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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 29, 2014

OR

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

For the transition period from ___________ to ___________

Commission File Number 0-19655

TETRA TECH, INC.

(Exact name of registrant as specified in its charter)

3475 East Foothill Boulevard, Pasadena, California 91107

(Address of principal executive offices)  (Zip Code)

(626) 351-4664

(Registrant’s telephone number, including area code)

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  x   No  o

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

Yes  x   No  o

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.

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

Yes  o   No  x

As of July 28, 2014, 64,243,795 shares of the registrant’s common stock were outstanding.

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TETRA TECH, INC.

INDEX

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PART I. FINANCIAL INFORMATION

Item 1.           Financial Statements

Tetra Tech, Inc.

Condensed Consolidated Balance Sheets

(unaudited - in thousands, except par value)

See Notes to Condensed Consolidated Financial Statements.

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Tetra Tech, Inc.

Condensed Consolidated Statements of Operations

(unaudited – in thousands, except per share data)

See Notes to Condensed Consolidated Financial Statements.

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Tetra Tech, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited – in thousands)

See accompanying Notes to Condensed Consolidated Financial Statements.

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Tetra Tech, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited – in thousands)

See Notes to Condensed Consolidated Financial Statements.

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TETRA TECH, INC.

Notes to Condensed Consolidated Financial Statements

1.                                      Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and related notes of Tetra Tech, Inc. (“we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  They do not include all of the information and footnotes required by GAAP for complete financial statements and, therefore, should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended September 29, 2013.

These financial statements reflect all normal recurring adjustments that are considered necessary for the fair statement of our financial position, results of operations and cash flows for the interim periods presented.  The results of operations and cash flows for any interim period are not necessarily indicative of results for the full year or for future years.  Certain immaterial reclassifications were made to the prior year to conform to current year presentation.

2.                                      Accounts Receivable – Net and Revenue Recognition

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

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 June 29, 2014 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. 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.

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Total accounts receivable at June 29, 2014 and September 29, 2013 include approximately $86 million and $41 million, respectively, related to claims, including requests for equitable adjustment, on contracts that provide for price redetermination.  The increase from the end of fiscal 2013 includes the impact of changes in scope on an oil and gas project in Western Canada in fiscal 2014 that is currently in negotiation with the client.  The remainder of the increase in claims primarily related to revenue recognized as progress continued on projects with claims that were in process at the end of fiscal 2013.  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.  As a result of this assessment, we recognized revenue and an increase to operating income of $3.4 million for the second quarter and first nine months of fiscal 2014.  We recognized net losses of approximately $17 million and $17 million related to the evaluation of collectability of claims during the third quarter and first nine months of fiscal 2013, respectively.

Billed accounts receivable related to U.S. federal government contracts were $59.5 million and $50.5 million at June 29, 2014 and September 29, 2013, respectively.  U.S. federal government unbilled receivables, net of progress payments, were $81.0 million and $79.3 million at June 29, 2014 and September 29, 2013, respectively.  Other than the U.S. federal government, no single client accounted for more than 10% of our accounts receivable at June 29, 2014 and September 29, 2013.

We recognize revenue for most of our contracts using the percentage-of-completion method, primarily utilizing the cost-to-cost approach to estimate the progress towards completion in order to determine the amount of revenue and profit to recognize. Revenue 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. As a result, we recognized the net unfavorable operating income adjustments of $5.0 million and $10.3 million during the third quarter and the first nine months of fiscal 2014, respectively. No material operating income adjustments were recognized during the three and nine months ended June 30, 2013 due to updated cost to complete estimates. Changes in revenue and cost estimates could also result in a projected loss that would be recorded immediately in earnings. As of June 29, 2014 and September 29, 2013, we recorded a liability for anticipated losses of $10.4 million and $13.3 million, respectively. The estimated cost to complete the related contracts as of June 29, 2014 was $37.2 million.

3.                                      Mergers and Acquisitions

In the second quarter of fiscal 2013, we acquired American Environmental Group, Ltd. (“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 Pipeline Contractors Ltd., Parkland Pipeline Equipment Ltd., Park L Projects Ltd. and Parkland Projects Ltd. (collectively, “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 Remediation and Construction Management (“RCM”) segment. We also made other acquisitions that enhanced our service offerings and expanded our geographic presence in our Engineering and Consulting Services (“ECS”) and Technical Support Services (“TSS”) 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 the first quarter of fiscal 2014, we acquired a company that enhanced our service offerings in our ECS segment.

