Tetra Tech Annual Report 2015

FY2015 Annual Report · Tetra Tech

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Dear Shareholders:

Tetra Tech delivered solid performance in our 2015 fiscal year, with
revenue of $2.3 billion, net revenue of $1.7 billion, and operating income
of $145 million. Our focus on differentiated consulting and engineering
services resulted in high margins and predictable income generation
from our ongoing operations. Our cash flow from operations of
$163 million was up 30% year-over-year. This performance enabled
us to return more than $118 million to shareholders through both
buybacks and dividends, a 33% increase from fiscal 2014.

Tetra Tech’s mission is to be the premier worldwide provider of
consulting and engineering services focused on water, environment,
infrastructure, resource management, energy, and international
development. We advanced this mission in 2015 through a combination
of acquisitive and organic growth strategies. Early in the year we

acquired Cornerstone Engineering, which expanded our geographic coverage and technical resources
in the emerging solid waste market in response to new U.S. federal regulations. In October 2015,
we announced plans to acquire Coffey International, a world-class consulting and engineering firm
headquartered in Sydney, Australia, with 3,300 staff worldwide. The addition of Coffey will increase our
annual revenue by approximately $400 million on a full annual basis. This significant step propels us
to a worldwide leadership position in international development and provides us a platform for future
growth in the Asia-Pacific region. Coffey augments our position with the U.S. Agency for International
Development (USAID), while offering new client relationships with the Australian Department of Foreign
Affairs and Trade and the UK’s Department for International Development. With Coffey, we now have a
network of 400 offices on 6 continents to provide our differentiated services across our major markets.

Our ability to lead with science differentiates us in the marketplace and has advanced us to number one
rankings in water, the environment, and solid waste, with 32 top-ten rankings in environmental and
design categories, as ranked by Engineering News-Record. To maintain our market-leadership positions,
we continue to adapt, advance science, and bring new technologies to our clients. Today we are using
unmanned aerial systems to support assessment of landfills, performing high-speed data collection
to assess transportation systems, and cleaning up hazardous waste sites using patented technologies
that remove contaminants from soil. Our scientists and engineers worked on more than 57,000 projects
in fiscal 2015, providing water and environmental solutions that are cost-effective for our clients and
sustainable for our future.

For decades, Tetra Tech has developed innovative solutions to manage, monitor, and control entire water
systems. This past year, our modelers and engineers developed predictive models to determine scenarios
for removing floodway obstructions in the Catskill Mountains; used state-of-the-art GIS software to map
and display damage to Napa, California, following the 2014 earthquake; and completed a pilot test of an
advanced treatment reuse and groundwater replenishment system that reliably meets drinking water
quality standards in Clearwater, Florida.

2015 Annual Report

Tetra Tech is also leading with science by exploring new options for integrated water management,
including stormwater capture for treatment and reuse. In conjunction with the Los Angeles Water
Collaborative Partnership, we launched a one-of-a-kind pilot program to retrofit Los Angeles homes
with a computerized water management system aimed at optimizing stormwater capture and managing
potentially torrential El Niño rains. This innovative program is part of a larger trend to develop more
flexible water management systems that address both long-term droughts and extreme floods.
Throughout North America and internationally, our water modeling systems, real-time controls, and
instrumentation have helped save our clients billions of dollars and benefited their operations for the
long term.

In 2015 we also significantly increased our portfolio of contracts with the U.S. federal government, winning
$4 billion in new contracts and bringing our total contract capacity to more than $12 billion for the first
time. Notably, we were awarded a series of U.S. contracts with worldwide scope and significant scale,
such as the U.S. Air Force A-E Services ($950 million), USAID Global A-E Services ($600 million), USAID
Water and Development ($1 billion), and USAID Urban Infrastructure ($650 million) contracts. These
contracts enable us to deliver environmental, water, and infrastructure design services worldwide to
address emerging issues and support developing countries with infrastructure improvements. In addition,
the Environmental Protection Agency awarded us a new Superfund cleanup contract ($76 million) and a
research contract ($20 million) under which we will develop tools and technologies to quickly detect and
mitigate contaminants in our drinking water or wastewater systems.

Awards of key USAID contracts such as the USAID Biodiversity and Climate Change ($49 million), USAID
Biodiversity and Forestry ($47 million), and USAID Oceans ($20 million) contracts furthered our leadership
position in addressing the impacts of climate change. Currently, our engineers and scientists are working
in more than 100 countries, using science and technology to advance these USAID programs. During fiscal
2015, we developed an innovative electronic reporting system to facilitate water utility infrastructure
systems in Mozambique; we used TV White Space to initiate online fisheries management in the
Philippines; and we supported the Mexican Global Climate Change Program in developing a national low
emissions development strategy.

Tetra Tech also saw strong orders for environmental restoration and remediation projects. In fiscal
2015, we initiated work on a $35-million restoration program for the Anacostia River under which we
characterized the water and sediment in a nine-mile segment that flows through the U.S. Capitol region.
We continued to expand our industrial water treatment services, including mine closure and tailings
treatment across North America. In British Columbia, our experts used advanced technologies to support
a coal producer in the design of a water treatment facility that provides long-term selenium removal. Our
engineers also conducted a feasibility study using three-dimensional software for a rare earth mine in
Greenland, a project for which they won a prestigious award for innovation in mining.

In oil and gas, Tetra Tech’s strategy of focusing on the midstream pipeline markets in the United States and
Canada provided stable work flow in a difficult year. Our knowledge of northern environments, difficult
terrain, and winter conditions enabled us to maintain a strong backlog of business in Canada, where we
are installing a one-of-a-kind hot bitumen pipeline to transport oil across northern regions of the country.
In the U.S. shale gas regions, we are applying new and cost-competitive mobile technologies to treat water
produced by the extraction process.

2015 Annual Report

In addition to conventional energy projects, Tetra Tech has supported more than 1,000 power projects,
including 600 wind projects and more than 150 utility-scale solar projects. Most recently, our energy
team has supported the early assessment of more than 50 offshore wind generation facilities across
North America. During the past five years, Tetra Tech has supported the permitting process for the first
U.S. offshore wind farm, a 30-megawatt farm near Block Island, Rhode Island, which will be capable of
providing the majority of Block Island’s electricity needs beginning in 2016.

In fiscal 2015, Tetra Tech’s engineers worked on a number of unique waste conversion projects to
assist our clients in meeting new regulatory standards and in adapting to new recycling technologies.
For example, Tetra Tech is supporting the development of an organics recycling bioenergy facility in
Southington, Connecticut, that is anticipated to convert more than 50,000 tons of source-separated
organics and 25,000 tons of wood, leaf, and yard waste annually into clean burning natural gas.

As we begin our 50th year as a company, Tetra Tech is in an ideal position to address the opportunities
of 2016 and beyond. Our strategy for growth is focused on continuing to expand our position with long-
term U.S. federal, local municipal, and global commercial customers, while also investing in emerging
growth areas. In the United States, new federal regulations have created growth opportunities for waste
treatment related to the upgrade or closure of coal-fired power facilities. Globally, a resurgence in the
development of urban centers has generated a new demand for environmental restoration and cleanup
of industrial areas. The need for improved water infrastructure and concerns about long-term drought
and extreme flood events are creating worldwide opportunities in water reuse, management, and
treatment. Our ability to apply smart water technology and provide our clients with innovative and
dynamic solutions to water management enables us to differentiate ourselves as the water market adapts
to technological advancements.

Through a combination of organic growth and strategic acquisitions, Tetra Tech continues to transform
and adapt our business to market changes. With the strength of our global professional staff, our client
relationships, and our financial discipline, we are prepared to meet our goals for the next fiscal year. On
behalf of our associates worldwide, I want to thank you for your continued confidence and support. We
look forward to providing our shareholders with long-term growth and strong performance in fiscal 2016.

Sincerely,

Dan Batrack
Chairman & CEO

2015 Annual Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)
(cid:2)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FORM 10-K

(cid:3)

For the Fiscal Year Ended September 27, 2015
or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the Transition Period from

Commission File Number 0-19655

TETRA TECH, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

95-4148514
(I.R.S. Employer
Identification No.)

3475 East Foothill Boulevard, Pasadena, California 91107
(Address of principal executive offices) (Zip Code)

(626) 351-4664
(Registrant’s telephone number, including area code)

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

Common Stock, $.01 par value
(Title of class)

The NASDAQ Stock Market LLC
(Name of exchange)

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:2)
No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes (cid:3) No (cid:2)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:2) No (cid:3)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes (cid:2) No (cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:3)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b-2 of the Exchange Act. Large accelerated filer (cid:2) Accelerated filer (cid:3) Non-accelerated filer (Do
not check if a smaller reporting company) (cid:3) Smaller reporting company (cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:3) No (cid:2)
The aggregate market value of the registrant’s common stock held by non-affiliates on March 27, 2015, was $1.4 billion
(based upon the closing price of a share of registrant’s common stock as reported by the Nasdaq National Market on that
date).

On November 9, 2015, 59,027,058 shares of the registrant’s common stock were outstanding.

Portions of registrant’s Proxy Statement for its 2016 Annual Meeting of Stockholders are incorporated by reference in
Part III of this report where indicated.

DOCUMENT INCORPORATED BY REFERENCE

TABLE OF CONTENTS

PART I

Item 1

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Tetra Tech Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Water, Environment & Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resource Management & Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remediation and Construction Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Project Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and Business Development
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sustainability Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions and Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Liability and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4

PART II

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Item 6
Item 7

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9

Page

4
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5
6
7
8
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10
11
13
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15
16
16
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49
75
77

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

125
125
126

Item 10
Item 11

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

126
126

PART III

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related

Item 13
Item 14

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

126
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126

PART IV

Item 15

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

127
129
131

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

PART I

Item 1. Business

General

Tetra Tech, Inc. is a leading provider of consulting and engineering services that focuses on
addressing fundamental needs for water, environment, infrastructure, resource management, and energy.
We typically begin at the earliest stage of a project by identifying technical solutions to problems and
developing execution plans tailored to our clients’ needs and resources. Our solutions may span the entire
life cycle of consulting and engineering projects and include applied science, research and technology,
engineering, design, construction management, operations and maintenance, and information technology.

We are a global provider of consulting and engineering services, renowned for our leadership in
water-related services for public and private clients. Engineering News-Record (‘‘ENR’’), the leading trade
journal for our industry, ranks firms by size of revenue. ENR has ranked us the number one water services
firm for the past 12 years, most recently in its May 2015 ‘‘Top 500 Design Firms’’ issue. In 2015, Tetra Tech
was also ranked number one in water treatment/desalination, water treatment and supply, environmental
management, environmental science, consulting studies and solid waste. ENR ranks Tetra Tech among the
largest 10 firms in numerous other service lines, including engineering/design, chemical and soil
remediation, site assessment and compliance, hazardous waste, industrial processes, and manufacturing.

Our focus on science and consulting and our ability to apply our skills to developing solutions for
water management across a wide array of public and private sector needs has diversified our client base,
expanded our geographic reach, and increased our ability to service both existing and emerging markets.
We currently have approximately 13,000 staff worldwide, located primarily in North America.

Mission

Our mission is to be the premier worldwide consulting and engineering firm, focusing on water,
environment, infrastructure, resource management, and energy. The following core principles form the
underpinning of how we work together to serve our clients:

(cid:129) Service. We put our clients first. We listen closely to better understand our clients’ needs and

deliver smart, cost-effective solutions that meet their needs.

(cid:129) Value. We solve our clients’ problems as if they were our own. We develop and implement

real-world solutions that are innovative, efficient and practical.

(cid:129) Excellence. We bring superior technical capability, disciplined project management, and

excellence in safety and quality to all of our services.

(cid:129) Opportunity. Our people are our number one asset. Opportunity means new technical
challenges that provide advancement within our company, encouraging a diverse workforce, and
ensuring a safe workplace.

Industry Overview

We are part of the global consulting and engineering industry that serves public and private clients
by addressing their challenges regarding water, the environment, infrastructure, resource management,
and energy. Our industry provides clients with the technical studies, planning, engineering, design and
construction management services that respond to their needs. The industry’s clients vary in size and scope
from small local public agencies and private companies to national governments and large multi-national
corporations. These clients seek service firms with high-caliber technical expertise, practical experience,
multi-disciplinary capabilities and the global reach needed to analyze their problems in order to develop
and implement the most appropriate, cost-effective solutions.

Many government and commercial organizations face complex problems due to increased demand
and competition for water and natural resources, newly understood threats to human health and the
environment, aging
in emerging economies, and
diversification and development of sustainable energy resources. As a global company with a local
presence in many areas around the world, we provide the breadth of technical knowledge and capabilities
to solve our clients’ diverse and challenging problems.

infrastructure, demand for new

infrastructure

Our water services support government agencies responsible for managing water supply,
wastewater treatment, stormwater management and flood protection. Our water services also support
private sector clients that require water supply and treatment for industrial processes. We help our clients
develop water supplies and manage water resources, while addressing a wide range of local and national
government requirements and policies. We provide essential support for water and site management needs
for resource extraction in the oil and gas and mining industries. Our water and environmental markets also
include both government and commercial clients that are working to restore contaminated areas and
protect and manage future uses. Our infrastructure market includes a broad range of engineering services
for water management and conveyance, transportation, public and commercial buildings, and related
community needs. Our infrastructure services include mechanical, civil and electrical engineering solutions
designed to provide resilient and long-term solutions sensitive to changing climate and development needs,
and emerging economies.

Our resource management services provide support for the safe, sustainable extraction of
necessary mineral resources and oil and gas, including a wide range of services to meet water, environment,
energy and infrastructure-related needs, sometimes in remote regions of the world. Our energy market
consists of both government and commercial clients that seek to develop energy resources, identify energy
efficiency enhancements, and support the development of energy transmission and distribution corridors.

Increasingly, the consulting and engineering industry is being asked to provide integrated solutions
in a global marketplace. Large firms such as ours can offer fully integrated services, from high end data
collection, to data analytics, to engineering design and implementation. Large firms that offer integrated
solutions differentiate themselves from smaller firms that generally offer niche services by providing fully
integrated sustainable solutions that provide lasting value to our clients. As a large company with a history

of leading with science, we are ideally suited to providing interdisciplinary solutions across our water and
related service lines.

Public policy, demand for resources, infrastructure development challenges, and natural forces
constantly shape changes in our industry. Public concern over environmental issues, especially water
quality, has been a driving force behind numerous regulations and changes in public policies and practices.
Public and private clients are increasingly focused on integrated water management, resilient infrastructure
and sustainable energy planning. Fluctuations in weather patterns and extreme events, such as prolonged
droughts and more frequent flooding, are driving concerns over the reliability of water supplies, the need
to protect coastal areas, and upgrade flood management in metropolitan areas.

Energy policies, resource limitations and concern about climate change have encouraged the
implementation of energy conservation measures, retrofits to existing structures, upgrades to energy
transmission infrastructure, and the development of renewable energy resources. Governments are using
international development as a foreign policy tool to help developing nations to overcome numerous
challenges, including challenges related to access to potable water, agricultural programs and human
health.

The Tetra Tech Strategy

To continue our successful growth and our competitive position in the markets we serve, we have
implemented the following strategy that is integral to our future success. Our approach is to lead with
science and provide solutions that are differentiated and of long-lasting benefit to our clients. Our
approach encompasses five aspects of differentiation:

Technical Differentiation. Since our inception, we have provided innovative consulting and
engineering services, with a focus on providing cost-effective solutions for all aspects of water resource
management. Adoption of emerging science in the development of practical cost-effective solutions is
central to our approach to ‘‘lead with science’’ in the delivery of our services.

Relationships and Trust. We have achieved a broad client and contract base by understanding our
clients’ priorities and demonstrating a long track record of successful performance which results in repeat
business and limits competition. We believe that proximity to our clients is also instrumental to integrating
global experience and resources with an understanding of our local clients’ needs. Over the past year, we
worked in over 100 countries, helping government and private sector clients address complex water,
environment, energy and related infrastructure needs.

Institutional Knowledge. Over our history, we have supported both public and private clients,
many for multiple decades of continuous contracts and repeat business. Long-term relationships provide us
with institutional knowledge of our clients’ programs, past projects and internal resources. Institutional
knowledge is often a significant factor in providing competitive proposals and cost-effective solutions
tailored to our clients’ needs.

One-of-a-Kind Solutions. We are often at the leading edge of new challenges where we are
providing one-of-a-kind solutions. These might be a new water reuse technology, a unique solution to
addressing new regulatory requirements, a new monitoring approach for assessing infrastructure assets or a
computer model for real time management of water resources. We are constantly evolving our intellectual
property, including a wide range of computer models, analytical software, and environmental treatment
approaches and instrumentation, often in collaboration with our forward-thinking clients. Bringing our
one-of-a-kind solutions to real world problems is a differentiator in expanding our services and growing
our business.

Smart Solutions/Innovation. Smart solutions often require taking the same pieces of the puzzle
and putting them together in a different way for a better outcome. Complex projects for the public and
private sector, at the leading edge of policy and technology development, often require innovative
solutions that combine multiple aspects of our interdisciplinary capabilities, technical resources and
institutional knowledge.

Our strategy leverages our five differentiators to both grow our existing business and expand into
new business areas. To support our growth plans, we actively attract, recruit and retain key hires. Our
combination of high-end science and consulting with practical applications provides challenging and
rewarding opportunities for our employees, thereby enhancing our ability to recruit and retain top quality
talent. Our internal networking programs, leadership training, entrepreneurial environment, focus on
technical excellence and global project portfolio help to attract and retain highly qualified individuals.

We also maintain a strong emphasis on project management at all levels of the organization. Our
client-focused project management is supported by strong fiscal management and financial tools. We take
a disciplined approach to monitoring, managing and improving our return on investment in each of our
business areas through our efforts to negotiate appropriate contract terms, manage our contract
performance to minimize schedule delays and cost overruns, and promptly bill and collect accounts
receivable.

Our strategic growth plans are augmented by our selective investment in acquisitions aligned with
our business. Acquisitions add specialized skills and staff in emerging growth markets, and augment plans
to broaden our service offerings, add contract capacity and extend our geographic presence. Our
experience in acquisitions strengthens our ability to integrate and rapidly leverage the resources of the
acquired companies post-acquisition.

Reportable Segments

In fiscal 2015, we managed our continuing operations under two reportable segments. We report
our water resources, water and wastewater treatment, environment and infrastructure engineering
activities in the Water, Environment and Infrastructure (‘‘WEI’’) reportable segment. Our Resource
Management and Energy (‘‘RME’’) reportable segment includes our oil and gas, energy, waste
management, remediation, utilities and international development services. In addition, we report the
results of the wind-down of our non-core construction activities in the Remediation and Construction
Management (‘‘RCM’’) reportable segment. The following table presents the percentage of our revenue by
reportable segment:

Reportable Segment

WEI . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RME . . . . . . . . . . . . . . . . . . . . . . . . . . .
RCM . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inter-segment elimination . . . . . . . . . . . . . .

2015

40.8%
58.4
3.8
(3.0)

Fiscal Year

2014

38.1%
56.7
8.9
(3.7)

2013

36.8%
53.2
11.7
(1.7)

100.0%

For additional information regarding our reportable segments, see Note 19, ‘‘Reportable
Segments’’ of the ‘‘Notes to Consolidated Financial Statements’’ included in Item 8. For more information
on risks related to our business, segments and geographic regions, including risks related to foreign
operations, see Item 1A, ‘‘Risk Factors’’ of this report.

Water, Environment and Infrastructure (WEI)

WEI provides consulting and engineering services worldwide for a broad range of water and
infrastructure-related needs in both developed and emerging economies. WEI supports both public and
private clients including federal, state/provincial and local governments, and global and local commercial
and industrial clients. The primary markets for WEI’s services include water resources analysis and water
management, environmental restoration, government consulting, and a broad range of civil infrastructure
master planning and engineering design for facilities, transportation, and regional and local development.
WEI’s services span from early data collection and monitoring, to data analysis and information
technology, to science and engineering applied research, to engineering design, to construction
management and operations and maintenance.

In a resource-constrained world, our experts assist clients in identifying, reducing and strategically
optimizing their water management and environmental footprint with sustainable solutions that mitigate
regulatory impacts, institute operational efficiencies, manage assets, provide new business opportunities
and promote corporate responsibility. Our services support our clients’ efforts to become sustainable by
‘‘greening’’ infrastructure, implementing energy efficiency and resource conservation, using alternative
sources of energy, capturing and sequestering carbon, providing emergency preparedness and response
support, and improving water and land resource management. We also provide climate change and
strategic management consulting, project implementation, and greenhouse gas inventory assessment,
certification, reduction and management services.

Our services include the following:

(cid:129) Providing water-related services world-wide including: master planning; data analysis and
surface and groundwater modeling, particularly in the areas of water resources, watershed
management, climate adaptation analysis; drought mitigation and water supply development;
and flood mitigation and management.

(cid:129) Providing smart water management solutions that integrate water modeling, instrumentation
and real-time controls to create flexible water systems that respond to changing conditions,
optimize use of infrastructure, and provide clients with the ability to more efficiently monitor
and manage their water infrastructure.

(cid:129) Providing consulting and engineering design services that are applied to numerous aspects of
water quality and quantity management, including major water and wastewater treatment
plants, combined sewer storage and separation, water reuse programs, regional stormwater
management and green infrastructure design, and drainage and flood control; supporting
master planning, permitting, design, and construction of water-related redevelopment projects,
and parks and river corridor restoration projects; and providing water supply, water treatment
and water reuse services.

(cid:129) Offering plant engineering services for commercial and industrial clients; helping to renovate,
upgrade and modernize industrial water supplies, and address water treatment and water reuse
needs; and providing plant engineering, project execution and program management services
for industrial water treatment projects throughout the world.

(cid:129) Comprehensive services for environmental planning, cleanup and reuse of sites contaminated
with hazardous materials, toxic chemicals, and oil and petroleum products, which cover all
phases of the remedial planning process, starting with emergency response and initial site
assessment through removal actions, remedial design and implementation management; and
supporting both commercial and government clients in planning and implementing remedial

activities at numerous sites around the world, and providing a broad range of environmental
analysis and planning services.

(cid:129) Providing engineering, architecture, construction management and technical services for
transportation projects, including roadway monitoring and asset management services,
collecting condition data, optimizing upgrades and long-term planning for expansion; providing
multi-model design services for commuter railway stations, airport expansions, bridges and
major highways, and ports and harbors; and designing solutions to repair, replace and upgrade
older transportation infrastructure.

(cid:129) Providing infrastructure services in extreme and remote areas by using specialized techniques
that are adapted to local resources, while minimizing environmental impacts, and considering
potential climate change impacts. These include providing consulting and construction services
to owners of transportation, natural resources, energy and community infrastructure in the
Arctic and areas of permafrost around the globe.

(cid:129) Providing planning, architectural and engineering services for U.S. federal, state and local
government, and commercial facilities and related infrastructure needs including military
housing, and educational, institutional, corporate headquarters, healthcare, and research
facilities; providing civil, electrical, mechanical, structural, plumbing and fire protection
engineering and design services for buildings and surrounding developments around the world;
and providing engineering and construction management projects for a wide range of clients
with specialized needs such as security systems, training and audiovisual facilities, clean rooms,
laboratories, medical facilities and emergency preparedness facilities.

(cid:129) Providing technology systems integration to support data management, data processing,
communications and outreach, and systems development; providing systems analysis and
information management to optimize the U.S. National Airspace System and related aviation
systems; and supporting research and technical services for national-scale water resource and
environmental data management, including archiving and statistical analysis.

Resource Management and Energy (RME)

RME provides consulting and engineering services worldwide for a broad range of resource
management and energy needs. RME supports both private and public clients, including global industrial
and commercial clients, U.S. federal agencies in large scale remediation, and major international
development agencies. The primary markets for RME’s services include natural resources, energy,
remediation, waste management, utilities and international development. RME’s services span from early
data collection and monitoring, to data analysis and information technology, to science and engineering
applied research, to engineering design, to construction management and operations and maintenance.
RME supports engineering, procurement and construction management (‘‘EPCM’’) for full service
implementation of commercial projects.

Our services include the following:

(cid:129) Supporting oil and gas clients across North America in the upstream, midstream and
downstream market sectors. Our services include environmental permitting support, siting
studies, strategic planning and analyses, design of well pads and surface impoundments for
drilling sites, water management for exploration activities, design of midstream pipelines and
associated pumping stations and storage facilities, construction monitoring, design and
construction management for downstream sustaining capital projects, biological and cultural
assessments, site investigations and hazardous waste site remediation.

(cid:129) Providing a full range of services to electric power utilities and independent power producers
worldwide, ranging from macro-level planning, management, and advisory services to project-
specific environmental, engineering and construction management services. For utilities and
governmental agencies regulating power, services include policy and regulatory development,
utility management and privatization, power asset evaluation and management, and transaction
support services. For energy developers and owners of renewable and conventional power
generation facilities, as well as transmission and distribution assets, services
include
environmental, engineering, procurement, and operations and maintenance services for all
project phases.

(cid:129) Providing international development services to many donor agencies to develop safe and
reliable water supplies and sanitation services, support the eradication of poverty, improve
increase economic growth; planning, designing,
livelihoods, promote democracy and
implementing, researching, and monitoring projects in the areas of climate change, agriculture
and rural development, governance and institutional development, natural resources and the
environment, infrastructure, economic growth, energy, rule of law and justice systems, land
tenure and property rights, and training and consulting for public-private partnerships; building
capacity and strengthening institutions in areas such as global health, energy sector reform,
utility management, food security and local governance.

(cid:129) Offering a wide range of consulting and engineering services for solid waste management,
including landfill design and management, throughout the United States and Canada; providing
design, construction management, and maintenance services to manage solid and hazardous
waste, for environmental, wastewater, energy, oil and gas containment, mining, utilities,
aquaculture and other industrial clients; designing and installing geosynthetic liners for large
lining and capping projects, as well as innovative renewable energy projects such as solar
energy-generating landfill caps; and providing full-service solutions for gas-to-energy facilities to
efficiently use landfill methane gas.

(cid:129) Providing environmental remediation and reconstruction services to evaluate and restore lands
to beneficial use, including the identification, evaluation and destruction of unexploded
ordinance (‘‘UXO’’), both domestically and
internationally. Under the U.S. federal
government’s Base Realignment and Closure (‘‘BRAC’’) Act, helping to remediate and restore
facilities at military locations in the United States and around the world; managing large,
complex sediment remediation programs that help restore rivers and coastal waters to beneficial
use.

(cid:129) Supporting utilities in the United States in implementing infrastructure needs, including

broadband and other wired utilities.

Remediation and Construction Management

We report the results of the wind-down of our non-core construction activities in the RCM
reportable segment. The remaining work performed in this segment will be substantially complete by the
end of fiscal 2016.

Project Examples

The following table presents brief examples of projects in our ongoing operations during fiscal

2015:

Segment

WEI

Representative Projects

(cid:129) Assisting the U.S. Environmental Protection Agency (‘‘EPA’’) Office of Wastewater
Management. Supporting EPA’s outreach and technical assistance efforts to increase
awareness of the function and benefits of green infrastructure, including technical
assistance
in planning, designing and
implementing a spectrum of practical and cost-effective green infrastructure
practices.

to over 30 municipal governments

(cid:129) Providing technical, analytical and programmatic support under the EPA’s
Brownfields and Land Revitalization Program to promote the assessment, cleanup
and revitalization of properties affected by the presence or potential presence of
hazardous substances, pollutants and other contaminants.

(cid:129) Providing support to EPA’s Climate Change Division to reduce emissions of
methane, a potent greenhouse gas and potential source of clean energy. Supporting
EPA’s Natural Gas STAR and AgStar programs.

(cid:129) Providing

innovative solutions

for stormwater capture and water quality
management for green infrastructure design and modeling services for City of Los
Angeles and Los Angeles County, California.

(cid:129) Providing engineering design and environmental management services to the U.S.
Army Corps of Engineers (‘‘USACE’’) for the Port of Miami channel deepening
environmental mitigation program.

(cid:129) Providing smart water solutions using real time control (‘‘RTC’’) systems, to reduce
overflows, maximize use of retention in the system, and improve operational
efficiency, in the City of Edmonton, Alberta, Canada.

(cid:129) Providing engineering services to the City of Clearwater, Florida for demonstration
testing of the first potable water reuse project in Florida using a combination of
innovative groundwater recharge and treatment.

(cid:129) Supporting DeKalb County, Georgia in the implementation of a 54 million gallon
per day Snapfinger Creek Advanced Wastewater Treatment Plan Expansion, which
will be the largest membrane bioreactor facility in the United States upon start-up.

(cid:129) Program management for the City of Detroit for broad implementation of
community-based stormwater management and green infrastructure effectively
combining city revitalization initiatives and reduction of overflows.

(cid:129) Providing master planning services to Miami-Dade County, Florida in smart, energy
efficient and resilient water infrastructure solutions for the most populous county in
Florida.

Segment

WEI

Representative Projects

(cid:129) Providing transportation planning, data collection and design services for the
in arctic region

Province of Alberta, Canada; with specialized expertise
infrastructure.

(cid:129) Providing energy efficiency, ‘‘net zero’’ project development and asset management

services for the U.S. military, including the Army, Navy and Air Force.

(cid:129) Providing energy, environmental assessment and studies to mitigate military
operations impacts to sensitive flora and fauna at U.S. bases, such as the endangered
desert tortoise on a Marine Corps base.

(cid:129) Providing master planning and engineering design services to USACE on U.S. bases
and in international facilities through multiple district and program specific
contracts.

(cid:129) Providing emergency preparedness and planning services for multiple state and local
agencies, especially in coastal regions, such as recovery from wildfires in California,
flooding in Texas and South Carolina, and infrastructure recovery services in New
York and New Jersey due to Superstorm Sandy.

RME

(cid:129) Performing design-build services for a coal ash leachate pond closure/conversion and
a groundwater cut-off wall project for the Orlando Utilities Commission. We also
provided the geotechnical, hydrological and ecological evaluations; and prepared the
engineering design and detailed construction drawings.

(cid:129) Developing and

implementing the EPA’s Coal Combustion Residuals Rule

Compliance Support Program for a coal-fired power plant in Pennsylvania.

(cid:129) Working with the U.S. Agency for International Development (‘‘USAID’’) to
implement a number of key projects. These include public-private partnerships for
electric generation and distribution of energy to poor and developing countries in
Africa; supporting the empowerment of women for increased gender diversity and
engagement in partnership with USAID and the Government of Afghanistan; and
providing technical leadership for strategies to confront global climate change
impacts and strengthen resilience to withstand extreme weather events through such
initiatives as the USAID-funded programs in Southeast Asia and West Africa.

(cid:129) Providing constraints analyses, siting studies, marine geophysical surveys, submarine
cable routing analyses, specialty marine impact studies, permitting services,
biological and cultural resources surveys, construction compliance, and support for
offshore energy projects, including the first offshore windfarm in the United States
off the coast of Block Island, Rhode Island.

(cid:129) Providing engineering, detailed design and construction monitoring for multiple oil
and gas midstream pipeline companies; performing in-plant engineering and
sustaining capital projects work at downstream refineries; building a specialty
insulated pipeline for the transport of hot bitumen in Alberta, Canada; and
preparing the Federal Energy Regulatory Commission environmental permitting for
the Mountain Valley gas pipeline project.

Segment

RME

Clients

Representative Projects

(cid:129) Providing landfill permitting and engineering for various cities, counties and private
companies; providing strategic planning support to the counties of Los Angeles and
Orange in the evaluation and implementation of innovative waste conversion
technologies; and supporting the Ocean County Landfill Corporation in Manchester,
New Jersey by providing permitting, engineering design, monitoring, compliance and
consulting services.

(cid:129) Providing design and construction management services for the hydropower industry
with Hydro-Quebec, BC Hydro and Manitoba Hydro; providing electrical
engineering for transmission and distribution; and providing plumbing design for an
energy efficient building campus in Houston.

(cid:129) Providing turn-key design, construction, dredging and treatment services for the
Lower Fox River
remediation and clean-up project; providing closure,
decontamination and demolition services for mines in Nevada and New Mexico; and
providing environmental remedial actions for several U.S. Department of Defense
(‘‘DoD’’) agencies.

We provide services to a diverse base of international, U.S. commercial, U.S. federal, and U.S.
state and local government clients. The following table presents the percentage of our revenue by client
sector:

Client Sector

International (1)
. . . . . . . . . . . . . . . . . .
U.S. commercial . . . . . . . . . . . . . . . . . .
U.S. federal government (2)
. . . . . . . . . .
U.S. state and local government . . . . . . .

2015

24.6%
32.0
30.9
12.5

100.0%

Fiscal Year

2014

25.9%
28.7
31.1
14.3

100.0%

2013

26.7%
26.5
31.8
15.0

100.0%

(1)

(2)

Includes revenue generated from foreign operations, primarily in Canada, and revenue
generated from non-U.S. clients.
Includes revenue generated under U.S. federal government contracts performed outside the
United States.

U.S. federal government agencies are significant clients. The DoD accounted for 10.4%, 11.7%
and 12.1% of our revenue in fiscal 2015, 2014 and 2013, respectively. We typically support multiple
programs within a single U.S. federal government agency, both domestically and internationally. We also
assist U.S. state and local government clients in a variety of jurisdictions across the United States. In
Canada, we work for several provinces and a variety of local jurisdictions. Our commercial clients include
companies in the chemical, energy, mining, pharmaceutical, retail, aerospace, automotive, petroleum, and
communications industries. No single client, except for U.S. federal government clients, accounted for
more than 10% of our revenue in fiscal 2015.

Contracts

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

Contract Type

Fixed-price . . . . . . . . . . . . . . . . . . . . .
Time-and-materials . . . . . . . . . . . . . . . .
Cost-plus . . . . . . . . . . . . . . . . . . . . . . .

2015

35.4%
45.8
18.8

100.0%

Fiscal Year

2014

45.3%
36.3
18.4

100.0%

2013

42.9%
39.2
17.9

100.0%

inherent risks,

Our clients select the type of contract we enter into for a particular engagement. Under a fixed-
price contract, the client agrees to pay a specified price for our performance of the entire contract or a
specified portion of the contract. Some fixed-price contracts can include date-certain and/or performance
obligations. Fixed-price contracts carry certain
losses from
underestimating costs, delays in project completion, problems with new technologies, price increases for
materials, and economic and other changes that may occur over the contract period. Consequently, the
profitability of fixed-price contracts may vary substantially. Under our time-and-materials contracts, we are
paid for labor at negotiated hourly billing rates and also paid for other expenses. Profitability on these
contracts is driven by billable headcount and cost control. Many of our time-and-materials contracts are
subject to maximum contract values and, accordingly, revenue related to these contracts is recognized as if
these contracts were fixed-price contracts. Under our cost-plus contracts, some of which are subject to a
contract ceiling amount, we are reimbursed for allowable costs and fees, which may be fixed or
performance-based. If our costs exceed the contract ceiling or are not allowable, we may not be able to
obtain full reimbursement. Further, the amount of the fee received for a cost-plus award fee contract
partially depends upon the client’s discretionary periodic assessment of our performance on that contract.

including risks of

Some contracts with the U.S. federal government are subject to annual funding approval. U.S.
federal government agencies may impose spending restrictions that limit the continued funding of our
existing contracts and may limit our ability to obtain additional contracts. These limitations, if significant,
could have a material adverse effect on us. All contracts with the U.S. federal government may be
terminated by the government at any time, with or without cause.

U.S. federal government agencies have formal policies against continuing or awarding contracts
that would create actual or potential conflicts of interest with other activities of a contractor. These policies
may prevent us from bidding for or performing government contracts resulting from or related to certain
work we have performed. In addition, services performed for a commercial or government sector client
may create conflicts of interest that preclude or limit our ability to obtain work for a private organization.
We attempt to identify actual or potential conflicts of interest and to minimize the possibility that such
conflicts could affect our work under current contracts or our ability to compete for future contracts. We
have, on occasion, declined to bid on a project because of an existing or potential conflict of interest.

Some of our operating units have contracts with the U.S. federal government that are subject to
audit by the government, primarily by the Defense Contract Audit Agency (‘‘DCAA’’). The DCAA
generally seeks to (i) identify and evaluate all activities that contribute to, or have an impact on, proposed
or incurred costs of government contracts; (ii) evaluate a contractor’s policies, procedures, controls, and
performance; and (iii) prevent or avoid wasteful, careless, and inefficient production or service. To
accomplish this, the DCAA examines our internal control systems, management policies, and financial
capability; evaluates the accuracy, reliability, and reasonableness of our cost representations and records;

and assesses our compliance with Cost Accounting Standards (‘‘CAS’’) and defective-pricing clauses found
within the Federal Acquisition Regulation (‘‘FAR’’). The DCAA also performs an annual review of our
overhead rates and assists in the establishment of our final rates. This review focuses on the allowability of
cost items and the applicability of CAS. The DCAA also audits cost-based contracts, including the
close-out of those contracts.

The DCAA reviews all types of U.S. federal government proposals, including those of award,
administration, modification, and re-pricing. The DCAA considers our cost accounting system, estimating
methods and procedures, and specific proposal requirements. Operational audits are also performed by
the DCAA. A review of our operations at every major organizational level is conducted during the
proposal review period. During the course of its audit, the U.S. federal government may disallow costs if it
determines that we accounted for such costs in a manner inconsistent with CAS. Under a government
contract, only those costs that are reasonable, allocable, and allowable are recoverable. A disallowance of
costs by the U.S. federal government could have a material adverse effect on our financial results.

In accordance with our corporate policies, we maintain controls to minimize any occurrence of
fraud or other unlawful activities that could result in severe legal remedies, including the payment of
damages and/or penalties, criminal and civil sanctions, and debarment. In addition, we maintain
preventative audit programs and mitigation measures to ensure that appropriate control systems are in
place.

We provide our services under contracts, purchase orders, or retainer letters. Our policy requires
that all contracts must be in writing. We bill our clients in accordance with the contract terms and
periodically based on costs incurred, on either an hourly-fee basis or on a percentage-of-completion basis,
as the project progresses. Most of our agreements permit our clients to terminate the agreements without
cause upon payment of fees and expenses through the date of the termination. Generally, our contracts do
not require that we provide performance bonds. If required, a performance bond, issued by a surety
company, guarantees a contractor’s performance under the contract. If the contractor defaults under the
contract, the surety will, at its discretion, complete the job or pay the client the amount of the bond. If the
contractor does not have a performance bond and defaults in the performance of a contract, the contractor
is responsible for all damages resulting from the breach of contract. These damages include the cost of
completion, together with possible consequential damages such as lost profits.

Marketing and Business Development

Our corporate management team establishes the scope and range of services we provide and our
overall business strategy. Our on-going strategic planning defines and guides our investment in marketing
and business development to leverage our differentiators and target priority programs and growth markets.
Our centralized business development support group develops corporate marketing materials, conducts
market research, and manages promotional and professional activities, including appearances at trade
shows, direct mailings, advertising and public relations.

Business development activities are implemented by our technical and professional management
staff throughout the company. We believe that these personnel have the best understanding of a client’s
needs and the effect of local or client-specific issues, laws and regulations, and procurement procedures.
Our professional staff members hold frequent meetings with existing and potential clients; give
presentations to civic and professional organizations; and present seminars on current technical topics.
Essential to the effective development of business is each staff member’s access to all of our service
offerings through our internal technical and geographic networks. Our strong internal networking
programs help our professional staff members to pursue new opportunities for both existing and new
clients. These networks also facilitate our ability to provide services throughout the project life cycle from
the early studies through to construction management and operations. Our information technology systems
provide the support for a variety of data needs including skills search tools, business development tracking
and collaboration.

For our major focus areas, consistent with our strategic plan, we have established company-wide
growth initiatives that reinforce internal coordination, track the development of new programs, identify
and coordinate collective resources for major bids, and help us build interdisciplinary teams and provide
innovative solutions for major pursuits. Our growth initiatives provide a forum for cross-sector
collaboration and the development of interdisciplinary solutions. We continuously identify new markets
that are consistent with our strategic plan and service offerings, and we leverage our full-service
capabilities and internal coordination structure to develop and implement strategies to research, anticipate
and position us for future procurements and emerging programs.

Sustainability Program

Our Sustainability Program allows us to encourage, coordinate and report on actions to minimize
our collective impacts on the environment. Our Sustainability Program has three primary pillars: Projects –
the solutions we provide for our clients; Procurement – our procurement and subcontracting approaches;
and Processes – the internal policies and processes that promote sustainable practices, reduce costs and
minimize environmental impacts. We have established a clear set of metrics to evaluate our progress
toward our sustainability goals. We continuously implement sustainability-related policies and practices,
and we assess the results of our efforts in order to improve upon them in the future.

Our Sustainability Program is led by our Chief Sustainability Officer, who has been appointed by
executive management and is supported by other key corporate and operations representatives via our
Sustainability Council. Our executive management team reviews and approves the Sustainability Program
and evaluates our progress in achieving the goals and objectives outlined in our plan. We publish an annual
sustainability report that documents our progress.

Acquisitions and Divestitures

Acquisitions. We continuously evaluate the marketplace for strategic acquisition opportunities.
Due to our reputation, size, financial resources, geographic presence and range of services, we have
numerous opportunities to acquire privately and publicly held companies or selected portions of such
companies. During our evaluation, we examine the effect an acquisition may have on our long-range
business strategy and results of operations. Generally, we proceed with an acquisition if we believe that it
would have a positive effect on future operations and could strategically expand our service offerings. As
successful integration and implementation are essential to achieving favorable results, no assurance can be
given that any acquisition will provide accretive results.

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

For detailed information regarding acquisitions, see Note 5, ‘‘Mergers and Acquisitions’’ of the

‘‘Notes to Consolidated Financial Statements’’ included in Item 8.

Divestitures. To complement our acquisition strategy and our focus on internal growth, we
regularly review and evaluate our existing operations to determine whether our business model should

change through the divestiture of certain businesses. Accordingly, from time to time, we may divest certain
non-core businesses and reallocate our resources to businesses that better align with our long-term
strategic direction. We did not have any divestitures in fiscal 2015 or 2014.

Competition

The market for our services is generally competitive. We often compete with many other firms

ranging from small regional firms to large international firms.

We perform a broad spectrum of consulting, engineering and technical services across our
reportable segments. Our client base includes U.S. federal government agencies such as the DoD, USAID,
the U.S. Department of Energy (‘‘DOE’’), EPA and the Federal Aviation Administration; U.S. state and
local government agencies; provincial and local government agencies in Canada; the U.S. commercial
sector, which consists primarily of large industrial companies and utilities; and our international
commercial clients. Our competition varies and is a function of the business areas in which, and the client
sectors for which, we perform our services. The number of competitors for any procurement can vary
widely, depending upon technical qualifications, the relative value of the project, geographic location, the
financial terms and risks associated with the work, and any restrictions placed upon competition by the
client. Historically, clients have chosen among competing firms by weighing the quality, innovation and
timeliness of the firm’s service versus its cost to determine which firm offers the best value. When less work
becomes available in a given market, price becomes an increasingly important factor.

We believe that our principal competitors include the following firms, in alphabetical order:
AECOM Technology Corporation; AMEC Foster Wheeler; Arcadis NV; Black & Veatch Corporation;
Brown & Caldwell; CDM Smith Inc.; CH2M HILL Companies, Ltd.; Chemonics International, Inc.; GHD;
ICF International, Inc.; Jacobs Engineering Group Inc.; Leidos, Inc., MWH Global, Inc.; SNC-Lavalin
Group Inc.; Stantec Inc.; TRC Companies, Inc.; Weston Solutions, Inc.; Willbros Group, Inc.; and WSP
Global Inc.

Backlog

We include in our backlog only those contracts for which funding has been provided and work
authorization has been received. We estimate that approximately 70% of our backlog at the end of fiscal
2015 will be recognized as revenue in fiscal 2016, as work is being performed. However, we cannot
guarantee that the revenue projected in our backlog will be realized or, if realized, will result in profits. In
addition, project cancellations or scope adjustments may occur with respect to contracts reflected in our
backlog. For example, certain of our contracts with the U.S. federal government and other clients are
terminable at the discretion of the client, with or without cause. These types of backlog reductions could
adversely affect our revenue and margins. Accordingly, our backlog as of any particular date is an
uncertain indicator of our future earnings.

At fiscal 2015 year-end, our backlog was $1.9 billion, a decrease of $109.6 million, or 5.4%,
compared to fiscal 2014 year-end. Approximately $800 million and $1.0 billion of our backlog at the end of
fiscal 2015 related to WEI and RME, respectively. The overall decrease in our backlog was due to the
wind-down of non-core construction projects in RCM and foreign currency translation. On a constant
currency basis and excluding RCM, our backlog grew 4.0% in fiscal 2015 compared to the end of fiscal
2014.

Regulations

We engage in various service activities that are subject to government oversight, including
environmental laws and regulations, general government procurement laws and regulations, and other
regulations and requirements imposed by specific government agencies with which we conduct business.

Environmental. A significant portion of our business involves planning, design, program
management and construction management of pollution control facilities, as well as assessment and
management of remediation activities at hazardous waste sites, U.S. Superfund sites and military bases. In
addition, we contract with U.S. federal government entities to destroy hazardous materials, including
weapons stockpiles. These activities require us to manage, handle, remove, treat, transport, and dispose of
toxic or hazardous substances.

Some environmental laws, such as the Superfund law in the United States and similar state,
provincial and local statutes, can impose liability for the entire cost of clean-up for contaminated facilities
or sites upon present and former owners and operators, as well as generators, transporters and persons
arranging for the treatment or disposal of such substances. In addition, while we strive to handle hazardous
and toxic substances with care and in accordance with safe methods, the possibility of accidents, leaks,
spills, and events of force majeure always exist. Humans exposed to these materials, including workers or
subcontractors engaged in the transportation and disposal of hazardous materials and persons in affected
areas, may be injured or become ill, resulting in lawsuits that expose us to liability that may result in
substantial damage awards. Liabilities for contamination or human exposure to hazardous or toxic
materials, or a failure to comply with applicable regulations, could result in substantial costs, including
clean-up costs, fines, civil or criminal sanctions, third party claims for property damage or personal injury,
or the cessation of remediation activities.

Certain of our business operations are covered by U.S. Public Law 85-804, which provides for
government indemnification against claims and damages arising out of unusually hazardous activities
performed at the request of the government. Due to changes in public policies and law, however,
government indemnification may not be available in the case of any future claims or liabilities relating to
other hazardous activities that we perform.

Government Procurement. The services we provide to the U.S. federal government are subject to

FAR and other rules and regulations applicable to government contracts. These rules and regulations:

(cid:129) require certification and disclosure of all cost and pricing data in connection with the contract

negotiations under certain contract types;

(cid:129) impose accounting rules that define allowable and unallowable costs and otherwise govern our

right to reimbursement under certain cost-based government contracts; and

(cid:129) restrict the use and dissemination of information classified for national security purposes and

the exportation of certain products and technical data.

In addition, services provided to the DoD are monitored by the Defense Contract Management
Agency and audited by the DCAA. Our government clients can also terminate any of their contracts, and
many of our government contracts are subject to renewal or extension annually. Further, the services we
provide to state and local government clients are subject to various government rules and regulations.

Seasonality

We experience seasonal trends in our business. Our revenue and operating income are typically
lower in the first quarter of our fiscal year, primarily due to the Thanksgiving (in the U.S.), Christmas and
New Year’s holidays. Many of our clients’ employees, as well as our own employees, take vacations during
these holiday periods. Further, seasonal inclement weather conditions occasionally cause some of our
offices to close temporarily or may hamper our project field work in the northern hemisphere’s temperate
and arctic regions. These occurrences result in fewer billable hours worked on projects and,
correspondingly, less revenue recognized.

Potential Liability and Insurance

Our business activities could expose us to potential liability under various environmental laws and
under workplace health and safety regulations. In addition, we occasionally assume liability by contract
under indemnification agreements. We cannot predict the magnitude of such potential liabilities.

We maintain a comprehensive general liability insurance policy with an umbrella policy that covers
losses beyond the general liability limits. We also maintain professional errors and omissions liability and
contractor’s pollution liability insurance policies. We believe that both policies provide adequate coverage
for our business. When we perform higher-risk work, such as fixed-price remediation, we obtain the
necessary types of insurance coverage for such activities, as is typically required by our clients.

We obtain insurance coverage through a broker that is experienced in the professional liability
field. The broker and our risk manager regularly review the adequacy of our insurance coverage. Because
there are various exclusions and retentions under our policies, or an insurance carrier may become
insolvent, there can be no assurance that all potential liabilities will be covered by our insurance policies or
paid by our carrier.

We evaluate the risk associated with insurance claims. If we determine that a loss is probable and
reasonably estimable, we establish an appropriate reserve. A reserve is not established if we determine that
a claim has no merit or is not probable or reasonably estimable. Our historic levels of insurance coverage
and reserves have been adequate. However, partially or completely uninsured claims, if successful and of
significant magnitude, could have a material adverse effect on our business.

Employees

At fiscal 2015 year-end, we had approximately 13,000 staff. A large percentage of our employees
have technical and professional backgrounds and undergraduate and/or advanced degrees, including the
employees of recently acquired companies. Our professional staff includes archaeologists, architects,
biologists, chemical engineers, chemists, civil engineers, computer scientists, economists, electrical
engineers, environmental engineers, environmental scientists, geologists, hydrogeologists, mechanical
engineers, oceanographers, project managers and toxicologists. We consider the current relationships with
our employees to be favorable. We are not aware of any employment circumstances that are likely to
disrupt work at any of our facilities. See Part I, Item 1A, ‘‘Risk Factors’’ for a discussion of the risks related
to the loss of key personnel or our inability to attract and retain qualified personnel.

Executive Officers of the Registrant

The following table shows the name, age and position of each of our executive officers at

November 20, 2015:

Name

Dan L. Batrack

Age

Chairman, Chief Executive Officer and President

Position

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

Steven M. Burdick

Executive Vice President, Chief Financial Officer

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

Leslie L. Shoemaker

Executive Vice President and President of Water, Environment and
Infrastructure

Dr. Shoemaker was named President of WEI
in April 2015.
Dr. Shoemaker joined us in 1991, and has previously served in various
management capacities, including project and program manager, water
resources manager and infrastructure group president. From 2005 to 2015,
she led our strategic planning, business development and company-wide
collaboration programs. Her technical expertise is in the management of
large-scale watershed and master planning studies, development of
modeling tools and application of optimization tools for decision making.
Dr. Shoemaker holds a B.A. degree in Mathematics from Hamilton
College, a Master of Engineering from Cornell University and a Ph.D. in
Agricultural Engineering from the University of Maryland.

Name

Ronald J. Chu

Age

Position

Executive Vice President and President of Resource Management and
Energy

Mr. Chu has served as the President of RME since June 2007. He has
more than 16 years of experience with us, and has served in various
technical and management capacities, including project and program
manager, office manager, regional manager and Chief Operating Officer
of the predecessor to RME. Mr. Chu was named a Vice President in 2001,
and has served as president of several subsidiary companies during his
tenure with us. He began his career as a civil/sanitary engineer in 1981 and
entered the environmental consulting field in 1984. His career has included
management of major assessment, engineering and remediation programs
for major oil and gas companies, Fortune 100 manufacturers, energy
suppliers, and government agencies. Mr. Chu is a registered professional
engineer in several states and has authored numerous technical articles.
He holds a B.S. in Civil Engineering from Northeastern University and an
M.S. in Environmental Engineering from the University of Southern
California.

William R. Brownlie

Senior Vice President, Chief Engineer and Corporate Risk Management
Officer

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

Richard A. Lemmon

Senior Vice President, Corporate Administration

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

Janis B. Salin

Senior Vice President, General Counsel and Secretary

Ms. Salin joined us in February 2002. For the prior 18 years, Ms. Salin was
a Principal with the law firm of Riordan & McKinzie in Los Angeles, and
served as Managing Principal of that firm from 1990 to 1992. She served as
our outside counsel from the time of our formation in 1988. Ms. Salin
holds B.A. and J.D. degrees from the University of California at Los
Angeles.

Name

Craig L. Christensen

Age

Senior Vice President, Chief Information Officer

Position

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

Kevin P. McDonald

Senior Vice President, Corporate Human Resources

Mr. McDonald joined us in 2004 through the acquisition of Foster
Wheeler Environmental Corporation. He is responsible for all areas of
human resources (‘‘HR’’), including executive compensation, employee
benefits, succession planning, human resources information systems, and
employment
leading our corporate HR
organization, Mr. McDonald was the HR Director for one of our
subsidiaries. He has more than 30 years’ experience in the engineering and
construction services industry. Mr. McDonald earned a B.S. degree in
Management from the University of Scranton and an M.B.A from
Fairleigh Dickinson University.

law compliance. Prior to

Brian N. Carter

Senior Vice President, Corporate Controller and Chief Accounting Officer

Mr. Carter joined Tetra Tech as Vice President, Corporate Controller and
Chief Accounting Officer in June 2011 and was appointed Senior Vice
President in October 2012. He previously served as Vice President of
Finance and Administration for Wedbush, Inc., a privately held financial
services holding company, from September 2009 to June 2011. Previously,
Mr. Carter served in finance and auditing positions in private industry and
in Business
with Ernst & Young LLP. Mr. Carter holds a B.S.
Administration from Miami University and
is a Certified Public
Accountant.

Available Information

All of our periodic report filings with the Securities and Exchange Commission (‘‘SEC’’) pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), are
made available, free of charge, through our website located at www.tetratech.com, including our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any
amendments to these reports. These reports are available on our website as soon as reasonably practicable
after we electronically file with or furnish the reports to the SEC. You may also request an electronic or
paper copy of these filings at no cost by writing or telephoning us at the following: Tetra Tech, Inc.,
Attention: Investor Relations, 3475 East Foothill Boulevard, Pasadena, California 91107, (626) 351-4664.

Item 1A. Risk Factors

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

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

The last several years have been periodically marked by concerns including but not limited to
decreased consumer confidence, the lingering effects of international conflicts, energy costs and inflation.
Although certain indices and economic data have shown signs of stabilization in the United States and
certain global markets, there can be no assurance that these improvements will be broad-based or
sustainable. This instability can make it extremely difficult for our clients, our vendors and us to accurately
forecast and plan future business activities, and could cause constrained spending on our services, delays
and a lengthening of our business development efforts and/or difficulty in collection of our accounts
receivable. Further, ongoing economic instability in the global markets could limit our ability to access the
capital markets at a time when we would like, or need, to raise capital, which could have an impact on our
ability to react to changing business conditions or new opportunities. Accordingly, if worldwide political
and economic uncertainties continue or worsen, our business, results of operations and financial condition
could be materially and adversely affected.

Our annual revenue, expenses, and operating results may fluctuate significantly, which may adversely affect
our stock price.

Our annual revenue, expenses, and operating results may fluctuate significantly because of
numerous factors, some of which may contribute to more pronounced fluctuations in an uncertain global
economic environment. These factors include:

(cid:129) loss of key employees;

(cid:129) the number and significance of client contracts commenced and completed during a quarter;

(cid:129) creditworthiness and solvency of clients;

(cid:129) the ability of our clients to terminate contracts without penalties;

(cid:129) general economic or political conditions;

(cid:129) unanticipated changes in contract performance that may affect profitability, particularly with

contracts that are fixed-price or have funding limits;

(cid:129) contract negotiations on change orders, requests for equitable adjustment, and collections of

related billed and unbilled accounts receivable;

(cid:129) 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;

(cid:129) budget constraints experienced by our U.S. federal, and state and local government clients;

(cid:129) integration of acquired companies;

(cid:129) changes in contingent consideration related to acquisition earn-outs;

(cid:129) divestiture or discontinuance of operating units;

(cid:129) employee hiring, utilization and turnover rates;

(cid:129) delays incurred in connection with a contract;

(cid:129) the size, scope and payment terms of contracts;

(cid:129) the timing of expenses incurred for corporate initiatives;

(cid:129) reductions in the prices of services offered by our competitors;

(cid:129) threatened or pending litigation;

(cid:129) legislative and regulatory enforcement policy changes that may affect demand for our services;

(cid:129) the impairment of goodwill or identifiable intangible assets;

(cid:129) the fluctuation of a foreign currency exchange rate;

(cid:129) stock-based compensation expense;

(cid:129) 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 condensed consolidated
financial statements;

(cid:129) success in executing our strategy and operating plans;

(cid:129) changes in tax laws or regulations or accounting rules;

(cid:129) results of income tax examinations;

(cid:129) 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;

(cid:129) 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; and

(cid:129) continued volatility in the financial and commodity markets.

As a consequence, operating results for a particular future period are difficult to predict and,
therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the

foregoing factors, or any other factors discussed elsewhere herein, could have a material adverse effect on
our business, results of operations and financial condition that could adversely affect our stock price.

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

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

We derive revenue from companies in the mining industry, which is a historically cyclical industry with
levels of activity that are significantly affected by the levels and volatility of prices for commodities. If
economic growth slows or global demand for commodities declines further, then our revenue, profits and
financial condition may deteriorate.

The businesses of our global mining clients are, to varying degrees, cyclical and have experienced
declines over the last two years due to lower global growth expectations and the associated decline in
market prices. For example, depending on the market prices of uranium, precious metals, aluminum,
copper, iron ore, and potash, our mining company clients may cancel or curtail their mining projects, which
could result in a corresponding decline in the demand for our services among these clients. Accordingly,
the cyclical nature of the mining industry could have a material adverse effect on our business, operating
results or financial condition. As an example, in the fourth quarter of fiscal 2015, the mining sector
continued to contract in response to lower global growth expectations driven in large part by China’s actual
and projected slower economic growth. Consistent with this trend, our mining customers continued their
curtailment of capital spending for new mining projects. As a result, we experienced a 25% decline in our
global mining revenue in the fourth quarter of fiscal 2015 compared to the same period of fiscal 2014. As a
result of this financial performance, and our revised forecasts beyond fiscal 2015, we wrote-off all of our
mining-related goodwill and identifiable intangible assets and recorded a related impairment charge of
$60.8 million ($57.3 million after-tax) in the fourth quarter of fiscal 2015.

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

Demand for our oil and gas services fluctuates, and we depend on our customers’ willingness to
make future expenditures to explore for, develop, produce and transport oil and natural gas in the United
States and Canada. Our customers’ willingness to undertake these activities depends largely upon

prevailing industry conditions that are influenced by numerous factors over which we have no control,
including:

(cid:129) prices, and expectations about future prices, of oil and natural gas;

(cid:129) domestic and foreign supply of and demand for oil and natural gas;

(cid:129) the cost of exploring for, developing, producing and delivering oil and natural gas;

(cid:129) transportation capacity, including but not limited to train transportation capacity and its future

regulation;

(cid:129) available pipeline, storage and other transportation capacity;

(cid:129) availability of qualified personnel and lead times associated with acquiring equipment and

products;

(cid:129) federal, state, provincial and local regulation of oilfield activities;

(cid:129) environmental concerns regarding the methods our customers use to produce hydrocarbons;

(cid:129) the availability of water resources and the cost of disposal and recycling services; and

(cid:129) seasonal limitations on access to work locations.

Anticipated future prices for natural gas and crude oil are a primary factor affecting spending by
our customers. Lower prices or volatility in prices for oil and natural gas typically decrease spending, which
can cause rapid and material declines in demand for our services and in the prices we are able to charge for
our services. In addition, the reduced spending in the development of the Canadian oil sands could be
further adversely affected by the denial of the proposed Keystone XL pipeline project application by the
U.S. federal government. Worldwide political, economic, military and terrorist events, as well as natural
disasters and other factors beyond our control, contribute to oil and natural gas price levels and volatility
and are likely to continue to do so in the future.

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

In fiscal 2015, we generated 43.4% of our revenue from contracts with U.S. federal, and state and
local government agencies. A significant amount of this revenue is derived under multi-year contracts,
many of which are appropriated on an annual basis. As a result, at the beginning of a project, the related
contract may be only partially funded, and additional funding is normally committed only as appropriations
are made in each subsequent year. These appropriations, and the timing of payment of appropriated
amounts, may be influenced by numerous factors as noted below. Our backlog includes only the projects
that have funding appropriated.

The demand for our U.S. government-related services is generally driven by the level of
government program funding. Accordingly, the success and further development of our business depends,
in large part, upon the continued funding of these U.S. government programs, and upon our ability to
obtain contracts and perform well under these programs. There are several factors that could materially
affect our U.S. government contracting business. These and other factors could cause U.S. government
agencies to delay or cancel programs, to reduce their orders under existing contracts, to exercise their

rights to terminate contracts or not to exercise contract options for renewals or extensions. Such factors,
which include the following, could have a material adverse effect on our revenue or the timing of contract
payments from U.S. government agencies:

(cid:129) 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;

(cid:129) changes

in and delays or cancellations of government programs, requirements or

appropriations;

(cid:129) budget constraints or policy changes resulting in delay or curtailment of expenditures related to

the services we provide;

(cid:129) re-competes of government contracts;

(cid:129) the timing and amount of tax revenue received by federal, and state and local governments, and

the overall level of government expenditures;

(cid:129) curtailment in the use of government contracting firms;

(cid:129) delays associated with insufficient numbers of government staff to oversee contracts;

(cid:129) the increasing preference by government agencies for contracting with small and disadvantaged

businesses;

(cid:129) competing political priorities and changes in the political climate with regard to the funding or

operation of the services we provide;

(cid:129) the adoption of new laws or regulations affecting our contracting relationships with the federal,

state or local governments;

(cid:129) 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;

(cid:129) a dispute with or improper activity by any of our subcontractors; and

(cid:129) general economic or political conditions.

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

We must comply with and are affected by U.S. federal, state, local, and foreign laws and
regulations relating to the formation, administration and performance of government contracts. For
example, we must comply with FAR, the Truth in Negotiations Act, CAS, the American Recovery and
Reinvestment Act of 2009, the Services Contract Act, and the U.S. Department of Defense security

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

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

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

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

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

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

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

Our revenue from commercial clients is significant, and the credit risks associated with certain of these
clients could adversely affect our operating results.

In fiscal 2015, we generated 51.4% of our revenue from U.S. and foreign commercial clients. Due
to continuing weakness in general economic conditions, our commercial business may be at risk as we rely
upon the financial stability and creditworthiness of our clients. To the extent the credit quality of these
clients deteriorates or these clients seek bankruptcy protection, our ability to collect our receivables, and
ultimately our operating results, may be adversely affected.

Our international operations expose us to legal, political, and economic risks that could harm our business
and financial results.

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

In fiscal 2015, we generated 24.6% of our revenue from our international operations, primarily in
Canada, and from international clients for work that is performed by our domestic operations.
International business is subject to a variety of risks, including:

(cid:129) imposition of governmental controls and changes in laws, regulations, or policies;

(cid:129) lack of developed legal systems to enforce contractual rights;

(cid:129) greater risk of uncollectible accounts and longer collection cycles;

(cid:129) currency exchange rate fluctuations, devaluations, and other conversion restrictions;

(cid:129) uncertain and changing tax rules, regulations, and rates;

(cid:129) 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 leave a country quickly;

(cid:129) logistical and communication challenges;

(cid:129) changes in regulatory practices, including tariffs and taxes;

(cid:129) changes in labor conditions;

(cid:129) general economic, political, and financial conditions in foreign markets; and

(cid:129) exposure to civil or criminal liability under the U.S. Foreign Corrupt Practices Act (‘‘FCPA’’),
the U.K. Bribery Act, the Canadian Corruption of Foreign Public Officials Act, the Brazilian
Clean Companies Act, the anti-boycott rules, trade and export control regulations, as well as
other international regulations.

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

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

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

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

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

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

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

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

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

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

agreements have expired. We do not maintain key-man life insurance policies on any of our executive
officers or senior managers. Our failure to attract and retain key individuals could impair our ability to
provide services to our clients and conduct our business effectively.

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

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

(cid:129) 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;

(cid:129) 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;

(cid:129) provisions for uncollectible receivables, client claims, and recoveries of costs from

subcontractors, vendors, and others;

(cid:129) provisions for income taxes, research and experimentation (‘‘R&E’’) tax credits, valuation

allowances, and unrecognized tax benefits;

(cid:129) value of goodwill and recoverability of other intangible assets;

(cid:129) valuations of assets acquired and liabilities assumed in connection with business combinations;

(cid:129) valuation of contingent earn-out liabilities recorded in connection with business combinations;

(cid:129) valuation of employee benefit plans;

(cid:129) valuation of stock-based compensation expense; and

(cid:129) accruals for estimated liabilities, including litigation and insurance reserves.

Our actual business and financial results could differ from those estimates, which may significantly

reduce or eliminate our profits.

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

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

(cid:129) our ability to transition employees from completed projects to new assignments and to hire and

assimilate new employees;

(cid:129) our ability to forecast demand for our services and thereby maintain an appropriate headcount

in each of our geographies and workforces;

(cid:129) our ability to manage attrition;

(cid:129) our need to devote time and resources to training, business development, professional

development, and other non-chargeable activities; and

(cid:129) our ability to match the skill sets of our employees to the needs of the marketplace.

If we over-utilize our workforce, our employees may become disengaged, which could impact

employee attrition. If we under-utilize our workforce, our profit margin and profitability could suffer.

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

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

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

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

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

Under our time-and-materials contracts, we are paid for labor at negotiated hourly billing rates
and also paid for other expenses. Profitability on these contracts is driven by billable headcount and cost
control. Many of our time-and-materials contracts are subject to maximum contract values and,

accordingly, revenue relating to these contracts is recognized as if these contracts were fixed-price
contracts. Under our cost-plus contracts, some of which are subject to contract ceiling amounts, we are
reimbursed for allowable costs and fees, which may be fixed or performance-based. If our costs exceed the
contract ceiling or are not allowable under the provisions of the contract or any applicable regulations, we
may not be able to obtain reimbursement for all of the costs we incur.

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

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

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

We have brought claims against clients for additional costs exceeding the contract price or for
amounts not included in the original contract price. These types of claims occur due to matters such as
client-caused delays or changes from the initial project scope, both of which may result in additional cost.
Often, these claims can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to
accurately predict when these claims will be fully resolved. When these types of events occur and
unresolved claims are pending, we have used working capital in projects to cover cost overruns pending the
resolution of the relevant claims. A failure to promptly recover on these types of claims could have a
negative impact on our liquidity and profitability. Total accounts receivable at September 27, 2015 included
approximately $53 million related to such claims.

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

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

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

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

(cid:129) we may not be able to identify suitable acquisition candidates or to acquire additional

companies on acceptable terms;

(cid:129) we are pursuing international acquisitions, which inherently pose more risk than domestic

acquisitions;

(cid:129) we compete with others to acquire companies, which may result in decreased availability of, or

increased price for, suitable acquisition candidates;

(cid:129) we may not be able to obtain the necessary financing, on favorable terms or at all, to finance any

of our potential acquisitions;

(cid:129) we may ultimately fail to consummate an acquisition even if we announce that we plan to

acquire a company; and

(cid:129) acquired companies may not perform as we expect, and we may fail to realize anticipated

revenue and profits.

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

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

(cid:129) issues in integrating information, communications, and other systems;

(cid:129) incompatibility of logistics, marketing, and administration methods;

(cid:129) maintaining employee morale and retaining key employees;

(cid:129) integrating the business cultures of both companies;

(cid:129) preserving important strategic client relationships;

(cid:129) consolidating corporate and administrative

infrastructures, and eliminating duplicative

operations; and

(cid:129) coordinating and integrating geographically separate organizations.

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

Further, acquisitions may cause us to:

(cid:129) issue common stock that would dilute our current stockholders’ ownership percentage;

(cid:129) use a substantial portion of our cash resources;

(cid:129) increase our interest expense, leverage, and debt service requirements (if we incur additional

debt to pay for an acquisition);

(cid:129) 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;

(cid:129) record goodwill and non-amortizable intangible assets that are subject to impairment testing

and potential impairment charges;

(cid:129) experience volatility in earnings due to changes in contingent consideration related to

acquisition earn-out liability estimates;

(cid:129) incur amortization expenses related to certain intangible assets;

(cid:129) lose existing or potential contracts as a result of conflict of interest issues;

(cid:129) incur large and immediate write-offs; or

(cid:129) become subject to litigation.

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

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

Because we have historically acquired a significant number of companies, goodwill and other
intangible assets represent a substantial portion of our assets. As of September 27, 2015, our goodwill was
$601.4 million and other intangible assets were $40.3 million. We are required to perform a goodwill
impairment test for potential impairment at least on an annual basis. We also assess the recoverability of
the unamortized balance of our intangible assets when indications of impairment are present based on

expected future profitability and undiscounted expected cash flows and their contribution to our overall
operations. The goodwill impairment test requires us to determine the fair value of our reporting units,
which are the components one level below our reportable segments. In determining fair value, we make
significant judgments and estimates, including assumptions about our strategic plans with regard to our
operations. We also analyze current economic indicators and market valuations to help determine fair
value. To the extent economic conditions that would impact the future operations of our reporting units
change, our goodwill may be deemed to be impaired, and we would be required to record a non-cash
charge that could result in a material adverse effect on our financial position or results of operations.

