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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, 2022
| | | | | |
☐ | 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 July 26, 2022 |
Class A Common Stock | 132,327,822 | |
TABLE OF CONTENTS
| | | | | | | | |
| | Page |
| |
ITEM 1 | | |
ITEM 2 | | |
ITEM 3 | | |
ITEM 4 | | |
| |
ITEM 1 | | |
ITEM 1A | | |
ITEM 2 | | |
ITEM 3 | | |
ITEM 4 | | |
ITEM 5 | | |
ITEM 6 | | |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
| | | | | | | | | | | |
| June 30, 2022 | | March 31, 2022 |
| | | |
| (Unaudited) | | |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 497,828 | | | $ | 695,910 | |
Accounts receivable, net | 1,828,376 | | | 1,622,989 | |
Prepaid expenses and other current assets | 94,949 | | | 126,777 | |
Total current assets | 2,421,153 | | | 2,445,676 | |
Property and equipment, net of accumulated depreciation | 194,948 | | | 202,229 | |
Operating lease right-of-use assets | 213,467 | | | 227,231 | |
Intangible assets, net of accumulated amortization | 626,907 | | | 646,682 | |
Goodwill | 2,021,931 | | | 2,021,931 | |
Other long-term assets | 483,993 | | | 481,826 | |
Total assets | $ | 5,962,399 | | | $ | 6,025,575 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Current portion of long-term debt | $ | 68,379 | | | $ | 68,379 | |
Accounts payable and other accrued expenses | 898,329 | | | 902,616 | |
Accrued compensation and benefits | 361,119 | | | 438,634 | |
Operating lease liabilities | 55,272 | | | 52,334 | |
Other current liabilities | 132,892 | | | 71,991 | |
Total current liabilities | 1,515,991 | | | 1,533,954 | |
Long-term debt, net of current portion | 2,715,497 | | | 2,731,693 | |
Operating lease liabilities, net of current portion | 229,998 | | | 247,070 | |
Deferred tax liabilities | 58,087 | | | 239,602 | |
Other long-term liabilities | 343,702 | | | 226,535 | |
Total liabilities | 4,863,275 | | | 4,978,854 | |
Commitments and contingencies (Note 15) | | | |
Stockholders’ equity: | | | |
Common stock, Class A — $0.01 par value — authorized, 600,000,000 shares; issued, 164,900,879 shares at June 30, 2022 and 164,372,545 shares at March 31, 2022; outstanding, 132,423,378 shares at June 30, 2022 and 132,584,348 shares at March 31, 2022 | 1,650 | | | 1,646 | |
Treasury stock, at cost — 32,477,501 shares at June 30, 2022 and 31,788,197 shares at March 31, 2022 | (1,693,012) | | | (1,635,454) | |
Additional paid-in capital | 679,632 | | | 656,222 | |
Retained earnings | 2,095,093 | | | 2,015,071 | |
Accumulated other comprehensive loss | 14,342 | | | 8,585 | |
Total Booz Allen stockholders' equity | 1,097,705 | | | 1,046,070 | |
Non-controlling interest | 1,419 | | | 651 | |
Total stockholders’ equity | 1,099,124 | | | 1,046,721 | |
Total liabilities and stockholders’ equity | $ | 5,962,399 | | | $ | 6,025,575 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
| | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, |
| | | | | 2022 | | 2021 |
| | | |
Revenue | | | | | $ | 2,249,600 | | | $ | 1,989,066 | |
Operating costs and expenses: | | | | | | | |
Cost of revenue | | | | | 1,074,973 | | | 962,719 | |
Billable expenses | | | | | 674,266 | | | 555,545 | |
General and administrative expenses | | | | | 253,064 | | | 301,800 | |
Depreciation and amortization | | | | | 40,102 | | | 27,745 | |
Total operating costs and expenses | | | | | 2,042,405 | | | 1,847,809 | |
Operating income | | | | | 207,195 | | | 141,257 | |
Interest expense | | | | | (24,655) | | | (21,270) | |
Other income (expense), net | | | | | (2,958) | | | (533) | |
Income before income taxes | | | | | 179,582 | | | 119,454 | |
Income tax expense | | | | | 41,489 | | | 27,352 | |
Net income | | | | | $ | 138,093 | | | $ | 92,102 | |
Net loss attributable to non-controlling interest | | | | | 191 | | | — | |
Net income attributable to common stockholders | | | | | 138,284 | | | 92,102 | |
Earnings per common share (Note 4): | | | | | | | |
Basic | | | | | $ | 1.04 | | | $ | 0.68 | |
Diluted | | | | | $ | 1.03 | | | $ | 0.67 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Amounts in thousands)
| | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, |
| | | | | 2022 | | 2021 |
| | | |
Net income | | | | | $ | 138,093 | | | $ | 92,102 | |
Other comprehensive income, net of tax: | | | | | | | |
Change in unrealized gain on derivatives designated as cash flow hedges | | | | | 5,759 | | | 2,994 | |
Change in postretirement plan costs | | | | | (2) | | | 19 | |
Total other comprehensive income, net of tax | | | | | 5,757 | | | 3,013 | |
Comprehensive income | | | | | 143,850 | | | 95,115 | |
