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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________

FORM 10-Q

___________________________________

(Mark One)



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

For the quarterly period ended June 30, 2019



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

For the transition period from to

Commission File No. 001-34972

___________________________________

Booz Allen Hamilton Holding Corporation

(Exact name of registrant as specified in its charter)

___________________________________



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)

(703) 902-5000

Registrant’s telephone number, including area code

(Former name, former address, and former fiscal year if changed since last report.)

___________________________________

Securities registered pursuant to Section 12(b) of the Act:



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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



	Shares Outstanding as of July 24, 2019
Class A Common Stock	140,218,115
Class B Non-Voting Common Stock	—
Class C Restricted Common Stock	—
Class E Special Voting Common Stock	—

TABLE OF CONTENTS



PART I. Financial Information		1

ITEM 1	Financial Statements	1

ITEM 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

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	42

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

ITEM 3	Defaults Upon Senior Securities	42

ITEM 4	Mine Safety Disclosures	43

ITEM 5	Other Information	43

ITEM 6	Exhibits	44

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

BOOZ ALLEN HAMILTON HOLDING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2019			March 31, 2019
	(Unaudited)
	(Amounts in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	649,100		$	283,990
Accounts receivable, net of allowance	1,407,716			1,330,364
Prepaid expenses and other current assets	59,583			84,986
Total current assets	2,116,399			1,699,340
Property and equipment, net of accumulated depreciation	177,837			172,453
Operating lease right-of-use assets	257,310			—
Intangible assets, net of accumulated amortization	291,629			287,051
Goodwill	1,581,160			1,581,160
Other long-term assets	89,315			91,837
Total assets	$	4,513,650		$	3,831,841
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	77,924		$	57,924
Accounts payable and other accrued expenses	674,508			664,948
Accrued compensation and benefits	251,093			325,553
Operating lease liabilities	29,789			—
Other current liabilities	178,200			130,814
Total current liabilities	1,211,514			1,179,239
Long-term debt, net of current portion	2,063,321			1,701,837
Operating lease liabilities, net of current portion	287,979			—
Other long-term liabilities	202,013			275,399
Total liabilities	3,764,827			3,156,475
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock, Class A — $0.01 par value — authorized, 600,000,000 shares; issued, 160,244,219 shares at June 30, 2019 and 159,924,825 shares at March 31, 2019; outstanding, 140,218,119 shares at June 30, 2019 and 140,027,853 shares at March 31, 2019	1,602			1,599
Treasury stock, at cost — 20,026,100 shares at June 30, 2019 and 19,896,972 shares at March 31, 2019	(719,736		)	(711,450		)
Additional paid-in capital	413,293			401,596
Retained earnings	1,079,785			994,811
Accumulated other comprehensive loss	(26,121		)	(11,190		)
Total stockholders’ equity	748,823			675,366
Total liabilities and stockholders’ equity	$	4,513,650		$	3,831,841

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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

	Three Months Ended June 30,
	2019			2018
	(Amounts in thousands, except per share data)
Revenue	$	1,825,176		$	1,646,848
Operating costs and expenses:
Cost of revenue	840,654			785,812
Billable expenses	551,175			477,435
General and administrative expenses	234,280			205,836
Depreciation and amortization	20,021			16,153
Total operating costs and expenses	1,646,130			1,485,236
Operating income	179,046			161,612
Interest expense	(25,187		)	(23,074		)
Other income (expense), net	1,971			(1,171		)
Income before income taxes	155,830			137,367
Income tax expense	38,444			33,163
Net income	$	117,386		$	104,204
Earnings per common share (Note 4):
Basic	$	0.83		$	0.72
Diluted	$	0.83		$	0.72

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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

	Three Months Ended June 30,
	2019			2018
	(Amounts in thousands)
Net income	$	117,386		$	104,204
Other comprehensive income, net of tax:
Change in unrealized gain (loss) on derivatives designated as cash flow hedges	(14,965		)	1,920
Change in postretirement plan costs	34			407
Total other comprehensive income (loss), net of tax	(14,931		)	2,327
Comprehensive income	$	102,455		$	106,531

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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

	Three Months Ended June 30,
	2019			2018
	(Amounts in thousands)
Cash flows from operating activities
Net income	$	117,386		$	104,204
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	20,021			16,153
Noncash lease expense	13,970			—
Stock-based compensation expense	6,444			6,115
Amortization of debt issuance costs	1,219			1,360
Losses on dispositions	23			401
Changes in assets and liabilities:
Accounts receivable, net of allowance	(77,352		)	(141,516		)
Deferred income taxes and income taxes receivable / payable	42,342			20,781
Prepaid expenses and other current assets	(15,540		)	(15,320		)
Other long-term assets	623			(1,703		)
Accrued compensation and benefits	(70,845		)	(38,144		)
Accounts payable and other accrued expenses	29,129			28,322
Accrued interest	(2,361		)	(2,613		)
Other current liabilities	(964		)	(4,967		)
Operating lease liabilities	(15,232		)	—
Other long-term liabilities	2,120			(110		)
Net cash provided by (used in) operating activities	50,983			(27,037		)
Cash flows from investing activities
Purchases of property, equipment, and software	(27,336		)	(20,465		)
Payments for business acquisitions, net of cash acquired	—			(20		)
Net cash used in investing activities	(27,336		)	(20,485		)
Cash flows from financing activities
Proceeds from issuance of common stock	3,378			2,585
Stock option exercises	2,155			5,265
Repurchases of common stock	(12,178		)	(53,845		)
Cash dividends paid	(32,412		)	(27,442		)
Dividend equivalents paid to option holders	—			(267		)
Repayment of debt	(19,480		)	(75,775		)
Proceeds from debt issuance	400,000			60,000
Payment on contingent liabilities from acquisition	—			(234		)
Net cash provided by (used in) financing activities	341,463			(89,713		)
Net increase (decrease) in cash and cash equivalents	365,110			(137,235		)
Cash and cash equivalents––beginning of period	283,990			286,958
Cash and cash equivalents––end of period	$	649,100		$	149,723
Supplemental disclosures of cash flow information
Net cash paid (refund) during the period for:
Interest	$	26,726		$	23,938
Income taxes	$	(4,238	)	$	11,475
Supplemental disclosures of non-cash investing and financing activities
Share repurchases transacted but not settled and paid	$	2,423		$	3,365
Noncash financing activities	$	2,682		$	3,216

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.



