Good morning and thank you for joining the Tetra Tech Earnings Call. By now, you should have received a copy of the press release. If you have not, please contact the company's corporate office at 626-351-4664. With us today from management are Dan Batrack, Chairman and Chief Executive Officer; and Steve Burdick, Chief Financial Officer. They will provide a brief overview of the results and will then open up the call for questions. During the course of the conference Tetra Tech management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements concerning future events and Tetra Tech's future financial performance. The statements are only predictions and may differ materially from actual future events or results. Tetra Tech's Form 10-K and 10-Q reports to the Securities and Exchange Commission identify certain risk factors that could cause actual results to differ materially from the forward-looking statements. Tetra Tech undertakes no duty to update forward-looking statements. In addition, since management will be presenting some of non-GAAP financial measures as references, the appropriate GAAP financial reconciliations are posted in the Investor Relations section of Tetra Tech's website. At this time, I would like to inform you that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answer after the presentation. With that, I would now like to turn the call over to Dan Batrack. Please go ahead, Mr. Batrack.

Great, thank you very much, Ashley. And good morning and welcome to our Second Quarter of Fiscal Year 2016 Earnings Conference Call. While Steve Burdick, our Chief Financial Officer, will present the specifics of our financials, I will start with a brief overview of the company and some of our key financial metrics for this past quarter. I am very pleased to announce that we not only completed the acquisition of Coffey in mid-January, but that this will be the first quarter that we've included Coffey in our financial reporting. The integration is going very well and it actually exceeded our expectations for revenue contribution in the second quarter. I will be specifically highlighting their contribution to our financial performance, which will help you see both how our new and our underlying business is performing. So during the quarter, we did have some one-time charges associated with the transaction and integration costs that we incurred, which Steve Burdick, our Chief Financial Officer, will describe in much more detail later in this presentation. I will now present the performance of our ongoing operations, and I will note that the financial comparisons that I'm going to present will be on a constant-currency basis, which we believe best reflects our performance as a company. So for the second quarter, Tetra Tech generated solid performance from our ongoing operations, with strong growth in both our top- and our bottom-line metrics. Our overall revenue was $617 million for the quarter, which is up 15% from the prior year. Net revenue was $476 million, which is up 14% from the prior year, and that revenue generated an operating income of $35 million, which is up 29% from last year as a result of our strong margin performance from both of our operating segments. The associated diluted…

Thank you, Dan. So before I present the financial results for Q2, I would like to briefly walk through a reconciliation of our ongoing operations, which Dan just spoke to, our GAAP financials. So as a reminder, our ongoing operations reflect our financial results, excluding RCM and any one-time charges or benefits. Also, a full reconciliation of our GAAP results to our ongoing operations is included in our Q2 earnings release. So for the second quarter of fiscal 2016, revenue for our ongoing operations totaled $617 million and net revenue was about $476 million. Including RCM, our revenue was $627 million and net revenue was $479 million on a GAAP basis. Our operating income, cash from operations, and earnings per share were all impacted by the various charges incurred in the second quarter, so, first, we had an earn-out adjustment in the amount of about $2 million or about $0.02 on an EPS basis as a result of improved results from certain of our prior acquisitions. Next, and by far the most significant, where the costs associated with the Coffey transaction. The acquisition and integration costs aggregated to $16 million, which was about 26% or $0.26 on an EPS basis. Of this total, we paid out $12 million in cash that affected our cash from operations. Approximately half of the total was for transaction costs which related primarily to fees for investment banking, as well as legal and other professional costs. The remaining half was for integration charges, such as severance and real estate consolidation. In addition, a $1.9 million was incurred for a prepayment penalty on some higher-cost debt from Coffey that we eliminated and this had about a $0.03 impact to EPS. So I do want to point out that our EPS was impacted more significantly compared to…

Great. Thank you very much, Steve. I would now like to review Tetra Tech's growth strategy with you. We have three primary areas or categories that are driving our growth. The first is our foundational markets, and these are areas that we are already recognized as a market leader. These are areas that are providing us predictable and reliable revenues as we go forward and really are the foundation and the building blocks of the company's growth activities. The second is an areas where we are actually seeing faster growth, this is areas where there is new opportunities due to changes in the marketplace, and these are changes such as new regulatory requirements or areas where our clients are actually investing more funds because of economic reasons. I will give an example of that in a moment. And the third is in areas of emerging markets, and this is where we are applying new technologies and really the cutting edge of Tetra Tech leading with science that is going to be the new areas of the future of our business. These are areas that are just emerging now, but are actually going to be the growth engines that are going to move Tetra Tech forward. And I would now like to discuss an example of each of these areas in a bit more detail for you. Now I would like to first highlight international development. This is an absolutely excellent market for us and this is where we can provide our differentiated services in water, infrastructure, and environment that help communities adapt and prepare for climate change all around the world. We're in an absolutely excellent position now as a major provider to the three major funding agencies of international development around the world. First and foremost, it is USAID…

[Operator Instructions] And the first question comes from Tahira Afzal from KeyBanc.

This is Sean [ph] on for Tahira today. Thanks for taking my questions. So first is just -- it is great to see the Coffey integration tracking ahead of schedule, but I was hoping you guys could expand on just the degree of variance in Coffey's contribution this quarter versus what you guys had expected a quarter ago? And also if you could expand a little bit on this pretty notable margin expansion you guys have planned for the second half of the year and how your assumptions around Coffey have changed within guidance?

Good question, Sean. Let me start with the first one, which is the performance in the revenue contribution in second quarter from Coffey and how it exceeded our expectation. I do realize that 90 days ago, one quarter ago, we had forecasted or anticipated the contribution of roughly $25 million of net revenue for the quarter, for our second quarter, and the reality is, with the quarter over, it actually contributed $0.60, so it was really quite a variance. Now it is nice when the variances are on the positive side like that, but I will wind the clock back a bit to our last investor conference call. The last call we had, which was at the end of January, Coffey had been with us a total of 10 days, that's number one. And number two, it was our intent to actually move quickly -- I hate to use the word aggressively, but I will call it quickly and definitively to initiate restructuring activities, and you can see from the costs that we incurred during the quarter, we actually did that. Now the dollars that we incurred in integration or restructuring were really in two areas; one was office integrations. We actually did consolidate offices, consolidate buildings and facilities, which resulted in about close to half of that charge. And we expected -- actually, I expected significant disruption associated with closing offices and moving people. The second is we were going to downsize, which we did do, a significant number of corporate staff within the Coffey organization in order to allow efficiencies with respect to IT, HR, accounting, and I will also say management in order to streamline the business, and it was my concern in our forecast that that would actually have the potential to be significant in disruptions…

Thanks for that very detailed response. Just second one for me is just looking into the second half of the year, I am just trying to flesh out what your organic revenue growth outlook is, just trying to think about what should be probably some easier comparisons for Tetra Tech's more challenged oil and gas markets. So any kind of flavor you can give on your organic expectations for this year, and to the extent you can comment, how does that trajectory look into 2017?

I will certainly share with you our forecast of what we expect here in Q3 and Q4. Let's just call it the second half of the fiscal year. We think that we will, if you take and actually calculate out our Q3 guidance and it is not too difficult to take our actuals for Q1/Q2, take our forecast for Q3 and subtract it from Q4 and get all of our numbers. I am sure you have done that. And it actually calculates out at a 3% to 5% organic growth rate for the second half of the year. You are right; part of it is attributable to easier comps, and I will also say not only on oil and gas because we have actually done quite well. Our year-ago comps aren't that easy on oil and gas because they performed very well. But I will say the comps actually get quite a bit better on the on the federal side because the Department of Defense reductions has a bit of a self-regulating process. As they get smaller, the impact to us becomes smaller, so a percent reduction on a smaller number is less of an impact. But to be specific, our forecast for the second half is a 3% to 5% organic growth rate.

Okay, and so you guys -- do you think that accelerates into 2017? Even just qualitatively, it would be really helpful to hear your internal expectations for the longer term.

Well, we really are not going to -- we really are really trying to stay away from 2017 guidance. That is going to come up in just two quarters from now. It is coming up quick. So I think I would abstain from providing any 2017 forecast. But I will say, just based on the backlog, we're certainly in good position going into the second half, and we will provide a pretty detailed update on that when we provide our 2017 guidance.

Fair enough. Thanks so much, guys.

Great. Thank you, Sean.

And your next question comes from the line of Andy Wittmann from Baird.

Hey guys, good morning. On the Department of Defense work, what is it that is funding that work up? You guys talked about contract capacity being up and the outlook feels pretty good. What is the feedback you're getting from the customer? And what is the likelihood and the confidence that you have in that breaking loose to help that second-half growth rate you were just talking about?

It is a great question, Andy. That's a great question, and it is not lost on me that I think I had stated the last two investor calls for the past two quarters that I had expected Department of Defense and the federal area to begin to pick up. First of all, let me just provide a little bit of a backdrop. This is work that is not going away, so it is not a decision to either move forward with a construction project or a platform of some activity or not. This is mostly associated with environmental compliance and investigation assessment and cleanup activities at different bases around the US and internationally. The bases didn't clean themselves up. They haven't gone away. They're primarily driven by regulatory directives and timing. Now the regulatory timing has continued to slip to the right. There have been different reasons for that, access of funding or availability of priority of the programs. I will say that, again, the programs have not gone away. They haven't cleaned themselves up, and furthermore, these are not projects or programs that we've lost to competitors and somehow we have been unsuccessful. I assure you I would be quite open and candid if I felt that somehow our competitive position has changed. So I do think what has to take place is some of these programs actually have to get started. A lot of it is driven by regulatory requirements and timing or third parties. It has been -- I will use the word disappointingly slow in getting started. I continue to see positive signs with respect to our positions. I hope to have much better actual news this next quarter, but I will tell you the contract capacity, the work, these are bases and facilities that we are on. We are well positioned and we have great relationships with our clients, and so I would say, and I'm going to add the word cautiously, I am cautiously optimistic we will still see this turn. I don't see our DoD work actually turning into a material positive year-over-year increase, but I do see these reductions that have been double digits in the federal Department of Defense abating and actually getting closer to flat, both because of comparables and because of new work that should get released.

Great, that's helpful. Then on your oil and gas business, I was hoping you could give us a little bit more detail about what's happening there perhaps north of the border and south of the border and what you're seeing in those business today and the confidence that you have that they can continue to remain down just slightly, like you said in your prepared comments.

It is also an area -- and I would say that while the federal work I just talked about is significant, we have been in that business a long time and the fundamental drivers really haven't changed. Oil and gas is quite different. We do see an extremely uncertain business outlook right now, but I will tell you what we are seeing internally. North of the border, which is Canada and it is mostly Alberta, things have actually gone quite well for us. We have been very fortunate to have a large pipeline project that has been a high priority. It has been funded. It is a multiyear project. We're a bit more than halfway through and we do have funding through most of 2017, so we have good visibility for the next -- essentially the next fiscal year, so I would say that is going well. No doubt that we have to replace that program. We have others that are high interest, and we don't at this moment have a high level of visibility out into fiscal year 2018. I'm not sure anybody in this market does. But, so, we are in pretty good shape between now and then, with backlog essentially in place for the next fiscal year. So Canada is looking well, at least on the midstream, where we are doing turnkey programs. The front end with respect to the oil sands, where we are doing design engineering work, continues to be challenged, but most of that has been taken out. So I would say Canada as far as confidence and visibility sort of at an 80% level is actually quite good. The U.S. has actually been different because we do not do turnkey work in the U.S., we do not do construction management, and we do…

Thanks, Dan, that's helpful. Technical question for Steve here. Just on tax rate, with more international contribution, you mentioned some things that weren't deductible in this quarter. Does it feel like the 32% tax rate is a little bit high? And where do you think -- if it is too high, as you look forward, after Coffey gets integrated, where do you think that new tax rate could get to?

I think just to be clear, our effective tax rate in the second quarter was -- I will call it a onetime blip for some of these discrete items, and it bumped it up to about 70%. But on an ongoing basis, I think 32% makes sense. And with an expansion of some of our international operations, we hope to bring that down from 32%. But for the time being and over the shorter term, we think that's a reasonable number.

Thank you very much, Andy. And one item I would like to just note with respect to Steve -- and I'm certainly not a tax person at all -- but I think there is sometimes a misperception about Coffey, that it's an Australian firm, that it's all international revenue. Well, they are contributing roughly, on a trailing basis, $400 million on a gross revenue and maybe $250 million to $300 million on a net. A very large portion of their business -- about a third of their entire business -- is actually US domiciled. It is actually work that resides here in the United States, it's work that is done for the US federal government, and it has the full and fair tax rate of the United States, not the international component. So this international acquisition doesn't carry with it a full international tax component. So just to put that in context.

That's a good point. Thanks, Dan.

And your next question comes from the line of Corey Greendale with First Analysis.

Good morning.

Good morning, Corey.

So first question I had, I'm looking at the slide on the municipal water infrastructure opportunity. Can you help us translate those CapEx spend dollar amounts into kind of market opportunity for Tetra Tech?

Yes, that's a great question and I know that's one that I myself ask of our engineers all the time. I would say that, generally what we do is, we take a look at total CapEx -- so this is a CapEx or capital-expenditure project, is typically from cradle to grave, from its initial permitting all the way through commissioning. And the biggest part of that, of course, is the construction activity. Typically this portion would be about 10%. So if you take a look at the environmental permitting and design, I know that depending on your reference of different engineering reference materials, you'll see about 10% of that is expended other than the construction activity. And so the O&M is different again; that's a different budget. So I would say the $200 billion would be about $20 billion -- would be clear, and areas that would be clearly areas that we could participate in. But we do work that -- we have participated and will do work on a turnkey basis under the right contractual terms. And so it is possible we can also participate in some of the remaining work that's done on a turnkey basis, given the right terms, financial terms and risk profiles, or areas where we've been a long-term incumbent and have done all the upfront work. So I would say, minimum, 10% of that work, and certainly participating in some of the other, Corey.

Okay, that's helpful. And then, on the guidance, if you look at the fact that you raised the low end of the EPS guidance, is it fair to say that the primary drivers of that were Coffey going better than expected, and share repurchases? Or did you change your forecast meaningfully for kind of the existing business?

No, the reason we brought the bottom end up and really didn't change, I guess by definition it moved the midpoint up slightly; it moved it up $0.025. But the reason we've moved the bottom end up is we do have six months behind us. We performed at the upper end of the range in both of those quarters, and we really think that some of the risk is off the table, because half of the year is behind us and our performance is already in the book, so to speak. So that's why we brought the bottom up. We didn't really materially change the Coffey contribution. If you take a look at what we had indicated 90 days ago with respect to Coffey, we expected they would contribute $0.05, and we've increased that range slightly because the first period has gone well with Coffey. So we increased it to a range of $0.05 to $0.07. So that incremental difference is $0.02. So that's really not what changed it. It was really just having a very first strong half of the year.

Okay. And I got one for Steve; I apologize if I missed this, but have you given an updated forecast for cash flow from ops for the year?

No, we believe that when you exclude or add back some of these one-time charges and cash that it took to integrate Coffey, we've kept our cash from operations at the same amount that we've had this whole year.

Okay.

So that remains unchanged.

Okay. And then, the last one I have is, Dan, can you just talk a little bit about -- these are -- Coffey is a larger-than-typical acquisition, just kind of what the acquisition landscape looks like, both in terms of multiples and your appetite?

We have a very strong appetite for firms that fit our strategic direction. So if it's firms that could help round out growth into -- for international development around the world that would increase our position and competitive -- competitiveness in health and education, it would be a quite a high priority and we are quite hungry for that, our appetite, so to speak. That would actually fit quite well. If it's smart water, we're actually highly desirous of that and are looking to actually get into this market. I know that sometimes analysts and investors think of things in innings and kind of where are we in this. I would say the smart water, we are at the top of the first inning. This is actually very, very early. And it's our objective to get in early and to get in in front and to actually carve out an area that takes our domain knowledge at the national, federal level, combine it with our Big Data and Internet of Things with other partners and actually become a leader. So, we're quite interested. I would say that both of those areas do command higher premiums. We're not the only one with this view of the entire world, so they are higher valuations. And we have, over the past 10 years, remained quite disciplined in our financial modeling and our financial amount that we would use to acquire a firm. Sometimes they are north of where we are interested in and it means it's more expensive and we'll have to remain patient and disciplined. So there are firms out there. I would say things are getting expensive in the areas that we are most interested in, but there are those that actually are looking to join a market leader and actually lead it for us as individuals in both INDUS and Coffey are. So we think we're the right company for the right intellectual thought leaders. And for those that want to auction their company and go for the maximum price and leave, we're probably not the right firm. So I think there is plenty that actually fit our model but that's not every firm out there.

Got it. All right, thanks very much.

And the next question comes from the line of Tate Sullivan with Sidoti.

Thank you. Can you give an update on -- are you out of fixed-price construction or how long do you have to work on the remaining projects there? And how long do you think it will take you to collect receivables to get down to your receivables target of 75 days outstanding?

Yes, great question, and good morning, Tate. Thank you for the question. RCM, our construction management division that we closed down from an operational standpoint, began about a year and a half ago. We're down to essentially two primary projects. I think I had said in previous calls -- and it was our expectation, internally, that we would be done at the end of the calendar year of 2016, which would have been Q1 of 2017. Because of -- as is typical with construction projects, because of delays of access to right of ways, decisions by customers and clients, one of the projects do appear that it will continue well into calendar year 2017 and probably toward the end of the summer or fall, so really the end of 2017. But let me quantify that with respect to how much, how big, what are we doing? We have about $40 million of total work to perform; that's our backlog number in the construction management division. I think that probably half to two-thirds of that will be done this fiscal year, so let's say by this coming fall. But we do have an amount of $10 million to $15 million that will continue on one project probably through most of fiscal year 2017. I do believe that financially we do not think that -- the scope hasn't changed, our financial forecast to complete that work hasn't changed. Just the time schedule has changed. And so, it will keep the receivables out there for that. Those contracts are almost by definition milestone driven. You don't get paid for the last amount until you hit either a milestone or complete the project. So I think that the final release of that seven days that is associated with both the performance and claims will carry us through -- it will continue to come down, but it will still be present at some level all the way through fiscal year 2017.

Thank you for that. And then, real quickly on interest charges, I think your effective rate was around 2% or 1.6% in the previous quarter. Are you planning to do more pay down of any Coffey debt? Are you all done with that effort? And what's a good rate to look at for your interest charges going forward?

Yes, so I think that on an ongoing basis that 1.6% to 2% is probably -- is the right range. What we did for Coffey is that we did take all of their outstanding debt and we did pay all that down and replaced it with our credit facility. And that was -- that has benefited all of us from the standpoint that our credit facility, debt, and interest rate was quite a bit lower. So we did finish that in Q2.

Okay, thank you very much.

Thank you very much, Tate.

And the next question comes from the line of David Rose with Wedbush.

Good morning, thank you for taking my call.

Thank you, David.

Just a couple -- I was just trying to get better sense of what was the source of the incremental earn-out expense in the quarter, which part of the business, which acquisition?

It was two different acquisitions that we had over the past couple years, and as they've come along, we re-estimated what they were going to be able to earn and therefore the earn-outs did change. So it wasn't any one singular one.

Was it a particular group -- a particular end market?

They were both in the RME group.

Okay. All right, and then in the last quarter, you highlighted in the 10-Q, there was some -- you incorporated language of a chance of writing down some of the goodwill for the waste management group. Any of the group grew less than 2%, and it seems like the group had some good performance this last quarter, if I'm not mistaken. Were there a set of particular contracts? Is this sustainable or is this kind of one-time in nature?

I think the -- you know, the waste management group, we do -- well, let me back up. For all of the goodwill for all of our different acquisitions and subgroups, we look at that on a quarterly basis, and the waste management group was performing better and therefore the goodwill and any of the earn-outs related to that group are -- the goodwill was at risk and the earn-outs have increased from some of those acquisitions.

Okay. So this is sustainable, then, from your point of view, not lumpy?

Yes.

Okay, great. And then lastly, if you can just talk about the backlog in Coffey. You've had a good working relationship with them before the acquisition, or at least you knew each other well. So I'm just trying to get a better sense as to how comfortable you are with the backlog today, as you are 90 days into this, and maybe just kind of give us a sense of -- that there won't be any surprises as you work through the backlog or there are operating practices that -- upon which that you are improving in the quarter. Maybe just provide a little bit of color on that. That would be great.

David, that's a good question. Let me start with the first is the backlog of Coffey. We did go through it and scrub it quite well. The one thing that is interesting is we're working through the Coffey backlog and they are much more heavily focused with respect to the work they are performing for international development then Tetra Tech. And what I mean by that is that about 65% of their revenues were derived from international development between Australia, the United Kingdom, and the United States. Now these projects that are awarded through USAID, AusAID, and UKAid are often funded with larger amounts and for longer durations. And so, we actually did go through their backlogs, made sure they met Tetra Tech standards -- because I think I've spoken on these calls in the past that I believe we have the most stringent, conservative method of identifying backlog, which is we have to have a contract in hand. So we did this for all the Coffey activities. Do they have a signed contract? Number two, is it funded? Do the clients have the funding and have they committed it? And number three, have they authorized us to go spend it? And so, those are the three criteria that we've held not only ourselves to, but new acquisitions, which was Coffey. And that's what represented the number I referred to on my presentation earlier, which was more than $300 million. We don't think that when that work has been committed, as we've talked about at Tetra Tech, if you say -- when your question is, is it at risk? I guess that means, is it possible that it would be de-obligated [Cross Talks].

I meant the margin risk. I'm sorry, just to be clear.

I think the margin risk is actually not in the backlog of the work that we've received. It was actually in their ability to -- how much it cost them to perform the work, and I think the reductions that we took in the second quarter and the additional leverage that we're going to get with our own back office to actually decrease the cost on the work and increase the efficiency, which means utilization and focus on the work, I think that a low margin is not inherently embedded in that work. I will say that it's not cost plus some low number. A lot of their work is P&M, or cost plus with caps, and we've actually done a significant amount to make sure that we've removed the indirect costs below the caps so that we can actually realize the margins that the clients want to provide us and that we are actually realizing it, not just throwing it out the back door because of absorbing it in administrative costs. So we've taken that off the table. So I feel pretty good about that.

Okay, that's really helpful. Thank you very much, Dan. I appreciate it.

All right. Thank you, David.

And we do have a question from Ryan Cassil from Seaport Global.

Hi guys, thanks for taking my question.

Great. Thank you, Ryan.

Looking at municipal, I think you guys said municipal revenues were the strongest they've been and it was broad based across the US. But perhaps you could give us a sense of order growth rates and maybe what those are, and the trend there as well.

I think you got it right; I'm glad we were clear on that. It was very broad based. I'd say that we've had nice growth everywhere from New England, the state of New York; we've actually seen some nice growth in the city of New York itself in the different boroughs. Things have gone strong, which is kind of a new growth area that we haven't seen. I will say that the primary driving municipalities and city for us have generally been along the South, historically, so that's everywhere from Tampa, Miami, the Florida coast, all the way across Texas has been quite strong -- has been particularly strong for us, and in fact it was highlighted on one of the presentation slides with respect of funding for water programs. And of course, out here in California with water capture, we use the drought flood control. So the South has been the primary driving component for it. The one thing that's both good and probably bad for visibility for analysts is its lots and lots of projects for lots of cities that range on projects from a few hundred thousand dollars up to several million dollars. There's very few individual projects when you talk about size that are so large that we actually press-release them. There's been a few exceptions to that, where they're larger desalination projects or something that actually measures a single project $10 million or larger. But the natural inherently -- the inherent funding stream of these projects are typically smaller over larger, longer periods and longtime incumbency. So what's very helpful for us and reassuring is when you see a fundamental groundswell of growth, these are places that you are working, and more cities, more projects. And typically if you do a good job, you do become the historical, institutional knowledge base for these locations. It does create a very large barrier to entry to others. So when we're at these cities -- because it's cheaper to select someone who already has all the data, has done the preliminary design, and so it is very broad based. It's literally over hundreds of cities. And what I'm most encouraged about, and I know our teams are, is some new successes based on new technology and better responsiveness that we've been providing to some of the municipal clients in the North, and particularly Northeast and other areas where we hadn't been before. So we're glad to provide a new alternative for some of the clients along the eastern seaboard and the North where we hadn't been before. And it's working out quite well.

Okay, so is it fair to say that the pipeline for municipal orders is growing more broadly?

Yes, yes, that's absolutely true, Ryan.

Okay, great. And then the last one for me, just looking at the full year guidance. I think last quarter you talked about in order to get to the high end, federal work really needed to pick up through the remainder of the year. And it sounds like those out there may be a bit more muted, but you didn't take down the high end. So perhaps you could give us some color on what could still get you there in the remainder of the year.

It's -- you've got it right. What we need to do is we do need to see federal pickup to put us at the high end. We did leave it unchanged because we do still think it's possible we could hit the high end. But what we would need is a material pickup in federal, and while we're doing quite well on the international development, which is USAID, and the civilian activities, which is FAA, EPA, National Science Foundation and these folks, but they are doing well, we do need the Department of Defense to pick up materially to drive us to the top end. We would need to get to the top end to watch -- to have our oil and gas work actually move from being flat year over year to see some growth there, and we do think that's possible. There are those programs out there. And really, our municipal and commercial work, if they just continue as they are, that would be sufficient. So the biggest movement would be on the Federal side. We need a material change on the pickup, which is still possible. We do have the opportunities, we do have the contract vehicles. And we would need a bit of pickup in oil and gas to take us to the top end.

Okay, thanks, guys.

Great. Thank you, Ryan.

And our final question comes from the line of Noelle Dilts from Equity Analysts.

Noelle Dilts with Stifel Nicolaus, hi. One quick question, could you just comment quickly on some of the steps that you're taking, particularly from a management perspective, to ensure that the Coffey integration goes smoothly?

We've actually made Coffey, the Coffey management, as we do in all acquisitions, part of the executive management team. So for instance, there is some of the key individuals at the top of their organization, so there -- on the geotechnical side, we've actually promoted the line managers who were the client leads, the people running their key programs, into key regional manager positions that report directly to business group president Ron Hsu, who has actually relocated to Australia. So we've actually elevated both their direct contact to executive management within Tetra Tech, and let me just put that in context, what that means. So there are five regional managers that would be in Australia and the Asia-Pacific who report to Ron Hsu and Ron reports to me. So these individuals at the regional level are one level removed from myself. So it's not as if it's far away and difficult and has many different filters. This has visibility and, you could in some ways say, accountability, but I would say responsibility and reward, based on performance at that level. So I feel quite good with respect to visibility and integration. As I mentioned earlier, we do have management training teams down there right now actually working with them. We're going to them at their project sites and at their locations. I would say we're integrating their USAID groups with ours. I actually was last week with their groups when we had a collective, global international development group for tactical plans for execution of existing work, pursuit of new activities, and integration of all functions across our international development. That's not just being talked about; that's actually on the ground being executed now. And I would say we've also -- we're doing the same thing in the UK with their activities. So, we're trying to actually not just transfer them to our accounting system or our finance systems and see how it works after a quarter; we are actually integrating their fabric of their management into ours and make them part of our executive management team, working shoulder to shoulder. So those are some of the steps that we're taking to see that the integration goes -- you know, there's no such thing as perfectly seamless, but that it actually goes well and we get the desired results out that we want. And, actually, we get the desired results they want out of this integration, which is making them more competitive and successful in the markets they're in. So Noelle, those are some of the things we're doing.

Great, thanks. That's very helpful.

And this will conclude the Q&A session. I will now turn the conference back over to Dan Batrack to conclude.

Great. Thank you very much, Ashley. I want to thank every one of you for your interest in Tetra Tech, for your questions; I think they're really quite good. I want to thank you for your patience and your following through the tracking in our reconciling these one-time charges. I believe this is the first time that I recall that at Tetra Tech we've ever actually had specific callouts for actual acquisition-related charges in a given quarter, so I know this is a bit unusual. But I'd tell you what -- the reward to the company and to our investors in going through this will more than be met, and I'm really quite happy both with the Coffey, the INDUS, but those are things that happened yesterday. The reason that they joined us is to make us more competitive as we go forward and we're looking for that translation to be almost immediate. And I really look forward to talking with you all next quarter and giving you an update on how that's progressing. And with that, I'll look forward to talking to you next quarter. Thank you.

Ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may disconnect now.