BOOZ ALLEN HAMILTON HOLDING CORP Management’s Report of Financial Condition and Results of Operations (Form 10-K)

The following discussion and analysis is intended to help the reader understand
our business, financial condition, results of operations, and liquidity and
capital resources. You should read this discussion in conjunction with 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 .

The statements in this discussion regarding industry outlook, our expectations
regarding our future performance, liquidity and capital resources, and other
non-historical statements in this discussion are forward-looking statements.
These forward-looking statements are subject to numerous risks and
uncertainties, including, but not limited to, the risks and uncertainties
described in "Item 1A. Risk Factors" and "Introductory Note - Cautionary Note
Regarding Forward-Looking Statements". Our actual results may differ materially
from those contained in or implied by any forward-looking statements.

Our fiscal year is ending March, 31st and, unless otherwise stated, references to years or financial years are to the financial years ended March, 31st. See “- Results of Operations”.

Insight


We are a leading provider of management and technology consulting, analytics,
engineering, digital solutions, mission operations, and cyber services to U.S.
and international governments, major corporations, and not-for-profit
organizations. Our ability to deliver value to our clients has always been, and
continues to be, a product of the strong character, expertise and tremendous
passion of our people. Our approximately 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.

Through our dedication to our clients' missions, and a commitment to evolving
our business to address their needs, we have longstanding relationships with our
clients, the longest of which is more than 80 years. We support critical
missions for a diverse base of federal government clients, including nearly all
of the U.S. government's cabinet-level departments, as well as for commercial
clients, both domestically and internationally. We support our federal
government clients by helping them tackle their most complex and pressing
challenges such as protecting soldiers in combat and supporting their families,
advancing cyber capabilities, keeping our national infrastructure secure,
enabling and enhancing digital services, transforming the healthcare system, and
improving government efficiency to achieve better outcomes. We serve commercial
clients across industries including financial services, health and life
sciences, energy, and technology.

Financial and Other Highlights

In fiscal 2022, the Company delivered year-over-year revenue growth and increased the headcount of client staff for the year. Revenue increased 6.4% from fiscal 2021 to fiscal 2022, primarily due to the impact of acquisitions and strong demand, partially offset by lower 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. The decrease in operating income and operating
margin were impacted by acquisition and divestiture costs of $97.5 million
primarily related to our acquisitions during fiscal 2022. Increases in
depreciation and amortization (primarily due to the recent acquisitions) year
over year also contributed to the decline in operating income. These decreases
were partially offset by profitable contract level performance and mix, which
includes inorganic contributions, as well as prudent cost management. In
addition, fiscal 2021 operating income was impacted by approximately $24.0
million by the inability to recognize revenue on, or bill for, fee on certain
contracts involving a ready workforce.

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. Based on the information currently available, the Company is not able to
reasonably estimate the expected long-term incremental legal costs or amounts
that may be reimbursed associated with this investigation and these related
matters.

We are monitoring the evolving situation related to COVID-19, and we continue to
work with our stakeholders to assess further possible implications to our
business. We could be impacted by the implementation of our Company policy
requiring full COVID-19 vaccinations of all employees, except for employees who
qualify for medical or religious exemptions. Although we cannot currently
predict the overall impact of COVID-19, the longer the duration the more likely
it is that it could have an adverse effect on our business, financial position,
results of operations, billable expenses, and/or cash flows.


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Non-GAAP Measures


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

•"Revenue, Excluding Billable Expenses" represents revenue less billable
expenses. We use Revenue, Excluding Billable Expenses because it provides
management useful information about the Company's operating performance by
excluding the impact of costs that are not indicative of the level of
productivity of our 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 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.
"Adjusted EBITDA Margin on Revenue" is calculated as Adjusted EBITDA divided by
revenue. "Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses" is
calculated as Adjusted EBITDA divided by Revenue, Excluding Billable Expenses.
The Company prepares Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, and
Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses to eliminate the
impact of items it does not consider indicative of ongoing operating performance
due to their inherent unusual, extraordinary or non-recurring nature or because
they result from an event of a similar nature.

•"Adjusted Net Income" represents net income before: (i) acquisition and
divestiture costs, (ii) financing transaction costs, (iii) supplemental employee
benefits due to COVID-19, (iv) significant acquisition amortization, (v)
restructuring costs, (vi) gain associated with equity method investment
activity, (vii) research and development tax credits, (viii) release of income
tax reserves, (ix) loss on debt extinguishment, (x) remeasurement of deferred
tax assets/liabilities, and (xi) amortization or write-off of debt issuance
costs
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and debt discount, in each case net of the tax effect where appropriate
calculated using an assumed effective tax rate. We prepare Adjusted Net Income
to eliminate the impact of items, net of tax, we do not consider indicative of
ongoing operating performance due to their inherent unusual, extraordinary, or
non-recurring nature or because they result from an event of a similar nature.
We view net income excluding the impact of the re-measurement of the Company's
deferred tax assets and liabilities as an important indicator of performance
consistent with the manner in which management measures and forecasts the
Company's performance and the way in which management is incentivized to
perform.

•"Adjusted Diluted EPS" represents diluted EPS calculated using Adjusted Net
Income as opposed to net income. Additionally, Adjusted Diluted EPS does not
contemplate any adjustments to net income as required under the two-class method
as disclosed in the footnotes to the consolidated financial statements.

•The “Free Cash Flow” represents the net cash generated by operating activities less the impact of purchases of property, plant and equipment and software.

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Below is a reconciliation of revenue excluding billable expenses, adjusted operating income, adjusted EBITDA, adjusted EBITDA margin to revenue, adjusted EBITDA margin to revenue excluding billable expenses, adjusted net income, adjusted diluted EPS and free cash flow most directly comparable financial measure calculated and presented in accordance with GAAP.

Year closed

                                                                                         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


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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 goods, 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. 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. ("EverWatch"), as well as the planned
divestiture of our management consulting business serving the Middle East and
North Africa (the "MENA Divestiture"), as disclosed in Note 5.

