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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 September 28, 1997.
/ / Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to_______
Commission file number 0-19655
TETRA TECH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 95-4148514
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
670 N. Rosemead Blvd.
Pasadena, California 91107
(Address of registrant's principal (Zip Code)
executive offices)
(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
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 9, 1997 was $366,641,534.
The number of shares of Common Stock, $.01 par value, outstanding (the only
class of common stock of the registrant outstanding) was 22,268,958 on December
9, 1997.
Portions of registrant's Annual Report to Stockholders for the fiscal year ended
September 28, 1997 are incorporated by reference in Part II of this report.
Portions of registrant's Proxy Statement for its 1998 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. / /
PART I
ITEM 1. BUSINESS.
THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934. THESE STATEMENTS ARE IN THE
SECOND PARAGRAPH UNDER "OVERVIEW," IN THE FIRST AND SECOND PARAGRAPHS UNDER
"RESOURCE MANAGEMENT BUSINESS AREA," AND IN THE FIRST, FIFTH AND FOURTEENTH
PARAGRAPHS UNDER "ENVIRONMENTAL LEGISLATION." ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT
OF THE RISK FACTORS SET FORTH BELOW UNDER "RISK FACTORS."
INTRODUCTION
Tetra Tech, Inc. ("Tetra Tech" or the "Company") provides nationally
recognized engineering and management consulting services focusing on
cost-effective solutions to engineering, environmental and natural resource
management problems. These services are directed to a broad base of public and
private sector clients and include substantially all types of engineering and
consulting services in the environmental area, such as water chemistry,
geohydrology, soil science, water and wastewater treatment, hydrodynamics,
geology, air quality and civil engineering. Engineering services also include
mechanical, electrical, chemical and structural engineering, as well as
architecture and design, and are applied to infrastructure projects including
wastewater treatment plants, roads, schools and telecommunications projects
including structures and construction management.
The Company was incorporated in Delaware in February 1988 to acquire the
assets of the Water Management Group of Tetra Tech, Inc. (the "Predecessor"),
a subsidiary of Honeywell Inc. ("Honeywell"), in a management buy-out in
March 1988. The Predecessor was founded in 1966 as a coastal and marine
engineering business. Honeywell acquired the Predecessor in 1982, by which
time the Predecessor had developed an integrated water and environmental
science and engineering business. In November 1988, the Company acquired
GeoTrans, Inc., a groundwater service firm. In March 1990, the Company
acquired M.H. Loe Company ("Loe"), an underground storage tank removal and
remediation company. In October 1991, Loe was merged into the Company. In
October 1993, the Company acquired Simons, Li & Associates, Inc., a firm
engaged primarily in advanced water resources and environmental engineering.
In June 1994, the Company acquired Hydro-Search, Inc., a groundwater
hydrology and remediation firm. In September 1995, the Company acquired
Tetra Tech EM Inc. (formerly known as PRC Environmental Management, Inc.), an
environmental engineering and consulting firm which provides services ranging
from policy analysis to innovative remedial technology evaluation. In
November 1995, the Company acquired KCM, Inc., an engineering firm
specializing in the areas of water quality, water and wastewater systems,
surface water management, fisheries and facilities. In December 1996, the
Company acquired IWA Engineers, an architecture and engineering ("A/E") firm
providing a wide range of planning, engineering and design capabilities in
water, wastewater and facility design. In December 1996, the Company also
acquired FLO Engineering, Inc., a consulting and engineering firm
specializing in water resource engineering involving hydraulic engineering
and hydrographic data collection. In January 1997, the Company merged
Hydro-Search, Inc. into GeoTrans, Inc. and changed the name of the combined
entity to HSI GeoTrans, Inc. In March 1997, the Company acquired SCM
Consultants, Inc., a consulting and engineering firm, providing design of
irrigation, water and wastewater systems, as well as facility and
infrastructure engineering services. In June 1997, the Company acquired
Whalen & Company, Inc. and Whalen Service Corps Inc. (collectively, "WAC"), a
wireless telecommunication services firm providing site development services
for PCS, cellular, ESMR, air-to-ground, microwave, paging, fiber optic and
switching centers technology. In July 1997, the Company acquired CommSite
Development Corporation, a wireless telecommunication site development
service firm. Since 1966, the Company's business has expanded through the
establishment of an international network of over 90 offices, allowing the
development of technical and marketing expertise in a variety of geographic
areas.
OVERVIEW
Tetra Tech works in partnership with government and industry to balance the
need for economic growth with sustainable development of natural resources and
adequate infrastructure to sustain economic activity. The Company responds to
its partnerships by recognizing the uniqueness of each client; by recognizing
the requirements and needs of the client; setting priorities and ensuring proper
allocation and control of resources applied to a problem; as well
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as monitoring results. The Company's goal is to help the client build
environmental performance into each aspect of their organizational activities to
enhance both environmental and fiscal performance. Tetra Tech achieves this
goal by assisting clients to be more effective in pollution prevention, better
manage the spectrum of environmental compliance, and apply innovative and
cost-effective solutions to remediation or corrective action to problems
impacting our environment.
Tetra Tech has a commitment to people and results, technical excellence and
teamwork and cost-effective solutions for its clients' technical problems. The
challenges of today's resource management and infrastructure issues requires an
integrated multi-disciplinary approach to assist clients in making informed
decisions and to implement them in the most cost-effective way. These
challenges are driven by:
- Complex and continuously evolving environmental regulations and the
need for a more strategic approach to meet national and
international environmental challenges in a way that allows the
government and industry to be cost-effective and competitive in the
markets they serve.
- Increased emphasis on pollution prevention and waste minimization as
a necessary part of a long-term solution to sound natural resource
management.
- Competition for limited resources and the need for new and more
effective technology to achieve pollution prevention, resource
management and remediation goals more cost-effectively.
- Population growth requiring new municipal infrastructure including
water and wastewater treatment plants, roads, and pipelines, as well
as schools, office buildings and criminal justice facilities.
COMPANY SERVICES
The Company's services generally fall within three business areas:
resource management, infrastructure and telecommunications services. The
Company provides its clients with five lines of service including research and
development, applied science and management consulting, engineering and
architectural design, construction management, and facility operation and
maintenance. These services are offered individually or together as part of the
Company's full service approach to problems. The Company is currently
performing services under more than 800 active contracts, which range from small
site investigations to large, complex infrastructure projects.
RESOURCE MANAGEMENT BUSINESS AREA
Public concern with water resources and other environmental issues has been
a driving force behind the promulgation of numerous laws and regulations which
seek to control or prevent environmental degradation and mandate restorative
measures. According to the United States Environmental Protection Agency
("EPA"), contamination of groundwater and surface water resulting from
industrial, agricultural and residential development is one of the most serious
environmental problems facing the United States. Because of the interrelated
nature of groundwater, surface water and rainwater in the water cycle,
contamination of one source of water affects the quality of other sources.
Surface water can be affected by direct contamination or runoff from cities or
agricultural areas. In addition, soil contamination from hazardous materials
often leads to water contamination through surface runoff and infiltration.
Similarly, air pollution and the resulting acid rain and other forms of
deposition can contribute to the contamination of water resources over a wide
geographic area. This contamination can threaten the quality of the water
supplies that serve as drinking water sources and detrimentally affect aquatic
life and the quality of lakes, rivers, estuaries, harbors and oceans.
The economic and environmental consequences from continuously evolving
regulations present new opportunities for the Company to assist public and
private sector clients in achieving compliance. Past enforcement efforts under
the Clean Water Act ("CWA") have focused on regulating sources of pollution
which originate from a discrete point, such as industrial facilities and
municipal treatment plants. Much of the Company's water-related environmental
business has been derived from this market. However, the EPA estimates that
nonpoint sources, such as stormwater runoff from urban streets, runoff from
farmland and construction sites, atmospheric deposition, drainage and combined
sewer overflow, currently account for more than 50% of the pollution entering
the nation's waters. As a result, the EPA is currently developing programs and
allocating funding to address the complex problem
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of nonpoint source pollution within the context of holistic watershed
management. Under National Pollutant Discharge Elimination System ("NPDES")
regulations promulgated in November 1990, for example, the EPA will require
municipalities and industries to apply for nonpoint discharge permits. The
Company's ongoing technical support of the EPA's water programs has led to early
involvement in the development and implementation of this emerging nonpoint
source program. However, no assurance can be given that the Company will
continue to participate in this program.
In addition to the CWA, other laws, such as the Resource Conservation and
Recovery Act of 1976 ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund") and the Safe Drinking Water Act
("SDWA"), require companies and government agencies to make considerable
environmental expenditures. Major environmental expenditures are also planned
by the United States government, including expenditures by the United States
Department of Defense ("DOD") and the United States Department of Energy ("DOE")
to clean up defense and nuclear weapons production and test facilities that have
become contaminated over the past four decades.
In the Resource Management Business Area, the Company's services extend
from research and development through applied science and management consulting;
to engineering and architectural design and construction management, and
operation and maintenance.
