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TRC Announces Third-Quarter Fiscal 2014 Financial Results


May 7, 2014 - LOWELL, MA

TRC Companies, Inc. (NYSE: TRR), a recognized leader in engineering, consulting and construction management services to the energy, environmental and infrastructure markets, announced today financial results for the fiscal three and nine months ended March 28, 2014.




Financial Highlights
Three Months Ended Nine Months Ended
-------------------- --------------------
(In millions, except per share March 28, March 29, March 28, March 29,
data) 2014 2013 2014 2013
-------------------------------- --------- --------- --------- ---------
Net service revenue(1) $ 88.1 $ 83.0 $ 260.5 $ 233.5
Insurance recoverables and other
income $ 5.0 $ 1.1 $ 17.6 $ 3.7
Operating income $ 2.5 $ 3.4 $ 12.0 $ 12.4
Federal and state income tax
provision(2) $ (1.1) $ (0.2) $ (4.8) $ (0.7)
Net income applicable to TRC
Companies, Inc. $ 1.4 $ 3.1 $ 7.0 $ 11.5
Diluted earnings per common
share(2) $ 0.05 $ 0.10 $ 0.23 $ 0.39
Diluted weighted-average common
shares outstanding 30.2 29.7 30.1 29.5

(1) The Company believes net service revenue (NSR) best reflects the value
of services provided and is the most meaningful indicator of revenue
performance.
(2) The three and nine month periods ended March 29, 2013 were impacted by a
deferred tax asset valuation allowance, which significantly reduced the
effective tax rate.


Comments on the Results
"TRC delivered incremental NSR growth for the third quarter of fiscal 2014, but operating income declined largely due to weather impacts and increased medical benefit costs," said Chris Vincze Chairman and Chief Executive Officer. "Our 6% NSR increase was driven primarily by strength in the Energy segment.

"Energy segment NSR and profit grew 19% and 53%, respectively, as utility customers continue to make significant transmission and distribution system improvement investments and as demand continues for our energy efficiency and renewable energy services. Increasing state and federal energy incentives are further expanding the opportunities for TRC to develop and implement programs for customers in the public and private sector. The segment also benefited somewhat from the severe winter conditions in the southern areas of the U.S. which increased demand for our emergency response field services and mitigated the impact of severe weather on segment revenue.

"NSR increased 1% in the Environmental segment, as a steady flow of remediation, pipeline permitting, and power plant decommissioning projects helped to mitigate weather-related impacts on field projects. During the quarter, our strong execution of large projects and lower subcontractor costs contributed to segment profit growth of 7%.

"Infrastructure segment NSR was down 10% due to the severe weather and an unfavorable adjustment to a fixed-price project estimate, both of which contributed to a 49% segment profit decline.

"Operating income declined by $0.9 million from the prior year third quarter due to a number of factors including severe winter weather and increased medical benefit costs. Due to the increased volume of large claims, third quarter expenses for our medical benefit plan were approximately $1.8 million higher than in the same period of the prior year. This increased cost, coupled with the above-mentioned weather impacts, negatively impacted operating income by an estimated $2.2 million.

"Income taxes were $0.8 million higher than the prior year quarter due to the reversal of a portion of the valuation allowance we maintained against our net deferred tax assets in the prior year, resulting in an increase in the effective tax rate from 7% to 43% and a corresponding reduction in net income.

Business Outlook
"TRC is well-positioned in markets with significant opportunity for growth. NSR backlog grew 5% sequentially, indicating a stable marketplace. Proposal activity is increasing, and we are winning more projects in all three segments. Our healthy balance sheet enables TRC to execute our balanced profitable growth strategy," concluded Vincze.

