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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

AECOM TECHNOLOGY CORPORATION

(Exact name of registrant as specified in its charter)

555 South Flower Street, Suite 3700

Los Angeles, California  90071

(Address of principal executive office and zip code)

(213) 593-8000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of February 4, 2009, 104,904,879 shares of the registrant’s common stock were outstanding.

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AECOM TECHNOLOGY CORPORATION

INDEX

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PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

AECOM Technology Corporation

Condensed Consolidated Balance Sheets

(in thousands, except share data)

See accompanying Notes to Condensed Consolidated Financial Statements.

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AECOM Technology Corporation

Condensed Consolidated Statements of Income

(unaudited - in thousands, except per share data)

See accompanying Notes to Condensed Consolidated Financial Statements.

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AECOM Technology Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited—in thousands)

See accompanying Notes to Condensed Consolidated Financial Statements.

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AECOM Technology Corporation

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

See accompanying Notes to Condensed Consolidated Financial Statements.

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AECOM Technology Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

1.              Basis of Presentation

The accompanying condensed consolidated financial statements of AECOM Technology Corporation (the Company) are unaudited and, in the opinion of management, include all adjustments necessary for a fair statement of the Company’s financial position and results of operations for the periods presented.  All inter-company balances and transactions are eliminated in consolidation.

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K/A for the fiscal year ended September 30, 2008.

The results of operations for the three months ended December 31, 2008 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2009.

The Company reports its annual results of operations based on 52 or 53-week periods ending on the Friday nearest September 30.  The Company reports its quarterly results of operations based on periods ending on the Friday nearest December 31, March 31, and June 30.  For clarity of presentation, all periods are presented as if the periods ended on September 30, December 31, March 31, and June 30.

2.              Adoption of Changes in Accounting Principles

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (SFAS 157), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements.  SFAS 157 was effective for the Company on October 1, 2008 for all financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value in its consolidated financial statements on a recurring basis (at least annually).  For all other nonfinancial assets and liabilities, SFAS 157 is effective for the Company on October 1, 2009.

As it relates to its non-pension financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually), the adoption of SFAS 157 did not have a material impact on the Company’s consolidated financial statements.  The Company is still in the process of evaluating the impact that SFAS 157 will have on its pension related financial assets and its nonfinancial assets.

The following table summarizes the Company’s non-pension financial assets and liabilities measured at fair value on a recurring basis (at least annually) as of December 31, 2008 (in millions):

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As of September 30, 2007, the Company adopted certain provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (SFAS 158).  SFAS 158 has an additional requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position, effective for the Company’s fiscal year ending September 30, 2009.  In the first quarter of fiscal 2009, the Company changed its measurement date for the defined benefit pension plans to correspond to its fiscal year-end and recorded a charge to beginning retained earnings of $2.4 million, net of tax, for the impact of the cumulative difference in our pension expense between the two measurement dates.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159).  SFAS 159 allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”).  The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.  If the fair value option is elected for an instrument, SFAS 159 specifies that unrealized gains and losses for that instrument be reported in earnings at each subsequent reporting date.  SFAS 159 was effective for the Company on October 1, 2008.  The Company did not apply the fair value option to any of its outstanding instruments and, therefore, SFAS 159 did not have an impact on the Company’s consolidated financial statements.

3.              Business Acquisitions

On July 25, 2008, the Company completed the acquisition of Earth Tech, Inc. (Earth Tech), a business unit of Tyco International Ltd., pursuant to a Purchase Agreement (Purchase Agreement), dated as of February 11, 2008, by and among the Company, Tyco International Finance, S.A. and other seller parties thereto.  The total purchase price for Earth Tech, net of proceeds from Earth Tech businesses sold to date of $90 million, as described in Note 4 below, was approximately $331 million.  This total purchase price calculation is preliminary and prior to the final settlement of working capital adjustments between the Company and Tyco, and does not include the proceeds from the planned divestitures of certain Earth Tech assets being held for sale.  See also Note 4.  No gain or loss resulted from the sales of these operations since they were sold for amounts that materially approximated their fair values at the acquisition date.

The table below presents summarized unaudited pro forma operating results assuming that the Company had acquired Earth Tech at the beginning of fiscal year ended September 30, 2008 (in millions, except per share data).  Other acquisitions completed during the periods presented did not meet the requirements for pro forma disclosure.

