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Item 7. Management’s Discussion and Analysis

2022-11-25 compared with 2021-11-24 · 215 added, 260 removed, 369 unchanged (56% of the section changed)

5 unchanged sentences

OVERVIEW OF RESULTS AND BUSINESS TRENDS

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.

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

Our government business, which represents approximately 60% of our revenue, has been stable, while our commercial business experienced more impact.

Much of our commercial business has continued due to regulatory drivers, but we have seen project delays in the industrial sectors.

Our diversified end-markets have allowed us to redeploy staff to areas of uninterrupted or increased demand, and we have made decisions to align our cost structures with our clients' projects.

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 fiscal 2021, o ur revenue increased 7.3% compared to fiscal 2020.

This year-over-year growth primarily reflects increased activity with government clients, both U.S.

and international, as federal and local government agency spending has been a source of economic stability and stimulus during the COVID-19 pandemic.

However, this growth was partially offset by lower commercial activity, which has been slower to recover to pre-pandemic levels.

Our revenue also includes contributions from acquisitions that did not contribute to our revenue in fiscal 2020.

Our year-over-year revenue comparisons were also impacted by the decision to dispose of our Canadian turn-key pipeline activities in fiscal 2019 and the subsequent wind-down of those activities in fiscal 2020.

State and Local Government.

state and local government revenue increased 22.2% i n fiscal 2021 compared to last fiscal 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 fiscal 2020.

Most of our work for U.S.

state and local governments relates to critical water and environmental programs, which we expect to continue to grow next year.

The risk of budgetary constraints to our clients is mitigated with the passage of the American Rescue Plan Act of 2021, signed into law on March 11, 2021, which provides financial support for state and local governments.

In fiscal 2022, o ur revenue increased 9.0% comp ared to fiscal 2021.

This year-over-year growth reflects increased activity in our U.S.

state and local, U.S.

commercial and international client sectors.

Our revenue also includes contributions from acquisitions that did not have comparable revenue in fiscal 2021.

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

Fiscal years 2022, 2021 and 2020 contained 52, 53 and 52 weeks, respectively.

We estimate that our revenue increased approximately 11.0% in fiscal 2022 compared to last fiscal year adjusting for the extra week in fiscal 2021.

Federal Government.

federal government revenue increased 8.8% in f iscal 2021 compared to fiscal 2020.

This increase includes contributions from acquisitions, which did not have comparable revenue in last fiscal year.

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

federal government revenue decreased 1.6% in f iscal 2022 compared to fiscal 2021.

This decrease primarily reflects the wind-down of our international development activities in Afghanistan that ceased in the fourth quarter of last fiscal year.

Excluding Afghanistan, our U.S.

federal government revenue grew approximately 3% in fiscal 2022 compared to fiscal 2021, primarily due to increased environmental activities for civilian agencies.

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

During perio ds of economic volatility, our U.S.

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

We expect our U.S.

federal government revenue to grow in fiscal 2022 due to continued increased advanced analytics activity, and the current administration's focus on long-term infrastructure and climate change.

commercial revenue decreased 5.4% in fiscal 2021 compared to fiscal 2020.

The decline was primarily due to reduced industrial activity as a result of the COVID-19 pandemic.

We currently expect our U.S.

commercial revenue to grow in fiscal 2022 primarily with clients focused on environmental programs, including meeting net zero carbon goals, and from higher demand for renewable energy;

however, if conditions due to the COVID-19 pandemic worsen or are prolonged, it could have a negative impact on our revenue for fiscal 2022.

federal government revenue to grow in fiscal 2023.

Approximately $1 trillion in new U.S.

federal funding passed in 2021 through the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS and Science Act.

Each of these programs include substantial planned investments in our key end markets including water, environment and sustainable infrastructure over the next five to ten years.

State and Local Government.

state and local government revenue increased 12.5% i n fiscal 2022 compared to fiscal 2021.

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

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 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 in fiscal 2023.

commercial revenue increased 17.4% i n fiscal 2022 compared to fiscal 2021.

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

In addition, industrial activity was reduced in fiscal 2021 as a result of the COVID-19 pandemic.

We expect growth in our U.S.

commercial work to continue in fiscal 2023.

International.

Our international revenue increased 13.6% in f iscal 2022 compared to fiscal 2021.

The revenue growth primarily reflects government stimulus spending on infrastructure, increased commercial activity related to new regulatory requirements for sustainability, and fewer restrictions related to the COVID-19 pandemic .

Our revenue also includes contributions from acquisitions that did not contribute to our revenue in fiscal 2020.

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

Our revenue includes contributions from acquisitions that did not have comparable revenue in fiscal 2021.

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 in fiscal 2023.

If the global economy were to experience a recession, as some forecasts predict, our international growth in fiscal 2023 could be adversely impacted.

Pending Acquisition.

On September 23, 2022, we made an all cash offer to acquire all the outstanding shares of RPS Group plc ("RPS"), a publicly traded company on the London Stock Exchange for 222 pence per share, which was unanimously recommended by RPS's Board of Directors.

RPS employs approximately 5,000 associates in the United Kingdom, Europe, Asia Pacific and North America, delivering high-end solutions especially in energy transformation, water and program management for government and commercial clients.

The transaction is to be affected using a court sanctioned scheme of arrangement between RPS and its shareholders, and is subject to certain regulatory approvals and approval by RPS shareholders.

On November 3, 2022, RPS's shareholders approved the scheme of arrangement, with the acquisition expected to be closed and effective in January 2023 after regulatory and court approval with an all cash purchase price for 100% of the outstanding shares of approximately GBP 636 million.

RESULTS OF OPERATIONS

2 unchanged sentences

Fiscal Year Ended

2021 September 27,

2022 October 3,

($ in thousands)

7 unchanged sentences

Contingent consideration – fair value adjustments (329) 3,273 (3,602) (110.1)

Impairment of goodwill — (15,800) 15,800 NM

Income from operations 340,446 278,701 61,745 22.2

Interest expense – net (11,584) (11,831) 247 2.1

Other income 19,904 — 19,904 NM

Income before income tax expense 348,766 266,870 81,896 30.7

13 unchanged sentences

In fiscal 2022, revenue and revenue, net of subcontractor costs, increased $290.5 million, or 9.0%, and $283.4 million, or 11.1%, respectively, compared to fiscal 2021.

Excluding the net contributions from acquisitions and the impact of the disposal of our Canadian turn-key pipeline activities, our revenue increased 3.2% in fiscal 2021 compared to last fiscal year.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $164.0 million, or 9.2%, and $120.3 million, or 9.3%, respectively, in fiscal 2021 compared to the prior fiscal year.

