TETRA TECH INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 29, 2003

OR

o	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 incorporation or organization)		(I.R.S. Employer Identification Number)

3475 East Foothill Boulevard, Pasadena, California 91107
(Address of principal executive offices)

(626) 351-4664
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

As of August 8, 2003, 53,862,363 shares of the Registrant’s common stock were outstanding.

TETRA TECH, INC.

INDEX

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets

	Condensed Consolidated Statements of Operations

	Condensed Consolidated Statements of Cash Flows

	Notes to Condensed Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings

Item 6.	Exhibits and Reports on Form 8-K

SIGNATURES

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Tetra Tech, Inc.

Condensed Consolidated Balance Sheets

	June 29, 2003			September 29, 2002
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	29,589,000		$	46,345,000
Accounts receivable – net	170,782,000			137,354,000
Unbilled receivables – net	153,570,000			117,354,000
Contract retentions	4,743,000			5,090,000
Prepaid expenses and other current assets	30,997,000			18,588,000
Income taxes receivable	20,978,000			20,683,000
Total Current Assets	410,659,000			345,414,000

PROPERTY AND EQUIPMENT:
Equipment, furniture and fixtures	82,089,000			76,756,000
Leasehold improvements	9,797,000			8,217,000
Total	91,886,000			84,973,000
Accumulated depreciation and amortization	(50,310,000		)	(44,847,000		)
PROPERTY AND EQUIPMENT – NET	41,576,000			40,126,000

GOODWILL – NET	189,422,000			278,267,000

INTANGIBLE AND OTHER ASSETS – NET	16,478,000			8,173,000

TOTAL ASSETS	$	658,135,000		$	671,980,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	70,987,000		$	60,038,000
Accrued compensation	44,745,000			34,228,000
Billings in excess of costs on uncompleted contracts	15,171,000			11,837,000
Other current liabilities	23,103,000			19,377,000
Deferred income taxes	18,638,000			18,638,000
Current portion of long-term obligations	36,592,000			1,559,000
Total Current Liabilities	209,236,000			145,677,000

LONG-TERM OBLIGATIONS	106,400,000			110,000,000

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Preferred stock – authorized, 2,000,000 shares of $0.01 par value; issued and outstanding, 0 shares at June 29, 2003 and September 29, 2002	—			—
Exchangeable stock of a subsidiary	13,239,000			13,239,000
Common stock – authorized, 85,000,000 shares of $0.01 par value; issued and outstanding, 53,804,503 and 53,273,227 shares at June 29, 2003 and September 29, 2002, respectively	538,000			533,000
Additional paid-in capital	212,555,000			207,505,000
Accumulated other comprehensive loss	(349,000		)	(1,784,000		)
Retained earnings	116,516,000			196,810,000
TOTAL STOCKHOLDERS’ EQUITY	342,499,000			416,303,000

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	658,135,000		$	671,980,000

See accompanying Notes to Condensed Consolidated Financial Statements.

Tetra Tech, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended				Nine Months Ended
	June 29, 2003		June 30, 2002		June 29, 2003			June 30, 2002
Gross Revenue	$	313,556,000	$	238,171,000	$	792,100,000		$	717,327,000
Subcontractor Costs	81,764,000		52,735,000		186,456,000			168,929,000
Net Revenue	231,792,000		185,436,000		605,644,000			548,398,000

Cost of Net Revenue	181,921,000		148,607,000		476,370,000			431,435,000
Gross Profit	49,871,000		36,829,000		129,274,000			116,963,000

Selling, General and Administrative Expenses	23,900,000		20,132,000		64,540,000			63,976,000
Amortization of Intangibles	407,000		2,661,000		723,000			7,982,000
Income from Operations	25,564,000		14,036,000		64,011,000			45,005,000

Interest Expense	2,600,000		2,384,000		7,024,000			7,104,000
Interest Income	54,000		149,000		305,000			1,187,000
Income Before Income Tax Expense	23,018,000		11,801,000		57,292,000			39,088,000

Income Tax Expense	9,207,000		3,701,000		22,917,000			14,343,000
Income Before Cumulative Effect of Accounting Change	13,811,000		8,100,000		34,375,000			24,745,000

Cumulative Effect of Accounting Change	—		—		(114,669,000		)	—

Net Income (Loss)	$	13,811,000	$	8,100,000	$	(80,294,000	)	$	24,745,000

Basic Earnings Per Share:
Income Before Cumulative Effect of Accounting Change	$	0.26	$	0.15	$	0.64		$	0.47
Cumulative Effect of Accounting Change	—		—		(2.14		)	—
Net Income (Loss)	$	0.26	$	0.15	$	(1.50	)	$	0.47

Diluted Earnings Per Share:
Income Before Cumulative Effect of Accounting Change	$	0.25	$	0.15	$	0.62		$	0.45
Cumulative Effect of Accounting Change	—		—		(2.07		)	—
Net Income (Loss)	$	0.25	$	0.15	$	(1.45	)	$	0.45

Weighted Average Common Shares Outstanding:
Basic	53,553,000		52,976,000		53,404,000			52,589,000

Diluted	56,086,000		55,201,000		55,503,000			55,126,000

See accompanying Notes to Condensed Consolidated Financial Statements.

Tetra Tech, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	June 29, 2003			June 30, 2002
CASH FLOWS FROM OPERATING ACTIVITIES:

Net (Loss) Income	$	(80,294,000	)	$	24,745,000

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Cumulative effect of accounting change	114,669,000			—
Depreciation and amortization	11,429,000			17,447,000
Provision for losses on receivables	3,221,000			3,958,000
Loss on disposal of property and equipment	170,000			—

Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(3,228,000		)	21,310,000
Unbilled receivables	(6,002,000		)	(1,901,000		)
Contract retentions	1,442,000			(9,000		)
Prepaid expenses and other assets	(4,223,000		)	(1,721,000		)
Accounts payable	(16,877,000		)	(6,496,000		)
Accrued compensation	5,458,000			2,180,000
Billings in excess of costs on uncompleted contracts	(1,608,000		)	2,120,000
Other current liabilities	322,000			(3,312,000		)
Income taxes receivable/payable	(295,000		)	(398,000		)
Net Cash Provided by Operating Activities	24,184,000			57,923,000

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures	(6,657,000		)	(5,168,000		)
Payments for business acquisitions, net of cash acquired	(72,072,000		)	(42,447,000		)
Proceeds on sale of property and equipment	1,086,000			—
Net Cash Used In Investing Activities	(77,643,000		)	(47,615,000		)

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments on long-term obligations	(38,188,000		)	(56,144,000		)
Proceeds from borrowings under credit agreement	69,500,000			46,000,000
Net proceeds from issuance of common stock	5,055,000			5,871,000
Net Cash Provided by (Used In) Financing Activities	36,367,000			(4,273,000		)

EFFECT OF EXCHANGE RATE CHANGES ON CASH	336,000			377,000

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(16,756,000		)	6,412,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	46,345,000			16,240,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	29,589,000		$	22,652,000

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the period for:
Interest	$	9,508,000		$	8,238,000
Income taxes, net of refunds received	$	22,818,000		$	13,227,000

SUPPLEMENTAL NON-CASH INVESTNG AND FINANCING ACTIVITIES:

In March 2003, the Company’s subsidiary, Tetra Tech FW, Inc., purchased certain assets and assumed certain liabilities of Foster Wheeler Environmental Corporation and Hartman Consulting Corporation. In conjunction with this acquisition, liabilities were assumed as follows:
Fair value of assets acquired	$	105,768,000
Cash paid	(72,072,000		)
Purchase price receivable	7,175,000
Other acquisition costs	(555,000		)
Liabilities assumed	$	40,316,000

In June 2002, the Company purchased all of the capital stock of Ardaman & Associates, Inc. In conjunction with this acquisition, liabilities were assumed as follows:
Fair value of assets acquired				$	23,559,000
Cash paid				(21,900,000		)
Other acquisition costs				(10,000		)
Liabilities assumed				$	1,649,000

In March 2002, the Company purchased all of the capital stock of Hartman & Associates, Inc. In conjunction with this acquisition, liabilities were assumed as follows:
Fair value of assets acquired				$	14,482,000
Cash paid				(10,800,000		)
Other acquisition costs				(10,000		)
Liabilities assumed				$	3,672,000

In March 2002, the Company’s subsidiary, The Thomas Group of Companies, Inc., purchased all of the capital stock of Thomas Associates Architects, Engineers, Landscape Architects, P.C. and America’s Schoolhouse Consulting Services, Inc. In conjunction with this acquisition, liabilities were assumed as follows:
Fair value of assets acquired				$	27,059,000
Cash paid				(15,055,000		)
Issuance of common stock				(5,018,000		)
Other acquisition costs				(10,000		)
Liabilities assumed				$	6,976,000

See accompanying Notes to Condensed Consolidated Financial Statements.

TETRA TECH, INC.

