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8-K - 8-K - TETRA TECH INCa11-29641_18k.htm

Exhibit 99.1

 

November 9, 2011

 

Tetra Tech Reports Strong Fourth Quarter and Fiscal 2011 Results

 

·                  Q4 Net Revenue up 22%(1) to $476 million

·                  Q4 Diluted EPS up 20%(1) to $0.42

·                  FY11 Net Revenue up 25%(1) to $1.79 billion

·                  FY11 Diluted EPS up 18%(1) to $1.43

 

Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the fourth quarter and fiscal year ended October 2, 2011.

 

Fourth Quarter Results

 

Pro-forma(1): Tetra Tech’s fourth quarter of fiscal 2011 had 13 weeks while the fourth quarter of fiscal 2010 had 14 weeks.  The pro-forma presentation excludes the benefit of the additional week in the fourth quarter of fiscal 2010.  On this basis, revenue in the fourth quarter of fiscal 2011 was $675.7 million, up 16.0% compared to $582.5 million in the fourth quarter last year.  Revenue, net of subcontractor costs(2), was $475.9 million, up 21.6% compared to $391.4 million in the fourth quarter last year.  Earnings before interest, taxes, depreciation, and amortization (EBITDA(3)), were $56.4 million, up 28.8% compared to $43.8 million in the fourth quarter last year.  Operating income was $43.4 million, up 25.5% compared to $34.6 million in the fourth quarter last year.  Net income was $26.4 million, up 22.5% compared to $21.6 million in the fourth quarter last year.  Diluted EPS were $0.42, up 20.0% compared to $0.35 in the fourth quarter last year.

 

GAAP: On a GAAP basis, which includes the results of the additional week in the fourth quarter of fiscal 2010, revenue in the fourth quarter of fiscal 2011 was $675.7 million, up 7.7% compared to $627.4 million last year.  Revenue, net of subcontractor costs, was $475.9 million, up 13.1% compared to $420.7 million in the fourth quarter last year.  EBITDA were $56.4 million, up 21.6% compared to $46.4 million in the fourth quarter last year.  Operating income was $43.4 million, up 17.0% compared to $37.1 million in the fourth quarter last year.  Net income was $26.4 million, up 14.1% compared to $23.1 million in the fourth quarter last year.  Diluted EPS were $0.42, up 13.5% compared to $0.37 in the fourth quarter last year.  Backlog was $1.95 billion, up 5.2% compared to $1.85 billion at the end of fiscal 2010.  Cash from operations was $33.2 million, compared to $42.3 million in the fourth quarter last year.

 


(1)  Tetra Tech reports results of operations based on 52 and 53-week periods ending near September 30 of each year.  Fiscal years 2011 and 2010 contained 52 and 53 weeks, respectively.  The Company believes the pro-forma information presented for the one-week difference provides important data for comparative purposes.  A table reconciling the pro-forma data can be found at the end of this release.

(2)  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.

(3)  EBITDA is a non-GAAP financial measure. The Company believes EBITDA is a useful representation of operating performance because of significant amounts of acquisition-related non-cash amortization expense. A table reconciling net income attributable to Tetra Tech to EBITDA can be found at the end of this release.

 



 

Fiscal Year Results

 

Pro-forma(1): Tetra Tech’s fiscal 2011 had 52 weeks while fiscal 2010 had 53 weeks.  The pro-forma presentation excludes the benefit of the additional week in fiscal 2010.  Revenue for fiscal 2011 was $2,573.1 million, up 19.3% compared to $2,156.3 million in fiscal 2010.  Revenue, net of subcontractor costs, was $1,792.3 million, up 25.3% compared to $1,431.0 million in fiscal 2010.  EBITDA were $198.6 million, up 28.2% compared to $155.0 million in fiscal 2010.  Operating income was $146.4 million, up 20.1% compared to $122.0 million in fiscal 2010.  Net income was $90.0 million, up 19.7% compared to $75.2 million in fiscal 2010.  Diluted EPS in fiscal 2011 were $1.43, up 18.2% compared to $1.21 in fiscal 2010.

 

GAAP: On a GAAP basis, which includes the results of the additional week in fiscal 2010, revenue for fiscal 2011 was $2,573.1 million, up 16.9% compared to $2,201.2 million in fiscal 2010.  Revenue, net of subcontractor costs, was $1,792.3 million, up 22.7% compared to $1,460.2 million in fiscal 2010.  EBITDA were $198.6 million, up 26.0% compared to $157.6 million in fiscal 2010.  Operating income was $146.4 million, up 17.6% compared to $124.5 million in fiscal 2010.  Net income was $90.0 million, up 17.2% compared to $76.8 million in fiscal 2010.  Diluted EPS in fiscal 2011 were $1.43, up 15.3% compared to $1.24 in fiscal 2010.  Cash from operations was $131.6 million, up 23.2% compared to $106.8 million in fiscal 2010.

 

Tetra Tech’s Chairman and CEO, Dan Batrack said, “Tetra Tech had a strong fiscal 2011 and finished with record results.  For the fiscal year, we exceeded our 15% long-term growth goals for revenue and income.  This growth was driven by strong demand for our water-related services provided to mining, energy and industrial clients.  Over the past year, we have successfully expanded our geographic reach and diversified our customer mix.  Today approximately 30% of our net revenue is represented by our international clients.  For fiscal 2012, we expect our organic growth to increase as a result of international expansion.  Our fiscal 2012 forecast reflects continued growth in the international and commercial markets and stability in our government markets.”

 

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 first quarter of fiscal 2012 to be in the range of $0.33 to $0.36.  Revenue, net of subcontractor costs, for the first quarter is expected to range from $450 million to $500 million.  For fiscal 2012, Tetra Tech expects diluted EPS to be $1.50 to $1.63.  Revenue, net of subcontractor costs, for fiscal 2012 is expected to range from $1.9 billion to $2.1 billion.

 

Webcast

 

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the fourth quarter results through a link posted on the Company’s website at www.tetratech.com on November 10, 2011 at 8:00 a.m. (PST).

 

2



 

 

 

Three Months Ended

 

Fiscal Year Ended

 

In thousands (except EPS data)

 

Oct. 2,
2011

 

Oct. 3,
2010

 

Oct. 2,
2011

 

Oct. 3,
2010

 

Revenue

 

$

675,662

 

$

627,382

 

$

2,573,144

 

$

2,201,232

 

Subcontractor costs

 

(199,724

)

(206,707

)

(780,817

)

(741,002

)

Revenue, net of subcontractor costs

 

475,938

 

420,675

 

1,792,327

 

1,460,230

 

Operating income

 

43,433

 

37,124

 

146,422

 

124,474

 

Interest expense, net

 

(1,452

)

(443

)

(5,930

)

(1,387

)

Income tax expense

 

(14,582

)

(13,539

)

(47,510

)

(46,268

)

Net income including noncontrolling interests

 

27,399

 

23,142

 

92,982

 

76,819

 

Net income attributable to noncontrolling interests

 

(1,000

)

 

(2,943

)

 

Net income

 

$

26,399

 

$

23,142

 

$

90,039

 

$

76,819

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.42

 

$

0.38

 

$

1.45

 

$

1.25

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.42

 

$

0.37

 

$

1.43

 

$

1.24

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

62,310

 

61,580

 

62,053

 

61,430

 

Diluted

 

62,864

 

61,999

 

62,775

 

62,087

 

 

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, natural resources, the environment, infrastructure, and energy. With more than 13,000 employees worldwide, Tetra Tech’s capabilities span the entire project life cycle.

 

3



 

Tetra Tech, Inc.

Regulation G Information

Reconciliation of Net Income to EBITDA

 

 

 

Three Months Ended

 

Fiscal Year Ended

 

In thousands

 

Oct. 2,
2011

 

Oct. 3,
2010

 

Oct. 2,
2011

 

Oct. 3,
2010

 

Net income attributable to Tetra Tech

 

$

26,399

 

$

23,142

 

$

90,039

 

$

76,819

 

Interest expense, net

 

1,452

 

443

 

5,930

 

1,387

 

Income tax expense

 

14,582

 

13,539

 

47,510

 

46,268

 

Depreciation

 

6,737

 

5,443

 

27,138

 

20,402

 

Amortization

 

7,232

 

3,832

 

27,979

 

12,683

 

EBITDA

 

$

56,402

 

$

46,399

 

$

198,596

 

$

157,559

 

 

Comparison of fiscal 2010 to pro-forma 2010 with 52 weeks

 

 

 

Fourth Quarter 2010

 

Fiscal Year 2010

 

In thousands (except EPS data)

 

As Reported

 

Pro-forma
for 13 weeks

 

As Reported

 

Pro-forma for
52 weeks

 

Revenue

 

$

627,382

 

$

582,478

 

$

2,201,232

 

$

2,156,327

 

Revenue, net of subcontractor costs

 

420,675

 

391,430

 

1,460,230

 

1,430,984

 

EBITDA

 

46,399

 

43,805

 

157,559

 

154,965

 

Operating income

 

37,124

 

34,605

 

124,474

 

121,955

 

Net income

 

23,142

 

21,552

 

76,819

 

75,230

 

Diluted earnings per share

 

0.37

 

0.35

 

1.24

 

1.21

 

 

Pro-forma results were determined by subtracting one week of fourth quarter fiscal 2010 results from as reported figures.

 

CONTACTS:
Jim Wu, Investor Relations
Talia Starkey, Media & Public Relations
(626) 470-2844

 

4



 

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; delays in U.S. federal debt ceiling legislation; a disruption in U.S. government funding; shifts in U.S. defense spending; delays 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; 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 to capital; credit agreement covenants; industry competition; volatility of common stock value; liability related to legal proceedings; 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 environmental laws and regulations; force majeure events; protection of intellectual property rights; and reliance on third-party software to run critical systems. 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.

 

5



 

TETRA TECH, INC.

Consolidated Balance Sheets

(in thousands, except par value)

 

 

 

October 2,
2011

 

October 3,
2010

 

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

90,494

 

$

220,933

 

Accounts receivable - net

 

657,179

 

566,642

 

Prepaid expenses and other current assets

 

84,612

 

49,889

 

Income taxes receivable

 

6,817

 

7,249

 

Total current assets

 

839,102

 

844,713

 

 

 

 

 

 

 

Property and equipment - net

 

77,536

 

79,383

 

Investments in and advances to unconsolidated joint ventures

 

3,454

 

140

 

Goodwill

 

569,414

 

394,422

 

Intangible assets - net

 

81,053

 

45,995

 

Other assets

 

23,429

 

17,036

 

Total Assets

 

$

1,593,988

 

$

1,381,689

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

164,819

 

$

166,450

 

Accrued compensation

 

110,937

 

93,243

 

Billings in excess of costs on uncompleted contracts

 

84,754

 

79,401

 

Deferred income taxes

 

22,870

 

21,851

 

Current portion of long-term debt

 

2,556

 

5,002

 

Contingent earn-out liabilities

 

64,119

 

10,513

 

Other current liabilities

 

81,654

 

90,747

 

Total current liabilities

 

531,709

 

467,207

 

 

 

 

 

 

 

Deferred income taxes

 

25,394

 

12,506

 

Long-term debt

 

144,868

 

122,510

 

Other long-term liabilities

 

36,767

 

31,333

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding as of October 2, 2011 and October 3, 2010

 

 

 

Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 62,495 and 61,755 shares as of October 2, 2011 and October 3, 2010, respectively

 

625

 

618

 

Additional paid-in capital

 

399,420

 

368,865

 

Accumulated other comprehensive income

 

4,754

 

18,763

 

Retained earnings

 

449,926

 

359,887

 

Tetra Tech stockholders’ equity

 

854,725

 

748,133

 

Noncontrolling interests

 

525

 

 

Total equity

 

855,250

 

748,133

 

Total Liabilities and Equity

 

$

1,593,988

 

$

1,381,689

 

 



 

Tetra Tech, Inc.

Consolidated Statements of Income

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Fiscal Year Ended

 

 

 

October 2,

 

October 3,

 

October 2,

 

October 3,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

675,662

 

$

627,382

 

$

2,573,144

 

$

2,201,232

 

Subcontractor costs

 

(199,724

)

(206,707

)

(780,817

)

(741,002

)

Other costs of revenue

 

(378,669

)

(338,672

)

(1,462,172

)

(1,172,542

)

Selling, general and administrative expenses

 

(53,836

)

(44,879

)

(183,733

)

(163,214

)

Operating income

 

43,433

 

37,124

 

146,422

 

124,474

 

Interest expense - net

 

(1,452

)

(443

)

(5,930

)

(1,387

)

Income before income tax expense

 

41,981

 

36,681

 

140,492

 

123,087

 

Income tax expense

 

(14,582

)

(13,539

)

(47,510

)

(46,268

)

Net income including noncontrolling interests

 

27,399

 

23,142

 

92,982

 

76,819

 

Net income attributable to noncontrolling interests

 

(1,000

)

 

(2,943

)

 

Net income attributable to Tetra Tech

 

$

26,399

 

$

23,142

 

$

90,039

 

$

76,819

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Tetra Tech:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.42

 

$

0.38

 

$

1.45

 

$

1.25

 

Diluted

 

$

0.42

 

$

0.37

 

$

1.43

 

$

1.24

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

62,310

 

61,580

 

62,053

 

61,430

 

Diluted

 

62,864

 

61,999

 

62,775

 

62,087

 

 



 

TETRA TECH, INC

Consolidated Statements of Cash Flows

 (in thousands)

 

 

 

Fiscal Year Ended

 

 

 

October 2,

 

October 3,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income including noncontrolling interests

 

$

92,982

 

$

76,819

 

 

 

 

 

 

 

Adjustments to reconcile net income including noncontrolling interests to net cash from operating activities:

 

 

 

 

 

Depreciation and amortization

 

55,684

 

33,491

 

Loss on settlement of foreign currency forward contract

 

293

 

28

 

Equity in earnings of unconsolidated joint ventures

 

(4,877

)

(1,184

)

Distributions of earnings from unconsolidated joint ventures

 

4,802

 

1,689

 

Stock-based compensation

 

10,582

 

10,178

 

Excess tax benefits from stock-based compensation

 

(104

)

(754

)

Deferred income taxes

 

1,720

 

11,641

 

Provision for doubtful accounts

 

3,733

 

7,179

 

Exchange (gain) and loss

 

1,288

 

(205

)

Lease termination costs

 

1,281

 

 

Gain on disposal of property and equipment

 

(231

)

(1,480

)

 

 

 

 

 

 

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

 

 

 

 

 

Accounts receivable

 

2,046

 

(23,161

)

Prepaid expenses and other assets

 

(28,324

)

5,770

 

Accounts payable

 

(34,013

)

(10,002

)

Accrued compensation

 

11,157

 

4,582

 

Billings in excess of costs on uncompleted contracts

 

(1,669

)

(19,957

)

Other liabilities

 

4,720

 

9,590

 

Income taxes receivable/payable

 

10,553

 

2,618

 

Net cash provided by operating activities

 

131,623

 

106,842

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(18,901

)

(21,584

)

Payments for business acquisitions, net of cash acquired

 

(269,996

)

(78,905

)

Payment in settlement of foreign currency forward contract

 

(4,216

)

(3,960

)

Receipt in settlement of foreign currency forward contract

 

3,923

 

3,932

 

Restricted cash

 

(5,000

)

 

Investments in unconsolidated joint ventures

 

(530

)

 

Proceeds from sale of property and equipment

 

879

 

3,128

 

Net cash used in investing activities

 

(293,841

)

(97,389

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Payments on long-term debt

 

(43,047

)

(2,673

)

Proceeds from borrowings

 

66,892

 

120,000

 

Net change overdrafts

 

726

 

 

Distributions paid to noncontrolling interests

 

(1,702

)

 

Excess tax benefits from stock-based compensation

 

104

 

754

 

Net proceeds from issuance of common stock

 

8,378

 

3,353

 

Net cash provided by financing activities

 

31,351

 

121,434

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

428

 

861

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(130,439

)

131,748

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

220,933

 

89,185

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

90,494

 

$

220,933

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

4,226

 

$

1,287

 

Income taxes, net of refunds received

 

$

33,715

 

$

32,407