(b) Reflects expenses associated with debt financing activities incurred during the first quarter of fiscal 2022.

(c) Represents additional contribution to employee FSA accounts for dependents in response to COVID-19.


(d)Amortization expense associated with acquired intangibles from significant
acquisitions. Significant acquisitions include acquisitions which the Company
considers to be beyond the scope of our normal operations. Significant
acquisition amortization includes amortization expense associated with the
acquisition of Liberty in the first quarter of fiscal 2022.

(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 of the Consolidated Statement of Income.


(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)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 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.

(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.

(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.

(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.

Factors and Trends Affecting Our Results of Operations

Our operating results have been, and we expect to continue to be, affected by the following factors, which could cause our future operating results to differ from our historical operating results described in the “-Operating results” section.

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Business environment and main trends in our markets

We believe that the following trends and developments in the WE the government services industry and our markets may affect our future operating results:


•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 WE government budgetary processes, which have in the past and may in the future delay the purchase 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 which could have an impact on the cost of the activity and/or reduce the purchasing power of customers;


•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;

• the efforts of the WE government to resolve organizational conflicts of interest and related issues and the impact of such 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 government’s emphasis on refining the definition of “inherently governmental” work, including proposals to limit contractors’ access to sensitive or classified information and work assignments, which continue to create pockets of internalization in various agencies, particularly in the intelligence market;

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•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 some of the trends identified above, and an industry trend towards consolidation, which may result in the emergence of better-equipped companies to compete with 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.

Sources of income


Substantially all of our revenue is derived from services provided under
contracts and task orders with the U.S. government, primarily by our client
staff and, to a lesser extent, our subcontractors. Funding for our contracts and
task orders is generally linked to trends in budgets and spending across various
U.S. government agencies and departments. We provide services under a large
portfolio of contracts and contract vehicles to a broad client base, and we
believe that our diversified contract and client base lessens potential
volatility in our business; however, a reduction in the amount of services that
we are contracted to provide to the U.S. government or any of our significant
U.S. government clients could have a material adverse effect on our business and
results of operations. In particular, the Department of Defense is one of our
significant clients, and the BCA 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. Mandatory
sequestrations under the BCA were subsequently extended by the Bipartisan Budget
Act of 2013, the Bipartisan Budget Act of 2015, the Bipartisan Budget Act of
2018, the Bipartisan Budget Act of 2019, the CARES Act and the Consolidated
Appropriations Act of 2021, which did not specify an amount of savings required
to be achieved through sequestration after 2021 but apply an 8.3% reduction in
defense spending in each year from 2021 to 2030. 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.

Types of contract

We generate revenue under the following three basic contract types:


•Cost-Reimbursable Contracts. Cost-reimbursable contracts provide for the
payment of allowable costs incurred during performance of the contract, up to a
ceiling based on the amount that has been funded, plus a fixed fee or award fee.
As we increase or decrease our spending on allowable costs, our revenue
generated on cost-reimbursable contracts will increase, up to the ceiling and
funded amounts, or decrease, respectively. We generate revenue under two general
types of cost-reimbursable contracts: cost-plus-fixed-fee and
cost-plus-award-fee, both of which reimburse allowable costs and provide for a
fee. The fee under each type of cost-reimbursable contract is generally payable
upon completion of services in accordance with the terms of the contract.
Cost-plus-fixed-fee contracts offer no opportunity for payment beyond the fixed
fee. Cost-plus-award-fee contracts also provide for an award fee that varies
within specified limits based upon the client's
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evaluation of our performance against a predetermined set of criteria, such as targets for factors such as cost, quality, schedule and performance.


•Time-and-Materials Contracts. Under contracts in this category, we are paid a
fixed hourly rate for each direct labor hour expended, and we are reimbursed for
billable material costs and billable out-of-pocket expenses inclusive of
allocable indirect costs. We assume the financial risk on time-and-materials
contracts because our costs of performance may exceed negotiated hourly rates.
To the extent our actual direct labor, including allocated indirect costs, and
associated billable expenses decrease or increase in relation to the fixed
hourly billing rates provided in the contract, we will generate more or less
profit, respectively, or could incur a loss.

•Fixed-Price Contracts. Under a fixed-price contract, we agree to perform the
specified work for a predetermined price. To the extent our actual direct and
allocated indirect costs decrease or increase from the estimates upon which the
price was negotiated, we will generate more or less profit, respectively, or
could incur a loss. Some fixed-price contracts have a performance-based
component, pursuant to which we can earn incentive payments or incur financial
penalties based on our performance. Fixed-price level of effort contracts
require us to provide a specified level of effort (i.e., labor hours), over a
stated period of time, for a fixed price.

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

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%


Diversity of contracts and revenue composition


We provide services to our clients through a large number of single award
contracts, contract vehicles, and multiple award contract vehicles. Most of our
revenue is generated under indefinite delivery/indefinite quantity, or IDIQ,
contract vehicles, which include multiple award government wide acquisition
contract vehicles, or GWACs, and General Services Administration Multiple Award
Schedule Contracts, or GSA schedules, and certain single award contracts. GWACs
and GSA schedules are available to all U.S. government agencies. Any number of
contractors typically competes under multiple award IDIQ contract vehicles for
task orders to provide particular services, and we earn revenue under these
contract vehicles only to the extent that we are successful in the bidding
process for task orders. No single task order under any IDIQ contract
represented more than 3.6% of our revenue in fiscal 2022. 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. 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. 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
                                       53
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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. Our ability to hire, retain,
and deploy talent with skills appropriately aligned with client needs is
critical to our ability to grow our revenue. We continuously evaluate whether
our talent base is properly sized and appropriately compensated, and contains an
optimal mix of skills to be cost competitive and meet the rapidly evolving needs
of our clients. We seek to achieve that result through recruitment and
management of capacity and compensation. As of March 31, 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.

Backlog

We define the backlog to include the following three components:


•Funded Backlog. Funded backlog represents the revenue value of orders for
services under existing contracts for which funding is appropriated or otherwise
authorized less revenue previously recognized on these contracts.

