ACS to Take $76 million Impairment Charge on Dept of Ed Contract

In a filing with the SEC on Friday, Affiliated Computer Services said that they will be taking a charge due to a change in a BPO contract with the Department of Education.

In November 2003, ACS was awarded a contract by the Department of Education in connection with the Department’s "Common Services for Borrowers" initiative. Under the CSB Contract, ACS provides comprehensive loan servicing, consolidation loan processing, debt collection services on delinquent accounts, IT infrastructure operations and support, maintenance and development of information systems, and portfolio management services for the Department’s Direct Student Loan program. ACS also develops software for use in delivering these services.

ACS previously announced that a change was being considered in the model for development of software under the CSB Contract. The company has now concluded discussions with the Department of ED and has agreed to cease development of certain software contemplated under the CSB Contract. As a result of the decision to cease development, ACS will record a non-cash impairment charge of approximately $76 million (approximately $48 million net of income tax) related to in-process capitalized development costs. This charge will be recorded in the fourth quarter of fiscal year 2007 ending June 30, 2007.

ACS continues to provide comprehensive loan servicing, consolidation loan processing, debt collection services on delinquent accounts, IT infrastructure operations and support, maintenance and enhancement of information systems, and portfolio management services under the CSB Contract.