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| ACM > SEC Filings for ACM > Form 10-Q on 7-Aug-2009 | All Recent SEC Filings |
7-Aug-2009
Quarterly Report
Forward-Looking Statements
This Quarterly Report contains certain forward-looking statements, including the plans and objectives of management for our business, operations and economic performance. These forward-looking statements generally can be identified by the context of the statement or the use of forward-looking terminology, such as "believes," "estimates," "anticipates," "intends," "expects," "plans," "is confident that" or words of similar meaning, with reference to us or our management. Similarly, statements that describe our future operating performance, financial results, financial position, plans, objectives, strategies or goals are forward-looking statements. Although management believes that the assumptions underlying the forward-looking statements are reasonable, these assumptions and the forward-looking statements are subject to various factors, risks and uncertainties, many of which are beyond our control, including, but not limited to, our dependence on long-term government contracts, which are subject to uncertainties concerning the government's budgetary approval process, the possibility that our government contracts may be terminated by the government, our ability to successfully manage our joint ventures, the risk of employee misconduct or our failure to comply with laws and regulations, our ability to successfully execute our mergers and acquisitions strategy, including the integration of new companies into our business, our ability to attract and retain key technical and management personnel, our ability to complete our backlog of uncompleted projects as currently projected, our liquidity and capital resources and changes in regulations or legislation that could affect us. Accordingly, actual results could differ materially from those contemplated by any forward-looking statement. In addition to the other risks and uncertainties mentioned in connection with certain forward-looking statements throughout this Quarterly Report, please review "Part II, Item 1A - Risk Factors" in this Quarterly Report for a discussion of the factors, risks and uncertainties that could affect our future results.
Unless otherwise noted, the terms "we," "our," "us," and "Company" refer to AECOM Technology Corporation and its subsidiaries.
Overview
We are a leading global provider of professional technical and management support services for commercial and government clients around the world. We provide our services in a broad range of end markets and strategic geographic markets through a global network of operating offices and approximately 44,000 employees and staff employed in the field on projects.
Our business focuses primarily on providing fee-based professional technical and support services and therefore our business is labor and not capital intensive. We primarily derive income from our ability to generate revenue and collect cash from our clients through the billing of our employees' time spent on client projects and our ability to manage our costs. We operate our business through two segments: Professional Technical Services (PTS) and Management Support Services (MSS).
Our PTS segment delivers planning, consulting, architecture and engineering design, and program and construction management services to institutional, commercial and government clients worldwide in end markets such as transportation, facilities, environmental, and energy markets. PTS revenue is primarily derived from fees from services that we provide, as opposed to pass-through fees from subcontractors and other direct costs.
Our MSS segment provides facilities management and maintenance, training, logistics, consulting, technical assistance and systems integration services, primarily for agencies of the U.S. government. MSS revenue typically includes a significant amount of pass-through fees from subcontractors and other direct costs.
Our revenue is dependent on our ability to attract and retain qualified and productive employees, identify business opportunities, allocate our labor resources to profitable markets, secure new contracts and renew existing client agreements. Moreover, as a professional services company, maintaining the high quality of the work generated by our employees is integral to our revenue generation.
Our costs consist primarily of the compensation we pay to our employees, including salaries and fringe benefits, the costs of hiring subcontractors and other project-related expenses, and general and administrative costs.
Components of Income and Expense
Our management internally analyzes the results of our operations using several non-GAAP measures. A significant portion of our revenue relates to services provided by subcontractors and other non-employees that we categorize as other direct costs. Those costs are typically paid to service providers upon our receipt of payment from the client. We segregate other direct costs from revenue resulting in a measurement that we refer to as "revenue, net of other direct costs," which is a measure of work performed by AECOM employees. We have included information on revenue, net of other direct costs, as we believe that it is useful to view our revenue exclusive of costs associated with external service providers.
The following table presents, for the periods indicated, a presentation of the non-GAAP financial measures reconciled to the closest GAAP measures:
Nine Months
Ended June 30, Year Ended September 30,
2009 2008 2008 2007 2006 2005 2004
(in millions)
Other Financial Data:
Revenue $ 4,464 $ 3,566 $ 5,184 $ 4,237 $ 3,421 $ 2,395 $ 2,012
Other direct costs 1,647 1,286 1,898 1,832 1,521 933 776
Revenue, net of other
direct costs 2,817 2,280 3,286 2,405 1,900 1,462 1,236
Cost of revenue, net of
other direct costs 2,561 2,080 3,000 2,207 1,757 1,345 1,131
Gross profit 256 200 286 198 143 117 105
Equity in earnings of
joint ventures 17 12 22 12 6 2 3
Amortization expense of
acquired intangible assets 19 8 18 12 15 3 -
Other general and
administrative expenses 42 36 52 42 31 18 21
General and administrative
expenses 61 44 70 54 46 21 21
Income from operations $ 212 $ 168 $ 238 $ 156 $ 103 $ 98 $ 87
Reconciliation of Cost of
Revenue:
Other direct costs $ 1,647 $ 1,286 $ 1,898 $ 1,832 $ 1,521 $ 933 $ 776
Cost of revenue, net of
other direct costs 2,561 2,080 3,000 2,207 1,757 1,345 1,131
Cost of revenue $ 4,208 $ 3,366 $ 4,898 $ 4,039 $ 3,278 $ 2,278 $ 1,907
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Results of Operations
Consolidated Results
Three Months Ended Nine Months Ended
June 30, June 30, Change June 30, June 30, Change
2009 2008 $ % 2009 2008 $ %
(in thousands)
Revenue $ 1,531,989 $ 1,321,203 $ 210,786 16.0 % $ 4,463,575 $ 3,565,574 $ 898,001 25.2 %
Other direct costs 564,854 467,919 96,935 20.7 1,646,089 1,285,952 360,137 28.0
Revenue, net of other
direct costs 967,135 853,284 113,851 13.3 2,817,486 2,279,622 537,864 23.6
Cost of revenue, net
of other direct costs 880,018 777,575 102,443 13.2 2,561,529 2,079,203 482,326 23.2
Gross profit 87,117 75,709 11,408 15.1 255,957 200,419 55,538 27.7
Equity in earnings of
joint ventures 6,153 5,313 840 15.8 16,793 12,163 4,630 38.1
General and
administrative
expenses 20,071 16,840 3,231 19.2 61,248 44,909 16,339 36.4
Income from operations 73,199 64,182 9,017 14.0 211,502 167,673 43,829 26.1
Minority interest in
share of earnings 3,040 4,862 (1,822 ) (37.5 ) 10,818 10,939 (121 ) (1.1 )
Other income (expense) 3,248 756 2,492 * (2,958 ) (872 ) (2,086 ) *
Interest income
(expense), net (2,517 ) (198 ) (2,319 ) * (8,134 ) 4,111 (12,245 ) *
Income before income
tax expense 70,890 59,878 11,012 18.4 189,592 159,973 29,619 18.5
Income tax expense 20,987 21,424 (437 ) (2.0 ) 56,878 56,197 681 1.2
Income from continuing
operations 49,903 38,454 11,449 29.8 132,714 103,776 28,938 27.9
Discontinued
operations, net of tax 1,218 - 1,218 n/a 2,710 - 2,710 n/a
Net income $ 51,121 $ 38,454 $ 12,667 32.9 % $ 135,424 $ 103,776 $ 31,648 30.5 %
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The following table presents the percentage relationship of certain items to revenue, net of other direct costs:
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
Revenue, net of other direct costs 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue, net of other direct costs 91.0 91.1 90.9 91.2
Gross profit 9.0 8.9 9.1 8.8
Equity in earnings of joint ventures 0.6 0.6 0.6 0.5
General and administrative expense 2.0 2.0 2.2 1.9
Income from operations 7.6 7.5 7.5 7.4
Minority interest in share of earnings 0.3 0.6 0.4 0.5
Other income (expense) 0.3 0.1 (0.1 ) -
Interest income (expense), net (0.3 ) - (0.3 ) 0.1
Income before income tax expense 7.3 7.0 6.7 7.0
Income tax expense 2.1 2.5 2.0 2.4
Income from continuing operations 5.2 4.5 4.7 4.6
Discontinued operations, net of tax 0.1 - 0.1 -
Net income 5.3 % 4.5 % 4.8 % 4.6 %
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Revenue
Our revenue for the three months ended June 30, 2009 increased $210.8 million, or 16.0%, to $1.5 billion as compared to $1.3 billion for the corresponding period last year. Of this increase, $214.4 million, or 101.7%, was provided by companies acquired in the past twelve months. Excluding the revenue provided by acquired companies, revenue decreased $3.6 million, or 0.3%.
Our revenue for the nine months ended June 30, 2009 increased $898.0 million, or 25.2%, to $4.5 billion as compared to $3.6 billion for the corresponding period last year. Of this increase, $606.0 million, or 67.5%, was provided by companies acquired in the past twelve months. Excluding the revenue provided by acquired companies, revenue increased $292.0 million, or 8.2%.
The decrease in revenue, excluding revenue provided by acquired companies, for the three months ended June 30, 2009 was primarily attributable to a reduction in demand for engineering and program management services on infrastructure projects provided by our business in the United Kingdom, a decline in our global commercial private facilities business, and weaker foreign currencies (primarily the British pound, Australian dollar, and Canadian dollar) as compared to their value against the U.S. dollar in the corresponding period last year. The reduction in services provided in these markets along with the weaker foreign currencies resulted in a decline in revenue of approximately $90 million as compared to the corresponding period last year. This decline was partially offset by a $62 million, or 28%, increase in our MSS segment resulting from a higher volume of activity on contracts with the United States government and continued growth in our Hong Kong/China and Middle East businesses, which experienced a combined increase of approximately $23 million.
The increase in revenue for the nine months ended June 30, 2009 was primarily attributable to strong demand for our engineering and program management services on infrastructure projects in the United States, United Arab Emirates, Libya, Hong Kong, and Australia, partially offset by a decline in our commercial facilities business and weaker foreign currencies (primarily the British pound, Australian dollar, and Canadian dollar) as compared to their value against the U.S. dollar in the corresponding periods last year. The increase was further attributable to increased scope on our Combat Support project in the Middle East, increased activity on the Taji National Depot project for the United States Army that was in its initial phase in the prior year corresponding periods, and work performed on new task orders on the Contract Field Teams project with the United States Air Force.
Revenue, Net of Other Direct Costs
Our revenue, net of other direct costs for the three months ended June 30, 2009 increased $113.8 million, or 13.3%, to $967.1 million as compared to $853.3 million in the corresponding period last year. Of this increase, $129.2 million, or 113.5%, was provided by companies acquired in the past twelve months. Excluding the revenue, net of other direct costs provided by acquired companies, revenue, net of other direct costs decreased $15.4 million, or 1.8%.
Our revenue, net of other direct costs for the nine months ended June 30, 2009 increased $537.9 million, or 23.6%, to $2.8 billion as compared to $2.3 billion in the corresponding period last year. Of this increase, $384.2 million, or 71.4%, was provided by companies acquired in the past twelve months. Excluding the revenue, net of other direct costs provided by acquired companies, revenue, net of other direct costs increased $153.7 million, or 6.7%.
The decrease in revenue, net of other direct costs, excluding revenue net of other direct costs provided by acquired companies, for the three months ended June 30, 2009 and the increase in revenue, net of other direct costs for the nine months ended June 30, 2009 were primarily due to the changes in revenue noted above.
Gross Profit
Our gross profit for the three months ended June 30, 2009 increased $11.4 million, or 15.1%, to $87.1 million as compared to $75.7 million in the corresponding period last year. Of this increase, $7.1 million, or 62.3%, was provided by companies acquired in the past twelve months. Excluding gross profit provided by acquired companies, gross profit increased $4.3 million, or 5.7%. For the three months ended June 30, 2009, gross profit, as a percentage of revenue, net of other direct costs, was 9.0% as compared to 8.9% in the corresponding period last year.
Our gross profit for the nine months ended June 30, 2009 increased $55.6 million, or 27.7%, to $256.0 million as compared to $200.4 million in the corresponding period last year. Of this increase, $15.9 million, or 28.6%, was provided by companies acquired in the past twelve months. Excluding gross profit provided by acquired companies, gross profit increased $39.7 million, or 19.8%. For the nine months ended June 30, 2009, gross profit, as a percentage of revenue, net of other direct costs, was 9.1% as compared to 8.8% in the corresponding period last year.
The increase in gross profit, excluding acquired companies, for the three months ended June 30, 2009, was primarily due to the increase in MSS revenue noted above and improved project performance in our PTS segment. The increase in gross profit, as a percentage of revenue, net of other direct costs was primarily due to improved project performance in our PTS segment, and reduced overhead resulting from our continuing cost efficiency initiatives, partially offset by lower margins in our MSS segment as further described below.
The increases in gross profit, excluding acquired companies, for the nine months ended June 30, 2009 and gross profit, as a percentage of revenue, net of other direct costs were primarily attributable to the increase in revenue, improved project performance in our PTS segment and the benefits realized from our continuing cost efficiency initiatives.
Equity in Earnings of Joint Ventures
Our equity in earnings of joint ventures for the three months ended June 30, 2009 increased $0.9 million, or 15.8%, to $6.2 million as compared to $5.3 million in the corresponding period last year.
Our equity in earnings of joint ventures for the nine months ended June 30, 2009 increased $4.6 million, or 38.1%, to $16.8 million as compared to $12.2 million in the corresponding period last year.
The increase for the three months ended June 30, 2009 was attributable to increased activity in several small joint ventures partially offset by the acquisition in September 2008 of the majority partner's interest in a joint venture in the Middle East that provides consulting and project management services.
The increase for the nine months ended June 30, 2009 was primarily attributable to increased volume on a joint venture providing engineering and design services at an airport in the United Arab Emirates and a joint venture for technical services for the United States Department of Energy at the Nevada Test Site, partially offset by the acquisition in September 2008 of the majority partner's interest in a joint venture in the Middle East that provides consulting and project management services.
General and Administrative Expenses
Our general and administrative expenses for the three months ended June 30, 2009 increased $3.3 million, or 19.2%, to $20.1 million as compared to $16.8 million in the corresponding period last year. For the three months ended June 30, 2009 and 2008, general and administrative expenses, as a percentage of revenue, net of other direct costs was 2.0%.
Our general and administrative expenses for the nine months ended June 30, 2009 increased $16.3 million, or 36.4%, to $61.2 million as compared to $44.9 million in the corresponding period last year. For the nine months ended June 30, 2009, general and administrative expenses, as a percentage of revenue, net of other direct costs was 2.2% as compared to 1.9% in the corresponding period last year.
The increases in general and administrative expenses were primarily attributable to costs associated with the support and integration of Earth Tech and other recent acquisitions, increased staffing and other expenses related to the growth in our business noted above, and continued investments to support our strategic initiatives. The increase in general and administrative expenses was further due to a $10.9 million increase in intangible amortization expense of acquired intangible assets to $19.3 million for the nine months ended June 30, 2009.
Other Income / Expense
Our other income for the three months ended June 30, 2009 and 2008 was $3.2 million and $0.8 million, respectively.
Our other expense for the nine months ended June 30, 2009 and 2008 was $3.0 million and $0.9 million, respectively.
Other income and expense is primarily comprised of net gains and losses on investments that we hold to offset our exposure related to employees' investment elections in a deferred compensation plan.
Interest Income / Expense
Our net interest expense for the three months ended June 30, 2009 was $2.5 million as compared to net interest expense of $0.2 million in the corresponding period last year.
Our net interest expense for the nine months ended June 30, 2009 was $8.1 million as compared to net interest income of $4.1 million in the corresponding period last year.
The increased net interest expense for the three and nine months ended June 30, 2009 as compared to the net interest expense and income in the corresponding periods last year is primarily due to higher borrowings and lower investment balances associated with the funding of acquisitions, including Earth Tech, completed in our fiscal 2008.
Income Tax Expense
Our income tax expense for the three months ended June 30, 2009 decreased $0.4 million, or 2.0%, to $21.0 million as compared to $21.4 million in the corresponding period last year. The effective tax rate for the three months ended June 30, 2009 was 29.6 % as compared to 35.8% for the corresponding period last year.
