What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-05-11 · 110 added, 133 removed, 593 unchanged (29% of the section changed)

3 unchanged sentences

(unaudited - in thousands, except par value)

ASSETS April 2,

ASSETS July 2,

2023 October 2,

29 unchanged sentences

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

no shares issued and outstanding at April 2, 2023 and October 2, 2022

no shares issued and outstanding at July 2, 2023 and October 2, 2022

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

issued and outstanding, 53,228 and 52,981 shares at April 2, 2023 and October 2, 2022, respectively

issued and outstanding, 53,243 and 52,981 shares at July 2, 2023 and October 2, 2022, respectively

Additional paid-in capital 17,906 —

9 unchanged sentences

(unaudited – in thousands, except per share data)

Three Months Ended Six Months Ended

2023 April 3,

2022 April 2,

2023 April 3,

Three Months Ended Nine Months Ended

Revenue $ 1,208,947 $ 890,231 $ 3,261,938 $ 2,601,485

23 unchanged sentences

(unaudited – in thousands)

Three Months Ended Six Months Ended

2023 April 3,

2022 April 2,

2023 April 3,

Three Months Ended Nine Months Ended

Net income $ 60,238 $ 58,657 $ 219,794 $ 180,205

12 unchanged sentences

(unaudited – in thousands)

Six Months Ended

2023 April 3,

Nine Months Ended

Cash flows from operating activities:

7 unchanged sentences

Fair value adjustments to contingent consideration 8,477 ( 64 )

Loss on sale of property and equipment 32 178

(Gain) loss on sale of assets ( 310 ) 93

Fair value adjustments to foreign currency forward contract ( 89,402 ) —

25 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 12,410 ( 4,403 )

Net increase in cash and cash equivalents 46,294 27,810

Net (decrease) increase in cash and cash equivalents ( 9,038 ) 50,816

Cash and cash equivalents at beginning of period 185,094 166,568

5 unchanged sentences

$ 54,967 $ 49,131

Supplemental disclosures on non-cash investing activities:

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

See Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Stockholders' Equity

Three Months Ended April 3, 2022 and April 02, 2023

Three Months Ended July 3, 2022 and July 02, 2023

(unaudited – in thousands)

7 unchanged sentences

Shares Amount

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

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

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

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

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

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

Cash dividends of $ 0.23 per common share

2 unchanged sentences

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

Stock options exercised 9 — 244 244 244

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

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

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

BALANCE AT APRIL 2, 2023 53,228 $ 532 $ 10,639 $ ( 181,381 ) $ 1,525,809 $ 1,355,599 $ 69 $ 1,355,668

BALANCE AT JANUARY 1, 2023 53,226 $ 532 $ 3,281 $ ( 175,126 ) $ 1,495,221 $ 1,323,908 $ 59 $ 1,323,967

Net income 60,235 60,235 3 60,238

5 unchanged sentences

Stock options exercised 12 — 334 334 334

BALANCE AT APRIL 2, 2023 53,228 $ 532 $ 10,639 $ ( 181,381 ) $ 1,525,809 $ 1,355,599 $ 69 $ 1,355,668

BALANCE AT JULY 2, 2023 53,243 $ 532 $ 17,906 $ ( 137,926 ) $ 1,572,204 $ 1,452,716 $ 73 $ 1,452,789

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Six Months Ended April 3, 2022 and April 02, 2023

Nine Months Ended July 3, 2022 and July 02, 2023

(unaudited – in thousands)

9 unchanged sentences

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

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

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

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

6 unchanged sentences

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

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

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

BALANCE AT OCTOBER 2, 2022 52,981 $ 530 $ — $ ( 208,144 ) $ 1,390,701 $ 1,183,087 $ 50 $ 1,183,137

7 unchanged sentences

Shares issued for Employee Stock Purchase Plan 98 1 12,627 12,628 12,628

BALANCE AT APRIL 2, 2023 53,228 $ 532 $ 10,639 $ ( 181,381 ) $ 1,525,809 $ 1,355,599 $ 69 $ 1,355,668

BALANCE AT JULY 2, 2023 53,243 $ 532 $ 17,906 $ ( 137,926 ) $ 1,572,204 $ 1,452,716 $ 73 $ 1,452,789

See Notes to Consolidated Financial Statements.

