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