Los Angeles — AECOM Technology Corporation reported third-quarter revenue of $2.0 billion and net service revenue of $1.2 billion. Operating income equaled $92 million, reported net income was $69 million, and diluted earnings per share equaled $0.70.

“New wins of $2.2 billion in the quarter fueled record backlog of $20.5 billion, a 22-percent year-over-year increase,” said Michael S. Burke, AECOM president and chief executive officer. “Backlog increased in our construction services business and in our growth markets, including Asia and Europe. We are particularly pleased to see signs of strength in our PTS segment.”

Burke continued, “In mid-July, we announced the execution of a definitive agreement to acquire URS Corporation. This strategic combination will significantly accelerate AECOM’s vision to become the premier fully integrated infrastructure firm in the world. The acquisition is on track to close in October, and I’m pleased to report that feedback from both clients and employees has been overwhelmingly positive.”

“Year to date, we generated free cash flow of $136 million, and we are on track to achieve our full-year goal of free cash flow at least equal to net income,” added Stephen M. Kadenacy, AECOM chief financial officer. “We also continued to make progress on increasing our EBITDA margins, which were up by more than 200 basis points sequentially.”

New Wins and Backlog

New wins in the quarter of $2.2 billion benefited from a sequential increase in wins in Asia and the Middle East. The company’s book-to-burn ratio was 1.1x for the quarter, with total backlog at June 30, 2014, of $20.5 billion, up 22 percent compared to the same period last year. These results demonstrate the underlying strength of AECOM’s business as clients increasingly turn to the company for its integrated service platform and global expertise.

Business Segments

In addition to providing consolidated financial results, AECOM reports separate financial information for its two segments: Professional Technical Services (PTS) and Management Support Services (MSS).

Professional Technical Services — The PTS segment delivers planning, consulting, architecture and engineering design, as well as program and construction management services to institutional, commercial and public-sector clients worldwide.

Revenue of $1.8 billion was down 2.8 percent compared to the third quarter of fiscal year 2013, and net service revenue (NSR) increased 0.9 percent to $1.11 billion, driven by continued growth in EMEA, Asia and our construction services business in the Americas. On a constant currency basis, organic net service revenue was up 1.8 percent. Operating income decreased 15.9 percent year over year, but increased 18.7 percent sequentially.

Management Support Services — The MSS segment provides program and facilities management and maintenance, training, logistics, consulting, technical assistance and systems integration services, primarily for agencies of the U.S. government.

Revenue declined 21.3 percent to $174 million compared to the same period last year, and net service revenue declined 30.8 percent to $93 million. Declines in revenue and NSR were primarily due to the migration of operations away from Afghanistan. Additionally, recent wins in the MSS segment reflect the successful growth of this business towards higher-margin non-Department of Defense work. Operating income decreased 14.8 percent year over year, but increased 38.5 percent sequentially.

Tax Rate and Costs Associated With Acquisitions

The company’s third-quarter effective tax rate was 16.5 percent, inclusive of a non-controlling interest deduction. Its tax rate benefited from an increase in tax deductions related to U.S. operations. The lower-than-expected tax rate contributed 10 cents of EPS in the quarter. The company also incurred $8 million of acquisition-related and internal due diligence costs in the third quarter, which impacted EPS by five cents.

Cash Flow

Cash flow from operations for the quarter was $80 million. Free cash flow, which includes capital expenditures of $17 million, totaled $63 million. The company reconfirmed that it is well positioned to meet its fiscal 2014 target of generating free cash flow at least equal to its net income.

Balance Sheet

As of June 30, 2014, AECOM had $510 million of total cash and cash equivalents, $1.043 billion of debt and $1.050 billion in committed bank facilities with $1.041 billion in unused capacity.

Fiscal 2014 Outlook

The company expects that full-year EPS will be in the range of $2.50 to $2.60. This guidance assumes slightly lower NSR from the previous year, higher EBITDA margin and excludes costs associated with the recent acquisitions.

Acquisition of URS

On July 11, 2014, AECOM entered into a definitive merger agreement to acquire URS, a leading international provider of engineering, construction and technical services. The parties currently expect to close the transaction in October. Completion of the transaction, however, is subject to a number of conditions, including regulatory approvals, approval of the stock issuance proposal by AECOM stockholders and adoption of the merger agreement by URS stockholders. On Aug. 4, 2014, the Federal Trade Commission granted AECOM and URS early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

As previously announced, AECOM received a firm commitment from Bank of America to finance the full cash portion of the transaction as well as refinance a portion of existing AECOM and URS debt. The process to syndicate the new debt financing has begun. The expected capital structure at closing will include a $1.05-billion secured revolving credit facility, a $500-million secured performance letter of credit facility, a $1.3-billion secured Term Loan A, a $1.8-billion secured Term Loan B and $1.6 billion of unsecured notes.