What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-11-24 compared with 2020-11-23 · 319 added, 363 removed, 1051 unchanged (39% of the section changed)

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Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at September 27, 2020 and September 29, 2019

Consolidated Statements of Income for the fiscal years ended September 27, 2020, September 29, 2019 and September 30, 2018

Consolidated Statements of Comprehensive Income for the fiscal years ended September 27, 2020, September 29, 2019 and September 30, 2018

Consolidated Statements of Cash Flows for the fiscal years ended September 27, 2020, September 29, 2019 and September 30, 2018

Consolidated Statements of Equity for the fiscal years ended September 27, 2020, September 29, 2019 and September 30, 2018

Consolidated Balance Sheets at October 3 , 202 1 and September 2 7 , 20 20

Consolidated Statements of Income for the fiscal years ended October 3 , 202 1 , September 2 7 , 20 20 and September 29 , 201 9

Consolidated Statements of Comprehensive Income for the fiscal years ended October 3 , 202 1 , September 2 7 , 20 20 and September 29 , 201 9

Consolidated Statements of Cash Flows for the fiscal years ended October 3 , 202 1 , September 2 7 , 20 20 and September 29 , 201 9

Consolidated Statements of Equity for the fiscal years ended October 3 , 202 1 , September 2 7 , 20 20 and September 29 , 201 9

Notes to Consolidated Financial Statements

Schedule II – Valuation and Qualifying Accounts and Reserves for the fiscal years ended September 27, 2020, September 29, 2019, and September 30, 2018

Schedule II – Valuation and Qualifying Accounts and Reserves for the fiscal years ended October 3 , 202 1 , September 2 7 , 20 20 , and September 29 , 201 9

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have audited the accompanying consolidated balance sheets of Tetra Tech, Inc.

and its subsidiaries (the “Company”) as of September 27, 2020 and September 29, 2019, and the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended September 27, 2020, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of September 27, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 27, 2020 and September 29, 2019, and the results of its operations and its cash flows for each of the three years in the period ended September 27, 2020 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 27, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

and its subsidiaries (the “Company”) as of October 3, 2021 and September 27, 2020, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended October 3, 2021, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of October 3, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 3, 2021 and September 27, 2020, and the results of its operations and its cash flows for each of the three years in the period ended October 3, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 3, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management's Report on Internal Control over Financial Reporting, management has excluded Hoare Lea, LLP and Subsidiaries ("HLE") from its assessment of internal control over financial reporting as of October 3, 2021, because it was acquired by the Company in a purchase business combination during 2021.

We have also excluded HLE from our audit of internal control over financial reporting.

HLE is a wholly-owned subsidiary whose total assets and total revenue excluded from management's assessment and our audit of internal control over financial reporting represent approximately 2% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the fiscal year ended October 3, 2021.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Determination of Total Estimated Contract Cost for Fixed-price Contracts

As described in Note 3 to the consolidated financial statements, $1.1 billion of the Company’s total revenues for the year ended September 27, 2020 was generated from fixed-price contracts.

As described in Note 3 to the consolidated financial statements, $1.2 billion of the Company’s total revenues for the year ended October 3, 2021 was generated from fixed-price contracts.

As disclosed by management, under fixed-price contracts, the Company's clients pay an agreed fixed-amount negotiated in advance for a specified scope of work.

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The cost input is based primarily on contract cost incurred to date compared to total estimated contract cost.

This measure includes forecasts based on the best information available and reflects the judgement to faithfully depict the value of the services transferred to the customer.

This measure includes forecasts based on the best information available and reflects management's judgement to faithfully depict the value of the services transferred to the customer.

Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term.

For those performance obligations for which revenue is recognized using a cost-to-cost measure of progress method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made.

As a result, the Company recognized net favorable operating income adjustments of $0.8 million as of September 27, 2020, exclusive of the amounts related to claims described below.

As a result, the Company recognized net favorable operating income adjustments of $0.7 million for the year ended October 3, 2021, exclusive of the amounts related to claims described below.

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.

The anticipated losses and estimated cost to complete the related contracts was $13.2 million and $118 million as of September 27, 2020.

The anticipated losses and estimated cost to complete the related contracts was $12.7 million and approximately $104 million, respectively, as of October 3, 2021.

Claims are amounts in excess of agreed contract prices that the Company seeks to collect from clients or other third parties.

Claims were approximately $14 million as of September 27, 2020.

Claims were approximately $11 million as of October 3, 2021.

The principal considerations for our determination that performing procedures relating to revenue recognition - determination of total estimated contract cost for fixed-price contracts is a critical audit matter are the significant amount of judgment required by management in determining the total estimated contract cost for fixed-price contracts which, in turn, led to a high degree of auditor judgment, subjectivity, and audit effort in performing procedures and in evaluating the audit evidence obtained related to the total estimated contract costs for fixed-price contracts with cumulative catch-up adjustments, anticipated losses or claims.

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These procedures also included, among others, (i) evaluating and testing management’s process for determining the total estimated contract cost for a sample of contracts with cumulative catch-up adjustments, anticipated losses or claims, which included evaluating the contract terms and other documents that support those estimates, and testing of underlying contract costs;

(ii) assessing management's ability to reasonably estimate total contract costs by performing a comparison of the actual total estimated contract cost as compared with prior period estimates, including evaluating the timely identification of circumstances that may warrant a modification to the total estimated contract cost;

(ii) assessing management's ability to reasonably estimate total contract costs by performing a comparison of the total estimated contract cost as compared with prior period estimates, including evaluating the timely identification of circumstances that may warrant a modification to the total estimated contract cost;

and (iii) evaluating, for certain contracts, management’s methodologies and assessing the consistency of management’s approach over the life of the contract.

Goodwill Impairment Assessment - Asia/Pacific Reporting Unit

As described in Notes 2 and 6 to the consolidated financial statements, the Company's consolidated goodwill balance was $993.5 million as of September 27, 2020, and the goodwill associated with the Asia/Pacific (ASP) reporting unit was $95.5 million.

Management performs an annual goodwill impairment review at the beginning of the fiscal fourth quarter, June 29, 2020, or more frequently when an event occurs or circumstances indicate that the carrying value of the asset may not be recoverable.

On September 2, 2020, Australia announced that it had fallen into economic recession in the quarter ending in June 2020.

Management performed an interim goodwill impairment review of the ASP reporting unit and recorded a $15.8 million goodwill impairment charge.

The impairment test for goodwill involves the comparison of the estimated fair value of each reporting unit to the reporting unit's carrying value, including goodwill.

Management estimates the fair value of reporting units based on a comparison and weighting of the income approach, specifically the discounted cash flow method and the market

The development of the present value of future cash flow projections include assumptions and estimates derived from expected revenue growth rates, operating profit margins, discount rates and the terminal growth rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the ASP reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value measurement of the reporting unit ;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management's significant assumptions related to revenue growth rates, operating profit margins, discount rates and terminal growth rates:

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management's goodwill impairment assessment, including controls over the valuation of the ASP reporting unit.

These procedures also included, among others, (i) testing management's process for developing the fair value estimate;

(ii) evaluating the appropriateness of the discounted cash flow method;

and the market approach;

(iii) testing the completeness and accuracy of underlying data used in the valuation approaches;

and (iv) evaluating the significant assumptions used by management related to the expected revenue growth rates, operating margins, discount rates and the terminal growth rates.

Evaluating management's assumptions related to expected revenue growth rates and operating profit margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company's discounted cash flow method and market approach and management's assumptions related to the discount rates and terminal growth rates.

/s/ PricewaterhouseCoopers LLP

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(in thousands, except par value)

ASSETS September 27,

ASSETS October 3,

2021 September 27,

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Preferred stock – Authorized, 2,000 shares of $ 0.01 par value;

no shares issued and outstanding at September 27, 2020 and September 29, 2019

no shares issued and outstanding at October 3, 2021 and September 27, 2020

Common stock – Authorized, 150,000 shares of $ 0.01 par value;

issued and outstanding, 53,797 and 54,565 shares at September 27, 2020 and September 29, 2019, respectively

Additional paid-in capital — 78,132

issued and outstanding, 53,981 and 53,797 shares at October 3, 2021 and September 27, 2020, respectively

Accumulated other comprehensive loss ( 125,028 ) ( 161,786 )

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2020 September 29, 2019

2019 September 30, 2018

Revenue $ 3,213,513 $ 2,994,891 $ 3,107,348

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2020 September 29, 2019

2019 September 30, 2018

Net income $ 232,831 $ 173,890 $ 158,761

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Foreign currency translation adjustments, net of tax 30,644 3,435 ( 20,866 )

(Loss) gain on cash flow hedge valuations, net of tax ( 4,638 ) ( 12,125 ) 806

Other comprehensive loss attributable to Tetra Tech, net of tax ( 1,202 ) ( 33,234 ) ( 28,850 )

Other comprehensive income (loss) attributable to noncontrolling interests, net of tax ( 1 ) 243 ( 64 )

Gain (loss) on cash flow hedge valuations, net of tax 6,117 ( 4,638 ) ( 12,125 )

Other comprehensive income (loss), net of tax 36,761 ( 1,203 ) ( 32,991 )

Comprehensive income, net of tax $ 269,592 $ 172,687 $ 125,770

Comprehensive income attributable to Tetra Tech, net of tax $ 172,657 $ 125,434 $ 108,033

Comprehensive income attributable to noncontrolling interests, net of tax 24 30 336

Comprehensive income, net of tax $ 172,687 $ 125,770 $ 108,043

Comprehensive income attributable to Tetra Tech, net of tax $ 269,568 $ 172,657 $ 125,434

See accompanying Notes to Consolidated Financial Statements.

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2020 September 29, 2019

2019 September 30, 2018

Cash flows from operating activities:

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Deferred income taxes ( 38,494 ) 565 ( 37,615 )

Provision for doubtful accounts 1,267 16,964 7,167

Provision for losses on accounts receivables ( 4,130 ) 1,267 16,964

Impairment of goodwill — 15,800 7,755

Fair value adjustments to contingent consideration ( 3,273 ) ( 14,971 ) 1,085

(Gain) loss on sale of assets and divested business ( 11,066 ) ( 232 ) 1,045

Gain on sale of property and equipment ( 110 ) ( 11,066 ) ( 232 )

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

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Income taxes receivable/payable 13,090 ( 5,192 ) ( 11,386 )

Cash settled contingent earn-out liability — — ( 2,349 )

Net cash provided by operating activities 304,372 262,479 208,513

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Capital expenditures ( 8,573 ) ( 12,245 ) ( 16,198 )

Proceeds from sale of assets and divested business, net 17,710 651 35,348

Proceeds from sale of property and equipment 492 17,710 651

Net cash used in investing activities ( 92,992 ) ( 63,023 ) ( 99,706 )

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Payments of contingent earn-out liabilities ( 20,251 ) ( 22,900 ) ( 12,018 )

Debt pre-payment costs — — ( 1,737 )

Stock options exercised 11,250 10,334 11,751

Net change in overdrafts ( 36,627 ) 36,627 —

Dividends paid ( 40,041 ) ( 34,743 ) ( 29,674 )

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Net cash used in financing activities ( 210,099 ) ( 163,049 ) ( 135,063 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash 207 ( 1,727 ) ( 4,947 )

Net increase (decrease) in cash, cash equivalents and restricted cash 36,614 ( 27,983 ) ( 43,806 )

Cash, cash equivalents and restricted cash at beginning of year 120,901 148,884 192,690

Cash, cash equivalents and restricted cash at end of year $ 157,515 $ 120,901 $ 148,884

Effect of exchange rate changes on cash and cash equivalents 7,772 207 ( 1,727 )

Net increase (decrease) in cash and cash equivalents 9,053 36,614 ( 27,983 )

Cash and cash equivalents at beginning of year 157,515 120,901 148,884

Cash and cash equivalents at end of year $ 166,568 $ 157,515 $ 120,901

Supplemental information:

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$ 59,111 $ 55,039 $ 66,038

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents $ 157,515 $ 120,732 $ 146,185

Restricted cash included in other current assets — 169 2,699

Total cash, cash equivalents and restricted cash $ 157,515 $ 120,901 $ 148,884

See accompanying Notes to Consolidated Financial Statements.

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Consolidated Statements of Equity

Fiscal Years Ended September 30, 2018, September 29, 2019, and September 27, 2020

Fiscal Years Ended September 29, 2019, September 27, 2020, and October 3, 2021

(in thousands)

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Shares Amount

BALANCE AT OCTOBER 1, 2017 55,873 $ 559 $ 193,835 $ ( 98,500 ) $ 832,559 $ 928,453 $ 171 $ 928,624

BALANCE AT SEPTEMBER 30, 2018 55,349 $ 553 $ 148,803 $ ( 127,350 ) $ 944,965 $ 966,971 $ 129 $ 967,100

Comprehensive income, net of tax:

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Stock-based compensation 17,618 17,618 17,618

Stock options exercised 549 5 13,506 13,511 13,511

Restricted & performance shares released 183 2 ( 6,895 ) ( 6,893 ) ( 6,893 )

Stock options exercised 448 5 11,746 11,751 11,751

Shares issued for Employee Stock Purchase Plan 148 2 6,844 6,846 6,846

Stock repurchases ( 1,563 ) ( 16 ) ( 99,984 ) ( 100,000 ) ( 100,000 )

Cumulative effect of accounting changes ( 2,767 ) ( 2,767 ) ( 2,767 )

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

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Foreign currency translation adjustments 3,436 3,436 ( 1 ) 3,435

Gain on cash flow hedge valuations ( 12,125 ) ( 12,125 ) ( 12,125 )

Loss on cash flow hedge valuations ( 4,638 ) ( 4,638 ) ( 4,638 )

Comprehensive income, net of tax 172,657 30 172,687

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Stock repurchases ( 1,509 ) ( 15 ) ( 105,432 ) ( 11,741 ) ( 117,188 ) ( 117,188 )

Cumulative effect of accounting changes ( 2,767 ) ( 2,767 ) ( 2,767 )

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

Comprehensive income, net of tax:

Common Stock Additional

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Shares Amount

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

Comprehensive income, net of tax:

Net income 232,810 232,810 21 232,831

Foreign currency translation adjustments 30,641 30,641 3 30,644

Loss on cash flow hedge valuations ( 4,638 ) ( 4,638 ) ( 4,638 )

Gain on cash flow hedge valuations 6,117 6,117 6,117

Comprehensive income, net of tax 269,568 24 269,592

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Stock repurchases ( 479 ) ( 5 ) ( 27,385 ) ( 32,610 ) ( 60,000 ) ( 60,000 )

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

BALANCE AT OCTOBER 3, 2021 53,981 $ 540 $ — $ ( 125,028 ) $ 1,358,726 $ 1,234,238 $ 53 $ 1,234,291

See accompanying Notes to Consolidated Financial Statements.

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Description of Business

We are a leading global provider of consulting and engineering services that focuses on water, environment, sustainable infrastructure, resource management, energy, and international development.

We are a leading global provider of consulting and engineering services that focuses on water, environment, sustainable infrastructure, renewable energy, and international development.

We are a global company that is Leading with Science® to provide innovative solutions for our public and private clients.

We typically begin at the earliest stage of a project by identifying technical solutions and developing execution plans tailored to our clients’ needs and resources.

Our solutions may span the entire life cycle of consulting and engineering projects and include applied science, data analysis, research, engineering, design, construction management, and operations and maintenance.

Our solutions may span the entire life cycle of consulting and engineering projects and include applied science, data analysis, research, engineering, design, project management, and operations and maintenance.

We manage our business under two 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 Remediation and Construction Management (“RCM”) reportable segment.

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

We continue to report the historical results of the wind-down of our non-core construction activities in the Remediation and Construction Management (“RCM”) reportable segment.

Basis of Presentation and Preparation

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All significant intercompany balances and transactions have been eliminated in consolidation.

We report results of operations based on 52 or 53-week periods ending on the Sunday nearest September 30.

Fiscal years 2020, 2019 and 2018 each contained 52 weeks.

We report results of operations based on 52/53-week periods ending on the Sunday nearest September 30.

Fiscal 2021 contained 53 weeks, and fiscal 2020 and 2019 each contained 52 weeks.

Use of Estimates.

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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 September 27, 2020 are expected to be billed and collected within 12 months.

Most of our unbilled receivables at October 3, 2021 are expected to be billed and collected within 12 months.

Unbilled accounts receivable also include amounts related to requests for equitable adjustment to contracts that provide for price redetermination.

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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 represent the amount of cash collected from clients and billings to clients on contracts in advance of work performed and revenue recognized.

liabilities represent the amount of cash collected from clients and billings to clients on contracts in advance of work performed and revenue recognized.

The majority of these amounts are expected be earned within 12 months and are classified as current liabilities.

Prepaid and other current assets.

Prepaid assets consist primarily of payments for insurance and software costs and are amortized over the estimated period of benefit.

Other current assets include primarily sales/services and use tax receivables from our U.S and foreign operations.

Property and Equipment.

Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method.

Property and equipment are recorded at cost and d epreciated over their estimated useful lives using the straight-line method.

When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from our consolidated balance sheets and any resulting gain or loss is reflected in our consolidated statements of income.

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Long-Lived Assets.

Our policy is to evaluate the recoverability of our long-lived assets when the facts and circumstances suggest that the assets may be impaired.

We evaluate the recoverability of our long-lived assets when the facts and circumstances suggest that the assets may be impaired.

This assessment is performed based on the estimated undiscounted cash flows compared to the carrying value of the assets.

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ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, incremental borrowing rates are used based on the information available at commencement date in determining the present value of lease payments.

The operating lease ROU asset also includes any lease payments made and excludes lease incentives.

The operating lease ROU asset at the commencement date also includes any lease payments made to the lessor at or before the commencement date and initial direct costs less lease incentives received.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

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

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 .

We also have finance leases which are primarily related to IT equipment.

We recognize a liability for contract termination costs associated with an exit activity for costs that will continue to be incurred under a lease for its remaining term without economic benefit to us, initially measured at its fair value at the cease-use date.

We recognize a liability for contra ct termination costs associated with an exit activity for costs that will continue to be incurred under a lease for its remaining term without economic benefit to us, initially measured at its fair value at the cease-use date.

The fair value is determined based on the remaining lease rentals, adjusted for the effects of any prepaid or deferred items recognized under the lease, and reduced by estimated sublease rentals.

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We believe the methodology that we use to review impairment of goodwill, which includes a significant amount of judgment and estimates, provides us with a reasonable basis to determine whether impairment has occurred.

However, many of the factors employed in determining whether our goodwill is impaired are outside of our control and it is reasonably likely that assumptions and estimates will change in future periods.

However, many of the factors employed in determining whether our goodwill is

impaired are outside of our control and it is reasonably likely that assumptions and estimates will change in future periods.

These changes could result in future impairments.

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We use a probability weighted discounted income approach as a valuation technique to convert future estimated cash flows to a single present value amount.

The significant unobservable inputs used in the fair value measurements are operating income projections over the earn-out period (generally two or three years ), and the probability outcome percentages we assign to each scenario.

The significant unobservable inputs used in the fair value measurements are operating income projections over the earn-out period (generally three or five years ), and the probability outcome percentages we assign to each scenario.

Significant increases or decreases to either of these inputs in isolation would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation.

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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.

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.

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.

Other current liabilities.

Other current liabilities consists primarily of accrued insurance, contingent liabilities, sales/services and use taxes due to our U.S.

and foreign operations, other tax accruals and accrued professional fees.

Fair Value of Financial Instruments.

We determine the fair values of our financial instruments, including short-term investments, debt instruments and derivative instruments based on inputs or assumptions that market participants would use in pricing an asset or a liability.

We determine the fair values of our financial instruments, including short-term investments, debt instruments, derivative instruments and pension plan assets bas ed on inputs or assumptions that market participants would use in pricing an asset or a liability.

We categorize our instruments using a valuation hierarchy for disclosure of the inputs used to measure fair value.

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Our consolidated balance sheets reflect our investment in variable life insurance contracts in "Other long-term assets." Our obligation to participating employees is reflected in "Other long-term liabilities." The net gains and losses related to the deferred compensation plan are reported as part of “Selling, general and administrative expenses” in our consolidated statements of income .

Pension Plan .

In connection with a fiscal 2021 acquisition, we assumed a defined benefit pension plan.

We calculate the market-related value of assets, which is used to determine the return-on-assets component of annual pension expense and the cumulative net unrecognized gain or loss subject to amortization.

This calculation reflects our anticipated long-term rate of return and amortization of the difference between the actual return (including capital, dividends, and interest) and the expected return.

Cumulative net unrecognized gains or losses that exceed 10% of the greater of the projected benefit obligation or the fair market related value of plan assets are subject to amortization.

Income Taxes.

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Financial instruments that subject us to credit risk consist primarily of cash and cash equivalents and net accounts receivable.

In th e event that we have surplus cash, we place our temporary cash investments with lower risk financial institutions and, by policy, limit the amount of investment exposure to any one financial institution.

In th e event that we have surplus cash, we place our temporary cash investments with lower ris k financial institutions and, by policy, limit the amount of investment exposure to any one financial institution.

Approximately 24 % of accounts receivable were due from various agencies of the U.S.

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Gains or losses from foreign currency transactions are included in income from operations.

Reclassifications.

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

Recently Issued Accounting Pronouncements Adopted in Fiscal 2021.

In February 2016, the Financial Accounting Standards Board ("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 ROU assets obtained in exchange for lease liabilities on the balance sheet.

Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases.

Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

In the first quarter of fiscal 2020, we adopted the standard using the modified retrospective method.

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

Our fiscal 2020 financial statements have been presented under this standard.

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

See Note 10, "Leases" for further discussion of the adoption and the impact on our consolidated financial statements.

In August 2017, the 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.

Recently Issued Accounting Pronouncements Not Yet Adopted.

In June 2016, the 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.

This guidance replaced the previous 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).

In anticipation of our adoption of ASU 2016-13, we have updated our presentation of gross receivables and the allowance for doubtful accounts to reflect only expected credit losses in the allowance.

We do not expect the adoption in the first quarter of fiscal 2021 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.

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.

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.

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.

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.

Recently Issued Accounting Pronouncements Not Yet Adopted.

In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and amending certain existing guidance for clarity.

This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020 (first quarter of fiscal 2022 for us).

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

In October 2021, the FASB issued ASU 2021-08, which requires the recognition and measurement of contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers.

Considerations to determine the amount of contract assets and contract liabilities to record at the acquisition date include the terms of the acquired contract, such as timing of payment, identification of each performance obligation in the contract and allocation of the contract transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception.

ASU 2021-08 is effective for us beginning in the first quarter of fiscal 2023.

ASU 2021-08 should be applied prospectively for acquisitions occurring on or after the effective date of the amendments.

Early adoption of the proposed amendments would be permitted, including adoption in an interim period.

We are currently assessing the impact this standard will have on our consolidated financial statements.

Revenue and Contract Balances

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2020 September 29, 2019

2019 September 30, 2018

(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 twelve months ended months ended September 27, 2020 and September 29, 2019.

federal governme nt, no single client accounted for more than 10% of our revenue for fiscal 2021 and 2020.

Contract Assets and Contract Liabilities

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There were no substantial non-current contract assets or liabilities for the periods presented.

Net contract assets/liabilities consisted of the following:

September 27,

Net contract liabilities consisted of the following:

2021 September 27, 2020

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Net contract liabilities $ ( 86,619 ) $ ( 79,273 )

(1) Include s $ 12.3 million and $ 26.5 million of contract retentions as of September 27, 2020 and September 29, 2019, respectively.

In fiscal 2020, we recognized revenue of approximately $ 118 million from amounts included in the contract liability balance at the end of fiscal 2019, compared to approximately $ 90 million for the c omparative prior-year period.

(1) Include s $ 12.2 million and $ 12.3 million of contract retentions as of October 3, 2021 and September 27, 2020, respectively.

In fiscal 2021, we recognized revenue of approximately $ 119 million from amounts included in the contract liability balance at the end of fiscal 2020, compared to approximately $ 118 million for the compara tive prior-year period.

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 net favorable operating income adjustments o f $ 0.8 million fo r both fiscal 2020 and fiscal 2019, exclusive of the amounts related to claims described below.

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 September 27, 2020 and September 29, 2019, our consolidated balance sheets included liabilities for anticipated losses of $ 13.2 million and $ 11.5 million, respectively.

The estimated cost to complete the related contracts as of September 27, 2020 was approximately $ 118 million.

As a result, we recognized net favorable operating income adjustments of $ 0.7 million and $ 0.8 million for fiscal 2021 and 2020, respectively, exclusive of the amounts related to claims described below.

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

As of October 3, 2021 and September 27, 2020, our consolidated balance sheets included liabilities for anticipated losses o f $ 12.7 million and $ 13.2 million, respectively.

The estimated cost to complete these related contracts as of October 3, 2021 and September 27, 2020 was approximate ly $ 104 million and $ 118 million, respectively.

Accounts Receivable, Net

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2021 September 27,

2020 September 29,

(in thousands)

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Most of our unbilled receivables at September 27, 2020 are expected to be billed and collected within 12 months.

The allowance for

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

of our unbilled receivables at October 3, 2021 are expected to be billed and collected within 12 months.

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

We determine an estimated allowance for uncollectible accounts based on management's consideration of trends in the actual and forecasted credit quality of our clients, including delinquency and payment history;

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

Total accounts receivable at September 27, 2020 and September 29, 2019 included approximate ly $ 14 million and $ 15 million, respectively, related to claims, including requests for equitable adjustment, on contracts that provide for price redetermination.

Total accounts receivable at October 3, 2021 and September 27, 2020 included approximate ly $ 11 million a nd $ 14 million, respectively, 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 adjustments to operating earnings when it is probable that the claim will result in a different contract value than the amount previously estimated.

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

In fiscal 2019 , we recognized reductions of revenue of $ 26.7 million and $ 4.6 million, and related losses in operating income of $ 28.2 million and $ 5.7 million in our CIG and RCM segments, respectively, primarily due to the resolution of several claims in fiscal 2019 for amounts lower than we previously expected.

No single client accounted for more than 10% of our accounts receivable at September 27, 2020 and September 29, 2019.

In 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 fi scal 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 October 3, 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 September 27, 2020.

We h ad $ 3.5 billion of RUP Os as of October 3, 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 September 27, 2020 over the following periods:

We expect to satisfy our RUPOs as of October 3, 2021 over the following periods:

(in thousands)

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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 September 27, 2020, we had a remaining balance of $ 207.8 million available under the 2019 and 2020 programs.

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

Fiscal Year 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 1,508,747 $ 77.67 $ 117,188

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

In fiscal 2021, we repurchased and settled 479,369 shares with an average price of $ 125.16 per share for a total cost of $ 60.0 million in the open market.

As of October 3, 2021, we had a remaining balance of $ 147.8 million available under repurchase program.

The following table presents dividends declared and paid in fiscal 2021 and 2020:

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(in thousands)

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

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

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July 26, 2021 $ 0.20 August 20, 2021 September 3, 2021 10,800

Total dividends paid as of September 27, 2020 $ 34,743

November 5, 2018 $ 0.12 November 30, 2018 December 14, 2018 $ 6,654

Total dividends paid as of October 3, 2021 $ 40,041

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

July 29, 2019 $ 0.15 August 14, 2019 August 30, 2019 8,185

July 27, 2020 $ 0.17 August 21, 2020 September 4, 2020 9,153

Total dividends paid as of September 27, 2020 $ 34,743

Subsequent Event.

On November 9, 2020, the Board of Directors declared a quarterly cash dividend of $ 0.17 per share payable on December 11, 2020 to stockholders of record as of the close of business on November 30, 2020.

Acquisitions and Divestitures

In fiscal 2018, we acquired Glumac, headquartered in Portland, Oregon.

Glumac is a leader in sustainable infrastructure design with more than 300 employees and is part of our GSG segment.

The fair value of the purchase price for Glumac was $ 38.4 million.

This amount is comprised of $ 20.0 million of initial cash payments made to the sellers and $ 18.4 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 20.0 million payable, based upon the achievement of specified operating income targets in each of the three years following the acquisition.

In fiscal 2018, we acquired Norman Disney & Young (“NDY”), a leader in sustainable infrastructure engineering design.

NDY is an Australian-based global engineering design firm with more than 700 professionals operating in offices throughout Australia, the Asia-Pacific region, the United Kingdom, and Canada and is part of our CIG segment.

The fair value of the purchase price for NDY was $ 56.1 million.

This amount is comprised of $ 46.9 million of initial cash payments made to the sellers, $ 1.6 million held in escrow, and $ 7.6 million for the estimated fair value of contingent earn-out obligations, with a maximum amount of $ 20.2 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition.

In fiscal 2018, we divested our non-core utility field services operations in the CIG segment for net proceeds after transaction costs of $ 30.2 million.

This operation generated approximately $ 70 million in annual revenue primarily from our U.S.

commercial clients.

We also divested non-core assets during the third quarter of fiscal 2018 resulting in a pre-tax loss of $ 3.4 million, which is included in selling, general and administrative expenses for fiscal 2018.

In 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 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 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 integration costs related to the WYG acquisition in the fourth quarter of fiscal 2019.

Subsequent Events.

On October 5, 2021, the Board of Directors authorized a new stock repurchase program under which we could repurchase up to $ 400 million of our common stock in addition to the $ 147.8 million remaining under the previous stock repurchase program at October 3, 2021.

On November 15, 2021, the Board of Directors also declared a quarterly cash dividend of $ 0.20 per share payable on December 20, 2021 to stockholders of record as of the close of business on December 2, 2021.

In fiscal 2021, we acquired Coanda Research and Development Corporation ("CRD"), The Kaizen Company (“KZN”), IBRA-RMAC Automation Solutions (“IRM”), and the partnership interests of Hoare Lea, LLP and Subsidiaries ("HLE").

CRD is based in Burnaby, British Columbia and 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.

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.

HLE is a leader in sustainable engineering design based in Bristol, United Kingdom.

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

CRD and HLE are part of our CIG segment, and KZN and IRM are part of our GSG segment.

The total fair value of the purchase price for these acquisitions was $ 151.7 million.

This amount is comprised of $ 101.4 million in initial cash payments made to the sellers, and $ 50.3 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 74.0 million, based upon the achievement of specified operating income targets in each of the three to four years following the acquisitions.

In fiscal 2020, we acquired Segue Technologies, Inc.

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

SEG is part of our 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 fiscal 2020, we acquired BlueWater Federal Solutions, 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.

BWF is part of our GSG segment.

The fair value of the purchase price w as $ 48.5 million.

T his amount was comprised of $ 41.8 million in initial cash payments made to the sellers, $ 1.5 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.

Both of these acquisitions are part of our GSG segment.

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

This amount was comprised of $ 71.4 million in initial cash payments made to the seller s, $ 0.7 million of payabl es 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.

In fiscal 2019, we acquired eGlobalTech ("EGT") and WYG plc (“WYG”).

EGT is a high-end information technology solutions, cloud migration, cybersecurity, and management consulting firm based in Arlington, Virginia.

WYG 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.

Both of these acquisitions are part of our GSG segment.

The total fair value of the purchase price for these two acquisitions was $ 103.3 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), cash payments of $ 54.2 million to the sellers, $ 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 acquisitions.

In addition, we assumed net debt of $ 11.5 million, which was subsequently paid in full in the fourth quarter of fiscal 2019 and incurred $ 10.4 million in acquisition and integration costs.

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 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.

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.

The fiscal 2021 goodwill additions represent the significant technical expertise residing in embedded workforces that are sought out by clients and the long-standing reputation of HLE.

The goodwill additions related to our 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 exis ting 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 compan ies.

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

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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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.

During fiscal 2020, we recorded adjustments to our contingent earn-out liabilities and reported related net gains in operating income of $ 15.0 million, substantially all in the fourth quarter.

These gains primarily resulted from updated valuations of the contingent consideration liabilities for NDY, EGT, and SEG.

In fiscal 2021, we recorded adjustments to our contingent earn-out liabilities and reported a net gain in operating income of $ 3.3 million, substantially all in the fourth quarter.

These adjustments resulted from the updated valuations of the contingent consideration liabilities, which reflect updated projections of acquired companies' financial performance during their respective earn-out periods.

In fiscal 2020, we recorded adjustments to our contingent earn-out liabilities and reported related net gains in operating income of $ 15.0 million, substantially all in the fourth quarter.

These gains primarily resulted from updated valuations of the contingent consideration liabilities for Norman, Disney and Young ("NDY"), EGT, and SEG.

The acquisition agreement for NDY included a contingent earn-out agreement based on the achievement of operating income thresholds (in Australian dollars) in each of the first three years beginning on the acquisition date, which was in the second quarter of fiscal 2018.

The maximum earn-out obligation over the three-year earn-out period was A$ 25 million (A$ 7.4 million in year one, and A$ 8.8 million each in years two and three).

The maximum earn-out obligation over the three-year earn-out period was A$ 25 million

(A$ 7.4 million in year one, and A$ 8.8 million each in years two and three).

These amounts could be earned primarily on a pro-rata basis for operating income within a predetermined range in each year.

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NDY's actual financial performance in the first two earn-out periods exceeded our original estimates at the acquisition date.

As a result, we increased the related contingent consideration liability and recognized losses of $ 2.1 million (A$ 3.0 million) an d $ 5.4 million (A$ 7.9 million) in fis cal 2018 and fiscal 2019, respectively.

In the fourth quarter of fiscal 2020, we evaluated our estimate of NDY’s contingent consideration liability for the third and final earn-out period.

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In fiscal 2018, we recorded adjustments to our contingent earn-out liabilities and reported related losses in operating income of $ 4.3 million.

These losses resulted from updated valuations of the contingent consideration liabilities for NDY, Eco Logical Australia and Cornerstone Environmental Group, as the actual and expected financial performance during the earn-out periods exceeded our original estimates at the acquisition dates.

At September 27, 2020, there was a total potential maximum o f $ 70.9 million of outstanding contingent consideration related to acquisitions.

At October 3, 2021, there was a total potential max imum of $ 105.4 million of outstanding contingent consideration related to acquisitions.

Of this amount, $ 59.3 million was estimated as the fair value and a ccrued on our consolidated balance sheet.

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2020 September 29,

2019 September 30,

(in thousands)

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Acquisitions 15,112 75,479 90,591

Impairment — ( 15,800 ) ( 15,800 )

Translation and other 7,006 17,483 24,489

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

The goodwill additions related to our fiscal 2020 acquisitions of SEG and BWF and adjustments of the final valuations for our fiscal 2019 acquisitions.

The purchase price allocations for the SEG and BWF acquisitions are preliminary and subject to adjustment based upon the final determinations of the net assets acquired and information to perform the final valuations.

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

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

Balance at October 3, 2021 $ 538,433 $ 570,145 $ 1,108,578

Our goodwill was impacted by the final valuations of our acquisitions, and the foreign currency translation related to the goodwill balances of our foreign subsid iaries with functional currencies that are different than our reporting currency.

The goodwill additions relate to our fiscal 2021 acquisitions.

The purchase price allocations for our fiscal 2021 acquisitions of CRD, IRM, KZN and HLE are preliminary and subject to adjustment based upon the final determinations of the net assets acquired and information to perform th e final valuations.

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

Our last review at June 28, 2021 (i.e.

the first day of our fourth quarter in fiscal 2021), 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 had no reporting units that had estimated fair values that exceeded their carrying values by less than 150 %.

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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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 in June 2020.

This prompted a strategic review of our ASP reporting unit.

This prompted a strategic review of our Asia/Pacific ("ASP") reporting unit .

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

The impaired goodwill related to our acquisitions of Coffey and NDY.

The impaired goodwill related to our acquisitions of Coffey International Limited and NDY.

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.

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.

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.

During the fourth quarter of fiscal 2019, we performed an interim goodwill impairment review of our Remediation and Field Services ("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 amounts of goodwill for GSG were $ 556.1 million and $ 534.0 million at fiscal 2021 and 2020 year-ends, respectively, excluding accumulated impairment of $ 17.7 million for each period.

The gross amounts of goodwill for CIG were $ 598.7 million and $ 588.7 million at fiscal 2020 and 2019 year-ends, respectively, excluding accumulated impairment of $ 121.5 million and $ 105.7 million, respectively.

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:

The gross amounts of goodwill for CIG were $ 691.6 million and $ 598.7 million at fiscal 2021 and 2020 year-ends, respectively, excluding accumulated impairment of $ 121.5 million for each period.

The fo llowing tabl e 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:

Fiscal Year Ended

September 27, 2020 September 29, 2019

October 3, 2021 September 27, 2020

(in years) Gross

Amount Accumulated

Amortization Gross

Amortization Net

Amount Accumulated

Amortization Net

($ in thousands)

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Total $ 118,971 $ ( 80,981 ) $ 37,990 $ 106,421 $ ( 92,478 ) $ 13,943

Foreign currency translation adjustments reduced net identifiable intangible asse ts by $ 0.4 million and $ 0.3 million in fiscal 2020 and 2019, respectively.

Amortization expense for the identifiable intangible assets for fiscal 2021, 2020 and 2019 was $ 11.5 million, $ 11.6 million and $ 11.6 million, respectively.

Estimated amortization expense for the succeeding four fiscal years is as follows:

Foreign currency translation adjustments were immaterial for fiscal 2021 and 2020.

Estimated amortization expense for the succeeding five fiscal years and beyond is as foll ows:

(in thousands)

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2021 September 27,

2020 September 29,

(in thousands)

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Leasehold improvements 36,462 34,569

Land and buildings 187 371

Total property and equipment 131,242 125,511

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The depreciation expense related to property and equipment w as $ 12.3 million, $ 13.0 million and $ 17.3 million for fiscal 2021, 2020 and 2019, respectively.

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 expense s and other current assets" on our consolidated balance sheet.

These assets were sold during fiscal 2020 resulting in a net gain of $ 8.5 million, which is reported in "Other costs of revenue" on the consolidated statement of income.

Income before income taxes, by geographic area, was as follows:

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2020 September 29,

2019 September 30,

(in thousands)

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2020 September 29,

2019 September 30,

(in thousands)

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Foreign ( 27,703 ) ( 328 ) ( 27,312 )

Total deferred income tax expense 2,729 ( 37,615 ) ( 29,360 )

Total deferred income tax (benefit) expense ( 35,797 ) 2,729 ( 37,615 )

Total income tax expense $ 34,039 $ 54,101 $ 16,375

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2020 September 29,

2019 September 30,

Tax at federal statutory rate 21.0 % 21.0 % 21.0 %

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Research and Development ("R&D") credits ( 2.6 ) ( 2.2 ) ( 4.7 )

Domestic production deduction — — ( 0.2 )

Tax differential on foreign earnings 0.9 0.7 1.0

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Change in uncertain tax positions 1.7 0.4 2.4

Return to provision ( 3.7 ) 0.8 ( 0.2 )

Disallowed officer compensation 2.0 0.2 0.2

Cash repatriation 2.1 — —

Unremitted earnings 1.0 — —

Revaluation of deferred taxes — — ( 1.4 )

Deferred tax adjustments 0.8 ( 1.3 ) ( 0.4 )

Transition tax on foreign earnings — 1.4 —

Transition taxes on foreign earnings — — 1.4

Other 0.9 1.6 3.4

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The effective tax rates for fiscal 2021, 2020 and 2019 were 12.8 % , 23.7 % and 9.3 %, respectively.

The goodwill impairment charges in fiscal 2020 and fiscal 2019 and certain of the transaction charges in fiscal 2019 did not have related tax benefits.

Income tax expense was reduced by $ 8.3 million, $ 6.4 million, $ 5.1 million of excess tax benefits on share-based payments in fiscal 2020, 2019, and 2018, respectively.

Additionally, we analyzed our deferred tax liabilities for the Tax Cuts and Jobs Act's ("TCJA's") lower tax rates and recorded a deferred tax benefit of $ 2.6 million and $ 10.1 million in fiscal 2019 and fiscal 2018, respectively .

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.

Our fiscal 2021 and 2019 effective tax rates reflect non-recurring net tax benefits of $ 21.6 million and $ 22.3 million, respectively, primarily consisting of valuation allowances in the United Kingdom and Australia that were released due to sufficient positive evidence being obtained in the respective years.

The valuation allowances were primarily related to net operating loss and research and development credit carry-forwards 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 impact of the non-deductible goodwill impairment charges and transaction costs, the excess tax benefits on share-based payments, the net deferred tax benefits from the TCJA, and the valuation allowance release, our effective tax rates in fiscal 2020, 2019, and 2018 were 25.6 %, 24.6 %, and 30.3 % respectively.

The primary factors used to assess the likelihood of realization were the past performance of the related entities and our forecast of future taxable

The goodwill impairment charges in fiscal 2020 and 2019 and certain of the transaction charges in fiscal 2019 did not have related tax benefits.

Also, income tax expense was reduced by $ 12.9 million, $ 8.3 million, $ 6.4 million of excess tax benefits on share-based payments in fiscal 2021, 2020, and 2019, respectively.

Excluding the impact of the valuation allowance releases, non-deductible goodwill impairment charges and transaction costs, and the excess tax benefits on share-based payments our effective tax rates in fiscal 2021, 2020, and 2019 were 25.7 %, 25.6 %, and 24.6 % respectively.

We are currently under examination by the Internal Revenue Service for fiscal year 2018, the Canada Revenue Agency for fiscal years 2011 through 2016, and the California Franchise Tax Board for fiscal years 2014 through 2016.

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2021 September 27,

2020 September 29,

(in thousands)

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Reserves and contingent liabilities 6,662 6,262

Allowance for doubtful accounts 6,283 7,506

Accounts receivable including the allowance for doubtful accounts 5,917 6,283

Accrued liabilities 41,657 28,223

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Intangibles ( 40,121 ) ( 29,130 )

Undistributed earnings ( 3,136 ) —

Property and equipment ( 85 ) ( 1,615 )

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Net deferred tax assets $ 43,850 $ 15,736

At September 27, 2020, undistributed earnings of our foreign subsidiaries, primarily in Canada, amounting to approximately $ 66.9 million are expected to be permanently reinvested.

In the fourth quarter of fiscal 2021, we repatriated approximately $ 80 million from Canada and recognized a related tax expense of $ 5.6 million.

At this time, we also determined that our remaining undistributed earnings in Canada of approximately $ 20.1 million are no longer being indefinitely reinvested and recorded an additional deferred tax liability/expense of $ 3.1 million.

At October 3, 2021, undistributed earnings of our other foreign subsidiaries, primarily in Australia and the U.K.

of approximately $ 50.9 million are expected to be indefinitely reinvested in t hese foreign countries.

Accordingly, no provision for foreign withholding taxes has been made.

Upon distribution of those earnings, we would be subject to foreign withholding taxes.

Assuming the permanently reinvested foreign earnings were repatriated under the laws and rates applicable at September 27, 2020, the incremental foreign withholding taxes applicable to those earnings would be approximately $ 2.0 million.

At September 27, 2020, we had available unused state net operating loss ("NOL") carry forwards of $ 43.7 million that expire at various dates from 2024 to 2037;

Assuming the indefinitely reinvested foreign earnings were repatriated under the laws and rates applicable at October 3, 2021, the incremental taxes applicable to those earnings would not be material.

At October 3, 2021, we had available unused state net operating loss ("NOL") carry forwards of $ 43.7 million that expire at various dates from 2024 to 2037;

and available foreign NOL carry forwards of $ 165.5 million, of which $ 14.7 million expire at various dates from 2024 to 2041, and $ 150.8 million have no expiration date.

In addition, we had foreign capital loss

carryforwards of $ 13.8 million and foreign research and development credits of $ 4.3 million that do not have expiration dates.

In addition, we had foreign capital loss carryforwards of $ 21.5 million and foreign research and development credits of $ 3.9 million that do not have expiration dates.

We have performed an assessment of positive and negative evidence regarding the realization of the deferred tax assets.

This assessment included the evaluation of scheduled reversals of deferred tax liabilities, availability of carrybacks, cumulative losses in recent years, estimates of projected future taxable income, and tax planning strategies.

Although realization is not assured, based on our assessment, we have concluded that it is more likely than not that the assets will be realized except for the assets related to the loss carry-forwards and certain foreign intangibles for which a valuation allowance of $ 24.4 million has been provided.

At September 27, 2020, we had $ 9.2 million of unrecognized tax benefits, all of which, if recognized, would affect our effective tax rate.

Although realization is not

assured, based on our assessment, we have concluded that it is more likely than not that the assets will be realized except for the deferred tax assets related to the loss carry-forwards for which a valuation allowance of $ 13.0 million has been provided.

At October 3, 2021, we had $ 12.9 million of unrecognized tax benefits, all of which, if recognized, would affect our effective tax rate.

It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of our unrecognized tax positions may significantly decrease in the next 12 months.

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2020 September 29,

2019 September 30,

(in thousands)

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We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense.

During fiscal years 2020, 2019 and 2018, we accrued additional interest and penalties of $ 0.8 million, $ 2.6 million and $ 0.6 million, respectively, and recorded reductions in accrued interest and penalties of $ 0 , $ 0.2 million and $ 0.3 million, respectively, as a result of audit settlements and other prior-year adjustments.

The amount of interest and penalties accrued at September 27, 2020, September 29, 2019 and September 30, 2018 was $ 4.4 million, $ 3.6 million and $ 1.2 million, respectively.

During fiscal years 2021, 2020 and 2019, we accrued additional interest and penalties of $ 0.8 million, $ 0.8 million and $ 2.6 million, respectively, and recorded reductions in accrued interest and penalties of $ 0 , $ 0 and $ 0.2 million, respectively, as a result of audit settlements and other prior-year adjustments.

The amount of interest and penalties accrued at October 3, 2021, September 27, 2020 and September 29, 2019 was $ 5.2 million, $ 4.4 million and $ 3.6 million, respectively.

Long-Term Debt

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2021 September 27,

2020 September 29,

(in thousands)

Credit facilities $ 212,500 $ 291,659

Current portion of long-term debt and other short-term borrowings ( 49,264 ) ( 12,500 )

Long-term debt, less current portion and other short-term borrowings $ 242,395 $ 263,934

Current portion of long-term debt ( 12,500 ) ( 49,264 )

Long-term debt $ 200,000 $ 242,395

On July 30, 2018, we entered into a Second Amended and Restated Credit Agreement (“Amended Credit Agreement”) with a total borrowing capacity of $ 1 billion that will mature in July 2023.

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dollars (the highest of the U.S.

federal funds rate plus 0.50 % per annum, the bank’s prime rate or

the Eurocurrency rate plus 1.00 %) plus a margin that ranges from 0 % to 0.75 % per annum.

federal funds rate plus 0.50 % per annum, the bank’s prime rate or the Eurocurrency rate plus 1.00 %) plus a margin that ranges from 0 % to 0.75 % per annum.

In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly.

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The Amended Credit Agreement expires on July 30, 2023, or earlier at our discretion upon payment in full of loans and other obligations.

At September 27, 2020, we had $ 254.9 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $ 228.1 million under the Amended Term Loan Facility and $ 26.8 million outstanding under the Amended Revolving Credit Facility at a year-to-date weighted-average interest rate of 2.31 % per annum.

At October 3, 2021, we had $ 212.5 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $ 212.5 million under the Amended Term Loan Facility and no borrowings outstanding under the Amended Revolving Credit Facility.

The weighted-average interest rate of the outstanding borrowings during fiscal 2021 was 1.25 %.

In addition, we had $ 0.7 million in standby letters of credit under the Amended Credit Agreement.

Our average effective weighted-average interest rate on borrowings outstanding during the year-to-date period ended September 27, 2020 under the Amended Credit Agreement, including the effects of interest rate swap agreements described in Note 14, "Derivative Financial Instruments", was 3.52 %.

At September 27, 2020, we had $ 422.4 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

Our weighted-average interest rate on borrowings outstanding during fiscal 2021 under the Amended Credit Agreement, including the effects of interest rate swap agreements described in Note 14, “Derivative Financial Instruments” of the "Notes to Consolidated Financial Statements" included in Item 8, was 3.30 %.

At October 3, 2021, we had $ 449.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

The Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default.

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Our obligations under the Amended Credit Agreement are guaranteed by certain of our domestic subsidiaries and are secured by first priority liens on (i) the equity interests of certain of our subsidiaries, including those subsidiaries that are guarantors or borrowers under the Amended Credit Agreement, and (ii) the accounts receivable, general intangibles and intercompany loans, and those of our subsidiaries that are guarantors or borrowers.

At September 27, 2020, we were in compliance with these covenants with a consolidated leverage ratio of 1.10 x and a consolidated interest coverage ratio of 19.76 x.

At October 3, 2021, we were in compliance with these covenants with a consolidated leverage ratio of 0.87 x and a consolidated interest coverage ratio of 26.38 x.

In addition to the Amended Credit Agreement, we maintain other credit facilities, which may be used for bank overdrafts, short-term cash advances and bank guarantees.

At September 27, 2020, th ere was $ 36.6 million outstanding under these facilities and the aggregate amount of standby letters of credit outstanding was $ 69.7 million.

As of September 27, 2020, we had bank overdrafts of $ 33.6 million related to our U.S.

disbursement bank accounts.

This balance is reported in the "Current portion of long-term debt and other short-term borrowings" within our fiscal 2020 year-end consolidated balance sheet.

The change in bank overdraft balance is classified as cash flows from financing activities within our consolidated statements of cash flows as we believe these overdrafts to be a form of short-term financing from the bank due to our ability to fund the overdraft with the $ 50.0 million overdraft protection on the bank accounts or our other credit facilities if needed.

At October 3, 2021, th ere were no amounts outstanding under these facilities and the aggregate amount of standby letters of credit outstanding was $ 53.4 million.

As of October 3, 2021 we had no bank overdrafts related to our disbursement bank accounts.

The following table presents scheduled maturities of our long-term debt:

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Total $ 212,500

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

Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases.

Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

We elected to adopt the standard, and available practical expedients, effective September 30, 2019 (the first day of our fiscal 2020).

These practical expedients allowed us to keep the lease classification assessed under the previous lease accounting standard (ASC 840) without reassessment under the new standard, and allowed all separate lease components, including non-lease components, to be accounted for as a single lease component for all existing leases prior to adoption of the new standard.

We adopted this new standard under the modified retrospective transition approach without adjusting comparative periods in the financial statements, as allowed under Leases (Topic 842), and implemented internal controls and key system functionality to enable the preparation of financial information on adoption.

The standard had a material impact on our consolidated balance sheets but did not have an impact on the consolidated income statements.

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 IT equipment and the related ROU and lease liabilities were immaterial, and included in "Other current liabilities" and "Other long-term liabilities" accordingly in the consolidated balance sheet at September 27, 2020 .

We adopted Leases (Topic 842), effective September 30, 2019 (the first day of our fiscal 2020) using the modified retrospective transition approach.

Results for reporting periods beginning after the adoption date are presented under Topic 842, while prior period amounts are not adjusted and continue to be presented in accordance with our historical accounting under ASC 840.

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

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 .

We determine if an arrangement is a lease at inception.

Operating leases are included in operating lease ROU assets and current and long-term operating lease liabilities in the consolidated balance sheets.

Operating leases are included in operating lease ROU assets and current and long-term op erating lease liabilities in the consolidated balance sheets.

Our finance leases are primarily for certain IT equipment.

The related ROU assets and lease liabilities were immaterial, and are included in "Property and equipment, net", "Other current liabilities" and "Other long-term liabilities", accordingly, in the consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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As most of our leases do not provide an implicit rate, incremental borrowing rates are used based on the information available at commencement date in determining the present value of lease payments .

The operating lease ROU asset also includes any lease payments made and excludes lease incentives.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The operating lease ROU asset at the commencement date also includes any lease payments made to the lessor at or before the commencement date and initial direct costs less lease incentives received.

Lease te rms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

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

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 fiscal year ended September 27, 2020 are as follows:

The components of lease costs are as follows:

Fiscal Year Ended

2021 September 27,

(in thousands)

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Total lease cost $ 90,970 $ 85,204

Supplemental cash flow information related to leases for fiscal 2020 is as follows:

Supplemental cash flow information related to leases is as follows:

Fiscal Year Ended

2021 September 27,

(in thousands)

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Right-of-use assets obtained in exchange for new operating lease liabilities $ 72,076 $ 317,587

Supplemental balance sheet and other information related to leases as of September 27, 2020 are as follows:

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

Fiscal Year Ended

2021 September 27,

(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 2.2 % 2.5 %

As of September 27, 2020 , we have no material additional operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our operating lease liabilities as of September 27, 2020 is as follows:

As of October 3, 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 as of October 3, 2021 is as follows:

(in thousands)

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Total present value of lease liabilities $ 241,737

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 fiscal 2019 was $ 79.3 million.

Rental expense for operating leases classified under ASC 840 for fiscal 2019 was $ 79.3 million, and was predominantly recorded within selling, general and administrative expenses.

Stockholders' Equity and Stock Compensation Plans

At September 27, 2020, we had the following stock-based compensation plans:

• Employee Stock Purchase Plan ("ESPP").

Purchase rights to purchase common stock are granted to our eligible full and part-time employees, and shares of common stock are issued upon exercise of the purchase rights.

An aggregate of 611,265 shares may be issued pursuant to such exercise.

The maximum amount that an employee can contribute during a purchase right period is $ 5,000 .

The exercise price of a purchase right is the lesser of 100 % of the fair market value of a share of common stock on the first day of the purchase right period (the business day preceding January 1) or 85 % of the fair market value on the last day of the purchase right period (December 15, or the business day preceding December 15 if December 15 is not a business day).

At October 3, 2021, we had the following stock-based compensation plans:

• 2005 Equity Incentive Plan.

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Shares issued with respect to awards granted under the 2018 EIP other than stock options or stock appreciation rights, which are referred to as "full value awards", are counted against the 2018 EIP's aggregate share limit as one share for every share or unit issued.

At September 27, 2020, there were 2.5 million shares available for future awards pursuant to the 2018 EIP.

At October 3, 2021, there were 2.3 million shares available for future awards pursuant to the 2018 EIP.

• Employee Stock Purchase Plan ("ESPP").

Purchase rights to purchase common stock are granted to our eligible full and part-time employees, and shares of common stock are issued upon exercise of the purchase rights.

An aggregate of 487,023 shares may be issued pursuant to such exercise.

The maximum amount that an employee can contribute during a purchase right period is $ 5,000 .

The following table presents our stock-based compensation and related income tax benefits:

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2020 September 29,

2019 September 30,

(in thousands)

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Stock-based compensation, net of tax benefit $ 18,157 $ 15,106 $ 13,602

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.

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

Stock Options

The following table presents our stock option activity for fiscal year ended September 27, 2020:

The following table presents our stock option activity for fiscal year ended October 3, 2021:

(in thousands) Weighted-

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Forfeited ( 1 ) 40.80

Outstanding at September 27, 2020 539 36.34 5.04 $ 29,623

Vested or expected to vest at September 27, 2020 539 36.34 5.04 29,623

Exercisable on September 27, 2020 437 34.17 4.62 24,932

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between our closing stock price on the last trading day of fiscal 2020 and the exercise price, times the number of shares) t hat would have been received by the in-the-money option holders if they had exercised their options on September 27, 2020.

Outstanding at October 3, 2021 214 $ 38.80 4.95 $ 24,149

Vested or expected to vest at October 3, 2021 214 $ 38.80 4.95 $ 24,149

Exercisable on October 3, 2021 179 $ 37.05 4.72 $ 20,600

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between our closing stock price on the last trading day of fiscal 2021 and the exercise price, times the number of shares) t hat would have been rec eived by the in-the-money option holders if they had exercised their options on October 3, 2021.

This amount will change based on the fair market value of our stock.

At September 27, 2020, we expect to recognize $ 0.7 million of unrecognized compensation cost related to stock option grants over a weighted-average period of one year .

No stock options were granted in fiscal 2019 and fiscal 2020.

The weighted-average fair value of stock options granted during fiscal 2018 was $ 14.82 .

At October 3, 2021, we expect to recognize $ 0.1 million of unrecognized compensation cost related to stock option grants over a weighted-average period of one year .

No stock options were granted in fiscal 2021 and 2020.

The aggregate intrinsic value of options exercised during fiscal 2021, 2020 and 2019 was $ 29.4 million, $ 22.4 million and $ 20.4 million, respectively.

The fair value of our stock options was estimated on the date of grant using the Black-Scholes option pricing model.

There were no options granted in fiscal 2020 and 2019.

The following assumptions were used in the calculation for fiscal 2018:

Fiscal Year Ended

September 30,

Dividend yield 1.0 %

Expected stock price volatility 36.1 % - 38.8 %

Risk-free rate of return, annual 1.7 % - 2.9 %

For purposes of the Black-Scholes model, forfeitures were estimated based on historical experience.

For the fiscal 2018 year-end, we based our expected stock price volatility on historical volatility behavior and current implied volatility behavior.

Our risk-free rate of return was based on constant maturity rates provided by the U.S.

The expected life was based on historical experience.

Net cash proceeds from the exercise of stock op tions were $ 10.3 million, $ 11.8 million and $ 13.5 million for fiscal 2020, 2019 and 2018, respectively.

Net cash proceeds from the exercise of stock options were $ 11.3 million, $ 10.3 million and $ 11.8 million for fiscal 2021, 2020 and 2019, respectively.

Our policy is to issue shares from our authorized shares upon the exercise of stock options.

The actual income tax benefit realized from exercises of nonqualified stock options and disqualifying dispositions of qualified options for fiscal 2020, 2019 and 2018 was $ 8.3 million, $ 6.4 million and $ 5.1 million, respectiv ely.

The actual income tax benefit realized from exercises of nonqualified stock options and disqualifying dispositions of qualified options for fiscal 2021, 2020 and 2019 was $ 12.9 million, $ 8.3 million and $ 6.4 million, respectively.

RSU awards are granted to our key employee and non-employee directors.

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

For these performance-based awards, our expected performance is reviewed to estimate the percentage of shares that will vest.

For these performance-

based awards, our expected performance is reviewed to estimate the percentage of shares that will vest.

The total compensation cost of the awards is then amortized over their applicable vesting period on a straight-line basis.

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(in thousands) Weighted-

Nonvested balance at October 1, 2017 511 $ 33.19 376 $ 36.05

Nonvested balance at September 30, 2018 488 $ 39.56 323 $ 44.27

Granted 179 66.26 90 80.41

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Adjustment (1)

— — 131 31.66

Forfeited ( 17 ) 48.56 — —

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Forfeited ( 14 ) 77.74 ( 1 ) 74.05

Nonvested balance at September 27, 2020 444 63.93 355 64.83

(1) For fiscal 2018, includes a payout adjustment of 130,730 PSUs due to the actual performance level achieved for PSUs granted in fiscal 2015 that vested fiscal 2018.

For fiscal 2019, includes a payout a djustment of 79,465 PSUs due to the actual performance level achieved for PSUs granted in fiscal 2016 that vested during fiscal 2019.

Nonvested balance at October 3, 2021 381 $ 83.30 318 $ 82.96

(1) For fiscal 2019, includes a payout adjustment of 79,465 PSUs due to the actual performance level achieved for PSUs granted in fiscal 2016 that vested during fiscal 2019.

For fiscal 2020 includes a payout adjustment of 63,643 PSUs due to the actual performance level achieved for PSUs granted in fiscal 2017 that vested during fiscal 2020.

For fiscal 2021 includes a payout adjustment of 99,214 PSUs due to the actual performance level achieved for PSUs granted in fiscal 2018 that vested during fiscal 2021.

During fiscal 2021, 2020 and 2019, we awarded 117,934 , 167,525 and 179,478 shares of RSUs, respectively, to our key employees and non-employee directors.

The weighted-average grant-date fair value of RSUs granted during fiscal 2021, 2020 and 2019 was $ 122.02 , $ 83.92 and $ 66.26 , respectively.

At September 27, 2020, there were 443,504 RSUs outstanding.

At October 3, 2021, there were 380,631 RSUs outstanding.

RSU forfeitures result from employment terminations prior to vesting.

Forfeited shares return to the pool of authorized shares available for award.

We use historical data as a basis to estimate the probability of forfeitures related to RSUs and the ESPP Plan.

During fiscal 2021, 2020 and 2019, we awarded 57,542 , 74,011 and 89,816 shares of PSUs, respectively, to our executive officers and non-employee directors.

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The stock-based compensation expense related to RSUs and PSUs for fiscal 2021, 2020 and 2019 was $ 20.9 million, $ 17.7 million and $ 15.4 million, respectively, and was included in total stock-based compensation expense.

At September 27, 2020, there was $ 27.7 million of unrecognized stock-based compensation costs related to nonvested RSUs and PSUs that will be substantially recognized by the end of fiscal 2022.

At October 3, 2021, there was $ 31.6 million of unrecognized stock-based compensation costs related to nonvested RSUs and PSUs that will be substantially recognized by the end of fiscal 2023.

The following table summarizes shares purchased, weighted-average purchase price, and cash received for shares purchased under the ESPP:

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2020 September 29,

2019 September 30,

(in thousands, except for purchase price)

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2020 September 29,

2019 September 30,

Dividend yield 1.0 % 1.0 % 1.0 %

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The unrecognized stock-based compensation costs for awards granted under the ESPP at fiscal 2021 and 2020 year-ends were $ 0.5 million and $ 0.3 million, respectively.

At September 27, 2020, ESPP participants had accumulated $ 8.5 million to purchase our common stock.

At October 3, 2021, ESPP participants had accumulated $ 10.8 million to purchase our common stock.

Retirement Plans

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Employee deferrals are deposited into a rabbi trust, and the funds are generally invested in individual variable life insurance contracts that we own and are specifically designed to informally fund savings plans of this nature.

At September 27, 2020 and September 29, 2019, the consolidated balance sheets reflect assets of $ 35.1 million and $ 30.4 million, respectively, related to the deferred compensation plan in "Other long-term assets," and liabilities of $ 35.0 million and $ 29.5 million, respectively, related to the deferred compensation plan in "Other long-term liabilities." The net gains and losses related to the deferred compensation plan are reported as part of “Selling, general and administrative expenses” in our consolidated statements of income .

At October 3, 2021 and September 27, 2020, the consolidated balance sheets reflect assets of $ 41.4 million and $ 35.1 million, respectively, related to the deferred compensation plan in "Other long-term assets," and liabilities of $ 41.1 million and $ 35.0 million, respectively, related to the deferred compensation plan in "Other long-term liabilities." The net gains and losses related to the deferred compensation plan are reported as part of “Selling, general and administrative expenses” in our consolidated statements of income .

These related net gains and losses were immaterial for fiscal 2021, 2020 and 2019.

In connection with the acquisition of HLE in fiscal 2021, we assumed a defined benefit pension plan (the “Plan”), which HLE operates for all qualifying employees.

The assets of the Plan are held in a separate trustee administered fund.

The Plan was closed to new entrants in August 2003, except for current employees who had not attained the age of 24 at that date.

The Plan was closed to future accrual on December 31, 2009.

Under the agreed schedule of contributions, HLE will make no further contributions, and is to pay the expenses of administering the plan.

The change in the defined benefit obligation, the change in fair value of plan assets, and the amounts recognized in the Consolidated Statement of Income, the Consolidated Statement of Comprehensive Income and the Consolidated Statements of Shareholders’ Equity for the period from July 26, 2021 (acquisition date of HLE) to October 3, 2021 were immaterial.

The Plan's funded status at October 3, 2021 was as follows:

Fair value of plan assets $ 65,836

Benefit obligation ( 64,830 )

Net surplus $ 1,006

The net surplus is reflected in other long-term assets on our consolidated balance sheet at October 3, 2021.

The fair values of the plan assets are substantially categorized within Level 2 of the fair value hierarchy.

As of October 3, 2021, the fair values of the plan assets by major asset categories were as follows (in 000’s):

Equities $ 13,646

Mutual funds 33,826

Liability driven investment funds 17,653

Cash/other 711

Fair value of plan assets $ 65,836

We seek a competitive rate of return relative to an appropriate level of risk depending on the funded status and obligations of each plan and typically employ both active and passive investment management strategies.

The risk in our practices include diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets.

The target asset allocation selected for each plan reflects a risk/return profile that we believe is appropriate relative to each plan’s liability structure and return goals.

Principal assumptions used for the benefit obligation in the valuation at October 3, 2021 are as follows:

Discount rate 2.00 %

Rate of inflation 2.85 % to 3.50 %

Earnings per Share

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2020 September 29,

2019 September 30,

(in thousands, except per share data)

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For fiscal 2021, 2020 and 2019, no options were excluded from the calculation of dilutive potential common shares.

For fiscal 2018, 0.1 million options were ex cluded from the calculation of dilutive potential common shares.

These options were not included in the computation of dilutive potential comm on shares because the assumed proceeds per share exceeded the average market price per share for that period.

Therefore, their inclusion would have been anti-dilutive.

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.

The derivative contracts to hedge interest exposure are categorized within Level 2 of the fair value hierarchy.

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

As of September 27, 2020, the notional principal of our outstanding interest swap agreements was $ 228.1 million ($ 45.6 million each.) The interest rate swaps have a fixed interest rate of 2.79 % and expire in July 2023 for all five agreements.

At September 27, 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 $( 15.5 ) 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 12 months.

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

As of October 3, 2021, the notional principal of our outstanding interest swap agreements was $ 212.5 million ($ 42.5 million each.) The interest rate swaps have a fixed interest rate of 2.79 % and expire in July 2023 for all five agreements.

At October 3, 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 $( 9.4 ) million and $( 15.5 ) million, respectively, of which we expect to reclassify $ 5.4 million from accumulated other comprehensive loss to interest expense within the next 12 months.

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

Fair Value of Derivative

Instruments as of

Balance Sheet Location September 27,

Balance Sheet Location October 3,

2021 September 27,

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Fiscal Year Ended

September 27, 2020 September 29, 2019 September 30, 2018

October 3, 2021 September 27, 2020 September 29, 2019

(in thousands)

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

Other comprehensive income before reclassifications 3,436 ( 599 ) 2,837

Other comprehensive income (loss) before reclassifications 3,436 ( 599 ) 2,837

Amounts reclassified from accumulated other comprehensive income

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

Other comprehensive income before reclassifications 30,641 12,175 42,816

Amounts reclassified from accumulated other comprehensive income

Interest rate contracts, net of tax (1)

— ( 6,058 ) ( 6,058 )

Net current-period other comprehensive income 30,641 6,117 36,758

Balances at October 3, 2021 $ ( 115,634 ) $ ( 9,394 ) $ ( 125,028 )

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

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Derivative Instruments.

Our derivative instruments are categorized within Level 2 of the fair value hierarchy.

For additional information about our derivative financial instruments (see Note 2, "Basis of Presentation and Preparation" and Note 14, "Derivative Financial Instruments").

Contingent Consideration.

We measure our contingent earn-out liabilities at fair value on a recurring basis (see Note 2, "Basis of Presentation and Preparation" and Note 5, "Acquisitions and Divestitures" for further information).

We measure our contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy.

(see Note 2, "Basis of Presentation and Preparation" and Note 5, "Acquisitions" for further information).

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).

The carrying value of our long-term debt approximated fair value at September 27, 2020 and September 29, 2019.

At September 27, 2020, we had borrowings of $ 254.9 million outstanding under our Amended Credit Agreement, which were used to fund our 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 October 3, 2021 and September 27, 2020.

At October 3, 2021, we had borrowings of $ 212.5 million outstanding under our Amended Credit Agreement, which were used to fund our business acquisitions, working capital needs, stock repurchases, dividends, capital expenditures and contingent earn-outs.

Defined Benefit Pension Plan .

The fair values of the plan assets are primarily categorized within Level 2 of the fair value hierarchy.

For additional information about our defined benefit pension plan (see Note 12, "Retirement Plans ").

Commitments and Contingencies

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Reportable Segments

We managed ou r operations under two reportable segments.

We manage ou r operations under two reportable segments.

Our GSG reportable segment primarily includes activities with U.S.

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We continued to report the results of the wind-down of our non-core construction activities in the RCM reportable segment for fiscal 2021.

As of September 27, 2020, there was no remaining backlog for RCM as the projects were complete.

As of October 3, 2021, there was no remaining backlog for RCM as all projects were complete.

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.

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2020 September 29, 2019

2019 September 30, 2018

(in thousands)

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(1) Includes goodwill and intangible assets impairment charges, amortization of intangibles, other costs and other income not allocable to segments.

The intangible asset amortization expense for fiscal 2020, 2019 and 2018 was $ 11.6 million, $ 11.6 million and $ 18.2 million, respectively.

The intangible asset amortization expense for fiscal 2021, 2020 and 2019 w as $ 11.5 million, $ 11.6 million and $ 11.6 million, respectively.

Additionally, Corporate results included income (loss) for fair value adjustments to contingent consideration liabilities of $ 3.3 million, $ 15.0 million and $( 1.1 ) million for fiscal 2021, 2020 and 2019, respectively.

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Total assets $ 2,576,562 $ 2,378,558

(1) Fiscal 2020 includes recognition of ROU assets for leases (substantially all operating leases) upon the adoption of ASU 2016-02 in the first quarter of fiscal 2020.

(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.

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Fiscal Year Ended

September 27, 2020 September 29, 2019 September 30, 2018

Revenue Long-Lived

2021 September 27,

2020 September 29, 2019

(in thousands)

United States $ 2,256,086 $ 2,107,459 $ 2,247,780

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957,427 887,432 859,568

Total $ 3,213,513 $ 2,994,891 $ 3,107,348

Long-lived assets (2) :

2021 September 27,

(in thousands)

United States $ 215,689 $ 230,933

Foreign countries (1)

87,771 108,348

Total $ 303,460 $ 339,281

(1) Includes revenue and long-lived assets from our foreign operations, primarily in Canada, Australia and the United Kingdom, and revenue generated from non-U.S.

(2) Excludes goodwill, intangible assets and deferred income taxes.

(3) Includes recognition of ROU assets for leases (substantially all operating leases) upon the adoption of ASU 2016-02 in the first quarter of fiscal 2020 .

Fiscal 2022 Reportable Segments

On the first day of fiscal 2022, we created a new High Performance Buildings division in our CIG reportable segment.

As a result, we transferred some related operations in our GSG reportable segment with annual revenue of approximately $ 170 million to our CIG reportable segment.

Beginning in the first quarter of fiscal 2022, our segment reporting will reflect this transfer and our historical comparisons will be revised to be consistent with the fiscal 2022 presentation.

Related Party Transactions

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Our revenue related to services we provided to unconsolidated joint ventures for fiscal 2021, 2020 and 2019 was $ 95.5 million, $ 88.2 million and $ 99.1 million, respectively.

Our related reimbursable costs for fiscal 2020, 2019 and 2018 were approximately $ 86.4 million, $ 98.5 million and $ 76.6 million, respectively.

Our related reimbursable costs for fiscal 2021, 2020 and 2019 were $ 92.4 million, $ 86.4 million and $ 98.5 million, respectively.

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

September 27, 2020 September 29, 2019

October 3, 2021 September 27, 2020

(in thousands)

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Quarterly Financial Information – Unaudited

In the opinion of management, the following unaudited quarterly data for the fiscal years ended September 27, 2020 and September 29, 2019 reflect all adjustments necessary for a fair statement of the results of operations.

In the opinion of management, the followin g unaudited quarte rly data for the fiscal years ended October 3, 2021 and September 27, 2020 reflect all adjustments necessary for a fair statement of the results of operations.

In the fourth quarter of fiscal 2021 we recognized a non-recurring net tax benefit of $ 21.6 million primarily consisting of valuation allowances in the United Kingdom that were released due to sufficient positive evidence being obtained.

In the second quarter of fiscal 2020, we incurred incremental costs totaling $ 8.2 million to address the COVID-19 pandemic.

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We sold non-core equipment related to the disposal of our Canadian turn-key pipeline activities throughout fiscal 2020 which resulted in gains of $ 0.8 million, $ 2.2 million, $ 4.5 million, and $ 1.0 million in the first, second, third, and fourth quarters of fiscal 2020, respectively.

In the second quarter of fiscal 2019, deferred tax valuation allowances of $ 22.3 million i n Australia were released due to sufficient positive evidence obtained.

During the fourth quarter of fiscal 2019, we decided to dispose of the Canadian turn-key pipeline activities in our CIG segment.

As a result, we recorded a $ 7.8 million goodwill impairment charge and other charges for severance and other disposition costs totaling $ 10.9 million.

Also in the fourth quarter of fiscal 2019, we incurred acquisition and transaction charges of $ 10.4 million related to the acquisition of WYG.

Quarter Second

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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-K

Item 8. Financial Statements and Supplementary Data