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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000912057-00-055237.txt : 20010101
<SEC-HEADER>0000912057-00-055237.hdr.sgml : 20010101
ACCESSION NUMBER: 0000912057-00-055237
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20001001
FILED AS OF DATE: 20001229
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TETRA TECH INC
CENTRAL INDEX KEY: 0000831641
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711]
IRS NUMBER: 954148514
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 000-19655
FILM NUMBER: 799462
BUSINESS ADDRESS:
STREET 1: 670 N ROSEMEAD BOULEVARD
CITY: PASEDENA
STATE: CA
ZIP: 91107-2190
BUSINESS PHONE: 6263514664
MAIL ADDRESS:
STREET 1: 670 N ROSEMEAD BLVD
CITY: PASADENA
STATE: CA
ZIP: 91107
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a2034071z10-k.txt
<DESCRIPTION>FORM 10K
<TEXT>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
<TABLE>
<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
OCTOBER 1, 2000.
</TABLE>
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ______ TO ______.
</TABLE>
Commission file number 0-19655
------------------------
TETRA TECH, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-4148514
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
670 N. ROSEMEAD BLVD. PASADENA, CALIFORNIA 91107
(Address of registrant's principal executive offices) (Zip Code)
</TABLE>
(Registrant's telephone number, including area code:) (626) 351-4664
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
(Title of each class) (Name of each exchange on which registered)
NONE NONE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
COMMON STOCK, $.01 PAR VALUE
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
The aggregate market value of the voting stock held by non-affiliates of the
registrant on December 15, 2000 was $1,052,714,353.
The number of shares of Common Stock, $.01 par value, outstanding (the only
class of common stock of the registrant outstanding) was 39,935,789 on
December 15, 2000.
Portions of registrant's Annual Report to Stockholders for the fiscal year
ended October 1, 2000 are incorporated by reference in Part II of this report.
Portions of registrant's Proxy Statement for its 2001 Annual Meeting of
Stockholders are incorporated by reference in Part III of this report.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
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<PAGE>
PART I
ITEM 1. BUSINESS.
Tetra Tech, Inc. is a leading provider of specialized management consulting
and technical services in three principal business areas: resource management,
infrastructure and communications. As a specialized management consultant, we
assist our clients in defining problems and developing innovative and
cost-effective solutions. Our management consulting services are complemented by
our technical services. These technical services, which implement solutions,
include research and development, applied science, engineering and architectural
design, construction management, and operations and maintenance. Our clients
include a diverse base of public and private organizations located in the United
States and internationally.
Since our initial public offering in December 1991, we have increased the
size and scope of our business and have expanded our service offerings through a
series of strategic acquisitions and internal growth. As of the end of our last
fiscal year, we had more than 6,500 employees worldwide, primarily located in
North America in more than 150 locations. In addition, we have established a
presence in Asia, South America and Europe. From fiscal 1991 through fiscal
2000, we generated a net revenue compounded annual growth rate of approximately
35.8%, and achieved a net income compounded annual growth rate of approximately
37.2%.
INDUSTRY OVERVIEW
Due to increased competition, changing regulatory environments and rapid
technological advancement, many organizations face new and complex challenges.
Increasingly, these organizations are turning to professional services firms to
assist them with addressing these challenges. Since each industry presents its
own unique set of challenges, organizations often seek professional service
firms with industry-specific expertise to analyze their problems and develop
appropriate solutions. These solutions are then implemented by firms possessing
the required engineering and technical service capabilities. Each of the
following three business areas faces its own unique set of problems:
RESOURCE MANAGEMENT. The world's natural resources, including water, air
and soil, are interdependent, creating a delicate balance. Factors such as
agricultural and residential development, commercial construction and
industrialization often upset this balance. Public concern over environmental
issues, especially water quality and availability, has been a driving force
behind numerous laws and regulations that are designed to prevent environmental
degradation and mandate restorative measures. To comply with environmental laws
and regulations, respond to public pressure and attain operating efficiencies,
public and private organizations are increasing their focus on resource
management. Two areas particularly affected by these trends are water management
and waste management.
- Water Management. Insufficient water supplies, concern over the cost,
quality and availability of water and the need in many parts of the world
to replace aging infrastructure used to capture, safeguard and distribute
water are critical social and economic concerns. According to the U.S.
Environmental Protection Agency (EPA), contamination of groundwater and
surface water resulting from agricultural, residential, commercial and
industrial development is one of the most serious environmental problems
facing the United States. To alleviate these social and economic concerns,
public and private organizations seek water management advice.
- Waste Management. In the past, many waste disposal practices caused
significant environmental damage. Since the 1970s, more stringent controls
on municipal and industrial waste have been established by governments
around the world to protect the environment. Organizations seek waste
management advice to comply with complex and evolving environmental
regulations, to
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minimize the economic impact of waste generation and disposal, and to
realize significant cost savings through increased operating efficiencies.
INFRASTRUCTURE. Continued population and economic growth place significant
strain on an overburdened infrastructure, thereby requiring additional
development. This development includes water and wastewater treatment plants,
roads, pipelines, communication and power networks, and educational,
recreational and correctional facilities. Additionally, as existing facilities
age, they require upgrading or replacement. Further, the trend toward
privatization of infrastructure is causing public and private organizations that
develop and maintain these facilities to evaluate their cost structures and
establish more efficient systems. These factors drive the need for development
and planning services that are often provided by consulting firms.
COMMUNICATIONS. Technological change and government deregulation have
spurred sweeping changes in the communications industry. Local and long-distance
telephone companies, cable operators and wireless service providers are
penetrating each other's markets and trying to establish a foothold in new
markets created by new technologies. For example, traditional cable operators
are installing advanced capabilities such as digital cable, cable modem, cable
telephony and other high-speed data transmission services at the same time as
wireless communications providers are seeking access to the Internet. At the
same time, various service providers are consolidating in order to offer their
subscribers a comprehensive set of services and to maintain dominance in their
markets. As these trends continue, network service providers will increasingly
turn to professional service firms for advice and assistance in planning,
deploying and maintaining their communications networks.
Increased pricing competition is forcing service providers to outsource
their network development activities, which we provide. In addition,
organizations within each of the above business areas face unique problems but
often lack the internal resources and experience necessary to identify issues
and evaluate possible solutions. As a result, many of these organizations rely
on advice from outside management consultants. Most consulting companies provide
limited front-end problem assessment and solution design and require clients to
engage other engineering and technical services companies to implement
recommended solutions. A significant opportunity exists for consulting companies
that not only develop, but also implement, solutions. These professional service
firms are often in the best position to help clients respond to the challenges
they face.
THE TETRA TECH SOLUTION
Tetra Tech provides the specialized management consulting services that
assist clients in identifying industry-specific problems and defining
appropriate solutions. We also provide the technical services required to
implement these solutions. We believe that we are a leader in this market and
that the following factors distinguish us from our competitors:
UNDERSTANDING CLIENT NEEDS. The ability to identify client needs is
essential to strategic planning and execution. Even before the proposal process
begins, we assist our clients by helping them define their business objectives
and strategies and identify issues that are critical to their success. We strive
to develop numerous contacts at various levels within our clients' organizations
to help us identify the key issues from a variety of perspectives. We believe
that our long history and exposure to a broad client base increase our awareness
of the issues being confronted by organizations and thereby help us identify and
solve our clients' problems.
CAPITALIZING ON OUR EXTENSIVE TECHNICAL EXPERIENCE. Since our inception in
1966, we have provided innovative consulting and engineering services,
historically focusing on cost-effective solutions to water resource management
and environmental problems. We have been successful in leveraging this
foundation of scientific and engineering capabilities into other areas,
including infrastructure and communications. Our services are provided by a wide
range of professionals including: archaeologists,
3
<PAGE>
biologists, chemical engineers, chemists, civil engineers, computer scientists,
economists, electrical engineers, environmental engineers, environmental
scientists, geologists, hydrogeologists, mechanical engineers, oceanographers
and toxicologists. Because of the experience that we have gained from thousands
of completed projects, we often are able to apply proven solutions to client
problems without the time-consuming process of developing new approaches.
OFFERING A FULL RANGE OF SERVICES. Our depth of consulting and technical
skills allows us to respond to client needs at every phase of a project,
including initial planning, research and development, applied science,
engineering and architectural design, and construction management. Once a
particular project is completed, we are able to offer our clients additional
value-added services such as operations and maintenance. Our expertise across
industries and our broad service offerings enable us to be a single source
provider to our clients.
PROVIDING BROAD GEOGRAPHIC COVERAGE AND LOCAL EXPERTISE. We believe that
proximity to our clients is instrumental to understanding their needs and
delivering comprehensive services. We have significantly broadened our
geographic presence in recent years through strategic acquisitions and internal
growth. Our historical geographic base was primarily in the western portion of
the United States. However, we currently have operations in more than 40 states.
We have also increased our international presence, and we now have operations in
Canada, Taiwan, the Philippines, Argentina, Chile, Brazil, Germany, France, and
the Czech Republic.
COMPANY STRATEGY
Our objective is to become the leading provider of specialized management
consulting and technical services in our chosen business areas. To achieve this
objective, we plan to continue the following primary strategies that we believe
have been integral to our success:
IDENTIFY AND EXPAND INTO NEW BUSINESS AREAS. We use our management
consulting services and certain of our technical services as an entry point to
evaluate and to enter new business areas. After our consulting practice is
established in a new business area, we can expand our operations by offering
additional technical services. For example, based on our provision of site
acquisition services to communications industry participants, we identified
infrastructure services within the communications industry as an appropriate
area into which we could expand our operations.
EXPAND SERVICE OFFERINGS AND GEOGRAPHIC PRESENCE THROUGH ACQUISITIONS. We
believe that acquisition opportunities exist that will allow us to continue our
growth in selected business areas, broaden our service offerings and extend our
geographic presence. We intend to make acquisitions that will enable us to
consolidate our position in certain key business areas, such as communications,
or further strengthen our position in our more established service offerings. We
believe that our reputation and public company status make us an attractive
partner and provide us with an advantage in pursuing acquisitions.
FOCUS ON GOVERNMENT PROJECTS. We intend to continue marketing to government
organizations and bidding for government projects to stay on the leading edge of
policy development. This experience helps us identify market opportunities and
enhances our ability to serve other public and private clients. Additionally,
government contracts provide more predictable revenues than private sector
contracts.
MANAGE INTERNAL FINANCIAL CONTROLS. We take a disciplined approach to
monitoring, managing and improving our return on investment in each of our
business areas through the prompt billing and collection of accounts
receivables, the negotiation of favorable contract terms and the management of
our contract performance to prevent cost overruns. We believe that this approach
to managing our financial affairs enables us to improve our cash position and
thereby fund acquisitions and internal growth.
4
<PAGE>
LEVERAGE EXISTING CLIENT BASE. Some of our clients engage us to provide
limited services. We believe that we can increase our revenue by selling
additional services to our existing client base. For example, we may be able to
secure an operations and maintenance contract after working with a client on the
design and construction phases of a facility. In addition, we believe that our
ability to offer a full spectrum of services will allow us to grow our business
and compete more effectively for larger projects.
SERVICES
We provide our clients with comprehensive management consulting and
technical services that focus on our clients' industry-specific needs. We offer
these services individually or as part of our full service approach to problem
solving. We are currently performing services under contracts ranging from small
site investigations to large, complex infrastructure projects. Our service
offerings include:
- MANAGEMENT CONSULTING to assist clients in identifying and addressing
operational and competitive problems they face within their industries;
- RESEARCH AND DEVELOPMENT to formulate solutions to complex problems and
develop advanced computer simulation techniques for modeling problems,
ranging from microscopic to global;
- APPLIED SCIENCE to assess all aspects of problems and develop practical
and cost-effective solutions through the application of new technology and
data interpretation;
- ENGINEERING AND ARCHITECTURAL DESIGN to provide services from concept
development and initial planning and design through project completion;
- CONTRACT MANAGEMENT to provide experienced and specialized construction
managers to assist clients in minimizing the risk of cost overruns, delays
and contractual conflicts; and
- OPERATIONS AND MAINTENANCE to allow clients to outsource routine
functions, permitting them to streamline contractor relationships and
reduce operating costs.
BUSINESS AREAS
We provide our services in the following three principal business areas:
resource management, infrastructure and communications.
RESOURCE MANAGEMENT
One of our major concentrations is water resource management, where we have
a leadership position in understanding the interrelationships of water quality
and human activities. We support high priority government programs for water
quality improvement, environmental restoration, productive reuse of defense
facilities and strategic environmental resource planning. We provide
comprehensive services, including management consulting, research and
development, applied science, engineering and architectural design, construction
management, and operations and maintenance. Our service offerings in the
resource management business area are focused on the following project areas:
Surface Water Projects: Public concern with the quality of rivers, lakes and
streams as well as coastal and marine waters and the ensuing legislative and
regulatory response is driving demand for our services. Over the past
34 years, we have developed a specialized set of technical skills that
positions us to compete effectively for surface water and watershed
management projects. We provide water resource services to government
clients such as the EPA, the Department of Defense (DOD) and the Department
of Energy (DOE), and to a broad base of private sector clients including
those in the chemical, pharmaceutical, utility, aerospace and petroleum
industries. We also provide surface water services to state and local
agencies, particularly in the area of watershed management.
5
<PAGE>
Groundwater Projects: Groundwater is the source of drinking water for
approximately 50% of the U.S. population and accounts for approximately 25%
of all water consumed for residential, industrial and agricultural purposes.
Our activities in the groundwater field are diverse and typically include
projects such as investigating and identifying sources of chemical
contamination, examining the extent of contamination, analyzing the speed
and direction of contamination migration, and designing and evaluating
remedial alternatives. In addition, we conduct monitoring studies to assess
the effectiveness of groundwater treatment and extraction wells.
Waste Management Projects: We currently provide a wide range of engineering
and consulting services for hazardous waste contamination and remediation
projects, from initial site assessment through design and implementation
phases of remedial solutions. In addition, we perform risk assessments to
determine the probability of adverse health effects that may result from
exposure to toxic substances. We also provide waste minimization and
pollution prevention services, and evaluate the effectiveness of innovative
technologies and novel solutions to environmental problems.
Nuclear Environmental Projects: The DOE's nuclear weapons plants and
research laboratories face a wide variety of environmental challenges
including groundwater and surface water contamination, hazardous waste
management and environmental compliance. Our services include environmental
impact analyses and documentation, environmental audits and risk
assessments, regulatory compliance support, groundwater characterization,
remedial investigation/feasibility studies, and project management and
oversight. Our environmental analyses provide the DOE with information it
requires in order to make decisions regarding the storage or disposition of
surplus materials from dismantled nuclear weapon components.
Regulatory Compliance Projects: Our regulatory compliance services include
advising our clients on the full spectrum of regulatory requirements under
the Resource Conservation and Recovery Act, the Clean Water Act, the Clean
Air Act, the National Environmental Policy Act and other environmental laws.
Although we provide services to both public and private clients, our current
emphasis is on providing regulatory compliance services to the Army, Navy
and Air Force.
INFRASTRUCTURE
In the infrastructure area, we focus on the development of water resource
projects, institutional facilities, commercial, recreational and leisure
facilities and transportation projects. These facilities are an essential part
of everyday life and also sustain economic activity and the quality of life. Our
engineers, architects and planners work in partnership with our clients to
provide adequate infrastructure development within their financial constraints.
We assist clients with infrastructure projects by providing management
consulting, engineering and architectural design, construction management, and
operations and maintenance. Our service offerings in the infrastructure business
area are focused on the following project areas:
Water Resource Projects: Our technical services are applied to all aspects
of water quantity and quality management ranging from stormwater management
through drainage and flood control projects to major water and wastewater
treatment plants. Our experience includes planning, design and construction
services for drinking water projects, the design of water treatment
facilities and reservoirs, and the design of distribution systems including
pipelines and pump stations. Our capabilities are also applied to
specialized technical challenges associated with the design and construction
of fisheries and hatcheries worldwide.
Institutional Facilities Projects: We provide architectural engineering and
construction services for projects including site planning for land
development, complete architectural design, interior design,
civil/structural engineering and mechanical/electrical engineering of
educational, healthcare and research facilities. We have completed
engineering and construction projects for a wide range
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of clients with specialized needs such as security systems, training and
audiovisual facilities, clean rooms, laboratories and emergency preparedness
facilities.
Commercial, Recreational and Leisure Facilities Projects: We specialize in
the planning and design of water-related entertainment and leisure
facilities from theme park attractions to large marine aquariums. Our
projects also include high-rise office buildings, museums, hotels, parks,
visitor centers and marinas. We have designed complex aquatic life support
systems and provided structural, civil and mechanical engineering and design
of interpretive exhibits for a series of large aquarium projects worldwide.
We have also designed integrated interior building systems for heat, light,
security, and communications to improve building energy efficiency and cost
effectiveness.
Transportation Projects: We provide architectural, engineering and
construction services for transportation projects to improve public safety
and mobility. Our projects include roadway improvements, commuter railway
stations and expansion of airports. We have also completed numerous
transportation projects including bridges, major highways, and repair,
replacement and upgrading of older transportation facilities.
COMMUNICATIONS
In the communications area, we focus on the delivery of technical solutions
necessary to build and manage communications infrastructure projects. Our
capabilities support a wide range of technologies for rapid information
transport including broadband and wireless communications. Our communications
clients seek management consulting, applied science, engineering and
architectural design, and construction management services. Our service
offerings in the communications business area are focused on the following
project areas:
Network Feasibility Projects: We apply our technical services to all aspects
of assessing the feasibility of network systems development, expansion and
upgrades for our clients. Our experience includes feasibility and remote
site selection studies, cost-benefit modeling and market assessments. We
also assist network service providers with technical requirements
definition, sensitivity/risk analysis and key economic projections.
Network Planning Projects: We specialize in network planning, including
short- and long-term network configuration and development planning. We
develop outside plant designs, civil engineering and regulatory compliance
assessment and support efforts. In addition, our projects have included
employment analysis, staffing, logistics, planning, and materials
provisioning and management.
Network Engineering Projects: We provide a full range of onsite and offsite
premises engineering and support services for projects ranging from
developing computer-aided design workprints to field surveys. Our experience
includes digital evaluation and terrain modeling, right-of-way permitting
and site acquisition for wireless and broadband networks. Capabilities
include radio frequency engineering for wireless networks and for fiber
optic, coaxial cable, and hybrid coaxial fiber networks. Our engineers
design each system to the specifications of the customer's transmission
requirements including subscriber density, traffic demand, coverage area and
cost-benefit decisions. In addition, we have performed outside and inside
plant design projects for twisted pair, coaxial fiber optic and copper cable
networks, and wireless networks.
Network Development Projects: We have performed both inside and outside
plant projects for major network service providers in both the broadband and
wireless sectors. Our construction projects include urban and long-haul
underground cable installation. We have also applied our capabilities to
wireless cell site construction and aerial cable placement.
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The following table presents brief examples of specific projects in our
three primary business areas:
<TABLE>
<CAPTION>
BUSINESS AREA REPRESENTATIVE PROJECTS
- ------------- ------------------------------------------------------------
<S> <C>
Resource Management - Currently providing engineering services for Bureau of
Reclamation projects throughout the southwestern U.S.
Providing water quality modeling, watershed
management, public consensus building, and engineering
solutions for water supplies.
- Assisting the EPA Office of Wastewater Management in
conducting the Clean Water Needs Survey, to assess
financial needs for constructing wastewater treatment
plants and other clean water related infrastructure.
- Currently supporting environmental activities at Air
Force installations worldwide, to assist the Air Force
in its environmental mission in the areas of
restoration, pollution prevention, compliance, and
conservation.
- Completed a remedial design/remedial action for a
Superfund site in Port Comfort, Texas for a private
corporation.
- Currently providing program management and technical
support for the Comprehensive Long-term Environmental
Action Navy (CLEAN) program under several ten-year
contracts. Activities include installation,
restoration, base realignment and closure, and
underground storage tank programs.
- Currently serving as prime contractor for
environmental operations and maintenance services at
Vandenberg Air Force Base in California. Also
providing operations and maintenance services for a
wastewater treatment plant and a hazardous waste
collection plant, and air monitoring and other
services.
- Currently providing environmental remediation and
operations and maintenance (O&M) services at Tinker
Air Force Base in Oklahoma, and at Wright-Patterson
Air Force Base in Ohio. O&M services include
groundwater treatment systems, product recovery
systems and landfill caps. Remediation projects have
included installation of groundwater monitoring wells,
excavation and disposal of contaminated soils, and
installation of soil and groundwater treatment
systems.
- Currently serving as prime contractor for
environmental and natural resource planning at U.S.
Navy facilities in four western states. Conducted air
emissions modeling, noise impact studies and
biological resource surveys.
Infrastructure - Currently implementing production process engineering
efficiencies. Upgraded information management systems
and implemented ISO 14000-compliant environmental
management systems for several Fortune 50 industrial
customers.
- Provided engineering design of building mechanical
systems including air, power, and data distribution
systems, for the world headquarters of a major
corporation in Ohio.
</TABLE>
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<TABLE>
<CAPTION>
BUSINESS AREA REPRESENTATIVE PROJECTS
- ------------- ------------------------------------------------------------
<S> <C>
- Provided complex mechanical, electrical, and other
building systems for the Guggenheim Museum in Bilbao,
Spain.
- Provided multi-modal transportation planning and
design for Boston's first citywide transportation plan
since the 1960s.
- Completed the development and analysis of alternative
flood control measures for the Los Angeles River.
- Provided design and program management for Taiwan's
National Museum of Marine Biology/Aquarium.
Responsible for civil, structural and mechanical
engineering and for aquatic life support systems.
Designed water, wastewater and parking facilities.
- Currently providing information technology,
mechanical, electrical, plumbing and fire protection
engineering for Time Warner Center, a mixed-use
project in New York City.
- Provided project management for upgrading residuals
management facilities at four drinking water treatment
plants in the Detroit, Michigan area that are among
the largest such plants in the U.S.
- Provided design for sections of a major six-lane toll
road in Southern California that includes new bridges,
a tunnel and numerous large regional drainage
facilities.
Communications - Currently supporting the nationwide build-out of a
wireless data network to provide mobile users with
high-speed Internet access.
- Currently providing integrated voice, video, and data
networks inside buildings for large corporations,
colleges, and health care facilities nationwide.
- Currently assisting a leading provider of broadband
services with deployment of a high capacity broadband
fiber optic network to provide high speed Internet
connections, digital cable television, and broadband
telephony in several western markets.
- Currently providing turnkey network development
services for broadband wireless networks in several
European countries. Services include overall project
management, site acquisition, radio frequency
engineering, network deployment, and startup
verification.
- Provided site acquisition, obtained entitlements,
supervised construction and installation of equipment,
and provided program management services for a
Canadian corporation.
- Providing services to install over 730 miles of cable
to provide telephony and expanded channel capacity to
approximately 135,000 homes in the Seattle, Washington
area.
- Providing turnkey services including site selection
and optimization, architectural and engineering
design, site construction, and electronics
installation and optimization for cell site
development in the Los Angeles area for a major
cellular communications carrier.
</TABLE>
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<TABLE>
<CAPTION>
BUSINESS AREA REPRESENTATIVE PROJECTS
- ------------- ------------------------------------------------------------
<S> <C>
- Providing network planning through network deployment
services for approximately 1,200 sites for a wireless
communications firm serving the western Great Lakes
markets.
</TABLE>
CLIENTS
We have developed a diverse client base of hundreds of clients both in the
public and private sectors. During fiscal 2000, the DOD, EPA and DOE accounted
for approximately 15.1%, 9.4% and 2.2%, respectively, of our net revenue.
Although agencies of the Federal government are among our most significant
clients, we often support multiple programs within a single Federal agency. Our
private sector clients include companies in the chemical, mining,
pharmaceutical, aerospace, automotive, petroleum, communications and utility
industries. No private sector client accounted for more than 10% of our net
revenue in fiscal 2000.
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The following table presents a list of representative clients in our three
primary business areas:
<TABLE>
<CAPTION>
REPRESENTATIVE CLIENTS
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BUSINESS AREA FEDERAL GOVERNMENT STATE, COUNTY AND LOCAL PRIVATE
- ------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C>
RESOURCE MANAGEMENT U.S. Environmental California Department Lockheed Martin
Protection Agency; of Health Services; Corporation; Merck &
U.S. Air Force; U.S. Washington Department Co.; General Electric
Navy; U.S. Army; U.S. of Ecology; Prince Company; Westwood
Coast Guard; U.S. Georges County, Squibb
Forest Service; U.S. Maryland; Clarmont Pharmaceuticals, Inc.;
Department of Energy; County, Ohio; City of Hewlett-Packard
U.S. Agency for San Jose, California; Corporation; Unocal
International Salton Sea Authority Corporation
Development; Federal
Energy Regulatory
Commission
INFRASTRUCTURE U.S. Army Corps of City of Tucson, Universal Studios,
Engineers; U.S. Bureau Arizona; City of Inc.; Boeing
of Reclamation; U.S. Breckenridge, Colorado; Corporation; E.I.
Air Force; Federal Washington Department DuPont de Nemours and
Emergency Management of Transportation; City Company; Ford Motor
Agency of Detroit, Michigan; Company; Chrysler
City of Portland, Corporation; Disney
Oregon; Texas Parks and Imagineering; Lowe's
Wildlife Department; Company; Marriott
King County, Corporation
Washington; Delaware
Department of
Transportation;
Delaware Department of
Corrections; Boston
Water and Sewer
Commission
COMMUNICATIONS AT&T Wireless
Services; AT&T
Broadband and Internet
Services; Nextel
Communications, Inc.;
Verizon
Communications;
Motorola, Inc.; Sprint
Communications
Company; Lucent
Technologies, Inc.;
Ericsson; Comcast
Corporation
</TABLE>
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CONTRACTS
We enter into various types of contracts with our clients, including
fixed-price, fixed-rate time and materials, cost-reimbursement plus fixed fee
and cost-reimbursement plus fixed and award fee contracts. In fiscal 2000,
42.9%, 31.4% and 25.7% of our net revenue was derived from fixed-price,
fixed-rate time and materials, and cost-reimbursement plus fixed fee and award
fee contracts, respectively. Under a fixed-price contract, the client agrees to
pay a specified price for our performance of the entire contract. Fixed-price
contracts carry certain inherent risks, including risks of losses from
underestimating costs, delays in project completion, problems with new
technologies and economic and other changes that may occur over the contract
period. Consequently, the profitability of fixed-price contracts may vary
substantially. The amount of the fee received for a cost-reimbursement and award
fee contract partially depends upon the government's discretionary periodic
assessment of our performance on that contract. Our various clients determine
which type of contract we enter into for a particular engagement.
Some contracts made with the Federal government are subject to annual
approval of funding. Federal government agencies may impose spending
restrictions that limit the continued funding of our existing contracts with the
Federal government and may limit our ability to obtain additional contracts.
These limitations, if significant, could have a material adverse effect on us.
To date, spending limitations have not had a significant effect on us. All
contracts made with the Federal government may be terminated by the government
at any time, with or without cause.
Federal government agencies have formal policies against continuing or
awarding contracts that would create actual or potential conflicts of interest
with other activities of a contractor. These policies may prevent us in certain
cases from bidding for or performing contracts resulting from or relating to
certain work we have performed for the government. In addition, services
performed for a private client may create conflicts of interest that preclude or
limit our ability to obtain work for another private organization. We attempt to
identify actual or potential conflicts of interest and to minimize the
possibility that such conflicts would affect our work under current contracts or
our ability to compete for future contracts. We have, on occasion, declined to
bid on a project because of an existing potential conflict of interest. However,
we have not experienced disqualification during a bidding or award negotiation
process by any government or private client as a result of a conflict of
interest.
Our contracts with the Federal government are subject to audit by the
government, primarily by the Defense Contract Audit Agency (DCAA). The DCAA
generally seeks to (1) identify and evaluate all activities which either
contribute to, or have an impact on, proposed or incurred costs of government
contracts; (2) evaluate the contractor's policies, procedures, controls and
performance; and (3) prevent or avoid wasteful, careless and inefficient
production or service. To accomplish this, the DCAA examines our internal
control systems, management policies and financial capability, evaluates the
accuracy, reliability and reasonableness of our cost representations and
records, and assesses compliance by us with Cost Accounting Standards and
Defective-pricing clauses found within the Federal Acquisition Regulations. The
DCAA also performs the annual review of our overhead rates and assists in the
establishment of our final rates. This review focuses on the allowability of
cost items and the allowability and applicability of Cost Accounting Standards.
The DCAA also audits cost-based contracts, including the close-out of those
contracts.
The DCAA also reviews all types of proposals, including those of award,
administration, modification and repricing. Factors considered are our cost
accounting system, estimating methods and procedures, and specific proposal
requirements. Operational audits are also performed by the DCAA. A review of our
operations at every major organizational level that has a significant effect on
the performance of future government contracts is also conducted during the
proposal review period.
During the course of its audit, the DCAA may disallow costs if it determines
that we improperly accounted for such costs in a manner inconsistent with Cost
Accounting Standards. Under a
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government contract, only those costs that are reasonable, allocable and
allowable are recoverable. A disallowance of costs by the DCAA could have a
material adverse effect on us.
Due to the severity of the legal remedies available to the government,
including the required payment of damages and/or penalties, criminal and civil
sanctions, and debarment, we maintain controls to avoid the occurrence of fraud
and other unlawful activity. In addition, we maintain preventative audit
programs to ensure appropriate control systems and mitigate control weaknesses.
We provide our services under contracts, purchase orders or retainer
letters. Our policy provides that, where possible, all contracts will be in
writing. We bill all of our clients periodically based on costs incurred, on
either an hourly-fee basis or on a percentage of completion basis, as the
project progresses. Generally, our contracts do not require that we provide
performance bonds. A performance bond, issued by a surety company, guarantees
the contractor's performance under the contract. If the contractor defaults
under the contract, the surety will, in its discretion, step in to finish the
job or pay the client the amount of the bond. If the contractor does not have a
performance bond and defaults in the performance of a contract, the contractor
is responsible for all damages resulting from the breach of contract. These
damages include the cost of completion, together with possible consequential
damages such as lost profits. To date, we have not incurred material damages
beyond the coverage of any performance bond.
Most of our agreements permit termination without cause by the clients upon
payment of fees and expenses through the date of the termination.
MARKETING
We utilize both a centralized corporate marketing department and local
marketing groups within each of our operating units. Our corporate marketing
department assists management in establishing our business plan, our target
markets and an overall marketing strategy. The corporate marketing department
also identifies and tracks the development of large Federal programs, positions
us for new business areas, selects appropriate partners, if any, for new
projects and assists in the bid process for new projects. We market throughout
the organizations we target, focusing primarily on senior representatives in
government organizations and senior management in private companies. In
addition, the corporate marketing department supports marketing activities
firm-wide by coordinating corporate promotional and professional activities,
including appearances at trade shows, direct mailings, telemarketing and public
and media relations.
We also perform marketing activities through our local offices. We believe
that these offices have a greater understanding of local environmental issues,
laws and regulations and, therefore, can better target their marketing
activities. These marketing activities are coordinated by full time marketing
staff located in certain of our offices. These activities include meetings with
potential clients and state, county and municipal regulators, presentations to
civic and professional organizations and seminars on current regulatory topics.
COMPETITION
The market for our services is highly competitive. We compete with many
other firms, ranging from small local firms to large national firms that may
have greater financial and marketing resources. We perform a broad spectrum of
engineering and consulting services across the resource management,
infrastructure and communications business areas. Services within these business
areas are provided to a client base which includes Federal agencies, such as the
DOD, the DOE, the Department of the Interior, the EPA and the U.S. Postal
Service, state and local agencies, and the private sector. Our competition
varies and is a function of the business areas in which, and client sectors for
which, we perform our services. The range of competitors for any one procurement
can vary from 10 to 100 firms, depending upon the relative value of the project,
the financial terms and risks associated with the work,
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and any restrictions placed upon competition by the client. Historically,
clients have chosen among competing firms based primarily on the quality and
timeliness of the firm's service. However, we believe that price has become an
increasingly important competitive factor. We believe that if this trend
continues it could have a material adverse effect on our operating margins and
profitability.
We believe that our principal competitors include, in alphabetical order,
Black & Veatch LLP; Brown & Caldwell; Castle Tower Corporation; CH2M Hill
Companies Ltd.; Earth Tech, Inc.; IT Group, Inc.; Mastec, Inc.; Montgomery
Watson; o2Wireless Solutions, Inc.; Quanta Services, Inc.; Roy F. Weston, Inc.;
Science Applications International Corporation; URS Corporation and Wireless
Facilities, Inc.
BACKLOG
At October 1, 2000, our gross revenue backlog was approximately
$632.9 million, compared to $602.4 million at October 3, 1999. We include in
gross revenue backlog only those contracts for which funding has been provided
and work authorizations have been received. We estimate that approximately
$538.1 million of the gross revenue backlog at October 1, 2000 will be
recognized during fiscal 2001. No assurance can be given that all amounts
included in backlog will ultimately be realized, even if evidenced by written
contracts. For example, certain of our contracts with the Federal government and
other clients are terminable at will. If any of these clients terminate their
contracts prior to completion, we may not be able to recognize that revenue.
ENVIRONMENTAL LEGISLATION
Our clients have become subject to an increasing number of frequently
overlapping Federal, state and local laws concerned with the protection of the
environment, as well as regulations promulgated by administrative agencies
pursuant to these laws. We provide services with respect to Federal
environmental laws, and regulations including: the Clean Water Act; the Resource
Conservation and Recovery Act; the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA); the National Environmental Policy Act;
the Safe Drinking Water Act; and other laws.
POTENTIAL LIABILITY AND INSURANCE
Our business activities could expose us to potential liability under various
environmental laws such as CERCLA. In addition, we occasionally contractually
assume liability under indemnification agreements. We cannot predict the
magnitude of such potential liabilities.
We currently maintain comprehensive general liability, umbrella and
professional liability insurance policies. The professional liability policies
are "claims made" policies. This means that only claims made during the term of
the policy are covered. If we terminate our professional liability policies and
do not obtain retroactive coverage, we would be uninsured for claims made after
termination even if based on events or acts that occurred during the term of the
policy.
We obtain insurance coverage through a broker who is experienced in the
engineering field. The broker, together with our Risk Manager, periodically
review the adequacy of our insurance programs. However, because there are
various exclusions and retentions under our insurance policies, there can be no
assurance that all potential liabilities will be covered by our insurance.
Further, in the event we expand our services into new markets, we may not be
able to obtain insurance coverage for such activities or, if insurance is
obtained, the dollar amount of any liabilities incurred could exceed our
insurance coverage.
We evaluate the risk associated with uninsured claims. If we determine that
an uninsured claim has potential liability, we establish an appropriate reserve.
A reserve is not established if we determine that the claim has no merit. Our
historic levels of insurance coverage and reserves have been adequate.
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However, a partially or completely uninsured claim, if successful and of
significant magnitude, could have a material adverse effect on our business.
EMPLOYEES
At October 1, 2000, we had approximately 6,601 total employees or
approximately 6,120 full-time equivalent employees. Our professional staff
includes archaeologists, biologists, chemical engineers, chemists, civil
engineers, computer scientists, economists, electrical engineers, environmental
engineers, environmental scientists, geologists, hydrogeologists, mechanical
engineers, oceanographers, toxicologists and project managers. Our ability to
retain and expand our staff of qualified professionals will be an important
factor in determining our future growth and success. We currently have 206
employees represented by four labor organizations. Management considers its
relations with our employees to be good.
In addition, we supplement our consultants on certain engagements with
independent contractors. We believe that the practice of retaining independent
contractors on a per engagement basis provides us with significant flexibility
in adjusting professional personnel levels in response to changes in demand for
our services.
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RISK FACTORS
SOME OF THE INFORMATION IN THIS ANNUAL REPORT ON FORM 10-K CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. YOU
CAN IDENTIFY THESE STATEMENTS BY FORWARD-LOOKING WORDS SUCH AS "MAY," "WILL,"
"EXPECT," "ANTICIPATE," "BELIEVE," "ESTIMATE" AND "CONTINUE" OR SIMILAR WORDS.
YOU SHOULD READ STATEMENTS THAT CONTAIN THESE WORDS CAREFULLY BECAUSE THEY:
(1) DISCUSS OUR FUTURE EXPECTATIONS; (2) CONTAIN PROJECTIONS OF OUR FUTURE
OPERATING RESULTS OR OF OUR FUTURE FINANCIAL CONDITION; OR (3) STATE OTHER
"FORWARD-LOOKING" INFORMATION. WE BELIEVE IT IS IMPORTANT TO COMMUNICATE OUR
EXPECTATIONS TO OUR INVESTORS. THERE MAY BE EVENTS IN THE FUTURE, HOWEVER, THAT
WE ARE NOT ACCURATELY ABLE TO PREDICT OR OVER WHICH WE HAVE NO CONTROL. THE RISK
FACTORS LISTED IN THIS SECTION, AS WELL AS ANY CAUTIONARY LANGUAGE IN THIS
ANNUAL REPORT ON FORM 10-K, PROVIDE EXAMPLES OF RISKS, UNCERTAINTIES AND EVENTS
THAT MAY CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE EXPECTATIONS WE
DESCRIBE IN OUR FORWARD-LOOKING STATEMENTS. YOU SHOULD BE AWARE THAT THE
OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN THESE RISK FACTORS AND ELSEWHERE IN
THIS ANNUAL REPORT ON FORM 10-K COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS AND THAT UPON
THE OCCURRENCE OF ANY OF THESE EVENTS, THE TRADING PRICE OF OUR COMMON STOCK
COULD DECLINE.
THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY THAT COULD ADVERSELY
IMPACT OUR BUSINESS AND OPERATING RESULTS
A significant part of our growth strategy is to acquire other companies that
complement our lines of business or that broaden our geographic presence. During
fiscal 2000, we purchased nine companies in eight separate transactions. We
expect to continue to acquire companies as an element of our growth strategy.
Acquisitions involve certain risks that could cause our actual growth or
operating results to differ from our expectations or the expectations of
security analysts. For example:
- We may not be able to identify suitable acquisition candidates or to
acquire additional companies on favorable terms;
- We compete with others to acquire companies. Competition may increase and
may result in decreased availability of or increased price for suitable
acquisition candidates;
- We may not be able to obtain the necessary financing, on favorable terms
or at all, to finance any of our potential acquisitions;
- We may ultimately fail to consummate an acquisition even if we announce
that we plan to acquire a company;
- We may fail to successfully integrate or manage these acquired companies
due to differences in business backgrounds or corporate cultures;
- These acquired companies may not perform as we expect;
- We may find it difficult to provide a consistent quality of service across
our geographically diverse operations; and
- If we fail to successfully integrate any acquired company, our reputation
could be damaged. This could make it more difficult to market our services
or to acquire additional companies in the future.
In addition, our acquisition strategy may divert management's attention away
from our primary service offerings, result in the loss of key clients or
personnel and expose us to unanticipated liabilities.
Finally, acquired companies that derive a significant portion of their
revenues from the Federal government and that do not follow the same cost
accounting policies and billing procedures as we do may be subject to larger
cost disallowances for greater periods than we typically encounter. If we fail
to determine the existence of unallowable costs and establish appropriate
reserves in advance of an
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acquisition, we may be exposed to material unanticipated liabilities, which
could have a material adverse effect on our business.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, WHICH COULD HAVE A
NEGATIVE EFFECT ON THE PRICE OF OUR COMMON STOCK
Our quarterly revenues, expenses and operating results may fluctuate
significantly because of a number of factors, including:
- The seasonality of the spending cycle of our public sector clients and the
spending patterns of our private sector clients;
- Employee hiring and utilization rates;
- The number and significance of client engagements commenced and completed
during a quarter;
- Delays incurred in connection with an engagement;
- The ability of our clients to terminate engagements without penalties;
- The size and scope of engagements;
- The timing of expenses incurred for corporate initiatives;
- The timing and size of the return on investment capital; and
- General economic and political conditions.
Variations in any of these factors could cause significant fluctuations in our
operating results from quarter to quarter and could result in net losses.
THE VALUE OF OUR COMMON STOCK COULD CONTINUE TO BE VOLATILE
The trading price of our common stock has fluctuated widely. In addition, in
recent years the stock market has experienced extreme price and volume
fluctuations. The overall market and the price of our common stock may continue
to fluctuate greatly. The trading price of our common stock may be significantly
affected by various factors, including:
- Quarter to quarter variations in our operating results;
- Changes in environmental legislation;
- Changes in investors' and analysts' perception of the business risks and
conditions of our business;
- Broader market fluctuations; and
- General economic or political conditions.
IF WE ARE NOT ABLE TO SUCCESSFULLY MANAGE OUR GROWTH STRATEGY, OUR BUSINESS AND
RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED
We are growing rapidly. Our growth presents numerous managerial,
administrative, operational and other challenges. Our ability to manage the
growth of our operations will require us to continue to improve our operational,
financial and human resource management information systems and our other
internal systems and controls. In addition, our growth will increase our need to
attract, develop, motivate and retain both our management and professional
employees. The inability of our management to manage our growth effectively or
the inability of our employees to achieve anticipated performance or utilization
levels could have a material adverse effect on our business.
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THE LOSS OF KEY PERSONNEL OR OUR INABILITY TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL COULD SIGNIFICANTLY DISRUPT OUR BUSINESS
We depend upon the efforts and skills of our executive officers, senior
managers and consultants. With limited exceptions, we do not have employment
agreements with any of these individuals. The loss of the services of any of
these key personnel could adversely affect our business. Although we have
obtained non-compete agreements from certain principals and stockholders of
companies we have acquired, we generally do not have non-compete or employment
agreements with key employees who were not once equity holders of these
companies. We do not maintain key-man life insurance policies on any of our
executive officers or senior managers.
Our future growth and success depends on our ability to attract and retain
qualified scientists and engineers. The market for these professionals is
competitive and we may not be able to attract and retain such professionals.
CHANGES IN EXISTING LAWS AND REGULATIONS COULD REDUCE THE DEMAND FOR OUR
SERVICES
A significant amount of our resource management business is generated either
directly or indirectly as a result of existing Federal and state governmental
laws, regulations and programs. Any changes in these laws or regulations that
reduce funding or affect the sponsorship of these programs could reduce the
demand for our services and could have a material adverse effect on our
business.
OUR REVENUES FROM AGENCIES OF THE FEDERAL GOVERNMENT ARE CONCENTRATED, AND A
REDUCTION IN SPENDING BY THESE AGENCIES COULD ADVERSELY AFFECT OUR BUSINESS AND
OPERATING RESULTS
Agencies of the Federal government are among our most significant clients.
During fiscal 2000, approximately 29.1% of our net revenue was derived from
Federal agencies of which 15.1% was derived from the Department of Defense
(DOD), 9.4% from the Environmental Protection Agency (EPA), 2.2% from the
Department of Energy (DOE) and 2.4% from various other Federal agencies. Some
contracts with Federal government agencies require annual funding approval and
may be terminated at their discretion. A reduction in spending by Federal
government agencies could limit the continued funding of our existing contracts
with them and could limit our ability to obtain additional contracts. These
limitations, if significant, could have a material adverse effect on our
business.
Additionally, the failure of clients to pay significant amounts due us for
our services could adversely affect our business. For example, we recently
received notification from a Federal government agency that we are entitled to
payments in excess of our billings. However, the agency involved must obtain
specific funding approval for amounts owed to us and there can be no assurance
this funding approval will be obtained.
