TRC Announces Second-Quarter Fiscal 2013 Financial Results

Marketwired

LOWELL, MA--(Marketwire - Feb 6, 2013) - 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 six months ended December 28, 2012.

Financial Highlights

           
    Three Months Ended   Six Months Ended  
(In millions, except per share data)     December 28,
2012
      December 30,
2011
    December 28,
2012
      December 30,
2011
 
                               
Net service revenue(1)   $ 75.3     $ 73.9   $ 150.5     $ 147.4  
                               
Arena Towers litigation expense (reversal) (2)   $ -     $ 0.2   $ -     $ (11.1 )
                               
Operating income   $ 4.4     $ 4.9   $ 9.0     $ 20.4  
                               
Federal and state income tax (provision) benefit (3)   $ (0.2 )   $ 0.2   $ (0.4 )   $ 3.5  
                               
Net income applicable to TRC Companies, Inc.   $ 4.1     $ 5.2   $ 8.4     $ 23.9  
                               
Diluted earnings per common share   $ 0.14     $ 0.18   $ 0.28     $ 0.84  
                               
Diluted weighted-average common shares outstanding     29.5       28.5     29.5       28.5  
                               
                               

(1) The Company believes net service revenue best reflects the value of services provided to its customers and is the most meaningful indicator of TRC's revenue performance.
(2) On October 5, 2011 a post-trial motion was granted to disregard a substantial portion of the verdict in this matter resulting in an $11.2 million reduction of the litigation accrual in the first quarter of fiscal 2012. In the fourth quarter of fiscal 2011 the Company had recorded litigation expense of $17.3 million related to the verdict.
(3) The Company received approval of a federal tax settlement resulting in a one-time benefit in the first quarter of fiscal 2012.

Comments on the Results
"In the second quarter TRC delivered another solid performance as we continued to grow the business despite challenging market conditions," said Chairman and Chief Executive Officer Chris Vincze. "Driven by higher demand for our Energy services, Net Service Revenue (NSR) increased 2% in the second quarter compared to the same quarter of the prior year. We also continued building our growth platform and finalized two strategic acquisitions which closed at the beginning of our fiscal third quarter." 

"Energy segment NSR grew 9% in the second quarter compared to the same period of the prior year primarily due to increased activity on electric distribution projects for large utilities and the expansion of our geographic presence in the mid-Atlantic region. Segment profit for the quarter was down 14% compared to the second quarter of fiscal 2012 reflecting higher-than-expected contract costs on several fixed-price projects. The market demand for distribution and transmission services continues to be high, and we believe that capital spending programs underlying those markets represent a growth opportunity for TRC in the years ahead."

"Our Environmental segment NSR grew 2% and profit was up 8% in the second quarter compared to the same period of the prior year due to increased utilization on certain large remediation projects. Natural gas pipeline development and regional gas transportation, as well as the potential for gas export, continue to represent major opportunities for TRC. Our Infrastructure segment, which is most affected by the lack of consistent government funding, saw NSR decrease 8% and profit 25% in the second quarter compared to the same period of the prior year, reflecting lower overall demand for our services. However, segment NSR backlog for the quarter was 14% higher than in the comparable period of the prior year." 

"We recently acquired GE's Air Emissions Testing business and the Heschong Mahone Group, Inc. ("HMG"), a California based energy efficiency consulting firm. The addition of the GE business to our Environmental segment strengthens our leadership position in the emissions testing market by adding technical resources and geographic reach, primarily in the upper Midwest, West Coast, and the South. Energy efficiency is a key growth market, and the HMG acquisition in our Energy segment augments our client base and service offerings while expanding our presence in the West Coast energy efficiency market. These acquisitions represent important steps in our profitable growth strategy and extend our momentum by focusing resources on our most attractive markets."

Business Outlook
"As we have said before, we believe TRC is in the right markets at the right time. We are well-positioned to benefit as the ongoing transformation of the U.S. energy industry continues and capital spending patterns normalize in our target markets. We continue to maintain a strong balance sheet and will leverage that to pursue profitable growth both organically and through acquisitions."

Conference Call Information
The Company will broadcast its financial results conference call today, February 6, 2013 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 may also be accessed by dialing (877) 709-8155 or (201) 689-8881. 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 and updates from the Company, visit TRC's website at www.TRCsolutions.com and follow TRC on Twitter 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, 2012, 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     Six Months Ended  
    December 28,     December 30,     December 28,     December 30,  
    2012     2011     2012     2011  
                                 
Gross revenue   $ 104,470     $ 105,378     $ 212,756     $ 209,113  
  Less subcontractor costs and other direct reimbursable charges     29,216       31,482       62,286       61,762  
Net service revenue     75,254       73,896       150,470       147,351  
                                 
Interest income from contractual arrangements     83       95       128       173  
Insurance recoverables and other income     913       518       2,657       738  
                                 
Operating costs and expenses:                                
  Cost of services (exclusive of costs shown separately below)     64,564       61,173       128,250       121,335  
  General and administrative expenses     5,694       6,847       12,869       14,395  
  Provision for doubtful accounts     -       -       -       365  
  Depreciation and amortization     1,593       1,434       3,131       2,796  
  Arena Towers litigation expense (reversal)     -       163       -       (11,061 )
Total operating costs and expenses     71,851       69,617       144,250       127,830  
Operating income     4,399       4,892       9,005       20,432  
Interest expense     (80 )     (175 )     (192 )     (356 )
Income from operations before taxes     4,319       4,717       8,813       20,076  
Federal and state income tax (provision) benefit     (215 )     206       (449 )     3,504  
Income from operations before equity in earnings     4,104       4,923       8,364       23,580  
Equity in earnings from unconsolidated affiliates, net of taxes     -       270       -       270  
Net income     4,104       5,193       8,364       23,850  
Net loss applicable to noncontrolling interest     19       18       31       49  
Net income applicable to TRC Companies, Inc.   $ 4,123     $ 5,211     $ 8,395     $ 23,899  
                                 
Basic earnings per common share   $ 0.14     $ 0.19     $ 0.29     $ 0.86  
Diluted earnings per common share   $ 0.14     $ 0.18     $ 0.28     $ 0.84  
                                 
Weighted-average common shares outstanding:                                 
  Basic     28,874       27,845       28,668       27,657  
  Diluted     29,471       28,525       29,477       28,458  
                                   
                                   
                                   
TRC Companies, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
 
    December 28,     June 30,  
    2012     2012  
ASSETS  
Current assets:                
  Cash and cash equivalents   $ 10,830     $ 16,561  
  Accounts receivable, less allowance for doubtful accounts     99,840       95,215  
  Insurance recoverable - environmental remediation     25,456       25,744  
  Restricted investments     6,615       4,413  
  Prepaid expenses and other current assets     12,998       12,077  
    Total current assets     155,739       154,010  
                 
Property and equipment     54,063       53,352  
  Less accumulated depreciation and amortization     (40,950 )     (39,621 )
    Property and equipment, net     13,113       13,731  
Goodwill     24,888       24,888  
Investments in and advances to unconsolidated affiliates and construction joint ventures     114       109  
Long-term restricted investments     29,855       35,265  
Long-term prepaid insurance     32,796       34,272  
Other assets     12,071       12,853  
    Total assets   $ 268,576     $ 275,128  
                 
LIABILITIES AND EQUITY  
Current liabilities:                
  Current portion of long-term debt   $ 5,676     $ 1,315  
  Current portion of capital lease obligations     371       267  
  Accounts payable     26,410       30,712  
  Accrued compensation and benefits     29,422       36,292  
  Deferred revenue     18,377       18,236  
  Environmental remediation liabilities     300       422  
  Other accrued liabilities     28,335       30,315  
    Total current liabilities     108,891       117,559  
Non-current liabilities:          
  Long-term debt, net of current portion     994       3,860  
  Capital lease obligations, net of current portion     618       462  
  Income taxes payable and deferred income tax liabilities     626       622  
  Deferred revenue     75,395       79,104  
  Environmental remediation liabilities     5,439       5,473  
    Total liabilities     191,963       207,080  
Commitments and contingencies          
Equity:                
    Common stock, $.10 par value; 40,000,000 shares authorized, 28,898,252 and 28,894,770 shares issued and outstanding, respectively, at December 28, 2012, and 28,130,702 and 28,127,220 shares issued and outstanding, respectively, at June 30, 2012     2,890       2,813  
  Additional paid-in capital     179,420       179,402  
  Accumulated deficit     (105,285 )     (113,680 )
  Accumulated other comprehensive loss     (78 )     (184 )
  Treasury stock, at cost     (33 )     (33 )
    Total shareholders' equity applicable to TRC Companies, Inc.     76,914       68,318  
  Noncontrolling interest     (301 )     (270 )
    Total equity     76,613       68,048  
    Total liabilities and equity   $ 268,576     $ 275,128  
                 
                 
Contact:
Investor
Dennis Walsh
Sharon Merrill
(617) 542-5300
trr@investorrelations.com

Company
Thomas W. Bennet, Jr.
CFO
(978) 970-5600
tbennet@trcsolutions.com

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