SEC Filing | Booz Allen Hamilton

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bah-20200930

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 September 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. ¨

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 October 27, 2020
Class A Common Stock			137,900,150

TABLE OF CONTENTS


		Page
PART I. Financial Information		1
ITEM 1	Financial Statements	1
ITEM 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	43
ITEM 4	Controls and Procedures	43
PART II. Other Information		44
ITEM 1	Legal Proceedings	44
ITEM 1A	Risk Factors	45
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	45
ITEM 3	Defaults Upon Senior Securities	45
ITEM 4	Mine Safety Disclosures	45
ITEM 5	Other Information	45
ITEM 6	Exhibits	46

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INDEX TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


			Page
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statements of Cash Flows			4
Condensed Consolidated Statement of Stockholders' Equity			5
Notes to Unaudited Condensed Consolidated Financial Statements
1. Business Overview			7
2. Basis of Presentation			7
3. Revenue			8
4. Earnings Per Share			10
5. Accounts Receivable, Net			11
6. Accounts Payable and Other Accrued Expenses			11
7. Accrued Compensation and Benefits			12
8. Debt			12
9. Derivatives			15
10. Leases			16
1 1 . Income Taxes			17
1 2 . Other Long Term Liabilities			17
13. Employee Benefit Plans			17
14. Accumulated Other Comprehensive Loss			19
15. Stock Based Compensation			20
16. Fair Value Measurements			21
17. Related Party Transactions			22
18 . Commitments and Contingencies			22

Table of Contents

BOOZ ALLEN HAMILTON HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2020		March 31, 2020
	(Unaudited)
	(Amounts in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	1,275,190	$	741,901
Accounts receivable, net of allowance	1,467,581		1,459,471
Prepaid expenses and other current assets	68,272		126,816
Total current assets	2,811,043		2,328,188
Property and equipment, net of accumulated depreciation	201,784		208,077
Operating lease right-of-use assets	241,523		240,122
Intangible assets, net of accumulated amortization	303,769		300,987
Goodwill	1,581,160		1,581,160
Other long-term assets	145,619		135,432
Total assets	$	5,284,898	$	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	852,885		698,011
Accrued compensation and benefits	360,547		348,775
Operating lease liabilities	52,988		49,021
Other current liabilities	57,306		54,006
Total current liabilities	1,401,591		1,327,678
Long-term debt, net of current portion	2,315,739		2,007,979
Operating lease liabilities, net of current portion	266,236		270,266
Other long-term liabilities	329,375		331,687
Total liabilities	4,312,941		3,937,610
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock, Class A — $0.01 par value — authorized, 600,000,000 shares; issued, 162,079,334 shares at September 30, 2020 and 161,333,973 shares at March 31, 2020; outstanding, 138,024,601 shares at September 30, 2020 and 138,719,921 shares at March 31, 2020	1,621		1,613
Treasury stock, at cost — 24,054,733 at September 30, 2020 and 22,614,052 shares at March 31, 2020	(1,003,650)		(898,095)
Additional paid-in capital	509,512		468,027
Retained earnings	1,508,206		1,330,812
Accumulated other comprehensive loss	(43,732)		(46,001)
Total stockholders’ equity	971,957		856,356
Total liabilities and stockholders’ equity	$	5,284,898	$	4,793,966

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

Table of Contents

BOOZ ALLEN HAMILTON HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
	(Amounts in thousands, except per share data)				(Amounts in thousands, except per share data)
Revenue	$	2,019,185	$	1,819,577	$	3,975,638	$	3,644,753
Operating costs and expenses:
Cost of revenue	942,597		843,942		1,891,499		1,684,596
Billable expenses	603,652		539,846		1,152,729		1,091,021
General and administrative expenses	244,700		244,122		490,555		478,402
Depreciation and amortization	21,015		19,632		41,747		39,653
Total operating costs and expenses	1,811,964		1,647,542		3,576,530		3,293,672
Operating income	207,221		172,035		399,108		351,081
Interest expense	(19,787)		(25,863)		(40,022)		(51,050)
Other (expense) income, net	(12,034)		2,005		(12,870)		3,976
Income before income taxes	175,400		148,177		346,216		304,007
Income tax expense	39,319		33,852		80,806		72,296
Net income	$	136,081	$	114,325	$	265,410	$	231,711
Earnings per common share (Note 4):
Basic	$	0.98	$	0.81	$	1.91	$	1.64
Diluted	$	0.98	$	0.80	$	1.90	$	1.63

