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MarketScreener Homepage  >  Equities  >  Nyse  >  Booz Allen Hamilton Holding Corporation    BAH

BOOZ ALLEN HAMILTON HOLDING CORPORATION

(BAH)
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BOOZ ALLEN HAMILTON : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

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05/26/2020 | 07:03am EDT
The following discussion and analysis is intended to help the reader understand
our business, financial condition, results of operations, and liquidity and
capital resources. You should read this discussion in conjunction with "Item 6.
Selected Financial Data," and our consolidated financial statements and the
related notes contained elsewhere in this Annual Report.
The statements in this discussion regarding industry outlook, our expectations
regarding our future performance, liquidity and capital resources, and other
non-historical statements in this discussion are forward-looking statements.
These forward-looking statements are subject to numerous risks and
uncertainties, including, but not limited to, the risks and uncertainties
described in "Item 1A. Risk Factors" and "Introductory Note - Cautionary Note
Regarding Forward-Looking Statements". Our actual results may differ materially
from those contained in or implied by any forward-looking statements.
Our fiscal year ends March 31 and, unless otherwise noted, references to years
or fiscal are for fiscal years ended March 31. See "- Results of Operations."
Overview
We are a leading provider of 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. Our ability to deliver value to our clients has always been, and
continues to be, a product of the strong character, expertise and tremendous
passion of our people. Our approximately 27,200 employees work to solve hard
problems by making clients' missions their own, combining decades of consulting
and domain expertise with functional expertise in areas such as analytics,
digital solutions, engineering, and cyber, all fostered by a culture of
innovation that extends to all reaches of the company.
Through our dedication to our clients' missions, and a commitment to evolving
our business to address their needs, we have longstanding relationships with our
clients, some more than 75 years. We support critical missions for a diverse
base of federal government clients, including nearly all of the
U.S. government's cabinet-level departments, as well as increasingly for
top-tier commercial and international clients. We support our federal government
clients by helping them tackle their most complex and pressing challenges such
as protecting soldiers in combat and supporting their families, advancing cyber
capabilities, keeping our national infrastructure secure, enabling and enhancing
digital services, transforming the healthcare system, and improving government
efficiency to achieve better outcomes. We serve commercial clients across
industries including aerospace, financial services, health and life sciences,
energy, and transportation. Our international clients are primarily in Europe,
the Middle East and Southeast Asia.


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Financial and Other Highlights
Effective April 1, 2019, the Company adopted Accounting Standard Codification
(ASC) No. 842 Leases (Topic 842), using the modified retrospective transition
approach and, as a result, comparative information for the prior fiscal years
have not been retrospectively adjusted. See Note 2 to our accompanying
consolidated financial statements for more information on the impact of the
adoption of this accounting standard.
During fiscal 2020, the Company generated its highest annual revenue since its
initial public offering and reported increases in headcount and backlog for the
year. Revenue increased 11.3% from fiscal 2019 to fiscal 2020 primarily driven
by sustained client demand and increased client staff headcount to meet that
demand. Revenue also benefited from higher billable expenses as compared to the
prior year.
Operating income increased 11.1% to $669.2 million in fiscal 2020 from $602.4
million in fiscal 2019, while operating margin was 9.0% in both years. The
increase in operating income was primarily driven by the same factors driving
revenue growth as well as strong contract performance. These increases in
operating income were partially offset by approximately $10.0 million in
COVID-19 related expenses, including transitional costs, temporary reductions in
billability during the month of March of fiscal 2020, and charges related to
certain contracts involving a ready workforce that we believe we may not be able
to recover. During fiscal 2019 the Company also benefited from an $11.2 million
reduction in expense as a result of an amendment and associated revaluation of
our long term disability plan liability. The Company also incurred incremental
legal costs during fiscal 2019 and 2020 in response to the U.S. Department of
Justice investigation and matters which purport to relate to the investigation,
a portion of which was offset by the receipt of insurance reimbursements. We
expect to incur additional costs in the future. Based on the information
currently available, the Company is not able to reasonably estimate the expected
long-term incremental legal costs or amounts that may be reimbursed associated
with this investigation and these related matters.
We are monitoring the evolving situation related to the COVID-19 outbreak and we
continue to work with our stakeholders to assess further possible implications
to our business and to take actions in an effort to mitigate adverse
consequences. To protect employee health and safety while COVID-19 remains a
threat, we plan to continue to deliver a majority of our services to clients via
telework for the foreseeable future. In cases where telework options or
effectiveness are limited, we are working closely with clients to achieve safe
return plans guided by federal, state and local policies and advice from other
experts. We are also working closely with our clients, where classified work is
concentrated, to retain continuity of service and ensure a ready workforce. We
expect to continue to be impacted by the inability of certain employees to
perform their contract requirements at their designated work locations due to
facility closures or restrictions as a result of COVID-19 and cannot perform
such work remotely. While the CARES Act contains a provision that allows federal
contractors to seek specified reimbursement for certain employees who are unable
to perform their contract requirements due to government restrictions, such
provision does not require the government to reimburse a contractor and
reimbursements are also subject to limitations and do not extend past September
30, 2020. As a result, we believe that some of our costs for certain employees
who are unable to perform their contract requirements due to government
restrictions will not be reimbursed and we expect that approximately $6 million
per month for the fee on certain contracts involving a ready workforce may not
be reimbursed or may exceed reimbursements in the near term. Although we cannot
currently predict the overall impact of the COVID-19 outbreak, the longer the
duration of the event, the more likely it is that it could have an adverse
effect on our business, financial position, results of operations and/or cash
flows.

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Non-GAAP Measures
We publicly disclose certain non-GAAP financial measurements, including Revenue,
Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA,
Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding
Billable Expenses, Adjusted Net Income, and Adjusted Diluted Earnings Per Share,
or Adjusted Diluted EPS, because management uses these measures for business
planning purposes, including to manage our business against internal projected
results of operations and measure our performance. We view Adjusted Operating
Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA
Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, and
Adjusted Diluted EPS as measures of our core operating business, which exclude
the impact of the items detailed below, as these items are generally not
operational in nature. These non-GAAP measures also provide another basis for
comparing period to period results by excluding potential differences caused by
non-operational and unusual or non-recurring items. In addition, we use Revenue,
Excluding Billable Expenses because it provides management useful information
about the Company's operating performance by excluding the impact of costs that
are not indicative of the level of productivity of our consulting staff
headcount and our overall direct labor, which management believes provides
useful information to our investors about our core operations. We also utilize
and discuss Free Cash Flow, because management uses this measure for business
planning purposes, measuring the cash generating ability of the operating
business, and measuring liquidity generally. We present these supplemental
measures because we believe that these measures provide investors and securities
analysts with important supplemental information with which to evaluate our
performance, long-term earnings potential, or liquidity, as applicable, and to
enable them to assess our performance on the same basis as management. These
supplemental performance measurements may vary from and may not be comparable to
similarly titled measures by other companies in our industry. Revenue, Excluding
Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA
Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable
Expenses, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow are not
recognized measurements under accounting principles generally accepted in the
United States, or GAAP, and when analyzing our performance or liquidity, as
applicable, investors should (i) evaluate each adjustment in our reconciliation
of revenue to Revenue, Excluding Billable Expenses, operating income to Adjusted
Operating Income, net income to Adjusted EBITDA, Adjusted EBITDA Margin on
Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses,
Adjusted Net Income and Adjusted Diluted Earnings Per Share, and net cash
provided by operating activities to Free Cash Flow, (ii) use Revenue, Excluding
Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA
Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable
Expenses, Adjusted Net Income, and Adjusted Diluted EPS in addition to, and not
as an alternative to, revenue, operating income, net income or diluted EPS, as
measures of operating results, each as defined under GAAP and (iii) use Free
Cash Flow in addition to, and not as an alternative to, net cash provided by
operating activities as a measure of liquidity, each as defined under GAAP. We
have defined the aforementioned non-GAAP measures as follows:
•            "Revenue, Excluding Billable Expenses" represents revenue less
             billable expenses. We use Revenue, Excluding Billable Expenses
             because it provides management useful information about the
             Company's operating performance by excluding the impact of costs
             that are not indicative of the level of productivity of our
             consulting staff headcount and our overall direct labor, which
             management believes provides useful information to our investors
             about our core operations.


•            "Adjusted Operating Income" represents operating income before
             transaction costs, fees, losses, and expenses, including fees
             associated with debt prepayments and supplemental employee benefits
             due to the COVID-19 outbreak. We prepare Adjusted Operating Income
             to eliminate the impact of items we do not consider indicative of
             ongoing operating performance due to their inherent unusual,
             extraordinary, or non-recurring nature or because they result from
             an event of a similar nature.


•            "Adjusted EBITDA" represents net income before income taxes, net
             interest and other expense and depreciation and amortization and
             before certain other items, including transaction costs, fees,
             losses, and expenses, including fees associated with debt
             prepayments and supplemental employee benefits due to the COVID-19
             outbreak. "Adjusted EBITDA Margin on Revenue" is calculated as
             Adjusted EBITDA divided by revenue. "Adjusted EBITDA Margin on
             Revenue, Excluding Billable Expenses" is calculated as Adjusted
             EBITDA divided by Revenue, Excluding Billable Expenses. The Company
             prepares Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, and
             Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses to
             eliminate the impact of items it does not consider indicative of
             ongoing operating performance due to their inherent unusual,
             extraordinary or non-recurring nature or because they result from an
             event of a similar nature.


