<PAGE>
===============================================================================
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, 1996 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 incorporation (I.R.S. Employer Identification
or organization) No.)
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 6, 1996, was approximately $23,138,000.
On September 6, 1996, there were 6,860,702 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 1996 Annual Report to Shareholders (Part II); and (2)
registrant's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held October 25, 1996 (Part III).
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1
<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 United 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 multi-disciplinary engineering firm assisting
industrial, utility and public sector clients to maximize the performance and
minimize the cost of manufacturing, energy generation and waste treatment
processes through pollution prevention and engineered solutions. A division of
the company also provides site/civil and transportation/traffic engineering
services that include the analyses of traffic conditions and development of
highway improvements.
2
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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
provide real-time measurement of 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 1996 was derived
from repeat business with existing clients.
For fiscal 1996, 1995 and 1994, the federal government (principally the U.S.
Environmental Protection Agency) accounted for 17%, 15% and 31%, 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, 1996, the Company's net contract backlog (excluding the estimated
costs of pass-through charges) was approximately $70 million, as compared to
approximately $75 million at June 30, 1995. The Company expects that
approximately 70% of this backlog will be completed in fiscal 1997. 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 canceled or delayed.
Employees
As of June 30, 1996, the Company had a total of 665 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 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.
3
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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 $283,000 in fiscal 1996, as
compared to approximately $204,000 in fiscal 1995 and $338,000 in fiscal 1994.
Environmental and Other Considerations
The Company does not believe that its own compliance with federal, state and
local laws and regulations relating to the protection of the environment will
have any material effect on 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 offices located
nationwide. The Company does not own any real estate and leases approximately
245,000 square feet of office and laboratory space to support these operations.
The Company owns substantially all of the analytical, chemical monitoring,
emissions 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.
4
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Item 3. Legal Proceedings
The Company and its subsidiaries are not a party to any pending legal
proceedings in which an adverse decision, in the opinion of the Company, would
have a material adverse effect upon the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
5
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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 28 of the Company's 1996 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 14 of the
Company's 1996 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 15 through 17 of the Company's 1996 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 18 through 27 of the
Company's 1996 Annual Report to Shareholders are incorporated herein by
reference:
Consolidated Statements of Operations, Cash Flows and Changes in
Shareholders' Equity - Years ended June 30, 1996, 1995 and 1994
Consolidated Balance Sheets - June 30, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Accountants, dated August 6, 1996
The supplementary data regarding quarterly results of operations is contained on
page 14 of the Company's 1996 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
None.
6
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PART III
Item 10. Directors and Executive Officers of the Registrant
Information on the Company's Directors and Executive Officers is contained on
pages 3 through 10 of the Company's Proxy Statement for its 1996 Annual Meeting
of Shareholders to be held October 25, 1996, 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 and 51 1979
Director
Bruce D. Cowen............. President and Director 43 1979
John H. Claussen........... Senior Vice President, General Counsel 47 1992
and Secretary,
formerly Managing Environmental
Counsel and
Manager - Remediation Programs for
General Electric
Company
Richard D. Ellison......... Senior Vice President and Chief 57 1994
Engineer,
President of TRC Environmental
Solutions, Inc.
Miro Knezevic.............. Executive Vice President of 46 1994
TRC Environmental Solutions, Inc.
Richard J. McGuire, Jr..... President of 52 1994
TRC Environmental Corporation, formerly
President of Mariah Associates, Inc.
Peter J. Russo............. Senior Vice President and Chief 50 1993
Financial Officer,
formerly Treasurer and Corporate
Controller for
Gerber Scientific, Inc.
</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 10 of
the Company's Proxy Statement for its Annual Meeting of Shareholders to be held
October 25, 1996, and such information is incorporated herein by reference.
7
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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 25, 1996, 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 12 of the Company's Proxy Statement for its Annual Meeting of Shareholders
to be held October 25, 1996 and such information is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedule 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 18 through 27 of the Company's 1996
Annual Report to Shareholders are incorporated by reference into this
report by Item 8 herein.
2. The Consolidated Financial Statement Schedule and Report of Independent
Accountants on such schedule are included in this report on the pages
indicated.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants on Financial Statement Schedule 11
Schedule II - Valuation and Qualifying Accounts 13
</TABLE>
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 1996.
(c) Exhibits
3.1 Restated Certificate of Incorporation, dated November 18, 1994,
incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1995.
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.
8
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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.
10.3.1 Amendment, dated August 6, 1996, to the Amended and Restated
Revolving Credit and Term Loan Agreement, by and among TRC
Companies, Inc. and its subsidiaries, The First National Bank of
Boston and BayBank, N.A.
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.
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 19, 1996, to the Executive Incentive
Compensation Plan.
13 Annual Report to Shareholders for the fiscal year ended June 30,
1996. (Only those portions expressly incorporated by reference are
deemed to be filed herewith.)
21 Subsidiaries of the Registrant.
27 Financial Data Schedule (for SEC purposes only).
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.
9
<PAGE>
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, 1996 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.
<TABLE>
<S> <C> <C>
/s/ Vincent A. Rocco Chairman, Chief Executive September 25, 1996
- ----------------------------------------------- Officer and Director
Vincent A. Rocco
/s/ Bruce D. Cowen President and Director September 25, 1996
- -----------------------------------------------
Bruce D. Cowen
/s/ Peter J. Russo Senior Vice President and Chief September 25, 1996
- ----------------------------------------------- Financial Officer (Principal
Peter J. Russo Financial and Accounting Officer)
/s/ Edward G. Jepsen Director September 25, 1996
- -----------------------------------------------
Edward G. Jepsen
/s/ Edward W. Large Director September 25, 1996
- -----------------------------------------------
Edward W. Large
/s/ J. Jeffrey McNealey Director September 25, 1996
- -----------------------------------------------
J. Jeffrey McNealey
</TABLE>
10
<PAGE>
Report of Independent Accountants on
Financial Statement Schedule
To the Shareholders and Board of Directors
of TRC Companies, Inc.
Our audits of the consolidated financial statements referred to in our report
dated August 6, 1996, appearing on page 27 of the 1996 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 Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
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
August 6, 1996
11
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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 August 6, 1996 appearing on page 27 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 Schedule, which appears on page 11 of this Form 10-K.
PRICE WATERHOUSE LLP
Hartford, Connecticut
September 25, 1996
12
<PAGE>
TRC Companies, Inc.
Schedule II - Valuation and Qualifying Accounts
For the Years Ended June 30, 1996, 1995 and 1994
<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>
1996
Allowance for doubtful
accounts $ 1,700,000 $ 2,660,000 $ - $ - $ (1,860,000) $ 2,500,000
------------ ------------ --------------- ------------------ -------------- -------------
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
------------ ------------ --------------- ------------------ -------------- -------------
</TABLE>
* Uncollectible accounts written off, net of recoveries.
13
<PAGE>
TRC Companies, Inc.
Form 10-K Exhibit Index
Fiscal Year Ended June 30, 1996
<TABLE>
<CAPTION>
Exhibit Sequential Page
Number Description Number
- ----------- ------------------------------------ ---------------------
<S> <C> <C>
10.3.1 Amendment, dated August 6, 1996, 15-21
to the Amended and Restated
Revolving Credit and Term Loan
Agreement, by and among TRC
Companies, Inc. and its
subsidiaries, The First National
Bank of Boston and BayBank, N.A.
10.8.1 Amendment, dated June 19, 1996, to
the Executive Incentive Compensation Plan. 22
13 Annual Report to Shareholders for 23-47
the Fiscal Year Ended June 30, 1996.
21 Subsidiaries of the Registrant. 48
27 Financial Data Schedule. 49
</TABLE>
14
<PAGE>
EXHIBIT 10.3.1
Amendment, dated August 6, 1996, to the Amended and Restated Revolving Credit
and Term Loan Agreement, by and among TRC Companies, Inc. and its subsidiaries,
The First National Bank of Boston and BayBank, N.A.
15
<PAGE>
THIRD AMENDMENT TO
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN
AGREEMENT (the "Third Amendment") is made and entered into as of the 6th day of
August, 1996, by and among TRC COMPANIES, INC., a Delaware corporation ("TRC"),
the subsidiaries of TRC identified on the signature pages hereto (the
"Subsidiaries" and together with TRC, the "Borrowers"), THE FIRST NATIONAL BANK
OF BOSTON ("FNBB"), a national banking association having its principal place of
business at 100 Federal Street, Boston, Massachusetts 02110, BAYBANK, N.A.
("BayBank", together with FNBB, the "Banks"), a national banking association
having its principal place of business at 175 Federal Street, Boston,
Massachusetts 02110, and FNBB as agent for the Banks (the "Agent").
WHEREAS, the Borrowers, the Agent and the Banks are parties to an Amended
and Restated Revolving Credit and Term Loan Agreement dated as of March 15,
1995, as amended August 30, 1995 and March 26, 1996 (the "Credit Agreement");
WHEREAS, the Agent, the Banks and the Borrowers have agreed to amend the
Credit Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without definition
-----------
have the meanings ascribed to them in the Credit Agreement.
2. Amendment to (S)1 of Credit Agreement. The definition of
--------------------------------------
"Consolidated Earnings Before Interest and Taxes" appearing in (S)1 the Credit
Agreement is amended by adding the following section (e) at the end thereof:
"and (e) up to $1,100,000 of special charges incurred in the
quarter ending March 31, 1996 relating to expenses for staff reductions,
selected office closures, excess lease costs and allowances for government
receivables and commercial inventories."
3. Amendment to (S)6.9 of the Credit Agreement. Section 6.9 of the
-------------------------------------------
Credit Agreement is hereby deleted in its entirety and the following substituted
in place thereof:
"(S)6.9. Interest Coverage. As at the end of any fiscal quarter, the
-------- --------
Borrowers will not permit the ratio of (a) Consolidated Earnings Before Interest
and Taxes for the four fiscal quarters ending on such date to (b) Interest
Expense for such period to be less than the stated ratio for the respective
periods set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
4/1/96 through 6/30/96 3.00:1
7/1/96 through 3/30/97 2.00:1
3/31/97 to 6/29/97 2.25:1
6/30/97 to 9/29/97 2.50:1
Thereafter 3.00:1."
</TABLE>
16
<PAGE>
4. Addition of (S)6.12 of the Credit Agreement. Section 6.12 of the
-------------------------------------------
Credit Agreement is hereby added to the Credit Agreement immediately following
(S)6.11 thereof, which (S)6.12 reads as follows:
"(S)6.12. Profitable Operations. Commencing with the fiscal quarter
---------------------
ending June 30, 1996, the Borrowers will not permit consolidated net income of
the Borrowers (determined in accordance with GAAP) to be less than $0 for any
two consecutive fiscal quarters."
5. Ratification, etc. Except as expressly amended hereby, the
------------------
Credit Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Third Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by the Third Amendment.
6. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND
--------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
7. Counterparts. This Third Amendment may be executed in any number
------------
of counterparts and by different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. Complete sets of counterparts shall be lodged with the Banks.
8. Representations and Warranties. The Borrowers hereby represent
------------------------------
and warrant to the Banks and the Agent that each of the representations and
warranties of the Borrowers contained in the Credit Agreement, the other Loan
Documents and in all other documents or instruments delivered pursuant to or in
connection with the Credit Agreement were true as of the date as of which they
were made and continue to be true at and as of the date hereof (except to the
extent of changes resulting from transactions contemplated or permitted by the
Credit Agreement as amended hereby and the other Loan Documents and changes
occurring in the ordinary course of business that singly or in the aggregate
have not been materially adverse, and to the extent that such representations
and warranties relate expressly to an earlier date).
9. Effectiveness. This Third Amendment shall become effective upon
--------------
satisfaction of each of the following conditions precedent:
(a) this Third Amendment shall have been executed and delivered by
the respective parties hereto; and
(b) the Agent shall have received from the Borrowers an amendment
fee of $5,000, such amendment fee to be shared pro rata by the Banks in
accordance with their respective Commitment Percentages.
10. ENTIRE AGREEMENT. THIS THIRD AMENDMENT AND THE CREDIT AGREEMENT
-----------------
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
17
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Amendment under seal as of the date set forth above.
TRC COMPANIES, INC.
By: /s/ Peter J. Russo
--------------------------------
Senior Vice President
Chief Financial Officer
MONITORING INSTRUMENTS FOR THE
ENVIRONMENT, INC.
By: /s/ Harold C. Elston, Jr.
--------------------------------
Treasurer
TRC ENVIRONMENTAL CORPORATION
By: /s/ Peter J. Russo
--------------------------------
Senior Vice President
Chief Financial Officer
TRC PROCESS ENGINEERING, INC.
By: /s/ Peter J. Russo
--------------------------------
Senior Vice President
Chief Financial Officer
TRC INVESTMENT CORPORATION
By: /s/ Harold C. Elston, Jr.
--------------------------------
Secretary and Treasurer
18
<PAGE>
NORTH AMERICAN WEATHER
CONSULTANTS
By: /s/ Peter J. Russo
--------------------------------
Senior Vice President
Chief Financial Officer
ENVIRONMENTAL SOLUTIONS, INC.
By: /s/ Harold C. Elston, Jr.
--------------------------------
Assistant Treasurer
TRC-MARIAH ASSOCIATES, INC.
By: /s/ Harold C. Elston, Jr.
--------------------------------
Assistant Treasurer
THE FIRST NATIONAL BANK OF BOSTON,
as Agent and individually
By: /s/ Arthur J. Oberheim
--------------------------------
Vice President
BAYBANK, N.A.
By: /s/ Kathleen S. Dobens
--------------------------------
Assistant Vice President
19
<PAGE>
EXHIBIT 10.8.1
TRC COMPANIES, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN FOR FISCAL 1997
AS ADOPTED JUNE 19, 1996
At the meeting of the Company's Board of Directors held June 19, 1996,
the following amendment to the Executive Incentive Compensation Plan regarding
the Incentive Pool for fiscal 1997 was adopted:
The amount of the fiscal 1997 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
1997 business plan. The Incentive Pool shall equal the sum of (a) up to
$250,000 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 1997 consolidated financial
statements and distributed by the Board of Directors' Compensation Committee in
accordance with the terms of the plan.
20
<PAGE>
EXHIBIT 13
Annual Report to Shareholders for the fiscal year ended June 30, 1996.
(Only those portions expressly incorporated by reference are deemed to be
filed herewith).
