SOURCE: TRC Companies, Inc.

TRC Companies, Inc.

February 02, 2011 07:30 ET

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--(Marketwire - 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
                                    ------------------  ------------------
(In millions, except per            December  December  December  December
 share data)                        24, 2010  25, 2009  24, 2010  25, 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 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 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.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share data)
                               (Unaudited)

                                    Three Months Ended   Six Months Ended
                                    ------------------  ------------------
                                    December  December  December  December
                                    24, 2010  25, 2009  24, 2010  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
 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 COMPANIES, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                    (in thousands, except share data)
                               (Unaudited)

                                                  December 24,   June 30,
                                                      2010         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
                                                  ===========  ===========

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