SOURCE: TRC Companies, Inc.

TRC Companies, Inc.

May 07, 2014 07:00 ET

TRC Announces Third-Quarter Fiscal 2014 Financial Results

Strong Energy Demand Drives 6% Net Service Revenue Growth

LOWELL, MA--(Marketwired - May 7, 2014) - TRC Companies, Inc. (NYSE: TRR), a recognized leader in engineering, consulting and construction management services to the energy, environmental and infrastructure markets, announced today financial results for the fiscal three and nine months ended March 28, 2014.

   
   
Financial Highlights  
    Three Months Ended     Nine Months Ended  
(In millions, except per share data)   March 28,
2014
    March 29,
2013
    March 28,
2014
    March 29,
2013
 
Net service revenue(1)   $ 88.1     $ 83.0     $ 260.5     $ 233.5  
Insurance recoverables and other income   $ 5.0     $ 1.1     $ 17.6     $ 3.7  
Operating income   $ 2.5     $ 3.4     $ 12.0     $ 12.4  
Federal and state income tax provision(2)   $ (1.1 )   $ (0.2 )   $ (4.8 )   $ (0.7 )
Net income applicable to TRC Companies, Inc.   $ 1.4     $ 3.1     $ 7.0     $ 11.5  
Diluted earnings per common share(2)   $ 0.05     $ 0.10     $ 0.23     $ 0.39  
Diluted weighted-average common shares outstanding     30.2       29.7       30.1       29.5  
                                 
(1)   The Company believes net service revenue (NSR) best reflects the value of services provided and is the most meaningful indicator of revenue performance.
(2)   The three and nine month periods ended March 29, 2013 were impacted by a deferred tax asset valuation allowance, which significantly reduced the effective tax rate.
     
     

Comments on the Results
"TRC delivered incremental NSR growth for the third quarter of fiscal 2014, but operating income declined largely due to weather impacts and increased medical benefit costs," said Chris Vincze Chairman and Chief Executive Officer. "Our 6% NSR increase was driven primarily by strength in the Energy segment.

"Energy segment NSR and profit grew 19% and 53%, respectively, as utility customers continue to make significant transmission and distribution system improvement investments and as demand continues for our energy efficiency and renewable energy services. Increasing state and federal energy incentives are further expanding the opportunities for TRC to develop and implement programs for customers in the public and private sector. The segment also benefited somewhat from the severe winter conditions in the southern areas of the U.S. which increased demand for our emergency response field services and mitigated the impact of severe weather on segment revenue.

"NSR increased 1% in the Environmental segment, as a steady flow of remediation, pipeline permitting, and power plant decommissioning projects helped to mitigate weather-related impacts on field projects. During the quarter, our strong execution of large projects and lower subcontractor costs contributed to segment profit growth of 7%.

"Infrastructure segment NSR was down 10% due to the severe weather and an unfavorable adjustment to a fixed-price project estimate, both of which contributed to a 49% segment profit decline.

"Operating income declined by $0.9 million from the prior year third quarter due to a number of factors including severe winter weather and increased medical benefit costs. Due to the increased volume of large claims, third quarter expenses for our medical benefit plan were approximately $1.8 million higher than in the same period of the prior year. This increased cost, coupled with the above-mentioned weather impacts, negatively impacted operating income by an estimated $2.2 million.

"Income taxes were $0.8 million higher than the prior year quarter due to the reversal of a portion of the valuation allowance we maintained against our net deferred tax assets in the prior year, resulting in an increase in the effective tax rate from 7% to 43% and a corresponding reduction in net income.

Business Outlook
"TRC is well-positioned in markets with significant opportunity for growth. NSR backlog grew 5% sequentially, indicating a stable marketplace. Proposal activity is increasing, and we are winning more projects in all three segments. Our healthy balance sheet enables TRC to execute our balanced profitable growth strategy," concluded Vincze.

Conference Call Information
TRC will broadcast its financial results conference call today, May 7, 2014 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. 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, 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 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, the uncertainty of TRC's operational and growth strategies; 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; 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, 2013, 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 28,     March 29,     March 28,     March 29,  
    2014     2013     2014     2013  
                                 
Gross revenue   $ 120,836     $ 109,806     $ 350,002     $ 322,562  
  Less subcontractor costs and other direct reimbursable charges     32,755       26,762       89,538       89,048  
Net service revenue     88,081       83,044       260,464       233,514  
                                 
Interest income from contractual arrangements     73       58       26       186  
Insurance recoverables and other income     5,008       1,068       17,613       3,725  
                                 
Operating costs and expenses:                                
  Cost of services (exclusive of costs shown separately below)     80,127       70,446       234,914       198,696  
  General and administrative expenses     8,363       8,096       24,642       20,965  
  Provision for doubtful accounts     -       408       -       408  
  Depreciation and amortization     2,161       1,828       6,587       4,959  
Total operating costs and expenses     90,651       80,778       266,143       225,028  
Operating income     2,511       3,392       11,960       12,397  
Interest expense     (22 )     (78 )     (152 )     (270 )
Income from operations before taxes     2,489       3,314       11,808       12,127  
Federal and state income tax provision     (1,060 )     (231 )     (4,830 )     (680 )
Net income     1,429       3,083       6,978       11,447  
Net loss applicable to noncontrolling interest     2       18       36       49  
Net income applicable to TRC Companies, Inc.   $ 1,431     $ 3,101     $ 7,014     $ 11,496  
                                 
Basic earnings per common share   $ 0.05     $ 0.11     $ 0.24     $ 0.40  
Diluted earnings per common share   $ 0.05     $ 0.10     $ 0.23     $ 0.39  
                                 
Weighted-average common shares outstanding:                                
  Basic     29,691       28,998       29,549       28,778  
  Diluted     30,166       29,654       30,088       29,547  
                                 
                                 
   
   
TRC Companies, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands, except share data)  
(Unaudited)  
    March 28,     June 30,  
    2014     2013  
ASSETS  
Current assets:                
  Cash and cash equivalents   $ 11,401     $ 18,136  
  Accounts receivable, less allowance for doubtful accounts     123,491       109,320  
  Insurance recoverable - environmental remediation     42,091       26,305  
  Restricted investments     4,135       5,582  
  Deferred income tax assets     11,917       12,518  
  Income taxes refundable     3,987       1,444  
  Prepaid expenses and other current assets     17,742       12,045  
    Total current assets     214,764       185,350  
                 
Property and equipment     60,391       57,005  
  Less accumulated depreciation and amortization     (47,045 )     (43,171 )
    Property and equipment, net     13,346       13,834  
Goodwill     31,679       28,797  
Investments in and advances to unconsolidated affiliates and construction joint ventures     117       113  
Long-term deferred income tax assets     5,098       6,601  
Long-term restricted investments     24,055       27,580  
Long-term prepaid insurance     29,235       31,497  
Other assets     14,269       13,992  
  Total assets   $ 332,563     $ 307,764  
                 
LIABILITIES AND EQUITY  
Current liabilities:                
  Current portion of long-term debt   $ 1,533     $ 4,745  
  Current portion of capital lease obligations     565       568  
  Accounts payable     29,325       32,238  
  Accrued compensation and benefits     37,691       34,040  
  Deferred revenue     13,334       20,094  
  Environmental remediation liabilities     136       291  
  Other accrued liabilities     49,705       31,737  
    Total current liabilities     132,289       123,713  
Non-current liabilities:                
  Long-term debt, net of current portion     134       568  
  Capital lease obligations, net of current portion     322       789  
  Income taxes payable and deferred income tax liabilities     1,063       310  
  Deferred revenue     73,392       68,514  
  Environmental remediation liabilities     6,329       6,973  
    Total liabilities     213,529       200,867  
Commitments and contingencies                
Equity:                
  Common stock, $.10 par value; 40,000,000 shares authorized, 29,713,545 and 29,710,063 shares issued and outstanding, respectively, at March 28, 2014, and 29,053,301 and 29,049,819 shares issued and outstanding, respectively, at June 30, 2013     2,971       2,905  
  Additional paid-in capital     186,929       181,874  
  Accumulated deficit     (70,391 )     (77,405 )
  Accumulated other comprehensive loss     (71 )     (109 )
  Treasury stock, at cost     (33 )     (33 )
    Total shareholders' equity applicable to TRC Companies, Inc.     119,405       107,232  
  Noncontrolling interest     (371 )     (335 )
    Total equity     119,034       106,897  
    Total liabilities and equity   $ 332,563     $ 307,764  
                     
                     

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