•Unfunded backlog. Unfunded backlog represents the value of order revenue (including optional orders) for services under existing contracts for which funding has not been earmarked or otherwise authorized.


•Priced Options. Priced contract options represent 100% of the revenue value of
all future contract option periods under existing contracts that may be
exercised at our clients' option and for which funding has not been appropriated
or otherwise authorized.

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

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. 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. 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. The
remainder is expected to be recognized thereafter. However, given the
uncertainties discussed below, as well as the risks described in "Item 1A. Risk
Factors", we can give no assurance that we will be able to convert our backlog
into revenue in any particular period, if at all. Our backlog includes orders
under contracts that in some cases extend for several years. The U.S. Congress
generally appropriates funds for our clients on a yearly basis, even though
their contracts with us may call for performance that is expected to take a
number of years to complete. As a result, contracts typically are only partially
funded at any point during their term and all or some of the work to be
performed under the contracts may remain unfunded unless and until the U.S.
Congress makes subsequent appropriations and the procuring agency allocates
funding to the contract.

We view growth in total backlog and client staff headcount as the two key
measures of our potential business growth. Growing and deploying client staff is
the primary means by which we are able to achieve profitable revenue growth. To
the extent that we are able to hire additional 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
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2020 to March 31, 2021. 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
task orders under which funding was appropriated, and the exercise and
subsequent funding of priced options. We report internally on our backlog on a
monthly basis and review backlog upon occurrence of certain events to determine
if any adjustments are necessary.

We cannot predict with any certainty the portion of our backlog that we expect
to recognize as revenue in any future period and we cannot guarantee that we
will recognize any revenue from our backlog. The primary risks that could affect
our ability to recognize such revenue on a timely basis or at all are: program
schedule changes, contract modifications, and our ability to assimilate and
deploy new client staff against funded backlog; cost-cutting initiatives and
other efforts to reduce U.S. government spending, which could reduce or delay
funding for orders for services; and delayed funding of our contracts due to
delays in the completion of the U.S. government's budgeting process and the use
of continuing resolutions by the U.S. government to fund its operations. The
amount of our funded backlog is also subject to change, due to, among other
factors: changes in congressional appropriations that reflect changes in U.S.
government policies or priorities resulting from various military, political,
economic, or international developments; changes in the use of U.S. government
contracting vehicles, and the provisions therein used to procure our services
and adjustments to the scope of services, or cancellation of contracts, by the
U.S. government at any time. In our recent experience, none of the following
additional risks have had a material negative effect on our ability to realize
revenue from our funded backlog: the unilateral right of the U.S. government to
cancel multi-year contracts and related orders or to terminate existing
contracts for convenience or default; in the case of unfunded backlog, the
potential that funding will not be made available; and, in the case of priced
options, the risk that our clients will not exercise their options.

In addition, contract backlog includes orders under contracts for which the
period of performance has expired, and we may not recognize revenue on the
funded backlog that includes such orders due to, among other reasons, the tardy
submission of invoices by our subcontractors and the expiration of the relevant
appropriated funding in accordance with a predetermined expiration date such as
the end of the U.S. government's fiscal year. The revenue value of orders
included in contract backlog that has not been recognized as revenue due to
period of performance expirations has not exceeded approximately 5.1% of total
backlog as of March 31, 2022 and any of the four preceding fiscal quarters.

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. 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. The principal
factors that affect our costs are additional people as we grow our business and
are awarded new contracts, task orders, and additional work under our existing
contracts, and the hiring of people with specific skill sets and security
clearances as required by our additional work.

Our most significant operating costs and expenses are described below.

•Cost of revenue. Revenue cost includes direct labor, related benefits and overhead. Overhead costs include indirect costs, including indirect labor related to infrastructure, management and administration, and other expenses.

• Billable expenses. Billable expenses include direct expenses of subcontractors, travel expenses and other expenses incurred to perform the contracts.

•General and administrative expenses. General and administrative expenses include the indirect labor of general management and corporate administrative functions, marketing, tendering and proposal costs, and other discretionary expenses.


•Depreciation and Amortization. Depreciation and amortization includes the
depreciation of computers, leasehold improvements, furniture and other
equipment, and the amortization of internally developed software, as well as
third-party software that we use internally, and of identifiable long-lived
intangible assets over their estimated useful lives.

Seasonality


The U.S. government's fiscal year ends on September 30 of each year. While not
certain, it is not uncommon for U.S. government agencies to award extra tasks or
complete other contract actions in the weeks before the end of its fiscal year
in order to avoid the loss of unexpended fiscal year funds. In addition, we also
have historically experienced higher bid and proposal costs in the months
leading up to the U.S. government's fiscal year end as we pursue new contract
opportunities being awarded shortly after the U.S. government fiscal year end as
new opportunities are expected to have funding appropriated in the
                                       55
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U.S. government's subsequent fiscal year. We may continue to experience this
seasonality in future periods, and our future periods may be affected by it.
While not certain, changes in the government's funding and spending patterns
have altered historical seasonality trends, supporting our approach to managing
the business on an annual basis.

Seasonality is just one of many factors, many of which are beyond our control, and which can affect our results in any period. See “Item 1A. Risk factors “.

Critical accounting estimates and policies


Our discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which have been prepared in
accordance with GAAP. The preparation of these consolidated financial statements
in accordance with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingencies at the date of the consolidated financial statements as well as
the reported amounts of revenue and expenses during the reporting period.
Management evaluates these estimates and assumptions on an ongoing basis. Our
estimates and assumptions have been prepared on the basis of the most current
reasonably available information. Actual results may differ from these estimates
under different assumptions or conditions.

Our significant accounting policies, including the critical policies and
practices listed below, are more fully described and discussed in the notes to
the consolidated financial statements. We consider the following accounting
policies to be critical to an understanding of our financial condition and
results of operations because these policies require the most difficult,
subjective or complex judgments on the part of our management in their
application, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.

Revenue recognition and cost estimation


Our revenues from contracts with customers (clients) are derived from offerings
that include consulting, analytics, digital solutions, engineering, and cyber
services, substantially with the U.S. government and its agencies, and to a
lesser extent, subcontractors. We also serve foreign governments, as well as
domestic and international commercial clients. We perform under various types of
contracts, which include cost-reimbursable-plus-fee contracts,
time-and-materials contracts, and fixed-price contracts.

  We consider a contract with a customer to exist under Topic 606 when there is
approval and commitment from us and the customer, the rights of the parties and
payment terms are identified, the contract has commercial substance, and
collectability of consideration is probable. We will also consider whether two
or more contracts entered into with the same customer should be combined and
accounted for as a single contract. Furthermore, in certain transactions with
commercial clients and with the U.S. government, we may commence providing
services prior to receiving a formal approval from the customer. In these
situations, we will consider the factors noted above, the risks associated with
commencing the work, and legal enforceability in determining whether a contract
with the customer exists under Topic 606.

Customer contracts are often modified to change the scope, price, specifications
or other terms within the existing arrangement. Contract modifications are
evaluated by management to determine whether the modification should be
accounted for as part of the original performance obligation(s) or as a separate
contract. If the modification adds distinct goods or services and increases the
contract value proportionate to the stand-alone selling price of the additional
goods or services, it will be accounted for as a separate contract. Generally,
our contract modifications do not include goods or services which are distinct,
and therefore are accounted for as part of the original performance
obligation(s) with any impact on transaction price or estimated costs at
completion being recorded as through a cumulative catch-up adjustment to
revenue.

We evaluate each service deliverable contracted with the customer to determine
whether it represents promises to transfer distinct goods or services. Under
Topic 606, these are referred to as performance obligations. One or more service
deliverables often represent a single performance obligation. This evaluation
requires significant judgment and the impact of combining or separating
performance obligations may change the time over which revenue from the contract
is recognized. Our contracts generally provide a set of integrated or highly
interrelated tasks or services and are therefore accounted for as a single
performance obligation. However, in cases where we provide more than one
distinct good or service within a customer contract, the contract is separated
into individual performance obligations which are accounted for discretely.

Contracts with the U.S. government are generally subject to the FAR and are
priced based on estimated or actual costs of providing the goods or services. We
derive a majority of our revenue from contracts awarded through a competitive
bidding process. Pricing for non-U.S. government agencies and commercial
customers is based on discrete negotiations with each customer. Certain of our
contracts contain award fees, incentive fees or other provisions that may
increase or decrease the transaction price. These variable amounts generally are
awarded upon achievement of certain performance metrics, program milestones or
cost targets and may be based upon customer discretion. Management estimates
variable consideration as the most likely amount that we expect to achieve based
on our assessment of the variable fee provisions within the contract, prior
experience with similar contracts or clients, and management's evaluation of the
performance on such contracts. We may perform work under a contract that has not
been fully funded if the work has been authorized by the management and the
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customer to proceed. We evaluate unfunded amounts as variable consideration in
estimating the transaction price. We include the estimated variable
consideration in our transaction price to the extent that it is probable that a
significant reversal of revenue will not occur upon the ultimate settlement of
the variable fee provision. In the limited number of situations where our
contracts with customers contain more than one performance obligation, we
allocate the transaction price of a contract between the performance obligations
in the proportion to their respective stand-alone selling prices. We generally
estimate the stand-alone selling price of performance obligations based on an
expected cost-plus margin approach as allowed under Topic 606. Our U.S.
government contracts generally contain FAR provisions that enable the customer
to terminate a contract for default or for the convenience of the U.S.
government.

We recognize revenue for each performance obligation identified within our
customer contracts when, or as, the performance obligation is satisfied by
transferring the promised goods or services. Revenue may either be recognized
over time or at a point in time. We generally recognize revenue over time as our
contracts typically involve a continuous transfer of control to the customer. A
continuous transfer of control under contracts with the U.S. government and its
agencies is evidenced by clauses which require us to be paid for costs incurred
plus a reasonable margin in the event that the customer unilaterally terminates
the contract for convenience. For contracts where we recognize revenue over
time, a contract cost-based input method is generally used to measure progress
towards satisfaction of the underlying performance obligation(s). Contract costs
include direct costs such as materials, labor and subcontract costs, as well as
indirect costs identifiable with, or allocable to, a specific contract that are
expensed as incurred. We do not incur material incremental costs to acquire or
fulfill contracts. Under a contract cost-based input method, revenue is
recognized based on the proportion of contract costs incurred to the total
estimated costs expected to be incurred upon completion of the underlying
performance obligation. We generally include both funded and unfunded portions
of customer contracts in this estimation process.

For interim financial reporting periods, contract revenue attributable to
indirect costs is recognized based upon agreed-upon annual forward-pricing rates
established with the U.S. government at the start of each fiscal year. Forward
pricing rates are estimated and agreed upon between us and the U.S. government
and represent indirect contract costs required to execute and administer
contract obligations. The impact of any agreed-upon changes, or changes in the
estimated annual forward-pricing rates, are recorded in the interim financial
reporting period when such changes are identified. These changes relate to the
interim financial reporting period differences between the actual indirect costs
incurred and allocated to customer contracts compared to the estimated amounts
allocated to contracts using the estimated annual forward-pricing rates
established with the U.S. government.

On certain contracts, principally time-and-materials and
cost-reimbursable-plus-fee contracts, revenue is recognized using the
right-to-invoice practical expedient as we are contractually able to invoice the
customer based on the control transferred. However, we did not elect to use the
practical expedient which would allow us to exclude contracts recognized using
the right-to-invoice practical expedient from the remaining performance
obligations disclosed below. Additionally, for stand-ready performance
obligations to provide services under fixed-price contracts, revenue is
recognized over time using a straight-line measure of progress as the control of
the services is provided to the customer ratably over the term of the contract.
If a contract does not meet the criteria for recognition of revenue over time,
we recognize revenue at the point in time when control of the good or service is
transferred to the customer. Determining a measure of progress towards the
satisfaction of performance obligations requires management to make judgments
that may affect the timing of revenue recognition.