Excluding the contributions from acquisitions, which did not have comparable revenue in fiscal 2021, our revenue increased 4.1% in fiscal 2022 compared to last fiscal year.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $48.0 million, or 2.7%, and $70.7 million, or 5.6%, respectively, in fiscal 2022 compared to the prior year.

Our CIG segment's revenue increased $238.4 million, or 15.9%, and revenue, net of subcontractor costs, increased $213.3 million, or 16.6% in fiscal 2022 compared to fiscal 2021.

Our fiscal 2021 results for our GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Services Group", respectively.

The fiscal 2022 results for GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Services Group", respectively.

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

GAAP adjusted results, which exclude certain non-operating accounting-related adjustments, such as gains on non-core dispositions, gains from adjustments to contingent considerations, goodwill impairment charges, non-recurring costs to address COVID-19, and non-recurring tax items.

The gains on non-core dispositions in fiscal 2020 relate to the disposal of our Canadian turn-key pipeline activities that commenced in the fourth quarter of fiscal 2019.

The goodwill impairment charge in fiscal 2020 did not have related tax benefits.

Excluding this charge, the effective tax rates applied to the adjustments to earnings per share ("EPS") to arrive at adjusted EPS averaged 25% and 24% for fiscal 2021 and 2020, respectively.

We applied the relevant marginal statutory tax rate based on the nature of the adjustments and tax jurisdiction in which they occur.

GAAP adjusted results, which exclude a non-operating benefit from Employee Retention Credits ("ERC's") received in fiscal 2022 and gains from adjustments to contingent consideration liabilities in fiscal 2021.

Our adjusted earnings per share ("EPS") for fiscal 2022 also excludes a non-operating $19.9 million unrealized gain on a foreign exchange contract that serves as an economic hedge related to our planned acquisition of RPS.

This gain is reported as "Other income" in our Consolidated Statement of Income for fiscal 2022.

Our adjusted EPS for fiscal 2021 also excludes non-recurring tax items.

The effective tax rates applied to the adjustments to EPS to arrive at adjusted EPS average 26% and 25% for fiscal 2022 and 2021, respectively.

We applied the relevant marginal statutory tax rate based on the nature of the adjustments and the tax jurisdiction in which it occurred.

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

During the second quarter of fiscal 2020, we took actions in response to the COVID-19 pandemic to ensure the health and safety of our employees, clients, and communities.

These actions included activating our Business Continuity Plan globally, which enabled 95% of our workforce to work remotely and all of our global offices to remain operational supporting our programs and projects.

This required incremental costs for employee relocation, expansion of our virtual private network capabilities, enhanced security, and sanitizing of our offices.

In addition, we incurred severance costs to right-size select operations where projects were cancelled specifically due to COVID-19 concerns and the resulting macroeconomic conditions.

These incremental costs totaled $8.2 million in the second quarter of fiscal 2020.

Although the charges were recognized in the second quarter of fiscal 2020, substantially all of these costs were paid in cash in the third quarter of fiscal 2020.

Fiscal Year Ended

2021 September 27,

2022 October 3,

Income from operations $ 340,446 $ 278,701 $ 61,745 22.2

Earn-out adjustments — (3,273) 3,273 NM

COVID-19 — 8,233 (8,233) NM

Non-core dispositions — (8,525) 8,525 NM

Impairment of goodwill — 15,800 (15,800) NM

Employee Retention Credits (6,486) — (6,486) NM

Adjusted income from operations (1)

2 unchanged sentences

Earn-out adjustments — (0.04) 0.04 NM

COVID-19 — 0.11 (0.11) NM

Non-core dispositions — (0.12) 0.12 NM

Impairment of goodwill — 0.29 (0.29) NM

Employee Retention Credits (0.08) — (0.08) NM

Other income (0.28) — (0.28) NM

Non-recurring tax items — (0.43) 0.43 NM

3 unchanged sentences

GAAP financial measure

Operating income increased $37.6 million in fiscal 2021 compared to fiscal 2020.

Our operating income reflects net gains of $3.3 million and $15.0 million related to changes in the estimated fair value of contingent earn-out liabilities in fiscal 2021 and 2020, respectively.

The net gain in fiscal 2020 was partially offset by the related compensation charges of $1.6 million.

These gains are described below under "Fiscal 2021 and 2020 Earn-Out Adjustments." Our operating income in fiscal 2020 was reduced by the previously described non-recurring charges of $8.2 million to address COVID-19.

In addition, our fiscal 2020 results include gains from the sales of non-core equipment of $8.5 million related to the disposal of our Canadian turn-key pipeline activities.

Further, our fiscal 2020 operating income reflects a non-cash goodwill impairment charge of $15.8 million, which is described below under "Fiscal 2020 and 2019 Impairment of Goodwill."

Excluding these items, our adjusted operating income increased $32.2 million, or 13.2%, in fiscal 2021 compared to fiscal 2020.

The increase reflects improved results in our GSG and CIG segments, which are described below under "Government Services Group" and "Commercial/International Services Group", respectively.

Our net interest expense w as $11.8 million and $13.1 million in fiscal 2021 and 2020, respectively.

The decrease primarily reflects lower average borrowings.

Operating income increased $61.7 million, or 22.2%, in fiscal 2022 compared to fiscal 2021.

The fiscal 2022 results included the benefit of ERC's totaling $6.5 million, 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 in 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 "Net cash provided by operating activities" in our Consolidated Statement of Cash Flows for fiscal 2022, consistent with the presentation of the related costs recognized in the second quarter of fiscal 2020.

Excluding the ERC's and the contributions from acquisitions, which did not have comparable results in fiscal 2021, our adjusted operating income increased $31.5 million, or 11.5% in fiscal 2022 compared to fiscal 2021.

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.

Our net interest expense was $11.6 million and $11.8 million in fiscal 2022 and 2021, respectively.

The decrease primarily reflects lower average year-over-year borrowings, partially offset by higher borrowing rates.

The effective tax rates for fiscal 2022 and 2021 were 24.5% and 12.8%, respectively.

Our fiscal 2021 effective tax rate reflects 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 sustainable profitability being achieved in fiscal 2021.

The valuation allowances were primarily related to net operating loss carry-forwards and other temporary differences.

The goodwill impairment charge in fiscal 2020 did not have related tax benefits, which increased our effective tax rate by 1.5% in fiscal 2020.

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

Excluding the impact of the fiscal 2021 non-recurring tax items, the non-deductible goodwill impairment charge, and the excess tax benefits on share-based payments, our effective tax rates in fiscal 2021 and 2020 were 25.7% and 25.6%, respectively.

Our EPS was $4.26 in fisc al 2021, compared to $3.16 in fiscal 2020.

On the same basis as our adjusted operating income and excluding non-recurring tax benefits in fiscal 2021, EPS was $3.79 in fiscal 2021, compared to $3.26 last fiscal year.

The fiscal 2021 effective tax rate reflects a non-recurring net tax benefit of $21.6 million, primarily consisting of a valuation allowance in the United Kingdom that was released due to sufficient sustainable profitability being achieved in fiscal 2021.

The valuation allowance was primarily related to net operating loss carry-forwards.

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

Also, i ncome tax expense was reduced by $10.3 million and $12.9 million of excess tax benefits on share-based payments in fiscal 2022 and 2021, respectively.

Excluding the impact of the fiscal 2021 valuation allowance benefit, the fiscal 2021 Canadian repatriation and the excess tax benefits on share-based payments in both fiscal years, our effective tax rates for fiscal 2022 and 2021 were 27.5% and 25.7%, respectively.

Our EPS was $4.86 in fiscal 2022, compared to $4.26 in fiscal 2021.

Excluding the aforementioned non-operating and non-recurring items, our adjusted EPS was $4.50 in fiscal 2022, compared to $3.79 last fiscal year, an increase of 18.7%.

Segment Results of Operations

1 unchanged sentence

Fiscal Year Ended

2021 September 27,

2022 October 3,

($ in thousands)

3 unchanged sentences

Income from operations $ 198,448 $ 174,755 $ 23,693 13.6%

Revenue and revenue, net of subcontractor costs, increased $164.0 million, or 9.2%, and $120.3 million, or 9.3%, respectively, in fiscal 2021 compared to fiscal 2020.

These increases primarily reflect higher U.S.

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

The increases also reflect contributions from acquisitions, which did not have comparable revenue in the prior fiscal year.

Operating income increased $26.6 million in fiscal 2021 compared to fiscal 2020 primarily reflecting the revenue growth.

In addition, we incurred $1.6 million of incremental costs for actions to respond to the COVID-19 pandemic in the second quarter of fiscal 2020.

Our operating margin, based on revenue, net of subcontractor costs, improved to 13.7% in fiscal 2021 compared to 13.0% last fiscal year.

Excluding the COVID-19 charges, our operating margin was 13.1% in fiscal 2020.

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

Revenue and revenue, net of subcontractor costs, increased $48.0 million, or 2.7%, and increased $70.7 million, or 5.6%, respectively, in fiscal 2022 compared to fiscal 2021.

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 $23.7 million in fiscal 2022 compared to fiscal 2021.

The fiscal 2022 results included $4.4 million of the aforementioned ERC's.

Excluding this benefit, operating income increased 11.0% in fiscal 2022 compared to last fiscal year.

Our operating margin, based on revenue, net of subcontractor costs, improved to 14.8% in fiscal 2022 compared to 13.8% in fiscal 2021.

Excluding the ERC's, our op erating margin was 14.5% in fiscal 2022.

The improved operating margin in fiscal 2022 was primarily due to our increased focus on high-end consulting services, including digital water, and improved labor utilization.

Commercial/International Services Group ("CIG")

Fiscal Year Ended

2021 September 27,

2022 October 3,

($ in thousands)

4 unchanged sentences

Revenue and revenue, net of subcontractor costs, increased $238.4 million, or 15.9%, and increased $213.3 million, or 16.6%, respectively, in fiscal 2022 compared to fiscal 2021.

The revenue growth in fiscal 2021 primarily reflects increased infrastructure activity in Canada and fewer restrictions related to the COVID-19 pandemic in the second half of fiscal 2021 .

The increases also reflect contributions from acquisitions, which did not have comparable revenue in the prior fiscal year, partially offset by the disposal of our Canadian turn-key pipeline activities.

Operating income increased $17.7 million in fiscal 2021 compared to fiscal 2020 primarily due to revenue growth.

Additionally, we realized gains of $8.5 million from the disposition of non-core equipment related to our Canadian turn-key pipeline activities, partially offset by $6.6 million of incremental costs for actions to respond to the COVID-19 pandemic in fiscal 2020.

Excluding these disposition gains and the COVID-19 charges, operating income increased $19.6 million in fiscal 2021 compared to fiscal 2020.

Our operating margin, based on revenue, net of subcontractor costs, improved to 11.6% in fiscal 2021 compared to 10.9% last fiscal year.

Excluding the disposition gains and COVID-19 charges, our operating margin was 10.7% in fiscal 2020.

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

The revenue growth primarily reflects increased 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, the fiscal 2022 revenue included contributions from acquisitions, which did not have comparable revenue in fiscal 2021.

Operating income increased $41.9 million in fiscal 2022 compared to fiscal 2021.

The fiscal 2022 operating income included $1.9 million of the aforementioned ERC's.

Excluding this benefit, operating income increased 26.2% in fiscal 2022 compared to last fiscal year.

Our operating margin, based on revenue, net of subcontractor costs, improved to 13.0% in fiscal 2022 compared to 11.8% in fiscal 2021.

Excluding the ERC's, o ur operating margin was 12.8% for fiscal 2022.

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

Remediation and Construction Management ("RCM")

Fiscal Year Ended

2021 September 27,

($ in thousands)

Revenue $ 613 $ 198 $ 415 NM

Subcontractor costs (25) (221) 196 NM

Revenue, net of subcontractor costs $ 588 $ (23) $ 611 NM

Loss from operations $ — $ — $ — NM

NM = not meaningful

RCM's projects were substantially complete at the end of fiscal 2018.

There were no significant operating activities in RCM in fiscal 2021 and 2020.

Fiscal 2021 and 2020 Earn-Out Adjustments

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.

We recorded adjustments to our contingent earn-out liabilities and reported net gains of $3.3 million and $15.0 million in fiscal 2021 and 2020, respectively.

Fiscal 2021 adjustments resulted from the updated valuations of several contingent consideration liabilities, which reflect updated projections of acquired companies' financial performance during their respective earn-out periods.

None of these valuation changes were individually material.

In fiscal 2020, the net gains primarily resulted from updated valuations of the contingent consideration liabilities for eGlobalTech ("EGT"), Norman, Disney and Young ("NDY"), and Segue Technologies, Inc.

These valuations included updated projections of EGT's, NDY's, and SEG's financial performance during the earn-out periods, which were below our original estimates at their respective acquisition dates.

In addition, we recognized charges of $1.6 million in fiscal 2020 that related to the earn-out for Glumac.

These charges were treated as compensation in selling, general and administrative expenses due to the terms of the arrangement, which included an on-going service requirement for a portion of the earn-out.

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

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

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

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

There were no significant operating activities in RCM for fiscal 2022 and 2021.

