What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-02-09 compared with 2021-08-11 · 181 added, 345 removed, 564 unchanged (48% of the section changed)

19 unchanged sentences

OPERATING LEASE RIGHT-OF-USE ASSETS

NON-CURRENT ASSETS HELD FOR SALE

LIABILITIES AND STOCKHOLDERS’ EQUITY

17 unchanged sentences

AECOM STOCKHOLDERS’ EQUITY:

Common stock—authorized, 300,000,000 shares of $ 0.01 par value as of June 30, 2021 and September 30, 2020;

issued and outstanding 144,877,676 and 157,044,687 shares as of June 30, 2021 and September 30, 2020, respectively

Common stock-authorized, 300,000,000 shares of $ 0.01 par value as of December 31, 2021 and September 30, 2021;

issued and outstanding 141,335,424 and 143,168,815 shares as of December 31, 2021 and September 30, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive loss

(Accumulated deficits) / Retained earnings

Accumulated deficits

TOTAL AECOM STOCKHOLDERS’ EQUITY

6 unchanged sentences

Three Months Ended

Nine Months Ended

Cost of revenue

5 unchanged sentences

Income from continuing operations before taxes

Income tax (benefit) expense for continuing operations

Income tax expense for continuing operations

Net income from continuing operations

1 unchanged sentence

Net income attributable to noncontrolling interests from continuing operations

Net income attributable to noncontrolling interests from discontinued operations

Net income attributable to noncontrolling interests

Net loss (income) attributable to noncontrolling interests from discontinued operations

Net loss (income) attributable to noncontrolling interests

Net income attributable to AECOM from continuing operations

10 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income

(unaudited—in thousands)

Three Months Ended

Nine Months Ended

Other comprehensive (loss) income, net of tax:

Other comprehensive income, net of tax:

Net unrealized gain on derivatives, net of tax

1 unchanged sentence

Pension adjustments, net of tax

Other comprehensive (loss) income , net of tax

Comprehensive income, net of tax

Noncontrolling interests in comprehensive income of consolidated subsidiaries, net of tax

Comprehensive (loss) income attributable to AECOM, net of tax

Other comprehensive income, net of tax

Comprehensive income

Noncontrolling interests in comprehensive loss (income) of consolidated subsidiaries, net of tax

Comprehensive income attributable to AECOM

See accompanying Notes to Consolidated Financial Statements.

4 unchanged sentences

Stockholders’

BALANCE AT MARCH 31, 2021

Other comprehensive loss

Issuance of stock

Repurchases of stock

Stock based compensation

Distributions to noncontrolling interests

BALANCE AT JUNE 30, 2021

Comprehensive

Stockholders’

BALANCE AT MARCH 31, 2020

Other comprehensive income

Issuance of stock

Repurchases of stock

Stock based compensation

Other transactions with noncontrolling interests

Contributions from noncontrolling interests

Distributions to noncontrolling interests

BALANCE AT JUNE 30, 2020

Consolidated Statements of Stockholders’ Equity

(unaudited—in thousands)

Comprehensive

Stockholders’

BALANCE AT SEPTEMBER 30, 2020

8 unchanged sentences

Distributions to noncontrolling interests

BALANCE AT JUNE 30, 2021

BALANCE AT DECEMBER 31, 2020

Comprehensive

2 unchanged sentences

BALANCE AT SEPTEMBER 30, 2021

Cumulative effect of accounting standard adoption

Other comprehensive income

Dividends declared

Other comprehensive income (loss)

Issuance of stock

2 unchanged sentences

Other transactions with noncontrolling interests

Disposal of noncontrolling interest of business sold

Contributions from noncontrolling interests

Distributions to noncontrolling interests

BALANCE AT JUNE 30, 2020

BALANCE AT DECEMBER 31, 2021

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

(unaudited - in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

2 unchanged sentences

Non-cash stock compensation

Prepayment premium on redemption of unsecured notes

Impairment of long-lived assets

Loss (gain) on sale of discontinued operations

Loss on disposal activities

Foreign currency translation

6 unchanged sentences

Other long-term liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

(Payment for) proceeds from sale of discontinued operations, net of cash disposed

Payments for sale of discontinued operations including cash disposed

Investment in unconsolidated joint ventures

3 unchanged sentences

Payments for capital expenditures

Net cash (used in) provided by investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

1 unchanged sentence

Repayments of borrowings under credit agreements

( 1,929,251 )

( 5,547,055 )

Redemption of unsecured senior notes

Prepayment premium on redemption of unsecured senior notes

Cash paid for debt issuance costs

Proceeds from issuance of common stock

Proceeds from exercise of stock options

Payments to repurchase common stock

2 unchanged sentences

Net cash used in financing activities

( 1,405,536 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

NET DECREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

12 unchanged sentences

Certain reclassifications were made to the prior year to conform to current year presentation.

The results of operations for the three and nine months ended June 30, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2021.

On January 31, 2020, the Company completed the sale of its Management Services business to an affiliate of American Securities LLC and Lindsay Goldberg LLC.

Additionally, as discussed in more detail in Note 3, the Company concluded that its self-perform at-risk construction businesses met the criteria for held for sale beginning in the first quarter of fiscal year 2020.

Collectively, the Management Services business and the self-perform at-risk construction businesses met the criteria for discontinued operation classification.

As a result, the Management Services business and the self-perform at-risk construction businesses are presented in the consolidated statements of operations as discontinued operations for all periods presented.

Prior period's disaggregated revenue by geographic region reclassifies the India business to Europe, Middle East and Africa to conform with current operations.

The results of operations for the three months ended December 31, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2022.

As discussed in more detail in Note 3, the Company concluded that its self-perform at-risk construction businesses met the criteria for held for sale beginning in the first quarter of fiscal year 2020 and met the criteria for discontinued operation classification.

As a result, the self-perform at-risk construction businesses are presented in the consolidated statements of operations as discontinued operations for all periods presented.

Current and non-current assets and liabilities of these businesses are presented in the consolidated balance sheets as assets and liabilities held for sale.

3 unchanged sentences

New Accounting Pronouncements and Changes in Accounting

In February 2016, the Financial Accounting Standards Board (FASB) issued new accounting guidance which changes accounting requirements for leases.

The new guidance requires lessees to recognize the assets and liabilities arising from all leases, including those classified as operating leases under previous accounting guidance, on the balance sheet.

It also requires disclosure of key information about leasing arrangements to increase transparency and comparability among organizations.

The Company adopted the new guidance beginning October 1, 2019 using the modified retrospective adoption method, which resulted in a downward adjustment to retained earnings of $ 87.8 million, net of tax.

Detailed disclosures regarding the adoption and other required disclosures can be found in Note 12.

In June 2016, the FASB issued a new credit loss standard that changes the impairment model for most financial assets and some other instruments.

In June 2016, the Financial Accounting Standards Board (FASB) issued a new credit loss standard that changes the impairment model for most financial assets and some other instruments.

The new guidance replaces the “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost.

2 unchanged sentences

Additional disclosures regarding the adoption can be found in Note 4.

In February 2018, the FASB issued new accounting guidance which provides entities the option to reclassify certain tax effects from other comprehensive income to retained earnings.

The guidance addresses a narrow-scope financial reporting issue related to the tax effects that may become stranded in accumulated other comprehensive income as a result of the enactment of the Tax Cuts and Jobs Act (Tax Act).

Under the guidance, an entity may elect to reclassify the income tax effects of the Tax Act on items within accumulated other comprehensive income to retained earnings.

The Company has determined that it will not make this election.

In August 2018, the FASB issued new accounting guidance aligning the capitalization of certain implementation costs incurred in a hosting arrangement that is a service contract with previously existing guidance for capitalizing costs incurred to develop internal-use software.

The new guidance was effective for the Company’s fiscal year starting October 1, 2020.

The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued new accounting guidance amending the disclosure requirements for fair value measurements.

These improvements require more disclosure for amounts measured at fair value, and specifically unobservable inputs used in fair value measurements.

The Company adopted the new guidance starting on October 1, 2020.

Adoption of the new guidance did not have a significant impact on the Company’s financial reporting process.

In August 2018, the FASB issued new accounting guidance for the disclosure requirements of defined benefit pension plans.

The amended guidance eliminates certain disclosure requirements that were no longer considered to be cost beneficial.

The Company expects to adopt the new guidance starting on October 1, 2021 and does not expect adoption of the new guidance will have a significant impact on its financial reporting process.

