8-K/A 1 a2079982z8-ka.txt 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT TO APPLICATION OR REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 TRC COMPANIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 1-9947 06-0853807 ------------------------------- ---------------- ---------------------- (State or other jurisdiction of (Commission File (IRS Employer incorporation) Number) Identification Number) 5 Waterside Crossing WINDSOR, CONNECTICUT 06095 ---------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (860) 298-9692 AMENDMENT NO. 3 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its current Report on Form 8-K, dated October 26, 2001, as set forth in the pages attached hereto: ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TRC COMPANIES, INC. May 14, 2002 By: /s/ Harold C. Elston, Jr. -------------------------------- Harold C. Elston, Jr. Senior Vice President and Chief Financial Officer (Chief Accounting Officer) TRC COMPANIES, INC. AMENDMENT NO. 3 TO CURRENT REPORT, DATED OCTOBER 26, 2001 ON FORM 8-K On October 15, 2001, the registrant completed the acquisition of the Site-Blauvelt Engineers Group, a transportation infrastructure firm headquartered in Mount Laurel, New Jersey with offices in a number of other states. The acquisition has been accounted for using the purchase method of accounting. This transaction was reported in Item 2 of the Current Report, dated October 26, 2001, on Form 8-K. The purpose of this amendment is to provide the financial statements of the business acquired and to update the pro forma financial information required pursuant to Item 7. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Page (a) Financial statements of business acquired: Site-Blauvelt Engineers Group for the year ended December 31, 2000 3 (with Independent Auditors' Report) and for the nine months ended September 30, 2001 and 2000. (b) Unaudited pro forma financial information: TRC Companies, Inc. unaudited pro forma consolidated financial statements: 14 Unaudited Pro Forma Consolidated Statements of Operations for the fiscal year ended June 30, 2001 15 Unaudited Pro Forma Consolidated Statements of Operations for the six months ended December 31, 2001 16 Notes to Unaudited Pro Forma Financial Information 17 (c) Exhibits - none
2 SITE-BLAUVELT ENGINEERS GROUP COMBINED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2000 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 CONTENTS Report of Independent Auditors...............................................4 Combined Balance Sheet.......................................................5 Combined Statement of Income and Retained Earnings...........................6 Combined Statement of Cash Flows.............................................7 Notes to Combined Financial Statements.......................................8 3 REPORT OF INDEPENDENT AUDITORS The Board of Directors Site-Blauvelt Engineers Group We have audited the accompanying combined balance sheet of the Site-Blauvelt Engineers Group, consisting of the corporations listed in Note 1, as of December 31, 2000, and the related combined statements of income and retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position at December 31, 2000, of the Group, and the combined results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Philadelphia, Pennsylvania March 9, 2001, except for Note 9, as to which the date is October 15, 2001 4 SITE-BLAUVELT ENGINEERS GROUP COMBINED BALANCE SHEET
September 30, December 31, 2001 2000 ---------------------------------------- ASSETS (Unaudited) Current assets: Restricted cash $ 50,000 $ 50,000 Accounts receivable (includes retainage of $902,000), net of allowance for doubtful accounts of $168,000 at December 31, 2000 11,442,024 13,752,991 Unbilled revenues 5,097,953 3,074,129 Other current assets 426,547 725,728 ---------------------------------------- Total current assets 17,016,524 17,602,848 ---------------------------------------- Property and equipment 5,907,591 5,663,140 Less accumulated depreciation 3,712,234 3,137,633 ---------------------------------------- Property and equipment, net 2,195,357 2,525,507 ---------------------------------------- Notes receivable - stockholders 472,500 472,500 ---------------------------------------- Other assets 434,450 421,761 ---------------------------------------- Total assets $20,118,831 $21,022,616 ======================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit $ 4,895,088 $ 6,697,181 Notes payable - stockholders - 200,000 Accounts payable 1,459,234 785,806 Accrued compensation and benefits 1,444,233 1,083,516 Other accrued expenses 165,321 183,354 Current maturities of long-term debt 194,516 1,364,731 ---------------------------------------- Total current liabilities 8,158,392 10,314,588 ---------------------------------------- Long-term debt, less current maturities 850,599 719,484 ---------------------------------------- Notes payable - stockholders - 500,000 ---------------------------------------- Deferred income taxes 938,000 938,000 ---------------------------------------- Stockholders' equity: Common stock, no par value 1,956,211 1,954,423 Retained earnings 8,215,629 6,596,121 ---------------------------------------- Total stockholders' equity 10,171,840 8,550,544 ---------------------------------------- Total liabilities and stockholders' equity $20,118,831 $21,022,616 ========================================
