“We delivered $4.8 billion in wins and made substantial progress on our integration efforts,” said Michael S. Burke, AECOM’s chairman and chief executive officer. “Additionally, we entered the final quarter of our fiscal year with strong momentum in our pipeline, which reflects the breadth of our capabilities as well as our broad geographic and end-market exposure.”
“We continue to execute well against the priorities we set at the beginning of the year,” said Stephen M. Kadenacy, AECOM’s president and chief financial officer. “This marks the third consecutive quarter of strong cash flow and debt reduction and keeps us on track with our capital allocation priorities.”
Wins and Backlog
Wins in the quarter of $4.8 billion were driven by growth in the design business in the Americas region, which had a book-to-burn ratio1 of 1.5. After adjusting for acquisitions, total backlog grew two percent. The company’s total book-to-burn ratio1 was 1.1 for the quarter, with total backlog at June 30, 2015, of $40.4 billion.
Business Segments
In addition to providing consolidated financial results, AECOM reports separate financial information for its three segments: Design & Consulting Services (DCS), Construction Services (CS), and Management Services (MS).
Design & Consulting Services (DCS)
The DCS segment delivers planning, consulting, architectural and engineering design services to commercial and government clients worldwide in major end markets such as transportation, facilities, environmental, energy, water and government.
Revenue of $2.0 billion increased 49 percent. Constant-currency6 organic revenue decreased four percent. Adjusted operating income7 was $145 million, an increase of 48 percent.
Construction Services (CS)
The CS segment provides construction services for energy, commercial, industrial and public and private infrastructure clients.
Revenue in the quarter was $1.7 billion. On an organic basis, revenue increased 54 percent. Adjusted operating income7 was $11 million. Results were favorably impacted by strong performance in the building construction business.
Management Services (MS)
The MS segment provides program and facilities management and maintenance, training, logistics, consulting, technical assistance and systems-integration services, primarily for agencies of the U.S. government, national governments around the world, and commercial customers.
Revenue increased 296 percent to $852 million. Adjusted operating income7 was $93 million, benefiting from the strength of acquired operations and strong project execution.
Tax Rate
Inclusive of the non-controlling interest deduction — and excluding acquisition and integration related expenses, financing charges in interest expense, and amortization of intangible assets — the effective adjusted tax rate was 26.9 percent.
Impact of Acquisition-Related Accounting Items
AECOM continues to evaluate the accounting impact of recently completed acquisitions. Due to further analysis, the positive full-year adjusted EPS impact from acquisition-related accounting items is now expected to total $0.19, which is $0.11 below the company’s prior expectation. Non-cash normal profit contributed $0.02 to fiscal third quarter adjusted earnings, which is $0.09 below the company’s prior expectation. AECOM expects to recognize an $0.08 benefit from non-cash normal profit during the fiscal fourth quarter. The company’s 2015 adjusted earnings per share guidance reflect these impacts.
Cash Flow
Free cash flow3 for the quarter was $150 million. In the first nine months of the fiscal year, AECOM generated free cash flow of $427 million.
Balance Sheet
As of June 30, 2015, AECOM had $606 million of total cash and cash equivalents, $4.77 billion of debt and $976 million in unused capacity under the $1.05-billion revolving credit facility.
Fiscal 2015 Outlook
AECOM is modifying its adjusted EPS2 guidance for fiscal year 2015, which is estimated to be $3.05 to $3.45. The change reflects lower non-cash normal profit estimates. Business trends underlying updated adjusted earnings guidance remain consistent with the firm’s prior outlook. The mid-point of the range assumes approximately $110 million of realized cost-synergy benefits from the URS combination.
In addition, the company continues to expect full-year interest expense
of approximately $220 million, an adjusted tax rate8 of
approximately 30%, and a full-year share count of 151 million. Capital
expenditures9 are now forecast at approximately $110 million,
down from the prior forecast of approximately $160 million. Depreciation
expense is expected to be approximately $200 million.
