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MarketScreener Homepage  >  Equities  >  Nyse  >  AECOM    ACM

AECOM

(ACM)
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AECOM : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

11/19/2020 | 06:09am EST
This Annual Report on Form 10-K contains forward-looking statements within the
meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 that are not limited to historical facts, but reflect the
Company's current beliefs, expectations or intentions regarding future events.
These statements include forward-looking statements with respect to the Company,
including the Company's business, operations and strategy, and the engineering
and construction industry. Statements that are not historical facts, without
limitation, including statements that use terms such as "anticipates,"
"believes," "expects," "estimates," "intends," "may," "plans," "potential,"
"projects," and "will" and that relate to future impacts caused by the Covid-19
 coronavirus pandemic and the related economic instability and market
volatility, including the reaction of governments to the coronavirus, including
any prolonged period of travel, commercial or other similar restrictions, the
delay in commencement, or temporary or permanent halting of construction,
infrastructure or other projects, requirements that we remove our employees or
personnel from the field for their protection, and delays or reductions in
planned initiatives by our governmental or commercial clients or potential
clients; future revenues, expenditures and business trends; future reduction of
our self-perform at-risk construction exposure; future accounting estimates;
future contractual performance obligations; future conversions of backlog;
future capital allocation priorities, including common stock repurchases, future
trade receivables, future debt pay downs; future post-retirement expenses;
future tax benefits and expenses; future compliance with regulations; future
legal claims and insurance coverage; future effectiveness of our disclosure and
internal controls over financial reporting; future costs savings; and other
future economic and industry conditions, are forward-looking statements. In
light of the risks and uncertainties inherent in all forward-looking statements,
the inclusion of such statements in this Annual Report should not be considered
as a representation by us or any other person that our objectives or plans will
be achieved. 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 business is cyclical and vulnerable to economic downturns and client
spending reductions; government shutdowns; long-term government contracts and
subject to uncertainties related to government contract appropriations;
governmental agencies may modify, curtail or terminate our contracts; government
contracts are subject to audits and adjustments of contractual terms; losses
under fixed-price contracts; limited control over operations run through our
joint venture entities; liability for misconduct by our employees or
consultants; failure to comply with laws or regulations applicable to our
business; maintaining adequate surety and financial capacity; high leverage and
potential inability to service our debt and guarantees; exposure to Brexit and
tariffs; exposure to political and economic risks in different countries;
currency exchange rate fluctuations; retaining and recruiting key technical and
management personnel; legal claims; inadequate insurance coverage; environmental
law compliance and inadequate nuclear indemnification; unexpected adjustments
and cancellations related to our backlog; partners and third parties who may
fail to satisfy their legal obligations; managing pension costs; AECOM Capital's
real estate development; cybersecurity issues, IT outages and data privacy;
risks associated with the benefits and costs of the Management Services
transaction, including the risk that the expected benefits of the Management
Services transaction or any contingent purchase price will not be realized
within the expected time frame, in full or at all; the risk that costs of
restructuring transactions and other costs incurred in connection with the
Management Services transaction will exceed our estimates or otherwise adversely
affect our business or operations; as well as other additional risks and factors
discussed in this Annual Report on Form 10-K and any subsequent reports we file
with the SEC. Accordingly, actual results could differ materially from those
contemplated by any forward-looking statement.

All subsequent written and oral forward-looking statements concerning the
Company or other matters attributable to the Company or any person acting on its
behalf are expressly qualified in their entirety by the cautionary statements
above. You are cautioned not to place undue reliance on these forward-looking
statements, which speak only to the date they are made. The Company is under no
obligation (and expressly disclaims any such obligation) to update or revise any
forward-looking statement that may be made from time to time, whether as a
result of new information, future developments or otherwise. Please review "Part
I, Item 1A-Risk Factors" in this Annual Report for a discussion of the factors,
risks and uncertainties that could affect our future results.

Our fiscal year consists of 52 or 53 weeks, ending on the Friday closest to
September 30. For clarity of presentation, we present all periods as if the year
ended on September 30. We refer to the fiscal year ended September 30, 2019 as
"fiscal 2019" and the fiscal year ended September 30, 2020 as "fiscal 2020."
Fiscal years 2020, 2019, and 2018 each contained 53, 52, and 52 weeks,
respectively, and ended on October 2, September 27, and September 28,
respectively.

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  Table of Contents

Overview
We are a leading global provider of professional, technical and management
support services for governments, businesses and organizations throughout the
world. We provide planning, consulting, architectural and engineering design,
construction management services, and investment and development services to
commercial and government clients worldwide in major end markets such as
transportation, facilities, environmental, energy, water and government markets.

Our business focuses primarily on providing fee-based planning, consulting,
architectural and engineering design services and, therefore, our business is
labor 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. AECOM Capital
primarily derives its income from real estate development sales and management
fees.

During the first quarter of fiscal 2020, we reorganized our operating and
reporting structure to better align with our ongoing professional services
business. This reorganization better reflected our continuing operations after
the sale of our Management Services segment and planned disposal of our
self-perform at-risk construction businesses, including our civil
infrastructure, power, and oil & gas construction businesses. Our Management
Services and self-perform at-risk construction businesses were part of our
former Management Services segment and a substantial portion of our former
Construction Services segment, respectively. These businesses are classified as
discontinued operations in all periods presented.

We report our continuing business through three segments: Americas,
International, and AECOM Capital (ACAP). Such segments are organized by the
differing specialized needs of the respective clients, and how we manage the
business. We have aggregated various operating segments into our reportable
segments based on their similar characteristics, including similar long-term
financial performance, the nature of services provided, internal processes for
delivering those services, and types of customers.

Our Americas segment delivers planning, consulting, architectural and
engineering design, and construction management services to commercial and
government clients in the United States, Canada, and Latin America in major end
markets such as transportation, water, government, facilities, environmental,
and energy. Our International segment delivers planning, consulting, and
architectural and engineering design services to commercial and government
clients in Europe, the Middle East, Africa, and the Asia-Pacific regions in
major end markets such as transportation, water, government, facilities,
environmental, and energy. Revenue for these two segments is primarily derived
from fees for services we provide.

Our ACAP segment primarily invests in and develops real estate projects. ACAP
typically partners with investors and experienced developers as co-general
partners. ACAP may, but is not required to, enter into contracts with our other
AECOM affiliates to provide design, engineering, construction management,
development and operations, and maintenance services for ACAP funded projects.

Our revenue is dependent on our ability to attract and retain qualified and
productive employees, identify business opportunities, integrate and maximize
the value of our recent acquisitions, allocate our labor resources to profitable
and high growth markets, secure new contracts, and renew existing client
agreements. Demand for our services is cyclical and may be vulnerable to sudden
economic downturns and reductions in government and private industry spending,
which may result in clients delaying, curtailing or canceling proposed and
existing projects. Moreover, as a professional services company, maintaining the
high quality of the work generated by our employees is integral to our revenue
generation and profitability.

Our costs consist primarily of the compensation we pay to our employees, including salaries, fringe benefits, the costs of hiring subcontractors, other project-related expenses and sales, general and administrative costs.


The U.S. federal government has proposed significant legislative and executive
infrastructure initiatives that, if enacted, could have a positive impact to our
infrastructure business.

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Regarding our capital allocation policy,  on November 13, 2020, the Board
approved an increase in our repurchase authorization to $1.0 billion, up from
the approximately $305 million authorization in place immediately prior to such
date. We intend to deploy future available cash towards stock repurchases
consistent with our capital allocation policy.

In July 2020, we drew $248.5 million on our secured delayed draw term loan facility for the purpose of redeeming all of the URS 5.00% Senior Notes due 2022 (2022 URS Senior Notes).


We expect to exit the self-perform at-risk construction and non-core oil and gas
markets. We are in the process of exiting more than 30 countries, subject to
applicable laws, as part of our ongoing plan to improve profitability and reduce
our risk profile, and we continue to evaluate our geographic exposure as part of
such plan.

We expect to incur restructuring costs of approximately $30 million to
$50 million in fiscal 2021 primarily related to previously announced
restructuring actions that are expected to deliver continued margin improvement
and efficiencies. Total cash costs for these restructuring actions are expected
to be approximately $30 million to $50 million.

Covid-19 Coronavirus Impacts

The impact of the coronavirus pandemic and measures to prevent its spread are affecting our businesses in a number of ways:

The coronavirus and accompanying economic effects are expected to reduce demand

? for our services and impact client spending in certain circumstances; however,

the uncertain nature of the coronavirus and its duration make it difficult for

us to predict and quantify such impact.

We have restricted non-essential business travel, required employees to work

? remotely where appropriate, reduced salaries or furloughed employees, reduced

non-essential spending and limited physical interactions with our clients.

? Non-essential construction and work on other client projects has been

temporarily halted in certain jurisdictions.

? Some contractual agreements are unable to be performed preventing us from

making or receiving payments.

? The coronavirus has made accessing the capital markets and engaging in business

and client development more difficult.

The coronavirus has made estimating the future performance of our business and

? mitigating the adverse financial impact of these developments on our business

operations more difficult.

? State and local budget shortfalls in the U.S. have negatively impacted our

pipeline of pursuits and the pace of award activity.

? Certain markets, such as the U.K., Middle East, and Southeast Asia, are

experiencing project delays that have impacted our performance and results.

During the second half of fiscal 2020, we benefited from government subsidies

? of approximately $23.2 million, which were received under various programs

   related to retaining employees.


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Acquisitions

The aggregate value of all consideration for our acquisitions consummated during
the year ended September 30, 2018 was $5.6 million. There were no acquisitions
consummated during the years ended September 30, 2020 and 2019.

All of our acquisitions have been accounted for as business combinations and the results of operations of the acquired companies have been included in our consolidated results since the dates of the acquisitions.

Components of Income and Expense




                                                           Year Ended September 30,
                                             2020        2019        2018        2017        2016

                                                                (in millions)
Other Financial Data:
Revenue                                    $ 13,240$ 13,642$ 13,878$ 18,203$ 17,411
Cost of revenue                              12,530      13,030      13,399      17,519      16,768
Gross profit                                    710         612         479         684         643
Equity in earnings of joint ventures             49          49          49         142         104
General and administrative expenses           (190)       (148)       (135)       (134)       (115)
Restructuring cost                            (188)        (95)           -           -           -
Gain (loss) on disposal activities                -           3           -           1        (43)
Impairment of long-lived assets                   -        (25)           -           -           -
Acquisition and integration expenses              -           -           -
       (39)       (214)
Income from operations                     $    381$    396$    393$    654$    375




Revenue

We generate revenue primarily by providing planning, consulting, architectural
and engineering design services to commercial and government clients around the
world. Our revenue consists of both services provided by our employees and
pass-through fees from subcontractors and other direct costs. We generally
recognize revenue over time as performance obligations are satisfied and control
over promised goods or services are transferred to our customers. We generally
measure progress to completion using an input measure of total costs incurred
divided by total costs expected to be incurred.

Cost of Revenue

Cost of revenue reflects the cost of our own personnel (including fringe benefits and overhead expense) associated with revenue.

