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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NUMBER 1-12997
MAXIMUS, INC.
(Exact Name of Registrant as Specified in Its Charter)
----------------------
VIRGINIA 54-1000588
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
11419 SUNSET HILLS ROAD
RESTON, VIRGINIA 20190
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (703) 251-8500
----------------------
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes / X / No / /
Class Outstanding at August 9, 2001
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Common Shares, no par value 22,920,404
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MAXIMUS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets as of September 30, 2000 (audited) and
June 30, 2001 (unaudited)
Consolidated Statements of Income for the three months and nine months
ended June 30, 2000 and 2001 (unaudited)
Consolidated Statements of Cash Flows for the nine months ended
June 30, 2000 and 2001 (unaudited)
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Signature
Exhibit Index
THROUGHOUT THIS QUARTERLY REPORT ON FORM 10-Q, THE TERMS "WE," "US," "OUR" AND
"MAXIMUS" REFER TO MAXIMUS, INC. AND ITS SUBSIDIARIES.
MAXIMUS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, JUNE 30,
2000 2001
------------- -----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents............................................. $ 36,975 $ 91,804
Marketable securities................................................. 1,359 1,230
Accounts receivable, net.............................................. 102,500 113,727
Costs and estimated earnings in excess of billings.................... 27,264 31,231
Prepaid expenses and other current assets............................. 6,344 4,096
-------- --------
Total current assets...................................................... 174,442 242,088
Property and equipment at cost:
Land.................................................................. 2,462 2,462
Building and improvements............................................. 9,484 10,771
Office furniture and equipment........................................ 14,264 17,283
Leasehold improvements................................................ 848 982
-------- --------
27,058 31,498
Less: Accumulated depreciation and amortization...................... (8,754) (10,983)
-------- --------
Total property and equipment, net......................................... 18,304 20,515
Software development costs................................................ 7,883 13,020
Less: Accumulated amortization....................................... (703) (1,845)
-------- --------
Total software development, net........................................... 7,180 11,175
Deferred income taxes..................................................... 1,402 1,384
Intangible assets, net.................................................... 52,586 50,455
Other assets.............................................................. 2,989 3,281
-------- --------
Total assets.............................................................. $256,903 $328,898
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................... $ 12,565 $12,736
Accrued compensation and benefits..................................... 17,747 19,101
Billings in excess of costs and estimated earnings.................... 15,648 11,408
Income taxes payable.................................................. - 2,542
Other current liabilities............................................. 670 683
-------- --------
Total current liabilities................................................. 46,630 46,470
Long-term debt............................................................ 555 -
Other liabilities......................................................... 785 643
-------- --------
Total liabilities......................................................... 47,970 47,113
Shareholders' equity:
Common stock, no par value; 60,000,000 shares authorized; 21,125,844
and 22,751,676 shares issued and outstanding at September 30, 2000
and June 30, 2001, at stated amount, respectively................... 133,082 176,177
Accumulated other comprehensive loss.................................. (26) (14)
Retained earnings..................................................... 75,877 105,622
-------- --------
Total shareholders' equity................................................ 208,933 281,785
-------- --------
Total liabilities and shareholders' equity................................ $256,903 $328,898
======== ========
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
-1-
MAXIMUS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
2000 2001 2000 2001
-------- -------- -------- -------
Revenues......................................................... $105,577 $129,677 $288,761 $363,198
Cost of revenues................................................. 71,832 90,120 198,166 249,420
-------- -------- -------- --------
Gross profit..................................................... 33,745 39,557 90,595 113,778
Selling, general and administrative expenses..................... 18,036 19,430 48,743 59,690
Merger related expenses.......................................... 210 - 210 -
Amortization of goodwill and other acquisition-related
intangibles.................................................. 1,079 1,417 1,724 4,168
-------- -------- -------- --------
Income from operations........................................... 14,420 18,710 39,918 49,920
