8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 8-K

CURRENT  REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

July 31, 2019

TETRA TECH, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-19655	95-4148514
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

3475 East Foothill Boulevard, Pasadena, California  91107

(Address of principal executive office, including zip code)

(626) 351-4664

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act  (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	TTEK	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02.     Results of Operations and Financial Condition.

On July 31, 2019, Tetra Tech, Inc. (“Tetra Tech”) reported its results of operations for its third fiscal quarter ended June 30, 2019.  A copy of the press release is attached to this Current Report as Exhibit 99.1.

The information contained in Item 2.02, and in the accompanying exhibit, shall not be incorporated by reference into any filing of Tetra Tech under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly incorporated by specific reference into such filing. The information in Item 2.02 of this Current Report, including the exhibit hereto, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

Item 8.01.     Other Events.

On July 31, 2019, Tetra Tech announced that its Board of Directors has declared a $0.15 per share quarterly cash dividend.  The dividend is payable on August 30, 2019 to stockholders of record as of the close of business on August 14, 2019.

Item 9.01.	Financial Statements and Exhibits.
	(d)     Exhibits
99.1	Press Release, dated July 31, 2019, reporting the results of operations for Tetra Tech’s third fiscal quarter ended June 30, 2019, and the declaration of a $0.15 per share quarterly cash dividend.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Tetra Tech has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			TETRA TECH, INC.
Date:	July 31, 2019	By:	/s/ DAN L. BATRACK
			Dan L. Batrack
			Chairman and Chief Executive Officer

3

EX-99.1

Exhibit 99.1

NEWS RELEASE

July 31, 2019

Tetra Tech Reports Record Third Quarter 2019 Results

·      Record revenue of $826 million, up 8% Y/Y

·      Record net revenue of $623 million, up 9% Y/Y

·      Record backlog of $2.83 billion, up 16% Y/Y

·      EPS $0.88; adjusted EPS $0.89, up 25% Y/Y

Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the third quarter ended June 30, 2019.

Third Quarter Results

Tetra Tech achieved record quarterly results with all-time highs for revenue, net revenue, operating income, and backlog.  Revenue in the third quarter totaled $826 million, up 8% year-over-year.  Revenue, net of subcontractor costs(1) (net revenue), in the third quarter totaled $623 million, up 9% year-over-year.  Operating income for the third quarter was $65 million, up 17% year-over-year.  EPS was $0.88 on a GAAP basis, up 49% year-over-year; adjusted EPS(1) was $0.89, up 25% year-over-year.  Backlog at the end of the quarter was a record $2.83 billion, up 16% year-over-year.

Quarterly Dividend and Share Repurchase Program

On July 29, 2019, Tetra Tech’s Board of Directors declared a $0.15 per share dividend payable on August 30, 2019 to stockholders of record as of August 14, 2019.  In the third quarter, Tetra Tech repurchased $25 million of common stock.  Additionally, as of June 30, 2019, the Company had $150 million remaining under the approved share repurchase program.

Comments on Results

Tetra Tech’s Chairman and CEO, Dan Batrack, commented, “While financially we had an all-time record quarter, I am even more pleased that we took a significant step forward in our strategic plan to offer services in the United Kingdom with the addition of WYG. We also received more than $100M of new data analytics orders that support our technical work for multiple U.S. federal government agencies. Our U.S. state and local water infrastructure business continues to grow at a double-digit pace augmented by additional disaster response activities in the quarter. Given the strength of our results and record backlog of more than $2.83 billion, we are increasing our guidance for both EPS and net revenue for fiscal 2019.”

(1)  Net revenue and adjusted EPS are non-GAAP financial measures which the Company believes provide valuable perspectives on its business results. Refer to Reconciliation of Revenue and Operating Results tables.

Nine-Month Results

Revenue for the nine-month period was $2.3 billion and net revenue was $1.8 billion.  Operating income was $168 million, and EPS was $2.63, up 15% and 38%, respectively, from the same period in fiscal 2018.  Cash flow from operations was $113 million, up 49% year-over-year.

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 adjusted EPS for the fourth quarter of fiscal 2019 to range from $0.82 to $0.87.  Net revenue for the fourth quarter is expected to range from $610 million to $650 million.  For fiscal 2019, Tetra Tech is increasing its net revenue and EPS guidance, and now expects adjusted EPS to be in the range of $3.10 to $3.15, and net revenue to range from $2.37 billion to $2.41 billion.

Webcast

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the third quarter of fiscal 2019 results through a link posted on the Company’s website at tetratech.com on August 1, 2019 at 8:00 a.m. (PT).

2

Reconciliation of Revenue and Operating Results

In thousands (except EPS data)

	Three Months Ended								Nine Months Ended
	June 30, 2019			July 1, 2018			% Y/Y		June 30, 2019			July 1, 2018			% Y/Y
Revenue	$	825,793		$	764,795		8	%	$	2,265,846		$	2,224,805		2	%
Subcontractor costs	(202,597		)	(194,443		)			(503,902		)	(576,813		)
Net revenue	$	623,196		$	570,352		9	%	$	1,761,944		$	1,647,992		7	%
EPS	$	0.88		$	0.59		49	%	$	2.63		$	1.91		38	%
Earn-out expense	0.01			—					0.02			0.03
RCM	—			0.01					0.08			0.03
Non-core divestitures	—			0.11					—			0.11
Revaluation of deferred tax liabilities	—			—					(0.05		)	(0.19		)
Non-recurring tax benefits	—			—					(0.40		)	—
Adjusted EPS	$	0.89		$	0.71		25	%	$	2.28		$	1.89		21	%

About Tetra Tech

Tetra Tech is a leading provider of high-end consulting and engineering services for projects worldwide. With 20,000 associates working together, Tetra Tech provides clear solutions to complex problems in water, environment, infrastructure, resource management, energy, and international development. We are Leading with Science® to provide sustainable and resilient solutions for our clients. For more information about Tetra Tech, please visit tetratech.com, follow us on Twitter (@TetraTech), or like us on Facebook.

CONTACTS:

Jim Wu, Investor Relations

Charlie MacPherson, Media & Public Relations

(626) 470-2844

3

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  The use of words such as “anticipate,” “expect,” “could,” “may,” “intend,” “plan” and “believe,” among others, generally identify forward-looking statements. These forward-looking statements are based on currently available operating, financial, economic and other information, and are subject to a number of risks and uncertainties.  Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results.  A variety of factors, many of which are beyond our control, could cause actual future results or events to differ materially from those projected in the forward-looking statements in this release, including but not limited to: continuing worldwide political and economic uncertainties; the U.S. Administration’s potential changes to fiscal policies; the cyclicality in demand for our overall services; the fluctuation in demand for oil and gas, and mining services; risks related to international operations; concentration of revenues from U.S. government agencies and potential funding disruptions by these agencies; dependence on winning or renewing U.S. 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; compliance with government procurement laws and regulations; credit risks associated with certain clients in certain geographic areas or industries; acquisition strategy and integration risks; goodwill or other intangible asset impairment; the failure to comply with worldwide anti-bribery laws; the failure to comply with domestic and international export laws; the failure to properly manage projects; the loss of key personnel or the inability to attract and retain qualified personnel; the ability of our employees to obtain government granted eligibility; 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 adequately recover on our claims for additional contract costs; the failure to win or renew contracts with private and public sector clients; growth strategy management; backlog cancellation and adjustments; risks relating to cyber security breaches; 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; the adoption of new legal requirements; 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; stock price volatility; the ability to impede a business combination based on Delaware law and charter documents; and other risks and uncertainties as may be described in Tetra Tech’s periodic filings with the Securities and Exchange Commission, including those described in the “Risk Factors” section of Tetra Tech’s Annual Report on Form 10-K for the year ended September 30, 2018, and Tetra Tech’s Quarterly Reports on Form 10-Q for fiscal year 2019, as well as in Tetra Tech’s other filings with the SEC.  Readers should not place undue reliance on forward-looking statements since such information speaks only as of the date of this release. Tetra Tech does not intend to update forward-looking statements and expressly disclaims any obligation to do so.

Non-GAAP Financial Measures

To supplement the financial results presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we present certain non-GAAP financial measures within the meaning of Regulation G under the Securities Exchange Act of 1934, as amended. We provide these non-GAAP financial measures because we believe they provide a valuable perspective on our financial results.  However, non-GAAP measures have limitations as analytical tools and should not be considered in isolation and are not in accordance with, or a substitute for, GAAP measures.  In addition, other companies may define non-GAAP measures differently which limits the ability of investors to compare non-GAAP measures of Tetra Tech to those used by our peer companies. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included in this release.

4

Tetra Tech, Inc.

Consolidated Balance Sheets

(unaudited - in thousands, except par value)

	June 30, 2019			September 30, 2018
Assets
Current assets:
Cash and cash equivalents	$	111,231		$	146,185
Accounts receivable - net	728,999			694,221
Contract assets	145,672			142,882
Prepaid expenses and other current assets	123,816			56,003
Income taxes receivable	6,756			11,089
Total current assets	1,116,474			1,050,380
Property and equipment - net	40,072			43,278
Investments in unconsolidated joint ventures	7,655			3,370
Goodwill	851,621			798,820
Intangible assets - net	10,438			16,123
Deferred tax assets	30,572			8,607
Other long-term assets	39,591			38,843
Total assets	$	2,096,423		$	1,959,421
Liabilities and Equity
Current liabilities:
Accounts payable	$	179,197		$	160,222
Accrued compensation	160,777			180,153
Contract liabilities	147,549			143,270
Income taxes payable	56			8,272
Current portion of long-term debt	12,526			12,599
Current contingent earn-out liabilities	21,479			13,633
Other current liabilities	125,313			99,944
Total current liabilities	646,897			618,093
Deferred tax liabilities	24,890			30,166
Long-term debt	324,074			264,712
Long-term contingent earn-out liabilities	30,844			21,657
Other long-term liabilities	53,925			57,693
Commitments and contingencies
Equity:
Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at June 30, 2019 and September 30, 2018	—			—
Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 54,714 and 55,349 shares at June 30, 2019 and September 30, 2018, respectively	547			553
Additional paid-in capital	94,292			148,803
Accumulated other comprehensive loss	(147,057		)	(127,350		)
Retained earnings	1,067,851			944,965
Tetra Tech stockholders’ equity	1,015,633			966,971
Noncontrolling interests	160			129
Total stockholders’ equity	1,015,793			967,100
Total liabilities and stockholders’ equity	$	2,096,423		$	1,959,421

