Summary Results
Three Months
Ended Years Ended
June 30, June 30, June 30, June 30,
------- ------- ------- -------
(In millions, except per share data) 2010 2009 2010 2009
------- ------- ------- -------
Net service revenue* $ 64.3 $ 63.6 $ 230.1 $ 254.8
Goodwill and intangible asset
write-offs** $ 20.2 $ - $ 20.2 $ 21.4
Depreciation and amortization*** $ 3.0 $ 2.0 $ 8.0 $ 7.3
Operating (loss) income $ (19.8) $ 0.4 $ (21.5) $ (16.7)
Federal and state income tax provision
(benefit) $ 0.6 $ 4.5 $ (4.2) $ 3.9
Accretion charges on preferred stock $ 2.6 $ 0.2 $ 6.4 $ 0.2
Net loss applicable to TRC Companies,
Inc.'s common shareholders $ (23.2) $ (5.3) $ (22.9) $ (24.1)
Diluted loss per common share $ (1.18) $ (0.27) $ (1.17) $ (1.25)
Diluted weighted-average common shares
outstanding 19,619 19,354 19,548 19,272
*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.
**During the fourth quarter of fiscal year 2010, TRC recorded a non-cash
goodwill impairment charge of $20.2 million.
***Fourth quarter of fiscal year 2010 includes a $1.6 million charge
related to accelerated amortization of intangible assets.
Comments on the Results
"We believe our fourth-quarter results indicate that the demand environment
across our key markets is beginning to improve," said Chairman and Chief
Executive Officer Chris Vincze. "Net service revenues of $64.3 million
were up 1.1% compared to the same quarter of the prior year -- the first
year-over-year increase in two years. Our gross revenue backlog of $361.0
million increased by $7.8 million, or 2.2%, from the third quarter level
making it the first time in eight quarters that our backlog has increased
from the immediately prior quarter. The $19.8 million operating loss in
the quarter was primarily the result of a $20.2 million goodwill impairment
charge. An additional $1.6 million expense for accelerated amortization of
other intangible assets was also recorded in the quarter as part of
depreciation and amortization expenses. Excluding the non-cash goodwill
impairment charge of $20.2 million, we would have generated positive
operating income for the fiscal fourth quarter."
"During the fourth quarter, demand for our services, as measured by backlog
growth in each of our operating segments, showed improvement compared to
the third quarter. Within our Energy operating segment, our energy
efficiency services continue to represent a significant growth opportunity
for TRC. The current regulatory atmosphere and the issues associated with
sustainability and climate change present continuing opportunities in our
Environmental operating segment. Overall, our Infrastructure operating
segment remains relatively flat, although major upgrades and substantial
investments over the long term are necessary for the nation's aging
infrastructure."
"While the demand environment is beginning to recover, we continued to
further streamline our cost structure and reduced our general and
administrative (G&A) costs in the fourth quarter by $0.1 million, or 1.9%,
compared to the same quarter last year."
"Although our full fiscal year 2010 net service revenue decreased by almost
10% year-over-year, we reduced both our G&A expenses and cost of services
at a more accelerated rate. We lowered G&A expenses by $5.8 million, or
17.6%, and our cost of services by $24.0 million, or 10.6%, from the prior
year. We concluded fiscal year 2010 with some revenue momentum, and we
enter fiscal year 2011 with a significant improvement in our cost
structure."
Business Outlook
"Our objectives for fiscal year 2011 are clear: generating profitable
organic growth and cash flow from operations, while continuing to deliver
performance excellence. We believe that sustainable profitable growth is
possible for TRC in the current economic environment. TRC's capabilities
align well with our country's goals to improve its transportation and
energy infrastructures, add renewable energy to domestic supply, and become
more efficient producers of conventional energy."
"The fundamentals of the markets TRC serves remain promising, both mid- and
long-term. Energy remains a primary driver of the domestic economy and we
expect to see long-term growth in this operating segment as we continue to
expand our offerings in energy efficiency, power delivery engineering and
demand management programs. Client interest in renewing large scale
capital investments and in Engineer Procure and Construct (EPC) contracts
is returning; however, the exact timing and award of these EPC projects
remains unpredictable. We expect demand for our Environmental services to
be driven by climate change, clean power, greenhouse gas and other air
issues. Coupled with the support of federal funding, the prospects for
growth in our Environmental operating segment are improving. We believe
that the long-term market for our Infrastructure services remains stable,
due to population shifts in certain geographic regions, continued aging and
obsolescence of existing infrastructure, capacity shortfalls, and Federal
stimulus funding for state and municipal projects. All of these factors
combined with the early signs of market improvements have led us to guarded
optimism about our near-term growth prospects," concluded Vincze.
