false--09-29FY20190000831641P2YP2Y00.380.440.540.010.0115000000015000000055349000545650005534900054565000P5Y4810048100481004810000177000003000000000.010.01200000020000000000210000025000005200000P10YP3YP3YP1YP3YP3YP4Y0.3880.3880.3610.3610.0190.0290.0170.017 0000831641 2018-10-01 2019-09-29 0000831641 2019-11-25 0000831641 2019-03-31 0000831641 2018-09-30 0000831641 2019-09-29 0000831641 2016-10-03 2017-10-01 0000831641 2017-10-02 2018-09-30 0000831641 us-gaap:ServiceOtherMember 2016-10-03 2017-10-01 0000831641 ttek:SubcontractorMember 2017-10-02 2018-09-30 0000831641 us-gaap:ServiceOtherMember 2017-10-02 2018-09-30 0000831641 us-gaap:ServiceOtherMember 2018-10-01 2019-09-29 0000831641 ttek:SubcontractorMember 2016-10-03 2017-10-01 0000831641 ttek:SubcontractorMember 2018-10-01 2019-09-29 0000831641 us-gaap:CommonStockMember 2016-10-03 2017-10-01 0000831641 us-gaap:AdditionalPaidInCapitalMember 2016-10-03 2017-10-01 0000831641 us-gaap:NoncontrollingInterestMember 2017-10-02 2018-09-30 0000831641 us-gaap:RetainedEarningsMember 2019-09-29 0000831641 2016-10-02 0000831641 us-gaap:ParentMember 2017-10-02 2018-09-30 0000831641 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-10-02 2018-09-30 0000831641 us-gaap:AdditionalPaidInCapitalMember 2017-10-02 2018-09-30 0000831641 us-gaap:CommonStockMember 2017-10-02 2018-09-30 0000831641 us-gaap:NoncontrollingInterestMember 2016-10-03 2017-10-01 0000831641 us-gaap:CommonStockMember 2017-10-01 0000831641 2018-10-01 0000831641 us-gaap:RetainedEarningsMember 2016-10-02 0000831641 us-gaap:ParentMember 2018-10-01 0000831641 us-gaap:CommonStockMember 2018-10-01 2019-09-29 0000831641 us-gaap:ParentMember 2016-10-03 2017-10-01 0000831641 us-gaap:CommonStockMember 2016-10-02 0000831641 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-10-01 2019-09-29 0000831641 us-gaap:ParentMember 2018-10-01 2019-09-29 0000831641 us-gaap:CommonStockMember 2018-09-30 0000831641 us-gaap:NoncontrollingInterestMember 2018-10-01 2019-09-29 0000831641 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-29 0000831641 us-gaap:RetainedEarningsMember 2017-10-02 2018-09-30 0000831641 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-10-03 2017-10-01 0000831641 us-gaap:CommonStockMember 2019-09-29 0000831641 us-gaap:AdditionalPaidInCapitalMember 2017-10-01 0000831641 us-gaap:RetainedEarningsMember 2018-09-30 0000831641 us-gaap:ParentMember 2018-09-30 0000831641 us-gaap:AdditionalPaidInCapitalMember 2016-10-02 0000831641 us-gaap:RetainedEarningsMember 2018-10-01 0000831641 us-gaap:RetainedEarningsMember 2018-10-01 2019-09-29 0000831641 us-gaap:AdditionalPaidInCapitalMember 2018-10-01 2019-09-29 0000831641 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 0000831641 us-gaap:NoncontrollingInterestMember 2016-10-02 0000831641 us-gaap:ParentMember 2019-09-29 0000831641 us-gaap:ParentMember 2017-10-01 0000831641 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0000831641 us-gaap:NoncontrollingInterestMember 2019-09-29 0000831641 us-gaap:AdditionalPaidInCapitalMember 2019-09-29 0000831641 us-gaap:NoncontrollingInterestMember 2017-10-01 0000831641 us-gaap:RetainedEarningsMember 2017-10-01 0000831641 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-10-02 0000831641 us-gaap:NoncontrollingInterestMember 2018-09-30 0000831641 2017-10-01 0000831641 us-gaap:RetainedEarningsMember 2016-10-03 2017-10-01 0000831641 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-10-01 0000831641 us-gaap:ParentMember 2016-10-02 0000831641 srt:RestatementAdjustmentMember 2017-10-02 2018-09-30 0000831641 srt:ScenarioForecastMember 2019-09-30 0000831641 srt:RestatementAdjustmentMember 2016-10-03 2017-10-01 0000831641 ttek:CommercialMember 2019-09-29 0000831641 ttek:InternationalMember 2019-09-29 0000831641 srt:MaximumMember us-gaap:BuildingMember 2018-10-01 2019-09-29 0000831641 srt:MaximumMember 2018-10-01 2019-09-29 0000831641 srt:MaximumMember us-gaap:EquipmentMember 2018-10-01 2019-09-29 0000831641 ttek:FederalGovernmentMember 2019-09-29 0000831641 srt:MinimumMember us-gaap:FurnitureAndFixturesMember 2018-10-01 2019-09-29 0000831641 srt:MinimumMember us-gaap:EquipmentMember 2018-10-01 2019-09-29 0000831641 srt:MaximumMember us-gaap:FurnitureAndFixturesMember 2018-10-01 2019-09-29 0000831641 srt:MinimumMember 2018-10-01 2019-09-29 0000831641 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2018-10-01 2019-09-29 0000831641 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-10-01 2019-09-29 0000831641 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2019-09-29 0000831641 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2019-09-29 0000831641 us-gaap:TimeAndMaterialsContractMember 2018-10-01 2019-09-29 0000831641 us-gaap:FixedPriceContractMember 2018-10-01 2019-09-29 0000831641 ttek:CostPlusMember 2016-10-03 2017-10-01 0000831641 us-gaap:FixedPriceContractMember 2017-10-02 2018-09-30 0000831641 us-gaap:TimeAndMaterialsContractMember 2016-10-03 2017-10-01 0000831641 ttek:CostPlusMember 2018-10-01 2019-09-29 0000831641 us-gaap:TimeAndMaterialsContractMember 2017-10-02 2018-09-30 0000831641 us-gaap:FixedPriceContractMember 2016-10-03 2017-10-01 0000831641 ttek:CostPlusMember 2017-10-02 2018-09-30 0000831641 ttek:CommercialInternationalServicesGroupMember 2018-10-01 2019-09-29 0000831641 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-10-01 0000831641 ttek:CommercialInternationalServicesGroupMember 2017-10-02 2018-09-30 0000831641 us-gaap:AccountingStandardsUpdate201409Member 2018-10-01 0000831641 ttek:CommercialMember 2017-10-02 2018-09-30 0000831641 ttek:InternationalMember 2017-10-02 2018-09-30 0000831641 ttek:FederalGovernmentMember 2018-10-01 2019-09-29 0000831641 ttek:StateAndLocalGovernmentMember 2016-10-03 2017-10-01 0000831641 ttek:StateAndLocalGovernmentMember 2017-10-02 2018-09-30 0000831641 ttek:InternationalMember 2016-10-03 2017-10-01 0000831641 ttek:StateAndLocalGovernmentMember 2018-10-01 2019-09-29 0000831641 ttek:FederalGovernmentMember 2016-10-03 2017-10-01 0000831641 ttek:FederalGovernmentMember 2017-10-02 2018-09-30 0000831641 ttek:InternationalMember 2018-10-01 2019-09-29 0000831641 ttek:CommercialMember 2016-10-03 2017-10-01 0000831641 ttek:CommercialMember 2018-10-01 2019-09-29 0000831641 2019-09-30 2019-09-29 0000831641 2020-09-30 2019-09-29 0000831641 2018-03-02 2018-03-02 0000831641 2018-08-31 2018-08-31 0000831641 2019-02-28 2019-02-28 0000831641 2019-05-31 2019-05-31 0000831641 2018-12-14 2018-12-14 0000831641 2017-12-15 2017-12-15 0000831641 2019-08-30 2019-08-30 0000831641 2018-06-01 2018-06-01 0000831641 us-gaap:SubsequentEventMember 2019-11-11 2019-11-11 0000831641 2018-11-05 0000831641 ttek:November52018StockRepurchaseProgramMember 2018-10-01 2019-09-29 0000831641 ttek:November52018StockRepurchaseProgramMember 2017-10-02 2018-09-30 0000831641 ttek:A2019StockRepurchaseProgramMember 2018-10-01 2019-09-29 0000831641 ttek:RemediationAndConstructionManagementMember 2017-10-02 2018-09-30 0000831641 ttek:FederalGovernmentMember 2018-09-30 0000831641 ttek:RemediationAndConstructionManagementMember 2018-10-01 2019-09-29 0000831641 ttek:NormanDisneyAndYoungMember 2017-10-02 2018-09-30 0000831641 srt:MinimumMember us-gaap:CustomerContractsMember 2017-10-02 2018-09-30 0000831641 ttek:EcoLogicalAustraliaMember 2016-10-03 2017-10-01 0000831641 ttek:NormanDisneyAndYoungMember 2018-04-01 0000831641 ttek:EGlobalTechMember 2018-12-31 2019-03-31 0000831641 ttek:GlumacMember 2018-09-30 0000831641 srt:MaximumMember us-gaap:TradeNamesMember 2017-10-02 2018-09-30 0000831641 ttek:GlumacMember 2017-10-02 2018-09-30 0000831641 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember ttek:NonCoreFieldServicesBusinessMember 2017-10-02 2018-09-30 0000831641 ttek:WYGplcMember 2019-07-01 2019-09-29 0000831641 ttek:EcoLogicalAustraliaMember 2017-10-01 0000831641 srt:MaximumMember us-gaap:CustomerContractsMember 2017-10-02 2018-09-30 0000831641 ttek:EGlobalTechMember 2019-03-31 0000831641 srt:MinimumMember us-gaap:TradeNamesMember 2017-10-02 2018-09-30 0000831641 ttek:RFSReportingUnitMember 2019-09-29 0000831641 ttek:GovernmentServicesGroupMember 2018-09-30 0000831641 ttek:CommercialInternationalServicesGroupMember 2019-09-29 0000831641 ttek:CommercialInternationalServicesGroupMember 2018-09-30 0000831641 ttek:RFSReportingUnitMember 2018-10-01 2019-09-29 0000831641 ttek:GovernmentServicesGroupMember 2019-09-29 0000831641 2019-07-01 2019-07-01 0000831641 ttek:GovernmentServicesGroupMember 2018-10-01 2019-09-29 0000831641 ttek:GovernmentServicesGroupMember 2017-10-01 0000831641 ttek:GovernmentServicesGroupMember 2017-10-02 2018-09-30 0000831641 ttek:CommercialInternationalServicesGroupMember 2017-10-01 0000831641 2019-06-30 0000831641 us-gaap:OrderOrProductionBacklogMember 2018-09-30 0000831641 us-gaap:TradeNamesMember 2019-09-29 0000831641 us-gaap:OrderOrProductionBacklogMember 2019-09-29 0000831641 us-gaap:CustomerRelationshipsMember 2018-10-01 2019-09-29 0000831641 us-gaap:NoncompeteAgreementsMember 2018-09-30 0000831641 us-gaap:OrderOrProductionBacklogMember 2018-10-01 2019-09-29 0000831641 us-gaap:NoncompeteAgreementsMember 2019-09-29 0000831641 us-gaap:CustomerRelationshipsMember 2018-09-30 0000831641 us-gaap:TradeNamesMember 2018-09-30 0000831641 us-gaap:CustomerRelationshipsMember 2019-09-29 0000831641 us-gaap:TradeNamesMember 2018-10-01 2019-09-29 0000831641 ttek:EquipmentFurnitureAndFixturesMember 2019-09-29 0000831641 us-gaap:LandAndBuildingMember 2019-09-29 0000831641 us-gaap:LandAndBuildingMember 2018-09-30 0000831641 us-gaap:LeaseholdImprovementsMember 2019-09-29 0000831641 us-gaap:LeaseholdImprovementsMember 2018-09-30 0000831641 ttek:EquipmentFurnitureAndFixturesMember 2018-09-30 0000831641 us-gaap:LandAndBuildingMember ttek:CommercialInternationalServicesGroupMember 2018-09-30 0000831641 us-gaap:StateAndLocalJurisdictionMember 2019-09-29 0000831641 us-gaap:ForeignCountryMember 2019-09-29 0000831641 us-gaap:ForeignCountryMember 2018-10-01 2019-09-29 0000831641 2018-10-01 2018-12-30 0000831641 2016-10-03 2017-01-01 0000831641 ttek:OtherLongTermDebtMember 2018-09-30 0000831641 ttek:OtherLongTermDebtMember 2019-09-29 0000831641 us-gaap:LineOfCreditMember 2019-09-29 0000831641 us-gaap:LineOfCreditMember 2018-09-30 0000831641 us-gaap:StandbyLettersOfCreditMember 2019-09-29 0000831641 us-gaap:RevolvingCreditFacilityMember ttek:AmendedCreditAgreementMember ttek:PrimeRateOrEurodollarRateMember 2018-07-30 2018-07-30 0000831641 us-gaap:BridgeLoanMember ttek:AmendedCreditAgreementMember 2018-07-30 0000831641 ttek:AmendedCreditAgreementMember 2018-07-30 0000831641 us-gaap:StandbyLettersOfCreditMember ttek:GBPCreditFacilityMember 2019-09-29 0000831641 us-gaap:StandbyLettersOfCreditMember ttek:AmendedCreditAgreementMember 2019-09-29 0000831641 us-gaap:StandbyLettersOfCreditMember ttek:AUDCreditFacilityMember 2019-09-29 0000831641 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember ttek:AmendedCreditAgreementMember ttek:PrimeRateOrEurodollarRateMember 2018-07-30 2018-07-30 0000831641 ttek:TermLoanFacilityMember ttek:AmendedCreditAgreementMember 2019-09-29 0000831641 us-gaap:RevolvingCreditFacilityMember ttek:AmendedCreditAgreementMember 2019-09-29 0000831641 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember ttek:AmendedCreditAgreementMember us-gaap:EurodollarMember 2018-07-30 2018-07-30 0000831641 ttek:TermLoanFacilityMember ttek:AmendedCreditAgreementMember 2018-07-30 0000831641 us-gaap:SecuredDebtMember ttek:GBPCreditFacilityMember 2019-09-29 0000831641 ttek:AmendedCreditAgreementMember 2019-09-29 0000831641 us-gaap:RevolvingCreditFacilityMember ttek:AmendedCreditAgreementMember 2018-07-30 0000831641 ttek:LineOfCreditMulticurrencyBorrowingsAndLettersOfCreditMember 2019-09-29 0000831641 us-gaap:StandbyLettersOfCreditMember ttek:AmendedCreditAgreementMember 2018-07-30 0000831641 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember ttek:AmendedCreditAgreementMember ttek:PrimeRateOrEurodollarRateMember 2018-07-30 2018-07-30 0000831641 ttek:CreditAgreementMember 2019-09-29 0000831641 ttek:AmendedCreditAgreementMember us-gaap:FederalFundsEffectiveSwapRateMember 2018-07-30 2018-07-30 0000831641 us-gaap:SecuredDebtMember ttek:AUDCreditFacilityMember 2019-09-29 0000831641 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember ttek:AmendedCreditAgreementMember us-gaap:EurodollarMember 2018-07-30 2018-07-30 0000831641 ttek:LineOfCreditMulticurrencyBorrowingsAndLettersOfCreditMember ttek:AmendedCreditAgreementMember 2018-07-30 0000831641 ttek:AmendedCreditAgreementMember 2018-07-30 2018-07-30 0000831641 us-gaap:PerformanceSharesMember 2018-10-01 2019-09-29 0000831641 ttek:EmployeeAndDirectorsStockOptionsMember 2019-09-29 0000831641 ttek:EquityIncentivePlan2018Member 2019-09-29 0000831641 ttek:EmployeeAndDirectorsStockOptionsMember 2017-10-02 2018-09-30 0000831641 ttek:EmployeeStockPurchasePlanMember 2019-09-29 0000831641 ttek:MarchSixth2006AndSubsequentDatesMember us-gaap:RestrictedStockUnitsRSUMember ttek:EquityIncentivePlan2005Member ttek:EachAnniversaryOfGrantDateMember 2018-10-01 2019-09-29 0000831641 ttek:EmployeeAndDirectorsStockOptionsMember 2016-10-03 2017-10-01 0000831641 us-gaap:PerformanceSharesMember 2017-10-02 2018-09-30 0000831641 ttek:EmployeeAndDirectorsStockOptionsMember 2018-10-01 2019-09-29 0000831641 us-gaap:RestrictedStockUnitsRSUMember 2018-10-01 2019-09-29 0000831641 us-gaap:RestrictedStockUnitsRSUMember 2017-10-02 2018-09-30 0000831641 ttek:EmployeeStockPurchasePlanMember 2016-10-03 2017-10-01 0000831641 ttek:DatesPriorToMarchSixth2006Member ttek:EmployeeAndDirectorsStockOptionsMember ttek:EquityIncentivePlan2005Member ttek:FirstAnniversaryOfGrantDateAndMonthlyThereafterMember 2018-10-01 2019-09-29 0000831641 ttek:EmployeeStockPurchasePlanMember 2018-09-30 0000831641 us-gaap:PerformanceSharesMember 2016-10-03 2017-10-01 0000831641 srt:DirectorMember us-gaap:RestrictedStockUnitsRSUMember 2018-10-01 2019-09-29 0000831641 ttek:EmployeeStockPurchasePlanMember 2018-10-01 2019-09-29 0000831641 us-gaap:RestrictedStockUnitsRSUMember 2019-09-29 0000831641 ttek:EmployeeStockPurchasePlanMember 2017-10-02 2018-09-30 0000831641 ttek:DatesPriorToMarchSixth2006Member ttek:EmployeeAndDirectorsStockOptionsMember ttek:EquityIncentivePlan2005Member 2018-10-01 2019-09-29 0000831641 ttek:RestrictedStockUnitsAndPerformanceShareUnitsMember 2016-10-03 2017-10-01 0000831641 ttek:RestrictedStockUnitsAndPerformanceShareUnitsMember 2019-09-29 0000831641 ttek:RestrictedStockUnitsAndPerformanceShareUnitsMember 2017-10-02 2018-09-30 0000831641 ttek:RestrictedStockUnitsAndPerformanceShareUnitsMember 2018-10-01 2019-09-29 0000831641 ttek:EquityIncentivePlan2015Member 2019-09-29 0000831641 us-gaap:RestrictedStockUnitsRSUMember 2016-10-03 2017-10-01 0000831641 ttek:MarchSixth2006AndSubsequentDatesMember ttek:EmployeeAndDirectorsStockOptionsMember ttek:EquityIncentivePlan2005Member ttek:EachAnniversaryOfGrantDateMember 2018-10-01 2019-09-29 0000831641 ttek:MarchSixth2006AndSubsequentDatesMember ttek:EmployeeAndDirectorsStockOptionsMember ttek:EquityIncentivePlan2005Member 2018-10-01 2019-09-29 0000831641 ttek:EmployeeAndDirectorsStockOptionsMember 2016-10-03 2017-01-01 0000831641 ttek:EmployeeStockPurchasePlanMember 2017-10-01 0000831641 us-gaap:RestrictedStockUnitsRSUMember 2016-10-02 0000831641 us-gaap:PerformanceSharesMember 2017-10-01 0000831641 us-gaap:RestrictedStockUnitsRSUMember 2017-10-01 0000831641 us-gaap:PerformanceSharesMember 2019-09-29 0000831641 us-gaap:PerformanceSharesMember 2016-10-02 0000831641 us-gaap:PerformanceSharesMember 2018-09-30 0000831641 us-gaap:RestrictedStockUnitsRSUMember 2018-09-30 0000831641 us-gaap:RestrictedStockMember ttek:EquityIncentivePlan2005Member 2018-10-01 2019-09-29 0000831641 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-29 0000831641 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2017-10-02 2018-09-30 0000831641 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-10-01 2019-09-29 0000831641 ttek:ForeignExchangeForwardAndInterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-10-01 2019-09-29 0000831641 us-gaap:NondesignatedMember 2019-09-29 0000831641 ttek:InterestRateSwap1Member us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-29 0000831641 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-29 0000831641 us-gaap:OtherCurrentAssetsMember us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0000831641 us-gaap:OtherCurrentAssetsMember us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-29 0000831641 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0000831641 us-gaap:InterestRateSwapMember 2017-10-02 2018-09-30 0000831641 us-gaap:InterestRateSwapMember 2016-10-03 2017-10-01 0000831641 us-gaap:InterestRateSwapMember 2018-10-01 2019-09-29 0000831641 us-gaap:NondesignatedMember 2018-09-30 0000831641 us-gaap:NondesignatedMember 2017-10-01 0000831641 ttek:InterestRateSwap4Member us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-29 0000831641 ttek:InterestRateSwap5Member us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-29 0000831641 ttek:InterestRateSwap3Member us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-29 0000831641 ttek:InterestRateSwap2Member us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-29 0000831641 us-gaap:AccumulatedTranslationAdjustmentMember 2017-10-02 2018-09-30 0000831641 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-10-01 0000831641 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-10-02 2018-09-30 0000831641 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-09-30 0000831641 us-gaap:AccumulatedTranslationAdjustmentMember 2018-10-01 2019-09-29 0000831641 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-10-01 2019-09-29 0000831641 us-gaap:AccumulatedTranslationAdjustmentMember 2019-09-29 0000831641 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-09-29 0000831641 us-gaap:AccumulatedTranslationAdjustmentMember 2017-10-01 0000831641 us-gaap:AccumulatedTranslationAdjustmentMember 2018-09-30 0000831641 2019-07-15 0000831641 us-gaap:CorporateNonSegmentMember 2016-10-03 2017-10-01 0000831641 us-gaap:OperatingSegmentsMember ttek:GovernmentServicesGroupMember 2017-10-02 2018-09-30 0000831641 us-gaap:OperatingSegmentsMember ttek:RemediationAndConstructionManagementMember 2017-10-02 2018-09-30 0000831641 us-gaap:OperatingSegmentsMember ttek:RemediationAndConstructionManagementMember 2016-10-03 2017-10-01 0000831641 us-gaap:OperatingSegmentsMember ttek:CommercialInternationalServicesGroupMember 2018-10-01 2019-09-29 0000831641 us-gaap:IntersegmentEliminationMember 2018-10-01 2019-09-29 0000831641 us-gaap:IntersegmentEliminationMember 2016-10-03 2017-10-01 0000831641 us-gaap:OperatingSegmentsMember ttek:GovernmentServicesGroupMember 2018-10-01 2019-09-29 0000831641 us-gaap:CorporateNonSegmentMember 2018-10-01 2019-09-29 0000831641 us-gaap:IntersegmentEliminationMember 2017-10-02 2018-09-30 0000831641 us-gaap:OperatingSegmentsMember ttek:RemediationAndConstructionManagementMember 2018-10-01 2019-09-29 0000831641 us-gaap:OperatingSegmentsMember ttek:GovernmentServicesGroupMember 2016-10-03 2017-10-01 0000831641 us-gaap:CorporateNonSegmentMember 2017-10-02 2018-09-30 0000831641 us-gaap:OperatingSegmentsMember ttek:CommercialInternationalServicesGroupMember 2016-10-03 2017-10-01 0000831641 us-gaap:OperatingSegmentsMember ttek:CommercialInternationalServicesGroupMember 2017-10-02 2018-09-30 0000831641 country:US 2019-09-29 0000831641 us-gaap:NonUsMember 2019-09-29 0000831641 us-gaap:NonUsMember 2018-10-01 2019-09-29 0000831641 country:US 2018-09-30 0000831641 country:US 2017-10-01 0000831641 country:US 2017-10-02 2018-09-30 0000831641 us-gaap:NonUsMember 2017-10-02 2018-09-30 0000831641 us-gaap:NonUsMember 2018-09-30 0000831641 country:US 2016-10-03 2017-10-01 0000831641 us-gaap:NonUsMember 2016-10-03 2017-10-01 0000831641 us-gaap:NonUsMember 2017-10-01 0000831641 country:US 2018-10-01 2019-09-29 0000831641 us-gaap:OperatingSegmentsMember ttek:CommercialInternationalServicesGroupMember 2019-09-29 0000831641 us-gaap:OperatingSegmentsMember ttek:RemediationAndConstructionManagementMember 2018-09-30 0000831641 us-gaap:OperatingSegmentsMember ttek:GovernmentServicesGroupMember 2019-09-29 0000831641 us-gaap:OperatingSegmentsMember ttek:RemediationAndConstructionManagementMember 2019-09-29 0000831641 us-gaap:OperatingSegmentsMember ttek:GovernmentServicesGroupMember 2018-09-30 0000831641 us-gaap:CorporateNonSegmentMember 2018-09-30 0000831641 us-gaap:OperatingSegmentsMember ttek:CommercialInternationalServicesGroupMember 2018-09-30 0000831641 us-gaap:CorporateNonSegmentMember 2019-09-29 0000831641 2018-04-02 2018-07-01 0000831641 2018-12-31 2019-03-31 0000831641 2018-01-01 2018-04-01 0000831641 2019-04-01 2019-06-30 0000831641 2019-07-01 2019-09-29 0000831641 2018-07-02 2018-09-30 0000831641 2017-10-02 2017-12-31 0000831641 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember ttek:NonCoreFieldServicesBusinessMember 2018-04-02 2018-07-01 0000831641 us-gaap:AllowanceForCreditLossMember 2018-10-01 2019-09-29 0000831641 us-gaap:AllowanceForCreditLossMember 2018-09-30 0000831641 us-gaap:AllowanceForCreditLossMember 2017-10-01 0000831641 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2017-10-01 0000831641 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2018-09-30 0000831641 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2018-10-01 2019-09-29 0000831641 us-gaap:AllowanceForCreditLossMember 2017-10-02 2018-09-30 0000831641 us-gaap:AllowanceForCreditLossMember 2016-10-02 0000831641 us-gaap:AllowanceForCreditLossMember 2019-09-29 0000831641 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2017-10-02 2018-09-30 0000831641 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2016-10-03 2017-10-01 0000831641 us-gaap:AllowanceForCreditLossMember 2016-10-03 2017-10-01 0000831641 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2016-10-02 0000831641 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2019-09-29 ttek:Level ttek:segment ttek:employee iso4217:USD xbrli:shares iso4217:USD xbrli:pure ttek:Institution xbrli:shares iso4217:AUD iso4217:GBP ttek:action ttek:instrument ttek:agreement
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________
FORM 10-K
(Mark One)
 
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 29, 2019
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the Transition Period from                          to   
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 No.)
3475 East Foothill Boulevard, Pasadena, California 91107
(Address of principal executive offices) (Zip Code)

(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
Securities registered pursuant to Section 12(g) of the Act:
None
________________________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No 
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  No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.   Large accelerated filer     Accelerated filer     Non-accelerated filer     Smaller reporting company   Emerging growth company
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. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 
The aggregate market value of the registrant's common stock held by non-affiliates on March 31, 2019, was $3.2 billion (based upon the closing price of a share of registrant's common stock as reported by the Nasdaq National Market on that date).
On November 25, 2019, 54,587,819 shares of the registrant's common stock were outstanding.
DOCUMENT INCORPORATED BY REFERENCE
Portions of registrant's Proxy Statement for its 2020 Annual Meeting of Stockholders are incorporated by reference in Part III of this report where indicated.



TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


             This Annual Report on Form 10-K ("Report"), 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 harbors created under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). 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," "estimates," "seeks," "continues," "may," variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, 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 "Risk 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.
PART I
Item 1.    Business
General
Tetra Tech, Inc. is a leading global provider of consulting and engineering services that focuses on water, environment, infrastructure, resource management, energy, and international development. We are a global company that is Leading with Science® to provide innovative solutions for our 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' needs and resources.
Engineering News-Record ("ENR"), the leading trade journal for our industry, has ranked us the number one water services firm for the past 16 years, most recently in its May 2019 "Top 500 Design Firms" issue. In 2019, we were also ranked number one in water treatment/desalination, water treatment and supply, environmental management, environmental science, consulting/studies, solid waste, hydro plants, and wind power. ENR ranks us among the largest 10 firms in numerous other service lines, including engineering/design, chemical and soil remediation, site assessment and compliance, dams and reservoirs, power, transmission and distribution plants, and hazardous waste.
Our reputation for high-end consulting and engineering services and our ability 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 broad consulting, engineering, and technology service offerings. We are working on over 70,000 projects a year, in more than 100 countries on seven continents, from 450 offices, with a talent force of 20,000 associates. We are Leading with Science throughout our operations, with domain experts across multiple disciplines supported by advanced analytics, artificial intelligence ("AI"), machine learning, and digital technology. Our ability to provide innovation and first-of-kind solutions is enhanced by partnerships with our forward-thinking clients. We are diverse and inclusive, embracing the breadth of experience across our talent force worldwide with a culture of innovation and entrepreneurship. We are disciplined in our business delivering value to customers and high performance to 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, our mission is to be the world's leading consulting and engineering firm solving global challenges in water and the environment that make a positive difference in people's lives worldwide.
The following core principles form the underpinning of how we work together to serve our clients:
Service.  We put our clients first. We listen closely to better understand our clients' needs and deliver smart, cost-effective solutions that meet their needs.
Value.  We solve our clients' problems as if they were our own. We develop and implement sustainable solutions that are innovative, efficient and practical.
Excellence.  We bring superior technical capability, disciplined project management, and excellence in safety and quality to all of our services.
Opportunity.  Our people are our number one asset. Opportunity means new technical challenges that provide advancement within our company, encourage an inclusive and diverse workforce, and ensure a safe workplace.
We have a strong project management culture that enables us to deliver on more than 70,000 projects in a year. We maintain a strong emphasis on project management at all levels of the organization. Our client-focused project management is supported by strong fiscal management and financial tools. We use a disciplined approach to monitoring, managing, and improving

3



our return on investment in each of our business areas through our efforts to negotiate appropriate contract terms, manage our contract performance to minimize schedule delays and cost overruns, and promptly bill and collect accounts receivable.
We have a broad client and contract base built by proactively understanding our clients' priorities and demonstrating a long track record of successful performance that results in repeat business and limits competition. We believe that proximity to our clients is also instrumental to integrating global experience and resources with an understanding of our local clients' needs. Over the past year, we worked in more than 100 countries, helping our clients address complex water, environment, energy and related infrastructure needs.
Throughout our history, we have supported both public and private clients, many for multiple decades of continuous contracts and repeat business. Long-term relationships provide us with institutional knowledge of our clients' programs, past projects and internal resources. Institutional knowledge is often a significant factor in winning competitive proposals and providing cost-effective solutions tailored to our clients' needs.
We are often at the leading edge of new challenges where we are delivering one-of-a-kind solutions. These might be a new water reuse technology, a unique solution to addressing new regulatory requirements, a new monitoring approach for assessing infrastructure assets or a computer model for real time management of water resources.
We combine interdisciplinary capabilities, technical resources, and institutional knowledge to implement complex projects that are at the leading edge of policy and technology development.    
Leading with Science
In implementing our projects, we integrate deep domain knowledge, technologies, and practical expertise. These tools and technologies that differentiate us are called Tetra Tech Delta ("TtΔ"). We use this suite of technologies and analytical tools to provide value engineering and cost efficiencies for our clients, while enhancing the effectiveness and responsiveness of our solutions.

TtΔ is our proprietary collection of technology and analytical tools. These advanced analytical solutions enable us to provide clients with real-time reporting, automated and remote data collection, and dashboards for tracking and communicating results. TtΔ is continually evolving and includes cutting-edge tools on interpretive analysis, modeling of physical systems, forecasting and scenario analysis, optimization and operations research.

In implementing our Leading with Science approach, we work with our clients to explore, incubate, and test solutions in our Tetra Tech Innovation Hubs ("Tt I-Hub"). Tt I-Hub provides a collaborative platform for exploration, testing, and formulation of new solutions in partnership with clients, academia and donor agencies.

Leading with Science also means fully leveraging the collective expertise provided by our global talent force of 20,000 associates. We actively share information, ideas, and resources across our global operations through our network structure, guided subject matter teams, and project team building. We also proactively share emerging technology and new ideas through our Tetra Tech Technology Transfer ("T4") program. T4 facilitates our innovation culture through webcasts, blogs, multi-media, and social media across our global operations.    
Reportable Segments
In fiscal 2019, we managed our operations under two 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. Our Commercial/International Services Group ("CIG") reportable segment primarily includes activities with U.S. commercial clients and international clients other than 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") reportable segment. The following table presents the percentage of our revenue by reportable segment:

4



 
 
Fiscal Year
Reportable Segment
 
2019
 
2018
 
2017
GSG
 
58.6%
 
57.2%
 
54.0%
CIG
 
43.1
 
44.6
 
48.2
RCM
 
 
0.5
 
0.7
Inter-segment elimination
 
(1.7)
 
(2.3)
 
(2.9)
 
 
100.0%
 
100.0%
 
100.0%
For additional information regarding our reportable segments, see Note 19, "Reportable Segments" of the "Notes to Consolidated Financial Statements" included in Item 8. For more information on risks related to our business, segments and geographic regions, including risks related to foreign operations, see Item 1A, “Risk Factors” of this report.
Government Services Group
GSG provides 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, infrastructure, information technology, and 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. GSG also leads our support for development agencies worldwide, especially in the United States, United Kingdom, and Australia.
GSG provides consulting and engineering services for a broad range of water, environment, and infrastructure-related needs primarily for U.S. government clients. The primary GSG markets include water resources analysis and water management, environmental monitoring, data analytics, government consulting, waste management, and a broad range of civil infrastructure master planning and engineering design for facilities, transportation, and local development projects. GSG's services span from early data collection and monitoring, to data analysis and information management, to science and engineering applied research, to engineering design, to construction management, and operations and maintenance.
GSG provides our clients with sustainable solutions that optimize their water management and environmental programs to address regulatory requirements, improve operational efficiencies, and manage assets. Our services advance sustainability and resiliency through the "greening" of infrastructure, design of energy efficiency and resource conservation programs, innovation in the capture and sequestration of carbon, development of disaster preparedness and response plans, and improvement in water and land resource management practices. We provide climate change and energy management consulting, and greenhouse gas ("GHG") inventory assessment, certification, reduction, and management services.
Many government organizations face complex problems due to increased demand and competition for water and natural resources, newly understood threats to human health and the environment, aging infrastructure, and demand for new and more resilient infrastructure. Our integrated water management services support government agencies responsible for managing water supplies, wastewater treatment, storm water management, and flood protection. We help our clients develop more resilient water supplies and more sustainable management of water resources, while addressing a wide range of local and national government requirements and policies. Fluctuations in weather patterns and extreme events, such as prolonged droughts and more frequent flooding, are increasing concerns over the reliability of water supplies, the need to protect coastal areas, and flood mitigation and adaptation in metropolitan areas. We provide smart water infrastructure solutions that integrate water modeling, instrumentation and controls, and real-time controls to create flexible water systems that respond to changing conditions, optimize use of existing infrastructure, and provide clients with the ability to more efficiently monitor and manage their water infrastructure.
We also support government agencies in the full range of disaster response and community resilience services including monitoring and environmental response, damage assessment and program management services, and resilient engineering design and mitigation planning. We have a full suite of innovative software tools and procedures that support our disaster response, planning, and management support services. These tools and procedures address disaster management and community resilience data management needs, including information technology systems, portals, dashboards, data management, data analytics, and statistical analysis.
GSG provides planning, architectural, and sustainable engineering services for U.S. federal, state and local government facilities and commercial high-rise multi-use buildings. We support the government agencies with related infrastructure needs including military housing, and educational, institutional, and research facilities. Our high-performance buildings practice provides sustainable energy, water, and GHG efficient solutions including civil, electrical, mechanical, structural, plumbing and fire protection engineering and design services for buildings and surrounding developments. We also provide engineering services for a wide range of clients with specialized needs, such as security systems, training and audiovisual facilities, clean rooms, laboratories, medical facilities and disaster preparedness facilities.

5



GSG provides a wide range of consulting and engineering services for solid waste management, including landfill design and management and recycling facility design, throughout the United States; providing design, construction management, and maintenance services to manage solid and hazardous waste, for environmental, wastewater, energy, containment, mining, utilities, aquaculture, and other industrial clients; designing and installing geosynthetic liners for large lining and capping projects, as well as innovative renewable energy projects such as solar energy-generating landfill caps; and providing full-service solutions for gas-to-energy facilities to efficiently use landfill methane gas.
We provide technical support for the Federal Aviation Administration ("FAA") to optimize the U.S. airspace system and support related aviation systems integration for the U.S. and other countries' metropolitan airports. We provide specialized modeling and data analytics for airspace acoustic analysis. Our aviation airspace services include data management, data processing, communications and outreach, and systems development; and providing systems analysis and information management. We also provide information technology ("IT") support to various federal clients for modernization of IT systems, cloud migration, AI, and machine learning.
We support governments in implementing international development programs for developing nations to help them address numerous challenges, including access to potable water and adapting to the threats of climate change. Our international development services include supporting donor agencies to develop safe and reliable water supplies and sanitation services, support the eradication of poverty, improve livelihoods, promote democracy and increase economic growth; planning, designing, implementing, researching, and monitoring projects in the areas of climate change, agriculture and rural development, governance and institutional development, natural resources and the environment, infrastructure, economic growth, energy, rule of law and justice systems, land tenure and property rights, and training and consulting for public-private partnerships; and building capacity and strengthening institutions in areas such as global health, energy sector reform, utility management, education, food security, and local governance.
Commercial/International Services Group
CIG primarily provides consulting and engineering services to U.S. commercial clients, and international clients that include both commercial and government sectors. CIG supports commercial clients across the Fortune 500, energy utilities, industrial, manufacturing, aerospace, and resource management markets. CIG also provides 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.
CIG provides consulting and engineering services worldwide for a broad range of water, environment, and sustainable infrastructure-related needs in both developed and emerging economies. The primary markets for CIG's services include natural resources, energy, and utilities, as well as civil infrastructure master planning and engineering design for facilities, transportation, and local development projects. CIG's services span from early data collection and monitoring to data analysis and information management, to feasibility studies and assessments, to science and engineering applied research, to engineering design, to construction management, and operations and maintenance.
CIG's environmental services include cleanup and beneficial reuse of sites contaminated with hazardous materials, toxic chemicals, and oil and petroleum products, which cover all phases of the remedial planning process, starting with disaster response and initial site assessment through removal actions, remedial design and implementation oversight; and supporting both commercial and government clients in planning and implementing remedial activities at numerous sites around the world, and providing a broad range of environmental analysis and planning services.
CIG also supports commercial clients by providing design services to renovate, upgrade, and modernize industrial water supplies, and address industrial water treatment and water reuse needs; and provides plant engineering, project execution, and program management services for industrial water treatment projects throughout the world.
CIG's international services, especially in Canada and Asia-Pacific, include high-end analytical, engineering, architecture, geotechnical, and construction management services for infrastructure projects, including roadway monitoring and asset management services, collection of condition data, optimization of upgrades and long-term planning for expansion; multi-modal design services for commuter railway stations, airport expansions, bridges and major highways, and ports and harbors; and designing solutions to repair, replace, and upgrade older transportation infrastructure.
CIG provides infrastructure design services in extreme and remote areas by using specialized techniques that are adapted to local resources, while minimizing environmental impacts, and considering potential climate change impacts. These include providing consulting, geotechnical, and design services to owners of transportation, natural resources, energy and community infrastructure in areas of permafrost or extreme climate regions.
CIG's energy services include support for electric power utilities and independent power producers worldwide, ranging from macro-level planning and management advisory services to project-specific environmental, engineering, construction

6



management, and operational services, and advising on the design and implementation of smart grids both in the U.S. and internationally, including increasing utility automation, information and operational technologies, and critical infrastructure security. For utilities and governmental regulatory agencies, services include policy and regulatory development, utility management, performance improvement, asset management and evaluation, and transaction support services. For developers and owners of renewable energy resources such as solar grid and off-grid, on-shore and off-shore wind, biogas and biomass, tidal, and hydropower, and conventional power generation facilities, micro-grid and battery or alternative storage facilities, as well as transmission and distribution assets, services include environmental, engineering, procurement, operations and maintenance, and regulatory support for all project phases.
CIG supports industrial and energy clients, primarily in North America, in the upstream, midstream and downstream market sectors. Our services include environmental permitting support, siting studies, strategic planning and analyses; design of well pads and surface impoundments for drilling sites; water management for exploration activities; design of midstream pipelines and associated pumping stations and storage facilities; construction monitoring, design and construction management for downstream sustaining capital projects; biological and cultural assessments, and site investigations; and hazardous waste site remediation.
CIG also provides environmental remediation and reconstruction services to evaluate and restore lands to beneficial use, including the identification, evaluation and destruction of unexploded ordinance, both domestically and internationally; investigating, remediating, and restoring contaminated facilities at military locations in the U.S. and around the world; managing large, complex sediment remediation programs that help restore rivers and coastal waters to beneficial use; constructing state-of-the-art water treatment plants for commercial clients; and supporting utilities in the U.S. in implementing infrastructure needs.
Remediation and Construction Management
We continued to report the results of the wind-down of our non-core construction activities in the RCM reportable segment in fiscal 2019. As of September 29, 2019, there was no remaining backlog for RCM as the projects were complete.
Project Examples
Project examples are provided on our company website located at tetratech.com, including expert interviews, in-depth articles, and project profiles that demonstrate our services across water, environment, infrastructure, energy, resource management, and international development.
Clients
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:
 
 
Fiscal Year
Client Sector
 
2019
 
2018
 
2017
U.S. state and local government
 
18.9%
 
15.8%
 
12.8%
U.S. federal government (1)
 
30.3
 
32.9
 
32.7
U.S. commercial
 
23.1
 
26.6
 
27.8
International (2)
 
27.7
 
24.7
 
26.7
 
 
100.0%
 
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, Australia, the United Kingdom, and revenue generated from non-U.S. clients.
U.S. federal government agencies are significant clients. The U.S. Agency for International Development ("USAID") accounted for 12.4%, 14.0% and 14.3% of our revenue in fiscal 2019, 2018 and 2017, respectively. The Department of Defense ("DoD") accounted for 7.9%, 10.0% and 9.2% of our revenue in fiscal 2019, 2018 and 2017, respectively. We typically support multiple programs within a single U.S. federal government agency, both domestically and internationally. We also assist U.S. state and local government clients in various jurisdictions across the United States. In Canada, we work for several provinces and various local jurisdictions. Our U.S. commercial clients include companies in the chemical, energy, mining, pharmaceutical, retail, aerospace, automotive, petroleum, and communications industries. No single client, except for U.S. federal government clients, accounted for more than 10% of our revenue in fiscal 2019.
Contracts

7



Our services are performed under three principal types of contracts with our clients: fixed-price, time-and-materials, and cost-plus. The following table presents the percentage of our revenue by contract type:
 
 
Fiscal Year
Contract Type
 
2019
 
2018
 
2017
Fixed-price
 
33.7%
 
33.3%
 
33.0%
Time-and-materials
 
48.6
 
47.1
 
45.9
Cost-plus
 
17.7
 
19.6
 
21.1
 
 
100.0%
 
100.0%
 
100.0%
Under a fixed-price contract, the client agrees to pay a specified price for our performance of the entire contract or a specified portion of the contract. Some fixed-price contracts can include date-certain and/or performance obligations. Fixed-price contracts carry certain inherent risks, including risks of losses from underestimating costs, delays in project completion, problems with new technologies, price increases for materials, and economic and other changes that may occur over the contract period. Consequently, the profitability of fixed-price contracts may vary substantially. Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and 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 related to these contracts is recognized as if these contracts were fixed-price contracts. Under our cost-plus contracts, some of which are subject to a contract ceiling amount, 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, we may not be able to obtain full reimbursement. Further, the amount of the fee received for a cost-plus award fee contract partially depends upon the client's discretionary periodic assessment of our performance on that contract.
Some contracts with the U.S. federal government are subject to annual funding approval. U.S. federal government agencies may impose spending restrictions that limit the continued funding of our existing contracts and may limit our ability to obtain additional contracts. These limitations, if significant, could have a material adverse effect on us. All contracts with the U.S. federal government may be terminated by the government at any time, with or without cause.
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 may prevent us from bidding for or performing government contracts resulting from or related to certain work we have performed. In addition, services performed for a commercial or government sector client may create conflicts of interest that preclude or limit our ability to obtain work for a private organization. We attempt to identify actual or potential conflicts of interest and to minimize the possibility that such conflicts could affect our work under current contracts or our ability to compete for future contracts. We have, on occasion, declined to bid on a project because of an existing or potential conflict of interest.
Some of our operating units have contracts with the U.S. federal government that are subject to audit by the government, primarily by the Defense Contract Audit Agency ("DCAA"). The DCAA generally seeks to (i) identify and evaluate all activities that contribute to, or have an impact on, proposed or incurred costs of government contracts; (ii) evaluate a contractor's policies, procedures, controls, and performance; and (iii) prevent or avoid wasteful, careless, and inefficient production or service. To accomplish this, the DCAA examines our internal control systems, management policies, and financial capability; evaluates the accuracy, reliability, and reasonableness of our cost representations and records; and assesses our compliance with Cost Accounting Standards ("CAS") and defective-pricing clauses found within the Federal Acquisition Regulation ("FAR"). The DCAA also performs an annual review of our overhead rates and assists in the establishment of our final rates. This review focuses on the allowability of cost items and the applicability of CAS. The DCAA also audits cost-based contracts, including the close-out of those contracts.
The DCAA reviews all types of U.S. federal government proposals, including those of award, administration, modification, and re-pricing. The DCAA considers our cost accounting system, estimating methods and procedures, and specific proposal requirements. Operational audits are also performed by the DCAA. A review of our operations at every major organizational level is conducted during the proposal review period. During the course of its audit, the U.S. federal government may disallow costs if it determines that we accounted for such costs in a manner inconsistent with CAS. Under a government contract, only those costs that are reasonable, allocable, and allowable are recoverable. A disallowance of costs by the U.S. federal government could have a material adverse effect on our financial results.
In accordance with our corporate policies, we maintain controls to minimize any occurrence of fraud or other unlawful activities that could result in severe legal remedies, including the payment of damages and/or penalties, criminal and civil sanctions, and debarment. In addition, we maintain preventative audit programs and mitigation measures to ensure that appropriate control systems are in place.

8



We provide our services under contracts, purchase orders, or retainer letters. Our policy requires that all contracts must be in writing. We bill our clients in accordance with the contract terms and periodically based on costs incurred, on either an hourly-fee basis or on a percentage-of-completion basis, as the project progresses. Most of our agreements permit our clients to terminate the agreements without cause upon payment of fees and expenses through the date of the termination. Generally, our contracts do not require that we provide performance bonds. If required, a performance bond, issued by a surety company, guarantees a contractor's performance under the contract. If the contractor defaults under the contract, the surety will, at its discretion, complete the job or pay the client the amount of the bond. If the contractor does not have a performance bond and defaults in the performance of a contract, the contractor is responsible for all damages resulting from the breach of contract. These damages include the cost of completion, together with possible consequential damages such as lost profits.
Growth Strategy
Our management team establishes Tetra Tech's overall business strategy. Our strategic plan defines and guides our investment in marketing and business development to leverage our differentiators and target priority programs and growth markets. We maintain centralized business development resources to develop our corporate branding and marketing materials, support proposal preparation and planning, conduct market research, and manage promotional and professional activities, including appearances at trade shows, direct mailings, advertising, and public relations.
We have established company-wide growth initiatives that reinforce internal coordination, track the development of new programs, identify and coordinate collective resources for major bids, and help us build interdisciplinary teams and provide innovative solutions for major pursuits. Our growth initiatives provide a forum for cross-sector collaboration and the development of interdisciplinary solutions. We continuously identify new markets that are consistent with our strategic plan and service offerings, and we leverage our full-service capabilities and internal coordination structure to develop and implement strategies to research, anticipate, and position us for future procurements and emerging programs.
Business development activities are implemented by our technical and professional management staff throughout the company with the support of company-wide resources and expertise. Our project managers and technical staff have the best understanding of a client's needs and the effect of local or client-specific issues, laws and regulations, and procurement procedures. Our professional staff members hold frequent meetings with existing and potential clients; give presentations to civic and professional organizations; and present seminars on research and technical applications. Essential to the effective development of business is each staff member's access to all our service offerings through our internal technical and geographic networks. Our strong internal networking programs help our professional staff members to pursue new opportunities for both existing and new clients. These networks also facilitate our ability to provide services throughout the project life cycle from the early studies to operations and maintenance. Our enterprise-wide knowledge management systems include skills search tools, business development tracking, and collaboration tools.
To support our growth plans we actively attract, recruit and retain key hires. Our combination of high-end science and consulting coupled with practical applications provides challenging and rewarding opportunities for our associates, thereby enhancing our ability to recruit and retain top quality talent. Our internal networking programs, leadership training, entrepreneurial environment, focus on technical excellence, and global project portfolio help to attract and retain highly qualified individuals.
Our strategic growth plans are augmented by our selective investment in acquisitions aligned with our business. Acquisitions enhance plans to add new technologies, broaden our service offerings, add contract capacity and extend our geographic presence. Our long-established experience in identifying and integrating acquisitions strengthens our ability to integrate and rapidly leverage the resources of the acquired companies’ post-acquisition.
Sustainability Program
Tetra Tech supports clients in more than 100 countries around the world, helping them to solve complex problems and achieve solutions that are technically, socially, and economically resilient. Our high-end consulting and engineering services focus on using innovative technologies and creative solutions to minimize environmental impacts. Our greatest contribution toward sustainability is through the projects we perform every day for our clients. Sustainability is embedded in our projects – from recycling freshwater supplies to recycling waste products, reducing energy consumption, and reducing GHG emissions in developing countries.
Our Sustainability Program enables us to further expand our commitment to sustainability by encouraging, coordinating, and reporting on actions to minimize our collective impacts on the environment. Our Sustainability Program has three primary pillars: Projects – the solutions we provide for our clients; Procurement – our procurement and subcontracting approaches; and Processes – the internal policies and processes that promote sustainable practices, reduce costs, and minimize environmental impacts. In addition, our program is based on the Global Reporting Initiative ("GRI") Sustainability Report Framework, the internationally predominant sustainability reporting protocol for corporate sustainability plans, which includes three fundamental areas: environmental, economic, and social sustainability.

9



Our Sustainability Program is led by our Chief Sustainability Officer, who has been appointed by executive management and is supported by other key corporate and operations representatives via our Sustainability Council. We have established a clear set of metrics to evaluate our progress toward our sustainability goals. Each metric corresponds with one or more performance indicators from GRI. These metrics include economic, health and safety, information technology, human resources, and real estate. We continuously implement sustainability-related policies and practices, and we assess the results of our efforts in order to improve upon them in the future. Our executive management team reviews and approves the Sustainability Program and evaluates our progress in achieving the goals and objectives outlined in our plan. We publish an annual sustainability report on Earth Day each year that documents our progress and is posted on our website located at tetratech.com.
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, the technologies and solutions they provide, and the additional new geographies and 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 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.
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.
For detailed information regarding acquisitions and divestitures, see Note 6, "Acquisitions and Divestitures" of the "Notes to Consolidated Financial Statements" included in Item 8.
Competition
The market for our services is generally competitive. We often compete with many other firms ranging from small regional firms to large international firms.
We perform a broad spectrum of consulting, engineering, and technical services across the water, environment, infrastructure, resource management, energy, and international development markets. Our client base includes U.S. federal government agencies such as the DoD, USAID, the U.S. Department of Energy ("DOE"), the U.S. Environmental Protection Agency ("EPA"), and the FAA; U.S. state and local government agencies; government and commercial clients in Canada, Australia, and the United Kingdom; the U.S. commercial sector, which consists primarily of large industrial companies and utilities; and our international commercial clients. Our competition varies and is a function of the business areas in which, and the client sectors for which, we perform our services. The number of competitors for any procurement can vary widely, depending upon technical qualifications, the relative value of the project, geographic location, the financial terms and risks associated with the work, and any restrictions placed upon competition by the client. Historically, clients have chosen among competing firms by weighing the quality, innovation and timeliness of the firm's service versus its cost to determine which firm offers the best value. When less work becomes available in certain markets, price could become an increasingly important factor.
Our competitors vary depending on end markets and clients, and often we may only compete with a portion of a firm. We believe that our principal competitors include the following firms, in alphabetical order: AECOM; Arcadis NV; Black & Veatch Corporation; Booz Allen Hamilton; Brown & Caldwell; CDM Smith Inc.; Chemonics International, Inc.; Exponent, Inc.; GHD; ICF International, Inc.; Jacobs Engineering Group Inc.; Leidos, Inc.; SAIC; SNC-Lavalin Group Inc.; Stantec Inc.; TRC Companies, Inc.; Weston Solutions, Inc.; and WSP Global Inc.
Backlog
We include in our backlog only those contracts for which funding has been provided and work authorization has been received. We estimate that approximately 62% of our backlog at the end of fiscal 2019 will be recognized as revenue in fiscal

10



2020, as work is being performed. However, 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 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. Accordingly, our backlog as of any particular date is an uncertain indicator of our future earnings.
At fiscal 2019 year-end, our backlog was $3.1 billion, an increase of $428.0 million, or 16.1%, compared to fiscal 2018 year-end. Approximately $2.1 billion and $1.0 billion of our backlog at the end of fiscal 2019 related to GSG and CIG, respectively.
Regulations
We engage in various service activities that are subject to government oversight, including environmental laws and regulations, general government procurement laws and regulations, and other regulations and requirements imposed by the specific government agencies with which we conduct business.
Environmental. A significant portion of our business involves the planning, design, program management and construction management of pollution control facilities, as well as the assessment and management of remediation activities at hazardous waste sites, U.S. Superfund sites, and military bases. In addition, we contract with U.S. federal government entities to destroy hazardous materials. These activities require us to manage, handle, remove, treat, transport, and dispose of toxic or hazardous substances.
Some environmental laws, such as the U.S. Superfund law and similar state, provincial and local statutes, can impose liability for the entire cost of clean-up for contaminated facilities or sites upon present and former owners and operators, as well as generators, transporters, and persons arranging for the treatment or disposal of such substances. In addition, while we strive to handle hazardous and toxic substances with care and in accordance with safe methods, the possibility of accidents, leaks, spills, and events of force majeure always exist. Humans exposed to these materials, including workers or subcontractors engaged in the transportation and disposal of hazardous materials and persons in affected areas, may be injured or become ill. This could result in lawsuits that expose us to liability and substantial damage awards. Liabilities for contamination or human exposure to hazardous or toxic materials, or a failure to comply with applicable regulations, could result in substantial costs, including clean-up costs, fines, civil or criminal sanctions, third party claims for property damage or personal injury, or the cessation of remediation activities.
Certain of our business operations are covered by U.S. Public Law 85-804, which provides for government indemnification against claims and damages arising out of unusually hazardous activities performed at the request of the government. Due to changes in public policies and law, however, government indemnification may not be available in the case of any future claims or liabilities relating to other hazardous activities that we perform.
Government Procurement.    The services we provide to the U.S. federal government are subject to the FAR and other rules and regulations applicable to government contracts. These rules and regulations:
require certification and disclosure of all cost and pricing data in connection with the contract negotiations under certain contract types;
impose accounting rules that define allowable and unallowable costs and otherwise govern our right to reimbursement under certain cost-based government contracts; and
restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.
In addition, services provided to the DoD are monitored by the Defense Contract Management Agency and audited by the DCAA. Our government clients can also terminate any of their contracts, and many of our government contracts are subject to renewal or extension annually. Further, the services we provide to state and local government clients are subject to various government rules and regulations.
Seasonality
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 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.
Potential Liability and Insurance

11



Our business activities could expose us to potential liability under various laws and under workplace health and safety regulations. In addition, we occasionally assume liability by contract under indemnification agreements. We cannot predict the magnitude of such potential liabilities.
We maintain a comprehensive general liability insurance policy with an umbrella policy that covers losses beyond the general liability limits. We also maintain professional errors and omissions liability and contractor's pollution liability insurance policies. We believe that both policies provide adequate coverage for our business. When we perform higher-risk work, we obtain, if available, the necessary types of insurance coverage for such activities, as is typically required by our clients.
We obtain insurance coverage through a broker that is experienced in our industry. The broker and our risk manager regularly review the adequacy of our insurance coverage. Because there are various exclusions and retentions under our policies, or an insurance carrier may become insolvent, there can be no assurance that all potential liabilities will be covered by our insurance policies or paid by our carrier.
We evaluate the risk associated with insurance claims. If we determine that a loss is probable and reasonably estimable, we establish an appropriate reserve. A reserve is not established if we determine that a claim has no merit or is not probable or reasonably estimable. Our historic levels of insurance coverage and reserves have been adequate. However, partially or completely uninsured claims, if successful and of significant magnitude, could have a material adverse effect on our business.

Employees
At fiscal 2019 year-end, we had approximately 20,000 staff worldwide. A large percentage of our employees have technical and professional backgrounds and undergraduate and/or advanced degrees, including the employees of recently acquired companies. Our professional staff includes archaeologists, architects, biologists, chemical engineers, chemists, civil engineers, data scientists, computer scientists, economists, electrical engineers, environmental engineers, environmental scientists, geologists, hydrogeologists, mechanical engineers, oceanographers, project managers and toxicologists. We consider the current relationships with our employees to be favorable. We are not aware of any employment circumstances that are likely to disrupt work at any of our facilities. See Part I, Item 1A, "Risk Factors" for a discussion of the risks related to the loss of key personnel or our inability to attract and retain qualified personnel.
Executive Officers of the Registrant
The following table shows the name, age and position of each of our executive officers at November 22, 2019:
Name
 
Age
 
Position
Dan L. Batrack
 
61

 
Chairman and Chief Executive Officer

 
 
 
Mr. Batrack joined our predecessor in 1980 and was named Chairman in January 2008. He has served as our Chief Executive Officer and a director since November 2005, and as our President from October 2008 to September 2019. Mr. Batrack has served in numerous capacities over the last 30 years, including project scientist, project manager, operations manager, Senior Vice President and President of an operating unit. He has managed complex programs for many small and Fortune 500 clients, both in the United States and internationally. Mr. Batrack holds a B.A. degree in Business Administration from the University of Washington.

Leslie L. Shoemaker
 
62

 
President
 
 
 
Dr. Shoemaker was appointed President in September 2019, having previously served as President of WEI Business Group from April 2015 to November 2017, and CIG from November 2017 to September 2019. Dr. Shoemaker joined us in 1991, and has served in various management capacities, including project and program manager, water resources manager and infrastructure group president. From 2005 to 2015, she led our strategic planning, business development and company-wide collaboration programs. Her technical expertise is in the management of large-scale watershed and master planning studies, development of modeling tools and application of optimization tools for decision making. Additionally, she is our Chief Sustainability Officer who leads our Sustainability Council to implement sustainability-related policies and practices company-wide. Dr. Shoemaker holds a B.A. degree in Mathematics from Hamilton College, a Master of Engineering from Cornell University and a Ph.D. in Agricultural Engineering from the University of Maryland.


12



Name
 
Age
 
Position
Steven M. Burdick
 
55

 
Executive Vice President, Chief Financial Officer

 
 
 
 
Mr. Burdick has served as our Executive Vice President, Chief Financial Officer since April 2011. He served as our Senior Vice President and Corporate Controller from January 2004 to March 2011. Mr. Burdick joined us in April 2003 as Vice President, Management Audit. Previously, Mr. Burdick served in senior financial and executive positions with Aura Systems, Inc., TRW Ventures, and Ernst & Young LLP. Mr. Burdick holds a B.S. degree in Business Administration from Santa Clara University and is a Certified Public Accountant.

Derek G. Amidon
 
52

 
Senior Vice President, President of CIG and the Commercial Account Management Division of CIG
 
 
 
Mr. Amidon was appointed President of CIG in September 2019, in addition to his role as President of CIG's Commercial Account Management Division. Mr. Amidon has served as a project manager, key account manager, operations manager, and regional manager since joining us in 2012. He has managed a variety of complex, high profile programs for key clients, including Fortune 100 companies. His focus has been on leading high value consulting services that deliver scientific, engineering and regulatory solutions for challenging environmental, engineering, permitting and public relations problems for energy, industrial, institutional and custodial trust clients. He has managed projects in the U.S., Africa, Australia, Europe, and the Caribbean. In addition to experience in both public and private consulting and engineering firms over his 24-year career, Mr. Amidon also served in a variety of business leadership and project development roles at Hess Corporation, a leading independent oil and gas company. Mr. Amidon is a registered Professional Engineer. He holds B.S. and M.S. degrees in Civil Engineering from Brigham Young University and a M.S. in Management from Rensselaer Polytechnic Institute.
Roger R. Argus
 
58

 
Senior Vice President, President of GSG and the U.S. Government Division of GSG
 
 
 
Mr. Argus is a chemical engineer with 35 years of experience, including 27 years with us in operational leadership, program and project management, and quality assurance for projects encompassing a broad spectrum of environmental, engineering, information technology, and disaster management services. Mr. Argus has also been responsible for managing multidisciplinary contracts and projects in support of the U.S. federal government (i.e., Navy, the U.S. Army Corps of Engineers ("USACE"), and the EPA), state and municipal agencies, and private clients nationwide. The scope of his technical experience includes planning and directing environmental programs, developing data acquisition, management and analytics solutions, fund research and development support for innovative environmental technologies and waste treatment systems, municipal resiliency, and sustainability programs. Mr. Argus holds a B.S. in Chemical Engineering from California State University, Long Beach.
Jan K. Auman
 
64

 
Senior Vice President, President of the Global Development Services Division of GSG

 
 
 
 Mr. Auman joined us through an acquisition in 2007. He has over 40 years of experience managing large, complex international development and technical assistance operations, having served 10 years with the United States federal government and 30 years in the private sector. With 20 years of residence overseas in eight countries, Mr. Auman has hands-on technical expertise in the areas of natural resources management, conflict resolution, political transformation, institutional development, and policy formulation in the Middle East, the South Pacific, the Caribbean, and Africa. Mr. Auman’s overall direction for our international development operations includes technical, operational, administrative, fiscal, and representational responsibilities involving operations that manage projects in over 60 countries. He holds a B.A. in Political Science and Government from Pennsylvania State University and an M.I.A in International Administration from the School for International Training.


13



Name
 
Age
 
Position
William R. Brownlie
 
66

 
Senior Vice President, Chief Engineer and Corporate Risk Management Officer

 
 
 
Dr. Brownlie was named Senior Vice President and Chief Engineer in September 2009, and Corporate Risk Management Officer in November 2013. From December 2005 to September 2009, he served as a Group President. Dr. Brownlie joined our predecessor in 1981 and was named a Senior Vice President in December 1993. Dr. Brownlie has managed various operating units and programs focusing on water resources and environmental services, including work with USACE, the U.S. Air Force, the U.S. Bureau of Reclamation and DOE. He is a registered professional engineer and has a strong technical background in water resources. Dr. Brownlie holds B.S. and M.S. degrees in Civil Engineering from the State University of New York at Buffalo and a Ph.D. in Civil Engineering from the California Institute of Technology.

Brian N. Carter
 
52

 
Senior Vice President, Corporate Controller and Chief Accounting Officer

 
 
 
Mr. Carter joined us as Vice President, Corporate Controller and Chief Accounting Officer in June 2011 and was appointed Senior Vice President in October 2012. Previously, Mr. Carter served in finance and auditing positions in private industry and with Ernst & Young LLP. Mr. Carter holds a B.S. in Business Administration from Miami University and is a Certified Public Accountant.

Craig L. Christensen
 
66

 
Senior Vice President, Chief Information Officer

 
 
 
Mr. Christensen joined us in 1998 through the acquisition of our Tetra Tech NUS, Inc. ("NUS") subsidiary. He is responsible for our information services and technologies, including the implementation of our enterprise resource planning system. Previously, Mr. Christensen held positions at NUS, Brown and Root Services, and Landmark Graphics subsidiaries of Halliburton Company where his responsibilities included contracts administration, finance, and system development. Prior to his service at Halliburton, Mr. Christensen held positions at Burroughs Corporation and Apple Computer. Mr. Christensen holds B.A. and M.B.A. degrees from Brigham Young University.

Preston Hopson
 
43

 
Senior Vice President, General Counsel and Secretary
 
 
 
 
Mr. Hopson was appointed Senior Vice President, General Counsel and Secretary to the Board of Directors in January 2018. He also serves as the Chief Compliance Officer. For the prior 10 years, Mr. Hopson served as Vice President, Assistant General Counsel and Assistant Corporate Secretary at the engineering and infrastructure firm AECOM. Prior to this, he was a Senior Associate at the law firm O’Melveny & Myers LLP. Mr. Hopson began his career as a judicial clerk on the U.S. Court of Appeals for the Ninth Circuit. Mr. Hopson holds B.A. and J.D. degrees from Yale University.
Richard A. Lemmon
 
60

 
Senior Vice President, Corporate Administration

 
 
 
Mr. Lemmon joined our predecessor in 1981 in a technical capacity and became a member of its corporate staff in a management position in 1985. In 1988, at the time of our predecessor's divestiture from Honeywell, Inc., Mr. Lemmon structured and managed many of our corporate functions. He is currently responsible for insurance, risk management, human resources, safety and facilities.

Brendan M. O'Rourke
 
46

 
Senior Vice President, Enterprise Risk Management

 
 
 
Mr. O'Rourke joined us in January 2018 as Vice President, Enterprise Risk Management and was appointed Senior Vice President, Enterprise Risk Management in November 2018. For the prior 10 years, Mr. O'Rourke served as Assistant Vice President of Professional Liability Claims at AIG. Prior to this, he was a Senior Associate at the law firm of Seyfarth Shaw in Boston, Massachusetts. Mr. O'Rourke has more than twenty years of experience in risk management, contract negotiation, claim resolution and litigation within the construction industry. Mr. O'Rourke holds a J.D. from Suffolk Law School and a B.A. from Worcester State University.

14



Name
 
Age
 
Position
Mark A. Rynning
 
58

 
Senior Vice President, President of the U.S. Infrastructure Division of GSG

 
 
 
Mr. Rynning has more than 30 years of experience in the engineering consulting industry, including 27 years with us. He is a registered professional engineer and has served us in numerous capacities including project manager, operations manager, and operating unit leader. He has managed large water infrastructure programs for state and local agencies throughout the United States. Mr. Rynning has broad experience in planning and design of water and wastewater infrastructure, utility master planning, and design of water and wastewater transmission and collection systems. In addition, Mr. Rynning has planned and designed reverse osmosis water treatment plants and advanced wastewater treatment systems. He has provided expert advisory services to numerous municipal clients for utility system acquisitions. He holds a B.S. in Civil Engineering and a Master of Business Administration, both from the University of Florida.

Bernard Teufele
 
54

 
Senior Vice President, President of the Canada and South America Division of CIG

 
 
 
Mr. Teufele joined us through an acquisition in 2010. He has over 22 years of consulting engineering experience as a leader of a highly diversified, high-end infrastructure practice and as a technical expert in the field of infrastructure monitoring and asset management. Prior to his current role, Mr. Teufele has managed operating units of increasing size and complexity with a primary focus on infrastructure, environmental sciences, civil transportation, and mining-related services doing work for municipal, provincial, and federal government clients in Canada. He has managed key provincial infrastructure programs in Canada with a particular focus on the monitoring and assessment of roadway infrastructure and the development of asset management programs. Mr. Teufele has a B.Sc. in Applied Science from the University of British Columbia.


Available Information
Our website address is www.tetratech.com. We made available, free electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports through the “Investor Relations” portion of our website, under the heading “SEC Filings” filed under “Financial Information.” These reports are available on our website as soon as reasonably practicable after we electronically file them with the Securities and Exchange Commission ("SEC"). These reports, and any amendments to them, are also available at the Internet website of the SEC, http://www.sec.gov. Also available on our website are our Corporate Governance Policies, Board Committees, Corporate Code of Conduct and Finance Code of Professional Conduct.

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.

15



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 Act ("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.

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 fiscal 2019, we generated 27.7% of our revenue from our international operations, primarily in Canada, Australia, the United Kingdom 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.

16




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.

The United Kingdom's proposed withdrawal from the European Union could have an adverse effect on our business and financial results.

In March 2017, the United Kingdom government initiated a process to withdraw from the European Union ("Brexit") and began negotiating the terms of the separation. Brexit has created substantial economic and political uncertainty and volatility in currency exchange rates, and the terms of the United Kingdom's withdrawal from the European Union remain uncertain. The uncertainty created by Brexit may cause our customers to closely monitor their costs and reduce demand for our services and may ultimately result in new regulatory and cost challenges for our United Kingdom and global operations. Any of these events could adversely affect our United Kingdom, European and overall business and financial results.

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 fiscal 2019, we generated 49.2% 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, a partial or full federal government shutdown, 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 regarding the funding or operation of the services we provide;

17



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 FAR, the Truth in Negotiations Act, CAS, the American Recovery and Reinvestment Act of 2009, the Services Contract Act, and the DoD security regulations, as well as many other rules and regulations. In addition, we must 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

18



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 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. For example, as discussed elsewhere in this report, on January 14, 2019, the Civil Division of the United States Attorney's Office ("USAO") filed complaints in intervention in three qui tam actions filed against our subsidiary, Tetra Tech EC, Inc. ("TtEC"), in the U.S. District Court for the Northern District of California. The complaints allege False Claims Act violations and breach of contract related to TtEC's contracts to perform environmental remediation services at the former Hunters Point Naval Shipyard in San Francisco, California. TtEC disputes the claims and will defend this matter vigorously. 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 fiscal 2019, 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

19



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 at acquisition, we may be exposed to material unanticipated liabilities, which could have a material adverse effect on our business.

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

Because we have historically acquired a significant number of companies, goodwill and intangible assets represent a substantial portion of our assets. As of September 29, 2019, our goodwill was $924.8 million and other intangible assets were $16.4 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 had goodwill impairment of $7.8 million in fiscal 2019. We had no goodwill impairment in fiscal 2017 or fiscal 2018.

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


20



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.


21



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 generally accepted accounting principles in the United States of America ("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 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.


22



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. Specifically, 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 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

23



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 included in the original contract price. These types of claims occur due to matters such as client-caused delays or 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 capital in projects to cover cost overruns pending the resolution of the relevant claims. A failure to promptly recover on these types of claims could have a negative impact on our liquidity and profitability. Total accounts receivable at September 29, 2019 included approximately $15 million related to such claims.

Our failure to win new contracts and renew existing contracts with private and public sector clients could adversely affect our profitability.

Our business depends on our ability to win new contracts 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, which is affected 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 certain projects, which could adversely affect our profitability.

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 September 29, 2019 was $3.1 billion, an increase of $428.0 million, or 16.1%, compared to the end of fiscal 2018. 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

24



to protect our own internal trade secrets and other business confidential information, as well as personal data of our employees and contractors, from disclosure. For example, the European Union's General Data Protection Regulation, which became effective in May 2018, extends the scope of the European Union data protection laws to all companies processing data of European Union residents, regardless of the company's location. In addition, the California Consumer Privacy Act takes effect in January 2020, increasing the penalties for data privacy incidents. 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. In the ordinary course of business, we have been targeted by malicious cyber-attacks. 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. We also rely in part on third-party software and information technology vendors to run our critical accounting, project management and financial information systems. We depend on our software and information technology vendors to provide long-term software and hardware support for our information systems. Our software and information technology vendors may decide to discontinue further development, integration or long-term software and hardware support for our information systems, in which case we may need to abandon one or more of our current information systems and migrate some or all of our accounting, project management and financial information to other systems, thus increasing our operational expense, as well as disrupting the management of our business operations. 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

25



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 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 the passage of climate change, defense, environmental, infrastructure and other legislation, policies and regulations. 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 many 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

26



competition varies according to certain 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 certain 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

27



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.


28



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.

We rely upon a combination of nondisclosure agreements and other contractual arrangements, as well as copyright, trademark, patent and trade secret laws to protect our proprietary information. We also enter into proprietary information and intellectual property agreements with employees, which require them to disclose any inventions created during employment, to convey such rights to inventions to us, and to restrict any disclosure of proprietary information. Trade secrets are generally 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 and/or the infringement of our patents and copyrights. Further, we may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights. Failure to adequately protect, maintain, or enforce our intellectual property rights may adversely limit our competitive position.

Assertions by third parties of infringement, misappropriation or other violations by us of their intellectual property rights could result in significant costs and substantially harm our business, financial condition and operating results.

In recent years, there has been significant litigation involving intellectual property rights in technology industries. We may face from time to time, allegations that we or a supplier or customer have violated the rights of third parties, including patent, trademark, and other intellectual property rights. If, with respect to any claim against us for violation of third-party intellectual property rights, we are unable to prevail in the litigation or retain or obtain sufficient rights or develop non-infringing intellectual property or otherwise alter our business practices on a timely or cost-efficient basis, our business, financial condition or results of operations may be adversely affected.

Any infringement, misappropriation or related claims, whether or not meritorious, are time consuming, divert technical and management personnel, and are costly to resolve. As a result of any such dispute, we may have to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease utilizing products or services, or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us.

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

29



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.

A significant drop in the price of our stock could 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 us, 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

30



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 1B    Unresolved Staff Comments
None.
Item 2.    Properties
At fiscal 2019 year-end, we owned two facilities located in the United States and leased approximately 450 operating facilities in domestic and foreign locations. Our significant lease agreements expire at various dates through 2029. We believe that our current facilities are adequate for the operation of our business, and that suitable additional space in various local markets is available to accommodate any needs that may arise.
The following table summarizes our ten most significant leased properties by location based on annual rental expenses (listed alphabetically, except for our corporate headquarters):
Location
 
Description
 
Reportable Segment
Pasadena, CA
 
Corporate Headquarters
 
Corporate
Adelaide, South Australia, Australia
 
Office Building
 
CIG
Arlington, VA
 
Office Building
 
GSG / CIG
Irvine, CA
 
Office Building
 
GSG / CIG
London, United Kingdom
 
Office Building
 
GSG / CIG
New York, NY
 
Office Building
 
GSG
Pittsburgh, PA
 
Office Building
 
GSG / CIG
San Francisco, CA
 
Office Building
 
GSG
Sydney, New South Wales, Australia
 
Office Building
 
CIG
Vancouver, BC, Canada
 
Office Building
 
CIG
Item 3.    Legal Proceedings
For a description of our material pending legal and regulatory proceedings and settlements, see Note 18, "Commitments and Contingencies" of the "Notes to Consolidated Financial Statements" included in Item 8.
Item 4.    Mine Safety Disclosures
Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") requires domestic mine operators to disclose violations and orders issued under the Mine Act by MSHA. 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 of Regulation S-K is included in Exhibit 95.

31



PART II
Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on the NASDAQ Global Select Market under the symbol TTEK. There were approximately 1,300 stockholders of record at September 29, 2019.
Stock-Based Compensation
For information regarding our stock-based compensation, see Note 12, "Stockholders' Equity and Stock Compensation Plans" of the "Notes to Consolidated Financial Statements" included in Item 8.
Performance Graph
The following graph shows a comparison of our cumulative total returns with those of the NASDAQ Market Index, the Standard & Poor's ("S&P") 1000 Index, and the S&P 1500 Construction and Engineering ("C&E") Index. Starting in fiscal 2020, we plan to remove the S&P 1500 C&E Index, as companies in this index are no longer representative of our peer group. At this time, we do not have a comparable peer group due to the combination of our differentiated high-end consulting services and our end-markets. Thus, we have selected the S&P 1000 Index. The graph assumes that the value of an investment in our common stock and in each such index was $100 on September 28, 2014, and that all dividends have been reinvested. During fiscal 2019, we declared and paid dividends in the first and second quarters totaling $0.24 per share ($0.12 each quarter) on our common stock and paid dividends in the third and fourth quarters totaling $0.30 per share ($0.15 each quarter) on our common stock. We declared and paid dividends totaling $0.44, $0.38, $0.34, $0.30 and $0.14 per share in fiscal 2018, 2017, 2016, 2015 and 2014, respectively. We did not pay any dividends prior to fiscal 2014. The comparison in the graph below is based on historical data and is not intended to forecast the possible future performance of our common stock.
chart-28847578053553be8fb.jpg
ASSUMES $100 INVESTED ON SEPTEMBER 28, 2014
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDED SEPTEMBER 29, 2019
 
2014
 
2015
 
2016
 
2017
 
2018
 
2019
Tetra Tech, Inc.
$
100.00

 
$
100.02

 
$
144.04

 
$
190.72

 
$
282.12

 
$
353.75

NASDAQ Market Index
100.00

 
105.06

 
120.60

 
149.17

 
186.71

 
186.28

S&P 1500 C&E Index
100.00

 
80.80

 
97.40

 
109.31

 
120.17

 
112.91

S&P 1000 Index
100.00

 
102.46

 
117.25

 
139.06

 
160.89

 
152.60

The performance graph above and related text are being furnished solely to accompany this annual report on Form 10-K pursuant to Item 201(e) of Regulation S-K, and are not being filed for purposes of Section 18 of the Exchange Act, and are not

32



to be incorporated by reference into any of our filings with the SEC, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Stock Repurchase Program
On November 5, 2018, our Board of Directors authorized a new stock repurchase program under which we could repurchase up to $200 million of our common stock. This was in addition to the $25 million remaining as of fiscal 2018 year-end under the previous stock repurchase program.
In fiscal 2018, we repurchased through open market purchases under the previous program a total of 1,491,569 shares at an average price of $50.28 for a total cost of $75 million. In the first quarter of fiscal 2019, we expended the remaining $25 million under the previous program by repurchasing 430,559 shares through open market purchases at an average price of $58.06. In the second, third and fourth quarters of fiscal 2019, we repurchased through open market purchases under the new program a total of 1,131,962 shares at an average price of $66.26 for a total cost of $75 million.
A summary of the repurchase activity for the 12 months ended September 29, 2019 is as follows:
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 1, 2018 - October 28, 2018
 

 
$

 

 
$
225,000

October 29, 2018 - November 25, 2018
 
85,938
 
65.97

 
85,938

 
219,331

November 26, 2018 - December 30, 2018
 
344,621
 
56.09

 
344,621

 
200,000

December 31, 2018 - January 27, 2019
 
128,657
 
52.23

 
128,657

 
193,281

January 28, 2019 - February 24, 2019
 
145,703
 
54.76

 
145,703

 
185,302

February 25, 2019 - March 31, 2019
 
174,695
 
58.97

 
174,695

 
175,000

April 1, 2019 - April 28, 2019
 
116,650
 
61.20

 
116,650

 
167,861

April 29, 2019 - May 26, 2019
 
126,356
 
66.47

 
126,356

 
159,462

May 27, 2019 - June 30, 2019
 
132,908
 
71.19

 
132,908

 
150,000

July 1, 2019 - July 28, 2019
 
84,725
 
83.25

 
84,725

 
142,947

July 29, 2019 - August 25, 2019
 
104,722
 
79.25

 
104,722

 
134,648

August 26, 2019 - September 29, 2019
 
117,546
 
82.07

 
117,546

 
125,000


33



Item 6.    Selected Financial Data
The following selected financial data was derived from our audited consolidated financial statements. The selected financial data presented below should be read in conjunction with the information contained in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and the notes thereto contained in Item 8, "Financial Statements and Supplementary Data," of this report.
 
Fiscal Year Ended
 
September 29,
2019
 
September 30,
2018
 
October 1,
2017
 
October 2,
2016
 
September 27, 2015
 
(in thousands, except per share data)
Statements of Operations Data
 
 
 
 
 
 
 
 
 
Revenue
$
3,107,348

 
$
2,964,148

 
$
2,753,360

 
$
2,583,469

 
$
2,299,321

Income from operations
188,762

 
190,086
 
183,342

 
135,855

 
87,684

Net income attributable to Tetra Tech
158,668

 
136,883
 
117,874

 
83,783

 
39,074

Diluted net income attributable to Tetra Tech per share
2.84

 
2.42
 
2.04

 
1.42

 
0.64

Cash dividends paid per share
0.54

 
0.44
 
0.38

 
0.34

 
0.30

 
 
 
 
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
 
 
 
 
Total assets
$
2,147,408

 
$
1,959,421

 
$
1,902,745

 
$
1,800,779

 
$
1,559,242

Long-term debt, net of current portion
263,949

 
264,712

 
341,283

 
331,501

 
180,972

Tetra Tech stockholders' equity
989,286

 
966,971

 
928,453

 
869,259

 
856,325



34



Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations
The following analysis of our financial condition and results of operations should be read in conjunction with Part I of this report, as well as our consolidated financial statements and accompanying notes in Item 8. The following analysis contains forward-looking statements about our future results of operations and expectations. Our actual results and the timing of events could differ materially from those described herein. See Part 1, Item 1A, "Risk Factors" for a discussion of the risks, assumptions, and uncertainties affecting these statements.
OVERVIEW OF RESULTS AND BUSINESS TRENDS
General. In fiscal 2019, our revenue increased 4.8% compared to fiscal 2018. The growth in our fiscal 2019 revenue was led by our U.S. state and local government and international businesses. The net contribution from acquisitions/divestitures and RCM did not significantly impact our overall revenue growth in fiscal 2019 compared to last year.

U.S. State and Local Government. Our U.S. state and local government revenue increased 25.2% in fiscal 2019 compared to last year as we continue to experience an increase in revenue from disaster response and recovery planning activities. Additionally, the increase includes broad-based growth in our U.S. state and local government project-related infrastructure business, particularly with increased revenue from municipal water infrastructure work in the metropolitan areas of California, Texas, and Florida. We expect our U.S. state and local government business to continue to grow in fiscal 2020 excluding the disaster response activities.

U.S. Federal Government. Our U.S. federal government revenue decreased 3.4% in fiscal 2019 compared to fiscal 2018. The decline primarily reflects disrupted activity due to the thirty-day partial U.S. government shutdown that commenced in late December 2018. During periods of economic volatility, our U.S. federal government clients have historically been the most stable and predictable. We anticipate revenue growth in U.S. federal government revenue in fiscal 2020; however, if there is another prolonged U.S. federal government shutdown, our U.S. federal government business could be adversely impacted.

U.S. Commercial. Our U.S. commercial revenue decreased 8.8% in fiscal 2019 compared to fiscal 2018. Our prior year revenue included $53.2 million from our non-core utility field services that were divested in fiscal 2018. Excluding the net impact of this divestiture, our U.S. commercial business declined 2.2% compared to last year. The decline reflects a higher level of subcontractor activity in fiscal 2018. Also, excluding subcontractor activity, our revenue was approximately the same as fiscal 2018. We expect our U.S. commercial revenue to grow modestly in fiscal 2020, primarily due to increased activities for industrial water treatment, environmental programs, high-performance green buildings, and renewable energy.

International. Our international revenue increased 17.4% in fiscal 2019 compared to fiscal 2018. Excluding contributions from acquisitions, our revenue grew 8.9% compared to prior year. The revenue growth primarily reflects increased activity in Canada. Additionally, we experienced an improvement in our infrastructure work in Australia, New Zealand, and Asia-Pacific. We anticipate our total international revenue to continue to grow in fiscal 2020.

35



RESULTS OF OPERATIONS
Fiscal 2019 Compared to Fiscal 2018
Consolidated Results of Operations
 
Fiscal Year Ended
 
September 29,
2019
 
September 30,
2018
 
Change
 
 
 
$
 
%
 
($ in thousands)

Revenue
$
3,107,348

 
$
2,964,148

 
$
143,200

 
4.8%
Subcontractor costs
(717,711
)
 
(763,414
)
 
45,703

 
6.0
Revenue, net of subcontractor costs (1)
2,389,637

 
2,200,734

 
188,903

 
8.6
Other costs of revenue
(1,981,454
)
 
(1,816,276
)
 
(165,178
)
 
(9.1)
Gross profit
408,183

 
384,458

 
23,725

 
6.2
Selling, general and administrative expenses
(200,230
)
 
(190,120
)
 
(10,110
)
 
(5.3)
Acquisition and integration expenses
(10,351
)
 

 
(10,351
)
 
NM
Contingent consideration – fair value adjustments
(1,085
)
 
(4,252
)
 
3,167

 
74.5
Impairment of goodwill
(7,755
)
 

 
(7,755
)
 
NM
Income from operations
188,762

 
190,086

 
(1,324
)
 
(0.7)
Interest expense – net
(13,626
)
 
(15,524
)
 
1,898

 
12.2
Income before income tax expense
175,136

 
174,562

 
574

 
0.3
Income tax expense
(16,375
)
 
(37,605
)
 
21,230

 
56.5
Net income
158,761

 
136,957

 
21,804

 
15.9
Net income attributable to noncontrolling interests
(93
)
 
(74
)
 
(19
)
 
(25.7)
Net income attributable to Tetra Tech
$
158,668

 
$
136,883

 
$
21,785

 
15.9
Diluted earnings per share
$
2.84

 
$
2.42

 
$
0.42

 
17.4
 
 
 
 
 
 
 
 
(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 USAID 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. 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.
NM = not meaningful



36



The following table reconciles our reported results to non-GAAP adjusted results, which exclude the RCM results and certain non-operating accounting-related adjustments, such as acquisition and transaction costs, gains/losses from adjustments to contingent consideration, and non-recurring tax benefits. Adjusted results also exclude charges from the disposal of our Canadian turn-key pipeline activities in fiscal 2019 and losses from the divestitures of our non-core utility field services operations and other non-core assets in fiscal 2018. The disposal in fiscal 2019 also resulted in a $7.8 million goodwill impairment charge that is excluded from our adjusted results. Our fiscal 2019 adjusted results exclude a reduction of revenue and a corresponding charge to operating income of $13.7 million from a claim that was resolved in the fourth quarter of fiscal 2019 for a remediation project, where the work was substantially performed in prior years. In addition, our fiscal 2018 adjusted results also exclude a reduction of revenue of $10.6 million and a related charge to operating income of $12.5 million from a claim settlement in the fourth quarter of fiscal 2018 for a fixed-price construction project that was completed in fiscal 2014. The effective tax rates applied to the adjustments to earnings per share ("EPS") to arrive at adjusted EPS averaged 16% and 28% in fiscal 2019 and 2018, respectively. The goodwill impairment charge and certain of the transaction charges in fiscal 2019 did not have a related tax benefit. Excluding these items, the effective tax rate applied to adjustments in fiscal 2019 was 26%. We applied the relevant marginal statutory tax rate based on the nature of the adjustments and tax jurisdiction in which they occur. Both EPS and adjusted EPS were calculated using diluted weighted-average common shares outstanding for the respective periods as reflected in our consolidated statements of income.
 
Fiscal Year Ended
 
September 29,
2019
 
September 30,
2018
 
Change
 
 
 
$
 
%
Revenue
$
3,107,348

 
$
2,964,148

 
$
143,200

 
4.8%
RCM
1,542

 
(14,199
)
 
15,741

 
NM
Claims
13,700

 
10,576

 
3,124

 
NM
Adjusted revenue
$
3,122,590

 
$
2,960,525

 
$
162,065

 
5.5
 
 
 
 
 
 
 
 
Revenue
$
3,107,348

 
$
2,964,148

 
$
143,200

 
4.8
Subcontractor costs
(717,711
)
 
(763,414
)
 
45,703

 
NM
Revenue, net of subcontractor costs
$
2,389,637

 
$
2,200,734

 
$
188,903

 
8.6
RCM
2,785

 
(2,648
)
 
5,433

 
NM
Claims
13,700

 
10,576

 
3,124

 
NM
Adjusted revenue, net of subcontractor costs
$
2,406,122

 
$
2,208,662

 
$
197,460

 
8.9
 
 
 
 
 
 
 
 
Income from operations
$
188,762

 
$
190,086

 
$
(1,324
)
 
(0.7)
Earn-out expense
3,085

 
5,753

 
(2,668
)
 
NM
RCM
5,933

 
4,573

 
1,360

 
NM
Claims
13,700

 
12,457

 
1,243

 
NM
Non-core dispositions
18,701

 
3,434

 
15,267

 
NM
Acquisition/Integration
10,351

 

 
10,351

 
NM
Adjusted income from operations
$
240,532

 
$
216,303

 
$
24,229

 
11.2
 
 
 
 
 
 
 
 
EPS
$
2.84

 
$
2.42

 
$
0.42

 
17.4
Earn-out expense
0.04

 
0.08

 
(0.04
)
 
NM
RCM
0.08

 
0.06

 
0.02

 
NM
Claims
0.18

 
0.16

 
0.02

 
NM
Non-core dispositions
0.28

 
0.11

 
0.17

 
NM
Acquisition/Integration
0.19

 

 
0.19

 
NM
Non-recurring tax benefits
(0.44
)
 
(0.19
)
 
(0.25
)
 
NM
Adjusted EPS
$
3.17

 
$
2.64

 
$
0.53

 
20.1
 
 
 
 
 
 
 
 
NM = not meaningful
In fiscal 2019, revenue and revenue, net of subcontractor costs, increased $143.2 million, or 4.8%, and $188.9 million, or 8.6%, respectively, compared to fiscal 2018. Our adjusted revenue and revenue, net of subcontractor costs, increased $162.1 million, or 5.5%, and $197.5 million, or 8.9%, respectively, compared to last year. This growth includes contributions from the

37



fiscal 2019 acquisitions of eGlobalTech ("EGT") and WYG plc ("WYG"), partially offset by the impact of the divestiture of our non-core utility field services operations in fiscal 2018. Excluding the net impact from these transactions, our adjusted revenue and revenue, net of subcontractor costs, grew $144.2 million, or 5.0%, and $180.5 million, or 8.3%, in fiscal 2019 compared to fiscal 2018. This growth primarily reflects continued growth in our U.S. state and local government water infrastructure revenue. In addition, our revenue from disaster response and recovery planning projects increased compared to last year. Our U.S. state and local government adjusted revenue and revenue, net of subcontractor costs, increased $132.3 million, or 28.8%, and $90.7 million, or 27.1%, respectively, in fiscal 2019 compared to last year. Additionally, in fiscal 2019, our international adjusted revenue, net of subcontractor costs, increased $98.6 million, or 16.3%, primarily due to increased activity in Canada.
    
Our operating income decreased $1.3 million in fiscal 2019 compared to fiscal 2018. Our operating income in fiscal 2019 was reduced by WYG-related acquisition and integration expenses of $10.4 million. For further detailed information regarding these expenses, see “Fiscal 2019 Acquisition and Integration Expenses” below. In addition, our operating income reflects losses of $1.1 million and $4.3 million related to changes in the estimated fair value of contingent earn-out liabilities and related compensation charges of $2.0 million and $1.5 million in fiscal 2019 and 2018, respectively. These earn-out charges are described below under “Fiscal 2019 and 2018 Earn-Out Adjustments.” The loss from exited construction activities in our RCM segment was $5.9 million in fiscal 2019 compared to $4.6 million last year. Our RCM results are described below under "Remediation and Construction Management." Additionally, our operating income for fiscal 2019 includes charges of $10.9 million related to the planned disposal of our turn-key pipeline activities in Western Canada. This disposal also resulted in a non-cash goodwill impairment charge of $7.8 million in fiscal 2019. Both of these charges are described below under “Fiscal 2019 Impairment of Goodwill.” Our operating income in fiscal 2018, also includes losses of $3.4 million related to the divestitures of our non-core utility field services operations and other non-core assets. These losses are reported in selling, general and administrative expenses in our consolidated statements of income.

Excluding these items and the aforementioned claims in fiscal 2019 and 2018, adjusted operating income increased $24.2 million, or 11.2%, in fiscal 2019 compared to fiscal 2018. The increase reflects improved results in both our GSG and CIG segments. GSG's operating income increased $17.1 million in fiscal 2019 compared to last year. These results are described below under "Government Services Group." CIG's operating income increased $5.2 million ($17.4 million on an adjusted basis) in fiscal 2019 compared to fiscal 2018. These results are described below under "Commercial/International Services Group."

Interest expense, net of interest income, was $13.6 million in fiscal 2019, compared to $15.5 million last year. The decreases reflect reduced borrowings, partially offset by higher interest rates (primarily LIBOR).

The effective tax rates for fiscal 2019 and 2018 were 9.3% and 21.5%, respectively. Theses tax rates reflect the impact of the comprehensive tax legislation enacted by the U.S. government on December 22, 2017, which is commonly referred to as the 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, and implementing a modified territorial tax system with the introduction of the Global Intangible Low-Taxed Income ("GILTI") tax rules. The TCJA also imposed a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries. In fiscal 2019, we finalized our fiscal 2018 U.S. federal tax return and recorded a $2.4 million tax expense with respect to the one-time transition tax on foreign earnings. As we have a September 30 fiscal year-end, our U.S. federal corporate income tax rate was blended in fiscal 2018, resulting in a statutory federal rate of 24.5% (3 months at 35% and 9 months at 21%), and was 21% in fiscal 2019.

U.S. 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 deferred tax benefit of $10.1 million in fiscal 2018 to reflect our estimate of temporary differences in the United States that were to 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. We finalized this analysis in the first quarter of fiscal 2019 and recorded an additional deferred tax benefit of $2.6 million.

Valuation allowances of $23.4 million in Australia were released due to sufficient positive evidence being obtained in fiscal 2019. The valuation allowances were primarily related to net operating loss and Research and Development credit carry-forwards and other temporary differences. Excluding the net deferred tax benefits from the TCJA and the release of the valuation allowance, our effective tax rate was 21.9% in fiscal 2019 compared to 25.1% in fiscal 2018; the reduction is primarily due to the reduced U.S. corporate income tax rate.

With respect to the GILTI provisions of the TCJA, we have analyzed our structure and global results of operations and expect to have a GILTI tax of $0.4 million for fiscal 2019, which was included in our fiscal 2019 income tax expense.


38



Our EPS was $2.84 in fiscal 2019, compared to $2.42 in fiscal 2018. On the same basis as our adjusted operating income and excluding non-recurring tax benefits, adjusted EPS was $3.17 in fiscal 2019, compared to $2.64 last year.

Segment Results of Operations
Government Services Group ("GSG")
 
Fiscal Year Ended
 
September 29,
2019
 
September 30,
2018
 
Change
 
 
 
$
 
%
 
($ in thousands)

Revenue
$
1,820,671

 
$
1,694,871

 
$
125,800

 
7.4%
Subcontractor costs
(491,290
)
 
(482,537
)
 
(8,753
)
 
(1.8)
Revenue, net of subcontractor costs
$
1,329,381

 
$
1,212,334

 
$
117,047

 
9.7
 
 
 
 
 
 
 
 
Income from operations
$
185,263

 
$
168,211

 
$
17,052

 
10.1
Revenue and revenue, net of subcontractor costs, increased $125.8 million, or 7.4%, and $117.0 million, or 9.7%, respectively, in fiscal 2019 compared to fiscal 2018. These increases include contributions from the aforementioned acquisitions in fiscal 2019. Excluding these contributions, revenue and revenue, net of subcontractor costs, increased 4.8% and 6.9%, respectively, in fiscal 2019 compared to last year. These increases reflect continued broad-based growth in our U.S. state and local government project-related infrastructure revenue. In addition, our revenue from disaster response and recovery planning projects increased compared to last year. Overall, our U.S. state and local government adjusted revenue, net of subcontractor costs, increased $136.7 million and $85.7 million, respectively in fiscal 2019 compared to last year. Operating income increased $17.1 million in fiscal 2019 compared to fiscal 2018, primarily reflecting the higher U.S. state and local revenue. Our operating margin, based on revenue, net of subcontractor costs, was stable at 13.9% in both fiscal 2019 and 2018.

Commercial/International Services Group ("CIG")
 
Fiscal Year Ended
 
September 29,
2019
 
September 30,
2018
 
Change
 
 
 
$
 
%
 
($ in thousands)

Revenue
$
1,342,509

 
$
1,323,142

 
$
19,367

 
1.5%
Subcontractor costs
(279,468
)
 
(337,390
)
 
57,922

 
17.2
Revenue, net of subcontractor costs
$
1,063,041

 
$
985,752

 
$
77,289

 
7.8
 
 
 
 
 
 
 
 
Income from operations
$
79,633

 
$
74,451

 
$
5,182

 
7.0
Revenue and revenue, net of subcontractor costs, increased $19.4 million, or 1.5%, and $77.3 million, or 7.8%, respectively, in fiscal 2019 compared to fiscal 2018. Our fiscal 2019 results included a reduction of revenue and a corresponding non-cash charge to operating income of $13.7 million from a claim that was resolved in the fourth quarter of fiscal 2019 for a remediation project, where the work was substantially performed in prior years. Excluding this claim and the net impact of the aforementioned acquisitions/divestiture, revenue and revenue, net of subcontractor costs, increased 4.0% and 10.3%, respectively, in fiscal 2019 compared to last year. These increases primarily reflect increased international revenue, particularly for broad-based activities in Canada and renewable energy projects globally. Operating income increased $5.2 million in fiscal 2019 compared to fiscal 2018 reflecting the higher revenue. In addition to the aforementioned claim resolution, operating income in fiscal 2019 included the previously described charges of $10.9 million related to the planned disposal of our Canadian turn-key pipeline operations. Operating income in fiscal 2018 included a $12.5 million charge for a claim settlement for a fixed-price construction project that was completed in fiscal 2014. Excluding these charges, our operating income increased $17.4 million in fiscal 2019 compared to last year, and our operating margin, based on revenue, net of subcontractor costs, improved to 9.8% in fiscal 2019 from 8.8% last year.

Remediation and Construction Management ("RCM")

39



 
Fiscal Year Ended
 
September 29,
2019
 
September 30,
2018
 
Change
 
 
 
$
 
%
 
($ in thousands)

Revenue
$
(1,542
)
 
$
14,199

 
$
(15,741
)
 
NM
Subcontractor costs
(1,243
)
 
(11,551
)
 
10,308

 
89.2
Revenue, net of subcontractor costs
$
(2,785
)
 
$
2,648

 
$
(5,433
)
 
NM
 
 
 
 
 
 
 
 
Loss from operations
$
(5,933
)
 
$
(4,573
)
 
$
(1,360
)
 
(29.7)
RCM's projects were substantially complete at the end of fiscal 2018. The operating loss of $5.9 million in fiscal 2019 reflects reductions of revenue and related operating losses based on updated evaluations of unsettled claim amounts for two construction projects that were completed in prior years. The operating loss in fiscal 2018 primarily reflects legal costs related to outstanding claims. We recorded no material gains or losses related to claims in fiscal 2018.

Fiscal 2019 Acquisition and Integration Expenses

In fiscal 2019, we incurred acquisition and integration expenses of $10.4 million related to the WYG acquisition. These expenses included $3.3 million of acquisition expenses that were primarily for professional services, such as legal and investment banking, to support the transaction and were all paid in the fourth quarter of fiscal 2019. Subsequent to the acquisition date, we also recorded charges of $7.1 million for integration activities, including the elimination of redundant general and administrative costs, real estate consolidation, and conversion of information technology platforms, substantially all of which will be paid next year.

Fiscal 2019 and 2018 Earn-Out Adjustments

We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates. We recorded adjustments to our contingent earn-out liabilities and reported losses of $1.1 million and $4.3 million in fiscal 2019 and 2018, respectively. The fiscal 2018 losses resulted from updated valuations of the contingent consideration liabilities for Norman, Disney and Young ("NDY"), Eco Logical Australia ("ELA") and Cornerstone Environmental Group ("CEG"). These valuations included updated projections of NDY's, ELA's, and CEG's financial performance during the earn-out periods, which exceeded our original estimates at their respective acquisition dates. In addition, we recognized charges of $2.0 million and $1.5 million in fiscal 2019 and 2018, respectively, that related to the earn-out for Glumac but was treated as compensation in selling, general and administrative expenses due to the terms of the arrangement, which included an on-going service requirement for a portion of the earn-out.

At September 29, 2019, there was a total maximum of $72.4 million of outstanding contingent consideration related to acquisitions. Of this amount, $53.0 million was estimated as the fair value and accrued on our consolidated balance sheet.

Fiscal 2019 Impairment of Goodwill

During the fourth quarter of fiscal 2019, we performed as strategic review of all of our operations. As a result, we decided to dispose of our turn-key pipeline activities in Western Canada in our Remediation and Field Services ("RFS") reporting unit, which is in our CIG segment. As a result, we incurred severance and project-related charges related to the disposition of $10.9 million, which were reported in the CIG segment's operating income. We also performed an interim goodwill impairment review of our RFS reporting unit and recorded a $7.8 million goodwill impairment charge. The impaired goodwill related to our acquisition of Parkland Pipeline Contractors LTD. As a result of the impairment charge, the estimated fair value of our RFS reporting unit equals its carrying value at September 29, 2019. If the financial performance of the remaining operations in our RFS reporting unit were to deteriorate or fall below our forecasts, the related goodwill may become further impaired.
ASC 606

Prior to the adoption of Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers" ("ASC 606") and the related disclosures of remaining unsatisfied performance obligations ("RUPOs"), we had reported backlog on a quarterly basis. Backlog is not a term recognized under United States generally accepted accounting principles; however, it is a common measurement used in our industry. Backlog generally represents the dollar amount of revenues we expect to realize in the future when we perform the work. RUPOs differ from our backlog.

40




The following table provides a reconciliation between RUPOs and backlog as of September 29, 2019:

 
Amount
 
(in thousands)
RUPOs
$
3,081,471

Items impacting comparability: Contract term
10,386

Backlog
$
3,091,857


The most significant difference between RUPOs and backlog relates to contract terms. Specifically, our backlog does not consider the impact of termination for convenience clauses within the contracts. The contract term and thus remaining performance obligation on certain of our operations and maintenance contracts, are limited to the notice period required for contract termination (usually 30, 60, or 90 days).


41



Fiscal 2018 Compared to Fiscal 2017
Consolidated Results of Operations
 
Fiscal Year Ended
 
September 30,
2018
 
October 1,
2017
 
Change
 
 
 
$
 
%
 
($ in thousands)

Revenue
$
2,964,148

 
$
2,753,360

 
$
210,788

 
7.7%
Subcontractor costs
(763,414
)
 
(719,350
)
 
(44,064
)
 
(6.1)
Revenue, net of subcontractor costs (1)
2,200,734

 
2,034,010

 
166,724

 
8.2
Other costs of revenue
(1,816,276
)
 
(1,680,372
)
 
(135,904
)
 
(8.1)
Gross profit
384,458

 
353,638

 
30,820

 
8.7
Selling, general and administrative expenses
(190,120
)
 
(177,219
)
 
(12,901
)
 
(7.3)
Contingent consideration – fair value adjustments
(4,252
)
 
6,923

 
(11,175
)
 
NM
Income from operations
190,086

 
183,342

 
6,744

 
3.7
Interest expense – net
(15,524
)
 
(11,581
)
 
(3,943
)
 
(34.0)
Income before income tax expense
174,562

 
171,761

 
2,801

 
1.6
Income tax expense
(37,605
)
 
(53,844
)
 
16,239

 
30.2
Net income
136,957

 
117,917

 
19,040

 
16.1
Net income attributable to noncontrolling interests
(74
)
 
(43
)
 
(31
)
 
(72.1)
Net income attributable to Tetra Tech
$
136,883

 
$
117,874

 
$
19,009

 
16.1
Diluted earnings per share
$
2.42

 
$
2.04

 
$
0.38

 
18.6
 
 
 
 
 
 
 
 
(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 USAID 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. 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.
NM = not meaningful    

42



The following table reconciles our reported results to non-GAAP adjusted results, which exclude the RCM results and certain non-operating accounting-related adjustments. Adjusted results also exclude losses from the divestitures of our non-core utility field services operations and other non-core assets in fiscal 2018. In addition, our adjusted results also exclude a reduction of revenue of $10.6 million and a related charge to operating income of $12.5 million from a claim settlement in the fourth quarter of fiscal 2018 for a fixed-price construction project that was completed in fiscal 2014. The effective tax rates applied to the adjustments to EPS to arrive at adjusted EPS averaged 28% and 33% in fiscal 2018 and 2017, respectively. We apply the relevant marginal statutory tax rate based on the nature of the adjustments and tax jurisdiction in which they occur. Both EPS and adjusted EPS were calculated using diluted weighted-average common shares outstanding for the respective periods as reflected in our consolidated statements of income.

 
Fiscal Year Ended
 
September 30,
2018
 
October 1,
2017
 
Change
 
 
 
$
 
%
Revenue
$
2,964,148

 
$
2,753,360

 
$
210,788

 
7.7%
RCM
(14,199
)
 
(18,207
)
 
4,008

 
NM
Claim settlement