|AECOM filed this Form 8-K on 02/05/2019|
The several records in the quarter create a strong foundation for expected profitable growth, said W. Troy Rudd, AECOMs chief financial officer. Though cash flow was below our expectations primarily due to the partial U.S. government shutdown, we expect to recover this cash flow as the year progresses and expect to achieve our full year free cash flow guidance of $600 to $800 million. Importantly, we continue to execute on our capital allocation policy, as evidenced by $210 million of repurchases to-date under our $1 billion Board authorization.
Wins and Backlog
Wins were $11.0 billion, which set a new record for the Company, and resulted in a book-to-burn ratio(4) of 2.0. Wins included strength across the business, highlighted by the award for the new $7 billion Terminal One at JFK, and a 1.3 book-to-burn ratio in the MS segment. Total backlog increased by 22%(2) over the prior year to $59.5 billion, which also set a new record.
Design & Consulting Services (DCS)
The DCS segment delivers planning, consulting, architectural and engineering design services to commercial and government clients worldwide in markets such as transportation, facilities, environmental, energy, water and government.
Revenue in the first quarter was $2.0 billion and increased by 5%. Constant-currency organic(3) revenue increased by 7%. This performance included 12% organic growth in the Americas, which was driven by the transportation and water markets, including a positive contribution from the storm recovery efforts in the Southeastern U.S. and Caribbean.
Operating income was $120 million compared to $85 million in the year-ago period. On an adjusted basis, operating income(1) was $126 million compared to $92 million in the year-ago period. Operating income increased over the prior year period due to strong performance in the Americas and Asia-Pacific regions.
Construction Services (CS)
The CS segment provides construction services for energy, sports, commercial, industrial, and public and private infrastructure clients.
Revenue in the first quarter was $2.0 billion and decreased by 5%. Constant-currency organic(3) revenue declined by 2%, due to a decline in Building Construction and a reduced contribution from Power, which were consistent with prior expectations.
Operating income was $11 million compared to $40 million in the year-ago period. On an adjusted basis, operating income(1) was $31 million compared to $51 million in the year-ago period. The decline in operating income reflects a lower contribution from Power. Importantly, execution of the Alliant Riverside combined-cycle gas power plant is on schedule and on budget.
Management Services (MS)
The MS segment provides program and facilities management and maintenance, training, logistics, consulting, technical assistance and systems-integration services and information technology services, primarily for agencies of the U.S. government, national governments around the world and commercial customers.
Revenue in the first quarter was $989 million. Revenue and organic(3) revenue growth accelerated in the quarter to 17%, reflecting near record levels of backlog and strong funding for the U.S. Departments of Defense and Energy clients.
Operating income was $51 million compared to $40 million in the year-ago period. On an adjusted basis, operating income(1) was $61 million compared to $50 million in the year-ago period. The increase in operating income represents strong execution on the segments near record backlog, and favorable end market trends.
AECOM Capital (ACAP)
The ACAP segment invests in and develops real estate projects. Revenue in the first quarter was $4 million and operating loss was $0.3 million. After the quarter closed, ACAP completed the sale of a property that resulted in an approximately 40% IRR and an approximately $10 million gain on its investment.
The effective tax rate in the first quarter was (106.7%), which included a benefit from the release of a $38 million valuation allowance. On an adjusted basis, the effective tax rate was 24.3%. The adjusted tax rate was derived by re-computing the annual effective tax rate on earnings from adjusted net income.(5) The adjusted tax expense differs from the GAAP tax expense based on the taxability or deductibility and tax rate applied to each of the adjustments.