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What changed in Booz Allen Hamilton Holding Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Booz Allen Hamilton Holding Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+402 added−417 removedSource: 10-K (2023-05-26) vs 10-K (2022-05-20)

Top changes in Booz Allen Hamilton Holding Corp's 2023 10-K

402 paragraphs added · 417 removed · 317 edited across 2 sections

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+29 added−25 removed100 unchanged
Biggest changeFiscal Year Ended March 31, (Amounts in thousands, except share and per share data) 2022 2021 2020 (Unaudited) Revenue, Excluding Billable Expenses Revenue $ 8,363,700 $ 7,858,938 $ 7,463,841 Less: Billable expenses 2,474,163 2,325,888 2,298,413 Revenue, Excluding Billable Expenses $ 5,889,537 $ 5,533,050 $ 5,165,428 Adjusted Operating Income Operating Income $ 685,181 $ 754,371 $ 669,202 Acquisition and divestiture costs (a) 97,485 411 — Financing transaction costs (b) 2,348 — 1,069 COVID-19 supplemental employee benefits (c) — 577 2,722 Significant acquisition amortization (d) 38,295 — — Restructuring costs (e) 4,164 — — Adjusted Operating Income $ 827,473 $ 755,359 $ 672,993 EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue & Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses Net income $ 466,577 $ 608,958 $ 482,603 Income tax expense 137,466 53,481 96,831 Interest and other, net (f) 81,138 91,932 89,768 Depreciation and amortization 145,747 84,315 81,081 EBITDA 830,928 838,686 750,283 Acquisition and divestiture costs (a) 97,485 411 — Financing transaction costs (b) 2,348 — 1,069 COVID-19 supplemental employee benefits (c) — 577 2,722 Restructuring costs (e) 4,164 — — Adjusted EBITDA $ 934,925 $ 839,674 $ 754,074 Adjusted EBITDA Margin on Revenue 11.2% 10.7 % 10.1 % Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses 15.9% 15.2 % 14.6 % Adjusted Net Income Net income $ 466,577 $ 608,958 $ 482,603 Acquisition and divestiture costs (a) 97,485 411 — Financing transaction costs (b) 2,348 — 1,069 COVID-19 supplemental employee benefits (c) — 577 2,722 Significant acquisition amortization (d) 38,295 — — Restructuring costs (e) 4,164 — — Gain associated with equity method investment activities (g) (12,761) — — Research and development tax credits (h) — (2,928) (38,395) Release of income tax reserves (i) — (29) (68) Loss on debt extinguishment (j) — 13,239 — Remeasurement of deferred tax assets/liabilities (k) — (76,767) — Amortization or write-off of debt issuance costs and debt discount 3,340 2,402 2,395 49 Adjustments for tax effect (l) (31,399) (4,324) (1,608) Adjusted Net Income $ 568,049 $ 541,539 $ 448,718 Adjusted Diluted Earnings Per Share Weighted-average number of diluted shares outstanding 134,850,808 138,703,220 141,238,135 Adjusted Net Income Per Diluted Share (m) $ 4.21 $ 3.90 $ 3.18 Free Cash Flow Net cash provided by operating activities $ 736,526 $ 718,684 $ 551,428 Less: Purchases of property, equipment and software (79,964) (87,210) (128,079) Free Cash Flow $ 656,562 $ 631,474 $ 423,349 (a) Represents costs associated with the acquisition and divestiture efforts of the Company related to transactions for which the Company has entered into a letter of intent to either acquire a controlling financial interest in the target entity or divest a portion of our business.
Biggest changeBelow is a reconciliation of Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow to the most directly comparable financial measure calculated and presented in accordance with GAAP. 52 Table of Contents Fiscal Year Ended March 31, (Amounts in thousands, except share and per share data) 2023 2022 2021 (Unaudited) Revenue, Excluding Billable Expenses Revenue $9,258,911 $8,363,700 $7,858,938 Less: Billable expenses 2,808,857 2,474,163 2,325,888 Revenue, Excluding Billable Expenses $6,450,054 $5,889,537 $5,533,050 Adjusted Operating Income Operating Income $446,848 $685,181 $754,371 Acquisition and divestiture costs (a) 44,269 97,485 411 Financing transaction costs (b) 6,888 2,348 — COVID-19 supplemental employee benefits (c) — — 577 Significant acquisition amortization (d) 51,553 38,295 — Legal matter reserve (e) 350,000 — — Restructuring costs (f) — 4,164 — Adjusted Operating Income $899,558 $827,473 $755,359 EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue & Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses Net income attributable to common stockholders $271,791 $466,740 $608,958 Income tax expense 96,734 137,466 53,481 Interest and other, net (g) 78,899 81,138 91,932 Depreciation and amortization 165,484 145,747 84,315 EBITDA 612,908 831,091 838,686 Acquisition and divestiture costs (a) 44,269 97,485 411 Financing transaction costs (b) 6,888 2,348 — Legal matter reserve (e) 350,000 — — COVID-19 supplemental employee benefits (c) — — 577 Restructuring costs (f) — 4,164 — Adjusted EBITDA $1,014,065 $935,088 $839,674 Net income margin attributable to common stockholders 2.9% 5.6% 7.7% Adjusted EBITDA Margin on Revenue 11.0% 11.2% 10.7% Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses 15.7% 15.9% 15.2% 53 Table of Contents Fiscal Year Ended March 31, (Amounts in thousands, except share and per share data) 2023 2022 2021 (Unaudited) Adjusted Net Income Net income attributable to common stockholders $271,791 $466,740 $608,958 Acquisition and divestiture costs (a) 44,269 97,485 411 Financing transaction costs (b) 6,888 2,348 — COVID-19 supplemental employee benefits (c) — — 577 Significant acquisition amortization (d) 51,553 38,295 — Legal matter reserve (e) 350,000 — — Restructuring costs (f) — 4,164 — Gains associated with equity method investment activity (h) — (12,761) — Gains associated with divestitures or deconsolidation (i) (44,632) — — Research and development tax credits (j) — — (2,928) Release of income tax reserves (k) — — (29) Loss on debt extinguishment (l) — — 13,239 Remeasurement of deferred tax assets/liabilities (m) — — (76,767) Amortization or write-off of debt issuance costs and debt discount 6,554 3,340 2,402 Adjustments for tax effect (n) (81,389) (31,399) (4,324) Adjusted Net Income $605,034 $568,212 $541,539 Adjusted Diluted Earnings Per Share Weighted-average number of diluted shares outstanding 132,716,436 134,850,808 138,703,220 Diluted earnings per share $2.03 $3.44 $4.37 Adjusted Net Income Per Diluted Share (o) $4.56 $4.21 $3.90 Free Cash Flow Net cash provided by operating activities 602,822 736,526 718,684 Less: Purchases of property, equipment and software (76,130) (79,964) (87,210) Free Cash Flow $526,692 $656,562 $631,474 Operating cash flow conversion 222% 158% 118% Free cash flow conversion 87% 116% 117% (a) Represents costs associated with the acquisition efforts of the Company related to transactions for which the Company has entered into a letter of intent to acquire a controlling financial interest in the target entity, as well as the divestiture costs incurred in divesting a portion of our business.
We anticipate that cash provided by operating activities, existing cash and cash equivalents, and borrowing capacity under our Revolving Credit Facility will be sufficient to meet our anticipated cash requirements for the next twelve months, which primarily include: • operating expenses, including salaries; • working capital requirements to fund both organic and inorganic growth of our business; • capital expenditures which primarily relate to the purchase of computer s, business systems, furniture and leasehold improvements to support our operations; • the on-going maintenance around all financial management systems; • commitments and other discretionary investments; • debt service requirements for borrowings under our Secured Credit Facility and interest payments for the Senior Notes; and • cash taxes to be paid.
We anticipate that cash provided by operating activities, existing cash and cash equivalents, and borrowing capacity under our Revolving Credit Facility will be sufficient to meet our anticipated cash requirements for the next twelve months, which primarily include: • operating expenses, including salaries; • working capital requirements to fund both organic and inorganic growth of our business; • capital expenditures which primarily relate to the purchase of computer s, business systems, furniture and leasehold improvements to support our operations; • the on-going maintenance around all financial management systems; • commitments and other discretionary investments; • debt service requirements for borrowings under our Senior Credit Facility and interest payments for the Senior Notes; and • cash taxes to be paid.
Remaining performance obligations do not include negotiated but unexercised options or the unfunded value of expired contracts. 57 Business Combinations The accounting for the Company's business combinations consists of allocating the purchase price to tangible and intangible assets acquired and liabilities assumed based on their fair values, with the excess recorded as goodwill.
Remaining performance obligations do not include negotiated but unexercised options or the unfunded value of expired contracts. Business Combinations The accounting for the Company's business combinations consists of allocating the purchase price to tangible and intangible assets acquired and liabilities assumed based on their fair values, with the excess recorded as goodwill.
A portion of the net proceeds from the sale of the Senior Notes was used to redeem in full $350 million aggregate principal amount of the outstanding 2017 Senior Notes at a redemption price of 102.56% of the principal amount thereof, plus accrued and unpaid interest thereon to (but excluding) the redemption date, and to pay all fees 64 and expenses related to the foregoing.
A portion of the net proceeds from the sale of the Senior Notes was used to redeem in full $350 million aggregate principal amount of the outstanding 2017 Senior Notes at a redemption price of 102.56% of the principal amount thereof, plus accrued and unpaid interest thereon to (but excluding) the redemption date, and to pay all fees and expenses related to the foregoing.
Risk Factors", we can give no assurance that we will be able to convert our backlog into revenue in any particular period, if at all. Operating Costs and Expenses Costs associated with compensation and related expenses for our people are the most significant component of our operating costs and expenses.
Risk Factors,” we can give no assurance that we will be able to convert our backlog into revenue in any particular period, if at all. Operating Costs and Expenses Costs associated with compensation and related expenses for our people are the most significant component of our operating costs and expenses.
In addition, we also have historically experienced higher bid and proposal costs in the months leading up to the U.S. government's fiscal year end as we pursue new contract opportunities being awarded shortly after the U.S. government fiscal year end as new opportunities are expected to have funding appropriated in the 55 U.S. government's subsequent fiscal year.
In addition, we also have historically experienced higher bid and proposal costs in the months leading up to the U.S. government's fiscal year end as we pursue new contract opportunities being awarded shortly after the U.S. government fiscal year end as new opportunities are expected to have funding appropriated in the U.S. government's subsequent fiscal year.
This increase w as primarily attributable to an increase in the use of subcontractors driven by 59 client demand and timing of client needs as well as increases in expenses from contracts that require the Company to incur other direct expenses and travel on behalf of clients as compared to the prior year.
This increase w as primarily attributable to an increase in the use of subcontractors driven by client demand and timing of client needs as well as increases in expenses from contracts that require the Company to incur other direct expenses and travel on behalf of clients as compared to the prior year.
Cost-plus-award-fee contracts also provide for an award fee that varies within specified limits based upon the client’s 52 assessment of our performance against a predetermined set of criteria, such as targets for factors like cost, quality, schedule, and performance. • Time-and-Materials Contracts.
Cost-plus-award-fee contracts also provide for an award fee that varies within specified limits based upon the client’s assessment of our performance against a predetermined set of criteria, such as targets for factors like cost, quality, schedule, and performance. • Time-and-Materials Contracts.
We may perform work under a contract that has not been fully funded if the work has been authorized by the management and the 56 customer to proceed. We evaluate unfunded amounts as variable consideration in estimating the transaction price.
We may perform work under a contract that has not been fully funded if the work has been authorized by the management and the customer to proceed. We evaluate unfunded amounts as variable consideration in estimating the transaction price.
The events of default include the following, in each case subject to certain exceptions: (a) failure to make required payments under the Secured Credit Facility; (b) material breaches of representations or warranties under the Secured Credit Facility; (c) failure to observe covenants or agreements under the Secured Credit Facility; (d) failure to pay or default under certain other material indebtedness; (e) bankruptcy or insolvency; (f) certain Employee Retirement Income Security Act, or ERISA, events; (g) certain material judgments; (h) actual or asserted invalidity of the Guarantee and Collateral Agreements or the other security documents or failure of the guarantees or perfected liens thereunder; and (i) a change of control.
The events of default include the following, in each case subject to certain exceptions: (a) failure to make required payments under the Senior Credit Facility; (b) material breaches of representations or warranties under the Senior Credit Facility; (c) failure to observe covenants or agreements under the Senior Credit Facility; (d) failure to pay or default under certain other material indebtedness; (e) bankruptcy or insolvency; (f) certain Employee Retirement Income Security Act, or ERISA, events; (g) certain material judgments; (h) actual or asserted invalidity of the Guarantee and Collateral Agreements or the other security documents or failure of the guarantees or perfected liens thereunder; and (i) a change of control.
(k) Reflects the income tax benefit associated with tax losses generated during fiscal 2021 as a result of a change in certain tax methods of accounting. The Company intends to carry these losses back to fiscal 2016 and subsequent periods under the Coronavirus Aid Relief and Economic Security Act and has re-measured the fiscal 2021 loss accordingly.
(m) Reflects the income tax benefit associated with tax losses generated during fiscal 2021 as a result of a change in certain tax methods of accounting. The Company intends to carry these losses back to fiscal 2016 and subsequent periods under the Coronavirus Aid Relief and Economic Security Act and has re-measured the fiscal 2021 loss accordingly.
We view net income excluding the impact of the re-measurement of the Company's deferred tax assets and liabilities as an important indicator of performance consistent with the manner in which management measures and forecasts the Company's performance and the way in which management is incentivized to perform. • "Adjusted Diluted EPS" represents diluted EPS calculated using Adjusted Net Income as opposed to net income.
We view net income excluding the impact of the re-measurement of the Company's deferred tax assets and liabilities as an important indicator of performance consistent with the manner in which management measures and forecasts the Company's performance and the way in which management is incentivized to perform. • “Adjusted Diluted EPS” represents diluted EPS calculated using Adjusted Net Income as opposed to net income.
The Company also incurred incremental legal costs during fiscal 2022 and 2021 in response to the U.S. Department of Justice investigation and matters which purport to relate to the investigation, a portion of which was offset by the receipt of insurance reimbursements. We expect to incur additional costs in the future.
