Tetra Tech, Inc. (NASDAQ: TTEK) announced today an update of its third quarter 2013 outlook to reflect increased restructuring costs resulting from the previously announced weakness in Eastern Canada and mining, and new findings on certain project claims.
Tetra Tech plans to incur restructuring costs associated with its Eastern Canadian and mining operations in the third quarter 2013. These costs are now estimated to be approximately $50 million in the third quarter, approximately $40 million of which are non-recurring. This increase is principally related to increased severance and office closure costs to downsize these operations due to reduced project demand caused by poor economic conditions. Approximately two-thirds of these costs are associated with Eastern Canada, and approximately one-third are associated with mining operations. Based upon these anticipated results, Tetra Tech is performing a goodwill impairment test on its Eastern Canadian and mining operations, and will update investors on the test results in the third quarter earnings release.
In addition, Tetra Tech plans to incur charges to resolve certain project claims in its third quarter. During the quarter, Tetra Tech received adverse findings principally related to claims on four programs, and will consequently record a charge while it continues the dispute resolution processes. The claims are primarily related to change orders on lump-sum projects for certain U.S. federal and state government customers that are currently under significant budget pressure. These charges are estimated to be up to $45 million, most of which are associated with accounts receivable.
The charges will affect the revenue and profitability of all three reportable segments. In the third quarter, revenue, net of subcontractor costs, is now expected to range from $440 million to $490 million, and, based on these charges, diluted loss per share is expected to range from $0.30 to $0.50.
In addition, Tetra Tech’s Board of Directors has authorized the repurchase of up to $100 million of its common stock. Because the repurchases under the program are subject to certain pricing parameters, there is no guarantee as to the exact number of shares that will be repurchased under the program, or that there will be any repurchases pursuant to the program.