ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 95-4148514 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Emerging growth company o |
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 |
PAGE NO. | ||
ASSETS | March 31, 2019 | September 30, 2018 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 130,728 | $ | 146,185 | |||
Accounts receivable – net | 629,597 | 694,221 | |||||
Contract assets | 157,918 | 142,882 | |||||
Prepaid expenses and other current assets | 71,999 | 56,003 | |||||
Income taxes receivable | 8,178 | 11,089 | |||||
Total current assets | 998,420 | 1,050,380 | |||||
Property and equipment – net | 41,660 | 43,278 | |||||
Investments in unconsolidated joint ventures | 3,536 | 3,370 | |||||
Goodwill | 827,676 | 798,820 | |||||
Intangible assets – net | 11,698 | 16,123 | |||||
Deferred tax assets | 30,581 | 8,607 | |||||
Other long-term assets | 38,294 | 38,843 | |||||
Total assets | $ | 1,951,865 | $ | 1,959,421 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 135,393 | $ | 160,222 | |||
Accrued compensation | 156,079 | 180,153 | |||||
Contract liabilities | 154,609 | 143,270 | |||||
Income taxes payable | 1,877 | 8,272 | |||||
Promissory note | 24,688 | — | |||||
Current portion of long-term debt | 12,551 | 12,599 | |||||
Current contingent earn-out liabilities | 20,026 | 13,633 | |||||
Other current liabilities | 119,219 | 99,944 | |||||
Total current liabilities | 624,442 | 618,093 | |||||
Deferred tax liabilities | 25,622 | 30,166 | |||||
Long-term debt | 231,332 | 264,712 | |||||
Long-term contingent earn-out liabilities | 25,869 | 21,657 | |||||
Other long-term liabilities | 53,995 | 57,693 | |||||
Commitments and contingencies (Note 16) | |||||||
Equity: | |||||||
Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at March 31, 2019 and September 30, 2018 | — | — | |||||
Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 54,947 and 55,349 shares at March 31, 2019 and September 30, 2018, respectively | 549 | 553 | |||||
Additional paid-in capital | 111,277 | 148,803 | |||||
Accumulated other comprehensive loss | (148,217 | ) | (127,350 | ) | |||
Retained earnings | 1,026,836 | 944,965 | |||||
Tetra Tech stockholders’ equity | 990,445 | 966,971 | |||||
Noncontrolling interests | 160 | 129 | |||||
Total stockholders' equity | 990,605 | 967,100 | |||||
Total liabilities and stockholders' equity | $ | 1,951,865 | $ | 1,959,421 |
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | April 1, 2018 | March 31, 2019 | April 1, 2018 | ||||||||||||
Revenue | $ | 722,621 | $ | 700,262 | $ | 1,440,052 | $ | 1,460,010 | |||||||
Subcontractor costs | (137,237 | ) | (167,469 | ) | (301,305 | ) | (382,370 | ) | |||||||
Other costs of revenue | (488,913 | ) | (441,368 | ) | (943,592 | ) | (892,070 | ) | |||||||
Gross profit | 96,471 | 91,425 | 195,155 | 185,570 | |||||||||||
Selling, general and administrative expenses | (48,898 | ) | (46,791 | ) | (91,871 | ) | (92,347 | ) | |||||||
Contingent consideration – fair value adjustments | (28 | ) | (1,918 | ) | (28 | ) | (1,918 | ) | |||||||
Income from operations | 47,545 | 42,716 | 103,256 | 91,305 | |||||||||||
Interest expense | (3,164 | ) | (4,092 | ) | (6,061 | ) | (7,252 | ) | |||||||
Income before income tax benefit (expense) | 44,381 | 38,624 | 97,195 | 84,053 | |||||||||||
Income tax benefit (expense) | 11,563 | (9,877 | ) | 781 | (9,254 | ) | |||||||||
Net income | 55,944 | 28,747 | 97,976 | 74,799 | |||||||||||
Net income attributable to noncontrolling interests | (33 | ) | (22 | ) | (69 | ) | (40 | ) | |||||||
Net income attributable to Tetra Tech | $ | 55,911 | $ | 28,725 | $ | 97,907 | $ | 74,759 | |||||||
Earnings per share attributable to Tetra Tech: | |||||||||||||||
Basic | $ | 1.01 | $ | 0.51 | $ | 1.77 | $ | 1.34 | |||||||
Diluted | $ | 1.00 | $ | 0.51 | $ | 1.74 | $ | 1.32 | |||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 55,143 | 55,841 | 55,237 | 55,900 | |||||||||||
Diluted | 55,985 | 56,673 | 56,161 | 56,825 |
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | April 1, 2018 | March 31, 2019 | April 1, 2018 | ||||||||||||
Net income | $ | 55,944 | $ | 28,747 | $ | 97,976 | $ | 74,799 | |||||||
Other comprehensive income, net of tax | |||||||||||||||
Foreign currency translation adjustments | 9,245 | (16,116 | ) | (14,089 | ) | (19,583 | ) | ||||||||
(Loss) gain on cash flow hedge valuations | (2,769 | ) | (27 | ) | (6,778 | ) | 39 | ||||||||
Other comprehensive income (loss) attributable to Tetra Tech | 6,476 | (16,143 | ) | (20,867 | ) | (19,544 | ) | ||||||||
Other comprehensive income (loss) attributable to noncontrolling interests | 1 | (5 | ) | 238 | (7 | ) | |||||||||
Comprehensive income | $ | 62,421 | $ | 12,599 | $ | 77,347 | $ | 55,248 | |||||||
Comprehensive income attributable to Tetra Tech | $ | 62,387 | $ | 12,582 | $ | 77,040 | $ | 55,215 | |||||||
Comprehensive income attributable to noncontrolling interests | 34 | 17 | 307 | 33 | |||||||||||
Comprehensive income | $ | 62,421 | $ | 12,599 | $ | 77,347 | $ | 55,248 |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Tetra Tech Equity | Non-Controlling Interests | Total Equity | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2017 | 55,988 | $ | 560 | $ | 175,293 | $ | (101,901 | ) | $ | 873,004 | $ | 946,956 | $ | 165 | $ | 947,121 | ||||||||||||||
Net income | 28,725 | 28,725 | 22 | 28,747 | ||||||||||||||||||||||||||
Other comprehensive loss | (16,143 | ) | (16,143 | ) | (5 | ) | (16,148 | ) | ||||||||||||||||||||||
Cash dividends of $0.10 per common share | (5,583 | ) | (5,583 | ) | (5,583 | ) | ||||||||||||||||||||||||
Stock-based compensation | 4,735 | 4,735 | 4,735 | |||||||||||||||||||||||||||
Restricted & performance shares released | 2 | (1 | ) | (6 | ) | (7 | ) | (7 | ) | |||||||||||||||||||||
Stock options exercised | 264 | 3 | 6,360 | 6,363 | 6,363 | |||||||||||||||||||||||||
Stock repurchases | (505 | ) | (5 | ) | (24,995 | ) | (25,000 | ) | (25,000 | ) | ||||||||||||||||||||
BALANCE AT APRIL 1, 2018 | 55,749 | $ | 557 | $ | 161,387 | $ | (118,044 | ) | $ | 896,146 | $ | 940,046 | $ | 182 | $ | 940,228 | ||||||||||||||
BALANCE AT DECEMBER 31, 2018 | 55,326 | $ | 553 | $ | 130,753 | $ | (154,693 | ) | $ | 977,541 | $ | 954,154 | $ | 147 | $ | 954,301 | ||||||||||||||
Net income | 55,911 | 55,911 | 33 | 55,944 | ||||||||||||||||||||||||||
Other comprehensive income | 6,476 | 6,476 | 1 | 6,477 | ||||||||||||||||||||||||||
Distributions paid to noncontrolling interests | — | (21 | ) | (21 | ) | |||||||||||||||||||||||||
Cash dividends of $0.12 per common share | (6,616 | ) | (6,616 | ) | (6,616 | ) | ||||||||||||||||||||||||
Stock-based compensation | 4,066 | 4,066 | 4,066 | |||||||||||||||||||||||||||
Restricted & performance shares released | 5 | — | (66 | ) | (66 | ) | (66 | ) | ||||||||||||||||||||||
Stock options exercised | 65 | 1 | 1,519 | 1,520 | 1,520 | |||||||||||||||||||||||||
Stock repurchases | (449 | ) | (5 | ) | (24,995 | ) | (25,000 | ) | (25,000 | ) | ||||||||||||||||||||
BALANCE AT MARCH 31, 2019 | 54,947 | $ | 549 | $ | 111,277 | $ | (148,217 | ) | $ | 1,026,836 | $ | 990,445 | $ | 160 | $ | 990,605 |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Tetra Tech Equity | Non-Controlling Interests | Total Equity | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||
BALANCE AT OCTOBER 1, 2017 | 55,873 | $ | 559 | $ | 193,835 | $ | (98,500 | ) | $ | 832,559 | $ | 928,453 | $ | 171 | $ | 928,624 | ||||||||||||||
Net income | 74,759 | 74,759 | 40 | 74,799 | ||||||||||||||||||||||||||
Other comprehensive loss | (19,544 | ) | (19,544 | ) | (7 | ) | (19,551 | ) | ||||||||||||||||||||||
Distributions paid to noncontrolling interests | — | (22 | ) | (22 | ) | |||||||||||||||||||||||||
Cash dividends of $0.20 per common share | (11,172 | ) | (11,172 | ) | (11,172 | ) | ||||||||||||||||||||||||
Stock-based compensation | 8,705 | 8,705 | 8,705 | |||||||||||||||||||||||||||
Restricted & performance shares released | 273 | 2 | (8,821 | ) | (8,819 | ) | (8,819 | ) | ||||||||||||||||||||||
Stock options exercised | 481 | 5 | 11,933 | 11,938 | 11,938 | |||||||||||||||||||||||||
Shares issued for Employee Stock Purchase Plan | 142 | 1 | 5,725 | 5,726 | 5,726 | |||||||||||||||||||||||||
Stock repurchases | (1,020 | ) | (10 | ) | (49,990 | ) | (50,000 | ) | (50,000 | ) | ||||||||||||||||||||
BALANCE AT APRIL 1, 2018 | 55,749 | $ | 557 | $ | 161,387 | $ | (118,044 | ) | $ | 896,146 | $ | 940,046 | $ | 182 | $ | 940,228 | ||||||||||||||
BALANCE AT SEPTEMBER 30, 2018 | 55,349 | $ | 553 | $ | 148,803 | $ | (127,350 | ) | $ | 944,965 | $ | 966,971 | $ | 129 | $ | 967,100 | ||||||||||||||
Net income | 97,907 | 97,907 | 69 | 97,976 | ||||||||||||||||||||||||||
Other comprehensive income (loss) | (20,867 | ) | (20,867 | ) | 238 | (20,629 | ) | |||||||||||||||||||||||
Distributions paid to noncontrolling interests | — | (276 | ) | (276 | ) | |||||||||||||||||||||||||
Cash dividends of $0.24 per common share | (13,270 | ) | (13,270 | ) | (13,270 | ) | ||||||||||||||||||||||||
Stock-based compensation | 8,595 | 8,595 | 8,595 | |||||||||||||||||||||||||||
Restricted & performance shares released | 179 | 2 | (6,804 | ) | (6,802 | ) | (6,802 | ) | ||||||||||||||||||||||
Stock options exercised | 151 | 2 | 3,832 | 3,834 | 3,834 | |||||||||||||||||||||||||
Shares issued for Employee Stock Purchase Plan | 148 | 1 | 6,842 | 6,843 | 6,843 | |||||||||||||||||||||||||
Stock repurchases | (880 | ) | (9 | ) | (49,991 | ) | (50,000 | ) | (50,000 | ) | ||||||||||||||||||||
Cumulative effect of accounting changes | (2,766 | ) | (2,766 | ) | (2,766 | ) | ||||||||||||||||||||||||
BALANCE AT MARCH 31, 2019 | 54,947 | $ | 549 | $ | 111,277 | $ | (148,217 | ) | $ | 1,026,836 | $ | 990,445 | $ | 160 | $ | 990,605 | ||||||||||||||
For certain items, the sum of the quarterly information above does not equal the year to date amounts reflected throughout this Form 10-Q due to rounding associated with the calculations on an individual quarter basis. These differences are not material to the Consolidated Financial Statements. |
Six Months Ended | |||||||
March 31, 2019 | April 1, 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 97,976 | $ | 74,799 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 14,731 | 20,312 | |||||
Equity in income of unconsolidated joint ventures, net of distributions | (193 | ) | (562 | ) | |||
Amortization of stock-based awards | 8,595 | 8,705 | |||||
Deferred income taxes | (26,092 | ) | (10,100 | ) | |||
Provision for doubtful accounts | 9,878 | 2,390 | |||||
Fair value adjustments to contingent consideration | 28 | 1,918 | |||||
Gain on sale of property and equipment | (223 | ) | (1,205 | ) | |||
Changes in operating assets and liabilities, net of effects of business acquisitions: | |||||||
Accounts receivable and contract assets | 48,041 | (42,912 | ) | ||||
Prepaid expenses and other assets | (16,007 | ) | (15,528 | ) | |||
Accounts payable | (26,908 | ) | (26,460 | ) | |||
Accrued compensation | (29,604 | ) | (11,453 | ) | |||
Contract liabilities | 5,114 | 15,367 | |||||
Other liabilities | 17,863 | 9,535 | |||||
Income taxes receivable/payable | (3,951 | ) | (1,213 | ) | |||
Net cash provided by operating activities | 99,248 | 23,593 | |||||
Cash flows from investing activities: | |||||||
Payments for business acquisitions, net of cash acquired | 3,545 | (64,451 | ) | ||||
Capital expenditures | (7,178 | ) | (4,565 | ) | |||
Proceeds from sale of property and equipment | 250 | 1,651 | |||||
Net cash used in investing activities | (3,383 | ) | (67,365 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from borrowings | 128,717 | 180,026 | |||||
Repayments on long-term debt | (162,092 | ) | (62,109 | ) | |||
Repurchases of common stock | (50,000 | ) | (50,000 | ) | |||
Taxes paid on vested restricted stock | (6,802 | ) | (8,819 | ) | |||
Stock options exercised | 3,834 | 11,945 | |||||
Dividends paid | (13,270 | ) | (11,172 | ) | |||
Payments of contingent earn-out liabilities | (11,067 | ) | (854 | ) | |||
Net cash (used in) provided by financing activities | (110,680 | ) | 59,017 | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (645 | ) | (2,047 | ) | |||
Net (decrease) increase in cash, cash equivalents and restricted cash | (15,460 | ) | 13,198 | ||||
Cash, cash equivalents and restricted cash at beginning of period | 148,884 | 192,690 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 133,424 | $ | 205,888 | |||
Supplemental information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 6,057 | $ | 6,895 | |||
Income taxes, net of refunds received of $0.9 million and $0.3 million | $ | 30,707 | $ | 20,151 | |||
Supplemental disclosures of non-cash investing activities: | |||||||
Issuance of promissory note for business acquisition | $ | 24,688 | $ | — | |||
Reconciliation of cash, cash equivalents and restricted cash: | |||||||