Fiscal 2021 Compared to Fiscal 2020

1 unchanged sentence

Fiscal Year Ended

September 27,

2021 September 27, 2020 Change

7 unchanged sentences

Selling, general and administrative expenses (222,972) (204,615) (18,357) (9.0)

Acquisition and integration expenses — (10,351) 10,351 NM

Contingent consideration – fair value adjustments 14,971 (1,085) 16,056 NM

Impairment of goodwill (15,800) (7,755) (8,045) (103.7)

Contingent consideration – fair value adjustments 3,273 14,971 (11,698) (78.1)

Impairment of goodwill — (15,800) 15,800 NM

Income from operations 278,701 241,091 37,610 15.6

8 unchanged sentences

GAAP financial measure, enhances investors' ability to analyze our business trends and performance because it substantially measures the work performed by our employees.

In the course of providing services, we routinely subcontract various services and, under certain USAID programs, issue grants.

In the course of providing services, we routinely subcontract various services and, under certain international development programs, issue grants.

Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with U.S.

3 unchanged sentences

NM = not meaningful

In fiscal 2020, revenue and revenue, net of subcontractor costs, decreased $112.5 million, or 3.6%, and $41.1 million, or 1.7%, compared to fiscal 2019.

These comparisons were impacted by the disposal of our Canadian turn-key pipeline activities in the fourth quarter of fiscal 2019 and a decrease in revenue from disaster response activities related to California wildfires.

In addition, our fiscal 2019 results included a reduction of revenue of $13.7 million from a claim that was resolved in fiscal 2019.

Excluding the disposal, the decreased California wildfire activity, and the 2019 claim resolution, our revenue increased 3.0% in fiscal 2020 compared to fiscal 2019.

This increase includes $210.5 million of revenue from acquisitions, which did not have comparable revenue in fiscal 2019.

Also excluding the contribution from acquisitions, our revenue in fiscal 2020 decreased 4.4% compared to fiscal 2019 primarily due to the adverse impact of the COVID-19 pandemic on our U.S.

commercial and international revenue.

In fiscal 2021 , revenue and revenue, net of subcontractor costs, increased $218.6 million, or 7.3%, and $203.6 million, or 8.7%, respectively, compared to fiscal 2020.

Excluding the net contributions from acquisitions and the impact of the disposal of our Canadian turn-key pipeline activities, our revenue increased 3.2% in fiscal 2021 compared to fiscal 2020.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $194.6 million, or 12.3%, and $148.3 million, or 13.3%, respectively, in fiscal 2021 compared to fiscal 2020.

Our CIG segment's revenue increased $29.0 million, or 2.0%, and revenue, net of subcontractor costs, increased $54.7 million, or 4.4% in fiscal 2021 compared to fiscal 2020.

Our fiscal 2021 results for our GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Services Group", respectively.

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

GAAP adjusted results, which exclude the RCM results and certain non-operating accounting-related adjustments, such as acquisition and integration costs, gains/losses from adjustments to contingent considerations, goodwill impairment charges, non-recurring costs to address COVID-19, and non-recurring tax benefits.

Adjusted results also exclude charges resulting from the decision to dispose of our Canadian turn-key pipeline activities that commenced in the fourth quarter of fiscal 2019 and subsequent related gains from non-core equipment disposals in fiscal 2020.

Our fiscal 2019 adjusted results exclude a charge to operating income of $13.7 million from a claim that was resolved in the fourth quarter of fiscal 2019 for a remediation project, where the work was substantially performed in prior years.

The effective tax rates applied to these adjustments to EPS to arrive at adjusted EPS averaged 155% and 16% in fiscal 2020 and 2019, respectively.

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

Excluding these items, the effective tax rates applied to the adjustments in fiscal 2020 and 2019 were 24% and 26%, respectively.

The gains on non-core dispositions in fiscal 2020 relate to the disposal of our Canadian turn-key pipeline activities that commenced in the fourth quarter of fiscal 2019.

The goodwill impairment charge in fiscal 2020 did not have related tax benefits.

Excluding this charge, the effective tax rates applied to the adjustments to earnings per share ("EPS") to arrive at adjusted EPS averaged 25% and 24% for fiscal 2021 and 2020, respectively.

We applied the relevant marginal statutory tax rate based on the nature of the adjustments and tax jurisdiction in which they occur.

1 unchanged sentence

During the second quarter of fiscal 2020, we took actions in response to the COVID-19 pandemic to ensure the health and safety of our employees, clients and communities.

These actions included activating our Business Continuity Plan globally, which enabled 95% of our workforce to work remotely and all 450 of our global offices to remain operational supporting our clients' programs and projects.

This required incremental costs for employee relocation, expansion of our virtual private network capabilities, enhanced security, and sanitizing our offices.

This required incremental costs for employee relocation, expansion of our virtual private network capabilities, enhanced security and sanitizing of our offices.

In addition, we incurred severance costs to right-size select operations where projects were cancelled specifically due to COVID-19 concerns and the resulting macroeconomic conditions.

These incremental costs totaled $8.2 million in the second quarter of fiscal 2020.

Substantially all of these costs were paid in cash in the third quarter of fiscal 2020.

Although the charges were recognized in the second quarter of fiscal 2020, substantially all of these costs were paid in cash in the third quarter of fiscal 2020.

Some of these costs were related to the $6.5 million benefit of ERC's, which were applied for in fiscal 2020 and subsequently received and recognized in fiscal 2022.

Fiscal Year Ended

September 27,

2021 September 27, 2020 Change

Income from operations $ 278,701 $ 241,091 $ 37,610 15.6

Earn-out adjustments (3,273) (13,371) 10,098 NM

COVID-19 — 8,233 (8,233) NM

Non-core dispositions — (8,525) 8,525 NM

RCM — 5,933 (5,933) NM

Claims — 13,700 (13,700) NM

Acquisition/Integration — 10,351 (10,351) NM

Earn-out adjustments (13,371) 3,085 (16,456) NM

Impairment of goodwill — 15,800 (15,800) NM

2 unchanged sentences

EPS $ 4.26 $ 3.16 $ 1.10 34.8

Earn-out adjustments (0.04) (0.18) 0.14 NM

COVID-19 — 0.11 (0.11) NM

Non-core dispositions — (0.12) 0.12 NM

RCM — 0.08 (0.08) NM

Claims — 0.18 (0.18) NM

Acquisition/Integration — 0.19 (0.19) NM

Earn-out adjustments (0.18) 0.04 (0.22) NM

Impairment of goodwill — 0.29 (0.29) NM

4 unchanged sentences

GAAP financial measure

Our operating income increased $52.3 million in fiscal 2020 compared to fiscal 2019.

Our operating income in fiscal 2020 was reduced by the previously described non-recurring charges of $8.2 million to address COVID-19.

Operating income increased $37.6 million in fiscal 2021 compared to fiscal 2020.

Our operating income reflects net gains of $3.3 million and $15.0 million related to changes in the estimated fair value of contingent earn-out liabilities in fiscal 2021 and 2020, respectively.

The net gain in fiscal 2020 was partially offset by the related compensation charges of $1.6 million.

In addition, our fiscal 2020 results include gains from the sales of non-core equipment of $8.5 million related to the disposal of our Canadian turn-key pipeline activities.

Our operating income in fiscal 2019 included charges of $10.9 million related to this disposal.

Our operating income in fiscal 2019 also included a $5.9 million loss from exited construction activities in our RCM segment.

Our RCM results are described below under "Remediation and Construction Management." Additionally, our operating income in fiscal 2019 included the aforementioned $13.7 million charge for a resolved claim and expenses of $10.4 million related to the acquisition and integration of WYG plc ("WYG").

For further detailed information regarding the WYG-related costs, see " Fiscal 2019 Acquisition and Integration Expenses" below.

Ou r fiscal 2020 operating income includes gains of $15.0 million related to changes in the estimated fair value of contingent earn-out liabilities partially offset by related compensation charges of $1.6 million.

Our fiscal 2019 operating income reflects losses of $1.1 million related to changes in the estimated fair value of contingent earn-out liabilities and an additional $2.0 million of related compensation charges.

These earn-out related amounts are described below under "Fiscal 2020 and 2019 Earn-Out Adjustments." Further, our operating income reflects non-cash goodwill impairment charges of $15.8 million and $7.8 million in fiscal 2020 and 2019, respectively.

These charges are described below under "Fiscal 2020 and 2019 Impairment of Goodwill."

Further, our fiscal 2020 operating income reflects a non-cash goodwill impairment charge of $15.8 million, which is described below under "Fiscal 2020 Impairment of Goodwill."

Excluding these items, our adjusted operating income increased $32.2 million, or 13.2%, in fiscal 2021 compared to fiscal 2020.

The increase reflects improved results in our CIG segment partially offset by lower operating income in our GSG segment.

GSG and CIG results are described below under "Government Services Group" and "Commercial/International Services Group", respectively.

Our net interest expense was $13.1 million in fiscal 2020 compared to $13.6 million fiscal 2019.

The decrease primarily reflects lower interest rates (primarily LIBOR), and to a lesser extent, lower average borrowings.

The increase reflects improved results in our GSG and CIG segments, which are described below under "Government Services Group" and "Commercial/International Services Group", respectively.

Our net interest expense w as $11.8 million and $13.1 million in fiscal 2021 and 2020, respectively.

The decrease primarily reflects lower average borrowings.

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

The goodwill impairment charges in fiscal 2020 and 2019 and certain of the transaction charges in fiscal 2019 did not have related tax benefits, which increased our effective tax rates by 1.5% and 1.1% in fiscal 2020 and 2019, respectively.

Our fiscal 2021 effective tax rate reflects the aforementioned non-recurring net tax benefit of $21.6 million primarily consisting of a valuation allowance in the United Kingdom.

The goodwill impairment charge in fiscal 2020 did not have related tax benefits, which increased our effective tax rate by 1.5% in fiscal 2020.

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

Additionally, we finalized the analysis of our deferred tax liabilities for the Tax Cuts and Jobs Act's ("TCJA's") lower tax rates

in the first quarter of fiscal 2019 and recorded a deferred tax benefit of $2.6 million.

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.

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 and 2019 were 25.6% and 24.6%, respectively.

Our EPS was $3.16 in fiscal 2020, compared to $2.84 in fiscal 2019.

On the same basis as our adjusted operating income and excluding non-recurring tax benefits in fiscal 2019, EPS was $3.26 in fiscal 2020, compared to $3.17 in fiscal 2019.

Excluding the impact of the fiscal 2021 non-recurring tax items, the non-deductible goodwill impairment charge and the excess tax benefits on share-based payments, our effective tax rates in fiscal 2021 and 2020 were 25.7% and 25.6%, respectively.

Our EPS was $4.26 in fisc al 2021, compared to $3.16 in fiscal 2020.

On the same basis as our adjusted operating income and excluding non-recurring tax benefits in fiscal 2021, EPS was $3.79 in fiscal 2021, compared to $3.26 fiscal 2020, an increase of 16.3%.

Segment Results of Operations

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Fiscal Year Ended

September 27,

2021 September 27, 2020 Change

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Income from operations $ 174,755 $ 146,273 $ 28,482 19.5

Revenue and revenue, net of subcontractor costs, decreased $41.7 million, or 2.3%, and $29.3 million, or 2.2%, respectively, in fiscal 2020 compared to fiscal 2019.

These declines primarily reflect the previously described decrease in revenue from disaster response activities related to California wildfires offset by revenue from acquisitions, which did not have comparable revenue in fiscal 2019.

Excluding the contributions from acquisitions and the California wildfire disaster response activities, our revenue in fiscal 2020 was substantially the same as fiscal 2019 as increases in federal information technology activity were offset by lower international development revenue.

Operating income decreased $16.6 million in fiscal 2020 compared to fiscal 2019 primarily reflecting the lower disaster response revenue.

Also, we incurred $1.6 million of incremental costs for actions to respond to the COVID-19 pandemic in the second quarter of fiscal 2020.

Our operating margin, based on revenue, net of subcontractor costs, was 13.0% in fiscal 2020 compared to 13.9% in fiscal 2019.

Revenue and revenue, net of subcontractor costs, increased $194.6 million, or 12.3%, and $148.3 million, or 13.3%, respectively, in fiscal 2021 compared to fiscal 2020.

These increases primarily reflect higher U.S.

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

The increases also reflect contributions from acquisitions, which did not have comparable revenue in fiscal 2020.

Operating income increased $28.5 million in fiscal 2021 compared to fiscal 2020 primarily reflecting the revenue growth.

In addition, we incurred $1.6 million of incremental costs for actions to respond to the COVID-19 pandemic in the second quarter of fiscal 2020.

Our operating margin, based on revenue, net of subcontractor costs, improved to 13.8% in fiscal 2021 compared to 13.1% fiscal 2020.

Excluding the COVID-19 charges, our operating margin was 13.2% in fiscal 2020.

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

Commercial/International Services Group ("CIG")

Fiscal Year Ended

September 27,

2021 September 27, 2020 Change

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Income from operations $ 152,262 $ 136,418 $ 15,844 11.6

Revenue and revenue, net of subcontractor costs, decreased $76.5 million, or 5.7%, and $14.5 million, or 1.4%, respectively, in fiscal 2020 compared to fiscal 2019.

Our year-over-year revenue comparisons were impacted by the disposal of our Canadian turn-key pipeline activities in the fourth quarter of fiscal 2019, and a reduction in revenue and a corresponding charge to operating income of $13.7 million in fiscal 2019 for a remediation project where the work was substantially

performed in prior years.

Excluding the disposal and t he fiscal 2019 claim resolution, our revenue decreased 2.2% due to lower subcontractor activity and the adverse impact of the COVID-19 pandemic on our U.S.

and international commercial revenue.

Operating income increased $34.4 million in fiscal 2020 compared to fiscal 2019.

This comparison was also impacted by the disposal of our Canadian turn-key pipeline activities.

Our fiscal 2020 operating income includes gains of $8.5 million from the disposition of non-core equipment and our fiscal 2019 operating income includes charges of $10.9 million related to these activities.

In addition, we incurred $6.6 million of incremental costs for actions to respond to the COVID-19 pandemic in the second quarter of fiscal 2020.

Excluding the Canadian turn-key pipeline activities, the COVID-19 charges, and the aforementioned $13.7 million claim in fiscal 2019, our operating income increased $7.9 million, or 7.5%, in fiscal 2020 compared to fiscal 2019.

On the same basis, our operating margin, based on revenue, net of subcontractor costs, improved to 10.7% in fiscal 2020 from 9.7% in fiscal 2019.

Revenue and revenue, net of subcontractor costs, increased $29.0 million, or 2.0%, and $54.7 million, or 4.4%, respectively, in fiscal 2021 compared to fiscal 2020.

The revenue growth in fiscal 2021 primarily reflects increased infrastructure activity in Canada and fewer restrictions related to the COVID-19 pandemic in the second half of fiscal 2021.

The increases also reflect contributions from acquisitions, which did not have comparable revenue in fiscal 2020, partially offset by the disposal of our Canadian turn-key pipeline activities.

Operating income increased $15.8 million in fiscal 2021 compared to fiscal 2020 primarily due to revenue growth.

Excluding these disposition gains and the COVID-19 charges, operating income increased $17.7 million in fiscal 2021 compared to fiscal 2020.

Our operating margin, based on revenue, net of subcontractor costs, improved to 11.8% in fiscal 2021 compared to 11.1% fiscal 2020.

Excluding the disposition gains and COVID-19 charges, our operating margin was 10.9% in fiscal 2020.

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

Remediation and Construction Management ("RCM")

Fiscal Year Ended

September 27,

2021 September 27, 2020 Change

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RCM's projects were substantially complete at the end of fiscal 2018.

The operating loss of $5.9 million in fiscal 2019 reflects reductions of revenue and related operating losses based on updated evaluations of unsettled claim amounts for two construction projects that were completed in prior years.

Fiscal 2019 Acquisition and Integration Expenses

In fiscal 2019, we incurred acquisition and integration expenses of $10.4 million related to the WYG acquisition.

These expenses included $3.3 million of acquisition expenses that were primarily for professional services, such as legal and investment banking, to support the transaction and were all paid in the fourth quarter of fiscal 2019.

Subsequent to the acquisition date, we also recorded charges of $7.1 million for integration activities, including the elimination of redundant general and administrative costs, real estate consolidation, and conversion of information technology platforms, substantially all of which were paid in fiscal 2020.

There were no significant operating activities in RCM in fiscal 2021 and 2020.

Fiscal 2021 and 2020 Earn-Out Adjustments

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.

We recorded adjustments to our contingent earn-out liabilities and reported net gains of $15.0 million and losses of $1.1 million in fiscal 2020 and 2019, respectively.

The fiscal 2020 net gains primarily resulted from updated valuations of the contingent consideration liabilities for EGT, NDY, and SEG.

We recorded adjustments to our contingent earn-out liabilities and reported net gains of $3.3 million and $15.0 million in fiscal 2021 and 2020, respectively.

None of these valuation changes were individually material.

These valuations included updated projections of EGT's, NDY's and SEG's financial performance during the earn-out periods, which were below our original estimates at their respective acquisition dates.

In addition, we recognized charges of $1.6 million and $2.0 million in fiscal 2020 and 2019, respectively, that related to the earn-out for Glumac.

In addition, we recognized charges of $1.6 million in fiscal 2020 that related to the earn-out for Glumac.

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

Of this amount, $32.6 million was estimated as the fair value and accrued on our consolidated balance sheet.

Fiscal 2020 and 2019 Impairment of Goodwill

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

Of this amount, $59.3 million was estimated as the fair value and accrued on our consolidated balance sheet at October 3, 2021.

Fiscal 2020 Impairment of Goodwill

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 Asia/Pacific ("ASP") reporting unit, which is in our CIG reportable segment.

That trend prompted a strategic review of our Asia/Pacific ("ASP") reporting unit, which was in our CIG reportable segment.

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

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 International Limited ("Coffey") and NDY.

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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 a strategic review of all operations.

As a result, we decided to dispose of our turn-key pipeline activities in Western Canada in our Remediation and Field Services ("RFS") reporting unit, which is in our CIG reportable segment.

As a result, we incurred severance and project-related charges related to the disposition of $10.9 million, which were reported in the CIG segment's operating income.

We also performed an interim goodwill impairment review of our RFS reporting unit and recorded a $7.8 million goodwill impairment charge.

The impaired goodwill related to our acquisition of Parkland Pipeline Contractors Ltd.

As a result of the impairment charge, the estimated fair value of the RFS reporting unit equaled its carrying value at September 29, 2019.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Capital Requirements.

As of October 3, 2021 , we h ad $166.6 million of cash and cash equivalents and access to an additional $749 million of borrowing capacity available under our credit facility.

As of October 2, 2022 , we h ad $185.1 million of cash and cash equivalents and access to an additional $784.3 million of borrowing available under our credit facility.

We generated $336.2 million of cash from operations in fiscal 2022.

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

Our primary sources of liquidity are cash flows from operations and borrowings under our credit facilities.

Our primary uses of cash are to fund working capital, capital expenditures, stock repurchases, cash dividends and repayment of debt, as well as to fund acquisitions and earn-out obligations from prior acquisitions.

We believe that our existing cash and cash equivalents, operating cash flows and borrowing capacity under our credit agreement, as described below, will be sufficient to meet our capital requirements for at least the next 12 months including any additional resources needed to address the COVID-19 pandemic.

Our primary uses of cash are to fund working capital, stock repurchases, cash dividends, capital expenditures and repayment of debt, as well as to fund acquisitions and earn-out obligations from prior acquisitions.