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, 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 (1)	—	—		(129,128)	(8,286		)	—			—			—			(8,286		)
Recognition of liability related to future stock 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



Balance at March 31, 2018	158,028,673	$	1,580	(14,582,134)	$	(461,457	)	$	346,958	$	690,516		$	(15,106	)	$	562,491
Issuance of common stock	320,275	4		—	—			2,581		—			—			2,585
Stock options exercised	445,067	4		—	—			5,261		—			—			5,265
Repurchase of common stock (2)	—	—		(1,089,945)	(48,064		)	—		—			—			(48,064		)
Net income	—	—		—	—			—		104,204			—			104,204
Other comprehensive income (loss), net of tax	—	—		—	—			—		—			2,327			2,327
Dividends paid of $0.19 per common share	—	—		—	—			—		(27,442		)	—			(27,442		)
Stock-based compensation expense	—	—		—	—			6,115		—			—			6,115
Balance at June 30, 2018	158,794,015	$	1,588	(15,672,079)	$	(509,521	)	$	360,915	$	767,278		$	(12,779	)	$	607,481

(1) During the first quarter of fiscal 2020, the Company purchased 93.0 thousand shares of the Company’s Class A Common Stock in a series of open market transactions for $5.9 million. Additionally, the Company repurchased shares during the first quarter of fiscal 2020 to cover the minimum statutory withholding taxes on restricted stock awards and restricted stock units that vested on June 30, 2019.

(2) During the first quarter of fiscal 2019, the Company purchased 1.0 million shares of the Company’s Class A Common Stock in a series of open market transactions for $44.2 million. Additionally, the Company repurchased shares during the first quarter of fiscal 2019 to cover the minimum statutory withholding taxes on restricted stock awards and restricted stock units that vested on June 30, 2018.

BOOZ ALLEN HAMILTON HOLDING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in tables in thousands, except share and per share data or unless otherwise noted)

1. BUSINESS OVERVIEW

Organization

Booz Allen Hamilton Holding Corporation, including its wholly owned subsidiaries, or the Company, we, us, and our, was incorporated in Delaware in May 2008. The Company provides management and technology consulting, analytics, engineering, digital solutions, mission operations, and cyber expertise to U.S. and international governments, major corporations, and not-for-profit organizations. The Company reports operating results and financial data in one reportable segment. The Company is headquartered in McLean, Virginia, with approximately 26,400 employees as of June 30, 2019.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission, or SEC, and should be read in conjunction with the information contained in the Company's Annual Report on Form 10-K for the year ended March 31, 2019. The interim period unaudited condensed consolidated financial statements are presented as described below. Certain information and disclosures normally required for annual financial statements have been condensed or omitted pursuant to GAAP and SEC rules and regulations. In the opinion of management, all adjustments considered necessary for fair presentation of the results of the interim period presented have been included. The Company’s fiscal year ends on March 31 and unless otherwise noted, references to fiscal year or fiscal are for fiscal years ended March 31. The results of operations for the three months ended June 30, 2019 are not necessarily indicative of results to be expected for the full fiscal year.

The condensed consolidated financial statements and notes of the Company include its subsidiaries, and the joint ventures and partnerships over which the Company has a controlling financial interest. The Company uses the equity method to account for investments in entities that it does not control if it is otherwise able to exert significant influence over the entities' operating and financial policies.

Effective April 1, 2019, the Company adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), using the modified retrospective transition approach and, as a result, comparative information for the prior fiscal year has not been retrospectively adjusted.

Certain amounts reported in the Company's prior year condensed consolidated financial statements have been reclassified to conform to the current year presentation.

Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Areas of the financial statements where estimates may have the most significant effect include contractual and regulatory reserves, valuation and lives of tangible and intangible assets, contingent consideration related to business acquisitions, impairment of long-lived assets, accrued liabilities, revenue recognition, including the accrual of indirect costs, bonus and other incentive compensation, lease incremental borrowing rates, stock-based compensation, reserves for tax benefits and valuation allowances on deferred tax assets, provisions for income taxes, postretirement obligations, certain deferred costs, collectability of receivables, and loss accruals for litigation. Actual results experienced by the Company may differ materially from management's estimates.

Recently Adopted Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability of accounting for lease transactions. The new leasing standard requires lessees to recognize lease assets and lease liabilities on their balance sheet for all leases with a lease term greater than 12 months. Topic 842 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. In July 2018, the FASB provided an alternative transition method of adoption through ASU No. 2018-11, Targeted Improvements, which permits the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption.

The Company adopted the standard on April 1, 2019 using the modified retrospective transition approach provided by ASU 2018-11, and, as a result, did not recast comparative prior period information. In addition, the Company elected certain practical expedients permitted under Topic 842, including the option not to apply lease recognition for short-term leases; an

election to not separate lease from non-lease components; and a package of practical expedients such that, upon the initial adoption of Topic 842, the Company did not reassess whether expired or existing contracts contain leases, nor did the Company reassess the lease classification for expired or existing leases. The Company did not elect the practical expedient to use hindsight in determining the lease term and in assessing impairment of right-of-use (ROU) assets.

Upon the adoption of Topic 842, the Company recognized right-of-use assets of $268.8 million and lease liabilities of $330.6 million on the condensed consolidated balance sheets, inclusive of required conforming balance sheet reclassifications pertaining to accounts such as deferred rent, tenant allowances, and lease receivables. As required under Topic 842 transition guidance, the lease liabilities recognized were measured at the present value of remaining minimum rental payments pursuant to Topic 840 which include executory costs.