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

Certain prior year amounts have been reclassified to conform to the current year presentation.

Certain prior year amounts have been reclassified to conform to the current year presentation in the accompanying notes.

Recent Accounting Pronouncements

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

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

ASU 2021-10 was effective for us beginning in the first quarter of fiscal 2023.

In fiscal 2020, the Canadian federal government implemented the Canadian Emergency Wage Subsidy ("CEWS") program in response to the negative impact of the coronavirus disease 2019 (" COVID-19") pandemic on businesses operating in Canada.

Our Canadian legal entities qualified for and applied for these CEWS cash benefits to partially offset the impacts of revenue reductions and on-going staffing costs.

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The following tables present revenue disaggregated by client sector and contract type (in thousands):

Three Months Ended Six Months Ended

2023 April 3,

2022 April 2,

2023 April 3,

Three Months Ended Nine Months Ended

Client Sector:

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Other than the U.S.

federal government, no single client accounted for more than 10% of our revenue for the three and six months ended April 2, 2023 and April 3, 2022.

federal government, no single client accounted for more than 10% of our revenue for the three and nine months ended July 2, 2023 and July 3, 2022.

Contract Assets and Contract Liabilities

15 unchanged sentences

Net contract liabilities $ ( 225,688 ) $ ( 148,935 )

(1) Inclu des $ 13.0 million and $ 23.3 million of contract retentions at April 2, 2023 and October 2, 2022, respectively.

In the first half of fiscal 2023 and 2022, we recognized revenue of approximately $ 121 million and $ 93 million, respectively, from the amounts included in the contract liability balances at the end of fiscal 2022 and 2021, respectively.

(1) Inclu des $ 8.1 million and $ 23.3 million of contract retentions at July 2, 2023 and October 2, 2022, respectively.

In the first nine months of fiscal 2023 and 2022, we recognized revenue of approximately $ 143 million and $ 111 million, respectively, from the amounts included in the contract liability balances at the end of fiscal 2022 and 2021, respectively.

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

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

As a res ult, we recognized net

favorable revenue and operating income adjustments of $ 4.0 million and $ 5.0 million in the first hal ves of fiscal 2023 and 2022, respectively.

As a res ult, in the first nine months of fiscal 2023, we recognized net favorable revenue and operating income adjustments of $ 4.0 million (substantially all in the first quarter).

In the third quarter and first nine months of fiscal 2022, we recognized net unfavorable revenue and operating income adjustments of $ 2.8 million and net favorable revenue and operating income adjustments of $ 2.2 million , respectively.

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

At April 2, 2023 and October 2, 2022, our consolidated balance sheets included liabilities for anticipated losses of $ 7.8 million and $ 10.0 million, respectively.

The estimated cost to complete these related contracts at April 2, 2023 and October 2, 2022 was approximately $ 67 million and $ 80 million, respectively.

At July 2, 2023 and October 2, 2022, our consolidated balance sheets included liabilities for anticipated losses of $ 9.7 million and $ 10.0 million, respectively.

The estimated cost to complete these related contracts at July 2, 2023 and October 2, 2022 was approximately $ 69 million and $ 80 million, respectively.

Accounts Receivable, Net

8 unchanged sentences

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

Substantially all of our unbilled receivables at April 2, 2023 are expected to be billed and collecte d within 12 months.

Substantially all of our unbilled receivables at July 2, 2023 are expected to be billed and collecte d within 12 months.

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

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

type of client, such as a government agency or a commercial sector client;

type of client, such as a government agency or a commerci al sector client;

and general economic and industry conditions.

Other than the U.S.

federal government, no single client accounted for more than 10% of our accounts receivable at April 2, 2023 and October 2, 2022.

federal government, no single client accounted for more than 10% of our accounts receivable at July 2, 2023 and October 2, 2022.

Remaining Unsatisfied Performance Obligations (“RUPO”)

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

We had $ 4.2 billion of RUPO at April 2, 2023.

We had $ 4.4 billion of RUPO at July 2, 2023.

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

1 unchanged sentence

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

We expect to satisfy our RUPO at April 2, 2023 over the following periods (in thousands):

We expect to satisfy our RUPO at July 2, 2023 over the following periods (in thousands):

Within 12 months $ 2,815,736

3 unchanged sentences

RUPO is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate.

Our operations and maintenance contracts can generally be terminated by the clients without a substantive financial penalty.

Our operations and maintenance contracts can generally be

terminated by the clients without a substantive financial penalty.

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

3 unchanged sentences

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.

Substantially all of RPS is included in our CIG segment.

Substantially all of RPS is included in our Commercial/International Services Group ("CIG") segment.

The total purchase price of RPS was approximately £ 633 million ($ 784 million).

In the second quarter and first half of fiscal 2023, we incurred $ 19.9 million and $ 23.7 million, respectively, related to acquisition and integration costs primarily for professional fees, substantially all of which were paid as of the end of the second quarter of fiscal 2023.

On January 23, 2023, we also settled a foreign exchange forward contract that was integral to our plan to finance the RPS acquisition developed in the fourth quarter of fiscal 2022.

In the third quarter and first nine months of fiscal 2023, we incurred acquisition and integration costs of $ 2.1 million and $ 25.8 million, respectively, primarily for professional fees, substantially all of which were paid as of the end of the third quarter of fiscal 2023.

On January 23, 2023, we also settled a foreign exchange forward contract that was integral to our plan to finance the RPS acquisition.

The cash gain of $ 109.3 million did not qualify for hedge accounting.

37 unchanged sentences

Following are the supplemental consolidated financial results of Tetra Tech and RPS on an unaudited pro forma basis, as if the RPS acquisition had been consummated as of the beginning of fiscal 2022 (in thousands):

Three Months Ended Six Months Ended

2023 April 3,

2022 April 2,

2023 April 3,

Three Months Ended Nine Months Ended

Revenue $ 1,208,947 $ 1,085,799 $ 3,519,792 $ 3,160,341

Net Income including noncontrolling interests $ 61,770 $ 45,456 $ 104,564 $ 101,519

For the period from January 23, 2023 through April 2, 2023, RPS had revenue o f $ 169.5 million.

RPS' net income, including interest expense, for this period was a loss of $ 2.0 million, or $ 0.03 per share, before intangible amortization.

Intangible amortization for RPS was $ 7.7 million, or $ 0.11 per share .

RPS contributed revenue of $ 220.4 million and $ 389.9 million for the third quarter and first nine months of fiscal 2023, respectively, to our consolidated results.

For the third quarter of fiscal 2023, RPS' net income, including interest expense, was $ 0.7 million, or $ 0.01 per share, before the related intangible amortization of $ 10.4 million.

For the first nine months of fiscal 2023, RPS' net loss, including interest expense, was $ 1.0 million, or $ 0.02 per share, before the related intangible amortization of $ 18.1 million.

In the second quarter of fiscal 2023, we also acquired Amyx, Inc.

1 unchanged sentence

Based in Reston, Virginia, Amyx, with over 500 employees, provides application modernization, cybersecurity, systems engineering, financial management and program management support on over 30 Federal Government programs.

Amyx is included in our GSG segment.

Amyx is included in our Government Services Group (" GSG") segment.

The total fair value of the purchase price of Amyx was $ 120.9 million, comprised of a $ 100.0 million payable in a promissory note issued to the sellers (paid subsequent to closing), $ 8.7 million of payables related to estimated post-closing adjustments, and $ 12.2 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 25.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition date.

21 unchanged sentences

The contingent earn-out arrangements are based on our valuations of the acquired companies and reduce the risk of overpaying for acquisitions if the projected financial results are not achieved.

The fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective

acquisition dates.

fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates.

For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair value of contingent consideration as a liability in “Current contingent earn-out liabilities” and “Non-current contingent earn-out liabilities” on the consolidated balance sheets.

12 unchanged sentences

Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present value calculation are reported in interest expense.

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

For the first half of fiscal 2023, we evaluated our estimates for contingent consideration liabilities for the remaining earn-out periods for each individu al acquisition, which included a review of their financial results to-date, the status of ongoing projects in their RUPO, and the inventory of prospective new contract awards.

During the first half of fiscal 2023, we recorded adjustments to our contingent earn-out liabilities and reported a related net loss in operating income of $ 8.5 million (largely in the second quarter).

The net loss primarily resulted from increased valuations of the contingent consideration liabilities for our prior acquisitions of Segue Technologies, Inc.

(SEG), Hoare Lea, LLP (HLE) and TIGA reflecting financial performance that exceeded our previous expectations.

For the second quarter and first half of fiscal 2022, we had no material adjustments to our contingent earn-out liabilities in operating income.

At April 2, 2023, there was a total potential maximum of $ 143.9 million of outstanding contingent consideration related to acquisitions.

Of this amount, $ 88.1 million was estimated as the fair value and accrued on our consolidated balance sheet at April 2, 2023.

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

For the first nine months of fiscal 2023, we evaluated our estimates for contingent consideration liabilities for the remaining earn-out periods for each individual acquisition, which included a review of their financial results to-date, the status of ongoing projects in their RUPO, and the inventory of prospective new contract awards.

During the first nine months of fiscal 2023, we recorded adjustments to our contingent earn-out liabilities and reported a related net charge to operating income of $ 8.5 million (all the in first half of fiscal 2023).

The net charge primarily resulted from increased valuations of the contingent consideration liabilities for our prior acquisitions of Segue Technologies, Inc., Hoare Lea, LLP and TIGA reflecting financial performance that exceeded our previous expectations.

For the third quarter and first nine months of fiscal 2022, we had no material adjustments to our contingent earn-out liabilities in operating income.

At July 2, 2023, there was a total potential maximum of $ 120.3 million of outstanding contingent consideration related to acquisitions.

Of this amount, $ 76.6 million was estimated as the fair value and accrued on our consolidated balance sheet at July 2, 2023.

Goodwill and Intangible Assets

4 unchanged sentences

Translation adjustments 5,459 47,051 52,510

Balance at April 2, 2023 $ 627,202 $ 1,229,219 $ 1,856,421

Balance at July 2, 2023 $ 628,661 $ 1,258,193 $ 1,886,854

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

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

The gross amounts for GSG were $ 644.9 million and $ 536.8 million at April 2, 2023 and October 2, 2022, respectively, excluding accumulated impairment of $ 17.7 million at each date.

The gross amounts of goodwill for CIG were $ 1,350.7 million and $ 712.8 million at April 2, 2023 and October 2, 2022, respectively, excluding accumulated impairment of $ 121.5 million at each date.

The gross amounts for GSG were $ 646.4 million and $ 536.8 million at July 2, 2023 and October 2, 2022, respectively, excluding accumulated impairment of $ 17.7 million at each date.

The gross amounts of goodwill for CIG were $ 1,379.7 million and $ 712.8 million at July 2, 2023 and October 2, 2022, respectively, excluding accumulated impairment of $ 121.5 million at each date.

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

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

April 2, 2023 October 2, 2022

July 2, 2023 October 2, 2022

Remaining Life

8 unchanged sentences

Total $ 312,628 $ ( 87,596 ) $ 225,032 $ 87,673 $ ( 58,510 ) $ 29,163

Amortization expense for the three and six months e nded April 2, 2023 w as $ 12.1 million and $ 15.5 million, compared to $ 3.2 million and $ 5.9 million for the prior-year periods.

Amortization expense for the three and nine months e nded July 2, 2023 w as $ 14.1 million and $ 29.6 million, compared to $ 3.7 million and $ 9.6 million for the prior-year periods.

Estimated amortization expense for the remainder of fiscal 2023 and succeeding years is as follows (in thousands):

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Property and equipment, net $ 81,321 $ 32,316

The depreciation expense related to property and equipment was $ 4.8 million and $ 8.0 million for the three and six months ended April 2, 2023, compared t o $ 3.3 million and $ 6.7 million for the prior-year periods.

The increases in property equipment from October 2, 2022 to April 2, 2023 are primarily due to the RPS acquisition.

The depreciation expense related to property and equipment was $ 5.6 million and $ 13.7 million for the three and nine months ended July 2, 2023, compared to $ 3.2 million and $ 9.9 million for the prior-year periods.

The increases in property equipment from October 2, 2022 to July 2, 2023 are primarily due to the RPS acquisition.

Stock Repurchase and Dividends

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 .

We did not repurchase any shares of our common stock in the first half of fiscal 2023.

At April 2, 2023, we had a remaining balance of $ 347.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first halves of fiscal 2023 and 2022:

We did not repurchase any shares of our common stock in the first nine months of fiscal 2023.

At July 2, 2023, we had a remaining balance of $ 347.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first nine months of fiscal 2023 and 2022:

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

2 unchanged sentences

January 30, 2023 $ 0.23 February 13, 2023 February 24, 2023 12,242

Total dividend paid as of April 2, 2023 $ 24,428

May 8, 2023 $ 0.26 May 24, 2023 June 6, 2023 13,840

Total dividend paid as of July 2, 2023 $ 38,268

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

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

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

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

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

Subsequent Event.

On May 8, 2023, our Board of Directors declared a quarterly cash dividend of $ 0.26 per share payable on June 6, 2023 to stockholders of record as of the close of business on May 24, 2023.

On August 7, 2023, our Board of Directors declared a quarterly cash dividend of $ 0.26 per share payable on September 6, 2023 to stockholders of record as of the close of business on August 23, 2023.

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

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The components of lease costs are as follows (in thousands):

Three Months Ended Six Months Ended

2023 April 3,

2022 April 2,

2023 April 3,

Three Months Ended Nine Months Ended

Operating lease cost $ 24,775 $ 21,004 $ 70,155 $ 64,015

Sublease income ( 48 ) ( 131 ) ( 79 ) ( 257 )

Sublease (income) cost ( 46 ) 140 ( 125 ) ( 116 )

Total lease cost $ 24,729 $ 21,144 $ 70,030 $ 63,899

Supplemental cash flow information related to leases is as follows (in thousands):

Six Months Ended

2023 April 3,

Nine Months Ended

Operating cash flows for operating leases $ 57,871 $ 50,965

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Operating leases 3.0 % 2.2 %

At April 2, 2023, we have no material operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at April 2, 2023 is as follows (in thousands):

At July 2, 2023, we have no material operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at July 2, 2023 is as follows (in thousands):

2023 (remaining) $ 20,727

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

Stock-based compensation expense for the three and six months ended April 2, 2023 was $ 7.4 million and $ 14.6 million, respectively, compared to $ 6.6 million and $ 12.4 million for the same periods last year.

Stock-based compensation expense for the three and nine months ended July 2, 2023 was $ 7.0 million and $ 21.6 million, respectively, compared to $ 6.7 million and $ 19.1 million for the same periods last year.

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

In the first half of fiscal 2023, we awarded 56,214 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $ 195.50 per share on the award date.

In the first nine months of fiscal 2023, we awarded 56,214 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $ 195.50 per share on the award date.

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

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The following table presents the number of weighted-average shares used to compute basic and diluted EPS (in thousands, except per share data):

Three Months Ended Six Months Ended

2023 April 3,

2022 April 2,

2023 April 3,

Three Months Ended Nine Months Ended

Net income attributable to Tetra Tech $ 60,235 $ 58,650 $ 219,771 $ 180,179

5 unchanged sentences

Diluted $ 1.12 $ 1.09 $ 4.10 $ 3.32

The effective tax rates for the first halves of fiscal 2023 and 2022 were 28.7 % and 21.9 %, respectively.

Income tax expense was reduced by $ 1.8 million and $ 4.8 million of excess tax benefits on share-based payments in the first halves of fiscal 2023 and 2022, respectively.

In addition, income tax expense in the first half of fiscal 2023 (all in the second quarter) included non-operating income tax expenses of $ 6.7 million to recognize the tax liability for foreign earnings, primarily in the U.K.

The effective tax rates for the first nine months of fiscal 2023 and 2022 were 28.3 % and 23.9 %, respectively.

Income tax expense was reduced by $ 2.2 million and $ 4.9 million of excess tax benefits on share-based payments in the first nine months of fiscal 2023 and 2022, respectively.

In addition, income tax expense in the first nine months of fiscal 2023 included non-operating income tax expenses of $ 7.2 million ($ 6.9 million in the second quarter) to recognize the tax liability for foreign earnings, primarily in the U.K.

and Australia, that are no longer indefinitely reinvested and to increase the liability for an uncertain tax position.

Excluding the impact of the excess tax benefits on share-based payments and the non-operating tax expenses in the second quarter of fiscal 2023, our effective tax rates in the first halves of fiscal 2023 and 2022 were 26.5 % and 25.0 %, respectively.

At April 2, 2023 and October 2, 2022, the liability for income taxes associated with uncertain tax positions was $ 42.4 million and $ 10.6 million, respectively.

Excluding the impact of the excess tax benefits on share-based payments and the non-operating tax expenses in the second and third quarter of fiscal 2023, our effective tax rates in the first nine months of fiscal 2023 and 2022 were 26.7 % and 25.9 %, respectively.

At July 2, 2023 and October 2, 2022, the liability for income taxes associated with uncertain tax positions was $ 48.8 million and $ 10.6 million, respectively.

These liabilities could materially decrease within the next 12 months as some related examinations have commenced.

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All significant intercompany balances and transactions are eliminated in consolidation.

In the second quarter and first half of fiscal 2023, our Corporate segment operating losses included $ 19.9 million and $ 23.7 million of acquisition and integration expenses, respectively, as described in Note 4, “Acquisitions”.

In the third quarter and first nine months of fiscal 2023 , our Corporate segment operating losses include d $ 2.1 million and $ 25.8 million of acquisition and integration expenses, respectively, as described in Note 4, “Acquisitions”.

The following tables summarize financial information regarding our reportable segments (in thousands):

Three Months Ended Six Months Ended

2023 April 3,

2022 April 2,

2023 April 3,

Three Months Ended Nine Months Ended

GSG $ 531,050 $ 459,987 $ 1,565,371 $ 1,365,041

8 unchanged sentences

Total income from operations $ 97,675 $ 83,905 $ 250,736 $ 245,645

(1) Includes amortization of intangibles, other costs and other income not allocable to our reportable segments.

(1) Includes amortization of intangibles, acquisition and integration expenses, as well as other costs and other income not allocable to our reportable segments.

2023 October 2,

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The fair value of long-term debt was determined using the present value of future cash flows based on the borrowing rates currently available for debt with similar terms and maturities (Level 2 measurement, as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended October 2, 2022 ).

The carrying value of our long-term debt approximated fair value at April 2, 2023 and October 2, 2022.

At April 2, 2023, we had bor rowing s of $ 1.08 billion outstanding under our Amended Credit Agreement, which were primarily used to fund business acquisitions, working capital needs, and capital expenditures.

The carrying value of our long-term debt approximated fair value at July 2, 2023 and October 2, 2022.

At July 2, 2023, we had bor rowing s of $ 919.4 million outstanding under our Amended Credit Agreement, which were primarily used to fund business acquisitions, working capital needs, and capital expenditures.

Credit Facility

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On January 23, 2023, we drew the entire amount of the New Term Loan Facility to partially finance the RPS acquisition.

The remaining purchase price was financed with existing cash on hand and borrowings under the existing Amended

Revolving Credit Facility.

The remaining purchase price was 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.

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The intrinsic value of the forward contract was immaterial at inception as the GBP/USD spot and forward exchange rates were essentially the same.

The fair value of the forward contract at October 2, 2022 was $ 19.9 million, and an unrealized gain of the same amount was recognized in our fourth quarter of fiscal 2022 results.

The fair value of the forward contract at October 2, 2022 was

$ 19.9 million, and an unrealized gain of the same amount was recognized in our fourth quarter of fiscal 2022 results.

On January 23, 2023, the forward contract was settled at the fair value of $ 109.3 million.

We recognized additional gains of

$ 68.0 million and $ 21.4 million in the first and second quarters of fiscal 2023, respectively.

We recognized additional gains of $ 68.0 million and $ 21.4 million in the first and second quarters of fiscal 2023, respectively.

All gains related to this transaction were reported in “Other non-operating income" on our consolidated income statements for the respective periods.

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

At April 2, 2023, the notional principal of our outstanding interest swap agreements was $ 193.8 million ($ 38.8 million each.) The interest rate swaps have a fixed interest rate of 2.79 % and expire in July 2023 for all five agreements.

At April 2, 2023 and October 2, 2022, the fair values of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect were unrealized gains of $ 1.4 million and $ 2.4 million, respectively, which were reported in "Other non-current assets" on our consolidated balance sheets.

Additionally, the related loss of $ 0.9 million and $ 1.0 million for the three and six months ended April 2, 2023, compared to the related gain of $ 4.9 million and $ 7.6 million for the prior-year periods, were recognized and reported on our consolidated statements of comprehensive income.

