What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 135 added, 141 removed, 556 unchanged (33% of the section changed)

3 unchanged sentences

(unaudited - in thousands, except par value)

ASSETS April 3,

ASSETS July 3,

2022 October 3,

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

no shares issued and outstanding at April 3, 2022 and October 3, 2021

no shares issued and outstanding at July 3, 2022 and October 3, 2021

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

issued and outstanding, 53,683 and 53,981 shares at April 3, 2022 and October 3, 2021, respectively

issued and outstanding, 53,319 and 53,981 shares at July 3, 2022 and October 3, 2021, respectively

Accumulated other comprehensive loss ( 157,806 ) ( 125,028 )

8 unchanged sentences

(unaudited – in thousands, except per share data)

Three Months Ended Six Months Ended

2022 March 28,

2021 April 3,

2022 March 28,

Three Months Ended Nine Months Ended

2022 June 27,

Revenue $ 890,231 $ 801,633 $ 2,601,485 $ 2,321,500

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(unaudited – in thousands)

Three Months Ended Six Months Ended

2022 March 28,

2021 April 3,

2022 March 28,

Three Months Ended Nine Months Ended

2022 June 27,

Net income $ 58,657 $ 51,924 $ 180,205 $ 149,900

3 unchanged sentences

Gain on cash flow hedge valuations, net of tax 2,380 1,498 9,984 4,864

Other comprehensive income, net of tax 7,745 12,865 9,725 46,734

Other comprehensive income (loss), net of tax ( 42,504 ) 12,657 ( 32,779 ) 59,391

Comprehensive income, net of tax $ 16,153 $ 64,581 $ 147,426 $ 209,291

5 unchanged sentences

(unaudited – in thousands)

Six Months Ended

2022 March 28,

Nine Months Ended

2022 June 27,

Cash flows from operating activities:

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Fair value adjustments to contingent consideration ( 64 ) ( 163 )

Loss (gain) on sale of property and equipment 178 ( 66 )

Loss (gain) on sale of assets 93 ( 110 )

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

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Capital expenditures ( 8,401 ) ( 6,234 )

Proceeds from sales of divested business 3,124 —

Proceeds from sale of property and equipment 541 79

Proceeds from sale of assets 3,754 333

Net cash used in investing activities ( 38,271 ) ( 23,055 )

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$ 49,131 $ 36,664

Supplemental disclosures on non-cash investing activities:

Issuance of promissory note for business acquisition $ 14,578 $ —

See Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Stockholders' Equity

Three Months Ended March 28, 2021 and April 03, 2022

Three Months Ended June 27, 2021 and July 03, 2022

(unaudited – in thousands)

7 unchanged sentences

Shares Amount

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

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

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

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

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

Cash dividends of $ 0.20 per common share

3 unchanged sentences

Stock options exercised 29 1 931 932 932

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

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

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

BALANCE AT JANUARY 2, 2022 53,999 $ 540 $ — $ ( 123,048 ) $ 1,360,390 $ 1,237,882 $ 63 $ 1,237,945

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

BALANCE AT APRIL 3, 2022 53,683 $ 537 $ — $ ( 115,303 ) $ 1,359,367 $ 1,244,601 $ 41 $ 1,244,642

Net income 58,650 58,650 7 58,657

Other comprehensive income 7,745 7,745 — 7,745

Distributions paid to noncontrolling interests — ( 31 ) ( 31 )

Other comprehensive loss ( 42,503 ) ( 42,503 ) ( 1 ) ( 42,504 )

Cash dividends of $ 0.23 per common share

2 unchanged sentences

Restricted & performance shares released 4 — ( 6,172 ) 6,034 ( 138 ) ( 138 )

Stock options exercised 9 — 244 244 244

Shares issued for Employee Stock Purchase Plan — — 1 1 1

Stock repurchases ( 368 ) ( 4 ) ( 6,575 ) ( 43,421 ) ( 50,000 ) ( 50,000 )

BALANCE AT APRIL 3, 2022 53,683 $ 537 $ — $ ( 115,303 ) $ 1,359,367 $ 1,244,601 $ 41 $ 1,244,642

BALANCE AT JULY 3, 2022 53,319 $ 533 $ — $ ( 157,806 ) $ 1,362,284 $ 1,205,011 $ 47 $ 1,205,058

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Six months ended March 28, 2021 and April 03, 2022

