Tetra Tech Reports First Quarter Results

Tetra Tech, Inc. (NASDAQ:TTEK) today announced resultsfor the first quarter ended January 1, 2006. In the quarter, dilutedearnings per share ("EPS") from continuing operations, before theeffect of stock option expense under SFAS 123R, was $0.17 compared to$0.12 for the same quarter last year, a 41.7% increase. Diluted EPSfrom continuing operations, after the effect of stock option expenseunder SFAS 123R, was $0.15. Revenue was $341.2 million, and revenue,net of subcontractor costs, was $229.8 million in the quarter.
In thousands (except EPS data) Three Months Ended
-------------------------------
Jan. 1, 2006 Jan. 2, 2005
---------------- --------------
Income from continuing operations
before the effect of SFAS 123R(a)(b) $ 9,549 $ 6,860
Income from continuing operations 8,488 6,860

Diluted EPS from continuing
operations:
Income from continuing operations
before the effect of SFAS 123R(a) $ 0.17 $ 0.12
Income from continuing operations $ 0.15 $ 0.12
--------------------------------------

(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.

First Quarter Results

Revenue for the first quarter was $341.2 million, up 10.2% from$309.7 million for the same quarter last year. Revenue, net ofsubcontractor costs, for the quarter was $229.8 million, up 1.7% from$225.9 million for the same quarter last year. Income from operationswas $17.1 million, up 21.8% from $14.1 million for the same periodlast year. Net income for the first quarter was $8.0 million, up 1.5%from $7.9 million for the same period last year. Diluted EPS from netincome was $0.14 compared to $0.14 for the same period last year.

Tetra Tech continued the wind-down and divestitures of non-corebusinesses in the first quarter and expects to complete the wind-downand divestitures of the remaining non-core businesses in the secondquarter. This resulted in $0.01 of diluted loss per share fromdiscontinued operations for the quarter. Tetra Tech may recognize again, if any, next quarter upon completing the divestiture ofbusinesses.
In thousands (except EPS data) Three Months Ended
-----------------------------
Jan. 1, 2006 Jan. 2, 2005
-------------- --------------
Revenue $ 341,192 $ 309,666
Revenue, net of subcontractor costs 229,759 225,867
Income from operations 17,123 14,056

Income from continuing operations 8,488 6,860
Income (loss) from discontinued
operations, net of tax (465) 1,043
------------- -------------
Net income $ 8,023 $ 7,903
============= =============

Basic EPS:
Income from continuing operations $ 0.15 $ 0.12
Income (loss) from discontinued
operations, net of tax (0.01) 0.02
Net income $ 0.14 $ 0.14
============= =============

Diluted EPS:
Income from continuing operations $ 0.15 $ 0.12
Income (loss) from discontinued
operations, net of tax (0.01) 0.02
Net income $ 0.14 $ 0.14
============= =============

Weighted average common shares
outstanding:
Basic 57,102 56,469
Diluted 57,641 56,977

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
-----------------------------
Jan. 1, 2006 Jan. 2, 2005
-------------- --------------
Income from continuing operations before
the effect of SFAS 123R $ 9,549 $ 6,860
Effect of SFAS 123R, net of tax (1,061) -
------------- -------------
Income from continuing operations 8,488 6,860
Income (loss) from discontinued
operations, net of tax (465) 1,043
------------- -------------
Net income -- as reported per GAAP $ 8,023 $ 7,903
============= =============

Diluted EPS:
Income from continuing operations
before the effect of SFAS 123R $ 0.17 $ 0.12
Effect of SFAS 123R, net of tax (0.02) -
------------- -------------
Income from continuing operations 0.15 0.12
Income (loss) from discontinued
operations, net of tax (0.01) 0.02
------------- -------------
Net income -- as reported per GAAP $ 0.14 $ 0.14
============= =============

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 for the second quarter of fiscal2006 to be in the range of $0.15 to $0.17, excluding the anticipatedgain from discontinued operations and before the effect of SFAS 123R.Revenue, net of subcontractor costs, for the second quarter isexpected to range from $220 million to $230 million. For fiscal 2006,guidance remains unchanged. Tetra Tech expects diluted EPS, before theeffect of SFAS 123R, to be in the range of $0.68 to $0.75 for fiscal2006. Revenue, net of subcontractor costs, for fiscal 2006 is expectedto range from $850 million to $950 million.

The effect of SFAS 123R on diluted EPS is expected to beapproximately $0.09 to $0.10 during fiscal 2006.

Webcast

Investors will have the opportunity to access a live audio-visualwebcast and supplemental financial information concerning the firstquarter results through a link posted on the Company's web site atwww.tetratech.com on January 26, 2006 at 8:00 a.m. (PST).

About Tetra Tech (www.tetratech.com)

Tetra Tech is a leading provider of consulting, engineering, andtechnical services. With over 7,500 associates located in the UnitedStates 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, 10-Q,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.