What changed in this filing

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Item 1. Financial Statements

2024-02-02 compared with 2023-08-10 · 213 added, 205 removed, 498 unchanged (46% of the section changed)

3 unchanged sentences

(unaudited - in thousands, except par value)

ASSETS July 2,

ASSETS December 31,

2023 October 1,

18 unchanged sentences

Short-term lease liabilities, operating leases 68,091 65,005

Current portion of long-term debt 12,505 12,504

Current contingent earn-out liabilities 37,556 51,108

8 unchanged sentences

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

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

no shares issued and outstanding at December 31, 2023 and October 1, 2023

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

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

issued and outstanding, 53,466 and 53,248 shares at December 31, 2023 and October 1, 2023, respectively

Additional paid-in capital 9,979 —

9 unchanged sentences

(unaudited – in thousands, except per share data)

Three Months Ended Nine Months Ended

Three Months Ended

2023 January 1,

Revenue $ 1,228,267 $ 894,766

23 unchanged sentences

(unaudited – in thousands)

Three Months Ended Nine Months Ended

Three Months Ended

2023 January 1,

Net income $ 74,980 $ 116,715

4 unchanged sentences

Net pension adjustments ( 13 ) —

Other comprehensive income (loss), net of tax 43,456 ( 42,504 ) 70,218 ( 32,779 )

Other comprehensive income, net of tax 63,093 33,018

Comprehensive income, net of tax $ 138,073 $ 149,733

5 unchanged sentences

(unaudited – in thousands)

Nine Months Ended

Three Months Ended

2023 January 1,

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization 19,484 6,616

Equity in income of unconsolidated joint ventures ( 4,831 ) ( 5,233 )

Distributions of earnings from unconsolidated joint ventures 4,345 4,532

Amortization of stock-based awards 7,641 7,184

Deferred income taxes ( 1,624 ) 15,935

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

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

Fair value adjustments to foreign currency forward contract — ( 67,995 )

Other non-cash items 123 601

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

4 unchanged sentences

Contract liabilities 41,862 27,769

Other liabilities ( 6,921 ) ( 12,702 )

Income taxes receivable/payable ( 15,941 ) 4,387

Other liabilities ( 20,097 ) ( 26,432 )

Net cash provided by operating activities 9,246 25,191

Cash flows from investing activities:

Payments for business acquisitions, net of cash acquired ( 854,319 ) ( 33,624 )

Capital expenditures ( 3,456 ) ( 4,996 )

Proceeds from sale of assets 22 51

Settlement of foreign currency forward contract 109,306 —

Net cash used in investing activities ( 3,434 ) ( 4,945 )

2 unchanged sentences

Repayments on long-term debt ( 60,000 ) ( 73,125 )

Repurchases of common stock — ( 150,000 )

Taxes paid on vested restricted stock ( 12,670 ) ( 16,586 )

Payments of contingent earn-out liabilities ( 18,862 ) —

Stock options exercised 335 57

Dividends paid ( 13,873 ) ( 12,186 )

Payments of contingent earn-out liabilities ( 15,078 ) ( 4,035 )

Principal payments on finance leases ( 1,539 ) ( 1,316 )

Net cash provided by (used in) financing activities 18,391 ( 42,267 )

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

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

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

Cash and cash equivalents at end of period $ 176,056 $ 217,384

Effect of exchange rate changes on cash, cash equivalents and restricted cash 5,655 8,695

Net increase (decrease) in cash, cash equivalents and restricted cash 29,858 ( 13,326 )

Cash, cash equivalents and restricted cash at beginning of period 168,831 185,491

Cash, cash equivalents and restricted cash at end of period $ 198,689 $ 172,165

Supplemental information:

1 unchanged sentence

Interest $ 9,768 $ 3,433

Income taxes, net of refunds received of $ 1.5 million and $ 4.2 million

Income taxes, net of refunds received o f $ 0.9 million and $ 0.1 million

$ 43,297 $ 14,540

Supplemental disclosures on non-cash investing activities:

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

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents $ 198,689 $ 164,397

Restricted cash — 7,768

Total cash, cash equivalents and restricted cash $ 198,689 $ 172,165

See Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Stockholders' Equity

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

(unaudited – in thousands)

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Retained

Earnings Total

Equity Non-Controlling

Interests Total

Shares Amount

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

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

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

Cash dividends of $ 0.23 per common share

( 12,311 ) ( 12,311 ) ( 12,311 )