The Company also incurred incremental legal costs during fiscal 2023 and 2022 in response to the U.S. Department of Justice investigation and matters which purport to relate to the investigation, a portion of which was offset by the receipt of insurance reimbursements. We expect to incur additional costs in the future.
An adverse change in any of these factors could have a significant impact on the recoverability of other intangible assets. During the fiscal years ended March 31, 2022, March 31, 2021, and March 31, 2020, the Company did not record any impairment of goodwill and intangible assets.
An adverse change in any of these factors could have a significant impact on the recoverability of other intangible assets. During the fiscal years ended March 31, 2023, March 31, 2022, and March 31, 2021, the Company did not record any impairment of goodwill and intangible assets.
The revenue value of orders included in contract backlog that has not been recognized as revenue due to period of performance expirations has not exceeded approximately 5.1% of total backlog as of March 31, 2022 and any of the four preceding fiscal quarters.
The revenue value of orders included in contract backlog that has not been recognized as revenue due to period of performance expirations has not exceeded approximately 5.1% of total backlog as of March 31, 2023 and any of the four preceding fiscal quarters.
The accompanying consolidated financial statements present the financial position of the Company as of March 31, 2022 and 2021 and the Company’s results of operations for fiscal 2022, fiscal 2021, and fiscal 2020. Certain amounts reported in the Company's prior year consolidated financial statements have been reclassified to conform to the current year presentation.
The accompanying consolidated financial statements present the financial position of the Company as of March 31, 2023 and 2022 and the Company’s results of operations for fiscal 2023, fiscal 2022, and fiscal 2021. Certain amounts reported in the Company's prior year consolidated financial statements have been reclassified to conform to the current year presentation.
However, in cases where we provide more than one distinct good or service within a customer contract, the contract is separated into individual performance obligations which are accounted for discretely. Contracts with the U.S. government are generally subject to the FAR and are priced based on estimated or actual costs of providing the goods or services.
However, in cases where we provide more than one distinct good or service within a customer contract, the contract is separated into individual performance obligations which are accounted for discretely. 61 Table of Contents Contracts with the U.S. government are generally subject to the FAR and are priced based on estimated or actual costs of providing the goods or services.
This could result in a commensurate reduction in the amount of services that we are contracted to provide to the Department of Defense and could have a material adverse effect on our business and results of operations, and given the uncertainty of when and how these automatic reductions required by the BCA may return and/or be applied, we are unable to predict the nature or magnitude of the potential adverse effect.
This could result in a commensurate reduction in the amount of services that we are contracted to provide to the Department of Defense and could hav e a material adverse effect on our business and results of operations, and given the uncertainty of when and how these automatic reductions required by the BCA may return and/or be applied, we are unable to predict the nature or magnitude of the potential adverse effect.
As of March 31, 2022, we had interest rate swaps with an aggregate notional amount of $700.0 million. These instruments hedge the variability of cash outflows for interest payments on the floating portion of our debt.
As of March 31, 2023, we had interest rate swaps with an aggregate notional amount of $700.0 million. These instruments hedge the variability of cash outflows for interest payments on the floating portion of our debt.
In particular, the Department of Defense is one of our significant clients, and the BCA originally required nine automatic spending cuts (referred to as “sequestration”) of $109 billion annually from 2013 to 2021, half of which was intended to come from defense programs, though less than $1 billion has been cut for defense programs per year under the BCA.
In particular, the Department of Defense is one of our significant clients, and the BCA originally required nine automatic spending cuts (referred to as “sequestration”) of $109 billion annually from 2013 to 2021, half of which was intended to com e from defense programs, though less than $1 billion has been cut for defense programs per year under the BCA.
The Company's objectives in using cash flow hedges are to reduce volatility due to interest rate movements and to add stability to interest expense (see Note 11 in our consolidated financial statements).
The Company's objectives in using cash flow hedges are to reduce volatility due to interest rate movements and to add stability to interest expense (see Note 11, “Derivatives,” in our consolidated financial statements).
We report internally on our backlog on a monthly basis and review backlog upon occurrence of certain events to determine if any adjustments are necessary. We cannot predict with any certainty the portion of our backlog that we expect to recognize as revenue in any future period and we cannot guarantee that we will recognize any revenue from our backlog.
We report internally on our backlog on a monthly basis and review backlog upon occurrence of certain events to determine if any adjustments are necessary. 59 Table of Contents We cannot predict with any certainty the portion of our backlog that we expect to recognize as revenue in any future period and we cannot guarantee that we will recognize any revenue from our backlog.
Borrowings under the Term Loans and, if used, the Revolving Credit Facility, incur interest at a variable rate. In accordance with our risk management strategy between April 6, 2017 and April 4, 2019, Booz Allen Hamilton executed a series of interest rate swaps.
Borrowings under the New Term Loan A and, if used, the Revolving Credit Facility, incur interest at a variable rate. In accordance with our risk management strategy between April 6, 2017 and April 4, 2019, Booz Allen Hamilton executed a series of interest rate swaps.
Factors and Trends Affecting Our Results of Operations Our results of operations have been, and we expect them to continue to be, affected by the following factors, which may cause our future results of operations to differ from our historical results of operations discussed under “—Results of Operations.” 50 Business Environment and Key Trends in Our Markets We believe that the following trends and developments in the U.S. government services industry and our markets may influence our future results of operations: • uncertainty around the timing, extent, nature and effect of Congressional and other U.S. government actions to approve funding of the U.S. government, address budgetary constraints, including caps on the discretionary budget for defense and non-defense departments and agencies, as established by the Bipartisan Budget Control Act of 2011 ("BCA") and subsequently adjusted by the American Taxpayer Relief Act of 2012, the Bipartisan Budget Act of 2013, the Bipartisan Budget Act of 2015, the Bipartisan Budget Act of 2018, and the Bipartisan Budget Act of 2019, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), and the Consolidated Appropriations Act of 2021, and address the ability of Congress to determine how to allocate the available budget authority and pass appropriations bills to fund both U.S. government departments and agencies that are, and those that are not, subject to the caps; • budget deficits and the growing U.S. national debt increasing pressure on the U.S. government to reduce federal spending across all federal agencies together with associated uncertainty about the size and timing of those reductions; • cost-cutting and efficiency initiatives, current and future budget restrictions, continued implementation of Congressionally mandated automatic spending cuts, and other efforts to reduce U.S. government spending could cause clients to reduce or delay funding for orders for services or invest appropriated funds on a less consistent or rapid basis or not at all, particularly when considering long-term initiatives and in light of current uncertainty around Congressional efforts to craft a long-term agreement on the U.S. government's ability to incur indebtedness in excess of its current limits, and generally in the current political environment, there is a risk that clients will not issue task orders in sufficient volume to reach current contract ceilings, alter historical patterns of contract awards, including the typical increase in the award of task orders or completion of other contract actions by the U.S. government in the period before the end of the U.S. government's fiscal year on September 30, delay requests for new proposals and contract awards, rely on short-term extensions and funding of current contracts, or reduce staffing levels and hours of operation; • delays in the completion of future U.S. government’s budget processes, which have in the past and could in the future delay procurement of the products, services, and solutions we provide; • changes in the relative mix of overall U.S. government spending and areas of spending growth, with lower spending on homeland security, intelligence, defense-related programs as certain overseas operations end, and continued increased spending on cybersecurity, Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR), advanced analytics, technology integration, and healthcare, including as a result of the presidential and administration transition; • the extent, nature and effect of COVID-19, including the impact on federal budgets, current and pending procurements, supply chains, demand for services, deployment and productivity of our employees and the economic and societal impact of a pandemic, and the expected continued volatility in billable expenses, as well as the impact of our Company policy requiring full COVID-19 vaccinations of all employees, except for employees who qualify for medical or religious exemptions; • increased inflationary pressure that could impact the cost of doing business and/or reduce customer buying power; • legislative and regulatory changes to limitations on the amount of allowable executive compensation permitted under flexibly priced contracts following implementation of interim rules adopted by federal agencies pursuant to the Bipartisan Budget Act of 2013, which substantially further reduce the amount of allowable executive compensation under these contracts and extend these limitations to a larger segment of our executives and our entire contract base; • efforts by the U.S. government to address organizational conflicts of interest and related issues and the impact of those efforts on us and our competitors; • increased audit, review, investigation, and general scrutiny by U.S. government agencies of government contractors' performance under U.S. government contracts and compliance with the terms of those contracts and applicable laws; • the federal focus on refining the definition of “inherently governmental” work, including proposals to limit contractor access to sensitive or classified information and work assignments, which will continue to drive pockets of insourcing in various agencies, particularly in the intelligence market; 51 • negative publicity and increased scrutiny of government contractors in general, including us, relating to U.S. government expenditures for contractor services and incidents involving the mishandling of sensitive or classified information; • U.S. government agencies awarding contracts on a technically acceptable/lowest cost basis, which could have a negative impact on our ability to win certain contracts; • increased competition from other government contractors and market entrants seeking to take advantage of certain of the trends identified above, and an industry trend towards consolidation, which may result in the emergence of companies that are better able to compete against us; • cost cutting and efficiency and effectiveness efforts by U.S. civilian agencies with a focus on increased use of performance measurement, “program integrity” efforts to reduce waste, fraud and abuse in entitlement programs, and renewed focus on improving procurement practices for and interagency use of IT services, including through the use of cloud based options and data center consolidation; • restrictions by the U.S. government on the ability of federal agencies to use lead system integrators, in response to cost, schedule, and performance problems with large defense acquisition programs where contractors were performing the lead system integrator role; • increasingly complex requirements and enforcement and reporting landscapes of the Department of Defense and the U.S. intelligence community, including cybersecurity, managing federal health care cost growth, competition, and focus on reforming existing government regulation of various sectors of the economy, such as financial regulation and healthcare; and • increasing small business regulations across the Department of Defense and civilian agency clients continue to gain traction, agencies are required to meet high small business set aside targets, and large business prime contractors are required to subcontract in accordance with considerable small business participation goals necessary for contract award.
Factors and Trends Affecting Our Results of Operations Our results of operations have been, and we expect them to continue to be, affected by the following factors, which may cause our future results of operations to differ from our historical results of operations discussed under “—Results of Operations.” Business Environment and Key Trends in Our Markets We believe that the following trends and developments in the U.S. government services industry and our markets may influence our future results of operations: • uncertainty around the timing, extent, nature and effect of Congressional and other U.S. government actions to approve funding of the U.S. government, address budgetary constraints, including caps on the discretionary budget for defense and non-defense departments and agencies, as established by the Bipartisan Budget Control Act of 2011 (“BCA”) and subsequently adjusted by the American Taxpayer Relief Act of 2012, the Bipartisan Budget Act of 2013, the Bipartisan Budget Act of 2015, the Bipartisan Budget Act of 2018, and the Bipartisan Budget Act of 2019, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and the Consolidated Appropriations Act of 2021, and address the ability of Congress to determine how to allocate the available budget authority and pass appropriations bills to fund both U.S. government departments and agencies that are, and those that are not, subject to the caps; • budget deficits and the growing U.S. national debt increasing pressure on the U.S. government to reduce federal spending across all federal agencies together with associated uncertainty about the size and timing of those reductions; 55 Table of Contents • cost-cutting and efficiency initiatives, current and future budget restrictions, continued implementation of Congressionally mandated automatic spending cuts, and other efforts to reduce U.S. government spending could cause clients to reduce or delay funding for orders for services or invest appropriated funds on a less consistent or rapid basis or not at all, particularly when considering long-term initiatives and in light of current uncertainty around Congressional efforts to craft a long-term agreement on the U.S. government's ability to incur indebtedness in excess of its current limits, and generally in the current political environment, there is a risk that clients will not issue task orders in sufficient volume to reach current contract ceilings, alter historical patterns of contract awards, including the typical increase in the award of task orders or completion of other contract actions by the U.S. government in the period before the end of the U.S. government's fiscal year on September 30, delay requests for new proposals and contract awards, rely on short-term extensions and funding of current contracts, or reduce staffing levels and hours of operation; • delays in the completion of future U.S. government’s budget processes, which have in the past and could in the future delay procurement of the products, services, and solutions we provide; • changes in the relative mix of overall U.S. government spending and areas of spending growth, with lower spending on homeland security, intelligence, defense-related programs as certain overseas operations end, and continued increased spending on cybersecurity, Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR), advanced analytics, technology integration, and healthcare, including as a result of the presidential and administration transition; • the extent, nature and effect of disease outbreaks, pandemics and widespread health epidemics, such as COVID-19, including the impact on federal budgets, current and pending procurements, supply chains, demand for services, deployment and productivity of our employees and the economic and societal impact of a pandemic, and the expected continued volatility in billable expenses; • increased inflationary pressure that could impact the cost of doing business and/or reduce customer buying power; • risks related to a possible recession and volatility or instability of the global financial system, including bank failures and the resulting impact on counterparties and business conditions generally; • legislative and regulatory changes to limitations on the amount of allowable executive compensation permitted under flexibly priced contracts following implementation of interim rules adopted by federal agencies pursuant to the Bipartisan Budget Act of 2013, which substantially further reduce the amount of allowable executive compensation under these contracts and extend these limitations to a larger segment of our executives and our entire contract base; • efforts by the U.S. government to address organizational conflicts of interest and related issues and the impact of those efforts on us and our competitors; • increased audit, review, investigation, and general scrutiny by U.S. government agencies of government contractors' performance under U.S. government contracts and compliance with the terms of those contracts and applicable laws; • the federal focus on refining the definition of “inherently governmental” work, including proposals to limit contractor access to sensitive or classified information and work assignments, which will continue to drive pockets of insourcing in various agencies, particularly in the intelligence market; • negative publicity and increased scrutiny of government contractors in general, including us, relating to U.S. government expenditures for contractor services and incidents involving the mishandling of sensitive or classified information; • U.S. government agencies awarding contracts on a technically acceptable/lowest cost basis, which could have a negative impact on our ability to win certain contracts; • increased competition from other government contractors and market entrants seeking to take advantage of certain of the trends identified above, and an industry trend towards consolidation, which may result in the emergence of companies that are better able to compete against us; • cost cutting and efficiency and effectiveness efforts by U.S. civilian agencies with a focus on increased use of performance measurement, “program integrity” efforts to reduce waste, fraud and abuse in entitlement programs, and renewed focus on improving procurement practices for and interagency use of IT services, including through the use of cloud based options and data center consolidation; • restrictions by the U.S. government on the ability of federal agencies to use lead system integrators, in response to cost, schedule, and performance problems with large defense acquisition programs where contractors were performing the lead system integrator role; 56 Table of Contents • increasingly complex requirements and enforcement and reporting landscapes of the Department of Defense and the U.S. intelligence community, including cybersecurity, managing federal health care cost growth, competition, and focus on reforming existing government regulation of various sectors of the economy, such as financial regulation and healthcare; and • increasing small business regulations across the Department of Defense and civilian agency clients continue to gain traction, agencies are required to meet high small business set aside targets, and large business prime contractors are required to subcontract in accordance with considerable small business participation goals necessary for contract award.
