SOURCE: TRC Companies, Inc.

TRC Companies, Inc.

May 04, 2011 07:30 ET

TRC Announces Third-Quarter Fiscal 2011 Financial Results

Company Generates Operating Income of $1.1 Million on Net Service Revenue Growth of 6%

LOWELL, MA--(Marketwire - May 4, 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 nine month periods ended March 25, 2011.

Financial Highlights
                                 Three Months Ended     Nine Months Ended
                                --------------------- --------------------
(In millions, except per share  March 25,  March 26,  March 25,  March 26,
 data)                            2011       2010       2011       2010
                                ---------- ---------  ---------  ---------
Net service revenue*            $     57.7 $    54.6  $   175.7  $   165.8
Operating income (loss)         $      1.1 $    (0.4) $     7.4  $    (1.6)
Federal and state income tax
 (provision) benefit            $        - $     0.4  $    (0.7) $     4.8
Accretion charges on preferred
 stock                          $        - $    (1.8) $    (7.3) $    (3.8)
Net income (loss) applicable to
 TRC Companies, Inc.'s common
 shareholders                   $      1.0 $    (2.0) $    (1.1) $     0.3
Diluted earnings (loss) per
 common share                   $     0.03 $   (0.10) $   (0.05) $    0.02
Diluted weighted-average common
 shares outstanding                 27,921    19,588     22,957     19,906

*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 Third Quarter

"The 6% year-over-year growth in net service revenue (NSR) in the quarter was achieved despite the continued sluggish market conditions and absence of clear macro growth drivers in the domestic economy," said Chairman and Chief Executive Officer Chris Vincze. "Many clients continue to carefully manage their capital spending below 2007 levels, as they press for certainty with regard to federal energy, infrastructure, and environmental policy. Our 5% NSR backlog growth year over year in the quarter reflects a positive trend in project awards, particularly in our Energy and Environmental segments. Equally as important as our NSR growth in the quarter was the achievement of $1 million of net income in what is typically our seasonally weakest quarter. Combined with revenue growth and the absence of the preferred stock accretion expense, our focus on margin improvement and cost efficiency over the past several years has positioned us well for results that positively impact the bottom line."

"Our Energy segment achieved 25% NSR growth year over year in the quarter and 17% for the nine month year to date period as a number of clients have begun to resume investments in electric transmission, distribution and energy efficiency projects that were deferred over the past few years. Our profit in the Energy segment grew 74% year over year in the quarter as we benefitted from higher staff utilization and more efficient resource allocation. Our re-entry into the engineer, procure and construct (EPC) markets over the past year has clearly supported our improvements."

"Within our Environmental segment, NSR grew by 2% year over year during the quarter and 9% for the nine month year to date period. Segment profit declined slightly in the quarter due to project completion timing as well as seasonal effects in the Northeast but is up 22% for the 9 month year to date period."

"Within our Infrastructure segment, NSR declined 8% year over year in the quarter and 13% for the nine month year to date period driven by the uncertainties with federal policy and funding, as well as state and municipal budget deficits. Again, seasonal impact also hampered production. Segment profit however was up 80% year over year in the quarter and 4% for the nine month year to date period as the result of margin improvement activities."

Business Outlook

"Although the near-term outlook for both the economy and many of our key markets remains uncertain, we are encouraged by the long-term opportunities available to TRC, especially in how we have repositioned ourselves in the Energy and Environmental markets. We also remain focused on our performance excellence initiatives, which include continued investment in margin improvement and enterprise scale initiatives that help drive profitable growth. A fundamental component of our profitable growth strategy is to pursue acquisitions that will expand TRC's platform in key U.S. markets. For example, our recent acquisition of Alexander Utility Engineering (AUE) increases our power and telecommunications engineering presence in Texas, an important market for our Energy sector."

"We have built a cost-efficient scalable business model. We concluded the third quarter with $17.7 million of cash, cash equivalents and marketable securities, and a growing business. With a healthy balance sheet and the attendant financial capacity and flexibility, we are continuing to pursue our strategic plan."

Conference Call Information

The Company will broadcast its third-quarter fiscal 2011 financial results conference call today, May 4, 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     Nine Months Ended
                                --------------------  --------------------
                                March 25,  March 26,  March 25,  March 26,
                                  2011       2010       2011       2010
                                ---------  ---------  ---------  ---------
Gross revenue                   $  76,071  $  82,101  $ 239,180  $ 246,722
  Less subcontractor costs and
   other direct reimbursable
   charges                         18,323     27,524     63,519     80,945
                                ---------  ---------  ---------  ---------
Net service revenue                57,748     54,577    175,661    165,777
                                ---------  ---------  ---------  ---------

Interest income from
 contractual arrangements              95        108        308        475
Insurance recoverables and
 other income                         392      2,999      3,302      8,925

Operating costs and expenses:
  Cost of services                 48,912     50,103    147,201    150,863
  General and administrative
   expenses                         6,713      6,127     19,563     19,176
  Provision for doubtful accounts     449        600      1,622      1,710
  Depreciation and amortization     1,025      1,251      3,486      5,047
                                ---------  ---------  ---------  ---------
Total operating costs and
 expenses                          57,099     58,081    171,872    176,796
                                ---------  ---------  ---------  ---------
Operating income (loss)             1,136       (397)     7,399     (1,619)
Interest expense                     (173)      (242)      (588)      (768)
Gain on extinguishment of debt          -          -          -      1,716
                                ---------  ---------  ---------  ---------
Income (loss) from operations
 before taxes and equity in
 (losses) earnings                     963       (639)     6,811      (671)
Federal and state income tax
 (provision) benefit                  (16)       393       (702)     4,818
                                ---------  ---------  ---------  ---------
Income (loss) from operations
 before equity in (losses)
 earnings                             947       (246)     6,109      4,147
Equity in (losses) earnings
 from unconsolidated affiliates,
 net of taxes                           -        (23)        10        (66)
                                ---------  ---------  ---------  ---------
Net income (loss)                     947       (269)     6,119      4,081
Net loss applicable to
 noncontrolling interest                5         28         39         92
                                ---------  ---------  ---------  ---------
Net income (loss) applicable to
 TRC Companies, Inc.                  952       (241)     6,158      4,173
Accretion charges on preferred
 stock                                  -     (1,779)    (7,261)    (3,831)
                                ---------  ---------  ---------  ---------
Net income (loss) applicable to
  TRC Companies, Inc.'s common
   shareholders                 $     952  $  (2,020) $  (1,103) $     342
                                =========  =========  =========  =========

Basic earnings (loss) per
 common share                   $    0.04  $   (0.10) $   (0.05) $    0.02
                                =========  =========  =========  =========
Diluted earnings (loss) per
 common share                   $    0.03  $   (0.10) $   (0.05) $    0.02
                                =========  =========  =========  =========

Weighted-average common shares
 outstanding:
  Basic                            27,190     19,588     22,957     19,523
                                =========  =========  =========  =========
  Diluted                          27,921     19,588     22,957     19,906
                                =========  =========  =========  =========




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

                                                  March 25,     June 30,
                                                    2011          2010
                                                ------------  ------------
                  ASSETS
Current assets:
  Cash and cash equivalents                     $     12,210  $     14,709
  Marketable securities                                5,481             -
  Accounts receivable, less allowance for
   doubtful accounts                                  79,182        87,104
  Insurance recoverable - environmental
   remediation                                        35,955        35,664
  Restricted investments                              12,505        14,744
  Prepaid expenses and other current assets           12,141         9,123
  Income taxes refundable                                 65           388
                                                ------------  ------------
    Total current assets                             157,539       161,732
                                                ------------  ------------

Property and equipment                                45,978        47,287
  Less accumulated depreciation and
   amortization                                      (35,818)      (35,535)
                                                ------------  ------------
    Property and equipment, net                       10,160        11,752
                                                ------------  ------------
Goodwill                                              16,713        14,870
Investments in and advances to unconsolidated
 affiliates and construction joint ventures              111           117
Long-term restricted investments                      41,604        46,426
Long-term prepaid insurance                           42,029        44,529
Other assets                                           8,758         8,369
                                                ------------  ------------
    Total assets                                $    276,914  $    287,795
                                                ============  ============


              LIABILITIES AND EQUITY
Current liabilities:
  Current portion of long-term debt             $      3,144  $      3,629
  Accounts payable                                    24,051        35,871
  Accrued compensation and benefits                   25,573        22,393
  Deferred revenue                                    21,627        26,486
  Environmental remediation liabilities                  527           623
  Other accrued liabilities                           42,405        43,781
                                                ------------  ------------
    Total current liabilities                        117,327       132,783
                                                ------------  ------------
Non-current liabilities:
  Long-term debt, net of current portion               6,096         5,815
  Long-term income taxes payable                       4,711         4,149
  Long-term deferred revenue                          98,350       102,452
  Long-term environmental remediation
   liabilities                                         5,866         6,404
                                                ------------  ------------
    Total liabilities                                232,350       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, 27,272,075 and
     27,268,593 shares issued and outstanding,
     respectively, at March 25, 2011, and
     19,637,535 and 19,634,053 shares issued
     and outstanding, respectively, at
     June 30, 2010                                     2,727         1,964
  Additional paid-in capital                         173,380       163,897
  Accumulated deficit                               (131,725)     (137,883)
  Accumulated other comprehensive income                 379           133
  Treasury stock, at cost                                (33)          (33)
                                                ------------  ------------
    Total shareholders' equity applicable to
     TRC Companies, Inc.                              44,728        28,078
  Noncontrolling interest                               (164)         (125)
                                                ------------  ------------
    Total equity                                      44,564        27,953
                                                ------------  ------------
    Total liabilities and equity                $    276,914  $    287,795
                                                ============  ============

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