What changed in this filing

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Item 1A. Risk Factors

2022-11-17 compared with 2021-11-17 · 60 added, 36 removed, 361 unchanged (21% of the section changed)

We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our operations.

We operate in a changing global environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our operations.

The risks described below highlight some of the factors that have affected, and in the future could affect our operations.

Additional risks we do not yet know of or that we currently think are immaterial may also affect our business operations.

Additional risks we do not yet know of or that we currently believe are immaterial may also affect our business operations.

If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected.

Risks Related to Our Markets, Customers and Business

We face various risks related to health outbreaks such as the Covid-19 pandemic that may have material adverse effects on our business, financial position, results of operations and/or cash flows.

Our business could be materially and adversely affected by the risk, or the public perception of risk, related to a pandemic or widespread health crisis, such as the current Covid-19 pandemic.

Our business, results of operations and financial condition have been adversely affected and could in the future be materially adversely affected by the Covid-19 pandemic.

Our business could be materially and adversely affected by the risk, or the public perception of risk, related to a pandemic or widespread health crisis, such as the Covid-19 pandemic.

A significant outbreak, epidemic or pandemic of contagious diseases in the human population could result in a widespread health crisis adversely affecting the broader economies, financial markets and overall demand for our services.

In addition, any preventative or protective actions that governments implement or that we take in respect of a global health crisis, such as travel restrictions, quarantines, or site closures, may interfere with the ability of our employees and vendors to perform their responsibilities.

For example, lockdowns and other Covid-19 related restrictions implemented by China starting in late March 2022 had a negative impact on our business in China for the third and fourth quarters of 2022 and we expect that if any similar lockdowns and restrictions in China are implemented in the future, our business in China could be negatively impacted in future quarters.

Such results could have a material adverse effect on our operations, business, financial condition, results of operations, or cash flows.

Our operations have been affected by a range of external factors related to the Covid-19 pandemic that are not within our control.

For example, many jurisdictions have imposed a wide range of restrictions on the physical movement of our employees and vendors to limit the spread of Covid-19 and some non-essential construction and other client projects temporarily halted as a result.

For example, some jurisdictions have imposed a wide range of restrictions on the physical movement of our employees and vendors to limit the spread of Covid-19 and some non-essential construction and other client projects temporarily halted as a result.

Extended disruptions due to the Covid-19 pandemic could further delay or limit our ability to perform services, make or receive timely payments, and impair our ability to win future contracts.

Any cost increases due to Covid-19 may not be fully recoverable or adequately covered by our insurance.

Our management is focused on mitigating the effects of Covid-19 on our business, which has required and will continue to require a substantial investment of their time and may delay their other efforts.

We continue to closely monitor the impact of the Covid-19 pandemic and to assess its potential effects on our business.

In response to the Covid-19 pandemic, we implemented various measures to mitigate the impact of the pandemic on our business but given the dynamic nature of these circumstances, the full impact of the Covid-19 pandemic cannot be reasonably estimated at this time.

The extent to which our business, financial condition, results of operations, or cash flows are affected by Covid-19 will depend in part on future developments which cannot be accurately predicted and are uncertain.

The impact of the Covid-19 pandemic depends upon various uncertainties, including the ultimate geographic spread of the virus, the severity of the virus, the duration of the outbreak, and actions that may be taken by governmental authorities to contain the virus.

This situation is changing continually, and additional effects may arise that we are not presently aware of or that we currently do not consider to be significant risks to our operations.

If we are not able to respond to and manage the impact of such events effectively, our business and financial condition could be negatively impacted.

Any cost increases due to Covid-19 or future pandemics may not be fully recoverable or adequately covered by our insurance.

Our management continues to focus on mitigating the effects of Covid-19 on our business, which has required and will continue to require a substantial investment of their time and may delay their other efforts.

The extent of the impact of the Covid-19 pandemic on our operational and financial performance is currently uncertain and will depend on many factors outside our control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the efficacy of available vaccines, the imposition of protective public safety measures, and the impact of the pandemic on the global economy.

Potential negative impacts of these external factors include, but are not limited to, material adverse effects on demand for our services;

collectability of customer accounts;

our ability to execute strategic plans;

and our profitability and cost structure.

To the extent the Covid-19 pandemic adversely affects our business, results of operations and financial condition, it may also have the effect of exacerbating the other risks discussed in this “Risk Factors” section.

Our industry is highly competitive, and we may be unable to compete effectively, which could result in reduced revenue, profitability and market share.

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Increased competition may result in our inability to win bids for future projects, increased margin pressure and loss of revenue, profitability and market share.

Our ability to compete in our industry will be harmed if we do not retain the continued services of our senior management and key technical personnel.

We rely heavily upon the expertise and leadership of our people.

There is strong competition for qualified technical and management personnel in the sectors in which we compete.

We may not be able to continue to attract and retain qualified technical and management personnel, such as engineers, architects and project managers, who are necessary for the development of our business or to replace qualified personnel in the timeframe demanded by our clients.

Also, some of our personnel hold government granted eligibility that may be required to obtain government projects.

Loss of the services of, or failure to recruit, senior management or key technical personnel could impact the long-term performance of the Company and limit our ability to successfully complete existing projects and compete for new projects.

Demand for our services is cyclical and vulnerable to sudden economic downturns and reductions in government and private industry spending.

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As a result, at the beginning of a program, the related contract is only partially funded, and additional funding is normally committed only as appropriations are made in each fiscal year.

These appropriations, and the timing of payment of appropriated amounts, may be influenced by, among other things, the state of the economy, a government shutdown, competing priorities for appropriation, changes in administration or control of legislatures, and the timing and amount of tax receipts and the overall level of government expenditures.

These appropriations, and the timing of payment of appropriated amounts, may be influenced by, among other things, the state of the economy, an extended government shutdown, competing priorities for appropriation, changes in administration or control of legislatures, and the timing and amount of tax receipts and the overall level of government expenditures.

Similarly, the impact of an economic downturn on governments, including as a result of the Covid-19 pandemic, may make it more difficult for them to fund infrastructure projects.

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These suits may remain under seal (and hence, be unknown to us) for some time while the government decides whether to intervene on behalf of the qui tam plaintiff.

An extended government shutdown, payment delays or reduced demand for our services may have a material impact on our results of operation and financial condition.

An extended government shutdown could significantly reduce demand for our services, delay payment and result in workforce reductions that may have a material adverse effect on our results of operation and financial condition.

Moreover, a prolonged government shutdown could result in program cancellations, disruptions and/or stop work orders and could limit the government’s ability to effectively process and our ability to perform government contracts and successfully compete for new work.

Risks Related to our Capital Structure

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Borrowings under our Credit Agreement are at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

In March 2022, the Federal Reserve began and it has continued, and is expected to continue, to raise interest rates in an effort to curb inflation.

As interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

A 1.00% increase in such interest rates would increase total interest expense under our Credit Agreement for the year ended September 30, 2022 by $11.3 million, including the effect of our interest rate swaps.

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In March 2021, the UK and EU agreed on a framework for voluntary regulatory cooperation and dialogue on financial services issues between the two countries in a memorandum of understanding, which is expected to be signed after formal steps are completed, although this has not yet occurred.

In June 2022, following an inquiry, the European Affairs Committee issued a report which concluded that while the outlook for financial services after Brexit seems relatively positive, the impact of Brexit on financial services would be dependent on political decisions made by the UK and the EU.

At this time, we cannot predict the impact that the trade agreement, the memorandum of understanding or any future agreements on services, particularly financial services, will have on our business.

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The uncertainty created by Brexit may cause our customers to closely monitor their costs and reduce demand for our services and may ultimately result in new regulatory and cost challenges for our United Kingdom and global operations.

Any of these events could adversely affect our United Kingdom, European and overall business and financial results.

Our operations worldwide expose us to legal, political and economic risks in different countries as well as currency exchange rate fluctuations that could harm our business and financial results.

The Building Safety Act, the primary legislation which introduces a new framework for the regulation of the UK construction industry, became law on April 28, 2022 with certain provisions coming into force on June 28, 2022 and remaining provisions and secondary legislation to follow.

The Act extends liability periods for some historical defects in residential properties completed prior to 2022, creates a new government regulatory body responsible for building safety and new legal obligations regarding building safety, reallocates the risk related to design and construction, and requires the development of a more stringent regulatory regime for select buildings.

The new legislation may result in new risk, regulatory and cost challenges for our United Kingdom and global operations which are not presently estimable.

Any of these events could adversely affect our United Kingdom, European operations and overall business and financial results.

Our operations worldwide expose us to legal, political and economic risks in different countries as well as currency exchange rate fluctuations and impacts from inflation that could harm our business and financial results.

During fiscal 2022, revenue attributable to our services provided outside of the United States to non-U.S.

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There are risks inherent in doing business internationally, including:

● the ongoing conflict between Russia and Ukraine, which has resulted in the imposition by the U.S.

and other nations of restrictive actions against Russia, Belarus and certain banks, companies and individuals;

● imposition of governmental controls and changes in laws, regulations or policies;

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● impact of the Covid-19 pandemic and its related economic impacts;

● increases in the consumer price index and interest rates;

● changes in regulatory practices, tariffs and taxes, such as Brexit;

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Any of these factors could have a material adverse effect on our business, results of operations or financial condition.

In March 2022, the Company substantially completed its previously announced exit of all business operations in Russia.

The impact of these government measures and our exit of our Russia-related businesses, as well as any further retaliatory actions taken by Russia and the U.S.

and other nations, is currently unknown and could adversely affect our business, financial condition and results of operations.

We operate in many different jurisdictions and we could be adversely affected by violations of the U.S.

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For the year ended September 30, 2022, our revenue was comprised of 41%, 33%, and 26% cost-reimbursable, guaranteed maximum price, and fixed-price contracts, respectively.

Fixed-price contracts expose us to a number of risks not inherent in cost-reimbursable contracts, including underestimation of costs, ambiguities in specifications, unforeseen increases in or failures in estimating the cost of raw materials, equipment or labor, problems with new technologies, delays beyond our control, fluctuations in profit margins, failures of subcontractors to perform and economic or other changes that may occur during the contract period.

Fixed-price contracts expose us to a number of risks not inherent in cost-reimbursable contracts, including underestimation of costs, ambiguities in specifications, unforeseen increases in or failures in estimating the cost of raw materials, equipment or labor, increased costs as a result of inflation, problems with new technologies, delays beyond our control, fluctuations in profit margins, failures of subcontractors to perform and economic or other changes that may occur during the contract period.

United States and foreign trade policy actions and tariffs such as the 2018 tariffs on steel and aluminum imports in the United States could affect the profitability of our fixed-price construction projects.

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ACAP’s real estate business involves managing, sponsoring, investing in and developing commercial real estate projects and joint ventures (Real Estate Joint Ventures) that are inherently risky and may result in future losses since real estate markets are significantly impacted by economic trends and government policies that we do not control.

Our registered investment adviser jointly manages and sponsors the AECOM-Canyon Equity Fund, L.P.

Our SEC-registered investment adviser jointly manages and sponsors the AECOM-Canyon Equity Fund, L.P.

(the “Fund”), in which the Company indirectly holds an equity interest and which also invests in and develops Real Estate Joint Ventures on behalf of its investors.

Real Estate Joint Ventures rely on substantial amounts of third party borrowing to finance their development activities including completion guarantees, repayment guarantees, environmental indemnities and other lender required credit support guarantees that may be provided by AECOM or an affiliate to secure the Real Estate Joint Venture financing.

Although the Fund and such Real Estate Joint Ventures have reserves that will be used to share any cost overruns of the Real Estate Joint Ventures, if such reserves are depleted, then AECOM may be required to make support payments to fund non-budgeted cost overruns on behalf of the Fund (but not on behalf of the Fund’s co-partner or any unaffiliated limited partners of the Real Estate Joint Ventures).

Some of the Fund’s limited partners may be permitted to make additional equity co-investments in certain Real Estate Joint Ventures for which AECOM will provide support payments on behalf of the limited partner co-investor in the event of a cost overrun of the Real Estate Joint Venture after additional specific reserves have been depleted.

Real Estate Joint Ventures rely on substantial amounts of third party borrowing to finance their development activities and the lenders of such financings typically require AECOM or an affiliate to provide completion guarantees, repayment guarantees, environmental indemnities and other lender required credit support guarantees to secure the Real Estate Joint Ventures financing.

AECOM’s provision of lender guarantees is contingent upon the Real Estate Joint Ventures meeting AECOM’s underwriting criteria, including an affiliate of AECOM acting as either the construction manager at risk or the owner’s representative for the project, no material adverse change in AECOM’s financial condition, and the guarantee not violating a covenant under a material AECOM agreement.

Some of the Fund’s limited partners may be permitted to make additional equity co-investments in certain Real Estate Joint Ventures for which AECOM will provide support payments on behalf of the limited partner co-investor in the event of a cost overrun of the Real Estate Joint Ventures after additional specific reserves have been depleted.

Risks Related to Laws and Regulations

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Our continuing work in the areas governed by these laws and regulations exposes us to the risk of substantial liability.

Risks Related to Climate Change

Climate change and related environmental issues could have a material adverse impact on us.

Climate-related events, such as an increase in frequency and severity of storms, floods, wildfires, droughts, hurricanes, freezing conditions, and other natural disasters, may have a long-term impact on our business, financial condition and results of operation.

While we seek to mitigate our business risks associated with climate events, we recognize that there are inherent climate-related risks regardless of where we conduct our businesses.

For example, a catastrophic natural disaster could negatively impact any of our office locations and the locations of our clients.

Accordingly, a natural disaster has the potential to disrupt our and our clients’ businesses and may cause us to experience work stoppages, project delays, financial losses and additional costs to resume operations, including increased insurance costs or loss of cover, legal liability and reputational losses.

There is a rapidly evolving awareness and focus from stakeholders with respect to environmental, social and governance practices, which could affect our business.

Stakeholder expectations with respect to environmental, social and governance matters have been rapidly evolving and increasing.

We risk damage to our reputation if we do not act responsibly in key areas including diversity and inclusion, environmental stewardship, support for local communities and corporate governance.

A failure to adequately meet stakeholders’ expectations may result in loss of business, and an inability to attract and retain customers and talented personnel, which could have a negative impact on our business, results of operations and financial condition, and potentially on the price of our common stock and cost of capital.

Risks Related to Acquisitions and Divestitures

AECOM is a smaller company after the sale of our Management Services and self-perform at-risk civil infrastructure and power construction businesses and, as a result, may be more vulnerable to changing market conditions.

AECOM is a smaller company after the sale of our Management Services and self-perform at-risk civil infrastructure and power construction businesses and more reliant on our remaining business segments.

After the sale of our Management Services and self-perform at-risk civil infrastructure and power construction businesses, AECOM may be more vulnerable to changing market conditions.

After the sale of our Management Services and self-perform at-risk civil infrastructure and power construction businesses, AECOM is more reliant on our remaining business segments.

Our results of operations, cash flows, working capital, effective tax rate, and financing requirements may be subject to increased volatility and our ability to fund capital expenditures, investments and service debt may be diminished.

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An impairment charge of goodwill could have a material adverse impact on our financial condition and results of operations.

Because we have grown in part through acquisitions, goodwill and intangible assets-net represent a substantial portion of our assets.

Because we have grown in part through acquisitions, goodwill and intangible assets-net represent a substantial portion of our assets, and were $3.4 billion and $35.6 million, respectively as of September 30, 2022.

Under generally accepted accounting principles in the United States, we are required to test goodwill carried in our consolidated balance sheets for possible impairment on an annual basis based upon a fair value approach and whenever events occur that indicate impairment could exist.

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These types of backlog reductions adversely affect the revenue and profits that we ultimately receive from contracts reflected in our backlog.

We have submitted claims to clients for work we performed beyond the initial scope of some of our contracts.

From time to time, we submit claims to clients for work we performed beyond the initial scope of some of our contracts.

If these clients do not approve these claims, our results of operations could be adversely impacted.

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Failure to adequately protect, maintain, or enforce our intellectual property rights may adversely limit our competitive position.

Our ability to compete in our industry will be harmed if we do not retain the continued services of our senior management and key technical personnel.

We rely heavily upon the expertise and leadership of our people.

There is strong competition for qualified technical and management personnel in the sectors in which we compete.

Also, some of our personnel hold government granted eligibility that may be required to obtain government projects.

Loss of the services of, or failure to recruit senior management or key technical personnel could impact the long term performance of the Company and limit our ability to successfully complete existing projects and compete for new projects.

Our revenue and growth prospects may be harmed if we or our employees are unable to obtain government granted eligibility or other qualifications we and they need to perform services for our customers.

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● advance notice requirements for stockholder proposals and nominations for election to our Board of Directors.

We cannot guarantee the timing, amount or payment of dividends.

Although our Board of Directors has adopted a dividend policy under which we intend to pay a regular quarterly cash dividend, the timing and amount of any subsequently declared dividend (or any special dividend) is subject to the discretion of the Board of Directors and will be based on a variety of factors, including cash flows, earnings and financial borrowing availability and other restrictions under our outstanding indebtedness.

We are not required to declare dividends and we are restricted under our outstanding indebtedness and could be restricted under future financing or other arrangements.

Our Board of Directors may modify or terminate our dividend policy.

Accordingly, we cannot provide any assurances that we will pay quarterly or special dividends or the amount or timing thereof.

Any reduction or elimination of our dividend policy or dividend payments could have a negative effect on the price of our common stock.

Changes in tax laws could increase our worldwide tax rate and materially affect our results of operations.

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multinational corporations are taxed.

In the U.S., the proposed legislation in the Build Back Better Act would impose a 15% minimum tax on corporate book income for corporations with profits over $1 billion, change the Global Intangible Low-Taxed Income (GILTI) regime, reduce the deduction for Foreign-Derived Intangible Income (FDII), and create a new limitation on interest deductions as well as other corporate tax reform.

Due to the large scale of our U.S.

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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-K

Item 1A. Risk Factors