MAXIMUS, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 6, 2012

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Exhibit 99.1
 
MAXIMUS Reports Fiscal 2012 First Quarter Results and Reiterates Fiscal 2012 Guidance
 
RESTON, Va.--(BUSINESS WIRE)--February 2, 2012--MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its fiscal first quarter ended December 31, 2011.
 
Key highlights include:
 
●  
Revenue for the first quarter grew 12% to $239.6 million compared to the same period last year.
 
●  
Diluted earnings per share from continuing operations were $0.51 for the first quarter, in-line with the Company’s expectations.
 
●  
Revenue and earnings in the quarter were impacted by unfavorable currency trends and the timing of a change order that is currently expected to be recognized in the second half of fiscal 2012.
 
●  
The Company generated strong cash in the first quarter with cash provided by operating activities from continuing operations of $27.6 million and free cash flow of $24.3 million.
 
●  
Cash and cash equivalents totaled $191.0 million at December 31, 2011.
 
Revenue for the fiscal 2012 first quarter increased 12% to $239.6 million versus $214.1 million reported for the same period last year. Year-over-year revenue increases were driven by growth in the Health Services Segment, offsetting the expected decline in revenue from the Human Services Segment related to the start up of the new Work Programme in the United Kingdom.
 
First quarter income from continuing operations, net of taxes, totaled $17.7 million, which was consistent with the same period last year. For the first quarter, diluted earnings per share from continuing operations were $0.51, in-line with expectations and consistent with the prior-year period.
 
Revenue and earnings in the quarter were impacted by unfavorable currency trends, relative to the Company’s guidance, and the timing of a change order for a project in the Health Services Segment. The change order is currently expected to be recognized in the second half of the fiscal year.
 
“As expected, growth in Medicaid managed care helped MAXIMUS deliver 12% year-over-year revenue growth in the first quarter. And while our initial revenue expectations for the quarter were somewhat higher, we remain on track to achieve our full-year revenue and earnings guidance,” commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. “Within our core markets, the United Kingdom operations are ramping up as expected, and we continue to see a broader movement towards the demand for our services as governments continue to seek new ways to manage programs while cost-effectively addressing the needs of their constituents around the world.”
 
 
 
 

Health Services Segment
 
Health Services Segment revenue for the first quarter of fiscal 2012 increased 22% to $158.0 million compared to $130.0 million for the same period last year, driven by the expansion of managed care in Texas. Operating income for the first quarter totaled $16.8 million with an operating margin of 10.6%. Operating income was lower compared to last year due to the timing of a change order and normal life-cycle fluctuations in contracts. In addition, Segment margin was also tempered by anticipated growth from a lower margin, cost-reimbursable contract in Texas.
 
Human Services Segment
 
Human Services Segment results in the quarter included the expected reimbursement for the termination of the predecessor Flexible New Deal (FND) contract, which was replaced by the Work Programme contract. The termination payment included $2.7 million for revenue earned and an additional $1.5 million, net of subcontractor expenses, for cost recoveries.
 
Human Services Segment revenue for the fiscal 2012 first quarter totaled $81.6 million, which was 3% lower (4% on a constant currency basis) than the prior-year period principally due to the transition to the Work Programme contract. Operating income for the first quarter was $10.3 million with an operating margin of 12.6% and benefitted from the FND termination payment, which partially offset the expected impacts from the ramp up of the Work Programme contract. Margins were higher compared to the prior year period, which was impacted by cost growth on a fixed-price contract that has since been successfully resolved.
 
Sales and Pipeline
 
At January 30, 2012, fiscal year-to-date signed contract wins totaled $298 million compared to $753 million reported for the same period last year, which included nearly $600 million for two contract renewals. New contracts pending (awarded but unsigned) totaled $579 million compared to $177 million last year. Sales opportunities (pipeline) at January 30, 2012 totaled $1.7 billion (consisting of $301 million in proposals pending, $334 million in proposals in preparation and $1.1 billion in proposals tracking) compared to $1.6 billion the prior year.
 
Balance Sheet and Cash Flows
 
Cash and cash equivalents increased to $191.0 million at December 31, 2011. For the fiscal 2012 first quarter, cash provided by operating activities from continuing operations totaled $27.6 million with free cash flow of $24.3 million. The Company defines free cash flow as cash provided by operating activities from continuing operations less cash paid for property, equipment and capitalized software. Cash flow in the quarter was driven by solid net income and strong collections.
 
Days Sales Outstanding (DSO) from continuing operations were 60 days. On November 30, 2011, MAXIMUS paid a quarterly cash dividend of $0.09 per share and in January 2012, the Company announced its next quarterly cash dividend of $0.09 per share, payable on February 29, 2012 to shareholders of record on February 15, 2012.
 
During the first quarter of fiscal 2012, MAXIMUS used $8.8 million to purchase 236,700 shares of common stock, and at December 31, 2011, the Company had $127.9 million available for repurchases under the current program.
 
Outlook
 
The Company is reiterating its fiscal 2012 revenue and earnings guidance. MAXIMUS continues to expect to generate revenue from continuing operations in the range of $980 million to $1.015 billion and adjusted diluted earnings per share from continuing operations in the range of $2.20 to $2.30.
 
Mr. Montoni concluded, “On a global basis, many governments are facing fiscal challenges coupled with rising caseloads and the overarching need to reform their welfare and health systems. We see significant opportunities ahead as governments realize the value of our expertise to build and implement efficient delivery models that provide quality services to citizens in an affordable manner.”
 
 
 
 
 
Website Presentation, Conference Call and Webcast Information
 
MAXIMUS will host a conference call this morning, February 2, 2012, 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 February 16, 2012. Callers can access the replay by calling:
 
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account number: 316
Replay conference ID number: 387441
 
About MAXIMUS
 
MAXIMUS is a leading health and human services administrator for governments in the United States, United Kingdom, Canada and Australia. The Company delivers administrative solutions to improve the cost effectiveness, efficiency and quality of government-sponsored benefit programs, such as Medicaid, Medicare, Children's Health Insurance Program (CHIP), Health Insurance BC (British Columbia), as well as welfare-to-work and child support enforcement programs across the globe. The Company's primary customer base includes federal, provincial, state, county and municipal governments. Operating under its founding mission of Helping Government Serve the People®, MAXIMUS has more than 7,000 employees located in more than 220 offices worldwide. For more information, visit www.maximus.com.
 
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 Annual Report filed with the Securities and Exchange Commission, found on www.maximus.com.
 
 
 
 
 
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
   
Three Months
Ended December 31,
   
2011
  
2010
Revenue
  
$
239,603
    
$
214,114
  
Cost of revenue
  
179,756
    
158,155
  
Gross profit
  
59,847
    
55,959
  
Selling, general and administrative expenses
  
32,756
    
28,667
  
Legal and settlement expense
  
186
    
—
  
Operating income from continuing operations
  
26,905
    
27,292
  
Interest and other income, net
  
1,104
    
491
  
Income from continuing operations before income taxes
  
28,009
    
27,783
  
Provision for income taxes
  
10,351
    
10,196
  
Income from continuing operations
  
17,658
    
17,587
  
             
Discontinued operations, net of income taxes:
            
Loss from discontinued operations
  
(44
)
  
—
  
Income (loss) on disposal
  
90
    
(105
)
Income (loss) from discontinued operations
  
46
    
(105
)
             
Net income
  
$
17,704
    
$
17,482
  
             
Basic earnings (loss) per share:
            
Income from continuing operations
  
$
0.52
    
$
0.51
  
Income (loss) from discontinued operations
  
0.01
    
—
  
Basic earnings per share
  
$
0.53
    
$
0.51
  
             
Diluted earnings (loss) per share:
            
Income from continuing operations
  
$
0.51
    
$
0.50
  
Income (loss) from discontinued operations
  
—
    
(0.01
)
Diluted earnings per share
  
$
0.51
    
$
0.49
  
             
Dividends paid per share
  
$
0.09
    
$
0.06
  
             
Weighted average shares outstanding:
            
Basic
  
33,663
    
34,361
  
Diluted
  
34,557
    
35,420
  
 
 
 
 
 
MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
   
December 31,
2011
  
September 30,
2011
   
(unaudited)
      
ASSETS
            
Current assets:
            
Cash and cash equivalents
  
$
191,048
    
$
172,950
  
Restricted cash
  
7,116
    
4,839
  
Accounts receivable — billed, net of reserves of $3,413 and $3,265
  
149,936
    
146,900
  
Accounts receivable — unbilled
  
7,588
    
7,170
  
Prepaid income taxes
  
7,054
    
12,959
  
Deferred income taxes
  
22,409
    
19,256
  
Prepaid expenses and other current assets
  
26,605
    
27,202
  
Total current assets
  
411,756
    
391,276
  
             
Property and equipment, net
  
50,235
    
51,740
  
Capitalized software, net
  
26,444
    
26,616
  
Goodwill
  
72,020
    
71,323
  
Intangible assets, net
  
5,427
    
5,651
  
Deferred contract costs, net
  
7,246
    
8,020
  
Deferred income taxes
  
778
    
732
  
Deferred compensation plan assets
  
8,543
    
8,004
  
Other assets, net
  
1,962
    
1,917
  
Total assets
  
$
584,411
    
$
565,279
  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY
            
Current liabilities:
            
Accounts payable
  
$
62,490
    
$
55,470
  
Accrued compensation and benefits
  
34,527
    
47,748
  
Deferred revenue
  
56,030
    
47,902
  
Current portion of long-term debt
  
86
    
42
  
Acquisition-related contingent consideration
  
1,863
    
1,840
  
Income taxes payable
  
4,409
    
5,104
  
Other accrued liabilities
  
4,432
    
5,787
  
Total current liabilities
  
163,837
    
163,893
  
Deferred revenue, less current portion
  
2,274
    
2,575
  
Long-term debt
  
1,632
    
1,654
  
Acquisition-related contingent consideration, less current portion
  
392
    
388
  
Income taxes payable, less current portion
  
1,511
    
1,484
  
Deferred income taxes
  
12,523
    
11,945
  
Deferred compensation plan liabilities, less current portion
  
10,320
    
8,883
  
Total liabilities
  
192,489
    
190,822
  
             
Shareholders’ equity:
            
Common stock, no par value; 60,000 shares authorized; 56,199 and 56,018 shares issued and 33,737 and 33,793 shares outstanding at December 31, 2011 and September 30, 2011, at stated amount, respectively
  
385,101
    
377,579
  
Treasury stock, at cost; 22,462 and 22,225 shares at December 31, 2011 and September 30, 2011, respectively
  
(425,651
)
  
(416,850
)
Accumulated other comprehensive income
  
16,711
    
12,480
  
Retained earnings
  
415,761
    
401,248
  
Total shareholders’ equity
  
391,922
    
374,457
  
Total liabilities and shareholders’ equity
  
$
584,411
    
$
565,279
  
 
 
 
 
 
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
   
Three Months
Ended December 31,
   
2011
  
2010
Cash flows from operating activities:
            
Net income
  
$
17,704
    
$
17,482
  
Adjustments to reconcile net income to net cash provided by operating activities:
            
(Income) loss from discontinued operations
  
(46
)
  
105
  
Depreciation and amortization
  
6,111
    
5,232
  
Deferred income taxes
  
(2,424
)
  
990
  
Non-cash equity based compensation
  
2,797
    
2,057
  
             
Change in assets and liabilities:
            
Accounts receivable — billed
  
(2,473
)
  
22,145
  
Accounts receivable — unbilled
  
(418
)
  
(1,554
)
Prepaid expenses and other current assets
  
(1,621
)
  
1,041
  
Deferred contract costs
  
790
    
(580
)
Accounts payable
  
7,770
    
3,948
  
Accrued compensation and benefits
  
(10,553
)
  
(11,553
)
Deferred revenue
  
7,629
    
(5,270
)
Income taxes
  
4,978
    
(3,470
)
Other assets and liabilities
  
(2,688
)
  
(192
)
Cash provided by operating activities — continuing operations
  
27,556
    
30,381
  
Cash used in operating activities — discontinued operations
  
—
    
(739
)
Cash provided by operating activities
  
27,556
    
29,642
  
             
Cash flows from investing activities:
            
Proceeds from sale of discontinued operations
  
2,240
    
—
  
Proceeds from note receivable
  
148
    
—
  
Purchases of property and equipment
  
(2,554
)
  
(2,407
)
Capitalized software costs
  
(720
)
  
(2,298
)
Cash used in investing activities — continuing operations
  
(886
)
  
(4,705
)
Cash used in investing activities — discontinued operations
  
—
    
—
  
Cash used in investing activities
  
(886
)
  
(4,705
)
             
Cash flows from financing activities:
            
Employee stock transactions
  
(272
)
  
4,329
  
Repurchases of common stock
  
(9,749
)
  
(8,370
)
Tax benefit due to option exercises and restricted stock units vesting
  
1,740
    
1,031
  
Cash dividends paid
  
(3,023
)
  
(2,067
)
Cash used in financing activities — continuing operations
  
(11,304
)
  
(5,077
)
Cash used in financing activities — discontinued operations
  
—
    
—
  
Cash used in financing activities
  
(11,304
)
  
(5,077
)
             
Effect of exchange rate changes on cash and cash equivalents
  
2,732
    
1,823
  
             
Net increase in cash and cash equivalents
  
18,098
    
21,683
  
             
Cash and cash equivalents, beginning of period
  
172,950
    
155,321
  
             
Cash and cash equivalents, end of period
  
$
191,048
    
$
177,004
  
 
 
 
 
 
 
MAXIMUS, Inc.
SEGMENT INFORMATION
(Dollars in thousands)
(Unaudited)
 
   
Three Months Ended December 31,
   
2011
    
% (1)
  
2010
    
% (1)
                             
Revenue:
                            
Health Services
  
$
158,043
      
100
%
  
$
130,011
      
100
%
Human Services
  
81,560
      
100
%
  
84,103
      
100
%
Total
  
239,603
      
100
%
  
214,114
      
100
%
                             
Gross profit:
                            
Health Services
  
35,999
      
22.8
%
  
34,277
      
26.4
%
Human Services
  
23,848
      
29.2
%
  
21,682
      
25.8
%
Total
  
59,847
      
25.0
%
  
55,959
      
26.1
%
                             
Selling, general, and administrative expense:
                            
Health Services
  
19,216
      
12.2
%
  
15,454
      
11.9
%
Human Services
  
13,540
      
16.6
%
  
13,179
      
15.7
%
Corporate/other
  
—
      
NM
    
34
      
NM
  
Total
  
32,756
      
13.7
%
  
28,667
      
13.4
%
                             
Operating income from continuing operations:
                            
Health Services
  
16,783
      
10.6
%
  
18,823
      
14.5
%
Human Services
  
10,308
      
12.6
%
  
8,503
      
10.1
%
Corporate/other
  
—
      
NM
    
(34
)
    
NM
  
Subtotal: Segment operating income
  
27,091
      
11.3
%
  
27,292
      
12.7
%
Legal and settlement expense
  
186
      
NM
    
—
      
NM
  
Total
  
$
26,905
      
11.2
%
  
$
27,292
      
12.7
%
                                 

_________________________
  
(1) Percentage of respective segment revenue. Changes not considered meaningful are marked “NM.”
 
 
 
 
 
 
 
MAXIMUS, Inc.
Supplemental Pro Forma Diluted EPS from Continuing Operations ("Adjusted Diluted EPS")
FY 2011 and FY 2012
(Unaudited)
 
   
Quarter Ended
  
Year
Ended
  
Quarter
Ended
   
Dec. 31,
2010
  
Mar. 31,
2011
  
Jun. 30,
2011
  
Sept. 30,
2011
  
Sept. 30,
2011
  
Dec. 31,
2011
Diluted EPS from continuing operations-GAAP basis
  
$
0.50
    
$
0.54
    
$
0.56
    
$
0.73
    
$
2.31
    
$
0.51
  
                                 
Pro forma adjustments:
                                
Legal and settlement expense (recovery), net
    
–
      
–
      
–
      
(0.02
)
    
(0.02
)
    
–
  
Adjustment for tax accounts
    
0.01
      
0.01
      
0.01
      
(0.07
)
    
(0.04
)
    
–
  
Subtotal pro forma adjustments
    
0.01
      
0.01
      
0.01
      
(0.09
)
    
(0.06
)
    
–
  
                                 
Adjusted Diluted EPS from continuing operations
  
$
0.51
    
$
0.55
    
$
0.57
    
$
0.64
    
$
2.25
    
$
0.51
  
 
 
CONTACT:
MAXIMUS, Inc.
Lisa Miles, 800-MAXIMUS x11637
 

MAXIMUS, INC. Reports