Many of our contracts recognize revenue under a contract cost-based input method
and require an Estimate-at-Completion (EAC) process, which management uses to
review and monitor the progress towards the completion of our performance
obligations. Under this process, management considers various inputs and
assumptions related to the EAC, including, but not limited to, progress towards
completion, labor costs and productivity, material and subcontractor costs, and
identified risks. Estimating the total cost at completion of performance
obligations is subjective and requires management to make assumptions about
future activity and cost drivers under the contract. Changes in these estimates
can occur for a variety of reasons and, if significant, may impact the
profitability of our contracts. Changes in estimates related to contracts
accounted for under the EAC process are recognized in the period when such
changes are made on a cumulative catch-up basis. If the estimate of contract
profitability indicates an anticipated loss on a contract, we recognize the
total loss at the time it is identified. For fiscal 2022, 2021, and 2020, the
aggregate impact of adjustments in contract estimates was not material.

Remaining performance obligations represent the transaction price of exercised
contracts for which work has not yet been performed, irrespective of whether
funding has or has not been authorized and appropriated as of the date of
exercise. Remaining performance obligations do not include negotiated but
unexercised options or the unfunded value of expired contracts.
                                       57
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Business combinations


The accounting for the Company's business combinations consists of allocating
the purchase price to tangible and intangible assets acquired and liabilities
assumed based on their fair values, with the excess recorded as goodwill.
Certain fair value measurements include inputs that are unobservable, requiring
management to make judgments and estimates that can be affected by contract
performance and other factors that may cause final amounts to differ materially
from original estimates. We have up to one year from the acquisition date to use
additional information obtained to adjust the fair value of the acquired assets
and liabilities which may result in changes to the recorded values with an
offsetting adjustment to goodwill.

Good will and impairment of intangible assets


We test goodwill and trade name for impairment at least annually as of January 1
of each year and more frequently if interim indicators of impairment exist. We
perform our impairment testing of goodwill at the reporting level. As our
business is highly integrated and all of our components have similar economic
characteristics, we conclude that we have one reporting unit at the consolidated
entity level, which is the same as our single operating segment. We test
goodwill for impairment using the quantitative method (primarily based on market
capitalization). We test the trade name for impairment using the relief from
royalty method that requires management to make significant amount of judgments
and estimates in the valuation. We do not consider goodwill, trade name, or any
other amortizable intangible assets at risk of impairment. A 10% change in our
enterprise value would not result in a goodwill or trade name impairment.

Amortizable intangible assets are tested for impairment when an event occurs or
circumstances change indicating that the carrying amount of the asset may not be
recoverable. A significant amount of management judgment is required to
determine if an event representing an impairment indicator has occurred during
the year, including but not limited to: a decline in forecasted cash flows; a
sustained, material decline in the stock price and market capitalization; a
significant adverse change in the business climate or economy; or unanticipated
competition. An adverse change in any of these factors could have a significant
impact on the recoverability of other intangible assets.

During the fiscal years ended March 31, 2022, March 31, 2021and March 31, 2020the Company has not recognized any impairment of goodwill and intangible assets.

Accounting for income taxes


Provisions for federal, state, and foreign income taxes are calculated from the
income reported on our consolidated financial statements based on current tax
law and also include the cumulative effect of any changes in tax rates from
those previously used in determining deferred tax assets and liabilities. Such
provisions differ from the amounts currently receivable or payable because
certain items of income and expense are recognized in different time periods for
purposes of preparing consolidated financial statements than for income tax
purposes.

Significant judgment is required in determining income tax provisions and
evaluating tax positions. We establish reserves for uncertain tax positions
when, despite the belief that our tax positions are supportable, there remains
uncertainty in a tax position taken in our previously filed income tax returns.
For tax positions where it is more likely than not that a tax benefit will be
sustained, we record the largest amount of tax benefit with a greater than 50%
likelihood of being realized upon settlement with a taxing authority that has
full knowledge of all relevant information. To the extent we prevail in matters
for which accruals have been established or are required to pay amounts in
excess of reserves, our effective tax rate in a given consolidated financial
statement period may be materially impacted.

The carrying value of our net deferred tax assets assumes that we will be able
to generate sufficient future taxable income in certain tax jurisdictions to
realize the value of these assets. If we are unable to generate sufficient
future taxable income in these jurisdictions, a valuation allowance is recorded
when it is more likely than not that the value of the deferred tax assets is not
realizable.

Recent accounting pronouncements

See Note 2 to our accompanying audited consolidated financial statements for information relating to our adoption of new accounting standards and for information on our planned adoption of recently issued accounting standards.

Sector reports


We report operating results and financial data in one operating and reportable
segment. We manage our business as a single profit center in order to promote
collaboration, provide comprehensive functional service offerings across our
entire client base, and provide incentives to employees based on the success of
the organization as a whole. Although certain information regarding served
markets and functional capabilities is discussed for purposes of promoting an
understanding of our complex business, we manage our business and allocate
resources at the consolidated level of a single operating segment.
                                       58
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presentation basis


The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, and have been prepared in accordance
with GAAP, and the rules and regulations of the U.S. Securities and Exchange
Commission, or SEC. All intercompany balances and transactions have been
eliminated in consolidation.

The accompanying consolidated financial statements and notes of the Company
include its subsidiaries, and the joint ventures and partnerships over which the
Company has a controlling financial interest. The Company uses the equity method
to account for investments in entities that it does not control if it is
otherwise able to exert significant influence over the entities' operating and
financial policies.

The Company's fiscal year ends on March 31 and unless otherwise noted,
references to fiscal year or fiscal are for fiscal years ended March 31. The
accompanying consolidated financial statements present the financial position of
the Company as of March 31, 2022 and 2021 and the Company's results of
operations for fiscal 2022, fiscal 2021, and fiscal 2020.

Certain amounts presented in the Company’s prior year consolidated financial statements have been reclassified to conform to the current year’s presentation.

