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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, 2020
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      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.
Large Accelerated Filer
  
  
Accelerated Filer
  
Non-Accelerated Filer
  
 
  
Smaller Reporting Company
  
 
 
 
 
Emerging Growth Company
 
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. ¨

1



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 28, 2020
Class A Common Stock
137,802,479


2



TABLE OF CONTENTS
 


3



PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements
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

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

1



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


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

2



BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
Three Months Ended
June 30,
 
2020
 
2019
 
(Amounts in thousands)
Net income
$
129,329

 
$
117,386

Other comprehensive income, net of tax:
 
 
 
Change in unrealized (loss) gain on derivatives designated as cash flow hedges
(1,439
)
 
(14,965
)
Change in postretirement plan costs
22

 
34

Total other comprehensive income (loss), net of tax
(1,417
)
 
(14,931
)
Comprehensive income
$
127,912

 
$
102,455


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

3



BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Three Months Ended
June 30,
 
2020
 
2019
 
(Amounts in thousands)
Cash flows from operating activities
 
 
 
Net income
$
129,329

 
$
117,386

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
20,732

 
20,021

Noncash lease expense
13,242

 
13,970

Stock-based compensation expense
10,833

 
6,444

Amortization of debt issuance costs
1,070

 
1,219

Losses on dispositions
3

 
23

Changes in assets and liabilities:
 
 
 
Accounts receivable, net of allowance
(62,570
)
 
(77,352
)
Deferred income taxes and income taxes receivable / payable
35,027

 
42,342

Prepaid expenses and other current assets
(11,877
)
 
(15,540
)
Other long-term assets
1,496

 
623

Accrued compensation and benefits
(36,294
)
 
(70,845
)
Accounts payable and other accrued expenses
50,864

 
24,757

Other current liabilities
(1,700
)
 
1,047

Operating lease liabilities
(12,992
)
 
(15,232
)
Other long-term liabilities
3,255

 
2,120

Net cash provided by operating activities
140,418

 
50,983

Cash flows from investing activities
 
 
 
Purchases of property, equipment, and software
(20,058
)
 
(27,336
)
Net cash used in investing activities
(20,058
)
 
(27,336
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of common stock
4,423

 
3,378

Stock option exercises
3,125

 
2,155

Repurchases of common stock
(85,899
)
 
(12,178
)
Cash dividends paid
(43,832
)
 
(32,412
)
Repayment of debt
(119,466
)
 
(19,480
)
Proceeds from debt issuance

 
400,000

Net cash (used in) provided by financing activities
(241,649
)
 
341,463

Net (decrease) increase in cash and cash equivalents
(121,289
)
 
365,110

Cash and cash equivalents––beginning of period
741,901

 
283,990

Cash and cash equivalents––end of period
$
620,612

 
$
649,100

Supplemental disclosures of cash flow information
 
 
 
Net cash paid (refunded) during the period for:
 
 
 
Interest
$
19,032

 
$
26,726

Income taxes
$
3,123

 
$
(4,238
)
Supplemental disclosures of non-cash investing and financing activities
 
 
 
Share repurchases transacted but not settled and paid
$
344

 
$
2,423

Noncash financing activities
$
178

 
$
2,682

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

4



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
Shares
 
Amount
 
Shares
 
Amount
 
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



(1) During the three months ended June 30, 2020, the Company purchased 0.9 million shares of the Company’s Class A Common Stock in a series of open market transactions for $66.4 million. Additionally, the Company repurchased shares during the first quarter of fiscal 2021 to cover the minimum statutory withholding taxes on restricted stock units that vested on June 30, 2020.
(2) During the three months ended June 30, 2019, the Company purchased 93 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 units that vested on June 30, 2019.

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

5



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
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 services 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 27,400 employees as of June 30, 2020.
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, 2020. 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, 2020 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.
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 the provision for claimed indirect costs, valuation and lives of tangible and intangible assets, impairment of long-lived assets, accrued liabilities, revenue recognition, including the accrual of indirect costs, bonus and other incentive compensation, stock-based compensation, reserves for uncertain tax positions and valuation allowances on deferred tax assets, provisions for income taxes, postretirement obligations, 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 June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). This guidance requires companies to record an allowance for expected credit losses over the contractual term of certain financial assets, including trade receivables and contract assets, and expands disclosure requirements for credit quality of financial assets. The Company adopted this standard effective April 1, 2020 using the modified retrospective method. The adoption of this standard did not have a material impact on the condensed consolidated financial statements and disclosures.
In August 2018, the FASB issued ASU 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. The Company adopted this standard effective April 1, 2020 on a prospective basis, and adoption of this standard did not have a material impact on the condensed consolidated financial statements.

6



In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance includes removal of certain exceptions to the general principles of Topic 740, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. The provisions of this standard are effective for years beginning after December 15, 2020, with early adoption permitted. The Company early adopted the standard effective April 1, 2020, and applied most of the relevant amendments prospectively. The Company’s adoption did not have a material impact on the condensed consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other areas or transactions that are impacted by reference rate reform. The Company elected to adopt Topic 848 in fiscal 2020 and as of June 30, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the Company’s ability to apply hedge accounting to our derivative financial instruments. The Company continues to evaluate the impact of the guidance and may apply other elections, as applicable and as allowed by Topic 848.
Recent Accounting Pronouncements Not Yet Adopted
Other accounting and reporting pronouncements effective after June 30, 2020 and issued 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 management and technology consulting services, analytics, digital solutions, engineering, mission operations, 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 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 reasonably 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, 2020 and 2019, 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

7



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,
 
2020
 
2019
Cost-reimbursable
$
1,092,048

56
%
 
$
1,026,593

56
%
Time-and-materials
502,546

26
%
 
420,595

23
%
Fixed-price
361,859

18
%
 
377,988

21
%
Total Revenue
$
1,956,453

100
%
 
$
1,825,176

100
%
Revenue by Customer Type:
 
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
%
Revenue by Whether the Company Acts as a Prime Contractor or a Sub-Contractor:
 
Three Months Ended
June 30,
 
2020
 
2019
Prime Contractor
$
1,803,604

92
%
 
$
1,673,429

92
%
Sub-contractor
152,849

8
%
 
151,747

8
%
Total Revenue
$
1,956,453

100
%
 
$
1,825,176

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 both June 30, 2020 and March 31, 2020, the Company had $6.3 billion of remaining performance obligations and we expect to recognize more than half of the remaining performance obligations at June 30, 2020 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.

8



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 Accounting Standards Codification (ASC) No. 606, Revenue from Contracts with Customers (Topic 606).
The following table summarizes the contract balances recognized on the Company’s condensed consolidated balance sheets:
 
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


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, 2020 and 2019, we recognized revenue of $19.5 million and $16.7 million, respectively, related to our contract liabilities on April 1, 2020 and 2019, 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 2021 and 2020. 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,
 
2020
 
2019
Earnings for basic computations (1)
$
128,686

 
$
116,766

Weighted-average common shares outstanding for basic computations
138,153,464

 
140,004,627

Earnings for diluted computations (1)
$
128,689

 
$
116,770

Dilutive stock options and restricted stock
1,018,990

 
1,124,674

Weighted-average common shares outstanding for diluted computations
139,172,454

 
141,129,301

Earnings per common share
 
 
 
Basic
$
0.93

 
$
0.83

Diluted
$
0.92

 
$
0.83

(1) During both the three months ended June 30, 2020 and 2019, approximately 0.7 million participating securities were paid dividends totaling $0.2 million. For both the three months ended June 30, 2020 and 2019, there were undistributed

9



earnings of $0.4 million 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 both the three months ended June 30, 2020 and 2019.
The EPS calculation for the three months ended June 30, 2020 and 2019 excludes 0.2 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,
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


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 (benefit) provision for doubtful accounts of $(0.03) million and $1.9 million for the three months ended June 30, 2020 and 2019, 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 is exposed to credit risk primarily through global commercial customers. The Company continuously monitors its credit exposure through review of customer balances against contract terms, historical cash collections, outstanding past due status, current economic conditions and dispute resolution. It records provisions for doubtful accounts based on its expected credit losses considering historical experience, current information and reasonable and supportable forecasts of future economic conditions.
6. ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES
Accounts payable and other accrued expenses consisted of the following: 
 
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


Accrued expenses consisted primarily of the Company’s provision for claimed indirect costs, which were approximately $232.5 million and $224.6 million as of June 30, 2020 and March 31, 2020, respectively. See Note 18 for further discussion of this provision.


10



7. ACCRUED COMPENSATION AND BENEFITS
Accrued compensation and benefits consisted of the following: 
 
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


8. DEBT
Debt consisted of the following: 
  
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


Term Loans and Revolving Credit Facility
On November 26, 2019 (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 Seventh Amendment (the "Seventh 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 the 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, the Fifth Amendment to the Credit Agreement, dated as of March 7, 2018, and the Sixth Amendment to the Credit Agreement, dated July 23, 2018). Pursuant to the Seventh Amendment, the Company reduced the applicable margin applicable to the Term Loan B ("Term Loan B" and, together with the Term Loan A, the "Term Loans") from 2.00% to 1.75% for LIBOR loans and from 1.00% to 0.75% for base rate loans and extended the maturity of the Term Loan B to November 26, 2026. The applicable margin and maturity date applicable to the Term Loan A (the "Term Loan A") remained unchanged.
Prior to the Seventh Amendment, approximately $389.0 million was outstanding under Term Loan B. Pursuant to the Seventh Amendment, certain lenders converted their existing Term Loan B loans into a new tranche of Term Loan B loans in an aggregate amount, along with Term Loan B loans advanced by certain new lenders, of approximately $389.0 million (the “New Refinancing Tranche B Term Loans”). The proceeds from the new lenders were used to prepay in full all of the existing Term Loan B loans that were not converted into the new Term Loan B tranche. Voluntary prepayments of the New Refinancing Tranche B Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty, subject to a 1.00% premium payable in connection with certain repricing transactions within the first six months after the Seventh Amendment. The other terms of the New Refinancing Tranche B Term Loans are generally the same as the existing Term Loan B prior to the Seventh Amendment.

11



As of June 30, 2020, the Credit Agreement provided Booz Allen Hamilton with a $1,345.2 million Term Loan A, a $387.1 million Term Loan B, and $500.0 million revolving credit facility (the "Revolving Credit Facility") with a sub-limit for letters of credit of $100.0 million. As of June 30, 2020, 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 November 26, 2026. 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 the 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) the 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 at 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 1.75% for LIBOR loans and 0.75% 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. For both the three months ended June 30, 2020 and 2019, Booz Allen Hamilton accessed no amounts of its $500.0 million Revolving Credit Facility. As of June 30, 2020, there was no outstanding balance on the Revolving Credit Facility. As of March 31, 2020, $100.0 million was outstanding on the Revolving Credit Facility, which was repaid in June 2020.
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, 2020 and March 31, 2020, Booz Allen Hamilton was in compliance with all financial covenants associated with its debt and debt-like instruments.
For the three months ended June 30, 2020 and 2019, interest payments of $6.9 million and $13.3 million were made for Term Loan A and $2.2 million and $4.4 million were made for Term Loan B, respectively.

12



Senior Notes
On April 25, 2017, Booz Allen Hamilton issued $350 million aggregate principal amount of its 5.125% Senior Notes due 2025 (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. Booz Allen Hamilton has the right to redeem the Senior Notes at its option, in whole at any time or in part from time to time, upon certain required notice, at any time (i) on and after May 1, 2020, at a price equal to 102.56% of the principal amount of the Senior Notes, (ii) on or after May 1, 2021, at a price equal to 101.28% of the principal amount of the Senior Notes, and (iii) on May 1, 2022 and thereafter, at a price equal to 100.00% of the principal amount of the Senior Notes, in each case, plus accrued and unpaid interest, if any, to (but not including) the applicable redemption date. 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. For both the three months ended June 30, 2020 and 2019, Booz Allen Hamilton made interest payments of $9.0 million 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, between April 6, 2017 and April 4, 2019, Booz Allen Hamilton executed a series of interest rate swaps. As of June 30, 2020, 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 term loan 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 to our condensed consolidated financial statements).
Interest on debt and debt-like instruments consisted of the following:
 
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

(1) 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. The aggregate notional amount of all interest rate swap agreements was $1 billion as of June 30, 2020. The swaps have staggered maturities, ranging from June 30, 2021 to June 30, 2025. These swaps mature within the last tranche of the Company's floating rate debt (November 26, 2026).

13



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 convert 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, 2020, $21.2 million and $37.4 million were classified as other current liabilities and other long-term liabilities, respectively, on the condensed consolidated balance sheet. As of March 31, 2020$18.8 million, and $37.8 million were classified as 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 Loss, or AOCL, 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 condensed consolidated financial statements for the three months ended June 30, 2020 and 2019 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 AOCL on Derivatives
Amount of Gain or (Loss) Reclassified from AOCL into Income
Interest Expense on Condensed Consolidated Statements of Operations
2020
2019
2020
2019
2020
2019
Interest rate swaps
Interest expense
$
(6,387
)
$
(19,748
)
$
(4,441
)
$
523

$
(20,235
)
$
(25,187
)
Over the next 12 months, the Company estimates that $21.4 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
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,
 
2020
 
2019
Operating lease cost
$
17,127

 
$
17,960

Short-term lease cost
1,601

 
2,417

Variable lease cost
3,534

 
2,562

Total operating lease costs
$
22,262

 
$
22,939




14



Future minimum operating lease payments for noncancelable operating leases as of June 30, 2020 are as follows:
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



Supplemental cash flow information related to leases was as follows:
 
Three Months Ended
June 30,
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
$
16,719

 
$
19,912

Operating lease liabilities arising from obtaining ROU assets (1)
3,750

 
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:
 
June 30, 2020
Weighted average remaining lease term (in years)
5.88

Weighted average discount rate
4.75
%


11. INCOME TAXES
The Company’s effective income tax rates were 24.3% and 24.7% for the three months ended June 30, 2020 and 2019, respectively. The decrease in the effective tax rate as compared to the same period last fiscal year was primarily due to the larger excess tax benefits recognized in the current quarter. The three months effective tax rates of 24.3% and 24.7% differ from the federal statutory rate of 21.0% primarily due to the inclusion of state and foreign income taxes and permanent rate differences, which are predominantly related to certain executive compensation, partially offset by research and development tax credits and excess tax benefits for employee share-based compensation.
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 $11.7 million, net of associated federal tax benefits as of June 30, 2020. The Company has taken similar tax positions with respect to subsequent fiscal years, net of expiring statute of limitations, totaling in aggregate $32.5 million. As of June 30, 2020, 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 reserves for uncertain tax positions of $59.1 million and $56.1 million as of June 30, 2020 and March 31, 2020, respectively, which is included in other long-term liabilities in the accompanying condensed consolidated balance sheets. As of June 30, 2020, the Company maintained reserves for uncertain tax positions of $47.6 million relating to research and development tax credits and $10.2 million 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.


15



12. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following: 
 
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



(1) Because of condensed financial statement presentation, components of other long-term liabilities at June 30, 2020 and March 31, 2020 primarily include the Company's long-term liability portion of the Company's derivative instruments, the long-term disability obligation, deferred tax liabilities and reserves for uncertain tax positions.

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 certain international employees. ECAP provides for distributions to participants by reason of retirement, death, disability, or termination of employment. The Company provides an annual matching contribution of up to 6% of eligible annual compensation. Total expense recognized under ECAP was $41.1 million and $36.9 million for the three months ended June 30, 2020 and 2019, respectively. The Company-paid contributions were $23.2 million and $19.9 million for the three months ended June 30, 2020 and 2019, 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, tax preparation and other financial or wellness expenses. The Retired Officers' Bonus Plan is not salary related, but rather is based primarily on years of service. The Company also provides for a one-time lump sum retirement payment of one month’s salary when a vice-president retires from the Company. This is referred to as the Retired Vice-President Bonus Plan.
The components of net postretirement medical expense for the Officer Medical Plan were as follows: 
 
Three Months Ended
June 30,
 
2020
 
2019
Service cost
$
1,414

 
$
1,239

Interest cost
1,059

 
1,215

Total postretirement medical expense
$
2,473

 
$
2,454


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, 2020 and March 31, 2020, the unfunded status of the post-retirement medical plan was $120.9 million and $119.6 million, respectively, which is included in other long-term liabilities in the accompanying condensed consolidated balance sheets.    

16



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 $10.7 million at both June 30, 2020 and March 31, 2020, and is presented in other long-term liabilities in the accompanying condensed 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 plan investments and obligations at June 30, 2020 and March 31, 2020 were $12.3 million and $5.9 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 loss, net of tax:
 
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
)

(1) Changes in other comprehensive income (loss) before reclassification for derivatives designated as cash flow hedges are recorded net of tax benefits of $1.7 million for the three months ended June 30, 2020.
 
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
)


17



(2) Changes in other comprehensive 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.
The following table presents the reclassifications out of accumulated other comprehensive loss to net income:
 
Three Months Ended
June 30,
 
2020
 
2019
Amounts reclassified from accumulated other comprehensive loss:
 
 
 
Post-retirement plans (Note 13):
 
 
 
Amortization of net actuarial loss included in net periodic benefit cost
$
29

 
$
44

Tax benefit
(7
)
 
(10
)
Net of tax
$
22

 
$
34

Derivatives designated as cash flow hedges (Note 9):
 
 
 
Reclassification of hedge loss (gain)
$
4,441

 
$
(523
)
Tax (benefit) expense
(1,158
)
 
137

Net of tax
$
3,283

 
$
(386
)


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,
 
2020
 
2019
Cost of revenue
$
4,498

 
$
1,934

General and administrative expenses
6,335

 
4,510

Total
$
10,833

 
$
6,444


The following table summarizes the total stock-based compensation expense recognized in the condensed consolidated statements of operations by the following types of equity awards;
 
Three Months Ended
June 30,
 
2020
 
2019
Equity Incentive Plan Options
$
446

 
$
485

Restricted Stock Awards
10,387

 
5,959

Total
$
10,833

 
$
6,444



As of June 30, 2020, there was $58.2 million of total unrecognized compensation cost related to unvested stock-based compensation agreements. The unrecognized compensation cost as of June 30, 2020 is expected to be fully amortized over the next 4.75 years. Absent the effect of accelerating stock compensation cost for any departures of employees who may continue to vest in their equity awards, the following table summarizes the unrecognized compensation cost and the weighted-average period the cost is expected to be amortized.

18



 
 
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

 
 

Equity Incentive Plan
During the three months ended June 30, 2020, 255,541 options were granted under the Amended and Restated Equity Incentive Plan, or EIP. The aggregate fair value of options granted was $3.3 million and was based on the estimated fair value per-option granted of $12.91.
As of June 30, 2020, there were 1,780,511 EIP options outstanding, of which 768,587 were unvested.
During the three months ended June 30, 2020, the Board of Directors granted 472,595 restricted stock units to certain employees of the Company. The aggregate value of these awards was $34.2 million based on the grant date stock price, which ranged from $69.60 to $79.74.
As permitted under the terms of the EIP, the Compensation Committee, as Administrator of the EIP, authorized the withholding of taxes not to exceed the minimum statutory withholding amount, through the surrender of restricted stock units upon the vesting of restricted stock units and the surrender of shares of Class A Common Stock issuable upon the vesting of restricted stock. The participants surrendered 122,586 shares of Class A Common Stock issuable upon the vesting of restricted stock and recorded them as treasury shares at a cost of $9.1 million during the three months ended June 30, 2020.
Employee Stock Purchase Plan
For the quarterly offering period that closed on June 30, 2020, 59,855 Class A Common Stock shares were purchased by employees under the Company's Employee Stock Purchase Plan, or ESPP. Since the program's inception, 2,719,658 shares have been purchased by employees.

16. FAIR VALUE MEASUREMENTS
The accounting standard for fair value measurements establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (Level 1); inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2); and unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions (Level 3).
A financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The financial instruments measured at fair value in the accompanying condensed consolidated balance sheets consist of the following:
 
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