Edgar Filing: AECOM TECHNOLOGY CORP

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 March 31, 2009

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)

Delaware		61-1088522
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

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 o 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):

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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 May 5, 2009, 109,142,820 shares of the registrant’s common stock were outstanding.

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AECOM TECHNOLOGY CORPORATION

INDEX

PART I.		FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets as of March 31, 2009 (unaudited) and September 30, 2008

		Condensed Consolidated Statements of Income for the Three and Six Months Ended March 31, 2009 and 2008 (unaudited)

		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended March 31, 2009 and 2008 (unaudited)

		Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended March 31, 2009 and 2008 (unaudited)

		Notes to Condensed Consolidated Financial Statements (unaudited)

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk

	Item 4.	Controls and Procedures

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings
	Item 1A.	Risk Factors
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 4	Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 6.	Exhibits

SIGNATURES

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AECOM Technology Corporation

Condensed Consolidated Balance Sheets

(in thousands, except share data)

	March 31, 2009			September 30, 2008
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	215,238		$	170,871
Cash in consolidated joint ventures	25,963			23,651
Total cash and cash equivalents	241,201			194,522
Marketable securities	—			81,449
Accounts receivable—net	1,655,497			1,638,814
Prepaid expenses and other current assets	73,629			80,243
Current assets held for sale	81,359			75,802
Deferred tax assets—net	34,161			34,420
TOTAL CURRENT ASSETS	2,085,847			2,105,250
PROPERTY AND EQUIPMENT—NET	220,088			223,017
DEFERRED TAX ASSETS—NET	41,079			45,886
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES	42,766			46,432
GOODWILL	973,865			949,089
INTANGIBLE ASSETS—NET	67,343			80,297
OTHER NON-CURRENT ASSETS	128,511			146,219
TOTAL ASSETS	$	3,559,499		$	3,596,190
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term debt	$	1,109		$	7,898
Accounts payable	382,630			406,963
Accrued expenses and other current liabilities	571,233			642,693
Billings in excess of costs on uncompleted contracts	343,241			306,610
Income taxes payable	2,848			17,744
Current liabilities held for sale	81,647			68,034
Current portion of long-term debt	13,937			24,137
TOTAL CURRENT LIABILITIES	1,396,645			1,474,079
OTHER LONG-TERM LIABILITIES	285,003			282,394
LONG-TERM DEBT	275,377			365,974
TOTAL LIABILITIES	1,957,025			2,122,447
MINORITY INTEREST	51,009			50,750
STOCKHOLDERS’ EQUITY:
Convertible preferred stock—authorized, 7,799,780; issued and outstanding, 24,724 and 26,423 shares at March 31, 2009 and September 30, 2008; respectively, $100.00 liquidation preference value	2,472			2,642
Preferred stock, Class C—authorized, 200 shares; issued and outstanding, 56 and 69 shares as of March 31, 2009 and September 30, 2008, respectively; no par value, $1.00 liquidation preference value	—			—
Preferred stock, Class E—authorized, 20 shares; issued and outstanding, 7 and 5 shares as of March 31, 2009 and September 30, 2008, respectively; no par value, $1.00 liquidation preference value	—			—
Common stock—authorized, 150,000,000 shares of $0.01 par value; issued and outstanding, 108,316,670 and 102,983,378 as of March 31, 2009 and September 30, 2008, respectively	1,083			1,030
Additional paid-in capital	1,407,158			1,309,493
Accumulated other comprehensive loss	(162,410		)	(111,549		)
Retained earnings	303,162			221,377
TOTAL STOCKHOLDERS’ EQUITY	1,551,465			1,422,993
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,559,499		$	3,596,190

See accompanying Notes to Condensed Consolidated Financial Statements.

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AECOM Technology Corporation

Condensed Consolidated Statements of Income

(unaudited - in thousands, except per share data)

	Three Months Ended March 31,					Six Months Ended March 31,
	2009			2008		2009			2008

Revenue	$	1,498,758		$	1,164,121	$	2,952,886		$	2,244,371

Cost of revenue	1,409,124			1,093,388		2,782,045			2,119,661
Gross profit	89,634			70,733		170,841			124,710

Equity in earnings of joint ventures	4,903			4,008		10,639			6,850
General and administrative expenses	23,930			15,782		41,176			28,069
Income from operations	70,607			58,959		140,304			103,491

Minority interest in share of earnings	5,732			4,798		9,178			6,077
Other expense	1,419			813		6,207			1,628
Interest income (expense), net	(2,019		)	2,061		(5,617		)	4,309
Income from continuing operations before income tax expense	61,437			55,409		119,302			100,095

Income tax expense	18,431			19,580		35,791			34,773

Income from continuing operations	43,006			35,829		83,511			65,322
Discontinued operations, net of tax	392			—		792			—
Net income	$	43,398		$	35,829	$	84,303		$	65,322

Net income allocation:
Preferred stock dividend	$	35		$	39	$	71		$	95
Net income available for common stockholders	43,363			35,790		84,232			65,227
Net income	$	43,398		$	35,829	$	84,303		$	65,322

Net income per share:
Basic
Continuing operations	$	0.40		$	0.36	$	0.79		$	0.65
Discontinued operations	0.01			—		0.01			—
	$	0.41		$	0.36	$	0.80		$	0.65

Diluted
Continuing operations	$	0.40		$	0.35	$	0.78		$	0.63
Discontinued operations	—			—		0.01			—
	$	0.40		$	0.35	$	0.79		$	0.63

Weighted average shares outstanding:
Basic	106,465			100,571		105,497			100,108
Diluted	108,148			103,454		107,384			103,240

See accompanying Notes to Condensed Consolidated Financial Statements.

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AECOM Technology Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited—in thousands)

	Three Months Ended March 31,						Six Months Ended March 31,
	2009			2008			2009			2008

Net income	$	43,398		$	35,829		$	84,303		$	65,322

Other comprehensive income (loss):
Foreign currency translation adjustments	(793		)	(160		)	(50,837		)	(1,070		)
Swap valuation	1,801			—			(1,637		)	—
Pension adjustments	3,945			1,588			1,613			1,588
Comprehensive income	$	48,351		$	37,257		$	33,442		$	65,840

See accompanying Notes to Condensed Consolidated Financial Statements.