Tetra Tech, Inc.

Consolidated Statements of Income

(unaudited - in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	June 30,			July 1,			June 30,			July 1,
	2019			2018			2019			2018
Revenue	$	825,793		$	764,795		$	2,265,846		$	2,224,805
Subcontractor costs	(202,597		)	(194,443		)	(503,902		)	(576,813		)
Other costs of revenue	(505,209		)	(460,758		)	(1,448,803		)	(1,352,827		)
Gross profit	117,987			109,594			313,141			295,165
Selling, general and administrative expenses	(53,146		)	(53,906		)	(145,016		)	(146,254		)
Contingent consideration - fair value adjustments	—			(192		)	(28		)	(2,110		)
Income from operations	64,841			55,496			168,097			146,801
Interest expense	(3,546		)	(4,345		)	(9,607		)	(11,597		)
Income before income tax expense	61,295			51,151			158,490			135,204
Income tax expense	(12,044		)	(17,806		)	(11,263		)	(27,060		)
Net income	49,251			33,345			147,227			108,144
Net income attributable to noncontrolling interests	(18		)	(23		)	(86		)	(62		)
Net income attributable to Tetra Tech	$	49,233		$	33,322		$	147,141		$	108,082
Earnings per share attributable to Tetra Tech:
Basic	$	0.90		$	0.60		$	2.67		$	1.94
Diluted	$	0.88		$	0.59		$	2.63		$	1.91
Weighted-average common shares outstanding:
Basic	54,819			55,537			55,101			55,780
Diluted	55,768			56,390			56,034			56,681

Tetra Tech, Inc.

Consolidated Statements of Cash Flows

(unaudited - in thousands)

	Nine Months Ended
	June 30,			July 1,
	2019			2018
Cash flows from operating activities:
Net income	$	147,227		$	108,144
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	21,293			30,592
Equity in income of unconsolidated joint ventures, net of distributions	(666		)	97
Amortization of stock-based awards	12,717			15,519
Deferred income taxes	(26,146		)	(8,266		)
Provision for doubtful accounts	16,489			5,841
Fair value adjustments to contingent consideration	28			2,110
Loss (gain) on sale of property and equipment	(278		)	1,938
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable and contract assets	(41,299		)	(58,713		)
Prepaid expenses and other assets	(13,076		)	(20,539		)
Accounts payable	16,865			(44,279		)
Accrued compensation	(25,540		)	(7,300		)
Contract liabilities	(1,946		)	35,666
Other liabilities	12,630			16,611
Income taxes receivable/payable	(4,913		)	(1,149		)
Net cash provided by operating activities	113,385			76,272
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired	(35,884		)	(65,901		)
Capital expenditures	(9,999		)	(6,346		)
Proceeds from sale of divested business	—			36,250
Proceeds from sale of property and equipment	1,226			3,145
Net cash used in investing activities	(44,657		)	(32,852		)
Cash flows from financing activities:
Proceeds from borrowings	325,685			293,756
Repayments on long-term debt	(265,982		)	(217,259		)
Repurchases of common stock	(75,000		)	(75,000		)
Taxes paid on vested restricted stock	(6,836		)	(8,825		)
Stock options exercised	7,759			13,200
Dividends paid	(21,489		)	(17,836		)
Payments of contingent earn-out liabilities	(11,443		)	(854		)
Net cash used in financing activities	(47,306		)	(12,818		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(512		)	(6,548		)
Net increase in cash, cash equivalents and restricted cash	20,910			24,054
Cash, cash equivalents and restricted cash at beginning of period	148,884			192,690
Cash, cash equivalents and restricted cash at end of period	$	169,794		$	216,744
Supplemental information:
Cash paid during the period for:
Interest	$	9,426		$	11,391
Income taxes, net of refunds received of $4.5 million and $0.5 million	$	44,058		$	36,620
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	111,231		$	214,040
Restricted cash	58,563			2,704
Total cash, cash equivalents and restricted cash	$	169,794		$	216,744