Tetra Tech Reports Second Quarter Results and Initiates Quarterly Dividend

  Tetra Tech Reports Second Quarter Results and Initiates Quarterly Dividend

  *Q2 EPS $0.48, up 26%
  *Net revenue in-line with guidance

Business Wire

PASADENA, Calif. -- April 30, 2014

Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the second quarter
ended March 30, 2014 and the initiation of a quarterly dividend.

Second Quarter Results

Revenue in the quarter was $586.3 million compared to $642.0 million in the
second quarter last year. Revenue, net of subcontractor costs^1, was $456.0
million compared to $520.9 million in the second quarter last year. Operating
income was $46.2 million, up 22.6% compared to $37.7 million in the second
quarter last year. Diluted earnings per share (EPS) were $0.48, up 26.3%
compared to $0.38 in the second quarter last year. Earnings before interest,
taxes, depreciation, and amortization (EBITDA^2), were $59.3 million, up 9.4%
compared to $54.2 million in the second quarter last year. Backlog was $1.8
billion at the end of the second quarter.

Quarterly Dividend Initiation

On April 28, 2014, Tetra Tech’s Board of Directors authorized a quarterly cash
dividend and declared an initial quarterly dividend of $0.07 per share payable
on June 4, 2014 to stockholders of record as of May 16, 2014.

Commenting on the dividend declaration, Tetra Tech’s Chairman and CEO Dan
Batrack said, “Our history of consistent cash flow generation has enabled the
Board to approve our first quarterly dividend. On an annual basis, this
represents approximately 15% of our free cash flow^3, which currently
correlates to a 1% yield. Combined with our current share repurchase program,
we anticipate returning a minimum of 30% of fiscal 2014 annualized free cash
flow to stockholders.”

Six-Month Results

Revenue for the six-month period was $1.2 billion compared to $1.3 billion in
the year-ago period. Revenue, net of subcontractor costs, was $939.0 million
compared to $1.0 billion in the year-ago period. Operating income was $89.9
million, up 13.1% compared to $79.5 million in the year-ago period. Diluted
EPS were $0.90, up 15.4% compared to $0.78 in the year-ago period. EBITDA were
$118.7 million, up 9.6% compared to $108.3 million in the year-ago period.
Cash generated from operations was $56.2 million compared to $62.0 million in
the year-ago period.

Mr. Batrack commented, “In the first half of fiscal 2014, our growth markets
in oil & gas, solid waste and industrial water continued to be our strongest
markets. In accordance with our strategy to reduce risk in our business, we
are continuing to exit select fixed-price construction markets. In the second
quarter, we reduced the profit on a project by $14 million that contributed to
$21 million of favorable contingent earn-out adjustments. Excluding these
items, we finished the quarter with results that were in-line with our
expectations and guidance. The strength of our balance sheet provides us with
access to over $500 million of capital to grow in strategic markets and
support our dividend and buyback programs.”

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 third quarter of fiscal 2014 to be in
the range of $0.39 to $0.44. Revenue, net of subcontractor costs, for the
third quarter is expected to range from $475 million to $525 million. Given
the results year to date, Tetra Tech is increasing EPS guidance for fiscal
2014. Diluted EPS guidance is now expected to range from $1.75 to $1.85 and
cash EPS^4 guidance is unchanged, and is expected to range from $2.30 to
$2.60. Revenue, net of subcontractor costs, for fiscal 2014 is now expected to
range from $1.9 billion to $2.0 billion due to adverse foreign exchange
translation, reduced wind revenue and lower U.S. federal bookings.

In thousands
(except EPS       Three Months Ended           Six Months Ended
data)
                   March 30,     March 31,      March 30,      March 31,
                    2014         2013         2014          2013      
Revenue            $ 586,285      $ 641,999      $ 1,232,133     $ 1,300,544
Subcontractor       (130,300 )    (121,052 )    (293,158  )    (282,399  )
costs
Revenue, net of
subcontractor        455,985        520,947        938,975         1,018,145
costs
Operating income     46,186         37,667         89,904          79,476
Interest expense     (2,496   )     (2,136   )     (4,919    )     (3,320    )
Income tax          (11,781  )    (10,659  )    (25,749   )    (24,888   )
expense
Net income
including            31,909         24,872         59,236          51,268
noncontrolling
interests
Net income
attributable to     (200     )    (52      )    (213      )    (225      )
noncontrolling
interests
Net income
attributable to    $ 31,709      $ 24,820      $ 59,023       $ 51,043    
Tetra Tech

Earnings per
share
attributable to
Tetra Tech:
Basic              $ 0.49        $ 0.38        $ 0.91         $ 0.79      
Diluted            $ 0.48        $ 0.38        $ 0.90         $ 0.78      
                                                                 
Weighted-average
common shares
outstanding:
Basic                64,835         64,551        64,670          64,376
Diluted              65,710         65,472        65,517          65,208

Webcast

Investors will have the opportunity to access a live audio-visual webcast and
supplemental financial information concerning the second quarter results
through a link posted on the Company’s website at www.tetratech.com on May 1,
2014 at 8:00 a.m. (PT).

^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.

^2 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.

^3 Free cash flow defined as cash flow from operations less capital
expenditures. Free cash flow is a non-GAAP financial measure that provides a
valuable perspective on the Company’s financial results.

^4 Cash EPS defined as cash flow from operations divided by diluted shares
outstanding. Cash EPS is a non-GAAP financial measure that provides a valuable
perspective on the Company’s financial results.

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 14,000 staff worldwide, Tetra Tech’s capabilities span
the entire project life cycle.

Tetra Tech, Inc.
Regulation G Information
Reconciliation of Net Income to EBITDA

In thousands                    Three Months Ended     Six Months Ended
                                 March 30,  March 31,   March 30,  March 31,
                                 2014        2013        2014        2013
Net income attributable to       $  31,709   $  24,820   $ 59,023    $ 51,043
Tetra Tech
Interest expense                    2,496       2,136      4,919       3,320
Income tax expense                  11,781      10,659     25,749      24,888
Depreciation                        6,578       7,522      13,707      14,330
Amortization                       6,723      9,051     15,305     14,684
EBITDA                           $  59,287   $  54,188   $ 118,703   $ 108,265

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
our overall services; the cyclicality in demand for mining services; the
cyclicality in demand for oil and gas services; 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. 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; credit risks
associated with certain commercial clients; risks associated with
international operations; 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 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; the
failure to adequately recover on our claims for additional contract costs;
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.

Contact:

Tetra Tech, Inc.
Jim Wu, Investor Relations
Charlie MacPherson, Media & Public Relations
626-470-2844
 
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