SEE ACCOMPANYING NOTES. 5 SITE-BLAUVELT ENGINEERS GROUP COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
Nine Months Ended Year Ended September 30, December 31, 2001 2000 2000 ------------------------------------------------------ (Unaudited) (Unaudited) Total revenues $30,887,227 $28,945,874 $39,216,211 Subcontract and procurement costs 5,418,582 4,979,823 7,105,453 ------------------------------------------------------ Operating revenue 25,468,645 23,966,051 32,110,758 Costs of services 10,998,017 10,020,333 13,314,008 Selling, general and administrative expenses 12,602,310 10,882,848 14,967,815 ------------------------------------------------------ Operating income 1,868,318 3,062,870 3,828,935 Other income (expense): Interest income 30,173 44,915 60,309 Interest expense (278,983) (362,628) (471,445) ------------------------------------------------------ Net income 1,619,508 2,745,157 3,417,799 Retained earnings at beginning of year 6,596,121 4,939,792 4,939,792 Distribution to stockholders - - (250,000) Recapitalization to common stock - (1,511,470) (1,511,470) ------------------------------------------------------ Retained earnings at end of year $8,215,629 $6,173,479 $ 6,596,121 ======================================================
SEE ACCOMPANYING NOTES. 6 SITE-BLAUVELT ENGINEERS GROUP COMBINED STATEMENT OF CASH FLOWS
Nine Months Ended Year Ended September 30, December 31, 2001 2000 ------------------------------------------------- (Unaudited) OPERATING ACTIVITIES Net income $1,619,508 $3,417,799 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 762,961 910,978 Bad debt expense 166,308 (65,384) Changes in operating assets and liabilities: Accounts receivable 2,144,659 (4,921,797) Unbilled revenues (2,023,824) (187,488) Other current assets 299,181 (467,161) Other assets (17,628) (74,144) Accounts payable 673,428 (455,392) Accrued expenses 342,684 147,873 ------------------------------------------------- Net cash provided by (used in) operating activities 3,967,277 (1,694,716) ------------------------------------------------- INVESTING ACTIVITIES Capital expenditures (119,408) (1,456,692) ------------------------------------------------- Net cash used in investing activities (119,408) (1,456,692) ------------------------------------------------- FINANCING ACTIVITIES Proceeds from long-term debt - 566,753 Repayment of long-term debt (695,776) (559,853) Proceeds from notes payable - 825,000 Repayment of notes payable (1,350,000) (300,000) Net borrowings (repayments) on line of credit (1,802,093) 2,619,508 ------------------------------------------------- Net cash provided by (used in) financing activities (3,847,869) 3,151,408 ------------------------------------------------- Net change in restricted cash Restricted cash at beginning of year 50,000 50,000 ------------------------------------------------- Restricted cash at end of year $ 50,000 $ 50,000 ================================================= SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND NONCASH TRANSACTIONS Cash paid for interest $ 248,921 $ 471,438 ================================================= Equipment obtained with capital leases $ 306,676 $ 431,656 ================================================= Distribution of notes receivable - stockholders $ - $ 250,000 =================================================
SEE ACCOMPANYING NOTES. 7 SITE-BLAUVELT ENGINEERS GROUP NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2000 1. BUSINESS AND BASIS OF PRESENTATION The combined financial statements include the accounts of Site-Blauvelt Engineers, Inc., a New Jersey corporation, Site-Blauvelt Engineers, Inc., a Virginia corporation, Site Construction Services, a New Jersey corporation, and Site-Blauvelt Engineers, Inc., a New York corporation (collectively referred to herein as the "Group"). The members of the Group are owned and controlled by the same stockholders. On January 1, 2000, the stockholders contributed all of their stock in Site-Blauvelt Engineers, Inc. New Jersey to Site-Blauvelt Engineers, Inc. New York at book value. Accordingly, the December 31, 2000 financial statements reflect the consolidation of these two entities along with the combination of Site-Blauvelt Engineers, Inc. Virginia and Site Construction Services. The financial statements as of and for the nine months ended September 30, 2001 also include the results of Site-Blauvelt Engineers, Inc. Ohio, a company formed in 2001. Site-Blauvelt Engineers, Inc. Ohio's activities were minimal during such period. All significant intercompany accounts and transactions have been eliminated in the accompanying combined financial statements. The Group offers professional services in Highway Design, Bridge Inspections and Design, Geotechnical Engineering and Consultation, Resident Engineering, and Construction Inspection and Testing. In support of the Group's professional credentials, it also maintains regionally located soils and concrete testing laboratories, a full complement of skid, truck, track, and ATV-mounted drilling equipment, Computer Assisted Design (CAD) workstations, and survey crews. 