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