The following discussion and analysis of financial condition and results of operations is provided to enhance the understanding of, and should be read in conjunction with, our Consolidated Financial Statements and related Notes included both herein and in our Annual Report on Form 10-K for the year ended September 30, 2008, filed with the Securities and Exchange Commission on December 15, 2008.

Forward Looking Statements

From time to time, we may make forward-looking statements that are not historical facts, including statements about our confidence and strategies and our expectations about revenue, results of operations, profitability, current and future contracts, market opportunities, market demand or acceptance of our products and services. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be forward-looking statements. The words "could," "estimate," "future," "intend," "may," "opportunity," "potential," "project," "will," "believes," "anticipates," "plans," "expect" and similar expressions are intended to identify forward-looking statements. These statements may involve risks and uncertainties that could cause our actual results to differ materially from those indicated by such forward-looking statements. These risks are detailed in Exhibit 99.1 to our Annual Report on Form 10-K for the year ended September 30, 2008 and incorporated herein by reference.

Business Overview

We are a leading provider of consulting services and operations program management focused in the areas of health and human services primarily to government. Since our inception, we have been at the forefront of innovation in meeting our mission of "Helping Government Serve the PeopleŽ." We use our expertise, experience and advanced information technology to make government operations more efficient while improving the quality of services provided to program beneficiaries. We operate primarily in the United States, and we have had contracts with government agencies in all 50 states, Canada, Australia, Israel and the United Kingdom. For the fiscal year ended September 30, 2008, we had revenue of $745.1 million and net income of $6.7 million. For the six months ended March 31, 2009, we had revenue of $364.3 million and net income of $23.0 million.

Results of Operations



Consolidated



The following table sets forth, for the periods indicated, selected statements
of operations data:



                                                    Three Months             Six Months
                                                   Ended March 31,         Ended March 31,
(dollars in thousands, except per share data)     2008        2009        2008        2009
Revenue                                         $ 189,611   $ 184,201   $ 366,700   $ 364,293
Gross profit                                    $  51,863   $  47,111   $  98,147   $  94,258
Selling, general and administrative expenses    $  28,762   $  27,996   $  55,800   $  55,334
Selling, general and administrative expense
as a percentage of revenue                           15.2 %      15.2 %      15.2 %      15.2 %

Operating income from continuing operations     $  22,170   $  18,747   $  41,416   $  38,556
Operating margin from continuing operations
percentage                                           11.7 %      10.2 %      11.3 %      10.6 %

Income from continuing operations, net of
income taxes                                    $  13,489   $  11,363   $  25,757   $  23,404
Loss from discontinued operations, net of
income taxes                                    $  (3,862 ) $    (336 ) $  (5,525 ) $    (414 )
Net income (loss)                               $   9,627   $  11,027   $  20,232   $  22,990

Basic earnings (loss) per share:
Income from continuing operations               $    0.73   $    0.65   $    1.32   $    1.33
Loss from discontinued operations                   (0.21 )     (0.02 )     (0.28 )     (0.03 )
Basic earnings per share                        $    0.52   $    0.63   $    1.04   $    1.30

Diluted earnings (loss) per share:
Income from continuing operations               $    0.72   $    0.64   $    1.30   $    1.31
Loss from discontinued operations                   (0.21 )     (0.02 )     (0.28 )     (0.02 )
Diluted earnings per share                      $    0.51   $    0.62   $    1.02   $    1.29

We present constant currency revenue information to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current quarter and year-to-date revenue from foreign operations is converted into United States dollars using average exchange rates from the same periods in fiscal 2008. All our foreign operations are in the Operations Segment.

Revenue decreased 2.9%, or increased 0.9% on a constant currency basis, for the three months ended March 31, 2009, compared to the same period in fiscal 2008. Strong revenue growth in our domestic health services division and federal operations offset the adverse impact of a strong United States dollar on foreign sourced revenue.

Revenue decreased 0.7%, or increased 2.9% on a constant currency basis, for the six months ended March 31, 2009, compared to the same period in fiscal 2008. Strong revenue growth in our domestic health services division and federal operations partially offset the adverse impact of a strong United States dollar on foreign sourced revenue.