Interest and other income........................................ 366 473 2,515 927
-------- -------- -------- --------
Income before income taxes....................................... 14,786 19,183 42,433 50,847
Provision for income taxes....................................... 6,188 7,961 17,609 21,102
-------- -------- -------- --------
Net income....................................................... $ 8,598 $ 11,222 $ 24,824 $ 29,745
======== ======== ======== ========
Earnings per share:
Basic......................................................... $ 0.41 $ 0.52 $ 1.18 $ 1.40
======== ======== ======== ========
Diluted....................................................... $ 0.40 $ 0.50 $ 1.16 $ 1.35
======== ======== ======== ========
Weighted average shares outstanding:
Basic......................................................... 21,079 21,511 21,039 21,289
======== ======== ======== ========
Diluted....................................................... 21,322 22,380 21,373 21,998
======== ======== ======== ========
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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MAXIMUS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NINE MONTHS
ENDED JUNE 30,
--------------------------
2000 2001
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 24,824 $ 29,745
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.............................................. 3,871 7,466
Deferred income taxes...................................................... - (93)
Change in assets and liabilities:
Accounts receivable, net................................................... (11,840) (10,948)
Costs and estimated earnings in excess of billings......................... (5,873) (3,967)
Prepaid expenses and other current assets.................................. 769 2,376
Other assets............................................................... 144 (964)
Accounts payable........................................................... (1,583) 51
Accrued compensation and benefits.......................................... (515) 1,118
Billings in excess of costs and estimated earnings......................... 933 (4,240)
Income taxes payable....................................................... (3,278) 2,542
Other liabilities.......................................................... (907) (62)
-------- --------
Net cash provided by operating activities.......................................... 6,545 23,024
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of acquired cash............................ (51,238) (825)
Purchase price adjustments, net............................................ - (1,284)
Proceeds from notes receivable............................................. 136 756
Capitalization of software development costs............................... (1,425) (5,137)
Purchase of property and equipment......................................... (2,344) (4,260)
Decrease in marketable securities.......................................... 26,331 139
-------- --------
Net cash used in investing activities.............................................. (28,540) (10,611)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock .................................................. 1,860 11,717
Net proceeds from secondary stock offering ................................ - 31,378
Net payments on borrowings................................................. (3,742) (679)
-------- --------
Net cash (used in) provided by financing activities................................ (1,882) 42,416
-------- --------
Net (decrease) increase in cash and cash equivalents............................... (23,877) 54,829
Cash and cash equivalents, beginning of period..................................... 61,647 36,975
-------- --------
Cash and cash equivalents, end of period........................................... $ 37,770 $ 91,804
======== ========
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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MAXIMUS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 2001 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
IN THESE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, THE
TERMS THE "COMPANY" AND "MAXIMUS" REFER TO MAXIMUS, INC. AND ITS SUBSIDIARIES.
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normally recurring accruals) considered necessary for a fair presentation
have been included. The results of operations for the three-month and nine-month
periods ended June 30, 2001 are not necessarily indicative of the results that
may be expected for the full fiscal year. These financial statements should be
read in conjunction with the audited financial statements as of September 30,
2000 and 1999 and for each of the three years in the period ended September 30,
2000, included in the Company's Annual Report on Form 10-K for the year ended
September 30, 2000 (File No. 1-12997) filed with the Securities and Exchange
Commission on December 27, 2000.
Certain reclassifications have been made to prior year amounts to
conform to current year presentation.
2. FOLLOW-ON PUBLIC OFFERING
The Company completed a public offering (the "follow-on offering") of
common stock during June 2001. Of the 4,255,000 shares of common stock sold in
the follow-on offering, 3,255,000 were sold by selling shareholders and
1,000,000 shares were sold by the Company, generating $31,378 in proceeds to the
Company, net of expenses.
3. IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In December 1999, the staff of the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN
FINANCIAL STATEMENTS ("SAB 101"). SAB 101 summarizes some of the staff's
interpretations of the application of generally accepted accounting principles
to revenue recognition, including presentation in the consolidated financial
statements. The Company intends to adopt SAB 101 in the fourth quarter of fiscal
2001. SAB 101 requires that the Company restate its year to date results for the
cumulative effect of the change through September 30, 2000 and the effect on the
first three quarters of fiscal year 2001 upon adoption. The Company estimates
that the cumulative effect of adopting SAB 101, which will be reported on a
separate line item as a change in accounting in the Company's restated first
quarter results, will reduce previously reported profit by $3,856 ($.18 per
diluted share). For the first three quarters of fiscal 2001, the Company
anticipates the restatement will result in a $3,064 reduction in reported
revenue which will reduce reported earnings by $1,792 ($.08 per diluted share).
In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, BUSINESS COMBINATIONS
("FAS 141"), and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS ("FAS 142"),
effective for fiscal years beginning after December 15, 2001, with earlier
adoption permitted. Under the new rules, goodwill will no longer be amortized
but will be subject to annual impairment tests in accordance with FAS 141 and
FAS 142. Other intangible assets will continue to be amortized over their useful
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lives. The Company intends to apply the new rules on accounting for goodwill and
other intangible assets beginning the first quarter of fiscal year 2002.
Application of the non-amortization provisions of FAS 142 is expected to result
in an increase in net income of approximately $2,600 ($.11 per diluted share)
for fiscal year 2002. During fiscal year 2002, the Company intends to perform
the first of the required impairment tests of goodwill as of October 1, 2001.
4. BUSINESS COMBINATIONS
On October 20, 1999, the Company acquired all of the outstanding shares
of capital stock of Public Systems, Inc. for $5,000. In conjunction with the
purchase, the Company recorded intangible assets of $4,540.
On March 20, 2000, the Company acquired all of the outstanding shares
of capital stock of Crawford Consulting, Inc. for $16,750. In conjunction with
the purchase, the Company recorded intangible assets of $11,887.
On March 31, 2000, the Company acquired substantially all of the assets
of the government services division of 3-G International, Inc. for $7,000, plus
an earn-out amount of $1,126 paid by the Company in May 2001 as a result of
achievement of certain objectives. In conjunction with the purchase, the Company
recorded intangible assets of $8,180.
On April 12, 2000, Asset Solutions (formerly known as CSI-MAXIMUS,
Inc.), a wholly owned subsidiary of the Company, acquired substantially all of
the assets of Asset Works, Inc. for $8,613. In conjunction with the purchase,
the Company recorded intangible assets of $8,674.
On April 14, 2000, the Company acquired all of the outstanding shares
of capital stock of Valuation Resource Management, Inc. for $4,500. In
conjunction with the purchase, the Company recorded intangible assets of $3,763.
On April 29, 2000, the Company acquired substantially all of the assets
of Technology Management Resources, Inc. for $9,674. In conjunction with the
purchase, the Company recorded intangible assets of $10,036.
On July 19, 2000, the Company acquired all of the outstanding
membership interests of Strategic Partners International, LLC for $1,800. In
conjunction with the purchase, the Company recorded intangible assets of $1,609.
On May 11, 2001, the Company acquired all of the outstanding membership
interests of Opportunity America, LLC for $825. In conjunction with the
purchase, the Company recorded intangible assets of $753.
Goodwill and intangible assets are amortized using the straight-line
method over periods ranging from two to fifteen years. The accumulated
amortization related to goodwill and intangible assets at September 30, 2000 was
$3,472 and at June 30, 2001 was $7,640.
5. COMMITMENTS AND CONTINGENCIES
In January 2000, the New York City Human Resources Administration
submitted two contracts that it had awarded to the Company for the performance
of welfare-to-work services to the Comptroller of New York City (the
"Comptroller") to be registered. Under New York law, the contracts must be
registered in order for the Company to receive payment. However, the Comptroller
refused to register the contracts, alleging improprieties in the procurement
process and in the Company's conduct. The New York Supreme Court, Appellate
Division - First Department ordered the Comptroller to register the contracts in
October 2000 after
-5-
finding no wrongdoing in the Company's conduct. The District Attorney's Office
of New York County and the United States Attorney's Office for the Southern
District of New York, in response to requests made by the Comptroller,
initiated investigations into the facts underlying this matter. Those offices
reviewed some of the Company's documents and interviewed some of the Company's
employees in 2000 and 2001. The Company believes that its actions were lawful
and appropriate and, although there can be no assurance of a favorable outcome,
the Company does not believe that this matter will have a material adverse
effect on the Company's financial condition or results of operations.
