4.0 million earn-out payment relating to an acquisition within its U.S. operations. There were no other acquisition-related payments made during FY2005.five acquisitions in FY2006.

Purchases of office and computer related equipment of $7.9 million and $9.5 million in FY2007 and $8.8 million in FY2006, and FY2005, respectively, accounted for thea majority of the remaining funds used in investing activities. We have relatively low capital expenditure requirements for our business, and expect these expenditures in the coming years to remain consistent with the levels reported in recent fiscal years.

Cash provided by financing activities totaled $208.0 million and $43.3 million during FY2007 and FY2006, while net cash used inrespectively. During FY2007 financing activities totaled $40.0reflect the sale of the Notes. We used $45.5 million in FY2005.of cash from the sales of the Notes to repurchase one million shares of our common stock. Cash provided by financing activities during FY2006 consisted primarily of a $25 million borrowing under the revolving facilityour Revolving Facility that was made to help finance the FY2006 acquisition of ISS on March 1, 2006. Financing activity cashAlphaInsight. This Revolving Facility borrowing was also provided by proceeds received from stock option exercises andrepaid during the related tax benefits, as described below. Cash used in financing activities during FY2005 resulted primarily from the repaymentfirst quarter of borrowings under the revolving facility. These borrowings had been made to help finance the acquisition of the D&IG in May 2004, and the Company applied cash generated during FY2005 to repay $65.7 due under various debt arrangements, including $62 million repaid under the revolving facility. During FY2005, the financing cash proceeds were also generated by stock option exercises and the related tax benefits, which partially offset the net financing cash used to repay outstanding borrowings.FY2007.

Cash flows from financing activities continued to benefit from proceeds received from the exercise of stock options, and purchases of stock under the Company’sour employee stock purchase plan. Proceeds from these activities totaled $13.9 million and $17.6 million during FY2007 and $23.6 million during FY2006, and FY2005, respectively. These were offset by cash used to purchase stock to fulfill obligations under the employee stock purchase plan. Cash used to acquire stock under the employee stock purchase plan was $4.7 million and $7.5 million during FY2007 and $8.4 million during FY2006, and FY2005, respectively.