Operating income from continuing operations for the three months ended March 31, 2009 was $18.7 million, compared to operating income of $22.2 million for the same period in fiscal 2008. The decrease in operating income of $3.5 million is primarily driven by a $2.9 million and $1.0 million decrease in operating income in the Operations and Consulting Segments, respectively.

Operating income from continuing operations for the six months ended March 31, 2009 was $38.6 million, compared to operating income of $41.4 million for the same period in fiscal 2008. The decrease in operating income of $2.8 million is primarily driven by a $4.2 million decrease in operating income in the Consulting Segment offset by a $0.6 million increase in operating income in the Operations Segment.

Selling, general and administrative expense (SG&A) consists of costs related to general management, marketing and administration. These costs include salaries, benefits, bid and proposal efforts, travel, recruiting, continuing education, employee training, non-chargeable labor costs, facilities costs, printing, reproduction, communications, equipment depreciation, intangible amortization, and legal expenses incurred in the ordinary course of business. SG&A as a percentage of revenue was 15.2% for all periods presented.

Provision for income taxes was 39.5% of income from continuing operations before income taxes for the three months ended March 31, 2009 and 2008. Provision for income taxes for the six months ended March 31, 2009 was 39.5% of income from continuing operations before income taxes, compared to 40.1% for the same period in fiscal 2008.

Income from continuing operations, net of income taxes was $11.4 million, or $0.64 per diluted share, for the three months ended March 31, 2009, compared with $13.5 million, or $0.72 per diluted share, for the same period in fiscal 2008. The decrease in income from continuing operations, net of income taxes of $2.1 million is primarily driven by the after-tax impact of a $2.9 million and $1.0 million decrease in operating income in the Operations and Consulting Segments, respectively.

Income from continuing operations, net of income taxes was $23.4 million, or $1.31 per diluted share, for the six months ended March 31, 2009, compared with $25.8 million, or $1.30 per diluted share, for the same period in fiscal 2008. The decrease in income from continuing operations, net of income taxes of $2.4 million is primarily driven by the after-tax impact of a $4.2 million decrease in operating income in the Consulting Segment offset by a $0.6 million increase in operating income in the Operations Segment.

Net income for the three months ended March 31, 2009 was $11.0 million, or $0.62 per diluted share, compared with $9.6 million, or $0.51 per diluted share, for the same period in fiscal 2008. The increase in net income of $1.4 million is primarily attributable to a smaller loss from discontinued operations, net of income taxes of $3.5 million offset by a decrease in income from continuing operations, net of income taxes of $2.1 million.

Net income for the six months ended March 31, 2009 was $23.0 million, or $1.29 per diluted share, compared with $20.2 million, or $1.02 per diluted share, for the same period in fiscal 2008. The increase in net income of $2.8 million is primarily attributable to a smaller loss from discontinued operations, net of income taxes of $5.1 million offset by a decrease in income from continuing operations, net of income taxes of $2.3 million.

Operations Segment



                                  Three Months             Six Months
                                 Ended March 31,         Ended March 31,
(dollars in thousands)          2008        2009        2008        2009

Revenue                       $ 160,982   $ 155,626   $ 307,789   $ 311,964
Gross profit                     42,166      40,233      77,723      81,702
Operating income                 22,848      19,910      40,674      41,256

Operating margin percentage        14.2 %      12.8 %      13.2 %      13.2 %

The Operations Segment includes health services, workforce services, child support, and federal managed services and operations work.

Revenue decreased 3.3%, or increased 1.0% on a constant currency basis, for the three months ended March 31, 2009, compared to the same period in fiscal 2008. Revenue in the second quarter of fiscal 2008 included $6.9 million of infrequently occurring revenue related to hardware and software for a large health project. Normalized for infrequently occurring revenue and constant currency, revenue increased 5.6% compared to the same period in fiscal 2008 driven by strong growth in health services and federal operations. Operating income for the three months ended March 31, 2009 was $19.9 million, compared to operating income of $22.8 million for the same period in fiscal 2008. The decrease in operating income of $2.9 million is primarily driven by the adverse impact of a strong United States dollar and the start of a large contract that was successfully rebid last year, partially offset by strong revenue growth and margin improvement in health services and federal operations.

Revenue increased 1.4%, or 5.6% on a constant currency basis, for the six months ended March 31, 2009, compared to the same period in fiscal 2008. Revenue in the first half of fiscal 2008 included $6.9 million of infrequently occurring revenue related to hardware and software for a large health project. Normalized for infrequently occurring revenue and constant currency, revenue increased 8.1% compared to the same period in fiscal 2008 driven by strong growth in health services and federal operations. Operating income for the six months ended March 31, 2009 was $41.3 million, compared to operating income of $40.7 million for the same period in fiscal 2008. The increase in operating income of $0.6 million is primarily driven by strong revenue growth and margin improvement in health services and federal operations, partially offset by the impact of a strong United States dollar.

Consulting Segment



                                 Three Months            Six Months
                                Ended March 31,        Ended March 31,
(dollars in thousands)          2008       2009        2008       2009

Revenue                       $ 28,629   $ 28,575    $ 58,911   $ 52,329
Gross profit                     9,697      6,878      20,424     12,556
Operating income                   496       (475 )     2,275     (1,937 )

Operating margin percentage        1.7 %     (1.7 )%      3.9 %     (3.7 )%

The Consulting Segment includes program performance services, program and systems integrity services, educational services, and enterprise resource planning (ERP) solutions.

Revenue was $28.6 million for the three months ended March 31, 2009 and 2008. Revenue in the second quarter of fiscal 2009 included $4.8 million of pass-through revenue related to hardware and third party costs for the five-year, $54.9 million New York City Department of Education special education case management contract. Revenue in the second quarter of fiscal 2008 was adversely impacted by a $2.3 million charge related to a legacy federal claiming project. Normalized for $4.8 million of pass-through revenue in fiscal 2009 and the project charge in fiscal 2008, revenue declined 23.1% compared to the same period in fiscal 2008. Revenue growth in educational services was offset by revenue declines related to our exit from federal healthcare claiming work and the wind down of several ERP projects. Operating loss for the three months ended March 31, 2009 was $0.5 million, compared to operating income of $0.5 million for the same period in fiscal 2008. The decrease in operating income of $1.0 million is primarily attributable to (1) a $1.6 million provision related to a fixed price ERP contract and (2) the exit from federal healthcare claiming work, partially offset by (3) a $2.3 million charge related to a legacy federal claiming project in fiscal 2008.

Revenue was $52.3 million for the six months ended March 31, 2009, compared to $58.9 million in the same period in fiscal 2008. Revenue in the first half of fiscal 2009 included $4.8 million of pass-through revenue related to hardware and third party costs for the five-year, $54.9 million New York City Department of Education special education case management contract. Revenue in the first half of fiscal 2008 was adversely impacted by a $2.3 million charge related to a legacy federal claiming project. Normalized for $4.8 million of pass-through revenue in fiscal 2009 and the project charge in fiscal 2008, revenue declined 22.4% compared to the same period in fiscal 2008. Revenue growth in educational services was more than offset by revenue declines related to the exit from federal healthcare claiming work and the wind down of several ERP projects. Operating loss for the six months ended March 31, 2009 was $1.9 million, compared to operating income of $2.3 million for the same period in fiscal 2008. The decrease in operating income of $4.2 million is primarily attributable to
(1) a $4.1 million provision related to a fixed price ERP contract and (2) our exit from federal healthcare claiming work, partially offset by (3) a $2.3 million charge related to a legacy federal claiming project in fiscal 2008.

Interest and Other Income, Net

Interest and other income, net $ 107 $ 35 $ 1,608 $ 129

Interest and other income was approximately $0.1 million for the three months ended March 31, 2009 and 2008. Interest and other income was $0.1 million, compared to $1.6 million for the same period in fiscal 2008. The decrease in interest and other income of $1.5 million is attributable to a reduction in interest income related to the $150.0 million Accelerated Share Repurchase that was completed during the first quarter of fiscal 2008, which reduced cash balances.

Discontinued Operations



The following table summarizes the operating results of the discontinued
operations included in the Condensed Consolidated Statements of Operations (in
thousands):



                                          Three Months           Six Months
                                         Ended March 31,       Ended March 31,
                                          2008       2009       2008       2009

Revenue                                $   20,973   $    -   $   45,834   $    -

Loss from discontinued operations      $   (6,384 )   (556 )     (9,116 )   (677 )
Provision (benefit) for income taxes       (2,522 )   (220 )     (3,591 )   (268 )
Loss from discontinued operations      $   (3,862 ) $ (336 ) $   (5,525 ) $ (409 )

Loss from discontinued operations               -        -            -       (9 )
Provision (benefit) for income taxes            -        -            -       (4 )
Loss on disposal                                -        -            -       (5 )

Loss from discontinued operations      $   (3,862 ) $ (336 ) $   (5,525 ) $ (414 )

On April 30, 2008, the Company sold its Security Solutions division for cash proceeds of $4.6 million, net of transaction costs of $0.4 million, and recognized a pre-tax gain on the sale of $2.9 million. The financial position, results of operations, and cash flows of this business are reported as discontinued operations and all prior periods have been reclassified to conform to the current period's presentation. The Security Solutions division was previously reported as part of the Company's Systems Segment.

On May 2, 2008, the Company sold its Unison MAXIMUS, Inc. subsidiary for proceeds of $6.5 million. The sale transaction was structured as a sale of stock to the then current management team of the subsidiary. The sale price of $6.5 million consisted of $0.1 million in cash and $6.4 million in the form of a promissory note secured by (1) a security interest in all of the assets of the former subsidiary; (2) a pledge of shares by the buyer; and (3) a personal guaranty by members of the then current management team who are shareholders of the buyer. In accordance with Topic 5-U of SEC Staff Accounting Bulletin No. 81, "Gain Recognition on the Sale of a Business or Operating Assets to a Highly Leveraged Entity," the Company has deferred recognition of a pre-tax gain on the sale of $3.9 million, and interest income on the promissory note, until realization is more fully assured. The deferred gain of $3.9 million is reflected as a deduction from the note receivable on the consolidated balance sheet as of September 30, 2008 and March 31, 2009. The financial position, results of operations, and cash flows of this business are reported as discontinued operations and all prior periods have been reclassified to conform to the current period's presentation. Unison MAXIMUS, Inc. was previously reported as part of the Company's Consulting Segment.

On September 30, 2008, the Company sold its Justice Solutions, Education Systems, and Asset Solutions divisions, which were previously reported as part of its Systems Segment. Total consideration for the transaction was $40.0 million, including a $35.0 million cash payment received at closing and a $5.0 million holdback for one year from closing, subject to a purchase price adjustment and any claims based on representations and warranties. The Company deferred recognition of the holdback and, net of transaction costs of $2.0 million, recognized a pre-tax loss on the sale of $12.2 million. Beginning in the fourth quarter of fiscal 2008, the Company classified the results of operations of these divisions as discontinued operations and incorporated the Enterprise Resource Planning (ERP) Solutions division into the Consulting Segment. The financial position, results of operations, and cash flows of these businesses are reported as discontinued operations and all prior periods have been reclassified to conform to the current period's presentation.

Liquidity and Capital Resources

Current Economic Environment

With the United States in a very significant recession, the current economic environment facing state and local governments is quite challenging. Not only are they experiencing declining tax revenues, but they are also facing increasing demand for critical services from the most vulnerable members of society. At the same time, states are generally required to balance their budgets each year. Certain states may delay payments to vendors as a result of budgetary constraints. In prior periods, the Company has faced short-term payment delays from state customers, all of which were ultimately recovered. The Company believes its liquidity and capital positions are adequate to weather short-term payment delays. In the event of more protracted delays, the Company may be required to seek additional capital sources, amend payment terms or take other actions. Extended payment delays could adversely affect the Company's cash flows, operations and profitability.

The Federal government has passed economic stimulus legislation to address some of the pressures facing state and local governments. The Company believes that demand for its services in its core areas of health, education and human services will remain strong and that the economic stimulus package could ultimately increase demand for such services. However, any increases in demand resulting from the economic stimulus legislation will depend largely upon the timing, amount and nature of the stimulus targeted at the states as well as the timing and nature of the states' actions in response to such funding.

Cash Flows



                                                                 Six Months Ended
                                                                     March 31,
(dollars in thousands)                                           2008        2009

Net cash provided by (used in):
Operating activities - continuing operations                   $  24,826   $  18,719
Operating activities - discontinued operations                       467      (7,035 )
Investing activities - continuing operations                     120,638      (9,170 )
Investing activities - discontinued operations                    (1,566 )         -
Financing activities - continuing operations                    (151,417 )   (34,127 )
Effect of exchange rate changes on cash and cash equivalents           -      (2,902 )
Net decrease in cash and cash equivalents                      $  (7,052 ) $ (34,515 )

Cash provided by operating activities from continuing operations for the six months ended March 31, 2009 was $18.7 million, compared to cash provided by operating activities from continuing operations of $24.8 million for the same period in fiscal 2008. The decrease in cash provided by operating activities from continuing operations of $6.1 million is primarily attributable to a $27.5 million cash payment, net of insurance recoveries of $12.5 million, to settle the Company's arbitration matter offset by favorable working capital changes.

Cash used in operating activities from discontinued operations for the six months ended March 31, 2009 was $7.0 million, compared to cash provided by operating activities from discontinued operations of $0.5 million for the same period in fiscal 2008. The decrease in cash provided by operating activities from discontinued operations of $7.5 million is attributable to the wind-down of the disposed operations.

Cash used in investing activities from continuing operations for the six months ended March 31, 2009 was $9.2 million, compared to cash provided by investing activities from continuing operations of $120.6 million for the same period in fiscal 2008. The decrease in cash provided by investing activities from continuing operations of $129.8 million is primarily attributable to the sale of $126.2 million of marketable securities in the first half of fiscal 2008 to partially finance the Company's $150.4 million Accelerated Share Repurchase program.

Cash used in financing activities from continuing operations for the six months ended March 31, 2009 was $34.1 million, compared to $151.4 million for the same period in fiscal 2008. The decrease in cash used in financing activities from continuing operations of $117.3 million is primarily attributable to a $120.4 million decrease in repurchases of common stock. Repurchases of common stock were $30.0 million and $150.4 million in the first half of fiscal 2009 and 2008, respectively.

The adverse effect of exchange rate changes on cash and cash equivalents of $2.9 million in the first quarter of fiscal 2009 is due to the impact of the strengthening United States dollar on cash and cash equivalents held in our foreign operations.

Other Matters

Under a resolution adopted in July 2008, the Board of Directors has authorized the repurchase, at management's discretion, of up to an aggregate of $75.0 million of the Company's common stock. The resolution also authorized the use of option exercise proceeds for the repurchase of the Company's common stock. During the six months ended March 31, 2009, the Company repurchased 927,690 common shares at a cost of $30.0 million. During the six months ended March 31, 2008, the Company repurchased 3,758,457 common shares at a cost of $150.4 million under an Accelerated Share Repurchase program. At March 31, 2009, $53.4 million remained available for future stock repurchases under the July 2008 resolution.

Our working capital at March 31, 2009 was $146.8 million. At March 31, 2009, we had cash and cash equivalents of $85.1 million and no debt. Management believes this liquidity and financial position, along with the revolving credit facility discussed below, provides sufficient liquidity to continue any contemplated stock repurchase program (depending on the price of the Company's common stock), to pursue selective acquisitions, and to consider the continuation of dividends on a quarterly basis. Restricted cash at March 31, 2009 was $2.4 million. Restricted cash represents amounts collected on behalf of certain customers where its use is restricted to the purposes specified under our contracts with these customers, and amounts on deposit with foreign banks as compensating balances for certain bank guarantees.

Under the provisions of certain long-term contracts, we may incur certain reimbursable transition period costs. During the transition period, these expenditures resulted in the use of our cash. Reimbursement of these costs may occur in the set-up phase or over the contract operating period. Related revenue may also be deferred during the set-up phase. As of March 31, 2009, $7.6 million in net costs had been incurred and reported as deferred contract costs on our consolidated balance sheet.

The Company's Revolving Credit Agreement provides for a senior secured revolving credit facility, with SunTrust Bank as administrative agent, issuing bank and swingline lender, and a syndicate of other lenders (the "Credit Facility"). The Credit Facility provides for a $35.0 million revolving line of credit commitment, which may be used (i) for revolving loans, (ii) for swingline loans, . . .