SURFACE WATER PROJECTS
Public concern with the quality of surface water resources, defined as
rivers, lakes and streams as well as coastal and marine waters, and the ensuing
legislative and regulatory response, have led to a demand for the Company's
services. Over the past 31 years, the Company and the Predecessor have
developed a specialized set of technical skills which position the Company to
compete effectively for surface water and watershed management projects. The
Company provides water resource services to public clients such as the EPA, DOD
and DOE and to a broad base of private clients including those in the chemical,
pharmaceutical, utility, aerospace and petroleum industries. The Company also
provides surface water services to state and local agencies, particularly in the
areas of watershed management, flood control and drainage designs. The
Company's services in the management of surface water quantity and quality
include research and development for new generations of computer models that can
predict and compare the response of water quality parameters under various
watershed management practices; design of monitoring programs; consulting
services, particularly in regulatory compliance, permitting and nonpoint source
management; and engineering design of integrated best management practices
(e.g., stormwater detention ponds and artificial wetlands), stream, lake and
wetland restoration and enhancement measures, and flood conveyance and control
structures.
Traditional "command and control" solutions used since the 1970s by the
federal government to bring industrial and municipal wastewater treatment plant
discharges into compliance have been successful in reducing impacts to U.S.
surface waters. However, a significant percentage of waters remain polluted due
primarily to diffuse "nonpoint source" pollution generated by man's activities
on the rural and urban landscape. Under a reauthorized CWA expected within the
next one to two years, the EPA has set as a high priority working with state
and local governments to implement more effective nonpoint source and watershed
management programs to address this problem.
The Company has also worked closely with the U.S. Army Corps of Engineers
("ACE") to develop and implement nationwide non-traditional approaches to flood
control policy, planning, and design. As a consultant to ACE, the Company has
implemented flood control practices using natural, non-structural features. In
addition to ensuring human health, safety, and welfare protection, this new
approach results in a decreased federal investment, higher benefit-to-cost
ratios, the creation of recreational opportunities, and the enhancement and
effective long-term management of endangered urban watersheds.
The Company has worked closely with the EPA since the passage of the CWA in
1977 in researching and evaluating surface water environmental systems. Under
contracts with the EPA, the Company has assisted in the development of national
guidelines on surface water monitoring strategies, nonpoint source pollution
control practices, pollution trading and other economic incentive-based control
strategies, and public education methods for use by states and local agencies in
their ongoing surface water and watershed management programs. Through its work
for the
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EPA, the Company has developed expertise in complex modeling, Geographic
Information Systems ("GIS"), remote sensing, surface water monitoring, data
analyses, publication of national guidance documents and environmental impact
assessments for surface water projects. The development of this knowledge base
has strategically positioned Tetra Tech as an authority on regulations affecting
discharges to surface water and best management practices.
Examples of past and current projects in the surface water field include
the following:
- STORMWATER RUNOFF. The Company recommended methods to manage
stormwater runoff and other point and nonpoint sources of pollution
for a variety of clients including Clermont County, Ohio; Baltimore
and Prince Georges Counties, Maryland; Suffolk County, New York;
Prince William County, Virginia; and the City of Tucson, Arizona.
For Prince Georges County, Tetra Tech developed several new
investigative technologies to assess and manage stormwater pollution
under the NPDES program. Predictive models and statistical
algorithms integrated with GIS help prioritize water quality
efforts. Models are also being developed to assess water quality
benefits derived from wetland systems and other best management
practices. The Company assisted the California Department of
Transportation to establish a statewide stormwater quality
monitoring program to meet state and federal regulations.
- WATER SUPPLY PROTECTION. Tetra Tech is assisting several local
agencies in watershed restoration and pollution source assessments
in areas where surface water supplies are susceptible to land
activities (e.g., urbanization, agriculture). These include, for
example, facilitating and refining management objectives for the
Orange Water and Sewer Authority, North Carolina; development of a
watershed plan for the Loch Raven Reservoir, Baltimore, Maryland;
and nitrogen loading impacts of domestic septic systems within the
Patuxent River Watershed, Maryland.
- WATERSHED ASSESSMENT TOOL DEVELOPMENT. Under contracts with the EPA
and Prince Georges County, Maryland, Tetra Tech has developed a
number of watershed assessment tools that provide integration of
watershed and receiving water models, databases, monitoring and
design data, and watershed attribute information within a GIS
platform (PC-Windows and UNIX workstations). These tools range from
"BASINS," which was developed for the EPA to be used by states to
perform local and regional scale watershed assessments, to "SAM,"
which was developed for Prince Georges County for detailed
assessment and optimization of best management practices.
- COASTAL NONPOINT POLLUTION. As the prime contractor to the EPA's
Assessment and Watershed Protection Division, Tetra Tech is
assisting in the development of implementation strategies and
technical guidance for nonpoint source pollution control within the
coastal zone under the Coastal Nonpoint Pollution Control Program.
The Company is also assisting the EPA in developing guidance for the
assessment of stormwater discharges and combined sewer overflows as
required under NPDES regulations. The Company is also assisting the
government of the Philippines in addressing problems related to the
management of the country's vital coastal resources. Under this
contract, the Company provides scientific and engineering services
and policy support for the development and implementation of
effective community-based coastal resources and watershed management.
- FLOOD CONTROL PLANNING. The Company is currently providing flood
control related planning services to the U.S. Army Corps of
Engineers' Los Angeles District. Individual projects include flood
investigations of 72 sites in Arizona; an analysis of flooding
effects to 300 in-stream structures in California, Arizona, Nevada,
and Utah; a reconnaissance study for habitat restoration along the
Gila River in Arizona; and development of multiple-use flood
mitigation alternatives for 35 miles of the Salt River through the
metropolitan Phoenix area. The Company recently completed
development and analysis of alternative flood control measures for
the Los Angeles River, one of the most important urban flood control
projects in the country. The Company considered numerous advanced
flood protection measures, including stormwater detention using
gravel pits, development of large greenbelts and flood walls.
Although this was one of the most contentious projects of its kind,
Tetra Tech successfully balanced habitat needs with structural flood
control solutions to develop a widely accepted plan.
4
- POWER PLANT DISCHARGES. Under a contract with the Electric Power
Research Institute, the Company developed "RIVRISK," a multi-purpose
mathematical model used to assess potential human health risks from
power plant discharges into rivers. The model is designed to help
utilities evaluate options, design new or restored wetlands, and
obtain permits for activities involving existing and constructed
wetlands such as power corridors, road construction and habitat
improvement.
- BLUE RIVER WETLANDS RESTORATION, BRECKENRIDGE, COLORADO. The
Company completed the design of wetland creation and channel
restoration of the Blue River for the Town of Breckenridge. The
project restored a one-mile reach of the Blue River which had been
disturbed by dredge boat mining from 1890 to 1940. Project features
included the removal of 500,000 cu. yd. of dredge rock,
reconstruction of a stream channel including 22 drop structures to
enhance channel stability and overbank grading to create wetlands.
Approximately ten acres of riparian wetlands were developed.
- RIO GRANDE HYDROGRAPHIC DATA COLLECTION PROGRAM, NEW MEXICO. The
Company is conducting a five-year hydrographic data collection
project on the Rio Grande in New Mexico for the Bureau of
Reclamation, Albuquerque Project Office. Data collection includes
geomorphic observations, cross-sectional survey, flow measurement,
sediment transport and bed material samples.
GROUNDWATER PROJECTS
According to the EPA, groundwater contamination is one of the most severe
environmental problems currently confronting the United States. Groundwater is
located in the saturated zone beneath the land surface, is the source of
drinking water for approximately 50% of the population and accounts for
approximately 25% of all water consumed for residential, industrial and
agricultural purposes. Tetra Tech's activities in the groundwater field are
diverse and typically include such projects as the investigation and
identification of sources of chemical contamination in groundwater; the
examination of the extent of contamination; the analysis of the speed and
direction of contamination migration; and the design and evaluation of remedial
alternatives. In addition, the Company conducts monitoring studies to assess
the effectiveness of groundwater treatment and extraction wells. Tetra Tech's
professionals have the ability to analyze complex groundwater data using
sophisticated computer models.
Examples of past and current projects in the groundwater field include the
following:
- INVESTIGATION, CHARACTERIZATION, AND REMEDIATION AT A FORTUNE 500
MANUFACTURING FACILITY IN WESTERN NEW YORK. At a former
manufacturing facility with metals and volatile organic
compound impacted soil, the Company is implementing an innovative
combination of excavation, stabilization, and phytoremediation. The
Company is currently coordinating the testing of the
phytoremediation component of the remedy, which uses vegetation for
the in-situ treatment of impacted soil. The New York State
Department of Environmental Conservation is allowing the site to be
used to test a passive phytoremediation strategy.
- HYDROGEOLOGIC SUPPORT FOR GUANACO MINE IN ANTOFAGASTA, CHILE. The
Company provided hydrogeologic services to substantially increase
the mine's current water supply. At a site located in one of the
driest deserts in the world, the Company performed design and
supervision of the water-well and water exploration drilling
programs; well design and construction; review of hydrogeologic data
collected to date; new target area identification for groundwater
exploration; review of the hydrogeologic database currently used at
the mine; design of bid documents and screening of final bids for
securing new drillers; aquifer testing to evaluate adequacy of water
supply for life of mine; and general advice to the customer
pertaining to strategy for water supply development. Tetra Tech's
efforts were successful after earlier efforts failed to produce
adequate water after drilling more than 100 boreholes.
- UTILITIES CLEANUP. The Company is supporting activities ranging
from initial site investigations through cleanup and demolition at
approximately 50 former manufactured gas plant sites across the
United States, including work in Oregon, Washington, California,
Iowa, Wisconsin, New York, New Jersey, West Virginia, and
Washington, DC. Of primary concern at most of these sites are dense
non-aqueous phase liquids ("DNAPL"). The Company is the author of
the standard reference
5
text, DNAPL SITE CHARACTERIZATION, and has taught seminars for the
EPA in all ten regions focusing on DNAPL investigation, cleanup and
control strategies.
WASTE MANAGEMENT PROJECTS
Tetra Tech currently provides a wide range of engineering and consulting
services for hazardous waste projects, from initial site assessment through
design and implementation of remedial solutions. In addition, the Company
performs risk assessments to determine the probability of adverse health effects
that may result from exposure to toxic substances in environmental media. The
Company also provides waste minimization and pollution prevention services, and
evaluates the effectiveness of innovative technologies.
Examples of past and current projects in hazardous waste management
include:
- RCRA FACILITY INVESTIGATION, INTERIM MEASURES, AND VERIFICATION
INVESTIGATIONS, WEST VIRGINIA FACILITY. For a Fortune 500 client,
the Company is providing RCRA services at a facility with over 30
solid waste management units and areas of concern. One task
involved the investigation of a landfill onsite where several cells
of buried drums and impacted soils were discovered. The Company
successfully excavated, characterized, and disposed of the drums in
less than three months. At another landfill onsite, the Company
provided construction management services for stabilization of a
20,000-foot area along a stream bank.
- NAVY INSTALLATION RESTORATION PROGRAM. The Company is providing
program management and technical support for the Navy CLEAN program
under a ten-year contract. Activities include installation
restoration, base realignment and closure, and underground storage
tank programs. The Company has conducted numerous treatability
studies of both conventional and innovative treatment technologies
to assist in selecting cleanup strategies for naval installations.
The Company supports the Navy Environmental Leadership Program by
identifying and demonstrating innovative methods for the Navy to
achieve compliance with applicable laws and regulations, accelerate
cleanup, implement pollution prevention techniques, and conserve
natural resources.
- INNOVATIVE TECHNOLOGY EVALUATION. The Company is the prime
contractor for the nationwide Superfund Innovative Technology
Evaluation ("SITE") program, to demonstrate and evaluate the
performance and cost of various processes for treating contaminated
soil and groundwater. Under SITE and similar federal government
efforts for the DOD and DOE, as well as state and private industry
partners, Tetra Tech has tested, evaluated, and disseminated
information on hundreds of new and emerging treatment technologies
and has supported government and industry efforts to foster the
continued development of these and other new technologies.
- RCRA SUPPORT AT INDUSTRIAL PLANT. The Company is performing a RCRA
Facility Investigation and streamlined Corrective Measures Study in
a fractured aquifer in Stonewall, Virginia. A phased and risk-based
screening approach was used at the site to delineate 22 source
areas, resulting in the consolidation of 22 areas into five areas of
concern. The Company negotiated a streamlined approach that focuses
on passive remediation and limited source reduction, thus limiting
costs at the site.
- MUNICIPAL SOLID WASTE LANDFILLS. The Company is participating in
remedial action at a landfill in Howard County, Maryland, including
contractor oversight, waste characterization, air monitoring, and
reporting functions at a hazardous waste removal action for more
than 500 buried drums. Work included setting up site zones, health
and safety procedures, and standard procedures for drum removal, as
well as comprehensive community relations activities. As part of
the same contract, the Company performed remedial
investigation/feasibility studies ("RI/FS") activities at three
municipal solid waste landfills.
- SUPPORT FOR ORDNANCE REMEDIATION. The Company supported a
first-of-its-kind, large-scale demonstration of over 50
state-of-the-art technologies that detect, identify, and remediate
buried
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unexploded ordnance (UXO) for the U.S. Army Environmental Center's
UXO Advanced Technology Demonstration Program.
- PORT OF LONG BEACH. Tetra Tech is conducting site investigation and
remediation of petroleum-contaminated soils for the Port of Long
Beach, California.
NUCLEAR ENVIRONMENTAL PROJECTS
The DOE's nuclear weapons plants and research laboratories have a wide
variety of environmental needs, including groundwater and surface water
contamination, as well as hazardous waste management and environmental
compliance. Tetra Tech's services to the DOE are focused in areas compatible
with the Company's core businesses and include the National Environmental Policy
Act ("NEPA") analysis and documentation, environmental audits and risk
assessments, regulatory compliance support, groundwater characterization, RI/FS
and project management and oversight. The end of the Cold War and subsequent
arms reduction agreements have reduced the nation's requirements for nuclear
weapons. These changes have resulted in increased opportunities for Tetra
Tech's nuclear environmental capabilities. The Company's environmental analyses
will assist DOE with the storage or disposition of surplus materials from
dismantled nuclear components from weapons no longer required for the U.S.
weapons stockpile.
Examples of DOE projects performed by the Company include the following:
- NUCLEAR TEST SITE. The Company is a subcontractor under a
multi-year DOE contract for an RI/FS of radioactive contamination
resulting from activities, including nuclear test explosions, at the
DOE's Nevada Test Site. This contract includes investigation of the
magnitude and extent of groundwater contamination, preparation of
environmental impact statements and corrective action under RCRA.
- SAVANNAH RIVER SITE. The Company is a prime contractor to the DOE
Savannah River Site operator in South Carolina. Ongoing programs
are being conducted by Tetra Tech to aid in the assessment of
closure and remedial action options for various waste units at this
site. The Company is also providing multi-disciplinary support for
low-level radioactive and mixed waste management activities
including the assessment of waste characterization, sampling and
analysis, treatment, and disposal alternatives.
- SUPPORT TO ENVIRONMENTAL MANAGEMENT OFFICE. The Company is
providing technical support to the Office of Environmental
Management at DOE Headquarters on a wide range of issues. The focus
of this program is on applying successful environmental practices to
improve the efficiency and cost-effectiveness of environmental
restoration and waste management activities throughout the DOE
complex.
REGULATORY COMPLIANCE PROJECTS
The Company's regulatory compliance services include the full spectrum of
regulatory requirements under RCRA, the CWA, the Clean Air Act, the NEPA and
other environmental laws. Although services are provided to both public and
private sector clients, the Company's current emphasis is on providing
regulatory compliance services to Army, Navy and Air Force installations.
Activities have been conducted at bases which are closing as well as those which
are remaining open.
Examples of Tetra Tech's regulatory compliance projects include the
following:
- PHILIPPINES RESOURCE MANAGEMENT. Assisting the
government of the Philippines, through the U.S. Agency for
International Development, with managing the country's natural
resources, including the nation's coastal environments. Supporting
Philippine environmental and resource management policies which focus
on market-driven incentives that encourage industry to comply with
standards.
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- U.S. AIR FORCE. A nationwide contract with the Air Mobility Command
to perform environmental compliance activities at Air Force bases.
- U.S. NAVY. Environmental documentation for base realignment and
closure activities at U.S. Naval bases in the San Francisco Bay area.
- U.S. ARMY. A nationwide contract with Army Material Command ("AMC")
to support compliance requirements of AMC installations and facility
tenants.
INFRASTRUCTURE BUSINESS AREA
Tetra Tech's focus is on engineering projects such as water and wastewater
treatment plants, institutional facilities and leisure facilities. These
facilities are an essential part of everyday life as well as being critical to
sustaining economic activity. Much of the U.S. infrastructure needs repair,
renovation or replacement, whereas developing countries need new infrastructure.
Tetra Tech's engineers, architects and planners are working in partnership with
public and private sector customers to ensure adequate infrastructure within
fiscal objectives.
In this business area, the Company's services include engineering and
architectural design, construction management, and operation and maintenance.
Examples of the Company's projects in the Infrastructure Business Area
include:
- SEWAGE PUMP STATION AND FORCEMAIN. The Company designed Portland,
Oregon's Fanno Pump Station and Forcemain Project to replace five
existing pump stations located in the uplands of the Fanno Creek
watershed. The project includes construction of a gravity bypass
sewer to connect the existing gravity sewer to the pump station.
