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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

OR

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission File Number 0-52423

AECOM TECHNOLOGY CORPORATION

(Exact name of registrant as specified in its charter)

555 South Flower Street, Suite 3700
Los Angeles, California  90071

(Address of principal executive office and zip code)

(213) 593-8000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x No o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No x

As of August 1, 2011, 119,447,820 shares of the registrant’s common stock were outstanding.

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AECOM TECHNOLOGY CORPORATION

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PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

AECOM Technology Corporation
Consolidated Balance Sheets

(in thousands, except share data)

See accompanying Notes to Consolidated Financial Statements.

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AECOM Technology Corporation

Consolidated Statements of Income

(unaudited - in thousands, except per share data)

See accompanying Notes to Consolidated Financial Statements.

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AECOM Technology Corporation
Consolidated Statements of Comprehensive Income

(unaudited—in thousands)

See accompanying Notes to Consolidated Financial Statements.

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AECOM Technology Corporation
Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

See accompanying Notes to Consolidated Financial Statements.

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AECOM Technology Corporation

Notes to Consolidated Financial Statements

(unaudited)

1.              Basis of Presentation

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

The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended September 30, 2010.  The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the U.S. (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

The results of operations for the nine months ended June 30, 2011 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2011.

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

2.              New Accounting Pronouncements and Changes in Accounting

In January 2010, the Financial Accounting Standards Board (FASB) issued guidance to amend the disclosure requirements related to fair value measurements.  The Company adopted the guidance for the quarter ended March 31, 2010, except for the portion of the guidance that requires the disclosure of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements).  The Level 3 fair value measurement guidance becomes effective for the Company in its fiscal year beginning October 1, 2011.  The Company does not believe that the adoption of the separate disclosures related to Level 3 measurements in its fiscal year beginning October 1, 2011 will have a material impact on its consolidated financial statements.  Additionally, the FASB issued a new accounting standard on fair value measurements that changes certain fair value measurement principles, clarifies the requirement for measuring fair value and expands disclosure requirements, particularly for Level 3 fair value measurements.  This guidance is effective for the Company’s fiscal year beginning October 1, 2012 and is not expected to have a material impact on its consolidated financial statements.

On October 1, 2010, the Company adopted guidance issued by the FASB on revenue recognition.  The new guidance provides another alternative for determining the selling price of deliverables, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, and requires companies to allocate arrangement consideration to separate deliverables using the relative selling price method.  The adoption of the guidance did not have a material effect on the Company’s consolidated financial statements.

On October 1, 2010, the Company also adopted guidance issued by the FASB on the consolidation of variable interest entities.  The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of whether the Company has the power to direct the activities over such entities, and additional disclosures for variable interests.  Adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements, see Note 6.

In June 2011, the FASB issued guidance on the presentation of comprehensive income.  The new standard will require companies to present items of net income, items of other comprehensive income and total comprehensive income in one continuous statement or two separate consecutive statements, and companies will no longer be allowed to present items of other comprehensive income in the statement of stockholders’ equity.  The guidance also requires presentation of reclassification adjustments from other comprehensive income to net income on the face of the financial statements.  This guidance is effective for the Company’s fiscal year beginning October 1, 2012 and, although it will change the financial statement presentation, it is not expected to have a material impact on its financial condition or results of operations.

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3.              Business Acquisitions, Goodwill and Intangible Assets

The Company completed six business acquisitions during the nine months ended June 30, 2011.  Total consideration related to these acquisitions consisted of $366 million in cash, net of cash acquired, and $68.5 million in Company stock.  Business acquisitions completed during the nine months ended June 30, 2011 did not meet the quantitative thresholds to require pro forma disclosures of operating results either individually or in the aggregate based on the Company’s consolidated assets and income.  Acquisitions during the nine months ended June 30, 2011 included four separate global cost and project management consultancy firms that operated under the Davis Langdon name, including businesses in Europe and Middle East, Australia and New Zealand, Africa, and North America.  Each of the four acquisitions were separately negotiated, executed by separate purchase agreements, with no one acquisition contingent upon the other, and the businesses, although operating as part of a Swiss Verein, under which they shared certain naming and marketing rights, were not under common control or management.  Business acquisitions during the nine months ended June 30, 2011 also included RSW, Inc., an international engineering firm based in Montreal, Quebec, Canada and Spectral Services Consultants Pte. Ltd. (Spectral), a building services consultancy in India.

The changes in the carrying value of goodwill by reporting segment for the nine months ended June 30, 2011 and 2010 were as follows:

The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of June 30, 2011 and September 30, 2010, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:

At the time of acquisition, the Company preliminarily estimates the amount of the identifiable intangible assets acquired based upon historical valuations of similar acquisitions and the facts and circumstances available at the time.  The Company determines the final value of the identifiable intangible assets as soon as information is available, but not more than 12 months from the date of acquisition.  During the nine months ended June 30, 2011, the Company completed its final valuations of identifiable intangible assets for Tishman Construction Corporation (Tishman), McNeil Technologies, Inc. (McNeil), the Davis Langdon businesses, and RSW, Inc.  These final valuations were not materially different from previously recorded estimates.  The Company has yet to complete its final valuation of intangible assets for Spectral.  The Company is also in the process of finalizing deferred taxes and fair values relating to projects and leases for recent acquisitions including the Davis Langdon businesses, RSW, Inc., and Spectral.  Post-acquisition adjustments primarily relate to project related liabilities.