Comprehensive loss attributable to non-controlling interest | | | | | 191 | | | — | |
Comprehensive income attributable to common stockholders | | | | | $ | 144,041 | | | $ | 95,115 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands) | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2022 | | 2021 |
Cash flows from operating activities | | | |
Net income | $ | 138,093 | | | $ | 92,102 | |
Adjustments to reconcile net income to net cash used in operating activities: | | | |
Depreciation and amortization | 40,102 | | | 27,745 | |
Noncash lease expense | 13,787 | | | 13,581 | |
Stock-based compensation expense | 13,696 | | | 12,444 | |
Amortization of debt issuance costs | 1,161 | | | 1,129 | |
Loss on debt extinguishment | — | | | 2,515 | |
Losses (gains) on dispositions, and other | 688 | | | (27) | |
Changes in assets and liabilities: | | | |
Accounts receivable, net | (205,387) | | | (220,112) | |
Deferred income taxes and income taxes receivable / payable | 34,802 | | | 22,323 | |
Prepaid expenses and other current and long-term assets | (10,636) | | | (8,874) | |
Accrued compensation and benefits | (61,039) | | | (75,509) | |
Accounts payable and other accrued expenses | (4,287) | | | 121,862 | |
Other current and long-term liabilities | (6,614) | | | 159 | |
Net cash used in operating activities | (45,634) | | | (10,662) | |
Cash flows from investing activities | | | |
Purchases of property, equipment, and software | (13,734) | | | (9,008) | |
Payments for business acquisitions, net of cash acquired | — | | | (665,583) | |
Payments for cost method investments | — | | | (2,000) | |
Net cash used in investing activities | (13,734) | | | (676,591) | |
Cash flows from financing activities | | | |
Proceeds from issuance of common stock | 6,081 | | | 5,758 | |
Stock option exercises | 4,596 | | | 1,794 | |
Repurchases of common stock | (73,397) | | | (123,805) | |
Cash dividends paid | (58,899) | | | (51,641) | |
Repayments on revolving credit facility, term loans, and Senior Notes | (17,095) | | | (60,973) | |
Net proceeds from debt issuance | — | | | 487,027 | |
Proceeds from revolving credit facility | — | | | 60,000 | |
Net cash (used in) provided by financing activities | (138,714) | | | 318,160 | |
Net decrease in cash and cash equivalents | (198,082) | | | (369,093) | |
Cash and cash equivalents––beginning of period | 695,910 | | | 990,955 | |
Cash and cash equivalents––end of period | $ | 497,828 | | | $ | 621,862 | |
Supplemental disclosures of cash flow information | | | |
Net cash paid during the period for: | | | |
Interest | $ | 8,735 | | | $ | 6,713 | |
Income taxes | $ | 2,952 | | | $ | 1,673 | |
Supplemental disclosures of non-cash investing and financing activities | | | |
Share repurchases transacted but not settled and paid | $ | — | | | $ | 3,041 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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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) | | Non-Controlling Interest | | Total Stockholders’ Equity |
Shares | | Amount | | Shares | | Amount | | |
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Balance at March 31, 2022 | | 164,372,545 | | $ | 1,646 | | | (31,788,197) | | $ | (1,635,454) | | | $ | 656,222 | | | $ | 2,015,071 | | | $ | 8,585 | | | $ | 651 | | | $ | 1,046,721 | |
Issuance of common stock | | 385,009 | | 3 | | | — | | | — | | | 6,078 | | | — | | | — | | | — | | | 6,081 | |
Stock options exercised | | 143,325 | | 1 | | | — | | | — | | | 4,595 | | | — | | | — | | | — | | | 4,596 | |
Repurchase of common stock (1) | | — | | | — | | | (689,304) | | (57,558) | | | — | | | — | | | — | | | — | | | (57,558) | |
Recognition of liability related to future restricted stock units vesting | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net income | | — | | | — | | | — | | | — | | | — | | | 138,284 | | | — | | | (191) | | | 138,093 | |
Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | — | | | — | | | 5,757 | | | — | | | 5,757 | |
Dividends declared of $0.43 per share of common stock | | — | | | — | | | — | | | — | | | — | | | (58,262) | | | — | | | — | | | (58,262) | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | 13,696 | | | | | — | | | — | | | 13,696 | |
Contribution to non-controlling interest | | — | | — | | | — | | — | | | (959) | | | — | | | — | | | 959 | | | — | |
Balance at June 30, 2022 | | 164,900,879 | | $ | 1,650 | | | (32,477,501) | | $ | (1,693,012) | | | $ | 679,632 | | | $ | 2,095,093 | | | $ | 14,342 | | | $ | 1,419 | | | $ | 1,099,124 | |
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Balance at March 31, 2021 | | 162,950,606 | | $ | 1,629 | | | (26,704,577) | | $ | (1,216,163) | | | $ | 557,957 | | | $ | 1,757,524 | | | $ | (29,771) | | | $ | — | | | $ | 1,071,176 | |
