TRC Announces Fourth-Quarter Fiscal 2016 Financial Results
Acquisition Integration and Record Cash Flow Conclude Transformative Year
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LOWELL, MA -- (Marketwired) -- 08/31/16 -- TRC Companies, Inc. (NYSE: TRR), a recognized leader in engineering, environmental consulting and construction-management services to the energy, environmental, infrastructure and oil and gas markets, today announced financial results for the fiscal fourth quarter and year ended June 30, 2016.
"Fiscal 2016 was a transformative and challenging year for TRC. In November we acquired the Willbros Professional Services (WPS) business and fully integrated it under very difficult market conditions. This transaction launched TRC as a leader of end-to-end project solutions in the midstream oil and gas markets. At the same time, we generated $48 million in positive cash flow for the year, paying down debt by $30 million and ending with $19 million of cash on the balance sheet," said Chris Vincze, Chairman and Chief Executive Officer.
"From an earnings perspective, TRC's fourth quarter trended in a positive direction, despite slowly improving conditions in the oil and gas markets. We had expenses related to the WPS acquisition of $2.8 million in the fourth quarter and $6.6 million for the full fiscal year. We also took a net $22.0 million, non-cash goodwill impairment charge for the full fiscal year," Vincze continued. "In the fourth quarter of fiscal 2016, NSR increased 16% compared with the same period of fiscal 2015. Operating income for the fourth quarter of fiscal 2016 was down 4% compared to the prior period, but when adjusted for acquisition-related expenses was down 1%. For the full fiscal year, NSR was up 14% and operating income declined 96%. However, adjusted for acquisition-related expenses and the goodwill charge, operating income was down only 3%."
Three Months Ended Twelve Months Ended
------------------ -------------------
(In millions, except June 30, June 30, % June 30, June 30, %
per share data) 2016 2015 Change 2016 2015 Change
--------------------- -------- -------- --------- --------
GAAP Results
---------------------
Net service
revenue(1) $ 132.3 $ 114.6 16% $ 465.1 $ 408.0 14%
Acquisition and
integration expense $ 2.8 $ - N/A $ 6.6 $ - N/A
Depreciation $ 1.8 $ 1.3 37% $ 6.9 $ 5.8 19%
Amortization $ 2.8 $ 0.9 217% $ 7.8 $ 3.5 124%
Goodwill impairment $ (2.5) $ - N/A $ 22.0 $ - N/A
Operating income $ 10.3 $ 10.7 -4% $ 1.3 $ 30.7 -96%
Net income applicable
to TRC Companies,
Inc. $ 5.9 $ 6.8 -13% $ 0.0 $ 19.4 -100%
Diluted earnings per
common share $ 0.19 $ 0.22 -14% $ 0.00 $ 0.63 -100%
Non-GAAP Results
---------------------
EBITDA $ 14.8 $ 12.9 15% $ 16.1 $ 40.0 -60%
Tax effect of
acqusition and
integration expenses $ (1.1) $ - N/A $ (2.4) $ - N/A
Tax effect of
goodwill impairment $ 1.0 $ - N/A $ (8.5) $ - N/A
Adjusted operating
income(2) $ 10.6 $ 10.7 -1% $ 29.9 $ 30.7 -3%
Adjusted EBITDA(2) $ 15.2 $ 12.9 18% $ 44.6 $ 40.0 11%
Adjusted net
income(2) (3) $ 6.1 $ 6.8 -10% $ 17.7 $ 19.4 -9%
Adjusted diluted
earnings per common
share(2) (3) $ 0.20 $ 0.22 -9% $ 0.56 $ 0.63 -11%
(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 $2.8 million and $6.6
million and goodwill impairment charges of $(2.5) million and $22.0
million for the three and twelve months ended June 30, 2016,
respectively.
(3) Excludes goodwill impairment and acquisition related expense in note 2,
net of an income tax benefit of $0.1 million and $10.9 million for the
three and twelve months ended June 30, 2016, respectively.
Comments on Segment Results "Our Energy segment experienced a 4% increase in NSR and 7% decline in segment profit compared to the fourth quarter of fiscal 2015," Vincze added. "The increase in NSR was primarily the result of increased demand for electric transmission and distribution services, and the decline in segment profit was related to delays in the award of project tasks under a significant program management project in California. In our Infrastructure segment, transportation-related spending by our clients led to a 24% increase in segment NSR and a 32% increase in segment profit. The continued slowdown from certain oil and gas clients led to a 9% decline in NSR in our Environmental segment, while profit increased 3%, primarily due to project efficiencies and cost savings from staff reductions.
"The downturn in oil and gas markets continued to weigh on our Pipeline Services segment. NSR for the quarter was $20.8 million, and the segment experienced a loss of $3.2 million, including $2.1 million of amortization expenses and $2.3 million of acquisition integration expenses, primarily lease abandonment charges," Vincze said. "We have made significant staff reductions and other cost improvements in this segment, normalizing our platform to the current revenue streams. These cost reductions led to fourth quarter segment profit of $1.2 million, before amortization and acquisition integration expenses."
Business Outlook "The long-term prospects are favorable for all of our segments," Vincze said. "In our Energy segment, demand from our utility clients, along with increased energy efficiency, testing and commissioning, and transmission project activity, will support growth. Increased state and federal government transportation spending continues to spur backlog growth in our Infrastructure segment. Our Environmental segment will continue to be affected by the slowdown from our oil and gas clients, but demand for services related to environmental remediation, construction, transaction support, the retirement of coal plants, and renewable energy should contribute to growth. Long-term fundamentals support future growth in our Pipeline Services segment, especially with regard to our integrity services, despite current headwinds. With the improvements we have made to our cost structure and balance sheet, we are ready to capitalize on expansion opportunities in all of our strategic markets."
Conference Call Information / Reconciliation of Non-GAAP Metrics TRC will webcast its financial results conference call today, Aug. 31, 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, 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 Companies, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
------------------ ------------------
June 30, June 30, June 30, June 30,
2016 2015 2016 2015
-------- -------- -------- --------
Gross revenue $169,532 $149,087 $620,864 $546,117
Less subcontractor costs and other
direct reimbursable charges 37,201 34,520 155,735 138,099
-------- -------- -------- --------
Net service revenue 132,331 114,567 465,129 408,018
-------- -------- -------- --------
Interest income from contractual
arrangements 53 30 122 97
Insurance recoverables and other
income 14,129 295 16,048 6,533
Operating costs and expenses:
Cost of services (exclusive of
costs shown separately below) 121,627 90,016 402,317 337,291
General and administrative expenses 9,685 11,971 34,375 37,331
Acquisition and integration
expenses 2,847 - 6,571 -
Depreciation 1,820 1,333 6,890 5,814
Amortization 2,757 869 7,835 3,502
Goodwill impairment (2,484) - 21,981 -
-------- -------- -------- --------
Total operating costs and expenses 136,252 104,189 479,969 383,938
-------- -------- -------- --------
Operating income 10,261 10,703 1,330 30,710
Interest income 514 - 840 -
Interest expense (1,145) (9) (2,707) (134)
-------- -------- -------- --------
Income from operations before taxes 9,630 10,694 (537) 30,576
Income tax provision (3,688) (3,936) 670 (11,180)
-------- -------- -------- --------
Net income 5,942 6,758 133 19,396
Net loss applicable to
noncontrolling interest (33) 5 (92) 19
-------- -------- -------- --------
Net income applicable to TRC
Companies, Inc. $ 5,909 $ 6,763 $ 41 $ 19,415
======== ======== ======== ========
Basic earnings per common share $ 0.19 $ 0.22 $ 0.00 $ 0.64
-------- -------- -------- --------
Diluted earnings per common share $ 0.19 $ 0.22 $ 0.00 $ 0.63
-------- -------- -------- --------
Weighted-average common shares
outstanding:
Basic 31,074 30,457 30,936 30,291
-------- -------- -------- --------
Diluted 31,424 31,232 31,359 30,724
-------- -------- -------- --------
TRC Companies, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited)
June 30, June 30,
2016 2015
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 18,804 $ 37,296
Restricted cash 71 122
Accounts receivable, less allowance for doubtful
accounts 149,280 138,346
Insurance recoverable - environmental remediation 49,934 40,927
Restricted investments 5,959 6,701
Income taxes refundable 75 412
Prepaid expenses and other current assets 24,122 10,499
-------- --------
Total current assets 248,245 234,303
-------- --------
Property and equipment 74,053 64,594
Less accumulated depreciation and amortization (51,593) (50,885)
-------- --------
Property and equipment, net 22,460 13,709
-------- --------
Goodwill 75,337 37,024
Intangible assets, net 45,969 9,304
Deferred income tax assets 26,239 18,924
Long-term restricted investments 18,420 18,385
Long-term prepaid insurance 23,425 25,929
Other assets 18,383 5,303
-------- --------
Total assets $478,478 $362,881
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 18,339 $ 50
Current portion of capital lease obligations - 166
Accounts payable 29,311 31,999
Accrued compensation and benefits 48,485 47,233
Deferred revenue 15,363 10,612
Environmental remediation liabilities 8,654 8,695
Income taxes payable 265 3,271
Other accrued liabilities 58,026 42,170
-------- --------
Total current liabilities 178,443 144,196
-------- --------
Non-current liabilities:
Long-term debt, net of current portion 79,243 55
Long-term income taxes payable 2,204 1,647
Deferred revenue 65,340 68,579
Environmental remediation liabilities 433 489
-------- --------
Total liabilities 325,663 214,966
-------- --------
Commitments and contingencies
Equity:
Common stock, $.10 par value; 40,000,000 shares
authorized, 31,087,084 and 31,083,602 shares issued
and outstanding, respectively, at June 30, 2016, and
30,485,510 and 30,482,028 shares issued and
outstanding, respectively, at June 30, 2015 3,109 3,049
Additional paid-in capital 195,156 191,321
Accumulated deficit (45,898) (45,939)
Accumulated other comprehensive loss (71) (88)
Treasury stock, at cost (33) (33)
-------- --------
Total shareholders' equity applicable to TRC
Companies, Inc. 152,263 148,310
Noncontrolling interest 552 (395)
-------- --------
Total equity 152,815 147,915
-------- --------
Total liabilities and equity $478,478 $362,881
======== ========
Investor Contact: Andrew Blazier Senior Associate Sharon Merrill (617) 542-5300 [email protected] Company Contact: Thomas W. Bennet, Jr. CFO (978) 970-5600 [email protected]
Source: TRC Companies, Inc.
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