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AECOM Technology Corporation (ACM)

F4Q09 Earnings Call

November 12, 2009 11:00 am ET


Paul Cyril – Vice President Investor Relations

John M. Dionisio – President and Chief Executive Officer

Michael S. Burke – Executive Vice President and Chief Financial Officer


Steven Fisher - UBS

Andy Kaplowitz - Barclays Capital

Vance Edelson - Morgan Stanley

Avram Fisher - BMO Capital Markets

Andrea Wirth - Robert W. Baird & Co., Inc.

Joe Foresi - Janney Montgomery Scott LLC

John Rogers - D. A. Davidson & Co.

Chase Jacobson - Sterne, Agee & Leach

Sameer Rathod - Macquarie Research Equities



Good day ladies and gentlemen, and welcome to the fourth quarter AECOM earnings conference call. My name is Angela and I will be your coordinator for today. (Operator Instructions)

And now I’d like to turn the presentation over to your initial host for today’s call, Mr. Paul Cyril, Vice President Investor Relations. Please proceed sir.

Paul Cyril

Thank you Angela, and welcome everyone to AECOM’s fourth quarter 2009 earnings conference call.

If we move to Slide 2, we’ll cover the Safe Harbor statement. As we begin, let me remind everyone that today’s discussion contains forward-looking statements based on the environment as we see it today and as such does include risks and uncertainties. As you know our actual results might differ materially from those projected in these forward-looking statements. Please refer to our press release or Slide 2 of our earnings presentation and to our reports filed with the Securities and Exchange Commission for more information on specific risk factors that could cause actual results to differ materially.

As we begin our call let me remind you of some of the important information about our earnings that are posted on the Investor website, First, we posted our earnings release and updated financial statements on the site for anyone who still needs access. Second, a replay of today’s call will be posted there at around noon Eastern Time and will remain there for approximately two weeks.

Please go to Slide 3. And lastly, since we are using some non-GAAP financial measures as references, the appropriate GAAP financial reconciliations are posted on our website as well.

Presenting today will be John M. Dionisio, President and Chief Executive Officer and Michael S. Burke, Executive Vice President and Chief Financial Officer. John, please go ahead.

John M. Dionisio

Thank you Paul. Good morning everyone and thank you for joining our call today. I will begin today’s call with a few introductory remarks. I will then turn the call over to Mike who will discuss our fourth quarter and fiscal year 2009 financial performance and our outlook for 2010. Following Mike’s comments I will provide an update on market trends, recent wins and our M&A activity.

Fiscal year 2009 was a solid year for AECOM overall. Despite the global recession we executed well. AECOM has a long history of adapting to changing market conditions and 2009 was no exception. We have remained focused on driving strong performance by pursuing opportunities in our key geographies and end markets and consistently realigning our resources.

In the fourth quarter, as signs of economic recovery became more evident, many of our customers began to reactivate programs that were previously delayed or on hold. We are beginning the year with record backlog of $9.5 billion and a diversified pipeline of new opportunities including stimulus funded projects in the United States and around the world.

We have managed our business carefully throughout the economic downturn as demonstrated by our ongoing margin improvements which will position AECOM for continued profitable growth in the years to come.

With that I’d like to turn the call over to Mike. Mike, please go ahead.

Michael S. Burke

Thank you John. Please turn to Slide 6. I will begin with a review of our fourth quarter results and then briefly review our 2009 annual results.

Our fourth quarter gross revenue was flat to last year’s fourth quarter at $1.6 billion. Our net service revenue was down 2% to $989 million. Our fourth quarter results were impacted by weakness in our private facilities market and a continued slowdown in project activity as our customers focused on strategies for obtaining stimulus funding. This weakness was offset by strength in Asia, Australia, the Middle East and our federal government services sector in the United States.

Also, foreign currency headwinds continued to impact our results in the fourth quarter. On a currency neutral basis, our organic revenue growth rate was 1% and net service revenue declined 1%. Net income from continuing operations was $54 million, up 27% year-over-year due to strong execution of our margin improvement initiatives.

Diluted earnings per share from continuing operations was $0.48, up 20% year-over-year. This also reflects a 6% increase in our diluted share count.

Please turn to Slide 7. Our PTS segment accounted for 82% of our fourth quarter gross revenue. Net service revenue in our PTS segment decreased 5% from last year’s record fourth quarter to $921 million. The single largest driver of our year-over-year decline in PTS net revenue was our private facilities business, which declined nearly $45 million from a year ago. The good news is that our PTS segment backlog increased 12% over last year, which bodes well for future quarters. Operating margins in the PTS segment improved over last year, driving operating income to $91 million, a 1% increase over the fourth quarter of 2008.

Continuing operating margin improvement has been driven by our ongoing efforts to streamline our global operations and the rapid integration of our M&A transactions. Three years ago we embarked on a margin improvement initiative that is now producing the intended results.

The performance of our Management Support Services segment, which accounted for 18% of revenue in the fourth quarter, continued to be very strong. Revenue for the quarter was $292 million, up 18% over last year. This growth was entirely organic and reflects the increased activity for the U.S. Air Force under the $10 billion CFT contract. Operating income increased 64% over last year to $10 million.

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