Issuance of common stock | | 458,943 | | 5 | | | — | | | — | | | 4,674 | | | | | — | | | — | | | 4,679 | |
Stock options exercised | | 55,205 | | 1 | | | — | | | — | | | 1,793 | | | — | | | — | | | — | | | 1,794 | |
Repurchase of common stock (2) | | — | | | — | | | (1,330,820) | | (111,438) | | | — | | | — | | | — | | | — | | | (111,438) | |
Recognition of liability related to future restricted stock units vesting | | — | | | — | | | — | | | — | | | 360 | | | — | | | — | | | — | | | 360 | |
Net income | | — | | | — | | | — | | | — | | | — | | | 92,102 | | | — | | | — | | | 92,102 | |
Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | — | | | — | | | 3,013 | | | — | | | 3,013 | |
Dividends declared of $0.37 per share of common stock | | — | | | — | | | — | | | — | | | — | | | (50,597) | | | — | | | — | | | (50,597) | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | 12,444 | | | — | | | — | | | — | | | 12,444 | |
Balance at June 30, 2021 | | 163,464,754 | | $ | 1,635 | | | (28,035,397) | | $ | (1,327,601) | | | $ | 577,228 | | | $ | 1,799,029 | | | $ | (26,758) | | | — | | | $ | 1,023,533 | |
(1) During the three months ended June 30, 2022, the Company purchased 0.6 million shares of the Company’s Class A Common Stock in a series of open market transactions for $46.9 million. Additionally, the Company repurchased shares for $10.6 million during the three months ended June 30, 2022 to cover the minimum statutory withholding taxes on restricted stock units that vested on various dates during the period.
(2) During the three months ended June 30, 2021, the Company purchased 1.2 million shares of the Company’s Class A Common Stock in a series of open market transactions for $98.2 million. Additionally, the Company repurchased shares for $13.3 million during the three months ended June 30, 2021 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.
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 29,300 employees as of June 30, 2022.
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, 2022. 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 periods 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, 2022 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 other entities over which the Company has a controlling financial interest or where the Company is a primary beneficiary. 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. Equity investments in entities over which the Company does not have the ability to exercise significant influence and whose securities do not have a readily determinable fair value are carried at cost or cost net of other-than-temporary impairments.
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.
Recent Accounting Pronouncements Not Yet Adopted
Accounting and reporting pronouncements effective after June 30, 2022 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 consulting, analytics, digital solutions, engineering, mission, 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.
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 Estimates
We recognize revenue for many of our contracts 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 the completion of our 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 revenue and 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, 2022 and 2021, 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 subcontractor, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following series of tables presents our revenue disaggregated by these categories.
Revenue by Contract Type:
We generate revenue under the following three basic types of contracts:
•Cost-Reimbursable Contracts: Cost-reimbursable contracts provide for the payment of allowable costs incurred during performance of the contract, up to a ceiling based on the amount that has been funded, plus a fixed fee or award fee.
•Time-and-Materials Contracts: Under contracts in this category, we are paid a fixed hourly rate for each direct labor hour expended, and we are reimbursed for billable material costs and billable out-of-pocket expenses inclusive of allocable indirect costs. We assume the financial risk on time-and-materials contracts because our costs of performance may exceed negotiated hourly rates.
•Fixed-Price Contracts: Under a fixed-price contract, we agree to perform the specified work for a predetermined price. To the extent our actual direct and allocated indirect costs decrease or increase from the estimates upon which the price was negotiated, we will generate more or less profit, respectively, or could incur a loss.
The table below presents the total revenue for each type of contract:
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| | | Three Months Ended June 30, |
| | | | | 2022 | | 2021 |
Cost-reimbursable | | | | | | | $ | 1,190,828 | | 53 | % | | $ | 1,115,426 | | 56 | % |
Time-and-materials | | | | | | | 545,902 | | 24 | % | | 497,449 | | 25 | % |
Fixed-price | | | | | | | 512,870 | | 23 | % | | 376,191 | | 19 | % |
Total Revenue | | | | | | | $ | 2,249,600 | | 100 | % | | $ | 1,989,066 | | 100 | % |
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)
Revenue by Customer Type:
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| | | Three Months Ended June 30, |
| | | | | 2022 | | 2021 |
U.S. government(1): | | | | | | | | | | | |
Defense Clients | | | | | | | $ | 1,019,991 | | 45 | % | | $ | 973,605 | | 49 | % |
Intelligence Clients | | | | | | | 408,883 | | 18 | % | | 379,174 | | 19 | % |
Civil Clients | | | | | | | 757,714 | | 34 | % | | 592,796 | | 30 | % |
Total U.S. government | | | | | | | 2,186,588 | | 97 | % | | 1,945,575 | | 98 | % |
Global Commercial Clients | | | | | | | 63,012 | | 3 | % | | 43,491 | | 2 | % |
Total Revenue | | | | | | | $ | 2,249,600 | | 100 | % | | $ | 1,989,066 | | 100 | % |
(1) Certain contracts were reassigned between the various verticals of our U.S. government business shown in the table above to better align our operations to the customers we serve within each market. Prior year revenue by customer type has been recast to reflect the changes.
Revenue by Whether the Company Acts as a Prime Contractor or a Subcontractor:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, |
| | | | | 2022 | | 2021 |
Prime Contractor | | | | | | | $ | 2,131,295 | | 95 | % | | $ | 1,861,722 | | 94 | % |
Subcontractor | | | | | | | 118,305 | | 5 | % | | 127,344 | | 6 | % |
Total Revenue | | | | | | | $ | 2,249,600 | | 100 | % | | $ | 1,989,066 | | 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 exclude negotiated but unexercised options, the unfunded value of expired contracts, and certain variable consideration which the Company does not expect to recognize as revenue.
As of June 30, 2022 and March 31, 2022, the Company had $7.5 billion and $7.4 billion of remaining performance obligations, respectively. We expect to recognize approximately 70% of the remaining performance obligations at June 30, 2022 as revenue over the next 12 months, and approximately 85% 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 result in net contract assets or liabilities being recognized at the end of each reporting period.
Contract assets primarily consist of unbilled receivables typically resulting from revenue recognized exceeding the amount billed to the customer and right to payment is not just subject to the passage of time. Unbilled amounts represent revenues for which billings have not been presented to customers. 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. 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 credit losses to provide for an estimate of uncollectible receivables. Provision for credit losses recognized was not material for the three months ended June 30, 2022 and 2021.
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)
The following table summarizes the contract assets and liabilities, and accounts receivable, net of allowance recognized on the Company’s condensed consolidated balance sheets:
| | | | | | | | | | | | | | |
| | June 30, 2022 | | March 31, 2022 |
Current assets | | | | |
Accounts receivable–billed | | $ | 627,774 | | | $ | 465,322 | |
Accounts receivable–unbilled (contract assets) | | 1,200,602 | | | 1,157,667 | |
Allowance for credit losses | | — | | | — | |
Accounts receivable, net | | 1,828,376 | | | 1,622,989 | |
Other long-term assets | | | | |
Accounts receivable–unbilled (contract assets) | | 63,960 | | | 64,339 | |
Total accounts receivable, net | | $ | 1,892,336 | | | $ | 1,687,328 | |
Other current liabilities | | | | |
Advance payments, billings in excess of costs incurred and deferred revenue (contract liabilities) | | $ | 33,762 | | | $ | 26,747 | |
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, 2022 and 2021, we recognized revenue of $16.3 million and $11.9 million, respectively, related to our contract liabilities on April 1, 2022 and 2021, 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 attributable to common stockholders 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 2023 and 2022. 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, |
| | | | | 2022 | | 2021 |
Earnings for basic computations (1) | | | | | $ | 137,369 | | | $ | 91,621 | |
Weighted-average common shares outstanding for basic computations | | | | | 132,371,487 | | | 135,569,968 |
Earnings for diluted computations (1) | | | | | $ | 137,372 | | | $ | 91,622 | |
Dilutive stock options and restricted stock | | | | | 639,601 | | | 822,375 |
Weighted-average common shares outstanding for diluted computations | | | | | 133,011,088 | | | 136,392,343 |
Earnings per common share | | | | | | | |
Basic | | | | | $ | 1.04 | | | $ | 0.68 | |
Diluted | | | | | $ | 1.03 | | | $ | 0.67 | |
(1) During the three months ended June 30, 2022 and 2021, approximately 0.9 million and 0.7 million participating securities were paid dividends totaling $0.4 million and $0.3 million, respectively. There were undistributed earnings of $0.5 million and $0.2 million for the three months ended June 30, 2022 and 2021, respectively, allocated to the participating class of securities in both basic and diluted EPS. The allocated undistributed earnings and the dividends paid comprise the difference between net income presented on the condensed consolidated statements of operations and earnings for basic and diluted computations for the three months ended June 30, 2022 and 2021. The impact of any anti-dilutive options excluded from the calculation of EPS was not material.
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)
5. ACQUISITIONS, DIVESTITURES, AND GOODWILL
Acquisitions
EverWatch
On March 16, 2022, the Company announced that it had entered into a stock purchase agreement to acquire EverWatch Corp. ("EverWatch"), a leading provider of advanced solutions to the defense and intelligence communities for approximately $440.0 million, subject to customary adjustments. If consummated, the Company expects to fund the acquisition with cash on hand. The transaction is subject to satisfaction of customary closing conditions. On June 29, 2022, the U.S. Department of Justice (“DOJ”) initiated a lawsuit seeking to enjoin consummation of the transaction. In connection with the DOJ’s lawsuit, the Company and EverWatch agreed to delay any closing of the transaction until October 9, 2022 or the date on which the court denies the DOJ’s request for a preliminary injunction and/or permanent injunction, whichever is earlier. The DOJ litigation and related delay have introduced an increased level of uncertainty regarding the ability of the parties to consummate the transaction. The Company can make no assurances that the transaction will be consummated.
Divestitures
In April 2022, the Company entered into an agreement with Oliver Wyman, a global management consulting firm and a business of Marsh McLennan, to divest the Company's management consulting business serving the Middle East and North Africa (MENA) region, which is substantially comprised of the contracts associated with the MENA business and the team of management consultants that provide services under those contracts. The Company concluded that the assets and liabilities associated with the MENA business met the criteria to be reported as held for sale on the consolidated balance sheet as of March 31, 2022. As of June 30, 2022, $9.2 million of net accounts receivable, $0.7 million of other assets, $1.3 million of deferred revenue, $0.8 million of bonus payable, and $0.1 million of accounts payable were included in other current assets and other current liabilities on the consolidated balance sheet. The transaction is expected to close in fiscal 2023, subject to customary closing conditions, including regulatory approvals.
Goodwill
As of June 30, 2022 and March 31, 2022, goodwill was $2,021.9 million. As of June 30, 2022, approximately $7.9 million of goodwill has been allocated to the assets held for sale related to the Company's divestiture of its MENA business noted above.
6. ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES
Accounts payable and other accrued expenses consisted of the following:
| | | | | | | | | | | |
| June 30, 2022 | | March 31, 2022 |
Vendor payables | $ | 502,372 | | | $ | 539,524 | |
Accrued expenses | 395,957 | | | 363,092 | |
Total accounts payable and other accrued expenses | $ | 898,329 | | | $ | 902,616 | |
Accrued expenses consisted primarily of the Company’s provision for claimed indirect costs, which were approximately $295.6 million and $290.4 million as of June 30, 2022 and March 31, 2022, respectively. See Note 15 for further discussion of this provision.
7. ACCRUED COMPENSATION AND BENEFITS
Accrued compensation and benefits consisted of the following:
| | | | | | | | | | | |
| June 30, 2022 | | March 31, 2022 |
Bonus | $ | 32,140 | | | $ | 96,040 | |
Retirement | 67,794 | | | 48,169 | |
Vacation | 205,298 | | | 206,199 | |
Other | 55,887 | | | 88,226 | |
Total accrued compensation and benefits | $ | 361,119 | | | $ | 438,634 | |
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)
8. DEBT
Debt consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | March 31, 2022 | |
| Interest Rate | | Outstanding Balance | | Interest Rate | | Outstanding Balance | |
Term Loan A | 2.31 | % | | $ | 1,225,276 | | | 1.71 | % | | $ | 1,241,398 | | |
Term Loan B | 2.81 | % | | 379,348 | | | 2.21 | % | | 380,321 | | |
| | | | | | | | |
Senior Notes due 2028 | 3.88 | % | | 700,000 | | | 3.88 | % | | 700,000 | | |
Senior Notes due 2029 | 4.00 | % | | 500,000 | | | 4.00 | % | | 500,000 | | |
Less: Unamortized debt issuance costs and discount on debt | | | (20,748) | | | | | (21,647) | | |
Total | | | 2,783,876 | | | | | 2,800,072 | | |
Less: Current portion of long-term debt | | | (68,379) | | | | | (68,379) | | |
Long-term debt, net of current portion | | | $ | 2,715,497 | | | | | $ | 2,731,693 | | |
Credit Agreement
As of June 30, 2022, the Credit Agreement provided Booz Allen Hamilton Inc. ("Booz Allen Hamilton") with a $1,225.3 million Term Loan A ("Term Loan A"), a $379.3 million Term Loan B ("Term Loan B", and, together with Term Loan A, the "Term Loans"), and a $1,000.0 million revolving credit facility (the "Revolving Credit Facility"), with a sub-limit for letters of credit of $200.0 million (collectively, the "Secured Credit Facility"). As of June 30, 2022, the maturity date of Term Loan A and Term Loan B are June 24, 2026 and November 26, 2026, respectively. Booz Allen Hamilton’s obligations and the guarantors’ guarantees under the Credit Agreement (the "Guarantee") are secured by a first priority lien on substantially all of the assets (including capital stock of subsidiaries) of Booz Allen Hamilton, Booz Allen Hamilton Investor Corporation, and the subsidiary guarantors, subject to certain exceptions set forth in the Credit Agreement and related documentation.
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 (i) the administrative agent’s prime corporate rate, (ii) the overnight federal funds rate plus 0.50%, and (iii) three-month LIBOR (adjusted for maximum reserves, and subject to a floor of zero) plus 1.00%), in each case plus an applicable margin as determined by the pricing grid, 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 1.125% to 2.00% for LIBOR loans and 0.125% to 1.00% for base rate loans, in each case based on Booz Allen Hamilton’s consolidated total net leverage ratio. Unused commitments under the Revolving Credit Facility are subject to a quarterly fee ranging from 0.175% to 0.35% based on Booz Allen Hamilton’s consolidated total net leverage ratio. Booz Allen Hamilton also agreed to pay customary letter of credit and agency fees. The applicable margin for Term Loan B is 1.75% for LIBOR loans and 0.75% for base rate loans.
The Credit Agreement 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. 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, 2022 and March 31, 2022, 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, 2022 and 2021, interest payments of $6.3 million and $4.9 million were made for Term Loan A, respectively, and $2.4 million and $1.8 million were made for Term Loan B, respectively.
Borrowings under the Term Loans, and if used, the Revolving Credit Facility, incur interest at a variable rate. As of June 30, 2022, Booz Allen Hamilton had interest rate swaps with an aggregate notional amount of $550.0 million. These instruments hedge the variability of cash outflows for interest payments on the Term Loans and Revolving Credit Facility. 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).
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)
Senior Notes
On June 17, 2021, Booz Allen Hamilton issued $500.0 million aggregate principal amounts of its 4.000% Senior Notes due July 1, 2029 (the “Senior Notes due 2029”) under an Indenture, dated as of June 17, 2021, among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as guarantors (the “2029 Subsidiary Guarantors”), and Wilmington Trust, National Association (in such capacity, the “2029 Trustee”), as supplemented by the First Supplemental Indenture, dated as of June 17, 2021, among Booz Allen Hamilton, the 2029 Subsidiary Guarantors and the 2029 Trustee. The Senior Notes due 2029 and the related guarantees are Booz Allen Hamilton’s and each 2029 Subsidiary Guarantor's senior unsecured obligations and rank equally in right of payment with all of Booz Allen Hamilton’s and the 2029 Subsidiary Guarantors’ existing and future senior indebtedness and rank senior in right of payment to any of Booz Allen Hamilton’s and the 2029 Subsidiary Guarantors’ future subordinated indebtedness. The net proceeds from the sale of the Senior Notes due 2029 were used to fund the acquisition of Liberty IT Solutions, LLC ("Liberty"), a leading digital partner driving transformation across the federal IT ecosystem, in June of 2021 and to pay related fees and expenses.
Interest is payable on the Senior Notes due 2029 semi-annually in cash in arrears on July 1 and January 1 of each year, beginning on January 1, 2022. In connection with the issuance of the Senior Notes due 2029, the Company recognized $6.5 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 due 2029.
On August 24, 2020, Booz Allen Hamilton issued $700.0 million aggregate principal amount of its 3.875% Senior Notes due 2028 (the “Senior Notes due 2028”, and, together with the Senior Notes due 2029, the "Senior Notes") under an Indenture, dated as of August 24, 2020, among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as guarantors (the “2028 Subsidiary Guarantors”), and Wilmington Trust, National Association as trustee (in such capacity, the “2028 Trustee”), as supplemented by the First Supplemental Indenture, dated as of August 24, 2020, among Booz Allen Hamilton, the 2028 Subsidiary Guarantors and the 2028 Trustee. Each of Booz Allen Hamilton's existing and future restricted subsidiaries that guarantee its obligations under the Secured Credit Facility or certain other indebtedness guarantee the Senior Notes due 2028 on a senior unsecured basis. The Senior Notes due 2028 and the guarantees are Booz Allen Hamilton’s and each 2028 Subsidiary Guarantors’ senior unsecured obligations and rank equally in right of payment with all of Booz Allen Hamilton’s and the 2028 Subsidiary Guarantors’ existing and future senior indebtedness and rank senior in right of payment to any of Booz Allen Hamilton’s and the Subsidiary Guarantors’ future subordinated indebtedness.
