Exhibit 99.1
August 2, 2006
Tetra Tech Reports Third Quarter Results
Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the third quarter ended July 2, 2006. Overall, the Company achieved the high end of its earnings and revenue guidance for the quarter. Revenue in the quarter was $359.1 million, up 12.0% from $320.6 million, and revenue, net of subcontractor costs, was $240.2 million, up 4.5% from $230.0 million for the same quarter last year. Income from operations was $18.4 million, up 26.4% from $14.6 million for the same period last year. Net income for the third quarter was $9.8 million, up 31.8% from $7.4 million for the same period last year. Diluted earnings per share (“EPS”) from continuing operations, after the effect of stock option expense under SFAS 123R, was $0.17 compared to $0.05 for the same period last year. Diluted EPS from continuing operations, before the effect of stock option expense under SFAS 123R, was $0.19 compared to $0.05 per share for the same quarter last year. Backlog at the end of the third quarter was $1,006 million, up 10.8% from $909 million at the end of the third quarter last year. Cash flow from operations for the quarter was $13.9 million compared to $6.1 million a year ago, an increase of 128.7%.
In the third quarter of 2006 compared to the same period a year ago, the resource management segment experienced revenue growth, continued margin expansion, and strong backlog growth. This strength was driven by a robust federal market and new wins with the U.S. Environmental Protection Agency and the Department of Defense, which includes work in Iraq. The infrastructure segment experienced revenue growth, continued margin improvement, and backlog growth as a result of increased state and local government business. The communications segment experienced revenue and backlog growth, but was negatively affected by a project delay that resulted in lower than expected earnings. Management expects this delay to abate in the fourth quarter.
Nine Month Results
Revenue for the nine months ended July 2, 2006 was $1.0 billion, up 9.8% from $927.8 million for the same period last year. Revenue, net of subcontractor costs, for the first nine months of fiscal 2006 was $707.7 million, an increase of 4.6% from $676.7 million for the first nine months of fiscal 2005. Income from operations for the first nine months was $51.8 million compared to a loss of $93.2 million for the same period last year. Net income for the first nine months of fiscal 2006 was $26.7 million compared to a net loss of $108.5 million for the same period last year. Diluted EPS from net income for the first nine months was $0.46 compared to a diluted loss per share of $1.92 for the same period last year.
Presentation of GAAP Financial Results
| | Three Months Ended | | Nine Months Ended | |
In thousands (except EPS data) | | July 2, 2006 | | July 3, 2005 | | July 2, 2006 | | July 3, 2005 | |
Revenue | | $ | 359,055 | | $ | 320,625 | | $ | 1,019,139 | | $ | 927,808 | |
Revenue, net of subcontractor costs | | 240,219 | | 229,957 | | 707,694 | | 676,702 | |
Income (loss) from operations | | 18,445 | | 14,596 | | 51,792 | | (93,192 | ) |
Interest expense, net | | (1,212 | ) | (3,499 | ) | (5,317 | ) | (8,826 | ) |
Income tax (expense) benefit | | (7,471 | ) | (8,135 | ) | (20,120 | ) | 13,896 | |
| | | | | | | | | |
Income (loss) from continuing operations | | 9,762 | | 2,962 | | 26,355 | | (88,122 | ) |
Income (loss) from discontinued operations, net of tax | | — | | 4,442 | | 394 | | (20,404 | ) |
Net income (loss) | | $ | 9,762 | | $ | 7,404 | | $ | 26,749 | | $ | (108,526 | ) |
| | | | | | | | | |
Basic EPS: | | | | | | | | | |
Income (loss) from continuing operations | | $ | 0.17 | | $ | 0.05 | | $ | 0.46 | | $ | (1.56 | ) |
Income (loss) from discontinued operations, net of tax | | — | | 0.08 | | 0.01 | | (0.36 | ) |
Net income (loss) | | $ | 0.17 | | $ | 0.13 | | $ | 0.47 | | $ | (1.92 | ) |
| | | | | | | | | |
Diluted EPS: | | | | | | | | | |
Income (loss) from continuing operations | | $ | 0.17 | | $ | 0.05 | | $ | 0.46 | | $ | (1.56 | ) |
Income (loss) from discontinued operations, net of tax | | — | | 0.08 | | — | | (0.36 | ) |
Net income (loss) | | $ | 0.17 | | $ | 0.13 | | $ | 0.46 | | $ | (1.92 | ) |
| | | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | | |
Basic | | 57,476 | | 56,808 | | 57,280 | | 56,640 | |
Diluted | | 58,039 | | 57,002 | | 57,829 | | 56,640 | |
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Summary of Continuing Operations
| | Three Months Ended | | Nine Months Ended | |
In thousands (except EPS data) | | July 2,
2006 | | July 3,
2005 | | July 2,
2006 | | July 3,
2005(c) | |
Income (loss) from continuing operations before the effect of SFAS 123R(a) (b) | | $ | 10,783 | | $ | 2,962 | | $ | 29,516 | | $ | (88,122 | ) |
Income (loss) from continuing operations | | 9,762 | | 2,962 | | 26,355 | | (88,122 | ) |
| | | | | | | | | |
Diluted EPS from continuing operations: | | | | | | | | | |
Income (loss) from continuing operations before the effectof SFAS 123R(a) (b) | | $ | 0.19 | | $ | 0.05 | | $ | 0.51 | | $ | (1.56 | ) |
Income (loss) from continuing operations | | $ | 0.17 | | $ | 0.05 | | $ | 0.46 | | $ | (1.56 | ) |
(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 year fiscal periods 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.
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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 | | Nine Months Ended | |
In thousands (except EPS data) | | July 2, 2006 | | July 3, 2005 | | July 2, 2006 | | July 3, 2005 | |
Income (loss) from continuing operations before the effect of SFAS 123R | | $ | 10,783 | | $ | 2,962 | | $ | 29,516 | | $ | (88,122 | ) |
Effect of SFAS 123R, net of tax | | (1,021 | ) | — | | (3,161 | ) | — | |
Income (loss) from continuing operations | | 9,762 | | 2,962 | | 26,355 | | (88,122 | ) |
Income (loss) from discontinued operations, net of tax | | — | | 4,442 | | 394 | | (20,404 | ) |
Net income (loss) – as reported per GAAP | | $ | 9,762 | | $ | 7,404 | | $ | 26,749 | | $ | (108,526 | ) |
| | | | | | | | | |
Diluted EPS: | | | | | | | | | |
Income (loss) from continuing operations before the effect of SFAS 123R | | $ | 0.19 | | $ | 0.05 | | $ | 0.51 | | $ | (1.56 | ) |
Effect of SFAS 123R, net of tax | | (0.02 | ) | — | | (0.05 | ) | — | |
Income (loss) from continuing operations | | 0.17 | | 0.05 | | 0.46 | | (1.56 | ) |
Income (loss) from discontinued operations, net of tax | | — | | 0.08 | | — | | (0.36 | ) |
Net income (loss) – as reported per GAAP | | $ | 0.17 | | $ | 0.13 | | $ | 0.46 | | $ | (1.92 | ) |
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 fourth quarter of fiscal 2006 to be in the range of $0.20 to $0.21. Revenue, net of subcontractor costs, for the fourth quarter is expected to range from $238 million to $245 million. For fiscal 2006, Tetra Tech now expects diluted EPS from continuing operations, before the effect of SFAS 123R, to be in the
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range of $0.71 to $0.72. Revenue, net of subcontractor costs, for fiscal 2006 is now expected to range from $945 million to $953 million.
The effect of SFAS 123R on diluted EPS is expected to be approximately $0.07 to $0.08 during fiscal 2006.
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 web site at www.tetratech.com on August 3, 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, infrastructure, and communications. 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.
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