Booz Allen Hamilton Holding Corp 10-Q for FY2021 Q1

About this 10-Q

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Booz Allen Hamilton Holding Corp (BAH)

10-Q 2020-07-31 For: 2020-06-30

Added on April 12, 2026

Booz Allen Hamilton Holding Corp filed this 10-Q on July 31, 2020, covering the quarter ended June 30, 2020 (FY2021 Q1).

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.96B; up 7.2% from $1.83B a year earlier
Net income: $129.33M; up 10.2% from net income of $117.39M a year earlier
Diluted EPS: $0.92; up 10.8% from $0.83 a year earlier

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Delaware			26-2634160
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

8283 Greensboro Drive,	McLean,	Virginia	22102
(Address of principal executive offices)			(Zip Code)



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Class A Common Stock	BAH	New York Stock Exchange



PART I. Financial Information		1

ITEM 1	Financial Statements	1

ITEM 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	40

ITEM 4	Controls and Procedures	40

PART II. Other Information		41

ITEM 1	Legal Proceedings	41

ITEM 1A	Risk Factors	41

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	42

ITEM 3	Defaults Upon Senior Securities	42

ITEM 4	Mine Safety Disclosures	42

ITEM 5	Other Information	42

ITEM 6	Exhibits	43

BOOZ ALLEN HAMILTON HOLDING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2020			March 31, 2020
	(Unaudited)
	(Amounts in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	620,612		$	741,901
Accounts receivable, net of allowance	1,521,545			1,459,471
Prepaid expenses and other current assets	101,383			126,816
Total current assets	2,243,540			2,328,188
Property and equipment, net of accumulated depreciation	205,096			208,077
Operating lease right-of-use assets	230,630			240,122
Intangible assets, net of accumulated amortization	303,469			300,987
Goodwill	1,581,160			1,581,160
Other long-term assets	140,094			135,432
Total assets	$	4,703,989		$	4,793,966
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	77,865		$	177,865
Accounts payable and other accrued expenses	748,875			698,011
Accrued compensation and benefits	301,405			348,775
Operating lease liabilities	50,339			49,021
Other current liabilities	60,295			54,006
Total current liabilities	1,238,779			1,327,678
Long-term debt, net of current portion	1,989,328			2,007,979
Operating lease liabilities, net of current portion	259,706			270,266
Other long-term liabilities	333,709			331,687
Total liabilities	3,821,522			3,937,610
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock, Class A — $0.01 par value — authorized, 600,000,000 shares; issued, 161,856,727 shares at June 30, 2020 and 161,333,973 shares at March 31, 2020; outstanding, 138,196,736 shares at June 30, 2020 and 138,719,921 shares at March 31, 2020	1,618			1,613
Treasury stock, at cost — 23,659,991 at June 30, 2020 and 22,614,052 shares at March 31, 2020	(973,601		)	(898,095		)
Additional paid-in capital	486,739			468,027
Retained earnings	1,415,129			1,330,812
Accumulated other comprehensive loss	(47,418		)	(46,001		)
Total stockholders’ equity	882,467			856,356
Total liabilities and stockholders’ equity	$	4,703,989		$	4,793,966



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



	Shares Outstanding as of July 28, 2020
Class A Common Stock	137,802,479

BOOZ ALLEN HAMILTON HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended June 30,
	2020			2019
	(Amounts in thousands, except per share data)
Revenue	$	1,956,453		$	1,825,176
Operating costs and expenses:
Cost of revenue	948,902			840,654
Billable expenses	549,077			551,175
General and administrative expenses	245,855			234,280
Depreciation and amortization	20,732			20,021
Total operating costs and expenses	1,764,566			1,646,130
Operating income	191,887			179,046
Interest expense	(20,235		)	(25,187		)
Other (expense) income, net	(836		)	1,971
Income before income taxes	170,816			155,830
Income tax expense	41,487			38,444
Net income	$	129,329		$	117,386
Earnings per common share (Note 4):
Basic	$	0.93		$	0.83
Diluted	$	0.92		$	0.83



BOOZ ALLEN HAMILTON HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(Amounts in thousands, except share data)	Class A Common Stock			Treasury Stock				Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
(Amounts in thousands, except share data)	Shares	Amount		Shares	Amount			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at March 31, 2020	161,333,973	$	1,613	(22,614,052)	$	(898,095	)	$	468,027	$	1,330,812		$	(46,001	)	$	856,356
Topic 326 adoption impact	—	—		—	—			—		(1,180		)	—			(1,180		)
Issuance of common stock	361,856	3		—	—			4,420		—			—			4,423
Stock options exercised	160,898	2		—	—			3,123		—			—			3,125
Repurchase of common stock (1)	—	—		(1,045,939)	(75,506		)	—		—			—			(75,506		)
Recognition of liability related to future restricted stock units vesting	—	—		—	—			339		—			—			339
Net income	—	—		—	—			—		129,329			—			129,329
Other comprehensive income (loss), net of tax	—	—		—	—			—		—			(1,417		)	(1,417		)
Dividends paid of $0.31 per common share	—	—		—	—			—		(43,832		)	—			(43,832		)
Stock-based compensation expense	—	—		—	—			10,830		—			—			10,830
Balance at June 30, 2020	161,856,727	$	1,618	(23,659,991)	$	(973,601	)	$	486,739	$	1,415,129		$	(47,418	)	$	882,467



Balance at March 31, 2019	159,924,825	$	1,599	(19,896,972)	$	(711,450	)	$	401,596		$	994,811		$	(11,190	)	$	675,366
Issuance of common stock	158,092	2		—	—			3,376			—			—			3,378
Stock options exercised	161,302	1		—	—			2,154			—			—			2,155
Repurchase of common stock (2)	—	—		(129,128)	(8,286		)	—			—			—			(8,286		)
Recognition of liability related to future stock option exercises	—	—		—	—			(277		)	—			—			(277		)
Net income	—	—		—	—			—			117,386			—			117,386
Other comprehensive income (loss), net of tax	—	—		—	—			—			—			(14,931		)	(14,931		)
Dividends paid of $0.23 per common share	—	—		—	—			—			(32,412		)	—			(32,412		)
Stock-based compensation expense	—	—		—	—			6,444			—			—			6,444
Balance at June 30, 2019	160,244,219	$	1,602	(20,026,100)	$	(719,736	)	$	413,293		$	1,079,785		$	(26,121	)	$	748,823


•	Cost-Reimbursable Contracts: Cost-reimbursable contracts provide for the payment of allowable costs incurred during performance of the contract, up to a ceiling based on the amount that has been funded, plus a fixed fee or award fee.


•	Time-and-Materials Contracts: Under contracts in this category, we are paid a fixed hourly rate for each direct labor hour expended, and we are reimbursed for billable material costs and billable out-of-pocket expenses inclusive of allocable indirect costs. We assume the financial risk on time-and-materials contracts because our costs of performance may exceed negotiated hourly rates.


•	Fixed-Price Contracts: Under a fixed-price contract, we agree to perform the specified work for a predetermined price. To the extent our actual direct and allocated indirect costs decrease or increase



	Balance Sheet line item	June 30, 2020		March 31, 2020
Contract assets:
Current	Accounts receivable, net of allowance	$	999,497	$	988,634
Long-term	Other long-term assets	63,016		62,600
Total		$	1,062,513	$	1,051,234
Contract liabilities:
Advance payments, billings in excess of costs incurred and deferred revenue	Other current liabilities	$	24,631	$	26,018



	Three Months Ended June 30,
	2020				2019
U.S. government:
Defense Clients	$	931,336	47	%	$	858,936	47	%
Intelligence Clients	407,104		21	%	419,067		23	%
Civil Clients	557,923		29	%	492,033		27	%
Total U.S. government	1,896,363		97	%	1,770,036		97	%
Global Commercial Clients	60,090		3	%	55,140		3	%
Total Revenue	$	1,956,453	100	%	$	1,825,176	100	%



