Tetra Tech: Q3 Results
Tetra Tech, Inc. 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 costs1, 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.”
In thousands (except EPS data)
Three Months Ended
Nine Months Ended
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
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
Basic 61,560 60,123
Diluted 62,181 61,108
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.
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.
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.
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 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.
Tetra Tech, Inc.
Jorge Casado, Investor Relations
Talia Starkey, Media & Public Relations