Amortization Expense of Acquired Intangible Assets


Included in our cost of revenue is amortization of acquired intangible assets.
We have ascribed value to identifiable intangible assets other than goodwill in
our purchase price allocations for companies we have acquired. These assets
include, but are not limited to, backlog and customer relationships. To the
extent we ascribe value to identifiable intangible assets that have finite
lives, we amortize those values over the estimated useful lives of the assets.
Such amortization expense, although non-cash in the period expensed, directly
impacts our results of operations. It is difficult to predict with any precision
the amount of expense we may record relating to acquired intangible assets.

Equity in Earnings of Joint Ventures


Equity in earnings of joint ventures includes our portion of fees charged by our
unconsolidated joint ventures to clients for services performed by us and other
joint venture partners along with earnings we receive from our return on
investments in unconsolidated joint ventures.

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General and Administrative Expenses

General and administrative expenses include corporate expenses, including personnel, occupancy, and administrative expenses.

Acquisition and Integration Expenses

Acquisition and integration expenses are comprised of transaction costs, professional fees, and personnel costs, including due diligence and integration activities, primarily related to business acquisitions.

Goodwill Impairment

See Critical Accounting Policies and Consolidated Results below.

Income Tax Expense (Benefit)

As a global enterprise, income tax expense/(benefit) and our effective tax rates
can be affected by many factors, including changes in our worldwide mix of
pre-tax losses/earnings, the effect of non-controlling interest in income of
consolidated subsidiaries, the extent to which the earnings are indefinitely
reinvested outside of the United States, our acquisition strategy, tax
incentives and credits available to us, changes in judgment regarding the
realizability of our deferred tax assets, changes in existing tax laws and our
assessment of uncertain tax positions. Our tax returns are routinely audited by
the taxing authorities and settlements of issues raised in these audits can also
sometimes affect our effective tax rate.

Geographic Information

For geographic financial information, please refer to Note 4 and Note 19 in the notes to our consolidated financial statements found elsewhere in the Form 10-K.

Critical Accounting Policies


Our financial statements are presented in accordance with accounting principles
generally accepted in the United States (GAAP). Highlighted below are the
accounting policies that management considers significant to understanding
the
operations of our business.

Revenue Recognition

Our accounting policies establish principles for recognizing revenue upon the
transfer of control of promised goods or services to customers. We generally
recognize revenues over time as performance obligations are satisfied. We
generally measure our progress to completion using an input measure of total
costs incurred divided by total costs expected to be incurred. In the course of
providing these services, we routinely subcontract for services and incur other
direct cost on behalf of our clients. These costs are passed through to clients,
and in accordance with accounting rules, are included in our revenue and cost of
revenue.

Revenue recognition and profit is dependent upon a number of factors, including
the accuracy of a variety of estimates made at the balance sheet date, such as
engineering progress, material quantities, the achievement of milestones,
penalty provisions, labor productivity and cost estimates. Additionally, we are
required to make estimates for the amount of consideration to be received,
including bonuses, awards, incentive fees, claims, unpriced change orders,
penalties and liquidated damages. Variable consideration is included in the
estimate of transaction price only to the extent that a significant reversal
would not be probable. We continuously monitor factors that may affect the
quality of our estimates, and material changes in estimates are disclosed
accordingly.

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Claims Recognition

Claims are amounts in excess of the agreed contract price (or amounts not
included in the original contract price) that we seek to collect from customers
or others for delays, errors in specifications and designs, contract
terminations, change orders in dispute or unapproved contracts as to both scope
and price or other causes of unanticipated additional costs. We record contract
revenue related to claims only if it is probable that the claim will result in
additional contract revenue and only to the extent that a significant reversal
would not be probable. The amounts recorded, if material, are disclosed in the
notes to the financial statements. Costs attributable to claims are treated as
costs of contract performance as incurred.

Government Contract Matters


Our federal government and certain state and local agency contracts are subject
to, among other regulations, regulations issued under the Federal Acquisition
Regulations (FAR). These regulations can limit the recovery of certain specified
indirect costs on contracts and subject us to ongoing multiple audits by
government agencies such as the Defense Contract Audit Agency (DCAA). In
addition, most of our federal and state and local contracts are subject to
termination at the discretion of the client.

Audits by the DCAA and other agencies consist of reviews of our overhead rates,
operating systems and cost proposals to ensure that we account for such costs in
accordance with the Cost Accounting Standards of the FAR (CAS). If the DCAA
determines we have not accounted for such costs consistent with CAS, the DCAA
may disallow these costs. There can be no assurance that audits by the DCAA or
other governmental agencies will not result in material cost disallowances in
the future.

Allowance for Doubtful Accounts


We record accounts receivable net of an allowance for doubtful accounts. This
allowance for doubtful accounts is estimated based on management's evaluation of
the contracts involved and the financial condition of our clients. The factors
we consider in our contract evaluations include, but are not limited to:

 ? Client type-federal or state and local government or commercial client;

? Historical contract performance;

? Historical collection and delinquency trends;

? Client credit worthiness; and

? General economic conditions.

Contract Assets and Contract Liabilities

Contract assets represent the contract revenue recognized but not yet billed pursuant to contract terms or accounts billed after the period end.

Contract liabilities represent the billings to date, as allowed under the terms of a contract, but not yet recognized as contract revenue using our revenue recognition policy.


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Investments in Unconsolidated Joint Ventures

We have noncontrolling interests in joint ventures accounted for under the
equity method. Fees received for and the associated costs of services performed
by us and billed to joint ventures with respect to work done by us for
third-party customers are recorded as our revenues and costs in the period in
which such services are rendered. In certain joint ventures, a fee is added to
the respective billings from both us and the other joint venture partners on the
amounts billed to the third-party customers. These fees result in earnings to
the joint venture and are split with each of the joint venture partners and paid
to the joint venture partners upon collection from the third-party customer. We
record our allocated share of these fees as equity in earnings of joint
ventures.

Additionally, our ACAP segment primarily invests in real estate projects.

Income Taxes

We provide for income taxes in accordance with principles contained in ASC Topic
740, Income Taxes. Under these principles, we recognize the amount of income tax
payable or refundable for the current year and deferred tax assets and
liabilities for the future tax consequences of events that have been recognized
in our financial statements or tax returns.

Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in earnings in the period when the new rate is
enacted. Deferred tax assets are evaluated for future realization and reduced by
a valuation allowance if it is more likely than not that a portion will not be
realized.

We measure and recognize the amount of tax benefit that should be recorded for
financial statement purposes for uncertain tax positions taken or expected to be
taken in a tax return. With respect to uncertain tax positions, we evaluate the
recognized tax benefits for recognition, measurement, derecognition,
classification, interest and penalties, interim period accounting and disclosure
requirements. Judgment is required in assessing the future tax consequences of
events that have been recognized in our financial statements or tax returns.

Valuation Allowance.  Deferred income taxes are provided on the liability method
whereby deferred tax assets and liabilities are established for the difference
between the financial reporting and income tax basis of assets and liabilities,
as well as for tax attributes such as operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws and tax rates on the date of enactment of such changes to
laws and tax rates.

Deferred tax assets are reduced by a valuation allowance when, in our opinion,
it is more likely than not that some portion or all of the deferred tax assets
may not be realized. The evaluation of the recoverability of the deferred tax
asset requires the Company to weigh all positive and negative evidence to reach
a conclusion that it is more likely than not that all or some portion of the
deferred tax assets will not be realized. The weight given to the evidence is
commensurate with the extent to which it can be objectively verified. Whether a
deferred tax asset may be realized requires considerable judgment by us. In
considering the need for a valuation allowance, we consider a number of factors
including the nature, frequency, and severity of cumulative financial reporting
losses in recent years, the future reversal of existing temporary differences,
predictability of future taxable income exclusive of reversing temporary
differences of the character necessary to realize the asset, relevant
carryforward periods, taxable income in carry-back years if carry-back is
permitted under tax law, and prudent and feasible tax planning strategies that
would be implemented, if necessary, to protect against the loss of the deferred
tax asset that would otherwise expire. Whether a deferred tax asset will
ultimately be realized is also dependent on varying factors, including, but not
limited to, changes in tax laws and audits by tax jurisdictions in which we
operate.

If future changes in judgment regarding the realizability of our deferred tax
assets lead us to determine that it is more likely than not that we will not
realize all or part of our deferred tax asset in the future, we will record an
additional valuation allowance. Conversely, if a valuation allowance exists and
we determine that the ultimate realizability of all or part of the net deferred
tax asset is more likely than not to be realized, then the amount of the
valuation allowance will be reduced. This adjustment will increase or decrease
income tax expense in the period of such determination.

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Undistributed Non-U.S. Earnings.  The results of our operations outside of the
United States are consolidated for financial reporting; however, earnings from
investments in non-U.S. operations are included in domestic U.S. taxable income
only when actually or constructively received. No deferred taxes have been
provided on the undistributed gross book-tax basis differences of our non-U.S.
operations of approximately $1.5 billion because we have the ability to and
intend to permanently reinvest these basis differences overseas. If we were to
repatriate these basis differences, additional taxes could be due at that time.

We continually explore initiatives to better align our tax and legal entity
structure with the footprint of our non-U.S. operations and we recognize the tax
impact of these initiatives, including changes in assessment of its uncertain
tax positions, indefinite reinvestment exception assertions and realizability of
deferred tax assets, earliest in the period when management believes all
necessary internal and external approvals associated with such initiatives have
been obtained, or when the initiatives are materially complete.

Goodwill and Acquired Intangible Assets


Goodwill represents the excess of amounts paid over the fair value of net assets
acquired from an acquisition. In order to determine the amount of goodwill
resulting from an acquisition, we perform an assessment to determine the value
of the acquired company's tangible and identifiable intangible assets and
liabilities. In our assessment, we determine whether identifiable intangible
assets exist, which typically include backlog and customer relationships.

We test goodwill for impairment annually for each reporting unit in the fourth
quarter of the fiscal year and between annual tests, if events occur or
circumstances change which suggest that goodwill should be evaluated. Such
events or circumstances include significant changes in legal factors and
business climate, recent losses at a reporting unit, and industry trends, among
other factors. A reporting unit is defined as an operating segment or one level
below an operating segment. Our impairment tests are performed at the operating
segment level as they represent our reporting units.

During the impairment test, we estimate the fair value of the reporting unit
using income and market approaches, and compare that amount to the carrying
value of that reporting unit. In the event the fair value of the reporting unit
is determined to be less than the carrying value, goodwill is impaired, and an
impairment loss is recognized equal to the excess, limited to the total amount
of goodwill allocated to the reporting unit.

The impairment evaluation process includes, among other things, making assumptions about variables such as revenue growth rates, profitability, discount rates, and industry market multiples, which are subject to a high degree of judgment.

Material assumptions used in the impairment analysis included the weighted
average cost of capital (WACC) percent and terminal growth rates. For example,
as of September 30, 2020, a 1% increase in the WACC rate represents a $500
million decrease to the fair value of our reporting units. As of September 30,
2020, a 1% decrease in the terminal growth rate represents a $200 million
decrease to the fair value of our reporting units.