Conference Call Information
TRC will broadcast its financial results conference call today, May 7, 2014 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. 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, 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 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, 2013, 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 Nine Months Ended -------------------- -------------------- March 28, March 29, March 28, March 29, 2014 2013 2014 2013 --------- --------- --------- --------- Gross revenue $ 120,836 $ 109,806 $ 350,002 $ 322,562 Less subcontractor costs and other direct reimbursable charges 32,755 26,762 89,538 89,048 --------- --------- --------- ---------Net service revenue 88,081 83,044 260,464 233,514 --------- --------- --------- --------- Interest income from contractual arrangements 73 58 26 186Insurance recoverables and other income 5,008 1,068 17,613 3,725 Operating costs and expenses: Cost of services (exclusive of costs shown separately below) 80,127 70,446 234,914 198,696 General and administrative expenses 8,363 8,096 24,642 20,965 Provision for doubtful accounts - 408 - 408 Depreciation and amortization 2,161 1,828 6,587 4,959 --------- --------- --------- ---------Total operating costs and expenses 90,651 80,778 266,143 225,028 --------- --------- --------- ---------Operating income 2,511 3,392 11,960 12,397Interest expense (22) (78) (152) (270) --------- --------- --------- ---------Income from operations before taxes 2,489 3,314 11,808 12,127Federal and state income tax provision (1,060) (231) (4,830) (680) --------- --------- --------- ---------Net income 1,429 3,083 6,978 11,447Net loss applicable to noncontrolling interest 2 18 36 49 --------- --------- --------- ---------Net income applicable to TRC Companies, Inc. $ 1,431 $ 3,101 $ 7,014 $ 11,496 ========= ========= ========= ========= Basic earnings per common share $ 0.05 $ 0.11 $ 0.24 $ 0.40 ========= ========= ========= =========Diluted earnings per common share $ 0.05 $ 0.10 $ 0.23 $ 0.39 ========= ========= ========= ========= Weighted-average common shares outstanding: Basic 29,691 28,998 29,549 28,778 ========= ========= ========= ========= Diluted 30,166 29,654 30,088 29,547 ========= ========= ========= ========= TRC Companies, Inc. Condensed Consolidated Balance Sheets (in thousands, except share data) (Unaudited) March 28, June 30, 2014 2013 --------- --------- ASSETSCurrent assets: Cash and cash equivalents $ 11,401 $ 18,136 Accounts receivable, less allowance for doubtful accounts 123,491 109,320 Insurance recoverable - environmental remediation 42,091 26,305 Restricted investments 4,135 5,582 Deferred income tax assets 11,917 12,518 Income taxes refundable 3,987 1,444 Prepaid expenses and other current assets 17,742 12,045 --------- --------- Total current assets 214,764 185,350 --------- --------- Property and equipment 60,391 57,005 Less accumulated depreciation and amortization (47,045) (43,171) --------- --------- Property and equipment, net 13,346 13,834 --------- ---------Goodwill 31,679 28,797Investments in and advances to unconsolidated affiliates and construction joint ventures 117 113Long-term deferred income tax assets 5,098 6,601Long-term restricted investments 24,055 27,580Long-term prepaid insurance 29,235 31,497Other assets 14,269 13,992 --------- --------- Total assets $ 332,563 $ 307,764 ========= ========= LIABILITIES AND EQUITYCurrent liabilities: Current portion of long-term debt $ 1,533 $ 4,745 Current portion of capital lease obligations 565 568 Accounts payable 29,325 32,238 Accrued compensation and benefits 37,691 34,040 Deferred revenue 13,334 20,094 Environmental remediation liabilities 136 291 Other accrued liabilities 49,705 31,737 --------- --------- Total current liabilities 132,289 123,713 --------- ---------Non-current liabilities: Long-term debt, net of current portion 134 568 Capital lease obligations, net of current portion 322 789 Income taxes payable and deferred income tax liabilities 1,063 310 Deferred revenue 73,392 68,514 Environmental remediation liabilities 6,329 6,973 --------- --------- Total liabilities 213,529 200,867 --------- ---------Commitments and contingenciesEquity: Common stock, $.10 par value; 40,000,000 shares authorized, 29,713,545 and 29,710,063 shares issued and outstanding, respectively, at March 28, 2014, and 29,053,301 and 29,049,819 shares issued and outstanding, respectively, at June 30, 2013 2,971 2,905 Additional paid-in capital 186,929 181,874 Accumulated deficit (70,391) (77,405) Accumulated other comprehensive loss (71) (109) Treasury stock, at cost (33) (33) --------- --------- Total shareholders' equity applicable to TRC Companies, Inc. 119,405 107,232 Noncontrolling interest (371) (335) --------- --------- Total equity 119,034 106,897 --------- --------- Total liabilities and equity $ 332,563 $ 307,764 ========= ========= 

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Investor Contact:
Dennis Walsh
Vice President
Sharon Merrill
(617) 542-5300
trr@investorrelations.com

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

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