•            "Adjusted Net Income" represents net income before: (i)

transaction

             costs, fees, losses, and expenses, including fees associated with
             debt prepayments, (ii) supplemental employee benefits due to the
             COVID-19 outbreak, (iii) tax credits, net of reserves for

uncertain

             tax positions, (iv) amortization or write-off of debt issuance 

costs

             and write-off of original issue discount, (v) release of 

income tax

             reserves, and (vi) re-



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measurement of deferred tax assets and liabilities as a result of the 2017 Tax
Act in each case net of the tax effect where appropriate calculated using an
assumed effective tax rate. We prepare Adjusted Net Income to eliminate the
impact of items, net of tax, we do not consider indicative of ongoing operating
performance due to their inherent unusual, extraordinary, or non-recurring
nature or because they result from an event of a similar nature. We view net
income excluding the impact of the re-measurement of the Company's deferred tax
assets and liabilities as a result of the 2017 Tax Act as an important indicator
of performance consistent with the manner in which management measures and
forecasts the Company's performance and the way in which management is
incentivized to perform.
•            "Adjusted Diluted EPS" represents diluted EPS calculated using
             Adjusted Net Income as opposed to net income. Additionally, Adjusted
             Diluted EPS does not contemplate any adjustments to net income as
             required under the two-class method as disclosed in the

footnotes to

             the consolidated financial statements.


•            "Free Cash Flow" represents the net cash generated from 

operating

             activities less the impact of purchases of property, equipment, and
             software.




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Below is a reconciliation of Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow to the most directly comparable financial measure calculated and presented in accordance with GAAP.


                                                       Fiscal Year Ended March 31,
(Amounts in thousands, except share and
per share data)                                 2020              2019      

2018

                                                               (Unaudited)
Revenue, Excluding Billable Expenses
Revenue                                    $   7,463,841$   6,704,037$   6,167,600
Billable expenses                              2,298,413         2,004,664  

1,861,312

Revenue, Excluding Billable Expenses $ 5,165,428$ 4,699,373

   $   4,306,288
Adjusted Operating Income
Operating Income                           $     669,202$     602,394$     519,723
Transaction expenses (a)                           1,069             3,660                 -
COVID-19 supplemental employee benefits
(b)                                                2,722                 -                 -
Adjusted Operating Income                  $     672,993$     606,054$     519,723
EBITDA, Adjusted EBITDA, Adjusted EBITDA
Margin on Revenue & Adjusted EBITDA Margin
on Revenue, Excluding Billable Expenses
Net income                                 $     482,603$     418,529$     301,692
Income tax (benefit) expense                      96,831            96,874  

128,344

Interest and other, net (c)                       89,768            86,991  

89,687

Depreciation and amortization                     81,081            68,575            64,756
EBITDA                                           750,283           670,969           584,479
Transaction expenses (a)                           1,069             3,660                 -
COVID-19 supplemental employee benefits
(b)                                                2,722                 -                 -
Adjusted EBITDA                            $     754,074$     674,629$     584,479
Adjusted EBITDA Margin on Revenue                   10.1 %            10.1 %             9.5 %
Adjusted EBITDA Margin on Revenue,
Excluding Billable Expenses                         14.6 %            14.4 %            13.6 %
Adjusted Net Income
Net income                                 $     482,603$     418,529$     301,692
Transaction expenses (a)                           1,069             3,660                 -
COVID-19 supplemental employee benefits
(b)                                                2,722                 -                 -
Research and development tax credits (d)         (38,395 )               -                 -
Release of income tax reserves (e)                   (68 )            (462 )               -
Re-measurement of deferred tax
assets/liabilities (f)                                 -           (27,908 )          (9,107 )
Amortization or write-off of debt issuance
costs and write-off of original issue
discount                                           2,395             2,920             2,655
Adjustments for tax effect (g)                    (1,608 )          (1,711 )            (969 )
Adjusted Net Income                        $     448,718$     395,028$     294,271
Adjusted Diluted Earnings Per Share
Weighted-average number of diluted shares
outstanding                                  141,238,135       143,156,176  

147,750,022

Adjusted Net Income Per Diluted Share (h) $ 3.18$ 2.76

    $        1.99
Free Cash Flow
Net cash provided by operating activities  $     551,428$     499,610$     369,143
Less: Purchases of property and equipment       (128,079 )         (94,681 )         (78,437 )
Free Cash Flow                             $     423,349$     404,929$     290,706



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(a)    Fiscal 2020 and fiscal 2019 reflect debt refinancing costs incurred in
       connection with the refinancing transactions consummated on November 26,
       2019 and July 23, 2018, respectively.

(b) Represents the supplemental contribution to employees' dependent care FSA

accounts in response to the COVID-19 outbreak.

(c) Reflects the combination of Interest expense and Other income (expense),

       net from the consolidated statement of operations.


(d)    Reflects tax credits, net of reserves for uncertain tax positions,
       recognized in fiscal 2020 related to an increase in research and
       development credits available for fiscal years 2016 to 2020.

(e) Release of pre-acquisition income tax reserves assumed by the Company in

       connection with the Carlyle Acquisition.


(f)    Reflects the adjustments made to the provisional income tax benefit

associated with the re-measurement of the Company's deferred tax assets

       and liabilities as a result of the 2017 Tax Act.


(g)    With the enactment of the 2017 Tax Act, the fiscal 2018 adjustment is
       reflected using assumed effective tax rate of 36.5%, whereas fiscal 2019
       and 2020 adjustments are reflected using an effective tax rate of 26%.

These rates approximate the blended federal and state tax rates for fiscal

2018, 2019 and 2020, respectively, and consistently exclude the impact of

       other tax credits and incentive benefits realized.


(h)    Excludes an adjustment of approximately $1.6 million, $1.8 million, and
       $1.9 million of net earnings for fiscal 2020, 2019, and 2018,

respectively, associated with the application of the two-class method for

computing diluted earnings per share.



Factors and Trends Affecting Our Results of Operations
Our results of operations have been, and we expect them to continue to be,
affected by the following factors, which may cause our future results of
operations to differ from our historical results of operations discussed under
"- Results of Operations."
Business Environment and Key Trends in Our Markets
We believe that the following trends and developments in the U.S. government
services industry and our markets may influence our future results of
operations:
•            uncertainty around the timing, extent, nature and effect of
             Congressional and other U.S. government actions to approve 

funding

             of the U.S. government, address budgetary constraints,

including

             caps on the discretionary budget for defense and non-defense
             departments and agencies, as established by the Bipartisan Budget
             Control Act of 2011 ("BCA") and subsequently adjusted by the
             American Tax Payer Relief Act of 2012, the Bipartisan Budget Act of
             2013, the Bipartisan Budget Act of 2015, the Bipartisan Budget Act
             of 2018, and the Bipartisan Budget Act of 2019 and address the
             ability of Congress to determine how to allocate the available
             budget authority and pass appropriations bills to fund both U.S.
             government departments and agencies that are, and those that are
             not, subject to the caps;


•            budget deficits and the growing U.S. national debt

increasing

             pressure on the U.S. government to reduce federal spending 

across

             all federal agencies together with associated uncertainty 

about the

             size and timing of those reductions;


•            cost-cutting and efficiency initiatives, current and future budget
             restrictions, continued implementation of Congressionally

mandated

             automatic spending cuts and other efforts to reduce U.S.

government

             spending could cause clients to reduce or delay funding for orders
             for services or invest appropriated funds on a less consistent or
             rapid basis or not at all, particularly when considering

long-term

             initiatives and in light of uncertainty around Congressional 

efforts

             to approve funding of the U.S. government and to craft a 

long-term

             agreement on the U.S. government's ability to incur 

indebtedness in

             excess of its current limits and generally in the current 

political

             environment, there is a risk that clients will not issue task orders
             in sufficient volume to reach current contract ceilings, alter
             historical patterns of contract awards, including the typical
             increase in the award of task orders or completion of other

contract

             actions by the U.S. government in the period before the end of the
             U.S. government's fiscal year on September 30, delay requests for
             new proposals and contract awards, rely on short-term

extensions and

             funding of current contracts, or reduce staffing levels and hours of
             operation;


•            delays in the completion of future U.S. government's budget
             processes, which have in the past and could in the future delay
             procurement of the products, services, and solutions we provide;



                                       48
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•            changes in the relative mix of overall U.S. government 

spending and

             areas of spending growth, with lower spending on homeland 

security,

             intelligence, defense-related programs as certain overseas
             operations end, and continued increased spending on 

cybersecurity,

             Command, Control, Communications, Computers, Intelligence,
             Surveillance, and Reconnaissance (C4ISR), advanced analytics,
             technology integration and healthcare;


•            the extent, nature and effect of the COVID-19 outbreak, including
             the impact on federal budgets, current and pending

procurements,

             supply chains, demand for services, deployment and 

productivity of

             our employees and the economic and societal impact of a pandemic;


•            legislative and regulatory changes to limitations on the amount of
             allowable executive compensation permitted under flexibly priced
             contracts following implementation of interim rules adopted by
             federal agencies pursuant to the Bipartisan Budget Act of 2013,
             which substantially further reduce the amount of allowable executive
             compensation under these contracts and extend these

limitations to a

             larger segment of our executives and our entire contract base;


