Maximus (MMS) 10-Q 8 Feb 18 2018 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Dec. 31, 2017	Feb. 05, 2018
Document and Entity Information
Entity Registrant Name	MAXIMUS INC
Entity Central Index Key	1,032,220
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		65,223,348

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Income Statement [Abstract]
Revenue	$ 623,148	$ 607,564
Cost of revenue	471,188	462,746
Gross profit	151,960	144,818
Selling, general and administrative expenses	69,559	65,398
Amortization of intangible assets	2,718	3,402
Restructuring costs	0	2,242
Operating income	79,683	73,776
Interest expense	168	849
Other income, net	287	263
Income before income taxes	79,802	73,190
Provision for income taxes	19,850	26,861
Net income	59,952	46,329
Income/(loss) attributable to noncontrolling interests	861	(335)
Net income attributable to MAXIMUS	$ 59,091	$ 46,664
Basic earnings per share attributable to MAXIMUS (in dollars per share)	$ 0.90	$ 0.71
Diluted earnings per share attributable to MAXIMUS (in dollars per share)	0.89	0.71
Dividends paid per share (in dollars per share)	$ 0.045	$ 0.045
Weighted average shares outstanding:
Basic weighted average shares outstanding (in shares)	65,866	65,770
Diluted weighted average shares outstanding (in shares)	66,177	66,020

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 59,952	$ 46,329
Foreign currency translation adjustments	315	(9,694)
Interest rate hedge, net of income taxes of $- and $8	0	12
Comprehensive income	60,267	36,647
Comprehensive income/(loss) attributable to noncontrolling interests	861	(335)
Comprehensive income attributable to MAXIMUS	$ 59,406	$ 36,982

CONSOLIDATED STATEMENTS OF COM4

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Interest rate hedge, tax	$ 0	$ 8

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 30, 2017
Current assets:
Cash and cash equivalents	$ 196,905	$ 166,252
Accounts receivable — billed and billable, net of reserves of $5,736 and $6,843	438,995	394,338
Accounts receivable — unbilled	30,944	36,475
Income taxes receivable	2,086	4,528
Prepaid expenses and other current assets	49,919	55,649
Total current assets	718,849	657,242
Property and equipment, net	95,931	101,651
Capitalized software, net	24,629	26,748
Goodwill	403,261	402,976
Intangible assets, net	96,138	98,769
Deferred contract costs, net	14,901	16,298
Deferred compensation plan assets	29,826	28,548
Deferred income taxes	7,679	7,691
Other assets	10,316	10,739
Total assets	1,401,530	1,350,662
Current liabilities:
Accounts payable and accrued liabilities	133,408	122,083
Accrued compensation and benefits	67,304	105,667
Deferred revenue	63,185	71,722
Income taxes payable	2,794	4,703
Other liabilities	12,565	12,091
Total current liabilities	279,256	316,266
Deferred revenue, less current portion	24,264	28,182
Deferred income taxes	25,914	20,106
Long-term debt	12,050	527
Deferred compensation plan liabilities, less current portion	34,162	30,707
Other liabilities	18,232	9,106
Total liabilities	393,878	404,894
Shareholders’ equity:
Common stock, no par value; 100,000 shares authorized; 65,120 and 65,137 shares issued and outstanding at December 31, 2017 and September 30, 2017, at stated amount, respectively	481,261	475,592
Accumulated other comprehensive loss	(27,304)	(27,619)
Retained earnings	547,151	492,112
Total MAXIMUS shareholders’ equity	1,001,108	940,085
Noncontrolling interests	6,544	5,683
Total equity	1,007,652	945,768
Total liabilities and equity	$ 1,401,530	$ 1,350,662

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 30, 2017
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable, current	$ 5,736	$ 6,843
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares outstanding	65,120,000	65,137,000
Common stock, shares issued	65,120,000	65,137,000

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operations:
Net income	$ 59,952	$ 46,329
Adjustments to reconcile net income to cash flows from operations:
Depreciation and amortization of property and equipment and capitalized software	13,719	14,562
Amortization of intangible assets	2,718	3,402
Deferred income taxes	5,707	5,910
Stock compensation expense	5,402	4,889
Change in assets and liabilities:
Accounts receivable — billed and billable	(44,381)	14,687
Accounts receivable — unbilled	5,535	(1,998)
Prepaid expenses and other current assets	6,019	6,245
Deferred contract costs	1,413	44
Accounts payable and accrued liabilities	11,387	(14,575)
Accrued compensation and benefits	(29,588)	(17,237)
Deferred revenue	(12,405)	(10,096)
Income taxes	9,642	16,902
Other assets and liabilities	2,748	2,076
Cash flows from operations	37,868	71,140
Cash flows from investing activities:
Purchases of property and equipment and capitalized software costs	(6,514)	(7,768)
Proceeds from the sale of a business	0	385
Other	45	43
Cash used in investing activities	(6,469)	(7,340)
Cash flows from financing activities:
Cash dividends paid to MAXIMUS shareholders	(2,930)	(2,920)
Repurchases of common stock	(1,038)	(28,767)
Tax withholding related to RSU vesting	(8,529)	(9,255)
Borrowings under credit facility	59,683	65,000
Repayment of credit facility and other long-term debt	(48,156)	(80,067)
Other	0	(1,145)
Cash used in financing activities	(970)	(57,154)
Effect of exchange rate changes on cash and cash equivalents	224	(3,078)
Net increase in cash and cash equivalents	30,653	3,568
Cash and cash equivalents, beginning of period	166,252	66,199
Cash and cash equivalents, end of period	$ 196,905	$ 69,767

CONSOLIDATED STATEMENTS OF CHAN

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Accumulated Other Comprehensive Income/(Loss)	Retained Earnings	Noncontrolling Interest
Balance (in shares) at Sep. 30, 2016		65,223
Balance at Sep. 30, 2016	$ 753,140	$ 461,679	$ (36,169)	$ 323,571	$ 4,059
Increase (Decrease) in Shareholders' Equity
Net income	46,329			46,664	(335)
Foreign currency translation	(9,694)		(9,694)
Interest rate hedge, net of income taxes	12		12
Cash dividends	(3,537)			(2,920)	(617)
Dividends on RSUs		$ 88		(88)
Repurchases of common stock (in shares)		(559)
Repurchases of common stock	(28,767)			(28,767)
Stock compensation expense	4,889	$ 4,889
Balance (in shares) at Dec. 31, 2016		64,664
Balance at Dec. 31, 2016	$ 762,372	$ 466,656	(45,851)	338,460	3,107
Balance (in shares) at Sep. 30, 2017	65,137	65,137
Balance at Sep. 30, 2017	$ 945,768	$ 475,592	(27,619)	492,112	5,683
Increase (Decrease) in Shareholders' Equity
Net income	59,952			59,091	861
Foreign currency translation	315		315
Interest rate hedge, net of income taxes	0
Cash dividends	(2,930)			(2,930)	0
Dividends on RSUs		$ 84		(84)
Repurchases of common stock (in shares)		(17)
Repurchases of common stock	(1,038)			(1,038)
Stock compensation expense	5,402	$ 5,402
Tax withholding related to RSU vesting	$ 183	$ 183
Balance (in shares) at Dec. 31, 2017	65,120	65,120
Balance at Dec. 31, 2017	$ 1,007,652	$ 481,261	$ (27,304)	$ 547,151	$ 6,544

Organization and Basis of Prese

Organization and Basis of Presentation	3 Months Ended
	Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Basis of Presentation	Organization and Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. As permitted by these instructions, they do not include all of the information and notes required by generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three months ended December 31, 2017 are not necessarily indicative of the results that may be expected for the full fiscal year. The balance sheet at September 30, 2017 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. Certain financial results have been reclassified to conform with our current period presentation. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenue and expenses. On an ongoing basis, we evaluate our estimates including those related to revenue recognition and cost estimation on certain contracts, the realizability of goodwill and amounts related to income taxes, certain accrued liabilities and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates. These financial statements should be read in conjunction with the consolidated audited financial statements and the notes thereto at September 30, 2017 and 2016 and for each of the three years ended September 30, included in our Annual Report on Form 10-K which was filed with the Securities and Exchange Commission on November 20, 2017 .

