What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-05-06 · 132 added, 136 removed, 297 unchanged (47% of the section changed)

12 unchanged sentences

Tetra Tech, Inc.

is a leading global provider of high-end consulting and engineering services that focuses on water, environment, sustainable infrastructure, clean energy, and international development.

is a leading global provider of high-end 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.

17 unchanged sentences

The following table presents the percentage of our revenue by client sector:

Three Months Ended Six Months Ended

2022 March 28,

2021 April 3,

2022 March 28,

Three Months Ended Nine Months Ended

2022 June 27,

Client Sector

16 unchanged sentences

RCM's projects were complete at the end of fiscal 20 18.

however, there was an outstanding $11 million claim receivable in dispute resolution as of April 3, 2022.

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

There were no significant operating activities in RCM for the second quarters and first halves of fiscal 2022 and 2021.

In May 2022, we received a cash settlement for the last $11 million RCM claim receivable in dispute resolution.

This settlement resulted in an immaterial gain in the third quarter of fiscal 2022.

There were no significant operating activities in RCM for the three and nine m onths of fiscal 2022 and 2021.

Government Services Group ( “ GSG ” ).

9 unchanged sentences

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 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.

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The following table presents the percentage of our revenue by reportable segment:

Three Months Ended Six Months Ended

2022 March 28,

2021 April 3,

2022 March 28,

Three Months Ended Nine Months Ended

2022 June 27,

Reportable Segment

6 unchanged sentences

The following table presents the percentage of our revenue by 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,

Contract Type

39 unchanged sentences

As the coronavirus disease 2019 ("COVID-19") spread globally, we responded quickly to ensure the health and safety of our employees, clients and the communities we support.

Our high-end consulting focus and the technologies we deployed have allowed our staff to support clients and projects remotely without interruption.

We remain focused on providing clients with the highest level of service and our 450 global offices are operational, supporting our programs and projects.

Our high-end consulting focus and the technologies we deployed have positioned our staff to successfully support our clients and projects in hybrid work solutions that enable seamless collaboration across remote, office and job site environments.

We remain foc used on providing clients with the highest level of service and our 450 global offices are operational, supporting our programs and projects.

By Leading with Science® , we are responding to the current global challenges including COVID-19, with the commitment of our 21,000 associates supported by technological innovation.

The actions we have taken to navigate through this worldwide pandemic, the strength of our balance sheet, and our technical leadership position us well to address the global challenges of providing clean water, environmental restoration, and the impacts of climate change.

In the first half of fiscal 2022, revenue increased 12.6% compared to the prior-year period.

This year-over-year growth reflects increased activity with U.S.

state and local government clients and commercial clients.

Our international activities with both commercial and government clients have also contributed to our revenue growth.

Our revenue also includes contributions from acquisitions that did not contribute to our revenue in the first half of fiscal 2021.

In the second half of fiscal 2022, we expect our revenue to continue to grow year-over-year at a rate similar to the first half of fiscal 2022 after normalizing for the extra week of operations in the fourth quarter of fiscal 2021.

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

As a result, our fiscal 2021 had 53 weeks compared to 52 weeks this year with the extra week occurring in the fourth quarter of fiscal 2021.

For the first nine months of fiscal 2022, revenue increased 12.1% compared to the prior-year period.

This year-over-year growth reflects increased activity in all four of our client sectors.

Our revenue also includes contributions from acquisitions that did not have comparable revenue in the first nine months of fiscal 2021.

In the fourth quarter of fiscal 2022, we expect our revenue to continue to grow year-over-year on a constant currency basis and after normalizing for the extra week of operations in the fourth quarter of fiscal 2021.

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

Our fiscal 2022 contains 52 weeks compared to 53 weeks in fiscal 2021 with the extra week occurring in the fourth quarter.

State and Local Government.

state and local government revenue increased 23.7% in the first half of fiscal 2022 compared to the same period last year.

state and local government revenue increased 19.3% in the first nine months of fiscal 2022 compared to the same period last year.