The Company also is involved in various other legal proceedings in the
ordinary course of its business. In the opinion of management, these proceedings
involve amounts that would not have a material effect on the financial position
or results of operations of the Company if such proceedings were disposed of
unfavorably.
6. EARNINGS PER SHARE
The following table sets forth the components of basic and diluted earnings per
share:
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
2000 2001 2000 2001
------- ------- ------- -------
Numerator:
Net income............................................ $ 8,598 $11,222 $24,824 $29,745
======= ======= ======= =======
Denominator:
Weighted average shares outstanding................... 21,079 21,511 21,039 21,289
Effect of dilutive securities:
Employee stock options................................ 243 869 334 709
------- ------- ------- -------
Denominator for diluted earnings per share............ 21,322 22,380 21,373 21,998
======== ======== ======= =======
-6-
7. SEGMENT INFORMATION
In October 2000, the Company completed a reorganization of its
divisions to better focus and manage the Company's existing and future
technology assets. Accordingly, prior period reports have been reclassified to
reflect current period presentation of segment information.
The following table provides certain financial information for each
business segment:
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
2000 2001 2000 2001
-------- -------- -------- --------
Revenues:
Government Operations Group.................... $ 55,629 $ 72,302 $160,839 $199,371
Consulting Group............................... 31,150 38,013 85,546 110,315
Systems Group.................................. 18,798 19,362 42,376 53,512
-------- -------- -------- --------
Total............................................... $105,577 $129,677 $288,761 $363,198
======== ======== ======== ========
Gross Profit:
Government Operations Group.................... $ 12,733 $ 15,314 $ 36,247 $ 42,654
Consulting Group............................... 12,352 17,193 34,534 48,924
Systems Group.................................. 8,660 7,050 19,814 22,200
-------- -------- -------- --------
Total............................................... $ 33,745 $ 39,557 $ 90,595 $113,778
======== ======== ======== ========
Income from operations:
Government Operations Group.................... $ 6,516 $ 8,332 $ 18,085 $ 20,566
Consulting Group............................... 5,196 9,339 15,101 25,408
Systems Group.................................. 2,708 1,039 6,732 3,946
-------- -------- -------- --------
Total............................................... $ 14,420 $ 18,710 $ 39,918 $ 49,920
======== ======== ======== ========
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
We are a leading provider of program management, consulting services
and systems solutions primarily to state and local government agencies
throughout the United States. Since our inception, we have been at the forefront
of innovation in meeting our mission of "Helping Government Serve the
People(R)." We use our expertise, experience and advanced information technology
to make government operations more efficient and cost-effective while improving
the quality of services provided to program beneficiaries. We currently have
contracts with government agencies in all 50 states, 49 of the 50 largest cities
and 27 of the 30 largest counties, and have been profitable every year since we
were founded in 1975. For the fiscal year ended September 30, 2000, we had
revenues of $399.2 million and net income of $30.5 million and for the nine
months ended June 30, 2001, we had revenues of $363.2 million and net income of
$29.7 million.
Prior to October 2000, we conducted our operations through two groups:
the Government Operations Group and the Consulting Group. In October 2000, we
reorganized our groups to better focus and manage our existing and future
technology assets. Our core technology assets were moved from the Consulting
Group to the newly created Systems Group. Accordingly, we have reflected the
segment information for earlier periods as if it were composed of three
reportable segments instead of two reportable segments.
Our revenues are generated from contracts with various payment
arrangements, including: (1) fixed-price; (2) costs incurred plus a negotiated
fee ("cost-plus"); (3) performance-based criteria; and (4) time and materials
reimbursement (used primarily by the Consulting Group). For the fiscal year
ended September 30, 2000, the most recent period for which this information is
available, revenues from fixed price contracts were approximately 47% of total
revenues; revenues from cost-plus contracts were approximately 19% of total
revenues; revenues from performance based contracts were approximately 18% of
total revenues; and revenues from time and materials reimbursement contracts
were approximately 16% of total revenues. Historically, a majority of our
contracts with state and local government agencies have been fixed-price and
performance-based and our contracts with the federal government have been
cost-plus. Fixed-price and performance-based contracts generally offer higher
margins but typically involve more risk than cost-plus or time and materials
reimbursement contracts because we are subject to the risk of potential cost
overruns or inaccurate revenue estimates.
The Government Operations Group's contracts generally contain base
periods of one or more years as well as one or more option periods that may
cover more than half of the potential contract duration. As of September 30,
2000, our average Government Operations contract duration was approximately 2.3
years. Our Consulting Group contracts had performance periods ranging from one
month to approximately two years. Our average Systems Group contract duration
was 1.5 years.
Our most significant expense is cost of revenues, which consists
primarily of project-related employee salaries and benefits, subcontractors,
computer equipment and travel expenses. Our ability to accurately predict
personnel requirements, salaries and other costs as well as to effectively
manage a project or achieve certain levels of performance can have a significant
impact on the service costs related to our fixed-price, performance-based and
time and materials contracts. Service cost variability has little impact on
cost-plus arrangements because allowable costs are reimbursed by the client.
Selling, general and administrative expenses consist of management,
marketing and administration costs including salaries, benefits, travel,
recruiting, continuing education and training, facilities costs, printing,
reproduction, communications and equipment depreciation.
-8-
BUSINESS COMBINATIONS AND ACQUISITIONS
As part of our growth strategy, we intend to continue to selectively
identify and pursue complementary businesses to expand our geographic reach and
the breadth and depth of our services and to enhance our customer base. During
fiscal 2000 and the first three quarters of fiscal 2001, we completed the
following transactions:
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
INTANGIBLE ASSETS
ACQUIRED COMPANY DESCRIPTION OF BUSINESS DATE PURCHASE PRICE RECORDED
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
Opportunity America, LLC Employment training and May 11, 2001 $825,000 $753,000
placement
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
Strategic Partners Activity-based costing July 19, 2000 $1,800,000 $1,609,000
International LLC systems
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
Technology Management Child support collection April 29, 2000 $9,674,000 $10,036,000
Resources services
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
Valuation Resource Asset inventorying and April 14, 2000 $4,500,000 $3,763,000
Management, Inc. valuation services
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
Asset Works, Inc. Infrastructure management April 12, 2000 $8,613,000 $8,674,000
systems
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
3-G International, Inc. Smart-card systems March 31, 2000 $8,126,000 $8,180,000
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
Crawford Consulting, Inc. Web-enabled information March 20, 2000 $16,750,000 $11,887,000
systems
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
Public Systems, Inc. Client-server management October 20, 1999 $5,000,000 $4,540,000
systems
- --------------------------- --------------------------- --------------------- ---------------------- --------------------
-9-
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of income data as a percentage of revenues:
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
2000 2001 2000 2001
-------- -------- -------- -------
Revenues:
Government Operations Group.............................. 52.7% 55.8% 55.7% 54.9%
Consulting Group......................................... 29.5 29.3 29.6 30.4
Systems Group............................................ 17.8 14.9 14.7 14.7
------ ------ ------ ------
Total revenues...................................... 100.0 100.0 100.0 100.0
Gross Profit:
Government Operations Group.............................. 22.9 21.2 22.5 21.4
Consulting Group......................................... 39.7 45.2 40.4 44.4
