TRC COMPANIES INC /DE/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 7, 2014

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8-K - 8-K - TRC COMPANIES INC /DE/trcform8-kq3f14.htm
Exhibit 99.1

Investor Contact:
 
Company Contact:
Dennis Walsh, Vice President
Thomas W. Bennet, Jr., CFO
Sharon Merrill
(978) 970-5600
(617) 542-5300
tbennet@trcsolutions.com
trr@investorrelations.com
 


TRC Announces Third-Quarter Fiscal 2014 Financial Results

Strong Energy Demand Drives 6% Net Service Revenue Growth

Lowell, MA, May 7, 2014 - TRC Companies, Inc. (NYSE: TRR), a recognized leader in engineering, consulting and construction management services to the energy, environmental and infrastructure markets, announced today financial results for the fiscal three and nine months ended March 28, 2014.


Financial Highlights
 
Three Months Ended
 
Nine Months Ended
 
March 28,
 
March 29,
 
March 28,
 
March 29,
(In millions, except per share data)
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Net service revenue (1)
$
88.1

 
$
83.0

 
$
260.5

 
$
233.5

Insurance recoverables and other income
$
5.0

 
$
1.1

 
$
17.6

 
$
3.7

Operating income
$
2.5

 
$
3.4

 
$
12.0

 
$
12.4

Federal and state income tax provision (2)
$
(1.1
)
 
$
(0.2
)
 
$
(4.8
)
 
$
(0.7
)
Net income applicable to TRC Companies, Inc.
$
1.4

 
$
3.1

 
$
7.0

 
$
11.5

Diluted earnings per common share (2)
$
0.05

 
$
0.10

 
$
0.23

 
$
0.39

Diluted weighted-average common shares outstanding
30.2

 
29.7

 
30.1

 
29.5


(1) The Company believes net service revenue (NSR) best reflects the value of services provided and is the most meaningful indicator of revenue performance.
(2) The three and nine month periods ended March 29, 2013 were impacted by a deferred tax asset valuation allowance, which significantly reduced the effective tax rate.


Comments on the Results

“TRC delivered incremental NSR growth for the third quarter of fiscal 2014, but operating income declined largely due to weather impacts and increased medical benefit costs,” said Chris Vincze Chairman and Chief Executive Officer. “Our 6% NSR increase was driven primarily by strength in the Energy segment.


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



“Energy segment NSR and profit grew 19% and 53%, respectively, as utility customers continue to make significant transmission and distribution system improvement investments and as demand continues for our energy efficiency and renewable energy services. Increasing state and federal energy incentives are further expanding the opportunities for TRC to develop and implement programs for customers in the public and private sector. The segment also benefited somewhat from the severe winter conditions in the southern areas of the U.S. which increased demand for our emergency response field services and mitigated the impact of severe weather on segment revenue.

“NSR increased 1% in the Environmental segment, as a steady flow of remediation, pipeline permitting, and power plant decommissioning projects helped to mitigate weather-related impacts on field projects. During the quarter, our strong execution of large projects and lower subcontractor costs contributed to segment profit growth of 7%.

“Infrastructure segment NSR was down 10% due to the severe weather and an unfavorable adjustment to a fixed-price project estimate, both of which contributed to a 49% segment profit decline.

“Operating income declined by $0.9 million from the prior year third quarter due to a number of factors including severe winter weather and increased medical benefit costs. Due to the increased volume of large claims, third quarter expenses for our medical benefit plan were approximately $1.8 million higher than in the same period of the prior year. This increased cost, coupled with the above-mentioned weather impacts, negatively impacted operating income by an estimated $2.2 million.

“Income taxes were $0.8 million higher than the prior year quarter due to the reversal of a portion of the valuation allowance we maintained against our net deferred tax assets in the prior year, resulting in an increase in the effective tax rate from 7% to 43% and a corresponding reduction in net income.

Business Outlook

“TRC is well-positioned in markets with significant opportunity for growth. NSR backlog grew 5% sequentially, indicating a stable marketplace. Proposal activity is increasing, and we are winning more projects in all three segments. Our healthy balance sheet enables TRC to execute our balanced profitable growth strategy,” concluded Vincze.


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

Exhibit 99.1

Conference Call Information

TRC will broadcast its financial results conference call today, May 7, 2014 at 9 a.m. ET. To listen to the live webcast and access the accompanying presentation slides, 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. A webcast replay will be available on the Company’s website for approximately 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 and updates from the Company, visit TRC's website at www.TRCsolutions.com and follow TRC on Twitter and StockTwits at @TRC_Companies and on LinkedIn.


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 uncertainty of TRC’s operational and growth strategies; circumstances which could create large cash outflows, such as contract losses, litigation, uncollectible receivables and income tax assessments; 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; the availability and adequacy of insurance; and general political or economic conditions. Furthermore, market trends are subject to changes, which could adversely affect future results. See the risk factors and additional discussion in TRC’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013, 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
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995


TRC Companies, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
March 28,
2014
 
March 29,
2013
 
March 28,
2014
 
March 29,
2013
Gross revenue
$
120,836

 
$
109,806

 
$
350,002

 
$
322,562

Less subcontractor costs and other direct reimbursable charges
32,755

 
26,762

 
89,538

 
89,048

Net service revenue
88,081

 
83,044

 
260,464

 
233,514

Interest income from contractual arrangements
73

 
58

 
26

 
186

Insurance recoverables and other income
5,008

 
1,068

 
17,613

 
3,725

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of services (exclusive of costs shown separately below)
80,127

 
70,446

 
234,914

 
198,696

General and administrative expenses
8,363

 
8,096

 
24,642

 
20,965

Provision for doubtful accounts
—

 
408

 
—

 
408

Depreciation and amortization
2,161

 
1,828

 
6,587

 
4,959

Total operating costs and expenses
90,651

 
80,778

 
266,143

 
225,028

Operating income
2,511

 
3,392

 
11,960

 
12,397

Interest expense
(22
)
 
(78
)
 
(152
)
 
(270
)
Income from operations before taxes
2,489

 
3,314

 
11,808

 
12,127

Federal and state income tax provision
(1,060
)
 
(231
)
 
(4,830
)
 
(680
)
Net income
1,429

 
3,083

 
6,978

 
11,447

Net loss applicable to noncontrolling interest
2

 
18

 
36

 
49

Net income applicable to TRC Companies, Inc.
$
1,431

 
$
3,101

 
$
7,014

 
$
11,496

 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.05

 
$
0.11

 
$
0.24

 
$
0.40

Diluted earnings per common share
$
0.05

 
$
0.10

 
$
0.23

 
$
0.39

 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
29,691

 
28,998

 
29,549

 
28,778

Diluted
30,166

 
29,654

 
30,088

 
29,547



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)
 
March 28,
2014
 
June 30,
2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
11,401

 
$
18,136

Accounts receivable, less allowance for doubtful accounts
123,491

 
109,320

Insurance recoverable - environmental remediation
42,091

 
26,305

Restricted investments
4,135

 
5,582

Deferred income tax assets
11,917

 
12,518

Income taxes refundable
3,987

 
1,444

Prepaid expenses and other current assets
17,742

 
12,045

Total current assets
214,764

 
185,350

Property and equipment
60,391

 
57,005

Less accumulated depreciation and amortization
(47,045
)
 
(43,171
)
Property and equipment, net
13,346

 
13,834

Goodwill
31,679

 
28,797

Investments in and advances to unconsolidated affiliates and construction joint ventures
117

 
113

Long-term deferred income tax assets
5,098

 
6,601

Long-term restricted investments
24,055

 
27,580

Long-term prepaid insurance
29,235

 
31,497

Other assets
14,269

 
13,992

Total assets
$
332,563

 
$
307,764

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
1,533

 
$
4,745

Current portion of capital lease obligations
565

 
568

Accounts payable
29,325

 
32,238

Accrued compensation and benefits
37,691

 
34,040

Deferred revenue
13,334

 
20,094

Environmental remediation liabilities
136

 
291

Other accrued liabilities
49,705

 
31,737

Total current liabilities
132,289

 
123,713

Non-current liabilities:
 
 
 
Long-term debt, net of current portion
134

 
568

Capital lease obligations, net of current portion
322

 
789

Income taxes payable and deferred income tax liabilities
1,063

 
310

Deferred revenue
73,392

 
68,514

Environmental remediation liabilities
6,329

 
6,973

Total liabilities
213,529

 
200,867

Commitments and contingencies
 
 
 
Equity:
 
 
 
Common stock, $.10 par value; 40,000,000 shares authorized, 29,713,545 and 29,710,063 shares issued and outstanding, respectively, at March 28, 2014, and 29,053,301 and 29,049,819 shares issued and outstanding, respectively, at June 30, 2013
2,971

 
2,905

Additional paid-in capital
186,929

 
181,874

Accumulated deficit
(70,391
)
 
(77,405
)
Accumulated other comprehensive loss
(71
)
 
(109
)
Treasury stock, at cost
(33
)
 
(33
)
Total shareholders' equity applicable to TRC Companies, Inc.
119,405

 
107,232

Noncontrolling interest
(371
)
 
(335
)
Total equity
119,034

 
106,897

Total liabilities and equity
$
332,563

 
$
307,764


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

TRC COMPANIES INC /DE/ Reports