The impact to the condensed consolidated balance sheet at April 1 for the adoption of Topic 842 is as follows:



	Balance at March 31, 2019		Adoption adjustments for Topic 842			Balance at April 1, 2019
Current assets:
Prepaid expenses and other current assets	$	84,986	$	(27,515	)	$	57,471

Non-current assets:
Operating lease right-of-use assets	$	—	$	268,840		$	268,840
Other long-term assets	91,837		(4,619		)	87,218

Current liabilities:
Accounts payable and other accrued expenses	$	664,948	$	(15,197	)	$	649,751
Operating lease liabilities	—		34,645			34,645

Non-current liabilities:
Operating lease liabilities, net of current portion	$	—	$	295,915		$	295,915
Other long-term liabilities	275,399		(78,657		)	196,742

Further, at the adoption of Topic 842, the Company recognized a deferred tax liability corresponding to the operating lease right-of-use assets of $69 million and a deferred tax asset corresponding to the operating lease liabilities of $93 million, inclusive of a decrease to deferred tax assets for the deferred rent and tenant allowances of $24 million as of March 31, 2019. There was no cumulative impact to retained earnings and the April 1, 2019 adoption of Topic 842 did not have a material impact to either of the condensed consolidated statements of operations or cash flows.

In March 2019, the SEC issued Final Rule Release No. 33-10618, FAST Act Modernization and Simplification of Regulation S-K, amending certain disclosure requirements in Regulation S-K, with the intent of improving the readability of filed documents and simplifying registrants' compliance efforts. The Company adopted certain aspects of this final rule in the fourth quarter of fiscal 2019 which did not have a material impact on the condensed consolidated financial statements. Other aspects not yet adopted are still being evaluated but are not expected to be material.

In August 2018, the SEC issued Final Rule Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. This analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The amendments became effective on November 5, 2018; however the SEC allows the filer’s first presentation of the changes in stockholders’ equity to be included in its Form 10-Q for the quarter that begins after the effective date of the amendments. Accordingly, the Company has first presented the condensed consolidated statement of stockholders' equity in the Form 10-Q in the first quarter of fiscal 2020. The Company's adoption of this final rule did not have a material effect on the condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance requires a customer in a cloud computing arrangement that is a service contract to follow existing internal-use software guidance to determine which implementation costs to defer and recognize as an asset. ASU 2018-15 generally aligns the guidance on capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with that of implementation costs incurred to develop or obtain internal-use software, including hosting arrangements that include an internal-use software license. ASU 2018-15 is effective for interim reporting periods for fiscal years beginning after December 15, 2019. Early adoption is permitted. The standard may be adopted either retrospectively or prospectively. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures.

Other accounting and reporting pronouncements issued after June 30, 2019 and through the filing date are not expected to have a material impact on the Company's condensed consolidated financial statements.

3. REVENUE

The Company's revenues from contracts with customers (clients) are derived from offerings that include consulting, analytics, digital solutions, engineering, and cyber services, substantially with the U.S. government and its agencies and, to a lesser extent, subcontractors. The Company also serves foreign governments, as well as domestic and international commercial clients. The Company performs under various types of contracts, which include cost-reimbursable-plus-fee contracts, time-and-materials contracts, and fixed-price contracts.

Contract Estimates

Many of our contracts recognize revenue under a contract cost-based input method and require an Estimate-at-Completion (EAC) process, which management uses to review and monitor the progress towards the completion of our performance obligations. Under this process, management considers various inputs and assumptions related to the EAC, including, but not limited to, progress towards completion, labor costs and productivity, material and subcontractor costs, and identified risks. Estimating the total cost at completion of performance obligations is subjective and requires management to make assumptions about future activity and cost drivers under the contract. Changes in these estimates can occur for a variety of reasons and, if significant, may impact the profitability of the Company’s contracts. Changes in estimates related to contracts accounted for under the EAC process are recognized on a cumulative catch-up basis in the period when such changes are determinable and reasonable estimable. If the estimate of contract profitability indicates an anticipated loss on a contract, the Company recognizes the total loss at the time it is identified. For each of the three months ended June 30, 2019 and 2018, the aggregate impact of adjustments in contract estimates was not material.

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by contract type, customer, as well as whether the Company acts as prime contractor or sub-contractor, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following series of tables presents our revenue disaggregated by these categories.

Revenue by Contract Type:

We generate revenue under the following three basic types of contracts:


•	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 from the estimates upon which the price was negotiated, we will generate more or less profit, respectively, or could incur a loss.

The table below presents the total revenue for each type of contract:



	Three Months Ended June 30,
	2019				2018
Cost-reimbursable	$	1,026,593	56	%	$	859,884	52	%
Time-and-materials	420,595		23	%	405,584		25	%
Fixed-price	377,988		21	%	381,380		23	%
Total Revenue	$	1,825,176	100	%	$	1,646,848	100	%

Revenue by Customer Type:



	Three Months Ended June 30,
	2019				2018
U.S. government:
Defense Clients	$	858,936	47	%	$	757,982	46	%
Intelligence Clients	419,067		23	%	397,480		24	%
Civil Clients	492,033		27	%	435,526		27	%
Total U.S. government	1,770,036		97	%	1,590,988		97	%
Global Commercial Clients	55,140		3	%	55,860		3	%
Total Revenue	$	1,825,176	100	%	$	1,646,848	100	%

Revenue by Whether the Company Acts as a Prime Contractor or a Sub-Contractor:



	Three Months Ended June 30,
	2019				2018
Prime Contractor	$	1,673,429	92	%	$	1,507,182	92	%
Sub-contractor	151,747		8	%	139,666		8	%
Total Revenue	$	1,825,176	100	%	$	1,646,848	100	%

Performance Obligations

Remaining performance obligations represent the transaction price of exercised contracts for which work has not yet been performed, irrespective of whether funding has or has not been authorized and appropriated as of the date of exercise. Remaining performance obligations do not include negotiated but unexercised options or the unfunded value of expired contracts.

As of June 30, 2019 and March 31, 2019, the Company had $6.2 billion and $5.8 billion, respectively, of remaining performance obligations and we expect to recognize more than half of the remaining performance obligations as revenue over the next 12 months, and approximately three quarters over the next 24 months. The remainder is expected to be recognized thereafter.

