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
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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.
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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 | ) |
