SEC Filings

10-Q
AECOM filed this Form 10-Q on 02/06/2019
Entire Document
 

Table of Contents

 

The Company recognizes derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value. The Company records changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as accounting hedges in the accompanying consolidated statements of operations as cost of revenue, interest expense or to accumulated other comprehensive loss in the accompanying consolidated balance sheets.

 

Cash Flow Hedges

 

The Company uses interest rate swap agreements designated as cash flow hedges to fix the variable interest rates on portions of the Company’s debt. The Company also uses foreign currency contracts designated as cash flow hedges to hedge forecasted revenue transactions denominated in currencies other than the U.S. dollar. The Company initially reports any gain on the effective portion of a cash flow hedge as a component of accumulated other comprehensive loss. Depending on the type of cash flow hedge, the gain is subsequently reclassified to either interest expense when the interest expense on the variable rate debt is recognized, or to cost of revenue when the hedged revenues are recorded. If the hedged transaction becomes probable of not occurring, any gain or loss related to interest rate swap agreements or foreign currency contracts would be recognized in other income (expense). Further, the Company excludes the change in the time value of the foreign currency contracts from the assessment of hedge effectiveness. The Company records the premium paid or time value of a contract on the date of purchase as an asset. Thereafter, the Company recognizes any change to this time value in cost of revenue.

 

The notional principal in U.S. dollar (USD), Canadian dollar (CAD), and Australian dollar (AUD), fixed rates and related expiration dates of the Company’s outstanding interest rate swap agreements were as follows:

 

December 31, 2018

 

Notional Amount
Currency

 

Notional Amount
(in millions)

 

Fixed
Rate

 

Expiration
Date

 

AUD

 

200.0

 

2.19

%

February 2021

 

CAD

 

400.0

 

2.49

%

September 2022

 

USD

 

200.0

 

2.60

%

February 2023

 

 

September 30, 2018

 

Notional Amount
Currency

 

Notional Amount
(in millions)

 

Fixed
Rate

 

Expiration
Date

 

AUD

 

200.0

 

2.19

%

February 2021

 

CAD

 

400.0

 

2.49

%

September 2022

 

USD

 

200.0

 

2.60

%

February 2023

 

 

The notional principal of outstanding foreign currency contracts to purchase AUD was AUD 52.8 million (or $39.8 million) and AUD 65.2 million (or $49.1 million) at December 31, 2018 and September 30, 2018, respectively.

 

Other Foreign Currency Forward Contracts

 

The Company uses foreign currency forward contracts which are not designated as accounting hedges to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary. Gains and losses on these contracts were not material for the three months ended December 31, 2018 and 2017.

 

Fair Value Measurements

 

The Company’s non-pension financial assets and liabilities recorded at fair value relate to derivative instruments and were not material at December 31, 2018 or September 30, 2018.

 

See Note 13 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, 2018 and 2017. Amounts recognized in accumulated other comprehensive loss from the Company’s foreign currency contracts were immaterial for all periods presented. Amounts reclassified from accumulated other comprehensive loss into income from the foreign currency options were immaterial for all periods presented. Additionally, there were no material losses recognized in income due to amounts excluded from effectiveness testing from the Company’s interest rate swap agreements.

 

During the year ended September 30, 2015, the Company entered into a contingent consideration arrangement in connection with a business acquisition. Under the arrangement, the Company agreed to pay cash to the sellers if financial performance thresholds are achieved in the future. The fair value of the contingent consideration liability, net of amounts paid, as of December 31, 2018 and September 30, 2018 was $11 million and $11 million, respectively. This liability is a Level 3 fair value measurement recorded within other accrued liabilities, and was valued based on estimated future net cash flows. Any future changes in the fair value of this contingent consideration liability will be recognized in earnings during the applicable period.

 

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