What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-05-09 · 156 added, 140 removed, 651 unchanged (31% of the section changed)

38 unchanged sentences

AECOM STOCKHOLDERS’ EQUITY:

Common stock-authorized, 300,000,000 shares of $ 0.01 par value as of March 31, 2023 and September 30, 2022;

issued and outstanding 138,724,105 and 138,933,907 shares as of March 31, 2023 and September 30, 2022, respectively

Common stock-authorized, 300,000,000 shares of $ 0.01 par value as of June 30, 2023 and September 30, 2022;

issued and outstanding 138,499,043 and 138,933,907 shares as of June 30, 2023 and September 30, 2022, respectively

Additional paid-in capital

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of revenue

Equity in earnings of joint ventures

Equity in (losses) earnings of joint ventures

General and administrative expenses

Restructuring costs

Income from operations

(Loss) income from operations

Interest income

Interest expense

Income from continuing operations before taxes

Income tax expense for continuing operations

Net income from continuing operations

(Loss) income from continuing operations before taxes

Income tax (benefit) expense for continuing operations

Net (loss) income from continuing operations

Net loss from discontinued operations

Net (loss) income

Net income attributable to noncontrolling interests from continuing operations

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

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

Net income attributable to noncontrolling interests

Net income attributable to AECOM from continuing operations

Net (loss) income attributable to AECOM from continuing operations

Net loss attributable to AECOM from discontinued operations

Net income attributable to AECOM

Net income (loss) attributable to AECOM per share:

Net (loss) income attributable to AECOM

Net (loss) income attributable to AECOM per share:

Basic continuing operations per share

6 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive (Loss) Income

(unaudited—in thousands)

Three Months Ended

Six Months Ended

Other comprehensive income, net of tax:

Net unrealized (loss) gain on derivatives, net of tax

Nine Months Ended

Net (loss) income

Other comprehensive (loss) income, net of tax:

Net unrealized gain (loss) on derivatives, net of tax

Foreign currency translation adjustments

Pension adjustments, net of tax

Other comprehensive (loss) income, net of tax

Comprehensive income, net of tax

Other comprehensive income (loss), net of tax

Comprehensive (loss) income, net of tax

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

Comprehensive income attributable to AECOM, net of tax

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

See accompanying Notes to Consolidated Financial Statements.

4 unchanged sentences

Stockholders’

BALANCE AT DECEMBER 31, 2022

BALANCE AT MARCH 31, 2023

Dividends declared

Other comprehensive loss

Other comprehensive income

Issuance of stock

3 unchanged sentences

Distributions to noncontrolling interests

BALANCE AT MARCH 31, 2023

BALANCE AT JUNE 30, 2023

Comprehensive

1 unchanged sentence

Stockholders’

BALANCE AT DECEMBER 31, 2021

BALANCE AT MARCH 31, 2022

Dividends declared

Other comprehensive income

Other comprehensive loss

Issuance of stock

2 unchanged sentences

Other transactions with noncontrolling interests

Contributions to noncontrolling interests

Distributions to noncontrolling interests

BALANCE AT MARCH 31, 2022

BALANCE AT JUNE 30, 2022

Comprehensive

9 unchanged sentences

Distributions to noncontrolling interests

BALANCE AT MARCH 31, 2023

BALANCE AT JUNE 30, 2023

Comprehensive

3 unchanged sentences

Dividends declared

Other comprehensive income

Other comprehensive loss

Issuance of stock

4 unchanged sentences

Distributions to noncontrolling interests

BALANCE AT MARCH 31, 2022

BALANCE AT JUNE 30, 2022

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

(unaudited - in thousands)

Six Months Ended March 31,

Nine Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Depreciation and amortization

Equity in earnings of unconsolidated joint ventures

Equity in losses (earnings) of unconsolidated joint ventures

Distribution of earnings from unconsolidated joint ventures

28 unchanged sentences

Payments to repurchase common stock

Net distributions to noncontrolling interests

Net contributions (distributions) to noncontrolling interests

Other financing activities

1 unchanged sentence

EFFECT OF EXCHANGE RATE CHANGES ON CASH

NET DECREASE IN CASH AND CASH EQUIVALENTS

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

11 unchanged sentences

The consolidated financial statements included in this report have been prepared consistently with the accounting policies described in the Annual Report, except as noted, and should be read together with the Annual Report.

The results of operations for the three and six months ended March 31, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2023.

The results of operations for the three and nine months ended June 30, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2023.

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 2020 and met the criteria for discontinued operation classification.

31 unchanged sentences

The Company recorded a pre-tax gain of approximately $ 3.0 million on the sale, net of transaction costs.

During the third quarter of fiscal 2023, the Company collected approximately $ 9.2 million cash payment for contingent consideration completing this transaction.

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

11 unchanged sentences

Three months ended

Six months ended

Nine months ended

Cost of revenue

10 unchanged sentences

Three months ended

Six months ended

Nine months ended

Payments for capital expenditures

The changes in the carrying value of goodwill by reportable segment for the six months ended March 31, 2023 were as follows:

The changes in the carrying value of goodwill by reportable segment for the nine months ended June 30, 2023 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 March 31, 2023 and September 30, 2022, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:

March 31, 2023

The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of June 30, 2023 and September 30, 2022, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:

June 30, 2023

September 30, 2022

1 unchanged sentence

Customer relationships

Amortization expense of acquired intangible assets included within cost of revenue were $ 9.3 million and $ 9.5 million for the six months ended March 31, 2023 and 2022, respectively.

Amortization expense of acquired intangible assets included within cost of revenue were $ 13.9 million and $ 14.2 million for the nine months ended June 30, 2023 and 2022, respectively.

The following table presents estimated amortization expense of existing intangible assets for the remainder of fiscal 2023 and for the succeeding years:

(in millions)

2023 (six months remaining)

2023 (three months remaining)

Revenue Recognition

4 unchanged sentences

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 revenues for the six months ended March 31, 2023 and 2022 were $ 3.6 billion and $ 3.3 billion, respectively.

These pass-through revenues for the nine months ended June 30, 2023 and 2022 were $ 5.6 billion and $ 5.0 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

Six months ended

Nine months ended

(in millions)

3 unchanged sentences

Three months ended

Six months ended

Nine months ended

(in millions)

2 unchanged sentences

Total revenue

As of March 31, 2023, the Company had allocated $ 22.2 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 June 30, 2023, the Company had allocated $ 21.7 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 and the remaining 45 % thereafter.

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

The Company recognized revenue of $ 696.9 million and $ 458.5 million during the six months ended March 31, 2023 and 2022, respectively, that was included in contract liabilities as of September 30, 2022 and 2021, respectively.

The Company recognized revenue of $ 869.5 million and $ 504.7 million during the nine months ended June 30, 2023 and 2022, respectively, that was included in contract liabilities as of September 30, 2022 and 2021, respectively.

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

10 unchanged sentences

Total accounts receivable—net

Substantially all contract assets as of March 31, 2023 and September 30, 2022 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 as of March 31, 2023 and $ 110 million as of September 30, 2022.

Substantially all contract assets as of June 30, 2023 and September 30, 2022 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 $ 150 million as of June 30, 2023 and $ 110 million as of September 30, 2022.

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.

2 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 March 31, 2023 and September 30, 2022.

The Company sold trade receivables to financial institutions, of which $ 256.2 million and $ 240.3 million were outstanding as of March 31, 2023 and September 30, 2022, respectively.

No single client accounted for more than 10 % of the Company’s outstanding receivables at June 30, 2023 and September 30, 2022.

The Company sold trade receivables to financial institutions of which $ 272.6 million and $ 240.3 million were outstanding as of June 30, 2023 and September 30, 2022, respectively.

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

31 unchanged sentences

Total liabilities and owners’ equity

Total revenue of the consolidated joint ventures was $ 941.7 million and $ 627.3 million for the six months ended March 31, 2023 and 2022, respectively.

Total revenue of the consolidated joint ventures was $ 1,441.9 million and $ 980.1 million for the nine months ended June 30, 2023 and 2022, 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.

10 unchanged sentences

AECOM’s investment in unconsolidated joint ventures

Six Months Ended

Nine Months Ended

(in millions)

1 unchanged sentence

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

Six Months Ended

Nine Months Ended

(in millions)

1 unchanged sentence

Other joint ventures

During the third quarter of fiscal 2023, the Company identified indicators of impairment in the equity method investments held in its AECOM Capital segment.

Specifically, the Company identified evidence that the carrying value of certain of the investments in its real estate portfolio were in excess of their fair values.

Additionally, in the fourth quarter of fiscal 2023, the Company entered into a term sheet with respect to the AECOM Capital team that will facilitate the transition of the AECOM Capital team to a new platform, while allowing the team to continue to support AECOM’s existing investment vehicles and investments in a manner consistent with their current obligations.

Accordingly, the Company considered the transition and concluded it no longer had the intent to retain certain of these investments for a period of time sufficient to allow for an anticipated recovery in market value.

Accordingly, the Company recorded an impairment loss of $ 307.0 million to reduce the carrying value of these investments to their estimated fair values.

This impairment did not relate to investments in respect of which affiliates of AECOM Capital provide advisory services or manage third party capital.

Fair value was determined using Level 3 inputs such as forecasted cash flows and comparable sales prices.

Pension Benefit Obligations

7 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 six months ended March 31, 2023 and 2022:

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, 2023 and 2022:

Three Months Ended

Six Months Ended

March 31, 2023

March 31, 2022

March 31, 2023

March 31, 2022

Nine Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

(in millions)

3 unchanged sentences

Expected return on plan assets

Amortization of prior service cost

Amortization of net loss (gain)

1 unchanged sentence

Net periodic benefit cost (credit)

The total amounts of employer contributions paid for the six months ended March 31, 2023 were $ 4.0 million for U.S.

The total amounts of employer contributions paid for the nine months ended June 30, 2023 were $ 5.9 million for U.S.

plans and $ 18.8 million for non-U.S.

9 unchanged sentences

Long-term debt

The following table presents, in millions, scheduled maturities of the Company’s debt as of March 31, 2023:

2023 (six months remaining)

The following table presents, in millions, scheduled maturities of the Company’s debt as of June 30, 2023:

2023 (three months remaining)

Credit Agreement

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.

On February 8, 2021, the Company entered into the 2021 Refinancing Amendment to the Credit Agreement (as amended, modified or otherwise supplemented, 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.

At the time of amendment, the Credit Agreement consisted 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.

6 unchanged sentences

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.

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.

When the provisions are triggered, LIBOR would be replaced by a secured overnight financing rate (SOFR)-based rate, which will be subject to a spread adjustment.

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 2.20 to 1.00 at March 31, 2023.

As of March 31, 2023, 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.

7 unchanged sentences

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.

At March 31, 2023 and September 30, 2022, letters of credit totaled $ 4.4 million and $ 4.4 million, respectively, under the Company’s Revolving Credit Facility.

As of March 31, 2023 and September 30, 2022, the Company had $ 1,145.6 million and $ 1,145.6 million, respectively, available under its revolving credit facility.

At June 30, 2023 and September 30, 2022, letters of credit totaled $ 4.4 million and $ 4.4 million, respectively, under the Company’s Revolving Credit Facility.

As of June 30, 2023 and September 30, 2022, the Company had $ 1,145.6 million and $ 1,145.6 million, respectively, available under its revolving credit facility.

On May 23, 2023, the Company entered into Amendment No.

12 to the Credit Agreement, pursuant to which LIBOR as a benchmark rate of interest was replaced by a secured overnight financing rate subject to a spread adjustment.

On May 23, 2023, the Company entered into Amendment No.

13 to the Credit Agreement, pursuant to which the spread adjustment with respect to the Revolving Credit Facility and the Term A Facility was amended.

The applicable interest rate under the Credit Agreement is calculated at a per annum rate equal to, at the Company’s option, (a) Term SOFR (as defined in the Credit Agreement) plus an applicable margin (the “SOFR 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”), which is currently at 0.2250 %.

The Applicable Margins for the Term A Facility and the Revolving Credit Facility 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 Company’s consolidated leverage ratio was 2.10 to 1.00 at June 30, 2023.

As of June 30, 2023, the Company was in compliance with the covenants of the Credit Agreement.

2027 Senior Notes

1 unchanged sentence

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 March 31, 2023, the estimated fair value of the 2027 Senior Notes was approximately $ 972.4 million.

The fair value of the 2027 Senior Notes as of March 31, 2023 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 June 30, 2023, the estimated fair value of the 2027 Senior Notes was approximately $ 958.6 million.

The fair value of the 2027 Senior Notes as of June 30, 2023 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.

5 unchanged sentences

The indenture also contains customary negative covenants.

The Company was in compliance with the covenants relating to the 2027 Senior Notes as of March 31, 2023.

The Company was in compliance with the covenants relating to the 2027 Senior Notes as of June 30, 2023.

Other Debt and Other Items

1 unchanged sentence

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 March 31, 2023 and September 30, 2022, these outstanding standby letters of credit totaled $ 860.5 million and $ 640.3 million, respectively.

As of March 31, 2023, the Company had $ 441.6 million available under these unsecured credit facilities.

At June 30, 2023 and September 30, 2022, these outstanding standby letters of credit totaled $ 883.3 million and $ 640.3 million, respectively.

As of June 30, 2023, the Company had $ 415.9 million available under these 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 and interest rate cap agreements, during the six months ended March 31, 2023 and 2022 was 5.2% and 3.3% , 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, 2023 of $ 1.2 million and $ 2.4 million, respectively, and for the three and six months ended March 31, 2022 of $ 1.2 million and $ 2.5 million, respectively.

The Company’s average effective interest rate on its total debt, including the effects of the interest rate swap and interest rate cap agreements, during the nine months ended June 30, 2023 and 2022 was 5.3% and 3.4% , 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, 2023 of $ 1.2 million and $ 3.7 million, respectively, and for the three and nine months ended June 30, 2022 of $ 1.2 million and $ 3.7 million, respectively.

Derivative Financial Instruments and Fair Value Measurements

9 unchanged sentences

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

During the third quarter of fiscal 2023, the hedged debt index was changed from LIBOR to SOFR.

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

March 31, 2023

June 30, 2023

Notional Amount

9 unchanged sentences

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 became effective February 2023 and terminate in March 2028.

By entering into the swap agreements, the Company converted a portion of the LIBOR rate-based liability into a fixed rate liability.

The Company will pay a fixed rate of 1.349 % and receive payment at the prevailing one-month LIBOR.

The new swaps became effective February 2023 and terminate in

By entering into the swap agreements, the Company converted a portion of the SOFR rate-based liability into a fixed rate liability.

The Company will pay a fixed rate of 1.283 % and receive payment at the prevailing one-month SOFR.

In the third quarter of fiscal 2022, the Company purchased interest rate cap agreements with a notional value of $ 300.0 million to manage interest rate exposure of its variable rate loans.

The caps became effective on June 30, 2022 and terminate in March 2028.

The caps reduce the Company’s exposure to one-month LIBOR.

In the event one-month LIBOR exceeds 3.5 %, the Company will pay a fixed rate of 3.5 % and receive payment at the prevailing one-month LIBOR.

The interest rate swap agreements and the interest rate cap agreements contain provisions that address the use of LIBOR as a benchmark rate.

Consistent with the Company’s variable rate loans, the provisions provide for a replacement of LIBOR to a SOFR-based rate.

The caps reduce the Company’s exposure to one-month SOFR.

In the event one-month SOFR exceeds 3.465 %, the Company will receive the spread between prevailing one-month SOFR and 3.465 %.

Other Foreign Currency Forward Contracts

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 six months ended March 31, 2023 and 2022.

Gains and losses on these contracts were not material for the nine months ended June 30, 2023 and 2022.

Fair Value Measurements

The Company’s non-pension financial assets and liabilities recorded at fair value relate to the interest rate swap and interest rate cap agreements included in other current assets, other non-current assets and other current liabilities on March 31, 2023 and were $ 14.3 million, $ 25.8 million, and $ 1.9 million, respectively.

The Company’s non-pension financial assets and liabilities recorded at fair value relate to the interest rate swap and interest rate cap agreements included in other current assets, and other non-current assets on June 30, 2023 and were $ 17.9 million and $ 30.3 million, respectively.

The fair values of the interest rate swap and interest rate cap agreements included in other current assets and other non-current assets on September 30, 2022 were $ 9.4 million and $ 41.8 million, respectively.

The fair values of the interest rate swap and interest rate cap agreements were derived by taking the net present value of the expected cash flows using observable market inputs (Level 2) such as LIBOR or SOFR rate curves, futures, volatilities and basis spreads (when applicable).

See Note 14 for accumulated balances and reporting period activities of derivatives related to reclassifications out of accumulated other comprehensive loss for the six months ended March 31, 2023 and 2022.

The fair values of the interest rate swap and interest rate cap agreements were derived by taking the net present value of the expected cash flows using observable market inputs (Level 2) such as SOFR rate curves, futures, volatilities and basis spreads (when applicable).

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, 2023 and 2022.

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

3 unchanged sentences

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

Restricted stock units and PEP units activity for the six months ended March 31 was as follows:

Restricted stock units and PEP units activity for the nine months ended June 30 was as follows:

(in millions)

4 unchanged sentences

PEP units earned

Outstanding at March 31,

Total compensation expense related to these share-based payments including stock options was $ 24.6 million and $ 21.7 million during the six months ended March 31, 2023 and 2022, respectively.

Unrecognized compensation expense related to total share-based payments outstanding as of March 31, 2023 and September 30, 2022 was $ 64.2 million and $ 45.9 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 23.1 % and 24.8 % for the six months ended March 31, 2023 and 2022, respectively.

Outstanding at June 30,

Total compensation expense related to these share-based payments including stock options was $ 40.9 million and $ 27.4 million during the nine months ended June 30, 2023 and 2022, respectively.

Unrecognized compensation expense related to total share-based payments outstanding as of June 30, 2023 and September 30, 2022 was $ 62.4 million and $ 45.9 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 29.9 % and 26.0 % for the nine months ended June 30, 2023 and 2022, 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 six-month period ended March 31, 2023 were a tax benefit of $ 23.6 million related to income tax credits and incentives, tax expense of $ 19.1 million related to foreign residual income, and tax expense of $ 9.0 million related to state income taxes.

These items are expected to have a continuing impact on the effective tax rate for the remainder of the fiscal year.

federal corporate tax rate of 21.0 % and the Company’s effective tax rate for the nine-month period ended June 30, 2023 were a tax benefit of $ 35.7 million related to income tax credits and

incentives, tax expense of $ 32.2 million related to foreign residual income, and tax expense of $ 21.0 million related to valuation allowances established in the third quarter of fiscal 2023 due to the AECOM Capital impairment charge.

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 expense related to valuation allowances.

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 six-month period ended March 31, 2022 were a tax benefit of $ 26.5 million related to income tax credits and incentives, tax expense of $ 19.5 million related to foreign residual income, a tax benefit of $ 13.9 million related to changes in valuation allowances, tax expense of $ 14.9 million primarily related to changes in foreign uncertain tax positions, and tax expense of $ 11.1 million related to state income taxes.

During the six-month period ended March 31, 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.

federal corporate tax rate of 21.0 % and the Company’s effective tax rate for the nine-month period ended June 30, 2022 were a tax benefit of $ 36.4 million related to income tax credits and incentives, tax expense of $ 31.4 million related to foreign residual income, tax expense of $ 16.4 million related to state income taxes, tax expense of $ 15.7 million related to uncertain tax positions, tax expense of $ 11.9 million related to nondeductible costs, and tax benefit of $ 11.6 million related to changes in valuation allowances.

During the nine-month period ended June 30, 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.

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

16 unchanged sentences

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

For the three and six months ended March 31, 2023 and 2022, equity awards excluded from the calculation of potential common shares were not significant.

For the three months ended June 30, 2022 and for the nine months ended June 30, 2023 and 2022, equity awards excluded from the calculation of potential common shares were not significant.

The computation of diluted loss per share for the three months ended June 30, 2023 excludes 1.3 million potential common shares due to their antidilutive effect.

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

Three Months Ended

Six Months Ended

Nine Months Ended

(in millions)

3 unchanged sentences

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

Substantially all of the Company’s office building leases are operating leases, and its equipment leases are both operating and finance leases.

Substantially all of the Company’s office building leases are operating leases, and its equipment leases are both operating and finance

The Company groups lease and non-lease components for its equipment leases into a single lease component but separates lease and non-lease components for its office building leases.

7 unchanged sentences

Three Months Ended

Six Months Ended

March 31, 2023

March 31, 2022

March 31, 2023

March 31, 2022

Nine Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

(in millions)

8 unchanged sentences

Balance Sheet Classification

March 31, 2023

June 30, 2023

September 30, 2022

14 unchanged sentences

Total non-current lease liabilities

March 31, 2023

June 30, 2023

September 30, 2022

6 unchanged sentences

Additional cash flow information related to leases is as follows:

Six Months Ended

Nine Months Ended

(in millions)

9 unchanged sentences

(in millions)

2023 (six months remaining)

2023 (three months remaining)

Total lease payments

8 unchanged sentences

Other accrued expenses

Accrued contract costs above include balances related to professional liability accruals of $ 707.7 million and $ 713.6 million as of March 31, 2023 and September 30, 2022, respectively.

Accrued contract costs above include balances related to professional liability accruals of $ 717.0 million and $ 713.6 million as of June 30, 2023 and September 30, 2022, 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 March 31, 2023 and September 30, 2022.

The Company did not have material revisions to estimates for contracts where revenue is recognized using the input method during the six months ended March 31, 2023 and 2022.

During the first half of fiscal 2023, the Company incurred restructuring expenses of $ 41.4 million, including personnel and other costs of $ 39.0 million and real estate costs of $ 2.4 million, of which $ 30.7 million was accrued and unpaid at March 31, 2023.

During the first half of fiscal 2022, the Company incurred restructuring expenses of $ 76.7 million, of which $ 69.1 million was related to the exit of our Russia-related businesses.

Liabilities recorded related to accrued contract losses were not material as of June 30, 2023 and September 30, 2022.

The Company did not have material revisions to estimates for contracts where revenue is recognized using the input method during the nine months ended June 30, 2023 and 2022.

During the first nine months of fiscal 2023, the Company incurred restructuring expenses of $ 50.5 million, including personnel and other costs of $ 41.9 million and real estate costs of $ 8.6 million, of which $ 28.3 million was accrued and unpaid at June 30, 2023.

During the first nine months of fiscal 2022, the Company incurred restructuring expenses of $ 88.9 million, of which $ 69.1 million was related to the exit of our Russia-related businesses.

The remaining $ 19.8 million related to actions to improve margins and deliver efficiencies.

These expenses included personnel and other costs of $ 5.4 million and real estate costs of $ 2.2 million, of which $ 0.6 million was accrued and unpaid at March 31, 2022.

These expenses included personnel and other costs of $ 16.5 million and real estate costs of $ 3.3 million, of which $ 1.1 million was accrued and unpaid at June 30, 2022.

On March 1, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.18 per share, which was paid on April 21, 2023 to stockholders of record as of April 5, 2023.

As of March 31, 2023, accrued and unpaid dividends totaled $ 26.5 million and were classified within other accrued expenses on the consolidated balance sheet.

As of June 30, 2023, accrued and unpaid dividends totaled $ 26.8 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 six months ended March 31, 2023 and 2022 related to reclassifications out of accumulated other comprehensive loss are summarized as follows (in millions):

The accumulated balances and reporting period activities for the three and nine months ended June 30, 2023 and 2022 related to reclassifications out of accumulated other comprehensive loss are summarized as follows (in millions):

Gain/(Loss) on

Comprehensive

Balances at December 31, 2022

Balances at March 31, 2023

Other comprehensive (loss) income before reclassification

Amounts reclassified from accumulated other comprehensive income (loss)

Balances at March 31, 2023

Balances at June 30, 2023

(Loss)/Gain on

Comprehensive

Balances at December 31, 2021

Balances at March 31, 2022

Other comprehensive income (loss) before reclassification

Amounts reclassified from accumulated other comprehensive loss

Balances at March 31, 2022

Balances at June 30, 2022

Gain/(Loss) on

3 unchanged sentences

Amounts reclassified from accumulated other comprehensive income (loss)

Balances at March 31, 2023

Balances at June 30, 2023

(Loss)/Gain on

3 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss

Balances at March 31, 2022

Balances at June 30, 2022

Commitments and Contingencies

9 unchanged sentences

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 March 31, 2023 and September 30, 2022, these outstanding standby letters of credit totaled $ 860.5 million and $ 640.3 million, respectively.

As of March 31, 2023, the Company had $ 441.6 million available under these unsecured credit facilities.

At June 30, 2023 and September 30, 2022, these outstanding standby letters of credit totaled $ 883.3 million and $ 640.3 million, respectively.

As of June 30, 2023, the Company had $ 415.9 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.

3 unchanged sentences

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 March 31, 2023, the Company was contingently liable in the amount of approximately $ 864.9 million in issued standby letters of credit and $ 4.7 billion in issued surety bonds primarily to support project execution.

At June 30, 2023, the Company was contingently liable in the amount of approximately $ 887.7 million in issued standby letters of credit and $ 4.6 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.

2 unchanged sentences

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

At March 31, 2023, the Company has capital commitments of $ 10.9 million to the Fund over the next 6 years .

At June 30, 2023, the Company has capital commitments of $ 10.9 million to the Fund over the next 6 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.

49 unchanged sentences

($ in millions)

Three Months Ended March 31, 2023:

Three Months Ended June 30, 2023:

Equity in earnings of joint ventures

3 unchanged sentences

Gross profit as a % of revenue

Three Months Ended March 31, 2022:

Three Months Ended June 30, 2022:

Equity in earnings of joint ventures

3 unchanged sentences

Gross profit as a % of revenue

Six Months Ended March 31, 2023:

Nine Months Ended June 30, 2023:

Equity in earnings of joint ventures

3 unchanged sentences

Gross profit as a % of revenue

Six Months Ended March 31, 2022:

Nine Months Ended June 30, 2022:

Equity in earnings of joint ventures

4 unchanged sentences

Reportable Segments:

March 31, 2023

June 30, 2023

September 30, 2022

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