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AECOM Technology Corporation (ACM)

F4Q 2012 Earnings Conference Call

November 13, 2012 10:00 ET


Lynn Antipas Tyson - Senior Vice President, Investor Relations

John Dionisio - Chairman and Chief Executive Officer

Mike Burke - President

Steve Kadenacy - Chief Financial Officer

Jane Chmielinski - Chief Operating Officer


Tahira Afzal - KeyBanc

Andy Kaplowitz - Barclays

Chase Jacobson - William Blair

Steven Fisher - UBS

Andrew Wittmann - Robert Baird

Saagar Parikh - KeyBanc



Good morning and welcome to the AECOM Fourth Quarter and Full Year Fiscal 2012 Earnings Conference Call. I would like to inform all participants this call is being recorded at the request of AECOM. This broadcast is the copyrighted property of AECOM. Any rebroadcast of this information in whole or part without the prior written permission of AECOM is prohibited. As a reminder, AECOM is also simulcasting this presentation with slides at the Investors section at Later, we will conduct a question-and-answer session. (Operator Instructions)

I would like to turn the call over to Lynn Antipas Tyson, Senior Vice President, Investor Relations.

Lynn Antipas Tyson - Senior Vice President, Investor Relations

Thank you, operator. Before we begin, I want to make sure that you are aware that we will be holding our Annual Analyst Meeting on December 4 in New York City. If you have not received an invitation and are interested in attending, please let me know.

I remind everyone that today’s discussion contains forward-looking statements based on the environment as we see it today, and as such, it does include risks and uncertainties. As you know, our actual results might differ materially from those projected in those forward-looking statements. Please refer to our press release or slide 2 of our earnings presentation and to our reports filed with the SEC for more information on the specific risk factors that could cause actual results to differ materially. Note that we are using some non-GAAP financial measures as references in the presentation. The appropriate GAAP financial reconciliations are posted on our website. Please also note that unless otherwise mentioned, all growth percentages refer to year-over-year progress, and all profit references are on an adjusted basis.

Beginning today’s presentation is John Dionisio, Chairman and Chief Executive Officer. John?

John Dionisio - Chairman and Chief Executive Officer

Thank you, Lynn. Good morning everyone and thanks for joining our call. With me today are Mike Burke, President; Steve Kadenacy, Chief Financial Officer; and Jane Chmielinski, Chief Operating Officer.

Before we begin our discussion on the quarter, I would like to take a moment to knowledge the efforts of everyone involved in the recovery following tropical storm Sandy. The exceptional professionalism on display by everyone helping our communities recover is nothing short of inspiring. As many of you on this call know, we have employees who live and work in areas that have been significantly impacted by this devastating storm. So, we are particularly sensitive to its impact. We are working closely with our clients to ensure the affected areas recover stronger than they were before.

Now, turning to our results. As you have seen in our press release, in the quarter, we took a non-cash goodwill impairment charge. The impairment was isolated to two areas of our business, and it in no way impacts our ability to execute on a broader basis. Steve will discuss the charge in more detail in his section.

Our results for the quarter clearly demonstrate the progress we have made to drive our performance culture committed to improved growth, profitability, and liquidity. Our client-centric focus drove a 3% increase in backlog to $16 billion supported by record wins in the Americas. Our tight execution and improved program management raised productivity. And our unyielding commitment to improve profitability lifted EBITDA margins to 12%, a record for the fourth quarter.

Relative to liquidity, free cash flow was $211 million underpinned by the work we’ve done to sustainably improve cash conversion. And our balance capital allocation strategy allowed us to invest $62 million to repurchase 3 million shares of our stock. These results demonstrate our strategy is working. However, as we plan for fiscal 2013 we do see headwinds in several developed and emerging markets. As a result we’ve taken a very pragmatic approach to our plan for fiscal 2013 with earnings per share in a range of $2.40 to $2.50.

On today’s call Steve will review the quarter including our goodwill impairments as well as give an update on our margin and cash flow initiatives and details of our fiscal 2013 guidance. Mike will follow with the strategic overview of how our capital allocation priorities are driving improved returns. And then before we turn to Q&A I’ll give you a snapshot of how our business is improving around the world.

With that, I’ll turn the call over the Steve. Steve?

Steve Kadenacy - Chief Financial Officer

Thanks John. Let me start off with the goodwill impairment. In the fourth quarter in conjunction with our annual goodwill impairment testing, we concluded that an impairment of goodwill existed and this resulted in the $317 million after tax non-cash impairment charge equal to $2.88 per share. The two drivers of the charge were our Management Support Services segment or MSS and our business in Western Europe.

During the last few quarters MSS experienced a series of challenges that began with the precipitous withdrawal as U.S. troops from Iraq last December. Though the pace of wins in MSS was healthy we have replaced the revenue loss from Iraq and this has prevented business from returning to previous profit levels. The business is growing however and we expect a sharp increase in profitability in fiscal 2013.

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