Seasonality is just one of a number of factors, many of which are outside of our control, which may affect our results in any period. See "Item 1A.
Seasonality is just one of a number of factors, many of which are outside of our control, which may affect our results in any period. See “Item 1A.
Our approximately 29,300 employees work to solve hard problems by making clients' missions their own, combining decades of consulting and domain expertise with functional expertise in areas such as analytics, digital solutions, engineering, and cyber, all fostered by a culture of innovation that extends to all reaches of the company.
Our approximately 31,900 employees work to solve hard problems by making clients' missions their own, combining decades of consulting and domain expertise with functional expertise in areas such as analytics, digital solutions, engineering, and cyber, all fostered by a culture of innovation that extends to all reaches of the Company.
Any number of contractors typically competes under multiple award IDIQ contract vehicles for task orders to provide particular services, and we earn revenue under these contract vehicles only to the extent that we are successful in the bidding process for task orders. No single task order under any IDIQ contract represented more than 3.6% of our revenue in fiscal 2022.
Any number of contractors typically competes under multiple award IDIQ contract vehicles for task orders to provide particular services, and we earn revenue under these contract vehicles only to the extent that we are successful in the bidding process for task orders. No single task order under any IDIQ contract represented more than 3.0% of our revenue in fiscal 2023.
However, due to fluctuations in cash flows, including as a result of the trends and developments described above under "—Factors and Trends Affecting Our Results of Operations" relating to U.S. government shutdowns, U.S. government cost-cutting, reductions or delays in the U.S. government appropriations and spending process and other budgetary matters, it may be necessary from time-to-time in the future to borrow under our Secured Credit Facility to meet cash demands.
However, due to fluctuations in cash flows, including as a result of the trends and developments described above under “—Factors and Trends Affecting Our Results of Operations” relating to U.S. government shutdowns, U.S. government cost-cutting, reductions or delays in the U.S. government appropriations and spending process and other budgetary matters, it may be necessary from time-to-time in the future to borrow under our Senior Credit Facility to meet cash demands.
We serve commercial clients across industries including financial services, health and life sciences, energy, and technology. Financial and Other Highlights During fiscal 2022, the Company generated year over year revenue growth and increased client staff headcount for the year.
We serve commercial clients across industries including financial services, health and life sciences, energy, and technology. Financial and Other Highlights During fiscal 2023, the Company generated year over year revenue growth and increased client staff headcount.
The remainder is expected to be recognized thereafter. However, given the uncertainties discussed below, as well as the risks described in "Item 1A. Risk Factors", we can give no assurance that we will be able to convert our backlog into revenue in any particular period, if at all.
The remainder is expected to be recognized thereafter. However, given the uncertainties discussed below, as well as the risks described in “Item 1A. Risk Factors”, we can give no assurance that we will be able to convert our backlog into revenue in any particular period, if at all.
We seek to achieve that result through recruitment and management of capacity and compensation. As of March 31, 2022, 2021, and 2020, we employed approximately 29,300, 27,700, and 27,200 people, respectively, of which approximately 26,300, 24,800, and 24,200, respectively, were client staff. Contract Backlog We define backlog to include the following three components: • Funded Backlog.
We seek to achieve that result through recruitment and management of capacity and compensation. As of March 31, 2023, 2022, and 2021, we employed approximately 31,900, 29,300, and 27,700 people, respectively, of which approximately 29,100, 26,300, and 24,800, respectively, were client staff. Contract Backlog We define backlog to include the following three components: • Funded Backlog.
The table below presents the percentage of total revenue for each type of contract: Fiscal Year Ended March 31, 2022 2021 2020 Cost-reimbursable 54% 56% 57% Time-and-materials 24% 25% 23% Fixed-price 22% 19% 20% Contract Diversity and Revenue Mix We provide services to our clients through a large number of single award contracts, contract vehicles, and multiple award contract vehicles.
The table below presents the percentage of total revenue for each type of contract: Fiscal Year Ended March 31, 2023 2022 2021 Cost-reimbursable 53% 54% 56% Time-and-materials 25% 24% 25% Fixed-price 22% 22% 19% Contract Diversity and Revenue Mix We provide services to our clients through a large number of single award contracts, contract vehicles, and multiple award contract vehicles.
We have defined the aforementioned non-GAAP measures as follows: • "Revenue, Excluding Billable Expenses" represents revenue less billable expenses.
We have defined the aforementioned non-GAAP measures as follows: • “Revenue, Excluding Billable Expenses” represents revenue less billable expenses.
As of March 31, 2022 and 2021, Booz Allen Hamilton was contingently liable under open standby letters of credit and bank guarantees issued by its banks in favor of third parties that totaled $8.4 million and $9.8 million, respectively. These letters of credit and bank guarantees primarily support insurance and bid and performance obligations.
As of March 31, 2023 and 2022, Booz Allen Hamilton was contingently liable under open standby letters of credit and bank guarantees issued by its banks in favor of third parties that totaled $6.1 million and $8.4 million, respectively. These letters of credit and bank guarantees primarily support insurance and bid and performance obligations.
We expect to recognize revenue from a substantial portion of funded backlog as of March 31, 2022 within the next twelve months. However, given the uncertainties discussed above, as well as the risks described in "Item 1A.
We expect to recognize revenue from a substantial portion of funded backlog as of March 31, 2023 within the next twelve months. However, given the uncertainties discussed above, as well as the risks described in “Item 1A.
You should read this discussion in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Annual Report, and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the fiscal year ended March 31, 2021, which provides additional information on comparisons of fiscal 2021 and 2020 .
You should read this discussion in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Annual Report, and Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended March 31, 2022, which provides additional information on comparisons of fiscal 2022 and 2021.
Acquisition and divestiture costs primarily include costs associated with (i) buy-side and sell-side due diligence activities, (ii) compensation expenses associated with employee retention, and (iii) legal and advisory fees, primarily associated with the acquisitions of Liberty IT Solutions, LLC ("Liberty"), Tracepoint Holdings, LLC ("Tracepoint") and EverWatch Corp.
Acquisition and divestiture costs primarily include costs associated with (i) buy-side and sell-side due diligence activities, (ii) compensation expenses associated with employee retention, and (iii) legal and advisory fees, primarily associated with the acquisitions of Liberty IT Solutions, LLC (“Liberty”) and Tracepoint Holdings, LLC (“Tracepoint”) in fiscal 2022, and the acquisition of EverWatch Corp.
Additions to funded backlog during fiscal 2022 and 2021 totaled $8.6 billion and $8.0 billion respectively, as a result of the conversion of unfunded backlog to funded backlog, the award of new contracts and tas k orders under which funding was appropriated, and the exercise and subsequent funding of priced options.
Additions to funded backlog during fiscal 2023 and 2022 totaled $10.2 billion and $8.6 billion respectively, as a result of the conversion of unfunded backlog to funded backlog, the award of new contracts and tas k orders under which funding was appropriated, and the exercise and subsequent funding of priced options.
Risk Factors." Critical Accounting Estimates and Policies Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP.
Risk Factors.” 60 Table of Contents Critical Accounting Estimates and Policies Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP.
We use Revenue, Excluding Billable Expenses because it provides management useful information about the Company's operating performance by excluding the impact of costs that are not indicative of the level of productivity of our client staff headcount and our overall direct labor, which management believes provides useful information to our investors about our core operations. • "Adjusted Operating Income" represents operating income before acquisition and divestiture costs, financing transaction costs, supplemental employee benefits due to COVID-19, significant acquisition amortization, and restructuring costs.
We use Revenue, Excluding Billable Expenses because it provides management useful information about the Company's operating performance by excluding the impact of costs that are not indicative of the level of productivity of our client staff headcount and our overall direct labor, which management believes provides useful information to our investors about our core operations. • “Adjusted Operating Income” represents operating income before acquisition and divestiture costs, financing transaction costs, supplemental employee benefits due to COVID-19, significant acquisition amortization, the reserve associated with the U.S.
No single definite contract accounted for more than 3.0% of our revenue in fiscal 2022. We generate revenue under our contracts and task orders through our provision of services as both a prime contractor and subcontractor, as well as from the provision of services by subcontractors under contracts and task orders for which we act as the prime contractor.
No single definite contract accounted for more than 2.5% of our revenue in fiscal 2023. We generate revenue under our contracts and task orders through our provision of services as both a prime contractor and subcontractor, as well as from the provision of services by subcontractors under contracts and task orders for which we act as the prime contractor.
(h) Reflects tax credits, net of reserves for uncertain tax positions, recognized in fiscal 2021 and 2020 related to an increase in research and development credits available for fiscal years 2016 to 2019 and fiscal years 2016 to 2020, respectively. (i) Release of pre-acquisition income tax reserves assumed by the Company in connection with the Carlyle Acquisition.
(j) Reflects tax credits, net of reserves for uncertain tax positions, recognized in fiscal 2021 related to an increase in research and development credits available for fiscal years 2016 to 2020. (k) Release of pre-acquisition income tax reserves assumed by the Company in connection with the Carlyle Acquisition.
(j) Reflects the loss on debt extinguishment resulting from the redemption of Booz Allen Hamilton Inc.'s 5.125% Senior Notes due 2025 (the "2025 Senior Notes"), including $9.0 million of the premium paid at redemption, and write-off of the unamortized debt issuance cost.
(l) Reflects the loss on debt extinguishment resulting from the fiscal 2021 redemption of Booz Allen Hamilton Inc.'s 5.125% Senior Notes due 2025 (the “2025 Senior Notes”), including $9.0 million of the premium paid at redemption, and write-off of the unamortized debt issuance cost.
On December 12, 2011, the Board of Directors approved a share repurchase program, which was most recently increased to $2,160.0 million in January 26, 2022. The Company may repurchase shares pursuant to the program by means of open market repurchases, directly negotiated repurchases or through agents acting pursuant to negotiated repurchase agreements.
On December 12, 2011, the Board of Directors approved a share repurchase program, which was most recently increased to $2,560.0 million on July 27, 2022. The Company may repurchase shares pursuant to the program by means of open market repurchases, directly negotiated repurchases or through agents acting pursuant to negotiated repurchase agreements.
For fiscal 2022, 2021, and 2020, 94%, 93%, and 92%, respectively, of our revenue was generated by contracts and task orders for which we served as a prime contractor; 6%, 7%, and 8%, respectively, of our revenue was generated by contracts and task orders for which we served as a subcontractor; and 24%, 25%, and 24%, respectively, of our revenue was generated by services provided by our subcontractors.
For fiscal 2023, 2022, and 2021, 95%, 94%, and 93%, respectively, of our revenue was generated by contracts and task orders for which we served as a prime contractor; 5%, 6%, and 7%, respectively, of our revenue was generated by contracts and task orders for which we served as a subcontractor; and 25%, 24%, and 25%, respectively, of our revenue was generated by services provided by our subcontractors.
Booz Allen Hamilton intends to use the remaining net proceeds from the sale of the Senior Notes for working capital and other general corporate purposes (see Note 10 in our consolidated financial statements). For fiscal 2022 and 2021, total interest payments of $37.9 million and $28.7 million were made for the Senior Notes, respectively.
Booz Allen Hamilton intends to use the remaining net proceeds from the sale of the Senior Notes for working capital and other general corporate purposes (see Note 10, “Debt,” in our consolidated financial statements). For fiscal 2023 and 2022, total interest payments of $47.1 million and $37.9 million were made for the Senior Notes, respectively.
The mix of these types of revenue affects our operating margin. Substantially all of our operating margin is derived from direct client staff labor as the portion of our operating margin derived from fees we earn on services provided by our subcontractors is not significant.
The mix of these types of revenue affects our operating margin. Substantially all of our operating margin is derived from direct client staff labor as the portion of our operating margin derived from fees we earn on services provided by our subcontractors is not significant. We view growth in direct client staff labor as the primary driver of earnings growth.
To the extent that we are able to hire additional client staff and deploy them against funded backlog, we generally recognize increased revenue. Total backlog increased by 21.7% from March 31, 2021 to March 31, 2022 and increased by 15.9% from March 31, 54 2020 to March 31, 2021.
To the extent that we are able to hire additional client staff and deploy them against funded backlog, we generally recognize increased revenue. Total backlog increased by 6.7% from March 31, 2022 to March 31, 2023 and increased by 21.7% from March 31, 2021 to March 31, 2022.
Recent Accounting Pronouncements See Note 2 to our accompanying audited consolidated financial statements for information related to our adoption of new accounting standards and for information on our anticipated adoption of recently issued accounting standards. Segment Reporting We report operating results and financial data in one operating and reportable segment.
Recent Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies,” to our accompanying audited consolidated financial statements for information related to our adoption of new accounting standards and for information on our anticipated adoption of recently issued accounting standards. 63 Table of Contents Segment Reporting We report operating results and financial data in one operating and reportable segment.
As of March 31, 2022 and March 31, 2021, the Company had $7.4 billion and $6.7 billion of remaining performance obligations, respectively, and we expect to recognize approximately 70% of the remaining performance obligations as of March 31, 2022 as revenue over the next 12 months, and approximately 85% over the next 24 months.
As of March 31, 2023 and March 31, 2022, the Company had $7.9 billion and $7.4 billion of remaining performance obligations, respectively, and we expect to recognize approximately 75% of the remaining performance obligations as of March 31, 2023 as revenue over the next 12 months, and approximately 85% over the next 24 months.
(g) Represents (i) a gain in the second quarter of fiscal 2022 associated with the Company's previously held equity method investment in Tracepoint and (ii) a gain in the third quarter of fiscal 2022 associated with the divestiture of a controlling financial interest of a certain product offering.