Interest is payable on the Senior Notes due 2028 semi-annually on March 1 and September 1 of each year, beginning on March 1, 2021, and principal is due at maturity on September 1, 2028. In connection with the issuance of the Senior Notes due 2028, the Company recognized $9.2 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 due 2028.
There were no changes to the Company’s outstanding debt obligations during the quarter. For additional information on the Company’s debt arrangements and default provisions, see Note 10, “Debt,” of the Company’s consolidated financial statements included in the fiscal 2022 Form 10-K.
Interest on debt and debt-like instruments consisted of the following: | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, |
| | | | | 2022 | | 2021 |
| | | (In thousands) |
Term Loan A Interest Expense | | | | | $ | 6,359 | | | $ | 5,229 | |
Term Loan B Interest Expense | | | | | $ | 2,429 | | | 1,801 | |
Interest on Revolving Credit Facility | | | | | $ | — | | | 25 | |
Senior Notes Interest Expense | | | | | $ | 11,781 | | | 7,559 | |
Amortization of Debt Issuance Cost (DIC) and Original Issue Discount (OID) (1) | | | | | $ | 1,161 | | | 1,128 | |
Interest Swap Expense | | | | | $ | 2,831 | | | 5,443 | |
Other | | | | | $ | 94 | | | 85 | |
Total Interest Expense | | | | | $ | 24,655 | | | $ | 21,270 | |
(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.
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)
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 $550.0 million as of June 30, 2022. The swaps have staggered maturities, ranging from June 30, 2023 to June 30, 2025. These swaps mature within the last tranche of the Company's floating rate debt (November 26, 2026).
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, 2022, $3.4 million and $4.1 million, were classified as other current assets and other long-term assets, respectively, on the condensed consolidated balance sheet. As of March 31, 2022, $4.1 million, $4.3 million and $39 thousand were classified as other long-term assets, other current liabilities, and other long-term liabilities, respectively, on the condensed consolidated balance sheet.
For interest rate swaps designated as cash flow hedges, the changes in the fair value of derivatives is recorded in Accumulated Other Comprehensive 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, 2022 and 2021 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 Pre-Tax Gain or (Loss) Recognized in AOCL on Derivatives | Amount of Pre-Tax Gain or (Loss) Reclassified from AOCL into Income (1) | |
2022 | 2021 | 2022 | 2021 | | |
Interest rate swaps | Interest expense | $ | 4,966 | | $ | (1,394) | | $ | (2,831) | | $ | (5,443) | | | |
(1) The reclassifications from accumulated other comprehensive loss to net income was reduced by taxes of $0.7 million and $1.4 million for the three months ended June 30, 2022 and 2021, respectively.
Over the next 12 months, the Company estimates that $3.4 million will be reclassified as a decrease 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. INCOME TAXES
The Company’s effective income tax rates were 23.1% and 22.9% for the three months ended June 30, 2022 and 2021. Our effective tax rates for these periods differ from the federal statutory rate 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 and the accrual of reserves for uncertain tax positions, offset by research and development tax credits, excess tax benefits for employee share-based compensation, and the Foreign Derived Intangible Income deduction.
The Company is currently contesting tax assessments from the District of Columbia Office of Tax and Revenue ("DC OTR") for fiscal years 2013 through 2015. The assessment relates to $11.7 million of taxes, net of federal tax benefits, as of June 30, 2022.
During fiscal 2022, the Company received notification that the District of Columbia Office of Administrative Hearings ruled in favor of the DC OTR. The Company is currently appealing the decision with the District of Columbia Court of Appeals. The Company intends to continue to vigorously defend this matter and filed its appellate brief on May 9, 2022. DC OTR's response brief is due August 8, 2022, absent an extension, while the Company's response brief is due August 29, 2022.
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)
The Company has taken similar tax positions with respect to subsequent fiscal years. As of June 30, 2022, the Company does not maintain reserves for any uncertain tax positions related to the contested tax benefits related to 2013 through 2015, nor does it maintain reserves for the similar tax positions taken in the subsequent fiscal years. Management continues to evaluate this position quarterly to determine if a change in estimate is needed. If an adverse final resolution were to occur with respect to uncertain tax positions related to the contested tax benefits or the similar tax positions taken for fiscal years 2013 through 2020, the total potential future tax expense that would arise would be approximately $40.2 million to $55.9 million, net of federal benefits.
11. EMPLOYEE BENEFIT PLANS
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 expenses recognized under ECAP were $46.2 million and $43.2 million for the three months ended June 30, 2022 and 2021, respectively.
The Company also provides post-retirement healthcare benefits to former officers under a medical indemnity insurance plan, with premiums paid by the Company. As of June 30, 2022 and March 31, 2022, the unfunded status of the post-retirement medical plan was $115.0 million and $113.5 million, respectively, which is included in other long-term liabilities in the accompanying condensed consolidated balance sheets. Remaining balance sheet and income statement impacts of any benefit plans are immaterial for all periods presented in these Condensed Consolidated Financial Statements.
12. 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, 2022 |
| | | | Post-retirement plans | Derivatives designated as cash flow hedges | Totals |
Beginning of period | | | | $ | 8,811 | | $ | (226) | | $ | 8,585 | |
Other comprehensive income before reclassifications(1) | | | | — | | 3,668 | | 3,668 | |
Amounts reclassified from accumulated other comprehensive income (loss) | | | | (2) | | 2,091 | | 2,089 | |
Net current-period other comprehensive income (loss) | | | | (2) | | 5,759 | | 5,757 | |
End of period | | | | $ | 8,809 | | $ | 5,533 | | $ | 14,342 | |
(1) Changes in other comprehensive income before reclassification for derivatives designated as cash flow hedges are recorded net of tax benefit of $1.3 million for the three months ended June 30, 2022, respectively.
| | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2021 |
| | | | Post-retirement plans | Derivatives designated as cash flow hedges | Totals |
Beginning of period | | | | $ | (1,562) | | $ | (28,209) | | $ | (29,771) | |
Other comprehensive loss before reclassifications(2) | | | | — | | (1,031) | | (1,031) | |
Amounts reclassified from accumulated other comprehensive loss | | | | 19 | | 4,025 | | 4,044 | |
Net current-period other comprehensive income | | | | 19 | | 2,994 | | 3,013 | |
End of period | | | | $ | (1,543) | | $ | (25,215) | | $ | (26,758) | |
(2) Changes in other comprehensive loss before reclassification for derivatives designated as cash flow hedges are recorded net of tax benefits of $0.4 million for the three months ended June 30, 2021.
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)
13. STOCK-BASED COMPENSATION
The following table summarizes stock-based compensation expense recognized in the condensed consolidated statements of operations:
| | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, |
| | | | | 2022 | | 2021 |
Cost of revenue | | | | | $ | 7,482 | | | $ | 5,885 | |
General and administrative expenses | | | | | 6,214 | | | 6,559 | |
Total | | | | | $ | 13,696 | | | $ | 12,444 | |
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, |
| | | | | 2022 | | 2021 |
Equity Incentive Plan Options | | | | | $ | 552 | | | $ | 573 | |
Restricted Stock and other awards | | | | | 13,144 | | | 11,871 | |
Total | | | | | $ | 13,696 | | | $ | 12,444 | |
As of June 30, 2022, there was $99.2 million of total unrecognized compensation cost related to unvested stock-based compensation agreements. The unrecognized compensation cost as of June 30, 2022 is expected to be fully amortized over the next 4.92 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.
| | | | | | | | | | | | | | |
| | June 30, 2022 |
| | Unrecognized Compensation Cost | | Weighted Average Remaining Period to be Recognized (in years) |
Equity Incentive Plan Options | | $ | 5,518 | | | 4.11 |
Restricted Stock and other Awards | | 93,632 | | | 1.98 |
Total | | $ | 99,150 | | | |
Equity Incentive Plan
As of June 30, 2022, there were 1.3 million EIP options outstanding, of which 0.6 million were unvested.
During the three months ended June 30, 2022, the Board of Directors granted 0.8 million restricted stock units to certain employees of the Company. The aggregate value of these awards was $66.4 million based on the grant date stock price.
14. 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:
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)
| | | | | | | | | | | | | | | | | | | | | | | |
| Recurring Fair Value Measurements as of June 30, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | |
Current derivative instruments (2) | $ | — | | | $ | 3,424 | | | $ | — | | | $ | 3,424 | |
Long-term deferred compensation plan asset (1) | 20,186 | | | — | | | — | | | 20,186 | |
Long term derivative instruments (2) | — | | | 4,099 | | | — | | | 4,099 | |
Total Assets | $ | 20,186 | | | $ | 7,523 | | | $ | — | | | $ | 27,709 | |
Liabilities: | | | | | | | |
Long-term deferred compensation plan liability (1) | 20,186 | | | — | | | — | | | 20,186 | |
Total Liabilities | $ | 20,186 | | | $ | — | | | $ | — | | | $ | 20,186 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Recurring Fair Value Measurements as of March 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | |
Long-term deferred compensation plan asset (1) | $ | 16,512 | | | $ | — | | | $ | — | | | $ | 16,512 | |
Long term derivative instruments (2) | — | | | 4,088 | | | |