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

Table of Contents

BOOZ ALLEN HAMILTON HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
	(Amounts in thousands)				(Amounts in thousands)
Net income	$	136,081	$	114,325	$	265,410	$	231,711
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on derivatives designated as cash flow hedges	3,664		(5,014)		2,225		(19,979)
Change in postretirement plan costs	22		16		44		50
Total other comprehensive income (loss), net of tax	3,686		(4,998)		2,269		(19,929)
Comprehensive income	$	139,767	$	109,327	$	267,679	$	211,782

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

Table of Contents

BOOZ ALLEN HAMILTON HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended September 30,
	2020		2019
	(Amounts in thousands)
Cash flows from operating activities
Net income	$	265,410	$	231,711
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	41,747		39,653
Noncash lease expense	26,891		27,711
Stock-based compensation expense	25,632		15,808
Amortization of debt issuance costs	2,176		2,459
Loss on debt extinguishment	13,239		—
Losses on dispositions	25		581
Changes in assets and liabilities:
Accounts receivable, net of allowance	(8,606)		9,253
Deferred income taxes and income taxes receivable / payable	51,846		(30,322)
Prepaid expenses and other current assets	(10,279)		(16,696)
Other long-term assets	(3,664)		(95)
Accrued compensation and benefits	22,788		(28,805)
Accounts payable and other accrued expenses	154,140		34,623
Other current liabilities	2,669		2,311
Operating lease liabilities	(28,355)		(24,529)
Other long-term liabilities	10,365		3,016
Net cash provided by operating activities	566,024		266,679
Cash flows from investing activities
Purchases of property, equipment, and software	(38,084)		(59,978)


Net cash used in investing activities	(38,084)		(59,978)
Cash flows from financing activities
Proceeds from issuance of common stock	9,092		7,049
Stock option exercises	6,492		3,687
Repurchases of common stock	(116,291)		(14,658)
Cash dividends paid	(86,836)		(64,848)
Debt extinguishment costs	(8,971)		—
Repayment of debt	(488,933)		(38,962)
Proceeds from debt issuance	691,496		400,000
Other financing activities	(700)		(1,413)
Net cash provided by financing activities	5,349		290,855
Net increase in cash and cash equivalents	533,289		497,556
Cash and cash equivalents––beginning of period	741,901		283,990
Cash and cash equivalents––end of period	$	1,275,190	$	781,546
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	32,282	$	44,965
Income taxes	$	24,451	$	102,151
Supplemental disclosures of non-cash investing and financing activities

Noncash financing activities	$	178	$	2,110

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

Table of Contents


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 June 30, 2020	161,856,727	$	1,618	(23,659,991)	$	(973,601)	$	486,739	$	1,415,129	$	(47,418)	$	882,467
Issuance of common stock	81,482	2		—	—		4,667		—		—		4,669
Stock options exercised	141,125	1		—	—		3,366		—		—		3,367
Repurchase of common stock	—	—		(394,742)	(30,049)		–		—		—		(30,049)
Recognition of liability related to future restricted stock units vesting	—	—		—	—		(59)		—		—		(59)
Net income	—	—		—	—		—		136,081		—		136,081
Other comprehensive income (loss), net of tax	—	—		—	—		–		—		3,686		3,686
Dividends paid of $0.31 per share of common stock	—	—		—	—		–		(43,004)		—		(43,004)
Stock-based compensation expense	—	—		—	—		14,799		—		—		14,799
Balance at September 30, 2020	162,079,334	$	1,621	(24,054,733)	$	(1,003,650)	$	509,512	$	1,508,206	$	(43,732)	$	971,957

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	443,338	5		—	—		9,087		—		—		9,092
Stock options exercised	302,023	3		—	—		6,489		—		—		6,492
Repurchase of common stock (1)	—	—		(1,440,681)	(105,555)		—		—		—		(105,555)
Recognition of liability related to future restricted stock units vesting	—	—		—	—		280		—		—		280
Net income	—	—		—	—		—		265,410		—		265,410
Other comprehensive income (loss), net of tax	—	—		—	—		—		—		2,269		2,269
Dividends paid of $0.62 per share of common stock	—	—		—	—		—		(86,836)		—		(86,836)
Stock-based compensation expense	—	—		—	—		25,629		—		—		25,629
Balance at September 30, 2020	162,079,334	$	1,621	(24,054,733)	$	(1,003,650)	$	509,512	$	1,508,206	$	(43,732)	$	971,957

(1) During the six months ended September 30, 2020, the Company purchased 1.3 million shares of the Company’s Class A Common Stock in a series of open market transactions for $96.4 million. Additionally, the Company repurchased shares during the six months ended September 30, 2020 to cover the minimum statutory withholding taxes on restricted stock units that vested on various dates during the period.

Table of Contents


BOOZ ALLEN HAMILTON HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) [CONTINUED]
(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 June 30, 2019	160,244,219	$	1,602	(20,026,100)	$	(719,736)	$	413,293	$	1,079,785	$	(26,121)	$	748,823
Issuance of common stock	88,141	1		—	—		3,670		—		—		3,671
Stock options exercised	67,997	1		—	—		1,531		—		—		1,532
Repurchase of common stock	—	—		(807)	(57)		—		—		—		(57)
Recognition of liability related to future restricted stock units vesting	—	—		—	—		(41)		—		—		(41)
Net income	—	—		—	—		—		114,325		—		114,325
Other comprehensive income (loss), net of tax	—	—		—	—		—		—		(4,998)		(4,998)
Dividends paid of $0.23 per share of common stock	—	—		—	—		—		(32,436)		—		(32,436)
Stock-based compensation expense	—	—		—	—		9,364		—		—		9,364
Balance at September 30, 2019	160,400,357	$	1,604	(20,026,907)	$	(719,793)	$	427,817	$	1,161,674	$	(31,119)	$	840,183

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	246,233	3		—	—		7,046		—		—		7,049
Stock options exercised	229,299	2		—	—		3,685		—		—		3,687
Repurchase of common stock (2)	—	—		(129,935)	(8,343)		—		—		—		(8,343)
Recognition of liability related to future restricted stock units vesting	—	—		—	—		(318)		—		—		(318)
Net income	—	—		—	—		—		231,711		—		231,711
Other comprehensive income (loss), net of tax	—	—		—	—		—		—		(19,929)		(19,929)
Dividends paid of $0.46 per share of common stock	—	—		—	—		—		(64,848)		—		(64,848)
Stock-based compensation expense	—	—		—	—		15,808		—		—		15,808
Balance at September 30, 2019	160,400,357	$	1,604	(20,026,907)	$	(719,793)	$	427,817	$	1,161,674	$	(31,119)	$	840,183

(2) During the six months ended September 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 six months ended September 30, 2019 to cover the minimum statutory withholding taxes on restricted stock units that vested on various dates during the period.

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

Tab le of C ontents

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 27,600 employees as of September 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 six months ended September 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.

Tab le of C ontents

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)

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This 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. This 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 September 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 September 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 and six months ended September 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.

Tab le of C ontents

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)

•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 September 30,								Six Months Ended September 30,
	2020				2019				2020				2019
Cost-reimbursable	$	1,138,501	56	%	$	1,026,055	57	%	$	2,230,549	56	%	$	2,052,648	56	%
Time-and-materials	504,663		25	%	423,605		23	%	1,007,209		25	%	844,200		23	%
Fixed-price	376,021		19	%	369,917		20	%	737,880		19	%	747,905		21	%
Total Revenue	$	2,019,185	100	%	$	1,819,577	100	%	$	3,975,638	100	%	$	3,644,753	100	%

Revenue by Customer Type:


