What changed in this filing

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Item 1. Financial Statements

2024-02-07 compared with 2023-08-09 · 137 added, 230 removed, 577 unchanged (39% of the section changed)

38 unchanged sentences

AECOM STOCKHOLDERS’ EQUITY:

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

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

issued and outstanding 136,018,182 and 136,210,883 shares as of December 31, 2023 and September 30, 2023, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated deficits

( 1,109,616 )

( 1,103,976 )

TOTAL AECOM STOCKHOLDERS’ EQUITY

6 unchanged sentences

Three Months Ended

Nine Months Ended

Cost of revenue

2 unchanged sentences

Restructuring costs

(Loss) income from operations

Income from operations

Interest income

Interest expense

(Loss) income from continuing operations before taxes

Income tax (benefit) expense for continuing operations

Net (loss) income from continuing operations

Income from continuing operations before taxes

Income tax expense for continuing operations

Net income from continuing operations

Net loss from discontinued operations

Net (loss) income

Net income attributable to noncontrolling interests from continuing operations

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

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

Net income attributable to noncontrolling interests

Net (loss) income attributable to AECOM from continuing operations

Net loss attributable to AECOM from discontinued operations

Net (loss) income attributable to AECOM

Net (loss) income attributable to AECOM per share:

Net income attributable to AECOM from continuing operations

Net (loss) income attributable to AECOM from discontinued operations

Net income attributable to AECOM

Net income (loss) attributable to AECOM per share:

Basic continuing operations per share

6 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income

(unaudited—in thousands)

Three Months Ended

Nine Months Ended

Net (loss) income

Other comprehensive (loss) income, net of tax:

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

Other comprehensive income, net of tax:

Net unrealized loss on derivatives, net of tax

Foreign currency translation adjustments

Pension adjustments, net of tax

Other comprehensive income (loss), net of tax

Comprehensive (loss) income, net of tax

Other comprehensive income, net of tax

Comprehensive income, net of tax

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

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

Comprehensive income attributable to AECOM, net of tax

See accompanying Notes to Consolidated Financial Statements.

4 unchanged sentences

Stockholders’

BALANCE AT MARCH 31, 2023

Dividends declared

Other comprehensive income

Issuance of stock

Repurchases of stock

Stock-based compensation

Contributions from noncontrolling interests

Distributions to noncontrolling interests

BALANCE AT JUNE 30, 2023

Comprehensive

Stockholders’

BALANCE AT MARCH 31, 2022

Dividends declared

Other comprehensive loss

Issuance of stock

Repurchases of stock

Stock-based compensation

Other transactions with noncontrolling interests

Contributions to noncontrolling interests

Distributions to noncontrolling interests

BALANCE AT JUNE 30, 2022

Comprehensive

Stockholders’

BALANCE AT SEPTEMBER 30, 2023

( 1,103,976 )

Dividends declared

5 unchanged sentences

Distributions to noncontrolling interests

BALANCE AT JUNE 30, 2023

BALANCE AT DECEMBER 31, 2023

( 1,109,616 )

Comprehensive

3 unchanged sentences

Dividends declared

Other comprehensive loss

Other comprehensive income

Issuance of stock

1 unchanged sentence

Stock-based compensation

Other transactions with noncontrolling interests

Contributions from noncontrolling interests

Distributions to noncontrolling interests

BALANCE AT JUNE 30, 2022

BALANCE AT DECEMBER 31, 2022

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

(unaudited - in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

4 unchanged sentences

Non-cash stock compensation

Loss on sale of discontinued operations

Foreign currency translation

8 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for sale of discontinued operations, including cash disposed

Payments for business acquisition, net of cash acquired

Investment in unconsolidated joint ventures

8 unchanged sentences

( 1,106,061 )

( 2,662,513 )

Cash paid for debt issuance costs

Dividends paid

Proceeds from issuance of common stock

Proceeds from exercise of stock options

Payments to repurchase common stock

Net contributions (distributions) to noncontrolling interests

Net distributions to noncontrolling interests

Other financing activities

1 unchanged sentence

EFFECT OF EXCHANGE RATE CHANGES ON CASH

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

NET 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 nine months ended June 30, 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 months ended December 31, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2024.

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.