In March 2020, the Securities and Exchange Commission (SEC) adopted final rules that amend the financial disclosure requirement for guarantors of registered debt securities in Rule 3-10 of Regulation S-X.

The new rules amend and streamline the disclosures required by guarantors and issuers of guaranteed securities.

Among other things, the new disclosures may be located outside the financial statements.

The new rule was effective January 4, 2021, and early adoption is permitted.

The Company adopted the new rule on March 31, 2020.

Accordingly, the revised condensed consolidating financial information is presented outside of these consolidated financial statements.

The Company adopted the new guidance starting on October 1, 2021.

Adoption of the new guidance did not have a significant impact on the Company’s financial statements.

In December 2019, the FASB issued new accounting guidance which simplifies the accounting for income taxes.

The guidance amends certain exceptions to the general principles of Accounting Standards Codification (ACS) 740, Income Taxes , and simplifies several areas such as accounting for a franchise tax or similar tax that is partially based on income.

The Company adopted the new guidance starting on October 1, 2021.

The adoption of the new guidance did not have a significant impact on the Company’s consolidated financial statements.

In October 2021, the FASB issued final guidance to companies that apply ASC 606, Revenue from Contracts with Customers , to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination.

The new guidance creates an exception to the general requirement to measure acquired assets and liabilities at fair value on the acquisition date.

Under this exception, an acquirer applies ASC 606 to recognize and measure contract assets and contract liabilities on the acquisition date.

The Company expects to adopt the new guidance starting on October 1, 2022 on a prospective basis.

The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

Discontinued Operations, Goodwill and Intangible Assets

During the second quarter of fiscal 2020, the Company completed the sale of its Management Services business to Maverick Purchaser Sub, LLC (Purchaser), an affiliate of American Securities LLC and Lindsay Goldberg LLC.

The Company received total cash consideration of $ 2.28 billion inclusive of the receipt in the third quarter of fiscal 2020 of $ 122.0 million received in connection with a favorable working capital purchase price adjustment and contingent consideration of approximately $ 120 million attributable to certain claims related to prior work and engagements.

As a result of the sale, the Company recognized a pre-tax gain of $ 161.9 million.

The gain on sale was included in the net loss from discontinued operations in the Consolidated Statements of Operations.

Additionally, in the first quarter of fiscal 2020, management approved a plan to dispose via sale the Company’s self-perform at-risk construction businesses within the next year.

In the first quarter of fiscal 2020, management approved a plan to dispose via sale the Company’s self-perform at-risk construction businesses.

These businesses include the Company’s civil infrastructure, power, and oil and gas construction businesses that were previously reported in the Company’s Construction Services segment.

After consideration of the relevant facts, the Company concluded the assets and liabilities of its Management Services business and its self-perform at-risk construction businesses met the criteria for classification as held for sale.

The Company concluded the actual and proposed disposal activities represented a strategic shift that will have a major effect on the Company’s operations and financial results and qualified for presentation as discontinued operations in accordance with FASB Accounting Standards Codification (ASC) 205-20.

Accordingly, the financial results of the Management Services business and the self-perform at-risk construction businesses are presented in the Consolidated Statement of Operations as discontinued operations for all periods presented.

Current and non-current assets and liabilities of these businesses not sold as of the balance sheet date are presented in the Consolidated Balance Sheet as assets and liabilities held for sale for both periods presented.

Interest expense allocated to discontinued operations represents interest expenses for the discontinued operations’ finance leases and term loans, which were required to be settled upon the sale of the Management Services business.

After consideration of the relevant facts, the Company concluded the assets and liabilities of its self-perform at-risk construction businesses met the criteria for classification as held for sale.

The Company concluded the actual and proposed disposal activities represented a strategic shift that would have a major effect on the Company’s operations and financial results and qualified for presentation as discontinued operations in accordance with FASB ASC 205-20.

Accordingly, the financial results of the self-perform at-risk construction businesses are presented in the Consolidated Statement of Operations as discontinued operations for all periods presented.

Current and non-current assets and liabilities of these businesses not sold as of the balance sheet date are presented in the Consolidated Balance Sheets as assets and liabilities held for sale for both periods presented.

During the first quarter of fiscal 2021, the Company completed the sale of its power construction business to CriticalPoint Capital, LLC.

The Company recorded $ 17.3 million through the first nine months of fiscal 2021 related to payments for post-closing working capital adjustments.

The Company recorded an additional pre-tax loss on the sale of $ 17.3 million in fiscal 2021 related to payments for post-closing working capital adjustments.

The Company also completed the sale of its civil infrastructure construction business to affiliates of Oroco Capital in the second quarter of fiscal 2021.

During the second quarter of fiscal 2021, the Company recorded a $ 32.8 million loss related to the sale of its civil infrastructure construction businesses.

During the second quarter of fiscal 2021, the Company recorded a $ 32.8 million loss related to the sale of its civil infrastructure construction business.

In the first quarter of fiscal 2022, the Company recorded an additional $ 40.0 million loss primarily related to revisions of estimates for its working capital obligation to be paid and contingent consideration receivable.

Under the terms of the sale agreement, the Company made the required cash payments and delivered the cash and cash equivalents, including cash in consolidated joint ventures, on the balance sheet at closing.

As a result, the Company recorded the net cash movement of the sale as a use of cash in the investing section of its statement of cash flows.

On January 28, 2022, the Company completed the sale of its oil and gas construction business to affiliates of Graham Maintenance Services LP for a purchase price of $ 14 million, subject to cash, debt and working capital adjustments.

The following table represents summarized balance sheet information of assets and liabilities held for sale (in millions):

12 unchanged sentences

Three months ended

Nine months ended

Cost of revenue

Gross profit (loss)

Equity in earnings (losses) of joint ventures

(Loss) gain on disposal activities

Gross (loss) profit

Equity in earnings of joint ventures

Loss on disposal activities

Transaction costs

1 unchanged sentence

Loss from operations

Other (expense) income

Interest expense

Loss before taxes

Income tax (benefit) expense

Net loss from discontinued operations

The significant components included in the Consolidated Statement of Cash Flows for the discontinued operations are as follows (in millions):

Income tax benefit

Net loss from discontinuing operations

The significant components included in our Consolidated Statement of Cash Flows for the discontinued operations are as follows (in millions):

Three months ended

Nine months ended

Depreciation and amortization:

2 unchanged sentences

Payments for capital expenditures

The changes in the carrying value of goodwill by reportable segment for the nine months ended June 30, 2021 were as follows:

The changes in the carrying value of goodwill by reportable segment for the three months ended December 31, 2021 were as follows:

September 30,

1 unchanged sentence

International

The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of June 30, 2021 and September 30, 2020, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:

June 30, 2021

The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of December 31 and September 30, 2021, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:

December 31, 2021

September 30, 2021

1 unchanged sentence

Backlog and customer relationships

Amortization expense of acquired intangible assets included within cost of revenue was $ 15.9 million and $ 18.3 million for the nine months ended June 30, 2021 and 2020, respectively.

Amortization expense of acquired intangible assets included within cost of revenue were $ 4.7 million and $ 5.4 million for the three months ended December 31, 2021 and 2020, respectively.

The following table presents estimated amortization expense of existing intangible assets for the remainder of fiscal 2022 and for the succeeding years:

(in millions)

2021 (three months remaining)

2022 (nine months remaining)

Revenue Recognition

1 unchanged sentence

The Company generally recognizes revenues over time as performance obligations are satisfied.

The Company generally measures its progress to completion using an input measure of total costs incurred divided by total costs expected to be incurred.

The Company generally measures its progress to completion using an input measure of total costs incurred divided by total costs expected to be incurred, which it believes to be the best measure of progress towards completion of the performance obligation.

In the course of providing its services, the Company routinely subcontracts for services and incurs other direct costs on behalf of its clients.

These costs are passed through to clients and, in accordance with GAAP, are included in the Company’s revenue and cost of revenue.

These pass through costs included in revenues for the nine months ended June 30, 2021 and 2020 were $ 5.4 billion and $ 5.1 billion, respectively.

These pass through revenues for the three months ended December 31, 2021 and 2020 were $ 1.7 billion and $ 1.8 billion, respectively.

Recognition of revenue and profit is dependent upon a number of factors, including the accuracy of a variety of estimates made at the balance sheet date, such as engineering progress, material quantities, the achievement of milestones, penalty provisions, labor productivity and cost estimates.