Nine months ended June 27, 2021 and July 03, 2022

(unaudited – in thousands)

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

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

Cash dividends of $ 0.54 per common share

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

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

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

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

Net income 180,179 180,179 26 180,205

Other comprehensive income 9,725 9,725 9,725

Other comprehensive loss ( 32,778 ) ( 32,778 ) ( 1 ) ( 32,779 )

Distributions paid to noncontrolling interests — ( 31 ) ( 31 )

6 unchanged sentences

Stock repurchases ( 986 ) ( 10 ) ( 7,242 ) ( 142,748 ) ( 150,000 ) ( 150,000 )

BALANCE AT APRIL 3, 2022 53,683 $ 537 $ — $ ( 115,303 ) $ 1,359,367 $ 1,244,601 $ 41 $ 1,244,642

BALANCE AT JULY 3, 2022 53,319 $ 533 $ — $ ( 157,806 ) $ 1,362,284 $ 1,205,011 $ 47 $ 1,205,058

See Notes to Consolidated Financial Statements.

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These financial statements reflect all normal recurring adjustments that are considered necessary for a fair statement of our financial position, results of operations and cash flows for the interim periods presented.

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

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

Beginning in fiscal 2022, we aligned our operations to better serve our clients and markets, and created a new High Performance Buildings ("HPB") division in our Commercial/International Services Group ("CIG") reportable segment.

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Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 .

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to general prin ciple s in Topic 740 and amending certain existing guidance for clarity .

We adopted this guidance in the first quarter of fiscal 2022, and the adoption did not have an impact on our consolidated financial statements.

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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.

We adopted this guidance in the first quarter of fiscal 2022, and the adoption did not have an impact on our consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), which requires disclosures for transactions with a government authority that are accounted for by applying a grant or contribution model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity's financial statements.

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Revenue and Contract Balances

Disaggregation of Revenue

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

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

Three Months Ended Six Months Ended

2022 March 28,

2021 April 3,

2022 March 28,

Three Months Ended Nine Months Ended

2022 June 27,

(in thousands)

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Other than the U.S.

federal government, no single client accounted for more than 10% of our revenue for the three and six months ended April 3, 2022 and March 28, 2021.

federal government, no single client accounted for more than 10% of our revenue for the three and nine months ended July 3, 2022 and June 27, 2021.

Contract Assets and Contract Liabilities

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Net contract liabilities $ ( 147,183 ) $ ( 86,619 )

(1) Inclu des $ 18.8 million and $ 12.2 million of contract retentions as of April 3, 2022 and October 3, 2021, respectively.

In the first halves of fiscal 2022 and 2021, we recognized revenue of approximately $ 93 million and $ 90 million , respectively, from amounts included in the contract liability balances at the end of fiscal 2021 and 2020, respectively.

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

(1) Inclu des $ 21.3 million and $ 12.2 million of contract retentions as of July 3, 2022 and October 3, 2021, respectively.

In the first nine months of fiscal 2022 and 2021, we recognized revenue of approximately $ 111 million and $ 108 million, respectively, from amounts included in the contract liability balances at the end of fiscal 2021 and 20 20, respectively.

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

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

As a result, we recognized net favorable revenue and operating income adjustments of $ 5.0 million in the first half of fiscal 2022 and $ 1.1 million in the first half of fiscal 2021.

As a result, we recognized net unfavorable revenue and operating income adjustments of $ 2.8 million and net favorable revenue and operating income adjustments of $ 2.2 million in the third quarter and first nine months of fiscal 2022, respectively, compared to net favorable adjustments of $ 1.7 million and $ 2.8 million in the third quarter and first nine months of fiscal 2021, respectively.

C hanges in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediate ly in earnings.

As of April 3, 2022 and October 3, 2021, our consolidated balance sheets included liabilities for anticipated losses of $ 11.6 million and $ 12.7 million, respectively.

The estimated cost to complete these related contracts as of April 3, 2022 and October 3, 2021 was approximately $ 88 million and $ 104 million, respectively.

As of July 3, 2022 and October 3, 2021, our consolidated balance sheets included liabilities for anticipated losses of $ 11.1 million and $ 12.7 million, respectively.

The estimated cost to complete these related contracts as of July 3, 2022 and October 3, 2021 was approximately $ 84 million and $ 104 million, respectively.

