<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
(Amendment No. 3)
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) June 11, 1997
-----------------------------
Tetra Tech, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-19566 95-4148514
- ---------------------------- ----------- ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
670 N. Rosemead Boulevard, Pasadena, California 91107-2190
----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (626) 351-4664
---------------------------
Not Applicable
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
The undersigned Registrant hereby amends the following item of its Current
Report on Form 8-K for the event of June 11, 1997:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
(i) Independent Auditors' Report of Deloitte & Touche LLP
dated August 8, 1997
(ii) Independent Public Accountants' Report of
Arthur Andersen LLP dated November 1, 1996
(iii) Whalen & Company, Inc. Balance Sheets for the Years
Ended December 31, 1996 and 1995
(iv) Whalen & Company, Inc. Statements of Income for the Years
Ended December 31, 1996, 1995 and 1994
(v) Whalen & Company, Inc. Statements of Stockholder's Equity
for the Years Ended December 31, 1996, 1995 and 1994
(vi) Whalen & Company, Inc. Statements of Cash Flows for the
Years Ended December 31, 1996, 1995 and 1994
(vii) Whalen & Company, Inc. Notes to Financial Statements for
the Years Ended December 31, 1996, 1995 and 1994
(viii) Whalen & Company, Inc. Unaudited Balance Sheets as of
March 31, 1997 and December 31, 1996
(ix) Whalen & Company, Inc. Unaudited Statements of Income for
the Three Months Ended March 31, 1997 and March 31, 1996
(x) Whalen & Company, Inc. Unaudited Statements of Cash Flows
for the Three Months Ended March 31, 1997 and March 31, 1996
(xi) Whalen & Company, Inc. Notes to the Unaudited Financial
Statements for the Three Months Ended March 31, 1997 and
March 31, 1996
(b) PRO FORMA FINANCIAL INFORMATION.
(i) Tetra Tech, Inc. and Whalen & Company, Inc. Unaudited
Pro Forma Condensed Consolidated Statement of Operations
for the Year Ended September 29, 1996
<PAGE>
(ii) Tetra Tech, Inc. and Whalen & Company, Inc. Unaudited
Pro Forma Condensed Consolidated Statement of Operations
for the Nine Months Ended June 29, 1997
(iii) Tetra Tech, Inc. and Whalen & Company, Inc. Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements for the Year Ended September 29, 1996 and
the Nine Months Ended June 29, 1997
(c) EXHIBITS.
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Arthur Andersen LLP
27 Financial Data Schedule (previously filed with Amendment
No. 2 to this Report on Form 8-K)
<PAGE>
REPORT OF DELOITTE & TOUCHE LLP
To the Board of Directors and Stockholder
of Whalen & Company, Inc.:
We have audited the accompanying balance sheet of Whalen & Company, Inc. as
of December 31, 1996, and the related statements of income, stockholder's
equity and cash flows for the year then ended. We have also audited the
statements of income, stockholder's equity and cash flows for the year ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements present fairly, in all material
respects, the financial position of Whalen & Company, Inc. at December 31,
1996, and the results of their operations and their cash flows for the years
ended December 31, 1996 and December 31, 1994 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
San Jose, California
August 8, 1997
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of
Whalen & Company, Inc.:
We have audited the accompanying balance sheet of Whalen & Company, Inc. (the
Company) as of December 31, 1995, and the related statements of operations,
stockholder's equity and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Whalen & Company, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
November 1, 1996
<PAGE>
WHALEN & COMPANY, INC.
BALANCE SHEETS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In thousands, except share amounts) 1996 1995
-------- --------
ASSETS
CURRENT ASSETS:
Cash and equivalents. . . . . . . . . . . . . . . . . . $ 3,126 $ 783
Accounts receivable, less allowance for doubtful accounts
of $2,020 and $195 in 1996 and 1995, respectively . . 24,941 15,205
Prepaid expenses and other. . . . . . . . . . . . . . . 472 566
-------- --------
Total current assets . . . . . . . . . . . . . . 28,539 16,554
PROPERTY AND EQUIPMENT, Net . . . . . . . . . . . . . . . 705 456
OTHER ASSETS. . . . . . . . . . . . . . . . . . . . . . . 682 360
-------- --------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,926 $ 17,370
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable. . . . . . . . . . . . . . . . . . . . $ 1,119 $ 804
Accrued employee benefits . . . . . . . . . . . . . . . 2,830 2,766
Other accrued liabilities . . . . . . . . . . . . . . . 509 --
Deferred revenue. . . . . . . . . . . . . . . . . . . . -- 2,511
Note payable to stockholder . . . . . . . . . . . . . . 1,446 --
-------- --------
Total liabilities. . . . . . . . . . . . . . . . 5,904 6,081
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDER'S EQUITY:
Common stock, $1 par value; 150,000 shares authorized;
100 shares issued outstanding . . . . . . . . . . . . 10 10
Retained earnings . . . . . . . . . . . . . . . . . . . 24,012 11,279
-------- --------
Total stockholder's equity . . . . . . . . . . . 24,022 11,289
-------- --------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,926 $ 17,370
-------- --------
-------- --------
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
WHALEN & COMPANY, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<S> <C> <C> <C>
(In thousands) 1996 1995 1994
--------- --------- ---------
NET REVENUES:
Management fees. . . . . . . . . . . . . . . . $ 45,773 $ 44,733 $ 41,145
Per-site fees. . . . . . . . . . . . . . . . . 10,783 7,366 3,888
Contract termination fee . . . . . . . . . . . -- -- 900
--------- --------- ---------
Total net revenues . . . . . . . . . . . . . . 56,556 52,099 45,933
FIELD OPERATING EXPENSES . . . . . . . . . . . . 26,058 29,586 23,890
--------- --------- ---------
OPERATING INCOME . . . . . . . . . . . . . . . . 30,498 22,513 22,043
GENERAL AND ADMINISTRATIVE EXPENSES. . . . . . . 11,220 6,193 3,976
--------- --------- ---------
INCOME FROM OPERATIONS . . . . . . . . . . . . . 19,278 16,320 18,067
--------- --------- ---------
OTHER INCOME (EXPENSE), Net:
Interest income. . . . . . . . . . . . . . . . 66 533 79
Interest expense . . . . . . . . . . . . . . . (35) (110) (234)
Other expense, net . . . . . . . . . . . . . . (74) (756) (48)
--------- --------- ---------
Total other expense, net . . . . . . . . . . . (43) (333) (203)
--------- --------- ---------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . 19,235 15,987 17,864
STATE INCOME TAXES . . . . . . . . . . . . . . . 385 500 357
--------- --------- ---------
NET INCOME . . . . . . . . . . . . . . . . . . . $ 18,850 $ 15,487 $ 17,507
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to financial statements.
<PAGE>
WHALEN & COMPANY, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands, except share amounts)
Common Stock Total
-------------- Retained Stockholder's
Shares Amount Earnings Equity
------ ------ -------- -------------
BALANCES, January 1, 1994. . . . . . . 100 $ 10 $ 705 $ 715
Net income . . . . . . . . . . . . . . -- -- 17,507 17,507
------ ------ ------- --------
BALANCES, December 31, 1994. . . . . . 100 10 18,212 18,222
Stockholder distribution . . . . . . . -- -- (22,420) (22,420)
Net income . . . . . . . . . . . . . . -- -- 15,487 15,487
------ ------ ------- --------
BALANCES, December 31, 1995. . . . . . 100 10 11,279 11,289
Stockholder distribution . . . . . . . -- -- (6,117) (6,117)
Net income . . . . . . . . . . . . . . -- -- 18,850 18,850
------ ------ ------- --------
BALANCES, December 31, 1996. . . . . . 100 $ 10 $24,012 $ 24,022
------ ------ ------- --------
------ ------ ------- --------
See notes to financial statements.
<PAGE>
WHALEN & COMPANY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,850 $ 15,487 $ 17,507
Reconciliation of net income to net cash provided by
operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 510 170 60
Provision for doubtful accounts. . . . . . . . . . . . . . 1,825 195 --
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . (11,561) 1,001 (14,119)
Prepaid expenses and other . . . . . . . . . . . . . . . 94 (151) (291)
Contract termination receivable. . . . . . . . . . . . . 180 180 (540)
Other assets . . . . . . . . . . . . . . . . . . . . . . (502) -- --
Accounts payable . . . . . . . . . . . . . . . . . . . . 315 755 35
Accrued employee benefits. . . . . . . . . . . . . . . . 64 422 1,495
Other accrued liabilities. . . . . . . . . . . . . . . . 509 (782) 553
Deferred revenue . . . . . . . . . . . . . . . . . . . . (2,511) 2,511 --
-------- -------- --------
Net cash provided by operating activities. . . . . . . 7,773 19,788 4,700
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of long-term investment . . . . . . . . . . . . . . -- -- (25)
Sale of long-term investment . . . . . . . . . . . . . . . . -- 25 --
Purchases of property and equipment. . . . . . . . . . . . . (763) (369) (173)
Proceeds from sale of property and equipment . . . . . . . . 4 16 --
-------- -------- --------
Net cash used in investing activities. . . . . . . . . (759) (328) (198)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of note payable to stockholder. . . . . . . . . . . 1,500 -- 1,002
Repayments of notes payable to stockholder . . . . . . . . . (54) (3,069) (251)
Distribution to stockholder. . . . . . . . . . . . . . . . . (6,117) (22,420) --
-------- -------- --------
Net cash provided by (used in) financing activities. . (4,671) (25,489) 751
-------- -------- --------
NET CHANGE IN CASH AND EQUIVALENTS . . . . . . . . . . . . . . 2,343 (6,029) 5,253
CASH AND EQUIVALENTS, Beginning of year. . . . . . . . . . . . 783 6,812 1,559
-------- -------- --------
CASH AND EQUIVALENTS, End of year. . . . . . . . . . . . . . . $ 3,126 $ 783 $ 6,812
-------- -------- --------
-------- -------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest . . . . . . . . . . . . . . . . . . . $ -- $ 110 $ 234
-------- -------- --------
-------- -------- --------
Cash paid for income taxes . . . . . . . . . . . . . . . . . $ 53 $ 495 $ 40
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to financial statements.
<PAGE>
WHALEN & COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Whalen & Company, Inc. (the "Company") is a
Delaware Chapter S corporation that was formed effective August 25, 1987. Dan
Whalen is the founder and sole stockholder of the Company.
The Company provides program and turnkey project development consulting
services on a contract basis to customers who build and operate wireless
networks. The Company offers a range of services from single-site deployments
to the implementation of complete wireless network systems. The Company has
consulting experience in PCS, cellular, ESMR, wireless, air-to-ground,
microwave, paging, fiber optic and switching center systems.
The Company provides services in North America, South America, Asia,
Australia and Europe.
FINANCIAL STATEMENT ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates include a provision for
doubtful accounts. Actual results could differ from estimates.
CASH AND EQUIVALENTS - Cash and equivalents include cash and highly liquid
debt instruments with original maturities of three months or less.
ACCOUNTS RECEIVABLE - Accounts receivable includes billed and unbilled
accounts receivable. Total unbilled accounts receivable were $6,794,000 and
$3,061,000 as of December 31, 1996 and 1995, respectively.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash
and equivalents and accounts receivable. The Company places its cash and
equivalents for safekeeping with high-credit-quality financial institutions.
The Company performs ongoing credit evaluations of its customers and generally
requires that customers remit payment for billed revenue within 30 days. The
Company maintains reserves for estimated credit losses. See Note 7 concerning
significant customers.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets ranging from two to seven years.
<PAGE>
REVENUE RECOGNITION - The Company recognizes management fee revenue as
project management and consulting services are performed in accordance with
customer contracts. The recognition of revenue related to per-site fees is
deferred until milestones in the Company's customer contracts have been met and
collection is reasonably assured. Per-site fees in 1996 include $8,407,000 from
a single customer of which $2,511,000 were related to 1995 and had been deferred
as of December 31, 1995 due to the uncertainty of collection as of that date.
REIMBURSABLE EXPENSES - Certain expenses incurred by the Company are passed
on to customers in accordance with customer contract agreements. The Company
records the expense and reimbursement on a gross basis. The amounts included in
management fees and field operating expenses were $6,861,000, $7,122,000 and
$6,128,000 in 1996, 1995 and 1994, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Financial instruments include cash
equivalents and long-term obligations. Cash equivalents are stated at cost
which approximates fair market value based on quoted market prices. The
carrying amount of the Company's long-term obligations approximates fair market
value.
INCOME TAXES - The Company's stockholder elected to be taxed as an S
corporation under the provisions of the Internal Revenue Code. Under these
provisions, the Company does not pay federal corporate income taxes on its
taxable income. As a Chapter S corporation, the Company is required to pay
state income taxes to the states in which it conducts business.
RECLASSIFICATIONS - Certain reclassifications to the 1995 financial
statements have been made to conform to the 1996 presentation.
2. PROPERTY AND EQUIPMENT, NET
Property and equipment at December 31 consist of the following (in
thousands):
1996 1995
Furniture and fixtures $ 197 $ 168
Office equipment 247 127
Computer equipment 814 281
Computer software 89 191
------ -----
1,347 767
Accumulated depreciation (642) (311)
------ -----
$ 705 $ 456
------ -----
------ -----
<PAGE>
3. LONG-TERM RECEIVABLE
On December 8, 1994, the Company reached a settlement on a contract
termination with a customer relating to a contract to provide construction
administration services that was canceled prior to December 8, 1994. The
customer agreed to pay, as a settlement of all past and future amounts due,
$900,000 over five years beginning in 1994. As of December 31, 1996, $360,000
of the settlement amount is still outstanding.
The Company has included $180,000 of the outstanding balance in current
accounts receivable for the portion due in 1997. The remaining amount of
$180,000 is due during 1998 and is included in other assets.
The principal amount of the receivable is adjusted each year for increases
in the Consumer Price Index.
4. LINE OF CREDIT
The Company has a revolving line of credit with a bank under which it may
borrow up to $5,000,000 through February 1998. Borrowings bear interest at the
bank's reference rate (8.25% at December 31, 1996) and are personally guaranteed
by the sole stockholder. There were no borrowings outstanding under the
revolving line of credit at December 31, 1996.
5. COMMITMENTS AND CONTINGENCIES
The Company leases office space for its corporate facilities. All leases
are classified as operating leases. The following is a schedule of the future
minimum rental payments required under operating leases that have initial or
remaining noncancelable terms in excess of one year as of December 31, 1996 (in
thousands):
1997............................... $ 87
1998............................... 13
1999............................... 13
2000............................... 13
2001............................... 12
----
Total minimum lease payments $138
----
----
Lease payments charged to operations totaled $222,000, $153,000 and $80,000
for 1996, 1995 and 1994, respectively.
<PAGE>
6. RELATED PARTY TRANSACTIONS
NOTE PAYABLE TO STOCKHOLDER
The sole stockholder of the Company advances the Company funds through
notes payable that are used for current operating and other costs and are due
upon demand. In 1994, the stockholder note payable accrued interest at a rate
varying from 7% to 9%. In January 1995, the note was amended to bear interest
at a rate of 9%. Total interest expense related to the stockholder note payable
was $21,000, $110,000 and $234,000 for 1996, 1995 and 1994, respectively.
At December 31, 1994, the Company had an outstanding stockholder note
payable of $3,069,000. The balance of the note payable was settled during
1995. The Company paid income taxes and various expenses of the sole
stockholder, which were recorded as a reduction in the stockholder note
payable balance.
In November 1996, the sole stockholder advanced the Company an
additional $1,500,000 which accrues interest at 8.5%.
7. MAJOR CUSTOMER INFORMATION
Customers which accounted for 10% or more of total revenues were as
follows:
1996 1995 1994
---- ---- ----
Customer A 27% 72% 89%
Customer B 18 -- --
Customer C 16 -- --
Customer D 15 -- --
Customer E 10 -- --
At December 31, 1996, three customers' balances accounted for 40%, 26%
and 11% of accounts receivable. At December 31, 1995, one customer's balance
accounted for 73% of accounts receivable.
8. EMPLOYEE BENEFITS PLAN
The Company maintains a 401(k) plan for employees who have completed 12
consecutive months of service and during that period have worked 1,000 hours.
The Company makes matching contributions to the plan based on the amounts
contributed by eligible employees. Company contributions to the plan totaled
$264,000, $223,000 and $105,000 for 1996, 1995 and 1994, respectively.
<PAGE>
9. SUBSEQUENT EVENT
On June 11, 1997, the Company entered into an Agreement and Plan of
Reorganization with Tetra Tech, Inc., a Delaware corporation (the "Agreement").
The Agreement provided for the merger of the Company, along with Whalen Service
Corps Inc., with Tetra Tech, Inc. for aggregate consideration of $52,456,000.
The consideration consisted of 1,680,000 shares of Tetra Tech, Inc. common
stock with a $.01 par value ("Common Stock"), 1,231,840 shares of Tetra Tech,
Inc. Series A convertible preferred stock with a $.01 par value ("Series A
Stock") and $8,051,000 in cash.
Each share of Series A Stock will automatically be converted into one share
of Common Stock immediately upon the filing of an amendment to Tetra Tech,
Inc.'s Certificate of Incorporation which increases the number of authorized
shares of Common Stock to a number sufficient to permit the conversion of all
the outstanding shares of Series A Stock.
As part of the Agreement, on the business day prior to the merger, the
Company distributed to the stockholder (i) cash in the amount of $4,138,000 and
(ii) accounts receivable having a net value of $18,456,000.
* * * * *
<PAGE>
WHALEN & COMPANY, INC.
UNAUDITED BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS) MARCH 31, 1997 DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 2,260 $ 3,126
Accounts receivable, less allowance
for doubtful accounts of $2,020 for
each respective period 29,595 24,941
Prepaid expenses and other 831 472
-------- ---------
Total current assets 32,686 28,539
PROPERTY AND EQUIPMENT, NET 1,015 705
OTHER ASSETS 180 682
-------- ---------
TOTAL $ 33,881 $ 29,926
-------- ---------
-------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,002 $ 1,119
Accrued employee benefits 2,245 2,830
Other accrued liabilities 719 509
Note payable to stockholder 1,476 1,446
-------- ---------
Total liabilities 5,442 5,904
-------- ---------
STOCKHOLDER'S EQUITY:
Common stock, $1 par value; 150,000
shares authorized;
100 shares issued and outstanding 10 10
Retained earnings 28,429 24,012
-------- ---------
Total stockholder's equity 28,439 24,022
-------- ---------
TOTAL $ 33,881 $ 29,926
-------- ---------
-------- ---------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
WHALEN & COMPANY, INC.
UNAUDITED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
Three Months Ended Three Months Ended
(In thousands) March 31, 1997 March 31, 1996
------------------ ------------------
NET REVENUES:
Management fees $ 13,821 $ 8,993
Per-site fees 833 3,501
------------- --------------
Total net revenues 14,654 12,494
FIELD OPERATING EXPENSES 7,470 5,312
------------- --------------
OPERATING INCOME 7,184 7,182
GENERAL AND ADMINISTRATIVE EXPENSES 3,206 2,035
------------- --------------
INCOME FROM OPERATIONS 3,978 5,147
------------- --------------
OTHER INCOME (EXPENSE), NET:
Interest income 47 87
Interest expense (36) (5)
Other expense, net (149) (157)
------------- --------------
Total other expense, net (138) (75)
INCOME BEFORE INCOME TAXES 3,840 5,072
STATE INCOME TAXES - -
------------- --------------
NET INCOME $ 3,840 $ 5,072
------------- --------------
------------- --------------
See notes to financial statements
<PAGE>
WHALEN & COMPANY, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
(In thousands) March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,840 $ 5,072
Reconciliation of net income to net cash provided by
operating activities:
Depreciation (96) 58
Changes in assets and liabilities:
Accounts receivable (4,654) (570)
Prepaid expenses and other (359) (30)
Other assets 502 -
Accounts payable (117) (770)
Accrued employee benefits (585) (617)
Other accrued liabilities 210 742
--------- ---------
Net cash (used in) provided by operating activities (1,259) 3,885
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (238) (118)
Disposal of property and equipment 24 -
--------- ---------
Net cash used in investing activities (214) (118)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase of note payable to stockholder 30 -
Contribution by stockholder 577 -
--------- ---------
Net cash provided by financing activities 607 -
--------- ---------
NET CHANGE IN CASH AND EQUIVALENTS (866) 3,767
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 3,126 783
--------- ---------
CASH AND EQUIVALENTS, END OF PERIOD $ 2,260 $ 4,550
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 35 $ 5
--------- ---------
--------- ---------
Cash paid for income taxes $ - $ -
--------- ---------
--------- ---------
See notes to financial statements
</TABLE>
<PAGE>
WHALEN & COMPANY, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1. BASIS OF PRESENTATION
The accompanying balance sheet as of March 31, 1997, the statements of
income and the statements of cash flows for the three-month periods ended
March 31, 1997 and 1996 are unaudited, and in the opinion of management
include all adjustments, which are of a normal recurring nature, necessary for
a fair presentation of the financial position and the results of operations
for the period presented.
The financial statements should be read in conjunction with the audited
financial statements and the notes thereto for the year ended December 31,
1996 included in the Tetra Tech, Inc. Form 8-K/A filed August 25, 1997.
The results of operations for the three-month period ended March 31,
1997 are not necessarily indicative of the results to be expected for the
fiscal year ending September 28, 1997.
2. CURRENT ASSETS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash equivalents
totaled $1,900,000 and $2,200,000 at March 31, 1997 and 1996, respectively.
3. RELATED PARTY TRANSACTIONS
The sole stockholder of the Company advances the Company funds through
notes payable that are used for current operating and other costs and are due
upon demand and bear interest at a rate of 9%. Total interest expense
related to the stockholder note payable was $30,000 and $0 for the three months
ended March 31, 1997 and 1996, respectively.
4. SUBSEQUENT EVENT
On June 11, 1997, the Company entered into an Agreement and Plan of
Reorganization with Tetra Tech, Inc., a Delaware corporation (the
"Agreement"). The Agreement provided for the merger of the Company, along
with Whalen Service Corps Inc., with Tetra Tech, Inc. for aggregate
consideration of $52,456,000.
The consideration consisted of 1,680,000 shares of Tetra Tech, Inc.
common stock with a $.01 par value ("Common Stock"), 1,231,840 shares of
Tetra Tech, Inc. Series A convertible preferred stock with a $.01 par value
("Series A Stock") and $8,051,000 in cash.
<PAGE>
Each share of Series A Stock will automatically be converted into one share
of common stock immediately upon the filing of an amendment to Tetra Tech,
Inc.'s Certificate of Incorporation which will increase the number of
authorized shares of Common Stock to a number sufficient to permit the
conversion of all the outstanding shares of Series A Stock. If an amendment
to Tetra Tech, Inc.'s Certificate of Incorporation is not executed by
December 10, 1997, the holders of the Series A Stock may put the Series A
Stock to Tetra Tech, Inc. for cash at the average closing price of the
Company's common stock on the five days ending one day prior to the exercise
of the put.
As part of the Agreement, on the business day prior to the merger, the
Company distributed to the stockholder (i) cash in the amount of $4,138,000
and (ii) accounts receivable having a net value of $18,456,000.
<PAGE>
TETRA TECH, INC. AND WHALEN & COMPANY, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended September 29, 1996
(In thousands except per share data)
<TABLE>
<CAPTION>
Historical (Note 1) Pro forma (Note 2)
-------------------------- --------------------------
Tetra Tech, Whalen &
Inc. Company, Inc. Adjustments Consolidated
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Gross Revenue. . . . . . . . . . . . . . . . . . . . $ 220,099 $ 56,556 $ - $ 276,655
Subcontractor costs. . . . . . . . . . . . . . . . 59,062 - - 59,062
--------- -------- ------- ---------
Net Revenue. . . . . . . . . . . . . . . . . . . . . 161,037 56,556 - 217,593
Cost of Net Revenue. . . . . . . . . . . . . . . . . 122,084 26,058 1,726 149,868
--------- -------- ------- ---------
Gross Profit . . . . . . . . . . . . . . . . . . . . 38,953 30,498 (1,726) 67,725
Selling, General and Adminstrative Expenses. . . . . 21,218 11,220 1,864 34,302
--------- -------- ------- ---------
Income From Operations . . . . . . . . . . . . . . . 17,735 19,278 (3,590) 33,423
Interest Expense . . . . . . . . . . . . . . . . . . 1,076 35 700 1,811
Interest Income. . . . . . . . . . . . . . . . . . . 300 66 - 366
Other Income (Expense), net. . . . . . . . . . . . . - (74) - (74)
--------- -------- ------- ---------
Income Before Income Taxes . . . . . . . . . . . . . 16,959 19,235 (4,290) 31,904
Income Tax Expense . . . . . . . . . . . . . . . . . 6,854 385 5,892 13,131
Net Income . . . . . . . . . . . . . . . . . . . . . $ 10,105 18,850 $(10,182) $ 18,773
--------- -------- ------- ---------
--------- -------- ------- ---------
Net Income Per Common Share (Note 3) . . . . . . . . 0.70 1.08
--------- ---------
--------- ---------
Shares Used in Per Share Calculations (Note 3) . . . 14,452 17,364
--------- ---------
--------- ---------
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
</TABLE>
<PAGE>
TETRA TECH, INC. AND WHALEN & COMPANY, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 29, 1997
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical (Note 1) Pro Forma (Note 2)
-------------------------- -------------------------
Tetra Tech, Whalen &
Inc. Company, Inc. Adjustments Consolidated
--------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Gross Revenue. . . . . . . . . . . . . . . . . . $ 171,406 $ 39,624 $ - $ 211,030
Subcontractor costs. . . . . . . . . . . . . . 38,447 - - 38,447
--------- ---------- --------- ---------
Net Revenue. . . . . . . . . . . . . . . . . . . 132,959 39,624 - 172,583
Cost of Net Revenue. . . . . . . . . . . . . . . 100,077 26,519 (3,542) 123,054
--------- ---------- --------- ---------
Gross Profit . . . . . . . . . . . . . . . . . . 32,882 13,105 3,542 49,529
Selling, General and Adminstrative Expenses. . . 17,390 12,365 (960) 28,795
--------- ---------- --------- ---------
Income From Operations . . . . . . . . . . . . . 15,492 740 4,502 20,734
Interest Expense . . . . . . . . . . . . . . . . 127 - 525 652
Interest Income. . . . . . . . . . . . . . . . . 201 - - 201
Other Income (Expense) . . . . . . . . . . . . . - 27 - 27
--------- ---------- --------- ---------
Income Before Income Taxes . . . . . . . . . . . 15,566 767 3,977 20,310
Income Tax Expense . . . . . . . . . . . . . . . 6,464 - 1,992 8,456
Net Income . . . . . . . . . . . . . . . . . . . $ 9,102 $ 767 $ 1,985 $ 11,854
--------- ---------- --------- ---------
--------- ---------- --------- ---------
Net Income Per Common Share (Note 3) . . . . . . 0.61 0.67
--------- ---------- --------- ---------
--------- ---------- --------- ---------
Shares Used in Per Share Calculations (Note 3) . 14,918 17,784
--------- ---------- --------- ---------
--------- ---------- --------- ---------
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
</TABLE>
<PAGE>
TETRA TECH, INC. AND WHALEN & COMPANY, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED SEPTEMBER 29, 1996 AND THE NINE MONTHS ENDED JUNE 29, 1997
(In thousands)
1. PERIODS PRESENTED
On June 11, 1997, Tetra Tech, Inc. ("Tetra Tech") purchased 100% of the
capital stock of Whalen & Company, Inc. and Whalen Service Corps Inc.
(collectively, "WAC") for approximately $43,070 consisting of cash and Tetra
Tech common and preferred stock. The common and preferred stock was issued in
a private placement and had a combined value of approximately $33,304. Tetra
Tech's stock was valued based upon the extended restriction period and
economic factors specific to Tetra Tech's circumstances which resulted in a
fair valuation approximately 28% below the then prevailing market price.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
have been prepared by combining the separate historical financial statements
of Tetra Tech and WAC for the year ended September 29, 1996 and the nine
months ended June 29, 1997. The historical statements of operations for WAC
included in the Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended September 29, 1996 represent the results of
operations for the year ended December 31, 1996. The historical statement of
operations for WAC included in the Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the nine months ended June 29, 1997 represents
the results of operations for the period October 1, 1996 through May 31,
1997. The Statement of Operations for the period June 1, 1997 through June
29, 1997 for WAC is reflected in the historical Condensed Consolidated
Statement of Operations of Tetra Tech for the period ended June 29, 1997.
An Unaudited Pro Forma Condensed Consolidated Balance Sheet has not been
prepared as WAC is included in the Unaudited Condensed Consolidated Balance
Sheet at June 29, 1997 for Tetra Tech, Inc. as filed in Tetra Tech's
Quarterly Report on Form 10-Q for the period ended June 29, 1997.
2. PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION
The adjustments to Cost of Net Revenue of $1,726 and $3,542 and the
adjustments to Selling, General and Administrative Expenses of $547 and
$1,947 for the year ended September 29, 1996 and the nine months ended June
29, 1997, respectively, represent salary and bonus expense adjustments for
WAC employees and WAC's principal stockholder. Prior to the acquisition, WAC
was an S corporation and made distributions to its principal stockholder in
lieu of increased salary and bonus. Immediately prior to the acquisition,
WAC declared a one-time bonus of approximately $5,000 for certain employees
as a result of terms negotiated in the acquisition. The pro forma
adjustments reflect the net effect of the bonus that would have been
<PAGE>
recognized under Tetra Tech's established bonus policy, net of the bonuses
declared by WAC, and the terms of the Employment Agreement between Tetra Tech
and the principal stockholder for each of the periods provided.
The adjustments to Selling, General and Administrative Expenses of
$1,317 and $987 for the year ended September 29, 1996 and the nine months
ended June 29, 1997, respectively, represent the amortization of intangible
assets resulting from the acquisition. The intangible assets are amortized
on a straight-line basis over thirty years.
The adjustments to Interest Expense of $700 and $263 for the year ended
September 29, 1996 and the nine months ended June 29, 1997, respectively,
represent expense on borrowings under Tetra Tech's existing credit
facility that relate to the acquisition of WAC. Such adjustments are based
upon the average interest rates and terms of the credit facility for the
periods presented.
The adjustments to Income Tax Expense of $4,239 and $1,992 for the year
ended September 29, 1996 and the nine months ended June 29, 1997,
respectively, represent the income tax effect of the pro forma adjustments
(since WAC was, as indicated above, an S corporation taxpayer) and an
adjustment to reflect the consolidated effective income tax rate.
3. EARNINGS PER SHARE
The adjustments to Shares Used in Per Share Calculations of 2,912 shares
and 2,866 shares for the year ended September 29, 1996 and the nine months
ended June 29, 1997, respectively, represent the number of additional shares
that would have been outstanding had the shares issued in the acquisition
been outstanding for the entire periods reflected.
The unaudited pro forma consolidated Net Income Per Common Share was
computed by dividing the pro forma consolidated Net Income by the pro forma
weighted average number of common shares and common stock equivalents
outstanding for each period.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 18, 1997
TETRA TECH, INC.
By: /s/ JAMES M. JASKA
---------------------
James M. Jaska
Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-46240, 33-47533, 33-80606, and 33-94706 on Form S-8 and Registration
Statement No. 333-26199 on Form S-3 of Tetra Tech, Inc. of our report dated
August 8, 1997 appearing in this Form 8-K/A.
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
September 18, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS'
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated November 1, 1996, included in this Form 8-K/A,
into Tetra Tech, Inc.'s previously filed Registration Statement File Nos.
33-46240, 33-47533, 33-80606, 33-94706 and 333-26199.
ARTHUR ANDERSEN LLP
San Francisco, California
September 18, 1997