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Pension Benefit Obligations

A number of assumptions are necessary to determine our pension liabilities and
net periodic costs. These liabilities and net periodic costs are sensitive to
changes in those assumptions. The assumptions include discount rates, long-term
rates of return on plan assets and inflation levels limited to the United
Kingdom and are generally determined based on the current economic environment
in each host country at the end of each respective annual reporting period. We
evaluate the funded status of each of our retirement plans using these current
assumptions and determine the appropriate funding level considering applicable
regulatory requirements, tax deductibility, reporting considerations and other
factors. Based upon current assumptions, we expect to contribute $28.4 million
to our international plans in fiscal 2021. Our required minimum contributions
for our U.S. qualified plans are not significant. In addition, we may make
additional discretionary contributions. We currently expect to contribute
$12.2 million to our U.S. plans (including benefit payments to nonqualified
plans and postretirement medical plans) in fiscal 2021. If the discount rate was
reduced by 25 basis points, plan liabilities would increase by approximately
$75.2 million. If the discount rate and return on plan assets were reduced by 25
basis points, plan expense would decrease by approximately $0.1 million and
increase by approximately $3.0 million, respectively. If inflation increased by
25 basis points, plan liabilities in the United Kingdom would increase by
approximately $35.0 million and plan expense would increase by approximately
$1.9 million.

At each measurement date, all assumptions are reviewed and adjusted as
appropriate. With respect to establishing the return on assets assumption, we
consider the long term capital market expectations for each asset class held as
an investment by the various pension plans. In addition to expected returns for
each asset class, we take into account standard deviation of returns and
correlation between asset classes. This is necessary in order to generate a
distribution of possible returns which reflects diversification of assets. Based
on this information, a distribution of possible returns is generated based on
the plan's target asset allocation.

Capital market expectations for determining the long term rate of return on
assets are based on forward-looking assumptions which reflect a 20-year view of
the capital markets. In establishing those capital market assumptions and
expectations, we rely on the assistance of our actuaries and our investment
consultants. We and the plan trustees review whether changes to the various
plans' target asset allocations are appropriate. A change in the plans' target
asset allocations would likely result in a change in the expected return on
asset assumptions. In assessing a plan's asset allocation strategy, we and the
plan trustees consider factors such as the structure of the plan's liabilities,
the plan's funded status, and the impact of the asset allocation to the
volatility of the plan's funded status, so that the overall risk level resulting
from our defined benefit plans is appropriate within our risk management
strategy.

Between September 30, 2019 and September 30, 2020, the aggregate worldwide
pension deficit increased from $366.1 million to $406.0 million due to decreased
discount rates. If the various plans do not experience future investment gains
to reduce this shortfall, the deficit will be reduced by additional
contributions.

Accrued Professional Liability Costs


We carry professional liability insurance policies or self-insure for our
initial layer of professional liability claims under our professional liability
insurance policies and for a deductible for each claim even after exceeding the
self-insured retention. We accrue for our portion of the estimated ultimate
liability for the estimated potential incurred losses. We establish our estimate
of loss for each potential claim in consultation with legal counsel handling the
specific matters and based on historic trends taking into account recent events.
We also use an outside actuarial firm to assist us in estimating our future
claims exposure. It is possible that our estimate of loss may be revised based
on the actual or revised estimate of liability of the claims.

Foreign Currency Translation


Our functional currency is the U.S. dollar. Results of operations for foreign
entities are translated to U.S. dollars using the average exchange rates during
the period. Assets and liabilities for foreign entities are translated using the
exchange rates in effect as of the date of the balance sheet. Resulting
translation adjustments are recorded as a foreign currency translation
adjustment into other accumulated comprehensive income/(loss) in stockholders'
equity.

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We limit exposure to foreign currency fluctuations in most of our contracts
through provisions that require client payments in currencies corresponding to
the currency in which costs are incurred. As a result of this natural hedge, we
generally do not need to hedge foreign currency cash flows for contract work
performed. However, we will use foreign exchange derivative financial
instruments from time to time to mitigate foreign currency risk. The functional
currency of all significant foreign operations is the respective local currency.

Fiscal year ended September 30, 2020 compared to the fiscal year ended

                               September 30, 2019

Consolidated Results




                                                          Fiscal Year Ended                     Change
                                                  September 30,       September 30,
                                                       2020                2019              $          %

                                                                       ($ in millions)
Revenue                                          $       13,240.0$       13,642.5$ (402.5)      (3.0) %
Cost of revenue                                          12,530.4            13,030.8      (500.4)      (3.8)
Gross profit                                                709.6               611.7         97.9       16.0
Equity in earnings of joint ventures                         48.8                49.3        (0.5)      (1.1)
General and administrative expenses                       (188.6)             (148.2)       (40.4)       27.3
Restructuring cost                                        (188.3)              (95.4)       (92.9)       97.3
Gain on disposal activities                                     -                 3.6        (3.6)    (100.0)
Impairment of long-lived assets                                 -              (24.9)         24.9    (100.0)
Income from operations                                      381.5               396.1       (14.6)      (3.7)
Other income                                                 11.1                14.6        (3.5)     (24.0)
Interest expense                                          (160.0)             (161.5)          1.5      (1.0)
Income from continuing operations before
income tax expense                                          232.6               249.2       (16.6)      (6.6)
Income tax expense from continuing operations                45.7                13.5         32.2      239.0
Net income from continuing operations                       186.9               235.7       (48.8)     (20.7)
Net loss from discontinued operations                     (340.6)             (419.7)         79.1     (18.8)
Net loss                                                  (153.7)             (184.0)         30.3     (16.4)
Net income attributable to noncontrolling
interests from continuing operations                       (16.5)              (24.7)          8.2     (33.6)
Net income attributable to noncontrolling
interests from discontinued operations                     (16.2)              (52.4)         36.2     (69.0)
Net income attributable to noncontrolling
interests                                                  (32.7)              (77.1)         44.4     (57.7)
Net income attributable to AECOM from
continuing operations                                       170.4               211.0       (40.6)     (19.2)
Net loss attributable to AECOM from
discontinued operations                                   (356.8)             (472.1)        115.3     (24.4)
Net loss attributable to AECOM                   $        (186.4)    $     
  (261.1)    $    74.7     (28.6) %




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The following table presents the percentage relationship of statement of
operations items to revenue:




                                                                 Fiscal Year Ended
                                                           September 30,   September 30,
                                                                2020            2019
Revenue                                                         100.0 %             100.0 %
Cost of revenue                                                  94.6                95.5
Gross profit                                                      5.4                 4.5
Equity in earnings of joint ventures                              0.4      

0.4

General and administrative expenses                             (1.5)      
        (1.1)
Restructuring costs                                             (1.4)               (0.7)
Gain on disposal activities                                       0.0                 0.0
Impairment of long-lived assets                                   0.0      
        (0.2)
Income from operations                                            2.9                 2.9
Other income                                                      0.1                 0.1
Interest expense                                                (1.2)               (1.2)
Income from continuing operations before income tax
expense                                                           1.8      

1.8

Income tax expense from continuing operations                     0.4      

0.1

Net income from continuing operations                             1.4      

1.7

Net loss from discontinued operations                           (2.6)      

(3.0)

Net loss                                                        (1.2)      

(1.3)

Net income attributable to noncontrolling interests from continuing operations

                                      (0.1)       

(0.2)

Net income attributable to noncontrolling interests from discontinued operations

                                    (0.1)       

(0.4)

Net income attributable to noncontrolling interests             (0.2)      

(0.6)

Net income attributable to AECOM from continuing
operations                                                        1.3      

1.5

Net loss attributable to AECOM from discontinued
operations                                                      (2.7)      

(3.4)

Net loss attributable to AECOM                                  (1.4) %    
        (1.9) %




Revenue

Our revenue for the year ended September 30, 2020 decreased $402.5 million, or 3.0%, to $13,240.0 million as compared to $13,642.5 million for the corresponding period last year.

The decrease in revenue for the year ended September 30, 2020 was primarily attributable to decreases in our Americas segment of $251.1 million and in our International segment of $150.0 million, as discussed further below.


In the course of providing our services, we routinely subcontract for services
and incur other direct costs on behalf of our clients. These costs are passed
through to clients and, in accordance with industry practice and GAAP, are
included in our revenue and cost of revenue. Because subcontractor and other
direct costs can change significantly from project to project and period to
period, changes in revenue may not be indicative of business trends.
Subcontractor and other direct costs for the years ended September 30, 2020 and
2019 were $7.1 billion and $7.4 billion, respectively. Subcontractor costs and
other direct costs as a percentage of revenue was 54% during the year ended
September 30, 2020 and the year ended September 30, 2019.

Gross Profit


Our gross profit for the year ended September 30, 2020 increased $97.9 million,
or 16.0%, to $709.6 million as compared to $611.7 million for the corresponding
period last year. For the year ended September 30, 2020, gross profit, as a
percentage of revenue, increased to 5.4% from 4.5% in the year ended September
30, 2019.

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Gross profit changes were due to the reasons noted in Americas and International reportable segments below.

Equity in Earnings of Joint Ventures


Our equity in earnings of joint ventures for the year ended September 30, 2020
was $48.8 million as compared to $49.3 million in the corresponding period last
year.

General and Administrative Expenses


Our general and administrative expenses for the year ended September 30, 2020
increased $40.4 million, or 27.3%, to $188.6 million as compared to $148.2
million for the corresponding period last year. For the year ended September 30,
2020, general and administrative expenses increased to 1.5% from 1.1% for the
year ended September 30, 2019.

The increase in general and administrative expenses was primarily due to the accelerated depreciation of a project management tool.

Restructuring Costs


In the first quarter of fiscal 2019, we commenced a restructuring plan to
improve profitability. We incurred additional restructuring costs in fiscal 2020
primarily related to optimizing our cost structure and eliminating overhead
costs as a result of the sale of the Management Services business and the exit
of our self-perform at-risk construction business. During the year ended
September 30, 2020, we incurred restructuring expenses of $188.3 million,
primarily related to personnel costs. During the year ended September 30, 2019,
we incurred restructuring expenses of $95.4 million.

Gain on Disposal Activities


Gain on disposal activities in the accompanying statements of operations for the
year ended September 30, 2019 was $3.6 million. The gain on disposal activities
in the year ended September 30, 2019 primarily relates to the sale of certain
non-core assets as part of our plan to improve profitability and reduce our risk
profile.

Impairment of Long-Lived Assets


Impairment of long-lived assets was $24.9 million for the year ended September
30, 2019. The impairment of long lived assets was primarily related to leasehold
improvements that were no longer recoverable. The impairment loss did not repeat
in fiscal year 2020.

Other Income

Our other income for the year ended September 30, 2020 decreased $3.5 million to
$11.1 million as compared to $14.6 million for the corresponding period last
year.

Other income is primarily comprised of interest income.

Interest Expense

Our interest expense for the year ended September 30, 2020 was $160.0 million as compared to $161.5 million for the corresponding period last year.

The decrease in interest expense for the year ended September 30, 2020 was primarily due to lower average outstanding debt during the period.

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Income Tax Expense

Our income tax expense for the year ended September 30, 2020 was $45.8 million
compared to $13.5 million for the year ended September 30, 2019. The increase in
tax expense for the year ended September 30, 2020, compared to the corresponding
period last year, is due primarily to a decrease in benefit of $10.6 million
related to changes in valuation allowances and an increase in tax expense of
$8.2 million related to nondeductible costs, and an increase in tax expense
related to foreign rate differential of $6.3 million.