2. ACCOUNTING POLICIES SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK The Group had contract revenues from six state Departments of Transportation which accounted for approximately 87% of total revenues in 2000. Amounts due from these customers accounted for approximately 85% of net accounts receivable at December 31, 2000. The Group performs ongoing credit evaluations of its customers' financial condition and, except where risk warrants, requires no collateral. USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 8 2. ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation is provided for using the straight-line method over the estimated useful lives of the assets which range from 2 years to 7 years. REVENUE RECOGNITION The Group earns revenue primarily on a time and materials basis. Certain government customers withhold payment under contract retainage provisions. Based on the Group's experience with similar contracts in recent years, the retention balance is expected to be collected during the year following the last billing date. RESTRICTED CASH The Group has an agreement with the New York Department of Transportation whereby $50,000 has been deposited in an escrow account in lieu of the Department of Transportation withholding payments under retainage provisions. OTHER ASSETS Included in other long-term assets at December 31, 2000 is an intangible asset related to the acquisition of a corporate charter acquired in 1997 for $250,000. The charter is being amortized over its estimated useful life of 40 years. Accumulated amortization at December 31, 2000 was $18,750. INCOME TAXES The members of the Group, with the consent of its stockholders, have elected S Corporation status for federal and state income tax purposes. In lieu of income taxes paid by the Group, the stockholders of an S Corporation are taxed on their share of the Group's taxable income or receive the benefit of their share of the Group's taxable loss. Therefore, no provision or benefit for federal and state income taxes has been reflected in the combined statements of operations. However, under Internal Revenue Section 1374, the Group may be subject to a corporate level tax which is imposed on any "built-in gain" recognized on the disposition of assets within 10 years from the date of conversion to S Corporation of one of the corporations in 1995. This built-in gains tax has been classified as a long-term deferred tax liability at December 31, 2000. INTERIM FINANCIAL INFORMATION The financial statements and disclosures included herein for the nine months ended September 30, 2001 and 2000 are unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial statements for these interim periods have been included. The results of interim periods are not necessarily indicative of the results to be obtained for a fiscal year. 9 3. RELATED PARTY TRANSACTIONS Notes receivable - stockholders are due on demand and earn interest quarterly at 8%. Interest income from the notes receivable was approximately $60,000 in 2000 and is included in other long-term assets. Notes payable - stockholders consists of subordinated notes payable to several of the Group's stockholders totaling $700,000. Principal is due on demand with interest payable quarterly at 7.1% on $200,000 of the notes, 12% on $200,000 of the notes, and at 7% on the remaining $300,000 of the notes. Based on the intentions of the noteholders to not require repayment of $500,000 of the notes payable during 2001, this amount has been classified as long-term. Total interest paid in connection with notes payable - stockholders was approximately $59,200 in 2000. The notes are subordinate to the line of credit and other senior debt. During the nine months ended September 30, 2001, in contemplation of the transaction described in Note 9, the Group repaid all of the notes payable - stockholders (unaudited). 4. PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 2000:
Machinery and equipment $1,274,308 Computer equipment 1,025,622 Furniture and fixtures 625,488 Vehicles 1,768,023 Leasehold improvements 969,699 ------------------- 5,663,140 Less accumulated depreciation 3,137,633 ------------------- $2,525,507 ===================
10 5. DEBT Debt consists of the following at December 31, 2000:
Note payable to bank due in monthly installments of $15,625 plus interest at 8.6%, collateralized by certain machinery and equipment, maturing in June 2002 $281,250 Note payable to bank due in equal monthly installments of $2,917 plus interest at 8.7%, collateralized by certain machinery and equipment, final payment due April 2001 8,750 Note payable to bank due in monthly installments of $16,210 plus interest at 8.6%, collateralized by certain machinery and equipment, maturing in October 2003 551,128 Subordinate installment debentures with monthly interest payments of 7.6%, principal due in full on demand 525,000 Subordinate installment debenture with monthly interest payments of 8.0%, principal due in full in August 2001 125,000 Capital lease obligations (Note 6) 593,087 ------------------ 2,084,215 Less current maturities 1,364,731 ------------------ $ 719,484 ==================
Maturities of long-term debt, including capital leases are as follows:
2001 $1,364,731 2002 496,230 2003 223,254 ------------------ $2,084,215 ==================
The Group has a $7,000,000 bank line of credit which permits borrowings of 85% of eligible accounts receivable, as defined. A commitment fee equal to .25% of the unused line of credit is payable quarterly. The line of credit is due on demand and expires on October 30, 2002. The above line of credit facility bears interest at a rate selected by the Group (Prime minus .5% or LIBOR Market Index Rate plus 2%) as adjusted in accordance with the agreement (8.63% at December 31, 2000). This credit facility is collateralized by substantially all of the Group's assets and requires the Group to maintain certain minimum working capital and debt ratios. 11 6. COMMITMENTS The Group rents automobiles, office space, and office equipment under operating leases with terms expiring through 2009. The Group additionally rents machinery and equipment on a short-term basis as needed. Total rent expense was approximately $1,165,000 in 2000. Future minimum rental payments under operating leases for the years ending December 31, 2000, are approximately:
2001 $ 962,000 2002 960,000 2003 966,000 2004 699,000 2005 and thereafter 1,438,000 ------------------- Total minimum rental payments $5,025,000 ===================
The Group entered into agreements to lease certain assets which have been accounted for as capital leases. The assets are recorded at the lesser of the fair value of the asset or at the present value of minimum lease payments and included in property and equipment in the amount of $1,247,349 at December 31, 2000. Accumulated depreciation at December 31, 2000 is approximately $693,000. Future minimum lease payments subsequent to December 31, 2000 under the aforementioned capital leases are as follows:
2001 $368,932 2002 222,955 2003 63,650 ------------------ Total minimum lease payments 655,537 Less amount representing interest (62,450) ------------------ Present value of net minimum lease payments $593,087 ==================
7. COMMON STOCKS The following table summarizes the common stock authorized, issued and outstanding of the companies which comprise the Group at December 31, 2000:
SHARES ISSUED STATED SHARES AUTHORIZED AND OUTSTANDING VALUE ------------------------------------------------------ Site-Blauvelt Engineers, Inc., New York 1 1 $1,951,834 Site Construction Services, New Jersey 100 22 1,100 Site-Blauvelt Engineers, Inc., Virginia 4,000 110 1,489 ------------------- $1,954,423 ===================
12 8. EMPLOYEE BENEFIT PLAN The companies of the Group sponsor a defined contribution 401(k) employee benefit plan covering substantially all employees. Matching contributions by the companies of the Group are discretionary. Matching contributions and administrative expenses under the plan were approximately $452,000 in 2000. 9. SUBSEQUENT EVENT On October 15, 2001, the Group completed the sale of all of its capital stock to TRC Companies, Inc. ("TRC") for approximately $22.4 million (after closing adjustments but before contingent consideration) consisting of 869,588 shares of TRC's common stock. The purchase price is net of the fees of the Group's financial advisor of approximately $1.1 million, that TRC agreed to pay. 13 TRC COMPANIES, INC. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENT INFORMATION The accompanying unaudited pro forma consolidated statements of operations for the fiscal year ended June 30, 2001 and for the six months ended December 31, 2001, reflect the historical results of operations of TRC Companies, Inc. ("TRC" or "the Company") adjusted to reflect the acquisition of Site-Blauvelt Engineers Group ("Site") using the purchase method of accounting, as if the acquisition had occurred as of the beginning of the year ended June 30, 2001. The pro forma adjustments are described in the notes following the unaudited pro forma consolidated financial statement information. The unaudited pro forma consolidated financial statement information is presented for informational purposes only. The pro forma results from operations and financial position are not necessarily indicative of what would have resulted had the acquisition occurred on the dates indicated, nor does the pro forma financial information purport to be indicative of results of operations or the financial position which may occur in the future. The Company believes that it has used reasonable methods in the preparation of this financial statement information. On July 1, 2001, the Company adopted the provisions of Statement of Financial Standard ("SFAS") No. 142, Goodwill and Other Intangible Assets. SFAS 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill's impairment and that identifiable intangible assets other than goodwill be amortized over their useful lives. Accordingly, the table below shows the effect on net income and earnings per share had SFAS 142 been adopted at the beginning of the year ended June 30, 2001 (dollars in thousands, except per share amounts).
