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AECOM reports third-quarter fiscal year 2013 results

Quarter Highlights*

  • Free cash flow of $84 million; $211 million year to date.
  • Backlog of $16.8 billion with $1.9 billion in new wins.
  • EBITDA margin of 10.9 percent improved sequentially and year over year.
  • Company invests $74 million to repurchase 2.4 million shares.
  • Reported EPS of $0.70, up 11 percent.
  • Full-year targeted diluted EPS range of $2.30 to $2.40.

LOS ANGELES--(BUSINESS WIRE)--Aug. 6, 2013-- AECOM Technology Corporation (NYSE: ACM) reported third-quarter revenue of $2.1 billion, and revenue, net of other direct costs1, of $1.2 billion. Operating income of $112 million and reported net income2 of $71 million were up 8.8 percent and 1.9 percent, respectively. Diluted earnings per share of $0.70 were up 11.1 percent.

        Third Quarter       Year to Date    
                  YOY %       Q3 YTD       Q3 YTD       YOY %
($ in millions, except EPS)       Q3 FY12       Q3 FY13       Change       FY12       FY13       Change
Gross Revenue       2,095       2,067       (1)       6,135       6,074       (1)
Net Service Revenue1       1,323       1,236       (7)       3,844       3,733       (3)
Operating Income       103       112       9       253       254       1
Net Income2       69       71       2       166       163       (2)
Earnings per Share2       0.63       0.70       11       1.47       1.58       7
Operating Cash Flow       202       96       (52)       207       248       20
Free Cash Flow3       186       84       (55)       159       211       33

*All comparisons are year over year unless noted otherwise.

“We continued to execute well against our long-term objectives, including the extension of our competitive advantage through our global footprint and portfolio of offerings, which are aligned well with our clients’ evolving needs as well as industry trends,” said John M. Dionisio, AECOM chairman and chief executive officer. “In a challenging growth environment, we booked $1.9 billion in new wins, which contributed to our $16.8 billion in backlog. We also saw on-going strength in emerging markets — such as Asia, Africa and the Middle East. Despite our strong execution this quarter, further deterioration in our mining business in Australia, and slower conversion of backlog in the Americas, is negatively impacting our topline growth. As a result, we are lowering our full-year fiscal 2013 earnings per share guidance range to $2.30 to $2.40.”

“Year to date, we generated $211 million in free cash flow and invested $312 million to repurchase our shares,” said Michael S. Burke, AECOM president. “This puts us well ahead of our target to return at least 50 percent of our free cash flow to shareholders in fiscal 2013 and 2014, and we are on track to deliver our five-year cumulative free cash flow objective of between $1.3 and $1.8 billion.”

New Wins and Backlog

New wins of $1.9 billion were driven by strength in the company’s construction services business as well as in emerging geographies such as Africa and the Middle East. The company’s book-to-burn ratio4 was 0.9 for the quarter, maintaining total backlog at June 30, 2013, of $16.8 billion. These metrics demonstrate the underlying strength of AECOM’s business as clients increasingly turn to the company for its integrated service platform and global expertise.

Tax Rate

The company’s third-quarter effective tax rate of 29.9 percent, inclusive of non-controlling interest deduction, includes tax expense related to a restructuring that resulted in the return of $148 million of foreign cash. The company now expects its full-year effective tax rate to be 28 percent.

Cash Flow

Cash flow from operations for the quarter was $96 million. Free cash flow, which includes capital expenditures of $12 million, totaled $84 million. Days sales outstanding (DSOs) improved by 3 days to 89 in the quarter. The company reconfirmed that it is well positioned to meet its fiscal 2013 target of generating free cash flow equal to or in excess of its net income.

Balance Sheet

As of June 30, 2013, AECOM had $508 million of total cash and cash equivalents, $1.1 billion of debt and $1.05 billion in committed bank facilities with $906.5 million in unused capacity.