Contract Balances

The Company's performance obligations are typically satisfied over time and revenue is generally recognized using a cost-based input method. Fixed-price contracts are typically billed to the customer using milestone or fixed monthly payments, while cost-reimbursable-plus-fee and time-and-material contracts are typically billed to the customer at periodic intervals (e.g. monthly or weekly) as indicated by the terms of the contract. Disparities between the timing of revenue recognition and customer billings and cash collections results in net contract assets or liabilities being recognized at the end of each reporting period.

Contract assets primarily consist of unbilled receivables typically resulting from revenue recognized exceeding the amount billed to the customer and right to payment is not just subject to the passage of time. Contract liabilities primarily consist of advance payments, billings in excess of costs incurred and deferred revenue. Contract assets and liabilities are reported on a net contract basis at the end of each reporting period. The Company maintains an allowance for doubtful accounts to provide for an estimate of uncollected receivables. Refer to Note 5 for more information on receivables recognized from contracts accounted for under Topic 606.

The following table summarizes the contract balances recognized on the Company’s condensed consolidated balance sheets:



	June 30, 2019		March 31, 2019
Contract assets:
Current	$	889,744	$	846,372
Long-term	61,575		61,391
Total	$	951,319	$	907,763
Contract liabilities:
Advance payments, billings in excess of costs incurred and deferred revenue	$	20,821	$	21,316

Changes in contract assets and contract liabilities are primarily due to the timing difference between the Company’s performance of services and payments from customers. For the three months ended June 30, 2019 and 2018, we recognized revenue of $16.7 million and $19.8 million, respectively, related to our contract liabilities on April 1, 2019 and 2018, respectively. To determine revenue recognized from contract liabilities during the reporting periods, the Company allocates revenue to individual contract liability balances and applies revenue recognized during the reporting periods first to the beginning balances of contract liabilities until the revenue exceeds the balances.

4. EARNINGS PER SHARE

The Company computes basic and diluted earnings per share amounts based on net income for the periods presented. The Company uses the weighted-average number of common shares outstanding during the period to calculate basic earnings per share, or EPS. Diluted EPS adjusts the weighted average number of shares outstanding to include the dilutive effect of outstanding common stock options and other stock-based awards.

The Company currently has outstanding shares of Class A Common Stock. Unvested Class A Restricted Common Stock holders are entitled to participate in non-forfeitable dividends or other distributions. These unvested restricted shares participated in the Company's dividends declared and were paid in the first quarter of fiscal 2020 and 2019. As such, EPS is calculated using the two-class method whereby earnings are reduced by distributed earnings as well as any available undistributed earnings allocable to holders of unvested restricted shares. A reconciliation of the income used to compute basic and diluted EPS for the periods presented are as follows:



	Three Months Ended June 30,
	2019		2018
Earnings for basic computations (1)	$	116,766	$	103,572
Weighted-average common shares outstanding for basic computations	140,004,627		143,273,387
Earnings for diluted computations (1)	$	116,770	$	103,576
Dilutive stock options and restricted stock	1,124,674		1,420,186
Weighted-average common shares outstanding for diluted computations	141,129,301		144,693,573
Earnings per common share
Basic	$	0.83	$	0.72
Diluted	$	0.83	$	0.72

(1) During the three months ended June 30, 2019 and 2018, approximately 0.7 million and 0.9 million participating securities, respectively, were paid dividends totaling $0.2 million and $0.2 million, respectively. For the three months ended June 30, 2019 and 2018, there were undistributed earnings of $0.4 million and $0.5 million, respectively, allocated to the participating class of securities in both basic and diluted EPS. The allocated undistributed earnings and the dividends paid comprise the difference between net income presented on the condensed consolidated statements of operations and earnings for basic and diluted computations for the three months ended June 30, 2019 and 2018.

The EPS calculation for the three months ended June 30, 2019 and 2018 excludes 0.1 million and 0.1 million options, respectively, as their impact was anti-dilutive.

5. ACCOUNTS RECEIVABLE, NET OF ALLOWANCE

Accounts receivable, net of allowance consisted of the following:



	June 30, 2019			March 31, 2019
Current assets
Accounts receivable–billed	$	530,678		$	494,671
Accounts receivable–unbilled	889,744			846,372
Allowance for doubtful accounts	(12,706		)	(10,679		)
Accounts receivable, net of allowance	1,407,716			1,330,364
Other long-term assets
Accounts receivable–unbilled	61,575			61,391
Total accounts receivable, net	$	1,469,291		$	1,391,755

Unbilled amounts represent revenues for which billings have not been presented to customers at quarter-end or year-end. These amounts are generally billed and collected within one year subject to various conditions including, without limitation, appropriated and available funding. Long-term unbilled receivables not anticipated to be billed and collected within one year, which are primarily related to retainage, holdbacks, and long-term rate settlements to be billed at contract closeout, are included in other long-term assets in the accompanying condensed consolidated balance sheets. The Company recognized a provision for doubtful accounts (including certain unbilled reserves) of $0.8 million and $0.04 million for the three months ended June 30, 2019 and 2018, respectively.

The primary financial instruments, other than derivatives, that potentially subject the Company to concentrations of credit risk are accounts receivable. The Company's primary customers are U.S. federal government agencies and prime contractors under contracts with the U.S. government. The Company continuously reviews its accounts receivable and records provisions for doubtful accounts as needed.

6. ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES

Accounts payable and other accrued expenses consisted of the following:



	June 30, 2019		March 31, 2019
Vendor payables	$	409,292	$	417,648
Accrued expenses	265,216		247,300
Total accounts payable and other accrued expenses	$	674,508	$	664,948

Accrued expenses consisted primarily of the Company’s reserve related to potential cost disallowance in conjunction with government audits. Refer to Note 18 for further discussion of this reserve.