21
<PAGE>
<TABLE>
<CAPTION>
TRC COMPANIES, INC. 1996 ANNUAL REPORT
Revision - 8/28/96
FINANCIAL HIGHLIGHTS
For the years ended June 30, 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenue $76,999,021 $93,013,053 $81,657,681
Net service revenue 60,018,195 71,812,673 61,002,579
Income (loss) from operations (1,216,198) 8,457,540 3,791,660
Net income (loss) $(1,315,053) $ 4,421,065 $ 2,143,463
Earnings (loss) per common share $ (.19) $ .61 $ .32
Working capital $19,003,211 $24,968,251 $25,963,093
Current ratio 2.5 to 1 2.9 to 1 3.1 to 1
Debt to total capitalization 21.4% 27.1% 34.7%
Return on equity (2.9)% 10.0% 5.7%
Book value per share $ 6.38 $ 6.56 $ 5.94
Common shareholders 2,500 2,600 2,500
Common shares outstanding 7,019,002 7,089,552 7,071,636
Employees 665 823 830
-----------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
TRC Companies, Inc. and subsidiaries
In thousands (except per share data)
For the years ended June 30, 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross revenue $76,999 $93,013 $81,658 $67,827 $60,332
Less subcontractor costs and
direct charges 16,981 21,200 20,655 15,928 14,265
-----------------------------------------------------------------
Net service revenue 60,018 71,813 61,003 51,899 46,067
-----------------------------------------------------------------
Operating costs and expenses:
Salaries and other direct costs
of services 54,388 56,353 51,039 46,554 36,539
General and administrative
expenses 3,950 3,965 3,738 3,292 2,656
Depreciation and amortization 2,896 3,037 2,434 1,901 1,405
Costs related to disposed
business -- -- -- 4,149 --
-----------------------------------------------------------------
61,234 63,355 57,211 55,896 40,600
-----------------------------------------------------------------
Income (loss) from operations (1,216) 8,458 3,792 (3,997) 5,467
Interest expense 906 1,399 466 71 92
Other income, net -- (15) (58) (86) (221)
-----------------------------------------------------------------
Income (loss) before taxes (2,122) 7,074 3,384 (3,982) 5,596
Federal and state income tax provision
(benefit) (807) 2,653 1,241 (1,084) 1,620
-----------------------------------------------------------------
Net income (loss) $(1,315) $ 4,421 $ 2,143 $(2,898) $ 3,976
=================================================================
Earnings (loss) per common share $(.19) $.61 $.32 $(.45) $.62
=================================================================
Weighted average number of common and
common equivalent shares
outstanding 7,078 7,208 6,789 6,462 6,365
=================================================================
Cash dividends declared None None None None None
-----------------------------------------------------------------
Balance Sheet at June 30,
Total assets $64,235 $73,815 $75,951 $46,477 $43,623
-----------------------------------------------------------------
Long-term debt $12,200 $17,200 $22,080 $ 140 $ 420
-----------------------------------------------------------------
Shareholders' equity $44,748 $46,538 $41,984 $33,607 $34,771
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Revenue and Earnings by Quarter (Unaudited)
In thousands (except per share data) 1st 2nd 3rd 4th
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 /(1)/
Gross revenue $20,019 $19,960 $19,422 $17,598
Net service revenue 16,247 15,380 14,809 13,582
Income (loss) from operations (1,453) 1,102 (529) (336)
Income (loss) before taxes (1,708) 869 (741) (542)
Net income (loss) $(1,059) $ 539 $ (455) $ (340)
Earnings (loss) per common share $(.15) $.08 $(.06) $(.05)
----------------------------------------------------
1995
Gross revenue $23,093 $25,203 $22,381 $22,337
Net service revenue 18,365 18,050 17,601 17,797
Income from operations 2,130 2,249 2,001 2,078
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
----------------------------------------------------
</TABLE>
/(1)/ Results for first and third quarters of fiscal 1996 include operating
charges of $3.3 million (approximately $2.1 million after taxes) and $1.1
million (approximately $.7 million after taxes), respectively .
23
<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
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 pollution
control, solid and hazardous waste management, risk assessment and process
engineering. 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 United 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. 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.
24
<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, 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net service revenue 100.0% 100.0% 100.0%
---------------------------------
Operating costs and expenses:
Salaries and other direct costs of
services 90.6/1/ 78.5 83.7
General and administrative expenses 6.6 5.5 6.1
Depreciation and amortization 4.8 4.2 4.0
---------------------------------
Income (loss) from operations (2.0)/1/ 11.8 6.2
Interest expense 1.5 1.9 .8
Other income, net -- -- (.1)
---------------------------------
Income (loss) before taxes (3.5) 9.9 5.5
Federal and state income tax provision
(benefit) (1.3) 3.7 2.0
---------------------------------
Net income (loss) (2.2)% 6.2% 3.5%
=================================
</TABLE>
/(1)/ 83.3% and 5.3%, respectively, before operating charges.
- --------------------------------------------------------------------------------
1996 Compared to 1995
The Company reported a net loss in fiscal 1996 of $1.3 million or $.19 per
share, compared to net income of $4.4 million or $.61 per share in fiscal 1995.
The loss includes charges of $4.4 million (approximately $2.8 million after
taxes) related to reductions in staff, the closing of certain offices, excess
lease costs and increased allowances for receivables and inventories. These
charges were necessary because of the continued weak environmental
engineering/consulting market resulting from regulatory uncertainty and
anticipated reductions in federal enforcement spending, which has led to overall
lower levels of expenditures by industry for environmental engineering and
remedial services, coupled with greater competition and capacity for available
work.
Net service revenue decreased by 16.4% in fiscal 1996 to $60 million, from $71.8
million in fiscal 1995. The decrease was primarily due to the weak commercial
hazardous waste engineering market resulting from regulatory uncertainty and
anticipated reductions in federal enforcement spending and the reduction in
services to the federal government.
Salaries and other direct costs of services decreased by 3.5% or $2.0 million in
fiscal 1996, as compared to fiscal 1995. Although partially offset by the $4.4
million charges recorded during
25
<PAGE>
the year, this decrease was the direct result of continued cost reduction
efforts taken to align resources with current business conditions .
General and administrative expenses decreased by .4% in fiscal 1996, as compared
to fiscal 1995, primarily due to continued cost reduction efforts.
Depreciation and amortization expense decreased by 4.6% in fiscal 1996, as
compared to fiscal 1995. This decrease was due to the comparative reduction in
expenditures for equipment in fiscal 1996 and 1995, combined with the effect of
other equipment which became fully depreciated.
The Company reported a loss from operations of $1.2 million in fiscal 1996,
compared to income from operations of $8.5 million in fiscal 1995. The loss was
the direct result of the operating charges recorded during fiscal 1996 and to
the reduction in net service revenue.
Interest expense decreased in fiscal 1996 to $.9 million, from $1.4 million last
year. The decrease resulted from lower levels of long-term debt outstanding at
lower rates of interest.
The provision (benefit) for federal and state income taxes for fiscal 1996 is
recorded at an effective rate of approximately 38%. 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.
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 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% in fiscal 1994.
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.
26
<PAGE>
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.
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.
Liquidity and Capital Resources
Working capital was $19 million at June 30, 1996, as compared to $25 million at
June 30, 1995. The decrease is primarily due to the repayment of long-term
debt, the $2 million increase in the current portion of long-term debt, the net
loss for the year and the repurchase of the Company's stock.
The Company has available a $35 million, unsecured revolving credit agreement
with a group of commercial banks through December 31, 2001. At June 30, 1996,
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. in March 1994, the
Company issued a $14 million three-year 5.75% subordinated note, of which $7
million remained outstanding at June 30, 1996.
In fiscal 1996, the Board of Directors' authorized the repurchase of up to
500,000 shares of the Company's outstanding common stock as, in the opinion of
management, market conditions may warrant. In fiscal 1996, the Company acquired
77,100 shares for $.5 million, at an average price of $6.69 per share. The
Company made capital expenditures of $.6 million in fiscal 1996, and
27
<PAGE>
expects to make capital expenditures of approximately $1.5 million in fiscal
1997. The Company believes that cash generated from operations, the cash on hand
at June 30, 1996 and available borrowings under the revolving credit agreement
will be sufficient to meet the Company's cash requirements in fiscal 1997.
Forward-Looking Statements
This report contains forward-looking statements that describe the Company's
business prospects. These statements involve risks and uncertainties, including
but not limited to, regulatory uncertainty, funding for government projects,
level of demand for the Company's services, product acceptance, industry-wide
competitive factors and political, economic or other conditions. Furthermore,
market trends are subject to changes which could adversely affect future
results.
28
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
TRC Companies, Inc. and subsidiaries
For the years ended June 30, 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenue $76,999,021 $93,013,053 $81,657,681
Less subcontractor costs and
direct charges 16,980,826 21,200,380 20,655,102
-----------------------------------------
Net service revenue 60,018,195 71,812,673 61,002,579
-----------------------------------------
Operating costs and expenses:
Salaries and other direct
costs of services 54,388,351 56,353,248 51,038,769
General and administrative
expenses 3,949,996 3,964,625 3,738,434
Depreciation and amortization 2,896,046 3,037,260 2,433,716
-----------------------------------------
61,234,393 63,355,133 57,210,919
-----------------------------------------
Income (loss) from operations (1,216,198) 8,457,540 3,791,660
Interest expense 905,855 1,399,288 466,157
Other income, net --- (15,813) (58,842)
---------------------------------------
Income (loss) before taxes (2,122,053) 7,074,065 3,384,345
Federal and state income tax
provision (benefit) (807,000) 2,653,000 1,240,882
---------------------------------------
Net income (loss) $(1,315,053) $ 4,421,065 $ 2,143,463
=======================================
Earnings (loss) per common share $(.19) $.61 $.32
=======================================
Weighted average number of common and
common equivalent shares
outstanding 7,077,845 7,207,650 6,789,355
=======================================
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
TRC Companies, Inc. and subsidiaries
As of June 30, 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,321,524 $ 2,180,764
Accounts receivable, less allowance
for doubtful accounts 27,977,190 32,306,865
Inventories 915,336 1,930,379
Deferred income tax benefits 1,219,000 1,164,702
Prepaid expenses and other current
assets 444,583 398,187
--------------------------
31,877,633 37,980,897
--------------------------
Property and equipment:
Furniture and equipment 18,304,956 17,778,808
Leasehold improvements 1,362,378 1,321,944
Construction in progress -- 339,419
--------------------------
19,667,334 19,440,171
Less accumulated depreciation and
amortization 13,802,300 12,093,880
--------------------------
5,865,034 7,346,291
--------------------------
Costs in excess of net assets of acquired
businesses, net of accumulated
amortization of $2,648,246 and
$1,719,652, respectively 25,903,615 27,752,208
--------------------------
Other assets 588,407 735,232
--------------------------
$ 64,234,689 $ 73,814,628
==========================
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 7,000,000 $ 5,000,000
Accounts payable 2,209,401 2,989,020
Accrued compensation and benefits 2,542,809 2,930,930
Income taxes payable 53,431 591,145
Current maturities of capitalized
lease obligations -- 64,649
Other accrued liabilities 1,068,781 1,436,902
--------------------------
12,874,422 13,012,646
--------------------------
Non-current liabilities:
Long-term debt 5,200,000 12,200,000
Capitalized lease obligations, less
current maturities -- 15,798
Accrued lease obligations 96,480 234,491
Deferred income taxes 1,316,000 1,813,610
--------------------------
6,612,480 14,263,899
--------------------------
Commitments and contingencies
(Notes 4, 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,
7,265,755 and 7,259,205 shares
issued at June 30, 1996
and 1995, respectively 726,575 725,920
Additional paid-in capital 37,894,744 37,855,092
Retained earnings 7,420,244 8,735,297
--------------------------
46,041,563 47,316,309
Less treasury stock, at cost 1,293,776 778,226
--------------------------
44,747,787 46,538,083
--------------------------
$ 64,234,689 $ 73,814,628
==========================
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
TRC Companies, Inc. and subsidiaries
For the years ended June 30, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $(1,315,053) $ 4,421,065 $ 2,143,463
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,896,046 3,037,260 2,433,716
Change in deferred taxes and other non-cash items (689,922) 927,446 271,826
