Tetra Tech, Inc.

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Tetra Tech, Inc.

670 N. Rosemead Boulevard
Pasadena, California 91107
U.S.A.
(626) 351-4664
Fax: (626) 351-5291
Web site: http://www.tetratech.com

Public Company
Incorporated: 1966
Employees: 3,800
Sales: $382.93 million
Stock Exchanges: NASDAQ
Ticker Symbol: WATR
NAIC: 54133 Engineering Services; 54169 Other Scientific & Technical Consulting Services; 54161 Management Consulting Services; 54138 Testing Laboratories; 513322 Cellular & Other Wireless Telecommunications

Tetra Tech, Inc. is a leading specialist in the field of environmental restoration and hazardous waste cleanup. The company also develops telecommunications systems and designs and builds infrastructure related to its environmental projects. One of the company’s primary customers is the United States government, particularly the Environmental Protection Agency and the Air Force. Other work is performed for state government agencies, foreign countries, and private businesses. The company has grown dramatically since the early 1990s through a series of acquisitions. Tetra Tech and its subsidiaries have over 110 offices worldwide.

1960s Beginnings

Tetra Tech was founded in 1966 by a group of engineers that included Henri Hodara, Dr. Bernard Le Mehaute, and Nicholas Boratynski, the latter of whom was chosen to be the company’s first president. The new company’s purpose was to perform engineering services for marine and energy related projects. This work included designing ports, harbors, marinas, and other coastal and waterways structures, as well as performing water quality control engineering and the management of gas and oil exploration projects. Other early work reportedly involved research for the Department of Defense, calculating the effects of an offshore nuclear explosion.

During the company’s early years its income grew steadily, with annual revenues topping $5 million by 1973. In December of that year Tetra Tech purchased Hydro Products, Inc., a manufacturer of underwater television systems, nuclear reactor inspection camera systems and remote-controlled deep-sea vehicles. Sales of Hydro’s products soon accounted for half of Tetra Tech’s income. By 1976 the combined companies’ annual sales had grown to $18 million.

In January 1977 Tetra Tech offered 500,000 shares of common stock on the over-the-counter market, which in May was listed on the American Stock Exchange. The company had created several subsidiaries by this time including Tetra Tech International, headquartered in Arlington, Virginia, and Hydro Products International. The company’s overseas work ranged from surveying and clearing shipping channels in Oman to designing a harbor in Korea. Other international business included selling underwater vehicles and television equipment to oil exploration companies. A major customer was the government of Saudi Arabia.

Tetra Tech’s work in the United States in the late 1970s included developing methods of predicting flood levels and frequency for the Flood Insurance Administration, a study of the causes of acid rain for the Electric Power Research Institute, and performing environmental impact studies for the Alaskan gas pipeline. Much work was being done for the U.S. Navy as well, including studies on facets of submarine warfare and the installation of Hydro Products equipment on the Sealab underwater research station. The company had opened almost two dozen offices by this time, mostly in the United States. Although revenues and the company’s contract backlog continued to grow, various complications were dragging down profits. These included the loss of a deep-sea exploration prototype and problems receiving payments from Saudi Arabia. Tetra Tech posted its first annual loss in 1979, but steps were quickly taken to decrease risk and the company was back in the black by the end of 1980.

Sale to Honeywell in 1982

In 1982 the company was purchased by Honeywell, Inc. for $33.3 million, while Tetra Tech International (TTI) was sold to a separate group at this time. Stories later surfaced about TTIs work for the government of Oman, which included virtually running the Musandam peninsula portion of the country. This rugged area was isolated from the rest of Oman and was close to American enemy Iran. TTI president James Critchfield had worked for the CIA prior to 1974, and while TTFs work officially involved improvement of water distribution, intelligence-gathering activities were also suspected.

Under the parentage of Honeywell in the 1980s, one newly emerging Tetra Tech business was data systems, and in 1984 the company signed a three-year, $30 million contract with the Navy to install hundreds of computer systems on ships and command centers. During the mid-1980s the company’s gas exploration and products divisions were gradually phased out, while the engineering business was growing steadily. In 1988 Honeywell sold Tetra Tech’s engineering division, and its name, to a consortium consisting of company employees and a Los Angeles investment firm, Riordan Venture Management. The company’s data systems division was meanwhile retained by Honeywell, and company co-founder Henri Hodara stayed behind to head this operation. The new, independent Tetra Tech would now be run by Dr. Li-San Hwang, who had been with the company since 1967.

Hwang had fled with his family from Communist China to Taiwan as a child and had emigrated to the United States in the early 1960s to study engineering. He began his career with Tetra Tech as the company’s lowest-paid employee, but quickly rose through the ranks and was named director of engineering in 1972, vice-president in 1974, and later senior vice-president of operations. Following the company’s acquisition by Honeywell he had been instrumental in shifting Tetra Tech’s focus from coastal engineering to environmental engineering and hazardous waste management. When Tetra Tech split off from Honeywell, Hwang oversaw its growth in these fields and would later coordinate a string of acquisitions that increased the company’s size dramatically.

The first of these came in 1988 when GeoTrans, Inc. was purchased. GeoTrans specialized in investigating and containing ground water pollution at hazardous waste sites. Tetra Tech was moving more and more into the field of hazardous waste cleanup and soon signed several large contracts with the U.S. Navy to perform studies on the waste problems of bases that were being closed. The company’s business was steadily growing under the leadership of Hwang, with Tetra Tech also signing environmental restoration contracts with the states of Oregon and California, among others.

1991: Tetra Tech Goes Public Again

In December 1991 the company went public yet again, offering 1.4 million shares of stock on the NASDAQ exchange. The sale was a success, and the stock’s price began to climb. The company was soon signing more major contracts, including one with the U.S. Air Force worth $125 million over five years, and another for $60 million with the Army Corps of Engineers. Both of these involved investigating and resolving environmental problems at a variety of contaminated sites around the United States. Tetra Tech also utilized the cash generated by its stock sale to acquire more subsidiaries. In December 1993 the company purchased Simons, Li & Associates, Inc., a California-based water resources engineering firm that specialized in urban drainage, flood control, bridge waterway design, and other types of civil engineering. Simons, Li did business in the United States and abroad, generating annual revenues of $3.3 million. Tetra Tech’s own revenues had leapt from $51.5 million in 1991 to $74.5 million in 1993.

The year 1994 saw the acquisition of Simon Hydro-Search Inc., a Denver company specializing in water resource management. The $6 million deal further strengthened Tetra Tech’s capabilities in this area. Several years later Hydro-Search was merged into GeoTrans to form HSI-GeoTrans, Inc. Another large contract was signed with the U.S. Air Force in August 1994, one worth up to $100 million over five years. Tetra Tech was to provide environmental assessment, planning, restoration, and compliance at 15 Air Mobility Command bases and installations. Revenues for 1994 reached another peak, topping $96.5 million.

The company’s business at this time continued to consist mainly of environmental restoration and hazardous waste cleanup. Tetra Tech’s work typically involved making an assessment of a particular situation and defining goals and priorities for the cleanup process. The company was less involved in the actual cleanup work than in the planning end, though it did see some projects through to closure. Tetra Tech also provided analysis of risks for new construction projects with the goal of minimizing future environmental problems. Other work included the creation of integrated resource management programs for military bases.

Company Perspectives:

Tetra Tech provides services to protect and improve the quality of life through responsible resource management, sound infrastructure, and rapid communications ability. The company continuously adapts its services to provide for society’s changing needs and to meet customer expectations. The three business areas in which the company provides capabilities to its customers are critical to sustaining quality of life and in offering expanding horizons for its services in the future.

1995: Acquisition of EMI

In September 1995 Tetra Tech purchased PRC Environmental Management, Inc., familiarly known as EMI. EMI provided hazardous waste management and cleanup for a wide range of U.S. and international clients. Its annual revenues of $100 million and order backlog of $500 million made it nearly the equal of Tetra Tech in size. EMI was integrated directly into Tetra Tech’s operations. The acquisition gave the company a much stronger national and international profile, adding over 30 regional offices in the United States alone.

The EMI purchase was closely followed by the acquisition of KCM, Inc., a water quality engineering firm. KCM, based in the Pacific Northwest, had been founded in 1943 and, with its subsidiary CMI, provided a variety of services that ranged from waste and surface water management to transportation projects and building design. KCM had annual revenues of $22 million. The year 1995 was another record year for Tetra Tech, with revenues bolstered by both newly signed contracts and the income of new subsidiaries. Sales topped $120 million, with a net income of over $7.5 million.