Accounts Receivable, Net

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

Substantially all of our unbilled receivables at April 3, 2022 are expected to be billed and collecte d within 12 months.

Substantially all of our unbilled receivables at July 3, 2022 are expected to be billed and collecte d within 12 months.

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

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

Total accounts receivable at April 3, 2022 and October 3, 2021 included approximately $ 11 million f or each period, related to claims, including requests for equitable adjustment, on contracts that provide for price redetermination.

This amount relates to a single claim in our RCM reportable segment.

In May 2022, we received a cash settlement for the $ 11 million claim in our RCM segment, which will result in an immaterial gain in the third quarter of fiscal 2022.

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

Total accounts receivable at October 3, 2021 included approximately $ 11 million related to claims, including requests for equitable adjustment, on contracts that provide for price redetermination.

This amount related to a single claim in our Remediation and Construction Management ("RCM") reportable segment.

In May 2022, we received a cash settlement for the claim, which resulted in an immaterial gain in the third quarter of fiscal 2022.

There were no claims included in our total accounts receivable at July 3, 2022.

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

In the first halves of fiscal 2022 and fiscal 2021, we recorded no gains or losses related to claims.

In the first nine months of fiscal 2022, we recorded no gains or losses related to claims other than the aforementioned immaterial gain on the settled RCM claim.

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

Other than the U.S.

federal government, no single client accounted for more than 10% of our accounts receivable at April 3, 2022 and October 3, 2021.

federal government, no single client accounted for more than 10% of our accounts receivable at July 3, 2022 and October 3, 2021.

Remaining Unsatisfied Performance Obligations (“RUPO”)

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

We h ad $ 3.6 billion of RUPO as of April 3, 2022.

We h ad $ 3.5 billion of RUPO as of July 3, 2022.

RUPO increases with awards from new contracts or additions on existing contracts and decreases as work is performed and revenue is recognized on existing contracts.

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

We expect to satisfy our RUPO as of April 3, 2022 over the following periods:

We expect to satisfy our RUPO as of July 3, 2022 over the following periods:

(in thousands)

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

In the second quarter of fiscal 2022, we acquired Piteau Associates (“PAE”), based in Vancouver, British Columbia.

PAE is a global leader in sustainable natural resource analytics including hydrologic numerical modeling and dewatering system design.

PAE is part of our Commercial/International Services Group (“CIG”) segment.

During the first half of fiscal 2022, we completed other immaterial acquisitions, which are part of our GSG segment.

The total fair value of the purchase price of all acquisitions during the first half of fiscal 2022 was $ 70.0 million.

This amount is comprised of $ 44.0 million in initial cash payments made to the sellers, $ 1.8 million of payables related to estimated post-closing adjustments for net assets acquired, and $ 24.2 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 35.5 million, based upon the achievement of specified operating income targets in each of the five years following the acquisitions.

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").

For the first nine months of fiscal 2022, we acquired The Integration Group of America ("TIGA"), Piteau Associates (“PAE”) and other immaterial acquisitions.

TIGA is based in Spring, Texas and is an industry leader in process automation and system integration solutions, including customized software and platform (SaaS/PaaS) applications, advanced data analytics, cloud data integration, and platform virtualization.

PAE is based in Vancouver, British Columbia and is a global leader in sustainable natural resource analytics including hydrologic numerical modeling and dewatering system design.

PAE is part of our CIG segment, and TIGA and other immaterial acquisitions are part of our GSG segment.

The total fair value of the purchase price for all of these acquisitions was $ 86.5 million.

This amount is comprised of $ 44.0 million in initial cash payments made to the sellers, $ 4.3 million of receivables (net) related to estimated post-closing adjustments for the net assets acquired, $ 15.5 million payable in a promissory note issued to the sellers along with related transaction expenses of the sellers (which were subsequently paid in July 2022), and $ 31.3 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 47.0 million, based upon the achievement of specified operating income targets in each of the three to five years following the acquisitions.

In fiscal 2021, we acquired Coanda Research and Development Corporation ("CRD"), The Kaizen Company (“KZN”), IBRA-RMAC Automation Solutions (“IRM”), and 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.

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This amount was 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.