The increase reflects continued broad-based growth in our U.S.

state and local government project-related infrastructure business, particularly with increased revenue from municipal water infrastructure work in the metropolitan areas of California, Texas and Florida.

Our disaster response activities also increased compared to the first half of fiscal 2021.

state and local government infrastructure business, particularly with increased revenue from municipal water infrastructure work, including digital water projects, in the metropolitan areas of California, Texas and Florida.

Our disaster response activities also increased compared to the first nine months of fiscal 2021.

Most of our work for the U.S.

state and local governments relates to critical water and environmental programs, which we expect to continue to grow for the remainder of fiscal 2022.

state and local governments relates to critical water and environmental programs, which we expect to continue to grow in the fourth quarter of fiscal 2022.

Federal Government.

federal government revenue decreased 2.5% in the first half of fiscal 2022 compared to the prior-year period.

The decrease was due to reduced international development activity, especially in Afghanistan.

This decline was partially offset by increased year-over-year revenue for both Department of Defense and civilian agencies.

During periods of economic volatility, including during the COVID-19 pandemic, our U.S.

federal government revenue decreased 2.3% in the first nine months of fiscal 2022 compared to the prior-year period.

The decrease was due to reduced international development activity, especially our work in Afghanistan that ceased in the fourth quarter of last year.

Excluding Afghanistan, our U.S.

federal government revenue grew more than 2% in the first nine months of fiscal 2022 compared to the same period last year, primarily due to increased environmental revenue for both Department of Defense and civilian agencies.

During periods of economic volatility, including the COVID-19 pandemic, our U.S.

federal government business has historically been the most stable and predictable.

Our revenue also includes contributions from acquisitions that did not contribute to our revenue in the first half of fiscal 2021.

Our revenue also includes contributions from acquisitions that did not have comparable revenue in the prior-year period.

We expect our U.S.

federal government revenue to grow for the remainder of fiscal 2022 primarily due to increased advanced analytics activity and the current administration's focus on long-term infrastructure and climate change.

commercial revenue increased 15.6% in the first half of fiscal 2022 compared to the same period last year.

federal government revenue, excluding Afghanistan, to grow for the remainder of fiscal 2022 primarily due to increased advanced analytics activity and the current administration's focus on long-term infrastructure and climate change.

commercial revenue increased 18.1% in the first nine months of fiscal 2022 compared to the same period last year.

This increase was primarily due to more activity on environmental programs, including meeting net zero carbon goals and high performance buildings.

We expect these trends and the related growth in our U.S.

commercial work to continue for the remainder of fiscal 2022.

We expect growth in our U.S.

commercial work to continue in the fourth quarter of fiscal 2022.

International.

Our international revenue increased 22.7% in the first half of fiscal 2022 compared to the prior-year period.

The revenue growth primarily reflects government stimulus spending on infrastructure and commercial activity related to an increased focus on sustainability .

Our revenue also includes contributions from acquisitions that did not contribute to our revenue in the first half of fiscal 2021.

We expect these trends and the related growth in our international work to continue for the remainder of fiscal 2022.

Our international revenue increased 20.7% in the first nine months of fiscal 2022 compared to the prior-year period.

Our revenue includes contributions from acquisitions that did not have comparable revenue in the year-ago period.

Additionally, the revenue growth reflects government stimulus spending on infrastructure and commercial activities related to an increased focus on sustainability .

We expect growth in our international work to continue for the remainder of fiscal 2022, although we expect adverse year-over-year foreign exchange rate changes reflecting a stronger U.S.

dollar to slow our international growth in the fourth quarter of fiscal 2022 compared to the first nine months of the fiscal year.

RESULTS OF OPERATIONS

Consolidated Results of Operations

Three Months Ended Six Months Ended

2022 March 28,

2021 Change April 3, 2022 March 28, 2021 Change

Three Months Ended Nine Months Ended

2022 June 27,

2021 Change July 3, 2022 June 27, 2021 Change

($ in thousands, except per share data)

23 unchanged sentences

Accordingly, we segregate subcontractor costs from revenue to promote a better understanding of our business by evaluating revenue exclusive of costs associated with external service providers.