4.              Discontinued Operations

As part of the acquisition of Earth Tech, the Company acquired non-strategic businesses that provide operations and maintenance services. Concurrent with the close of the purchase of Earth Tech, the Company divested Earth Tech’s Water & Power Technologies and North American Contract Operations businesses and Earth Tech’s Mexican operations.  Additionally, the Company divested Earth Tech’s Swedish business in September 2008 and intends to divest its Irish business and certain non-strategic contracts in Canada.  As a result, the Irish business and certain non-strategic contracts in Canada have been segregated from continuing operations and presented as discontinued operations in the accompanying Consolidated Statements of Income and Cash Flows and as held for sale in the accompanying Consolidated Balance Sheet in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

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For the three months ended December 31, 2008, the summarized results of the discontinued operation, included in the Company’s results of operations, is as follows (in millions):

5.              Accounts Receivable—Net

Net accounts receivable consisted of the following as of December 31, 2008 and September 30, 2008:

Billed accounts receivable represent amounts billed to clients that have yet to be collected.  Unbilled accounts receivable represent revenue recognized but not yet billed pursuant to contract terms or accounts billed after the period end.  Substantially all unbilled receivables as of December 31, 2008 and September 30, 2008 are expected to be billed and collected within twelve months of such date.  Contract retentions represent amounts invoiced to clients where payments have been withheld pending the completion of certain milestones, other contractual conditions or upon the completion of the project.  These retention agreements vary from project to project and could be outstanding for several months or years.

Allowances for doubtful accounts have been determined through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable based on current and past experience.

Other than the U.S. government, no single client accounted for more than 10% of the Company’s accounts receivable as of December 31, 2008 or September 30, 2008.

6.              Goodwill and Acquired Intangible Assets

The changes in the carrying value of goodwill by reporting segment for the three months ended December 31, 2008 were as follows:

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The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of December 31, 2008 and September 30, 2008, included in intangible assets—net in the accompanying condensed consolidated balance sheets, were as follows:

At the time of acquisition, the Company preliminarily estimates the amount of the identifiable intangible assets acquired based upon historical valuations and the facts and circumstances available at the time.  The Company determines the value of the identifiable intangible assets during the purchase allocation period, within 12 months from the date of acquisition.  Depending upon the date of acquisition, the 12-month purchase allocation period may cross into subsequent fiscal periods.  Acquisitions for which the purchase price allocation period has not ended include Earth Tech, Boyle Engineering Corporation, and Tecsult, Inc.  The Company is completing post acquisition procedures including finalizing a plan for facilities, severance, and project related liabilities.  Additionally, the total purchase price allocation for Earth Tech is preliminary prior to the final settlement of working capital adjustments between the Company and Tyco.

The following table presents, in thousands, estimated amortization expense of existing intangible assets for the remainder of fiscal 2009 and for the succeeding years:

7.              Disclosures About Pension Benefit Obligations

The following table details the components of net periodic benefit cost for the plans for the three months ended December 31, 2008 and 2007:

The total amounts of employer contributions paid for the three months ended December 31, 2008 were $0.1 million for U.S. plans and $3.6 million for non-U.S. plans.  The expected remaining scheduled annual employer contributions for the fiscal year ending September 30, 2009 are $6.5 million for U.S. plans and $11.7 million for non-U.S. plans.  Included in other long-term liabilities are net pension liabilities of $103.2 and $116.3 million as of December 31 and September 30, 2008, respectively.

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8.              Reportable Segments

The Company’s operations are organized into two reportable segments: Professional Technical Services and Management Support Services.  This segmentation corresponds to how the Company manages its business as well as the underlying characteristics of its markets.

Management internally analyzes the results of its operations using several non-GAAP measures. A significant portion of the Company's revenues relates to services provided by subcontractors and other non-employees that it categorizes as other direct costs. Other direct costs are segregated from cost of revenues resulting in revenue, net of other direct costs, which is a measure of work performed by Company employees. The Company has included information on revenue, net of other direct costs, as it believes that it is a more accurate measure on which to base gross margin.

The following tables set forth summarized financial information concerning the Company’s reportable segments:

9.              Stock-Based Compensation

The fair value of the Company’s stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model.  The expected term of awards granted represents the period of time the awards are expected to be outstanding.  As the Company’s common stock has only been publicly-traded since May 2007, expected volatility was based on a historical volatility, for a period consistent with the expected option term, of publicly-traded peer companies.  The risk-free interest rate is based on U.S. Treasury bond rates with maturities equal to the expected term of the option on the grant date.  The Company uses historical data as a basis to estimate the probability of forfeitures.

The fair value of options granted during the three months ended December 31, 2008 and 2007 were determined using the following weighted average assumptions:

Under SFAS No. 123R, “Share-Based Payments”, the Company’s expense related to stock options for the three months ended December 31, 2008 and 2007 was $0.9 million and $0.4 million, respectively.

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Stock option activity for the three months ended December 31, 2008 and 2007 was as follows:

The weighted average grant-date fair value of stock options granted during the three months ended December 31, 2008 was $8.14.

The Company grants stock units under the Performance Earnings Program (PEP), whereby units are earned and issued dependent upon meeting established cumulative performance objectives.  The Company recognized compensation expense relating to the PEP of $4.4 and 4.0 million during the three months ended December 31, 2008 and 2007, respectively.  Additionally, the Company issued restricted stock units in December 2008 which are earned based on service conditions, resulting in compensation expense of $0.1 million during the three months ended December 31, 2008.  Future compensation expense related to stock options, PEP units, and restricted stock units granted during the current quarter will be $6.1 million, $15.8 million, and $4.9 million, respectively, to be recognized over the respective vesting period of the awards.

10.       Earnings Per Share

Basic earnings per share (EPS) excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding and dilutive potential common shares for the period.  The Company includes as potential common shares the weighted average dilutive effects of outstanding stock options using the treasury stock method.

The following table sets forth a reconciliation of the denominators for basic and diluted EPS:

For the three months ended December 31, 2008 and 2007, no options were excluded from the calculation of potential common shares because they were considered anti-dilutive.

11.       Commitments and Contingencies

In accordance with SFAS No. 5—Accounting for Contingencies, the Company records amounts representing its estimated liabilities relating to claims, guarantees, litigation, audits and investigations.  The Company relies in part on qualified actuaries to assist it in determining the level of reserves to establish for insurance-related claims that are known and have been asserted against it, and for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to the Company’s claims administrators as of the respective balance sheet dates.  The Company includes any adjustments to such insurance reserves in its consolidated results of operations.  The Company is a defendant in various lawsuits arising in the normal course of business.  In the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the financial position or results of operations of the Company.

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At December 31, 2008, the Company was contingently liable in the amount of approximately $116.0 million under standby letters of credit issued primarily in connection with general and professional liability insurance programs and for payment and performance guarantees relating to domestic and overseas contracts.  In addition, in some instances the Company guarantees that a project, when complete, will achieve specified performance standards.  If the project subsequently fails to meet guaranteed performance standards, the Company may either incur significant additional costs or be held responsible for the costs incurred by the client to achieve the required performance standards.

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.  These agreements are entered into primarily to support the project execution commitments of these entities. The guarantees have various expiration dates.  The maximum potential payment amount of an outstanding performance guarantee is the remaining cost of work to be performed by or on behalf of third parties.  Under joint venture arrangements, if a partner is financially unable to complete its share of the contract, the other partner(s) will be required to complete those activities.  The Company generally only enters into joint venture arrangements with partners who are reputable, financially sound and who carry appropriate levels of surety bonds for the project in order to adequately assure completion of their assignments.  The Company does not expect that these guarantees will have a material adverse effect on its consolidated balance sheet or statements of income or cash flows.

12.       Income Taxes

During the three months ended December 31, 2008, the Company concluded an examination by the California Franchise Tax Board (FTB) for the fiscal years 1990-2003 and has received a Notice of Proposed Adjustment (NOPA) from the FTB.  The primary audit issue was the resolution of R&E Credits applicable to California.  As a result of the NOPA and other events, the Company reduced the tax reserves for uncertain tax positions in accordance with the Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109.”

The Company is currently under examination by the Internal Revenue Service (IRS) for fiscal years 2006 and 2007.  The examination process is at an early stage and the Company is unable to determine whether any material adjustments will be proposed by the IRS.

13.       Recently Issued Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” (SFAS 161), which is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows.  SFAS 161 is effective beginning in the Company’s fiscal second quarter ending March 31, 2009.  The Company is currently evaluating the impact of SFAS 161 on its financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141R).  SFAS 141R significantly changes the way companies account for business combinations and will generally require more assets acquired and liabilities assumed to be measured at their acquisition-date fair value.  Under SFAS 141R, legal fees and other transaction-related costs are expensed as incurred and are no longer included in goodwill as a cost of acquiring the business.  SFAS 141R also requires, among other things, acquirers to estimate the acquisition-date fair value of any contingent consideration and to recognize any subsequent changes in the fair value of contingent consideration in earnings.  In addition, restructuring costs the acquirer expected, but was not obligated to incur, will be recognized separately from the business acquisition.  This accounting standard is effective for the Company’s fiscal year ending September 30, 2010.  The Company is currently evaluating the impact of SFAS 141R on its financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (SFAS 160).  SFAS 160 requires all entities to report noncontrolling interests in subsidiaries as a separate component of equity in the consolidated financial statements.  SFAS 160 establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation.  Under SFAS 160, companies will no longer recognize a gain or loss on partial disposals of a subsidiary where control is retained.  In addition, in partial acquisitions, where control is obtained, the acquiring company will recognize and measure at fair value 100 percent of the assets and liabilities, including goodwill, as if the entire target company had been acquired.  SFAS 160 is effective for the Company’s fiscal year ending September 30, 2010.  The Company is currently evaluating the impact of SFAS 160 on its financial statements.

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Item 2.  Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

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.

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 43,000 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.

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The following table presents, for the periods indicated, a presentation of the non-GAAP financial measures reconciled to the closest GAAP measures: