<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended June 30, 1995 Commission file number 1-5170
TRC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0853807
- ---------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5 Waterside Crossing
Windsor, Connecticut 06095
- ---------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 289-8631
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- -------------------------------------- -------------------------------------
Common Stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12)
months and has been subject to such filing requirements for the past ninety (90)
days.
The aggregate market value of the registrant's voting stock held by
non-affiliates on September 8, 1995 was approximately $49,467,000.
On September 8, 1995, there were 7,085,552 shares of Common Stock of the
registrant outstanding.
Documents incorporated by reference:
Portions of the following documents are incorporated by reference into this
Report: (1) registrant's 1995 Annual Report to Shareholders (Part II); and (2)
registrant's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held October 27, 1995 (Part III).
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<PAGE>
PART I
Item 1. Business
TRC Companies, Inc. (the Company) together with its wholly-owned subsidiaries,
provides a full range of environmental engineering and consulting services and
specialized pollution control measurement instrumentation to industry and
government.
Significant recent events in the development of the Company's business include:
(i) the acquisition in March 1994, of the business assets, liabilities and
obligations of Environmental Solutions, Inc. of Irvine, California, a firm
providing a broad range of solid and hazardous waste engineering and consulting
services, specializing in remedial design and construction management; and (ii)
the acquisition in May 1994, of the capital stock of Mariah Associates, Inc.
(Mariah) of Laramie, Wyoming, a full service environmental consulting firm
serving primarily the western states with a focus on cultural resource
consulting and environmental impact statements. The acquisition of Environmental
Solutions, Inc. was treated as a purchase for accounting purposes and Mariah was
accounted for as a pooling-of-interests. Accordingly, the Company's
consolidated financial statements have been restated to include the financial
results of Mariah.
Environmental Engineering and Consulting Services
Environmental engineering and consulting services are provided by the Company's
wholly-owned subsidiaries, TRC Environmental Corporation, TRC Environmental
Solutions, Inc., TRC Mariah Associates, Inc. and TRC Process Engineering Inc.,
through a network of offices across the United States.
TRC Environmental Corporation is an international environmental services company
with expertise in all areas of air quality and hazardous waste management,
regulatory compliance and permitting, environmental consulting and pollution
control engineering. The company's air quality services incorporate all
technical aspects of facility permitting, control engineering, regulatory
compliance and air quality analyses and measurement. Hazardous waste management
services include all aspects of site evaluation, permitting, and soil and
groundwater remediation engineering.
The company also provides risk management services that assess toxicological,
exposure and clinical data to protect human health and determine risk based
controls. Additionally, the company's industrial hygienists and asbestos
engineers address indoor environment problems and assist in managing workplace
risks. The company also develops, organizes and assesses major databases used
by government agencies and industry to make strategic decisions. A subsidiary
of the company provides weather modification services to water districts,
municipalities, irrigation companies and other organizations that utilize water.
TRC Environmental Solutions, Inc. provides a broad range of solid and hazardous
waste engineering and management services, specializing in all aspects of
planning, design, permitting and construction for all classes of landfills and
solid waste disposal facilities, including RI/FS investigations, risk
assessments, remedial designs and construction management of on-site remediation
facilities.
TRC Mariah Associates, Inc. is a full service environmental services company
with a unique focus on cultural and natural resource management, permitting and
environmental impact statements.
TRC Process Engineering Inc. is a multidisciplinary engineering firm assisting
industrial, utility and public sector clients maximize the performance and
minimize the cost of manufacturing, energy generation and waste treatment
processes through pollution prevention and process engineered solutions. A
division of the company also
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provides site/civil and transportation/traffic engineering services that include
the analyses of traffic conditions and development of highway improvements in
accordance with the transportation provisions of the Clean Air Act Amendments.
Specialized Air Pollution Measurement Instruments
The Company's wholly-owned subsidiary, MIE, Inc. (MIE), develops, manufactures
and markets a line of specialized pollution control measurement instruments that
instantaneously sense airborne dust, smoke, fumes and asbestos fibers. These
instruments have diverse applications including worker's health protection,
asbestos remediation monitoring, energy conservation and hazardous waste site
dust monitoring.
Clients
The Company's clients include companies in the chemical, automotive, petroleum,
construction, transportation, mining, waste management and other industries,
financial institutions, public utilities, and state and federal government
agencies. Over 80% of the Company's annual revenue in fiscal 1995 was derived
from repeat business with existing clients.
For fiscal 1995, 1994 and 1993, the federal government (principally the U.S.
Environmental Protection Agency) accounted for 15%, 31% and 45%, respectively,
of the Company's net service revenue. No other client represented 10% or more
of the Company's net service revenue in any of those years.
Marketing and Sales
The Company believes that it attracts clients primarily on the basis of its
reputation for quality work and the ability to respond quickly to client needs.
The marketing activities for the Company's service businesses are conducted by
senior professional staff members and executives who regularly meet with
existing and potential clients to solicit new business. These activities are
typically conducted through the Company's network of offices. In addition,
corporate and subsidiary marketing departments coordinate representation at
trade shows, prepare sales literature and develop and place advertising. MIE
sells its instruments through its direct sales force and a network of
manufacturer's representatives in the United States, Europe and Asia.
Backlog
At June 30, 1995, the Company's net contract backlog (excluding the estimated
costs of pass-through charges) was approximately $75 million, as compared to
approximately $71 million at June 30, 1994. The Company expects that
approximately 70% of this backlog will be completed in fiscal 1996. In addition
to this net contract backlog, the Company holds open order contracts from
various clients and government agencies. As work under these contracts is
authorized and funded, the Company includes this portion in its net contract
backlog. There can be no assurance that any work included in backlog will not
be cancelled or delayed.
Employees
As of June 30, 1995, the Company had a total of 823 full and part time
employees. Approximately 80% of these employees are engaged primarily in
performing environmental engineering and consulting, and process and civil
engineering services for clients. Many of these employees have master's degrees
or their equivalent and a number have Ph.D. degrees. The Company's professional
staff includes registered professional engineers, civil, environmental and
chemical engineers, meteorologists, geologists, hydrologists, hydrogeologists,
toxicologists, chemists, industrial hygienists, archaeologists, biologists and
others with degrees and experience that enable them
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to provide a full range of services. The balance of the Company's employees are
engaged primarily in executive, administrative and support activities. None of
the Company's employees are represented by a union. The Company considers its
relations with its employees to be very good.
Competition
The markets for the Company's services are highly competitive. There are
numerous professional architectural, engineering and consulting firms and other
organizations which offer many of the services offered by the Company. The
Company is subject to direct competition with respect to the services it
provides from many other firms, ranging from small local firms to large national
firms having substantially greater financial, management and marketing resources
than the Company. Competitive factors include reputation, performance, price,
geographic location and availability of technically skilled personnel.
MIE's products have few direct competitors; however, MIE often competes with
firms which offer alternative technologies. Such competition is based on price,
performance and regulatory requirements.
Regulatory Matters
The Company's businesses are subject to various rules and regulations at the
federal, state and local government levels. The Company believes that it is in
compliance with these rules and regulations. On occasion, the Company has not
bid on projects in certain jurisdictions due to licensing requirements. In
addition, some projects are not bid due to bonding or insurance requirements
which the Company elects not to meet. While the Company has not experienced any
significant limitations on its business as a result of regulatory, bonding or
insurance requirements, there can be no assurance that future changes in law or
changes in industry practice will not impose conditions to bidding on certain
projects which the Company may not be able to satisfy.
Patents, Trademarks and Licenses
The Company has a number of patents, trademarks, service marks, copyrights and
licenses, none of which are considered material to the Company's business as a
whole.
Research and Development
During the past year the Company continued work both on programs relating to its
hazardous and toxic waste services and on development of new products for
monitoring airborne contaminants. Research and development costs are charged to
operations as incurred and amounted to approximately $204,000 in fiscal 1995, as
compared to approximately $338,000 in fiscal 1994, and $241,000 in fiscal 1993.
Environmental and Other Considerations
The Company does not believe that compliance with federal, state and local laws
and regulations relating to the protection of the environment will have any
material effect on its capital expenditures, earnings or competitive position.
The Company's business is not seasonal to any significant extent.
Item 2. Properties
The Company provides its services through a network of twenty-three offices
located nationwide. The Company does not own any real estate and leases
approximately 315,000 square feet of office and laboratory space to support
these operations. The Company owns substantially all of the analytical,
chemical monitoring, emissions
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testing and other specialized equipment required to render its various services.
In addition, the Company leases certain computers and office equipment. The
Company also leases approximately 15,000 square feet of space in Billerica,
Massachusetts for MIE's manufacturing operation.
Item 3. Legal Proceedings
On August 2, 1993, the Company entered into an agreement with the U.S.
Department of Justice to resolve all pending claims arising from the activities
of metaTRACE, Inc. (metaTRACE), its former analytical laboratory subsidiary. In
connection with the settlement, the Company agreed to refund $2,425,000 to the
government as the value of the laboratory services provided by metaTRACE but not
used by the government. In return, the government released the Company from
claims related to metaTRACE and terminated its investigation. The settlement
amount was paid to the government in three equal installments over a one-year
period.
The Company's subsidiaries are from time-to-time subject to certain client suits
arising from services performed by the subsidiaries. The Company does not
believe that any client suits pending against the subsidiaries will have a
material adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Information on "Market for the Registrant's Common Equity and Related
Stockholder Matters" is contained on page 32 of the Company's 1995 Annual Report
to Shareholders and such information is incorporated herein by reference.
Item 6. Selected Financial Data
Information on "Selected Financial Data" is contained on page 18 of the
Company's 1995 Annual Report to Shareholders and such information is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" is contained on pages 19 through 21 of the Company's 1995 Annual
Report to Shareholders and such information is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The following Consolidated Financial Statements of TRC Companies, Inc. and
Report of Independent Accountants set forth on pages 22 through 31 of the
Company's 1995 Annual Report to Shareholders are incorporated herein by
reference:
Consolidated Statements of Operations, Cash Flows and Changes in Shareholders'
Equity - Years ended June 30, 1995, 1994 and 1993
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Consolidated Balance Sheets - June 30, 1995 and 1994
Notes to Consolidated Financial Statements
Report of Independent Accountants, dated July 24, 1995
The supplementary data regarding quarterly results of operations is contained on
page 18 of the Company's 1995 Annual Report to Shareholders and such information
is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information on the Company's Directors and Executive Officers is contained on
pages 2 through 11 of the Company's Proxy Statement for its 1995 Annual Meeting
of Shareholders to be held October 27, 1995 and such information is incorporated
herein by reference.
The following table sets forth the name, age and capacity of the executive
officers of the Company and its subsidiaries:
<TABLE>
<CAPTION>
Name Capacity Age Since
---- -------- --- -----
<S> <C> <C> <C>
Vincent A. Rocco................................. Chairman, Chief Executive Officer 50 1979
and Director
Bruce D. Cowen................................... President and Director 42 1979
John H. Claussen................................. Senior Vice President, General Counsel 46 1992
and Secretary, formerly Managing
Environmental Counsel and Manager -
Remediation Programs for General
Electric Company
Richard D. Ellison............................... Senior Vice President and Chief Engineer, 56 1994
President of TRC Environmental
Solutions, Inc.
Miro Knezevic.................................... Executive Vice President of 45 1994
TRC Environmental Solutions, Inc.
Richard J. McGuire, Jr........................... Executive Vice President of 51 1994
TRC Environmental Corporation,
President of TRC Mariah
Associates, Inc.
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Peter J. Russo................................... Senior Vice President and Chief Financial 49 1993
Officer, formerly Treasurer and Corporate
Controller for Gerber Scientific, Inc.
Harold C. Elston, Jr............................. Vice President and Treasurer 51 1983
</TABLE>
No family relationship exists between any of the individuals named above.
Item 11. Executive Compensation
Information on "Executive Compensation" is contained on pages 6 through 11 of
the Company's Proxy Statement for its Annual Meeting of Shareholders to be held
October 27, 1995 and such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information on "Security Ownership of Certain Beneficial Owners and Management"
is contained on pages 2 through 5 of the Company's Proxy Statement for its
Annual Meeting of Shareholders to be held October 27, 1995 and such information
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information on "Certain Relationships and Related Transactions" is contained on
page 13 of the Company's Proxy Statement for its Annual Meeting of Shareholders
to be held October 27, 1995 and such information is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules
1. The Consolidated Financial Statements and Report of Independent
Accountants set forth on pages 22 through 31 of the Company's 1995
Annual Report to Shareholders are incorporated by reference into this
report by Item 8 herein.
2. The Consolidated Financial Statement Schedules and Report of
Independent Accountants on such schedules are included in this report
on the pages indicated.
Page
----
Report of Independent Accountants on Financial Statement Schedules 11
Schedule V - Property, Plant and Equipment 13
Schedule VI - Accumulated Depreciation and Amortization of 13
Property, Plant and Equipment
Schedule VIII - Valuation and Qualifying Accounts 14
Schedule X - Supplementary Income Statement Information 15
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All other schedules are omitted because they are not applicable, not
required or the information required is included in the financial
statements or notes thereto.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourth quarter
of fiscal 1995.
(c) Exhibits
3.1 Restated Certificate of Incorporation, dated November 18, 1994.
3.2 Bylaws of the Company, as amended, incorporated by reference to the
Company's Form S-1 as filed on April 16, 1986, Registration No.
33-4896.
10.1 Stock Option Plan for Key Employees of the Company, as amended,
incorporated by reference to the Company's Form S-1 as filed on April
16, 1986, Registration No. 33-4896.
10.1.1 Amendment, dated June 23, 1994, to the Stock Option Plan for Key
Employees of the Company incorporated by reference to the Company's
Form 10-K for the fiscal year ended June 30, 1994.
10.2 Outside Directors Stock Option Plan, as adopted May 29, 1992,
incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1992.
10.3 Amended and Restated Revolving Credit and Term Loan Agreement, by and
among TRC Companies, Inc. and its subsidiaries and The First National
Bank of Boston, dated March 15, 1995, incorporated by reference to
the Company's Form 10-Q for the quarterly period ended March 31,
1995.
10.4 Asset Purchase Agreement, dated March 21, 1994, by and among TRC
Companies, Inc., Environmental Solutions, Inc., Richard D. Ellison
and Miro Knezevic; Registration Rights Agreement among TRC
Companies, Inc. and Environmental Solutions, Inc., dated March 21,
1994; and 5.75% Subordinated Note, due March 21, 1997, incorporated
by reference to the Company's Form 8-K, dated April 1, 1994.
10.5 Stock Purchase Agreement, dated May 27, 1994, by and among TRC
Companies, Inc., Richard J. McGuire, Jr., W. Thomas Turner and
Stephen B. Goppert; Registration Rights Agreement, dated May 27,
1994, by and among TRC Companies, Inc., Richard J. McGuire, Jr.,
W. Thomas Turner and Stephen B. Goppert, incorporated by reference
to the Company's Form 8-K, dated June 10, 1994.
10.6 Severance Agreements between the Company and Vincent A. Rocco and
Bruce D. Cowen, dated August 19, 1994, incorporated by reference to
the Company's Form 10-K for the fiscal year ended June 30, 1994.
10.7 Employment Agreement between Environmental Solutions, Inc. and
Richard D. Ellison, dated March 21, 1994, incorporated by reference
to the Company's Form 10-K for the fiscal year ended June 30, 1994.
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10.8 Executive Incentive Compensation Plan, as adopted June 20, 1988,
incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1988.
10.8.1 Amendment, dated June 23, 1995, to the Executive Incentive
Compensation Plan.
13 Annual Report to Shareholders for the fiscal year ended June 30,
1995. (Only those portions expressly incorporated by reference are
deemed to be filed herewith.)
21 Subsidiaries of the Registrant.
As to any security holder requesting a copy of this Form 10-K, the Company will
furnish any exhibit indicated above as being filed with the Form 10-K upon
payment to the Company of its expenses in furnishing such exhibit.
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRC COMPANIES, INC.
Dated: September 25, 1995 By: /s/ Vincent A. Rocco
------------------------------------
Vincent A. Rocco
Chairman and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
/s/ Vincent A. Rocco
- -------------------- Chairman, Chief Executive September 25, 1995
Vincent A. Rocco Officer and Director
/s/ Bruce D. Cowen President and Director September 25, 1995
- ------------------
Bruce D. Cowen
/s/ Peter J. Russo Senior Vice President and Chief September 25, 1995
- ------------------ Financial Officer (Principal
Peter J. Russo Financial and Accounting Officer)
/s/ Edward G. Jepsen Director September 25, 1995
- --------------------
Edward G. Jepsen
/s/ Edward W. Large Director September 25, 1995
- -------------------
Edward W. Large
/s/ J. Jeffrey McNealey Director September 25, 1995
- -----------------------
J. Jeffrey McNealey
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Report of Independent Accountants on
Financial Statement Schedules
To the Board of Directors
of TRC Companies, Inc.
Our audits of the consolidated financial statements referred to in our report
dated July 24, 1995 appearing on page 31 of the 1995 Annual Report to
Shareholders of TRC Companies, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in Item 14(a)
of this Form 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Hartford, Connecticut
July 24, 1995
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Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 2-66247, 2-77690, 33-18771, 33-26748, 33-38810,
33-45169, 33-70662, 33-87446 and 33-87448) and in the Prospectus constituting
part of the Registration Statement on Form S-3 (No. 33-84660) of TRC Companies,
Inc. and its subsidiaries of our report dated July 24, 1995 appearing on page
31 of the Annual Report to Shareholders which is incorporated in this Annual
Report on Form 10-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedules, which appears on page 11 of this
Form 10-K.
PRICE WATERHOUSE LLP
Hartford, Connecticut
September 25, 1995
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TRC Companies, Inc. and Subsidiaries
Schedules V and VI - Property, Plant and Equipment and Accumulated Depreciation
and Amortization of Property, Plant and Equipment
For the Years Ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Accumulated Depreciation and
Property, Plant and Equipment Amortization of Property, Plant and Equipment
------------------------------------------------- -------------------------------------------------
Additions
Balance at at cost Balance at Balance at Charged to Balance at
beginning (net of Retirements end of beginning costs and Retirements end of
of period transfers) or sales period of period expenses or sales period
----------- ---------- ----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
- ---------------------------
Furniture and Equipment $17,252,449 $ 910,363 $(384,004) $17,778,808 $ 9,326,406 $1,961,555 $(235,564) $11,052,397
Leasehold Improvements 1,186,179 135,765 -- 1,321,944 955,379 86,104 -- 1,041,483
Construction in Process 102,000 237,419 -- 339,419 -- -- -- --
----------- ---------- --------- ----------- ----------- ---------- --------- -----------
$18,540,628 $1,283,547 $(384,004) $19,440,171 $10,281,785 $2,047,659 $(235,564) $12,093,880
=========== ========== ========= =========== =========== ========== ========= ===========
1994
- ---------------------------
Furniture and Equipment $14,321,688 $3,061,686 $(130,925) $17,252,449 $ 7,472,497 $1,910,637 $ (76,726) $ 9,306,408
Leasehold Improvements 1,155,326 30,853 -- 1,186,179 920,631 54,746 -- 975,377
Construction in Process 20,766 81,234 -- 102,000 -- -- -- --
----------- ---------- --------- ----------- ----------- ---------- --------- -----------
$15,497,780 $3,173,773 $(130,925) $18,540,628 $ 8,393,128 $1,965,383 $ (76,726) $10,281,785
=========== ========== ========= =========== =========== ========== ========= ===========
1993
- ---------------------------
Furniture and Equipment $11,422,714 $3,049,025 $(150,051) $14,321,688 $ 5,928,061 $1,628,613 $ (84,177) $ 7,472,497
Leasehold Improvements 1,102,629 52,697 -- 1,155,326 853,533 67,098 -- 920,631
Construction in Process 579,316 (558,550) -- 20,766 -- -- -- --
----------- ---------- --------- ----------- ----------- ---------- --------- -----------
$13,104,659 $2,543,172 $(150,051) $15,497,780 $ 6,781,594 $1,695,711 $ (84,177) $ 8,393,128
=========== ========== ========= =========== =========== ========== ========= ===========
</TABLE>
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TRC Companies, Inc.
Schedule VIII - Valuation and Qualifying Accounts
For the Years Ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Balance at Charged to Allowances Reclassification Balance at
beginning costs and from acquired from other end of
Description of period expenses businesses accruals Deductions* period
- ---------------------- ---------- ---------- ------------- ---------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
1995
Allowance for doubtful
accounts $1,788,000 $824,000 $ -- $1,332,000 $(2,244,000) $1,700,000
---------- -------- -------- ---------- ----------- ----------
1994
Allowance for doubtful
accounts $1,247,000 $802,000 $255,000 $ 200,000 $ (716,000) $1,788,000
---------- -------- -------- ---------- ----------- ----------
1993
Allowance for doubtful
accounts $1,223,000 $772,305 $100,000 $1,024,345 $(1,872,650) $1,247,000
---------- -------- -------- ---------- ----------- ----------
</TABLE>
* Uncollectible accounts written off, net of recoveries.
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TRC Companies, Inc.
Schedule X - Supplementary Income Statement Information
For the Years Ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Charged to costs and expenses
------------------------------
Item 1995 1994 1993
---- -------- -------- --------
<S> <C> <C> <C>
Maintenance and repairs $389,819 $475,849 $394,213
Depreciation and amortization of intangible assets 989,601 468,333 217,912
Advertising costs 478,109 426,397 378,920
</TABLE>
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TRC Companies, Inc.
Form 10-K Exhibit Index
Fiscal Year Ended June 30, 1995
<TABLE>
<CAPTION>
Exhibit Sequential Page
Number Description Number
- ------- ------------------------------------------------ ---------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation, dated 17-22
November 18, 1994.
10.8.1 Amendment, dated June 23, 1995, to the Executive 22
Incentive Compensation Plan.
13 Annual Report to Shareholders for the Fiscal 23-44
Year Ended June 30, 1995.
21 Subsidiaries of the Registrant. 45
</TABLE>
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EXHIBIT 3.1
-----------
Restated Certificate of Incorporation
dated November 18, 1994
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RESTATED CERTIFICATE OF
INCORPORATION OF
TRC COMPANIES, INC.
Pursuant to Sections 242 and 245 of the General Corporation Law of the State of
Delaware, TRC Companies, Inc. originally incorporated on February 20, 1969 as
Vast Inc., whose name was changed to TRC Companies, Inc. in 1976, hereby
certifies that this Restated Certificate of Incorporation restates and
integrates the provisions of the Company's Certificate of Incorporation as
amended, and further amends Article Fourth of said Certificate of Incorporation
and was adopted by the Board of Directors and stockholders of the Company.
FIRST: The name of the Corporation is TRC Companies, Inc.
SECOND: The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
The name of its registered agent at that address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is Thirty Million Five Hundred Thousand (30,500,000) shares,
consisting of a class of Five Hundred Thousand (500,000) shares of Preferred
Stock, par value $.10 per share ("Preferred Stock"), and a class of Thirty
Million (30,000,000) shares of Common Stock, par value $.10 per share ("Common
Stock").
FIFTH: The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of the capital stock of the Corporation are
as follows:
A. Preferred Stock
---------------
1. Subject to the provisions of this Certificate of Incorporation,
authority is hereby expressly granted to and vested in the Board
of Directors, to the extent permitted by and upon compliance with
the provisions set forth in the laws of the State of Delaware, to
issue the shares of Preferred Stock from time to time in one or
more series, each series to have such voting powers, designations,
preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions
thereof, as shall be determined and stated prior to the issuance
of any shares of any such series by and in a resolution or
resolutions of the Board of Directors authorizing the issuance of
such series, including without limitation:
(a) The number of shares to constitute such series and the
distinctive designation thereof;
(b) The dividend rate or rates to which the shares of such series
shall be entitled and whether dividends shall be cumulative
and, if so, the date or dates from which dividends shall
accumulate, and the dates on which dividends, if declared,
shall be payable;
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(c) Whether the shares of such series shall be redeemable, the
limitations and restrictions in respect of such redemptions,
the manner of selecting shares of such series for redemption
if less than all shares are to be redeemed, and the amount
per share, including the premium, if any, which the holders
of shares of such series shall be entitled to receive upon
the redemption thereof, which amount may vary at different
redemption dates and may be different in respect of shares
redeemed through the operation of any retirement or sinking
fund and in respect of shares otherwise redeemed;
(d) The amount payable with respect to shares of such series in
the event of any voluntary or involuntary dissolution,
liquidation and winding-up of the Corporation;
(e) Whether the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund and, if
so, whether such fund shall be cumulative or non-cumulative,
the extent to and the manner in which such fund shall be
applied to the purchase or redemption of the shares of
such series for retirement or for other corporate purposes,
and the terms and provisions in respect of the operation
thereof;
(f) Whether the shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other class or
series thereof or of any other series of the same class, and
if so convertible or exchangeable, the price or prices or
the rate or rates of conversion or exchange and the method,
if any, of adjusting the same;
(g) The voting powers, if any, of the shares of such series in
addition to the voting powers provided by law; and
(h) Any other rights, preferences, limitations or restrictions
not inconsistent with law or the provisions of this
Certificate of Incorporation.
2. All shares of any one series of Preferred Stock shall be identical
and of equal rank with each other in all respects, except that in
respect of any series entitled to cumulative dividends, shares of
such series issued at different times may differ as to the dates
from which such dividends shall be cumulative. All shares of all
series of Preferred Stock shall be issued for a consideration of
at least ten cents ($0.10) per share.
3. The holders of outstanding shares of every series of Preferred
Stock shall be entitled to receive out of funds of the
Corporation, at the time legally available for the declaration of
dividends, but only when declared by the Board of Directors,
dividends in such amounts and payable at such time or times as
shall be fixed and determined by the Board of Directors in the
resolution providing for the issuance of the series of Preferred
Stock of which such shares are a part. In no event shall any
dividend whatsoever be declared or paid on the shares of Common
Stock of the Corporation unless and until the current dividend on
the shares of Preferred Stock, and all declared but unpaid
dividends and any accumulated dividends thereon, shall have been
paid.
4. In the event of any voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation, the holders of the
shares of Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to its
shareholders,
-19-
<PAGE>
whether from capital, surplus or earnings, such amounts per share
as shall be fixed and determined by the Board of Directors in the
resolution providing for the issuance of the series of Preferred
Stock of which such shares are a part, before any distribution of
the assets shall be made to the holders of the shares of Common
Stock, but shall be entitled to no further distribution. If, upon
any such dissolution, liquidation or winding-up of the
Corporation, the assets thus distributable among the holders of
the shares of Preferred Stock shall be insufficient to permit
payment in full to the holders of each series of Preferred Stock
of the respective preferential amounts fixed and determined as
aforesaid, then the entire assets of the Corporation thus
distributable shall be distributed ratably among them in
proportion to the amount so payable upon the shares of Preferred
Stock held by them, respectively. A consolidation or merger of the
Corporation with or into any other corporation shall not be deemed
to constitute a dissolution, liquidation or winding-up of the
Corporation within the meaning of this paragraph.
B. Common Stock
------------
1. After all dividends shall have been paid, or declared and set
apart for payment, upon the outstanding shares of Preferred Stock
and after redemptions of shares of Preferred Stock required to be
made previous thereto shall have been effected, and after making
any such further provision for working capital and for reserves
for any purpose as the Board of Directors of the Corporation may
deem advisable, and provided that there is no violation or default
existing in any of the terms and provisions of this Certificate of
Incorporation insofar as the same relates to the shares of
Preferred Stock, the holders of the shares of Common Stock of the
Corporation shall be entitled to receive, pro rata to the
exclusion of the holders of the shares of Preferred Stock, such
dividends as, from time to time, may be declared by the Board of
Directors.
2. In the event of any dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, after payment in
full of the respective amounts hereinbefore stated to be payable
in respect of the shares of Preferred Stock, the holders of the
shares of Common Stock shall be entitled to the exclusion of the
holders of the shares of Preferred Stock, to share, pro rata, in
all the remaining assets of the Corporation available for
distribution to the shareholders.
3. Except as otherwise provided by law or by the terms of any
resolution of the Board of Directors providing for the issuance of
shares of any series of Preferred Stock, the entire voting power
for the election of directors and for all other purposes shall be
vested exclusively in the holders of the Common Stock. Each share
of Common Stock shall be entitled to one vote on all matters.
C. Preemptive Rights
-----------------
No holder of any shares of any class or series of capital stock of the
Corporation shall have any preemptive right or be entitled as a matter
of right to subscribe for or to acquire any other shares or securities
of any class or series of the Corporation, whether now or hereafter
authorized, which at any time may be issued by the Corporation.
SIXTH: The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
-20-
<PAGE>
A. The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the Bylaws of the
Corporation.
B. Election of directors need not be by written ballot unless the Bylaws
so provide.
C. In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the statutes of Delaware, this Certificate of
Incorporation, and any Bylaws adopted by the stockholders; provided,
however, that no Bylaws hereinafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid
if such Bylaw had not been adopted.
SEVENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein upon
stockholders, directors and officers are subject to this reservation.
EIGHTH: Each director of the Corporation shall be personally liable to the
Corporation or any of its shareholders, if at all, for monetary damages for
breach of a fiduciary duty as a director only for: (a) any breach of the
director's duty of loyalty to the Corporation or its shareholders; (b) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (c) acts covered under Section 174 of the Delaware General
Corporation Law, or (d) for any transaction from which the director derives
improper personal benefit.
IN WITNESS WHEREOF
/s/ Vincent A. Rocco
----------------------------------
Chairman of the Board of Directors
Attest:
/s/ John H. Claussen
- --------------------------------
Secretary
State of Connecticut :
ss. Windsor
County of Hartford :
On the 21st day of November, 1994, before me personally appeared Vincent A.
Rocco and John H. Claussen to me known and known to me to be the persons who
executed the foregoing instrument in the capacities indicated, and they have
represented that they are executing such instrument with full authority to do so
on behalf of TRC Companies, Inc.
/s/ Anne W. Green
------------------------------------
Notary Public
-21-
<PAGE>
EXHIBIT 10.8.1
--------------
TRC COMPANIES, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN FOR FISCAL 1996,
AS ADOPTED JUNE 23, 1995
At the meeting of the Company's Board of Directors held June 23, 1995,
the following amendment to the Executive Incentive Compensation Plan regarding
the Incentive Pool for fiscal 1996 was adopted:
The amount of the fiscal 1996 Incentive Pool shall depend on the
extent to which the Company's consolidated operating income for fiscal 1996
exceeds 60% of targeted operating income, as set forth in the Company's fiscal
1996 business plan. The Incentive Pool shall equal the sum of (a) up to
$300,000 if actual operating income exceeds 60%, but is not greater than 100% of
targeted operating income, (b) 30% of the amount by which actual operating
income exceeds 100% of targeted operating income, but not by more than 125% of
targeted operating income, and 12% of the amount by which actual operating
income exceeds 125% of targeted operating income. To the extent that an
Incentive Pool is established for fiscal 1996, it will be calculated in
connection with the audit of the Company's fiscal 1996 consolidated financial
statements and distributed by the Board of Directors' Compensation Committee in
accordance with the terms of the plan.
-22-
<PAGE>
EXHIBIT 13
----------
Annual Report to Shareholders for the fiscal year ended June 30, 1995.
(Only those portions expressly incorporated by reference
are deemed to be filed herewith).
-23-
<PAGE>
TRC COMPANIES, INC. 1995 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the years ended June 30, 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenue $93,013,053 $81,657,681 $67,826,529
Net service revenue 71,812,673 61,002,579 51,898,917
Costs related to disposed business -- -- 4,148,596
Income (loss) from operations 8,457,540 3,791,660 (3,997,420)
Net income (loss) $ 4,421,065 $ 2,143,463 $(2,898,376)
Earnings (loss) per common share $.61 $.32 $(.45)
Working capital $24,968,251 $25,963,093 $22,919,869
Current ratio 2.9 to 1 3.1 to 1 3.2 to 1
Debt to total capitalization 27.1% 34.7% 2.3%
Return on equity 10.0% 5.7% (8.5)%
Book value per share $6.56 $5.94 $5.17
Common shareholders 2,600 2,500 2,100
Common shares outstanding 7,089,552 7,071,636 6,496,965
Employees 823 830 735
-------------------------------------------
</TABLE>
-24-
<PAGE>
SELECTED FINANCIAL DATA
TRC Companies, Inc. and subsidiaries
In thousands (except per share data)
<TABLE>
<CAPTION>
For the years ended June 30, 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross revenue $93,013 $81,658 $67,827 $60,332 $50,296
Less subcontractor costs and
direct charges 21,200 20,655 15,928 14,265 13,129
-------------------------------------------
Net service revenue 71,813 61,003 51,899 46,067 37,167
-------------------------------------------
Operating costs and expenses:
Salaries and other direct costs
of services 56,353 51,039 46,554 36,539 29,226
General and administrative
expenses 3,965 3,738 3,292 2,656 2,681
Depreciation and amortization 3,037 2,434 1,901 1,405 1,177
Costs related to disposed
business -- -- 4,149 -- --
-------------------------------------------
63,355 57,211 55,896 40,600 33,084
-------------------------------------------
Income (loss) from operations 8,458 3,792 (3,997) 5,467 4,083
Interest expense 1,399 466 71 92 157
Other income, net (15) (58) (86) (221) (289)
-------------------------------------------
Income (loss) before taxes 7,074 3,384 (3,982) 5,596 4,215
Federal and state income tax
provision (benefit) 2,653 1,241 (1,084) 1,620 740
-------------------------------------------
Net income (loss) $4,421 $2,143 $(2,898) $3,976 $3,475
-------------------------------------------
Earnings (loss) per common share $.61 $.32 $(.45) $.62 $.58
-------------------------------------------
Weighted average number of common
and common equivalent shares
outstanding 7,208 6,789 6,462 6,365 6,009
-------------------------------------------
Cash dividends declared None None None None None
-------------------------------------------
Balance Sheet at June 30,
Total assets $73,815 $75,951 $46,477 $43,623 $34,155
-------------------------------------------
Long-term debt $17,200 $22,080 $140 $420 $1,000
-------------------------------------------
Shareholders' equity $46,538 $41,984 $33,607 $34,771 $27,810
-------------------------------------------
</TABLE>
Revenue and Earnings by Quarter (Unaudited)
<TABLE>
<CAPTION>
In thousands (except per share data) 1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Gross revenue $23,093 $25,203 $22,381 $22,337
Net service revenue 18,364 18,050 17,601 17,797
Income from operations 2,130 2,249 2,001 2,074
Income before taxes 1,740 1,884 1,677 1,773
Net income $ 1,061 $ 1,149 $ 1,077 $ 1,134
Earnings per common share $ .15 $ .16 $ .15 $ .16
-----------------------------------
1994
Gross revenue $17,603 $19,119 $20,355 $24,581
Net service revenue 13,278 13,759 14,972 18,993
Income (loss) from operations 875 1,088 (98) 1,928
Income (loss) before taxes 881 1,087 (131) 1,547
Net income (loss) $ 556 $ 688 $ (90) $ 990
Earnings (loss) per common share $ .08 $ .10 $ (.01) $ .14
-----------------------------------
</TABLE>
-25-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
The following discussion should be read in conjunction with the Selected
Financial Data, the Consolidated Financial Statements and related Notes to
the Consolidated Financial Statements.
Overview
TRC Companies, Inc. is an international environmental engineering and consulting
company with a premier reputation for expertise in all areas of air quality and
solid and hazardous waste management as well as regulatory compliance and
permitting, water resources engineering, air pollution engineering, risk
assessment, pollution prevention, civil engineering, process engineering and the
development of strategic plans for environmental issues. The Company is one of
the largest air pollution engineering companies in the nation and provides
innovative approaches to solid and hazardous waste management.
Significant recent events in the development of the Company's business include:
(i) the acquisition in March 1994, of the assets of Environmental Solutions,
Inc. of Irvine, California, a firm providing a broad range of solid and
hazardous waste engineering and consulting services, specializing in remedial
design and construction management; and (ii) the acquisition in May 1994, of the
capital stock of Mariah Associates, Inc. of Laramie, Wyoming, a full-service
environmental consulting firm serving primarily the western states with a focus
on cultural resource consulting and environmental impact statements. The
acquisition of Environmental Solutions, Inc. was treated as a purchase for
accounting purposes and Mariah was accounted for as a pooling-of-interests.
Accordingly, the Company's consolidated financial statements have been restated
to include the financial results of Mariah.
The Company believes that it is strongly positioned as a provider of air
pollution control, pollution prevention and solid and hazardous waste
engineering and consulting services. Over the next several years, the Company
anticipates an increase in the demand for its highly specialized air pollution
engineering and consulting services as industry complies with the requirements
of the Clean Air Act Amendments of 1990. In addition, TRC Environmental
Solutions, Inc. will increase the Company's revenue from solid and hazardous
waste services in the United States and internationally. Historically, the
Company has realized a significant amount of its revenue from federal government
agencies. However, future levels of government business will be dependent upon
the Company's selectivity in bidding on government projects coupled with the
strategy to reduce its dependence on government contracts, and its success in
procuring contract awards.
-26-
<PAGE>
Results of Operations
The Company, in the course of providing its services, routinely subcontracts
drilling, laboratory analyses and other specialized services. These costs are
passed directly through to clients and, in accordance with industry practice,
are included in gross revenue. Because subcontractor costs and direct charges
can vary significantly from project to project, the change in gross revenue is
not necessarily a true indication of business trends. Accordingly, the Company
considers net service revenue, which is gross revenue less subcontractor costs
and direct charges, as its primary measure of revenue growth.
The following table presents the percentage relationships of certain items in
the consolidated statements of operations to net service revenue:
<TABLE>
<CAPTION>
Years ended June 30, 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net service revenue 100.0% 100.0% 100.0%
-------------------------------------
Operating costs and expenses:
Salaries and other direct costs
of services 78.5 83.7 89.7
General and administrative expenses 5.5 6.1 6.3
Depreciation and amortization 4.2 4.0 3.7
Costs related to disposed business -- -- 8.0
-------------------------------------
Income (loss) from operations 11.8 6.2 (7.7)
Interest expense 1.9 .8 .1
Other income, net -- (.1) (.1)
-------------------------------------
Income (loss) before taxes 9.9 5.5 (7.7)
Federal and state income tax
provision (benefit) 3.7 2.0 (2.1)
-------------------------------------
Net income (loss) 6.2 3.5 (5.6)
-------------------------------------
</TABLE>
1995 Compared to 1994
Net service revenue increased by 17.7% in fiscal 1995 to $71.8 million, from $61
million in fiscal 1994. This increase resulted primarily from the additional
revenue from TRC Environmental Solutions, Inc. which was acquired in March 1994,
and to an increase in revenue from commercial air pollution engineering
services, significantly offset by lower revenue from contracts with the U.S.
Environmental Protection Agency (EPA) and other federal government agencies.
Revenue derived from contracts with the federal government decreased in fiscal
1995 by 41.6% or $7.9 million, as compared to fiscal 1994, as the Company
implemented its strategy to reduce the federal government component of its
business. As a result, the percentage of net service revenue from the federal
government decreased to 15% in fiscal 1995, compared to 31% last year.
-27-
<PAGE>
Salaries and other direct costs of services increased by 10.4% or $5.3 million
in fiscal 1995, as compared to fiscal 1994, primarily due to the inclusion of
the additional costs from TRC Environmental Solutions, Inc. However, as a
percentage of net service revenue these costs decreased to 78.5%, from 83.7%
last year. This improvement was primarily due to achieving higher net revenue
per labor dollar and lower operating expenses resulting from cost reduction
efforts.
General and administrative expenses increased by 6.1% in fiscal 1995, as
compared to fiscal 1994. This increase was primarily due to the additional
costs from TRC Environmental Solutions, Inc., offset by cost reductions.
Depreciation and amortization expense increased by 24.8% in fiscal 1995, as
compared to fiscal 1994. This increase was primarily due to the additional
amortization of costs in excess of the net assets acquired in connection with
the acquisition of Environmental Solutions, Inc.
Income from operations increased by 123.1% to $8.5 million, from $3.8 million
in fiscal 1994. The increase in income from operations resulted primarily from
the inclusion of the results of TRC Environmental Solutions, Inc. for the
entire fiscal year, improved operating performance from air pollution and
other services and the reduction in operating costs as a percentage of net
service revenue.
Interest expense increased in fiscal 1995 to $1.4 million, from $.5 million
last year, primarily due to the interest expense on the long-term debt issued
in connection with the acquisition of Environmental Solutions, Inc.
The federal and state income tax provision was 37.5% of income before taxes, as
compared to 36.7% in fiscal 1994. The higher rate in fiscal 1995 results
primarily from higher state income taxes. The Company provides for income taxes
in accordance with the provisions of Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes, and believes that there will be sufficient
taxable income in the carryforward periods to enable utilization of the deferred
income tax benefits.
1994 Compared to 1993
Net service revenue increased by 17.5% in fiscal 1994 to $61 million, from $51.9
million in fiscal 1993. This increase was primarily from the additional revenue
from TRC Environmental Solutions, Inc. which was acquired in March 1994, and to
an increase in revenue from commercial air pollution engineering services,
partially offset by lower revenue from contracts with the U.S. Environmental
Protection Agency and other federal government agencies. Revenue derived from
federal government contracts decreased in fiscal 1994 by 17.5% or $4 million, as
compared to fiscal 1993.
-28-
<PAGE>
Salaries and other direct costs of services increased by 9.6% or $4.5 million,
in fiscal 1994, as compared to fiscal 1993, primarily due to the inclusion of
the additional costs from TRC Environmental Solutions, Inc. However, as
percentage of net service revenue, these costs decreased to 83.7%, from 89.7% in
fiscal 1993. This decrease was primarily due to reduced operating costs
resulting from the fiscal 1993 cost reduction efforts that included staff
reductions and the closing of certain offices.
General and administrative expenses increased by 13.5% in fiscal 1994, as
compared to fiscal 1993. This increase resulted from costs related to the
acquisition of Mariah Associates, Inc., which was completed in May 1994, and
to the increased costs of salaries and related costs.
Depreciation and amortization expense increased by 28% in fiscal 1994, as
compared to fiscal 1993. This increase was primarily due to the additional
depreciation expense on equipment acquired in fiscal 1994 and 1993 to support
the Company's growth, and to the additional amortization of costs in excess of
the net assets of acquired businesses.
In fiscal 1994 the Company reported income from operations of $3.8 million, as
compared to a loss of $4 million in fiscal 1993. The loss in fiscal 1993 was a
direct result of the charges incurred related to the disposed laboratory
business and the recording of restructuring costs related to reductions in staff
and the closing of certain offices. The income from operations in fiscal 1994
resulted from the increase in net service revenue, an improvement in staff
utilization and the reduction in operating costs as a percentage of net service
revenue.
Interest expense increased in fiscal 1994 to $466,157, from $70,479 in fiscal
1993. This increase was due to the additional interest expense on the $14
million three-year 5.75% subordinated note issued in connection with the
acquisition of Environmental Solutions, Inc. and bank borrowings pursuant to the
Company's revolving credit agreement.
The federal and state income tax provision (benefit) was 36.7% of income before
taxes, as compared to (27.2)% in fiscal 1993. The Company provides for income
taxes in accordance with the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, and believes that there will be
sufficient taxable income in the carryforward periods to enable utilization of
the deferred tax benefits. (See Note 6 to the Consolidated Financial
Statements).
Impact of Inflation
The Company's operations have not been materially affected by inflation or
changing prices because of the short-term nature of many of its contracts, and
most contracts of a longer term are subject to adjustment or have been priced
to cover anticipated increases in labor and other costs.
-29-
<PAGE>
Liquidity and Capital Resources
Working capital was $25 million at June 30, 1995, as compared to $26 million at
June 30, 1994. The decrease is primarily due to the increase in the current
portion of the long-term debt related to the acquisition of Environmental
Solutions, Inc., partially offset by the working capital provided by operations.
The Company has available a $35 million, unsecured revolving credit agreement
with a commercial bank through December 31, 2001. At June 30, 1995, outstanding
borrowings under this agreement were $5.2 million. The amount outstanding has
been classified as long-term in accordance with the Company's intention and
ability to refinance the obligation on a long-term basis. In addition, the
Company had standby letters of credit outstanding totaling $1 million which
reduce available borrowings under the agreement. In conjunction with the
acquisition of Environmental Solutions, Inc., the Company issued a $14 million
three-year 5.75% subordinated note in March 1994, of which $12 million remained
outstanding at June 30, 1995. The Company made capital expenditures of $1.3
million in fiscal 1995, and expects to make capital expenditures of
approximately $1.2 million in fiscal 1996. The Company believes that cash
generated from operations, the cash on hand at June 30, 1995 and available
borrowings under the revolving credit agreement will be sufficient to meet the
Company's cash requirements in fiscal 1996.
-30-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
TRC Companies, Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the years ended June 30, 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenue $93,013,053 $81,657,681 $67,826,529
Less subcontractor costs and
direct charges 21,200,380 20,655,102 15,927,612
--------------------------------------------
Net service revenue 71,812,673 61,002,579 51,898,917
--------------------------------------------
Operating costs and expenses:
Salaries and other direct
costs of services 56,353,248 51,038,769 46,553,703
General and administrative
expenses 3,964,625 3,738,434 3,292,431
Depreciation and amortization 3,037,260 2,433,716 1,901,607
Costs related to disposed business -- -- 4,148,596
--------------------------------------------
63,355,133 57,210,919 55,896,337
--------------------------------------------
Income (loss) from operations 8,457,540 3,791,660 (3,997,420)
Interest expense 1,399,288 466,157 70,479
Other income, net (15,813) (58,842) (86,223)
--------------------------------------------
Income (loss) before taxes 7,074,065 3,384,345 (3,981,676)
Federal and state income tax
provision (benefit) 2,653,000 1,240,882 (1,083,300)
--------------------------------------------
Net income (loss) $ 4,421,065 $ 2,143,463 $(2,898,376)
--------------------------------------------
Earnings (loss) per common share $.61 $.32 $(.45)
--------------------------------------------
Weighted average number of common
and common equivalent shares
outstanding 7,207,650 6,789,355 6,462,286
--------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
-31-
<PAGE>
CONSOLIDATED BALANCE SHEETS
TRC Companies, Inc. and Subsidiaries
<TABLE>
<CAPTION>
As of June 30, 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,180,764 $ 2,244,144
Accounts receivable, less allowance
for doubtful accounts 32,306,865 32,395,013
Inventories 1,930,379 1,718,130
Deferred income tax benefits 1,164,702 1,397,702
Prepaid expenses and other current
assets 398,187 661,967
------------------------------
37,980,897 38,416,956
------------------------------
Property and equipment:
Furniture and equipment 17,778,808 17,252,449
Leasehold improvements 1,321,944 1,186,179
Construction in progress 339,419 102,000
------------------------------
19,440,171 18,540,628
Less accumulated depreciation
and amortization 12,093,880 10,281,785
------------------------------
7,346,291 8,258,843
------------------------------
Costs in excess of net assets of acquired
businesses, net of accumulated amortization
of $1,719,652 and $791,902, respectively 27,752,208 28,554,959
------------------------------
Other assets 735,232 720,242
------------------------------
$73,814,628 $75,951,000
------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 5,000,000 $ 2,000,000
Accounts payable 2,989,020 2,859,540
Accrued compensation and benefits 2,930,930 3,431,441
Income taxes payable 591,145 778,102
Accrued costs related to disposed
business 37,492 974,963
Current maturities of capitalized
lease obligations 64,649 177,179
Other accrued liabilities 1,399,410 2,232,638
------------------------------
13,012,646 12,453,863
------------------------------
Non-current liabilities:
Long-term debt 12,200,000 20,080,000
Capitalized lease obligations,
less current maturities 15,798 79,917
Accrued lease obligations 234,491 327,045
Deferred income taxes 1,813,610 1,026,610
------------------------------
14,263,899 21,513,572
------------------------------
Contingencies and commitments
(Notes 3, 7 and 10)
Shareholders' equity:
Capital stock:
Preferred, $.10 par value; 500,000
shares authorized, none issued -- --
Common, $.10 par value; 30,000,000
shares authorized, 7,259,205 and
7,241,289 shares issued at June
30, 1995 and 1994, respectively 725,920 724,129
Additional paid-in capital 37,855,092 37,723,430
Retained earnings 8,735,297 4,314,232
------------------------------
47,316,309 42,761,791
Less treasury stock, at cost 778,226 778,226
------------------------------
46,538,083 41,983,565
------------------------------
$73,814,628 $75,951,000
------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
-32-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
TRC Companies, Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the years ended June 30, 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $4,421,065 $2,143,463 $(2,898,376)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,037,260 2,433,716 1,743,682
Change in deferred taxes and other
non-cash items 927,446 271,826 66,850
Changes in assets and liabilities,
net of effects from acquisitions:
Accounts receivable 88,148 (5,867,871) (438,226)
Inventories (212,249) 1,836 37,675
Prepaid expenses and other
current assets 263,780 78,662 228,664
Accounts payable 129,480 (677,748) 320,134
Accrued compensation and benefits (500,511) (244,149) 79,159
Income taxes (172,957) 1,703,719 (1,712,783)
Accrued costs related to disposed
business (937,471) (1,820,697) 2,795,660
Other accrued liabilities (833,228) (1,367,163) 254,766
--------------------------------------
Net cash provided by (used in)
operating activities 6,210,763 (3,344,406) 477,205
--------------------------------------
Cash flows from investing activities:
Additions to property and equipment (1,283,547) (2,140,396) (1,594,543)
Acquisition of businesses, net of
cash acquired (100,000) (4,847,871) (395,182)
Disposal of equipment, net 148,440 54,199 65,874
Decrease (increase) in other assets (76,840) 20,340 5,575
--------------------------------------
Net cash used in investing activities (1,311,947) (6,913,728) (1,918,276)
--------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) on
long-term debt (4,880,000) 7,730,000 109,105
Proceeds from exercise of stock
options 94,453 251,662 368,554
Principal repayments under
capitalized lease obligations (176,649) (149,188) (57,613)
--------------------------------------
Net cash provided by (used in)
financing activities (4,962,196) 7,832,474 420,046
--------------------------------------
Decrease in cash and cash equivalents (63,380) (2,425,660) (1,021,025)
Cash and cash equivalents, beginning
of year 2,244,144 4,669,804 5,690,829
--------------------------------------
Cash and cash equivalents, end of year $2,180,764 $2,244,144 $4,669,804
--------------------------------------
Supplemental cash flow information:
Interest paid $1,384,156 $ 414,413 $ 58,459
Income taxes paid (refunded) 1,807,279 (631,773) 549,158
--------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
-33-
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
TRC Companies, Inc. and Subsidiaries
For the years ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common stock issued Treasury stock
--------------------- ---------------------
Additional
Number paid-in Retained Number
of shares Amount capital earnings of shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, June 30, 1992 6,458,311 $645,831 $29,834,649 $5,069,145 169,653 $(778,226)
Exercise of stock options 73,543 7,354 361,200 -- -- --
Income tax benefit from stock
option transactions -- -- 85,342 -- -- --
Issuance of common stock in
connection with
business acquired 78,426 7,843 992,157 -- -- --
Conversion of 9.95%
convertible subordinated
promissory notes into
common stock 56,338 5,634 274,366 -- -- --
Net loss -- -- -- (2,898,376) -- --
--------------------------------------------------------------------
Balances, June 30, 1993 6,666,618 666,662 31,547,714 2,170,769 169,653 (778,226)
Exercise of stock options 40,238 4,024 247,638 -- -- --
Income tax benefit from stock
option transactions -- -- 35,325 -- -- --
Issuance of common stock in
connection with businesses
acquired 506,265 50,626 5,419,084 -- -- --
Conversion of 9.95%
convertible subordinated
promissory notes into
common stock 28,168 2,817 137,183 -- -- --
Compensation related to stock
incentive plan -- -- 336,486 -- -- --
Net income -- -- -- 2,143,463 -- --
--------------------------------------------------------------------
Balances, June 30, 1994 7,241,289 724,129 37,723,430 4,314,232 169,653 (778,226)
Exercise of stock options 15,582 1,558 92,895 -- -- --
Income tax benefit from
stock option transactions -- -- 14,000 -- -- --
Issuance of common stock
in connection with
businesses acquired 2,334 233 24,767 -- -- --
Net income -- -- -- 4,421,065 -- --
--------------------------------------------------------------------
Balances, June 30, 1995 7,259,205 $725,920 $37,855,092 $8,735,297 169,653 $(778,226)
--------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
-34-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRC Companies, Inc. and Subsidiaries
1. ACCOUNTING POLICIES
A. The consolidated financial statements include the Company and its
wholly-owned subsidiaries, after elimination of intercompany accounts and
transactions.
B. Property and equipment are stated on the basis of cost, including
costs which bring the equipment into operation. Major improvements and
betterments to existing equipment are capitalized. Maintenance and repairs are
charged to expense as incurred.
The Company provides for depreciation of property and equipment on
the straight-line method using estimated useful lives of 3 to 10 years.
Accelerated methods are used for income tax purposes.
C. Leasehold improvements are amortized over the lives of the various
leases or the useful lives of the improvements, whichever is shorter.
D. Revenue on engineering and consulting contracts is recognized as the
services are performed and the related costs are incurred. Revenue is recognized
from sales of instruments when the product is shipped.
The Company makes revisions in its cost estimates as required during
the course of performing contracts; the impact of such revisions is reflected
in the accounting periods in which the relevant facts become known.
E. The Company provides for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statements carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
effect for the years in which the differences are expected to reverse.
F. Earnings per common share are based upon the weighted average number
of common shares outstanding, and when dilutive, outstanding warrants and stock
options are included as common share equivalents using the treasury stock
method. Contingently issuable shares related to the acquisition of Environmental
Solutions, Inc. are not dilutive for purposes of computing fully diluted
earnings per share.
G. Research and development costs are charged to operations as incurred
and amounted to approximately $204,000, $338,000 and $241,000 in fiscal 1995,
1994 and 1993, respectively.
-35-
<PAGE>
H. Costs in excess of the fair value of net assets of acquired businesses
are primarily amortized over 30 years on a straight-line basis. The carrying
value of goodwill is assessed annually.
I. Inventories, other than inventoried costs relating to fixed price
contracts, are stated at the lower of cost or market, cost being determined
using the first-in, first-out (FIFO) method.
The components of inventories at June 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Materials and supplies $ 896,161 $ 633,064
Work-in-process 332,206 377,677
Finished goods 702,012 707,389
-----------------------------------
$1,930,379 $1,718,130
-----------------------------------
</TABLE>
J. The Company has 401(k) savings plans covering substantially all
employees. The Company's contributions to the plans were approximately $721,000,
$634,000 and $527,000 in fiscal 1995, 1994 and 1993, respectively. The Company
does not have any employee benefit plans that provide post-retirement or post-
employment benefits.
K. Cash equivalents are stated at cost plus accrued interest, which
approximates market value. The Company considers investments with a maturity of
three months or less when purchased to be cash equivalents.
2. ACCOUNTS RECEIVABLE
Accounts receivable at June 30, 1995 and 1994 are comprised of the
following:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Amounts billed $25,263,291 $23,743,329
Unbilled costs 8,068,797 9,864,823
Retainage 674,777 574,861
-----------------------------------
34,006,865 34,183,013
Less allowance for doubtful accounts 1,700,000 1,788,000
-----------------------------------
$32,306,865 $32,395,013
-----------------------------------
</TABLE>
-36-
<PAGE>
Unbilled costs represent revenue which is not currently billable to the
client under the terms of the contract. Management expects that substantially
all unbilled costs will be billed and collected in the subsequent year.
Retainage represents amounts billed but not paid by the client which, pursuant
to the contract, are due upon completion and acceptance by the client.
Net service revenue from contracts with U.S. Government agencies amounted
to approximately $11,135,000, $19,062,000 and $23,098,000 in fiscal 1995, 1994
and 1993, respectively.
3. ACQUISITIONS
In March 1994, a wholly-owned subsidiary of the Company completed the
acquisition of substantially all of the business assets, liabilities and
obligations of Environmental Solutions, Inc., an environmental engineering
and consulting business. The purchase price included cash of $4,848,000 (net
of cash acquired), a $14,000,000 three-year 5.75% subordinated note and 459,770
shares of the Company's common stock valued at $5,000,000. The Company may
also be required to issue up to an additional 827,586 shares of common stock if
certain profit objectives are achieved over the four years ending February 28,
1998. The acquisition, which was effective as of the close of business on
February 28, 1994, has been accounted for using the purchase method of
accounting. The purchase price has been allocated to the assets and
liabilities of Environmental Solutions, Inc. based on their estimated fair
values as of the date of acquisition. The purchase price and expenses
associated with the acquisition resulted in costs in excess of the fair value
of the net assets acquired of approximately $23,287,000, which is being
amortized over 30 years on a straight-line basis.
The following unaudited pro forma summary presents the consolidated
results of operations as if the acquisition occurred at the beginning of the
years presented after giving effect to certain adjustments, including
amortization of costs in excess of the net assets acquired, increased interest
expense on acquisition debt, income tax effects and the increase in common
shares outstanding.
<TABLE>
<CAPTION>
1994 1993
---------------------------------
<S> <C> <C>
Net revenue $75,042,000 $70,178,000
---------------------------------
Net income (loss) 2,793,000 (2,291,000)
---------------------------------
Earnings (loss) per share $.39 $(.33)
---------------------------------
</TABLE>
The pro forma financial information does not purport to be indicative of the
results of operations that would have occurred had the transaction taken place
at the beginning of the periods presented or of future results of operations.
-37-
<PAGE>
4. COSTS RELATED TO DISPOSED BUSINESS
In August 1993, the Company entered into an agreement with the U.S.
Department of Justice to resolve all pending claims arising from the activities
of metaTRACE, Inc., its former analytical laboratory subsidiary. In
connection with the settlement, the Company agreed to refund $2,425,000 to the
government as the value of the laboratory services provided by metaTRACE but
not used by the government. In return, the government released the Company
from claims related to metaTRACE and terminated its investigation. The
settlement amount was paid to the government in three equal installments over a
one-year period. In fiscal 1993, the Company recognized charges related to the
disposed laboratory business totaling $4,148,596 ($.47 per share), which
included the amount payable to the government, defense and other costs of the
settlement and the write-off of its remaining accounts receivables.
5. LONG-TERM DEBT
Long-term debt at June 30, 1995 and 1994 is comprised of the following:
<TABLE>
<CAPTION>
1995 1994
---------------------------------------------------------------------------------
<S> <C> <C>
Note payable - revolving credit agreement $ 5,200,000 $ 8,080,000
5.75% subordinated note 12,000,000 14,000,000
---------------------------------
17,200,000 22,080,000
Less current portion 5,000,000 2,000,000
---------------------------------
$12,200,000 $20,080,000
---------------------------------
</TABLE>
The Company has a revolving credit agreement with a commercial bank which
provides an unsecured line of credit of up to $35,000,000 through December 31,
2001, with interest at the lower of the bank's base rate or the Eurodollar rate
plus 1%. The Company pays a commitment fee of 1/4% on the unused portion of the
line. The agreement provides that, at the option of the Company, the principal
outstanding on December 31, 1997 may be converted into a four-year term loan
payable in sixteen equal quarterly installments. The agreement requires the
Company to meet certain financial ratios and levels of tangible net worth. The
Company was in compliance with these covenants at June 30, 1995. At June 30,
1995, borrowings outstanding under this agreement were $5,200,000 at an average
interest rate of 7.2%. The amount outstanding has been classified as long-term
debt in accordance with the Company's intention and ability to refinance such
obligation on a long-term basis. At June 30, 1995, the Company had outstanding
standby letters of credit related to contract performance totaling $1,000,000
which reduce available borrowings under the agreement.
The 5.75% subordinated note was issued in March 1994 in connection with the
Company's acquisition of Environmental Solutions, Inc. The remaining principal
on the note is payable in annual installments of $5,000,000 and $7,000,000 in
fiscal 1996 and 1997, respectively.
-38-
<PAGE>
6. FEDERAL AND STATE INCOME TAXES
The federal and state income tax provision (benefit) for fiscal 1995, 1994
and 1993 consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $1,116,480 $ 328,550 $ (837,807)
State 410,520 180,332 (195,493)
Deferred
Federal 987,000 801,000 (55,000)
State 139,000 (69,000) 5,000
----------------------------------------
$2,653,000 $1,240,882 $(1,083,300)
----------------------------------------
</TABLE>
Deferred income taxes represent the tax effect of transactions which are
reported in different periods for financial and tax reporting purposes.
Temporary differences and carryforwards which give rise to a significant portion
of deferred income tax benefits (liabilities) are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred income tax benefits:
Doubtful accounts and other accruals $ 619,875 $ 901,620 $ 724,060
Costs related to disposed business 14,250 331,500 1,073,720
Adjustment of inventories and contracts to tax basis 171,750 203,320 288,000
Other, net 358,827 (38,738) 377,922
----------------------------------------
$ 1,164,702 $ 1,397,702 $ 2,463,702
----------------------------------------
Deferred income tax liabilities:
Depreciation and amortization $(1,265,250) $(1,040,400) $(1,191,280)
Accrued lease obligations 122,625 175,100 221,240
Other, net (670,985) (161,310) (940,570)
----------------------------------------
$(1,813,610) $(1,026,610) $(1,910,610)
----------------------------------------
</TABLE>
A reconciliation of the federal statutory and the effective income tax rates
follows:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% (34.0)%
Other current provision -- -- 11.1
State taxes, net of federal tax benefit 5.2 3.3 (1.8)
Other, net (1.7) (0.6) (2.5)
-------------------------------
Effective income tax rate 37.5% 36.7% (27.2)%
-------------------------------
</TABLE>
-39-
<PAGE>
7. LEASE COMMITMENTS
The Company has commitments at June 30, 1995 under noncancelable operating
leases primarily for office and warehouse space and for computer and office
equipment. Rental payments charged to operations in fiscal 1995, 1994 and 1993
were approximately $4,517,000, $4,157,000 and $3,886,000, respectively. Certain
leases for office and warehouse space require payments for expenses under
escalation clauses. The obligations under capital leases relate to certain
equipment included in property and equipment.
Minimum future lease obligations payable in future fiscal years are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year Ending June 30, Leases Leases
- ---------------------------------------------------------------------------
<S> <C> <C>
1996 $75,954 $ 4,680,000
1997 16,359 4,382,000
1998 --- 3,926,000
1999 --- 2,663,000
2000 --- 2,064,000
2001 and thereafter --- 1,708,000
--------------------------------
Total minimum lease payments 92,313 $19,423,000
------------
Less amount representing interest 11,866
-------
Capitalized lease obligations 80,447
Less current portion 64,649
-------
$15,798
-------
</TABLE>
8. CAPITAL STOCK
The authorized capital of the Company consists of 30,000,000 shares of
common stock, $.10 par value, and 500,000 shares of preferred stock, $.10 par
value.
In connection with the issuance of 9.95% convertible subordinated
promissory notes in 1986, the Company issued warrants to purchase 78,750 shares
of the Company's common stock at $4.97 per share. The warrants are exercisable
on or before June 30, 1997. The convertible notes were repaid or converted into
shares of the Company's common stock before the end of fiscal 1994.
9. STOCK OPTIONS
The Company's non-qualified stock option plan for employees, as amended,
authorizes the granting of options to purchase 1,743,500 common shares at no
less than the fair market value of the stock on the date such options are
granted. The exercisable option period is fixed by the Compensation Committee
of the Board of Directors at the time of grant, but does not exceed five years
and generally begins one year after the date of grant. No accounting
recognition is given to
-40-
<PAGE>
stock options until they are exercised, at which time the proceeds are credited
to the capital accounts. The Company receives a tax benefit upon exercise of
these options in an amount equal to the difference between the option price and
the fair market value of the common stock. Tax benefits related to stock
options are credited to additional paid-in capital when realized for financial
reporting purposes.
<TABLE>
<CAPTION>
For the years ended June 30, 1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding options, beginning of year 693,424 545,717 458,384
Granted 129,600 218,500 165,500
Exercised (15,582) (40,238) (73,543)
Canceled (35,131) (30,555) (4,624)
-------------------------------------------
Outstanding options, end of year 772,311 693,424 545,717
-------------------------------------------
Average price of options exercised
during the year $6.06 $6.25 $5.01
At end of year:
Exercise prices of outstanding options $5.75-$13.75 $5.75-$13.75 $4.50-$13.75
Average exercise price per share $9.36 $9.20 $9.45
Options exercisable at end of year 459,409 342,703 271,092
Options available for future grants 309,182 103,652 41,597
-------------------------------------------
</TABLE>
In connection with the acquisition of Environmental Solutions, Inc. in
fiscal 1994, the Company issued warrants to the employees to purchase 100,000
shares of common stock at $11 per share, under the same terms and conditions as
the employee stock option plan.
The Company also has an Outside Directors Stock Option Plan that provides
for the granting of options to directors of the Company who are not employees.
The plan currently authorizes the granting of options to purchase 50,000 shares
of the Company's common stock in accordance with a formula based upon Company
performance. During fiscal 1995, the Company granted options to purchase 6,000
shares exercisable during the next three years at an option price of $10 per
share.
10. CONTINGENCIES
The Company's contracts with the U.S. Government are subject to examination
and renegotiation. Contracts and other records of the Company have been examined
through June 30, 1991. The Company believes that adjustments resulting from such
examination or renegotiation proceedings, if any, will not have a significant
impact on the Company's financial condition or results of operations.
-41-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of TRC Companies, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in shareholders'
equity and of cash flows present fairly, in all material respects, the financial
position of TRC Companies, Inc. and its subsidiaries at June 30, 1995 and 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended June 30, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Hartford, Connecticut Price Waterhouse LLP
July 24, 1995
-42-
<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
One Financial Plaza
Hartford, Connecticut 06103
ANNUAL MEETING
The 1995 annual meeting of shareholders will be held on Friday, October 27,
1995 at 10:00 a.m., at the Company's executive offices.
FORM 10-K
A copy of the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission, Washington, D.C., is available without
charge by writing to:
TRC Companies, Inc.
5 Waterside Crossing
Windsor, CT 06095
Attn: Investor Relations
STOCK EXCHANGE, DIVIDEND AND MARKET INFORMATION
The Company's common stock is traded on the New York Stock Exchange under
the symbol "TRR". On August 25, 1995, the last reported sale price of the
common stock on the exchange was $8.375 per share.
To date the Company has not paid any cash dividends. The payment of
dividends in the future will be subject to the financial condition, capital
requirements and earnings of the Company. However, future earnings are
expected to be used for expansion of the Company's operations, and cash
dividends are not likely for the foreseeable future.
-43-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-K, June 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000103096
<NAME> TRC COMPANIES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 2,180,764
<SECURITIES> 0
<RECEIVABLES> 32,306,865
<ALLOWANCES> 0
<INVENTORY> 1,930,379
<CURRENT-ASSETS> 37,980,897
<PP&E> 19,440,171
<DEPRECIATION> 12,093,880
<TOTAL-ASSETS> 73,814,628
<CURRENT-LIABILITIES> 13,012,646
<BONDS> 0
<COMMON> 725,920
0
0
<OTHER-SE> 45,812,163
<TOTAL-LIABILITY-AND-EQUITY> 73,814,628
<SALES> 93,013,053
<TOTAL-REVENUES> 93,013,053
<CGS> 0
<TOTAL-COSTS> 84,555,513
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,399,288
<INCOME-PRETAX> 7,074,065
<INCOME-TAX> 2,653,000
<INCOME-CONTINUING> 4,421,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,421,065
<EPS-PRIMARY> .61
<EPS-DILUTED> 0
</TABLE>