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

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

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

Our backlog at September 27, 2015 was $1.9 billion, a decrease of $109.6 million, or 5.4%,
compared to the end of fiscal 2014. We include in backlog only those contracts for which funding has been
provided and work authorizations have been received. We cannot guarantee that the revenue projected in
our backlog will be realized or, if realized, will result in profits. In addition, project cancellations or scope
adjustments may occur, from time to time, with respect to contracts reflected in our backlog. For example,
certain of our contracts with the U.S. federal government and other clients are terminable at the discretion
of the client, with or without cause. These types of backlog reductions could adversely affect our revenue
and margins. As a result of these factors, our backlog as of any particular date is an uncertain indicator of
our future earnings.

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

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

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

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

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

We may be required to pay liquidated damages if we fail to meet milestone requirements in our contracts.

We may be required to pay liquidated damages if we fail to meet milestone requirements in our
contracts. Failure to meet any of the milestone requirements could result in additional costs, and the
amount of such additional costs could exceed the projected profits on the project. These additional costs
include liquidated damages paid under contractual penalty provisions, which can be substantial and can
accrue on a regular basis.

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

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

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

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

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

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

(cid:129) incur additional indebtedness;

(cid:129) create liens securing debt or other encumbrances on our assets;

(cid:129) make loans or advances;

(cid:129) pay dividends or make distributions to our stockholders;

(cid:129) purchase or redeem our stock;

(cid:129) repay indebtedness that is junior to indebtedness under our credit agreement;

(cid:129) acquire the assets of, or merge or consolidate with, other companies; and

(cid:129) sell, lease, or otherwise dispose of assets.

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

Our industry is highly competitive and we may be unable to compete effectively.

Our industry is highly fragmented and intensely competitive. Our competitors are numerous,
ranging from small private firms to multi-billion-dollar public companies. In addition, the technical and
professional aspects of our services generally do not require large upfront capital expenditures and provide
limited barriers against new competitors. Some of our competitors have achieved greater market
penetration in some of the markets in which we compete, and some have substantially more financial
resources and/or financial flexibility than we do. As a result of the number of competitors in the industry,
our clients may select one of our competitors on a project due to competitive pricing or a specific skill set.
This competitive environment could force us to make price concessions or otherwise reduce prices for our
services. If we are unable to maintain our competitiveness, our market share, revenue, and profits will
decline.

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

We engage in consulting, engineering, program management, construction management,
construction, and technical services that can result in substantial injury or damages that may expose us to
legal proceedings, investigations, and disputes. For example, in the ordinary course of our business, we may
be involved in legal disputes regarding personal injury claims, employee or labor disputes, professional
liability claims, and general commercial disputes involving project cost overruns and liquidated damages,
as well as other claims. In addition, in the ordinary course of our business, we frequently make professional
judgments and recommendations about environmental and engineering conditions of project sites for our
clients, and we may be deemed to be responsible for these judgments and recommendations if they are
later determined to be inaccurate. Any unfavorable legal ruling against us could result in substantial
monetary damages or even criminal violations. We maintain insurance coverage as part of our overall legal
and risk management strategy to minimize our potential liabilities; however, insurance coverage contains
exclusions and other limitations that may not cover our potential liabilities. Generally, our insurance

program covers workers’ compensation and employer’s liability, general liability, automobile liability,
professional errors and omissions liability, property, and contractor’s pollution liability (in addition to
other policies for specific projects). Our insurance program includes deductibles or self-insured retentions
for each covered claim that may increase over time. In addition, our insurance policies contain exclusions
that insurance providers may use to deny or restrict coverage. Excess liability and professional liability
insurance policies provide for coverage on a ‘‘claims-made’’ basis, covering only claims actually made and
reported during the policy period currently in effect. If we sustain liabilities that exceed or that are
excluded from our insurance coverage, or for which we are not insured, it could have a material adverse
impact on our results of operations and financial condition (see Note 18, ‘‘Commitments and
Contingencies’’ of the ‘‘Notes to Consolidated Financial Statements’’ for more information).

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

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

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

Certain clients require bid bonds, and performance and payment bonds. These bonds indemnify
the client should we fail to perform our obligations under a contract. If a bond is required for a particular
project and we are unable to obtain an appropriate bond, we cannot pursue that project. In some instances,
we are required to co-venture with a small or disadvantaged business to pursue certain U.S. federal or state
government contracts. In connection with these ventures, we are sometimes required to utilize our bonding
capacity to cover all of the payment and performance obligations under the contract with the client. We
have a bonding facility but, as is typically the case, the issuance of bonds under that facility is at the surety’s
sole discretion. Moreover, due to events that can negatively affect the insurance and bonding markets,
bonding may be more difficult to obtain or may only be available at significant additional cost. There can
be no assurance that bonds will continue to be available to us on reasonable terms. Our inability to obtain
adequate bonding and, as a result, to bid on new work could have a material adverse effect on our future
revenue and business prospects.

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

Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper
activities by one of our employees, agents, or partners could have a significant negative impact on our
business and reputation. Such misconduct could include the failure to comply with government
procurement regulations, regulations regarding the protection of classified information, regulations
prohibiting bribery and other foreign corrupt practices, regulations regarding the pricing of labor and other
costs in government contracts, regulations on lobbying or similar activities, regulations pertaining to the
internal controls over financial reporting, environmental laws, and any other applicable laws or regulations.
For example, as previously noted, the FCPA and similar anti-bribery laws in other jurisdictions generally
prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the
purpose of obtaining or retaining business. Our policies mandate compliance with these regulations and

laws, and we take precautions to prevent and detect misconduct. However, since our internal controls are
subject to inherent limitations, including human error, it is possible that these controls could be
intentionally circumvented or become inadequate because of changed conditions. As a result, we cannot
assure that our controls will protect us from reckless or criminal acts committed by our employees or
agents. Our failure to comply with applicable laws or regulations, or acts of misconduct could subject us to
fines and penalties, loss of security clearances, and suspension or debarment from contracting, any or all of
which could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil
enforcement actions.

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

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

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

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

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

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

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

We issue reports and opinions to clients based on our professional engineering expertise, as well as
our other professional credentials. Our reports and opinions may need to comply with professional
standards, licensing requirements, securities regulations, and other laws and rules governing the

performance of professional services in the jurisdiction in which the services are performed. In addition,
we could be liable to third parties who use or rely upon our reports or opinions even if we are not
contractually bound to those third parties. For example, if we deliver an inaccurate report or one that is not
in compliance with the relevant standards, and that report is made available to a third party, we could be
subject to third-party liability, resulting in monetary damages and penalties.

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

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

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

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

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

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

adversely affect our competitive business position. In addition, if we are unable to prevent third parties
from infringing or misappropriating our trademarks or other proprietary information, our competitive
position could be adversely affected.

Systems and information technology interruption could adversely impact our ability to operate.

We rely heavily on computer, information, and communications technology and systems to
operate. From time to time, we experience system interruptions and delays. If we are unable to effectively
deploy software and hardware, upgrade our systems and network infrastructure, and take steps to improve
and protect our systems, systems operations could be interrupted or delayed.

Our computer and communications systems and operations could be damaged or interrupted by
natural disasters, telecommunications failures, acts of war or terrorism, and similar events or disruptions.
In addition, we face the threat of unauthorized system access, computer hackers, computer viruses,
malicious code, organized cyber-attacks, and other security breaches and system disruptions. We devote
significant resources to the security of our computer systems, but they may still be vulnerable to threats.
Anyone who circumvents security measures could misappropriate proprietary information or cause
interruptions or malfunctions in system operations. As a result, we may be required to expend significant
resources to protect against the threat of system disruptions and security breaches, or to alleviate problems
caused by disruptions and breaches.

Any of these or other events could cause system interruption, delays, and loss of critical data that
could delay or prevent operations, and could have a material adverse effect on our business, financial
condition, results of operations, and cash flows, and could negatively impact our clients.

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

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

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

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

(cid:129) quarter-to-quarter variations in our financial results, including revenue, profits, days sales
outstanding, backlog, and other measures of financial performance or financial condition;

(cid:129) our announcements or our competitors’ announcements of significant events, including

acquisitions;

(cid:129) our announcements concerning the payment of dividends or the repurchase of our shares;

(cid:129) resolution of threatened or pending litigation;

(cid:129) changes in investors’ and analysts’ perceptions of our business or any of our competitors’

businesses;

(cid:129) investors’ and analysts’ assessments of reports prepared or conclusions reached by third parties;

(cid:129) changes in environmental legislation;

(cid:129) investors’ perceptions of our performance of services in countries in which the U.S. military is

engaged;

(cid:129) broader market fluctuations; and

(cid:129) general economic or political conditions.

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

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

At fiscal 2015 year-end, we owned three facilities located in the United States and leased
approximately 300 operating facilities in domestic and foreign locations. Our significant lease agreements
expire at various dates through 2024. We also have some month-to-month leases. We believe that our
current facilities are adequate for the operation of our business, and that suitable additional space in
various local markets is available to accommodate any needs that may arise.

The following table summarizes our ten most significant leased properties by location based on

annual rental expenses:

Location

Description

Reportable Segment

Pasadena, CA
Arlington, VA
Bellevue, WA
Fairfax, VA
Pittsburgh, PA
Calgary, AB, Canada
Morris Plains, NJ
New York, NY
Vancouver, BC, Canada
Montr´eal, QC, Canada

Corporate Headquarters
Office Building
Office Building
Office Building
Office Building
Office Building
Office Building
Office Building
Office Building
Office Building

Corporate
WEI
WEI
WEI
WEI
WEI / RME
WEI / RME
WEI / RME
WEI / RME
RME

Item 3. Legal Proceedings

For a description of our material pending legal and regulatory proceedings and settlements, see
Note 18, ‘‘Commitments and Contingencies’’ of the ‘‘Notes to Consolidated Financial Statements’’
included in Item 8.

Item 4. Mine Safety Disclosures

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

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities

Market Information

Our common stock is traded on the NASDAQ Global Select Market under the symbol TTEK.
There were 1,555 stockholders of record at November 9, 2015. The high and low sales prices per share for
the common stock for the last two fiscal years, as reported by the NASDAQ Global Select Market, are set
forth in the following tables.

Prices

High

Low

Fiscal 2015

First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$27.84
27.25
27.48
27.52

$23.68
22.98
23.87
24.12

Fiscal 2014

$30.00
30.92
29.99
28.27

$23.85
27.37
25.23
22.96

Dividends

During fiscal 2015, we declared and paid dividends totaling $0.30 per share ($0.07 for the first and
second quarters and $0.08 for the third and fourth quarters) of our common stock. In fiscal 2014, we paid
dividends for the third and fourth quarters totaling $0.14 per share ($0.07 each quarter) of our common
stock. We currently intend to continue paying dividends on a quarterly basis, although the declaration of
any future dividends will be determined by our Board of Directors and will depend on available cash,
estimated cash needs, earnings, and capital requirements, as well as limitations in our long-term debt
agreements. On November 9, 2015, the Board of Directors declared a quarterly cash dividend of $0.08 per

share payable on December 11, 2015 to stockholders of record as of the close of business on November 30,
2015.

Stock-Based Compensation

For information regarding our stock-based compensation, see Note 11, ‘‘Stockholders’ Equity and

Stock Compensation Plans’’ of the ‘‘Notes to Consolidated Financial Statements’’ included in Item 8.

Performance Graph

The following graph shows a comparison of our cumulative total returns with those of the
NASDAQ Market Index, the S&P 1500 SuperComposite Engineering and Construction Index, and our
Former Peer Group Index (as defined below). The graph assumes that the value of an investment in our
common stock and in each such index was $100 on September 26, 2010, and that all dividends have been
reinvested. During fiscal 2015, we declared and paid dividends during the first and second quarters totaling
$0.14 per share ($0.07 each quarter) of our common stock and paid dividends during the third and fourth
quarters totaling $0.16 per share ($0.08 each quarter) of our common stock. We did not pay any dividends
prior to fiscal 2014. Our self-constructed Peer Group Index is the S&P 1500 SuperComposite Engineering
and Construction Index. Given the consolidation of our industry, only three peers remain publicly traded
in our Former Peer Group Index (AECOM Technology Corporation, Jacobs Engineering and Willbros
Group, Inc.) and, as such, we updated our peer group to the S&P 1500 SuperComposite Engineering and
Construction Index as a more representative measure of our performance versus our peers. The
comparison in the graph below is based on historical data and is not intended to forecast the possible
future performance of our common stock.

COMPARISON OF CUMULATIVE TOTAL RETURN

Tetra Tech, Inc.

Former Peer Group

S&P 1500 Engineering & Construction Index

NASDAQ Market Index

$240

$200

$160

$120

$80

$40

S
R
A
L
L
O
D

2010

2011

2012

2013

2014

2015

ASSUMES $100 INVESTED ON OCTOBER 4, 2010
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDED SEPTEMBER 27, 2015

2010

100.00
100.00
100.00
100.00

2011

88.44
102.87
85.22
77.16

2012

123.93
134.27
110.85
95.32

2013

122.61
165.28
143.44
138.48

12NOV201520492436

2014

119.57
199.61
141.02
129.22

2015

119.60
209.70
113.95
94.44

Tetra Tech, Inc.
NASDAQ Market Index
S&P 1500 E&C Index
Former Peer Group Index

The performance graph above and related text are being furnished solely to accompany this
annual report on Form 10-K pursuant to Item 201(e) of Regulation S-K, and are not being filed for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated
by reference into any of our filings with the SEC, whether made before or after the date hereof, regardless
of any general incorporation language in such filing.

Stock Repurchase Program

In June 2013, our Board of Directors authorized a stock repurchase program under which we
could repurchase up to $100 million of our common stock. In February 2014, the Board amended this
repurchase program to authorize the repurchase of up to $30 million in open market purchases through
September 2014, revised the pricing parameters and extended the program through fiscal 2014. Stock
repurchases could be made on the open market or in privately negotiated transactions with third parties.
From the inception of this repurchase program through September 28, 2014, we repurchased through open
market purchases a total of 3.9 million shares at an average price of $25.59 per share, for a total cost of
$100 million. On November 10, 2014, the Board authorized a new stock repurchase program under which
we could repurchase up to $200 million of our common stock over the next two years. As of September 27,

2015, we repurchased through open market purchases a total of 4.0 million shares at an average price of
$25.36, for a total cost of $100.5 million under this new repurchase program. These shares were
repurchased during the period from November 24, 2014 through September 27, 2015. A summary of the
repurchase activity for the 12 months ended September 27, 2015 is as follows:

Period

Total Number
of Shares
Purchased

Average Price
Paid per Share

October 27, 2014 – November 23, 2014 . . . .
November 24, 2014 – December 28, 2014 . . .
December 29, 2014 – January 25, 2015 . . . .
January 26, 2015 – February 22, 2015 . . . . .
February 23, 2015 – March 29, 2015 . . . . . .
March 30, 2015 – April 26, 2015 . . . . . . . . .
April 27, 2015 – May 24, 2015 . . . . . . . . . .
May 25, 2015 – June 28, 2015 . . . . . . . . . . .
June 29, 2015 – July 26, 2015 . . . . . . . . . . .
July 27, 2015 – August 23, 2015 . . . . . . . . .
August 24, 2015 – September 27, 2015 . . . . .

Item 6. Selected Financial Data

–
760,926
476,900
944,162
555,191
70,486
88,394
105,926
–
315,189
645,822

–
26.50
24.92
24.16
24.99
24.46
25.99
25.91
–
26.83
25.62

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

–
760,926
476,900
944,162
555,191
70,486
88,394
105,926
–
315,189
645,822

$ 200,000,000
179,832,548
167,948,257
145,139,217
131,265,390
129,541,385
127,244,355
124,500,005
124,500,005
116,042,830
99,500,010

The following selected financial data was derived from our audited consolidated financial
statements. The selected financial data presented below should be read in conjunction with the
information contained in Item 7, ‘‘Management’s Discussion and Analysis of Financial Condition and
Results of Operations,’’ and our consolidated financial statements and the notes thereto contained in
Item 8, ‘‘Financial Statements and Supplementary Data,’’ of this report.

Fiscal Year Ended

September 27, September 28, September 29, September 30, October 2,
2013

2014

2015

2011

2012

Statements of Operations Data

(in thousands, except per share data)

Revenue . . . . . . . . . . . . . . . . . . . $ 2,299,321
87,684
Operating income . . . . . . . . . . . . .
Net income (loss) attributable to

Tetra Tech . . . . . . . . . . . . . . . . .

39,074

$ 2,483,814
153,833

$ 2,613,755
20,218

$ 2,711,075
166,367

$ 2,573,144
146,422

108,266

(2,141)

104,380

90,039

Diluted net income (loss)

attributable to Tetra Tech per
share . . . . . . . . . . . . . . . . . . . .
Cash dividends paid per share . . . . .

Balance Sheet Data

0.64
0.30

1.66
0.14

(0.03)
–

1.63
–

1.43
–

Total assets . . . . . . . . . . . . . . . . . . $ 1,559,242
Long-term debt, net of current

portion . . . . . . . . . . . . . . . . . . .
Tetra Tech stockholders’ equity . . . .

180,972
856,325

$ 1,776,404

$ 1,799,092

$ 1,671,030

$ 1,593,988

192,842
1,012,079

203,438
997,763

81,047
1,018,970

144,868
854,725

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following analysis of our financial condition and results of operations should be read in
conjunction with Part I of this report, as well as our consolidated financial statements and accompanying
notes in Item 8. The following analysis contains forward-looking statements about our future results of
operations and expectations. Our actual results and the timing of events could differ materially from those
described herein. See Part 1, Item 1A, ‘‘Risk Factors’’ for a discussion of the risks, assumptions, and
uncertainties affecting these statements.

OVERVIEW OF RESULTS AND BUSINESS TRENDS

General.

In fiscal 2015, our revenue declined 7.4% compared to fiscal 2014. This decline
primarily reflects a reduction in construction activities compared to last year, which resulted from our
decision in fiscal 2014 to exit from select fixed-price construction markets. In addition, this decline resulted
from adverse foreign exchange rate fluctuations as the U.S. dollar strengthened during fiscal 2015 against
most of the foreign currencies in which we conduct our international business, particularly the Canadian
dollar. On a constant currency basis, the combined revenue from our WEI and RME segments increased
0.9% compared to fiscal 2014.

International. Our international business decreased 12.2% in fiscal 2015 compared to last year
primarily due to foreign exchange rate fluctuations. Excluding the impact of foreign exchange, our
international business declined 1.2% compared to the prior year. This trend reflects a reduction in
upstream oil and gas revenue due to lower oil prices and continued weakness in our mining operations,
particularly in Canada and Brazil. However, growth in our midstream oil and gas activities in Western
Canada substantially offset these declines. We anticipate stable international revenue in fiscal 2016 on a
constant currency basis. However, if commodity prices continue to remain low or decrease further, our
international business would likely be negatively impacted.

U.S. Commercial. Our U.S. commercial business increased 3.3% in fiscal 2015 compared to fiscal
2014. This increase occurred despite the reduction in construction activities compared to the prior year.
Excluding these activities, which are reported in the RCM segment, our U.S. commercial revenue
increased 8.4% in fiscal 2015 compared to last year. This growth primarily reflects increased environmental
remediation and energy-related activities. We expect our U.S. commercial revenue to continue to show
year-over-year improvement in fiscal 2016.

U.S. Federal Government. Our U.S. federal government business declined 8.1% in fiscal 2015
compared to the prior year. The aforementioned reduction in RCM construction activities compared to
last year contributed to this decline. Excluding these activities, our U.S. federal government revenue
decreased 6.5% in fiscal 2015 compared to fiscal 2014. Additionally, we experienced reduced activity on
projects for the DoD, which more than offset broad-based increases in revenues from civilian federal
projects. During periods of economic volatility, our U.S. federal government clients have historically been
the most stable and predictable. Although we remain cautious, we expect our U.S. federal revenue to be
stable during fiscal 2016, excluding the RCM segment.

U.S. State and Local Government. Our U.S. state and local government business decreased
18.8% in fiscal 2015 compared to fiscal 2014. The decline resulted from the aforementioned reduction in
certain construction activities, especially those related to state transportation projects. Excluding these
activities, our U.S. state and local government revenue increased 9.4% in fiscal 2015 compared to the
prior-year. Many state and local government agencies are experiencing improved financial conditions that
enable them to address major long-term infrastructure requirements, including the need for maintenance,
repair, and upgrading of existing critical infrastructure and the need to build new facilities. As a result, we
experienced broad-based growth in U.S. state and local government infrastructure project-related revenue

over the last two years. We expect our U.S. state and local government business to continue to show growth
during fiscal 2016, excluding the RCM segment.

RESULTS OF OPERATIONS

Fiscal 2015 Compared to Fiscal 2014

Consolidated Results of Operations

Fiscal Year Ended

September 27, September 28,

Change

2015

2014

($ in thousands)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Subcontractor costs . . . . . . . . . . . . . . . . . . . . . . .

2,299,321
(580,606)

2,483,814
(623,896)

Revenue, net of subcontractor costs (1)

. . . . . . . .
Other costs of revenue . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . .
Contingent consideration – fair value adjustments . .
Impairment of goodwill and other intangible assets .

1,718,715
(1,402,925)
(170,456)
3,113
(60,763)

Operating income . . . . . . . . . . . . . . . . . . . . . .
Interest expense – net . . . . . . . . . . . . . . . . . . . . .

Income before income tax expense . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . .

Net income including noncontrolling interests . . .
Net income attributable to noncontrolling

87,684
(7,363)

80,321
(41,093)

39,228

1,859,918
(1,577,481)
(187,298)
58,694
–

153,833
(9,490)

144,343
(35,668)

108,675

(184,493)
43,290

(141,203)
174,556
16,842
(55,581)
(60,763)

(66,149)
2,127

(64,022)
(5,425)

(69,447)

interests . . . . . . . . . . . . . . . . . . . . . . . . . . .

(154)

(409)

255

Net income attributable to Tetra Tech . . . . . . . . . $

39,074

108,266

(69,192)

(7.4)%
6.9

(7.6)
11.1
9.0
94.7
(100.0)

(43.0)
22.4

(44.4)
(15.2)

(63.9)

62.3

(63.9)

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

In fiscal 2015, revenue and revenue, net of subcontractor costs, decreased $184.5 million, or 7.4%,
and $141.2 million, or 7.6%, respectively, compared to last year. These declines reflect the above-described
reduction in construction activities compared to fiscal 2014 and the fluctuation in foreign exchange rates.
Revenue and revenue, net of subcontractor costs, from these construction activities, which are reported in
the RCM segment, declined $134.5 million and $56.2 million, respectively, in fiscal 2015 compared to last
year. Revenue declines caused by foreign exchange rate fluctuations resulted from a stronger U.S. dollar
during fiscal 2015 versus most of the foreign currencies in which we conduct our international business,
particularly the Canadian dollar. These fluctuations negatively impacted revenue and revenue, net of
subcontractor costs, by $71.2 million and $64.4 million, respectively, in fiscal 2015 compared to fiscal 2014.

On a constant currency basis, our revenue and revenue, net of subcontractor costs, excluding the
exited activities in the RCM segment (referred to as ‘‘ongoing’’ results) increased 0.9% and decreased
1.2%, respectively, in fiscal 2015 compared to fiscal 2014. These results reflect increased state and local
government and commercial activity in our ongoing U.S. operations. On a combined basis, revenue and
revenue, net of subcontractor costs, from these activities increased $78.3 million, or 8.6%, and
$29.4 million, or 4.1%, respectively, in fiscal 2015 compared to the prior year, primarily due to increased
environmental remediation, infrastructure, and energy-related activities. These increases were offset by a
decline in our U.S. federal activity. Our ongoing U.S. federal revenue and revenue, net of subcontractor
costs, decreased $46.4 million and $43.8 million, respectively, in fiscal 2015 compared to last year, which
primarily reflected less work for the DoD.

The following table reconciles our reported results to ongoing results, which exclude RCM results,

purchase accounting adjustments, and the impact of foreign exchange translation:

Fiscal Year Ended

September 27, September 28,

Change

2015

2014

($ in thousands)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,299,321
71,227
(86,575)

Foreign exchange . . . . . . . . . . . . . . . . . . . . . . .
RCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,483,814
–
(221,109)

(184,493)
71,227
134,534

(7.4)%
–
–

Ongoing revenue . . . . . . . . . . . . . . . . . . . . . . . .

2,283,973

2,262,705

21,268

Revenue, net of subcontractor cost

. . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . .
RCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,718,715
64,421
(23,275)

1,859,918
–
(79,498)

Ongoing revenue, net of subcontractor costs . . . . . .

1,759,861

1,780,420

Operating income . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration – fair value adjustment .
Impairment of goodwill and other intangible

assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subtotal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

87,684
3,122
(3,113)

60,763

148,456
8,614

153,833
–
(58,694)

–

95,139
45,151

(141,203)
64,421
56,223

(20,559)

(66,149)
3,122
55,581

60,763

53,317
(36,537)

Ongoing operating income . . . . . . . . . . . . . . . . . . $

157,070

140,290

16,780

0.9

(7.6)
–
–

(1.2)

(43.0)
–
–

–

56.0
–

12.0

Our operating income decreased to $87.7 million in fiscal 2015 from $153.8 million last year. This
decline reflects the reduction in net gains related to changes in the estimated fair value of contingent
earn-out liabilities. In addition, we recognized a non-cash goodwill and other intangible asset charge of
$60.8 million in the fourth quarter of fiscal 2015 related to our Global Mining Practice (‘‘GMP’’) reporting
unit. These items are described below under ‘‘Fiscal 2015 and 2014 Goodwill and Earn-Out Adjustments.’’
The loss from the exited construction activities in our RCM segment was $8.6 million in fiscal 2015
compared to $45.2 million last year. The fiscal 2014 RCM results included project-related charges that are
described below under
‘‘Fiscal 2014 Project-Related Charges.’’ Additionally, the aforementioned
year-over-year foreign exchange rate fluctuations reduced operating income by $3.1 million in fiscal 2015
compared to fiscal 2014. Excluding these non-operating items, ongoing operating income increased
$16.8 million, or 12.0%, compared to last year.

The increase in ongoing operating income was primarily due to improved results in our RME
segment. On a constant currency basis, operating income in RME increased $10.9 million, or 12.9%, in

fiscal 2015 compared to last year. This increase was primarily driven by improved results in our midstream
oil and gas operations, particularly in Western Canada. In addition, lower intangible asset amortization of
$5.6 million, on a constant currency basis, contributed to the higher year-over-year ongoing operating
income.

In fiscal 2015, we recorded income tax expense of $41.1 million, representing an effective tax rate
of 51.2%. This tax rate is higher than the expected statutory tax rate primarily due to the $60.8 million
goodwill and intangible assets impairment charge most of which was not tax deductible. In fiscal 2014, we
recorded income tax expense of $35.7 million, representing an effective tax rate of 24.7%, which was lower
than the expected rate due to the impact of gains from changes to contingent consideration liabilities, most
of which were not taxable. Excluding these items in both years, our effective tax rate was 32.3% in fiscal
2015 compared to 36.2% in fiscal 2014. During the first quarter of fiscal 2015, the Tax Increase Prevention
Act of 2014 was signed into law. This law retroactively extended the federal R&E credits for amounts
incurred from January 1, 2014 through December 31, 2014. Our income tax expense for fiscal 2015
includes a tax benefit of $1.2 million attributable to operating income during the last nine months of fiscal
2014, primarily related to the retroactive recognition of these credits. The remainder of the decline in the
effective tax rate was primarily due to a higher proportion of operating income from international
operations, in fiscal 2015 compared to fiscal 2014, which have lower tax rates than the U.S.

Fiscal 2015 and 2014 Goodwill and Earn-Out Adjustments

In both fiscal 2015 and 2014, our operating income included significant non-cash adjustments
related to purchase accounting. In the fourth quarter of fiscal 2015, we recognized a non-cash goodwill and
other intangible assets impairment charge of $60.8 million related to our GMP reporting unit in the RME
segment. During fiscal years 2015 and 2014, we also recognized net decreases in our contingent earn-out
liabilities and reported related net gains in operating income of $3.1 million and $58.7 million, respectively.
The fiscal 2015 gain resulted from an updated valuation of the contingent consideration liability for Caber
Engineering Inc. (‘‘Caber’’), which is part of our Oil, Gas & Energy (‘‘OGE’’) reporting unit. The fiscal
2014 net gains primarily resulted from updated valuations of the contingent consideration liabilities for
Parkland Pipeline (‘‘Parkland’’), which is part of our OGE reporting unit, and American Environmental
Group (‘‘AEG’’), which is part of our Waste Management Group (‘‘WMG’’) reporting unit. Both of these
reporting units are in the RME segment.

In the fourth quarter of fiscal 2015, the mining sector continued to contract in response to lower
global growth expectations driven in large part by China’s actual and projected slower economic growth.
Consistent with this trend, our mining customers continued their curtailment of capital spending for new
mining projects. As a result, GMP experienced a 25% decline in revenue in the fourth quarter of fiscal
2015 compared to the same period of fiscal 2014. This negative trend was compared to the expected
revenue growth of approximately 3% in the previous goodwill impairment test, performed as of June 30,
2014. In response to these results, we performed a strategic review of GMP in the fourth quarter of fiscal
2015, and determined that our mining activities would likely decline further in fiscal 2016, and that revenue
and profits would not return to acceptable levels of performance in the foreseeable future. We also decided
to redeploy our mining resources into other operational areas that have better growth and profitability
prospects. Consequently, as of the first day of fiscal 2016, GMP is no longer a reporting unit. We
considered GMP’s financial performance and prospects, in our goodwill impairment analysis in the fourth
quarter of fiscal 2015 and determined that GMP’s fair value had fallen significantly below its carrying
value, including goodwill. As required, we performed further analysis to measure the amount of the
impairment loss and, as a result, we wrote-off all of GMP’s goodwill and identifiable intangible assets and
recorded a related impairment charge of $60.8 million ($57.3 million after-tax) in the fourth quarter of
fiscal 2015. The related goodwill and identifiable intangible assets that were determined not to be
recoverable totaled $58.1 million and $2.7 million, respectively.

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. During the second quarter of
fiscal 2015, we recorded a decrease in our contingent earn-out liabilities and reported a related gain in
operating income of $3.1 million. This gain resulted from an updated valuation of the contingent
consideration liability for Caber. Our assessment of the Caber contingent earn-out liability included a
review of the status of on-going projects in Caber’s backlog, and the inventory of prospective new contract
awards. We also considered the status of the upstream oil and gas industry in Western Canada particularly
in light of the recent decline in oil prices. As a result of this assessment, we concluded that Caber’s
operating income in the second year post-acquisition would be lower than our original estimate at the
acquisition date and our subsequent estimates through the first quarter of fiscal 2015. We also concluded
that Caber’s operating income for the second earn-out period, which ended in the first quarter of fiscal
2015, would be lower than the minimum requirement of C$4.6 million to earn any contingent
consideration. Accordingly, in the second quarter of fiscal 2015, we reduced the Caber contingent earn-out
liability to $0, which resulted in a gain of $3.1 million.

In fiscal 2014, we recorded decreases in our contingent earn-out liability for Parkland and
reported related gains in operating income of $44.6 million. These gains resulted from Parkland’s actual
and projected post-acquisition performance falling below our initial expectations concerning the likelihood
and timing of achieving the relevant operating income thresholds in each of the three years subsequent to
the acquisition. In the second quarter of fiscal 2014, we updated the estimated cost to complete a large
fixed-price contract at Parkland and determined that the project would be break-even compared to the
significant profit estimated the previous quarter when the project was initiated. As a result, during the
second quarter of fiscal 2014 we reversed $5.3 million of profit previously recognized on the project. This
variance, and our updated estimate that the revenue for the remainder of the project would produce no
operating income, resulted in our conclusion that Parkland’s operating income in the first and second
earn-out periods would fall below the minimum operating income thresholds in each such year. As a result,
we reduced the contingent earn-out liability for the first and second earn-out periods to $0, which resulted
in gains totaling $24.7 million ($5.6 million and $19.1 million in the first and second quarters of fiscal 2014,
respectively). The remaining fiscal 2014 gain of $19.9 million was recognized in the fourth quarter of fiscal
2014, which reduced the related liability to $0 at the end of fiscal 2014.

In fiscal 2014, we also recorded net decreases in our contingent earn-out liability for AEG and
reported related net gains in operating income of $12.4 million. AEG’s first earn-out period ended on the
last day of the first quarter of fiscal 2014. As a result, during the first quarter of fiscal 2014, we performed a
preliminary calculation of the contingent consideration for the first earn-out period and concluded that
AEG’s operating income in that period would be higher than both our original estimate at the acquisition
date and our previous quarterly estimates. As a result, we increased the contingent earn-out liability for the
first earn-out period, which resulted in additional expense of $1.0 million. The contingent consideration of
$9.1 million for the first earn-out period was paid in the second quarter of fiscal 2014.

During calendar 2014, which corresponded to AEG’s second earn-out period, adverse weather
conditions hindered AEG’s ability to complete its project field work. As a result, in the third quarter of
fiscal 2014, we updated our projection of AEG’s operating income for its second earn-out period. This
assessment included a review of the status of on-going projects in AEG’s backlog, and the inventory of
prospective new contract awards. As a result of this assessment, we concluded that AEG’s operating
income in the second earn-out period would be significantly lower than our original estimate at the
acquisition date, and would fall below the minimum operating income threshold, but would still exceed
$9.0 million of operating income in order to earn the additional earn-out payment. As a result, we reduced
the contingent earn-out liability, which resulted in a gain of $8.9 million.

second earn-out period. Based on this analysis, we concluded that AEG’s operating income in the second
earn-out period would be lower than the $9.0 million needed to receive the $4.5 million of contingent
consideration that remained accrued for performance in both earn-out years. As a result, we reduced the
contingent earn-out liability to $0, which resulted in a gain of $4.5 million in the fourth quarter of fiscal
2014, and net gains of $12.4 million for all of fiscal 2014.

Each time we determined that Caber’s, AEG’s and Parkland’s operating income would be lower
than our original estimate at the acquisition date, we also evaluated the related goodwill for potential
impairment. In each case, we determined that the lower income projections were the result of temporary
events, and did not negatively impact the reporting unit’s longer term performance or result in a goodwill
impairment.

Segment Results of Operations

Beginning in the first quarter of fiscal 2015, we reorganized our ongoing operations to better align
them with our markets, resulting in two renamed reportable segments. We now report our water resources,
water and wastewater treatment, environment and infrastructure engineering activities in the WEI
reportable segment. Our RME reportable segment includes our oil and gas, energy, waste management,
remediation, utilities and international development services. We report the results of the wind-down of
our non-core construction activities in the RCM reportable segment. Prior year amounts for reportable
segments have been revised to conform to the current-year presentation.

Water, Environment and Infrastructure

Fiscal Year Ended

September 27,
2015

September 28,
2014

Change

($ in thousands)

Revenue . . . . . . . . . . . . .
Subcontractor costs . . . . . .

Revenue, net of

subcontractor costs . . . . .

Operating income . . . . . . .

938,469
(223,399)

715,070

92,920

946,849
(200,507)

746,342

93,972

(8,380)
(22,892)

(31,272)

(1,052)

(0.9)%
11.4

(4.2)

(1.1)

Revenue and revenue, net of subcontractor costs, decreased $8.4 million, or 0.9%, and
$31.3 million, or 4.2%, respectively, compared to last year. As described above, foreign exchange rate
fluctuations negatively impacted revenue and revenue, net of subcontractor costs, in the amounts of
$26.8 million and $25.2 million, respectively, in fiscal 2015. On a constant currency basis, our revenue
increased $18.4 million, or 1.9%, in fiscal 2015 compared to last year. This growth reflects an increase in
revenue from U.S. state and local government infrastructure projects across a broad range of government
agencies.

Operating income decreased $1.1 million, or 1.1%, in fiscal 2015 compared to last year. On a
constant currency basis, our operating income increased $1.1 million, or 1.1%. These comparisons are
consistent with the revenue trends as our relative profit margins were stable year-over-year at 12.8% in
fiscal 2015 and 12.6% in fiscal 2014.

Resource Management and Energy

Fiscal Year Ended

September 27,
2015

September 28,
2014

Change

($ in thousands)

Revenue . . . . . . . . . . . . .
Subcontractor costs . . . . . .

$ 1,342,889
(362,519)

$ 1,406,885
(372,806)

Revenue, net of

subcontractor costs . . . . .

Operating income . . . . . . .

980,370

$ 1,034,079

93,581

84,743

(63,996)
10,287

(53,709)

8,838

(4.5)%
(2.8)

(5.2)

10.4

Revenue and revenue, net of subcontractor costs, decreased $64.0 million, or 4.5%, and
$53.7 million, or 5.2%, respectively, compared to last year. Foreign exchange rate fluctuations had an
adverse impact on revenue and revenue, net of subcontractor costs, during fiscal 2015 in the amounts of
$45.5 million and $39.2 million, respectively. On a constant currency basis, revenue and revenue, net of
subcontractor costs, decreased $18.5 million, or 1.3%, and $14.5 million, or 1.4%, respectively, in fiscal
2015 compared to fiscal 2014. These decreases primarily reflect a continued decline in mining and
upstream oil and gas revenue, particularly in Canada and Brazil, which were down $58.6 million
year-over-year. These decreases were substantially offset by increased midstream oil and gas revenue in
both the U.S. and Western Canada.

Operating income increased $8.8 million in fiscal 2015 compared to fiscal 2014. This increase
primarily reflects improved profit in our midstream oil and gas business in Western Canada. Further, our
fiscal 2014 results included a $5.3 million profit reversal on a fixed price construction management project.
The operating income increase was partially offset by declines in our other commodity-based activities,
including upstream oil and gas services and mining-related activities.

Remediation and Construction Management

Fiscal Year Ended

September 27,
2015

September 28,
2014

Change

($ in thousands)

Revenue . . . . . . . . . . . . .
Subcontractor costs . . . . . .

Revenue, net of

subcontractor costs . . . . .

Operating loss . . . . . . . . . .

86,575
(63,300)

23,275

(8,614)

221,108
(141,611)

79,497

(45,151)

(134,533)
78,311

(60.8)%
(55.3)

(56,222)

36,537

(70.7)

(80.9)

Revenue and revenue, net of subcontractor costs, decreased $134.5 million and $56.2 million,
respectively, compared to the prior year. These decreases resulted from our decision to wind-down the
RCM construction activities. The operating loss in fiscal 2015 reflects our updated evaluation of the
collectability of certain claims as well as related legal costs, and the costs required to complete the
remaining projects in the RCM segment. The remaining RCM backlog at the end of fiscal 2015 was

$61 million. The related work performed in this segment will be substantially complete by the end of fiscal
2016.

Fiscal 2014 Compared to Fiscal 2013

Consolidated Results of Operations

Fiscal Year Ended

September 28,
2014

September 29,
2013

Change

($ in thousands)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . .
Subcontractor costs . . . . . . . . . . . . . . . . . . .

2,483,814
(623,896)

2,613,755
(588,923)

Revenue, net of subcontractor costs (1)

. . . .
Other costs of revenue . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . .
Contingent consideration – fair value

1,859,918
(1,577,481)
(187,298)

2,024,832
(1,757,842)
(199,732)

(129,941)
(34,973)

(164,914)
180,361
12,434

adjustments . . . . . . . . . . . . . . . . . . . . . .

58,694

9,560

49,134

Impairment of goodwill and other intangible

assets

. . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . .
Interest expense – net . . . . . . . . . . . . . . . . .

Income before income tax expense . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . .

Net income (loss) including noncontrolling

–

153,833
(9,490)

144,343
(35,668)

(56,600)

20,218
(7,686)

12,532
(14,038)

56,600

133,615
(1,804)

131,811
(21,630)

(5.0)%
(5.9)

(8.1)
10.3
6.2

514.0

100.0

660.9
(23.5)

1,051.8
(154.1)

interests . . . . . . . . . . . . . . . . . . . . . . .

108,675

(1,506)

110,181

7,316.1

Net income attributable to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . .

(409)

(635)

226

Net income (loss) attributable to Tetra Tech

108,266

(2,141)

110,407

35.6

5,156.8

In fiscal 2014, revenue and revenue, net of subcontractor costs, decreased $129.9 million and
$164.9 million, respectively, compared to fiscal 2013. These results include declines due to foreign
exchange rate fluctuations as the U.S. dollar strengthened in fiscal 2014 against most of the foreign
currencies in which we conduct our international business. These exchange rate variations reduced revenue
and revenue, net of subcontractor costs, by $41.7 million and $36.9 million, respectively, in fiscal 2014
compared to fiscal 2013. In addition, our year-over-year comparisons reflect project-related charges last
year in our WEI and RCM segments that are described under ‘‘Fiscal 2013 Project-Related Charges’’.

These lower year-over-year results include decreases in revenue and revenue, net of subcontractor
costs, of $63.3 million and $67.6 million, respectively, from U.S. federal government programs in fiscal
2014 compared to the prior year. The decline in U.S. federal activity reflects a broad-based slowdown
caused by budgetary constraints that primarily impacted discretionary programs. The reduction was
exacerbated by U.S. federal office closures due to inclement weather in the second quarter of fiscal 2014,
and the two-week U.S. federal government shut-down in October 2013.

Our fiscal 2014 results also reflect declines in our international revenue, which was adversely
impacted by the reduction in mining work and projects in Eastern Canada. Both businesses had strong
results in the first half of fiscal 2013, which then abruptly declined in the third quarter of fiscal 2013. On a
combined basis for these operations, revenue and revenue, net of subcontractor costs, excluding the impact
of foreign exchange rate fluctuations, decreased $60.1 million and $62.0 million, respectively, in fiscal 2014
compared to fiscal 2013.

Our U.S. state and local government revenue and revenue, net of subcontractor costs, were also
lower than fiscal 2013 by $37.7 million and $40.6 million, respectively. The decrease reflects the abnormally
strong growth in this business in fiscal 2013, partially due to several large transportation projects that
wound down in fiscal 2014.

In our U.S. commercial business, we experienced a $25.3 million increase in revenue from last
year, which primarily reflects continued organic growth in our commercial oil and gas business. Further,
the Parkland and AEG acquisitions completed in the second quarter of fiscal 2013, which focus on oil and
gas and solid waste, respectively, contributed additional revenue, adjusted for foreign exchange rate
fluctuations, of $42.2 million in fiscal 2014 compared to fiscal 2013.

Despite the overall revenue decline, our operating income increased to $153.8 million in fiscal
2014 compared to $20.2 million the previous year. This $133.6 million increase includes non-operating
gains and charges related to acquisition accounting in both fiscal 2014 and fiscal 2013. In the third quarter
of fiscal 2013, our operating income was adversely impacted by weakness in certain areas of our business,
which resulted in a non-cash goodwill impairment charge of $56.6 million. This charge is explained in
detail under ‘‘Fiscal 2013 Goodwill Impairment Charge’’. In addition, our fiscal 2014 and fiscal 2013
operating income included net gains from updated valuations of our contingent consideration liabilities. In
fiscal 2014, we recorded net decreases in our contingent earn-out liabilities and reported related net gains
in operating income of $58.7 million, compared to net gains of $9.6 million in fiscal 2013. The fiscal 2014
net gains are explained in detail under ‘‘Fiscal 2015 and 2014 Goodwill and Earn-Out Adjustments’’. Our
operating income also reflected the lower amortization of intangibles of $5.1 million in fiscal 2014
compared to fiscal 2013. Excluding these acquisition accounting-related items, our operating income
increased $22.8 million in fiscal 2014 compared to the prior year.

During the fourth quarter of fiscal 2014, we completed a strategic review of our RCM segment and
decided to retain our core environmental remediation, oil and gas, solid waste, and utilities-related
activities. We also decided to exit all non-core construction activities that require lump-sum fixed-price
bidding. In connection with the decision to wind-down certain RCM activities, we recorded a combined
charge of $4.0 million related to severance and the abandonment of certain leased facilities in our RCM
segment in the fourth quarter of fiscal 2014. Of this amount, approximately $1.2 million related to
severance and was paid in cash in the fourth quarter of fiscal 2014. The remaining $2.8 million related to
leases, and is expected to be paid in cash net of estimated sublease income over six years as these leases
expire. In the third quarter of fiscal 2013, we incurred similar types of restructuring charges to right-size
our RME segment totaling $10.3 million. These charges are described in detail under ‘‘Fiscal 2013
Restructuring Charges’’.

We recorded project-related charges, primarily in our RCM segment, which reduced our operating
income in both fiscal 2014 and 2013. We regularly review each of our active projects, including those in the
market areas we are exiting or winding-down. The review includes an update of the expected costs to
complete each project and the collectability of any related outstanding claims. Based on these reviews, we
recorded project-related charges of $30.6 million in fiscal 2014, all in the RCM segment, which are
described under ‘‘Fiscal 2014 Project-Related Charges’’. We also recorded project-related charges and
adjustments to estimated costs at completion during the third quarter of fiscal 2013 that reduced operating
income by $35.5 million, as described under ‘‘Fiscal 2013 Project-Related Charges’’.

In fiscal 2014, we recorded income tax expense of $35.7 million, representing an effective tax rate
of 24.7%. This tax rate is significantly lower than the expected statutory rate primarily due to the impact of
gains from charges to contingent consideration liabilities, most of which are not taxable. In fiscal 2013, we
recorded $14.0 million of income tax expense with an effective tax rate of 112.0%. The fiscal 2013 rate
resulted from the goodwill impairment charge that was substantially not deductible for tax purposes.

Fiscal 2013 Restructuring, Goodwill Impairment and Project-Related Charges

Fiscal 2013 Restructuring Charges

In Eastern Canada, poor economic conditions, including budget deficits, reduced customer
in Quebec, slowed
spending and on-going government
procurements and business activity in that region beginning in the third quarter of fiscal 2013. As a result,
we experienced weaker than expected financial performance in our Eastern Canada operations, and we
took actions to right-size the business that resulted in significant severance and office closure charges in
the third quarter of fiscal 2013.

into political corruption

investigations

Our work for mining customers also slowed more than expected in the third quarter of fiscal 2013
as those customers responded to lower global growth expectations. This was driven in large part by China’s
report in April 2013 of anticipated slower economic growth. As a result, our mining customers experienced
a significant reduction in the global demand for commodities that caused a drop in mineral prices. Due to
the subsequent slowdown in mining activities, we right-sized our global mining business by reducing staff
and closing offices in the third quarter of fiscal 2013.

In connection with the actions taken to right-size our Eastern Canada and global mining
operations, we recorded a total combined charge of $10.3 million related to severance and the
abandonment of certain leased facilities in our WEI and RME segments. Of this amount, approximately
$4.0 million, related to severance, was paid in cash in fiscal 2013, and $2.2 million, related to leases, was
paid in cash in fiscal 2014. The remaining $4.1 million is expected to be paid in cash net of estimated
sublease income over the following six years as the related leases expire. If these operations decline
further, we may take further right-sizing actions and incur additional costs. No material right-sizing charges
were incurred in the WEI and RME segments in fiscal 2014. The approximate annual cost savings in fiscal
2014 in the WEI and RME segments from lower compensation and rent expense was approximately
$14.9 million.

Fiscal 2013 Goodwill Impairment Charge

During the third quarter of fiscal 2013, certain of our reporting units experienced declines in
actual performance and lowered their financial projections for the remainder of fiscal 2013. In Eastern
Canada, poor economic conditions, including budget deficits, reduced customer spending, and on-going
government investigations into political corruption in Quebec, slowed procurements and business activity
in that region. In addition, our work for mining customers continued to slow at a faster pace than
previously anticipated due to reduced demand and significant declines in prices for certain commodities.

To a lesser extent, we also experienced reduced performance from reporting units with a concentration of
work for certain agencies of the U.S. federal government as a result of customer budgetary constraints. As
a result of these factors, during the third quarter of fiscal 2013, we performed an interim goodwill
impairment test for three reporting units.

The reporting units tested for goodwill impairment included our Tetra Tech Canada (‘‘TTC’’)
reporting unit, with operations primarily in Eastern Canada, particularly Quebec. A significant portion of
TTC’s business related to work performed for city and provincial government clients in Quebec. This work,
which had already slowed due to budgetary constraints, was curtailed almost completely during the third
quarter of fiscal 2013 due to the political corruption investigations in Quebec. As a result, TTC’s revenue
declined 26% in the third quarter of fiscal 2013 compared to the prior year period, and TTC reported a
quarterly loss. This negative trend was compared to the expected revenue growth of approximately 8% in
the annual goodwill impairment test performed as of July 1, 2012. In response to these results, we made
significant staff and office reductions in TTC during the third quarter of fiscal 2013 to align our costs with
the expected lower level of revenue. Although these actions returned TTC to profitability in the fourth
quarter of fiscal 2013, revenue and profits were at a lower level than previously expected. Due to the
significance of the staff reductions and the expected prolonged government investigations, we concluded
that TTC would likely experience a long-term deficit in performance compared to previous periods and
expectations.

We also performed an interim goodwill impairment test for our GMP reporting unit, with
operations primarily in the U.S., Canada, Australia and South America. Our work for mining customers
slowed more than expected in the third quarter of fiscal 2013, as these customers responded to lower
global growth expectations driven in large part by China’s report in April 2013 of slower economic growth.
As a result, our mining customers experienced a significant reduction in the global demand for
commodities that caused a drop in mineral prices. Their response included a significant curtailment of
capital spending for new mining projects. As a result, GMP experienced a 27% decline in revenue in the
third quarter of fiscal 2013 compared to the same period of fiscal 2012 and reported a quarterly loss. This
negative trend was compared to the expected revenue growth of approximately 15% in the previous
goodwill impairment test, performed as of July 1, 2012. In response to these results, we made significant
staff and office reductions in GMP during the third quarter of fiscal 2013 to align our costs with the
expected lower level of revenue. Although these actions returned GMP to profitability in the fourth
quarter of fiscal 2013, revenue and profits did not return to historical levels. Due to the significance of the
staff reductions and the expected prolonged lower level of mining activity, we concluded that GMP would
likely not return to historical levels of performance for the foreseeable future.

interim goodwill

Lastly, we performed an

impairment test for Advanced Management
Technology, Inc. (‘‘AMT’’), a U.S. federal government contractor primarily doing business with the Federal
Aviation Administration. In fiscal 2013, we experienced a decline in revenue from U.S. federal government
programs as uncertainty regarding the U.S. federal budget delayed project funding and budget cuts were
implemented. As a result, our overall U.S. federal government revenue declined 23% in the third quarter
of fiscal 2013 compared to the same period last year. Correspondingly, AMT’s revenue declined
approximately 12%. Although AMT remained profitable despite this decline in revenue, the related
operating income declined 46% as competition increased for the shrinking level of federal work. This
negative trend was compared to the stable expectations for revenue and profit in the previous goodwill
impairment test performed as of July 1, 2012. We expect the level of federal spending for the work AMT
performs to remain stable at the reduced levels experienced in fiscal 2013 for the foreseeable future.

We performed the first step of the impairment test for each of these reporting units during the
third quarter of fiscal 2013, and in each case determined that the carrying value of the reporting unit
exceeded its fair value, indicating potential goodwill impairment. The significant change to the
assumptions used in the interim test in the third quarter of fiscal 2013 compared to the previous annual
impairment test as of July 1, 2012 was the projected revenue, operating income and cash flows for each
reporting unit tested.

We performed the second step of the goodwill impairment test to measure the amount of the
impairment loss, if any, of the applicable reporting units. The second step of the test requires the allocation
of the reporting unit’s fair value to its assets and liabilities, including any unrecognized intangible assets, in
a hypothetical analysis that calculates the implied fair value of goodwill as if the reporting unit was being
acquired in a business combination. If the implied fair value of goodwill is less than the carrying value, the
difference is recorded as an impairment loss. Based on the results of the step two analyses, we recorded an
aggregate goodwill impairment charge of $56.6 million, or $48.1 million, net of tax, in the third quarter of
fiscal 2013 for the TTC, GMP and AMT reporting units. The calculations of the reporting unit fair values
for the second step of the goodwill impairment test are highly dependent on estimated future annual
revenue growth rates. The revenue growth rate assumptions for the interim impairment test for TTC,
GMP and AMT ranged from 0% to 5%. If it becomes apparent that these reporting units are unable to
achieve the assumed growth rates, or they continue to decline, we would likely have further goodwill
impairment charges in the future.

The carrying amounts of these reporting units, including goodwill were as follows:

June 30, 2013

TTC

GMP

AMT

(in thousands)

Carrying value before impairment . . . . . . . . . . . $
Goodwill impairment . . . . . . . . . . . . . . . . . . . .

245,634
(27,900)

Carrying value after impairment

. . . . . . . . . . . . $

217,734

116,184
(11,900)

104,284

56,474
(16,800)

39,674

The goodwill amounts after the impairment charges for the TTC, GMP and AMT reporting units

were $109.5 million, $71.9 million and $32.6 million, respectively.

Fiscal 2014 Project-Related Charges

In fiscal 2014, primarily in the fourth quarter, we recorded project-related charges principally from
adjustments to estimated costs at completion that increased project costs. These charges included amounts
primarily related to two lines of business in the RCM segment with U.S. federal and state and local
government clients that we decided to exit or wind-down in the fourth quarter of fiscal 2014.

One of the businesses we decided to exit or wind-down related to fixed-price contracts for project
management, construction management, and construction services, primarily for U.S. federal government
clients. In the course of performing the required work, we encountered delays related to defective designs,
permit issues and differing site conditions, among other factors, that slowed our progress. Due to these
delays, we determined that the costs to complete the projects would exceed the contract values. As a result,
we recorded related pre-tax project charges of $20.5 million on these projects in fiscal 2014. These projects
were substantially completed in fiscal 2015.

The other business we decided to exit or wind-down related to fixed-price contracts for
transportation projects with state government agencies. During the execution of these contracts, numerous

issues and events disrupted our plans and progress, including weather delays, differing site conditions,
drainage design changes, lane closure delays, and revised soil testing requirements. These issues caused us
to incur costs in excess of the contract values and increase our estimates of the expected costs to complete.
As a result, we recorded pre-tax charges to operating income of $9.1 million in the fourth quarter of fiscal
2014. These projects are expected to be completed primarily in fiscal 2016, with total estimated costs to
complete of approximately $37 million as of September 27, 2015. If our costs increase above this estimate,
we could record further losses.

Fiscal 2013 Project-Related Charges

In the third quarter of fiscal 2013, we recorded project-related charges and adjustments to
estimated costs at completion that reduced revenue and increased project costs. These project charges
primarily related to adverse developments on certain projects during the third quarter of fiscal 2013, and
our subsequent evaluations and conclusions concerning the collectability of the related unbilled accounts
receivable. These charges included amounts related to claims, including requests for equitable adjustment
(‘‘REA’’), on three programs in the RCM segment with U.S. federal and state and local government clients.
In addition, we recorded a project-related charge on a commercial development contract in the WEI
segment due to a change in client ownership and the related modification of plans for completion of the
project. These events adversely affected the collectability of certain related receivables and the profitability
expectations for the project. Collectively, the project charges on these four programs reduced revenue and
revenue, net of subcontractor costs, by $29.6 million and reduced operating income by $35.5 million in the
third quarter of fiscal 2013.

The first of the four programs related to U.S. federal government fixed-price contracts in our
RCM segment, awarded in fiscal 2010, for the construction of structures to reduce the risks associated with
hurricanes and other storms in Southeastern Louisiana. During construction, we incurred costs in excess of
the contract values to meet client requests, and submitted a related REA to the client. We concluded that
there was a technical and legal basis for recovery of a portion of these costs and recorded revenue and
associated accounts receivable deemed probable of collection related to the REA through the second
quarter of fiscal 2013. The total amount of the excess costs and the REA significantly exceeded the
revenue recognized, which resulted in a loss for the program.

During the third quarter of fiscal 2013, we received a decision from the client affirmatively
rejecting a portion of the costs submitted in the REA. Accordingly, during that quarter, we re-evaluated
the collectability of the related accounts receivable and the estimated costs to complete the projects and
recorded charges to pre-tax income of $6.8 million, including reductions to revenue of $5.7 million. As of
September 29, 2013, the project was complete and no further costs are expected to be incurred. However,
if it is determined that any or all of the remaining accounts receivable are uncollectible, we could recognize
further losses in future periods. Conversely, we are pursuing all available legal methods to collect the
entire amount of the submitted REA and, if successful, we could recognize gains on recovery in future
periods. No gains or losses on this project were recorded during fiscal 2014 or 2015.

The second program related to U.S. federal government fixed-price contracts in our RCM
segment, awarded in fiscal 2012, to provide design and construction services for Afghan National Army
camps in Afghanistan. Upon contract execution, we engaged a subcontractor under fixed-price
arrangements to provide staffing, procure materials and engage local Afghan subcontractors. During the
third quarter of fiscal 2013, as a result of non-performance, we terminated the subcontractor and began to
self-perform the contracts. As a result of this change, we revised our estimates of the total costs to
complete, including costs to self-perform the remainder of the contracts, and recorded charges to pre-tax
income of $9.9 million including reductions to revenue of $7.9 million. Additionally, as a result of differing
site conditions, changes to contract specifications by the client and other factors, we recorded revenue and
associated accounts receivable through project completion in the first quarter of fiscal 2014 as we believe

we have a technical and legal basis for recovery and such amount is probable of collection. We submitted
REAs to the client during the first and second quarters of fiscal 2014. As of the end of the first quarter of
fiscal 2014, the projects were complete and no further costs are expected to be incurred. No material gains
or losses on this project were recorded during fiscal 2014. We settled this REA in the first quarter of fiscal
2015, which resulted in a gain of $2.3 million.

The third program related to fixed-price transportation projects in our RCM segment with a state
government agency awarded in fiscal 2011 and 2012. During the execution of these contracts, numerous
issues and events disrupted our plans and progress, including weather delays, differing site conditions,
drainage design changes, lane closure delays, and revised soil testing requirements. These issues caused us
to incur costs in excess of the contract value. As a result, we submitted change orders including REAs to
the client. In the third quarter of fiscal 2013, we determined that a portion of the costs in excess of the
contract value was not recoverable. This assessment included an evaluation of the recoverability of change
orders and REAs, and changes in estimated costs to complete. The result was a pre-tax charge to operating
income of $6.5 million and a related reduction of revenue of $3.7 million. As of June 29, 2014, the related
projects were substantially complete. During fiscal 2014, we recognized a $3.4 million gain based on our
updated evaluation of the collectability of a portion of the claims. In fiscal 2015, we settled the remainder
of the claims, which resulted in a loss of $5.0 million.

The fourth program related to a fixed-price design and construction environmental assurance
agreement, and a separate fixed-price operation and maintenance (‘‘O&M’’) environmental assurance
agreement in our WEI segment, with a commercial property developer that we entered into in fiscal 2008.
At the time of contract execution, it was expected that the design and construction contract would be
completed during the fourth quarter of fiscal 2011 and the O&M contract would cover related activities
through December 31, 2027. Although the contract terms only allowed for final billing of the multiple
project milestones upon their individual completion, we recognized revenue and the related receivable as
the costs were incurred on a percentage-of-completion basis, as we believed that completion of all
milestones was probable. As a result of changes in scope and delays in project execution as directed by the
client, we have issued numerous change orders related to the design and construction contract, and this
contract has not yet been completed.

In April 2013, our client was acquired by a larger commercial property developer. Subsequently,
the new client implemented a plan to substantially modify the original scope and projected timeline
associated with the contract. We determined that these proposed changes would result in increased risk
and cost and, potentially, the termination of the original contract. Accordingly, subsequent to significant
discussions with the new client during the third quarter of fiscal 2013, we reviewed the recoverability of
estimated costs to be incurred in anticipation of the potential project termination. We also reviewed the
outstanding accounts receivable related to individual task orders under which we did not reach the
required contract milestones and, therefore, would not be collectible. As a result of this process, we
recorded a pre-tax charge to operating income of $12.4 million that reduced revenue by the same amount
during the third quarter of fiscal 2013. This charge principally consisted of reserves established for the
outstanding accounts receivable that were no longer considered probable of collection, a reversal of
previously recognized profit based upon the change in estimate associated with the potential early project
termination, and the write-off of previously recorded accounts receivable associated with partially
completed milestones. No other gains or losses on this project were recorded during fiscal 2014 or 2015.

In total for all four programs, we had $5.7 million of accounts receivable outstanding, including
those related to REAs and change orders, and the related projects were complete as of September 27,
2015. If we are unable to collect these accounts receivable, we could record further losses on these
programs. Conversely, we intend to pursue all available legal methods to collect the entire amount of the
REAs and change orders, and other amounts we believe are due us. The total amount, which is

approximately $15.6 million, significantly exceeds the revenue recognized on the related contracts. If we
are successful, we could recognize gains on recovery in future periods.

Segment Results of Operations

Water, Environment and Infrastructure

Fiscal Year Ended

September 28, September 29,

Change

2014

2013

Revenue . . . . . . . . . . . . . . . . . . $
Subcontractor costs . . . . . . . . . .

946,849
(200,507)

Revenue, net of subcontractor

costs . . . . . . . . . . . . . . . . . . . $

746,342

Operating income . . . . . . . . . . . $

93,972

($ in thousands)

963,592
(205,098)

758,494

59,924

(16,743)
4,591

(12,152)

34,048

(1.7)%
(2.2)

(1.6)

56.8

Revenue and revenue, net of subcontractor costs, declined $16.7 million and $12.1 million,
respectively, in fiscal 2014 compared to the prior year. These decreases were primarily the result of
fluctuations in foreign currency translation. In fiscal 2014, the U.S. dollar strengthened against many
foreign currencies compared to fiscal 2013. These fluctuations, particularly related to the Canadian dollar,
reduced revenue by $14.5 million and revenue, net of subcontractor costs, by $13.4 million in fiscal 2014
compared to fiscal 2013.

Despite stable revenues, on a constant currency basis, operating income increased $34.0 million in
fiscal 2014 compared to the prior year. In the third quarter of fiscal 2013, our operating income was
adversely impacted by the weakness in our Canadian operations, which resulted in significant severance
and office-related closure costs to right-size the related operations. Prior to these right-sizing actions,
operating income in our Eastern Canada operations was significantly below historical levels due to a lower
level of revenue, and the corresponding under-utilization of our labor and equipment resources. As a
result of the right-sizing actions, utilization improved, and the combined operating income, excluding the
related charges, for these businesses increased $7.6 million in fiscal 2014 compared to fiscal 2013.
Additionally, in fiscal 2013 we recorded a $12.3 million charge to operating income related to a commercial
development project, which is described in more detail under, ‘‘Fiscal 2013 Project-Related Charges’’.

Resource Management and Energy

Fiscal Year Ended

September 28, September 29,

Change

2014

2013

($ in thousands)

Revenue . . . . . . . . . . . . . . . . . . $ 1,406,885
(372,806)
Subcontractor costs . . . . . . . . . .

$ 1,389,711
(284,842)

Revenue, net of subcontractor

costs . . . . . . . . . . . . . . . . . . . $ 1,034,079

$ 1,104,869

Operating income . . . . . . . . . . . $

84,743

74,796

17,174
(87,964)

(70,790)

9,947

1.2%
30.9

(6.4)

13.3

In fiscal 2014, revenue and revenue, net of subcontractor costs, increased $17.2 million and
decreased $70.8 million, respectively, compared to the prior year. These changes include the result of
fluctuations in foreign currency translation. In fiscal 2014, the U.S. dollar strengthened against many
foreign currencies compared to fiscal 2013. These fluctuations, particularly related to the Canadian dollar,
reduced revenue by $27.7 million and revenue, net of subcontractor costs, by $23.5 million in fiscal 2014
compared to fiscal 2013. The disparity between the variance in revenue versus revenue, net of
subcontractor costs, was caused by several oil and gas projects that had a high level of subcontractor
activity. The lower level of revenue, net of subcontractor costs, primarily related to reduced mining activity
of $41.1 million.

Despite the lower revenue, operating income increased $9.9 million in fiscal 2014 compared to
fiscal 2013. This increase primarily resulted from significant severance and office-related closure costs to
right-size our global mining operations, particularly in Canada, in fiscal 2013.

Remediation and Construction Management

Fiscal Year Ended

September 28, September 29,

Change

2014

2013

($ in thousands)

Revenue . . . . . . . . . . . . . . . . . . $
Subcontractor costs . . . . . . . . . .

221,108
(141,611)

Revenue, net of subcontractor

costs . . . . . . . . . . . . . . . . . . . $

79,497

Operating income . . . . . . . . . . . $

(45,151)

305,821
(144,352)

161,469

(24,986)

(84,713)
2,741

(27.7)%
(1.9)

(81,972)

(50.8)

(20,165)

80.7

Revenue and revenue, net of subcontractor costs decreased $84.7 million and $82.0 million,
respectively, in fiscal 2014 compared to the prior year. In the third quarter of fiscal 2013, we recorded
$17.3 million of negative revenue adjustments for project-related charges on three programs with U.S.
federal, and state and local government clients. Excluding the impact of these charges, revenue and
revenue, net of subcontractor costs, decreased $67.4 million and $64.7 million in fiscal 2014 compared to
fiscal 2013. The revenue decline primarily reflects reduced revenues from U.S. state and local government
work due to the wind-down of large transportation projects, and our decision in the fourth quarter of fiscal
2014 to exit these and other activities that require fixed-price bidding.

Operating income declined $20.2 million in fiscal 2014 compared to the prior year, and we
reported a segment loss of $45.2 million compared to a loss of $25.0 million in fiscal 2013. The losses in
both years were primarily attributable to cost-overruns on fixed-price construction projects. The project
losses are described in detail under, ‘‘Fiscal 2014 Project-Related Charges’’ and ‘‘Fiscal 2013 Project-
Related Charges.’’

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Capital Requirements. Our primary sources of liquidity are cash flows from operations and
borrowings under our credit facilities. Our primary uses of cash are to fund working capital, capital
expenditures, stock repurchases, cash dividends and repayment of debt, as well as to fund acquisitions and
earn-out obligations from prior acquisitions. We believe that our existing cash and cash equivalents,
operating cash flows and borrowing capacity under our credit agreement as described below will be
sufficient to meet our capital requirements for at least the next 12 months. On November 10, 2014, the

Board of Directors authorized a new stock repurchase program under which we may repurchase up to
$200 million of our common stock over the next two years. On November 10, 2014, the Board of Directors
also declared a quarterly cash dividend of $0.07 per share that was paid on December 15, 2014 to
stockholders of record as of the close of business on November 26, 2014. On January 26, 2015, the Board
of Directors declared a quarterly cash dividend of $0.07 per share that was paid on February 26, 2015 to
stockholders of record as of the close of business on February 11, 2015. On April 27, 2015, the Board of
Directors declared a quarterly cash dividend of $0.08 per share payable on May 29, 2015 to stockholders of
record as of the close of business on May 14, 2015. On July 27, 2015, the Board of Directors declared a
quarterly cash dividend of $0.08 per share payable on September 4, 2015 to stockholders of record as of the
close of business on August 17, 2015.

Subsequent Events. On November 9, 2015, the Board of Directors declared a quarterly cash
dividend of $0.08 per share payable on December 11, 2015 to stockholders of record as of the close of
business on November 30, 2015. On October 14, 2015, we announced the execution of a Bid
Implementation Agreement to acquire 100% of the outstanding shares of Coffey International Limited
(‘‘Coffey’’) for A$0.425 cash per share. The closing is conditional on the satisfactory completion of
customary conditions, including that we acquire at least 90% of Coffey’s shares. Our off-market tender
offer for Coffey shares opened on November 10, 2015. The acquisition is expected to close in the second
quarter of fiscal 2016, with a purchase price for 100% of the shares of approximately $76 million.

We use a variety of tax planning and financing strategies to manage our worldwide cash and
deploy funds to locations where they are needed. We also indefinitely reinvest our foreign earnings, and
our current plans do not demonstrate a need to repatriate these earnings. Should we require additional
capital in the United States, we may elect to repatriate these foreign funds or raise capital in the United
States through debt or equity. If we were to repatriate these foreign funds, we would be required to accrue
and pay additional U.S. taxes less applicable foreign tax credits.

As of September 27, 2015, cash and cash equivalents were $135.3 million, an increase of
$12.9 million compared to the fiscal 2014 year-end. The increase was due to cash provided by operating
activities partially offset by capital expenditures, share repurchases and dividends.

Operating Activities. Net cash provided by operating activities was $162.8 million, an increase of
$35.5 million compared to last year. The increase primarily reflects strong collections on accounts
receivable including claims and lower income tax payments, partially offset by increased payments for
accounts payable.

Investing Activities. Net cash used in investing activities was $21.0 million, a decrease of
$20.1 million compared to last year. Payments for business acquisitions were $18.6 million lower in fiscal
2015 compared to last year, which accounted for most of the decrease.

Financing Activities. Net cash used in financing activities was $123.6 million, an increase of
$35.9 million compared to last year. This resulted primarily from a $20.5 million increase in common stock
repurchases, and a $9.3 million increase in dividend payments during fiscal 2015.

