TRC Announces Financial Results for the Third Quarter of Fiscal 2007

TRC (NYSE: TRR), a recognized leader in engineering, consulting and construction management, today announced financial results for the three and nine months ended March 31, 2007. Third-Quarter Results For the three months ended March 31, 2007, gross revenue increased 20% to $111.5 million compared with $92.7 million for the three months ended March 31, 2006. Net service revenue for the third quarter of fiscal 2007 grew 3.8% to $64.1 million compared with $61.7 million for the three months ended March 31, 2006. Gross revenue includes subcontracted costs that can fluctuate period to period. The Company believes that net service revenue better reflects the value of services provided to customers. The loss from continuing operations for the three months ended March 31, 2007 was $665,000 compared with a loss from continuing operations of $1.9 million for the same period in fiscal 2006. The net loss for the three months ended March 31, 2007 was $712,000 compared with a net loss of $1.9 million for the comparable period in fiscal 2006. The net loss applicable to common shareholders for the third quarter of fiscal 2007 was $712,000, or $(0.04) per share, compared with a net loss of $2.1 million, or $(0.14) per share, for the three months ended March 31, 2006. Results for the Nine Months Ended March 31, 2007 For the nine months ended March 31, 2007, gross revenue increased 10.0% to $326.7 million compared with $296.8 million for the nine months ended March 31, 2006. Net service revenue for the nine months ended March 31, 2007 grew 8.8% to $192.0 million compared with $176.4 million for the nine months ended March 31, 2006. Net income for the nine months ended March 31, 2007 was $623,000 compared with a net loss of $11.7 million for the nine months ended March 31, 2006. Net income applicable to common shareholders for the first nine months of fiscal 2007 was $4.3 million, or $0.24 per diluted share, compared with a net loss of $12.2 million, or $(0.84) per share, for the nine months ended March 31, 2006. Net income applicable to common shareholders for the nine months ended March 31, 2007 included a $3.9 million benefit related to the redemption of $15.0 million of convertible redeemable preferred stock in December 2006. The benefit did not impact net income but increased net income applicable to common shareholders and net income per diluted share by $0.22 per share. Comments on the Third Quarter "TRC’s financial performance this quarter was in line with our expectations,” said Chris Vincze, TRC’s Chairman and Chief Executive Officer. "While the third quarter is historically weak due to seasonality, we experienced continued strength in underlying demand within our target markets, particularly engineering services related to power generation projects. As expected, the net loss for the quarter was primarily the result of investments in TRC’s infrastructure, the continued effect of redundant overhead costs, expenses related to the conversion of our legacy systems into a common enterprise-wide IT platform, the launch of our branding campaign and reduced field activity levels due to seasonality.” "During the quarter, we made substantial progress toward achieving our ongoing goal of streamlining our business by centralizing many of our primary functions, including our IT platform,” said Vincze. "We spent considerable resources on continuing to identify and eliminate redundancies within the organization while focusing on organizing the Company for long-term sustainable, profitable growth.” "Initial feedback on our rebranding campaign has been decidedly positive,” Vincze said. "We have successfully consolidated numerous subsidiaries within TRC, creating a consistent corporate identity for our employees nationwide. From a market perspective, unifying our brand has increased our clients’ awareness of our services, our competitiveness in the marketplace and accelerated cross-selling opportunities for our sales teams.” Outlook and Financial Guidance "We are fully engaged in the transformation stage of our turnaround strategy,” said Vincze. "As we continue to improve the organizational structure of the Company, we expect to continue enhancing our underlying profitability. However, we expect that the costs associated with the conversion of our legacy systems onto a common platform will continue to limit our operating results into the fourth quarter and the beginning of fiscal 2008.” "The transformation is now shifting aggressively from an internal focus of improving operations management to an external strategy emphasizing revenue growth,” said Vincze. "Going forward we plan to identify and capitalize on external opportunities to drive growth in revenues, in particular in our energy and infrastructure services. TRC operates in markets with significant potential for long-term growth. Our backlog is strong and growing and we continue to generate a positive win-rate for new contracts. Our management team is sharply focused on executing a broad range of growth initiatives designed to ultimately result in TRC becoming a top-quintile performer in all our business segments.” Conference Call Information The Company will host a conference call this morning at 9:00 a.m. ET to discuss its financial results for the third quarter of fiscal 2007. Those who wish to listen to the conference call should visit the "Investor Center” section of TRC’s website at www.TRCsolutions.com. The call also may be accessed by dialing (800) 810-0924 or (913) 981-4900 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 Company’s website. About TRC TRC creates and implements sophisticated and innovative solutions to the challenges facing America's real estate, environmental, energy, and infrastructure markets. The Company is also a leading provider of technical, financial, risk management, and construction services to commercial and government customers across the country. For more information, visit TRC's website at www.TRCsolutions.com. 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 our future expectations, contain projections of our future results of operations or of our financial condition, or state other "forward-looking" information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our 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 and bonding, the uncertainty of our operational and growth strategies, the challenges inherent in integrating newly acquired businesses, regulatory uncertainty, the availability of funding for government projects, the level of demand for our services, product acceptance, industry-wide competitive factors, the ability to continue to attract and retain highly skilled and qualified personnel, recent changes in our senior management, the results of outstanding litigation, risks arising from either failure to identify, or from identified material weaknesses in our internal controls over financial reporting or our inability to effectively remedy such weaknesses, our inability to comply with the terms of our credit facility and our lenders' future unwillingness to waive our noncompliance, and general political or economic conditions. Furthermore, market trends are subject to changes, which could adversely affect future results. See additional discussion in our Annual Report on Form 10-K/A for the fiscal year ended June 30, 2006, Quarterly Reports on Form 10-Q, and other factors detailed from time to time in our other filings with the Securities and Exchange Commission. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited)   Three Months Ended Nine Months Ended March 31, March 31,   2007 2006 2007 2006 Gross revenue $ 111,450 $ 92,725 $ 326,656 $ 296,844 Less subcontractor costs and direct charges   47,395   31,010   134,651   120,423 Net service revenue   64,055   61,715   192,005   176,421   Interest income from contractual arrangements 1,194 1,057 3,645 2,904 Insurance recoverables 127 103 4,943 907   Operating costs and expenses: Cost of services 57,491 56,266 170,391 166,689 General and administrative expenses 5,742 5,144 17,258 17,341 Provision for doubtful accounts 619 1,298 2,429 5,737 Depreciation and amortization   1,895   1,670   5,917   4,997   65,747   64,378   195,995   194,764 Operating income (loss) (371) (1,503) 4,598 (14,532) Interest expense   1,005   1,346   3,285   3,616       Income (loss) from continuing operations before taxes, minority interest and equity earnings (losses) (1,376) (2,849) 1,313 (18,148) Federal and state income tax provision (benefit) (688) (964) 673 (6,077) Minority interest, net of taxes   7   -   7   -       Income (loss) from continuing operations before equity earnings (losses) (681) (1,885) 647 (12,071) Equity in earnings (losses) from unconsolidated affiliates, net of taxes   16   (8)   53   (10) Income (loss) from continuing operations (665) (1,893) 700 (12,081) Discontinued operations, net of taxes   (47)   35   (77)   424 Net income (loss) (712) (1,858) 623 (11,657) Dividends, accretion charges, and benefit on redemption of preferred stock   -   199   (3,642)   589 Net income (loss) applicable to common shareholders $ (712) $ (2,057) $ 4,265 $ (12,246)   Basic earnings (loss) per common share: Continuing operations $ (0.04) $ (0.14) $ 0.25 $ (0.86) Discontinued operations   -   -   -   0.02 $ (0.04) $ (0.14) $ 0.25 $ (0.84)   Diluted earnings (loss) per common share: Continuing operations $ (0.04) $ (0.14) $ 0.24 $ (0.86) Discontinued operations   -   -   -   0.02 $ (0.04) $ (0.14) $ 0.24 $ (0.84)   Average shares outstanding: Basic   18,194   15,131   17,341   14,657 Diluted   18,194   15,131   17,724   14,657 CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (Unaudited)   March 31, June 30, 2007 2006 ASSETS Current assets: Cash $ 1,590 $ 3,093 Accounts receivable, less allowances for doubtful accounts 123,377 120,829 Insurance recoverable - environmental remediation 7,806 3,546 Deferred income tax benefits 15,547 15,261 Income taxes refundable 5,919 5,429 Restricted investment 25,021 33,230 Prepaid expenses and other current assets   12,235   8,049 Total current assets   191,495   189,437   Property and equipment, at cost 55,128 54,063 Less accumulated depreciation and amortization   34,211   35,105 20,917 18,958 Goodwill 130,753 126,325 Investments in and advances to unconsolidated affiliates and construction joint ventures 6,466 4,315 Long-term restricted investment 73,884 78,856 Long-term prepaid insurance 55,224 56,612 Assets held for sale - 458 Other assets   13,882   10,442 Total assets $ 492,621 $ 485,403   LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 33,858 $ 37,608 Accounts payable 44,445 41,450 Accrued compensation and benefits 19,681 20,930 Deferred revenue 33,521 39,726 Environmental remediation liability 3,796 2,504 Other accrued liabilities 26,286   22,214 Total current liabilities 161,587 164,432 Non-current liabilities: Long-term debt, net of current portion 11,068 2,845 Deferred income tax liabilities 5,334 4,689 Long-term deferred revenue 138,382 143,979 Long-term environmental remediation liability 10,879 9,302 Minority interest   89   - Total liabilities   327,339   325,247   Convertible redeemable preferred stock   -   15,000   Commitments and contingencies   Shareholders' equity: Capital stock: Preferred, $.10 par value; 500,000 shares authorized, 0 and 15,000 issued and outstanding as convertible redeemable, liquidation preference of $0 and $15,000 at March 31, 2007 and June 30, 2006, respectively - - Common, $.10 par value; 30,000,000 shares authorized, 18,233,910 and 18,230,428 issued and outstanding, respectively, at March 31, 2007, and 16,720,420 shares issued and outstanding at June 30, 2006 1,823 1,672 Additional paid-in capital 140,669 125,152 Retained earnings 22,585 18,320 Accumulated other comprehensive income   238   12 165,315 145,156 Less treasury stock, at cost   33   - Total shareholders' equity   165,282   145,156 Total liabilities and shareholders' equity $ 492,621 $ 485,403