Cash and cash equivalents | $ | 130,728 | $ | 203,177 | |||
Restricted cash | 2,696 | 2,711 | |||||
Total cash, cash equivalents and restricted cash | $ | 133,424 | $ | 205,888 |
• | A decrease to contract assets of $5.0 million |
• | A decrease to contract liabilities of $1.1 million |
• | An increase to deferred tax assets of $1.1 million |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
Recognition Under Previous Guidance | Impact of the Adoption of ASC 606 | Recognition Under ASC 606 | Recognition Under Previous Guidance | Impact of the Adoption of ASC 606 | Recognition Under ASC 606 | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenue | $ | 723,666 | $ | (1,045 | ) | $ | 722,621 | $ | 1,438,894 | $ | 1,158 | $ | 1,440,052 | ||||||||||
Income from operations | 48,590 | (1,045 | ) | 47,545 | 102,098 | 1,158 | 103,256 | ||||||||||||||||
Income tax benefit (expense) | 11,317 | 246 | 11,563 | 1,061 | (280 | ) | 781 | ||||||||||||||||
Net income (loss) attributable to Tetra Tech | 56,710 | (799 | ) | 55,911 | 97,028 | 879 | 97,907 |
Recognition Under Previous Guidance | Impact of the Adoption of ASC 606 | Recognition Under ASC 606 | |||||||||
(in thousands) | |||||||||||
Assets | |||||||||||
Accounts receivable - net | $ | 634,972 | $ | (5,375 | ) | $ | 629,597 | ||||
Contract assets (1) | 165,530 | (7,612 | ) | 157,918 | |||||||
Deferred tax assets | 29,461 | 1,120 | 30,581 | ||||||||
Liabilities and equity | |||||||||||
Contract liabilities (2) | $ | 164,868 | $ | (10,259 | ) | $ | 154,609 | ||||
Income taxes payable | 1,597 | 280 | 1,877 | ||||||||
Equity (3) | |||||||||||
Retained earnings | $ | 1,028,724 | $ | (1,888 | ) | $ | 1,026,836 | ||||
Recognition Under Previous Guidance | Impact of the Adoption of ASC 606 | Recognition Under ASC 606 | |||||||||
(in thousands) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 97,097 | $ | 879 | $ | 97,976 | |||||
Accounts receivable and contract assets | 32,716 | 15,325 | 48,041 | ||||||||
Contract liabilities | 21,598 | (16,484 | ) | 5,114 | |||||||
Income taxes receivable/payable | (4,231 | ) | 280 | (3,951 | ) | ||||||
Net cash provided by operating activities | 99,248 | — | 99,248 |
Balance at | |||||||
March 31, 2019 | September 30, 2018 | ||||||
(in thousands) | |||||||
Contract assets | $ | 157,918 | $ | 142,882 | |||
Contract liabilities | 154,609 | 143,270 | |||||
Net contract assets (liabilities) | $ | 3,309 | $ | (388 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | April 1, 2018 | March 31, 2019 | April 1, 2018 | ||||||||||||
Client Sector | |||||||||||||||
U.S. state and local government | $ | 129,868 | $ | 104,905 | $ | 253,147 | $ | 256,659 | |||||||
U.S. federal government (1) | 216,498 | 236,951 | 441,256 | 473,199 | |||||||||||
U.S. commercial | 165,970 | 180,398 | 338,758 | 387,184 | |||||||||||
International (2) | 210,285 | 178,008 | 406,891 | 342,968 | |||||||||||
Total | $ | 722,621 | $ | 700,262 | $ | 1,440,052 | $ | 1,460,010 | |||||||
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | April 1, 2018 | March 31, 2019 | April 1, 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Contract Type | |||||||||||||||
Fixed-price | $ | 247,831 | $ | 224,878 | $ | 488,764 | $ | 460,298 | |||||||
Time-and-materials | 345,626 | 333,590 | 682,163 | 710,362 | |||||||||||
Cost-plus | 129,164 | 141,794 | 269,125 | 289,350 | |||||||||||
Total | $ | 722,621 | $ | 700,262 | $ | 1,440,052 | $ | 1,460,010 |
Amount | |||
(in thousands) | |||
Within 12 months | $ | 1,807,078 | |
Beyond | 993,344 | ||
Total | $ | 2,800,422 |
March 31, 2019 | September 30, 2018 | ||||||
(in thousands) | |||||||
Billed | $ | 439,480 | $ | 464,062 | |||
Unbilled | 234,577 | 267,739 | |||||
Total accounts receivable – gross | 674,057 | 731,801 | |||||
Allowance for doubtful accounts | (44,460 | ) | (37,580 | ) | |||
Total accounts receivable – net | $ | 629,597 | $ | 694,221 |
GSG | CIG | Total | ||||||||||
(in thousands) | ||||||||||||
Balance at September 30, 2018 | $ | 389,741 | $ | 409,079 | $ | 798,820 | ||||||
Acquisition activity | 38,680 | — | 38,680 | |||||||||
Translation and other | (1,751 | ) | (8,073 | ) | (9,824 | ) | ||||||
Balance at March 31, 2019 | $ | 426,670 | $ | 401,006 | $ | 827,676 |
March 31, 2019 | September 30, 2018 | ||||||||||||||||
Weighted- Average Remaining Life (in Years) | Gross Amount | Accumulated Amortization | Gross Amount | Accumulated Amortization | |||||||||||||
($ in thousands) | |||||||||||||||||
Non-compete agreements | — | $ | — | $ | — | $ | 83 | $ | (83 | ) | |||||||
Client relations | 2.6 | 54,277 | (48,733 | ) | 54,639 | (46,449 | ) | ||||||||||
Backlog | 0.8 | 25,042 | (22,552 | ) | 23,371 | (20,007 | ) | ||||||||||
Trade names | 2.8 | 8,028 | (4,364 | ) | 8,144 | (3,575 | ) | ||||||||||
Total | $ | 87,347 | $ | (75,649 | ) | $ | 86,237 | $ | (70,114 | ) |
Amount | |||
(in thousands) | |||
2019 | $ | 3,691 | |
2020 | 4,295 | ||
2021 | 2,256 | ||
2022 | 1,026 | ||
2023 | 430 | ||
Total | $ | 11,698 |
March 31, 2019 | September 30, 2018 | ||||||
(in thousands) | |||||||
Equipment, furniture and fixtures | $ | 133,593 | $ | 131,521 | |||
Leasehold improvements | 31,915 | 31,430 | |||||
Land and buildings | 411 | 413 | |||||
Total property and equipment | 165,919 | 163,364 | |||||
Accumulated depreciation | (124,259 | ) | (120,086 | ) | |||
Property and equipment, net | $ | 41,660 | $ | 43,278 |
Declare Date | Dividend Paid Per Share | Record Date | Payment Date | Dividend Paid | ||||||||
(in thousands, except per share data) | ||||||||||||
November 5, 2018 | $ | 0.12 | November 30, 2018 | December 14, 2018 | $ | 6,654 | ||||||
January 28, 2019 | $ | 0.12 | February 13, 2019 | February 28, 2019 | 6,616 | |||||||
Total dividend paid as of March 31, 2019 | $ | 13,270 | ||||||||||
November 6, 2017 | $ | 0.10 | November 30, 2017 | December 15, 2017 | $ | 5,589 | ||||||
January 29, 2018 | $ | 0.10 | February 14, 2018 | March 2, 2018 | 5,583 | |||||||
Total dividend paid as of April 1, 2018 | $ | 11,172 | ||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | April 1, 2018 | March 31, 2019 | April 1, 2018 | ||||||||||||
(in thousands, except per share data) | |||||||||||||||
Net income attributable to Tetra Tech | $ | 55,911 | $ | 28,725 | $ | 97,907 | $ | 74,759 | |||||||
Weighted-average common shares outstanding – basic | 55,143 | 55,841 | 55,237 | 55,900 | |||||||||||
Effect of dilutive stock options and unvested restricted stock | 842 | 832 | 924 | 925 | |||||||||||
Weighted-average common shares outstanding – diluted | 55,985 | 56,673 | 56,161 | 56,825 | |||||||||||
Earnings per share attributable to Tetra Tech: | |||||||||||||||
Basic | $ | 1.01 | $ | 0.51 | $ | 1.77 | $ | 1.34 | |||||||
Diluted | $ | 1.00 | $ | 0.51 | $ | 1.74 | $ | 1.32 |
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | April 1, 2018 | March 31, 2019 | April 1, 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Revenue | |||||||||||||||
GSG | $ | 417,526 | $ | 406,027 | $ | 829,497 | $ | 848,799 | |||||||
CIG | 322,458 | 309,704 | 640,252 | 641,217 | |||||||||||
RCM | (4,645 | ) | 1,480 | (3,192 | ) | 8,286 | |||||||||
Elimination of inter-segment revenue | (12,718 | ) | (16,949 | ) | (26,505 | ) | (38,292 | ) | |||||||
Total | $ | 722,621 | $ | 700,262 | $ | 1,440,052 | $ | 1,460,010 | |||||||
Income from operations | |||||||||||||||
GSG | $ | 44,803 | $ | 34,177 | $ | 82,217 | $ | 73,302 | |||||||
CIG | 20,869 | 18,400 | 47,968 | 39,693 | |||||||||||
RCM | (5,938 | ) | (489 | ) | (5,934 | ) | (1,647 | ) | |||||||
Corporate (1) | (12,189 | ) | (9,372 | ) | (20,995 | ) | (20,043 | ) | |||||||
Total | $ | 47,545 | $ | 42,716 | $ | 103,256 | $ | 91,305 | |||||||
March 31, 2019 | September 30, 2018 | ||||||
(in thousands) | |||||||
Total Assets | |||||||
GSG | $ | 524,796 | $ | 468,010 | |||
CIG | 410,918 | 478,197 | |||||
RCM | 17,213 | 25,683 | |||||
Corporate (1) | 998,938 | 987,531 | |||||
Total | $ | 1,951,865 | $ | 1,959,421 | |||
Fair Value of Derivative Instruments as of | |||||||||
Balance Sheet Location | March 31, 2019 | September 30, 2018 | |||||||
(in thousands) | |||||||||
Interest rate swap agreements | Other current (liabilities) assets | $ | (5,530 | ) | $ | 1,244 |
Three Months Ended | |||||||||||
Foreign Currency Translation Adjustments | Gain (Loss) on Derivative Instruments | Accumulated Other Comprehensive Loss | |||||||||
(in thousands) | |||||||||||
Balances at December 31, 2017 | $ | (102,413 | ) | $ | 512 | $ | (101,901 | ) | |||
Other comprehensive loss before reclassifications | (16,116 | ) | (136 | ) | (16,252 | ) | |||||
Amounts reclassified from accumulated other comprehensive income | |||||||||||
Interest rate contracts, net of tax (1) | — | 109 | 109 | ||||||||
Net current-period other comprehensive loss | (16,116 | ) | (27 | ) | (16,143 | ) | |||||
Balances at April 1, 2018 | $ | (118,529 | ) | $ | 485 | $ | (118,044 | ) | |||
Balances at December 30, 2018 | $ | (151,936 | ) | $ | (2,757 | ) | $ | (154,693 | ) | ||
Other comprehensive loss before reclassifications | 9,245 | (2,504 | ) | 6,741 | |||||||
Amounts reclassified from accumulated other comprehensive income | |||||||||||
Interest rate contracts, net of tax (1) | — | (265 | ) | (265 | ) | ||||||
Net current-period other comprehensive income (loss) | 9,245 | (2,769 | ) | 6,476 | |||||||
Balance at March 31, 2019 | $ | (142,691 | ) | $ | (5,526 | ) | $ | (148,217 | ) | ||
Six Months Ended | |||||||||||
Foreign Currency Translation Adjustments | Gain (Loss) on Derivative Instruments | Accumulated Other Comprehensive Loss | |||||||||
(in thousands) | |||||||||||
Balances at October 1, 2017 | $ | (98,946 | ) | $ | 446 | $ | (98,500 | ) | |||
Other comprehensive loss before reclassifications | (19,583 | ) | (52 | ) | (19,635 | ) | |||||
Amounts reclassified from accumulated other comprehensive income | |||||||||||
Interest rate contracts, net of tax (1) | — | 91 | 91 | ||||||||
Net current-period other comprehensive (loss) income | (19,583 | ) | 39 | (19,544 | ) | ||||||
Balances at April 1, 2018 | $ | (118,529 | ) | $ | 485 | $ | (118,044 | ) | |||
Balances at September 30, 2018 | $ | (128,602 | ) | $ | 1,252 | $ | (127,350 | ) | |||
Other comprehensive loss before reclassifications | (14,089 | ) | (6,287 | ) | (20,376 | ) | |||||
Amounts reclassified from accumulated other comprehensive income | |||||||||||
Interest rate contracts, net of tax (1) | — | (491 | ) | (491 | ) | ||||||
Net current-period other comprehensive loss | (14,089 | ) | (6,778 | ) | (20,867 | ) | |||||
Balances at March 31, 2019 | $ | (142,691 | ) | $ | (5,526 | ) | $ | (148,217 | ) | ||
(1) This accumulated other comprehensive component is reclassified to “Interest expense” in our consolidated statements of income. See Note 14, “Derivative Financial Instruments”, for more information. |
Three Months Ended | Six Months Ended | ||||||||||
March 31, 2019 | April 1, 2018 | March 31, 2019 | April 1, 2018 | ||||||||
Client Sector | |||||||||||
U.S. state and local government | 18.0 | % | 15.0 | % | 17.6 | % | 17.6 | % | |||
U.S. federal government (1) | 29.9 | 33.8 | 30.6 | 32.4 | |||||||
U.S. commercial | 23.0 | 25.8 | 23.5 | 26.5 | |||||||
International (2) | 29.1 | 25.4 | 28.3 | 23.5 | |||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
Three Months Ended | Six Months Ended | ||||||||||
March 31, 2019 | April 1, 2018 | March 31, 2019 | April 1, 2018 | ||||||||
Reportable Segment | |||||||||||
GSG | 57.8 | % | 58.0 | % | 57.6 | % | 58.1 | % | |||
CIG | 44.6 | 44.2 | 44.4 | 43.9 | |||||||
RCM | (0.6 | ) | 0.2 | (0.2 | ) | 0.6 | |||||
Inter-segment elimination | (1.8 | ) | (2.4 | ) | (1.8 | ) | (2.6 | ) | |||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Three Months Ended | Six Months Ended | ||||||||||
March 31, 2019 | April 1, 2018 | March 31, 2019 | April 1, 2018 | ||||||||
Contract Type | |||||||||||
Fixed-price | 34.3 | % | 32.1 | % | 33.9 | % | 31.5 | % | |||
Time-and-materials | 47.8 | 47.6 | 47.4 | 48.7 | |||||||
Cost-plus | 17.9 | 20.3 | 18.7 | 19.8 | |||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
March 31, 2019 | April 1, 2018 | Change | March 31, 2019 | April 1, 2018 | Change | |||||||||||||||||||||||
$ | % | $ | % | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Revenue | $ | 722,621 | $ | 700,262 | $ | 22,359 | 3.2% | $ | 1,440,052 | $ | 1,460,010 | $ | (19,958 | ) | (1.4 | )% | ||||||||||||
Subcontractor costs | (137,237 | ) | (167,469 | ) | 30,232 | 18.1 | (301,305 | ) | (382,370 | ) | 81,065 | 21.2 | ||||||||||||||||
Revenue, net of subcontractor costs (1) | 585,384 | 532,793 | 52,591 | 9.9 | 1,138,747 | 1,077,640 | 61,107 | 5.7 | ||||||||||||||||||||
Other costs of revenue | (488,913 | ) | (441,368 | ) | (47,545 | ) | (10.8) | (943,592 | ) | (892,070 | ) | (51,522 | ) | (5.8 | ) | |||||||||||||
Gross profit | 96,471 | 91,425 | 5,046 | 5.5 | 195,155 | 185,570 | 9,585 | 5.2 | ||||||||||||||||||||