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Amortization of acquired intangible assets included within cost of revenue was $25.2 million and $14.5 million for the nine months ended June 30, 2011 and 2010, respectively.  The following table presents estimated amortization expense of existing intangible assets for the remainder of fiscal 2011 and for the succeeding years:

In addition to the above, amortization of acquired intangible assets included within equity in earnings of joint ventures was $2.8 million for the nine months ended June 30, 2011.  This amortization expense will be $0.3 million for the remainder of fiscal 2011.

4.              Accrued Facility Costs

Accrued facility costs primarily relate to the 2008 acquisition of Earth Tech, and are expected to be paid over the next four years.  The following table presents the accrued facility cost activity in the Company’s Professional Technical Services segment from October 1, 2010 to June 30, 2011 (in millions):

5.              Accounts Receivable—Net

Net accounts receivable consisted of the following as of June 30, 2011 and September 30, 2010:

Billed accounts receivable represent amounts billed to clients that have yet to be collected.  Unbilled accounts receivable represent revenue recognized but not yet billed pursuant to contract terms or accounts billed after the period end.  Substantially all unbilled receivables as of June 30, 2011 and September 30, 2010 are expected to be billed and collected within twelve months.  Contract retentions represent amounts invoiced to clients where payments have been withheld pending the completion of certain milestones, other contractual conditions or upon the completion of the project.  These retention agreements vary from project to project and could be outstanding for several months or years.

Allowances for doubtful accounts have been determined through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable based on current and past experience.  The increase in allowance for doubtful accounts from September 30, 2010 to June 30, 2011 was primarily due to the cessation of a project in Libya, as discussed in Note 14.

Other than the U.S. government, no single client accounted for more than 10% of the Company’s accounts receivable as of June 30, 2011 or September 30, 2010.

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6.              Joint Ventures and Variable Interest Entities

The Company’s joint ventures provide architecture, engineering, program management, construction management and operations and maintenance services.  Joint ventures, the combination of two or more partners, are generally formed for a specific project.  Management of the joint venture is typically controlled by a joint venture executive committee, comprised of a representative from the joint venture partners.  The joint venture executive committee normally provides management oversight and controls decisions which could have significant impact on the joint venture’s economics.

Some of the Company’s joint ventures have no employees and minimal operating expenses.  For these joint ventures, the Company’s employees perform work for the joint venture, which is then billed to a third-party customer by the joint venture.  These joint ventures function as pass through entities to bill the third-party customer.  For consolidated entities, the Company records the entire amount of the services performed and the costs associated with these services, including the services provided by the other joint venture partners, in the Company’s result of operations.  For certain of these joint ventures where a fee is added by an unconsolidated joint venture to client billings, the Company’s portion of that fee is recorded in equity in earnings of joint ventures.

The Company also has joint ventures that have their own employees and operating expenses, and to which the Company generally makes a capital contribution.  The Company accounts for these joint ventures either as consolidated entities or equity method investments based on the criteria further discussed below.

Adoption of new consolidation standard

Effective October 1, 2010, the Company adopted guidance issued by the FASB on the consolidation of variable interest entities (VIEs).  The new consolidation standard requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE.  The process for identifying the primary beneficiary of a VIE requires consideration of the factors which provide a party the power to direct the activities that most significantly impact the joint ventures’ economic performance, including powers granted to the joint venture’s program manager, powers contained in the joint venture governing board and, to a certain extent, a company’s economic interest in the joint venture.  The Company analyzed its joint ventures and effective October 1, 2010, prospectively classified them according to the new consolidation standard as either:

·                  a VIE that must be consolidated because the Company is the primary beneficiary or the joint venture is not a VIE and the Company holds the majority voting interest with no significant participative rights available to the other partners; or

·                  a VIE that does not require consolidation because the Company is not the primary beneficiary or the joint venture is not a VIE and the Company does not hold the majority voting interest.

Once it was determined that the Company has the power to direct the activities that most significantly impact the joint ventures’ economic performance, the Company assessed whether or not it has the obligation to absorb losses or rights to receive benefits from the entities that could potentially be significant to the entities.

The adoption of the new consolidation standard did not result in the consolidation or de-consolidation of any joint ventures that were material either individually or in the aggregate to the consolidated financial statements of the Company.  The Company has not provided financial or other support during the periods presented to any of its VIEs that it was not previously contractually required to provide.  Contractually required support provided to the Company’s joint ventures is further discussed in Note 14.

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Summary of unaudited financial information of the consolidated joint ventures is as follows:

Total revenues of the consolidated joint ventures were $461.4 million and $594.6 million for the nine months ended June 30, 2011 and 2010, respectively.  The assets of the Company’s consolidated joint ventures are restricted for use only by the particular joint venture and are not available for the general operations of the Company.

Summary of unaudited financial information of the unconsolidated joint ventures is as follows:

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7.              Disclosures About Pension Benefit Obligations

The following table details the components of net periodic benefit cost for the Company’s pension plans for the three and nine months ended June 30, 2011 and 2010:

The total amounts of employer contributions paid for the nine months ended June 30, 2011 were $17.0 million for U.S. plans and $13.0 million for non-U.S. plans.  The expected remaining scheduled annual employer contributions for the fiscal year ending September 30, 2011 are $1.3 million for U.S. plans and $6.0 million for non-U.S. plans.  During the quarter ended March 31, 2011, the Company adopted an amendment to freeze pension plan benefit accruals for certain U.K. and Ireland employee plans resulting in a curtailment gain of $4.2 million.  During the quarter ended December 31, 2009, the Company adopted an amendment to freeze pension plan benefit accruals for certain U.S. employee plans resulting in a curtailment gain of $1.9 million.  Included in other long-term liabilities are net pension liabilities of $161.0 million and $164.2 million as of June 30, 2011 and September 30, 2010, respectively.

8.              Debt

Debt consisted of the following:

The following table presents, in millions, scheduled maturities of the Company’s debt as of June 30, 2011 (which does not account for the Company’s amended and restated unsecured revolving credit facility entered into as of July 2011, as discussed in Note 16):

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Unsecured Term Credit Agreements

In September 2010, the Company entered into an unsecured term credit agreement with a syndicate of banks to support its working capital and acquisition needs.  Pursuant to the credit agreement, the Company borrowed $600 million in term loans and may borrow up to an additional $100 million in term loans upon request by the Company subject to certain conditions.  The loans under the credit agreement bear interest, at the Company’s option, at either the base rate (as defined in the credit agreement) plus an applicable margin or the Eurodollar rate (as defined in the credit agreement) plus an applicable margin.  The applicable margin for base rate loans is a range of 1.0% to 2.25% and the applicable margin for Eurodollar rate loans is a range of 2.0% to 3.25%, both based on the debt-to-earnings leverage ratio of the Company at the end of each fiscal quarter.  For the nine months ended June 30, 2011, the average interest rate was 3.1%.  Payments of the initial principal amount outstanding under the credit agreement are required on a quarterly basis beginning in September 2012.  Any remaining principal of the loans under the credit agreement is due no later than September 2014.

In September 2006, through certain wholly-owned subsidiaries, the Company entered into an unsecured term credit agreement with a syndicate of banks to facilitate dividend repatriations under Section 965 of the American Jobs Creation Act, which provided for a limited time opportunity to repatriate foreign earnings to the U.S. at a 5.25% tax rate.  The agreement provided for a $65.0 million, five-year term loan among four subsidiary borrowers and one subsidiary guarantor and was fully repaid as of June 30, 2011.  In order to obtain favorable pricing, the Company also provided a parent company guarantee.  In June 2010, certain of the Company’s wholly-owned subsidiaries entered into an amendment to this credit agreement to, among other things, permit the Company to enter into the note purchase agreement for a private placement of Unsecured Senior Notes (as described below) and permit the subsidiaries to enter into subsidiary guarantees in connection therewith.  The amounts outstanding on this credit agreement were $0.0 million and $9.1 million at June 30, 2011 and September 30, 2010, respectively.

Unsecured Senior Notes

In July 2010, the Company issued $300 million of notes to private institutional investors.  The notes consisted of $175.0 million of 5.43% Senior Notes, Series A, due July 2020 and $125.0 million of 1.00% Senior Discount Notes, Series B, due July 2022 for net proceeds of $249.8 million.  The outstanding accreted balance of Series B Notes was $77.8 million at June 30, 2011, which have an effective interest rate of 5.62%.  The Company’s obligations under the notes are guaranteed by certain subsidiaries of the Company pursuant to one or more subsidiary guarantees.

Unsecured Revolving Credit Facility

The Company has an unsecured revolving credit facility with a syndicate of banks to support its working capital and acquisition needs.  As of June 30, 2011 and September 30, 2010, the borrowing capacity under the unsecured revolving credit facility was $600 million, and pursuant to the terms of the associated credit agreement, had an expiration date of August 2012.  The facility also provided that, at the Company’s option, it could request an increase in the commitments under the facility up to a total of $750 million, subject to lender approval.  The Company could borrow, at its option, at either (a) a base rate (the greater of the federal funds rate plus 0.50% or the bank’s reference rate), or (b) an offshore, or LIBOR, rate plus a margin which ranges from 0.50% to 1.38%.  In addition to these borrowing rates, there was a commitment fee, which ranged from 0.10% to 0.25% on any unused commitment.  At June 30, 2011 and September 30, 2010, $271.3 million and $26.5 million, respectively, were outstanding under the credit facility.  At June 30, 2011 and September 30, 2010, outstanding standby letters of credit totaled $35.4 million and $31.5 million, respectively, under the credit facility.  Additionally, as of June 30, 2011, the Company had $293.3 million available under the credit facility.