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 additions related to the fiscal 2013 acquisitions primarily represent the value of workforces with distinct expertise in the solid and hazardous waste, and oil and gas 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.  The purchase price allocations related to acquisitions completed during the fourth quarter of fiscal 2013 and the first quarter of fiscal 2014 are preliminary, and subject to adjustment, based on the valuation and final determination of net assets acquired.  We do not believe that any such adjustment will have a material effect on our consolidated results of operations.  None of the acquisitions were considered material, individually or in the aggregate, to our condensed consolidated financial statements.  As a result, no pro forma information has been provided for the respective periods.

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Most of our acquisition agreements include contingent earn-out agreements, which are generally based on the achievement of future operating income thresholds.  The contingent earn-out arrangements are based on our valuations of the acquired companies, and reduce the risk of overpaying for acquisitions if the projected financial results are not achieved. The fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates.  For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair value of contingent consideration as a liability in “Estimated contingent earn-out liabilities” and “Long-term estimated contingent earn-out liabilities” on the condensed 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 (as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2013).  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 condensed 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 initial estimates.  Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present value calculation are reported in interest expense.  Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.  During the three and nine months ended June 29, 2014, we recorded net decreases in our contingent earn-out liabilities and reported related net gains in operating income of $8.9 million and $34.9 million, respectively, compared with net gains of $7.7 million and $8.7 million, respectively, in the same periods last year.  The fiscal 2014 gains primarily resulted from updated valuations of the contingent consideration liability for AEG in the third quarter and Parkland in the second quarter.  Adverse weather conditions during the second and third quarter of fiscal 2014 hindered AEG’s ability to complete construction field work.  We recognized a net unfavorable operating income adjustment for Parkland related to a single project during the second quarter of fiscal 2014.  As a result, we lowered our income projections over the remaining earn-out periods and recorded corresponding reductions of the earn-out liabilities for AEG and Parkland.  We also determined that these lower income projections were the result of temporary events, and would not negatively impact AEG and Parkland’s longer-term performance or result in goodwill impairment.  However, if our income projections for AEG and Parkland were to decline further, this could result in the impairment of a portion of the combined related goodwill balance of approximately $139 million.  In this event, we would also likely have gains in our operating income up to a maximum of the remaining related contingent consideration liabilities.  Conversely, if AEG or Parkland’s performance increases beyond our projections, we could incur future losses in operating income if the resulting contingent consideration earned exceeds the current recorded liability.

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At June 29, 2014, there was a total maximum of $68.3 million of outstanding contingent consideration related to completed acquisitions.  Of this amount, $31.5 million was estimated as the fair value and accrued on our condensed consolidated balance sheets.  For the nine months ended June 29, 2014, we made $20.6 million of earn-out payments to former owners.  Of this amount, we reported $18.7 million as cash used in financing activities and $1.9 million as cash used in operating activities.  For the nine months ended June 30, 2013, we made $24.4 million of earn-out payments to former owners.  Of this amount, we reported $24.0 million as cash used in financing activities and $0.4 million as cash used in operating activities.

4.                                      Goodwill and Intangible Assets

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

Goodwill additions are attributable to an acquisition completed in the first quarter of fiscal 2014.  Substantially all of the goodwill additions are not deductible for income tax purposes.  The foreign exchange impact relates to our foreign subsidiaries with functional currencies that are different than our reporting currency.  The gross amounts of goodwill for ECS were $413.9 million and $411.1 million at June 29, 2014 and September 29, 2013, respectively, excluding $57.5 million of accumulated impairment.

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 perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter. Our last annual review at July 1, 2013, indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill. During this review we identified three operating units (with goodwill totaling $214.0 million as of June 29, 2014) in the ECS segment and two recently acquired reporting units (with goodwill totaling $138.7 million as of June 29, 2014) in the RCM segment with fair values in excess of their carrying values of less than 20%. The goodwill related to the three reporting units in the ECS segment was adjusted to fair value in the third quarter of fiscal 2013, and a $56.6 million impairment charge was recorded. The two reporting units in the RCM segment were acquired at fair value in the second quarter of fiscal 2013. In addition, we regularly evaluate whether events and circumstances have occurred that may indicate a potential change in recoverability of goodwill. Based on these assessments as of June 29, 2014, we also determined that all of our reporting units had estimated fair values in excess of their carrying values, including goodwill as of June 29, 2014. However, four of the five aforementioned reporting units had fair value in excess of carrying value of less than 20%. Although we believe that our estimates of fair value for these reporting units are reasonable, if the financial performance for these reporting units falls significantly below our expectations or market prices for similar businesses decline, the goodwill for these reporting units could become impaired.

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The gross amount and accumulated amortization of our acquired identifiable intangible assets with finite useful lives included in “Intangible assets - net” on the condensed consolidated balance sheets, were as follows:

The gross amount and accumulated amortization for acquired identifiable intangible assets decreased due to the full amortization of assets in fiscal 2014.  The fiscal 2014 acquisition added $2.2 million of identifiable intangible assets.  Amortization expense for the identifiable intangible assets for the three and nine months ended June 29, 2014 was $6.1 million and $21.4 million, respectively, compared to $9.6 million and $24.2 million for the prior-year periods.  Estimated amortization expense for the remainder of fiscal 2014 and succeeding years is as follows:

5.                                      Property and Equipment

Property and equipment consisted of the following:

The depreciation expense related to property and equipment, including assets under capital leases, was $6.5 million and $20.2 million for the three and nine months ended June 29, 2014, respectively, compared to $8.1 million and $22.4 million for the prior-year periods.

6.                                      Stock Repurchase and Dividends

In June 2013, our Board of Directors authorized a stock repurchase program (the “Stock Repurchase Program”) under which we may currently repurchase up to $100 million of our common stock.  Stock repurchases may be made on the open market or in privately negotiated transactions with third parties.  From the inception of the Stock Repurchase Program through June 29, 2014, we repurchased through open market purchases a total of 1.8 million shares at an average price of $25.50 per share, for a total cost of $46.6 million.

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On April 28, 2014, the Board of Directors declared a quarterly cash dividend of $0.07 per share payable on June 4, 2014 to stockholders of record as of the close of business on May 16, 2014.  We paid $4.5 million of cash dividends for the three months ended June 29, 2014.

Subsequent Events.  On July 28, 2014, the Board of Directors declared a quarterly cash dividend of $0.07 per share payable on September 5, 2014 to stockholders of record as of the close of business on August 15, 2014.  Further, on July 28, 2014, the Board of Directors amended the Stock Repurchase Program to authorize the repurchase of the remaining amount in the $100 million Stock Repurchase Program in open market purchases through September 2014 without regard to pricing parameters.

7.                                      Stockholders’ Equity and Stock Compensation Plans

We recognize the fair value of our stock-based compensation awards as compensation expense on a straight-line basis over the requisite service period in which the award vests. Stock-based compensation expense for the three and nine months ended June 29, 2014 was $2.8 million and $8.3 million, respectively, compared to $2.8 million and $7.6 million for the same periods last year. The majority of these amounts was included in “Selling, general and administrative (“SG&A”) expenses” in our condensed consolidated statements of operations. In the three months ended June 29, 2014, no stock options were granted. For the nine months ended June 29, 2014, we granted 354,238 stock options with exercise prices of $28.58 - $28.68 per share and an estimated weighted-average fair value of $9.36 per share. In addition, we awarded 117,067 shares of restricted stock to our non-employee directors and executive officers at the fair value of $28.58 per share on the award date. All of these shares are performance-based and vest, if at all, over a three-year period. The number of shares that ultimately vest is based on the growth in our diluted earnings per share. Additionally, we awarded 224,743 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at the weighted-average fair value of $28.58 per share on the award date. All of the executive officer and employee RSUs have time-based vesting over a four-year period, and the non-employee director RSUs vest after one year.

8.                                      Earnings Per Share (“EPS”)

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, less unvested restricted stock for the period.  Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive potential common shares for the period.  Potential common shares include the weighted-average dilutive effects of outstanding stock options and unvested restricted stock using the treasury stock method.

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

For the three and nine months ended June 29, 2014, 0.7 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 during the period.  Therefore, their inclusion would have been anti-dilutive.  The computation of diluted loss per share for the three and nine months ended June 30, 2013 excluded 0.7 million and 0.8 million of potential common shares due to their anti-dilutive effect.

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9.                                      Income Taxes

The effective tax rates for the first nine months of fiscal 2014 and 2013 were 29.4% and (4.3%), respectively. The fiscal 2014 effective rate reflects $26.2 million of gains related to the updated valuation of contingent consideration liabilities that were not taxable. The negative effective tax rate of 4.3% resulted primarily from the approximately $35 million goodwill impairment charge taken during the third quarter of fiscal 2013 that was not deductible for tax purposes. At June 29, 2014, undistributed earnings of our foreign subsidiaries, primarily in Canada, in the amount of approximately $43.3 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. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable; however, the potential foreign tax credit associated with the deferred income would be available to partially reduce the resulting U.S. tax liabilities.

We review the realizability of deferred tax assets on a quarterly basis by assessing the need for a valuation allowance.  As of June 29, 2014, we performed our assessment of net deferred tax assets.  Significant management judgment is required to determine 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, both 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 foreign jurisdictions.  We have historically relied on the following factors in our assessment of the realizability of our net deferred tax assets:

·                  taxable income in prior carryback years as permitted under the tax law;

·                  future reversals of existing taxable temporary differences;

·                  consideration of available tax planning strategies and actions that could be implemented, if necessary; and

·                  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 these certain foreign jurisdictions for the 36 months ending September 28, 2014, we concluded that our estimates of future taxable income and certain tax planning strategies did not constitute sufficient positive evidence to assert that it is more likely than not that certain deferred tax assets would be realizable before expiration.  Although we project earnings in the related business beyond 2014, we did not rely on these projections when assessing the realizability of our deferred tax assets.  Based on our assessment, we concluded that it is more likely than not that the assets will be realized except for the assets related to loss carry-forwards in foreign jurisdictions for which a valuation allowance of $8.8 million had been provided in previous years.

In the third quarter of fiscal 2014, we received notification from the Internal Revenue Service that our appeals settlement in connection with three issues, research and experimentation tax credit (“R&E credit”), domestic production activities deduction, and meals and entertainment expenses, was approved for fiscal years 2005 through 2007.  The settlement of these issues, including interest, resulted in a cash refund of $6.3 million, which was received in the third quarter of fiscal 2014.  The settlement did not have a material impact on our financial statements as the amount received was consistent with the amount previously recognized in the financial statements.

During the second quarter of fiscal 2013, the American Taxpayer Relief Act of 2012 was signed into law. This law retroactively extended the federal R&E credits for amounts incurred from January 1, 2012 through December 31, 2013. Our effective tax rate for the first quarter of fiscal 2014 includes a tax benefit from R&E credits attributable to the first three months of fiscal 2014. Should the R&E credits provision be retroactively extended during fiscal 2014, additional benefits will be reflected in our effective tax rate during the quarter reporting period of enactment.

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10.                               Reportable Segments

Our reportable segments are as follows:

ECS:  provides front-end science, consulting engineering and project management services in the areas of surface water management, water infrastructure, solid waste management, mining, geotechnical sciences, arctic engineering, industrial processes and oil sands, transportation and information technology.

TSS:  provides management consulting and engineering services and strategic direction in the areas of environmental assessments/hazardous waste management, climate change, international development, international reconstruction and stabilization, energy, oil and gas, technical government consulting, and building and facilities.

RCM:  provides full-service support, including construction and construction management, to all of our client sectors, including the U.S. federal government in the United States and internationally, and commercial clients worldwide, in the areas of environmental remediation, infrastructure development, solid waste management, energy, and oil and gas.

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 regarding our reportable segments:

Reportable Segments

(1)        Includes goodwill impairment charge, amortization of intangibles, other costs and other income not allocable to segments. The goodwill impairment charge of $56.6 million for the three and nine-month periods of fiscal 2013 was recorded at Corporate.  The intangible asset amortization expense for the three and nine-month periods of fiscal 2014 was $6.1 million and $21.4 million, respectively, compared to $9.6 million and $24.2 million for the same periods last year.

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

Major Clients

Other than the U.S. federal government, no single client accounted for more than 10% of our revenue.  All of our segments generated revenue from all client sectors.

The following table represents our revenue by client sector: