SOURCE: TRC Companies, Inc.

TRC Companies, Inc.

November 03, 2016 07:00 ET

TRC Announces First-Quarter Fiscal 2017 Financial Results

NSR Up 24% from Q1 Fiscal 2016; Oil & Gas Segment Results Continue to Improve

LOWELL, MA--(Marketwired - Nov 3, 2016) -  TRC Companies, Inc.  (NYSE: TRR), a recognized leader in engineering, environmental consulting and construction-management services to the power, environmental, infrastructure and oil and gas markets, today announced financial results for the fiscal first quarter ended September 30, 2016.

                 
    Three Months Ended            
    September 30,   September 25,   $     %  
(In millions, except per share data)   2016   2015   Change     Change  
                     
GAAP Results                    
                     
Net service revenue(1)   $ 124.3   $ 100.2   $ 24.1     24 %
Acquisition and integration expense   $ -   $ 0.9   $ (0.9 )   N/A  
Depreciation   $ 1.8   $ 1.4   $ 0.4     26 %
Amortization   $ 2.7   $ 0.8   $ 1.9     223 %
Operating income   $ 6.0   $ 7.7   $ (1.7 )   -22 %
Net income applicable to TRC Companies, Inc.   $ 3.6   $ 4.5   $ (0.9 )   -19 %
Diluted earnings per common share   $ 0.12   $ 0.14   $ (0.02 )   -14 %
                           
Non-GAAP Results                          
EBITDA   $ 10.5   $ 9.9   $ 0.5     5 %
Tax effect of acqusition and integration expenses   $ -   $ 0.4   $ (0.4 )   N/A  
Adjusted operating income(2)   $ 6.0   $ 8.6   $ (2.6 )   -30 %
Adjusted EBITDA(2)   $ 10.5   $ 10.8   $ (0.3 )   -3 %
Adjusted net income(2) (3)   $ 3.6   $ 5.0   $ (1.4 )   -28 %
Adjusted diluted earnings per common share(2) (3)   $ 0.12   $ 0.16   $ (0.04 )   -25 %

(1) TRC believes net service revenue (NSR) best reflects the value of services provided and is the most meaningful indicator of revenue performance.
(2) Excludes acquisition and integration expenses of $0.9 million for the three months ended September 25, 2015.
(3) Excludes acquisition related expenses in note 2, net of an income tax benefit of $0.4 million for the three months ended September 25, 2015.

"In the first quarter of fiscal 2017, NSR was $124 million, up 24% from $100 million in the same period of fiscal 2016. The increase was primarily driven by our Oil & Gas segment, which we acquired during the second quarter of fiscal 2016, as well as by large projects in our Power and Infrastructure segments," said Chris Vincze, Chairman and Chief Executive Officer. "Operating income was $6 million, $1.7 million lower than the $7.7 million reported in the prior-year period, while net income was $3.6 million, down $0.9 million, primarily due to a $1.9 million increase in amortization expense. EBITDA increased to $10.5 million, up $0.5 million, or 5% from the prior-year period. Our Days Sales Outstanding, or DSO, of 84 days was an improvement of six days from the 90-day result in the year-ago quarter."

Comments on Segment Results
"In our Power segment, NSR increased 8% and segment profit rose 9%, compared with the first quarter of fiscal 2016," Vincze said. "The increases were primarily driven by several large capital projects, including a significant program management project in California. Environmental segment NSR and segment profit declined 5% and 9%, respectively, primarily as a result of a decrease in demand from our oil and gas clients, continuing the trend of recent quarters. In our Infrastructure segment, ongoing transportation-related spending by our clients drove a 23% increase in NSR and a 49% increase in segment profit year-over-year.

"Our Oil & Gas segment generated much improved results, despite continued uncertainty in this market. NSR of $21.3 million increased from $20.8 million in the fourth quarter of fiscal 2016. Segment profit was $1.4 million, up from a segment loss in the fourth quarter," Vincze said. "The improvement in bottom-line performance is primarily related to higher productivity and the significant cost improvements we made in previous quarters to align our platform to current revenue streams."

Business Outlook
"We are encouraged by the long-term prospects in each of our segments," Vincze said. "In our Power segment, demand from our utility clients, our current expansion in California and the ongoing shift toward program management work are driving revenue growth. We are working on significant state and public-private partnership projects that should fuel Infrastructure results in the near term. The capital spend slowdown in oil and gas continues to weigh on our Environmental segment. However, this should be partially offset by demand for services related to construction, transaction support, the retirement of coal plants and renewable energy. Our Oil & Gas segment appears to be stabilizing, and we expect to see a number of capital projects going forward. In particular, we see an increased level of activity and interest in our pipeline integrity-related services."

Conference Call Information / Reconciliation of Non-GAAP Metrics
TRC will webcast its financial results conference call today, Nov. 3, 2016 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. Those slides also contain a reconciliation of non-GAAP metrics utilized in this press release to GAAP metrics. 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, environmental consulting and construction management firm that provides integrated services to the power, environmental, infrastructure and oil and gas markets. TRC serves a broad range of commercial, industrial and government clients, 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, 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; capital availability and project investment by TRC's clients; 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, 2016, and other factors included from time to time in the Company's other filings with the Securities and Exchange Commission.

   
TRC Companies, Inc.  
Condensed Consolidated Statements of Operations  
(in thousands, except per share data)  
(Unaudited)  
   
  Three Months Ended  
  September 30,     September 25,  
  2016     2015  
Gross revenue $ 180,851     $ 135,459  
  Less subcontractor costs and other direct reimbursable charges   56,546       35,296  
Net service revenue   124,305       100,163  
               
Interest income from contractual arrangements   34       15  
Insurance recoverables and other income   637       742  
               
Operating costs and expenses:              
  Cost of services (exclusive of costs shown separately below)   103,676       82,984  
  General and administrative expenses   10,839       7,121  
  Acquistion and intergration expenses   -       878  
  Depreciation   1,788       1,424  
  Amortization   2,716       840  
Total operating costs and expenses   119,019       93,247  
Operating income   5,957       7,673  
Interest income   278       -  
Interest expense   (845 )     (28 )
Income from operations before taxes   5,390       7,645  
Income tax provision   (1,731 )     (3,157 )
Net income   3,659       4,488  
Net loss applicable to noncontrolling interest   (20 )     4  
Net income applicable to TRC Companies, Inc. $ 3,639     $ 4,492  
               
               
Basic earnings per common share $ 0.12     $ 0.15  
Diluted earnings per common share $ 0.12     $ 0.14  
               
Weighted-average common shares outstanding:              
  Basic   31,149       30,635  
  Diluted   31,601       31,318  
                 
                 
                 
TRC Companies, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands, except per share data)  
(Unaudited)  
   
  September 30,     June 30,  
  2016     2016  
ASSETS  
Current assets:              
  Cash and cash equivalents $ 12,681     $ 18,804  
  Restricted cash   60       71  
  Accounts receivable, less allowance for doubtful accounts   168,466       149,280  
  Insurance recoverable - environmental remediation   50,086       49,934  
  Restricted investments   5,473       5,959  
  Income taxes refundable   -       75  
  Prepaid expenses and other current assets   21,917       24,122  
    Total current assets   258,683       248,245  
               
Property and equipment   75,193       74,053  
  Less accumulated depreciation and amortization   (52,922 )     (51,593 )
    Property and equipment, net   22,271       22,460  
Goodwill   75,337       75,337  
Intangible assets, net   43,253       45,969  
Deferred income tax assets   25,851       26,239  
Long-term restricted investments   18,150       18,420  
Long-term prepaid insurance   22,896       23,425  
Other assets   16,575       18,383  
    Total assets $ 483,016     $ 478,478  
               
LIABILITIES AND EQUITY  
Current liabilities:              
  Current portion of long-term debt $ 15,497     $ 18,339  
  Accounts payable   39,210       29,311  
  Accrued compensation and benefits   47,733       48,485  
  Deferred revenue   13,880       15,363  
  Environmental remediation liabilities   8,646       8,654  
  Income taxes payable   902       265  
  Other accrued liabilities   57,541       58,026  
    Total current liabilities   183,409       178,443  
Non-current liabilities:              
  Long-term debt, net of current portion   77,253       79,243  
  Long-term income taxes payable   903       2,204  
  Deferred revenue   63,933       65,340  
  Environmental remediation liabilities   408       433  
    Total liabilities   325,906       325,663  
Commitments and contingencies              
Equity:              
    Common stock, $.10 par value; 40,000,000 shares authorized, 31,258,090 and 31,254,608 shares issued and outstanding, respectively, at September 30, 2016, and 31,087,084 and 31,083,602 shares issued and outstanding, respectively, at June 30, 2016   3,126       3,109  
  Additional paid-in capital   195,802       195,156  
  Accumulated deficit   (42,259 )     (45,898 )
  Accumulated other comprehensive loss   (98 )     (71 )
  Treasury stock, at cost   (33 )     (33 )
    Total shareholders' equity applicable to TRC Companies, Inc.   156,538       152,263  
  Noncontrolling interest   572       552  
    Total equity   157,110       152,815  
    Total liabilities and equity $ 483,016     $ 478,478  
                   

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