Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Mar. 31, 2018 | May 07, 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 | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 65,242,950 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||||
Revenue | $ 612,787 | $ 622,047 | $ 1,235,935 | $ 1,229,611 |
Cost of revenue | 463,984 | 469,730 | 935,172 | 932,476 |
Gross profit | 148,803 | 152,317 | 300,763 | 297,135 |
Selling, general and administrative expenses | 72,559 | 68,596 | 142,118 | 133,994 |
Amortization of intangible assets | 2,603 | 3,386 | 5,321 | 6,788 |
Restructuring charges | 2,320 | |||
Restructuring costs | 0 | 2,320 | 2,242 | |
Operating income | 71,321 | 80,335 | 151,004 | 154,111 |
Interest expense | 157 | 744 | 325 | 1,593 |
Other income, net | 1,392 | 417 | 1,679 | 680 |
Income before income taxes | 72,556 | 80,008 | 152,358 | 153,198 |
Provision for income taxes | 17,450 | 26,911 | 37,300 | 53,772 |
Net income | 55,106 | 53,097 | 115,058 | 99,426 |
(Loss)/income attributable to noncontrolling interests | (386) | 582 | 475 | 247 |
Net income attributable to MAXIMUS | $ 55,492 | $ 52,515 | $ 114,583 | $ 99,179 |
Basic earnings per share attributable to MAXIMUS (in dollars per share) | $ 0.84 | $ 0.80 | $ 1.74 | $ 1.51 |
Diluted earnings per share attributable to MAXIMUS (in dollars per share) | 0.84 | 0.80 | 1.73 | 1.50 |
Dividends paid per share (in dollars per share) | $ 0.045 | $ 0.045 | $ 0.09 | $ 0.09 |
Weighted average shares outstanding: | ||||
Basic weighted average shares outstanding (in shares) | 65,856 | 65,549 | 65,857 | 65,669 |
Diluted weighted average shares outstanding (in shares) | 66,268 | 65,947 | 66,223 | 65,989 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 55,106 | $ 53,097 | $ 115,058 | $ 99,426 |
Foreign currency translation adjustments | 2,869 | 5,623 | 3,184 | (4,071) |
Interest rate hedge, net of income taxes of $-, $5, $- and $(3), respectively | 0 | (7) | 0 | 5 |
Comprehensive income | 57,975 | 58,713 | 118,242 | 95,360 |
Comprehensive (loss)/income attributable to noncontrolling interests | (386) | 582 | 475 | 247 |
Comprehensive income attributable to MAXIMUS | $ 58,361 | $ 58,131 | $ 117,767 | $ 95,113 |
CONSOLIDATED STATEMENTS OF COM4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Interest rate hedge, tax | $ 0 | $ 5 | $ 0 | $ (3) |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2018 | Sep. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 253,227 | $ 166,252 |
Accounts receivable — billed and billable, net of reserves of $4,356 and $6,843 | 415,008 | 394,338 |
Accounts receivable — unbilled | 41,202 | 36,475 |
Income taxes receivable | 1,677 | 4,528 |
Prepaid expenses and other current assets | 47,918 | 55,649 |
Total current assets | 759,032 | 657,242 |
Property and equipment, net | 90,741 | 101,651 |
Capitalized software, net | 22,601 | 26,748 |
Goodwill | 405,082 | 402,976 |
Intangible assets, net | 94,109 | 98,769 |
Deferred contract costs, net | 14,673 | 16,298 |
Deferred compensation plan assets | 29,703 | 28,548 |
Deferred income taxes | 7,625 | 7,691 |
Other assets | 6,934 | 10,739 |
Total assets | 1,430,500 | 1,350,662 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 119,589 | 122,083 |
Accrued compensation and benefits | 81,833 | 105,667 |
Deferred revenue | 52,743 | 71,722 |
Income taxes payable | 11,652 | 4,703 |
Other liabilities | 13,534 | 12,091 |
Total current liabilities | 279,351 | 316,266 |
Deferred revenue, less current portion | 23,802 | 28,182 |
Deferred income taxes | 10,997 | 20,106 |
Deferred compensation plan liabilities, less current portion | 30,904 | 30,707 |
Other liabilities | 19,118 | 9,633 |
Total liabilities | 364,172 | 404,894 |
Shareholders’ equity: | ||
Common stock, no par value; 100,000 shares authorized; 65,243 and 65,137 shares issued and outstanding at March 31, 2018 and September 30, 2017, at stated amount, respectively | 487,385 | 475,592 |
