EX-99.1 2 a13-18229_1ex99d1.htm EX-99.1

Exhibit 99.1

 

August 7, 2013

 

Tetra Tech Reports Third Quarter Results

 

Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the third quarter ended June 30, 2013.

 

Third Quarter Results

 

The results in the third quarter, on an aggregate basis, were in-line with the expected results that were announced in the Company’s June 18, 2013 press release.

 

Revenue in the quarter was $614.8 million compared to $684.7 million in the third quarter last year.  Revenue, net of subcontractor costs(1), was $475.1 million compared to $516.9 million in the third quarter last year.  Including a non-cash goodwill impairment charge, the loss from operations was $99.9 million compared to operating income of $46.3 million in the third quarter last year.  The goodwill impairment charge was $56.6 million pre-tax ($48.1 million net of tax), or $0.74 per share.  Diluted loss per share was $1.21, or $0.47 per share excluding the goodwill impairment charge, compared to diluted earnings per share (EPS) of $0.45 in the third quarter last year.  Backlog was $1.90 billion compared to $2.06 billion at the end of the third quarter last year.  Cash generated from operations was $53.3 million compared to $56.8 million in the third quarter last year.

 

Tetra Tech took charges on four programs referenced in the June 18, 2013 press release that reduced revenue and revenue, net of subcontractor costs, by $29.6 million.  On a pro-forma basis excluding these charges, revenue in the quarter was $644.5 million compared to $684.7 million in the third quarter last year.  Revenue, net of subcontractor costs, was $504.8 million compared to $516.9 million in the third quarter last year.

 

Tetra Tech’s Chairman and CEO, Dan Batrack commented, “This quarter, we continued to see strength in most of our international and U.S. commercial businesses driven by our customers’ demand for our water and environmental services.  Outside of Eastern Canada and mining, our international and U.S. commercial businesses grew 16%, including over 25% organic growth for oil & gas customers.  During the quarter, we restructured our Eastern Canada and mining activities with the goal to return these operations to their historical profitability.  We also recorded charges, including pending claims and change orders, principally related to four programs.  Collectively, these actions position us for a solid finish to fiscal 2013 and strong entry into next year.”

 


(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.

 



 

Nine-Month Results

 

Revenue for the nine-month period was $1.92 billion compared to $1.99 billion in the year-ago period.  Revenue, net of subcontractor costs, was $1.49 billion compared to $1.49 billion in the year-ago period.  Including the non-cash goodwill impairment charge, the loss from operations was $20.4 million compared to operating income of $117.9 million in the year-ago period.  Diluted loss per share was $0.42 for the nine-month period.  Excluding the goodwill impairment charge, diluted EPS were $0.32 compared to diluted EPS of $1.16 in the year-ago period.  Cash generated from operations was $115.3 million compared to $128.2 million in the year-ago period.

 

On a pro-forma basis excluding the revenue impact from charges on the four programs mentioned above, revenue for the nine-month period was $1.95 billion compared to $1.99 billion in the year-ago period.  Revenue, net of subcontractor costs, was $1.52 billion compared to $1.49 billion in the year-ago period.

 

 

 

Three Months Ended

 

Nine Months Ended

 

In thousands (except EPS data)

 

June 30,
2013

 

July 1,
2012

 

June 30,
2013

 

July 1,
2012

 

Revenue

 

$

614,835

 

$

684,698

 

$

1,915,379

 

$

1,991,670

 

Subcontractor costs

 

(139,693

)

(167,832

)

(422,092

)

(505,855

)

Revenue, net of subcontractor costs

 

475,142

 

516,866

 

1,493,287

 

1,485,815

 

Operating income (loss)

 

(99,884

)

46,261

 

(20,409

)

117,896

 

Interest expense, net

 

(2,010

)

(1,419

)

(5,330

)

(4,182

)

Income tax benefit (expense)

 

23,779

 

(15,674

)

(1,108

)

(39,522

)

Net income (loss) including noncontrolling interests

 

(78,115

)

29,168

 

(26,847

)

74,192

 

Net income attributable to noncontrolling interests

 

(270

)

(114

)

(495

)

(244

)

Net income (loss) attributable to Tetra Tech

 

$

(78,385

)

$

29,054

 

$

(27,342

)

$

73,948

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to Tetra Tech:

 

 

 

 

 

 

 

 

 

Basic

 

$

(1.21

)

$

0.46

 

$

(0.42

)

$

1.17

 

Diluted

 

$

(1.21

)

$

0.45

 

$

(0.42

)

$

1.16

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

64,832

 

63,387

 

64,554

 

63,054

 

Diluted

 

64,832

 

64,179

 

64,554

 

63,752

 

 

2



 

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 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 2013 to be in the range of $0.30 to $0.40.  Revenue, net of subcontractor costs, for the fourth quarter is expected to range from $500 million to $540 million.  For fiscal 2013, Tetra Tech now expects diluted EPS to be $0.62 to $0.72, excluding the non-cash goodwill impairment charge taken in the third quarter.  Revenue, net of subcontractor costs, for fiscal 2013 is expected to range from $1.99 billion to $2.03 billion.

 

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 August 8, 2013 at 8:00 a.m. (PDT).

 

About Tetra Tech (www.tetratech.com)

Tetra Tech is a leading provider of consulting, engineering, program management, construction management, and technical services. The Company supports government and commercial clients by providing innovative solutions to complex problems focused on water, environment, energy, infrastructure, and natural resources. With more than 14,000 staff worldwide, Tetra Tech’s capabilities span the entire project life cycle.

 

Tetra Tech, Inc.

Regulation G Information

Because the Company’s method for calculating the non-GAAP and pro forma measures may differ from other companies’ methods, the non-GAAP and pro forma measures presented may not be comparable to similarly titled measures reported by other companies. These measures are not recognized in accordance with GAAP, and the Company does not intend for this information to be considered in isolation or as a substitute for GAAP measures.

 

3



 

Reconciliation of GAAP Revenue to Pro Forma Revenue and Revenue, Net of Subcontractor Costs

 

 

 

Three Months Ended

 

Nine Months Ended

 

In thousands

 

June 30,
2013

 

July 1,
2012

 

June 30,
2013

 

July 1,
2012

 

GAAP revenue

 

$

614,835

 

$

684,698

 

$

1,915,379

 

$

1,991,670

 

Revenue adjustment due to charges on four programs

 

29,631

 

 

29,631

 

 

Pro forma revenue

 

$

644,466

 

$

684,698

 

$

1,945,010

 

$

1,991,670

 

Subcontractor costs

 

(139,693

)

(167,832

)

(422,092

)

(505,855

)

Pro forma revenue, net of subcontractor costs

 

$

504,773

 

$

516,866

 

$

1,522,918

 

$

1,485,815

 

 

CONTACTS:
Jim Wu, Investor Relations

Charlie MacPherson, 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; the effect of sequestration under the Budget Control Act of 2011; fluctuations in annual revenue, expenses and operating results; the cyclicality in demand for U.S. state and local government and U.S. commercial services; the cyclicality in demand for mining services; credit risks associated with certain U.S. commercial clients; concentration of revenues from U.S. government agencies and potential funding disruptions by these agencies; violations of U.S. government contractor regulations; dependence on winning or renewing U.S. federal, state and local government contracts; the delay or unavailability of public funding on U.S. government contracts; the U.S. government’s right to modify, delay, curtail or terminate contracts at its convenience; risks associated with international operations, including violations of anti-bribery laws; 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 workforce utilization; the use of the percentage-of-completion method of accounting; the inability to accurately estimate and control contract 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; backlog cancellation and adjustments; the failure of partners to perform on joint projects; the failure of subcontractors to satisfy their obligations; requirements to pay liquidated damages based on contract performance; changes in resource management, environmental or infrastructure industry laws, regulations or programs; changes in capital markets and the access to capital; credit agreement covenants; industry competition; liability related to legal proceedings, investigations and disputes; the availability of third-party insurance coverage; 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 reports and opinions; liabilities relating to environmental laws and regulations; force majeure events; protection of intellectual property rights; the interruption of systems and information technology; the ability to impede a business combination based on Delaware law and charter documents; and stock price volatility. 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 30,
2013

 

September 30,
2012

 

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

146,335

 

$

104,848

 

Accounts receivable - net

 

632,220

 

700,480

 

Prepaid expenses and other current assets

 

46,433

 

48,168

 

Income taxes receivable

 

25,635

 

5,817

 

Total current assets

 

850,623

 

859,313

 

 

 

 

 

 

 

Property and equipment - net

 

87,376

 

74,309

 

Investments in and advances to unconsolidated joint ventures

 

2,733

 

3,279

 

Goodwill

 

710,321

 

635,958

 

Intangible assets - net

 

94,754

 

74,231

 

Other long-term assets

 

25,705

 

23,940

 

Total Assets

 

$

1,771,512

 

$

1,671,030

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

133,092

 

$

154,003

 

Accrued compensation

 

118,737

 

128,086

 

Billings in excess of costs on uncompleted contracts

 

85,352

 

90,909

 

Deferred income taxes

 

9,642

 

20,809

 

Current portion of long-term debt

 

4,043

 

2,031

 

Estimated contingent earn-out liabilities

 

24,178

 

35,407

 

Other current liabilities

 

87,177

 

72,549

 

Total current liabilities

 

462,221

 

503,794

 

 

 

 

 

 

 

Deferred income taxes

 

26,738

 

24,268

 

Long-term debt

 

208,396

 

81,047

 

Long-term estimated contingent earn-out liabilities

 

68,140

 

16,132

 

Other long-term liabilities

 

29,061

 

25,922

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding as of June 30, 2013 and September 30, 2012

 

 

 

Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 64,799 and 63,837 shares as of June 30, 2013 and September 30, 2012, respectively

 

648

 

638

 

Additional paid-in capital

 

457,480

 

433,009

 

Accumulated other comprehensive (loss) income

 

(9,021

)

31,017

 

Retained earnings

 

526,964

 

554,306

 

Tetra Tech stockholders’ equity

 

976,071

 

1,018,970

 

Noncontrolling interests

 

885

 

897

 

Total equity

 

976,956

 

1,019,867

 

Total Liabilities and equity

 

$

1,771,512

 

$

1,671,030

 

 


 


 

Tetra Tech, Inc.

Condensed Consolidated Statements of Operations

(unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

July 1,

 

June 30,

 

July 1,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

614,835

 

$

684,698

 

$

1,915,379

 

$

1,991,670

 

Subcontractor costs

 

(139,693

)

(167,832

)

(422,092

)

(505,855

)

Other costs of revenue

 

(469,398

)

(419,140

)

(1,314,219

)

(1,215,391

)

Selling, general and administrative expenses

 

(56,744

)

(53,210

)

(151,539

)

(154,487

)

Contingent consideration - fair value adjustments

 

7,716

 

1,745

 

8,662

 

1,959

 

Impairment of goodwill

 

(56,600

)

 

(56,600

)

 

Operating (loss) income

 

(99,884

)

46,261

 

(20,409

)

117,896

 

Interest expense - net

 

(2,010

)

(1,419

)

(5,330

)

(4,182

)

(Loss) income before income tax expense

 

(101,894

)

44,842

 

(25,739

)

113,714

 

Income tax benefit (expense)

 

23,779

 

(15,674

)

(1,108

)

(39,522

)

Net (loss) income including noncontrolling interests

 

(78,115

)

29,168

 

(26,847

)

74,192

 

Net income attributable to noncontrolling interests

 

(270

)

(114

)

(495

)

(244

)

Net (loss) income attributable to Tetra Tech

 

$

(78,385

)

$

29,054

 

$

(27,342

)

$

73,948

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Tetra Tech per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(1.21

)

$

0.46

 

$

(0.42

)

$

1.17

 

Diluted

 

$

(1.21

)

$

0.45

 

$

(0.42

)

$

1.16

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

64,832

 

63,387

 

64,554

 

63,054

 

Diluted

 

64,832

 

64,179

 

64,554

 

63,752

 

 


 


 

TETRA TECH, INC

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

 

 

 

Nine Months Ended

 

 

 

June 30,

 

July 1,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net (loss) income including noncontrolling interests

 

$

(26,847

)

$

74,192

 

 

 

 

 

 

 

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

 

 

 

 

 

Depreciation and amortization

 

47,148

 

42,203

 

Loss on settlement of foreign currency forward contract

 

270

 

286

 

Equity in income of unconsolidated joint ventures

 

(2,495

)

(2,369

)

Distributions of earnings from unconsolidated joint ventures

 

2,868

 

2,812

 

Stock-based compensation

 

7,628

 

8,193

 

Excess tax benefits from stock-based compensation

 

(875

)

(283

)

Deferred income taxes

 

(27,005

)

(3,896

)

Provision for doubtful accounts

 

12,125

 

2,115

 

Fair value adjustments to contingent consideration

 

(8,662

)

(1,959

)

Gain on disposal of property and equipment

 

(142

)

(157

)

Lease termination costs and related asset impairment

 

6,463

 

 

Impairment of goodwill

 

56,600

 

 

 

 

 

 

 

 

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

 

 

 

 

 

Accounts receivable

 

117,687

 

(34,037

)

Prepaid expenses and other assets

 

7,435

 

27,561

 

Accounts payable

 

(43,911

)

(2,584

)

Accrued compensation

 

(12,458

)

9,974

 

Billings in excess of costs on uncompleted contracts

 

(10,986

)

6,032

 

Other liabilities

 

5,569

 

3,333

 

Income taxes receivable/payable

 

(15,144

)

(3,215

)

Net cash provided by operating activities

 

115,268

 

128,201

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(20,533

)

(14,906

)

Payments for business acquisitions, net of cash acquired

 

(168,660

)

(52,226

)

Payment in settlement of foreign currency forward contract

 

(4,177

)

(4,192

)

Receipt in settlement of foreign currency forward contract

 

3,907

 

3,906

 

Investments in unconsolidated joint ventures

 

 

(586

)

Changes in restricted cash

 

470

 

 

Proceeds from sale of property and equipment

 

1,763

 

701

 

Net cash used in investing activities

 

(187,230

)

(67,303

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Payments on long-term debt

 

(167,185

)

(60,222

)

Proceeds from borrowings

 

296,389

 

52,849

 

Payments of debt issuance costs

 

(1,938

)

 

Payments of earn-out liabilities

 

(24,015

)

(18,055

)

Excess tax benefits from stock-based compensation

 

875

 

283

 

Repurchases of common stock

 

(4,147

)

 

Net proceeds from issuance of common stock

 

15,697

 

12,885

 

Net cash provided by (used in) financing activities

 

115,676

 

(12,260

)

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash

 

(2,227

)

1,533

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

41,487

 

50,171

 

Cash and cash equivalents at beginning of period

 

104,848

 

90,494

 

Cash and cash equivalents at end of period

 

$

146,335

 

$

140,665

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

3,801

 

$

4,143

 

Income taxes, net of refunds received

 

$

34,913

 

$

45,670