Operating results

The following table sets forth the items in our Consolidated Statements of Income for the periods indicated:


                                                               Fiscal Year Ended March 31,                          Fiscal 2022                Fiscal 2021
                                                                                                                       Versus                     Versus
                                                      2022                 2021                 2020                Fiscal 2021                Fiscal 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 vs. Fiscal 2021

Revenue

Revenue went to $8,363.7 million from $7,858.9 millionan increase of 6.4%, mainly attributable to the impact of acquisitions in fiscal 2022 of approximately $340.1 million and high demand, partially offset by reduced staff utilization.

Revenue cost


Cost of revenue increased to $3,899.6 million from $3,657.5 million, or a 6.6%
increase, and remained relatively flat as a percentage of revenue at 46.6% and
46.5% for fiscal 2022 and 2021, respectively. This increase was primarily due to
an increase in salaries and salary-related benefits of $251.8 million, driven by
an increase in headcount (including the impact of acquisitions) and annual base
salary increases, as well as increases in other direct costs of $29.3 million.

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%. This increase
was primarily attributable to an increase in the use of subcontractors driven by
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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.

General and administrative expenses


General and administrative expenses increased to $1,159.0 million from $1,036.8
million, or an 11.8% increase and increased as a percentage of revenue to 13.9%
from 13.2%. General and administrative expenses were impacted by approximately
$95.5 million of acquisition costs primarily associated with our acquisitions of
Liberty and Tracepoint incurred during fiscal 2022. In addition, salaries and
salary related benefits increased $34.7 million, driven by an increase in
headcount and annual base salary increases.

Depreciation and amortization

Depreciation and amortization increased to $145.7 million from $84.3 millionan increase of 72.9%, primarily due to increased amortization of intangible assets related to FY2022 acquisitions and amortization expense resulting from the implementation of our new management systems financial on April 1, 2021.

Interest charges

Interest expense increased to $92.4 million from $81.3 millionan increase of 13.6%, primarily due to higher expenses related to the issuance of senior notes due 2029 in fiscal 2022 and senior notes due 2028 in fiscal 2022. the 2021 financial year.


Other (Income) Expense, net

Other (income) net expenses increased to $11.2 million other net income from
$10.7 million other net expenses mainly attributable to the following items:


•A net gain of $7.1 million recognized from a transaction in the third quarter
of fiscal 2022 in which the Company transferred all assets related to
SnapAttack™ to a new cyber threat hunting and detection company and disposed of
the controlling interest to an unrelated third party and retained an equity
method investment;

•A $5.7 million the gain from the Company’s revaluation of its previously held investment under the equity method in Tracepoint in the second quarter of fiscal 2022; and

•A $13.2 million loss on extinguishment of debt resulting from the repurchase of
Booz Allen Hamilton Inc. 5.125% Senior Notes due 2025 (the “2017 Senior Notes”) recognized in the second quarter of fiscal 2021, not present in the current year.

income tax expense


Income tax expense increased to $137.5 million from $53.5 million. The effective
tax rate increased to 22.8% in fiscal 2022 from 8.1% in fiscal 2021. The
increase was primarily due to a $76.8 million income tax benefit recognized in
the fourth quarter of fiscal 2021 related to the re-measurement of net operating
losses that were carried back to fiscal 2016 and subsequent years.


Cash and capital resources


As of March 31, 2022, our total liquidity was $1.7 billion, consisting of $695.9
million of cash and cash equivalents and $999.0 million available under the
Revolving Credit Facility. To date, COVID-19 has not had a significant impact on
our liquidity, cash flows or capital resources. However, COVID-19 has led to
disruption and volatility in the global capital markets, which, depending on
future developments, could impact our capital resources and liquidity in the
future. In the opinion of management, we will be able to meet our liquidity and
cash needs through a combination of cash flows from operating activities,
available cash balances, and available borrowing under the Revolving Credit
Facility. If these resources need to be augmented, additional cash requirements
would likely be financed through the issuance of debt or equity securities.

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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. Some of
the possible uses of our remaining excess cash at any point in time may include
funding strategic acquisitions, further investment in our business, and
returning value to shareholders through share repurchases, quarterly dividends,
and special dividends. While the timing and financial magnitude of these
possible actions are currently indeterminable, the Company expects to be able to
manage and adjust its capital structure in the future to meet its liquidity
needs.

Historically, we have been able to generate sufficient cash to fund our
operations, mandatory debt and interest payments, capital expenditures, and
discretionary funding needs. However, due to fluctuations in cash flows,
including as a result of the trends and developments described above under
"-Factors and Trends Affecting Our Results of Operations" relating to U.S.
government shutdowns, U.S. government cost-cutting, reductions or delays in the
U.S. government appropriations and spending process and other budgetary matters,
it may be necessary from time-to-time in the future to borrow under our Secured
Credit Facility to meet cash demands. While the timing and financial magnitude
of these possible actions are currently indeterminable, we expect to be able to
manage and adjust our capital structure to meet our liquidity needs. Our
expected liquidity and capital structure may also be impacted by discretionary
investments and acquisitions that we could pursue. We anticipate that cash
provided by operating activities, existing cash and cash equivalents, and
borrowing capacity under our Revolving Credit Facility will be sufficient to
meet our anticipated cash requirements for the next twelve months, which
primarily include:

•operating expenses, including salaries;

• working capital requirements to finance the organic and inorganic growth of our business;

•capital expenditures which relate primarily to the purchase of computers, business systems, furniture and leasehold improvements to support our operations;

•continuous 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 senior notes; and

• cash taxes to be paid.

Our ability to fund our operating requirements depends, in part, on our ability to continue to generate positive cash flow from operations or, if necessary, to raise funds in the capital markets. In addition, from time to time, we evaluate conditions for opportunistic access to funding markets to obtain additional debt capital resources and to improve the terms of our indebtedness.


In the fourth quarter of fiscal 2022, the Company announced that it had entered
into a definitive agreement to acquire EverWatch Corp., a leading provider of
advanced solutions to the defense and intelligence communities for approximately
$440.0 million, subject to customary adjustments. The Company expects to fund
the acquisition with cash on hand. The transaction is expected to close in
fiscal 2023.

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Cash flow


Cash received from clients, either from the payment of invoices for work
performed or for advances in excess of costs incurred, is our primary source of
cash. We generally do not begin work on contracts until funding is appropriated
by the client. Billing timetables and payment terms on our contracts vary based
on a number of factors, including whether the contract type is
cost-reimbursable, time-and-materials, or fixed-price. We generally bill and
collect cash more frequently under cost-reimbursable and time-and-materials
contracts, as we are authorized to bill as the costs are incurred or work is
performed. In contrast, we may be limited to bill certain fixed-price contracts
only when specified milestones, including deliveries, are achieved. In addition,
a number of our contracts may provide for performance-based payments, which
allow us to bill and collect cash prior to completing the work.

Accounts receivable is the principal component of our working capital and is
generally driven by revenue growth with other short-term fluctuations related to
the payment practices of our clients. Our accounts receivable reflects amounts
billed to our clients as of each balance sheet date. Our clients generally pay
our invoices within 30 days of the invoice date, although we experience a longer
billing and collection cycle with our global commercial customers. At any
month-end, we also include in accounts receivable the revenue that was
recognized in the preceding month, which is generally billed early in the
following month. Finally, we include in accounts receivable amounts related to
revenue accrued in excess of amounts billed, primarily on our fixed-price and
cost-reimbursable-plus-award-fee contracts. The total amount of our accounts
receivable can vary significantly over time, but is generally sensitive to
revenue levels and customer mix.

Operating cash flow


Net cash provided by operations is primarily affected by the overall
profitability of our contracts, our ability to invoice and collect cash from
clients in a timely manner, our ability to manage our vendor payments, and the
timing of cash paid for income taxes. Continued uncertainty in global economic
conditions may also affect our business as customers and suppliers may decide to
downsize, defer, or cancel contracts, which could negatively affect the
operating cash flows. Net cash provided by operations was $736.5 million in
fiscal 2022 compared to $718.7 million in fiscal 2021, or a 2.5% increase. The
increase in operating cash flow over the prior year was primarily driven by
strong working capital management, partially offset by approximately $97.5
million of acquisition costs incurred and paid during fiscal 2022, primarily
associated with our acquisitions of Liberty and Tracepoint.

Effective fiscal 2023, the Tax Cuts and Jobs Act of 2017 requires the
capitalization of research and development costs for tax purposes, which can
then be amortized over five years and 15 years for domestic and foreign costs,
respectively. Congress has proposed tax legislation to delay the effective date
of this change to 2026, but it is uncertain whether the proposed delay will
ultimately be enacted into law. Based upon the analysis performed to date and
our interpretation of the legislation, the Company estimates that we will incur
approximately $150.0 million in cash taxes in fiscal 2023 if the current
effective date remains in place, but our deferred tax liability would be offset
by a corresponding amount.

Investing Cash Flow

Net cash used in investing activities was $867.7 million in fiscal 2022 compared
to $158.3 million in the prior year. The increase in net cash used in investing
activities was primarily due to the Company's acquisitions of Liberty and
Tracepoint, partially offset by the initial 40% minority investment in
Tracepoint of $74.2 million in the prior year.

Financing cash


Net cash used in financing activities was $163.8 million in fiscal 2022 compared
to $311.3 million in the prior year, or a 47.4% decrease. The decrease in net
cash used in financing activities was primarily due to the following:

•An increase of $152.2 million in net proceeds from the issuance of bonds in
fiscal 2022 (Senior Notes due 2029) as compared to fiscal 2021 (Senior Notes due
2028);

•A decrease of $25.6 million in payments on the Company’s term loans;

•A $100.0 million the net repayment of the revolving credit facility paid the previous year;


•The above was partially offset by an increase in share repurchases of $105.5
million and an increase in dividends paid of $28.0 million as compared to the
prior year.

Dividends and share buybacks


The Company paid $1.54 in dividends per share to shareholders of record in
fiscal 2022. On May 20, 2022, the Company announced a regular quarterly cash
dividend in the amount of $0.43 per share. The quarterly dividend is payable on
June 30, 2022 to stockholders of record on June 15, 2022.

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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 during each quarter of fiscal years 2022, 2021 and 2020, respectively.


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. 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.

Any determination to pursue one or more of the above alternative uses for excess
cash is subject to the discretion of our Board of Directors, and will depend
upon various factors, including our results of operations, financial condition,
liquidity requirements, restrictions that may be imposed by applicable law, our
contracts, and our Credit Agreement, as amended, and other factors deemed
relevant by our Board of Directors.

Debt


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. ("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. The Eighth Amendment added an
additional tier in the pricing grid and extended the maturity applicable to both
the Term Loan A ("Term Loan A") and revolving credit facility (the "Revolving
Credit Facility") to June 24, 2026, increased the aggregate principal amount of
the Revolving Credit Facility and the letter of credit sublimit thereunder, and
made certain other amendments to the financial covenants and other terms under
the Existing Credit Agreement. The interest rate and maturity date applicable to
Term Loan B ("Term Loan B" and, together with Term Loan A, the "Term Loans")
remained unchanged.

Prior to the Eighth Amendment, approximately $1,289.8 million was outstanding
under Term Loan A (the "Existing Tranche A Term Loans"). Pursuant to the Eighth
Amendment, certain lenders under the Existing Credit Agreement converted their
Existing Tranche A Term Loans into a new tranche of tranche A term loans (the
"New Refinancing Tranche A Term Loans") in an aggregate amount, along with the
New Refinancing Tranche A Term Loans advanced by certain new lenders, of
approximately $1,289.8 million. The proceeds from the new lenders were used to
prepay in full all of the Existing Tranche A Term Loans that were not converted
into the New Refinancing Tranche A Term Loans. Voluntary prepayments of the New
Refinancing Tranche A Term Loans are permitted at any time, in minimum principal
amounts, without premium or penalty. The other terms of the New Refinancing
Tranche A Term Loans are generally the same as the Existing Tranche A Term Loans
prior to the Eighth Amendment.