Goodwill additions resulting from fiscal 2022 business combinations are primarily attributable to the significant technical expertise residing in embedded workforces that are sought out by clients, long-term management experience, the reputation of PAE in its industry, and the synergies expected to arise after the acquisitions in the areas of data management, digitization, modeling, water, and natural resources.

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.

Goodwill additions resulting from fiscal 2022 business combinations are primarily attributable to the significant technical expertise residing in embedded workforces that are sought out by clients, long-term management experience, the industry reputations, and the synergies expected to arise after the acquisitions in the areas of data management, digitization, modeling, water, and natural resources.

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.

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 companies.

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

Backlog, client relations and trade name intangible assets include the fair value of existing contracts and the underlying customer relationships with lives ranging from one to ten years , and trade names with lives ranging from three to five years .

Backlog and client relations intangible assets include the fair value of existing contracts and the underlying customer relationships with lives ranging from one to ten years , and trade names intangible assets have lives ranging from three to five years .

For detailed information regarding our intangible assets, see Note 5, “Goodwill and Intangible Assets”.

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

In the first half of fiscal 2022, we evaluated our estimates for contingent consideration liabilities for the remaining earn-out periods for each individu al acquisition, which included a review of their financial results to-date, the status of ongoing projects in their RUPO, and the inventory of prospective new contract awards.

For the first nine months of fiscal 2022, we evaluated our estimates for contingent consideration liabilities for the remaining earn-out periods for each individu al acquisition, which included a review of their financial results to-date, the status of ongoing projects in their RUPO, and the inventory of prospective new contract awards.

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

During the first halves of fiscal 2022 and 2021, the total adjustments to our contingent earn-out liabilities in operating income were immaterial.

At April 3, 2022, there was a total potential maximum of $ 139.6 million of outstanding contingent consideration related to acquisitions.

For the first nine months of fiscal 2022 and 2021, total adjustments to our contingent earn-out liabilities in operating income were immaterial.

At July 3, 2022, there was a total potential maximum of $ 141.1 million of outstanding contingent consideration related to acquisitions.

Of this amount, $ 83.3 million was estimated as the fair value and accrued on our consolidated balance sheet.

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Translation and adjustments ( 3,961 ) ( 25,804 ) ( 29,765 )

Balance at April 3, 2022 $ 510,403 $ 648,220 $ 1,158,623

Balance at July 3, 2022 $ 529,301 $ 622,156 $ 1,151,457

Our goodwill balances reflect the goodwill reallocation related to the creation of our new HPB division on the first day of fiscal 2022, which included a transfer of some related operations in our GSG reportable segment to our CIG reportable segment.

The foreign currency translation adjustments resulted from our foreign subsidiaries with functional currencies that are

different than our reporting currency.

The foreign currency translation adjustments resulted from our foreign subsidiaries with functional currencies that are different than our reporting currency.

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

The gross amounts o f goodwill for GSG were $ 528.1 million and $ 556.1 million at April 3, 2022 and October 3, 2021, respectively, excluding accumulated impairment of $ 17.7 million at each date.

The gross amounts of goodwill for CIG were $ 769.7 million and $ 691.6 million at April 3, 2022 and October 3, 2021, respectively, excluding accumulated impairment of $ 121.5 million at each date.

The gross amounts o f goodwill for GSG were $ 547.0 million and $ 556.1 million at July 3, 2022 and October 3, 2021, respectively, excluding accumulated impairment of $ 17.7 million at each date.

The gross amounts of goodwill for CIG were $ 743.7 million and $ 691.6 million at July 3, 2022 and October 3, 2021, respectively, excluding accumulated impairment of $ 121.5 million at each date.

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

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

April 3, 2022 October 3, 2021

July 3, 2022 October 3, 2021

Remaining Life

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Backlog 0.8 34,088 ( 29,811 ) 4,277 34,577 ( 30,670 ) 3,907

Technology and trade names 4.1 14,904 ( 7,592 ) 7,312 14,939 ( 6,327 ) 8,612

Trade names 3.9 13,651 ( 7,425 ) 6,226 14,939 ( 6,327 ) 8,612

Total $ 92,026 $ ( 58,083 ) $ 33,943 $ 118,971 $ ( 80,981 ) $ 37,990

Amortization expense for the three and six months e nded April 3, 2022 wa s $ 3.2 million and $ 5.9 million, respectively, compared to $ 2.2 million and $ 5.6 million for the prior-year periods.