	June 30, 2020					March 31, 2020
	Interest Rate		Outstanding Balance			Interest Rate		Outstanding Balance
Term Loan A	1.68	%	$	1,345,245		2.49	%	$	1,363,739
Term Loan B	1.93	%	387,129			2.74	%	388,102
Revolver			—			3.75	%	100,000
Senior Notes	5.13	%	350,000			5.13	%	350,000
Less: Unamortized debt issuance costs and discount on debt			(15,181		)			(15,997		)
Total			2,067,193					2,185,844
Less: Current portion of long-term debt			(77,865		)			(177,865		)
Long-term debt, net of current portion			$	1,989,328				$	2,007,979



	Three Months Ended June 30,
	2020		2019
	(In thousands)
Term Loan A Interest Expense	$	6,918	$	13,450
Term Loan B Interest Expense	2,214		4,420
Interest on Revolving Credit Facility	799		—
Senior Notes Interest Expense	4,484		4,484
Deferred Payment Obligation Interest	—		2,011
Amortization of Debt Issuance Cost (DIC) and Original Issue Discount (OID) ⁽¹⁾	1,070		1,219
Interest Swap Expense	4,441		(523		)
Other	309		126
Total Interest Expense	$	20,235	$	25,187



		Three Months Ended June 30,
Derivatives in Cash Flow Hedging Relationships	Location of Gain or Loss Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in AOCL on Derivatives						Amount of Gain or (Loss) Reclassified from AOCL into Income					Interest Expense on Condensed Consolidated Statements of Operations
Derivatives in Cash Flow Hedging Relationships		2020			2019			2020			2019		2020			2019
Interest rate swaps	Interest expense	$	(6,387	)	$	(19,748	)	$	(4,441	)	$	523	$	(20,235	)	$	(25,187	)



	June 30, 2020			March 31, 2020
Current assets
Accounts receivable–billed	$	526,500		$	474,822
Accounts receivable–unbilled	999,497			988,634
Allowance for doubtful accounts	(4,452		)	(3,985		)
Accounts receivable, net of allowance	1,521,545			1,459,471
Other long-term assets
Accounts receivable–unbilled	63,016			62,600
Total accounts receivable, net	$	1,584,561		$	1,522,071



	June 30, 2020		March 31, 2020
Vendor payables	$	383,523	$	432,953
Accrued expenses	365,352		265,058
Total accounts payable and other accrued expenses	$	748,875	$	698,011



	June 30, 2020		March 31, 2020
Bonus	$	22,496	$	114,359
Retirement	59,688		41,604
Vacation	196,443		159,512
Other	22,778		33,300
Total accrued compensation and benefits	$	301,405	$	348,775



Fiscal Year Ending	Operating Lease Payments
Remainder of 2021	$	47,461
2022	66,454
2023	62,476
2024	51,212
2025	45,691
Thereafter	86,459
Total future lease payments	359,753
Less: imputed interest	(49,708		)
Total lease liabilities	$	310,045



	June 30, 2020
Weighted average remaining lease term (in years)	5.88
Weighted average discount rate	4.75	%



	June 30, 2020		March 31, 2020
Postretirement benefit obligations	125,584		124,375
Other (1)	208,125		207,312
Total other long-term liabilities	$	333,709	$	331,687



	Three Months Ended June 30, 2020
	Post-retirement plans			Derivatives designated as cash flow hedges			Totals
Beginning of period	$	(4,127	)	$	(41,874	)	$	(46,001	)
Other comprehensive loss before reclassifications (1)	—			(4,722		)	(4,722		)
Amounts reclassified from accumulated other comprehensive loss	22			3,283			3,305
Net current-period other comprehensive income (loss)	22			(1,439		)	(1,417		)
End of period	$	(4,105	)	$	(43,313	)	$	(47,418	)



	Three Months Ended June 30, 2019
	Post-retirement plans			Derivatives designated as cash flow hedges			Totals
Beginning of period	$	(9,068	)	$	(2,122	)	$	(11,190	)
Other comprehensive loss before reclassifications (2)	—			(14,579		)	(14,579		)
Amounts reclassified from accumulated other comprehensive loss	34			(386		)	(352		)
Net current-period other comprehensive income (loss)	34			(14,965		)	(14,931		)
End of period	$	(9,034	)	$	(17,087	)	$	(26,121	)



	June 30, 2020
	Unrecognized Compensation Cost		Weighted Average Remaining Period to be Recognized (in years)
Equity Incentive Plan Options	$	5,886	4.02
Restricted Stock Awards	52,328		1.78
Total	$	58,214



	Recurring Fair Value Measurements as of June 30, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Long-term deferred compensation plan asset (1)	12,293		—		—		12,293
Total Assets	$	12,293	$	—	$	—	$	12,293
Liabilities:
Contingent consideration liability (2)	$	—	$	—	$	1,223	1,223
Current derivative instruments (3)	—		21,224		—		21,224
Long-term derivative instruments (3)	—		37,372		—		37,372
Long-term deferred compensation plan liability (1)	12,293		—		—		12,293
Total Liabilities	$	12,293	$	58,596	$	1,223	$	72,112


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations


•	"Adjusted Diluted EPS" represents diluted EPS calculated using Adjusted Net Income as opposed to net income. Additionally, Adjusted Diluted EPS does not contemplate any adjustments to net income as required under the two-class method as disclosed in the footnotes to the condensed consolidated financial statements.


•	"Free Cash Flow" represents the net cash generated from operating activities less the impact of purchases of property, equipment and software.



	Three Months Ended June 30,
(In thousands, except share and per share data)	2020			2019
	(Unaudited)
Revenue, Excluding Billable Expenses
Revenue	$	1,956,453		$	1,825,176
Billable expenses	549,077			551,175
Revenue, Excluding Billable Expenses	$	1,407,376		$	1,274,001
Adjusted Operating Income
Operating Income	$	191,887		$	179,046
COVID-19 supplemental employee benefits (a)	342			—
Adjusted Operating Income	$	192,229		$	179,046
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue & Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses
Net income	$	129,329		$	117,386
Income tax expense	41,487			38,444
Interest and other, net (b)	21,071			23,216
Depreciation and amortization	20,732			20,021
EBITDA	212,619			199,067
COVID-19 supplemental employee benefits (a)	342			—
Adjusted EBITDA	$	212,961		$	199,067
Adjusted EBITDA Margin on Revenue	10.9		%	10.9		%
Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses	15.1		%	15.6		%
Adjusted Net Income
Net income	$	129,329		$	117,386
COVID-19 supplemental employee benefits (a)	342			—
Release of income tax reserves (c)	(29		)	—
Amortization or write-off of debt issuance costs and write-off of original issue discount	454			457
Adjustments for tax effect (d)	(199		)	(119		)
Adjusted Net Income	$	129,897		$	117,724
Adjusted Diluted Earnings Per Share
Weighted-average number of diluted shares outstanding	139,172,454			141,129,301
Adjusted Net Income Per Diluted Share (e)	$	0.93		$	0.83
Free Cash Flow
Net cash provided by operating activities	$	140,418		$	50,983
Less: Purchases of property, equipment and software	(20,058		)	(27,336		)
Free Cash Flow	$	120,360		$	23,647


(a)	Represents the supplemental contribution to employees' dependent care FSA accounts in response to the COVID-19 outbreak.


(b)	Reflects the combination of Interest expense and Other (expense) income, net from the condensed consolidated statement of operations.


(c)	Release of pre-acquisition income tax reserves assumed by the Company in connection with the Carlyle Acquisition.


(d)	Reflects the tax effect of adjustments at an assumed effective tax rate of 26%, which approximates the blended federal and state tax rates, and consistently excludes the impact of other tax credits and incentive benefits realized.


(e)	Excludes adjustments of approximately $0.6 million of net earnings for both the three months ended June 30, 2020 and 2019, associated with the application of the two-class method for computing diluted earnings per share.


•	budget deficits and the growing U.S. national debt increasing pressure on the U.S. government to reduce federal spending across all federal agencies together with associated uncertainty about the size and timing of those reductions;