LOWELL, MA--(Marketwired - May 4, 2016) - TRC Companies, Inc. (
Third-Quarter FY 2016 Highlights
- NSR1 up 20% to $121.3 million
- Adjusted operating income2 of $2.8 million
- Adjusted EBITDA2 of $7.9 million
- Adjusted net income2 of $1.7 million
- Adjusted EPS2 of $0.05
- Operating cash flow of $17.0 million
TRC Companies, Inc. (
"During the third quarter, we advanced our strategy to position TRC as the leading provider of full-service solutions to our primary markets," said Chris Vincze, Chairman and Chief Executive Officer. "In just 120 days, we have fully integrated the Pipeline Services segment acquisition into TRC's systems. Pipeline Services results drove the 20% increase in NSR from the third quarter a year ago."
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| March 25, | March 27, | % | March 25, | March 27, | % | |||||||||||||||
| (In millions, except per share data) | 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||
| GAAP Results | ||||||||||||||||||||
| Net service revenue(1) | $ | 121.3 | $ | 101.0 | 20 | % | $ | 332.8 | $ | 293.5 | 13 | % | ||||||||
| Acquisition and integration expense | $ | 1.6 | $ | - | N/A | $ | 3.7 | $ | - | N/A | ||||||||||
| Goodwill impairment | $ | 24.5 | $ | - | N/A | $ | 24.5 | $ | - | N/A | ||||||||||
| Depreciation | $ | 1.9 | $ | 1.3 | 49 | % | $ | 5.1 | $ | 4.5 | 13 | % | ||||||||
| Amortization | $ | 3.2 | $ | 0.9 | 249 | % | $ | 5.1 | $ | 2.6 | 93 | % | ||||||||
| Operating income | $ | (23.3 | ) | $ | 7.1 | -426 | % | $ | (8.9 | ) | $ | 20.0 | -145 | % | ||||||
| Net income applicable to TRC Companies, Inc. | $ | (14.3 | ) | $ | 5.2 | -377 | % | $ | (5.9 | ) | $ | 12.7 | -146 | % | ||||||
| Diluted earnings per common share | $ | (0.46 | ) | $ | 0.17 | -371 | % | $ | (0.19 | ) | $ | 0.41 | -146 | % | ||||||
| Non-GAAP Results | ||||||||||||||||||||
| Adjusted operating income(2) | $ | 2.8 | $ | 7.1 | -61 | % | $ | 19.3 | $ | 20.0 | -4 | % | ||||||||
| Adjusted EBITDA(2) | $ | 7.9 | $ | 9.4 | -16 | % | $ | 29.4 | $ | 27.1 | 8 | % | ||||||||
| Adjusted net income(2) (3) | $ | 1.7 | $ | 5.2 | -66 | % | $ | 11.4 | $ | 12.7 | -10 | % | ||||||||
| Adjusted diluted earnings per common share(2) (3) | $ | 0.05 | $ | 0.17 | -71 | % | $ | 0.36 | $ | 0.41 | -12 | % | ||||||||
| (1) | TRC believes net service revenue (NSR) best reflects the value of services provided and is the most meaningful indicator of revenue performance. | |
| (2) | Excludes acquisition and integration expenses of $1.6 million and $3.7 million and goodwill impairment charges of $24.5 million for the three and nine months ended March 25, 2016, respectively. | |
| (3) | Excludes goodwill impairment and acquisition related expense in note 2, net of an income tax benefit of $10.1 million and $10.9 million for the three and nine months ended March 25, 2016, respectively. |
Comments on Segment Results
"Our Energy segment experienced a 3% decline in NSR and 9% decline in segment profit year over year, driven by delays related to a significant new project award and timing associated with the receipt of change orders," Vincze continued. "In our Infrastructure segment, renewed transportation-related spending by our municipal and state clients drove a 10% increase in segment NSR on solid 20% margins. The 4% decline in segment profit was due to a significant change order awarded in the year-ago quarter. In our Environmental segment, the continued slowdown from certain oil and gas clients led to a 2% decline in NSR and a profit decline of 20% year-over-year.