7. ACCRUED COMPENSATION AND BENEFITS

Accrued compensation and benefits consisted of the following:



	June 30, 2019		March 31, 2019
Bonus	$	25,961	$	117,604
Retirement	54,518		37,678
Vacation	147,764		141,953
Other	22,850		28,318
Total accrued compensation and benefits	$	251,093	$	325,553

8. DEBT

Debt consisted of the following:



	June 30, 2019					March 31, 2019
	Interest Rate		Outstanding Balance			Interest Rate		Outstanding Balance
Term Loan A	3.90	%	$	1,419,219		4.00	%	$	1,037,713
Term Loan B	4.40	%	390,063			4.50	%	391,050
Senior Notes	5.13	%	350,000			5.13	%	350,000
Less: Unamortized debt issuance costs and discount on debt			(18,037		)			(19,002		)
Total			2,141,245					1,759,761
Less: Current portion of long-term debt			(77,924		)			(57,924		)
Long-term debt, net of current portion			$	2,063,321				$	1,701,837

Term Loans and Revolving Credit Facility

On July 23, 2018 (the "Amendment Effective Date"), Booz Allen Hamilton Inc. ("Booz Allen Hamilton") and Booz Allen Hamilton Investor Corporation ("Investor"), and certain wholly-owned subsidiaries of Booz Allen Hamilton, entered into the Sixth Amendment (the "Sixth Amendment") to the Credit Agreement (as amended, the "Credit Agreement"), dated as of July 31, 2012 among Booz Allen Hamilton, Investor, certain wholly-owned subsidiaries of Booz Allen Hamilton and Bank of America, N.A., as Administrative Agent, and Collateral Agent and the other lenders and financial institutions from time to time party thereto (as previously amended by the First Amendment to the Credit Agreement, dated as of August 16, 2013, the Second Amendment to Credit Agreement, dated as of May 7, 2014, the Third Amendment to the Credit Agreement, dated as of July 13, 2016, the Fourth Amendment to the Credit Agreement, dated as of February 6, 2017, and the Fifth Amendment to the Credit Agreement, dated as of March 7, 2018). The Sixth Amendment provided for a delayed draw (the "Delayed Draw Facility") on the tranche A term loan ("Term Loan A") facility in the amount of up to $400.0 million and extended the maturity of the Term Loan A and the revolving credit facility (the "Revolving Credit Facility") to July 2023. Additionally, the Sixth Amendment reduced the interest rate spread applicable to the Term Loan A and the Revolving Credit Facility from a range of 1.50% to 2.25% to a range of 1.25% to 2.00% based on consolidated net total leverage. The interest rate applicable to the Term Loan B ("Term Loan B" and, together with Term Loan A, the "Term Loans") remained unchanged.

Prior to the Sixth Amendment, approximately $1,079.5 million was outstanding under Term Loan A. Pursuant to the Sixth Amendment, certain lenders converted their existing Term Loan A loans into a new tranche of Term Loan A loans in an aggregate amount, along with Term Loan A loans advanced by certain new lenders, of approximately $1,479.5 million, $400.0 million of which was available as the Delayed Draw Facility. On April 23, 2019, Booz Allen Hamilton drew down $400 million of the Delayed Draw Facility, the proceeds of which are expected to be used for general corporate purposes and other purposes not prohibited by the Credit Agreement.

Prior to the Sixth Amendment, $500.0 million was available under the Revolving Credit Facility. Pursuant to the Sixth Amendment, certain lenders under the Existing Credit Agreement converted their Existing Revolving Commitments into a new tranche of revolving commitments (the "New Revolving Commitments" and the revolving credit loans made thereunder, the "New Revolving Loans") in an aggregate amount, along with New Revolving Commitments of certain new lenders, of $500.0 million.

As of June 30, 2019, the Credit Agreement provided Booz Allen Hamilton with a $1,419.2 million Term Loan A, a $390.1 million Term Loan B, and $500.0 million in New Revolving Commitments with a sub-limit for letters of credit of $100.0 million. As of June 30, 2019, the maturity date of Term Loan A and the termination date for the Revolving Credit Facility was July 23, 2023 and the maturity date of Term Loan B was June 30, 2023. Booz Allen Hamilton’s obligations and the guarantors’ guarantees under the Credit Agreement are secured by a first priority lien on substantially all of the assets (including capital stock of subsidiaries) of Booz Allen Hamilton, Investor, and the subsidiary guarantors, subject to certain exceptions set forth in the Credit Agreement and related documentation. Subject to specified conditions, without the consent of the then-existing lenders (but subject to the receipt of commitments), the Term Loans or New Revolving Credit Facility may be expanded (or a new term loan facility or revolving credit facility added to the existing facilities) by up to (i) greater of (x) $627 million and (y) 100% of consolidated EBITDA of Booz Allen Hamilton, as of the end of the most recently ended four quarter period for which financial statements have been delivered pursuant to the Credit Agreement plus (ii) the aggregate principal amount under which pro forma consolidated net secured leverage remains less than or equal to 3.50:1.00.

At Booz Allen Hamilton’s option, borrowings under the Secured Credit Facility bear interest based either on LIBOR (adjusted for maximum reserves, and subject to a floor of zero) for the applicable interest period or a base rate (equal to the highest of (x) the administrative agent’s prime corporate rate, (y) the overnight federal funds rate plus 0.50%, and (z) three-month LIBOR (adjusted for maximum reserves, and subject to a floor of zero) plus 1.00%), in each case plus an applicable margin, payable at the end of the applicable interest period and in any event at least quarterly. The applicable margin for Term Loan A and borrowings under the Revolving Credit Facility ranges from 1.25% to 2.00% for LIBOR loans and 0.25% to 1.00% for base rate loans, in each case based on Booz Allen Hamilton’s consolidated total net leverage ratio. The applicable margin for Term Loan B is 2.00% for LIBOR loans and 1.00% for base rate loans. Unused commitments under the Revolving Credit Facility are subject to a quarterly fee ranging from 0.20% to 0.35% based on Booz Allen Hamilton’s consolidated total net leverage ratio.

Booz Allen Hamilton occasionally borrows under the Revolving Credit Facility in anticipation of cash demands. During the first quarter of fiscal 2020, Booz Allen Hamilton accessed no amounts of its $500.0 million Revolving Credit Facility. During the first quarter of fiscal 2019, Booz Allen Hamilton accessed a total of $60.0 million of its $500.0 million Revolving Credit Facility. As of June 30, 2019 and March 31, 2019, there were no amounts outstanding under the Revolving Credit Facility.