Business Segments

In addition to providing consolidated financial results, AECOM reports separate financial information for its two segments: Professional Technical Services (PTS) and Management Support Services (MSS).

Professional Technical Services

The PTS segment delivers planning, consulting, architecture and engineering design, as well as program and construction management services to institutional, commercial and public sector clients worldwide.

Revenue of $1.8 billion was flat, and revenue, net of other direct costs, declined 5.4 percent to $1.1 billion as declines in Australia and the Americas were only partially offset by growth in Asia. Despite the decline in revenue, net of other costs, operating profit increased by one percent aided by improved costs and efficiencies.

Management Support Services

The MSS segment provides program and facilities management and maintenance, training, logistics, consulting, technical assistance and systems integration services, primarily for agencies of the U.S. government.

Revenue declined 11.4 percent to $220 million, and revenue, net of other direct costs, declined 15.6 percent to $134 million. The decline in revenue and revenue, net of other directs costs, was primarily due to the closeout of certain low-margin projects, which advanced the company’s diversification strategy in the segment and helped to drive a nearly threefold increase in operating income to $15 million.

Fiscal 2013 Outlook

AECOM’s target EPS range for fiscal 2013 is now $2.30 to $2.40. EPS guidance is based on a full-year diluted share count of 102 million shares, which reflects the impact of shares repurchased through the end of the third fiscal quarter. The company now expects its full-year effective tax rate to be 28 percent.

Five-Year Free Cash Flow Target

AECOM reaffirms its five-year free cash flow target of $1.3 billion to $1.8 billion.

AECOM is hosting a conference call today at 11 a.m. EDT, during which management will make a brief presentation focusing on the company's results, strategies and operating trends. Interested parties can listen to the conference call and view accompanying slides via webcast at www.aecom.com. The webcast will be available for replay following the call.

1AECOM’s revenue includes a significant amount of pass-through costs and, therefore, the company believes that revenue, net of other direct costs (net service revenue), which is a non-GAAP measure, also provides a meaningful perspective on its business results. See the accompanying reconciliation of revenue, net of other direct costs, to revenue, the closest comparable GAAP measure.

2Attributable to AECOM.

3Free cash flow is defined as cash flow from operations less capital expenditures and is a non-GAAP measure. See the accompanying reconciliation of free cash flow from operations, to cash flow from operations, the closest comparable GAAP measure.

4Book-to-burn ratio is defined as the amount of gross revenue wins divided by gross revenue recognized during the period.

About AECOM

AECOM is a global provider of professional technical and management support services to a broad range of markets, including transportation, facilities, environmental, energy, water and government. With approximately 45,000 employees around the world, AECOM is a leader in all of the key markets that it serves. AECOM provides a blend of global reach, local knowledge, innovation and technical excellence in delivering solutions that create, enhance and sustain the world's built, natural, and social environments. A Fortune 500 company, AECOM serves clients in more than 140 countries and had revenue of $8.2 billion during the 12 months ended June 30, 2013. More information on AECOM and its services can be found at www.aecom.com.

Forward-Looking Statements: All statements in this press release other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenue, profit margins, cash flows, share count or other financial items; any statements of the plans, strategies and objectives for future operations; and any statements regarding future economic conditions or performance. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.

Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in forward-looking statements include: uncertainties related to global economic conditions and funding, audits, modifications and termination of long-term government contracts; losses under fixed-price contracts; limited control over operations run through our joint venture entities; misconduct by our employees or consultants or our failure to comply with laws or regulations; failure to successfully execute our merger and acquisition strategy; the failure to retain and recruit key technical and management personnel; and unexpected adjustments and cancellations related to our backlog. Additional factors that could cause actual results to differ materially from our forward-looking statements are set forth in our reports filed with the Securities and Exchange Commission. We do not intend, and undertake no obligation, to update any forward-looking statement.

This press release contains financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”). In particular, the company believes that non-GAAP financial measures such as revenue, net of other direct costs, and free cash flow also provide a meaningful perspective on its business results as the company utilizes this information to evaluate and manage the business. This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the company’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

     
AECOM Technology Corporation
Consolidated Statements of Income
(unaudited - in thousands, except per share data)
 
Three Months Ended Nine Months Ended
June 30,   June 30,   % June 30,   June 30,   %
2012 2013 Change 2012 2013 Change
 
Revenue $ 2,095,138 $ 2,067,490 (1.3 )% $ 6,135,269 $ 6,074,408 (1.0 )%
Other direct costs 771,736 831,491 7.7 % 2,291,518 2,341,552 2.2 %
Revenue, net of other direct costs (non-GAAP) 1,323,402 1,235,999 (6.6 )% 3,843,751 3,732,856 (2.9 )%
Cost of revenue, net of other direct costs 1,212,164 1,104,185 (8.9 )% 3,566,050 3,423,081 (4.0 )%
Gross profit 111,238 131,814 18.5 % 277,701 309,775 11.5 %
 
Equity in earnings of joint ventures 12,281 4,094 (66.7 )% 38,141 17,855 (53.2 )%
General and administrative expenses (20,682 ) (24,010 ) 16.1 % (63,150 ) (73,365 ) 16.2 %
Income from operations 102,837 111,898 8.8 % 252,692 254,265 0.6 %
 
Other income 1,519 1,215 (20.0 )% 8,640 2,042 (76.4 )%
Interest expense (13,178 ) (11,719 ) (11.1 )% (35,727 ) (34,495 ) (3.4 )%
Income before income tax expense 91,178 101,394 11.2 % 225,605 221,812 (1.7 )%
 
Income tax expense 21,323 30,179 41.5 % 57,670 56,843 (1.4 )%
Net income 69,855 71,215 1.9 % 167,935 164,969 (1.8 )%
Noncontrolling interests in income of consolidated subsidiaries, net of tax (442 ) (460 ) 4.1 % (1,597 ) (2,294 ) 43.6 %
Net income attributable to AECOM $ 69,413 $ 70,755 1.9 % $ 166,338 $ 162,675 (2.2 )%
 
Net income attributable to AECOM per share:
Basic $ 0.63 $ 0.71 12.7 % $ 1.48 $ 1.60 8.1 %
Diluted $ 0.63 $ 0.70 11.1 % $ 1.47 $ 1.58 7.5 %
 
Weighted average shares outstanding:
Basic 110,221 99,257 (9.9 )% 112,513 101,482 (9.8 )%
Diluted 110,819 100,761 (9.1 )% 113,233 102,706 (9.3 )%
 
       
AECOM Technology Corporation
Balance Sheet and Cash Flow Information
(unaudited - in thousands)
 
September 30, June 30,
2012 2013
Balance Sheet Information:
Total cash and cash equivalents $ 593,776 $ 507,591
Accounts receivable, net 2,395,881 2,341,146
Working capital 1,068,891 1,108,128
Working capital, net of cash and cash equivalents 475,115 600,537
 
Total debt 1,069,732 1,148,719
Total assets 5,664,568 5,539,368
Total AECOM stockholders’ equity 2,169,464 1,985,730
 
 
 
 
Three months ended Nine months ended  
June 30, 2012 June 30, 2013 June 30, 2012 June 30, 2013  
Cash Flow Information:
Net cash provided by operating activities $ 201,965 $ 96,117 $ 206,963 $ 248,451
Capital expenditures   (15,600 )   (12,435 )   (47,805 )   (37,067 )
Free cash flow $ 186,365 $ 83,682 $ 159,158 $ 211,384  
 
         
AECOM Technology Corporation
Reportable Segments
(unaudited - $ in thousands)
 
Professional Management
Technical Support
Reportable Segments: Services Services Corporate Total
 
