EX-99.1 2 a06-11152_1ex99d1.htm EX-99

Exhibit 99.1

 

May 3, 2006

 

Tetra Tech Reports Second Quarter Results

 

Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the second quarter ended April 2, 2006. Overall, the Company achieved its earnings guidance and exceeded its revenue guidance for the quarter. In the quarter, diluted earnings per share (“EPS”) from continuing operations, before the effect of stock option expense under SFAS 123R, was $0.16 compared to a loss of $1.73 per share for the same quarter last year. Diluted EPS from continuing operations, after the effect of stock option expense under SFAS 123R, was $0.14. Revenue in the quarter was $318.9 million, up 7.2% from $297.5 million, and revenue, net of subcontractor costs, was $237.7 million, up 7.6% from $220.9 million for the same quarter last year. Backlog at the end of the second quarter was $941 million, up 8.3% from $869 million at the end of the first quarter.

 

 

 

Three Months Ended

 

Six Months Ended

 

In thousands (except EPS data)

 

April 2,
2006

 

April 3,
2005(c)

 

April 2,
2006

 

April 3,
2005(c)

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before the effect of SFAS 123R(a) (b)

 

$

9,182

 

$

(97,944

)

$

18,731

 

$

(91,084

)

Income (loss) from continuing operations

 

8,105

 

(97,944

)

16,593

 

(91,084

)

 

 

 

 

 

 

 

 

 

 

Diluted EPS from continuing operations:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before the effect of SFAS 123R(a)

 

$

0.16

 

$

(1.73

)

$

0.32

 

$

(1.61

)

Income (loss) from continuing operations

 

$

0.14

 

$

(1.73

)

$

0.29

 

$

(1.61

)

 

(a)          A non-GAAP financial measure; see “Non-GAAP Financial Measure” below.

(b)         Effective as of the beginning of fiscal 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004) – Share-Based Payment (“SFAS 123R”) using the modified prospective application method. Accordingly, the results of operations for the current fiscal period include expense related to the fair value of its stock-based compensation awards.

(c)          Reflects a non-cash impairment charge in the second quarter of fiscal 2005 of $105.6 million for goodwill and other identifiable intangible assets.

 


 

Second Quarter Results

 

Revenue in the quarter was $318.9 million, up 7.2% from $297.5 million, and revenue, net of subcontractor costs, was $237.7 million, up 7.6% from $220.9 million for the same quarter last year. Income from operations was $16.2 million compared to a loss of $121.8 million for the same period last year. The loss from last year was largely due to a non-cash goodwill impairment charge. Net income for the second quarter was $9.0 million compared to a net loss of $123.8 million for the same period last year. In the quarter, diluted EPS from continuing operations, before the effect of stock option expense under SFAS 123R, was $0.16 compared to a loss of $1.73 per share for the same quarter last year. The Company earned $0.02 per diluted share for the quarter on discontinued operations, which included a gain on the sale of a non-core business. Diluted EPS from net income, which includes income from discontinued operations and the effect of stock option expense under SFAS 123R, was $0.16 compared to a loss of $2.19 for the same period last year.

 

Six Month Results

 

Revenue for the six months ended April 2, 2006 was $660.1 million, up 8.7% from $607.2 million for the same period last year. Revenue, net of subcontractor costs, for the first six months of fiscal 2006 was $467.5 million, an increase of 4.6% from $446.7 million for the first six months of fiscal 2005. Income from operations was $33.3 million compared to a loss of $107.8 million for the same period last year. Net income for the first six months of fiscal 2006 was $17.0 million compared to a net loss of $115.9 million for the same period last year. Diluted EPS from net income for the first six months was $0.29 compared to a diluted loss per share of $2.05 for the same period last year.

 

 

 

Three Months Ended

 

Six Months Ended

 

In thousands (except EPS data)

 

April 2,
2006

 

April 3,
2005

 

April 2,
2006

 

April 3,
2005

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

318,892

 

$

297,517

 

$

660,084

 

$

607,183

 

Revenue, net of subcontractor costs

 

237,716

 

220,878

 

467,475

 

446,745

 

Income (loss) from operations

 

16,224

 

(121,844

)

33,347

 

(107,788

)

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

8,105

 

(97,944

)

16,593

 

(91,084

)

Income (loss) from discontinued operations, net of tax

 

859

 

(25,889

)

394

 

(24,846

)

Net income (loss)

 

$

8,964

 

$

(123,833

)

$

16,987

 

$

(115,930

)

 

2


 

 

 

Three Months Ended

 

Six Months Ended

 

In thousands (except EPS data)

 

April 2,
2006

 

April 3,
2005

 

April 2,
2006

 

April 3,
2005

 

 

 

 

 

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.14

 

$

(1.73

)

$

0.29

 

$

(1.61

)

Income (loss) from discontinued operations, net of tax

 

0.02

 

(0.46

)

0.01

 

(0.44

)

Net income (loss)

 

$

0.16

 

$

(2.19

)

$

0.30

 

$

(2.05

)

 

 

 

 

 

 

 

 

 

 

Diluted EPS:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.14

 

$

(1.73

)

$

0.29

 

$

(1.61

)

Income (loss) from discontinued operations, net of tax

 

0.02

 

(0.46

)

—

 

(0.44

)

Net income (loss)

 

$

0.16

 

$

(2.19

)

$

0.29

 

$

(2.05

)

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

57,262

 

56,643

 

57,182

 

56,556

 

Diluted

 

57,806

 

56,643

 

57,724

 

56,556

 

 

Non-GAAP Financial Measure

 

Management of the Company believes that income before the effect of SFAS 123R is useful information because it allows investors to assess the Company’s earnings trend. Such non-GAAP information is also integral to management’s internal evaluation of the Company’s performance. The following table reconciles the Company’s reported GAAP net income and EPS to the non-GAAP financial measure:

 

 

 

Three Months Ended

 

Six Months Ended

 

In thousands (except EPS data)

 

April 2,
2006

 

April 3,
2005

 

April 2,
2006

 

April 3,
2005

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before the effect of SFAS 123R

 

$

9,182

 

$

(97,944

)

$

18,731

 

$

(91,084

)

Effect of SFAS 123R, net of tax

 

(1,077

)

—

 

(2,138

)

—

 

Income (loss) from continuing operations

 

8,105

 

(97,944

)

16,593

 

(91,084

)

Income (loss) from discontinued operations, net of tax

 

859

 

(25,889

)

394

 

(24,846

)

Net income (loss) – as reported per GAAP

 

$

8,964

 

$

(123,833

)

$

16,987

 

$

(115,930

)

 

3


 

 

 

Three Months Ended

 

Six Months Ended

 

In thousands (except EPS data)

 

April 2,
2006

 

April 3,
2005

 

April 2,
2006

 

April 3,
2005

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before the effect of SFAS 123R

 

$

0.16

 

$

(1.73

)

$

0.32

 

$

(1.61

)

Effect of SFAS 123R, net of tax

 

(0.02

)

—

 

(0.03

)

—

 

Income (loss) from continuing operations

 

0.14

 

(1.73

)

0.29

 

(1.61

)

Income (loss) from discontinued operations, net of tax

 

0.02

 

(0.46

)

—

 

(0.44

)

Net income (loss) – as reported per GAAP

 

$

0.16

 

$

(2.19

)

$

0.29

 

$

(2.05

)

 

Business Outlook

 

The following statements are based on current expectations. These statements are forward-looking and the actual results could differ materially. These statements do not include the potential impact of corporate transactions that may be completed after the date of this release. The Business Outlook section should be read in conjunction with the information on forward-looking statements at the end of this release.

 

Tetra Tech expects diluted EPS from continuing operations, before the effect of SFAS 123R, for the third quarter of fiscal 2006 to be in the range of $0.18 to $0.19. Revenue, net of subcontractor costs, for the third quarter is expected to range from $230 million to $240 million. For fiscal 2006, Tetra Tech expects diluted EPS from continuing operations, before the effect of SFAS 123R, to be in the range of $0.69 to $0.73. Revenue, net of subcontractor costs, for fiscal 2006 is expected to range from $900 million to $950 million.

 

The effect of SFAS 123R on diluted EPS is now expected to be approximately $0.08 to $0.09 during fiscal 2006.

 

4


 

Webcast

 

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the second quarter results through a link posted on the Company’s web site at www.tetratech.com on May 4, 2006 at 8:00 a.m. (PDT).

 

About Tetra Tech (www.tetratech.com)

 

Tetra Tech is a leading provider of consulting, engineering, and technical services. With approximately 7,500 associates located in the United States and internationally, the Company supports commercial and government clients in the areas of resource management and infrastructure. Tetra Tech’s services include research and development, applied science and technology, engineering design, program management, construction management, and operations and maintenance.

 

CONTACT: Mike Bieber, (626) 351-4664

 

Forward-Looking Statements

 

This news release contains forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include information concerning future events and the future financial performance of Tetra Tech that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Readers are urged to read the documents filed by Tetra Tech with the SEC, specifically the most recent reports on Form 10-K, 10Q, and 8-K, each as it may be amended from time to time, which identify risk factors that could cause actual results to differ materially from the forward-looking statements. Among the important factors or risks that could cause actual results or events to differ materially from those in the forward-looking statements in this release are: fluctuations in quarterly operating results; the impact of downturns in the financial markets and reductions in government budgets; volatility of common stock value; concentration of revenues from government agencies and funding disruptions by these agencies; failure to properly manage projects; acquisition strategy risks; management of growth strategy; use of the percentage-of-completion method of accounting; adverse resolution of an IRS examination; loss of key personnel or the inability to attract and retain qualified personnel; implementation of the enterprise resource planning system; international operations risks; credit risks associated with commercial clients; violations of government contractor regulations; competitive bidding for government contracts; the affect of a negative government audit; the inability to accurately estimate contract risks, revenue and costs; backlog cancellation and adjustments; client base consolidation; failure of partners to perform on joint projects; inability to find qualified subcontractors; changes in existing environmental laws, regulations, or programs; competition; restrictive covenants in debt agreements; risks of professional and other liabilities; adverse resolution of litigation; conflict of interest issues; changes in accounting for equity-related compensation; expenses associated with corporate governance; and disruption of operations due to computer viruses or terrorism. Any projections in this release are based on limited information currently available to Tetra Tech, which is subject to change. Although any such projections and the factors influencing them will likely change, Tetra Tech will not necessarily update the information, since Tetra Tech will only provide guidance at certain points during the year. Readers should not place undue reliance on forward-looking statements since such information speaks only as of the date of this release.

 

5


 

TETRA TECH, INC.

Condensed Consolidated Statements of Operations

(Unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

April 2,
2006

 

April 3,
2005

 

April 2,
2006

 

April 3,
2005

 

Revenue

 

$

318,892

 

$

297,517

 

$

660,084

 

$

607,183

 

Subcontractor costs

 

81,176

 

76,639

 

192,609

 

160,438

 

Revenue, net of subcontractor costs

 

237,716

 

220,878

 

467,475

 

446,745

 

Other contract costs

 

191,155

 

199,160

 

376,527

 

387,709

 

Gross profit

 

46,561

 

21,718

 

90,948

 

59,036

 

Selling, general and administrative expenses

 

30,337

 

37,950

 

57,601

 

61,212

 

Impairment of goodwill and other intangible assets

 

—

 

105,612

 

—

 

105,612

 

Income (loss) from operations

 

16,224

 

(121,844

)

33,347

 

(107,788

)

Interest expense - net

 

1,873

 

2,859

 

4,105

 

5,327

 

Income (loss) from continuing operations before income tax expense (benefit)

 

14,351

 

(124,703

)

29,242

 

(113,115

)

Income tax expense (benefit)

 

6,246

 

(26,759

)

12,649

 

(22,031

)

Income (loss) from continuing operations

 

8,105

 

(97,944

)

16,593

 

(91,084

)

Income (loss) from discontinued operations, net of tax

 

859

 

(25,889

)

394

 

(24,846

)

Net income (loss)

 

$

8,964

 

$

(123,833

)

$

16,987

 

$

(115,930

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.14

 

$

(1.73

)

$

0.29

 

$

(1.61

)

Income (loss) from discontinued operations

 

0.02

 

(0.46

)

0.01

 

(0.44

)

Net income (loss)

 

$

0.16

 

$

(2.19

)

$

0.30

 

$

(2.05

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.14

 

$

(1.73

)

$

0.29

 

$

(1.61

)

Income (loss) from discontinued operations

 

0.02

 

(0.46

)

—

 

(0.44

)

Net income (loss)

 

$

0.16

 

$

(2.19

)

$

0.29

 

$

(2.05

)

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

57,262

 

56,643

 

57,182

 

56,556

 

Diluted

 

57,806

 

56,643

 

57,724

 

56,556

 

 


 

TETRA TECH, INC.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

 

 

 

April 2,
2006

 

October 2,
2005

 

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

39,626

 

$

26,861

 

Accounts receivable - net

 

297,726

 

304,905

 

Prepaid expenses and other current assets

 

23,493

 

20,936

 

Income taxes receivable

 

11,245

 

14,172

 

Current assets of discontinued operations

 

3,143

 

24,074

 

Total current sssets

 

375,233

 

390,948

 

Property and equipment:

 

 

 

 

 

Equipment, furniture, and fixtures

 

75,368

 

70,863

 

Leasehold improvements

 

8,623

 

9,021

 

Total

 

83,991

 

79,884

 

Accumulated depreciation and amortization

 

(52,343

)

(48,248

)

Property and equipment - net

 

31,648

 

31,636

 

 

 

 

 

 

 

Deferred income taxes

 

13,136

 

8,926

 

Income taxes receivable

 

33,800

 

33,800

 

Goodwill

 

160,080

 

159,175

 

Intangible assets - net

 

5,185

 

5,668

 

Other assets

 

10,763

 

10,731

 

Noncurrent assets of discontinued operations

 

11,183

 

7,251

 

Total assets

 

$

641,028

 

$

648,135

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts Payable

 

$

56,179

 

$

88,508

 

Accrued compensation

 

53,186

 

50,935

 

Billing in excess of costs on uncompleted contracts

 

44,097

 

48,560

 

Deferred income taxes

 

17,410

 

5,019

 

Current portion of long-term obligations

 

17,871

 

17,800

 

Other current liabilites

 

44,146

 

45,137

 

Current liabilities of discontinued operations

 

6,911

 

13,376

 

Total current liabilities

 

239,800

 

269,335

 

 

 

 

 

 

 

Long-term obligations

 

74,511

 

74,138

 

Noncurrent liabilities of discontinued operations

 

—

 

47

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding as of April 2, 2006 and October 2, 2005

 

—

 

—

 

Common stock - authorized, 85,000 shares of $0.01 par value; issued and outstanding 57,353 and 57,048 shares as of April 2, 2006 and October 2, 2005, respectively

 

574

 

570

 

Additional Paid in Capital

 

256,987

 

251,112

 

Accumulated other comprehensive income (loss)

 

(7

)

757

 

Retained earnings

 

69,163

 

52,176

 

Total stockholders’ equity

 

326,717

 

304,615

 

Total liabilities and stockholders’ equity

 

$

641,028

 

$

648,135

 

 


 

TETRA TECH, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited - in thousands)

 

 

 

Six Months Ended

 

 

 

April 2,
2006

 

April 3,
2005

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income (loss)

 

$

16,987

 

$

(115,930

)

 

 

 

 

 

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

6,663

 

8,623

 

Stock-based compensation

 

2,248

 

—

 

Deferred income taxes

 

8,231

 

(28,969

)

Provision for losses on contracts and related receivables

 

199

 

26,447

 

Impairment of goodwill and other intangible assets

 

—

 

105,612

 

Impairment of long-lived assets

 

—

 

2,000

 

Lease exit costs

 

—

 

5,568

 

(Gain) on sale of discontinued operations

 

(1,415

)

—

 

(Gain) loss on disposal of property and equipment

 

(3

)

1,305

 

 

 

 

 

 

 

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:

 

 

 

 

 

Accounts receivable

 

21,450

 

43,482

 

Prepaid expenses and other assets

 

(1,829

)

(416

)

Accounts payable

 

(38,434

)

(23,486

)

Accrued compensation

 

1,341

 

(4,376

)

Billings in excess of costs on uncompleted contracts

 

(4,514

)

(1,158

)

Other current liabilities

 

987

 

4,003

 

Income taxes receivable/payable

 

3,152

 

(12,502

)

Net cash provided by operating activities

 

15,063

 

10,203

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(5,857

)

(5,472

)

Payments for business acquisitions, net

 

(1,900

)

(5,849

)

Proceeds from sale of discontinued operations

 

3,475

 

—

 

Proceeds on sale of property and equipment

 

125

 

618

 

Net cash used in investing activities

 

(4,157

)

(10,703

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Payments on long-term obligations

 

(11,159

)

(21,033

)

Proceeds from borrowings under long-term obligations

 

10,000

 

50,000

 

Net proceeds from issuance of common stock

 

3,018

 

2,243

 

Net cash provided by financing activities

 

1,859

 

31,210

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

—

 

131

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

12,765

 

30,841

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

26,861

 

48,032

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

39,626

 

$

78,873

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

4,418

 

$

5,510

 

Income taxes, net of refunds received

 

$

722

 

$

5,585