•            efforts by the U.S. government to address organizational conflicts
             of interest and related issues and the impact of those efforts on us
             and our competitors;


•            increased audit, review, investigation and general scrutiny by U.S.
             government agencies of government contractors' performance under
             U.S. government contracts and compliance with the terms of those
             contracts and applicable laws;


•            the federal focus on refining the definition of "inherently
             governmental" work, including proposals to limit contractor access
             to sensitive or classified information and work assignments, which
             will continue to drive pockets of insourcing in various agencies,
             particularly in the intelligence market;


•            negative publicity and increased scrutiny of government

contractors

             in general, including us, relating to U.S. government

expenditures

             for contractor services and incidents involving the 

mishandling of

             sensitive or classified information;


•            U.S. government agencies awarding contracts on a technically
             acceptable/lowest cost basis, which could have a negative impact on
             our ability to win certain contracts;


•            increased competition from other government contractors and market
             entrants seeking to take advantage of certain of the trends
             identified above, and industry trend towards consolidation, which
             may result in the emergence of companies that are better able to
             compete against us;


•            cost-cutting and efficiency and effectiveness efforts by U.S.
             civilian agencies with a focus on increased use of performance
             measurement, "program integrity" efforts to reduce waste, fraud and
             abuse in entitlement programs, and renewed focus on improving
             procurement practices for and interagency use of IT services,
             including through the use of cloud based options and data center
             consolidation;


•            restrictions by the U.S. government on the ability of federal
             agencies to use lead system integrators, in response to cost,
             schedule and performance problems with large defense

acquisition

             programs where contractors were performing the lead system
             integrator role;


•            increasingly complex requirements of the Department of

Defense and

             the U.S. intelligence community, including cybersecurity, managing
             federal health care cost growth and focus on reforming existing
             government regulation of various sectors of the economy, such as
             financial regulation and healthcare; and


•            increasing small business regulations across the Department of
             Defense and civilian agency clients continue to gain traction,
             agencies are required to meet high small business set aside targets,
             and large business prime contractors are required to

subcontract in

             accordance with considerable small business participation goals
             necessary for contract award.


Sources of Revenue
Substantially all of our revenue is derived from services provided under
contracts and task orders with the U.S. government, primarily by our consulting
staff and, to a lesser extent, our subcontractors. Funding for our contracts and
task orders is generally linked to trends in budgets and spending across various
U.S. government agencies and departments. We provide services under a large
portfolio of contracts and contract vehicles to a broad client base, and we
believe that our diversified contract and client base lessens potential
volatility in our business; however, a reduction in the amount of services that
we are contracted to provide to the U.S. government or any of our significant
U.S. government clients could have a material adverse effect on our business and
results of operations. In particular, the Department of Defense is one of our
significant clients, and the BCA (as amended by the American Taxpayer Relief Act
of 2012, the Bipartisan Budget Act of 2013,

                                       49
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the Bipartisan Budget Act of 2015, and the Bipartisan Act of 2018, and the
Bipartisan Act of 2019), provides for automatic spending cuts (referred to as
sequestration) totaling approximately $1.2 trillion between 2013 and 2021,
including an estimated $500 billion in federal defense spending cuts over this
time period. The Bipartisan Budget Act of 2019 raised BCA spending caps on
defense spending by $90 billion for fiscal 2020, and $81 billion for fiscal
2021. For non-defense funding, the Bipartisan Budget Act of 2019 raised BCA
spending caps by $78 billion for fiscal 2020 and $72 billion for government
fiscal 2021. While the American Taxpayer Relief Act of 2012, the Bipartisan
Budget Act of 2013, the Bipartisan Budget Act of 2015, the Bipartisan Budget Act
of 2018, and the Bipartisan Budget Act of 2019 all negated and raised budget
limits put in place by the BCA for both defense and non-defense spending, there
can be no assurance that any spending cuts implemented in the future would be
similarly negated. This could result in a commensurate reduction in the amount
of services that we are contracted to provide to the Department of Defense and
could have a material adverse effect on our business and results of operations,
and given the uncertainty of when and how these automatic reductions required by
the BCA may return and/or be applied, we are unable to predict the nature or
magnitude of the potential adverse effect.
Contract Types
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. As
                   we increase or decrease our spending on allowable costs, our
                   revenue generated on cost-reimbursable contracts will
                   increase, up to the ceiling and funded amounts, or decrease,
                   respectively. We generate revenue under two general types of
                   cost-reimbursable contracts: cost-plus-fixed-fee and
                   cost-plus-award-fee, both of which reimburse allowable costs
                   and provide for a fee. The fee under each type of
                   cost-reimbursable contract is generally payable upon
                   completion of services in accordance with the terms of the
                   contract. Cost-plus-fixed-fee contracts offer no opportunity
                   for payment beyond the fixed fee. Cost-plus-award-fee
                   contracts also provide for an award fee that varies within
                   specified limits based upon the client's assessment of our
                   performance against a predetermined set of criteria, such as
                   targets for factors like cost, quality, schedule, and
                   performance.


•                  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. To the extent our actual
                   direct labor, including allocated indirect costs, and
                   associated billable expenses decrease or increase in relation
                   to the fixed hourly billing rates provided in the contract, we
                   will generate more or less profit, respectively, or could
                   incur a loss.


•                  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. Some fixed-price
                   contracts have a performance-based component, pursuant to
                   which we can earn incentive payments or incur financial
                   penalties based on our performance. Fixed-price level of
                   effort contracts require us to provide a specified level of
                   effort (i.e., labor hours), over a stated period of time, for
                   a fixed price.


The amount of risk and potential reward varies under each type of contract.
Under cost-reimbursable contracts, there is limited financial risk, because we
are reimbursed for all allowable costs up to a ceiling. However, profit margins
on this type of contract tend to be lower than on time-and-materials and
fixed-price contracts. Under time-and-materials contracts, we are reimbursed for
the hours worked using the predetermined hourly rates for each labor category.
In addition, we are typically reimbursed for other contract direct costs and
expenses at cost. We assume financial risk on time-and-materials contracts
because our labor costs may exceed the negotiated billing rates. Profit margins
on well-managed time-and-materials contracts tend to be higher than profit
margins on cost-reimbursable contracts as long as we are able to staff those
contracts with people who have an appropriate skill set. Under fixed-price
contracts, we are required to deliver the objectives under the contract for a
predetermined price. Compared to time-and-materials and cost-reimbursable
contracts, fixed-price contracts generally offer higher profit margin
opportunities because we receive the full benefit of any cost savings but
generally involve greater financial risk because we bear the impact of any cost
overruns. In the aggregate, the contract type mix in our revenue for any given
period will affect that period's profitability. Changes in contract type as a
result of re-competes and new business could influence the percentage/mix in
unanticipated ways.

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The table below presents the percentage of total revenue for each type of
contract:
                     Fiscal Year Ended March 31,
                     2020        2019        2018
Cost-reimbursable    57%         53%         51%
Time-and-materials   23%         24%         25%
Fixed-price          20%         23%         24%



Note: Upon the adoption of Topic 606 in fiscal 2019, the contract type
descriptions noted above have been aligned to the Revenue by Contract Type
descriptions found in Note 3 to our accompanying consolidated financial
statements.
Contract Diversity and Revenue Mix
We provide services to our clients through a large number of single award
contracts, contract vehicles, and multiple award contract vehicles. Most of our
revenue is generated under indefinite delivery/indefinite quantity, or IDIQ,
contract vehicles, which include multiple award government wide acquisition
contract vehicles, or GWACs, and General Services Administration Multiple Award
Schedule Contracts, or GSA schedules, and certain single award contracts. GWACs
and GSA schedules are available to all U.S. government agencies. Any number of
contractors typically competes under multiple award IDIQ contract vehicles for
task orders to provide particular services, and we earn revenue under these
contract vehicles only to the extent that we are successful in the bidding
process for task orders. No single task order under any IDIQ contract
represented more than 2.3% of our revenue in fiscal 2020. No single definite
contract accounted for more than 2.9% of our revenue in fiscal 2020.
We generate revenue under our contracts and task orders through our provision of
services as both a prime contractor and subcontractor, as well as from the
provision of services by subcontractors under contracts and task orders for
which we act as the prime contractor. For fiscal 2020, 2019, and 2018, 92%, 92%,
and 91%, respectively, of our revenue was generated by contracts and task orders
for which we served as a prime contractor; 8%, 8%, and 9%, respectively, of our
revenue was generated by contracts and task orders for which we served as a
subcontractor; and approximately 24%, 24%, and 25%, respectively, of our revenue
was generated by services provided by our subcontractors. The mix of these types
of revenue affects our operating margin. Substantially all of our operating
margin is derived from direct consulting staff labor as the portion of our
operating margin derived from fees we earn on services provided by our
subcontractors is not significant. We view growth in direct consulting staff
labor as the primary driver of earnings growth. Direct consulting staff labor
growth is driven by consulting staff headcount growth, after attrition, and
total backlog growth.
Our People
Revenue from our contracts is derived from services delivered by consulting
staff and, to a lesser extent, from our subcontractors. Our ability to hire,
retain, and deploy talent with skills appropriately aligned with client needs is
critical to our ability to grow our revenue. We continuously evaluate whether
our talent base is properly sized and appropriately compensated and contains an
optimal mix of skills to be cost competitive and meet the rapidly evolving needs
of our clients. We seek to achieve that result through recruitment and
management of capacity and compensation. As of March 31, 2020, 2019, and 2018,
we employed approximately 27,200, 26,100, and 24,600 people, respectively, of
which approximately 24,200, 23,400, and 22,100, respectively, were consulting
staff.
Contract Backlog
We define backlog to include the following three components:
•            Funded Backlog. Funded backlog represents the revenue value of
             orders for services under existing contracts for which funding is
             appropriated or otherwise authorized less revenue previously
             recognized on these contracts.


•            Unfunded Backlog. Unfunded backlog represents the revenue

value of

             orders (including optional orders) for services under existing
             contracts for which funding has not been appropriated or 

otherwise

             authorized.


•            Priced Options. Priced contract options represent 100% of the
             revenue value of all future contract option periods under

existing

             contracts that may be exercised at our clients' option and for which
             funding has not been appropriated or otherwise authorized.


Our backlog does not include contracts that have been awarded but are currently
under protest and also does not include any task orders under IDIQ contracts,
except to the extent that task orders have been awarded to us under those
contracts.

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The following table summarizes the value of our contract backlog at the respective dates presented:

                     Fiscal Year Ended March 31,
                     2020           2019        2018
                            (In millions)
Backlog:
Funded         $     3,415$  3,436$  2,685
Unfunded             4,518           3,687       4,161
Priced options      12,796          12,198       9,174
Total backlog  $    20,729$ 19,321$ 16,020




Our total backlog consists of remaining performance obligations, certain orders
under contracts for which the period of performance has expired, and unexercised
option period and other unexercised optional orders. As of March 31, 2020 and
March 31, 2019, the Company had $6.3 billion and $5.8 billion of remaining
performance obligations, respectively and we expect to recognize more than half
of the remaining performance obligations as of March 31, 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. However, given the
uncertainties discussed below, as well as the risks described in "Item 1A. Risk
Factors", we can give no assurance that we will be able to convert our backlog
into revenue in any particular period, if at all. Our backlog includes orders
under contracts that in some cases extend for several years. The U.S. Congress
generally appropriates funds for our clients on a yearly basis, even though
their contracts with us may call for performance that is expected to take a
number of years to complete. As a result, contracts typically are only partially
funded at any point during their term and all or some of the work to be
performed under the contracts may remain unfunded unless and until the U.S.
Congress makes subsequent appropriations and the procuring agency allocates
funding to the contract.
We view growth in total backlog and consulting staff headcount as the two key
measures of our potential business growth. Growing and deploying consulting
staff is the primary means by which we are able to achieve profitable revenue
growth. To the extent that we are able to hire additional consulting staff and
deploy them against funded backlog, we generally recognize increased revenue.
Total backlog increased by 7.3% from March 31, 2019 to March 31, 2020 and
increased by 20.6% from March 31, 2018 to March 31, 2019. Additions to funded
backlog during fiscal 2020 and 2019 both totaled $7.4 billion. We report
internally on our backlog on a monthly basis and review backlog upon occurrence
of certain events to determine if any adjustments are necessary.
We cannot predict with any certainty the portion of our backlog that we expect
to recognize as revenue in any future period and we cannot guarantee that we
will recognize any revenue from our backlog. The primary risks that could affect
our ability to recognize such revenue on a timely basis or at all are: program
schedule changes, contract modifications, and our ability to assimilate and
deploy new consulting staff against funded backlog; cost-cutting initiatives and
other efforts to reduce U.S. government spending, which could reduce or delay
funding for orders for services; and delayed funding of our contracts due to
delays in the completion of the U.S. government's budgeting process and the use
of continuing resolutions by the U.S. government to fund its operations. The
amount of our funded backlog is also subject to change, due to, among other
factors: changes in congressional appropriations that reflect changes in U.S.
government policies or priorities resulting from various military, political,
economic or international developments; changes in the use of U.S. government
contracting vehicles, and the provisions therein used to procure our services
and adjustments to the scope of services, or cancellation of contracts, by the
U.S. government at any time. In our recent experience, none of the following
additional risks have had a material negative effect on our ability to realize
revenue from our funded backlog: the unilateral right of the U.S. government to
cancel multi-year contracts and related orders or to terminate existing
contracts for convenience or default; in the case of unfunded backlog, the
potential that funding will not be made available; and, in the case of priced
options, the risk that our clients will not exercise their options.
In addition, contract backlog includes orders under contracts for which the
period of performance has expired, and we may not recognize revenue on the
funded backlog that includes such orders due to, among other reasons, the tardy
submission of invoices by our subcontractors and the expiration of the relevant
appropriated funding in accordance with a predetermined expiration date such as
the end of the U.S. government's fiscal year. The revenue value of orders
included in contract backlog that has not been recognized as revenue due to
period of performance expirations has not exceeded approximately 5.2% of total
backlog as of March 31, 2020 and any of the four preceding fiscal quarters.
We expect to recognize revenue from a substantial portion of funded backlog as
of March 31, 2020 within the next twelve months. However, given the
uncertainties discussed above, as well as the risks described in "Item 1A. Risk
Factors", we can give no assurance that we will be able to convert our backlog
into revenue in any particular period, if at all.

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Operating Costs and Expenses
Costs associated with compensation and related expenses for our people are the
most significant component of our operating costs and expenses. The principal
factors that affect our costs are additional people as we grow our business and
are awarded new contracts, task orders, and additional work under our existing
contracts, and the hiring of people with specific skill sets and security
clearances as required by our additional work.
Our most significant operating costs and expenses are described below.
•            Cost of Revenue. Cost of revenue includes direct labor, related
             employee benefits, and overhead. Overhead consists of indirect
             costs, including indirect labor relating to infrastructure,
             management and administration, and other expenses.


•            Billable Expenses. Billable expenses include direct

subcontractor

             expenses, travel expenses, and other expenses incurred to perform on
             contracts.


•            General and Administrative Expenses. General and

administrative

             expenses include indirect labor of executive management and
             corporate administrative functions, marketing and bid and proposal
             costs, and other discretionary spending.


•            Depreciation and Amortization. Depreciation and amortization
             includes the depreciation of computers, leasehold

improvements,

             furniture and other equipment, and the amortization of internally
             developed software, as well as third-party software that we use
             internally, and of identifiable long-lived intangible assets over
             their estimated useful lives.


Seasonality
The U.S. government's fiscal year ends on September 30 of each year. While not
certain, it is not uncommon for U.S. government agencies to award extra tasks or
complete other contract actions in the weeks before the end of its fiscal year
in order to avoid the loss of unexpended fiscal year funds. In addition, we also
have historically experienced higher bid and proposal costs in the months
leading up to the U.S. government's fiscal year end as we pursue new contract
opportunities being awarded shortly after the U.S. government fiscal year end as
new opportunities are expected to have funding appropriated in the U.S.
government's subsequent fiscal year. We may continue to experience this
seasonality in future periods, and our future periods may be affected by it.
While not certain, changes in the government's funding and spending patterns
have altered historical seasonality trends, supporting our approach to managing
the business on an annual basis.
Seasonality is just one of a number of factors, many of which are outside of our
control, which may affect our results in any period. See "Item 1A. Risk
Factors."
Critical Accounting Estimates and Policies
Our discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which have been prepared in
accordance with GAAP. The preparation of these consolidated financial statements
in accordance with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingencies at the date of the consolidated financial statements as well as
the reported amounts of revenue and expenses during the reporting period.
Management evaluates these estimates and assumptions on an ongoing basis. Our
estimates and assumptions have been prepared on the basis of the most current
reasonably available information. Actual results may differ from these estimates
under different assumptions or conditions.
Our significant accounting policies, including the critical policies and
practices listed below, are more fully described and discussed in the notes to
the consolidated financial statements. We consider the following accounting
policies to be critical to an understanding of our financial condition and
results of operations because these policies require the most difficult,
subjective or complex judgments on the part of our management in their
application, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.
Revenue Recognition and Cost Estimation
Our revenues from contracts with customers (clients) are derived from offerings
that include consulting, analytics, digital solutions, engineering, and cyber
services, substantially with the U.S. government and its agencies, and to a
lesser extent, subcontractors. We also serve foreign governments, as well as
domestic and international commercial clients. We perform under various types of
contracts, which include cost-reimbursable-plus-fee contracts, time-and-material
contracts, and fixed-price contracts.
We consider a contract with a customer to exist under Topic 606 when there is
approval and commitment from us and the customer, the rights of the parties and
payment terms are identified, the contract has commercial substance, and
collectability of consideration is probable. We will also consider whether two
or more contracts entered into with the same

