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
Tetra Tech Reports Second Quarter Results and Initiates Quarterly Dividend
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