26 unchanged sentences

Three months ended

Nine months ended

(in millions)

3 unchanged sentences

Three months ended

Nine months ended

(in millions)

Europe, Middle East, Africa

Europe, Middle East, India, Africa

Total revenue

As of June 30, 2021, the Company had allocated $ 18.5 billion of transaction price to unsatisfied or partially satisfied performance obligations, of which approximately 55 % is expected to be satisfied within the next twelve months .

As of December 31, 2021, the Company had allocated $ 22.2 billion of transaction price to unsatisfied or partially satisfied performance obligations, of which approximately 50 % is expected to be satisfied within the next twelve months .

Contract liabilities represent amounts billed to clients in excess of revenue recognized to date.

The Company recognized revenue of $ 646.6 million and $ 563.1 million during the nine months ended June 30, 2021 and 2020, respectively, that was included in contract liabilities as of September 30, 2020 and 2019, respectively.

The Company recognized revenue of $ 466.2 million and $ 464.3 million during the three months ended December 31, 2021 and 2020, respectively, that was included in contract liabilities as of September 30, 2021 and 2020, respectively.

The Company’s timing of revenue recognition may not be consistent with its rights to bill and collect cash from its clients.

8 unchanged sentences

Total accounts receivable—gross

Allowances for doubtful accounts and credit losses

Allowance for doubtful accounts and credit losses

Total accounts receivable—net

Substantially all contract assets as of June 30, 2021 and September 30, 2020 are expected to be billed and collected within twelve months , except for claims.

Significant claims recorded in contract assets and other non-current assets were approximately $ 170 million as of both June 30, 2021 and September 30, 2020.

The asset related to the Deactivation, Demolition, and Removal Project retained from the Purchaser discussed in Note 15 is presented in prepaid expense and other current assets from continuing operations in the Consolidated Balance Sheet.

Contract retentions represent amounts invoiced to clients where payments have been withheld from progress payments until the contracted work has been completed and approved by the client.

Substantially all contract assets as of December 31, 2021 and September 30, 2021 are expected to be billed and collected within twelve months , except for claims.

Significant claims recorded in contract assets and other non-current assets were approximately $ 140 million and $ 140 million as of December 31, 2021 and September 30, 2021, respectively.

The asset related to the Deactivation, Demolition, and Removal Project retained from the MS Purchaser as defined in and discussed in Note 15 is presented in prepaid expense and other current assets from continuing operations in the Consolidated Balance Sheet.

Contract retentions represent amounts invoiced to clients where payments have been withheld from progress payments until the contracted work has been completed and approved by the client but nonetheless represent an unconditional right to cash.

These retention agreements vary from project to project and could be outstanding for several months or years.

3 unchanged sentences

Negative macroeconomic trends or delays in payment of outstanding receivables could result in an increase in the estimated credit losses.

No single client accounted for more than 10% of the Company’s outstanding receivables at June 30, 2021 and September 30, 2020.

The Company sold trade receivables to financial institutions, of which $ 243.7 million and $ 166.6 million were outstanding as of June 30, 2021 and September 30, 2020, respectively.

No single client accounted for more than 10 % of the Company’s outstanding receivables at December 31, 2021 and September 30, 2021.

The Company sold trade receivables to financial institutions, of which $ 230.9 million and $ 263.6 million were outstanding as of December 31, 2021 and September 30, 2021, respectively.

The Company does not retain financial or legal obligations for these receivables that would result in material losses.

6 unchanged sentences

Some of the Company’s joint ventures have no employees and minimal operating expenses.

For these joint ventures, the Company’s employees perform work for the joint venture, which is then billed to a third-party customer by the joint venture.

For these joint ventures, which are referred to as pass-through joint ventures, the Company’s employees perform work for the joint venture, which is then billed to a third-party customer by the joint venture.

These joint ventures function as pass-through entities to bill the third-party customer.

22 unchanged sentences

Total liabilities and owners’ equity

Total revenue of the consolidated joint ventures was $ 604.7 million and $ 602.1 million for the nine months ended June 30, 2021 and 2020, respectively.

Total revenue of the consolidated joint ventures was $ 301.2 million and $ 189.2 million for the three months ended December 31, 2021 and 2020, respectively.

The assets of the Company’s consolidated joint ventures are restricted for use only by the particular joint venture and are not available for the general operations of the Company.

9 unchanged sentences

Total liabilities and joint ventures’ equity

AECOM’s investment in joint ventures

Nine Months Ended

AECOM’s investment in unconsolidated joint ventures

Three Months Ended

(in millions)

1 unchanged sentence

Summary of AECOM’s equity in earnings of unconsolidated joint ventures is as follows:

Nine Months Ended

Three Months Ended

(in millions)

10 unchanged sentences

The components of net periodic benefit cost other than the service cost component are included in other income in the consolidated statement of operations.

The following table details the components of net periodic benefit cost for the Company’s pension plans for the three and nine months ended June 30, 2021 and 2020:

The following table details the components of net periodic benefit cost for the Company’s pension plans for the three months ended December 31, 2021 and 2020:

Three Months Ended

Nine Months Ended

December 31, 2021

December 31, 2020

(in millions)

3 unchanged sentences

Expected return on plan assets

Amortization of prior service cost

Amortization of net loss

Curtailment loss recognized

Settlement loss recognized

Net periodic benefit cost

The total amounts of employer contributions paid for the nine months ended June 30, 2021 were $ 10.1 million for U.S.

The total amounts of employer contributions paid for the three months ended December 31, 2021 were $ 2.4 million for U.S.

plans and $ 5.4 million for non-U.S.

6 unchanged sentences

2027 Senior Notes

Current portion of debt and short-term borrowings

1 unchanged sentence

Long-term debt

The following table presents, in millions, scheduled maturities of the Company’s debt as of June 30, 2021:

2021 (three months remaining)

The following table presents, in millions, scheduled maturities of the Company’s debt as of December 31, 2021:

2022 (nine months remaining)

Credit Agreement

The Company entered into a credit agreement (Credit Agreement) on October 17, 2014, which, as amended to date, consists of (i) a term loan A facility that included a $ 510 million (US) term loan A facility with a term that expired on March 13, 2021 and a $ 500 million Canadian dollar (CAD) term loan A facility and a $ 250 million Australian dollar (AUD) term loan A facility, each with terms expiring on March 13, 2023;

(ii) a $ 600 million term loan B facility with a term expiring on March 13, 2025;

and (iii) a revolving credit facility in an aggregate principal amount of $ 1.35 billion with a term expiring on March 13, 2023.

Some subsidiaries of the Company (Guarantors) have guaranteed the obligations of the borrowers under the Credit Agreement.

The borrowers’ obligations under the Credit Agreement are secured by a lien on substantially all of the assets of the Company and the Guarantors pursuant to a security and pledge agreement (Security Agreement).

The collateral under the Security Agreement is subject to release upon fulfillment of conditions specified in the Credit Agreement and Security Agreement.

The Credit Agreement contains covenants that limit the ability of the Company and the ability of some of its subsidiaries to, among other things:

(i) create, incur, assume, or suffer to exist liens;

(ii) incur or guarantee indebtedness;

(iii) pay dividends or repurchase stock;

(iv) enter into transactions with affiliates;

(v) consummate asset sales, acquisitions or mergers;

(vi) enter into various types of burdensome agreements;

or (vii) make investments.

On July 1, 2015, the Credit Agreement was amended to revise the definition of “Consolidated EBITDA” to increase the allowance for acquisition and integration expenses related to the Company’s acquisition of the URS Corporation (URS) in October 2014.

On December 22, 2015, the Credit Agreement was amended to further revise the definition of “Consolidated EBITDA” by further increasing the allowance for acquisition and integration expenses related to the acquisition of URS and to allow for an internal corporate restructuring primarily involving the Company’s international subsidiaries.

On September 29, 2016, the Credit Agreement and the Security Agreement were amended to (1) lower the applicable interest rate margins for the term loan A and the revolving credit facilities, and lower the applicable letter of credit fees and commitment fees to the revised consolidated leverage levels;

(2) extend the term of the term loan A and the revolving credit facility to September 29, 2021;

(3) add a new delayed draw term loan A facility tranche in the amount of $ 185.0 million;

(4) replace the then existing $ 500 million performance letter of credit facility with a $ 500 million basket to enter into secured letters of credit outside the Credit Agreement;

and (5) revise covenants, including the Maximum Consolidated Leverage Ratio so that the step down from a 5.00 to a 4.75 leverage ratio is effective as of March 31, 2017 as well as the investment basket for the Company’s AECOM Capital business.