The project also includes construction of a forcemain approximately
16,200 feet in length. The pump station is designed for flows in
the range of 4.2 to 13.5 million gallons per day ("MGD"). The
pumping station encloses a full carbon odor scrubber system,
stand-by power, chemical injection for downstream corrosion control,
automated controls and connection to the City of Portland's
monitoring system. Due to the nature of the site and surrounding
development, significant measures were taken to maintain the
integrity of wildlife habitat. This was accomplished by careful
selection of plantings and landscaping materials to screen the
structure from surrounding homes and produce a habitat that
optimizes the site's wildlife carrying capacity.
- FISH HATCHERY AND VISITOR CENTER. The Texas Parks and Wildlife
Department selected the Company as prime consultant to plan and
develop a new, state-of-the-art, marine fish hatchery and visitor
center at Lake Jackson, Texas. Sea Center Texas is located on a
60-acre parcel donated by the Dow Chemical Company. Major project
components include a 30,000 sq. ft. hatchery building, a visitor
center, 40 one-acre lined ponds, a seawater pump station with five
miles of transmission piping, and a fresh water pump station with
2,000 feet of transmission piping. A sophisticated ozone
disinfection/biofiltration system for seawater reuse is also in use.
The project involved the development of a master plan, preliminary
design, final design and construction administration. In addition,
the Company provided engineering and bioengineering for all life
support systems.
- DESIGN-BUILD RESIDENTIAL PROJECT. The Company is currently
designing a 74 unit, four-story, residence hall for the Naval
Homeport in Everett, Washington. This design-build project was
successfully awarded based upon the Company's design team's technical
and price proposals. The Company is developing the final design for
this concrete, steel, and masonry structure. Site improvements
include formal entries, basketball court and recreational field. The
Company's responsibilities include design management, architectural,
civil, structural, site planning & construction services.
- WASTEWATER LARGE-DIAMETER PIPELINE ADDITION. The Company is
currently designing the Wilburton Siphon, a critical element of the
160 MGD Eastside Interceptor in King County, Washington, conveying
flows from Woodinville to Renton. The project evaluates the existing
siphon in terms of flow capacity, condition, and odor control. In
order to meet the future
8
capacity of 160 MGD through the siphon, a new parallel 48-inch
siphon barrel is to be added to the existing 16-, 30-, and 48-inch
barrels. Additionally, new structures upstream and downstream of the
existing siphon will be constructed to allow the flow to be bypassed
around the siphon control structure to allow for new lining of the
structures and future inspection and maintenance. A new odor
control and chemical dosing facility is also being constructed at
the upstream end of the siphon to control odors at the siphon and
corrosion in the siphon and downstream tunnel.
- ROADWAY WIDENING. The Company is currently completing plans,
specifications, and estimates ("PS&E") for the City of Bellingham,
Washington, for design of a two-mile section of Bakerview Road. The
project calls for widening the 35-mph, two-lane paved road with
5-foot shoulders to a roadway with two travel lanes in each
direction, a continuous left-turn lane, 5-foot bike paths, curbs,
gutters, and 7-to 9.5-foot sidewalks on both sides. New traffic
channelization and signalization at four intersections are included
in the design requirements. The Company prepared alternative
analyses, a design report, PS&E and right-of-way plans. Improvements
include filling existing ditches, removing vegetation, and providing
wetland mitigation.
- LAKE AND WATERSHED RESTORATION AND CREATION. Tetra Tech is one of
the Southwest's leaders in developing lakes and watersheds within
coastal, arid and semi-arid regions. These projects offer multiple
benefits, including habitat enhancement, recreation, flood control,
water quality protection, beach sand replenishment, and species
re-introduction. The Company is providing lake design services,
including grant application preparation, planning, permitting,
engineering and design, and construction services for a new
recreation lake in Picacho, Arizona. The Company is working with
the ACE on watershed management and enhancement
plans in the Aliso Creek and San Juan Creek systems in coastal
southern California as well as the Gila River near Tucson, Arizona.
- MUNICIPAL FLOOD CONTROL DESIGN. The Company has provided design
services for numerous flood control projects in western states.
The Company provided design and construction engineering services
for the Talbert Channel ocean outlet, a major component of the ACE's
Santa Ana River flood control project. This project is the largest
of its kind west of the Mississippi River. For the city of Federal
Way, Washington, the Company performed the feasibility assessment,
predesign and final design for a regional stormwater detention basin
to address existing and predicted future flooding on a rapidly
urbanizing portion of Hylebos Creek. The results of the analysis
identified flood frequency levels, identified unstable downstream
channel reaches, and predicted typical water quality expected for the
site. The subsequent design required balancing various environmental
(wetlands, fisheries, water quality) and physical (property
availability, geologic) constraints. The Company is currently
charged with developing design for the City of Scottsdale's Desert
Greenbelt multi-million dollar flood control project. The project
will protect homeowners from flash flooding within alluvial fans,
one of the most challenging environments for effective flood
control. In addition to design of channels and sediment basins, the
team will also design roadway, bridges, and park features, and is
responsible for landscape architecture to create not just a simple
flood control project but also a community amenity.
- REGIONAL STORMWATER DETENTION AND WATER QUALITY FACILITY. The
Company designed a 21-acre regional detention and water quality
treatment facility for the City of Federal Way, Washington, to serve
a largely commercial and industrial tributary watershed. Runoff
from the tributary area was being directed to an undersized
detention pond and discharged into Tributary 0013 of West Hylebos
Creek, an important anadromous fish bearing creek. Following a
feasibility assessment, the Company used the "HSPF" model to
evaluate conditions for land use as they existed in 1975, a time of
much lighter development, prior to significant water quality and
flooding problems. Using the "HSPF" base case model, a facility was
sized to achieve the target goals. Features to enhance water quality
included a sedimentation forebay, meandering low flow channels to
maximize contact with stormwater, and an outlet micropool for
trapping organics that may transfer through the facility.
Landscaping visually screens the facility. All plantings emphasize
the use of native, drought-tolerant vegetation to promote survival
and minimize maintenance. The Company developed a plan
9
for planting vegetation that would tolerate the fluctuations and
duration of stormwater and also benefit the biological and
biochemical treatment of the stormwater runoff quality.
- INDUSTRIAL OIL-WATER SEPARATION. The Company provided complete
engineering services for design of two coalescing plate oil-water
separators at the North Boeing Field facility in Seattle,
Washington. The new separators will treat stormwater runoff and
provide spill protection in fueling areas. The larger of the
separators was 50' x 20' and designed to support the full
operational load of a Boeing 757 jet liner. Associated taxiway
paving comprised approximately 10,000 square feet of area.
- WASTEWATER TREATMENT PLANT DESIGN. The City of Snoqualmie,
Washington, is projected to increase from 1,200 to over 18,000
people in the next 20 years, necessitating a major upgrade to the
existing aerated lagoon treatment plant and river bank outfall. The
Company prepared an engineering report and design documents for
these improvements on a fast track time schedule. The facilities
include a 2 MGD oxidation ditch plant with ultra violet
disinfection, coagulation and filtration to meet Class A reclaimed
water standards and provisions for future biological nutrient
removal. The existing lagoon will be used for sludge treatment and
storage, with future sludge disposal by dredging and land
application. Effluent disposal is based on discharging secondary
effluent to a new Snoqualmie River outfall in the winter, and Class
A reclaimed water to the outfall and golf course irrigation in the
summer. Provisions are included for pilot testing rapid
infiltration disposal of Class A reclaimed water, because future
total maximum daily load ("TMDL") limits for biochemical oxygen
demand, toxic metals and nutrients may effectively prohibit summer
discharge to the river. Intensive pretreatment and water supply
corrosion control efforts are planned to minimize toxic heavy metals
concentrations (copper, cadmium, zinc, etc.) in the sewage. River
water quality will be monitored for heavy metals using the EPA's "clean
techniques."
- NEW MAIN OFFICE BUILDING. The Company provided complete design and
construction administration services for this 33,500 sq. ft., $3.3
million building, including drive-through bill paying,
accounting/data processing, personnel, purchasing, engineering,
Board Meeting room and community auditorium, all served by a
fully-integrated computer network, energy-efficient heat pump
system, and low-maintenance building systems.
- WASHINGTON STATE PENITENTIARY TELECOMMUNICATIONS PROJECT. This $3
million project included construction of a new 4,500 sq. ft.,
one-story building with offices, work rooms, and telecommunications
equipment room. Telecommunications work included design,
construction, and installation of a new high-bandwidth, digital
telecommunications infrastructure for voice and data services. The
Company provided development of drawings and specifications, and
construction administration services.
- SCHOOL OVERPRESSURIZATION PROJECT. This $4.3 million project
created pressurized, protected areas of refuge for the students and
staff at eleven schools in the communities of Hermiston, Umatilla,
and Irrigon, Oregon. The project began with defining protective
zones within each of the facilities. This involved facility surveys
and interviews with users of each facility. Protective designs were
developed and construction documents were prepared for bid. This
design features include high efficiency particulate and gas
absorption filters, air handling units with high-pressure fans and
heating and cooling systems, diesel generator systems for emergency
electrical power, and a pressure sensing and control system.
- PASCO HIGH SCHOOL RENOVATION AND EXPANSION. The Company provided
full A/E services for the 106,000 sq. ft. remodel and 20,000 sq. ft.
expansion of this mid-1950's high school facility Construction cost
was $13.5 million for the project, which was completed in 1995.
Completely redesigned auditorium, administration, gymnasium and
laboratory spaces are featured in the highly functional new layout.
Audio, video and data networks have been provided throughout the
building.
10
OPERATION AND MAINTENANCE PROJECTS
The Company also works in partnership with government and some of the
world's leading corporations to develop long-term solutions to their total
facility management and operation needs. Tetra Tech's approach to Operation &
Maintenance ("O&M") services is to provide a fully integrated capability that
targets improving technical effectiveness at the operating unit and process
levels.
The Company's O&M services include the operation and maintenance of
facilities as well as oversight and support for day-to-day compliance
activities. Tetra Tech has operated treatment plants, soil and groundwater
remediation systems, air monitoring stations, hazardous waste
transfer/collection stations, landfills, and industrial systems. The Company's
approach to O&M services focuses on improving operating efficiencies and
maintaining continued effectiveness of operating units. O&M services offered by
the Company range from overall facility operating management to obtaining a
facility's operating permits and licenses and providing the necessary
documentation through automated data management systems. In addition, Tetra
Tech has the capability to manage its clients' complete waste management
requirements; to mitigate environmental impact from past management practices;
and also to ensure that operations meet the stringent operating, reporting and
administrative demands placed on today's facility managers.
- LARGE AIR FORCE BASE FACILITIES. The Company is prime contractor
for O&M services at a large Air Force Base in California. The
Company provides O&M services for a wastewater treatment plant and a
hazardous waste collection plant, as well as air monitoring and
other services. The Company's contract represents the consolidation
of numerous individual contracts into one contract to provide cost
savings and improve efficiency, a model which is expected to be
adopted at additional military bases in the future.
- AEROSPACE CORPORATION LANDFILLS. The Company is providing O&M
services of wastewater treatment plants to treat leachate from
several landfills owned by a private corporation.
- LARGE AIR FORCE BASE SITE. The Company is providing O&M services of
the facilities' soil biofarm/bioventing systems.
TELECOMMUNICATIONS SERVICES BUSINESS AREA
In today's highly mobile society, the ability to communicate rapidly has
become critical to commerce as well as to individual needs. Technical advances
have improved the ability to communicate voice, video, and data through wireless
telecommunications. Wireless communications continues to evolve from a
convenience to a modern necessity, and is one of the world's fastest growing
economic sectors. Tetra Tech provides services to locate and construct the
infrastructure necessary to support this rapidly growing industry. The Company
also provides program management services including the application of advanced
siting tools and engineering project management techniques to expedite the
time-critical process of bringing new communication sites online and to upgrade
existing networks with the most advanced technology.
Tetra Tech currently serves the wireless telecommunications and cable
television industry segments, and is expanding its services to the broader
telecommunications industry, including wireless, cable, fiber, satellite, and
land line local and long distance telephone companies. The Company has
developed over 15,000 sites and 20 switching areas in five continents, 42
states, and across Canada. The Company applies state-of-the-art geographic
mapping technologies to rapidly identify optimal locations for wireless
antenna sites, and provide complete design and implementation services for
tower construction. The Company's program management experience enables it to
bring high quality networks online quickly and cost-effectively, providing a
competitive advantage to its customers. The Company's services include
applied science and management consulting, engineering and architectural
design, and construction management.
Project experience includes:
- SITE DEVELOPMENT OF 415 CELLULAR MOBILE RADIO BASE STATIONS. The
Company provided site acquisition, obtained entitlements,
supervised construction and installation of equipment, and
11
provided program management services for a Canadian corporation.
- SITE DEVELOPMENT FOR CELLULAR TELEPHONE SYSTEM IN INDONESIA. The
Company provided site development consulting services for
approximately 174 radio base stations at three locations in
Indonesia. The Company developed and implemented a written site
acquisition process and tracking database. The Company performed
civil engineering surveys of all candidate sites to determine site
suitability, and provided construction management support. The
Company also managed the construction of a 30,000 square feet master
switching center and operations office, including the erection of a
90 meter tower, installation of all mechanical components and
electronics, and installation of switching equipment.
- CELLULAR BUILDOUT PROGRAM MANAGER. The Company performed as the
primary program manager, site acquisition and construction firm for
McCaw Cellular's initial U.S. cellular buildouts. The Company was
also program manager for systemwide electronic radio base station
equipment change-outs in central Florida, south Florida and western
Washington for McCaw Cellular.
- WORLD'S FIRST ESMR SYSTEM. The Company acquired and built the
world's first ESMR system for Motorola and Nextel Communications.
The Company program managed, acquired and built Nextel's initial
1,800 site build out.
- NATION'S FIRST PCS SYSTEM. The Company was the primary site
acquisition firm for the nation's first PCS system in
Washington-Baltimore for American Personal Communications, Inc.
CLIENTS
The Company has developed a diverse client base of over 500 current
clients, including Federal, state and local government agencies, utilities,
private companies, professional firms (such as law, consulting and engineering
firms) and real estate development firms. As a result of the diversity of the
Company's services, it may support multiple programs within a specific Federal
agency. Tetra Tech's private sector clients include chemical, mining,
pharmaceutical, aerospace, petroleum, telecommunications and utility companies.
CONTRACTS
The Company enters into various types of contracts with its clients which
include fixed-price, fixed-rate time and materials, cost-reimbursement plus
fixed fee and cost-reimbursement plus fixed and award fee contracts. In fiscal
1997, 32.2%, 25.4% and 42.4% of the Company's 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
customer agrees to pay a specified price for the Company's performance of the
entire contract. Fixed-price contracts carry certain inherent risks, including
risks of losses from underestimating costs, problems with new technologies and
economic and other changes that may occur over the contract period.
Consequently, the profitability of fixed-price contracts may vary substantially.
The amount of the fee received for a cost-reimbursement plus fixed and award fee
contract partially depends upon the government's discretionary periodic
assessment of the Company's performance on that contract. The Company's fee
from a cost-reimbursement plus fixed and award fee contract may vary based upon
the Company's performance.
Agencies of the Federal government are among the Company's most significant
clients. During fiscal 1997, the EPA, DOD and DOE accounted for 16.9%, 27.5%
and 4.3%, respectively, of the Company's net revenue. Some contracts made with
the Federal government are subject to annual approval of funding. Limitations
imposed on spending by Federal government agencies may limit the continued
funding of the Company's existing contracts with the Federal government and may
limit the Company's ability to obtain additional contracts. These limitations,
if significant, could have a material adverse effect on the Company. To date,
spending limitations have not had a significant effect on the Company. 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, among other things, may prevent the Company in certain cases from
bidding for or performing contracts resulting from or relating to certain work
the Company has performed for the government. In addition,
12
services performed for a private client may create conflicts of interest which
preclude or limit the Company's ability to obtain work for another private
entity. The Company attempts to identify actual or potential conflicts of
interest and to minimize the possibility that such conflicts would affect its
work under current contracts or its ability to compete for future contracts.
The Company has, on occasion, declined to bid on a project because of an
existing potential conflict of interest. However, the Company has not
experienced disqualification during a bidding or award negotiation process by
any government or private client as a result of a conflict of interest. None of
the Company's government contracts are subject to renegotiation of profits
without a change in the contractual scope of work.
All of the Company's contracts with the Federal government are subject to
audit by the government, primarily by the Defense Contract Audit Agency (the
"DCAA"). The DCAA generally seeks to (i) identify and evaluate all activities
which either contribute to, or have an impact on, proposed or incurred costs of
government contracts; (ii) evaluate the contractor's policies, procedure,
controls and performance; and (iii) prevent or avoid wasteful, careless and
inefficient production or service. To accomplish the foregoing, the DCAA (i)
examines the Company's internal control systems, management policies and
financial capability, (ii) evaluates the accuracy, reliability and
reasonableness of the Company's cost representations and records, and (iii)
assesses compliance by the Company under its contracts with Cost Accounting
Standards and defective-pricing clauses found within the Federal Acquisition
Regulations. The DCAA also performs the annual review of the Company's overhead
rates and assists in the establishment of the Company's final rates. This
review focuses on the allowability of cost items as well as the allocability 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 or repricing. Factors considered are the Company's
cost accounting system, estimating methods and procedures, and specific proposal
requirements. Operational audits are also performed by the DCAA. A review of
the Company's operations at any major organization level that have 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 the Company improperly accounted for such costs in a manner
inconsistent with Cost Accounting Standards. Under a 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 the
Company.
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, the Company maintains controls to avoid the occurrence
of fraud and other unlawful activity. In addition, the Company maintains
preventative audit programs to ensure appropriate control systems and mitigate
control weaknesses.
The Company provides its services pursuant to contracts, purchase orders
or retainer letters. Company policy provides that, where possible, all
contracts will be in writing. The Company bills all of its clients
periodically based on costs incurred, on either an hourly-fee basis or on a
percentage of completion basis, as the project progresses. Generally, Tetra
Tech's contracts do not require that it 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, the Company
has not incurred material damages beyond the coverage of any performance
bond. Most of the Company's agreements permit termination by the client upon
payment of fees and expenses through the date of the termination.
MARKETING
The Company's marketing activities are managed by the corporate marketing
department, which establishes the Company's business plan, target markets and
develops overall marketing strategies. The marketing department also identifies
and tracks the development of large Federal programs, positions the Company for
new business areas, selects appropriate partners, if any, for new projects and
assists in the bid process for new projects. In addition, the corporate
marketing department supports marketing activities firm-wide by coordinating
corporate promotional and
13
professional activities, including appearances at trade shows, direct mailings,
telemarketing and public and media relations.
Local marketing activities for the Company are implemented through its over
90 local offices. A local presence enables the Company's professionals to gain
greater knowledge of local environmental issues and a better understanding of
local laws and regulations. Local marketing activities are coordinated by full
time marketing staff located in certain local offices and include meetings with
potential clients and local regulators, presentations to civic and professional
organizations and seminars on current regulatory topics.
COMPETITION
The market for the Company's services is highly competitive. The Company
competes with many other firms, ranging from small local firms to large national
firms having greater financial and marketing resources than the Company. The
Company performs engineering and consulting services across a broad spectrum of
business areas including facilities management, resource management, nuclear
management, waste management, and ground and surface water management. These
services are provided to a customer base including Federal (Departments of
Defense, Interior and Energy; U.S. Environmental Protection Agency; and the U.S.
Post Office), state and local agencies, as well as the commercial sector. The
Company's competition varies and is a function of the business areas in which,
and client sectors for which, the Company performs its services. The range of
competitors for any one procurement can vary from ten to 100 firms, depending
upon the relative value of the project, the financial terms and risks associated
with the work, and any restrictions placed upon competition by the client.
Historically, competition has been based primarily on the quality and timeliness
of service. However, the Company believes that price has become an increasingly
important competitive factor. The Company believes that its principal
competitors include Dames & Moore, Inc., E A Engineering Science & Technology,
Inc., EMCON, Ecology & Environment, Inc., Harding Associates, Inc., ICF Kaiser
International, Inc., International Technology Corp., TRC Companies, Inc., URS
Consultants, Inc. and Roy F. Weston, Inc.
BACKLOG
At September 28, 1997, Tetra Tech's gross revenue backlog was approximately
$217.5 million, compared to $206.3 million at September 29, 1996. The Company
includes in gross revenue backlog only those contracts for which funding has
been provided and work authorizations have been received. The Company estimates
that approximately $192.2 million of the gross revenue backlog at September 28,
1997 will be recognized during fiscal 1998. No assurance can be given that all
amounts included in backlog ultimately will be realized, even if evidenced by
written contracts. See "Contracts."
ENVIRONMENTAL LEGISLATION
The demand for the Company's environmental services is a result of public
concern over environmental issues and the ensuing legislative response. As a
result, the Company's 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 such laws.
The Company has provided services to clients with respect to the following
Federal statutes and regulations:
THE CLEAN WATER ACT. Under the CWA, as amended, a system of permits and
enforcement procedures for the discharge of pollutants into waters of the United
States from industrial, municipal and other wastewater sources was established.
The EPA sets discharge standards for certain wastewater discharges and provides
grants to assist municipalities in complying with treatment requirements.
In addition, Section 303(d) of the CWA requires all states and
authorized Indian tribes to list waters for which these technology-based
treatment requirements alone do not assure attainment of water quality
standards. States and tribes are then required to develop TMDLs for these
water; these TMDLs recommend the additional controls (often for nonpoint
source discharges) that will be needed to meet water quality standards.
The states and tribes must submit these lists of impaired waters and
associated TMDLs to the EPA for approval and,
14
in cases where they are disapproved by the EPA, the CWA requires the EPA to
establish the list and/or TMDL for the state or tribe.
The CWA requires pretreatment of industrial wastewater before discharge
into municipal systems and gives the EPA the authority to set pretreatment
limits under certain circumstances. These efforts by the EPA will prompt
facility upgrading and better control of industrial discharges. The surface
water toxics regulations require states to identify waters adversely affected by
toxics and propose control strategies. Promulgated regulations require permits
for stormwater discharges for industrial activities and large (populations
greater than 100,000) municipal stormwater systems.
THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976. RCRA, as amended by
the Hazardous and Solid Waste Amendments of 1984 ("HSWA"), provides a
comprehensive scheme for the regulation of hazardous waste from the time of
generation to its ultimate disposal (and sometimes thereafter), as well as the
regulation of persons engaged in generation, handling, transportation,
treatment, storage and disposal of hazardous waste. The RCRA scheme includes
both a permitting and a manifest tracking system. With few exceptions, every
facility that treats, stores or disposes of hazardous waste must obtain a RCRA
permit from the EPA, or a state agency which has been authorized by the EPA to
administer the RCRA program, and must comply with certain operating, financial
responsibility and disclosure requirements. Although most states have obtained
authority to administer this program within their respective states, the
applicable state statutes must be at least as stringent as the Federal standards
and the Federal government retains enforcement authority. Regulations have been
issued pursuant to RCRA in the following areas, among others: permitting
assistance, remediation of environmental complications associated with
underground storage tanks, municipal solid waste disposal and land disposal of
hazardous waste. HSWA also imposes land disposal restrictions on certain listed
hazardous wastes which do not meet specified treatment standards, prescribes
more stringent standards for hazardous waste disposal sites, sets standards for
underground storage tanks and provides for corrective action at or near sites of
waste management units.
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF
1980. This legislation, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), established the Superfund program to
identify and clean up inactive hazardous waste sites and provides for penalties
and punitive damages for noncompliance with EPA orders. Superfund also covers
the emergency cleanup of spills. Superfund may impose strict joint and several
liability on certain hazardous substance generators, transporters and disposal
facility owners and operators for the costs of removal or remedial action, other
necessary response costs and damages for injury, destruction or loss of natural
resources, and the cost of any health effects study. Federal funds may be used
to pay for the cleanup. SARA provided a separate fund, supported by a tax on
gasoline, for the cleanup of leaks from underground storage tanks. In addition,
under SARA, the EPA has the mandate to emphasize permanent remedies and
treatment at Superfund sites, developing a technology oriented market.
THE NATIONAL ENVIRONMENTAL POLICY ACT. NEPA is the basic national charter
for protection of the environment. The purpose of NEPA is to guide public
officials in making decisions that are based on an understanding of the
environmental consequences of those decisions.
NEPA requires that an environmental impact statement ("EIS") be prepared
for "major federal actions significantly affecting the quality of the human
environment." A "major federal action" includes actions with effects that may
be major and which are potentially subject to Federal control and
responsibility. The term includes legislation proposed by an agency; adoption
of agency rules, regulation and policies; adoption of formal plans; and approval
of specific Federal projects. In addition, Federal permits, licenses, loans,
grants, leases and other Federal actions that are necessary for private
developments may require preparation of an EIS, although actual Federal
involvement in the activity may be minimal.
NEPA requires the EIS to contain a detailed statement on: the
environmental impact of the proposed action; any adverse environmental effects
which cannot be avoided should the proposal be implemented; alternatives to the
proposed action; the relationship between local short-term uses of the
environment and the maintenance and enhancement of long-term productivity; and
any irreversible and irretrievable commitments of resources which would be
involved in the proposed action should it be implemented.
15
In addition to NEPA, several states have adopted legislation requiring
environmental impact analysis to be prepared for actions at the state level.
THE SAFE DRINKING WATER ACT. Under the SDWA and its subsequent
reauthorizations, the EPA is empowered to set drinking water standards for water
supply systems in the United States. The SDWA requires that the EPA set maximum
groundwater contamination levels for 83 previously unregulated toxic substances
and also requires the EPA to establish a priority list every three years of
contaminants that may cause adverse health effects and may require regulation.
The first priority list was published in January 1988. Water supply systems are
required to begin monitoring within defined time limits following the
publication of the final regulations. The SDWA also requires that the EPA set
criteria specifying when utilities using surface water supplies should filter
their water and issue national primary drinking water regulations requiring all
utilities to disinfect their water. By June 1993, all surface water supply
systems must provide filtration and disinfection. The EPA regulations under the
SDWA are expected to result in significant expenditures by water supply systems
for evaluation and, ultimately, for upgrading of many facilities.
OTHER REGULATIONS. The Company's services are also utilized by its clients
in complying with the following Federal laws: the Oil Pollution Act of 1990,
the Toxic Substances Control Act, the Clean Air Act, the Emergency Planning and
Community Right-to-Know Act of 1986, and the Marine Protection, Research and
Sanctuaries Act of 1972.
Many states have passed legislation and established policies to cover more
detailed aspects of hazardous waste management. The State of California, for
example, has consistently been a leader in passing and implementing waste
management legislation. These laws, and similar laws in other states, address
such topics as air pollution control, underground storage tanks, water quality,
solid waste, hazardous materials, surface impoundments, site cleanup and waste
discharge. Several states have modeled their environmental laws and regulations
on those of California. The Company believes that its experience in California
makes it prepared to respond to the regulatory environment in such states.
Because much of the Company's resource management business is generated
either directly or indirectly as a result of Federal and state governmental
programs and regulations, changes in governmental policies affecting such
programs, or regulations or administrative actions affecting the funding or
sponsorship of such programs, could have a material adverse effect on the
Company's business. However, the Company believes that it will benefit from
current regulatory initiatives emphasizing risk management, cost/benefit
analysis, pollution prevention and source control, and natural resources
conservation and disaster planning.
POTENTIAL LIABILITY AND INSURANCE
Because of the type of projects in which the Company is or may be involved,
the Company's current and anticipated future services may involve risks of
potential liability under Superfund, common law or contractual indemnification
agreements. It is difficult to assess accurately the magnitude of potential
risk to the Company.
The Company maintains two comprehensive general liability policies, both
in the amount of $1,000,000. These amounts, together with two $9,000,000
umbrella policies, provide total general liability coverage of $10,000,000
for the Environmental business and Architecture & Engineering business
segments and coverage of $10,000,000 for the Telecommunications business
segment. The Company's professional liability insurance ("E&O") policy,
which included pollution coverage, for 1997 provided $10,000,000 in coverage
for Environmental and Architecture & Engineering, with $100,000 self-insured
retention. The same E&O policy covered the Telecommunications segment with a
sublimit of $1,000,000 each claim/$1,000,000 aggregate. For 1998, the Company
expects to maintain similar coverages as to 1997 for professional services
including pollution-related services rendered by the Company. The Company
procures insurance coverage through a broker who is experienced in
professional liability. The broker, together with the Company's Risk Manager,
reviews the Company's risk/insurance programs with those of the Company's
competitors and clients. This review, combined with historical experience,
claims history and contractual requirements, allows the Company to determine
the adequate amount of insurance. However, because there are various
exclusions and retentions under the Company's insurance policies, there can
be no assurance that all liabilities that may be incurred by the Company are
subject to insurance coverage. In addition, the E&O policy is a "claims
made" policy which only covers claims made during the term of the policy. If
a policy terminates and retroactive coverage is not obtained, a claim
subsequently made, even a claim based on events or acts which occurred
16
during the term of the policy, would not be covered by the policy. In the event
the Company expands its services into new markets, no assurance can be given
that the Company will be able to obtain insurance coverage for such activities
or, if insurance is obtained, that the dollar amount of any liabilities incurred
in connection with the performance of such services will not exceed policy
limits. The premiums paid by the Company for its professional liability
policies during fiscal 1997 were approximately $726,000 for E&O. The projected
amounts to be paid for fiscal 1998 will be approximately $722,000.
EMPLOYEES
At September 28, 1997, the Company had 2,262 employees, including 1,508
professionals. The Company's professional staff includes archaeologists,
biologists, cartographers, chemists, chemical engineers, civil engineers,
electrical engineers, environmental engineers, environmental scientists,
geologists, hydrogeologists, mechanical engineers, oceanographers,
toxicologists and project managers. The Company's ability to retain and
expand its staff of qualified professionals will be an important factor in
determining the Company's future growth and success. None of the Company's
employees is represented by a labor organization, and management considers
its relations with its employees to be good.
RISK FACTORS
STATEMENTS REGARDING THE COMPANY'S PERFORMANCE PROSPECTS COULD CONTAIN
FORWARD-LOOKING INFORMATION THAT INVOLVES RISK AND UNCERTAINTIES SUCH AS THE
LEVEL OF DEMAND FOR THE COMPANY'S SERVICES, FUNDING DELAYS FOR PROJECTS, LACK OF
REGULATORY CLARITY AFFECTING THE MARKETPLACE AND INDUSTRY-WIDE COMPETITIVE
FACTORS. THE FOLLOWING RISK FACTORS SHOULD BE REVIEWED IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS ANNUAL REPORT ON FORM 10-K.
POTENTIAL LIABILITY AND INSURANCE. Because of the type of projects in which
the Company is or may be involved, the Company's current and anticipated future
services may involve risks of potential liability under Superfund, common law or
contractual indemnification agreements. It is difficult to assess accurately
the magnitude of potential risk to the Company.
The Company maintains two comprehensive general liability policies, both
in the amount of $1,000,000. These amounts, together with two $9,000,000
umbrella policies, provide total general liability coverage of $10,000,000
for the Environmental business and Architecture & Engineering business
segments and coverage of $10,000,000 for the Telecommunications business
segment. The Company's professional liability insurance ("E&O") policy,
which included pollution coverage, for 1997 provided $10,000,000 in coverage
for Environmental and Architecture & Engineering, with $100,000 self-insured
retention. The same E&O policy covered the Telecommunications segment with a
sublimit of $1,000,000 each claim/$1,000,000 aggregate. For 1998, the Company
expects to maintain similar coverages as to 1997 for professional services
including pollution-related services rendered by the Company. The Company
procures insurance coverage through a broker who is experienced in the
engineering field. The broker, together with the Company's Risk Manager,
reviews the Company's risk/insurance programs with those of the Company's
competitors and clients. This review, combined with historical experience,
claims history and contractual requirements, allows the Company to determine
the adequate amount of insurance. However, because there are various
exclusions and retentions under the Company's insurance policies, there can
be no assurance that all liabilities that may be incurred by the Company are
subject to insurance coverage. In addition, the E&O policy is a "claims
made" policy which only covers claims made during the term of the policy. If
a policy terminates and retroactive coverage is not obtained, a claim
subsequently made, even a claim based on events or acts which occurred during
the term of the policy, would not be covered by the policy. In the event the
Company expands its services into new markets, no assurance can be given that
the Company will be able to obtain insurance coverage for such activities or,
if insurance is obtained, that the dollar amount of any liabilities incurred
in connection with the performance of such services will not exceed policy
limits. The premiums paid by the Company for its professional liability
policies during fiscal 1997 were approximately $726,000 for E&O. The
projected amounts to be paid for fiscal 1998 will be approximately $722,000.
The Company evaluates and determines the risk associated with an uninsured
claim. In the event the Company determines that an uninsured claim has
potential liability, the Company establishes an appropriate reserve. The
Company does not establish a reserve if it determines that the claim has no
merit. The Company's historical levels of insurance coverage and reserves have
been shown to be adequate. However, a partially or completely
17
uninsured claim, if successful and of significant magnitude, could have a
material adverse effect on the Company.
SIGNIFICANT COMPETITION. The market for the Company's services is highly
competitive. The Company competes with many other firms, ranging from small
local firms to large national firms having greater financial and marketing
resources than the Company. The Company performs engineering and consulting
services across a broad spectrum of business areas, primarily in the resource
management, infrastructure, and the telecommunication service business areas.
Services within these business areas are provided to a client base including
Federal (Departments of Defense, Interior and Energy; U.S Environmental
Protection Agency; and the U.S. Post Office), state and local agencies, as well
as the commercial sector. The range of competitors for any one procurement can
vary from 10 to 100 firms, depending upon the relative value of the project, the
financial terms and risks associated with the work, and any restrictions placed
upon competition by the customer. Historically, competition has been based
primarily on the quality and timeliness of service. However, the Company
believes that price has become an increasingly important competitive factor.
The Company believes that its principal competitors include Dames & Moore, Inc.,
E A Engineering Science & Technology, International, Inc., International
Technology Corp., TRC Companies, Inc., URS Consultants, Inc., Roy F. Weston,
Inc., Castle Tower Corporation and OSP Consultants, Inc.
CONTRACTS. The Company's contracts with the Federal and state
governments and some of its other client contacts are subject to termination
at the discretion of the client. Some contracts made with the Federal
government are subject to annual approval of funding and audits of the
Company's rates. Limitations imposed on spending by Federal government
agencies may limit the continued funding of the Company's existing contracts
with the Federal government and may limit the Company's ability to obtain
additional contracts. These limitations, if significant, could have a
material adverse effect on the Company. All of the Company's contracts with
the Federal government are subject to audit by the government, primarily by
the DCAA, which reviews the Company's overhead rates, operating systems and
cost proposals. During the course of its audit, the DCAA may disallow costs
if it determines that the Company improperly accounted for such costs in a
manner inconsistent with Cost Accounting Standards. Historically, the Company
has not had any material cost disallowances by the DCAA as a result of audit,
however, there can be no assurance that DCAA audits will not result in
material cost disallowances in the future.
In September 1995, the Company acquired Tetra Tech EM Inc. (formerly known
as PRC Environmental Management, Inc., "EMI"). EMI likewise contracts with the
Federal government and such contracts are subject to the same auditing standards
as those of the Company. Audits and negotiations for the years 1987 through
1992 have recently been completed and cost disallowances as a result of audit
totaled approximately $672,000. Negotiations for the 1993 audit are currently
underway. Audits for the years 1994 and 1995 have yet to be completed.
The Company enters into various contracts with its clients, which include
fixed-price contracts. In fiscal 1997, 32.2% of the Company's net revenue was
derived from fixed-price contracts. Under a fixed-price contract, the customer
agrees to pay a specified price for the Company's performance of the entire
contract. Fixed-price contracts carry inherent risks, including risks of losses
from underestimating costs, problems with new technologies and economic and
other changes that may occur over the contract period. Losses under fixed-price
contracts, should they occur, could have a material adverse effect on the
Company.
The Company contracts with both domestic and international customers.
Certain contracts with international customers are denominated in a currency
other than the U.S. dollar. Contracts denominated in any currency other than
the U.S. dollar contain certain inherent risks, including risks on foreign
currency translation and risks in expatriating funds from foreign countries. In
fiscal 1997, 3.7% of the Company's net revenue was derived from the
international marketplace compared to 1.6% for fiscal 1996. As the Company's
net revenue derived from the international marketplace increases, so increases
risks associated in realizing the full contract value of those contracts
denominated in foreign currencies. The Company is currently evaluating options
to hedge future potential losses from foreign currency transactions.
CONFLICTS OF INTEREST. Many of the Company's clients are concerned about
potential or actual conflicts of interest in retaining environmental consultants
and engineers. For example, Federal government agencies have formal policies
against continuing or awarding contracts that would create actual or potential
conflicts of interest with other activities of a contractor. These policies,
among other things, may prevent the Company in certain cases from bidding for or
performing contracts resulting from or relating to certain work the Company has
performed for the government. In addition, services performed for a private
client may create a conflict of interest which precludes or limits the
18
Company's ability to obtain work from another private entity. The Company has,
on occasion, declined to bid on a project because of an actual or potential
conflict of interest. However, the Company has not experienced disqualification
during a bidding or award negotiation process by any government or private
client as a result of a conflict of interest.
POTENTIAL VOLATILITY OF STOCK PRICE. The market price of the Company's
common stock may be significantly affected by factors such as quarter-to-quarter
variations in the Company's results of operations, changes in environmental
legislation and changes in investors' perception of the business risks and
conditions in the environmental services business. In addition, market
fluctuations, as well as general economic or political conditions, may adversely
affect the market price of the Company's common stock, regardless of the
Company's actual performance.
QUALIFIED PROFESSIONALS. The Company's ability to attract and retain
qualified scientists and engineers is an important factor in determining the
Company's future growth and success. The market for environmental professionals
is competitive and there can be no assurance that the Company will continue to
be successful in its efforts to attract and retain such professionals.
COMPUTER SYSTEMS AND BUSINESS PROCESSES. The Company is currently
converting its computer systems and business processes to ensure that its
computer systems will be capable of processing periods for the year 2000 and
beyond as well as ensure that its business processes will be able to support
current and anticipated growth projections. The Company does not anticipate the
costs associated with ensuring these capabilities will have a material adverse
effect on the Company.
ITEM 2. PROPERTIES.
The Company's corporate headquarters facilities are located in Pasadena,
California. These facilities contain approximately 25,000 square feet of office
space. A portion of these facilities are subject to a lease which expires in
February 1998 and gives the Company an option to extend the term for one
additional five-year period. Another portion of these facilities is subject to
a lease which expires in January 2001. The Company leases office space in
approximately 80 locations in the United States. The Company also rents some
additional office space on a month-to-month basis.
The Company believes that its 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.
The Company is subject to certain claims and lawsuits typically filed
against the engineering and consulting professions, primarily alleging
professional errors or omissions. The Company carries professional liability
insurance, subject to certain deductibles and policy limits against such claims.
Management is of the opinion that the resolution of these claims will not have a
material effect on the Company's 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.
None.
PART II
The information required by Items 5 through 8 of this report is set forth
on pages 17 through 34 of the Company's Annual Report to Stockholders for the
fiscal year ended September 28, 1997. Such information is incorporated in this
report and made a part hereof by reference. Item 9 is not applicable.
19
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 the Company's Proxy Statement
for its 1998 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 24.
3. EXHIBITS.
3.1 Restated Certificate of Incorporation of the Company,
as amended to date (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 Incorporation of the
Company.
10.1 Credit Agreement dated as of Sept. 15, 1995 between
the Company, and Bank of America Illinois, as amended
by the First Amendment to Credit Agreement dated as
of Nov. 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 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 (successor in interest
of Bank of America Illinois).
10.4 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).
10.5 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).
10.6 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).
20
10.7 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).
10.8 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).
10.9 Executive Medical Reimbursement Plan provided to
Messrs. Hwang, Rodrigue and Gherini (incorporated
herein by reference to Exhibit 10.16 to the Company's
Registration Statement on Form S-1, No. 33-43723).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
10.14 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).
10.15 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).
10.16 Employment Agreement dated as of June 11, 1997
between the Company and Daniel A. Whalen
(incorporated by reference to Exhibit 10.16 to the
Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 29, 1997).
10.17 Registration Rights Agreement dated as of June 11,
1997 among the Company and the parties listed on
Schedule A attached thereto (incorporated by
reference to Exhibit 10.17 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June
29, 1997).
10.18 Registration Rights Agreement dated as of July 11,
1997 among the Company and the parties listed on
Schedule A attached thereto.
11. Computation of Net Income Per Common Share.
21
13. Annual Report to Stockholders for the fiscal year
ended September 28, 1997, 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 to be 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
1. Current Report on Form 8-K/A (Amendment No. 2) for
event of June 11, 1997, as filed with the Securities
and Exchange Commission on August 25, 1997.
2. Current Report on Form 8-K/A (Amendment No. 2) for
event of June 11, 1997, as filed with the Securities
and Exchange Commission on September 19, 1997.
22
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 24, 1997 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
/s/ Li-San Hwang Chairman of the Board of Directors, December 24, 1997
- ------------------------ President and Chief Executive
Li-San Hwang Officer (Principal Executive Officer)
/s/ James M. Jaska Vice President, Chief Financial December 24, 1997
- ------------------------ Officer and Treasurer (Principal
James M. Jaska Financial and Accounting Officer)
/s/ Daniel A. Whalen
- ------------------------ Director December 24, 1997
Daniel A. Whalen
/s/ J. Christopher Lewis
- ------------------------ Director December 24, 1997
J. Christopher Lewis
/s/ Patrick C. Haden
- ------------------------ Director December 24, 1997
Patrick C. Haden
/s/ James J. Shelton
- ------------------------ Director December 24, 1997
James J. Shelton
23
INDEX TO FINANCIAL STATEMENTS
The consolidated financial statements, together with the Notes thereto
and report thereon of Deloitte & Touche LLP dated November 7, 1997, appearing
on pages 26 through 34 of the accompanying 1997 Annual Report to
Stockholders, are incorporated by reference in this Form 10-K Annual Report.
With the exception of the aforementioned information and Part II information
set forth on pages 17 through 34, the 1997 Annual Report to Stockholders is
not to be deemed filed as part of this report.
FINANCIAL STATEMENT SCHEDULES
Page No.
--------
Report of Independent Accountants on Financial Statement
Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
24
INDEPENDENT AUDITORS' REPORT
Tetra Tech, Inc.:
We have audited the consolidated financial statements of Tetra Tech, Inc. and
its subsidiaries as of September 28, 1997 and September 29, 1996, and for
each of the three years in the period ended September 28, 1997, and have
issued our report thereon dated November 7, 1997 (except for Note 5, as to
which the date is December 15, 1997); such financial statements and report
are included in your 1997 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 financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
November 7, 1997 (except for Note 5, as to which the date is December 15,
1997)
25
TETRA TECH, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED
OCTOBER 1, 1995, SEPTEMBER 29, 1996 AND SEPTEMBER 28, 1997
Balance at Additions Charges to Deductions
Beginning of through Costs and Net of Balance at
Period Acquisitions Expenses Recoveries End of Period
------------- ------------ --------- ----------- -------------
Fiscal year ended October 1, 1995
Allowance for loss on accounts
receivable . . . . . . . . . . . . . . $ 1,641,000 $9,635,000 $(56,000) $ (67,000) $11,153,000
Fiscal year ended September 29, 1996
Allowance for loss on accounts
receivable . . . . . . . . . . . . . . $11,153,000 $1,365,000 $241,000 $(1,658,000) $11,101,000
Fiscal year ended September 28, 1997
Allowance for loss on accounts
receivable . . . . . . . . . . . . . . $11,101,000 $ 228,000 $(56,000) $ (120,000) $11,153,000
26