During fiscal 2020, management approved a tax planning strategy and we
restructured certain operations in Canada which resulted in the release of a
valuation allowance related to net operating losses and other deferred tax
assets in the amount of $31.7 million. We are now forecasting the utilization of
the net operating losses within the foreseeable future. The new positive
evidence was evaluated against any negative evidence to determine the valuation
allowance was no longer needed.

During fiscal 2019, a valuation allowance in the amount of $38.1 million related
to foreign tax credits was released due to sufficient positive evidence obtained
during the fiscal year. The positive evidence included the issuance of
regulations related to the Tax Act and forecasting the utilization of the
foreign tax credits within the foreseeable future.

We are currently under tax audit in several jurisdictions including the U.S. and believe the outcomes which are reasonably possible within the next twelve months, including lapses in statutes of limitations, could result in future adjustments, but will not result in a material change in the liability for uncertain tax positions.

We regularly integrate and consolidate our business operations and legal entity structure, and such internal initiatives could impact the assessment of uncertain tax positions, indefinite reinvestment assertions and the realizability of deferred tax assets.

Net Loss From Discontinued Operations


During the first quarter of fiscal 2020, management approved a plan to dispose
via sale our Management Services business and our self-perform at-risk
construction businesses. As a result of these strategic actions, the Management
Services and self-perform at-risk construction businesses were classified as
discontinued operations. That classification was applied retrospectively for all
periods presented.

Net loss from discontinued operations decreased $79.1 million to $340.6 million
from $419.7 million for the years ended September 30, 2020 and 2019,
respectively. The decrease in net loss from discontinued operations for the year
ended September 30, 2020 was primarily due to a $161.9 million gain recorded on
the disposal of our Management Services business.  The gain was offset by
impairment of goodwill of approximately $83.6 million related to the
self-perform at-risk construction business, and a $247.2 million loss related to
the remeasurement of the businesses within discontinued operations based on
estimated fair values less costs to sell. Net loss from discontinued operations
for the year ended September 30, 2019 included a goodwill impairment of
$588.0 million related to a reduction in estimated fair value of our at-risk
construction businesses and a reduction in our self-perform at-risk construction
exposure.

Net Loss Attributable to AECOM

The factors described above resulted in the net loss attributable to AECOM of
$186.4 million for the year ended September 30, 2020, as compared to the net
loss attributable to AECOM of $261.1 million for the year ended September 30,
2019.

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  Table of Contents

Results of Operations by Reportable Segment

Americas


                                      Fiscal Year Ended
                    September 30,      September 30,           Change
                        2020               2019              $          %

                                        ( in millions)
Revenue            $      10,131.5$      10,382.6$ (251.1)    (2.4) %
Cost of revenue            9,551.0            9,871.1      (320.1)    (3.2)
Gross profit       $         580.5    $         511.5    $    69.0     13.5 %



The following table presents the percentage relationship of statement of operations items to revenue:


                         Fiscal Year Ended
                   September 30,    September 30,
                       2020             2019
Revenue                    100.0 %          100.0 %
Cost of revenue             94.3             95.1
Gross profit                 5.7 %            4.9 %




Revenue

Revenue for our Americas segment for the year ended September 30, 2020 decreased
$251.1 million, or 2.4%, to $10,131.5 million as compared to $10,382.6 million
for the corresponding period last year.

The decrease in revenue for the year ended September 30, 2020 was primarily driven by near-term headwinds from the coronavirus pandemic and lower oil and gas prices.


Gross Profit

Gross profit for our Americas segment for the year ended September 30, 2020 increased $69.0 million, or 13.5%, to $580.5 million as compared to $511.5 million for the corresponding period last year. As a percentage of revenue, gross profit increased to 5.7% of revenue for the year ended September 30, 2020 from 4.9% in the corresponding period last year.


The increase in gross profit and gross profit as a percentage of revenue for the
year ended September 30, 2020 were primarily due to reduced costs resulting from
restructuring activities that commenced during the prior year.

International


                                       Fiscal Year Ended
                    September 30,       September 30,            Change
                         2020                2019              $          %

                                         (in millions)
Revenue            $        3,101.7$        3,251.7$ (150.0)    (4.6) %
Cost of revenue             2,979.5             3,159.8      (180.3)    (5.7)
Gross profit       $          122.2    $           91.9    $    30.3     33.0 %




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  Table of Contents

The following table presents the percentage relationship of statement of operations items to revenue:


                          Fiscal Year Ended
                   September 30,     September 30,
                        2020              2019
Revenue                     100.0 %           100.0 %
Cost of revenue              96.1              97.2
Gross profit                  3.9 %             2.8 %




Revenue

Revenue for our International segment for the year ended September 30, 2020 decreased $150.0 million, or 4.6%, to $3,101.7 million as compared to $3,251.7 million for the corresponding period last year.

The decrease in revenue for the year ended September 30, 2020 was primarily
attributable to declines in the United Kingdom and Greater China regions due to
downtime caused by the impact of the coronavirus pandemic in those regions and
the Middle East was impacted by lower oil and gas prices.

Gross Profit

Gross profit for our International segment for the year ended September 30, 2020
increased $30.3 million, or 33.0%, to $122.2 million as compared to $91.9
million for the corresponding period last year. As a percentage of revenue,
gross profit increased to 3.9% of revenue for the year ended September 30, 2020
from 2.8% in the corresponding period last year.

The increase in gross profit and gross profit as a percentage of revenue for the
year ended September 30, 2020 was primarily due to reduced costs resulting from
restructuring activities that commenced during the prior year.

AECOM Capital


                                                                 Fiscal Year Ended
                                              September 30,       September 30,            Change
                                                   2020                2019             $          %

                                                                   (in millions)
Revenue                                      $            6.8    $            8.2    $  (1.4)    (17.1) %
Equity in earnings of joint ventures         $           14.7    $         

17.7 $ (3.0) (16.9) General and administrative expenses $ (8.6) $ (5.0) $ (3.6) 72.0 %


* NM - Not Meaningful



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Fiscal year ended September 30, 2019 compared to the fiscal year ended September
                                    30, 2018

Consolidated Results


                                                      Fiscal Year Ended                     Change
                                              September 30,       September 30,
                                                   2019                2018              $           %

                                                                   ($ in millions)
Revenue                                      $       13,642.5$       13,878.3$ (235.8)      (1.7) %
Cost of revenue                                      13,030.8            13,399.3      (368.5)      (2.8)
Gross profit                                            611.7               479.0        132.7       27.7
Equity in earnings of joint ventures                     49.3                49.4        (0.1)      (0.1)
General and administrative expenses                   (148.2)             (135.8)       (12.4)        9.1
Restructuring cost                                     (95.4)                   -       (95.4)        0.0
Gain on disposal activities                               3.6                   -          3.6        0.0
Impairment of long-lived assets                        (24.9)              
    -       (24.9)        0.0
Income from operations                                  396.1               392.6          3.5        0.9
Other income                                             14.6                20.6        (6.0)     (29.4)
Interest expense                                      (161.5)             (201.0)         39.5     (19.7)
Income from continuing operations before
income tax expense (benefit)                            249.2               212.2         37.0       17.4
Income tax expense (benefit) from
continuing operations                                    13.5               (3.5)         17.0    (486.3)
Net income from continuing operations                   235.7               215.7         20.0        9.3
Net loss from discontinued operations                 (419.7)              (18.6)      (401.1)         NM
Net (loss) income                                     (184.0)               197.1      (381.1)    (193.3)
Net income attributable to noncontrolling
interests from continuing operations                   (24.7)              (20.2)        (4.5)       22.3
Net income attributable to noncontrolling
interests from discontinued operations                 (52.4)              (40.4)       (12.0)       29.4
Net income attributable to noncontrolling
interests                                              (77.1)              (60.6)       (16.5)       27.0
Net income attributable to AECOM from
continuing operations                                   211.0               195.5         15.5        7.9
Net loss attributable to AECOM from
discontinued operations                               (472.1)             

(59.0) (413.1) 699.5 Net (loss) income attributable to AECOM$ (261.1) $ 136.5 $ (397.6) (291.3) %


*NM - Not Meaningful



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The following table presents the percentage relationship of statement of
operations items to revenue:




                                                                Fiscal Year Ended
                                                          September 30,   September 30,
                                                               2019            2018
Revenue                                                        100.0 %             100.0 %
Cost of revenue                                                 95.5                96.5
Gross profit                                                     4.5                 3.5
Equity in earnings of joint ventures                             0.4       

0.4

General and administrative expenses                            (1.1)       
       (1.1)
Restructuring costs                                            (0.7)                 0.0
Gain on disposal activities                                      0.0                 0.0
Impairment of long-lived assets                                (0.2)       
         0.0
Income from operations                                           2.9                 2.8
Other income                                                     0.1                 0.1
Interest expense                                               (1.2)               (1.4)
Income from continuing operations before income tax
expense (benefit)                                                1.8       

1.5

Income tax expense (benefit) from continuing
operations                                                       0.1       

(0.1)

Net income from continuing operations                            1.7       

1.6

Net loss from discontinued operations                          (3.0)       

(0.2)

Net (loss) income                                              (1.3)       

1.4

Net income attributable to noncontrolling interests from continuing operations

                                     (0.2)        

(0.1)

Net income attributable to noncontrolling interests from discontinued operations

                                   (0.4)        

(0.3)

Net income attributable to noncontrolling interests            (0.6)       

(0.4)

Net income attributable to AECOM from continuing
operations                                                       1.5       

1.5

Net loss attributable to AECOM from discontinued
operations                                                     (3.4)       

(0.5)

Net (loss) income attributable to AECOM                        (1.9) %     
         1.0 %




Revenue
Our revenue for the year ended September 30, 2019 decreased $235.8 million, or
1.7%, to $13,642.5 million as compared to $13,878.3 million for the year ended
September 30, 2018.

The decrease in revenue for the year ended September 30, 2019 was primarily attributable to a decrease in our subcontractor activity for residential high-rise buildings in New York City compared to the prior year.


In the course of providing our services, we routinely subcontract for services
and incur other direct costs on behalf of our clients. These costs are passed
through to clients and, in accordance with industry practice and GAAP, are
included in our revenue and cost of revenue. Because subcontractor and other
direct costs can change significantly from project to project and period to
period, changes in revenue may not be indicative of business trends.
Subcontractor and other direct costs for the years ended September 30, 2019 and
2018 were $7.4 billion and $7.7 billion, respectively. Subcontractor costs and
other direct costs as a percentage of revenue decreased to 54% during the year
ended September 30, 2019 compared with 56% during the year ended September
30,
2018.

Gross Profit

Our gross profit for the year ended September 30, 2019 increased $132.7 million,
or 27.7%, to $611.7 million as compared to $479.0 million for the year ended
September 30, 2018. For the year ended September 30, 2019, gross profit, as a
percentage of revenue, increased to 4.5% from 3.5% in the year ended
September 30, 2018.

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Gross profit changes were due to the reasons noted in the Americas and International reportable segments below.

Equity in Earnings of Joint Ventures


Our equity in earnings of joint ventures for the year ended September 30, 2019
was $49.3 million as compared to $49.4 million in the year ended September 30,
2018.

General and Administrative Expenses


Our general and administrative expenses for the year ended September 30, 2019
increased $12.4 million, or 9.1%, to $148.2 million as compared to
$135.8 million for the year ended September 30, 2018. For the year ended
September 30, 2019, general and administrative expenses remained at 1.1% for the
years ended September 30, 2019 and 2018.

Restructuring Costs


In the first quarter of fiscal 2019, we commenced a restructuring plan to
improve profitability. During the year ended September 30, 2019, we incurred
restructuring expenses of $95.4 million. We expect to achieve approximately $225
million of annual cost savings, which is expected to contribute to $150 million
of cost savings in fiscal 2020.

Gain on Disposal Activities


Gain on disposal activities in the accompanying statements of operations for the
year ended September 30, 2019 was $3.6 million for the year ended September 30,
2018. The gain on disposal activities primarily relates to incremental gains on
the sale of specific non-core oil and gas assets in North America from our CS
segment previously classified as assets held for sale.

Impairment of Long-Lived Assets

Impairment of long-lived assets was $24.9 million for the year ended September 30, 2019. The impairment of long lived assets was primarily related to leasehold improvements that were no longer recoverable.

Other Income

Our other income for the year ended September 30, 2019 decreased $6.0 million to $14.6 million as compared to $20.6 million for the year ended September 30, 2018.


Other income is primarily comprised of interest income. The decrease in other
income for the year ended September 30, 2019 was primarily due to a $9.1 million
gain realized in the year ended September 30, 2018 from a foreign exchange
forward contract entered into as part of the refinance of our Credit Agreement
in March 2018, as discussed below in "Liquidity and Capital Resources - Debt -
2014 Credit Agreement."

Interest Expense

Our interest expense for the year ended September 30, 2019 was $161.5 million as compared to $201.0 million for the year ended September 30, 2018.

The decrease in interest expense for the year ended September 30, 2019 was
primarily due to a $34.5 million prepayment premium paid on our $800 million
unsecured 5.750% Senior Notes due 2022 that was incurred during the year ended
September 30, 2018 and did not repeat in 2019.

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Income Tax Expense (Benefit)

Our income tax expense for the year ended September 30, 2019 was $13.5 million
compared to a benefit of $3.5 million for the year ended September 30, 2018. The
increase in tax expense for the year ended September 30, 2019, compared to the
year ended September 30, 2018, is due primarily to one-time items that occurred
during the fiscal year ended September 30, 2018, including valuation allowance
increases of $37.8 million, a $12.5 million net tax expense related to one-time
U.S. federal tax law changes, a tax benefit of $26.0 million related to changes
in uncertain tax positions primarily in the U.S. and Canada, and a tax benefit
of $27.7 million related to an audit settlement in the U.S. The tax impact of
these items was partially offset by a tax benefit of $26.5 million that occurred
in fiscal 2019 related to changes in valuation allowances including the release
of a valuation allowance in the amount of $38.1 million due to sufficient
positive evidence obtained during fiscal 2019.

During fiscal 2018, we recorded a $38.1 million valuation allowance related to
foreign tax credits as a result of U.S. federal tax law changes. In fiscal 2019,
we released this valuation allowance due to sufficient positive evidence
obtained during the quarter. The positive evidence included the issuance of
regulations related to the Tax Act during the quarter and forecasting the
utilization of the foreign tax credits within the foreseeable future.

During fiscal 2018, we effectively settled a U.S. federal income tax examination
for URS pre-acquisition tax years 2012, 2013 and 2014 and recorded a benefit of
$27.7 million related to various adjustments, in addition to the favorable
settlement of R&D credits of $19.9 million recorded in fiscal 2018.

During fiscal 2018, President Trump signed The Tax Cuts and Jobs Act (Tax Act)
into law. The Tax Act reduced our U.S. federal corporate tax rate from 35% to
21%, required companies to pay a one-time transition tax on accumulated earnings
of foreign subsidiaries, created new taxes on certain foreign sourced earnings,
and eliminated or reduced certain deductions.

In fiscal 2018, we remeasured certain deferred tax assets and liabilities based
on the rates at which they were expected to reverse in the future, which is
generally 21%. The amount recorded related to the remeasurement of our deferred
tax balance was a $38.9 million tax expense. In addition, we released the
deferred tax liability and recorded a tax benefit related to certain foreign
subsidiaries for which the undistributed earnings are not intended to be
reinvested indefinitely for $79.8 million and accrued $53.4 million of tax
expense on these earnings as part of the one-time transition tax.

We are currently under tax audit in several jurisdictions including the U.S. and believe the outcomes which are reasonably possible within the next twelve months, including lapses in statutes of limitations, could result in future adjustments, but will not result in a material change in the liability for uncertain tax positions.

We regularly integrate and consolidate our business operations and legal entity structure, and such internal initiatives could impact the assessment of uncertain tax positions, indefinite reinvestment assertions and the realizability of deferred tax assets.

Net Loss From Discontinued Operations


Net loss from discontinued operations increased $401.1 million to $419.7 million
compared to $18.6 million for the years ended September 30, 2019 and 2018,
respectively. The increase in net loss from discontinued operations for the year
ended September 30, 2019 was primarily related to goodwill impairment of $588.0
million recognized due to a reduction in the estimated fair value of our at-risk
construction business and a reduction in our self-perform at-risk construction
exposure.

Net (Loss) Income Attributable to AECOM

The factors described above resulted in the net loss attributable to AECOM of
$261.1 million for the year ended September 30, 2019, as compared to the net
income attributable to AECOM of $136.5 million for the year ended September
30,
2018.

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  Table of Contents

Results of Operations by Reportable Segment

Americas




                                       Fiscal Year Ended
                    September 30,       September 30,            Change
                         2019                2018              $          %

                                         ( in millions)
Revenue            $       10,382.6$       10,512.3$ (129.7)    (1.2) %
Cost of revenue             9,871.1            10,108.5      (237.4)    (2.3)
Gross profit       $          511.5    $          403.8    $   107.7     26.7 %



The following table presents the percentage relationship of statement of operations items to revenue:




                          Fiscal Year Ended
                   September 30,     September 30,
                        2019              2018
Revenue                     100.0 %           100.0 %
Cost of revenue              95.1              96.2
Gross profit                  4.9 %             3.8 %




Revenue

Revenue for our Americas segment for the year ended September 30, 2019 decreased
$129.7 million, or 1.2%, to $10,382.6 million as compared to $10,512.3 million
for the year ended September 30, 2018.

The decrease in revenue for the year ended September 30, 2019 was primarily
attributable to decreased construction management of airports in the U.S. and
residential high-rise buildings in New York City of approximately $340 million,
partially offset by an increase in design consulting services, largely due to
increased work performed on a residential housing storm disaster relief program.

Gross Profit

Gross profit for our Americas segment for the year ended September 30, 2019 increased $107.7 million, or 26.7%, to $511.5 million as compared to $403.8 million for the year ended September 30, 2018. As a percentage of revenue, gross profit increased to 4.9% of revenue for the year ended September 30, 2019 from 3.8% in the year ended September 30, 2018.


The increases in gross profit and gross profit as a percentage of revenue for
the year ended September 30, 2019 were primarily due to reduced costs resulting
from restructuring activities taken earlier in fiscal 2019.

International




                                      Fiscal Year Ended
                    September 30,      September 30,           Change
                         2019              2018              $          %

                                        (in millions)
Revenue            $        3,251.7$       3,366.0$ (114.3)    (3.4) %
Cost of revenue             3,159.8           3,290.8      (131.0)    (4.0)
Gross profit       $           91.9   $          75.2    $    16.7     22.2 %




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The following table presents the percentage relationship of statement of operations items to revenue:




                         Fiscal Year Ended
                   September 30,   September 30,
                        2019           2018
Revenue                 100.0 %            100.0 %
Cost of revenue          97.2               97.8
Gross profit              2.8 %              2.2 %




Revenue

Revenue for our International segment for the year ended September 30, 2019 decreased $114.3 million, or 3.4%, to $3,251.7 million as compared to $3,366.0 million for the year ended September 30, 2018.

Gross Profit

Gross profit for our International segment for the year ended September 30, 2019
increased $16.7 million, or 22.2%, to $91.9 million as compared to $75.2 million
for the year ended September 30, 2018. As a percentage of revenue, gross profit
increased to 2.8% of revenue for the year ended September 30, 2019 from 2.2% in
the year ended September 30, 2018.

AECOM Capital




                                                               Fiscal Year Ended
                                             September 30,      September 30,           Change
                                                  2019               2018             $         %

                                                                 (in millions)
Revenue                                       $          8.2     $            -    $    8.2       NM %
Equity in earnings of joint ventures          $         17.7     $         15.3    $    2.4     15.7
General and administrative expenses           $        (5.0)$       (11.2)$    6.3   (55.4) %


* NM - Not Meaningful


Equity in earnings of joint ventures included a gain on the sale of a property.

Liquidity and Capital Resources

Cash Flows


Our principal sources of liquidity are cash flows from operations, borrowings
under our credit facilities, and access to financial markets. Our principal uses
of cash are operating expenses, capital expenditures, working capital
requirements, acquisitions, repurchases of common stock, and repayment of debt.
We believe our anticipated sources of liquidity including operating cash flows,
existing cash and cash equivalents, borrowing capacity under our revolving
credit facility and our ability to issue debt or equity, if required, will be
sufficient to meet our projected cash requirements for at least the next twelve
months. We expect to spend approximately $30 million to $50 million in
restructuring costs in fiscal 2021 associated with previously announced
restructuring actions that are expected to deliver continued margin improvement
and efficiencies.

Generally, we do not provide for U.S. taxes or foreign withholding taxes on
gross book-tax basis differences in our non-U.S. subsidiaries because such basis
differences are able to and intended to be reinvested indefinitely. At September
30, 2020, we have determined that we will continue to indefinitely reinvest the
earnings of some foreign subsidiaries and therefore we will continue to account
for these undistributed earnings based on our existing accounting under ASC 740
and not accrue additional tax outside of the one-time transition tax required
under the Tax Cuts and Jobs Act that was enacted on December 22, 2017.
Determination of the amount of any unrecognized deferred income tax liability on
this temporary difference is not practicable because of the complexities of the
hypothetical calculation. Based on the available sources of cash flows discussed
above, we anticipate we will continue to have the ability to permanently
reinvest these remaining amounts.

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At September 30, 2020, cash and cash equivalents were $1,708.3 million, an
increase of $882.7 million, or 92.9%, from $885.6 million at September 30, 2019.
The increase in cash and cash equivalents was primarily attributable to positive
cash flows from operating activities and proceeds from the sale of our
Management Services business, partially offset by repurchases of common stock
and repayments of our credit agreement.

Net cash provided by operating activities was $329.6 million for the year ended
September 30, 2020 as compared to $777.6 million for the year ended September
30, 2019. The change was primarily attributable to the timing of receipts and
payments of working capital, which includes accounts receivable, contract
assets, accounts payable, accrued expenses, and contract liabilities. The sale
of trade receivables to financial institutions during the year ended September
30, 2020 provided a net unfavorable impact of $143.3 million as compared to a
net benefit of $21.9 million during the year ended September 30, 2019. We expect
to continue to sell trade receivables in the future as long as the terms
continue to remain favorable to us.

Net cash provided by investing activities was $2,037.4 million for the year ended September 30, 2020, as compared to net cash used of $146.8 million for the year ended September 30, 2019. This increase in cash provided was primarily attributable to the sale of our Management Services business in fiscal 2020.


Net cash used in financing activities was $1,628.0 million for the year ended
September 30, 2020, as compared to $433.3 million for the year ended September
30, 2019. This change was primarily attributable to repayments of our credit
agreement and the redemption of our unsecured senior notes. Total borrowings
outstanding varied during the period. For the year ended September 30, 2020, our
weighted average floating rate borrowings were $292.4 million.

AECOM Caribe, a subsidiary of the Company, has incurred payment delays
supporting the storm recovery work in the U.S. Virgin Islands. AECOM Caribe
signed several contracts with Virgin Islands authorities to provide emergency
design, construction and technical services after two Category Five hurricanes
devastated the Virgin Islands in 2017, that were dependent on federal funding.
AECOM Caribe and its subcontractors have performed over $750 million of work
under the Virgin Islands contracts and payment delays have increased working
capital by over $150 million from September 30, 2018 to September 30, 2019. We
are currently negotiating with the Virgin Island authorities and U.S. Federal
Emergency Management Agency to modify the contract and accelerate funding for
current and future contractual payments; however, we can provide no certainty as
to the timing or amount of future payments.

Working Capital

Working capital, or current assets less current liabilities, increased $367.0 million, or 34.2%, to $1,439.9 million at September 30, 2020 from $1,072.9 million at September 30, 2019. Net accounts receivable and contract assets, net of contract liabilities, decreased to $3,413.9 million at September 30, 2020 from $3,600.0 million at September 30, 2019.

Days Sales Outstanding (DSO), which includes net accounts receivable and contract assets, net of contract liabilities, was 90 days at September 30, 2020 compared to 94 days at September 30, 2019.

In Note 4, Revenue Recognition, in the notes to our consolidated financial statements, a comparative analysis of the various components of accounts receivable is provided. Except for claims, substantially all contract assets are expected to be billed and collected within twelve months.

Contract assets related to claims are recorded only if it is probable that the
claim will result in additional contract revenue and if the amount can be
reliably estimated. In such cases, revenue is recorded only to the extent that
contract costs relating to the claim have been incurred. Award fees in contract
assets are accrued only when there is sufficient information to assess contract
performance. On contracts that represent higher than normal risk or technical
difficulty, award fees are generally deferred until an award fee letter is
received.

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Because our revenue depends to a great extent on billable labor hours, most of
our charges are invoiced following the end of the month in which the hours were
worked, the majority usually within 15 days. Other direct costs are normally
billed along with labor hours. However, as opposed to salary costs, which are
generally paid on either a bi-weekly or monthly basis, other direct costs are
generally not paid until payment is received (in some cases in the form of
advances) from the customers.



Debt

Debt consisted of the following:




                                                            September 30,       September 30,
                                                                 2020                2019

                                                                      (in millions)
2014 Credit Agreement                                      $          248.5    $        1,182.2
2014 Senior Notes                                                     797.3               800.0
2017 Senior Notes                                                     997.3             1,000.0
URS Senior Notes                                                          -               248.1
Other debt                                                             41.9               122.2
Total debt                                                          2,085.0             3,352.5
Less: Current portion of debt and short-term borrowings              (20.9)              (98.3)
Less: Unamortized debt issuance costs                                (23.0)
             (36.2)
Long-term debt                                             $        2,041.1$        3,218.0




The following table presents, in millions, scheduled maturities of our debt as
of September 30, 2020:




Fiscal Year
2021           $    20.9
2022                17.9
2023               244.8
2024                 5.1
2025               799.0
Thereafter         997.3
Total          $ 2,085.0




2014 Credit Agreement
We entered into a credit agreement (Credit Agreement) on October 17, 2014,
which, as amended to date, consists of (i) a term loan A facility that includes
a $510 million (USD) term loan A facility with a term expiring on March 13, 2021
and a $500 million Canadian dollar (CAD) term loan A facility and a $250 million
Australian dollar (AUD) term loan A facility, each with terms expiring on
March 13, 2023; (ii) a $600 million term loan B facility with a term expiring on
March 13, 2025; and (iii) a revolving credit facility in an aggregate principal
amount of $1.35 billion with a term expiring on March 13, 2023. Some of our
subsidiaries (Guarantors) have guaranteed the obligations of the borrowers under
the Credit Agreement. The borrowers' obligations under the Credit Agreement are
secured by a lien on substantially all of our assets and the Guarantors'
pursuant to a security and pledge agreement (Security Agreement). The collateral
under the Security Agreement is subject to release upon fulfillment of
conditions specified in the Credit Agreement and Security Agreement.

The Credit Agreement contains covenants that limit our ability and the ability
of some of our subsidiaries to, among other things: (i) create, incur, assume,
or suffer to exist liens; (ii) incur or guarantee indebtedness; (iii) pay
dividends or repurchase stock; (iv) enter into transactions with affiliates;
(v) consummate asset sales, acquisitions or mergers; (vi) enter into various
types of burdensome agreements; or (vii) make investments.

On July 1, 2015, the Credit Agreement was amended to revise the definition of
"Consolidated EBITDA" to increase the allowance for acquisition and integration
expenses related to our acquisition of URS.

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On December 22, 2015, the Credit Agreement was amended to further revise the
definition of "Consolidated EBITDA" by further increasing the allowance for
acquisition and integration expenses related to the acquisition of URS and to
allow for an internal corporate restructuring primarily involving our
international subsidiaries.

On September 29, 2016, the Credit Agreement and the Security Agreement were
amended to (i) lower the applicable interest rate margins for the term loan A
and the revolving credit facilities, and lower the applicable letter of credit
fees and commitment fees to the revised consolidated leverage levels;
(ii) extend the term of the term loan A and the revolving credit facility to
September 29, 2021; (iii) add a new delayed draw term loan A facility tranche in
the amount of $185.0 million; (iv) replace the then existing $500 million
performance letter of credit facility with a $500 million basket to enter into
secured letters of credit outside the Credit Agreement; and (v) revise
covenants, including the Maximum Consolidated Leverage Ratio, so that the step
down from a 5.00 to a 4.75 leverage ratio is effective as of March 31, 2017 as
well as the investment basket for our ACAP business.

On March 31, 2017, the Credit Agreement was amended to (i) expand the ability of
restricted subsidiaries to borrow under "Incremental Term Loans;" (ii) revise
the definition of "Working Capital" as used in "Excess Cash Flow;" (iii) revise
the definitions for "Consolidated EBITDA" and "Consolidated Funded Indebtedness"
to reflect the expected gain and debt repayment of an AECOM Capital disposition,
which disposition was completed on April 28, 2017; and (iv) amend provisions
relating to our ability to undertake internal restructuring steps to accommodate
changes in tax laws.

On March 13, 2018, the Credit Agreement was amended to (i) refinance the
existing term loan A facility to include a $510 million (US) term loan A
facility with a term expiring on March 13, 2021 and a $500 million CAD term
loan A facility and a $250 million AUD term loan A facility each with terms
expiring on March 13, 2023; (ii) issue a new $600 million term loan B facility
to institutional investors with a term expiring on March 13, 2025;
(iii) increase the capacity of our revolving credit facility from $1.05 billion
to $1.35 billion and extend its term until March 13, 2023; (iv) reduce our
interest rate borrowing costs as follows: (a) the term loan B facility, at our
election, Base Rate (as defined in the Credit Agreement) plus 0.75% or
Eurocurrency Rate (as defined in the Credit Agreement) plus 1.75%, (b) the (USD)
term loan A facility, at our election, Base Rate plus 0.50% or Eurocurrency Rate
plus 1.50%, and (c) the Canadian (CAD) term loan A facility, the Australian
(AUD) term loan A facility, and the revolving credit facility, an initial rate
of, at our election, Base Rate plus 0.75% or Eurocurrency Rate plus 1.75%, and
after the end of our fiscal quarter ended June 30, 2018, Base Rate loans plus a
margin ranging from 0.25% to 1.00% or Eurocurrency Rate plus a margin from 1.25%
to 2.00%, based on the Consolidated Leverage Ratio (as defined in the Credit
Agreement); and (v) revise covenants including increasing the amounts available
under the restricted payment negative covenant and revising the Maximum
Consolidated Leverage Ratio (as defined in the Credit Agreement) to include a
4.5 leverage ratio through September 30, 2019 after which the leverage ratio
stepped down to 4.0.

On November 13, 2018, the Credit Agreement was amended to revise the definition of "Consolidated EBITDA" to increase corporate restructuring allowances and provide for additional flexibility under the covenants for non-core asset dispositions, among other changes.


On January 28, 2020, AECOM entered into Amendment No. 7 to the Credit Agreement
which modifies the asset disposition covenant to permit the sale of our
Management Services business and the mandatory prepayment provision so that only
outstanding term loans were prepaid using the net proceeds from the sale.

On May 1, 2020, the Company entered into Amendment No. 8 to the Credit Agreement
which allows for borrowings to be made, until three months after closing, up to
an aggregate principal amount of $400,000,000 under a secured delayed draw term
loan facility, the proceeds of which are permitted to be used to pay all or a
portion of the amounts payable in connection with any tender for or redemption
or repayment of the Company's or its subsidiaries' existing senior unsecured
notes and any associated fees and expenses. The amendment also revised certain
terms and covenants in the Credit Agreement, including by, among other things,
revising the maximum leverage ratio covenant to 4.00:1.00, subject to increases
to 4.50:1.00 for certain specified periods in connection with certain material
acquisitions, increasing the potential size of incremental facilities under the
Credit Agreement, revising the definition of "Consolidated EBITDA" to provide
for additional flexibility in the calculation thereof and adding a Eurocurrency
Rate floor of 0.75% to the interest rate under the revolving credit facility.

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On July 30, 2020, we drew $248.5 million on our secured delayed draw term loan facility for the purpose of redeeming all of the 2022 URS Senior Notes.


Under the Credit Agreement, we are subject to a maximum consolidated leverage
ratio and minimum consolidated interest coverage ratio at the end of each fiscal
quarter. Our Consolidated Leverage Ratio was 2.7 at September 30, 2020. Our
Consolidated Interest Coverage Ratio was 5.0 at September 30, 2020. As of
September 30, 2020, we were in compliance with the covenants of the Credit
Agreement.

At September 30, 2020 and September 30, 2019, outstanding standby letters of
credit totaled $19.0 million and $22.8 million, respectively, under our
revolving credit facilities. As of September 30, 2020 and September 30, 2019, we
had $1,331.0 million and $1,327.2 million, respectively, available under our
revolving credit facility.

2014 Senior Notes

On October 6, 2014, we completed a private placement offering of $800,000,000
aggregate principal amount of the unsecured 5.750% Senior Notes due 2022 (2022
Notes) and $800,000,000 aggregate principal amount of the unsecured 5.875%
Senior Notes due 2024 (the 2024 Notes and, together with the 2022 Notes, the
2014 Senior Notes). On November 2, 2015, we completed an exchange offer to
exchange the unregistered 2014 Senior Notes for registered notes, as well as all
related guarantees. On March 16, 2018, we redeemed all of the 2022 Notes at a
redemption price that was 104.313% of the principal amount outstanding plus
accrued and unpaid interest. The March 16, 2018 redemption resulted in a
$34.5 million prepayment premium, which was included in interest expense.

As of September 30, 2020, the estimated fair value of the 2024 Notes was
approximately $863.0 million. The fair value of the 2024 Notes as of September
30, 2020 was derived by taking the mid-point of the trading prices from an
observable market input (Level 2) in the secondary bond market and multiplying
it by the outstanding balance of the 2024 Notes.

On July 21, 2020, we completed a cash tender offer at par  for up to $639
million in aggregate principal amount of the 2024 Notes and the 2017 Senior
Notes. We accepted for purchase all of 2024 Notes validly tendered and not
validly withdrawn pursuant to the cash tender offer, amounting to $2.7 million
aggregate principal amount of the 2024 Notes at par. We made the cash tender
offer at par to satisfy obligations under the indentures governing the 2024
Notes and the 2017 Senior Notes relating to the use of certain cash proceeds
from our disposition of the Management Services business, which was completed on
January 31, 2020.

At any time prior to July 15, 2024, we may redeem on one or more occasions all
or part of the 2024 Notes at a redemption price equal to the sum of (i) 100% of
the principal amount thereof, plus (ii) a "make-whole" premium as of the date of
the redemption, plus any accrued and unpaid interest to the date of redemption.
In addition, on or after July 15, 2024, the 2024 Notes may be redeemed at a
redemption price of 100% of the principal amount thereof, plus accrued and
unpaid interest to the date of redemption.

The indenture pursuant to which the 2024 Notes were issued contains customary events of default, including, among other things, payment default, exchange default, failure to provide notices thereunder and provisions related to bankruptcy events. The indenture also contains customary negative covenants.

We were in compliance with the covenants relating to the 2024 Notes as of September 30, 2020.

2017 Senior Notes


On February 21, 2017, we completed a private placement offering of
$1,000,000,000 aggregate principal amount of our unsecured 5.125% Senior Notes
due 2027 (the 2017 Senior Notes) and used the proceeds to immediately retire the
remaining $127.6 million outstanding on the then existing term loan B facility
as well as repay $600 million of the term loan A facility and $250 million of
the revolving credit facility under our Credit Agreement. On June 30, 2017, we
completed an exchange offer to exchange the unregistered 2017 Senior Notes for
registered notes, as well as related guarantees.

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As of September 30, 2020, the estimated fair value of the 2017 Senior Notes was
approximately $1,069.6 million. The fair value of the 2017 Senior Notes as of
September 30, 2020 was derived by taking the mid-point of the trading prices
from an observable market input (Level 2) in the secondary bond market and
multiplying it by the outstanding balance of the 2017 Senior Notes. Interest
will be payable on the 2017 Senior Notes at a rate of 5.125% per annum. Interest
on the 2017 Senior Notes is payable semi-annually on March 15 and September 15
of each year, commencing on September 15, 2017. The 2017 Senior Notes will
mature on March 15, 2027.

At any time and from time to time prior to December 15, 2026, we may redeem all
or part of the 2017 Senior Notes, at a redemption price equal to 100% of their
principal amount, plus a "make whole" premium as of the redemption date, and
accrued and unpaid interest to the redemption date.

At any time on or after December 15, 2026, we may redeem on one or more occasions all or part of the 2017 Senior Notes at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest.

The indenture pursuant to which the 2017 Senior Notes were issued contains
customary events of default, including, among other things, payment default,
exchange default, failure to provide notices thereunder and provisions related
to bankruptcy events. The indenture also contains customary negative covenants.

We were in compliance with the covenants relating to the 2017 Senior Notes as of September 30, 2020.


URS Senior Notes

In connection with the URS acquisition, we assumed the URS 3.85% Senior Notes
due 2017 (2017 URS Senior Notes) and the URS 5.00% Senior Notes due 2022 (2022
URS Senior Notes), totaling $1.0 billion (URS Senior Notes). The URS acquisition
triggered change in control provisions in the URS Senior Notes that allowed the
holders of the URS Senior Notes to redeem their URS Senior Notes at a cash price
equal to 101% of the principal amount and, accordingly, we redeemed
$572.3 million of the URS Senior Notes on October 24, 2014. The remaining 2017
URS Senior Notes matured and were fully redeemed on April 3, 2017 for
$179.2 million using proceeds from a $185 million delayed draw term loan A
facility tranche under the Credit Agreement.

The remaining $248.5 million principal amount of the 2022 URS Senior Notes were
fully redeemed on August 31, 2020 using proceeds from a $248.5 million secured
delayed draw term loan facility under the Credit Agreement, at a redemption
price that was 106.835% of the principal amount outstanding plus accrued and
unpaid interest. The August 31, 2020 redemption resulted in a $17.0 million
prepayment premium, which was included in interest expense.

Other Debt and Other Items


Other debt consists primarily of obligations under capital leases and loans, and
unsecured credit facilities. Our unsecured credit facilities are primarily used
for standby letters of credit issued in connection with general and professional
liability insurance programs and for contract performance guarantees. At
September 30, 2020 and September 30, 2019, these outstanding standby letters of
credit totaled $510.1 million and $470.9 million, respectively. As of September
30, 2020, we had $435.3 million available under these unsecured credit
facilities.

Effective Interest Rate


Our average effective interest rate on our total debt, including the effects of
the interest rate swap agreements, during the years ended September 30, 2020,
2019 and 2018 was 5.3%, 5.1% and 5.1%, respectively.

Interest expense in the consolidated statement of operations included amortization of deferred debt issuance costs for the years ended September 30, 2020, 2019 and 2018 of $5.4 million, $5.0 million and $12.5 million, respectively.


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Other Commitments

We enter into various joint venture arrangements to provide architectural,
engineering, program management, construction management and operations and
maintenance services. The ownership percentage of these joint ventures is
typically representative of the work to be performed or the amount of risk
assumed by each joint venture partner. Some of these joint ventures are
considered variable interest. We have consolidated all joint ventures for which
we have control. For all others, our portion of the earnings is recorded in
equity in earnings of joint ventures. See Note 6, Joint Ventures and Variable
Interest Entities, in the notes to our consolidated financial statements.

Other than normal property and equipment additions and replacements,
expenditures to further the implementation of our various information technology
systems, commitments under our incentive compensation programs, amounts we may
expend to repurchase stock under our stock repurchase program and acquisitions
from time to time and disposition costs, we currently do not have any
significant capital expenditures or outlays planned except as described below.
However, if we acquire additional businesses in the future or if we embark on
other capital-intensive initiatives, additional working capital may be required.

Under our secured revolving credit facility and other facilities discussed in
Other Debt and Other Items above, as of September 30, 2020, there was
approximately $529.1 million outstanding under standby letters of credit
primarily issued in connection with general and professional liability insurance
programs and for contract performance guarantees. For those projects for which
we have issued a performance guarantee, if the project subsequently fails to
meet guaranteed performance standards, we may either incur significant
additional costs or be held responsible for the costs incurred by the client to
achieve the required performance standards.

We recognized on our balance sheet the funded status of our pension benefit
plans, measured as the difference between the fair value of plan assets and the
projected benefit obligation. At September 30, 2020, our defined benefit pension
plans had an aggregate deficit (the excess of projected benefit obligations over
the fair value of plan assets) of approximately $406.0 million. The total
amounts of employer contributions paid for the year ended September 30, 2020
were $7.0 million for U.S. plans and $27.7 million for non-U.S. plans. Funding
requirements for each plan are determined based on the local laws of the country
where such plan resides. In some countries, the funding requirements are
mandatory while in other countries, they are discretionary. There is a required
minimum contribution for one of our domestic plans; however, we may make
additional discretionary contributions. In the future, such pension funding may
increase or decrease depending on changes in the levels of interest rates,
pension plan performance and other factors. In addition, we have collective
bargaining agreements with unions that require us to contribute to various third
party multiemployer pension plans that we do not control or manage. In addition,
we have collective bargaining agreements with unions that require us to
contribute various third party multiemployer plans that we do not control or
manage. For the year ended September 30, 2020, we contributed $4.0 million to
multiemployer pension plans.

Condensed Combined Financial Information

In connection with the registration of the Company's 2014 Senior Notes that were
declared effective by the SEC on September 29, 2015, AECOM became subject to the
requirements of Rule 3-10 of Regulation S-X, as amended, regarding financial
statements of guarantors and issuers of guaranteed securities. Both the 2014
Senior Notes and the 2017 Senior Notes are fully and unconditionally guaranteed
on a joint and several basis by some of AECOM's directly and indirectly 100%
owned subsidiaries (the Subsidiary Guarantors). Other than customary
restrictions imposed by applicable statutes, there are no restrictions on the
ability of the Subsidiary Guarantors to transfer funds to AECOM in the form of
cash dividends, loans or advances.



The following tables present condensed combined summarized financial information
for AECOM and the Subsidiary Guarantors. All intercompany balances and
transactions are eliminated in the presentation of the combined financial
statements. Amounts provided do not represent our total consolidated amounts as
of September 30, 2020 and for the twelve months then ended.

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                       Condensed Combined Balance Sheets

                        Parent and Subsidiary Guarantors

                           (unaudited - in millions)




                                               September 30, 2020
Current assets                                $            3,801.9
Non-current assets                                         3,620.1
Total assets                                  $            7,422.0

Current liabilities                           $            3,175.1
Non-current liabilities                                    2,806.8
Total liabilities                                          5,981.9

Total stockholders' equity                                 1,440.1
Total liabilities and stockholders' equity    $            7,422.0




                   Condensed Combined Statement of Operations

                        Parent and Subsidiary Guarantors

                           (unaudited - in millions)




                                            For the twelve months ended
                                                September 30, 2020
Revenue                                    $                     7,437.8
Cost of revenue                                                  7,128.2
Gross profit                                                       309.6

Net loss from continuing operations                               (94.2)
Net income from discontinued operations                            130.2
Net income                                 $                        36.0

Net income attributable to AECOM           $                        36.0




Commitments and Contingencies

We record amounts representing our probable estimated liabilities relating to
claims, guarantees, litigation, audits and investigations. We rely in part on
qualified actuaries to assist us in determining the level of reserves to
establish for insurance-related claims that are known and have been asserted
against us, and for insurance-related claims that are believed to have been
incurred based on actuarial analysis, but have not yet been reported to our
claims administrators as of the respective balance sheet dates. We include any
adjustments to such insurance reserves in our consolidated results of
operations. Our reasonably possible loss disclosures are presented on a gross
basis prior to the consideration of insurance recoveries. We do not record gain
contingencies until they are realized. In the ordinary course of business, we
may not be aware that we or our affiliates are under investigation and may not
be aware of whether or not a known investigation has been concluded.

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In the ordinary course of business, we may enter into various arrangements
providing financial or performance assurance to clients, lenders, or partners.
Such arrangements include standby letters of credit, surety bonds, and corporate
guarantees to support the creditworthiness or the project execution commitments
of our affiliates, partnerships and joint ventures. Performance arrangements
typically have various expiration dates ranging from the completion of the
project contract and extending beyond contract completion in some circumstances
such as for warranties. We may also guarantee that a project, when complete,
will achieve specified performance standards. If the project subsequently fails
to meet guaranteed performance standards, we may incur additional costs, pay
liquidated damages or be held responsible for the costs incurred by the client
to achieve the required performance standards. The potential payment amount of
an outstanding performance arrangement is typically the remaining cost of work
to be performed by or on behalf of third parties. Generally, under joint venture
arrangements, if a partner is financially unable to complete its share of the
contract, the other partner(s) may be required to complete those activities.

