EX-99.1 2 a05-13720_1ex99d1.htm EX-99.1

Exhibit 99.1

 

July 27, 2005

 

Tetra Tech Reports Third Quarter Results

 

Pasadena, California.  Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the third quarter ended July 3, 2005.  Overall, the Company achieved its earnings and revenue guidance.  Last quarter, the Company made a strategic decision to exit the wireless communications business, and that strategy is being accomplished according to the Company’s plan.

 

Third Quarter Results

Revenue for the third quarter was $349.6 million, down 6.9% from $375.5 million for the same quarter last year, primarily due to the exit from wireless communications.  Revenue, net of subcontractor costs, for the quarter was $242.6 million, down 7.8% from $263.2 million for the same quarter last year.  Income from operations for the third quarter was $15.3 million compared to $17.4 million for the same period last year.  Net income for the third quarter was $7.4 million compared to $9.0 million for the same period last year.  Diluted earnings per share was $0.13 compared to $0.16 for the same period last year.

 

Nine Month Results

Revenue for the nine months ended July 3, 2005 was $990.8 million, down 5.1% from $1,044.0 million for the same period last year, primarily due to the exit from wireless communications.  Revenue, net of subcontractor costs, for the first nine months of fiscal 2005 was $695.5 million, a decrease of 7.0% from $747.7 million for the first nine months of fiscal 2004.  Including the non-cash impairment charge of $105.6 million, loss from operations for the first nine months of fiscal 2005 was $131.1 million compared to income from operations of $65.3 million for the same period last year.  Net loss for the first nine months of fiscal 2005 was $108.5 million, compared to net income of $35.0 million for the same period last year.  Diluted loss per share for the first nine months of fiscal 2005 was $1.92 compared to diluted earnings per share of $0.61 for the same period last year.

 

In thousands, except EPS (preliminary)

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 3, 2005

 

June 27, 2004

 

July 3, 2005

 

June 27, 2004

 

Revenue

 

$

349,616

 

$

375,527

 

$

990,771

 

$

1,044,024

 

Revenue, Net of Subcontractor
Costs

 

242,641

 

263,174

 

695,547

 

747,697

 

Income/(Loss) from Operations

 

15,342

 

17,439

 

(131,115

)*

65,345

 

Net Income/(Loss)

 

7,404

 

9,031

 

(108,526

)*

35,002

 

Earnings/(Loss) Per Share (EPS):

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

$

0.16

 

$

(1.92

)*

$

0.63

 

Diluted

 

$

0.13

 

$

0.16

 

$

(1.92

)*

$

0.61

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common
Shares Outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

56,808

 

56,104

 

56,640

 

55,831

 

Diluted

 

57,002

 

57,157

 

56,640

 

57,339

 


*  Reflects a non-cash impairment charge in the second quarter of approximately $105.6 million for goodwill and other identifiable intangible assets, based on the requirements of SFAS No. 142 - Goodwill and Other Intangible Assets.

 



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 Company continues to exit from its non-core construction-related business and has uncovered certain possible irregular activities at one of its operating units that are currently being investigated.  Although absolute assurance cannot be given at this time, the Company does not believe that the completion of this investigation will require material changes to its financial statements.  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 earnings per share for the fourth quarter of fiscal 2005 to be in the range of $0.15 to $0.17.  Revenue, net of subcontractor costs, for the fourth quarter is expected to range from $240 million to $250 million.

 

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 July 28, 2005 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 nearly 8,000 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 at (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

 

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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: 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.

 

3



 

TETRA TECH, INC.

Condensed Consolidated Statements of Operations

(Unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 3, 2005

 

June 27, 2004

 

%
Change

 

July 3, 2005

 

June 27, 2004

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

349,616

 

$

375,527

 

-6.9

 

$

990,771

 

$

1,044,024

 

-5.1

 

Subcontractor costs

 

106,975

 

112,353

 

-4.8

 

295,224

 

296,327

 

-0.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue, net of subcontractor costs

 

242,641

 

263,174

 

-7.8

 

695,547

 

747,697

 

-7.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other contract costs

 

201,475

 

219,751

 

-8.3

 

630,019

 

608,298

 

3.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

41,166

 

43,423

 

-5.2

 

65,528

 

139,399

 

-53.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

25,824

 

25,984

 

-0.6

 

91,031

 

74,054

 

22.9

 

Impairment of goodwill and other intangible assets

 

0

 

 

 

105,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

15,342

 

17,439

 

-12.0

 

(131,115

)

65,345

 

-300.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense - net

 

3,455

 

2,387

 

44.7

 

8,760

 

7,008

 

25.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax expense

 

11,887

 

15,052

 

-21.0

 

(139,875

)

58,337

 

-339.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

4,483

 

6,021

 

-25.5

 

(31,349

)

23,335

 

-234.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

7,404

 

$

9,031

 

-18.0

 

$

(108,526

)

$

35,002

 

-410.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

$

0.16

 

-18.8

 

$

(1.92

)

$

0.63

 

-404.8

 

Diluted

 

$

0.13

 

$

0.16

 

-18.8

 

$

(1.92

)

$

0.61

 

-414.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

56,808

 

56,104

 

1.3

 

56,640

 

55,831

 

1.4

 

Diluted

 

57,002

 

57,157

 

-0.3

 

56,640

 

57,339

 

-1.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of revenue, net of subcontractor costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue, net of subcontractor costs

 

100.0

%

100.0

%

 

 

100.0

%

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other contract costs

 

83.0

%

83.5

%

 

 

90.6

%

81.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

17.0

%

16.5

%

 

 

9.4

%

18.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

10.6

%

9.9

%

 

 

13.1

%

9.9

%

 

 

Impairment of goodwill and other intangible assets

 

0.0

%

0.0

%

 

 

15.2

%

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

6.4

%

6.6

%

 

 

-18.9

%

8.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense - net

 

1.4

%

0.9

%

 

 

1.3

%

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax expense

 

5.0

%

5.7

%

 

 

-20.2

%

7.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

1.8

%

2.3

%

 

 

-4.5

%

3.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

3.2

%

3.4

%

 

 

-15.7

%

4.7

%

 

 

 

4



 

TETRA TECH, INC.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

 

 

 

July 3,
2005

 

October 3,
2004

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

21,505

 

$

48,032

 

Accounts receivable - net

 

323,365

 

374,630

 

Prepaid expenses and other current assets

 

20,169

 

23,857

 

Income taxes receivable

 

17,474

 

6,148

 

Deferred income taxes

 

7,854

 

 

Total current assets

 

390,367

 

452,667

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT:

 

 

 

 

 

Equipment, furniture and fixtures

 

83,946

 

87,159

 

Leasehold improvements

 

9,446

 

9,694

 

Total

 

93,392

 

96,853

 

Accumulated depreciation and amortization

 

(58,054

)

(55,572

)

PROPERTY AND EQUIPMENT - NET

 

35,338

 

41,281

 

 

 

 

 

 

 

INCOME TAXES RECEIVABLE

 

33,800

 

33,800

 

 

 

 

 

 

 

DEFERRED INCOME TAXES

 

3,001

 

 

 

 

 

 

 

 

GOODWILL

 

158,175

 

254,553

 

 

 

 

 

 

 

INTANGIBLE AND OTHER ASSETS - NET

 

21,083

 

26,206

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

641,764

 

$

808,507

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts payable

 

$

89,271

 

$

111,038

 

Accrued compensation

 

49,673

 

55,493

 

Billings in excess of costs on uncompleted contracts

 

39,769

 

28,941

 

Provisions for losses on contracts

 

10,117

 

4,792

 

Deferred income taxes

 

 

4,421

 

Current portion of long-term obligations

 

17,870

 

59,024

 

Other current liabilities

 

40,689

 

44,129

 

Total current liabilities

 

247,389

 

307,838

 

 

 

 

 

 

 

DEFERRED INCOME TAXES

 

 

11,027

 

 

 

 

 

 

 

LONG-TERM OBLIGATIONS

 

99,544

 

92,142

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding as of July 3, 2005 and October 3, 2004

 

 

 

Exchangeable stock of a subsidiary

 

 

1,426

 

Common stock - authorized, 85,000 shares of $0.01 par value; issued and outstanding 57,011 and 56,305 shares as of July 3, 2005 and October 3, 2004, respectively

 

570

 

563

 

Additional paid-in capital

 

250,650

 

243,490

 

Accumulated other comprehensive income

 

491

 

375

 

Retained earnings

 

43,120

 

151,646

 

TOTAL STOCKHOLDERS’ EQUITY

 

294,831

 

397,500

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

641,764

 

$

808,507

 

 

5



 

TETRA TECH, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited - in thousands)

 

 

 

Nine Months Ended

 

 

 

July 3,
2005

 

June 27,
2004

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net (loss) income

 

$

(108,526

)

$

35,002

 

 

 

 

 

 

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

12,372

 

13,531

 

Deferred income taxes

 

(26,304

)

(264

)

Provision for losses on contracts and related receivables

 

29,381

 

6,840

 

Impairment of goodwill and other intangible assets

 

105,612

 

 

Impairment of long-lived assets

 

2,500

 

 

Lease exit costs

 

4,889

 

 

Loss on disposal of property and equipment

 

1,367

 

729

 

 

 

 

 

 

 

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

 

 

 

 

 

Accounts receivable

 

26,086

 

(75,057

)

Prepaid expenses and other assets

 

4,330

 

(6,166

)

Accounts payable

 

(21,767

)

2,211

 

Accrued compensation

 

(5,820

)

6,084

 

Billings in excess of costs on uncompleted contracts

 

10,828

 

3,981

 

Other current liabilities

 

(7,360

)

2,427

 

Income taxes receivable/payable

 

(11,309

)

(11,631

)

Net cash provided by (used in) operating activities

 

16,279

 

(22,313

)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(6,848

)

(11,085

)

Payments for business acquisitions, net of cash acquired

 

(8,349

)

(31,371

)

Proceeds on sale of property and equipment

 

621

 

982

 

Net cash used in investing activities

 

(14,576

)

(41,474

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Payments on long-term obligations

 

(83,752

)

(65,074

)

Proceeds from borrowings under long-term obligations

 

50,000

 

125,324

 

Net proceeds from issuance of common stock

 

5,468

 

9,468

 

Net cash provided by (used in) financing activities

 

(28,284

)

69,718

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

54

 

(195

)

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(26,527

)

5,736

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

48,032

 

33,164

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

21,505

 

$

38,900

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

10,181

 

$

9,244

 

Income taxes, net of refunds received

 

$

6,283

 

$

34,866

 

 

6