On March 31, 2017, the Credit Agreement was amended to (1) expand the ability of restricted subsidiaries to borrow under “Incremental Term Loans;” (2) revise the definition of “Working Capital” as used in “Excess Cash Flow;” (3) revise the definitions for “Consolidated EBITDA” and “Consolidated Funded Indebtedness” to reflect the expected gain and debt repayment of an AECOM Capital disposition, which disposition was completed on April 28, 2017;

and (4) amend provisions relating to the Company’s ability to undertake internal restructuring steps to accommodate changes in tax laws.

On March 13, 2018, the Credit Agreement was amended to (1) refinance the existing term loan A facility to include a $ 510 million (US) term loan A facility with a term expiring on March 13, 2021 and a $ 500 million CAD term loan A facility and a $ 250 million AUD term loan A facility each with terms expiring on March 13, 2023;

(2) issue a new $ 600 million term loan B facility to institutional investors with a term expiring on March 13, 2025;

(3) increase the capacity of the Company’s revolving credit facility from $ 1.05 billion to $ 1.35 billion and extend its term until March 13, 2023;

(4) reduce the Company’s interest rate borrowing costs as follows:

(a) the term loan B facility, at the Company’s election, Base Rate (as defined in the Credit Agreement) plus 0.75 % or Eurocurrency Rate (as defined in the Credit Agreement) plus 1.75 %, (b) the (US) term loan A facility, at the Company’s election, Base Rate plus 0.50 % or Eurocurrency Rate plus 1.50 %, and (c) the Canadian (CAD) term loan A facility, the Australian (AUD) term loan A facility, and the revolving credit facility, an initial rate of, at the Company’s election, Base Rate plus 0.75 % or Eurocurrency Rate plus 1.75 %, and after the end of the Company’s fiscal quarter ended June 30, 2018, Base Rate loans plus a margin ranging from 0.25 % to 1.00 % or Eurocurrency Rate plus a margin from 1.25 % to 2.00 %, based on the Consolidated Leverage Ratio (as defined in the Credit Agreement);

(5) revise covenants including increasing the amounts available under the restricted payment negative covenant and revising the Maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) to include a 4.5 leverage ratio through September 30, 2019 after which the leverage ratio stepped down to 4.0 .

On November 13, 2018, the Credit Agreement was amended to revise the definition of “Consolidated EBITDA” to increase corporate restructuring allowances and provide for additional flexibility under the covenants for non-core asset dispositions, among other changes.

On January 28, 2020, AECOM entered into Amendment No.

7 to the Credit Agreement which modifies the asset disposition covenant to permit the sale of our Management Services business and the mandatory prepayment provision so that only outstanding term loans are prepaid using the net proceeds from the sale.

On May 1, 2020, the Company entered into Amendment No.

8 to the Credit Agreement which allows for borrowings to be made, until three months after closing, up to an aggregate principal amount of $ 400,000,000 under a secured delayed draw term loan facility, the proceeds of which are permitted to be used to pay all or a portion of the amounts payable in connection with any tender for or redemption or repayment of the Company’s or its subsidiaries’ existing senior unsecured notes and any associated fees and expenses.

The amendment also revised certain terms and covenants in the Credit Agreement, including by, among other things, the maximum leverage ratio covenant to 4.00 :1.00, subject to increases to 4.50 :1.00 for certain specified periods in connection with certain material acquisitions, increasing the potential size of incremental facilities under the Credit Agreement, revising the definition of “Consolidated EBITDA” to provide for additional flexibility in the calculation thereof and adding a Eurocurrency Rate floor of 0.75 % to the interest rate under the revolving credit facility.

On July 30, 2020, the Company drew $ 248.5 million on its secured delayed draw term loan facility (Term A Facility) for the purpose of redeeming all of the 2022 URS Senior Notes.

On February 8, 2021, the Company entered into the 2021 Refinancing Amendment to the Credit Agreement, pursuant to which the maturity of the revolving credit facility and the term loans outstanding under the Credit Agreement were extended to February 8, 2026.

In addition, the refinancing amendment reduced the size of the revolving credit facility to $ 1,150,000,000 .

The applicable interest rate under the Credit Agreement is calculated at a per annum rate equal to, at our option, (a) the Eurocurrency Rate (as defined in the Credit Agreement) plus an applicable margin (the “LIBOR Applicable Margin”), which is currently at 1.50 % or (b) the Base Rate (as defined in the Credit Agreement) plus an applicable margin (the “Base Rate Applicable Margin” and together with the LIBOR Applicable Margin, the “Applicable Margins”), which is currently at 0.50 %.

The Credit Agreement includes certain environmental, social and governance (ESG) metrics relating to our CO 2 emissions and the Company’s percentage of employees who identify as women (each, a “Sustainability Metric”).

On February 8, 2021, the Company entered into the 2021 Refinancing Amendment to the Credit Agreement (the "Credit Agreement"), pursuant to which the Company amended and restated its Syndicated Credit Facility Agreement, dated as of October 17, 2014 (as amended prior to February 8, 2021, the "Original Credit Agreement"), between the Company, as borrower, Bank of America, N.A., as administrative agent, and other parties thereto.

The Credit Agreement consists of a $ 1,150,000,000 revolving credit facility (the "Revolving Credit Facility") and a $ 246,968,737.50 term loan A facility (the "Term A Facility,"

together with the Revolving Credit Facility, the "Credit Facilities"), each of which mature on February 8, 2026.

The outstanding loans under the Term A Facility were borrowed in U.S.

Loans under the Revolving Credit Facility may be borrowed, and the letters of credit thereunder may be issued, in U.S.

dollars or certain foreign currencies.

The proceeds of the Revolving Credit Facility may be used from time to time for ongoing working capital and for other general corporate purposes.

The proceeds of the Revolving Credit Facility and the Term A Loan facility borrowed on February 8, 2021 were used to refinance the existing revolving credit facility and the existing term loan facility under the Original Credit Agreement and to pay related fees and expenses.

The Credit Agreement permits the Company to designate certain of its subsidiaries as additional co-borrowers from time to time.

Currently, there are no co-borrowers under the Credit Facilities.

The applicable interest rate under the Credit Agreement is calculated at a per annum rate equal to, at the Company’s option, (a) the Eurocurrency Rate (as defined in the Credit Agreement) plus an applicable margin (the “LIBOR Applicable Margin”), which is currently at 1.2250 % or (b) the Base Rate (as defined in the Credit Agreement) plus an applicable margin (the “Base Rate Applicable Margin” and together with the LIBOR Applicable Margin, the “Applicable Margins”), which is currently at 0.2250 %.

The Credit Agreement includes certain environmental, social and governance (ESG) metrics relating to the Company’s CO 2 emissions and its percentage of employees who identify as women (each, a “Sustainability Metric”).

The Applicable Margins and the commitment fees for the Revolving Credit Facility will be adjusted on an annual basis based on the Company’s achievement of preset thresholds for each Sustainability Metric.

Some of the Company's material subsidiaries (the "Guarantors") have guaranteed the Company's obligations of the borrowers under the Credit Agreement, subject to certain exceptions.

The borrowers' obligations under the Credit Agreement are secured by a lien on substantially all of the Company's assets and its Guarantors' assets, subject to certain exceptions.

The Credit Agreement contains customary negative covenants that include, among other things, limitations on the ability of the Company and certain of its subsidiaries, subject to certain exceptions, to incur liens and debt, make investments, dispositions, and restricted payments, change the nature of their business, consummate mergers, consolidations and the sale of all or substantially all of their respective assets, taken as a whole, and transact with affiliates.

The Company is also required to maintain a consolidated interest coverage ratio of at least 3.00 to 1.00 and a consolidated leverage ratio of less than or equal to 4.00 to 1.00 (subject to certain adjustments in connection with permitted acquisitions), tested on a quarterly basis (the "Financial Covenants").

The Company's consolidated leverage ratio was 2.40 to 1.00 at December 31, 2021.

As of December 31, 2021, the Company was in compliance with the covenants of the Credit Agreement.

The Credit Agreement contains customary affirmative covenants, including, among other things, compliance with applicable law, preservation of existence, maintenance of properties and of insurance, and keeping proper books and records.