OUR CONTRACTS WITH GOVERNMENTAL AGENCIES ARE SUBJECT TO AUDIT, WHICH COULD
RESULT IN THE DISALLOWANCE OF CERTAIN COSTS
Contracts with the Federal government and other governmental agencies are
subject to audit. Most of these audits are conducted by the Defense Contract
Audit Agency (DCAA), which reviews our overhead rates, operating systems and
cost proposals. The DCAA may disallow costs if it determines that we accounted
for these costs incorrectly or in a manner inconsistent with Cost Accounting
Standards. A disallowance of costs by the DCAA, or other governmental auditors,
could have a material adverse effect on our business.
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OUR BUSINESS AND OPERATING RESULTS COULD BE ADVERSELY AFFECTED BY LOSSES UNDER
FIXED-PRICE CONTRACTS OR TERMINATION OF CONTRACTS AT THE CLIENT'S DISCRETION
We contract with Federal and state governments as well as with the
commercial sector. These contracts are often subject to termination at the
discretion of the client with or without cause. Additionally, we enter into
various types of contracts with our clients, including fixed-price contracts. In
fiscal 2000, approximately 42.9% of our net revenue was derived from fixed-price
contracts. Fixed-price contracts protect clients and expose us to a number of
risks. These risks include underestimation of costs, problems with new
technologies, unforeseen costs or difficulties, delays beyond our control and
economic and other changes that may occur during the contract period. Losses
under fixed-price contracts or termination of contracts at the discretion of the
client could have a material adverse effect on our business.
OUR INABILITY TO FIND QUALIFIED SUBCONTRACTORS COULD ADVERSELY AFFECT THE
QUALITY OF OUR SERVICE AND OUR ABILITY TO PERFORM UNDER CERTAIN CONTRACTS
Under some of our contracts, we depend on the efforts and skills of
subcontractors for the performance of certain tasks. Reliance on subcontractors
varies from project to project. During fiscal 2000, subcontractor costs
comprised 24.7% of our gross revenue. The absence of qualified subcontractors
with whom we have a satisfactory relationship could adversely affect the quality
of our service and our ability to perform under some of our contracts.
OUR INDUSTRY IS HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO COMPETE EFFECTIVELY
We provide specialized management consulting and technical services to a
broad range of public and private sector clients. The market for our services is
highly competitive and we compete with many other firms. These firms range from
small regional firms to large national firms which have greater financial and
marketing resources than ours.
We focus primarily on the resource management, infrastructure and
communications business areas. We provide services to our clients which include
Federal, state and local agencies, and organizations in the private sector.
We compete for projects and engagements with a number of competitors which
can vary from 10 to 100 firms. Historically, clients have chosen among competing
firms based on the quality and timeliness of the firm's service. We believe,
however, that price has become an increasingly important factor.
We believe that our principal competitors include, in alphabetical order,
Black & Veatch LLP; Brown & Caldwell; Castle Tower Corporation; CH2M Hill
Companies Ltd.; Earth Tech, Inc.; IT Group, Inc.; Mastec, Inc.; Montgomery
Watson; o2 Wireless Solutions, Inc.; Quanta Services; Roy F. Weston, Inc.;
Science Applications International Corporation; URS Corporation and Wireless
Facilities, Inc.
OUR SERVICES EXPOSE US TO SIGNIFICANT RISKS OF LIABILITY AND OUR INSURANCE
POLICIES MAY NOT PROVIDE ADEQUATE COVERAGE
Our services involve significant risks of professional and other liabilities
which may substantially exceed the fees we derive from our services. Our
business activities could expose us to potential liability under various
environmental laws such as the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA). In addition, we sometimes
contractually assume liability under indemnification agreements. We cannot
predict the magnitude of such potential liabilities.
We currently maintain comprehensive general liability, umbrella and
professional liability insurance policies. We believe that our insurance
policies are adequate for our business operations. Professional
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liability policies are "claims made" policies. Thus, only claims made during the
term of the policy are covered. Should we terminate our professional liability
policies and do not obtain retroactive coverage, we would be uninsured for
claims made after termination even if these claims are based on events or acts
that occurred during the term of the policy. Additionally our insurance policies
may not protect us against potential liability due to various exclusions and
retentions. In addition, if we expand into new markets, we may not be able to
obtain insurance coverage for such activities or, if insurance is obtained, the
dollar amount of any liabilities incurred could exceed our insurance coverage.
Partially or completely uninsured claims, if successful and of significant
magnitude, could have a material adverse affect on our business.
WE MAY BE PRECLUDED FROM PROVIDING CERTAIN SERVICES DUE TO CONFLICT OF INTEREST
ISSUES
Many of our clients are concerned about potential or actual conflicts of
interest in retaining management consultants. Federal government agencies have
formal policies against continuing or awarding contracts that would create
actual or potential conflicts of interest with other activities of a contractor.
These policies, among other things, may prevent us from bidding for or
performing contracts resulting from or relating to certain work we have
performed for the government. In addition, services performed for a private
client may create a conflict of interest that precludes or limits our ability to
obtain work from other public or private organizations. We have, on occasion,
declined to bid on projects because of these conflicts of interest issues.
ITEM 2. PROPERTIES.
Our corporate headquarters facilities are located in Pasadena, California.
These facilities contain approximately 1.8 million square feet of office space,
and are subject to leases which expire beyond the year 2001. We lease office
space in approximately 275 locations in the United States. We also rent some
additional office space on a month-to-month basis.
We believe that our existing facilities are adequate to meet current
requirements and that suitable additional or substitute space will be available
as needed to accommodate any expansion of operations and for additional offices.
ITEM 3. LEGAL PROCEEDINGS.
We are subject to certain claims and lawsuits typically filed against the
engineering and consulting professions, primarily alleging professional errors
or omissions. We carry professional liability insurance, subject to certain
deductibles and policy limits against such claims. Management is of the opinion
that the resolution of these claims will not have a material effect on our
financial position or results of operations. See "Item 1. Business--Potential
Liability and Insurance."
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
The information required by Items 5 through 8 of this report is set forth on
pages 17 through 41 of our Annual Report to Stockholders for the fiscal year
ended October 1, 2000. Such information is incorporated in this report and made
a part hereof by reference. Item 9 is not applicable.
PART III
The information required by Items 10 through 13 of this report is set forth
in the sections entitled "Security Ownership of Principal Stockholders,
Directors and Executive Officers," "Election of Directors," and "Executive
Officers, Compensation and Other Information" in our Proxy Statement for our
2001 Annual Meeting of Stockholders. Such information is incorporated in this
report and made a part hereof by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
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(a) 1. and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
The Financial Statements filed as part of this report are
listed in the accompanying index at page 25.
3. EXHIBITS.
3.1 Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 1, 1995).
3.2 Bylaws of the Company as amended to date (incorporated
herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1, No. 33-43723).
3.3 Certificate of Amendment of Certificate of Incorporation of
the Company (incorporated herein by reference to
Exhibit 3.4 to the Company's Annual Report on Form 10-K for
the fiscal year ended October 4, 1998).
10.1 Credit Agreement dated as of March 17, 2000 among the
Company and the financial institutions named therein
(incorporated herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 2, 2000).
10.2 1989 Stock Option Plan dated as of February 1, 1989
(incorporated herein by reference to Exhibit 10.13 to the
Company's Registration Statement on Form S-1,
No. 33-43723).
10.3 Form of Incentive Stock Option Agreement executed by the
Company and certain individuals in connection with the
Company's 1989 Stock Option Plan (incorporated herein by
reference to Exhibit 10.14 to the Company's Registration
Statement on Form S-1, No. 33-43723).
10.4 Executive Medical Reimbursement Plan (incorporated herein by
reference to Exhibit 10.16 to the Company's Registration
Statement on Form S-1, No. 33-43723).
10.5 1992 Incentive Stock Plan (incorporated herein by reference
to Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 3, 1993).
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10.6 Form of Incentive Stock Option Agreement used by the Company
in connection with the Company's 1992 Incentive Stock Plan
(incorporated herein by reference to Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 3, 1993).
10.7 1992 Stock Option Plan for Nonemployee Directors
(incorporated herein by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 3, 1993).
10.8 Form of Nonqualified Stock Option Agreement used by the
Company in connection with the Company's 1992 Stock Option
Plan for Nonemployee Directors (incorporated herein by
reference to Exhibit 10.21 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 3, 1993).
10.9 1994 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 10.22 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 2, 1994).
10.10 Form of Stock Purchase Agreement used by the Company in
connection with the Company's 1994 Employee Stock Purchase
Plan (incorporated herein by reference to Exhibit 10.23 to
the Company's Annual Report on Form 10-K for the fiscal
year ended October 2, 1994).
10.11 Employment Agreement dated as of June 11, 1997 between the
Company and Daniel A. Whalen (incorporated herein by
reference to Exhibit 10.16 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 29, 1997).
10.12 Registration Rights Agreement dated as of June 11, 1997
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.17 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 29, 1997).
10.13 Registration Rights Agreement dated as of July 11, 1997
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.18 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 28, 1997).
10.14 Registration Rights Agreement dated as of March 26, 1998
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.20 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 29, 1998).
10.15 Registration Rights Agreement dated as of July 9, 1998 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.22
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 28, 1998).
10.16 Registration Rights Agreement dated as of September 22, 1998
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 4, 1998).
10.17 Registration Rights Agreement dated as of February 26, 1999
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.24 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 4, 1999).
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C>
10.18 Registration Rights Agreement dated as of May 7, 1999 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.26
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 4, 1999).
10.19 Registration Rights Agreement dated as of May 21, 1999 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.27
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 4, 1999).
10.20 Registration Rights Agreement dated as of June 18, 1999
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.28 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 4, 1999).
10.21 Registration Rights Agreement dated as of September 3, 1999
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.30 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 3, 1999).
10.22 Registration Rights Agreement dated as of March 31, 2000
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.22 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 2, 2000).
10.23 Registration Rights Agreement dated as of May 3, 2000 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.23
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 2, 2000).
10.24 Registration Rights Agreement dated as of May 17, 2000 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.24
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 2, 2000).
10.25 Registration Rights Agreement dated as of May 24, 2000 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.25
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 2, 2000).
10.26 Registration Rights Agreement dated as of December 21, 2000
among the Company and the parties listed on Schedule A
attached thereto.
13. Annual Report to Stockholders for the fiscal year ended
October 1, 2000, portions of which are incorporated by
reference in this report as set forth in Part II hereof.
With the exception of these portions, such Annual Report is
not deemed filed as part of this report.
21. Subsidiaries of the Company.
23. Independent Auditors' Consent.
27. Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
None.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
TETRA TECH, INC.
Date: December 29, 2000 By: /s/ LI-SAN HWANG
-----------------------------------------
Li-San Hwang,
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman of the Board of
/s/ LI-SAN HWANG Directors, President and
------------------------------------------- Chief Executive Officer December 29, 2000
Li-San Hwang (Principal Executive
Officer)
Executive Vice President,
/s/ JAMES M. JASKA Chief Financial Officer
------------------------------------------- and Treasurer (Principal December 29, 2000
James M. Jaska Financial and Accounting
Officer)
/s/ DANIEL A. WHALEN
------------------------------------------- Director December 29, 2000
Daniel A. Whalen
/s/ J. CHRISTOPHER LEWIS
------------------------------------------- Director December 29, 2000
J. Christopher Lewis
/s/ PATRICK C. HADEN
------------------------------------------- Director December 29, 2000
Patrick C. Haden
/s/ JAMES J. SHELTON
------------------------------------------- Director December 29, 2000
James J. Shelton
</TABLE>
24
<PAGE>
INDEX TO FINANCIAL STATEMENTS
The consolidated financial statements, together with the Notes thereto and
report thereon of Deloitte & Touche LLP dated November 15, 2000, appearing on
pages 25 through 41 of the accompanying 2000 Annual Report to Stockholders, are
incorporated by reference in this Annual Report on Form 10-K. With the exception
of the aforementioned information and Part II information set forth on pages 17
through 24, the 2000 Annual Report to Stockholders is not to be deemed filed as
part of this report.
FINANCIAL STATEMENTS SCHEDULE
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Independent Auditors' Report................................ 26
Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts and
Reserves.................................................. 27
</TABLE>
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
Tetra Tech, Inc.:
We have audited the consolidated financial statements of Tetra Tech, Inc.
and its subsidiaries as of October 1, 2000 and October 3, 1999, and for each of
the three years in the period ended October 1, 2000, and have issued our report
thereon dated November 15, 2000; such financial statements and report are
included in your 2000 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of Tetra
Tech, Inc. and its subsidiaries, listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
<TABLE>
<S> <C>
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
November 15, 2000
</TABLE>
26
<PAGE>
TETRA TECH, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED
OCTOBER 4, 1998, OCTOBER 3, 1999 AND OCTOBER 1, 2000
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS CHARGES TO DEDUCTIONS,
BEGINNING OF THROUGH COSTS AND NET OF BALANCE AT
PERIOD ACQUISITIONS EARNINGS RECOVERIES END OF PERIOD
------------ ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended October 4,
1998
Allowance for loss on accounts
receivable.................... $11,153,000 $3,187,000 $ (334,000) $(1,321,000) $12,685,000
Fiscal year ended October 3,
1999
Allowance for loss on accounts
receivable.................... $12,685,000 $ 747,000 $ (667,000) $(4,236,000) $ 8,529,000
Fiscal year ended October 1,
2000
Allowance for loss on accounts
receivable.................... $ 8,529,000 $ 391,000 $3,056,000 $(4,903,000) $ 7,073,000
</TABLE>
27
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>2
<FILENAME>a2034071zex-10_26.txt
<DESCRIPTION>EXHIBIT 10.26
<TEXT>
<PAGE>
EXHIBIT 10.26
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as
of December 21, 2000 by and among Tetra Tech, Inc., a Delaware corporation
("Tetra Tech"), and the parties listed on Schedule A attached hereto (each, a
"Holder" and collectively, the "Holders").
R E C I T A L S
A. Tetra Tech and the Holders are parties to the Agreement and Plan of
Reorganization of even date (the "Reorganization Agreement"), pursuant to which
Rocky Mountain Consultants, Inc., a Colorado corporation ("RMC"), will merge
with and into TDH Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Tetra Tech.
B. Pursuant to the Reorganization Agreement, the shareholders of RMC
will receive shares of the common stock, $.01 par value, of Tetra Tech ("Tetra
Tech Common Stock"); and
C. This Agreement is the Registration Rights Agreement referred to in
SECTION 6.2 of the Reorganization Agreement and, pursuant thereto, must be
entered into by the parties in connection with the consummation of the
transactions contemplated by the Reorganization Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"FORM S-3" shall mean such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by Tetra Tech with the SEC.
"PROSPECTUS" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such Prospectus.
"REGISTER", "REGISTERED" and "REGISTRATION" shall mean and refer to
a registration effected by preparing and filing a Registration Statement and
taking all other actions that are necessary or appropriate in connection
therewith, and the declaration or ordering of effectiveness of such Registration
Statement by the SEC.
"REGISTRATION EXPENSES" shall have the meaning set forth in
SECTION 4.
"REGISTRABLE SECURITIES" shall mean the shares of Tetra Tech Common
Stock (i) issued pursuant to the Reorganization Agreement, and (ii) issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (i) above; provided, however, that
Registrable Securities shall not include any shares of Tetra Tech Common Stock
that have previously been registered or sold to the public or have been sold
pursuant to Rule 144 ( or similar successor Rule).
"REGISTRATION STATEMENT" shall mean any registration statement of
Tetra Tech in compliance with the Securities Act that covers Registrable
Securities pursuant to the provisions of this Agreement, including, without
limitation, the Prospectus, all amendments and supplements to such Registration
Statement, including all post-effective amendments, all exhibits and all
material incorporated by reference in such Registration Statement.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act
or any similar successor rule, as the same shall be in effect from time to time.
"RULE 144A" shall mean Rule 144A promulgated under the Securities
Act or any similar successor rule, as the same shall be in effect from time to
time.
"RULE 415" shall mean Rule 415 promulgated under the Securities Act,
or any similar successor rule, as the same shall be in effect from time to time.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"SEC" shall mean the Securities and Exchange Commission.
2
<PAGE>
"UNDERWRITTEN OFFERING" shall mean a registration in which
securities of Tetra Tech are sold to an underwriter or through an underwriter as
agent for reoffering to the public.
2. REGISTRATION FOR HOLDERS.
(a) Tetra Tech shall file a Registration Statement on Form S-3,
providing for the sale by the Holders, pursuant to Rule 415, and/or any similar
rule that may be adopted by the SEC, of the Registrable Securities. Tetra Tech
shall use commercially reasonable efforts to cause such Registration Statement
to become effective on or before January 21, 2001, subject to review by the SEC,
and to keep such Registration Statement continuously effective for a period
ending on the date on which all such Holders are eligible to sell Registrable
Securities under Rule 144 (or similar successor rule) without any volume
limitation. Tetra Tech represents and warrants that it is currently eligible to
file a Registration Statement on Form S-3. However, if, at the time Tetra Tech
is required to file a Registration Statement pursuant to this SECTION 3(a),
Tetra Tech is not eligible to file a Registration Statement on Form S-3 to
register resales by stockholders, Tetra Tech shall initially file a Registration
Statement on Form S-1 and shall comply with the provisions of the immediately
preceding sentence. Upon becoming eligible to use the Registration Statement on
Form S-3 to register resales by stockholders (whether pursuant to a ruling or
waiver from the SEC or otherwise), Tetra Tech shall promptly file a Registration
Statement on Form S-3 or convert the existing Registration Statement to Form S-3
relating to the offer and sale of Registrable Securities by the Holders from
time to time. Thereafter, Tetra Tech shall use commercially reasonable efforts
to cause such new or amended Registration Statement to be declared effective by
the SEC as promptly as practicable.
(b) No Holder shall have the right to register securities under this
Agreement unless such Holder provides and/or confirms in writing prior to or
after the filing of the Registration Statement such information (including,
without limitation, information as to the number of Registrable Securities that
such Holder has sold pursuant to any such Registration Statement from time to
time) as Tetra Tech reasonably requests in connection with such Registration
Statement.
(c) Notwithstanding the foregoing, for a period not to exceed 90
days, Tetra Tech shall not be obligated to prepare and file the Registration
Statement required hereunder if Tetra Tech, in its good faith judgment,
reasonably believes that the filing of such Registration Statement would require
the disclosure of material non-public information regarding Tetra Tech and,
accordingly, that the filing thereof, at the time requested, or the offering of
Tetra Tech Common Stock pursuant thereto, would materially and adversely affect
(i) a pending or scheduled public offering or private placement of securities of
Tetra Tech, (ii) an acquisition, merger, consolidation or similar transaction by
or of Tetra Tech, (iii) preexisting and continuing negotiations, discussions or
pending proposals with respect to any of the foregoing transactions, or (iv) the
financial condition of Tetra Tech in view of the disclosure of any pending or
3
<PAGE>
threatened litigation, claim, assessment or governmental investigation which
might be required thereby.
In the event that Tetra Tech, in good faith, reasonably believes that
such conditions are continuing after such 90-day period, it may, with the
consent of the Holders of a majority of the Registrable Securities subject (or
to be subject) to the Registration Statement, which consent shall not be
unreasonably withheld, extend such 90-day period for an additional 30 days. Any
further delay shall require the consent of the Holders of all such shares.
In the event of any delay in the filing of the Registration Statement
pursuant to this subparagraph (c), Tetra Tech will effect such filing as soon as
practicable.
3. REGISTRATION PROCEDURES. In connection with Tetra Tech's
registration obligations pursuant to SECTION 2 hereof, Tetra Tech will use
commercially reasonable efforts to effect such registration to permit the sale
of the Registrable Securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto Tetra Tech will:
(a) prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use its commercially reasonable
efforts to cause such Registration Statement to become effective; PROVIDED that,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, Tetra Tech will furnish to the Holders of the Registrable
Securities covered by such Registration Statement and their counsel, copies of
all such documents proposed to be filed at least ten days prior thereto, and
Tetra Tech will not file any such Registration Statement or amendment thereto or
any Prospectus or any supplement thereto to which any such Holder shall
reasonably object within such ten day period; PROVIDED, FURTHER, that Tetra Tech
will not name or otherwise provide any information with respect to any Holder in
any Registration Statement or Prospectus without the express written consent of
such Holder, unless required to do so by the Securities Act and the rules and
regulations thereunder;
(b) prepare and file with the SEC such amendments, post-effective
amendments and supplements to the Registration Statement and the Prospectus as
may be necessary to comply with the provisions of the Securities Act and the
rules and regulations thereunder with respect to the disposition of all
securities covered by such Registration Statement;
(c) notify the selling Holders (i) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by Tetra Tech of any notification with
respect to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose and (v) of the happening of any event which makes any statement
made in the Registration Statement, the Prospectus or any
4
<PAGE>
document incorporated therein by reference untrue or which requires the making
of any changes in the Registration Statement, the Prospectus or any document
incorporated therein by reference in order to make the statements therein not
misleading in light of the circumstances then existing;
(d) make every commercially reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment;
(e) deliver to each selling Holder, without charge, such reasonable
number of conformed copies of the Registration Statement (and any post-effective
amendment thereto) and such number of copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto (and any
documents incorporated by reference therein) as such Holder may reasonably
request. Tetra Tech consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders in connection with the offer
and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(f) prior to any offering of Registrable Securities covered by a
Registration Statement, register or qualify or cooperate with the selling
Holders in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any such selling Holder reasonably requests, and use
commercially reasonable efforts to keep each such registration or qualification
effective, including through new filings, or amendments or renewals, during the
period such Registration Statement is required to be kept effective pursuant to
the terms of this Agreement; and do any and all other acts or things necessary
or advisable to enable the disposition in all such jurisdictions reasonably
requested by the Holders of the Registrable Securities covered by such
Registration Statement, PROVIDED that under no circumstances shall Tetra Tech be
required in connection therewith or as a condition thereof to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions;
(g) cooperate with the selling Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, free of any and all restrictive legends, such certificates to be in
such denominations and registered in such names as the Holders may request;
(h) upon the occurrence of any event contemplated by SECTION 3(c)(v)
above, prepare a supplement or post-effective amendment to the Registration
Statement or the Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material
5
<PAGE>
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(i) make generally available to the holders of Tetra Tech's
outstanding securities earnings statements satisfying the provisions of Section
11(a) of the Securities Act, no later than 60 days after the end of any 12 month
period (or 90 days, if such period is a fiscal year) beginning with the first
month of Tetra Tech's first fiscal quarter commencing after the effective date
of the Registration Statement, which statements shall cover said 12 month
period;
(j) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by each Registration Statement
from and after a date not later than the effective date of such Registration
Statement;
(k) use its best efforts to cause all Registrable Securities covered
by each Registration Statement to be listed, subject to notice of issuance,
prior to the date of the first sale of such Registrable Securities pursuant to
such Registration Statement, on each securities exchange on which the Tetra Tech
Common Stock is then listed, and admitted to trading on the Nasdaq Stock Market,
if the Tetra Tech Common Stock is then admitted to trading on the Nasdaq Stock
Market; and
(l) enter into such agreements (including underwriting agreements in
customary form containing, among other things, reasonable and customary
indemnities) and take such other actions as a majority of the Holders shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities; and
(m) cooperate with the selling Holders and the managing underwriter
or underwriters in their marketing efforts with respect to the sale of the
Registrable Securities, including participation by Tetra Tech management in
"road show" presentations.
Each Holder agrees that, upon receipt of any notice from Tetra Tech of
the happening of any event of the kind described in SECTION 3(c)(v) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities under
the Prospectus related to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by SECTION 3(h) hereof, or until it is advised in writing by Tetra
Tech that the use of the Prospectus may be resumed.
It shall be a condition precedent to the obligations of Tetra Tech to
take any action pursuant to this SECTION 3 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to Tetra Tech
such information regarding itself and the Registrable Securities held by it as
shall be required by the Securities Act to effect the registration of such
Holder's Registrable Securities.
6
<PAGE>
4. REGISTRATION EXPENSES. All expenses incident to any registration to
be effected hereunder and incident to Tetra Tech's performance of or compliance
with this Agreement, including without limitation all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, National Association of Securities
Dealers, Inc., stock exchange and qualification fees, fees and disbursements of
Tetra Tech's counsel and of independent certified public accountants of Tetra
Tech (including the expenses of any special audit required by or incident to
such performance), the fees and disbursements of one counsel and one accountant
representing the Holders in such offering, expenses of the underwriters that are
customarily requested in similar circumstances by such underwriters (excluding
discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals relating to the distribution of the
Registrable Securities, which will be borne by the Holders), all such expenses
being herein called "Registration Expenses," will be borne by Tetra Tech. Tetra
Tech will also pay its internal expenses, the expense of any annual audit and
the fees and expenses of any person retained by Tetra Tech.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY TETRA TECH. Tetra Tech agrees to indemnify
and hold harmless each Holder of Registrable Securities, its officers,
directors, partners and employees and each person who controls such Holder
(within the meaning of Section 15 of the Securities Act) from and against any
and all losses, claims, damages and liabilities (including any investigation,
legal or other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim asserted)
(collectively, "Damages") to which such Holder may become subject under the
Securities Act, the Exchange Act or other federal or state securities law or
regulation, at common law or otherwise, insofar as such Damages arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment or supplement thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and (iii) any violation or alleged
violation by Tetra Tech of the Securities Act, the Exchange Act or any state
securities or blue sky laws in connection with the Registration Statement,
Prospectus or preliminary prospectus or any amendment or supplement thereto,
PROVIDED that Tetra Tech will not be liable to any Holder to the extent that
such Damages arise from or are based upon any untrue statement or omission (x)
based upon written information furnished to Tetra Tech by such Holder expressly
for the inclusion in such Registration Statement, (y) made in any preliminary
prospectus if such Holder failed to deliver a copy of the Prospectus with or
prior to the delivery of written confirmation of the sale by such Holder to the
party asserting the claim underlying such Damages and such Prospectus would have
corrected such untrue statement or omission and (z) made in any Prospectus if
such untrue statement or omission was corrected in an amendment or supplement to
such Prospectus and such Holder failed to deliver such amendment or supplement
prior to or
7
<PAGE>
concurrently with the sale of Registrable Securities to the party asserting the
claim underlying such Damages.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. Each Holder
of Registrable Securities whose Registrable Securities are sold under a
Prospectus which is a part of a Registration Statement agrees to indemnify and
hold harmless Tetra Tech, its directors and each officer who signed such
Registration Statement and each person who controls Tetra Tech (within the
meaning of Section 15 of the Securities Act), and each other Holder of
Registrable Securities whose Registrable Securities are sold under the
Prospectus which is a part of such Registration Statement (and such Holder's
officers, directors and employees and each person who controls such Holder
within the meaning of SECTION 15 of the Securities Act), under the same
circumstances as the foregoing indemnity from Tetra Tech to each Holder of
Registrable Securities to the extent that such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement of a
material fact or omission of a material fact that was made in the Prospectus,
the Registration Statement, or any amendment or supplement thereto, in reliance
upon and in conformity with information relating to such Holder furnished in
writing to Tetra Tech by such Holder expressly for use therein, PROVIDED that in
no event shall the aggregate liability of any selling Holder of Registrable
Securities exceed the amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. Tetra Tech and the selling Holders shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as customarily furnished by such persons in similar circumstances.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; PROVIDED, HOWEVER, that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such person and not of the
indemnifying party unless (A) the indemnifying party has agreed to pay such fees
or expenses, (B) the indemnifying party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such person or (C)
in the reasonable judgment of such person and the indemnifying party, based upon
advice of their respective counsel, a conflict of interest may exist between
such person and the indemnifying party with respect to such claims (in which
case, if the person notifies the indemnifying party in writing that such person
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such person). If such defense is not assumed by the indemnifying
party, the indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be unreasonably
withheld). No indemnified party will be required to consent to entry of any
judgment or enter into any
8
<PAGE>
settlement which does not include as an unconditional term thereof the giving by
all claimants or plaintiffs to such indemnified party of a release from all
liability in respect to such claim or litigation. Any indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim. As used in
this SECTION 7(C), the terms "indemnifying party", "indemnified party" and other
terms of similar import are intended to include only Tetra Tech (and its
officers, directors and control persons as set forth above) on the one hand, and
the Holders (and their officers, directors, partners, employees, attorneys and
control persons as set forth above) on the other hand, as applicable.
(d) CONTRIBUTION. If for any reason the foregoing indemnity is
unavailable, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by such indemnifying party
or by such indemnified party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The parties acknowledge and agree that it would not be just and
equitable if contribution pursuant to this SECTION 5(d) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in this SECTION 5(d).
Notwithstanding the foregoing, no Holder shall be required to contribute any
amount in excess of the amount such Holder would have been required to pay to an
indemnified party if the indemnity under SECTION 5(b) hereof was available. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The obligation of any
person to contribute pursuant to this SECTION 5(d) shall be several and not
joint.
(e) TIMING OF PAYMENTS. An indemnifying party shall make payments of
all amounts required to be made pursuant to the foregoing provisions of this
SECTION 5 to or for the account of the indemnified party from time to time
promptly upon receipt of bills or invoices relating thereto or when otherwise
due or payable.
(f) SURVIVAL. The indemnity and contribution agreements contained in
this SECTION 5 shall remain in full force and effect, regardless of any
investigation made by or on behalf of Tetra Tech, a participating Holder, its
officers, directors, partners, attorneys, agents or any person, if any, who
controls Tetra Tech or such Holder as aforesaid, and shall survive the transfer
of such Registrable Securities by such Holder.
6. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of a Registration Statement pursuant to the terms of this
Agreement:
9
<PAGE>
(a) Tetra Tech shall, with respect to a Registration Statement filed
pursuant to SECTION 2, give the Holders of such Registrable Securities so
registered, their underwriters, if any, and their respective counsel and
accountants the opportunity to participate in the preparation of such
Registration Statement (other than reports and proxy statements incorporated
therein by reference and properly filed with the SEC) and each Prospectus
included therein or filed with the SEC, and each amendment thereof or supplement
thereto; and
(b) Tetra Tech shall give the Holders of such Registrable Securities
so registered, their underwriters, if any, and their respective counsel and
accountants such reasonable access to its books and records and such
opportunities to discuss the business of Tetra Tech with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders or such underwriters, to
conduct a reasonable investigation within the meaning of Section 11(b)(3) of the
Securities Act.
7. RULE 144. Tetra Tech covenants that it will use commercially
reasonable efforts to file, on a timely basis, the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as any Holder may reasonably request (including, without limitation, compliance
with the current public information requirements of Rule 144(c) and Rule 144A),
all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the conditions provided by Rule 144, Rule 144A or any similar rule
or regulation hereafter adopted by the SEC. Upon the request of any Holder,
Tetra Tech will promptly deliver to such Holder a written statement verifying
that it has complied with such information and requirements.
8. SPECIFIC PERFORMANCE. Each Holder, in addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. Tetra Tech agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
9. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by United States first-class
mail, postage prepaid, sent by facsimile or delivered personally by hand or
nationally recognized courier addressed (a) if to a Holder, as indicated on the
list of Holders attached hereto as SCHEDULE A, or at such other address as such
Holder or permitted assignee shall have furnished to Tetra Tech in writing, or
(b) if to Tetra Tech, at such address or facsimile number as Tetra Tech shall
have furnished to each
10
<PAGE>
Holder in writing. All such notices and other written communications shall be
effective on the date of mailing, facsimile transfer or delivery.
10. SUCCESSORS AND ASSIGNS: ASSIGNMENT OF RIGHTS. The rights and
benefits of a Holder hereunder may not be assigned to a transferee or assignee
without the consent of Tetra Tech; PROVIDED, HOWEVER, that, no later than the
10th day prior to the filing of the Registration Statement under SECTION 2
hereof, the rights and benefits of a Holder hereunder may be transferred in
connection with a transfer or assignment of any Registrable Securities held by
such Holder (i) by gift to immediate family members of such Holder, or trusts or
other entities for the sole benefit thereof, or (ii) by gift to any entity in
which such Holder, his or her immediate family members, or trusts or other
entities for the sole benefit thereof beneficially own all of the voting
securities; PROVIDED, HOWEVER, that in each case, the transferee executes an
instrument pursuant to which the transferee agrees to be bound by the terms and
conditions hereof as a Holder, and such other documents as Tetra Tech or its
counsel may reasonably require, after which, such transferee shall be deemed a
"Holder" hereunder. Any transfer of Registrable Securities, and rights
hereunder, shall be subject to compliance with applicable securities laws and
the restrictions contained in the Investment Letter executed by each Holder
pursuant to the Reorganization Agreement.
11. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
12. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, the
Reorganization Agreement and the other agreements contemplated thereby
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof and thereof. Without limiting the foregoing,
the rights of the Holders to registration pursuant to the terms of this
Agreement shall be subject to the limitations on resale contained in the
Investment Letter (as defined in the Reorganization Agreement). Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by Tetra Tech and the holders of at least
51% of the Registrable Securities and any such amendment, waiver, discharge or
termination shall be binding upon all the parties hereto, but in no event shall
the obligation of any party hereto be materially increased, except upon the
written consent of such party.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be original, and all of which together shall
constitute one instrument.
14. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without giving effect to
principles of conflicts of laws thereof.
11
<PAGE>
15. NO THIRD PARTY BENEFICIARIES. The covenants and agreements set
forth herein are for the sole and exclusive benefit of the parties hereto and
their respective successors and assigns and such covenants and agreements shall
not be construed as conferring, and are not intended to confer, any rights or
benefits upon any other persons.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TETRA TECH, INC.
By: /s/ Li-San Hwang
-----------------------------------------------
Li-San Hwang
Chairman, Chief Executive Officer and President
/s/ Daniel V. Ault
---------------------------------------------------
Daniel V. Ault
/s/ Don W. Deere
---------------------------------------------------
Don W. Deere
/s/ Thomas J. Hesemann
---------------------------------------------------
Thomas J. Hesemann
/s/ Mark Klee
---------------------------------------------------
Mark Klee
/s/ L. Stephen Schmidt
---------------------------------------------------
L. Stephen Schmidt
/s/ Jennifer E. Vecchi
---------------------------------------------------
Jennifer E. Vecchi
/s/ Leonard R. Wilson
---------------------------------------------------
Leonard R. Wilson
12
<PAGE>
SCHEDULE A
SCHEDULE OF HOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF TETRA TECH COMMON
HOLDER'S NAME/ADDRESS/FACSIMILE NO. STOCK ISSUED PURSUANT
TO THE REORGANIZATION AGREEMENT
- ----------------------------------- -------------------------------------
<S> <C>
Daniel V. Ault 44,500
7835 Middlefork Road
Boulder, CO 80302
Facsimile: ______________
Don W. Deere 44,500
8592 Skyline Drive
Niwot, CO 80503
Facsimile: ______________
Thomas J. Hesemann 44,500
512 W. Arrowhead Court
Louisville, CO 80027
Facsimile: ______________
Mark Klee 29,667
7942 Field Court
Arvada, CO 80005
Facsimile: ______________
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF TETRA TECH COMMON
HOLDER'S NAME/ADDRESS/FACSIMILE NO. STOCK ISSUED PURSUANT
TO THE REORGANIZATION AGREEMENT
- ----------------------------------- -------------------------------------
<S> <C>
L. Stephen Schmidt 44,500
2120 S. Youngfield
Lakewood, CO 80228
Facsimile: ______________
Jennifer E. Vecchi 44,500
3509 Camden Drive
Longmont, CO 80104
Facsimile: ______________
Leonard R. Wilson 44,500
1050 N. Tabor Drive
Castle Rock, CO 80104
Facsimile: ______________
</TABLE>
14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.
<SEQUENCE>3
<FILENAME>a2034071zex-13_.txt
<DESCRIPTION>EXHIBIT 13
<TEXT>
<PAGE>
EXHIBIT 13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------------------
Oct. 1,(1) Oct. 3,(2) Oct. 4, Sept. 28, Sept. 29,
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Gross revenue.......................... $ 794,578 $ 566,490 $ 382,934 $ 246,767 $ 220,099
Net revenue............................ 598,121 432,080 297,597 190,791 161,037
Income from operations................. 74,245 55,424 39,813 24,599 17,735
Net income............................. 40,442 29,115 20,586 14,256 10,105
Basic earnings per share............... 1.04 0.78 0.59 0.49 0.37
Diluted earnings per share ............ 0.97 0.74 0.56 0.46 0.36
Weighted average common shares
outstanding:
Basic............................. 39,003 37,159 34,962 29,214 27,314
Diluted........................... 41,602 39,550 36,488 30,820 28,226
Net cash flow from operating
activities(3)...................... (12,188) 30,258 (6,620) 1,144 21,124
Working capital........................ 154,341 86,313 77,049 42,539 32,739
Total assets........................... 526,038 380,478 266,610 159,513 88,463
Long-term obligations, excluding
current portion..................... 85,532 37,289 33,546 -- --
Stockholders' equity................... 297,907 234,432 167,781 107,641 63,269
</TABLE>
(1) REVENUE AND INCOME FROM OPERATIONS WERE UPWARDLY IMPACTED BY A
REVERSAL OF RESERVES IN THE AMOUNT OF $2.00 MILLION, OR $1.16 MILLION
ON AN AFTER TAX BASIS.
(2) REVENUE AND INCOME FROM OPERATIONS WERE UPWARDLY IMPACTED BY A
REVERSAL OF RESERVES IN THE AMOUNT OF $1.75 MILLION, OR $0.98 MILLION
ON AN AFTER TAX BASIS.
(3) NET CASH FROM OPERATING ACTIVITIES WAS REDUCED BY $10.7 MILLION, $9.3
MILLION, $10.3 MILLION AND $15.6 MILLION FOR THE YEARS ENDED OCTOBER 1,
2000, OCTOBER 3, 1999, OCTOBER 4, 1998 AND SEPTEMBER 28, 1997,
RESPECTIVELY, AS A RESULT OF OUR ASSIGNMENT OF ACCOUNTS RECEIVABLE TO THE
FORMER OWNERS OF CERTAIN ACQUIRED COMPANIES.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------------
Oct. 1,(1) Oct. 3,(2) Oct. 4,(3) Sept. 28,(4) Sept. 29,(5)
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA
Gross revenue.......................... $ 794,578 $ 566,490 $ 382,934 $ 246,767 $ 220,099
Subcontractor costs.................... 196,457 134,410 85,337 55,976 59,062
---------- ---------- ---------- ---------- ---------
Net revenue............................ 598,121 432,080 297,597 190,791 161,037
Cost of net revenue.................... 452,872 327,336 223,871 141,019 122,084
---------- ---------- ---------- ---------- ---------
Gross profit........................... 145,249 104,744 73,726 49,772 38,953
Selling, general and administrative
expenses............................ 71,004 49,320 33,913 25,173 21,218
---------- ---------- ---------- ---------- ---------
Income from operations................. 74,245 55,424 39,813 24,599 17,735
Net interest expense................... 7,026 3,135 1,910 20 776
----------- ---------- ---------- ---------- --------
Income before minority interest and
income tax expense.................. 67,219 52,289 37,903 24,579 16,959
Minority interest...................... -- -- 1,397 -- --
---------- ---------- ---------- ---------- ---------
Income before income tax expense....... 67,219 52,289 36,506 24,579 16,959
Income tax expense..................... 26,777 23,174 15,920 10,323 6,854
---------- ---------- ---------- ---------- ---------
Net income............................. $ 40,442 $ 29,115 $ 20,586 $ 14,256 $ 10,105
========== ========== ========== ========== =========
Basic earnings per share .............. $ 1.04 $ 0.78 $ 0.59 $ 0.49 $ 0.37
========== ========== ========== ========== =========
Diluted earnings per share ............ $ 0.97 $ 0.74 $ 0.56 $ 0.46 $ 0.36
========== ========== ========== ========== =========
Weighted average common shares
outstanding:
Basic............................. 39,003 37,159 34,962 29,214 27,314
========== ========== ========== ========== =========
Diluted........................... 41,602 39,550 36,488 30,820 28,226
========== ========== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Oct. 1, Oct. 3, Oct. 4, Sept. 28, Sept. 29,
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital........................ $ 154,341 $ 86,313 $ 77,049 $ 42,539 $ 32,739
Total assets........................... 526,038 380,478 266,610 159,513 88,463
Long-term obligations, excluding
current portion..................... 85,532 37,289 33,546 -- --
Stockholders' equity................... 297,907 234,432 167,781 107,641 63,269
</TABLE>
(Continued)
2
<PAGE>
(1) INCLUDED IN OUR REVENUE AND INCOME FROM OPERATIONS IS $2.00 MILLION OR
$1.16 MILLION ON AN AFTER TAX BASIS, RELATING TO THE REVERSAL OF
CERTAIN RESERVES. ADDITIONALLY, WE HAVE INCLUDED THE RESULTS OF
OPERATIONS AND FINANCIAL POSITIONS OF LC OF ILLINOIS, INC. AND HFC
TECHNOLOGIES, INC. (COLLECTIVELY ACQUIRED OCTOBER 25, 1999), EDWARD A.
SEARS ASSOCIATES (ACQUIRED MARCH 30, 2000), EXPERT WIRELESS SOLUTIONS, INC.
(ACQUIRED APRIL 3, 2000), 1261248 ONTARIO, INC., WHICH DOES BUSINESS AS
ENGINEERED COMMUNICATIONS (ACQUIRED MAY 3, 2000), FHC, INC. (ACQUIRED
MAY 17, 2000), RIZZO ASSOCIATES, INC. (ACQUIRED MAY 24, 2000), DRAKE
CONTRACTORS, INC. (ACQUIRED JUNE 16, 2000), AND WM. BETHLEHEM TRENCHING
LTD. (ACQUIRED JULY 5, 2000) FROM THE EFFECTIVE ACQUISITION DATES.
(2) INCLUDED IN OUR REVENUE AND INCOME FROM OPERATIONS IS $1.75 MILLION, OR
$0.98 MILLION ON AN AFTER TAX BASIS, RELATING TO THE REVERSAL OF CERTAIN
RESERVES. ADDITIONALLY, WE HAVE INCLUDED THE RESULTS OF OPERATIONS AND
FINANCIAL POSITIONS OF MFG, INC. (FORMERLY MCCULLEY, FRICK & GILMAN, INC.,
ACQUIRED FEBRUARY 26, 1999), COLLINS/PINA CONSULTING ENGINEERS, INC.
(ACQUIRED MAY 7, 1999), D.E.A. CONSTRUCTION COMPANY (ACQUIRED MAY 19, 1999),
BAHA COMMUNICATIONS, INC. (ACQUIRED MAY 21, 1999), UTILITIES & C.C., INC.
(ACQUIRED JUNE 18, 1999), ASL CONSULTANTS, INC. (ACQUIRED JUNE 25, 1999),
COSENTINI ASSOCIATES, INC. (FORMERLY PARTNERSHIP INTERESTS AND CERTAIN
COMPANIES AFFILIATED WITH COSENTINI ASSOCIATES LLP, ACQUIRED JUNE 30, 1999),
PDR ENGINEERS, INC. (ACQUIRED SEPTEMBER 3, 1999), AND EVERGREEN UTILITY
CONTRACTORS, INC., CONTINENTAL UTILITY CONTRACTORS, INC. AND GIG HARBOR
CONSTRUCTION, INC. (COLLECTIVELY ACQUIRED OCTOBER 2, 1999) FROM THE
EFFECTIVE ACQUISITION DATES.
(3) WE HAVE INCLUDED THE RESULTS OF OPERATIONS AND FINANCIAL POSITIONS OF TETRA
TECH NUS, INC. (ACQUIRED DECEMBER 31, 1997), WHALEN/SENTREX LLC (FORMED
MARCH 2, 1998), C.D.C. ENGINEERING, INC. (ACQUIRED MARCH 26, 1998 AND
SUBSEQUENTLY MERGED INTO TETRA TECH, INC. ON JULY 29, 1999), MCNAMEE, PORTER
& SEELEY, INC. (ACQUIRED JULY 8, 1998) AND THE SENTREX GROUP OF COMPANIES
(ACQUIRED SEPTEMBER 22, 1998) FROM THE EFFECTIVE ACQUISITION DATES.
(4) WE HAVE INCLUDED THE RESULTS OF OPERATIONS AND FINANCIAL POSITIONS OF IWA
ENGINEERS (ACQUIRED DECEMBER 11, 1996 AND SUBSEQUENTLY MERGED INTO TETRA
TECH, INC. ON JULY 29, 1999), FLO ENGINEERING, INC. (ACQUIRED DECEMBER 20,
1996 AND SUBSEQUENTLY MERGED INTO TETRA TECH, INC. ON JULY 29, 1999), SCM
CONSULTANTS, INC. (ACQUIRED MARCH 19, 1997), WHALEN & COMPANY, INC.
(ACQUIRED JUNE 11, 1997) AND COMMSite DEVELOPMENT CORPORATION (ACQUIRED JULY
11, 1997 AND SUBSEQUENTLY MERGED INTO WHALEN & COMPANY, INC. ON JANUARY 4,
1999) FROM THE EFFECTIVE ACQUISITION DATES.
(5) WE HAVE INCLUDED THE RESULTS OF OPERATIONS AND FINANCIAL POSITION OF KCM,
INC. (ACQUIRED NOVEMBER 7, 1995) FROM THE EFFECTIVE ACQUISITION DATE.
(Concluded)
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED BELOW, THE MATTERS
DISCUSSED IN THIS SECTION ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE A NUMBER
OF RISKS AND UNCERTAINTIES. OUR ACTUAL LIQUIDITY NEEDS, CAPITAL RESOURCES AND
OPERATING RESULTS MAY DIFFER MATERIALLY FROM THE DISCUSSION SET FORTH BELOW IN
THESE FORWARD-LOOKING STATEMENTS. FOR ADDITIONAL INFORMATION, REFER TO THE NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
OVERVIEW
Tetra Tech, Inc. is a leading provider of specialized management
consulting and technical services in three principal business areas: resource
management, infrastructure and communications. As a specialized management
consultant, we assist our clients in defining problems and developing
innovative and cost-effective solutions. Our management consulting services
are complemented by our technical services. These technical services, which
implement solutions, include research and development, applied science,
engineering and architectural design, construction management, and operations
and maintenance. Our clients include a diverse base of public and private
organizations located in the United States and internationally.
Since our initial public offering in December 1991, we increased the
size and scope of our business and have expanded our service offerings
through a series of strategic acquisitions and internal growth. From fiscal
1991 through fiscal 2000, we generated a net revenue compounded annual growth
rate of approximately 35.8% and achieved a net income compounded annual
growth rate of approximately 37.2%.
We derive our revenue from fees from professional services. Our
services are billed under various types of contracts with our clients,
including:
- fixed-price;
- fixed-rate time and materials;
- cost-reimbursement plus fixed fee; and
- cost-reimbursement plus fixed and award fee.
In the course of providing our services, we routinely subcontract
services. These subcontractor costs are passed through to our clients and, in
accordance with industry practice, are included in our gross revenue. Because
subcontractor services can change significantly from project to project, we
believe net revenue, which is gross revenue less the cost of subcontractor
services, is a more appropriate measure of our performance.
Our cost of net revenue includes professional compensation and
certain direct and indirect overhead costs such as rents, utilities and
travel. Professional compensation represents the majority of these costs. Our
selling, general and administrative (SG&A) expenses are comprised primarily
of our corporate headquarters' costs related to the executive offices,
corporate accounting, information technology, marketing, and bid and proposal
costs. These costs are generally unrelated to specific client projects. In
addition, we include amortization of certain intangible assets resulting from
acquisitions in SG&A expenses.
4
<PAGE>
We provide services to a diverse base of Federal, state and local
government agencies, and private and international clients. The following table
presents, for the periods indicated, the approximate percentage of our net
revenue attributable to these client sectors:
<TABLE>
<CAPTION>
Percentage of Net Revenue
----------------------------------------------
Client Fiscal 2000 Fiscal 1999 Fiscal 1998
------ ----------- ----------- -----------
<S> <C> <C> <C>
Federal government............................... 29.1% 39.1% 48.7%
State and local government....................... 16.3 16.3 12.7
Private.......................................... 51.4 41.3 35.4
International.................................... 3.2 3.3 3.2
----------- ----------- -----------
Total............................................ 100.0% 100.0% 100.0%
=========== =========== ===========
</TABLE>
We manage our business in three operating segments: Resource
Management, Infrastructure and Communications. The following table presents, for
the periods indicated, the approximate percentage of net revenue attributable to
the operating segments:
<TABLE>
<CAPTION>
Percentage of Net Revenue
----------------------------------------------
Operating Segment Fiscal 2000 Fiscal 1999 Fiscal 1998
----------------- ----------- ----------- -----------
<S> <C> <C> <C>
Resource Management.............................. 41.3% 53.6% 66.8%
Infrastructure................................... 31.8 25.9 15.9
Communications................................... 25.6 20.5 17.2
Other revenue.................................... 1.3 0.0 0.1
----------- ----------- -----------
Total............................................ 100.0% 100.0% 100.0%
=========== =========== ===========
</TABLE>
Our revenue and operating results fluctuate from quarter to quarter as a
result of a number of factors, such as:
- the seasonality of the spending cycle of our public sector clients
and the spending patterns of our private sector clients;
- employee hiring and utilization rates;
- the number and significance of client engagements commenced and
completed during a quarter;
- delays incurred in connection with an engagement;
- the ability of clients to terminate engagements without penalties;
- the size and scope of engagements;
- the timing and size of the return on investment capital; and
- general economic and political conditions.
Variations in any of these factors can cause significant variations in
operating results from quarter to quarter and could result in losses.
RECENT ACQUISITIONS
As a part of our growth strategy, we expect to pursue complementary
acquisitions to expand our geographical reach and the breadth and depth of
our service offerings. During fiscal 2000, we purchased nine companies in the
following eight transactions:
5
<PAGE>
- LC OF ILLINOIS, INC. - In October 1999, we acquired LC of Illinois,
Inc. and HFC Technologies, Inc. (collectively, LCI). The purchase was valued
at approximately $1.6 million. LCI, an Illinois-based firm, provides
engineering and network infrastructure services for cable television and
fiber optic telephone networks including design, construction and maintenance
capabilities for communications and information transport systems.
- EDWARD A. SEARS ASSOCIATES - In March 2000, Tetra Tech Engineers, P.C.
acquired certain assets of Edward A. Sears Associates (ESA). Concurrent with
this transaction, our wholly-owned subsidiary, Cosentini Associates, Inc.,
acquired certain non-licensed assets of ESA from Tetra Tech Engineers, P.C.
The purchase was valued at approximately $0.4 million. ESA, a New York-based
firm, provides engineering services to hospitals primarily in New York.
- EXPERT WIRELESS SOLUTIONS, INC. - In April 2000, we acquired eXpert
Wireless Solutions, Inc. (EWS). The purchase was valued at approximately
$18.8 million, excluding the value of the accounts receivable of $1.8 million
which were assigned to the former owners at the time of acquisition. EWS, a
New Jersey-based firm, provides radio-frequency engineering and consulting
services to the wireless communications industry.
- ENGINEERED COMMUNICATIONS - In May 2000, we acquired, through our
majority-owned subsidiary, Tetra Tech Canada Ltd., 1261248 Ontario, Inc.,
which does business as Engineered Communications (ENG). The purchase was
valued at approximately $1.5 million. ENG, a Canadian-based firm, provides
engineering and network services for the wired communications industry in
Ontario, Canada.
- FHC, INC. - In May 2000, we acquired FHC, Inc. (FHC). The purchase was
valued at approximately $5.2 million. FHC, an Oklahoma-based firm, provides
engineering consulting services primarily to state and local governments in
Oklahoma.
- RIZZO ASSOCIATES, INC. - In May 2000, we acquired Rizzo Associates,
Inc. (RAI). The purchase was valued at approximately $10.3 million. RAI, a
Massachusetts-based firm, provides engineering consulting services to state
and local governments and commercial clients in the upper Northeast region of
the United States.
- DRAKE CONTRACTORS, INC. - In June 2000, we acquired Drake Contractors,
Inc. (DCI). The purchase was valued at approximately $5.5 million, excluding
the value of the accounts receivable of $2.1 million which were assigned to
the former owners at the time of acquisition. DCI, a Colorado-based firm,
provides infrastructure installation and maintenance services primarily in
Colorado.
- WM. BETHLEHEM TRENCHING LTD. - In July 2000, we acquired Wm. Bethlehem
Trenching Ltd. (BTL). The purchase was valued at approximately $0.3 million.
BTL, a Canadian-based firm, provides infrastructure installation and
maintenance services primarily in Ontario, Canada.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
operating information as a percentage of net revenue:
<TABLE>
<CAPTION>
Percentage of Net Revenue
------------------------------------------------
Fiscal Year Ended
------------------------------------------------
Oct. 1, Oct. 3, Oct. 4,
2000 1999 1998
--------- --------- --------
<S> <C> <C> <C>
Net revenue............................. 100.0% 100.0% 100.0%
Cost of net revenue..................... 75.7 75.8 75.2
--------- --------- --------
Gross profit............................ 24.3 24.2 24.8
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
Selling, general and administrative
expenses............................. 11.9 11.4 11.4
--------- --------- --------
Income from operations.................. 12.4 12.8 13.4
Net interest expense.................... 1.2 0.7 0.7
--------- --------- --------
Income before minority interest and
income tax expense................... 11.2 12.1 12.7
Minority interest....................... -- -- (0.5)
--------- --------- --------
Income before income tax expense........ 11.2 12.1 12.2
Income tax expense...................... 4.4 5.4 5.3
--------- --------- --------
Net income.............................. 6.8 % 6.7% 6.9%
======== ========= =========
</TABLE>
FISCAL 2000 COMPARED TO FISCAL 1999
NET REVENUE. Net revenue increased $166.0 million, or 38.4%, to
$598.1 million in fiscal 2000 from $432.1 million in fiscal 1999. All three
business segments and all four client sectors continued to show net revenue
increases in actual dollars. These increases were primarily attributable to
the expansion of our infrastructure services throughout the United States,
the continued expansion of new lines of service in our communications
business and companies acquired in fiscal 2000. As a percentage of net
revenue, an increase was realized in the private sector. We segregate from
our total revenue, revenue from companies acquired during the current fiscal
year as well as revenue recognized from acquired companies during the first
12 months following their respective effective dates of acquisition. Revenue
recognized from acquired companies during such first 12 months is referred to
as acquisitive revenue. Organic revenue is measured as total revenue less any
acquisitive revenue. Net revenue provided by companies acquired during fiscal
2000 totaled $32.7 million. Excluding this net revenue, we realized 30.9%
growth in our net revenue from fiscal 1999 to fiscal 2000. Acquisitive net
revenue for fiscal 2000 totaled $114.2 million. Excluding this net revenue,
we realized organic growth in our net revenue of 12.0%.
Gross revenue increased $228.1 million, or 40.3%, to $794.6 million
in fiscal 2000 from $566.5 million in fiscal 1999. In fiscal 2000,
subcontractor costs comprised 24.7% of gross revenue compared to 23.7% for
fiscal 1999.
COST OF NET REVENUE. Cost of net revenue increased $125.5 million,
or 38.3%, to $452.9 million in fiscal 2000 from $327.3 million in fiscal
1999. As a percentage of net revenue, cost of net revenue decreased from
75.8% in fiscal 1999 to 75.7% in fiscal 2000. Professional compensation, the
largest component of our cost of net revenue, rose as the number of our
employees increased by 677, or 12.4%, to 6,120 in fiscal 2000 from 5,443 in
fiscal 1999. However, excluding the 681 employees provided from acquired
companies, the number of our employees remained flat. Gross profit increased
$40.5 million, or 38.7%, to $145.2 million in fiscal 2000 from $104.7 million
in fiscal 1999. Included in our net revenue and gross profit was $2.00
million and $1.75 million relating to reversals of previously established
allowances for disallowed costs in fiscal 2000 and fiscal 1999, respectively.
(See Note 3 of Notes to Consolidated Financial Statements.) As a percentage
of net revenue, gross profit increased from 24.2% in fiscal 1999 to 24.3% in
fiscal 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses,
exclusive of amortization expense, increased $20.0 million, or 45.1%, to
$64.5 million in fiscal 2000 from $44.5 million in fiscal 1999. This increase
was primarily attributable to expenses associated with the automation of our
corporate business systems and processes, business development activities and
higher administrative costs associated with acquired companies. As a
percentage of net revenue, SG&A expenses, exclusive of amortization expense,
increased to 10.8% in fiscal 2000 from 10.3% in fiscal 1999. The amortization
7
<PAGE>
expense related to acquisitions increased $1.7 million, or 33.5%, to $6.5
million in fiscal 2000 from $4.8 million in fiscal 1999.
NET INTEREST EXPENSE. Net interest expense increased $3.9 million,
or 124.1%, from $3.1 million in fiscal 1999 to $7.0 million in fiscal 2000.
This increase was primarily attributable to increased borrowings on our
credit facility in order to fund working capital and investing needs of
acquisitions as well as increase in interest rates. In fiscal 2000,
borrowings on our credit facility averaged $95.4 million compared to $44.6
million in fiscal 1999.
INCOME TAX EXPENSE. Income tax expense increased $3.6 million, or
15.5%, to $26.8 million in fiscal 2000 from $23.2 million in fiscal 1999.
This increase was due to higher income before income taxes and a change in
our effective tax rate. During fiscal 2000, we performed an extensive review
of our current tax position and certain tax strategies which could
potentially reduce our effective tax rate. As a result of this review, we
have determined that we are entitled to certain tax credits for fiscal 2000
as well as certain prior years. These credits are primarily responsible for
the reduction in our effective tax rate to 39.8% in fiscal 2000 from 44.3% in
fiscal 1999. We expect our future effective tax rate to be approximately
42.0%.
FISCAL 1999 COMPARED TO FISCAL 1998
NET REVENUE. Net revenue increased $134.5 million, or 45.2%, to
$432.1 million in fiscal 1999 from $297.6 million in fiscal 1998. All four
client sectors continued to show net revenue increases in actual dollars.
These increases were primarily attributable to the expansion of our
infrastructure services throughout the United States, the continued expansion
of new lines of service in our communications business and companies acquired
in fiscal 1999. As a percentage of net revenue, increases were realized in
the state and local sector, the private sector and the international sector.
Net revenue from the companies acquired in fiscal 1999 totaled $61.5 million.
Excluding the net revenue from these companies, we realized 24.5% growth in
our net revenue. Acquisitive net revenue for fiscal 1999 totaled $117.3
million. Excluding this net revenue, we realized organic growth in our net
revenue of 5.8%.
Gross revenue increased $183.6 million, or 47.9%, to $566.5 million
in fiscal 1999 from $382.9 million in fiscal 1998. In fiscal 1999,
subcontractor costs comprised 23.7% of gross revenue compared to 22.3% for
fiscal 1998.
COST OF NET REVENUE. Cost of net revenue increased $103.5 million,
or 46.2%, to $327.3 million in fiscal 1999 from $223.9 million in fiscal
1998. As a percentage of net revenue, cost of net revenue increased from
75.2% in fiscal 1998 to 75.8% in fiscal 1999. This increase was primarily
attributable to higher costs incurred from the acquired companies.
Professional compensation, the largest component of our cost of net revenue,
rose as the number of our employees increased by 1,781, or 48.6%, to 5,443 in
fiscal 1999 from 3,662 in fiscal 1998. Excluding the employees provided from
acquired companies, our number of employees increased by 74, or 2.0%. Gross
profit increased $31.0 million, or 42.1%, to $104.7 million in fiscal 1999
from $73.7 million in fiscal 1998. Included in our fiscal 1999 net revenue
and gross profit was $1.75 million relating to the reversal of previously
established allowances for disallowed costs. (See Note 3 of Notes to
Consolidated Financial Statements.) However, as a percentage of net revenue,
gross profit decreased from 24.8% in fiscal 1998 to 24.2% in fiscal 1999,
primarily due to lower margins of acquired companies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses
increased $15.4 million, or 45.4%, to $49.3 million in fiscal 1999 from
$33.9 million in fiscal 1998. This increase was primarily attributable to
additional headquarters' costs associated with centralizing corporate
functions, other corporate initiatives, costs associated with year 2000
compliance, as well as additional amortization expense relating to acquired
companies. As a percentage of net revenue, SG&A expenses remained at
8
<PAGE>
11.4%. The amortization expense related to acquisitions increased $1.8
million, or 63.1%, to $4.8 million in fiscal 1999 from $3.0 million in fiscal
1998.
NET INTEREST EXPENSE. Net interest expense increased $1.2 million,
or 64.1%, from $1.9 million to $3.1 million from fiscal 1998 to fiscal 1999.
This increase was primarily attributable to the financing and working capital
needs of certain acquisitions.
INCOME TAX EXPENSE. Income tax expense increased $7.3 million, or
45.6%, to $23.2 million in fiscal 1999 from $15.9 million in fiscal 1998.
This increase was due to higher income before income taxes and an increase in
our effective tax rate from 43.6% in fiscal 1998 to 44.3% in fiscal 1999.
This increase was primarily attributable to increased amounts of
non-deductible goodwill resulting from our business acquisitions.
UNAUDITED QUARTERLY OPERATING RESULTS
The following tables set forth certain unaudited quarterly operating
results for each of our last three fiscal years ended October 1, 2000,
October 3, 1999 and October 4, 1998. This data is also expressed as a
percentage of net revenue for the respective quarters. The information has
been derived from unaudited consolidated financial statements that, in our
opinion, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such quarterly information.
The operating results for any quarter are not necessarily indicative of the
results to be expected for any future period.
<TABLE>
<CAPTION>
Fiscal 2000 Quarter Ended Fiscal 1999 Quarter Ended
----------------------------------------- ---------------------------------------
Jan. 2, Apr. 2, Jul. 2, Oct. 1, Jan. 3, Apr. 4, Jul. 4, Oct. 3,
2000 2000 2000 2000 1999 1999 1999 1999
-------- -------- -------- -------- ------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue $129,171 $138,846 $156,468 $173,636 $89,245 $96,955 $120,739 $125,141
Cost of net revenue 100,417 109,562 116,266 126,627 70,187 74,402 88,189 94,558
-------- -------- -------- -------- ------- ------- -------- --------
Gross profit 28,754 29,284 40,202 47,009 19,058 22,553 32,550 30,583
Selling, general and
administrative expenses 14,021 13,304 20,529 23,150 8,871 10,684 16,951 12,814
-------- -------- -------- -------- ------- ------- -------- --------
Income from operations 14,733 15,980 19,673 23,859 10,187 11,869 15,599 17,769
Net interest expense 1,228 1,473 1,958 2,367 699 532 550 1,354
-------- -------- -------- -------- ------- ------- -------- --------
Income before minority
interest and income
tax expense 13,505 14,507 17,715 21,492 9,488 11,337 15,049 16,415
Minority interest - - - - - - - -
-------- -------- -------- -------- ------- ------- -------- --------
Income before income
tax expense 13,505 14,507 17,715 21,492 9,488 11,337 15,049 16,415
Income tax expense 5,942 6,383 7,795 6,657 4,061 4,875 6,546 7,692
-------- -------- -------- -------- ------- ------- -------- --------
Net income $ 7,563 $ 8,124 $ 9,920 $14,835 $ 5,427 $ 6,462 $ 8,503 $ 8,723
======== ======== ======== ======== ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998 Quarter Ended
----------------------------------------
Dec. 28, Mar. 29, Jun. 28, Oct. 4,
1997 1998 1998 1998
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net revenue $53,664 $71,806 $75,149 $96,978
Cost of net revenue 40,339 54,786 54,405 74,341
-------- -------- -------- -------
Gross profit 13,325 17,020 20,744 22,637
Selling, general and
administrative expenses 6,146 8,148 9,333 10,286
-------- -------- -------- -------
Income from operations 7,179 8,872 11,411 12,351
Net interest expense 73 596 510 731
-------- -------- -------- -------
Income before minority
interest and income
tax expense 7,106 8,276 10,901 11,620
Minority interest - 203 1,194 -
-------- -------- -------- -------
Income before income
tax expense 7,106 8,073 9,707 11,620
Income tax expense 3,055 3,552 4,214 5,099
-------- -------- -------- -------
Net income $ 4,051 $ 4,521 $ 5,493 $ 6,521
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Fiscal 2000 Quarter Ended Fiscal 1999 Quarter Ended
----------------------------------------- ---------------------------------------
Jan. 2, Apr. 2, Jul. 2, Oct. 1, Jan. 3, Apr. 4, Jul. 4, Oct. 3,
2000 2000 2000 2000 1999 1999 1999 1999
-------- -------- -------- -------- ------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of net revenue 77.7 78.9 74.3 72.9 78.6 76.7 73.0 75.6
-------- -------- -------- -------- ------- ------- -------- --------
Gross profit 22.3 21.1 25.7 27.1 21.4 23.3 27.0 24.4
Selling, general and
administrative expenses 10.9 9.6 13.1 13.4 10.0 11.1 14.1 10.2
-------- -------- -------- -------- ------- ------- -------- --------
Income from operations 11.4 11.5 12.6 13.7 11.4 12.2 12.9 14.2
Net interest expense 0.9 1.1 1.3 1.3 0.8 0.5 0.4 1.1
-------- -------- -------- -------- ------- ------- -------- --------
Income before minority
interest and income
tax expense 10.5 10.4 11.3 12.4 10.6 11.7 12.5 13.1
Minority interest - - - - - - - -
-------- -------- -------- -------- ------- ------- -------- --------
Income before income
tax expense 10.5 10.4 11.3 12.4 10.6 11.7 12.5 13.1
Income tax expense 4.6 4.5 5.0 3.9 4.5 5.0 5.5 6.1
-------- -------- -------- -------- ------- ------- -------- --------
Net income 5.9% 5.9% 6.3% 8.5% 6.1% 6.7% 7.0% 7.0%
======== ======== ======== ======== ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998 Quarter Ended
----------------------------------------
Dec. 28, Mar. 29, Jun. 28, Oct. 4,
1997 1998 1998 1998
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 100.0%
Cost of net revenue 75.2 76.3 72.4 76.7
-------- -------- -------- -------
Gross profit 24.8 23.7 27.6 23.3
Selling, general and
administrative expenses 11.5 11.3 12.4 10.6
-------- -------- -------- -------
Income from operations 13.3 12.4 15.2 12.7
Net interest expense 0.1 0.9 0.7 0.7
-------- -------- -------- -------
Income before minority
interest and income
tax expense 13.2 11.5 14.5 12.0
Minority interest - 0.3 1.6 -
-------- -------- -------- -------
Income before income
tax expense 13.2 11.2 12.9 12.0
Income tax expense 5.7 4.9 5.6 5.3
-------- -------- -------- -------
Net income 7.5% 6.3% 7.3% 6.7%
======== ======== ======== =======
</TABLE>
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of October 1, 2000, our working capital was $154.3 million, an
increase of $68.0 million from $86.3 million on October 3, 1999, of which
cash and cash equivalents totaled $7.6 million at October 1, 2000. In fiscal
2000, $12.2 million was used in operating activities and $42.3 million was
used in investing activities, of which $27.5 million was related to business
acquisitions. In fiscal 1999, $30.3 million was provided by operating
activities and $57.7 million was used in investing activities, of which $50.7
million was related to business acquisitions. In both fiscal years 2000 and
1999, cash provided by/used in operating activities was affected by the
structure of certain transactions. One of our acquisition structures is to
assign accounts receivable to the former owners at the time of the
transaction in lieu of cash consideration. This structure allows us to reduce
our cash used in investing activities. However, cash must be invested in
future periods to finance the working capital needs of the acquired company.
In fiscal 2000, in the EWS and DCI acquisitions, accounts receivable in the
aggregate amount of $3.9 million were assigned to the former owners.
Collections on assigned receivables totaled $10.7 million. If we had not
assigned these receivables at the time of acquisition, cash used in operating
activities could have been $1.5 million. In fiscal 1999, in the BAHA
Communications, Inc. and Cosentini Associates, Inc. acquisitions, accounts
receivable in the aggregate amount of $19.4 million were assigned to the
former owners. Collections on these receivables during fiscal 1999 totaled
$9.3 million. If we had not assigned these receivables at the time of
acquisition, cash provided by operating activities in fiscal 1999 could have
been $39.6 million. Our capital expenditures during fiscal years 2000 and
1999 were approximately $14.7 million and $7.0 million, respectively. Capital
expenditures were primarily for the replacement of field equipment, the
enhancement of computer equipment and office expansion.
We have a credit agreement with a bank (the "Credit Agreement")
which provides us with a revolving credit facility (the "Facility") of $150.0
million. The Facility matures on March 17, 2005 or earlier at our discretion
upon payment in full of loans and other obligations. Throughout fiscal 2000,
maximum borrowings under the Facility were $128.5 million. At October 1,
2000, borrowings and standby letters of credit totaled $110.0 million and
$1.7 million, respectively.
In conjunction with our investment strategy, we continuously
evaluate the marketplace for strategic acquisition opportunities. Once an
opportunity is identified, we examine the effect an acquisition may have on
the business environment, as well as on our results of operations. We proceed
with an acquisition if we determine that the acquisition is anticipated to
have an accretive effect on future operations or could expand our service
offerings. As successful integration and implementation are essential to
achieve favorable results, no assurances can be given that all acquisitions
will provide accretive results. Our strategy is to position ourselves to
address existing and emerging markets. We view acquisitions as a key
component of our growth strategy, and we intend to use both cash and our
securities, as we deem appropriate, to fund such acquisitions.
We believe our operations have not been and, in the foreseeable
future, are not expected to be materially adversely affected by inflation or
changing prices.
10
<PAGE>
RECENTLY ISSUED FINANCIAL STANDARDS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which was amended by SFAS No.
138, ACCOUNTING FOR CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING
ACTIVITIES. These Statements required derivatives to be measured at fair
value and to be recorded as assets or liabilities on the balance sheet. The
accounting for gains or losses resulting from changes in the fair values of
those derivatives would be dependent upon the use of the derivative and
whether it qualifies for hedge accounting. These Statements are effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. We will
adopt these Statements in fiscal year 2001 and believe that the adoption of
SFAS No. 133 and SFAS No. 138 will have no material impact on our results of
operations or financial position.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin (SAB) No. 101, REVENUE RECOGNITION, which outlines
the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. SAB No. 101
requires companies to report any changes in revenue recognition as a
cumulative change in accounting principle at the time of implementation in
accordance with Accounting Principles Board Opinion No. 20, ACCOUNTING
CHANGES. SAB No. 101, as amended, is effective no later than the fourth
quarter of fiscal years beginning after December 15, 1999. We will adopt SAB
No. 101 in fiscal year 2001. We believe our existing revenue recognition
policies and procedures are in compliance with SAB No. 101, and that the
adoption of SAB No. 101 will have no material impact on our results of
operations or financial position.
MARKET RISKS
We do not currently utilize any material derivative financial
instruments which expose us to significant market risk. We are exposed to
cash flow risk due to interest rate fluctuations with respect to our
long-term debt. At our option, we borrow on our Facility (a) at a base rate
(the greater of the federal funds rate plus 0.50% or the bank's reference
rate) or (b) at a eurodollar rate plus a margin which ranges from 0.75% to
1.25%. Borrowings at the base rate have no designated term and may be repaid
without penalty anytime prior to the Facility's maturity date. Borrowings at
a eurodollar rate have a term no less than 30 days and no greater than 90
days. Typically, at the end of such term, such borrowings may be rolled over
at our discretion into either a borrowing at the base rate or a borrowing at
a eurodollar rate with similar terms, not to exceed the maturity date of the
Facility. The Facility matures on March 17, 2005 or earlier at our discretion
upon payment in full of loans and other obligations. Accordingly, we classify
total outstanding debt between current liabilities and long-term obligations
based on anticipated payments within and beyond one year's period of time. We
presently anticipate repaying $26.0 million of our long-term obligations in
fiscal 2001. Assuming we pay our long-term debt in the amounts of $26.0
million, $31.0 million, $37.0 million and $17.5 million for the next four
years ratably throughout each year, and our average interest rate on our
long-term debt increases or decreases by one percentage point, our interest
expense could increase or decrease by $0.9 million, $0.6 million, $0.3
million and $0.1 million in fiscal 2001, 2002, 2003 and 2004, respectively.
However there can be no assurance that we will, or will be able to, repay our
debt in the prescribed manner or obtain alternate financing. We could incur
additional debt under this credit facility or our operating results could be
worse than we expect.
11
<PAGE>
INDEPENDENT AUDITORS' REPORT
Tetra Tech, Inc.:
We have audited the accompanying consolidated balance sheets of
Tetra Tech, Inc. and its subsidiaries as of October 1, 2000 and October 3,
1999, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended
October 1, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Tetra Tech, Inc.
and its subsidiaries as of October 1, 2000 and October 3, 1999, and the
results of their operations and their cash flows for each of the three years
in the period ended October 1, 2000 in conformity with accounting principles
generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
November 15, 2000
12
<PAGE>
TETRA TECH, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Oct. 1, Oct. 3,
2000 1999
----------------- ------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents..................................... $ 7,557,000 $ 8,189,000
Accounts receivable - net..................................... 153,527,000 91,376,000
Unbilled receivables - net.................................... 122,102,000 85,072,000
Prepaid expenses and other current assets..................... 11,203,000 7,174,000
Deferred income taxes......................................... 2,551,000 3,259,000
--------------- ---------------
Total Current Assets....................................... 296,940,000 195,070,000
--------------- ---------------
Property and Equipment:
Equipment, furniture and fixtures............................. 59,361,000 39,488,000
Leasehold improvements........................................ 4,182,000 3,343,000
--------------- ---------------
Total...................................................... 63,543,000 42,831,000
Accumulated depreciation and amortization..................... (28,331,000) (21,085,000)
--------------- ---------------
Property and Equipment - Net...................................... 35,212,000 21,746,000
--------------- ---------------
Intangible Assets - Net........................................... 190,452,000 160,686,000
Other Assets...................................................... 3,434,000 2,976,000
--------------- ---------------
Total Assets...................................................... $ 526,038,000 $ 380,478,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.............................................. $ 50,304,000 $ 32,570,000
Accrued compensation.......................................... 25,705,000 21,900,000
Billings in excess of costs on uncompleted contracts.......... 15,947,000 5,872,000
Other current liabilities..................................... 17,523,000 14,606,000
Income taxes payable.......................................... 7,120,000 9,809,000
Current portion of long-term obligations...................... 26,000,000 24,000,000
--------------- ---------------
Total Current Liabilities.................................. 142,599,000 108,757,000
--------------- ---------------
Long-term Obligations............................................. 85,532,000 37,289,000
--------------- ---------------
Commitments and Contingencies (Notes 8 and 10)
Stockholders' Equity:
Preferred stock - authorized, 2,000,000 shares of $.01 par value;
issued and outstanding 0 shares at October 1, 2000 and
October 3, 1999............................................. -- --
Exchangeable stock of a subsidiary............................ 13,887,000 13,239,000
Common stock - authorized, 50,000,000 shares of $.01 par
value; issued and outstanding 39,830,633 shares at
October 1, 2000 and 38,433,621 shares at October 3, 1999.... 398,000 384,000
Additional paid-in capital.................................... 150,391,000 127,978,000
Accumulated other comprehensive income (loss)................. (844,000) (802,000)
Retained earnings............................................. 134,075,000 93,633,000
--------------- ---------------
Total Stockholders' Equity........................................ 297,907,000 234,432,000
--------------- ---------------
Total Liabilities and Stockholders' Equity........................ $ 526,038,000 $ 380,478,000
=============== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
13
<PAGE>
TETRA TECH, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------
Oct. 1, Oct. 3, Oct. 4,
2000 1999 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
Revenue:
Gross revenue................................. $ 794,578,000 $ 566,490,000 $ 382,934,000
Subcontractor costs........................... 196,457,000 134,410,000 85,337,000
---------------- ---------------- ----------------
Net Revenue........................................ 598,121,000 432,080,000 297,597,000
Cost of Net Revenue................................ 452,872,000 327,336,000 223,871,000
---------------- ---------------- ----------------
Gross Profit....................................... 145,249,000 104,744,000 73,726,000
Selling, General and Administrative Expenses....... 71,004,000 49,320,000 33,913,000
---------------- ---------------- ----------------
Income From Operations............................. 74,245,000 55,424,000 39,813,000
Interest Expense................................... 7,355,000 3,561,000 2,329,000
Interest Income.................................... 329,000 426,000 419,000
---------------- ---------------- ----------------
Income Before Minority Interest and Income
Tax Expense..................................... 67,219,000 52,289,000 37,903,000
Minority Interest.................................. -- -- 1,397,000
---------------- ---------------- ----------------
Income Before Income Tax Expense................... 67,219,000 52,289,000 36,506,000
Income Tax Expense................................. 26,777,000 23,174,000 15,920,000
---------------- ---------------- ----------------
Net Income......................................... $ 40,442,000 $ 29,115,000 $ 20,586,000
================ ================ ================
Basic Earnings Per Share........................... $ 1.04 $ 0.78 $ 0.59
================ ================ ================
Diluted Earnings Per Share......................... $ 0.97 $ 0.74 $ 0.56
================ ================ ================
Weighted Average Common Shares Outstanding:
Basic........................................ 39,003,000 37,159,000 34,962,000
================ ================ ================
Diluted...................................... 41,602,000 39,550,000 36,488,000
================ ================ ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
14
<PAGE>
TETRA TECH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FISCAL YEARS ENDED OCTOBER 1, 2000, OCTOBER 3, 1999 AND OCTOBER 4, 1998
<TABLE>
<CAPTION>
Additional
Exchangeable Stock Common Stock Paid-In Retained
Shares Amount Shares Amount Capital Earnings
-------- ----------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 28, 1997 -- $ -- 32,366,023 $324,000 $ 63,385,000 $43,932,000
Net income and comprehensive
income........................ 20,586,000
Shares issued in acquisitions.... 920,354 15,411,000 432,435 4,000 5,520,000
Stock options exercised.......... 440,331 4,000 2,613,000
Shares issued in Employee
Stock Purchase Plan.............. 144,431 1,000 1,505,000
Preferred shares converted to
common......................... 2,405,938 24,000 13,502,000
Tax benefit for disqualifying
dispositions of stock
options........................ 977,000
Payment for fractional shares.... (908) (7,000)
-------- ----------- ---------- -------- ------------ ------------
BALANCE, OCTOBER 4, 1998 920,354 15,411,000 35,788,250 357,000 87,495,000 64,518,000
Comprehensive income:
Net income .................... 29,115,000
Foreign currency translation
adjustment....................
Comprehensive income ............
Shares issued in secondary
offering..................... 1,250,000 12,000 22,159,000
Shares issued in acquisitions.... 787,051 8,000 11,563,000
Stock options exercised ......... 289,972 3,000 1,920,000
Shares issued in Employee
Stock Purchase Plan............ 156,361 2,000 2,220,000
Exchangeable shares of a
subsidiary exchanged for
common shares.................. (129,712) (2,172,000) 162,140 2,000 2,170,000
Tax benefit for disqualifying
dispositions of stock
options........................ 473,000
Payment for fractional shares.... (153) (22,000)
-------- ----------- ---------- -------- ------------ ------------
BALANCE, OCTOBER 3, 1999 790,642 13,239,000 38,433,621 384,000 127,978,000 93,633,000
Comprehensive income:
Net income .................... 40,442,000
Foreign currency translation
adjustment....................
Comprehensive income ............
Shares issued in acquisitions.... 33,606 648,000 585,795 6,000 11,380,000
Stock options exercised ......... 645,106 6,000 5,694,000
Shares issued in Employee
Stock Purchase Plan............ 166,111 2,000 2,843,000
Tax benefit for disqualifying
dispositions of stock
options........................ 2,496,000
-------- ----------- ---------- -------- ------------ ------------
BALANCE, OCTOBER 1, 2000 824,248 $13,887,000 39,830,633 $398,000 $150,391,000 $134,075,000
======== =========== ========== ======== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Income (Loss) Total
------------- -----
<S> <C> <C>
BALANCE, SEPTEMBER 28, 1997 $ -- $107,641,000
Net income and comprehensive
income........... 20,586,000
Shares issued in acquisitions.. 20,935,000
Stock options exercised.......... 2,617,000
Shares issued in Employee
Stock Purchase Plan............ 1,506,000
Preferred shares converted to
common......................... 13,526,000
Tax benefit for disqualifying
dispositions of stock
options.................. 977,000
Payment for fractional shares.. (7,000)
----------- ------------
BALANCE, OCTOBER 4, 1998 -- 167,781,000
Comprehensive income:
Net income .................... 29,115,000
Foreign currency
translation adjustment........ (802,000) (802,000)
------------
Comprehensive income ............ 28,313,000
------------
Shares issued in secondary
offering..................... 22,171,000
Shares issued in acquisitions.... 11,571,000
Stock options exercised ......... 1,923,000
Shares issued in Employee
Stock Purchase Plan............ 2,222,000
Exchangeable shares of a
subsidiary exchanged for
common shares.................. --
Tax benefit for disqualifying
dispositions of stock
options........................ 473,000
Payment for fractional shares.... (22,000)
----------- ------------
BALANCE, OCTOBER 3, 1999 (802,000) 234,432,000
Comprehensive income:
Net income .................... 40,442,000
Foreign currency
translation adjustment........ (42,000) (42,000)
------------
Comprehensive income ............ 40,400,000
------------
Shares issued in acquisitions.... 12,034,000
Stock options exercised ......... 5,700,000
Shares issued in Employee
Stock Purchase Plan............ 2,845,000
Tax benefit for disqualifying
dispositions of stock
options........................ 2,496,000
----------- ------------
BALANCE, OCTOBER 1, 2000 $ (844,000) $297,907,000
=========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
15
<PAGE>
TETRA TECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>>
<CAPTION>
Fiscal Year Ended
----------------------------------------------
Oct. 1, Oct. 3, Oct. 4,
2000 1999 1998
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................... $40,442,000 $29,115,000 $20,586,000
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization............................ 13,709,000 12,708,000 6,595,000
Deferred income taxes.................................... 723,000 (211,000) (2,899,000)
Provision for losses on receivables...................... 3,056,000 (667,000) (334,000)
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable...................................... (47,102,000) 4,713,000 (23,262,000)
Unbilled receivables..................................... (31,439,000) (13,727,000) (11,502,000)
Prepaid expenses and other current assets................ (4,337,000) 998,000 (1,375,000)
Accounts payable......................................... 12,746,000 (8,306,000) 10,203,000
Accrued compensation..................................... 3,053,000 (935,000) (32,000)
Other current liabilities................................ (2,185,000) 3,973,000 (6,548,000)
Income taxes payable..................................... (854,000) 2,597,000 1,948,000
----------- ----------- -----------
Net Cash (Used In) Provided By Operating Activities.. (12,188,000) 30,258,000 (6,620,000)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................... (14,745,000) (7,040,000) (3,511,000)
Payments for business acquisitions, net of cash acquired...... (27,515,000) (50,655,000) (37,778,000)
----------- ----------- ------------
Net Cash Used In Investing Activities................ (42,260,000) (57,695,000) (41,289,000)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term obligations............................. (67,763,000) (67,605,000) (39,580,000)
Proceeds from issuance of long-term obligations............... 112,000,000 72,841,000 76,000,000
Proceeds from issuance of common stock........................ 8,545,000 26,576,000 4,116,000
----------- ----------- -----------
Net Cash Provided By Financing Activities............ 52,782,000 31,812,000 40,536,000
----------- ----------- -----------
Effect of Rate Changes on Cash................................... 1,034,000 (1,075,000) --
----------- ----------- -----------
Net (Decrease) Increase in Cash and Cash Equivalents............. (632,000) 3,300,000 (7,373,000)
Cash and Cash Equivalents at Beginning of Year................... 8,189,000 4,889,000 12,262,000
----------- ----------- -----------
Cash and Cash Equivalents at End of Year......................... $ 7,557,000 $ 8,189,000 $ 4,889,000
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................................... $ 6,734,000 $ 3,524,000 $ 2,129,000
=========== =========== ===========
Income taxes............................................... $27,844,000 $20,067,000 $17,195,000
=========== =========== ===========
</TABLE>
(Continued)
16
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------
Oct. 1, Oct. 3, Oct. 4,
2000 1999 1998
-------------- -------------- --------------
<S> <C> <C> <C>
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
In fiscal 2000, the Company purchased all of the capital stock
of LC of Illinois, Inc., HFC Technologies, Inc., eXpert
Wireless Solutions, Inc., 1261248 Ontario, Inc., FHC, Inc.,
Rizzo Associates, Inc., Drake Contractors, Inc. and
Wm. Bethlehem Trenching Ltd. The Company also purchased
certain assets of Edward A. Sears Associates. In conjunction
with these acquisitions, liabilities were assumed as follows:
Fair value of assets acquired.......................... $ 59,653,000
Cash paid.............................................. (29,466,000)
Issuance of common stock and exchangeable stock........ (11,903,000)
Purchase price payable (1,500,000)
Other acquisition costs................................ (730,000)
------------
Liabilities assumed................................ $ 16,054,000
============
In fiscal 1999, the Company purchased all of the capital stock
of McCulley, Frick & Gilman, Inc., Collins/Pina Consulting
Engineers, Inc., D.E.A. Construction Company, BAHA
Communications, Inc., Utilities & C.C., Inc., ASL Consultants,
Inc., Cosentini Associates, Evergreen Utility Contractors,
Inc., Continental Utility Contractors, Inc., Gig Harbor
Construction, Inc. and PDR Engineers, Inc. In conjunction
with these acquisitions, liabilities were assumed as follows:
Fair value of assets acquired.......................... $110,616,000
Cash paid.............................................. (52,275,000)
Issuance of common stock............................... (11,571,000)
Purchase price payable (282,000)
Other acquisition costs................................ (965,000)
------------
Liabilities assumed................................ $ 45,523,000
============
In fiscal 1998, the Company purchased all of the capital stock of
C.D.C. Engineering, Inc., McNamee, Porter & Seeley, Inc. and
the Sentrex Group of Companies. The Company also purchased
certain assets of Brown & Root, Inc. and Halliburton
Corporation. In conjunction with these acquisitions,
liabilities were assumed as follows:
Fair value of assets acquired.......................... $ 80,209,000
Cash paid.............................................. (38,348,000)
Issuance of common and exchangeable stock.............. (20,935,000)
Other acquisition costs................................ (985,000)
--------------
Liabilities assumed................................ $ 19,941,000
=============
</TABLE>
(Concluded)
See accompanying Notes to Consolidated Financial Statements.
17
<PAGE>
TETRA TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED OCTOBER 1, 2000,
OCTOBER 3, 1999 AND OCTOBER 4, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Tetra Tech, Inc. (the "Company") provides specialized
management consulting and technical services in three principal business
areas: resource management, infrastructure and communications. The Company's
management consulting services are complemented by its technical services.
These technical services, which implement solutions, include research and
development, applied science, engineering and architectural design,
construction management, and operations and maintenance.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Company, its wholly-owned subsidiaries and its
majority-owned subsidiary Tetra Tech Canada Ltd. All significant intercompany
balances and transactions have been eliminated in consolidation.
FISCAL YEAR - The Company reports results of operations based on 52-
or 53-week periods ending near September 30. Fiscal years 2000 and 1999
contained 52 weeks. Fiscal year 1998 contained 53 weeks.
CONTRACT REVENUE AND COSTS - In the course of providing its
services, the Company routinely subcontracts for services. These costs are
passed through to clients and, in accordance with industry practice, are
included in the Company's gross revenue. Because subcontractor services can
change significantly from project to project, changes in gross revenue may
not be indicative of business trends. Accordingly, the Company also reports
net revenue, which is gross revenue less the cost of subcontractor services.
Contract revenue and contract costs on both cost-type and fixed-price-type
contracts are recorded using the percentage-of-completion (cost-to-cost)
method. Under this method, contract revenue on long-term contracts is
recognized in the ratio that contract costs incurred bear to total estimated
costs. Costs and income on long-term contracts are subject to revision
throughout the lives of the contracts and any required adjustments are made
in the period in which the revisions become known. Losses on contracts are
recorded in full as they are identified.
Selling, general and administrative costs are expensed in the period
incurred.
Net revenue under Federal government contracts and subcontracts
accounted for approximately 29.1%, 39.1% and 48.7% of net revenue for the fiscal
years ended October 1, 2000, October 3, 1999 and October 4, 1998, respectively.
CASH AND CASH EQUIVALENTS - Cash equivalents include all investments
with initial maturities of 90 days or less.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost
and are depreciated over their estimated useful lives using the straight-line
method. Expenditures for maintenance and repairs are expensed as incurred.
Generally, estimated useful lives range from three to ten years for
equipment, furniture and fixtures. Leasehold improvements are amortized on a
straight-line basis over the shorter of their estimated useful lives or the
remaining terms of the leases.
18
<PAGE>
LONG-LIVED ASSETS - Management's policy regarding long-lived assets
is to evaluate the recoverability of its assets when the facts and
circumstances suggest that the assets may be impaired. This assessment is
performed based on the estimated undiscounted cash flows compared with the
carrying value of the assets. If the future cash flows (undiscounted and
without interest charges) are less than the carrying value, a writedown would
be recorded to reduce the related asset to its estimated fair value.
Intangible assets as of October 1, 2000 and October 3, 1999 consist
principally of goodwill resulting from business acquisitions which is being
amortized over periods ranging from 15 to 30 years. The accumulated
amortization of intangible assets as of October 1, 2000 and October 3, 1999
was $17.8 million and $11.3 million, respectively.
INCOME TAXES - The Company files a consolidated federal income tax
return and combined California franchise tax reports, as well as other
returns which are required in the states in which the Company does business,
which include the Company and its subsidiaries. Income taxes are recognized
for (a) the amount of taxes payable or refundable for the current period, and
(b) deferred income tax assets and liabilities for the future tax
consequences of events that have been recognized in the Company's financial
statements or income tax returns. The effects of income taxes are measured
based on enacted tax laws and rates.
EARNINGS PER SHARE - Basic Earnings Per Share (EPS) excludes
dilution and is computed by dividing the income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted EPS is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding and
dilutive potential common shares. The Company includes as potential common
shares the weighted average number of shares of exchangeable stock of a
subsidiary, the weighted average number of shares of redeemable preferred
stock and the weighted average dilutive effects of outstanding stock options.
The exchangeable stock of a subsidiary is non-voting and is exchangeable on a
one to one basis, as adjusted for stock splits and stock dividends subsequent
to the original issuance, for the Company's common stock. The redeemable
preferred stock had voting and dividend rights substantially similar to those
of common. The redeemable preferred stock outstanding at September 28, 1997
was converted to common stock during the fiscal year ended October 4, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of cash
and cash equivalents, accounts receivable, unbilled receivables and accounts
payable approximate fair value because of the short maturities of these
instruments. The carrying amount of the revolving credit facility and other
long-term debt approximates fair value because the interest rates are based
upon variable reference rates.
CONCENTRATION OF CREDIT RISK - Financial instruments which subject
the Company to credit risk consist primarily of cash and cash equivalents,
accounts receivable and unbilled receivables. The Company places its
temporary cash investments with high credit quality financial institutions
and, by policy, limits the amount of investment exposure to any one financial
institution. As of October 1, 2000, approximately 10.2% of accounts
receivable was due from various agencies of the Federal government. The
remaining accounts receivable are generally diversified due to the large
number of organizations comprising the Company's client base and their
geographic dispersion. The Company performs ongoing credit evaluations of its
clients and maintains an allowance for potential credit losses.
USE OF ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the
19
<PAGE>
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS)
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which
was amended by SFAS No. 138, ACCOUNTING FOR CERTAIN DERIVATIVE INSTRUMENTS
AND CERTAIN HEDGING ACTIVITIES. These Statements required derivatives to be
measured at fair value and to be recorded as assets or liabilities on the
balance sheet. The accounting for gains or losses resulting from changes in
the fair values of those derivatives would be dependent upon the use of the
derivative and whether it qualifies for hedge accounting. These Statements
are effective for all fiscal quarters of fiscal years beginning after June
15, 2000. The Company will adopt these Statements in fiscal year 2001 and
believe that the adoption of SFAS No. 133 and SFAS No. 138 will have no
material impact on its results of operations or financial position.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin (SAB) No. 101, REVENUE RECOGNITION, which outlines
the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. SAB No. 101
requires companies to report any changes in revenue recognition as a
cumulative change in accounting principle at the time of implementation in
accordance with Accounting Principles Board (APB) Opinion No. 20, ACCOUNTING
CHANGES. SAB No. 101, as amended, is effective no later than the fourth
quarter of fiscal years beginning after December 15, 1999. The Company will
adopt SAB No. 101 in fiscal year 2001. The Company believes its existing
revenue recognition policies and procedures are in compliance with SAB No.
101, and that the adoption of SAB No. 101 will have no material impact on its
results of operations or financial position.
2. MERGERS AND ACQUISITIONS
On December 31, 1997, the Company acquired, through its wholly-owned
subsidiary Tetra Tech NUS, Inc., the assets of certain environmental services
businesses of Brown & Root, Inc. and Halliburton Corporation, both of which
are subsidiaries of Halliburton Company (collectively, NUS). NUS provides
consulting, engineering and design services for the environmental remediation
of contaminated air, water and soil conditions. The purchase price was valued
at approximately $25.2 million, as adjusted, and consisted of cash.
On March 2, 1998, Whalen Service Corps Inc. (WSC) agreed to
participate in a partnership with Sentrex Cen-Comm and ANTEC Corporation to
provide design, engineering, information management and construction services
to support advanced communication system upgrades to the broadband
information transport industries. The agreement required the purchase of
certain assets of TANCO LLC from ANTEC Corporation for a price in cash of
approximately $0.3 million. WSC initially held a 51% majority interest in
Whalen/Sentrex LLC, a California limited liability company, while LAL Corp.
held the remaining 49% minority interest.
On March 26, 1998, the Company acquired 100% of the capital stock of
C.D.C. Engineering, Inc. (CDE), a consulting and engineering firm
specializing in civil engineering, transportation engineering, structural
engineering and land surveying. The purchase was valued at approximately $1.5
million, consisting of cash and 88,825 shares of Company common stock.
On July 8, 1998, the Company acquired 100% of the capital stock of
McNamee, Porter & Seeley, Inc. (MPS), a provider of engineering services with
expertise in the areas of water, industrial wastewater and process controls.
The purchase was valued at approximately $14.9 million, consisting of cash
and 343,610 shares of Company common stock. Simultaneously with the
acquisition, MPS assigned to its former owners accounts receivable having a
net value of $8.0 million.
On September 22, 1998, the Company acquired, through its
majority-owned subsidiary Tetra Tech Canada Ltd. (TtC), 100% of the capital
stock of 1056584 Ontario Limited, 1056585 Ontario Limited, Venture Cable
Limited, Cen-Comm Communications, Inc., Sentrex Electronics, Inc. and LAL
Corp. (collectively, the Sentrex Group of Companies (SGOC)), providers of
engineering and technical services to the cable television, telephony and
data networking industries. The purchase was valued at approximately $19.2
million, consisting of cash and 920,354 shares of TtC exchangeable stock. The
TtC exchangeable stock is exchangeable, share for share, subject to
adjustment, for Company common stock as described in the related purchase
agreement. Upon completion of the SGOC acquisition, the Company beneficially
owns 100% of Whalen/Sentrex LLC.
On February 26, 1999, the Company acquired 100% of the capital stock
of McCulley, Frick & Gilman, Inc. (MFG), a provider of professional
environmental science and consulting services to private-sector clients. The
purchase was valued at approximately $8.1 million, as adjusted, consisting of
cash and 237,413 shares of Company common stock, of which 5,923 shares were
issued in October 1999 pursuant to the purchase price adjustment clause in
the related purchase agreement.
On May 7, 1999, the Company acquired 100% of the capital stock of
Collins/Pina Consulting Engineers, Inc. (CPC), a provider of consulting
engineering and related services primarily in Arizona. The purchase was
valued at approximately $2.7 million, as adjusted, consisting of cash and
4,938 shares of Company common stock.
On May 19, 1999, the Company acquired 100% of the capital stock of
D.E.A. Construction Company (DCC), a provider of engineering and network
infrastructure services for cable television and fiber optic telephone
networks including design and construction and maintenance capabilities of
communications and information transport systems. The purchase was valued at
approximately $15.5 million, as adjusted, consisting of cash.
On May 21, 1999, the Company acquired 100% of the capital stock of
BAHA Communications, Inc. (BCI), a supplier of infrastructure installation
and maintenance services to the wireless personal communications industry.
The purchase was valued at approximately $2.6 million, consisted of 176,168
shares of Company common stock. Simultaneously with the acquisition, BCI
assigned to its former owners accounts receivable having a net value of $1.0
million.
20
<PAGE>
On June 18, 1999, the Company acquired 100% of the capital stock of
Utilities & C.C., Inc. (UCC), a supplier of infrastructure installation and
maintenance services to the wireless personal communications industry. The
purchase was valued at approximately $2.2 million, as adjusted, consisting of
144,482 shares of Company common stock, of which 6,552 shares were issued in
October 1999 pursuant to the purchase price adjustment clause in the related
purchase agreement.
On June 25, 1999, the Company acquired 100% of the capital stock of
ASL Consultants, Inc. (ASL), a provider of water and wastewater treatment,
transportation, and other engineering services. The purchase was valued at
approximately $10.1 million, consisting of cash.
On June 30, 1999, the Company acquired 100% of the capital stock of
L.M.W. Associates, Inc., Cosentini Associates, Inc. and Cobin, Inc., and 100%
of the limited liability partnership interests of Cosentini Associates IL
LLP, Cosentini Associates MA LLP, Cosentini Associates DC LLP and Cosentini
Associates FL LLP (collectively, CAA). The purchase was valued at
approximately $5.3 million, consisting of cash. Simultaneously with the
acquisition, CAA assigned to its former owners accounts receivable having a
gross value of $18.4 million.
On September 3, 1999, the Company acquired 100% of the capital stock
of PDR Engineers, Inc. (PDR), a provider of engineering consulting services
to Federal, state and local government and private-sector clients. The
purchase was valued at approximately $6.6 million, consisting of cash and
236,525 shares of Company common stock.
On October 2, 1999, the Company acquired 100% of the capital stock
of Evergreen Utility Contractors, Inc., Continental Utility Contractors, Inc.
and Gig Harbor Construction, Inc. (collectively, EUC), a provider of
engineering and network services for cable TV and fiber optic networks in the
Pacific Northwest Region of the U.S. The purchase was valued at approximately
$11.8 million, consisting of cash.
On October 25, 1999, the Company acquired 100% of the capital stock
of LC of Illinois, Inc. and HFC Technologies, Inc. (collectively, LCI), a
provider of engineering and network infrastructure services for cable
television and fiber optic telephone networks including design, construction
and maintenance capabilities for communications and information transport
systems. The purchase was valued at approximately $1.6 million, consisting of
cash.
On March 30, 2000, Tetra Tech Engineers, P.C. acquired certain
assets of Edward A. Sears Associates (ESA), a provider of engineering
services to hospitals in New York. Concurrent with this transaction, the
Company's subsidiary, Cosentini Associates, Inc., acquired certain
non-licensed assets of ESA from Tetra Tech Engineers, P.C. The purchase was
valued at approximately $0.4 million, and consisted of cash.
On April 3, 2000, the Company acquired 100% of the capital stock of
eXpert Wireless Solutions, Inc. (EWS), a provider of radio-frequency
engineering and consulting services to the wireless communications industry.
The purchase was valued at approximately $18.8 million, consisting of cash
(of which $500,000 is dependent on operational performance) and 407,877
shares of Company common stock. Additionally, concurrently with the
acquisition, EWS distributed to its former shareholders accounts receivable
valued at approximately $1.8 million.
On May 3, 2000, the Company, through its majority-owned subsidiary,
Tetra Tech Canada Ltd., acquired 100% of the capital stock of 1261248
Ontario, Inc., which does business as Engineered Communications (ENG), a
provider of engineering and network services for the wired communications
21
<PAGE>
industry in Ontario, Canada. The purchase was valued at approximately
$1.5 million, consisting of cash and 33,606 shares of exchangeable stock of
the Company's majority-owned subsidiary.
On May 17, 2000, the Company acquired 100% of the capital stock of
FHC, Inc. (FHC), a provider of engineering consulting services primarily to
the state and local governments in Oklahoma. The purchase was valued at
approximately $5.2 million, consisting of cash and 56,334 shares of Company
common stock.
On May 24, 2000, the Company acquired 100% of the capital stock of
Rizzo Associates, Inc. (RAI), a provider of engineering consulting services
to state and local governments and commercial clients in the upper Northeast
region of the U.S. This purchase was valued at approximately $10.3 million,
consisting of cash and 112,436 shares of Company common stock.
On June 16, 2000, the Company acquired 100% of the capital stock of
Drake Contractors, Inc. (DCI), a provider of infrastructure installation and
maintenance services primarily in Colorado. The purchase was valued at
approximately $5.5 million, consisting of cash (of which $1.0 million is
contingent on operational performance). Additionally, concurrent with the
acquisition, DCI distributed to its former shareholders accounts receivable
valued at approximately $2.1 million.
On July 5, 2000, the Company, through its majority-owned subsidiary,
Tetra Tech Canada Ltd., acquired 100% of the capital stock of Wm. Bethlehem
Trenching Ltd. (BTL), a provider of infrastructure installation and
maintenance services primarily in Ontario, Canada. The purchase was valued at
approximately $0.3 million and consisted of cash.
All of the acquisitions above have been accounted for as purchases
and accordingly, the purchase prices of the businesses acquired have been
allocated to the assets and liabilities acquired based upon their fair
values. The excess of the purchase cost of the acquisitions over the fair
value of the net assets acquired was recorded as goodwill and is included in
Intangible Assets - Net in the accompanying condensed consolidated balance
sheets. The Company historically valued stock exchanged in acquisitions based
on extended restriction periods, high volatility in the trading price of the
Company's common stock and other economic factors specific to the Company's
circumstances. During the first three fiscal quarters of fiscal 2000 and all
of fiscal 1999 and fiscal 1998, stock exchanged in acquisitions was
discounted by 15%. The results of operations of each of the companies
acquired have been included in the Company's financial statements from the
effective acquisition dates.
The effect of unaudited pro forma operating results of the LCI, ENG,
ESA, DCI and BTL acquisitions, had they been acquired on October 5, 1998, is
not material.
The following table presents summarized unaudited pro forma
operating results assuming that the Company had acquired MFG, CPC, DCC, BCI,
UCC, ASL, CAA, PDR, EUC, EWS, FHC and RAI on October 5, 1998:
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------
Oct. 1, 2000 Oct. 3, 1999
-------------------- -------------------
<S> <C> <C>
Gross revenue $823,125,000 $706,990,000
Income before income tax expense 67,457,000 57,179,000
Net income 40,580,000 32,020,000
Basic earnings per share $ 1.03 $ 0.84
Diluted earnings per share 0.97 0.79
Weighted average common shares outstanding:
Basic 39,305,000 38,135,000
Diluted 41,904,000 40,526,000
</TABLE>
22
<PAGE>
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at October 1, 2000
and October 3, 1999:
<TABLE>
<CAPTION>
Oct. 1, 2000 Oct. 3, 1999
--------------- ---------------
<S> <C> <C>
Billed accounts receivable.................................... $ 158,992,000 $ 95,465,000
--------------- ---------------
Unbilled accounts receivable:
Billable amounts not invoiced, amounts billable at
stipulated stages of completion of contract work,
and unbilled amounts pending negotiation or receipt
of contract modifications............................. 119,478,000 84,230,000
Costs and fee retention billable upon audit of total
contract costs ....................................... 4,232,000 5,282,000
--------------- ---------------
Total unbilled accounts receivable ........................... 123,710,000 89,512,000
--------------- ---------------
Billings in excess of costs on uncompleted contracts.......... (15,947,000) (5,872,000)
--------------- ---------------
Allowance for uncollectible accounts:
Allowance for doubtful accounts.......................... (5,465,000) (4,089,000)
Allowance for disallowed costs .......................... (1,608,000) (4,440,000)
---------------- ---------------
Total allowance for uncollectible accounts................... (7,073,000) (8,529,000)
--------------- ---------------
Total ........................................................ $ 259,682,000 $ 170,576,000
=============== ===============
</TABLE>
The accounts receivable valuation allowance includes amounts to
provide for doubtful accounts and for the potential disallowance of billed
and unbilled costs. The Company's contracts with the Federal government are
subject to audit by the government, primarily the Defense Contract Audit
Agency (DCAA), which reviews the Company's overhead rates, operating systems
and cost proposals. During the course of its audit, the DCAA may disallow
costs if it determines that the Company improperly accounted for such costs
in a manner inconsistent with Cost Accounting Standards. Historically, the
Company has not had any material cost disallowances by the DCAA as a result
of audit, except for disallowances of acquired receivables as further
described. There can be no assurance that DCAA audits will not result in
material cost disallowances in the future.
On September 15, 1995, the Company acquired Tetra Tech EM Inc. (EMI)
which contracts with the Federal government. At the time of acquisition,
audits had not been performed for years beyond 1986 and reserves for
disallowances relating to those unaudited years were adjusted to reflect the
estimated ultimate disallowances relating to those receivables. As of October
3, 1999, audits and negotiations relating to the EMI contracts for years 1987
through 1995 were complete, and cost disallowances as a result of these
audits totaled approximately $4.4 million. Beyond the $4.4 million in cost
disallowances, there remained uncollected receivables of $2.1 million.
Although it was determined that the Company was entitled to payments,
collectibility of such amounts was not assured as each Federal agency must
obtain separate funding approval. The reserves established for these
receivables exceeded the disallowances and the uncollected amounts by $1.75
million. Accordingly, this amount was taken into income in fiscal 1999.
During fiscal 2000, the Company collected $2.0 million and reversed
previously established reserves related to these receivables. As of October
1, 2000, substantially all of these outstanding receivables have been
collected and all reserves relating to these receivables have been reversed.
Allowances to provide for doubtful accounts have been determined
through reviews of specific amounts determined to be uncollectible, plus a
general allowance for other amounts for which some
23
<PAGE>
potential loss is determined to be probable based on current events and
circumstances. Given the above, management believes that the resolution of
these matters will not have a material adverse effect on the Company's
financial position or results of operations.
As of October 1, 2000, the Company had approximately $4.2 million
under retainage provisions of contracts.
4. INCOME TAXES
Income tax expense for the fiscal years ended October 1, 2000,
October 3, 1999 and October 4, 1998 consisted of the following:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
Oct. 1, Oct. 3, Oct. 4,
2000 1999 1998
-------------- -------------- ------------
<S> <C> <C> <C>
Current:
Federal............................ $ 20,845,000 $ 18,763,000 $ 15,284,000
State.............................. 5,224,000 4,661,000 3,535,000
Deferred ............................. 708,000 (250,000) (2,899,000)
------------- ------------- -------------
Total income tax expense.............. $ 26,777,000 $ 23,174,000 $ 15,920,000
============= ============= =============
</TABLE>
Temporary differences comprising the net deferred income tax asset
shown on the consolidated balance sheets were as follows:
<TABLE>
<CAPTION>
Oct. 1, Oct. 3,
2000 1999
------------- -------------
<S> <C> <C>
Allowance for doubtful accounts............................. $ 3,041,000 $ 1,787,000
Cash to accrual............................................. (994,000) (1,119,000)
Accrued vacation............................................ 1,871,000 2,189,000
State taxes................................................. 1,337,000 1,477,000
Prepaid expense............................................. (514,000) (307,000)
Depreciation................................................ (2,317,000) (1,047,000)
Other....................................................... 127,000 279,000
------------- -------------
Net deferred income tax asset............................... $ 2,551,000 $ 3,259,000
============= =============
</TABLE>
Total income tax expense was different than the amount computed by
applying the federal statutory rate as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------------
Oct. 1, 2000 Oct. 3, 1999 Oct. 4, 1998
--------------------- ---------------------- -----------------------
Amount % Amount % Amount %
------------- ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Tax at federal statutory rate.......... $ 23,527,000 35.0% $ 18,301,000 35.0% $ 12,777,000 35.0%
State taxes, net of federal benefit.... 3,495,000 5.2 2,719,000 5.2 1,898,000 5.2
Tax credit............................. (2,800,000) (4.2) -- -- -- --
Goodwill............................... 2,053,000 3.1 1,434,000 2.7 990,000 2.7
Other.................................. 502,000 0.7 720,000 1.4 255,000 0.7
------------- ----- ------------ ----- ------------ -----
Total income tax expense............... $ 26,777,000 39.8% $ 23,174,000 44.3% $ 15,920,000 43.6%
============= ===== ============ ===== ============= =====
</TABLE>
24
<PAGE>
5. LONG-TERM OBLIGATIONS
The Company has a credit agreement (as amended, the "Credit
Agreement") with a bank to support its working capital and acquisition needs.
The Credit Agreement provides a revolving credit facility of $150.0 million
and matures on March 17, 2005 or earlier at the discretion of the Company
upon payment in full of loans and other obligations.
Interest on borrowings under the Credit Agreement is payable at the
Company's option (a) at a base rate (the greater of the federal funds rate
plus 0.50% or the bank's reference rate) as defined in the Credit Agreement
or (b) at a eurodollar rate plus a margin which ranges from 0.75% to 1.25%.
The weighted average interest rate on outstanding borrowings under the Credit
Agreement at October 1, 2000 was 7.71%.
Borrowings under the Credit Agreement are secured by the Company's
accounts receivable and the stock of the Company's subsidiaries.
The Credit Agreement contains various covenants including, but not
limited to, restrictions related to tangible net worth, net income,
additional indebtedness, asset sales, mergers and acquisitions, creation of
liens, and dividends on capital stock (other than stock dividends).
As of October 1, 2000, outstanding borrowings totaled $110.0 million
and standby letters of credit totaled $1.7 million.
At October 1, 2000, approximately $1.5 million of additional debt
existed from acquired companies. The weighted average interest rate on these
outstanding borrowings at October 1, 2000 was 7.99%. This debt is primarily
related to pre-acquisition borrowings to facilitate equipment purchases. The
Company intends to repay these amounts prior to the end of their term and
terminate all such agreements.
6. STOCKHOLDERS' EQUITY
In February 1999, the Company, along with certain selling
stockholders, offered a total of 3,968,750 shares of its common stock through
a public offering. The Company offered 1,250,000 shares and received
approximately $22.2 million in net proceeds which were used for the partial
repayment of outstanding indebtedness under the Company's revolving credit
facility.
In connection with the ENG and SGOC acquisitions, the Company issued
an aggregate of 953,960 shares of exchangeable stock of its subsidiary, Tetra
Tech Canada Ltd. (the "Exchangeable Shares"), a corporation existing under
the laws of the Province of Ontario, Canada. The Exchangeable Shares are
non-voting but carry exchange rights under which a holder of Exchangeable
Shares is entitled, at any time after five months from the date of issue of
the Exchangeable Shares, to require the Company to redeem all or any part of
the Exchangeable Shares for an amount per share equal to (a) the current
market price of a share of the Company's common stock, which shall be
satisfied in full by the Company's delivery to such holder of one share of
its common stock for each Exchangeable Share presented and surrendered, plus
(b) a dividend amount or dividend shares, if any. The Exchangeable Shares
cannot be put back to the Company for cash.
Pursuant to the Company's 1989 Stock Option Plan, key employees may
be granted options to purchase an aggregate of 1,192,090 shares of the
Company's common stock at prices ranging from 85% to 100% of the market value
on the date of grant. All options granted to date by the Company have been at
100% of the market value as determined by the Board of Directors at the date
of grant. These options
25
<PAGE>
become exercisable beginning one year from date of grant, become fully vested
in four years and terminate ten years from the date of grant.
The Company also has a 1992 Incentive Stock Plan under which key
employees may be granted options to purchase an aggregate of 5,761,718 shares
of the Company's common stock at prices not less than the market value on the
date of grant. From such date of grant, these options become exercisable
after one year, are fully vested no later than five years after grant and
terminate no later than ten years after grant.
Pursuant to the Company's 1992 Stock Option Plan for Nonemployee
Directors, non-employee directors may be granted options to purchase an
aggregate of 143,047 shares of the Company's common stock at prices not less
than the market value on the date of grant. These options vest and become
exercisable when, and only if, the optionee continues to serve as a director
until the Annual Meeting following the year in which the options were granted.
The Company also has an Employee Stock Purchase Plan (the "Purchase
Plan") which provides for the granting of Purchase Rights to purchase common
stock to regular full and part-time employees or officers of the Company and
its subsidiaries. Under the Purchase Plan, shares of common stock will be
issued upon exercise of the Purchase Rights. Under the Purchase Plan, an
aggregate of 1,098,632 shares may be issued pursuant to the exercise of
Purchase Rights. The maximum amount that an employee can contribute during a
Purchase Right Period is $4,000, and the minimum contribution per payroll
period is $25.
Under the Purchase Plan, the exercise price of a Purchase Right will
be the lesser of 100% of the fair market value of such shares on the first
day of the Purchase Right Period or 85% of the fair market value on the last
day of the Purchase Right Period. For this purpose, the fair market value of
the stock is its closing price as reported on the Nasdaq Stock Market on the
day in question.
During the three years in the period ended October 1, 2000, option
activity was as follows:
<TABLE>
<CAPTION>
Number Weighted Average
of Options Exercise Price
-------------- ---------------
<S> <C> <C>
Balance, September 28, 1997..................... 2,922,968 $ 7.46
Granted.................................... 711,957 13.51
Exercised.................................. (440,331) 5.94
Cancelled.................................. (234,007) 10.09
------------ ------------
Balance, October 4, 1998........................ 2,960,587 8.94
Granted.................................... 899,284 16.51
Exercised.................................. (289,972) 6.63
Cancelled.................................. (189,386) 11.02
------------ ------------
Balance, October 3, 1999........................ 3,380,513 11.27
Granted.................................... 709,722 12.88
Exercised.................................. (645,106) 8.84
Cancelled.................................. (106,824) 15.03
------------ ------------
Outstanding at October 1, 2000.................. 3,338,305 $ 11.96
------------ ------------
Exercisable at October 1, 2000.................. 1,660,664 $ 9.45
------------ ------------
</TABLE>
The following table summarizes information concerning currently
outstanding and exercisable options:
26
<PAGE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- -----------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (Yrs.) Price Exercisable Price
----------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.75 - $0.94 24,152 0.73 $ 0.93 24,152 $ 0.93
$2.56 - $3.82 84,413 2.09 3.44 84,413 3.44
$4.27 - $6.31 444,596 3.75 5.23 444,596 5.23
$7.10 - $10.43 797,508 6.03 9.43 636,560 9.34
$10.91 - $15.84 1,216,299 8.20 12.37 310,162 13.34
$16.50 - $24.50 770,437 8.64 19.07 160,761 18.49
$25.56 - $26.88 900 9.86 26.29 -- --
----------------- ----------- ------------ -------- ----------- --------
$0.75 - $26.88 3,338,305 6.98 $ 11.96 1,660,644 $ 9.45
================= =========== ============ ======== =========== ========
</TABLE>
The Company applies APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES, and related interpretations in accounting for its employee
stock option plans. Accordingly, no compensation expense has been recognized
for its stock-based compensation plans. Pro forma net income and earnings per
share had the Company accounted for stock options issued to employees in
accordance with SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, are as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
Oct. 1, 2000 Oct. 3, 1999 Oct. 4, 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net income-as reported.............................. $ 40,442,000 $ 29,115,000 $ 20,586,000
Net income-pro forma................................ 36,324,000 27,004,000 18,945,000
Basic earnings per share-as reported................ $ 1.04 $ 0.78 $ 0.59
Diluted earnings per share-as reported.............. 0.97 0.74 0.56
Basic earnings per share-pro forma.................. 0.93 0.73 0.54
Diluted earnings per share-pro forma................ 0.87 0.68 0.52
</TABLE>
The fair value of the Company's stock options used to compute pro
forma net income and pro forma earnings per share disclosures is the
estimated value using the Black-Scholes option-pricing model. The weighted
average fair values per share of options granted in fiscal 2000, 1999 and
1998 are $5.48, $6.59 and $4.90, respectively. The following assumptions were
used in completing the model:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
Oct. 1, 2000 Oct. 3, 1999 Oct. 4, 1998
------------ ------------ ------------
<S> <C> <C> <C>
Dividend yield...................................... 0.0% 0.0% 0.0%
Expected volatility................................. 46.5% 42.2% 42.5%
Risk-free rate of return, annual.................... 7.7% 6.4% 6.4%
Expected life....................................... 3.51 yrs. 3.26 yrs. 3.11 yrs.
</TABLE>
7. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
Oct. 1, Oct. 3, Oct. 4,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C> <C>
Numerator--
Net income............................................... $ 40,442,000 $ 29,115,000 $ 20,586,000
------------ ------------ ------------
Denominator--
Denominator for basic earnings per share--
weighted average shares............................. 39,003,000 37,159,000 34,962,000
Effect of dilutive securities:
Stock options....................................... 1,601,000 1,320,000 1,300,000
Redeemable preferred stock.......................... -- -- 189,000
Exchangeable stock of a subsidiary.................. 998,000 1,071,000 37,000
------------ ------------ ------------
Dilutive potential common shares......................... 2,599,000 2,391,000 1,526,000
Denominator for diluted earnings per share--
adjusted weighted average shares and
assumed conversions............................... 41,602,000 39,550,000 36,488,000
============ ============ ============
Basic earnings per share.................................... $ 1.04 $ 0.78 $ 0.59
============ ============ ============
Diluted earnings per share.................................. $ 0.97 $ 0.74 $ 0.56
============ ============ ============
</TABLE>
8. LEASES
The Company leases land, buildings and equipment under various
operating leases. Rent expense under all operating leases was approximately
$28.3 million, $20.6 million and $13.4 million for the fiscal years ended
October 1, 2000, October 3, 1999 and October 4, 1998, respectively. Amounts
payable under noncancelable operating lease commitments are as follows during
the fiscal years ending in:
<TABLE>
<CAPTION>
<S> <C>
2001......................................... $ 22,087,000
2002......................................... 18,328,000
2003......................................... 14,215,000
2004......................................... 11,391,000
2005......................................... 8,942,000
Thereafter................................... 18,329,000
------------
Total........................................ $ 93,292,000
============
</TABLE>
9. RETIREMENT PLANS
The Company and its subsidiaries have established defined
contribution plans and 401(k) plans. Generally, employees are eligible to
participate in the defined contribution plans upon completion of one year of
service and in the 401(k) plans upon commencement of employment. For the
fiscal years ended October 1, 2000, October 3, 1999 and October 4, 1998,
employer contributions relating to the plans were approximately $7.2 million,
$6.4 million and $4.0 million, respectively.
28
<PAGE>
10. CONTINGENCIES
The Company is subject to certain claims and lawsuits typically
filed against the engineering and consulting professions, primarily alleging
professional errors or omissions. The Company carries professional liability
insurance, subject to certain deductibles and policy limits against such
claims. Management is of the opinion that the resolution of these claims will
not have a material adverse effect on the Company's financial position and
results of operations.
11. OPERATING SEGMENTS
The Company's management has organized its operations into three
operating segments: Resource Management, Infrastructure, and Communications.
The Resource Management operating segment provides specialized environmental
engineering and consulting services primarily relating to water quality and
water availability to both public and private organizations. The
Infrastructure operating segment provides engineering services to provide
additional development, as well as upgrading and replacement of existing
infrastructure to both public and private organizations. The Communications
operating segment provides a comprehensive set of services including network
planning, engineering, site acquisition, construction and construction
management, and operations and maintenance services to telecommunications
companies, wireless service providers and cable operators. Management has
established these operating segments based upon the services provided, the
different marketing strategies, and the specialized needs of the clients. The
Company accounts for inter-segment sales and transfers as if the sales and
transfers were to third parties, that is, by applying a negotiated fee onto
the cost of the services performed. Management evaluates the performance of
these operating segments based upon their respective income from operations
before the effect of any acquisition-related amortization and any fee from
inter-segment sales and transfers.
The following tables set forth (in thousands) summarized financial
information on the Company's reportable segments:
Reportable Segments:
<TABLE>
<CAPTION>
Resource
Fiscal year ended October 1, 2000 Management Infrastructure Communications Total
---------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
Gross Revenue.......................... $ 374,875 $ 236,922 $ 207,936 $ 819,733
Net Revenue............................ 246,851 190,269 153,360 590,480
Income from Operations................. 32,901 20,866 28,020 81,787
Depreciation Expense................... 1,670 2,514 2,806 6,990
Segment Assets......................... 175,571 75,043 86,702 337,316
</TABLE>
<TABLE>
<CAPTION>
Resource
Fiscal year ended October 3, 1999 Management Infrastructure Communications Total
---------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
Gross Revenue......................... $ 340,955 $ 135,589 $ 102,378 $ 578,922
Net Revenue........................... 231,518 111,776 88,765 432,059
Income from Operations................ 30,147 15,703 14,905 60,755
Depreciation Expense.................. 1,446 4,430 1,565 7,441
Segment Assets........................ 154,375 48,633 44,444 247,452
</TABLE>
<TABLE>
<CAPTION>
Resource
Fiscal year ended October 4, 1998 Management Infrastructure Communications Total
---------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
Gross Revenue......................... $ 279,582 $ 56,464 $ 54,739 $ 390,785
Net Revenue........................... 198,701 47,174 51,084 296,959
Income from Operations................ 24,572 8,337 9,967 42,876
Depreciation Expense.................. 1,851 1,101 530 3,482
Segment Assets........................ 124,951 20,329 24,931 170,211
Reconciliations:
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
Oct. 1, 2000 Oct. 3, 1999 Oct. 4, 1998
---------------- ----------------- ---------------
<S> <C> <C> <C>
GROSS REVENUE
Gross revenue from reportable segments.................. $ 819,733 $ 578,922 $ 390,785
Elimination of inter-segment revenue.................... (32,796) (15,850) (11,237)
Other revenue........................................... 7,641 3,418 3,386
----------- ----------- -----------
Total consolidated gross revenue.................... $ 794,578 $ 566,490 $ 382,934
=========== =========== ===========
NET REVENUE
Net revenue from reportable segments.................... $ 590,480 $ 432,059 $ 296,959
Other revenue........................................... 7,641 21 638
----------- ----------- -----------
Total consolidated net revenue...................... $ 598,121 $ 432,080 $ 297,597
=========== =========== ===========
INCOME FROM OPERATIONS
Income from operations of reportable segments........... $ 81,787 $ 60,755 $ 42,876
Elimination of inter-segment income..................... (2,069) (730) (1,286)
Other income............................................ 990 240 1,191
Amortization of intangibles............................. (6,463) (4,841) (2,968)
----------- ----------- -----------
Total consolidated income from operations........... $ 74,245 $ 55,424 $ 39,813
=========== =========== ===========
TOTAL ASSETS
Total assets from reportable segments................... $ 337,316 $ 247,452 $ 170,211
Goodwill not allocated to segments...................... 190,452 160,686 108,638
Elimination of inter-segment assets..................... (1,730) (27,660) (12,239)
----------- ----------- -----------
Total consolidated total assets..................... $ 526,038 $ 380,478 $ 266,610
=========== =========== ===========
</TABLE>
GEOGRAPHIC INFORMATION:
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------------------------------------
Oct. 1, 2000 Oct. 3, 1999 Oct. 4, 1998
--------------------------- --------------------------- --------------------------
Net Long-Lived Net Long-Lived Net Long-Lived
Revenue (a) Assets (b) Revenue (a) Assets (b) Revenue (a) Assets (b)
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States............. $ 579,593 $ 229,098 $ 417,983 $ 185,408 $ 288,020 $ 124,278
Foreign countries......... 18,528 -- 14,097 -- 9,577 --
</TABLE>
(a) Net revenue is attributed to countries based on the location of work
performed.
(b) Long-lived assets include non-current assets of the Company.
MAJOR CLIENTS
The Company's net revenue attributable to the U.S. Federal
government was approximately $174.2 million, $169.3 million and $144.4
million for fiscal years ended October 1, 2000, October 3, 1999 and October
4, 1998, respectively. Both the Resource Management and Infrastructure
operating segments report revenue from the U.S. government.
12. QUARTERLY FINANCIAL INFORMATION - UNAUDITED
In the opinion of management, the following unaudited quarterly data
for the fiscal years ended October 1, 2000 and October 3, 1999 reflect all
adjustments necessary for a fair statement of the results of operations. All
such adjustments are of a normal recurring nature. (In thousands, except per
share data)
30
<PAGE>
<TABLE>
<CAPTION>
First Second Third Fourth
Fiscal Year 2000 Quarter Quarter Quarter Quarter
- ---------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Gross revenue................................ $ 170,241 $ 177,581 $ 203,795 $ 242,961
Net revenue.................................. 129,171 138,846 156,468 173,636
Gross profit................................. 28,754 29,284 40,202 47,009
Income from operations....................... 14,733 15,980 19,673 23,859
Net income................................... 7,563 8,124 9,920 14,835(a)
Basic earnings per share..................... $ 0.20 $ 0.21 $ 0.25 $ 0.37
Diluted earnings per share .................. 0.19 0.20 0.24 0.35
Weighted average common shares
outstanding:
Basic................................... 38,453 38,550 39,287 39,721
Diluted................................. 40,418 41,140 42,104 42,590
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
Fiscal Year 1999 Quarter Quarter Quarter Quarter
- ---------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Gross revenue................................ $ 113,973 $ 128,083 $ 157,091 $ 167,343
Net revenue.................................. 89,245 96,955 120,739 125,141
Gross profit................................. 19,058 22,553 32,550 30,583
Income from operations....................... 10,187 11,869 15,599 17,769
Net income................................... 5,427 6,462 8,503 8,723
Basic earnings per share..................... $ 0.15 $ 0.18 $ 0.22 $ 0.23
Diluted earnings per share .................. 0.14 0.16 0.21 0.22
Weighted average common shares
outstanding:
Basic................................... 35,820 36,793 37,801 38,223
Diluted................................. 38,387 39,263 40,145 40,404
</TABLE>
- --------------------------
(a) Includes a tax credit of $2.8 million.
31
<PAGE>
SECURITIES INFORMATION
Tetra Tech's common stock is traded on the Nasdaq Stock Market under
the symbol TTEK (formerly, WATR). There were 1,911 stockholders of record as
of December 15, 2000. Tetra Tech has not paid any cash dividends since its
inception and does not intend to pay any cash dividends on its common stock
in the foreseeable future. The high and low sales prices for the common stock
for the last two fiscal years, as reported by the National Association of
Securities Dealers, Inc., are set forth in the following tables.
<TABLE>
<CAPTION>
<S> <C> <C>
FISCAL YEAR 2000 HIGH LOW
---------------- ---- ---
First Quarter $ 17.63 $ 10.50
Second Quarter 28.25 13.38
Third Quarter 26.50 15.94
Fourth Quarter 31.44 21.13
FISCAL YEAR 1999 HIGH LOW
---------------- ---- ---
First Quarter $ 22.40 $ 12.50
Second Quarter 21.50 13.70
Third Quarter 20.70 15.20
Fourth Quarter 20.00 13.50
</TABLE>
32
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>4
<FILENAME>a2034071zex-21.txt
<DESCRIPTION>EXHIBIT 21
<TEXT>
<PAGE>
Exhibit 21
SUBSIDIARIES OF TETRA TECH, INC.
HSI GeoTrans, Inc., a Virginia corporation
Tetra Tech EM Inc., a Delaware corporation
KCM, Inc., a Washington corporation
Tetra Tech Technical Services, Inc., a Delaware corporation
SCM Consultants, Inc., a Washington corporation
Whalen & Company, Inc., a Delaware corporation
Whalen Service Corps Inc., a Delaware corporation
Tetra Tech NUS, Inc., a Delaware corporation
McNamee, Porter & Seeley, Inc., a Michigan corporation
Tetra Tech Canada Ltd., a Province of Ontario, Canada corporation (dba Sentrex
Communications Company)
IWA Services, Inc., a California corporation
MFG, Inc., a Delaware corporation
Collins/Pina Consulting Engineers, Inc., an Arizona corporation
D.E.A. Construction Company, a Colorado corporation
BAHA Communications, Inc., a Nevada corporation
Utilities & C. C., Inc., a California corporation
ASL Consultants, Inc., a California corporation
Cosentini Associates, Inc., a New York corporation
PDR Engineers, Inc., a Delaware corporation
Evergreen Utility Contractors, Inc., a Washington corporation
Gig Harbor Construction, Inc., a Washington corporation
LC of Illinois, an Illinois corporation
eXpert Wireless Solutions, Inc., a Delaware corporation
Engineered Communications, a Province of Ontario, Canada corporation
FHC, Inc., an Oklahoma corporation
Rizzo Associates, Inc., a Massachusetts corporation
Drake Contractors, Inc., a Colorado corporation
Wm. Bethlehem Trenching Ltd., a Province of Ontario, Canada Corporation
All of such subsidiaries, other than Tetra Tech Canada Ltd., are wholly-owned by
Tetra Tech, Inc.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>5
<FILENAME>a2034071zex-23.txt
<DESCRIPTION>EXHIBIT 23
<TEXT>
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
033-46240, 033-47533, 033-80606, 033-94706 and 333-11757 of Tetra Tech, Inc.
on Form S-8 and 333-02766, 333-26199, 333-48569, 333-61159, 333-64165,
333-72989, 333-86341, 333-89449, 333-95083, 333-43942 and 333-48848 of Tetra
Tech, Inc. on Form S-3 of our reports dated November 15, 2000, appearing in,
and incorporated by reference in, this Annual Report on Form 10-K for the
year ended October 1, 2000.
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
December 29, 2000
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>6
<FILENAME>a2034071zex-27.txt
<DESCRIPTION>EXHIBIT 27
<TEXT>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-01-2000
<PERIOD-START> OCT-04-1999
<PERIOD-END> OCT-01-2000
<CASH> 7,557
<SECURITIES> 0
<RECEIVABLES> 268,556
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</TABLE>
</TEXT>
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-----END PRIVACY-ENHANCED MESSAGE-----