SOURCE: TRC Companies, Inc.

TRC Companies, Inc.

May 04, 2016 07:00 ET

TRC Announces Third-Quarter Fiscal 2016 Financial Results

LOWELL, MA--(Marketwired - May 4, 2016) - TRC Companies, Inc. (NYSE: TRR)

Third-Quarter FY 2016 Highlights

  • NSR1 up 20% to $121.3 million
  • Adjusted operating income2 of $2.8 million
  • Adjusted EBITDA2 of $7.9 million
  • Adjusted net income2 of $1.7 million
  • Adjusted EPS2 of $0.05
  • Operating cash flow of $17.0 million

TRC Companies, Inc. (NYSE: TRR), a recognized leader in engineering, environmental consulting and construction-management services to the energy, environmental, infrastructure and pipeline markets, today announced financial results for the fiscal third quarter ended March 25, 2016.

"During the third quarter, we advanced our strategy to position TRC as the leading provider of full-service solutions to our primary markets," said Chris Vincze, Chairman and Chief Executive Officer. "In just 120 days, we have fully integrated the Pipeline Services segment acquisition into TRC's systems. Pipeline Services results drove the 20% increase in NSR from the third quarter a year ago."

    Three Months Ended         Nine Months Ended      
    March 25,     March 27,   %     March 25,     March 27,   %  
(In millions, except per share data)   2016     2015   Change     2016     2015   Change  
                                 
GAAP Results                                
                                         
Net service revenue(1)   $ 121.3     $ 101.0   20 %   $ 332.8     $ 293.5   13 %
Acquisition and integration expense   $ 1.6     $ -   N/A     $ 3.7     $ -   N/A  
Goodwill impairment   $ 24.5     $ -   N/A     $ 24.5     $ -   N/A  
Depreciation   $ 1.9     $ 1.3   49 %   $ 5.1     $ 4.5   13 %
Amortization   $ 3.2     $ 0.9   249 %   $ 5.1     $ 2.6   93 %
Operating income   $ (23.3 )   $ 7.1   -426 %   $ (8.9 )   $ 20.0   -145 %
Net income applicable to TRC Companies, Inc.   $ (14.3 )   $ 5.2   -377 %   $ (5.9 )   $ 12.7   -146 %
Diluted earnings per common share   $ (0.46 )   $ 0.17   -371 %   $ (0.19 )   $ 0.41   -146 %
                                         
Non-GAAP Results                                        
                                         
Adjusted operating income(2)   $ 2.8     $ 7.1   -61 %   $ 19.3     $ 20.0   -4 %
Adjusted EBITDA(2)   $ 7.9     $ 9.4   -16 %   $ 29.4     $ 27.1   8 %
Adjusted net income(2) (3)   $ 1.7     $ 5.2   -66 %   $ 11.4     $ 12.7   -10 %
Adjusted diluted earnings per common share(2) (3)   $ 0.05     $ 0.17   -71 %   $ 0.36     $ 0.41   -12 %
                                         
                                         
(1)   TRC believes net service revenue (NSR) best reflects the value of services provided and is the most meaningful indicator of revenue performance.
(2)   Excludes acquisition and integration expenses of $1.6 million and $3.7 million and goodwill impairment charges of $24.5 million for the three and nine months ended March 25, 2016, respectively.
(3)   Excludes goodwill impairment and acquisition related expense in note 2, net of an income tax benefit of $10.1 million and $10.9 million for the three and nine months ended March 25, 2016, respectively.

Comments on Segment Results
"Our Energy segment experienced a 3% decline in NSR and 9% decline in segment profit year over year, driven by delays related to a significant new project award and timing associated with the receipt of change orders," Vincze continued. "In our Infrastructure segment, renewed transportation-related spending by our municipal and state clients drove a 10% increase in segment NSR on solid 20% margins. The 4% decline in segment profit was due to a significant change order awarded in the year-ago quarter. In our Environmental segment, the continued slowdown from certain oil and gas clients led to a 2% decline in NSR and a profit decline of 20% year-over-year.

"Our newest and fourth segment, Pipeline Services, has been affected by the downturn that has spread throughout the oil and gas sector," Vincze said. "Pipeline services delivered NSR of $21.6 million and a segment loss of $3.1 million. We have undertaken a series of cost reduction initiatives with total annualized savings of approximately $15 million, in order to align segment expenses with current revenues in this business. We also incurred $1.6 million of acquisition integration expenses in Q3. In addition, given the steep decline in near-term demand in the oil and gas sector, we incurred a non-cash goodwill impairment charge in the quarter associated with the Pipeline Services segment acquisition."

Business Outlook
"We continue to believe in the long-term prospects for each of our segments. The underlying market fundamentals in our Energy segment remain strong, spurred by demand from our utility clients and activity on the energy efficiency and renewables fronts. Infrastructure segment backlog is healthy, driven by increased transportation spending at both the state and federal levels and a new federal transportation bill. Although we are experiencing a slowdown from our oil and gas clients in our Environmental segment, demand for services related to environmental remediation, construction, transaction support, the retirement of coal plants and the need to transport natural gas should contribute to segment revenue going forward. Despite the market constraints currently affecting our Pipeline Services segment, the long-term outlook is positive on the strength of domestic demand for energy, the need for comprehensive pipeline integrity management, an expected increase in U.S. fossil fuel exports and the transition from coal-fired power plants to natural gas."

Conference Call Information / Reconciliation of Non-GAAP Metrics
TRC will webcast its financial results conference call today, May 4, 2016 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. Those slides also contain a reconciliation of non-GAAP metrics utilized in this press release to GAAP metrics. 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, environmental consulting and construction management firm that provides integrated services to the energy, environmental, infrastructure and pipeline markets. TRC serves a broad range of commercial, industrial and government clients, 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, 2015, and other factors included 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 27,     March 25,     March 27,  
    2016     2015     2016     2015  
                                 
Gross revenue   $ 158,130     $ 130,777     $ 451,332     $ 397,030  
  Less subcontractor costs and other direct reimbursable charges     36,877       29,783       118,534       103,579  
Net service revenue     121,253       100,994       332,798       293,451  
                                 
Interest income from contractual arrangements     27       23       69       67  
Insurance recoverables and other income     146       753       1,919       6,238  
                                 
Operating costs and expenses:                                
  Cost of services (exclusive of costs shown separately below)     104,030       83,486       280,690       247,275  
  General and administrative expenses     9,523       8,927       24,690       25,360  
  Acquisition and integraton expenses     1,606       -       3,724       -  
  Goodwill impairment     24,465       -       24,465       -  
  Depreciation     1,942       1,303       5,070       4,481  
  Amortization     3,162       905       5,078       2,633  
Total operating costs and expenses     144,728       94,621       343,717       279,749  
Operating (loss) income     (23,302 )     7,149       (8,931 )     20,007  
Interest income     189       -       326       -  
Interest expense     (1,073 )     (73 )     (1,562 )     (125 )
(Loss) income from operations before taxes     (24,186 )     7,076       (10,167 )     19,882  
Income tax benefit (provision)     9,954       (1,916 )     4,358       (7,244 )
Net (loss) income     (14,232 )     5,160       (5,809 )     12,638  
Net (income) loss applicable to noncontrolling interest     (65 )     5       (59 )     14  
Net (loss) income applicable to TRC Companies, Inc.   $ (14,297 )   $ 5,165     $ (5,868 )   $ 12,652  
                                 
Basic (loss) earnings per common share   $ (0.46 )   $ 0.17     $ (0.19 )   $ 0.42  
Diluted (loss) earnings per common share   $ (0.46 )   $ 0.17     $ (0.19 )   $ 0.41  
                                 
Weighted-average common shares outstanding:                                
  Basic     31,045       30,382       30,886       30,233  
  Diluted     31,045       30,737       30,886       30,551  
                                 
                                 
                                 
                                 
   
   
TRC Companies, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands, except per share data)  
(Unaudited)  
   
    March 25,     June 30,  
    2016     2015  
ASSETS  
Current assets:                
  Cash and cash equivalents   $ 9,120     $ 37,296  
  Restricted cash     -       122  
  Accounts receivable, less allowance for doubtful accounts     145,789       138,346  
  Insurance recoverable - environmental remediation     38,745       40,927  
  Restricted investments     6,156       6,701  
  Deferred income tax assets     16,280       16,057  
  Income taxes refundable     203       412  
  Prepaid expenses and other current assets     27,559       10,499  
    Total current assets     243,852       250,360  
                 
Property and equipment     73,114       64,594  
  Less accumulated depreciation and amortization     (50,356 )     (50,885 )
    Property and equipment, net     22,758       13,709  
Goodwill     75,337       37,024  
Intangible assets, net     48,726       9,304  
Long-term deferred income tax assets     10,284       2,867  
Long-term restricted investments     16,870       18,385  
Long-term prepaid insurance     24,258       25,929  
Other assets     20,174       5,303  
    Total assets   $ 462,259     $ 362,881  
                 
LIABILITIES AND EQUITY  
Current liabilities:                
  Current portion of long-term debt   $ 20,031     $ 50  
  Current portion of capital lease obligations     -       166  
  Accounts payable     32,370       31,999  
  Accrued compensation and benefits     47,552       47,233  
  Deferred revenue     16,010       10,612  
  Environmental remediation liabilities     8,669       8,695  
  Income taxes payable     212       3,271  
  Other accrued liabilities     45,605       42,170  
    Total current liabilities     170,449       144,196  
Non-current liabilities:                
  Long-term debt, net of current portion     83,756       55  
  Capital lease obligations, net of current portion     -       -  
  Income taxes payable and deferred income tax liabilities     2,067       1,647  
  Deferred revenue     60,492       68,579  
  Environmental remediation liabilities     461       489  
    Total liabilities     317,225       214,966  
Commitments and contingencies                
Equity:                
    Common stock, $.10 par value; 40,000,000 shares authorized, 31,057,243 and 31,053,761 shares issued and outstanding, respectively, at March 25, 2016, and 30,485,510 and 30,482,028 shares issued and outstanding, respectively, at June 30, 2015     3,106       3,049  
  Additional paid-in capital     193,288       191,321  
  Accumulated deficit     (51,807 )     (45,939 )
  Accumulated other comprehensive loss     (79 )     (88 )
  Treasury stock, at cost     (33 )     (33 )
    Total shareholders' equity applicable to TRC Companies, Inc.     144,475       148,310  
  Noncontrolling interest     559       (395 )
    Total equity     145,034       147,915  
    Total liabilities and equity   $ 462,259     $ 362,881  
                 

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