Exhibit 99.1
January 25, 2006
Tetra Tech Reports First Quarter Results
Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the first quarter ended January 1, 2006. In the quarter, diluted earnings per share (“EPS”) from continuing operations, before the effect of stock option expense under SFAS 123R, was $0.17 compared to $0.12 for the same quarter last year, a 41.7% increase. Diluted EPS from continuing operations, after the effect of stock option expense under SFAS 123R, was $0.15. Revenue was $341.2 million, and revenue, net of subcontractor costs, was $229.8 million in the quarter.
| | Three Months Ended | |
In thousands (except EPS data) | | Jan. 1, 2006 | | Jan. 2, 2005 | |
Income from continuing operations before the effect of SFAS 123R(a) (b) | | $ | 9,549 | | $ | 6,860 | |
Income from continuing operations | | 8,488 | | 6,860 | |
| | | | | |
Diluted EPS from continuing operations: | | | | | |
Income from continuing operations before the effect of SFAS 123R(a) | | $ | 0.17 | | $ | 0.12 | |
Income from continuing operations | | $ | 0.15 | | $ | 0.12 | |
(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.
First Quarter Results
Revenue for the first quarter was $341.2 million, up 10.2% from $309.7 million for the same quarter last year. Revenue, net of subcontractor costs, for the quarter was $229.8 million, up 1.7% from $225.9 million for the same quarter last year. Income from operations was $17.1 million, up 21.8% from $14.1 million for the same period last year. Net income for the first quarter was $8.0 million, up 1.5% from $7.9 million for the same period last year. Diluted EPS from net income was $0.14 compared to $0.14 for the same period last year.
Tetra Tech continued the wind-down and divestitures of non-core businesses in the first quarter and expects to complete the wind-down and divestitures of the remaining non-core businesses in the second quarter. This resulted in $0.01 of diluted loss per share from discontinued operations for the quarter. Tetra Tech may recognize a gain, if any, next quarter upon completing the divestiture of businesses.
| | Three Months Ended | |
In thousands (except EPS data) | | Jan. 1, 2006 | | Jan. 2, 2005 | |
Revenue | | $ | 341,192 | | $ | 309,666 | |
Revenue, net of subcontractor costs | | 229,759 | | 225,867 | |
Income from operations | | 17,123 | | 14,056 | |
| | | | | |
Income from continuing operations | | 8,488 | | 6,860 | |
Income (loss) from discontinued operations, net of tax | | (465 | ) | 1,043 | |
Net income | | $ | 8,023 | | $ | 7,903 | |
| | | | | |
Basic EPS: | | | | | |
Income from continuing operations | | $ | 0.15 | | $ | 0.12 | |
Income (loss) from discontinued operations, net of tax | | (0.01 | ) | 0.02 | |
Net income | | $ | 0.14 | | $ | 0.14 | |
| | | | | |
Diluted EPS: | | | | | |
Income from continuing operations | | $ | 0.15 | | $ | 0.12 | |
Income (loss) from discontinued operations, net of tax | | (0.01 | ) | 0.02 | |
Net income | | $ | 0.14 | | $ | 0.14 | |
| | | | | |
Weighted average common shares outstanding: | | | | | |
Basic | | 57,102 | | 56,469 | |
Diluted | | 57,641 | | 56,977 | |
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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 | |
In thousands (except EPS data) | | Jan. 1, 2006 | | Jan. 2, 2005 | |
Income from continuing operations before the effect of SFAS 123R | | $ | 9,549 | | $ | 6,860 | |
Effect of SFAS 123R, net of tax | | (1,061 | ) | — | |
Income from continuing operations | | 8,488 | | 6,860 | |
Income (loss) from discontinued operations, net of tax | | (465 | ) | 1,043 | |
Net income - as reported per GAAP | | $ | 8,023 | | $ | 7,903 | |
| | | | | |
Diluted EPS: | | | | | |
Income from continuing operations before the effect of SFAS 123R | | $ | 0.17 | | $ | 0.12 | |
Effect of SFAS 123R, net of tax | | (0.02 | ) | — | |
Income from continuing operations | | 0.15 | | 0.12 | |
Income (loss) from discontinued operations, net of tax | | (0.01 | ) | 0.02 | |
Net income - as reported per GAAP | | $ | 0.14 | | $ | 0.14 | |
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 for the second quarter of fiscal 2006 to be in the range of $0.15 to $0.17, excluding the anticipated gain from discontinued operations and before the effect of SFAS 123R. Revenue, net of subcontractor costs, for the second quarter is expected to range from $220 million to $230 million. For fiscal 2006, guidance remains unchanged. Tetra Tech expects diluted EPS, before the effect of SFAS 123R, to be in the range of $0.68 to $0.75 for fiscal 2006. Revenue, net of subcontractor costs, for fiscal 2006 is expected to range from $850 million to $950 million.
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The effect of SFAS 123R on diluted EPS is expected to be approximately $0.09 to $0.10 during fiscal 2006.
Webcast
Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the first quarter results through a link posted on the Company’s web site at www.tetratech.com on January 26, 2006 at 8:00 a.m. (PST).
About Tetra Tech (www.tetratech.com)
Tetra Tech is a leading provider of consulting, engineering, and technical services. With over 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
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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.
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TETRA TECH, INC.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
| | January 1,
2006 | | October 2,
2005 | |
Assets | | | | | |
Current Assets: | | | | | |
Cash and cash equivalents | | $ | 14,692 | | $ | 26,861 | |
Accounts receivable - net | | 315,654 | | 304,905 | |
Prepaid expenses and other current assets | | 25,835 | | 20,936 | |
Income taxes receivable | | 18,219 | | 64 | |
Current assets of discontinued operations | | 7,424 | | 40,090 | |
Total current assets | | 381,824 | | 392,856 | |
| | | | | |
Property and equipment: | | | | | |
Equipment, furniture, and fixtures | | 73,214 | | 70,863 | |
Leasehold improvements | | 9,057 | | 9,021 | |
Total | | 82,271 | | 79,884 | |
| | | | | |
Accumulated depreciation and amortization | | (50,652 | ) | (48,248 | ) |
Property and equipment - net | | 31,619 | | 31,636 | |
| | | | | |
Deferred income taxes | | 8,203 | | 7,469 | |
Income taxes receivable | | 33,800 | | 33,800 | |
Goodwill | | 159,175 | | 159,175 | |
Intangible and other assets - net | | 26,455 | | 16,399 | |
Noncurrent assets of discontinued operations | | 2,435 | | 8,708 | |
| | | | | |
Total assets | | $ | 643,511 | | $ | 650,043 | |
| | | | | |
Liabilities and Stockholders’ Equity | | | | | |
Current liabilities: | | | | | |
Accounts Payable | | $ | 73,571 | | $ | 88,508 | |
Accrued compensation | | 39,724 | | 50,935 | |
Billings in excess of costs on uncompleted contracts | | 45,165 | | 48,560 | |
Deferred income taxes | | 17,048 | | 7,009 | |
Current portion of long-term obligations | | 17,713 | | 12,285 | |
Other current liabilites | | 47,606 | | 45,137 | |
Current liabilities of discontinued operations | | 3,772 | | 18,809 | |
Total current liabilities | | 244,599 | | 271,243 | |
| | | | | |
Long-term obligations | | 84,026 | | 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 January 1, 2006 and October 2, 2005 | | — | | — | |
Common stock - authorized, 85,000 shares of $0.01 par value; issued and outstanding 57,156 and 57,048 shares as of January 1, 2006 and October 2, 2005, respectively | | 572 | | 570 | |
Additional Paid in Capital | | 253,391 | | 251,112 | |
Accumulated other comprehensive income | | 724 | | 757 | |
Retained earnings | | 60,199 | | 52,176 | |
| | | | | |
Total stockholders’ equity | | 314,886 | | 304,615 | |
| | | | | |
Total liabilities and stockholders’ equity | | $ | 643,511 | | $ | 650,043 | |
TETRA TECH, INC.
Condensed Consolidated Statements of Income
(Unaudited - in thousands, except per share data)
| | Three Months Ended | |
| | January 1,
2006 | | January 2,
2005 | |
Revenue | | $ | 341,192 | | $ | 309,666 | |
Subcontractor costs | | 111,433 | | 83,799 | |
Revenue, net of subcontractor costs | | 229,759 | | 225,867 | |
Other contract costs | | 185,372 | | 188,549 | |
Gross profit | | 44,387 | | 37,318 | |
Selling, general and administrative expenses | | 27,264 | | 23,262 | |
Income from operations | | 17,123 | | 14,056 | |
Interest expense - net | | 2,232 | | 2,468 | |
Income from continuing operations before income tax expense | | 14,891 | | 11,588 | |
Income tax expense | | 6,403 | | 4,728 | |
Income from continuing operations | | 8,488 | | 6,860 | |
Income (loss) from discontinued operations, net of tax | | (465 | ) | 1,043 | |
Net income | | $ | 8,023 | | $ | 7,903 | |
| | | | | |
Basic earnings per share: | | | | | |
Income from continuing operations | | $ | 0.15 | | $ | 0.12 | |
Income (loss) from discontinued operations, net of tax | | (0.01 | ) | 0.02 | |
Net income | | $ | 0.14 | | $ | 0.14 | |
| | | | | |
Diluted earnings per share: | | | | | |
Income from continuing operations | | $ | 0.15 | | $ | 0.12 | |
Income (loss) from discontinued operations, net of tax | | (0.01 | ) | 0.02 | |
Net income | | $ | 0.14 | | $ | 0.14 | |
| | | | | |
Weighted average common shares outstanding: | | | | | |
Basic | | 57,102 | | 56,469 | |
Diluted | | 57,641 | | 56,977 | |
| | | | | |
Percentage of revenue, net of subcontractor costs: | | | | | |
Revenue, net of subcontractor costs | | 100.0 | % | 100.0 | % |
Other contract costs | | 80.7 | % | 83.5 | % |
Gross profit | | 19.3 | % | 16.5 | % |
Selling, general and administrative expenses | | 11.9 | % | 10.3 | % |
Income from operations | | 7.4 | % | 6.2 | % |
Interest expense - net | | 1.0 | % | 1.1 | % |
Income from continuing operations before income tax expense | | 6.4 | % | 5.1 | % |
Income tax expense | | 2.8 | % | 2.1 | % |
Income from continuing operations | | 3.6 | % | 3.0 | % |
Income (loss) from discontinued operations, net of tax | | -0.2 | % | 0.5 | % |
Net income | | 3.4 | % | 3.5 | % |