Segment Information

Segment Information	3 Months Ended
	Dec. 31, 2017
Segment Reporting [Abstract]
Segment Information	Segment Information The table below provides certain financial information for each of our business segments. Three Months Ended December 31, (dollars in thousands) 2017 % (1) 2016 % (1) Revenue: Health Services $ 352,090 100 % $ 340,729 100 % U.S. Federal Services 132,983 100 % 141,298 100 % Human Services 138,075 100 % 125,537 100 % Total $ 623,148 100 % $ 607,564 100 % Gross profit: Health Services $ 91,056 25.9 % $ 78,234 23.0 % U.S. Federal Services 33,358 25.1 % 37,576 26.6 % Human Services 27,546 20.0 % 29,008 23.1 % Total $ 151,960 24.4 % $ 144,818 23.8 % Selling, general and administrative expense: Health Services $ 33,416 9.5 % $ 28,107 8.2 % U.S. Federal Services 16,648 12.5 % 19,695 13.9 % Human Services 19,495 14.1 % 17,239 13.7 % Other (2) — NM 357 NM Total $ 69,559 11.2 % $ 65,398 10.8 % Operating income: Health Services $ 57,640 16.4 % $ 50,127 14.7 % U.S. Federal Services 16,710 12.6 % 17,881 12.7 % Human Services 8,051 5.8 % 11,769 9.4 % Amortization of intangible assets (2,718 ) NM (3,402 ) NM Restructuring costs (3) — NM (2,242 ) NM Other (2) — NM (357 ) NM Total $ 79,683 12.8 % $ 73,776 12.1 % (1) Percentage of respective segment revenue. Percentages not considered meaningful are marked “NM.” (2) Other costs and credits relate to SG&A balances that do not relate directly to segment business activities. During the three months ended December 31, 2016 we incurred $0.4 million of legal costs pertaining to a matter which occurred in fiscal year 2009. This matter was settled in the third quarter of fiscal year 2017. (3) During fiscal year 2017, we incurred costs in restructuring our United Kingdom Human Services business. See "Note 5. Supplemental disclosures" for more information.

Earnings Per Share

Earnings Per Share	3 Months Ended
	Dec. 31, 2017
Earnings Per Share [Abstract]
Earnings Per Share	Earnings Per Share The weighted average number of shares outstanding used to compute earnings per share was as follows: Three Months Ended December 31, (shares in thousands) 2017 2016 Basic weighted average shares outstanding 65,866 65,770 Dilutive effect of employee stock options and unvested RSUs 311 250 Denominator for diluted earnings per share 66,177 66,020 All of our unvested restricted stock units (RSUs) are included in the calculations of dilution above.

Income Tax (Notes)

Income Tax (Notes)	3 Months Ended
	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Income Tax	Income Tax Our results for the first quarter of fiscal year 2018 benefited from the estimated effects of the Tax Cuts and Jobs Act (the Act), which was signed on December 22, 2017 and is effective from January 1, 2018. Our results for the three months ended December 31, 2017 have been affected by: • A one-time "toll tax" on our undistributed and previously untaxed earnings in foreign locations, of approximately $9.5 million ; • A one-time benefit from the reduction of our deferred tax liabilities of $10.6 million to reflect the new U.S. federal tax rates; and • A reduced provision for income taxes, which has resulted in a reduction to our expense of approximately $6.4 million , compared to our tax provision under previous law. We are required to recognize the expected effects of the Act as of December 31, 2017. The calculations of deferred tax assets and liabilities and the toll tax are complicated by two factors: • Our U.S. federal income tax return for fiscal year 2017, which ended on September 30, 2017, is required to be filed on or before July 15, 2018, and certain estimates of differences between recorded amounts for financial reporting purposes and for tax reporting purposes will continue to be refined for the next several months; and • The “toll tax” requires the gathering of detailed information previously not required to be filed with our U.S. federal tax returns; both the IRS and U.S. Treasury Department will be providing interpretations and guidance over the next several months to assist tax payers in calculating the toll tax. In addition, many U.S. states continue to issue their interpretations of the Act, which may change our estimates of our charge. Accordingly, the accounting for certain income tax effects of the Act is provisional. We believe that we have a reasonable basis for our estimates. Our effective income tax rate for the three months ended December 31, 2017 was 24.9% . The net effect of our toll charge and reduction of deferred tax liabilities reduced the effective income tax rate by approximately 1.4% . During the three months ended December 31, 2017 and 2016 , we made income tax payments of $4.0 million and $3.7 million , respectively.

Supplemental disclosures

Supplemental disclosures	3 Months Ended
	Dec. 31, 2017
Supplemental Cash Flow Elements [Abstract]
Supplemental disclosures	Supplemental disclosures Under a resolution adopted in August 2015, the Board of Directors authorized the repurchase, at management's discretion, of up to an aggregate of $200 million of our common stock. The resolution also authorizes the use of option exercise proceeds for the repurchase of our common stock. During the three months ended December 31, 2017 , we repurchased approximately 17,000 common shares at a cost of $1.0 million . During three months ended December 31, 2016 , we acquired 0.6 million common shares at a cost of $28.8 million . At December 31, 2017 , $108.8 million remained available for future stock repurchases. Our deferred compensation plan assets include $16.2 million invested in mutual funds that have quoted prices in active markets. These assets are recorded at fair value with changes in fair value being recorded in the Statement of Operations. During the three months ended December 31, 2017 , we granted 0.3 million RSUs to our employees. These awards will vest ratably over five years. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and other amounts included within current assets and liabilities that meet the definition of a financial instrument are shown at values equivalent to fair value due to the short-term nature of these items. Our accounts receivable balance includes both amounts invoiced and amounts that are ready to be invoiced and the funds are collectible within standard invoice terms. During the three months ended December 31, 2016 , we undertook a restructuring of our United Kingdom Human Services operations as part of the ongoing integration of Remploy. We recorded restructuring costs of $2.2 million , principally severance expenses. As part of our work for the U.S. Federal Government and many states, we allocate costs to individual projects and segments using a methodology driven by the Federal Cost Accounting Standards. During fiscal year 2018, we updated our methodology for allocation of costs which resulted in certain costs which had been within Cost of Revenue now being classified as Selling, General and Administrative Expenses (SG&A). If we had utilized the same methodology in fiscal year 2018 as we had in fiscal year 2017, we estimate that SG&A would have been lower by approximately $1.2 million during the first fiscal quarter of 2018. This change in methodology did not affect our operating income. Shareholder Lawsuit In August 2017, the Company and certain officers were named as defendants in a putative class action lawsuit filed in the U.S. District Court for the Eastern District of Virginia, Steamfitters Local 449 Pension Plan v. MAXIMUS . The plaintiff alleges the defendants made a variety of materially false and misleading statements, or failed to disclose material information, concerning the status of the Company’s Health Assessment Advisory Services project for the U.K. Department for Work and Pensions from the period October 20, 2014 through February 3, 2016, and seek damages to be proved at trial. The defendants deny the allegations and intend to defend the matter vigorously. At this time, it is not possible to reasonably predict whether this matter will be permitted to proceed as a class or to reasonably estimate the value of the claims asserted. No assurances can be given that we will be successful in our defense of this action on the merits or otherwise. For these reasons, we are unable to estimate the potential loss or range of loss in this matter.

Debt

Debt	3 Months Ended
	Dec. 31, 2017
Debt Disclosure [Abstract]
Debt	Debt Credit Facilities Our credit agreement provides for a revolving line of credit up to $400 million that may be used for revolving loans, swingline loans (subject to a sublimit of $5 million ), and to request letters of credit, subject to a sublimit of $50 million . The line of credit is available for general corporate purposes, including working capital, capital expenditures and acquisitions. Borrowings are permitted in currencies other than the U.S. Dollar. In September 2017, we extended the term of our credit agreement to September 2022, at which time all outstanding borrowings must be repaid. At December 31, 2017 , we had U.S. Dollar borrowings of $10.0 million and Australian Dollar borrowings of $1.6 million under the credit agreement. In addition to borrowings under the credit agreement, we have an outstanding loan of $0.6 million ( $0.8 million Canadian Dollars) with the Atlantic Innovation Fund of Canada. The loan is non-interest bearing and is repayable over 18 remaining quarterly installments. At December 31, 2017 , we held three letters of credit under our credit agreement totaling $3.1 million . Each of these letters of credit may be called by vendors or customers in the event that we default under the terms of a contract, the probability of which we believe is remote. In addition, one letter of credit totaling $1.0 million , secured with restricted cash balances, is held with another financial institution to cover similar obligations to customers. Our credit agreement requires us to comply with certain financial covenants and other covenants including a maximum total leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all covenants as of December 31, 2017 . Our obligations under the credit agreement are guaranteed by material domestic subsidiaries of the Company, but are otherwise unsecured. In the event that our total leverage ratio, as defined in the credit agreement, exceeds 2.50 :1, we would be obliged to provide security in the form of the assets of the parent company and certain of its subsidiaries. Our credit agreement contains no restrictions on the payment of dividends as long as our leverage ratio does not exceed 2.50 :1. At December 31, 2017 , our total leverage ratio was less than 1.0 :1.0. We do not believe that the provisions of the credit agreement represent a significant restriction to the successful operation of the business or to our ability to pay dividends. The Credit Agreement provides for an annual commitment fee payable on funds not borrowed or utilized for letters of credit. This charge is based upon our leverage and varies between 0.125% and 0.275% . Borrowings under the Credit Agreement bear interest at our choice at either (a) a Base Rate plus a margin that varies between 0.0% and 0.75% per year, (b) a Eurocurrency Rate plus an applicable margin that varies between 1.0% and 1.75% per year or (c) an Index Rate plus an applicable margin which varies between 1.0% and 1.75% per year. The Base Rate, Eurocurrency Rate and Index Rate are defined by the Credit Agreement. Derivative Arrangement In order to add stability to our interest expense and manage our exposure to interest rate movements, we may enter into derivative arrangements to fix payments on part of an outstanding loan balance. We agree to pay a fixed rate of interest to a financial institution and receive a balance equivalent to the floating rate payable. Our outstanding derivative instruments expired during fiscal year 2017. As this cash flow hedge was considered effective, the gains and losses in the fair value of this derivative instrument were reported in accumulated other comprehensive income (AOCI) in the consolidated statement of comprehensive income. Interest Payments During the three months ended December 31, 2017 and 2016 , we made interest payments of less than $0.1 million and $0.6 million , respectively.

Recent accounting pronouncement

Recent accounting pronouncements	3 Months Ended
	Dec. 31, 2017
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
Recent accounting pronouncements	Recent accounting pronouncements We are evaluating the effects of guidance issued in three significant areas of financial reporting. In May 2014, the Financial Accounting Standards Board (the FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers. In addition, the FASB has issued additional updates covering technical items and changing the date of adoption. This new standard will change the manner in which we evaluate revenue recognition for all contracts with customers, although the effect of the changes on revenue recognition will vary from contract to contract. We will adopt this standard during our 2019 fiscal year. The standard is required to be applied either retrospectively to each prior period presented (the full retrospective approach) or retrospectively with the cumulative effect of the initial application recognized at the date of initial application (the modified retrospective approach). While we previously disclosed that we anticipated using the full retrospective approach, we have further evaluated both approaches and have concluded that we will adopt the standard using the modified retrospective approach. We have established a cross-functional steering committee which includes representatives from across all our business and support segments. The steering committee is responsible for evaluating the impact of the standard on our operations including accounting, taxation, internal audit and financial systems. Our approach to analyzing these impacts includes reviewing our current accounting policies and practices to identify potential differences that will result from applying the requirements of the new standard to our existing contracts. We are in the process of evaluating the changes needed to our business processes, systems and controls in order to support revenue recognition and the related disclosures under the new standard. While we are still evaluating the changes that the new standard will have, we expect the standard will affect the timing of revenue recognition for certain of our variable fee contracts. In February 2016, the FASB issued ASU No. 2016-02, Leases . The new standard will change the manner in which we will present our leasing arrangements. We will adopt this standard during our 2020 fiscal year. We are evaluating the likely effects on our business. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. This standard will not change the manner in which we would identify a goodwill impairment but would change the manner of the calculation of any resulting impairment. Under existing guidance, we would calculate goodwill for each of our reporting units by calculating the fair value of all existing assets and liabilities within that reporting unit and comparing this to the fair value of the reporting unit; to the extent that this difference is less than our existing goodwill balance related to that reporting unit, we would record an impairment. The new standard will require us to calculate goodwill based upon the difference between the fair value and reported value of a reporting unit. This standard would be effective for our 2021 fiscal year, although early adoption is permitted. With the exception of the new accounting standards discussed above, there have been no new accounting pronouncements that have significance, or potential significance, to the Company's consolidated financial statements.

Subsequent event

Subsequent event	3 Months Ended
	Dec. 31, 2017
Subsequent Events [Abstract]
Subsequent Event	Subsequent events On January 5, 2018 , our Board of Directors declared a quarterly cash dividend of $0.045 for each share of our common stock outstanding. The dividend is payable on February 28, 2018 to shareholders of record on February 15, 2018 . On January 16, 2018, we announced the appointment of a new Chief Executive Officer, with Bruce L. Caswell replacing Richard A. Montoni as of April 1, 2018. Both individuals entered into new employment, confidentiality and non-compete agreements; Mr. Caswell's contract is for three years, through April 1, 2021; Mr. Montoni's is for eighteen months, through September 30, 2019. On January 16, 2018, we announced the retirement of a member of our Board of Directors, Mayor Wellington E. Webb. Mayor Webb had previously deferred his RSU awards and, as a result, we will record a tax benefit of approximately $1.7 million during the three month period ended March 31, 2018.

Organization and Basis of Pre17

Organization and Basis of Presentation (Policies)	3 Months Ended
	Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Accounting	The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. As permitted by these instructions, they do not include all of the information and notes required by generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three months ended December 31, 2017 are not necessarily indicative of the results that may be expected for the full fiscal year. The balance sheet at September 30, 2017 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. Certain financial results have been reclassified to conform with our current period presentation.
Use of Estimates	The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenue and expenses. On an ongoing basis, we evaluate our estimates including those related to revenue recognition and cost estimation on certain contracts, the realizability of goodwill and amounts related to income taxes, certain accrued liabilities and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
New accounting pronouncements	Recent accounting pronouncements We are evaluating the effects of guidance issued in three significant areas of financial reporting. In May 2014, the Financial Accounting Standards Board (the FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers. In addition, the FASB has issued additional updates covering technical items and changing the date of adoption. This new standard will change the manner in which we evaluate revenue recognition for all contracts with customers, although the effect of the changes on revenue recognition will vary from contract to contract. We will adopt this standard during our 2019 fiscal year. The standard is required to be applied either retrospectively to each prior period presented (the full retrospective approach) or retrospectively with the cumulative effect of the initial application recognized at the date of initial application (the modified retrospective approach). While we previously disclosed that we anticipated using the full retrospective approach, we have further evaluated both approaches and have concluded that we will adopt the standard using the modified retrospective approach. We have established a cross-functional steering committee which includes representatives from across all our business and support segments. The steering committee is responsible for evaluating the impact of the standard on our operations including accounting, taxation, internal audit and financial systems. Our approach to analyzing these impacts includes reviewing our current accounting policies and practices to identify potential differences that will result from applying the requirements of the new standard to our existing contracts. We are in the process of evaluating the changes needed to our business processes, systems and controls in order to support revenue recognition and the related disclosures under the new standard. While we are still evaluating the changes that the new standard will have, we expect the standard will affect the timing of revenue recognition for certain of our variable fee contracts. In February 2016, the FASB issued ASU No. 2016-02, Leases . The new standard will change the manner in which we will present our leasing arrangements. We will adopt this standard during our 2020 fiscal year. We are evaluating the likely effects on our business. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. This standard will not change the manner in which we would identify a goodwill impairment but would change the manner of the calculation of any resulting impairment. Under existing guidance, we would calculate goodwill for each of our reporting units by calculating the fair value of all existing assets and liabilities within that reporting unit and comparing this to the fair value of the reporting unit; to the extent that this difference is less than our existing goodwill balance related to that reporting unit, we would record an impairment. The new standard will require us to calculate goodwill based upon the difference between the fair value and reported value of a reporting unit. This standard would be effective for our 2021 fiscal year, although early adoption is permitted. With the exception of the new accounting standards discussed above, there have been no new accounting pronouncements that have significance, or potential significance, to the Company's consolidated financial statements.

Segment Information (Tables)

Segment Information (Tables)	3 Months Ended
	Dec. 31, 2017
Segment Reporting [Abstract]
Schedule of financial information for each of the Company's business segments	The table below provides certain financial information for each of our business segments. Three Months Ended December 31, (dollars in thousands) 2017 % (1) 2016 % (1) Revenue: Health Services $ 352,090 100 % $ 340,729 100 % U.S. Federal Services 132,983 100 % 141,298 100 % Human Services 138,075 100 % 125,537 100 % Total $ 623,148 100 % $ 607,564 100 % Gross profit: Health Services $ 91,056 25.9 % $ 78,234 23.0 % U.S. Federal Services 33,358 25.1 % 37,576 26.6 % Human Services 27,546 20.0 % 29,008 23.1 % Total $ 151,960 24.4 % $ 144,818 23.8 % Selling, general and administrative expense: Health Services $ 33,416 9.5 % $ 28,107 8.2 % U.S. Federal Services 16,648 12.5 % 19,695 13.9 % Human Services 19,495 14.1 % 17,239 13.7 % Other (2) — NM 357 NM Total $ 69,559 11.2 % $ 65,398 10.8 % Operating income: Health Services $ 57,640 16.4 % $ 50,127 14.7 % U.S. Federal Services 16,710 12.6 % 17,881 12.7 % Human Services 8,051 5.8 % 11,769 9.4 % Amortization of intangible assets (2,718 ) NM (3,402 ) NM Restructuring costs (3) — NM (2,242 ) NM Other (2) — NM (357 ) NM Total $ 79,683 12.8 % $ 73,776 12.1 % (1) Percentage of respective segment revenue. Percentages not considered meaningful are marked “NM.” (2) Other costs and credits relate to SG&A balances that do not relate directly to segment business activities. During the three months ended December 31, 2016 we incurred $0.4 million of legal costs pertaining to a matter which occurred in fiscal year 2009. This matter was settled in the third quarter of fiscal year 2017. (3) During fiscal year 2017, we incurred costs in restructuring our United Kingdom Human Services business. See "Note 5. Supplemental disclosures" for more information.

Earnings Per Share (Tables)

Earnings Per Share (Tables)	3 Months Ended
	Dec. 31, 2017
Earnings Per Share [Abstract]
Schedule of the components of basic and diluted earnings per share	The weighted average number of shares outstanding used to compute earnings per share was as follows: Three Months Ended December 31, (shares in thousands) 2017 2016 Basic weighted average shares outstanding 65,866 65,770 Dilutive effect of employee stock options and unvested RSUs 311 250 Denominator for diluted earnings per share 66,177 66,020

Segment Information (Details)

Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Revenue:
Revenue	$ 623,148	$ 607,564
Revenue (as a percent)	100.00%	100.00%
Gross profit:
Gross profit	$ 151,960	$ 144,818
Gross profit (as a percent)	24.40%	23.80%
Selling, general and administrative expense:
Selling, general and administrative expenses	$ 69,559	$ 65,398
Selling, general, and administrative expense (as a percent)	11.20%	10.80%
Operating income:
Operating income	$ 79,683	$ 73,776
Operating income (as a percent)	12.80%	12.10%
Amortization of intangible assets	$ (2,718)	$ (3,402)
Restructuring cost	0	(2,242)
Segment Reconciling Items
Operating income:
Amortization of intangible assets	(2,718)	(3,402)
Restructuring cost	0	(2,242)
Other
Selling, general and administrative expense:
Selling, general and administrative expenses	0	357
Operating income:
Operating income	0	(357)
Legal costs		400
Health Services | Operating Segments
Revenue:
Revenue	$ 352,090	$ 340,729
Revenue (as a percent)	100.00%	100.00%
Gross profit:
Gross profit	$ 91,056	$ 78,234
Gross profit (as a percent)	25.90%	23.00%
Selling, general and administrative expense:
Selling, general and administrative expenses	$ 33,416	$ 28,107
Selling, general, and administrative expense (as a percent)	9.50%	8.20%
Operating income:
Operating income	$ 57,640	$ 50,127
Operating income (as a percent)	16.40%	14.70%
U.S. Federal Services | Operating Segments
Revenue:
Revenue	$ 132,983	$ 141,298
Revenue (as a percent)	100.00%	100.00%
Gross profit:
Gross profit	$ 33,358	$ 37,576
Gross profit (as a percent)	25.10%	26.60%
Selling, general and administrative expense:
Selling, general and administrative expenses	$ 16,648	$ 19,695
Selling, general, and administrative expense (as a percent)	12.50%	13.90%
Operating income:
Operating income	$ 16,710	$ 17,881
Operating income (as a percent)	12.60%	12.70%
Human Services | Operating Segments
Revenue:
Revenue	$ 138,075	$ 125,537
Revenue (as a percent)	100.00%	100.00%
Gross profit:
Gross profit	$ 27,546	$ 29,008
Gross profit (as a percent)	20.00%	23.10%
Selling, general and administrative expense:
Selling, general and administrative expenses	$ 19,495	$ 17,239
Selling, general, and administrative expense (as a percent)	14.10%	13.70%
Operating income:
Operating income	$ 8,051	$ 11,769
Operating income (as a percent)	5.80%	9.40%

Earnings Per Share (Details)

Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Earnings Per Share [Abstract]
Basic weighted average shares outstanding	65,866	65,770
Dilutive effect of employee stock options and unvested RSUs	311	250
Denominator for diluted earnings per share	66,177	66,020

Income Tax (Details)

Income Tax (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Tax cuts and jobs act of 2017, transition tax for accumulated foreign earnings income tax expense (benefit)	$ 9.5
Tax cuts and jobs act of 2017, change in tax rate, deferred tax liability, income tax (expense) benefit	10.6
Tax cuts and jobs act of 2017, income tax expense (benefit)	$ 6.4
Effective income tax rate, percent	24.90%
Tax cuts and jobs act of 2017, income (decrease) in the effective income tax rate	1.40%
Income taxes paid	$ 4	$ 3.7

Supplemental disclosures (Detai

Supplemental disclosures (Details) - USD ($) shares in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Aug. 31, 2015
Payments for Repurchase of Equity [Abstract]
Repurchases of common stock	$ 1,038,000	$ 28,767,000
Selling, general and administrative expense:
Change in selling, general and administrative expenses	$ 69,559,000	$ 65,398,000
Restricted Stock Units (RSUs)
Employee Benefits and Share-based Compensation, Noncash [Abstract]
Granted (in shares)	300
Vesting period	5 years
Common Stock
Payments for Repurchase of Equity [Abstract]
Common shares repurchased	17	559
United Kingdom
Restructuring Charges [Abstract]
Restructuring charges		$ 2,200,000
Mutual Fund
Retirement Benefits [Abstract]
Investments in mutual funds	$ 16,200,000
Estimated Revision Had Accounting Principle Been Adopted Previous Fiscal Year [Member]
Selling, general and administrative expense:
Change in selling, general and administrative expenses	(1,200,000)
Stock Repurchase Program, August 2015
Payments for Repurchase of Equity [Abstract]
Stock repurchase programs, authorized amount			$ 200,000,000
Amount remaining available for future stock repurchases	$ 108,800,000
Stock Repurchase Program, August 2015 | Common Stock
Payments for Repurchase of Equity [Abstract]
Common shares repurchased	17	600
Repurchases of common stock	$ 1,000,000	$ 28,800,000

Debt (Details)

Debt (Details) CAD in Millions, AUD in Millions	3 Months Ended
	Dec. 31, 2017USD ($)periodletter_of_credit	Dec. 31, 2016USD ($)	Dec. 31, 2017AUDperiodletter_of_credit	Dec. 31, 2017CADperiodletter_of_credit
Credit Agreement Expiring 2022
Debt Instrument [Line Items]
Dividend payment restriction ratio (less than)	2.5
Total leverage ratio (less than)	1
Interest paid	$ 100,000	$ 600,000
Letters of Credit
Debt Instrument [Line Items]
Number of letters of credit issued | letter_of_credit	3		3	3
Outstanding borrowings	$ 3,100,000
Letters of Credit (Other than Revolving Credit Agreement)
Debt Instrument [Line Items]
Number of letters of credit issued | letter_of_credit	1		1	1
Outstanding borrowings	$ 1,000,000
Atlantic Innovation Fund of Canada
Debt Instrument [Line Items]
Amount borrowed	$ 600,000			CAD 0.8
Number of remaining quarterly installments | period	18		18	18
Line of Credit | Credit Agreement Expiring 2022
Debt Instrument [Line Items]
Amount borrowed	$ 10,000,000		AUD 1.6
Line of Credit | Credit Agreement Expiring 2022 | Revolving Credit Facility
Debt Instrument [Line Items]
Maximum borrowing capacity	400,000,000
Line of Credit | Credit Agreement Expiring 2022 | Bridge Loan
Debt Instrument [Line Items]
Maximum borrowing capacity	5,000,000
Line of Credit | Credit Agreement Expiring 2022 | Letters of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 50,000,000
Minimum | Credit Agreement Expiring 2022 | Letters of Credit
Debt Instrument [Line Items]
Commitment fee percentage	0.125%
Maximum | Credit Agreement Expiring 2022 | Letters of Credit
Debt Instrument [Line Items]
Commitment fee percentage	0.275%
Base Rate | Minimum | Credit Agreement Expiring 2022 | Letters of Credit
Debt Instrument [Line Items]
Basis spread on variable rate	0.00%
Base Rate | Maximum | Credit Agreement Expiring 2022 | Letters of Credit
Debt Instrument [Line Items]
Basis spread on variable rate	0.75%
Eurocurrency Rate | Minimum | Credit Agreement Expiring 2022 | Letters of Credit
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
Eurocurrency Rate | Maximum | Credit Agreement Expiring 2022 | Letters of Credit
Debt Instrument [Line Items]
Basis spread on variable rate	1.75%
Index Rate | Minimum | Credit Agreement Expiring 2022 | Letters of Credit
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
Index Rate | Maximum | Credit Agreement Expiring 2022 | Letters of Credit
Debt Instrument [Line Items]
Basis spread on variable rate	1.75%

Subsequent event (Details)

Subsequent event (Details) - Subsequent Event - USD ($) $ / shares in Units, $ in Millions	Feb. 28, 2018	Feb. 15, 2018	Jan. 16, 2018	Jan. 05, 2018
Subsequent Event [Line Items]
Dividend declared date				Jan. 5, 2018
Cash dividend declared (in dollars per share)				$ 0.045
Dividends payable date	Feb. 28, 2018
Dividends payable date of record		Feb. 15, 2018
Chief Executive Officer
Subsequent Event [Line Items]
Confidentiality and non-complete agreement			3 years
Executive Officer
Subsequent Event [Line Items]
Confidentiality and non-complete agreement			18 months
Director
Subsequent Event [Line Items]
Tax benefit from compensation expense			$ 1.7