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable 4,329,675 88,148 (5,867,871)
Inventories 1,015,043 (212,249) 1,836
Prepaid expenses and other current assets (46,396) 263,780 78,662
Accounts payable (779,619) 129,480 (677,748)
Accrued compensation and benefits (388,121) (500,511) (244,149)
Income taxes (535,888) (172,957) 1,703,719
Accrued costs related to disposed business (37,492) (937,471) (1,820,697)
Other accrued liabilities 589,371 (833,228) (1,367,163)
---------------------------------------
Net cash provided by (used in) operating activities 5,037,644 6,210,763 (3,344,406)
---------------------------------------
Cash flows from investing activities:
Additions to property and equipment (585,304) (1,283,547) (2,140,396)
Acquisition of businesses, net of cash acquired -- (100,000) (4,847,871)
Disposal of equipment, net 165,089 148,440 54,199
Decrease (increase) in other assets 80,847 (76,840) 20,340
---------------------------------------
Net cash used in investing activities (339,368) (1,311,947) (6,913,728)
---------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) on long-term debt (5,000,000) (4,880,000) 7,730,000
Purchase of treasury stock (515,550) -- --
Proceeds from exercise of stock options 38,481 94,453 251,662
Principal repayments under capitalized lease obligations (80,447) (176,649) (149,188)
---------------------------------------
Net cash provided by (used in) financing activities (5,557,516) (4,962,196) 7,832,474
---------------------------------------
Decrease in cash and cash equivalents (859,240) (63,380) (2,425,660)
Cash and cash equivalents, beginning of year 2,180,764 2,244,144 4,669,804
---------------------------------------
Cash and cash equivalents, end of year $ 1,321,524 $ 2,180,764 $ 2,244,144
=======================================
Supplemental cash flow information:
Interest paid $ 867,467 $ 1,384,156 $ 414,413
Income taxes paid (refunded) 276,933 1,807,279 (631,773)
=======================================
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
TRC Companies, Inc. and subsidiaries
For the years ended June 30, 1996, 1995 and 1994
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, 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)
Purchase of treasury stock -- -- -- -- 77,100 (515,550)
Exercise of stock options 6,550 655 37,826 -- -- --
Income tax benefit from stock option
transactions -- -- 1,826 -- -- --
Net income (loss) -- -- -- (1,315,053) -- --
---------------------------------------------------------------------------
Balances, June 30, 1996 7,265,755 $726,575 $37,894,744 $ 7,420,244 246,753 $(1,293,776)
==========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRC Companies, Inc. and subsidiaries
1. ACCOUNTING POLICIES
A. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
B. The consolidated financial statements include the Company and its
wholly-owned subsidiaries, after elimination of intercompany accounts and
transactions. Certain prior year financial statement items have been
reclassified to conform to the current year's format.
C. 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.
D. Leasehold improvements are amortized over the lives of the various
leases or the useful lives of the improvements, whichever is shorter.
E. 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.
F. 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 carrying amounts and tax bases of
assets and liabilities.
G. 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.
H. Research and development costs are charged to operations as incurred
and amounted to approximately $283,000, $204,000 and $338,000 in fiscal 1996,
1995 and 1994, respectively.
I. Costs in excess of the fair value of net assets of acquired
businesses are primarily amortized over 30 years on a straight-line basis. On a
periodic basis, the Company reassesses the
33
<PAGE>
appropriateness of both the carrying value and remaining life of these costs.
Such reassessments are computed using forecasted cash flows, on an undiscounted
basis, and other factors.
J. 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, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Materials and supplies $ 539,054 $ 896,161
Work-in-process 60,787 332,206
Finished goods 315,495 702,012
-----------------------
$ 915,336 $ 1,930,379
=======================
</TABLE>
K. The Company has 401(k) savings plans covering substantially all
employees. The Company's contributions to the plans were approximately $661,000,
$721,000 and $634,000 in fiscal 1996, 1995, and 1994, respectively. The Company
does not have any employee benefit plans that provide post-retirement or post-
employment benefits.
L. Cash, accounts receivable, accounts payable, accrued liabilities and
the Company's subordinated note as reflected in the financial statements are
reasonable estimates of their fair value because of the short-term maturity of
those instruments.
The carrying amount of the Company's note payable pursuant to its
revolving credit agreement approximates fair value because the interest rate on
this instrument changes with market interest rates.
M. In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. FAS
121 requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company is required to
estimate the future cash flows expected to result from the use of these assets
and, if appropriate, their eventual disposition, and recognize an impairment
loss for any difference between the fair value and carrying amount of these
assets. FAS 121 must be adopted for years beginning after December 15, 1995. The
effect, if any, on the Company's financial position or results of operations
from adoption of FAS 121 is not expected to be material.
N. In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, effective for years beginning after December 15, 1995. Under the
provisions of this accounting standard, the Company is not required to change
its method of accounting for stock-based compensation and expects to retain its
current method of accounting.
34
<PAGE>
2. BUSINESS ACTIVITIES
The Company conducts its activities under one business segment which
involves providing engineering and consulting services in all areas of air
pollution control, solid and hazardous waste management, risk assessment,
process engineering and related services to commercial and governmental
organizations throughout the United States and internationally.
3. ACCOUNTS RECEIVABLE
Accounts receivable at June 30, 1996 and 1995 are comprised of the
following:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
Amounts billed $ 22,320,356 $ 25,263,291
Unbilled costs 7,402,002 8,068,797
Retainage 754,832 674,777
---------------------------
30,477,190 34,006,865
Less allowance for
doubtful accounts 2,500,000 1,700,000
---------------------------
$ 27,977,190 $ 32,306,865
===========================
</TABLE>
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 $10,418,000, $11,135,000 and $19,062,000 in fiscal 1996, 1995
and 1994, respectively
4. 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 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 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 fiscal
1994 after giving effect to certain adjustments,
35
<PAGE>
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.
Net service revenue $ 75,042,000
-------------
Net income 2,793,000
-------------
Earnings per common share $.39
-------------
5. LONG-TERM DEBT
Long-term debt at June 30, 1996 and 1995 is comprised of the following:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
Note payable - revolving
credit agreement $ 5,200,000 $ 5,200,000
5.75% subordinated note 7,000,000 12,000,000
----------------------------
12,200,000 17,200,000
Less current portion 7,000,000 5,000,000
----------------------------
$ 5,200,000 $ 12,200,000
============================
</TABLE>
The Company has a revolving credit agreement, as amended, with a group of
commercial banks 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 .75%. The Company pays a commitment fee of .25% 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, 1996. The agreement also requires the Company to have income in at least
one of any two consecutive fiscal quarters beginning with the quarter ended June
30, 1996. At June 30, 1996, borrowings outstanding under this agreement were
$5,200,000 at an average interest rate of 6.3%. 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, 1996,
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 of $7,000,000 is payable in fiscal 1997.
36
<PAGE>
6. FEDERAL AND STATE INCOME TAXES
The federal and state income tax provision (benefit) for fiscal 1996,
1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
Current:
<S> <C> <C> <C>
Federal $(375,000) $1,116,480 $328,550
State 18,000 410,520 180,332
Foreign 102,000 -- --
Deferred:
Federal (555,000) 987,000 801,000
State 3,000 139,000 (69,000)
-----------------------------------------
$(807,000) $2,653,000 $1,240,882
=========================================
</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>
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred income tax benefits:
Doubtful accounts and other
accruals $1,026,000 $619,875 $901,620
Costs related to disposed business -- 14,250 331,500
Adjustment of inventories and
contracts to tax basis 79,000 171,750 203,320
Other, net 114,000 358,827 (38,738)
-----------------------------------------
$1,219,000 $1,164,702 $1,397,702
=========================================
Deferred income tax liabilities:
Depreciation and amortization $(1,422,000) $(1,265,250) $(1,040,400)
Accrued lease obligations 254,000 122,625 175,100
Other, net (148,000) (670,985) (161,310)
-----------------------------------------
$(1,316,000) $(1,813,610) $(1,026,610)
=========================================
</TABLE>
A reconciliation of the federal statutory and the effective income tax rates
follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate (34.0)% 34.0% 34.0%
Other current provision (benefit) (3.5) -- --
State taxes, net of federal tax
benefit .6 5.2 3.3
Other, net (1.1) (1.7) (.6)
-----------------------------------------
Effective income tax rate (38.0)% 37.5% 36.7%
=========================================
</TABLE>
37
<PAGE>
7. LEASE COMMITMENTS
The Company has commitments at June 30, 1996 under noncancelable operating
leases primarily for office and warehouse space and for computer and office
equipment. Rental payments charged to operations in fiscal 1996, 1995 and 1994
were approximately $4,526,000, $4,517,000 and $4,157,000, respectively. Certain
leases for office and warehouse space require payments for expenses under
escalation clauses. In addition, the Company subleases space in certain of its
offices. Sublease receipts credited to operations in fiscal 1996 amounted to
$325,000 and future sublease receipts as of June 30, 1996 are approximately
$1,942,000 in the aggregate.
Minimum future lease obligations payable in future fiscal years are as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
- -------------------------------------------------------------
<S> <C>
1997 $ 4,663,000
1998 4,127,000
1999 2,871,000
2000 2,277,000
2001 1,164,000
2002 and thereafter 362,000
-----------
$15,464,000
===========
</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 fiscal 1996, the Board of Directors authorized the repurchase of up to
500,000 shares of the Company's common stock. At June 30, 1996, the Company had
repurchased 77,100 shares for $515,500.
In connection with the issuance of 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.
38
<PAGE>
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 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, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding options, beginning of year 772,311 693,424 545,717
Granted 401,139 129,600 218,500
Exercised (6,550) (15,582) (40,238)
Canceled (588,941) (35,131) (30,555)
----------------------------------------------------
Outstanding options, end of year 577,959 772,311 693,424
====================================================
Average price of options exercised
during the year $5.88 $6.06 $6.25
At end of year:
Exercise prices of outstanding options $5.88-$13.75 $5.75-$13.75 $5.75-$13.75
Average exercise price per share $6.86 $9.36 $9.20
Options exercisable at end of year 226,817 459,409 342,703
Options available for future grants 496,984 309,182 103,652
====================================================
</TABLE>
In connection with the acquisition of Environmental Solutions, Inc. in
fiscal 1994, the Company authorized the issuance of warrants to the employees to
purchase 100,000 shares of common stock, under the same terms and conditions as
the employee stock option plan. At June 30, 1996, warrants to purchase 50,000
shares of common stock at $6.63 per share were outstanding.
In fiscal 1996, the Company gave existing option holders the right to
cancel their existing options and be issued new options at a ratio of two
existing option shares in exchange for one new option share. The new non-
qualified options were issued at the fair market value of the stock on the date
such options were granted and have terms and conditions consistent with the
Company's stock option plan. The Company canceled 525,178 options and issued
262,589 new options under the program.
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 1996, the Company granted options to purchase 6,000
shares exercisable during the next three years at an option price of $7.75 per
share. At June 30, 1996, a total of 12,000 options to purchase shares of the
Company's common stock were outstanding pursuant to the Plan.
39
<PAGE>
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, 1992. The Company believes that adjustments
resulting from such examinations or renegotiation proceedings, if any, will not
have a significant impact on the Company's financial condition or results of
operations.
40
<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, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1996, 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
August 6, 1996
41
<PAGE>
TRC COMPANIES, INC.
DIRECTORS
Vincent A. Rocco
Chairman and Chief Executive Officer
TRC Companies, Inc.
Bruce D. Cowen
President
TRC Companies, Inc.
Edward W. Large*
Counsel to the law firms of Crowell & Moring
and Day, Berry & Howard; formerly Executive
Vice President and Director of United
Technologies Corporation
J. Jeffrey McNealey*
Partner in the law firm of
Porter, Wright, Morris & Arthur
Edward G. Jepsen*
Executive Vice President,
Chief Financial Officer and Director of
Amphenol Corporation
* Audit Committee Member
OFFICERS
Vincent A. Rocco
Chairman and Chief Executive Officer
Bruce D. Cowen
President
John H. Claussen
Senior Vice President and General Counsel
Richard D. Ellison
Senior Vice President and Chief Engineer
Peter J. Russo
Senior Vice President and Chief Financial Officer
42
<PAGE>
Martin H. Dodd
Vice President and Deputy General Counsel
Harold C. Elston, Jr.
Vice President and Treasurer
SUBSIDIARY OPERATING OFFICERS
Richard J. McGuire, Jr.
President
TRC Environmental Corporation
Richard D. Ellison
President
TRC Environmental Solutions, Inc.
Miro Knezevic
Executive Vice President
TRC Environmental Solutions, Inc.
Daniel S. Tedone
President
TRC Process Engineering Inc.
Pedro Lilienfeld
President
MIE, Inc.
SHAREHOLDER INFORMATION
EXECUTIVE OFFICES
TRC Companies, Inc.
5 Waterside Crossing
Windsor, Connecticut 06095
(860) 289-8631
43
<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
One Financial Plaza
Hartford, Connecticut 06103
ANNUAL MEETING
The 1996 annual meeting of shareholders will be held on Friday, October
25, 1996, 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 20, 1996, the last reported sale price of the common
stock on the exchange was $4.125 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.
44
<PAGE>
The following table provides quarterly price ranges of the common stock:
<TABLE>
<CAPTION>
High Low
--------- ------
Fiscal 1996:
<S> <C> <C>
First Quarter $ 8 3/4 $ 7
Second Quarter 7 7/8 5 1/2
Third Quarter 7 1/4 6
Fourth Quarter 6 5/8 5 5/8
Fiscal 1995:
First Quarter $11 $ 9
Second Quarter 10 5/8 7 7/8
Third Quarter 9 1/8 7 1/2
Fourth Quarter 8 3/8 7 1/8
</TABLE>
REGISTRAR AND TRANSFER AGENT FOR COMMON STOCK
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Shareholders may call the agent's Shareholder Services Department directly
concerning stock certificates and address changes at (718) 921-8200.
45
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF TRC COMPANIES, INC.
Listed below are the subsidiaries which are included in the consolidated
financial statements of TRC Companies, Inc. Inactive subsidiaries are excluded.
<TABLE>
<CAPTION>
Percent of Voting Stock
Name of Subsidiary and Jurisdiction in which Incorporated or Organized Owned by Registrant
- ---------------------------------------------------------------------- -------------------
<S> <C>
TRC Environmental Corporation (incorporated in Connecticut) 100%
TRC Investment Corporation (incorporated in Delaware) 100%
TRC Environmental Solutions, Inc. (incorporated in California) 100%
TRC Mariah Associates, Inc. (incorporated in Wyoming) 100%
TRC Process Engineering Inc. (incorporated in New Jersey) 100%
Monitoring Instruments for the Environment, Inc. (incorporated in
Massachusetts), a subsidiary of TRC Environmental Corporation 100%
TRC North American Weather Consultants (incorporated in Utah),
a subsidiary of TRC Environmental Corporation 100%
PAKTO, S.A. (incorporated in Poland) 48%
</TABLE>
46
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000103096
<NAME> TRC Companies Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,321,524
<SECURITIES> 0
<RECEIVABLES> 27,977,190
<ALLOWANCES> 0
<INVENTORY> 915,336
<CURRENT-ASSETS> 31,877,633
<PP&E> 19,667,334
<DEPRECIATION> 13,802,300
<TOTAL-ASSETS> 64,234,689
<CURRENT-LIABILITIES> 12,874,422
<BONDS> 0
0
0
<COMMON> 726,575
<OTHER-SE> 44,021,212
<TOTAL-LIABILITY-AND-EQUITY> 64,234,689
<SALES> 76,999,021
<TOTAL-REVENUES> 76,999,021
<CGS> 0
<TOTAL-COSTS> 78,215,219
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 905,855
<INCOME-PRETAX> (2,122,053)
<INCOME-TAX> (807,000)
<INCOME-CONTINUING> (1,315,053)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,315,053)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> 0
</TABLE>
