Tetra Tech Reports Second Quarter Results

Tetra Tech, Inc. (NASDAQ:TTEK) today announced resultsfor the second quarter ended April 2, 2006. Overall, the Companyachieved its earnings guidance and exceeded its revenue guidance forthe quarter. In the quarter, diluted earnings per share ("EPS") fromcontinuing operations, before the effect of stock option expense underSFAS 123R, was $0.16 compared to a loss of $1.73 per share for thesame quarter last year. Diluted EPS from continuing operations, afterthe effect of stock option expense under SFAS 123R, was $0.14. Revenuein the quarter was $318.9 million, up 7.2% from $297.5 million, andrevenue, net of subcontractor costs, was $237.7 million, up 7.6% from$220.9 million for the same quarter last year. Backlog at the end ofthe second quarter was $941 million, up 8.3% from $869 million at theend of the first quarter.
In thousands (except EPS data) Three Months Ended Six Months Ended
------------------ ------------------
April 2, April 3, April 2, April 3,
2006 2005(c) 2006 2005(c)
-------- --------- -------- ---------
Income (loss) from continuing
operations before the effect of
SFAS 123R(a)(b) $ 9,182 $(97,944) $18,731 $(91,084)
Income (loss) from continuing
operations 8,105 (97,944) 16,593 (91,084)

Diluted EPS from continuing
operations:
Income (loss) from continuing
operations before the effect
of SFAS 123R(a) $ 0.16 $ (1.73) $ 0.32 $ (1.61)
Income (loss) from continuing
operations $ 0.14 $ (1.73) $ 0.29 $ (1.61)

----------------------------------------------------------------------
(a) A non-GAAP financial measure; see "Non-GAAP Financial Measure"
below.
(b) Effective as of the beginning of fiscal 2006, the Company adopted
Statement of Financial Accounting Standards No. 123 (Revised 2004)
- Share-Based Payment ("SFAS 123R") using the modified prospective
application method. Accordingly, the results of operations for the
current fiscal period include expense related to the fair value of
its stock-based compensation awards.
(c) Reflects a non-cash impairment charge in the second quarter of
fiscal 2005 of $105.6 million for goodwill and other identifiable
intangible assets.

Second Quarter Results

Revenue in the quarter was $318.9 million, up 7.2% from $297.5million, and revenue, net of subcontractor costs, was $237.7 million,up 7.6% from $220.9 million for the same quarter last year. Incomefrom operations was $16.2 million compared to a loss of $121.8 millionfor the same period last year. The loss from last year was largely dueto a non-cash goodwill impairment charge. Net income for the secondquarter was $9.0 million compared to a net loss of $123.8 million forthe same period last year. In the quarter, diluted EPS from continuingoperations, before the effect of stock option expense under SFAS 123R,was $0.16 compared to a loss of $1.73 per share for the same quarterlast year. The Company earned $0.02 per diluted share for the quarteron discontinued operations, which included a gain on the sale of anon-core business. Diluted EPS from net income, which includes incomefrom discontinued operations and the effect of stock option expenseunder SFAS 123R, was $0.16 compared to a loss of $2.19 for the sameperiod last year.

Six Month Results

Revenue for the six months ended April 2, 2006 was $660.1 million,up 8.7% from $607.2 million for the same period last year. Revenue,net of subcontractor costs, for the first six months of fiscal 2006was $467.5 million, an increase of 4.6% from $446.7 million for thefirst six months of fiscal 2005. Income from operations was $33.3million compared to a loss of $107.8 million for the same period lastyear. Net income for the first six months of fiscal 2006 was $17.0million compared to a net loss of $115.9 million for the same periodlast year. Diluted EPS from net income for the first six months was$0.29 compared to a diluted loss per share of $2.05 for the sameperiod last year.
In thousands (except EPS data)
Three Months Ended Six Months Ended
-------------------- --------------------
April 2, April 3, April 2, April 3,
2006 2005 2006 2005
--------- ---------- --------- ----------
Revenue $318,892 $ 297,517 $660,084 $ 607,183
Revenue, net of
subcontractor costs 237,716 220,878 467,475 446,745
Income (loss) from
operations 16,224 (121,844) 33,347 (107,788)

Income (loss) from
continuing operations 8,105 (97,944) 16,593 (91,084)
Income (loss) from
discontinued operations,
net of tax 859 (25,889) 394 (24,846)
-------- --------- -------- ---------
Net income (loss) $ 8,964 $(123,833) $ 16,987 $(115,930)
======== ========= ======== =========

Basic EPS:
Income (loss) from continuing
operations $ 0.14 $ (1.73) $ 0.29 $ (1.61)
Income (loss) from discontinued
operations, net of tax 0.02 (0.46) 0.01 (0.44)
-------- --------- -------- ---------
Net income (loss) $ 0.16 $ (2.19) $ 0.30 $ (2.05)
======== ========= ======== =========

Diluted EPS:
Income (loss) from continuing
operations $ 0.14 $ (1.73) $ 0.29 $ (1.61)
Income (loss) from discontinued
operations, net of tax 0.02 (0.46) - (0.44)
-------- --------- -------- ---------
Net income (loss) $ 0.16 $ (2.19) $ 0.29 $ (2.05)
======== ========= ======== =========

Weighted average common
shares outstanding:
Basic 57,262 56,643 57,182 56,556
Diluted 57,806 56,643 57,724 56,556

Non-GAAP Financial Measure

Management of the Company believes that income before the effectof SFAS 123R is useful information because it allows investors toassess the Company's earnings trend. Such non-GAAP information is alsointegral to management's internal evaluation of the Company'sperformance. The following table reconciles the Company's reportedGAAP net income and EPS to the non-GAAP financial measure:

In thousands (except EPS data)
Three Months Ended Six Months Ended
------------------- --------------------
April 2, April 3, April 2, April 3,
2006 2005 2006 2005
-------- ---------- --------- ----------
Income (loss) from continuing
operations before the effect
of SFAS 123R $ 9,182 $ (97,944) $ 18,731 $ (91,084)
Effect of SFAS 123R, net of
tax (1,077) - (2,138) -
------- --------- -------- ---------
Income (loss) from continuing
operations 8,105 (97,944) 16,593 (91,084)
Income (loss) from
discontinued operations, net
of tax 859 (25,889) 394 (24,846)
------- --------- -------- ---------
Net income (loss) - as
reported per GAAP $ 8,964 $(123,833) $ 16,987 $(115,930)
======= ========= ======== =========
Diluted EPS:
Income (loss) from
continuing operations
before the effect of SFAS
123R $ 0.16 $ (1.73) $ 0.32 $ (1.61)
Effect of SFAS 123R, net of
tax (0.02) - (0.03) -
------- --------- -------- ---------
Income (loss) from
continuing operations 0.14 (1.73) 0.29 (1.61)
Income (loss) from
discontinued operations,
net of tax 0.02 (0.46) - (0.44)
------- --------- -------- ---------
Net income (loss) - as
reported per GAAP $ 0.16 $ (2.19) $ 0.29 $ (2.05)
======= ========= ======== =========

Business Outlook

The following statements are based on current expectations. Thesestatements are forward looking and the actual results could differmaterially. These statements do not include the potential impact ofcorporate transactions that may be completed after the date of thisrelease. The Business Outlook section should be read in conjunctionwith the information on forward-looking statements at the end of thisrelease.

Tetra Tech expects diluted EPS from continuing operations, beforethe effect of SFAS 123R, for the third quarter of fiscal 2006 to be inthe range of $0.18 to $0.19. Revenue, net of subcontractor costs, forthe third quarter is expected to range from $230 million to $240million. For fiscal 2006, Tetra Tech expects diluted EPS fromcontinuing operations, before the effect of SFAS 123R, to be in therange of $0.69 to $0.73. Revenue, net of subcontractor costs, forfiscal 2006 is expected to range from $900 million to $950 million.

The effect of SFAS 123R on diluted EPS is now expected to beapproximately $0.08 to $0.09 during fiscal 2006.

Webcast

Investors will have the opportunity to access a live audio-visualwebcast and supplemental financial information concerning the secondquarter results through a link posted on the Company's web site atwww.tetratech.com on May 4, 2006 at 8:00 a.m. (PDT).

About Tetra Tech (www.tetratech.com)

Tetra Tech is a leading provider of consulting, engineering, andtechnical services. With approximately 7,500 associates located in theUnited States and internationally, the Company supports commercial andgovernment clients in the areas of resource management andinfrastructure. Tetra Tech's services include research anddevelopment, applied science and technology, engineering design,program management, construction management, and operations andmaintenance.

Forward-Looking Statements

This news release contains forward-looking statements that aresubject to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995. These forward-looking statementsinclude information concerning future events and the future financialperformance of Tetra Tech that involve risks and uncertainties.Readers are cautioned that these forward-looking statements are onlypredictions and may differ materially from actual future events orresults. Readers are urged to read the documents filed by Tetra Techwith the SEC, specifically the most recent reports on Form 10-K, 10Q,and 8-K, each as it may be amended from time to time, which identifyrisk factors that could cause actual results to differ materially fromthe forward-looking statements. Among the important factors or risksthat could cause actual results or events to differ materially fromthose in the forward-looking statements in this release are:fluctuations in quarterly operating results; the impact of downturnsin the financial markets and reductions in government budgets;volatility of common stock value; concentration of revenues fromgovernment agencies and funding disruptions by these agencies; failureto properly manage projects; acquisition strategy risks; management ofgrowth strategy; use of the percentage-of-completion method ofaccounting; adverse resolution of an IRS examination; loss of keypersonnel or the inability to attract and retain qualified personnel;implementation of the enterprise resource planning system;international operations risks; credit risks associated withcommercial clients; violations of government contractor regulations;competitive bidding for government contracts; the affect of a negativegovernment audit; the inability to accurately estimate contract risks,revenue, and costs; backlog cancellation and adjustments; client baseconsolidation; failure of partners to perform on joint projects;inability to find qualified subcontractors; changes in existingenvironmental laws, regulations, or programs; competition; restrictivecovenants in debt agreements; risks of professional and otherliabilities; adverse resolution of litigation; conflict of interestissues; changes in accounting for equity-related compensation;expenses associated with corporate governance; and disruption ofoperations due to computer viruses or terrorism. Any projections inthis release are based on limited information currently available toTetra Tech, which is subject to change. Although any such projectionsand the factors influencing them will likely change, Tetra Tech willnot necessarily update the information, since Tetra Tech will onlyprovide guidance at certain points during the year. Readers should notplace undue reliance on forward-looking statements since suchinformation speaks only as of the date of this release.