UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-19655 TETRA TECH, INC. (Exact name of registrant as specified in its charter) Delaware 95-4148514 (State or other jurisdiction of i ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 3475 East Foothill Boulevard, Pasadena, California 91107 (Address of principal executive offices) (Zip Code) For the quarterly period ended March 29, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIE ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 29, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-19655 TETRA TECH, INC. (Exact name of registrant as specified in its charter) Delaware 95-4148514 (State or other jurisdiction ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________________________ FORM 10-K (Mark One) | ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | --- | | For the Fiscal Year Ended September 29, 2019 | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ | | For the Transition Period from to | | Commission File Number 0-19655 | | ________________________ ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q2 2019 interim financials show total assets at **$2.10 billion**, revenue at **$2.27 billion**, and net income at **$147.1 million**, post-ASC 606 adoption [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2019, total assets reached **$2.10 billion**, with liabilities at **$1.08 billion**, and stockholders' equity at **$1.02 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | September 30, 2018 | | :--- | :--- | :--- | | **Total current assets** | $1,116,474 | $1,050,380 | | **Goodwill** | $851,621 | $798,820 | | **Total assets** | **$2,096,423** | **$1,959,421** | | **Total current liabilities** | $646,897 | $618,093 | | **Long-term debt** | $324,074 | $264,712 | | **Total liabilities** | $1,080,630 | $992,321 | | **Total stockholders' equity** | $1,015,793 | $967,100 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Q3 2019 revenue increased to **$825.8 million** and net income to **$49.2 million**, with nine-month revenue at **$2.27 billion** and net income at **$147.1 million** Financial Performance Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2019 | Three Months Ended July 1, 2018 | Nine Months Ended June 30, 2019 | Nine Months Ended July 1, 2018 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $825,793 | $764,795 | $2,265,846 | $2,224,805 | | **Gross Profit** | $117,987 | $109,594 | $313,141 | $295,165 | | **Income from Operations** | $64,841 | $55,496 | $168,097 | $146,801 | | **Net Income Attributable to Tetra Tech** | $49,233 | $33,322 | $147,141 | $108,082 | | **Diluted EPS** | $0.88 | $0.59 | $2.63 | $1.91 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Nine-month operating cash flow increased to **$113.4 million**, with **$44.7 million** used in investing and **$47.3 million** in financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended June 30, 2019 | Nine Months Ended July 1, 2018 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $113,385 | $76,272 | | **Net cash used in investing activities** | ($44,657) | ($32,852) | | **Net cash used in financing activities** | ($47,306) | ($12,818) | | **Net increase in cash, cash equivalents and restricted cash** | $20,910 | $24,054 | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key notes detail ASC 606 adoption, eGlobalTech acquisition, WYG plc intent, goodwill increase, stock repurchases, dividends, and a 7.1% effective tax rate - The company adopted ASC 606 on October 1, 2018, using the modified retrospective method, resulting in a cumulative effect adjustment that decreased retained earnings by **$2.8 million**[32](index=32&type=chunk)[44](index=44&type=chunk)[57](index=57&type=chunk) - As of June 30, 2019, the company had **$2.8 billion** of Remaining Unsatisfied Performance Obligations (RUPOs), with approximately **$1.8 billion** expected to be recognized as revenue within the next 12 months[68](index=68&type=chunk)[69](index=69&type=chunk) - In Q2 2019, the company acquired eGlobalTech (EGT) for **$48.4 million** and announced its intent to acquire WYG plc, funding **$55 million** to an escrow account[75](index=75&type=chunk)[78](index=78&type=chunk) - The effective tax rate for the first nine months of fiscal 2019 was **7.1%**, down from **20.0%** in the prior year, due to TCJA and a **$22.3 million** release of valuation allowances[100](index=100&type=chunk)[102](index=102&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **1.8%** revenue increase for the first nine months of fiscal 2019, driven by U.S. state and local government and international markets, with strong liquidity and capital allocation [Overview of Results and Business Trends](index=33&type=section&id=Overview%20of%20Results%20and%20Business%20Trends) Nine-month revenue grew **1.8%**, with U.S. state and local government up **18.2%** and international up **12.7%**, offsetting declines in federal and commercial sectors Revenue Percentage by Client Sector (Nine Months Ended) | Client Sector | June 30, 2019 | July 1, 2018 | | :--- | :--- | :--- | | U.S. state and local government | 18.8% | 16.2% | | U.S. federal government | 30.2% | 32.3% | | U.S. commercial | 23.6% | 26.8% | | International | 27.4% | 24.7% | - U.S. state and local government revenue increased **18.2%** in the first nine months of fiscal 2019, driven by municipal water infrastructure projects and disaster response activities[141](index=141&type=chunk) - U.S. federal government revenue decreased **4.5%** in the first nine months of fiscal 2019, primarily reflecting disruption from the partial U.S. government shutdown[142](index=142&type=chunk) - International revenue grew **12.7%** in the first nine months of fiscal 2019, with strong performance in Canada and improved infrastructure work in Australia, New Zealand, and the Asia-Pacific region[144](index=144&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Q3 2019 consolidated revenue rose **8.0%** YoY to **$825.8 million**, with nine-month net income up **36.1%** and adjusted EPS at **$2.28**, driven by Government Services Group Consolidated Results Summary (Nine Months Ended) | Metric | 2019 (in thousands) | 2018 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $2,265,846 | $2,224,805 | 1.8% | | Income from operations | $168,097 | $146,801 | 14.5% | | Net income attributable to Tetra Tech | $147,141 | $108,082 | 36.1% | | Diluted EPS | $2.63 | $1.91 | 37.7% | Adjusted EPS Reconciliation (Nine Months Ended) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Reported EPS | $2.63 | $1.91 | | Adjustments (RCM, Divestitures, Tax, etc.) | ($0.35) | ($0.02) | | **Adjusted EPS** | **$2.28** | **$1.89** | [Financial Condition, Liquidity and Capital Resources](index=40&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) Primary liquidity sources are **$113.4 million** cash from operations and a **$1 billion** credit facility, with **$336.5 million** outstanding and **$353.4 million** available - Net cash from operating activities for the first nine months of fiscal 2019 was **$113.4 million**, a **$37.1 million** increase from the prior-year period[173](index=173&type=chunk) - The company repurchased **$75 million** of its common stock in the first nine months of fiscal 2019 and has **$150 million** remaining under its authorization as of June 30, 2019[95](index=95&type=chunk)[168](index=168&type=chunk) - As of June 30, 2019, the company had **$336.5 million** in outstanding borrowings under its Amended Credit Agreement and was in compliance with all financial covenants[180](index=180&type=chunk)[182](index=182&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk on variable-rate debt, mitigated by swaps, and foreign currency risk from international operations, managed by matching revenues and expenses - The company is exposed to interest rate risk on its **$336.5 million** of borrowings, partially mitigated by interest rate swaps fixing the rate on **$250 million** of its term loan[198](index=198&type=chunk)[199](index=199&type=chunk) - Foreign currency exchange rate exposure exists as **27.4%** of consolidated revenue for the first nine months of fiscal 2019 was international, primarily in Canadian and Australian dollars[200](index=200&type=chunk)[201](index=201&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[203](index=203&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company faces various claims, including a False Claims Act complaint against Tetra Tech EC, Inc. related to environmental remediation services, which it vigorously disputes - The U.S. Attorney's Office filed a complaint against subsidiary Tetra Tech EC, Inc. alleging False Claims Act violations and breach of contract for environmental remediation services at the Hunters Point Naval Shipyard[120](index=120&type=chunk)[206](index=206&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) Key risks include dependence on government funding, cyclical demand, international operations, acquisition integration challenges, and liabilities from legal proceedings and regulations - A substantial portion of revenue (**50.6%** in Q3 2019) comes from U.S. government agencies, making the company vulnerable to disruptions in government funding and spending priorities[220](index=220&type=chunk)[221](index=221&type=chunk) - International operations (**25.8%** of Q3 2019 revenue) expose the company to risks such as political instability, currency fluctuations, and complex regulations like the FCPA and UK Bribery Act[215](index=215&type=chunk)[217](index=217&type=chunk) - The company's acquisition strategy involves risks such as the inability to successfully integrate acquired companies, which could disrupt operations and prevent the realization of expected benefits[230](index=230&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) - As a U.S. government contractor, the company is subject to regular audits and complex procurement laws; violations could result in sanctions, contract termination, and reputational harm[227](index=227&type=chunk)[228](index=228&type=chunk] [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **1,255,528** shares for **$75.0 million** in the first nine months of fiscal 2019 at an average price of **$59.74** per share Share Repurchase Activity (Nine Months Ended June 30, 2019) | Metric | Value | | :--- | :--- | | Total Shares Purchased | 1,255,528 | | Average Price Paid per Share | $59.74 | | Total Cost (in millions) | $75.0 | | Remaining Authorization (in millions) | $150.0 |

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q1 2019 are presented, detailing financial position, performance, and cash flows, highlighting the adoption of ASC 606 and its impact on retained earnings Consolidated Balance Sheet Highlights | | March 31, 2019 (in thousands) | September 30, 2018 (in thousands) | | :--- | :--- | :--- | | **Total current assets** | $998,420 | $1,050,380 | | **Total assets** | $1,951,865 | $1,959,421 | | **Total current liabilities** | $624,442 | $618,093 | | **Total liabilities** | $961,260 | $992,321 | | **Total stockholders' equity** | $990,605 | $967,100 | Consolidated Statements of Income Highlights | | Three Months Ended Mar 31, 2019 (in thousands) | Six Months Ended Mar 31, 2019 (in thousands) | | :--- | :--- | :--- | | **Revenue** | $722,621 | $1,440,052 | | **Gross profit** | $96,471 | $195,155 | | **Income from operations** | $47,545 | $103,256 | | **Net income attributable to Tetra Tech** | $55,911 | $97,907 | | **Diluted EPS** | $1.00 | $1.74 | Consolidated Statements of Cash Flows Highlights | | Six Months Ended Mar 31, 2019 (in thousands) | Six Months Ended Apr 1, 2018 (in thousands) | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $99,248 | $23,593 | | **Net cash used in investing activities** | ($3,383) | ($67,365) | | **Net cash (used in) provided by financing activities** | ($110,680) | $59,017 | - The company adopted the new revenue recognition standard ASC 606 on October 1, 2018, using the modified retrospective method, which resulted in a cumulative effect adjustment that decreased retained earnings by **$2.8 million**[32](index=32&type=chunk)[57](index=57&type=chunk) - As of March 31, 2019, the company had Remaining Unsatisfied Performance Obligations (RUPOs) of **$2.8 billion**, with approximately **$1.8 billion** expected to be recognized as revenue within the next 12 months[68](index=68&type=chunk)[69](index=69&type=chunk) - In the second quarter of fiscal 2019, the company acquired eGlobalTech (eGT) for a fair value purchase price of **$48.4 million**, which included a $24.7 million promissory note and $21.1 million in estimated contingent earn-out obligations[75](index=75&type=chunk) - A subsidiary, Tetra Tech EC, Inc. (TtEC), is involved in a False Claims Act lawsuit filed by the U.S. Attorney's Office concerning environmental remediation services at the former Hunters Point Naval Shipyard, but the company disputes the claims and is currently unable to determine the range of possible loss[121](index=121&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for Q2 and H1 fiscal 2019, covering revenue trends, segment performance, liquidity, and the impact of the new ASC 606 revenue standard Financial Performance Highlights | Metric | Q2 2019 | Q2 2018 | % Change | H1 2019 | H1 2018 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $722.6M | $700.3M | 3.2% | $1,440.1M | $1,460.0M | (1.4)% | | **Revenue, net of subcontractor costs** | $585.4M | $532.8M | 9.9% | $1,138.7M | $1,077.6M | 5.7% | | **Income from operations** | $47.5M | $42.7M | 11.3% | $103.3M | $91.3M | 13.1% | | **Diluted EPS** | $1.00 | $0.51 | 96.1% | $1.74 | $1.32 | 31.8% | | **Adjusted EPS** | $0.70 | $0.54 | 29.6% | $1.40 | $1.18 | 18.6% | - Revenue from U.S. federal government clients decreased by **6.8%** in the first half of fiscal 2019, primarily due to the thirty-day partial U.S. government shutdown that began in late December 2018[143](index=143&type=chunk) - International revenue grew **18.6%** in H1 2019, driven by increased activity in Canada and contributions from the NDY acquisition, while U.S. state and local government revenue, excluding the RCM segment, grew **3.0%** from municipal water infrastructure work[142](index=142&type=chunk)[145](index=145&type=chunk) - The company's cash and cash equivalents decreased by **$15.5 million** to **$130.7 million** as of March 31, 2019, compared to the fiscal 2018 year-end, primarily due to financing and investing activities like debt repayment and share repurchases[171](index=171&type=chunk) - As of March 31, 2019, the company had **$243.8 million** in outstanding borrowings under its Amended Credit Agreement and **$449.1 million** of available credit, and was in compliance with all debt covenants[178](index=178&type=chunk)[180](index=180&type=chunk) - The effective tax rate for H1 2019 was **(0.8)%** compared to **11.0%** for H1 2018, favorably impacted by a **$2.6 million** deferred tax benefit from finalizing the TCJA analysis and a **$22.3 million** release of valuation allowances in Australia[155](index=155&type=chunk)[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to financial market risks, primarily interest rate fluctuations on variable-rate debt and foreign currency exchange rate volatility - The company is exposed to interest rate risk through its Amended Credit Agreement, and to mitigate this, it entered into interest rate swaps to fix the rate on **$250 million** of its term loan[196](index=196&type=chunk)[197](index=197&type=chunk) - The company is subject to foreign currency risk, primarily from the Canadian and Australian dollars, with **28.3%** of revenue from international business in H1 2019, and foreign currency translation resulted in a **$14.1 million** decrease in equity during this period[198](index=198&type=chunk)[199](index=199&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[201](index=201&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2019, that have materially affected, or are reasonably likely to materially affect, internal controls[202](index=202&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to ordinary course claims and lawsuits, with a significant False Claims Act lawsuit against subsidiary TtEC regarding environmental remediation services - The company is subject to typical industry claims and lawsuits, primarily for professional errors or omissions, and maintains professional liability insurance to cover such claims[203](index=203&type=chunk) - On January 14, 2019, the U.S. Attorney's Office filed complaints against subsidiary TtEC, alleging False Claims Act violations related to environmental remediation contracts at the former Hunters Point Naval Shipyard in San Francisco[205](index=205&type=chunk) - TtEC disputes the claims and intends to defend the matter vigorously, but the company is currently unable to determine the probability of the outcome or estimate a range of reasonably possible loss[205](index=205&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section details numerous risks that could materially affect the company's operations and financial results, including dependence on government funding, cyclical demand, international operations, and cybersecurity threats - A substantial portion of revenue (**47.9%** in Q2 2019) is derived from U.S. government agencies, making the company vulnerable to budget disruptions, sequestration, government shutdowns, and changes in spending priorities[219](index=219&type=chunk)[220](index=220&type=chunk) - Demand for services in the oil & gas and mining sectors is cyclical and vulnerable to economic downturns and commodity price volatility, which could lead to project cancellations and reduced revenue[212](index=212&type=chunk)[214](index=214&type=chunk) - International operations (**29.1%** of Q2 2019 revenue) expose the company to risks such as currency fluctuations, political instability, uncertain tax rules, and compliance with anti-corruption laws like the FCPA[215](index=215&type=chunk)[217](index=217&type=chunk) - The company's growth strategy involves acquisitions, which carry risks such as integration difficulties, diversion of management attention, assumption of undisclosed liabilities, and failure to realize expected synergies[229](index=229&type=chunk)[231](index=231&type=chunk) - As a U.S. government contractor, the company must comply with complex procurement laws (e.g., FAR, CAS), and non-compliance could result in sanctions, contract termination, and reputational harm[226](index=226&type=chunk) - Cybersecurity breaches pose a significant threat, with potential for unauthorized access to proprietary and client information, which could lead to operational disruptions, financial loss, and reputational damage[258](index=258&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase activities, including a new $200 million program authorized in November 2018 and shares repurchased in H1 fiscal 2019 - On November 5, 2018, the Board of Directors authorized a new stock repurchase program for up to **$200 million** of common stock[287](index=287&type=chunk) Stock Repurchase Program Summary | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | H1 FY 2019 | **879,614** | $56.84 | **$50.0** | [Item 4. Mine Safety Disclosure](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) Information concerning mine safety violations and orders issued under the Mine Act by MSHA is provided in Exhibit 95, as required by the Dodd-Frank Act - Information concerning mine safety violations required by Section 1503 of the Dodd-Frank Act is included in Exhibit 95[289](index=289&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q report, including CEO/CFO certifications, the Mine Safety Disclosure, and XBRL formatted financial data - The exhibits filed with this report include: - CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) - Mine Safety Disclosure (Exhibit 95) - XBRL formatted financial data (Exhibit 101)[290](index=290&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Total assets decreased to **$1.83 billion** from **$1.96 billion**, with quarterly revenue at **$717.4 million** and net income at **$42.0 million**, impacted by ASC 606 adoption Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 30, 2018 | Sep 30, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$1,834,889** | **$1,959,421** | | Cash and cash equivalents | $66,502 | $146,185 | | Goodwill | $782,564 | $798,820 | | **Total Liabilities** | **$880,586** | **$992,321** | | Long-term debt (incl. current) | $260,154 | $277,311 | | **Total Stockholders' Equity** | **$954,303** | **$967,100** | Consolidated Statement of Income Highlights (in thousands, except per share data) | Metric | Q1 FY2019 (ended Dec 30, 2018) | Q1 FY2018 (ended Dec 31, 2017) | | :--- | :--- | :--- | | Revenue | $717,431 | $759,749 | | Gross Profit | $98,684 | $94,145 | | Income from Operations | $55,711 | $48,589 | | Net Income attributable to Tetra Tech | $41,997 | $46,034 | | Diluted EPS | $0.75 | $0.81 | Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 FY2019 (ended Dec 30, 2018) | Q1 FY2018 (ended Dec 31, 2017) | | :--- | :--- | :--- | | Net cash used in operating activities | ($15,302) | ($57,682) | | Net cash used in investing activities | ($3,738) | ($19,727) | | Net cash (used in) provided by financing activities | ($59,021) | $61,183 | | **Net decrease in cash** | **($79,687)** | **($16,951)** | - The company adopted the new revenue recognition standard ASC 606 on October 1, 2018, using the modified retrospective method, resulting in a cumulative effect adjustment that decreased retained earnings by **$2.8 million**[24](index=24&type=chunk)[37](index=37&type=chunk)[51](index=51&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 FY2019 revenue decreased **5.6%** due to lower disaster response, while international revenue grew **19.2%**, and adjusted operating income increased **12.0%**, maintaining strong liquidity Q1 FY2019 vs Q1 FY2018 Performance Summary (in thousands) | Metric | Q1 FY2019 | Q1 FY2018 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $717,431 | $759,749 | (5.6)% | | Revenue, net of subcontractor costs | $553,364 | $544,847 | 1.6% | | Income from Operations | $55,711 | $48,589 | 14.7% | | Net Income attributable to Tetra Tech | $41,997 | $46,034 | (8.8)% | - Excluding contributions from the NDY acquisition and the impact of the divestiture of non-core utility field services, revenue decreased **6.0%** in Q1 FY2019 compared to the prior-year quarter[134](index=134&type=chunk) - The decrease in U.S. state and local government revenue (down **18.8%**) was attributed to a reduction in disaster response work compared to the high activity levels in Q1 FY2018 following hurricanes and fires[135](index=135&type=chunk) - International revenue grew **19.2%**, or **6.1%** excluding the NDY acquisition, driven by increased activity in Canada and infrastructure work in Australia, New Zealand, and the Asia-Pacific region[139](index=139&type=chunk) Adjusted (Non-GAAP) Performance | Metric | Q1 FY2019 | Q1 FY2018 | Change (%) | | :--- | :--- | :--- | :--- | | Adjusted Revenue | $715,978 | $752,942 | (4.9)% | | Adjusted Income from Operations | $55,707 | $49,747 | 12.0% | | Adjusted EPS | $0.70 | $0.65 | 7.7% | [Segment Results of Operations](index=30&type=section&id=Segment%20Results%20of%20Operations) GSG revenue declined **7.0%** due to reduced disaster recovery, while CIG revenue net of subcontractor costs increased **6.8%**, boosting operating income **27.3%** Government Services Group (GSG) Performance (in thousands) | Metric | Q1 FY2019 | Q1 FY2018 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $411,971 | $442,772 | (7.0)% | | Revenue, net of subcontractor costs | $303,281 | $309,966 | (2.2)% | | Income from Operations | $37,413 | $39,125 | (4.4)% | Commercial/International Services Group (CIG) Performance (in thousands) | Metric | Q1 FY2019 | Q1 FY2018 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $317,793 | $331,513 | (4.1)% | | Revenue, net of subcontractor costs | $249,506 | $233,729 | 6.8% | | Income from Operations | $27,099 | $21,294 | 27.3% | - CIG's operating margin, based on revenue net of subcontractor costs, improved to **10.9%** in Q1 FY2019 from **9.1%** in the prior year, reflecting improvements in Western Canadian operations[149](index=149&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=31&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) Liquidity is supported by cash from operations and a **$1 billion** credit facility, with **$66.5 million** cash and a new **$200 million** stock repurchase program authorized - On November 5, 2018, the Board authorized a new stock repurchase program for up to **$200 million**, in addition to the **$25 million** remaining under the previous program[154](index=154&type=chunk) - As of December 30, 2018, the company had **$260.0 million** in outstanding borrowings under its Amended Credit Agreement and **$439.1 million** of available credit[163](index=163&type=chunk)[164](index=164&type=chunk) - The company was in compliance with its debt covenants, with a consolidated leverage ratio of **1.11x** (max 3.00x) and an interest coverage ratio of **15.9x** (min 3.00x)[166](index=166&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk on its variable-rate credit agreement with **$250 million** in swaps and mitigates foreign currency exposure, primarily CAD and AUD, by matching revenues and expenses - The company is exposed to interest rate risk under its Amended Credit Agreement, with borrowings outstanding at December 30, 2018, totaling **$260.0 million**[178](index=178&type=chunk) - To manage interest rate risk, the company entered into five interest rate swaps to fix the variable rate on its **$250 million** Amended Term Loan Facility[179](index=179&type=chunk) - The company is subject to foreign currency transaction and translation risk, primarily related to the Canadian and Australian dollar, with **27.4%** of consolidated revenue generated by the international business for Q1 FY2019[177](index=177&type=chunk)[181](index=181&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of December 30, 2018, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that as of the end of the period, the company's disclosure controls and procedures were effective[183](index=183&type=chunk) - No changes occurred during the quarter ended December 30, 2018, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[184](index=184&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company faces legal proceedings, including False Claims Act allegations against its subsidiary TtEC regarding environmental remediation at Hunters Point Naval Shipyard - On January 14, 2019, the U.S. Attorney's Office filed complaints in intervention in three qui tam actions against subsidiary Tetra Tech EC, Inc. ("TtEC")[186](index=186&type=chunk) - The complaints allege False Claims Act violations and breach of contract related to environmental remediation services at the former Hunters Point Naval Shipyard in San Francisco, with the company currently unable to determine the outcome or potential loss[186](index=186&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) Risks include global economic uncertainty, reliance on U.S. government contracts, international operational challenges, acquisition integration, goodwill impairment, and compliance with complex regulations - A substantial amount of revenue (**48.5%** in Q1 FY2019) is derived from U.S. federal, state, and local government agencies, making the business vulnerable to disruptions in government funding, budget cuts, or shutdowns[200](index=200&type=chunk)[201](index=201&type=chunk) - International operations (**27.4%** of revenue in Q1 FY2019) expose the company to risks such as currency fluctuations, political instability, and compliance with laws like the FCPA and U.K. Bribery Act[196](index=196&type=chunk)[217](index=217&type=chunk) - Acquisitions are a key growth strategy but involve risks such as integration difficulties, potential goodwill impairment (**$782.6 million** as of Dec 30, 2018), and assumption of undisclosed liabilities[210](index=210&type=chunk)[216](index=216&type=chunk) - The company faces risks from fixed-price contracts, where cost overruns can reduce or eliminate profitability, and the potential for inaccurate cost and revenue estimates under the percentage-of-completion accounting method[230](index=230&type=chunk)[231](index=231&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) A new **$200 million** stock repurchase program was authorized, with **430,559 shares** repurchased for **$25.0 million** in Q1 FY2019 - A new stock repurchase program of up to **$200 million** was authorized on November 5, 2018[269](index=269&type=chunk) Share Repurchase Activity (Q1 FY2019) | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost (approx.) | | :--- | :--- | :--- | :--- | | Oct 1 - Oct 28, 2018 | 0 | $— | $0 | | Oct 29 - Nov 25, 2018 | 85,938 | $65.97 | $5.7M | | Nov 26 - Dec 30, 2018 | 344,621 | $56.09 | $19.3M | | **Total Q1 FY2019** | **430,559** | **$58.06** | **$25.0M** | [Item 4. Mine Safety Disclosure](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) The company provides mine safety disclosures as required by the Dodd-Frank Act, with violation information detailed in Exhibit 95 - The company may act as a mining operator under the Mine Act when performing services at a mine and is required to disclose safety violations[272](index=272&type=chunk) - Information concerning mine safety violations as required by the Dodd-Frank Act is included in Exhibit 95[272](index=272&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists key exhibits to the Form 10-Q, including CEO/CFO certifications, Mine Safety Disclosure, and XBRL financial statements - Lists key exhibits filed with the report, including CEO/CFO certifications, Mine Safety Disclosure, and XBRL data[273](index=273&type=chunk)