What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-04-30 compared with 2021-01-29 · 180 added, 100 removed, 501 unchanged (36% of the section changed)

3 unchanged sentences

(unaudited - in thousands, except par value)

ASSETS December 27,

ASSETS March 28,

2021 September 27,

31 unchanged sentences

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

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

no shares issued and outstanding at March 28, 2021 and September 27, 2020

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

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

issued and outstanding, 54,158 and 53,797 shares at March 28, 2021 and September 27, 2020, respectively

Accumulated other comprehensive loss ( 115,056 ) ( 161,786 )

8 unchanged sentences

(unaudited – in thousands, except per share data)

Three Months Ended

2020 December 29,

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

Revenue $ 754,764 $ 734,133 $ 1,519,868 $ 1,531,756

3 unchanged sentences

Selling, general and administrative expenses ( 51,907 ) ( 51,041 ) ( 101,928 ) ( 97,476 )

Contingent consideration – fair value adjustments 230 1,571 193 1,571

Income from operations 60,807 47,530 127,059 110,832

15 unchanged sentences

(unaudited – in thousands)

Three Months Ended

2020 December 29,

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

Net income $ 45,528 $ 36,413 $ 97,976 $ 83,730

2 unchanged sentences

10,975 ( 47,015 ) 43,368 ( 33,114 )

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

Gain (loss) on cash flow hedge valuations, net of tax 1,890 ( 7,365 ) 3,366 ( 5,695 )

Other comprehensive income (loss), net of tax 12,865 ( 54,380 ) 46,734 ( 38,809 )

Comprehensive income (loss), net of tax $ 58,393 $ ( 17,967 ) $ 144,710 $ 44,921

Comprehensive income attributable to noncontrolling interests, net of tax 13 12 27 21

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

Comprehensive income (loss) attributable to Tetra Tech, net of tax $ 58,380 $ ( 17,979 ) $ 144,683 $ 44,900

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(unaudited – in thousands)

Three Months Ended

2020 December 29,

Six Months Ended

2021 March 29,

Cash flows from operating activities:

6 unchanged sentences

Deferred income taxes 350 3,153

Provision for losses from uncollectible receivables ( 1,538 ) 539

Fair value adjustments to contingent consideration ( 193 ) ( 1,571 )

Gain on sale of property and equipment ( 66 ) ( 3,523 )

Changes in operating assets and liabilities:

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

Accounts receivable and contract assets 35,415 104,388

5 unchanged sentences

Income taxes receivable/payable ( 10,419 ) ( 5,895 )

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

Net cash provided by operating activities 157,424 83,199

Cash flows from investing activities:

Payments for business acquisitions, net of cash acquired ( 3,065 ) ( 27,739 )

Capital expenditures ( 4,297 ) ( 5,876 )

7 unchanged sentences

Stock options exercised 9,771 7,927

Bank overdrafts ( 21,121 ) 2,737

Dividends paid ( 18,410 ) ( 16,414 )

1 unchanged sentence

Principal payments on finance leases ( 1,222 ) —

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

Net cash used in financing activities ( 91,129 ) ( 39,257 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash 8,803 ( 2,409 )

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

Net increase in cash, cash equivalents and restricted cash 67,815 14,234

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

5 unchanged sentences

$ 30,832 $ 23,437

Supplemental disclosures of non-cash investing activities:

Reconciliation of cash, cash equivalents and restricted cash:

5 unchanged sentences

Consolidated Statements of Stockholders' Equity

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

Three Months Ended March 29, 2020 and March 28, 2021

(unaudited – in thousands)

7 unchanged sentences

Shares Amount

BALANCE AT SEPTEMBER 29, 2019 54,565 $ 546 $ 78,132 $ ( 160,584 ) $ 1,071,192 $ 989,286 $ 178 $ 989,464

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

Net income 36,397 36,397 16 36,413

Other comprehensive loss ( 54,376 ) ( 54,376 ) ( 4 ) ( 54,380 )

Distributions paid to noncontrolling interests — ( 56 ) ( 56 )

Cash dividends of $ 0.15 per common share

( 8,224 ) ( 8,224 ) ( 8,224 )

Stock-based compensation 4,955 4,955 4,955

Restricted & performance shares released 30 1 ( 281 ) ( 280 ) ( 280 )

Stock options exercised 215 2 6,511 6,513 6,513

Stock repurchases ( 831 ) ( 9 ) ( 61,459 ) ( 61,468 ) ( 61,468 )

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

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

Net income 45,517 45,517 11 45,528

Other comprehensive income 12,863 12,863 2 12,865

Cash dividends of $ 0.17 per common share

( 9,212 ) ( 9,212 ) ( 9,212 )

Stock-based compensation 5,668 5,668 5,668

Restricted & performance shares released 2 — ( 158 ) ( 158 ) ( 158 )

Stock options exercised 77 1 2,274 2,275 2,275

Shares issued for Employee Stock Purchase Plan — — 8 8 8

Stock repurchases ( 114 ) ( 1 ) ( 7,792 ) ( 7,207 ) ( 15,000 ) ( 15,000 )

BALANCE AT MARCH 28, 2021 54,158 $ 542 $ — $ ( 115,056 ) $ 1,261,661 $ 1,147,147 $ 81 $ 1,147,228

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Six Months Ended March 29, 2020 and March 28, 2021

(unaudited – in thousands)

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Retained

Earnings Total

Equity Non-Controlling

Interests Total

Shares Amount

BALANCE AT SEPTEMBER 29, 2019 54,565 $ 546 $ 78,132 $ ( 160,584 ) $ 1,071,192 $ 989,286 $ 178 $ 989,464

Net income 83,707 83,707 23 83,730

Other comprehensive loss ( 38,807 ) ( 38,807 ) ( 2 ) ( 38,809 )

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

6 unchanged sentences

Stock repurchases ( 1,075 ) ( 11 ) ( 82,634 ) ( 82,645 ) ( 82,645 )

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

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

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

8 unchanged sentences

Stock repurchases ( 249 ) ( 2 ) ( 13,549 ) ( 16,449 ) ( 30,000 ) ( 30,000 )

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

BALANCE AT MARCH 28, 2021 54,158 $ 542 $ — $ ( 115,056 ) $ 1,261,661 $ 1,147,147 $ 81 $ 1,147,228

See Notes to Consolidated Financial Statements.

31 unchanged sentences

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

Three Months Ended

2020 December 29,

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

(in thousands)

16 unchanged sentences

Other than the U.S.

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.

federal government, no single client accounted for more than 10% of our revenue for the three and six months ended March 28, 2021 and March 29, 2020.

Contract Assets and Contract Liabilities

16 unchanged sentences

Net contract liabilities $ ( 90,523 ) $ ( 79,273 )

(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.

(1) Includes $ 7.4 million and $ 12.3 million of contract retentions as of March 28, 2021 and September 27, 2020, respectively.

In the first half of fiscal 2021 and 2020, we recognized revenue of approximate ly $ 90 million and $ 105 million, respectively, from amounts included in the contract liability balances at the end of fiscal 2020 and 2019, respectively.

We recognize revenue primarily using the cost-to-cost measure of progress to estimate 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.

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 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 .

As a result, we recognized net favorable operating income adjustments of $ 1.1 million i n the first half of fiscal 2021 (all in the second quarter) compared to a net unfavorable adjustment of $ 2.8 million in the first half of fiscal 2020 (all in the second quarter).

C hanges 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 March 28, 2021 and September 27, 2020, our consolidated balance sheets included liabilities for anticipated losses of $ 9.5 million and $ 13.2 million , respectively.

The estimated cost to complete these related contracts as of March 28, 2021 and September 27, 2020 was approxima tely $ 95 million and $ 118 million, respectively.

Accounts Receivable, Net

9 unchanged sentences

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 December 27, 2020 are expected to be billed and collecte d within 12 months.

Substantially all of our unbilled receivables at March 28, 2021 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.

2 unchanged sentences

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 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 .

Total accounts receivable at March 28, 2021 and September 27, 2020 included approximately $ 11 million for each period (all in our Remediation Construction Management ("RCM") segment), related 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.

2 unchanged sentences

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.

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

In the first half of fiscal 2021 (al l in the second quarter), we recognized increases to revenue and related gains of $ 2.8 million in our Commercial/International Services Group ("CIG").

We recorded no material gains or losses related to claims in the first half of fiscal 2020.

No single client accounted for more than 10% of our accounts receivable at March 28, 2021 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 $ 3.2 billion of RUPOs as of December 27, 2020.

We had $ 3.1 billion of RU POs as of March 28, 2021.

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.

1 unchanged sentence

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 December 27, 2020 over the following periods:

We expect to satisfy our RUPOs as of March 28, 2021 over the following periods:

(in thousands)

6 unchanged sentences

Therefore, the remaining performance obligations on such contracts are limited to the notice period required for the termination (usually 30 , 60 , or 90 days).

In the second quarter of fiscal 2021, we acquired a small company, Coanda Research and Development Corporation ("CRD"), based in Burnaby, British Columbia.

CRD provides high-end expertise in computational fluid dynamics and utilizes industry-leading capabilities to solve complex engineering science problems for commercial customers, across a broad range of industries and is part of our CIG segment.

In the second quarter of fiscal 2020, we acquired Segue Technologies, Inc.

8 unchanged sentences

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.

Goodwill additions resulting from the acquisition of CRD is primarily attributable to the significant technical expertise residing in an embedded workforce that is sought out by clients, and the synergies expected to arise after the acquisition.

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.

8 unchanged sentences

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.

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

13 unchanged sentences

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.

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.

During the first half of fiscal 2021 and 2020, we recorded adjustments to our contingent earn-out liabilities and reported a net gain in operating income of $ 0.2 million and $ 1.6 million, respectively (substantially all in the second quarters of fiscal 2021 and 2020).

At March 28, 2021, there was a total potential maximu m of $ 66.9 million of outstanding contingent consideration related to acquisitions.

Of this amount, $ 28.7 million was estimated as the fair value and accrued on our consolidated balance sheet.

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.

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

Goodwill and Intangible Assets

3 unchanged sentences

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

Acquisition activity — 3,675 3,675

Translation 7,874 24,526 32,400

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

Balance at March 28, 2021 $ 524,189 $ 505,384 $ 1,029,573

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.

The gross amounts of goodwill for GSG we re $ 541.9 million and $ 534.0 million at March 28, 2021 and September 27, 2020, respectively, excluding accumulated impairment of $ 17.7 million for each

The gross amounts of goodwill for CIG were $ 626.9 million and $ 598.7 million at March 28, 2021 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.

1 unchanged sentence

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 %.

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

Our former 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.

6 unchanged sentences

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.

This prompted a strategic review of our former ASP reporting unit.

As a result of the economic recession in Australia, our revenue growth and profit margin forecasts for our former 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 former 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 former 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 former 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

March 28, 2021 September 27, 2020

Remaining Life

8 unchanged sentences

Total $ 85,229 $ ( 76,306 ) $ 106,421 $ ( 92,478 )

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

Amortization expense for the three and six months ended March 28, 2021 was $ 2.2 million and $ 5.6 million , respectively, compared to $ 3.4 million and $ 6.4 million for the prior-year periods.

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

10 unchanged sentences

Property and equipment, net $ 37,423 $ 35,507

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.

The depreciation expense related to property and equipment was $ 3.1 million and $ 5.9 million for the three and six months ended March 28, 2021, respectively, compared to $ 3.1 million and $ 6.4 million for the prior-year periods.

Stock Repurchase and Dividends

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:

In the first half of fiscal 2021, we repurchased and settl ed 249,714 shares with an average price of $ 120.14 per share for a total cost of $ 30 million in the open market.

At March 28, 2021, we had a remaining balance of $ 177.8 million under our stock repu rchase program.

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

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

1 unchanged sentence

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

January 25, 2021 $ 0.17 February 10, 2021 February 26, 2021 9,212

Total dividend paid as of March 28, 2021 $ 18,410

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

January 27, 2020 $ 0.15 February 12, 2020 February 28, 2020 8,224

Total dividend paid as of March 29, 2020 $ 16,414

Subsequent Event.

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.

On April 26, 2021, the Board of Directors declared a quarterly cash dividend of $ 0.20 pe r share payable on May 28, 2021 to stockholders of record as of the close of business on May 12, 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.

6 unchanged sentences

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 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.

10 unchanged sentences

The components of lease costs are as follows:

Three Months Ended

2020 December 29,

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

(in thousands)

1 unchanged sentence

Sublease income ( 30 ) ( 541 ) ( 59 ) ( 1,115 )

Other — 18 — 36

Total lease cost $ 22,610 $ 21,072 $ 44,650 $ 41,688

Supplemental cash flow information related to leases is as follows:

Three Months Ended

2020 December 29,

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

(in thousands)

2 unchanged sentences

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

December 27, 2020 September 27, 2020

March 28, 2021 September 27, 2020

(in thousands)

9 unchanged sentences

Operating leases 2.4 % 2.5 %

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

As of March 28, 2021, 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:

12 unchanged sentences

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 first quarters of fiscal 2021 and 2020 was $ 4.9 million and $ 4.5 million, respectively.

Stock-based compensation expense for the three and six months ended March 28, 2021 w as $ 5.7 million and $ 10.6 million, respectively, compared to $ 5.0 million and $ 9.4 million for the same periods last year.

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

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.

In the first half of fiscal 2021, we award ed 57,542 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $ 153.03 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 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.

Additionally, we award ed 108,464 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $ 121.17 per share on the award 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 .

4 unchanged sentences

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

Three Months Ended

2020 December 29,

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

(in thousands, except per share data)

6 unchanged sentences

Diluted $ 0.83 $ 0.66 $ 1.79 $ 1.51

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.

The effective tax rates for the first half of fiscal 2021 and 2020 were 19.2 % and 19.5 %, respectively.

Income tax expense was reduced by $ 8.0 million and $ 6.7 million of excess tax benefits on share-based payments in the first half 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 half of fiscal 2021 and 2020 were 25.8 % and 25.9 %, respectively.

As of March 28, 2021 and September 27, 2020, the liability for income taxes associated with uncertain tax positions was $ 10.0 million and $ 9.7 million, respectively.

Th ese 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.

17 unchanged sentences

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.

5 unchanged sentences

The following tables summarize financial information regarding our reportable segments:

Three Months Ended

2020 December 29,

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

(in thousands)

1 unchanged sentence

CIG 293,128 308,412 604,152 659,576

RCM 470 5 470 150

Elimination of inter-segment revenue ( 12,663 ) ( 11,187 ) ( 27,205 ) ( 22,277 )

3 unchanged sentences

CIG 26,311 21,676 55,869 53,309

RCM 1 ( 1 ) 1 1

Corporate (1)

10 unchanged sentences

Total $ 2,455,062 $ 2,378,558

(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 .

(1) Corporate assets consist of intercompany eliminations and assets not allocated to our reportable segments including goo dwill, 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 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.

The carrying value of our long-term debt approximated fair value at March 28, 2021 and September 27, 2020.

At March 28, 2021, we had borrowings of $ 250.8 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

5 unchanged sentences

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 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.

As of March 28, 2021, the notional principal of our outstanding interest swap agreements w as $ 221.9 million ($ 44.4 million each.) The interest rate swaps have a fixed interest rate of 2.79 % and expire in July 2023 for all five agreements.

At March 28, 2021 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 w as $( 12.1 ) million and $( 15.5 ) million, which were reported in "Other current liabilities" on our consolidated balance sheets.

Additionally, the related gains of $ 1.9 million and $ 3.4 million for the three and six months ended March 28, 2021, respectively, compared to related losses of $ 7.4 million and $ 5.7 million for the prior-year periods, were recognized and reported on our consolidated statements of comprehensive income.

We expect to reclas sify $ 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 half 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:

The accumulated balances and activities for the three and six months ended March 28, 2021 and March 29, 2020 related to reclassifications out of accumulated other comprehensive income are summarized as follows:

Three Months Ended

3 unchanged sentences

(in thousands)

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

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

Other comprehensive loss before reclassifications ( 47,011 ) ( 6,727 ) ( 53,738 )

Amounts reclassified from accumulated other comprehensive loss

Interest rate contracts, net of tax (1)

— ( 638 ) ( 638 )

Net current-period other comprehensive loss ( 47,011 ) ( 7,365 ) ( 54,376 )

Balance at March 29, 2020 $ ( 182,823 ) $ ( 16,568 ) $ ( 199,391 )

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

Other comprehensive income before reclassifications 10,973 3,382 14,355

3 unchanged sentences

Net current-period other comprehensive income 10,973 1,890 12,863

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

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

Balance at March 28, 2021 $ ( 102,911 ) $ ( 12,145 ) $ ( 115,056 )

Six Months Ended

Adjustments Gain (Loss)

on Derivative

Instruments Accumulated Other Comprehensive Income (Loss)

(in thousands)

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

Other comprehensive loss before reclassifications ( 33,112 ) ( 4,574 ) ( 37,686 )

Amounts reclassified from accumulated other comprehensive loss

Interest rate contracts, net of tax (1)

— ( 1,121 ) ( 1,121 )

Net current-period other comprehensive loss ( 33,112 ) ( 5,695 ) ( 38,807 )

Balance at March 29, 2020 $ ( 182,823 ) $ ( 16,568 ) $ ( 199,391 )

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

Other comprehensive income before reclassifications 43,364 6,360 49,724

3 unchanged sentences

Net current-period other comprehensive income 43,364 3,366 46,730

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

Balance at March 28, 2021 $ ( 102,911 ) $ ( 12,145 ) $ ( 115,056 )

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

2 unchanged sentences

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.

8 unchanged sentences

We often provide services to unconsolidated joint ventures.

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.

Revenue generated from the services we provided to unconsolidated joint ventures for the three and six months of fiscal 2021 was approxim ately $ 24 million and $ 46 million, respectively, compared to $ 19 million and $ 48 million for the same periods last year.

Related reimbursable costs for the three and six months of fiscal 2021 were approximately the same as revenue since these reimbursable costs are pass-through costs.

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

5 unchanged sentences

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