The Credit Agreement, as amended, requires quarterly principal payments of 1.25% of the stated principal amount of Term Loan A until maturity, and quarterly principal payments of 0.25% of the stated principal amount of Term Loan B until maturity.

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants include limitations on the following, in each case subject to certain exceptions: (i) indebtedness and liens, (ii) mergers, consolidations or amalgamations, liquidations, wind-ups or dissolutions, and disposition of all or substantially all assets; (iii) dispositions of property; (iv) restricted payments; (v) investments; (vi) transactions with affiliates; (vii) change in fiscal periods; (viii) negative pledges; (ix) restrictive agreements; (x) line of business; and (xi) speculative hedging. The events of default include the following, in each case subject to certain exceptions: (a) failure to make required payments under the Secured Credit Facility; (b) material breaches of representations or warranties under the Secured Credit Facility; (c) failure to observe covenants or agreements under the Secured Credit Facility; (d) failure to pay or default under certain other material indebtedness; (e) bankruptcy or insolvency; (f) certain Employee Retirement Income Security Act, or ERISA events; (g) certain material judgments; (h) actual or asserted invalidity of the Guarantee and Collateral Agreements or the other security documents or failure of the guarantees or perfected liens thereunder; and (i) a change of control. In addition, Booz Allen Hamilton is required to meet certain financial covenants at each quarter end, namely Consolidated Net Total Leverage and Consolidated Net Interest Coverage Ratios. As of June 30, 2019 and March 31, 2019, Booz Allen Hamilton was in compliance with all financial covenants associated with its debt and debt-like instruments.

During the first quarter of fiscal 2020, interest payments of $13.3 million and $4.4 million were made for Term Loan A and Term Loan B, respectively. During the first quarter of fiscal 2019, interest payments of $11.0 million and $4.0 million were made for Term Loan A and Term Loan B, respectively.

Senior Notes

On April 25, 2017, Booz Allen Hamilton issued $350 million aggregate principal amount of its 5.125% Senior Notes (the "Senior Notes"), under an Indenture, dated as of April 25, 2017, among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as guarantors (the "Subsidiary Guarantors"), and Wilmington Trust, National Association, as trustee (the "Trustee"), as supplemented by the First Supplemental Indenture, dated as of April 25, 2017, among Booz Allen Hamilton, the Subsidiary Guarantors and the Trustee. Each of Booz Allen Hamilton's existing and future domestic restricted subsidiaries that guarantee its obligations under the Secured Credit Facility and certain other indebtedness guarantee the Senior Notes on a senior unsecured basis. Interest is payable semi-annually on May 1 and November 1 of each year, beginning on November 1, 2017, and principal is due at maturity on May 1, 2025. In connection with the Senior Notes, the Company recognized $6.7 million of issuance costs, which were recorded as an offset against the carrying value of debt and will be amortized to interest expense over the term of the Senior Notes. During each of the first quarters of fiscal 2020 and 2019, interest payments of $9.0 million were made for the Senior Notes.

Borrowings under the Term Loans and, if used, the Revolving Credit Facility, incur interest at a variable rate. In accordance with Booz Allen Hamilton’s risk management strategy, Booz Allen Hamilton executed a series of interest rate swaps. As of June 30, 2019, Booz Allen Hamilton had interest rate swaps with an aggregate notional amount of $1 billion. These instruments hedge the variability of cash outflows for interest payments on the floating portion of the Company's debt. The Company's objectives in using cash flow hedges are to reduce volatility due to interest rate movements and to add stability to interest expense (See Note 9 in our condensed consolidated financial statements).

Interest on debt and debt-like instruments consisted of the following:



	Three Months Ended June 30,
	2019			2018
	(In thousands)
Term Loan A Interest Expense	$	13,450		$	10,842
Term Loan B Interest Expense	4,420			3,917
Interest on Revolving Credit Facility	—			59
Senior Notes Interest Expense	4,484			4,484
Deferred Payment Obligation Interest ⁽¹⁾	2,011			2,022
Amortization of Debt Issuance Cost (DIC) and Original Issue Discount (OID) ⁽²⁾	1,219			1,360
Other	(397		)	390
Total Interest Expense	$	25,187		$	23,074

⁽¹⁾ Interest payments on the deferred payment obligation are made twice a year in January and July.

⁽²⁾ DIC and OID on the Term Loans and Senior Notes are recorded as a reduction of long-term debt in the condensed consolidated balance sheet and are amortized ratably over the life of the related debt using the effective rate method. DIC on the Revolving Credit Facility is recorded as a long-term asset on the condensed consolidated balance sheet and amortized ratably over the term of the Revolving Credit Facility.

9. DERIVATIVES

The Company utilizes derivative financial instruments to manage interest rate risk related to its variable rate debt. The Company’s objectives in using these interest rate derivatives, which were designated as cash flow hedges, are to manage its exposure to interest rate movements and reduce volatility of interest expense. During the first quarter of fiscal 2020, the Company entered into eight floating-to-fixed interest rate swap agreements with six financial institutions with a start date of April 30, 2019 with an aggregate notional amount of $400 million. The aggregate notional amount of all interest rate swap agreements increased to $1 billion as of June 30, 2019. The swaps have staggered maturities, ranging from June 30, 2021 to June 30, 2025.

The floating-to-fixed interest rate swaps involve the exchange of variable interest amounts from a counterparty for the Company making fixed-rate interest payments over the life of the agreements without exchange of the underlying notional amount and effectively converting a portion of the variable rate debt into fixed interest rate debt.

Derivative instruments are recorded in the condensed consolidated balance sheet on a gross basis at estimated fair value. As of June 30, 2019, $4.0 million and $19.1 million were classified as other current liabilities and other long-term liabilities, respectively, on the condensed consolidated balance sheet. As of March 31, 2019, $1.8 million, $0.6 million, $0.9 million, and $4.3 million were classified as other current assets, other long-term assets, other current liabilities, and other long-term liabilities, respectively, on the condensed consolidated balance sheet.

For interest rate swaps designated as cash flow hedges, the changes in the fair value of derivatives is recorded in Accumulated Other Comprehensive Income, or AOCI, net of taxes, and is subsequently reclassified into interest expense in the period that the hedged forecasted interest payments are made on the Company's variable-rate debt. The effect of derivative instruments on the accompanying consolidated financial statements for the three months ended June 30, 2019 and 2018 is as follows:



		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 AOCI on Derivatives					Amount of Gain or (Loss) Reclassified from AOCI into Income					Interest Expense on Consolidated Statements of Operations
Derivatives in Cash Flow Hedging Relationships		2019			2018		2019			2018		2019			2018
Interest rate swaps	Interest expense	$	(19,748	)	$	2,568	$	(386	)	$	24	$	(25,187	)	$	(23,074	)

Over the next 12 months, the Company estimates that $4.1 million will be reclassified as an increase to interest expense. Cash flows associated with periodic settlements of interest rate swaps will be classified as operating activities in the condensed consolidated statement of cash flows.

The Company is subject to counterparty risk in connection with its interest rate swap derivative contracts. Credit risk related to a derivative financial instrument represents the possibility that the counterparty will not fulfill the terms of the contract. The Company mitigates this credit risk by entering into agreements with credit-worthy counterparties and regularly reviews its credit exposure and the creditworthiness of the counterparties.

10. LEASES

Under Topic 842, the Company determines whether the contract is, or contains, a lease, which exists when the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. Operating leases are included in operating lease right-of-use ("ROU") assets, operating lease liabilities, and operating lease liabilities, net of current portion in our condensed consolidated balance sheets. Cash payments arising from operating leases are classified within operating activities in the condensed consolidated statement of cash flows. At June 30, 2019, the Company had no finance leases.

The Company's leases are generally for facilities and office space and the Company recognizes operating lease ROU assets and operating lease liabilities at lease commencement date, for those arrangements. The initial lease liability is equal to the present value of the future minimum lease payments over the lease term. The initial measurement of the right-of-use asset is equal to the initial lease liability plus any initial direct costs and prepaid lease payments, less any lease incentives. At the lease commencement date the Company estimates its collateralized incremental borrowing rate based on publicly available yields adjusted for Company-specific considerations and the Company's varying lease terms in determining the present value of future payments. Certain of the Company’s leases contain options to renew or to terminate the lease which are included in the determination of the ROU assets and lease liabilities when it is reasonably certain that the Company will exercise the option. The Company's leases may also include variable lease payments, such as maintenance costs, utilities, or other variable lease-related payments which are not included in measuring ROU assets and lease liabilities and are recorded as lease expense in the period incurred.

As permitted under Topic 842, the Company elected not to recognize ROU assets and lease liabilities for leases with an initial term of 12 months or less; lease expense from these leases are recognized on a straight-line basis over the lease term. As further permitted under Topic 842, the Company elected to not separate lease components from non-lease components, accounting for both components as a single lease component.

The Company’s total lease cost is recorded primarily within general and administrative expenses on the condensed consolidated statement of operations and consisted of the following:



	Three Months Ended June 30, 2019
Operating lease cost	$	17,960
Short-term lease cost	2,417
Variable lease cost	2,562
Total operating lease costs	$	22,939

Future minimum operating lease payments for noncancelable operating leases as of June 30, 2019 are as follows:



For the Fiscal Year Ending March 31,	Operating Lease Payments
Remainder of 2020	$	24,609
2021	69,224
2022	58,767
2023	53,745
2024	46,425
Thereafter	125,642
Total future lease payments	378,412
Less: imputed interest	(60,644		)
Total lease liabilities	$	317,768

Supplemental cash flow information related to leases was as follows:



	Three Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities	$	19,912
Operating lease liabilities arising from obtaining ROU assets⁽¹⁾	2,440

(1) Includes all noncash increases and decreases arising from new or remeasured operating lease arrangements

Other information related to leases was as follows:



	At June 30, 2019
Weighted average remaining lease term (in years)	6.38
Weighted average discount rate	4.59	%

11. INCOME TAXES

The Company’s effective income tax rates were 24.7% and 24.1% for the three months ended June 30, 2019 and 2018, respectively. The three months effective tax rates of 24.7% and 24.1% differ from the federal statutory rate of 21.0% primarily due to the inclusion of state income taxes and permanent rate differences, primarily related to meals and entertainment and certain executive compensation, which were partially offset by discrete tax items.

As of the end of fiscal 2019, the examinations of the Company’s federal income tax returns and refund claims for fiscal years 2013 through 2015 were completed by the IRS. The Company received the full refund claim of $10.9 million during the first quarter of fiscal 2020.

The Company is currently contesting tax assessments from the District of Columbia Office of Tax and Revenue for fiscal years 2013 through 2015 at various stages of applicable administrative and judicial processes, with a combined amount at issue of approximately $11.4 million, net of associated tax benefits as of June 30, 2019. The Company has taken similar tax positions with respect to subsequent fiscal years, totaling in aggregate $27.4 million. As of June 30, 2019, the Company does not maintain reserves for any uncertain tax positions related to the contested tax benefits or the similar tax positions taken in the subsequent fiscal years. Given the recoverable nature of the state tax expense, the Company does not believe that the resolution of these matters will have a material adverse effect on its results of operations, cash flows or financial condition.

The Company maintained a reserve of $10.2 million as of June 30, 2019 relating to the acquisition of eGov Holdings, Inc. (d/b/a Aquilent) in the fourth quarter of fiscal 2017 for pre-acquisition period tax return uncertain tax positions.

12. OTHER LONG-TERM LIABILITIES

Other long-term liabilities consisted of the following:



	June 30, 2019		March 31, 2019
Deferred rent (1)	$	—	$	78,658
Postretirement benefit obligations	126,465		124,925
Other (2)	75,548		71,816
Total other long-term liabilities	$	202,013	$	275,399

(1) Deferred rent balance was reclassified to operating lease right-of-use assets on the condensed consolidated balance sheet as a result of the adoption of Topic 842. See Notes 2 and 10, respectively to our condensed consolidated financial statements.