"Our newest and fourth segment, Pipeline Services, has been affected by the downturn that has spread throughout the oil and gas sector," Vincze said. "Pipeline services delivered NSR of $21.6 million and a segment loss of $3.1 million. We have undertaken a series of cost reduction initiatives with total annualized savings of approximately $15 million, in order to align segment expenses with current revenues in this business. We also incurred $1.6 million of acquisition integration expenses in Q3. In addition, given the steep decline in near-term demand in the oil and gas sector, we incurred a non-cash goodwill impairment charge in the quarter associated with the Pipeline Services segment acquisition."
Business Outlook
"We continue to believe in the long-term prospects for each of our segments. The underlying market fundamentals in our Energy segment remain strong, spurred by demand from our utility clients and activity on the energy efficiency and renewables fronts. Infrastructure segment backlog is healthy, driven by increased transportation spending at both the state and federal levels and a new federal transportation bill. Although we are experiencing a slowdown from our oil and gas clients in our Environmental segment, demand for services related to environmental remediation, construction, transaction support, the retirement of coal plants and the need to transport natural gas should contribute to segment revenue going forward. Despite the market constraints currently affecting our Pipeline Services segment, the long-term outlook is positive on the strength of domestic demand for energy, the need for comprehensive pipeline integrity management, an expected increase in U.S. fossil fuel exports and the transition from coal-fired power plants to natural gas."
Conference Call Information / Reconciliation of Non-GAAP Metrics
TRC will webcast its financial results conference call today, May 4, 2016 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 energy, environmental, infrastructure and pipeline 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, 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, 2015, 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 | Nine Months Ended | ||||||||||||||||
| March 25, | March 27, | March 25, | March 27, | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Gross revenue | $ | 158,130 | $ | 130,777 | $ | 451,332 | $ | 397,030 | |||||||||
| Less subcontractor costs and other direct reimbursable charges | 36,877 | 29,783 | 118,534 | 103,579 | |||||||||||||
| Net service revenue | 121,253 | 100,994 | 332,798 | 293,451 | |||||||||||||
| Interest income from contractual arrangements | 27 | 23 | 69 | 67 | |||||||||||||
| Insurance recoverables and other income | 146 | 753 | 1,919 | 6,238 | |||||||||||||
| Operating costs and expenses: | |||||||||||||||||
| Cost of services (exclusive of costs shown separately below) | 104,030 | 83,486 | 280,690 | 247,275 | |||||||||||||
| General and administrative expenses | 9,523 | 8,927 | 24,690 | 25,360 | |||||||||||||
| Acquisition and integraton expenses | 1,606 | - | 3,724 | - | |||||||||||||
| Goodwill impairment | 24,465 | - | 24,465 | - | |||||||||||||
| Depreciation | 1,942 | 1,303 | 5,070 | 4,481 | |||||||||||||
| Amortization | 3,162 | 905 | 5,078 | 2,633 | |||||||||||||
| Total operating costs and expenses | 144,728 | 94,621 | 343,717 | 279,749 | |||||||||||||
| Operating (loss) income | (23,302 | ) | 7,149 | (8,931 | ) | 20,007 | |||||||||||
| Interest income | 189 | - | 326 | - | |||||||||||||
| Interest expense | (1,073 | ) | (73 | ) | (1,562 | ) | (125 | ) | |||||||||
| (Loss) income from operations before taxes | (24,186 | ) | 7,076 | (10,167 | ) | 19,882 | |||||||||||
| Income tax benefit (provision) | 9,954 | (1,916 | ) | 4,358 | (7,244 | ) | |||||||||||
| Net (loss) income | (14,232 | ) | 5,160 | (5,809 | ) | 12,638 | |||||||||||
| Net (income) loss applicable to noncontrolling interest | (65 | ) | 5 | (59 | ) | 14 | |||||||||||
| Net (loss) income applicable to TRC Companies, Inc. | $ | (14,297 | ) | $ | 5,165 | $ | (5,868 | ) | $ | 12,652 | |||||||
| Basic (loss) earnings per common share | $ | (0.46 | ) | $ | 0.17 | $ | (0.19 | ) | $ | 0.42 | |||||||
| Diluted (loss) earnings per common share | $ | (0.46 | ) | $ | 0.17 | $ | (0.19 | ) | $ | 0.41 | |||||||
| Weighted-average common shares outstanding: | |||||||||||||||||
| Basic | 31,045 | 30,382 | 30,886 | 30,233 | |||||||||||||
| Diluted | 31,045 | 30,737 | 30,886 | 30,551 | |||||||||||||
| TRC Companies, Inc. | ||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||
| (in thousands, except per share data) | ||||||||||
| (Unaudited) | ||||||||||
| March 25, | June 30, | |||||||||
| 2016 | 2015 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 9,120 | $ | 37,296 | ||||||
| Restricted cash | - | 122 | ||||||||
| Accounts receivable, less allowance for doubtful accounts | 145,789 | 138,346 | ||||||||
| Insurance recoverable - environmental remediation | 38,745 | 40,927 | ||||||||
| Restricted investments | 6,156 | 6,701 | ||||||||
| Deferred income tax assets | 16,280 | 16,057 | ||||||||
| Income taxes refundable | 203 | 412 | ||||||||
| Prepaid expenses and other current assets | 27,559 | 10,499 | ||||||||
| Total current assets | 243,852 | 250,360 | ||||||||
| Property and equipment | 73,114 | 64,594 | ||||||||
| Less accumulated depreciation and amortization | (50,356 | ) | (50,885 | ) | ||||||
| Property and equipment, net | 22,758 | 13,709 | ||||||||
| Goodwill | 75,337 | 37,024 | ||||||||
| Intangible assets, net | 48,726 | 9,304 | ||||||||
| Long-term deferred income tax assets | 10,284 | 2,867 | ||||||||
| Long-term restricted investments | 16,870 | 18,385 | ||||||||
| Long-term prepaid insurance | 24,258 | 25,929 | ||||||||
| Other assets | 20,174 | 5,303 | ||||||||
| Total assets | $ | 462,259 | $ | 362,881 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Current portion of long-term debt | $ | 20,031 | $ | 50 | ||||||
| Current portion of capital lease obligations | - | 166 | ||||||||
| Accounts payable | 32,370 | 31,999 | ||||||||
| Accrued compensation and benefits | 47,552 | 47,233 | ||||||||
| Deferred revenue | 16,010 | 10,612 | ||||||||
| Environmental remediation liabilities | 8,669 | 8,695 | ||||||||
| Income taxes payable | 212 | 3,271 | ||||||||
| Other accrued liabilities | 45,605 | 42,170 | ||||||||
| Total current liabilities | 170,449 | 144,196 | ||||||||
| Non-current liabilities: | ||||||||||
| Long-term debt, net of current portion | 83,756 | 55 | ||||||||
| Capital lease obligations, net of current portion | - | - | ||||||||
| Income taxes payable and deferred income tax liabilities | 2,067 | 1,647 | ||||||||
| Deferred revenue | 60,492 | 68,579 | ||||||||
| Environmental remediation liabilities | 461 | 489 | ||||||||
| Total liabilities | 317,225 | 214,966 | ||||||||
| Commitments and contingencies | ||||||||||
| Equity: | ||||||||||
| Common stock, $.10 par value; 40,000,000 shares authorized, 31,057,243 and 31,053,761 shares issued and outstanding, respectively, at March 25, 2016, and 30,485,510 and 30,482,028 shares issued and outstanding, respectively, at June 30, 2015 | 3,106 | 3,049 | ||||||||
| Additional paid-in capital | 193,288 | 191,321 | ||||||||
| Accumulated deficit | (51,807 | ) | (45,939 | ) | ||||||
| Accumulated other comprehensive loss | (79 | ) | (88 | ) | ||||||
| Treasury stock, at cost | (33 | ) | (33 | ) | ||||||
| Total shareholders' equity applicable to TRC Companies, Inc. | 144,475 | 148,310 | ||||||||
| Noncontrolling interest | 559 | (395 | ) | |||||||
| Total equity | 145,034 | 147,915 | ||||||||
| Total liabilities and equity | $ | 462,259 | $ | 362,881 | ||||||
Contact Information:
Investor Contact:
Andrew Blazier
Senior Associate
Sharon Merrill
(617) 542-5300
trr@investorrelations.com
Company Contact:
Thomas W. Bennet, Jr.
CFO
(978) 970-5600
tbennet@trcsolutions.com