What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-11 compared with 2022-02-09 · 115 added, 84 removed, 277 unchanged (42% of the section changed)

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maintaining adequate surety and financial capacity;

high leverage and potential inability to service our debt and guarantees;

potential high leverage and inability to service our debt and guarantees;

ability to continue payment of dividends;

exposure to Brexit and tariffs;

exposure to political and economic risks in different countries;

currency exchange rate fluctuations;

exposure to political and economic risks in different countries, including tariffs;

currency exchange rate and interest fluctuations;

retaining and recruiting key technical and management personnel;

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cybersecurity issues, IT outages and data privacy;

risks associated with the benefits and costs of the sale of our Management Services and self-perform at-risk civil infrastructure and power construction businesses, including the risk that any purchase adjustments from those transactions could be unfavorable and any future proceeds owed to us as part of the transactions could be lower than we expect;

risks associated with the benefits and costs of the sale of our Management Services and self-perform at-risk civil infrastructure, power construction, and oil and gas construction businesses, including the risk that any purchase adjustments from those transactions could be unfavorable and any future proceeds owed to us as part of the transactions could be lower than we expect;

as well as other additional risks and factors discussed in this Quarterly Report on Form 10-Q and any subsequent reports we file with the SEC.

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We are a leading global provider of professional infrastructure consulting services for governments, businesses and organizations throughout the world.

We provide planning, consulting, architectural and engineering design, construction and program management services, and investment and development services to commercial and government clients worldwide in major end markets such as transportation, facilities, environmental, energy, and water.

We provide advisory, planning, consulting, architectural and engineering design, construction and program management services, and investment and development services to commercial and government clients worldwide in major end markets such as transportation, facilities, water, environmental, and energy.

Our business focuses primarily on providing fee-based planning, consulting, architectural and engineering design services and, therefore, our business is primarily driven by knowledge-based services.

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● International :

Planning, consulting, architectural and engineering design services and program management to commercial and government clients in Europe, the Middle East, Africa and the Asia-Pacific regions in major end markets such as transportation, water, government, facilities, environmental, and energy.

Planning, consulting, architectural and engineering design services and program management to commercial and government clients in Europe, the Middle East, India, Africa and the Asia-Pacific regions in major end markets such as transportation, water, government, facilities, environmental, and energy.

● AECOM Capital (ACAP) :

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Regarding our capital allocation policy, on September 22, 2021, the Board approved an increase in our stock repurchase authorization to $1.0 billion.

At December 31, 2021, we have approximately $790 million remaining of the Board’s repurchase authorization.

At March 31, 2022, we have approximately $737 million remaining of the Board’s repurchase authorization.

We intend to deploy future available cash towards dividends and stock repurchases consistent with our capital allocation policy.

We have exited substantially all of our self-perform at-risk construction businesses and divested our remaining non-core oil and gas businesses in January 2022.

We have substantially completed our exit of 30 countries, subject to applicable laws, as part of our ongoing plan to improve profitability and reduce our risk profile, and we continue to evaluate our geographic exposure as part of such plan.

We expect to incur restructuring costs of approximately $20 million to $30 million in fiscal year 2022, including $3.4 million in the first quarter, primarily related to previously announced restructuring actions that are expected to deliver continued margin improvement and efficiencies.

Total cash costs for these restructuring actions are expected to be approximately $20 million to $30 million.

As part of our ongoing plan to improve profitability and reduce our risk profile, we continue to evaluate our geographic exposure.

In March 2022, we substantially completed our exit of all business operations in Russia consistent with our announcement on March 7, 2022.

We expect to incur restructuring costs of approximately $20 million to $30 million in fiscal 2022, including $7.6 million in the first fiscal half, primarily related to previously announced restructuring actions that are expected to deliver continued margin improvement and efficiencies.

Additionally, we expect restructuring costs of approximately $70 million to $80 million related to our exit of our Russia-related businesses.

Total cash costs are expected to be approximately $20 million to $30 million for restructuring actions related to efficiencies and margin improvements and approximately $10 million related to the exit of our Russia-related businesses.

Covid-19 Coronavirus Impacts

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however, the uncertain nature of the coronavirus and its duration make it difficult for us to predict and quantify such impact.

● We have restricted non-essential business travel, required or facilitated employees to work remotely where appropriate.

● We have required or facilitated employees to work remotely where appropriate.

● The coronavirus has made estimating the future performance of our business and mitigating the adverse financial impact of these developments on our business operations more difficult.

● Certain markets, such as the U.K., Middle East, and Southeast Asia, are experiencing project delays that have impacted our performance and results.

● Certain markets are experiencing project delays that have impacted our performance and results.

Results of Operations

Three months ended December 31, 2021 compared to the three months ended December 31, 2020

Three and six months ended March 31, 2022 compared to the three and six months ended March 31, 2021

Consolidated Results

Three Months Ended

Six Months Ended

($ in millions)

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Net income attributable to noncontrolling interests from continuing operations

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

Net loss (income) attributable to noncontrolling interests

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

Net income attributable to noncontrolling interests

Net income attributable to AECOM from continuing operations

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Three Months Ended

Six Months Ended

Cost of revenue

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Net income attributable to noncontrolling interests from continuing operations, net of tax

Net loss (income) attributable to noncontrolling interests from discontinued operations, net of tax

Net loss (income) attributable to noncontrolling interests

Net (income) loss attributable to noncontrolling interests from discontinued operations, net of tax

Net income attributable to noncontrolling interests

Net income attributable to AECOM from continuing operations

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Net income attributable to AECOM

Our revenue for the three months ended December 31, 2021 decreased $46.5 million, or 1.4%, to $3,266.7 million as compared to $3,313.2 million for the corresponding period last year.

The decrease in revenue for the three months ended December 31, 2021 was primarily attributable to a decrease in our Americas segment of $93.8 million, offset by an increase in our International segment of $46.8 million, as discussed further below.

Our revenue for the three months ended March 31, 2022 decreased $51.8 million, or 1.6%, to $3,213.7 million as compared to $3,265.5 million for the corresponding period last year.

Our revenue for the six months ended March 31, 2022 decreased $98.3 million, or 1.5%, to $6,480.4 million as compared to $6,578.7 million for the corresponding period last year.

The decrease in revenue for the three months ended March 31, 2022 was primarily attributable to a decrease in our Americas segment of $68.4 million, offset by an increase in our International segment of $16.8 million, as discussed further below.

The decrease in revenue for the six months ended March 31, 2022 was primarily attributable to a decrease in our Americas segment of $162.2 million, offset by an increase in our International segment of $63.6 million, as discussed further below.

In the course of providing our services, we routinely subcontract for services and incur other direct costs on behalf of our clients.

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Because these pass-through revenues can change significantly from project to project and period to period, changes in revenue may not be indicative of business trends.

Pass-through revenues for the quarters ended December 31, 2021 and 2020 were $1.7 billion and $1.8 billion, respectively.

Pass-through revenue as a percentage of revenue, was 53% and 55% during the three months ended December 31, 2021 and 2020, respectively.

Our gross profit for the three months ended December 31, 2021 increased $15.8 million, or 8.6%, to $200.2 million as compared to $184.4 million for the corresponding period last year.

For the three months ended December 31, 2021, gross profit, as a percentage of revenue, increased to 6.1% from 5.6% in the three months ended December 31, 2020.

Pass-through revenues for the quarters ended March 31, 2022 and 2021 were $1.6 billion and $1.7 billion, respectively.

Pass-through revenues for the six months ended March 31, 2022 and 2021 were $3.3 billion and $3.5 billion, respectively.

Pass-through revenue as a percentage of revenue was 50% and 52% during the three months ended March 31, 2022 and 2021, respectively.

Pass-through revenue as a percentage of revenue, was 51% and 54% during the six months ended March 31, 2022 and 2021, respectively.

Our gross profit for the three months ended March 31, 2022 increased $14.8 million, or 7.6%, to $210.0 million as compared to $195.2 million for the corresponding period last year.

