What changed in this filing

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Item 1. Financial Statements

2021-01-29 compared with 2020-07-31 · 157 added, 277 removed, 444 unchanged (49% of the section changed)

3 unchanged sentences

(unaudited - in thousands, except par value)

ASSETS June 28,

ASSETS December 27,

2020 September 27,

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Short-term lease liabilities, operating leases 69,612 69,650

Current portion of long-term debt 12,654 12,572

Current portion of long-term debt and other short-term borrowings 26,179 49,264

Current contingent earn-out liabilities 10,945 16,142

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Preferred stock - authorized, 2,000 shares of $ 0.01 par value;

no shares issued and outstanding at June 28, 2020 and September 29, 2019

no shares issued and outstanding at December 27, 2020 and September 27, 2020

Common stock - authorized, 150,000 shares of $ 0.01 par value;

issued and outstanding, 53,888 and 54,565 shares at June 28, 2020 and September 29, 2019, respectively

Additional paid-in capital — 78,132

issued and outstanding, 54,193 and 53,797 shares at December 27, 2020 and September 27, 2020, respectively

Accumulated other comprehensive loss ( 127,919 ) ( 161,786 )

8 unchanged sentences

(unaudited – in thousands, except per share data)

Three Months Ended Nine Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended

2020 December 29,

Revenue $ 765,104 $ 797,623

3 unchanged sentences

Selling, general and administrative expenses ( 50,058 ) ( 46,435 )

Contingent consideration – fair value adjustments ( 50 ) — 1,521 ( 28 )

Income from operations 66,252 63,302

15 unchanged sentences

(unaudited – in thousands)

Three Months Ended Nine Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended

2020 December 29,

Net income $ 52,448 $ 47,317

2 unchanged sentences

32,393 13,901

Loss on cash flow hedge valuations, net of tax ( 30 ) ( 4,289 ) ( 5,726 ) ( 11,067 )

Other comprehensive income (loss) attributable to Tetra Tech, net of tax 21,659 1,139 ( 17,148 ) ( 19,728 )

Other comprehensive income (loss) attributable to noncontrolling interests, net of tax ( 4 ) 3 ( 6 ) 242

Gain on cash flow hedge valuations, net of tax 1,476 1,670

Other comprehensive income, net of tax 33,869 15,571

Comprehensive income, net of tax $ 86,317 $ 62,888

Comprehensive income attributable to Tetra Tech, net of tax $ 67,156 $ 50,372 $ 112,057 $ 127,413

Comprehensive income attributable to noncontrolling interests, net of tax 14 9

Comprehensive income, net of tax $ 67,158 $ 50,393 $ 112,080 $ 127,741

Comprehensive income attributable to Tetra Tech, net of tax $ 86,303 $ 62,879

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(unaudited – in thousands)

Nine Months Ended

2020 June 30,

Three Months Ended

2020 December 29,

Cash flows from operating activities:

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Deferred income taxes 954 2,173

Provision for doubtful accounts 5,145 16,489

Fair value adjustments to contingent consideration ( 1,521 ) 28

Gain on sale of property and equipment ( 7 ) ( 897 )

Changes in operating assets and liabilities, net of effects of business acquisitions:

Changes in operating assets and liabilities:

Accounts receivable and contract assets ( 11,400 ) 44,040

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Income taxes receivable/payable 2,452 3,096

Net cash provided by operating activities 194,550 113,385

Net cash provided by (used in) operating activities 33,180 ( 18,024 )

Cash flows from investing activities:

Payments for business acquisitions, net of cash acquired ( 28,505 ) ( 35,884 )

Capital expenditures ( 1,795 ) ( 3,331 )

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Payments of contingent earn-out liabilities ( 7,037 ) ( 9,236 )

Net cash used in financing activities ( 152,584 ) ( 47,306 )

Principal payments on finance leases ( 538 ) —

Net cash (used in) provided by financing activities ( 32,827 ) 8,806

Effect of exchange rate changes on cash, cash equivalents and restricted cash 7,356 2,200

Net increase in cash, cash equivalents and restricted cash 20,929 20,910

Net increase (decrease) in cash, cash equivalents and restricted cash 5,923 ( 9,894 )

Cash, cash equivalents and restricted cash at beginning of period 157,515 120,901

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$ 5,696 $ 5,579

Supplemental disclosures of non-cash investing activities:

Reconciliation of cash, cash equivalents and restricted cash:

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Consolidated Statements of Stockholders' Equity

Three Months Ended June 30, 2019 and June 28, 2020

(unaudited – in thousands)

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Retained

Earnings Total

Equity Non-Controlling

Interests Total

Shares Amount

BALANCE AT MARCH 31, 2019 54,947 $ 549 $ 111,277 $ ( 148,217 ) $ 1,026,837 $ 990,446 $ 160 $ 990,606

Net income 49,233 49,233 18 49,251

Other comprehensive income 1,139 1,139 3 1,142

Cash dividends of $ 0.15 per common share

( 8,219 ) ( 8,219 ) ( 8,219 )

Stock-based compensation 4,122 4,122 4,122

Restricted & performance shares released 1 1 ( 34 ) ( 33 ) ( 33 )

Stock options exercised 142 1 3,923 3,924 3,924

Stock repurchases ( 376 ) ( 4 ) ( 24,996 ) ( 25,000 ) ( 25,000 )

BALANCE AT JUNE 30, 2019 54,714 $ 547 $ 94,292 $ ( 147,078 ) $ 1,067,851 $ 1,015,612 $ 181 $ 1,015,793

BALANCE AT MARCH 29, 2020 54,142 $ 541 $ 10,473 $ ( 199,391 ) $ 1,138,485 $ 950,108 $ 130 $ 950,238

Net income 45,497 45,497 6 45,503

Other comprehensive income (loss) 21,659 21,659 ( 4 ) 21,655

Distributions paid to noncontrolling interests — — —

Cash dividends of $ 0.17 per common share

( 9,175 ) ( 9,175 ) ( 9,175 )

Stock-based compensation 4,057 4,057 4,057

Restricted & performance shares released ( 5 ) 0 ( 45 ) ( 45 ) ( 45 )

Stock options exercised 14 0 336 336 336

Stock repurchases ( 263 ) ( 2 ) ( 14,821 ) ( 4,720 ) ( 19,543 ) ( 19,543 )