Selling, general and administrative expenses | (48,898 | ) | (46,791 | ) | (2,107 | ) | (4.5) | (91,871 | ) | (92,347 | ) | 476 | 0.5 | |||||||||||||||
Contingent consideration - fair value adjustments | (28 | ) | (1,918 | ) | 1,890 | 98.5 | (28 | ) | (1,918 | ) | 1,890 | 98.5 | ||||||||||||||||
Income from operations | 47,545 | 42,716 | 4,829 | 11.3 | 103,256 | 91,305 | 11,951 | 13.1 | ||||||||||||||||||||
Interest expense | (3,164 | ) | (4,092 | ) | 928 | 22.7 | (6,061 | ) | (7,252 | ) | 1,191 | 16.4 | ||||||||||||||||
Income before income tax benefit (expense) | 44,381 | 38,624 | 5,757 | 14.9 | 97,195 | 84,053 | 13,142 | 15.6 | ||||||||||||||||||||
Income tax benefit (expense) | 11,563 | (9,877 | ) | 21,440 | 217.1 | 781 | (9,254 | ) | 10,035 | 108.4 | ||||||||||||||||||
Net income | 55,944 | 28,747 | 27,197 | 94.6 | 97,976 | 74,799 | 23,177 | 31.0 | ||||||||||||||||||||
Net income attributable to noncontrolling interests | (33 | ) | (22 | ) | (11 | ) | (50.0) | (69 | ) | (40 | ) | (29 | ) | (72.5 | ) | |||||||||||||
Net income attributable to Tetra Tech | $ | 55,911 | $ | 28,725 | $ | 27,186 | 94.6 | $ | 97,907 | $ | 74,759 | $ | 23,148 | 31.0 | ||||||||||||||
Diluted earnings per share | $ | 1.00 | $ | 0.51 | $ | 0.49 | 96.1 | $ | 1.74 | $ | 1.32 | $ | 0.42 | 31.8 | ||||||||||||||
(1) We believe that the presentation of “Revenue, net of subcontractor costs”, which is a non-U.S. GAAP financial measure, enhances investors’ ability to analyze our business trends and performance because it substantially measures the work performed by our employees. While providing services, we routinely subcontract various services and, under certain U.S. Agency for International Development programs, issue grants. Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with U.S. GAAP and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities. The grants are included as part of our subcontractor costs. Because subcontractor services can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of our business trends. Accordingly, we segregate subcontractor costs from revenue to promote a better understanding of our business by evaluating revenue exclusive of costs associated with external service providers. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
March 31, 2019 | April 1, 2018 | Change | March 31, 2019 | April 1, 2018 | Change | ||||||||||||||||||||||
$ | % | $ | % | ||||||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||||||
Revenue | $ | 722,621 | $ | 700,262 | $ | 22,359 | 3.2% | $ | 1,440,052 | $ | 1,460,010 | $ | (19,958 | ) | (1.4)% | ||||||||||||
RCM | 4,645 | (1,480 | ) | 6,125 | NM | 3,192 | (8,286 | ) | 11,478 | NM | |||||||||||||||||
Adjusted revenue | $ | 727,266 | $ | 698,782 | $ | 28,484 | 4.1 | $ | 1,443,244 | $ | 1,451,724 | $ | (8,480 | ) | (0.6) | ||||||||||||
Revenue, net of subcontractor costs | $ | 585,384 | $ | 532,793 | $ | 52,591 | 9.9 | $ | 1,138,747 | $ | 1,077,640 | $ | 61,107 | 5.7 | |||||||||||||
RCM | 4,741 | (369 | ) | 5,110 | NM | 4,165 | (1,521 | ) | 5,686 | NM | |||||||||||||||||
Adjusted revenue, net of subcontractor costs | $ | 590,125 | $ | 532,424 | $ | 57,701 | 10.8 | $ | 1,142,912 | $ | 1,076,119 | $ | 66,793 | 6.2 | |||||||||||||
Income from operations | $ | 47,545 | $ | 42,716 | $ | 4,829 | 11.3 | $ | 103,256 | $ | 91,305 | $ | 11,951 | 13.1 | |||||||||||||
Contingent consideration - compensation | 1,000 | — | 1,000 | NM | 1,000 | — | 1,000 | NM | |||||||||||||||||||
Contingent consideration - fair value adjustments | 28 | 1,918 | (1,890 | ) | NM | 28 | 1,918 | (1,890 | ) | NM | |||||||||||||||||
RCM | 5,938 | 489 | 5,449 | NM | 5,934 | 1,647 | 4,287 | NM | |||||||||||||||||||
Adjusted income from operations | $ | 54,511 | $ | 45,123 | $ | 9,388 | 20.8 | $ | 110,218 | $ | 94,870 | $ | 15,348 | 16.2 | |||||||||||||
EPS | $ | 1.00 | $ | 0.51 | $ | 0.49 | 96.1 | $ | 1.74 | $ | 1.32 | $ | 0.42 | 31.8% | |||||||||||||
Contingent consideration | 0.01 | 0.03 | (0.02 | ) | NM | 0.01 | 0.03 | (0.02 | ) | NM | |||||||||||||||||
RCM | 0.08 | — | 0.08 | NM | 0.08 | 0.01 | 0.07 | NM | |||||||||||||||||||
Non-recurring tax benefits | (0.39 | ) | — | (0.39 | ) | NM | (0.43 | ) | (0.18 | ) | (0.25 | ) | NM | ||||||||||||||
Adjusted EPS | $ | 0.70 | $ | 0.54 | $ | 0.16 | 29.6% | $ | 1.40 | $ | 1.18 | $ | 0.22 | 18.6% | |||||||||||||
NM = not meaningful |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
March 31, 2019 | April 1, 2018 | Change | March 31, 2019 | April 1, 2018 | Change | |||||||||||||||||||||||
$ | % | $ | % | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Revenue | $ | 417,526 | $ | 406,027 | $ | 11,499 | 2.8% | $ | 829,497 | $ | 848,799 | $ | (19,302 | ) | (2.3 | )% | ||||||||||||
Subcontractor costs | (101,485 | ) | (115,463 | ) | 13,978 | 12.1 | (210,175 | ) | (248,269 | ) | 38,094 | 15.3 | ||||||||||||||||
Revenue, net of subcontractor costs | $ | 316,041 | $ | 290,564 | $ | 25,477 | 8.8 | $ | 619,322 | $ | 600,530 | $ | 18,792 | 3.1 | ||||||||||||||
Income from operations | $ | 44,803 | $ | 34,177 | $ | 10,626 | 31.1 | $ | 82,217 | $ | 73,302 | $ | 8,915 | 12.2 |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
March 31, 2019 | April 1, 2018 | Change | March 31, 2019 | April 1, 2018 | Change | |||||||||||||||||||||||
$ | % | $ | % | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Revenue | $ | 322,458 | $ | 309,704 | $ | 12,754 | 4.1% | $ | 640,252 | $ | 641,217 | $ | (965 | ) | (0.2 | )% | ||||||||||||
Subcontractor costs | (48,374 | ) | (67,844 | ) | 19,470 | 28.7 | (116,662 | ) | (165,628 | ) | 48,966 | 29.6 | ||||||||||||||||
Revenue, net of subcontractor costs | $ | 274,084 | $ | 241,860 | $ | 32,224 | 13.3 | $ | 523,590 | $ | 475,589 | $ | 48,001 | 10.1 | ||||||||||||||
Income from operations | $ | 20,869 | $ | 18,400 | $ | 2,469 | 13.4 | $ | 47,968 | $ | 39,693 | $ | 8,275 | 20.8 |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
March 31, 2019 | April 1, 2018 | Change | March 31, 2019 | April 1, 2018 | Change | |||||||||||||||||||||||
$ | % | $ | % | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Revenue | $ | (4,645 | ) | $ | 1,480 | $ | (6,125 | ) | (413.9)% | $ | (3,192 | ) | $ | 8,286 | $ | (11,478 | ) | (138.5 | )% | |||||||||
Subcontractor costs | (96 | ) | (1,111 | ) | 1,015 | 91.4 | (973 | ) | (6,765 | ) | 5,792 | 85.6 | ||||||||||||||||
Revenue, net of subcontractor costs | $ | (4,741 | ) | $ | 369 | $ | (5,110 | ) | (1,384.8) | $ | (4,165 | ) | $ | 1,521 | $ | (5,686 | ) | (373.8 | ) | |||||||||
Loss from operations | $ | (5,938 | ) | $ | (489 | ) | $ | (5,449 | ) | (1,114.3) | $ | (5,934 | ) | $ | (1,647 | ) | $ | (4,287 | ) | (260.3 | ) |
Amount | |||
(in thousands) | |||
RUPOs | $ | 2,800,422 | |
Items impacting comparability: | |||
Contract term | 13,655 | ||
Backlog | $ | 2,814,077 |
Dividend Per Share | Record Date | Total Maximum Payment | Payment Date | ||||||||
(in thousands, except per share data) | |||||||||||
November 5, 2018 | $ | 0.12 | November 30, 2018 | $ | 6,654 | December 14, 2018 | |||||
January 28, 2019 | $ | 0.12 | February 13, 2019 | $ | 6,616 | February 28, 2019 | |||||
April 29, 2019 | $ | 0.15 | May 15, 2019 | N/A | May 31, 2019 |
• | Letters of credit and bank guarantees are used primarily to support project performance and insurance programs. We are required to reimburse the issuers of letters of credit and bank guarantees for any payments they make under the outstanding letters of credit or bank guarantees. Our Amended Credit Agreement and additional letter of credit facilities cover the issuance of our standby letters of credit and bank guarantees and are critical for our normal operations. If we default on the Amended Credit Agreement or additional credit facilities, our inability to issue or renew standby letters of credit and bank guarantees would impair our ability to maintain normal operations. At March 31, 2019, we had $0.9 million in standby letters of credit outstanding under our Amended Credit Agreement, |
• | From time to time, we provide guarantees and indemnifications related to our services. If our services under a guaranteed or indemnified project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed or indemnified projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guaranteed losses. |
• | In the ordinary course of business, we enter into various agreements as part of certain unconsolidated subsidiaries, joint ventures, and other jointly executed contracts where we are jointly and severally liable. We enter into these agreements primarily to support the project execution commitments of these entities. The potential payment amount of an outstanding performance guarantee is typically the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. However, we are not able to estimate other amounts that may be required to be paid in excess of estimated costs to complete contracts and, accordingly, the total potential payment amount under our outstanding performance guarantees cannot be estimated. For cost-plus contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump sum or fixed-price contracts, this amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In those cases where costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors, for claims. |
• | In the ordinary course of business, our clients may request that we obtain surety bonds in connection with contract performance obligations that are not required to be recorded in our consolidated balance sheets. We are obligated to reimburse the issuer of our surety bonds for any payments made thereunder. Each of our commitments under performance bonds generally ends concurrently with the expiration of our related contractual obligation. |
• | prices, and expectations about future prices, of oil and natural gas; |
• | domestic and foreign supply of and demand for oil and natural gas; |
• | the cost of exploring for, developing, producing and delivering oil and natural gas; |
• | transportation capacity, including but not limited to train transportation capacity and its future regulation; |
• | available pipeline, storage and other transportation capacity; |
• | availability of qualified personnel and lead times associated with acquiring equipment and products; |
• | federal, state, provincial and local regulation of oilfield activities; |
• | environmental concerns regarding the methods our customers use to produce hydrocarbons; |
• | the availability of water resources and the cost of disposal and recycling services; and |
• | seasonal limitations on access to work locations. |
• | 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. |
• | 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; |
• | 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. |
• | 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. |
• | 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. |
• | 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. |
• | 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 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. |
• | 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. |
• | 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. |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value that May Yet be Purchased Under the Plans or Programs | ||||||||||
October 1, 2018 – October 28, 2018 | — | $ | — | — | $ | 225,000,591 | ||||||||
October 29, 2018 – November 25, 2018 | 85,938 | 65.97 | 85,938 | 219,331,078 | ||||||||||
November 26, 2018 – December 30, 2018 | 344,621 | 56.09 | 344,621 | 200,000,634 | ||||||||||
December 31, 2018 - January 27, 2019 | 128,657 | 52.23 | 128,657 | 193,281,097 | ||||||||||
January 28, 2019 - February 24, 2019 | 145,703 | 54.76 | 145,703 | 185,301,729 | ||||||||||
February 25, 2019 - March 31, 2019 | 174,695 | 58.97 | 174,695 | 175,000,645 |
101 | The following financial information from our Company’s Quarterly Report on Form 10-Q, for the period ended March 31, 2019, formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, (v) Notes to Consolidated Financial Statements. |
Dated: May 3, 2019 | TETRA TECH, INC. | ||
By: | /s/ Dan L. Batrack | ||
Dan L. Batrack | |||
Chairman, Chief Executive Officer and President | |||
(Principal Executive Officer) | |||
By: | /s/ Steven M. Burdick | ||
Steven M. Burdick | |||
Chief Financial Officer | |||
(Principal Financial Officer) | |||
By: | /s/ Brian N. Carter | ||
Brian N. Carter | |||
Senior Vice President, Corporate Controller | |||
(Principal Accounting Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Tetra Tech, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Dan L. Batrack | |
Dan L. Batrack | |
Chairman, Chief Executive Officer and President | |
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Tetra Tech, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Steven M. Burdick | |
Steven M. Burdick | |
Chief Financial Officer | |