Notes To Condensed Consolidated Financial Statements

1. Basis of Presentation

The accompanying condensed consolidated balance sheet as of June 29, 2003, the condensed consolidated statements of operations for the three-month and nine-month periods ended June 29, 2003 and June 30, 2002, and the condensed consolidated statements of cash flows for the nine months ended June 29, 2003 and June 30, 2002 are unaudited, and, in the opinion of management, include all adjustments, consisting of the normal and recurring adjustments and a cumulative effect of accounting change, necessary for a fair presentation of the financial position and the results of operations for the periods presented.

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 29, 2002.

The results of operations for the three and nine months ended June 29, 2003 are not necessarily indicative of the results to be expected for the fiscal year ending September 28, 2003.

2. Goodwill and Acquired Intangibles

Effective September 30, 2002, the Company adopted the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. The statement changed the accounting method for goodwill and indefinite-lived intangible assets from an amortization approach to an impairment-only approach. As a result of the adoption of SFAS No. 142, the Company recorded a transitional goodwill impairment charge during the quarter ended March 30, 2003 of $114,669,000 presented as a cumulative effect of accounting change. This charge related to the Company’s communications reporting unit.

The SFAS No. 142 goodwill impairment model is a two-step process. First, it requires a comparison of the book value of net assets to the fair value of the related operations that have goodwill assigned to them. The Company estimates the fair values of the related operations using a combination of discounted cash flows, peer company comparables and similar transactions in the marketplace. The cash flow forecasts are adjusted by an appropriate discount rate. If the fair value is determined to be less than book value, a second step is performed to compute the amount of the impairment. In this process, a fair value for goodwill is estimated, based on the fair value of the operations used in the first step, and is compared to its carrying value. The shortfall of the fair value below carrying value represents the amount of goodwill impairment. SFAS No. 142 requires goodwill to be tested for impairment annually at the same time every year, and when an event occurs or circumstances change such that it is reasonably possible that an impairment may exist.

The changes in the carrying value of goodwill by reporting unit for the nine months ended June 29, 2003 were as follows:

Reporting Unit	September 29, 2002		Goodwill Adjustments (1)			Impairment Losses			June 29, 2003
Resource Management	$	52,092,000	$	25,784,000		$	—		$	77,876,000
Infrastructure	111,435,000		111,000			—			111,546,000
Communications	114,740,000		(71,000		)	(114,669,000		)	—
Total	$	278,267,000	$	25,824,000		$	(114,669,000	)	$	189,422,000

(1) The goodwill adjustments represent goodwill related to an acquisition and post-acquisition purchase price adjustments.

The gross carrying amounts and accumulated amortization of the Company’s acquired intangible assets as of June 29, 2003 and September 30, 2002, included in Intangible and Other Assets, Net in the accompanying condensed consolidated balance sheets, were as follows:

	June 29, 2003					September 30, 2002
Identifiable Intangible Assets	Carrying Amount		Accumulated Amortization			Carrying Amount		Accumulated Amortization
Backlog	$	10,856,000	$	(837,000	)	$	1,751,000	$	(163,000	)
Non-compete Agreements	451,000		(435,000		)	451,000		(397,000		)
Software	25,000		(15,000		)	25,000		(5,000		)
Other	41,000		(38,000		)	41,000		(36,000		)
Total	$	11,373,000	$	(1,325,000	)	$	2,268,000	$	(601,000	)

Identifiable intangible assets acquired during the nine months ended June 29, 2003 consisted of backlog of $9,105,000 with a weighted average amortization period of 8.5 years. Amortization expense for acquired finite-lived intangible assets for the nine months ended June 29, 2003 was $723,000. Estimated amortization expense for the remainder of fiscal 2003 and for the succeeding five years is as follows:

2003	$	403,000
2004	1,474,000
2005	1,432,000
2006	1,396,000
2007	1,329,000
2008	1,125,000

SFAS No. 142 requires disclosures of the after-tax impact to reported net income and earnings per share of the adoption of the statement for all periods presented. The following table recognizes the after-tax impact on the Company’s operating results of the adoption of SFAS No. 142 as if the statement had been in effect for all periods presented:

	Three Months Ended June 30, 2002		Nine Months Ended June 30, 2002

Reported net income	$	8,100,000	$	24,745,000
Add back: Goodwill amortization	2,661,000		7,982,000
Adjusted net income	$	10,761,000	$	32,727,000

Basic earnings per share:

Reported basic earnings per share	$	0.15	$	0.47
Add back: Goodwill amortization per basic share	0.05		0.15
Adjusted basic earnings per share	$	0.20	$	0.62

Diluted earnings per share:

Reported diluted earnings per share	$	0.15	$	0.45
Add back: Goodwill amortization per diluted share	0.04		0.14
Adjusted diluted earnings per share	$	0.19	$	0.59

3. Accounting Pronouncements

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. SFAS No. 144 addresses financial accounting and reporting requirements for the impairment or disposal of long-lived assets. This statement also expands the scope of a discontinued operation to include a component of an entity and eliminates the current exemption to consolidation when control over a subsidiary is likely to be temporary. The Company adopted SFAS No. 144 effective September 30, 2002. The adoption of SFAS No. 144 did not have a material impact on the Company’s financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting for Exit or Disposal Activities. SFAS No. 146 addresses the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including certain lease termination costs and severance-type costs under a one-time benefit arrangement rather than an ongoing benefit arrangement or an individual deferred compensation agreement. SFAS No. 146 requires liabilities associated with exit or disposal activities to be expensed as incurred and will impact the timing of recognition for exit or disposal activities that are initiated after December 31, 2002. The Company will apply the provisions of SFAS No. 146 to any exit or disposal activities initiated after December 31, 2002.

issued or modified after December 31, 2002. The disclosure requirements in this interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 did not have a material impact on the Company’s results of operations or financial position.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148’s amendment of the transition and annual disclosure requirements is effective for fiscal years ending after December 15, 2002. The amendment of the disclosure requirements is effective for interim periods beginning after December 15, 2002. The Company did not elect to adopt the fair value recognition provisions of SFAS No. 123; however, the Company adopted the expanded disclosure requirements to include the effect of stock-based compensation in interim reporting.

4. Earnings Per Share

Basic earnings per share (EPS) excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding and dilutive potential common shares for the period. The Company includes as potential common shares the weighted average number of shares of exchangeable stock of a subsidiary and the weighted average dilutive effects of outstanding stock options. The exchangeable stock of a subsidiary is non-voting and is exchangeable on a one to one basis, as adjusted for stock splits and stock dividends subsequent to the original issuance, for the Company’s common stock. The following table sets forth the number of weighted average shares used to compute basic and diluted EPS:

	Three Months Ended				Nine Months Ended
	June 29, 2003		June 30, 2002		June 29, 2003		June 30, 2002
Numerator—
Income before cumulative effect of accounting change	$	13,811,000	$	8,100,000	$	34,375,000	$	24,745,000

Denominator for basic earnings per share—
Weighted average shares	53,553,000		52,976,000		53,404,000		52,589,000

Denominator for diluted earnings per share—
Denominator for basic earnings per share	53,553,000		52,976,000		53,404,000		52,589,000
Potential common shares:
Stock options	1,298,000		991,000		864,000		1,302,000
Exchangeable stock of subsidiary	1,235,000		1,235,000		1,235,000		1,235,000

Potential common shares	2,533,000		2,226,000		2,099,000		2,537,000

Denominator for diluted earnings per share	56,086,000		55,201,000		55,503,000		55,126,000

Basic earnings per share before cumulative effect of accounting change	$	0.26	$	0.15	$	0.64	$	0.47

Diluted earnings per share before cumulative effect of accounting change	$	0.25	$	0.15	$	0.62	$	0.45

For the three and nine months ended June 29, 2003, 1.9 million and 2.2 million options, respectively, were excluded from the calculation of potential common shares. For the three and nine months ended June 30, 2002, 2.5 million and 1.9 million options, respectively, were excluded from the calculation of potential common shares. These options were excluded because their exercise prices exceeded the average market price for the respective periods.

5. Stock-Based Compensation

The Company accounts for its stock-based employee compensation plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates what the effect on net income and earnings per share would have been if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation.

	Three Months Ended				Nine Months Ended
	June 29, 2003		June 30, 2002		June 29, 2003		June 30, 2002
Income Before Cumulative Effect of Accounting Change, as reported	$	13,811,000	$	8,100,000	$	34,375,000	$	24,745,000

Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	1,417,000		1,138,000		3,780,000		3,183,000

Pro Forma Income Before Cumulative Effect of Accounting Change	$	12,394,000	$	6,962,000	$	30,595,000	$	21,562,000

Earnings Per Share Before Cumulative Effect of Accounting Change:

Basic – as reported	$	0.26	$	0.15	$	0.64	$	0.47
Basic – pro forma	$	0.23	$	0.13	$	0.57	$	0.41

Diluted – as reported	$	0.25	$	0.15	$	0.62	$	0.45
Diluted – pro forma	$	0.22	$	0.13	$	0.55	$	0.39

6. Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents totaled $29.6 million and $46.3 million at June 29, 2003 and September 29, 2002, respectively.

7. Mergers and Acquisitions

On March 25, 2002, the Company acquired through its wholly-owned subsidiary, The Thomas Group of Companies, Inc., 100% of the capital stock of Thomas Associates Architects, Engineers, Landscape Architects P.C. and America’s Schoolhouse Consulting Services, Inc. (collectively, TGI), providers of architectural, engineering and planning services for educational buildings and school systems primarily in the eastern region of the United States. The purchase was valued at approximately $20.0 million and consisted of cash and 392,126 shares of Company common stock.

On March 29, 2002, the Company acquired 100% of the capital stock of Hartman & Associates, Inc. (HAI), a provider of engineering, construction and consulting services in the southeastern region of the United States. The purchase was valued at approximately $10.8 million and consisted of cash.

On June 29, 2002, the Company acquired 100% of the capital stock of Ardaman & Associates, Inc. (AAI), a provider of geotechnical, geophysical and hydrogeological consulting and engineering services in the southeastern region of the United States. The purchase was valued at approximately $21.9 million and consisted of cash.

On March 7, 2003, the Company acquired through its wholly-owned subsidiary, Tetra Tech FW, Inc. (FWI), certain assets and certain related liabilities of Foster Wheeler Environmental Corporation and Hartman Consulting Corporation, providers of engineering and program management services throughout the United States. The purchase was valued at approximately $65.5 million, consisted of cash and is subject to a purchase price adjustment based upon the final determination of FWI’s net asset value as of March 7, 2003.

All of the acquisitions above have been accounted for as purchases and, accordingly, the purchase prices of the businesses acquired have been allocated to the assets and liabilities acquired based upon their fair values. The excess of the purchase cost of the acquisitions over the fair value of the net assets acquired was recorded as goodwill in the accompanying condensed consolidated balance sheets. The results of operations of each of the acquired companies have been included in the Company’s financial statements from the effective acquisition dates.

8. Unaudited Pro Forma Operating Results

The table below presents summarized unaudited pro forma operating results assuming that the Company had acquired TGI, HAI, AAI, and FWI on October 1, 2001. These amounts are based on historical results and assumptions and estimates which the Company believes to be reasonable. The pro forma results do not reflect anticipated cost savings and do not represent results that would have occurred if these acquisitions had actually taken place on October 1, 2001.

	Pro Forma Nine Months Ended
	June 29, 2003		June 30, 2002
Gross revenue	$	956,123,000	$	985,057,000
Net revenue	693,864,000		738,287,000
Income from operations	68,345,000		55,762,000
Income before cumulative effect of accounting change	36,627,000		30,176,000
Earnings per share before cumulative effect of accounting change:
Basic	0.69		0.57
Diluted	0.66		0.55
Weighted average shares outstanding:
Basic	53,404,000		52,752,000
Diluted	55,503,000		55,289,000

9. Accounts Receivable and Unbilled Receivables

Accounts receivable and unbilled receivables are presented net of valuation allowances to provide for doubtful accounts and for the potential disallowance of billed and unbilled costs. The allowance for doubtful accounts as of June 29, 2003 and September 29, 2002 was $13.9 million and $12.8 million, respectively. The allowance for disallowed costs as of June 29, 2003 and September 29, 2002 was $2.6 million and $1.4 million, respectively. Disallowance of billed and unbilled costs is primarily associated with contracts with the Federal government which contain clauses that subject contractors to several levels of audit. The Company establishes reserves on contract receivables when collectibility is doubtful plus a general allowance for which some potential loss is determined to be probable based upon current events and circumstances. Management believes that resolution of these matters will not have a material adverse impact on the Company’s financial position or results of operations.

10. Operating Segments

The Company’s management has organized its operations into two operating segments: Resource Management and Infrastructure. The Resource Management operating segment provides environmental engineering and consulting services primarily relating to water quality and water quantity to both public and private organizations. The Infrastructure operating segment provides design, engineering and project management services for the additional development, as well as the upgrading and replacement of existing infrastructure to both public and private organizations. Management has established these operating segments based upon the services provided, the different marketing strategies associated with the segments, and the specialized needs of the clients.

The Company accounts for inter-segment sales and transfers as if the sales and transfers were to third parties; that is, by applying a negotiated fee onto the cost of the services performed. Management evaluates the performance of these operating segments based upon their respective income from operations before the effect of any acquisition-related amortization. All inter-company balances and transactions are eliminated in consolidation.

In fiscal 2003, due to changes in the communications marketplace, the decline in the size of the Company’s historical communications business, the convergence of communications products into smart infrastructure, and the Company’s market strategy for its overall infrastructure business, the Company combined its historical Communications operating segment into its Infrastructure operating segment. In accordance with the segment reporting requirements of SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, the results of the historical Infrastructure and Communications segments are provided in the table below. The prior year historical information is presented in conformity with the current year operating segment information.

The following tables set forth summarized financial information concerning the Company’s reportable segments:

Reportable Segments:

			Infrastructure
	Resource Management		Historical Infrastructure		Historical Communications		Subtotal Infrastructure		Total
Three Months Ended June 29, 2003
Gross Revenue	$	208,284,000	$	80,921,000	$	34,247,000	$	115,168,000	$	323,452,000
Net Revenue	144,549,000		67,446,000		19,089,000		86,535,000		231,084,000
Income from Operations	17,840,000		7,123,000		1,412,000		8,535,000		26,375,000
Depreciation Expense	1,945,000		1,062,000		1,054,000		2,116,000		4,061,000

Nine Months Ended June 29, 2003
Gross Revenue	$	476,895,000	$	241,973,000	$	94,702,000	$	336,675,000	$	813,570,000
Net Revenue	341,379,000		202,040,000		58,324,000		260,364,000		601,743,000
Income from Operations	38,314,000		20,683,000		4,815,000		25,498,000		63,812,000
Depreciation Expense	4,087,000		3,282,000		2,859,000		6,141,000		10,228,000

Three Months Ended June 30, 2002
Gross Revenue	$	124,107,000	$	85,037,000	$	37,905,000	$	122,942,000	$	247,049,000
Net Revenue	88,844,000		71,297,000		23,860,000		95,157,000		184,001,000
Income from Operations	9,229,000		7,586,000		123,000		7,709,000		16,938,000
Depreciation Expense	840,000		1,215,000		1,198,000		2,413,000		3,253,000

Nine Months Ended June 30, 2002
Gross Revenue	$	375,901,000	$	235,240,000	$	127,550,000	$	362,790,000	$	738,691,000
Net Revenue	259,295,000		197,576,000		87,338,000		284,914,000		544,209,000
Income from Operations	27,633,000		23,869,000		1,353,000		25,222,000		52,855,000
Depreciation Expense	2,092,000		3,534,000		3,471,000		7,005,000		9,097,000

Reconciliations:

	Three Months Ended
	June 29, 2003			June 30, 2002
Gross Revenue
Gross revenue from reportable segments	$	323,452,000		$	247,049,000
Elimination of inter-segment revenue	(10,604,000		)	(10,313,000		)
Other revenue	708,000			1,435,000
Total consolidated gross revenue	$	313,556,000		$	238,171,000

Net Revenue
Net revenue from reportable segments	$	231,084,000		$	184,001,000
Other revenue	708,000			1,435,000
Total consolidated net revenue	$	231,792,000		$	185,436,000

Income from Operations
Income from operations of reportable segments	$	26,375,000		$	16,938,000
Other income	(404,000		)	(241,000		)
Amortization of intangibles	(407,000		)	(2,661,000		)
Total consolidated income from operations	$	25,564,000		$	14,036,000

	Nine Months Ended
	June 29, 2003			June 30, 2002
Gross Revenue
Gross revenue from reportable segments	$	813,570,000		$	738,691,000
Elimination of inter-segment revenue	(25,371,000		)	(25,553,000		)
Other revenue	3,901,000			4,189,000
Total consolidated gross revenue	$	792,100,000		$	717,327,000

Net Revenue
Net revenue from reportable segments	$	601,743,000		$	544,209,000
Other revenue	3,901,000			4,189,000
Total consolidated net revenue	$	605,644,000		$	548,398,000

Income from Operations
Income from operations of reportable segments	$	63,812,000		$	52,855,000
Other income	922,000			132,000
Amortization of intangibles	(723,000		)	(7,982,000		)
Total consolidated income from operations	$	64,011,000		$	45,005,000

Major Clients:

The Company’s net revenue attributable to the U.S. government was approximately $88.9 million and $42.9 million for the three months ended June 29, 2003 and June 30, 2002, respectively. Net revenue attributable to the U.S. government was approximately $186.2 million and $138.7 million for the nine months ended June 29, 2003 and June 30, 2002, respectively. Both the Resource Management and Infrastructure operating segments report revenue from the U.S. government.

11. Comprehensive Income (Loss)

Comprehensive income (loss) is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. These sources include net income (loss) and other revenues, expenses, gains and losses incurred. The Company includes as other comprehensive income translation gains and losses from subsidiaries with functional currencies different than that of the Company. Comprehensive income was approximately $14.7 million for the three months ended June 29, 2003 and comprehensive income was approximately $8.5 million for the three months ended June 30, 2002. For the nine months ended June 29, 2003, comprehensive loss was $78.9 million. For the nine months ended June 30, 2002, comprehensive income was $25.1 million. For the three and nine months ended June 29, 2003, the Company realized net translation gains of $0.8 million and $1.4 million, respectively. For the three and nine months ended June 30, 2002, the Company realized net translation gains of $0.4 million.

12. Litigation

The Company is subject to certain claims and lawsuits typically filed against the engineering and consulting profession, 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 adverse effect on the Company’s financial position, results of operations or cash flows.

On December 2, 2002, a jury in Washington County Court in Bartlesville, Oklahoma handed down a $4.1 million verdict against the Company in a dispute with Horsehead Industries, Inc., doing business as Zinc Corporation of America. The Company has filed an appeal in this matter, and is also pursuing other legal alternatives related to the case. The Company established a $4.1 million reserve for this matter in selling, general and administrative expenses in the consolidated statement of income for the year ended September 29, 2002.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements regarding future events and our future results that are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “projects,” “intends,” “plans,” “believes,” “estimates,” and similar expressions are intended to identify such forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Readers are referred to risks and uncertainties identified below, and in the documents filed by us with the Securities and Exchange Commission, specifically the most recent reports on Forms 10-K, 10-Q and 8-K, each as it may be amended from time to time. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

Overview

Tetra Tech, Inc. is a leading provider of consulting, engineering and technical services. As a consultant, we assist our clients in defining problems and developing innovative and cost-effective solutions. Our consulting services are complemented by our engineering and technical services. These technical services span the lifecycle of a project and include research and development, applied science and technology, engineering design, construction management, and operations and maintenance. Our clients include a diverse base of public and private organizations located in the United States and internationally.

Since our initial public offering in December 1991, we have increased the size and scope of our business and have expanded our service offerings through a series of strategic acquisitions that leverage our cross-selling capabilities and by internal growth.

We derive our revenue and related fees from providing professional services. Our services are billed under various types of contracts with our clients, including:

• Fixed-price;

• Fixed-rate time and materials;

• Cost-reimbursement plus fixed fee; and

• Cost-reimbursement plus fixed and award fee.

In the course of providing our services, we routinely subcontract services. These subcontractor costs are passed through to clients and, in accordance with industry practice, are included in gross revenue. Because subcontractor services can change significantly from project to project, changes in gross revenue may not be indicative of business trends. Accordingly, we report net revenue, which is gross revenue less the cost of subcontractor services. The majority of our contract revenue and contract costs, on both cost-type and fixed-price-type contracts, are recorded using the percentage-of-completion (cost-to-cost) method. Under this method, contract

revenue on contracts is recognized in the ratio that contract costs incurred bear to total estimated costs. Costs and income are subject to revision throughout the lives of the contracts and any required adjustments are made in the period in which the revision or adjustments become known. Other time and materials contract revenue is recognized as earned and contract costs are recorded as incurred. Losses on contracts are recorded as they are identified.

Our cost of net revenue includes professional compensation and related benefits, together with certain direct and indirect overhead costs such as rents, utilities and travel. Professional compensation represents the majority of these costs. Our selling, general and administrative (SG&A) expenses are comprised primarily of marketing, and bid and proposal costs, as well as our corporate headquarters’ costs related to the executive offices, corporate finance and accounting, and information technology costs. These costs are generally unrelated to specific client projects and can vary as expenses are incurred to support corporate activities and initiatives. We also include in SG&A expenses the charges to bad debt expense to provide reserves for account debtors.

We provide our services to a diverse base of Federal, state and local government agencies, and commercial and international clients. The following table presents, for the periods indicated, the approximate percentage of net revenue attributable to these client sectors:

	Percentage of Net Revenue
	Three Months Ended				Nine Months Ended
Client Sector	June 29, 2003		June 30, 2002		June 29, 2003		June 30, 2002
Federal government	38.4	%	23.1	%	30.7	%	25.3	%
State and local government	19.9		28.1		22.1		22.6
Commercial	40.3		46.3		45.5		49.8
International	1.4		2.5		1.7		2.3
	100.0	%	100.0	%	100.0	%	100.0	%

We manage our business in two operating segments: Resource Management and Infrastructure. In fiscal 2003, due to changes in the communications marketplace, the decline in the size of our historical communications business, the convergence of communications products into smart infrastructure, and our market strategy for our overall infrastructure business, we combined our historical Infrastructure and Communications operating segments into the Infrastructure operating segment. The following table presents, for the periods indicated, the approximate percentage of net revenue attributable to the operating segments:

	Percentage of Net Revenue
	Three Months Ended				Nine Months Ended
Operating Segment	June 29, 2003		June 30, 2002		June 29, 2003		June 30, 2002
Resource Management	62.4	%	47.9	%	56.4	%	47.3	%
Infrastructure	37.3		51.3		43.0		51.9
Other revenue	0.3		0.8		0.6		0.8
	100.0	%	100.0	%	100.0	%	100.0	%

Results of Operations

The following table presents the percentage relationship of selected items to net revenue in our condensed consolidated statements of operations:

	Percentage Relationship to Net Revenue
	Three Months Ended				Nine Months Ended
	June 29, 2003		June 30, 2002		June 29, 2003		June 30, 2002
Net revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of net revenue	78.5		80.1		78.7		78.7
Gross profit	21.5		19.9		21.3		21.3
Selling, general and administrative expenses	10.3		10.9		10.6		11.7
Amortization of intangibles	0.2		1.4		0.1		1.4
Income from operations	11.0		7.6		10.6		8.2
Net interest expense	1.1		1.2		1.1		1.1
Income before income tax expense	9.9		6.4		9.5		7.1
Income tax expense	3.9		2.0		3.8		2.6
Net income before cumulative effect of accounting change	6.0	%	4.4	%	5.7	%	4.5	%

Net Revenue. Net revenue increased $46.4 million, or 25.0%, to $231.8 million for the three months ended June 29, 2003 from $185.4 million for the comparable period last year. For the nine months ended June 29, 2003, net revenue increased $57.2 million, or 10.4%, to $605.6 million from $548.4 million for the comparable period last year.

Net revenue in our Resource Management segment grew $55.7 million, or 62.7%, to $144.5 million in the three months ended June 29, 2003 from $88.8 million for the comparable period last year. For the nine months ended June 29, 2003, net revenue in our Resource Management segment grew $82.1 million, or 31.7%, to $341.4 million from $259.3 million for the comparable period last year. This growth was primarily attributable to our acquisition of Foster Wheeler Environmental Corporation (FWI) in March 2003, our acquisition of Ardaman & Associates, Inc. (AAI) in June 2002 and increased revenue from Federal government customers, particularly the Department of Energy and the Environmental Protection Agency.

Net revenue in our Infrastructure segment decreased by $8.7 million, or 9.1%, to $86.5 million in the three months ended June 29, 2003 from $95.2 million in the comparable period last year. For the nine months ended June 29, 2003, net revenue in our Infrastructure segment decreased by $24.5 million, or 8.6%, to $260.4 million, from $284.9 million in the comparable period last year.

Net revenue in our historical Infrastructure segment area decreased $3.9 million, or 5.4%, to $67.4 million in the three months ended June 29, 2003 from $71.3 million for the comparable period last year. This change resulted primarily because of reduced spending by our commercial clients in a limited number of geographical markets. For the nine months ended June 29, 2003, net revenue in our historical Infrastructure segment grew $4.5 million, or 2.3%, to $202.0 million from $197.6 million in the comparable period last year. This growth was primarily attributable to our fiscal 2002

acquisitions of The Thomas Group of Companies (TGI) and Hartman & Associates, Inc. (HAI). However, this increase was limited by economic conditions in certain geographic areas and reduced spending by commercial clients.

Net revenue in our historical Communications segment decreased $4.8 million in the three months ended June 29, 2003, or 20.0%, to $19.1 million from $23.9 million in the comparable period last year. For the nine months ended June 29, 2003, net revenue in our historical Communications segment decreased $29.0 million, or 33.2%, to $58.3 million from $87.3 million for the comparable period last year. This decrease reflects the continued reduction of capital spending by our communications clients, particularly in the wired communications market. In our Federal, state and local government and commercial client sectors, we continued to realize net revenue increases in actual dollars.

We segregate from our total revenue the revenue recognized by acquired companies during their first 12 months following their respective effective dates of acquisition. We refer to revenue recognized from acquired companies during such first 12 months as acquisitive revenue. We compute organic revenue by deducting acquisitive revenue from total revenue. Acquisitive revenue for the three months ended June 29, 2003 totaled $51.3 million. Excluding this net revenue, we realized negative organic growth in our net revenue of 2.7% for the three months ended June 29, 2003 from the comparable period last year.

Gross Revenue. Gross revenue increased $75.4 million, or 31.7%, to $313.6 million for the three months ended June 29, 2003 from $238.2 million for the comparable period last year. For the nine months ended June 29, 2003, gross revenue increased $74.8 million, or 10.4%, to $792.1 million from $717.3 million for the comparable period last year.

Gross revenue in our Resource Management segment grew $84.2 million, or 67.8%, to $208.3 million in the three months ended June 29, 2003 from $124.1 million for the comparable period last year. For the nine months ended June 29, 2003, gross revenue in our Resource Management segment grew $101.0 million, or 26.9%, to $476.9 million from $375.9 million for the comparable period last year. This growth was primarily attributable to the FWI acquisition in March 2003, our acquisition of AAI in June 2002, and increased revenue from Federal government customers, particularly the Department of Energy and the Environmental Protection Agency.

Gross revenue in our Infrastructure segment decreased $7.8 million, or 6.3%, to $115.2 million in the three months ended June 29, 2003 from $122.9 million in the comparable period last year. Gross revenue in our Infrastructure segment decreased by $26.1 million, or 7.2%, to $336.7 million in the nine months ended June 29, 2003 from $362.8 million in the comparable period last year.

Gross revenue in our historical Infrastructure segment decreased $4.1 million, or 4.8%, to $80.9 million in the three months ended June 29, 2003 from $85.0 million for the comparable period last year. The decrease was primarily due to decreased spending by our commercial clients. For the nine months ended June 29, 2003, gross revenue in our historical Infrastructure

segment grew $6.8 million, or 2.9%, to $242.0 million from $235.2 million in the comparable period last year. This growth was primarily attributable to the fiscal 2002 acquisitions of TGI and HAI. However, this increase was limited by economic conditions in certain geographic areas and reduced spending by commercial clients.

Gross revenue in our historical Communications segment decreased by $3.7 million in the three months ended June 29, 2003, or 9.7%, to $34.2 million from $37.9 million in the comparable period last year. For the nine months ended June 29, 2003, gross revenue in our historical Communications segment decreased by $32.9 million, or 25.8%, to $94.7 million from $127.6 million for the comparable period last year. This decrease reflects the continued reduction of capital spending by our communications clients.

Acquisitive gross revenue for the three months ended June 29, 2003 totaled $76.7 million. Excluding this gross revenue, we realized negative organic growth in our gross revenue of 0.5% for the three months ended June 29, 2003 from the comparable period last year.

Cost of Net Revenue. Cost of net revenue increased $33.3 million, or 22.4%, to $181.9 million for the three months ended June 29, 2003 from $148.6 million for the comparable period last year. As a percentage of net revenue, cost of net revenue for the three months ended June 29, 2003 was 78.5% compared to 80.1% for the comparable period last year. For the nine months ended June 29, 2003, cost of net revenue increased $45.0 million, or 10.4%, to $476.4 million from $431.4 million for the comparable period last year. As a percentage of net revenue, cost of net revenue for the nine months ended June 29, 2003 was unchanged at 78.7% when compared to the same period last year. For the quarter ended June 29, 2003, the reduction in cost of net revenue as a percentage of net revenue resulted from cost reductions, particularly in our communications companies, in response to the overall slowdown in the communications industry. For the nine months ended June 29, 2003, the cost reductions during the third quarter were offset by the increase in cost of net revenue as a percentage of net revenue in the first quarter due primarily to the timing of our cost reduction efforts.

Selling, General and Administrative Expenses. SG&A expenses increased $3.8 million, or 18.7%, to $23.9 million for the three months ended June 29, 2003 from $20.1 million for the comparable period last year due primarily to the growth of our operations. However, as a percentage of net revenue, total SG&A expenses decreased to 10.3% for the three months ended June 29, 2003 from 10.9% for the comparable period last year. For the nine months ended June 29, 2003, SG&A expenses increased $0.5 million, or 0.9%, to $64.5 million from $64.0 million for the comparable period last year. As a percentage of net revenue, total SG&A expenses decreased to 10.6% for the nine months ended June 29, 2003 from 11.7% for the comparable period last year. SG&A expenses for the nine months ended June 30, 2002 were not commensurate with the net revenue for that period, primarily due to the rapid decline in net revenue from our communications clients. Amortization expense relating to acquisitions decreased to 0.2% and 0.1% of net revenue for the three months and nine months ended June 29, 2003, respectively, compared to 1.4% and 1.5% for the three months and nine months ended June 30, 2002, respectively, as a result of the discontinuation of goodwill amortization resulting from the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets.

Net Interest Expense. Net interest expense increased $0.3 million, or 13.9%, to $2.5 million for the three months ended June 29, 2003 from $2.2 million for the comparable period last year. For the nine months ended June 29, 2003, net interest expense increased $0.8 million, or 13.6%, to $6.7 million from $5.9 million for the comparable period last year. These increases were primarily attributable to interest income on certain receivables recognized in the prior year, as well as by an increase in average borrowings outstanding resulting primarily from the FWI acquisition during the three and nine months ended June 29, 2003.

Income Tax Expense. Income tax expense increased $5.5 million, or 148.8%, to $9.2 million for the three months ended June 29, 2003 from $3.7 million for the comparable period last year. For the nine months ended June 29, 2003, income tax expense increased $8.6 million, or 59.8%, to $22.9 million from $14.3 million for the comparable period last year. The increased income tax expense is due to the increase in income before taxes. Our current estimated effective tax rate is 40.0% compared to 36.7% in the comparable nine month period last year. This increase is primarily attributable to lower estimated research and experimentation tax credits for fiscal 2003, offset by the discontinuation of goodwill amortization under SFAS No. 142.

Cumulative Effect of Accounting Change. We adopted SFAS No. 142 effective September 30, 2002. The adoption of this standard required us to discontinue the amortization of goodwill and to test the net book value of goodwill for impairment. The cumulative effect of adopting this standard resulted in the elimination of $114.7 million in net goodwill attributable to the acquisitions in our historical Communications segment.

Net Income. Net income increased $5.7 million, or 70.5%, to $13.8 million for the three months ended June 29, 2003 from $8.1 million for the comparable period last year. The increase was primarily due to the increase in net revenue and a decrease in amortization expense, partially offset by an increase in SG&A costs and income taxes. The net income decreased by $105.0 million to a net loss of $80.3 million for the nine months ended June 29, 2003 from a net income of $24.7 million for the comparable period last year. The decrease is primarily due to the $114.7 million charge related to the cumulative effect of an accounting change in the second quarter, as well as an increase in the income tax expense. These expenses were partially offset by an increase in gross profit and the elimination of goodwill amortization expense.

Liquidity and Capital Resources

As of June 29, 2003, our working capital was $201.4 million, an increase of $1.7 million from September 29, 2002, of which cash and cash equivalents totaled $29.6 million as compared to $46.3 million at September 29, 2002.

In the nine months ended June 29, 2003, cash provided by operating activities was $24.2 million compared to $57.9 million in the comparable period last year. This change is primarily attributable to the timing of billing and collection of accounts receivable and the timing of payments for liabilities. In addition, the FWI acquisition in March 2003 did not include cash, and funding was required for the payment of related acquired liabilities. For the nine months ended June 29, 2003, cash used in investing activities was $77.6 million compared to $47.6 million for

the comparable period last year. This increase was primarily due to cash used for the FWI acquisition. In the nine months ended June 29, 2003, cash provided by financing activities was $36.4 million compared to $4.3 million used for financing activities for the comparable period last year.

Our credit agreement with various financial institutions (the “Credit Agreement”) provides for a revolving credit facility (the “Facility”) of $140.0 million. Under the Credit Agreement, we may also request standby letters of credit up to the aggregate sum of $25.0 million outstanding at any given time. The Facility matures on March 17, 2005 or earlier at our discretion upon payment in full of loans and other obligations. As of June 29, 2003, borrowings and standby letters of credit under the Facility totaled $33.0 million and $6.9 million, respectively. These borrowings are classified as current portion of long-term obligations on our condensed consolidated balance sheet because we anticipate having the ability of repaying the total owed within 12 calendar months. However, we are not obligated to repay outstanding borrowings on the Facility until its maturity in 2005.

Further, we have issued two series of senior secured notes in the aggregate amount of $110.0 million. The Series A Notes, totaling $92.0 million with an interest rate of 7.28%, mature on May 30, 2011. The Series B Notes, totaling $18.0 million with an interest rate of 7.08%, mature on May 30, 2008. At June 29, 2003, the outstanding principal balance on these notes was $110.0 million, of which a scheduled $3.6 million payment on the Series B Notes is due within the next 12 calendar months.

We expect that internally generated funds, our existing cash balances and borrowing capacity under the Credit Agreement will be sufficient to meet our capital requirements through the next 12 months. However, should we pursue an acquisition or acquisitions in which the potential cash consideration exceeds the then current availability of cash, we may pursue additional financing.

In conjunction with our investment strategy, we continuously evaluate the marketplace for strategic acquisition opportunities. Once an opportunity is identified, we examine the effect an acquisition may have on our long-range business strategy, as well as on our results of operations. We proceed with an acquisition if we believe that the acquisition will have an accretive effect on future operations or could expand our service offerings. As successful integration and implementation are essential to achieve favorable results, no assurances can be given that all acquisitions will provide accretive results. Our strategy is to position ourselves to address existing and emerging markets. We view acquisitions as a key component of our growth strategy, and we intend to use both cash and our securities, as we deem appropriate, to fund such acquisitions.

We believe our operations have not been, and, in the foreseeable future, are not expected to be, materially adversely affected by inflation or changing prices due to the average duration of our projects and our ability to negotiate prices as contracts end and new contracts begin. However, current general economic conditions may impact our client base, and, as such, may impact their credit worthiness and our ability to collect cash to meet our operating needs.

Recently Issued Financial Standards

In October 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. SFAS No. 144 addresses financial accounting and reporting requirements for the impairment or disposal of long-lived assets. This statement also expands the scope of a discontinued operation to include a component of an entity and eliminates the current exemption to consolidation when control over a subsidiary is likely to be temporary. We adopted SFAS No. 144 effective September 30, 2002. The adoption of SFAS No. 144 did not have a material impact on our financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting for Exit or Disposal Activities. SFAS No. 146 addresses the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including certain lease termination costs and severance-type costs under a one-time benefit arrangement rather than an ongoing benefit arrangement or an individual deferred compensation agreement. SFAS No. 146 requires liabilities associated with exit or disposal activities to be expensed as incurred and will impact the timing of recognition for exit or disposal activities that are initiated after December 31, 2002. We will apply the provisions of SFAS No. 146 to any exit or disposal activities initiated after December 31, 2002.

In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements in this interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 did not have a material impact on our results of operations or financial position.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148’s amendment of the transition and annual disclosure requirements is effective for fiscal years ending after December 15, 2002. The amendment of the disclosure requirements is effective for interim periods beginning after December 15, 2002. We did not elect to adopt the fair value recognition provisions of SFAS No. 123; however, we adopted the expanded disclosure to include the effect of stock-based compensation in interim reporting.

Market Risks

We currently utilize no material derivative financial instruments which expose us to significant market risk. We are exposed to cash flow risk due to interest rate fluctuations under our Credit Agreement. At our option, we borrow on our Facility (a) at a base rate (the greater of the federal funds rate plus 0.50% or the bank’s reference rate) plus a margin which ranges from 0.0% to 0.5%, or (b) at a eurodollar rate plus a margin which ranges from 0.75% to 1.50%. Borrowings at the base rate have no designated term and may be repaid without penalty anytime prior to the Facility’s maturity date. Borrowings at a eurodollar rate have a term no less than 30 days and no greater than 90 days. Typically, at the end of such term, such borrowings may be rolled over at our discretion upon payment in full of loans and other obligations. Accordingly, we classify total outstanding obligations between current liabilities and long-term obligations based on anticipated payments within and beyond one year’s period of time.

We have outstanding senior secured notes which bear interest at a fixed rate. The Series A Notes bear interest at 7.28% and are payable at $13.1 million per year commencing fiscal 2005 through fiscal 2011. The Series B Notes bear interest at 7.08% and are payable at $3.6 million per year commencing fiscal 2004 through fiscal 2008. If interest rates increased by 1.0%, the fair value of the senior secured notes could decrease by $4.8 million. If interest rates decreased by 1.0%, the fair value of the senior secured notes could increase by $5.1 million.

We currently anticipate repaying $36.6 million of our outstanding indebtedness in the next 12 months, of which $3.6 million is a scheduled principal payment on the Series B Notes. Assuming we do repay the remaining $33.0 million ratably during the next 12 months, and our average interest rate increases or decreases by one percent, our annual interest expense could increase or decrease by $0.2 million. However, there can be no assurance that we will, or will be able to, repay our debt in the prescribed manner or obtain alternate financing. We could incur additional debt under the Facility or our operating results could be worse than we expect.

We presently have no material contracts under which the currency is not denominated in U.S. dollars. Accordingly, foreign exchange rate fluctuations will not have a material impact on our financial statements.

RISK FACTORS

Set forth below and elsewhere in this Report and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in the Report. You should be aware that the occurrence of any of the events described in these risk factors and elsewhere in this Report could have a material adverse effect on our business, financial condition and results of operations and that upon the occurrence of any of these events, the trading price of our common stock could decline.

Our quarterly operating results may fluctuate significantly, which could have a negative effect on the price of our common stock

Our quarterly revenues, expenses and operating results may fluctuate significantly because of a number of factors, including:

• Unanticipated changes in contract performance that may effect profitability, particularly with fixed-price and not-to-exceed contracts;

• The seasonality of the spending cycle of our public sector clients, notably the Federal government, and the spending patterns of our commercial sector clients;

• Employee hiring and utilization rates;

• The number and significance of client engagements commenced and completed during a quarter;

• Credit worthiness and solvency of clients;

• The ability of our clients to terminate engagements without penalties;

• Delays incurred in connection with an engagement;

• The size and scope of engagements;

• The timing of expenses incurred for corporate initiatives;

• Reductions in the prices of services offered by our competitors;

• Changes in accounting rules;

• The timing and size of the return on investment capital; and

• General economic or political conditions.

Variations in any of these factors could cause significant fluctuations in our operating results from quarter to quarter and could result in net losses.

There are risks associated with our acquisition strategy that could adversely impact our business and operating results

A significant part of our growth strategy is to acquire other companies that complement our lines of business or that broaden our geographic presence. We expect to continue to acquire companies as an element of our growth strategy. Acquisitions involve certain risks that could cause our actual growth or operating results to differ from our expectations or the expectations of securities analysts. For example:

• We may not be able to identify suitable acquisition candidates or to acquire additional companies on acceptable terms;

• We compete with others to acquire companies which may result in decreased availability of or increased price for suitable acquisition candidates;

• We may not be able to obtain the necessary financing, on favorable terms or at all, to finance any of our potential acquisitions;

• We may ultimately fail to consummate an acquisition even if we announce that we plan to acquire a company;

• We may not be able to retain key employees of an acquired company which could negatively impact these companies’ future performance;

• We may fail to successfully integrate or manage these acquired companies due to differences in business backgrounds or corporate cultures;

• If we fail to successfully integrate any acquired company, our reputation could be damaged. This could make it more difficult to market our services or to acquire additional companies in the future;

• These acquired companies may not perform as we expect; and

• We may find it difficult to provide a consistent quality of service across our geographically diverse operations.

In addition, our acquisition strategy may divert management’s attention away from our primary service offerings, result in the loss of key clients or personnel and expose us to unanticipated liabilities.

Further, acquisitions may also cause us to:

• Issue common stock that would dilute our current stockholders’ percentage ownership;

• Assume liabilities;

• Record goodwill that will be subject to impairment testing and potential periodic impairment charges;

• Incur amortization expenses related to certain intangible assets;

• Incur large and immediate write-offs; or

• Become subject to litigation.

Finally, acquired companies that derive a significant portion of their revenues from the Federal government and that do not follow the same cost accounting policies and billing procedures as we do may be subject to larger cost disallowances for greater periods than we typically encounter. If we fail to determine the existence of unallowable costs and establish appropriate reserves in advance of an acquisition, we may be exposed to material unanticipated liabilities, which could have a material adverse effect on our business.

The value of our common stock could continue to be volatile

The trading price of our common stock has fluctuated widely. In addition, in recent years the stock market has experienced extreme price and volume fluctuations. The overall market and the price of our common stock may continue to fluctuate greatly. The trading price of our common stock may be significantly affected by various factors, including:

• Quarter to quarter variations in our operating results;

• Resolution of threatened or pending litigation;

• Changes in investors’ and analysts’ perceptions of our business;

• Investors’ and analysts’ assessments of reports prepared or conclusions reached by third parties;

• Changes in environmental legislation;

• Broader market fluctuations; and

• General economic or political conditions.

Downturns in the financial markets could negatively impact the capital spending of our clients and adversely affect our revenue and operating results

Recent downturns in the capital markets have impacted the spending patterns of certain clients. For example, as a result of the slowdown in communications infrastructure spending, we have experienced contract delays in our Infrastructure segment. In addition, certain of our existing and potential clients have either postponed entering into new contracts or requested price concessions. The difficult financing and economic conditions are also causing some of our clients to delay payments for services we perform, thereby increasing the average number of days our receivables are outstanding. Further, these conditions may result in the inability of some of our clients to pay us for services that we have already performed. If we are not able to reduce our costs quickly enough to respond to the revenue decline from these clients, our operating results may be adversely affected. Accordingly, these conditions affect our ability to forecast with any accuracy our future revenue and earnings from business areas that may be adversely impacted by market downturns.

If we are not able to successfully manage our growth strategy, our business and results of operations may be adversely affected

We have grown rapidly over the last several years. Our growth presents numerous managerial, administrative, operational and other challenges. Our ability to manage the growth of our operations will require us to continue to improve our management information systems and our other internal systems and controls. In addition, our growth will increase our need to attract, develop, motivate and retain both our management and professional employees. The inability of our management to effectively manage our growth or the inability of our employees to achieve anticipated performance or utilization levels could have a material adverse effect on our business.

We derive the majority of our revenue from government agencies, and any disruption in government funding or in our relationship with those agencies could adversely affect our business

During the nine months ended June 29, 2003, we derived approximately 52.8% of our net revenue from contracts with Federal, state and local government agencies. Any disruption in government funding or in our relationship with those agencies could adversely affect our business with these agencies. As a result, our financial condition and operating results could suffer.

The demand for our government-related services is generally related to the level of government program funding. Accordingly, the success and further development of our business depends, in large part, upon the continued funding of these government programs and upon our ability to obtain contracts under these programs. There are several factors that could materially affect our government contracting business, including the following:

• Changes in and delays or cancellations of government programs, requirements or appropriations;

• Budget constraints or policy changes resulting in delay or curtailment of expenditures relating to the services we provide;

• Curtailment of the use of government contracting firms;

• Changes in the political climate with regard to the funding or operation of the services we provide;

• The adoption of new laws or regulations affecting our contracting relationships with the Federal, state or local governments;

• Unsatisfactory performance on government contracts by us or one of our subcontractors, negative government audits or other events that may impair our relationship with the Federal, state or local governments;

• A dispute with or improper activity by one of our subcontractors; and

• General economic or political conditions.

These and other factors could cause government agencies to delay or cancel programs, to reduce their orders under existing contracts, to exercise their rights to terminate contracts or not to exercise contract options for renewals or extensions. Any of these actions could have a material adverse effect on our revenues or timing of contract payments from these agencies.

Our revenue from commercial clients is significant, and the credit risks associated with certain of these clients could adversely affect our operating results

During the nine months ended June 29, 2003, we derived approximately 45.5% of our net revenue from commercial clients. We rely upon the financial stability and credit worthiness of these clients. To the extent the credit quality of these clients deteriorates or these clients seek

bankruptcy protection, our ability to collect our receivables, and ultimately our operating results, may be adversely affected.

On July 2, 2001, our client, Metricom, Inc. (“Metricom”), filed for protection under Chapter 11 of the U.S. Bankruptcy Code. At the time of filing, we had outstanding accounts receivable with Metricom in the aggregate amount of $38.3 million. In the third quarter of fiscal 2001, we took a charge in that amount to provide a reserve for the Metricom receivable. We have received partial settlement payments in the aggregate amount of approximately $7.9 million and anticipate receiving an additional $1.3 million in the upcoming months. This recovery was offset by additional costs relating to that charge that were not reserved for, costs for defending our claim, and additional bad debt expense to reserve for solvency issues with other communications clients.

The consolidation of our client base could adversely impact our business

Recently, there has been consolidation within our current and potential commercial client base, particularly in the telecommunications industry. Future consolidation activity could have the effect of reducing the number of our current or potential clients, and lead to an increase in the bargaining power of our remaining clients. This potential increase in bargaining power could create greater competitive pressures and effectively limit the rates we charge for our services. As a result, our revenue and margins could be adversely affected.

The loss of key personnel or our inability to attract and retain qualified personnel could significantly disrupt our business

We depend upon the efforts and skills of our executive officers, senior managers and consultants. With limited exceptions, we do not have employment agreements with any of these individuals. The loss of the services of any of these key personnel could adversely affect our business. Although we have obtained non-compete agreements from certain principals and stockholders of companies we have acquired, we generally do not have non-compete or employment agreements with key employees who were not once equity holders of these companies. We do not maintain key-man life insurance policies on any of our executive officers or senior managers.

Our future growth and success depends on our ability to attract and retain qualified scientists and engineers. The market for these professionals is competitive and we may not be able to attract and retain such professionals. Stock options are a significant component of compensation. A reduction in our stock price could further impact our ability to attract and retain professionals.

Changes in existing laws and regulations could reduce the demand for our services

A significant amount of our resource management business is generated either directly or indirectly as a result of existing Federal and state governmental laws, regulations and programs. Any changes in these laws or regulations that reduce funding or affect the sponsorship of these

programs could reduce the demand for our services and could have a material adverse effect on our business.

Our revenue from agencies of the Federal government is concentrated, and a reduction in spending by these agencies could adversely affect our business and operating results

Agencies of the Federal government are among our most significant clients. During the nine months ended June 29, 2003, approximately 30.7% of our net revenue was derived from Federal agencies, of which 15.8% was derived from the Department of Defense (DOD), 8.0% from the Environmental Protection Agency (EPA), 3.5% from the Department of Energy (DOE) and 3.4% from various other Federal agencies. Some contracts with Federal government agencies require annual funding approval and may be terminated at their discretion. A reduction in spending by Federal government agencies could limit the continued funding of our existing contracts with them and could limit our ability to obtain additional contracts. These limitations, if significant, could have a material adverse effect on our business.

Our contracts with governmental agencies are subject to audit, which could result in the disallowance of certain costs

Contracts with the Federal government and other governmental agencies are subject to audit. Most of these audits are conducted by the Defense Contract Audit Agency (DCAA), which reviews our overhead rates, accounting systems and cost proposals. The DCAA may disallow costs if it determines that we accounted for these costs incorrectly or in a manner inconsistent with Cost Accounting Standards. A disallowance of costs by the DCAA, or other governmental auditors, could have a material adverse effect on our business.

Our business and operating results could be adversely affected by losses under fixed-price contracts or termination of contracts at the client’s discretion

We contract with Federal and state governments as well as with the commercial sector. These contracts are often subject to termination at the discretion of the client with or without cause. Additionally, we enter into various types of contracts with our clients, including fixed-price contracts. During the nine months ended June 29, 2003, approximately 38.0% of our net revenue was derived from fixed-price contracts and fixed-unit price contracts. These contracts protect clients and expose us to a number of risks. These risks include underestimation of costs, problems with new technologies, unforeseen costs or difficulties, delays beyond our control and economic and other changes that may occur during the contract period. Losses under fixed-price contracts or termination of contracts at the discretion of the client could have a material adverse effect on our business.

Our backlog is subject to cancellation and unexpected adjustments, and is an uncertain indicator of future operating results

Our gross revenue backlog as of June 29, 2003 was approximately $1.0 billion. We cannot guarantee that the gross revenue projected in our backlog will be realized or, if realized, will result in profits. In addition, project cancellations or scope adjustments may occur,

from time to time, with respect to contracts reflected in our backlog. For example, certain of our contracts with the Federal government and other clients are terminable at will. These types of backlog reductions could adversely affect our revenue and margins. Accordingly, our backlog as of any particular date is an uncertain indicator of our future earnings.

Our inability to find qualified subcontractors could adversely affect the quality of our service and our ability to perform under certain contracts

Under some of our contracts, we depend on the efforts and skills of subcontractors for the performance of certain tasks. Our reliance on subcontractors varies from project to project. During the nine months ended June 29, 2003, subcontractor costs comprised 23.5% of our gross revenue. The absence of qualified subcontractors with whom we have a satisfactory relationship could adversely affect the quality of our service and our ability to perform under some of our contracts.

Our industry is highly competitive and we may be unable to compete effectively

We provide specialized management consulting and technical services to a broad range of public and commercial sector clients. The market for our services is highly competitive and we compete with many other firms. These firms range from small regional firms to large national firms which have greater financial and marketing resources than ours.

We focus primarily on the resource management and infrastructure business areas. We provide services to our clients which include Federal, state and local agencies, and organizations in the private sector.

We compete for projects and engagements with a number of competitors that can vary from one to 100 firms. Historically, clients have chosen among competing firms based on the quality and timeliness of the firm’s service. We believe, however, that price has become an increasingly important factor. If competitive pressures force us to make price concessions or otherwise reduce prices for our services, then our revenue and margins will decline and our results of operations would be harmed.

We believe that our principal competitors include, in alphabetical order, AECOM Technology Corporation; Black & Veatch Corporation; Brown & Caldwell; Camp, Dresser & McKee Inc.; CH2M Hill Companies Ltd.; Earth Tech, Inc., a wholly-owned subsidiary of Tyco International Ltd.; Jacobs Engineering Group, Inc.; Mastec, Inc.; MWH Global, Inc.; Quanta Services, Inc.; Weston Solutions, Inc.; Science Applications International Corporation; The Shaw Group, Inc; TRC Companies, Inc.; URS Corporation; and Wireless Facilities, Inc.

Our services expose us to significant risks of liability and our insurance policies may not provide adequate coverage

Our services involve significant risks of professional and other liabilities which may substantially exceed the fees we derive from our services. Our business activities could expose

us to potential liability under various environmental laws such as the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). In addition, we sometimes assume liability by contract under indemnification agreements. We cannot predict the magnitude of such potential liabilities.

We currently maintain comprehensive general liability, umbrella professional and pollution liability insurance policies. We believe that our insurance policies are adequate for our business operations. The professional and pollution liability policies are “claims made” policies. Only claims made during the term of the policy are covered. Should our professional and pollution liability policies be terminated for any reason and we fail to obtain retroactive coverage, we would be uninsured for claims made after termination even if the claims were based on events or acts that occurred during the term of the policy. Additionally, our insurance policies may not protect us against potential liability due to various exclusions and retentions or an insurance carrier’s insolvency. In addition, if we expand into new markets, there can be no assurance that we will be able to obtain insurance coverage for the new activities or, if insurance is obtained, the dollar amount of any liabilities incurred could exceed our insurance coverage limits. Partially or completely uninsured claims, if successful and of significant magnitude, could have a material adverse effect on our business.

Adverse resolution of litigation may harm our operating results of financial condition

We are a party to lawsuits in the normal course of business. Litigation can be expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a particular lawsuit could have a material adverse effect on our business, operating results or financial condition. For additional information regarding current litigation, see Item 1, “Legal Proceedings,” contained in Part II of this Report.

We may be precluded from providing certain services due to conflict of interest issues

Many of our clients are concerned about potential or actual conflicts of interest in retaining management consultants. Federal government agencies have formal policies against continuing or awarding contracts that would create actual or potential conflicts of interest with other activities of a contractor. These policies, among other things, may prevent us from bidding for or performing contracts resulting from or relating to certain work we have performed for the government. In addition, services performed for a commercial client may create a conflict of interest that precludes or limits our ability to obtain work from other public or private organizations. We have, on occasion, declined to bid on projects because of these conflicts of interest issues.

Problems such as computer viruses or terrorism may disrupt our operations and harm our operating results

Despite our implementation of network security measures, our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems. Any such event could have a material adverse effect on our business,

operating results and financial condition. In addition, the effects of war or acts of terrorism could have a material adverse effect on our business, operating results and financial condition. The terrorist attacks in New York and Washington, D.C. on September 11, 2001 disrupted commerce and intensified the uncertainty of the U.S. and other economies. The continued threat of terrorism and heightened security and military action in response to this threat, or any future acts of terrorism, may cause further disruptions and create further uncertainties. To the extent that such disruptions or uncertainties result in delays or cancellations of customer contracts, our business, operating results and financial condition could be materially and adversely affected.

Our international operations expose us to risks such as foreign currency fluctuations

During the nine months ended June 29, 2003, we derived approximately 1.7% of our net revenue from the international marketplace. Some contracts with our international clients are denominated in foreign currencies. As such, these contracts contain inherent risks including foreign currency exchange risk and the risk associated with expatriating funds from foreign countries. If our international revenue increases, our exposure to foreign currency fluctuations may also increase. We periodically enter into forward exchange contracts to mitigate foreign currency exposures.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Please refer to the information we have included under the heading “Market Risks” in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on such evaluation, such officers have concluded that our disclosure controls and procedures are effective as of the end of such period in identifying, on a timely basis, material information required to be disclosed in our reports filed or submitted under the Exchange Act.

There have been no changes during the period covered by this Report in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to certain claims and lawsuits typically filed against the engineering and consulting profession, primarily alleging professional errors or omissions. We carry professional liability insurance, subject to certain deductibles and policy limits, against such claims. Management is of the opinion that the resolution of these claims will not have a material adverse effect on our financial position, results of operations or cash flows.

On December 2, 2002, a jury in Washington County Court in Bartlesville, Oklahoma handed down a $4.1 million verdict against us in our dispute with Horsehead Industries, Inc., doing business as Zinc Corporation of America. We have filed an appeal in this matter, and are also pursuing other legal alternatives related to the case. However, because a verdict has been rendered, we established a $4.1 million reserve for this matter in selling, general and administrative expenses in the consolidated statement of income for the year ended September 29, 2002.

Item 6. Exhibits and Reports on Form 8-K.

a. Exhibits

3.1 Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 1, 1995).

3.2 Bylaws of the Company, as amended to date (incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, No. 33-43723).

3.3 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 4, 1998).

3.4 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.4 to the Company’s Quarterly Report on Form 10-Q as amended for the fiscal quarter ended April 1, 2001).

10.1 Credit Agreement dated as of March 17, 2000 among the Company and the financial institutions named therein (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2000).

10.2 First Amendment dated as of April 9, 2001 to the Credit Agreement dated as of March 17, 2000 among the Company and the financial institutions named therein (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2001).

10.3 Second Amendment dated as of August 13, 2001 to the Credit Agreement dated as of March 17, 2000 among the Company and the financial institutions named therein (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001).

10.4 Third Amendment dated as of February 28, 2002 to the Credit Agreement dated as of March 17, 2000 among the Company and the financial institutions named therein (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002).

10.5 Fourth Amendment dated as of April 18, 2003 to the Credit Agreement dated as of March 17, 2000 among the Company and the financial institutions named therein (incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2003).

10.6 Note Purchase Agreement dated as of May 15, 2001 among the Company and the purchasers named therein (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2001).

10.7 First Amendment dated as of September 30, 2001 to the Note Purchase Agreement dated as of May 15, 2001 among the Company and the purchasers named therein (incorporated herein by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001).

10.8 Second Amendment dated as of September 30, 2001 to the Note Purchase Agreement dated as of May 15, 2001 among the Company and the purchasers named therein (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001).

10.9 1989 Stock Option Plan dated as of February 1, 1989 (incorporated herein by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-1, No. 33-43723). *

10.10 Form of Incentive Stock Option Agreement executed by the Company and certain individuals in connection with the Company’s 1989 Stock Option Plan (incorporated herein by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1, No. 33-43723). *

10.11 Executive Medical Reimbursement Plan (incorporated herein by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1, No. 33-43723).*

10.12 1992 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 1993).*

10.13 Form of Incentive Stock Option Agreement used by the Company in connection with the Company’s 1992 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 1993).*

10.14 1992 Stock Option Plan for Nonemployee Directors (incorporated herein by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 1993).*

10.15 Form of Nonqualified Stock Option Agreement used by the Company in connection with the Company’s 1992 Stock Option Plan for Nonemployee Directors (incorporated herein by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 1993).*

10.16 Employee Stock Purchase Plan (as amended through May 31, 2003).

10.17 Form of Stock Purchase Agreement used by the Company in connection with the Company’s Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 1994).

10.18 2002 Stock Option Plan (incorporated herein by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001).*

10.19 Form of Incentive Option Agreement used by the Company in connection with the 2002 Stock Option Plan (incorporated herein by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001).*

10.20 2003 Outside Director Stock Option Plan (incorporated herein by reference to Exhibit 10.20 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2003).*

10.21 Form of Option Agreement used by the Company in connection with the 2003 Outside Director Stock Option Plan (incorporated herein by reference to Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2003).*

10.22 Registration Rights Agreement dated as of September 26, 2001 among the Company and the parties listed on Schedule A attached thereto (incorporated herein by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001).

10.23 Registration Rights Agreement dated as of September 26, 2001 among the Company and the parties listed on Schedule A attached thereto (incorporated herein by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001).

10.24 Registration Rights Agreement dated as of March 25, 2002 among the Company and the parties listed on Schedule A attached thereto (incorporated herein by reference to Exhibit 10.30 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002).

31.1 Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract or compensatory arrangement.

b. Reports on Form 8-K

On May 22, 2003, we filed with the Securities and Exchange Commission a Current Report on Form 8-K/A. The item reported in the Form 8-K/A was Item 7 (Financial Statements and Exhibits), which related to the acquisition of substantially all of the assets of (i) Foster Wheeler Environmental Corporation and (ii) Hartman Consulting Corporation, a wholly-owned subsidiary of Foster Wheeler Environmental Corporation. The date of the Form 8-K was March 7, 2003.

On July 24, 2003, we filed with the Securities and Exchange Commission a Current Report on Form 8-K. The items reported in the Form 8-K were Item 7 (Financial Statements and Exhibits) and Item 9 (Regulation FD Disclosure), which related to the press release dated July 22, 2003, titled “Tetra Tech Reports Third Quarter 2003 Earnings.” The date of the Form 8-K was July 23, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: August 13, 2003		TETRA TECH, INC.


	By:	/s/ Li-San Hwang
		Li-San Hwang
		Chairman of the Board of Directors and Chief Executive Officer
		(Principal Executive Officer)


	By:	/s/ David W. King
		David W. King
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Operations

Three Months Ended
June 30, 2002

Nine Months Ended
June 30, 2002

Pro Forma Nine Months Ended

June 29, 2003

June 30, 2002

Infrastructure

Resource
Management

Historical
Infrastructure

Historical
Communications

Subtotal
Infrastructure

Total

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Percentage of Net Revenue

Percentage of Net Revenue

Percentage Relationship to Net Revenue

Liquidity and Capital Resources

Recently Issued Financial Standards

Market Risks

RISK FACTORS

Our industry is highly competitive and we may be unable to compete effectively

SIGNATURES

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Operations

Three Months Ended June 30, 2002

Nine Months Ended June 30, 2002

Pro Forma Nine Months Ended

June 29, 2003

June 30, 2002

Infrastructure

Resource Management

Historical Infrastructure

Historical Communications

Subtotal Infrastructure

Total

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Percentage of Net Revenue

Percentage of Net Revenue

Percentage Relationship to Net Revenue

Liquidity and Capital Resources

Recently Issued Financial Standards

Market Risks

RISK FACTORS

Our industry is highly competitive and we may be unable to compete effectively

SIGNATURES

Three Months Ended
June 30, 2002

Nine Months Ended
June 30, 2002

Resource
Management

Historical
Infrastructure

Historical
Communications

Subtotal
Infrastructure