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customer should be combined and accounted for as a single contract. Furthermore,
in certain transactions with commercial clients and with the U.S. government, we
may commence providing services prior to receiving a formal approval from the
customer. In these situations, we will consider the factors noted above, the
risks associated with commencing the work, and legal enforceability in
determining whether a contract with the customer exists under Topic 606.
Customer contracts are often modified to change the scope, price, specifications
or other terms within the existing arrangement. Contract modifications are
evaluated by management to determine whether the modification should be
accounted for as part of the original performance obligation(s) or as a separate
contract. If the modification adds distinct goods or services and increases the
contract value proportionate to the stand-alone selling price of the additional
goods or services, it will be accounted for as a separate contract. Generally,
our contract modifications do not include goods or services which are distinct,
and therefore are accounted for as part of the original performance
obligation(s) with any impact on transaction price or estimated costs at
completion being recorded as through a cumulative catch-up adjustment to
revenue.
We evaluate each service deliverable contracted with the customer to determine
whether it represents promises to transfer distinct goods or services. Under
Topic 606, these are referred to as performance obligations. One or more service
deliverables often represent a single performance obligation. This evaluation
requires significant judgment and the impact of combining or separating
performance obligations may change the time over which revenue from the contract
is recognized. Our contracts generally provide a set of integrated or highly
interrelated tasks or services and are therefore accounted for as a single
performance obligation. However, in cases where we provide more than one
distinct good or service within a customer contract, the contract is separated
into individual performance obligations which are accounted for discretely.
Contracts with the U.S. government are subject to the FAR and are priced based
on estimated or actual costs of providing the goods or services. We derive a
majority of our revenue from contracts awarded through a competitive bidding
process. Pricing for non-U.S. government agencies and commercial customers is
based on discrete negotiations with each customer. Certain of our contracts
contain award fees, incentive fees or other provisions that may increase or
decrease the transaction price. These variable amounts generally are awarded
upon achievement of certain performance metrics, program milestones or cost
targets and may be based upon customer discretion. Management estimates variable
consideration as the most likely amount that we expect to achieve based on our
assessment of the variable fee provisions within the contract, prior experience
with similar contracts or clients, and management's evaluation of the
performance on such contracts. We may perform work under a contract that has not
been fully funded if the work has been authorized by the management and the
customer to proceed. We evaluate unfunded amounts as variable consideration in
estimating the transaction price. We include the estimated variable
consideration in our transaction price to the extent that it is probable that a
significant reversal of revenue will not occur upon the ultimate settlement of
the variable fee provision. In the limited number of situations where our
contracts with customers contain more than one performance obligation, we
allocate the transaction price of a contract between the performance obligations
in the proportion to their respective stand-alone selling prices. We generally
estimate the stand-alone selling price of performance obligations based on an
expected cost-plus margin approach as allowed under Topic 606. Our U.S.
government contracts generally contain FAR provisions that enable the customer
to terminate a contract for default or for the convenience of the U.S.
government.
We recognize revenue for each performance obligation identified within our
customer contracts when, or as, the performance obligation is satisfied by
transferring the promised goods or services. Revenue may either be recognized
over time or at a point in time. We generally recognize revenue over time as our
contracts typically involve a continuous transfer of control to the customer. A
continuous transfer of control under contracts with the U.S. government and its
agencies is evidenced by clauses which require us to be paid for costs incurred
plus a reasonable margin in the event that the customer unilaterally terminates
the contract for convenience. For contracts where we recognize revenue over
time, a contract cost-based input method is generally used to measure progress
towards satisfaction of the underlying performance obligation(s). Contract costs
include direct costs such as materials, labor and subcontract costs, as well as
indirect costs identifiable with, or allocable to, a specific contract that are
expensed as incurred. We do not incur material incremental costs to acquire or
fulfill contracts. Under a contract cost-based input method, revenue is
recognized based on the proportion of contract costs incurred to the total
estimated costs expected to be incurred upon completion of the underlying
performance obligation. We generally include both funded and unfunded portions
of customer contracts in this estimation process.
For interim financial reporting periods, contract revenue attributable to
indirect costs is recognized based upon agreed-upon annual forward-pricing rates
established with the U.S. government at the start of each fiscal year. Forward
pricing rates are estimated and agreed upon between us and the U.S. government
and represent indirect contract costs required to execute and administer
contract obligations. The impact of any agreed-upon changes, or changes in the
estimated annual forward-pricing rates, will be recorded in the interim
financial reporting period when such changes are identified. This change relates
to the interim financial reporting period differences between the actual
indirect costs incurred and allocated to customer contracts compared to the
estimated amounts allocated to contracts using the estimated annual
forward-pricing rates established with the U.S. government.

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On certain contracts, principally time-and-materials and
cost-reimbursable-plus-fee contracts, revenue is recognized using the
right-to-invoice practical expedient as we are contractually able to invoice the
customer based on the control transferred. However, we did not elect to use the
practical expedient which would allow us to exclude contracts recognized using
the right-to-invoice practical expedient from the remaining performance
obligations disclosed below. Additionally, for stand-ready performance
obligations to provide services under fixed-price contracts, revenue is
recognized over time using a straight-line measure of progress as the control of
the services is provided to the customer ratably over the term of the contract.
If a contract does not meet the criteria for recognition of revenue over time,
we recognize revenue at the point in time when control of the good or service is
transferred to the customer. Determining a measure of progress towards the
satisfaction of performance obligations requires management to make judgments
that may affect the timing of revenue recognition.
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 our contracts. Changes in estimates related to contracts
accounted for under the EAC process are recognized in the period when such
changes are made on a cumulative catch-up basis. If the estimate of contract
profitability indicates an anticipated loss on a contract, we recognize the
total loss at the time it is identified. For fiscal 2019, 2018 and 2017, the
aggregate impact of adjustments in contract estimates was not material.
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.
Business Combinations
The accounting for the Company's business combinations consists of allocating
the purchase price to tangible and intangible assets acquired and liabilities
assumed based on their fair values, with the excess recorded as goodwill.
Certain fair value measurements include inputs that are unobservable, requiring
management to make judgments and estimates that can be affected by contract
performance and other factors that may cause final amounts to differ materially
from original estimates. We have up to one year from the acquisition date to use
additional information obtained to adjust the fair value of the acquired assets
and liabilities which may result in changes to the recorded values with an
offsetting adjustment to goodwill.
Goodwill and Intangible Assets Impairment
We test goodwill and trade name for impairment at least annually as of January 1
of each year and more frequently if interim indicators of impairment exist. We
perform our impairment testing of goodwill at the reporting level. As our
business is highly integrated and all of our components have similar economic
characteristics, we conclude that we have one reporting unit at the consolidated
entity level, which is the same as our single operating segment. We test
goodwill for impairment using the quantitative method (primarily based on market
capitalization). We test the trade name for impairment using the relief from
royalty method that requires management to make significant amount of judgments
and estimates in the valuation. We do not consider goodwill, trade name, or any
other amortizable intangible assets at risk of impairment.
Amortizable intangible assets are tested for impairment when an event occurs or
circumstances change indicating that the carrying amount of the asset may not be
recoverable. A significant amount of management judgment is required to
determine if an event representing an impairment indicator has occurred during
the year, including but not limited to: a decline in forecasted cash flows; a
sustained, material decline in the stock price and market capitalization; a
significant adverse change in the business climate or economy; or unanticipated
competition. An adverse change in any of these factors could have a significant
impact on the recoverability of other intangible assets.
During the fiscal years ended March 31, 2020, March 31, 2019, and March 31,
2018, the Company did not record any impairment of goodwill and intangible
assets.
Accounting for Income Taxes
Provisions for federal, state, and foreign income taxes are calculated from the
income reported on our consolidated financial statements based on current tax
law and also include the cumulative effect of any changes in tax rates from
those previously used in determining deferred tax assets and liabilities. Such
provisions differ from the amounts currently receivable or payable because
certain items of income and expense are recognized in different time periods for
purposes of preparing consolidated financial statements than for income tax
purposes.

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Significant judgment is required in determining income tax provisions and
evaluating tax positions. We establish reserves for uncertain tax positions
when, despite the belief that our tax positions are supportable, there remains
uncertainty in a tax position taken in our previously filed income tax returns.
For tax positions where it is more likely than not that a tax benefit will be
sustained, we record the largest amount of tax benefit with a greater than 50%
likelihood of being realized upon settlement with a taxing authority that has
full knowledge of all relevant information. To the extent we prevail in matters
for which accruals have been established or are required to pay amounts in
excess of reserves, our effective tax rate in a given consolidated financial
statement period may be materially impacted.
The carrying value of our net deferred tax assets assumes that we will be able
to generate sufficient future taxable income in certain tax jurisdictions to
realize the value of these assets. If we are unable to generate sufficient
future taxable income in these jurisdictions, a valuation allowance is recorded
when it is more likely than not that the value of the deferred tax assets is not
realizable.
Recent Accounting Pronouncements
See Note 2 to our accompanying audited consolidated financial statements for
information related to our adoption of new accounting standards and for
information on our anticipated adoption of recently issued accounting standards.
Segment Reporting
We report operating results and financial data in one operating and reportable
segment. We manage our business as a single profit center in order to promote
collaboration, provide comprehensive functional service offerings across our
entire client base, and provide incentives to employees based on the success of
the organization as a whole. Although certain information regarding served
markets and functional capabilities is discussed for purposes of promoting an
understanding of our complex business, we manage our business and allocate
resources at the consolidated level of a single operating segment.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, and have been prepared in accordance
with GAAP, and the rules and regulations of the U.S. Securities and Exchange
Commission, or SEC. All intercompany balances and transactions have been
eliminated in consolidation.
The accompanying 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.
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
accompanying consolidated financial statements present the financial position of
the Company as of March 31, 2020 and 2019 and the Company's results of
operations for fiscal 2020, fiscal 2019, and fiscal 2018.
Effective April 1, 2019, the Company adopted Accounting Standards Update (ASU)
2016-02, Leases (Topic 842), using the modified retrospective transition
approach and, as a result, comparative information for the prior fiscal years
have not been retrospectively adjusted.
Certain amounts reported in the Company's prior year consolidated financial
statements have been reclassified to conform to the current year presentation.

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Results of Operations The following table sets forth items from our consolidated statements of operations for the periods indicated:

                                        Fiscal Year Ended March 31,             Fiscal 2020     Fiscal 2019
                                                                                  Versus          Versus
                                   2020            2019            2018         Fiscal 2019     Fiscal 2018
                                              (In thousands)
Revenue                        $ 7,463,841$ 6,704,037$ 6,167,600         11.3  %          8.7  %
Operating costs and
expenses:
Cost of revenue                  3,379,180       3,100,466       2,866,268          9.0  %          8.2  %
Billable expenses                2,298,413       2,004,664       1,861,312         14.7  %          7.7  %
General and administrative
expenses                         1,035,965         927,938         855,541         11.6  %          8.5  %
Depreciation and
amortization                        81,081          68,575          64,756         18.2  %          5.9  %
Total operating costs and
expenses                         6,794,639       6,101,643       5,647,877         11.4  %          8.0  %
Operating income                   669,202         602,394         519,723         11.1  %         15.9  %
Interest expense                   (96,960 )       (89,517 )       (82,269 )        8.3  %          8.8  %
Other income (expense), net          7,192           2,526          (7,418 )         NM              NM

Income before income taxes 579,434 515,403 430,036

        12.4  %         19.9  %
Income tax expense                  96,831          96,874         128,344            -  %        (24.5 )%
Net income                     $   482,603$   418,529$   301,692         15.3  %         38.7  %


NM - Not meaningful
Fiscal 2020 Compared to Fiscal 2019
Revenue
Revenue increased to $7,463.8 million from $6,704.0 million, or an 11.3%
increase, primarily due to sustained client demand and increased client staff
headcount to meet that demand. Revenue growth was also driven by an increase in
billable expenses, including subcontractors and direct expenses on behalf of our
clients.
Cost of Revenue
Cost of revenue increased to $3,379.2 million from $3,100.5 million, or a 9.0%
increase. This increase was primarily due to an increase in salaries and
salary-related benefits of $250.4 million, and an increase in employer
retirement plan contributions of $12.7 million. The increase in salaries and
salary-related benefits was driven by an increase in headcount growth and annual
base salary increases. Cost of revenue as a percentage of revenue was 45.3% and
46.2% in fiscal 2020 and fiscal 2019, respectively.
Billable Expenses
Billable expenses increased to $2,298.4 million from $2,004.7 million, or a
14.7% increase. The overall increase was primarily attributable to an increase
in use of subcontractors in fiscal 2020 driven by client demand. In addition,
contracts which require the Company to incur direct expenses on behalf of
clients increased over the prior year. Billable expenses as a percentage of
revenue were 30.8% and 29.9% for fiscal 2020 and fiscal 2019, respectively.
General and Administrative Expenses
General and administrative expenses increased to $1,036.0 million from $927.9
million, or an 11.6% increase. The increase was primarily due to salaries and
salary-related benefits of $52.0 million, driven by headcount growth as well as
annual base salary increases. In addition, other business related expenses and
professional fees increased $53.0 million. General and administrative expenses
as a percentage of revenue were 13.9% and 13.8% for fiscal 2020 and fiscal 2019,
respectively.
Depreciation and Amortization Expense
Depreciation and amortization expense increased to $81.1 million from $68.6
million, or an 18.2% increase, primarily due to increases in depreciation
expense resulting from the effects of higher capital expenditures in fiscal
2019.

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Interest Expense
Interest expense increased to $97.0 million from $89.5 million, or an 8.3%
increase, primarily as a result of the incremental $400 million in debt the
Company incurred in April 2019 under the delayed draw facility (the "Delayed
Draw Facility"). This was partially offset by a reduction in expense as a result
of the repayment of the remaining Deferred Payment Obligation balance in
December 2019.
Income Tax Expense
Income tax expense decreased to $96.8 million from $96.9 million. The effective
tax rate decreased to 16.7% in fiscal 2020 from 18.8% in fiscal 2019. The
decrease was primarily due to an increase of $38.4 million in available research
and development credits, net of reserves for uncertain tax positions, recognized
in fiscal 2020, partially offset by the re-measurement of deferred income taxes
of $27.9 million in fiscal 2019. We expect our effective tax rate to increase in
relation to fiscal 2020 due to the research and development credits to be
recognized being limited to a single tax year. For additional information
concerning the research and development credit, see Note 14 to our consolidated
financial statements.
Fiscal 2019 Compared to Fiscal 2018
Revenue
Revenue increased to $6,704.0 million from $6,167.6 million, or an 8.7%
increase, primarily due to continued strength in client demand, which led to
increased client staff headcount, and an increase in client staff labor, as well
as improved contract performance. Revenue growth was also driven by an increase
in billable expenses, including subcontractors and direct expenses on behalf of
our clients.
Cost of Revenue
Cost of revenue increased to $3,100.5 million from $2,866.3 million, or an 8.2%
increase. This increase was primarily due to an increase in salaries and
salary-related benefits of $176.2 million, higher incentive compensation of
$24.6 million, and an increase in employer retirement plan contributions of $7.2
million. The increase in salaries and salary-related benefits was driven by an
increase in headcount growth and annual base salary increases. Cost of revenue
as a percentage of revenue was 46.2% and 46.5% in fiscal 2019 and fiscal 2018,
respectively.
Billable Expenses
Billable expenses increased to $2,004.7 million from $1,861.3 million, or a 7.7%
increase. The overall increase was primarily attributable to an increase in use
of subcontractors in fiscal 2019 driven by client demand. In addition, contracts
which require the Company to incur direct and travel expenses on behalf of our
clients increased over the prior year. Billable expenses as a percentage of
revenue were 29.9% and 30.2% in fiscal 2019 and fiscal 2018, respectively.
General and Administrative Expenses
General and administrative expenses increased to $927.9 million from $855.5
million, or an 8.5% increase. The increase was primarily due to salaries and
salary-related benefits of $32.0 million, driven by headcount growth as well as
annual base salary increases. Incentive and stock compensation increased $14.6
million and other business expenses and professional fees increased $23.6
million. General and administrative expenses as a percentage of revenue were
13.8% and 13.9% for fiscal 2019 and fiscal 2018, respectively.
Depreciation and Amortization Expense
Depreciation and amortization expense increased to $68.6 million from $64.8
million, or a 5.9% increase, primarily due to increases in depreciation expense
resulting from the effects of higher capital expenditures in fiscal 2018.
Interest Expense
Interest expense increased to $89.5 million from $82.3 million, or an 8.8%
increase, primarily due to an increase in 1 Month LIBOR, the benchmark interest
rate under our Secured Credit Facility, which rose approximately 60 basis points
during fiscal 2019.
Income Tax Expense
Income tax expense decreased to $96.9 million from $128.3 million, or a 24.5%
decrease. The effective tax rate decreased to 18.8% in fiscal 2019 from 29.8% in
fiscal 2018, primarily due to the 2017 Tax Act's reduction of the U.S. federal
corporate tax rate and the re-measurement of deferred income taxes.
Liquidity and Capital Resources
As of March 31, 2020, our total liquidity was $1.1 billion, consisting of $741.9
million of cash and cash equivalents and $399.1 million available under the
Revolving Credit Facility. During the fourth quarter of fiscal 2020, we drew
$100 million on

                                       58
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our Revolving Credit Facility as a precautionary measure to test the
availability of funds during this time of uncertainty caused by the outbreak of
COVID-19. To date, COVID-19 has not had a significant impact on our liquidity,
cash flows or capital resources. However, the continued spread of COVID-19 has
led to disruption and volatility in the global capital markets, which, depending
on future developments, could impact our capital resources and liquidity in the
future. In the opinion of management, we will be able to meet our liquidity and
cash needs through a combination of cash flows from operating activities,
available cash balances, and available borrowing under the Revolving Credit
Facility. If these resources need to be augmented, additional cash requirements
would likely be financed through the issuance of debt or equity securities.
The following table presents selected financial information for the periods
presented:
                                                       Fiscal Year Ended March 31,
                                                  2020            2019            2018
                                                             (In thousands)
Cash and cash equivalents                     $   741,901$   283,990$   286,958
Total debt                                    $ 2,185,844$ 1,759,761$ 1,818,579

Net cash provided by operating activities $ 551,428$ 499,610

   $   369,143
Net cash used in investing activities            (128,079 )       (89,212 )       (96,453 )
Net cash provided by (used in) financing
activities                                         34,562        (413,366 )      (203,149 )
Total increase (decrease) in cash and cash
equivalents                                   $   457,911$    (2,968 )

$ 69,541



From time to time we evaluate alternative uses for excess cash resources once
our operating cash flow and required debt servicing needs have been met. Some of
the possible uses of our remaining excess cash at any point in time may include
funding strategic acquisitions, further investment in our business, and
returning value to shareholders through share repurchases, quarterly dividends,
and special dividends. While the timing and financial magnitude of these
possible actions are currently indeterminable, the Company expects to be able to
manage and adjust its capital structure in the future to meet its liquidity
needs.
Historically, we have been able to generate sufficient cash to fund our
operations, mandatory debt and interest payments, capital expenditures, and
discretionary funding needs. However, due to fluctuations in cash flows,
including as a result of the trends and developments described above under
"-Factors and Trends Affecting Our Results of Operations" relating to U.S.
government shutdowns, U.S. government cost-cutting, reductions or delays in the
U.S. government appropriations and spending process and other budgetary matters,
it may be necessary from time-to-time in the future to borrow under our Secured
Credit Facility to meet cash demands. While the timing and financial magnitude
of these possible actions are currently indeterminable, we expect to be able to
manage and adjust our capital structure to meet our liquidity needs. Our
expected liquidity and capital structure may also be impacted by discretionary
investments and acquisitions that we could pursue. We anticipate that cash
provided by operating activities, existing cash and cash equivalents, and
borrowing capacity under our Revolving Credit Facility will be sufficient to
meet our anticipated cash requirements for the next twelve months, which
primarily include:
• operating expenses, including salaries;


• working capital requirements to fund the growth of our business;



•            capital expenditures which primarily relate to the purchase 

of

             computers, business systems, furniture and leasehold 

improvements to

             support our operations;


•            the design, build-out, testing, and potential implementation and
             operation of new financial management systems;

• commitments and other discretionary investments;


•            debt service requirements for borrowings under our Secured Credit
             Facility and interest payments for the Senior Notes; and

• cash taxes to be paid.

Our ability to fund our operating needs depends, in part, on our ability to continue to generate positive cash flows from operations or, if necessary, raise cash in the capital markets.

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Cash Flows
Cash received from clients, either from the payment of invoices for work
performed or for advances in excess of costs incurred, is our primary source of
cash. We generally do not begin work on contracts until funding is appropriated
by the client. Billing timetables and payment terms on our contracts vary based
on a number of factors, including whether the contract type is
cost-reimbursable, time-and-materials, or fixed-price. We generally bill and
collect cash more frequently under cost-reimbursable and time-and-materials
contracts, as we are authorized to bill as the costs are incurred or work is
performed. In contrast, we may be limited to bill certain fixed-price contracts
only when specified milestones, including deliveries, are achieved. In addition,
a number of our contracts may provide for performance-based payments, which
allow us to bill and collect cash prior to completing the work.
Accounts receivable is the principal component of our working capital and is
generally driven by revenue growth with other short-term fluctuations related to
the payment practices of our clients. Our accounts receivable reflects amounts
billed to our clients as of each balance sheet date. Our clients generally pay
our invoices within 30 days of the invoice date, although we experience a longer
billing and collection cycle with our global commercial customers. At any
month-end, we also include in accounts receivable the revenue that was
recognized in the preceding month, which is generally billed early in the
following month. Finally, we include in accounts receivable amounts related to
revenue accrued in excess of amounts billed, primarily on our fixed-price and
cost-reimbursable-plus-award-fee contracts. The total amount of our accounts
receivable can vary significantly over time, but is generally sensitive to
revenue levels and customer mix.
Operating Cash Flow
Net cash provided by operations is primarily affected by the overall
profitability of our contracts, our ability to invoice and collect cash from
clients in a timely manner, our ability to manage our vendor payments, and the
timing of cash paid for income taxes. Continued uncertainty in global economic
conditions may also affect our business as customers and suppliers may decide to
downsize, defer, or cancel contracts, which could negatively affect the
operating cash flows. Net cash provided by operations was $551.4 million in
fiscal 2020 compared to $499.6 million in fiscal 2019, or a 10.4% increase. The
improvement in operating cash flow over the prior year was primarily due to the
collection of our revenue and net income growth. This was partially offset by an
increase in income taxes paid in fiscal 2020 as compared to the prior year.
Investing Cash Flow
Net cash used in investing activities was $128.1 million in fiscal 2020 compared
to $89.2 million in the prior year, or a 43.6% increase. The increase in net
cash used in investing activities was primarily due to an increase in capital
expenditures over the prior year primarily related to investments in our
facilities and infrastructure and information technology.
Financing Cash Flow
Net cash provided by financing activities was $34.6 million in fiscal 2020
compared to $413.4 million of net cash used in financing activities in the prior
year. The increase in net cash provided by financing activities was primarily
due to the following:
•      Total proceeds in fiscal 2020 of $500.0 million from the $400.0 million
       draw on our Delayed Draw Facility and a $100.0 million draw on our
       Revolving Credit Facility.

• A $70.6 million decrease in share repurchases in fiscal 2020 as compared

to the prior year.

• The above was partially offset by the repayment of the remaining deferred

payment obligation balance of $80.0 million and a $32.4 million increase

in dividends paid compared to the prior year.



Dividends and Share Repurchases
The Company paid $1.04 in dividends per share to shareholders of record in
fiscal 2020. On May 26, 2020, the Company announced a regular quarterly cash
dividend in the amount of $0.31 per share. The quarterly dividend is payable on
June 30, 2020 to stockholders of record on June 15, 2020.
The following table summarizes the cash distributions recognized in the
consolidated statement of cash flows:
                                Fiscal Year Ended March 31,
                              2020          2019         2018
                                      (In thousands)
Recurring dividends (1)    $  146,602$ 114,234$ 103,411
Dividend equivalents (2)            -          280          951
Total distributions        $  146,602$ 114,514$ 104,362



                                       60
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(1) Amounts represent recurring dividends that were declared and paid for during
each quarter of fiscal 2020, 2019, and 2018, respectively.
(2) Dividend equivalents are distributions made to option holders equal to the
previously declared special dividends.
On December 12, 2011, the Board approved a $30.0 million share repurchase
program, which was further increased by the Board on (i) January 27, 2015 to
$180.0 million, (ii) January 25, 2017 to $410.0 million, (iii) November 2, 2017
to $610.0 million, (iv) May 24, 2018 to $910.0 million, and (v) May 23, 2019 to
$1,310.0 million. The Company may repurchase shares pursuant to the program by
means of open market repurchases, directly negotiated repurchases or through
agents acting pursuant to negotiated repurchase agreements. During fiscal 2020
and 2019, the Company purchased 2.5 million and 5.1 million shares of the
Company's Class A Common Stock for an aggregate of $173.4 million and $239.8
million, respectively. As of March 31, 2020, the Company had approximately
$484.8 million remaining under the repurchase program.
Any determination to pursue one or more of the above alternative uses for excess
cash is subject to the discretion of the Board, and will depend upon various
factors, including our results of operations, financial condition, liquidity
requirements, restrictions that may be imposed by applicable law, our contracts,
and our Credit Agreement, as amended, and other factors deemed relevant by the
Board.
Indebtedness
Our debt totaled $2,185.8 million and $1,759.8 million as of March 31, 2020 and
2019, respectively. Our debt bears interest at specified rates (see Note 11 to
our consolidated financial statements).
On November 26, 2019 (the "Amendment Effective Date"), Booz Allen Hamilton Inc.
("Booz Allen Hamilton") and Booz Allen Hamilton Investor Corporation
("Investor"), and certain wholly-owned subsidiaries of Booz Allen Hamilton,
entered into the Seventh Amendment (the "Seventh Amendment") to the Credit
Agreement, dated as of July 31, 2012, as amended (the "Credit Agreement") with
certain institutional lenders, and Bank of America, N.A., as Administrative and
Collateral Agents. The Seventh Amendment reduced the applicable margin
applicable to the Term Loan B ("Term Loan B" and, together with the Term Loan A,
the "Term Loans") from 2.00% to 1.75% for LIBOR loans and from 1.00% to 0.75%
for base rate loans and extended the maturity of the Term Loan B to November 26,
2026. The applicable margin and maturity date applicable to the Term Loan A (the
"Term Loan A") remained unchanged.
Prior to the Seventh Amendment, approximately $389.0 million was outstanding
under Term Loan B. Pursuant to the Seventh Amendment, certain lenders converted
their existing Term Loan B loans into a new tranche of Term Loan B loans in an
aggregate amount, along with Term Loan B loans advanced by certain new lenders,
of approximately $389.0 million (the "New Refinancing Tranche B Term Loans").
The proceeds from the new lenders were used to prepay in full all of the
existing Term Loan B loans that were not converted into the new Term Loan B
tranche. Voluntary prepayments of the New Refinancing Tranche B Term Loans are
permitted at any time, in minimum principal amounts, without premium or penalty,
subject to a 1.00% premium payable in connection with certain repricing
transactions within the first six months after the Seventh Amendment. The other
terms of the New Refinancing Tranche B Term Loans are generally the same as the
existing Term Loan B prior to the Seventh Amendment.
As of March 31, 2020, the Credit Agreement provided Booz Allen Hamilton with a
$1,363.7 million Term Loan A, a $388.1 million Term Loan B, and $500.0 million
in New Revolving Commitments with a sub-limit for letters of credit of $100.0
million. As of March 31, 2020, the maturity date of Term Loan A and the
termination date for the Revolving Credit Facility was June 23, 2023 and the
maturity date of Term Loan B was November 26, 2026. Booz Allen Hamilton's
obligations and the guarantors' guarantees under the Credit Agreement are
secured by a first priority lien on substantially all of the assets (including
capital stock of subsidiaries) of Booz Allen Hamilton, Investor and the
subsidiary guarantors, subject to certain exceptions set forth in the Credit
Agreement and related documentation. Subject to specified conditions, without
the consent of the then-existing lenders (but subject to the receipt of
commitments), the Term Loans or Revolving Credit Facility may be expanded (or a
new term loan facility or revolving credit facility added to the existing
facilities) by up to (i) the greater of (x) $627 million and (y) 100% of
consolidated EBITDA of Booz Allen Hamilton, as of the end of the most recently
ended four quarter period for which financial statements have been delivered
pursuant to the Credit Agreement plus (ii) the aggregate principal amount under
which pro forma consolidated net secured leverage remains less than or equal to
3.50:1.00.
At Booz Allen Hamilton's option, borrowings under the Secured Credit Facility
bear interest based either on LIBOR (adjusted for maximum reserves, and subject
to a floor of zero) for the applicable interest period or, a base rate equal to
the highest of (x) the administrative agent's prime corporate rate, (y) the
overnight federal funds rate plus 0.50% and (z) three-month LIBOR (adjusted for
maximum reserves, and subject to a floor of zero) plus 1.00%), in each case plus
an applicable margin, payable at the end of the applicable interest period and
in any event at least quarterly. The applicable margin for Term Loan A and
borrowings under the Revolving Credit Facility ranges from 1.25% to 2.00% for
LIBOR loans and 0.25% to 1.00% for base rate loans, in each case based on Booz
Allen Hamilton's consolidated total net leverage ratio. The applicable margin
for Term Loan B is 1.75% for LIBOR loans and 0.75% for base rate loans. Unused
commitments under the Revolving Credit

                                       61
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Facility are subject to a quarterly fee ranging from 0.20% to 0.35% based on
Booz Allen Hamilton's consolidated total net leverage ratio.
Booz Allen Hamilton occasionally borrows under the Revolving Credit Facility in
anticipation of cash demands. During fiscal 2020 and 2019, Booz Allen Hamilton
accessed a total $100.0 million and $110.0 million of its $500.0 million
Revolving Credit Facility. As of March 31, 2020, there was $100.0 million
outstanding on the Revolving Credit Facility. As of March 31, 2019, there was no
outstanding balance on the Revolving Credit Facility.
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.
Booz Allen Hamilton also has agreed to pay customary letter of credit and agency
fees. As of March 31, 2020 and 2019, Booz Allen Hamilton was contingently liable
under open standby letters of credit and bank guarantees issued by its banks in
favor of third parties that totaled $9.7 million and $9.5 million, respectively.
These letters of credit and bank guarantees primarily support insurance and bid
and performance obligations. At March 31, 2020 and 2019, approximately $0.9
million and $1.0 million, respectively, of these instruments reduced our
available borrowings under the Revolving Credit Facility. The remainder is
guaranteed under a separate $15.0 million facility established in fiscal 2015,
of which $6.2 million and $6.5 million, respectively, was available to Booz
Allen Hamilton at March 31, 2020 and 2019. As of March 31, 2020, we had $399.1
million of capacity available for additional borrowings under the Revolving
Credit Facility.
The Credit Agreement contains customary representations and warranties and
customary affirmative and negative covenants. The negative covenants include
limitations on the following, in each case subject to certain exceptions:
(i) indebtedness and liens; (ii) mergers, consolidations or amalgamations,
liquidations, wind-ups or dissolutions, and disposition of all or substantially
all assets; (iii) dispositions of property; (iv) restricted payments;
(v) investments; (vi) transactions with affiliates; (vii) change in fiscal
periods; (viii) negative pledges; (ix) restrictive agreements; (x) line of
business; and (xi) speculative hedging. The events of default include the
following, in each case subject to certain exceptions: (a) failure to make
required payments under the Secured Credit Facility; (b) material breaches of
representations or warranties under the Secured Credit Facility; (c) failure to
observe covenants or agreements under the Secured Credit Facility; (d) failure
to pay or default under certain other material indebtedness; (e) bankruptcy or
insolvency; (f) certain ERISA events; (g) certain material judgments; (h) actual
or asserted invalidity of the Guarantee and Collateral Agreements or the other
security documents or failure of the guarantees or perfected liens thereunder;
and (i) a change of control. In addition, we are required to meet certain
financial covenants at each quarter end, namely Consolidated Net Total Leverage
and Consolidated Net Interest Coverage Ratios. As of March 31, 2020, we were
compliant with these covenants.
During fiscal 2020, interest payments of $50.3 million and $15.9 million were
made for the Term Loan A and Term Loan B facilities, respectively. During fiscal
2019, interest payments of $41.9 million and $16.8 million were made for the
Term Loan A and Term Loan B facilities, respectively.
The total outstanding debt balance is recorded in the accompanying consolidated
balance sheets net of unamortized discount and debt issuance costs of $16.0
million and $19.0 million as of March 31, 2020 and 2019, respectively.
On April 25, 2017, Booz Allen Hamilton issued $350 million aggregate principal
amount of its 5.125% Senior Notes due 2025 (the "Senior Notes") under an
Indenture, dated April 25, 2017, among Booz Allen Hamilton, certain subsidiaries
of Booz Allen Hamilton, as guarantors (the "Subsidiary Guarantors"), and
Wilmington Trust, National Association, as trustee (the "Trustee"), as
supplemented by the First Supplemental Indenture, dated as of April 25, 2017,
among Booz Allen Hamilton, the Subsidiary Guarantors and the Trustee. A portion
of the proceeds was used to repay all outstanding loans under the Revolving
Credit Facility. For both fiscal 2020 and 2019, interest payments of $17.9
million were made for the Senior Notes.
Borrowings under the Term Loans and, if used, the Revolving Credit Facility,
incur interest at a variable rate. In accordance with our risk management
strategy between April 6, 2017 and April 4, 2019, Booz Allen Hamilton executed a
series of interest rate swaps. As of March 31, 2020, we had interest rate swaps
with an aggregate notional amount of $1 billion. These instruments hedge the
variability of cash outflows for interest payments on the floating portion of
our debt. The Company's objectives in using cash flow hedges are to reduce
volatility due to interest rate movements and to add stability to interest
expense (see Note 12 in our consolidated financial statements).
Capital Structure and Resources
Our stockholders' equity amounted to $856.4 million as of March 31, 2020, an
increase of $181.0 million compared to stockholders' equity of $675.4 million as
of March 31, 2019. The increase was primarily due to net income of $482.6
million in fiscal 2020 and stock-based compensation expense of $43.3 million,
partially offset by $186.6 million in treasury stock resulting from the
repurchase of shares of our Class A Common Stock and $146.6 million in aggregate
quarterly dividend payments in fiscal 2020.

                                       62
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Off-Balance Sheet Arrangements
As of March 31, 2020, we did not have any material off-balance sheet
arrangements.
Contractual Obligations
The following table summarizes our contractual obligations that require us to
make future cash payments as of March 31, 2020. For contractual obligations, we
included payments that we have an unconditional obligation to make.

                                                       Payments Due by Fiscal Periods
                                                   Less Than       1 to 3         3 to 5        More Than
                                      Total          1 Year         Years          Years         5 years
                                                               (In thousands)
Long-term debt (a)                $ 2,101,841$   77,865$ 155,730$ 1,149,599$  718,647
Operating lease obligations           372,258         61,900       128,689          95,569         86,100
Interest on indebtedness              272,679         62,398       118,872          65,596         25,813
Revolver debt                         100,000        100,000             -               -              -
Tax liabilities for uncertain
tax positions (b)                      11,159         11,159             -               -              -

Total contractual obligations $ 2,857,937$ 313,322$ 403,291

$ 1,310,764$ 830,560

(a) See Note 11 to our consolidated financial statements for additional

information regarding debt and related matters.

(b) The balance primarily includes an $11.1 million reserve for income tax

uncertainties created with the acquisition of eGov Holdings, Inc. in fiscal

2017. Approximately, $45.0 million of gross unrecognized tax benefits were

excluded as we are not able to reasonably estimate the timing of future

cash flows to such unrecognized tax benefits. See Note 14 to our

consolidated financial statements for additional information regarding

gross unrecognized tax benefits.



In the normal course of business, we enter into agreements with subcontractors
and vendors to provide products and services that we consume in our operations
or that are delivered to our clients. These products and services are not
considered unconditional obligations until the products and services are
actually delivered, at which time we record a liability for our obligation.
Capital Expenditures
Since we do not own any of our facilities, our capital expenditure requirements
primarily relate to the purchase of computers, management systems, furniture,
and leasehold improvements to support our operations. Direct facility and
equipment costs billed to clients are not treated as capital expenses. Our
capital expenditures for fiscal 2020 and 2019 were $128.1 million and $94.7
million, respectively. The increase in capital expenditures over the prior year
primarily relates to investments in our facilities and infrastructure, and
information technology. We expect capital expenditures to decrease in the near
term and overall in fiscal 2021 as compared to fiscal 2020. Given the
uncertainty surrounding the COVID-19 outbreak, we may adjust our capital
expenditures in fiscal 2021 to support our business operations as we further
develop our long term strategy on a safe return to work.
Commitments and Contingencies
We are subject to a number of reviews, investigations, claims, lawsuits, and
other uncertainties related to our business. For a discussion of these items,
refer to Note 22 to our consolidated financial statements.

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