Year Ended June 30, 2001 ---------------------------------- Pro forma As reported --------------- ---------------- Net income $ 10,001 $ 8,985 Add back goodwill amortization (net of taxes) 1,531 948 --------------- ---------------- Adjusted net income $ 11,532 $ 9,933 =============== ================ Basic earnings per share $ .85 $ .83 Add back goodwill amortization (net of taxes) .13 .09 --------------- ---------------- Adjusted basic earnings per share $ .98 $ .92 =============== ================ Diluted earnings per share $ .78 $ .75 Add back goodwill amortization (net of taxes) .12 .08 --------------- ---------------- Adjusted diluted earnings per share $ .90 $ .83 =============== ================
14 TRC COMPANIES, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2001 (unaudited)
As reported Pro forma ---------------------------- ---------------------------------------- TRC Site Adjustments Notes Combined ------------ ------------- ------------- --------- -------------- (in thousands, except per share data) GROSS REVENUE $ 181,473 $ 41,115 $ - $ 222,588 Less subcontractor costs and direct charges 57,271 7,993 - 65,264 ------------ ------------- ------------ -------------- NET SERVICE REVENUE 124,202 33,122 - 157,324 ------------ ------------- ------------ -------------- OPERATING COSTS AND EXPENSES: Cost of services 100,587 28,918 - 129,505 General and administrative expenses 3,909 - - 3,909 Depreciation and amortization 3,771 976 1,098 (a) 5,845 ------------ ------------- ------------ -------------- 108,267 29,894 1,098 139,259 ------------ ------------- ------------ -------------- INCOME FROM OPERATIONS 15,935 3,228 (1,098) 18,065 Interest expense 1,541 431 66 (b) 2,038 ------------ ------------- ------------ -------------- INCOME BEFORE TAXES 14,394 2,797 (1,164) 16,027 Federal and state income tax provision 5,409 - 617 (c) 6,026 ------------ ------------- ------------ -------------- NET INCOME 8,985 2,797 (1,781) 10,001 Dividends and accretion charges on preferred stock - - - - ------------ ------------- ------------ -------------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 8,985 $ 2,797 $ (1,781) $ 10,001 ============ ============= ============ ============== EARNINGS PER SHARE: Basic $ .83 $ .85 Diluted .75 .78 ============ ============== AVERAGE SHARES OUTSTANDING: Basic 10,854 870 (d) 11,724 Diluted 11,934 870 (d) 12,804 ============ ============ ==============
See accompanying pro forma notes. 15 TRC COMPANIES, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2001 (unaudited)
As reported(1) Pro forma ---------------------------------- ----------------------------------------- TRC Site Adjustments Notes Combined ------------- ----------------- ------------------------- ------------- (in thousands, except per share data) GROSS REVENUE $ 124,482 $ 12,849 $ - $ 137,331 Less subcontractor costs and direct charges 41,960 1,755 - 43,715 ------------- ----------------- ------------- ------------- NET SERVICE REVENUE 82,522 11,094 - 93,616 ------------- ----------------- ------------- ------------- OPERATING COSTS AND EXPENSES: Cost of Services 66,421 9,746 - 76,167 General and administrative expenses 2,403 - - 2,403 Depreciation and amortization 1,426 286 48 (a) 1,760 ------------- ----------------- ------------- ------------- 70,250 10,032 48 80,330 ------------- ----------------- ------------- ------------- INCOME FROM OPERATIONS 12,272 1,062 (48) 13,286 Interest expense 617 112 19 (b) 748 ------------- ----------------- ------------- ------------- INCOME BEFORE TAXES 11,655 950 (67) 12,538 Federal and state income tax provision 4,458 - 338 (c) 4,796 ------------- ----------------- ------------- ------------- NET INCOME 7,197 950 (405) 7,742 Dividends and accretion charges on preferred stock 25 - - 25 ------------- ----------------- ------------- ------------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 7,172 $ 950 $ (405) $ 7,717 ============= ================= ============= ============= EARNINGS PER SHARE: Basic $ .62 $ .64 Diluted .55 .57 ============= ============= AVERAGE SHARES OUTSTANDING: Basic 11,644 507 (d) 12,151 Diluted 13,004 507 (d) 13,511 ============= ============= =============
(1) The as reported Statement of Operations for Site reflects results for the July 1, 2001 to October 15, 2001 period. The as reported Statement of Operations for TRC includes Site's results from October 16, 2001 to December 31, 2001. See accompanying pro forma notes. 16 TRC COMPANIES, INC. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION a. Adjustment to reflect amortization of costs in excess of the fair value of the net assets acquired (goodwill) on a straight-line basis over twenty years and amortization of intangible assets over estimated useful lives. b. Adjustment to record additional interest expense resulting from additional bank borrowings in connection with the acquisition. c. Adjustment to income tax provision to reflect tax effect of foregoing adjustments and the termination of Site's Subchapter S income tax status. d. Adjustment to record issuance of TRC common stock in connection with the acquisition. 17