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AECOM Technology Corporation

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

	Six Months Ended March 31,
	2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	84,303		$	65,322
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	39,134			21,340
Equity in earnings of unconsolidated joint ventures	(10,639		)	(6,850		)
Distribution of earnings from unconsolidated affiliates	10,324			9,068
Non-cash stock compensation	12,285			11,456
Excess tax benefit from share based payments	(9,856		)	(8,552		)
Foreign currency translation	(7,668		)	(475		)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(20,656		)	(165,609		)
Prepaid expenses and other assets	23,694			33,112
Accounts payable	(24,333		)	18,400
Accrued expenses and other current liabilities	(96,540		)	10,303
Billings in excess of costs on uncompleted contracts	36,631			28,262
Other long-term liabilities	(28,073		)	(13,811		)
Income taxes payable	(4,886		)	1,301
Net cash provided by operating activities from continuing operations	3,720			3,267
Net cash provided by operating activities from discontinued operations	8,056			—
Net cash provided by operating activities	11,776			3,267

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for business acquisitions, net of cash acquired	(17,920		)	(102,750		)
Net investment in unconsolidated affiliates	2,083			(1,247		)
Sales of investment securities	81,449			129,234
Purchases of investment securities	—			(9,900		)
Payments for capital expenditures	(32,665		)	(23,807		)
Net cash provided by (used in) investing activities	32,947			(8,470		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under credit agreements	285			—
Repayments of borrowings under credit agreements	(104,486		)	(5,184		)
Proceeds from issuance of common stock	98,930			5,979
Proceeds from exercise of stock options	8,711			4,979
Payments to repurchase common stock	(3,148		)	(8,650		)
Excess tax benefit from share based payments	9,856			8,552
Net cash provided by financing activities	10,148			5,676

EFFECT OF EXCHANGE RATE CHANGES ON CASH	(8,192		)	291
NET INCREASE IN CASH AND CASH EQUIVALENTS	46,679			764
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	194,522			216,911
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	241,201		$	217,675

NON-CASH INVESTING AND FINANCING ACTIVITY
Common stock issued in acquisitions	$	—		$	20,850

See accompanying Notes to Condensed Consolidated Financial Statements.

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AECOM Technology Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation

The accompanying condensed 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 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K/A for the fiscal year ended September 30, 2008.

The results of operations for the six months ended March 31, 2009 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2009.

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. Public Offering of Common Stock

In March 2009, the Company sold 4.6 million shares of its common stock in a public offering at a price per share of $20.20, for proceeds of approximately $91.6 million, net of underwriters’ discounts and offering costs.

3. Adoption of New Accounting Pronouncements

In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” (SFAS 161), which is intended to improve financial reporting of derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand the effects of such instruments and activities on an entity’s financial position, financial performance and cash flows. SFAS 161 was effective for the Company beginning on January 1, 2009. The adoption of SFAS 161 did not have a material impact on the Company’s financial statements.

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The Company utilizes derivative instruments to manage interest rate risk associated with its outstanding borrowings under the Company’s revolving credit facility. The Company entered into three and two pay-fixed interest rate swaps with an aggregate notional amount of $225.0 million during the quarters ended September 30, 2008 and March 31, 2009, respectively. The swaps are designated and qualify as cash flow hedges in accordance with the associated criteria in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133). Accordingly, the derivatives are recorded at fair value on the balance sheet, and the effective portion of changes in the fair value of the derivatives, measured quarterly, is reported in other comprehensive income. As of March 31, 2009, all five swaps were in a liability position and are recorded in accrued expenses and other long-term liabilities on the balance sheet.

The change in fair value related to the derivatives included in other comprehensive income/(loss) for the six months ended March 31, 2009 was $(1.6) million, net of tax. The expiration dates of the swap agreements are as follows:

Notional Amount (in thousands)		Expiration Date
$	50,000	May 2009
$	25,000	August 2009
$	50,000	August 2009
$	50,000	February 2010
$	50,000	August 2010

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 was effective for the Company on October 1, 2008 for all non-pension financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value in its consolidated financial statements on a recurring basis (at least annually). For pension and all other nonfinancial assets and liabilities, SFAS 157 is effective for the Company on October 1, 2009.

As it relates to its non-pension financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually), the adoption of SFAS 157 did not have a material impact on the Company’s consolidated financial statements. The Company is still in the process of evaluating the impact that SFAS 157 will have on its pension related financial assets and its other nonfinancial assets.

The following table summarizes the Company’s non-pension financial assets and liabilities measured at fair value on a recurring basis (at least annually) as of March 31, 2009 (in millions):

	March 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Deferred compensation plan assets (1)	$	4.0	$	4.0	$	—	$	—
Total assets	$	4.0	$	4.0	$	—	$	—

Deferred compensation plan liability (1)	$	81.6	$	—	$	81.6	$	—
Derivative liabilities (2)	3.2		—		3.2		—
Total liabilities	$	84.8	$	—	$	84.8	$	—

(1)	The Company maintains a self-directed, non-qualified deferred compensation plan structured as a rabbi trust (a trust established to provide a source of funds for the plan on a tax-deferred basis) for eligible highly compensated employees. As of March 31, 2009, the rabbi trust held approximately $4.0 million, or 8% of its investment assets in marketable securities valued using quoted market prices. The remaining assets, not reflected in this table, of $44.8 million are valued at cash surrender value and not subject to SFAS 157 disclosure. The related deferred compensation liability represents the fair value of the participant deferrals. For additional information about the Company’s deferred compensation plan, refer to Note 16 of the Notes to Consolidated Financial Statements in the Company’s Form 10-K/A.

(2)	The Company calculates derivative liability amounts in accordance with SFAS 133. For additional information about the Company’s derivative financial instruments, refer to Notes 1 and 15 of the Notes to Consolidated Financial Statements in the Company’s Form 10-K/A.

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As of September 30, 2007, the Company adopted certain provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (SFAS 158). SFAS 158 has an additional requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position, effective for the Company’s fiscal year ending September 30, 2009. In the first quarter of fiscal 2009, the Company changed its measurement date for the defined benefit pension plans to correspond to its fiscal year-end and recorded a charge to beginning retained earnings of $2.7 million, net of tax, for the impact of the cumulative difference in the Company’s pension expense between the two measurement dates.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). SFAS 159 allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs as described under SFAS 159. If the fair value option is elected for an instrument, SFAS 159 specifies that unrealized gains and losses for that instrument be reported in earnings at each subsequent reporting date. SFAS 159 was effective for the Company on October 1, 2008. The Company did not apply the fair value option to any of its outstanding instruments and, therefore, SFAS 159 did not have an impact on the Company’s consolidated financial statements.

4. Business Acquisitions

On July 25, 2008, the Company completed the acquisition of the Earth Tech business unit of Tyco International Ltd. (Earth Tech), pursuant to a Purchase Agreement (Purchase Agreement) dated as of February 11, 2008, by and among the Company, Tyco International Finance, S.A. and other seller parties thereto. Earth Tech provides a broad range of technical and consulting services, including architecture, engineering, and design and build services to water/wastewater, environmental, transportation, and facilities clients globally. The Company acquired Earth Tech to increase its global presence, particularly in the Americas, Europe and Australia. This acquisition also significantly strengthens the Company’s water and wastewater business, while augmenting its leadership position in the environmental, facilities and transportation sectors. The total purchase price for Earth Tech, net of proceeds from Earth Tech businesses sold to date of $90 million, as described in Note 5 below, was approximately $346 million, in cash. This total purchase price does not include the proceeds from the planned divestitures of certain Earth Tech assets being held for sale. See also Note 5. No gain or loss resulted from the sales of these operations since they were sold for amounts that materially approximated their fair values at the acquisition date. Goodwill related to Earth Tech is partially due to the fact that the values inherent in professional services businesses are largely attributable to existing human capital.

The table below presents summarized unaudited pro forma operating results assuming that the Company had acquired Earth Tech at the beginning of fiscal year ended September 30, 2008 (in millions, except per share data). Other acquisitions completed during the periods presented were not material.

	Pro Forma
	Six Months Ended
	March 31, 2008

Revenue	$	2,743
Income from operations	$	103
Net income	$	61

Earnings per share from continuing operations:
Basic	$	0.61
Diluted	$	0.59

Weighted average shares outstanding:
Basic	100.1
Diluted	103.2

Subsequent to the quarter ended March 31, 2009, the Company completed the acquisition of Savant, an international project and construction-management firm (Savant) operating across Europe and the Commonwealth of Independent States.

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5. Discontinued Operations

As part of the July 2008 acquisition of Earth Tech, the Company acquired certain non-strategic businesses that it intends to divest. Concurrent with the close of the purchase of Earth Tech, the Company divested Earth Tech’s Water & Power Technologies and North American Contract Operations businesses and Earth Tech’s Mexican operations. Additionally, the Company divested Earth Tech’s Swedish business in September 2008 and intends to divest certain international businesses and non-strategic contracts in the U.S. and Canada. As a result, certain international businesses and non-strategic contracts in the U.S. and Canada have been segregated from continuing operations and presented as discontinued operations in the accompanying Consolidated Statements of Income and Cash Flows and as held for sale in the accompanying Consolidated Balance Sheet in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

For the three and six months ended March 31, 2009, the summarized results of the discontinued operations, included in the Company’s results of operations, are as follows (in millions):

	Three Months Ended March 31, 2009		Six Months Ended March 31, 2009

Revenue	$	18.4	$	34.0

Earnings before income taxes	$	0.5	$	1.1
Income tax expense	0.1		0.3
Earnings from discontinued operations, net of tax	$	0.4	$	0.8

Pursuant to Amendment No. 2 to the Purchase Agreement of Earth Tech, by and among the Company, Tyco International Finance, S.A. and other seller parties thereto, the parties agreed to, among other things, delay the legal transfer of Earth Tech’s U.K. businesses to the Company until certain third party consents to the transaction are obtained. Pending receipt of such consents, the parties have agreed that the Company will manage the U.K. businesses. The Company has determined that it is the primary beneficiary of the U.K. businesses, as defined in FIN 46(R). Accordingly, the accompanying consolidated financial statements include the results of operations, financial position, and cash flows of the U.K. businesses. Upon receipt of the consents and transfer to the Company of legal ownership of the U.K. businesses, the Company intends to divest certain of the assets (UK Assets) of the U.K. businesses. As of March 31, 2009, AECOM has recorded $28.1 million as prepaid expenses and other current assets, $45.2 million as other non-current assets, $37.1 million as accounts payable and other current liabilities, $22.4 million as other long-term liabilities and $27.2 million as minority interest in the Consolidated Balance Sheets and $2.9 million net loss in the Consolidated Statements of Income for the six months ended March 31, 2009 relating to the UK Assets.

6. Accounts Receivable—Net

Net accounts receivable consisted of the following as of March 31, 2009 and September 30, 2008:

	March 31, 2009			September 30, 2008
	(in thousands)
Billed	$	995,291		$	971,222
Unbilled	698,635			703,271
Contract retentions	52,202			47,241
Total accounts receivable—gross	1,746,128			1,721,734
Allowance for doubtful accounts	(90,631		)	(82,920		)
Total accounts receivable—net	$	1,655,497		$	1,638,814

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 March 31, 2009 and September 30, 2008 are expected to be billed and collected within twelve months of such date. 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.

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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.

Other than the U.S. government, no single client accounted for more than 10% of the Company’s accounts receivable as of March 31, 2009 or September 30, 2008.

7. Goodwill and Acquired Intangible Assets

The changes in the carrying value of goodwill by reporting segment for the six months ended March 31, 2009 were as follows:

	September 30, 2008		Post- Acquisition Adjustments		Foreign Exchange Impact			Acquired		March 31, 2009
	(in thousands)
Professional Technical Services	$	946,263	$	48,796	$	(24,020	)	$	—	$	971,039
Management Support Services	2,826		—		—			—		2,826
Total	$	949,089	$	48,796	$	(24,020	)	$	—	$	973,865

The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of March 31, 2009 and September 30, 2008, included in intangible assets—net in the accompanying condensed consolidated balance sheets, were as follows:

	March 31, 2009				September 30, 2008
	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
	(in thousands)
Backlog	$	60,962	$	45,144	$	65,639	$	36,001
Customer Relationships	64,123		12,598		59,649		8,990
Trade-Names	2,684		2,684		2,684		2,684
Total	$	127,769	$	60,426	$	127,972	$	47,675

At the time of acquisition, the Company preliminarily estimates the amount of the identifiable intangible assets acquired based upon historical valuations and the facts and circumstances available at the time. The Company determines the value of the identifiable intangible assets as soon as possible, but not more than 12 months from the date of the acquisition. Due to the period of time it takes to finalize the allocation of purchase price, the determination of such allocation for acquisitions typically occurs in fiscal periods subsequent to the period in which the acquisition occurred. Acquisitions for which the purchase price allocation period has not ended include Earth Tech and Boyle Engineering Corporation. Earth Tech is described in Note 4 above. Boyle Engineering Corporation is a Newport Beach, California based engineering services firm that specializes in the water and wastewater markets acquired by the Company in the third quarter of fiscal 2008. Post-acquisition adjustments to goodwill primarily relate to finalizing intangible asset valuations and additional consideration paid for businesses as a result of finalizing working capital adjustments. Additionally, the Company is completing post acquisition procedures including finalizing a plan for facilities, severance, and project related liabilities.

The following table presents, in thousands, estimated amortization expense of existing intangible assets for the remainder of fiscal 2009 and for the succeeding years:

Fiscal Year	(in thousands)
2009	$	12,809
2010	11,869
2011	6,897
2012	6,897
2013	6,897
Thereafter	21,974
Total	$	67,343

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8. Disclosures About Pension Benefit Obligations

The following table details the components of net periodic benefit cost for the plans for the three and six months ended March 31, 2009 and 2008:

	Three Months Ended March 31,												Six Months Ended March 31,
	2009						2008						2009						2008
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
	(in thousands)
Components of net periodic benefit cost:
Service costs	$	462		$	1,021		$	563		$	1,086		$	925		$	2,114		$	1,126		$	2,173
Interest cost on projected benefit obligation	2,154			5,021			1,912			4,848			4,308			10,445			3,824			9,746
Expected return on plan assets	(1,959		)	(5,229		)	(1,778		)	(5,252		)	(3,918		)	(10,874		)	(3,556		)	(10,555		)
Amortization of prior service costs	(260		)	(73		)	(290		)	(102		)	(419		)	(152		)	(580		)	(205		)
Amortization of net (gain) loss	729			804			833			794			1,216			1,555			1,666			1,589
Net periodic benefit cost	$	1,126		$	1,544		$	1,240		$	1,374		$	2,112		$	3,088		$	2,480		$	2,748

The total amounts of employer contributions paid for the six months ended March 31, 2009 were $1.1 million for U.S. plans and $8.0 million for non-U.S. plans. The expected remaining scheduled annual employer contributions for fiscal year ending September 30, 2009 are $5.5 million for U.S. plans and $6.9 million for non-U.S. plans. Included in other long-term liabilities are net pension liabilities of $98.8 and $116.3 million as of March 31, 2009 and September 30, 2008, respectively.

9. Other Financial Information

The components of accumulated other comprehensive loss are as follows:

	March 31,			September 30,
	2009			2008
	(in millions)
Foreign currency translation adjustment	$	(74.0	)	$	(23.1	)
Defined benefit minimum pension liability adjustment	(86.5		)	(88.1		)
Interest rate swap valuation	(1.9		)	(0.3		)
	$	(162.4	)	$	(111.5	)

Accrued expenses consist of the following:

	March 31,		September 30,
	2009		2008
	(in millions)
Accrued salaries and benefits	$	248.7	$	315.4
Accrued contract costs	284.0		284.9
Other accrued expenses	38.5		42.4
Total accrued expenses	$	571.2	$	642.7

Accrued contract costs above include balances related to professional liability risks of $92.8 and $84.2 million as of March 31, 2009 and September 30, 2008, respectively.

10. Reportable Segments

The Company’s operations are organized into two reportable segments: Professional Technical Services and Management Support Services. This segmentation corresponds to how the Company manages its business as well as the underlying characteristics of its markets.

Management internally analyzes the results of its operations using several non-GAAP measures. One such measure is revenue, net of other direct costs. A significant portion of the Company’s revenue relates to services provided by subcontractors and other non-employees that it categorizes as other direct costs. Other direct costs are segregated from cost of revenue resulting in revenue, net of other direct costs, which is a measure of work performed by Company employees. The Company has included information on revenue, net of other direct costs, as it believes that it provides a valuable perspective on its results of operations.

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The following tables set forth summarized financial information concerning the Company’s reportable segments:

Reportable Segments:	Professional Technical Services			Management Support Services			Corporate			Total
	(in thousands)
Three Months Ended March 31, 2009
Revenue	$	1,240,355		$	258,403		$	—		$	1,498,758
Revenue, net of other direct costs (non-GAAP)	899,056			66,806			—			965,862
Gross profit	75,989			13,645			—			89,634
Gross profit as a % of revenue	6.1		%	5.3		%	—			6.0		%
Gross profit as a % of revenue, net of other direct costs (non-GAAP)	8.5		%	20.4		%	—			9.3		%
Equity in earnings of joint ventures	3,408			1,495			—			4,903
General and administrative expenses	—			—			23,930			23,930
Operating income	79,397			15,140			(23,930		)	70,607
Segment assets	3,270,739			210,076			78,684			3,559,499

Three Months Ended March 31, 2008
Revenue	$	955,067		$	209,054		$	—		$	1,164,121
Revenue, net of other direct costs (non-GAAP)	710,631			40,121			—			750,752
Gross profit	58,077			12,656			—			70,733
Gross profit as a % of revenue	6.1		%	6.1		%	—			6.1		%
Gross profit as a % of revenue, net of other direct costs (non-GAAP)	8.2		%	31.5		%	—			9.4		%
Equity in earnings of joint ventures	2,676			1,332			—			4,008
General and administrative expenses	—			—			15,782			15,782
Operating income	60,753			13,988			(15,782		)	58,959

Reportable Segments:	Professional Technical Services			Management Support Services			Corporate			Total
	(in thousands)
Six Months Ended March 31, 2009
Revenue	$	2,471,681		$	481,205		$	—		$	2,952,886
Revenue, net of other direct costs (non-GAAP)	1,745,346			110,006			—			1,855,352
Gross profit	149,916			20,925			—			170,841
Gross profit as a % of revenue	6.1		%	4.3		%	—			5.8		%
Gross profit as a % of revenue, net of other direct costs (non-GAAP)	8.6		%	19.0		%	—			9.2		%
Equity in earnings of joint ventures	6,385			4,254			—			10,639
General and administrative expenses	—			—			41,176			41,176
Operating income	156,301			25,179			(41,176		)	140,304
Segment assets	3,270,739			210,076			78,684			3,559,499

Six Months Ended March 31, 2008
Revenue	$	1,848,508		$	395,863		$	—		$	2,244,371
Revenue, net of other direct costs (non-GAAP)	1,359,156			67,182			—			1,426,338
Gross profit	110,440			14,270			—			124,710
Gross profit as a % of revenue	6.0		%	3.6		%	—			5.6		%
Gross profit as a % of revenue, net of other direct costs (non-GAAP)	8.1		%	21.2		%	—			8.7		%
Equity in earnings of joint ventures	3,708			3,142			—			6,850
General and administrative expenses	—			—			28,069			28,069
Operating income	114,148			17,412			(28,069		)	103,491

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11. Stock-Based Compensation

The fair value of the Company’s stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model. The expected term of awards granted represents the period of time the awards are expected to be outstanding. As the Company’s common stock has only been publicly-traded since May 2007, expected volatility is based on a historical volatility, for a period consistent with the expected option term, of publicly-traded peer companies. The risk-free interest rate is based on U.S. Treasury bond rates with maturities equal to the expected term of the option on the grant date. The Company uses historical data as a basis to estimate the probability of forfeitures.

The fair value of options granted during the three and six months ended March 31, 2009 and 2008 were determined using the following weighted average assumptions:

	Three Months Ended March 31,				Six Months Ended March 31,
	2009		2008		2009		2008
Dividend yield	—		—		—		—
Expected volatility	38	%	33	%	38	%	33	%
Risk-free interest rate	1.8	%	3.5	%	1.8	%	3.5	%
Term (in years)	4.5		4.5		4.5		4.5

Under SFAS No. 123R, “Share-Based Payments,” the Company’s expense related to stock options for the six months ended March 31, 2009 and 2008 was $1.9 million and $0.6 million, respectively.

Stock option activity for the six months ended March 31, 2009 and 2008 was as follows:

	2009				2008
	Number of options		Weighted average exercise price		Number of options		Weighted average exercise price
	(in thousands)				(in thousands)
Outstanding at September 30	5,309		$	11.78	7,728		$	9.27
Options granted	890		23.68		464		27.38
Options exercised	(1,030	)	8.48		(1,107	)	7.27
Options forfeited or expired	(23	)	19.67		(38	)	15.90
Outstanding at March 31	5,146		14.47		7,047		10.75

Vested and expected to vest in the future as of March 31	5,083		$	14.29	7,024		$	10.72

The weighted average grant-date fair value of stock options granted during the six months ended March 31, 2009 was $8.04.

The Company grants stock units under the Performance Earnings Program (PEP), whereby units are earned and issued dependent upon meeting established cumulative performance objectives over a three-year period. The Company recognized compensation expense relating to the PEP of $9.7 and $9.0 million during the six months ended March 31, 2009 and 2008, respectively. Additionally, the Company issued restricted stock units in March 2009 which are earned based on service conditions, resulting in compensation expense of $0.6 million during the six months ended March 31, 2009. Future compensation expense related to stock options, PEP units, and restricted stock units granted during the six months ended March 31, 2009 will be $5.0 million, $17.0 million, and $4.5 million, respectively, to be recognized over the awards’ respective vesting periods.

12. Earnings Per Share

Basic earnings per share (EPS) excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding and dilutive potential common shares for the period. The Company includes as potential common shares the weighted average dilutive effects of outstanding stock options using the treasury stock method.

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The following table sets forth a reconciliation of the denominators for basic and diluted EPS:

	Three Months Ended		Six Months Ended
	March 31, 2009	March 31, 2008	March 31, 2009	March 31, 2008
	(in thousands)
Denominator for basic earnings per share	106,465	100,571	105,497	100,108
Potential common shares:
Stock options	1,570	2,780	1,771	3,008
Other	113	103	116	124
Denominator for diluted earnings per share	108,148	103,454	107,384	103,240

For the six months ended March 31, 2009 and 2008, no options were excluded from the calculation of potential common shares because they were considered anti-dilutive.

13. Commitments and Contingencies

In accordance with SFAS No. 5, “Accounting for Contingencies,” the Company records amounts representing its estimated liabilities relating to claims, guarantees, litigation, audits and investigations. The Company’s insurance coverage contains various retention and deductible amounts for which the Company provides accruals based upon reported claims and an actuarially determined estimated liability for certain claims incurred but not reported. It is the Company’s policy not to accrue for any potential legal expense to be incurred in defending the Company’s position. The Company believes that its accruals for estimated liabilities associated with professional and other liabilities are sufficient and any excess liability beyond the accrual is not expected to have a material adverse effect on the Company’s results of operations or financial position. The Company is involved in various investigations, claims and lawsuits in the normal conduct of its business, none of which, in the opinion of management, based upon current information and discussions with counsel, is expected to have a material adverse effect on its consolidated financial position, results of operations, cash flows or its ability to conduct business. From time to time the Company establishes reserves for litigation when it considers it probable that a loss will occur.

At March 31, 2009, the Company was contingently liable in the amount of approximately $126.0 million under standby letters of credit issued primarily in connection with general and professional liability insurance programs and for payment and performance guarantees relating to domestic and overseas contracts. In addition, in some instances the Company guarantees that a project, when complete, will achieve specified performance standards. If the project subsequently fails to meet guaranteed performance standards, the Company may either incur significant additional costs or be held responsible for the costs incurred by the client to achieve the required performance standards.

In the ordinary course of business, the Company enters 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. The guarantees have various expiration dates. The maximum potential payment amount of an outstanding performance guarantee is the remaining cost of work to be performed by or on behalf of third parties. Under joint venture arrangements, if a partner is financially unable to complete its share of the contract, the other partner(s) will be required to complete those activities. The Company generally only enters into joint venture arrangements with partners who are reputable, financially sound and who carry appropriate levels of surety bonds for the project in order to adequately assure completion of their assignments. The Company does not expect that these guarantees will have a material adverse effect on its consolidated balance sheet or statements of income or cash flows.

14. Income Taxes

The effective tax rate for the six month period ended March 31, 2009 was 30.0% as compared to 34.7% for the corresponding period last year. The decrease in the effective tax rate was primarily due to the benefits from R&E credits from the current and prior years.

During the three months ended December 31, 2008, the Company concluded an examination by the California Franchise Tax Board (FTB) for the fiscal years 1990-2003 and has received a Notice of Proposed Adjustment (NOPA) from the FTB. The primary audit issue was the resolution of R&E Credits applicable to California. As a result of the NOPA and other events, the Company reduced the tax reserves for uncertain tax positions in accordance with the Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109.”

The Company is currently under examination by the Internal Revenue Service (IRS) for fiscal years 2006 and 2007. The examination process is at an early stage and the Company is unable to determine whether any material adjustments will be proposed by the IRS.

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15. Recently Issued Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141R). SFAS 141R significantly changes the way companies account for business combinations and will generally require more assets acquired and liabilities assumed to be measured at their acquisition-date fair value. Under SFAS 141R, legal fees and other transaction-related costs are expensed as incurred and are no longer included in goodwill as a cost of acquiring the business. SFAS 141R also requires, among other things, acquirers to estimate the acquisition-date fair value of any contingent consideration and to recognize any subsequent changes in the fair value of contingent consideration in earnings. In addition, restructuring costs the acquirer expected, but was not obligated to incur, will be recognized separately from the business acquisition. This accounting standard is effective beginning October 1, 2009. The Company is currently evaluating the impact of SFAS 141R on its financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (SFAS 160). SFAS 160 requires all entities to report noncontrolling interests in subsidiaries as a separate component of equity in the consolidated financial statements. SFAS 160 establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation. Under SFAS 160, companies will no longer recognize a gain or loss on partial disposals of a subsidiary where control is retained. In addition, in partial acquisitions, where control is obtained, the acquiring company will recognize and measure at fair value 100 percent of the assets and liabilities, including goodwill, as if the entire target company had been acquired. SFAS 160 is effective beginning October 1, 2009. The Company is currently evaluating the impact of SFAS 160 on its financial statements.

16. Subsequent Events

As discussed in Note 4 — Business Acquisitions, subsequent to the quarter ended March 31, 2009, the Company completed the acquisition of Savant. Savant is an international construction and project management consultancy that will expand the Company’s global presence in Europe and the Commonwealth of Independent States.

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Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

Forward-Looking Statements

This Quarterly Report contains certain forward-looking statements, including the plans and objectives of management for our business, operations and economic performance. These forward-looking statements generally can be identified by the context of the statement or the use of forward-looking terminology, such as “believes,” “estimates,” “anticipates,” “intends,” “expects,” “plans,” “is confident that” or words of similar meaning, with reference to us or our management. Similarly, statements that describe our future operating performance, financial results, financial position, plans, objectives, strategies or goals are forward-looking statements. 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 dependence on long-term government contracts, which are subject to uncertainties concerning the government’s budgetary approval process, the possibility that our government contracts may be terminated by the government, our ability to successfully manage our joint ventures, the risk of employee misconduct or our failure to comply with laws and regulations, our ability to successfully execute our mergers and acquisitions strategy, including the integration of new companies into our business, our ability to attract and retain key technical and management personnel, our ability to complete our backlog of uncompleted projects as currently projected, our liquidity and capital resources and changes in regulations or legislation that could affect us. Accordingly, actual results could differ materially from those contemplated by any forward-looking statement. In addition to the other risks and uncertainties mentioned in connection with certain forward-looking statements throughout this Quarterly Report, please review “Part II, Item 1A — Risk Factors” in this Quarterly Report for a discussion of the factors, risks and uncertainties that could affect our future results.

Unless otherwise noted, the terms “we,” “our,” “us,” and “Company” refer to AECOM Technology Corporation and its subsidiaries.

Overview

We are a leading global provider of professional technical and management support services for commercial and government clients around the world. We provide our services in a broad range of end markets and strategic geographic markets through a global network of operating offices and approximately 43,000 employees and staff employed in the field on projects.

Our business focuses primarily on providing fee-based professional technical and support services and therefore our business is labor and not capital 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. We operate our business through two segments: Professional Technical Services (PTS) and Management Support Services (MSS).

Our PTS segment delivers planning, consulting, architecture and engineering design, and program and construction management services to institutional, commercial and government clients worldwide in end markets such as transportation, facilities, environmental, and energy markets. PTS revenue is primarily derived from fees from services that we provide, as opposed to pass-through fees from subcontractors and other direct costs.

Our MSS segment provides facilities management and maintenance, training, logistics, consulting, technical assistance and systems integration services, primarily for agencies of the U.S. government. MSS revenue typically includes a significant amount of pass-through fees from subcontractors and other direct costs.

Our revenue is dependent on our ability to attract and retain qualified and productive employees, identify business opportunities, allocate our labor resources to profitable markets, secure new contracts and renew existing client agreements. Moreover, as a professional services company, maintaining the high quality of the work generated by our employees is integral to our revenue generation.

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

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Components of Income and Expense

Our management internally analyzes the results of our operations using several non-GAAP measures. A significant portion of our revenue relates to services provided by subcontractors and other non-employees that we categorize as other direct costs. Those costs are typically paid to service providers upon our receipt of payment from the client. We segregate other direct costs from revenue resulting in a measurement that we refer to as “revenue, net of other direct costs,” which is a measure of work performed by AECOM employees. We have included information on revenue, net of other direct costs, as we believe that it is useful to view our revenue exclusive of costs associated with external service providers.

The following table presents, for the periods indicated, a presentation of the non-GAAP financial measures reconciled to the closest GAAP measures:


	Six Months Ended March 31,				Year Ended September 30,
	2009		2008		2008		2007		2006		2005		2004
	(in millions)
Other Financial Data:
Revenue	$	2,953	$	2,244	$	5,194	$	4,237	$	3,421	$	2,395	$	2,012
Other direct costs	1,098		818		1,905		1,832		1,521		933		776
Revenue, net of other direct costs	1,855		1,426		3,289		2,405		1,900		1,462		1,236
Cost of revenue, net of other direct costs	1,684		1,301		3,002		2,207		1,757		1,345		1,131
Gross profit	171		125		287		198		143		117		105
Equity in earnings of joint ventures	11		6		23		12		6		2		3
Amortization expense of acquired intangible assets	13		2		18		12		15		3		—
Other general and administrative expenses	29		26		53		42		31		18		21
General and administrative expenses	42		28		71		54		46		21		21
Income from operations	$	140	$	103	$	239	$	156	$	103	$	98	$	87

Reconciliation of Cost of Revenue:
Other direct costs	$	1,098	$	818	$	1,905	$	1,832	$	1,521	$	933	$	776
Cost of revenue, net of other direct costs	1,684		1,301		3,002		2,207		1,757		1,345		1,131
Cost of revenue	$	2,782	$	2,119	$	4,907	$	4,039	$	3,278	$	2,278	$	1,907

Results of Operations

Consolidated Results

	Three Months Ended										Six Months Ended
	March 31,			March 31,		Change					March 31,			March 31,		Change
	2009			2008		$			%		2009			2008		$			%
	(in thousands)
Revenue	$	1,498,758		$	1,164,121	$	334,637		28.7	%	$	2,952,886		$	2,244,371	$	708,515		31.6	%
Other direct costs	532,896			413,369		119,527			28.9		1,097,534			818,033		279,501			34.2
Revenue, net of other direct costs	965,862			750,752		215,110			28.7		1,855,352			1,426,338		429,014			30.1
Cost of revenue, net of other direct costs	876,228			680,019		196,209			28.9		1,684,511			1,301,628		382,883			29.4
Gross profit	89,634			70,733		18,901			26.7		170,841			124,710		46,131			37.0
Equity in earnings of joint ventures	4,903			4,008		895			22.3		10,639			6,850		3,789			55.3
General and administrative expenses	23,930			15,782		8,148			51.6		41,176			28,069		13,107			46.7
Income from operations	70,607			58,959		11,648			19.8		140,304			103,491		36,813			35.6
Minority interest in share of earnings	5,732			4,798		934			19.5		9,178			6,077		3,101			51.0
Other expense	1,419			813		606			74.5		6,207			1,628		4,579			281.3
Interest income (expense), net	(2,019		)	2,061		(4,080		)	-198.0		(5,617		)	4,309		(9,926		)	-230.4
Income before income tax expense	61,437			55,409		6,028			10.9		119,302			100,095		19,207			19.2
Income tax expense	18,431			19,580		(1,149		)	-5.9		35,791			34,773		1,018			2.9
Income from continuing operations	43,006			35,829		7,177			20.0		83,511			65,322		18,189			27.8
Discontinued operations, net of tax	392			—		392			0.0		792			—		792			0.0
Net income	$	43,398		$	35,829	$	7,569		21.1	%	$	84,303		$	65,322	$	18,981		29.1	%

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The following table presents the percentage relationship of certain items to revenue, net of other direct costs:

	Three Months Ended				Six Months Ended
	March 31, 2009		March 31, 2008		March 31, 2009		March 31, 2008
Revenue, net of other direct costs	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue, net of other direct costs	90.7		90.6		90.8		91.3
Gross profit	9.3		9.4		9.2		8.7
Equity in earnings of joint ventures	0.5		0.5		0.6		0.5
General and administrative expense	2.5		2.0		2.2		1.9
Income from operations	7.3		7.9		7.6		7.3
Minority interest in share of earnings	0.6		0.6		0.5		0.4
Other expense	0.1		0.1		0.3		0.1
Interest income (expense), net	(0.2	)	0.2		(0.4	)	0.2
Income before income tax expense	6.4		7.4		6.4		7.0
Income tax expense	1.9		2.6		1.9		2.4
Income from continuing operations	4.5		4.8		4.5		4.6
Discontinued operations, net of tax	0.0		0.0		0.0		0.0
Net income	4.5	%	4.8	%	4.5	%	4.6	%

Revenue

Our revenue for the three months ended March 31, 2009 increased $334.6 million, or 28.7%, to $1.5 billion as compared to $1.2 billion for the corresponding period last year. Of this increase, $245.0 million, or 73.2%, was provided by companies acquired in the past twelve months. Excluding the revenue provided by acquired companies, revenue increased $89.6 million, or 7.7%.

Our revenue for the six months ended March 31, 2009 increased $708.5 million, or 31.6%, to $3.0 billion as compared to $2.2 billion for the corresponding period last year. Of this increase, $488.4 million, or 68.9%, was provided by companies acquired in the past twelve months. Excluding the revenue provided by acquired companies, revenue increased $220.1 million, or 9.8%.

These increases in revenue were primarily attributable to strong demand for our engineering and program management services on infrastructure projects in the United States, United Arab Emirates, Libya, Hong Kong, and Australia partially, offset by a decline in our commercial facilities business and weaker foreign currencies (primarily the British pound, Australian dollar, and Canadian dollar) as compared to their value against the U.S. dollar in the corresponding periods last year. The increase was further attributable to increased scope on our combat support project in the Middle East, increased activity on the Taji National Depot project for the United States Army that was in its initial phase in the prior year corresponding periods, and work performed on new task orders on the Contract Field Teams project with the United States Air Force.

Revenue, Net of Other Direct Costs

Our revenue, net of other direct costs for the three months ended March 31, 2009 increased $215.1 million, or 28.7%, to $965.9 million as compared to $750.8 million in the corresponding period last year. Of this increase, $155.2 million, or 72.1%, was provided by companies acquired in the past twelve months. Excluding the revenue, net of other direct costs provided by acquired companies, revenue, net of other direct costs increased $59.9 million, or 8.0%.

Our revenue, net of other direct costs for the six months ended March 31, 2009 increased $429.0 million, or 30.1%, to $1.9 billion as compared to $1.4 billion in the corresponding period last year. Of this increase, $316.0 million, or 73.7%, was provided by companies acquired in the past twelve months. Excluding the revenue, net of other direct costs provided by acquired companies, revenue, net of other direct costs increased $113.0 million, or 7.9%.

These increases in revenue, net of other direct costs were primarily due to strong demand for our engineering and program management services on infrastructure projects in the markets noted above, an increase in task orders for our Contract Field Team project, and increased activity on the Taji National Depot project resulting in increased project staffing.

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Gross Profit

Our gross profit for the three months ended March 31, 2009 increased $18.9 million, or 26.7%, to $89.6 million as compared to $70.7 million in the corresponding period last year. Of this increase, $10.6 million, or 56.1%, was provided by companies acquired in the past twelve months. Excluding gross profit provided by acquired companies, gross profit increased $8.3 million, or 11.7%. For the three months ended March 31, 2009, gross profit, as a percentage of revenue, net of other direct costs, was 9.3% as compared to 9.4% in the corresponding period last year.

Our gross profit for the six months ended March 31, 2009 increased $46.1 million, or 37.0%, to $170.8 million as compared to $124.7 million in the corresponding period last year. Of this increase, $19.9 million, or 43.2%, was provided by companies acquired in the past twelve months. Excluding gross profit provided by acquired companies, gross profit increased $26.2 million, or 21.0%. For the six months ended March 31, 2009, gross profit, as a percentage of revenue, net of other direct costs, was 9.2% as compared to 8.7% in the corresponding period last year.

The increase in gross profit, excluding acquired companies, for the three months ended March 31, 2009 was primarily attributable to the increase in revenue, net of other direct costs. The decrease in gross profit, as a percentage of revenue, net of other direct costs was primarily due to reduced margins in our MSS segment, largely offset by improved project performance in our PTS as further described below.

The increases in gross profit, excluding acquired companies, for the six months ended March 31, 2009 and gross profit, as a percentage of revenue, net of other direct costs were primarily attributable to improved project performance in our PTS segment and the increase in revenue, net of other direct costs.

Equity in Earnings of Joint Ventures

Our equity in earnings of joint ventures for the three months ended March 31, 2009 increased $0.9 million, or 22.3%, to $4.9 million as compared to $4.0 million in the corresponding period last year.

Our equity in earnings of joint ventures for the six months ended March 31, 2009 increased $3.7 million, or 55.3%, to $10.6 million as compared to $6.9 million in the corresponding period last year.

These increases in equity in earnings of joint ventures were primarily attributable to contributions by various joint ventures from companies acquired in the past twelve months, primarily Earth Tech. The increase for the six months ended March 31, 2009 was further attributable to increased volume on a joint venture providing engineering and design services at an airport in the Middle East and a joint venture for technical services for the United States Department of Energy at the Nevada Test Site.

General and Administrative Expenses

Our general and administrative expenses for the three months ended March 31, 2009 increased $8.1 million, or 51.6%, to $23.9 million as compared to $15.8 million in the corresponding period last year. For the three months ended March 31, 2009, general and administrative expenses, as a percentage of revenue, net of other direct costs was 2.5% as compared to 2.0% in the corresponding period last year.

Our general and administrative expenses for the six months ended March 31, 2009 increased $13.1 million, or 46.7%, to $41.2 million as compared to $28.1 million in the corresponding period last year. For the six months ended March 31, 2009, general and administrative expenses, as a percentage of revenue, net of other direct costs was 2.2% as compared to 1.9% in the corresponding period last year.

The increases in general and administrative expenses were primarily attributable to costs associated with the support and integration of Earth Tech and other recent acquisitions, increased staffing and other expenses related to the growth in our business noted above, and continued investments to support our strategic initiatives.

Interest Income / Expense

Our net interest expense for the three months ended March 31, 2009 was $2.0 million as compared to net interest income of $2.1 million in the corresponding period last year.

Our net interest expense for the six months ended March 31, 2009 was $5.6 million as compared to net interest income of $4.3 million in the corresponding period last year.

Table of Contents

The net interest expense for the three and six months ended March 31, 2009 as compared to the net interest income in the corresponding periods last year is primarily due to higher borrowings and lower investment balances associated with the funding of acquisitions, including Earth Tech, completed in our fiscal 2008.

Income Tax Expense

Our income tax expense for the three months ended March 31, 2009 decreased $1.2 million, or 5.9%, to $18.4 million as compared to $19.6 million in the corresponding period last year. The effective tax rate for the three months ended March 31, 2009 was 30.0% as compared to 35.3% for the corresponding period last year.

Our income tax expense for the six months ended March 31, 2009 increased $1.0 million, or 2.9%, to $35.8 million as compared to $34.8 million in the corresponding period last year. The effective tax rate for the six months ended March 31, 2009 was 30.0% as compared to 34.7% for the corresponding period last year.

The decrease in the effective tax rate was due to the recognition of the benefits from research and experimentation credits from the current and prior years.

Net Income

Net income for the three months ended March 31, 2009 increased $7.6 million, or 21.1%, to $43.4 million as compared to $35.8 million in the corresponding period last year for the reasons stated above.

Net income for the six months ended March 31, 2009 increased $19.0 million, or 29.1%, to $84.3 million as compared to $65.3 million in the corresponding period last year for the reasons stated above.

Results of Operations by Reportable Segment:

Professional Technical Services

	Three Months Ended								Six Months Ended
	March 31,		March 31,		Change				March 31,		March 31,		Change
	2009		2008		$		%		2009		2008		$		%
	(in thousands)
Revenue	$	1,240,355	$	955,067	$	285,288	29.9	%	$	2,471,681	$	1,848,508	$	623,173	33.7	%
Other direct costs	341,299		244,436		96,863		39.6		726,335		489,352		236,983		48.4
Revenue, net of other direct costs	899,056		710,631