EX-99.2 4 exhibit992trcq2f2017earnin.htm EXHIBIT 99.2 TRC Q2F17 EARNINGS RELEASE Exhibit
Exhibit 99.2

Investor Contact:
 
Andrew Blazier, Senior Associate
 
Sharon Merrill
 
(617) 542-5300
 
trr@investorrelations.com
 
trclogoa07.jpg
 
Company Contact:
 
Thomas W. Bennet, Jr., CFO
 
(978) 970-5600
 
tbennet@trcsolutions.com
 
 

TRC Announces Second-Quarter Fiscal 2017 Financial Results
NSR Up 14% from Q2 Fiscal 2016; Operating Cash Flow of $21.4 Million
Lowell, MA, Feb. 2, 2017 - 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 Ended
 
 
 
 
Six Months Ended
 
 
 
 
December 30,
 
December 25,
 
$
%
 
December 30,
 
December 25,
 
$
%
(In millions, except per share 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)
The Company 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 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.”

TRC
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995

Exhibit 99.2

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.”



TRC
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995

Exhibit 99.2

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
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995


TRC Companies, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
December 30,
2016
 
December 25,
2015
 
December 30,
2016
 
December 25,
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

Acquisition 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 (income) 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
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995


TRC Companies, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
 
December 30,
2016
 
June 30,
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 stockholders' 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


TRC
650 Suffolk Street • Lowell, Massachusetts 01854
Telephone 978-970-5600 • Fax 978-453-1995