Three Months Ended June 30, 2013:
Revenue $ 1,847,089 $ 220,401 $ — $ 2,067,490
Other direct costs 745,057 86,434   — 831,491
Revenue, net of other direct costs (non-GAAP) 1,102,032 133,967 — 1,235,999
Cost of revenue, net of other direct costs 982,208 121,977   — 1,104,185
Gross profit 119,824 11,990 — 131,814
Equity in earnings of joint ventures 993 3,101 — 4,094
General and administrative expenses

--

--   (24,010 ) (24,010 )
Income from operations $ 120,817   $ 15,091   $ (24,010 ) $ 111,898
 
Gross profit as a % of revenue 6.5 % 5.4 % — 6.4 %
Gross profit as a % of revenue, net of other direct costs (non-GAAP) 10.9 % 8.9 % — 10.7 %
 
Three Months Ended June 30, 2012:
Revenue $ 1,846,487 $ 248,651 $ — $ 2,095,138
Other direct costs 681,894 89,842   — 771,736
Revenue, net of other direct costs (non-GAAP) 1,164,593 158,809 — 1,323,402
Cost of revenue, net of other direct costs 1,050,438 161,726   — 1,212,164
Gross profit 114,155 (2,917 ) — 111,238
Equity in earnings of joint ventures 5,499 6,782 — 12,281
General and administrative expenses -- --   (20,682 ) (20,682 )
Income from operations $ 119,654   $ 3,865   $ (20,682 ) $ 102,837
 
Gross profit as a % of revenue 6.2 % (1.2 ) % — 5.3 %
Gross profit as a % of revenue, net of other direct costs (non-GAAP) 9.8 % (1.8 ) % — 8.4 %
 
 
AECOM Technology Corporation
Reportable Segments
(unaudited - $ in thousands)
         
Professional Management
Technical Support
Reportable Segments: Services Services Corporate Total
 
Nine Months Ended June 30, 2013:
Revenue $ 5,384,199 $ 690,209 $ — $ 6,074,408
Other direct costs 2,078,089 263,463   — 2,341,552
Revenue, net of other direct costs (non-GAAP) 3,306,110 426,746 — 3,732,856
Cost of revenue, net of other direct costs 3,024,846 398,235   — 3,423,081
Gross profit 281,264 28,511 — 309,775
Equity in earnings of joint ventures 10,305 7,550 — 17,855
General and administrative expenses

--

--   (73,365 ) (73,365 )
Income from operations $ 291,569 $ 36,061   $ (73,365 ) $ 254,265
 
Gross profit as a % of revenue 5.2 % 4.1 % — 5.1 %
Gross profit as a % of revenue, net of other direct costs (non-GAAP) 8.5 % 6.7 % — 8.3 %
 
Contracted backlog $ 8,147,121 $ 491,530 $ — $ 8,638,651
Awarded backlog   7,138,389   1,014,374     —   8,152,763
Total backlog $ 15,285,510 $ 1,505,904   $ — $ 16,791,414
 
Nine Months Ended June 30, 2012:
Revenue $ 5,455,036 $ 680,233 $ — $ 6,135,269
Other direct costs 2,026,460 265,058   — 2,291,518
Revenue, net of other direct costs (non-GAAP) 3,428,576 415,175 — 3,843,751
Cost of revenue, net of other direct costs 3,143,219 422,831   — 3,566,050
Gross profit 285,357 (7,656 ) — 277,701
Equity in earnings of joint ventures 12,547 25,594 — 38,141
General and administrative expenses -- --   (63,150 ) (63,150 )
Income from operations $ 297,904 $ 17,938   $ (63,150 ) $ 252,692
 
Gross profit as a % of revenue 5.2 % (1.1 ) % — 4.5 %
Gross profit as a % of revenue, net of other direct costs (non-GAAP) 8.3 % (1.8 ) % — 7.2 %
 
Contracted backlog $ 7,495,374 $ 856,560 $ — $ 8,351,934
Awarded backlog   6,050,922   1,429,864     —   7,480,786
Total backlog $ 13,546,296 $ 2,286,424   $ — $ 15,832,720
 
 

AECOM Technology Corporation

Regulation G Information
($ in millions)
 

Reconciliation of Revenue to Revenue, Net of Other Direct Costs

  Three Months Ended         Nine Months Ended
June 30, 2012   March 31, 2013   June 30, 2013 June 30, 2012   June 30, 2013

Consolidated

Revenue $ 2,095.2 $ 1,989.6 $ 2,067.5 $ 6,135.3 $ 6,074.4
Less: Other direct costs   771.7   737.7   831.5   2,291.5   2,341.5
Revenue, net of other direct costs $ 1,323.5 $ 1,251.9 $ 1,236.0 $ 3,843.8 $ 3,732.9

 

PTS Segment

Revenue $ 1,846.5 $ 1,765.9 $ 1,847.1 $ 5,455.0 $ 5,384.2
Less: Other direct costs   681.9   655.6   745.1   2,026.4   2,078.1
Revenue, net of other direct costs $ 1,164.6 $ 1,110.3 $ 1,102.0 $ 3,428.6 $ 3,306.1
 

MSS Segment

Revenue $ 248.7 $ 223.7 $ 220.4 $ 680.3 $ 690.2
Less: Other direct costs   89.8   82.1   86.4   265.1   263.4
Revenue, net of other direct costs $ 158.9 $ 141.6 $ 134.0 $ 415.2 $ 426.8
 
 

Reconciliation of EBITDA Before Goodwill Impairment to Net Income Attributable to AECOM

Three Months Ended
  Jun 30, 2012   Sep 30, 2012   Dec 31, 2012   Mar 31, 2013   Jun 30, 2013
EBITDA before goodwill impairment $ 129.0 $ 163.9 $ 84.7 $ 102.5 $ 135.1
Less: Goodwill impairment  

--

    336.0     --     --     --  
EBITDA 129.0 (172.1 ) 84.7 102.5 135.1
Less: Interest expense1 (12.5 ) (10.4 ) (10.4 ) (11.3 ) (11.0 )
Add: Interest income2 0.4 0.4 0.4 0.5 0.4
Less: Depreciation and amortization   (26.1 )   (26.1 )   (23.9 )   (23.9 )   (23.6 )
 
Income (loss) attributable to AECOM before income taxes 90.8 (208.2 ) 50.8 67.8 100.9
Less: Income tax expense   21.4     16.7     12.7     14.0     30.1  
 
Net income (loss) attributable to AECOM $ 69.4   $ (224.9

)

 

$ 38.1   $ 53.8   $ 70.8  
 

1 Excluding related amortization

2 Included in other income

Reconciliation of Total Debt to Net Debt

  Balances at:
June 30, 2012   March 31, 2013   June 30, 2013
Short-term debt $ 2.9 $ 14.8 $ 12.0
Current portion of long-term debt 116.8 152.8 1.5
Long-term debt   950.6   1,123.4   1,135.2
Total debt 1,070.3 1,291.0 1,148.7
Less: Total cash and cash equivalents   398.4   627.7   507.6
Net debt $ 671.9 $ 663.3 $ 641.1
 

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

  Three Months Ended
Jun 30, 2012   Sep 30, 2012   Dec 31, 2012   Mar 31, 2013   Jun 30, 2013
Net cash provided by operating activities $ 202.0 $ 226.4 $ 67.1 $ 85.2 $ 96.1
Capital expenditures   (15.6 )   (15.1 )   (12.9 )   (11.7 )   (12.4 )
Free cash flow $ 186.4   $ 211.3   $ 54.2   $ 73.5   $ 83.7  
 

NR 13-0802

Source: AECOM Technology Corporation

AECOM Technology Corporation
Media:
Paul Gennaro, 212-973-3167
SVP & Chief Communications Officer
Paul.Gennaro@aecom.com
or
Investors:
Lynn Antipas Tyson, 646-432-8428
SVP, Investor Relations
Lynn.Tyson@aecom.com