Systems Group............................................ 46.1 36.4 46.8 41.5
------ ------ ------ ------
Total gross profit.................................. 32.0 30.5 31.4 31.3
Selling, general and administrative expenses............. 17.1 15.0 16.9 16.4
Merger related expenses.................................. 0.2 - 0.1 -
Amortization of goodwill and other acquisition-
related intangibles................................... 1.0 1.1 0.6 1.2
------ ------ ------ ------
Income from operations:
Government Operations Group.............................. 11.7 11.5 11.2 10.3
Consulting Group......................................... 16.7 24.6 17.7 23.0
Systems Group............................................ 14.4 5.4 15.9 7.4
------ ------ ------ ------
Total income from operations........................ 13.7 14.4 13.8 13.7
Interest and other income................................ 0.3 0.4 0.9 0.3
------ ------ ------ ------
Income before income taxes............................... 14.0 14.8 14.7 14.0
Provision for income taxes............................... 5.9 6.1 6.1 5.8
------ ------ ------ ------
Net income............................................... 8.1% 8.7% 8.6% 8.2%
====== ====== ====== ======
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED
JUNE 30, 2000
REVENUES. Our total contract revenues increased 22.8% to $129.7 million
for the three months ended June 30, 2001 from $105.6 million for the same period
in 2000. Revenues of our Government Operations Group increased 30.0% to $72.3
million for the three months ended June 30, 2001 from $55.6 million for the same
period in 2000. This increase was due to an increase in the number of contracts
plus revenue totaling $0.1 million received this quarter from entities acquired
after the third quarter of the last fiscal year. Revenues of our Consulting
Group increased 22.0% to $38.0 million for the three months ended June 30, 2001
from $31.2 million for the same period in 2000. This increase was due to an
increase in the number of contracts plus revenue totaling $0.5 million received
this quarter from entities acquired after the third quarter of the last fiscal
year. Revenues of our Systems Group increased 3.0% to $19.4 million for the
three months ended June 30, 2001 from $18.8 million for the same period in 2000
due primarily to an increase in the number of contracts. For the three months
ended June 30, 2001 compared to the three months ended June 30, 2000, our
overall growth in revenue was 22.3 % excluding the revenue from entities we
acquired after the period ended June 30, 2000.
GROSS PROFIT. Our total gross profit increased 17.2% to $39.6 million
for the three months ended June 30, 2001 from $33.8 million for the same period
in 2000. Gross profit of our Government Operations Group
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increased 20.3% to $15.3 million for the three months ended June 30, 2001 from
$12.7 million for the three months ended June 30, 2000. As a percentage of
Government Operations Group revenues, Government Operations Group gross profit
decreased to 21.2% for the three months ended June 30, 2001 from 22.9% for the
same period in 2000. The decrease was due to a decline in gross margins on a few
projects within the Group. Gross profit of our Consulting Group increased 39.2%
to $17.2 million for the three months ended June 30, 2001 from $12.4 million for
the same period in 2000. As a percentage of Consulting Group revenues,
Consulting Group gross profit increased to 45.2% for the three months ended June
30, 2001 from 39.7% for the same period in 2000, primarily due to improved
margins on a few projects within the Group. Gross profit of our Systems Group
decreased 18.6% to $7.1 million for the three months ended June 30, 2001 from
$8.7 million for the same period in 2000. As a percentage of Systems Group
revenues, Systems Group gross profit decreased to 36.4% for the three months
ended June 30, 2001 from 46.1% for the same period in 2000, due primarily to a
decline in software license sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our total selling,
general and administrative (SG&A) expenses increased 7.7% to $19.4 million for
the three months ended June 30, 2001 from $18.0 million for the same period in
2000. The primary reasons for the increase in SG&A costs were the growth in the
number of our employees to approximately 4,600 at June 30, 2001 from
approximately 4,100 at June 30, 2000, the increase in expenses necessary to
support our growth and the increase in marketing and proposal preparation
expenditures incurred to pursue further growth. As a percentage of our revenues,
our SG&A expenses decreased to 15.0% for the three months ended June 30, 2001
from 17.1% for the same period in 2000.
AMORTIZATION OF GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLES. In
the quarter ended June 30, 2001, we incurred $1.4 million of amortization
expense, as compared to $1.1 million for the same period in 2000. The increase
was due to amortization of $58.1 million of goodwill and other
acquisition-related intangible assets we recorded in connection with
acquisitions we completed through June 30, 2001.
INTEREST AND OTHER INCOME. The increase in interest and other income to
$0.5 million for the three months ended June 30, 2001 as compared to $0.4
million for the same period in 2000 was due to an increase in the average
balance of funds we invested.
PROVISION FOR INCOME TAXES. Our provision for income tax for the three
months ended June 30, 2001 was 41.5% of income before income taxes as compared
to 41.9% for the three months ended June 30, 2000. This decrease was due to
differences in the amounts of certain expense items, primarily amortization of
intangible assets, some of which is not deductible for tax purposes.
NINE MONTHS ENDED JUNE 30, 2001 COMPARED TO NINE MONTHS ENDED
JUNE 30, 2000
REVENUES. Our total contract revenues increased 25.8% to $363.2 million
for the nine months ended June 30, 2001 from $288.8 million for the same period
in 2000. Revenues of our Government Operations Group increased 24.0% to $199.4
million for the nine months ended June 30, 2001 from $160.8 million for the same
period in 2000. This increase was due to an increase in the number of contracts
plus revenue totaling $2.9 million received during the nine months ended June
30, 2001 related to acquisitions made during the prior fiscal year. Revenues of
our Consulting Group increased 29.0% to $110.3 million for the nine months ended
June 30, 2001 from $85.6 million for the same period in 2000. This increase was
due to an increase in the number of contracts plus revenue totaling $4.7 million
received during the nine months ended June 30, 2001 related to acquisitions made
during the prior fiscal year. Revenues of our Systems Group increased 26.3% to
$53.5 million for the nine months ended June 30, 2001 from $42.4 million for the
same period in 2000. This increase was primarily due to revenue totaling $10.1
million received during the nine months ended June 30, 2001 related to
acquisitions made during the prior fiscal year. For the nine months ended June
30, 2001 compared to the nine months ended June 30, 2000, our overall growth in
revenue was 19.6% excluding the revenue related to acquisitions made during the
prior fiscal year.
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GROSS PROFIT. Our total gross profit increased 25.6% to $113.8 million
for the nine months ended June 30, 2001 from $90.6 million for the same period
in 2000. Gross profit of our Government Operations Group increased 17.7% to
$42.7 million for the nine months ended June 30, 2001 from $36.3 million for the
nine months ended June 30, 2000. As a percentage of Government Operations Group
revenues, Government Operations Group gross profit decreased to 21.4% for the
nine months ended June 30, 2001 from 22.5% for the same period in 2000. The
decrease was due to a decline in gross margins on a few projects within the
Group. Gross profit of our Consulting Group increased 41.7% to $48.9 million for
the nine months ended June 30, 2001 from $34.5 million for the same period in
2000. As a percentage of Consulting Group revenues, Consulting Group gross
profit increased to 44.4% for the nine months ended June 30, 2001 from 40.4% for
the same period in 2000, primarily due to improved margins on a few projects
within the Group. Gross profit of our Systems Group increased 12.0% to $22.2
million for the nine months ended June 30, 2001 from $19.8 million for the same
period in 2000. As a percentage of Systems Group revenues, Systems Group gross
profit decreased to 41.5% for the nine months ended June 30, 2001 from 46.8% for
the same period in 2000, due primarily to a decline in software license sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our SG&A expenses
increased 22.5% to $59.7 million for the nine months ended June 30, 2001 from
$48.7 million for the same period in 2000. The primary reasons for the increase
in SG&A costs were the growth in the number of our employees to approximately
4,600 at June 30, 2001 from approximately 4,100 at June 30, 2000, the increase
in expenses necessary to support our growth and the increase in marketing and
proposal preparation expenditures incurred to pursue further growth. As a
percentage of our revenues, our SG&A expenses decreased to 16.4% for the nine
months ended June 30, 2001 from 16.9% for the same period in 2000.