BALANCE AT JUNE 28, 2020 53,888 $ 539 $ — $ ( 177,732 ) $ 1,170,087 $ 992,894 $ 132 $ 993,026

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Nine Months Ended June 30, 2019 and June 28, 2020

Three Months Ended December 29, 2019 and December 27, 2020

(unaudited – in thousands)

9 unchanged sentences

Net income 47,310 47,310 7 47,317

Other comprehensive (loss) income ( 19,728 ) ( 19,728 ) 242 ( 19,486 )

Other comprehensive income 15,569 15,569 2 15,571

Distributions paid to noncontrolling interests — ( 13 ) ( 13 )

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Stock repurchases ( 244 ) ( 2 ) ( 21,175 ) ( 21,177 ) ( 21,177 )

Cumulative effect of accounting changes ( 2,766 ) ( 2,766 ) ( 2,766 )

BALANCE AT JUNE 30, 2019 54,714 $ 547 $ 94,292 $ ( 147,078 ) $ 1,067,851 $ 1,015,612 $ 181 $ 1,015,793

BALANCE AT DECEMBER 29, 2019 54,728 $ 547 $ 60,747 $ ( 145,015 ) $ 1,110,312 $ 1,026,591 $ 174 $ 1,026,765

BALANCE AT SEPTEMBER 27, 2020 53,797 $ 538 $ — $ ( 161,786 ) $ 1,198,567 $ 1,037,319 $ 54 $ 1,037,373

Net income 52,436 52,436 12 52,448

Other comprehensive loss ( 17,148 ) ( 17,148 ) ( 6 ) ( 17,154 )

Distributions paid to noncontrolling interests — ( 69 ) ( 69 )

Other comprehensive income 33,867 33,867 2 33,869

Cash dividends of $ 0.17 per common share

5 unchanged sentences

Stock repurchases ( 135 ) ( 1 ) ( 5,757 ) ( 9,242 ) ( 15,000 ) ( 15,000 )

BALANCE AT JUNE 28, 2020 53,888 $ 539 $ — $ ( 177,732 ) $ 1,170,087 $ 992,894 $ 132 $ 993,026

BALANCE AT DECEMBER 27, 2020 54,193 $ 542 $ — $ ( 127,919 ) $ 1,232,563 $ 1,105,186 $ 68 $ 1,105,254

See Notes to Consolidated Financial Statements.

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The results of operations and cash flows for any interim period are not necessarily indicative of results for the full year or for future years.

In the first quarter of fiscal 2020, we adopted Accounting Standards Update ("ASU") 2016-02 "Leases (Topic 842)", using the modified retrospective method.

The new guidance was applied to leases that existed or were entered into on or after September 30, 2019.

Our current year financial statements have been presented under Leases (Topic 842).

However, the prior-year financial statements have not been adjusted and continue to be reported in accordance with previous guidance.

See Note 8, "Leases" for further discussion of the adoption and the impact on our financial statements.

Certain reclassifications were made to the prior year to conform to current year presentation.

Recent Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board ("FASB") issued accounting guidance on hedging activities.

The amendment better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.

The guidance was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018 (first quarter of fiscal 2020 for us).

The adoption of this guidance had no impact on our consolidated financial statements.

In February 2018, the FASB issued guidance on reclassification of certain tax effects from accumulated comprehensive income, which allows for a reclassification of stranded tax effects from the Tax Cuts and Jobs Act ("TCJA") from accumulated other comprehensive income to retained earnings.

The guidance was effective for fiscal years beginning after December 15, 2018 (first quarter of fiscal 2020 for us).

We did not reclassify our stranded effects from the TCJA, which were immaterial.

In June 2016, the FASB issued updated guidance related to the measurement of credit losses for certain financial assets.

This guidance requires us to use a current lifetime expected credit loss methodology to measure impairments rather than incurred losses.

Under this methodology, we would recognize an impairment allowance equal to our current estimate of all contractual cash flows that we do not expect to collect.

In June 2016, the Financial Accounting Standards Board ("FASB") issued updated guidance, Accounting Standards Update ("ASU") 2016-13, related to the measurement of credit losses for certain financial assets.

This guidance replaces the current incurred loss methodology with an expected credit loss methodology.

It requires us to recognize an allowance equal to our current estimate of all contractual cash flows that we do not expect to collect.

Our estimate would consider relevant information about past events, current conditions, and reasonable and supportable forecasts impacting the collectability of the reported amounts.

The guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019 (first quarter of fiscal 2021 for us).

Early adoption is permitted.

We are currently evaluating the impact of this guidance, but we do not expect it to have a material impact on our consolidated financial statements.

We adopted this guidance in the first quarter of fiscal 2021, and the adoption did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued updated guidance modifying certain fair value measurement disclosures.

The guidance contains additional disclosures to enable users of the financial statements to better understand the entity’s assumption used to develop significant unobservable inputs for Level 3 fair value measurements, but also eliminates the requirement for entities to disclose the amount of and reasons for transfers between Level 1 and Level 2 investments within the fair value hierarchy.

This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019 (first quarter of fiscal 2021 for us).

Early adoption is permitted.

We do not expect the adoption of this guidance to have a significant impact on our consolidated financial statements.

The guidance contains additional disclosures to enable users of the financial statements to better understand the entity’s assumptions used to develop significant unobservable inputs for Level 3 fair value measurements, but also eliminates the requirement for entities to disclose the amount of and reasons for transfers between Level 1 and Level 2 investments within the fair value hierarchy.

We adopted this guidance in the first quarter of fiscal 2021, and the adoption did not have a material impact on our consolidated financial statements.

In December 2019, the FASB issued guidance simplifying the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and amending certain existing guidance for clarity.

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Early adoption is permitted.

We do not expect the adoption of this guidance to have an impact on our consolidated financial statements.

In May 2020, the U.S.

Securities and Exchange Commission issued guidance amending certain financial disclosures about acquired and disposed businesses.

We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In May 2020, the Securities and Exchange Commission issued guidance amending certain financial disclosures about acquired and disposed businesses.

The amendments are designed to assist registrants in making more meaningful determinations of whether a subsidiary or an acquired or disposed business is significant, and to improve the related disclosure requirements.

The guidance is effective for fiscal years beginning after December 31, 2020 (first quarter of fiscal 2022 for us).

We do not expect the adoption of this guidance to have an impact on our consolidated financial statements.

We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Revenue and Contract Balances

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We disaggregate revenue by client sector and contract type, as we believe it best depicts how the nature, timing, and uncertainty of revenue and cash flows are affected by economic factors.

The following tables provide information about disaggregated revenue:

Three Months Ended Nine Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

The following tables present revenue disaggregated by client sector and contract type:

Three Months Ended

2020 December 29,

(in thousands)

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federal government contracts performed outside the United States.

(2) Includes revenue generated from foreign operations, primarily in Canada, Australia and the United Kingdom, and revenue generated from non-U.S.

(2) Includes revenue generated from foreign operations, primarily in Canada, Australia, the United Kingdom, and revenue generated from non-U.S.

Other than the U.S.

federal government, no single client accounted for more than 10% of our revenue for the three and nine months ended June 28, 2020 and June 30, 2019 .

federal government, no single client accounted for more than 10% of our revenue for the three months ended December 27, 2020 and December 29, 2019.

Contract Assets and Contract Liabilities

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In addition, many of our time and materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings.

Contract retentions, included in contract assets, represent amounts withheld by clients until certain conditions are met or the project is completed, which may extend beyond one year.

Contract liabilities consist of billings in excess of revenue recognized.

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Net contract liabilities $ ( 107,699 ) $ ( 79,273 )

(1) Includes $ 19.9 million and $ 26.5 million of contract retentions as of June 28, 2020 and September 29, 2019, respectively.

In the first nine months of fiscal 2020, we recognized revenue of approximate ly $ 106 million from amounts included in the contract liability balance at the end of fiscal 2019, compared to approximately $ 84 million for the co mparative prior-year period.

(1) Includes $ 8.5 million and $ 12.3 million of contract retentions as of December 27, 2020 and September 27, 2020, respectively.

In the first quarter of fiscal 2021, we recognized revenue of approximate ly $ 60 million from amounts included in the contract liability balance at the end of fiscal 2020, compared to approximately $ 64 million for the same period last year.

We recognize revenue primarily using the cost-to-cost measure of progress method, which involves the estimates of progress towards completion.

Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the period in which such changes are made.

As a result, we recognized immaterial operating income adjustments in the third quarter of fiscal 2020 and net unfavorable operating income adjustments of $ 2.8 million in the first nine months of fiscal 2020 compared to net favorable operating income adjustments of $ 8.2 million and $ 5.0 million for the prior-year periods in the third quarter and first nine months of fiscal 2019, respectively.

For the first quarters of fiscal 2021 and 2020, these net adjustments to our operating income were immaterial.

Changes in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediately in earnings.

As of June 28, 2020 and September 29, 2019, our consolidated balance sheets included liabilities for anticipated losses of $ 19.5 million and $ 11.5 million, respectively.

The estimated cost to complete the related contracts as of June 28, 2020 was approxima tely $ 96 million.

As of December 27, 2020 and September 27, 2020, our consolidated balance sheets included liabilities for anticipated losses of $ 11.4 million and $ 13.2 million, respectively.

The estimated cost to complete the related contracts as of December 27, 2020 was approxima tely $ 135 million .

Accounts Receivable, Net

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Unbilled accounts receivable, which represent an unconditional right to payment subject only to the passage of time, include unbilled amounts typically resulting from revenue recognized but not yet billed pursuant to contract terms or billed after the period end date.

Most of our unbilled receivables at June 28, 2020 are expected to be billed and collecte d within 12 months.

Most of our unbilled receivables at December 27, 2020 are expected to be billed and collecte d within 12 months.

The allowance for doubtful accounts represents amounts that are expected to become uncollectible or unrealizable in the future.

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and general economic and industry conditions, including the potential impacts of the coronavirus disease 2019 ("COVID-19") pandemic, that may affect our clients' ability to pay.

Total accounts receivable at June 28, 2020 and September 29, 2019 included approximately $ 14 million and $ 15 million, respectively, related to claims, including requests for equitable adjustment, on contracts that provide for price redeterminat ion.

We regularly evaluate all unsettled claim amounts and record appropriate adjustments to operating earnings when it is probable that the claim will result in a different contract value than the amount previously estimated.

In the first nine months of fiscal 2020, we recorded net losses in operating income related to claims of $ 4.4 million in our Commercial/

International Services Group ("CIG") segment.

I n the first nine months of fiscal 2019, we recognized reductions of revenue of $ 4.8 million and $ 4.2 million related to claims and corresponding losses in operating income of $ 5.9 million and $ 4.2 million in our Remediation and Construction Management ("RCM") and CIG segments, respectively.

No single client accounted for more than 10% of our accounts receivable at June 28, 2020 and September 29, 2019.

Total accounts receivable at December 27, 2020 and September 27, 2020 included approximate ly $ 14 million for each period (all in our Remediation Construction Management ("RCM") segment) , r elated to claims, including requests for equitable adjustment, on contracts that provide for price redeterminat ion .

Claims are amounts in excess of agreed contract prices that we seek to collect from our clients or other third parties for delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price, or other causes of unanticipated additional costs.

Factors considered in determining whether revenue associated with claims (including change orders in dispute and unapproved change orders in regards to both scope and price) should be recognized include the following:

(a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in our performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable.

This can lead to a situation in which costs are recognized in one period and revenue is recognized in a subsequent period when a client agreement is obtained, or a claims resolution occurs.

We regularly evaluate all unsettled claim amounts and record appropriate adjustme nts to operating earnings when it is probable that the claim will result in a different contract value than the amount previously estimated.

In the first quarters of fiscal 2021 and 2020, we recorded no material gains or losses related to claims.

No single client accounted for more than 10% of our accounts receivable at December 27, 2020 and September 27, 2020.

Remaining Unsatisfied Performance Obligations (“RUPOs”)

Our RUPOs represent a measure of the total dollar value of work to be performed on contracts awarded and in progress.

We had $ 3.0 billion of RUPOs as of June 28, 2020.

We had $ 3.2 billion of RUPOs as of December 27, 2020.

RUPOs increase with awards from new contracts or additions on existing contracts and decrease as work is performed and revenue is recognized on existing contracts.

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We include a contract within our RUPOs when the contract is awarded and an agreement on contract terms has been reached.

We expect to satisfy our RUPOs as of June 28, 2020 over the following periods:

We expect to satisfy our RUPOs as of December 27, 2020 over the following periods:

(in thousands)

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The fair value of the purchase price w as $ 40.9 million.

T his amount was comprised of $ 30.0 million in initial cash payments made to the sellers, $ 0.5 million of receivables related to estimated post-closing adjustments for net assets acquired, and $ 11.3 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 20.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition.

In the second quarter of fiscal 2019, we acquired eGlobalTech ("EGT"), a high-end information technology solutions, cloud migration, cybersecurity, and management consulting firm based in Arlington, Virginia.

EGT is part of our GSG segment.

The fair value of the purchase price was $ 49.1 million.

This amount was comprised of a $ 24.7 million promissory note issued to the sellers (which was subsequently paid in full in the third quarter of fiscal 2019), $ 3.3 million of payables related to estimated post-closing adjustments for net assets acquired, and $ 21.1 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 25.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition.

In the fourth quarter of fiscal 2019, we acquired WYG plc (“WYG”), which employs approximately 1,600 staff primarily in the United Kingdom and Europe, delivering consulting and engineering solutions for complex projects across key service areas including planning, water and environment, transport, infrastructure, the built environment, architecture, urban design, surveying, asset management, program management, and international development.

WYG’s United Kingdom based consulting and engineering business is part of our CIG segment, while its international development business is part of our GSG segment.

The fair value of the purchase price was $ 54.2 million, entirely paid in cash.

In addition, we assumed a net debt of $ 11.5 million, which was subsequently paid in full in the fourth quarter of fiscal 2019.

We also incurred $ 10.4 million in acquisition and transaction costs related to the WYG acquisition in the fourth quarter of fiscal 2019.

T his amount was comprised of $ 29.6 million in initial cash payments made to the sellers, and $ 11.3 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 20.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition.

In the fourth quarter of fiscal 2020, we acquired BlueWater Federal Solutions, Inc.

("BWF"), a leading information technology management consulting firm based in Chantilly, Virginia.

BWF is part of our GSG segment.

The fair value of the purchase price w as $ 47.7 million.

T his amount was comprised of $ 41.8 million in initial cash payments made to the sellers, $ 0.7 million of payables related to estimated post-closing adjustments for net assets acquired, and $ 5.2 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 8.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition.

Goodwill additions resulting from the above business combinations are primarily attributable to the existing workforce of the acquired companies and the synergies expected to arise after the acquisitions.

The goodwill additions related to our fiscal 2019 acquisitions represent the value of a workforce with emerging technology and new techniques that incorporate artificial

intelligence, data analytics and advanced cybersecurity solutions for government and commercial clients, and expanding our geographic presence in the United Kingdom with a strong platform for growth in the United Kingdom and Europe.

The fiscal 2020 goodwill addition represents the value of a workforce with distinct expertise in the high-end information technology field, in the areas of data analytics, modeling and simulation, cloud, and agile software development.

The fiscal 2020 goodwill additions represent the value of a workforce with distinct expertise in the high-end information technology field, in the areas of data analytics, modeling and simulation, cloud, and agile software development.

In addition, these acquired capabilities, when combined with our existing global consulting and engineering business, result in opportunities that allow us to provide services under contracts that could not have been pursued individually by either us or the acquired companies.

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The fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates.

For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair value of contingent consideration as a liability in “Current contingent earn-out liabilities” and “Long-term contingent earn-out liabilities” on the consolidated balance sheets.

and “Long-term contingent earn-out liabilities” on the consolidated balance sheets.

We consider several factors when determining that contingent earn-out liabilities are part of the purchase price, including the following:

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Any amount paid in excess of the contingent earn-out liability on the acquisition date is reflected as cash used in operating activities in our consolidated statements of cash flows.

We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates.

We evaluated our estimated fair value of contingent consideration liabilities for each individual acquisition on a quarterly basis, which included a review of their financial results to-date, the status of ongoing projects in their RUPOs, and the inventory of prospective new contract awards.

We also considered the potential impact of the global economic disruption due to the COVID-19 pandemic on our operating income projections over the various earn-out periods.

The updated fair value could differ materially from the initial estimates.

Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present value calculation are reported in interest expense.

Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.

In each quarter during the first nine months of fiscal 2020, we evaluated our estimates for contingent consideration liabilities for the remaining earn-out periods for each individual acquisition, which included a review of their financial results to-date, the status of ongoing projects in their RUPOs, and the inventory of prospective new contract awards.

In addition, we considered the potential impact of the global economic disruption due to the COVID-19 pandemic on our operating income projections over the various earn-out periods.

As a result, we had a net reduction of $ 1.5 million in our contingent earn-out liabilities as of June 28, 2020 and a net gain of $ 1.5 million in our operating income for the first nine months of fiscal 2020 (substantially all in the second quarter).

These adjustments were immaterial for the first nine months of fiscal 2019.

At June 28, 2020, there was a total potential maximu m of $ 65.9 million of outs tanding contingent consideration related to acquisitions.

For the first quarters of fiscal 2021 and 2020, we had no material adjustments to our contingent earn-out liabilities in operating income .

At December 27, 2020, there was a total potential maximu m of $ 63.9 million of outs tanding contingent consideration related to acquisitions.

Of this amount, $ 26.0 million was estimated as the fair value and accrued on our consolidated balance sheet.

If the global economic disruption due to the COVID-19 pandemic is prolonged, we could have more significant reductions in our contingent earn-out liabilities and related gains in operating income in future periods.

If the global economic disruption related to the COVID-19 pandemic is prolonged, we could have more significant reductions in our contingent earn-out liabilities and related gains in our operating income in future periods.

Goodwill and Intangible Assets

The following table summarizes the changes in the carrying value of goodwill:

The following table summarizes the changes in the carrying value of goodwill by reportable segment:

GSG CIG Total

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Balance at September 27, 2020 $ 516,315 $ 477,183 $ 993,498

Acquisition activity 35,520 5,294 40,814

Translation 5,834 18,577 24,411

Balance at June 28, 2020 $ 474,464 $ 483,698 $ 958,162

The goodwill addition in GSG relates to the SEG acquisition completed in the second quarter of fiscal 2020.

The purchase price allocation for this acquisition is preliminary and subject to adjustment based upon the final determination of the net assets acquired and information to perform the final valuation.

Our goodwill was impacted by foreign currency translation related to our foreign subsidiaries with functional currencies that are different than our reporting currency.

The goodwill amounts above are presented net of any reductions from historical impairment adjustments.

The gross amounts of goodwill for GSG were $ 492.2 million and $ 459.5 million at June 28, 2020 and September 29, 2019, respectively, excluding $ 17.7 million of accumulated impairment.

The gross amounts of goodwill for CIG were $ 589.4 million and $ 588.7 million at June 28, 2020 and September 29, 2019, respectively, excluding $ 105.7 million of accumulated impairment.

Balance at December 27, 2020 $ 522,149 $ 495,760 $ 1,017,909

Our goodwill balances reflect foreign currency translation adjustments related to our foreign subsidiaries with functional currencies that are different than our reporting currency.

These amounts are presented net of reductions from historical impairment adjustments.

The gross amounts of goodwill for GSG were $ 539.9 million and $ 534.0 million at December 27, 2020 and September 27, 2020, respectively, excluding accumulated impairment of $ 17.7 million for each period.

The gross amounts of goodwill for CIG were $ 617.3 million and $ 598.7 million at December 27, 2020 and September 27, 2020, respectively, excluding accumulated impairment of $ 121.5 million for each period.

We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter.

Our most recent annual review at July 1, 2019 (i.e.

Our most recent annual review at June 29, 2020 (i.e.

the first day of our fourth quarter in fiscal 2020) indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill.

All of our reporting units had estimated fair values that exceeded their carrying values by more than 80 %, with the exception of our Asia/Pacific ("ASP") reporting unit, which is in our CIG reportable segment.

Our ASP reporting unit had an estimated fair value that exceeded its carrying value by less than 20 %.

We also regularly evaluate whether events and circumstances have occurred that may indicate a potential change in the recoverability of goodwill.

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Although we believe that our estimates of fair value for these reporting units are reasonable, if financial performance for these reporting units falls significantly below our expectations or market prices for similar business decline, the goodwill for these reporting units could become impaired.

We estimate the fair value of all reporting units with a goodwill balance based on a comparison and weighting of the income approach (weighted 70 %), specifically the discounted cash flow method, and the market approach (weighted 30 %), which estimates the fair value of our reporting units based upon comparable market prices and recent transactions, and also validates the reasonableness of the multiples from the income approach.

The resulting fair value is most sensitive to the assumptions we use in our discounted cash flow analysis.

The assumptions that have the most significant impact on the fair value calculation are the reporting unit’s revenue growth rate and operating profit margin, and the discount rate used to convert future estimated cash flows to a single present value amount.

During the second and third quarters of fiscal 2020, we considered whether the global economic disruption due to the COVID-19 pandemic had caused the fair value of any of our reporting units to fall below their carrying value resulting in goodwill impairment.

Although our overall forecasted revenue and operating income for the second half of fiscal 2020 are now lower than our expectations during our last annual and interim impairment tests, we concluded that none of our reporting units' fair values had fallen below their carrying values.

However, our Asia Pacific ("ASP") and Remediation and Field Services ("RFS") reporting units had fair values that exceeded their carrying values by less than 30 % as of the dates of our last annual and interim impairment tests.

The carrying values for our ASP and RFS reporting units include approximately $ 109 million and $ 48 million of goodwill, respectively, as of June 28, 2020.

If the financial performance of the operations in the ASP and RFS reporting units were to deteriorate further and fall below our current revenue and operating profit margin forecasts, or we are required to increase the discount rate used in our cash flow analysis, the related goodwill may become impaired.

During the fourth quarter of fiscal 2019, we performed an interim goodwill impairment review of our RFS reporting unit and recorded a $ 7.8 million goodwill impairment charge.

As a result of the impairment charge, the estimated fair value of the RFS reporting unit equaled its carrying value of $ 61 million at September 29, 2019, including the remaining $ 48.8 million of goodwill.

The gross amount and accumulated amortization of our acquired identifiable intangible assets with finite useful lives included in “Intangible assets, net” on our consolidated balance sheets, were as follows:

June 28, 2020 September 29, 2019

On September 2, 2020, Australia announced that it had fallen into economic recession, defined as two consecutive quarters of negative growth, for the first time since 1991 including 7 % negative growth in the quarter ending June 30, 2020.

This prompted a strategic review of our ASP reporting unit.

As a result of the economic recession in Australia, our revenue growth and profit margin forecasts for our ASP reporting unit declined from the previous forecast used for our annual goodwill impairment review as of June 29, 2020.

We also performed an interim goodwill impairment review of our ASP reporting unit in September 2020 and recorded a $ 15.8 million goodwill impairment charge.

As a result of the impairment charge, the estimated fair value of our ASP reporting unit equaled its carrying value of $ 144.9 million, including $ 95.5 million of goodwill, at September 27, 2020.

On September 28, 2020 (the first day of our fiscal 2021), we merged our ASP reporting unit into our Client Account Management reporting unit.

The following table presents the gross amount and accumulated amortization of our acquired identifiable intangible assets with finite useful lives included in “Intangible assets, net” on the consolidated balance sheets:

December 27, 2020 September 27, 2020

Remaining Life

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Total $ 84,471 $ ( 73,578 ) $ 106,421 $ ( 92,478 )

Amortization expense for the three and nine months ended June 28, 2020 was $ 2.6 million and $ 9.0 million, respectively, compared to $ 2.4 million and $ 8.6 million for the prior-year periods.

Amortization expense for the three months ended December 27, 2020 was $ 3.4 million, compared to $ 2.9 million for the prior-year period.

Estimated amortization expense for the remainder of fiscal 2021 and succeeding years is as follows:

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Leasehold improvements 34,464 34,569

Land and buildings 192 371

Total property and equipment 129,009 125,511

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Property and equipment, net $ 35,141 $ 35,507

The depreciation expense related to property and equipment was $ 3.7 million and $ 10.1 million for the three and nine months ended June 28, 2020, respectively, compared to $ 4.2 million and $ 12.7 million for the prior-year periods.

As of September 29, 2019, we classified $ 5.4 million of net assets related to the disposal of our Canadian turn-key pipeline activities as held-for-sale, and reported them as "Prepaid expenses and other current assets" on our consolidated balance sheet.

These assets were sold during the first nine months of fiscal 2020, which resulted in a net gain of $ 4.5 million and $ 7.5 million for the three and nine months ended June 28, 2020, respectively.

The depreciation expense related to property and equipment was $ 2.9 million for the first quarter of fiscal 2021, compared to $ 3.3 million for the prior-year quarter.

Stock Repurchase and Dividends

On November 5, 2018, the Board of Directors authorized a stock repurchase program ("2019 Program") under which we could repurchase up to $ 200 million of our common stock.

This was in addition to the $ 25 million remaining as of fiscal 2018 year-end under the previous stock repurchase program ("2018 Program").

On January 27, 2020, the Board of Directors authorized a new $ 200 million stock repurchase program ("2020 Program").

As of June 28, 2020, we had a remaining balance of $ 222.8 million available under the 2019 and 2020 programs.

The following table summarizes stock repurchases in the open market and settled in fiscal 2019 and the first nine months of fiscal 2020:

Activity Stock Repurchase Program Shares Repurchased Average Price Paid per Share Total Cost

(in thousands)

2019 2018 Program 430,559 $ 58.06 $ 25,000

2019 2019 Program 1,131,962 66.26 75,000

2019 Total 1,562,521 $ 64.00 $ 100,000

2020 2019 Program 1,337,845 $ 76.38 $ 102,188

The following table presents dividend declared and paid in the first nine months of fiscal 2020 and 2019:

On January 27, 2020, the Board of Directors authorized a new $ 200 million stock repurchase program, which was included in our remaining balance of $ 207.8 million as of fiscal 2020 year-end.

In the first quarter of fiscal 2021, we repurchased and settled 135,413 shares with an average price of $ 110.77 per share for a total cost of $ 15 million in the open market.

At December 27, 2020, we had a remaining balance of $ 192.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first quarters of fiscal 2021 and 2020:

Declare Date Dividend Paid Per Share Record Date Payment Date Dividend Paid

(in thousands)

November 11, 2019 $ 0.15 December 2, 2019 December 13, 2019 $ 8,190

January 27, 2020 $ 0.15 February 12, 2020 February 28, 2020 8,225

April 27, 2020 $ 0.17 May 13, 2020 May 29, 2020 9,175

Total dividend paid as of June 28, 2020 $ 25,590

November 9, 2020 $ 0.17 November 30, 2020 December 11, 2020 $ 9,198

January 28, 2019 $ 0.12 February 13, 2019 February 28, 2019 6,616

April 29, 2019 $ 0.15 May 15, 2019 May 31, 2019 8,219

Total dividend paid as of June 30, 2019 $ 21,489

November 11, 2019 $ 0.15 December 2, 2019 December 13, 2019 $ 8,190

Subsequent Event.

On July 27, 2020, the Board of Directors declared a quarterly cash dividend of $ 0.17 per share payable on September 4, 2020 to stockholders of record as of the close of business on August 21, 2020.

On January 25, 2021, the Board of Directors declared a quarterly cash dividend of $ 0.17 pe r share payable on February 26, 2021 to stockholders of record as of the close of business on February 10, 2021.

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)”, which is a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets obtained in exchange for lease liabilities on the balance sheet.

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The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while accounting for finance leases remained substantially unchanged.

Our finance leases are primarily for certain information technology ("IT") equipment and the related ROU and lease liabilities were immaterial at June 28, 2020.

Our finance leases are primarily for certain information technology equipment and the related ROU and lease liabilities were immaterial, and included in "Other current liabilities" and "Other long-term liabilities" accordingly on our consolidated balance sheets at December 27, 2020 and September 27, 2020.

We determine if an arrangement is a lease at inception.

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Our operating leases are primarily for corporate and project office spaces.

To a much lesser extent, we have operating leases for IT equipment, vehicles, and equipment.

To a much lesser extent, we have operating leases for vehicles and equipment.

Our operating leases have remaining lease terms of one month to twelve years , some of which may include options to extend the leases for up to five years .

The components of lease costs for the three and nine months ended June 28, 2020 are as follows:

Three Months Ended Nine Months Ended

The components of lease costs are as follows:

Three Months Ended

2020 December 29,

(in thousands)

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Total lease cost $ 22,040 $ 20,616

Supplemental cash flow information related to leases for the nine months ended June 28, 2020 is as follows:

Supplemental cash flow information related to leases is as follows:

Three Months Ended

2020 December 29,

(in thousands)

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Right-of-use assets obtained in exchange for new operating lease liabilities $ 10,293 $ 262,248

Supplemental balance sheet and other information related to leases as of June 28, 2020 are as follows:

Supplemental balance sheet and other information related to leases are as follows:

December 27, 2020 September 27, 2020

(in thousands)

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Weighted-average remaining lease term:

Operating leases 5 years

Operating leases 5 years 5 years

Weighted-average discount rate:

Operating leases 2.5 % 2.5 %

As of June 28, 2020, we have additional operating leases, primarily for office space, that have not yet commenced of $ 4.9 million.

These operating leases will commence in fiscal 2020 and 2021 with lease terms of five years .

A maturity analysis of the future undiscounted cash flows associated with our operating lease liabilities as of June 28, 2020 is as follows:

As of December 27, 2020, we do not have any material additional operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our operating lease liabilities is as follows:

2020 September 27,

(in thousands)

2021 $ 57,306 $ 75,074

2022 68,072 64,972

2023 45,590 44,733

2024 31,380 30,991

2025 22,112 21,466

Beyond 44,928 44,169

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Total present value of lease liabilities $ 251,085 $ 261,605

As of September 29, 2019, $ 343.5 million of minimum rental commitments on operating leases was payable as follows:

$ 108.8 million in fiscal 2020, $ 66.4 million in fiscal 2021, $ 51.4 million in fiscal 2022, $ 36.5 million in fiscal 2023, $ 25.8 million in fiscal 2024, and $ 54.6 million thereafter.

Rental expense for the three and nine months ended June 30, 2019 was $ 19.5 million and $ 58.1 million, respectively.

Stockholders’ Equity and Stock Compensation Plans

We recognize the fair value of our stock-based awards as compensation expense on a straight-line basis over the requisite service period in which the award vests.

Stock-based compensation expense for the three and nine months ended June 28, 2020 was $ 4.1 million and $ 13.5 million, respectively, compared to $ 4.1 million and $ 12.7 million for the same periods last year.

Stock-based compensation expense for the first quarters of fiscal 2021 and 2020 was $ 4.9 million and $ 4.5 million, respectively.

Most of these amounts were included in selling, general and administrative expenses on our consolidated statements of income.

In the first nine months of fiscal 2020 (all in the first quarter), we awarded 74,011 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $ 99.85 per share on the award date.

All of the PSUs are performance-based and vest, if at all, after the conclusion of the three-year performance period.

In the first quarter of fiscal 2021, we awarded 57,542 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $ 144.33 per share on the award date.

All PSUs are performance-based and vest, if at all, after the conclusion of the three-year performance period.

The number of PSUs that ultimately vest is based 50 % on the growth in our diluted earnings per share and 50 % on our relative total shareholder return over the vesting period.

Additionally, we awarded 166,025 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $ 83.90 per share on the award date.

Additionally, we awarded 107,384 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $ 121.00 per share on the aw ard date.

All executive officer and employee RSUs have time-based vesting over a four-year period, and the non-employee director RSUs vest after one year .

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The following table presents the number of weighted-average shares used to compute basic and diluted EPS:

Three Months Ended Nine Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended

2020 December 29,

(in thousands, except per share data)

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Diluted $ 0.96 $ 0.85

The effective tax rates for the first nine months of fiscal 2020 and 2019 were 21.2 % and 7.1 %, respectively.

Income tax expense was reduced by $ 7.1 million and $ 4.3 million of excess tax benefits on share-based payments in the first nine months of fiscal 2020 and 2019, respectively.

Additionally, we finalized the analysis of our deferred tax liabilities for the TCJA's lower tax rates in the first quarter of fiscal 2019 and recorded a deferred tax benefit of $ 2.6 million.

Also, valuation allowances of $ 22.3 million in Australia were released due to sufficient positive evidence obtained during the second quarter of fiscal 2019.

The valuation allowances were primarily related to net operating loss and research and development credit carryforwards and other temporary differences.

We evaluated the positive evidence against any negative evidence and determined that it was more likely than not that the deferred tax assets would be realized.

The factors used to assess the likelihood of realization were the past performance of the related entities, our forecast of future taxable income, and available tax planning strategies that could be implemented to realize the deferred tax assets.

Excluding the excess tax benefits on share-based payments, the net deferred tax benefits from the TCJA and valuation allowance releases, our effective tax rate in the first nine months fiscal 2020 and 2019 was 25.5 %.

As of June 28, 2020 and September 29, 2019, the liability for income taxes associated with uncertain tax positions was $ 9.3 million and $ 9.2 million, respectively.

The effective tax rates for the first quarters of fiscal 2021 and 2020 were 17.0 % and 21.1 %, respectively.

Income tax expense was reduced by $ 6.1 million and $ 3.6 million of excess tax benefits on share-based payments in the first quarter of fiscal 2021 and 2020, respectively.

Excluding the impact of the excess tax benefits on share-based payments, our effective tax rates in the first quarter of fiscal 2021 and 2020 were 26.8 % and 27.1 % respectively.

As of December 27, 2020 and September 27, 2020, the liability for income taxes associated with uncertain tax positions was $ 10.7 million and $ 9.7 million, respectively.

These uncertain tax positions substantially relate to ongoing examinations, which are reasonably likely to be resolved within the next 12 months.

These liabilities represent our current estimates of the additional tax liabilities that we may be assessed when the related audits are concluded.

If these audits are resolved in a manner more unfavorable than our current expectations, our additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.

Reportable Segments

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commercial clients and international clients other than development agencies.

This alignment allows us to capitalize on our growing market opportunities and enhance the development of high-end consulting and technical solutions to meet our growing client demand.

We continue to report the results of the wind-down of our non-core construction activities in the RCM reportable segment.

Additionally , we continue to report the results of the wind-down of our non-core construction activities in the RCM reportable segment.

Substantially, there has been no remaining backlog for RCM since fiscal 2018 as the projects were complete.

GSG provides consulting and engineering services primarily to U.S.

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GSG supports U.S.

government civilian and defense agencies with services in water, environment, infrastructure, information technology, and disaster management.

government civilian and defense agencies with services in water, environment, sustainable infrastructure, information technology, and disaster management.

GSG also provides engineering design services for U.S.

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commercial clients, and international clients that include both commercial and government sectors.

CIG supports commercial clients across the Fortune 500, energy, utilities,

industrial, manufacturing, aerospace, and resource management markets.

CIG supports commercial clients across the Fortune 500, energy utilities, industrial, manufacturing, aerospace, and resource management markets.

CIG also provides infrastructure and related environmental, engineering and project management services to commercial and local government clients across Canada, in Asia Pacific (primarily Australia and New Zealand), the United Kingdom, as well as Brazil and Chile.

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The following tables summarize financial information regarding our reportable segments:

Three Months Ended Nine Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended

2020 December 29,

(in thousands)

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CIG 311,024 351,164

RCM 48 329 198 ( 2,862 )

Elimination of inter-segment revenue ( 14,543 ) ( 11,090 )

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CIG 29,559 31,632

RCM ( 1 ) 3 — ( 5,931 )

Corporate (1)

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Total $ 2,414,872 $ 2,378,558

(1) Corporate assets consist of intercompany eliminations and assets not allocated to our reportable segments including goodwill, intangible assets, leases, deferred income taxes and certain other assets .

(1) Corporate assets consist of intercompany eliminations and assets not allocated to our reportable segments including goodwill, intangible assets, deferred income taxes and certain other assets .

Fair Value Measurements

The fair value of long-term debt was determined using the present value of future cash flows based on the borrowing rates currently available for debt with similar terms and maturities (Level 2 measurement, as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2020).

The carrying value of our long-term debt approximated fair value at June 28, 2020 and September 29, 2019.

At June 28, 2020, we had borrowings of $ 277.2 million outstanding under our Amended Credit Agreement, which were used to fund business acquisitions, working capital needs, stock repurchases, dividends, capital expenditures and contingent earn-outs.

The carrying value of our long-term debt approximated fair value at December 27, 2020 and September 27, 2020.

At December 27, 2020, we had borrowings of $ 288.5 million outstanding under our Amended Credit Agreement, which were used to fund business acquisitions, working capital needs, stock repurchases, dividends, capital expenditures and contingent earn-outs.

Derivative Financial Instruments

We often use certain interest rate derivative contracts to hedge interest rate exposures on our variable rate debt.

Also, we may enter into foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings could adversely be affected by foreign currency exchange rate fluctuations.

Also, we may enter in foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings could adversely be affected by foreign currency exchange rate fluctuations.

Our hedging program is not designated for trading or speculative purposes.

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In fiscal 2018, we entered into five interest rate swap agreements that we designated as cash flow hedges to fix the interest rate on the borrowings under our term loan facility.

As of June 28, 2020, the notional principal of our outstanding interest swap agreements was $ 231.3 million ($ 46.3 million each.) The interest rate swaps have a fixed interest rate of 2.79 % and expire in July 2023 for all five agreements.

At June 28, 2020 and September 29, 2019, the fair value of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect was $( 16.6 ) million and $( 10.9 ) million, respectively, of which we expect to reclassify $ 5.8 million from accumulated other comprehensive loss to interest expense within the next twelve months.

The fair values of our outstanding derivatives designated as hedging instruments were as follows:

Fair Value of Derivative

Instruments as of

Balance Sheet Location June 28,

2020 September 29, 2019

(in thousands)

Interest rate swap agreements Other current liabilities $ 16,600 $ 10,873

Changes in the fair value of the interest rate swap agreements are presented on the consolidated statements of comprehensive income as follows:

Nine Months Ended

2020 June 30,

(in thousands)

Loss recognized in other comprehensive income, net of tax:

Interest rate swap agreements $ 5,726 $ 11,067

We had no other derivative instruments that were not designated as hedging instruments for the first nine months of fiscal 2020 and fiscal year ended September 29, 2019.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

The accumulated balances and reporting period activities for the three and nine months ended June 28, 2020 and June 30, 2019 related to reclassifications out of accumulated other comprehensive loss are summarized as follows:

As of December 27, 2020, the notional principal of our outstanding interest swap agreements was $ 225.0 million ($ 45.0 million each.) The interest rate swaps have a fixed interest rate of 2.79 % and expire in July 2023 for all five agreements.

At December 27, 2020 and September 27, 2020, the fair value of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect was $( 14.0 ) million and $( 15.5 ) million, which were reported in "Other current liabilities" on our consolidated balance sheets.

Additionally, the related gains of $ 1.5 million and $ 1.7 million for the first quarters of fiscal 2021 and 2020, respectively, were recognized and reported on our consolidated statements of comprehensive income.

We expect to reclassify $ 5.7 million from accumulated other comprehensive loss to interest expense within the next twelve months.

There were no other derivative instruments designated as hedging instruments for the first quarter of fiscal 2021.

Reclassifications Out of Accumulated Other Comprehensive Income

The accumulated balances and activities for the first quarters of fiscal 2021 and 2020 related to reclassifications out of accumulated other comprehensive income are summarized as follows:

Three Months Ended

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(in thousands)

Balances at March 31, 2019 $ ( 142,691 ) $ ( 5,526 ) $ ( 148,217 )

Other comprehensive income (loss) before reclassifications 5,428 ( 4,097 ) 1,331

Amounts reclassified from accumulated other comprehensive loss:

Interest rate contracts, net of tax (1)

— ( 192 ) ( 192 )

Net current-period other comprehensive income (loss) 5,428 ( 4,289 ) 1,139

Balances at June 30, 2019 $ ( 137,263 ) $ ( 9,815 ) $ ( 147,078 )

Balances at March 29, 2020 $ ( 182,822 ) $ ( 16,569 ) $ ( 199,391 )

Balances at September 29, 2019 $ ( 149,711 ) $ ( 10,873 ) $ ( 160,584 )

Other comprehensive income before reclassifications 13,899 2,153 16,052

Amounts reclassified from accumulated other comprehensive loss:

Amounts reclassified from accumulated other comprehensive income

Interest rate contracts, net of tax (1)

— ( 483 ) ( 483 )

Net current-period other comprehensive income (loss) 21,689 ( 30 ) 21,659

Balances at June 28, 2020 $ ( 161,133 ) $ ( 16,599 ) $ ( 177,732 )

Nine Months Ended

Adjustments Gain (Loss)

on Derivative

Instruments Accumulated

Comprehensive

(in thousands)

Balances at September 30, 2018 $ ( 128,602 ) $ 1,252 $ ( 127,350 )

Other comprehensive loss before reclassifications ( 8,661 ) ( 10,384 ) ( 19,045 )

Amounts reclassified from accumulated other comprehensive loss:

Interest rate contracts, net of tax (1) — ( 683 ) ( 683 )

Net current-period other comprehensive loss ( 8,661 ) ( 11,067 ) ( 19,728 )

Balances at June 30, 2019 $ ( 137,263 ) $ ( 9,815 ) $ ( 147,078 )

Net current-period other comprehensive income 13,899 1,670 15,569

Balances at December 29, 2019 $ ( 135,812 ) $ ( 9,203 ) $ ( 145,015 )

Balances at September 27, 2020 $ ( 146,275 ) $ ( 15,511 ) $ ( 161,786 )

Other comprehensive loss before reclassifications ( 11,422 ) ( 3,200 ) ( 14,622 )

Amounts reclassified from accumulated other comprehensive loss:

Other comprehensive income before reclassifications 32,391 2,978 35,369

Amounts reclassified from accumulated other comprehensive income

Interest rate contracts, net of tax (1)

Net current-period other comprehensive loss ( 11,422 ) ( 5,726 ) ( 17,148 )

Balances at June 28, 2020 $ ( 161,133 ) $ ( 16,599 ) $ ( 177,732 )

— ( 1,502 ) ( 1,502 )

Net current-period other comprehensive income 32,391 1,476 33,867

Balances at December 27, 2020 $ ( 113,884 ) $ ( 14,035 ) $ ( 127,919 )

(1) This accumulated other comprehensive component is reclassified to “Interest expense” in our consolidated statements of income.

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We are subject to certain claims and lawsuits typically filed against the consulting and engineering profession, alleging primarily professional errors or omissions.

We carry professional liability insurance, subject to certain deductibles and policy limits, against such claims.

We carry professional liability insurance, subject to certain deductibles and policy

limits, against such claims.

However, in some actions, parties are seeking damages that exceed our insurance coverage or for which we are not insured.

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We are currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.

Related Party Transaction

Related Party Transactions

We often provide services to unconsolidated joint ventures.

Our revenue related to services we provided to unconsolidated joint ventures for the three and nine months of fiscal 2020 was $ 19.0 million and $ 67.0 million, respectively, compared to $ 26.3 million and $ 72.0 million for the same periods last year.

Our related reimbursable costs for the three and nine months of fiscal 2020 were approximately $ 18.4 million and $ 65.9 million, respectively, compared to $ 25.8 million and $ 70.9 million for the prior-year periods.

Revenue generated from the services we provided to unconsolidated joint ventures for the first quarters of fiscal 2021 and 2020 was approxim ately $ 22 million and $ 29 million, respectively.

Related reimbursable costs for the first quarters of fiscal 2021 and 2020 were approximately the same as our revenue since these reimbursable costs are pass-through costs.

Our consolidated balance sheets also included the following amounts related to these services:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements