What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-30 compared with 2021-04-30 · 138 added, 131 removed, 550 unchanged (33% of the section changed)

3 unchanged sentences

(unaudited - in thousands, except par value)

ASSETS March 28,

ASSETS June 27,

2021 September 27,

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

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

no shares issued and outstanding at June 27, 2021 and September 27, 2020

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

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

issued and outstanding, 54,071 and 53,797 shares at June 27, 2021 and September 27, 2020, respectively

Accumulated other comprehensive loss ( 102,401 ) ( 161,786 )

8 unchanged sentences

(unaudited – in thousands, except per share data)

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

Three Months Ended Nine Months Ended

2021 June 28,

2020 June 27,

2021 June 28,

Revenue $ 801,633 $ 709,771 $ 2,321,500 $ 2,241,527

21 unchanged sentences

(unaudited – in thousands)

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

Three Months Ended Nine Months Ended

2021 June 28,

2020 June 27,

2021 June 28,

Net income $ 51,924 $ 45,503 $ 149,900 $ 129,234

Other comprehensive income, net of tax

Other comprehensive income (loss), net of tax

Foreign currency translation adjustment, net of tax

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Other comprehensive income (loss), net of tax 12,657 21,655 59,391 ( 17,154 )

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

Comprehensive income, net of tax $ 64,581 $ 67,158 $ 209,291 $ 112,080

Comprehensive income attributable to noncontrolling interests, net of tax 23 2 50 23

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

Comprehensive income attributable to Tetra Tech, net of tax $ 64,558 $ 67,156 $ 209,241 $ 112,057

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(unaudited – in thousands)

Six Months Ended

2021 March 29,

Nine Months Ended

2021 June 28,

Cash flows from operating activities:

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Deferred income taxes 123 2,767

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

Provision for losses on accounts receivables ( 4,355 ) 539

Fair value adjustments to contingent consideration ( 163 ) ( 1,521 )

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Repayments on long-term debt ( 173,895 ) ( 297,856 )

Bank overdrafts ( 33,770 ) —

Repurchases of common stock ( 45,000 ) ( 102,188 )

1 unchanged sentence

Stock options exercised 10,703 8,263

Bank overdrafts ( 21,121 ) 2,737

Dividends paid ( 29,241 ) ( 25,590 )

18 unchanged sentences

Consolidated Statements of Stockholders' Equity

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

Three Months Ended June 28, 2020 and June 27, 2021

(unaudited – in thousands)

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Shares Amount

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

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

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

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

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

Cash dividends of $ 0.17 per common share

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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

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

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

Net income 51,903 51,903 21 51,924

Other comprehensive income 12,655 12,655 2 12,657

Distributions paid to noncontrolling interests — ( 9 ) ( 9 )

Cash dividends of $ 0.20 per common share

3 unchanged sentences

Stock options exercised 29 1 931 932 932

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

Stock repurchases ( 118 ) ( 2 ) ( 6,525 ) ( 8,473 ) ( 15,000 ) ( 15,000 )

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

BALANCE AT JUNE 27, 2021 54,071 $ 541 $ — $ ( 102,401 ) $ 1,294,260 $ 1,192,400 $ 95 $ 1,192,495

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

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

Nine months ended June 28, 2020 and June 27, 2021

(unaudited – in thousands)

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Stock repurchases ( 1,338 ) ( 13 ) ( 97,455 ) ( 4,720 ) ( 102,188 ) ( 102,188 )

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

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

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

1 unchanged sentence

Other comprehensive income 59,385 59,385 6 59,391

Distributions paid to noncontrolling interests — ( 9 ) ( 9 )

Cash dividends of $ 0.54 per common share

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Stock repurchases ( 367 ) ( 4 ) ( 20,074 ) ( 24,922 ) ( 45,000 ) ( 45,000 )

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

BALANCE AT JUNE 27, 2021 54,071 $ 541 $ — $ ( 102,401 ) $ 1,294,260 $ 1,192,400 $ 95 $ 1,192,495

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 .

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

Recent Accounting Pronouncements

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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.

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.

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

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

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

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

Three Months Ended Nine Months Ended

2021 June 28,

2020 June 27,

2021 June 28,

(in thousands)

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Other than the U.S.

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.

federal government, no single client accounted for more than 10% of our revenue for the three and nine months ended June 27, 2021 and June 28, 2020.

Contract Assets and Contract Liabilities

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Net contract liabilities $ ( 87,722 ) $ ( 79,273 )

(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.

(1) Includes $ 8.5 million and $ 12.3 million of contract retentions as of June 27, 2021 and September 27, 2020, respectively.

In the first nine months of fiscal 2021 and 2020, we recognized revenue of approximately $ 108 million and $ 106 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.

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).

As a result, we recognized net favorable operating income adjustments of $ 1.7 million and $ 2.8 million in the third quarter and first nine months of fiscal 2021, respectively, compared to a net unfavorable adjustment of $ 2.8 million in the first nine months 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.

As of June 27, 2021 and September 27, 2020, our consolidated balance sheets included liabilities for anticipated losses of $ 8.0 million and $ 13.2 million, respectively.

The estimated cost to complete these related contracts as of June 27, 2021 and September 27, 2020 was approximately $ 81 million and $ 118 million, respectively.

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.

Substantially all of our unbilled receivables at March 28, 2021 are expected to be billed and collecte d within 12 months.

Substantially all of our unbilled receivables at June 27, 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.

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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 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 .

The $ 3.8 million decline in our allowance for doubtful accounts in the first nine months of fiscal 2021 primarily reflects the collection of accounts receivable we previously determined were likely uncollectible related to our Canadian turn-key pipeline activities that we decided to dispose of in the fourth quarter of fiscal 2019.

Total accounts receivable at June 27, 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 redetermination.

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.

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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.

In the first nine months of fiscal 2021 (all in the second quarter), we recognized increases to revenue and related gains of $ 2.8 million in our Commercial/

International Services Group ("CIG").

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

No single client accounted for more than 10% of our accounts receivable at June 27, 2021 a nd 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 $ 3.1 billion of RU POs as of March 28, 2021.

We h ad $ 3.2 billion of RU POs as of June 27, 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.

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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 March 28, 2021 over the following periods:

We expect to satisfy our RUPOs as of June 27, 2021 over the following periods:

(in thousands)

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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.

("SEG"), a leading information technology management consulting firm based in Arlington, Virginia.

SEG is part of our Government Services Group ("GSG") segment.

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

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 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.

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

CRD provides world-class 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 third quarter of fiscal 2021, we acquired The Kaizen Company (“KZN”) and IBRA-RMAC Automation Solutions (“IRM”).

KZN is based in Washington, DC and provides international development advisory and management consulting services offering a suite of innovative tools that support advanced solutions in health, education, governance, peace and stability, and sustainable economic growth.

IRM is based in San Diego, California, and provides digital water transformation consulting services and an innovative suite of tools to address complex water system modernization challenges.

Both KZN and IRM are part of our Government Services Group ("GSG") segment.

The total fair value of the purchase price of these three acquisitions completed during the first nine months of fiscal 2021 was $ 29.1 million.

This amount was comprised of $ 18.9 million in initial cash payments made to the sellers, and $ 10.2 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 19.0 million, based upon the achievement of specified operating income targets in each of the three to four years following the acquisition.

We acquired Segue Technologies, Inc.

("SEG"), a leading information technology management consulting firm based in Arlington, Virginia and BlueWater Federal Solutions, Inc.

("BWF"), a leading information technology management consulting firm based in Chantilly, Virginia in the second and fourth quarters of fiscal 2020, respectively.

SEG and BWF are both part of our GSG segment.

The total fair value of the purchase price for these two acquisitions w as $ 88.6 million.

T his amount was comprised of $ 71.4 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 $ 16.5 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 28.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisitions.

Goodwill additions resulting from the recent acquisitions of KZN, IRM and CRD are 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 acquisitions.

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.

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The results of these acquisitions were included in our consolidated financial statements from their respective closing dates.

These acquisitions were not considered material to our consolidated financial statements.

These acquisitions were not considered material, individually or in the aggregate, to our consolidated financial statements.

As a result, no pro forma information has been provided.

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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.

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.

During the first nine months 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 $ 1.5 million, respectively (substantially all in the second quarters of fiscal 2021 and 2020).

At June 27, 2021, there was a total potential maximu m of $ 68.2 million of outstanding contingent consideration related to acquisitions.

Of this amount, $ 31.2 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 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 prolo nged, we could have significant reductions in our contingent earn-out liabilities and related gains in our operating income in future periods.

Subsequent Event.

On July 26, 2021, we acquired Hoare Lea, a leader in sustainable engineering design.

Based in Bristol, United Kingdom, Hoare Lea was established in 1862 and is an award-winning high-end consultancy firm in the United Kingdom, with more than 900 employees, providi ng innovative solutions to complex engineering and design challenges for sustainable infrastructure and high performance buildings.

Hoare Lea will be included in our CIG segment .

Goodwill and Intangible Assets

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Translation 10,099 29,633 39,732

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

Balance at June 27, 2021 $ 541,305 $ 510,491 $ 1,051,796

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 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.

The gross amounts o f goodwill for GSG were $ 559.0 million and $ 534.0 million at June 27, 2021 and September 27, 2020, respectively, excluding accumulated impairment of $ 17.7 million for each period.

The gross amounts of goodwill for CIG were $ 632.0 million and $ 598.7 million at June 27, 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.

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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:

March 28, 2021 September 27, 2020

June 27, 2021 September 27, 2020

Remaining Life

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Total $ 87,898 $ ( 78,738 ) $ 106,421 $ ( 92,478 )

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.

Amortization expense for the three and nine months ended June 27, 2021 was $ 2.2 million and $ 7.8 million , respectively, compared to $ 2.6 million and $ 9.0 million for the prior-year periods.

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

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Property and equipment, net $ 36,001 $ 35,507

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.

The depreciation expense related to property and equipment was $ 3.1 million and $ 9.0 million for the three and nine months ended June 27, 2021, respectively, compared to $ 3.7 million and $ 10.1 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 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:

In the first nine months of fiscal 2021, we repurchased and settled 368,177 shares with an average price of $ 122.22 per share for a total cost of $ 45.0 million in the open market.

At June 27, 2021, we had a remaining balance of $ 162.8 million under our stock repurchase program.

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

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

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

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

April 26, 2021 $ 0.20 May 12, 2021 May 28, 2021 10,831

Total dividend paid as of June 27, 2021 $ 29,241

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

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

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

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

Subsequent Event.

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.

On July 26, 2021, the Board of Directors declared a quarterly cash dividend of $ 0.20 pe r share payable on September 3, 2021 to stockholders of record as of the close of business on August 20, 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 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 March 28, 2021 and September 2 7, 2020.

We determine if an arrangement is a lease at inception.

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The components of lease costs are as follows:

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

Three Months Ended Nine Months Ended

2021 June 28,

2020 June 27,

2021 June 28,

(in thousands)

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Supplemental cash flow information related to leases is as follows:

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

Three Months Ended Nine Months Ended

2021 June 28,

2020 June 27,

2021 June 28,

(in thousands)

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

March 28, 2021 September 27, 2020

June 27, 2021 September 27, 2020

(in thousands)

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Operating leases 2.3 % 2.5 %

As of March 28, 2021, we do not have any material additional operating leases that have not yet commenced.

As of June 27, 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:

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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 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.

We recogniz e 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 27, 2021 was $ 5.7 million and $ 16.3 million, respectively, compared to $ 4.1 million and $ 13.5 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 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.

In the first nine months of fiscal 2021, we awarded 57,542 performance share units (“PSUs”) (all in the first quarter) 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 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 .

Additionally, we awarded 117,084 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $ 121.97 per share on the award date.

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

Earnings per Share (“EPS”)

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

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

Three Months Ended Nine Months Ended

2021 June 28,

2020 June 27,

2021 June 28,

(in thousands, except per share data)

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Diluted $ 0.95 $ 0.83 $ 2.74 $ 2.34

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.

The effective tax rates for the first nine months of fiscal 2021 and 2020 were 20.4 % and 21.2 %, respectively.

Income tax expense was reduced by $ 8.7 million and $ 7.0 million of excess tax benefits on share-based payments in the first nine months 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 nine months fiscal 2021 and 2020 were 25.0 % and 25.4 %, r espectively.

As of June 27, 2021 and September 27, 2020, the liability for income taxes associated with uncertain tax positions was $ 12.8 million and $ 9.7 million, respectively.

Th ese uncertain tax positions substantially relate to ongoing examinations, which are not 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.

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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 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.

CIG supports commercial clients across the Fortun e 500, renewable energy, industrial, manufacturing, and aerospace markets.

CIG also provides sustainable 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.

Management evaluates the performance of these reportable segments based upon their respective segment operating income before the effect of amortization expense related to acquisitions, and other unallocated corporate expenses.

We account for inter-segment revenues and transfers as if they were to third parties;

for inter-segment revenues and transfers as if they were to third parties;

that is, by applying a negotiated fee onto the costs of the services performed.

All significant intercompany balances and transactions are eliminated in consolidation.

Reportable Segments

The following tables summarize financial information regarding our reportable segments:

Three Months Ended Six Months Ended

2021 March 29,

2020 March 28,

2021 March 29,

Three Months Ended Nine Months Ended

2021 June 28,

2020 June 27,

2021 June 28,

(in thousands)

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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 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.

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

At June 27, 2021, we had borrowings o f $ 246.5 million ou tstanding 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

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We record changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as cash flow hedges in our consolidated balance sheets as accumulated other comprehensive income, and in our consolidated statements of income for those derivatives designated as fair value hedges.

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 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.

In fiscal 2018, we entere d 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 27, 2021, the notional principal of our outstanding interest swap agreements was $ 218.8 million ($ 43.8 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 27, 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 was $( 10.6 ) 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 $ 4.9 million for the three and nine months ended June 27, 2021, respectively, compared to related losses of $ 0.0 million and $ 5.7 million for the prior-year periods, 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 nine months of fiscal 2021.

Reclassifications Out of Accumulated Other Comprehensive Income

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:

The accumulated balances and activities for the three and nine months ended June 27, 2021 and June 28, 2020 related to reclassifications out of accumulated other comprehensive income are summarized as follows:

Three Months Ended

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(in thousands)

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

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

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

Other comprehensive income before reclassifications 21,689 1,279 22,968

Amounts reclassified from accumulated other comprehensive loss

1 unchanged sentence

— ( 1,309 ) ( 1,309 )

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

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

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

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

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

Other comprehensive income before reclassifications 11,157 2,981 14,138

Amounts reclassified from accumulated other comprehensive income

Amounts reclassified from accumulated other comprehensive loss

Interest rate contracts, net of tax (1)

1 unchanged sentence

Net current-period other comprehensive income 11,157 1,498 12,655

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

Six Months Ended

Balance at June 27, 2021 $ ( 91,754 ) $ ( 10,647 ) $ ( 102,401 )

Nine Months Ended

Adjustments Gain (Loss)

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

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

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

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

Other comprehensive income before reclassifications 54,521 9,341 63,862

Amounts reclassified from accumulated other comprehensive income

Amounts reclassified from accumulated other comprehensive loss

Interest rate contracts, net of tax (1)

1 unchanged sentence

Net current-period other comprehensive income 54,521 4,864 59,385

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

Balance at June 27, 2021 $ ( 91,754 ) $ ( 10,647 ) $ ( 102,401 )

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

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We often provide services to unconsolidated joint ventures.

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.

Revenue generated from the services we provided to unconsolidated joint ventures for the three and nine months of fiscal 2021 was $ 24.2 million and $ 69.8 million, respectively, compared to $ 19.0 million and $ 67.0 million for the same periods last year.

Related reimbursable costs for the three and nine months of fiscal 2021 were $ 23.2 million and $ 67.2 million, respectively, compared to $ 18.4 million and $ 66.0 million for the same periods last year.

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