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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT FILED
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
TRC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 1-9947 06-0853807
------------------------------- ---------------- ----------------------------
(State or other jurisdiction of (Commission File (IRS Employer Identification
incorporation) Number) Number)
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5 Waterside Crossing
Windsor, Connecticut 06095
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 289-8631
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its current Report on Form 8-K, dated
May 15, 2000, as set forth in the pages attached hereto:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
TRC COMPANIES, INC.
Dated: July 14, 2000 By: /s/ Harold C. Elston, Jr.
-------------------------
Harold C. Elston, Jr.
Senior Vice President and Chief Financial Officer
(Chief Accounting Officer)
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TRC COMPANIES, INC.
AMENDMENT NO. 1 TO CURRENT REPORT, DATED MAY 15, 2000 ON FORM 8-K
On January 7, 2000, the registrant completed the acquisition of Hunter
Associates, Inc., a civil engineering firm headquartered in Dallas, Texas. The
acquisition has been accounted for using the purchase method of accounting. This
transaction was reported in Item 2 of the Current Report, dated May 15, 2000, on
Form 8-K. The purpose of the amendment is to provide the financial statements of
the business acquired and the pro forma financial information required pursuant
to Item 7.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Page
<S> <C>
A. Financial statements of business acquired:
Hunter Associates, Inc. for the year ended
December 31, 1999 (with Report of Independent Accountants) 3
B. Unaudited pro forma financial information:
TRC Companies, Inc. unaudited pro forma consolidated
financial statements: 11
Unaudited Pro Forma Consolidated Statement of Operations
for the fiscal year ended June 30, 1999 12
Unaudited Pro Forma Consolidated Statement of Operations
for the nine months ended March 31, 2000 13
Notes to Unaudited Pro Forma Financial Information 14
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2
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HUNTER ASSOCIATES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
Page
Report of Independent Accountants 4
Consolidated Statement of Income and Retained Earnings 5
Consolidated Balance Sheet 6
Consolidated Statement of Cash Flows 7
Notes to Consolidated Financial Statements 8
3
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders' and Board of Directors
of TRC Companies, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statement of income and retained earnings, and of cash flows
present fairly, in all material respects, the financial position of Hunter
Associates, Inc. and its subsidiary at December 31, 1999, and the results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States. 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 audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States, 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 audit provides a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
July 14, 2000
4
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HUNTER ASSOCIATES, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1999
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<S> <C>
REVENUE FROM ENGINEERING AND CONSULTING FEES $ 4,722,295
-----------
Less - Job costs:
Salaries and payroll taxes 1,232,076
Outside services 513,121
Other 221,629
-----------
1,966,826
-----------
GROSS PROFIT 2,755,469
-----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and payroll taxes 592,831
Outside services 216,239
Rent expense 193,498
Employee retirement and insurance 146,850
Depreciation 55,879
Other expenses 217,334
-----------
1,422,631
-----------
OPERATING INCOME 1,332,838
OTHER INCOME (EXPENSE):
Interest income 19,738
Other income 20,137
Minority interest in net income of subsidiary (68,637)
-----------
NET INCOME 1,304,076
Retained earnings, beginning of year 1,821,153
Less distributions to shareholders (1,472,500)
===========
RETAINED EARNINGS, END OF YEAR $ 1,652,729
===========
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See accompanying notes to consolidated financial statements.
5
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HUNTER ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
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<S> <C>
CURRENT ASSETS:
Cash $ 44,785
Accounts receivable, less allowance
for doubtful accounts 2,223,316
Prepaid expenses 50,240
----------
Total current assets 2,318,341
----------
PROPERTY AND EQUIPMENT:
Office furniture and equipment 320,564
Computer software 47,097
----------
367,661
Less accumulated depreciation 189,266
----------
178,395
----------
SECURITY DEPOSITS 12,483
==========
Total assets $2,509,219
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 46,947
Accrued expenses 137,655
Billings in excess of revenue earned 591,563
----------
Total current liabilities 776,165
----------
MINORITY INTEREST 79,325
----------
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value,
1,000,000 shares authorized, 94
shares issued and outstanding 9
Additional paid-in capital 991
Retained earnings 1,652,729
----------
Total shareholders' equity 1,653,729
----------
Total liabilities and shareholders' equity $2,509,219
==========
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See accompanying notes to consolidated financial statements.
6
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HUNTER ASSOCIATES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
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<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,304,076
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 55,879
Minority interest in net income of subsidiary 68,637
Changes in assets and liabilities:
Increase in accounts receivable (186,601)
Increase in prepaid expenses (7,661)
Increase in security deposits (3,481)
Decrease in accounts payable (73,273)
Increase in accrued expenses 51,619
Increase in billings in excess of revenue earned 340,822
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,550,017
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (119,326)
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NET CASH USED IN INVESTING ACTIVITIES (119,326)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to shareholders (1,472,500)
Distribution to holders of minority interest (77,500)
-----------
NET CASH USED IN FINANCING ACTIVITIES (1,550,000)
-----------
DECREASE IN CASH (119,309)
Cash, beginning of year 164,094
===========
CASH, END OF YEAR $ 44,785
===========
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See accompanying notes to consolidated financial statements.
7
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HUNTER ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1. ACCOUNTING POLICIES:
A. The consolidated financial statements include the accounts of
Hunter Associates, Inc. and its ninety-five percent owned
subsidiary partnership, Hunter Associates Texas, Ltd.,
collectively referred to as the Company. The limited partners,
whose ownership aggregates five percent, are all shareholders of
Hunter Associates, Inc. Intercompany transactions and balances
have been eliminated in consolidation.
B. The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles in the
United States requires management to make certain estimates and
assumptions that effect 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.
C. Property and equipment are stated on the basis of cost. 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 five to
seven years. Accelerated methods are used for income tax purposes.
D. The Company uses the percentage of completion method of accounting
to recognize revenue on contracts. Under this method, the
percentage of the cost incurred to date to the total estimated
cost is used to determine the portion of the contract amount which
is considered earned. At the time a loss on a contract becomes
known, the full amount of the projected loss is recognized.
On contracts where billings are in excess of revenue earned, the
excess is presented on the balance sheet as a current liability.
E. The Company has elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Under those provisions,
the Company does not pay federal and state income taxes on its
taxable income. Instead, the shareholders are liable for
individual taxes on their respective shares of common stock of the
Company.
8
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F. The Company participates in a multiple-employer profit sharing
plan under which most full-time and many part-time employees
become participants following six-months of employment, and a
401(k) plan in which the same employees may elect to contribute up
to 15% of their earnings, subject to certain limits. The Company
contributes 30% of the amount contributed by each employee.
The Company may make at its sole discretion annual contributions
to those plans on behalf of all eligible employees, including
those who have not elected to contribute to the 401(k) plan. The
Company's contributions to the plans for the year ended December
31, 1999 were $40,195.
G. In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities. This standard
requires that the Company recognize derivatives on the balance
sheet at fair value. In June 1999, the statement's effective date
was delayed by one year, and it will be effective January 1, 2001.
The Company believes that adoption of this standard will not have
a material impact on the Company's financial position, results of
operations or cash flows.
NOTE 2. ACCOUNTS RECEIVABLE:
Accounts receivable at December 31, 1999 consists of the following:
Amounts billed $1,821,669
Unbilled costs 589,668
----------
2,411,337
Less allowance for doubtful accounts 188,021
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$2,223,316
==========
Management expects that substantially all unbilled costs will be
billed and collected in the subsequent year.
NOTE 3. MAJOR CUSTOMERS:
During the year ended December 31, 1999, revenue from two customers amounted to
approximately $1,340,000 and $470,000, which represents 27% and 10% of total
revenue, respectively.
9
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NOTE 4. LEASE COMMITMENTS:
The Company is obligated at December 31, 1999 under long-term real estate leases
expiring at various dates through 2005. Certain leases provide renewal options
and require that the Company pay adjustments for property taxes, insurance and
utilities. Rental expense was $193,498 for the year ended December 31, 1999.
Minimum lease obligations payable in future years are as follows:
2000 $ 204,392
2001 203,281
2002 185,926
2003 175,229
2004 176,631
2005 14,719
=========
$ 960,178
=========
NOTE 5. RELATED PARTY TRANSACTIONS:
Prior to July 1, 1999, substantially all administrative and technical
support functions were provided to the Company by personnel employed by other
entities owned by the Company's shareholders. After July 1, 1999,
substantially all employees of such entities became employees of the Company.
For the year ended December 31, 1999, the Company paid approximately $285,000
for those support functions. In addition, during the year ended December 31,
1999 the Company charged other entities owned by the Company's shareholders
approximately $53,000 for the use of a portion of the Company's facilities.
NOTE 6. SUBSEQUENT EVENT:
On January 7, 2000, TRC Companies, Inc. acquired 100% of the outstanding common
stock of Hunter Associates, Inc. and the limited partners interest in Hunter
Associates Texas, Ltd. The purchase price of approximately $3.4 million,
consisted of $2.8 million in cash, 25,000 shares of TRC common stock and a five
year warrant to purchase 20,000 shares of TRC common stock at $7.81 per share.
Additional payments could be made based upon certain revenue objectives achieved
in each of the next three years.
10
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TRC COMPANIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENT INFORMATION
The accompanying unaudited pro forma consolidated statements of operations for
the fiscal year ended June 30, 1999 and for the nine months ended March 31,
2000, reflect the historical results of operations of TRC Companies, Inc. (TRC)
adjusted to reflect the acquisition of Hunter Associates, Inc. (Hunter) using
the purchase method of accounting, as if the acquisition had occurred at the
beginning of the most recent fiscal year presented. The pro forma adjustments
are described in the notes following the unaudited pro forma financial statement
information.
The unaudited pro forma consolidated financial statement information is
presented for informational purposes only. The pro forma results from operations
are not necessarily indicative of what would have resulted had the acquisition
occurred on the dates indicated, nor does the unaudited pro forma financial
information purport to be indicative of results of operations which may occur in
the future. The Company believes that it has used reasonable methods in the
preparation of this financial statement information.
11
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TRC COMPANIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
(unaudited)
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<CAPTION>
As reported Pro forma
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TRC Hunter Adjustments Notes Combined
------- ------ ----------- ------ ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Gross revenue $78,223 $ 4,317 $ -- $82,540
Less subcontractor costs
and direct charges 20,890 674 -- 21,564
------- ------- -------- -------
Net service revenue 57,333 3,643 -- 60,976
------- ------- -------- -------
Operating costs and expenses:
Direct labor and fringe benefit costs 26,075 1,504 -- 27,579
Indirect costs and expenses 21,998 1,162 -- 23,160
General and administrative expenses 2,462 -- -- 2,462
Depreciation and amortization 2,468 42 97 (a) 2,607
------- ------- -------- -------
53,003 2,708 97 55,808
------- ------- -------- ------
Income from operations 4,330 935 (97) 5,168
Interest expense 507 -- 227 (b) 734
------- ------- -------- -------
Income before taxes 3,823 935 (324) 4,434
Federal and state income tax provision 1,376 -- 220 (c) 1,596
======= ======= ======== =======
Net income $ 2,447 $ 935 $ (544) $ 2,838
======= ======= ======== =======
Earnings per share:
Basic $ .36 $ .42
Diluted .36 .41
======= ======
Average shares outstanding:
Basic 6,782 25 (d) 6,807
Diluted 6,839 25 (d) 6,864
======= ======== ======
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TRC COMPANIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(unaudited)
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<CAPTION>
As reported (1) Pro forma
--------------------- --------------------------------------
TRC Hunter Adjustments Notes Combined
--------- -------- ------------ ------- -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Gross revenue $ 81,635 $ 2,407 $ - $ 84,042
Less subcontractor costs
and direct charges 23,443 191 - 23,634
--------- --------- --------- --------
Net service revenue 58,192 2,216 - 60,408
--------- --------- --------- --------
Operating costs and expenses:
Direct labor and fringe benefit costs 26,079 748 - 26,827
Indirect costs and expenses 22,311 790 - 23,101
General and administrative expenses 2,162 - - 2,162
Depreciation and amortization 1,984 26 49 (a) 2,059
--------- --------- --------- --------
52,536 1,564 49 54,149
--------- --------- --------- --------
Income from operations 5,656 652 (49) 6,259
Interest expense 686 - 113 (b) 799
--------- --------- --------- --------
Income before taxes 4,970 652 (162) 5,460
Federal and state income tax provision 1,789 - 177 (c) 1,966
========= ========= ========= ========
Net income $ 3,181 $ 652 $ (339) $ 3,494
========= ========= ========= ========
Earnings per share:
Basic $ .47 $ .51
Diluted .45 .49
========= ========
Average shares outstanding:
Basic 6,800 25 (d) 6,825
Diluted 7,116 25 (d) 7,141
========= ========= ========
</TABLE>
(1) The as reported statement of operations for Hunter reflects results for
the six months ended December 31, 1999. The as reported statement of
operations for TRC includes Hunter's results for the three months ended
March 31, 2000.
13
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TRC COMPANIES, INC.
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
a. Adjustment to reflect amortization of costs in excess of the fair
value of the net assets acquired on a straight-line basis over twenty
years and additional depreciation expense related to the write-up of
certain assets to estimated fair value using estimated lives of five
to seven years.
b. Adjustment to record additional interest expense resulting from
additional bank borrowings in connection with the acquisition.
c. Adjustment to income tax provision to reflect the tax effect of
adjustments (a) and (b) and the termination of Hunter's Subchapter S
income tax status.
d. Adjustment to reflect issuance of 25,000 shares of TRC common stock
in connection with the acquisition.
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