TRC Announces Second-Quarter Fiscal 2017 Financial Results

LOWELL, MA -- (Marketwired) -- 02/02/17 -- TRC Companies, Inc. (NYSE: TRR), a recognized leader in engineering, environmental consulting and construction-management services to the power, environmental, infrastructure and oil and gas markets, today announced financial results for the fiscal second quarter ended December 30, 2016.

                    Three Months                  Six Months
                       Ended                        Ended
                  ----------------             ----------------
(In millions,    December December            December December
 except per share    30,     25,      $     %    30,     25,      $     %
 data)              2016    2015  Change Change 2016    2015   Change Change
----------------- ------- ------- ------ ----- ------- ------- ------- -----
GAAP Results
Net service
 revenue(1)       $ 127.4 $ 111.4 $16.0    14% $ 251.7 $ 211.5 $ 40.2    19%
Acquisition and
 integration
 expense                - $   1.2 $(1.2)  N/A        - $   2.1 $ (2.1)  N/A
Amortization      $   2.6 $   1.1 $ 1.5   143% $   5.3 $   1.9 $  3.4   178%
Operating income  $   7.0 $   6.7 $ 0.3     5% $  13.0 $  14.4 $ (1.4)  -10%
Net income
 applicable to
 TRC Companies,
 Inc.             $   4.0 $   3.9 $ 0.1     2% $   7.6 $   8.4 $ (0.8)   -9%
Diluted earnings
 per common share $  0.13 $  0.13 $   -     0% $  0.24 $  0.27 $(0.03)  -11%

Non-GAAP Results
EBITDA(2)         $  11.4 $   9.5 $ 1.9    20% $  21.9 $  19.4 $  2.5    13%
Adjusted
 EBITDA(3)        $  11.4 $  10.7 $ 0.7     6% $  21.9 $  21.5 $  0.4     2%

(1) TRC believes net service revenue (NSR) best reflects the value of
    services provided and is the most meaningful indicator of revenue
    performance.
(2) TRC presents EBITDA because it believes that it is a useful tool for the
    Company, its lenders and its investors to measure the Company's ability
    to meet debt service, capital expenditure and working capital
    requirements. As used in the presentation, EBITDA is operating income
    plus depreciation and amortization.
(3) Excludes acquisition and integration expenses of $1.2 million and $2.1
    million for the three months and six months ended December 25, 2015. For
    a complete reconciliation of the Company's non-GAAP results, please see
    the associated earnings webcast slides, which are posted on the
    Company's website.

"Our second quarter results demonstrate the benefit of our diversified business model, which has driven continued growth during the past several quarters. In the second quarter of fiscal 2017, robust demand drove growth in revenues and generated strong operating cash flow. NSR was $127.4 million, up 14% from $111.4 million in the same period of fiscal 2016. The increase was primarily from our Oil & Gas segment, which we acquired late in the second quarter of fiscal 2016, as well as the strong performance of our Infrastructure segment," said Chris Vincze, Chairman and Chief Executive Officer. "Operating income was $7.0 million, up $0.3 million from the prior-year period. Net income was $4.0 million, up $0.1 million from the year-ago period, and EBITDA was $11.4 million, up $1.9 million or 20% from the prior-year period. Our $26.7 million cash balance at the end of the quarter was up significantly as a result of operating cash flow of $21.4 million."

Comments on Segment Results "In our Power segment, NSR was up 1% and segment profit was flat, although backlog was up 16% from the second quarter of fiscal 2016," Vincze said. "Environmental segment NSR and segment profit declined 2% and 4%, respectively, largely as a result of a decrease in demand from our oil and gas clients and the completion of several large remediation projects. In our Infrastructure segment, several large public-private partnership projects led to a 7% increase in NSR and a 37% increase in segment profit year over year.

"We have begun to see more stability in the oil and gas market. NSR of $21.3 million in our Oil and Gas segment was unchanged sequentially from the first quarter of fiscal 2017. Segment profit was $1.5 million, up from $1.4 million in the first quarter," Vincze said. "The improved segment profit is primarily related to higher productivity and the significant cost improvements we made in the latter half of the prior fiscal year."

Business Outlook "The long-term prospects are favorable and improving in each of our four segments, driven by strong underlying fundamentals," Vincze said. "In our Power segment, demand from our utility clients, our expansion in California and the shift toward program management work continue to build backlog. Significant state and public-private partnership projects should fuel Infrastructure results in the near term, with any additional expenditures at the federal level under the new Administration providing further mid- and long-term opportunity. The capital spend slowdown in oil and gas has stabilized, but a lack of investment in large projects continues to weigh on our Environmental segment. However, we expect this to be partially offset by increased demand for services related to industrial and construction activity, transaction support, and the ongoing retirement of coal plants and expansion of renewable energy. Our Oil & Gas segment has achieved consistent financial performance during the past six months. We expect to see a continuation of this trend in the second half of our fiscal year, led by demand for our pipeline integrity-related services.

"With the integration of the Oil and Gas acquisition now complete, we are again exploring strategic acquisitions that provide opportunities to expand geographically and enhance our technical capabilities," Vincze said. "We recently acquired the New Brunswick, N.J. office of Applied Energy Group, the administrator of New Jersey's Clean Energy Program. This acquisition supports TRC's strategy of enhancing our leadership position in the energy efficiency services market, in order to prepare for evolving energy policies and economic drivers."

Conference Call Information / Reconciliation of Non-GAAP Metrics TRC will webcast its financial results conference call today, Feb. 2, 2017 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 power, environmental, infrastructure and oil and gas 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, 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; capital availability and project investment by TRC's clients; 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, 2016, 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   Six Months Ended
                                     ------------------  ------------------
                                     December  December  December  December
                                        30,       25,       30,       25,
                                       2016      2015      2016      2015
                                     --------  --------  --------  --------
Gross revenue                        $198,662  $157,743  $379,513  $293,202
  Less subcontractor costs and other
   direct reimbursable charges         71,306    46,361   127,852    81,657
                                     --------  --------  --------  --------
Net service revenue                   127,356   111,382   251,661   211,545
                                     --------  --------  --------  --------

Interest income from contractual
 arrangements                              62        27        96        42
Insurance recoverables and other
 income                                   644     1,031     1,281     1,773

Operating costs and expenses:
  Cost of services (exclusive of
   costs shown separately below)      105,613    93,676   209,289   176,660
  General and administrative
   expenses                            11,042     8,046    21,881    15,167
  Acquistion and integration
   expenses                                 -     1,240         -     2,118
  Depreciation                          1,754     1,704     3,542     3,128
  Amortization                          2,617     1,076     5,333     1,916
                                     --------  --------  --------  --------
Total operating costs and expenses    121,026   105,742   240,045   198,989
                                     --------  --------  --------  --------
Operating income                        7,036     6,698    12,993    14,371
Interest income                           286       137       564       137
Interest expense                         (841)     (461)   (1,686)     (489)
                                     --------  --------  --------  --------
Income from operations before taxes     6,481     6,374    11,871    14,019
Income tax provision                   (2,473)   (2,439)   (4,204)   (5,596)
                                     --------  --------  --------  --------
Net income                              4,008     3,935     7,667     8,423
Net loss applicable to
 noncontrolling interest                  (10)        2       (30)        6
                                     --------  --------  --------  --------
Net income applicable to TRC
 Companies, Inc.                     $  3,998  $  3,937  $  7,637  $  8,429
                                     ========  ========  ========  ========

Basic earnings per common share      $   0.13  $   0.13  $   0.24  $   0.27
                                     --------  --------  --------  --------
Diluted earnings per common share    $   0.13  $   0.13  $   0.24  $   0.27
                                     --------  --------  --------  --------

Weighted-average common shares
 outstanding:
  Basic                                31,451    30,968    31,300    30,805
                                     --------  --------  --------  --------
  Diluted                              31,966    31,369    31,783    31,347
                                     --------  --------  --------  --------



                            TRC Companies, Inc.
                   Condensed Consolidated Balance Sheets
                   (in thousands, except per share data)
                                (Unaudited)

                                                 December 30,    June 30,
                                                     2016          2016
                                                 ------------  ------------
                                   ASSETS
Current assets:
  Cash and cash equivalents                      $     26,733  $     18,804
  Restricted cash                                          43            71
  Accounts receivable, less allowance for
   doubtful accounts                                  174,215       149,280
  Insurance recoverable - environmental
   remediation                                         49,066        49,934
  Restricted investments                                5,767         5,959
  Income taxes refundable                                   -            75
  Prepaid expenses and other current assets            21,798        24,122
                                                 ------------  ------------
    Total current assets                              277,622       248,245
                                                 ------------  ------------

Property and equipment                                 76,120        74,053
  Less accumulated depreciation and amortization      (54,600)      (51,593)
                                                 ------------  ------------
    Property and equipment, net                        21,520        22,460
                                                 ------------  ------------
Goodwill                                               75,337        75,337
Intangible assets, net                                 40,636        45,969
Deferred income tax assets                             26,377        26,239
Long-term restricted investments                       17,441        18,420
Long-term prepaid insurance                            22,367        23,425
Other assets                                           14,540        18,383
                                                 ------------  ------------
    Total assets                                 $    495,840  $    478,478
                                                 ============  ============
                           LIABILITIES AND EQUITY
Current liabilities:
  Current portion of long-term debt              $     13,963  $     18,339
  Accounts payable                                     51,455        29,311
  Accrued compensation and benefits                    45,398        48,485
  Deferred revenue                                     15,890        15,363
  Environmental remediation liabilities                 8,644         8,654
  Income taxes payable                                    785           265
  Other accrued liabilities                            59,796        58,026
                                                 ------------  ------------
    Total current liabilities                         195,931       178,443
                                                 ------------  ------------
Non-current liabilities:
  Long-term debt, net of current portion               74,101        79,243
  Long-term income taxes payable                          959         2,204
  Deferred revenue                                     61,930        65,340
  Environmental remediation liabilities                   436           433
                                                 ------------  ------------
    Total liabilities                                 333,357       325,663
                                                 ------------  ------------
Commitments and contingencies
Equity:
    Common stock, $.10 par value; 40,000,000
     shares authorized, 31,594,124 and
     31,590,642 shares issued and outstanding,
     respectively, at December 30, 2016, and
     31,087,084 and 31,083,602 shares issued and
     outstanding, respectively, at June 30, 2016        3,159         3,109
  Additional paid-in capital                          197,164       195,156
  Accumulated deficit                                 (38,261)      (45,898)
  Accumulated other comprehensive loss                   (128)          (71)
  Treasury stock, at cost                                 (33)          (33)
                                                 ------------  ------------
    Total shareholders' equity applicable to TRC
     Companies, Inc.                                  161,901       152,263
  Noncontrolling interest                                 582           552
                                                 ------------  ------------
    Total equity                                      162,483       152,815
                                                 ------------  ------------
    Total liabilities and equity                 $    495,840  $    478,478
                                                 ============  ============

Investor Contact:
Andrew Blazier
Senior Associate
Sharon Merrill Associates
(617) 542-5300
[email protected]

Company Contact:
Thomas W. Bennet, Jr.
CFO
(978) 970-5600
[email protected]

Source: TRC Companies, Inc.

You May Also Be Interested In

• Cosmos Health posts 29% revenue rise in Q2 but net loss widens
• Nebius Group plans $4.5B convertible notes offering in two series
• Veralto agrees to acquire Cleanwater1 for $465 million