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Risks Related to Our Markets, Customers and Business
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Such results could have a material adverse effect on our operations, business, financial condition, results of operations, or cash flows.
−Removed: Our operations have been affected by a range of external factors related to the Covid-19 pandemic that are not within our control.
−Removed: 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.
−Removed: 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.
−Removed: Any cost increases due to Covid-19 or future pandemics may not be fully recoverable or adequately covered by our insurance.
−Removed: 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.
−Removed: 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.
−Removed: Potential negative impacts of these external factors include, but are not limited to, material adverse effects on demand for our services;
−Removed: collectability of customer accounts;
−Removed: our ability to execute strategic plans;
−Removed: and our profitability and cost structure.
−Removed: 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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Demand for our services is cyclical and may be vulnerable to sudden economic downturns, interest rate fluctuations and reductions in government and private industry spending that result in clients delaying, curtailing or canceling proposed and existing projects.
−Removed: For example, the Covid-19 pandemic reduced demand for some of our services and impacted certain client spending.
Where economies are weakening, our clients may demand more favorable pricing or other terms while their ability to pay our invoices or to pay them in a timely manner may be adversely affected.
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In addition, public-supported financing such as state and local municipal bonds may be only partially raised to support existing infrastructure projects.
−Removed: 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.
+Added: 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, 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.
−Removed: 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.
−Removed: If appropriations are not made in subsequent years on our government contracts, then we will not realize all of our potential revenue and profit from that contract.
+Added: Similarly, the impact of an economic downturn on governments may make it more difficult for them to fund infrastructure projects.
+Added: If appropriations are not made in subsequent years on our government contracts, then we will not realize all of our potential revenue and profit from those contracts.
If we are unable to win or renew government contracts during regulated procurement processes, our operations and financial results would be harmed.
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The agreements governing our debt contain a number of restrictive covenants which will limit our ability to finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest.
−Removed: The Credit Agreement and the indentures governing our debt contain a number of significant covenants that impose operating and other restrictions on us and our subsidiaries.
+Added: The Credit Agreement (defined below) and the indentures governing our debt contain a number of significant covenants that impose operating and other restrictions on us and our subsidiaries.
Such restrictions affect or will affect and, in many respects, limit or prohibit, among other things, our ability and the ability of some of our subsidiaries to:
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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.
−Removed: 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.
+Added: A 1.00% increase in such interest rates would increase total interest expense under our Credit Agreement for the year ended September 30, 2023 by $8.6 million, including the effect of our interest rate swap and interest rate cap agreements.
We may, from time to time, enter into additional interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility.
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Risks Related to our International Operations
−Removed: The uncertainty surrounding the implementation of and effects of the United Kingdom’s proposed withdrawal from the European Union could have an adverse effect on our business and financial results.
−Removed: The United Kingdom formally left the European Union on January 31, 2020, under the UK-EU Withdrawal Agreement, which also included a transition period that concluded on December 31, 2020.
−Removed: On January 1, 2021, the UK also left the EU Single Market and Customs Union, as well as all EU policies and international agreements.
−Removed: As a result, the free movement of persons, goods, services and capital between the UK and the EU ended, and the EU and the UK formed two separate markets.
−Removed: On December 24, 2020, the EU reached a trade agreement with the UK.
−Removed: The trade agreement offers UK and EU companies preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas;
−Removed: however, economic relations between the UK and EU will now be on more restricted terms than existed previously.
−Removed: The trade agreement does not incorporate the full scope of the services sector, and businesses such as banking and finance face uncertainty.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Our United Kingdom business is a significant part of our European operations with approximately 7,000 employees and revenues representing approximately 6% of our total revenue for the fiscal year ended September 30, 2022.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The new legislation may result in new risk, regulatory and cost challenges for our United Kingdom and global operations which are not presently estimable.
−Removed: 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.
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● imposition of governmental controls and changes in laws, regulations or policies;
−Removed: ● political and economic instability, including in the Middle East and Southeast Asia;
+Added: ● political and economic instability, including in the Middle East;
● civil unrest, acts of terrorism, force majeure, war, or other armed conflict;
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● increases in the consumer price index and interest rates;
−Removed: ● changes in regulatory practices, tariffs and taxes, such as Brexit;
+Added: ● changes in regulatory practices, tariffs and taxes;
● potential non-compliance with a wide variety of laws and regulations, including anti-corruption, export control and anti-boycott laws and similar non-U.S.
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Any of these factors could have a material adverse effect on our business, results of operations or financial condition.
−Removed: In March 2022, the Company substantially completed its previously announced exit of all business operations in Russia.
−Removed: 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.
−Removed: and other nations, is currently unknown and could adversely affect our business, financial condition and results of operations.
−Removed: We operate in many different jurisdictions and we could be adversely affected by violations of the U.S.
+Added: We operate in many different jurisdictions and we could be adversely affected by legislative actions of governments, as well as violations of the U.S.
Foreign Corrupt Practices Act and similar worldwide anti-corruption laws.
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Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations or financial condition.
+Added: 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.
+Added: 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.
+Added: The new legislation may result in new risk, regulatory and cost challenges for our United Kingdom and global operations.
+Added: Any of these events could adversely affect our United Kingdom, European operations and overall business and financial results.
We work in international locations where there are high security risks, which could result in harm to our employees and contractors or material costs to us.
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AECOM Capital’s real estate development and investment activities are inherently risky and may result in a future loss.
−Removed: 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.
+Added: 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 based on factors beyond our control, including economic trends, government policies and competition.
Our SEC-registered investment adviser jointly manages and sponsors the AECOM-Canyon Equity Fund, L.P.
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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.
−Removed: 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.
+Added: AECOM’s provision of lender guarantees is contingent upon the Real Estate Joint Ventures meeting AECOM’s underwriting criteria, which include an affiliate of AECOM acting as either the construction manager at risk or the owner’s representative for the project.
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).
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Risks Related to Climate Change
−Removed: Climate change and related environmental issues could have a material adverse impact on us.
+Added: Climate change, natural disasters 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.
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Risks Related to Acquisitions and Divestitures
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: In addition, any purchase price adjustments could be unfavorable and other future proceeds owed to us as part of these transactions could be lower than we expect.
−Removed: We are also obligated to incur ongoing costs and retain certain legal claims that were previously allocated to the Management Services business.
−Removed: As a result, we may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition, and results of operations.
We may be unable to successfully execute or effectively integrate acquisitions and divestitures may not occur as planned.
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After we dispose of a business, we may retain exposure on financial or performance guarantees and other contractual, employment, pension and severance obligations, and potential liabilities that may arise under law because of the disposition or the subsequent failure of an acquirer.
+Added: 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.
+Added: In addition, any purchase price adjustments could be unfavorable and other future proceeds owed to us as part of these transactions could be lower than we expect.
As a result, performance by the divested businesses or other conditions outside of our control could have a material adverse effect on our results of operations.
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These events or circumstances could include a significant change in the business climate, including a significant sustained decline in a reporting unit’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of our business, a significant sustained decline in our market capitalization and other factors.
−Removed: For example, in the year ended September 30, 2020, we recorded a noncash impairment of long-lived assets, including goodwill of $83.6 million primarily related to a decrease in the estimated recovery and fair value of reporting units with self-perform at-risk construction.
In addition, if we experience a decrease in our stock price and market capitalization over a sustained period, we would have to record an impairment charge in the future.
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multinational corporations are taxed.
+Added: The Organization for Economic Co-operation and Development (OECD), a global coalition of member countries, has developed a two-pillar framework to reform international taxation.
+Added: The proposal aims to ensure that multinationals pay a minimum rate of tax on their foreign profits through the introduction of a global minimum tax among other provisions.
+Added: As this framework is subject to further negotiation and implementation by each member country, the timing and ultimate impact of any such changes on our tax obligations are uncertain.
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.