At September 30, 2020 and 2019, we were contingently liable in the amount of
approximately $529.1 million and $493.7 million, respectively, in issued standby
letters of credit and $6.2 billion and $4.8 billion, respectively, in issued
surety bonds primarily to support project execution.

In the ordinary course of business, we enter 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.

Our registered investment adviser jointly manages and sponsors the AECOM-Canyon
Equity Fund, L.P. (the "Fund"), in which we indirectly hold an equity interest
and have an ongoing capital commitment to fund investments. At September 30,
2020, we have capital commitments of $22.1 million to the Fund over the next 8
years.

In addition, in connection with the investment activities of AECOM Capital, we
provide guarantees of certain contractual obligations, including guarantees for
completion of projects, repayment of debt, environmental indemnity obligations
and other lender required guarantees.

Department of Energy Deactivation, Demolition, and Removal Project


AECOM Energy and Construction, Inc., an Ohio corporation, a former affiliate of
the Company ("Former Affiliate") executed a cost-reimbursable task order with
the Department of Energy (DOE) in 2007 to provide deactivation, demolition and
removal services at a New York State project site that, during 2010, experienced
contamination and performance issues. In February 2011, the Former Affiliate and
the DOE executed a Task Order Modification that changed some cost-reimbursable
contract provisions to at-risk. The Task Order Modification, including
subsequent amendments, required the DOE to pay all project costs up to $106
million, required the Former Affiliate and the DOE to equally share in all
project costs incurred from $106 million to $146 million, and required the
Former Affiliate to pay all project costs exceeding $146 million.

Due to unanticipated requirements and permitting delays by federal and state
agencies, as well as delays and related ground stabilization activities caused
by Hurricane Irene in 2011, the Former Affiliate was required to perform work
outside the scope of the Task Order Modification. In December 2014, the Former
Affiliate submitted an initial set of claims against the DOE pursuant to the
Contracts Disputes Acts seeking recovery of $103 million, including additional
fees on changed work scope (the "2014 Claims"). On December 6, 2019, the Former
Affiliate submitted a second set of claims against the DOE seeking recovery of
an additional $60.4 million, including additional project costs and delays
outside the scope of the contract as a result of differing site and ground
conditions (the "2019 Claims"). The Former Affiliate also submitted three
alternative breach of contract claims to the 2014 and 2019 Claims that may
entitle the Former Affiliate to recovery of $148.5 million to $329.4 million. On
December 30, 2019, the DOE denied the Former Affiliate's 2014 Claims. On
September 25, 2020, the DOE denied the Former Affiliate's 2019 Claims. The
Company intends to appeal these decisions by December 30, 2020. Deconstruction,
decommissioning and site restoration activities are complete.

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On January 31, 2020, the Company completed the sale of its Management Services
business to the Purchaser including the Former Affiliate who worked on the DOE
project. The Company and the Purchaser agreed that all future DOE project claim
recoveries and costs will be split 10% to the Purchaser and 90% to the Company
with the Company retaining control of all future strategic legal decisions.

The Company intends to vigorously pursue all claimed amounts but can provide no
certainty that the Company will recover 2014 and 2019 Claims submitted against
the DOE, or any additional incurred claims or costs, which could have a material
adverse effect on the Company's results of operations.

New York Department of Environmental Conservation


In September 2017, AECOM USA, Inc. was advised by the New York State Department
of Environmental Conservation (DEC) of allegations that it committed
environmental permit violations pursuant to the New York Environmental
Conservation Law (ECL) associated with AECOM USA, Inc.'s oversight of a stream
restoration project for Schoharie County which could result in substantial
penalties if calculated under the ECL's maximum civil penalty provisions. AECOM
USA, Inc. disputes this claim and intends to continue to defend this matter
vigorously; however, AECOM USA, Inc. cannot provide assurances that it will be
successful in these efforts. The potential range of loss in excess of any
current accrual cannot be reasonably estimated at this time primarily because
the matter involves complex and unique environmental and regulatory issues; the
project site involves the oversight and involvement of various local, state and
federal government agencies; there is substantial uncertainty regarding any
alleged damages; and the matter is in its preliminary stages.

Refinery Turnaround Project


A Former Affiliate of the Company entered into an agreement to perform
turnaround maintenance services during a planned shutdown at a refinery in
Montana in December 2017. The turnaround project was completed in February 2019.
Due to circumstances outside of the Company's Former Affiliate's control,
including client directed changes and delays and the refinery's condition, the
Company's Former Affiliate performed additional work outside of the original
contract over $90 million and is entitled to payment from the refinery owner of
approximately $144 million. In March 2019, the refinery owner sent a letter to
the Company's Former Affiliate alleging it incurred approximately $79 million in
damages due to the Company's Former Affiliate's project performance. In April
2019, the Company's Former Affiliate filed and perfected a $132 million
construction lien against the refinery for unpaid labor and materials costs. In
August 2019, following a subcontractor complaint filed in the Thirteen Judicial
District Court of Montana asserting claims against the refinery owner and the
Company's Former Affiliate, the refinery owner crossclaimed against the
Company's Former Affiliate and the subcontractor. In October 2019, following the
subcontractor's dismissal of its claims, the Company's Former Affiliate removed
the matter to federal court and cross claimed against the refinery owner. In
December 2019, the refinery owner claimed $93.0 million in damages and offsets
against the Company's Former Affiliate.

On January 31, 2020, the Company completed the sale of its Management Services
business to the Purchaser including the Former Affiliate, however, the Refinery
Turnaround project, including related claims and liabilities, remained as part
of the Company's self-perform at-risk construction business which is classified
within discontinued operations.

The Company intends to vigorously prosecute and defend this matter; however, the
Company cannot provide assurance that the Company will be successful in these
efforts. The resolution of this matter and any potential range of loss cannot be
reasonably determined or estimated at this time, primarily because the matter
raises complex legal issues that Company is continuing to assess.

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Contractual Obligations and Commitments


The following summarizes our contractual obligations and commercial commitments
as of September 30, 2020:




Contractual Obligations and
Commitments                                        Less than        One to          Three to       More than
                                       Total       One Year       Three Years      Five Years     Five Years

                                                                  (in millions)
Debt                                 $ 2,085.0$      20.9$       262.7$      804.1$     997.3
Interest on debt                         581.5          121.9            230.4           153.7           75.5
Operating leases                       1,121.1          212.4            311.1           225.8          371.8
Pension funding obligations(1)            40.6           40.6                -               -              -
Total contractual obligations and
commitments                          $ 3,828.2$     395.8    $       

804.2 $ 1,183.6$ 1,444.6

Represents expected fiscal 2021 contributions to fund our defined benefit (1) pension and other postretirement plans. Contributions beyond one year have

    not been included as amounts are not determinable.



New Accounting Pronouncements and Changes in Accounting


In May 2014, the Financial Accounting Standards Board (FASB) issued new
accounting guidance which amended the existing accounting standards for revenue
recognition. The new accounting guidance establishes principles for recognizing
revenue upon the transfer of promised goods or services to customers, in an
amount that reflects the expected consideration received in exchange for those
goods or services. We adopted the new standard on October 1, 2018, using the
modified retrospective method, which resulted in an adjustment to retained
earnings of $7.0 million, net of tax. Detailed disclosures regarding the
adoption and other required disclosures can be found in Note 4.

In February 2016, the FASB issued new accounting guidance which changes
accounting requirements for leases. The new guidance requires lessees to
recognize the assets and liabilities arising from all leases, including those
classified as operating leases under previous accounting guidance, on the
balance sheet. It also requires disclosure of key information about leasing
arrangements to increase transparency and comparability among organizations. We
adopted the new guidance beginning October 1, 2019 using the modified
retrospective adoption method, which resulted in a downward adjustment to
retained earnings of $87.8 million, net of tax. Detailed disclosures regarding
the adoption and other required disclosures can be found in Note 11.

In June 2016, the FASB issued a new credit loss standard that changes the
impairment model for most financial assets and some other instruments. The new
guidance will replace the current "incurred loss" approach with an "expected
loss" model for instruments measured at amortized cost. It also simplifies the
accounting model for purchased credit-impaired debt securities and loans. The
guidance will be effective for the fiscal year starting October 1, 2020. We do
not expect that the adoption of this standard will have a material impact on our
consolidated financial statements.

In February 2018, the FASB issued new accounting guidance which provides
entities the option to reclassify certain tax effects from other comprehensive
income to retained earnings. The guidance addresses a narrow-scope financial
reporting issue related to the tax effects that may become stranded in
accumulated other comprehensive income as a result of the enactment of the Tax
Cuts and Jobs Act (Tax Act). Under the guidance, an entity may elect to
reclassify the income tax effects of the Tax Act on items within accumulated
other comprehensive income to retained earnings. We have determined that we will
not make this election.

In August 2018, the FASB issued new accounting guidance aligning the
capitalization of certain implementation costs incurred in a hosting arrangement
that is a service contract with previously existing guidance for capitalizing
costs incurred to develop internal-use software. The new guidance will be
effective for the fiscal year starting October 1, 2020. We do not expect that
the adoption of this guidance will have a material impact on our consolidated
financial statements.

In August 2018, the FASB issued new accounting guidance amending the disclosure
requirements for fair value measurements. These improvements will require more
disclosure for amounts measured at fair value, and specifically unobservable
inputs used in fair value measurements. We expect to adopt the new guidance
starting on October 1, 2020. We are currently evaluating the impact that the new
guidance will have on our financial reporting process.

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In March 2020, the Securities and Exchange Commission (SEC) adopted final rules
that amend the financial disclosure requirement for guarantors of registered
debt securities in Rule 3-10 of Regulation S-X. The new rules amend and
streamline the disclosures required by guarantors and issuers of guaranteed
securities. Among other things, the new disclosures may be located outside the
financial statements. The new rule is effective January 4, 2021, and early
adoption is permitted. We adopted the new rule on March 31, 2020. Accordingly,
the revised condensed consolidating financial information is presented in Item
7, Management's Discussion and Analysis of Financial Condition and Results of
Operations.

Off-Balance Sheet Arrangements

We enter into various joint venture arrangements to provide architectural,
engineering, program management, construction management and operations and
maintenance services. The ownership percentage of these joint ventures is
typically representative of the work to be performed or the amount of risk
assumed by each joint venture partner. Some of these joint ventures are
considered variable interest entities. We have consolidated all joint ventures
for which we have control. For all others, our portion of the earnings are
recorded in equity in earnings of joint ventures. See Note 6 in the notes to our
consolidated financial statements. We do not believe that we have any
off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that would be material to investors.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2021 13 223 M - -
Net income 2021 362 M - -
Net Debt 2021 670 M - -
P/E ratio 2021 22,6x
Yield 2021 -
Capitalization 7 903 M 7 903 M -
EV / Sales 2021 0,65x
EV / Sales 2022 0,62x
Nbr of Employees 54 000
Free-Float 96,8%
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Number of Analysts 9
Average target price 57,44 $
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Managers and Directors
NameTitle
W. Troy Rudd Chief Executive Officer & Director
Lara Poloni President
Douglas W. Stotlar Chairman
Gaurav Kapoor Chief Financial Officer
Sarah Urbanowicz Chief Information Officer
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