5 unchanged sentences

New Accounting Pronouncements and Changes in Accounting

In August 2018, the Financial Accounting Standards Board (FASB) issued new accounting guidance for the disclosure requirements of defined benefit pension plans.

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

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

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

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

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

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

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

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

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

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

The Company adopted the new guidance starting on October 1, 2022 on a prospective basis and the revised guidance will be applied to any business combinations the Company undertakes.

In November 2023, the Financial Accounting Standards Board (FASB) amended the guidance of Accounting Standards Codification (ASC) 280, Segment Reporting , requiring public entities to disclose significant segment expenses and other segment items on an annual and interim basis.

The new guidance is effective for the Company for its interim period ending December 31, 2025, with early adoption permitted.

The Company is currently evaluating the impact that the adoption of this new guidance will have on its financial statement presentation.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which includes amendments that further enhance the income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid.

The update also includes certain other amendments to improve the effectiveness of income tax disclosures.

The amendments are effective for the Company’s annual periods beginning October 1, 2025, with early adoption permitted.

The Company is currently evaluating the impact that the adoption of this new guidance will have on its financial statement presentation.

Discontinued Operations, Goodwill and Intangible Assets

2 unchanged sentences

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

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

The Company concluded the actual and proposed disposal activities represented a strategic shift that would have a major

effect on the Company’s operations and financial results and qualified for presentation as discontinued operations in accordance with FASB ASC 205-20.

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

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

The Company completed the sale of its power and oil and gas construction businesses in fiscal 2021 and fiscal 2022, respectively.

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

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

In the second quarter of fiscal 2023, the Company recorded a $ 38.9 million loss related to a revised estimate of its contingent consideration receivable recognized at the sale.

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

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

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

The 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

Nine months ended

Cost of revenue

Gross (loss) profit

Equity in earnings of joint ventures

2 unchanged sentences

Loss from operations

Interest expense

Loss before taxes

3 unchanged sentences

Three months ended

Nine months ended

Payments for capital expenditures

The changes in the carrying value of goodwill by reportable segment for the nine months ended June 30, 2023 were as follows:

The Company completed one acquisition in the first quarter of fiscal 2024.

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

June 30, 2023

The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of December 31, 2023 and September 30, 2023, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:

December 31, 2023

September 30, 2023

(in millions)

Customer relationships

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.

Backlog and Customer relationships

Amortization expense of acquired intangible assets included within cost of revenue was $ 4.6 million and $ 4.7 million for the three months ended December 31, 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 (three months remaining)

2024 (nine 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 nine months ended June 30, 2023 and 2022 were $ 5.6 billion and $ 5.0 billion, respectively.

These pass-through revenues for the three months ended December 31, 2023 and 2022 were $ 2.2 billion and $ 1.8 billion, respectively.

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

26 unchanged sentences

Three months ended

Nine months ended

(in millions)

3 unchanged sentences

Three months ended

Nine months ended

(in millions)

2 unchanged sentences

Total revenue

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.

As of December 31, 2023, the Company had allocated $ 21.8 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 .

The majority of remaining performance obligation after the first 12 months are expected to be recognized over a two-year period .

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

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 recognized revenue of $ 527.0 million and $ 423.0 million during the three months ended December 31, 2023 and 2022, respectively, that was included in contract liabilities as of September 30, 2023 and 2022, 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 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.

Substantially all contract assets as of December 31, 2023 and September 30, 2023 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 $ 160 million and $ 160 million as of December 31, 2023 and September 30, 2023, respectively.

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

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 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.

No single client accounted for more than 10 % of the Company’s outstanding receivables at December 31, 2023 and September 30, 2023.

The Company sold trade receivables to financial institutions, of which $ 298.5 million and $ 291.0 million were outstanding as of December 31, 2023 and September 30, 2023, respectively.

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

27 unchanged sentences

Total liabilities

Total AECOM equity

Total AECOM deficit

Noncontrolling interests

1 unchanged sentence

Total liabilities and owners’ equity

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.

Total revenue of the consolidated joint ventures was $ 505.1 million and $ 484.8 million for the three months ended December 31, 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

Nine Months Ended

Three Months Ended

(in millions)

1 unchanged sentence

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

Nine Months Ended

Three Months Ended

(in millions)

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 nine months ended June 30, 2023 and 2022:

The following table details the components of net periodic benefit cost for the Company’s pension plans for the three months ended December 31, 2023 and 2022:

Three Months Ended

Nine Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

December 31, 2023

December 31, 2022

(in millions)

3 unchanged sentences

Expected return on plan assets

Amortization of prior service cost

Amortization of net loss/(gain)

Settlement loss recognized

Net periodic benefit cost (credit)

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

The total amounts of employer contributions paid for the three months ended December 31, 2023 were $ 2.3 million for U.S.

plans and $ 6.2 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 June 30, 2023:

2023 (three months remaining)

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

2024 (nine months remaining)

Credit Agreement

5 unchanged sentences

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

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

Agreement and to pay related fees and expenses.

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

4 unchanged sentences

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

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

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

On June 25, 2021, the Company entered into Amendment No.

1 unchanged sentence

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 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.

12 to the Credit Agreement, pursuant to which LIBOR as a benchmark rate of interest was replaced by, in the case of US Dollar-denominated loans, a secured overnight financing rate subject to a spread adjustment, and, in the case of loans denominated in other currencies, other customary successor rates, subject in certain cases 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 %.

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

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

The applicable interest rate for U.S.

Dollar-denominated loans under the Revolving Credit Facility and the Term A Facility is calculated at a per annum rate equal to, at the Company’s option, (a) the 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,” and together with the SOFR Applicable Margin, the “Applicable Margins”), which is currently at 0.2250 %.

The applicable interest rate for loans under the Revolving Credit Facility denominated in other currencies is calculated at a per annum rate equal to a customary floating reference rate for such currency specified in the Credit Agreement plus the SOFR Applicable Margin.

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”).

4 unchanged sentences

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 2.10 to 1.00 at June 30, 2023.

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

The Financial Covenants do not apply to the Term B Facility.

The Company’s consolidated leverage ratio was 2.00 to 1.00 at December 31, 2023.

As of December 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.

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

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

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 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.

As of December 31, 2023, the estimated fair value of the 2027 Senior Notes was approximately $ 979.8 million.

The fair value of the 2027 Senior Notes as of December 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.

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 June 30, 2023.

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

At December 31, 2023 and September 30, 2023, these outstanding standby letters of credit totaled $ 887.6 million and $ 878.9 million, respectively.

As of December 31, 2023, the Company had $ 406.1 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 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.

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 three months ended December 31, 2023 and 2022 was 5.4 % and 5.1 %, respectively.

Interest expense in the consolidated statements of operations included amortization of deferred debt issuance costs for the three months ended December 31, 2023 and 2022 of $ 1.2 million and $ 1.2 million, respectively.

Derivative Financial Instruments and Fair Value Measurements

11 unchanged sentences

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

June 30, 2023

December 31, 2023

Notional Amount

7 unchanged sentences

February 2023

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

The new swaps became effective February 2023 and terminate in

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 SOFR rate-based liability into a fixed rate liability.

6 unchanged sentences

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

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

Gains and losses on these contracts were not material for the three months ended December 31, 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, and other non-current assets on June 30, 2023 and were $ 17.9 million and $ 30.3 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, other non-current assets, and other long-term liabilities on December 31, 2023 and were $ 13.9 million, $ 23.5 million and $ 2.4 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, 2023 were $ 17.2 million and $ 37.5 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 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.

See Note 14 for accumulated balances and reporting period activities of derivatives related to reclassifications out of accumulated other comprehensive loss for the three months ended December 31, 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 nine months ended June 30 was as follows:

Restricted stock units and PEP units activity for the three months ended December 31 was as follows:

(in millions)

4 unchanged sentences

PEP units earned

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.

Outstanding at December 31,

Total compensation expense related to these share-based payments including stock options was $ 15.1 million and $ 11.9 million during the three months ended December 31, 2023 and 2022, respectively.

Unrecognized compensation expense related to total share-based payments outstanding as of December 31, 2023 and September 30, 2023 was $ 83.6 million and $ 48.3 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 19.5 % and 21.0 % for the three months ended December 31, 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 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.

federal corporate tax rate of 21.0 % and the Company’s effective tax rate for the three-month period ended December 31, 2023 were a tax benefit of $ 13.0 million related to income tax credits and incentives, tax expense of $ 11.3 million related to foreign residual income, a tax benefit of $ 6.9 million related to an audit settlement, tax expense of $ 4.4 million related to changes in valuation allowances, and tax expense of $ 4.2 million related to state income taxes.

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

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

federal corporate tax rate of 21.0 % and the Company’s effective tax rate for the nine-month period ended June 30, 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.

federal corporate tax rate of 21.0 % and the Company’s effective tax rate for the three-month period ended December 31, 2022 were a tax benefit of $ 8.6 million related to income tax credits and incentives and tax expense of $ 8.5 million related to foreign residual income.

During the first quarter of fiscal 2024, the Company settled its tax audit in Hong Kong for fiscal year 2011 through fiscal year 2021 and recorded a tax benefit of $ 6.9 million due primarily to changes in uncertain tax positions.

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

3 unchanged sentences

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

and believes the outcomes which are reasonably possible within the next twelve months, including lapses in statutes of limitations, could result in future adjustments, but will not result in a material change in the liability for uncertain tax positions.

and believes the outcomes which are reasonably possible within the next twelve months, including lapses in statutes of limitations, could result in future adjustments in the liability for uncertain tax positions, but an estimate of the range of the reasonably possible outcomes cannot be made.

Generally, the Company does not provide for U.S.

1 unchanged sentence

subsidiaries because such basis differences of approximately $ 1.3 billion are able to and intended to be reinvested indefinitely.

If these basis differences were distributed, foreign tax credits could become available under current law to partially or fully reduce the resulting U.S.

If these basis differences were distributed, foreign tax credits could become available under current law to partially or

fully reduce the resulting U.S.

income tax liability.

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

For the three 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.

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

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

Three Months Ended

Nine Months Ended

(in millions)

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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

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

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

Nine Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

December 31, 2023

December 31, 2022

(in millions)

8 unchanged sentences

Balance Sheet Classification

June 30, 2023

December 31, 2023

September 30, 2023

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Total non-current lease liabilities

June 30, 2023

December 31, 2023

September 30, 2023

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Additional cash flow information related to leases is as follows:

Nine Months Ended

Three Months Ended

(in millions)

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(in millions)

2023 (three months remaining)

2024 (nine months remaining)

Total lease payments

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Other accrued expenses

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

Accrued contract costs above include balances related to professional liability accruals of $ 813.8 million and $ 809.6 million as of December 31, 2023 and September 30, 2023, respectively.

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

Liabilities recorded related to accrued contract losses were not material as of June 30, 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 $ 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 June 30, 2023, accrued and unpaid dividends totaled $ 26.8 million and were classified within other accrued expenses on the consolidated balance sheet.

Liabilities recorded related to accrued contract losses were not material as of December 31, 2023 and September 30, 2023.

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

During the first three months of fiscal 2024, the Company incurred restructuring expenses of $ 16.2 million, including personnel and other costs of $ 8.7 million and real estate costs of $ 7.5 million, of which $ 5.0 million was accrued and unpaid at December 31, 2023.

During the first three months of fiscal 2023, the Company incurred restructuring expenses of $ 37.5 million, including personnel and other costs of $ 36.2 million and real estate costs of $ 1.3 million, of which $ 32.6 million was accrued and unpaid at December 31, 2022.

On November 13, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.22 per share, which was paid on January 19, 2024 to stockholders of record as of January 4, 2024.

As of December 31, 2023, accrued and unpaid dividends totaled $ 32.3 million and were classified within other accrued expenses on the consolidated balance sheet.

Reclassifications out of Accumulated Other Comprehensive Loss

The accumulated balances and reporting period activities for the three and nine months ended June 30, 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 months ended December 31, 2023 and 2022 related to reclassifications out of accumulated other comprehensive loss are summarized as follows (in millions):

Gain/(Loss) on

Comprehensive

Balances at March 31, 2023

Balances at September 30, 2023

Other comprehensive (loss) income before reclassification

Amounts reclassified from accumulated other comprehensive income (loss)

Balances at June 30, 2023

(Loss)/Gain on

Comprehensive

Balances at March 31, 2022

Other comprehensive income (loss) before reclassification

Amounts reclassified from accumulated other comprehensive loss

Balances at June 30, 2022

Balances at December 31, 2023

Gain/(Loss) on

1 unchanged sentence

Balances at September 30, 2022

Other comprehensive (loss) income before reclassification

Amounts reclassified from accumulated other comprehensive income (loss)

Balances at June 30, 2023

(Loss)/Gain on

Comprehensive

Balances at September 30, 2021

Other comprehensive income (loss) before reclassification

Amounts reclassified from accumulated other comprehensive loss

Balances at June 30, 2022

Amounts reclassified from accumulated other comprehensive income (loss)

Balances at December 31, 2022

Commitments and Contingencies

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

The Company’s

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

At 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.

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

At December 31, 2023 and September 30, 2023, these outstanding standby letters of credit totaled $ 887.6 million and $ 878.9 million, respectively.

As of December 31, 2023, the Company had $ 406.1 million available under these unsecured credit facilities.

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

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

At June 30, 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.

At December 31, 2023, the Company was contingently liable in the amount of approximately $ 891.9 million in issued standby letters of credit and $ 4.9 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 June 30, 2023, the Company has capital commitments of $ 10.9 million to the Fund over the next 6 years .

At December 31, 2023, the Company has capital commitments of $ 7.1 million to the Fund over the next 5 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.

In February 2024, the Company was informed of a potential liability as one of the indemnitors on a divested business’ surety bonds.

The Company does not have sufficient information to determine the range of potential impacts, however, it is reasonably possible that the Company may incur additional costs related to these bonds.

Department of Energy Deactivation, Demolition, and Removal Project

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

New York Department of Environmental Conservation

In September 2017, AECOM USA, Inc.

was advised by the New York State Department of Environmental Conservation (DEC) of allegations that it committed environmental permit violations pursuant to the New York Environmental Conservation Law (ECL) associated with AECOM USA, Inc.’s oversight of a stream restoration project for Schoharie County which could result in substantial penalties if calculated under the ECL’s maximum civil penalty provisions.

AECOM USA, Inc.

disputes this claim and intends to continue to defend this matter vigorously;

however, AECOM USA, Inc.

cannot provide assurances that it will be successful in these efforts.

The potential range of loss in excess of any current accrual cannot be reasonably estimated at this time primarily because the matter involves complex and unique environmental and regulatory issues.

The project site involves the oversight and involvement of various local, state and federal government agencies and there is substantial uncertainty regarding any alleged damages.

The stream restoration project is ongoing.

Refinery Turnaround Project

1 unchanged sentence

The turnaround project was completed in February 2019.

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

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

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

In April 2019, the Company’s Former Affiliate filed and perfected a $ 132 million construction lien against the refinery for unpaid labor and materials costs.

In August 2019, following a subcontractor complaint filed in the Thirteen Judicial District Court of Montana asserting claims against the refinery owner and the Company’s Former Affiliate, the refinery owner crossclaimed against the Company’s Former Affiliate and the subcontractor.

In August 2019, following a subcontractor complaint filed in the Thirteenth Judicial District Court of Montana asserting claims against the refinery owner and the Company’s Former Affiliate, the refinery owner crossclaimed against the Company’s Former Affiliate and the subcontractor.

In October 2019, following the subcontractor’s dismissal of its claims, the Company’s Former Affiliate removed the matter to federal court and cross claimed against the refinery owner.

7 unchanged sentences

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

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

The Company’s AECOM Capital (ACAP) segment primarily invests in and develops real estate projects.

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

The Company’s AECOM Capital segment primarily invests in and develops real estate projects.

These reportable segments are organized by the differing specialized needs of the respective clients, and how the Company manages its business.

4 unchanged sentences

( in millions)

Three Months Ended June 30, 2023:

Equity in earnings of joint ventures

General and administrative expenses

Restructuring costs

Operating income

Gross profit as a % of revenue

Three Months Ended June 30, 2022:

Equity in earnings of joint ventures

General and administrative expenses

Restructuring costs

Operating income

Gross profit as a % of revenue

Nine Months Ended June 30, 2023:

Three Months Ended December 31, 2023:

Equity in earnings of joint ventures

3 unchanged sentences

Gross profit as a % of revenue

Nine Months Ended June 30, 2022:

Three Months Ended December 31, 2022:

Equity in earnings of joint ventures

1 unchanged sentence

Restructuring costs

Operating income (loss)

Operating income

Gross profit as a % of revenue

Reportable Segments:

June 30, 2023

December 31, 2023

September 30, 2023

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