	Three Months Ended September 30,								Six Months Ended September 30,
	2020				2019				2020				2019
U.S. government:
Defense Clients	$	1,000,340	50	%	$	845,270	47	%	$	1,931,676	49	%	$	1,704,206	47	%
Intelligence Clients	396,110		19	%	405,220		22	%	803,214		20	%	824,287		22	%
Civil Clients	570,213		28	%	511,012		28	%	1,128,136		28	%	1,003,045		28	%
Total U.S. government	1,966,663		97	%	1,761,502		97	%	3,863,026		97	%	3,531,538		97	%
Global Commercial Clients	52,522		3	%	58,075		3	%	112,612		3	%	113,215		3	%
Total Revenue	$	2,019,185	100	%	$	1,819,577	100	%	$	3,975,638	100	%	$	3,644,753	100	%

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


	Three Months Ended September 30,								Six Months Ended September 30,
	2020				2019				2020				2019
Prime Contractor	$	1,880,778	93	%	$	1,676,522	92	%	$	3,684,382	93	%	$	3,349,952	92	%
Sub-contractor	138,407		7	%	143,055		8	%	291,256		7	%	294,801		8	%
Total Revenue	$	2,019,185	100	%	$	1,819,577	100	%	$	3,975,638	100	%	$	3,644,753	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 September 30, 2020 and March 31, 2020, the Company had $8.4 billion and $6.3 billion, respectively, of remaining performance obligations and we expect to recognize more than half of the remaining performance obligations at September 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.

Tab le of C ontents

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)

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	September 30, 2020		March 31, 2020
Contract assets:
Current	Accounts receivable, net of allowance	1,022,558		988,634
Long-term	Other long-term assets	63,294		62,600
Total		$	1,085,852	$	1,051,234
Contract liabilities:
Advance payments, billings in excess of costs incurred and deferred revenue	Other current liabilities	$	28,840	$	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 September 30, 2020 and 2019, we recognized revenue of $2.5 million and $1.7 million, respectively, and for the six months ended September 30, 2020 and September 30, 2019, we recognized revenue of $22.0 million and $18.4 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 and second quarters 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 September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Earnings for basic computations (1)	$	135,283	$	113,725	$	263,951	$	230,492
Weighted-average common shares outstanding for basic computations	137,882,906		140,245,038		138,017,120		140,125,779
Earnings for diluted computations (1)	$	135,286	$	113,728	$	263,958	$	230,499
Dilutive stock options and restricted stock	864,734		1,117,098		987,262		1,127,138
Weighted-average common shares outstanding for diluted computations	138,747,640		141,362,136		139,004,382		141,252,917
Earnings per common share
Basic	$	0.98	$	0.81	$	1.91	$	1.64
Diluted	$	0.98	$	0.80	$	1.90	$	1.63

Tab le of C ontents

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) During the three months ended September 30, 2020 and 2019, approximately 0.8 million and 0.7 million participating securities, respectively, were paid dividends totaling $0.3 million and $0.2 million, respectively. During the six months ended September 30, 2020 and 2019, approximately 0.8 million and 0.7 million participating securities, respectively, were paid dividends totaling $0.5 million and $0.3 million, respectively. For the three months ended September 30, 2020 and 2019, there were undistributed earnings of $0.5 million and $0.4 million, respectively, allocated to the participating class of securities in both basic and diluted EPS. For the six months ended September 30, 2020 and 2019, there were undistributed earnings of $1.0 million and $0.9 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 both the three and six months ended September 30, 2020 and 2019.

The EPS calculation for the three months ended September 30, 2020 and 2019 excludes 0.3 million and 0.2 million options, respectively, as their impact was anti-dilutive. The EPS calculation for both the six months ended September 30, 2020 and 2019 excludes 0.2 million options, as their impact was anti-dilutive.

5. ACCOUNTS RECEIVABLE, NET OF ALLOWANCE

Accounts receivable, net of allowance consisted of the following:


	September 30, 2020		March 31, 2020
Current assets
Accounts receivable–billed	$	449,382	$	474,822
Accounts receivable–unbilled	1,022,558		988,634
Allowance for doubtful accounts	(4,359)		(3,985)
Accounts receivable, net of allowance	1,467,581		1,459,471
Other long-term assets
Accounts receivable–unbilled	63,294		62,600
Total accounts receivable, net	$	1,530,875	$	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 $(0.09) million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively, and $(0.12) million and $2.4 million for the six months ended September 30, 2020 and September 30, 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