Estimated amortization expense for the remainder of fiscal 2022 and succeeding years is as follows:

Amortization expense for the three and n ine months e nded July 3, 2022 wa s $ 3.7 million and $ 9.6 million, respectively, compared to $ 2.2 million and $ 7.8 million for the prior-year periods.

Estimated amortization expense for the

remainder of fiscal 2022 and succeeding years is as follows:

(in thousands)

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Property and equipment, net $ 35,010 $ 37,733

The depreciation expense related to property and equipment wa s $ 3.3 million and $ 6.7 million for the three and six months ended April 3, 2022, compared t o $ 3.1 million and $ 5.9 million for the prior-year periods.

The depreciation expense related to property and equipment was $ 3.2 million and $ 9.9 million for th e three and nine months ended July 3, 2022, compared t o $ 3.1 million and $ 9.0 million for the prior-year periods.

Stock Repurchase and Dividends

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 .

In the first half of fiscal 2022, we repurchased and settled 618,236 shares with an average price of $ 161.75 per share for a total cost of $ 100.0 million in the open market.

At April 3, 2022, we had a remaining balance of $ 447.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first halves of fiscal 2022 and 2021:

In the first nine months of fiscal 2022, we repurchased and settled 986,280 shares with an average price of $ 152.09 per share for a total cost of $ 150.0 million in the open market.

At July 3, 2022, we had a remaining balance of $ 397.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first nine months of fiscal 2022 and 2021:

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

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January 31, 2022 $ 0.20 February 11, 2022 February 25, 2022 10,769

Total dividend paid as of April 3, 2022 $ 21,562

May 2, 2022 $ 0.23 May 13, 2022 May 27, 2022 12,311

Total dividend paid as of July 3, 2022 $ 33,873

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

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

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

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

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

Subsequent Event.

On May 2, 2022 the Board of Directors declared a quarterly cash dividend of $ 0.23 per share payable on May 27, 2022 to stockholders of record as of the close of business on May 13, 2022.

On August 1, 2022, the Board of Directors declared a quarterly cash dividend of $ 0.23 per share payable on August 26, 2022 to stockholders of record as of the close of business on August 12, 2022.

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

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Our finance leases are primarily for certain information technology 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 at April 3, 2022 and October 3, 2021.

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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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 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.

The components of lease costs are as follows:

Three Months Ended Six Months Ended

2022 March 28,

2021 April 3,

2022 March 28,

Three Months Ended Nine Months Ended

2022 June 27,

(in thousands)

Operating lease cost $ 21,004 $ 22,423 $ 64,015 $ 67,132

Sublease income ( 131 ) ( 30 ) ( 257 ) ( 59 )

Sublease cost (income) 140 ( 21 ) ( 116 ) ( 81 )

Total lease cost $ 21,144 $ 22,402 $ 63,899 $ 67,051

Supplemental cash flow information related to leases is as follows:

Six Months Ended

2022 March 28,

Nine Months Ended

2022 June 27,

(in thousands)

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

April 3, 2022 October 3, 2021

July 3, 2022 October 3, 2021

(in thousands)

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Operating leases 2.1 % 2.2 %

As of April 3, 2022, 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 at April 3, 2022 is as follows:

As of July 3, 2022, 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 at July 3, 2022 is as follows:

(in thousands)

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

Stock-based compensation expense for the three and six months ended April 3, 2022 was $ 6.6 million and $ 12.4 million, respectively, compared to $ 5.7 million and $ 10.6 million for the same periods last year.

Stock-based compensation expense for the three and first nine months ended July 3, 2022 was $ 6.7 million and $ 19.1 million, respectively, compared to $ 5.7 million and $ 16.3 million for the same periods last year.

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

In the first half of fiscal 2022, we awarded 41,199 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $ 247.47 per share on the award date.

In the first nine months of fiscal 2022, we awarded 41,734 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $ 247.16 per share on the award date.

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

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Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, less unvested restricted stock for the period.

Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive potential common shares for the period.

Diluted EPS is computed by dividing net income by

the weighted-average number of common shares outstanding and dilutive potential common shares for the period.

Potential common shares include the weighted-average dilutive effects of outstanding stock options and unvested restricted stock using the treasury stock method.