(h) Represents (i) a gain in the second quarter of fiscal 2022 associated with the Company's previously held equity method investment in Tracepoint and (ii) a gain in the third quarter of fiscal 2022 associated with the divestiture of a controlling financial interest in SnapAttack.
Under time-and-materials contracts, we are reimbursed for the hours worked using the predetermined hourly rates for each labor category. In addition, we are typically reimbursed for other contract direct costs and expenses at cost. We assume financial risk on time-and-materials contracts because our labor costs may exceed the negotiated billing rates.
In addition, we are typically reimbursed for other contract direct costs and expenses at cost. We assume financial risk on time-and-materials contracts because our labor costs may exceed the negotiated billing rates.
Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. • Unfunded Backlog. Unfunded backlog represents the revenue value of orders (including optional orders) for services under existing contracts for which funding has not been appropriated or otherwise authorized. • Priced Options.
Unfunded backlog represents the revenue value of orders (including optional orders) for services under existing contracts for which funding has not been appropriated or otherwise authorized. • Priced Options.
The amount of risk and potential reward varies under each type of contract. Under cost-reimbursable contracts, there is limited financial risk, because we are reimbursed for all allowable costs up to a ceiling. However, profit margins on this type of contract tend to be lower than on time-and-materials and fixed-price contracts.
Under cost-reimbursable contracts, there is limited financial risk, because we are reimbursed for all allowable costs up to a ceiling. However, profit margins on this type of contract tend to be lower than on time-and-materials and fixed-price contracts. Under time-and-materials contracts, we are reimbursed for the hours worked using the predetermined hourly rates for each labor category.
If these resources need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities. 60 The following table presents selected financial information for the periods presented: Fiscal Year Ended March 31, 2022 2021 2020 (In thousands) Cash and cash equivalents $ 695,910 $ 990,955 $ 741,901 Total debt $ 2,800,072 $ 2,356,596 $ 2,185,844 Net cash provided by operating activities $ 736,526 $ 718,684 $ 551,428 Net cash (used in) investing activities (867,725) (158,284) (128,079) Net cash (used in) provided by financing activities (163,846) (311,346) 34,562 Total (decrease) increase in cash and cash equivalents $ (295,045) $ 249,054 $ 457,911 From time to time we evaluate alternative uses for excess cash resources once our operating cash flow and required debt servicing needs have been met.
If these resources need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities. 65 Table of Contents The following table presents selected financial information for the periods presented: Fiscal Year Ended March 31, 2023 2022 2021 (In thousands) Cash and cash equivalents $ 404,862 $ 695,910 $ 990,955 Total debt $ 2,812,145 $ 2,800,072 $ 2,356,596 Net cash provided by operating activities $ 602,822 $ 736,526 $ 718,684 Net cash used in investing activities $ (468,016) $ (867,725) $ (158,284) Net cash used in financing activities (425,854) (163,846) (311,346) Total (decrease) increase in cash and cash equivalents $ (291,048) $ (295,045) $ 249,054 From time to time we evaluate alternative uses for excess cash resources once our operating cash flow and required debt servicing needs have been met.
We prepare Adjusted Operating Income to eliminate the impact of items we do not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary, or non-recurring nature or because they result from an event of a similar nature. • "Adjusted EBITDA" represents net income before income taxes, net interest and other expense and depreciation and amortization and before certain other items, including acquisition and divestiture costs, financing transaction costs, supplemental employee benefits due to COVID-19, and restructuring costs.
We prepare Adjusted Operating Income to eliminate the impact of items we do not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary, or non-recurring nature or because they result from an event of a similar nature. • “Adjusted EBITDA” represents net income attributable to common stockholders before income taxes, net interest and other expense and depreciation and amortization and before certain other items, including acquisition and divestiture costs, financing transaction costs, the reserve associated with the U.S.
During fiscal 2022 and 2021, the Company purchased 4.7 million and 3.8 million shares of the Company’s Class A Common Stock, respectively, for an aggregate of $389.9 million and $293.4 million, respectively. As of March 31, 2022, the Company had approximately $651.6 million remaining under the repurchase program.
During fiscal 2023 and 2022, the Company purchased 2.1 million and 4.7 million shares of the Company’s Class A Common Stock, respectively, for an aggregate of $196.2 million and $389.9 million, respectively. As of March 31, 2023, the Company had approximately $855.9 million remaining under the repurchase program.
Total backlog acquired was approximately $2.6 billion as of March 31, 2022 Our total backlog consists of remaining performance obligations, certain orders under contracts for which the period of performance has expired, and unexercised option period and other unexercised optional orders.
Total backlog acquired from EverWatch Corp. was approximately $282 million as of March 31, 2023 Our total backlog consists of remaining performance obligations, certain orders under contracts for which the period of performance has expired, and unexercised option period and other unexercised optional orders.
(m) Excludes an adjustment of approximately $3.1 million, $3.5 million, and $1.6 million of net earnings for fiscal 2022, 2021, and 2020, respectively, associated with the application of the two-class method for computing diluted earnings per share.
(o) Excludes adjustments of approximately $2.1 million, $3.1 million, and $3.5 million of net earnings for fiscal 2023, 2022, and 2021, respectively, associated with the application of the two-class method for computing diluted earnings per share.
As of March 31, 2022, we had $999.0 million of capacity available for additional borrowings under the Revolving Credit Facility. The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants.
As of March 31, 2023, we had $998.7 million of capacity available for additional borrowings under the Revolving Credit Facility. 69 Table of Contents The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants.
We view growth in direct client staff 53 labor as the primary driver of earnings growth. Direct client staff labor growth is driven by client staff headcount growth, after attrition, and total backlog growth. Our People Revenue from our contracts is derived from services delivered by client staff and, to a lesser extent, from our subcontractors.
Direct client staff labor growth is driven by client staff headcount growth, after attrition, and total backlog growth. Our People Revenue from our contracts is derived from services delivered by client staff and, to a lesser extent, from our subcontractors.
The following table summarizes the value of our contract backlog at the respective dates presented: Fiscal Year Ended March 31, 2022 2021 2020 (In millions) Backlog: Funded $ 3,710 $ 3,510 $ 3,415 Unfunded 9,925 6,086 4,518 Priced options 15,612 14,436 12,796 Total backlog $ 29,247 $ 24,032 $ 20,729 (1) Backlog presented as of March 31, 2022 includes backlog acquired from the Company's acquisitions made during the twelve months ended March 31, 2022.
The following table summarizes the value of our contract backlog at the respective dates presented: Fiscal Year Ended March 31, 2023 2022 2021 (In millions) Backlog: (1) Funded $ 4,619 $ 3,710 $ 3,510 Unfunded 9,519 9,925 6,086 Priced options 17,064 15,612 14,436 Total backlog $ 31,202 $ 29,247 $ 24,032 (1) Backlog presented as of March 31, 2023 includes backlog acquired from the Company's acquisition of EverWatch Corp. made during the fiscal year ended March 31, 2023.
Capital Structure and Resources Our stockholders’ equity amounted to $1,046.7 million as of March 31, 2022, a decrease of $25.1 million compared to stockholders’ equity of $1,071.2 million as of March 31, 2021.
Capital Structure and Resources Our stockholders’ equity amounted to $992.0 million as of March 31, 2023, a decrease of $54.7 million compared to stockholders’ equity of $1,046.7 million as of March 31, 2022.
The decrease was primarily due to $419.3 million in treasury stock resulting from the repurchase of shares of our Class A Common Stock and $209.2 million in aggregate quarterly dividend payments in fiscal 2022, partially offset by net income of $466.6 million in fiscal 2022 and stock-based compensation expense of $69.8 million.
The decrease was primarily due to $224.5 million in treasury stock resulting from the repurchase of shares of our Class A Common Stock and $235.4 million in aggregate quarterly dividend payments, partially offset by net income of $271.2 million and stock-based compensation expense of $80.3 million.
Booz Allen Hamilton’s obligations and the guarantors’ guarantees under the Credit Agreement are secured by a first priority lien on substantially all of the assets (including capital stock of subsidiaries) of Booz Allen Hamilton, Investor and the subsidiary guarantors, subject to certain exceptions set forth in the Credit Agreement and related documentation.
Booz Allen Hamilton’s obligations and the guarantors’ guarantees under the Credit Agreement were secured by a first priority lien on substantially all of the assets (including capital stock of subsidiaries) of Booz Allen Hamilton, Investor and the subsidiary guarantors, subject to certain exceptions set forth in the Credit Agreement and related documentation; such security was released in connection with Booz Allen Hamilton obtaining investment grade ratings from both Moody's and S&P.
(l) Reflects the tax effect of adjustments at an assumed effective tax rate of 26%, which approximates the blended federal and state tax rates, and consistently excludes the impact of other tax credits and incentive benefits realized.
(n) Reflects the tax effect of adjustments at an assumed effective tax rate of 26%, which approximates the blended federal and state tax rates, and consistently excludes the impact of other tax credits and incentive benefits realized. The tax effect of certain discrete items is calculated specifically and may vary from the general 26% rate.
As of March 31, 2022, the Credit Agreement provided Booz Allen Hamilton with a $1,241.4 million Term Loan A, a $380.3 million Term Loan B, and $1,000 million Revolving Credit Facility with a sub-limit for letters of credit of $200.0 million (collectively, the "Secured Credit Facility").
As of March 31, 2023, the Credit Agreement provided Booz Allen Hamilton with a $1,629.4 million Term Loan A (“New Term Loan A”) and a $1,000.0 million revolving credit facility (the “Revolving Credit Facility”), with a sub-limit for letters of credit of $200.0 million (collectively, the “Senior Credit Facility”).
The quarterly dividend is payable on June 30, 2022 to stockholders of record on June 15, 2022. 62 The following table summarizes the cash distributions recognized in the consolidated statement of cash flows: Fiscal Year Ended March 31, 2022 2021 2020 (In thousands) Recurring dividends (1) $ 209,057 $ 181,066 $ 146,602 (1) Amounts represent recurring dividends that were declared and paid for during each quarter of fiscal 2022, 2021, and 2020, respectively.
The following table summarizes the cash distributions recognized in the consolidated statement of cash flows: Fiscal Year Ended March 31, 2023 2022 2021 (In thousands) Recurring dividends (1) $ 235,726 $ 209,057 $ 181,066 (1) Amounts represent recurring dividends that were declared and paid for during each quarter of fiscal 2023, 2022, and 2021, respectively.
Billable Expenses Billable expenses increased to $2,474.2 million from $2,325.9 million, or a 6.4% increase, and remained flat as a percentage of revenue at 29.6%.
Billable Expenses Billable expenses increased to $2,808.9 million from $2,474.2 million, or a 13.5% increase, and increased as a percentage of revenue to 30.3% from 29.6%.
Indebtedness Our debt totaled $2.8 billion and $2.4 billion as of March 31, 2022 and 2021, respectively. Our debt bears interest at specified rates (see Note 10 to our consolidated financial statements). On June 24, 2021, Booz Allen Hamilton Inc.
Indebtedness Our debt totaled $2.8 billion as of both March 31, 2023 and 2022. Our debt bears interest at specified rates (see Note 10, “Debt,” to our consolidated financial statements). On September 7, 2022 (the “Ninth Amendment Effective Date”), Booz Allen Hamilton Inc.
Remaining performance obligations represent the transaction price of exercised contracts for which work has not yet been performed, irrespective of whether funding has or has not been authorized and appropriated as of the date of exercise.
For fiscal 2023, 2022, and 2021, the aggregate impact of adjustments in contract estimates was not material. 62 Table of Contents Remaining performance obligations represent the transaction price of exercised contracts for which work has not yet been performed, irrespective of whether funding has or has not been authorized and appropriated as of the date of exercise.
Results of Operations The following table sets forth items from our consolidated statements of operations for the periods indicated: Fiscal Year Ended March 31, Fiscal 2022 Versus Fiscal 2021 Fiscal 2021 Versus Fiscal 2020 2022 2021 2020 (In thousands) Revenue $ 8,363,700 $ 7,858,938 $ 7,463,841 6.4 % 5.3 % Operating costs and expenses: Cost of revenue 3,899,622 3,657,530 3,379,180 6.6 % 8.2 % Billable expenses 2,474,163 2,325,888 2,298,413 6.4 % 1.2 % General and administrative expenses 1,158,987 1,036,834 1,035,965 11.8 % 0.1 % Depreciation and amortization 145,747 84,315 81,081 72.9 % 4.0 % Total operating costs and expenses 7,678,519 7,104,567 6,794,639 8.1 % 4.6 % Operating income 685,181 754,371 669,202 (9.2) % 12.7 % Interest expense (92,352) (81,270) (96,960) 13.6 % (16.2) % Other income (expense), net 11,214 (10,662) 7,192 NM NM Income before income taxes 604,043 662,439 579,434 (8.8) % 14.3 % Income tax expense 137,466 53,481 96,831 157.0 % (44.8) % Net income $ 466,577 $ 608,958 $ 482,603 (23.4) % 26.2 % Net loss attributable to non-controlling interest $ (163) $ — $ — NM NM Net income attributable to common stockholders $ 466,740 $ 608,958 $ 482,603 (23.4) % 26.2 % NM - Not meaningful Fiscal 2022 Compared to Fiscal 2021 Revenue Revenue increased to $8,363.7 million from $7,858.9 million, or a 6.4% increase, primarily driven by the impact of acquisitions during fiscal 2022 of approximately $340.1 million and strong demand, partially offset by reduced staff utilization.