We believe that our existing cash and cash equivalents, operating cash flows and borrowing capacity under our credit agreement as amended in the anticipation of our planned acquisition of RPS in the second quarter of fiscal 2023, as described below, will be sufficient to meet our capital requirements for at least the next 12 months.

We use a variety of tax planning and financing strategies to manage our worldwide cash and deploy funds to locations where they are needed.

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 mill ion.

At that time, we also determined that our remaining undistributed earnings in Canada of approximately $20.1 million were no longer being indefinitely reinvested and recorded an additional deferred tax

liability/expense of $3.1 million.

Prospectively, from the date of the repatriation, our earnings in Canada are not considered indefinitely reinvested and any potential tax liability that would be incurred upon repatriation is recognized currently with the related income.

At October 2, 2022, undistributed earnings of our other foreign subsidiaries, primarily in Australia and the U.K.

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Assuming the indefinitely reinvested foreign earnings were repatriated under the laws and rates applicable at October 3, 2022, the incremental taxes applicable to those earnings would not be material.

We currently have no need or plans to repatriate undistributed foreign earnings, other than from Canada, in the foreseeable future;

however, this could change due to varied economic circumstances.

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

On October 5, 2021, our 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 fiscal 2022, we repurchased and settled 1,341,679 shares with an average price of $149.07 per share for a total cost of $200.0 million in the open market.

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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.

On November 7, 2022, our Board of Directors declared a quarterly cash dividend of $0.23 per share payable on December 9, 2022 to stockholders of record as of the close of business on November 21, 2022.

Cash and Cash Equivalents.

As of October 2, 2022, cash and cash equivalents were $185.1 million, an increase of $18.5 million compared to the fiscal 2021 year-end.

The increase was due to net cash provided by operating activities, partially offset by net repayments of long-term debt, stock repurchases, dividends, as well as payments for business acquisitions and contingent earn-out payments.

The increase was primarily due to net cash provided by operating activities, partially offset by stock repurchases, dividends, as well as payments for business acquisitions, contingent earn-outs and taxes on vested restricted stock.

Operating Activities.

In fiscal 2021, net cash provided by operating activities was $304.4 million compared to $262.5 million in fiscal 2020.

The increase primarily reflects an increase in earnings adjusted for non-cash items of $24.1 million and improved working capital from faster collections of our accounts receivable in fiscal 2021 compared to the prior fiscal year.

Cash provided by operating activities increased 10.5% from $304.4 million in fiscal 2021 to $336.2 million in fiscal 2022.

The increase primarily reflects higher earnings and improved working capital from faster collections of our receivables in fiscal 2022 compared to fiscal 2021.

Investing Activities.

Net cash used in investing activities was $93.0 million in fiscal 2021, an increase of $30.0 million compared to last fiscal year.

The increase was due to higher payments for business acquisitions in fiscal 2021 and the proceeds from sales of equipment related to the disposal of our Canadian turn-key pipeline activities in fiscal 2020.

Net cash used in investing activities was $55.7 million in fiscal 2022, a decrease of $37.3 million compared to fiscal 2021.

The decrease was primarily due to lower payments for business acquisitions completed in fiscal 2022 compared to last fiscal year.

Financing Activities.

In fiscal 2022, net cash used in financing activities was $249.6 million, an increase of $39.5 million compared to fiscal 2021.

The increase was due to the net change in overdrafts and higher net repayments on long-term debt, partially offset by lower stock repurchases compared to last fiscal year.

The increase was primarily due to higher stock repurchases.

Debt Financing.

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

The Amended Credit Agreement is a $700 million senior secured, five-year facility that provides for a $250 million term loan facility (the “Amended Term Loan Facility”), a $450 million revolving credit facility (the “Amended Revolving Credit Facility”), and a $300 million accordion feature that allows us to increase the Amended Credit Agreement to $1 billion subject to lender approval.

The Amended Credit Agreement allows us to, among other things, (i) refinance indebtedness under our Credit Agreement dated as of May 7, 2013;

(ii) finance certain permitted open market repurchases of our common stock, permitted acquisitions, and cash dividends and distributions;

On February 18, 2022, we entered into Amendment No.

2 to our Second Amended and Restated Credit Agreement (“Amended Credit Agreement”) with a total borrowing capacity of $1.05 billion that will mature in February 2027.

The Amended Credit Agreement is a $750 million senior secured, five-year facility that provides for a $250 million term loan facility (the “Amended Term Loan Facility”) and a $500 million revolving credit facility (the “Amended Revolving Credit Facility”).

In addition, the Amended Credit Agreement includes a $300 million accordion feature that allows us to increase the Amended Credit Agreement to $1.05 billion subject to lender approval.

The Amended Credit Agreement provides for, among other things, (i) refinance indebtedness under our Credit Agreement dated as of July 30, 2018;

(ii) finance open market repurchases of common stock, acquisitions and cash dividends and distributions;

and (iii) utilize the proceeds for working capital, capital expenditures and other general corporate purposes.

The Amended Credit Agreement provides for a reduction in the interest grid for meeting certain sustainability targets related to the (i) reduction of greenhouse gas emissions through the Company’s projects and operational sustainability initiatives and (ii) improvement of peoples’ lives as a result of the Company’s projects that provide environmental, social and governance benefits.

The Amended Revolving Credit Facility includes a $100 million sublimit for the issuance of standby letters of credit, a $20 million sublimit for swingline loans and a $300 million sublimit for multicurrency borrowings and letters of credit.

The entire Amended Term Loan Facility was drawn on July 30, 2018.

The Amended Term Loan Facility is subject to quarterly amortization of principal at 5% annually beginning December 31, 2018.

We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a Eurocurrency rate plus a margin that ranges from 1.00% to 1.75% per annum, or (b) a base rate for loans in U.S.

The entire Amended Term Loan Facility was drawn on February 18, 2022.

The Amended Term Loan Facility is subject to quarterly amortization of principal at 5% annually commencing June 30, 2022.

We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000% to 1.875% per annum, or (b) a base rate for loans in U.S.

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 Secured Overnight Financing Rate ("SOFR") rate plus 1.00%, plus a margin that ranges from 0% to 0.875% per annum.

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

The Amended Term Loan Facility is subject to the same interest rate provisions.

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

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%.

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

At October 2, 2022, we had $258.8 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $243.8 million under the Amended Term Loan Facility and $15.0 million under the Amended Revolving Credit Facility.

The year-to-date weighted-average interest rate of the outstanding borrowings during fiscal 2022 was 1.97%.

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

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%.

Our year-to-date weighted-average interest rate on borrowings outstanding during fiscal 2022 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 3.60%.

At October 2, 2022, we had $484.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

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The financial covenants provide for a maximum Consolidated Leverage Ratio of 3.25 to 1.00 (total funded debt/EBITDA, as defined in the Amended Credit Agreement) and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 (EBITDA/Consolidated Interest Charges, as defined in the Amended Credit Agreement).

Our obligations under the Amended Credit Agreement are guarant eed 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.

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 October 2, 2022, we were in compliance with these covenants with a consolidated leverage ratio of 0.76x and a consolidated interest coverage ratio of 29.52x.

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 October 3, 2021, there was no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $53.4 million.

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 October 2, 2022, there were no outstanding borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $44.4 million.

As of October 2, 2022, we had no bank overdrafts related to our disbursement bank accounts.

Subsequent Event.

On October 26, 2022, we entered into a Third Amended and Restated Credit Agreement that provides for an additional $500 million senior secured term loan facility (the "New Term Loan Facility") increasing our total borrowing capacity to $1.55 billion.

We expect to draw the entire amount of the New Term Loan Facility to partially finance the planned acquisition of RPS.

The remaining purchase price is expected to be financed with existing cash on hand and borrowings under the existing Amended Revolving Credit Facility.

The New Term Loan Facility is not subject to any amortization payments of principal and matures on the third anniversary of the RPS acquisition closing date.

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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(in thousands) Payment Date

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

November 15, 2021 $ 0.20 December 2, 2021 $ 10,793 December 20, 2021

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

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

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

November 15, 2021 $ 0.20 December 2, 2021 N/A December 20, 2021

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

August 1, 2022 $ 0.23 August 12, 2022 $ 12,226 August 26, 2022

November 7, 2022 $ 0.23 November 21, 2022 N/A December 9, 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 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 October 3, 2021 and September 27, 2020, the liability for income taxes associated with uncertain tax positions was $14.1 million and $9.7 million, respectively.

As of October 2, 2022 and October 3, 2021, the liability for income taxes associated with uncertain tax positions was $10.6 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.

These changes would be the result of ongoing examinations.

These liabilities represent our current estimates of the additional tax liabilities that we may be assessed when the related audits are concluded.

If these audits are resolved in a manner more unfavorable than our current expectations, our additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.

Off-Balance Sheet Arrangements

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Our Amended Credit Agreement and additional letter of credit facilities cover the issuance of our standby letters of credit and bank guarantees and are critical for our normal operations.

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.

If we default on t he 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 October 2, 2022, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $44.4 million in standby letters of credit outstanding under our additional letter of credit facilities.

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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 an d construction contrac ts.

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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Remaining billable amounts could be greater or less than the cost to complete.

In those cases where costs exceed the

remaining amounts payable under the contract, we may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors, for claims.

In those cases where costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors, for claims.

• In the ordinary course of business, our clients may request that we obtain surety bonds in connection with contract performance obligations that are not required to be recorded in our consolidated balance sheets.

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To determine the proper revenue recognition method for contracts under ASC 606, we evaluate whether multiple contracts should be combined and accounted for as a single contract and whether the combined or single contract should be accounted for as having more than one performance obligation.

The decision to combine a group of contracts or separate a combined or single contract into multiple performance obligations may impact the amount of revenue recorded in a given period.

The decision to combine a group of contracts or separate a combined or single contract into multiple performance obligations may impact the amount of revenue recorded in a given

Contracts are considered to have a single performance obligation if the promises are not separately identifiable from other promises in the contracts.

At contract inception, we assess the goods or services promised in a contract and identify, as a separate performance obligation, each distinct promise to transfer goods or services to the customer.

The identified performance obligations represent the “unit of account” for purposes of determining revenue recognition.

The identified performance obligations represent the “units of account” for purposes of determining revenue recognition.

In order to properly identify separate performance obligations, we apply judgment in determining whether each good or service provided is:

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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.

Factors considered in determining whether revenue associated with

claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized include the following:

Factors considered in determining whether revenue associated with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized include the following:

(a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in our performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable.

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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.

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.

When the current estimate of total costs indicates a loss, a provision for the entire estimated loss on the contract is made in the period in which the loss becomes evident.

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We record in our consolidated balance sheets amounts representing our estimated liability for self-insurance claims.

We utilize actuarial analyses to assist in determining the level of accrued liabilities to establish for our employee medical and workers' compensation self-insurance claims that are known and have been asserted against us, as well as for self-insurance claims that are believed to have been incurred based on actuarial analyses but have not yet been reported to our claims

administrators at the balance sheet date.

We include any adjustments to such insurance reserves in our consolidated statements of income.

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In addition, we regularly evaluate whether events and circumstances have occurred that may indicate a potential change in recoverability of goodwill.

We perform interim goodwill impairment reviews between our annual reviews if certain events and circumstances have occurred, including a deterioration in general economic conditions, an increased competitive environment, a change in management, key personnel, strategy or customers, negative or declining cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods (se e Note 6, "Goodwill and Intangible Assets" of the "Notes to Consolidated Financial Statements" in Item 8 for further discussion).

management, key personnel, strategy or customers, negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods (se e Note 6, "Goodwill and Intangible Assets" of the "Notes to Consolidated Financial Statements" in Item 8 for further discussion).

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.

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The Income Approach was given a higher weight because it has the most direct correlation to the specific economics of the reporting unit, as compared to the Market Approach, which is based on multiples of broad-based (i.e., less comparable) companies .

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

Our last review at July 4, 2022 (i.e.

the first day of our fourth quarter in fiscal 2022), 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.

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This prompted a strategic review of our ASP reporting unit, which is in our CIG reportable segment.

That trend prompted a strategic review of our Asia/Pacific ("ASP") reporting unit, which was in our CIG reportable segment.

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

As a result of the impairment charge, the estimated fair value of our ASP reporting unit equals its carrying value of $144.9 million, including $95.5 million of goodwill, at September 27, 2020 .

As a result of the impairment charge, the estimated fair value of our ASP reporting unit equaled its carrying value of $144.9 million, including $95.5 million of goodwill, at September 27, 2020 .

On September 28, 2020 (the first day of our fiscal 2021), we merged our 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 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.

Contingent Consideration

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Based on our assessment, we have concluded that a portion of the deferred tax assets at October 2, 2022, primarily loss carryforwards, will not be realized, and we have reserved accordingly.

In fiscal 2022, the Inflation Reduction Act and the CHIPS and Science Act were signed into law.

These Acts both contain new U.S.

income tax provisions;

however, we do not expect them to have a material impact on our consolidated financial statements.

According to the authoritative guidance on accounting for uncertainty in income taxes, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

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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 7. Management’s Discussion and Analysis