In the second quarter of fiscal 2022, revenue and revenue, net of subcontractor costs, increased $98.0 million, or 13.0%, and $99.8 million, or 16.6%, respectively, compared to the year-ago quarter.

Excluding the contributions from acquisitions that did not have activity in the second quarter of last year, our revenue increased approximately 7% in the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $16.4 million, or 3.8%, and $27.4 million, or 8.8%, respectively, in the second quarter of fiscal 2022 compared to last year's second quarter.

Our CIG segment's revenue increased $81.5 million, or 24.3%, and revenue, net of subcontractor costs, increased $72.9 million, or 25.2% in the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021.

In the first half of fiscal 2022, revenue and revenue, net of subcontractor costs, increased $191.4 million, or 12.6%, and $174.0 million, or 14.4%, respectively, compared to the prior-year period.

Excluding the contributions from acquisitions that did not have activity in the first half of fiscal 2021, our revenue increased approximately 7% in the first half of fiscal 2022 compared to the first half of fiscal 2021.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $47.8 million, or 5.6%, and $49.9 million, or 8.1%, respectively, in the first half of fiscal 2022 compared to the prior-year period.

Our CIG segment's revenue increased $141.3 million, or 20.4%, and revenue, net of subcontractor costs, increased $124.6 million, or 21.1% in the first half of fiscal 2022 compared to the first half of fiscal 2021.

Our quarterly and year-to-date results for our GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Services Group", respectively.

In the third quarter of fiscal 2022, revenue and revenue, net of subcontractor costs, increased $88.6 million, or 11.1%, and $82.4 million, or 12.9%, respectively, compared to the year-ago quarter.

Excluding the contributions from acquisitions that did not have activity in the third quarter of last year, our revenue increased approximately 5% in the third quarter of fiscal 2022 compared to the prior-year quarter.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $15.7 million, or 3.5%, and $20.4 million, or 6.5%, respectively, in the third quarter of fiscal 2022 compared to last year's third quarter.

Our CIG segment's revenue increased $71.5 million, or 19.2%, and revenue, net of subcontractor costs, increased $62.1 million, or 19.2% in the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021.

In the first nine months of fiscal 2022, revenue and revenue, net of subcontractor costs, increased $280.0 million, or 12.1%, and $256.4 million, or 13.9%, respectively, compared to the prior-year period.

Excluding the contributions from acquisitions that did not have activity in the first nine months of fiscal 2021, our revenue increased approximately 6% in the first nine months of fiscal 2022 compared to the same period last year.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $63.5 million, or 4.9%, and $70.3 million, or 7.6%, respectively, in the first nine months of fiscal 2022 compared to last year's period.

Our CIG segment's revenue increased $212.8 million, or 20.0%, and revenue, net of subcontractor costs, increased $186.8 million, or 20.5% in the first nine months of fiscal 2022 compared to the year-ago period.

Our quarterly and year-to-date results for our GSG and CIG segments are described below under "Government Servi ces Group" and "Commercial/International Services Group", respectively.

The following table reconciles our reported results to non-U.S.

GAAP adjusted results, which exclude a non-operating benefit of Employee Retention Credits ("ERC's") related to COVID-19 in the first quarter of fiscal 2022.

GAAP adjusted results, which exclude a non-operating benefit of Employee Retention Credits ("ERC's") related to COVID-19 in the first nine months of fiscal 2022.

The effective tax rate applied to the adjustment to earnings per share ("EPS") to arrive at adjusted EPS was 26%.

1 unchanged sentence

Both EPS and adjusted EPS were calculated using diluted weighted-average common shares outstanding as reflected in our consolidated statements of income.

Three Months Ended Six Months Ended

2022 March 28,

2021 Change April 3,

2022 March 28,

Three Months Ended Nine Months Ended

2022 June 27,

2021 Change July 3,

2022 June 27,

($ in thousands, except per share data)

9 unchanged sentences

(1) Non-GAAP financial measure

Operating income increased $13.7 million, or 22.6%, in the second quarter of fiscal 2022 compared to the second quarter last year.

In the first half of fiscal 2022, operating income increased $34.7 million, or 27.3%, compared to the first half of fiscal 2021.

The first half of fiscal 2022 results include the benefit of ERC's totaling $4.5 million, which represents reimbursement from the U.S.

federal government under the Coronavirus Aid, Relief and Economic Security Act for the costs we incurred during the second quarter of fiscal 2020 to address the COVID-19 pandemic.

These amounts were recognized in the first quarter of fiscal 2022 when the funds were received due to the uncertainty related to the computation of qualifying amounts and delayed processing times for our application.

These amounts were primarily reflected as a reduction to "Other Costs of Revenue" in our Consolidated Statement of Income and an increase to "Cash Provided by Operations" in our Consolidated Statement of Cash Flows for the first half of fiscal 2022, consistent with the presentation of the related costs in the second quarter of fiscal 2020.

The ERC's increased operating income in our GSG and CIG segments by $3.1 million and $1.4 million, respectively.

Excluding the ERC's, our adjusted operating income increased $30.2 million, or 23.8%, in the first half of fiscal 2022 compared to year-ago period.

Operating income increased $14.1 million, or 20.2%, in the third quarter of fiscal 2022 compared to the year-ago quarter.

In the first nine months of fiscal 2022, operating income increased $48.8 million, or 24.8%, compared to the same period last year.

The third quarter and first nine months of fiscal 2022 results include the benefit of ERC's totaling $1.0 million and $5.5 million, respectively, which represents reimbursement from the U.S.

federal government under the Coronavirus Aid, Relief and Economic Security Act for the costs that we incurred during the second quarter of fiscal 2020 to address the COVID-19 pandemic.

The amounts were recognized during the first nine months of fiscal 2022 when the funds were received due to the uncertainty related to the computation of qualifying amounts and delayed processing times for our application.

These amounts were primarily reflected as a reduction to "Other Costs of Revenue" in our Consolidated Statement of Income and an increase to "Cash Provided by Operations" in our Consolidated Statement of Cash Flows for the first nine months of fiscal 2022, consistent with the presentation of the related costs in the second quarter of fiscal 2020.

Excluding the ERC's, our adjusted operating income increased $13.1 million, or 18.7% for the third quarter of fiscal 2022 and increased $43.3 million, or 22.0%, for the first nine months of fiscal 2022 compared to the year-ago periods.

These increases reflect improved results in both GSG and CIG segments, which are described below under "Government Services Group" and "Commercial/International Services Group", respectively.

Net interest expense increased $0.3 million and $0.2 million in the second quarter and first half of fiscal 2022, respectively, compared to the prior-year periods.

Net interest expense increased $0.2 million and $0.4 million in the third quarter and first nine months of fiscal 2022, respectively, compared to the same periods last year.

The increased interest expense related to our contingent earn-out liabilities was substantially offset by the benefit of lower average year-over-year borrowings.

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 by $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 these tax benefits, our effective tax rates for the first halves of fiscal 2022 and 2021 were 25.0% and 25.8%, respectively.

Our EPS was $0.98 and $2.23 in the second quarter and first half of fiscal 2022, compared to $0.83 and $1.79 in the prior-year periods.

On the same basis as our adjusted operating income, adjusted EPS was $2.17 in the first half of fiscal 2022.

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

Income tax expense was reduced by $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 these tax benefits, our effective tax rates for the first nine months of fiscal 2022 and 2021 were 25.9% and 25.0%, respectively.

Our EPS was $1.09 and $3.32 for the third quarter and first nine months of fiscal 2022, compared to $0.95 and $2.74 for the same periods in fiscal 2021, respectively.

On the same basis as our adjusted operating income, adjusted EPS was $1.08 and $3.25 for the third quarter and first nine months of fiscal 2022, compared to $0.95 and $2.74 for the same periods last year, respectively.

Segment Results of Operations

Government Services Group

Three Months Ended Six Months Ended

2022 March 28,

2021 Change April 3, 2022 March 28, 2021 Change

Three Months Ended Nine Months Ended

2022 June 27,

2021 Change July 3, 2022 June 27, 2021 Change

($ in thousands)

3 unchanged sentences

Income from operations $ 45,580 $ 44,323 $ 1,257 2.8% $ 147,104 $ 128,491 $ 18,613 14.5%

Revenue increased $16.4 million, or 3.8%, and revenue, net of subcontractor costs, increased $27.4 million, or 8.8%, in the second quarter of fiscal 2022 compared to the year-ago quarter.

For the first half of fiscal 2022, revenue increased $47.8 million, or 5.6%, and revenue, net of subcontractor costs, increased $49.9 million, or 8.1%, compared to the first half of last year.

These increases primarily reflect higher U.S.

Revenue increased $15.7 million, or 3.5%, and revenue, net of subcontractor costs, increased $20.4 million, or 6.5%, in the third quarter of fiscal 2022 compared to the year-ago quarter.

For the first nine months of fiscal 2022, revenue increased $63.5 million, or 4.9%, and revenue, net of subcontractor costs, increased $70.3 million, or 7.6%, compared to the prior year periods.

The increases primarily reflect higher U.S.

state and local government activities related to water and environmental programs and disaster response projects.

Operating income increased $8.9 million and $17.4 million in the second quarter and first half of fiscal 2022, respectively, compared to the prior-year periods.

Operating income in the first half of fiscal 2022 included $3.1 million of the aforementioned ERC's.

Excluding this benefit, operating income increased 17.0% in the first half of fiscal 2022 compared to the same period last year.

Our operating margin, based on revenue, net of subcontractor costs, improved to 15.3% for the first half of fiscal 2022 compared to 13.7% for fiscal 2021 period.

Excluding the ERC's, our operating margin was 14.8% in the first half of fiscal 2022.

Operating income increased $1.3 million and $18.6 million in the third quarter and first nine months of fiscal 2022, respectively, compared to the same periods in fiscal 2021.

Operating income for the third quarter and first nine months fiscal 2022 included $0.7 million and $3.7 million of the aforementioned ERC's.

Excluding this benefit, operating income increased 11.6% in the first nine months of fiscal 2022 compared to the same period last year.

Our operating margin, based on revenue, net of subcontractor costs, improved to 14.7% for the first nine months of fiscal 2022 compared to 13.8% for fiscal 2021 period.

Excluding the ERC's, our operating margin was 14.3% in the first nine months of fiscal 2022.

The improved operating margin was primarily due to our increased focus on high-end consulting services and improved labor utilization.

Commercial/International Services Group

Three Months Ended Six Months Ended

2022 March 28,

2021 Change April 3, 2022 March 28, 2021 Change

Three Months Ended Nine Months Ended

2022 June 27,

2021 Change July 3, 2022 June 27, 2021 Change

($ in thousands)

3 unchanged sentences

Income from operations $ 53,535 $ 38,991 $ 14,544 37.3% $ 139,328 $ 104,500 $ 34,828 33.3 %

Revenue increased $81.5 million, or 24.3%, and revenue, net of subcontractor costs, increased $72.9 million, or 25.2%, in the second quarter of fiscal 2022 compared to last year's second quarter.

For the first half of fiscal 2022, revenue increased $141.3 million, or 20.4%, and revenue, net of subcontractor costs, increased $124.6 million, or 21.1%, compared to the first half of fiscal 2021.

The revenue growth in the first half of fiscal 2022 primarily reflects more activity on commercial environmental programs, including meeting net zero carbon goals and high performance buildings.

These increases were also

due to international government stimulus spending on infrastructure.

Additionally, revenue in the first half of fiscal 2022, includes contributions from acquisitions, which did not have comparable revenue in the first half of last year.

Operating income increased $9.5 million and $20.3 million, in the second quarter and first half of fiscal 2022, respectively, compared to the same periods last year.

Operating income in the first half of fiscal 2022 included $1.4 million of the aforementioned ERC's.