Accumulated other comprehensive loss | (24,435) | (27,619) |
Retained earnings | 599,630 | 492,112 |
Total MAXIMUS shareholders’ equity | 1,062,580 | 940,085 |
Noncontrolling interests | 3,748 | 5,683 |
Total equity | 1,066,328 | 945,768 |
Total liabilities and equity | $ 1,430,500 | $ 1,350,662 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2018 | Sep. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable, current | $ 4,356 | $ 6,843 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares outstanding | 65,243,000 | 65,137,000 |
Common stock, shares issued | 65,243,000 | 65,137,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operations: | ||
Net income | $ 115,058 | $ 99,426 |
Adjustments to reconcile net income to cash flows from operations: | ||
Depreciation and amortization of property and equipment and capitalized software | 27,074 | 29,967 |
Amortization of intangible assets | 5,321 | 6,788 |
Deferred income taxes | (9,179) | (5,721) |
Stock compensation expense | 11,324 | 10,234 |
Change in assets and liabilities: | ||
Accounts receivable — billed and billable | (18,522) | 10,030 |
Accounts receivable — unbilled | (4,730) | (3,445) |
Prepaid expenses and other current assets | 8,526 | 7,512 |
Deferred contract costs | 1,794 | 998 |
Accounts payable and accrued liabilities | (3,171) | (17,719) |
Accrued compensation and benefits | (15,391) | (6,293) |
Deferred revenue | (23,789) | (15,853) |
Income taxes | 18,634 | 20,715 |
Other assets and liabilities | 3,620 | 209 |
Cash flows from operations | 116,569 | 136,848 |
Cash flows from investing activities: | ||
Purchases of property and equipment and capitalized software costs | (13,175) | (12,975) |
Acquisition of part of noncontrolling interest | 157 | 0 |
Proceeds from the sale of a business | 0 | 385 |
Other | 183 | 218 |
Cash used in investing activities | (13,149) | (12,372) |
Cash flows from financing activities: | ||
Cash dividends paid to MAXIMUS shareholders | (5,865) | (5,837) |
Repurchases of common stock | (1,038) | (28,858) |
Tax withholding related to RSU vesting | (8,529) | (9,267) |
Borrowings under credit facility | 124,683 | 135,000 |
Repayment of credit facility and other long-term debt | (124,752) | (184,828) |
Other | (2,130) | (1,145) |
Cash used in financing activities | (17,631) | (94,935) |
Effect of exchange rate changes on cash and cash equivalents | 1,186 | (878) |
Net increase in cash and cash equivalents | 86,975 | 28,663 |
Cash and cash equivalents, beginning of period | 166,252 | 66,199 |
Cash and cash equivalents, end of period | $ 253,227 | $ 94,862 |
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 | 99,426 | 99,179 | 247 | ||
Foreign currency translation | (4,071) | (4,071) | |||
Interest rate hedge, net of income taxes | 5 | 5 | |||
Cash dividends | (6,454) | (5,837) | (617) | ||
Dividends on RSUs | $ 174 | (174) | |||
Repurchases of common stock (in shares) | (558) | ||||
Repurchases of common stock | (28,858) | (28,858) | |||
Stock compensation expense | 10,234 | $ 10,234 | |||
Tax withholding related to RSU vesting | (12) | $ (12) | |||
RSUs vested (in shares) | 157 | ||||
RSUs vested | 0 | $ 0 | |||
Balance (in shares) at Mar. 31, 2017 | 64,822 | ||||
Balance at Mar. 31, 2017 | $ 823,410 | $ 472,075 | (40,235) | 387,881 | 3,689 |
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 | 115,058 | 114,583 | 475 | ||
Foreign currency translation | 3,184 | 3,184 | |||
Interest rate hedge, net of income taxes | 0 | ||||
Cash dividends | (7,994) | (5,865) | (2,129) | ||
Dividends on RSUs | $ 162 | (162) | |||
Repurchases of common stock (in shares) | (17) | ||||
Repurchases of common stock | (1,038) | (1,038) | |||
Stock compensation expense | 11,324 | $ 11,324 | |||
Tax withholding related to RSU vesting | 183 | $ 183 | |||
