UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



ý☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIESEXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2017~~July 3, 2022



o ☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIESEXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number 0-19655

TETRA TECH, INC.

(Exact name of registrant as specified in its charter)



Delaware						95-4148514
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

3475 East Foothill Boulevard, Pasadena, California 91107

(Address of principal executive offices) (Zip Code)

~~(626)~~(626) 351-4664

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

TTEK

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý☒ No o☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ý☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filerx

☒

Accelerated filero

☐

Non-accelerated filero

~~(Do not check if a smaller~~☐

Smaller reporting ~~company)~~company

☐

~~Smaller reporting company~~ o

Emerging growth companyo

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o☐ No ý☒

As of ~~January 29, 2018, 55,850,848 shares~~July 25, 2022, 53,318,715 shares of the registrant’s common stock were outstanding.

TETRA TECH, INC.

INDEX


PART I.		FINANCIAL INFORMATION		PAGE NO.

~~PART I.~~		~~FINANCIAL INFORMATION~~	~~PAGE NO.~~

Item 1.	Financial Statements ~~(unaudited)~~(Unaudited)		3

		Consolidated Balance Sheets as of ~~December 31, 2017~~J uly 3, 2022 and October ~~1, 2017~~3, 2021		3

		Consolidated Statements of Income for the Three and Nine Months Ended ~~December 31, 2017~~July 3, 2022 and ~~January 1, 2017~~J une 2 7 , 2021		4

		Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended ~~December 31, 2017~~July 3, 2022 and ~~January 1, 2017~~June 2 7 , 2021		5

		Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~December 31, 2017~~July 3, 2022 and ~~January 1, 2017~~June 2 7 , 2021		6

		Consolidated Statements of Equity for the Three and Nine Months Ended July 3, 2022 and June 2 7 , 2021		7

		Notes to Unaudited Consolidated Financial Statements		79

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		1924

Item 3.		Quantitative and Qualitative Disclosures About Market Risk		3035

Item 4.		Controls and Procedures		3035

PART II.		OTHER INFORMATION		3035

Item 1.		Legal Proceedings		3035

Item 1A.		Risk Factors		3136

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		4636

Item 4.		Mine Safety ~~Disclosure~~Disclosures		4636

Item 6.		Exhibits		4636

SIGNATURES				4738

PART I.FINANCIAL INFORMATION

Item 1.Financial Statements

Tetra Tech, Inc.

Consolidated Balance Sheets

(unaudited - in thousands, except par value)


ASSETS	December 31, 2017			October 1, 2017			ASSETS	July 3, 2022		October 3, 2021
Current assets:							Current assets:
Cash and cash equivalents	$	173,025		$	189,975		Cash and cash equivalents	$	217,384	$	166,568
Accounts receivable – net	846,201			788,767
Accounts receivable, net							Accounts receivable, net	722,868		668,998
Contract assets							Contract assets	99,830		103,784
Prepaid expenses and other current assets	65,856			49,969			Prepaid expenses and other current assets	94,497		112,338
Income taxes receivable	5,589			13,312			Income taxes receivable	10,778		14,260
Total current assets	1,090,671			1,042,023			Total current assets	1,145,357		1,065,948

Property and equipment – net	56,929			56,835
Property and equipment, net							Property and equipment, net	35,010		37,733
Right-of-use assets, operating leases							Right-of-use assets, operating leases	191,022		215,422
Investments in unconsolidated joint ventures	2,419			2,700			Investments in unconsolidated joint ventures	3,974		3,282
Goodwill	763,455			740,886			Goodwill	1,151,457		1,108,578
Intangible assets – net	24,533			26,688
Intangible assets, net							Intangible assets, net	33,943		37,990
Deferred tax assets	—			1,763			Deferred tax assets	56,634		54,413
Other long-term assets	32,980			31,850			Other long-term assets	60,309		53,196
Total assets	$	1,970,987		$	1,902,745		Total assets	$	2,677,706	$	2,576,562

LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	144,628		$	177,638		Accounts payable	$	138,190	$	128,767
Accrued compensation	100,833			143,408			Accrued compensation	224,611		206,322
Billings in excess of costs on uncompleted contracts	132,930			117,499
Current portion of long-term debt	15,511			15,588
Contract liabilities							Contract liabilities	247,013		190,403
Short-term lease liabilities, operating leases							Short-term lease liabilities, operating leases	60,101		67,452

Current portion of long-term debt and other short-term borrowings							Current portion of long-term debt and other short-term borrowings	27,081		12,504
Current contingent earn-out liabilities	7,868			2,024			Current contingent earn-out liabilities	32,386		19,520
Other current liabilities	82,146			81,511			Other current liabilities	216,083		223,515
Total current liabilities	483,916			537,668			Total current liabilities	945,465		848,483

Deferred tax liabilities	39,240			43,781			Deferred tax liabilities	18,282		10,563
Long-term debt	432,431			341,283			Long-term debt	234,375		200,000
Long-term lease liabilities, operating leases							Long-term lease liabilities, operating leases	154,499		174,285
Long-term contingent earn-out liabilities	13,218			414			Long-term contingent earn-out liabilities	50,900		39,777
Other long-term liabilities	55,061			50,975			Other long-term liabilities	69,127		69,163

Commitments and contingencies (Note 14)
Commitments and contingencies (Note 17)							Commitments and contingencies (Note 17)	0		0

Equity:							Equity:
Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at December 31, 2017 and October 1, 2017	—			—
Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 55,988 and 55,873 shares at December 31, 2017 and October 1, 2017, respectively	560			559
Additional paid-in capital	175,293			193,835
Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at July 3, 2022 and October 3, 2021							Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at July 3, 2022 and October 3, 2021	—		—
Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 53,319 and 53,981 shares at July 3, 2022 and October 3, 2021, respectively							Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 53,319 and 53,981 shares at July 3, 2022 and October 3, 2021, respectively	533		540

Accumulated other comprehensive loss	(101,901		)	(98,500		)	Accumulated other comprehensive loss	(157,806)		(125,028)
Retained earnings	873,004			832,559			Retained earnings	1,362,284		1,358,726
Tetra Tech stockholders’ equity	946,956			928,453			Tetra Tech stockholders’ equity	1,205,011		1,234,238
Noncontrolling interests	165			171			Noncontrolling interests	47		53
Total stockholders' equity	947,121			928,624			Total stockholders' equity	1,205,058		1,234,291
Total liabilities and stockholders' equity	$	1,970,987		$	1,902,745		Total liabilities and stockholders' equity	$	2,677,706	$	2,576,562

See Notes to Consolidated Financial Statements.

Tetra Tech, Inc.

Consolidated Statements of Income

(unaudited – in thousands, except per share data)


	Three Months Ended				Nine Months Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
Revenue	$	890,231	$	801,633	$	2,601,485	$	2,321,500
Subcontractor costs	(169,745)		(163,590)		(502,024)		(478,461)
Other costs of revenue	(575,902)		(512,347)		(1,679,937)		(1,488,549)
Gross profit	144,584		125,696		419,524		354,490
Selling, general and administrative expenses	(60,679)		(55,889)		(173,879)		(157,625)


Income from operations	83,905		69,807		245,645		196,865
Interest expense, net	(2,919)		(2,737)		(8,967)		(8,585)
Income before income tax expense	80,986		67,070		236,678		188,280
Income tax expense	(22,329)		(15,146)		(56,473)		(38,380)
Net income	58,657		51,924		180,205		149,900
Net income attributable to noncontrolling interests	(7)		(21)		(26)		(44)
Net income attributable to Tetra Tech	$	58,650	$	51,903	$	180,179	$	149,856
Earnings per share attributable to Tetra Tech:
Basic	$	1.10	$	0.96	$	3.35	$	2.77
Diluted	$	1.09	$	0.95	$	3.32	$	2.74
Weighted-average common shares outstanding:
Basic	53,507		54,117		53,777		54,095
Diluted	54,006		54,666		54,328		54,698

Three Months Ended
December 31,
2017 January 1,
2017
Revenue $ 759,749
$ 668,851
Subcontractor costs (214,902 ) (179,300 )
Other costs of revenue (450,702 ) (408,190 )
Gross profit 94,145
81,361

Selling, general and administrative expenses (45,556 ) (41,506 )
Income from operations 48,589
39,855

Interest expense (3,160 ) (2,908 )
Income before income tax benefit (expense) 45,429
36,947

Income tax benefit (expense) 623
(10,358 )
Net income 46,052
26,589

Net income attributable to noncontrolling interests (18 ) (27 )
Net income attributable to Tetra Tech $ 46,034
$ 26,562

Earnings per share attributable to Tetra Tech:

Basic $ 0.82
$ 0.47
Diluted $ 0.81
$ 0.46

Weighted-average common shares outstanding:

Basic 55,855
57,099
Diluted 56,875
58,145

Cash dividends paid per share $ 0.10
$ 0.09

See Notes to Consolidated Financial Statements.

Tetra Tech, Inc.

Consolidated Statements of Comprehensive Income

(unaudited – in thousands)


	Three Months Ended				Nine Months Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
Net income	$	58,657	$	51,924	$	180,205	$	149,900

Other comprehensive income, net of tax
Foreign currency translation adjustment, net of tax	(44,884)		11,159		(42,763)		54,527
Gain on cash flow hedge valuations, net of tax	2,380		1,498		9,984		4,864
Other comprehensive income (loss), net of tax	(42,504)		12,657		(32,779)		59,391

Comprehensive income, net of tax	$	16,153	$	64,581	$	147,426	$	209,291
Comprehensive income attributable to noncontrolling interests, net of tax	6		23		25		50
Comprehensive income attributable to Tetra Tech, net of tax	$	16,147	$	64,558	$	147,401	$	209,241

Three Months Ended
December 31,
2017 January 1,
2017
Net income $ 46,052
$ 26,589

Foreign currency translation adjustments (3,469 ) (15,999 )
Gain on cash flow hedge valuations 66
996
Other comprehensive loss, net of tax (3,403 ) (15,003 )

Comprehensive income, net of tax 42,649
11,586

Net income attributable to noncontrolling interests (18 ) (27 )
Foreign currency translation adjustments 2
(183 )
Comprehensive income attributable to noncontrolling interests (16 ) (210 )

Comprehensive income attributable to Tetra Tech, net of tax $ 42,633
$ 11,376

See Notes to Consolidated Financial Statements.

Tetra Tech, Inc.

Consolidated Statements of Cash Flows

(unaudited – in thousands)

Three Months Ended
December 31,
2017 January 1,
2017
Cash flows from operating activities:

Net income $ 46,052
$ 26,589
Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 9,983
11,191
Equity in income of unconsolidated joint ventures (839 ) (1,030 )
Distributions of earnings from unconsolidated joint ventures 1,121
1,114
Non-cash stock compensation 3,970
3,217
Deferred income taxes (10,100 ) 2,195
Provision for doubtful accounts 2,524
(1,128 )
Gain on disposal of property and equipment (411 ) (118 )
Changes in operating assets and liabilities, net of effects of business acquisitions:

Accounts receivable (36,011 ) (41,962 )
Prepaid expenses and other assets (16,321 ) (7,392 )
Accounts payable (35,169 ) (22,609 )
Accrued compensation (42,575 ) (36,884 )
Billings in excess of costs on uncompleted contracts 12,330
24,472
Other liabilities (8,974 ) (9,642 )
Income taxes receivable/payable 7,926
(6,760 )
Net cash used in operating activities (66,494 ) (58,747 )

Cash flows from investing activities:

Payments for business acquisitions, net of cash acquired (18,294 ) —
Capital expenditures (2,143 ) (2,031 )
Proceeds from sale of property and equipment 710
223
Net cash used in investing activities (19,727 ) (1,808 )

Cash flows from financing activities:

Proceeds from borrowings 120,026
88,950
Payments on long-term debt (25,026 ) (47,265 )
Repurchases of common stock (25,000 ) (10,000 )
Dividends paid (5,589 ) (5,144 )
Net proceeds from issuance of common stock 5,584
2,403
Net cash provided by financing activities 69,995
28,944

Effect of exchange rate changes on cash (724 ) (1,867 )

Net decrease in cash and cash equivalents (16,950 ) (33,478 )
Cash and cash equivalents at beginning of period 189,975
160,459
Cash and cash equivalents at end of period $ 173,025
$ 126,981

Supplemental information:

Cash paid during the period for:

Interest $ 2,913
$ 2,931
Income taxes $ 1,794
$ 14,831


	Nine Months Ended
	July 3, 2022		June 27, 2021
Cash flows from operating activities:
Net income	$	180,205	$	149,900
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	19,545		16,811
Equity in income of unconsolidated joint ventures	(5,233)		(3,513)
Distributions of earnings from unconsolidated joint ventures	4,532		2,773
Amortization of stock-based awards	19,104		16,261

Deferred income taxes	750		123

Fair value adjustments to contingent consideration	(64)		(163)
Loss (gain) on sale of assets	93		(110)

Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable and contract assets	(54,874)		10,999
Prepaid expenses and other assets	33,254		17,243
Accounts payable	8,845		19,712
Accrued compensation	15,349		(7,332)
Contract liabilities	59,025		3,083
Other liabilities	(12,702)		1,389

Income taxes receivable/payable	8,147		(638)
Net cash provided by operating activities	275,976		226,538
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired	(33,624)		(17,154)
Capital expenditures	(8,401)		(6,234)
Proceeds from sale of assets	3,754		333

Net cash used in investing activities	(38,271)		(23,055)
Cash flows from financing activities:
Proceeds from borrowings	141,456		165,570

Repayments on long-term debt	(108,949)		(173,895)


Bank overdrafts	—		(33,770)
Repurchases of common stock	(150,000)		(45,000)
Taxes paid on vested restricted stock	(25,193)		(17,589)
Stock options exercised	1,205		10,703
Dividends paid	(33,873)		(29,241)
Payments of contingent earn-out liabilities	(4,035)		(12,374)
Principal payments on finance leases	(3,097)		(1,908)
Net cash used in financing activities	(182,486)		(137,504)

Effect of exchange rate changes on cash and cash equivalents	(4,403)		10,772
Net increase in cash and cash equivalents	50,816		76,751
Cash and cash equivalents at beginning of period	166,568		157,515
Cash and cash equivalents at end of period	$	217,384	$	234,266
Supplemental information:
Cash paid during the period for:
Interest	$	7,556	$	7,044
Income taxes, net of refunds received of $4.2 million and $2.0 million	$	49,131	$	36,664
Supplemental disclosures on non-cash investing activities:
Issuance of promissory note for business acquisition	$	14,578	$	—

See Notes to Consolidated Financial Statements.

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Three Months Ended June 27, 2021 and July 03, 2022

(unaudited – in thousands)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Tetra Tech Equity		Non-Controlling Interests		Total Equity
	Shares	Amount
BALANCE AT MARCH 28, 2021	54,158	$	542	$	—	$	(115,056)	$	1,261,661	$	1,147,147	$	81	$	1,147,228
Net income								51,903		51,903		21		51,924
Other comprehensive income						12,655				12,655		2		12,657
Distributions paid to noncontrolling interests										—		(9)		(9)
Cash dividends of $0.20 per common share								(10,831)		(10,831)				(10,831)
Stock-based compensation				5,695						5,695				5,695
Restricted & performance shares released	2	—		(101)						(101)				(101)
Stock options exercised	29	1		931						932				932

Stock repurchases	(118)	(2)		(6,525)				(8,473)		(15,000)				(15,000)
BALANCE AT JUNE 27, 2021	54,071	$	541	$	—	$	(102,401)	$	1,294,260	$	1,192,400	$	95	$	1,192,495

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

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Nine months ended June 27, 2021 and July 03, 2022

(unaudited – in thousands)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Tetra Tech Equity		Non-Controlling Interests		Total Equity
	Shares	Amount
BALANCE AT SEPTEMBER 27, 2020	53,797	$	538	$	—	$	(161,786)	$	1,198,567	$	1,037,319	$	54	$	1,037,373
Net income								149,856		149,856		44		149,900
Other comprehensive income						59,385				59,385		6		59,391
Distributions paid to noncontrolling interests										—		(9)		(9)
Cash dividends of $0.54 per common share								(29,241)		(29,241)				(29,241)
Stock-based compensation				16,261						16,261				16,261
Restricted & performance shares released	213	2		(17,591)						(17,589)				(17,589)
Stock options exercised	304	4		10,699						10,703				10,703
Shares issued for Employee Stock Purchase Plan	124	1		10,705						10,706				10,706
Stock repurchases	(367)	(4)		(20,074)				(24,922)		(45,000)				(45,000)
BALANCE AT JUNE 27, 2021	54,071	$	541	$	—	$	(102,401)	$	1,294,260	$	1,192,400	$	95	$	1,192,495

BALANCE AT OCTOBER 3, 2021	53,981	$	540	$	—	$	(125,028)	$	1,358,726	$	1,234,238	$	53	$	1,234,291
Net income								180,179		180,179		26		180,205
Other comprehensive loss						(32,778)				(32,778)		(1)		(32,779)
Distributions paid to noncontrolling interests										—		(31)		(31)
Cash dividends of $0.63 per common share								(33,873)		(33,873)				(33,873)
Stock-based compensation				19,104				—		19,104				19,104
Restricted & performance shares released	189	2		(25,195)				—		(25,193)				(25,193)
Stock options exercised	29	—		1,205						1,205				1,205
Shares issued for Employee Stock Purchase Plan	106	1		12,128						12,129				12,129
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

See Notes to Consolidated Financial Statements.

TETRA TECH, INC.

Notes to Consolidated Financial Statements

1.Basis of Presentation

The accompanying unaudited ~~interim~~ consolidated financial statements and related notes of Tetra Tech, Inc. (“we,” ~~“us” ,~~“us,” “our” or "Tetra Tech") have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the audited consolidated financial statements and ~~related~~the notes contained in our Annual Report on Form 10-K for the fiscal year ended October ~~1, 2017.~~3, 2021.

These financial statements reflect all normal recurring adjustments that are considered necessary for a fair statement of our financial position, results of operations and cash flows for the interim periods presented. The results of operations and cash flows for any interim period are not necessarily indicative of results for the full fiscal year or for future ~~years.~~fiscal years.

Beginning in fiscal ~~2018,~~2022, we aligned our operations to better serve our clients and markets, ~~resulting~~and created a new High Performance Buildings ("HPB") division in two renamed reportable segments. Our Government Services Group (“GSG”) reportable segment primarily includes activities with U.S. government clients (federal, state and local) and all activities with development agencies worldwide. Ourour Commercial/International Services Group ~~(“CIG”~~("CIG") reportable segment. As a result, we transferred some related operations in our Government Services Group ("GSG") reportable segment ~~primarily includes activities with U.S. commercial clients and all international activities other than work for development agencies. This alignment allows us~~ to ~~capitalize on~~ our growing market opportunities and enhance the development of high-end consulting and technical solutions to meet our growing client demand. We continue to report the results of the wind-down of our non-core construction activities in the Remediation and Construction Management (“RCM”)CIG reportable segment. Prior year amounts for reportable segments have been ~~revised~~reclassified to conform to the ~~current-year~~current year presentation.

2.~~Accounts Receivable – Net~~Recent Accounting Pronouncements

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 principles 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.

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. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

3.Revenue ~~Recognition~~and Contract Balances

~~Net accounts receivable~~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:


	Three Months Ended				Nine Months Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
	(in thousands)
Client Sector:
U.S. state and local government	$	150,731	$	135,717	$	465,770	$	390,464
U.S. federal government (1)	261,434		265,999		781,503		799,560
U.S. commercial	188,255		153,100		536,901		454,607
International (2)	289,811		246,817		817,311		676,869
Total	$	890,231	$	801,633	$	2,601,485	$	2,321,500

Contract Type:
Fixed-price	$	335,014	$	294,568	$	982,565	$	841,118
Time-and-materials	417,898		379,705		1,221,598		1,082,143
Cost-plus	137,319		127,360		397,322		398,239
Total	$	890,231	$	801,633	$	2,601,485	$	2,321,500

(1) Includes revenue generated under U.S. 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. clients.

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 3, 2022 and June 27, 2021.

Contract Assets and Contract Liabilities

We invoice customers based on the contractual terms of each contract. However, the timing of revenue recognition may differ from the timing of invoice issuance.

Contract assets represent revenue recognized in excess of the amounts for which we have the contractual right to bill our customers. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones or completion of a contract. In addition, many of our time and materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Contract retentions, included in contract assets, represent amounts withheld by clients until certain conditions are met or the project is completed, which may extend beyond one year.

Contract liabilities consist of billings in excess of ~~costs~~revenue recognized. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and increase as billings in advance of revenue recognition occur. Contract assets and liabilities are reported in a net position on ~~uncompleted contracts~~a contract-by-contract basis at the end of each reporting period. There were no substantial non-current contract assets or liabilities for the periods presented. Net contract assets/liabilities consisted of the following:


	Balance at
	July 3, 2022		October 3, 2021
	(in thousands)
Contract assets (1)	$	99,830	$	103,784
Contract liabilities	(247,013)		(190,403)
Net contract liabilities	$	(147,183)	$	(86,619)

(1) Includes $21.3 million and $12.2 million of contract retentions as of July 3, 2022 and October 3, 2021, respectively.

December 31,
2017 October 1,
2017
(in thousands)
Billed $ 437,317
$ 376,287
Unbilled 419,912
404,899
Contract retentions 23,109
39,840
Total accounts receivable – gross 880,338
821,026
Allowance for doubtful accounts (34,137 ) (32,259 )
Total accounts receivable – net $ 846,201
$ 788,767

Billings in excess of costs on uncompleted contracts $ 132,930
$ 117,499
In the first nine months of fiscal 2022 and 2021, we recognized revenue of approximately $111 million and $108 million, respectively, from amounts included in the contract liability balances at the end of fiscal 2021 and 2020, 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 result, 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 in the third quarter and first nine months of fiscal 2022, respectively, compared to net favorable adjustments of $1.7 million and $2.8 million in the third quarter and first nine months of fiscal 2021, respectively.

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. As of July 3, 2022 and October 3, 2021, our consolidated balance sheets included liabilities for anticipated losses of $11.1 million and $12.7 million, respectively. The estimated cost to complete these related contracts as of July 3, 2022 and October 3, 2021 was approximately $84 million and $104 million, respectively.

Accounts Receivable, Net

Net accounts receivable consisted of the following:


	Balance at
	July 3, 2022		October 3, 2021
	(in thousands)
Billed	$	451,065	$	432,814
Unbilled	276,001		240,536
Total accounts receivable	727,066		673,350
Allowance for doubtful accounts	(4,198)		(4,352)
Total accounts receivable, net	$	722,868	$	668,998

Billed accounts receivable represent amounts billed to clients that have not been collected. 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. ~~Except for amounts related to claims as discussed below, most~~Substantially all of our unbilled receivables at ~~December 31, 2017~~July 3, 2022 are expected to be billed and ~~collected~~collected within 12 months. ~~Contract retentions represent amounts withheld by clients until certain conditions are met or the project is completed, which may be several months or years.~~ 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 ~~particular~~ industry conditions, including the potential impacts of the coronavirus disease 2019 ("COVID-19") pandemic, that may affect ~~a client's~~our clients' ability to pay. Billings in excess of costs on uncompleted contracts represent the amount of cash collected from clients and billings to clients on contracts in advance of revenue recognized. The majority of billings in excess of costs on uncompleted contracts will be earned within 12 months.

Once contract performance is underway, we may experience changes in conditions, client requirements, specifications, designs, materials and expectations regarding the period of performance. Such changes result in “change orders” and may be initiated by us or by our clients. In many cases, agreement with the client as to the terms of change orders is reached prior to work

~~commencing; however, sometimes circumstances require that work progress without a definitive client agreement. Unapproved change orders constitute claims~~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. ~~Revenue on~~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 ~~recognized when contract costs related to claims have been incurred~~objective and ~~when their addition to contract value can be reliably estimated.~~verifiable. This can lead to a situation in which costs are recognized in one period and revenue is recognized in a subsequent period ~~such as~~ when a client agreement is obtained, or a claims resolution occurs.

Total accounts receivable at ~~December 31, 2017 and~~ October ~~1, 2017~~3, 2021 included ~~$61~~approximately $11 million ~~and $59 million, respectively,~~ related to claims, including requests for equitable adjustment, on contracts that provide for price redetermination. This amount related to a single claim in our Remediation and Construction Management ("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 0 claims included in our total accounts receivable at July 3, 2022. We regularly evaluate all unsettled claim amounts and record appropriate ~~adjustments~~adjustments to ~~operating earnings~~revenue when it is probable that the claim will result in a different contract value than the amount previously estimated. We In the first nine months of fiscal 2022, we recorded no gains or losses related to claims inother than the aforementioned immaterial gain on the settled RCM claim. In the first ~~quarters~~nine months of fiscal ~~2018~~2021 (all in the second quarter), we recognized increases to revenue and ~~2017.~~related gains of $2.8 million.

Billed accounts receivable related to U.S. federal government contracts were $65.0 million and $45.4 million at December 31, 2017 and October 1, 2017, respectively. U.S. federal government contracts unbilled receivables were $116.8 million and $109.7 million at December 31, 2017 and October 1, 2017, respectively.

Other than the U.S. federal government, no single client accounted for more than 10% of our accounts receivable at ~~December 31, 2017~~July 3, 2022 and October ~~1, 2017.~~3, 2021.

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 $3.5 billion of RUPO as of July 3, 2022. 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. RUPO may also decrease when projects are canceled or modified in scope. We include a contract within our RUPO when the contract is awarded and an agreement on contract terms has been reached.

We ~~recognize~~expect to satisfy our ~~revenue from~~RUPO as of July 3, 2022 over the following periods:


	Amount
	(in thousands)
Within 12 months	$	2,182,597
Beyond	1,312,857
Total	$	3,495,454

Although RUPO reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. 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 ~~using~~can generally be terminated by the ~~percentage-of-completion method, primarily utilizing~~clients without a substantive financial penalty. Therefore, the cost-to-cost approach, to estimate the progress towards completion in order to determine the amount of revenue and profit to recognize. Changes in those estimates could result in the recognition of cumulative catch-up adjustmentsremaining performance obligations on such contracts are limited to the ~~contract’s inception-to-date revenue, costs and profit in~~notice period required for the ~~period in which such changes are made. As a result, we recognized net unfavorable operating income adjustments of $0.7 million during~~termination (usually 30, 60, or 90 days).

4.Acquisitions

For the first ~~quarter~~nine months of fiscal ~~2018~~2022, we acquired The Integration Group of America ("TIGA"), Piteau Associates (“PAE”) and other immaterial acquisitions.TIGA is based in ~~the CIG segment. We recognized net unfavorable operating income adjustments during the first quarter~~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 ~~fiscal 2017 of $4.0 million ($2.3 million in the~~our CIG segment, and ~~$1.7 million in the RCM segment). Changes in revenue~~TIGA and cost estimates could also result in a projected loss that would be recorded immediately in earnings. As of December 31, 2017 and October 1, 2017, our consolidated balance sheets included liabilities for anticipated losses of $4.5 million and $8.1 million, respectively. The estimated cost to complete the related contracts as of December 31, 2017 was $4.7 million.

3.~~Mergers and Acquisitions~~

~~On October 2, 2017, we completed the acquisition of Glumac, headquartered in Portland, Oregon. Glumac is a leader in sustainable infrastructure design with more than 300 employees and is~~other immaterial acquisitions are part of our GSG segment. The total fair value of the purchase price for ~~Glumac~~all of these acquisitions was ~~$38.4~~$86.5 million. This amount is comprised of ~~$19.0~~$44.0 million ofin initial cash payments made to the sellers, ~~$1.0~~$4.3 million ~~held~~of receivables (net) related to estimated post-closing adjustments for the net assets acquired, $15.5 million payable in ~~escrow and included in current liabilities for pending resolution~~a promissory note issued to the sellers along with related transaction expenses of the ~~closing balance sheet,~~sellers (which were subsequently paid in July 2022), and ~~$18.4~~$31.3 million offor the estimated fair value of contingent earn-out obligations, with a maximum of ~~$20.0~~$47.0 million, ~~payable,~~ based upon the achievement of specified operating income targets in each of the three to five years following the ~~acquisition.~~acquisitions.

In ~~the second quarter of~~ fiscal ~~2017,~~2021, we acquired ~~Eco Logical Australia (“ELA”~~Coanda Research and Development Corporation ("CRD"), ~~headquartered~~The Kaizen Company (“KZN”), IBRA-RMAC Automation Solutions (“IRM”), and Hoare Lea, LLP and Subsidiaries ("HLE"). CRD is based in ~~Sydney, Australia. ELA~~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, DC 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 ~~multi-disciplinary consulting~~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 ~~over 160 staff that provides~~more than 900 employees, providing innovative ~~high-end environmental~~solutions to complex engineering and ~~ecological services,~~design challenges for sustainable infrastructure and ishigh 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 ~~ELA~~these acquisitions was ~~$9.9~~$151.7 million. This amount ~~consists~~was comprised of ~~$8.3~~$101.4 million ofin initial cash payments made to the sellers, and ~~$1.6~~$50.3 million offor the estimated fair value of contingent earn-out obligations, with a maximum of ~~$1.7~~$74.0 million, ~~payable,~~ based upon the achievement of specified operating income targets in each of the ~~two~~three to four years following the ~~acquisition.~~acquisitions.

Goodwill additions resulting from ~~the above~~fiscal 2022 business combinations are primarily attributable to the ~~existing workforce of~~significant technical expertise residing in embedded workforces that are sought out by clients, long-term management experience, the ~~acquired companies~~industry reputations, and the synergies expected to arise after the ~~acquisitions. The goodwill addition related to the fiscal 2018 acquisition primarily represents the value of a workforce with distinct expertise~~acquisitions in the ~~sustainable infrastructure design market.~~areas of data management, digitization, modeling, water, and natural resources. The fiscal 2021 goodwill ~~addition related to~~additions represent the ~~fiscal 2017 acquisition primarily represents~~significant technical expertise residing

in embedded workforces that are sought out by clients and the ~~value~~long-standing reputation of ~~a workforce with distinct expertise in the environmental and ecological markets.~~HLE. In addition, these acquired capabilities, when combined with our ~~existing~~existing 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 ~~and trade names~~ intangible assets include the fair value of existing contracts and the underlying customer relationships with lives ranging from 1one to 10ten years, and trade names ~~with~~intangible assets have lives ranging from 3three to 5five years. For detailed information regarding our intangible assets, see Note ~~4, "Goodwill~~5, “Goodwill and Intangible ~~Assets"~~Assets”.

Most of our acquisition agreements include contingent earn-out agreements, which are generally based on the achievement of future operating income thresholds. The contingent earn-out arrangements are based on our valuations of the acquired companies and reduce the risk of overpaying for acquisitions if the projected financial results are not achieved. The fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. 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 ~~our~~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; and (2) the former owners of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of our other key employees. The contingent earn-out payments are not affected by employment termination.

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. We use a probability-weighted discounted income approach as a valuation technique to convert future estimated cash flows to a single present value amount. The significant unobservable inputs used in the fair value measurements are operating income projections over the earn-out period (generally ~~two or~~ three to five years), and the probability outcome percentages we assign to each scenario. Significant increases or decreases to either of these inputs in isolation would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent earn-out liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the acquisition date is reflected as cash used in operating ~~activities.~~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. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income. ~~We had no~~ For the first nine months of fiscal 2022, 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. In addition, we considered the potential impact of the global economic disruption due to the COVID-19 pandemic on our operating income projections over the various earn-out periods. For the first nine months of fiscal 2022 and 2021, total adjustments to our contingent earn-out liabilities in ~~the first quarters of fiscal 2018 and 2017.~~operating income were immaterial.

At ~~December 31, 2017,~~July 3, 2022, there was a total potential maximum of ~~$28.9~~$141.1 million of outstanding contingent consideration related to acquisitions. Of this amount, ~~$21.1~~$83.3 million was estimated as the fair value and accrued on our consolidated balance sheet.

~~Subsequent Event.~~ On January 17, 2018, we announced a definitive agreement to acquire Norman Disney & Young (“NDY”), a leader in sustainable infrastructure engineering design. NDY is an Australian-based global engineering design firm with more than 700 professionals operating in offices throughout Australia, the Asia-Pacific region, the United Kingdom, and Canada. The acquisition is subject to the satisfaction of customary closing conditions and is expected to be completed during the second quarter of fiscal 2018.

4.5.Goodwill and Intangible Assets

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

goodwill by reportable segment:

GSG CIG Total
(in thousands)
Balance at October 1, 2017 $ 361,761
$ 379,125
$ 740,886
Goodwill additions 24,522
—
24,522
Foreign exchange impact (545 ) (1,408 ) (1,953 )
Balance at December 31, 2017 $ 385,738
$ 377,717
$ 763,455


	GSG		CIG		Total
	(in thousands)
Balance at October 3, 2021	$	538,433	$	570,145	$	1,108,578
Goodwill reallocation	(51,497)		51,497		—
Acquisition activity	46,326		26,318		72,644

Translation and adjustments	(3,961)		(25,804)		(29,765)
Balance at July 3, 2022	$	529,301	$	622,156	$	1,151,457

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. The ~~goodwill addition of $24.5 million~~foreign currency translation adjustments resulted from our acquisition of Glumac. The purchase price allocation for Glumac is preliminary and subject to adjustment based upon the final determination of the net assets acquired and information to perform the final valuation. Foreign exchange impact relates to our foreign subsidiaries with functional currencies that are different than our reporting currency. These amounts are presented net of reductions from historical impairment adjustments. The gross amounts ofof goodwill for GSG were ~~$403.4~~$547.0 million and ~~$379.5~~$556.1 million at ~~December 31, 2017~~

July 3, 2022 and October ~~1, 2017,~~3, 2021, respectively, excluding accumulated impairment of $17.7 million ~~of accumulated impairment.~~at each date. The gross amounts of goodwill for CIG were ~~$475.6~~$743.7 million and ~~$477.0~~$691.6 million at ~~December 31, 2017~~July 3, 2022 and October ~~1, 2017,~~3, 2021, respectively, excluding ~~$97.9~~accumulated impairment of $121.5 million ~~of accumulated impairment.~~at each date.

We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter. Our most recent annual review at ~~July 3, 2017~~June 28, 2021 (i.e. the first day of our fourth quarter in fiscal ~~2017)~~2021) 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 June 28, 2021, and after the reallocation of goodwill on the first day of fiscal 2022, we had no reporting units that had estimated fair values that exceeded their carrying values by less than 150%.

We also regularly evaluate whether events and circumstances 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; an increase in the 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.

The reorganization of our core operations, described in Note 1, "Basis of Presentation" and Note 10, "Reportable Segments", also impacted the definition of our reporting units for goodwill impairment testing. As a result, on October 2, 2017, we performed impairment testing for goodwill under our new segment structure and determined that the estimated fair value of each new reporting unit exceeded its corresponding carrying amount including recorded goodwill. Although we believe that our estimates of fair value for ~~our~~these reporting units are reasonable, if financial performance for ~~our~~these reporting units falls significantly below our expectations or market prices for similar ~~businesses~~business decline, the goodwill for ~~our~~these reporting units could become impaired.

We estimate the fair value of all reporting units with a goodwill balance based on a comparison and weighting of the income approach (weighted 70%), specifically the discounted cash flow method, and the market approach (weighted 30%), which estimates the fair value of our reporting units based upon comparable market prices and recent transactions and also validates the reasonableness of the multiples from the income approach. The resulting fair value is most sensitive to the assumptions we use in our discounted cash flow analysis. The assumptions that have the most significant impact on the fair value calculation are the reporting unit’s revenue growth rate and operating profit margin, and the discount rate used to convert future estimated cash flows to a single present value amount.

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 ~~our~~the consolidated balance ~~sheets, were as follows:~~sheets:


	Period Ended
	July 3, 2022							October 3, 2021
	Weighted- Average Remaining Life (in Years)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
	($ in thousands)
Client relations	5.7	$	44,287	$	(20,847)	$	23,440	$	69,455	$	(43,984)	$	25,471
Backlog	0.8	34,088		(29,811)		4,277		34,577		(30,670)		3,907
Trade names	3.9	13,651		(7,425)		6,226		14,939		(6,327)		8,612
Total		$	92,026	$	(58,083)	$	33,943	$	118,971	$	(80,981)	$	37,990

December 31, 2017 October 1, 2017

Weighted-
Average
Remaining Life
(in Years)

Gross
Amount

Accumulated
Amortization

Gross
Amount

Accumulated
Amortization
($ in thousands)
Non-compete agreements 0.0 $ 85
$ (85 ) $ 495
$ (493 )
Client relations 2.8 54,940
(41,700 ) 90,297
(75,074 )
Backlog 1.1 21,896
(13,530 ) 21,518
(13,301 )
Trade names 3.0 5,311
(2,384 ) 6,685
(3,439 )
Total $ 82,232
$ (57,699 ) $ 118,995
$ (92,307 )

Amortization expense for the ~~first quarters of fiscal 2018~~three and ~~2017 was $4.6~~nine months ended July 3, 2022 was $3.7 million and ~~$5.9~~$9.6 million, ~~respectively.~~respectively, compared to $2.2 million and $7.8 million for the prior-year periods. Estimated amortization expense for the

remainder of fiscal ~~2018~~2022 and succeeding years is as follows:


	Amount
	(in thousands)
2022	$	3,394
2023	9,675
2024	5,592
2025	4,759
2026	3,885
Beyond	6,638
Total	$	33,943

Amount
(in thousands)
2018 $ 12,413
2019 7,027
2020 2,799
2021 1,654
2022 411
Beyond 229
Total $ 24,533

5.6.Property and Equipment

Property and equipment consisted of the following:


	Balance at
	July 3, 2022		October 3, 2021
	(in thousands)
Equipment, furniture and fixtures	$	100,667	$	94,780
Leasehold improvements	35,818		36,462
Total property and equipment	136,485		131,242
Accumulated depreciation	(101,475)		(93,509)
Property and equipment, net	$	35,010	$	37,733

December 31,
2017 October 1,
2017
(in thousands)
Equipment, furniture and fixtures 149,705
150,026
Leasehold improvements 30,212
27,689
Land and buildings $ 3,716
$ 3,680
Total property and equipment 183,633
181,395
Accumulated depreciation (126,704 ) (124,560 )
Property and equipment, net $ 56,929
$ 56,835

The depreciation expense related to property and equipment was ~~$5.2~~$3.2 million and ~~$5.3~~$9.9 million for the three and nine months ended July 3, 2022, compared to $3.1 million and $9.0 million for the ~~first quarters of fiscal 2018 and 2017, respectively.~~prior-year periods.

6.7.Stock Repurchase and Dividends

On ~~November 7, 2016,~~October 5, 2021, the Board of Directors authorized a new stock repurchase program under which we could repurchase up to ~~$200~~$400 million of our common ~~stock.~~stock in addition to the $147.8 million remaining under the previous stock repurchase program at October 3, 2021. In the first ~~quarter~~nine months of fiscal ~~2018,~~2022, we repurchased ~~through open market purchases under this program a total of 514,676~~and settled 986,280 shares atwith an average price of ~~$48.57~~$152.09 per share for a total cost of ~~$25.0 million.~~$150.0 million in the open market. At July 3, 2022, we had a remaining balance of $397.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first nine months of fiscal 2022 and 2021:


Declare Date	Dividend Paid Per Share		Record Date	Payment Date	Dividend Paid (in thousands)
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 9, 2020	$	0.17	November 30, 2020	December 11, 2020	$	9,198
January 25, 2021	$	0.17	February 10, 2021	February 26, 2021	9,212
April 26, 2021	$	0.20	May 12, 2021	May 28, 2021	10,831
Total dividend paid as of June 27, 2021					$	29,241

Subsequent Event. On ~~November 7, 2017,~~August 1, 2022, the Board of Directors declared a quarterly cash dividend of ~~$0.10~~$0.23 per share payable on ~~December 15, 2017~~August 26, 2022 to stockholders of record as of the close of business on ~~November 30, 2017. Dividends totaling $5.6 million~~August 12, 2022.

8.Leases

Our operating leases are primarily for corporate and ~~$5.1 million were paid~~project office spaces. To a much lesser extent, we have operating leases for vehicles and equipment. Our operating leases have remaining lease terms of one month to twelve years, some of which may include options to extend the leases for up to five years.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets and current and long-term operating lease liabilities in the ~~first quarters~~consolidated balance sheets. Our finance leases are primarily for certain information technology equipment. The related ROU assets and lease liabilities were immaterial, and are included in "Property and equipment, net", "Other current liabilities" and "Other long-term liabilities", accordingly, in the consolidated balance sheets at July 3, 2022 and October 3, 2021.

ROU assets represent our right to use an underlying asset for the lease term 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 ~~fiscal 2018~~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. The operating lease ROU asset at the commencement date also includes any lease payments made to the lessor at or before the commencement date and ~~2017, respectively.~~initial direct costs less lease incentives received. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

~~Subsequent Event.~~ ~~On January 29, 2018, the Board~~The components of ~~Directors declared a quarterly~~lease costs are as follows:


	Three Months Ended				Nine Months Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
	(in thousands)
Operating lease cost	$	21,004	$	22,423	$	64,015	$	67,132
Sublease cost (income)	140		(21)		(116)		(81)

Total lease cost	$	21,144	$	22,402	$	63,899	$	67,051

Supplemental cash ~~dividend~~flow information related to leases is as follows:


		Nine Months Ended
		July 3, 2022		June 27, 2021
	(in thousands)
Operating cash flows for operating leases		$	50,965	$	56,616
Right-of-use assets obtained in exchange for new operating lease liabilities		$	32,175	$	43,394

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


	Balance at
	July 3, 2022			October 3, 2021
	(in thousands)
Operating leases:
Right-of-use assets	$	191,022		$	215,422

Lease liabilities:
Current	60,101			67,452
Long-term	154,499			174,285
Total operating lease liabilities	$	214,600		$	241,737

Weighted-average remaining lease term:
Operating leases	5 years			5 years
Weighted-average discount rate:
Operating leases	2.1		%	2.2		%

As of ~~$0.10 per share payable on March 2, 2018 to stockholders of record as~~July 3, 2022, we do not have any material additional operating leases that have not yet commenced.

A maturity analysis of the ~~close of business on February 14, 2018.~~future undiscounted cash flows associated with our operating lease liabilities at July 3, 2022 is as follows:


	Amount
	(in thousands)
2022	$	17,316
2023	60,889
2024	46,144
2025	33,756
2026	22,595
Beyond	47,096
Total lease payments	227,796
Less: imputed interest	(13,196)
Total present value of lease liabilities	$	214,600

9.Stockholders’ Equity and Stock Compensation Plans

We ~~recognize~~recognize the fair value of our stock-based ~~compensation~~ 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 first ~~quarters of fiscal 2018 and 2017~~nine months ended July 3, 2022 was ~~$4.0~~$6.7 million and ~~$3.2~~$19.1 million, ~~respectively. The majority~~respectively, compared to $5.7 million and $16.3 million for the same periods last year. Most of these amounts were included in ~~“Selling,~~selling, general and administrative ~~(“SG&A”) expenses” in~~expenses on our consolidated statements of income. In the first ~~quarter~~nine months of fiscal 2018, we granted 170,222 stock options with an exercise price of $47.95 per share and an estimated weighted-average fair value of $14.79 per share to our non-employee directors and executive officers. The executive officer options vest over a four-year period, and the non-employee director options vest after one year. In addition,2022, we awarded ~~98,599~~41,734 performance ~~shares~~share units (“PSUs”) to our non-employee directors and executive officers at ~~the~~a fair value of ~~$56.10~~$247.16 per share on the award date. All ~~of the~~ PSUs are ~~performance-~~

~~based~~performance-based and vest, if at all, after the conclusion of the three-year performance period. The number of PSUs that ultimately vest is based 50% on the growth in our diluted earnings per share and 50% on our relative total shareholder return ~~relative to a peer group of companies and a stock market index~~ over the vesting period. Additionally, we awarded ~~185,651~~76,231 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at ~~the~~a fair value of ~~$47.95~~$185.35 per share on the award date. All ~~of the~~ executive officer and employee RSUs have time-based vesting over a four-year period, and the non-employee director RSUs vest after one year.

8.10.Earnings ~~Per~~per Share (“EPS”)

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, less unvested restricted stock for the period. Diluted EPS is computed by dividing net income by

the weighted-average number of common shares outstanding and dilutive potential common shares for the period. Potential common shares include the weighted-average dilutive effects of outstanding stock options and unvested restricted stock using the treasury stock method.

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


	Three Months Ended				Nine Months Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
	(in thousands, except per share data)
Net income attributable to Tetra Tech	$	58,650	$	51,903	$	180,179	$	149,856

Weighted-average common shares outstanding – basic	53,507		54,117		53,777		54,095
Effect of dilutive stock options and unvested restricted stock	499		549		551		603
Weighted-average common shares outstanding – diluted	54,006		54,666		54,328		54,698

Earnings per share attributable to Tetra Tech:
Basic	$	1.10	$	0.96	$	3.35	$	2.77
Diluted	$	1.09	$	0.95	$	3.32	$	2.74

Three Months Ended
December 31,
2017 January 1,
2017
(in thousands, except per share data)
Net income attributable to Tetra Tech $ 46,034
$ 26,562

Weighted-average common shares outstanding – basic 55,855
57,099
Effect of dilutive stock options and unvested restricted stock 1,020
1,046
Weighted-average common stock outstanding – diluted 56,875
58,145

Earnings per share attributable to Tetra Tech:

Basic $ 0.82
$ 0.47
Diluted $ 0.81
$ 0.46

For the first quarters of fiscal 2018 and 2017, 0.3 million and 0.1 million options, respectively, were excluded from the calculation of dilutive potential common shares because the assumed proceeds per share exceeded the average market price per share during the periods. Therefore, their inclusion would have been anti-dilutive.

9.11.Income Taxes

In the first quarter of fiscal 2018, we recorded an income tax benefit of $0.6 million, representing an effective tax rate of (1.4)%. This tax rate reflects the impact of the comprehensive tax legislation enacted by the U.S. government on December 22, 2017, which is commonly referred to as the Tax Cuts and Jobs Act ("TCJA"). The TCJA significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, while also repealing the deduction for domestic production activities, limiting the deductibility of certain executive compensation, implementing a territorial tax system, and imposing a one-time repatriation tax on deemed repatriated earnings of foreign subsidiaries. As we have a September 30 fiscal year-end, our U.S. federal corporate income tax rate will be blended in fiscal 2018, resulting in a statutory federal rate of approximately 24.5% (3 months at 35% and 9 months at 21%), and will be 21% for subsequent fiscal years.

GAAP requires that the impact of tax legislation be recognized in the period in which the tax law was enacted. As a result of the TCJA, we reduced our deferred tax liabilities and recorded a one-time deferred tax benefit of approximately $10.1 million in the first quarter of fiscal 2018 to reflect our estimate of temporary differences in the United States that will be recovered or settled in fiscal 2018 based on the 24.5% blended corporate tax rate or based on the 21% tax rate in fiscal 2019 and beyond versus the previous enacted 35% corporate tax rate. Excluding this tax benefit, our effective tax rate in the first quarter of fiscal 2018 was 20.9%.

The TCJA also imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries. We analyzed this provision of the TCJA and our related foreign earnings accumulated under legacy tax laws during the first quarter of fiscal 2018. Based on our preliminary analysis of tax earnings and profits and tax deficits at the prescribed measurement dates, we have a cumulative net tax deficit and do not believe we have any tax liability related to this tax.

The one-time revaluation of our deferred tax liabilities and our estimate of the one-time transition tax on foreign earnings are both preliminary and subject to adjustment as we refine the information necessary to record the final values. The provisional amounts incorporate assumptions made based on our current interpretation of the TCJA and may change as we receive additional clarification on the implementation guidance. Additionally, in order to complete the valuation of our deferred tax liabilities, additional information related to the timing of the recovery or settlement of our deferred tax assets and liabilities and the effective tax rates (including state tax rates) that will apply needs to be obtained and analyzed. Similarly, information related to the computation of our foreign earnings and profits subject to the one-time transition tax requires further analysis before we make a final determination that we have no related liability. The U.S. Securities and Exchange Commission ("SEC") has issued rules that would allow for a measurement period of up to one year after the enactment date of the TCJA to finalize the recording of the related tax impacts. We currently anticipate finalizing and recording any resulting adjustments by the end of our current fiscal year ending September 30, 2018.

During the first quarter of fiscal 2017, we adopted accounting guidance which requires excess tax benefits and deficiencies on share-based payments to be recorded as an income tax benefit or expense, respectively, in the consolidated statement of income rather than being recorded in additional paid-in capital on the consolidated balance sheet. As a result, we recognized income tax benefits of $3.2 million and $1.8 million in the first quarters of fiscal 2018 and fiscal 2017, respectively. Excluding these discrete amounts from both periods and the one-time impacts of the TCJA, the effective tax rates for the first ~~quarters~~nine months of fiscal ~~2018~~2022 and ~~2017~~2021 were ~~28.0%~~ 23.9% and ~~32.8%~~20.4%, respectively.

~~We evaluate the realizability~~Income tax expense was reduced by $4.9 million and $8.7 million of ~~our deferred~~excess tax assets by assessing the valuation allowance and adjust the allowance, if necessary. The factors used to assess the likelihood of realization are our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The ability or failure to achieve the forecasted taxable incomebenefits on share-based payments in the ~~applicable taxing jurisdictions could affect~~first nine months of fiscal 2022 and 2021, respectively. Excluding the ~~ultimate realization~~impact of ~~deferred~~the excess tax ~~assets. Based~~benefits on ~~future operating results in certain jurisdictions, it is possible that the current valuation allowance positions of those jurisdictions could be adjusted~~share-based payments, our effective tax rates in the ~~next 12 months.~~first nine months of fiscal 2022 and 2021 were 25.9% and 25.0%, respectively.

Because of the complexity of the new Global Intangible Low-Taxed Income ("GILTI") tax rules, we continue to evaluate this provision of the TCJA and the application of Accounting Standards Codification 740, Income Taxes. Under GAAP, we are allowed to make an accounting policy choice of either: 1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the "period cost method") or 2) factoring such amounts into our measurement of our deferred taxes (the "deferred method"). Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Whether we expect to have future U.S. inclusions in taxable income related to GILTI depends on not only our current structure and estimated future results of global operations, but also our intent and ability to modify our structure. We are currently in the process of analyzing our structure and, as a result, we are not yet able to reasonably estimate the effect of this provision of the TCJA. Therefore, we have not made any adjustments related to potential GILTI tax in our consolidated financial statements, and have not made a policy decision regarding whether to record deferred tax on GILTI.

As of ~~December 31, 2017~~July 3, 2022 and October ~~1, 2017,~~3, 2021, the liability for income taxes associated with uncertain tax positions was ~~$9.4~~$11.3 million and ~~$9.3~~$14.1 million, respectively. These uncertain tax positions substantially relate to ongoing ~~examinations, which are~~examinations. It is reasonably ~~likely to be resolved~~possible that these liabilities may decrease within the next 12 ~~months.~~ months as certain examinations are resolved. These liabilities represent our current estimates of the additional tax liabilities that we may be assessed when the related audits are concluded. If these audits are resolved in a manner more unfavorable than our current expectations, our additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.

On December 28, 2021, the U.S. Department of the Treasury and the Internal Revenue Service released final regulations addressing aspects of the foreign tax credit regime, and represent the third and final regulations that have been issued with respect to the core provisions of the U.S. foreign tax credit regime following the 2017 Tax Cut and Jobs Act. These regulations were primarily effective on March 7, 2022, with certain provisions applicable to prior periods, and they do not materially impact our consolidated financial statements.

~~10.~~

12.Reportable Segments

~~Beginning in fiscal 2018, we aligned~~We manage our operations ~~to better serve our clients and markets, resulting in two renamed~~under 2 reportable segments. Our GSG reportable segment primarily includes activities with U.S. government clients (federal, state and local) and all activities with development agencies worldwide. Our CIG reportable segment primarily includes activities with U.S. commercial clients and ~~all~~ international ~~activities~~clients other than ~~work for~~ development agencies. ~~This alignment allows us to capitalize on our growing market opportunities and enhance the development of high-end consulting and technical solutions to meet our growing client demand. We will~~ Additionally, we continue to report the results of the wind-down of our non-core construction activities in the RCM reportable segment. ~~Prior year amounts~~There has been no remaining backlog for ~~reportable segments have been revised to conform to~~RCM since fiscal 2018 as the ~~current-year presentation.~~projects were complete.

GSG provides high-end consulting and engineering services primarily to U.S. government clients (federal, state and local) and development agencies worldwide. GSG supports U.S. government civilian and defense agencies with services in water, environment, sustainable infrastructure, information technology, and ~~emergency management services.~~disaster management. 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. ~~Additionally,~~ GSG ~~provides a wide range of~~also leads our support tofor development agencies ~~worldwide.~~worldwide, especially in the United States, United Kingdom, and Australia.

CIG primarily provides high-end consulting and engineering services ~~primarily~~ to U.S. commercial clients, and international clients that include both commercial and ~~local government.~~government sectors. CIG supports commercial clients across the ~~Fortune~~Fortune 500, ~~oil~~renewable energy, industrial, high performance buildings, and ~~gas, energy utilities, and mining~~aerospace markets. CIG also provides sustainable infrastructure and related environmental, ~~and geotechnical services, testing,~~ 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.

At the beginning of fiscal 2022, we aligned our operations to better serve our clients and markets, and created a new HPB division in our CIG ~~also provides field construction management activities in the United States and Western Canada.~~

~~We report the results of the wind-down of our non-core construction activities in the RCM~~ reportable segment. ~~The remaining backlog~~As a result, we transferred some related operations in our GSG reportable segment to our CIG reportable segment. Accordingly, amounts related to our segment reporting for ~~RCM as~~the third quarter and first nine months of ~~December 31, 2017 was immaterial as~~fiscal 2021 have been reclassified to conform to the ~~related projects were substantially completed.~~current year presentation.

Management evaluates ~~the~~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; that is, by applying a negotiated fee onto the costs of the services performed. All significant intercompany balances and transactions are eliminated in consolidation.

~~Reportable Segments~~

The following tables ~~set forth summarized~~summarize financial information regarding our reportable segments:


	Three Months Ended				Nine Months Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
	(in thousands)
Revenue
GSG	$	459,987	$	444,263	$	1,365,041	$	1,301,497
CIG	444,238		372,722		1,277,469		1,064,680
RCM	—		143		—		613
Elimination of inter-segment revenue	(13,994)		(15,495)		(41,025)		(45,290)
Total revenue	$	890,231	$	801,633	$	2,601,485	$	2,321,500


Income from operations
GSG	$	45,580	$	44,323	$	147,104	$	128,491
CIG	53,535		38,991		139,328		104,500

Corporate (1)	(15,210)		(13,507)		(40,787)		(36,126)
Total income from operations	$	83,905	$	69,807	$	245,645	$	196,865

Three Months Ended
December 31,
2017 January 1,
2017
(in thousands)
Revenue

GSG $ 442,772
$ 362,859
CIG 331,513
318,071
RCM 6,807
8,231
Elimination of inter-segment revenue (21,343 ) (20,310 )
Total revenue $ 759,749
$ 668,851

Income (loss) from operations

GSG $ 39,125
$ 30,168
CIG 21,294
21,544
RCM (1,158 ) (3,042 )
Corporate ⁽¹⁾
(10,672 ) (8,815 )
Total income from operations $ 48,589
$ 39,855

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


	Balance at
	July 3, 2022		October 3, 2021
	(in thousands)
Total Assets
GSG	$	549,648	$	545,533
CIG	756,195		698,916
RCM	2		11,360
Corporate (1)	1,371,861		1,320,753
Total assets	$	2,677,706	$	2,576,562

December 31,
2017 October 1,
2017
(in thousands)
Total Assets

GSG $ 489,893
$ 378,839
CIG 481,924
518,697
RCM 33,030
33,620
Corporate ⁽¹⁾
966,140
971,589
Total assets $ 1,970,987
$ 1,902,745

⁽¹⁾Corporate assets consist of intercompany eliminations and assets not allocated to our reportable segments including ~~goodwill,~~goodwill, intangible assets, deferred income taxes and certain other assets.

~~Major Clients~~

Other than the U.S. federal government, no single client accounted for more than 10% of our revenue. For the three-month periods ended December 31, 2017 and January 1, 2017, GSG and CIG generated revenue from all client sectors.

~~The following table represents our revenue by client sector:~~

Three Months Ended
December 31,
2017 January 1,
2017
(in thousands)
Client Sector

U.S. federal government ⁽¹⁾
$ 236,249
$ 222,634
International ⁽²⁾
164,960
172,457
U.S. state and local government 151,754
83,494
U.S. commercial 206,786
190,266
Total $ 759,749
$ 668,851

⁽¹⁾ ~~Includes revenue generated under U.S. federal government contracts performed outside the United States.~~

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

~~11.~~13.Fair Value Measurements

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, 2017)~~3, 2021). The carrying value of our long-term debt approximated fair value at ~~December 31, 2017~~July 3, 2022 and October ~~1, 2017. As of December 31, 2017,~~3, 2021. At July 3, 2022, we had ~~borrowings~~borrowings of ~~$447.6~~$246.9 million outstanding under our ~~credit agreement,~~Amended Credit Agreement, which were used to fund ~~our~~ business acquisitions, ~~working~~working capital needs, stock repurchases, dividends, capital expenditures and contingent earn-outs.

~~12.~~14. Credit Facility

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. The Amended Credit Agreement provides for, among other things, (i) refinance indebtedness under our Credit Agreement dated as of July 30, 2018; (ii) finance open market repurchases of common stock, acquisitions, and cash dividends and distributions; and (iii) utilize the proceeds for working capital, capital expenditures and other general corporate purposes. The Amended Credit Agreement provides for a reduction in the interest grid for meeting certain sustainability targets related to the (i) reduction of greenhouse gas emissions through the Company’s projects and operational sustainability initiatives and (ii) improvement of peoples’ lives as a result ofthe 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. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate or the Secured Overnight Financing Rate ("SOFR") rate plus 1.00%, plus a margin that ranges from 0% to 0.875% per annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The Amended Term Loan Facility is subject to the same interest rate provisions. The Amended Credit Agreement expires on February 18, 2027, or earlier at our discretion upon payment in full of loans and other obligations.

The Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The financial covenants provide for a maximum Consolidated Leverage Ratio of 3.25 to 1.00 (total funded debt/EBITDA, as defined in the Amended Credit Agreement) and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 (EBITDA/Consolidated Interest Charges, as defined in the Amended Credit Agreement). Our obligations under the Amended Credit Agreement are 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.

15.Derivative Financial Instruments

We often use certain interest rate derivative contracts to hedge interest rate exposures on our variable rate debt. WeAlso, we may enter ~~into~~in foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings ~~will~~could adversely be ~~adversely~~ affected by foreign currency exchange rate fluctuations. Our hedging program is not designated for trading or speculative purposes.

We recognize derivative instruments as either assets or liabilities on ~~our~~the accompanying consolidated balance sheets at fair value. We record changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as cash flow hedges in our consolidated balance sheets as accumulated other comprehensive income, ~~(loss),~~ and in our consolidated statements of income for those derivatives designated as fair value hedges. The derivative contracts to hedge interest exposure are categorized within Level 2 of the fair value hierarchy.

In fiscal ~~2013,~~2018, we ~~entered~~entered into ~~three~~5 interest rate swap agreements that we designated as cash flow hedges to fix the ~~variable interest rates on a portion of borrowings under our term loan facility. In the first quarter of fiscal 2014, we entered into two~~ interest rate ~~swap agreements that we designated as cash flow hedges to fix the variable interest rates~~ on the borrowings under our term loan facility. As of July 3, 2022, the notional principal of our outstanding interest swap agreements was $203.1 million ($40.6 million each.) The interest rate swaps have a fixed interest rate of 2.79% and expire

in July 2023 for all 5 agreements. At ~~December 31, 2017,~~July 3, 2022 and October 3, 2021, the fair values of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect was ~~$0.1~~an unrealized gain of $0.6 million and ~~is expected~~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 gains of $2.4 million and $10.0 million for the three and first nine months ended July 3, 2022, compared to ~~be reclassified~~related gains of $1.5 million and $4.9 million for the prior-year periods, were recognized and reported on our consolidated statements of comprehensive income. We expect to reclassify a credit of $0.7 million from accumulated other comprehensive ~~income (loss)~~loss to interest expense within the next 12twelve months.

~~As of December 31, 2017, the notional principal, fixed rates and related expiration dates of our outstanding interest rate swap agreements are as follows:~~

Notional Amount
(in thousands)

Fixed
Rate

Expiration
Date
$39,398 1.36% May 2018
39,398 1.34% May 2018
39,398 1.35% May 2018
19,700 1.23% May 2018
19,700 1.24% May 2018

~~The fair values of our outstanding derivatives~~ There were no other derivative instruments designated as hedging instruments ~~were as follows:~~

Fair Value of Derivative
Instruments as of
Balance Sheet Location December 31,
2017 October 1,
2017
(in thousands)
Interest rate swap agreements Other current assets $ 118
$ 49

~~The impact of the effective portions of derivative instruments in cash flow hedging relationships and fair value relationships on income and other comprehensive income was immaterial~~ for the first ~~three~~nine months of fiscal 2018 and the fiscal year ended October 1, 2017. Additionally, there were no ineffective portions of derivative instruments. Accordingly, no amounts were excluded from effectiveness testing for our interest rate swap agreements.2022.

~~13.~~

16.Reclassifications Out of Accumulated Other Comprehensive Income ~~(Loss)~~

The accumulated balances and ~~reporting period~~ activities for the three and ninemonths ended ~~December 31, 2017~~July 3, 2022 and ~~January 1, 2017~~June 27, 2021 related to reclassifications out of accumulated other comprehensive ~~loss~~income are summarized as follows:


	Three Months Ended
	Foreign Currency Translation Adjustments		Gain (Loss) on Derivative Instruments		Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance at March 28, 2021	$	(102,911)	$	(12,145)	$	(115,056)
Other comprehensive income before reclassifications	11,157		2,981		14,138
Amounts reclassified from accumulated other comprehensive loss
Interest rate contracts, net of tax (1)	—		(1,483)		(1,483)
Net current-period other comprehensive income	11,157		1,498		12,655


Balance at June 27, 2021	$	(91,754)	$	(10,647)	$	(102,401)

Balance at April 3, 2022	$	(113,513)	$	(1,790)	$	(115,303)
Other comprehensive income (loss) 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 income (loss)	(44,883)		2,380		(42,503)


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

	Nine Months Ended
	Foreign Currency Translation Adjustments		Gain (Loss) on Derivative Instruments		Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance at September 27, 2020	$	(146,275)	$	(15,511)	$	(161,786)
Other comprehensive loss before reclassifications	54,521		9,341		63,862
Amounts reclassified from accumulated other comprehensive loss
Interest rate contracts, net of tax (1)	—		(4,477)		(4,477)
Net current-period other comprehensive income	54,521		4,864		59,385

Balance at June 27, 2021	$	(91,754)	$	(10,647)	$	(102,401)

Balance at October 3, 2021	$	(115,634)	$	(9,394)	$	(125,028)
Other comprehensive income (loss) 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 income (loss)	(42,762)		9,984		(32,778)

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

(1) This accumulated other comprehensive component is reclassified to “Interest expense” in our consolidated statements of income. See Note 15 “Derivative Financial Instruments”, for more information.

Three Months Ended

Foreign
Currency
Translation
Adjustments

Gain (Loss)
on Derivative
Instruments

Accumulated
Other
Comprehensive
Loss
(in thousands)
Balances at October 2, 2016 $ (126,844 ) $ (1,164 ) $ (128,008 )
Other comprehensive income (loss) before reclassifications (16,182 ) 1,338
(14,844 )
Amounts reclassified from accumulated other comprehensive income
Interest rate contracts, net of tax ⁽¹⁾
—
(342 ) (342 )
Net current-period other comprehensive income (loss) (16,182 ) 996
(15,186 )
Balances at January 1, 2017 $ (143,026 ) $ (168 ) $ (143,194 )

Balances at October 1, 2017 $ (98,946 ) $ 446
$ (98,500 )
Other comprehensive income (loss) before reclassifications (3,467 ) 84
(3,383 )
Amounts reclassified from accumulated other comprehensive income
Interest rate contracts, net of tax ⁽¹⁾
—
(18 ) (18 )
Net current-period other comprehensive income (loss) (3,467 ) 66
(3,401 )
Balances at December 31, 2017 $ (102,413 ) $ 512
$ (101,901 )

⁽¹⁾ This accumulated other comprehensive component is reclassified to "Interest expense" in our consolidated statements of income. See Note 12, "Derivative Financial Instruments", for more information.

~~14.~~17.Commitments and Contingencies

We are subject to certain claims and lawsuits typically filed against the ~~engineering,~~ consulting and ~~construction~~engineering profession, alleging primarily professional errors or omissions. We carry professional liability insurance, subject to certain deductibles and policy limits, against such claims. However, in some actions, parties are seeking damages that exceed our insurance coverage or for which we are not insured. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on our financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.

~~15.Recent Accounting Pronouncements~~

~~In May 2014,~~On July 15, 2019, following an initial January 14, 2019 filing, the Financial Accounting Standards Board ("FASB") issued an accounting standard that will supersede existing revenue recognition guidance under current GAAP. The new standard is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods and services. The standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized asCivil Division of the ~~date~~United States Attorney's Office filed an amended complaint in intervention in 3 qui tam actions filed against our subsidiary, Tetra Tech EC, Inc. ("TtEC"), in the U.S. District Court for the Northern District of ~~initial application. This guidance is effective for fiscal reporting periods~~California. The complaint alleges False Claims Act violations and ~~interim periods within that reporting period, beginning after December 15, 2017 (first quarter~~breach of ~~fiscal 2019 for us). We continue~~contract related to ~~evaluate~~TtEC's contracts to perform environmental remediation services at the ~~impact that~~former Hunters Point Naval Shipyard in San Francisco, California. TtEC disputes the claims and will defend this ~~guidance will have on our consolidated financial statements. We expect to use the modified retrospective method, which may result in a cumulative effect adjustment as of the date of adoption.~~

In January 2016, the FASB issued guidance that generally requires companies to measure investments in other entities, except those accounted for under the equity method, at fair value and recognize any changes in fair value in net income. The guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). We do not expect the adoption of this guidance to have an impact on our consolidated financial statements.

In February 2016, the FASB issued guidance that primarily requires lessees to recognize most leases on their balance sheets but record expenses on their income statements in a manner similar to current accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018 (first quarter of fiscal 2020 for us). Early adoption is permitted.matter vigorously. We are currently ~~evaluating~~unable to determine the ~~impact that~~probability of the outcome of this ~~guidance will have on our consolidated financial statements.~~matter or the range of reasonably possible loss, if any.

~~In June 2016,~~

18.Related Party Transactions

We often provide services to unconsolidated joint ventures. Our revenue related to services we provided to unconsolidated joint ventures for the three and first nine months of fiscal 2022 was approximately $24 million and $74 million, respectively, compared to $24 million and $70 million for the ~~FASB issued updated guidance which requires entities to estimate all expected credit losses~~same periods last year. Related reimbursable costs for ~~certain types~~the three and first nine months of ~~financial instruments, including trade receivables, held at~~fiscal 2022 were approximately $23 million and $70 million. Related reimbursable costs for the ~~reporting date based on historical experience, current conditions,~~three and reasonable and supportable forecasts. The updated guidance also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019 (first quarterfirst nine months of fiscal 2021 ~~for us). Early adoption is permitted. We are currently evaluating~~were approximately $23 million and $67 million. Our consolidated balance sheets also included the ~~impact that this guidance will have on our consolidated financial statements.~~following amounts related to these services:


	Balance at
	July 3, 2022		October 3, 2021
	(in thousands)
Accounts receivable, net	$	17,838	$	19,082
Contract assets	3,558		5,092
Contract liabilities	3,958		3,026

In August 2016, the FASB issued guidance to address eight specific cash flow issues to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

In October 2016, the FASB issued updated guidance which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance is effective for fiscal reporting periods and interim reporting periods within those fiscal reporting periods, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

In November 2016, the FASB issued updated guidance which provides amendments to address the classification and presentation of changes in restricted cash and in the statement of cash flows. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

In January 2017, the FASB issued updated guidance to simplify the test for goodwill impairment. This guidance eliminates step two from the goodwill impairment test. Under the updated guidance, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. This guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 (first quarter of fiscal 2021for us), on a prospective basis. Earlier adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. We adopted this guidance in the first quarter of our fiscal 2018, and the adoption of this guidance had no impact on our consolidated financial statements.

In May 2017, the FASB issued updated guidance to clarify when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the updated guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us), on a prospective basis. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

In August 2017, the FASB issued accounting guidance on hedging activities. The amendment better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018 (first quarter of fiscal 2020 for us). Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbor provisions created under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” ~~“seeks,~~“estimates,” ~~“estimates,~~“seeks,” “continues,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, ~~any~~ statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including those identified below under “Part II, Item 1A. Risk ~~Factors”~~Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

GENERAL OVERVIEW

Tetra Tech, Inc. is a leading global provider of high-end consulting and engineering services that focuses on water, environment, sustainable infrastructure, ~~resource management,~~renewable energy, and international development. We are a global company that is ~~renowned~~Leading with Science® to provide innovative solutions for our ~~expertise in providing water-related services for~~ public and private clients. We typically begin at the earliest stage of a project by identifying technical solutions and developing execution plans tailored to our ~~clients’~~clients' needs and resources. Our solutions may span the entire life cycle of consulting and engineering projects and include applied science, data analysis, research, engineering, design, construction management, and operations and maintenance.

Our reputation for high-end consulting and engineering services and our ability ~~to apply our skills~~ to develop solutions for water and environmental management has supported our growth for more than 50 years. Today, we are proud to be making a difference in people’s lives worldwide through our high-end consulting, engineering, and technology service offerings. We work on over ~~50 years since~~70,000 projects annually, in more than 100 countries on all seven continents, with a talent force of 21,000 associates. We are Leading with Science® throughout our operations, with domain experts across multiple disciplines supported by our advanced analytics, artificial intelligence, machine learning, and digital technology solutions. Our ability to provide innovation and first-of-kind solutions is enhanced by partnerships with our forward-thinking clients. We are diverse, equitable, and inclusive, embracing the ~~founding~~breadth of experience across our ~~predecessor company.~~ talented workforce worldwide with a culture of innovation and entrepreneurship. We are disciplined in our business, and focused on delivering value to customers and high performance for our shareholders. In supporting our clients, we seek to add value and provide long-term sustainable consulting, engineering and technology solutions.

By combining ingenuity and practical experience, we have helped to advance ~~solutions for~~sustainability by managing water, protecting the environment, providing clean energy, and engineering ~~the infrastructure~~green solutions for our cities and communities.

We derive income from fees for professional, technical, program management, and construction management services. As primarily a ~~service-based~~professional services company, we are labor-intensive rather than capital-intensive. Our revenue is driven by our ability to attract and retain qualified and productive employees, identify business opportunities, secure new and renew existing client contracts, provide outstanding services to our clients and execute projects successfully. We provide services to a diverse base of U.S. state and local government, U.S. federal government, U.S. commercial, and international clients.

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


	Three Months Ended				Nine Months Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
Client Sector
U.S. state and local government	16.9	%	16.9	%	17.9	%	16.8	%
U.S. federal government (1)	29.4		33.2		30.0		34.4
U.S. commercial	21.1		19.1		20.7		19.6
International (2)	32.6		30.8		31.4		29.2
Total	100.0	%	100.0	%	100.0	%	100.0	%

Three Months Ended
December 31,
2017 January 1,
2017
Client Sector

U.S. state and local government 20.0 % 12.5 %
U.S. federal government ⁽¹⁾
31.1
33.3
U.S. commercial 27.2
28.4
International ⁽²⁾
21.7
25.8
Total 100.0 % 100.0 %

⁽¹⁾Includes revenue generated under U.S. federal government contracts performed outside the United States.

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

~~Beginning in the first quarter of fiscal 2018, we aligned~~We manage our operations ~~to better serve our clients and markets, resulting in~~under two ~~renamed~~ reportable segments. Our ~~GSG~~Government Services Group ("GSG") reportable segment primarily includes activities with U.S. government clients (federal, state and local) and all activities with development agencies worldwide. Our ~~CIG~~Commercial/International Services Group ("CIG") reportable segment primarily includes activities with U.S. commercial clients and ~~all~~ international ~~activities~~clients other than ~~work for~~ development agencies. ~~This alignment~~

~~allows us to capitalize on our growing market opportunities and enhance the development of high-end consulting and technical solutions to meet our growing client demand. We will~~Additionally, we continue to report the results of the wind-down of our non-core construction activities in the Remediation and Construction Management ("RCM") reportable segment. RCM's projects were complete at the end of fiscal 2018. In May 2022, we received a cash settlement for the last $11 million RCM ~~segment. Prior year amounts~~claim receivable in dispute resolution. This settlement resulted in an immaterial gain in the third quarter of fiscal 2022. There were no significant operating activities in RCM for ~~reportable segments have been revised to conform to~~ the ~~current-year presentation.~~three and nine months of fiscal 2022 and 2021.

~~Our reportable segments are as follows:~~

Government Services Group ~~("GSG"~~(“GSG”). GSG provides high-end consulting and engineering services primarily to U.S. government clients (federal, state and local) and development agencies worldwide. GSG supports U.S. government civilian and defense agencies with services in water, environment, sustainable infrastructure, information technology, and ~~emergency management services.~~disaster management. 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. ~~Additionally,~~ GSG ~~provides a wide range of~~also leads our support tofor development agencies ~~worldwide.~~worldwide, especially in the United States, United Kingdom, and Australia.

Commercial/International Services Group ~~("CIG"~~(“CIG”). CIG primarily provides high-end consulting and engineering services ~~primarily~~ to U.S. commercial clients, and international clients that include both commercial and ~~local government.~~government sectors. CIG supports commercial clients across the ~~Fortune~~Fortune 500, ~~oil~~renewable energy, industrial, high performance buildings, and ~~gas, energy utilities, and mining~~aerospace markets. CIG also provides sustainable infrastructure and related environmental, ~~and geotechnical services, testing,~~ 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.

At the beginning of fiscal 2022, we aligned our operations to better serve our clients and markets, and created a new High Performance Buildings division in our CIG ~~also provides field construction management activities in the United States and Western Canada.~~

~~Remediation and Construction Management ("RCM"). We report the results of the wind-down of our non-core construction activities in the RCM~~ reportable segment. ~~The remaining backlog~~As a result, we transferred some related operations in our GSG reportable segment to our CIG reportable segment. Certain prior year amounts for ~~RCM as of December 31, 2017 was immaterial as~~reportable segments have been reclassified to conform to the ~~related projects were substantially completed.~~current year presentation.

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


	Three Months Ended				Nine Months Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
Reportable Segment
GSG	51.7	%	55.4	%	52.5	%	56.1	%
CIG	49.9		46.5		49.1		45.9

Inter-segment elimination	(1.6)		(1.9)		(1.6)		(2.0)
Total	100.0	%	100.0	%	100.0	%	100.0	%

Three Months Ended
December 31,
2017 January 1,
2017
Reportable Segment

GSG 58.3 % 54.2 %
CIG 43.6
47.6
RCM 0.9
1.2
Inter-segment elimination (2.8 ) (3.0 )
Total 100.0 % 100.0 %

~~We provide~~Our services are performed under three principal types of ~~contracts:~~contracts with our clients: fixed-price, time-and-materials, and cost-plus. The following table presents the percentage of our revenue by contract type:


	Three Months Ended					Three Months Ended				Nine Months Ended
	December 31, 2017		January 1, 2017			July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
Contract Type					Contract Type
Fixed-price	31.0	%	32.3	%	Fixed-price	37.6	%	36.7	%	37.7	%	36.2	%
Time-and-materials	49.6		46.5		Time-and-materials	47.0		47.4		47.0		46.6
Cost-plus	19.4		21.2		Cost-plus	15.4		15.9		15.3		17.2
Total	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%

Under fixed-price contracts, ~~we receive~~clients agree to pay a ~~fixed~~specified price ~~irrespective~~for our performance of the ~~actual costs we incur.~~entire contract or a specified portion of the contract. Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and ~~also~~ paid for other expenses. Under cost-plus contracts, some of which are subject to a contract ceiling ~~amounts,~~amount, we are reimbursed for allowable ~~costs and~~costs plus fees, which may be fixed or performance-based. Profitability on ~~our~~these contracts is driven by billable headcount and our ~~ability to manage our subcontractors, vendors, and material suppliers.~~cost control. We recognize ~~our~~ revenue from contracts using the ~~percentage-of-completion~~cost-to-cost measure of progress method ~~primarily utilizing the cost-to-cost approach,~~ to estimate the progress towards completion ~~in order~~ to determine the amount of revenue and profit to recognize. ~~Revenue~~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 ~~on these contracts are subject to revision throughout the duration of the contracts and any required~~

~~adjustments are made~~ in the period in which ~~the revisions become known. Losses on contracts~~such changes are made. On a quarterly basis, we review and assess our revenue and cost estimates for each significant contract. Changes in revenue and cost estimates could also result in a projected loss that would be recorded immediately in ~~full as they are identified.~~earnings.

Other contract costs include professional compensation and related benefits, together with certain direct and indirect overhead costs such as rents, utilities, and travel. Professional compensation represents a large portion of these costs. Our "Selling, general and administrative expenses" ("SG~~&A expenses~~&A") are comprised primarily of marketing and bid and proposal costs, and our corporate headquarters’ costs related to the executive offices, finance, accounting, administration, and information technology. Our SG&A expenses also include a portion of stock-based compensation and depreciation of property and equipment related to our corporate headquarters, and the amortization of identifiable intangible assets. Most of these costs are unrelated to specific clients or projects, and can vary as expenses are incurred to support company-wide activities and initiatives.

We experience seasonal trends in our business. Our revenue and operating income are typically lower in the first half of our fiscal year, primarily due to the Thanksgiving (in the ~~United States)~~U.S.), Christmas, and New Year’s holidays. Many of our clients’ employees, as well as our own employees, take vacations during these holiday periods. Further, seasonal inclement weather conditions occasionally cause some of our offices to close temporarily or may hamper our project field work in the northern hemisphere's temperate and arctic regions. These occurrences result in fewer billable hours worked on projects and, correspondingly, less revenue recognized. Our revenue is typically higher in the second half of the fiscal year due to favorable weather conditions during spring and summer months that may result in higher billable hours. In addition, our revenue is typically higher in the fourth fiscal quarter due to the U.S. federal government’s fiscal year-end spending.

ACQUISITIONS AND DIVESTITURES

Acquisitions. We continuously evaluate the marketplace for acquisition opportunities to further our strategic growth plans. Due to our reputation, size, financial resources, geographic presence and range of services, we have numerous opportunities to acquire privately and publicly held companies or selected portions of such companies. We evaluate an acquisition opportunity based on its ability to strengthen our leadership in the markets we serve, ~~broaden our service offerings, add~~the technologies and solutions they provide, and the additional new geographies and ~~provide complementary skills.~~clients they bring. Also, during our evaluation, we examine an acquisition's ability to drive organic growth, its accretive effect on long-term earnings, and its ability to generate return on investment. Generally, we proceed with an acquisition if we believe that it ~~could~~will strategically expand our service offerings, improve our long-term financial performance, and increase shareholder returns.

We view acquisitions as a key component in the execution of our growth strategy, and we intend to use cash, debt or equity, as we deem appropriate, to fund acquisitions. We may acquire other businesses that we believe are synergistic and will ultimately increase our revenue and net income, strengthen our ability to achieve our strategic goals, provide critical mass with existing clients, and further expand our lines of service. We typically pay a purchase price that results in the recognition of goodwill, generally representing the intangible value of a successful business with an assembled workforce specialized in our areas of interest. Acquisitions are inherently risky, and no assurance can be given that our previous or future acquisitions will be successful or will not have a material adverse effect on our financial position, results of operations, or cash flows. All acquisitions require the approval of our Board of Directors.

In the first quarter of fiscal 2018, we acquired Glumac, headquartered in Portland, Oregon. Glumac is a leader in sustainable infrastructure design with more than 300 employees and is part of our GSG segment.

In the second quarter of fiscal 2017, we acquired ELA, headquartered in Sydney, Australia. ELA is a multi-disciplinary consulting firm with over 160 staff that provides innovative, high-end environmental and ecological services, and is part of our CIG segment.

For detailed information regarding acquisitions, see Note ~~3, “Mergers and Acquisitions~~”4, “Acquisitions” of the “Notes to Consolidated Financial Statements”.

~~Subsequent Event.~~ On January 17, 2018, we announced a definitive agreement to acquire NDY, a leader in sustainable infrastructure engineering design. NDY is an Australian-based global engineering design firm with more than 700 professionals operating in offices throughout Australia, the Asia-Pacific region, the United Kingdom, and Canada. The acquisition is subject to the satisfaction of customary closing conditions and is expected to be completed during the second quarter of fiscal 2018.

Divestitures. We regularly review and evaluate our existing operations to determine whether our business model should change through the divestiture of certain businesses. Accordingly, from time to time, we may divest or wind-down certain non-core businesses and reallocate our resources to businesses that better align with our long-term strategic direction. ~~We did not have any divestitures in the first quarters of fiscal 2018 or 2017.~~

OVERVIEW OF RESULTS AND BUSINESS TRENDS

General. InAs the coronavirus disease 2019 ("COVID-19") spread globally, we responded quickly to ensure the health and safety of our employees, clients and the communities we support. Our high-end consulting focus and the technologies we deployed have positioned our staff to successfully support our clients and projects in hybrid work solutions that enable seamless collaboration across remote, office and job site environments. We remain focused on providing clients with the highest level of service and our 450 global offices are operational, supporting our programs and projects. By Leading with Science®, we are responding to the current global challenges including COVID-19, with the commitment of our 21,000 associates supported by technological innovation. The actions we have taken to navigate through this worldwide pandemic, the strength of our balance sheet, and our technical leadership position us well to address the global challenges of providing clean water, environmental restoration, and the impacts of climate change.

For the first ~~quarter~~nine months of fiscal ~~2018, our~~2022, revenue increased ~~13.6%~~12.1% compared to the prior-year period. ~~Glumac, which was acquired on the first day~~This year-over-year growth reflects increased activity in all four of ~~fiscal 2018, contributed~~our client sectors. Our revenue ~~of $13.2 million~~also includes contributions from acquisitions that did not have comparable revenue in the first nine months of fiscal 2021. In the fourth quarter of fiscal ~~2018. Excluding this contribution,~~2022, we expect our revenue ~~increased 11.6%~~to continue to grow year-over-year on a constant currency basis and after normalizing for the extra week of operations in the ~~first~~fourth quarter of fiscal ~~2018~~2021. We report results of operations based on either a 52-week or 53-week period ending on the Sunday nearest September 30. Our fiscal 2022 contains 52 weeks compared to the same period last year. Our revenue reflects a reduction in construction activities compared to last year. This reduction resulted from our decision to exit from select fixed-price construction markets in late fiscal 2014, which are reported in our RCM segment. Revenue from our ongoing business, excluding RCM and Glumac, increased 12.0%53 weeks in fiscal ~~2018 compared to~~2021 with the ~~prior-year~~extra week occurring in the fourth quarter.

U.S. State and Local Government. Our U.S. state and local government revenue increased ~~81.8%~~19.3% in the first ~~quarter~~nine months of fiscal ~~2018~~2022 compared to the same period ~~in fiscal 2017. We experienced this~~last year. The increase ~~despite the reduction~~reflects continued broad-based growth in ~~certain construction activities noted above, especially those related to state transportation projects in the RCM segment. Excluding these activities,~~ our U.S. state and local government infrastructure business, particularly with increased revenue from municipal water infrastructure work, including digital water projects, in the metropolitan areas of California, Texas and Florida. Our disaster response activities also increased ~~86.3%~~compared to the first nine months of fiscal 2021. Most of our work for the U.S. state and local governments relates to critical water and environmental programs, which we expect to continue to grow in the fourth quarter of fiscal 2022.

U.S. Federal Government. Our U.S. federal government revenue decreased 2.3% in the first nine months of fiscal 2022 compared to the prior-year period. The decrease was due to reduced international development activity, especially our work in Afghanistan that ceased in the fourth quarter of last year. Excluding Afghanistan, our U.S. federal government revenue grew more than 2% in the first nine months of fiscal ~~2018~~2022 compared to the same period last year, primarily due to increased environmental revenue for both Department of Defense and civilian agencies. During periods of economic volatility, including the COVID-19 pandemic, our U.S. federal government business has historically been the most stable and predictable. Our revenue also includes contributions from acquisitions that did not have comparable revenue in the prior-year period. We expect our U.S. federal government revenue, excluding Afghanistan, to grow for the remainder of fiscal 2022 primarily due to increased advanced analytics activity and the current administration's focus on long-term infrastructure and climate change.

U.S. Commercial. Our U.S. commercial revenue increased 18.1% in the first nine months of fiscal 2022 compared to the same period last year. This increase ~~includes higher~~was primarily due to more activity on environmental programs, including meeting net zero carbon goals and high performance buildings. We expect growth in our U.S. commercial work to continue in the fourth quarter of fiscal 2022.

International. Our international revenue ~~from emergency response activities~~increased 20.7% in the first nine months of fiscal 2022 compared to the prior-year period. Our revenue includes contributions from acquisitions that did not have comparable revenue in the year-ago period. Additionally, the revenue growth reflects government stimulus spending on infrastructure and commercial activities related to an increased focus on sustainability. We expect growth in our international work to continue for the remainder of fiscal 2022, although we expect adverse year-over-year foreign exchange rate changes reflecting a stronger U.S. dollar to slow our international growth in the fourth quarter of fiscal ~~2018~~2022 compared to the first nine months of the fiscal year.

RESULTS OF OPERATIONS

Consolidated Results of Operations


	Three Months Ended							Nine Months Ended
	July 3, 2022		June 27, 2021		Change			July 3, 2022		June 27, 2021		Change
					$		%					$		%
	($ in thousands, except per share data)
Revenue	$	890,231	$	801,633	$	88,598	11.1%	$	2,601,485	$	2,321,500	$	279,985	12.1%
Subcontractor costs	(169,745)		(163,590)		(6,155)		(3.8)	(502,024)		(478,461)		(23,563)		(4.9)
Revenue, net of subcontractor costs (1)	720,486		638,043		82,443		12.9	2,099,461		1,843,039		256,422		13.9
Other costs of revenue	(575,902)		(512,347)		(63,555)		(12.4)	(1,679,937)		(1,488,549)		(191,388)		(12.9)
Gross profit	144,584		125,696		18,888		15.0	419,524		354,490		65,034		18.3
Selling, general and administrative expenses	(60,679)		(55,889)		(4,790)		(8.6)	(173,879)		(157,625)		(16,254)		(10.3)


Income from operations	83,905		69,807		14,098		20.2	245,645		196,865		48,780		24.8
Interest expense	(2,919)		(2,737)		(182)		(6.6)	(8,967)		(8,585)		(382)		(4.4)
Income before income tax expense	80,986		67,070		13,916		20.7	236,678		188,280		48,398		25.7
Income tax expense	(22,329)		(15,146)		(7,183)		(47.4)	(56,473)		(38,380)		(18,093)		(47.1)
Net income	58,657		51,924		6,733		13.0	180,205		149,900		30,305		20.2
Net income attributable to noncontrolling interests	(7)		(21)		14		66.7	(26)		(44)		18		40.9
Net income attributable to Tetra Tech	$	58,650	$	51,903	$	6,747	13.0	$	180,179	$	149,856	$	30,323	20.2
Diluted earnings per share	$	1.09	$	0.95	$	0.14	14.7%	$	3.32	$	2.74	$	0.58	21.2%

(1) We believe that the presentation of “Revenue, net of subcontractor costs”, which is a non-U.S. GAAP financial measure, enhances investors’ ability to analyze our business trends and performance because it substantially measures the work performed by our employees. While providing services, we routinely subcontract various services and, under certain U.S. Agency for International Development programs, issue grants. Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with U.S. GAAP and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities. The grants are included as part of our subcontractor costs. Because subcontractor services can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of our business trends. Accordingly, we segregate subcontractor costs from revenue to promote a better understanding of our business by evaluating revenue exclusive of costs associated with external service providers.

In the third quarter of fiscal 2022, revenue and revenue, net of subcontractor costs, increased $88.6 million, or 11.1%, and $82.4 million, or 12.9%, respectively, compared to the year-ago quarter. Excluding the contributions from acquisitions that did not have activity in the third quarter of last year, ~~due~~our revenue increased approximately 5% in the third quarter of fiscal 2022 compared to the ~~unprecedented number~~prior-year quarter.Our GSG segment's revenue and revenue, net of ~~natural disasters~~subcontractor costs, increased $15.7 million, or 3.5%, and $20.4 million, or 6.5%, respectively, in the ~~United States during 2017. The level~~third quarter of our activities were particularly increased by the hurricanes in Florida and Texas, and the fires in California. In addition, many state and local government agencies are experiencing improved financial conditions that enable themfiscal 2022 compared to address major long-term infrastructure requirements, including the need for maintenance, repair, and upgrading of existing critical infrastructure and the need to build new facilities. As a result, we experienced broad-based growth in our U.S. state and local government project-related infrastructure revenue. We expect our U.S. state and local government business to continue to grow in fiscal 2018.

~~U.S. Federal Government.~~ last year's third quarter. Our ~~U.S. federal government~~CIG segment's revenue increased ~~6.1%~~$71.5 million, or 19.2%, and revenue, net of subcontractor costs, increased $62.1 million, or 19.2% in the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021.

In the first nine months of fiscal 2022, revenue and revenue, net of subcontractor costs, increased $280.0 million, or 12.1%, and $256.4 million, or 13.9%, respectively, compared to the prior-year period. Excluding the contributions from acquisitions that did not have activity in the first ~~quarter~~nine months of fiscal ~~2018~~2021, our revenue increased approximately 6% in the first nine months of fiscal 2022 compared to the same period ~~in fiscal 2017. This growth primarily reflects~~last year.Our GSG segment's revenue and revenue, net of subcontractor costs, increased ~~international development~~$63.5 million, or 4.9%, and U.S. Department of Defense ("DoD") activities. During periods of economic volatility, our U.S. federal government clients have historically been the most stable and predictable. We anticipate modest growth in U.S. federal government revenue in fiscal 2018; however, if there is a prolonged U.S. federal government shutdown, our U.S. federal government business could be adversely impacted.

~~U.S. Commercial.~~ ~~Our U.S. commercial revenue increased 8.7%~~$70.3 million, or 7.6%, respectively, in the first ~~quarter~~nine months of fiscal ~~2018~~2022 compared to last year's period. Our CIG segment's revenue increased $212.8 million, or 20.0%, and revenue, net of subcontractor costs, increased $186.8 million, or 20.5% in the first nine months of fiscal 2022 compared to the ~~same period in fiscal 2017. Excluding the contribution from Glumac,~~year-ago period. Our quarterly and year-to-date results for our U.S. commercial business increased 1.8% in the first quarter of fiscal 2018 compared to the first quarter of last year. This growth primarily reflects increased industrial environmental activities. We expect our U.S. commercial revenue, excluding the contribution from Glumac, to grow modestly in fiscal 2018.GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Services Group", respectively.

~~International.~~ Our international revenue decreased 4.3% in first quarter of fiscal 2018 compared to the same period in fiscal 2017. This decline reflects our reduced oil and gas business, particularly in Western Canada. Excluding these activities, our international revenue increased 8.7% due to an improvement in our infrastructure and environmental activities. We anticipate our international revenue to decline modestly overall in fiscal 2018, while continuing to grow excluding our Canadian oil and gas activities.

~~RESULTS OF OPERATIONS~~

~~Consolidated Results of Operations~~

Three Months Ended
December 31,
2017 January 1,
2017 Change
$ %
($ in thousands)
Revenue $ 759,749
$ 668,851
$ 90,898
13.6%
Subcontractor costs (214,902 ) (179,300 ) (35,602 ) (19.9)
Revenue, net of subcontractor costs ⁽¹⁾
544,847
489,551
55,296
11.3
Other costs of revenue (450,702 ) (408,190 ) (42,512 ) (10.4)
Gross profit 94,145
81,361
12,784
15.7
Selling, general and administrative expenses (45,556 ) (41,506 ) (4,050 ) (9.8)
Income from operations 48,589
39,855
8,734
21.9
Interest expense (3,160 ) (2,908 ) (252 ) (8.7)
Income before income tax benefit (expense) 45,429
36,947
8,482
23.0
Income tax benefit (expense) 623
(10,358 ) 10,981
106.0
Net income 46,052
26,589
19,463
73.2
Net income attributable to noncontrolling interests (18 ) (27 ) 9
33.3
Net income attributable to Tetra Tech $ 46,034
$ 26,562
$ 19,472
73.3
Diluted earnings per share $ 0.81
$ 0.46
$ 0.35
76.1

⁽¹⁾ We believe that the presentation of “Revenue, net of subcontractor costs”, which is a non-GAAP financial measure, enhances investors’ ability to analyze our business trends and performance because it substantially measures the work performed by our employees. In the course of providing services, we routinely subcontract various services and, under certain U.S. Agency for International Development programs, issue grants. Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with GAAP and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities. The grants are included as part of our subcontractor costs. Because subcontractor services can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of our business trends. Accordingly, we segregate subcontractor costs from revenue to promote a better understanding of our business by evaluating revenue exclusive of costs associated with external service providers.

The following table reconciles our reported results to ~~non-GAAP ongoing~~non-U.S. GAAP adjusted results, which exclude a non-operating benefit of Employee Retention Credits ("ERC's") related to COVID-19 in the ~~RCM results and certain non-operating accounting-related adjustments.~~first nine months of fiscal 2022. The effective tax ~~rates~~rate applied to the ~~adjustments~~adjustment to ~~EPS~~earnings per share ("EPS") to arrive at ~~ongoing~~adjusted EPS ~~averaged~~ ~~29.0% and 32.6% in the first quarters of fiscal 2018 and 2017, respectively.~~was 26%. We ~~apply~~applied the relevant marginal statutory tax rate based on the nature of the ~~adjustments~~adjustment and tax jurisdiction in which ~~they occur.~~it occurred. Both EPS and ~~ongoing~~adjusted EPS were calculated using diluted weighted-average common shares outstanding ~~for the respective periods~~ as reflected in our consolidated statements of income.


	Three Months Ended							Nine Months Ended
	July 3, 2022		June 27, 2021		Change			July 3, 2022		June 27, 2021		Change
					$		%					$		%
	($ in thousands, except per share data)
Income from operations	$	83,905	$	69,807	$	14,098	20.2%	$	245,645	$	196,865	$	48,780	24.8%


COVID-19 Credits	(1,040)		—		(1,040)		NM	(5,491)		—		(5,491)		NM
Adjusted income from operations (1)	$	82,865	$	69,807	$	13,058	18.7%	$	240,154	$	196,865	$	43,289	22.0%

EPS	$	1.09	$	0.95	$	0.14	14.7%	$	3.32	$	2.74	$	0.58	21.2%


COVID-19 Credits	(0.01)		—		(0.01)		NM	(0.07)		—		(0.07)		NM
Adjusted EPS (1)	$	1.08	$	0.95	$	0.13	13.7%	$	3.25	$	2.74	$	0.51	18.6%

NM = not meaningful

(1) Non-GAAP financial measure

Three Months Ended
December 31,
2017 January 1,
2017 Change
$ %
($ in thousands)
Revenue $ 759,749
$ 668,851
$ 90,898
13.6%
RCM (6,807 ) (8,231 ) 1,424
NM
Ongoing revenue $ 752,942
$ 660,620
$ 92,322
14.0

Revenue, net of subcontractor costs $ 544,847
$ 489,551
$ 55,296
11.3
RCM (1,152 ) (1,795 ) 643
NM
Ongoing revenue, net of subcontractors costs $ 543,695
$ 487,756
$ 55,939
11.5

Income from operations $ 48,589
$ 39,855
$ 8,734
21.9
RCM 1,158
3,042
(1,884 ) NM
Ongoing income from operations $ 49,747
$ 42,897
$ 6,850
16.0

EPS $ 0.81
$ 0.46
$ 0.35
76.1
RCM 0.01
0.03
(0.02 ) NM
Revaluation of deferred tax liabilities (0.17 ) —
(0.17 ) NM
Ongoing EPS $ 0.65
$ 0.49
$ 0.16
32.7%

NM = not meaningful

Operating income increased $14.1 million, or 20.2%, in the third quarter of fiscal 2022 compared to the year-ago quarter. In the first ~~quarter~~nine months of fiscal ~~2018, revenue and revenue, net of subcontractor costs,~~2022, operating income increased ~~$90.9~~$48.8 million, or ~~13.6%~~24.8%, ~~and $55.3 million, or 11.3%, respectively,~~ compared to the same period last year. The ~~year-over-year comparisons~~third quarter and first nine months of fiscal 2022 results include the ~~above-described~~benefit of ERC's totaling $1.0 million and $5.5 million, respectively, which represents reimbursement from the U.S. federal government under the Coronavirus Aid, Relief and Economic Security Act for the costs that we incurred during the second quarter of fiscal 2020 to address the COVID-19 pandemic. The amounts were recognized during the first nine months of fiscal 2022 when the funds were received due to the uncertainty related to the computation of qualifying amounts and delayed processing times for our application. These amounts were primarily reflected as a reduction to "Other Costs of Revenue" in ~~certain construction activities. Revenue~~our Consolidated Statement of Income and ~~revenue, net~~an increase to "Cash Provided by Operations" in our Consolidated Statement of ~~subcontractor~~Cash Flows for the first nine months of fiscal 2022, consistent with the presentation of the related costs ~~from these construction activities,~~in the second quarter of fiscal 2020. Excluding the ERC's, our adjusted operating income increased $13.1 million, or 18.7% for the third quarter of fiscal 2022 and increased $43.3 million, or 22.0%, for the first nine months of fiscal 2022 compared to the year-ago periods. These increases reflect improved results in both GSG and CIG segments, which are ~~reported~~described below under "Government Services Group" and "Commercial/International Services Group", respectively.

Net interest expense increased $0.2 million and $0.4 million in the ~~RCM segment, declined $1.4~~third quarter and first nine months of fiscal 2022, respectively, compared to the same periods last year. The increased interest expense related to our contingent earn-out liabilities was substantially offset by the benefit of lower average year-over-year borrowings.

The effective tax rates for the first nine months of fiscal 2022 and 2021 were 23.9% and 20.4%, respectively. Income tax expense was reduced by $4.9 million and ~~$0.6~~$8.7 million ~~respectively,~~of excess tax benefits on share-based payments in the first ~~quarter~~nine months of fiscal ~~2018~~2022 and 2021, respectively. Excluding the impact of these tax benefits, our effective tax rates for the first nine months of fiscal 2022 and 2021 were 25.9% and 25.0%, respectively.

Our EPS was $1.09 and $3.32 for the third quarter and first nine months of fiscal 2022, compared to $0.95 and $2.74 for the ~~prior-year quarter.~~same periods in fiscal 2021, respectively. On the same basis as our adjusted operating income, adjusted EPS was $1.08 and $3.25 for the third quarter and first nine months of fiscal 2022, compared to $0.95 and $2.74 for the same periods last year, respectively.

~~Ongoing revenue~~Segment Results of Operations

Government Services Group


	Three Months Ended							Nine Months Ended
	July 3, 2022		June 27, 2021		Change			July 3, 2022		June 27, 2021		Change
					$		%					$		%
	($ in thousands)
Revenue	$	459,987	$	444,263	$	15,724	3.5%	$	1,365,041	$	1,301,497	$	63,544	4.9%
Subcontractor costs	(124,487)		(129,133)		4,646		3.6	(364,970)		(371,685)		6,715		1.8
Revenue, net of subcontractor costs	$	335,500	$	315,130	$	20,370	6.5	$	1,000,071	$	929,812	$	70,259	7.6

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

Revenue increased $15.7 million, or 3.5%, and revenue, net of subcontractor costs, increased ~~$92.3~~$20.4 million, or ~~14.0%~~6.5%, in the third quarter of fiscal 2022 compared to the year-ago quarter. For the first nine months of fiscal 2022, revenue increased $63.5 million, or 4.9%, and ~~$55.9~~revenue, net of subcontractor costs, increased $70.3 million, or ~~11.5%~~7.6%, compared to the prior year periods. The increases primarily reflect higher U.S. state and local government activities related to water and environmental programs and disaster response projects.

Operating income increased $1.3 million and $18.6 million in the third quarter and first nine months of fiscal 2022, respectively, compared to the same periods in fiscal 2021. Operating income for the third quarter and first nine months fiscal 2022 included $0.7 million and $3.7 million of the aforementioned ERC's. Excluding this benefit, operating income increased 11.6% in the first ~~quarter~~nine months of fiscal 2018 compared to last year’s first quarter. These increases include the contribution from Glumac, which was acquired on the first day of fiscal 2018, and contributed revenue of $13.2 million. Excluding this contribution, our ongoing revenue increased 12.0% in the first quarter of fiscal 20182022 compared to the same period last year. ~~These results reflect increased state and local government activity in our U.S. operations.~~ Our revenue and revenue, net of subcontractor costs, from this business increased $67.5 million and $34.6 million, respectively, in the first quarter of fiscal 2018 compared to last year's first quarter. This year-over-year growth in our state and local business was primarily a result of increased activity in response to the unprecedented natural disasters in the United States that occurred during 2017. Our emergency response projects were concentrated in Florida, Texas, and California in the first quarter of fiscal 2018. In addition, we experienced broad-based growth in our U.S. state and local government project-related infrastructure revenue. Our U.S. federal, U.S. commercial, and international government-related revenue also increased in the first quarter of fiscal 2018 compared to the same period last year; however, this growth was partially offset by lower international oil and gas activities, particularly in Western Canada.

Operating income increased $8.7 million in the first quarter of fiscal 2018 compared to the same period last year. The loss from exited construction activities in our RCM segment was $1.2 million in the first quarter of fiscal 2018 compared to $3.0 million in the first quarter of fiscal 2017. Our RCM results are described below under “Remediation and Construction Management.” Excluding RCM, ongoing operating income increased $6.9 million, or 16.0%, in the first quarter of fiscal 2018 compared to the same period last year. The increase in our ongoing operating income primarily reflects improved results in our GSG segment. GSG’s operating income increased $9.0 million in the first quarter of fiscal 2018 compared to the same period last year. These results are described below under “Government Services Group.”

Interest expense, net was $3.2 million in the first quarter of fiscal 2018 compared to $2.9 million in last year’s first quarter. The increase in interest expense reflects additional borrowings to fund working capital needs and increases in LIBOR rates.

income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, while also repealing the deduction for domestic production activities, limiting the deductibility of certain executive compensation, implementing a territorial tax system, and imposing a one-time repatriation tax on deemed repatriated earnings of foreign subsidiaries. As we have a September 30 fiscal year-end, our U.S. federal corporate income tax rate will be blended in fiscal 2018, resulting in a statutory federal rate of approximately 24.5% (3 months at 35% and 9 months at 21%), and will be 21% for subsequent fiscal years.

The one-time revaluation of our deferred tax liabilities and our estimate of the one-time transition tax on foreign earnings are both preliminary and subject to adjustment as we refine the information necessary to record the final values. The provisional amounts incorporate assumptions made based on our current interpretation of the TCJA and may change as we receive additional clarification on the implementation guidance. Additionally, in order to complete the valuation of our deferred tax liabilities, additional information related to the timing of the recovery or settlement of our deferred tax assets and liabilities and the effective tax rates (including state tax rates) that will apply needs to be obtained and analyzed. Similarly, information related to the computation of our foreign earnings and profits subject to the one-time transition tax requires further analysis before we make a final determination that we have no related liability. The SEC has issued rules that would allow for a measurement period of up to one year after the enactment date of the TCJA to finalize the recording of the related tax impacts. We currently anticipate finalizing and recording any resulting adjustments by the end of our current fiscal year ending September 30, 2018.

During the first quarter of fiscal 2017, we adopted accounting guidance which requires excess tax benefits and deficiencies on share-based payments to be recorded as an income tax benefit or expense, respectively, in the consolidated statement of income rather than being recorded in additional paid-in capital on the consolidated balance sheet. As a result, we recognized income tax benefits of $3.2 million and $1.8 million in the first quarters of fiscal 2018 and fiscal 2017, respectively. Excluding these discrete amounts from both periods and the one-time impacts of the TCJA, the effective tax rates for the first quarters of fiscal 2018 and 2017 were 28.0% and 32.8%, respectively. Excluding discrete items, we expect our effective tax rate to be approximately 28.0% for the remainder of fiscal 2018 and to decline to approximately 26.0% in fiscal 2019 as the full benefit of the lower U.S. corporate tax rate becomes effective.

EPS was $0.81 in the first quarter of fiscal 2018 compared to $0.46 in last year’s first quarter. On the same basis as our ongoing operating income, EPS was $0.65 in the first quarter of fiscal 2018 compared to $0.49 in the first quarter of fiscal 2017.

~~Segment Results of Operations~~

~~Government Services Group~~

Three Months Ended
December 31,
2017 January 1,
2017 Change
$ %
($ in thousands)
Revenue $ 442,772
$ 362,859
$ 79,913
22.0%
Subcontractor costs (132,806 ) (105,700 ) (27,106 ) (25.6)
Revenue, net of subcontractor costs $ 309,966
$ 257,159
$ 52,807
20.5

Income from operations $ 39,125
$ 30,168
$ 8,957
29.7

Revenue and revenue, net of subcontractor costs, increased $79.9 million, or 22.0%, and $52.8 million, or 20.5%, respectively, in the first quarter of fiscal 2018 compared to the same period last year. These increases include the aforementioned contribution from Glumac. Excluding this contribution, our revenue increased 18.4% in the first quarter of fiscal 2018 compared to the same period last year. These increases reflect broad-based revenue growth in our U.S. state and local government emergency response and project-related infrastructure business in the first quarter of fiscal 2018 compared to the same period in fiscal 2017. Our U.S. state and local government revenue and revenue, net of subcontractor costs, increased $59.9 million and $32.2 million, respectively, in the first quarter of fiscal 2018 compared to the same period last year. To a lesser extent, our U.S. federal business also improved compared to the first quarter of last year, primarily due to an increase in environmental work for the DoD.

~~Operating income increased $9.0 million in the first quarter of fiscal 2018 compared to the same period last year, reflecting the higher revenue. In addition, our~~ operating margin, based on revenue, net of subcontractor costs, improved to ~~12.6%~~14.7% for the first nine months of fiscal 2022 compared to 13.8% for fiscal 2021 period. Excluding the ERC's, our operating margin was 14.3% in the first ~~quarter~~nine months of fiscal ~~2018 from 11.7% in the same period last year. This~~2022. The improved ~~profitability~~operating margin was primarily ~~reflects~~due to our increased focus on high-end consulting services and improved ~~project performance.~~labor utilization.

Commercial/International Services Group


	Three Months Ended							Nine Months Ended
	July 3, 2022		June 27, 2021		Change			July 3, 2022		June 27, 2021		Change
					$		%					$		%
	($ in thousands)
Revenue	$	444,238	$	372,722	$	71,516	19.2%	$	1,277,469	$	1,064,680	$	212,789	20.0	%
Subcontractor costs	(59,252)		(49,862)		(9,390)		(18.8)	(178,079)		(152,042)		(26,037)		(17.1)
Revenue, net of subcontractor costs	$	384,986	$	322,860	$	62,126	19.2	$	1,099,390	$	912,638	$	186,752	20.5

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

Three Months Ended
December 31,
2017 January 1,
2017 Change
$ %
($ in thousands)
Revenue $ 331,513
$ 318,071
$ 13,442
4.2%
Subcontractor costs (97,784 ) (87,474 ) (10,310 ) (11.8)
Revenue, net of subcontractor costs $ 233,729
$ 230,597
$ 3,132
1.4

Income from operations $ 21,294
$ 21,544
$ (250 ) (1.2)

Revenue increased $71.5 million, or 19.2%, and revenue, net of subcontractor costs, increased ~~$13.4~~$62.1 million, ~~and $3.1 million, respectively,~~or 19.2%, in the ~~first~~third quarter of fiscal ~~2018~~2022 compared to ~~the year-ago~~last year's third quarter. These results reflect increased environmental activity across a broad range of commercial clients that was substantially offset by lower oil and gas activity in Canada. Operating income decreased $0.3 million inFor the first ~~quarter~~nine months of fiscal ~~2018 compared to the first quarter of fiscal 2017. The decrease in operating income also reflects lower oil and gas activity in Canada.~~

~~Remediation and Construction Management~~

2022, revenue

Three Months Ended
December 31,
2017 January 1,
2017 Change
$ %
($ in thousands)
Revenue $ 6,807
$ 8,231
$ (1,424 ) (17.3)%
Subcontractor costs (5,655 ) (6,436 ) 781
12.1
Revenue, net of subcontractor costs $ 1,152
$ 1,795
$ (643 ) (35.8)

Loss from operations $ (1,158 ) $ (3,042 ) $ 1,884
61.9

~~Revenue~~increased $212.8 million, or 20.0%, and revenue, net of subcontractor costs, ~~decreased $1.4~~increased $186.8 million, ~~and $0.6 million, respectively,~~or 20.5%, compared to the same period last year. The revenue growth in the first ~~quarter~~nine months of fiscal ~~2018~~2022 primarily reflects more activity on commercial environmental programs, including meeting net zero carbon goals and high performance buildings. These increases were also due to the international government stimulus spending on infrastructure. Additionally, revenue in the first nine months of fiscal 2022, includes contributions from acquisitions, which did not have comparable revenue in year-ago period.

Operating income increased $14.5 million and $34.8 million, in the third quarter and first nine months of fiscal 2022, respectively, compared to the ~~year-ago period. These decreases resulted from our decision to wind-down~~same periods last year. Operating income in the ~~RCM construction activities in late~~third quarter and first nine months of fiscal ~~2014. The~~2022 included $0.3 million and $1.6 million of the aforementioned ERC's, respectively. Excluding this benefit, operating ~~loss~~income increased 31.8% in the first ~~quarter~~nine months of fiscal ~~2018~~2022 compared to the fiscal 2021 period. Our operating margin, based on revenue, net of subcontractor costs, improved to 12.7% for the first nine months of fiscal 2022 compared to 11.5% for the prior-year period. Excluding the ERC's, our operating margin was 12.5% for the first nine months of fiscal 2022. The improved operating margin was primarily ~~reflects legal costs related~~due to ~~outstanding claims. The operating loss~~our increased focus on high-end consulting services, project execution and labor utilization.

Backlog

Backlog generally represents the dollar amount of revenues we expect to realize in the ~~first quarter~~future when we perform the work. The difference between remaining unsatisfied performance obligations ("RUPO") and backlog relates to contract terms. Specifically, our backlog does not consider the impact of ~~fiscal 2017 includes an unfavorable adjustment~~termination for convenience clauses within the contracts. The contract term and thus remaining performance obligation on certain of ~~$1.7 million~~our operations and maintenance contracts, are limited to ~~a transportation project that was completed in fiscal 2017. The remaining RCM~~the notice period required for contract termination (usually 30, 60, or 90 days). At July 3, 2022 and October 3, 2021, the differences between our backlog ~~at the end~~and RUPO of ~~the first quarter of 2018 was immaterial as the related projects~~$3.5 billion for each period were ~~substantially completed in fiscal 2017.~~immaterial.

Financial Condition, Liquidity and Capital Resources

Capital Requirements. As of July 3, 2022, we had $217.4 million of cash and cash equivalents and access to an additional $799.3 million of borrowings available under our credit facility. During the first nine months of fiscal 2022, we generated $276.0 million of cash from operations. To date, we have not experienced any significant deterioration in our financial condition or liquidity due to the COVID-19 pandemic and our credit facilities remain available.

Our primary sources of liquidity are cash flows from operations and borrowings under our credit facilities. Our primary uses of cash are to fund working capital, ~~capital expenditures,~~ stock repurchases, cash dividends, capital expenditures and repayment of debt, as well as to fund acquisitions and earn-out obligations from prior acquisitions. We believe that our existing cash and cash equivalents, operating cash flows and borrowing capacity under our credit agreement, as described below, will be sufficient to meet our capital requirements for at least the next 12 months. On November 7, 2016, the Board of Directors authorized a stock repurchase program under which we could repurchase up to $200 million of our common stock. On November 7, 2017, the Board of Directors declared a quarterly cash dividend of $0.10 per share payable on December 15, 2017 to stockholders of record as of the close of business on November 30, 2017.

~~Subsequent Event.~~ ~~On January 29, 2018, the Board of Directors declared a quarterly cash dividend of $0.10 per share payable on March 2, 2018 to stockholders of record as of the close of business on February 14, 2018.~~

We use a variety of tax planning and financing strategies to manage our worldwide cash and deploy funds to locations where they are needed. We ~~also indefinitely reinvest our~~currently have no need or plans to repatriate undistributed foreign earnings, ~~and our current plans do not demonstrate a need to repatriate these earnings. Should we require additional capital~~other than from Canada, in the ~~United States,~~foreseeable future; however, this could change due to varied economic circumstances.

On October 5, 2021, the Board of Directors authorized a new stock repurchase program under which we ~~may elect~~could repurchase up to ~~repatriate these foreign funds or raise capital~~$400 million of our common stock in addition to the $147.8 million remaining under the previous stock repurchase program at October 3, 2021. In the nine months fiscal 2022, we repurchased and settled 986,280 shares with an average price of $152.09 per share for a total cost of $150.0 million in the ~~United States through debt or equity. If~~open market. At July 3, 2022, we ~~were~~had a remaining balance of $397.8 million under our stock repurchase program.

On November 15, 2021, the Board of Directors declared a quarterly cash dividend of $0.20 per share payable on December 20, 2021 to ~~repatriate these foreign funds, we could be required~~stockholders of record as of the close of business on December 2, 2021. On January 31, 2022, the Board of Directors declared a quarterly cash dividend of $0.20 per share payable on February 25, 2022 to ~~accrue and pay foreign withholding taxes.~~stockholders of record as of the close of business on February 11, 2022. On May 2, 2022 the Board of Directors declared a quarterly cash dividend of $0.23 per share payable on May 27, 2022 to stockholders of record as of the close of business on May 13, 2022.

Subsequent Event. On August 1, 2022, the Board of Directors declared a quarterly cash dividend of $0.23 per share payable on August 26, 2022 to stockholders of record as of the close of business on August 12, 2022.

Cash and Cash Equivalents. As of ~~December 31, 2017,~~July 3, 2022, our cash and cash equivalents ~~were $173.0~~were $217.4 million, ~~a decrease~~an increase of ~~$17.0~~$50.8 million compared to the fiscal ~~2017~~2021 year-end. The increase was primarily due to net cash ~~decrease resulted from cash used in~~provided by operating activities ~~share~~partially offset by stock repurchases, ~~business acquisitions,~~ dividends, ~~and capital expenditures. The overall decrease was partially mitigated by net borrowings~~as well as payments for taxes on ~~long-term debt and net proceeds from the issuance of common~~vested restricted stock.

Operating Activities. For the first ~~quarter~~nine months of fiscal ~~2018,~~2022, net cash ~~used in~~provided by operating activities was ~~$66.5~~$276.0 million, an increase ~~in cash used~~ of ~~$7.7~~$49.4 million compared to the prior-year period. The increase primarily reflects an increase in ~~cash used was in order to fund~~earnings adjusted for non-cash items and improved working capital ~~due primarily~~from faster collections of our receivables in the first nine months of fiscal 2022 compared to the ~~timing of payments to our vendors and employees as a result of increased revenue. The overall use of cash also resulted from the timing of collections on accounts receivable.~~fiscal 2021 period.

Investing Activities. For the first ~~quarter~~nine months of fiscal ~~2018,~~2022, net cash used in investing activities was ~~$19.7~~$38.3 million, an increase of ~~$17.9~~$15.2 million compared to the prior-year ~~period,~~period. The increase was primarily due to payments related to the ~~acquisition~~acquisitions completed in the first nine months of ~~Glumac.~~fiscal 2022.

Financing Activities. For the first ~~quarter~~nine months of ~~2018,~~fiscal 2022, net cash ~~provided by~~used in financing activities was ~~$70.0~~$182.5 million, an increase of ~~$41.1~~$45.0 million compared to the same ~~quarter~~period last ~~year,~~year. The increase was due to higher ~~net borrowings. The increase was~~stock repurchases, partially offset by ~~an increase~~a change in ~~stock repurchases.~~bank overdrafts and a net borrowing, which was primarily used to fund acquisitions.

Debt Financing. On ~~May 7, 2013,~~February 18, 2022, we entered into Amendment No. 2 to Second Amended and Restated Credit Agreement (“Amended Credit Agreement”) with a ~~credit agreement~~total borrowing capacity of $1.05 billion that ~~provided for a $205 million term loan facility and a $460 million revolving credit facility that was scheduled to~~will mature in ~~May 2018. On May 29, 2015, we entered into a third amendment to our credit agreement (as amended, the “Credit Agreement”) that extended the maturity date for these facilities to May 2020.~~February 2027. The Amended Credit Agreement is a ~~$654.8~~$750 million senior secured, five-year facility that provides for a ~~$194.8~~$250 million term loan facility (the ~~“Term~~“Amended Term Loan Facility”) and a ~~$460~~$500 million revolving credit facility (the ~~“Revolving~~“Amended Revolving Credit Facility”). ~~The~~In addition, the Amended Credit Agreement includes a $300 million accordion feature that allows us to increase the Amended Credit Agreement to $1.05 billion subject to lender approval. The Amended Credit Agreement provides for, among other things, (i) refinance indebtedness under our Credit Agreement dated as of July 30, 2018; (ii) finance ~~certain permitted~~ open market repurchases of ~~our~~ common stock, ~~make permitted~~ acquisitions, and ~~pay~~ cash dividends and ~~distributions.~~distributions; and (iii) utilize the proceeds for working capital, capital expenditures and other general corporate purposes. The Amended Credit Agreement provides for a reduction in the interest grid for meeting certain sustainability targets related to the (i) reduction of greenhouse gas emissions through the Company’s projects and operational sustainability initiatives and (ii) improvement of peoples’ lives as a result ofthe Company’s projects that provide environmental, social and governance benefits. The Amended Revolving Credit Facility includes a ~~$150~~$100 million sublimit for the issuance of standby letters of credit, a $20 million sublimit for swingline loans, and a ~~$150~~$300 million sublimit for multicurrency ~~borrowings.~~ borrowings and letters of credit.

The ~~interest rate provisions of the~~entire Amended Term Loan Facility ~~and the Revolving Credit Facility did not materially change.~~

was drawn on February 18, 2022. The Amended Term Loan Facility is subject to quarterly amortization of principal ~~with $10.3 million payable in year 1, and $15.4 million payable in years 2 through 5. The Term Loan may be prepaid~~ at ~~any time without penalty.~~5% annually commencing June 30, 2022. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a ~~Eurocurrency~~benchmark rate plus a margin that ranges from ~~1.15%~~1.000% to ~~2.00%~~1.875% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate or the ~~Eurocurrency~~Secured Overnight Financing Rate ("SOFR") rate plus 1.00%), plus a margin that ranges from ~~0.15%~~0% to ~~1.00%~~0.875% per annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The Amended Term Loan Facility is subject to the same interest rate provisions. The ~~interest rate of the Term Loan Facility at the date of inception was 1.57%. The~~Amended Credit Agreement expires on ~~May 29, 2020,~~February 18, 2027, or earlier at our discretion upon payment in full of loans and other obligations.

As of ~~December 31, 2017,~~July 3, 2022, we had ~~$447.6 million~~$246.9 million. in outstanding borrowings under the Amended Credit Agreement, which was comprised of ~~$157.6~~$246.9 million under the Amended Term Loan Facility and ~~$290.0 million~~no outstanding borrowings under the Amended Revolving Credit ~~Facility at a~~Facility. The year-to-date weighted-average interest rate of ~~2.69% per annum.~~the outstanding borrowings during July 3, 2022 is 1.49%. In addition, we had ~~$0.9~~$0.7 million in standby letters of credit under the Amended Credit Agreement. Our ~~average effective~~year-to-date weighted-average interest rate on borrowings outstanding ~~at December 31, 2017~~ under the Amended Credit Agreement,

including the effects of interest rate swap agreements described in Note ~~12, “Derivative~~15, “Derivative Financial ~~Instruments~~”Instruments” of the “Notes to Consolidated Financial Statements”, was ~~2.70%~~3.53%. At ~~December 31, 2017,~~July 3, 2022, we had ~~$169.1~~$499.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants. In addition, we entered into agreements with four banks to issue standby letters of credit. The aggregate amount of standby letters of credit outstanding under these additional agreements and other bank guarantees was $23.7 million, of which $4.9 million was issued in currencies other than the U.S. dollar.

The Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The financial covenants provide for a maximum Consolidated Leverage Ratio of ~~3.00~~3.25 to 1.00 (total funded debt/EBITDA, as defined in the Amended Credit Agreement) and a minimum Consolidated ~~Fixed Charge~~Interest Coverage Ratio of ~~1.25~~3.00 to 1.00 ~~(EBITDA,~~(EBITDA/Consolidated Interest Charges, as defined in the Amended Credit ~~Agreement minus capital expenditures/cash interest plus taxes plus principal payments of indebtedness including capital leases, notes and post-acquisition payments)~~Agreement).

~~At December 31, 2017, we were in compliance with these covenants with a consolidated leverage ratio of 2.01x and a consolidated fixed charge coverage ratio of 2.68x.~~ 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) ~~our~~the accounts receivable, general intangibles and intercompany loans, and those of our subsidiaries that are guarantors or borrowers. At July 3, 2022, we were in compliance with these covenants with a consolidated leverage ratio of 0.85x and a consolidated interest coverage ratio of 28.19x.

WeIn addition to the Amended Credit Agreement, we maintain ~~at our Australian subsidiary an AUD$30 million~~other credit ~~facility,~~facilities, which may be used for ~~bank overdrafts,~~ short-term cash advances orand bank guarantees. ~~This facility expires in March 2019 and is secured by a parent guarantee.~~ At ~~December 31, 2017,~~July 3, 2022, there were no outstanding borrowings under these facilities, and the

aggregate amount of standby letters of credit outstanding ~~under this facility; there are~~was $50.9 million. As of July 3, 2022, we had no bank ~~guarantees outstanding of $5.6 million, which were issued in currencies other than the U.S. dollar.~~overdrafts related to our disbursement bank accounts.

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

Dividends. Our Board of Directors has authorized the following dividends in fiscal ~~2018:~~2022:


	Dividend Per Share		Record Date	Total Maximum Payment (in thousands)		Payment Date
November 15, 2021	$	0.20	December 2, 2021	$	10,793	December 20, 2021
January 31, 2022	$	0.20	February 11, 2022	$	10,769	February 25, 2022
May 2, 2022	$	0.23	May 13, 2022	$	12,311	May 27, 2022
August 1, 2022	$	0.23	August 12, 2022	N/A		August 26, 2022

Dividend
Per Share
Record Date
Total Maximum
Payment
Payment Date
(in thousands, except per share data)
November 6, 2017 $ 0.10
November 30, 2017 $ 5,589
December 15, 2017
January 29, 2018 $ 0.10
February 14, 2018 N/A
March 2, 2018

Income Taxes

We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and adjust the allowance, if necessary. The factors used to assess the likelihood of realization are our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The ability or failure to achieve the forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets. Based on projected future operating results in certain jurisdictions, it is ~~possible~~unlikely that the current valuation allowance positions of those jurisdictions could be adjusted in the next 12 months.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions may significantly decrease within the next 12 months. These ~~changes would~~liabilities represent our current estimates of the additional tax liabilities that we may be assessed when the ~~result of ongoing examinations.~~related audits are concluded. If these audits are resolved in a manner more unfavorable than our current expectations, our additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.

Off-Balance Sheet Arrangements

In the ordinary course of business, we may use off-balance sheet arrangements if we believe that such arrangements would be an efficient way to lower our cost of capital or help us manage the overall risks of our business operations. We do not believe that such arrangements have had a material adverse effect on our financial position or our results of operations.

The following is a summary of our off-balance sheet arrangements:

•Letters of credit and bank guarantees are used primarily to support project performance and insurance programs. We are required to reimburse the issuers of letters of credit and bank guarantees for any payments they make under the outstanding letters of credit or bank guarantees. Our Amended Credit Agreement and additional letter of credit facilities cover the ~~issuance~~issuance of our standby letters of credit and bank guarantees and are critical for our normal operations. If we default on the Amended Credit Agreement or additional credit facilities, our inability to issue or renew standby letters of credit and bank guarantees would impair our ability to maintain normal operations. At ~~December 31, 2017,~~July 3, 2022, we had ~~$0.1~~$0.7 million in standby letters of credit outstanding under our Amended Credit Agreement ~~$23.7~~and $50.9 million in standby letters of credit outstanding under our additional letter of credit ~~facilities and $5.6 million of bank guarantees under our Australian facility.~~facilities.

•From time to time, we provide guarantees and indemnifications related to our services. If our services under a guaranteed or indemnified project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed or indemnified projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guaranteed losses.

•In the ordinary course of business, we enter into various agreements as part of certain unconsolidated subsidiaries, joint ventures, and other jointly executed contracts where we are jointly and severally liable. We enter into these agreements primarily to support the project execution commitments of these entities. The potential payment amount of an outstanding performance guarantee is typically the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. However, we are not able to estimate other amounts that may be required to be paid in excess of estimated costs to complete contracts and, accordingly, the total potential payment amount under our outstanding performance guarantees cannot be estimated. For cost-plus contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump sum or fixed-price contracts, this amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In those cases where costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors, for claims.

•In the ordinary course of business, our clients may request that we obtain surety bonds in connection with contract performance obligations that are not required to be recorded in our consolidated balance sheets. We are obligated to reimburse the issuer of our surety bonds for any payments made thereunder. Each of our commitments under performance bonds generally ends concurrently with the expiration of our related contractual obligation.

Critical Accounting Policies

Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended October ~~1, 2017.~~3, 2021. To date, there have been no material changes in our critical accounting policies as reported in our ~~2017~~2021 Annual Report on Form 10-K.

New Accounting Pronouncements

For information regarding recent accounting pronouncements, see “Notes to Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report.

Financial Market Risks

We do not enter into derivative financial instruments for trading or speculation purposes. In the normal course of business, we have exposure to both interest rate risk and foreign currency transaction and translation risk, primarily related to the Canadian and Australian ~~dollar.~~dollar, and British Pound.

We are exposed to interest rate risk under our Amended Credit Agreement. We can borrow, at our option, under both the Amended Term Loan Facility and Amended Revolving Credit Facility. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a ~~Eurocurrency~~benchmark rate plus a margin that ranges from ~~1.15%~~1.000% to ~~2.00%~~1.875% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate or the ~~Eurocurrency~~SOFR rate plus 1.00%) plus a margin that ranges from ~~0.15%~~0% to ~~1.00%~~0.875% per annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The Amended Term Loan Facility is subject to the same interest rate provisions. Borrowings at the base rate have no designated term and may be repaid without penalty any time prior to the Facility’s maturity date. Borrowings at a ~~Eurodollar~~SOFR rate have a term no less than 30 days and no greater than 90

~~days.~~180 days and may be prepaid without penalty. Typically, at the end of such term, such borrowings may be rolled over at our discretion into either a borrowing at the base rate or a borrowing at a ~~Eurodollar~~SOFR rate with similar terms, not to exceed the maturity date of the Facility. The Facility matures on ~~May 29, 2020.~~February 18, 2027. At ~~December 31, 2017,~~July 3, 2022, we had $246.9 million in outstanding borrowings ~~outstanding~~ under the Amended Credit Agreement, which was comprised of ~~$447.6~~$246.9 million ~~at a~~under the Amended Term Loan Facility and no outstanding borrowings under the Amended Revolving Credit Facility. The year-to-date weighted-average interest rate of ~~2.69% per annum.~~the outstanding borrowings during fiscal 2022 was 1.49%.

In ~~fiscal 2013,~~August 2018, we entered into ~~three~~five interest rate swap agreements with ~~three~~five banks to fix the variable interest rate on ~~$153.8~~$250 million of our ~~Term Loan Facility. In fiscal 2014, we entered into two interest rate swap agreements with two banks to fix the variable interest rate on $51.3 million of our~~Amended Term Loan Facility. The objective of these interest rate swaps was to eliminate the variability of our cash flows on the amount of interest expense we pay under our Credit Agreement. As of July 3, 2022, the notional principal of our outstanding interest swap agreements was $203.1 million ($40.6 million each.) Our year-to-date average effective interest rate on borrowings outstanding under the Credit Agreement, including the effects of interest rate swap agreements, at ~~December 31, 2017,~~July 3, 2022, was ~~2.70%~~3.53%. For more information, see Note ~~12, “Derivative~~15, “Derivative Financial ~~Instruments~~”Instruments” of the “Notes to Consolidated Financial Statements”.

Most of our transactions are in U.S. dollars; however, some of our subsidiaries conduct business in foreign currencies, primarily the Canadian and Australian ~~dollar.~~dollar, and British Pound. Therefore, we are subject to currency exposure and volatility because of currency fluctuations. We attempt to minimize our exposure to these ~~fluctuations~~fluctuations by matching revenue and expenses in the same currency for our contracts. ~~Foreign currency gains and losses were immaterial for both~~For the first ~~quarters~~nine months of fiscal ~~2018 and 2017. Foreign~~2021, we reported $1.8 million of foreign currency ~~gains and~~ losses ~~are reported as part of~~in “Selling, general and administrative expenses” inon our consolidated statements of income. The foreign currency impact for the first nine months of fiscal 2022 was immaterial.

WeWe have foreign currency exchange rate exposure in our results of operations and equity primarily ~~as a result~~because of the currency translation related to our foreign subsidiaries where the local currency is the functional currency. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions will result in reduced revenue, operating expenses, assets and liabilities. Similarly, our revenue, ~~operating~~operating expenses, assets and liabilities will increase if the U.S. dollar weakens against foreign currencies. For the first ~~quarters~~nine months of fiscal ~~2018~~2022 and ~~2017, 21.7%~~2021, 31.4% and ~~25.8%~~29.2% of our consolidated revenue, respectively, was generated by our international business. For the ~~three-month periods ended December 31, 2017 and January 1, 2017, we reduced~~first nine months of fiscal 2022, the effect of foreign exchange rate translation on the consolidated balance sheets was a decrease in our equity by $42.8 million compared to an increase in equity of $54.5 million in the first nine months of fiscal 2021. These amounts were recognized as adjustments to equity through other comprehensive ~~income on our consolidated balance sheets by $3.5 million and $16.2 million, respectively, for the effect of foreign currency translation adjustments.~~income.

Item 3.Quantitative and Qualitative Disclosures ~~About~~about Market Risk

Please refer to the information we have included under the heading “Financial Market Risks” in ~~Item 2.~~ “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in Item 2 of this Form 10-Q which is incorporated herein by reference.

Item 4.Controls and Procedures

Evaluation of disclosure controls and procedures and changes in internal control over financial reporting. As of ~~December 31, 2017,~~July 3, 2022, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer), our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), were effective.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~December 31, 2017~~July 3, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.OTHER INFORMATION

Item 1.Legal Proceedings

~~We are subject to certain claims~~For information regarding legal proceedings, see Note 17, "Commitments and lawsuits typically filed against the engineering, consulting and construction profession, alleging primarily professional errors or omissions. We carry professional liability insurance, subject to certain deductibles and policy limits, against such claims. However, in some actions, parties are seeking damages that exceed our insurance coverage or for which we are not insured. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on our financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.

~~Item 1A.Risk Factors~~

We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our operations. Set forth below and elsewhere in this report and in other documents we file with the SEC are descriptions of the risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. Additional risks we do not yet know of or that we currently think are immaterial may also affect our business operations. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected.

~~Continuing worldwide political and economic uncertainties may adversely affect our revenue and profitability.~~

The last several years have been periodically marked by political and economic concerns, including decreased consumer confidence, the lingering effects of international conflicts, energy costs and inflation. Although certain indices and economic data have shown signs of stabilization in the United States and certain global markets, there can be no assurance that these improvements will be broad-based or sustainable. This instability can make it extremely difficult for our clients, our vendors and us to accurately forecast and plan future business activities, and could cause constrained spending on our services, delays and a lengthening of our business development efforts, the demand for more favorable pricing or other terms, and/or difficulty in collection of our accounts receivable. Our government clients may face budget deficits that prohibit them from funding proposed and existing projects. Further, ongoing economic instability in the global markets could limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing business conditions or new opportunities. If economic conditions remain uncertain or weaken, or government spending is reduced, our revenue and profitability could be adversely affected.

~~Changes in applicable tax regulations could negatively affect our financial results.~~

We are subject to taxation in the United States and numerous foreign jurisdictions. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Acts ("TCJA"). The changes to U.S. tax law implemented by the TCJA are broad and complex. The final impacts of the TCJA may differ from the estimates provided elsewhere in this report, possibly materially, due to, among other things, changes in interpretations of the TCJA, any legislative action to address questions that arise because of the TCJA, any changes in accounting standards for income taxes or related interpretations in response to the TCJA, or any updates or changes in estimates we have utilized to calculate the impacts, including impacts from changes to current year earnings estimates and foreign exchange rates.

Demand for our services is cyclical and vulnerable to economic downturns. If economic growth slows, government fiscal conditions worsen, or client spending declines further, then our revenue, profits and financial condition may deteriorate.

Demand for our services is cyclical, and vulnerable to economic downturns and reductions in government and private industry spending. Such downturns or reductions may result in clients delaying, curtailing or canceling proposed and existing projects. Our business traditionally lags the overall recovery in the economy; therefore, our business may not recover immediately when the economy improves. If economic growth slows, government fiscal conditions worsen, or client spending declines, then our revenue, profits and overall financial condition may deteriorate. Our government clients may face budget deficits that prohibit them from funding new or existing projects. In addition, our existing and potential clients may either postpone entering into new contracts or request price concessions. Difficult financing and economic conditions may cause some of our clients to demand better pricing terms or delay payments for services we perform, thereby increasing the average number of days our receivables are outstanding, and the potential of increased credit losses of uncollectible invoices. Further, these conditions may result in the inability of some of our clients to pay us for services that we have already performed. If we are not able to reduce our costs quickly enough to respond to the revenue decline from these clients, our operating results may be adversely affected. Accordingly, these factors affect our ability to forecast our future revenue and earnings from business areas that may be adversely impacted by market conditions.

~~Demand for our oil and gas, and mining services fluctuates and a decline in demand could adversely affect our revenue, profits and financial condition.~~

Demand for our oil and gas services fluctuates, and we depend on our customers’ willingness to make future expenditures to explore for, develop, produce and transport oil and natural gas in the United States and Canada. Our customers’ willingness to undertake these activities depends largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control, including:

~~prices, and expectations about future prices, of oil and natural gas;~~

~~domestic and foreign supply of and demand for oil and natural gas;~~

~~the cost of exploring for, developing, producing and delivering oil and natural gas;~~

~~transportation capacity, including but not limited to train transportation capacity and its future regulation;~~

~~available pipeline, storage and other transportation capacity;~~

~~availability of qualified personnel and lead times associated with acquiring equipment and products;~~

~~federal, state, provincial and local regulation of oilfield activities;~~

~~environmental concerns regarding the methods our customers use to produce hydrocarbons;~~

~~the availability of water resources and the cost of disposal and recycling services; and~~

~~seasonal limitations on access to work locations.~~

Anticipated future prices for natural gas and crude oil are a primary factor affecting spending by our customers. Lower prices or volatility in prices for oil and natural gas typically decrease spending, which can cause rapid and material declines in demand for our services and in the prices we are able to charge for our services. Worldwide political, economic, military and terrorist events, as well as natural disasters and other factors beyond our control, contribute to oil and natural gas price levels and volatility and are likely to continue to do so in the future.

Further, the businesses of our global mining clients are, to varying degrees, cyclical and have experienced declines over the last three years due to lower global growth expectations and the associated decline in market prices. For example, depending on the market prices of uranium, precious metals, aluminum, copper, iron ore, and potash, our mining company clients may cancel or curtail their mining projects, which could result in a corresponding decline in the demand for our services among these clients. Accordingly, the cyclical nature of the mining industry could adversely affect our business, operating results or financial condition.

~~Our international operations expose us to legal, political, and economic risks in different countries as well as currency exchange rate fluctuations that could harm our business and financial results.~~

In the first quarter of fiscal 2018, we generated 21.7% of our revenue from our international operations, primarily in Canada and Australia, and from international clients for work that is performed by our domestic operations. International business is subject to a variety of risks, including:

~~imposition of governmental controls and changes in laws, regulations, or policies;~~

~~lack of developed legal systems to enforce contractual rights;~~

~~greater risk of uncollectible accounts and longer collection cycles;~~

~~currency exchange rate fluctuations, devaluations, and other conversion restrictions;~~

~~uncertain and changing tax rules, regulations, and rates;~~

~~the potential for civil unrest, acts of terrorism, force majeure, war or other armed conflict, and greater physical security risks, which may cause us to have to leave a country quickly;~~

~~logistical and communication challenges;~~

~~changes in regulatory practices, including tariffs and taxes;~~

~~changes in labor conditions;~~

~~general economic, political, and financial conditions in foreign markets; and~~

exposure to civil or criminal liability under the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act, the Canadian Corruption of Foreign Public Officials Act, the Brazilian Clean Companies Act, the anti-boycott rules, trade and export control regulations, as well as other international regulations.

For example, an ongoing government investigation into political corruption in Quebec contributed to the slow-down in procurements and business activity in that province, which adversely affected our business. The Province of Quebec has adopted legislation that requires businesses and individuals seeking contracts with governmental bodies be certified by a Quebec regulatory authority for contracts over a specified size. Our failure to maintain certification could adversely affect our business.

International risks and violations of international regulations may significantly reduce our revenue and profits, and subject us to criminal or civil enforcement actions, including fines, suspensions, or disqualification from future U.S. federal procurement contracting. Although we have policies and procedures to monitor legal and regulatory compliance, our employees, subcontractors, and agents could take actions that violate these requirements. As a result, our international risk exposure may be more or less than the percentage of revenue attributed to our international operations.

We derive a substantial amount of our revenue from U.S. federal, state and local government agencies, and any disruption in government funding or in our relationship with those agencies could adversely affect our business.

In the first quarter of fiscal 2018, we generated 51.1% of our revenue from contracts with U.S. federal, and state and local government agencies. A significant amount of this revenue is derived under multi-year contracts, many of which are appropriated on an annual basis. As a result, at the beginning of a project, the related contract may be only partially funded, and additional funding is normally committed only as appropriations are made in each subsequent year. These appropriations, and the timing of payment of appropriated amounts, may be influenced by numerous factors as noted below. Our backlog includes only the projects that have funding appropriated.

The demand for our U.S. government-related services is generally driven by the level of government program funding. Accordingly, the success and further development of our business depends, in large part, upon the continued funding of these U.S. government programs, and upon our ability to obtain contracts and perform well under these programs. Under the Budget Control Act of 2011, an automatic sequestration process, or across-the-board budget cuts (a large portion of which was defense-related), was triggered. The sequestration began on March 1, 2013. Although the Bipartisan Budget Act of 2013 provided some sequester relief through the end of fiscal year 2015, the sequestration requires reduced U.S. federal government spending through fiscal year 2021. A significant reduction in federal government spending, the absence of a bipartisan agreement on the federal government budget, or a change in budgetary priorities could reduce demand for our services, cancel or delay federal projects, result in the closure of federal facilities and significant personnel reductions, and have a material and adverse impact on our business, financial condition, results of operations and cash flows.

There are several additional factors that could materially affect our U.S. government contracting business, which could cause U.S. government agencies to delay or cancel programs, to reduce their orders under existing contracts, to exercise their rights to terminate contracts or not to exercise contract options for renewals or extensions. Such factors, which include the following, could have a material adverse effect on our revenue or the timing of contract payments from U.S. government agencies:

the failure of the U.S. government to complete its budget and appropriations process before its fiscal year-end, which would result in the funding of government operations by means of a continuing resolution that authorizes agencies to continue to operate but does not authorize new spending initiatives. As a result, U.S. government agencies may delay the procurement of services;

~~changes in and delays or cancellations of government programs, requirements or appropriations;~~

~~budget constraints or policy changes resulting in delay or curtailment of expenditures related to the services we provide;~~

~~re-competes of government contracts;~~

~~the timing and amount of tax revenue received by federal, and state and local governments, and the overall level of government expenditures;~~

~~curtailment in the use of government contracting firms;~~

~~delays associated with insufficient numbers of government staff to oversee contracts;~~

~~the increasing preference by government agencies for contracting with small and disadvantaged businesses;~~

~~competing political priorities and changes in the political climate with regard to the funding or operation of the services we provide;~~

~~the adoption of new laws or regulations affecting our contracting relationships with the federal, state or local governments;~~

unsatisfactory performance on government contracts by us or one of our subcontractors, negative government audits or other events that may impair our relationship with federal, state or local governments;

~~a dispute with or improper activity by any of our subcontractors; and~~

~~general economic or political conditions.~~

~~Our inability to win or renew U.S. government contracts during regulated procurement processes could harm our operations and significantly reduce or eliminate our profits.~~

U.S. government contracts are awarded through a regulated procurement process. The U.S. federal government has increasingly relied upon multi-year contracts with pre-established terms and conditions, such as indefinite delivery/indefinite quantity (“IDIQ”) contracts, which generally require those contractors who have previously been awarded the IDIQ to engage in an additional competitive bidding process before a task order is issued. As a result, new work awards tend to be smaller and of shorter duration, since the orders represent individual tasks rather than large, programmatic assignments. In addition, we believe that there has been an increase in the award of federal contracts based on a low-price, technically acceptable criteria emphasizing price over qualitative factors, such as past performance. As a result, pricing pressure may reduce our profit margins on future federal contracts. The increased competition and pricing pressure, in turn, may require us to make sustained efforts to reduce costs in order to realize revenue, and profits under government contracts. If we are not successful in reducing the amount of costs we incur, our profitability on government contracts will be negatively impacted. In addition, the U.S. federal government has scaled back outsourcing of services in favor of “insourcing” jobs to its employees, which could reduce our revenue. Moreover, even if

we are qualified to work on a government contract, we may not be awarded the contract because of existing government policies designed to protect small businesses and under-represented minority contractors. Our inability to win or renew government contracts~~during regulated procurement processes could harm our operations and significantly reduce or eliminate our profits.~~

Each year, client funding for some of our U.S. government contracts may rely on government appropriations or public-supported financing. If adequate public funding is delayed or is not available, then our profits and revenue could decline.

Each year, client funding for some of our U.S. government contracts may directly or indirectly rely on government appropriations or public-supported financing. Legislatures may appropriate funds for a given project on a year-by-year basis, even though the project may take more than one year to perform. In addition, public-supported financing such as U.S. state and local municipal bonds may be only partially raised to support existing projects. Similarly, an economic downturn may make it more difficult for U.S. state and local governments to fund projects. In addition to the state of the economy and competing political priorities, public funds and the timing of payment of these funds may be influenced by, among other things, curtailments in the use of government contracting firms, increases in raw material costs, delays associated with insufficient numbers of government staff to oversee contracts, budget constraints, the timing and amount of tax receipts, and the overall level of government expenditures. If adequate public funding is not available or is delayed, then our profits and revenue could decline.

Our U.S. federal government contracts may give government agencies the right to modify, delay, curtail, renegotiate, or terminate existing contracts at their convenience at any time prior to their completion, which may result in a decline in our profits and revenue.

U.S. federal government projects in which we participate as a contractor or subcontractor may extend for several years. Generally, government contracts include the right to modify, delay, curtail, renegotiate, or terminate contracts and subcontracts at the government’s convenience any time prior to their completion. Any decision by a U.S. federal government client to modify, delay, curtail, renegotiate, or terminate our contracts at their convenience may result in a decline in our profits and revenue.

As a U.S. government contractor, we must comply with various procurement laws and regulations and are subject to regular government audits; a violation of any of these laws and regulations or the failure to pass a government audit could result in sanctions, contract termination, forfeiture of profit, harm to our reputation or loss of our status as an eligible government contractor and could reduce our profits and revenue.

We must comply with and are affected by U.S. federal, state, local, and foreign laws and regulations relating to the formation, administration and performance of government contracts. For example, we must comply with Federal Acquisition of Regulation (“FAR”), the Truth in Negotiations Act, Cost Accounting Standards (“CAS”), the American Recovery and Reinvestment Act of 2009, the Services Contract Act, and the U.S. Department of Defense security regulations, as well as many other rules and regulations. In addition, we must also comply with other government regulations related to employment practices, environmental protection, health and safety, tax, accounting, and anti-fraud measures, as well as many other regulations in order to maintain our government contractor status. These laws and regulations affect how we do business with our clients and, in some instances, impose additional costs on our business operations. Although we take precautions to prevent and deter fraud, misconduct, and non-compliance, we face the risk that our employees or outside partners may engage in misconduct, fraud, or other improper activities. U.S. government agencies, such as the Defense Contract Audit Agency (“DCAA”), routinely audit and investigate government contractors. These government agencies review and audit a government contractor’s performance under its contracts and cost structure, and evaluate compliance with applicable laws, regulations, and standards. In addition, during the course of its audits, the DCAA may question our incurred project costs. If the DCAA believes we have accounted for such costs in a manner inconsistent with the requirements for FAR or CAS, the DCAA auditor may recommend to our U.S. government corporate administrative contracting officer that such costs be disallowed. Historically, we have not experienced significant disallowed costs as a result of government audits. However, we can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future. In addition, U.S. government contracts are subject to various other requirements relating to the formation, administration, performance, and accounting for these contracts. We may also be subject to ~~qui tam~~ litigation brought by private individuals on behalf of the U.S. government under the Federal Civil False Claims Act, which could include claims for treble damages. U.S. government contract violations could result in the imposition of civil and criminal penalties or sanctions, contract termination, forfeiture of profit, and/or suspension of payment, any of which could make us lose our status as an eligible government contractor. We could also suffer serious harm to our reputation. Any interruption or termination of our U.S. government contractor status could reduce our profits and revenue significantly.

If we extend a significant portion of our credit to clients in a specific geographic area or industry, we may experience disproportionately high levels of collection risk and nonpayment if those clients are adversely affected by factors particular to their geographic area or industry.

Our clients include public and private entities that have been, and may continue to be, negatively impacted by the changing landscape in the global economy. While outside of the U.S. federal government no one client accounted for over 10% of our revenue for the first quarter of fiscal 2018, we face collection risk as a normal part of our business where we perform services and subsequently bill our clients for such services. In the event that we have concentrated credit risk from clients in a specific geographic area or industry, continuing negative trends or a worsening in the financial condition of that specific geographic area or industry could make us susceptible to disproportionately high levels of default by those clients. Such defaults could materially adversely impact our revenues and our results of operations.

We have made and expect to continue to make acquisitions. Acquisitions could disrupt our operations and adversely impact our business and operating results. Our failure to conduct due diligence effectively, or our inability to successfully integrate acquisitions, could impede us from realizing all of the benefits of the acquisitions, which could weaken our results of operations.

A key part of our growth strategy is to acquire other companies that complement our lines of business or that broaden our technical capabilities and geographic presence. We expect to continue to acquire companies as an element of our growth strategy; however, our ability to make acquisitions is restricted under our credit agreement. Acquisitions involve certain known and unknown risks that could cause our actual growth or operating results to differ from our expectations or the expectations of securities analysts. For example:

~~we may not be able to identify suitable acquisition candidates or to acquire additional companies on acceptable terms;~~

~~we are pursuing international acquisitions, which inherently pose more risk than domestic acquisitions;~~

~~we compete with others to acquire companies, which may result in decreased availability of, or increased price for, suitable acquisition candidates;~~

~~we may not be able to obtain the necessary financing, on favorable terms or at all, to finance any of our potential acquisitions;~~

~~we may ultimately fail to consummate an acquisition even if we announce that we plan to acquire a company; and~~

~~acquired companies may not perform as we expect, and we may fail to realize anticipated revenue and profits.~~

In addition, our acquisition strategy may divert management’s attention away from our existing businesses, resulting in the loss of key clients or key employees, and expose us to unanticipated problems or legal liabilities, including responsibility as a successor-in-interest for undisclosed or contingent liabilities of acquired businesses or assets.

If we fail to conduct due diligence on our potential targets effectively, we may, for example, not identify problems at target companies, or fail to recognize incompatibilities or other obstacles to successful integration. Our inability to successfully integrate future acquisitions could impede us from realizing all of the benefits of those acquisitions and could severely weaken our business operations. The integration process may disrupt our business and, if implemented ineffectively, may preclude realization of the full benefits expected by us and could harm our results of operations. In addition, the overall integration of the combining companies may result in unanticipated problems, expenses, liabilities, and competitive responses, and may cause our stock price to decline. The difficulties of integrating an acquisition include, among others:

~~issues in integrating information, communications, and other systems;~~

~~incompatibility of logistics, marketing, and administration methods;~~

~~maintaining employee morale and retaining key employees;~~

~~integrating the business cultures of both companies;~~

~~preserving important strategic client relationships;~~

~~consolidating corporate and administrative infrastructures, and eliminating duplicative operations; and~~

~~coordinating and integrating geographically separate organizations.~~

In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all.

~~Further, acquisitions may cause us to:~~

~~issue common stock that would dilute our current stockholders’ ownership percentage;~~

~~use a substantial portion of our cash resources;~~

~~increase our interest expense, leverage, and debt service requirements (if we incur additional debt to fund an acquisition);~~

assume liabilities, including environmental liabilities, for which we do not have indemnification from the former owners. Further, indemnification obligations may be subject to dispute or concerns regarding the creditworthiness of the former owners;

~~record goodwill and non-amortizable intangible assets that are subject to impairment testing and potential impairment charges;~~

~~experience volatility in earnings due to changes in contingent consideration related to acquisition earn-out liability estimates;~~

~~incur amortization expenses related to certain intangible assets;~~

~~lose existing or potential contracts as a result of conflict of interest issues;~~

~~incur large and immediate write-offs; or~~

~~become subject to litigation.~~

Finally, acquired companies that derive a significant portion of their revenue from the U.S. federal government and do not follow the same cost accounting policies and billing practices that we follow may be subject to larger cost disallowances for greater periods than we typically encounter. If we fail to determine the existence of unallowable costs and do not establish appropriate reserves in advance of an acquisition, we may be exposed to material unanticipated liabilities, which could have a material adverse effect on our business.

~~If our goodwill or other intangible assets become impaired, then our profits may be significantly reduced.~~

Because we have historically acquired a significant number of companies, goodwill and other intangible assets represent a substantial portion of our assets. As of December 31, 2017, our goodwill was $763.5 million and other intangible assets were $24.5 million. We are required to perform a goodwill impairment test for potential impairment at least on an annual basis. We also assess the recoverability of the unamortized balance of our intangible assets when indications of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to our overall operations. The goodwill impairment test requires us to determine the fair value of our reporting units, which are the components one level below our reportable segments. In determining fair value, we make significant judgments and estimates, including assumptions about our strategic plans with regard to our operations. We also analyze current economic indicators and market valuations to help determine fair value. To the extent economic conditions that would impact the future operations of our reporting units change, our goodwill may be deemed to be impaired, and we would be required to record a non-cash charge that could result in a material adverse effect on our financial position or results of operations.

For example, we wrote-off all of our Global Mining Practice’s goodwill and identifiable intangible assets and recorded a related impairment charge of $60.8 million ($57.3 million after-tax) in the fourth quarter of fiscal 2015. We had no goodwill impairment in fiscal 2017 or 2016.

~~We could be adversely affected by violations of the FCPA and similar worldwide anti-bribery laws.~~

The FCPA and similar anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. The U.K. Bribery Act of 2010 prohibits both domestic and international bribery, as well as bribery across both private and public sectors. In addition, an organization that “fails to prevent bribery” by anyone associated with the organization can be charged under the U.K. Bribery Act unless the organization can establish the defense of having implemented “adequate procedures” to prevent bribery. Improper payments are also prohibited under the Canadian Corruption of Foreign Public Officials Act and the Brazilian Clean Companies Act. Local business practices in many countries outside the United States create a greater risk of government corruption than that found in the United States and other more developed countries. Our policies mandate compliance with anti-bribery laws, and we have established policies and procedures designed to monitor compliance with anti-bribery law requirements; however, we cannot ensure that our policies and procedures will protect us from potential reckless or criminal acts committed by individual employees or agents. If we are found to be liable for anti-bribery law violations, we could suffer from criminal or civil penalties or other sanctions that could have a material adverse effect on our business.

~~We could be adversely impacted if we fail to comply with domestic and international export laws.~~

To the extent we export technical services, data and products outside of the United States, we are subject to U.S. and international laws and regulations governing international trade and exports, including but not limited to the International Traffic in Arms Regulations, the Export Administration Regulations, and trade sanctions against embargoed countries. A failure to comply with these laws and regulations could result in civil or criminal sanctions, including the imposition of fines, the denial of export privileges, and suspension or debarment from participation in U.S. government contracts, which could have a material adverse effect on our business.

If we fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may reduce or eliminate our overall profitability.

Our engagements often involve large-scale, complex projects. The quality of our performance on such projects depends in large part upon our ability to manage the relationship with our clients and our ability to effectively manage the project and deploy appropriate resources, including third-party contractors and our own personnel, in a timely manner. We may commit to a client that we will complete a project by a scheduled date. We may also commit that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to meet required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project. If the project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling the project. In addition, performance of projects can be affected by a number of factors beyond our control, including unavoidable delays from government inaction, public opposition, inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards, and labor disruptions. To the extent these events occur, the total costs of the project could exceed our estimates, and we could experience reduced profits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability. Further, any defects or errors, or failures to meet our clients’ expectations, could result in claims for damages against us. Failure to meet performance standards or complete performance on a timely basis could also adversely affect our reputation.

~~The loss of key personnel or our inability to attract and retain qualified personnel could impair our ability to provide services to our clients and otherwise conduct our business effectively.~~

As primarily a professional and technical services company, we are labor-intensive and, therefore, our ability to attract, retain, and expand our senior management and our professional and technical staff is an important factor in determining our future success. The market for qualified scientists and engineers is competitive and, from time to time, it may be difficult to attract and retain qualified individuals with the required expertise within the timeframe demanded by our clients. For example, some of our U.S. government contracts may require us to employ only individuals who have particular government security clearance levels. In addition, we rely heavily upon the expertise and leadership of our senior management. If we are unable to retain executives and other key personnel, the roles and responsibilities of those employees will need to be filled, which may require that we devote time and resources to identify, hire, and integrate new employees. With limited exceptions, we do not have employment agreements with any of our key personnel. The loss of the services of any of these key personnel could adversely affect our business. Although we have obtained non-compete agreements from certain principals and stockholders of companies we have acquired, we generally do not have non-compete or employment agreements with key employees who were once equity holders of these companies. Further, many of our non-compete agreements have expired. We do not maintain key-man life insurance policies on any of our executive officers or senior managers. Our failure to attract and retain key individuals could impair our ability to provide services to our clients and conduct our business effectively.

Our revenue and growth prospects may be harmed if we or our employees are unable to obtain government granted eligibility or other qualifications we and they need to perform services for our customers.

A number of government programs require contractors to have certain kinds of government granted eligibility, such as security clearance credentials. Depending on the project, eligibility can be difficult and time-consuming to obtain. If we or our employees are unable to obtain or retain the necessary eligibility, we may not be able to win new business, and our existing customers could terminate their contracts with us or decide not to renew them. To the extent we cannot obtain or maintain the required security clearances for our employees working on a particular contract, we may not derive the revenue or profit anticipated from such contract.

Our actual business and financial results could differ from the estimates and assumptions that we use to prepare our consolidated financial statements, which may significantly reduce or eliminate our profits.

To prepare consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions as of the date of the consolidated financial statements. These estimates and assumptions affect the reported values of assets, liabilities, revenue and expenses, as well as disclosures of contingent assets and liabilities. For example, we typically recognize revenue over the life of a contract based on the proportion of costs incurred to date compared to the total costs estimated to be incurred for the entire project. Areas requiring significant estimates by our management include:

~~the application of the percentage-of-completion method of accounting and revenue recognition on contracts, change orders, and contract claims, including related unbilled accounts receivable;~~

unbilled accounts receivable, including amounts related to requests for equitable adjustment to contracts that provide for price redetermination, primarily with the U.S. federal government. These amounts are recorded only when they can be reliably estimated and realization is probable;

~~provisions for uncollectible receivables, client claims, and recoveries of costs from subcontractors, vendors, and others;~~

~~provisions for income taxes, research and development tax credits, valuation allowances, and unrecognized tax benefits;~~

~~value of goodwill and recoverability of other intangible assets;~~

~~valuations of assets acquired and liabilities assumed in connection with business combinations;~~

~~valuation of contingent earn-out liabilities recorded in connection with business combinations;~~

~~valuation of employee benefit plans;~~

~~valuation of stock-based compensation expense; and~~

~~accruals for estimated liabilities, including litigation and insurance reserves.~~

~~Our actual business and financial results could differ from those estimates, which may significantly reduce or eliminate our profits.~~

~~Our profitability could suffer if we are not able to maintain adequate utilization of our workforce.~~

The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability. The rate at which we utilize our workforce is affected by a number of factors, including:

~~our ability to transition employees from completed projects to new assignments and to hire and assimilate new employees;~~

~~our ability to forecast demand for our services and thereby maintain an appropriate headcount in each of our geographies and operating units;~~

~~our ability to manage attrition;~~

~~our need to devote time and resources to training, business development, professional development, and other non-chargeable activities; and~~

~~our ability to match the skill sets of our employees to the needs of the marketplace.~~

~~If we over-utilize our workforce, our employees may become disengaged, which could impact employee attrition. If we under-utilize our workforce, our profit margin and profitability could suffer.~~

~~Our use of the percentage-of-completion method of revenue recognition could result in a reduction or reversal of previously recorded revenue and profits.~~

We account for most of our contracts on the percentage-of-completion method of revenue recognition. Generally, our use of this method results in recognition of revenue and profit ratably over the life of the contract, based on the proportion of costs incurred to date to total costs expected to be incurred for the entire project. The effects of revisions to estimated revenue and costs, including the achievement of award fees and the impact of change orders and claims, are recorded when the amounts are known and can be reasonably estimated. Such revisions could occur in any period and their effects could be material. Although we have historically made reasonably reliable estimates of the progress towards completion of long-term contracts, the uncertainties inherent in the estimating process make it possible for actual costs to vary materially from estimates, including reductions or reversals of previously recorded revenue and profit.

If we are unable to accurately estimate and control our contract costs, then we may incur losses on our contracts, which could decrease our operating margins and reduce our profits. In particular, our fixed-price contracts could increase the unpredictability of our earnings.

It is important for us to accurately estimate and control our contract costs so that we can maintain positive operating margins and profitability. We generally enter into three principal types of contracts with our clients: fixed-price, time-and-materials and cost-plus.

The U.S. federal government and certain other clients have increased the use of fixed-priced contracts. Under fixed-price contracts, we receive a fixed price irrespective of the actual costs we incur and, consequently, we are exposed to a number of risks. We realize a profit on fixed-price contracts only if we can control our costs and prevent cost over-runs on our contracts. Fixed-

price contracts require cost and scheduling estimates that are based on a number of assumptions, including those about future economic conditions, costs, and availability of labor, equipment and materials, and other exigencies. We could experience cost over-runs if these estimates are originally inaccurate as a result of errors or ambiguities in the contract specifications, or become inaccurate as a result of a change in circumstances following the submission of the estimate due to, among other things, unanticipated technical problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, changes in the costs of raw materials, or the inability of our vendors or subcontractors to perform. If cost overruns occur, we could experience reduced profits or, in some cases, a loss for that project. If a project is significant, or if there are one or more common issues that impact multiple projects, costs overruns could increase the unpredictability of our earnings, as well as have a material adverse impact on our business and earnings.

Under our time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and also paid for other expenses. Profitability on these contracts is driven by billable headcount and cost control. Many of our time-and-materials contracts are subject to maximum contract values and, accordingly, revenue relating to these contracts is recognized as if these contracts were fixed-price contracts. Under our cost-plus contracts, some of which are subject to contract ceiling amounts, we are reimbursed for allowable costs and fees, which may be fixed or performance-based. If our costs exceed the contract ceiling or are not allowable under the provisions of the contract or any applicable regulations, we may not be able to obtain reimbursement for all of the costs we incur.

Profitability on our contracts is driven by billable headcount and our ability to manage our subcontractors, vendors, and material suppliers. If we are unable to accurately estimate and manage our costs, we may incur losses on our contracts, which could decrease our operating margins and significantly reduce or eliminate our profits. Certain of our contracts require us to satisfy specific design, engineering, procurement, or construction milestones in order to receive payment for the work completed or equipment or supplies procured prior to achievement of the applicable milestone. As a result, under these types of arrangements, we may incur significant costs or perform significant amounts of services prior to receipt of payment. If a client determines not to proceed with the completion of the project or if the client defaults on its payment obligations, we may face difficulties in collecting payment of amounts due to us for the costs previously incurred or for the amounts previously expended to purchase equipment or supplies.

Accounting for a contract requires judgments relative to assessing the contract’s estimated risks, revenue, costs, and other technical issues. Due to the size and nature of many of our contracts, the estimation of overall risk, revenue, and cost at completion is complicated and subject to many variables. Changes in underlying assumptions, circumstances, or estimates may also adversely affect future period financial performance. If we are unable to accurately estimate the overall revenue or costs on a contract, then we may experience a lower profit or incur a loss on the contract.

~~Our failure to adequately recover on claims brought by us against clients for additional contract costs could have a negative impact on our liquidity and profitability.~~

~~We have brought claims against clients for additional costs exceeding the contract price or for amounts not~~Contingencies" included in the ~~original contract price. These types~~"Notes to Consolidated Financial Statements" included in Part I, Item 1 of ~~claims occur due to matters such as client-caused delays or~~this Form 10-Q which is incorporated herein by reference.

Item 1A.Risk Factors

There have been no material changes ~~from the initial project scope, both of which may result~~ in additional cost. Often, these claims can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to accurately predict when these claims will be fully resolved. When these types of events occur and unresolved claims are pending, we have used working capitalour risk factors disclosed in ~~projects to cover cost overruns pending the resolution of the relevant claims. A failure to promptly recover~~Part I, Item 1A in our 2021 Annual Report on ~~these types of claims could have a negative impact on our liquidity and profitability. Total accounts receivable at December 31, 2017 included approximately $61 million~~Form 10-K. For updated disclosures related to ~~such claims.~~

~~Our failure to win new contracts~~interest and ~~renew existing contracts with private~~exchange rate risks, see “Financial Market Risks” in “Management’s Discussion and ~~public sector clients could adversely affect our profitability.~~

~~Our business depends on our ability to win new contracts~~Analysis of Financial Condition and ~~renew existing contracts with private and public sector clients. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection process,~~Results of Operations” included in Item 2 of this Form 10-Q which is ~~affected~~incorporated herein by a number of factors. These factors include market conditions, financing arrangements, and required governmental approvals. For example, a client may require us to provide a bond or letter of credit to protect the client should we fail to perform under the terms of the contract. If negative market conditions arise, or if we fail to secure adequate financial arrangements or the required government approval, we may not be able to pursue particular projects, which could adversely affect our profitability.reference.

~~If we are not able to successfully manage our growth strategy, our business and results of operations may be adversely affected.~~

Our expected future growth presents numerous managerial, administrative, operational, and other challenges. Our ability to manage the growth of our operations will require us to continue to improve our management information systems and our other internal systems and controls. In addition, our growth will increase our need to attract, develop, motivate, and retain both our management and professional employees. The inability to effectively manage our growth or the inability of our employees to achieve anticipated performance could have a material adverse effect on our business.

~~Our backlog is subject to cancellation, unexpected adjustments and changing economic conditions, and is an uncertain indicator of future operating results.~~

Our backlog at December 31, 2017 was $2.4 billion, a decrease of $112.4 million, or 4.4%, compared to the end of fiscal 2017. We include in backlog only those contracts for which funding has been provided and work authorizations have been received. We cannot guarantee that the revenue projected in our backlog will be realized or, if realized, will result in profits. In addition, project cancellations or scope adjustments may occur, from time to time, with respect to contracts reflected in our backlog. For example, certain of our contracts with the U.S. federal government and other clients are terminable at the discretion of the client, with or without cause. These types of backlog reductions could adversely affect our revenue and margins. As a result of these factors, our backlog as of any particular date is an uncertain indicator of our future earnings.

~~Cyber security breaches of our systems and information technology could adversely impact our ability to operate.~~

We develop, install and maintain information technology systems for ourselves, as well as for customers. Client contracts for the performance of information technology services, as well as various privacy and securities laws, require us to manage and protect sensitive and confidential information, including federal and other government information, from disclosure. We also need to protect our own internal trade secrets and other business confidential information, as well as personal data of our employees and contractors, from disclosure. We face the threat to our computer systems of unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems and system disruptions, including possible unauthorized access to our and our clients' proprietary or classified information. We rely on industry-accepted security measures and technology to securely maintain all confidential and proprietary information on our information systems. We have devoted and will continue to devote significant resources to the security of our computer systems, but they may still be vulnerable to these threats. A user who circumvents security measures could misappropriate confidential or proprietary information, including information regarding us, our personnel and/or our clients, or cause interruptions or malfunctions in operations. As a result, we may be required to expend significant resources to protect against the threat of these system disruptions and security breaches or to alleviate problems caused by these disruptions and breaches. Any of these events could damage our reputation and have a material adverse effect on our business, financial condition, results of operations and cash flows.

~~If our business partners fail to perform their contractual obligations on a project, we could be exposed to legal liability, loss of reputation and profit reduction or loss on the project.~~

We routinely enter into subcontracts and, occasionally, joint ventures, teaming arrangements, and other contractual arrangements so that we can jointly bid and perform on a particular project. Success under these arrangements depends in large part on whether our business partners fulfill their contractual obligations satisfactorily. In addition, when we operate through a joint venture in which we are a minority holder, we have limited control over many project decisions, including decisions related to the joint venture’s internal controls, which may not be subject to the same internal control procedures that we employ. If these unaffiliated third parties do not fulfill their contract obligations, the partnerships or joint ventures may be unable to adequately perform and deliver their contracted services. Under these circumstances, we may be obligated to pay financial penalties, provide additional services to ensure the adequate performance and delivery of the contracted services, and may be jointly and severally liable for the other’s actions or contract performance. These additional obligations could result in reduced profits and revenues or, in some cases, significant losses for us with respect to the joint venture, which could also affect our reputation in the industries we serve.

If our contractors and subcontractors fail to satisfy their obligations to us or other parties, or if we are unable to maintain these relationships, our revenue, profitability, and growth prospects could be adversely affected.

We depend on contractors and subcontractors in conducting our business. There is a risk that we may have disputes with our subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, client concerns about the subcontractor, or our failure to extend existing task orders or issue new task orders under a subcontract. In addition, if a subcontractor fails to deliver on a timely basis the agreed-upon supplies, fails to perform the agreed-upon services, or goes out of business, then we may be required to purchase the services or supplies from another source at a higher price, and our ability to fulfill our obligations as a prime contractor may be jeopardized. This may reduce the profit to be realized or result in a loss on a project for which the services or supplies are needed.

We also rely on relationships with other contractors when we act as their subcontractor or joint venture partner. The absence of qualified subcontractors with which we have a satisfactory relationship could adversely affect the quality of our service and our ability to perform under some of our contracts. Our future revenue and growth prospects could be adversely affected if other contractors eliminate or reduce their subcontracts or teaming arrangement relationships with us, or if a government agency terminates or reduces these other contractors’ programs, does not award them new contracts, or refuses to pay under a contract.

~~Our failure to meet contractual schedule or performance requirements that we have guaranteed could adversely affect our operating results~~.

In certain circumstances, we can incur liquidated or other damages if we do not achieve project completion by a scheduled date. If we or an entity for which we have provided a guarantee subsequently fails to complete the project as scheduled and the matter cannot be satisfactorily resolved with the client, we may be responsible for cost impacts to the client resulting from any delay or the cost to complete the project. Our costs generally increase from schedule delays and/or could exceed our projections for a particular project. In addition, project performance can be affected by a number of factors beyond our control, including unavoidable delays from governmental inaction, public opposition, inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards, labor disruptions and other factors. As a result, material performance problems for existing and future contracts could cause actual results of operations to differ from those anticipated by us and also could cause us to suffer damage to our reputation within our industry and client base.

~~New legal requirements could adversely affect our operating results~~.

Our business and results of operations could be adversely affected by U.S. health care reform, climate change, defense, environmental and infrastructure industry specific and other legislation and regulations. We are continually assessing the impact that health care reform could have on our employer-sponsored medical plans. Growing concerns about climate change may result in the imposition of additional environmental regulations. For example, legislation, international protocols, regulation or other restrictions on emissions could increase the costs of projects for our clients or, in some cases, prevent a project from going forward, thereby potentially reducing the need for our services. In addition, relaxation or repeal of laws and regulations, or changes in governmental policies regarding environmental, defense, infrastructure or other industries we serve could result in a decline in demand for our services, which could in turn negatively impact our revenues. We cannot predict when or whether any of these various proposals may be enacted or what their effect will be on us or on our customers.

Changes in resource management, environmental, or infrastructure industry laws, regulations, and programs could directly or indirectly reduce the demand for our services, which could in turn negatively impact our revenue.

Some of our services are directly or indirectly impacted by changes in U.S. federal, state, local or foreign laws and regulations pertaining to the resource management, environmental, and infrastructure industries. Accordingly, a relaxation or repeal of these laws and regulations, or changes in governmental policies regarding the funding, implementation or enforcement of these programs, could result in a decline in demand for our services, which could in turn negatively impact our revenue.

~~Changes in capital markets could adversely affect our access to capital and negatively impact our business.~~

Our results could be adversely affected by an inability to access the revolving credit facility under our credit agreement. Unfavorable financial or economic conditions could impact certain lenders' willingness or ability to fund our revolving credit facility. In addition, increases in interest rates or credit spreads, volatility in financial markets or the interest rate environment, significant political or economic events, defaults of significant issuers, and other market and economic factors, may negatively impact the general level of debt issuance, the debt issuance plans of certain categories of borrowers, the types of credit-sensitive products being offered, and/or a sustained period of market decline or weakness could have a material adverse effect on us.

~~Restrictive covenants in our credit agreement may restrict our ability to pursue certain business strategies.~~

~~Our credit agreement limits or restricts our ability to, among other things:~~

~~incur additional indebtedness;~~

~~create liens securing debt or other encumbrances on our assets;~~

~~make loans or advances;~~

~~pay dividends or make distributions to our stockholders;~~

~~purchase or redeem our stock;~~

~~repay indebtedness that is junior to indebtedness under our credit agreement;~~

~~acquire the assets of, or merge or consolidate with, other companies; and~~

~~sell, lease, or otherwise dispose of assets.~~

Our credit agreement also requires that we maintain certain financial ratios, which we may not be able to achieve. The covenants may impair our ability to finance future operations or capital needs or to engage in other favorable business activities.

~~Our industry is highly competitive and we may be unable to compete effectively, which could result in reduced revenue, profitability and market share.~~

We are engaged in a highly competitive business. The markets we serve are highly fragmented and we compete with a large number of regional, national and international companies. Certain of these competitors have greater financial and other resources than we do. Others are smaller and more specialized, and concentrate their resources in particular areas of expertise. The extent of our competition varies according to the particular markets and geographic area. In addition, the technical and professional aspects of some of our services generally do not require large upfront capital expenditures and provide limited barriers against new competitors. The degree and type of competition we face is also influenced by the type and scope of a particular project. Our clients make competitive determinations based upon qualifications, experience, performance, reputation, technology, customer relationships and ability to provide the relevant services in a timely, safe and cost-efficient manner. This competitive environment could force us to make price concessions or otherwise reduce prices for our services. If we are unable to maintain our competitiveness and win bids for future projects, our market share, revenue, and profits will decline.

Legal proceedings, investigations, and disputes could result in substantial monetary penalties and damages, especially if such penalties and damages exceed or are excluded from existing insurance coverage.

We engage in consulting, engineering, program management, construction management, construction, and technical services that can result in substantial injury or damages that may expose us to legal proceedings, investigations, and disputes. For example, in the ordinary course of our business, we may be involved in legal disputes regarding personal injury claims, employee or labor disputes, professional liability claims, and general commercial disputes involving project cost overruns and liquidated damages, as well as other claims. In addition, in the ordinary course of our business, we frequently make professional judgments and recommendations about environmental and engineering conditions of project sites for our clients, and we may be deemed to be responsible for these judgments and recommendations if they are later determined to be inaccurate. Any unfavorable legal ruling against us could result in substantial monetary damages or even criminal violations. We maintain insurance coverage as part of our overall legal and risk management strategy to minimize our potential liabilities; however, insurance coverage contains exclusions and other limitations that may not cover our potential liabilities. Generally, our insurance program covers workers’ compensation and employer’s liability, general liability, automobile liability, professional errors and omissions liability, property, and contractor’s pollution liability (in addition to other policies for specific projects). Our insurance program includes deductibles or self-insured retentions for each covered claim that may increase over time. In addition, our insurance policies contain exclusions that insurance providers may use to deny or restrict coverage. Excess liability and professional liability insurance policies provide for coverage on a “claims-made” basis, covering only claims actually made and reported during the policy period currently in effect. If we sustain liabilities that exceed or that are excluded from our insurance coverage, or for which we are not insured, it could have a material adverse impact on our financial condition, results of operations and cash flows.

~~Unavailability or cancellation of third-party insurance coverage would increase our overall risk exposure as well as disrupt the management of our business operations.~~

We maintain insurance coverage from third-party insurers as part of our overall risk management strategy and because some of our contracts require us to maintain specific insurance coverage limits. If any of our third-party insurers fail, suddenly cancel our coverage, or otherwise are unable to provide us with adequate insurance coverage, then our overall risk exposure and our operational expenses would increase and the management of our business operations would be disrupted. In addition, there can be no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will be affordable at the required limits.

~~Our inability to obtain adequate bonding could have a material adverse effect on our future revenue and business prospects.~~

Certain clients require bid bonds, and performance and payment bonds. These bonds indemnify the client should we fail to perform our obligations under a contract. If a bond is required for a particular project and we are unable to obtain an appropriate bond, we cannot pursue that project. In some instances, we are required to co-venture with a small or disadvantaged business to pursue certain U.S. federal or state government contracts. In connection with these ventures, we are sometimes required to utilize our bonding capacity to cover all of the payment and performance obligations under the contract with the client. We have a bonding

facility but, as is typically the case, the issuance of bonds under that facility is at the surety’s sole discretion. Moreover, due to events that can negatively affect the insurance and bonding markets, bonding may be more difficult to obtain or may only be available at significant additional cost. There can be no assurance that bonds will continue to be available to us on reasonable terms. Our inability to obtain adequate bonding and, as a result, to bid on new work could have a material adverse effect on our future revenue and business prospects.

Employee, agent, or partner misconduct, or our failure to comply with anti-bribery and other laws or regulations, could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.

Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one of our employees, agents, or partners could have a significant negative impact on our business and reputation. Such misconduct could include the failure to comply with government procurement regulations, regulations regarding the protection of classified information, regulations prohibiting bribery and other foreign corrupt practices, regulations regarding the pricing of labor and other costs in government contracts, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting, environmental laws, and any other applicable laws or regulations. For example, as previously noted, the FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these regulations and laws, and we take precautions to prevent and detect misconduct. However, since our internal controls are subject to inherent limitations, including human error, it is possible that these controls could be intentionally circumvented or become inadequate because of changed conditions. As a result, we cannot assure that our controls will protect us from reckless or criminal acts committed by our employees or agents. Our failure to comply with applicable laws or regulations, or acts of misconduct could subject us to fines and penalties, loss of security clearances, and suspension or debarment from contracting, any or all of which could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.

Our business activities may require our employees to travel to and work in countries where there are high security risks, which may result in employee death or injury, repatriation costs or other unforeseen costs.

Certain of our contracts may require our employees travel to and work in high-risk countries that are undergoing political, social, and economic upheavals resulting from war, civil unrest, criminal activity, acts of terrorism, or public health crises. For example, we currently have employees working in high security risk countries such as Afghanistan and Iraq. As a result, we risk loss of or injury to our employees and may be subject to costs related to employee death or injury, repatriation, or other unforeseen circumstances. We may choose or be forced to leave a country with little or no warning due to physical security risks.

~~Our failure to implement and comply with our safety program could adversely affect our operating results or financial condition.~~

Our project sites often put our employees and others in close proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials. On some project sites, we may be responsible for safety, and, accordingly, we have an obligation to implement effective safety procedures. Our safety program is a fundamental element of our overall approach to risk management, and the implementation of the safety program is a significant issue in our dealings with our clients. We maintain an enterprise-wide group of health and safety professionals to help ensure that the services we provide are delivered safely and in accordance with standard work processes. Unsafe job sites and office environments have the potential to increase employee turnover, increase the cost of a project to our clients, expose us to types and levels of risk that are fundamentally unacceptable, and raise our operating costs. The implementation of our safety processes and procedures are monitored by various agencies, including the U.S. Mine Safety and Health Administration (“MSHA”), and rating bureaus, and may be evaluated by certain clients in cases in which safety requirements have been established in our contracts. Our failure to meet these requirements or our failure to properly implement and comply with our safety program could result in reduced profitability, the loss of projects or clients, or potential litigation, and could have a material adverse effect on our business, operating results, or financial condition.

~~We may be precluded from providing certain services due to conflict of interest issues.~~

Many of our clients are concerned about potential or actual conflicts of interest in retaining management consultants. U.S. federal government agencies have formal policies against continuing or awarding contracts that would create actual or potential conflicts of interest with other activities of a contractor. These policies, among other things, may prevent us from bidding for or performing government contracts resulting from or relating to certain work we have performed. In addition, services performed for a commercial or government client may create a conflict of interest that precludes or limits our ability to obtain work from other public or private organizations. We have, on occasion, declined to bid on projects due to conflict of interest issues.

~~If our reports and opinions are not in compliance with professional standards and other regulations, we could be subject to monetary damages and penalties.~~

We issue reports and opinions to clients based on our professional engineering expertise, as well as our other professional credentials. Our reports and opinions may need to comply with professional standards, licensing requirements, securities regulations, and other laws and rules governing the performance of professional services in the jurisdiction in which the services are performed. In addition, we could be liable to third parties who use or rely upon our reports or opinions even if we are not contractually bound to those third parties. For example, if we deliver an inaccurate report or one that is not in compliance with the relevant standards, and that report is made available to a third party, we could be subject to third-party liability, resulting in monetary damages and penalties.

~~We may be subject to liabilities under environmental laws and regulations.~~

Our services are subject to numerous U.S. and international environmental protection laws and regulations that are complex and stringent. For example, we must comply with a number of U.S. federal government laws that strictly regulate the handling, removal, treatment, transportation, and disposal of toxic and hazardous substances. Under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (“CERCLA”), and comparable state laws, we may be required to investigate and remediate regulated hazardous materials. CERCLA and comparable state laws typically impose strict, joint and several liabilities without regard to whether a company knew of or caused the release of hazardous substances. The liability for the entire cost of clean-up could be imposed upon any responsible party. Other principal U.S. federal environmental, health, and safety laws affecting us include, but are not limited to, the Resource Conversation and Recovery Act, National Environmental Policy Act, the Clean Air Act, the Occupational Safety and Health Act, the Federal Mine Safety and Health Act of 1977 (the “Mine Act”), the Toxic Substances Control Act, and the Superfund Amendments and Reauthorization Act. Our business operations may also be subject to similar state and international laws relating to environmental protection. Further, past business practices at companies that we have acquired may also expose us to future unknown environmental liabilities. Liabilities related to environmental contamination or human exposure to hazardous substances, or a failure to comply with applicable regulations, could result in substantial costs to us, including clean-up costs, fines, civil or criminal sanctions, and third-party claims for property damage or personal injury or cessation of remediation activities. Our continuing work in the areas governed by these laws and regulations exposes us to the risk of substantial liability.

Force majeure events, including natural disasters and terrorist actions, could negatively impact the economies in which we operate or disrupt our operations, which may affect our financial condition, results of operations, or cash flows.

Force majeure or extraordinary events beyond the control of the contracting parties, such as natural and man-made disasters, as well as terrorist actions, could negatively impact the economies in which we operate by causing the closure of offices, interrupting projects, and forcing the relocation of employees. We typically remain obligated to perform our services after a terrorist action or natural disaster unless the contract contains a force majeure clause that relieves us of our contractual obligations in such an extraordinary event. If we are not able to react quickly to force majeure, our operations may be affected significantly, which would have a negative impact on our financial condition, results of operations, or cash flows.

~~We have only a limited ability to protect our intellectual property rights, and our failure to protect our intellectual property rights could adversely affect our competitive position.~~

Our success depends, in part, upon our ability to protect our proprietary information and other intellectual property. We rely principally on trade secrets to protect much of our intellectual property where we do not believe that patent or copyright protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although our employees are subject to confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of our confidential information. In addition, we may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights. Failure to obtain or maintain trade secret protection could adversely affect our competitive business position. In addition, if we are unable to prevent third parties from infringing or misappropriating our trademarks or other proprietary information, our competitive position could be adversely affected.

~~Our stock price could become more volatile and stockholders’ investments could lose value.~~

In addition to the macroeconomic factors that have affected the prices of many securities generally, all of the factors discussed in this section could affect our stock price. Our common stock has previously experienced substantial price volatility. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many companies, and that have often been unrelated to the operating performance of these companies. The overall market and the price of our common stock may fluctuate greatly. The trading price of our common stock may be significantly affected by various

factors, including quarter-to-quarter variations in our financial results, such as revenue, profits, days sales outstanding, backlog, and other measures of financial performance or financial condition (which factors may, themselves, be affected by the factors described below):

~~loss of key employees;~~

~~the number and significance of client contracts commenced and completed during a quarter;~~

~~creditworthiness and solvency of clients;~~

~~the ability of our clients to terminate contracts without penalties;~~

~~general economic or political conditions;~~

~~unanticipated changes in contract performance that may affect profitability, particularly with contracts that are fixed-price or have funding limits;~~

~~contract negotiations on change orders, requests for equitable adjustment, and collections of related billed and unbilled accounts receivable;~~

~~seasonality of the spending cycle of our public sector clients, notably the U.S. federal government, the spending patterns of our commercial sector clients, and weather conditions;~~

~~budget constraints experienced by our U.S. federal, and state and local government clients;~~

~~integration of acquired companies;~~

~~changes in contingent consideration related to acquisition earn-outs;~~

~~divestiture or discontinuance of operating units;~~

~~employee hiring, utilization and turnover rates;~~

~~delays incurred in connection with a contract;~~

~~the size, scope and payment terms of contracts;~~

~~the timing of expenses incurred for corporate initiatives;~~

~~reductions in the prices of services offered by our competitors;~~

~~threatened or pending litigation;~~

~~legislative and regulatory enforcement policy changes that may affect demand for our services;~~

~~the impairment of goodwill or identifiable intangible assets;~~

~~the fluctuation of a foreign currency exchange rate;~~

~~stock-based compensation expense;~~

actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the value of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our consolidated financial statements;

~~success in executing our strategy and operating plans;~~

~~changes in tax laws or regulations or accounting rules;~~

~~results of income tax examinations;~~

~~the timing of announcements in the public markets regarding new services or potential problems with the performance of services by us or our competitors, or any other material announcements;~~

speculation in the media and analyst community, changes in recommendations or earnings estimates by financial analysts, changes in investors’ or analysts’ valuation measures for our stock, and market trends unrelated to our stock;

~~our announcements concerning the payment of dividends or the repurchase of our shares;~~

~~resolution of threatened or pending litigation;~~

~~changes in investors’ and analysts’ perceptions of our business or any of our competitors’ businesses;~~

~~changes in environmental legislation;~~

~~broader market fluctuations; and~~

~~general economic or political conditions.~~

Volatility in the financial markets could cause a decline in our stock price, which could trigger an impairment of the goodwill of individual reporting units that could be material to our consolidated financial statements. A significant drop in the price of our stock could also expose us to the risk of securities class action lawsuits, which could result in substantial costs and divert management’s attention and resources, which could adversely affect our business. Additionally, volatility or a lack of positive performance in our stock price may adversely affect our ability to retain key employees, many of whom are awarded equity securities, the value of which is dependent on the performance of our stock price.

Delaware law and our charter documents may impede or discourage a merger, takeover, or other business combination even if the business combination would have been in the short-term best interests of our stockholders.

We are a Delaware corporation and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of Tetra Tech, even if a change in control would be beneficial to our stockholders. In

addition, our Board of Directors has the power, without stockholder approval, to designate the terms of one or more series of preferred stock and issue shares of preferred stock, which could be used defensively if a takeover is threatened. Our incorporation under Delaware law, the ability of our Board of Directors to create and issue a new series of preferred stock, and provisions in our certificate of incorporation and bylaws, such as those relating to advance notice of certain stockholder proposals and nominations, could impede a merger, takeover, or other business combination involving us, or discourage a potential acquirer from making a tender offer for our common stock, even if the business combination would have been in the best interests of our current stockholders.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

On ~~November 7, 2016, our~~October 5, 2021, the Board of Directors authorized a new stock repurchase program under which we could repurchase up to ~~$200~~$400 million of our common ~~stock. As of December 31, 2017,~~stock in addition to the $147.8 million remaining under the previous stock repurchase program at October 3, 2021. In the nine months fiscal 2022, we repurchased ~~through open market purchases a total of 514,676~~and settled 986,280 shares atwith an average price of ~~$48.57~~$152.09 per share for a total cost of ~~$25.0~~$150.0 million in the open market. At July 3, 2022, we had a remaining balance of $397.8 million under ~~this~~our stock repurchase program. ~~These shares were repurchased during the period from October 2, 2017 through December 31, 2017. A~~

Below is a summary of the ~~repurchase activity for~~stock repurchases that were traded and settled during the ~~three~~first nine months ~~ended December 31, 2017 is as follows:~~of fiscal 2022:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value that May Yet be Purchased Under the Plans or Programs (in thousands)
October 4, 2021 - October 31, 2021	97,020	$	160.47	97,020	$	532,244
November 1, 2021 - November 28, 2021	91,216	180.16		91,216	515,811
November 29, 2021 - January 2, 2022	101,960	176.52		101,960	497,813
January 3, 2022 - January 30, 2022	96,908	185.62		96,908	483,279
January 31, 2022 - February 27, 2022	110,858	162.17		110,858	467,036
February 28, 2022 - April 3, 2022	120,274	149.40		120,274	447,813
April 4, 2022 - May 1, 2022	95,121	152.79		95,121	433,279
May 2, 2022 - May 29, 2022	131,962	129.57		131,962	416,181
May 30, 2022 - July 3, 2022	140,961	130.30		140,961	397,813

Period
Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs

Maximum
Dollar Value
that May Yet
be Purchased
Under the
Plans or
Programs
October 2, 2017 – October 29, 2017 154,528
$ 48.12
154,528
$ 92,564,290
October 30, 2017 – November 26, 2017 161,251
48.67
161,251
84,716,836
November 27, 2017 – December 31, 2017 198,897
48.86
198,897
74,999,595

Item 4.Mine Safety ~~Disclosure~~Disclosures

Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ~~“Dodd-Frank Act”~~"Dodd-Frank Act") requires domestic mine operators to disclose violations and orders issued under the Mine Act by ~~MSHA.~~Mine Safety and Health Administration. We do not act as the owner of any mines, but we may act as a mining operator as defined under the Mine Act where we may be an independent contractor performing services or construction at such mine. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 ~~Regulations~~of Regulation S-K is included in Exhibit 95.

Item 6.Exhibits

The following documents are filed as Exhibits to this Report:



31.1			Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a).

31.2			Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a).

32.1			Certification of Chief Executive Officer pursuant to Section 1350.

32.2			Certification of Chief Financial Officer pursuant to Section 1350.

95			Mine Safety Disclosure.

101			The following financial information from our Company’s Quarterly Report on Form 10-Q, for the period ended ~~December 31, 2017,~~July 3, 2022, formatted in Inline eXtensible Business Reporting Language: (i) Consolidated Balance Sheets (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Equity, (vi) Notes to Consolidated Financial ~~Statements.~~Statements

104			Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Dated: ~~February 1, 2018~~August 5, 2022	TETRA TECH, INC.



	By:	/s/ DAN L. BATRACK
		Dan L. Batrack
		~~Dan L. Batrack~~
Chairman and Chief Executive Officer ~~and President~~
		(Principal Executive Officer)


	By:	/s/ STEVEN M. BURDICK
		Steven M. Burdick
		~~Steven M. Burdick~~
Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)


	By:	/s/ BRIAN N. CARTER
		Brian N. Carter
		~~Brian N. Carter~~
Senior Vice President, Corporate Controller
		(Principal Accounting Officer)



	GSG			CIG			Total
	(in thousands)
Balance at October 1, 2017	$	361,761		$	379,125		$	740,886
Goodwill additions	24,522			—			24,522
Foreign exchange impact	(545		)	(1,408		)	(1,953		)
Balance at December 31, 2017	$	385,738		$	377,717		$	763,455



	December 31, 2017						October 1, 2017
	Weighted- Average Remaining Life (in Years)	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization
	($ in thousands)
Non-compete agreements	0.0	$	85	$	(85	)	$	495	$	(493	)
Client relations	2.8	54,940		(41,700		)	90,297		(75,074		)
Backlog	1.1	21,896		(13,530		)	21,518		(13,301		)
Trade names	3.0	5,311		(2,384		)	6,685		(3,439		)
Total		$	82,232	$	(57,699	)	$	118,995	$	(92,307	)



	Amount
	(in thousands)
2018	$	12,413
2019	7,027
2020	2,799
2021	1,654
2022	411
Beyond	229
Total	$	24,533



Notional Amount (in thousands)	Fixed Rate	Expiration Date
$39,398	1.36%	May 2018
39,398	1.34%	May 2018
39,398	1.35%	May 2018
19,700	1.23%	May 2018
19,700	1.24%	May 2018



		Fair Value of Derivative Instruments as of
	Balance Sheet Location	December 31, 2017		October 1, 2017
		(in thousands)
Interest rate swap agreements	Other current assets	$	118	$	49



	Dividend Per Share		Record Date	Total Maximum Payment		Payment Date
	(in thousands, except per share data)
November 6, 2017	$	0.10	November 30, 2017	$	5,589	December 15, 2017
January 29, 2018	$	0.10	February 14, 2018	N/A		March 2, 2018