<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 JANUARY 3, 1999
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.
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(Exact name of registrant as specified in its charter)
Delaware 95-4148514
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) number)
670 N. Rosemead Boulevard, Pasadena, California 91107
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(Address of principal executive offices)
(626) 351-4664
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(Registrant's telephone number, including area code)
Not Applicable
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(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
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As of February 5, 1999, the total number of outstanding shares of the
Registrant's common stock was 28,735,910.
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TETRA TECH, INC
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <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 Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Risk Factors 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 28
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1.
Tetra Tech, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
In thousands, except share data January 3, October 4,
1999 1998
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(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 434 $ 4,889
Accounts receivable - net.......................................... 80,327 68,834
Unbilled receivables - net......................................... 59,438 59,888
Prepaid and other current assets................................... 6,479 4,955
Deferred income taxes.............................................. 3,766 3,766
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Total Current Assets............................................ 150,444 142,332
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PROPERTY AND EQUIPMENT:
Leasehold improvements............................................. 1,988 1,348
Equipment, furniture and fixtures.................................. 26,230 25,616
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Total........................................................... 28,218 26,964
Accumulated depreciation and amortization.......................... (14,214) (13,219)
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PROPERTY AND EQUIPMENT - NET........................................... 14,004 13,745
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INTANGIBLE ASSETS - NET................................................ 107,643 108,638
OTHER ASSETS........................................................... 1,752 1,895
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TOTAL ASSETS........................................................... $ 273,843 $ 266,610
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................... $ 18,132 $ 24,027
Accrued compensation............................................... 12,249 15,614
Other current liabilities.......................................... 13,829 8,283
Current portion of long-term obligations........................... 18,462 14,065
Income taxes payable............................................... 4,407 3,294
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Total Current Liabilities....................................... 67,079 65,283
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LONG-TERM OBLIGATIONS.................................................. 33,181 33,546
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STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 2,000,000 shares of $.01 par value;
issued and outstanding 0 shares at January 3, 1999
and October 4, 1998, respectively................................ -- --
Exchangeable stock of a subsidiary................................. 15,411 15,411
Common stock - authorized, 50,000,000 shares of $.01 par value;
issued and outstanding 28,684,117 and 28,630,600 shares at
January 3, 1999 and October 4, 1998, respectively................ 287 287
Additional paid-in capital......................................... 87,940 87,565
Retained earnings.................................................. 69,945 64,518
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TOTAL STOCKHOLDERS' EQUITY............................................. 173,583 167,781
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................. $ 273,843 $ 266,610
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</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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Tetra Tech, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
In thousands, except per share data Three Months Ended
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January 3, December 28,
1999 1997
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<S> <C> <C>
Gross Revenue............................................................... $ 113,973 $ 66,438
Subcontractor costs...................................................... 24,728 12,774
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Net Revenue................................................................. 89,245 53,664
Cost of Net Revenue......................................................... 70,187 40,339
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Gross Profit................................................................ 19,058 13,325
Selling, General and Administrative Expenses................................ 8,871 6,146
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Income From Operations...................................................... 10,187 7,179
Interest Expense............................................................ 838 137
Interest Income............................................................. 139 65
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Income Before Income Taxes.................................................. 9,488 7,107
Income Tax Expense.......................................................... 4,061 3,056
Net Income.................................................................. $ 5,427 $ 4,051
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Basic Earnings Per Share.................................................... $ 0.19 $ 0.15
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Diluted Earnings Per Share.................................................. $ 0.18 $ 0.14
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Weighted Average Common Shares Outstanding:
Basic.................................................................... 28,656 27,217
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Diluted.................................................................. 30,710 28,834
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</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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Tetra Tech, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
In thousands Three Months Ended
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January 3, December 28,
1999 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................. $ 5,427 $ 4,051
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization......................................... 1,990 1,374
Other................................................................. (28) (380)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable................................................... (11,586) (9,600)
Unbilled receivables.................................................. 570 2,161
Prepaid and other assets.............................................. (1,380) (2,164)
Accounts payable...................................................... (5,895) 1,837
Accrued compensation.................................................. (3,365) (2,615)
Other current liabilities............................................. 5,546 (3,410)
Income taxes payable.................................................. 1,113 393
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Net Cash Used In Operating Activities............................. (7,608) (8,353)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................ (1,254) (684)
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Net Cash Used In Investing Activities............................. (1,254) (684)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt.................................................. (4,000) --
Proceeds from issuance of long-term debt.................................... 8,032 2,000
Net proceeds from issuance of common stock.................................. 375 186
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Net Cash Provided By Financing Activities......................... 4,407 2,186
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NET DECREASE IN CASH AND CASH EQUIVALENTS................................... (4,455) (6,851)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................ 4,889 12,262
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CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................. $ 434 $ 5,411
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SUPPLIMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.............................................................. $ 850 $ 130
Income taxes.......................................................... $ 2,948 $ 2,663
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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TETRA TECH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheets as of January
3, 1999, the condensed consolidated statements of income and the condensed
statements of cash flows for the three-month periods ended January 3, 1999
and December 28, 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 October 4, 1998.
The results of operations for the three-month period ended January
3, 1999 are not necessarily indicative of the results to be expected for the
fiscal year ending October 3, 1999.
2. EARNINGS PER SHARE
Due to the Company's complex capital structure, the Company presents
both basic and diluted Earnings Per Share (EPS). Basic EPS excludes dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
EPS is computed by dividing net income by the weighted average number of
common shares outstanding and dilutive potential common shares. The Company
includes as potential common shares the weighted average number shares of
exchangeable stock of a subsidiary and the weighted average diluted effects
of outstanding stock options. The exchangeable stock of a subsidiary is
non-voting and is exchangeable, share for share, for the Company's common
stock. 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 September 15, 1998 for each four shares
outstanding as of the record date of July 27, 1998.
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 $434,000 and $4,889,000 at January 3, 1999 and October 4,
1998, respectively.
4. MERGERS AND ACQUISITIONS
On December 31, 1997, the Company acquired, through its wholly-owned
subsidiary Tetra Tech NUS, Inc., the assets of certain environmental services
businesses of Brown & Root, Inc. and Halliburton Corporation, both of which
are subsidiaries of Halliburton
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Company (collectively, NUS). NUS provides consulting, engineering and design
services for the environmental remediation of contaminated air, water and
soil conditions. The purchase price was valued at approximately $25,217,000,
as adjusted, and consisted of cash.
On March 2, 1998, Whalen Service Corps Inc. (WSC) agreed to
participate in a partnership with Sentrex Cen-Comm and ANTEC Corporation to
provide design, engineering, information management and construction services
to support advanced communication system upgrades to the broadband
information transport industries. The agreement required the purchase of
certain assets of TANCO LLC from ANTEC Corporation for a price in cash of
approximately $623,000. WSC initially held a 51% majority interest in
Whalen/Sentrex LLC, a California limited liability company, while LAL Corp.
held the remaining 49% minority interest.
On March 26, 1998, the Company acquired 100% of the capital stock of
C.D.C. Engineering, Inc. (CDE), a consulting and engineering firm
specializing in civil engineering, transportation engineering, structural
engineering and land surveying. The purchase has been valued at approximately
$1,502,000, consisting of cash and 71,060 shares of Company common stock.
On July 8, 1998, the Company acquired 100% of the capital stock of
McNamee, Porter & Seeley, Inc. (MPS), a provider of engineering services with
expertise in the areas of water, industrial wastewater and process controls.
The purchase was valued at approximately $14,247,000, consisting of cash and
274,888 shares of Company common stock. Simultaneously with the acquisition,
MPS distributed to its former shareholders accounts receivable having a net
value of $8,040,000.
On September 22, 1998, the Company acquired, through its subsidiary
Tetra Tech Canada Ltd. (TtC), 100% of the capital stock of 1056584 Ontario
Limited, 1056585 Ontario Limited, Venture Cable Limited, Cen-Comm
Communications, Inc., Sentrex Electronics Inc. and LAL Corp. (collectively,
the Sentrex Group of Companies (SGOC)), providers of engineering and
technical services to the cable television, telephony and data networking
industries. The purchase has been valued at approximately $19,227,000,
consisting of cash and 920,354 shares of TtC exchangeable stock. The TtC
exchangeable stock is exchangeable, share for share, for Company common stock
as described in the related purchase agreement. Upon completion of the SGOC
acquisition, the Company beneficially owns 100% of Whalen/Sentrex LLC.
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 Company values
stock exchanged in acquisitions based on extended restriction periods and
economic factors specific to the Company's circumstances. During fiscal 1998,
stock exchanged in acquisitions was discounted by 15%. The results of
operations of each of the companies acquired have been
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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 SGOC and
CDE transactions, had they been acquired on September 29, 1997, is not
material.
Pro forma operating results assuming the Company had acquired MPS
and NUS on September 29, 1997 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 January 3, 1999
and October 4, 1998 was $3,004,000 and $2,911,000, respectively. The
allowance for disallowed costs as of January 3, 1999 and October 4, 1998 was
$9,654,000 and $9,773,000, 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 MPS and NUS on
September 29, 1997:
<TABLE>
<CAPTION>
Pro Forma Three Months Ended
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December 28, 1997
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(In thousands, except per share data)
<S> <C>
Gross revenue $ 96,563,000
Income from operations 7,601,000
Net income 3,986,000
Basic earnings per share 0.15
Diluted earnings per share 0.14
Weighted average shares outstanding:
Basic 27,286,000
Diluted 28,903,000
</TABLE>
7. SUBSEQUENT EVENT
On February 3, 1999, the Company filed an amendment to its
registration statement on Form S-3 with the U.S. Securities and Exchange
Commission to offer up to 3,175,000 shares of common stock, par value $.01.
Of this total, 1,000,000 shares were newly issued by the Company and
2,175,000 outstanding shares were sold by selling stockholders. The Company
and the selling stockholders have also granted the underwriters a 30-day
option to purchase up to an aggregate of 476,250 additional shares solely to
cover over-allotments, if any. The net proceeds from this offering to the
Company are approximately $22,420,000 and will be used
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for the partial repayment of outstanding indebtedness, possible acquisitions
of businesses and general corporate purposes.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED BELOW, THE MATTERS
DISCUSSED IN THIS SECTION ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE A
NUMBER OF RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL LIQUIDITY NEEDS,
CAPITAL RESOURCES AND OPERATING RESULTS MAY DIFFER MATERIALLY FROM THE
DISCUSSION SET FORTH BELOW IN THESE FORWARD-LOOKING STATEMENTS.
OVERVIEW
Tetra Tech, Inc. (the "Company") is a leading provider of
specialized management consulting and technical services in three principal
business areas: resource management, infrastructure and communications. As a
specialized management consultant, the Company assists its clients in
defining problems and developing innovative and cost-effective solutions. The
Company's management consulting services are complemented by its technical
services. These technical services, which implement solutions, include
research and development, applied science, engineering and architectural
design, construction management, and operations and maintenance. The
Company's clients include a diverse base of public and private organizations
located in the United States and internationally.
Since its initial public offering in December 1991, the Company has
increased the size and scope of its business and has expanded its service
offerings through a series of strategic acquisitions and internal growth.
The Company derives its gross revenues from fees from professional
services. Its services are billed under various types of contracts with its
clients, including:
- Fixed-price;
- Fixed-rate time and materials;
- Cost-reimbursement plus fixed fee; and
- Cost-reimbursement plus fixed and award fee.
In the course of providing its services, the Company routinely
subcontracts services. These subcontractor costs are passed through to
clients and, in accordance with industry practice, are included in gross
revenue. Because subcontractor services can change significantly from project
to project, the Company believes net revenue, which is gross revenue less the
cost of subcontractor services, is a more appropriate measure of its
performance.
The Company's cost of net revenue includes professional compensation
and certain direct and indirect overhead costs such as rents, utilities and
travel. Professional compensation represents the majority of these costs. The
Company's selling, general and administrative (SG&A) expenses are comprised
primarily of its corporate headquarters' costs related to the
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executive offices, corporate accounting, information technology, marketing,
and bid and proposal costs. These costs are generally unrelated to specific
client projects. In addition, the Company includes amortization of certain
intangible assets resulting from acquisitions in SG&A expenses.
The Company provides its services to a diverse base of Federal,
state and local government agencies, and private and international clients.
The following table presents, for the periods indicated, the approximate
percentage of net revenue attributable to these client sectors:
<TABLE>
<CAPTION>
Percentage of Net Revenue
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Quarter Ended
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<S> <C> <C>
Client Sector January 3, 1999 December 28, 1997
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Federal government 41% 45%
State and local government 13 13
Private 41 40
International 5 2
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100% 100%
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</TABLE>
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:
<TABLE>
<CAPTION>
Percentage Relationship to Revenue
---------------------------------------
Quarter Ended
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January 3, 1999 December 28, 1997
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<S> <C> <C>
Net revenue 100.0% 100.0%
Cost of net revenue 78.6 75.2
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Gross profit 21.4 24.8
Selling, general and
administrative expenses 9.9 11.5
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Income from operations 11.4 13.4
Net interest (expense) income (0.8) (0.1)
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Income before income taxes 10.6 13.2
Income tax expense 4.6 5.7
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Net income 6.1% 7.5%
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</TABLE>
Net revenue increased $35.6 million, or 66.3%, to $89.2 million for
the three months ended January 3, 1999 from $53.7 million for the comparable
prior year period. Net revenue attributable to entities acquired in fiscal
1998 was approximately $26.8 million. All four client sectors continued to
show net revenue increases in actual dollars. As a percentage of net revenue,
a decrease in net revenue was realized in the Federal government sector while
increases were realized in the private and international sectors. The
percentage of net revenue realized from the state and local government sector
remained relatively flat. The increase in the percentage of net revenue from
the international sector was primarily attributable to the expansion of the
communications build out in Brazil and the SGOC acquisition. Gross revenue
increased $47.5 million, or 71.6%, to $114.0 million for the three months
ended
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January 3, 1999 from $66.4 million for the comparable prior year period.
Gross revenue attributable to entities acquired in fiscal 1998 was
approximately $33.4 million.
Cost of net revenue increased $29.8 million, or 74.0%, to $70.2
million for the three months ended January 3, 1999 from $40.3 million for the
comparable prior year period. As a percentage of net revenue, cost of net
revenue increased to 78.6% for the three months ended January 3, 1999 from
75.2% for the comparable prior year period. This increase is primarily
attributable to the volume increase in cost reimbursable contracts related to
the NUS acquisition.
SG&A expenses, inclusive of amortization, increased $2.87 million,
or 44.4%, to $8.9 million for the three months ended January 3, 1999 from
$6.1 million for the comparable prior year period. As a percentage of net
revenue, SG&A expenses decreased to 9.9% for the three months ended January
3, 1999 from 11.5% for the comparable prior year period. Although increased
amortization costs were realized due to the fiscal 1998 acquisitions,
increases in headquarters' costs were not commensurate to the net revenue
growth.
Net interest expense increased $0.6 million to $0.7 million for the
three months ended January 3, 1999 from $0.1 million for the comparable prior
year period. This increase was primarily attributable to interest on
acquisition related borrowings on the Company's revolving credit facility.
Income tax expense increased $1.0 million, or 32.9%, to $4.1 million
for the three months ended January 3, 1999 from $3.1 million for the
comparable prior year period. This increase was primarily attributable to
higher income before income taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of January 3, 1999, the Company's working capital was $83.4
million, an increase of $6.4 million from October 4, 1998, of which cash and
cash equivalents totaled $0.4 million. In addition, the Company has a credit
agreement (the "Credit Agreement") with a bank which provides for a revolving
credit facility (the "Facility") of $65.0 million. Under the Credit
Agreement, the Company may also request standby letters of credit up to the
aggregate sum of $20.0 million outstanding at any one time. The Credit
Agreement provides for a mandatory reduction of $5.0 million on December 15,
1999. The Facility matures on December 15, 2000 or earlier at the Company's
discretion upon payment in full of loans and other obligations. As of January
3, 1999, borrowings and standby letters of credit totaled $51.0 million and
$1.4 million, respectively.
In the three months ended January 3, 1999, cash used in operating
activities was $7.6 million compared to $8.4 million for the comparable prior
year period. The decrease is primarily attributable to the timing of payments
for liabilities. The Company has targeted, as an immediate and ongoing
practice, to increase its efficiency in the timing of billings and collection
of receivables. For the three months ended January 3, 1999, cash used in
investing activities was $1.3 million compared to $0.7 million for the
comparable prior year period. The increase was due to increases in the
capital expenditures. For the three months ended January 3, 1999, cash
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provided by financing activities was $4.4 million primarily from the proceeds
of issuance of long-term debt compared to $2.2 million for the comparable
prior year period.
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. However, as successful integration
and implementation are essential to achieve favorable results, no assurances
can be given that all acquisitions will provide accretive results. 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 availability under the Credit Agreement will be
sufficient to meet the Company's capital requirements through the end of
fiscal 1999. However, as acquisition opportunities present themselves, the
Company may seek to expand its borrowing capabilities to accommodate such
opportunities.
The Company believes its operations have not been and, in the
foreseeable future, do not expect to be materially adversely affected by
inflation or changing prices.
YEAR 2000
The Company is working to resolve the potential impact of the year
2000 on its business operations and the ability of its computerized
information systems to accurately process information that may be
date-sensitive. Any of the Company's programs that recognize a date using
"00" as the year 1900 rather than the year 2000 could result in errors or
system failures.
The Company utilizes a number of computer programs across its entire
operation. The primary information technology (IT) systems the Company
utilizes are (1) the accounting and financial systems which include general
ledger, accounts payable, accounts receivable, billing and collection, fixed
assets, job cost accounting and payroll, and (2) human resource information
management systems. The Company does not believe it has a material amount of
non-IT systems on which it relies.
The Company has established both a year 2000 review committee and a
year 2000 action team. The purpose of the review committee is to develop and
communicate the Company's year 2000 plan to achieve its year 2000 compliance
mission. The purpose of the action team is to identify, remediate and
implement plans to resolve year 2000 related issues. Through the review
committee and the action team, the Company is in the process of completing
its full assessment of all issues relating to the year 2000. The Company has
developed questionnaires regarding year 2000 readiness to be used internally
and externally. It has completed its internal assessment and is in the
process of assessing the year 2000 issues of its clients and vendors. The
Company relies on certain software vendors who are the makers of year 2000
compliance statements as they
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apply to their specific software. The Company's references to the year 2000
compliance status of these systems are republications of their statements.
Based on the information collected to date, the Company does not believe that
the cost of addressing its year 2000 issues will have a material adverse
impact on its financial position. The Company plans to devote all resources
required to resolve any significant year 2000 issues in a timely manner.
STATE OF READINESS
The Company began its risk assessment in 1995. Since that time the
Company has procured and implemented certain accounting and financial
reporting systems as well as contract administration and billing systems that
have been certified as year 2000 compliant by its vendors. Currently,
approximately 74% of the Company's gross revenue is recognized on these year
2000 compliant systems. The Company has successfully converted seven of its
18 operating units to these year 2000 compliant systems. The Company is
planning to convert four additional operating units by July 1999. The
operating units that will not be converted to the systems currently in place
are in the process of upgrading their existing systems to a year 2000
compliant version or will procure and implement a year 2000 compliant
software. In all cases, the Company believes that its financial and
accounting systems will be year 2000 compliant in a timely manner and will
not be materially impacted by the year 2000.
The Company is currently installing a year 2000 compliant human
resource information management system. Ten operating units including the
Company's corporate units will be supported by this system. The anticipated
completion date is April 1999. The Company plans to convert the remaining
operating units following April 1999. In all cases, the Company believes that
its human resource management information systems will be year 2000 compliant
in a timely manner and will not be materially impacted by the year 2000.
The Company has expended or obligated approximately $2.6 million on
the procurement of these systems, the conversion of data from legacy systems
to these systems, and on the implementation and testing of these systems.
The Company has extensive business with the Federal government.
Should the Federal government, specifically the Department of Defense,
experience significant business interruptions relating to non-year 2000
compliance, the Company could be materially impacted. To the extent that
other third parties upon which the Company relies, such as banking
institutions, clients and vendors, are unable to address their year 2000
issues in a timely manner, the Company could be materially impacted. The
Company believes that the worst case scenario relating to the year 2000 would
be an extensive period of time in which the Federal government and other
third parties could not process payments promptly.
RISKS
The Company believes the risks associated with non-year 2000
compliance include:
- the inability to invoice and process payments;
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- the inability to produce accurate and timely financials;
- the impact on cash flow and working capital needs;
- the impact on profitability; and
- potential liability to third parties for not meeting contracted
deliverables.
CONTINGENCY PLANS
The Company currently does not have formal contingency plans for the
failure of its financial and accounting systems. The Company has substantial
experience in the conversion process from multiple legacy systems to its
vendor certified year 2000 systems. The Company has an experienced and
dedicated staff to perform the functions identified and is reasonably
confident that the projected conversions will be accomplished as projected.
The Company currently does not have formal contingency plans for the
failure of its human resource information management system. The Company's
implementation strategy is to install the system as simply as possible, with
little customization. The Company's vendor supports its implementation
strategy and has agreed to a financial penalty if the implementation is not
achieved within three months, or by April 1999. If the implementation is not
achieved by April 1999, the Company believes there will still be sufficient
time to meet the year 2000 deadline.
The Company maintains, as a matter of policy and practice,
mitigation plans in the event of systems failure which include regular backup
of historical information.
-15-
<PAGE>
RISK FACTORS
SOME OF THE INFORMATION IN THIS QUARTERLY REPORT ON FORM 10-Q
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES. YOU CAN IDENTIFY THESE STATEMENTS BY FORWARD-LOOKING WORDS
SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "BELIEVE," "ESTIMATE" AND
"CONTINUE" OR SIMILAR WORDS. YOU SHOULD READ STATEMENTS THAT CONTAIN THESE
WORDS CAREFULLY BECAUSE THEY: (1) DISCUSS THE COMPANY'S FUTURE EXPECTATIONS;
(2) CONTAIN PROJECTIONS OF THE COMPANY'S FUTURE OPERATING RESULTS OR OF THE
COMPANY'S FUTURE FINANCIAL CONDITION; OR (3) STATE OTHER "FORWARD-LOOKING"
INFORMATION. THE COMPANY BELIEVES IT IS IMPORTANT TO COMMUNICATE ITS
EXPECTATIONS TO ITS INVESTORS. THERE MAY BE EVENTS IN THE FUTURE, HOWEVER,
THAT THE COMPANY IS NOT ACCURATELY ABLE TO PREDICT OR OVER WHICH THE COMPANY
HAS NO CONTROL. THE RISK FACTORS LISTED IN THIS SECTION, AS WELL AS ANY
CAUTIONARY LANGUAGE IN THIS QUARTERLY REPORT ON FORM 10-Q, PROVIDE EXAMPLES
OF RISKS, UNCERTAINTIES AND EVENTS THAT MAY CAUSE ITS ACTUAL RESULTS TO
DIFFER MATERIALLY FROM EXPECTATIONS DESCRIBED IN FORWARD-LOOKING STATEMENTS.
THE OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN THESE RISK FACTORS AND
ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q COULD HAVE A MATERIAL ADVERSE
EFFECT ON THE COMPANY'S BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS.
UPON THE OCCURRENCE OF ANY OF THESE EVENTS, THE TRADING PRICE OF THE
COMPANY'S COMMON STOCK COULD DECLINE.
RISKS ASSOCIATED WITH THE COMPANY'S ACQUISITION STRATEGY
A significant part of the Company's growth strategy is to acquire
other companies that complement its lines of business or that broaden its
geographic presence. During fiscal 1998, the Company purchased ten companies
in five separate transactions. The Company expects to continue to acquire
companies as an element of its growth strategy. Acquisitions involve certain
risks that could cause the Company's actual growth or operating results to
differ from its expectations or the expectations of security analysts. For
example:
- The Company may not be able to identify suitable acquisition
candidates or to acquire additional companies on favorable terms;
- The Company competes with others to acquire companies. Competition
may increase and may result in decreased availability or increased
price for suitable acquisition candidates;
- The Company may not be able to obtain the necessary financing, on
favorable terms or at all, to finance any potential acquisitions;
- The Company may ultimately fail to consummate an acquisition even
if announced that the Company plans to acquire a company;
- The Company may fail to successfully integrate or manage these
acquired companies due to differences in business backgrounds or
corporate cultures;
- These acquired companies may not perform as the Company expects;
-16-
<PAGE>
- The Company may find it difficult to provide a consistent quality
of service across its geographically diverse operations; and
- If the Company fails to successfully integrate any acquired
company, its reputation could be damaged. This could make it more
difficult to market its services or to acquire additional
companies in the future.
In addition, the Company's acquisition strategy may divert management's
attention away from its primary service offerings, result in the loss of key
clients or personnel and expose the Company to unanticipated liabilities.
Finally, acquired companies that derive a significant portion of
their revenues from the Federal government and that do not follow the same
cost accounting policies and billing procedures as the Company does may be
subject to larger cost disallowances for greater periods than the Company. If
the Company fails to determine the existence of unallowable costs and
establish appropriate reserves in advance of an acquisition the Company may
be exposed to material unanticipated liabilities, which could have a material
adverse effect on the Company's business.
FLUCTUATIONS IN THE COMPANY'S QUARTERLY OPERATING RESULTS
The Company's quarterly revenues, expenses and operating results may
fluctuate significantly because of a number of factors, including:
- The seasonality of the spending cycle of public sector clients,
notably the Federal government;
- Employee hiring and utilization rates;
- The number and significance of client engagements commenced and
completed during a quarter;
- Delays incurred in connection with an engagement;
- The ability of clients to terminate engagements without penalties;
- The size and scope of engagements;
- The timing and size of the return on investment capital; and
- General economic and political conditions.
Variations in any of these factors could cause significant fluctuations in
the Company's operating results from quarter to quarter and could result in
net losses.
-17-
<PAGE>
POTENTIAL VOLATILITY OF THE COMPANY'S STOCK PRICE
The trading price of the Company's Common Stock has fluctuated
widely. In addition, in recent years the stock market has experienced extreme
price and volume fluctuations. The overall market and the price of the
Company's Common Stock may continue to fluctuate greatly. The trading price
of the Company's Common Stock may be significantly affected by various
factors, including:
- Quarter to quarter variations in the Company's operating results;
- Changes in environmental legislation;
- Changes in investors' and analysts' perception of the business
risks and conditions of the Company's business;
- Broader market fluctuations; and
- General economic or political conditions.
MANAGEMENT OF GROWTH
The Company is growing rapidly. Its growth presents numerous
managerial, administrative, operational and other challenges. The Company's
ability to manage the growth of its operations will require it to continue to
improve its operational, financial and human resource management information
systems and its other internal systems and controls. In addition, the
Company's growth will increase its need to attract, develop, motivate and
retain both its management and professional employees. The inability of the
Company's management to manage its growth effectively or the inability of its
employees to achieve anticipated performance or utilization levels, could
have a material adverse effect on its business.
RELIANCE ON KEY PERSONNEL AND QUALIFIED PROFESSIONALS
The Company depends upon the efforts and skills of its executive
officers, senior managers and consultants. With limited exceptions, the
Company does not have employment agreements with any of these individuals.
The loss of the services of any of these key personnel could adversely affect
the Company's business. Although the Company has obtained non-compete
agreements from the principal stockholders of each of the companies it has
acquired, the Company generally does not have non-compete or employment
agreements with key employees who were not equity holders of these companies.
The Company does not maintain key-man life insurance policies on any of its
executive officers or senior managers.
The Company's future growth and success depends on its ability to
attract and retain qualified scientists and engineers. The market for these
professionals is competitive and the Company may not be able to attract and
retain such professionals.
-18-
<PAGE>
DEPENDENCE UPON EXISTING LAWS AND REGULATIONS
A significant amount of the Company's resource management business
is generated either directly or indirectly as a result of existing Federal
and state governmental laws, regulations and programs. Any changes in these
laws or regulations that reduce funding or affect the sponsorship of these
programs could reduce the demand for the Company's services and could have a
material adverse effect on its business.
CONCENTRATION OF REVENUES
Agencies of the Federal government are among the Company's most
significant clients. During the three months ended January 3, 1999,
approximately 41.5% of the Company's net revenue was derived from federal
agencies of which 22.8% was derived from the Department of Defense (DOD),
14.4% from the Environmental Protection Agency (EPA), and 3.0% from the
Department of Energy (DOE). Some contracts with Federal government agencies
require annual funding approval and may be terminated at their discretion. A
reduction in spending by Federal government agencies could limit the
continued funding of existing contracts with them and could limit the
Company's ability to obtain additional contracts. These limitations, if
significant, could have a material adverse effect on the Company's business.
Additionally, the failure of clients to pay significant amounts due
the Company for its services could adversely affect the Company's business.
For example, the Company recently received notification from a federal
government agency that it is entitled to payments in excess of the Company's
billings. However, the agency involved must obtain specific funding approval
for amounts owed to the Company and there can be no assurance this funding
approval will be obtained.
RISKS ASSOCIATED WITH GOVERNMENTAL AUDITS
Contracts with the Federal government and other governmental
agencies are subject to audit. Most of these audits are conducted by the
Defense Contract Audit Agency (DCAA), which reviews the Company's overhead
rates, operating systems and cost proposals. The DCAA may disallow costs if
it determines that the Company accounted for these costs incorrectly or in a
manner inconsistent with Cost Accounting Standards. A disallowance of costs
by the DCAA, or other governmental auditors, could have a material adverse
effect on the Company's business.
In September 1995, the Company acquired PRC Environmental
Management, Inc. (EMI). EMI also contracts with Federal government agencies
and such contracts are also subject to the same governmental audits. The DCAA
has completed audits of EMI's contracts for the fiscal years 1987 through
1995. As a result of these audits and negotiations with the DCAA, the DCAA
disallowed approximately $2.9 million in costs.
FIXED-PRICE CONTRACTS
The Company enters into various contracts with its clients,
including fixed-price contracts. In the three months ended January 3, 1999,
approximately 30.4% of the Company's net
-19-
<PAGE>
revenue was derived from fixed-price contracts. Fixed-price contracts protect
clients and expose the Company to a number of risks. These risks include
underestimation of costs, problems with new technologies, unforeseen costs or
difficulties, delays beyond the Company's control and economic and other
changes that may occur during the contract period. If the Company incurs
losses under fixed-price contracts it could have a material adverse effect on
its business.
DEPENDENCE ON SUBCONTRACTORS
Under some of its contracts, the Company depends on the efforts and
skills of subcontractors for the performance of certain tasks. Reliance on
subcontractors varies from project to project. In the three months ended
January 3, 1999, subcontractor costs comprised 21.7% of the Company's gross
revenue. The absence of qualified subcontractors with whom the Company has a
satisfactory relationship could adversely affect the quality of its service
and its ability to perform under some of its contracts.
SIGNIFICANT COMPETITION
The Company provides specialized management consulting and technical
services to a broad range of public and private sector clients. The market
for the Company's services is highly competitive and it competes with many
other firms. These firms range from small regional firms to large national
firms which have greater financial and marketing resources than the Company.
The Company focuses primarily on the resource management,
infrastructure and communications business areas. The Company provides
services to its clients which include Federal, state and local agencies, and
organizations in the private sector.
The Company competes for projects and engagements with a number of
competitors which can vary from 10 to 100 firms. Historically, clients have
chosen among competing firms based on the quality and timeliness of the
firm's service. The Company believes, however, that price has become an
increasingly important factor.
The Company believes that its principal competitors include, in
alphabetical order, Black & Veatch LLP; Brown & Caldwell; Castle Tower
Corporation; Camp, Dresser & McKee; CH2M Hill Companies Ltd.; Dames & Moore
Group; EA Engineering, Science & Technology, Inc.; Earth Tech, Inc.; ICF
Kaiser International, Inc.; IT Group Inc.; Mastec, Inc.; Montgomery Watson;
OSP Consultants, Inc.; Roy F. Weston, Inc.; and URS Greiner Corporation.
POTENTIAL LIABILITY AND INSURANCE
The Company's services involve significant risks of professional and
other liabilities which may substantially exceed the fees the Company derives
from its services. The Company's business activities could expose it to
potential liability under various environmental laws such as the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA). In addition, the Company sometimes contractually assumes liability
under indemnification agreements. The Company cannot predict the magnitude of
such potential liabilities.
-20-
<PAGE>
The Company currently maintains comprehensive general liability,
umbrella and professional liability insurance policies. The Company believes
that its insurance policies are adequate for its business operations. These
policies are "claims made" policies. Thus, only claims made during the term
of the policy are covered. If the Company terminates its policies and does
not obtain retroactive coverage, it would be uninsured for claims made after
termination even if these claims are based on events or acts that occurred
during the term of the policy. The Company's insurance may not protect the
Company against liability because its policies typically have various
exclusions and retentions. In addition, if the Company expands into new
markets, it may not be able to obtain insurance coverage for such activities
or, if insurance is obtained, the dollar amount of any liabilities incurred
could exceed its insurance coverage. A partially or completely uninsured
claim, if successful and of significant magnitude, could have a material
adverse affect on the Company's business.
CONFLICTS OF INTEREST
Many of the Company's clients are concerned about potential or
actual conflicts of interest in retaining management consultants. Federal
government agencies have formal policies against continuing or awarding
contracts that would create actual or potential conflicts of interest with
other activities of a contractor. These policies, among other things, may
prevent the Company from bidding for or performing contracts resulting from
or relating to certain work it has performed for the government. In addition,
services performed for a private client may create a conflict of interest
that precludes or limits the Company's ability to obtain work from other
public or private organizations. The Company has, on occasion, declined to
bid on projects because of these conflicts of interest issues.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
In the three months ended January 3, 1999, approximately 5% of the
Company's net revenue was derived from the international marketplace. Some
contracts with the Company's international clients are denominated in foreign
currencies. As such, these contracts contain inherent risks including foreign
currency exchange risk and the risk associated with expatriating funds from
foreign countries. If the Company's international revenue increases, its
exposure to foreign currency fluctuations will also increase. The Company has
entered into forward exchange contracts to address foreign currency
fluctuations.
YEAR 2000
The Company is working to resolve the potential impact of the year
2000 on its business operations and the ability of its computerized
information systems to accurately process information that may be
date-sensitive. Any of its programs that recognize a date using "00" as the
year 1900 rather than the year 2000 could result in errors or system failures.
The Company utilizes a number of computer programs across its entire
operation. The primary information technology systems the Company utilizes
are the accounting and financial and human resource information management
systems. The Company began its risk assessment
-21-
<PAGE>
in 1995. Since that time the Company has procured and implemented certain
accounting and financial reporting systems as well as contract administration
and billing systems that have been certified as year 2000 compliant by its
vendors. Currently, approximately 72% of the Company's gross revenue is
recognized on these year 2000 compliant systems. The Company believes that
its financial and accounting and human resource management information
systems will be year 2000 compliant in a timely manner and will not be
materially impacted by the year 2000. The Company may fail, however, in
updating its various systems to be year 2000 compliant in a timely manner.
The Company has extensive business with the Federal government.
Should the Federal government, especially the DOD, experience significant
business interruptions relating to non-year 2000 compliance, the Company's
business could be materially impacted. To the extent that other third parties
upon which the Company relies, such as banking institutions, clients and
vendors, are unable to address their year 2000 issues in a timely manner, its
business could be materially impacted. The Company believes that the worst
case scenario relating to the year 2000 would be an extensive period of time
in which the Federal government and other third parties could not process
payments promptly, in addition to the Company's financial institutions not
being able to supply the Company with its working capital needs.
Additional risks associated with non-year 2000 compliance include:
- The Company's inability to invoice and process payments;
- The Company's inability to produce accurate and timely financials;
- The impact on the Company's profitability; and
- The Company's potential liability to third parties for not
meeting contracted deliverables.
IMPACT OF ANTI-TAKEOVER PROVISIONS ON OUR STOCK PRICE
The Company's certificate of incorporation and by-laws and the
Delaware General Corporation Law include provisions that may be deemed to
have anti-takeover effects. These anti-takeover effects could delay or
prevent a takeover attempt the Company's other stockholders might consider in
their best interests.
In addition, the Company's board of directors is authorized to
issue, without obtaining stockholder approval, up to 2,000,000 shares of
preferred stock and to determine the price, rights, preferences and
privileges of such shares without any further stockholder action. The
existence of this "blank-check" preferred stock could make more difficult or
discourage an attempt to obtain control of the Company by means of a tender
offer, merger, proxy contest or otherwise.
In the future, the Company may adopt other measures that may have
the effect of delaying, deferring or preventing an unsolicited takeover, even
if such a change in control were
-22-
<PAGE>
at a premium price or favored by a majority of unaffiliated stockholders.
Certain of these measures may be adopted without any further vote or action
by the stockholders.
-23-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C> <C>
(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 3.4
to the Company's Annual Report on Form 10-K for the fiscal
year ended October 4, 1998).
10.1 Credit Agreement dated as of 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).
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.5 Fifth Amendment dated as of July 6, 1998 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).
10.6 Security Agreement dated as of September 15, 1995 among the
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).
10.7 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).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.14 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).
10.15 Form of Nonqualified Stock Option Agreement used by the
Company in connection with the Company's 1992 Stock Option
Plan for Nonemployee Directors (incorporated herein by
reference to Exhibit 10.21 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 3, 1993).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 Registration Rights Agreement dated as of July 11, 1997
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.18 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 28, 1997).
10.21 Registration Rights Agreement dated as of March 26, 1998
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 29, 1998).
10.22 Registration Rights Agreement dated as of July 9, 1998 among
the Company and the parties listed on Schedule A attached
thereto
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(incorporated herein by reference to Exhibit 10.22 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 28, 1998).
10.23 Registration Rights Agreement dated as of September 22, 1998
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 4, 1998).
11 Computation of Net Income Per Common Share.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
None
-27-
<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: February 16, 1999 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)
-28-
<PAGE>
Exhibit 11
Tetra Tech, Inc.
Computation of Net Income Per Common Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
January 3, December 28,
---------------- ---------------
1999 1997
---------------- ---------------
<S> <C> <C>
Basic:
Common stock outstanding, beginning of period........................... 28,630,600 25,892,818
Stock options exercised................................................. 53,364 23,676
Stock purchase plan issuance............................................ 153
Issuance of common stock................................................ -- 1,924,750
Payment of fractional shares............................................ -- (318)
---------------- ---------------
Common stock outstanding, end of period................................. 28,684,117 27,840,926
---------------- ---------------
---------------- ---------------
Weighted average common stock outstanding during the period............. 29,655,622 27,217,905
---------------- ---------------
---------------- ---------------
Net income as reported in condensed
consolidated financial statements..................................... $ 5,427,000 $ 4,051,000
---------------- ---------------
---------------- ---------------
Basic Earnings Per Share................................................ $ 0.19 $ 0.15
---------------- ---------------
---------------- ---------------
Diluted:
Weighted average common stock outstanding during the period............. 29,655,622 27,216,905
Potential common shares under the treasury stock method assuming
the exercise of options and warrants and the conversion
of preferred stock and exchangeable stock of a subsidiary............. 1,054,273 1,626,383
--------------- ---------------
Total............................................................. 30,709,895 28,843,288
---------------- ---------------
---------------- ---------------
Net income as reported in condensed consolidated financial statements... $ 5,427,000 $ 4,051,000
---------------- ---------------
---------------- ---------------
Diluted Earnings Per Share.............................................. $ 0.18 $ 0.14
---------------- ---------------
---------------- ---------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-03-1999
<PERIOD-START> OCT-05-1998
<PERIOD-END> JAN-03-1999
<CASH> 434
<SECURITIES> 0
<RECEIVABLES> 152,423
<ALLOWANCES> 12,658
<INVENTORY> 0
<CURRENT-ASSETS> 150,444
<PP&E> 28,218
<DEPRECIATION> 14,214
<TOTAL-ASSETS> 273,843
<CURRENT-LIABILITIES> 67,079
<BONDS> 0
0
0
<COMMON> 287
<OTHER-SE> 173,296
<TOTAL-LIABILITY-AND-EQUITY> 273,843
<SALES> 113,973
<TOTAL-REVENUES> 113,973
<CGS> 103,786
<TOTAL-COSTS> 103,786
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 838
<INCOME-PRETAX> 9,488
<INCOME-TAX> 4,061
<INCOME-CONTINUING> 5,427
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,427
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.18
</TABLE>