AMORTIZATION OF GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLES. In
the nine months ended June 30, 2001, we incurred $4.2 million of amortization
expense, as compared to $1.7 million for the same period in 2000. The increase
is due to amortization of $58.1 million of goodwill and other
acquisition-related intangible assets we recorded in connection with
acquisitions we completed through June 30, 2001.
INTEREST AND OTHER INCOME. The decrease in interest and other income to
$0.9 million for the nine months ended June 30, 2001 as compared to $2.5 million
for the same period in 2000 was due to a decrease in the average balance of
funds we invested.
PROVISION FOR INCOME TAXES. Our provision for income tax for both the
nine months ended June 30, 2000 and 2001 was 41.5% of income before income
taxes.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended June 30, 2001, cash provided by our
operations was $23.0 million as compared to $6.5 million for the nine months
ended June 30, 2000. Cash provided by operating activities for the nine months
ended June 30, 2001 primarily consisted of net income of $29.7 million plus
non-cash adjustments of $7.5 million, offset by increases in accounts receivable
of $11.0 million and costs and estimated earnings in excess of billings of $4.0
million. During the nine months ended June 30, 2000, cash provided by operating
activities primarily consisted of net income of $24.8 million plus non-cash
adjustments of $3.9 million, offset by increases in accounts receivable of $11.8
million and costs and estimated earnings in excess of billings of $5.8 million
and a decrease in income taxes payable of $3.3 million.
.
For the nine months ended June 30, 2001, cash used in investing
activities was $10.6 million as compared to $28.5 million for the nine months
ended June 30, 2000. Cash used in investing activities for the nine months ended
June 30, 2001 primarily consisted of expenditures for capitalized software costs
totaling $5.1 million, purchases of property and equipment of $4.3 million and
purchase price adjustments of acquired businesses of $1.3 million. During the
nine months ended June 30, 2000, we generated cash from sales of marketable
securities, substantially all of which consisted of short-term government
obligations totaling $26.3
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million, and used $51.2 million in cash for six acquisitions.
Cash provided by financing activities was $42.4 million, which
consisted primarily of the $31.4 million of proceeds, net of offering expenses,
from the secondary stock offering completed in June 2001. Sales of stock to
employees through our Employee Stock Purchase Plan and Stock Option Plan were
$11.7 million for the nine months ended June 30, 2001. Cash used during the nine
months ended June 30, 2000 was $1.8 million, which consisted primarily of
payments on borrowings of $3.7 million offset by sales of stock to employees
through our Employee Stock Purchase Plan and Stock Option Plan during the
period.
Our management believes that we will have sufficient resources to meet
our currently anticipated capital expenditure and working capital requirements
for at least the next twelve months.
FORWARD LOOKING STATEMENTS
From time to time, we may make forward-looking statements that are not
historical facts, including statements about our confidence and strategies and
our expectations about revenues, results of operations, profitability, future
contracts, market opportunities, market demand or acceptance of our products and
services. These statements involve risks and uncertainties that could cause our
actual results to differ materially from those indicated by such forward-looking
statements. Examples of these risks include: risks associated with government
contracting; risks involved in managing government projects; opposition from
government unions; challenges resulting from our growth; legislative changes and
political developments; adverse publicity; and legal, economic, and other risks
detailed in Exhibit 99 to this Quarterly Report on Form 10-Q for the fiscal
period ended June 30, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We believe that our exposure to market risk related to the effect of
changes in interest rates, foreign currency exchange rates, commodity prices and
equity prices with regard to instruments entered into for trading or for other
purposes is immaterial.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The Exhibits filed as part of this Form 10-Q are listed on
the Exhibit Index immediately preceding the Exhibits. The Exhibit
Index is incorporated herein by reference.
(b) Reports on Form 8-K. The Company did not file any Current Reports on
Form 8-K during the quarter ended June 30, 2001.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAXIMUS, INC.
Date: August 10, 2001 By: /s/ F. ARTHUR NERRET
-----------------------------------
F. Arthur Nerret
Vice President, Finance,
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99 Important Factors Regarding Forward Looking Statements.
Filed herewith.