Prior to the Eighth Amendment, approximately $500.0 million of revolving
commitments (the "Existing Revolving Commitments") were available under the
Existing Credit Agreement, with a sublimit for letters of credit of
$100.0 million. 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.

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, 2022, the
maturity date of Term Loan A and the termination date for the Revolving Credit
Facility was June 24, 2026 and the maturity date of Term Loan B was November 26,
2026. Booz Allen Hamilton's obligations and the guarantors' guarantees under the
Credit Agreement are secured by a first priority lien on substantially all of
the assets (including capital stock of subsidiaries) of Booz Allen Hamilton,
Investor and the subsidiary guarantors, subject to certain exceptions set forth
in the Credit Agreement and related documentation. Subject to specified
conditions, without the consent of the then-existing lenders (but subject to the
receipt of commitments), the Term
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Loans or the Revolving Credit Facility may be expanded (or a new term loan
facility or revolving credit facility added to the existing facilities) by up to
(i) the greater of (x) $909 million and (y) 100% of consolidated EBITDA of Booz
Allen Hamilton, as of the end of the most recently ended four quarter period for
which financial statements have been delivered pursuant to the Credit Agreement
plus (ii) the aggregate principal amount under which pro forma consolidated net
secured leverage remains less than or equal to 3.50:1.00.

At Booz Allen Hamilton's option, borrowings under the Secured Credit Facility
bear interest based either on LIBOR (adjusted for maximum reserves, and subject
to a floor of zero) for the applicable interest period or, a base rate equal to
the highest of (x) the administrative agent's prime corporate rate, (y) the
overnight federal funds rate plus 0.50% and (z) three-month LIBOR (adjusted for
maximum reserves, and subject to a floor of zero) plus 1.00%), in each case plus
an applicable margin, payable at the end of the applicable interest period and
in any event at least quarterly. The applicable margin for Term Loan A and
borrowings under the Revolving Credit Facility ranges from 1.13% to 2.00% for
LIBOR loans and 0.13% to 1.00% for base rate loans, in each case based on Booz
Allen Hamilton's consolidated total net leverage ratio. The applicable margin
for Term Loan B is 1.75% for LIBOR loans and 0.75% for base rate loans. Unused
commitments under the Revolving Credit Facility are subject to a quarterly fee
ranging from 0.18% to 0.35% based on Booz Allen Hamilton's consolidated total
net leverage ratio.

Booz Allen Hamilton occasionally borrows under the Revolving Credit Facility in
anticipation of cash demands. During fiscal 2022, Booz Allen Hamilton accessed
no amounts of its $500.0 million Revolving Credit Facility. During fiscal 2021,
Booz Allen Hamilton accessed a total of $100.0 million of its $500.0 million
Revolving Credit Facility. As of March 31, 2022, there was no outstanding
balance on the Revolving Credit Facility. As of March 31, 2021,$100.0 million
was outstanding on the Revolving Credit Facility, which was repaid in June 2021.

The credit agreement requires quarterly principal repayments of 1.25% of the stated principal amount of Term Loan A until maturity, and quarterly principal repayments of 0.25% of the stated principal amount of the loan term B until maturity.


Booz Allen Hamilton also has agreed to pay customary letter of credit and agency
fees. 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. 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,
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. The negative covenants include
limitations on the following, in each case subject to certain exceptions:
(i) indebtedness and liens; (ii) mergers, consolidations or amalgamations,
liquidations, wind-ups or dissolutions, and disposition of all or substantially
all assets; (iii) dispositions of property; (iv) restricted payments;
(v) investments; (vi) transactions with affiliates; (vii) change in fiscal
periods; (viii) negative pledges; (ix) restrictive agreements; (x) line of
business; and (xi) speculative hedging. The events of default include the
following, in each case subject to certain exceptions: (a) failure to make
required payments under the Secured Credit Facility; (b) material breaches of
representations or warranties under the Secured Credit Facility; (c) failure to
observe covenants or agreements under the Secured Credit Facility; (d) failure
to pay or default under certain other material indebtedness; (e) bankruptcy or
insolvency; (f) certain 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. 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. During fiscal
2021, interest payments of $23.6 million and $7.8 million were made for the Term
Loan A and Term Loan B facilities, respectively.

The total amount of debt outstanding is recorded in the accompanying consolidated balance sheets, net of the unamortized discount and debt issue costs of $21.6 million and $17.4 million from March 31, 2022 and 2021, respectively.


On August 24, 2020, Booz Allen Hamilton issued $700 million aggregate principal
amount of its Senior Notes under an Indenture, dated as of August 24, 2020,
among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as
guarantors (the "Subsidiary Guarantors"), and Wilmington Trust, National
Association as trustee (the "Trustee"), as supplemented by the First
Supplemental Indenture, dated as of August 24, 2020, among Booz Allen Hamilton,
the Subsidiary Guarantors and the Trustee. 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
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and expenses related to the foregoing. 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.

Borrowings under the Term Loans and, if used, the Revolving Credit Facility,
incur interest at a variable rate. In accordance with our risk management
strategy between April 6, 2017 and April 4, 2019, Booz Allen Hamilton executed a
series of interest rate swaps. As of March 31, 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. 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).

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. 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.

Capital expenditure


Since we do not own any of our facilities, our capital expenditure requirements
primarily relate to the purchase of computers, management systems, furniture,
and leasehold improvements to support our operations. Direct facility and
equipment costs billed to clients are not treated as capital expenses. Our
capital expenditures for fiscal 2022 and 2021 were $80.0 million and $87.2
million, respectively. The decrease in capital expenditures was primarily driven
by lower spend related to the implementation of our new financial management
system on April 1, 2021 as compared to the prior year period, as well as lower
facilities expenses reflecting the investment in technology and tools needed to
support the virtual work environment.

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.
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