Results of Operations The following table sets forth items from our consolidated statements of operations for the periods indicated: Fiscal Year Ended March 31, Fiscal 2023 Versus Fiscal 2022 Fiscal 2022 Versus Fiscal 2021 2023 2022 2021 (In thousands) Revenue $ 9,258,911 $ 8,363,700 $ 7,858,938 10.7 % 6.4 % Operating costs and expenses: Cost of revenue 4,304,810 3,899,622 3,657,530 10.4 % 6.6 % Billable expenses 2,808,857 2,474,163 2,325,888 13.5 % 6.4 % General and administrative expenses 1,532,912 1,158,987 1,036,834 32.3 % 11.8 % Depreciation and amortization 165,484 145,747 84,315 13.5 % 72.9 % Total operating costs and expenses 8,812,063 7,678,519 7,104,567 14.8 % 8.1 % Operating income 446,848 685,181 754,371 (34.8) % (9.2) % Interest expense (119,850) (92,352) (81,270) 29.8 % 13.6 % Other income (expense), net 40,951 11,214 (10,662) NM NM Income before income taxes 367,949 604,043 662,439 (39.1) % (8.8) % Income tax expense 96,734 137,466 53,481 (29.6) % 157.0 % Net income $ 271,215 $ 466,577 $ 608,958 (41.9) % (23.4) % Net loss attributable to non-controlling interest $ 576 $ 163 $ — NM NM Net income attributable to common stockholders $ 271,791 $ 466,740 $ 608,958 (41.8) % (23.4) % NM - Not meaningful Fiscal 2023 Compared to Fiscal 2022 Revenue Revenue increased to $9,258.9 million from $8,363.7 million, or a 10.7% increase, primarily driven by headcount growth, as well as higher staff utilization compared to the prior year period.
For both March 31, 2022 and 2021, approximately $1.0 million, of these instruments reduced our available borrowings under the Revolving Credit Facility. The remainder is guaranteed under a separate $20.0 million facility, of which $12.6 million and $11.1 million, respectively, was available to Booz Allen Hamilton at March 31, 2022 and 2021.
As of March 31, 2023 and 2022, approximately $1.3 million and $1.0 million, respectively, of these instruments reduced our available borrowings under the Revolving Credit Facility. The remainder is guaranteed under a separate $7.5 million facility of which $2.7 million was available to the Company at March 31, 2023.
("Booz Allen Hamilton"), Booz Allen Hamilton Investor Corporation ("Investor"), and certain wholly-owned subsidiaries of Booz Allen Hamilton, entered into the eighth amendment (the "Eighth Amendment") to the Credit Agreement dated as of July 31, 2012, as amended (the "Existing Credit Agreement" and, as amended, the "Credit Agreement"), with certain institutional lenders and Bank of America, N.A., as Administrative Agent and Collateral Agent.
(“Booz Allen Hamilton”), Booz Allen Hamilton Investor Corporation (“Investor”), and certain wholly owned subsidiaries of Booz Allen Hamilton, entered into the Ninth Amendment (the “Ninth Amendment”) to the Credit Agreement dated as of July 31, 2012, as amended (the “Existing Credit Agreement” and, as amended, the “Credit Agreement”), with certain institutional lenders and Bank of America, N.A., as Administrative Agent, Collateral Agent, Issuing Lender, Refinancing Revolver Lender, New Refinancing Tranche A Term Lender and 2022 Supplemental Tranche A Lender.
In addition, we are required to meet certain financial covenants at each quarter end, namely Consolidated Net Total Leverage and Consolidated Net Interest Coverage Ratios. As of March 31, 2022, we were compliant with these covenants. During fiscal 2022, interest payments of $19.6 million and $7.2 million were made for the Term Loan A and Term Loan B facilities, respectively.
In addition, we are required to meet certain financial covenants at each quarter end, namely Consolidated Net Total Leverage and Consolidated Net Interest Coverage Ratios. As of March 31, 2023, we were compliant with these covenants.
Commitments and Contingencies We are subject to a number of reviews, investigations, claims, lawsuits, and other uncertainties related to our business. For a discussion of these items, refer to Note 20 to our consolidated financial statements. 65
Our capital expenditures for fiscal 2023 and 2022 were $76.1 million and $80.0 million, respectively. Commitments and Contingencies We are subject to a number of reviews, investigations, claims, lawsuits, and other uncertainties related to our business. For a discussion of these items, refer to Note 20, “Commitments and Contingencies,” to our consolidated financial statements. 70 Table of Contents
Pursuant to the Eighth Amendment, certain lenders under the Existing Credit Agreement converted their Existing Revolving Commitments into a new tranche of revolving commitments (the “New Revolving Commitments” and the revolving credit loans made thereunder, the “New Revolving Loans”) in an aggregate amount, along with the New Revolving Commitments of certain new lenders, of $1,000 million, with a sublimit for letters of credit of $200.0 million.
Pursuant to the Ninth Amendment, (i) $1,000.0 million of revolving commitments outstanding under the Existing Credit Agreement were refinanced by a new tranche of revolving commitments (the “New Revolving Commitments” and the revolving credit loans made thereunder, the “New Revolving Loans”) in an aggregate amount of $1,000.0 million, with a sublimit for letters of credit of $200.0 million and (ii) approximately $1,225.3 million of Term Loan A loans (the “Existing Term Loan A Loans”) and $379.3 million of Term Loan B loans (the “Existing Term Loan B Loans”) outstanding under the Existing Credit Agreement were refinanced by a new tranche of Term Loan A loans in an aggregate amount, along with additional new tranche A term loans advanced by certain lenders, totaling $1,650.0 million.
Revenue increased 6.4% from fiscal 2021 to fiscal 2022 primarily driven by the impact of acquisitions and strong demand, partially offset by reduced staff utilization. Operating income decreased 9.2% to $685.2 million in fiscal 2022 from $754.4 million in fiscal 2021, which reflects a decrease in operating margin to 8.2% from 9.6% in the comparable year.
Revenue increased 10.7% from fiscal 2022 to fiscal 2023 primarily driven by headcount growth, higher staff utilization compared to the prior year period, and the impact of acquisitions. Operating income decreased 34.8% to $446.8 million in fiscal 2023 from $685.2 million in fiscal 2022, which reflects a decrease in operating margin to 4.8% from 8.2% in the comparable year.
(e) Represents restructuring charges of $8.3 million incurred during the fourth quarter of fiscal 2022, net of approximately $4.2 million of revenue recognized on recoverable expenses, associated with severance costs of a restructuring plan to reduce certain executive administrative personnel costs. (f) Reflects the combination of Interest expense and Other income (expense), net from the consolidated statement of operations.
See Note 20, “Commitments and Contingencies,” to the consolidated financial statements for further information. 54 Table of Contents (f) Represents restructuring charges of $8.3 million incurred during the fourth quarter of fiscal 2022, net of approximately $4.2 million of revenue recognized on recoverable expenses, associated with severance costs of a restructuring plan to reduce certain executive administrative personnel costs.
At Booz Allen Hamilton's option, borrowings under the Secured Credit Facility bear interest based either on LIBOR (adjusted for maximum reserves, and subject to a floor of zero) for the applicable interest period or, a base rate equal to the highest of (x) the administrative agent’s prime corporate rate, (y) the overnight federal funds rate plus 0.50% and (z) three-month LIBOR (adjusted for maximum reserves, and subject to a floor of zero) plus 1.00%), in each case plus an applicable margin, payable at the end of the applicable interest period and in any event at least quarterly.
The rate at which the New Term Loan A and the New Revolving Loans bear interest will be based either on Term SOFR (subject to a 0.10% adjustment and a floor of zero) for the applicable interest period or a base rate (equal to the highest of (i) the administrative agent’s prime corporate rate, (ii) the overnight federal funds rate plus 0.50% and (iii) three-month Term SOFR (subject to a 0.10% adjustment and a floor of zero) plus 1.00%), in each case plus an applicable margin, payable at the end of the applicable interest period and in any event at least quarterly.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeF-9 BOOZ ALLEN HAMILTON HOLDING CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Amounts in thousands, except share data) Class A Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-Controlling Interest Total Stockholders’ Equity Shares Amount Shares Amount Balance at March 31, 2019 159,924,825 $ 1,599 (19,896,972) $ (711,450) $ 401,596 $ 994,811 $ (11,190) — $ 675,366 Issuance of common stock 833,258 8 — — 14,979 — — — 14,987 Stock options exercised 575,890 6 — — 8,919 — — — 8,925 Repurchase of common stock — — (2,717,080) (186,645) — — — — (186,645) Recognition of liability related to future restricted stock units vesting — — — — (757) — — — (757) Net income — — — — — 482,603 — — 482,603 Other comprehensive income, net of tax — — — — — — (34,811) — (34,811) Dividends paid of $1.04 per share of common stock — — — — — (146,602) — — (146,602) Stock-based compensation expense — — — — 43,290 — — — 43,290 Balance at March 31, 2020 161,333,973 $ 1,613 (22,614,052) $ (898,095) $ 468,027 $ 1,330,812 $ (46,001) — $ 856,356 Issuance of common stock 1,112,183 11 — — 18,803 — — — 18,814 Stock options exercised 504,450 5 — — 11,742 — — — 11,747 Repurchase of common stock — — (4,090,525) (318,068) — — — — (318,068) Recognition of liability related to future restricted stock units vesting — — — — (456) — — — (456) Net income — — — — — 608,958 — — 608,958 Topic 326 adoption impact — — — — — (1,180) — — (1,180) Other comprehensive income, net of tax — — — — — — 16,230 — 16,230 Dividends paid of $1.30 per share of common stock — — — — — (181,066) — — (181,066) Stock-based compensation expense — — — — 59,841 — — — 59,841 Balance at March 31, 2021 162,950,606 $ 1,629 (26,704,577) $ (1,216,163) $ 557,957 $ 1,757,524 $ (29,771) — $ 1,071,176 Issuance of common stock 1,224,207 15 — — 22,155 — — — 22,170 Stock options exercised 197,732 2 — — 5,927 — — — 5,929 Repurchase of common stock — — (5,083,620) (419,291) — — — (419,291) Recognition of liability related to future restricted stock units vesting — — — — 1,213 — — — 1,213 Net income — — — — — 466,740 (163) 466,577 Other comprehensive income, net of tax — — — — — — 38,356 — 38,356 Dividends paid of $1.54 per share of common stock — — — — — (209,193) — — (209,193) Stock-based compensation expense — — — — 69,784 — — — 69,784 Contribution to non-controlling interest — $ — — $ — $ (814) $ — $ — $ 814 $ — Balance at March 31, 2022 164,372,545 $ 1,646 (31,788,197) $ (1,635,454) $ 656,222 $ 2,015,071 $ 8,585 651 $ 1,046,721 The accompanying notes are an integral part of these Consolidated Financial Statements.
Biggest changeF-8 Table of Contents BOOZ ALLEN HAMILTON HOLDING CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Amounts in thousands, except share data) Class A Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-Controlling Interest Total Stockholders’ Equity Shares Amount Shares Amount Balance at March 31, 2020 161,333,973 $ 1,613 (22,614,052) $ (898,095) $ 468,027 $ 1,330,812 $ (46,001) — $ 856,356 Issuance of common stock 1,112,183 11 — — 18,803 — — — 18,814 Stock options exercised 504,450 5 — — 11,742 — — — 11,747 Repurchase of common stock — — (4,090,525) (318,068) — — — — (318,068) Recognition of liability related to future restricted stock units vesting — — — — (456) — — — (456) Net income — — — — — 608,958 — — 608,958 Topic 326 adoption impact — — — — — (1,180) — — (1,180) Other comprehensive income, net of tax — — — — — — 16,230 — 16,230 Dividends paid of $1.30 per share of common stock — — — — — (181,066) — — (181,066) Stock-based compensation expense — — — — 59,841 — — — 59,841 Balance at March 31, 2021 162,950,606 $ 1,629 (26,704,577) $ (1,216,163) $ 557,957 $ 1,757,524 $ (29,771) — $ 1,071,176 Issuance of common stock 1,224,207 15 — — 22,155 — — — 22,170 Stock options exercised 197,732 2 — — 5,927 — — — 5,929 Repurchase of common stock — — (5,083,620) (419,291) — — — (419,291) Recognition of liability related to future restricted stock units vesting — — — — 1,213 — — — 1,213 Net income — — — — — 466,740 (163) 466,577 Other comprehensive income, net of tax — — — — — — 38,356 — 38,356 Dividends paid of $1.54 per share of common stock — — — — — (209,193) — — (209,193) Stock-based compensation expense — — — — 69,784 — — — 69,784 Contribution to non-controlling interest — — — — (814) — — 814 — Balance at March 31, 2022 164,372,545 $ 1,646 (31,788,197) $ (1,635,454) $ 656,222 $ 2,015,071 $ 8,585 $ 651 $ 1,046,721 Issuance of common stock 1,170,726 10 — — 24,653 — — — 24,663 Stock options exercised 329,061 3 — — 11,381 — — — 11,384 Repurchase of common stock — — (2,446,547) (224,451) — — — — (224,451) Net income — — — — — 271,791 — (576) 271,215 Other comprehensive income, net of tax — — — — — — 20,748 — 20,748 Dividends paid of $1.76 per share of common stock — — — — — (235,407) — — (235,407) Stock-based compensation expense — — — — 80,272 — — — 80,272 Contribution to non-controlling interest — — — — (3,068) — — 3,068 — De-Consolidation of non-controlling interest — — — — — — — (3,143) (3,143) Balance at March 31, 2023 165,872,332 $ 1,659 (34,234,744) $ (1,859,905) $ 769,460 $ 2,051,455 $ 29,333 $ — $ 992,002 The accompanying notes are an integral part of these Consolidated Financial Statements.
Disaggregation of Revenue We disaggregate our revenue from contracts with customers by contract type, customer, as well as whether the Company acts as prime contractor or sub-contractor, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
Revenue Disaggregation of Revenue We disaggregate our revenue from contracts with customers by contract type and by customer type, as well as by whether the Company acts as prime contractor or sub-contractor, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) All amounts recorded in other comprehensive loss are related to the Company's post-retirement plans and interest rate swaps designated as cash flow hedges.
Accumulated Other Comprehensive Income All amounts recorded in other comprehensive loss are related to the Company's post-retirement plans and interest rate swaps designated as cash flow hedges.
Long-term unbilled receivables not anticipated to be billed and collected within one year, which are primarily related to retainage, holdbacks, and long-term rate settlements to be billed at contract closeout, are included in other long-term assets in the accompanying condensed consolidated balance sheets. Contract liabilities primarily consist of advance payments, billings in excess of costs incurred and deferred revenue.
Long-term unbilled receivables not anticipated to be billed and collected within one year, which are primarily related to retainage, holdbacks, and long-term rate settlements to be billed at contract closeout, are included in other long-term assets in the accompanying consolidated balance sheets. Contract liabilities primarily consist of advance payments, billings in excess of costs incurred and deferred revenue.
Liberty IT Solutions, LLC On June 11, 2021, the Company acquired Liberty IT Solutions, LLC ("Liberty") for cash consideration of approximately $669.1 million, net of adjustments related to working capital, and transaction costs incurred as part of the acquisition, including compensation expenses paid by the Company that were associated with employee retention.
Liberty IT Solutions, LLC On June 11, 2021, the Company acquired Liberty IT Solutions, LLC (“Liberty”) for cash consideration of approximately $669.1 million, net of adjustments related to working capital, and transaction costs incurred as part of the acquisition, including compensation expenses paid by the Company that were associated with employee retention.
(3) The Company’s interest rate swaps are considered over-the-counter derivatives and fair value is estimated based on the present value of future cash flows using a model-derived valuation that uses Level 2 observable inputs such as interest rate yield curves.
(2) The Company’s interest rate swaps are considered over-the-counter derivatives and fair value is estimated based on the present value of future cash flows using a model-derived valuation that uses Level 2 observable inputs such as interest rate yield curves.
The fair value of the Senior Notes due 2029 and Senior Notes due 2028 are determined using quoted prices or other market information obtained from recent trading activity in the high-yield bond market (Level 2 inputs). 19.
The fair value of the Senior Notes due 2029 and the Senior Notes due 2028 are determined using quoted prices or other market information obtained from recent trading activity in the high-yield bond market (Level 2 inputs).
On August 24, 2020, Booz Allen Hamilton issued $700.0 million aggregate principal amount of its 3.875% Senior Notes due 2028 (the “Senior Notes due 2028”, and, together with the Senior Notes due 2029, the "Senior Notes") under an Indenture, dated as of August 24, 2020, among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as guarantors (the “2028 Subsidiary Guarantors”), and Wilmington Trust, National Association as trustee (in such capacity, the “2028 Trustee”), as supplemented by the First Supplemental Indenture, dated as of August 24, 2020, among Booz Allen Hamilton, the 2028 Subsidiary Guarantors and the 2028 Trustee.
On August 24, 2020, Booz Allen Hamilton issued $700.0 million aggregate principal amount of its 3.875% Senior Notes due 2028 (the “Senior Notes due 2028”, and, together with the Senior Notes due 2029, the “Senior Notes”) under an Indenture, dated as of August 24, 2020, among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as guarantors, and Wilmington Trust, National Association as trustee (in such capacity, the “2028 Trustee”), as supplemented by the First Supplemental Indenture, dated as of August 24, 2020, among Booz Allen Hamilton, the 2028 Subsidiary Guarantors and the 2028 Trustee.
As further permitted under Topic 842, for all material classes of leased assets, the Company elected to not separate lease components from non-lease components, and instead account for both components as a single lease component. As of March 31, 2022, the Company did not have any lease agreements with residual value guarantees or material restrictions or covenants.
As further permitted under Topic 842, for all material classes of leased assets, the Company elected to not separate lease components from non-lease components, and instead account for both components as a single lease component. As of March 31, 2023, the Company did not have any lease agreements with residual value guarantees or material restrictions or covenants.
Such audits may result in, and have historically resulted in, the Company’s inability to retain certain claimed indirect costs, including executive and employee compensation, due to differing views of the allowability and reasonableness of such costs. As of March 31, 2022, years subsequent to the Company’s fiscal year 2011 remained subject to audit and final resolution.
Such audits may result in, and have historically resulted in, the Company’s inability to retain certain claimed indirect costs, including executive and employee compensation, due to differing views of the allowability and reasonableness of such costs. As of March 31, 2023, years subsequent to the Company’s fiscal year 2011 remained subject to audit and final resolution.
For interest rate swaps designated as cash flow hedges, the changes in the fair value of derivatives is recorded in Accumulated Other Comprehensive Income (Loss), net of taxes, and is subsequently reclassified into interest expense in the period that the hedged forecasted interest payments are made on the Company's variable-rate debt.
For interest rate swaps designated as cash flow hedges, the changes in the fair value of derivatives is recorded in Accumulated Other Comprehensive Income (Loss), or AOCI, net of taxes, and is subsequently reclassified into interest expense, net in the period that the hedged forecasted interest payments are made on the Company's variable-rate debt.
Significant changes in management’s estimate could have a material effect on the Company’s results of operations. F-3 How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s determination of its provision for claimed indirect costs.
Significant changes in management’s estimate could have a material effect on the Company’s results of operations. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s determination of its provision for claimed indirect costs.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2022, in conformity with U.S. generally accepted accounting principles.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2023, in conformity with U.S. generally accepted accounting principles.
The Company uses the relief from royalty method to estimate the fair value. The fair value of the asset is the present value of the license fees avoided by owning the asset, or the royalty savings. During the fiscal years ended March 31, 2022, 2021, and 2020, the Company did not record any impairment of intangible assets.
The Company uses the relief from royalty method to estimate the fair value. The fair value of the asset is the present value of the license fees avoided by owning the asset, or the royalty savings. During the fiscal years ended March 31, 2023, 2022, and 2021, the Company did not record any impairment of intangible assets.
The awards will vest based on the applicable vesting period for the specific award subject to the employees' continued employment with the Company. The Board of Directors also granted Class A Restricted Common Stock to members of the Board of Directors during fiscal 2022. These awards generally vest over one year.
The awards will vest based on the applicable vesting period for the specific award subject to the employees' continued employment with the Company. The Board of Directors also granted Class A Restricted Common Stock to members of the Board of Directors during fiscal 2023. These awards generally vest over one year.
Our exposure to market risk for changes in interest rates relates primarily to our outstanding debt, cash equivalents, which consist primarily of funds invested in U.S. government money-market funds, our cash flow hedges and our Rabbi trust. Our exposure to market risk for changes in interest rates related to our outstanding debt will impact our Secured Credit Facility.
Our exposure to market risk for changes in interest rates relates primarily to our outstanding debt, cash equivalents, which consist primarily of funds invested in U.S. government money-market funds, our cash flow hedges and our Rabbi trust. Our exposure to market risk for changes in interest rates related to our outstanding debt will impact our Senior Credit Facility.
As of January 1, 2022, the Company performed its annual impairment test of goodwill by comparing the fair value of the Company (based on market capitalization) to the carrying value of the Company's net equity, and concluded that the fair value of the reporting unit was significantly greater than the carrying amount.
As of January 1, 2023, the Company performed its annual impairment test of goodwill by comparing the fair value of the Company (based on market capitalization) to the carrying value of the Company's net equity, and concluded that the fair value of the reporting unit was significantly greater than the carrying amount.
Booz Allen Hamilton may redeem some or all of the Senior Notes due 2028 at any time prior to September 1, 2023, at a price equal to 100.00% of the principal amount of the Senior Notes due 2028 redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date, plus an applicable “make-whole premium.” Booz Allen Hamilton may redeem the Senior Notes due 2028 at its option, in whole at any time or in part from time to time, upon certain required notice, at any time (i) on and after September 1, 2023, at a price equal to 101.94% of the principal amount of the Senior Notes due 2028, (ii) on or after September 1, 2024, at a price equal to 100.97% of the principal amount of the Senior Notes due 2028, and (iii) on September 1, 2025 and thereafter, at a price equal to 100.00% of the principal amount of the Senior Notes due 2028, in each case, plus accrued and unpaid interest, if any, to (but not including) the applicable redemption date.
Booz Allen Hamilton may redeem some or all of the Senior Notes due 2028 at any time prior to September 1, 2023, at a price equal to 100.00% of the principal amount of the Senior Notes due 2028 redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date, plus an applicable “make-whole premium.” Booz Allen Hamilton may redeem the Senior Notes due 2028 at its option, in whole at any time or in part from time to time, upon certain required notice, (i) on and after September 1, 2023, at a price equal to 101.938% of the principal amount of the Senior Notes due 2028, (ii) on or after September 1, 2024, at a price equal to 100.969% of the principal amount of the Senior Notes due 2028, and (iii) on September 1, 2025 and thereafter, at a price equal to 100.00% of the principal amount of the Senior Notes due 2028, in each case, plus accrued and unpaid interest, if any, to (but not including) the applicable redemption date.
If the estimate of contract profitability indicates an anticipated loss on a contract, the Company recognizes the total loss at the time it is identified. For fiscal 2022, 2021 and 2020, the aggregate impact of adjustments in contract estimates was not material.
If the estimate of contract profitability indicates an anticipated loss on a contract, the Company recognizes the total loss at the time it is identified. For fiscal 2023, 2022 and 2021, the aggregate impact of adjustments in contract estimates was not material.
The Company has taken similar tax positions with respect to subsequent fiscal years. As of March 31, 2022, the Company does not maintain reserves for any uncertain tax positions related to the contested tax benefits related to 2013 through 2015, nor does it maintain reserves for the similar tax positions taken in the subsequent fiscal years.
The Company has taken similar tax positions with respect to subsequent fiscal years. As of March 31, 2023 , the Company does not maintain reserves for any uncertain tax positions related to the contested tax benefits related to 2013 through 2015, nor does it maintain reserves for the similar tax positions taken in the subsequent fiscal years.
The Company’s fiscal year ends on March 31 and unless otherwise noted, references to fiscal year or fiscal are for fiscal years ended March 31. The accompanying consolidated financial statements present the financial position of the Company as of March 31, 2022 and 2021 and the Company’s results of operations for fiscal 2022, 2021, and 2020.
The Company’s fiscal year ends on March 31 and unless otherwise noted, references to fiscal year or fiscal are for fiscal years ended March 31. The accompanying consolidated financial statements present the financial position of the Company as of March 31, 2023 and 2022 and the Company’s results of operations for fiscal 2023, 2022, and 2021.
Holders of unvested Class A Restricted Common Stock are entitled to participate in non-forfeitable dividends or other distributions. These unvested restricted shares participated in the Company's dividends declared and paid in each quarter of fiscal 2022, 2021, and 2020.
Holders of unvested Class A Restricted Common Stock are entitled to participate in non-forfeitable dividends or other distributions. These unvested restricted shares participated in the Company's dividends declared and paid in each quarter of fiscal 2023, 2022, and 2021.
During fiscal 2022 and 2021, the Company granted 0.1 million and 0.3 million options under the EIP, with an aggregate grant date fair value of $1.6 million and $3.6 million, respectively.The total fair value of EIP options vested during both fiscal 2022 and 2021 were $2.4 million.
During fiscal 2023 and 2022, the Company granted 0.3 million and 0.1 million options under the EIP, with an aggregate grant date fair value of $4.4 million and $1.6 million, respectively. The total fair value of EIP options vested during both fiscal 2023 and 2022 were $2.4 million.
As of March 31, 2022, the Company's tax years ended March 31, 2016 and forward are open and subject to examination by the federal tax authorities. The other jurisdictions' currently open or under examination are not considered to be material.
As of March 31, 2023, the Company's tax years ended March 31, 2016 and forward are open and subject to examination by the federal tax authorities. The other jurisdictions' currently open or under examination are not considered to be material.
As a result of the Tracepoint transaction, the Company recognized $90.5 million of intangible assets which primarily consists of channel relationships. Channel relationships were valued using the excess earnings method discounted cash flow approach, incorporating Level 3 inputs as described under the fair value hierarchy of ASC No. 820, Fair Value Measurement (Topic 820).
As a result of the Tracepoint transaction, the Company recognized $90.5 million of intangible assets which primarily consists of channel relationships. Channel relationships were valued using the excess earnings method discounted cash flow approach, incorporating Level 3 inputs as described under the fair value hierarchy of ASC No. 820, Fair Value Measurement (“Topic 820”).
If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for any excess of the carrying amount over the fair value of the asset. During the fiscal years ended March 31, 2022, 2021, and 2020, the Company did not record any impairment charges.
If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for any excess of the carrying amount over the fair value of the asset. During the fiscal years ended March 31, 2023, 2022, and 2021, the Company did not record any material impairment charges.
Post Retirement Benefit Plans The Company provides postretirement healthcare benefits to former officers under a medical indemnity insurance plan, with premiums paid by the Company. This plan is referred to as the Officer Medical Plan.
Post Retirement Benefits The Company provides postretirement healthcare benefits to former officers under a medical indemnity insurance plan, with premiums paid by the Company. This plan is referred to as the Officer Medical Plan.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated May 20, 2022 expressed an unqualified opinion thereon.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated May 26, 2023 expressed an unqualified opinion thereon.
Financial Statements and Supplementary Data INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID#00042) 2 Consolidated Balance Sheets as of March 31, 2022 and 2021 6 Consolidated Statements of Operations for the Fiscal Years Ended March 31, 2022, 2021 and 2020 7 Consolidated Statements of Comprehensive Income for the Fiscal Years Ended March 31, 2022, 2021 and 2020 8 Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2022, 2021 and 2020 9 Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended March 31, 2022, 2021 and 2020 10 Notes to Consolidated Financial Statements 11 F-1 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Booz Allen Hamilton Holding Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Booz Allen Hamilton Holding Corporation (the Company) as of March 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income , stockholders' equity and cash flows for each of the three years in the period ended March 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).
Financial Statements and Supplementary Data INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID#00042) F- 2 Consolidated Balance Sheets as of March 31, 2023 and 2022 F- 5 Consolidated Statements of Operations for the Fiscal Years Ended March 31, 2023, 2022 and 2021 F- 6 Consolidated Statements of Comprehensive Income for the Fiscal Years Ended March 31, 2023, 2022 and 2021 F- 7 Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2023, 2022 and 2021 F- 8 Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended March 31, 2023, 2022 and 2021 F- 9 Notes to Consolidated Financial Statements F- 10 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Booz Allen Hamilton Holding Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Booz Allen Hamilton Holding Corporation (the Company) as of March 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income , stockholders' equity and cash flows for each of the three years in the period ended March 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).
During the fiscal years ended March 31, 2022, 2021, and 2020, the Company did not record any impairment of goodwill. Long-Lived Assets The Company reviews its long-lived assets, including property and equipment, amortizable intangible assets, and right-of-use (ROU) assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable.
During the fiscal years ended March 31, 2023, 2022, and 2021, the Company did not record any impairment of goodwill. Long-Lived Assets The Company reviews its long-lived assets, including property and equipment, amortizable intangible assets, and right-of-use (“ROU”) assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable.
If an adverse final resolution were to occur with respect to uncertain tax positions related to the contested tax benefits or the similar tax positions taken for fiscal years 2013 through 2020, the total potential future tax expense that would arise would be approximately $40.2 million to $55.8 million, net of federal benefit.
If an adverse final resolution were to occur with respect to uncertain tax positions related to the contested tax benefits or the similar tax positions taken for fiscal years 2013 through 2020, the total potential future tax expense that would arise would be approximately $40.2 million to $59.3 million , net of federal benefit.
Senior Notes On June 17, 2021, Booz Allen Hamilton issued $500.0 million aggregate principal amount of its 4.000% Senior Notes due July 1, 2029 (the “Senior Notes due 2029”) under an Indenture, dated as of June 17, 2021, among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as guarantors (the “2029 Subsidiary Guarantors”), and Wilmington Trust, National Association (in such capacity, the “2029 Trustee”), as supplemented by the First Supplemental Indenture, dated as of June 17, 2021, among Booz Allen Hamilton, the 2029 Subsidiary Guarantors and the 2029 Trustee.
F-25 Table of Contents Senior Notes On June 17, 2021, Booz Allen Hamilton issued $500.0 million aggregate principal amount of its 4.000% Senior Notes due July 1, 2029 (the “Senior Notes due 2029”) under an Indenture, dated as of June 17, 2021, among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as guarantors, and Wilmington Trust, National Association, as trustee (in such capacity, the “2029 Trustee”), as supplemented by the First Supplemental Indenture, dated as of June 17, 2021, among Booz Allen Hamilton, the 2029 Subsidiary Guarantors and the 2029 Trustee.
F-2 Revenue recognition related to the cost-based input method and variable consideration Description of the Matter As described in Notes 2 and 3 to the consolidated financial statements, the Company generally recognizes revenue over time as services are provided, as most of its contracts involve a continuous transfer of control to the customer.
F-2 Table of Contents Revenue recognition related to the cost-based input method Description of the Matter As described in Notes 2 and 3 to the consolidated financial statements, the Company generally recognizes revenue over time as services are provided, as most of its contracts involve a continuous transfer of control to the customer.
ACQUISITIONS AND DIVESTITURES Acquisitions Tracepoint Holdings, LLC On September 10, 2021, the Company acquired the remaining 60% equity interest in Tracepoint Holdings, LLC ("Tracepoint"), an industry-leading digital forensics and incident response company serving public and private sector clients, for cash consideration of approximately $120.3 million, net of adjustments (the "Tracepoint Transaction").
Acquisitions and Divestitures Acquisitions Tracepoint Holdings, LLC On September 10, 2021, the Company acquired the remaining 60% equity interest in Tracepoint Holdings, LLC (“Tracepoint”), an industry-leading digital forensics and incident response company serving public and private sector clients, for cash consideration of approximately $120.3 million, net of adjustments (the “Tracepoint Transaction”).
See Note 11 to the consolidated financial statements for further discussion on the Company’s derivative instruments designated as cash flow hedges.
See Note 11, “Derivatives,” to the consolidated financial statements for further discussion on the Company’s derivative instruments designated as cash flow hedges.
Programs and contract assets, channel relationships, and other amortizable intangible assets are generally amortized on an accelerated basis over the expected life based on projected future cash flows of approximately two to twelve years. Software purchased or developed for internal use is amortized over one to five years.
Programs and contract assets, channel relationships, and other amortizable intangible assets are generally amortized on an accelerated basis over the expected life based on projected future cash flows of approximately two to fourteen years. Software purchased or developed for internal use is amortized over one to ten years.
The majority of the Company's trade name intangible assets are not amortized, but are tested for impairment on at least an annual basis as of January 1 and more frequently if interim indicators of impairment exist. The trade name is considered to be impaired if the carrying value exceeds its estimated fair value.
The Company's trade name intangible asset is not amortized, but is tested for impairment on at least an annual basis as of January 1 and more frequently if interim indicators of impairment exist. The trade name is considered to be impaired if the carrying value exceeds its estimated fair value.
In addition, at any time on or prior to September 1, 2023, Booz Allen Hamilton may redeem up to 40.00% of the original aggregate principal amount of the Senior Notes due 2028 with the net cash proceeds of certain equity offerings at a redemption price equal to 103.88% of the principal amount of the Senior Notes due 2028, plus accrued and unpaid interest, if any, to (but not including) the redemption date, provided that at least 50.00% of the original aggregate principal amount of the Senior Notes due 2028 remains outstanding after each such redemption; and the redemption occurs within 180 days of the closing date of such equity offering.
In addition, at any time on or prior to September 1, 2023, Booz Allen Hamilton may redeem up to 40.00% of the original aggregate principal amount of the Senior Notes due 2028 with the net cash proceeds of certain equity offerings at a redemption price equal to 103.875% of the principal amount of the Senior Notes due 2028, plus accrued and unpaid interest, if any, to (but not including) the redemption date, provided that at least 50.00% of the original aggregate principal amount of the Senior Notes due 2028 remains outstanding after each such redemption; and provided, further, that the redemption occurs within 180 days after the date on which any such equity offering is consummated.
The Senior Notes due 2029 and the related guarantees are Booz Allen Hamilton’s and each 2029 Subsidiary Guarantors’ senior unsecured obligations and rank equally in right of payment with all of Booz Allen Hamilton’s and the 2029 Subsidiary Guarantors’ existing and future senior indebtedness and rank senior in right of payment to any of Booz Allen Hamilton’s and the 2029 Subsidiary Guarantors’ future subordinated indebtedness.
The Senior Notes due 2029 are Booz Allen Hamilton’s senior unsecured obligations and rank equally in right of payment with all of Booz Allen Hamilton’s and the 2029 Subsidiary Guarantors’ existing and future senior indebtedness and rank senior in right of payment to any of Booz Allen Hamilton’s future subordinated indebtedness.
How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over revenue recognition under the cost-based input method and for variable consideration.
How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over revenue recognition under the cost-based input method.
Operating lease balances are included in operating lease right-of-use ("ROU") assets, operating lease liabilities, and operating lease liabilities, net of current portion in our consolidated balance sheet. Cash payments arising from operating leases are classified within operating activities in the consolidated statement of cash flows. As of March 31, 2022, the Company had no finance leases.
Operating lease balances are included in operating lease ROU assets, operating lease liabilities, and operating lease liabilities, net of current portion in our consolidated balance sheet. Cash payments arising from operating leases are classified within operating activities in the consolidated statement of cash flows. As of March 31, 2023, the Company had no finance leases.
Actual results experienced by the Company may differ materially from management's estimates. Revenue Recognition The Company's revenues from contracts with customers (clients) are derived from offerings that include consulting, analytics, digital solutions, engineering, and cyber services, substantially with the U.S. government and its agencies, and to a lesser extent, subcontractors.
Actual results experienced by the Company may differ materially from management's estimates. Revenue Recognition The Company's revenues from contracts with customers (clients) are derived from offerings that include management and technology consulting services, analytics, digital solutions, engineering, mission operations and cyber services, substantially all with the U.S. government and its agencies, and to a lesser extent, subcontractors.
The Company's objectives in using cash flow hedges are to reduce volatility due to interest rate movements and to add stability to interest expense (see Note 11 in our consolidated financial statements).
The Company's objectives in using cash flow hedges are to reduce volatility due to interest rate movements and to add stability to interest expense (see Note 11, “Derivatives,” to the consolidated financial statements).
The ESPP provides for quarterly offering periods. For the year ended March 31, 2022, 0.3 million shares of Class A Common Stock were purchased by employees under the ESPP. Since the program's inception, 3.2 million shares have been purchased by employees of the total 10 million shares available. 18.
The ESPP provides for quarterly offering periods. For the year ended March 31, 2023, 0.3 million shares of Class A Common Stock were purchased by employees under the ESPP. Since the program's inception, 3.5 million shares have been purchased by employees of the total 10.0 million shares available. 18.
As of March 31, 2022 and 2021, the Company had recorded liabilities of approximately $290.4 million and $263.2 million, respectively, for estimated adjustments to claimed indirect costs based on its historical DCAA audit results, including the final resolution of such audits with the Defense Contract Management Agency, for claimed indirect costs incurred subsequent to fiscal 2011, and for contracts not yet closed that are subject to audit and final resolution.
As of March 31, 2023 and 2022, the Company had recorded liabilities of approximately $326.7 million and $290.4 million, respectively, for estimated adjustments to claimed indirect costs based on its historical DCAA audit results, including the final resolution of such audits with the Defense Contract Management Agency, for claimed indirect costs incurred subsequent to fiscal 2011, and for contracts not yet closed that are subject to audit and final resolution.
Fiscal Year Ended March 31, 2021 Post-retirement plans Derivatives designated as cash flow hedges Totals Beginning of year $ (4,127) $ (41,874) $ (46,001) Other comprehensive income (loss) before reclassifications (2) 2,481 (1,529) 952 Amounts reclassified from accumulated other comprehensive loss 84 15,194 15,278 Net current-period other comprehensive income 2,565 13,665 16,230 End of year $ (1,562) $ (28,209) $ (29,771) (2) Changes in other comprehensive income (loss) before reclassification for derivatives designated as cash flow hedges are recorded net of tax benefits of $0.5 million for the fiscal year ended March 31, 2021.
Fiscal Year Ended March 31, 2021 Post-retirement plans Derivatives designated as cash flow hedges Total Beginning of year $ (4,127) $ (41,874) $ (46,001) Other comprehensive income (loss) before reclassifications (3) 2,481 (1,529) 952 Amounts reclassified from accumulated other comprehensive loss 84 15,194 15,278 Net current-period other comprehensive income (loss) 2,565 13,665 16,230 End of year $ (1,562) $ (28,209) $ (29,771) (3) Changes in other comprehensive income (loss) before reclassification for post-retirement plans and derivatives designated as cash flow hedges are recorded net of tax benefit of $0.9 million and $0.5 million, respectively, for the fiscal year ended March 31, 2021. 16.
The Company recognized a liability of $290.4 million for estimated adjustments to claimed indirect costs based on its historical DCAA audit results, including the final resolution of such audits with the Defense Contract Management Agency (DCMA) (the provision for claimed indirect costs).
The Company recognized a liability of $326.7 million for estimated adjustments to claimed indirect costs based on its historical DCAA audit results, including the final resolution of such audits with the Defense Contract Management Agency (DCMA) (the provision for claimed indirect costs).
As of March 31, 2022 and 2021, there were 8.6 million and 9.3 million shares, respectively, available for future grant under the EIP. Stock Options Stock options under the EIP are granted at the discretion of the Board of Directors or its Compensation, Culture and People Committee and expire ten years from the grant date.
As of March 31, 2023 and 2022, there were 7.7 million and 8.6 million shares, respectively, available for future grant under the EIP. Stock Options Stock options under the EIP are granted at the discretion of the Board of Directors or its Compensation, Culture and People Committee and expire ten years from the grant date.
There were undistributed earnings of $1.7 million, $2.5 million, and $0.9 million allocated to the participating class of securities in both basic and diluted earnings per share of common stock for fiscal 2022, 2021, and 2020, respectively.
There were undistributed earnings of $0.3 million, $1.7 million, and $2.5 million allocated to the participating class of securities in both basic and diluted earnings per share of common stock for fiscal 2023, 2022, and 2021, respectively.
The Company performed an annual impairment test of the trade name as of January 1, 2022 and 2021, and did not identify any impairment. Amortization expense for fiscal 2022, 2021, and 2020 was $76.2 million, $19.3 million, and $22.3 million, respectively.
The Company performed an annual impairment test of the trade name as of January 1, 2023 and 2022, and did not identify any impairment. Amortization expense for fiscal 2023, 2022, and 2021 was $94.3 million, $76.2 million, and $19.3 million, respectively.
Government Contracting Matters - Provision for Claimed Indirect Costs For fiscal 2022, 2021, and 2020, approximately 97%, 97%, and 96%, respectively, of the Company’s revenue was generated from contracts where the end user was an agency or department of the U.S. government, including contracts where the Company performed either as a prime contractor or subcontractor, and regardless of the geographic location in which the work was performed.
Government Contracting Matters - Provision for Claimed Indirect Costs For each of the fiscal years 2023, 2022, and 2021, approximately 97% of the Company’s revenue was generated from contracts where the end user was an agency or department of the U.S. government, including contracts where the Company performed either as a prime contractor or subcontractor, and regardless of the geographic location in which the work was performed.
As of March 31, 2022 and 2021, $3.1 million and $11.1 million, respectively, of the reserve is reflected as a reduction to deferred taxes and the remaining balance is recorded as a component of other long-term liabilities in the consolidated balance sheet.
As of March 31, 2023 and 2022, $3.0 million and $3.1 million, respectively, of the reserve is reflected as a reduction to deferred taxes and the remaining balance is recorded as a component of other long-term liabilities in the consolidated balance sheet.
Included in the total reserve for uncertain tax positions are accrued penalties and interest of approximately $2.9 million, $1.2 million and $0.9 million at March 31, 2022, 2021, and 2020, respectively. The Company is subject to taxation in the United States and various state and foreign jurisdictions.
Included in the total reserve for uncertain tax positions are accrued penalties and interest of approximately $5.8 million, $2.9 million and $1.2 million at March 31, 2023, 2022, and 2021, respectively. The Company is subject to taxation in the United States and various state and foreign jurisdictions.
From time to time and in the ordinary course of business, agencies of the U.S. government audit our claimed indirect costs and conduct inquiries and investigations of our business practices with respect to government contracts to determine whether the Company’s operations are conducted in accordance with these requirements and the terms of the relevant contracts.
From time to time and in the ordinary course of business , agencies of the U.S. government, including the Defense Contract Audit Agency (“DCAA”), audit the Company’s claimed indirect costs and conduct inquiries and investigations of our business practices with respect to government contracts to determine whether the Company's operations are conducted in accordance with these requirements and the terms of the relevant contracts.
These letters of credit and bank guarantees primarily support insurance and bid and performance obligations. At March 31, 2022 and 2021, approximately $1.0 million and $0.9 million of these instruments reduce the available borrowings under the Revolving Credit Facility.
These letters of credit and bank guarantees primarily support insurance and bid and performance obligations. At March 31, 2023 and 2022, approximately $1.3 million and $1.0 million of these instruments reduce the available borrowings under the Revolving Credit Facility.
Due to the wide-ranging adverse impacts on global financial markets and the current economic crisis caused by COVID-19, we may be exposed to greater interest rate volatility and market risk in the near future. We actively monitor these exposures and manage such risks through our regular financing activities and through the use of derivative financial instruments.
Due to the wide-ranging adverse impacts on global financial markets and the ensuing economic crisis, we may be exposed to greater interest rate volatility and market risk in the near future. We actively monitor these exposures and manage such risks through our regular financing activities and through the use of derivative financial instruments.
During fiscal 2019, we established a Rabbi trust to provide for the payment of benefits under our non-qualified deferred compensation plan. As of March 31, 2022, fund assets totaled $16.5 million which include mutual fund investments that are subject to fluctuations in market prices and interest rates.
During fiscal 2019, we established a Rabbi trust to provide for the payment of benefits under our non-qualified deferred compensation plan. As of March 31, 2023, fund assets totaled $20.1 million which include mutual fund investments that are subject to fluctuations in market prices and interest rates.
The components of net postretirement medical expense for the Officer Medical Plan were as follows: Fiscal Year Ended March 31, 2022 2021 2020 Service cost $ 6,505 $ 5,657 $ 4,955 Interest cost 4,063 4,237 4,859 Total postretirement medical expense $ 10,568 $ 9,894 $ 9,814 The service cost component of net periodic benefit cost is included in cost of revenue and general and administrative expenses, and the non-service cost components of net periodic benefit cost (interest cost and net actuarial loss) are included as part of other income (expense), net in the accompanying consolidated statements of operations.
The components of net postretirement medical expense for the Officer Medical Plan were as follows: Fiscal Year Ended March 31, 2023 2022 2021 Service cost $ 6,117 $ 6,505 $ 5,657 Interest cost 4,182 4,063 4,237 Total postretirement medical expense $ 10,299 $ 10,568 $ 9,894 The service cost component of net periodic benefit cost is included in cost of revenue and general and administrative expenses, and the non-service cost components of net periodic benefit cost (interest cost and net actuarial loss) are included as part of other income (expense), net in the accompanying consolidated statements of operations.
We involved our valuation specialists to assist in assessing the methodologies and testing the significant assumptions used to value the acquired intangible asset. For example, we compared the significant assumptions to current industry, market, and economic trends, historical results of the acquired businesses, and to other relevant factors.
We involved our valuation specialists to assist in assessing the methodologies and testing the significant assumptions, including discount rates, used to value the acquired intangible assets. For example, we compared the significant assumptions to current industry, market, and economic trends, historical results of the acquired businesses, and to other relevant factors.
ASU 2021-08 is effective for annual periods beginning after December 15, 2022 on a prospective basis. Early adoption is permitted. The Company early adopted the requirements of ASU 2021-08 to apply the amendments prospectively to all business combinations that occurred on or after April 1, 2022.
Topic 805 is effective for annual periods beginning after December 15, 2022 on a prospective basis. Early adoption is permitted. The Company early adopted the requirements of Topic 805 to apply the amendments prospectively to all business combinations that occurred on or after April 1, 2022.
Unrecognized Tax Benefits Description of the Matter As discussed in Notes 2 and 13 to the consolidated financial statements, the Company is subject to federal, state and foreign taxation in various jurisdictions.
F-3 Table of Contents Unrecognized Tax Benefits Description of the Matter As discussed in Notes 2 and 13 to the consolidated financial statements, the Company is subject to federal, state and foreign taxation in various jurisdictions.
We expect to recognize approximately 70% of the remaining performance obligations as of March 31, 2022 as revenue over the next 12 months, and approximately 85% over the next 24 months. The remainder is expected to be recognized thereafter.
We expect to recognize approximately 75% of the remaining performance obligations as of March 31, 2023 as revenue over the next 12 months, and approximately 85% over the next 24 months. The remainder is expected to be recognized thereafter.
Fiscal Year Ended March 31, Changes in plan assets 2022 2021 2020 Fair value of plan assets, beginning of the year $ — $ — $ — Employer contributions 5,018 4,519 3,785 Benefits paid (5,018) (4,519) (3,785) Fair value of plan assets, end of the year $ — $ — $ — As of March 31, 2022 and 2021, the unfunded status of the Officer Medical Plan was $113.5 million and $121.5 million, respectively, which is included in other long-term liabilities in the accompanying consolidated balance sheets.
Fiscal Year Ended March 31, Changes in plan assets 2023 2022 2021 Fair value of plan assets, beginning of the year $ — $ — $ — Employer contributions 3,931 5,018 4,519 Benefits paid (3,931) (5,018) (4,519) Fair value of plan assets, end of the year $ — $ — $ — As of March 31, 2023 and 2022, the unfunded status of the Officer Medical Plan was $105.6 million and $113.5 million, respectively, which is included in other long-term liabilities in the accompanying consolidated balance sheets.
The effect of derivative instruments on the accompanying consolidated financial statements is as follows: Fiscal year ended March 31, Derivatives in Cash Flow Hedging Relationships Location of Gain or Loss Recognized in Income on Derivatives Amount of Gain (Loss) Recognized in AOCI on Derivatives Amount of Loss Reclassified from AOCI into Income (1) 2022 2021 2020 2022 2021 2020 Interest rate swaps Interest expense $ 20,352 $ (2,071) $ (55,871) $ (17,535) $ (20,558) $ (2,094) (1) The reclassifications from accumulated other comprehensive gain (loss) to net income was reduced by taxes of $4.6 million, $5.4 million and $0.5 million for fiscal 2022, 2021 and 2020.
The effect of derivative instruments on the accompanying consolidated financial statements is as follows: Derivatives in Cash Flow Hedging Relationships Location of Gain or Loss Recognized in Income on Derivatives Amount of Gain (Loss) Recognized in AOCI on Derivatives Amount of Gain (Loss) Reclassified from AOCI into Income (1) Fiscal year ended March 31, Fiscal year ended March 31, 2023 2022 2021 2023 2022 2021 Interest rate swaps Interest expense $ 14,919 $ 20,352 $ (2,071) $ 1,237 $ (17,535) $ (20,558) (1) The reclassifications from accumulated other comprehensive gain (loss) to net income was reduced by taxes of $0.3 million, $4.6 million and $5.4 million, respectively, for fiscal 2023, 2022 and 2021.
The Senior Notes due 2028 and the guarantees are Booz Allen Hamilton’s and each 2028 Subsidiary Guarantors’ senior unsecured obligations and rank equally in right of payment with all of Booz Allen Hamilton’s and the 2028 Subsidiary Guarantors’ existing and future senior indebtedness and rank senior in right of payment to any of Booz Allen Hamilton’s and the Subsidiary Guarantors’ future subordinated indebtedness.
The Senior Notes due 2028 are Booz Allen Hamilton’s senior unsecured obligations and rank equally in right of payment with all of Booz Allen Hamilton’s existing and future senior indebtedness and rank senior in right of payment to any of Booz Allen Hamilton’s future subordinated indebtedness.
The accounting standard for fair value measurements establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (Level 1); inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2); and unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions (Level 3).
The accounting standard for fair value measurements establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (“Level 1”); inputs other than quoted prices in active markets that are observable either directly or indirectly (“Level 2”); and unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions (“Level 3”).
Programs and contract assets, channel relationships, and other amortizable intangible assets are generally amortized on an accelerated basis over periods ranging from 2 years to 12 years, and those related to software are generally amortized on a straight line basis over periods ranging from 1 years to 5 years.
Programs and contract assets, channel relationships, and other amortizable intangible assets are generally amortized on an accelerated basis over periods ranging from 2 years to 14 years, and those related to software are generally amortized on a straight line basis over periods ranging from 1 year to 10 years.
In determining fair value, we consider the principal or most advantageous market in which the asset or liability would transact, and if necessary, consider assumptions that market participants would use when pricing the asset or liability.
In determining fair value, the Company considers the principal or most advantageous market in which the asset or liability would transact, and if necessary, considers assumptions that market participants would use when pricing the asset or liability.
See Note 11 to our consolidated financial statements for further discussion. As of March 31, 2022, we had interest rate swaps with an aggregate notional amount of $700.0 million. These derivative instruments hedge the variability of cash outflows for interest payments on our variable rate debt and are recorded at fair value on our consolidated balance sheet.
See Note 11, “Derivatives,” to our consolidated financial statements for further discussion. As of March 31, 2023, we had effective interest rate swaps with an aggregate notional amount of $550 million. These derivative instruments hedge the variability of cash outflows for interest payments on our variable rate debt and are recorded at fair value on our consolidated balance sheet.
Grants of Class A Restricted Common Stock and Restricted Stock Units During fiscal 2022, the Board of Directors granted an aggregate of 1.1 million Restricted Stock Units with service-based and performance-based vesting conditions to existing officers, vice presidents, and other employees and non-employees of the Company, as well as to newly promoted and hired partners and vice presidents.
F-37 Table of Contents Grants of Class A Restricted Common Stock and Restricted Stock Units During fiscal 2023, the Board of Directors granted an aggregate of 1.2 million Restricted Stock Units with service-based and performance-based vesting conditions to existing officers, vice presidents, and other employees and non-employees of the Company, as well as to newly promoted and hired partners and vice presidents.
The Company is currently contesting tax assessments from the District of Columbia Office of Tax and Revenue ("DC OTR") for fiscal years 2013 through 2015. The assessment relates to $11.7 million of taxes, net of federal tax benefits, as of March 31, 2022.
The Company is currently contesting tax assessments from the District of Columbia Office of Tax and Revenue (“DC OTR”) for fiscal years 2013 through 2015. The assessment relates to $11.7 million of taxes, net of federal tax benefits, as of March 31, 2023 .
The Company provides an annual matching contribution of up to 6% of eligible annual compensation. Total expense recognized under ECAP for fiscal 2022, 2021, and 2020 was $176.8 million, $166.3 million, and $151.0 million, respectively and the Company-paid contributions were $171.6 million, $163.0 million, and $146.5 million, respectively.
The Company provides an annual matching contribution of up to 6% of eligible annual compensation. Total expense recognized under ECAP for fiscal 2023, 2022, and 2021 was $190.5 million, $176.8 million, and $166.3 million, respectively, and the Company-paid contributions were $185.7 million, $171.6 million, and $163.0 million, respectively.
Many of our contracts recognize revenue under a contract cost-based input method and require an Estimate-at-Completion (EAC) process, which management uses to review and monitor the progress towards the completion of our performance obligations.
F-12 Table of Contents Many of our contracts recognize revenue under a contract cost-based input method and require an Estimate-at-Completion (“EAC”) process, which management uses to review and monitor the progress towards the completion of our performance obligations.
The weighted-average discount rate used to determine the year-end benefit obligation for the Officer Medical Plan were 3.75%, 3.40% and 3.60% for fiscal 2022, 2021, and 2020, respectively.
The weighted-average discount rate used to determine the year-end benefit obligation for the Officer Medical Plan were 4.90%, 3.75% and 3.40% for fiscal 2023, 2022, and 2021, respectively.
The following table shows the changes in accumulated other comprehensive loss, net of tax: Fiscal Year Ended March 31, 2022 Post-retirement plans Derivatives designated as cash flow hedges Totals Beginning of year $ (1,562) $ (28,209) $ (29,771) Other comprehensive income before reclassifications (1) 10,294 15,032 25,326 Amounts reclassified from accumulated other comprehensive loss 79 12,951 13,030 Net current-period other comprehensive income 10,373 27,983 38,356 End of year 8,811 (226) 8,585 (1) Changes in other comprehensive income (loss) before reclassification for derivatives designated as cash flow hedges are recorded net of tax benefits of $5.3 million for the fiscal year ended March 31, 2022.
F-34 Table of Contents Fiscal Year Ended March 31, 2022 Post-retirement plans Derivatives designated as cash flow hedges Total Beginning of year $ (1,562) $ (28,209) $ (29,771) Other comprehensive income before reclassifications (2) 10,294 15,032 25,326 Amounts reclassified from accumulated other comprehensive income 79 12,951 13,030 Net current-period other comprehensive income 10,373 27,983 38,356 End of year $ 8,811 $ (226) $ 8,585 (2) Changes in other comprehensive income before reclassification for post-retirement plans and derivatives designated as cash flow hedges are recorded net of tax benefit of $3.6 million and $5.3 million, respectively, for the fiscal year ended March 31, 2022.
During fiscal 2022 and 2021, the Company reduced the gross cost and accumulated depreciation and amortization by $55.0 million and $100.3 million, respectively, for zero net book value assets deemed no longer in service. 8.
During fiscal 2023 and 2022, the Company reduced the gross cost and accumulated depreciation and amortization by $24.7 million and $55.0 million, respectively, for zero net book value assets deemed no longer in service. 8.
The Company is currently under federal audit by the Internal Revenue Service (“IRS”) for fiscal years 2016, 2017 and 2019 and the receipt of our U.S federal return refund claims is contingent upon the completion of the ongoing IRS audits. 14.
The Company is currently under federal audit by the IRS for fiscal years 2016, 2017 and 2019-2021 and the receipt of our U.S federal return refund claims is contingent upon the completion of the ongoing IRS audits.
To test the fair value of the acquired intangible assets, our audit procedures included, among others, evaluating the Company’s use of valuation methodologies, evaluating the projected revenues and expenses used in the valuation, and testing the completeness and accuracy of underlying data.
To test the fair value of the acquired intangible assets, our audit procedures included, among others, evaluating the Company’s use of valuation methodologies, evaluating the prospective financial information used in the valuation, and testing the completeness and accuracy of underlying data.
As of March 31, 2022 and 2021, there were no material amounts accrued in the consolidated financial statements related to these proceedings. On June 7, 2017, Booz Allen Hamilton Inc. was informed that the U.S. Department of Justice (DOJ) is conducting a civil and criminal investigation of the Company.
As of March 31, 2023 and 2022, there were no material amounts accrued in the consolidated financial statements related to these proceedings. F-40 Table of Contents On June 7, 2017, Booz Allen Hamilton was informed that the U.S. Department of Justice (“DOJ”) is conducting a civil and criminal investigation of the Company.
As a result of these transactions, the Company repurchase d 0.3 million shares a nd recorded them as treasury shares at a total cost of $29.3 million in fiscal 2022.
As a result of these transactions, the Company repurchase d 0.3 million shares a nd recorded them as treasury shares at a total cost of $28.2 million in fiscal 2023.

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