SOURCE: TRC Companies, Inc.

TRC Companies, Inc.

September 13, 2010 07:24 ET

TRC Announces Fourth-Quarter and Fiscal Year 2010 Financial Results

LOWELL, MA--(Marketwire - September 13, 2010) - 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 months and year ended June 30, 2010.

Summary Results
                                          Three Months
                                             Ended          Years Ended
                                        June 30, June 30, June 30, June 30,
                                        -------  -------  -------  -------
(In millions, except per share data)      2010     2009     2010     2009
                                        -------  -------  -------  -------

Net service revenue*                    $  64.3  $  63.6  $ 230.1  $ 254.8
Goodwill and intangible asset
 write-offs**                           $  20.2  $     -  $  20.2  $  21.4
Depreciation and amortization***        $   3.0  $   2.0  $   8.0  $   7.3
Operating (loss) income                 $ (19.8) $   0.4  $ (21.5) $ (16.7)
Federal and state income tax provision
 (benefit)                              $   0.6  $   4.5  $  (4.2) $   3.9
Accretion charges on preferred stock    $   2.6  $   0.2  $   6.4  $   0.2
Net loss applicable to TRC Companies,
 Inc.'s common shareholders             $ (23.2) $  (5.3) $ (22.9) $ (24.1)
Diluted loss per common share           $ (1.18) $ (0.27) $ (1.17) $ (1.25)
Diluted weighted-average common shares
 outstanding                             19,619   19,354   19,548   19,272

*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.

**During the fourth quarter of fiscal year 2010, TRC recorded a non-cash
goodwill impairment charge of $20.2 million.

***Fourth quarter of fiscal year 2010 includes a $1.6 million charge
related to accelerated amortization of intangible assets.

Comments on the Results

"We believe our fourth-quarter results indicate that the demand environment across our key markets is beginning to improve," said Chairman and Chief Executive Officer Chris Vincze. "Net service revenues of $64.3 million were up 1.1% compared to the same quarter of the prior year -- the first year-over-year increase in two years. Our gross revenue backlog of $361.0 million increased by $7.8 million, or 2.2%, from the third quarter level making it the first time in eight quarters that our backlog has increased from the immediately prior quarter. The $19.8 million operating loss in the quarter was primarily the result of a $20.2 million goodwill impairment charge. An additional $1.6 million expense for accelerated amortization of other intangible assets was also recorded in the quarter as part of depreciation and amortization expenses. Excluding the non-cash goodwill impairment charge of $20.2 million, we would have generated positive operating income for the fiscal fourth quarter."

"During the fourth quarter, demand for our services, as measured by backlog growth in each of our operating segments, showed improvement compared to the third quarter. Within our Energy operating segment, our energy efficiency services continue to represent a significant growth opportunity for TRC. The current regulatory atmosphere and the issues associated with sustainability and climate change present continuing opportunities in our Environmental operating segment. Overall, our Infrastructure operating segment remains relatively flat, although major upgrades and substantial investments over the long term are necessary for the nation's aging infrastructure."

"While the demand environment is beginning to recover, we continued to further streamline our cost structure and reduced our general and administrative (G&A) costs in the fourth quarter by $0.1 million, or 1.9%, compared to the same quarter last year."

"Although our full fiscal year 2010 net service revenue decreased by almost 10% year-over-year, we reduced both our G&A expenses and cost of services at a more accelerated rate. We lowered G&A expenses by $5.8 million, or 17.6%, and our cost of services by $24.0 million, or 10.6%, from the prior year. We concluded fiscal year 2010 with some revenue momentum, and we enter fiscal year 2011 with a significant improvement in our cost structure."

Business Outlook

"Our objectives for fiscal year 2011 are clear: generating profitable organic growth and cash flow from operations, while continuing to deliver performance excellence. We believe that sustainable profitable growth is possible for TRC in the current economic environment. TRC's capabilities align well with our country's goals to improve its transportation and energy infrastructures, add renewable energy to domestic supply, and become more efficient producers of conventional energy."

"The fundamentals of the markets TRC serves remain promising, both mid- and long-term. Energy remains a primary driver of the domestic economy and we expect to see long-term growth in this operating segment as we continue to expand our offerings in energy efficiency, power delivery engineering and demand management programs. Client interest in renewing large scale capital investments and in Engineer Procure and Construct (EPC) contracts is returning; however, the exact timing and award of these EPC projects remains unpredictable. We expect demand for our Environmental services to be driven by climate change, clean power, greenhouse gas and other air issues. Coupled with the support of federal funding, the prospects for growth in our Environmental operating segment are improving. We believe that the long-term market for our Infrastructure services remains stable, due to population shifts in certain geographic regions, continued aging and obsolescence of existing infrastructure, capacity shortfalls, and Federal stimulus funding for state and municipal projects. All of these factors combined with the early signs of market improvements have led us to guarded optimism about our near-term growth prospects," concluded Vincze.

Conference Call Information

The Company will broadcast its fourth-quarter and fiscal year-end 2010 financial results conference call today 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) 709-8155 or (201) 689-8881 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.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share data)
                               (Unaudited)

                                 Three Months Ended       Years Ended
                                --------------------  --------------------
                                 June 30,   June 30,   June 30,   June 30,
                                   2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Gross revenue                   $  83,853  $ 105,750  $ 330,575  $ 432,517
 Less subcontractor costs and
  other direct reimbursable
  charges                          19,531     42,144    100,476    177,713
                                ---------  ---------  ---------  ---------
Net service revenue                64,322     63,606    230,099    254,804
                                ---------  ---------  ---------  ---------
Interest income from
 contractual arrangements             121        216        596      1,859
Insurance recoverables and
 other (loss) income                  (81)     5,498      8,844     19,539
Operating costs and expenses:
 Cost of services                  52,358     57,448    203,221    227,217
 General and administrative
  expenses                          7,952      8,102     27,128     32,936
 Provision for doubtful
  accounts                            634      1,336      2,344      3,952
 Goodwill and intangible asset
  write-offs                       20,249          -     20,249     21,438
 Depreciation and amortization      3,002      2,030      8,049      7,322
                                ---------  ---------  ---------  ---------
Total operating costs and
 expenses                          84,195     68,916    260,991    292,865
                                ---------  ---------  ---------  ---------
Operating (loss) income           (19,833)       404    (21,452)   (16,663)
Interest expense                     (235)      (519)    (1,003)    (2,925)
Gain on extinguishment of debt          -          -      1,716          -
                                ---------  ---------  ---------  ---------
Loss from operations before
 taxes and equity in earnings
 (losses)                         (20,068)      (115)   (20,739)   (19,588)
Federal and state income tax
 provision (benefit)                  608      4,515     (4,210)     3,871
                                ---------  ---------  ---------  ---------
Loss from operations before
 equity in earnings (losses)      (20,676)    (4,630)   (16,529)   (23,459)
Equity in earnings (losses)
 from unconsolidated
 affiliates, net of taxes              21       (449)       (45)      (449)
                                ---------  ---------  ---------  ---------
Net loss                          (20,655)    (5,079)   (16,574)   (23,908)
Net loss attributable to
 noncontrolling interest              (33)         -       (125)         -
                                ---------  ---------  ---------  ---------
Net loss applicable to TRC
 Companies, Inc.                  (20,622)    (5,079)   (16,449)   (23,908)
Accretion charges on preferred
 stock                              2,600        215      6,431        215
                                ---------  ---------  ---------  ---------
Net loss applicable to TRC
 Companies, Inc.'s common
 shareholders                   $ (23,222) $  (5,294) $ (22,880) $ (24,123)
                                =========  =========  =========  =========
Basic and diluted loss per
 common share                   $   (1.18) $   (0.27) $   (1.17) $   (1.25)
                                =========  =========  =========  =========

Basic and diluted weighted
 average common shares
 outstanding                       19,619     19,354     19,548     19,272
                                =========  =========  =========  =========




                           TRC COMPANIES, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                    (in thousands, except share data)
                               (Unaudited)

                                                       June 30,   June 30,
                                                         2010       2009
                                                      ---------  ---------
                        ASSETS
Current assets:
 Cash and cash equivalents                            $  14,709  $   8,469
 Accounts receivable, less allowance for doubtful
  accounts                                               87,104     99,903
 Insurance recoverable - environmental remediation       35,664     27,379
 Restricted investments                                  14,744     28,214
 Prepaid expenses and other current assets                9,123     11,032
 Income taxes refundable                                    388        224
                                                      ---------  ---------
  Total current assets                                  161,732    175,221
                                                      ---------  ---------
Property and equipment:
 Land and building                                          480        480
 Equipment, furniture and fixtures                       41,946     46,727
 Leasehold improvements                                   4,861      4,909
                                                      ---------  ---------
                                                         47,287     52,116
 Less accumulated depreciation and amortization         (35,535)   (37,075)
                                                      ---------  ---------
  Property and equipment, net                            11,752     15,041
                                                      ---------  ---------
Goodwill                                                 14,870     35,119
Investments in and advances to unconsolidated
 affiliates and construction joint ventures                 117        119
Long-term restricted investments                         46,426     53,295
Long-term prepaid insurance                              44,529     47,766
Other assets                                              8,369     10,335
                                                      ---------  ---------
  Total assets                                        $ 287,795  $ 336,896
                                                      =========  =========


                LIABILITIES AND EQUITY
Current liabilities:
 Current portion of long-term debt                    $   3,629  $   4,632
 Accounts payable                                        35,871     44,106
 Accrued compensation and benefits                       22,393     30,029
 Deferred revenue                                        26,486     38,684
 Environmental remediation liabilities                      623        566
 Other accrued liabilities                               43,781     41,959
                                                      ---------  ---------
  Total current liabilities                             132,783    159,976
                                                      ---------  ---------
Non-current liabilities:
 Long-term debt, net of current portion                   5,815      7,869
 Long-term income taxes payable                           4,149      6,079
 Long-term deferred revenue                             102,452    105,008
 Long-term environmental remediation liabilities          6,404      7,533
                                                      ---------  ---------
  Total liabilities                                     251,603    286,465
                                                      ---------  ---------
Preferred stock, $.10 par value; 500,000 shares
 authorized, 7,209 shares issued and outstanding as
 convertible, liquidation preference value of
 $22,277 and $28,837 as of June 30, 2010 and 2009,
 respectively                                             8,239      1,808
                                                      ---------  ---------
Commitments and contingencies
Equity:
  Common stock, $.10 par value; 40,000,000 shares
   authorized, 19,637,535 and 19,634,053 shares
   issued and outstanding, respectively, at June 30,
   2010, and 19,357,573 and 19,354,091 shares issued
   and outstanding, respectively, at June 30, 2009        1,964      1,936
 Additional paid-in capital                             163,897    168,459
 Accumulated deficit                                   (137,883)  (121,434)
 Accumulated other comprehensive income (loss)              133       (305)
 Treasury stock, at cost                                    (33)       (33)
                                                      ---------  ---------
  Total shareholders' equity attributable to TRC
   Companies, Inc.                                       28,078     48,623
 Noncontrolling interest                                   (125)         -
                                                      ---------  ---------
  Total equity                                           27,953     48,623
                                                      ---------  ---------
  Total liabilities and equity                        $ 287,795  $ 336,896
                                                      =========  =========

Contact Information

  • Investor Contact:
    Sharon Merrill Associates
    (617) 542-5300
    Email Contact

    Company Contact:
    Thomas W. Bennet, Jr.
    CFO
    (978) 970-5600
    Email Contact