Debt Financing. On May 7, 2013, we entered into a credit agreement that provided for a
$205 million term loan facility and a $460 million revolving credit facility both maturing in May 2018. On
May 29, 2015, we entered into a third amendment to our credit agreement (as amended, the ‘‘Credit
Agreement’’) that extended the maturity date for the term loan and the revolving credit facility to May
2020. The Credit Agreement is a $654.8 million senior secured, five-year facility that provides for a
$194.8 million term loan facility (the ‘‘Term Loan Facility’’) and a $460 million revolving credit facility (the
‘‘Revolving Credit Facility’’). The Credit Agreement allows us to, among other things, finance certain
permitted open market repurchases of our common stock, permitted acquisitions, and cash dividends and

distributions. The Revolving Credit Facility includes a $150 million sublimit for the issuance of standby
letters of credit, a $20 million sublimit for swingline loans, and a $150 million sublimit for multicurrency
borrowings. The interest rate provisions of the term loan and the revolving credit facility did not materially
change.

The Term Loan Facility was fully drawn on May 7, 2013, and had an outstanding principal balance
of $194.8 million at May 29, 2015. The Term Loan Facility is subject to quarterly amortization of principal,
with $10.3 million payable in year 1, and $15.4 million payable in years 2 through 5. The Term Loan may be
prepaid at any time without penalty. We may borrow on the Revolving Credit Facility, at our option, at
either (a) a Eurocurrency rate plus a margin that ranges from 1.15% to 2.00% per annum, or (b) a base
rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s
prime rate or the Eurocurrency rate plus 1.00%) plus a margin that ranges from 0.15% to 1.00% per
annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated
quarterly. The Term Loan Facility is subject to the same interest rate provisions. The interest rate of the
Term Loan Facility at the date of inception was 1.57%. The Credit Agreement expires on May 29, 2020, or
earlier at our discretion upon payment in full of loans and other obligations.

As of September 27, 2015, we had $192.2 million in outstanding borrowings under the Credit
Agreement, which was comprised entirely of the Term Loan Facility at a weighted-average interest rate of
1.58% per annum. In addition, we had $1.3 million in standby letters of credit under the Credit
Agreement. Our average effective weighted-average interest rate on borrowings outstanding at
September 27, 2015 under the Credit Agreement, including the effects of interest rate swap agreements
described in Note 14, ‘‘Derivative Financial Instruments’’ of the ‘‘Notes to Consolidated Financial
Statements’’, was 2.73%. At September 27, 2015, we had $458.7 million of available credit under the
Revolving Credit Facility, of which $381.6 million could be borrowed without a violation of our debt
covenants. In addition, we entered into agreements with three banks to issue up to $53 million in standby
letters of credit. The aggregate amount of standby letters of credit outstanding under these additional
facilities and other bank guarantees was $26.2 million, of which $5.6 million was issued in currencies other
than the U.S. dollar.

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

At September 27, 2015, we were in compliance with these covenants with a consolidated leverage
ratio of 1.11x and a consolidated fixed charge coverage ratio of 3.91x. Our obligations under the Credit
Agreement are guaranteed by certain of our subsidiaries and are secured by first priority liens on (i) the
equity interests of certain of our subsidiaries, including those subsidiaries that are guarantors or borrowers
under the Credit Agreement, and (ii) our accounts receivable, general intangibles and intercompany loans,
and those of our subsidiaries that are guarantors or borrowers.

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

Dividends. Our Board of Directors has authorized the following dividends:

Dividend Per Share

Record Date

Total Maximum
Payment

Payment Date

(in thousands, except per share data)

November 10, 2014 . . . . . . . . . . . $
January 26, 2015 . . . . . . . . . . . . . $
April 27, 2015 . . . . . . . . . . . . . . . $
July 27, 2015 . . . . . . . . . . . . . . . $
November 9, 2015 . . . . . . . . . . . . $

0.07
0.07
0.08
0.08
0.08

November 26, 2014 $
$
February 11, 2015
$
May 14, 2015
August 17, 2015
$
November 30, 2015

4,372
4,258
4,810
4,799
N/A

December 15, 2014
February 26, 2015
May 29, 2015
September 4, 2015
December 11, 2015

Contractual Obligations. The following sets forth our contractual obligations at September 27,

2015:

Debt:

Total

Year 1

Years 2 - 3

Years 4 - 5

Beyond

(in thousands)

Credit facility . . . . . . . . . . . $
Interest (1)

. . . . . . . . . . . . .
Capital leases . . . . . . . . . . . .
Operating leases (2) . . . . . . . . .
Contingent earn-outs (3)
. . . . .
Deferred compensation liability
Unrecognized tax benefits (4)
. .

192,203
20,149
700
200,750
4,169
19,494
18,122

11,531
5,140
394
59,779
609
–
–

30,765
8,881
293
84,464
3,560
–
13,759

30,750
6,128
13
44,660
–
–
–

119,157
–
–
11,847
–
19,494
4,363

Total . . . . . . . . . . . . . . . . . $

455,587

77,453

141,722

81,551

154,861

(1)

Interest primarily related to the credit facility is based on a weighted-average interest rate at September 27, 2015,
on borrowings that are presently outstanding.

(2) Predominantly represents real estate leases.
(3) Represents the estimated fair value recorded for contingent earn-out obligations for acquisitions consummated
after fiscal 2009. The remaining maximum contingent earn-out obligations for these acquisitions are $67.1 million.
(4) Represents liabilities for unrecognized tax benefits related to uncertain tax positions, excluding amounts related
primarily to outstanding refund claims. We are unable to reasonably predict the timing of tax settlements, as tax
audits can involve complex issues and the resolution of those issues may span multiple years, particularly if subject
to negotiation or litigation. For more information, see Note 8, ‘‘Income Taxes’’ of the ‘‘Notes to Consolidated
Financial Statements’’ included in Item 8.

Income Taxes

We review the realizability of deferred tax assets on a quarterly basis by assessing the need for a
valuation allowance. As of September 27, 2015, we performed our assessment of net deferred tax assets.
Significant management judgment is required in determining the provision for income taxes and, in
particular, any valuation allowance recorded against our deferred tax assets. Applying the applicable
accounting guidance requires an assessment of all available evidence, positive and negative, regarding the
realizability of the net deferred tax assets. Based upon recent results, we concluded that a cumulative loss
in recent years exists in certain states and foreign jurisdictions. We have historically relied on the following
factors in our assessment of the realizability of our net deferred tax assets:

(cid:129) taxable income in prior carryback years as permitted under the tax law;

(cid:129) future reversals of existing taxable temporary differences;

(cid:129) consideration of available tax planning strategies and actions that could be implemented, if

necessary; and

(cid:129) estimates of future taxable income from our operations.

We considered these factors in our estimate of the reversal pattern of deferred tax assets, using
assumptions that we believe are reasonable and consistent with operating results. However, as a result of
projected cumulative pre-tax losses in certain states and foreign jurisdictions for the 36 months ended
September 27, 2015, we concluded that our estimates of future taxable income and certain tax planning
strategies did not constitute sufficient positive evidence for certain entities to assert that it is more likely
than not that certain deferred tax assets would be realizable before expiration. Based on our assessment,
we have concluded that it is more likely than not that the assets will be realized except for the assets
related to loss carry-forwards in certain states and foreign jurisdictions and for certain foreign intangibles
for which a valuation allowance of $7.8 million has been provided.

We are currently under examination by the Internal Revenue Service for fiscal years 2010 through
2013, and by the California Franchise Tax Board for fiscal years 2004 through 2009. We are also subject to
various other state audits. With a few exceptions, we are no longer subject to U.S. federal, state and local,
or non-U.S. income tax examinations for fiscal years before 2010.

During the first quarter of fiscal 2015, the Tax Franchise Prevention Act of 2014 was signed into
law. This law retroactively extended the federal R&E credits for amounts incurred from January 1, 2014
through December 31, 2014. Our effective tax rate for fiscal 2015 includes a tax benefit from R&E credits
attributable to the last nine months of fiscal 2014 and first three months of fiscal 2015. Should the R&E
credits provision be retroactively extended during fiscal 2016, additional benefits will be reflected in our
effective tax rate during the quarter reporting period of enactment.

Off-Balance Sheet Arrangements

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

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

(cid:129) 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 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 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 September 27, 2015, we had $1.3 million in standby letters of credit outstanding
under our Credit Agreement and $26.2 million in standby letters of credit outstanding under
our additional letter of credit facilities.

(cid:129) 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.

(cid:129) 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.

(cid:129) In the ordinary course of business, our clients may request that we obtain surety bonds in
connection with contract performance obligations that are not required to be recorded in our
consolidated balance sheets. We are obligated to reimburse the issuer of our surety bonds for
any payments made thereunder. Each of our commitments under performance bonds generally
ends concurrently with the expiration of our related contractual obligation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements in conformity with U.S. GAAP requires us to make
estimates and assumptions in the application of certain accounting policies that affect amounts reported in
our consolidated financial statements and accompanying footnotes included in Item 8 of this report. In
order to understand better the changes that may occur to our financial condition, results of operations and
cash flows, readers should be aware of the critical accounting policies we apply and estimates we use in
preparing our consolidated financial statements. Although such estimates and assumptions are based on
management’s best knowledge of current events and actions we may undertake in the future, actual results
could differ materially from those estimates.

Our significant accounting policies are described in the ‘‘Notes to Consolidated Financial
Statements’’ included in Item 8. Highlighted below are the accounting policies that management considers
most critical to investors’ understanding of our financial results and condition, and that require complex
judgments by management.

Revenue Recognition and Contract Costs

We recognize revenue for most of our contracts using the percentage-of-completion method,
primarily based on contract costs incurred to date compared to total estimated contract costs. We generally
utilize the cost-to-cost approach to estimate the progress towards completion in order to determine the
amount of revenue and profit to recognize. This method of revenue recognition requires us to prepare
estimates of costs to complete contracts in progress. In making such estimates, judgments are required to
evaluate contingencies such as potential variances in schedule; the cost of materials and labor productivity;
and the impact of change orders, liability claims, contract disputes and achievement of contractual
performance standards. Changes in total estimated contract cost and losses, if any, could materially impact
our results of operations or financial position. Certain of our contracts are service-related contracts, such

as providing operations and maintenance services or a variety of technical assistance services. Our service
contracts are accounted for using the proportional performance method under which revenue is
recognized in proportion to the number of service activities performed, in proportion to the direct costs of
performing the service activities, or evenly across the period of performance depending upon the nature of
the services provided.

We recognize revenue for work performed under three major types of contracts: fixed-price,

time-and-materials and cost-plus.

Fixed-Price. We enter into two major types of fixed-price contracts: firm fixed-price (‘‘FFP’’) and
fixed-price per unit (‘‘FPPU’’). Under FFP contracts, our clients pay us an agreed fixed-amount negotiated
in advance for a specified scope of work. We generally recognize revenue on FFP contracts using the
percentage-of-completion method. If the nature or circumstances of the contract prevent us from
preparing a reliable estimate at completion, we will delay profit recognition until adequate information
about the contract’s progress becomes available. Under our FPPU contracts, clients pay us a set fee for
each service or production transaction that we complete. Accordingly, we recognize revenue under FPPU
contracts as we complete the related service or production transactions, generally using the proportional
performance method.

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 of materials and other direct incidental expenditures that we incur in
connection with our performance under the contract. The majority of our time-and-material contracts are
subject to maximum contract values and, accordingly, revenue under these contracts is generally
recognized under the percentage-of-completion method. However, time and materials contracts that are
service-related contracts are accounted for utilizing the proportional performance method. Revenue on
contracts that are not subject to maximum contract values is recognized based on the actual number of
hours we spend on the projects plus any actual out-of-pocket costs of materials and other direct incidental
expenditures that we incur on the projects. Our time-and-materials contracts also generally include annual
billing rate adjustment provisions.

Cost-Plus. Under cost-plus contracts, we are reimbursed for allowable 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. Revenue for cost-plus contracts is
recognized at the time services are performed. Revenue is not recognized for non-recoverable costs.
Performance incentives are included in our estimates of revenue when their realization is reasonably
assured.

If estimated total costs on any contract indicate a loss, we recognize the entire estimated loss in
the period the loss becomes known. The cumulative effect of revisions to revenue, estimated costs to
complete contracts, including penalties, incentive awards, change orders, claims, anticipated losses and
others are recorded in the period in which the revisions are identified and the loss can be reasonably
estimated. Such revisions could occur in any reporting period and the effects may be material depending
on the size of the project or the adjustment.

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 are ‘‘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 obtaining client agreement. Revenue related to change

orders is recognized as costs are incurred. Change orders that are unapproved as to both price and scope
are evaluated as claims.

Claims are amounts in excess of agreed contract prices that we seek to collect from our clients or
other third parties for delays, errors in specifications and designs, contract terminations, change orders in
dispute or unapproved as to both scope and price or other causes of unanticipated additional costs.
Revenue on claims is recognized only to the extent that contract costs related to the claims have been
incurred and when it is probable that the claim will result in a bona fide addition to contract value that can
be reliably estimated. No profit is recognized on a claim until final settlement occurs. 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 claim resolution occurs.

Insurance Matters, Litigation and Contingencies

In the normal course of business, we are subject to certain contractual guarantees and litigation.
Generally, such guarantees relate to project schedules and performance. Most of the litigation involves us
as a defendant in contractual disagreements, workers’ compensation, personal injury and other similar
lawsuits. We maintain insurance coverage for various aspects of our business and operations. However, we
have elected to retain a portion of losses that may occur through the use of various deductibles, limits and
retentions under our insurance programs. This practice may subject us to some future liability for which we
are only partially insured or are completely uninsured.

We record in our consolidated balance sheets amounts representing our estimated liability for
self-insurance claims. We utilize actuarial analyses to assist in determining the level of accrued liabilities to
establish for our employee medical and workers’ compensation self-insurance claims that are known and
have been asserted against us, as well as for self-insurance claims that are believed to have been incurred
based on actuarial analyses but have not yet been reported to our claims administrators at the balance
sheet date. We include any adjustments to such insurance reserves in our consolidated results of
operations.

Except as described in Note 18, ‘‘Commitments and Contingencies’’ of the ‘‘Notes to Consolidated
Financial Statements’’ included in Item 8, we do not have any litigation or other contingencies that have
had, or are currently anticipated to have, a material impact on our results of operations or financial
position. As additional information about current or future litigation or other contingencies becomes
available, management will assess whether such information warrants the recording of additional expenses
relating to those contingencies. Such additional expenses could potentially have a material impact on our
results of operations and financial position.

Stock-Based Compensation

Our stock-based compensation plans include stock options, restricted stock, restricted stock units
(‘‘RSUs’’), performance share units (‘‘PSUs’’) and an employee stock purchase plan for our eligible
employees and outside directors. Stock-based compensation cost is measured at the grant date based on
the fair value of the award and is recognized as expense over the requisite service period. Determining the
fair value of stock-based awards at the grant date requires management to make assumptions and apply
judgment to determine the fair value of our awards. These assumptions and judgments include future
employee turnover rates, along with estimating the future volatility of our stock price, future stock option
exercise behaviors and, for performance-based awards, the achievement of company performance goals.
Our stock-based compensation expense was $10.9 million, $10.4 million and $8.8 million for fiscal 2015,
2014 and 2013, respectively.

Goodwill and Intangibles

The cost of an acquired company is assigned to the tangible and intangible assets purchased and
the liabilities assumed on the basis of their fair values at the date of acquisition. The determination of fair
values of assets and liabilities acquired requires us to make estimates and use valuation techniques when a
market value is not readily available. Any excess of purchase price over the fair value of net tangible and
intangible assets acquired is allocated to goodwill. Goodwill typically represents the value paid for the
assembled workforce and enhancement of our service offerings.

Identifiable intangible assets include backlog, non-compete agreements, client relations, trade
names, patents and other assets. The costs of these intangible assets are amortized over their contractual
or economic lives, which range from one to ten years. We assess the recoverability of the unamortized
balance of our intangible assets when indicators of impairment are present based on expected future
profitability and undiscounted expected cash flows and their contribution to our overall operations. Should
the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the
fair value of the intangible assets would be recognized as an impairment loss.

We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter.
In addition, we regularly evaluate whether events and circumstances have occurred that may indicate a
potential change in recoverability of goodwill. We perform interim goodwill impairment reviews between
our annual reviews if certain events and circumstances have occurred, including a deterioration in general
economic conditions, an increased 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 (see Note 6, ‘‘Goodwill and
Intangible Assets’’ of the ‘‘Notes to Consolidated Financial Statements’’ in Item 8 for further discussion).

We believe the methodology that we use to review impairment of goodwill, which includes a
significant amount of judgment and estimates, provides us with a reasonable basis to determine whether
impairment has occurred. However, many of the factors employed in determining whether our goodwill is
impaired are outside of our control and it is reasonably likely that assumptions and estimates will change in
future periods. These changes could result in future impairments.

The goodwill impairment review involves the determination of the fair value of our reporting
units, which for us are the components one level below our reportable segments. This process requires us
to make significant judgments and estimates, including assumptions about our strategic plans with regard
to our operations as well as the interpretation of current economic indicators and market valuations.
Furthermore, the development of the present value of future cash flow projections includes assumptions
and estimates derived from a review of our expected revenue growth rates, profit margins, business plans,
cost of capital and tax rates. We also make certain assumptions about future market conditions, market
prices, interest rates and changes in business strategies. Changes in assumptions or estimates could
materially affect the determination of the fair value of a reporting unit. This could eliminate the excess of
fair value over carrying value of a reporting unit entirely and, in some cases, result in impairment. Such
changes in assumptions could be caused by a loss of one or more significant contracts, reductions in
government or commercial client spending, or a decline in the demand for our services due to changing
economic conditions. In the event that we determine that our goodwill is impaired, we would be required
to record a non-cash charge that could result in a material adverse effect on our results of operations or
financial position.

We use two methods to determine the fair value of our reporting units: (i) the Income Approach
and (ii) the Market Approach. While each of these approaches is initially considered in the valuation of
the business enterprises, the nature and characteristics of the reporting units indicate which approach is
most applicable. The Income Approach utilizes the discounted cash flow method, which focuses on the

expected cash flow of the reporting unit. In applying this approach, the cash flow available for distribution
is calculated for a finite period of years. Cash flow available for distribution is defined, for purposes of this
analysis, as the amount of cash that could be distributed as a dividend without impairing the future
profitability or operations of the reporting unit. The cash flow available for distribution and the terminal
value (the value of the reporting unit at the end of the estimation period) are then discounted to present
value to derive an indication of the value of the business enterprise. The Market Approach is comprised of
the guideline company method and the similar transactions method. The guideline company method
focuses on comparing the reporting unit to select reasonably similar (or ‘‘guideline’’) publicly traded
companies. Under this method, valuation multiples are (i) derived from the operating data of selected
guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of the reporting
units relative to the selected guideline companies; and (iii) applied to the operating data of the reporting
unit to arrive at an indication of value. In the similar transactions method, consideration is given to prices
paid in recent transactions that have occurred in the reporting unit’s industry or in related industries. For
our annual impairment analysis at June 29, 2015, we weighted the Income Approach and the Market
Approach at 70% and 30%, respectively. The Income Approach was given a higher weight because it has
the most direct correlation to the specific economics of the reporting unit, as compared to the Market
Approach, which is based on multiples of broad-based (i.e., less comparable) companies.

In the fourth quarter of fiscal 2015, we recognized a non-cash goodwill and other intangible assets
impairment charge of $60.8 million related to our GMP reporting unit in the RME segment. This charge is
explained in detail under ‘‘Fiscal 2015 and 2014 Goodwill and Earn-Out Adjustments’’. Our fourth quarter
2015 goodwill impairment review indicated that we had no other impairment of goodwill, and all of our
other reporting units had estimated fair values that were in excess of their carrying values, including
goodwill. Although we believe that our estimates of fair value for these reporting units are reasonable, if
financial performance for these reporting units falls significantly below our expectations or market prices
for similar business decline, the goodwill for these reporting units could become impaired.

In the fourth quarter of fiscal 2015, we also identified one reporting unit, WMG in our RME
segment, which had an estimated fair value that exceeded its carrying value by less than 20%. As previously
discussed, 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.

In our discounted cash flow model for WMG in the fourth quarter of fiscal 2015, we assumed
annual revenue growth rates of 3% to 5% based on historical trends in WMG and the solid waste industry,
projections for future solid waste activity, and WMG’s backlog and prospects for new orders. We
discounted the resulting cash flows at a rate of 11.0%. Our market based assessment resulted in a value
approximating a 1.0 multiple of revenue for the 12 month period preceding the valuation date. The
discounted cash flow value, combined on a weighted-basis with the results of our market analysis, resulted
in an estimated fair value for WMG of $103.5 million compared to our carrying value including goodwill of
$93.9 million. As of September 27, 2015, the goodwill amount for WMG was $54.5 million.

Although we believe that our current estimate of fair value is reasonable, our analysis is primarily
dependent on our future level of revenue from our solid waste clients. However, the extent of our future
activity is uncertain. We currently anticipate that if WMG’s future revenue grows by less than 2.0%, or
market prices for similar businesses decline by more than 10%, WMG’s goodwill could become impaired.

Additionally, if the yield on 20-year U.S. treasury bonds (our assumed risk-free rate of return) or
the additional return investors require for alternate investments, including those similar to WMG,
increases, we may be required to increase the discount rate used in our cash flow analysis. If all of our
operating assumptions remain constant, but we are required to increase the discount rate in our cash flow
model to 14.0% or higher, WMG’s goodwill could become impaired.

Contingent Consideration. Certain of our acquisition agreements include contingent earn-out
arrangements, which are generally based on the achievement of future operating income thresholds. The
contingent earn-out arrangements are based upon 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 these 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 ‘‘Estimated contingent earn-out liabilities’’ and ‘‘Long-term
estimated 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 shareholders 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 (See Note 2, ‘‘Basis of Presentation
and Preparation – Fair Value of Financial Instruments’’ of the ‘‘Notes to Consolidated Financial
Statements’’ included in Item 8). 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 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 liability on the
acquisition date is reflected as cash used in operating activities.

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.

Income Taxes

We file a consolidated U.S. federal income tax return and a combined California franchise tax
return. In addition, we file other returns that are required in the states, foreign jurisdictions and other
jurisdictions in which we do business. We account for certain income and expense items differently for
financial reporting and income tax purposes. Deferred tax assets and liabilities are computed for the
differences between the financial statement and tax bases of assets and liabilities that will result in taxable

or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which
the differences are expected to reverse. In determining the need for a valuation allowance on deferred tax
assets, management reviews both positive and negative evidence, including current and historical results of
operations, future income projections and potential tax planning strategies. Based on our assessment, we
have concluded that a portion of the deferred tax assets at September 27, 2015, primarily net operating
losses and certain foreign intangibles, will not be realized, and we have reserved accordingly.

According to the authoritative guidance on accounting for uncertainty in income taxes, we may
recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate
settlement. For more information related to our unrecognized tax benefits, see Note 8, ‘‘Income Taxes’’ of
the ‘‘Notes to Consolidated Financial Statements’’ included in Item 8.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting standards and the effect they could have on the consolidated
financial statements, see Note 2, ‘‘Basis of Presentation and Preparation’’ of the ‘‘Notes to Consolidated
Financial Statements’’ included in Item 8.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

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

We are exposed to interest rate risk under our Credit Agreement. We can borrow, at our option,
under both the Term Loan Facility and Revolving Credit Facility. We may borrow on the Revolving Credit
Facility, at our option, at either (a) a Eurocurrency rate plus a margin that ranges from 1.15% to 2.00% per
annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50%
per annum, the bank’s prime rate or the Eurocurrency rate plus 1.00%) plus a margin that ranges from
0.15% to 1.00% per annum. Borrowings at the base rate have no designated term and may be repaid
without penalty any time prior to the Facility’s maturity date. Borrowings at a Eurodollar rate have a term
no less than 30 days and no greater than 90 days. Typically, at the end of such term, such borrowings may
be rolled over at our discretion into either a borrowing at the base rate or a borrowing at a Eurodollar rate
with similar terms, not to exceed the maturity date of the Facility. The Facility matures on May 29, 2020. At
September 27, 2015 we had borrowings outstanding under the Credit Agreement of $192.2 million at a
weighted-average interest rate of 1.58% per annum.

In fiscal 2013, we entered into three interest rate swap agreements with three banks to fix the
variable interest rate on $153.8 million of our Term Loan Facility. In fiscal 2014, we entered into two
interest rate swap agreements with two banks to fix the variable interest rate on $51.3 million of our Term
Loan Facility. The objective of these interest rate swaps was to eliminate the variability of our cash flows
on the amount of interest expense we pay under our Credit Agreement. Our average effective interest rate
on borrowings outstanding under the Credit Agreement, including the effects of interest rate swap
agreements, at September 27, 2015 was 2.73%. For more information, see Note 14, ‘‘Derivative Financial
Instruments’’ of the ‘‘Notes to Consolidated Financial Statements’’ in Item 8.

Most of our transactions are in U.S. dollars; however, some of our subsidiaries conduct business in
foreign currencies, primarily the CAD. Therefore, we are subject to currency exposure and volatility
because of currency fluctuations. We attempt to minimize our exposure to these fluctuations by matching

revenue and expenses in the same currency for our contracts. Foreign currency gains and losses were
immaterial for both fiscal 2015 and the prior-year periods. Foreign currency gains and losses are reported
as part of ‘‘Selling, general and administrative expenses’’ in our consolidated statements of operations.

We have foreign currency exchange rate exposure in our results of operations and equity primarily
as a result of the currency translation related to our Canadian subsidiaries where the local currency is the
functional currency. To the extent the U.S. dollar strengthens against the CAD, the translation of these
foreign currency denominated transactions will result in reduced revenue, operating expenses, assets and
liabilities. Similarly, our revenue, operating expenses, assets and liabilities will increase if the U.S. dollar
weakens against the CAD. For fiscal 2015 and 2014, 24.6% and 25.9% of our consolidated revenue,
respectively, was generated by our international business, and such revenue was primarily denominated in
CAD. For fiscal 2015, the effect of foreign exchange rate translation on the consolidated balance sheets
was a reduction in equity of $100.8 million compared to a reduction in equity of $44.5 million in fiscal 2014.
These amounts were recognized as an adjustment to equity through other comprehensive income.

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets at September 27, 2015 and September 28, 2014 . . . . . . . . . . . . . .

Page

Consolidated Statements of Operations for each of the three years in the period ended

September 27, 2015, September 28, 2014 and September 29, 2013 . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income (Loss) for each of the three years in the

period ended September 27, 2015, September 28, 2014 and September 29, 2013 . . . . . . . . . . .

Consolidated Statements of Equity for each of the three years in the period ended

September 27, 2015, September 28, 2014 and September 29, 2013 . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for each of the three years in the period ended

September 27, 2015, September 28, 2014 and September 29, 2013 . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule II – Valuation and Qualifying Accounts and Reserves . . . . . . . . . . . . . . . . . . . . . . . . .

128

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders of Tetra Tech, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of operations, comprehensive income (loss), equity and cash flows present fairly, in all material
respects, the financial position of Tetra Tech, Inc. and its subsidiaries at September 27, 2015 and
September 28, 2014, and the results of their operations and their cash flows for each of the three years in
the period ended September 27, 2015, in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of September 27,
2015 based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
management is responsible for these financial statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in Management’s Report on Internal Control over Financial
Reporting, appearing under Item 9A of this Form 10-K. Our responsibility is to express opinions on these
financial statements, on the financial statement schedule and on the Company’s internal control over
financial reporting based on our integrated audits. We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS LLP

Los Angeles, California
November 20, 2015

TETRA TECH, INC.
Consolidated Balance Sheets
(in thousands, except par value)

Current assets:

ASSETS

September 27,
2015

September 28,
2014

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents
Accounts receivable – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . .
Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment – net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in and advances to unconsolidated joint ventures . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

135,326
636,030
42,125
10,294

823,775

64,906
1,886
601,379
40,332
26,964

122,379
701,892
52,256
22,076

898,603

73,864
2,140
714,190
63,095
24,512

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,559,242

1,776,404

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Billings in excess of costs on uncompleted contracts . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated contingent earn-out liabilities . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred income taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term estimated contingent earn-out liabilities . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commitments and contingencies (Note 18)

Equity:

Preferred stock – Authorized, 2,000 shares of $0.01 par value; no

shares issued and outstanding at September 27, 2015 and
September 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock – Authorized, 150,000 shares of $0.01 par value; issued
and outstanding, 59,381 and 62,591 shares at September 27, 2015
and September 28, 2014, respectively . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tetra Tech stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

150,284
103,866
93,989
20,787
11,904
609
69,003

450,442

34,759
180,972
3,560
32,711

175,952
110,186
103,343
20,387
10,989
3,568
79,436

503,861

28,786
192,842
3,462
34,397

–

594
326,593
(143,171)
672,309

856,325
473

856,798

626
402,516
(42,538)
651,475

1,012,079
977

1,013,056

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,559,242

1,776,404

See accompanying Notes to Consolidated Financial Statements.

TETRA TECH, INC.
Consolidated Statements of Operations
(in thousands, except per share data)

Fiscal Year Ended

September 27,
2015

September 28,
2014

September 29,
2013

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Subcontractor costs . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs of revenue . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
Selling, general and administrative expenses
Contingent consideration – fair value adjustments
. . . .
Impairment of goodwill and other intangible assets . . . .

2,299,321
(580,606)
(1,402,925)
(170,456)
3,113
(60,763)

Operating income . . . . . . . . . . . . . . . . . . . . . . . . .

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income tax expense . . . . . . . . . . . . .

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) including noncontrolling interests
.
Net income attributable to noncontrolling interests . .

87,684

680
(8,043)

80,321

(41,093)

39,228
(154)

Net income (loss) attributable to Tetra Tech . . . . . . . $

39,074

Net income (loss) attributable to Tetra Tech per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.64

60,913

61,532

2,483,814
(623,896)
(1,577,481)
(187,298)
58,694
–

153,833

804
(10,294)

144,343

(35,668)

108,675
(409)

108,266

1.68

1.66

64,379

65,146

2,613,755
(588,923)
(1,757,842)
(199,732)
9,560
(56,600)

20,218

1,003
(8,689)

12,532

(14,038)

(1,506)
(635)

(2,141)

(0.03)

64,544

Cash dividends paid per share . . . . . . . . . . . . . . . . . . $

0.30

0.14

–

See accompanying Notes to Consolidated Financial Statements.

TETRA TECH, INC.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)

Fiscal Year Ended

September 27,
2015

September 28,
2014

September 29,
2013

Net income (loss) including noncontrolling interests . . . . $

39,228

108,675

(1,506)

Other comprehensive loss, net of tax:

Foreign currency translation adjustments . . . . . . . . .
. . . . . . . .
Gain (loss) on cash flow hedge valuations

(98,287)
(2,489)

Other comprehensive loss, net of tax . . . . . . . . . .

(100,776)

(45,480)
1,029

(44,451)

(28,817)
(389)

(29,206)

Comprehensive income (loss) including

noncontrolling interests . . . . . . . . . . . . . . . .

(61,548)

64,224

(30,712)

Net income attributable to noncontrolling interests . . . .
Foreign currency translation adjustments, net of tax . . . .

Comprehensive income attributable to

noncontrolling interests . . . . . . . . . . . . . . . .

(154)
143

(11)

(409)
55

(354)

(635)
47

(588)

Comprehensive income (loss) attributable to

Tetra Tech . . . . . . . . . . . . . . . . . . . . . . . . $

(61,559)

63,870

(31,300)

See accompanying Notes to Consolidated Financial Statements.

TETRA TECH, INC.
Consolidated Statements of Equity
Fiscal Years Ended September 29, 2013, September 28, 2014, and September 27, 2015
(in thousands)

Common Stock

Additional
Paid-in
Shares Amount Capital

Accumulated
Other

Total

Comprehensive Retained Tetra Tech Non-Controlling

Income

Earnings

Equity

Interests

Total
Equity

BALANCE AT SEPTEMBER 30, 2012 . . . . 63,837 $ 638

$ 433,009 $

31,017

$554,306 $1,018,970 $

897

$1,019,867

Comprehensive income, net of tax:

Net income (loss) . . . . . . . . . . . . . . .
Foreign currency translation adjustments .
. . . .
Loss on cash flow hedge valuations

Comprehensive income (loss), net of tax . . .

Distributions paid to noncontrolling interests
Stock-based compensation . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . .
Shares issued for Employee Stock Purchase

Plan . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
. . . . . . . . .

Stock repurchases
Tax expense for stock options

899

253
(855)

3
(9)

8,775
14,872

5,548
(19,991)
886

(2,141)

(28,770)
(389)

635
(47)

588

(445)

(2,141)
(28,770)
(389)

(31,300)

8,775
14,881

5,551
(20,000)
886

BALANCE AT SEPTEMBER 29, 2013 . . . . 64,134

641

443,099

1,858

552,165

997,763

1,040

Comprehensive income, net of tax:

Net income . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments .
Gain on cash flow hedge valuations . . . .

Comprehensive income, net of tax . . . . . .

Distributions paid to noncontrolling interests
Dividends . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . .
Shares issued for Employee Stock Purchase

Plan . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
. . . . . . . . .

Stock repurchases
Tax expense for stock options

1,263

246
(3,052)

2
(30)

10,374
22,956

5,597
(79,970)
460

108,266

(45,425)
1,029

(8,956)

409
(55)

354

(417)

108,266
(45,425)
1,029

63,870

(8,956)
10,374
22,969

5,599
(80,000)
460

(1,506)
(28,817)
(389)

(30,712)

(445)
8,775
14,881

5,551
(20,000)
886

998,803

108,675
(45,480)
1,029

64,224

(417)
(8,956)
10,374
22,969

5,599
(80,000)
460

BALANCE AT SEPTEMBER 28, 2014 . . . . 62,591

626

402,516

(42,538)

651,475

1,012,079

977

1,013,056

Comprehensive income, net of tax:

Net income . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments .
. . . .
Loss on cash flow hedge valuations

Comprehensive income (loss), net of tax . . .

Plan . . . . . . . . . . . . . . . . . . . . . . .
Stock repurchases
. . . . . . . . . . . . . . . .
Tax benefit for stock options . . . . . . . . . .

510

243
(3,963)

3
(40)

10,926
8,985

5,200
(100,460)
(574)

39,074

(98,144)
(2,489)

(18,240)

154
(143)

(515)

39,074
(98,144)
(2,489)

(61,559)

(18,240)
10,926
8,990

5,203
(100,500)
(574)

39,228
(98,287)
(2,489)

(61,548)

(515)
(18,240)
10,926
8,990

5,203
(100,500)
(574)

BALANCE AT SEPTEMBER 27, 2015 . . . . 59,381 $ 594

$ 326,593 $

(143,171)

$672,309 $ 856,325 $

473

$ 856,798

See accompanying Notes to Consolidated Financial Statements.

TETRA TECH, INC.
Consolidated Statements of Cash Flows
(in thousands)

Fiscal Year Ended

September 27, September 28, September 29,
2014

2013

2015

Cash flows from operating activities:

Net income (loss) including noncontrolling interests

. . . . . . . . . . . . . . . . . . $

39,228

108,675

(1,506)

Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on settlement of foreign currency forward contract . . . . . . . . . . . . .
Equity in income of unconsolidated joint ventures . . . . . . . . . . . . . . . . .
Distributions of earnings from unconsolidated joint ventures . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from stock-based compensation . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill and other intangible assets . . . . . . . . . . . . . . . .
Fair value adjustments to contingent consideration . . . . . . . . . . . . . . . .
Foreign exchange (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease termination costs and related asset impairment
. . . . . . . . . . . . . .
(Gain) loss on disposal of property and equipment . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Billings in excess of costs on uncompleted contracts
. . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable/payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44,201
–
(5,131)
5,252
10,926
(172)
8,412
(1,034)
60,763
(3,113)
(275)
342
(6,014)

40,345
12,970
(26,901)
(7,676)
(10,319)
(6,868)
7,911

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . .

162,847

Cash flows from investing activities:

Capital expenditures
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for business acquisitions, net of cash acquired . . . . . . . . . . . . .
Payment in settlement of foreign currency forward contract . . . . . . . . . . .
Receipt in settlement of foreign currency forward contract
. . . . . . . . . . .
Changes in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . . . .
Payment received on note for sale of operation . . . . . . . . . . . . . . . . . .

Net cash used in investing activities

. . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from financing activities:
Payments on long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of earn-out liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from stock-based compensation . . . . . . . . . . . . . . . .
Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . .
Dividend paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . .

Effect of foreign exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . .

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year

(24,296)
(11,680)
–
–
4,530
10,426
–

(21,020)

(75,459)
64,794
(3,199)
(1,457)
(515)
172
(100,500)
10,825
(18,240)

(123,579)

(5,301)

12,947
122,379

54,540
–
(2,804)
2,724
10,374
(904)
(145)
1,467
–
(58,694)
(104)
2,416
58

(32,020)
(4,481)
31,772
(4,728)
23,833
(9,315)
4,712

127,376

(19,404)
(30,251)
–
–
–
4,594
3,900

(41,161)

(4,379)
–
(18,663)
–
(417)
904
(80,000)
23,834
(8,956)

(87,677)

(5,464)

(6,926)
129,305

62,605
270
(3,461)
4,458
8,775
(886)
(11,468)
13,818
56,600
(9,560)
754
7,188
(287)

87,367
(11,782)
(34,191)
(16,385)
(16,830)
21,489
(19,218)

137,750

(27,545)
(171,349)
(4,177)
3,907
470
2,089
–

(196,605)

(171,400)
296,389
(33,672)
(2,136)
(445)
886
(20,000)
15,993
–

85,615

(2,303)

24,457
104,848

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . $

135,326

122,379

129,305

Supplemental information:
Cash paid during the year for:

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$
Income taxes, net of refunds of $5.4 million, $14.7 million and $6.7 million .

7,323
23,268

$
$

8,293
28,092

$
$

5,049
35,796

See accompanying Notes to Consolidated Financial Statements.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Description of Business

We are a leading provider of consulting and engineering services that focuses on addressing
fundamental needs for water, environment, infrastructure, resource management and energy. We typically
begin at the earliest stage of a project identifying technical solutions to problems and developing execution
plans tailored to our clients’ needs and resources. Our solutions may span the entire life cycle of consulting
and engineering projects and include applied science, research and technology, engineering, design,
construction management, operations and maintenance, and information technology.

Basis of Presentation and Preparation

Principles of Consolidation and Presentation. The consolidated financial statements include our
accounts and those of joint ventures of which we are the primary beneficiary. All significant intercompany
balances and transactions have been eliminated in consolidation. Certain prior year amounts have been
revised to conform to the current year presentation.

Fiscal Year. We report results of operations based on 52 or 53-week periods ending on the Sunday

nearest September 30. Fiscal years 2015, 2014 and 2013 each contained 52 weeks.

Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires
us to make estimates and assumptions. These estimates and assumptions affect the amounts reported in
our consolidated financial statements and accompanying notes. Although such estimates and assumptions
are based on management’s best knowledge of current events and actions we may take in the future, actual
results could differ materially from those estimates.

Revenue Recognition and Contract Costs. We recognize revenue for most of our contracts using the
percentage-of-completion method, primarily based on contract costs incurred to date compared to total
estimated contract costs. We generally utilize the cost-to-cost approach to estimate the progress towards
completion in order to determine the amount of revenue and profit to recognize. Revenue and cost
estimates for each significant contract are reviewed and reassessed quarterly. Changes in those estimates
could result in 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. Changes in revenue and cost estimates
could also result in a projected loss that would be recorded immediately in earnings. For fiscal years 2015,
2014 and 2013, we recognized net unfavorable operating income adjustments of $8.9 million, $35.9 million
and $40.1 million, respectively, due to changes in estimates. As of September 27, 2015 and September 28,
2014, we recorded a liability for anticipated losses of $10.5 million and $18.6 million, respectively. The
estimated cost to complete the related contracts as of September 27, 2015 was $54.7 million.

Certain of our contracts are service-related contracts, such as providing operations and
maintenance services or a variety of technical assistance services. Our service contracts are accounted for
using the proportional performance method under which revenue is recognized in proportion to the
number of service activities performed, in proportion to the direct costs of performing the service activities,
or evenly across the period of performance depending upon the nature of the services provided.

We recognize revenue for work performed under three major types of contracts: fixed-price,

time-and-materials and cost-plus.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation and Preparation (Continued)

Fixed-Price. We enter into two major types of fixed-price contracts: FFP and FPPU. Under FFP
contracts, our clients pay us an agreed fixed-amount negotiated in advance for a specified scope of work.
We generally recognize revenue on FFP contracts using the percentage-of-completion method. If the
nature or circumstances of the contract prevent us from preparing a reliable estimate at completion, we
will delay profit recognition until adequate information about the contract’s progress becomes available.
Under our FPPU contracts, clients pay us a set fee for each service or production transaction that we
complete. Accordingly, we recognize revenue under FPPU contracts as we complete the related service or
production transactions, generally using the proportional performance method.

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. The majority of our time-and-material contracts are
subject to maximum contract values and, accordingly, revenue under these contracts is generally
recognized under the percentage-of-completion method. However, time and materials contracts that are
service-related contracts are accounted for utilizing the proportional performance method. Revenue on
contracts that are not subject to maximum contract values is recognized based on the actual number of
hours we spend on the projects plus any actual out-of-pocket costs of materials and other direct incidental
expenditures that we incur on the projects. Our time-and-materials contracts also generally include annual
billing rate adjustment provisions.

If estimated total costs on any contract indicate a loss, we recognize the entire estimated loss in
the period the loss becomes known. The cumulative effect of revisions to revenue, estimated costs to
complete contracts, including penalties, incentive awards, change orders, claims, liquidated damages,
anticipated losses, and other revisions are recorded in the period in which the revisions are identified and
the loss can be reasonably estimated. Such revisions could occur in any reporting period and the effects
may be material depending on the size of the project or the adjustment.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation and Preparation (Continued)

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 the claim will result in a bona fide addition to contract value that can
be reliably estimated. No profit is recognized on a claim until final settlement occurs. 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.

Cash and Cash Equivalents. Cash and cash equivalents include all highly liquid investments with
maturities of 90 days or less at the date of purchase. Restricted cash of $4.5 million was included in
‘‘Prepaid expenses and other current assets’’ on the consolidated balance sheet at fiscal 2014 year-end. For
cash held by our consolidated joint ventures, see Note 17, ‘‘Joint Ventures.’’

Insurance Matters, Litigation and Contingencies.

In the normal course of business, we are subject to
certain contractual guarantees and litigation. In addition, we maintain insurance coverage for various
aspects of our business and operations. We record in our consolidated balance sheets amounts
representing our estimated liability for these legal and insurance obligations. We include any adjustments
to these liabilities in our consolidated results of operations.

Accounts Receivable – Net. Net accounts receivable is primarily comprised of billed and unbilled
accounts receivable, contract retentions and allowances for doubtful accounts. Billed accounts receivable
represent amounts billed to clients that have not been collected. Unbilled accounts receivable represent
revenue recognized but not yet billed pursuant to contract terms or billed after the period end date. Most
of our unbilled receivables at September 27, 2015 are expected to be billed and collected within 12 months.
Unbilled accounts receivable also include 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. Contract
retentions represent amounts withheld by clients until certain conditions are met or the project is
completed, which may be several months or years. Allowances for doubtful accounts represent the
amounts that may become uncollectible or unrealizable in the future. We determine an estimated
allowance for uncollectible accounts based on management’s consideration of trends in the actual and
forecasted credit quality of our clients, including delinquency and payment history; type of client, such as a
government agency or a commercial sector client; and general economic and particular industry conditions
that may affect a client’s ability to pay. Billings in excess of costs on uncompleted contracts represent the
amounts of cash collected from clients and billings to clients on contracts in advance of work performed
and revenue recognized. The majority of these amounts will be earned within 12 months.

Property and Equipment. Property and equipment are recorded at cost and are depreciated over
their estimated useful lives using the straight-line method. When property and equipment are retired or
otherwise disposed of, the cost and accumulated depreciation are removed from our consolidated balance
sheets and any resulting gain or loss is reflected in our consolidated statements of operations. Expenditures
for maintenance and repairs are expensed as incurred. Generally, estimated useful lives range from three
to ten years for equipment, furniture and fixtures. Buildings are depreciated over periods not exceeding
40 years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated
useful lives or the length of the lease.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation and Preparation (Continued)

Long-Lived Assets. Our policy regarding long-lived assets is to evaluate the recoverability of our
assets when the facts and circumstances suggest that the assets may be impaired. This assessment is
performed based on the estimated undiscounted cash flows compared to the carrying value of the assets. If
the future cash flows (undiscounted and without interest charges) are less than the carrying value, a
write-down would be recorded to reduce the related asset to its estimated fair value.

We recognize a liability for contract termination costs associated with an exit activity for costs that
will continue to be incurred under a lease for its remaining term without economic benefit to us, initially
measured at its fair value at the cease-use date. The fair value is determined based on the remaining lease
rentals, adjusted for the effects of any prepaid or deferred items recognized under the lease, and reduced
by estimated sublease rentals.

Business Combinations. The cost of an acquired company is assigned to the tangible and intangible
assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. The
determination of fair values of assets and liabilities acquired requires us to make estimates and use
valuation techniques when a market value is not readily available. Any excess of purchase price over the
fair value of net tangible and intangible assets acquired is allocated to goodwill. Goodwill typically
represents the value paid for the assembled workforce and enhancement of our service offerings.
Transaction costs associated with business combinations are expensed as they are incurred.

Goodwill and Intangible Assets. Goodwill represents the excess of the aggregate purchase price over
the fair value of the net assets acquired in a business acquisition. Following an acquisition, we perform an
analysis to value the acquired company’s tangible and identifiable intangible assets and liabilities. With
respect to identifiable intangible assets, we consider backlog, non-compete agreements, client relations,
trade names, patents and other assets. We amortize our intangible assets based on the period over which
the contractual or economic benefits of the intangible assets are expected to be realized. We assess the
recoverability of the unamortized balance of our intangible assets when indicators of impairment are
present based on expected future profitability and undiscounted expected cash flows and their contribution
to our overall operations. Should the review indicate that the carrying value is not fully recoverable, the
excess of the carrying value over the fair value of the intangible assets would be recognized as an
impairment loss.

We test our goodwill for impairment on an annual basis, and more frequently when an event
occurs or circumstances indicate that the carrying value of the asset may not be recoverable. We believe the
methodology that we use to review impairment of goodwill, which includes a significant amount of
judgment and estimates, provides us with a reasonable basis to determine whether impairment has
occurred. However, many of the factors employed in determining whether our goodwill is impaired are
outside of our control and it is reasonably likely that assumptions and estimates will change in future
periods. These changes could result in future impairments.

We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter.
Our last annual review was performed at June 29, 2015 (i.e., the first day of our fiscal fourth quarter). In
addition, we regularly evaluate whether events and circumstances have occurred that may indicate a
potential change in recoverability of goodwill. We perform interim goodwill impairment reviews between
our annual reviews if certain events and circumstances have occurred, including a deterioration in general
economic conditions, an increased competitive environment, a change in management, key personnel,

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation and Preparation (Continued)

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 (See Note 6, ‘‘Goodwill and
Intangible Assets’’ for further discussion). We assess goodwill for impairment at the reporting unit level,
which is defined as an operating segment or one level below an operating segment, referred to as a
component. Our operating segments are the same as our reportable segments and our reporting units for
goodwill impairment testing are the components one level below our reportable segments. These
components constitute a business for which discrete financial information is available and where segment
management regularly reviews the operating results of that component. We aggregate components within
an operating segment that have similar economic characteristics.

The impairment test for goodwill is a two-step process involving the comparison of the estimated
fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. We estimate the
fair value of reporting units based on a comparison and weighting of the income approach, specifically the
discounted cash flow method and the market approach, 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. If the fair value of a reporting unit exceeds its carrying
amount, the goodwill of the reporting unit is not considered impaired; therefore, the second step of the
impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, we
perform the second step of the goodwill impairment test to measure the amount of impairment loss to be
recorded. If our goodwill is impaired, we are required to record a non-cash charge that could have a
material adverse effect on our consolidated financial statements.

Contingent Consideration. Most of our acquisition agreements include contingent earn-out
arrangements, which are generally based on the achievement of future operating income thresholds. The
contingent earn-out arrangements are based upon our valuations of the acquired companies and reduce
the risk of overpaying for acquisitions if the projected financial results are not achieved. These contingent
earn-out payments are reflected as cash flows used in investing activities on the consolidated statements of
cash flows in the period paid.

The fair values of these 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 ‘‘Estimated contingent earn-out liabilities’’ and ‘‘Long-term
estimated 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.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation and Preparation (Continued)

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 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 liability on the acquisition date is reflected as cash used in operating activities.

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.

Assets Held for Sale. Assets that meet the held for sale classification criteria are valued at the lower
of their carrying amount or estimated fair value less cost to sell. If the carrying amount of the asset exceeds
its estimated fair value less cost to sell, an impairment loss is recognized. Depreciation, depletion and
amortization expense is not recorded on assets once they are classified as held for sale.

Fair Value of Financial Instruments. We determine the fair values of our financial instruments,
including short-term investments, debt instruments and derivative instruments based on inputs or
assumptions that market participants would use in pricing an asset or a liability. We categorize our
instruments using a valuation hierarchy for disclosure of the inputs used to measure fair value. This
hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices
(unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar
assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly
or indirectly through market corroboration, for substantially the full term of the financial instrument; and
Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities
at fair value. The classification of a financial asset or liability within the hierarchy is determined based on
the lowest level input that is significant to the fair value measurement.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable
approximate fair values based on their short-term nature. The carrying amounts of our revolving credit
facility approximates fair value because the interest rates are based upon variable reference rates (see
Note 9, ‘‘Long-Term Debt’’ and Note 14, ‘‘Derivative Financial Instruments’’ for additional disclosure).
Certain other assets and liabilities, such as contingent earn-out liabilities, assets held for sale and amounts
related to cash-flow hedges, are required to be carried in our consolidated financial statements at fair
value.

Our fair value measurement methods may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values. Although we believe our valuation
methods are appropriate and consistent with those used by other market participants, the use of different
methodologies or assumptions to determine fair value could result in a different fair value measurement at
the reporting date.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation and Preparation (Continued)

Derivative Financial Instruments. We account for our derivative instruments as either assets or
liabilities and carry them at fair value. For derivative instruments that hedge the exposure to variability in
expected future cash flows that are designated as cash flow hedges, the effective portion of the gain or loss
on the derivative instrument is reported as a component of accumulated other comprehensive income
(loss) in stockholders’ equity and reclassified into income in the same period or periods during which the
hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative
instrument, if any, is recognized in current income. To receive hedge accounting treatment, cash flow
hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions.

The net gain or loss on the effective portion of a derivative instrument that is designated as an
economic hedge of the foreign currency translation exposure generated by the re-measurement of certain
assets and liabilities denominated in a non-functional currency in a foreign operation is reported in the
same manner as a foreign currency translation adjustment. Accordingly, any gains or losses related to these
derivative instruments are recognized in current income. Derivatives that do not qualify as hedges are
adjusted to fair value through current income.

Deferred Compensation. We maintain a non-qualified defined contribution supplemental
retirement plan for certain key employees that is accounted for in accordance with applicable authoritative
guidance on accounting for deferred compensation arrangements where amounts earned are held in a
rabbi trust and invested. Employee deferrals and our match are deposited into a rabbi trust, and the funds
are generally invested in individual variable life insurance contracts that we own and are specifically
designed to informally fund savings plans of this nature. Our consolidated balance sheets reflect our
investment in variable life insurance contracts in ‘‘Other long-term assets.’’ Our obligation to participating
employees is reflected in ‘‘Other long-term liabilities.’’ All income and expenses related to the rabbi trust
are reflected in our consolidated statements of operations.

Income Taxes. We file a consolidated U.S. federal income tax return and a combined California
franchise tax return. In addition, we file other returns that are required in the states, foreign jurisdictions
and other jurisdictions in which we do business. We account for certain income and expense items
differently for financial reporting and income tax purposes. Deferred tax assets and liabilities are
computed for the difference between the financial statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to reverse. In determining the need for a valuation
allowance, management reviews both positive and negative evidence, including current and historical
results of operations, future income projections and potential tax planning strategies. Based on our
assessment, we have concluded that a portion of the deferred tax assets at September 27, 2015 will not be
realized.

According to the authoritative guidance on accounting for uncertainty in income taxes, we may
recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate
settlement. This guidance also addresses de-recognition, classification, interest and penalties on income
taxes, accounting in interim periods and disclosure requirements for uncertain tax positions.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation and Preparation (Continued)

Concentration of Credit Risk. Financial instruments that subject us to credit risk consist primarily of
cash and cash equivalents and net accounts receivable. In the event that we have surplus cash, we place our
temporary cash investments with lower risk financial institutions and, by policy, limit the amount of
investment exposure to any one financial institution. Approximately 25% of accounts receivable were due
from various agencies of the U.S. federal government at fiscal 2015 year-end. The remaining accounts
receivable are generally diversified due to the large number of organizations comprising our client base
and their geographic dispersion. We perform ongoing credit evaluations of our clients and maintain an
allowance for potential credit losses. Approximately 43.4%, 32.0% and 24.6% of our fiscal 2015 revenue
was generated from our U.S government, U.S. commercial and international clients, respectively (see
Note 20, ‘‘Reportable Segments’’ for more information).

Foreign Currency Translation. We determine the functional currency of our foreign operating units
based upon the primary currency in which they operate. These operating units maintain their accounting
records in their local currency, primarily CAD. Where the functional currency is not the U.S. dollar,
translation of assets and liabilities to U.S. dollars is based on exchange rates at the balance sheet date.
Translation of revenue and expenses to U.S. dollars is based on the average rate during the period.
Translation gains or losses are reported as a component of other comprehensive income (loss). Gains or
losses from foreign currency transactions are included in results of operations, with the exception of
intercompany foreign transactions that are considered long-term investments, which are recorded in
‘‘Accumulated other comprehensive income (loss)’’ on the consolidated balance sheets.

Recently Adopted and Issued Accounting Guidance.

In July 2013, the Financial Accounting Standards
Board (‘‘FASB’’) issued an update on the financial statement presentation of unrecognized tax benefits.
We are required to present a liability related to an unrecognized tax benefit as a reduction of a deferred tax
asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement
is required or expected in the event the uncertain tax position is disallowed. This guidance became
effective for us in the first quarter of fiscal 2015, and did not have a material impact on our consolidated
financial statements.

In April 2014, the FASB issued guidance that changes the threshold for reporting discontinued
operations and adds new disclosures. The new guidance defines a discontinued operation as a disposal of a
component or group of components that is disposed of or is classified as held for sale and ‘‘represents a
strategic shift that has (or will have) a major effect on our operations and financial results.’’ For disposals
of individually significant components that do not qualify as discontinued operations, we must disclose
pre-tax earnings of the disposed component. This guidance is effective for us prospectively for all disposals
(or classifications as held for sale) of components of an entity that occur within annual periods beginning
on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but
only for disposals (or classifications as held for sale) that have not been reported in financial statements
previously issued or available for issuance. The adoption of this guidance did not have a material impact on
our consolidated financial statements.

In May 2014, the FASB issued an accounting standard that will supersede existing revenue
recognition guidance under current U.S. GAAP. The new standard is a comprehensive new revenue
recognition model that requires a company to recognize revenue to depict the transfer of goods or services
to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods
and services. The accounting standard is effective for us in the first quarter of fiscal year 2019. Companies
may use either a full retrospective or a modified retrospective approach to adopt this standard, and
management is currently evaluating which transition approach to use. We are currently in the process of
assessing what impact this new standard may have on our consolidated financial statements.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation and Preparation (Continued)

In June 2014, the FASB issued updated guidance intended to eliminate the diversity in practice
regarding share-based payment awards that include terms which provide for a performance target that
affects vesting being achieved after the requisite service period. The new standard requires that a
performance target which affects vesting and could be achieved after the requisite service period be treated
as a performance condition that affects vesting and should not be reflected in estimating the grant-date fair
value. The updated guidance is effective for interim and annual reporting periods beginning after
December 15, 2015, with early adoption permitted. We do not expect the adoption of this guidance to have
an impact on our consolidated financial statements.

In January 2015, the FASB issued an amendment to the accounting guidance related to the income
statement presentation of extraordinary and unusual items. The amendment eliminates from U.S. GAAP
the concept of extraordinary items. The guidance is effective for us in the first quarter of fiscal 2017. We do
not expect the adoption of this guidance to have an impact on our consolidated financial statements.

In February 2015, the FASB issued updated guidance which changes the analysis that a reporting
entity must perform to determine whether it should consolidate certain types of legal entities. The updated
guidance is effective for interim and annual reporting periods beginning after December 15, 2015, with
early adoption permitted. We do not expect the adoption of this guidance to have an impact on our
consolidated financial statements.

In April 2015, the FASB issued updated guidance intended to simplify, and provide consistency to,
the presentation of debt issuance costs. The new standard requires that debt issuance costs be presented in
the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt
discounts. The updated guidance is effective for interim and annual reporting periods beginning after
December 15, 2015, with early adoption permitted. We do not expect the adoption of this guidance to have
a material impact on our consolidated financial statements.

In August 2015, the FASB issued updated guidance relating to the SEC Staff Announcement at
the June 18, 2015 Emerging Issues Task Force meeting on the presentation and subsequent measurement
of debt issuance costs associated with line-of-credit arrangements. The updated guidance allows for the
deferral and presentation of debt issuance costs as an asset which may be amortized ratably over the term
of the line-of-credit arrangement, regardless of whether there are any related outstanding borrowings. We
do not expect the adoption of this guidance to have a material impact on our consolidated financial
statements.

In September 2015, the FASB issued updated guidance to simplify measurement-period
adjustments in business combinations. The updated guidance eliminated the requirement that an acquirer
in a business combination account for measurement-period adjustments retrospectively. Instead, an
acquirer will recognize a measurement-period adjustment during the period in which it determines the
amount of the adjustment. The updated guidance is effective for interim and annual reporting periods
beginning after December 15, 2015, with early adoption permitted. We do not expect the adoption of this
guidance to have a material impact on our consolidated financial statements.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Repurchase and Dividends

In June 2013, our Board of Directors authorized a stock repurchase program under which we
could repurchase up to $100 million of our common stock. Stock repurchases could be made on the open
market or in privately negotiated transactions with third parties. From the inception of this program
through September 28, 2014, we repurchased through open market purchases a total of 3.9 million shares
at an average price of $25.59 per share, for a total cost of $100 million.

On November 10, 2014, the Board of Directors authorized a new stock repurchase program under
which we may repurchase up to $200 million of our common stock over the next two years. In fiscal 2015,
we repurchased through open market purchases a total of 4.0 million shares at an average price of $25.36,
for a total cost of $100.5 million under this new repurchase program.

On November 10, 2014, the Board of Directors declared a quarterly cash dividend of $0.07 per
share to stockholders of record as of the close of business on November 26, 2014. On January 26, 2015, the
Board of Directors declared a quarterly cash dividend of $0.07 per share to stockholders of record as of the
close of business on February 11, 2015. On April 27, 2015, the Board of Directors declared a quarterly cash
dividend of $0.08 per share payable on May 29, 2015 to stockholders of record as of the close of business
on May 14, 2015. On July 27, 2015, the Board of Directors declared a quarterly cash dividend of $0.08 per
share payable on September 4, 2015 to stockholders of record as of the close of business on August 17,
2015. A total of $18.2 million was paid in dividends for fiscal 2015.

Subsequent Event. On November 9, 2015, the Board of Directors declared a quarterly cash
dividend of $0.08 per share payable on December 11, 2015 to stockholders of record as of the close of
business on November 30, 2015.

Accounts Receivable – Net and Revenue Recognition

Net accounts receivable and billings in excess of costs on uncompleted contracts consisted of the

following at September 27, 2015 and September 28, 2014:

Fiscal Year Ended

September 27, September 28,

2015

2014

(in thousands)

Billed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unbilled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract retentions

Total accounts receivable – gross . . . . . . . . . . . . . . . . . . . .

331,364
311,823
24,333

667,520

Allowance for doubtful accounts

. . . . . . . . . . . . . . . . . . . . .

(31,490)

Total accounts receivable – net . . . . . . . . . . . . . . . . . . . . . $

636,030

Billings in excess of costs on uncompleted contracts . . . . . . . . $

93,989

351,693
363,050
26,929

741,672

(39,780)

701,892

103,343

Billed accounts receivable represent amounts billed to clients that have not been collected.
Unbilled accounts receivable represent revenue recognized but not yet billed pursuant to contract terms or

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounts Receivable – Net and Revenue Recognition (Continued)

billed after the period end date. Substantially all of our unbilled receivables at September 27, 2015 are
expected to be billed and collected within 12 months. Contract retentions represent amounts withheld by
clients until certain conditions are met or the project is completed, which may be several months or years.
The allowance for doubtful accounts represents amounts that may become uncollectible or unrealizable in
the future. We determine an estimated allowance for uncollectible accounts based on management’s
consideration of trends in the actual and forecasted credit quality of our clients, including delinquency and
payment history; type of client, such as a government agency or a commercial sector client; and general
economic and particular industry conditions that may affect a client’s ability to pay. Billings in excess of
costs on uncompleted contracts represent the amount of cash collected from clients and billings to clients
on contracts in advance of revenue recognized. The majority of billings in excess of costs on uncompleted
contracts, excluding those related to claims, will be earned within 12 months.

Once contract performance is underway, we may experience changes in conditions, client
requirements, specifications, designs, materials, and expectations regarding the period of performance.
Such changes result in ‘‘change orders’’ and may be initiated by us or by our clients. In many cases,
agreement with the client as to the terms of change orders is reached prior to work commencing; however,
sometimes circumstances require that work progresses without obtaining a definitive client agreement.
Unapproved change orders constitute claims 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, or other causes of unanticipated additional costs. Revenue on claims is recognized when
contract costs related to claims have been incurred and when their addition to contract value can be
reliably estimated and realization is probable. This can lead to a situation in which costs are recognized in
one period and revenue is recognized in a subsequent period such as when client agreement is obtained or
a claims resolution occurs.

Total accounts receivable at September 27, 2015 and September 28, 2014 included approximately
$53 million and $79 million, respectively, related to claims, including requests for equitable adjustment, on
contracts that provide for price redetermination. The decline in claims in fiscal 2015 is primarily due to the
settlement of two claims related to completed transportation projects in the RCM segment totaling
$31 million. We settled for cash proceeds of $29 million and, as a result, recognized reduced revenue and
operating income of $2.0 million in the RCM segment. We regularly evaluate all 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 fiscal 2015, we recorded net losses of $1.8 million
related to all claims including the aforementioned completed transportation projects. We recognized
revenue and an increase to operating income of $3.4 million related to the evaluation of the collectability
of claims in fiscal 2014.

Billed accounts receivable related to U.S. federal government contracts were $61.9 million and
$57.4 million at September 27, 2015 and September 28, 2014, respectively. U.S. federal government
unbilled receivables were $74.2 million and $73.2 million at September 27, 2015 and September 28, 2014,
respectively. Other than the U.S. federal government, no single client accounted for more than 10% of our
accounts receivable at September 27, 2015 and September 28, 2014.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mergers and Acquisitions

In fiscal 2013, we acquired AEG, headquartered in Richfield, Ohio. AEG provides environmental,
design, construction and maintenance services primarily to solid and hazardous waste, environmental,
energy and utility clients. Also in the second quarter of fiscal 2013, we acquired Parkland, headquartered in
Alberta, Canada. Parkland serves the oil and gas industry in Western Canada, and specializes in the
technical support, engineering support and construction of pipelines and oilfield facilities. AEG and
Parkland are both included in our RME segment. We also made other acquisitions that enhanced our
service offerings and expanded our geographic presence in our WEI and RME segments during fiscal
2013. The aggregate fair value of the purchase prices for fiscal 2013 acquisitions was $248.9 million. Of this
amount, $171.6 million was paid to the sellers, $2.0 million was recorded as liabilities in accordance with
the purchase agreements, and $75.3 million was the estimated fair value of contingent earn-out obligations
as of the respective acquisition dates, with an aggregate maximum of $86.7 million upon the achievement
of specified financial objectives. In fiscal 2014, we made immaterial acquisitions that enhanced our service
offerings and expanded our geographic presence in our WEI and RME segments.

In fiscal 2015, we acquired Cornerstone Environmental Group, LLC (‘‘CEG’’), headquartered in
Middletown, New York. CEG is an environmental engineering and consulting firm focused on solid waste
markets in the United States, and is included in our RME segment. The fair value of the purchase price for
CEG was $15.9 million. Of this amount, $11.8 million was paid to the sellers and $4.1 million was the
estimated fair value of contingent earn-out obligations, with a maximum of $9.8 million, based upon the
achievement of specified financial objectives.

Subsequent Event. On October 14, 2015, we announced the execution of a Bid Implementation
Agreement to acquire 100% of the outstanding shares of Coffey International Limited (‘‘Coffey’’) for
A$0.425 cash per share. The closing is conditional on the satisfactory completion of customary conditions,
including that we acquire at least 90% of Coffey’s shares. Our off-market tender offer for Coffey shares
opened on November 10, 2015. The acquisition is expected to close in the second quarter of fiscal 2016,
with a purchase price for 100% of the shares of approximately $76 million.

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.
Specifically, the goodwill addition related to the fiscal 2015 acquisition primarily represents the value of
the workforce with distinct expertise in the solid waste market. The goodwill additions related to the fiscal
2014 acquisitions primarily represent the value of workforces with distinct expertise in the oil and gas and
disaster preparedness markets. 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 the consolidated financial statements from their respective closing
dates. None of the acquisitions were considered material, individually or in the aggregate, to our
consolidated financial statements. As a result, no pro forma information has been provided for the
respective periods.

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

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mergers and Acquisitions (Continued)

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 ‘‘Estimated contingent
earn-out liabilities’’ and ‘‘Long-term estimated 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.

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 previous 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 fiscal years 2015, 2014 and 2013,
we recorded net decreases in our contingent earn-out liabilities and reported related net gains in operating
income of $3.1 million, $58.7 million and $9.6 million, respectively. The fiscal 2015 gain resulted from an
updated valuation of the contingent consideration liability for Caber, which is part of our RME segment.

The acquisition agreement for Caber included a contingent earn-out agreement based on the
achievement of operating income thresholds (in Canadian dollars) in each of the first two years beginning
on the acquisition date, which was in the first quarter of fiscal 2014. The maximum earn-out obligation
over the two-year earn-out period was C$8.0 million (C$4.0 million in each year). These amounts could be
earned on a pro-rata basis for operating income within a predetermined range in each year. Caber was
required to meet a minimum operating income threshold in each year to earn any contingent
consideration. These thresholds were C$4.0 million and C$4.6 million in years one and two, respectively. In
order to earn the maximum contingent consideration, Caber would need to generate operating income of
C$4.4 million in year one and C$5.1 million in year two.

The determination of the fair value of the purchase price for Caber on the acquisition date
included our estimate of the fair value of the related contingent earn-out obligation. This initial valuation

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mergers and Acquisitions (Continued)

was primarily based on probability-weighted internal estimates of Caber’s operating income during each
earn-out period. As a result of these estimates, we calculated an initial fair value at the acquisition date of
Caber’s contingent earn-out liability of C$6.5 million in the first quarter of fiscal 2014. In determining that
Caber would earn 81% of the maximum potential earn-out, we considered several factors including
Caber’s recent historical revenue and operating income levels and growth rates. We also considered the
recent trend in Caber’s backlog level and the prospects for the oil and gas industry in Western Canada.

Caber’s actual financial performance in the first earn-out period exceeded our original estimate at
the acquisition date. As a result, in the fourth quarter of fiscal 2014, we increased the related contingent
consideration liability and recognized a loss of $1.0 million. This updated valuation included our
assumption that Caber would earn the maximum amount of contingent consideration of C$4.0 million in
the first earn-out period. In the second quarter of fiscal 2015, we completed our final calculation of the
contingent consideration for the first earn-out period and paid contingent consideration of C$4.0 million
(USD$3.2 million). At that time we also evaluated our estimate of Caber’s contingent consideration
liability for the second earn-out period. This assessment included a review of the status of on-going
projects in Caber’s backlog, and the inventory of prospective new contract awards. We also considered the
status of the oil and gas industry in Western Canada, particularly in light of the recent decline in oil prices.
As a result of this assessment, we concluded that Caber’s operating income in the second earn-out period
would be lower than our original estimate at the acquisition date and our subsequent estimates through the
first quarter of fiscal 2015. We concluded that Caber’s operating income for the second earn-out period,
which ends in the first quarter of fiscal 2016, would be lower than the minimum requirement of
C$4.6 million to earn any contingent consideration. Accordingly, in the second quarter of fiscal 2015, we
reduced the Caber contingent earn-out liability to $0, which resulted in a gain of $3.1 million.

The fiscal 2014 net gains primarily resulted from updated valuations of the contingent

consideration liabilities for Parkland and AEG, which are both part of our RME segment.

The acquisition agreement for Parkland included a contingent earn-out agreement based on the
achievement of operating income thresholds (in Canadian dollars) in each of the first three years
beginning on the acquisition date, which was in the second quarter of fiscal 2013. The maximum earn-out
obligation over the three-year earn-out period was C$56.0 million (C$12.0 million, C$22.0 million and
C$22.0 million in earn-out years one, two and three, respectively). These amounts could be earned
primarily on a pro-rata basis for operating income within a predetermined range in each year. To a lesser
extent, additional earn-out consideration could be earned for operating income above the high-end of the
range up to the contractual maximum of C$56.0 million. Parkland was required to meet a minimum
operating income threshold in each year in order to earn any contingent consideration. These thresholds
were C$34.7 million, C$38.2 million and C$41.9 million in years one, two and three, respectively. In order
to earn the maximum contingent consideration, Parkland would need to generate operating income of
C$42.5 million in year one, C$46.4 million in year two, and C$50.6 million in year three.

The determination of the fair value of the purchase price for Parkland on the acquisition date
included our estimate of the fair value of the related contingent earn-out obligation. This initial valuation
was primarily based on probability-weighted internal estimates of Parkland’s operating income during each
earn-out period. As a result of these estimates, we calculated an initial fair value at the acquisition date of
Parkland’s contingent earn-out liability of C$46.8 million in the second quarter of fiscal 2013. In
determining that Parkland would attain 84% of the maximum potential earn-out, we considered several

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mergers and Acquisitions (Continued)

factors including Parkland’s recent historical revenue and operating income levels and growth rates, the
recent trend in Parkland’s backlog level, and the prospects for the midstream oil and gas industry in
Western Canada.

In fiscal 2014, we recorded decreases in our contingent earn-out liability for Parkland and
reported related net gains in operating income of $44.6 million. These gains resulted from Parkland’s
actual and projected post-acquisition performance falling below our initial expectations concerning the
likelihood and timing of achieving the relevant operating income thresholds. The remaining difference
compared to the initial value was due to currency translation, and the related liability was $0 at the end of
fiscal 2014.

In the second quarter of fiscal 2014, we updated the estimated cost to complete a large fixed-price
contract at Parkland, and determined that the project would be break-even compared to the significant
profit estimated the previous quarter when the project was initiated. As a result, during the second quarter
of fiscal 2014 we reversed $5.3 million of profit previously recognized on the project. This variance, and
our updated estimate that the revenue for the remainder of the project would produce no operating
income, resulted in our conclusion that Parkland’s operating income in the first and second earn-out
periods would fall below the minimum operating income thresholds in each such year. As a result, we
reduced the contingent earn-out liability for the first and second earn-out periods to $0, which resulted in
gains totaling $24.7 million ($5.6 million and $19.1 million in the first and second quarters of fiscal 2014,
respectively).

In the fourth quarter of fiscal 2014, we updated our projection of Parkland’s operating income for
the third earn-out period. This assessment included a review of the projects in Parkland’s backlog, the
inventory of prospective new contract awards, and the forecast for economic activity in the Western
Canada oil and gas sector. As a result of this assessment, we concluded that Parkland’s operating income in
the third earn-out period would be lower than our original estimate at the acquisition date and would fall
below the minimum operating income threshold. As a result, we reduced the remaining contingent
earn-out liability balance for the third earn-out period to $0, which resulted in a gain of $19.9 million.

The acquisition agreement for AEG included a contingent earn-out agreement based on the
achievement of operating income thresholds in each of the first two years beginning on the acquisition
date. The maximum earn-out obligation over the two-year earn-out period was $27.1 million ($11.3 million
annually plus a $4.5 million one-time payment based on minimum operating income in each year). The
annual amounts could be earned primarily on a pro-rata basis for operating income within a
predetermined range in each year. To a lesser extent, additional earn-out consideration could be earned for
operating income above the high-end of the range up to the contractual maximum of $27.1 million. AEG
was required to meet a minimum operating income threshold in each year in order to earn any contingent
consideration. These minimum thresholds were $10.0 million and $11.0 million in years one and two,
respectively. In order to earn the maximum contingent consideration, AEG would need to achieve
operating income of $17.5 million in year one and $18.5 million in year two. In addition, if AEG achieved
operating income of at least $9.0 million during both earn-out periods, AEG would receive $4.5 million at
the end of the second earn-out period.

The determination of the fair value of the purchase price for AEG on the acquisition date
included our estimate of the fair value of the related contingent earn-out obligation. This initial valuation

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mergers and Acquisitions (Continued)

was primarily based on probability-weighted internal estimates of AEG’s operating income during each
earn-out period. As a result of these estimates, we calculated an initial fair value at the acquisition date of
AEG’s contingent earn-out liability of $21.5 million in the second quarter of fiscal 2013. In determining
that AEG would attain 79% of the maximum potential earn-out we considered several factors including
AEG’s recent historical revenue and operating income levels and growth rates. We also considered the
recent trend in AEG’s backlog level and the prospects for the solid waste industry in the United States.

AEG’s first earn-out period ended on the last day of the first quarter of fiscal 2014. As a result,
during the first quarter of fiscal 2014, we performed a preliminary calculation of the contingent
consideration for the first earn-out period and concluded that AEG’s operating income in that period
would be higher than both our original estimate at the acquisition date and our previous quarterly
estimates. As a result, we increased the contingent earn-out liability for the first earn-out period, which
resulted in an additional expense of $1.0 million. The contingent consideration of $9.1 million for the first
earn-out period was paid in the second quarter of fiscal 2014.

During calendar 2014, which corresponds to AEG’s second earn-out period, adverse weather
conditions hindered AEG’s ability to complete its project field work. As a result, in the third quarter of
fiscal 2014, we updated our projection of AEG’s operating income for its second earn-out period. This
assessment included a review of the status of on-going projects in AEG’s backlog, and the inventory of
prospective new contract awards. As a result of this assessment, we concluded that AEG’s operating
income in the second earn-out period would be significantly lower than our original estimate at the
acquisition date, would fall below the minimum operating income threshold, but would still exceed
$9.0 million of operating income in order to earn the additional tranche. As a result, we reduced the
contingent earn-out liability, which resulted in a gain of $8.9 million in the third quarter of fiscal 2014.

During the fourth quarter of fiscal 2014, we performed an updated projection of AEG’s operating
income for its second earn-out period based on actual results and the forecast for the remainder of the
second earn-out period. Based on this analysis, we concluded that AEG’s operating income in the second
earn-out period would be lower than the $9.0 million needed to receive the $4.5 million of contingent
consideration that remained accrued for performance in both earn-out years. As a result, we reduced the
contingent earn-out liability to $0, which resulted in a gain of $4.5 million in the fourth quarter of fiscal
2014, and net gains of $13.2 million for all of fiscal 2014.

At September 27, 2015, there was a total maximum of $29.3 million of outstanding contingent
consideration related to acquisitions. Of this amount, $4.2 million was estimated as the fair value and
accrued on our consolidated balance sheet.

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mergers and Acquisitions (Continued)

The following table summarizes the changes in the carrying value of estimated contingent earn-out

liabilities:

Fiscal Year Ended

September 27, September 28, September 29,
2014

2013

2015

(in thousands)

Beginning balance (at fair value) . . . . . . . . . . . . $
Estimated earn-out liabilities for acquisitions

7,030

81,789

51,539

during the fiscal year . . . . . . . . . . . . . . . . . .

4,100

6,242

75,253

Earn-out liabilities for acquisitions completed

prior to fiscal 2010.

. . . . . . . . . . . . . . . . . . .

Increases due to re-measurement of fair value

reported in interest expense . . . . . . . . . . . . . .

Net decreases due to re-measurement of fair

value reported as gains in operating income . . .
. . . . . . . . . . . . . . . . .

Foreign exchange impact
Earn-out payments:

Reported as cash used in operating activities . .
Reported as cash used in investing activities . . .
. .
Reported as cash used in financing activities

–

136

(3,113)
(785)

–
–
(3,199)

–

1,846

(58,694)
(3,507)

(1,984)
–
(18,662)

250

2,433

(9,560)
(2,480)

(695)
(1,279)
(33,672)

Ending balance (at fair value) . . . . . . . . . . . . . . $

4,169

7,030

81,789

Goodwill and Intangible Assets

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

WEI

RME

Total

(in thousands)

Balance at September 29, 2013 . . . . . . . . . . . . . . . . . $ 229,931
8,982
(6,922)
–

Goodwill additions . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange translation . . . . . . . . . . . . . . . . .
Goodwill adjustments . . . . . . . . . . . . . . . . . . . . . .

$ 492,861
11,642
(22,779)
475

$ 722,792
20,624
(29,701)
475

Balance at September 28, 2014 . . . . . . . . . . . . . . . . .
Goodwill additions . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange translation . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment

231,991
–
(21,243)
–

482,199
6,272
(39,722)
(58,118)

714,190
6,272
(60,965)
(58,118)

Balance at September 27, 2015 . . . . . . . . . . . . . . . . . $ 210,748

$ 390,631

$ 601,379

We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter.
Our most recent review was performed at June 29, 2015 (i.e. the first day of our fourth quarter in fiscal
2015). In addition, we regularly evaluate whether events and circumstances have occurred that may
indicate a potential change in recoverability of goodwill. We perform interim goodwill impairment reviews

100

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill and Intangible Assets (Continued)

between our annual reviews if certain events and circumstances have occurred, including a deterioration in
general economic conditions, an increased 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.

In the fourth quarter of fiscal 2015, the mining sector continued to contract in response to lower
global growth expectations driven in large part by China’s actual and projected slower economic growth.
Consistent with this trend, our mining customers continued their curtailment of capital spending for new
mining projects. As a result, GMP experienced a 25% decline in revenue in the fourth quarter of fiscal
2015 compared to the same period of fiscal 2014. This negative trend was compared to the expected
revenue growth of approximately 3% in the previous goodwill impairment test, performed as of June 30,
2014. In response to these results, we performed a strategic review of GMP in the fourth quarter of fiscal
2015, and determined that our mining activities would likely decline further in fiscal 2016, and that revenue
and profits would not return to acceptable levels of performance in the foreseeable future. We also decided
to redeploy a significant portion of our mining resources into other operational areas that have better
growth and profitability prospects. Consequently, as of the first day of fiscal 2016, GMP is no longer a
reporting unit. We considered GMP’s financial performance and prospects in our goodwill impairment
analysis in the fourth quarter of fiscal 2015 and determined that GMP’s fair value had fallen significantly
below its carrying value, including goodwill. As required, we performed further analysis to measure the
amount of the impairment loss and, as a result, we wrote-off all of GMP’s goodwill and identifiable
intangible assets and recorded a related impairment charge of $60.8 million ($57.3 million after-tax) in the
fourth quarter of fiscal 2015. The related goodwill and identifiable intangible assets that were determined
not to be recoverable totaled $58.1 million and $2.7 million, respectively.

Our fourth quarter 2015 goodwill impairment review indicated that we had no other impairment
of goodwill, and all of our other reporting units had estimated fair values that were in excess of their
carrying values, including goodwill. Although we believe that our estimates of fair value for these reporting
units are reasonable, if financial performance for these reporting units falls significantly below our
expectations or market prices for similar business decline, the goodwill for these reporting units could
become impaired.

In the fourth quarter of fiscal 2015, we also identified one reporting unit, WMG in our RME
segment, which had an estimated fair value that exceeded its carrying value by less than 20%. As previously
discussed, 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.

101

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill and Intangible Assets (Continued)

approximating a 1.0 multiple of revenue for the 12 month period preceding the valuation date. The
discounted cash flow value, combined on a weighted-basis with the results of our market analysis, resulted
in an estimated fair value for WMG of $103.5 million compared to our carrying value including goodwill of
$93.9 million. As of September 27, 2015, the goodwill amount for WMG was $54.5 million.

Foreign exchange impact relates to our foreign subsidiaries with functional currencies that are
different than our reporting currency. The gross amounts of goodwill for WEI were $241.8 million and
$263.1 million at September 27, 2015 and September 28, 2014, respectively, excluding $31.1 million of
accumulated impairment. The gross amounts of goodwill for RME were $475.1 million and $508.6 million
at September 27, 2015 and September 28, 2014, respectively, excluding $84.5 million of accumulated
impairment.

The gross amount and accumulated amortization of our acquired identifiable intangible assets
with finite useful lives included in ‘‘Intangible assets – net’’ on the consolidated balance sheets, were as
follows:

Fiscal Year Ended

September 27, 2015

September 28, 2014

Weighted-
Average
Remaining
Life
(in years)

Gross
Amount

Accumulated
Amortization

Gross
Amount

Accumulated
Amortization

($ in thousands)

Non-compete agreements . . . . . . . . . .
Client relations . . . . . . . . . . . . . . . . .
Backlog . . . . . . . . . . . . . . . . . . . . . .
Technology and trade names . . . . . . . .

1.1
3.4
0.6
1.4

819
106,676
2,115
2,506

(587)
(67,726)
(1,444)
(2,027)

1,086
122,198
1,283
2,917

(524)
(61,117)
(1,072)
(1,676)

Total . . . . . . . . . . . . . . . . . . . . . . .

112,116

(71,784)

127,484

(64,389)

Foreign currency translation adjustments reduced net identifiable intangible assets by $4.4 million
in fiscal 2015. Amortization expense for the identifiable intangible assets for fiscal 2015, 2014 and 2013 was

102

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill and Intangible Assets (Continued)

$20.2 million, $27.3 million and $32.4 million, respectively. Estimated amortization expense for the
succeeding five years and beyond is as follows:

Amount

(in thousands)

2016 . . . . . . .
2017 . . . . . . .
2018 . . . . . . .
2019 . . . . . . .
2020 . . . . . . .
Beyond . . . . .

15,290
12,718
5,856
2,989
2,418
1,061

Total . . . . . .

40,332

Property and Equipment

The property and equipment consisted of the following:

Fiscal Year Ended

September 27, September 28,

2015

2014

(in thousands)

Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Equipment, furniture and fixtures . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,661
176,883
21,582

Total property and equipment . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .

202,126
(137,220)

4,029
204,298
24,478

232,805
(158,941)

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . $

64,906

73,864

The depreciation expense related to property and equipment, including assets under capital leases,
was $23.1 million, $26.5 million and $29.5 million for fiscal 2015, 2014 and 2013, respectively. In fiscal 2015,
we sold assets with a net book value of $4.4 million for net proceeds of $10.4 million, and recognized a
corresponding net gain of $6.0 million. This equipment was primarily related to our RCM segment.

In connection with exit activities related to vacating leased facilities, we recorded a loss of
$2.7 million in the fourth quarter of fiscal 2014. The loss consisted of an accrued liability of $2.5 million for
estimated contract termination costs associated with the long-term non-cancelable leases of those facilities,
reduced by $0.3 million of write-offs of prorated portions of existing deferred items previously recognized
in connection with the leases, and $0.5 million in net write-offs of fixed assets, primarily leasehold
improvements, furniture and fixtures, that were no longer in use after vacating the facilities. The loss is
recorded in other costs of revenue on the consolidated statements of operations (see Note 10, ‘‘Leases’’ for
further information).

103

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income Taxes

The income before income taxes, by geographic area, was as follows:

Fiscal Year Ended

September 27, September 28, September 29,
2014

2015

2013

Income (loss) before income taxes:

United States
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . $

118,822
(38,501)

Total income before income taxes . . . . . . . . $

80,321

118,900
25,443

144,343

60,547
(48,015)

12,532

(in thousands)

Income tax expense consisted of the following:

September 27,
2015

Fiscal Year Ended

September 28,
2014

(in thousands)

September 29,
2013

Current:

. . . . . . . . . . . . . . . .
Federal
State . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . .

23,836
5,072
3,773

Total current income tax

expense . . . . . . . . . . . . .

32,681

Deferred:
Federal
. . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . .

Total deferred income tax

7,218
2,335
(1,141)

26,503
7,551
1,759

35,813

5,957
434
(6,536)

11,155
2,705
11,646

25,506

(2,965)
(637)
(7,866)

expense (benefit) . . . . . .

8,412

(145)

(11,468)

Total income tax expense . . . . . .

41,093

35,668

14,038

104

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income Taxes (Continued)

Total income tax expense was different from the amount computed by applying the U.S. federal

statutory rate to pre-tax income as follows:

Fiscal Year Ended

September 27,
2015

September 28,
2014

September 29,
2013

Tax at federal statutory rate . . . . . . . . . . . .
State taxes, net of federal benefit
. . . . . . . .
R&E credits . . . . . . . . . . . . . . . . . . . . . . .
Domestic production deduction . . . . . . . . . .
Tax differential on foreign earnings . . . . . . .
Corrections of prior-year errors . . . . . . . . . .
Goodwill and contingent consideration . . . . .
Stock compensation . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .

35.0%
5.0
(3.8)
(0.8)
(2.5)
–
12.0
0.5
5.7
0.1

Total income tax expense . . . . . . . . . . . . . .

51.2%

35.0%
3.4
(0.6)
(0.7)
(5.5)
–
(8.2)
0.2
0.3
0.8

24.7%

35.0%
10.5
(52.8)
(6.6)
(34.0)
26.0
90.0
3.5
39.5
0.9

112.0%

In fiscal 2015, we recorded income tax expense of $41.1 million, representing an effective tax rate
of 51.2%. This tax rate is significantly higher than the expected statutory tax rate primarily due to the
$60.8 million goodwill and intangible assets impairment charge, most of which was not tax deductible. In
fiscal 2014, we recorded income tax expense of $35.7 million, representing an effective tax rate of 24.7%,
which was lower than the expected rate due to the impact of gains from changes to contingent
consideration liabilities, most of which were not taxable. Excluding these items in both years, our effective
tax rate was 32.3% in fiscal 2015 compared to 36.2% in fiscal 2014. During the first quarter of fiscal 2015,
the Tax Increase Prevention Act of 2014 was signed into law. This law retroactively extended the federal
R&E credits for amounts incurred from January 1, 2014 through December 31, 2014. Our income tax
expense for fiscal 2015 includes a tax benefit of $1.2 million attributable to operating income during the
last nine months of fiscal 2014, primarily related to the retroactive recognition of these credits. The
remainder of the decline in the effective tax rate was primarily due to a higher proportion of operating
income from international operations, which have lower tax rates than the U.S., in fiscal 2015 compared to
last year.

We are currently under examination by the Internal Revenue Service for the fiscal years 2010
through 2013, and by the California Franchise Tax Board for fiscal years 2004 through 2009. We are also
subject to various other state audits. With a few exceptions, we are no longer subject to U.S. federal, state
and local, or non-U.S. income tax examinations for fiscal years before 2010.

105

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income Taxes (Continued)

Temporary differences comprising the net deferred

income tax

liability shown on the

accompanying consolidated balance sheets were as follows:

Fiscal Year Ended

September 27,
2015

September 28,
2014

(in thousands)

Deferred Tax Asset:

State taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves and contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss carry-forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred Tax Liability:

Unbilled revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,746
3,842
4,115
19,404
10,516
2,910
5,512
(7,791)

40,254

(46,513)
(5,506)
(33,068)
(10,713)

(95,800)

2,635
8,860
6,084
12,212
10,273
1,159
10,815
(7,576)

44,462

(49,150)
(5,834)
(30,416)
(8,235)

(93,635)

Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(55,546)

(49,173)

At September 27, 2015, undistributed earnings of our foreign subsidiaries, primarily in Canada,
amounting to approximately $60.0 million are expected to be permanently reinvested. Accordingly, no
provision for U.S. income taxes or foreign withholding taxes has been made. Upon distribution of those
earnings, we would be subject to U.S. income taxes and foreign withholding taxes. Assuming the
permanently reinvested foreign earnings were repatriated under the laws and rates applicable at
September 27, 2015, the incremental federal tax applicable to those earnings would be approximately
$5.1 million.

At September 27, 2015, we had available unused state net operating loss (‘‘NOL’’) carry forwards
of $38.4 million that expire at various dates from 2022 to 2035; and available foreign NOL carry forwards
of $18.4 million, of which $14.0 million expire at various dates from 2022 to 2035, and $4.4 million have no
expiration date. We have performed an assessment of positive and negative evidence regarding the
realization of the deferred tax assets. This assessment included the evaluation of scheduled reversals of
deferred tax liabilities, availability of carrybacks, cumulative losses in recent years, and estimates of
projected future taxable income. Although realization is not assured, based on our assessment, we have
concluded that it is more likely than not that the assets will be realized except for the assets related to the
loss carry-forwards and certain foreign intangibles for which a valuation allowance of $7.8 million has been
provided.

106

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income Taxes (Continued)

At September 27, 2015, we had $21.6 million of unrecognized tax benefits. Included in the balance
of unrecognized tax benefits at the end of fiscal year 2015 were $21.6 million of tax benefits that, if
recognized, would affect our effective tax rate. It is not expected that there will be a significant change in
the unrecognized tax benefits in the next 12 months. A reconciliation of the beginning and ending amount
of unrecognized tax benefits is as follows:

September 27,
2015

Fiscal Year Ended

September 28,
2014

(in thousands)

September 29,
2013

Beginning balance . . . . . . . . . . . . . . . . . . . . . . .
Additions for current year tax positions . . . . . . . .
Additions for prior year tax positions . . . . . . . . . .
Reductions for prior year tax positions . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements

21,717
1,147
2,309
(23)
(3,532)

25,886
1,243
1,416
–
(6,828)

24,092
2,661
4,951
(5,818)
–

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . .

21,618

21,717

25,886

We recognize potential interest and penalties related to unrecognized tax benefits in income tax
expense. During fiscal years 2015 and 2014, we accrued additional interest of $0.4 million and $0.2 million,
respectively, and recorded reductions in accrued interest of $0.5 million and $0.9 million, respectively, as a
result of audit settlements and other prior-year adjustments. The amount of interest and penalties accrued
at September 27, 2015 and September 28, 2014, was $1.2 million and $1.4 million, respectively.

Long-Term Debt

Long-term debt consisted of the following:

Fiscal Year Ended

September 27,
2015

September 28,
2014

(in thousands)

Credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total long-term debt . . . . . . . . . . . . . . . . . . . . . .

192,203
673

192,876

Less: Current portion of long-term debt . . . . . . . . . .

(11,904)

202,438
1,393

203,831

(10,989)

Long-term debt, less current portion . . . . . . . . . . . .

180,972

192,842

On May 7, 2013, we entered into our Credit Agreement, which provided for a $205 million term
loan facility and a $460 million revolving credit facility both maturing in May 2018. On May 29, 2015, we
entered into a third amendment to our Credit Agreement, which extended the maturity date for the term
loan and the revolving credit facility to May 2020. The Credit Agreement is a $654.8 million senior

107

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Long-Term Debt (Continued)

secured, five-year facility that provides for a $194.8 million Term Loan Facility and a $460 million
Revolving Credit Facility. The Credit Agreement allows us to, among other things, finance certain
permitted open market repurchases of our common stock, permitted acquisitions, and cash dividends and
distributions. The Revolving Credit Facility includes a $150 million sublimit for the issuance of standby
letters of credit, a $20 million sublimit for swingline loans, and a $150 million sublimit for multicurrency
borrowings. The interest rate provisions of the term loan and the revolving credit facility did not materially
change.

As of September 27, 2015, we had $192.2 million in outstanding borrowings under the Credit
Agreement, which consisted entirely of the Term Loan Facility at a weighted-average interest rate of 1.58%
per annum. In addition, we had $1.3 million in standby letters of credit. Our average effective weighted-
average interest rate on borrowings outstanding at September 27, 2015 under the Credit Agreement,
including the effects of interest rate swap agreements described in Note 14, ‘‘Derivative Financial
Instruments’’ of the ‘‘Notes to Consolidated Financial Statements’’, was 2.73%. At September 27, 2015, we
had $458.7 million of available credit under the Revolving Credit Facility, of which $381.6 million could be
borrowed without a violation of our debt covenants. In addition, we entered into agreements with three
banks to issue up to $53 million in standby letters of credit. The aggregate amount of standby letters of
credit outstanding under these additional facilities and other bank guarantees was $26.2 million, of which
$5.6 million was issued in currencies other than the U.S. dollar.

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

108

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Long-Term Debt (Continued)

The following table presents scheduled maturities of our long-term debt:

Amount

(in thousands)

2016 . . . . . . . . . .
2017 . . . . . . . . . .
2018 . . . . . . . . . .
2019 . . . . . . . . . .
2020 . . . . . . . . . .
Beyond . . . . . . . .

11,904
15,629
15,423
15,388
15,375
119,157

Total . . . . . . . .

192,876

10.

Leases

We lease office and field equipment, vehicles and buildings under various operating leases. In
fiscal 2015, 2014 and 2013, we recognized $66.4 million, $70.0 million and $80.8 million of expense
associated with operating leases, respectively. The following are amounts payable under non-cancelable
operating and capital lease commitments for the next five fiscal years and beyond:

Operating

Capital

(in thousands)

2016 . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . .
Beyond . . . . . . . . . . . . . . . . . . . . . .

59,779
48,212
36,252
26,055
18,605
11,847

Total . . . . . . . . . . . . . . . . . . . . . .

200,750

Less: Amounts representing interest .

Net present value . . . . . . . . . . . . .

394
243
50
13
–
–

700

673

We vacated certain facilities under long-term non-cancelable leases and recorded contract
termination costs of $2.2 million in fiscal 2014 and $4.5 million in fiscal 2013. These amounts were initially
measured at the fair value of the portion of the lease payments associated with the vacated facilities,
reduced by estimated sublease rentals, less the write off of a prorated portion of existing deferred items
previously recognized on these leases. We expect the remaining lease payments to be paid through the
various lease expiration dates that continue until 2021.

109

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.

Leases (Continued)

We initially measured the lease contract termination liability at the fair value of the prorated
portion of the lease payments associated with the vacated facilities, reduced by estimated sublease rentals
and other costs. If the actual timing and potential termination costs or realization of sublease income differ
from our estimates, the resulting liabilities could vary from recorded amounts. These liabilities are
reviewed periodically and adjusted when necessary. The following is a reconciliation of the beginning and
ending balances of these liabilities related to lease contract termination costs:

WEI

RME

RCM

Total

Balance at September 29, 2013 . . $

1,599

Costs incurred and charged to

expense . . . . . . . . . . . . . . .
Adjustments (1) . . . . . . . . . . . .

Balance at September 28, 2014 . . $

Cost incurred and charged to

expense . . . . . . . . . . . . . . .
Adjustments (1) . . . . . . . . . . . .

Balance as September 27, 2015 . . $

–
(699)

900

–
(369)

531

(in thousands)

4,674

2,035
(1,663)

5,046

–
(2,585)

2,461

–

423
–

423

–
(246)

177

6,273

2,458
(2,362)

6,369

–
(3,200)

3,169

(1) Adjustments of the actual timing and potential termination costs or realization of sublease income.

11.

Stockholders’ Equity and Stock Compensation Plans

At September 27, 2015, we had the following stock-based compensation plans:

(cid:129) Employee Stock Purchase Plan (‘‘ESPP’’). Purchase rights to purchase common stock are
granted to our eligible full and part-time employees, and shares of common stock are issued
upon exercise of the purchase rights. An aggregate of 2,373,290 shares may be issued pursuant
to such exercise. The maximum amount that an employee can contribute during a purchase
right period is $5,000. The exercise price of a purchase right is the lesser of 100% of the fair
market value of a share of common stock on the first day of the purchase right period or 85% of
the fair market value on the last day of the purchase right period (December 15, or the business
day preceding December 15 if December 15 is not a business day).

(cid:129) 2003 Outside Director Stock Option Plan. Non-employee directors may be granted options to
purchase an aggregate of up to 400,000 shares of our common stock at prices not less than 100%
of the market value on the date of grant. Exercise prices of all options granted were at the
market value on the date of grant. These options vest and become exercisable on the first
anniversary of the grant date if the director has not ceased to be a director prior to such date,
and expire no later than ten years from the grant date.

(cid:129) 2005 Equity Incentive Plan (‘‘2005 EIP’’). Key employees and non-employee directors may be
granted equity awards, including stock options and restricted stock and RSUs, with respect to an
aggregate of 6,086,216 shares of our common stock. Options granted before March 6, 2006 vest

110

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.

Stockholders’ Equity and Stock Compensation Plans (Continued)

at 25% on the first anniversary of the grant date, and the balance vests monthly thereafter, such
that these options become fully vested no later than four years from the date of grant. These
options expire no later than ten years from the date of grant. Options granted on and after
March 6, 2006 vest at 25% on each anniversary of the grant date. These options expire no later
than eight years from the grant date. RSUs granted to date vest at 25% on each anniversary of
the grant date.

Our Compensation Committee has also awarded restricted stock to executive officers and
non-employee directors under the 2005 EIP. Restricted stock grants generally vest over a
minimum three-year period, and may be performance-based, determined by EPS growth, or
service-based.

(cid:129) 2015 Equity Incentive Plan (‘‘2015 EIP’’). Key employees and non-employee directors may be
granted equity awards, including stock options, Performance Share Units (‘‘PSUs’’) and RSUs.
Shares issued with respect to awards granted under the 2015 EIP other than stock options or
stock appreciation rights (‘‘SARs’’), which are referred to as ‘‘full value awards’’, are counted
against the 2015 EIP’s aggregate share limit as three shares for every share or unit actually
issued. At September 27, 2015, there were 5.0 million shares available for future awards
pursuant to the 2015 EIP.

The stock-based compensation and related income tax benefits were as follows:

September 27,
2015

Fiscal Year Ended

September 28,
2014

(in thousands)

September 29,
2013

Total stock-based compensation .
Income tax benefit related to

stock-based compensation . . . .

Stock-based compensation, net
of tax benefit . . . . . . . . . . .

10,926

(3,811)

7,115

10,374

(3,696)

6,678

8,775

(3,048)

5,727

111

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.

Stockholders’ Equity and Stock Compensation Plans (Continued)

Stock Options

Stock option activity for the fiscal year ended September 27, 2015 was as follows:

Number of
Options
(in thousands)

Weighted-
Average
Exercise Price
per Share

Weighted-
Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding on September 28,
2014 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . .

Outstanding at September 27,
2015 . . . . . . . . . . . . . . . .

3,383
266
(501)
(163)

2,985

Vested or expected to vest at

September 27, 2015 . . . . . .

2,920

Exercisable on September 27,
2015 . . . . . . . . . . . . . . . .

2,336

23.14
27.26
26.12
24.41

23.71

22.93

3.64

3.58

2.91

5,656

5,565

5,371

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference
between our closing stock price on the last trading day of fiscal 2015 and the exercise price, times the
number of shares) that would have been received by the in-the-money option holders if they had exercised
their options on September 27, 2015. This amount will change based on the fair market value of our stock.
At September 27, 2015, we expect to recognize $3.9 million of unrecognized compensation cost related to
stock option grants over a weighted-average period of 2.1 years.

The weighted-average fair value of stock options granted during fiscal 2015, 2014 and 2013 was
$8.20, $9.36 and $8.74, respectively. The aggregate intrinsic value of options exercised during fiscal 2015,
2014 and 2013 was $2.3 million, $9.3 million and $6.4 million, respectively.

The fair value of our stock options was estimated on the date of grant using the Black-Scholes

option pricing model. The following assumptions were used in the calculation:

September 27,
2015

Dividend yield . . . . . . . . . . . . .
Expected stock price volatility . .
.
Risk-free rate of return, annual

1.0%
36.2% - 38.8%
1.5% - 1.7%

Fiscal Year Ended

September 28,
2014

–
36.1% - 38.8%
1.3% - 1.5%

September 29,
2013

–
41.7% - 42.2%
0.6% - 1.3%

112

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.

Stockholders’ Equity and Stock Compensation Plans (Continued)

For purposes of the Black-Scholes model, forfeitures were estimated based on historical
experience. For the fiscal 2015, 2014 and 2013 year-ends, we based our expected stock price volatility on
historical volatility behavior and current implied volatility behavior. Our risk-free rate of return was based
on constant maturity rates provided by the U.S. Treasury. The expected life was based on historical
experience.

Net cash proceeds from the exercise of stock options were $10.8 million, $23.8 million and
$16.0 million for fiscal 2015, 2014 and 2013, respectively. Our policy is to issue shares from our authorized
shares upon the exercise of stock options. The actual income tax benefit realized from exercises of
nonqualified stock options and disqualifying dispositions of qualified options for fiscal 2015, 2014 and 2013
was $3.0 million, $4.6 million and $3.7 million, respectively.

Restricted Stock , PSUs and RSUs

Restricted stock activity for the fiscal year ended September 27, 2015 was as follows:

Number of
Shares
(in thousands)

Weighted-
Average Grant
Date Fair
Value

Nonvested balance at September 28, 2014 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nonvested balance at September 27, 2015 . . . . . . . . .

Vested or expected to vest at September 27, 2015 . . .

223
–
(55)
(64)

104

26.26
–
28.58
22.87

27.15

In fiscal 2015, 2014 and 2013, we awarded 0 shares, 117,067 shares and 108,350 shares,
respectively, of restricted stock to certain of our executive officers and non-employee directors. Vesting is
performance-based, such that the percentage of awarded shares that ultimately vests, from 0% to 140%, is
dependent on fiscal year EPS growth rates for the three fiscal years that end after the award date. In fiscal
2013, an additional 4,947 shares of restricted stock, respectively, were awarded for performance-based
adjustments in excess of 100% vesting. Restricted stock forfeitures resulted from performance-based
vesting of less than 100%. Forfeited shares return to the pool of authorized shares available for award.

The fair value of the total compensation cost of each restricted stock award was determined at the
date of grant using the market price of the underlying common stock as of the date of grant. For
performance-based awards, our expected performance is reviewed to estimate the percentage of shares
that will vest. The total compensation cost of the awards is then amortized over their applicable vesting
period on a straight-line basis.

In fiscal 2015, we awarded 139,052 PSUs to our executive officers and non-employee directors at
the weighted-average fair value of $31.66 per share on the award date. All of the PSUs are

113

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.

Stockholders’ Equity and Stock Compensation Plans (Continued)

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 EPS and 50% on our relative total
shareholder return over the vesting period.

RSU activity for the fiscal year ended September 27, 2015 was as follows:

Number of
Shares
(in thousands)

Weighted-
Average Grant
Date Fair
Value

Nonvested balance at September 27, 2015 . . . . . . . . .

432
235
(141)
(43)

483

26.09
27.21
25.64
26.33

26.75

In fiscal 2015, we also awarded 234,685 RSUs to our employees at the weighted average fair value
of $27.21 per share on the award date. All of the RSUs have time-based vesting over a four-year period,
except that RSUs awarded to directors vest after one year. At September 27, 2015, there were 483,111
RSUs outstanding. RSU forfeitures result from employment terminations prior to vesting. Forfeited shares
return to the pool of authorized shares available for award.

In fiscal 2014, we also awarded 224,911 RSUs to our employees at the weighted average fair value
of $28.53 per share on the award date. All of the RSUs have time-based vesting over a four-year period,
except that RSUs awarded to directors vest after one year. At September 28, 2014, there were 432,289
RSUs outstanding. RSU forfeitures result from employment terminations prior to vesting. Forfeited shares
return to the pool of authorized shares available for award.

The stock-based compensation expense related to restricted stock and RSUs for fiscal years 2015,
2014 and 2013 was $7.5 million, $4.6 million and $2.2 million, respectively, and was included in the total
stock-based compensation expense. At September 27, 2015, there was $12.8 million of unrecognized
compensation costs related to restricted stock and RSUs that will be substantially recognized by the end of
fiscal 2018.

114

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.

Stockholders’ Equity and Stock Compensation Plans (Continued)

ESPP

The following table summarizes shares purchased, weighted-average purchase price, cash received

and the aggregate intrinsic value for shares purchased under the ESPP:

Fiscal Year Ended

September 27, September 28, September 29,
2014

2013

2015

(in thousands, except for purchase price)

Shares purchased . . . . . . . . . . . . . . . . . . . . . .
Weighted-average purchase price . . . . . . . . . . . . $
Cash received from exercise of purchase rights . . $
Aggregate intrinsic value . . . . . . . . . . . . . . . . . $

243
21.44
5,204
1,277

245
22.99
5,604
1,221

$
$
$

253
21.96
5,551
1,140

$
$
$

The grant date fair value of each award granted under the ESPP was estimated using the Black-

Scholes option pricing model with the following assumptions:

Fiscal Year Ended

Dividend yield . . . . . . . . . . . . . . . . . . . . . . . .
Expected stock price volatility . . . . . . . . . . . . . .
Risk-free rate of return, annual . . . . . . . . . . . . .
Expected life (in years) . . . . . . . . . . . . . . . . . .

2015

September 27, September 28, September 29,
2014
(cid:4)
29.2%
0.1%
1

2013
(cid:4)
27.1%
0.1%
1

1.1%
23.7%
0.2%
1

For fiscal 2015, 2014 and 2013, we based our expected stock price volatility on historical volatility
behavior and current implied volatility behavior. The risk-free rate of return was based on constant
maturity rates provided by the U.S. Treasury. The expected life was based on the ESPP terms and
conditions.

Included in stock-based compensation expense for fiscal 2015, 2014 and 2013 was $0.6 million,
$0.7 million and $0.8 million, respectively, related to the ESPP. The unrecognized stock-based
compensation costs for awards granted under the ESPP at September 27, 2015 and September 28, 2014
were $0.1 million and $0.2 million, respectively. At September 27, 2015, ESPP participants had
accumulated $2.6 million to purchase our common stock.

12.

Retirement Plans

We have established defined contribution plans including 401(k) plans. Generally, employees are
eligible to participate in the defined contribution plans upon completion of one year of service and in the
401(k) plans upon commencement of employment. For fiscal 2015, 2014 and 2013, employer contributions
to the plans were $9.8 million, $9.6 million and $9.5 million, respectively.

We have established a non-qualified deferred compensation plan for certain key employees and
non-employee directors. Eligible employees and non-employee directors may elect to defer the receipt of

115

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.

Retirement Plans (Continued)

salary, incentive payments, restricted stock and RSU awards, and non-employee director fees, which are
generally invested by us in individual variable life insurance contracts we own that are designed to
informally fund savings plans of this nature. At September 27, 2015 and September 28, 2014, the
consolidated balance sheets reflect assets of $19.5 million and $20.1 million, respectively, related to the
deferred compensation plan in ‘‘Other long-term assets,’’ and liabilities of $19.3 million and $19.9 million,
respectively, related to the deferred compensation plan in ‘‘Other long-term liabilities.’’

13.

Earnings Per Share

The following table sets forth the number of weighted-average shares used to compute basic and

diluted EPS:

Fiscal Year Ended

September 27, September 28, September 29,
2014

2015

2013

(in thousands, except per share data)

Net income (loss) attributable to Tetra Tech . . . . . . . . . . . . . . . . . $

39,074

108,266

(2,141)

Weighted-average common shares outstanding – basic . . . . . . . .
Effect of diluted stock options and unvested restricted stock . . . .

Weighted-average common stock outstanding – diluted . . . . . . . .

60,913
619

61,532

64,379
767

65,146

64,544
–

64,544

Net income (loss) attributable to Tetra Tech per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.64

1.68

1.66

(0.03)

For 2015 and 2014, 1.0 million and no options were excluded from the calculation of dilutive
potential common shares, respectively. These options were not included in the computation of dilutive
potential common shares because the assumed proceeds per share exceeded the average market price per
share for that period. Therefore, their inclusion would have been anti-dilutive. The computation of diluted
loss per share for fiscal 2013 excludes 0.5 million of potential common shares due to their anti-dilutive
effect.

14.

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 accounting hedges in our consolidated balance sheets as
accumulated other comprehensive income (loss).

116

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.

Derivative Financial Instruments (Continued)

In fiscal 2009, we entered into an intercompany promissory note with a wholly-owned Canadian
subsidiary in connection with the acquisition of Wardrop Engineering, Inc. The intercompany note
receivable is denominated in CAD and has a fixed rate of interest payable in CAD. In the second quarter
of fiscal 2010, we entered into a forward contract for CAD $4.2 million (equivalent to U.S. $3.9 million at
the date of inception) that matured on January 28, 2013. In the third quarter of fiscal 2011, we entered into
a forward contract for CAD $4.2 million (equivalent to U.S. $4.2 million at the date of inception) with a
maturity date of January 27, 2014. Our objective was to eliminate variability of our cash flows on the
amount of interest income we receive on the promissory note from changes in foreign currency exchange
rates. These contracts were designated as cash flow hedges. Accordingly, changes in the fair value of the
contracts were recorded in ‘‘Other comprehensive income’’. In the second quarter of fiscal 2013, we settled
one of the foreign currency forward contracts for U.S. $3.9 million and terminated the remaining forward
contract. As a result, we recognized immaterial gains and losses in our consolidated statements of
operations for fiscal 2013 and 2012.

In fiscal 2013, we entered into three interest rate swap agreements that we have designated as cash
flow hedges to fix the variable interest rates on a portion of borrowings under our Term Loan Facility. In
fiscal 2014, we entered into two interest rate swap agreements that we have designated as cash flow hedges
to fix the variable interest rates on a portion of borrowings under our Term loan Facility. At September 27,
2015 and September 28, 2014, the effective portion of our interest rate swap agreements designated as cash
flow hedges before tax effect was $2.3 million and ($0.2) million, respectively, all of which is expected to be
reclassified from accumulated other comprehensive income (loss) to interest expense within the next
12 months.

As of September 27, 2015, the notional principal, fixed rates and related expiration dates of our

outstanding interest rate swap agreements are as follows:

Notional Amount
(in thousands)

48,047
48,047
48,047
24,023
24,023

Fixed
Rate

1.36%
1.34%
1.35%
1.23%
1.24%

Expiration
Date

May 2018
May 2018
May 2018
May 2018
May 2018

The fair values of our outstanding derivative designated as hedging instruments were as follows:

Fair Value of Derivative
Instruments as of

Balance Sheet Location

September 27,
2015

September 28,
2014

(in thousands)

Interest rate swap agreements . . . . . . . . . . . . . . . . . Other current liabilities

2,518

117

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.

Derivative Financial Instruments (Continued)

The impact of the effective portions of derivative instruments in cash flow hedging relationships
on income and other comprehensive income from our foreign currency forward contracts and interest rate
swap agreements was immaterial for the fiscal years ended September 27, 2015 and September 28, 2014.
Additionally, there were no ineffective portions of derivative instruments. Accordingly, no amounts were
excluded from effectiveness testing for our foreign currency forward contracts and interest rate swap
agreements. We had no derivative instruments that were not designated as hedging instruments for fiscal
2015, 2014 and 2013.

15.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

The accumulated balances and reporting period activities for fiscal 2015 and 2014 related to

reclassifications out of accumulated other comprehensive income (loss) are summarized as follows:

Foreign
Currency
Translation
Adjustments

Accumulated
Other
Comprehensive
Income (Loss)

Gain (Loss)
on Derivative
Instruments

(in thousands)

Balances at September 29, 2013 . . . . . . . . . . . . . . . . .

2,340

(482)

1,858

Other comprehensive (loss) income before

reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . .

(45,425)

3,317

(42,108)

Amounts reclassified from accumulated other

comprehensive income
Interest rate contracts, net of tax (1)

. . . . . . . . . . . . .

–

Net current-period other comprehensive (loss) income . .

(45,425)

Balances at September 28, 2014 . . . . . . . . . . . . . . . . .

(43,085)

Other comprehensive loss before reclassifications . . . . . .

(98,144)

Amounts reclassified from accumulated other

comprehensive income
Interest rate contracts, net of tax (1)

. . . . . . . . . . . . .

–

Net current-period other comprehensive loss . . . . . . . . .

(98,144)

Balances at September 27, 2015 . . . . . . . . . . . . . . . . .

(141,229)

(2,288)

1,029

547

(203)

(2,286)

(2,489)

(1,942)

(2,288)

(44,396)

(42,538)

(98,347)

(2,286)

(100,633)

(143,171)

(1) This accumulated other comprehensive component is reclassified in ‘‘Interest expense’’ in our consolidated

statements of operations. See Note 14, ‘‘Derivative Financial Instruments’’, for more information.

16.

Fair Value Measurements

Derivative Instruments. For additional information about our derivative financial instruments (see
Note 2, ‘‘Basis of Presentation and Preparation’’ and Note 14, ‘‘Derivative Financial Instruments’’ for more
information).

118

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16.

Fair Value Measurements (Continued)

Contingent Consideration. We measure our contingent earn-out liabilities at fair value on a
recurring basis (see Note 2, ‘‘Basis of Presentation and Preparation’’ and Note 5, ‘‘Mergers and
Acquisitions’’ for further information).

Debt. 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’’). The carrying value of our
long-term debt approximated fair value at September 27, 2015 and September 28, 2014. For fiscal 2015, we
had borrowings of $192.2 million outstanding under our Credit Agreement, which were used to fund our
business acquisitions, working capital needs and contingent earn-outs (see Note 9, ‘‘Long-Term Debt’’ for
more information).

17.

Joint Ventures

Consolidated Joint Ventures

The aggregate revenue of the consolidated joint ventures was $7.5 million, $12.3 million and
$15.6 million for fiscal 2015, 2014 and 2013, respectively. The assets and liabilities of these consolidated
joint ventures were immaterial at fiscal 2015, 2014 and 2013 year-ends. These assets are restricted for use
only by those joint ventures and are not available for our general operations. Cash and cash equivalents
maintained by the consolidated joint ventures at September 27, 2015 and September 28, 2014 were
$0.7 million and $1.4 million, respectively.

Unconsolidated Joint Ventures

We account for our unconsolidated joint ventures using the equity method of accounting. Under
this method, we recognize our proportionate share of the net earnings of these joint ventures within
‘‘Other costs of revenue’’ in our consolidated statements of operations. For fiscal 2015, 2014 and 2013, we
reported $5.1 million, $2.8 million and $3.5 million of equity in earnings of unconsolidated joint ventures,
respectively. Our maximum exposure to loss as a result of our investments in unconsolidated variable
interest entities is typically limited to the aggregate of the carrying value of the investment. Future funding
commitments for the unconsolidated joint ventures are immaterial. The unconsolidated joint ventures are,
individually and in aggregate, immaterial to our consolidated financial statements.

The aggregate carrying values of the assets and liabilities of the unconsolidated joint ventures were
$17.1 million and $15.2 million, respectively, at September 27, 2015, and $20.1 million and $18.0 million,
respectively, at September 28, 2014.

18.

Commitments and Contingencies

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

119

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18.

Commitments and Contingencies (Continued)

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.

We acquired BPR Inc. (‘‘BPR’’), a Quebec-based engineering firm on October 4, 2010.
Subsequently, we have been informed of the following with respect to pre-acquisition activities at BPR. On
April 17, 2012, authorities in the province of Quebec, Canada charged two former employees of BPR
Triax, a subsidiary of BPR, and BPR Triax, under the Canadian Criminal Code with allegations of
corruption. Discovery procedures associated with the charges are currently ongoing, and the legal process
is expected to continue into 2016. We have conducted an internal investigation concerning this matter and,
based on the results of our investigation, we believe these allegations are limited to activities at BPR Triax
prior to our acquisition of BPR. The financial impact to us of this matter is unknown at this time. On
April 19, 2013, a class action proceeding was filed in Montreal in which BPR, BPR’s former president, and
other Quebec-based engineering firms and individuals are named as defendants. The plaintiff class
includes all individuals and entities that have paid real estate or municipal taxes to the city of Montreal.
The allegations include participation in collusion to share contracts awarded by the City of Montreal,
conspiracy to reduce competition and fix prices, payment of bribes to officials, making illegal political
contributions, and bid rigging. A class certification hearing was held in March 2014, and on May 7, 2014,
the court dismissed the action. On June 5, 2014, the plaintiff filed an appeal, and on November 3, 2014, the
court dismissed this appeal. The plaintiff filed an appeal with the Supreme Court of Canada, and on
April 23, 2015, the court dismissed the application. Accordingly, this matter is officially closed.

19.

Reportable Segments

Beginning in the first quarter of fiscal 2015, we reorganized our ongoing operations to better align
them with our markets, resulting in two renamed reportable segments. We now report our water resources,
water and wastewater treatment, environment and infrastructure engineering activities in the WEI
reportable segment. Our RME reportable segment includes our natural resources, energy, waste
management, remediation, utilities and international development services. We report the results of the
wind-down of our non-core construction activities in the RCM reportable segment. Prior year amounts for
reportable segments have been revised to conform to the current-year presentation.

Our reportable segments are described as follows:

WEI: WEI provides consulting and engineering services worldwide for a broad range of water
and infrastructure-related needs in both developed and emerging economies. WEI supports both public
and private clients including federal, state/provincial, and local governments, and global and local
commercial and industrial clients. The primary markets for WEI’s services include water resources analysis
and water management, environmental restoration, government consulting, and a broad range of civil
infrastructure master planning and engineering design for facilities, transportation, and regional and local
development. WEI’s services span from early data collection and monitoring, to data analysis and
information technology, to science and engineering applied research, to engineering design, to
construction management and operations and maintenance.

RME: RME provides consulting and engineering services worldwide for a broad range of
resource management and energy needs. RME supports both private and public clients, including global
industrial and commercial clients, U.S. federal agencies in large scale remediation, and major international

120

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.

Reportable Segments (Continued)

development agencies. The primary markets for RME’s services include natural resources, energy,
remediation, waste management, utilities and international development. RME’s services span from early
data collection and monitoring, to data analysis and information technology, to science and engineering
applied research, to engineering design, to construction management and operations and maintenance.
RME supports EPCM for full service implementation of commercial projects.

RCM: We report the results of the wind-down of our non-core construction activities in the RCM
reportable segment. The remaining work performed in this segment will be substantially complete by the
end of fiscal 2016.

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 sales and transfers as if the sales and
transfers 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.

The following tables set forth summarized financial information concerning our reportable

segments:

Reportable Segments

Fiscal Year Ended

September 27, September 28, September 29,
2014

2015

2013

(in thousands)

Revenue

WEI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
RME . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RCM . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elimination of inter-segment revenue . . . . . . .

938,469
1,342,889
86,575
(68,612)

946,849
1,406,885
221,108
(91,028)

963,592
1,389,711
305,821
(45,369)

Total revenue . . . . . . . . . . . . . . . . . . . . . $

2,299,321

2,483,814

2,613,755

Operating Income

WEI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
RME . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RCM . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate (1)
. . . . . . . . . . . . . . . . . . . . . . .

92,920
93,581
(8,614)
(90,203)

Total operating income . . . . . . . . . . . . . . . $

87,684

Depreciation

WEI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
RME . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RCM . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . .

Total depreciation . . . . . . . . . . . . . . . . . . $

4,763
13,914
1,801
2,632

23,110

93,972
84,743
(45,151)
20,269

153,833

5,627
14,764
2,958
3,103

26,452

59,924
74,796
(24,986)
(89,516)

20,218

7,918
15,295
3,280
3,055

29,548

(1)

Includes goodwill and intangible assets impairment charges, amortization of intangibles, other costs and
other income not allocable to segments. The impairment charges of $60.8 million and $56.6 million for

121

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.

Reportable Segments (Continued)

fiscal 2015 and 2013, respectively, were recorded at Corporate. The intangible asset amortization
expense for fiscal 2015, 2014 and 2013 was $20.2 million, $27.3 million and $32.4 million, respectively.
Corporate results also included income for fair value adjustments to contingent consideration liabilities
of $3.1 million, $58.7 million and $9.6 million for 2015, 2014 and 2013, respectively.

September 27, September 28,

2015

2014

(in thousands)

Total Assets

WEI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

267,576
441,662
57,612
792,392

302,877
442,911
100,996
929,620

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,559,242

1,776,404

(1) Corporate assets consist of intercompany eliminations and assets not allocated to segments including

goodwill, intangible assets, deferred income taxes and certain other assets.

Geographic Information

Fiscal Year Ended

September 27, 2015

September 28, 2014

September 29, 2013

Revenue

Long-Lived
Assets (2)

Revenue

Long-Lived
Assets (2)

Revenue

Long-Lived
Assets (2)

(in thousands)

United States
Foreign countries (1)

. . . . . . . . . . . . . $ 1,734,439
564,882

. . . . . . . . .

61,526
32,230

$ 1,840,129
643,685

61,940
38,576

$ 1,915,780
697,975

76,229
41,500

(1)

Includes revenue generated from our foreign operations, primarily in Canada, and revenue generated from
non-U.S. clients. Long-lived assets consist primarily of amounts from our Canadian operations.

(2) Excludes goodwill and other intangible assets.

Major Clients

Other than the U.S. federal government, we had no single client that accounted for more than

10% of our revenue. All of our segments generated revenue from all client sectors.

122

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.

Reportable Segments (Continued)

The following table presents our revenue by client sector:

Fiscal Year Ended

September 27,
2015

September 28,
2014

September 29,
2013

(in thousands)

Client Sector

International (1)
. . . . . . . . . . . . . . . . . $
. . . . . . . . . . . . . . . . .
U.S commercial
U.S. federal government (2)
. . . . . . . . .
U.S. state and local government . . . . . .

564,882
736,815
709,600
288,024

643,649
713,266
772,290
354,609

697,975
693,677
829,790
392,313

Total

. . . . . . . . . . . . . . . . . . . . . . . $

2,299,321

2,483,814

2,613,755

(1)

(2)

Includes revenue generated from foreign operations, primarily in Canada, and revenue generated from
non-U.S. clients.
Includes revenue generated under U.S. federal government contracts performed outside the United
States.

20.

Quarterly Financial Information – Unaudited

In the opinion of management, the following unaudited quarterly data for the fiscal years ended
September 27, 2015 and September 28, 2014 reflect all adjustments necessary for a fair statement of the
results of operations.

As a result of GMP’s financial performance and prospects, we wrote-off all of GMP’s goodwill and
intangible assets and recorded a related impairment charge of $60.8 million ($57.3 million after-tax) in the
fourth quarter of fiscal 2015.

In the fourth quarter of fiscal 2014, our RCM segment reported a loss of $35.1 million. These
results included project charges of $25.6 million primarily, related to two lines of business with U.S. federal
and state and local government clients that we have decided to exit or wind-down. These charges were

123

TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.

Quarterly Financial Information – Unaudited (Continued)

substantially offset in our fourth quarter consolidated operating income by net gains from updated
valuations of our contingent earn-out liabilities totaling $23.8 million.

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

(in thousands, except per share data)

Fiscal Year 2015

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating income (loss) . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Tetra Tech . . .

581,056
36,612
25,575

Net income (loss) attributable to Tetra Tech per

share (1):
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year 2014

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating income . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Tetra Tech . . . . . . .
Earnings per share attributable to Tetra Tech (1):

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.41

62,452

63,112

645,848
43,718
27,315

0.43

0.42

64,227

65,048

564,763
30,398
19,017

0.31

61,153

61,723

586,285
46,186
31,709

0.49

0.48

64,835

65,710

575,108
40,721
26,206

0.44

0.43

60,207

60,792

629,502
39,167
26,657

0.41

64,566

65,302

578,394
(20,047)
(31,724)

(0.53)

59,963

622,179
24,762
22,585

0.36

0.35

63,602

64,235

(1) The sum of the quarterly EPS may not add up to the full-year EPS due to rounding.

124

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of disclosure controls and procedures and changes in internal control over financial

reporting

At September 27, 2015, we carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on our management’s evaluation (with the
participation of our principal executive officer and principal financial officer), our principal executive
officer and principal financial officer have concluded that, as of the end of the period covered by this
report, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act), were effective.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over
financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is
a process designed by, or under the supervision of, our principal executive and principal financial officer
and effected by our Board of Directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of consolidated financial statements for
external purposes in accordance with U.S. GAAP. Internal controls include those policies and procedures
that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that our
receipts and expenditures are being made only in accordance with authorizations of our management and
directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on our consolidated financial
statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. Accordingly, even effective internal control
over financial reporting can only provide reasonable assurance of achieving their control objectives.

Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over
financial reporting at September 27, 2015, based on the criteria in Internal Control – Integrated Framework
(2013) issued by the COSO. Based upon this assessment, management has concluded that our internal
control over financial reporting was effective at September 27, 2015, at a reasonable assurance level.

PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the
consolidated financial statements included in this Form 10-K, has issued a report on our internal control
over financial reporting. This report, dated November 20, 2015, appears on page 78 of this Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months
ended September 27, 2015 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

125

Item 9B. Other Information

None.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information required by this item relating to our directors and nominees, regarding
compliance with Section 16(a) of the Exchange Act, and regarding our Audit Committee is included under
the captions ‘‘Item No. 1 – Election of Directors and Section 16(a) Beneficial Ownership Reporting
Compliance’’ in our Proxy Statement related to the 2016 Annual Meeting of Stockholders and is
incorporated by reference.

Pursuant to General Instruction G(3) of Form 10-K, the information required by this item relating
to our executive officers is included under the caption ‘‘Executive Officers of the Registrant’’ in Part I of
this Report.

We have adopted a code of ethics that applies to our principal executive officer and all members of
our finance department, including our principal financial officer and principal accounting officer. This
code of ethics, entitled ‘‘Finance Code of Professional Conduct,’’ is posted on our website. The Internet
address for our website is www.tetratech.com, and the code of ethics may be found through a link to the
Investor Relations section of our website.

We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K for any amendment
to, or waiver from, a provision of this code of ethics by posting any such information on our website, at the
address and location specified above.

Item 11. Executive Compensation

The information required by this item is included under the captions ‘‘Item No. 1 – Election of
Directors’’ and ‘‘Executive Compensation Tables’’ in our Proxy Statement related to the 2016 Annual
Meeting of Stockholders and is incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

The information required by this item relating to security ownership of certain beneficial owners
and management, and securities authorized for issuance under equity compensation plans, is included
under the caption ‘‘Security Ownership of Management and Significant Stockholders’’ in our Proxy
Statement related to the 2016 Annual Meeting of Stockholders and is incorporated by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item relating to review, approval or ratification of transactions
with related persons is included under the caption ‘‘Related Person Transactions,’’ and the information
required by this item relating to director independence is included under the caption ‘‘Item No. 1 –
Election of Directors,’’ in each case in our Proxy Statement related to the 2016 Annual Meeting of
Stockholders and is incorporated by reference.

Item 14. Principal Accounting Fees and Services

The information required by this item is included under the captions ‘‘Item No. 3 – Ratification of
Independent Registered Public Accounting Firm’’ in our Proxy Statement related to the 2016 Annual
Meeting of Stockholders and is incorporated by reference.

126

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a.)

1. Financial Statements

The Index to Financial Statements and Financial Statement Schedule on page 77 is
incorporated by reference as the list of financial statements required as part of this
Report.

2. Financial Statement Schedule

The Index to Financial Statements and Financial Statement Schedule on page 77 is
incorporated by reference as the list of financial statement schedules required as part of
this Report.

3. Exhibits

The exhibit list in the Index to Exhibits on pages 131 - 132 is incorporated by reference
as the list of exhibits required as part of this Report.

127

TETRA TECH, INC.
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

For the Fiscal Years Ended
September 29, 2013, September 28, 2014 and September 27, 2015
(in thousands)

Allowance for doubtful accounts:

Balance at
Beginning of Costs, Expenses

Charged to

Balance at

Period

and Revenue

Deductions (1) Other (2) End of Period

Fiscal 2013 . . . . . . . . . . . . . . . . . . . .

35,552

13,818

(4,452)

(295)

44,623

Fiscal 2014 . . . . . . . . . . . . . . . . . . . .

44,623

1,467

(4,855)

(1,455)

39,780

Fiscal 2015 . . . . . . . . . . . . . . . . . . . .

39,780

(1,034)

(5,965)

(1,291)

31,490

Income tax valuation allowance:

Fiscal 2013 . . . . . . . . . . . . . . . . . . . .

2,512

Fiscal 2014 . . . . . . . . . . . . . . . . . . . .

7,459

Fiscal 2015 . . . . . . . . . . . . . . . . . . . .

7,576

4,947

396

4,609

–

7,459

(279)

7,576

(4,394)

7,791

(1) Primarily represents uncollectible accounts written off, net of recoveries.
(2)

Includes allowances from new business acquisitions, loss in foreign jurisdictions, and currency adjustments, and
represents valuation allowance adjustments related to net operating loss carry-forwards.

128

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated: November 18, 2015

TETRA TECH, INC.

By:

/s/ DAN L. BATRACK

Dan L. Batrack
Chairman, Chief Executive Officer and
President

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dan L. Batrack and Steven M. Burdick, jointly and severally, his
attorney-in-fact, each with the full power of substitution, for such person, in any and all capacities, to sign
any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he
might do or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and
agents, or his substitute, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K
has been signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Signature

Title

Date

/s/ DAN L. BATRACK

Chairman, Chief Executive Officer and
President

November 18, 2015

Dan L. Batrack

(Principal Executive Officer)

/s/ STEVEN M. BURDICK

Chief Financial Officer

November 18, 2015

Steven M. Burdick

(Principal Financial Officer)

/s/ BRIAN N. CARTER

Senior Vice President, Corporate Controller

November 18, 2015

Brian N. Carter

(Principal Accounting Officer)

/s/ ALBERT E. SMITH

Director

November 18, 2015

Albert E. Smith

/s/ HUGH M. GRANT

Director

November 18, 2015

Hugh M. Grant

129

Signature

Title

/s/ PATRICK C. HADEN

Director

Patrick C. Haden

Date

November 18, 2015

/s/ J. CHRISTOPHER LEWIS

Director

November 18, 2015

J. Christopher Lewis

/s/ J. KENNETH THOMPSON

Director

J. Kenneth Thompson

November 18, 2015

/s/ RICHARD H. TRULY

Director

November 18, 2015

Richard H. Truly

/s/ KIRSTEN M. VOLPI

Director

November 18, 2015

Kirsten M. Volpi

/s/ KIMBERLY E. RITRIEVI

Director

November 18, 2015

Kimberly E. Ritrievi

130

INDEX TO EXHIBITS

3.1

3.2

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to
the Company’s Current Report on Form 8-K dated February 26, 2009).

Amended and Restated Bylaws of the Company (as of April 24, 2009) (incorporated by reference
to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 24, 2009).

Amended and Restated Credit Agreement dated as of May 7, 2013 among Tetra Tech, Inc., Tetra
Tech Canada Holding Corporation, the lenders party thereto and Bank of America, N.A., as
Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K dated May 9, 2013).

Amendment No. 1 dated as of September 27, 2013 to the Amended and Restated Credit
Agreement dated as of May 7, 2013 among Tetra Tech, Inc., Tetra Tech Canada Holding
Corporation, the lenders party thereto and Bank of America, N.A., as Administrative Agent
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
September 27, 2013).

Amendment No. 2 dated as of June 23, 2014 to the Amended and Restated Credit Agreement
dated as of May 7, 2013 among Tetra Tech, Inc., Tetra Tech Canada Holding Corporation, the
lenders party thereto and Bank of America, N.A., as Administrative Agent (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 23, 2014).

Amendment No. 3 dated as of May 29, 2015 to the Amended and Restated Credit Agreement
dated as of May 7, 2013 (as amended by Amendment No. 1 dated as of September 27, 2013 and
Amendment No. 2 dated as of June 23, 2014) among Tetra Tech, Inc., Tetra Tech Canada Holding
Corporation, Bank of America, N.A., as Administrative Agent, L/C Issuer and a Lender, U.S.
Bank National Association, as L/C Issuer and a Lender, and the other Lenders party thereto
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
June 2, 2015).

Amended and Restated Security Agreement dated as of May 7, 2013 made by Tetra Tech, Inc. and
certain of its subsidiaries in favor of Bank of America, N.A., as Administrative Agent
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated
May 9, 2013).

Security Agreement dated as of May 7, 2013 made by Tetra Tech Canada Holding Corporation and
certain of its subsidiaries in favor of Bank of America, N.A., as Administrative Agent
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated
May 9, 2013).

Amended and Restated Pledge Agreement dated as of May 7, 2013 made by Tetra Tech, Inc. and
certain of its subsidiaries in favor of Bank of America, N.A., as Administrative Agent
(incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated
May 9, 2013).

Pledge Agreement dated as of May 7, 2013 made by Tetra Tech Canada Holding Corporation and
certain of its subsidiaries in favor of Bank of America, N.A., as Administrative Agent
(incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated
May 9, 2013).

10.9

Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 to the Company’s
Annual Report on Form 10-K for the fiscal year ended September 30, 2012).

131

10.10

2005 Equity Incentive Plan (as amended through November 7, 2011) (incorporated by reference to
the Company’s Proxy Statement for its 2012 Annual Meeting of Stockholders held on February 28,
2012).*

10.11 First Amendment to the 2005 Equity Incentive Plan (as amended through November 7, 2011)
(incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the
fiscal year ended September 29, 2013). *

10.12

10.13

2015 Equity Incentive Plan (incorporated by reference to the Company’s Proxy Statement for its
2015 Annual Meeting of Stockholders held on March 5, 2015).*

2003 Outside Director Stock Option Plan (as amended through July 30, 2007) (incorporated by
reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the fiscal year
ended September 30, 2007).*

10.14 Form of Indemnity Agreement entered into between the Company and each of its directors and
executive officers (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on
Form 10-K for the fiscal year ended October 3, 2004).*

10.15 Deferred Compensation Plan (incorporated by reference to Exhibit 10.17 to the Company’s

Annual Report on Form 10-K for the fiscal year ended September 30, 2007).*

10.16 Amendment to Deferred Compensation Plan dated November 14, 2013 (incorporated by
reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the fiscal year
ended September 29, 2013).*

10.17 Amended and Restated Change of Control Agreement with Dan L. Batrack dated November 3,
2014 (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K
for the fiscal year ended September 28, 2014).*

10.18 Form of Amended and Restated Change of Control Agreement for executive vice presidents
(incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K for
the fiscal year ended September 28, 2014).*

10.19 Executive Compensation Plan (as amended and restated November 14, 2013) (incorporated by
reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the fiscal year
ended September 29, 2013).*

21.

23.

24.

31.1

31.2

32.1

32.2

95.

101

Subsidiaries of the Company.+

Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP).+

Power of Attorney (included on page 129 of this Annual Report on Form 10-K).

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

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

Certification of Chief Executive Officer pursuant to Section 1350.+

Certification of Chief Financial Officer pursuant to Section 1350.+

Mine Safety Disclosures.+

The following financial information from our Company’s Annual Report on Form 10-K, for the
period ended September 27, 2015, formatted in eXtensible Business Reporting Language:
(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated
Statement of Comprehensive Income (Loss), (iv) Consolidated Statements of Equity,
(v) Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements.+(1)

Indicates a management contract or compensatory arrangement.

132

+ Filed herewith.
(1) Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual
Report on Form 10-K shall not be deemed to be ‘‘filed’’ for purposes of Section 18 of the Exchange
Act or otherwise subject to the liability of the section, and shall not be deemed part of a registration
statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as
shall be expressly set forth by specific reference in such filings.

133

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8
(Nos. 333-203817, 333-184958, 333-174032, 333-158932, 333-148712, 333-145201, 333-145199, 333-85558,
333-53036 and 333-11757) of Tetra Tech, Inc. of our report dated November 18, 2015 relating to the
financial statements, financial statement schedule and the effectiveness of internal control over financial
reporting, which appears in this Form 10-K.

EXHIBIT 23

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Los Angeles, California
November 20, 2015

EXHIBIT 31.1

Chief Executive Officer Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Dan L. Batrack, certify that:

I have reviewed this Annual Report on Form 10-K of Tetra Tech, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a 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;

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;

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;

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

(c)

(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

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):

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

(a)

employees who have a significant role in the registrant’s internal control over financial reporting.

(b)

Any fraud, whether or not material, that involves management or other

Dated: November 20, 2015

/s/ Dan L. Batrack

Dan L. Batrack
Chairman, Chief Executive Officer and President
(Principal Executive Officer)

EXHIBIT 31.2

Chief Financial Officer Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven M. Burdick, certify that:

I have reviewed this Annual Report on Form 10-K of Tetra Tech, Inc.;

(a)

(b)

(c)

(d)

(a)

employees who have a significant role in the registrant’s internal control over financial reporting.

(b)

Any fraud, whether or not material, that involves management or other

Dated: November 20, 2015

/s/ Steven M. Burdick

Steven M. Burdick
Chief Financial Officer
(Principal Financial Officer)

Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

EXHIBIT 32.1

In connection with the Annual Report of Tetra Tech, Inc. (the ‘‘Company’’) on Form 10-K for the
fiscal year ended September 27, 2015, as filed with the Securities and Exchange Commission on the date
hereof (the ‘‘Report’’), I, Dan L. Batrack, Chief Executive Officer of the Company, hereby certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to my knowledge:

1. The Report fully complies with the 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.

Dated: November 20, 2015

/s/ DAN L. BATRACK

Dan L. Batrack
Chairman, Chief Executive Officer and President
(Principal Executive Officer)

A signed original of this written statement required by Section 906, or other document
authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the
electronic version of this written statement required by Section 906, has been provided to Tetra Tech, Inc.
and will be retained by Tetra Tech, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an

exhibit to the Form 10-K and shall not be considered filed as part of the Form 10-K.

Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

EXHIBIT 32.2

In connection with the Annual Report of Tetra Tech, Inc. (the ‘‘Company’’) on Form 10-K for the
fiscal year ended September 27, 2015, as filed with the Securities and Exchange Commission on the date
hereof (the ‘‘Report’’), I, Steven M. Burdick, Chief Financial Officer and Treasurer of the Company,
hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the 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.

Dated: November 20, 2015

/s/ STEVEN M. BURDICK

Steven M. Burdick
Chief Financial Officer
(Principal Financial Officer)

The foregoing certification is being furnished to the Securities and Exchange Commission as an

exhibit to the Form 10-K and shall not be considered filed as part of the Form 10-K.

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