RSUs vested (in shares) | 123 | ||||
RSUs vested | 0 | $ 0 | |||
Acquisition of part of noncontrolling interest | $ (157) | $ 124 | (281) | ||
Balance (in shares) at Mar. 31, 2018 | 65,243 | 65,243 | |||
Balance at Mar. 31, 2018 | $ 1,066,328 | $ 487,385 | $ (24,435) | $ 599,630 | $ 3,748 |
Organization and Basis of Prese
Organization and Basis of Presentation | 6 Months Ended |
Mar. 31, 2018 | |
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 and six months ended March 31, 2018 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 | 6 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information The table below provides certain financial information for each of our business segments. Three Months Ended March 31, Six Months Ended March 31, (dollars in thousands) 2018 % (1) 2017 % (1) 2018 % (1) 2017 % (1) Revenue: Health Services $ 365,633 100 % $ 348,994 100 % $ 717,723 100 % $ 689,723 100 % U.S. Federal Services 116,327 100 % 145,370 100 % 249,310 100 % 286,668 100 % Human Services 130,827 100 % 127,683 100 % 268,902 100 % 253,220 100 % Total $ 612,787 100 % $ 622,047 100 % $ 1,235,935 100 % $ 1,229,611 100 % Gross profit: Health Services $ 98,207 26.9 % $ 86,454 24.8 % $ 189,263 26.4 % $ 164,688 23.9 % U.S. Federal Services 27,374 23.5 % 36,571 25.2 % 60,732 24.4 % 74,147 25.9 % Human Services 23,222 17.8 % 29,292 22.9 % 50,768 18.9 % 58,300 23.0 % Total $ 148,803 24.3 % $ 152,317 24.5 % $ 300,763 24.3 % $ 297,135 24.2 % Selling, general and administrative expense: Health Services $ 35,190 9.6 % $ 29,914 8.6 % $ 68,606 9.6 % $ 58,021 8.4 % U.S. Federal Services 17,540 15.1 % 18,927 13.0 % 34,188 13.7 % 38,622 13.5 % Human Services 19,829 15.2 % 19,663 15.4 % 39,324 14.6 % 36,902 14.6 % Other (2) — NM 92 NM — NM 449 NM Total $ 72,559 11.8 % $ 68,596 11.0 % $ 142,118 11.5 % $ 133,994 10.9 % Operating income: Health Services $ 63,017 17.2 % $ 56,540 16.2 % $ 120,657 16.8 % $ 106,667 15.5 % U.S. Federal Services 9,834 8.5 % 17,644 12.1 % 26,544 10.6 % 35,525 12.4 % Human Services 3,393 2.6 % 9,629 7.5 % 11,444 4.3 % 21,398 8.5 % Amortization of intangible assets (2,603 ) NM (3,386 ) NM (5,321 ) NM (6,788 ) NM Restructuring costs (3) (2,320 ) NM — NM (2,320 ) NM (2,242 ) NM Other (2) — NM (92 ) NM — NM (449 ) NM Total $ 71,321 11.6 % $ 80,335 12.9 % $ 151,004 12.2 % $ 154,111 12.5 % (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 six months ended March 31, 2017 we incurred $0.4 million of legal costs pertaining to a matter which occurred in fiscal year 2009. (3) During fiscal years 2018 and 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 | 6 Months Ended |
Mar. 31, 2018 | |
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 March 31, Six Months Ended March 31, (shares in thousands) 2018 2017 2018 2017 Basic weighted average shares outstanding 65,856 65,549 65,857 65,669 Dilutive effect of employee stock options and unvested RSUs 412 398 366 320 Denominator for diluted earnings per share 66,268 65,947 66,223 65,989 All of our unvested restricted stock units (RSUs) are included in the calculations of dilution above. |
Income Tax
Income Tax | 6 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Tax | Income Tax Our results for the three and six months ended March 31, 2018 benefited from the estimated effects of the Tax Cuts and Jobs Act (the Act), which was signed on December 22, 2017 and was effective from January 1, 2018. Our results for the six months ended March 31, 2018 were affected by: • A one-time "toll tax" on our undistributed and previously untaxed earnings in foreign locations, of approximately $9.5 million , recorded in the three months ended December 31, 2017; • A one-time benefit from the reduction of our deferred tax liabilities of $11.7 million , of which $1.1 million was recorded in the three months ended March 31, 2018, to reflect the new U.S. federal tax rates; and • A reduced provision for income taxes to reflect the new lower U.S. corporate tax rates of approximately $12.8 million for the six months ended March 31, 2018, split evenly between both quarters, compared to our tax provision under previous law. 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 and six months ended March 31, 2018 was 24.1% and 24.5% , respectively, compared to our effective income tax rate for the three and six months ended March 31, 2017 of 33.6% and 35.1% , respectively. The net effect of our toll charge and reduction of deferred tax liabilities reduced the effective income tax rate by approximately 1.5% and 1.4% for the three and six months ended March 31, 2018, respectively. During the six months ended March 31, 2018 and 2017 , we made income tax payments of $28.5 million and $38.8 million , respectively. |
Supplemental disclosures
Supplemental disclosures | 6 Months Ended |
Mar. 31, 2018 | |
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 six months ended March 31, 2018 , we repurchased approximately 17,000 common shares at a cost of $1.0 million . During the six months ended March 31, 2017 , we acquired 0.6 million common shares at a cost of $28.9 million . At March 31, 2018 , $108.8 million remained available for future stock repurchases. Our deferred compensation plan assets inclu de $16.3 million i nvested 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 six months ended March 31, 2018 , we granted 0.3 million RSUs to our employees. These awards will vest ratably over five years. During the three months ended March 31, 2018 , we granted approximately 22,000 RSU's to members of our Board of Directors. These awards vest over one year. 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 six months ended March 31, 2017 , we undertook a restructuring of our United Kingdom Human Services operations as part of the ongoing integration of Remploy. During the six months ended March 31, 2017 , we recorded restructuring costs of $2.2 million , principally severance expenses. During the three and six months ended March 31, 2018 , we recorded additional restructuring costs of $2.3 million . 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 $1.3 million and $2.5 million during the three and six months ended March 31, 2018 , respectively. This change in methodology did not affect our operating income. Securities Class Action Lawsuit On August 4, 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 seeks damages to be proved at trial. We 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 and we are unable to estimate the potential loss or range of loss. |
Debt
Debt | 6 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 , we had no borrowings under the credit agreement. At March 31, 2018 , we held three letters of credit under our credit agreement totaling $2.7 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, two letters of credit totaling $3.0 million , secured with restricted cash balances, are 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 March 31, 2018 . 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 March 31, 2018 , 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 six months ended March 31, 2018 and 2017 , we made interest payments of less than $0.1 million and $1.6 million , respectively. |
Recent accounting pronouncement
Recent accounting pronouncements | 6 Months Ended |
Mar. 31, 2018 | |
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 at the beginning of 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 requires that assets and liabilities arising under leases be recognized on the balance sheet. The standard also requires additional quantitative and qualitative disclosures that provide the amount, timing and uncertainty of cash flows relating to lease arrangements. This standard is effective for annual reporting periods beginning after December 15, 2018, using a modified retrospective approach. The modified retrospective approach requires retrospective application to the earliest period presented in the respective financial statements. This approach also provides practical expedients related to leases that commenced prior to the effective date and allows the use of hindsight when evaluating lease options. We will adopt this standard at the beginning of our 2020 fiscal year. We are currently 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. The impact of the new standard will depend on the outcomes of future goodwill impairment tests. 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 | 6 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent events On April 6, 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 May 31, 2018 to shareholders of record on May 15, 2018 . |
Organization and Basis of Pre17
Organization and Basis of Presentation (Policies) | 6 Months Ended |
Mar. 31, 2018 | |
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 and six months ended March 31, 2018 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 at the beginning of 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 requires that assets and liabilities arising under leases be recognized on the balance sheet. The standard also requires additional quantitative and qualitative disclosures that provide the amount, timing and uncertainty of cash flows relating to lease arrangements. This standard is effective for annual reporting periods beginning after December 15, 2018, using a modified retrospective approach. The modified retrospective approach requires retrospective application to the earliest period presented in the respective financial statements. This approach also provides practical expedients related to leases that commenced prior to the effective date and allows the use of hindsight when evaluating lease options. We will adopt this standard at the beginning of our 2020 fiscal year. We are currently 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. The impact of the new standard will depend on the outcomes of future goodwill impairment tests. 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) | 6 Months Ended |
Mar. 31, 2018 | |
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 March 31, Six Months Ended March 31, (dollars in thousands) 2018 % (1) 2017 % (1) 2018 % (1) 2017 % (1) Revenue: Health Services $ 365,633 100 % $ 348,994 100 % $ 717,723 100 % $ 689,723 100 % U.S. Federal Services 116,327 100 % 145,370 100 % 249,310 100 % 286,668 100 % Human Services 130,827 100 % 127,683 100 % 268,902 100 % 253,220 100 % Total $ 612,787 100 % $ 622,047 100 % $ 1,235,935 100 % $ 1,229,611 100 % Gross profit: Health Services $ 98,207 26.9 % $ 86,454 24.8 % $ 189,263 26.4 % $ 164,688 23.9 % U.S. Federal Services 27,374 23.5 % 36,571 25.2 % 60,732 24.4 % 74,147 25.9 % Human Services 23,222 17.8 % 29,292 22.9 % 50,768 18.9 % 58,300 23.0 % Total $ 148,803 24.3 % $ 152,317 24.5 % $ 300,763 24.3 % $ 297,135 24.2 % Selling, general and administrative expense: Health Services $ 35,190 9.6 % $ 29,914 8.6 % $ 68,606 9.6 % $ 58,021 8.4 % U.S. Federal Services 17,540 15.1 % 18,927 13.0 % 34,188 13.7 % 38,622 13.5 % Human Services 19,829 15.2 % 19,663 15.4 % 39,324 14.6 % 36,902 14.6 % Other (2) — NM 92 NM — NM 449 NM Total $ 72,559 11.8 % $ 68,596 11.0 % $ 142,118 11.5 % $ 133,994 10.9 % Operating income: Health Services $ 63,017 17.2 % $ 56,540 16.2 % $ 120,657 16.8 % $ 106,667 15.5 % U.S. Federal Services 9,834 8.5 % 17,644 12.1 % 26,544 10.6 % 35,525 12.4 % Human Services 3,393 2.6 % 9,629 7.5 % 11,444 4.3 % 21,398 8.5 % Amortization of intangible assets (2,603 ) NM (3,386 ) NM (5,321 ) NM (6,788 ) NM Restructuring costs (3) (2,320 ) NM — NM (2,320 ) NM (2,242 ) NM Other (2) — NM (92 ) NM — NM (449 ) NM Total $ 71,321 11.6 % $ 80,335 12.9 % $ 151,004 12.2 % $ 154,111 12.5 % (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 six months ended March 31, 2017 we incurred $0.4 million of legal costs pertaining to a matter which occurred in fiscal year 2009. (3) During fiscal years 2018 and 2017, we incurred costs in restructuring our United Kingdom Human Services business. See "Note 5. Supplemental disclosures" for more information. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of the components of basic and diluted earnings per share | The weighted average number of shares outstanding used to compute earnings per share was as follows: Three Months Ended March 31, Six Months Ended March 31, (shares in thousands) 2018 2017 2018 2017 Basic weighted average shares outstanding 65,856 65,549 65,857 65,669 Dilutive effect of employee stock options and unvested RSUs 412 398 366 320 Denominator for diluted earnings per share 66,268 65,947 66,223 65,989 |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Revenue: | ||||
Revenue | $ 612,787 | $ 622,047 | $ 1,235,935 | $ 1,229,611 |
Revenue (as a percent) | 100.00% | 100.00% | 100.00% | 100.00% |
Gross profit: | ||||
Gross profit | $ 148,803 | $ 152,317 | $ 300,763 | $ 297,135 |
Gross profit (as a percent) | 24.30% | 24.50% | 24.30% | 24.20% |
Selling, general and administrative expense: | ||||
Selling, general and administrative expenses | $ 72,559 | $ 68,596 | $ 142,118 | $ 133,994 |
Selling, general, and administrative expense (as a percent) | 11.80% | 11.00% | 11.50% | 10.90% |
Operating income: | ||||
Operating income | $ 71,321 | $ 80,335 | $ 151,004 | $ 154,111 |
Operating income (as a percent) | 11.60% | 12.90% | 12.20% | 12.50% |
Amortization of intangible assets | $ (2,603) | $ (3,386) | $ (5,321) | $ (6,788) |
Restructuring cost | 0 | (2,320) | (2,242) | |
Segment Reconciling Items | ||||
Operating income: | ||||
Amortization of intangible assets | (2,603) | (3,386) | (5,321) | (6,788) |
Restructuring cost | (2,320) | 0 | (2,320) | (2,242) |
Other | ||||
Selling, general and administrative expense: | ||||
Selling, general and administrative expenses | 0 | 92 | 0 | 449 |
Operating income: | ||||
Operating income | 0 | (92) | 0 | (449) |
Legal costs | 400 | |||
Health Services | Operating Segments | ||||
Revenue: | ||||
Revenue | $ 365,633 | $ 348,994 | $ 717,723 | $ 689,723 |
Revenue (as a percent) | 100.00% | 100.00% | 100.00% | 100.00% |
Gross profit: | ||||
Gross profit | $ 98,207 | $ 86,454 | $ 189,263 | $ 164,688 |
Gross profit (as a percent) | 26.90% | 24.80% | 26.40% | 23.90% |
Selling, general and administrative expense: | ||||
Selling, general and administrative expenses | $ 35,190 | $ 29,914 | $ 68,606 | $ 58,021 |
Selling, general, and administrative expense (as a percent) | 9.60% | 8.60% | 9.60% | 8.40% |
Operating income: | ||||
Operating income | $ 63,017 | $ 56,540 | $ 120,657 | $ 106,667 |
Operating income (as a percent) | 17.20% | 16.20% | 16.80% | 15.50% |
U.S. Federal Services | Operating Segments | ||||
Revenue: | ||||
Revenue | $ 116,327 | $ 145,370 | $ 249,310 | $ 286,668 |
Revenue (as a percent) | 100.00% | 100.00% | 100.00% | 100.00% |
Gross profit: | ||||
Gross profit | $ 27,374 | $ 36,571 | $ 60,732 | $ 74,147 |
Gross profit (as a percent) | 23.50% | 25.20% | 24.40% | 25.90% |
Selling, general and administrative expense: | ||||
Selling, general and administrative expenses | $ 17,540 | $ 18,927 | $ 34,188 | $ 38,622 |
Selling, general, and administrative expense (as a percent) | 15.10% | 13.00% | 13.70% | 13.50% |
Operating income: | ||||
Operating income | $ 9,834 | $ 17,644 | $ 26,544 | $ 35,525 |
Operating income (as a percent) | 8.50% | 12.10% | 10.60% | 12.40% |
Human Services | Operating Segments | ||||
Revenue: | ||||
Revenue | $ 130,827 | $ 127,683 | $ 268,902 | $ 253,220 |
Revenue (as a percent) | 100.00% | 100.00% | 100.00% | 100.00% |
Gross profit: | ||||
Gross profit | $ 23,222 | $ 29,292 | $ 50,768 | $ 58,300 |
Gross profit (as a percent) | 17.80% | 22.90% | 18.90% | 23.00% |
Selling, general and administrative expense: | ||||
Selling, general and administrative expenses | $ 19,829 | $ 19,663 | $ 39,324 | $ 36,902 |
Selling, general, and administrative expense (as a percent) | 15.20% | 15.40% | 14.60% | 14.60% |
Operating income: | ||||
Operating income | $ 3,393 | $ 9,629 | $ 11,444 | $ 21,398 |
Operating income (as a percent) | 2.60% | 7.50% | 4.30% | 8.50% |
Earnings Per Share (Details)
Earnings Per Share (Details) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Earnings Per Share [Abstract] | ||||
Basic weighted average shares outstanding | 65,856 | 65,549 | 65,857 | 65,669 |
Dilutive effect of employee stock options and unvested RSUs | 412 | 398 | 366 | 320 |
Denominator for diluted earnings per share | 66,268 | 65,947 | 66,223 | 65,989 |
Income Tax (Details)
Income Tax (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |||||
Tax cuts and jobs act of 2017, transition tax for accumulated foreign earnings income tax expense (benefit) | $ 9.5 | $ 9.5 | |||
Tax Cuts And Jobs Act Of 2017, incomplete accounting, change in tax rate, deferred tax liability, provisional income tax (expense) benefit | $ 1.1 | 11.7 | |||
Tax cuts and jobs act of 2017, income tax expense (benefit) | $ 6.4 | $ 6.4 | $ 12.8 | ||
Effective income tax rate, percent | 24.10% | 33.60% | 24.50% | 35.10% | |
Tax cuts and jobs act of 2017, income (decrease) in the effective income tax rate | 1.50% | 1.40% | |||
Income taxes paid | $ 28.5 | $ 38.8 |
Supplemental disclosures (Detai
Supplemental disclosures (Details) - USD ($) shares in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Aug. 31, 2015 | |
Payments for Repurchase of Equity [Abstract] | |||||
Repurchases of common stock | $ 1,038,000 | $ 28,858,000 | |||
Restructuring Charges [Abstract] | |||||
Restructuring charges | $ 2,320,000 | ||||
Selling, general and administrative expense: | |||||
Change in selling, general and administrative expenses | 72,559,000 | $ 68,596,000 | $ 142,118,000 | $ 133,994,000 | |
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 | 558 | |||
United Kingdom | |||||
Restructuring Charges [Abstract] | |||||
Restructuring charges | 2,300,000 | $ 2,300,000 | $ 2,200,000 | ||
Mutual Fund | |||||
Retirement Benefits [Abstract] | |||||
Investments in mutual funds | 16,300,000 | 16,300,000 | |||
Estimated Revision Had Accounting Principle Been Adopted Previous Fiscal Year [Member] | |||||
Selling, general and administrative expense: | |||||
Change in selling, general and administrative expenses | (1,300,000) | (2,500,000) | |||
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 | $ 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 | $ 28,900,000 | |||
Board of Directors | Restricted Stock Units (RSUs) | |||||
Employee Benefits and Share-based Compensation, Noncash [Abstract] | |||||
Granted (in shares) | 22 | ||||
Vesting period | 1 year |
Debt (Details)
Debt (Details) | 6 Months Ended | |
Mar. 31, 2018USD ($)letter_of_credit | Mar. 31, 2017USD ($) | |
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 | $ 1,600,000 |
Letters of Credit | ||
Debt Instrument [Line Items] | ||
Number of letters of credit issued | letter_of_credit | 3 | |
Outstanding borrowings | $ 2,700,000 | |
Letters of Credit (Other than Revolving Credit Agreement) | ||
Debt Instrument [Line Items] | ||
Number of letters of credit issued | letter_of_credit | 2 | |
Outstanding borrowings | $ 3,000,000 | |
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 - $ / shares | May 31, 2018 | May 15, 2018 | Apr. 06, 2018 |
Subsequent Event [Line Items] | |||
Dividend declared date | Apr. 6, 2018 | ||
Cash dividend declared (in dollars per share) | $ 0.045 | ||
Dividends payable date | May 31, 2018 | ||
Dividends payable date of record | May 15, 2018 |