(Principal Financial Officer) |
1. | The Report fully complies with requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Dan L. Batrack | |
Dan L. Batrack | |
Chairman, Chief Executive Officer and President | |
May 3, 2019 |
1. | The Report fully complies with requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Steven M. Burdick | |
Steven M. Burdick | |
Chief Financial Officer | |
May 3, 2019 |
3 Month Period Ending March 31, 2019 | American Environmental Group Ltd. |
Alleged violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard (#) | 0 |
Section 104(b) orders (#) | 0 |
Section 104(d) citations and orders (#) | 0 |
Section 110(b)(2) violations (#) | 0 |
Section 107(a) orders (#) | 0 |
Proposed assessments under MSHA ($) whole dollars | 132.00 |
Mining-related fatalities (#) | 0 |
Section 104(e) notice | 0 |
Notice of the potential for a pattern of violations under Section 104(e) | 0 |
Legal actions before the Federal Mine Safety and Health Review Commission (“FMSHRC”) initiated (#) | 0 |
Legal actions before the FMSHRC resolved | 0 |
Legal actions pending before the FMSHRC, end of period | — |
Contests of citations and orders reference in Subpart B of 29 CFR Part 2700 | 0 |
Contests of proposed penalties referenced in Subpart C of 29 CFR Part 2700 (#) | 0 |
Complaints for compensation referenced in Subpart D of 29 CFR Part 2700 (#) | 0 |
Complaints of discharge, discrimination or interference reference in Subpart E of 29 CFR Part 2700 (#) | 0 |
Applications for temporary relief referenced in Subpart F of 29 CFR Part 2700 (#) | 0 |
Appeals of judges’ decisions or orders reference in Subpart H of 29 CFR Part 2700 (#) | 0 |
Total pending legal actions (#) | 0 |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 26, 2019 |
|
Document and Entity Information | ||
Entity Registrant Name | TETRA TECH INC | |
Entity Central Index Key | 0000831641 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-29 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 54,866,464 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, authorized shares (in shares) | 2,000,000 | 2,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, authorized shares (in shares) | 150,000,000 | 150,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (in shares) | 54,947,000 | 55,349,000 |
Common stock, shares outstanding (in shares) | 54,947,000 | 55,349,000 |
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019 |
Apr. 01, 2018 |
Mar. 31, 2019 |
Apr. 01, 2018 |
|
Revenue | $ 722,621 | $ 700,262 | $ 1,440,052 | $ 1,460,010 |
Gross profit | 96,471 | 91,425 | 195,155 | 185,570 |
Selling, general and administrative expenses | (48,898) | (46,791) | (91,871) | (92,347) |
Contingent consideration – fair value adjustments | (28) | (1,918) | (28) | (1,918) |
Income from operations | 47,545 | 42,716 | 103,256 | 91,305 |
Interest expense | (3,164) | (4,092) | (6,061) | (7,252) |
Income before income tax benefit (expense) | 44,381 | 38,624 | 97,195 | 84,053 |
Income tax benefit (expense) | 11,563 | (9,877) | 781 | (9,254) |
Net income | 55,944 | 28,747 | 97,976 | 74,799 |
Net income attributable to noncontrolling interests | (33) | (22) | (69) | (40) |
Net income attributable to Tetra Tech | $ 55,911 | $ 28,725 | $ 97,907 | $ 74,759 |
Earnings per share attributable to Tetra Tech: | ||||
Basic (in dollars per share) | $ 1.01 | $ 0.51 | $ 1.77 | $ 1.34 |
Diluted (in dollars per share) | $ 1.00 | $ 0.51 | $ 1.74 | $ 1.32 |
Weighted-average common shares outstanding: | ||||
Basic (in shares) | 55,143 | 55,841 | 55,237 | 55,900 |
Diluted (in shares) | 55,985 | 56,673 | 56,161 | 56,825 |
Subcontractor | ||||
Cost of revenue | $ (137,237) | $ (167,469) | $ (301,305) | $ (382,370) |
Other | ||||
Cost of revenue | $ (488,913) | $ (441,368) | $ (943,592) | $ (892,070) |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019 |
Apr. 01, 2018 |
Mar. 31, 2019 |
Apr. 01, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 55,944 | $ 28,747 | $ 97,976 | $ 74,799 |
Other comprehensive income, net of tax | ||||
Foreign currency translation adjustments | 9,245 | (16,116) | (14,089) | (19,583) |
(Loss) gain on cash flow hedge valuations | (2,769) | (27) | (6,778) | 39 |
Other comprehensive income (loss) attributable to Tetra Tech | 6,476 | (16,143) | (20,867) | (19,544) |
Other comprehensive income (loss) attributable to noncontrolling interests | 1 | (5) | 238 | (7) |
Comprehensive income attributable to Tetra Tech | 62,387 | 12,582 | 77,040 | 55,215 |
Comprehensive income attributable to noncontrolling interests | 34 | 17 | 307 | 33 |
Comprehensive income | $ 62,421 | $ 12,599 | $ 77,347 | $ 55,248 |
Consolidated Statements of Equity (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Feb. 28, 2019 |
Dec. 14, 2018 |
Mar. 02, 2018 |
Dec. 15, 2017 |
Mar. 31, 2019 |
Apr. 01, 2018 |
Mar. 31, 2019 |
Apr. 01, 2018 |
|
Statement of Stockholders' Equity [Abstract] | ||||||||
Dividend Paid Per Share (in dollars per share) | $ 0.12 | $ 0.12 | $ 0.1 | $ 0.1 | $ 0.12 | $ 0.10 | $ 240.00 | $ 0.20 |
Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 01, 2018 |
|
Statement of Cash Flows [Abstract] | ||
Income tax refunds | $ 0.9 | $ 0.3 |
Basis of Presentation |
6 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim consolidated financial statements and related notes of Tetra Tech, Inc. (“we,” “us,” “our” or "Tetra Tech") have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018. These financial statements reflect all normal recurring adjustments that are considered necessary for a fair statement of our financial position, results of operations and cash flows for the interim periods presented. The results of operations and cash flows for any interim period are not necessarily indicative of results for the full year or for future years. Certain reclassifications were made to the prior year to conform to current year presentation. In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 ("ASC 606"), "Revenue from Contracts with Customers", which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance and the related ASUs were effective for interim and annual reporting periods beginning after December 15, 2017 (first quarter of fiscal 2019 for us). On October 1, 2018, we adopted ASC 606 using the modified retrospective method in which the new guidance was applied retrospectively to contracts that were not substantially completed as of the date of adoption. Results for the reporting period beginning after October 1, 2018 have been presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the previous guidance. See Note 3, "Revenue Recognition" for further discussion of the adoption and the impact on our consolidated financial statements. |
Recent Accounting Pronouncements |
6 Months Ended |
---|---|
Mar. 31, 2019 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Standards In January 2016, the FASB issued guidance that generally requires companies to measure investments in other entities, except those accounted for under the equity method, at fair value and recognize any changes in fair value in net income. The guidance was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). The adoption of this guidance had no impact on our consolidated financial statements. In March 2016, the FASB issued updated guidance which requires excess tax benefits and deficiencies on share-based payments to be recorded as income tax expense or benefit in the income statement rather than being recorded in additional paid-in capital. It also requires the presentation of employee taxes as financing activities on consolidated statements of cash flows, which was previously classified as operating activities. This guidance was effective for annual and interim periods beginning after December 15, 2016 (first quarter of fiscal 2018 for us), with early adoption permitted. In the first quarter of fiscal 2017, we adopted this guidance. At the beginning of fiscal 2019, we revised the presentation of "Net cash provided by operating activities" and "Net cash (used in) provided by financing activities" in the consolidated statement of cash flows for prior period to correct the presentation of “Taxes paid on vested restricted stock” and appropriately reflect such amounts as financing activities. The correction resulted in an increase of net cash provided by operating activities of $8.8 million and a decrease of net cash provided by financing activities of $8.8 million for the six months ended April 1, 2018. We assessed the materiality of these errors on our consolidated financial statements for prior periods and concluded that the amounts were not material to any prior interim or annual periods. We elected to revise the presentation for comparability purposes. In August 2016, the FASB issued guidance to address eight specific cash flow issues to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). The adoption of this guidance had no material impact on our consolidated financial statements. In October 2016, the FASB issued updated guidance which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The guidance was effective for fiscal reporting periods and interim reporting periods within those fiscal reporting periods, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). The adoption of this guidance had no material impact on our consolidated financial statements. In November 2016, the FASB issued updated guidance which provides amendments to address the classification and presentation of changes in restricted cash in the statement of cash flows. The guidance was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). The adoption of this guidance had no material impact on our consolidated financial statements. We updated certain captions in our consolidated statements of cash flows to include restricted cash, which is reported in our "Prepaid expenses and other current assets" on the consolidated balance sheets. In May 2017, the FASB issued updated guidance to clarify when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the updated guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes because of a change in terms or conditions. The guidance was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us), on a prospective basis. The adoption of this guidance had no impact on our consolidated financial statements. In August 2018, the Securities and Exchange Commission (“SEC”) published Release No. 33-10532, Disclosure Update and Simplification, which adopted amendments to certain disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded, considering other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. While most of the amendments eliminate outdated or duplicative disclosure requirements, the final rule amends the interim financial statement requirements to include a reconciliation of changes in stockholders’ equity in the notes or as a separate statement for each period for which a statement of comprehensive income is required to be filed. The new interim reconciliation of changes in stockholders’ equity is included herein as a separate statement. Additionally, we removed the disclosure on cash dividends paid per share from our consolidated statements of income. Recently Issued Accounting Standards Not Yet Adopted In February 2016, the FASB issued guidance that requires the rights and obligations associated with leasing arrangements be reflected on the balance sheet to increase transparency and comparability among organizations. Under the guidance, lessees will be required to recognize a right-of-use asset and a liability to make lease payments and disclose key information about leasing arrangements. The guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018 (first quarter of fiscal 2020 for us). Early adoption is permitted, and the standard must be adopted using a modified retrospective approach. In July 2018, the FASB issued updated guidance, which provides entities with an additional transition method to adopt the lease accounting guidance. Under the new transition method, an entity initially applies the new standard at the adoption date, versus at the beginning of the earliest period presented, and recognizes a cumulative-effective adjustment to the opening balance of retained earnings in the period of adoption, if any. While we are currently evaluating the impact that this guidance will have on our consolidated financial statements, we currently expect that the adoption of the new guidance will result in a significant increase in the assets and liabilities on our consolidated balance sheets and will likely have no impact on our consolidated statements of income and cash flows. In June 2016, the FASB issued updated guidance which requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019 (first quarter of fiscal 2021 for us). Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements. In August 2017, the FASB issued accounting guidance on hedging activities. The amendment better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018 (first quarter of fiscal 2020 for us). Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements. In February 2018, the FASB issued guidance on reclassification of certain tax effects from accumulated comprehensive income, which allows for a reclassification of stranded tax effects from the Tax Cuts and Jobs Act ("TCJA") from accumulated other comprehensive income to retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018 (first quarter of fiscal 2020 for us). We are currently evaluating the impact that this guidance will have on our consolidated financial statements. |
Revenue Recognition |
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Revenue Recognition | Revenue Recognition On October 1, 2018, we adopted ASC 606, which supersedes most current revenue recognition guidance, including industry-specific guidance. We adopted the standard on a modified retrospective basis which results in no restatement of the comparative periods presented and a cumulative effect adjustment to retained earnings as of the date of adoption. As part of our adoption, the new standard was applied only to those contracts that were not substantially completed as of the date of adoption. To determine the proper revenue recognition method for contracts under ASC 606, we evaluate whether multiple contracts should be combined and accounted for as a single contract and whether the combined or single contract should be accounted for as having more than one performance obligation. The decision to combine a group of contracts or separate a combined or single contract into multiple performance obligations may impact the amount of revenue recorded in a given period. Contracts are considered to have a single performance obligation if the promises are not separately identifiable from other promises in the contracts. At contract inception, we assess the goods or services promised in a contract and identify, as a separate performance obligation, each distinct promise to transfer goods or services to the customer. The identified performance obligations represent the “unit of account” for purposes of determining revenue recognition. In order to properly identify separate performance obligations, we apply judgment in determining whether each good or service provided is: (a) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (b) distinct within the context of the contract, whereby the transfer of the good or service to the customer is separately identifiable from other promises in the contract. Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from existing contracts due to the significant integration provided or significant interdependencies in the context of the contract and are accounted for as if they were part of the original contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. We account for contract modifications as a separate contract when the modification results in the promise to deliver additional goods or services that are distinct and the increase in price of the contract is for the same amount as the stand-alone selling price of the additional goods or services included in the modification. The transaction price represents the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to our customers. The consideration promised within a contract may include fixed amounts, variable amounts, or both. The nature of our contracts gives rise to several types of variable consideration, including claims, award fee incentives, fiscal funding clauses, and liquidated damages. We recognize revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized for the contract will not occur. We estimate the amount of revenue to be recognized on variable consideration using either the expected value or the most likely amount method, whichever is expected to better predict the amount of consideration to be received. Project mobilization costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred to the client. Claims are amounts in excess of agreed contract prices that we seek to collect from our clients or other third parties for delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price, or other causes of unanticipated additional costs. Revenue on claims is recognized only to the extent that contract costs related to the claims have been incurred and when it is probable that any significant revenue recognized related to the claim will not be reversed. Factors considered in determining whether revenue associated with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized include the following: (a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in our performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable. This can lead to a situation in which costs are recognized in one period and revenue is recognized in a subsequent period when a client agreement is obtained, or a claims resolution occurs. In some cases, contract retentions are withheld by clients until certain conditions are met or the project is completed, which may be several months or years. In these cases, we have not identified a significant financing component under ASC 606 as the timing difference in payment compared to delivery of obligations under the contract is not for purposes of financing. For contracts with multiple performance obligations, we allocate the transaction price to each performance obligation using a best estimate of the standalone selling price of each distinct good or service in the contract. The standalone selling price is typically determined using the estimated cost of the contract plus a margin approach. For contracts containing variable consideration, we allocate the variability to a specific performance obligation within the contract if such variability relates specifically to our efforts to satisfy the performance obligation or transfer the distinct good or service, and the allocation depicts the amount of consideration to which we expect to be entitled. We recognize revenue over time as the related performance obligation is satisfied by transferring control of a promised good or service to our customers. Progress toward complete satisfaction of the performance obligation is primarily measured using a cost-to-cost measure of progress method. The cost input is based primarily on contract cost incurred to date compared to total estimated contract cost. This measure includes forecasts based on the best information available and reflects our judgment to faithfully depict the value of the services transferred to the customer. For certain on-call engineering or consulting and similar contracts, we recognize revenue in the amount which we have the right to invoice the customer if that amount corresponds directly with the value of our performance completed to date. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost measure of progress method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. Contract Types Our services are performed under three principal types of contracts: fixed-price, time-and-materials and cost-plus. Customer payments on contracts are typically due within 60 days of billing, depending on the contract. Fixed-Price. Under fixed-price contracts, clients pay us an agreed fixed-amount negotiated in advance for a specified scope of work. Time-and-Materials. Under time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on the actual time that we spend on a project. In addition, clients reimburse us for our actual out-of-pocket costs for materials and other direct incidental expenditures that we incur in connection with our performance under the contract. Most of our time-and-material contracts are subject to maximum contract values, and also may include annual billing rate adjustment provisions. Cost-Plus. Under cost-plus contracts, we are reimbursed for allowed or otherwise defined costs incurred plus a negotiated fee. The contracts may also include incentives for various performance criteria, including quality, timeliness, ingenuity, safety and cost-effectiveness. In addition, our costs are generally subject to review by our clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract. Adoption Upon adoption on October 1, 2018, under the modified retrospective method, we recorded a cumulative effect adjustment to decrease retained earnings by $2.8 million on October 1, 2018, as well as the following cumulative effect adjustments:
The decrease in retained earnings primarily resulted from a change in the way we determine the unit of account for projects (i.e. performance obligations). Under previous guidance, we typically accounted for a contract as a single unit of revenue recognition. Upon adoption of ASC 606, we assess the nature of the promises in the contract and recognize revenue based on performance obligations within the respective contract or combined contract. The following table presents how the adoption of ASC 606 affected certain line items in our consolidated statements of income for the three and six months ended March 31, 2019:
The following table presents how the adoption of ASC 606 affected certain line items in our consolidated balance sheet as of March 31, 2019:
(1) Previously included in "Account receivable - net". (2) Previously presented as "Billings in excess of costs on uncompleted contracts". (3) Includes $2.8 million of cumulative catch-up adjustment to retained earnings on October 1, 2018 upon adoption of ASC 606. The following table presents how the adoption of ASC 606 affected certain line items in our consolidated statement of cash flows for the six months ended March 31, 2019:
Contract Assets and Contract Liabilities We invoice customers based on the contractual terms of each contract. However, the timing of revenue recognition may differ from the timing of invoice issuance. As part of the adoption of ASC 606, contract assets have been bifurcated from billed and unbilled receivables. Contract assets represent revenue recognized in excess of the amounts for which we have the contractual right to bill our customers. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones or completion of a contract. In addition, many of our time and materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Contract liabilities consist of billings in excess of revenue recognized. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and increase as billings in advance of revenue recognition occur. Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. There were no substantial non-current contract assets or liabilities for the periods presented. Net contract liabilities/assets consisted of the following:
We recognized $74.2 million of revenue during the first half of fiscal 2019 that was included in contract liabilities as of September 30, 2018. The amount of revenue recognized from changes in transaction price associated with performance obligations satisfied in prior periods during the first half of fiscal 2019 was not material. The change in transaction price primarily relates to reimbursement of costs incurred in prior periods. We recognize revenue from contracts primarily utilizing the cost-to-cost measure of progress method, to estimate the progress towards completion to determine the amount of revenue and profit to recognize. Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the period in which such changes are made. As a result, we recognized net unfavorable operating income adjustments of $2.8 million and $3.2 million for the second quarter and first half of fiscal 2019, respectively, compared to $0.7 million and $1.4 million for the prior-year periods in the Commercial/International Services Group ("CIG") segment. Changes in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediately in earnings. As of March 31, 2019 and September 30, 2018, our consolidated balance sheets included liabilities for anticipated losses of $11.7 million and $13.6 million, respectively. The estimated cost to complete the related contracts as of March 31, 2019 was $11.7 million. Disaggregation of Revenue We disaggregate revenue by client sector and contract type, as we believe it best depicts how the nature, timing, and uncertainty of revenue and cash flows are affected by economic factors. The following tables provide information about disaggregated revenue and a reconciliation of the disaggregated revenue:
(1) Includes revenue generated under U.S. federal government contracts performed outside the United States. (2) Includes revenue generated from foreign operations, primarily in Canada and Australia, and revenue generated from non-U.S. clients. Other than the U.S. federal government, no single client accounted for more than 10% of our revenue for the three and six months ended March 31, 2019 and April 1, 2018.
Remaining Unsatisfied Performance Obligations (“RUPOs”) Our RUPOs represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. We had $2.8 billion of RUPOs as of March 31, 2019. RUPOs increase with awards from new contracts or additions on existing contracts and decrease as work is performed and revenue is recognized on existing contracts. RUPOs may also decrease when projects are canceled or modified in scope. We include a contract within our RUPOs when the contract is awarded and an agreement on contract terms has been reached. We expect to satisfy our RUPOs as of March 31, 2019 over the following periods:
Although RUPOs reflect business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. RUPOs are adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Our operations and maintenance contracts can generally be terminated by the clients without a substantive financial penalty. Therefore, the remaining performance obligations on such contracts are limited to the notice period required for the termination (usually 30, 60, or 90 days). |
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Accounts Receivable - Net | Accounts Receivable - Net Net accounts receivable consisted of the following:
Billed accounts receivable represent amounts billed to clients that have not been collected. Unbilled accounts receivable, which represent an unconditional right to payment subject only to the passage of time, include unbilled amounts typically resulting from revenue recognized but not yet billed pursuant to contract terms or billed after the period end date. Most of our unbilled receivables at March 31, 2019 are expected to be billed and collected within 12 months. The allowance for doubtful accounts represents amounts that are expected to become uncollectible or unrealizable in the future. We determine an estimated allowance for uncollectible accounts based on management's consideration of trends in the actual and forecasted credit quality of our clients, including delinquency and payment history; type of client, such as a government agency or a commercial sector client; and general economic and industry conditions that may affect a client's ability to pay. Once contract performance is underway, we may experience changes in conditions, client requirements, specifications, designs, materials and expectations regarding the period of performance. Such changes result in change orders and may be initiated by us or by our clients. In many cases, agreement with the client as to the terms of change orders is reached prior to work commencing; however, sometimes circumstances require that work progress without a definitive client agreement. Revenue and any corresponding receivable in these cases is recognized based on the policy described in Note 3, "Revenue Recognition" above. The total accounts receivable at both March 31, 2019 and September 30, 2018 included approximately $53 million and $74 million, respectively, related to claims, including requests for equitable adjustment, on contracts that provide for price redetermination. We regularly evaluate all unsettled claim amounts and record appropriate adjustments to operating earnings when it is probable that the claim will result in a different contract value than the amount previously estimated. In the first half of fiscal 2019 (all in the second quarter), we recognized reductions of revenue of $4.8 million and $3.6 million and related losses in operating income of $5.9 million and $3.6 million in our RCM and CIG segments, respectively. We recorded no material gains or losses related to claims in the first half of fiscal 2018. On U.S. federal government contracts, billed accounts receivable were $76.2 million and $81.5 million at March 31, 2019 and September 30, 2018, respectively. The total of unbilled receivables and contract assets were $101.9 million and $102.7 million at March 31, 2019 and September 30, 2018, respectively. Other than the U.S. federal government, no single client accounted for more than 10% of our accounts receivable at March 31, 2019 and September 30, 2018. |
Acquisitions and Divestitures |
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Business Combinations [Abstract] | |
Acquisitions and Divestitures | Acquisitions and Divestitures At the end of second quarter of fiscal 2019, we acquired eGlobalTech ("eGT"), a high-end information technology solutions, cloud migration, cybersecurity, and management consulting firm based in Arlington, Virginia. eGT is part of our Government Services Group ("GSG") segment. The fair value of the purchase price was $48.4 million. This amount was comprised of a $24.7 million promissory note issued to the sellers (which was subsequently paid in full in the third quarter of fiscal 2019), $2.6 million of payables related to estimated post-closing adjustments for net assets acquired, and $21.1 million for the estimated fair value of contingent earn-out obligations, with a maximum of $25.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition. In the first quarter of fiscal 2018, we acquired Glumac, headquartered in Portland, Oregon. Glumac is a leader in sustainable infrastructure design with more than 300 employees and is part of our GSG segment. The fair value of the purchase price for Glumac was $38.4 million. This amount was comprised of $20.0 million of initial cash payments made to the sellers and $18.4 million for the estimated fair value of contingent earn-out obligations, with a maximum of $20.0 million payable, based upon the achievement of specified operating income targets in each of the three years following the acquisition. In the second quarter of fiscal 2018, we completed the acquisition of Norman Disney & Young (“NDY”), a leader in sustainable infrastructure engineering design. NDY is an Australian-based global engineering design firm with more than 700 professionals operating in offices throughout Australia, the Asia-Pacific region, the United Kingdom, and Canada and is part of our CIG segment. The fair value of the purchase price for NDY was $56.1 million. This amount was comprised of $46.9 million of initial cash payments made to the sellers, $1.6 million held in escrow, and $7.6 million for the estimated fair value of contingent earn-out obligations, with a maximum amount of $20.2 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition. In the third quarter of fiscal 2018, we divested our non-core utility field services operations in the CIG segment for net proceeds after transaction costs of $30.2 million. This operation generated approximately $70 million in annual revenue primarily from our U.S. commercial clients. These non-core divestitures resulted in a pre-tax loss of $1.7 million, which was included in "Selling, general and administrative expenses" ("SG&A") in the third quarter of fiscal 2018. Goodwill additions resulting from the above business combinations are primarily attributable to the existing workforce of the acquired companies and the synergies expected to arise after the acquisitions. The goodwill addition related to our fiscal 2018 acquisitions primarily represent the value of a workforce with distinct expertise in the sustainable infrastructure design market. The fiscal 2019 goodwill addition represents the value of a workforce with emerging technology and new techniques that incorporate artificial intelligence, data analytics and advanced cybersecurity solutions for government and commercial clients. In addition, these acquired capabilities, when combined with our existing global consulting and engineering business, result in opportunities that allow us to provide services under contracts that could not have been pursued individually by either us or the acquired companies. The results of these acquisitions were included in our consolidated financial statements from their respective closing dates. These acquisitions were not considered material to our consolidated financial statements. As a result, no pro forma information has been provided. Backlog, client relations and trade name intangible assets include the fair value of existing contracts and the underlying customer relationships with lives ranging from 1 to 10 years, and trade names with lives ranging from 3 to 5 years. For detailed information regarding our intangible assets, see Note 6, “Goodwill and Intangible Assets”. Most of our acquisition agreements include contingent earn-out agreements, which are generally based on the achievement of future operating income thresholds. The contingent earn-out arrangements are based on our valuations of the acquired companies and reduce the risk of overpaying for acquisitions if the projected financial results are not achieved. The fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair value of contingent consideration as a liability in “Current contingent earn-out liabilities” and “Long-term contingent earn-out liabilities” on the consolidated balance sheets. We consider several factors when determining that contingent earn-out liabilities are part of the purchase price, including the following: (1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (2) the former owners of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of our other key employees. The contingent earn-out payments are not affected by employment termination. We measure our contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. We use a probability-weighted discounted income approach as a valuation technique to convert future estimated cash flows to a single present value amount. The significant unobservable inputs used in the fair value measurements are operating income projections over the earn-out period (generally two or three years), and the probability outcome percentages we assign to each scenario. Significant increases or decreases to either of these inputs in isolation would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent earn-out liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the acquisition date is reflected as cash used in operating activities in our consolidated statement of cash flows. We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates. Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present value calculation are reported in interest expense. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income. During the first half of fiscal 2019, we recorded an immaterial adjustment related to NDY contingent earn-out liability and reported the related loss in operating income. During the first half of fiscal 2018 (all in the second quarter), we recorded increases in our contingent earn-out liabilities related to Eco Logical Australia and Cornerstone Environmental Group and reported related losses in operating income totaling $1.9 million. At March 31, 2019, there was a total potential maximum of $62.7 million of outstanding contingent consideration related to acquisitions. Of this amount, $45.9 million was estimated as the fair value and accrued on our consolidated balance sheet. |
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets The following table summarizes the changes in the carrying value of goodwill:
The goodwill addition in GSG relates to our eGT acquisition completed in the second quarter of fiscal 2019. The purchase price allocation for this acquisition is preliminary and subject to adjustment based upon the final determination of the net assets acquired and information to perform the final valuation. Our goodwill was impacted by foreign currency translation related to our foreign subsidiaries with functional currencies that are different than our reporting currency. The goodwill amounts above are presented net of any reductions from historical impairment adjustments. The gross amounts of goodwill for GSG were $444.4 million and $407.4 million at March 31, 2019 and September 30, 2018, respectively, excluding $17.7 million of accumulated impairment. The gross amounts of goodwill for CIG were $498.9 million and $507.0 million at March 31, 2019 and September 30, 2018, respectively, excluding $97.9 million of accumulated impairment. We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter. Our most recent annual review at July 2, 2018 (i.e. the first day of our fourth quarter in fiscal 2018) indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that exceeded their carrying values, including goodwill, by more than 30%. We regularly evaluate whether events and circumstances have occurred that may indicate a potential change in the recoverability of goodwill. We perform interim goodwill impairment reviews between our annual reviews if certain events and circumstances have occurred, such as a deterioration in general economic conditions; an increase in the competitive environment; a change in management, key personnel, strategy, or customers; negative or declining cash flows; or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods. We estimate the fair value of all reporting units with a goodwill balance based on a comparison and weighting of the income approach (weighted 70%), specifically the discounted cash flow method, and the market approach (weighted 30%), which estimates the fair value of our reporting units based upon comparable market prices and recent transactions, and also validates the reasonableness of the multiples from the income approach. The resulting fair value is most sensitive to the assumptions we use in our discounted cash flow analysis. The assumptions that have the most significant impact on the fair value calculation are the reporting unit’s revenue growth rate and operating profit margin, and the discount rate used to convert future estimated cash flows to a single present value amount. The gross amount and accumulated amortization of our acquired identifiable intangible assets with finite useful lives included in “Intangible assets - net” on our consolidated balance sheets, were as follows:
Amortization expense for the three and six months ended March 31, 2019 was $2.2 million and $6.2 million, respectively, compared to $5.0 million and $9.7 million for the prior-year periods. Estimated amortization expense for the remainder of fiscal 2019 and succeeding years is as follows:
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Property and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and Equipment Property and equipment consisted of the following:
The depreciation expense related to property and equipment was $4.2 million and $8.5 million for the three and six months ended March 31, 2019, respectively, compared to $5.1 million and $10.3 million for the prior-year periods. |
Stock Repurchase and Dividends |
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Stock Repurchase And Dividends [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Repurchase and Dividends | Stock Repurchase and Dividends On November 5, 2018, the Board of Directors authorized a new stock repurchase program under which we could repurchase up to $200 million of our common stock in addition to the $25 million remaining under the previous stock repurchase program. 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 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 second quarter of fiscal 2019, we repurchased through open market purchases under the new program a total of 449,055 shares at an average price of $55.67 for a total cost of $25 million. The following table summarizes dividend declared and paid in the first half of fiscal 2019 and 2018:
Subsequent Event. On April 29, 2019, the Board of Directors declared a quarterly cash dividend of $0.15 per share payable on May 31, 2019 to stockholders of record as of the close of business on May 15, 2019. |
Stockholders' Equity and Stock Compensation Plans |
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Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity and Stock Compensation Plans | Stockholders’ Equity and Stock Compensation Plans We recognize the fair value of our stock-based awards as compensation expense on a straight-line basis over the requisite service period in which the award vests. Stock-based compensation expense for the three and six months ended March 31, 2019 was $4.1 million and $8.6 million, respectively, compared to $4.7 million and $8.7 million for the same periods last year. Most of these amounts were included in SG&A in our consolidated statements of income. There were no material stock compensation awards in the second quarter of fiscal 2019. In the first half of fiscal 2019, we awarded 89,816 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $80.41 per share on the award date. All of the PSUs are performance-based and vest, if at all, after the conclusion of the three-year performance period. The number of PSUs that ultimately vest is based 50% on the growth in our diluted earnings per share and 50% on our total shareholder return relative to a peer group of companies and a stock market index over the vesting period. Additionally, we awarded 176,491 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at the fair value of $66.11 per share on the award date. All of the executive officer and employee RSUs have time-based vesting over a four-year period, and the non-employee director RSUs vest after one year. |
Earnings per Share ("EPS") |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share (EPS) | Earnings per Share (“EPS”) Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, less unvested restricted stock for the period. Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive potential common shares for the period. Potential common shares include the weighted-average dilutive effects of outstanding stock options and unvested restricted stock using the treasury stock method. The following table presents the number of weighted-average shares used to compute basic and diluted EPS:
For both the three and six months of fiscal 2019, 0.1 million options and restricted stock units were excluded from the calculation of dilutive potential common shares, compared to no options for the prior-year periods because the assumed proceeds per share exceeded the average market price per share during the periods. Therefore, their inclusion would have been anti-dilutive. |
Income Taxes |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The effective tax rates for the first half of fiscal 2019 and 2018 were (0.8)% and 11.0%, respectively. The tax rates for fiscal 2019 and 2018 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 Tax Cuts and Jobs Act ("TCJA"). The TCJA significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, while also repealing the deduction for domestic production activities, limiting the deductibility of certain executive compensation, and implementing a modified territorial tax system with the introduction of the Global Intangible Low-Taxed Income (“GILTI”) tax rules. The TCJA also imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries. Based on our analysis of tax earnings and profits and tax deficits at the prescribed measurement dates, we have a cumulative net tax deficit and do not have any tax liability related to this tax. 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 approximately 24.5% (3 months at 35% and 9 months at 21%), and will be 21% for fiscal 2019 and subsequent fiscal years. 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 one-time deferred tax benefit of approximately $10.1 million in the first quarter of fiscal 2018 to reflect our estimate of temporary differences in the United States that would 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 $22.3 million in Australia were released due to sufficient positive evidence obtained during the second quarter of fiscal 2019. The valuation allowances are primarily related to net operating loss and R&D credit carryforwards and other temporary differences. We evaluated the positive evidence against any negative evidence and determined that it is more likely than not that the deferred tax assets will be realized. The factors used to assess the likelihood of realization were the past performance of the related entities, our forecast of future taxable income, and available tax planning strategies that could be implemented to realize the deferred tax assets. Excluding the net deferred tax benefits from the TCJA and valuation allowance releases, our effective tax rate in the first half of fiscal 2019 was 24.8% compared to 23.0% in first half of fiscal 2018. We have completed our measurement of the tax effects of the TCJA with respect to the one-time revaluation of our deferred tax liabilities and the one-time transition tax on foreign earnings pursuant to Staff Accounting Bulletin No. 118 in the first quarter of fiscal 2019. The amounts recorded for these two items incorporate assumptions made based on our current interpretation of the TCJA and should not materially change. With respect to the GILTI provisions of the TCJA, we have analyzed our structure and expected global results of operations and do not expect to have any adjustment related to potential GILTI tax in our consolidated financial statements. Because of the complexity of the new GILTI tax rules, we will continue to evaluate the impact of this provision and the application of Accounting Standards Codification 740, Income Taxes. As of March 31, 2019 and September 30, 2018, the liability for income taxes associated with uncertain tax positions was $12.1 million and $9.4 million, respectively. These uncertain tax positions substantially relate to ongoing examinations, which are reasonably likely to be resolved within the next 12 months. |
Reportable Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reportable Segments | Reportable Segments We manage our operations under two reportable segments. Our GSG reportable segment primarily includes activities with U.S. government clients (federal, state and local) and all activities with development agencies worldwide. Our CIG reportable segment primarily includes activities with U.S. commercial clients and all international activities other than work for development agencies. Additionally, we will continue to report the results of the wind-down of our non-core construction activities in the Remediation and Construction Management ("RCM") segment. As of March 31, 2019, there was no remaining backlog for RCM as the projects were complete. 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 response and recovery planning services. GSG also provides engineering design services for 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. CIG provides consulting and engineering services primarily to U.S. commercial clients and international clients, both commercial and government. CIG supports commercial clients across the Fortune 500, oil and gas, energy utilities, manufacturing, aerospace, and mining 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), as well as Brazil and Chile. Management evaluates the performance of these reportable segments based upon their respective segment operating income before the effect of amortization expense related to acquisitions, and other unallocated corporate expenses. We account for inter-segment revenues and transfers as if they were to third parties; that is, by applying a negotiated fee onto the costs of the services performed. All significant intercompany balances and transactions are eliminated in consolidation. Reportable Segments The following tables summarize financial information regarding our reportable segments:
(1) Includes amortization of intangibles, other costs and other income not allocable to our reportable segments.
(1) Corporate assets consist of intercompany eliminations and assets not allocated to our reportable segments including goodwill, intangible assets, deferred income taxes and certain other assets. |
Fair Value Measurements |
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Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The fair value of long-term debt was determined using the present value of future cash flows based on the borrowing rates currently available for debt with similar terms and maturities (Level 2 measurement, as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018). The carrying value of our long-term debt approximated fair value at March 31, 2019 and September 30, 2018. At March 31, 2019, we had borrowings of $243.8 million outstanding under our Amended Credit Agreement, which were used to fund our business acquisitions, working capital needs, stock repurchases, dividends, capital expenditures and contingent earn-outs. |
Derivative Financial Instruments |
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Derivative Financial Instruments | Derivative Financial Instruments We use certain interest rate derivative contracts to hedge interest rate exposures on our variable rate debt. We enter into foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. Our hedging program is not designated for trading or speculative purposes. We recognize derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value. We record changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as cash flow hedges in our consolidated balance sheets as accumulated other comprehensive income, and in our consolidated statements of income for those derivatives designated as fair value hedges. In the fourth quarter of fiscal 2018, we entered into five interest rate swap agreements that we designated as cash flow hedges to fix the interest rate on the borrowings under our term loan facility. As of March 31, 2019, the notional principal of our outstanding interest swap agreements was $243.8 million. The interest rate swaps have a fixed interest rate of 2.79% and expire in July 2023. At March 31, 2019 and September 30, 2018, the fair value of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect was $5.5 million and $(1.3) million, respectively, of which we expect to reclassify $1.0 million from accumulated other comprehensive income to interest expense within the next twelve months. The fair values of our outstanding derivatives designated as hedging instruments were as follows:
The impact of the effective portions of derivative instruments in cash flow hedging relationships and fair value relationships on other comprehensive income was $(6.8) million for the first half of fiscal 2019 and was immaterial for the first half of fiscal 2018, respectively. Additionally, there were no ineffective portions of derivative instruments. Accordingly, no amounts were excluded from effectiveness testing for our interest rate swap agreements. |
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications Out of Accumulated Other Comprehensive Income | Reclassifications Out of Accumulated Other Comprehensive Income The accumulated balances and reporting period activities for the three and six months ended March 31, 2019 and April 1, 2018 related to reclassifications out of accumulated other comprehensive income are summarized as follows:
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Commitments and Contingencies |
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Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies We are subject to certain claims and lawsuits typically filed against the consulting and engineering profession, alleging primarily professional errors or omissions. We carry professional liability insurance, subject to certain deductibles and policy limits, against such claims. However, in some actions, parties are seeking damages that exceed our insurance coverage or for which we are not insured. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on our financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters. 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. We are currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. |
Recent Accounting Pronouncements (Policies) |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Standards In January 2016, the FASB issued guidance that generally requires companies to measure investments in other entities, except those accounted for under the equity method, at fair value and recognize any changes in fair value in net income. The guidance was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). The adoption of this guidance had no impact on our consolidated financial statements. In March 2016, the FASB issued updated guidance which requires excess tax benefits and deficiencies on share-based payments to be recorded as income tax expense or benefit in the income statement rather than being recorded in additional paid-in capital. It also requires the presentation of employee taxes as financing activities on consolidated statements of cash flows, which was previously classified as operating activities. This guidance was effective for annual and interim periods beginning after December 15, 2016 (first quarter of fiscal 2018 for us), with early adoption permitted. In the first quarter of fiscal 2017, we adopted this guidance. At the beginning of fiscal 2019, we revised the presentation of "Net cash provided by operating activities" and "Net cash (used in) provided by financing activities" in the consolidated statement of cash flows for prior period to correct the presentation of “Taxes paid on vested restricted stock” and appropriately reflect such amounts as financing activities. The correction resulted in an increase of net cash provided by operating activities of $8.8 million and a decrease of net cash provided by financing activities of $8.8 million for the six months ended April 1, 2018. We assessed the materiality of these errors on our consolidated financial statements for prior periods and concluded that the amounts were not material to any prior interim or annual periods. We elected to revise the presentation for comparability purposes. In August 2016, the FASB issued guidance to address eight specific cash flow issues to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). The adoption of this guidance had no material impact on our consolidated financial statements. In October 2016, the FASB issued updated guidance which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The guidance was effective for fiscal reporting periods and interim reporting periods within those fiscal reporting periods, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). The adoption of this guidance had no material impact on our consolidated financial statements. In November 2016, the FASB issued updated guidance which provides amendments to address the classification and presentation of changes in restricted cash in the statement of cash flows. The guidance was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us). The adoption of this guidance had no material impact on our consolidated financial statements. We updated certain captions in our consolidated statements of cash flows to include restricted cash, which is reported in our "Prepaid expenses and other current assets" on the consolidated balance sheets. In May 2017, the FASB issued updated guidance to clarify when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the updated guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes because of a change in terms or conditions. The guidance was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2017 (first quarter of fiscal 2019 for us), on a prospective basis. The adoption of this guidance had no impact on our consolidated financial statements. In August 2018, the Securities and Exchange Commission (“SEC”) published Release No. 33-10532, Disclosure Update and Simplification, which adopted amendments to certain disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded, considering other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. While most of the amendments eliminate outdated or duplicative disclosure requirements, the final rule amends the interim financial statement requirements to include a reconciliation of changes in stockholders’ equity in the notes or as a separate statement for each period for which a statement of comprehensive income is required to be filed. The new interim reconciliation of changes in stockholders’ equity is included herein as a separate statement. Additionally, we removed the disclosure on cash dividends paid per share from our consolidated statements of income. Recently Issued Accounting Standards Not Yet Adopted In February 2016, the FASB issued guidance that requires the rights and obligations associated with leasing arrangements be reflected on the balance sheet to increase transparency and comparability among organizations. Under the guidance, lessees will be required to recognize a right-of-use asset and a liability to make lease payments and disclose key information about leasing arrangements. The guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018 (first quarter of fiscal 2020 for us). Early adoption is permitted, and the standard must be adopted using a modified retrospective approach. In July 2018, the FASB issued updated guidance, which provides entities with an additional transition method to adopt the lease accounting guidance. Under the new transition method, an entity initially applies the new standard at the adoption date, versus at the beginning of the earliest period presented, and recognizes a cumulative-effective adjustment to the opening balance of retained earnings in the period of adoption, if any. While we are currently evaluating the impact that this guidance will have on our consolidated financial statements, we currently expect that the adoption of the new guidance will result in a significant increase in the assets and liabilities on our consolidated balance sheets and will likely have no impact on our consolidated statements of income and cash flows. In June 2016, the FASB issued updated guidance which requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019 (first quarter of fiscal 2021 for us). Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements. In August 2017, the FASB issued accounting guidance on hedging activities. The amendment better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018 (first quarter of fiscal 2020 for us). Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements. In February 2018, the FASB issued guidance on reclassification of certain tax effects from accumulated comprehensive income, which allows for a reclassification of stranded tax effects from the Tax Cuts and Jobs Act ("TCJA") from accumulated other comprehensive income to retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018 (first quarter of fiscal 2020 for us). We are currently evaluating the impact that this guidance will have on our consolidated financial statements. |
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Revenue Recognition | Our RUPOs represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. We had $2.8 billion of RUPOs as of March 31, 2019. RUPOs increase with awards from new contracts or additions on existing contracts and decrease as work is performed and revenue is recognized on existing contracts. RUPOs may also decrease when projects are canceled or modified in scope. We include a contract within our RUPOs when the contract is awarded and an agreement on contract terms has been reached. Contract Assets and Contract Liabilities We invoice customers based on the contractual terms of each contract. However, the timing of revenue recognition may differ from the timing of invoice issuance. As part of the adoption of ASC 606, contract assets have been bifurcated from billed and unbilled receivables. Contract assets represent revenue recognized in excess of the amounts for which we have the contractual right to bill our customers. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones or completion of a contract. In addition, many of our time and materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Contract liabilities consist of billings in excess of revenue recognized. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and increase as billings in advance of revenue recognition occur. We recognize revenue from contracts primarily utilizing the cost-to-cost measure of progress method, to estimate the progress towards completion to determine the amount of revenue and profit to recognize. Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the period in which such changes are made. As a result, we recognized net unfavorable operating income adjustments of $2.8 million and $3.2 million for the second quarter and first half of fiscal 2019, respectively, compared to $0.7 million and $1.4 million for the prior-year periods in the Commercial/International Services Group ("CIG") segment. Changes in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediately in earnings Revenue Recognition On October 1, 2018, we adopted ASC 606, which supersedes most current revenue recognition guidance, including industry-specific guidance. We adopted the standard on a modified retrospective basis which results in no restatement of the comparative periods presented and a cumulative effect adjustment to retained earnings as of the date of adoption. As part of our adoption, the new standard was applied only to those contracts that were not substantially completed as of the date of adoption. To determine the proper revenue recognition method for contracts under ASC 606, we evaluate whether multiple contracts should be combined and accounted for as a single contract and whether the combined or single contract should be accounted for as having more than one performance obligation. The decision to combine a group of contracts or separate a combined or single contract into multiple performance obligations may impact the amount of revenue recorded in a given period. Contracts are considered to have a single performance obligation if the promises are not separately identifiable from other promises in the contracts. At contract inception, we assess the goods or services promised in a contract and identify, as a separate performance obligation, each distinct promise to transfer goods or services to the customer. The identified performance obligations represent the “unit of account” for purposes of determining revenue recognition. In order to properly identify separate performance obligations, we apply judgment in determining whether each good or service provided is: (a) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (b) distinct within the context of the contract, whereby the transfer of the good or service to the customer is separately identifiable from other promises in the contract. Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from existing contracts due to the significant integration provided or significant interdependencies in the context of the contract and are accounted for as if they were part of the original contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. We account for contract modifications as a separate contract when the modification results in the promise to deliver additional goods or services that are distinct and the increase in price of the contract is for the same amount as the stand-alone selling price of the additional goods or services included in the modification. The transaction price represents the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to our customers. The consideration promised within a contract may include fixed amounts, variable amounts, or both. The nature of our contracts gives rise to several types of variable consideration, including claims, award fee incentives, fiscal funding clauses, and liquidated damages. We recognize revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized for the contract will not occur. We estimate the amount of revenue to be recognized on variable consideration using either the expected value or the most likely amount method, whichever is expected to better predict the amount of consideration to be received. Project mobilization costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred to the client. Claims are amounts in excess of agreed contract prices that we seek to collect from our clients or other third parties for delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price, or other causes of unanticipated additional costs. Revenue on claims is recognized only to the extent that contract costs related to the claims have been incurred and when it is probable that any significant revenue recognized related to the claim will not be reversed. Factors considered in determining whether revenue associated with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized include the following: (a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in our performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable. This can lead to a situation in which costs are recognized in one period and revenue is recognized in a subsequent period when a client agreement is obtained, or a claims resolution occurs. In some cases, contract retentions are withheld by clients until certain conditions are met or the project is completed, which may be several months or years. In these cases, we have not identified a significant financing component under ASC 606 as the timing difference in payment compared to delivery of obligations under the contract is not for purposes of financing. For contracts with multiple performance obligations, we allocate the transaction price to each performance obligation using a best estimate of the standalone selling price of each distinct good or service in the contract. The standalone selling price is typically determined using the estimated cost of the contract plus a margin approach. For contracts containing variable consideration, we allocate the variability to a specific performance obligation within the contract if such variability relates specifically to our efforts to satisfy the performance obligation or transfer the distinct good or service, and the allocation depicts the amount of consideration to which we expect to be entitled. We recognize revenue over time as the related performance obligation is satisfied by transferring control of a promised good or service to our customers. Progress toward complete satisfaction of the performance obligation is primarily measured using a cost-to-cost measure of progress method. The cost input is based primarily on contract cost incurred to date compared to total estimated contract cost. This measure includes forecasts based on the best information available and reflects our judgment to faithfully depict the value of the services transferred to the customer. For certain on-call engineering or consulting and similar contracts, we recognize revenue in the amount which we have the right to invoice the customer if that amount corresponds directly with the value of our performance completed to date. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost measure of progress method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. Contract Types Our services are performed under three principal types of contracts: fixed-price, time-and-materials and cost-plus. Customer payments on contracts are typically due within 60 days of billing, depending on the contract. Fixed-Price. Under fixed-price contracts, clients pay us an agreed fixed-amount negotiated in advance for a specified scope of work. Time-and-Materials. Under time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on the actual time that we spend on a project. In addition, clients reimburse us for our actual out-of-pocket costs for materials and other direct incidental expenditures that we incur in connection with our performance under the contract. Most of our time-and-material contracts are subject to maximum contract values, and also may include annual billing rate adjustment provisions. Cost-Plus. Under cost-plus contracts, we are reimbursed for allowed or otherwise defined costs incurred plus a negotiated fee. The contracts may also include incentives for various performance criteria, including quality, timeliness, ingenuity, safety and cost-effectiveness. In addition, our costs are generally subject to review by our clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract. Adoption Upon adoption on October 1, 2018, under the modified retrospective method, we recorded a cumulative effect adjustment to decrease retained earnings by $2.8 million on October 1, 2018, as well as the following cumulative effect adjustments:
The decrease in retained earnings primarily resulted from a change in the way we determine the unit of account for projects (i.e. performance obligations). Under previous guidance, we typically accounted for a contract as a single unit of revenue recognition. Upon adoption of ASC 606, we assess the nature of the promises in the contract and recognize revenue based on performance obligations within the respective contract or combined contract. Although RUPOs reflect business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. RUPOs are adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Our operations and maintenance contracts can generally be terminated by the clients without a substantive financial penalty. Therefore, the remaining performance obligations on such contracts are limited to the notice period required for the termination (usually 30, 60, or 90 days). |
Revenue Recognition (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the Effects of Adoption of ASC 606 | The following table presents how the adoption of ASC 606 affected certain line items in our consolidated balance sheet as of March 31, 2019:
(1) Previously included in "Account receivable - net". (2) Previously presented as "Billings in excess of costs on uncompleted contracts". (3) Includes $2.8 million of cumulative catch-up adjustment to retained earnings on October 1, 2018 upon adoption of ASC 606. The following table presents how the adoption of ASC 606 affected certain line items in our consolidated statements of income for the three and six months ended March 31, 2019:
The following table presents how the adoption of ASC 606 affected certain line items in our consolidated statement of cash flows for the six months ended March 31, 2019:
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Summary of Net Contract Liabilities/Assets | Net contract liabilities/assets consisted of the following:
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Reconciliation of Disaggregation of Revenue to Reportable Segments | The following tables provide information about disaggregated revenue and a reconciliation of the disaggregated revenue:
(1) Includes revenue generated under U.S. federal government contracts performed outside the United States. (2) Includes revenue generated from foreign operations, primarily in Canada and Australia, and revenue generated from non-U.S. clients. Other than the U.S. federal government, no single client accounted for more than 10% of our revenue for the three and six months ended March 31, 2019 and April 1, 2018.
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Remaining Performance Obligation, Expected Timing | We expect to satisfy our RUPOs as of March 31, 2019 over the following periods:
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Accounts Receivable - Net (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net accounts receivable and billings in excess of costs on uncompleted contracts | Net accounts receivable consisted of the following:
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Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of changes in the carrying value of goodwill | The following table summarizes the changes in the carrying value of goodwill:
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Summary of gross amount and accumulated amortization of acquired identifiable intangible assets with finite useful lives | The gross amount and accumulated amortization of our acquired identifiable intangible assets with finite useful lives included in “Intangible assets - net” on our consolidated balance sheets, were as follows:
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Schedule of estimated amortization expense for remainder of fiscal and succeeding years | Estimated amortization expense for the remainder of fiscal 2019 and succeeding years is as follows:
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Property and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment | Property and equipment consisted of the following:
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Stock Repurchase and Dividends (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Stock Repurchase And Dividends [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends Declared and Paid | The following table summarizes dividend declared and paid in the first half of fiscal 2019 and 2018:
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Earnings per Share ("EPS") (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of number of weighted-average shares used to compute basic and diluted EPS | The following table presents the number of weighted-average shares used to compute basic and diluted EPS:
|
Reportable Segments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized financial information of reportable segments | The following tables summarize financial information regarding our reportable segments:
(1) Includes amortization of intangibles, other costs and other income not allocable to our reportable segments.
(1) Corporate assets consist of intercompany eliminations and assets not allocated to our reportable segments including goodwill, intangible assets, deferred income taxes and certain other assets. |
Derivative Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of derivatives designated as hedging instruments | The fair values of our outstanding derivatives designated as hedging instruments were as follows:
|
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of reclassifications out of accumulated other comprehensive loss | The accumulated balances and reporting period activities for the three and six months ended March 31, 2019 and April 1, 2018 related to reclassifications out of accumulated other comprehensive income are summarized as follows:
|
Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 01, 2018 |
|
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Net cash provided by operating activities | $ 99,248 | $ 23,593 |
Net cash (used in) provided by financing activities | $ 110,680 | (59,017) |
Restatement Adjustment | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Net cash provided by operating activities | 8,800 | |
Net cash (used in) provided by financing activities | $ 8,800 |
Revenue Recognition - Summary of Contract Liabilities/Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 157,918 | $ 142,882 |
Contract liabilities | 154,609 | 143,270 |
Net contract assets (liabilities) | $ 3,309 | $ (388) |
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019 |
Apr. 01, 2018 |
Mar. 31, 2019 |
Apr. 01, 2018 |
|
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 722,621 | $ 700,262 | $ 1,440,052 | $ 1,460,010 |
U.S. state and local government | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 129,868 | 104,905 | 253,147 | 256,659 |
U.S. federal government | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 216,498 | 236,951 | 441,256 | 473,199 |
U.S. commercial | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 165,970 | 180,398 | 338,758 | 387,184 |
International | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 210,285 | 178,008 | 406,891 | 342,968 |
Fixed-price | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 247,831 | 224,878 | 488,764 | 460,298 |
Time-and-materials | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 345,626 | 333,590 | 682,163 | 710,362 |
Cost-plus | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 129,164 | $ 141,794 | $ 269,125 | $ 289,350 |
Accounts Receivable - Net - Net Accounts Receivable and Billings in Excess of Costs on Uncompleted Contracts (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|
Receivables [Abstract] | ||
Billed | $ 439,480 | $ 464,062 |
Unbilled | 234,577 | 267,739 |
Total accounts receivable – gross | 674,057 | 731,801 |
Allowance for doubtful accounts | (44,460) | (37,580) |
Total accounts receivable – net | $ 629,597 | $ 694,221 |
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands |
6 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Goodwill | |
Balance at beginning of the period | $ 798,820 |
Acquisition activity | 38,680 |
Translation and other | (9,824) |
Balance at end of the period | 827,676 |
GSG | |
Goodwill | |
Balance at beginning of the period | 389,741 |
Acquisition activity | 38,680 |
Translation and other | (1,751) |
Balance at end of the period | 426,670 |
CIG | |
Goodwill | |
Balance at beginning of the period | 409,079 |
Acquisition activity | 0 |
Translation and other | (8,073) |
Balance at end of the period | $ 401,006 |
Goodwill and Intangible Assets - Narrative (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jul. 02, 2018 |
Mar. 31, 2019 |
Sep. 30, 2018 |
|
Goodwill [Line Items] | |||
Impairment of goodwill | $ 0 | ||
Estimated fair values that exceeded their carrying values, percent (more than) | 30.00% | ||
Income approach, discounted cash flow method | |||
Goodwill [Line Items] | |||
Weighted rate used in fair value of goodwill (as a percent) | 70.00% | ||
Market approach | |||
Goodwill [Line Items] | |||
Weighted rate used in fair value of goodwill (as a percent) | 30.00% | ||
GSG | |||
Goodwill [Line Items] | |||
Gross amounts of goodwill | $ 444,400,000 | $ 407,400,000 | |
Accumulated impairment | 17,700,000 | ||
CIG | |||
Goodwill [Line Items] | |||
Gross amounts of goodwill | 498,900,000 | 507,000,000 | |
Accumulated impairment | $ 97,900,000 | $ 97,900,000 |
Property and Equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2019 |
Apr. 01, 2018 |
Mar. 31, 2019 |
Apr. 01, 2018 |
Sep. 30, 2018 |
|
Property and Equipment | |||||
Property and equipment, gross | $ 165,919 | $ 165,919 | $ 163,364 | ||
Accumulated depreciation | (124,259) | (124,259) | (120,086) | ||
Property and equipment, net | 41,660 | 41,660 | 43,278 | ||
Depreciation expense related to property and equipment | 4,200 | $ 5,100 | 8,500 | $ 10,300 | |
Equipment, furniture and fixtures | |||||
Property and Equipment | |||||
Property and equipment, gross | 133,593 | 133,593 | 131,521 | ||
Leasehold improvements | |||||
Property and Equipment | |||||
Property and equipment, gross | 31,915 | 31,915 | 31,430 | ||
Land and buildings | |||||
Property and Equipment | |||||
Property and equipment, gross | $ 411 | $ 411 | $ 413 |
Stock Repurchase and Dividends - Schedule of Dividends Declared and Paid (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Feb. 28, 2019 |
Dec. 14, 2018 |
Mar. 02, 2018 |
Dec. 15, 2017 |
Mar. 31, 2019 |
Apr. 01, 2018 |
Mar. 31, 2019 |
Apr. 01, 2018 |
|
Stock Repurchase And Dividends [Abstract] | ||||||||
Dividend Paid Per Share (in dollars per share) | $ 0.12 | $ 0.12 | $ 0.1 | $ 0.1 | $ 0.12 | $ 0.10 | $ 240.00 | $ 0.20 |
Dividend Paid | $ 6,616 | $ 6,654 | $ 5,583 | $ 5,589 | $ 13,270 | $ 11,172 |
Earnings per Share ("EPS") - Calculation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019 |
Apr. 01, 2018 |
Mar. 31, 2019 |
Apr. 01, 2018 |
|
Earnings Per Share [Abstract] | ||||
Net income attributable to Tetra Tech | $ 55,911 | $ 28,725 | $ 97,907 | $ 74,759 |
Weighted-average common shares outstanding – basic (in shares) | 55,143 | 55,841 | 55,237 | 55,900 |
Effect of dilutive stock options and unvested restricted stock (in shares) | 842 | 832 | 924 | 925 |
Weighted-average common stock outstanding – diluted (in shares) | 55,985 | 56,673 | 56,161 | 56,825 |
Earnings per share attributable to Tetra Tech: | ||||
Basic (in dollars per share) | $ 1.01 | $ 0.51 | $ 1.77 | $ 1.34 |
Diluted (in dollars per share) | $ 1.00 | $ 0.51 | $ 1.74 | $ 1.32 |
Earnings per Share ("EPS") - Antidilutive Securities (Details) - shares shares in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2019 |
|
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities excluded from the calculation of dilutive potential common shares (in shares) | 0.1 | 0.1 |
Income Taxes - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Mar. 31, 2019 |
Apr. 01, 2018 |
Mar. 31, 2019 |
Apr. 01, 2018 |
Sep. 30, 2018 |
|
Income Tax Disclosure [Abstract] | |||||
Effective tax rate (as a percent) | (0.80%) | 11.00% | |||
Statutory federal tax rate | 24.50% | ||||
Deferred tax benefit from tax reform remeasurement | $ 2.6 | $ 10.1 | |||
Deferred tax liability valuation allowance | $ 22.3 | $ 22.3 | |||
Effective income tax rate excluding revaluation of deferred taxes (as a percent) | 24.80% | 23.00% | |||
Liability for uncertain tax positions | $ 12.1 | $ 12.1 | $ 9.4 | ||
Period during which unrecognized tax benefits would affect the effective tax rate | 12 months |
Reportable Segments - Financial Information (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2019
USD ($)
|
Apr. 01, 2018
USD ($)
|
Mar. 31, 2019
USD ($)
segment
|
Apr. 01, 2018
USD ($)
|
Sep. 30, 2018
USD ($)
|
|
Financial information regarding reportable segments | |||||
Number of reportable segments | segment | 2 | ||||
Revenue | $ 722,621 | $ 700,262 | $ 1,440,052 | $ 1,460,010 | |
Income from operations | 47,545 | 42,716 | 103,256 | 91,305 | |
Total Assets | 1,951,865 | 1,951,865 | $ 1,959,421 | ||
Operating segment | GSG | |||||
Financial information regarding reportable segments | |||||
Revenue | 417,526 | 406,027 | 829,497 | 848,799 | |
Income from operations | 44,803 | 34,177 | 82,217 | 73,302 | |
Total Assets | 524,796 | 524,796 | 468,010 | ||
Operating segment | CIG | |||||
Financial information regarding reportable segments | |||||
Revenue | 322,458 | 309,704 | 640,252 | 641,217 | |
Income from operations | 20,869 | 18,400 | 47,968 | 39,693 | |
Total Assets | 410,918 | 410,918 | 478,197 | ||
Operating segment | RCM | |||||
Financial information regarding reportable segments | |||||
Revenue | (4,645) | 1,480 | (3,192) | 8,286 | |
Income from operations | (5,938) | (489) | (5,934) | (1,647) | |
Total Assets | 17,213 | 17,213 | 25,683 | ||
Elimination of inter-segment revenue | |||||
Financial information regarding reportable segments | |||||
Revenue | (12,718) | (16,949) | (26,505) | (38,292) | |
Corporate | |||||
Financial information regarding reportable segments | |||||
Income from operations | (12,189) | $ (9,372) | (20,995) | $ (20,043) | |
Total Assets | $ 998,938 | $ 998,938 | $ 987,531 |
Fair Value Measurements (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Fair Value Disclosures [Abstract] | |
Borrowing under credit agreement | $ 243.8 |
Derivative Financial Instruments - Narrative (Details) - Derivatives designated as hedging instruments |
3 Months Ended | 6 Months Ended | 12 Months Ended |
---|---|---|---|
Sep. 30, 2018
USD ($)
agreement
|
Mar. 31, 2019
USD ($)
|
Sep. 30, 2018
USD ($)
|
|
Interest rate swap agreements | Designated as cash flow hedges | |||
Derivative Financial Instruments | |||
Number of derivative agreements | agreement | 5 | ||
Notional amount | $ 243,800,000 | ||
Fixed rate | 2.79% | 2.79% | |
Effective portion of interest rate swap agreements | $ (1,300,000) | 5,500,000 | |
Gain (loss) to be reclassified during next twelve months | 1,000,000 | ||
Foreign currency forward contracts and interest rate swap agreements | |||
Derivative Financial Instruments | |||
Effective portion of interest rate swap agreements | (6,800,000) | ||
Ineffective portion of derivative instruments | 0 | $ 0 | |
Amounts excluded from effectiveness testing | $ 0 | $ 0 |
Derivative Financial Instruments - Fair Value (Details) - Designated as cash flow hedges - Interest rate swap agreements - Derivatives designated as hedging instruments - USD ($) $ in Thousands |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|
Other Current Liabilities | ||
Derivative Financial Instruments | ||
Derivative liability | $ (5,530) | |
Other current assets | ||
Derivative Financial Instruments | ||
Derivative asset | $ 1,244 |
Commitments and Contingencies (Details) |
Jan. 14, 2019
action
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Loss contingency, actions taken by plaintiff | 3 |
Label | Element | Value |
---|---|---|
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (2,766,000) |
Restricted Cash | us-gaap_RestrictedCash | 2,711,000 |
Restricted Cash | us-gaap_RestrictedCash | 2,696,000 |
Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (2,766,000) |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (2,766,000) |
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