We expect to reclassify a credit of $ 1.4 million from accumulated other comprehensive loss to interest expense during the second half of fiscal 2023, up to the expiration date in July 2023.

There were no other derivative instruments designated as hedging instruments for the first half of fiscal 2023.

At July 2, 2023, the notional principal of our outstanding interest swap agreements was $ 190.6 million ($ 38.1 million each.) The interest rate swaps have a fixed interest rate of 2.79 % and expire in July 2023 for all five agreements.

At July 2, 2023 and October 2, 2022, the fair values of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect were unrealized gains of $ 0.4 million and $ 2.4 million, respectively, which were reported in "Other non-current assets" on our consolidated balance sheets.

Additionally, the related loss of $ 1.0 million and $ 2.0 million for the three and nine months ended July 2, 2023, compared to the related gain of $ 2.4 million and $ 10.0 million for the prior-year periods, were recognized and reported on our consolidated statements of comprehensive income.

We expect to reclassify a credit of $ 0.4 million from accumulated other comprehensive loss to interest expense during the fourth quarter of fiscal 2023, up to the expiration date in July 2023.

There were no other derivative instruments designated as hedging instruments for the first nine months of fiscal 2023.

Reclassifications Out of Accumulated Other Comprehensive Income

The accumulated balances and activities for the three and six months ended April 2, 2023 and April 3, 2022 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

The accumulated balances and activities for the three and nine months ended July 2, 2023 and July 3, 2022 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

Three Months Ended

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Instruments Net Pension Adjustments Accumulated Other Comprehensive Income (Loss)

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

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

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

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

Amounts reclassified from accumulated other comprehensive loss:

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— ( 1,033 ) — ( 1,033 )

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

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

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

Balance at April 2, 2023 $ ( 185,602 ) $ 1,427 2,794 $ ( 181,381 )

Balance at January 1, 2023 $ ( 177,449 ) $ 2,323 — $ ( 175,126 )

Other comprehensive income (loss) before reclassifications 44,499 ( 2,137 ) — 42,362

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Interest rate contracts, net of tax (1)

— 1,093 — 1,093

Net current-period other comprehensive income (loss) 44,499 ( 1,044 ) — 43,455

Balance at April 2, 2023 $ ( 185,602 ) $ 1,427 $ 2,794 $ ( 181,381 )

Six Months Ended

Balance at July 2, 2023 $ ( 141,103 ) $ 383 $ 2,794 $ ( 137,926 )

Nine Months Ended

Adjustments Gain (Loss)

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

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

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

Amounts reclassified from accumulated other comprehensive loss:

1 unchanged sentence

— ( 3,849 ) ( 3,849 )

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

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

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

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

Balance at October 2, 2022 $ ( 210,556 ) $ 2,412 — $ ( 208,144 )

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Net current-period other comprehensive income (loss) 69,453 ( 2,029 ) 2,794 70,218

Balance at April 2, 2023 $ ( 185,602 ) $ 1,427 $ 2,794 $ ( 181,381 )

Balance at July 2, 2023 $ ( 141,103 ) $ 383 $ 2,794 $ ( 137,926 )

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

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We often provide services to unconsolidated joint ventures.

Our revenue related t o services we provided to unconsolidated joint ventures for the three and six months of fiscal 2023 was approximately $ 20 million and $ 43 million, respectively, compared to $ 24 million and $ 50 million for the same periods last year.

Our related reimbursable costs for the three and six months of fiscal 2023 were approximately $ 19 million and $ 41 million, respectively.

Our related reimbursable costs for the three and six months of fiscal 2022 were approximately $ 22 million and $ 47 million, respectively.

Our revenue related t o services we provided to unconsolidated joint ventures for the third quarter and first nine months of fiscal 2023 was approximately $ 22 million and $ 65 million, respectively, compared to $ 24 million and $ 74 million for the same periods last year.

Our related reimbursable costs for the third quarter and nine months of fiscal 2023 were approximately $ 21 million and $ 61 million, respectively.

Our related reimbursable costs for the third quarter and nine months of fiscal 2022 were approximately $ 23 million and $ 70 million, respectively.

Our consolidated balance sheets also included the following amounts related to these services (in thousands):

4 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements