EX-99.1 2 a10-14861_1ex99d1.htm EX-99.1

Exhibit 99.1

 

July 28, 2010

 

Tetra Tech Reports Third Quarter Results

 

·                  Diluted EPS: $0.33 – Exceeded guidance

·                  Raising FY10 net revenue and EPS guidance

 

Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the third quarter ended June 27, 2010.

 

Third Quarter Results

 

Revenue in the quarter was $562.4 million, and revenue, net of subcontractor costs(1), was $370.1 million.  These figures compare to $551.4 million and $356.9 million, respectively, for the same quarter last year.  Operating income was $32.7 million and net income was $20.6 million, compared to $32.8 million and $31.0 million, respectively, for the same quarter last year.  Diluted EPS were $0.33, compared to $0.51 for the same quarter last year.  Last year’s $0.51 of diluted EPS included tax benefits of $0.20, while this year’s $0.33 included tax benefits of $0.01.  Backlog was $1.68 billion compared to $1.67 billion at the end of the second quarter of 2010 and $1.70 billion at the end of the third quarter last year.  Cash from operations was $24.5 million, compared to $60.8 million in the same quarter last year.  Last year’s $60.8 million of cash from operations included a tax refund of $39.8 million.

 

Nine Month Results

 

Revenue for the first nine months was $1,573.8 million, and revenue, net of subcontractor costs, was $1,039.6 million.  These figures compare to $1,712.4 million and $1,019.2 million, respectively, for the same period last year.  Operating income was $87.3 million and net income was $53.7 million, compared to $89.2 million and $66.5 million, respectively, for the same period last year.  Diluted EPS were $0.86, compared to $1.10 for the same period last year.  Last year’s $1.10 of diluted EPS included tax benefits of $0.26, while this year’s $0.86 included tax benefits of $0.01.  Cash from operations was $64.5 million, compared to $107.4 million in the same period last year.  Last year’s $107.4 million of cash from operations included a tax refund of $39.8 million.

 

Tetra Tech’s Chairman and CEO, Dan Batrack commented, “Our third quarter results exceeded our net revenue and EPS guidance.  This performance was driven by strong front-end consulting and engineering services, particularly for our federal and international clients.  We grew our backlog sequentially, maintained solid operating margins, and generated strong cash flow from operations.  Additionally, we have signed a definitive agreement to acquire a Canadian consulting and engineering firm with about $100 million in annual revenue, which we expect to close in August.  Given our performance in the third quarter and strength in our business, we are raising our net revenue and diluted EPS guidance for fiscal 2010.”

 


(1)  Tetra Tech’s revenue includes a significant amount of subcontractor costs and, therefore, the Company believes revenue, net of subcontractor costs, which is a non-GAAP financial measure, provides a valuable perspective on its business results.

 



 

 

 

Three Months Ended

 

Nine Months Ended

 

In thousands (except EPS data)

 

June 27,
2010

 

June 28,
2009

 

June 27,
2010

 

June 28,
2009

 

Revenue

 

$

562,365

 

$

551,376

 

$

1,573,850

 

$

1,712,364

 

Subcontractor costs

 

(192,237

)

(194,449

)

(534,295

)

(693,197

)

Revenue, net of subcontractor costs

 

370,128

 

356,927

 

1,039,555

 

1,019,167

 

Operating income

 

32,706

 

32,751

 

87,349

 

89,196

 

Interest expense, net

 

(336

)

(473

)

(943

)

(2,240

)

Income tax expense

 

(11,731

)

(1,267

)

(32,728

)

(20,423

)

Net income

 

$

20,639

 

$

31,011

 

$

53,678

 

$

66,533

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

$

0.52

 

$

0.87

 

$

1.11

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.33

 

$

0.51

 

$

0.86

 

$

1.10

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

61,560

 

60,123

 

61,380

 

59,947

 

Diluted

 

62,181

 

61,108

 

62,115

 

60,707

 

 

Business Outlook

 

The following statements are based on current expectations.  These statements are forward-looking and the actual results could differ materially.  Except for the aforementioned acquisition, these statements do not include the potential impact of transactions that may be completed or developments that become evident 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 for the fourth quarter of fiscal 2010 to be in the range of $0.31 to $0.34.  Revenue, net of subcontractor costs, for the fourth quarter is expected to range from $370 million to $390 million.  For fiscal 2010, Tetra Tech is raising its guidance and now expects diluted EPS to be $1.17 to $1.20.  Revenue, net of subcontractor costs, for fiscal 2010 is now expected to range from $1.41 billion to $1.43 billion.  Our updated guidance includes the expected contributions from the aforementioned acquisition.

 

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Webcast

 

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the third quarter results through a link posted on the Company’s website at www.tetratech.com on July 29, 2010 at 8:00 a.m. (PDT).

 

About Tetra Tech (www.tetratech.com)

 

Tetra Tech is a leading provider of consulting, engineering, program management, construction, and technical services addressing the resource management and infrastructure markets.  The Company supports government and commercial clients by providing innovative solutions focused on water, the environment, and energy.  With approximately 10,000 employees worldwide, Tetra Tech’s capabilities span the entire project life cycle.

 

CONTACTS:
Jorge Casado, Investor Relations
Talia Starkey, Media & Public Relations
(626) 470-2844

 

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, 10-Q, 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:  worldwide political and economic uncertainties; fluctuations in annual revenue, expenses and operating results; the cyclicality in demand for state and local government and commercial services; credit risks associated with certain commercial clients; concentration of revenues from government agencies and funding disruptions by these agencies; a shift in U.S. defense spending; a delay in the completion of the U.S. government budget process; violations of government contractor regulations; dependence on winning or renewing federal, state and local government contracts; the delay or unavailability of public funding; the government’s right to modify, delay, curtail or terminate contracts at its convenience; the failure to properly manage projects; the loss of key personnel or the inability to attract and retain qualified personnel; the use of estimates and assumptions in the preparation of financial statements; the ability to maintain adequate utilization of our workforce; the use of the percentage-of-completion method of accounting; the inability to accurately estimate contract risks, revenue and costs; the failure to win or renew contracts with private and public sector clients; acquisition strategy and integration risks; goodwill or other intangible asset impairment; growth strategy management; adverse resolution of an IRS examination; backlog cancellation and adjustments; risks associated with international operations; the failure of partners to perform on joint projects; the failure of subcontractors to satisfy their obligations; changes in resource management or infrastructure industry laws, regulations or programs; changes in capital markets and the access

 

3



 

to capital; credit agreement covenants; industry competition; the volatility of common stock value; liability risks and the ability to obtain or maintain adequate insurance; liability related to legal proceedings; the ability to obtain adequate bonding; employee, agent or partner misconduct; employee risks related to international travel; safety programs; conflict of interest issues; liabilities relating to environmental laws and regulations; force majeure events; protection of intellectual property rights; and the completion of the enterprise resource planning system. 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.

 

4



 

Tetra Tech, Inc.

Condensed Consolidated Balance Sheets

(unaudited - in thousands, except par value)

 

 

 

June 27,
2010

 

September 27,
2009

 

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

120,294

 

$

89,185

 

Accounts receivable - net

 

517,240

 

506,316

 

Prepaid expenses and other current assets

 

51,051

 

55,167

 

Income taxes receivable

 

7,613

 

5,222

 

 

 

 

 

 

 

Total current assets

 

696,198

 

655,890

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

Land and buildings

 

11,711

 

10,555

 

Equipment, furniture and fixtures

 

137,051

 

126,249

 

Leasehold improvements

 

14,278

 

13,740

 

 

 

 

 

 

 

Total

 

163,040

 

150,544

 

Accumulated depreciation and amortization

 

(92,381

)

(79,616

)

Property and equipment - net

 

70,659

 

70,928

 

 

 

 

 

 

 

Goodwill

 

342,502

 

319,685

 

Intangible assets - net

 

29,806

 

33,769

 

Other assets

 

16,491

 

17,633

 

 

 

 

 

 

 

Total Assets

 

$

1,155,656

 

$

1,097,905

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

152,856

 

$

149,352

 

Accrued compensation

 

72,616

 

88,793

 

Billings in excess of costs on uncompleted contracts

 

87,883

 

105,162

 

Deferred income taxes

 

17,471

 

9,645

 

Current portion of long-term debt

 

5,174

 

4,320

 

Other current liabilities

 

73,171

 

74,964

 

Total current liabilities

 

409,171

 

432,236

 

 

 

 

 

 

 

Deferred income taxes

 

8,816

 

4,615

 

Long-term debt

 

4,297

 

6,530

 

Other long-term liabilities

 

12,785

 

8,046

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding as of June 27, 2010 and September 27, 2009

 

 

 

Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 61,743 and 61,257 shares as of June 27, 2010 and September 27, 2009, respectively

 

617

 

613

 

Additional paid-in capital

 

366,151

 

350,571

 

Accumulated other comprehensive income

 

17,073

 

12,226

 

Retained earnings

 

336,746

 

283,068

 

Total stockholders’ equity

 

720,587

 

646,478

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

 

$

1,155,656

 

$

1,097,905

 

 



 

Tetra Tech, Inc.

Condensed Consolidated Statements of Income

(unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 27,

 

June 28,

 

June 27,

 

June 28,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

562,365

 

$

551,376

 

$

1,573,850

 

$

1,712,364

 

Subcontractor costs

 

(192,237

)

(194,449

)

(534,295

)

(693,197

)

Other costs of revenue

 

(297,730

)

(282,258

)

(833,869

)

(813,835

)

Selling, general and administrative expenses

 

(39,692

)

(41,918

)

(118,337

)

(116,136

)

Operating income

 

32,706

 

32,751

 

87,349

 

89,196

 

Interest expense - net

 

(336

)

(473

)

(943

)

(2,240

)

Income before income tax expense

 

32,370

 

32,278

 

86,406

 

86,956

 

Income tax expense

 

(11,731

)

(1,267

)

(32,728

)

(20,423

)

 

 

 

 

 

 

 

 

 

 

Net income

 

$

20,639

 

$

31,011

 

$

53,678

 

$

66,533

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

$

0.52

 

$

0.87

 

$

1.11

 

Diluted

 

$

0.33

 

$

0.51

 

$

0.86

 

$

1.10

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

61,560

 

60,123

 

61,380

 

59,947

 

Diluted

 

62,181

 

61,108

 

62,115

 

60,707

 

 



 

Tetra Tech, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

 

 

 

Nine Months Ended

 

 

 

June 27,

 

June 28,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

53,678

 

$

66,533

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

Depreciation and amortization

 

24,113

 

19,400

 

Stock-based compensation

 

7,679

 

6,988

 

Excess tax benefits from stock-based compensation

 

(755

)

(400

)

Deferred income taxes

 

11,771

 

4,411

 

Provision for losses on contracts and related receivables

 

6,105

 

14,674

 

Exchange (gain) loss

 

(254

)

32

 

Gain on disposal of property and equipment

 

(897

)

(76

)

 

 

 

 

 

 

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

 

 

 

 

 

Accounts receivable

 

(14,503

)

92,629

 

Prepaid expenses and other assets

 

6,487

 

(10,808

)

Accounts payable

 

2,737

 

(76,759

)

Accrued compensation

 

(16,166

)

(27,157

)

Billings in excess of costs on uncompleted contracts

 

(17,294

)

(12,495

)

Other liabilities

 

2,175

 

(531

)

Income taxes receivable/payable

 

(341

)

31,008

 

Net cash provided by operating activities

 

64,535

 

107,449

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(15,855

)

(13,324

)

Payments for business acquisitions, net of cash acquired

 

(23,444

)

(102,828

)

Proceeds from sale of discontinued operation

 

 

192

 

Proceeds from sale of property and equipment

 

2,189

 

324

 

Net cash used in investing activities

 

(37,110

)

(115,636

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Payments on long-term debt

 

(824

)

(120,296

)

Proceeds from borrowings

 

 

118,168

 

Excess tax benefits from stock-based compensation

 

755

 

400

 

Net proceeds from issuance of common stock

 

3,165

 

6,471

 

Net cash provided by financing activities

 

3,096

 

4,743

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

588

 

817

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

31,109

 

(2,627

)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

89,185

 

50,902

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

120,294

 

$

48,275

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid (received) during the period for:

 

 

 

 

 

Interest

 

$

1,078

 

$

1,986

 

Income taxes, net of refunds received

 

$

21,595

 

$

(14,816

)