Stock-based compensation 12,747 ( 6,035 ) 6,712 6,712

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

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

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

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

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

Other comprehensive income 43,455 43,455 1 43,456

Cash dividends of $ 0.26 per common share

( 13,840 ) ( 13,840 ) ( 13,840 )

Stock-based compensation 7,038 7,038 7,038

Restricted & performance shares released 3 — ( 105 ) ( 105 ) ( 105 )

Stock options exercised 12 — 334 334 334

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

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

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

Three Months Ended January 1, 2023 and December 31, 2023

(unaudited – in thousands)

9 unchanged sentences

Net income 116,706 116,706 9 116,715

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

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

Other comprehensive income 33,018 33,018 33,018

Cash dividends of $ 0.23 per common share

4 unchanged sentences

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

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

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

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

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

7 unchanged sentences

Shares issued for Employee Stock Purchase Plan 104 1 14,674 14,675 14,675

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

BALANCE AT DECEMBER 31, 2023 53,466 $ 534 $ 9,979 $ ( 132,202 ) $ 1,659,295 $ 1,537,606 $ 81 $ 1,537,687

See Notes to Consolidated Financial Statements.

11 unchanged sentences

Recent Accounting Pronouncements

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.

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No.

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

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

In fiscal 2020, the Canadian federal government implemented the Canadian Emergency Wage Subsidy ("CEWS") program in response to the negative impact of the coronavirus disease 2019 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.

The $ 26.0 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.

We expect to distribute approximately $ 9 million in the next twelve months.

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

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

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

In the first quarter of fiscal 2024, we distributed approximately $ 10 million to our Canadian employees.

The remaining $ 11 million, which we expect to distribute within one year, is reported in "Accrued compensation".

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

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires that an entity report segment information in accordance with Topic 280, Segment Reporting.

The amendments in the ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 (fiscal 2025 for us).

Early adoption is permitted.

We are currently evaluating the impact of this guidance on our consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid.

The amendments in the ASU are intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this ASU are effective for annual periods beginning after December 15, 2024 (fiscal 2026 for us).

Early adoption is permitted.

We are currently evaluating the impact of this guidance on our consolidated financial statements;

however, we do not plan to adopt Topic 740 before fiscal 2026.

Revenue and Contract Balances

1 unchanged sentence

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

Three Months Ended Nine Months Ended

Three Months Ended

2023 January 1,

Client Sector:

14 unchanged sentences

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

clien ts, primarily in Canada, Australia and the United Kingdom.

clien ts, 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 the three and nine months ended July 2, 2023 and July 3, 2022.

federal government, no single client accounted for more than 10% of our revenue for the first quarters of fiscal 2024 and 2023.

Contract Assets and Contract Liabilities

15 unchanged sentences

Net contract liabilities $ ( 293,789 ) $ ( 221,105 )

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

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

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

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

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

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

(1) Inclu des $ 6.0 million and $ 6.8 million of contract retentions at December 31, 2023 and October 1, 2023, respectively.

In the first quarters of fiscal 2024 and 2023, we recognized revenue of approximately $ 130 million and $ 81 million, respectively, from the amounts included in the contract liability balances at the end of fiscal 2023 and 2022, respectively.

Revenue is recognized by measuring progress over time under Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers".

We estimate and measure progress on our contracts over time whereby we compare our total costs incurred on each contract as a percentage of the total expected contract costs.

Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the

period in which such changes are made.

As a result, in the first quarters of fiscal 2024 and 2023, we recognized net favorable revenue and operating income adjustments of $ 5.7 million and $ 3.5 million, respectively.

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

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

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

At December 31, 2023 and October 1, 2023, our consolidated balance sheets included liabilities for anticipated losses of $ 9.2 million and $ 8.5 million, respectively.

The estimated cost to complete these related contracts was approximately $ 68 million at December 31, 2023 and October 1, 2023.

Accounts Receivable, Net

8 unchanged sentences

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

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

Substantially all of our unbilled receivables at December 31, 2023 are expected to be billed and collecte d within 12 months.

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

1 unchanged sentence

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

and general economic and industry conditions.

and general economic and industry conditions , 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 July 2, 2023 and October 2, 2022.

federal government, no single client accounted for more than 10% of our accounts receivable at December 31, 2023 and October 1, 2023.

Remaining Unsatisfied Performance Obligations (“RUPO”)

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

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

We had $ 4.7 billion of RUPO at December 31, 2023.

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

1 unchanged sentence

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

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

We expect to satisfy our RUPO at December 31, 2023 over the following periods (in thousands):

Within 12 months $ 3,149,015

3 unchanged sentences

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

Our operations and maintenance contracts can generally be

terminated by the clients without a substantive financial penalty.

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

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

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

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

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.

3 unchanged sentences

This forward contract is explained further in Note 15, "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):

The table below represents the purchase price allocation for RPS based on estimates, assumptions, valuations and other analyses as of January 23, 2023.

The purchase consideration, excluding the aforementioned forward contract gain, was 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

14 unchanged sentences

Other current liabilities ( 135,474 )

Long-term debt ( 91,973 )

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

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

12 unchanged sentences

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):

Three Months Ended Nine Months Ended

Following are the supplemental consolidated financial results of Tetra Tech and RPS for the first quarter of fiscal 2023 on an unaudited pro forma basis, as if the RPS acquisition had been consummated as of the beginning of fiscal 2022 (in thousands):

Three Months Ended

Revenue $ 1,107,301

Net Income including noncontrolling interests $ 63,701

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

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

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

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

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

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

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.

2 unchanged sentences

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

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 the 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.

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

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

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.

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

The results of fiscal 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.

1 unchanged sentence

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

Our 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.

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.

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 eight years .

lives of the underlying assets, ranging from one to twelve years .

These consist of client relations, backlog and trade names.

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

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

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 “Non-current contingent earn-out liabilities” on the consolidated balance sheets.

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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.

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.

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

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

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

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

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

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

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

In the first quarter of fiscal 2024, we evaluated our estimates for contingent consideration liabilities for the remaining earn-out periods for each individual acquisition, which included a review of their financial results to-date, the status of ongoing projects in their RUPO, and the inventory of prospective new contract awards.

For the first quarters of fiscal 2024 and 2023, we had no material adjustments to our contingent earn-out liabilities in operating income.

The following table summarizes the changes in the fair value of estimated contingent consideration for the first quarters of fiscal 2024 and 2023 (in thousands):

Three Months Ended

2023 January 1,

Beginning balance $ 73,422 $ 65,566

Payments of contingent consideration ( 18,862 ) —

Adjustments to fair value recorded in earnings ( 37 ) 933

Interest accretion expense 471 513

Effect of foreign currency exchange rate changes 610 2,017

Ending balance $ 55,604 $ 69,029

Maximum potential payout at end of period $ 92,253 $ 120,882

Goodwill and Intangible Assets

2 unchanged sentences

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

Acquisition activity 104,100 619,832 723,932

Translation adjustments 2,731 40,171 42,902

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

Balance at December 31, 2023 $ 662,673 $ 1,260,473 $ 1,923,146

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

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

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

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

The gross amounts for GSG were $ 680.4 million and $ 677.6 million at December 31, 2023 and October 1, 2023, respectively, excluding accumulated impairment of $ 17.7 million at each date.

The gross amounts of goodwill for CIG were $ 1,381.9 million and $ 1,341.8 million at December 31, 2023 and October 1, 2023, respectively, excluding accumulated impairment of $ 121.5 million at each date.

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

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

July 2, 2023 October 2, 2022

December 31, 2023 October 1, 2023

Remaining Life

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Total $ 280,622 $ ( 112,488 ) $ 168,134 $ 270,453 $ ( 96,517 ) $ 173,936

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

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

Amortization expense for the three months e nded December 31, 2023 w as $ 12.5 million, compared to $ 3.4 million for the prior-year periods.

Estimated amortization expense for the remainder of fiscal 2024 and succeeding years is as follows (in

2024 (remaining) $ 31,021

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Property and equipment, net $ 74,971 $ 74,832

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

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

The depreciation expense related to property and equipment was $ 7.0 million and $ 3.2 million for the first quarters of fiscal 2024 and 2023, respectively.

Stock Repurchase and Dividends

On October 5, 2021, our Board of Directors authorized a new stock repurchase program under which we could repurchase up to $ 400 million of our common stock .

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

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

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

We did not repurchase any shares of our common stock in the first quarters of fiscal 2024 and 2023.

At December 31, 2023, we had a remaining balance of $ 347.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first quarters of fis cal 2024 and 2023:

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

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November 13, 2023 $ 0.26 November 30, 2023 December 13, 2023 $ 13,873

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

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

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

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

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

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

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

Subsequent Event.

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

On January 29, 2024, our Board of Directors declared a quarterly cash dividend of $ 0.26 per share payable on February 27, 2024 to stockholders of record as of the close of business on February 14, 2024.

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

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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.

Our finance leases are immaterial.

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

Three Months Ended Nine Months Ended

Three Months Ended

2023 January 1,

Operating lease cost $ 24,232 $ 20,961

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

Nine Months Ended

Three Months Ended

2023 January 1,

Operating cash flows for operating leases $ 19,682 $ 16,493

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Operating leases 3.1 % 3.0 %

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

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

At December 31, 2023, we had $ 8.5 million of operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at December 31, 2023 is as follows (in thousands):

2024 (remaining) $ 57,581

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

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

Stock-based compensation expense for the three months ended December 31, 2023 was $ 7.6 million, compared to $ 7.2 million for the same periods last year.

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

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

In the first quarter of fiscal 2024, we awarded 55,836 performance share units (“PSUs”) to our non-employee directors and executive officers at an estimated fair value of $ 205.39 per share on the award date.

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

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

Three Months Ended Nine Months Ended

Three Months Ended

2023 January 1,

Net income attributable to Tetra Tech $ 74,972 $ 116,706

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Diluted $ 1.40 $ 2.18

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

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

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

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

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

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

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

For the first quarters of fiscal 2024 and 2023, no options were excluded from the calculation of dilutive potential common shares.

The Convertible Notes described in Note 14 "Long-Term Debt", had no impact on the calculation of dilutive potential common shares in the first quarter of fiscal 2024, as the price of our common stock did not exceed the conversion price.

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

The effective tax rates for the first three months of fiscal 2024 and 2023 were 26.1 % and 24.5 %, respectively.

Income tax expense was reduced by $ 1.0 million and $ 1.7 million of excess tax benefits on share-based payments in the first quarters of fiscal 2024 and 2023, respectively.

Excluding the impact of the excess tax benefits on share-based payments, our effective tax rates in the first quarters of fiscal 2024 and 2023 were 27.1 % and 25.7 %, respectively.

At December 31, 2023 and October 1, 2023, the liability for income taxes associated with uncertain tax positions was $ 61.7 million and $ 62.0 million, respectively.

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

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

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

government clients (federal, state and local) and international development agencies worldwide.

GSG supports U.S.

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

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

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

CIG supports commercial clients worldwide in renewable energy, industrial, high performance buildings and aerospace markets.

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

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All significant intercompany balances and transactions are eliminated in consolidation.

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

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

Three Months Ended Nine Months Ended

Three Months Ended

2023 January 1,

GSG $ 575,041 $ 471,067

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Fair Value Measurements

We classified our assets and liabilities that were carried at fair value in one of the following categories:

Quoted market prices in active markets for identical assets or liabilities.

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Unobservable inputs that are not corroborated by market data.

Derivative Instruments.

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

For additional information about our derivative financial instruments (see Note 15, "Derivative Financial Instruments").

Contingent Consideration.

We measure our contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy.

(see Note 4, "Acquisitions" for further information).

The fair value of long-term debt was determined using the present value of future cash flows based on the borrowing rates currently available for debt with similar terms and maturities (Level 2 measurement, as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended October 1, 2023).

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

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

Credit Facility

The carrying value of our long-term debt under our Credit Facility approximated fair value at December 31, 2023 and October 1, 2023.

At December 31, 2023, we had $ 385 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $ 320 million under the New Term Loan Facility and $ 65 million under the Amended Revolving Credit Facility.

The estimated fair value of our $ 575 million Convertible Senior Notes (the "Convertible Notes") was determined based on the trading price of the Convertible Notes as of the last trading day of our first quarter of fiscal 2024.

We consider the fair value of the Convertible Notes to be a Level 2 measurement as they are not actively traded in markets.

The carrying amounts and estimated fair values of the Convertible notes were approximately $ 562 million and $ 603 million, respectively, at December 31, 2023, and $ 561 million and $ 566 million, respectively, at October 1, 2023.

The Credit Facility and Convertible Notes were used to fund our business acquisitions, working capital needs, dividends, capital expenditures and contingent earn-outs.

Long-Term Debt

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

2023 October 1,

Credit facilities $ 385,000 $ 320,000

Convertible notes 575,000 575,000

Debt issuance costs and discount ( 14,681 ) ( 15,471 )

Long-term debt $ 945,319 $ 879,529

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.

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 consolidated balance sheets 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) :

2023 October 1,

Principal $ 575,000 $ 575,000

Unamortized discount and issuance costs ( 13,481 ) ( 14,158 )

Net carrying amount $ 561,519 $ 560,842

The following table sets forth the interest expense recognized related to the Convertible Notes for the first quarter of fiscal 2024 (in thousands) :

Interest expense 3,270

Amortization of discount and issuance costs 678

Total interest expense $ 3,948

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 of 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.

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

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

The 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.

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.

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

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

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

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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.

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

For the first quarter of fiscal 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 6.75 %.

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

At December 31, 2023, we had $ 434.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

The Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default.

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

At December 31, 2023, we were in compliance with these covenants with a consolidated leverage ratio of 1.84 x and a consolidated interest coverage ratio of 9.49 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 December 31, 2023, there were no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $ 57.4 million.

As of December 31, 2023, we had no bank overdrafts related to our disbursement bank accounts.

Derivative Financial Instruments

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This contract matured on December 30, 2022.

On December 28, 2022, we entered into an extension of the integrated forward contr act 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.

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 was marked-to-market with changes in fair value recogni zed 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, and an unrealized gain of the same amount was recognized in our fourth quarter of fiscal 2022 results.

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

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

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

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

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

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

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

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

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

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

The five swaps expired on July 31, 2023.

The related loss of $ 0.1 million was recognized and reported on our consolidated statement of comprehensive income for the first quarter of fiscal 2023.

There were no derivative instruments that were not designated as hedging instruments for the first quarters of fiscal 2024 and 2023.

Reclassifications Out of Accumulated Other Comprehensive Income

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

The accumulated balances and activities for the three months ended December 31, 2023 and January 1, 2023 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

Three Months Ended

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Instruments Net Pension Adjustments Accumulated Other Comprehensive Income (Loss)

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

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

Amounts reclassified from accumulated other comprehensive loss:

Interest rate contracts, net of tax (1)

— ( 1,033 ) — ( 1,033 )

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

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

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

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

Other comprehensive income (loss) before reclassifications 33,107 ( 535 ) — 32,572

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Interest rate contracts, net of tax (1)

— 1,093 — 1,093

Net current-period other comprehensive income (loss) 33,107 ( 89 ) — 33,018

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

Nine Months Ended

Adjustments Gain (Loss)

on Derivative

Instruments Net Pension Adjustments Accumulated Other Comprehensive Income (Loss)

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

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

Amounts reclassified from accumulated other comprehensive loss:

Interest rate contracts, net of tax (1)

— ( 3,849 ) ( 3,849 )

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

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

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

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

Other comprehensive income (loss) before reclassifications 63,106 — ( 13 ) 63,093

Amounts reclassified from accumulated other comprehensive loss:

Interest rate contracts, net of tax (1)

— 2,410 — 2,410

Net current-period other comprehensive income (loss) 63,106 — ( 13 ) 63,093

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

Balance at December 31, 2023 $ ( 134,827 ) $ — $ 2,625 $ ( 132,202 )

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

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District Court for the Northern District of California.

The complaint alleges False Claims Act violations and breach of contract related to TtEC's contracts to perform environmental remediation services at the former Hunters Point Naval Shipyard in San Francisco, California.

The complaint alleges False Claims Act violations and breach of contract related to TtEC's contracts to perform environmental remediation services at the former Hunters Point Naval

Shipyard in San Francisco, California.

TtEC disputes the claims and will defend this matter vigorously.

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We often provide services to unconsolidated joint ventures.

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

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

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

Our revenue related t o services we provided to unconsolidated joint ventures for the first quarters of fiscal 2024 and 2023 was approxima tely $ 19 million and $ 23 million, respectively.

Our related reimbursable costs for the first quarters of fiscal 2024 and 2023 were approximately $ 18 million a nd $ 22 million, respectively.

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

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

What changed 10-Q

Item 1. Financial Statements