Conference Call Information
The Company will broadcast its fourth-quarter and fiscal year-end 2010
financial results conference call today 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 Years Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
--------- --------- --------- ---------
Gross revenue $ 83,853 $ 105,750 $ 330,575 $ 432,517
Less subcontractor costs and
other direct reimbursable
charges 19,531 42,144 100,476 177,713
--------- --------- --------- ---------
Net service revenue 64,322 63,606 230,099 254,804
--------- --------- --------- ---------
Interest income from
contractual arrangements 121 216 596 1,859
Insurance recoverables and
other (loss) income (81) 5,498 8,844 19,539
Operating costs and expenses:
Cost of services 52,358 57,448 203,221 227,217
General and administrative
expenses 7,952 8,102 27,128 32,936
Provision for doubtful
accounts 634 1,336 2,344 3,952
Goodwill and intangible asset
write-offs 20,249 - 20,249 21,438
Depreciation and amortization 3,002 2,030 8,049 7,322
--------- --------- --------- ---------
Total operating costs and
expenses 84,195 68,916 260,991 292,865
--------- --------- --------- ---------
Operating (loss) income (19,833) 404 (21,452) (16,663)
Interest expense (235) (519) (1,003) (2,925)
Gain on extinguishment of debt - - 1,716 -
--------- --------- --------- ---------
Loss from operations before
taxes and equity in earnings
(losses) (20,068) (115) (20,739) (19,588)
Federal and state income tax
provision (benefit) 608 4,515 (4,210) 3,871
--------- --------- --------- ---------
Loss from operations before
equity in earnings (losses) (20,676) (4,630) (16,529) (23,459)
Equity in earnings (losses)
from unconsolidated
affiliates, net of taxes 21 (449) (45) (449)
--------- --------- --------- ---------
Net loss (20,655) (5,079) (16,574) (23,908)
Net loss attributable to
noncontrolling interest (33) - (125) -
--------- --------- --------- ---------
Net loss applicable to TRC
Companies, Inc. (20,622) (5,079) (16,449) (23,908)
Accretion charges on preferred
stock 2,600 215 6,431 215
--------- --------- --------- ---------
Net loss applicable to TRC
Companies, Inc.'s common
shareholders $ (23,222) $ (5,294) $ (22,880) $ (24,123)
========= ========= ========= =========
Basic and diluted loss per
common share $ (1.18) $ (0.27) $ (1.17) $ (1.25)
========= ========= ========= =========
Basic and diluted weighted
average common shares
outstanding 19,619 19,354 19,548 19,272
========= ========= ========= =========
TRC COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
June 30, June 30,
2010 2009
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 14,709 $ 8,469
Accounts receivable, less allowance for doubtful
accounts 87,104 99,903
Insurance recoverable - environmental remediation 35,664 27,379
Restricted investments 14,744 28,214
Prepaid expenses and other current assets 9,123 11,032
Income taxes refundable 388 224
--------- ---------
Total current assets 161,732 175,221
--------- ---------
Property and equipment:
Land and building 480 480
Equipment, furniture and fixtures 41,946 46,727
Leasehold improvements 4,861 4,909
--------- ---------
47,287 52,116
Less accumulated depreciation and amortization (35,535) (37,075)
--------- ---------
Property and equipment, net 11,752 15,041
--------- ---------
Goodwill 14,870 35,119
Investments in and advances to unconsolidated
affiliates and construction joint ventures 117 119
Long-term restricted investments 46,426 53,295
Long-term prepaid insurance 44,529 47,766
Other assets 8,369 10,335
--------- ---------
Total assets $ 287,795 $ 336,896
========= =========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 3,629 $ 4,632
Accounts payable 35,871 44,106
Accrued compensation and benefits 22,393 30,029
Deferred revenue 26,486 38,684
Environmental remediation liabilities 623 566
Other accrued liabilities 43,781 41,959
--------- ---------
Total current liabilities 132,783 159,976
--------- ---------
Non-current liabilities:
Long-term debt, net of current portion 5,815 7,869
Long-term income taxes payable 4,149 6,079
Long-term deferred revenue 102,452 105,008
Long-term environmental remediation liabilities 6,404 7,533
--------- ---------
Total liabilities 251,603 286,465
--------- ---------
Preferred stock, $.10 par value; 500,000 shares
authorized, 7,209 shares issued and outstanding as
convertible, liquidation preference value of
$22,277 and $28,837 as of June 30, 2010 and 2009,
respectively 8,239 1,808
--------- ---------
Commitments and contingencies
Equity:
Common stock, $.10 par value; 40,000,000 shares
authorized, 19,637,535 and 19,634,053 shares
issued and outstanding, respectively, at June 30,
2010, and 19,357,573 and 19,354,091 shares issued
and outstanding, respectively, at June 30, 2009 1,964 1,936
Additional paid-in capital 163,897 168,459
Accumulated deficit (137,883) (121,434)
Accumulated other comprehensive income (loss) 133 (305)
Treasury stock, at cost (33) (33)
--------- ---------
Total shareholders' equity attributable to TRC
Companies, Inc. 28,078 48,623
Noncontrolling interest (125) -
--------- ---------
Total equity 27,953 48,623
--------- ---------
Total liabilities and equity $ 287,795 $ 336,896
========= =========
Contact Information: Investor Contact: Sharon Merrill Associates (617) 542-5300 Company Contact: Thomas W. Bennet, Jr. CFO (978) 970-5600