The Credit Agreement contains customary events of default, including, among other things, nonpayment of principal, interest or fees, cross-defaults to other debt, inaccuracies of representations and warranties, failure to perform covenants, events of bankruptcy and insolvency, change of control and unsatisfied judgments, subject in certain cases to notice and cure periods and other exceptions.

On April 13, 2021, the Company entered into Amendment No.

10 to the Credit Agreement, pursuant to which the lenders thereunder provided a secured term “B” credit facility (Term B Facility) to the Company in an aggregate principal amount of $ 700,000,000 .

10 to the Credit Agreement, pursuant to which the lenders thereunder provided a secured term “B” credit facility (the “Term B Facility”) to the Company in an aggregate principal amount of $ 700,000,000 .

The Term B Facility matures on April 13, 2028.

The proceeds of the Term B Facility were used to fund the purchase price, fees and expenses in connection with the Company’s cash tender offer to purchase up to $ 700,000,000 aggregate purchase price (not including any accrued and unpaid interest) of the Company’s outstanding 5.875 % Senior Notes due 2024.

The Term B Facility is subject to the same affirmative and negative covenants and events of default as the existing term loans previously incurred pursuant to the existing Credit Agreement (except that the financial covenants in the existing Credit Agreement do not apply to the Term B Facility).

The Term B Facility is subject to the same affirmative and negative covenants and events of default as the Term A Facility previously incurred pursuant to the existing Credit Agreement (except that the Financial Covenants in the Credit Agreement do not apply to the Term B Facility).

The applicable interest rate for the Term B Facility is calculated at a per annum rate equal to, at the Company’s option, (a) the Eurocurrency Rate (as defined in the Credit Agreement) plus 1.75 % or (b) the Base Rate (as defined in the Credit Agreement) plus 0.75 %.

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11 to the Credit Agreement, pursuant to which the lenders have provided to the Company an additional $ 215,000,000 in aggregate principal amount under the Term A Facility.

The Term A Facility matures on February 8, 2026.

The Company used the net proceeds from the increase in the Term A Facility (together with cash on hand), to (i) redeem all of the Company’s remaining 5.875 % Senior Notes due 2024 and (ii) pay fees and expenses related to such redemption.

The Company is required to maintain a consolidated interest coverage ratio of at least 3.00 to 1.00 and a consolidated leverage ratio of less than or equal to 4.00 to 1.00 (subject to certain adjustments in connection with permitted acquisitions), tested on a quarterly basis.

The Company’s consolidated leverage ratio was 2.5 at June 30, 2021.

The Company’s consolidated interest coverage ratio was 6.8 at June 30, 2021.

As of June 30, 2021, the Company was in compliance with the covenants of the Credit Agreement.

At June 30, 2021 and September 30, 2020, letters of credit totaled $ 11.2 million and $ 19.0 million, respectively, under the Company’s revolving credit facilities.

As of June 30, 2021 and September 30, 2020, the Company had $ 1,138.8 million and $ 1,331.0 million, respectively, available under its revolving credit facility.

2024 Senior Notes

On October 6, 2014, the Company completed a private placement offering of $ 800,000,000 aggregate principal amount of the unsecured 5.875 % Senior Notes due 2024 (the 2024 Notes).

On November 2, 2015, the Company completed an exchange offer to exchange the unregistered 2024 Senior Notes for registered notes, as well as all related guarantees.

On July 21, 2020, the Company completed a cash tender offer at par for up to $ 639 million in aggregate principal amount of the 2024 Notes and the 2027 Senior Notes.

The Company accepted for purchase all of 2024 Notes validly tendered and not validly withdrawn pursuant to the cash tender offer, amounting to $ 2.7 million aggregate principal amount of the 2024 Notes at par.

The Company made the cash tender offer at par to satisfy obligations under the indentures governing the 2024 Notes and the 2027 Senior Notes relating to the use of certain cash proceeds from its disposition of the Management Services business, which was completed on January 31, 2020.

On April 26, 2021, the Company completed a cash tender offer for up to $ 700 million in aggregate purchase price (not including any accrued and unpaid interest) of the 2024 Notes.

The Company accepted for purchase all of 2024 Notes validly tendered and not validly withdrawn pursuant to the cash tender offer, amounting to $ 608.3 million aggregate principal amount of the 2024 Notes.

The aggregate purchase price paid by the Company in connection with the tender offer was $ 697.2 million (inclusive of the tender offer premiums paid pursuant to the terms of the tender offer), plus accrued and unpaid interest.

The amounts paid were funded using the proceeds from the Term B Facility described above and cash on hand.

On April 6, 2021, the Company, the guarantors with respect to the 2024 Notes, and the trustee with respect to the 2024 Notes executed and delivered a supplemental indenture to the 2024 Notes (Supplemental Indenture), which became effective on April 6, 2021.

The Supplemental Indenture became operative on April 13, 2021, upon the Company’s acceptance of the 2024 Notes for purchase and payment therefore at the early settlement date of the April 2021 tender offer.

With respect to the Supplemental Indenture, each of the following sections in the indenture relating to the 2024 Notes were deleted:

(i) Section 4.03, “SEC Reports”;

(ii) Section 4.04, “Compliance Certificate”;

(iii) Section 4.05, “Taxes”;

(iv) Section 4.06, “Stay, Extension and Usury Laws”;

(v) Section 4.07, “Limitation on Restricted Payments”;

(vi) Section 4.08, “Limitation on Restrictions on Distributions from Restricted Subsidiaries”;

(vii) Section 4.09, “Limitations on Indebtedness”;

(viii) Section 4.10, “Limitation on Sales of Assets and Subsidiary Stock”;

(ix) Section 4.11, “Limitation on Transactions with Affiliates”;

(x) Section 4.12, “Limitation on Liens”;

(xi) Section 4.14, “Change of Control”;

(xii) Section 4.18, “Future Subsidiary Guarantors”;

(xiii) Section 4.19, “Suspension of Covenants”;

(xiv) Section 4.20, “Additional Interest Notice”;

and (xv) Section 6.01(a), “Events of Default” (subsections (3) through (7) thereof (inclusive)).

Certain modifications to Section 3.01, “Notices to Trustee”;

Section 3.02(a) “Selection of Notes to Be Redeemed”;

Section 3.03(a) “Notice of Redemption”;

Section 4.15 “Corporate Existence”;

Section 5.01, “Merger and Consolidation”;

and Section 5.02, “Successor Corporation” were also made.

On June 25, 2021, the Company redeemed its remaining 2024 Notes.

The redemption price of the 2024 Notes was 115.108 % of the remaining outstanding aggregate principal amount, amounting to $ 217.5 million, plus accrued and unpaid interest.

The amounts paid were funded using the proceeds from the additional draw down from the Term A Facility described above and cash on hand.

The redemption of the 2024 Notes in the third quarter of fiscal 2021 resulted in a $ 117.5 million prepayment premium, which was included interest expense.

At December 31, 2021 and September 30, 2021, letters of credit totaled $ 5.2 million and $ 5.2 million, respectively, under the Company’s Revolving Credit Facility.

As of December 31, 2021 and September 30, 2021, the Company had $ 1,144.8 million and $ 1,144.8 million, respectively, available under its Revolving Credit Facility.

2027 Senior Notes

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On June 30, 2017, the Company completed an exchange offer to exchange the unregistered 2027 Senior Notes for registered notes, as well as related guarantees.

As of June 30, 2021, the estimated fair value of the 2027 Senior Notes was approximately $ 1,109.5 million.

The fair value of the 2027 Senior Notes as of June 30, 2021 was derived by taking the mid-point of the trading prices from an observable market input (Level 2) in the secondary bond market and multiplying it by the outstanding balance of the 2027 Senior Notes.

As of December 31, 2021, the estimated fair value of the 2027 Senior Notes was approximately $ 1,052.1 million.

The fair value of the 2027 Senior Notes as of December 31, 2021 was derived by taking the mid-point of the trading prices from an observable market input (Level 2) in the secondary bond market and multiplying it by the outstanding balance of the 2027 Senior Notes.

Interest is payable on the 2027 Senior Notes at a rate of 5.125 % per annum.

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At any time and from time to time prior to December 15, 2026, the Company may redeem all or part of the 2027 Senior Notes, at a redemption price equal to 100 % of their principal amount, plus a “make whole” premium as of the redemption date, and accrued and unpaid interest to the redemption date.

On or after December 15, 2026, the Company may redeem all or part of the 2027 Senior Notes at a redemption price equal to 100 % of their principal amount, plus accrued and unpaid interest to the redemption date.

The indenture pursuant to which the 2027 Senior Notes were issued contains customary events of default, including, among other things, payment default, exchange default, failure to provide notices thereunder and provisions related to bankruptcy events.

The indenture also contains customary negative covenants.

The Company was in compliance with the covenants relating to the 2027 Senior Notes as of June 30, 2021.

URS Senior Notes

In connection with the 2014 acquisition of the URS Corporation (URS), the Company assumed the URS 5.00 % Senior Notes due 2022 (2022 URS Senior Notes).

The remaining $ 248.5 million principal amount of the 2022 URS Senior Notes were fully redeemed on August 31, 2020 using proceeds from a $ 248.5 million secured delayed draw term loan facility under the Credit Agreement, at a

redemption price that was 106.835 % of the principal amount outstanding plus accrued and unpaid interest.

The August 31, 2020 redemption resulted in a $ 17.0 million prepayment premium, which was included in interest expense during the year ended September 30, 2020.

Other Debt and Other Items

Other debt consists primarily of obligations under capital leases and loans, and unsecured credit facilities.

The Company’s unsecured credit facilities are primarily used for standby letters of credit issued in connection with general and professional liability insurance programs and for contract performance guarantees.

At June 30, 2021 and September 30, 2020, these outstanding standby letters of credit totaled $ 489.6 million and $ 510.1 million, respectively.

As of June 30, 2021, the Company had $ 443.1 million available under these unsecured credit facilities.

The Company was in compliance with the covenants relating to the 2027 Senior Notes as of December 31, 2021.

Other debt consists primarily of obligations under finance leases and loans and unsecured credit facilities.

Effective Interest Rate

The Company’s average effective interest rate on its total debt, including the effects of the interest rate swap agreements and excluding the effects of prepayment premiums included in interest expense, during the nine months ended June 30, 2021 and 2020 was 4.7% and 5.2% , respectively.

Interest expense in the consolidated statements of operations included amortization of deferred debt issuance costs for the three and nine months ended June 30, 2021 of $ 4.6 million and $ 9.0 million, respectively, and for the three and nine months ended June 30, 2020 of $ 1.3 million and $ 3.8 million, respectively.

The Company’s average effective interest rate on its total debt, including the effects of the interest rate swap agreements, during the three months ended December 31, 2021 and 2020 was 3.4% and 5.2% , respectively.

Interest expense in the consolidated statements of operations included amortization of deferred debt issuance costs for the three months ended December 31, 2021 and 2020 of $ 1.2 million and $ 1.8 million, respectively.

Derivative Financial Instruments and Fair Value Measurements

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The Company initially reports any gain on the effective portion of a cash flow hedge as a component of accumulated other comprehensive loss.

The gain or loss is subsequently reclassified to interest expense when the interest expense on the variable rate debt is recognized.

Depending on the type of cash flow hedge, the gain is subsequently reclassified to interest expense when the interest expense on the variable rate debt is recognized.

If the hedged transaction becomes probable of not occurring, any gain or loss related to interest rate swap agreements would be recognized in other income.

The notional principal, fixed rates, and related expiration dates of the Company’s outstanding interest rate swap agreements were as follows:

The notional principal, fixed rates and related effective and expiration dates of the Company’s outstanding interest rate swap agreements were as follows:

December 31, 2021

Notional Amount

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February 2023

September 30, 2021

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February 2023

Subsequent to the end of the third quarter of fiscal 2021, the Company entered into new interest rate swap agreements with a notional value of $ 400.0 million to manage the interest rate exposure of its variable rate loans.

February 2023

In the fourth quarter of fiscal 2021, the Company entered into new interest rate swap agreements with a notional value of $ 400.0 million to manage the interest rate exposure of its variable rate loans.

The new swaps will become effective February 2023 and terminate in March 2028.

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The Company uses foreign currency forward contracts which are not designated as accounting hedges to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary.

Gains and losses on these contracts were not material for the nine months ended June 30, 2021 and 2020.

Gains and losses on these contracts were not material for the three months ended December 31, 2021 and 2020.

Fair Value Measurements

The Company’s non-pension financial assets and liabilities recorded at fair values relate to derivative instruments and were not material at June 30, 2021 or September 30, 2020.

See Note 14 for accumulated balances and reporting period activities of derivatives related to reclassifications out of accumulated other comprehensive loss for the nine months ended June 30, 2021 and 2020.

Amounts recognized in accumulated other comprehensive loss from the Company’s foreign currency options were immaterial for all periods presented.

Amounts reclassified from accumulated other comprehensive loss into income from the foreign currency options were immaterial for all periods presented.

The Company’s non-pension financial assets and liabilities recorded at fair values relate to derivative instruments were not material at December 31, 2021 or September 30, 2021.

See Note 14 for accumulated balances and reporting period activities of derivatives related to reclassifications out of accumulated other comprehensive loss for the three months ended December 31, 2021 and 2020.

Additionally, there were no material losses recognized in income due to amounts excluded from effectiveness testing from the Company’s interest rate swap agreements.

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The Company uses historical data as a basis to estimate the probability of forfeitures.

Stock option activity for the nine months ended June 30 was as follows:

Stock option activity for the three months ended December 31 was as follows:

Shares of stock

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Options forfeited or expired

Outstanding at June 30

Vested and expected to vest in the future as of June 30

Outstanding at December 31

Vested and expected to vest in the future as of December 31

The Company grants stock units to employees under its Performance Earnings Program (PEP), whereby units are earned and issued dependent upon meeting established cumulative performance objectives and vest over a three-year service period.

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The grant date fair value of PEP awards and restricted stock unit awards is that day’s closing market price of the Company’s common stock.

The weighted average grant date fair value of PEP awards was $ 52.76 and $ 42.99 during the nine months ended June 30, 2021 and 2020, respectively.

The weighted average grant date fair value of restricted stock unit awards was $ 49.21 and $ 42.25 during the nine months ended June 30, 2021 and 2020, respectively.

Total compensation expense related to these share-based payments including stock options was $ 36.2 million and $ 37.0 million during the nine months ended June 30, 2021 and 2020, respectively.

Unrecognized compensation expense related to total share-based payments outstanding as of June 30, 2021 and September 30, 2020 was $ 56.2 million and $ 50.0 million, respectively, to be recognized on a straight-line basis over the awards’ respective vesting periods which are generally three years .

The Company’s effective tax rate was 16.6 % and 14.2 % for the nine months ended June 30, 2021 and 2020, respectively.

The weighted average grant date fair value of PEP awards was $ 85.48 and $ 52.50 during the three months ended December 31, 2021 and 2020, respectively.

The weighted average grant date fair value of restricted stock unit awards was $ 74.70 and $ 47.87 during the three months ended December 31, 2021 and 2020, respectively.

Total compensation expense related to these share-based payments including stock options was $ 9.8 million and $ 15.4 million during the three months ended December 31, 2021 and 2020, respectively.

Unrecognized compensation expense related to total share-based payments outstanding as of December 31, 2021 and September 30, 2021 was $ 69.7 million and $ 45.6 million, respectively, to be recognized on a straight-line basis over the awards’ respective vesting periods which are generally three years .

The Company’s effective tax rate was 15.5 % and 22.4 % for the three months ended December 31, 2021 and 2020, respectively.

The most significant items contributing to the difference between the statutory U.S.

federal corporate tax rate of 21.0 % and the Company’s effective tax rate for the nine-month period ended June 30, 2021 were a tax benefit of $ 39.0 million related to income tax credits and incentives, a tax benefit of $ 25.9 million related to a corporate tax rate change in the United Kingdom, a tax expense of $ 30.7 million related to foreign residual income, a tax expense of $ 13.2 million related to an audit settlement, and a tax expense of $ 11.5 million related to state income taxes.

All of these items are expected to have a continuing impact on the effective tax rate for the remainder of the fiscal year except for the tax rate change and the audit settlement.

federal corporate tax rate of 21.0 % and the Company’s effective tax rate for the three-month period ended December 31, 2021 were a tax benefit of $ 21.9 million related to changes in valuation allowances, tax expense of $ 16.1 million primarily related to changes in foreign uncertain tax positions, a tax benefit of $ 13.3 million related to income tax credits and incentives,and a tax expense of $ 11.6 million related to foreign residual income.

All of these items are expected to have a continuing impact on the effective tax rate for the remainder of the fiscal year except for the changes in valuation allowance and uncertain positions.

The most significant items contributing to the difference between the statutory U.S.

federal income tax rate of 21.0 % and the Company’s effective tax rate for the nine-month period ended June 30, 2020 were a tax benefit of $ 25.4 million related to the release of a valuation allowance on net operating losses and a benefit of $ 22.9 million related to income tax credits and incentives, partially offset by tax expense of $ 21.7 million related to nondeductible costs and tax expense of $ 9.0 million related to state income tax.

During the third quarter of fiscal 2021, the United Kingdom enacted a corporate tax rate increase from 19 % to 25 % beginning April 2023 requiring deferred tax assets and liabilities to be remeasured.

The remeasurement resulted in a $ 25.9 million tax benefit.

During the third quarter of fiscal 2021, the Company partially settled its U.S.

federal audit for fiscal 2015 and 2016 and recorded a tax expense of $ 13.2 million due primarily to changes in tax attributes.

During the third quarter of fiscal 2020, management approved a tax planning strategy and it began restructuring certain operations in Canada which resulted in the release of a valuation allowance related to net operating losses in the amount of $ 25.4 million.

federal corporate tax rate of 21.0 % and the Company’s effective tax rate for the three-month period ended December 31, 2020 were a tax benefit of $ 10.9 million related to income tax credits and incentives, tax expense of $ 7.2 million related to foreign residual income, and tax expense of $ 4.5 million related to state income taxes.

During the three-month period ended December 31, 2021, valuation allowances in the amount of $ 21.9 million primarily related to net operating losses in certain foreign entities were released due to sufficient positive evidence obtained during the quarter.

The positive evidence included a realignment of the Company’s global transfer pricing methodology that was implemented during the quarter which resulted in forecasting the utilization of the net operating losses within the foreseeable future.

The Company is utilizing the annual effective tax rate method under ASC 740 to compute its interim tax provision.

The Company’s effective tax rate fluctuates from quarter to quarter due to various factors including the change in the mix of global income and expenses, outcomes of administrative audits, changes in the assessment of valuation allowances due to management’s consideration of new positive or negative evidence during the quarter, and changes in enacted tax laws.

federal government has recently proposed significant legislation that would increase the U.S.

corporate tax rate and impact how corporations are taxed.

In addition, many international legislative and regulatory bodies have proposed legislation that could significantly impact how our international business activities are taxed.

These proposed changes, if enacted, could have a material impact on the Company’s income tax expense and deferred tax balances.

The U.S.and many

international legislative and regulatory bodies have proposed legislation that could significantly impact how our business activities are taxed.

These proposed changes could have a material impact on the Company’s income tax expense and deferred tax balances.

The Company is currently under tax audit in several jurisdictions including the U.S.

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The Company includes as potential common shares the weighted average dilutive effects of equity awards using the treasury stock method.

For the three and nine months ended June 30, 2021 and 2020, equity awards excluded from the calculation of potential common shares were not significant.

For the three months ended December 31, 2021 and 2020, equity awards excluded from the calculation of potential common shares were not significant.

The following table sets forth a reconciliation of the denominators for basic and diluted earnings per share:

Three Months Ended

Nine Months Ended

(in millions)

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Denominator for diluted earnings per share

On October 1, 2019, the Company adopted FASB ASC 842 on a modified retrospective basis, which amended the accounting standards for leases.

Accordingly, the Company applied the new guidance as of the date of adoption with a cumulative-effect adjustment recorded through equity.

Prior periods have not been restated as a result of the adoption.

Retained earnings decreased $ 87.8 million due to the adoption, primarily from impairment of the right-of-use assets associated with office building leases.

The Company also applied transition elections that allow it to avoid reassessment of lease definition, classification, or direct costs relating to expired or expiring leases.

Adoption of the new lease guidance did not significantly change the Company’s accounting for finance leases, which were previously referred to as capital leases.

The Company and its subsidiaries are lessees in non-cancelable leasing agreements for office buildings and equipment.

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The present value is calculated using the rate implicit in the lease, if known, or the Company’s incremental secured borrowing rate.

The discount rate used for operating leases is primarily determined based on an analysis the Company’s incremental secured borrowing rate, while the discount rate used for finance leases is primarily determined by the rate specified in the lease.

The discount rate used for operating leases is primarily determined based on an analysis of the Company’s incremental secured borrowing rate, while the discount rate used for finance leases is primarily determined by the rate specified in the lease.

The related lease payments are expensed on a straight-line basis over the lease term, including, as applicable, any free-rent period during which the Company has the right to use the asset.

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Three Months Ended

Nine Months Ended

(in millions)

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Balance Sheet Classification

December 31, 2021

September 30, 2021

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Total non-current lease liabilities

June 30, 2021

December 31, 2021

September 30, 2021

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Additional cash flow information related to leases is as follows:

Nine Months Ended

Three Months Ended

(in millions)

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(in millions)

2021 (three months remaining)

2022 (nine months remaining)

Total lease payments

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Other accrued expenses

Accrued contract costs above include balances related to professional liability accruals of $ 800.4 million and $ 625.9 million as of June 30, 2021 and September 30, 2020, respectively.

The remaining accrued contract costs primarily relate to costs for services provided by subcontractors and other non-employees.

Liabilities recorded related to accrued contract losses were not material as of June 30, 2021 and September 30, 2020.

The Company did not have material revisions to estimates for contracts where revenue is recognized using the percentage-of-completion method during the nine months ended June 30, 2021 and 2020.

In the first quarter of fiscal 2019, the Company commenced a restructuring plan to improve profitability.

The Company expects to incur restructuring costs of $ 40 million to $ 50 million in fiscal year 2021 primarily related to costs associated with the advancing its previously announced actions to deliver margin improvement and efficiencies that result in a more agile organization.

During the first nine months of fiscal 2021, the Company incurred restructuring expenses of $ 34.8 million, including personnel and other costs of $ 25.8 million and real estate costs of $ 9.0 million, of which $ 6.5 million was accrued and unpaid at June 30, 2021.

During the first nine months of fiscal 2020, the Company incurred restructuring expenses of $ 96.4 million, including personnel and other costs of $ 83.5 million and real estate costs of $ 12.9 million.

Accrued contract costs above include balances related to professional liability accruals of $ 744.0 million and $ 736.4 million as of December 31, 2021 and September 30, 2021, respectively.

The remaining accrued contract costs primarily relate to costs for services provided by subcontractors and other non-employees for which the Company has not received an invoice.

Liabilities recorded related to accrued contract losses were not material as of December 31, 2021 and September 30, 2021.

The Company did not have material revisions to estimates for contracts where revenue is recognized using the input method during the three months ended December 31, 2021 and 2020.

During the first quarter of fiscal 2022, the Company incurred restructuring expenses of $ 3.4 million, including personnel and other costs of $ 2.2 million and real estate costs of $ 1.2 million, of which $ 0.3 million was accrued and unpaid at December 31, 2021.

During the first quarter of fiscal 2021, the Company incurred restructuring expenses of $ 13.0 million, including personnel and other costs of $ 10.2 million and real estate costs of $ 2.8 million, of which $ 1.7 million was accrued and unpaid at December 31, 2020.

On December 13, 2021, the Company's Board of Directors declared a quarterly cash dividend of $ 0.15 per share, which was paid on January 21, 2022 to stockholders of record as of January 5, 2022.

As of December 31, 2021, accrued and unpaid dividends totaled $ 21.5 million and were classified within other accrued expenses on the consolidated balance sheet.

Reclassifications out of Accumulated Other Comprehensive Loss

The accumulated balances and reporting period activities for the three and nine months ended June 30, 2021 and 2020 related to reclassifications out of accumulated other comprehensive loss are summarized as follows (in millions):

Gain/(Loss) on

Comprehensive

Balances at March 31, 2021

Other comprehensive income (loss) before reclassification

Amounts reclassified from accumulated other comprehensive loss

Balances at June 30,2021

Gain/(Loss) on

Comprehensive

Balances at March 31, 2020

Other comprehensive income (loss) before reclassification

Amounts reclassified from accumulated other comprehensive loss

Balances at June 30, 2020

Gain/(Loss) on

The accumulated balances and reporting period activities for the three months ended December 31, 2021 and 2020 related to reclassifications out of accumulated other comprehensive loss are summarized as follows (in millions):

(Loss)/Gain on

Comprehensive

Balances at September 30, 2021

Other comprehensive (loss) income before reclassification

Amounts reclassified from accumulated other comprehensive loss

Balances at June 30,2021

Gain/(Loss) on

Other comprehensive income (loss) before reclassification

Amounts reclassified from accumulated other comprehensive (loss) income

Balances at December 31, 2021

(Loss)/Gain on

Comprehensive

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Other comprehensive (loss) income before reclassification

Amounts reclassified from accumulated other comprehensive loss

Balances at June 30, 2020

Amounts reclassified from accumulated other comprehensive (loss) income

Balances at December 31, 2020

Commitments and Contingencies

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In the ordinary course of business, the Company may not be aware that it or its affiliates are under investigation and may not be aware of whether or not a known investigation has been concluded.

In the ordinary course of business, the Company enters into various arrangements providing financial or performance assurance to clients, lenders, or partners.

In the ordinary course of business, the Company may enter into various arrangements providing financial or performance assurance to clients, lenders, or partners.

Such arrangements include standby letters of credit, surety bonds, and corporate guarantees to support the creditworthiness or the project execution commitments of its affiliates, partnerships and joint ventures.

The Company's unsecured credit arrangements are used for standby letters of credit issued in connection with general and professional liability insurance programs and for contract performance guarantees.

At December 31, 2021 and September 30, 2021, these outstanding standby letters of credit totaled $ 465.9 million and $ 478.5 million, respectively.

As of December 31, 2021, the Company had $ 466.5 million available under these unsecured credit facilities.

Performance arrangements typically have various expiration dates ranging from the completion of the project contract and extending beyond contract completion in some circumstances such as for warranties.

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Generally, under joint venture arrangements, if a partner is financially unable to complete its share of the contract, the other partner(s) may be required to complete those activities.

At June 30, 2021, the Company was contingently liable in the amount of approximately $ 500.2 million in issued standby letters of credit and $ 3.8 billion in issued surety bonds primarily to support project execution.

At December 31, 2021, the Company was contingently liable in the amount of approximately $ 470.4 million in issued standby letters of credit and $ 3.4 billion in issued surety bonds primarily to support project execution.

In the ordinary course of business, the Company enters into various agreements providing financial or performance assurances to clients on behalf of certain unconsolidated partnerships, joint ventures and other jointly executed contracts.

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(the “Fund”), in which the Company indirectly holds an equity interest and has an ongoing capital commitment to fund investments.

At June 30, 2021, the Company has capital commitments of $ 20.3 million to the Fund over the next 8 years .

In addition, in connection with the investment activities of AECOM Capital, the Company provides guarantees of contractual obligations, including guarantees for completion of projects, repayment of debt, environmental indemnity obligations and other lender required guarantees.

At December 31, 2021, the Company has capital commitments of $ 20.9 million to the Fund over the next 7 years .

In addition, in connection with the investment activities of AECOM Capital, the Company provides guarantees of certain contractual obligations, including guarantees for completion of projects, repayment of debt, environmental indemnity obligations and other lender required guarantees.

Department of Energy Deactivation, Demolition, and Removal Project

AECOM Energy and Construction, Inc., an Ohio corporation, a former affiliate of the Company (“Former Affiliate”) executed a cost-reimbursable task order with the Department of Energy (DOE) in 2007 to provide deactivation, demolition and removal services at a New York State project site that, during 2010, experienced contamination and performance issues.

A former affiliate of the Company, Amentum Environment & Energy, Inc., f/k/a AECOM Energy and Construction, Inc.

(“Former Affiliate”), executed a cost-reimbursable task order with the Department of Energy (DOE) in 2007 to provide deactivation, demolition and removal services at a New York State project site that, during 2010, experienced contamination and performance issues.

In February 2011, the Former Affiliate and the DOE executed a Task Order Modification that changed some cost-reimbursable contract provisions to at-risk.

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Deconstruction, decommissioning and site restoration activities are complete.

On January 31, 2020, the Company completed the sale of its Management Services business to the Purchaser including the Former Affiliate who worked on the DOE project.

The Company and the Purchaser agreed that all future DOE project claim recoveries and costs will be split 10 % to the Purchaser and 90 % to the Company with the Company retaining control of all future strategic legal decisions.

The Company intends to vigorously pursue all claimed amounts but can provide no certainty that the Company will recover 2014 and 2019 Claims submitted against the DOE, or any additional incurred claims or costs, which could have a material adverse effect on the Company’s results of operations.

On January 31, 2020, the Company completed the sale of its Management Services business, including the Former Affiliate who worked on the DOE project, to Maverick Purchaser Sub LLC (MS Purchaser), an affiliate of American Securities LLC and Lindsay Goldberg LLC.

The Company and the MS Purchaser agreed that all future DOE project claim recoveries and costs will be split 10 % to the MS Purchaser and 90 % to the Company with the Company retaining control of all future strategic legal decisions.

The Company intends to vigorously pursue all claimed amounts but can provide no certainty that the Company will recover 2014 Claims and 2019 Claims submitted against the DOE, or any additional incurred claims or costs, which could have a material adverse effect on the Company’s results of operations.

New York Department of Environmental Conservation

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The turnaround project was completed in February 2019.

Due to circumstances outside of the Company’s Former Affiliate’s control, including client directed changes and delays and the refinery’s condition, the Company’s Former Affiliate performed additional work outside of the original contract over $ 90 million and is entitled to payment from the refinery owner of approximately $ 144 million.

Due to circumstances outside of the Company’s Former Affiliate’s control, including client directed changes and delays and the refinery’s condition, the

Company’s Former Affiliate performed additional work outside of the original contract over $ 90 million and is entitled to payment from the refinery owner of approximately $ 144 million.

In March 2019, the refinery owner sent a letter to the Company’s Former Affiliate alleging it incurred approximately $ 79 million in damages due to the Company’s Former Affiliate’s project performance.

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In December 2019, the refinery owner claimed $ 93.0 million in damages and offsets against the Company’s Former Affiliate.

The parties have agreed on a February 28, 2022 deadline for close of discovery in this matter.

On January 31, 2020, the Company completed the sale of its Management Services business to the Purchaser including the Former Affiliate, however, the Refinery Turnaround Project, including related claims and liabilities, has been retained by the Company.

On January 31, 2020, the Company completed the sale of its Management Services business, including the Former Affiliate, to the MS Purchaser;

however, the Refinery Turnaround Project, including related claims and liabilities, has been retained by the Company.

The Company intends to vigorously prosecute and defend this matter;

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Reportable Segments

During the first quarter of fiscal 2020, the Company reorganized its operating and reporting structure to better align with its ongoing professional services business.

This reorganization better reflects the continuing operations of the Company after the sale of its former Management Services reportable business segment and planned disposal of its self-perform at-risk construction businesses discussed in Note 3.

The businesses that comprised the Company’s former Management Services reportable business segment and the civil infrastructure, power and oil and gas construction businesses in the former Construction Services reportable business segment were classified as discontinued operations.

The former Design and Consulting Services reportable business segment and construction management business in the former Construction Services reportable business segment were reformed around geographic regions.

The Company's reportable segments are presented according to their geographic regions and business activities.

The Americas segment provides planning, consulting, architectural and engineering design services, and construction management services to commercial and government clients in the United States, Canada, and Latin America, while the International segment provides similar professional services to commercial and government clients in Europe, the Middle East, Africa, and the Asia-Pacific regions.

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The Company has aggregated various operating segments into its reportable segments based on their similar characteristics, including similar long term financial performance, the nature of services provided, internal processes for delivering those services, and types of customers.

The change in reportable segments was applied to all periods presented.

The following tables set forth summarized financial information concerning the Company’s reportable segments:

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(in millions)

Three Months Ended June 30, 2021:

Equity in earnings of joint ventures

General and administrative expenses

Restructuring costs

Operating income (loss)

Gross profit as a % of revenue

Three Months Ended June 30, 2020:

Three Months Ended December 31, 2021:

Equity in earnings of joint ventures

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Gross profit as a % of revenue

Nine Months Ended June 30, 2021:

Equity in earnings of joint ventures

General and administrative expenses

Restructuring costs

Operating income

Gross profit as a % of revenue

Nine Months Ended June 30, 2020:

Three Months Ended December 31, 2020:

Equity in earnings of joint ventures

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Reportable Segments:

June 30, 2021

December 31, 2021

September 30, 2021

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements