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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
OCTOBER 1, 2000.
/ / 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
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TETRA TECH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4148514
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
670 N. ROSEMEAD BLVD. PASADENA, CALIFORNIA 91107
(Address of registrant's principal executive offices) (Zip Code)
(Registrant's telephone number, including area code:) (626) 351-4664
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class) (Name of each exchange on which registered)
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
COMMON STOCK, $.01 PAR VALUE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
The aggregate market value of the voting stock held by non-affiliates of the
registrant on December 15, 2000 was $1,052,714,353.
The number of shares of Common Stock, $.01 par value, outstanding (the only
class of common stock of the registrant outstanding) was 39,935,789 on
December 15, 2000.
Portions of registrant's Annual Report to Stockholders for the fiscal year
ended October 1, 2000 are incorporated by reference in Part II of this report.
Portions of registrant's Proxy Statement for its 2001 Annual Meeting of
Stockholders are incorporated by reference in Part III of this report.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
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PART I
ITEM 1. BUSINESS.
Tetra Tech, Inc. is a leading provider of specialized management consulting
and technical services in three principal business areas: resource management,
infrastructure and communications. As a specialized management consultant, we
assist our clients in defining problems and developing innovative and
cost-effective solutions. Our management consulting services are complemented by
our technical services. These technical services, which implement solutions,
include research and development, applied science, engineering and architectural
design, construction management, and operations and maintenance. Our clients
include a diverse base of public and private organizations located in the United
States and internationally.
Since our initial public offering in December 1991, we have increased the
size and scope of our business and have expanded our service offerings through a
series of strategic acquisitions and internal growth. As of the end of our last
fiscal year, we had more than 6,500 employees worldwide, primarily located in
North America in more than 150 locations. In addition, we have established a
presence in Asia, South America and Europe. From fiscal 1991 through fiscal
2000, we generated a net revenue compounded annual growth rate of approximately
35.8%, and achieved a net income compounded annual growth rate of approximately
37.2%.
INDUSTRY OVERVIEW
Due to increased competition, changing regulatory environments and rapid
technological advancement, many organizations face new and complex challenges.
Increasingly, these organizations are turning to professional services firms to
assist them with addressing these challenges. Since each industry presents its
own unique set of challenges, organizations often seek professional service
firms with industry-specific expertise to analyze their problems and develop
appropriate solutions. These solutions are then implemented by firms possessing
the required engineering and technical service capabilities. Each of the
following three business areas faces its own unique set of problems:
RESOURCE MANAGEMENT. The world's natural resources, including water, air
and soil, are interdependent, creating a delicate balance. Factors such as
agricultural and residential development, commercial construction and
industrialization often upset this balance. Public concern over environmental
issues, especially water quality and availability, has been a driving force
behind numerous laws and regulations that are designed to prevent environmental
degradation and mandate restorative measures. To comply with environmental laws
and regulations, respond to public pressure and attain operating efficiencies,
public and private organizations are increasing their focus on resource
management. Two areas particularly affected by these trends are water management
and waste management.
- Water Management. Insufficient water supplies, concern over the cost,
quality and availability of water and the need in many parts of the world
to replace aging infrastructure used to capture, safeguard and distribute
water are critical social and economic concerns. According to the U.S.
Environmental Protection Agency (EPA), contamination of groundwater and
surface water resulting from agricultural, residential, commercial and
industrial development is one of the most serious environmental problems
facing the United States. To alleviate these social and economic concerns,
public and private organizations seek water management advice.
- Waste Management. In the past, many waste disposal practices caused
significant environmental damage. Since the 1970s, more stringent controls
on municipal and industrial waste have been established by governments
around the world to protect the environment. Organizations seek waste
management advice to comply with complex and evolving environmental
regulations, to
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minimize the economic impact of waste generation and disposal, and to
realize significant cost savings through increased operating efficiencies.
INFRASTRUCTURE. Continued population and economic growth place significant
strain on an overburdened infrastructure, thereby requiring additional
development. This development includes water and wastewater treatment plants,
roads, pipelines, communication and power networks, and educational,
recreational and correctional facilities. Additionally, as existing facilities
age, they require upgrading or replacement. Further, the trend toward
privatization of infrastructure is causing public and private organizations that
develop and maintain these facilities to evaluate their cost structures and
establish more efficient systems. These factors drive the need for development
and planning services that are often provided by consulting firms.
COMMUNICATIONS. Technological change and government deregulation have
spurred sweeping changes in the communications industry. Local and long-distance
telephone companies, cable operators and wireless service providers are
penetrating each other's markets and trying to establish a foothold in new
markets created by new technologies. For example, traditional cable operators
are installing advanced capabilities such as digital cable, cable modem, cable
telephony and other high-speed data transmission services at the same time as
wireless communications providers are seeking access to the Internet. At the
same time, various service providers are consolidating in order to offer their
subscribers a comprehensive set of services and to maintain dominance in their
markets. As these trends continue, network service providers will increasingly
turn to professional service firms for advice and assistance in planning,
deploying and maintaining their communications networks.
Increased pricing competition is forcing service providers to outsource
their network development activities, which we provide. In addition,
organizations within each of the above business areas face unique problems but
often lack the internal resources and experience necessary to identify issues
and evaluate possible solutions. As a result, many of these organizations rely
on advice from outside management consultants. Most consulting companies provide
limited front-end problem assessment and solution design and require clients to
engage other engineering and technical services companies to implement
recommended solutions. A significant opportunity exists for consulting companies
that not only develop, but also implement, solutions. These professional service
firms are often in the best position to help clients respond to the challenges
they face.
THE TETRA TECH SOLUTION
Tetra Tech provides the specialized management consulting services that
assist clients in identifying industry-specific problems and defining
appropriate solutions. We also provide the technical services required to
implement these solutions. We believe that we are a leader in this market and
that the following factors distinguish us from our competitors:
UNDERSTANDING CLIENT NEEDS. The ability to identify client needs is
essential to strategic planning and execution. Even before the proposal process
begins, we assist our clients by helping them define their business objectives
and strategies and identify issues that are critical to their success. We strive
to develop numerous contacts at various levels within our clients' organizations
to help us identify the key issues from a variety of perspectives. We believe
that our long history and exposure to a broad client base increase our awareness
of the issues being confronted by organizations and thereby help us identify and
solve our clients' problems.
CAPITALIZING ON OUR EXTENSIVE TECHNICAL EXPERIENCE. Since our inception in
1966, we have provided innovative consulting and engineering services,
historically focusing on cost-effective solutions to water resource management
and environmental problems. We have been successful in leveraging this
foundation of scientific and engineering capabilities into other areas,
including infrastructure and communications. Our services are provided by a wide
range of professionals including: archaeologists,
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biologists, chemical engineers, chemists, civil engineers, computer scientists,
economists, electrical engineers, environmental engineers, environmental
scientists, geologists, hydrogeologists, mechanical engineers, oceanographers
and toxicologists. Because of the experience that we have gained from thousands
of completed projects, we often are able to apply proven solutions to client
problems without the time-consuming process of developing new approaches.
OFFERING A FULL RANGE OF SERVICES. Our depth of consulting and technical
skills allows us to respond to client needs at every phase of a project,
including initial planning, research and development, applied science,
engineering and architectural design, and construction management. Once a
particular project is completed, we are able to offer our clients additional
value-added services such as operations and maintenance. Our expertise across
industries and our broad service offerings enable us to be a single source
provider to our clients.
PROVIDING BROAD GEOGRAPHIC COVERAGE AND LOCAL EXPERTISE. We believe that
proximity to our clients is instrumental to understanding their needs and
delivering comprehensive services. We have significantly broadened our
geographic presence in recent years through strategic acquisitions and internal
growth. Our historical geographic base was primarily in the western portion of
the United States. However, we currently have operations in more than 40 states.
We have also increased our international presence, and we now have operations in
Canada, Taiwan, the Philippines, Argentina, Chile, Brazil, Germany, France, and
the Czech Republic.
COMPANY STRATEGY
Our objective is to become the leading provider of specialized management
consulting and technical services in our chosen business areas. To achieve this
objective, we plan to continue the following primary strategies that we believe
have been integral to our success:
IDENTIFY AND EXPAND INTO NEW BUSINESS AREAS. We use our management
consulting services and certain of our technical services as an entry point to
evaluate and to enter new business areas. After our consulting practice is
established in a new business area, we can expand our operations by offering
additional technical services. For example, based on our provision of site
acquisition services to communications industry participants, we identified
infrastructure services within the communications industry as an appropriate
area into which we could expand our operations.
EXPAND SERVICE OFFERINGS AND GEOGRAPHIC PRESENCE THROUGH ACQUISITIONS. We
believe that acquisition opportunities exist that will allow us to continue our
growth in selected business areas, broaden our service offerings and extend our
geographic presence. We intend to make acquisitions that will enable us to
consolidate our position in certain key business areas, such as communications,
or further strengthen our position in our more established service offerings. We
believe that our reputation and public company status make us an attractive
partner and provide us with an advantage in pursuing acquisitions.
FOCUS ON GOVERNMENT PROJECTS. We intend to continue marketing to government
organizations and bidding for government projects to stay on the leading edge of
policy development. This experience helps us identify market opportunities and
enhances our ability to serve other public and private clients. Additionally,
government contracts provide more predictable revenues than private sector
contracts.
MANAGE INTERNAL FINANCIAL CONTROLS. We take a disciplined approach to
monitoring, managing and improving our return on investment in each of our
business areas through the prompt billing and collection of accounts
receivables, the negotiation of favorable contract terms and the management of
our contract performance to prevent cost overruns. We believe that this approach
to managing our financial affairs enables us to improve our cash position and
thereby fund acquisitions and internal growth.
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LEVERAGE EXISTING CLIENT BASE. Some of our clients engage us to provide
limited services. We believe that we can increase our revenue by selling
additional services to our existing client base. For example, we may be able to
secure an operations and maintenance contract after working with a client on the
design and construction phases of a facility. In addition, we believe that our
ability to offer a full spectrum of services will allow us to grow our business
and compete more effectively for larger projects.
SERVICES
We provide our clients with comprehensive management consulting and
technical services that focus on our clients' industry-specific needs. We offer
these services individually or as part of our full service approach to problem
solving. We are currently performing services under contracts ranging from small
site investigations to large, complex infrastructure projects. Our service
offerings include:
- MANAGEMENT CONSULTING to assist clients in identifying and addressing
operational and competitive problems they face within their industries;
- RESEARCH AND DEVELOPMENT to formulate solutions to complex problems and
develop advanced computer simulation techniques for modeling problems,
ranging from microscopic to global;
- APPLIED SCIENCE to assess all aspects of problems and develop practical
and cost-effective solutions through the application of new technology and
data interpretation;
- ENGINEERING AND ARCHITECTURAL DESIGN to provide services from concept
development and initial planning and design through project completion;
- CONTRACT MANAGEMENT to provide experienced and specialized construction
managers to assist clients in minimizing the risk of cost overruns, delays
and contractual conflicts; and
- OPERATIONS AND MAINTENANCE to allow clients to outsource routine
functions, permitting them to streamline contractor relationships and
reduce operating costs.
BUSINESS AREAS
We provide our services in the following three principal business areas:
resource management, infrastructure and communications.
RESOURCE MANAGEMENT
One of our major concentrations is water resource management, where we have
a leadership position in understanding the interrelationships of water quality
and human activities. We support high priority government programs for water
quality improvement, environmental restoration, productive reuse of defense
facilities and strategic environmental resource planning. We provide
comprehensive services, including management consulting, research and
development, applied science, engineering and architectural design, construction
management, and operations and maintenance. Our service offerings in the
resource management business area are focused on the following project areas:
Surface Water Projects: Public concern with the quality of rivers, lakes and
streams as well as coastal and marine waters and the ensuing legislative and
regulatory response is driving demand for our services. Over the past
34 years, we have developed a specialized set of technical skills that
positions us to compete effectively for surface water and watershed
management projects. We provide water resource services to government
clients such as the EPA, the Department of Defense (DOD) and the Department
of Energy (DOE), and to a broad base of private sector clients including
those in the chemical, pharmaceutical, utility, aerospace and petroleum
industries. We also provide surface water services to state and local
agencies, particularly in the area of watershed management.
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Groundwater Projects: Groundwater is the source of drinking water for
approximately 50% of the U.S. population and accounts for approximately 25%
of all water consumed for residential, industrial and agricultural purposes.
Our activities in the groundwater field are diverse and typically include
projects such as investigating and identifying sources of chemical
contamination, examining the extent of contamination, analyzing the speed
and direction of contamination migration, and designing and evaluating
remedial alternatives. In addition, we conduct monitoring studies to assess
the effectiveness of groundwater treatment and extraction wells.
Waste Management Projects: We currently provide a wide range of engineering
and consulting services for hazardous waste contamination and remediation
projects, from initial site assessment through design and implementation
phases of remedial solutions. In addition, we perform risk assessments to
determine the probability of adverse health effects that may result from
exposure to toxic substances. We also provide waste minimization and
pollution prevention services, and evaluate the effectiveness of innovative
technologies and novel solutions to environmental problems.
Nuclear Environmental Projects: The DOE's nuclear weapons plants and
research laboratories face a wide variety of environmental challenges
including groundwater and surface water contamination, hazardous waste
management and environmental compliance. Our services include environmental
impact analyses and documentation, environmental audits and risk
assessments, regulatory compliance support, groundwater characterization,
remedial investigation/feasibility studies, and project management and
oversight. Our environmental analyses provide the DOE with information it
requires in order to make decisions regarding the storage or disposition of
surplus materials from dismantled nuclear weapon components.
Regulatory Compliance Projects: Our regulatory compliance services include
advising our clients on the full spectrum of regulatory requirements under
the Resource Conservation and Recovery Act, the Clean Water Act, the Clean
Air Act, the National Environmental Policy Act and other environmental laws.
Although we provide services to both public and private clients, our current
emphasis is on providing regulatory compliance services to the Army, Navy
and Air Force.
INFRASTRUCTURE
In the infrastructure area, we focus on the development of water resource
projects, institutional facilities, commercial, recreational and leisure
facilities and transportation projects. These facilities are an essential part
of everyday life and also sustain economic activity and the quality of life. Our
engineers, architects and planners work in partnership with our clients to
provide adequate infrastructure development within their financial constraints.
We assist clients with infrastructure projects by providing management
consulting, engineering and architectural design, construction management, and
operations and maintenance. Our service offerings in the infrastructure business
area are focused on the following project areas:
Water Resource Projects: Our technical services are applied to all aspects
of water quantity and quality management ranging from stormwater management
through drainage and flood control projects to major water and wastewater
treatment plants. Our experience includes planning, design and construction
services for drinking water projects, the design of water treatment
facilities and reservoirs, and the design of distribution systems including
pipelines and pump stations. Our capabilities are also applied to
specialized technical challenges associated with the design and construction
of fisheries and hatcheries worldwide.
Institutional Facilities Projects: We provide architectural engineering and
construction services for projects including site planning for land
development, complete architectural design, interior design,
civil/structural engineering and mechanical/electrical engineering of
educational, healthcare and research facilities. We have completed
engineering and construction projects for a wide range
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of clients with specialized needs such as security systems, training and
audiovisual facilities, clean rooms, laboratories and emergency preparedness
facilities.
Commercial, Recreational and Leisure Facilities Projects: We specialize in
the planning and design of water-related entertainment and leisure
facilities from theme park attractions to large marine aquariums. Our
projects also include high-rise office buildings, museums, hotels, parks,
visitor centers and marinas. We have designed complex aquatic life support
systems and provided structural, civil and mechanical engineering and design
of interpretive exhibits for a series of large aquarium projects worldwide.
We have also designed integrated interior building systems for heat, light,
security, and communications to improve building energy efficiency and cost
effectiveness.
Transportation Projects: We provide architectural, engineering and
construction services for transportation projects to improve public safety
and mobility. Our projects include roadway improvements, commuter railway
stations and expansion of airports. We have also completed numerous
transportation projects including bridges, major highways, and repair,
replacement and upgrading of older transportation facilities.
COMMUNICATIONS
In the communications area, we focus on the delivery of technical solutions
necessary to build and manage communications infrastructure projects. Our
capabilities support a wide range of technologies for rapid information
transport including broadband and wireless communications. Our communications
clients seek management consulting, applied science, engineering and
architectural design, and construction management services. Our service
offerings in the communications business area are focused on the following
project areas:
Network Feasibility Projects: We apply our technical services to all aspects
of assessing the feasibility of network systems development, expansion and
upgrades for our clients. Our experience includes feasibility and remote
site selection studies, cost-benefit modeling and market assessments. We
also assist network service providers with technical requirements
definition, sensitivity/risk analysis and key economic projections.
Network Planning Projects: We specialize in network planning, including
short- and long-term network configuration and development planning. We
develop outside plant designs, civil engineering and regulatory compliance
assessment and support efforts. In addition, our projects have included
employment analysis, staffing, logistics, planning, and materials
provisioning and management.
Network Engineering Projects: We provide a full range of onsite and offsite
premises engineering and support services for projects ranging from
developing computer-aided design workprints to field surveys. Our experience
includes digital evaluation and terrain modeling, right-of-way permitting
and site acquisition for wireless and broadband networks. Capabilities
include radio frequency engineering for wireless networks and for fiber
optic, coaxial cable, and hybrid coaxial fiber networks. Our engineers
design each system to the specifications of the customer's transmission
requirements including subscriber density, traffic demand, coverage area and
cost-benefit decisions. In addition, we have performed outside and inside
plant design projects for twisted pair, coaxial fiber optic and copper cable
networks, and wireless networks.
Network Development Projects: We have performed both inside and outside
plant projects for major network service providers in both the broadband and
wireless sectors. Our construction projects include urban and long-haul
underground cable installation. We have also applied our capabilities to
wireless cell site construction and aerial cable placement.
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The following table presents brief examples of specific projects in our
three primary business areas:
BUSINESS AREA REPRESENTATIVE PROJECTS
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Resource Management - Currently providing engineering services for Bureau of
Reclamation projects throughout the southwestern U.S.
Providing water quality modeling, watershed
management, public consensus building, and engineering
solutions for water supplies.
- Assisting the EPA Office of Wastewater Management in
conducting the Clean Water Needs Survey, to assess
financial needs for constructing wastewater treatment
plants and other clean water related infrastructure.
- Currently supporting environmental activities at Air
Force installations worldwide, to assist the Air Force
in its environmental mission in the areas of
restoration, pollution prevention, compliance, and
conservation.
- Completed a remedial design/remedial action for a
Superfund site in Port Comfort, Texas for a private
corporation.
- Currently providing program management and technical
support for the Comprehensive Long-term Environmental
Action Navy (CLEAN) program under several ten-year
contracts. Activities include installation,
restoration, base realignment and closure, and
underground storage tank programs.
- Currently serving as prime contractor for
environmental operations and maintenance services at
Vandenberg Air Force Base in California. Also
providing operations and maintenance services for a
wastewater treatment plant and a hazardous waste
collection plant, and air monitoring and other
services.
- Currently providing environmental remediation and
operations and maintenance (O&M) services at Tinker
Air Force Base in Oklahoma, and at Wright-Patterson
Air Force Base in Ohio. O&M services include
groundwater treatment systems, product recovery
systems and landfill caps. Remediation projects have
included installation of groundwater monitoring wells,
excavation and disposal of contaminated soils, and
installation of soil and groundwater treatment
systems.
- Currently serving as prime contractor for
environmental and natural resource planning at U.S.
Navy facilities in four western states. Conducted air
emissions modeling, noise impact studies and
biological resource surveys.
Infrastructure - Currently implementing production process engineering
efficiencies. Upgraded information management systems
and implemented ISO 14000-compliant environmental
management systems for several Fortune 50 industrial
customers.
- Provided engineering design of building mechanical
systems including air, power, and data distribution
systems, for the world headquarters of a major
corporation in Ohio.
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BUSINESS AREA REPRESENTATIVE PROJECTS
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- Provided complex mechanical, electrical, and other
building systems for the Guggenheim Museum in Bilbao,
Spain.
- Provided multi-modal transportation planning and
design for Boston's first citywide transportation plan
since the 1960s.
- Completed the development and analysis of alternative
flood control measures for the Los Angeles River.
- Provided design and program management for Taiwan's
National Museum of Marine Biology/Aquarium.
Responsible for civil, structural and mechanical
engineering and for aquatic life support systems.
Designed water, wastewater and parking facilities.
- Currently providing information technology,
mechanical, electrical, plumbing and fire protection
engineering for Time Warner Center, a mixed-use
project in New York City.
- Provided project management for upgrading residuals
management facilities at four drinking water treatment
plants in the Detroit, Michigan area that are among
the largest such plants in the U.S.
- Provided design for sections of a major six-lane toll
road in Southern California that includes new bridges,
a tunnel and numerous large regional drainage
facilities.
Communications - Currently supporting the nationwide build-out of a
wireless data network to provide mobile users with
high-speed Internet access.
- Currently providing integrated voice, video, and data
networks inside buildings for large corporations,
colleges, and health care facilities nationwide.
- Currently assisting a leading provider of broadband
services with deployment of a high capacity broadband
fiber optic network to provide high speed Internet
connections, digital cable television, and broadband
telephony in several western markets.
- Currently providing turnkey network development
services for broadband wireless networks in several
European countries. Services include overall project
management, site acquisition, radio frequency
engineering, network deployment, and startup
verification.
- Provided site acquisition, obtained entitlements,
supervised construction and installation of equipment,
and provided program management services for a
Canadian corporation.
- Providing services to install over 730 miles of cable
to provide telephony and expanded channel capacity to
approximately 135,000 homes in the Seattle, Washington
area.
- Providing turnkey services including site selection
and optimization, architectural and engineering
design, site construction, and electronics
installation and optimization for cell site
development in the Los Angeles area for a major
cellular communications carrier.
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BUSINESS AREA REPRESENTATIVE PROJECTS
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- Providing network planning through network deployment
services for approximately 1,200 sites for a wireless
communications firm serving the western Great Lakes
markets.
CLIENTS
We have developed a diverse client base of hundreds of clients both in the
public and private sectors. During fiscal 2000, the DOD, EPA and DOE accounted
for approximately 15.1%, 9.4% and 2.2%, respectively, of our net revenue.
Although agencies of the Federal government are among our most significant
clients, we often support multiple programs within a single Federal agency. Our
private sector clients include companies in the chemical, mining,
pharmaceutical, aerospace, automotive, petroleum, communications and utility
industries. No private sector client accounted for more than 10% of our net
revenue in fiscal 2000.
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The following table presents a list of representative clients in our three
primary business areas:
REPRESENTATIVE CLIENTS
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BUSINESS AREA FEDERAL GOVERNMENT STATE, COUNTY AND LOCAL PRIVATE
- ------------- ---------------------- ----------------------- ----------------------
RESOURCE MANAGEMENT U.S. Environmental California Department Lockheed Martin
Protection Agency; of Health Services; Corporation; Merck &
U.S. Air Force; U.S. Washington Department Co.; General Electric
Navy; U.S. Army; U.S. of Ecology; Prince Company; Westwood
Coast Guard; U.S. Georges County, Squibb
Forest Service; U.S. Maryland; Clarmont Pharmaceuticals, Inc.;
Department of Energy; County, Ohio; City of Hewlett-Packard
U.S. Agency for San Jose, California; Corporation; Unocal
International Salton Sea Authority Corporation
Development; Federal
Energy Regulatory
Commission
INFRASTRUCTURE U.S. Army Corps of City of Tucson, Universal Studios,
Engineers; U.S. Bureau Arizona; City of Inc.; Boeing
of Reclamation; U.S. Breckenridge, Colorado; Corporation; E.I.
Air Force; Federal Washington Department DuPont de Nemours and
Emergency Management of Transportation; City Company; Ford Motor
Agency of Detroit, Michigan; Company; Chrysler
City of Portland, Corporation; Disney
Oregon; Texas Parks and Imagineering; Lowe's
Wildlife Department; Company; Marriott
King County, Corporation
Washington; Delaware
Department of
Transportation;
Delaware Department of
Corrections; Boston
Water and Sewer
Commission
COMMUNICATIONS AT&T Wireless
Services; AT&T
Broadband and Internet
Services; Nextel
Communications, Inc.;
Verizon
Communications;
Motorola, Inc.; Sprint
Communications
Company; Lucent
Technologies, Inc.;
Ericsson; Comcast
Corporation
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CONTRACTS
We enter into various types of contracts with our clients, including
fixed-price, fixed-rate time and materials, cost-reimbursement plus fixed fee
and cost-reimbursement plus fixed and award fee contracts. In fiscal 2000,
42.9%, 31.4% and 25.7% of our net revenue was derived from fixed-price,
fixed-rate time and materials, and cost-reimbursement plus fixed fee and award
fee contracts, respectively. Under a fixed-price contract, the client agrees to
pay a specified price for our performance of the entire contract. Fixed-price
contracts carry certain inherent risks, including risks of losses from
underestimating costs, delays in project completion, problems with new
technologies and economic and other changes that may occur over the contract
period. Consequently, the profitability of fixed-price contracts may vary
substantially. The amount of the fee received for a cost-reimbursement and award
fee contract partially depends upon the government's discretionary periodic
assessment of our performance on that contract. Our various clients determine
which type of contract we enter into for a particular engagement.
Some contracts made with the Federal government are subject to annual
approval of funding. Federal government agencies may impose spending
restrictions that limit the continued funding of our existing contracts with the
Federal government and may limit our ability to obtain additional contracts.
These limitations, if significant, could have a material adverse effect on us.
To date, spending limitations have not had a significant effect on us. All
contracts made with the Federal government may be terminated by the government
at any time, with or without cause.
Federal government agencies have formal policies against continuing or
awarding contracts that would create actual or potential conflicts of interest
with other activities of a contractor. These policies may prevent us in certain
cases from bidding for or performing contracts resulting from or relating to
certain work we have performed for the government. In addition, services
performed for a private client may create conflicts of interest that preclude or
limit our ability to obtain work for another private organization. We attempt to
identify actual or potential conflicts of interest and to minimize the
possibility that such conflicts would affect our work under current contracts or
our ability to compete for future contracts. We have, on occasion, declined to
bid on a project because of an existing potential conflict of interest. However,
we have not experienced disqualification during a bidding or award negotiation
process by any government or private client as a result of a conflict of
interest.
Our contracts with the Federal government are subject to audit by the
government, primarily by the Defense Contract Audit Agency (DCAA). The DCAA
generally seeks to (1) identify and evaluate all activities which either
contribute to, or have an impact on, proposed or incurred costs of government
contracts; (2) evaluate the contractor's policies, procedures, controls and
performance; and (3) prevent or avoid wasteful, careless and inefficient
production or service. To accomplish this, the DCAA examines our internal
control systems, management policies and financial capability, evaluates the
accuracy, reliability and reasonableness of our cost representations and
records, and assesses compliance by us with Cost Accounting Standards and
Defective-pricing clauses found within the Federal Acquisition Regulations. The
DCAA also performs the annual review of our overhead rates and assists in the
establishment of our final rates. This review focuses on the allowability of
cost items and the allowability and applicability of Cost Accounting Standards.
The DCAA also audits cost-based contracts, including the close-out of those
contracts.
The DCAA also reviews all types of proposals, including those of award,
administration, modification and repricing. Factors considered are our cost
accounting system, estimating methods and procedures, and specific proposal
requirements. Operational audits are also performed by the DCAA. A review of our
operations at every major organizational level that has a significant effect on
the performance of future government contracts is also conducted during the
proposal review period.
During the course of its audit, the DCAA may disallow costs if it determines
that we improperly accounted for such costs in a manner inconsistent with Cost
Accounting Standards. Under a
12
government contract, only those costs that are reasonable, allocable and
allowable are recoverable. A disallowance of costs by the DCAA could have a
material adverse effect on us.
Due to the severity of the legal remedies available to the government,
including the required payment of damages and/or penalties, criminal and civil
sanctions, and debarment, we maintain controls to avoid the occurrence of fraud
and other unlawful activity. In addition, we maintain preventative audit
programs to ensure appropriate control systems and mitigate control weaknesses.
We provide our services under contracts, purchase orders or retainer
letters. Our policy provides that, where possible, all contracts will be in
writing. We bill all of our clients periodically based on costs incurred, on
either an hourly-fee basis or on a percentage of completion basis, as the
project progresses. Generally, our contracts do not require that we provide
performance bonds. A performance bond, issued by a surety company, guarantees
the contractor's performance under the contract. If the contractor defaults
under the contract, the surety will, in its discretion, step in to finish the
job or pay the client the amount of the bond. If the contractor does not have a
performance bond and defaults in the performance of a contract, the contractor
is responsible for all damages resulting from the breach of contract. These
damages include the cost of completion, together with possible consequential
damages such as lost profits. To date, we have not incurred material damages
beyond the coverage of any performance bond.
Most of our agreements permit termination without cause by the clients upon
payment of fees and expenses through the date of the termination.
MARKETING
We utilize both a centralized corporate marketing department and local
marketing groups within each of our operating units. Our corporate marketing
department assists management in establishing our business plan, our target
markets and an overall marketing strategy. The corporate marketing department
also identifies and tracks the development of large Federal programs, positions
us for new business areas, selects appropriate partners, if any, for new
projects and assists in the bid process for new projects. We market throughout
the organizations we target, focusing primarily on senior representatives in
government organizations and senior management in private companies. In
addition, the corporate marketing department supports marketing activities
firm-wide by coordinating corporate promotional and professional activities,
including appearances at trade shows, direct mailings, telemarketing and public
and media relations.
We also perform marketing activities through our local offices. We believe
that these offices have a greater understanding of local environmental issues,
laws and regulations and, therefore, can better target their marketing
activities. These marketing activities are coordinated by full time marketing
staff located in certain of our offices. These activities include meetings with
potential clients and state, county and municipal regulators, presentations to
civic and professional organizations and seminars on current regulatory topics.
COMPETITION
The market for our services is highly competitive. We compete with many
other firms, ranging from small local firms to large national firms that may
have greater financial and marketing resources. We perform a broad spectrum of
engineering and consulting services across the resource management,
infrastructure and communications business areas. Services within these business
areas are provided to a client base which includes Federal agencies, such as the
DOD, the DOE, the Department of the Interior, the EPA and the U.S. Postal
Service, state and local agencies, and the private sector. Our competition
varies and is a function of the business areas in which, and client sectors for
which, we perform our services. The range of competitors for any one procurement
can vary from 10 to 100 firms, depending upon the relative value of the project,
the financial terms and risks associated with the work,
13
and any restrictions placed upon competition by the client. Historically,
clients have chosen among competing firms based primarily on the quality and
timeliness of the firm's service. However, we believe that price has become an
increasingly important competitive factor. We believe that if this trend
continues it could have a material adverse effect on our operating margins and
profitability.
We believe that our principal competitors include, in alphabetical order,
Black & Veatch LLP; Brown & Caldwell; Castle Tower Corporation; CH2M Hill
Companies Ltd.; Earth Tech, Inc.; IT Group, Inc.; Mastec, Inc.; Montgomery
Watson; o2Wireless Solutions, Inc.; Quanta Services, Inc.; Roy F. Weston, Inc.;
Science Applications International Corporation; URS Corporation and Wireless
Facilities, Inc.
BACKLOG
At October 1, 2000, our gross revenue backlog was approximately
$632.9 million, compared to $602.4 million at October 3, 1999. We include in
gross revenue backlog only those contracts for which funding has been provided
and work authorizations have been received. We estimate that approximately
$538.1 million of the gross revenue backlog at October 1, 2000 will be
recognized during fiscal 2001. No assurance can be given that all amounts
included in backlog will ultimately be realized, even if evidenced by written
contracts. For example, certain of our contracts with the Federal government and
other clients are terminable at will. If any of these clients terminate their
contracts prior to completion, we may not be able to recognize that revenue.
ENVIRONMENTAL LEGISLATION
Our clients have become subject to an increasing number of frequently
overlapping Federal, state and local laws concerned with the protection of the
environment, as well as regulations promulgated by administrative agencies
pursuant to these laws. We provide services with respect to Federal
environmental laws, and regulations including: the Clean Water Act; the Resource
Conservation and Recovery Act; the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA); the National Environmental Policy Act;
the Safe Drinking Water Act; and other laws.
POTENTIAL LIABILITY AND INSURANCE
Our business activities could expose us to potential liability under various
environmental laws such as CERCLA. In addition, we occasionally contractually
assume liability under indemnification agreements. We cannot predict the
magnitude of such potential liabilities.
We currently maintain comprehensive general liability, umbrella and
professional liability insurance policies. The professional liability policies
are "claims made" policies. This means that only claims made during the term of
the policy are covered. If we terminate our professional liability policies and
do not obtain retroactive coverage, we would be uninsured for claims made after
termination even if based on events or acts that occurred during the term of the
policy.
We obtain insurance coverage through a broker who is experienced in the
engineering field. The broker, together with our Risk Manager, periodically
review the adequacy of our insurance programs. However, because there are
various exclusions and retentions under our insurance policies, there can be no
assurance that all potential liabilities will be covered by our insurance.
Further, in the event we expand our services into new markets, we may not be
able to obtain insurance coverage for such activities or, if insurance is
obtained, the dollar amount of any liabilities incurred could exceed our
insurance coverage.
We evaluate the risk associated with uninsured claims. If we determine that
an uninsured claim has potential liability, we establish an appropriate reserve.
A reserve is not established if we determine that the claim has no merit. Our
historic levels of insurance coverage and reserves have been adequate.
14
However, a partially or completely uninsured claim, if successful and of
significant magnitude, could have a material adverse effect on our business.
EMPLOYEES
At October 1, 2000, we had approximately 6,601 total employees or
approximately 6,120 full-time equivalent employees. Our professional staff
includes archaeologists, biologists, chemical engineers, chemists, civil
engineers, computer scientists, economists, electrical engineers, environmental
engineers, environmental scientists, geologists, hydrogeologists, mechanical
engineers, oceanographers, toxicologists and project managers. Our ability to
retain and expand our staff of qualified professionals will be an important
factor in determining our future growth and success. We currently have 206
employees represented by four labor organizations. Management considers its
relations with our employees to be good.
In addition, we supplement our consultants on certain engagements with
independent contractors. We believe that the practice of retaining independent
contractors on a per engagement basis provides us with significant flexibility
in adjusting professional personnel levels in response to changes in demand for
our services.
15
RISK FACTORS
SOME OF THE INFORMATION IN THIS ANNUAL REPORT ON FORM 10-K CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. YOU
CAN IDENTIFY THESE STATEMENTS BY FORWARD-LOOKING WORDS SUCH AS "MAY," "WILL,"
"EXPECT," "ANTICIPATE," "BELIEVE," "ESTIMATE" AND "CONTINUE" OR SIMILAR WORDS.
YOU SHOULD READ STATEMENTS THAT CONTAIN THESE WORDS CAREFULLY BECAUSE THEY:
(1) DISCUSS OUR FUTURE EXPECTATIONS; (2) CONTAIN PROJECTIONS OF OUR FUTURE
OPERATING RESULTS OR OF OUR FUTURE FINANCIAL CONDITION; OR (3) STATE OTHER
"FORWARD-LOOKING" INFORMATION. WE BELIEVE IT IS IMPORTANT TO COMMUNICATE OUR
EXPECTATIONS TO OUR INVESTORS. THERE MAY BE EVENTS IN THE FUTURE, HOWEVER, THAT
WE ARE NOT ACCURATELY ABLE TO PREDICT OR OVER WHICH WE HAVE NO CONTROL. THE RISK
FACTORS LISTED IN THIS SECTION, AS WELL AS ANY CAUTIONARY LANGUAGE IN THIS
ANNUAL REPORT ON FORM 10-K, PROVIDE EXAMPLES OF RISKS, UNCERTAINTIES AND EVENTS
THAT MAY CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE EXPECTATIONS WE
DESCRIBE IN OUR FORWARD-LOOKING STATEMENTS. YOU SHOULD BE AWARE THAT THE
OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN THESE RISK FACTORS AND ELSEWHERE IN
THIS ANNUAL REPORT ON FORM 10-K COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS AND THAT UPON
THE OCCURRENCE OF ANY OF THESE EVENTS, THE TRADING PRICE OF OUR COMMON STOCK
COULD DECLINE.
THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY THAT COULD ADVERSELY
IMPACT OUR BUSINESS AND OPERATING RESULTS
A significant part of our growth strategy is to acquire other companies that
complement our lines of business or that broaden our geographic presence. During
fiscal 2000, we purchased nine companies in eight separate transactions. We
expect to continue to acquire companies as an element of our growth strategy.
Acquisitions involve certain risks that could cause our actual growth or
operating results to differ from our expectations or the expectations of
security analysts. For example:
- We may not be able to identify suitable acquisition candidates or to
acquire additional companies on favorable terms;
- We compete with others to acquire companies. Competition may increase and
may result in decreased availability of or increased price for suitable
acquisition candidates;
- We may not be able to obtain the necessary financing, on favorable terms
or at all, to finance any of our potential acquisitions;
- We may ultimately fail to consummate an acquisition even if we announce
that we plan to acquire a company;
- We may fail to successfully integrate or manage these acquired companies
due to differences in business backgrounds or corporate cultures;
- These acquired companies may not perform as we expect;
- We may find it difficult to provide a consistent quality of service across
our geographically diverse operations; and
- If we fail to successfully integrate any acquired company, our reputation
could be damaged. This could make it more difficult to market our services
or to acquire additional companies in the future.
In addition, our acquisition strategy may divert management's attention away
from our primary service offerings, result in the loss of key clients or
personnel and expose us to unanticipated liabilities.
Finally, acquired companies that derive a significant portion of their
revenues from the Federal government and that do not follow the same cost
accounting policies and billing procedures as we do may be subject to larger
cost disallowances for greater periods than we typically encounter. If we fail
to determine the existence of unallowable costs and establish appropriate
reserves in advance of an
16
acquisition, we may be exposed to material unanticipated liabilities, which
could have a material adverse effect on our business.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, WHICH COULD HAVE A
NEGATIVE EFFECT ON THE PRICE OF OUR COMMON STOCK
Our quarterly revenues, expenses and operating results may fluctuate
significantly because of a number of factors, including:
- The seasonality of the spending cycle of our public sector clients and the
spending patterns of our private sector clients;
- Employee hiring and utilization rates;
- The number and significance of client engagements commenced and completed
during a quarter;
- Delays incurred in connection with an engagement;
- The ability of our clients to terminate engagements without penalties;
- The size and scope of engagements;
- The timing of expenses incurred for corporate initiatives;
- The timing and size of the return on investment capital; and
- General economic and political conditions.
Variations in any of these factors could cause significant fluctuations in our
operating results from quarter to quarter and could result in net losses.
THE VALUE OF OUR COMMON STOCK COULD CONTINUE TO BE VOLATILE
The trading price of our common stock has fluctuated widely. In addition, in
recent years the stock market has experienced extreme price and volume
fluctuations. The overall market and the price of our common stock may continue
to fluctuate greatly. The trading price of our common stock may be significantly
affected by various factors, including:
- Quarter to quarter variations in our operating results;
- Changes in environmental legislation;
- Changes in investors' and analysts' perception of the business risks and
conditions of our business;
- Broader market fluctuations; and
- General economic or political conditions.
IF WE ARE NOT ABLE TO SUCCESSFULLY MANAGE OUR GROWTH STRATEGY, OUR BUSINESS AND
RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED
We are growing rapidly. Our growth presents numerous managerial,
administrative, operational and other challenges. Our ability to manage the
growth of our operations will require us to continue to improve our operational,
financial and human resource management information systems and our other
internal systems and controls. In addition, our growth will increase our need to
attract, develop, motivate and retain both our management and professional
employees. The inability of our management to manage our growth effectively or
the inability of our employees to achieve anticipated performance or utilization
levels could have a material adverse effect on our business.
17
THE LOSS OF KEY PERSONNEL OR OUR INABILITY TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL COULD SIGNIFICANTLY DISRUPT OUR BUSINESS
We depend upon the efforts and skills of our executive officers, senior
managers and consultants. With limited exceptions, we do not have employment
agreements with any of these individuals. The loss of the services of any of
these key personnel could adversely affect our business. Although we have
obtained non-compete agreements from certain principals and stockholders of
companies we have acquired, we generally do not have non-compete or employment
agreements with key employees who were not once equity holders of these
companies. We do not maintain key-man life insurance policies on any of our
executive officers or senior managers.
Our future growth and success depends on our ability to attract and retain
qualified scientists and engineers. The market for these professionals is
competitive and we may not be able to attract and retain such professionals.
CHANGES IN EXISTING LAWS AND REGULATIONS COULD REDUCE THE DEMAND FOR OUR
SERVICES
A significant amount of our resource management business is generated either
directly or indirectly as a result of existing Federal and state governmental
laws, regulations and programs. Any changes in these laws or regulations that
reduce funding or affect the sponsorship of these programs could reduce the
demand for our services and could have a material adverse effect on our
business.
OUR REVENUES FROM AGENCIES OF THE FEDERAL GOVERNMENT ARE CONCENTRATED, AND A
REDUCTION IN SPENDING BY THESE AGENCIES COULD ADVERSELY AFFECT OUR BUSINESS AND
OPERATING RESULTS
Agencies of the Federal government are among our most significant clients.
During fiscal 2000, approximately 29.1% of our net revenue was derived from
Federal agencies of which 15.1% was derived from the Department of Defense
(DOD), 9.4% from the Environmental Protection Agency (EPA), 2.2% from the
Department of Energy (DOE) and 2.4% from various other Federal agencies. Some
contracts with Federal government agencies require annual funding approval and
may be terminated at their discretion. A reduction in spending by Federal
government agencies could limit the continued funding of our existing contracts
with them and could limit our ability to obtain additional contracts. These
limitations, if significant, could have a material adverse effect on our
business.
Additionally, the failure of clients to pay significant amounts due us for
our services could adversely affect our business. For example, we recently
received notification from a Federal government agency that we are entitled to
payments in excess of our billings. However, the agency involved must obtain
specific funding approval for amounts owed to us and there can be no assurance
this funding approval will be obtained.
OUR CONTRACTS WITH GOVERNMENTAL AGENCIES ARE SUBJECT TO AUDIT, WHICH COULD
RESULT IN THE DISALLOWANCE OF CERTAIN COSTS
Contracts with the Federal government and other governmental agencies are
subject to audit. Most of these audits are conducted by the Defense Contract
Audit Agency (DCAA), which reviews our overhead rates, operating systems and
cost proposals. The DCAA may disallow costs if it determines that we accounted
for these costs incorrectly or in a manner inconsistent with Cost Accounting
Standards. A disallowance of costs by the DCAA, or other governmental auditors,
could have a material adverse effect on our business.
18
OUR BUSINESS AND OPERATING RESULTS COULD BE ADVERSELY AFFECTED BY LOSSES UNDER
FIXED-PRICE CONTRACTS OR TERMINATION OF CONTRACTS AT THE CLIENT'S DISCRETION
We contract with Federal and state governments as well as with the
commercial sector. These contracts are often subject to termination at the
discretion of the client with or without cause. Additionally, we enter into
various types of contracts with our clients, including fixed-price contracts. In
fiscal 2000, approximately 42.9% of our net revenue was derived from fixed-price
contracts. Fixed-price contracts protect clients and expose us to a number of
risks. These risks include underestimation of costs, problems with new
technologies, unforeseen costs or difficulties, delays beyond our control and
economic and other changes that may occur during the contract period. Losses
under fixed-price contracts or termination of contracts at the discretion of the
client could have a material adverse effect on our business.
OUR INABILITY TO FIND QUALIFIED SUBCONTRACTORS COULD ADVERSELY AFFECT THE
QUALITY OF OUR SERVICE AND OUR ABILITY TO PERFORM UNDER CERTAIN CONTRACTS
Under some of our contracts, we depend on the efforts and skills of
subcontractors for the performance of certain tasks. Reliance on subcontractors
varies from project to project. During fiscal 2000, subcontractor costs
comprised 24.7% of our gross revenue. The absence of qualified subcontractors
with whom we have a satisfactory relationship could adversely affect the quality
of our service and our ability to perform under some of our contracts.
OUR INDUSTRY IS HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO COMPETE EFFECTIVELY
We provide specialized management consulting and technical services to a
broad range of public and private sector clients. The market for our services is
highly competitive and we compete with many other firms. These firms range from
small regional firms to large national firms which have greater financial and
marketing resources than ours.
We focus primarily on the resource management, infrastructure and
communications business areas. We provide services to our clients which include
Federal, state and local agencies, and organizations in the private sector.
We compete for projects and engagements with a number of competitors which
can vary from 10 to 100 firms. Historically, clients have chosen among competing
firms based on the quality and timeliness of the firm's service. We believe,
however, that price has become an increasingly important factor.
We believe that our principal competitors include, in alphabetical order,
Black & Veatch LLP; Brown & Caldwell; Castle Tower Corporation; CH2M Hill
Companies Ltd.; Earth Tech, Inc.; IT Group, Inc.; Mastec, Inc.; Montgomery
Watson; o2 Wireless Solutions, Inc.; Quanta Services; Roy F. Weston, Inc.;
Science Applications International Corporation; URS Corporation and Wireless
Facilities, Inc.
OUR SERVICES EXPOSE US TO SIGNIFICANT RISKS OF LIABILITY AND OUR INSURANCE
POLICIES MAY NOT PROVIDE ADEQUATE COVERAGE
Our services involve significant risks of professional and other liabilities
which may substantially exceed the fees we derive from our services. Our
business activities could expose us to potential liability under various
environmental laws such as the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA). In addition, we sometimes
contractually assume liability under indemnification agreements. We cannot
predict the magnitude of such potential liabilities.
We currently maintain comprehensive general liability, umbrella and
professional liability insurance policies. We believe that our insurance
policies are adequate for our business operations. Professional
19
liability policies are "claims made" policies. Thus, only claims made during the
term of the policy are covered. Should we terminate our professional liability
policies and do not obtain retroactive coverage, we would be uninsured for
claims made after termination even if these claims are based on events or acts
that occurred during the term of the policy. Additionally our insurance policies
may not protect us against potential liability due to various exclusions and
retentions. In addition, if we expand into new markets, we may not be able to
obtain insurance coverage for such activities or, if insurance is obtained, the
dollar amount of any liabilities incurred could exceed our insurance coverage.
Partially or completely uninsured claims, if successful and of significant
magnitude, could have a material adverse affect on our business.
WE MAY BE PRECLUDED FROM PROVIDING CERTAIN SERVICES DUE TO CONFLICT OF INTEREST
ISSUES
Many of our clients are concerned about potential or actual conflicts of
interest in retaining management consultants. Federal government agencies have
formal policies against continuing or awarding contracts that would create
actual or potential conflicts of interest with other activities of a contractor.
These policies, among other things, may prevent us from bidding for or
performing contracts resulting from or relating to certain work we have
performed for the government. In addition, services performed for a private
client may create a conflict of interest that precludes or limits our ability to
obtain work from other public or private organizations. We have, on occasion,
declined to bid on projects because of these conflicts of interest issues.
ITEM 2. PROPERTIES.
Our corporate headquarters facilities are located in Pasadena, California.
These facilities contain approximately 1.8 million square feet of office space,
and are subject to leases which expire beyond the year 2001. We lease office
space in approximately 275 locations in the United States. We also rent some
additional office space on a month-to-month basis.
We believe that our existing facilities are adequate to meet current
requirements and that suitable additional or substitute space will be available
as needed to accommodate any expansion of operations and for additional offices.
ITEM 3. LEGAL PROCEEDINGS.
We are subject to certain claims and lawsuits typically filed against the
engineering and consulting professions, primarily alleging professional errors
or omissions. We carry professional liability insurance, subject to certain
deductibles and policy limits against such claims. Management is of the opinion
that the resolution of these claims will not have a material effect on our
financial position or results of operations. See "Item 1. Business--Potential
Liability and Insurance."
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
20
PART II
The information required by Items 5 through 8 of this report is set forth on
pages 17 through 41 of our Annual Report to Stockholders for the fiscal year
ended October 1, 2000. Such information is incorporated in this report and made
a part hereof by reference. Item 9 is not applicable.
PART III
The information required by Items 10 through 13 of this report is set forth
in the sections entitled "Security Ownership of Principal Stockholders,
Directors and Executive Officers," "Election of Directors," and "Executive
Officers, Compensation and Other Information" in our Proxy Statement for our
2001 Annual Meeting of Stockholders. Such information is incorporated in this
report and made a part hereof by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
The Financial Statements filed as part of this report are
listed in the accompanying index at page 25.
3. EXHIBITS.
3.1 Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 1, 1995).
3.2 Bylaws of the Company as amended to date (incorporated
herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1, No. 33-43723).
3.3 Certificate of Amendment of Certificate of Incorporation of
the Company (incorporated herein by reference to
Exhibit 3.4 to the Company's Annual Report on Form 10-K for
the fiscal year ended October 4, 1998).
10.1 Credit Agreement dated as of March 17, 2000 among the
Company and the financial institutions named therein
(incorporated herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 2, 2000).
10.2 1989 Stock Option Plan dated as of February 1, 1989
(incorporated herein by reference to Exhibit 10.13 to the
Company's Registration Statement on Form S-1,
No. 33-43723).
10.3 Form of Incentive Stock Option Agreement executed by the
Company and certain individuals in connection with the
Company's 1989 Stock Option Plan (incorporated herein by
reference to Exhibit 10.14 to the Company's Registration
Statement on Form S-1, No. 33-43723).
10.4 Executive Medical Reimbursement Plan (incorporated herein by
reference to Exhibit 10.16 to the Company's Registration
Statement on Form S-1, No. 33-43723).
10.5 1992 Incentive Stock Plan (incorporated herein by reference
to Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 3, 1993).
21
10.6 Form of Incentive Stock Option Agreement used by the Company
in connection with the Company's 1992 Incentive Stock Plan
(incorporated herein by reference to Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 3, 1993).
10.7 1992 Stock Option Plan for Nonemployee Directors
(incorporated herein by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 3, 1993).
10.8 Form of Nonqualified Stock Option Agreement used by the
Company in connection with the Company's 1992 Stock Option
Plan for Nonemployee Directors (incorporated herein by
reference to Exhibit 10.21 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 3, 1993).
10.9 1994 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 10.22 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 2, 1994).
10.10 Form of Stock Purchase Agreement used by the Company in
connection with the Company's 1994 Employee Stock Purchase
Plan (incorporated herein by reference to Exhibit 10.23 to
the Company's Annual Report on Form 10-K for the fiscal
year ended October 2, 1994).
10.11 Employment Agreement dated as of June 11, 1997 between the
Company and Daniel A. Whalen (incorporated herein by
reference to Exhibit 10.16 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 29, 1997).
10.12 Registration Rights Agreement dated as of June 11, 1997
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.17 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 29, 1997).
10.13 Registration Rights Agreement dated as of July 11, 1997
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.18 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 28, 1997).
10.14 Registration Rights Agreement dated as of March 26, 1998
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.20 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 29, 1998).
10.15 Registration Rights Agreement dated as of July 9, 1998 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.22
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 28, 1998).
10.16 Registration Rights Agreement dated as of September 22, 1998
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 4, 1998).
10.17 Registration Rights Agreement dated as of February 26, 1999
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.24 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 4, 1999).
22
10.18 Registration Rights Agreement dated as of May 7, 1999 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.26
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 4, 1999).
10.19 Registration Rights Agreement dated as of May 21, 1999 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.27
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 4, 1999).
10.20 Registration Rights Agreement dated as of June 18, 1999
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.28 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 4, 1999).
10.21 Registration Rights Agreement dated as of September 3, 1999
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.30 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 3, 1999).
10.22 Registration Rights Agreement dated as of March 31, 2000
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.22 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 2, 2000).
10.23 Registration Rights Agreement dated as of May 3, 2000 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.23
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 2, 2000).
10.24 Registration Rights Agreement dated as of May 17, 2000 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.24
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 2, 2000).
10.25 Registration Rights Agreement dated as of May 24, 2000 among
the Company and the parties listed on Schedule A attached
thereto (incorporated herein by reference to Exhibit 10.25
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 2, 2000).
10.26 Registration Rights Agreement dated as of December 21, 2000
among the Company and the parties listed on Schedule A
attached thereto.
13. Annual Report to Stockholders for the fiscal year ended
October 1, 2000, portions of which are incorporated by
reference in this report as set forth in Part II hereof.
With the exception of these portions, such Annual Report is
not deemed filed as part of this report.
21. Subsidiaries of the Company.
23. Independent Auditors' Consent.
27. Financial Data Schedule.
(b) Reports on Form 8-K
None.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TETRA TECH, INC.
Date: December 29, 2000 By: /s/ LI-SAN HWANG
-----------------------------------------
Li-San Hwang,
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Chairman of the Board of
/s/ LI-SAN HWANG Directors, President and
------------------------------------------- Chief Executive Officer December 29, 2000
Li-San Hwang (Principal Executive
Officer)
Executive Vice President,
/s/ JAMES M. JASKA Chief Financial Officer
------------------------------------------- and Treasurer (Principal December 29, 2000
James M. Jaska Financial and Accounting
Officer)
/s/ DANIEL A. WHALEN
------------------------------------------- Director December 29, 2000
Daniel A. Whalen
/s/ J. CHRISTOPHER LEWIS
------------------------------------------- Director December 29, 2000
J. Christopher Lewis
/s/ PATRICK C. HADEN
------------------------------------------- Director December 29, 2000
Patrick C. Haden
/s/ JAMES J. SHELTON
------------------------------------------- Director December 29, 2000
James J. Shelton
24
INDEX TO FINANCIAL STATEMENTS
The consolidated financial statements, together with the Notes thereto and
report thereon of Deloitte & Touche LLP dated November 15, 2000, appearing on
pages 25 through 41 of the accompanying 2000 Annual Report to Stockholders, are
incorporated by reference in this Annual Report on Form 10-K. With the exception
of the aforementioned information and Part II information set forth on pages 17
through 24, the 2000 Annual Report to Stockholders is not to be deemed filed as
part of this report.
FINANCIAL STATEMENTS SCHEDULE
PAGE NO.
--------
Independent Auditors' Report................................ 26
Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts and
Reserves.................................................. 27
25
INDEPENDENT AUDITORS' REPORT
Tetra Tech, Inc.:
We have audited the consolidated financial statements of Tetra Tech, Inc.
and its subsidiaries as of October 1, 2000 and October 3, 1999, and for each of
the three years in the period ended October 1, 2000, and have issued our report
thereon dated November 15, 2000; such financial statements and report are
included in your 2000 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of Tetra
Tech, Inc. and its subsidiaries, listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
November 15, 2000
26
TETRA TECH, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED
OCTOBER 4, 1998, OCTOBER 3, 1999 AND OCTOBER 1, 2000
BALANCE AT ADDITIONS CHARGES TO DEDUCTIONS,
BEGINNING OF THROUGH COSTS AND NET OF BALANCE AT
PERIOD ACQUISITIONS EARNINGS RECOVERIES END OF PERIOD
------------ ------------ ---------- ----------- -------------
Fiscal year ended October 4,
1998
Allowance for loss on accounts
receivable.................... $11,153,000 $3,187,000 $ (334,000) $(1,321,000) $12,685,000
Fiscal year ended October 3,
1999
Allowance for loss on accounts
receivable.................... $12,685,000 $ 747,000 $ (667,000) $(4,236,000) $ 8,529,000
Fiscal year ended October 1,
2000
Allowance for loss on accounts
receivable.................... $ 8,529,000 $ 391,000 $3,056,000 $(4,903,000) $ 7,073,000
27