For the three months ended March 31, 2022, gross profit, as a percentage of revenue, increased to 6.5% from 6.0% in the three months ended March 31, 2021.

Our gross profit for the six months ended March 31, 2022 increased $30.6 million, or 8.1%, to $410.2 million as compared to $379.6 million for the corresponding period last year.

For the six months ended March 31, 2022, gross profit, as a percentage of revenue, increased to 6.3% from 5.8% in the six months ended March 31, 2021.

Gross profit changes were due to the reasons noted in Americas and International reportable segments below.

Equity in Earnings of Joint Ventures

Our equity in earnings of joint ventures for the three months ended December 31, 2021 was $7.9 million as compared to $8.2 million in the corresponding period last year.

The decrease in earnings of joint ventures for the three months ended December 31, 2021 compared to the same period in the prior year is primarily due to decreased earnings in our AECOM Capital segment compared to the prior year.

Our equity in earnings of joint ventures for the three months ended March 31, 2022 was $12.0 million as compared to $7.2 million in the corresponding period last year.

Our equity in earnings of joint ventures for the six months ended March 31, 2022 was $19.9 million as compared to $15.4 million in the corresponding period last year.

The increases in earnings of joint ventures for the three and six months ended March 31, 2022 compared to the same period in the prior year were primarily due to increased earnings in our AECOM Capital segment compared to the prior year.

General and Administrative Expenses

Our general and administrative expenses for the three months ended December 31, 2021 decreased $2.0 million, or 5.2%, to $36.4 million as compared to $38.4 million for the corresponding period last year.

For the three months ended December 31, 2021, general and administrative expenses, as a percentage of revenue, decreased to 1.0% from 1.1% in the three months ended December 31, 2020.

The decrease in general and administrative expenses was primarily due to the execution of restructuring actions taken by management to increase profitability and simplify our operating structure.

Our general and administrative expenses for the three months ended March 31, 2022 increased $1.2 million, or 3.3%, to $37.2 million as compared to $36.0 million for the corresponding period last year.

For the three months ended March 31, 2022, general and administrative expenses, as a percentage of revenue, was 1.1% which was the same as in the three months ended March 31, 2021.

Our general and administrative expenses for the six months ended March 31, 2022 decreased $0.8 million, or 1.1%, to $73.6 million as compared to $74.4 million for the corresponding period last year.

For the six months ended March 31, 2022, general and administrative expenses, as a percentage of revenue, decreased to 1.1% from 1.2% in the six months ended March 31, 2021.

Restructuring Costs

Since the first quarter of fiscal 2019, we have been implementing a restructuring plan to improve profitability.

During the first quarter of fiscal 2021, we incurred restructuring expenses of $13.0 million, primarily related to personnel costs, including costs associated with recent executive transitions.

During the first quarter of fiscal 2022, we incurred restructuring expenses of $3.4 million, primarily related to costs associated with advancing our previously announced actions to deliver margin improvement and efficiencies that result in a more agile organization.

Our other income for the three months ended December 31, 2021 decreased to $2.9 million from $3.9 million for the corresponding period last year.

In the second quarter of fiscal 2022, we exited our business in Russia, and we incurred restructuring expenses related to asset impairment charges, personnel and real estate costs.

We also incurred approximately $19.5 million of expenses resulting from the reclassification of other comprehensive income into earnings of our cumulative translation adjustment related to Russian ruble.

During the three and six months ended March 31, 2022, we incurred restructuring expenses of $73.3 million and $76.7 million, respectively, primarily related to costs associated with our previously announced actions to exit our Russia-related businesses, improve margins and deliver efficiencies that result in a more agile organization.

Our other income for the three months ended March 31, 2022 decreased to $3.3 million from $3.5 million for the corresponding period last year.

Our other income for the six months ended March 31, 2022 decreased to $6.2 million from $7.4 million for the corresponding period last year.

Other income is primarily comprised of interest income and net periodic pension adjustments.

