<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 29, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-19655
TETRA TECH, INC.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4148514
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) number)
670 N. Rosemead Boulevard, Pasadena, California 91107
------------------------------------------------------
(Address of principal executive offices)
(626) 351-4664
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 periods 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
--- ---
As of May 4, 1998, the total number of outstanding shares of the Registrant's
common stock was 22,473,776.
-1-
<PAGE>
TETRA TECH, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to the Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Risk Factors 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 21
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1.
Tetra Tech, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
In thousands, except share data March 29, September 28,
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . $ 6,459 $ 12,262
Accounts receivable - net. . . . . . . . . . . . . . . . . . . 52,407 30,089
Unbilled receivables - net. . . . . . . . . . . . . . . . . . 52,561 35,145
Prepaid and other current assets . . . . . . . . . . . . . . . 5,238 2,522
Income taxes receivable. . . . . . . . . . . . . . . . . . . . 2,114 --
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . 867 867
--------- ---------
Total Current Assets . . . . . . . . . . . . . . . . . . . 119,646 80,885
--------- ---------
PROPERTY AND EQUIPMENT:
Leasehold improvements . . . . . . . . . . . . . . . . . . . . 1,227 1,177
Equipment, furniture and fixtures. . . . . . . . . . . . . . . 19,811 16,838
--------- ---------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 21,038 18,015
Accumulated depreciation and amortization. . . . . . . . . . . (11,485) (9,592)
--------- ---------
PROPERTY AND EQUIPMENT - NET . . . . . . . . . . . . . . . . . . 9,553 8,423
INTANGIBLE ASSETS - NET. . . . . . . . . . . . . . . . . . . . . 72,302 69,439
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 1,611 766
--------- ---------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 203,112 $ 159,513
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . $ 15,508 $ 11,621
Accrued compensation . . . . . . . . . . . . . . . . . . . . . 10,432 10,981
Other current liabilities. . . . . . . . . . . . . . . . . . . 9,333 6,386
Current portion of long-term obligations . . . . . . . . . . . 25,039 8,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . . -- 1,358
--------- ---------
Total Current Liabilities. . . . . . . . . . . . . . . . . 60,312 38,346
--------- ---------
LONG-TERM OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . 10,000 --
--------- ---------
MINORITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . . 762 --
--------- ---------
REDEEMABLE PREFERRED STOCK . . . . . . . . . . . . . . . . . . . -- 13,526
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 2,000,000 shares of $.01
par value; issued and outstanding 0 and 1,231,840 shares
at March 29, 1998 and September 28, 1997, respectively . . . -- --
Common stock - authorized, 30,000,000 shares of $.01
par value; issued and outstanding 22,439,360 and
20,714,254 shares at March 29, 1998 and September 28,
1997, respectively . . . . . . . . . . . . . . . . . . . . . 224 207
Additional paid-in capital . . . . . . . . . . . . . . . . . . 79,311 63,502
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 52,503 43,932
--------- ---------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . 132,038 107,641
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . $ 203,112 $ 159,513
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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<PAGE>
Tetra Tech, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
In thousands, except per share data Three Months Ended Six Months Ended
-------------------------- --------------------------
March 29, March 30, March 29, March 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gross Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,727 $ 55,545 $ 159,165 $ 110,483
Subcontractor costs . . . . . . . . . . . . . . . . . . . . 20,921 11,631 33,695 26,146
--------- --------- --------- ---------
Net Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . 71,806 43,914 125,470 84,337
Cost of Net Revenue. . . . . . . . . . . . . . . . . . . . . . . 54,786 33,367 95,125 64,418
--------- --------- --------- ---------
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . 17,020 10,547 30,345 19,919
Selling, General and Administrative Expenses . . . . . . . . . . 8,148 5,655 14,294 10,634
--------- --------- --------- ---------
Income From Operations . . . . . . . . . . . . . . . . . . . . . 8,872 4,892 16,051 9,285
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . 671 27 809 42
Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . (75) (58) (140) (122)
--------- --------- --------- ---------
Income Before Income Taxes and Minority
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 8,276 4,923 15,382 9,365
Income to Minority Interest. . . . . . . . . . . . . . . . . . . 203 -- 203 --
--------- --------- --------- ---------
Income Before Income Taxes . . . . . . . . . . . . . . . . . . . 8,073 4,923 15,179 9,365
Income Tax Expense . . . . . . . . . . . . . . . . . . . . . . . 3,552 2,051 6,608 3,897
--------- --------- --------- ---------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,521 $ 2,872 $ 8,571 $ 5,468
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic Earnings Per Share . . . . . . . . . . . . . . . . . . . . $ 0.20 $ 0.16 $ 0.39 $ 0.31
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted Earnings Per Share . . . . . . . . . . . . . . . . . . . $ 0.20 $ 0.16 $ 0.37 $ 0.30
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted Average Common Shares Outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,324 17,845 22,049 17,766
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . 23,165 18,292 23,116 18,326
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
-4-
<PAGE>
Tetra Tech, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
In thousands Six Months Ended
-------------------------------
March 29, March 30,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,571 $ 5,468
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . 3,220 1,830
Undistributed earnings to minority interest. . . . . . . . . 203 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . (662) (56)
Changes in operating assets and liabilities, net of effects
of acquisitions:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . (8,724) 1,839
Unbilled receivables . . . . . . . . . . . . . . . . . . . . (4,862) (2,799)
Prepaid and other assets . . . . . . . . . . . . . . . . . . (4,028) 665
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 3,806 (2,830)
Accrued compensation . . . . . . . . . . . . . . . . . . . . (702) (339)
Other current liabilities. . . . . . . . . . . . . . . . . . 23 652
