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 nine months ended June 30, 2009, we had revenue of $549.5 million and net income of $38.0 million.

Results of Operations



Consolidated



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



                                                      Three Months              Nine Months
                                                     Ended June 30,            Ended June 30,
(dollars in thousands, except per share data)      2008         2009         2008         2009
Revenue                                          $ 189,364    $ 185,240    $ 556,064    $ 549,533
Gross profit                                     $  52,788    $  48,053    $ 150,935    $ 142,311
Selling, general and administrative expenses     $  28,949    $  28,155    $  84,749    $  83,489
Selling, general and administrative expense
as a percentage of revenue                            15.3 %       15.2 %       15.2 %       15.2 %

Gain on sale of building                         $   3,938            -    $   3,938            -
Legal and settlement expense (recovery), net     $     700    $  (4,829 )  $   1,631    $  (4,461 )

Operating income from continuing operations      $  27,077    $  24,727    $  68,493    $  63,283
Operating margin from continuing operations
percentage                                            14.3 %       13.3 %       12.3 %       11.5 %

Income from continuing operations, net of
income taxes                                     $  17,296    $  15,038    $  43,053    $  38,442
Loss from discontinued operations, net of
income taxes                                     $  (5,891 )  $     (55 )  $ (11,416 )  $    (469 )
Net income                                       $  11,405    $  14,983    $  31,637    $  37,973

Basic earnings (loss) per share:
Income from continuing operations                $    0.93    $    0.86    $    2.24    $    2.19
Loss from discontinued operations                    (0.32 )          -        (0.60 )      (0.03 )
Basic earnings per share                         $    0.61    $    0.86    $    1.64    $    2.16

Diluted earnings (loss) per share:
Income from continuing operations                $    0.92    $    0.84    $    2.21    $    2.15
Loss from discontinued operations                    (0.31 )          -        (0.59 )      (0.02 )
Diluted earnings per share                       $    0.61    $    0.84    $    1.62    $    2.13

We discuss constant currency revenue information to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To provide 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 of our foreign operations are in the Operations Segment.

Revenue decreased 2.2%, but increased 0.7% on a constant currency basis, for the three months ended June 30, 2009, compared to the same period in fiscal 2008. The adverse impact of a strong United States dollar on foreign sourced revenue offset strong revenue growth in our domestic health services division and federal operations.

Revenue decreased 1.2%, but increased 2.2% on a constant currency basis, for the nine months ended June 30, 2009, compared to the same period in fiscal 2008. The adverse impact of a strong United States dollar on foreign sourced revenue partially offset strong revenue growth in our domestic health services division and federal operations.

Operating income from continuing operations for the three months ended June 30, 2009 was $24.7 million, compared to operating income of $27.1 million for the same period in fiscal 2008. The decrease in operating income of $2.4 million is primarily driven by (1) a $2.8 million and $1.4 million decrease in operating income in the Operations and Consulting Segments, respectively, (2) a $3.9 million gain on sale of building in fiscal 2008, partially offset by a $5.5 million reduction in legal and settlement expense.

Operating income from continuing operations for the nine months ended June 30, 2009 was $63.3 million, compared to operating income of $68.5 million for the same period in fiscal 2008. The decrease in operating income of $5.2 million is primarily driven by (1) a $2.2 million and $5.6 million decrease in operating income in the Operations and Consulting Segments, respectively, (2) a $3.9 million gain on sale of building in fiscal 2008, partially offset by a $6.1 million reduction in legal and settlement expense.

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 for the three months ended June 30, 2009 was 15.2%, compared to 15.3% for the same period in fiscal 2008, and was 15.2% for the nine months ended June 30, 2009 and 2008.

Legal and settlement expense (recovery) consists of costs, net of reimbursed insurance claims, related to significant legal settlements and non-routine legal matters, including future probable legal costs estimated to be incurred in connection with those matters. Legal expenses incurred in the ordinary course of business are included in selling, general and administrative expense. The following table sets forth the matters that represent legal and settlement expense (recovery):

                                        Three months ended             Nine months ended
                                             June 30,                      June 30,
(dollars in thousands)                 2008            2009           2008           2009

Accenture Arbitration and
Related Settlement                  $       700    $     (6,300 )  $     1,650    $   (6,300 )
Other                                         -           1,471            (19 )       1,839
Total                               $       700    $     (4,829 )  $     1,631    $   (4,461 )

Legal and settlement expense (recovery) for the three and nine months ended June 30, 2009 included a $6.3 million recovery from one of the Company's excess insurance carriers for the Accenture arbitration matter. The Company continues to pursue additional insurance recoveries from its other excess insurance carriers; however, such recoveries are not assured.

Provision for income taxes was 39.5% of income from continuing operations before income taxes for the three and nine months ended June 30, 2009. Provision for income taxes was 37.3% and 39.0% of income from continuing operations before income taxes for the three and nine months ended June 30, 2008, respectively.

Income from continuing operations, net of income taxes, was $15.0 million, or $0.84 per diluted share, for the three months ended June 30, 2009, compared with $17.3 million, or $0.92 per diluted share, for the same period in fiscal 2008. The decrease in income from continuing operations, net of income taxes, of $2.3 million is primarily driven by the after-tax impact of a $2.4 million decrease in operating income from continuing operations and a $0.4 million decrease in interest and other income.

Income from continuing operations, net of income taxes, was $38.4 million, or $2.15 per diluted share, for the nine months ended June 30, 2009, compared with $43.1 million, or $2.21 per diluted share, for the same period in fiscal 2008. The decrease in income from continuing operations, net of income taxes, of $4.7 million is primarily driven by the after-tax impact of a $5.2 million decrease in operating income from continuing operations and a $1.8 million decrease in interest and other income.

Net income for the three months ended June 30, 2009 was $15.0 million, or $0.84 per diluted share, compared with $11.4 million, or $0.61 per diluted share, for the same period in fiscal 2008. The increase in net income of $3.6 million is primarily attributable to a smaller loss from discontinued operations, net of income taxes, of $5.9 million offset by a decrease in income from continuing operations, net of income taxes, of $2.3 million.

Net income for the nine months ended June 30, 2009 was $38.0 million, or $2.13 per diluted share, compared with $31.6 million, or $1.62 per diluted share, for the same period in fiscal 2008. The increase in net income of $6.4 million is primarily attributable to a smaller loss from discontinued operations, net of income taxes, of $11.1 million offset by a decrease in income from continuing operations, net of income taxes, of $4.7 million.

Operations Segment



                                          Three Months             Nine Months
                                         Ended June 30,          Ended June 30,
        (dollars in thousands)          2008        2009        2008        2009

        Revenue                       $ 157,917   $ 165,522   $ 465,706   $ 477,486
        Gross profit                     41,870      41,981     119,593     123,683
        Operating income                 22,845      20,039      63,519      61,295

        Operating margin percentage        14.5 %      12.1 %      13.6 %      12.8 %

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

Revenue increased 4.8%, or 8.3% on a constant currency basis, for the three months ended June 30, 2009, compared to the same period in fiscal 2008. Constant currency revenue growth was driven by strong growth in health services and federal operations. Operating income for the three months ended June 30, 2009 was $20.0 million, compared to operating income of $22.8 million for the same period in fiscal 2008. The decrease in operating income of $2.8 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 2.5%, or 6.5% on a constant currency basis, for the nine months ended June 30, 2009, compared to the same period in fiscal 2008. Revenue in 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 nine months ended June 30, 2009 was $61.3 million, compared to operating income of $63.5 million for the same period in fiscal 2008. The decrease in operating income of $2.2 million is primarily driven by the 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.

Consulting Segment



                                          Three Months            Nine Months
                                         Ended June 30,         Ended June 30,
         (dollars in thousands)          2008       2009        2008       2009

         Revenue                       $ 31,447   $ 19,718    $ 90,358   $ 72,047
         Gross profit                    10,918      6,072      31,342     18,628
         Operating income/(loss)          1,262       (146 )     3,537     (2,083 )

         Operating margin percentage        4.0 %     (0.7 )%      3.9 %     (2.9 )%

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

Revenue was $19.7 million for the three months ended June 30, 2009, compared to $31.4 million in the same period in fiscal 2008. Lower revenue reflects our exit from federal healthcare claiming work and the wind down of several ERP projects. Operating loss for the three months ended June 30, 2009 was $0.1 million, compared to operating income of $1.3 million for the same period in fiscal 2008. The decrease in operating income of $1.4 million is primarily attributable to a $1.3 million provision related to a fixed price ERP contract and the exit from federal healthcare claiming work.

Revenue was $72.0 million for the nine months ended June 30, 2009, compared to $90.4 million in the same period in fiscal 2008. Revenue in 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 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 27.4% compared to the same period in fiscal 2008. Lower revenue reflects our exit from federal healthcare claiming work and the wind down of several ERP projects. Operating loss for the nine months ended June 30, 2009 was $2.1 million, compared to operating income of $3.5 million for the same period in fiscal 2008. The decrease in operating income of $5.6 million is primarily attributable to (1) a $5.4 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.

Interest and Other Income, Net

Interest and other income, net $ 490 $ 129 $ 2,098 $ 258

Interest and other income was approximately $0.1 million and $0.5 million for the three months ended June 30, 2009 and 2008. Interest and other income was $0.3 million for the nine months ended June 30, 2009, compared to $2.1 million for the same period in fiscal 2008. The decrease in interest and other income of $1.8 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, and lower interest rates.

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         Nine Months
                                                  Ended June 30,       Ended June 30,
                                                   2008      2009      2008       2009

    Revenue                                     $   18,649   $   -   $  64,483   $    -

    Loss from discontinued operations           $  (12,590 ) $ (91 ) $ (21,706 ) $ (767 )
    Benefit from income taxes                       (4,973 )   (36 )    (8,564 )   (303 )
    Loss from discontinued operations           $   (7,617 ) $ (55 ) $ (13,142 ) $ (464 )

    Gain (loss) from discontinued operations    $    2,853   $   -   $   2,853   $   (9 )
    Provision for (benefit from) income taxes        1,127       -       1,127       (4 )
    Gain (loss) on disposal                     $    1,726   $   -   $   1,726   $   (5 )

    Loss from discontinued operations           $   (5,891 ) $ (55 ) $ (11,416 ) $ (469 )

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. The sale transaction was structured as a sale of stock to the then current management team of the subsidiary. The sale price of $6.6 million consisted of $0.1 million in cash, $0.2 million in a short-term note receivable and $6.3 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 $4.0 million, and interest income on the promissory note, until realization is more fully assured. The deferred gain of $4.0 million is reflected as a deduction from the note receivable on the consolidated balance sheet as of September 30, 2008 and June 30, 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 extremely 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 or, as in the case of California, may issue IOUs payable at a future date. 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



                                                                 Nine Months Ended
                                                                     June 30,
(dollars in thousands)                                           2008        2009

Net cash provided by (used in):
Operating activities - continuing operations                   $  42,724   $  31,081
Operating activities - discontinued operations                    (4,632 )    (7,596 )
Investing activities - continuing operations                     125,232     (14,992 )
Investing activities - discontinued operations                    (2,259 )         -
Financing activities - continuing operations                    (153,593 )   (35,776 )
Effect of exchange rate changes on cash and cash equivalents           -        (656 )
Net increase/(decrease) in cash and cash equivalents           $   7,472   $ (27,939 )

Cash provided by operating activities from continuing operations for the nine months ended June 30, 2009 was $31.1 million, compared to cash provided by operating activities from continuing operations of $42.7 million for the same period in fiscal 2008. The decrease in cash provided by operating activities from continuing operations of $11.6 million is primarily attributable to the after-tax impact of a $21.2 million cash payment, net of insurance recoveries of $18.8 million, to settle the Company's arbitration matter.

Cash used in operating activities from discontinued operations for the nine months ended June 30, 2009 was $7.6 million, compared to cash used in operating activities from discontinued operations of $4.6 million for the same period in fiscal 2008. The increase in cash used in operating activities from discontinued operations of $3.0 million is attributable to the wind-down of the disposed operations.

Cash used in investing activities from continuing operations for the nine months ended June 30, 2009 was $15.0 million, compared to cash provided by investing activities from continuing operations of $125.2 million for the same period in fiscal 2008. The decrease in cash provided by investing activities from continuing operations of $140.2 million is primarily attributable to (1) the sale of $126.2 million of marketable securities during fiscal 2008 to partially finance the Company's Accelerated Share Repurchase program; (2) cash proceeds of $5.9 million from the sale of a building during fiscal 2008 and (3) cash proceeds of $4.6 million from the sales of discontinued operations during fiscal 2008.

Cash used in financing activities from continuing operations for the nine months ended June 30, 2009 was $35.8 million, compared to $153.6 million for the same period in fiscal 2008. The decrease in cash used in financing activities from continuing operations of $117.8 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 for the nine months ended June 30, 2009 and 2008, respectively.

The adverse effect of exchange rate changes on cash and cash equivalents of $0.7 million for the nine months ended June 30, 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 nine months ended June 30, 2009, the Company repurchased 927,690 common shares at a cost of $30.0 million. At June 30, 2009, $54.2 million remained available for future stock repurchases under the July 2008 resolution.

Our working capital at June 30, 2009 was $163.9 million. At June 30, 2009, we had cash and cash equivalents of $91.7 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 . . .