MAXIMUS, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 8, 2011

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Exhibit 99.1
 
MAXIMUS Reports Fiscal 2011 Third Quarter Results
- Company Delivers Record Revenue and Adjusted EPS, Raises Fiscal 2011 Outlook -
 
RESTON, Va.--(BUSINESS WIRE)--August 4, 2011--MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its fiscal third quarter ended June 30, 2011.
 
Key highlights include:
 
●  
Third quarter revenue grew 13% to a record $238.3 million compared to the same period last year.
 
●  
Adjusted diluted earnings per share from continuing operations for the third quarter increased 22% to a record level of $0.56 compared to adjusted diluted EPS of $0.46 in the prior-year period.
 
●  
Cash and cash equivalents totaled $204.0 million at June 30, 2011, while share repurchases totaled $9.4 million during the quarter.
 
●  
Year-to-date signed awards were $1.4 billion at August 2, 2011.
 
●  
The Company completed a two-for-one stock split effective June 30, 2011 and in May announced a 20% increase to its quarterly cash dividend payable on August 31, 2011.
 
Revenue for the fiscal 2011 third quarter increased 13% (8% on a constant currency basis) to $238.3 million compared to $211.5 million reported for the same period last year. Income from continuing operations, net of taxes, increased 24% to $20.0 million for the third quarter compared to $16.1 million last year. For the third quarter, adjusted diluted earnings per share from continuing operations increased 22% to $0.56 compared to $0.46 for the same period last year. All numbers reflect the recent two-for-one stock split.
 
Revenue and profit growth were driven principally by strong operational performance in both segments from new work and expansion of existing contracts, which resulted in an operating margin of 13.1%, excluding legal and settlement expense. Results in the quarter exceeded expectations and benefitted from strong performance in Australia, the acceleration of revenue and profit in the United Kingdom, and favorable currency rates in the quarter.
 
“Record results for the third quarter demonstrate our solid execution and continued strong performance, which positions us well for fiscal 2012,” commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. “In June, we successfully launched operations in the United Kingdom for the new Work Programme and operations are trending as expected. We are also actively marketing and responding to the increase in activities under the Affordable Care Act, as states are working to solidify their plans for Medicaid expansion and health insurance exchanges.”
 
Health Services Segment
 
Health Services Segment revenue for the third quarter of fiscal 2011 increased 11% to $141.8 million compared to $127.3 million in the same period last year, driven by new work and expansion of existing contracts. Operating income for the third quarter increased 10% to $15.9 million compared to $14.5 million for the same period last year. Segment operating margin for the third quarter was 11.2%.
 
Human Services Segment
 
Human Services Segment revenue for the fiscal 2011 third quarter increased 15% (4% on a constant currency basis) to $96.5 million compared to $84.2 million in the prior-year period. Revenue growth was driven by the Company’s international welfare-to-work business in Australia and the United Kingdom. Operating income for the third quarter increased 40% to $14.9 million compared to $10.7 million for the same period last year. Segment operating margin for the third quarter was 15.4%.
 
New Sales and Pipeline
 
At August 2, 2011 fiscal year-to-date signed contract wins totaled $1.4 billion compared to $379 million reported last year. New contracts pending (awarded but unsigned) totaled $338 million compared to $916 million last year. Sales opportunities (pipeline) at August 2, 2011 totaled $1.8 billion (consisting of $378 million in proposals pending, $39 million in proposals in preparation and $1.4 billion in proposals tracking) compared to $1.8 billion the prior year.
 
Balance Sheet and Cash Flows
 
Cash and cash equivalents totaled $204.0 million at June 30, 2011. For the fiscal 2011 third quarter, cash provided by operating activities from continuing operations totaled $34.1 million with free cash flow of $27.8 million. The Company defines free cash flow as cash provided by operating activities from continuing operations less property, equipment and capitalized software.
 
Days Sales Outstanding (DSO) from continuing operations were favorable at 54 days and driven by the timing of collections.
 
On May 31, 2011, MAXIMUS paid a quarterly cash dividend of $2.6 million, which reflected the 25% dividend increase declared in January. During the third quarter, the Company completed a two-for-one stock split effective June 30, 2011 and announced another 20% increase to its quarterly cash dividend. The cash dividend of $0.09 is payable on August 31, 2011 to shareholders of record on August 15, 2011.
 
During the fiscal 2011 third quarter, the Company purchased 238,600 shares of MAXIMUS common stock for $9.4 million under the Board-authorized share repurchase program. At June 30, 2011, the Company had $115.4 million available under the program for future repurchases. MAXIMUS remains committed to this program and since 2008, has repurchased 12.4 million shares of common stock for $246.8 million through August 2, 2011.
 
 
 
 
 
Outlook
 
The Company is raising its fiscal 2011 revenue and earnings guidance as a result of strong performance in the third quarter. MAXIMUS now expects revenue from continuing operations in the range of $925 million to $935 million and adjusted diluted earnings per share from continuing operations in the range of $2.15 to $2.20.
 
Mr. Montoni concluded, “Our favorable performance in the quarter, in addition to our fourth quarter outlook, has led us to increase our full-year guidance and demonstrates our commitment to profitable growth and delivering long-term shareholder value. Additionally, we completed a two-for-one stock split and announced an additional 20% increase to our quarterly cash dividend, which underscores the confidence we have in our future. With a healthy balance sheet and strong cash flows, we are well positioned to fund our future growth while providing cash returns to shareholders."
 
Website Presentation, Conference Call and Webcast Information
 
MAXIMUS will host a conference call this morning, August 4, 2011, at 9:00 a.m. (ET). The call is open to the public and can be accessed under the Investor Relations page of the Company’s website at www.maximus.com or by calling:
 
877.407.8289 (Domestic)/201.689.8341 (International)
 
For those unable to listen to the live call, a replay will be available through August 11, 2011. Callers can access the replay by calling:
 
877.660.6853 (Domestic)/201.612.7415 (International)
 
Replay account number: 316
 
Replay conference ID number: 376023
 
About MAXIMUS
 
MAXIMUS is a leading provider of government services worldwide and is devoted to providing health and human services program management and consulting services to its clients. The Company has more than 6,500 employees located in more than 220 offices in the United States, Canada, Australia and the United Kingdom. Additionally, MAXIMUS is included in the Russell 2000 Index and the S&P SmallCap 600 Index.
 
Statements that are not historical facts, including statements about the Company's confidence and strategies and the Company's expectations about revenues, results of operations, profitability, future contracts, market opportunities, market demand or acceptance of the Company's products are forward-looking statements that involve risks and uncertainties. These uncertainties could cause the Company's actual results to differ materially from those indicated by such forward-looking statements and include reliance on government clients; risks associated with government contracting; risks involved in managing government projects; legislative changes and political developments; opposition from government unions; challenges resulting from growth; adverse publicity; and legal, economic, and other risks detailed in Exhibit 99.1 to the Company's most recent Quarterly Report filed with the Securities and Exchange Commission, found on www.maximus.com.
 
 
 
 
 
             
MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
             
   
June 30,
    
September 30,
  
   
2011
    
2010
  
   
(Unaudited)
        
ASSETS
            
Current assets:
            
Cash and cash equivalents
  
$
204,016
    
$
155,321
  
Restricted cash
  
5,097
    
4,182
  
Accounts receivable — billed, net of reserves of $3,792 and $1,845
  
125,747
    
136,260
  
Accounts receivable — unbilled
  
16,394
    
17,245
  
Income taxes receivable
  
19,127
    
4,149
  
Deferred income taxes
  
17,301
    
13,290
  
Prepaid expenses and other current assets
  
24,223
    
25,702
  
Total current assets
  
411,905
    
356,149
  
             
Property and equipment, net
  
50,426
    
48,873
  
Capitalized software, net
  
27,589
    
24,715
  
Goodwill
  
73,252
    
71,251
  
Intangible assets, net
  
6,409
    
7,778
  
Deferred contract costs, net
  
8,617
    
6,708
  
Deferred income taxes
  
676
    
1,844
  
Deferred compensation plan assets
  
9,171
    
8,317
  
Other assets, net
  
2,022
    
2,106
  
Total assets
  
$
590,067
    
$
527,741
  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY
            
Current liabilities:
            
Accounts payable
  
$
61,552
    
$
49,200
  
Accrued compensation and benefits
  
41,134
    
40,807
  
Deferred revenue
  
45,109
    
58,070
  
Acquisition-related contingent consideration
  
2,969
    
923
  
Income taxes payable
  
9,420
    
7,120
  
Other accrued liabilities
  
6,100
    
7,934
  
Liabilities of discontinued operations
  
—
    
634
  
Total current liabilities
  
166,284
    
164,688
  
Deferred revenue, less current portion
  
4,494
    
4,083
  
Long-term debt
  
1,794
    
1,411
  
Acquisition-related contingent consideration, less current portion
  
406
    
2,138
  
Income taxes payable, less current portion
  
1,784
    
1,793
  
Deferred income tax liability
  
7,824
    
4,946
  
Deferred compensation plan liabilities
  
11,507
    
9,893
  
Total liabilities
  
194,093
    
188,952
  
             
Shareholders’ equity:
            
Common stock, no par value
  
374,267
    
352,696
  
Treasury stock, at cost; 21,140,926 and 20,627,168 shares at June 30, 2011 and September 30, 2010, respectively
  
(377,247
)
  
(359,366
)
Accumulated other comprehensive income
  
23,154
    
14,530
  
Retained earnings
  
375,800
    
330,929
  
Total shareholders’ equity
  
395,974
    
338,789
  
Total liabilities and shareholders’ equity
  
$
590,067
    
$
527,741
  
 
 
 
 
 
           
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
           
   
Three Months
  
Nine Months
  
   
Ended June 30,
  
Ended June 30,
  
   
2011
    
2010
  
2011
    
2010
  
Revenue
  
$
238,296
    
$
211,527
  
$
679,526
    
$
619,233
  
Cost of revenue
  
171,897
    
154,514
  
494,102
    
459,494
  
Gross profit
  
66,399
    
57,013
  
185,424
    
159,739
  
Selling, general and administrative expenses
  
35,259
    
31,658
  
97,498
    
87,874
  
Legal and settlement expense (recovery), net
  
361
    
—
  
361
    
(5,351
)
Operating income from continuing operations
  
30,779
    
25,355
  
87,565
    
77,216
  
Interest and other income, net
  
961
    
442
  
2,371
    
727
  
Income from continuing operations before income taxes
  
31,740
    
25,797
  
89,936
    
77,943
  
Provision for income taxes
  
11,780
    
9,672
  
33,351
    
29,227
  
Income from continuing operations
  
19,960
    
16,125
  
56,585
    
48,716
  
                       
Discontinued operations, net of income taxes:
                      
Income (loss) from discontinued operations
  
(65
)
  
1,200
  
(330
)
  
(20
)
Loss on disposal
  
(3
)
  
—
  
(662
)
  
—
  
Income (loss) from discontinued operations
  
(68
)
  
1,200
  
(992
)
  
(20
)
                       
Net income
  
$
19,892
    
$
17,325
  
$
55,593
    
$
48,696
  
                       
Basic earnings (loss) per share:
                      
Income from continuing operations
  
$
0.58
    
$
0.46
  
$
1.64
    
$
1.39
  
Income (loss) from discontinued operations
  
(0.01
)
  
0.04
  
(0.03
)
  
—
  
Basic earnings per share
  
$
0.57
    
$
0.50
  
$
1.61
    
$
1.39
  
                       
Diluted earnings (loss) per share:
                      
Income from continuing operations
  
$
0.56
    
$
0.45
  
$
1.59
    
$
1.35
  
Income (loss) from discontinued operations
  
—
    
0.03
  
(0.03
)
  
—
  
Diluted earnings per share
  
$
0.56
    
$
0.48
  
$
1.56
    
$
1.35
  
                       
Dividends paid per share
  
$
0.075
    
$
0.06
  
$
0.21
    
$
0.18
  
Dividends declared per share
  
$
0.165
    
$
0.06
  
$
0.30
    
$
0.18
  
                       
Weighted average shares outstanding:
                      
Basic
  
34,708
    
34,847
  
34,496
    
34,952
  
Diluted
  
35,803
    
36,008
  
35,612
    
36,030
  
 
 
 
 
 
             
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
             
   
Three Months
    
Nine Months
  
   
Ended June 30,
    
Ended June 30,
  
   
2011
    
2010
    
2011
    
2010
  
Cash flows from operating activities:
                                
Net income
  
$
19,892
    
$
17,325
    
$
55,593
    
$
48,696
  
Adjustments to reconcile net income to net cash provided by operating activities:
                        
Loss from discontinued operations
  
68
    
(1,200
)
  
992
    
20
  
Depreciation and amortization
  
5,696
    
4,630
    
16,479
    
13,648
  
Deferred income taxes
  
(774
)
  
(1,126
)
  
372
    
(1,281
)
Deferred interest income on note receivable
  
—
    
84
    
—
    
263
  
Non-cash equity based compensation
  
2,441
    
2,030
    
6,936
    
5,983
  
Change in assets and liabilities:
                        
Accounts receivable — billed
  
12,483
    
6,118
    
10,887
    
10,895
  
Accounts receivable — unbilled
  
(1,162
)
  
1,891
    
859
    
(2,539
)
Prepaid expenses and other current assets
  
220
    
(1,590
)
  
1,889
    
(2,004
)
Deferred contract costs
  
(620
)
  
392
    
(1,849
)
  
1,358
  
Accounts payable
  
(4,827
)
  
6,762
    
7,460
    
8,568
  
Accrued compensation and benefits
  
6,061
    
3,844
    
(506
)
  
6,761
  
Deferred revenue
  
(2,679
)
  
8,423
    
(13,975
)
  
22,549
  
Income taxes
  
(2,883
)
  
5,751
    
(13,217
)
  
9,519
  
Other assets and liabilities
  
183
    
(3,745
)
  
(1,435
)
  
(2,087
)
Cash provided by continuing operations
  
34,099
    
49,589
    
70,485
    
120,349
  
Cash used in discontinued operations
  
(135
)
  
(1,147
)
  
(1,086
)
  
(2,152
)
Cash provided by operating activities
  
33,964
    
48,442
    
69,399
    
118,197
  
                         
Cash flows from investing activities:
                        
Acquisition of businesses, net of cash acquired
  
—
    
—
    
—
    
(10,673
)
Purchases of property and equipment
  
(4,499
)
  
(4,352
)
  
(10,963
)
  
(10,383
)
Capitalized software costs
  
(1,821
)
  
(1,982
)
  
(5,693
)
  
(6,307
)
Proceeds from note receivable
  
65
    
83
    
65
    
473
  
Cash used in investing activities — continuing ops
  
(6,255
)
  
(6,251
)
  
(16,591
)
  
(26,890
)
                         
Cash flows from financing activities:
                        
Employee stock transactions
  
1,037
    
1,064
    
9,050
    
2,679
  
Repurchases of common stock
  
(8,515
)
  
(8,007
)
  
(16,974
)
  
(22,518
)
Tax benefit due to option exercises and restricted stock units vesting
  
1,409
    
314
    
5,227
    
1,424
  
Issuance of long-term debt
  
4
    
333
    
304
    
326
  
Cash dividends paid
  
(2,598
)
  
(2,094
)
  
(7,241
)
  
(6,295
)
Cash used in financing activities — continuing ops
  
(8,663
)
  
(8,390
)
  
(9,634
)
  
(24,384
)
   
Effect of exchange rate changes on cash and cash equivalents
  
1,815
    
(2,104
)
  
5,521
    
(1,679
)
                         
Net increase in cash and cash equivalents
  
20,861
    
31,697
    
48,695
    
65,244
  
                         
Cash and cash equivalents, beginning of period
  
183,155
    
121,362
    
155,321
    
87,815
  
                         
Cash and cash equivalents, end of period
  
$
204,016
    
$
153,059
    
$
204,016
    
$
153,059
  
 
 
 
 
 
             
MAXIMUS, Inc.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
             
   
Three Months Ended June 30,
    
Nine Months Ended June 30,
  
   
2011
    
% (1)
    
2010
    
% (1)
    
2011
    
% (1)
    
2010
    
% (1)
  
                                                 
Revenue:
                                                
Health Services
  
$
141,788
    
100
%
  
$
127,307
    
100
%
  
$
409,578
    
100
%
  
$
385,226
    
100
%
Human Services
  
96,508
    
100
%
  
84,220
    
100
%
  
269,948
    
100
%
  
234,007
    
100
%
Total
  
238,296
    
100
%
  
211,527
    
100
%
  
679,526
    
100
%
  
619,233
    
100
%
                                                 
Gross Profit:
                                                
Health Services
  
35,459
    
25.0
%
  
32,425
    
25.5
%
  
108,056
    
26.4
%
  
94,267
    
24.5
%
Human Services
  
30,940
    
32.1
%
  
24,588
    
29.2
%
  
77,368
    
28.7
%
  
65,472
    
28.0
%
Total
  
66,399
    
27.9
%
  
57,013
    
27.0
%
  
185,424
    
27.3
%
  
159,739
    
25.8
%
                                                 
Selling, general, and administrative expense:
                                                
Health Services
  
19,536
    
13.8
%
  
17,916
    
14.1
%
  
53,958
    
13.2
%
  
49,527
    
12.9
%
Human Services
  
16,032
    
16.6
%
  
13,904
    
16.5
%
  
43,834
    
16.2
%
  
38,372
    
16.4
%
Corporate/Other
  
(309
)
  
NM
    
(162
)
  
NM
    
(294
)
  
NM
    
(25
)
  
NM
  
Total
  
35,259
    
14.8
%
  
31,658
    
15.0
%
  
97,498
    
14.3
%
  
87,874
    
14.2
%
                                                 
Operating income from continuing operations:
                                                
Health Services
  
15,923
    
11.2
%
  
14,509
    
11.4
%
  
54,098
    
13.2
%
  
44,740
    
11.6
%
Human Services
  
14,908
    
15.4
%
  
10,684
    
12.7
%
  
33,534
    
12.4
%
  
27,100
    
11.6
%
Consolidating adjustments
  
309
    
NM
    
162
    
NM
    
294
    
NM
    
25
    
NM
  
Subtotal: Segment Operating Income
  
31,140
    
13.1
%
  
25,355
    
12.0
%
  
87,926
    
12.9
%
  
71,865
    
11.6
%
Legal and settlement recovery (expense), net
  
(361
)
  
NM
    
—
    
NM
    
(361
)
  
NM
    
5,351
    
NM
  
Total
  
$
30,779
    
12.9
%
  
$
25,355
    
12.0
%
  
$
87,565
    
12.9
%
  
$
77,216
    
12.5
%

     
(1)
  
Percentage of respective segment revenue. Changes not considered meaningful are marked “NM.”
 
 
 
 
 
                     
MAXIMUS, Inc.
Supplemental Pro Forma Diluted EPS from Continuing Operations
("Adjusted EPS")
FY 2010 and YTD FY 2011
(Unaudited)
                     
                     
                   
Total
   
Q1 10
  
Q2 10
  
Q3 10
  
Q4 10
  
FY 10
Diluted EPS from continuing operations - GAAP basis
  
$
0.40
  
$
0.50
    
$
0.45
  
$
0.58
    
$
1.93
  
                     
Pro forma Adjustments:
                    
Legal and settlement expense (recovery), net
    
0.01
    
(0.11
)
    
-
    
-
      
(0.10
)
Adjustment for taxation rate
    
0.02
    
(0.01
)
    
0.01
    
(0.04
)
    
(0.02
)
Subtotal pro forma adjustments
    
0.03
    
(0.12
)
    
0.01
    
(0.04
)
    
(0.12
)
                     
Adjusted EPS from continuing operations
  
$
0.43
  
$
0.38
    
$
0.46
  
$
0.54
    
$
1.81
  
                     
                     
   
Q1 11
  
Q2 11
  
Q3 11
        
Diluted EPS from continuing operations
  
$
0.50
  
$
0.54
    
$
0.56
        
                     
Pro forma Adjustments:
                    
Legal and settlement expense (recovery), net
    
-
    
-
      
-
        
Adjustment for taxation rate
    
-
    
-
      
-
        
Subtotal pro forma adjustments
    
-
    
-
      
-
        
                     
Adjusted EPS from continuing operations
  
$
0.50
  
$
0.54
    
$
0.56
        
 
CONTACT:
MAXIMUS
Lisa Miles, 800-MAXIMUS x11637

MAXIMUS, INC. Reports