(2) Because of condensed financial statement presentation, components of other long-term liabilities at June 30, 2019 and March 31, 2019 primarily include the Company's long-term disability obligation, the long-term liability portion of the Company's derivative instruments, income tax reserves and deferred tax liabilities.

13. EMPLOYEE BENEFIT PLANS

Defined Contribution Plan

The Company sponsors the Employees’ Capital Accumulation Plan, or ECAP, which is a qualified defined contribution plan that covers eligible U.S. and international employees. ECAP provides for distributions, subject to certain vesting provisions, to participants by reason of retirement, death, disability, or termination of employment. Effective April 1, 2014, the Company transitioned from a discretionary employer contribution to an annual matching contribution of up to 6% of eligible annual income as determined by the Internal Revenue Code for the ECAP. Total expense recognized under ECAP was $36.9 million and $32.6 million for the three months ended June 30, 2019 and 2018, respectively. The Company-paid contributions were $19.9 million and $17.5 million for the three months ended June 30, 2019 and 2018, respectively.

Defined Benefit Plan and Other Postretirement Benefit Plans

The Company provides postretirement healthcare benefits to former officers under a medical indemnity insurance plan, with premiums paid by the Company. This plan is referred to as the Officer Medical Plan. The Company also established a non-qualified defined benefit plan for all officers in May 1995, or the Retired Officers' Bonus Plan, which pays a lump-sum amount of $10,000 per year of service as an officer, provided the officer meets retirement vesting requirements. In addition, the Company provides a fixed annual allowance after retirement to cover financial counseling and other expenses. The Retired Officers' Bonus Plan is not salary related, but rather is based primarily on years of service. During fiscal 2017, the Company adopted a new plan which will provide for a one-time, lump sum retirement payment of one month’s salary when a vice-president retires from the Company, effective April 1, 2017. This is referred to as the Retired Vice-President Bonus Plan. Additionally, the Company offers medical and dental benefits to inactive employees (and their eligible dependents) on long-term disability.

The components of net postretirement medical expense for the Officer Medical Plan were as follows:



	Three Months Ended June 30,
	2019		2018
Service cost	$	1,239	$	1,488
Interest cost	1,215		1,282
Net actuarial loss	—		527
Total postretirement medical expense	$	2,454	$	3,297

The service cost component of net periodic benefit cost is included in cost of revenue and general and administrative expenses, and the non-service cost components of net periodic benefit cost (interest cost and net actuarial loss) is included as part of other income (expense), net in the accompanying condensed consolidated statements of operations.

As of June 30, 2019 and March 31, 2019, the unfunded status of the post-retirement medical plan was $121.8 million and $120.3 million, respectively, which is included in other long-term liabilities in the accompanying condensed consolidated balance sheets.

Long-term Disability Benefits

The Company offers medical and dental benefits to inactive employees (and their eligible dependents) on long-term disability. These benefits do not vary with an employee's years of service; therefore, the Company is required to accrue the costs of the benefits at the date the inactive employee becomes disability eligible and elects to participate in the benefit. The accrued cost for such benefits is calculated using an actuarial estimate. The accrued cost for these benefits was $11.6 million at both June 30, 2019 and March 31, 2019, and is presented in other long-term liabilities in the accompanying consolidated balance sheets.

Deferred Compensation Plan

The Company established a non-qualified deferred compensation plan (the "Plan") for certain executives and other highly compensated employees that was effective in fiscal 2018. Pursuant to the Plan, participants are eligible to defer up to 100% of their incentive cash compensation on a tax deferred basis in excess of the IRS limits imposed on 401(k) plans. The assets of the plan are held in a consolidated trust and are subject to the claims of the Company's general creditors under federal and state laws in the event of insolvency. Consequently, the trust qualifies as a Rabbi trust for income tax purposes.

The fair values of both plan investments and obligations at June 30, 2019 and March 31, 2019 were $6.8 million and $3.2 million, respectively, and were recorded in other long term assets and in other long term liabilities, respectively, in the condensed consolidated balance sheets. Adjustments to the fair value of the plan investments and obligations are recorded in operating expenses.

14. ACCUMULATED OTHER COMPREHENSIVE LOSS

All amounts recorded in other comprehensive loss are related to the Company's post-retirement plans and interest rate swaps designated as cash flow hedges. The following table shows the changes in accumulated other comprehensive income (loss), net of tax:



	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 (1)	—			(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	)

(1) Changes in other comprehensive income (loss) before reclassification for derivatives designated as cash flow hedges are recorded net of tax benefits of $5.2 million for the three months ended June 30, 2019.



	Three Months Ended June 30, 2018
	Post-retirement plans			Derivatives designated as cash flow hedges		Totals
Beginning of period	$	(20,955	)	$	5,849	$	(15,106	)
Other comprehensive income (loss) before reclassifications (2)	—			1,896		1,896
Amounts reclassified from accumulated other comprehensive loss	407			24		431
Net current-period other comprehensive income (loss)	407			1,920		2,327
End of period	$	(20,548	)	$	7,769	$	(12,779	)

(2) Changes in other comprehensive income (loss) before reclassification for derivatives designated as cash flow hedges are recorded net of tax expenses of $0.7 million for the three months ended June 30, 2018.

The following table presents the reclassifications out of accumulated other comprehensive loss to net income:



	Three Months Ended June 30,
	2019			2018
Amounts reclassified from accumulated other comprehensive loss:
Post-retirement plans (Note 13):
Amortization of net actuarial loss included in net periodic benefit cost	$	44		$	550
Tax benefit (expense)	(10		)	(143		)
Net of tax	$	34		$	407
Derivatives designated as cash flow hedges (Note 9):
Reclassification of hedge (loss) gain	$	(523	)	$	33
Tax benefit (expense)	137			(9		)
Net of tax	$	(386	)	$	24

15. STOCK-BASED COMPENSATION

The following table summarizes stock-based compensation expense recognized in the condensed consolidated statements of operations:



	Three Months Ended June 30,
	2019		2018
Cost of revenue	$	1,934