TRC Announces Second-Quarter Fiscal 2012 Financial Results

LOWELL, MA -- (Marketwire) -- 02/08/12 -- TRC Companies, Inc. (NYSE: TRR), a recognized leader in engineering, consulting and construction management services to the energy, environmental and infrastructure markets, today announced financial results for the three and six month periods ended December 30, 2011.

Financial Highlights

                         Three Months Ended           Six Months Ended
                     --------------------------  --------------------------
(In millions, except  December 30, December 24,  December 30,  December 24,
 per share data)          2011         2010          2011          2010
                     ------------- ------------  ------------  ------------

Net service
 revenue(1)                  73.9        60.3        147.4        117.9

Arena Towers
 litigation (2)               0.2           -        (11.1)           -

Operating income              4.9         2.9         20.4          6.3

Federal and state
 income tax benefit
 (provision)                  0.2        (0.2)         3.5         (0.7)

Accretion charges on
 preferred stock                -        (3.5)           -         (7.3)

Net income (loss)
 applicable to TRC
 Companies, Inc.s
 common shareholders          5.2        (1.0)        23.9         (2.1)

Diluted earnings
 (loss) per common
 share                       0.18       (0.04)        0.84        (0.10)

Diluted weighted-
 average common
 shares outstanding           28.5         21.8          28.5          20.8

(1) The Company believes net service revenue, rather than gross revenue,
    best reflects the value of services provided to its customers and is the
    most meaningful indicator of TRCs revenue performance.
(2) On October 5, 2011 a post-trial motion was granted to disregard a
    substantial portion of the verdict in this matter resulting in an 11.2
    million reduction of the litigation accrual. A judgment was entered in
    the case on October 10, 2011, and on January 3, 2012 the Company paid
    8.7 million in full satisfaction of the judgment and interest. In the
    fourth quarter of fiscal 2011 the Company had recorded a litigation
    accrual of 17.3 million related to the verdict.

Comments on Fiscal Second-Quarter Results

"TRC delivered a strong second-quarter performance with net service revenue (NSR) growth of 23% driven by a combination of organic growth and contributions from our recent acquisitions," said Chairman and Chief Executive Officer Chris Vincze. "Much of the organic growth stemmed from our Energy segment, while our Environmental segment produced most of the acquisition related growth. In the quarter, we continued to improve our profitability with operating margins increasing 68% and net income more than doubling."

"The performance of our Energy segment continues to be bolstered by increased investment by utilities in their electric transmission and distribution systems and a renewed focus on capital programs for electric system reliability. In the quarter, Energy segment NSR was up 34%, and segment profit increased by 43%. The growth in this segment is mostly organic and is a testament to the success of our strategy to gain market share through integrating TRCs energy service offerings and expanding our geographic presence."

"TRCs Environmental segment continues to post steady results with a 22% increase in NSR, which was primarily attributable to recent acquisitions. Our performance was in line with the overall environmental marketplace, which experienced weakness due to several factors, including a slowdown in real estate activity and reduced government spending. As a result, segment profit in the quarter was down 6%."

"Our Infrastructure segment performed well in the quarter, achieving NSR growth of 3% despite a challenging environment. The markets we serve continue to grapple with government budget deficits and the absence of a clear national policy for the transportation and infrastructure industries. Amidst these challenges, we continued to improve Infrastructure segment profit, which was up 54%, through enhanced project performance and execution and a focus on higher-margin project work."

Business Outlook

"Looking ahead, we see a number of opportunities to extend the momentum we have established in recent quarters, particularly within our Energy and Environmental segments. Our two-pronged profitable growth strategy, which combines selective acquisitions with internal growth initiatives, is delivering more consistent results as we have created a highly scalable, flexible and reliable business model. Several recently promulgated environmental regulations, involving the coal industry in particular, should support an increasing demand for many of our energy and environmental services in the coming quarters. We are also optimistic about opportunities for profitable growth within power markets such as energy efficiency, renewable energy, and electric transmission systems/substations upgrades, as well as the oil and gas markets. We believe the intermediate and long-term prospects for all three of our primary markets are promising and supported by favorable industry trends."

Conference Call Information

The Company will broadcast its second-quarter fiscal 2012 financial results conference call today, at 9 a.m. ET. Those who wish to listen to the conference call should visit the "Investor Center" section of TRCs website at www.TRCsolutions.com. The call also may be accessed by dialing (877) 709-8155 or (201) 689-8881 prior to the start of the call. For interested individuals unable to join the live conference call, a webcast replay will be available on the Companys website for 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 TRCs website at www.TRCsolutions.com and follow us on Twitter 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 TRCs future expectations, contain projections of the Companys 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 availability and adequacy of insurance; the uncertainty of our 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 TRCs services; product acceptance; industry-wide competitive factors; the ability to continue to attract and retain highly skilled and qualified personnel; 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 TRCs Annual Report on Form 10-K for the fiscal year ended June 30, 2011, Quarterly Reports on Form 10-Q, and other factors detailed from time to time in the Companys 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 30,  December 24,  December 30,  December 24,
                         2011          2010          2011          2010
                     ------------  ------------  ------------  ------------

Gross revenue            105,378       84,291      209,113      163,109
  Less subcontractor
   costs and other
   direct
   reimbursable
   charges                 31,482        23,968        61,762        45,196
                     ------------  ------------  ------------  ------------
Net service revenue        73,896        60,323       147,351       117,913
                     ------------  ------------  ------------  ------------

Interest income from
 contractual
 arrangements                  95           125           173           213
Insurance
 recoverables and
 other income                 518         2,313           738         2,910

Operating costs and
 expenses:
  Cost of services
   (exclusive of
   costs shown
   separately below)       61,173        51,715       121,335        98,289
  General and
   administrative
   expenses                 6,847         6,312        14,395        12,850
  Provision for
   doubtful accounts            -           595           365         1,173
  Depreciation and
   amortization             1,434         1,233         2,796         2,461
  Arena Towers
   litigation                 163             -       (11,061)            -
                     ------------  ------------  ------------  ------------
Total operating
 costs and expenses        69,617        59,855       127,830       114,773
                     ------------  ------------  ------------  ------------
Operating income            4,892         2,906        20,432         6,263
Interest expense             (175)         (218)         (356)         (415)
                     ------------  ------------  ------------  ------------
Income from
 operations before
 taxes and equity in
 earnings                   4,717         2,688        20,076         5,848
Federal and state
 income tax benefit
 (provision)                  206          (222)        3,504          (686)
                     ------------  ------------  ------------  ------------
Income from
 operations before
 equity in earnings         4,923         2,466        23,580         5,162
Equity in earnings
 from unconsolidated
 affiliates, net of
 taxes                        270            23           270            10
                     ------------  ------------  ------------  ------------
Net income                  5,193         2,489        23,850         5,172
Net loss applicable
 to noncontrolling
 interest                      18            13            49            34
                     ------------  ------------  ------------  ------------
Net income
 applicable to TRC
 Companies, Inc.            5,211         2,502        23,899         5,206
Accretion charges on
 preferred stock                -        (3,462)            -        (7,261)
                     ------------  ------------  ------------  ------------
Net income (loss)
 applicable to TRC
 Companies, Inc.s
 common shareholders       5,211         (960)      23,899       (2,055)
                     ============  ============  ============  ============

Basic earnings
 (loss) per common
 share                      0.19        (0.04)        0.86        (0.10)
                     ============  ============  ============  ============
Diluted earnings
 (loss) per common
 share                      0.18        (0.04)        0.84        (0.10)
                     ============  ============  ============  ============

Weighted-average
 common shares
 outstanding:
Basic                      27,845        21,817        27,657        20,781
                     ============  ============  ============  ============
Diluted                    28,525        21,817        28,458        20,781
                     ============  ============  ============  ============



                            TRC Companies, Inc.
                   Condensed Consolidated Balance Sheets
                     (in thousands, except share data)
                                (Unaudited)
                                                 December 30,    June 30,
                                                     2011          2011
                                                 ------------  ------------
                                   ASSETS
Current assets:
  Cash and cash equivalents                           14,736       10,829
  Accounts receivable, less allowance for
   doubtful accounts                                   98,766        89,258
  Insurance recoverable - environmental
   remediation                                         28,475        30,827
  Restricted investments                                6,376        12,413
  Prepaid expenses and other current assets            15,093        10,087
                                                 ------------  ------------
    Total current assets                              163,446       153,414
                                                 ------------  ------------

Property and equipment                                 51,495        48,475
  Less accumulated depreciation and amortization      (38,220)      (36,825)
                                                 ------------  ------------
    Property and equipment, net                        13,275        11,650
                                                 ------------  ------------
Goodwill                                               24,775        20,886
Investments in and advances to unconsolidated
 affiliates and construction joint ventures               111           111
Long-term restricted investments                       38,379        38,753
Long-term prepaid insurance                            35,841        37,410
Other assets                                           13,442        13,836
                                                 ------------  ------------
    Total assets                                     289,269      276,060
                                                 ============  ============

                           LIABILITIES AND EQUITY
Current liabilities:
  Current portion of long-term debt                    6,484        3,139
  Accounts payable                                     39,167        26,510
  Accrued compensation and benefits                    29,750        28,252
  Deferred revenue                                     16,985        22,709
  Environmental remediation liabilities                   527           505
  Other accrued liabilities                            44,687        59,718
                                                 ------------  ------------
    Total current liabilities                         137,600       140,833
                                                 ------------  ------------
Non-current liabilities:
  Long-term debt, net of current portion                3,364         6,037
  Income taxes payable                                    757         4,912
  Deferred revenue                                     86,574        88,865
  Environmental remediation liabilities                 5,600         5,741
                                                 ------------  ------------
    Total liabilities                                 233,895       246,388
                                                 ------------  ------------

Commitments and contingencies
Equity:
    Common stock, .10 par value; 40,000,000
     shares authorized, 27,870,592 and
     27,867,110 shares issued and outstanding,
     respectively, at Dectember 30, 2011, and
     27,303,774 and 27,300,292 shares issued and
     outstanding, respectively, at June 30, 2011        2,787         2,730
  Additional paid-in capital                          175,858       173,984
  Accumulated deficit                                (123,356)     (147,255)
  Accumulated other comprehensive income                  350           429
  Treasury stock, at cost                                 (33)          (33)
                                                 ------------  ------------
    Total shareholders equity applicable to TRC
     Companies, Inc.                                   55,606        29,855
  Noncontrolling interest                                (232)         (183)
                                                 ------------  ------------
    Total equity                                       55,374        29,672
                                                 ------------  ------------
    Total liabilities and equity                     289,269      276,060
                                                 ============  ============

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