Our income tax expense for the nine months ended June 30, 2009 increased $0.7 million, or 1.2 %, to $56.9 million as compared to $56.2 million in the corresponding period last year. The effective tax rate for the nine months ended June 30, 2009 was 30.0 % as compared to 35.1% for the corresponding period last year.
The decrease in the effective tax rate was due to the recognition of the benefits from research and experimentation credits from the current and prior years, and the reduction in tax reserves. During the quarter ended June 30, 2009, the reserve for uncertain tax positions was reduced for items in which the statute of limitations had expired, which primarily were from the federal income tax return for the September 30, 2005 tax year.
Net Income
Net income for the three months ended June 30, 2009 increased $12.6 million, or 32.9 %, to $51.1 million as compared to $38.5 million in the corresponding period last year for the reasons stated above.
Net income for the nine months ended June 30, 2009 increased $31.6 million, or 30.5 %, to $135.4 million as compared to $103.8 million in the corresponding period last year for the reasons stated above.
Results of Operations by Reportable Segment:
Professional Technical Services
Three Months Ended Nine Months Ended
June 30, June 30, Change June 30, June 30, Change
2009 2008 $ % 2009 2008 $ %
(in thousands)
Revenue $ 1,245,739 $ 1,096,986 $ 148,753 13.6 % $ 3,696,120 $ 2,945,494 $ 750,626 25.5 %
Other direct costs 352,224 287,271 64,953 22.6 1,062,260 776,623 285,637 36.8
Revenue, net of
other direct costs 893,515 809,715 83,800 10.3 2,633,860 2,168,871 464,989 21.4
Cost of revenue,
net of other
direct costs 816,730 742,262 74,468 10.0 2,409,160 1,990,978 418,182 21.0
Gross profit $ 76,785 $ 67,453 $ 9,332 13.8 % $ 224,700 $ 177,893 $ 46,807 26.3 %
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The following table presents the percentage relationship of certain items to revenue, net of other direct costs:
Three Months Ended June 30, Nine Months Ended June 30,
2009 2008 2009 2008
Revenue, net of other direct
costs 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue, net of other
direct costs 91.4 91.7 91.5 91.8
Gross profit 8.6 % 8.3 % 8.5 % 8.2 %
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Revenue
Revenue for our PTS segment for the three months ended June 30, 2009 increased $148.8 million, or 13.6%, to $1.2 billion as compared to $1.1 billion in the corresponding period last year. Of this increase, $214.4 million, or 144.1%, was provided by companies acquired in the past twelve months. Excluding revenue provided by acquired companies, PTS' revenue decreased $65.6 million, or 6.0%.
Revenue for our PTS segment for the nine months ended June 30, 2009 increased $750.6 million, or 25.5%, to $3.7 billion as compared to $2.9 billion in the corresponding period last year. Of this increase, $606.0 million, or 80.7%, was provided by companies acquired in the past twelve months. Excluding revenue provided by acquired companies, PTS' revenue increased $144.6 million, or 4.9%.
The decrease in revenue for the three months ended June 30, 2009, excluding revenue provided by acquired companies, was primarily attributable to a reduction in demand for engineering and program management services on infrastructure projects provided by our business in the United Kingdom, a decline in our global commercial facilities business, and weaker foreign currencies (primarily the British pound, Australian dollar, and Canadian dollar) as compared to their value against the U.S. dollar in the corresponding period last year. The reduction in services provided in these markets along with weaker foreign currencies resulted in a decline in revenue of approximately $90 million as compared to the corresponding period last year. This decline was partially offset by continued growth in our Hong Kong/China and Middle East businesses which together experienced an increase in revenue of approximately $23 million compared to the prior year.
The increase in revenue, excluding acquired companies, for the nine months ended June 30, 2009 was primarily driven by strong demand for our engineering and program management services on infrastructure projects in the United States, United Arab Emirates, Hong Kong, Libya and Australia. Increased services provided in these markets were partially offset by a decline in our commercial facilities business and weaker foreign currencies (primarily the British pound, Australian dollar, and Canadian dollar) as compared to their value against the U.S. dollar in the corresponding period last year.
Revenue, Net of Other Direct Costs
Revenue, net of other direct costs for our PTS segment for the three months ended June 30, 2009 increased $83.8 million, or 10.3%, to $893.5 million as . . .
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