What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-11-22 compared with 2022-11-25 · 373 added, 365 removed, 1000 unchanged (42% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets at October 1 , 202 3 and October 2 , 202 2

Consolidated Statements of Income for the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020

Consolidated Statements of Comprehensive Income for the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020

Consolidated Statements of Cash Flows for the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020

Consolidated Statements of Equity for the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020

Consolidated Statements of Income for the fiscal years ended October 1 , 202 3 , October 2 , 202 2 and October 3 , 20 21

Consolidated Statements of Comprehensive Income for the fiscal years ended October 1 , 202 3 , October 2 , 202 2 and October 3 , 202 1

Consolidated Statements of Cash Flows for the fiscal years ended October 1 , 202 3 , October 2 , 202 2 and October 3 , 202 1

Consolidated Statements of Equity for the fiscal years ended October 1 , 202 3 , October 2 , 202 2 and October 3 , 202 1

Notes to Consolidated Financial Statements

Schedule II – Valuation and Qualifying Accounts and Reserves for the fiscal years ended October 2, 2022, October 3, 2021 and September 27, 2020

Schedule II – Valuation and Qualifying Accounts and Reserves for the fiscal years ended October 1 , 202 3 , October 2 , 202 2 and October 3 , 202 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

2 unchanged sentences

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

and its subsidiaries (the “Company”) as of October 2, 2022 and October 3, 2021, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended October 2, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of October 1, 2023 and October 2, 2022, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended October 1, 2023, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of October 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

22 unchanged sentences

Critical Audit Matters

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

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

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

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

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

7 unchanged sentences

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

As a result, the Company recognized immaterial operating income adjustments for the year ended October 2, 2022.

As a result, the Company recognized net favorable revenue and operating income adjustments of $11.0 million for the year ended October 1, 2023.

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

The anticipated losses and estimated cost to complete the related contracts was $8.5 million and approximately $68 million, respectively, as of October 1, 2023.

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

The Company had no claims as of October 2, 2022.

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

and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating audit evidence related to management’s estimate of total contract costs for fixed-price contracts with cumulative catch-up adjustments, anticipated losses or claims.

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

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of total estimated contract cost for fixed-price contracts.

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

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the total estimated contract cost for fixed-price contracts.

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

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

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

Acquisition of RPS Group plc – Valuation of Certain Client Relations and Trade Name

As described in Note 5 to the consolidated financial statements, the Company completed its acquisition of RPS Group plc (“RPS”) on January 23, 2023 for a total purchase price of approximately $784 million.

Of the total acquired intangible assets of $174.1 million, certain client relations and a trade name represent the majority.

Fair value was estimated by management using a multi-period excess earnings method for client relations and a relief from royalty method for trade names.

Management’s significant assumptions used in estimating fair value of client relations include (i) the estimated life the asset will contribute to cash flows, such as remaining contractual terms, (ii) revenue growth rates and EBITDA margins, (iii) attrition rate of customers, and (iv) the estimated discount rates that reflect the level of risk associated with receiving future cash flows.

The significant assumptions used in estimating fair value of trade name include the royalty rates and discount rates.

The principal considerations for our determination that performing procedures relating to the valuation of certain client relations and trade name in the acquisition of RPS Group plc is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of certain client relations and trade name acquired, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to estimated life, revenue growth rates, customer attrition rates, EBITDA margins and discount rates for certain client relations and a royalty rate and discount rate for a trade name, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of certain client relations and trade name acquired.

These procedures also included, among others, (i) reading the purchase agreement;

(ii) testing management’s process for developing the fair value estimate of certain client relations and trade name acquired;

(iii) evaluating the appropriateness of the multi-period excess earnings and relief from royalty methods used by management;

(iv) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings and relief from royalty methods;

and (v) evaluating the reasonableness of the significant assumptions used by management related to the estimated life, revenue growth rates, customer attrition rates, EBITDA margins and discount rates for certain client relations and the royalty rate and discount rate for a trade name.

Evaluating management’s assumptions related to the estimated life, revenue growth rates, customer attrition rates and EBITDA margins for client relations involved considering (i) the current and past performance of RPS;

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

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

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the multi-period excess earnings and relief from royalty methods and (ii) the reasonableness of the discount rate assumption for certain client relations and trade name, as well as, the royalty rate for a trade name.

/s/ PricewaterhouseCoopers LLP

16 unchanged sentences

Right-of-use assets, operating leases 175,932 182,319

Investments in unconsolidated joint ventures 4,570 3,282

Goodwill 1,880,244 1,110,412

1 unchanged sentence

Deferred tax assets 89,002 47,804

Other long-term assets 57,976 53,196

Other non-current assets 70,507 62,546

Total assets $ 3,820,477 $ 2,622,776

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Long-term lease liabilities, operating leases 144,685 146,285

Long-term contingent earn-out liabilities 36,769 39,777

Other long-term liabilities 79,157 69,163

Non-current contingent earn-out liabilities 22,314 36,769

Other non-current liabilities 148,045 79,157

Commitments and contingencies (Note 17)

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issued and outstanding, 53,248 and 52,981 shares at October 1, 2023 and October 2, 2022, respectively

Additional paid-in capital — —

Accumulated other comprehensive loss ( 195,295 ) ( 208,144 )

10 unchanged sentences

2023 October 2,

2021 September 27, 2020

2022 October 3, 2021

Revenue $ 4,522,550 $ 3,504,048 $ 3,213,513

3 unchanged sentences

Selling, general and administrative expenses ( 305,107 ) ( 234,784 ) ( 222,972 )

Acquisition and integration expenses ( 33,169 ) — —

Right-of-use operating lease asset impairment ( 16,385 ) — —

Contingent consideration – fair value adjustments ( 12,255 ) ( 329 ) 3,273

Impairment of goodwill — — ( 15,800 )

Income from operations 358,113 340,446 278,701

1 unchanged sentence

Interest expense ( 52,435 ) ( 13,364 ) ( 12,748 )

Other income 19,904 — —

Other non-operating income 89,402 19,904 —

Income before income tax expense 400,978 348,766 266,870

15 unchanged sentences

2023 October 2,

2021 September 27, 2020

2022 October 3, 2021

Net income $ 273,452 $ 263,164 $ 232,831

1 unchanged sentence

Foreign currency translation adjustments, net of tax 12,622 ( 94,933 ) 30,644

Gain (loss) on cash flow hedge valuations, net of tax 11,806 6,117 ( 4,638 )

(Loss) gain on cash flow hedge valuations, net of tax ( 2,412 ) 11,806 6,117

Net pension adjustments 2,638 — —

Other comprehensive income (loss), net of tax 12,848 ( 83,127 ) 36,761

8 unchanged sentences

2023 October 2,

2021 September 27, 2020

2022 October 3, 2021

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization 61,206 27,033 23,805

Equity in income of unconsolidated joint ventures ( 7,525 ) ( 4,990 ) ( 6,605 )

Distributions of earnings from unconsolidated joint ventures 6,177 4,604 6,310

Amortization of stock-based awards 28,607 26,227 23,067

Deferred income taxes ( 21,204 ) 2,175 ( 38,494 )

Impairment of goodwill — — 15,800

Fair value adjustments to contingent consideration 12,255 329 ( 3,273 )

Loss (gain) on sale of assets 103 ( 110 ) ( 11,066 )

Right-of-use operating lease asset impairment 16,385 — —

Fair value adjustment to foreign currency forward contract ( 89,402 ) ( 19,904 ) —

Other non-cash items 975 ( 1,245 ) ( 496 )

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

4 unchanged sentences

Contract liabilities 44,152 55,915 13,407

Other liabilities ( 56,606 ) 8,740 19,460

Income taxes receivable/payable 40,527 14,627 13,090

Other liabilities ( 75,273 ) ( 56,606 ) 8,740

Net cash provided by operating activities 368,463 336,188 304,372

1 unchanged sentence

Payments for business acquisitions, net of cash acquired ( 854,319 ) ( 49,124 ) ( 84,911 )

Settlement of foreign currency forward contract 109,306 — —

Capital expenditures ( 26,901 ) ( 10,582 ) ( 8,573 )

4 unchanged sentences

Repayments on long-term debt ( 1,026,051 ) ( 117,080 ) ( 414,308 )

Proceeds from issuance of convertible notes 575,000 — —

Payments of debt issuance costs ( 14,451 ) — —

Capped call transactions ( 51,750 ) — —

Repurchases of common stock — ( 200,000 ) ( 60,000 )

5 unchanged sentences

Principal payments on finance leases ( 5,579 ) ( 4,344 ) ( 2,714 )

Net cash used in financing activities ( 249,608 ) ( 210,099 ) ( 163,049 )

Net cash provided by (used in) financing activities 382,380 ( 249,608 ) ( 210,099 )

Effect of exchange rate changes on cash and cash equivalents 4,093 ( 12,314 ) 7,772

Net increase in cash and cash equivalents 18,526 9,053 36,614

Net (decrease) increase in cash and cash equivalents ( 16,263 ) 18,526 9,053

Cash and cash equivalents at beginning of year 185,094 166,568 157,515

8 unchanged sentences

Consolidated Statements of Equity

Fiscal Years Ended September 27, 2020, October 3, 2021, and October 2, 2022

Fiscal Years Ended October 3, 2021, October 2, 2022, and October 1, 2023

(in thousands)

11 unchanged sentences

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

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

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

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

7 unchanged sentences

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

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

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

Comprehensive income, net of tax:

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Foreign currency translation adjustments 12,623 12,623 ( 1 ) 12,622

Pension 2,638 2,638 2,638

Gain on cash flow hedge valuations ( 2,412 ) ( 2,412 ) ( 2,412 )

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Shares issued for Employee Stock Purchase Plan 99 1 12,627 12,628 12,628

Stock repurchases ( 1,342 ) ( 13 ) ( 14,936 ) ( 185,051 ) ( 200,000 ) ( 200,000 )

Reclassification of APIC 26,724 ( 26,724 ) — —

Capped call transactions ( 51,750 ) 12,912 ( 38,838 ) ( 38,838 )

BALANCE AT OCTOBER 1, 2023 53,248 $ 532 $ — $ ( 195,295 ) $ 1,598,196 $ 1,403,433 $ 73 $ 1,403,506

12 unchanged sentences

commercial clients and international clients other than development agencies.

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

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

Prior year amounts for reportable segments have been reclassified to conform to the current year presentation.

Basis of Presentation and Preparation

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

Most of our unbilled receivables at October 2, 2022 are expected to be billed and collected within 12 months.

Substantially all of our unbilled receivables at our fiscal 2023 year-end are expected to be billed and collected within 12 months.

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

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These changes could result in future impairments.

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

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

Our last annual review was performed at July 3, 2023 (i.e., the first day of our fiscal fourth quarter).

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

I n 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.

25 unchanged sentences

Any amount paid in excess of the contingent earn-out liability on the acquisition date is reflected as cash used in operating activities in our consolidated statements of cash flows.

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 review and reassess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates.

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

1 unchanged sentence

Other current liabilities.

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

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

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

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Pension Plan .

We assumed a defined benefit pension plan from a fiscal 2021 acquisition.

We assumed a defined benefit pension plan from an acquisition.

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

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Approximately 31 %, 13 %, 19 % and 37 % of our fiscal 2023 revenue was generated from our U.S.

government, U.S.

federal government, U.S.

state and local government, U.S.

commercial and international clients, respectively.

Foreign Currency Translation.

We determine the functional currency of our foreign operating units based upon the primary currency in which they operate.

These operating units maintain their accounting records in their local currency, primarily Canadian and Australian dollars and British pounds.

We determine the fu nctional currency of our foreign operating units based upon the primary currency in which they operate.

These operating units maintain their accounting records in their local currency, primarily Canadian and Australian dollars, the Euros and British pounds.

Where the functional currency is not the U.S.

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

Recently Issued Accounting Pronouncements Adopted in Fiscal 2022.

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

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

In May 2020, the Securities and Exchange Commission issued guidance amending certain financial disclosures about acquired and disposed businesses.

The amendments are designed to assist registrants in making more meaningful determinations of whether a subsidiary or an acquired or disposed business is significant, and to improve the related disclosure requirements.

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

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

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

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

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

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

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

Recently Issued Accounting Pronouncements Not Yet Adopted.

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

ASU 2021-10 is effective for us beginning in the first quarter of fiscal 2023, with early adoption permitted.

This guidance should be applied prospectively to all transactions that are reflected in the financial statements at the date of initial application and to new transactions that are entered into after that date, or retrospectively.

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.

Recently Issued Accounting Pro nouncements

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.

Some of 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.

The $ 21.0 million total received was initially recorded in " Other current liabilities " until all potential amendments to the qualification criteria, including some that were proposed with retroactive application, were finalized in fiscal 2022.

As there are no further contingencies, beginning in fiscal 2023, the amounts received will be distributed to all Canadian employees.

As there are no further contingencies, the amounts received will be distributed to all Canadian employees.

We expect to distribute approximately $ 10 million in the next twelve months.

Accordingly, this amount was reclassified from "Other current liabilities" to "Accrued compensation" on our consolidated balance sheet as of October 2, 2022.

The remaining $ 17.0 million, which we expect to distribute beyond one year, was reclassified to "Other long-term liabilities".

We do not expect there will be any related impact to our operating income, and we have no outstanding applications for further government assistance.

Accordingly, this amount is included in "Accrued compensation" on our consolidated balance sheet as of October 1, 2023.

The remaining $ 11.0 million, which we expect to distribute beyond one year, is reported in " Other long-term liabilities ".

We do not expect there will be any related impact on our operating income, and we have no outstanding applications for further government assistance.

Revenue and Contract Balances

9 unchanged sentences

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

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

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

Fiscal Year Ended

2023 October 2,

2021 September 27, 2020

(in thousands)

2022 October 3, 2021

Client Sector:

13 unchanged sentences

federal government contracts performed outside the United States.

(2) Includes revenue generated from foreign operations, primarily in Canada, Australia, the United Kingdom and revenue generated from non-U.S.

(2) Includes revenue generated from non-U.S.

clients, primarily in Canada, Australia, Europe and the United Kingdom.

Other than the U.S.

federal government, no single client accounted for more than 10% of our revenue for fiscal 2023 and 2022.

Contract Assets and Contract Liabilities

Contract Asset s and Contract Liabilities

We invoice customers based on the contractual terms of each contract.

8 unchanged sentences

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

Net contract liabilities consisted of the following:

Net contract assets/liabilities consisted of the following (in thousands):

2023 October 2, 2022

(in thousands)

Contract assets (1)

2 unchanged sentences

Net contract liabilities $ ( 221,105 ) $ ( 148,935 )

(1) Includ es $ 23.3 million and $ 12.2 million of contract retentions as of October 2, 2022 and October 3, 2021, respectively.

(1) Includ es $ 6.8 million and $ 23.3 million of contract retentions at fiscal 2023 and 2022 year-ends, respectively.

In fiscal 2023, we recognized revenue of approximately $ 164 million from amounts included in the contract liability balance at the end of fiscal 2022, compared to approximately $ 125 million in fiscal 2022 .

1 unchanged sentence

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.

T he corresponding net revenue and operating income adjustments were immaterial for fiscal 2022 and 2021.

As a result, in fiscal 2023, we recognized net favorable revenue and operating income adjustments of $ 11.0 million.

T he corresponding net revenue and operating income adjustments were immaterial for fiscal 2022.

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

As of October 1, 2023 and October 2, 2022, our consolidated balance sheets included liabilities for anticipated losses of $ 8.5 million and $ 10.0 million, respectively.

The estimated cost to complete these related contracts as of October 2, 2022 and October 3, 2021 was approximately $ 80 million and $ 104 million, respectively.

The estimated cost to complete these related contracts at the end of fiscal 2023 and 2022 was approximately $ 68 million and $ 80 million, respectively.

Accounts Receivable, Net

Net accounts receivable consisted of the following:

Net accounts receivable consisted of the following (in thousands):

2023 October 2,

(in thousands)

Billed $ 672,712 $ 491,700

5 unchanged sentences

Substantially all of our unbilled receivables at October 2, 2022 are expected to be billed and collecte d within 12 months.

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

Substantially all of our unbilled receivables at fiscal 2023 year-end 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;

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

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 regards 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.

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

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

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

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

There were no claims included in our total accounts receiva ble at October 2, 2022.

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

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

In fiscal 2021 (all in the second quarter), we recognized increases to revenue and related gains of $ 2.8 million in our CIG reportable segment.

No single client accounted for more than 10% of our accounts receivable at October 2, 2022 and October 3, 2021 .

and general economic and industry condition s , which may affect our clients' ability to pay .

Other than the U.S.

federal government, no single client accounted for more than 10% of our accounts receivable at fiscal 2023 and 2022 year-ends .

Remaining Unsatisfied Performance Obligations (“RUPOs”)

1 unchanged sentence

We h ad $ 4.8 billion of RUP Os as of October 1, 2023.

RUPOs increase with awards from new contracts or additions on existing contracts and decrease as work is performed and revenue is recognized on existing contracts.

RUPOs increase with awards from new contracts or additions to existing contracts and decrease as work is performed and revenue is recognized on existing contracts.

RUPOs may also decrease when projects are canceled or modified in scope.

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

We expect to satisfy our RUPOs as of October 2, 2022 over the following periods:

(in thousands)

We expect to satisfy our RUPOs as of fiscal 2023 year-end over the following periods (in thousands):

Within 12 months $ 3,103,466

6 unchanged sentences

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 in addi tion to the $ 147.8 million 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.

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 fiscal 2023, we did not repurchase any shares of our common stock.

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 fiscal 2022, and 479,369 shares with an average price of $ 125.16 per share for a total cost of $ 60.0 million in fiscal 2021, in the open market.

As of October 1, 2023, we had a remaining balance of $ 347.8 million under our repurchase program.

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(in thousands)

November 7, 2022 $ 0.23 November 21, 2022 December 9, 2022 $ 12,186

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

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

August 7, 2023 $ 0.26 August 23, 2023 September 6, 2023 13,845

Total dividends paid as of October 1, 2023 $ 52,113

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

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On November 13, 2023, our Board of Directors declared a quarterly cash dividend of $ 0.26 per share payable on December 13, 2023 to stockholders of record as of the close of business on November 30, 2023.

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.

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

On November 3, 2022, RPS' shareholders approved the scheme of arrangement.

On January 19, 2023, the court-sanctioned scheme of arrangement to purchase RPS was approved, and we completed the acquisition on January 23, 2023.

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.

Subsequent Event.

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.

In fiscal 2022, we acquired The Integration Group of America ("TIGA"), Piteau Associates (“PAE”) and two other immaterial acquisitions.

Substantially all of RPS is included in our CIG segment.

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

In connection with the transaction, we incurred acquisition and integration costs of $ 33.2 million, primarily for professional fees, substantially all of which were paid as of fiscal 2023 year-end.

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.

As a result, the gain was recognized as non-operating income over the life of the contract and not included in the purchase price allocation below.

However, the cash proceeds of $ 109.3 million economically reduced the purchase price for the shares of RPS to approximately $ 675 million.

This forward contract is explained further in Note 14, "Derivative Financial Instruments".

The table below represents the preliminary purchase price allocation for RPS based on estimates, assumptions, valuations and other analyses as of January 23, 2023, that has not been finalized in order to make a definitive allocation.

The purchase consideration, excluding the aforementioned forward contract gain, is allocated to the tangible and intangible assets, and liabilities of RPS based on their estimated fair values, with any excess purchase consideration allocated to goodwill as follows (in thousands) :

Cash and cash equivalents $ 32,093

Accounts receivable and contract assets 202,303

Prepaid expenses and other current assets 45,999

Income taxes receivables 1,999

Property and equipment 38,435

Right-of-use assets, operating leases 40,179

Intangible assets 174,094

Deferred income taxes 36,388

Other long-term assets 1,061

Total assets acquired 572,551

Account Payable $ ( 44,376 )

Accrued compensation ( 19,073 )

Contract liabilities ( 46,287 )

Income tax payable ( 7,083 )

Short-term lease liabilities, operating leases ( 13,477 )

Other current liabilities ( 135,474 )

Current portion of long-term debt ( 91,973 )

Long-term lease liabilities, operating leases ( 26,702 )

Other long-term liabilities ( 18,571 )

Deferred tax liabilities ( 41,613 )

Total liabilities assumed ( 444,629 )

Fair value of net assets acquired 127,922

Goodwill 656,287

Total purchase consideration $ 784,209

The following table summarizes the estimated fair values that were assigned to intangible assets at the acquisition date:

Fair Value Weighted-Average Estimated Useful Life

(in thousands) (in years)

Backlog $ 27,880 1.6

Trade names 27,260 3.0

Client relations 118,954 11.1

Total intangible assets acquired $ 174,094 8.3

Estimated fair value measurements for the intangible assets related to the RPS acquisition were made using Level 3 inputs including discounted cash flow techniques.

Fair value was estimated using a multi-period excess earnings method for backlog and client relations and a relief from royalty method for trade names.

The significant assumptions used in estimating fair value of backlog and client relations include (i) the estimated life the asset will contribute to cash flows, such as remaining contractual terms, (ii) revenue growth rates and EBITDA margins, (iii) attrition rate of customers, and (iv) the estimated discount rates that reflect the level of risk associated with receiving future cash flows.

The significant assumptions used in estimating fair value of trade names include the royalty rates and discount rates.

Supplemental Pro Forma Information (Unaudited)

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) :

Fiscal Year Ended

2023 October 2,

Revenue $ 4,780,404 $ 4,271,580

Net income including noncontrolling interests $ 223,857 $ 152,964

Our fiscal 2023 consolidated results reflect RPS' contribution of revenue of approximately $ 600 million, with net income, including interest expense, of $ 3.6 million, or $ 0.07 per share, before the related intangible amortization of $ 26.8 million.

In fiscal 2023, we also acquired Amyx, Inc.

(“Amyx”), an enterprise technology services, cybersecurity and management consulting firm based in Reston, Virginia.

With over 500 employees, Amyx provides application modernization, cybersecurity, systems engineering, financial management and program management support on over 30 Federal Government programs.

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.

Amyx was not considered significant to our consolidated financial statements.

In fiscal 2022, we acquired The Integration Group of America ("TIGA"), Piteau Associates (“PAE”) and two other financially immaterial acquisitions.

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

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

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

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

The total fair value of the purchase price for all four acquisitions was $ 88.3 million.

This amount is comprised of $ 44.0 million in initial cash payments made to the sellers, $ 2.5 million of receivables (net) related to estimated post-closing adjustments for the net assets acquired, $ 15.5 million payable in a promissory note issued to the sellers along with related transaction expenses of the sellers (which were subsequently paid in July 2022) and $ 31.3 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 47.0 million, based upon the achievement of specified operating income targets in each of the three to five years following the acquisitions.

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

CRD is based in Burnaby, British Columbia and provides world-class expertise in computational fluid dynamics and utilizes industry-leading capabilities to solve complex engineering science problems for commercial customers, across a broad range of industries.

KZN is based in Washington, D.C.

and provides international development advisory and management consulting services offering a suite of innovative tools that support advanced solutions in health, education, governance, peace and stability and sustainable economic growth.

IRM is based in San Diego, California and provides digital water transformation consulting services and an innovative suite of tools to address complex water system modernization challenges.

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

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

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

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

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

In fiscal 2020, we acquired Segue Technologies, Inc.

("SEG"), a leading information technology management consulting firm based in Arlington, Virginia, and BlueWater Federal Solutions, Inc.

("BWF"), a leading information technology management consulting firm based in Chantilly, Virginia.

Both of these acquisitions are part of our GSG segment.

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

This amount was comprised of $ 71.4 million in initial cash payments made to the seller s, $ 0.7 million of payabl es related to estimated post-closing adjustments for net assets acquired and $ 16.5 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 28.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisitions.

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

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

The fiscal 2020 goodwill additions represent the value of a workforce with distinct expertise in the high-end information technology field, in the areas of data analytics, modeling and simulation, cloud and agile software development.

These acquisitions were not considered significant, individually or in the aggregate, to our consolidated financial statements.

The majority of the goodwill from the fiscal 2023 acquisitions is not deductible for tax purposes, while the majority of the goodwill from the fiscal 2022 acquisitions is deductible for tax purposes.

The results of fiscal 2022 and 2023 acquisitions were included in our consolidated financial statements beginning on the respective closing dates.

Goodwill additions resulting from the fiscal 2023 business combinations are primarily attributable to the significant technical expertise residing in embedded workforces that are sought out by clients, synergies expected to arise after the acquisitions in the areas of enterprise technology services, data management, energy transformation, water, program management, and data analytics and the long-standing reputations of RPS and Amyx.

These acquisitions further expand and complement our market-leading positions in water, renewable energy and sustainable infrastructure;

enhanced by a combined suite of differentiated data analytics and digital technologies, and expansion into existing and new geographies.

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

In addition, these acquired capabilities, when combined with our exis ting global consulting and engineering business, result in opportunities that allow us to provide services under contracts that could not have been pursued individually by either us or the acquired companies.

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

These acquisitions were not considered material, individually or in the aggregate, to our consolidated financial statements.

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

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

Intangible assets with finite lives arise from business acquisitions and are amortized based on the period over which the contractual or economic benefit of the intangible assets are expected to be realized or on a straight-line basis over the useful lives of the underlying assets, ranging from one to twelve years .

These consist of client relations, backlog and trade names.

For detailed information regarding our intangible assets, see Note 6 , “ Goodwill and Intangible Assets ”.

Most of our acquisition agreements include contingent earn-out agreements, which are generally based on the achievement of future operating income thresholds.

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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.

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 “Long-term contingent earn-out liabilities” on the consolidated balance sheets.

We consider several factors when determining that contingent earn-out liabilities are part of the purchase price, including the following:

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.

We consider several factors when

determining that contingent earn-out liabilities are part of the purchase price, including the following:

(1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price;

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Any amount paid in excess of the contingent earn-out liability on the acquisition date is reflected as cash used in operating activities in our consolidated statements of cash flows.

We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates.

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

We review and reassess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates.

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

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

In each quarter during 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 RUPOs and the inventory of prospective new contract awards.

In fiscal 2023, we recorded adjustments to our contingent earn-out liabilities and reported a net loss to operating income of $ 12.3 million.

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

These increases were partially offset by a decreased valuation of the contingent consideration for Amyx, which has the forecasted revenue becoming realized later than originally anticipated.

In fiscal 2022, total adjustments to our contingent earn-out liabilities in operating income were immaterial.

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

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

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

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

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

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

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

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

NDY was required to meet a minimum operating income threshold in each year to earn any contingent consideration.

The determination of the fair value of the purchase price for NDY on the acquisition date included our estimate of the fair value of the related contingent earn-out obligation.

The initial valuation was primarily based on probability-weighted internal estimates of NDY's operating income during each earn-out period.

Based on these estimates, we calculated an initial fair value at the acquisition date of A$ 9.4 million for NDY's contingent earn-out liability in the second quarter of fiscal 2018.

In determining that NDY would earn 38 % of the maximum potential earn-out, we considered several factors including NDY's recent historical revenue and operating income levels and growth rates.

We also considered the recent trend in NDY's backlog level.

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

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

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

This assessment included a review of NDY’s actual and forecasted results for the third earn-out period, which included an evaluation of the status of ongoing projects in NDY’s backlog, the inventory of prospective new contract awards and the impact of the COVID-19 pandemic on the Australian economy and NDY's operations.

As a result of this assessment, we concluded that NDY’s operating income in the third earn-out period would be lower than previously estimated, and we reduced NDY’s contingent earn-out liability to $ 1.8 million (A$ 2.6 million), which resulted in a gain of $ 3.7 million (A$ 5.2 million).

The acquisition agreement for EGT included a contingent earn-out agreement based on the achievement of operating income thresholds in each of the first three years beginning on the acquisition date, which was in the second quarter of fiscal 2019.

The maximum earn-out obligation over the three-year earn-out period was $ 25 million ($ 8.5 million in year one, $ 9.0 million in year two and $ 7.5 million in year three).

In each of the first two earn-out years, EGT was to receive a portion of the contingent consideration if EGT achieved a minimum operating income threshold.

The remaining contingent consideration could be earned primarily on a pro-rata basis for operating income within a predetermined range in each year.

EGT was required to meet a minimum operating income threshold in each year to earn any of this contingent consideration.

The determination of the fair value of the purchase price for EGT on the acquisition date included our estimate of the fair value of the related contingent earn-out obligation.

The initial valuation was primarily based on probability-weighted internal estimates of EGT's operating income during each earn-out period.

Based on these estimates, we calculated an initial fair value at the acquisition date of $ 21.1 million for EGT's contingent earn-out liability in the second quarter of fiscal 2019.

In determining that EGT would earn 84 % of the maximum potential earn-out, we considered several factors including EGT's recent historical revenue and operating income levels and growth rates.

We also considered the recent trend in EGT's backlog level and the prospects for the U.S.

federal information technology market.

In the third quarter of fiscal 2020, EGT achieved and was paid the maximum earn-out obligation for the first earn-out period.

Subsequently, we evaluated our estimate of EGT’s contingent consideration liability for the second and third earn-out periods.

This assessment included a review of EGT’s actual and forecasted results for the second and third earn-out periods, which included an evaluation of the status of ongoing projects in EGT’s backlog and the inventory of prospective new contract awards.

As a result of this assessment, we concluded that EGT's operating income in the second and third earn-out period would be lower than previously estimated.

Accordingly, in the fourth quarter of fiscal 2020, we reduced EGT’s contingent earn-out liability to $ 7.5 million, which resulted in a gain of $ 4.7 million.

The acquisition agreement for SEG included a contingent earn-out agreement based on the achievement of operating income thresholds in each of the first three years beginning on the acquisition date, which was in the second quarter of fiscal 2020.

The maximum earn-out obligation over the three-year earn-out period was $ 20 million ($ 5.0 million, $ 7.0 million and $ 8.0 million for years one, two and three, respectively).

SEG was to receive a portion of the contingent consideration if SEG achieved a minimum operating income threshold in each year of the earn-out period.

The remaining contingent consideration

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

SEG was required to meet a minimum operating income threshold in each year to earn any of this contingent consideration.

The determination of the fair value of the purchase price for SEG on the acquisition date included our estimate of the fair value of the related contingent earn-out obligation.

The initial valuation was primarily based on probability-weighted internal estimates of SEG's operating income during each earn-out period.

Based on these estimates, we calculated an initial fair value at the acquisition date of $ 11.3 million for SEG's contingent earn-out liability in the second quarter of fiscal 2020.

In determining that SEG would earn 57 % of the maximum potential earn-out, we considered several factors including SEG's recent historical revenue and operating income levels and growth rates.

We also considered the recent trend in SEG's backlog level and the prospects for the U.S.

federal information technology market.

SEG’s actual financial performance in the first earn-out period on a year to date basis was below our original expectation at the acquisition date.

As a result, in the fourth quarter of fiscal 2020, we evaluated our estimate of SEG’s contingent consideration liability for all earn-out periods.

This assessment included a review of SEG’s financial results in the first earn-out period, the status of ongoing projects in SEG’s backlog, the inventory of prospective new contract awards and future synergies with other Tetra Tech operating units.

As a result of this assessment, we concluded that SEG’s operating income in all earn-out periods would be lower than originally anticipated.

Accordingly, in the fourth quarter of fiscal 2020, we reduced the SEG contingent earn-out liability to $ 8.1 million, which resulted in a gain of $ 3.4 million.

At October 1, 2023, there was a total potential max imum of $ 113.8 million of outstanding contingent consideration related to acquisitions.

Of this amount, $ 73.4 million was estimated as the fair value and accrued on our consolidated balance sheet.

The following table summarizes the changes in the carrying value of estimated contingent earn-out liabilities:

The following table summarizes the changes in the carrying value of estimated contingent earn-out liabilities (in thousands):

Fiscal Year Ended

2023 October 2,

2021 September 27,

(in thousands)

2022 October 3,

Beginning balance $ 65,566 $ 59,297 $ 32,617

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Goodwill and Intangible Assets

The following table summarizes the changes in the carrying value of goodwill:

The following table summarizes the changes in the carrying value of goodwill (in thousands):

GSG CIG Total

(in thousands)

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

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

Goodwill reallocation ( 51,497 ) 51,497 —

Acquisitions 42,365 26,318 68,683

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Balance at October 2, 2022 519,102 591,310 1,110,412

Goodwill reallocation ( 51,497 ) 51,497 —

Acquisitions 138,380 621,496 759,876

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Balance at October 1, 2023 $ 659,942 $ 1,220,302 $ 1,880,244

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

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

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

The goodwill additions relate to our fiscal 2022 acquisitions.

The purchase price allocations for our fiscal 2022 acquisitions are preliminary and subject to adjustment based upon the final determinations of the net assets acquired and information to perform th e final valuations.

The fiscal 2023 goodwill amounts are presented net of reductions from historical impairment adjustments and fiscal 2023 goodwill additions relate to our fiscal 2023 acquisitions.

The purchase price allocations for our fiscal 2023 acquisitions are preliminary and subject to adjustment based upon the final determinations of the net assets acquired and information to perform the final valuations.

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

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.

Our last review at July 3, 2023 (i.e., the first day of our fourth quarter in fiscal 2023) 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.

As of July 3, 2023, and after the reallocation of goodwill on the first day of fiscal 2023, we had no reporting units that had estimated fair values that exceeded their carrying values by less than 45 %.

We also regularly evaluate whether events and circumstances have occurred that may indicate a potential change in the recoverability of goodwill.

We also regularly evaluate whether events and c ircumstances have occurred that may indicate a potential change in the recoverability of goodwill.

We perform interim goodwill impairment reviews between our annual reviews if certain events and circumstances have occurred, such as a deterioration in general economic conditions;

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The gross amounts of goodwill for CIG were $ 1,341.8 million and $ 712.8 million at fiscal 2023 and 2022 year-ends, respectively, excluding accumulated impairment of $ 121.5 million for each period.

The fo llowing tabl e presents the gross amount and accumulated amortization of our acquired identifiable intangible assets with finite useful lives included in "Intangible assets, net" on the consolidated balance sheets:

Fiscal Year Ended

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Amortization Net

($ in thousands)

Client relations 9.4 $ 169,217 $ ( 36,072 ) $ 133,145 $ 41,676 $ ( 21,092 ) $ 20,584

Backlog 0.9 63,825 ( 47,802 ) 16,023 33,286 ( 29,990 ) 3,296

Technology and trade names 3.7 12,711 ( 7,428 ) 5,283 14,939 ( 6,327 ) 8,612

Trade names 2.4 37,411 ( 12,643 ) 24,768 12,711 ( 7,428 ) 5,283

Total $ 270,453 $ ( 96,517 ) $ 173,936 $ 87,673 $ ( 58,510 ) $ 29,163

Amortization expense for the identifiable intangible assets for fiscal 2023, 2022 and 2021 was $ 41.2 million, $ 13.2 million and $ 11.5 million, respectively.

Foreign currency translation adjustments reduced net identifiable intangible assets by $ 5.3 million in fiscal 2022 and were immaterial for fiscal 2021.

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

(in thousands)

Foreign currency translation adjustments reduced net identifiable intangible assets by $ 0.2 million and $ 5.3 million in fiscal 2023 and 2022, respectively.

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

2024 $ 42,180

Beyond 56,589

Total $ 173,936

Property and Equipment

Property and equipment consisted of the following:

Property and equipment consisted of the following (in thousands):

Fiscal Year Ended

2023 October 2,

(in thousands)

Equipment, furniture and fixtures $ 132,744 $ 96,710

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Property and equipment, net $ 74,832 $ 32,316

The depreciation expense related to property and equipment w as $ 13.9 million, $ 12.3 million and $ 13.0 million for fiscal 2022, 2021 and 2020, respectively.

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

The depreciation expense related to property and e quipment was $ 20.0 million, $ 13.9 million and $ 12.3 million for fiscal 2023, 2022 and 2021, respectively.

The increases in property and equipment from October 2, 2022 to October 1, 2023 are primarily due to the RPS acquisition.

Income before income taxes, by geographic area, was as follows (in thousands):

Fiscal Year Ended

2023 October 2,

2021 September 27,

(in thousands)

2022 October 3,

Income before income taxes:

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Total income before income taxes $ 400,978 $ 348,766 $ 266,870

Income tax expense consisted of the following:

Income tax expense consisted of the following (in thousands):

Fiscal Year Ended

2023 October 2,

2021 September 27,

(in thousands)

2022 October 3,

Federal $ 110,371 $ 47,447 $ 41,056

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Foreign ( 4,802 ) 3,016 ( 27,703 )

Total deferred income tax expense (benefit) 2,210 ( 35,797 ) 2,729

Total deferred income tax (benefit) expense ( 27,840 ) 2,210 ( 35,797 )

Total income tax expense $ 127,526 $ 85,602 $ 34,039

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2023 October 2,

2021 September 27,

2022 October 3,

Tax at federal statutory rate 21.0 % 21.0 % 21.0 %

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Non-taxable foreign interest income — — ( 1.0 )

Goodwill — — 1.5

Stock compensation ( 0.4 ) ( 2.0 ) ( 3.3 )

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Unremitted earnings 0.2 ( 0.2 ) 1.0

Hedging gain ( 5.7 ) — —

Global intangible low-taxed income 0.5 — —

Deferred tax adjustments ( 1.0 ) 0.1 0.8

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Total income tax expense 31.8 % 24.5 % 12.8 %

The effective tax rates for fiscal 2022, 2021 and 2020 were 24.5 %, 12.8 % and 23.7 %, respectively.

The effective tax rates for fiscal 2023, 2022 and 2021 wer e 31.8 %, 24.5 % and 12.8 %, respectively.

The fiscal 2023 income tax expense included non-operating income tax expenses totaling $ 20.6 million to (i) increase the tax liability for uncertain tax positions related to certain U.S.

tax credits and an intercompany financing transaction, (ii) to recognize the tax liability for foreign earnings, primarily in the U.K.

and Australia, that are no longer indefinitely reinvested.

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

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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.

The goodwill impairment

charge in fiscal 2020 did not have related tax benefits.

Also, income tax expense was reduced by $ 4.6 million , $ 10.3 million and $ 12.9 million of excess tax benefits on share-based payments in fiscal 2023, 2022 and 2021, respectively.

Excluding the impact of the valuation allowance release, the non-deductible goodwill impairment charge, the Canadian repatriation and the excess tax benefits on share-based payments our effective tax rates in fiscal 2022, 2021 and 2020 were 27.5 %, 25.7 % and 25.6 % respectively.

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.

We are currently under examination by the Internal Revenue Service for fiscal years 2018 and 2019, and the Canada Revenue Agency for fiscal years 2011 through 2016.

Excluding the impact of increasing the tax liability for uncertain tax positions, the valuation allowance release, the foreign earnings repatriation and the excess tax benefits on share-based payments our effective tax rates in fiscal 2023, 2022 and 2021 were 27.8 % , 27.5 % and 25.7 % respectively.

We are currently under examination by the Internal Revenue Service for fiscal years from 2018 to 2021, and the Canada Revenue Agency for fiscal 2011 through 2016.

We are also subject to various other state audits.

Temporary differences comprising the net deferred income tax asset shown on the accompanying consolidated balance sheets were as follows:

Temporary differences comprising the net deferred income tax asset shown on the accompanying consolidated balance sheets were as follows (in thousands):

Fiscal Year Ended

2023 October 2,

(in thousands)

Deferred Tax Assets:

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Unbilled revenue 3,090 4,885

Loss carry-forwards 41,648 54,825

Loss and other carry-forwards 62,777 41,648

Property and equipment 552 —

Capitalized research and development 17,778 —

Capped call transactions 12,696 —

Valuation allowance ( 11,663 ) ( 12,286 )

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Deferred Tax Liabilities:

Unbilled revenue — ( 5,595 )

Prepaid expense ( 2,703 ) ( 6,065 )

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Net deferred tax assets $ 74,745 $ 32,643

Prospectively, from the date of the aforementioned 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 United Kingdom of approximately $ 81.7 million are expected to be indefinitely reinvested in these foreign countries.

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

Assuming the indefinitely reinvested foreign earnings were repatriated under the laws and rates applicable at October 2, 2022, the incremental taxes applicable to those earnings would not be material.

At October 2, 2022, we had available unused state net operating loss ("NOL") carry forwards of $ 43.7 million that expire at various dates from 2026 to 2037;

Our foreign earnings 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 1, 2023, we had available unused federal net operating loss (“NOL”) carry forwards of $ 37.5 million that has no expiration date;

state net operating loss carry forwards of $ 26.0 million that expire at various dates from 2024 to 2037;

and available foreign NOL carry forwards of $ 170.8 million, of which $ 21.1 million expire at various dates from 2024 to 2043, and $ 149.7 million have no expiration date.

In addition, we had foreign capital loss carryforwards of $ 18.4 million and foreign research and development credits of $ 3.9 million that do not have expiration dates.

In addition, we had foreign capital loss carryforwards of $ 18.4 million, foreign corporate interest restriction allowances of $ 6.2 million, and foreign research and development credits of $ 4.5 million that do not have expiration dates.

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

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

Although realization is not assured, based on our assessment, we have concluded that it is more likely than not that the assets will be realized except for the deferred tax assets related to the loss carry-forwards for which a valuation allowance of $ 12.3 million has been provided.

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

Although realization is not assured, based on our assessment, we have concluded that it is more likely than not that the assets will be realized except for the deferred tax assets related to certain loss carry-forwards for which a valuation allowance of $ 11.7 million has been provided.

At October 1, 2023, we had $ 53.6 million of unrecognized tax benefits, all of which, if recognized, would affect our effective tax rate.

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

It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of our unrecognized tax positions may not significantly decrease in the next 12 months.

These changes would be the result of ongoing examinations.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands) :

Fiscal Year Ended

2023 October 2,

2021 September 27,

(in thousands)

2022 October 3,

Beginning balance $ 8,908 $ 12,899 $ 9,228

Acquisition of RPS Group 6,012 — —

Additions for current fiscal year tax positions 27,272 — 2,171

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

During fiscal years 2022 , 2021 and 2020 , we accrued additional interest and penalties of $ 0.5 million, $ 0.8 million and $ 0.8 million, respectively, and recorded reductions in accrued interest and penalties of $ 0.4 million, $ 0 and $ 0 , respectively, as a result of audit settlements and other prior-year adjustments.

The amount of interest and penalties accrued at October 2, 2022, October 3, 2021 and September 27, 2020 was $ 5.3 million, $ 5.2 million and $ 4.4 million, respectively.

During fiscal 2023 , 2022 and 2021 , we accrued additional interest and penalties of $ 4.6 million , $ 0.5 million and $ 0.8 million, respectively, and recorded reductions in accrued interest and penalties of $ 2.0 million , $ 0.4 million and $ 0 , respe ctively, as a result of audit settlements and other prior-year adjustments.

The amount of interest and penalties accrued at October 1, 2023, October 2, 2022 and October 3, 2021 was $ 8.0 million , $ 5.3 million and $ 5.2 million, respectively.

Long-Term Debt

Long-term debt consisted of the following:

Long-term debt consisted of the following (in thousands):

Fiscal Year Ended

2023 October 2,

(in thousands)

Credit facilities $ 320,000 $ 258,754

Convertible notes 575,000 —

Debt issuance costs and discount ( 15,471 ) —

Current portion of long-term debt — ( 12,504 )

Long-term debt $ 879,529 $ 246,250

On August 22, 2023, we issued $ 575.0 million in convertible notes that bear interest at a rate of 2.25 % per annum payable in arrears on February 15 and August 15 of each year, beginning on February 15, 2024 and mature on August 15, 2028, unless converted, redeemed or repurchased (the "Convertible Notes").

Prior to May 15, 2028, the Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods.

Thereafter, the Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The initial conversion rate applicable to the Convertible Notes is 5.0855 shares of our common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial price of approximately $ 196.64 per share of our common stock, subject to adjustment if certain events occur.

Upon conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.

In addition, upon the occurrence of a "fundamental change" as defined in the indenture governing the Convertible Notes, holders may require us to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Convertible Notes to be repurchased plus any accrued and unpaid interest.

If certain corporate events occur prior to the maturity date of the Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such event or notice of redemption.

We will not be able to redeem the Convertible Notes prior to August 20, 2026.

On or after August 20, 2026, we have the option to redeem for cash all or any portion of the Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130 % of the conversion price for a specified period of time at a redemption price equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus any accrued but unpaid interest.

In addition, as described in the indenture governing the Convertible Notes, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the Convertible Notes becoming due and payable immediately.

Our net proceeds from the offering were approximately $ 560.5 million after deducting the initial purchasers’ discounts and commissions and offering expenses.

We used approximately $ 51.8 million of the net proceeds to pay the cost of the capped

call transactions described below.

We used the remaining net proceeds to repay all $ 185.0 million principal amount outstanding under our revolving credit facility, the remaining $ 234.4 million principal amount outstanding under our senior secured term loan due 2027 and approximately $ 89.4 million principal amount outstanding under our senior secured term loan due 2026.

The Convertible Notes were recorded as a single unit within "Long-term debt" in our fiscal 2023 year-end consolidated balance sheet as the conversion option within the Convertible Notes was not a derivative that would require bifurcation and the Convertible Notes did not involve a substantial premium.

Transaction costs to issue the Convertible Notes were recorded as direct deductions from the related debt liabilities and amortized to interest expense using the effective interest method over the terms of the Convertible Notes.

Debt issuance costs for the Convertible Notes have been amortized to interest expense over the terms of the Convertible Notes at an effective annual interest rate of 2.79 %.

The net carrying amount of the Convertible Notes was as follows (in thousands) :

Principal $ 575,000

Unamortized discount and issuance costs ( 14,158 )

Net carrying amount $ 560,842

The following table sets forth the interest expense recognized related to the Convertible Notes (in thousands) :

Interest expense $ 1,438

Amortization of discount and issuance costs 292

Total interest expense $ 1,730

Concurrent with the offering of the Convertible Notes, in August 2023, we entered into capped call transactions (the "Capped Call Transactions").

The Capped Call Transactions are expected generally to reduce the potential dilution our common stock upon conversion of the Convertible Notes and/or offset any cash payments we elect to make in excess of the principal amount of converted Convertible Notes, as the case may be.

If, however, the market price per share of our common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions.

The cap price of the Capped Call Transactions is initially $ 259.56 per share, which represents a premium of 65 % over the last reported sale price of our common stock of $ 157.31 per share on the NASDAQ Global Select Market on August 17, 2023, and is subject to certain adjustments under the terms of the Capped Call Transactions.

We recorded the Capped Call Transactions as separate transactions from the issuance of the Convertible Notes.

The cost of $ 51.8 million incurred to purchase the Capped Call Transactions was recorded as a reduction to additional paid-in capital (net of $ 12.9 million in deferred taxes) on our consolidated balance sheet as of fiscal 2023 year-end.

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.

The New Term Loan Facility will mature in January 2026.

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

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 in January 2026.

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

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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.

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 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.

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.

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

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 %.

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

At fiscal 2023 year-end, we had $ 320 million in outstanding borrowings under the Amended Credit Agreement, which was all under the New Term Loan Facility, and no borrowings under the Amended Revolving Credit Facility.

The weighted-average interest rate of the outstanding borrowings during fiscal 2023 was 5.71 %.

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

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

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

At fiscal 2023 year-end, we were in compliance with these covenants with a consolidated leverage ratio of 1.79 x and a consolidated interest coverage ratio of 9.84 x.

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.

At fiscal 2023 year-end, there were no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $ 54.9 million.

As of October 1, 2023 we had no bank overdrafts related to our disbursement bank accounts.

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

(in thousands)

The following table presents scheduled maturities of our long-term debt (in thousands) :

Total $ 895,000

Subsequent Event:

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

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

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

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We determine if an arrangement is a lease at inception.

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

Operating leases are included in "Right-of-use assets, operating leases", "Short-term lease liabilities, operating leases" and "Long-term lease liabilities, operating leases" in the consolidated balance sheets.

Our finance leases are primarily for certain IT equipment.

The related ROU assets and lease liabilities were immaterial.

Our finance leases are immaterial.

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

Operating lease ROU assets and liabilities are recognized at

commencement date based on the present value of lease payments over the lease term.

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

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

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

The components of lease costs are as follows:

In fiscal 2023, we exited certain lease arrangements as a result of the RPS acquisition and its subsequent integration.

Accordingly, we evaluated the ongoing value of the ROU assets associated with the discontinued lease agreements.

Based on this evaluation, we determined that some long-lived assets were no longer recoverable and were in fact impaired.

Fair value was based on expected future cash flows using Level 3 inputs under Accounting Standards Codification Topic 820, Fair Value Measurement ("ASC 820").

The cash flows are those expected to be generated by the market participants, discounted at a real estate-based rate of interest.

As a result of our evaluation, we recorded a $ 16.4 million non-cash charge related to the ROU operating lease asset impairment which was reported in our fiscal 2023 statement of income, and a corresponding decrease to our ROU assets operating leases on our consolidated balance sheet as of fiscal 2023 year-end.

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

Fiscal Year Ended

2023 October 2,

(in thousands)

Operating lease cost $ 93,674 $ 86,725

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Total lease cost $ 92,934 $ 86,575

Supplemental cash flow information related to leases is as follows:

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

Fiscal Year Ended

2023 October 2,

(in thousands)

Operating cash flows for operating leases $ 78,268 $ 71,365

Right-of-use assets obtained in exchange for new operating lease liabilities 70,552 44,096

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

Supplemental balance sheet and other information related to leases are as follows (in thousands):

Fiscal Year Ended

2023 October 2,

(in thousands)

Operating leases:

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Current 65,005 57,865

Long-term 146,285 174,285

Non-current 144,685 146,285

Total operating lease liabilities $ 209,690 $ 204,150

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Operating leases 3.0 % 2.2 %

As of October 2, 2022 , we do not have any material additional operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our operating lease liabilities as of October 2, 2022 is as follows:

(in thousands)

As of fiscal 2023 year-en d, we had $ 8.3 million of operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our operating lease liabili ties as of fiscal 2023 year-end is as follows (in thousands):

2024 $ 69,562

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Stockholders' Equity and Stock Compensation Plans

At October 2, 2022, we had the following stock-based compensation plans:

• 2005 Equity Incentive Plan.

Key employees and non-employee directors may be granted equity awards, including stock options, restricted stock and restricted stock units ("RSUs").

Options vest at 25 % on each anniversary of the grant date and expire no later than eight years from the grant date.

RSUs granted to date vest at 25 % on each anniversary of the grant date.

At fiscal 2023 year-end, we had the following stock-based compensation plans:

• 2015 Equity Incentive Plan ("2015 EIP").

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Shares issued with respect to awards granted under the 2015 EIP other than stock options or stock appreciation rights, which are referred to as "full value awards", are counted against the 2015 EIP's aggregate share limit as three shares for every share or unit actually issued .

No awards have been made under the 2015 Equity Incentive Plan since the adoption of the 2018 Equity Incentive Plan on March 8, 2018 described below.

No awards have been made under the 2015 Equity Incentive Plan since the adoption of the 2018 Equity Incentive Plan on March 8, 2018 as described below.

• 2018 Equity Incentive Plan ("2018 EIP") .

Key employees and non-employee directors may be granted equity awards, including stock options, PSUs and RSUs.

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

At October 2, 2022, there were 2.2 million shares available for future awards pursuant to the 2018 EIP.

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

At fiscal 2023 year-end, there were 2.7 million shares available for future awards pursuant to the 2018 EIP.

• Employee Stock Purchase Plan ("ESPP").

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An aggregate of 282,350 shares may be issued pursuant to such exercise.

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

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

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

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

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

The following table presents our stock-based compensation and related income tax benefits (in thousands):

Fiscal Year Ended

2023 October 2,

2021 September 27,

(in thousands)

2022 October 3,

Total stock-based compensation $ 28,607 $ 26,227 $ 23,067

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Stock Options

The following table presents our stock option activity for fiscal year ended October 2, 2022:

The following table presents our stock option activity for fiscal 2023 year-end:

(in thousands) Weighted-

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Forfeited — —

Outstanding at October 2, 2022 168 $ 38.62 4.04 $ 15,086

Vested or expected to vest at October 2, 2022 168 $ 38.62 4.04 $ 15,086

Outstanding on October 1, 2023 148 $ 39.45 3.20 $ 16,708

Vested or expected to vest on October 1, 2023 148 $ 39.45 3.20 $ 16,708

Exercisable on October 1, 2023 148 $ 39.45 3.20 $ 16,708

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

No stock options we re granted in fiscal 2022, 2021 and 2020.

No stock options were granted in fiscal 2023, 2022 and 2021.

The aggregate intrinsic value of options exercised during fiscal 2023, 2022 and 2021 was $ 2.5 million, $ 5.7 million and $ 29.4 million, respectively.

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Forfeited ( 14 ) 77.74 ( 1 ) 74.05

Nonvested balance at September 27, 2020 444 63.93 355 64.83

Nonvested balance at October 3, 2021 381 83.30 318 82.96

Granted 78 184.61 42 247.16

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Fiscal 2023 includes a payout adjustment of 68,792 PSUs due to the actual performance level achieved for PSUs granted in fiscal 2020 that vested during fiscal 2023.

During fiscal 2022, 2021 and 2020, we awar ded 77,844 , 117,934 and 167,525 shares of RSUs, respectively, to our key employees and non-employee directors.

In fiscal 2023, 2022 and 2021, we awar ded 105,082 , 77,844 and 117,934 shares of RSUs, respectively, to our key employees and non-employee directors.

The weighted-average grant-date fair value of RSUs granted during fiscal 2023, 2022 and 2021 was $ 156.33 , $ 184.61 and $ 122.02 , respectively.

At October 2, 2022, there were 299,055 RSUs outstanding.

At fiscal 2023 year-end, there were 269,424 RSUs outstanding.

RSU forfeitures result from employment terminations prior to vesting.

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

During fiscal 2022, 2021 and 2020, we awarded 41,734 , 57,542 and 74,011 shares of PSUs, respectively, to our executive officers and non-employee directors.

The weighted-average grant-date fair value of PSUs granted during fiscal 2022, 2021 and 2020 was $ 247.16 , $ 153.03 and $ 99.85 , respectively.

In fiscal 2023, 2022 and 2021, we awarded 56,214 , 41,734 and 57,542 shares of PSUs, respectively, to our executive officers and non-employee directors.

The weighted-average grant-date fair value of PSUs granted in fiscal 2023, 2022 and 2021 was $ 195.50 , $ 247.16 and $ 153.03 , respectively.

At fiscal 2023 year-end, there were 249,880 PSUs outstanding.

The stock-based compensation expense related to RSUs and PSUs for fiscal 2023, 2022 and 2021 was $ 26.2 million, $ 23.9 million and $ 20.9 million, respectively, and was included in total stock-based compensation expense.

The actual income tax benefit realized from RSUs and PSUs for fiscal 2023, 2022 and 2021 was $ 4.0 million, $ 9.1 million and $ 6.2 million, respectively.

At October 2, 2022, there was $ 35.9 million of unrecognized stock-based compensation costs r elated to nonvested RSUs and PSUs that will be substantially recognized by the end of fiscal 2025.

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

At fiscal 2023 year-end, there was $ 38.8 million of unrecognized stock-based compensation costs related to nonvested RSUs and PSUs that will be substantially recognized by fiscal 2026 year-end.

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

Fiscal Year Ended

2023 October 2,

2021 September 27,

(in thousands, except for purchase price)

2022 October 3,

Shares purchased 98 106 124

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2023 October 2,

2021 September 27,

2022 October 3,

Dividend yield 0.7 % 1.0 % 1.0 %

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The expected life was based on the ESPP terms and conditions.

Stock-based compensation expense for fiscal 2022, 2021 and 2020 included $ 2.3 million, $ 2.0 million and $ 1.2 million, respectively, related to the ESPP.

Stock-based compensation expense for fiscal 2023, 2022 and 2021 includ ed $ 2.4 million, $ 2.3 million and $ 2.0 million, respectively, related to the ESPP.

The unrecognized stock-based compensation costs for awards granted under the ESPP at fiscal 2023 and 2022 year-ends were $ 0.6 million and $ 0.6 million, respectively.

At October 2, 2022, ESPP participants had accumulated $ 11 million to purchase our common stock.

At fiscal 2023 year-end, ESPP participants had accumulated $ 12 million to purchase our common stock.

Retirement Plans

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

At October 2, 2022 and October 3, 2021, the consolidated balance sheets reflect assets of $ 36.7 million and $ 41.4 million, respectively, related to the deferred compensation plan in "Other long-term assets," and liabilities of $ 36.3 million and $ 41.1 million, respectively, related to the deferred compensation plan in "Other long-term liabilities." The net gains and losses related to the deferred compensation plan are reported as part of “Selling, general and administrative expenses” in our c onsolidated statements of income .

At fiscal 2023 and 2022 year-ends, the consolidated balance sheets reflect assets of $ 43.5 million and $ 36.7 million, respectively, related to the deferred compensation plan in "Other long-term assets," and liabilities of $ 43.4 million and $ 36.3 million, respectively, related to the deferred compensation plan in "Other long-term liabilities." The net gains and losses related to the deferred compensation plan are reported as part of “Selling, general and administrative expenses” in our c onsolidated statements of income .

These related net gains and losses were immaterial for fiscal 2023 , 2022 and 2021 .

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The change in the defined benefit obligation, the change in fair value of plan assets and the amounts recognized in the Consolidated Statement of Income, the Consolidated Statement of Comprehensive Income and the Consolidated Statements of Shareholders’ Equity for fiscal 2023 and fiscal 2022 were immaterial.

The Plan's funded status was as follows:

The Plan's funded status was as follows (in thousands) :

Fiscal Year Ended

2023 October 2,

(in thousands)

Fair value of plan assets $ 39,572 $ 36,250

1 unchanged sentence

Net surplus $ 4,269 $ 3,244

The net surplus is reflected in other long-term assets on our consolidated balance sheets at October 2, 2022 and October 3, 2021.

As the plan is closed to new participants and to future benefit accrual, the reduction in the fair value of plan assets and the benefit obligation were primarily due to actual losses on plan assets and an increased discount rate, respectively.

Benefits paid during fiscal 2022 were $ 1.0 million.

The net surplus is reflected in other long-term assets on our consolidated balance sheets as of fiscal 2023 and 2022 year-ends.

The plan is closed to new participants and to future benefit accrual.

The benefits paid in fiscal 2023 and 2022 were $ 1.3 million and $ 1.0 million, respectively.

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

The fair values of the plan assets by major asset categories were as follows:

The fair values of the plan assets by major asset categories were as follows (in thousands) :

Fiscal Year Ended

2023 October 2,

(in thousands)

Equities $ 2,213 $ 8,390

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Liability driven investment funds 13,807 6,484

Bonds 2,354 —

Cash/other 740 490

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

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

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

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

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Earnings per Share

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

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

Fiscal Year Ended

2023 October 2,

2021 September 27,

(in thousands, except per share data)

2022 October 3,

Net income attributable to Tetra Tech $ 273,420 $ 263,125 $ 232,810

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Diluted $ 5.10 $ 4.86 $ 4.26

For fisc al 2022, 2021 and 2020, no options were exc luded from the calculation of dilutive potential common shares.

For fiscal 2023, 2022 and 2021, no options were excluded from the calculation of dilutive potential common shares.

The Convertible Notes had no impact on the calculation of dilutive potential common shares in fiscal 2023, as the price of our common stock did not exceed the conversion price.

The Capped Call Transactions are excluded from the calculation of dilutive potential common shares as their effect is anti-dilutive.

Derivative Financial Instruments

We use certain interest rate derivative contracts to hedge interest rate exposures on our variable rate debt.

Also, we may enter in foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings could adversely be affected by foreign currency exchange rate fluctuations.

Also, we may enter into foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings could adversely be affected by foreign currency exchange rate fluctuations.

Our hedging program is not designated for trading or speculative purposes.

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

In the anticipation of the planned acquisition of RPS, we entered into a forward contract during the fourth quarter of fiscal 2022 to acquire GBP 714.0 million at a rate of 1.0852 for a total of USD 774.8 million.

The contract matures on December 30, 2022.

In the fourth quarter of fiscal 2022, we entered into a forward contract to acquire GBP 714.0 million at a rate of 1.0852 for a total of USD 774.8 million that was integrated with our plan to acquire RPS.

This contract matured on December 30, 2022.

On December 28, 2022, we entered into an extension of the integrated forward contract to acquire GBP 714.0 million at a rate of 1.086 for a total of USD 775.4 million, extending the maturity date to January 23, 2023, the closing date of the RPS acquisition.

Although an effective economic hedge of our foreign exchange risk related to this transaction, the forward contract did not qualify for hedge accounting.

As a result, the forward contract is marked-to-market with changes in fair value recognized in earnings each period.

As a result, the forward contract was marked-to-market with changes in fair value recognized in earnings each period.

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, which resulted in an unrealized gain of the same amount in the fourth quarter fiscal 2022, which is reflected in “Other income" on the consolidated income statement for fiscal 2022.

The related $ 19.9 million asset is reported in "Prepaid expenses and other current assets" on the consolidated balance sheet at October 2, 2022.

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.

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

As of October 2, 2022, the notional principal of our outstanding interest swap agreements was $ 200.0 million ($ 40.0 million each.) The interest rate swaps have a fixed interest rate of 2.79 % and expire in July 2023 for all five agreements.

At October 2, 2022 and October 3, 2021, the fair value of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect was an unrealized gain of $ 2.4 million and an unrealized loss of $ 9.4 million, which were reported in "Other long-term assets" and "Other current liabilities" on our consolidated balance sheets, respectively.

Additionally, the related gain of $ 11.8 million, a gain of $ 6.1 million and a loss of $ 4.6 million for fiscal year ended 2022, 2021 and 2020, respectively, were recognized and reported on our consolidated statements of comprehensive income.

We expect to reclassify a credit of $ 3.1 million from accumulated other comprehensive loss to interest expense within the next 12 months.

The five swaps expired on July 31, 2023.

At fiscal 2022 year-end, the fair value of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect was an unrealized gain of $ 2.4 million, which was reported in "Other non-current assets" on our consolidated balance sheet.

Additionally, the related loss of $ 2.4 million, a gain of $ 11.8 million and a gain of $ 6.1 million for fiscal year ended 2023, 2022 and 2021, respectively, were recognized and reported on our consolidated statements of comprehensive income.

There were no other derivative instruments that were not designated as hedging instruments for fiscal 2023, 2022 and 2021.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

The accumulated balances and reporting period activities for fiscal 2022, 2021 and 2020 related to reclassifications out of accumulated other comprehensive income are summarized as follows:

The accumulated balances and reporting period activities for fiscal 2023, 2022 and 2021 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

Adjustments Gain (Loss)

on Derivative

Instruments Accumulated

Instruments Net Pension Adjustments Accumulated

Comprehensive

Income (Loss)

(in thousands)

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

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

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

Amounts reclassified from accumulated other comprehensive income

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— ( 6,058 ) — ( 6,058 )

Net current-period other comprehensive income (loss) 3,436 ( 4,638 ) ( 1,202 )

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

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

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

Other comprehensive income before reclassifications ( 94,922 ) 15,937 — ( 78,985 )

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— ( 4,131 ) — ( 4,131 )

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

Net current-period other comprehensive (loss) income ( 94,922 ) 11,806 — ( 83,116 )

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

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— 2,780 — 2,780

Net current-period other comprehensive income ( 94,922 ) 11,806 ( 83,116 )

Net current-period other comprehensive income (loss) 12,623 ( 2,412 ) 2,638 12,849

Balances at October 1, 2023 $ ( 197,933 ) $ — $ 2,638 $ ( 195,295 )

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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).

The carrying value of our long-ter m debt approximated fair value at October 2, 2022 and October 3, 2021.

At October 2, 2022, we had borrowings of $ 258.8 million outstanding under our Amended Credit Agreement, which were used to fund our business acquisitions, working capital needs, stock repurchases, dividends, capital expenditures and contingent earn-outs.

The carrying value of our long-term debt approximated fair value at the end of our fiscal 2023 and 2022.

At fiscal 2023 year-end, we had borrowings of $ 320 million outstanding under our Amended Credit Agreement and $ 575 million outstanding under our Convertible Senior

Notes, which were used to fund our business acquisitions, working capital needs, dividends, capital expenditures and contingent earn-outs (see Note 9, "Long-Term Debt ").

Defined Benefit Pension Plan.

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government clients (federal, state and local) and all activities with development agencies worldwide.

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

Our CIG reporta ble segment primarily includes activities with U.S.

commercial clients and international clients other than development agencies.

Additionally , we continue to report the results of the wind-down of our non-core construction activities in the RCM reportable segment.

There has been no remaining backlog for RCM since fiscal 2018 as the projects were complete.

Our reportable segments are described as follows:

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GSG also provides engineering design services for U.S.

municipal and commercial clients, especially in water infrastructure, solid waste and high-end sustainable infrastructure designs.

GSG also leads our support for development agencies worldwide, especially in the United States, the United Kingdom and Australia.

based federal and municipal clients, especially in water infrastructure, flood protection and solid waste.

GSG also leads our support for development agencies worldwide, especially in the United States, United Kingdom and Australia.

CIG primarily provides high-end consulting and engineering services to U.S.

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

commercial clients, and international clients inclusive of the commercial and government sectors.

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

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

We continued to report the results of the wind-down of our non-core construction activities in the RCM reportable segment in fiscal 2022.

There has been no remaining backlog for RCM since fiscal 2018 as the projects were complete.

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

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, 2021 and 2020.

Management evaluates the performance of these reportable segments based upon their respective segment operating income before the effect of amortization expense related to acquisitions, and other unallocated corporate expenses.

Management eva luates the performance of these reportable segments based upon their respective segment operating income before the effect of amortization expense related to acquisitions, and other unallocated corporate expenses.

We account for inter-segment revenues and transfers as if they were to third parties;

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All significant intercompany balances and transactions are eliminated in consolidation.

The following tables present summarized financial information of our reportable segments:

In fiscal 2023, our Corporate segment operating losses included $ 33.2 million of acquisition and integration expenses as described in Note 5, "Acquisitions".

We also recorded a $ 16.4 million ($ 6.8 million in GSG, $ 8.3 million in CIG and $ 1.3 million in Corporate) of a non-cash impairment charge related to our ROU operating lease assets in fiscal 2023 (see Note 10, "Leases" for more information.)

T he following tables present summarized financial information of our reportable segments (in thousands):

Reportable Segments

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2023 October 2,

2021 September 27, 2020

(in thousands)

2022 October 3, 2021

GSG $ 2,158,889 $ 1,820,868 $ 1,772,905

CIG 2,424,649 1,738,436 1,500,074

RCM — 613 198

Elimination of inter-segment revenue ( 60,988 ) ( 55,256 ) ( 59,466 )

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The intangible asset amortization expense for fiscal 2023, 2022 and 2021 was $ 41.2 million, $ 13.2 million and $ 11.5 million, respectively.

Additionally, Corporate results included income (loss) for fair value adjustments to contingent consideration liabilities of $( 0.3 ) million, $ 3.3 million and $ 15.0 million for fiscal 2022,

2021 and 2020, respectively.

Corporate results in fiscal 2020 also included $ 15.8 million goodwill impairment charges.

See No te 6 - "Goodwill and Intangible Assets" for more information.

Additionally, Corporate results included (loss) income for fair value adjustments to contingent consideration liabilities of $( 12.3 ) million, $( 0.3 ) million and $ 3.3 million for fiscal 2023, 2022 and 2021, respectively.

See Note 6 - "Goodwill and Intangible Assets" for more information.

2023 October 2,

(in thousands)

GSG $ 543,066 $ 558,764

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2023 October 2,

2021 September 27, 2020

(in thousands)

2022 October 3, 2021

United States $ 2,863,635 $ 2,416,586 $ 2,256,086

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2023 October 2,

(in thousands)

United States $ 159,856 $ 199,875

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Our related reimbursable costs for fiscal 2023, 2022 and 2021 were $ 78.5 million, $ 91.7 million and $ 92.4 million, respectively.

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

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

October 1, 2023 October 2, 2022

(in thousands)

Accounts receivable, net $ 19,944 $ 16,818

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Quarterly Financial Information – Unaudited

In the opinion of management, the followin g unaudited quarte rly data for the fiscal years ended October 2, 2022 and October 3, 2021 reflect all adjustments necessary for a fair statement of the results of operations.

In the fourth quarter of fiscal 2022, we recognized a $ 19.9 million unrea lized gain on a foreign currency forward contract related to the planned acquisition of RPS.

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

In the opinion of management, the followin g unaudited quarte rly data for the fiscal 2023 and 2022 reflect all adjustments necessary for a fair statement of the results of operations (in thousands, except per share data).

In the fourth quarter of fiscal 2022 and in the first and second quarters of fiscal 2023, we recognized a $ 19.9 million, $ 68.0 million and $ 21.4 million, respectively, of unrea lized gain on a foreign currency forward contract related to the planned acquisition of RPS.

We also recorded a $ 16.4 million of a non-cash impairment charge related to our ROU operating lease assets in the fourth quarter of fiscal 2023 (see Note 10, "Leases" for more information).

Additionally, we incurred $ 33.2 million of acquisition and integration expenses in fiscal 2023 (largely comprised of $ 19.9 million in the second quarter and $ 7.3 million in fourth quarter) as described in Note 5, "Acquisitions".

Quarter Second

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Quarter Fourth

(in thousands, except per share data)

Fiscal Year 2023

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data