TRC COMPANIES INC /DE/ - FORM 8-K - EX-99.1 - FINANCIAL STATEMENTS AND EXHIBITS - February 2, 2011

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8-K - TRC COMPANIES INC /DE/trcform8kq2f11.htm
Exhibit 99.1

Investor Contact:
 
Company Contact:
Sharon Merrill Associates
Thomas W. Bennet, Jr., CFO
(617) 542-5300
(978) 970-5600
trr@investorrelations.com
tbennet@trcsolutions.com
 
TRC Announces Second-Quarter Fiscal 2011 Financial Results
 
Company Generates Operating Income of $2.9 Million on Net Service Revenue Growth of 11%
 
Lowell, MA, February 2, 2011 - TRC Companies, Inc. (NYSE: TRR), a recognized leader in engineering, consulting, and construction management services to the energy, environmental, and infrastructure markets, today announced financial results for the fiscal three and six month periods ended December 24, 2010.
 
Financial Highlights
 
Three Months Ended
 
Six Months Ended
 
December 24,
 
December 25,
 
December 24,
 
December 25,
(In millions, except per share data)
2010
 
2009
 
2010
 
2009
 
 
 
 
 
 
 
 
Net service revenue*
$
60.3
 
 
$
54.2
 
 
$
117.9
 
 
$
111.2
 
 
 
 
 
 
 
 
 
Operating income (loss)
$
2.9
 
 
$
(1.5
)
 
$
6.3
 
 
$
(1.2
)
 
 
 
 
 
 
 
 
Federal and state income tax (provision) benefit
$
(0.2
)
 
$
4.5
 
 
$
(0.7
)
 
$
4.4
 
 
 
 
 
 
 
 
 
Accretion charges on preferred stock
$
(3.5
)
 
$
(1.2
)
 
$
(7.3
)
 
$
(2.1
)
 
 
 
 
 
 
 
 
Net (loss) income applicable to TRC Companies, Inc.'s common shareholders
$
(1.0
)
 
$
3.3
 
 
$
(2.1
)
 
$
2.4
 
 
 
 
 
 
 
 
 
Diluted (loss) earnings per common share
$
(0.04
)
 
$
0.16
 
 
$
(0.10
)
 
$
0.12
 
 
 
 
 
 
 
 
 
Diluted weighted-average common shares outstanding
21,817
 
 
19,926
 
 
20,781
 
 
19,788
 
 
*The Company believes net service revenue, rather than gross revenue, best reflects the value of services provided to its customers and is the most meaningful indicator of TRC's revenue performance.
 
Comments on the Second Quarter
“Sustained by growth in our Energy and Environmental segments, TRC's net service revenue (NSR) for the second quarter was up 11.2% from the same period in fiscal 2010,” said Chairman and Chief Executive Officer Chris Vincze. “The combination of the higher NSR and a lower cost structure resulted

TRC
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995
 
in significantly improved operating income during the quarter. Our cost reduction initiatives continue to be reflected in our results - both Cost of Service and G&A costs as a percent of NSR declined year over year. Operating income in the quarter grew by $4.4 million from the prior year, and for the first six months of fiscal 2011 is $6.3 million, an improvement of $7.5 million from the same period in the prior year.”
 
“We concluded the second quarter with $18.5 million of cash and no outstanding borrowings on our revolving credit facility. Primarily as a result of the conversion of the preferred stock to common equity, shareholders' equity increased by $15.2 million during the quarter to $42.6 million.”
 
“Bolstered by renewed spending for electric transmission and distribution capital projects, the NSR for the Energy segment grew by 26.8% compared to the same quarter in the prior year. The Environmental segment also delivered strong results with NSR growth of 16.7% over the same quarter in the prior year. Our Infrastructure segment, where funding for projects remains constrained, particularly at the state and local levels, experienced an 18.0% decline in NSR from the prior year. The decline in Infrastructure revenue also reflects our aggressive approach toward improving the profitability of this segment by consolidating or rightsizing underperforming businesses.”
 
Business Outlook
“We are cautious about the near-term outlook given the volatility in our economy and lingering uncertainties within our markets. In addition, we are observing an increase of competition for new projects in all three segments. Although we anticipate normal seasonality for the fiscal third quarter, we are striving to extend our recent momentum. NSR backlog at the end of the second quarter declined by 5% from the previous quarter to $221.8 million.”
 
“A rapidly evolving regulatory compliance arena and the need to enhance our nation's aging transportation and energy infrastructure continue to present new opportunities for growth. As the United States commences a multi-year upgrade of the electric transmission grid to improve capacity, reliability and dispatch of renewable sources of power generation, hundreds of new project opportunities will be created, and we expect TRC to be considered as a principal provider of integrated Energy and Environmental services. Expansion of natural gas use and the development of shale natural gas also is providing TRC's Energy and Environmental segments with growth opportunities. We are currently pursuing a number of projects in our target geographic markets, including energy efficiency, renewable energy, and transmission/substation projects. Budget deficit issues, the lack of a new federal transportation bill, and state/municipal revenue shortfalls have all affected the infrastructure market as a whole. Until these

TRC
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995
 
issues are resolved, TRC's infrastructure strategy remains focused on being a key provider in certain niche markets, both geographically and technically.”
 
“While the near-term business environment remains uncertain, we are continuing to make investments toward driving revenue growth and executing margin improvement initiatives. In particular, our bundled services initiatives are proving to be successful and give us a competitive advantage when bidding for new projects. We believe our long-term prospects remain strong and macro-industry trends are becoming more favorable,” concluded Vincze.
 
Conference Call Information
The Company will broadcast its second-quarter fiscal 2011 financial results conference call today, February 2, at 9 a.m. ET. Those who wish to listen to the conference call should visit the “Investor Center” section of TRC's website at www.TRCsolutions.com. The call also may be accessed by dialing (877) 407-5790 or (201) 689-8328 prior to the start of the call. For interested individuals unable to join the live conference call, a webcast replay will be available on the Company's website for one year.
 
About TRC
A pioneer in groundbreaking scientific and engineering developments since the 1960s, TRC is a national engineering, consulting and construction management firm that provides integrated services to the energy, environmental, and infrastructure markets. TRC serves a broad range of clients in government and industry, implementing complex projects from initial concept to delivery and operation. TRC delivers results that enable clients to achieve success in a complex and changing world. For more information, visit TRC's website at http://www.trcsolutions.com.
 
Forward-Looking Statements
Certain statements in this press release may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these statements by forward-looking words such as "may," "expects," "plans," "anticipates," "believes," "estimates," or other words of similar import. You should consider statements that contain these words carefully because they discuss TRC's future expectations, contain projections of the Company's future results of operations or of its financial condition, or state other "forward-looking" information. TRC believes that it is important to communicate its future expectations to its investors. However, there may be events in the future that the Company is not able to accurately predict or control and that may cause its actual results to differ materially from the expectations described in its forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including, but not limited to, the availability and adequacy of insurance; the uncertainty of our operational and growth strategies; circumstances which could create large cash outflows, such as contract losses, litigation, uncollectible receivables and income tax assessments, including potential payments related to TRC's ongoing IRS audit, if not resolved successfully; regulatory uncertainty; the availability of funding for government projects; the level of demand for TRC's services; product acceptance; industry-wide competitive factors; the ability to continue to attract and retain highly skilled and qualified personnel; and general political or economic conditions. Furthermore, market trends are subject to changes, which could adversely affect future results. See additional discussion in TRC's Annual Report on Form 10-K for the fiscal year ended June 30, 2010, Quarterly Reports on Form 10-Q, and other factors detailed from time to time in the Company's other filings with the Securities and Exchange Commission.
 
TRC Companies, Inc.

TRC
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995
 
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
December 24,
2010
 
December 25,
2009
 
December 24,
2010
 
December 25,
2009
Gross revenue
$
84,291
 
 
$
82,264
 
 
$
163,109
 
 
$
164,621
 
Less subcontractor costs and other direct reimbursable charges
23,968
 
 
28,024
 
 
45,196
 
 
53,421
 
Net service revenue
60,323
 
 
54,240
 
 
117,913
 
 
111,200
 
Interest income from contractual arrangements
125
 
 
187
 
 
213
 
 
367
 
Insurance recoverables and other income
2,313
 
 
2,643
 
 
2,910
 
 
5,926
 
 
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of services
51,715
 
 
49,880
 
 
98,289
 
 
100,760
 
General and administrative expenses
6,312
 
 
6,371
 
 
12,850
 
 
13,049
 
Provision for doubtful accounts
595
 
 
424
 
 
1,173
 
 
1,110
 
Depreciation and amortization
1,233
 
 
1,846
 
 
2,461
 
 
3,796
 
Total operating costs and expenses
59,855
 
 
58,521
 
 
114,773
 
 
118,715
 
Operating income (loss)
2,906
 
 
(1,451
)
 
6,263
 
 
(1,222
)
Interest expense
(218
)
 
(262
)
 
(415
)
 
(526
)
Gain on extinguishment of debt
—
 
 
1,716
 
 
—
 
 
1,716
 
Income (loss) from operations before taxes and equity in earnings (losses)
2,688
 
 
3
 
 
5,848
 
 
(32
)
Federal and state income tax (provision) benefit
(222
)
 
4,481
 
 
(686
)
 
4,425
 
Income from operations before taxes and equity in earnings (losses)
2,466
 
 
4,484
 
 
5,162
 
 
4,393
 
Equity in earnings (losses) from unconsolidated affiliates, net of taxes
23
 
 
(28
)
 
10
 
 
(43
)
Net income
2,489
 
 
4,456
 
 
5,172
 
 
4,350
 
Net loss applicable to noncontrolling interest
13
 
 
37
 
 
34
 
 
64
 
Net income applicable to TRC Companies, Inc.
2,502
 
 
4,493
 
 
5,206
 
 
4,414
 
Accretion charges on preferred stock
(3,462
)
 
(1,218
)
 
(7,261
)
 
(2,052
)
Net (loss) income applicable to TRC Companies, Inc.'s common shareholders
$
(960
)
 
$
3,275
 
 
$
(2,055
)
 
$
2,362
 
 
 
 
 
 
 
 
 
Basic (loss) earnings per common share
$
(0.04
)
 
$
0.17
 
 
$
(0.10
)
 
$
0.12
 
Diluted (loss) earnings per common share
$
(0.04
)
 
$
0.16
 
 
$
(0.10
)
 
$
0.12
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
21,817
 
 
19,573
 
 
20,781
 
 
19,491
 
Diluted
21,817
 
 
19,926
 
 
20,781
 
 
19,788
 
 

TRC
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995
 
TRC Companies, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
 
December 24,
2010
 
June 30,
2010
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
18,546
 
 
$
14,709
 
Accounts receivable, less allowance for doubtful accounts
83,005
 
 
87,104
 
Insurance recoverable - environmental remediation
36,442
 
 
35,664
 
Restricted investments
12,241
 
 
14,744
 
Prepaid expenses and other current assets
12,468
 
 
9,123
 
Income taxes refundable
147
 
 
388
 
Total current assets
162,849
 
 
161,732
 
Property and equipment
46,361
 
 
47,287
 
Less accumulated depreciation and amortization
(35,726
)
 
(35,535
)
Property and equipment, net
10,635
 
 
11,752
 
Goodwill
14,870
 
 
14,870
 
Investments in and advances to unconsolidated affiliates and construction joint ventures
116
 
 
117
 
Long-term restricted investments
44,243
 
 
46,426
 
Long-term prepaid insurance
42,863
 
 
44,529
 
Other assets
8,286
 
 
8,369
 
Total assets
$
283,862
 
 
$
287,795
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
4,244
 
 
$
3,629
 
Accounts payable
26,258
 
 
35,871
 
Accrued compensation and benefits
26,708
 
 
22,393
 
Deferred revenue
21,924
 
 
26,486
 
Environmental remediation liabilities
529
 
 
623
 
Other accrued liabilities
43,857
 
 
43,781
 
Total current liabilities
123,520
 
 
132,783
 
Non-current liabilities:
 
 
 
Long-term debt, net of current portion
5,700
 
 
5,815
 
Long-term income taxes payable
4,580
 
 
4,149
 
Long-term deferred revenue
101,407
 
 
102,452
 
Long-term environmental remediation liabilities
6,025
 
 
6,404
 
Total liabilities
241,232
 
 
251,603
 
Preferred stock, $.10 par value; 500,000 shares authorized, 7,209 shares issued and outstanding as convertible, liquidation preference value of $22,277 as of June 30, 2010
—
 
 
8,239
 
Commitments and contingencies
 
 
 
Equity:
 
 
 
Common stock, $.10 par value; 40,000,000 shares authorized, 27,150,060 and 27,146,578 shares issued and outstanding, respectively, at December 24, 2010 and 19,637,535 and 19,634,053 shares issued and outstanding, respectively, at June 30, 2010
2,715
 
 
1,964
 
Additional paid-in capital
172,519
 
 
163,897
 
Accumulated deficit
(132,677
)
 
(137,883
)
Accumulated other comprehensive income
265
 
 
133
 
Treasury stock, at cost
(33
)
 
(33
)
Total shareholders' equity applicable to TRC Companies, Inc.
42,789
 
 
28,078
 
Noncontrolling interest
(159
)
 
(125
)
Total equity
42,630
 
 
27,953
 
Total liabilities and equity
$
283,862
 
 
$
287,795
 
 

TRC
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995
 

TRC COMPANIES INC /DE/ Reports