According to the Congressional Budget Office, U.S. Government total discretionary spending in government fiscal 2005 will be approximately $960 billion and they estimate that more than $125 billion of this amount will be spent in areas in which they compete.

Spending on national security accounts for the largest portion of the discretionary U.S. Government budget. The Office of Management and Budget (OMB) estimates that in government fiscal 2005 aggregate DoD and DHS spending, excluding supplemental budget requests, will be $431 billion and is expected to increase to $531 billion in government fiscal 2010, representing a compound annual growth rate of 4.3%.

National security spending is driven primarily by the DoD. After substantial contraction in the DoD budget during the early 1990s with the end of the Cold War, spending on national security began to rebound significantly in 1999. This trend was accelerated by the U.S. Government’s response to the September 11, 2001 terrorist attacks. According to the OMB, the DoD budget authority grew at a compound annual growth rate of 7.2% from government fiscal 2001 to 2005. As a result of the ongoing global war on terror and the U.S. military’s continued deployment to Iraq and Afghanistan

The Company develops leading-edge concepts, technologies and systems to solve complex challenges facing the U.S. military and its allies, helping them transform the way they fight. To help ensure that U.S. military personnel are better equipped, protected and trained, the Company assists the DoD in developing and implementing advanced technologies into the current armed forces. As a leader in the emerging area of network-centric operations, the Company is helping the U.S. military to develop next-generation C4ISR capabilities, including advanced communications networks, shared situational awareness, improved collaborative planning and enhanced mobility and logistics.

The Company develops solutions to help the U.S. defense, intelligence and homeland security communities build an integrated intelligence picture, allowing them to be more agile and dynamic in chaotic environments and produce actionable intelligence. The Company provides operations, engineering and technical support for the development and improvement of technologies relating to intelligence collection, processing, dissemination, collaboration and implementation. The Company’s intelligence services include activities related to the support of intelligence and operations centers, surveillance and reconnaissance through satellite technologies and unmanned aerial vehicle operations centers and enhanced radar and sensors on weapon systems.

The Company provides services and solutions including vulnerability analysis, infrastructure protection and emergency response and recovery. The Company contributes to critical counterintelligence plans and programs to assess vulnerabilities and helps safeguard important events and infrastructure, including the 2004 national political conventions, the U.S. Capitol, House and Senate office buildings and the Library of Congress.

Total consolidated segment operating income was $110.0 million for the three months ended April 30, 2005 and $115.0 million for the three months ended April 30, 2004

Income from continuing operations of $55 million for the three months ended April 30, 2005 decreased 18% from $67 million for the same period of the prior year.

Net income for the three months ended April 30, 2005 increased $496 million over the same period of the prior year.