Excluding this benefit, operating income increased 28.9% in the first half of fiscal 2022 compared to fiscal 2021 period.

Our operating margin, based on revenue, net of subcontractor costs, improved to 12.0% for the first half of fiscal 2022 compared to 11.1% for the prior-year period.

Excluding the ERC's, our operating margin was 11.8% for the first half of fiscal 2022.

The improved operating margin was primarily due to our increased focus on high-end consulting services and improved labor utilization.

Revenue increased $71.5 million, or 19.2%, and revenue, net of subcontractor costs, increased $62.1 million, or 19.2%, in the third quarter of fiscal 2022 compared to last year's third quarter.

For the first nine months of fiscal 2022, revenue

increased $212.8 million, or 20.0%, and revenue, net of subcontractor costs, increased $186.8 million, or 20.5%, compared to the same period last year.

The revenue growth in the first nine months of fiscal 2022 primarily reflects more activity on commercial environmental programs, including meeting net zero carbon goals and high performance buildings.

These increases were also due to the international government stimulus spending on infrastructure.

Additionally, revenue in the first nine months of fiscal 2022, includes contributions from acquisitions, which did not have comparable revenue in year-ago period.

Operating income increased $14.5 million and $34.8 million, in the third quarter and first nine months of fiscal 2022, respectively, compared to the same periods last year.

Operating income in the third quarter and first nine months of fiscal 2022 included $0.3 million and $1.6 million of the aforementioned ERC's, respectively.

Excluding this benefit, operating income increased 31.8% in the first nine months of fiscal 2022 compared to the fiscal 2021 period.

Our operating margin, based on revenue, net of subcontractor costs, improved to 12.7% for the first nine months of fiscal 2022 compared to 11.5% for the prior-year period.

Excluding the ERC's, our operating margin was 12.5% for the first nine months of fiscal 2022.

The improved operating margin was primarily due to our increased focus on high-end consulting services, project execution and labor utilization.

Backlog generally represents the dollar amount of revenues we expect to realize in the future when we perform the work.

1 unchanged sentence

Specifically, our backlog does not consider the impact of termination for convenience clauses within the contracts.

The contract term and thus remaining performance obligation on certain of our operations and maintenance contracts, are limited to the notice period required for contract termination (usually 30, 60, or 90 days).

At April 3, 2022 and October 3, 2021, the differences between our backlog and RUPO o f $3.6 billion were immaterial.

At July 3, 2022 and October 3, 2021, the differences between our backlog and RUPO of $3.5 billion for each period were immaterial.

Financial Condition, Liquidity and Capital Resources

Capital Requirements.

As of April 3, 2022, we h ad $194.4 million of cash and cash equivalents and access to an additional $799.3 million of borrowings available under our credit facility.

During the first half of fiscal 2022, we generated $177.5 million of cash from operations.

As of July 3, 2022, we h ad $217.4 million of cash and cash equivalents and access to an additional $799.3 million of borrowings available under our credit facility.

During the first nine months of fiscal 2022, we generated $276.0 million of cash from operations.

To date, we have not experienced any significant deterioration in our financial condition or liquidity due to the COVID-19 pandemic and our credit facilities remain available.

6 unchanged sentences

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.

In the nine months 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.

On November 15, 2021, the Board of Directors 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.

On January 31, 2022, the Board of Directors declared a quarterly cash dividend of $0.20 per share payable on February 25, 2022 to stockholders of record as of the close of business on February 11, 2022.

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.

Subsequent Event.

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.

Cash and Cash Equivalents.

As of April 3, 2022, our cash and cash equivalents w ere $194.4 million, an increase of $27.8 million compared to the fiscal 2021 year-end.

As of July 3, 2022, our cash and cash equivalents w ere $217.4 million, an increase of $50.8 million compared to the fiscal 2021 year-end.

The increase was primarily due to net cash provided by operating activities partially offset by stock repurchases, dividends, as well as payments for taxes on vested restricted stock.

Operating Activities .

For the first half of fiscal 2022, net cash provided by operating activities was $177.5 million, an increase of $20.1 million compared to the prior-year period.

The increase primarily reflects an increase in earnings adjusted for non-cash items and improved working capital from faster collections of our receivables in the first half of fiscal 2022 compared to the fiscal 2021 period.

For the first nine months of fiscal 2022, net cash provided by operating activities was $276.0 million, an increase of $49.4 million compared to the prior-year period.

The increase primarily reflects an increase in earnings adjusted for non-cash items and improved working capital from faster collections of our receivables in the first nine months of fiscal 2022 compared to the fiscal 2021 period.

Investing Activities .

For the first half of fiscal 2022, net cash used in investing activities was $35.6 million, an increase of $28.3 million compared to the prior-year period.

The increase was primarily due to payments related to the acquisitions completed in the first half of fiscal 2022.

For the first nine months of fiscal 2022, net cash used in investing activities was $38.3 million, an increase of $15.2 million compared to the prior-year period.

The increase was primarily due to payments related to the acquisitions completed in the first nine months of fiscal 2022.

Financing Activities .

For the first half of fiscal 2022, net cash used in financing activities was $115.8 million, an increase of $24.7 million compared to the same period last year.

The increase was due to higher stock repurchases, taxes paid on vested restricted stock and stock options exercised.

The increased uses of cash were partially offset by higher net borrowings in the first half of fiscal 2022, which was primarily used to fund acquisitions.

For the first nine months of fiscal 2022, net cash used in financing activities was $182.5 million, an increase of $45.0 million compared to the same period last year.

The increase was due to higher stock repurchases, partially offset by a change in bank overdrafts and a net borrowing, which was primarily used to fund acquisitions.

Debt Financing.

16 unchanged sentences

The Amended Credit Agreement expires on February 18, 2027, or earlier at our discretion upon payment in full of loans and other obligations.

As of April 3, 2022, we had $250.0 million.

As of July 3, 2022, we had $246.9 million.

in outstanding borrowings under the Amended Credit Agreement, which was comprised of $246.9 million under the Amended Term Loan Facility and no outstanding borrowings under the Amended Revolving Credit Facility.

The year-to-date weighted-average interest rate of the outstanding borrowings during April 3, 2022 is 1.27%.

The year-to-date weighted-average interest rate of the outstanding borrowings during July 3, 2022 is 1.49%.

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

Our year-to-date weighted-average interest rate on borrowings outstanding under the Amended Credit Agreement, including the effects of interest rate swap agreements described in Note 15, “Derivative Financial Instruments” of the “Notes to Consolidated Financial Statements”, was 3.53%.

At April 3, 2022, we had $499.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

At July 3, 2022, we had $499.3 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 April 3, 2022, we were in compliance with these covenants with a consolidated leverage ratio of 0.82x and a consolidated interest coverage ratio of 28.09x.

At July 3, 2022, we were in compliance with these covenants with a consolidated leverage ratio of 0.85x and a consolidated interest coverage ratio of 28.19x.

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

At April 3, 2022, there were no outstanding borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $51.7 million.

As of April 3, 2022, we had no bank overdrafts related to our disbursement bank accounts.

At July 3, 2022, there were no outstanding borrowings under these facilities, and the

aggregate amount of standby letters of credit outstanding was $50.9 million.

As of July 3, 2022, we had no bank overdrafts related to our disbursement bank accounts.

We believe our operations have not been, and, in the foreseeable future, are not expected to be, materially adversely affected by inflation or changing prices due to the average duration of our projects and our ability to negotiate prices as contracts end and new contracts begin.

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

May 2, 2022 $ 0.23 May 13, 2022 N/A May 27, 2022

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

August 1, 2022 $ 0.23 August 12, 2022 N/A August 26, 2022

We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and adjust the allowance, if necessary.

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Based on projected future operating results in certain jurisdictions, it is unlikely that the current valuation allowance positions of those jurisdictions could be adjusted in the next 12 months.

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.

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.

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

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If we default on the Amended Credit Agreement or additional credit facilities, our inability to issue or renew standby letters of credit and bank guarantees would impair our ability to maintain normal operations.

At April 3, 2022, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $51.7 million in standby letters of credit outstanding under our additional letter of credit facilities.

At July 3, 2022, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $50.9 million in standby letters of credit outstanding under our additional letter of credit facilities.

• From time to time, we provide guarantees and indemnifications related to our services.

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We enter into these agreements primarily to support the project execution commitments of these entities.

The potential payment amount of an outstanding performance guarantee is typically the remaining cost of work to be

performed by or on behalf of third parties under engineering and construction contracts.

The potential payment amount of an outstanding performance guarantee is typically the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts.

However, we are not able to estimate other amounts that may be required to be paid in excess of estimated costs to complete contracts and, accordingly, the total potential payment amount under our outstanding performance guarantees cannot be estimated.

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The Facility matures on February 18, 2027.

At April 3, 2022, we had $250.0 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $250.0 million under the Amended Term Loan Facility and no outstanding borrowings under the Amended Revolving Credit Facility.

At July 3, 2022, we had $246.9 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $246.9 million under the Amended Term Loan Facility and no outstanding borrowings under the Amended Revolving Credit Facility.

The year-to-date weighted-average interest rate of the outstanding borrowings during fiscal 2022 was 1.49%.

In August 2018, we entered into five interest rate swap agreements with five banks to fix the variable interest rate on $250 million of our Amended Term Loan Facility.

The objec tive of these interest rate swaps was to eliminate the variability of our cash flows on the amount of interest expense we pay under our Credit Agreement.

As of April 3, 2022, the notional principal of our outstanding interest swap agreements was $206.3 million ($41.3 million each.) Our year-to-date average effective interest rate on borrowings outstanding under the Credit Agreement, including the effects of interest rate swap agreements, at April 3, 2022, was 3.50%.

The objective of these interest rate swaps was to eliminate the variability of our cash flows on the amount of interest expense we pay under our Credit Agreement.

As of July 3, 2022, the notional principal of our outstanding interest swap agreements was $203.1 million ($40.6 million each.) Our year-to-date average effective interest rate on borrowings outstanding under the Credit Agreement, including the effects of interest rate swap agreements, at July 3, 2022, was 3.53%.

For more information, see Note 15, “Derivative Financial Instruments” of the “Notes to Consolidated Financial Statements”.

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We attempt to minimize our exposure to these fluctuati ons by matching revenue and expenses in the same currency for our contracts.

For the first half of fiscal 2021, we reported $1.3 million of foreign currency losses in

“Selling, general and administrative expenses” on our consolidated statements of income.

The foreign currency impact for the first half of fiscal 2022 was immaterial.

We have foreign currency exchange rate exposure in our results of operations and equity primarily because of the currency translation related to our foreign subsidiaries where the local currency is the functional currency.

For the first nine months of fiscal 2021, we reported $1.8 million of foreign currency losses in “Selling, general and administrative expenses” on our consolidated statements of income.

The foreign currency impact for the first nine months of fiscal 2022 was immaterial.

W e have foreign currency exchange rate exposure in our results of operations and equity primarily because of the currency translation related to our foreign subsidiaries where the local currency is the functional currency.

To the extent the U.S.

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dollar weakens against foreign currencies.

For the first halves of fiscal 2022 and 2021, 30.8% and 28.3% of our consolidated revenue, respectively, was generated by our international business.

For the first half of fiscal 2022, the effect of foreign exchange rate translation on the consolidated balance sheets was an increase in our equity by $2.1 million compared to an increase in equity of $43.4 million in the first half of fiscal 2021.

For the first nine months of fiscal 2022 and 2021, 31.4% and 29.2% of our consolidated revenue, respectively, was generated by our international business.

For the first nine months of fiscal 2022, the effect of foreign exchange rate translation on the consolidated balance sheets was a decrease in our equity by $42.8 million compared to an increase in equity of $54.5 million in the first nine months of fiscal 2021.

These amounts were recognized as adjustments to equity through other comprehensive income.

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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 2. Management’s Discussion and Analysis