Income taxes payable . . . . . . . . . . . . . . . . . . . . (3,859) (188)
--------- ---------
Net Cash (Used In) Provided By Operating Activities. . . . (7,014) 4,242
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (1,061) (985)
Proceeds from sale of property and equipment . . . . . . . . . . -- 23
Payments for business acquisitions, net of cash acquired . . . . (25,640) (261)
--------- ---------
Net Cash Used In Investing Activities. . . . . . . . . . . (26,701) (1,223)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt . . . . . . . . . . . . . . . . . . . (15,002) (405)
Proceeds from issuance of long-term debt . . . . . . . . . . . . 42,000 --
Net proceeds from issuance of common stock . . . . . . . . . . . 914 496
--------- ---------
Net Cash Provided By Financing Activities. . . . . . . . . 27,912 91
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . (5,803) 3,110
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . 12,262 6,129
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . $ 6,459 $ 9,239
--------- ---------
--------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION -
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $ 574 $ 9
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . $ 10,080 $ 5,826
</TABLE>
-5-
<PAGE>
Tetra Tech, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
In thousands Six Months Ended
-------------------------------
March 29, March 30,
1998 1997
--------- ---------
<S> <C> <C>
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING
ACTIVITIES:
In December 1996, the Company purchased all of the capital
stock of IWA Engineers. In conjunction with this acquisition,
liabilities were assumed as follows:
Fair value of assets acquired . . . . . . . . . . . . . . . $ 3,152
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . (310)
Issuance of common stock. . . . . . . . . . . . . . . . . . (1,252)
Other acquisition costs . . . . . . . . . . . . . . . . . . (70)
---------
Liabilities assumed . . . . . . . . . . . . . . . . . . . . $ 1,520
---------
---------
In December 1996, the Company purchased all of the capital
stock of FLO Engineering, Inc. In conjunction with this
acquisition, liabilities were assumed as follows:
Fair value of assets acquired . . . . . . . . . . . . . . . $ 948
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . (139)
Issuance of common stock. . . . . . . . . . . . . . . . . . (515)
Other acquisition costs . . . . . . . . . . . . . . . . . . (70)
---------
Liabilities assumed . . . . . . . . . . . . . . . . . . . . $ 224
---------
---------
In March 1997, the Company purchased all of the capital
stock of SCM Consultants, Inc. In conjunction with this
acquisition, liabilities were assumed as follows:
Fair value of assets acquired . . . . . . . . . . . . . . . $ 3,079
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . (311)
Issuance of common stock. . . . . . . . . . . . . . . . . . (2,050)
Other acquisition costs . . . . . . . . . . . . . . . . . . (70)
---------
Liabilities assumed . . . . . . . . . . . . . . . . . . . . $ 648
---------
---------
In December 1997, the Company purchased the assets of
certain environmental services businesses of
Brown & Root, Inc. and Halliburton NUS Corporation,
both of which were subsidiaries of Halliburton Company.
In conjunction with this acquisition, liabilities were
assumed as follows:
Fair value of assets acquired . . . . . . . . . . . . . . . $ 27,794
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . (24,872)
Other acquisition costs . . . . . . . . . . . . . . . . . . (325)
---------
Liabilities assumed . . . . . . . . . . . . . . . . . . . . $ 2,597
---------
---------
In March 1998, the Company purchased all of the capital
stock of C.D.C. Engineering, Inc. In conjunction with
this acquisition, liabilities were assumed as follows:
Fair value of assets acquired . . . . . . . . . . . . . . . $ 2,492
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . (360)
Issuance of common stock. . . . . . . . . . . . . . . . . . (1,440)
Other acquisition costs . . . . . . . . . . . . . . . . . . (70)
---------
Liabilities assumed . . . . . . . . . . . . . . . . . . . $ 622
---------
---------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
-6-
<PAGE>
TETRA TECH, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheets as of March 29,
1998, the condensed consolidated statements of income and the condensed
consolidated statements of cash flows for the three-month and six-month
periods ended March 29, 1998 and March 30, 1997 are unaudited, and in the
opinion of management include all adjustments, consisting of only normal and
recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations for the periods presented.
The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 28, 1997.
The results of operations for the three and six months ended March 29, 1998
are not necessarily indicative of the results to be expected for the fiscal year
ending October 4, 1998.
2. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER
SHARE, which the Company has adopted in the accompanying financial
statements. The Statement replaces the presentation of primary Earnings Per
Share (EPS) with a presentation of basic EPS, which excludes dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. The Statement
also requires the dual presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
Diluted EPS is computed similarly to fully diluted EPS pursuant to Accounting
Principles Board Opinion No. 15. EPS for 1997 have been restated to reflect
the requirement of SFAS 128. Basic and diluted EPS reflect, on a retroactive
basis, a 5-for-4 stock split, effected in the form of a 25% stock dividend,
wherein one additional share of stock was issued on December 1, 1997 for each
four shares outstanding as of the record date of November 14, 1997.
3. CURRENT ASSETS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash and cash
equivalents totaled $6,459,000 and $12,262,000 at March 29, 1998 and
September 28, 1997, respectively.
-7-
<PAGE>
4. MERGERS AND ACQUISITIONS
On March 26, 1998, the Company acquired 100% of the capital stock of C.D.C.
Engineering, Inc. (CDCE), a consulting and engineering firm specializing in
civil engineering, transportation engineering, structural engineering and land
surveying. The purchase has been valued at approximately $1,800,000 consisting
of Company common stock and cash, and is subject to a purchase price adjustment
based on CDCE's Net Asset Value as of March 26, 1998 as described in the related
purchase agreement.
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. WSC holds a 51% majority interest in Whalen/Sentrex
LLC, a California limited liability company. The agreement obligated the
assumption of certain assets of TANCO LLC from ANTEC Corporation for a price
in cash of approximately $623,000.
On December 31, 1997, the Company acquired the assets of certain
environmental services businesses of Brown & Root, Inc. and Halliburton NUS
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 of approximately $24,872,000, as adjusted,
consisted of cash.
On July 11, 1997, the Company acquired 100% of the capital stock of
CommSite Development Corporation (CDC), a wireless telecommunications site
development service firm. The purchase has been valued at approximately
$5,702,000, consisting of cash and 318,079 shares of Company common stock, as
adjusted based on CDC's Net Asset Value on July 11, 1997 as described in the
related purchase agreement.
On June 11, 1997, the Company acquired 100% of the capital stock of Whalen
& Company, Inc. and Whalen Service Corps Inc. (collectively, "WAC"). WAC, a
telecommunications firm, provides a full range of services including
telecommunications site development services for PCS, cellular, ESMR,
air-to-ground, microwave, paging, fiber optic and switching centers technology.
In addition, WAC provides consulting, engineering, design services and
construction management with respect to the cable television industry. The
purchase has been valued at approximately $41,738,000, consisting of cash and
3,639,800 shares of Company common stock. The common stock was issued in a
private placement and had a value of $31,972,000. The Company's stock was
valued based upon the extended restriction period and economic factors specific
to the Company's circumstances which resulted in a fair valuation approximately
28% below the then prevailing market price. On the business day prior to the
merger, WAC distributed to its stockholders (i) cash in the amount of $4,138,000
and (ii) accounts receivable having a net value of $18,456,000.
-8-
<PAGE>
On March 20, 1997, the Company acquired 100% of the capital stock of SCM
Consultants, Inc. (SCM), a consulting and engineering firm, providing design of
irrigation, water and wastewater systems, as well as facility and infrastructure
engineering services, to state and local government, private and industrial
customers. The purchase was valued at approximately $2,431,000, consisting of
cash and 197,572 shares of Company common stock, as adjusted based upon SCM's
Net Asset Value on March 30, 1997 as described in the related purchase
agreement.
On December 18, 1996, the Company acquired 100% of the capital stock of FLO
Engineering, Inc. (FLO), a consulting and engineering firm specializing in water
resource engineering involving hydraulic engineering and hydrographic data
collection. The purchase was valued at approximately $724,000, consisting of
cash and 40,138 shares of Company common stock, as adjusted based upon FLO's Net
Asset Value on December 29, 1996 as described in the related purchase agreement.
On December 11, 1996, the Company acquired 100% of the capital stock of IWA
Engineers (IWA), an architecture and engineering firm providing a wide range of
planning, engineering, and design capabilities in water, wastewater, and
facility design, and serving state and local government and private customers.
The purchase was valued at approximately $1,632,000, consisting of cash and
95,675 shares of Company common stock, as adjusted based upon IWA's Net Asset
Value on December 29, 1996 as described in the related purchase agreement.
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 market 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 balance sheets. The final determination of such excess
amount for WAC, CDC, NUS and CDCE is subject to a final determination of the
value of the consideration paid and the net assets acquired as various studies
and valuations are not yet complete. The results of operations of each of the
companies acquired have been included in the Company's financial statements from
their respective acquisition effective dates as set forth in the related
purchase agreements.
The effect of unaudited pro forma operating results of the CDCE, SCM, FLO
and IWA transactions, had they been acquired on September 30, 1996, is not
material.
The effect of unaudited pro forma operating results assuming that the
Company had acquired NUS, CDC and WAC on September 30, 1996 is presented in
Note 6. UNAUDITED PRO FORMA OPERATING RESULTS.
5. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of a valuation allowance to provide
for doubtful accounts and for the potential disallowance of billed and unbilled
costs. The allowance for doubtful accounts as of March 29, 1998 and
September 28, 1997 was $1,163,000 and
-9-
<PAGE>
$1,346,000, respectively. The allowance for disallowed costs as of March 29,
1998 and September 28, 1997 was $9,777,000 and $9,807,000, respectively.
Disallowance of billed and unbilled costs is primarily associated with contracts
with the U.S. government which contain clauses that subject contractors to
several levels of audit. Management believes that resolution of these matters
will not have a material adverse impact on the Company's financial position or
results of operations.
6. UNAUDITED PRO FORMA OPERATING RESULTS
The following table presents summarized unaudited pro forma operating
results assuming that the Company had acquired NUS, CDC and WAC on September 30,
1996:
<TABLE>
<CAPTION>
Pro Forma Six Months Ended
--------------------------
March 29, 1998 March 30, 1997
-------------- --------------
(In thousands, except per share data)
<S> <C> <C>
Gross revenue $ 180,495 $ 190,874
Income from operations 16,390 16,711
Net income 8,784 8,744
Basic earnings per share 0.40 0.40
Diluted earnings per share 0.38 0.39
Weighted average shares outstanding:
Basic 22,049 21,724
Diluted 23,116 22,284
</TABLE>
-10-
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents the percentage relationship of selected items in
the Company's condensed consolidated Statements of Income to net revenue, and
the percentage increase or (decrease) in the dollar amount of such items:
<TABLE>
<CAPTION>
% Relationship to Net Revenue Period to % Relationship to Net Revenue Period to
------------------------------- -------------------------------
Three Months Ended Period Six Months Ended Period
------------------ ----------------
Mar. 29, 1998 Mar. 30, 1997 Change Mar. 29, 1998 Mar. 30, 1997 Change
------------- ------------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 63.5% 100.0% 100.0% 48.8%
Cost of net revenue 76.3 76.0 64.2 75.8 76.4 47.7
----- ----- ----- ----- ----- -----
Gross profit 23.7 24.0 61.4 24.2 23.6 52.3
Selling, general and
administrative expenses 11.3 12.9 44.1 11.4 12.6 34.4
----- ----- ----- ----- ----- -----
Income from operations 12.4 11.1 81.4 12.8 11.0 72.9
Net interest (expense) income (0.9) 0.1 nm* (0.5) 0.1 nm*
----- ----- ----- ----- ----- -----
Income before income taxes
and minority interest 11.5 -- 68.1 12.3 -- 64.3
Income to minority interest (0.3) -- nm* (0.2) -- nm*
----- ----- ----- ----- ----- -----
Income before income taxes 11.2 11.2 64.0 12.1 11.1 62.1
Income tax expense 4.9 4.7 73.2 5.3 4.6 69.6
----- ----- ----- ----- ----- -----
Net income 6.3% 6.5% 57.4% 6.8% 6.5% 56.8%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
* not meaningful
</TABLE>
Gross revenue increased by 66.9% to $92,727,000 for the three months ended
March 29, 1998 compared to $55,545,000 for the comparable prior year period.
For the six months ended March 29, 1998, gross revenue increased by 44.1% to
$159,165,000 from $110,483,000 in the prior year. Net revenue increased by
63.5% to $71,806,000 for the quarter from $43,914,000 a year ago. For the six
months ended March 29, 1998, net revenue increased by 48.8% to $125,470,000 from
$84,337,000 last year. For both gross and net revenue, growth in actual dollars
was experienced in all client sectors. Additionally, net revenue attributable
to the commercial sector increased 133.8% primarily due to the
telecommunications services firms acquired in fiscal 1997. The percentage of
the Company's net revenue attributable to the Federal government, state and
local government, commercial, and international clients was affected, as further
described, by the acquisitions of Whalen & Company, Inc., Whalen Service Corps
Inc., CommSite Development Corporation, NUS Environmental and C.D.C.
Engineering, Inc. (the "Acquisitions"). The following table presents the
percentage of net revenue for each client sector:
-11-
<PAGE>
<TABLE>
<CAPTION>
Percentage of Net Revenue
--------------------------------------------------------------------------
Three Months Ended Six Months Ended
---------------------------------- ----------------------------------
Client Sector March 29, 1998 March 30, 1997 March 29, 1998 March 30, 1997
- ------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Federal government 51 56 49 57
State & local government 12 17 13 17
Commercial 35 24 36 23
International 2 3 2 3
</TABLE>
For the quarter ended March 29, 1998, the Acquisitions contributed $25,047,000
in net revenue growth, of which $10,935,000 was in the Federal government
sector, $342,000 was in the state and local government sector, $13,651,000 was
in the commercial sector and $120,000 was in the international sector. For the
six months ended March 29, 1998, the Acquisitions contributed $33,730,000 in net
revenue growth, of which $10,934,000 was in the Federal government sector,
$342,000 was in the state and local government sector, $22,151,000 was in the
commercial sector and $303,000 was in the international sector.
Cost of net revenue increased 64.2% to $54,786,000 for the three months ended
March 29, 1998 compared to $33,367,000 for the comparable prior year period.
For the six months ended March 29, 1998, cost of net revenue increased 47.7% to
$95,125,000 from $64,418,000 in the prior year. As a percentage of net revenue,
cost of net revenue increased in the quarter and decreased in the six months
from 76.0% and 76.4% last year to 76.3% and 75.8% this year, respectively. The
Company continues to emphasize strong project management techniques.
Selling, general and administrative (SG&A) expenses, inclusive of amortization,
increased 44.1% to $8,148,000 for the three months ended March 29, 1998 compared
to $5,655,000 for the comparable prior year period. For the quarter ended
March 29, 1998, this increase was primarily due to the amortization of goodwill
associated with the Acquisitions ($415,000), and the addition of SG&A expenses
of the Acquisitions ($2,489,000), exclusive of corporate allocations. For the
six months ended March 29, 1998, SG&A increased 34.4% to $14,294,000 from
$10,634,000 in the comparable period last year. The amortization of goodwill
associated with the Acquisitions was $799,000, and the SG&A expenses of the
Acquisitions were ($3,413,000), exclusive of corporate allocations for the six
months ended March 29, 1998. As a percentage of net revenue, SG&A expenses
decreased to 11.3% for the quarter ended March 29, 1998 from 12.9% for the
comparable period last year, and for the six months ended March 29, 1998, SG&A
expenses decreased to 11.4% from 12.6% for the comparable period last year.
For the quarter ended March 29, 1998, net interest expense of $596,000 was
recognized compared to net interest income of $31,000 in the quarter ended
March 30, 1997, primarily due to interest on borrowings on the Company's
revolving credit facility related to the Acquisitions. For the six months ended
March 29, 1998, net interest expense increased to $669,000, compared to net
interest income of $80,000 in the prior year.
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<PAGE>
Income tax expense increased to $3,552,000 and $6,608,000 for the quarter and
six months ended March 29, 1998, respectively, from $2,051,000 and $3,897,000
for the comparable prior year period due to higher income before income taxes
and the non-deductibility of certain goodwill amortization for income tax
purposes.
LIQUIDITY AND CAPITAL RESOURCES
As of March 29, 1998, the Company's cash and cash equivalents totaled
$6,459,000. In addition, the Company has a credit agreement (the "Credit
Agreement") with a bank which, as of January 30, 1998, provides for a revolving
credit facility of $55,000,000. Under the Credit Agreement, the Company may
also request standby letters of credit up to the aggregate sum of $10,000,000
outstanding at any one time. As of March 29, 1998, outstanding borrowings
totaled $35,000,000 and standby letters of credit totaled $1,776,000.
In the six months ended March 29, 1998, cash used in operating
activities was $7,014,000 compared to cash provided by operating activities
of $4,242,000 for the comparable prior year period. The increase is primarily
attributable to increases in billed accounts receivable of $8,723,000, of
which $3,392,000 is related to the Acquisitions. The Company has targeted,
as an ongoing practice, to increase its efficiency in the timing of invoicing
and to accelerate the collecting of receivables. For the six months ended
March 29, 1998, cash used in investing activities was $26,701,000 compared to
$1,223,000 for the comparable prior year period. The increase of $25,478,000
was due to the fiscal 1998 acquisitions. For the six months ended March 29,
1998, cash provided by financing activities was $27,912,000, and resulted
primarily from the proceeds from the incurrence of long-term debt.
The Company continuously evaluates the marketplace for strategic
acquisition opportunities. Once an opportunity is identified, the Company
examines the effect an acquisition may have on the business environment, as well
as on the Company's results of operations. The Company proceeds with an
acquisition only if it determines that the acquisition is anticipated to have an
accretive effect on future operations. The Company's strategy is to position
itself to address existing and emerging markets. The Company views acquisitions
as a key component of its growth strategy, and intends to use both cash and its
securities, as it deems appropriate, to fund such acquisitions.
The Company expects that existing cash balances, internally generated
funds, and its credit facility will be sufficient to meet the Company's capital
requirements through the end of fiscal 1998. However, as acquisition
opportunities present themselves, the Company may seek to expand its borrowing
capabilities to accommodate such opportunities.
The Company is currently converting its computer systems and business
processes to ensure that its computer systems will be capable of processing
periods for the year 2000 and beyond, as well as ensure that its business
processes will be able to support current and anticipated growth projections.
The Company does not presently anticipate the costs associated with ensuring
these capabilities will have a material adverse effect on the Company.
-13-
<PAGE>
RISK FACTORS
STATEMENTS REGARDING THE COMPANY'S PERFORMANCE PROSPECTS COULD CONTAIN
FORWARD-LOOKING INFORMATION THAT INVOLVES RISK AND UNCERTAINTIES SUCH AS THE
LEVEL OF DEMAND FOR THE COMPANY'S SERVICES, FUNDING DELAYS FOR PROJECTS, LACK OF
REGULATORY CLARITY AFFECTING THE MARKETPLACE AND INDUSTRY-WIDE COMPETITIVE
FACTORS. THE FOLLOWING RISK FACTORS SHOULD BE REVIEWED IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q.
POTENTIAL LIABILITY AND INSURANCE. Because of the type of projects in which
the Company is or may be involved, the Company's current and anticipated future
services may involve risks of potential liability under Superfund, common law or
contractual indemnification agreements. It is difficult to assess accurately the
magnitude of potential risk to the Company.
The Company maintains two comprehensive general liability policies, both in
the amount of $1,000,000. These policies, together with two $9,000,000 umbrella
policies, provide total general liability coverage of $10,000,000 for the
resource management and infrastructure business areas and coverage of
$10,000,000 for the telecommunications business area. The Company's
professional liability insurance (E&O) policy, which included pollution
coverage, for 1998 provides $10,000,000 in coverage for resource management and
infrastructure business areas, with a $100,000 self-insured retention. The same
E&O policy covered the telecommunications business area with a sublimit of
$1,000,000 for each claim and $1,000,000 in the aggregate. The Company procures
insurance coverage through a broker who is experienced in the engineering field.
The broker, together with the Company's Risk Manager, reviews the Company's
risk/insurance programs with those of the Company's competitors and clients.
This review, combined with historical experience, claims history and contractual
requirements, allows the Company to determine the adequate amount of insurance.
However, because there are various exclusions and retentions under the Company's
insurance policies, there can be no assurance that all liabilities that may be
incurred by the Company are subject to insurance coverage. In addition, the E&O
policy is a "claims made" policy which only covers claims made during the term
of the policy. If a policy terminates and retroactive coverage is not obtained,
a claim subsequently made, even a claim based on events or acts which occurred
during the term of the policy, would not be covered by the policy. In the event
the Company expands its services into new markets, no assurance can be given
that the Company will be able to obtain insurance coverage for such activities
or, if insurance is obtained, that the dollar amount of any liabilities incurred
in connection with the performance of such services will not exceed policy
limits. The premiums paid by the Company for its E&O policies during fiscal
1998 are approximately $890,000.
The Company evaluates and determines the risk associated with an uninsured
claim. In the event the Company determines that an uninsured claim has
potential liability, the Company establishes an appropriate reserve. The
Company does not establish a reserve if it determines that the claim has no
merit. The Company's historical levels of insurance coverage and reserves have
been shown to be adequate. However, a partially or completely uninsured claim,
if successful and of significant magnitude, could have a material adverse effect
on the Company.
-14-
<PAGE>
SIGNIFICANT COMPETITION. The market for the Company's services is highly
competitive. The Company competes with many other firms, ranging from small
local firms to large national firms having greater financial and marketing
resources than the Company. The Company performs engineering and consulting
services across a broad spectrum of business areas, primarily in the resource
management, infrastructure, and the telecommunication service business areas.
Services within these business areas are provided to a client base including
Federal (Departments of Defense, the Interior and Energy; U.S Environmental
Protection Agency; and the U.S. Postal Service), state and local agencies, as
well as the commercial sector. 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, and any restrictions
placed upon competition by the customer. Historically, competition has been
based primarily on the quality and timeliness of service. However, the Company
believes that price has become an increasingly important competitive factor.
The Company believes that its principal competitors include Dames & Moore, Inc.,
E A Engineering Science & Technology, ICF Kaiser International, Inc.,
International Technology Corp., TRC Companies, Inc., URS Consultants, Inc., Roy
F. Weston, Inc., Castle Tower Corporation and OSP Consultants, Inc.
CONTRACTS. The Company's contracts with the Federal and state governments
and some of its other client contracts are subject to termination at the
discretion of the client. Some contracts made with the Federal government are
subject to annual approval of funding and audits of the Company's rates.
Limitations imposed on spending by Federal government agencies may limit the
continued funding of the Company's existing contracts with the Federal
government and may limit the Company's ability to obtain additional contracts.
These limitations, if significant, could have a material adverse effect on the
Company.
All of the Company's contracts with the Federal government are subject to
audit by the government, primarily by the 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. A disallowance of costs by the DCAA could have a material adverse
effect on the Company. Historically, the Company has not had any material cost
disallowances by the DCAA as a result of audit, however, there can be no
assurance that DCAA audits will not result in material cost disallowances in the
future. The Company's government contracts are also subject to renegotiation of
profits in the event of a change in the contractual scope of the work to be
performed.
In September 1995, the Company acquired Tetra Tech EM Inc. (formerly known
as PRC Environmental Management, Inc., "EMI"). EMI likewise contracts with the
Federal government and such contracts are subject to the same auditing standards
as those of the Company. Audits and negotiations for the years 1987 through
1992 have recently been completed and cost disallowances as a result of audit
totaled approximately $672,000. Negotiations for the 1993 audit are currently
underway. Audits for the years 1994 and 1995 have yet to be completed.
The Company enters into various contracts with its clients, which include
fixed-price contracts. To date, in fiscal 1998, 24.9% of the Company's net
revenue was derived from fixed-
-15-
<PAGE>
price contracts. Under a fixed-price contract, the customer agrees to pay a
specified price for the Company's performance of the entire contract.
Fixed-price contracts carry inherent risks, including risks of losses from
underestimating costs, problems with new technologies and economic and other
changes that may occur over the contract period. Losses under fixed-price
contracts, should they occur, could have a material adverse effect on the
Company.
The Company contracts with both domestic and international customers.
Certain contracts with international customers are denominated in a currency
other than the U.S. dollar. Contracts denominated in any currency other than
the U.S. dollar contain certain inherent risks, including risks on foreign
currency translation and risks in expatriating funds from foreign countries. To
date, in fiscal 1998, 2.3% of the Company's net revenue was derived from the
international marketplace compared to 3.7% for fiscal 1997. To the extent the
Company's net revenue derived from the international marketplace increases, so
increases risks associated in realizing the full contract value of those
contracts denominated in foreign currencies. The Company is currently
evaluating options to hedge future potential losses from foreign currency
transactions.
CONFLICTS OF INTEREST. Many of the Company's clients are concerned about
potential or actual conflicts of interest in retaining consultants and
engineers. For example, 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 the Company in certain cases from bidding for or
performing contracts resulting from or relating to certain work the Company has
performed for the government. In addition, services performed for a private
client may create a conflict of interest which precludes or limits the Company's
ability to obtain work from another private entity. The Company has, on
occasion, declined to bid on a project because of an actual or potential
conflict of interest.
POTENTIAL VOLATILITY OF STOCK PRICE. The market price of the Company's
common stock may be significantly affected by factors such as quarter-to-quarter
variations in the Company's results of operations, changes in environmental
legislation and changes in investors' perception of the business risks and
conditions in the environmental and telecommunication services business. In
addition, market fluctuations, as well as general economic or political
conditions, may adversely affect the market price of the Company's common stock,
regardless of the Company's actual performance.
QUALIFIED PROFESSIONALS. The Company's ability to attract and retain
qualified scientists and engineers is an important factor in determining the
Company's future growth and success. The market for environmental and
telecommunication professionals is competitive and there can be no assurance
that the Company will continue to be successful in its efforts to attract and
retain such professionals.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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 3.3 to the Company's Annual Report
on Form 10-K for the fiscal year ended September 28,
1997).
10.1 Credit Agreement dated as of September 15, 1995 between
the Company and Bank of America Illinois, as amended by
the First Amendment to Credit Agreement dated as of
November 27, 1995 (incorporated herein by reference to
Exhibit 10.1 to the Company's Annual Report on Form
10-K for the fiscal year ended October 1, 1995).
10.2 Second Amendment dated as of June 20, 1997 to the
Credit Agreement dated as of September 15, 1995 between
the Company and Bank of America Illinois (incorporated
herein by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 29, 1997).
10.3 Third Amendment dated as of December 15, 1997 to the
Credit Agreement dated as of September 15, 1995 between
the Company and Bank of America National Trust and
Savings Association (incorporated herein by reference
to Exhibit 10.3 to the Company's Annual Report on Form
10-K for the fiscal year ended September 28, 1997).
10.4 Fourth Amendment dated as of January 30, 1997 to the
Credit Agreement dated as of September 15, 1995 between
the Company and Bank of America National Trust and
Savings Association. (incorporated herein by reference
to Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended December 28,
1997).
10.5 Security Agreement dated as of September 15, 1995 among
the
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<PAGE>
Company, GeoTrans, Inc., Simons Li & Associates, Inc.,
Hydro-Search, Inc., PRC Environmental Management, Inc.
and Bank of America Illinois (incorporated herein by
reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
1, 1995).
10.6 Pledge Agreement dated as of September 15, 1995 between
the Company and Bank of America Illinois (incorporated
herein by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 1, 1995).
10.7 Guaranty dated as of September 15, 1995, executed by
the Company in favor of Bank of America Illinois
(incorporated herein by reference to Exhibit 10.4 to
the Company's Annual Report on Form 10-K for the fiscal
year ended October 1, 1995).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
10.14 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).
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<PAGE>
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 Registration Rights Agreement dated as of July 11, 1997
among the Company and the parties listed on Schedule A
attached thereto (incorporated by reference to Exhibit
10.18 to the Company's Annual Report on Form 10-K for
the fiscal year ended September 28, 1997).
10.20 Registration Rights Agreement dated as of March 26,
1998 among the Company and the parties listed on
Schedule A attached thereto.
11 Computation of Net Income Per Common Share.
27.1 Financial Data Schedule for the fiscal quarter ended
March 29, 1998.
27.2 Restated Financial Data Schedules for the fiscal
quarter ended December 28, 1997, fiscal year ended
September 28, 1997, fiscal quarter ended June 29,
1997 and fiscal quarter ended March 30, 1997.
27.3 Restated Financial Data Schedules for the fiscal
quarter ended December 29, 1996, fiscal year ended
September 29, 1996, fiscal quarter ended June 30,
1996 and fiscal quarter ended March 31, 1996.
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<PAGE>
(b) REPORTS ON FORM 8-K
Current Report on Form 8-K for the event of December 31, 1997,
filed with the Securities and Exchange Commission on January 15,
1998, which relates to the Company's acquisition of the
environmental services business (NUS) from Brown & Root, Inc. and
Halliburton NUS Corporation.
Current Report on Form 8-K/A for the event of December 31, 1997,
filed with the Securities and Exchange Commission on March 16,
1998, which relates to the Company's acquisition of the
environmental services business (NUS) from Brown & Root, Inc. and
Halliburton NUS Corporation.
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<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 thereunto duly authorized.
Dated: May 13, 1998 TETRA TECH, INC.
By: /s/ Li-San Hwang
---------------------------------------------
Li-San Hwang
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ James M. Jaska
---------------------------------------------
James M. Jaska
Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
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<PAGE>
EXHIBIT 10.20
EXHIBIT 7.10
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as of
March 26, 1998 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, CDC Acquisition Corporation, a California corporation
("Acquisition"), C.D.C. Engineering, Inc., a California corporation ("CDC"), and
the Holders are parties to an Agreement and Plan of Reorganization dated as of
March 26, 1998 (the "Reorganization Agreement"), pursuant to which Acquisition
will merge with and into CDC; and
B. Pursuant to the Reorganization Agreement, the shareholders of CDC 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 7.10 of the Reorganization Agreement and, pursuant thereto, must be
entered into by the parties as a condition to 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.
<PAGE>
"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 6.
"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 in
a private transaction (excluding the issuance of the Tetra Tech Common Stock
pursuant to the Reorganization Agreement).
"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 145" shall mean Rule 145 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.
2.
<PAGE>
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"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. FORM S-3 REGISTRATION.
(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, and Tetra
Tech shall use all commercially reasonable efforts to cause such Registration
Statement to become effective on or before July 26, 1998 and to keep such
Registration Statement continuously effective for a period ending on the date on
which all Holders are eligible to sell Registrable Securities under Rule 144
without any volume limitation (or similar successor Rule).
(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 requests in connection with such Registration Statement.
(c) Notwithstanding the foregoing, for a period not to exceed 90 days
in any 12-month period, Tetra Tech shall not be obligated to prepare and file,
or be prevented from delaying or abandoning, the Registration Statement required
hereunder if Tetra Tech, in its good faith judgment, reasonably believes that
the filing or maintenance 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
(A) a pending or scheduled public offering or private placement of securities of
Tetra Tech, (B) an acquisition, merger, consolidation or similar transaction by
or of Tetra Tech, (C) preexisting and continuing negotiations, discussions or
pending proposals with respect to any of the foregoing transactions, or (D) the
financial condition of Tetra Tech in view of the disclosure of any pending or
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,
3.
<PAGE>
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.
No seller of Registrable Securities shall (until further notice) effect
sales of shares covered by the Registration Statement after receipt of
telegraphic, telecopied or written notice from Tetra Tech to suspend sales to
permit Tetra Tech to correct or update a registration statement or prospectus.
3. REGISTRATION PROCEDURES. In connection with Tetra Tech's registration
obligations pursuant to SECTION 2 hereof, Tetra Tech will use its diligent
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 diligent 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) promptly 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 document incorporated
therein by reference untrue or which requires the making of any changes in the
Registration Statement, the Prospectus or any document
4.
<PAGE>
incorporated therein by reference in order to make the statements therein not
misleading in light of the circumstances then existing;
(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) furnish to each selling Holder, without charge, at least one
signed copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
(f) 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;
(g) 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 its
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;
(h) 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;
(i) 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;
(j) 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;
(k) 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;
(l) 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
(m) 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.
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(i) 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.
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
6.
<PAGE>
to such performance), the fees 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 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
7.
<PAGE>
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 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 5(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.
8.
<PAGE>
(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 benefits received by the indemnifying party on the one hand and the
indemnified party on the other, or (ii) if the allocation provided by CLAUSE (i)
above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other but
also the relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. 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 7 shall remain in full force and effect, regardless of any
investigation made by or on behalf of a participating Holder, its officers,
directors, partners, attorneys, agents or any person, if any, who controls 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:
(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 lawfully 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,
9.
<PAGE>
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 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 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
10.
<PAGE>
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:--------------------------------------------
Li-San Hwang
Chairman, Chief Executive Officer
and President
-----------------------------------------------
Lorenzo Gaglio
-----------------------------------------------
Robert L. Ozibko
12.
<PAGE>
SCHEDULE A
----------
SCHEDULE OF HOLDERS
<TABLE>
<CAPTION>
Number of Shares of Tetra Tech
Holder's Name/Address/Facsimile No. Common Stock Issued Pursuant
to the Reorganization Agreement
- --------------------------------------- -----------------------------------
<S> <C>
Lorenzo A. Gaglio 30,803 shares
c/o C.D.C. Engineering, Inc.
5 Wrigley
Irvine, California 92618-6801
Facsimile: (714) 830-0546
Robert L. Ozibko 30,803 shares
c/o C.D.C. Engineering, Inc.
5 Wrigley
Irvine, California 92618-6801
Facsimile: (714) 830-0546
</TABLE>
13.
<PAGE>
Exhibit 11
Tetra Tech, Inc.
Computation of Net Income Per Common Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
March 29, March 30, March 29, March 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic:
Common stock outstanding, beginning
of period . . . . . . . . . . . . . . . 22,272,741 17,805,262 20,714,254 17,658,752
Stock options exercised. . . . . . . . . . 105,013 56,570 123,954 75,171
Issuance of common stock . . . . . . . . . 61,606 184,365 1,601,406 312,274
Payment of fractional shares . . . . . . . -- -- (254) --
---------- ---------- ---------- ----------
Common stock outstanding, end
of period . . . . . . . . . . . . . . . 22,439,360 18,046,197 22,439,360 18,046,197
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common stock
outstanding during the period . . . . . 22,323,748 17,845,031 22,048,636 17,766,460
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . 22,323,748 17,845,031 22,048,636 17,766,460
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income as reported in condensed
consolidated financial statements . . . $ 4,521,000 $ 2,872,000 $ 8,571,000 $ 5,468,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic Earnings Per Share . . . . . . . . . $ 0.20 $ 0.16 $ 0.39 $ 0.31
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted:
Weighted average common shares
outstanding during the period . . . . . 22,323,748 17,845,031 22,048,636 17,766,460
Potential common shares under the
treasury stock method assuming the
exercise of options and warrants. . . . 841,190 446,616 1,067,146 559,918
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . 23,164,938 18,291,648 23,115,782 18,326,378
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income as reported in condensed
consolidated financial statements . . . $ 4,521,000 $ 2,872,000 $ 8,571,000 $ 5,468,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted Earnings Per Share . . . . . . . . $ 0.20 $ 0.16 $ 0.37 $ 0.30
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-04-1998
<PERIOD-END> MAR-29-1998
<CASH> 6,459
<SECURITIES> 0
<RECEIVABLES> 115,908
<ALLOWANCES> 10,940
<INVENTORY> 0
<CURRENT-ASSETS> 119,646
<PP&E> 21,038
<DEPRECIATION> 11,485
<TOTAL-ASSETS> 203,112
<CURRENT-LIABILITIES> 60,312
<BONDS> 0
0
0
<COMMON> 224
<OTHER-SE> 131,814
<TOTAL-LIABILITY-AND-EQUITY> 203,112
<SALES> 92,727
<TOTAL-REVENUES> 92,727
<CGS> 75,707
<TOTAL-COSTS> 75,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 671
<INCOME-PRETAX> 8,073
<INCOME-TAX> 3,552
<INCOME-CONTINUING> 4,521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,521
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR 9-MOS 6-MOS
<FISCAL-YEAR-END> OCT-04-1998 SEP-28-1997 SEP-28-1997 SEP-28-1997
<PERIOD-END> DEC-28-1997 SEP-28-1997 JUN-29-1997 MAR-30-1997
<CASH> 5,411 12,262 12,793 9,239
<SECURITIES> 0 0 0 0
<RECEIVABLES> 83,826 76,387 59,202 51,057
<ALLOWANCES> 10,828 11,153 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 83,542 80,885 80,706 66,157
<PP&E> 10,698 18,015 17,191 15,487
<DEPRECIATION> 10,323 9,592 8,770 8,035
<TOTAL-ASSETS> 161,900 159,513 154,363 97,134
<CURRENT-LIABILITIES> 36,551 38,346 43,289 24,702
<BONDS> 0 0 0 0
0 0 0 0
0 13,526 12 0
<COMMON> 223 207 163 144
<OTHER-SE> 77,143 63,502 110,899 72,288
<TOTAL-LIABILITY-AND-EQUITY> 161,900 159,513 154,363 97,134
<SALES> 66,438 246,767 60,922 55,545
<TOTAL-REVENUES> 66,438 246,767 60,922 55,545
<CGS> 53,113 196,995 47,971 44,998
<TOTAL-COSTS> 53,113 196,995 47,971 44,998
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 137 320 84 27
<INCOME-PRETAX> 7,107 24,579 6,211 4,923
<INCOME-TAX> 3,056 10,323 2,567 2,051
<INCOME-CONTINUING> 4,051 14,256 3,644 2,872
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 4,051 14,256 3,644 2,872
<EPS-PRIMARY> 0.19 0.76 0.20 0.16
<EPS-DILUTED> 0.18 0.72 0.19 0.16
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR 9-MOS 6-MOS
<FISCAL-YEAR-END> SEP-28-1997 SEP-29-1996 SEP-29-1996 SEP-29-1996
<PERIOD-END> DEC-29-1996 SEP-29-1996 JUN-30-1996 MAR-31-1996
<CASH> 7,601 6,129 7,746 5,734
<SECURITIES> 0 0 0 0
<RECEIVABLES> 49,653 58,608 44,837 49,741
<ALLOWANCES> 0 11,101 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 62,903 57,933 56,356 60,174
<PP&E> 14,574 13,805 13,731 13,044
<DEPRECIATION> 7,383 6,790 6,707 6,193
<TOTAL-ASSETS> 93,719 88,463 87,233 90,938
<CURRENT-LIABILITIES> 26,229 25,194 21,802 21,427
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 141 141 141 113
<OTHER-SE> 67,348 63,128 59,161 56,398
<TOTAL-LIABILITY-AND-EQUITY> 93,719 88,463 87,233 90,938
<SALES> 54,938 220,099 54,152 53,929
<TOTAL-REVENUES> 54,938 220,099 54,152 53,929
<CGS> 45,566 181,146 44,317 44,529
<TOTAL-COSTS> 45,566 181,146 44,317 44,529
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 15 1,076 203 361
<INCOME-PRETAX> 4,442 16,959 4,375 3,828
<INCOME-TAX> 1,846 6,854 1,750 1,531
<INCOME-CONTINUING> 2,596 10,105 2,625 2,297
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 2,596 10,105 2,625 2,297
<EPS-PRIMARY> 0.15 0.58 0.15 0.13
<EPS-DILUTED> 0.14 0.56 0.14 0.13
</TABLE>
