Forward Looking Statements

There are statements made herein which do not address historical facts and, therefore, could be interpreted to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those anticipated include, but are not limited to, the following: regional and national economic conditions in the United States and the United Kingdom, including conditions that result from terrorist activities or war; changes in interest rates; currency fluctuations; significant fluctuations in the equity markets; failure to achieve contract awards in connection with re-competes for present business and/or competition for new business; the risks and uncertainties associated with client interest in and purchases of new products and/or services; continued funding of U.S. government or other public sector projects, based on a change in spending patterns, or in the event of a priority need for funds, such as homeland security, the war on terrorism or rebuilding Iraq; government contract procurement (such as bid protest, small business set asides, loss of work due to organizational conflicts of interest etc.) and termination risks; the results of government investigations into allegations of improper actions related to the provision of services in support of U.S. military operations in Iraq; the results of government audits and reviews conducted by the Defense Contract Audit Agency or other governmental entities with cognizant oversight; individual business decisions of our clients; paradigm shifts in technology; competitive factors such as pricing pressures and/or competition to hire and retain employees (particularly those with security clearances); market speculation regarding our continued independence; material changes in laws or regulations applicable to our businesses, particularly in connection with (i) government contracts for services, (ii) outsourcing of activities that have been performed by the government, (iii) competition for task orders under Government Wide Acquisition Contracts (GWACs) and/or schedule contracts with the General Services Administration; and (iv) accounting for convertible debt instruments; our own ability to achieve the objectives of near term or long range business plans; and other risks described in our Securities and Exchange Commission filings.

Overview

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 unaudited condensed consolidated financial statements and the notes to those statements that appear elsewhere in this Quarterly Report on Form 10-Q.

We are a leading provider of professional services and information technology solutions to the U.S. government. We derived 95.4% and 94.5% of our revenue during the three months ended September 30, 2008 and 2007, respectively, from contracts with U.S. government agencies. These were derived through both prime and subcontractor relationships. We also provide services to state and local governments and commercial customers. Our major service offerings are as follows:

• Enterprise IT and network services - We support our clients' critical networked operational missions by providing tailored end-to-end enterprise information technology services for the design, establishment, management, security and operations of client infrastructure. Our operational, analytic, consultancy and transformational services effectively use industry best practices and standards to enable and optimize the full life cycle of the networked environment, improve customer service, improve efficiency, and reduce total cost and complexity of large, geographically dispersed operations.

• Data, information and knowledge management services - We deliver a full spectrum of solutions and services that automate the knowledge management life cycle from data capture through information analysis and understanding. We provide commercially-based products, custom solutions development, and operations and maintenance services that facilitate information sharing. Our information technology solutions are complemented by a suite of analytical expertise support offerings for our U.S. government intelligence community, Department of Defense (DoD), Department of Justice (DoJ), and Homeland Security customers.

• Business system solutions - We provide solutions that address the full spectrum of requirements in the financial, procurement, human resources, supply chain and other business domains. Our solutions employ an integrated cross-functional approach to maximize investments in existing systems, while leveraging the potential of advanced technologies to implement new, high payback solutions. Our offerings include services, consulting and software development/integration that support the full life cycle of commercial technology implementation from blueprint through application sustainment.

• Logistics and material readiness services - We offer a full suite of solutions and service offerings that plan for, implement and control the efficient and effective flow and storage of goods, services and information in support of U.S. government agencies. We develop and manage logistics information systems, specialized simulation and modeling toolsets, and provide logistics engineering services. Our operational capabilities span the supply chain, including

• C4ISR integration services - We provide rapid response services in support of military missions in a coordinated and controlled operational setting. We support the military efforts to ensure delivery and sustainment of integrated, enterprise wide, Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) programs. We integrate sensors, mission applications and systems that connect with DoD data networks.

• Cyber security, information assurance, and information operations services - Our solutions and services support the full life cycle of preparing for, protecting against, detecting, reacting to and actively responding to the full range of cyber threats. We achieve this through comprehensive and consistently managed risk-based, cost-effective controls and measures to protect information operated by the U.S. government. We proactively support the operational use and availability/reliability of information.

• Integrated security and intelligence solutions - The United States, its partners and its allies around the world face state, non-state and transnational adversaries that do not recognize political boundaries; do not recognize international law; and will seek, through asymmetric and irregular means, ways to strike at seams in our national security. We assist clients in developing integrated solutions that close gaps between security, intelligence, and law enforcement in order to address complex threats to our national security.

• Program management and system engineering and technical assistance (SETA) services - We support U.S. government Program Executive Offices and Program Management Offices via subject matter experts and comprehensive technical management processes that optimize program resources. This includes translating operational requirements into configured systems, integrating technical inputs, characterizing and managing risk, transitioning technology into program efforts, and verifying that designs meet operational needs, through the application of internationally recognized and accepted standards. Additionally, we provide SETA and advisory and assistance services that include contract and acquisition management, operations support, architecture and system engineering services, project and portfolio management, strategy and policy support, and complex trade analyses.

In the near term, we face some uncertainties due to the current business environment. We continue to experience a number of protests of major contract awards. In addition, many of our federal government contracts require us to have security clearances and employ personnel with specific levels of education, work experience and security clearances. Depending on the level of clearance, security clearances can be difficult and time-consuming to obtain and competition for skilled personnel in the information technology services industry is intense. In addition, a shift of expenditures away from programs that we support could cause federal government agencies to reduce their purchases under contracts, to exercise their right to terminate contracts at any time without penalty, or to decide not to exercise options to renew contracts. Among the factors that could affect our federal government contracting business are the continued demand and priority of funding for combat operations in Iraq and Afghanistan, an increase in set-asides for small businesses, and budgetary priorities limiting or delaying federal government spending in general.

Our operations may also be affected by local, national and worldwide economic conditions. The consequences of a prolonged recession may include a lower level of government spending. Instability in the financial markets, as a result of recession or otherwise, also may affect the cost of capital and our ability to raise capital. We are already experiencing the impact of current economic conditions on our operations in the United Kingdom (UK). Our UK business is centered on providing marketing solutions to commercial customers who have been particularly impacted by the global economic slow down. In addition, our income tax expense for the three months ended September 30, 2008 was adversely impacted by non-deductible losses on assets invested in corporate-owned life insurance policies and may be impacted to a greater extent if the losses exceed our estimates.

Results of Operations for the Three Months Ended September 30, 2008 and 2007

Revenue. The table below sets forth revenue by customer type with related
percentages of total revenue for the three months ended September 30, 2008 and
2007, respectively:



                                   Three Months Ended September 30,                Change
 (dollars in thousands)               2008                   2007                $          %
 Department of Defense (DoD)   $   492,961    75.3 %   $ 405,797    73.3 %   $  87,164     21.5 %
 Federal civilian agencies         131,831    20.1       117,299    21.2        14,532     12.4
 Commercial and other               24,684     3.8        25,903     4.7        (1,219 )   (4.7 )
 State and local governments         5,284     0.8         4,581     0.8           703     15.3

 Total                         $   654,760   100.0 %   $ 553,580   100.0 %   $ 101,180     18.3 %

For the three months ended September 30, 2008, total revenue increased by 18.3%, or $101.2 million, over the same period a year ago. This growth in revenue resulted primarily from the higher volume of work from DoD and federal civilian agency customers and was generated both from organic growth and from acquisitions completed since September 30, 2007. Revenue generated from the date a business is acquired through the first anniversary of that date is considered acquired revenue. Our acquired revenue in the three months ended September 30, 2008 is as follows (in thousands):

                 Athena Innovative Solutions, Inc. (AIS)   $ 28.0
                 Dragon Development Corporation (DDC)         8.3
                 Other                                        5.1

                 Total                                     $ 41.4

Revenue from existing operations increased by 10.8%, or $59.8 million, for the three months ended September 30, 2008. This organic growth was driven by both an increase in our direct labor and an increase in other direct costs (ODCs). ODCs include work which we subcontract to third parties to meet customer needs.

DoD revenue increased 21.5%, or $87.2 million, for the three months ended September 30, 2008, as compared to the same period a year ago. The acquisitions we completed during our fiscal year ended June 30, 2008, generated $20.7 million of DoD revenue, while revenue from existing operations increased by $66.5 million. DoD revenue includes services provided to the U.S. Army, our largest customer, where our services focus on supporting readiness, tactical military intelligence, and communications of the commands in Iraq and Afghanistan. DoD revenue also includes work with the U.S. Navy and other DoD agencies across all of our major service offerings.

Revenue from federal civilian agencies increased 12.4%, or $14.5 million, for the three months ended September 30, 2008, as compared to the same period a year ago. Of this increase, $19.0 million was attributable to our acquisitions while revenue from existing operations decreased $4.5 million. The main reason for this decrease was the completion in the fiscal year ended June 30, 2008 of a single program for which we lost the recompete in the prior fiscal year. Approximately 14.0% of the federal civilian agency revenue for the quarter was derived from DoJ, for whom we provide litigation support services. Revenue from DoJ was $18.4 million and $18.2 million for the three months ended September 30, 2008 and 2007, respectively.

Commercial revenue decreased 4.7%, or $1.2 million, during the three months ended September 30, 2008, as compared to the same period a year ago. Commercial revenue is derived from both international and domestic operations. International operations accounted for 90.9%, or $22.4 million, of total commercial revenue, while domestic operations accounted for 9.1%, or $2.2 million. The decline in commercial revenue came in part from operations within the UK. The decrease in revenue in the UK was primarily caused by the strengthening dollar versus the pound sterling and the impact of the global economic situation on the UK economy. The UK retail sector, which is one of the key sectors of our UK operations, has been particularly affected.

Revenue from state and local governments increased by 15.3%, or $0.7 million, for the three months ended September 30, 2008, as compared to the same period a year ago. Revenue from state and local governments represented 0.8% of our total revenue for both the three months ended September 30, 2008 and 2007. Our continued focus on DoD and federal civilian agency opportunities has resulted in a relatively reduced emphasis on state and local government business.

Income from Operations. The following table sets forth the relative percentage that certain items of expense and earnings bore to revenue for the three months ended September 30, 2008 and 2007, respectively.

                                            Dollar Amount          Percentage of Revenue
                                          Three Months Ended        Three Months Ended
                                            September 30,              September 30,               Increase
(dollars in thousands)                     2008        2007        2008            2007            $        %
Revenue                                 $  654,760   $ 553,580       100.0 %         100.0 %   $ 101,180   18.3 %

Costs of revenue
Direct costs                               443,545     372,398        67.8            67.3        71,147   19.1
Indirect costs and selling expenses        157,871     135,757        24.1            24.5        22,114   16.3
Depreciation and amortization               12,026      10,746         1.8             1.9         1,280   11.9

Total costs of revenue                     613,442     518,901        93.7            93.7        94,541   18.2

Income from operations                      41,318      34,679         6.3             6.3         6,639   19.1
Interest expense and other, net              5,740       5,152         0.9             0.9           588   11.4

Income before income taxes                  35,578      29,527         5.4             5.4         6,051   20.5
Income taxes                                14,587      11,235         2.2             2.1         3,352   29.8

Net income                              $   20,991   $  18,292         3.2 %           3.3 %   $   2,699   14.8 %

Income from operations for the three months ended September 30, 2008 was $41.3 million. This was an increase of $6.6 million, or 19.1%, from income from operations of $34.7 million for the three months ended September 30, 2007. Our operating margin was 6.3% equal to that during the same period a year ago.

As a percentage of revenue, direct costs were 67.8% and 67.3% for the three months ended September 30, 2008 and 2007, respectively. Direct costs include direct labor and ODCs, which include, among other costs, subcontractor labor and materials along with equipment purchases and travel expenses. ODCs, which are common in our industry, 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 $181.7 million and $148.1 million for the three months ended September 30, 2008 and 2007, respectively. This increase in direct labor was attributable to both organic growth and acquisitions completed since September 30, 2007. ODCs were $261.8 million and $224.3 million during the three months ended September 30, 2008 and 2007, respectively. This increase was primarily driven by an increased volume of tasking across C4ISR integration services within our Strategic Services Sourcing contract along with the aforementioned acquisitions.

Indirect costs and selling expenses include fringe benefits, marketing and bid and proposal costs, indirect labor, and other discretionary expenses. As a percentage of revenue, indirect costs and selling expenses were 24.1% and 24.5% for the three months ended September 30, 2008 and 2007, respectively. The decrease in indirect costs and selling expenses as a percentage of revenue was primarily a result of integrating acquired businesses, controlling our various indirect and general and administrative expenses and the aforementioned higher ODC content which require less indirect costs and selling expenses. Total stock compensation expense, a component of indirect costs, was $5.1 million and $5.7 million for the three months ended September 30, 2008 and 2007, respectively, and decreased as a result of the current year's grants being issued later within the quarter than occurred in the prior year. In addition, current year expense related to RSUs issued in the quarter ended September 30, 2008 is reduced as a result of having a longer period of amortization associated with a longer vesting period than those issued in the prior year.

Depreciation and amortization expense was $12.0 million and $10.7 million for the three months ended September 30, 2008 and 2007, respectively. The increase of $1.3 million, or 11.9%, was primarily the result of amortization expense attributable to intangibles acquired in the aforementioned acquisitions.

Interest expense and other, net increased $0.6 million, or 11.4%, during the three months ended September 30, 2008 as compared to the same period a year ago. The increase was primarily due to less interest income generated from the lower average of cash balances maintained during the period along with a lower rate earned on invested funds. The lower average cash balance is attributable to the use of cash to fund the AIS and DDC acquisitions. This was partially offset by a decrease in interest on the Credit Facility due to a lower effective interest rate.

The effective tax rate was 41.0% and 38.0% during the three months ended September 30, 2008 and 2007, respectively. The higher tax rate reported in the first quarter of FY2009 was primarily attributable to non-deductible losses on assets invested in corporate-owned life insurance policies to date and estimated to be incurred throughout the rest of the year. If losses on these investments exceed our estimates, our effective tax rate may be higher in future quarters of the year ending June 30, 2009.

Liquidity and Capital Resources

Historically, our positive cash flow from operations and our available credit facilities have provided adequate liquidity and working capital to fund our operational needs. Cash flows from operations totaled $15.6 million and $23.4 million for the three months ended September 30, 2008 and 2007, respectively.

We maintain a $590.0 million credit facility (the Credit Facility), which includes a $240.0 million revolving credit facility (the Revolving Facility) and a $350.0 million institutional term loan (the Term Loan). The initial borrowings under the Credit Facility were $422.6 million, of which $334.3 million was outstanding under the Term Loan at September 30, 2008. On May 10, 2007, in connection with the issuance of the Notes, the Credit Facility was amended in order to, among other things, permit the issuance of the Notes and address certain related matters. On August 28, 2008, the Credit Facility was amended to reflect the exercise of the accordion feature under the Revolving Facility. The amendment increased the credit available to CACI under the Revolving Facility from $200.0 million to $240.0 million.

The August 2008 amendment also 1) provided CACI with additional flexibility with respect to certain of its covenants under the Credit Facility, 2) extended the expiration date of the Revolving Facility from May 3, 2009 to May 3, 2011, on which date repayment of any outstanding balance under the Revolving Facility, together with accrued interest thereon, will be due, and 3) increased the total amount to which the Revolving Facility may be increased pursuant to the accordion feature to $450.0 million (from $300.0 million). The Revolving Facility continues to have annual sublimits on amounts borrowed for acquisitions and a $25.0 million sublimit for the issuance of letters of credit.

As of September 30, 2008, we had no borrowings under the Revolving Facility.

The Term Loan portion of the Credit Facility is a seven-year secured facility under which principal payments are due in quarterly installments of $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 3, 2011.

Interest rates for both Revolving Facility and Term Loan borrowings are based on LIBOR, or the higher of the prime rate or the federal funds rate plus 0.5 percent, plus applicable margins. Margin and unused fee rates are determined quarterly based on our leverage ratios. We are expected to operate within certain limits on leverage, net worth and fixed-charge coverage ratios throughout the term of the Credit Facility. The total costs incurred related to the Credit Facility, as amended, were approximately $9.9 million, including $1.2 million incurred in connection with the August 2008 amendment described previously, and are being amortized over the life of the Credit Facility.

Effective May 16, 2007, we issued the Notes which 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.

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 convertible note was equal to or less than 97% of the average product of the closing price of a share of our common stock and the conversion rate of each date during the note measurement period; 3) upon the occurrence of certain corporate events constituting a fundamental change, as defined in the indenture governing the Notes; or
4) during the last three-month period prior to maturity. We are required to satisfy 100% of the principal amount of these notes solely in cash, with any amounts above the principal amount to be satisfied in common stock. As of September 30, 2008, none of the conditions permitting conversion of the Notes had been satisfied.

In the event of a fundamental change, as defined in the indenture governing the Notes, 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 related conversion obligation so that these notes are convertible into shares of the acquiring or surviving company. We are not permitted to redeem the Notes.

The contingently issuable shares are not included in our diluted share count for the three month periods ended September 30, 2008 or 2007, because our average stock price during those periods was below the conversion price. Debt issuance costs of approximately $7.8 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 created an original issue discount for income tax reporting purposes, and therefore the cost of the Call Options is being 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 was recorded 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 sale of the 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 in the event that the Notes are converted by effectively increasing the conversion price of these notes from $54.65 to $68.31. The Call Options are anti-dilutive and are therefore excluded . . .