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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _________ TO __________
Commission file number 1-9947
TRC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-0853807
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5 WATERSIDE CROSSING
WINDSOR, CONNECTICUT 06095
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (860) 298-9692
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
- ---------------------------------------- ---------------------------------------
COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. (X)
The aggregate market value of the registrant's voting stock held by
non-affiliates on September 8, 2000, was approximately $89,912,000.
On September 8, 2000, there were 7,082,942 shares of Common Stock of the
registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following documents are incorporated by reference into
this Report: (1) registrant's 2000 Annual Report to Shareholders (Part II); and
(2) registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held October 27, 2000 (Part III).
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PART I
ITEM 1. BUSINESS
TRC Companies, Inc. (the Company) together with its wholly-owned subsidiaries
and equity investments provides technical, financial risk management and
construction services to industry and government primarily in the United States
market. The Company's main focus is in the areas of infrastructure improvements
and expansions, environmental management and information technology.
Traditionally much of the Company's work was derived from the environmental
service business and was related to satisfying local, state and federal
regulatory requirements. In early 1998, new TRC management initiated a growth
plan directed toward maintaining the traditional business while increasing
growth by also focusing on economically driven markets in the following four
business areas:
- - Environmental Services
- - Infrastructure
- - Information Management
- - Engineered Financial Solutions
Environmental Services includes pollution control, waste management, auditing
and assessment, permitting and compliance, design and engineering and natural
and cultural resources management. This has been the Company's historic focus
and the Company has an established niche in the high growth energy
deregulation market. TRC's infrastructure development business targets
geographic areas where rehabilitation of existing systems and population
growth lead to expansion opportunities and continued infrastructure
development. The Company provides customized information management systems
to assist its customers' to utilize data more cost effectively. Within the
Engineered Financial Solutions business area, the Company combines financing
and/or financial risk management with technology (e.g., Exit Strategies(R),
Brownfields redevelopment) to optimize customer solutions. The Company is the
leading supplier of environmental remediation outsourcing through its
trademarked Exit Strategies program. This value-added outsourcing program
provides added rewards to the Company by partnering with a customer to share
site environmental risks or to transfer those risks to TRC entirely. The
Company manages its own risks through innovative problem solving, the
application of premium charges for the transfer of risks and administrative
costs from the customer to TRC and, when appropriate, insurance policy
partnerships with companies such as American International Group (AIG).
CUSTOMERS
The Company's customers include companies in the chemical, automotive,
petroleum, construction, transportation, mining, waste management and other
industries, financial institutions, public utilities, and local, state and
federal government agencies. Many of the Company's commercial customers are
major multinational corporations. The following customers represent more than 50
percent of the Company's net service revenue:
AES Enterprises Hanson PLC Southern Energy
ASARCO Lockheed Martin Corporation Tosco
Burlington Northern Santa Fe RR Meridian Gold The Trump Organization
Centex Corporation Mobil U.S. Government
City of Frisco, Texas New York City - EPA
Connecticut Resources Recovery - School Construction Authority - DOD
Authority - Department of Transportation - FAA
Consolidated Edison - Department of Parks Unocal
Duke Energy New York State Dept. of Transportation Waste Management
Express Pipeline Orange County, CA
General Electric PG&E National Energy Group
General Motors
2
For fiscal 2000, 1999 and 1998, the federal government (principally the U.S.
Environmental Protection Agency and the U. S. Department of Defense) accounted
for 9%, 19% and 20%, respectively, of the Company's net service revenue. No
other customer represented 10% or more of the Company's net service revenue in
any of those years.
MARKETING AND SALES
The Company believes that it attracts customers primarily on the basis of its
reputation for providing value-added and cost-effective solutions to customer
needs and its ability to respond to meet customer schedules. The marketing
activities for the Company's services are generally conducted by senior
professional staff members and executives (seller-doers) who are recognized
experts in our business areas and regularly meet with existing and potential
customers to obtain new business. These activities are typically conducted
through the Company's network of regional resource centers for local
customers and by business sector leaders for national customers. In addition,
corporate and subsidiary marketing departments coordinate representation at
trade shows, prepare sales literature and develop and place advertising.
BACKLOG
At June 30, 2000, the Company's net contract backlog (excluding the estimated
costs of pass-through charges) was approximately $80 million, as compared to
approximately $58 million at June 30, 1999. The Company expects that
approximately 60% of this backlog will be completed in fiscal 2001. In
addition to this net contract backlog, the Company holds open order contracts
from various customers and government agencies. As work under these contracts
is authorized and funded, the Company includes this portion in its net
contract backlog. While most contracts contain cancellation provisions, the
Company is unaware of any material work included in backlog which will be
canceled or delayed.
EMPLOYEES
As of June 30, 2000, the Company had approximately 1,000 full and part-time
employees. Approximately 85% of these employees are primarily engaged in
performing environmental engineering and consulting, process and civil
engineering, financial risk management, construction management and
information management services for customers. Many of these employees have
master's degrees or their equivalent and a number have Ph.D. degrees. The
Company's professional staff includes registered professional engineers,
geologists, hydrologists, hydrogeologists, meteorologists, toxicologists,
chemists, industrial hygienists, archaeologists, biologists, construction
specialists, computer programmers, systems analysts, attorneys and others
with degrees and experience that enables the Company to provide a full range
of services. The balance of the Company's employees are engaged primarily in
executive, administrative and support activities. None of the Company's
employees are represented by a union. The Company considers its relations
with its employees to be very good.
COMPETITION
The markets for many of the Company's services are highly competitive. There are
numerous professional architectural, engineering and consulting firms and other
organizations which offer many of the services offered by the Company. The
Company is subject to direct competition with respect to the services it
provides from many other firms, ranging from small local firms to large national
firms having substantially greater financial, management and marketing resources
than the Company. Competitive factors include reputation, performance, price,
geographic location and availability of technically skilled personnel.
The Company focuses on market areas where the Company can be a leading provider
due to staff skills, reputation, financial strength and/or geographic presence.
For example, the Company believes that it is one of the top 2 or 3 providers of
permitting services for the rapidly growing deregulated energy business.
Further, the Company appears to be the market leader in providing complete
outsourcing of site remediation services through its Exit Strategy program.
3
GOVERNMENT CONTRACTS
The Company has contracts with the U.S. Government which are subject to
examination and renegotiation. Contracts and other records of the Company
have been examined through June 30, 1993. The Company believes that
adjustments resulting from such examinations or renegotiation proceedings, if
any, will not have a material impact on the Company's operating results,
financial condition or cash flows.
REGULATORY MATTERS
The Company's businesses are subject to various rules and regulations at the
federal, state and local government levels. The Company believes that it is
in compliance with these rules and regulations. On occasion, the Company has
not bid on projects in certain jurisdictions due to licensing requirements.
In addition, some projects are not bid due to bonding or insurance
requirements which the Company elects not to meet. The Company has not
experienced any significant limitations on its business as a result of
regulatory, bonding or insurance requirements. The Company does not believe
any changes in law or changes in industry practice would impose conditions to
bidding on certain projects which the Company may not be able to satisfy.
PATENTS, TRADEMARKS AND LICENSES
The Company has a number of trademarks, service marks, copyrights and licenses,
none of which are considered material to the Company's business as a whole.
RESEARCH AND DEVELOPMENT
Historically, research and development costs were charged to operations as
incurred by the Company's instrumentation subsidiary, which was sold in July
1998, and amounted to approximately $187,000 in fiscal 1998. There were no
research and development costs in fiscal 2000 and 1999.
ENVIRONMENTAL AND OTHER CONSIDERATIONS
The Company does not believe that its own compliance with federal, state and
local laws and regulations relating to the protection of the environment will
have any material effect on capital expenditures, earnings or competitive
position.
ITEM 2. PROPERTIES
The Company provides its services through a network of 35 offices located
nationwide and offices in Lima, Peru and Santiago, Chile. The Company does
not own any real estate and leases approximately 276,000 square feet of
office and laboratory space to support these operations. The Company believes
that these leased properties have been adequately maintained, are in
satisfactory operating condition and are suitable and adequate for the
business activities conducted therein.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are not a party to any pending legal
proceedings in which an adverse decision, in the opinion of the Company, would
have a material adverse effect upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information on "Market for the Registrant's Common Equity and Related
Stockholder Matters" is contained on pages 6 and 21 of the Company's 2000
Annual Report to Shareholders and such information is incorporated herein by
reference. On September 8, 2000, there were approximately 2000 holders of the
Company's common stock, of which 335 were shareholders of record.
4
ITEM 6. SELECTED FINANCIAL DATA
Information on "Selected Financial Data" is contained on page 5 of the Company's
2000 Annual Report to Shareholders and such information is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" is contained on pages 7 through 9 of the Company's 2000 Annual Report
to Shareholders and such information is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information on "Quantitative and Qualitative Disclosures About Market Risk" is
contained on page 9 of the Company's 2000 Annual Report and such information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements of TRC Companies, Inc. and
Report of Independent Accountants set forth on pages 10 through 20 of the
Company's 2000 Annual Report to Shareholders are incorporated herein by
reference:
Consolidated Statements of Operations, Cash Flows and Changes in
Shareholders' Equity - Years ended June 30, 2000, 1999 and
1998
Consolidated Balance Sheets - June 30, 2000 and 1999
Notes to Consolidated Financial Statements
Report of Independent Accountants, dated August 15, 2000
The supplementary data regarding quarterly results of operations is contained on
page 6 of the Company's 2000 Annual Report to Shareholders and such information
is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
5
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the Company's Directors and Executive Officers is contained on
pages 3 through 9 of the Company's Proxy Statement for its 2000 Annual Meeting
of Shareholders to be held October 27, 2000, and such information is
incorporated herein by reference.
The following table presents the name and age of each of the Company's executive
officers, their present positions with the Company and date of appointment
thereto, and other positions held during the past five years, including
positions held with other companies and with subsidiaries of the Company:
Present Position and Other Positions Held
Name and Age Date of Appointment During Last Five Years
------------ --------------------- -----------------------
Richard D. Ellison.........(61) Chairman, President and Chief Senior Vice President and Chief Engineer
Executive Officer (April 1997)
John H. Claussen...........(51) Senior Vice President, TRC Senior Vice President and General
Companies, Inc. and President, TRC Counsel
Environmental Corporation (February
1997)
Harold C. Elston, Jr........(56) Senior Vice President (March 1998), Vice President and Treasurer
Chief Financial Officer (May 1999)
and Secretary (March 1998)
Glenn E. Harkness.........(52) Senior Vice President, TRC Vice President, TRC Environmental
Environmental Corporation Corporation
(September 1997)
Miro Knezevic..............(50) Senior Vice President, TRC
Companies, Inc. (August 1998)
Executive Vice President, TRC
Environmental Solutions, Inc. (March
1994)
Michael C. Salmon........(45) Senior Vice President, TRC General Manager, Southern California
Companies, Inc. (June 2000), Senior Region, IT Corporation
Vice President, TRC Environmental
Solutions, Inc. (April 1997)
NO FAMILY RELATIONSHIP EXISTS BETWEEN ANY OF THE INDIVIDUALS NAMED ABOVE.
6
ITEM 11. EXECUTIVE COMPENSATION
Information on "Executive Compensation" is contained on pages 6 through 9 of the
Company's Proxy Statement for its Annual Meeting of Shareholders to be held
October 27, 2000, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information on "Security Ownership of Certain Beneficial Owners and Management"
is contained on pages 2 through 5 of the Company's Proxy Statement for its
Annual Meeting of Shareholders to be held October 27, 2000, and such information
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on "Certain Relationships and Related Transactions" is contained on
page 12 of the Company's Proxy Statement for its Annual Meeting of Shareholders
to be held October 27, 2000 and such information is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND SCHEDULE
1. The Consolidated Financial Statements and Report of Independent
Accountants set forth on pages 10 through 20 of the Company's 2000
Annual Report to Shareholders are incorporated by reference into
this report by Item 8 herein.
2. The Consolidated Financial Statement Schedule and Report of
Independent Accountants on such schedule are included in this
report on the pages indicated.
PAGE
----
Report of Independent Accountants on Financial Statement Schedule 10
Schedule II - Valuation and Qualifying Accounts 11
All other schedules are omitted because they are not applicable,
not required or the information required is included in the
financial statements or notes thereto.
(b) REPORTS ON FORM 8-K
On May 15, 2000, the Company filed a Form 8-K (amended under cover of
Form 8-K/A on July 14, 2000) reporting that on January 7, 2000, the
Company had completed the acquisition of the outstanding capital stock
of Hunter Associates, Inc.
On June 2, 2000, the Company filed a Form 8-K (amended under cover of
Form 8-K/A on August 3, 2000) reporting that on May 23, 2000, the
Company had completed the acquisition of Lowney Associates.
7
(c) EXHIBITS
3.1 Restated Certificate of Incorporation, dated November 18,
1994, incorporated by reference to the Company's Form 10-K for
the fiscal year ended June 30, 1995.
3.2 Bylaws of the Company, as amended, incorporated by reference
to the Company's Form S-1 as filed on April 16, 1986,
Registration No. 33-4896.
10.1 Restated Stock Option Plan, dated May 6, 1998, incorporated by
reference to the Company's Form 10-K for the year ended June
30, 1998.
10.2.1 Termination Policy for Members of TRC Key Person Group, as
adopted on December 1, 1998, incorporated by reference to the
Company's Form 10-K for the fiscal year ended June 30, 1999.
10.2.2 TRC Key Person Bonus Plan for Fiscal Years 1999 - 2003, as
adopted on March 22, 1999, incorporated by reference to the
Company's Form 10-K for the fiscal year ended June 30, 1999.
10.3 Third Amended and Restated Revolving Credit Agreement, by and
among TRC Companies, Inc. and its subsidiaries and Fleet
National Bank (formerly BankBoston, N.A.) dated July 10, 1998,
incorporated by reference to the Company's Form 10-K for the
year ended June 30, 1998.
10.3.1 Amendment No. 1 to the Third Amended and Restated Revolving
Credit Agreement, by and among TRC Companies, Inc. and its
subsidiaries and Fleet National Bank (formerly BankBoston,
N.A.) dated July 1, 1999 incorporated by reference to the
Company's Form 10-K for the year ended June 30, 1999.
10.3.2 Amendment Nos. 2 and 3 to the Third Amended and Restated
Revolving Credit Agreement by and among TRC Companies, Inc and
its subsidiaries and Fleet National Bank, dated March 14, 2000
and May 19, 2000, respectively.
13 Annual Report to Shareholders for the fiscal year ended June
30, 2000. (Only those portions expressly incorporated by
reference are deemed to be filed herewith.)
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
8
27 Financial Data Schedule (for SEC purposes only).
As to any security holder requesting a copy of this Form 10-K, the Company will
furnish any exhibit indicated above as being filed with the Form 10-K upon
payment to the Company of its expenses in furnishing such exhibit.
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRC COMPANIES, INC.
Dated: September 28, 2000 By: /s/ Richard D. Ellison
---------------------
Richard D. Ellison, Ph.D., P.E.
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
/s/ Richard D. Ellison Chairman, President and September 28, 2000
- -------------------------------------- Chief Executive Officer
Richard D. Ellison
/s/ Edward G. Jepsen Director September 28, 2000
- --------------------------------------
Edward G. Jepsen
/s/ Richard J. McGuire, Jr. Director September 28, 2000
- --------------------------------------
Richard J. McGuire, Jr.
/s/ Edward W. Large Director September 28, 2000
- --------------------------------------
Edward W. Large
/s/ J. Jeffrey McNealey Director September 28, 2000
- --------------------------------------
J. Jeffrey McNealey
/s/ Harold C. Elston, Jr. Senior Vice President, September 28, 2000
- -------------------------------------- Chief Financial
Harold C. Elston, Jr. Officer and Secretary
10
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors
of TRC Companies, Inc.
Our audits of the consolidated financial statements referred to in our report
dated August 15, 2000, appearing on page 20 of the 2000 Annual Report to
Shareholders of TRC Companies, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/PricewaterhouseCoopers LLP
Hartford, Connecticut
August 15, 2000
11
TRC COMPANIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(IN THOUSANDS)
Additions
---------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end of
Description of period expenses accounts* Deductions** period
- -------------------------------------- ------------ ------------- ---------------- -------------- -------------
2000
Allowance for doubtful accounts $ 2,546 $ 2,934 $ 223 $ (2,498) $ 3,205
------------ ------------- ---------------- -------------- -------------
1999
Allowance for doubtful accounts $ 2,375 $ 725 $ 200 $ (754) $ 2,546
------------ ------------- ---------------- -------------- -------------
1998
Allowance for doubtful accounts $ 2,300 $ 1,129 $ 25 $ (1,079) $ 2,375
------------ ------------- ---------------- -------------- -------------
* Allowances from acquired businesses.
** Uncollectable accounts written off, net of recoveries.
12
TRC COMPANIES, INC.
Form 10-K Exhibit Index
Fiscal Year Ended June 30, 2000
Exhibit Sequential
Number Description Page Number
- ------- ----------- -----------
10.3.2 Amendment Nos. 2 and 3 to Third Amended and Restated 14
Revolving Credit Agreement, by and among TRC
Companies, Inc. and its subsidiaries and Fleet National Bank,
dated March 14, 2000 and May 19, 2000, respectively
13 Annual Report to Shareholders for the fiscal year 33
ended June 30, 2000
21 Subsidiaries of the Registrant 58
23 Consent of Independent Accountants 59
27 Financial Data Schedule (for SEC purposes only)
13