In early 1996 Tetra Tech announced that its various companies were in the process of signing contracts with federal and state government agencies worth nearly $800 million. Two-thirds of the company’s business at this time came from the federal government. A pair of acquisitions were completed during the year, those of IWA Engineers, Inc. and FLO Engineering, Inc. IWA specialized in design of water and wastewater plants, and also did work for such entertainment business clients as Knott’s Berry Farm and Universal Studios. FLO, a Colorado-based firm, was involved in studies of the environment in harsh or mountainous areas. Much of its work was done for the U.S. Bureau of Reclamation.

Acquisitions continued to come fast and furious in 1997, as did the signing of major contracts. In March Tetra Tech announced a $230 million, ten-year deal to perform a variety of tasks at Environmental Protection Agency Superfund sites in the Midwest. Also that month, the company acquired SCM Consultants, Inc. The Kennewick, Washington-based SCM was a designer of various water and wastewater systems, as well as related infrastructure and other types of facilities including schools and penal institutions. SCM had annual revenues of $6 million.

Two months later Tetra Tech purchased Whalen & Company, a wireless telecommunications development firm that operated worldwide. The $66 million Whalen acquisition was the start of a new direction for Tetra Tech, a venture into the growing business of telecommunications. The fields of hazardous waste and water management were expanding less rapidly than they had during the 1980s and early 1990s, and the company was seeking to reduce its reliance on the federal government. Telecommunications were an important aspect of many of the projects the company took on, and development of cell phone transmission towers and other telecommunications facilities were also easy to incorporate into the company’s business.

Another wireless firm, CommSite Development Corporation, was purchased in July 1997. CommSite’s activities included site acquisition and construction management for the telecommunications industry. Late in 1997 Halliburton NUS Corp. joined the Tetra Tech family and was renamed Tetra Tech NUS. NUS provided environmental and waste management services to private industry and government agencies, and was noted for its ability to successfully manage difficult projects.

The company purchased three new businesses in 1998: CDC Engineering; McNamee, Porter & Seeley, Inc.; and Sentrex Cen-Comm Communications Systems, Inc. The first two were wastewater and engineering service companies, while Sentrex concentrated on television and data networking services. Sentrex, headquartered in Toronto, was Canada’s largest provider of such services, with annual revenues of $28 million. Tetra Tech also formed a new division, the Infrastructure Southwest Group, by merging CDC into IWA, FLO, and Simons, Li & Associates. Annual sales for 1998 reached $382.9 million, more than triple the figure of just three years earlier.

In February 1999 Tetra Tech purchased environmental consulting and engineering firm McCulley, Frick & Oilman. In June two additional companies came aboard, D.E.A. Construction Co. of Denver and Baha Communications of Las Vegas. D.E.A., with revenues of $13 million, provided network infrastructure engineering and construction services. Baha, which had $6 million in sales, specialized in the construction and maintenance of communications infrastructure. Tetra Tech also announced the signing of several major contracts, including one for $75 million to perform environmental cleanup and maintenance at Tinker Air Force Base in Oklahoma City. Others were a $100 million deal with the Department of Energy to facilitate safe storage of nuclear weapons, and a $35 million-plus arrangement with the EPA to implement provisions of the Resource Conservation and Recovery Act.

As it neared the end of the 1990s, Tetra Tech was still growing under CEO Li-San Hwang through acquisitions and the negotiation of numerous major contracts. Its reliance on the federal government remained high, but through its newly purchased telecommunications and infrastructure services companies it was branching out into new territory. Since going public in 1991 the company had seen annual revenues grow by more than sevenfold, and its backlog of orders was also at an all-time high. The company appeared well positioned to maintain its status as a leading environmental and hazardous waste services provider, and its future in the telecommunications and infrastructure businesses looked promising.

Principal Subsidiaries

KCM Inc.; Tetra Tech EM, Inc.; HSI GeoTrans, Inc.; GeoTrans Wireless; McNamee, Porter, & Seeley, Inc.; SCM Consultants, Inc.; Whalen & Company, Inc.; McCulley, Frick & Gilman, Inc.; Sentrex Communications Company; Tetra Tech NUS, Inc.; D.E.A. Construction Co.; Baha Communications, Inc.