Interest Expense

Our interest expense for the three months ended December 31, 2021 was $25.4 million as compared to $30.7 million for the corresponding period last year.

The decrease in interest expense for the three months ended December 31, 2021 was primarily due to lower interest rates on our outstanding debts compared to the prior year.

Our interest expense for the three months ended March 31, 2022 was $24.2 million as compared to $32.8 million for the corresponding period last year.

Our interest expense for the six months ended March 31, 2022 was $49.6 million as compared to $63.5 million for the corresponding period last year.

The decreases in interest expense for the three and six months ended March 31, 2022 were primarily due to lower interest rates on our outstanding debts compared to the prior year.

Income Tax Expense

Our income tax expense for the three months ended December 31, 2021 was $22.6 million as compared to $25.6 million in the corresponding period last year.

The decrease in tax expense for the current period compared to the corresponding period last year is due primarily to a tax benefit of $21.9 million related to changes in valuation allowances, a tax expense of $16.1 million related to changes in foreign uncertain positions, offset by the tax impacts of an increase in overall pre-tax income of $31.4 million.

Our income tax expense for the three months ended March 31, 2022 was $36.0 million as compared to $35.1 million in the corresponding period last year.

The increase in tax expense for the current period compared to the corresponding period last year was due primarily to an increase in tax expense of $5.6 million related to changes in valuation allowances and an increase in tax expense of $5.2 million related to an increase in nondeductible costs, partially offset by the tax impacts of a decrease in overall pre-tax income of $37.7 million.

Our income tax expense for the six months ended March 31, 2022 was $58.6 million as compared to $60.7 million in the corresponding period last year.

The decrease in tax expense for the current period compared to the corresponding period last year is due primarily to a tax benefit of $16.4 million related to changes in valuation allowances and an increase in tax expense of $12.8 million related to changes in foreign uncertain tax positions.

During the first quarter of fiscal 2022, 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 our 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.

During the second quarter of fiscal 2022, valuation allowances in the amount of $6.4 million on the net deferred tax assets of our Russia business were recorded due to exiting all our business operations in Russia.

It is now more likely than not the net deferred tax assets will not be realized.

We regularly integrate and consolidate our business operations and legal entity structure, and such internal initiatives could impact the assessment of uncertain tax positions, indefinite reinvestment assertions and the realizability of deferred tax assets.

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That classification was applied for all periods presented.

Net loss from discontinued operations was $62.0 million for the three months ended December 31, 2021 and net loss was $55.8 million for the three months ended December 31, 2020, an increase of $6.2 million.

The increase in net loss from discontinued operations for the three months ended December 31, 2021 was primarily due to losses recorded in the first quarter of fiscal year 2022 related to revisions of estimates for our working capital obligation to be paid and contingent consideration receivable related to the

civil infrastructure business, partially offset by the losses recorded on the sales of our power business and losses related to the remeasurement of our civil infrastructure businesses to fair value recorded in the first quarter of fiscal year 2021 that did not recur in fiscal year 2022.

Net loss from discontinued operations was $6.0 million for the three months ended March 31, 2022 and net loss was $47.9 million for the three months ended March 31, 2021, a decrease of $41.9 million.

The decrease in net loss from discontinued operations for the three months ended March 31, 2022 was primarily due to the loss on the sale of our civil infrastructure construction business in the second quarter of fiscal 2021 that did not recur in fiscal 2022.

Net loss from discontinued operations was $68.0 million for the six months ended March 31, 2022 and net loss was $103.7 million for the six months ended March 31, 2021, a decrease of $35.7 million.

The decrease in net loss from discontinued operations for the six months ended March 31, 2022 was primarily due to losses recorded on the sales of our power business and our civil infrastructure businesses in the first half of fiscal 2021 that did not recur in fiscal 2022, partially offset by a $3.0 million gain on sale, net of transaction costs, of our oil and gas construction business and losses recorded in the first half of fiscal 2022 of $43.9 million related to revisions of estimates for our working capital obligation to be paid and contingent consideration receivable related to the civil infrastructure business.

Net Income Attributable to AECOM

The factors described above resulted in net income attributable to AECOM of $61.5 million for the three months ended December 31, 2021 as compared to net income attributable to AECOM of $26.1 million for the three months ended December 31, 2020.

The factors described above resulted in net income attributable to AECOM of $41.6 million and $103.1 million for the three and six months ended March 31, 2022 as compared to net income attributable to AECOM of $39.4 million and $65.5 million for the three and six months ended March 31, 2021.

Results of Operations by Reportable Segment:

Three Months Ended

Six Months Ended

($ in millions)

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Three Months Ended

Six Months Ended

Cost of revenue

Revenue for our Americas segment for the three months ended December 31, 2021 decreased $93.8 million, or 3.7%, to $2,463.5 million as compared to $2,557.3 million for the corresponding period last year.

The decrease in revenue for the three months ended December 31, 2021 was primarily driven by a decrease in pass through revenues primarily in our construction management business for high-rise buildings in New York City.

Gross profit for our Americas segment for the three months ended December 31, 2021 increased $5.0 million, or 3.4%, to $150.0 million as compared to $145.0 million for the corresponding period last year.

As a percentage of revenue, gross profit increased to 6.1% of revenue for the three months ended December 31, 2021 from 5.7% in the corresponding period last year.

The increase in gross profit for the three months ended December 31, 2021 was primarily due to reduced costs of a more efficient operating structure resulting from a realigned overhead and delivery structure, better operational execution, investments in technology and shared service centers to enhance efficiencies and underlying revenue growth excluding pass through revenues.

Revenue for our Americas segment for the three months ended March 31, 2022 decreased $68.4 million, or 2.8%, to $2,399.9 million as compared to $2,468.3 million for the corresponding period last year.

Revenue for our Americas segment for the six months ended March 31, 2022 decreased $162.2 million, or 3.2%, to $4,863.4 million as compared to $5,025.6 million for the corresponding period last year.

The decreases in revenue for the six months ended March 31, 2022 were primarily driven by a decrease in pass-through revenues primarily in our construction management business for high-rise buildings in New York City.

Gross profit for our Americas segment for the three months ended March 31, 2022 increased $8.7 million, or 5.7%, to $160.4 million as compared to $151.7 million for the corresponding period last year.

As a percentage of revenue, gross profit increased to 6.7% of revenue for the three months ended March 31, 2022 from 6.1% in the corresponding period last year.

Gross profit for our Americas segment for the six months ended March 31, 2022 increased $13.7 million, or 4.6%, to $310.4 million as compared to $296.7 million for the corresponding period last year.

As a percentage of revenue, gross profit increased to 6.4% of revenue for the six months ended March 31, 2022 from 5.9% in the corresponding period last year.

The increases in gross profit for the three and six months ended March 31, 2022 were primarily due to a more efficient execution, investments in digital solutions, enterprise capability centers and shared service centers and underlying revenue growth excluding pass-through revenues.

International

Three Months Ended

Six Months Ended

($ in millions)

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Three Months Ended

Six Months Ended

Cost of revenue

Revenue for our International segment for the three months ended December 31, 2021 increased $46.8 million, or 6.2%, to $802.4 million as compared to $755.6 million for the corresponding period last year.

The increase in revenue for the three months ended December 31, 2021 was primarily attributable to increased volume in the Europe, Middle East, Asia and Australia compared to the prior year.

Gross profit for our International segment for the three months ended December 31, 2021 increased $10.3 million, or 26.3%, to $49.4 million as compared to $39.1 million for the corresponding period last year.

As a percentage of revenue, gross profit increased to 6.2% of revenue for the three months ended December 31, 2021 from 5.2% in the corresponding period last year.

The increase in gross profit and gross profit as a percentage of revenue for the three months ended December 31, 2021 was primarily due to an increase in revenue and reduced costs resulting from actions taken to improve efficiency, including consolidating real estate, implementing a streamlined overhead structure, and better operational execution.

Revenue for our International segment for the three months ended March 31, 2022 increased $16.8 million, or 2.1%, to $813.3 million as compared to $796.5 million for the corresponding period last year.

Revenue for our International segment for the six months ended March 31, 2022 increased $63.6 million, or 4.1%, to $1,615.7 million as compared to $1,552.1 million for the corresponding period last year.

The increases in revenue for the three and six months ended March 31, 2022 were primarily attributable to increased growth in Europe, Middle East, India, and Asia compared to the prior year.

Gross profit for our International segment for the three months ended March 31, 2022 increased $6.3 million, or 14.7%, to $49.1 million as compared to $42.8 million for the corresponding period last year.

As a percentage of revenue, gross profit increased to 6.0% of revenue for the three months ended March 31, 2022 from 5.4% in the corresponding period last year.

Gross profit for our International segment for the six months ended March 31, 2022 increased $16.6 million, or 20.3%, to $98.5 million as compared to $81.9 million for the corresponding period last year.

As a percentage of revenue, gross profit increased to 6.1% of revenue for the six months ended March 31, 2022 from 5.3% in the corresponding period last year.

The increases in gross profit and gross profit as a percentage of revenue for the three and six months ended March 31, 2022 were primarily due to an increase in revenue and reduced costs resulting from investments in digital solutions, enterprise capability centers and shared service centers, and more efficient operational execution.

AECOM Capital

Three Months Ended

Six Months Ended

($ in millions)

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We believe our anticipated sources of liquidity including operating cash flows, existing cash and cash equivalents, borrowing capacity under our revolving credit facility and our ability to issue debt or equity, if required, will be sufficient to meet our projected cash requirements for at least the next twelve months.

We expect to spend approximately $30 million to $40 million in restructuring costs in fiscal 2022 associated with previously announced restructuring actions that are expected to deliver continued margin improvement and efficiencies.

We expect to spend approximately $40 million to $50 million in restructuring costs in fiscal 2022 associated with our previously announced restructuring actions that are expected to deliver continued margin improvement and efficiencies and the exit of our Russia-related businesses.

Generally, we do not provide for U.S.

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subsidiaries because such basis differences are able to and intended to be reinvested indefinitely.

At December 31, 2021, we have determined that we will continue to indefinitely reinvest the earnings of some foreign subsidiaries and therefore we will continue to account for these undistributed earnings based on our existing accounting under ASC 740 and not accrue additional tax.

At March 31, 2022, we have determined that we will continue to indefinitely reinvest the earnings of some foreign subsidiaries and therefore we will continue to account for these undistributed earnings based on our existing accounting under ASC 740 and not accrue additional tax.

Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation.

Based on the available sources of cash flows discussed above, we anticipate we will continue to have the ability to permanently reinvest these remaining amounts.

At December 31, 2021, cash and cash equivalents, including cash and cash equivalents included in current assets held for sale, were $1,091.4 million, a decrease of $143.4 million, or 11.6%, from $1,234.8 million at September 30, 2021.

At March 31, 2022, cash and cash equivalents, including cash and cash equivalents included in current assets held for sale, were $967.2 million, a decrease of $267.6 million, or 21.7%, from $1,234.8 million at September 30, 2021.

The decrease in cash and cash equivalents was primarily attributable to $312.8 million of cash used to repurchase common stock.

Net cash provided by operating activities was $194.9 million for the three months ended December 31, 2021 as compared to $7.1 million for the three months ended December 31, 2020.

The change was primarily attributable to an increase in cash provided by working capital of approximately $229.2 million, partially driven by an 11-day improvement in days sales outstanding from prior year, and an increase in net income of approximately $28.2 million, offset by a decrease in adjustments for non-cash items of approximately $69.6 million.

The improvement in operating cash flow was also partly due to the sales of our power construction business in the first quarter of fiscal year 2021 and the civil construction business in the second quarter of fiscal year 2021, which led to a net favorable year over year impact to operating cash flow of approximately $22.6 million.

The sale of trade receivables to financial institutions during the three months ended December 31, 2021 provided a net use of cash of $17.7 million as compared to a net cash provided of $26.8 million during the three months ended December 31, 2020.

Net cash provided by operating activities was $193.2 million for the six months ended March 31, 2022 as compared to $66.3 million for the six months ended March 31, 2021.

The change was primarily attributable to an increase in cash provided by working capital of approximately $165.2 million, partially driven by a 12-day improvement in days sales outstanding from prior year, and an increase in net income of approximately $31.5 million, offset by a decrease in adjustments for non-cash items of approximately $69.8 million.

The improvement in operating cash flow was also partly offset by a net unfavorable year over year impact of $6.9 million due to the sale of our oil and gas construction business in the current quarter and the sales of our power construction and civil construction businesses in fiscal 2021.

The sale of trade receivables to financial institutions included in operating cash flows decreased $4.1 million during the six months ended March 31, 2022 compared to the six months ended March 31, 2021.

We expect to continue to sell trade receivables in the future as long as the terms continue to remain favorable to us.

Net cash used in investing activities was $48.6 million for the three months ended December 31, 2021, as compared to $141.3 million for the three months ended December 31, 2020.

Net cash used in investing activities was $93.9 million for the six months ended March 31, 2022, as compared to $362.5 million for the six months ended March 31, 2021.

Cash used in investing activities decreased primarily due to a $216.2 million decrease in cash disposed as a result of the sales of discontinued operations.

Net cash used in financing activities was $288.9 million for the three months ended December 31, 2021 as compared to $469.5 million for the three months ended December 31, 2020.

Net cash used in financing activities was $368.6 million for the six months ended March 31, 2022 as compared to $580.4 million for the six months ended March 31, 2021.

The decrease was primarily attributable to decreased stock repurchases under the Stock Repurchase Program.

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Working Capital

Working capital, or current assets less current liabilities, decreased $235.0 million, or 36.1%, to $416.8 million at December 31, 2021 from $651.8 million at September 30, 2021.

Net accounts receivable and contract assets, net of contract liabilities, decreased to $2,919.2 million at December 31, 2021 from $2,929.9 million at September 30, 2021.

Days Sales Outstanding (DSO), which includes net accounts receivable and contract assets, net of contract liabilities, was 78 days at December 31, 2021 compared to 76 days at September 30, 2021.

Working capital, or current assets less current liabilities, decreased $238.1 million, or 36.5%, to $413.7 million at March 31, 2022 from $651.8 million at September 30, 2021.

Net accounts receivable and contract assets, net of contract liabilities, decreased to $2,845.2 million at March 31, 2022 from $2,929.9 million at September 30, 2021.

Days Sales Outstanding (DSO), which includes net accounts receivable and contract assets, net of contract liabilities, was 77 days at March 31, 2022 compared to 76 days at September 30, 2021.

In Note 4, Revenue Recognition, in the notes to our consolidated financial statements, a comparative analysis of the various components of accounts receivable is provided.

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Long-term debt

The following table presents, in millions, scheduled maturities of our debt as of December 31, 2021:

2022 (nine months remaining)

The following table presents, in millions, scheduled maturities of our debt as of March 31, 2022:

2022 (six months remaining)

Credit Agreement

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Revolving Credit Facility will be adjusted on an annual basis based on our achievement of preset thresholds for each Sustainability Metric.

The Credit Agreement contains provisions addressing the end of the use of LIBOR as a benchmark rate of interest and a mechanism for determining an alternative benchmark rate of interest.

If the provisions are triggered, LIBOR would be replaced by a secured overnight financing rate (SOFR)-based rate, if one can be determined, or, if not, LIBOR may be replaced by a rate selected by the Company and the administrative agent under the Credit Agreement.

Any replacement rate would also be subject to a spread adjustment which may be positive, negative or zero.

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

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We are 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").

Our consolidated leverage ratio was 2.40 to 1.00 at December 31, 2021.

As of December 31, 2021, we were in compliance with the covenants of the Credit Agreement.

Our consolidated leverage ratio was 2.30 to 1.00 at March 31, 2022.

As of March 31, 2022, we were 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.

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

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

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

At March 31, 2022 and September 30, 2021, letters of credit totaled $4.5 million and $5.2 million, respectively, under our Revolving Credit Facility.

As of March 31, 2022 and September 30, 2021, we had $1,145.5 million and $1,144.8 million, respectively, available under our Revolving Credit Facility.

2027 Senior Notes

1 unchanged sentence

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

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.

As of March 31, 2022, the estimated fair value of the 2027 Senior Notes was approximately $1,017.2 million.

The fair value of the 2027 Senior Notes as of March 31, 2022 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.

1 unchanged sentence

The 2027 Senior Notes will mature on March 15, 2027.

At any time and from time to time prior to December 15, 2026, we 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, we 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.

1 unchanged sentence

The indenture also contains customary negative covenants.

We were in compliance with the covenants relating to the 2027 Senior Notes as of December 31, 2021.

We were in compliance with the covenants relating to the 2027 Senior Notes as of March 31, 2022.

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

Effective Interest Rate

Our average effective interest rate on our 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.

Our average effective interest rate on our total debt, including the effects of the interest rate swap agreements, during the six months ended March 31, 2022 and 2021 was 3.3% and 5.1%, respectively.

Interest expense in the consolidated statements of operations included amortization of deferred debt issuance costs for the three and six months ended March 31, 2022 of $1.2 million and $2.5 million, respectively, and for the three and six months ended March 31, 2021 of $2.6 million and $4.4 million, respectively.

Other Commitments

7 unchanged sentences

However, if we acquire additional businesses in the future or if we embark on other capital-intensive initiatives, additional working capital may be required.

Under our secured revolving credit facility and other facilities discussed in Other Debt and Other Items above, as of December 31, 2021, there was approximately $470.4 million, including both continuing and discontinued operations, outstanding under standby letters of credit primarily issued in connection with general and professional liability insurance programs and for contract performance guarantees.

Under our secured revolving credit facility and other facilities discussed in Other Debt and Other Items above, as of March 31, 2022, there was approximately $492.0 million, including both continuing and discontinued operations, outstanding under standby letters of credit primarily issued in connection with general and professional liability insurance programs and for contract performance guarantees.

For those projects for which we have issued a performance guarantee, if the project subsequently fails to meet guaranteed performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to achieve the required performance standards.

We recognized on our balance sheet the funded status of our pension benefit plans, measured as the difference between the fair value of plan assets and the projected benefit obligation.

At December 31, 2021, our defined benefit pension plans had an aggregate deficit (the excess of projected benefit obligations over the fair value of plan assets) of approximately $332.7 million.

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

At March 31, 2022, our defined benefit pension plans had an aggregate deficit (the excess of projected benefit obligations over the fair value of plan assets) of approximately $312.5 million.

The total amounts of employer contributions paid for the six months ended March 31, 2022 were $4.8 million for U.S.

plans and $12.2 million for non-U.S.

8 unchanged sentences

Refer to our Annual Report on Form 10-K for the year ended September 30, 2021 for a discussion of our contractual obligations.

There have been no changes, outside of the ordinary course of business, to these contractual obligations during the three months ended December 31, 2021.

There have been no changes, outside of the ordinary course of business, to these contractual obligations during the six months ended March 31, 2022.

Condensed Combined Financial Information

4 unchanged sentences

All intercompany balances and transactions are eliminated in the presentation of the combined financial statements.

Amounts provided do not represent our total consolidated amounts as of December 31, 2021 and September 30, 2021, and for the three months ended December 31, 2021.

Amounts provided do not represent our total consolidated amounts as of March 31, 2022 and September 30, 2021, and for the six months ended March 31, 2022.

Condensed Combined Balance Sheets

1 unchanged sentence

(unaudited - in millions)

December 31, 2021

March 31, 2022

September 30, 2021

9 unchanged sentences

(unaudited - in millions)

For the three months ended

December 31, 2021

For the six months ended

March 31, 2022

Cost of revenue

12 unchanged sentences

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 2. Management’s Discussion and Analysis