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

Three Months Ended Six Months Ended

2022 March 28,

2021 April 3,

2022 March 28,

Three Months Ended Nine Months Ended

2022 June 27,

(in thousands, except per share data)

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Diluted $ 1.09 $ 0.95 $ 3.32 $ 2.74

The effective tax rates for the first halves of fiscal 2022 and 2021 were 21.9 % and 19.2 %, respectively.

Income tax expense was reduced b y $ 4.8 million and $ 8.0 million of excess tax benefits on share-based payments in the first halves of fiscal 2022 and 2021, respectively.

Excluding the impact of the excess tax benefits on share-based payments, our effective tax rates in the first halves of fiscal 2022 and 2021 were 25.0 % an d 25.8 %, r espectively.

As of April 3, 2022 and October 3, 2021, the liability for income taxes associated with uncertain tax positions was $ 13.9 million and $ 14.1 million, respectively.

The effective tax rates for the first nine months of fiscal 2022 and 2021 were 23.9 % and 20.4 %, respectively.

Income tax expense was reduced b y $ 4.9 million and $ 8.7 million of excess tax benefits on share-based payments in the first nine months of fiscal 2022 and 2021, respectively.

Excluding the impact of the excess tax benefits on share-based payments, our effective tax rates in the first nine months of fiscal 2022 and 2021 were 25.9 % an d 25.0 %, r espectively.

As of July 3, 2022 and October 3, 2021, the liability for income taxes associated with uncertain tax positions was $ 11.3 million and $ 14.1 million, respectively.

These uncertain tax positions substantially relate to ongoing examinations.

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foreign tax credit regime following the 2017 Tax Cut and Jobs Act.

These regulations were primarily effective on March 7, 2022, with certain provisions applicable to prior periods.

We do not expect these new regulations to materially impact our consolidated financial statements.

These regulations were primarily effective on March 7, 2022, with certain provisions applicable to prior periods, and they do not materially impact our consolidated financial statements.

Reportable Segments

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

CIG supports commercial clients across the Fortun e 500, clean energy, industrial, high performance buildings, and aerospace markets.

CIG also provides sustainable infrastructure and related

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

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

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

At the beginning of fiscal 2022, we aligned our operations to better serve our clients and markets, and created a new HPB division in our CIG reportable segment.

As a result, we transferred some related operations in our GSG reportable segment to our CIG reportable segment.

Accordingly, amounts related to our segment reporting for the first quarter and first half of fiscal 2021 have been reclassified to conform to the current year presentation.

Accordingly, amounts related to our segment reporting for the third quarter and first nine months of fiscal 2021 have been reclassified to conform to the current year presentation.

Management evaluates th e 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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The following tables summarize financial information regarding our reportable segments:

Three Months Ended Six Months Ended

2022 March 28,

2021 April 3,

2022 March 28,

Three Months Ended Nine Months Ended

2022 June 27,

(in thousands)

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CIG 756,195 698,916

RCM 11,316 11,360

Corporate (1)

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The fair value of long-term debt was determined using the present value of future cash flows based on the borrowing rates currently available for debt with similar terms and maturities (Level 2 measurement, as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended October 3, 2021).

The carrying value of our long-term debt approximated fair value at April 3, 2022 and October 3, 2021.

At April 3, 2022, we had borrowings o f $ 250.0 million outstan ding under our Amended Credit Agreement, which were used to fund business acquisitions, working capital needs, stock repurchases, dividends, capital expenditures and contingent earn-outs.

The carrying value of our long-term debt approximated fair value at July 3, 2022 and October 3, 2021.

At July 3, 2022, we had borrowing s of $ 246.9 million outstanding under our Amended Credit Agreement, which were used to fund business acquisitions, work ing capital needs, stock repurchases, dividends, capital expenditures and contingent earn-outs.

Credit Facility

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

As of April 3, 2022, the notional principal of our outstanding interest swap agreements was $ 206.3 million ($ 41.3 million each.) The interest rate swaps have a fixed interest rate of 2.79 %

and expire in July 2023 for all five agreements.

At April 3, 2022 and October 3, 2021, the fair values of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect were unrealized losses of $ 1.8 million and $ 9.4 million, which were reported in "Other current liabilities" on our consolidated balance sheets.

Additionally, the related gains of $ 4.9 million and $ 7.6 million for the three and six months ended April 3, 2022, compared to related gain s of $ 1.9 million and $ 3.4 million for the prior-year periods, were recognized and reported on our consolidated statements of comprehensive income.

We expect to reclassify $ 1.7 million from accumulated other comprehensive loss to interest expense within the next twelve months.

There were no other derivative instruments designated as hedging instruments for the fir st half o f fiscal 2022.

As of July 3, 2022, the notional principal of our outstanding interest swap agreements was $ 203.1 million ($ 40.6 million each.) The interest rate swaps have a fixed interest rate of 2.79 % and expire

in July 2023 for all five agreements.

At July 3, 2022 and October 3, 2021, the fair values of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect was an unrealized gain of $ 0.6 million and an unrealized loss of $ 9.4 million, which were reported in "Other long-term assets" and "Other current liabilities" on our consolidated balance sheets, respectively.

Additionally, the related gains of $ 2.4 million and $ 10.0 million for the three and first nine months ended July 3, 2022, compared to related gains of $ 1.5 million and $ 4.9 million for the prior-year periods, were recognized and reported on our consolidated statements of comprehensive income.

We expect to reclassify a credit of $ 0.7 million from accumulated other comprehensive loss to interest expense within the next twelve months.

There were no other derivative instruments designated as hedging instruments for the first nine months of fiscal 2022.

Reclassifications Out of Accumulated Other Comprehensive Income

The accumulated balances and activities for the three and six months ended April 3, 2022 and March 28, 2021 related to reclassifications out of accumulated other comprehensive income are summarized as follows:

The accumulated balances and activities for the three and nine months ended July 3, 2022 and June 27, 2021 related to reclassifications out of accumulated other comprehensive income are summarized as follows:

Three Months Ended

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(in thousands)

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

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

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

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

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

Balance at January 2, 2022 $ ( 116,320 ) $ ( 6,728 ) $ ( 123,048 )

Other comprehensive income before reclassifications 2,807 6,332 9,139

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

Balance at April 3, 2022 $ ( 113,513 ) $ ( 1,790 ) $ ( 115,303 )

Other comprehensive income (loss) before reclassifications ( 44,883 ) 3,413 ( 41,470 )

Amounts reclassified from accumulated other comprehensive loss

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— ( 1,033 ) ( 1,033 )

Net current-period other comprehensive income 2,807 4,938 7,745

Balance at April 3, 2022 $ ( 113,513 ) $ ( 1,790 ) $ ( 115,303 )

Six Months Ended

Net current-period other comprehensive income (loss) ( 44,883 ) 2,380 ( 42,503 )

Balance at July 3, 2022 $ ( 158,396 ) $ 590 $ ( 157,806 )

Nine Months Ended

Adjustments Gain (Loss)

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

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

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

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

Other comprehensive income before reclassifications 2,121 10,364 12,485

Other comprehensive income (loss) before reclassifications ( 42,762 ) 13,833 ( 28,929 )

Amounts reclassified from accumulated other comprehensive loss

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— ( 3,849 ) ( 3,849 )

Net current-period other comprehensive income 2,121 7,604 9,725

Balance at April 3, 2022 $ ( 113,513 ) $ ( 1,790 ) $ ( 115,303 )

Net current-period other comprehensive income (loss) ( 42,762 ) 9,984 ( 32,778 )

Balance at July 3, 2022 $ ( 158,396 ) $ 590 $ ( 157,806 )

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

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We often provide services to unconsolidated joint ventures.

Our revenue related to services we provided to unconsolidated joint ventures for th e three and six months o f fiscal 2022 was approxima tely $ 24 million and $ 50 million, respectively, compared to $ 24 million and $ 46 million for the same periods last year.

Related reimbursable costs for the three and six months of fiscal 2022 were approximately $ 22 million and $ 47 million.

Related reimbursable costs for the three and six months of fiscal 2021 were approximately $ 23 million and $ 44 million.

Our revenue related to services we provided to unconsolidated joint ventures for th e three and first nine months o f fiscal 2022 was approxim ately $ 24 million and $ 74 million, respectively, compared to $ 24 million and $ 70 million for the same periods last year.

Related reimbursable costs for the three and first nine months of fiscal 2022 were approximately $ 23 million and $ 70 million.

Related reimbursable costs for the three and first nine months of fiscal 2021 were approximately $ 23 million and $ 67 million.

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

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

What changed 10-Q

Item 1. Financial Statements