TRC Companies 10-Q 2015 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQuarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 27, 2015

OR

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to _______________

Commission file number 1-9947

TRC COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	06-0853807
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
21 Griffin Road North
Windsor, Connecticut	06095
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (860) 298-9692

___________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer [ ]	Accelerated filer [X]	Non-accelerated filer [ ]	Smaller reporting company [ ]
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         YES [ ] NO [X]

On March 30, 2015 there were 30,432,977 shares of the registrant's common stock, $.10 par value, outstanding.

TRC COMPANIES, INC.

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED March 27, 2015

PART I - Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statements of Operations for the three and nine months ended March 27, 2015 and March 28, 2014	3
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended March 27, 2015 and March 28, 2014	4
	Condensed Consolidated Balance Sheets as of March 27, 2015 and June 30, 2014	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 27, 2015 and March 28, 2014	6
	Condensed Consolidated Statements of Changes in Equity for the nine months ended March 27, 2015 and March 28, 2014	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39
PART II - Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
Signature		41
Exhibits

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

TRC COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 27, 2015			March 28, 2014			March 27, 2015			March 28, 2014
Gross revenue	$	130,777		$	120,836		$	397,030		$	350,002
Less subcontractor costs and other direct reimbursable charges	29,783			32,755			103,579			89,538
Net service revenue	100,994			88,081			293,451			260,464
Interest income from contractual arrangements	23			73			67			26
Insurance recoverables and other income	753			5,008			6,238			17,613
Operating costs and expenses:
Cost of services (exclusive of costs shown separately below)	83,486			80,127			247,275			234,914
General and administrative expenses	8,927			8,363			25,360			24,642
Depreciation and amortization	2,208			2,161			7,114			6,587
Total operating costs and expenses	94,621			90,651			279,749			266,143
Operating income	7,149			2,511			20,007			11,960
Interest expense	(73		)	(22		)	(125		)	(152		)
Income from operations before taxes	7,076			2,489			19,882			11,808
Provision for income taxes	(1,916		)	(1,060		)	(7,244		)	(4,830		)
Net income	5,160			1,429			12,638			6,978
Net loss applicable to noncontrolling interest	5			2			14			36
Net income applicable to TRC Companies, Inc.	$	5,165		$	1,431		$	12,652		$	7,014
Basic earnings per common share	$	0.17		$	0.05		$	0.42		$	0.24
Diluted earnings per common share	$	0.17		$	0.05		$	0.41		$	0.23
Weighted-average common shares outstanding:
Basic	30,382			29,691			30,233			29,549
Diluted	30,737			30,166			30,551			30,088

See accompanying notes to condensed consolidated financial statements.

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TRC COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

			Three Months Ended						Nine Months Ended
			March 27, 2015			March 28, 2014			March 27, 2015			March 28, 2014
Net income			$	5,160		$	1,429		$	12,638		$	6,978
Other comprehensive income (loss)
	Unrealized gain on available-for-sale securities		15			19			8			162
	Tax effect on unrealized gain on available-for-sale securities		(6		)	(9		)	(3		)	(66		)
	Reclassification for loss (gain) included in net income		(2		)	(67		)	5			(98		)
	Tax effect on realized loss (gain) on available-for-sale securities		1			28			(2		)	40
		Total other comprehensive income (loss)	8			(29		)	8			38
Comprehensive income			5,168			1,400			12,646			7,016
	Comprehensive loss attributable to noncontrolling interests		5			2			14			36
Comprehensive income attributable to TRC Companies, Inc.			$	5,173		$	1,402		$	12,660		$	7,052

See accompanying notes to condensed consolidated financial statements.

4

TRC COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(Unaudited)

	March 27, 2015			June 30, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	21,343		$	27,597
Restricted cash	277			5,756
Accounts receivable, less allowance for doubtful accounts	131,666			116,937
Insurance recoverable - environmental remediation	42,647			42,062
Restricted investments	6,892			2,934
Deferred income tax assets	12,281			12,293
Income taxes refundable	2,266			1,021
Prepaid expenses and other current assets	12,354			12,441
Total current assets	229,726			221,041
Property and equipment	63,501			60,240
Less accumulated depreciation and amortization	(50,283		)	(47,190		)
Property and equipment, net	13,218			13,050
Goodwill	36,354			31,679
Long-term deferred income tax assets	3,046			4,267
Long-term restricted investments	19,729			23,537
Long-term prepaid insurance	26,505			28,521
Other assets	15,076			13,490
Total assets	$	343,654		$	335,585
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	1,035		$	463
Current portion of capital lease obligations	261			562
Accounts payable	27,188			32,663
Accrued compensation and benefits	43,150			36,586
Deferred revenue	14,580			14,503
Environmental remediation liabilities	8,147			138
Other accrued liabilities	40,623			47,310
Total current liabilities	134,984			132,225
Non-current liabilities:
Long-term debt, net of current portion	60			105
Capital lease obligations, net of current portion	—			167
Income taxes payable and deferred income tax liabilities	1,481			1,539
Deferred revenue	66,538			70,398
Environmental remediation liabilities	527			6,268
Total liabilities	203,590			210,702
Commitments and contingencies
Equity:
Common stock, $.10 par value; 40,000,000 shares authorized, 30,436,459 and 30,432,977 shares issued and outstanding, respectively, at March 27, 2015, and 29,752,934 and 29,749,452 shares issued and outstanding, respectively, at June 30, 2014	3,044			2,975
Additional paid-in capital	190,214			187,748
Accumulated deficit	(52,702		)	(65,354		)
Accumulated other comprehensive loss	(69		)	(77		)
Treasury stock, at cost	(33		)	(33		)
Total stockholders' equity applicable to TRC Companies, Inc.	140,454			125,259
Noncontrolling interest	(390		)	(376		)
Total equity	140,064			124,883
Total liabilities and equity	$	343,654		$	335,585

See accompanying notes to condensed consolidated financial statements.

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TRC COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended
	March 27, 2015			March 28, 2014
Cash flows from operating activities:
Net income	$	12,638		$	6,978
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash items:
Depreciation and amortization	7,114			6,587
Stock-based compensation expense	3,746			3,513
Deferred income taxes	156			1,384
Other non-cash items	4			(1,127		)
Changes in operating assets and liabilities:
Accounts receivable	(9,582		)	(12,470		)
Insurance recoverable - environmental remediation	(585		)	(15,786		)
Income taxes	(1,291		)	(2,105		)
Restricted investments	(982		)	3,694
Prepaid expenses and other current assets	(1,913		)	19
Long-term prepaid insurance	2,016			2,262
Other assets	(107		)	518
Accounts payable	(5,456		)	(2,996		)
Accrued compensation and benefits	6,254			3,150
Deferred revenue	(3,783		)	(1,882		)
Environmental remediation liabilities	2,268			(799		)
Other accrued liabilities	2,083			12,237
Net cash provided by operating activities	12,580			3,177
Cash flows from investing activities:
Additions to property and equipment	(4,996		)	(3,757		)
Withdrawals from restricted investments	874			1,441
Acquisition of businesses, net of cash acquired	(11,214		)	(3,788		)
Earnout and net working capital payments on acquisitions	—			(252		)
Proceeds from sale of fixed assets	51			95
Investments in and advances to unconsolidated affiliates	—			(17		)
Net cash used in investing activities	(15,285		)	(6,278		)
Cash flows from financing activities:
Payments on long-term debt and other	(4,634		)	(8,464		)
Payments on capital lease obligations	(468		)	(470		)
Proceeds from long-term debt and other	5,247			4,904
Net working capital and additional cash payments on acquisitions	(2,644		)	(872		)
Shares repurchased to settle tax withholding obligations	(1,628		)	(2,172		)
Excess tax benefit from stock-based awards	251			3,385
Proceeds on exchange of stock options	327			55
Net cash used in financing activities	(3,549		)	(3,634		)
Decrease in cash and cash equivalents	(6,254		)	(6,735		)
Cash and cash equivalents, beginning of period	27,597			18,136
Cash and cash equivalents, end of period	$	21,343		$	11,401
Supplemental cash flow information:
Non-cash consideration for assets acquired	$	994		$	1,903

See accompanying notes to condensed consolidated financial statements.

6

TRC COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands)

(Unaudited)

	TRC Companies, Inc. Stockholders' Equity
												Accumulated							Total
	Common Stock					Additional						Other			Treasury Stock				TRC			Non-
	Number					Paid-in			Accumulated			Comp.			Number				Stockholders'			Controlling			Total
	of Shares		Amount			Capital			Deficit			Loss			of Shares	Amount			Equity			Interest			Equity
Balances as of July 1, 2013	29,053		$	2,905		$	181,874		$	(77,405	)	$	(109	)	3	$	(33	)	$	107,232		$	(335	)	$	106,897
Net income	—		—			—			7,014			—			—	—			7,014			(36		)	6,978
Other comprehensive income	—		—			—			—			38			—	—			38			—			38
Issuance of common stock	4		1			29			—			—			—	—			30			—			30
Issuance of common stock in connection with business acquired	34		3			292			—			—			—	—			295			—			295
Exercise of stock options	13		1			54			—			—			—	—			55			—			55
Stock-based compensation	898		89			3,424			—			—			—	—			3,513			—			3,513
Shares repurchased to settle tax withholding obligations	(293	)	(29		)	(2,162		)	—			—			—	—			(2,191		)	—			(2,191		)
Directors' deferred compensation	5		1			33			—			—			—	—			34			—			34
Stock-based compensation income tax benefits	—		—			3,385			—			—			—	—			3,385			—			3,385
Balances as of March 28, 2014	29,714		$	2,971		$	186,929		$	(70,391	)	$	(71	)	3	$	(33	)	$	119,405		$	(371	)	$	119,034

	TRC Companies, Inc. Stockholders' Equity
												Accumulated							Total
	Common Stock					Additional						Other			Treasury Stock				TRC			Non-
	Number					Paid-in			Accumulated			Comp.			Number				Stockholders'			Controlling			Total
	of Shares		Amount			Capital			Deficit			Loss			of Shares	Amount			Equity			Interest			Equity
Balances as of July 1, 2014	29,753		$	2,975		$	187,748		$	(65,354	)	$	(77	)	3	$	(33	)	$	125,259		$	(376	)	$	124,883
Net income	—		—			—			12,652			—			—	—			12,652			(14		)	12,638
Other comprehensive income	—		—			—			—			8			—	—			8			—			8
Issuance of common stock in connection with business acquired	50		5			318			—			—			—	—			323			—			323
Exercise of stock options	61		6			321			—			—			—	—			327			—			327
Stock-based compensation	862		86			3,660			—			—			—	—			3,746			—			3,746
Shares repurchased to settle tax withholding obligations	(295	)	(29		)	(1,603		)	—			—			—	—			(1,632		)	—			(1,632		)
Directors' deferred compensation	5		1			37			—			—			—	—			38			—			38
Stock-based compensation income tax deficiencies	—		—			(267		)	—			—			—	—			(267		)	—			(267		)
Balances as of March 27, 2015	30,436		$	3,044		$	190,214		$	(52,702	)	$	(69	)	3	$	(33	)	$	140,454		$	(390	)	$	140,064

See accompanying notes to condensed consolidated financial statements.

7

TRC COMPANIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 27, 2015 and March 28, 2014

(in thousands, except per share data)

(Unaudited)

Note 1. Company Background and Basis of Presentation

TRC Companies, Inc., through its subsidiaries (collectively, the "Company"), provides integrated engineering, consulting, and construction management services. Its project teams help its commercial and governmental clients implement environmental, energy and infrastructure projects from initial concept to delivery and operation. The Company provides its services almost entirely in the United States of America.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been omitted pursuant to those rules and regulations, but the Company's management believes that the disclosures included herein are adequate to make the information presented not misleading. The condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained, as well as variable interest entities in which the Company is considered the primary beneficiary. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2014.

Note 2. New Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update related to an entity’s ability to continue as a going concern. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. The new standard applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. This guidance will be effective for the Company in fiscal year 2017. The Company does not expect that the adoption of this standard will have a material effect on its financial statements.

In June 2014, the FASB issued an accounting standards update related to stock compensation. The new standard requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and can be applied either prospectively or retrospectively to all awards outstanding as of the beginning of the earliest annual period presented as an adjustment to opening retained earnings. Early adoption is permitted. This guidance is applicable to the Company's fiscal year beginning July 1, 2016. The Company is currently evaluating the impact of adopting this new accounting guidance on its condensed consolidated financial statements.

In May 2014, the FASB issued an accounting standards update that will supersede virtually all existing revenue recognition guidance under U.S. GAAP. The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. This guidance will be effective for annual reporting periods beginning after

8

December 15, 2016, including interim reporting periods, and will be required to be applied retrospectively. Early application of the guidance is not permitted. This guidance is applicable to the Company's fiscal year beginning July 1, 2017. In April 2015, the FASB proposed a deferral of the effective date of the new revenue standard by one year, subject to the FASB's due process requirement. The Company is currently evaluating the impact of adopting this new accounting guidance on its condensed consolidated financial statements.

In April 2014, the FASB issued an accounting standards update for the requirements of reporting discontinued operations. The update amends the definition of a discontinued operation by raising the threshold for a disposal to qualify as discontinued operations. The standard will also require entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued operations criteria. The pronouncement is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014. The implementation of this standard did not have a material impact on the Company's condensed consolidated financial statements.

Note 3. Fair Value Measurements

The Company's financial assets or liabilities are measured using inputs from the three levels of the fair value hierarchy. The classification of a financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Generally, this includes debt and equity securities and derivative contracts that are traded on an active exchange market (e.g. the New York Stock Exchange) as well as certain U.S. Treasury and U.S. Government and agency mortgage-backed securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, credit risks) or can be corroborated by observable market data.

Level 3 Inputs - Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company's own assumptions about the assumptions that market participants would use.

The following tables present the level within the fair value hierarchy at which the Company's financial assets and certain liabilities were measured on a recurring basis as of March 27, 2015 and June 30, 2014:

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 27, 2015

	Level 1		Level 2		Level 3		Total
Restricted investments:
Mutual funds	$	101	$	—	$	—	$	101
Certificates of deposit	—		207		—		207
Municipal bonds	—		752		—		752
Corporate bonds	—		231		—		231
U.S. government obligations	—		117		—		117
Money market accounts and cash deposits	4,785		—		—		4,785
Total assets	$	4,886	$	1,307	$	—	$	6,193
Contingent consideration	$	—	$	—	$	368	$	368
Total liabilities	$	—	$	—	$	368	$	368

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Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2014

	Level 1		Level 2		Level 3		Total
Restricted investments:
Mutual funds	$	140	$	—	$	—	$	140
Certificates of deposit	—		209		—		209
Municipal bonds	—		740		—		740
Corporate bonds	—		236		—		236
Asset backed securities	—		130		—		130
Money market accounts and cash deposits	2,650		—		—		2,650
Total assets	$	2,790	$	1,315	$	—	$	4,105
Contingent consideration	$	—	$	—	$	352	$	352
Total liabilities	$	—	$	—	$	352	$	352

A majority of the Company's investments are priced by pricing vendors and are generally Level 1 or Level 2 investments, as these vendors either provide a quoted market price in an active market or use observable input for their pricing without applying significant adjustments. Broker pricing is used mainly when a quoted price is not available, the investment is not priced by the pricing vendors, or when a broker price is more reflective of fair value in the market in which the investment trades. The Company's broker priced investments are classified as Level 2 investments because the broker prices the investment based on similar assets without applying significant adjustments. The Company's restricted investment financial assets as of March 27, 2015 and June 30, 2014 are included within current and long-term restricted investments on the condensed consolidated balance sheets.

Reclassification adjustments for realized gains or losses from available for sale restricted investment securities out of accumulated other comprehensive income are included in the condensed consolidated statements of operations within the insurance recoverables and other income line item.

The Company's contingent consideration liabilities, included in other accrued liabilities on the condensed consolidated balance sheets, are associated with the acquisitions made in fiscal year ending June 30, 2015. The liabilities are measured at fair value using a probability weighted average of the potential payment outcomes that would occur should certain contract metrics be reached. There is no market data available to use in valuing the contingent consideration; therefore, the Company developed its own assumptions related to the achievement of the metrics to evaluate the fair value of these liabilities. As such, the contingent consideration is classified within Level 3 as described below.

Items classified as Level 3 within the valuation hierarchy, consisting of contingent consideration liabilities related to recent acquisitions, were valued based on various estimates, including probability of success, discount rates and amount of time until the conditions of the contingent payments are achieved. The table below presents a rollforward of the contingent consideration liabilities valued using Level 3 inputs:

Contingent consideration balance at July 1, 2014	$	352
Additions for fiscal year 2015 acquisitions	362
Reduction of liability for payments made	(346		)
Contingent consideration balance at March 27, 2015	$	368

The Company's long-term debt is not measured at fair value in the condensed consolidated balance sheets. The fair value of debt is the estimated amount the Company would have to pay to transfer its debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at the balance sheet date. Fair values are based on valuations of similar debt at the balance sheet date and supported by observable market transactions when available: Level 2 of the fair value hierarchy.  At March 27, 2015 and June 30, 2014 the fair value of the Company's debt was not materially different than its carrying value.

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Note 4. Stock-Based Compensation

The Company has two plans under which outstanding stock-based awards have been issued: the TRC Companies, Inc. Restated Stock Option Plan (the "Restated Plan"), and the Amended and Restated 2007 Equity Incentive Plan (the "2007 Plan"), (collectively "the Plans"). The Company issues new shares or utilizes treasury shares, when available, to satisfy awards under the Plans. Awards are made by the Compensation Committee of the Board of Directors; however, the Compensation Committee has delegated to the Chief Executive Officer ("CEO") the authority to grant awards for up to 10 shares to employees subject to a limitation of 100 shares in any 12 month period.

Stock-based awards under the Plans consist of stock options, restricted stock awards ("RSA's"), restricted stock units ("RSU's") and performance stock units ("PSU's"). As of March 27, 2015, 3,111 shares remained available for grants under the 2007 Plan.

Stock-Based Compensation

The Company measures stock-based compensation cost at the grant date based on the fair value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's condensed consolidated statements of operations. Stock-based compensation expense includes the estimated effects of forfeitures, and estimates of forfeitures will be adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized in the period of change and will also impact the amount of expense to be recognized in future periods.

During the three and nine months ended March 27, 2015 and March 28, 2014, the Company recognized stock-based compensation expense in cost of services ("COS") and general and administrative expenses within the condensed consolidated statements of operations as follows:

		Three Months Ended				Nine Months Ended
		March 27, 2015		March 28, 2014		March 27, 2015		March 28, 2014
Cost of services		$	670	$	515	$	1,799	$	1,603
General and administrative expenses		700		600		1,947		1,910
	Total stock-based compensation expense	$	1,370	$	1,115	$	3,746	$	3,513

The benefits associated with the tax deductions in excess of recognized compensation cost are required to be reported as financing activities in the condensed consolidated statements of cash flows. This reduces reported operating cash flows and increases reported financing cash flows. As a result, net financing cash flows included $251 and $3,385 for the nine months ended March 27, 2015 and March 28, 2014, respectively, from the benefits of tax deductions in excess of recognized compensation cost. The tax benefit of any resulting excess tax deduction increases the additional paid-in capital ("APIC") pool. Any resulting tax deficiency is deducted from the APIC pool.

Stock Options

The Company uses the Black-Scholes option pricing model for determining the estimated grant date fair value for stock options. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of the employee stock options. The average expected life is based on the contractual term of the option and expected employee exercise and historical post-vesting employment termination experience. The Company estimates the volatility of its stock using historical volatility in accordance with current accounting guidance. Management determined that historical volatility of TRC common stock is most reflective of market conditions and the best indicator of expected volatility. The dividend yield assumption is based on the Company's historical and

11

expected dividend payouts. There were no stock options granted during the nine months ended March 27, 2015 and March 28, 2014.

A summary of stock option activity for the nine months ended March 27, 2015 under the Plans is as follows:

					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual	Aggregate
			Exercise		Term	Intrinsic
	Options		Price		(in years)	Value
Outstanding options as of June 30, 2014 (649 exercisable)	654		$	9.62
Options exercised	(61	)	$	5.39
Options expired	(268	)	$	11.09
Outstanding options as of March 27, 2015	325		$	9.19	1.0	$	320
Options exercisable as of March 27, 2015	323		$	9.21	1.0	$	314
Options vested and expected to vest as of March 27, 2015	325		$	9.19	1.0	$	320

The aggregate intrinsic value is measured using the fair market value at the date of exercise (for options exercised) or as of March 27, 2015 (for outstanding options), less the applicable exercise price. The closing price of the Company's common stock on the New York Stock Exchange was $8.27 as of March 27, 2015. The total intrinsic value of options exercised for the nine months ended March 27, 2015 and March 28, 2014 was $134 and $33, respectively. The total proceeds received from option exercises for the nine months ended March 27, 2015 and March 28, 2014 was $327 and $55, respectively.

As of March 27, 2015, there was $4 of total unrecognized compensation expense related to unvested stock option grants under the Plans, and this expense is expected to be recognized over a weighted-average period of 1.0 years.

Restricted Stock Awards

Compensation expense for RSA's is recognized ratably over the vesting term, which is generally four years. The fair value of the RSA's is determined based on the closing market price of the Company's common stock on the grant date. There were 6 non-vested RSA's as of March 27, 2015. There were noRSA's granted during the nine months ended March 27, 2015. As of March 27, 2015, there was $25 of total unrecognized compensation expense related to unvested RSA's under the Plans, and this expense is expected to be recognized over a weighted-average period of 1.4 years.

Restricted Stock Units

Compensation expense for RSU's is recognized ratably over the vesting term, which is generally four years. The fair value of RSU's is determined based on the closing market price of the Company's common stock on the grant date.

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A summary of non-vested RSU activity for the nine months ended March 27, 2015 is as follows:

			Weighted-
	Restricted		Average
	Stock		Grant Date
	Units		Fair Value
Non-vested units as of June 30, 2014	1,007		$	6.06
Units granted	403		$	6.90
Units vested	(489	)	$	5.24
Units forfeited	(6	)	$	6.89
Non-vested units as of March 27, 2015	915		$	6.87

RSU grants totaled 26 and 403 shares with a total weighted-average grant date fair value of $203 and $2,781 during the three and nine months ended March 27, 2015, respectively. RSU grants totaled 14 and 336 shares with a total weighted-average grant date fair value of $93 and $2,622 during the three and nine months ended March 28, 2014, respectively. The total fair value of RSU's vested during the three and nine months ended March 27, 2015 was $202 and $2,797, respectively. The total fair value of RSU's vested during the three and nine months ended March 28, 2014 was $128 and $4,407, respectively.

As of March 27, 2015, there was $4,887 of total unrecognized compensation expense related to unvested RSU's under the Plans, and this expense is expected to be recognized over a weighted-average period of 2.6 years.

Performance Stock Units

Compensation expense for PSU's is recognized ratably over the vesting term, which is generally four years, if and when the Company concludes that it is probable that the performance condition will be achieved. The Company reassesses the probability of vesting at each reporting period for awards with performance conditions and adjusts compensation expense based on its probability assessment. The fair value of the PSU's is determined based on the closing market price of the Company's common stock on the grant date.

The number of PSU's earned is determined based on the Company's performance against predefined targets. The range of payout is zero to 150% of the number of granted PSU's. The number of PSU's earned is determined based on actual performance at the end of the performance period. PSU grants totaled 464 shares with a total weighted-average grant date fair value of $2,986 during the nine months ended March 27, 2015. These PSU's will vest over four years upon meeting certain financial targets for the fiscal year ending June 30, 2015. PSU grants totaled 355 shares with a total weighted-average grant date fair value of $2,827 during the nine months ended March 28, 2014. The total fair value of PSU's vested during the nine months ended March 27, 2015, was $1,977. The total fair value of PSU's vested during the nine months ended March 28, 2014, was $2,234.

At March 27, 2015, there was $6,496 of total unrecognized compensation expense related to non-vested PSU's; this expense is expected to be recognized over a weighted-average period of 1.9 years.

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A summary of non-vested PSU activity for the nine months ended March 27, 2015 is as follows:

							Weighted-
	PSU				Total		Average
	Original		PSU		PSU		Grant Date
	Awards		Adjustments (1)		Awards		Fair Value
Non-vested units as of June 30, 2014	879		—		879		$	6.50
Units granted	433		31		464		$	6.90
Units vested	(337	)	(31	)	(368	)	$	5.14
Units forfeited	(34	)	—		(34	)	$	7.41
Non-vested units as of March 27, 2015	941		—		941		$	7.10

(1) Represents the additional number of PSU's issued based on the final performance condition achieved at the end of the respective performance period.

Note 5. Earnings per Share

Basic earnings per share ("EPS") is computed based on the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed using the treasury stock method for stock options, warrants, non-vested restricted stock awards and units, and non-vested performance stock units. The treasury stock method assumes conversion of all potentially dilutive shares of common stock with the proceeds from assumed exercises used to hypothetically repurchase stock at the average market price for the period. Diluted EPS is computed by dividing net income applicable to the Company by the weighted-average common shares and potentially dilutive common shares that were outstanding during the period.

The following table sets forth the computations of basic and diluted EPS for the three and nine months ended March 27, 2015 and March 28, 2014:

	Three Months Ended				Nine Months Ended
	March 27, 2015		March 28, 2014		March 27, 2015		March 28, 2014
Net income applicable to TRC Companies, Inc.	$	5,165	$	1,431	$	12,652	$	7,014
Basic weighted-average common shares outstanding	30,382		29,691		30,233		29,549
Effect of dilutive stock options, RSA's, RSU's and PSU's	355		475		318		539
Diluted weighted-average common shares outstanding	30,737		30,166		30,551		30,088
Earnings per common share applicable to TRC Companies, Inc.
Basic earnings per common share	$	0.17	$	0.05	$	0.42	$	0.24
Diluted earnings per common share	$	0.17	$	0.05	$	0.41	$	0.23
Anti-dilutive stock options, RSA's, RSU's and PSU's, excluded from the calculation	1,832		2,153		1,868		2,088

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Note 6. Accounts Receivable

The current portion of accounts receivable as of March 27, 2015 and June 30, 2014, were comprised of the following:

		March 27, 2015			June 30, 2014
Billed		$	83,930		$	69,730
Unbilled		51,760			50,743
Retainage		4,394			5,184
	Total accounts receivable - gross	140,084			125,657
Less allowance for doubtful accounts		(8,418		)	(8,720		)
	Total accounts receivable, less allowance for doubtful accounts	$	131,666		$	116,937

Note 7. Other Accrued Liabilities

As of March 27, 2015 and June 30, 2014, other accrued liabilities were comprised of the following:

		March 27, 2015		June 30, 2014
Contract costs		$	28,266	$	26,289
Legal accruals		3,761		5,903
Lease obligations		3,741		3,420
Other		4,855		11,698
	Total other accrued liabilities	$	40,623	$	47,310

Note 8. Goodwill and Other Intangible Assets

Goodwill

As of March 27, 2015, the Company had $36,354 of goodwill, and the Company does not believe there were any events or changes in circumstances since the last goodwill assessment on April 25, 2014 that would indicate the fair value of goodwill was more likely than not reduced to below its carrying value. Accordingly, goodwill was not tested for impairment during the current fiscal quarter.

On September 29, 2014, the Company acquired all of the outstanding stock of NOVA Training Inc. and all of the outstanding membership interests of NOVA Earthworks, LLC (collectively "NOVA") based in Midland, Texas. NOVA provides safety training and environmental services as well as oil spill response, remediation and general oil field construction services to customers in the oil and gas industry. The initial purchase price consisted of (i) a cash payment of $7,198 payable at closing, (ii) a second cash payment of $2,600 placed into escrow, of which $508 was payable in six months and the remaining $2,092 is due in 18 months subject to withholding for various contractual issues, (iii) 50 shares of the Company's common stock valued at $323 on the closing date, and (iv) a $560 net working capital adjustment. The sellers are also entitled to up to $1,500 in contingent cash consideration through an earn-out provision based on the NSR performance of the acquired firm over the 24 month period following closing. The Company estimated the fair value of the contingent earn-out liability to be $287 based on the projections and probabilities of reaching the performance goals through September 2016. Goodwill of $3,683, none of which is expected to be tax deductible, and other intangible assets of $3,622 were recorded as a result of this acquisition. The goodwill is primarily attributable to the synergies and ancillary growth opportunities expected to arise after the acquisition. The fair values of assets and liabilities of the NOVA acquisition have been recorded in the Environmental operating segment. The impact of this acquisition was not material to the Company's condensed consolidated balance sheets and results of operations.

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On July 1, 2014, the Company acquired all of the outstanding stock of Covino Environmental Associates, Inc. ("Covino"), based in Woburn, Massachusetts. Covino provides building sciences, industrial hygiene and related consulting services to private and public clients including major educational institutions. The initial purchase price of $1,994 consisted of cash of $1,500 payable at closing, a second cash payment of $309 payable on the one-year anniversary of the closing date subject to withholding for various contractual issues, and a $110 net working capital adjustment. The selling shareholder is also entitled to contingent cash consideration through an earn-out provision based on net service revenue ("NSR") performance of the acquired firm over the twelve month period following closing. The Company estimated the fair value of the contingent earn-out liability to be $75 based on the projections and probabilities of reaching the performance goals through July 2015. Goodwill of $992, none of which is expected to be tax deductible, and other intangible assets of $601 were recorded as a result of this acquisition. The goodwill is primarily attributable to the synergies and ancillary growth opportunities expected to arise after the acquisition. The fair values of assets and liabilities of the Covino acquisition have been recorded in the Environmental operating segment. The impact of this acquisition was not material to the Company's condensed consolidated balance sheets and results of operations.

The changes in the carrying amount of goodwill for the nine months ended March 27, 2015 by operating segment are as follows:

	Gross									Gross
	Balance,		Accumulated			Balance,				Balance,		Accumulated			Balance,
	July 1,		Impairment			July 1,		Additions /		March 27,		Impairment			March 27,
Operating Segment	2014		Losses			2014		Adjustments		2015		Losses			2015
Energy	$	27,836	$	(14,506	)	$	13,330	$	—	$	27,836	$	(14,506	)	$	13,330
Environmental	36,214		(17,865		)	18,349		$	4,675	40,889		(17,865		)	23,024
Infrastructure	7,224		(7,224		)	—		$	—	7,224		(7,224		)	—
	$	71,274	$	(39,595	)	$	31,679	$	4,675	$	75,949	$	(39,595	)	$	36,354

Other Intangible Assets

Identifiable intangible assets as of March 27, 2015 and June 30, 2014 are included in other assets on the condensed consolidated balance sheets and were comprised of:

	March 27, 2015							June 30, 2014
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
Identifiable intangible assets	Amount		Amortization			Amount		Amount		Amortization			Amount
With determinable lives:
Customer relationships	$	16,213	$	(6,871	)	$	9,342	$	12,125	$	(4,400	)	$	7,725
Contract backlog	—		—			—		110		(83		)	27
	16,213		(6,871		)	9,342		12,235		(4,483		)	7,752
With indefinite lives:
Engineering licenses	426		—			426		426		—			426
	$	16,639	$	(6,871	)	$	9,768	$	12,661	$	(4,483	)	$	8,178

Identifiable intangible assets with determinable lives are amortized over their estimated useful lives and are also reviewed for impairment if events or changes in circumstances indicate that their carrying amount may not be realizable.

Identifiable intangible assets with determinable lives are being amortized over a weighted-average period of approximately 6 years. The weighted-average periods of amortization by intangible asset class is approximately 6 years for customer relationship assets and 4 months for contract backlog. The amortization of intangible assets for the

16

three and nine months ended March 27, 2015 was $905 and $2,633, respectively. The amortization of intangible assets for the three and nine months ended March 28, 2014 was $755 and $2,127, respectively.

Estimated amortization expense of intangible assets for the remainder of fiscal year 2015 and succeeding fiscal years is as follows:

Fiscal Year		Amount
2015		$	852
2016		2,915
2017		2,335
2018		1,748
2019		948
2020 and Thereafter		544
	Total	$	9,342

On an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired, the fair value of the indefinite-lived intangible assets is evaluated by the Company to determine if an impairment charge is required. The Company performed its most recent annual impairment review as of April 25, 2014. There were no events or changes in circumstances that would indicate the fair value of intangible assets was reduced to below its carrying value during the nine months ended March 27, 2015, and therefore intangible assets were not tested for impairment.

Note 9. Long-Term Debt and Capital Lease Obligations

Revolving Credit Facility

On April 16, 2013, the Company and substantially all of its subsidiaries (the "Borrower"), entered into a secured credit agreement (the "Credit Agreement") and related security documentation with Citizens Commercial Banking as lender, administrative agent, sole lead arranger, and sole book runner and JP Morgan Chase Bank, N.A. as lender and syndication agent. The Credit Agreement provides the Company with a $75,000five-year secured revolving credit facility with a sublimit of $15,000 available for the issuance of letters of credit. Pursuant to the terms of the Credit Agreement, the Company may request an increase in the amount of the credit facility up to $95,000. The expiration date of the Credit Agreement is April 16, 2018.

Amounts outstanding under the Credit Agreement bear interest at the Base Rate (as defined, generally the prime rate) plus a margin of 1.00% to 1.50% or at LIBOR plus a margin of 2.00% to 2.50%, based on the ratio (measured over a trailing four-quarter period) of consolidated total debt to earnings before interest, taxes, depreciation and amortization ("EBITDA"), as defined. The Company's obligations under the Credit Agreement are secured by a pledge of substantially all of its assets and guaranteed by its principal operating subsidiaries. The Credit Agreement also contains cross-default provisions which become effective if the Company defaults on other indebtedness.

Under the Credit Agreement the Company is required to maintain a fixed charge coverage ratio of no less than 1.25 to 1.00 and to not permit its leverage ratio to exceed 2.00 to 1.00. The Credit Agreement also requires the Company to achieve minimum levels of Consolidated Adjusted EBITDA of $20,000 for the twelve-month periods ending June 30, 2015 and thereafter. The Company was in compliance with the financial covenants under the Credit Agreement as of March 27, 2015.

As of March 27, 2015 and June 30, 2014, the Company had no borrowings outstanding under the Credit Agreement. Letters of credit outstanding were $2,648 and $3,148 as of March 27, 2015 and June 30, 2014, respectively. Based upon the leverage covenant, the maximum availability under the Credit Agreement was $75,000 and $68,536 as of March 27, 2015 and June 30, 2014, respectively. Funds available to borrow under the Credit Agreement, after

17

consideration of the letters of credit outstanding and other indebtedness outstanding of $261 and $701, were $72,091 and $64,687 as of March 27, 2015 and June 30, 2014, respectively.

Other Notes Payable

In March 2012, the Company financed $2,195, of which $161 was being accounted for as a capital lease obligation, for a three-year software license agreement payable in twelve equal quarterly installments of approximately $190 each, including a finance charge of 2.74%. As of March 27, 2015, the balance outstanding under this agreement was $0.

In July 2014, the Company financed $5,247 of insurance premiums payable in eleven equal monthly installments of approximately $482 each, including a finance charge of 1.99%. As of March 27, 2015, the balance outstanding under this agreement was $961.

Capital Lease Obligations

During fiscal years 2013 and 2012, the Company financed $1,160 and $756, respectively, of furniture, office equipment, and computer equipment under capital lease agreements expiring in fiscal years 2015 and 2016. The assets and liabilities under capital lease agreements are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are amortized over the shorter of their related lease terms or their estimated useful lives. Amortization of assets under capital leases is included in depreciation and amortization in the condensed consolidated statements of operations. The cost of assets under capital leases was $1,916, and accumulated amortization was $1,440 at March 27, 2015. The average interest rates on the capital leases is 2.55% and is imputed based on the lower of the Company's incremental borrowing rate at the inception of each lease or the implicit interest rate of the respective lease.

Note 10. Variable Interest Entity

The Company's condensed consolidated financial statements include the financial results of a variable interest entity in which it is the primary beneficiary. In determining whether the Company is the primary beneficiary of an entity, it considers a number of factors, including its ability to direct the activities that most significantly affect the entity's economic success, the Company's contractual rights and responsibilities under the arrangement and the significance of the arrangement to each party. These considerations impact the way the Company accounts for its existing collaborative and joint venture relationships and determines the consolidation of companies or entities with which the Company has collaborative or other arrangements.

The Company consolidates the operations of Center Avenue Holdings ("CAH") a limited liability company, as it retains the contractual power to direct the activities of CAH which most significantly and directly impact its economic performance. The activity of CAH is not significant to the overall performance of the Company. The assets of CAH are restricted, from the standpoint of the Company, in that they are not available for the Company's general business use outside the context of CAH.

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The following table sets forth the assets and liabilities of CAH included in the condensed consolidated balance sheets of the Company:

	March 27, 2015		June 30, 2014
Current assets:
Restricted investments	$	63	$	63
Total current assets	63		63
Other assets	4,344		4,344
Total assets	$	4,407	$	4,407
Current liabilities:
Environmental remediation liabilities	$	2	$	7
Total current liabilities	2		7
Long-term environmental remediation liabilities	18		16
Total liabilities	$	20	$	23

The Company and the other member of CAH do not generally have an obligation to make additional capital contributions to CAH. However, through the end of the fiscal quarter ended March 27, 2015, the Company has provided approximately $4,023 of support it was not contractually obligated to provide. The additional support was primarily for debt service payments on a note payable. CAH repaid this loan balance in the amount of $2,448 in full on October 1, 2013. The Company intends to continue funding CAH's obligations as they become due.

Note 11. Income Taxes

The Company's effective tax rate was approximately 27.1% and 42.6% for the three months ended March 27, 2015 and March 28, 2014, respectively. The primary reconciling items between the federal statutory rate of 35.0% and the Company's overall effective tax rate for the three months ended March 27, 2015 were the effect of state income taxes offset by discrete tax benefits related to the U.S. Research and Development credit. The discrete impact of research and development credits is the result of a change in estimate resulting from the finalization of a new research and development credit study during the three months ended March 27, 2015. A tax benefit for the change in estimate was reflected in its entirety in the three months ended March 27, 2015. For the three months ended March 28, 2014, the primary reconciling item between the federal statutory rate of 35.0% and the Company's overall effective tax rate was the effect of state income taxes.

The Company's effective tax rate was approximately 36.4% and 40.8% for the nine months ended March 27, 2015 and March 28, 2014, respectively. The primary reconciling items between the federal statutory rate of 35.0% and the Company's overall effective tax rate were the effect of state income taxes offset by discrete tax benefits related to research and development tax credits for the nine months ended March 27, 2015, as well as the effect of state income taxes for the nine months ended March 28, 2014.

As of March 27, 2015, the recorded liability for uncertain tax positions under the measurement criteria of Accounting Standards Codification ("ASC") Topic 740, Income Taxes, was $1,481. The Company does not expect the amount of unrecognized tax benefits to materially change within the next twelve months.

As of March 27, 2015, the Company had a tax benefit of approximately $3,321 related to excess tax benefits from stock compensation. Pursuant to ASC Topic 718, a benefit of $251 was recorded to increase APIC as it reduced income taxes payable during the nine months ended March 27, 2015; in addition, a tax deficiency of $518 related to the expiration of vested stock options was recorded to decrease APIC as it reduced deferred tax assets.

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Note 12. Operating Segments

The Company manages its business under the following three operating segments:

Energy: The Energy operating segment provides services to a range of clients including energy companies, utilities, other commercial entities, and state and federal government agencies. The Company's Energy services include program management, engineer/procure/construct projects, design, and consulting. The Company's typical Energy projects involve upgrades, design and new construction for electric transmission and distribution systems and substations; energy efficiency program design and management; and renewable energy development and power generation.

Environmental: The Environmental operating segment provides services to a range of clients including industrial, transportation, energy and natural resource companies, as well as federal, state and municipal agencies. The Environmental operating segment is organized to focus on key areas of demand including: environmental management of buildings and facilities; air quality measurements and modeling of potential air pollution impacts; water quality and water resource management; assessment and remediation of contaminated sites and buildings; hazardous waste management; construction monitoring, inspection and management; environmental, health and safety management and sustainability advisory services; compliance auditing and strategic due diligence; environmental licensing and permitting of a wide variety of projects; and natural and cultural resource assessment, protection and management.

Infrastructure: The Infrastructure operating segment provides services related to the expansion of infrastructure capacity, the rehabilitation of overburdened and deteriorating infrastructure systems, and the management of risks related to security of public and private facilities. The Company's client base is predominantly state and municipal governments as well as select commercial developers. In addition, the Company provides infrastructure services on projects originating in its Energy and Environmental operating segments. Primary services include: roadway, bridge and related surface transportation design; structural design and inspection of bridges; program management; construction engineering inspection and construction management for roads and bridges; civil engineering for municipalities and public works departments; geotechnical engineering services; and security assessments, design and construction management.

The Company's chief operating decision maker ("CODM") is its Chief Executive Officer ("CEO"). The Company's CEO manages the business by evaluating the financial results of the three operating segments focusing primarily on segment revenue and segment profit. The Company utilizes segment revenue and segment profit because it believes they provide useful information for effectively allocating resources among operating segments; evaluating the health of its operating segments based on metrics that management can actively influence; and gauging its investments and its ability to service, incur or pay down debt. Specifically, the Company's CEO evaluates segment revenue and segment profit and assesses the performance of each operating segment based on these measures, as well as, among other things, the prospects of each of the operating segments and how they fit into the Company's overall strategy. The Company's CEO then decides how resources should be allocated among its operating segments. The Company does not track its assets by operating segment, and consequently, it is not practical to show assets by operating segment. Segment profit includes all operating expenses except the following: costs associated with providing corporate shared services (including certain depreciation and amortization), goodwill and intangible asset write-offs, and stock-based compensation expense. Depreciation expense is primarily allocated to operating segments based upon their respective use of total operating segment office space. Assets solely used at the Corporate level are not allocated to the operating segments. Inter-segment balances and transactions are not material. The accounting policies of the operating segments are the same as those for the Company as a whole, except as discussed herein.

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The following tables present summarized financial information for the Company's operating segments (for the periods noted below): 

	Energy		Environmental		Infrastructure		Total
Three months ended March 27, 2015:
Gross revenue	$	41,643	$	70,711	$	16,696	$	129,050
Net service revenue	36,413		51,172		12,425		100,010
Segment profit	8,676		9,942		2,806		21,424
Depreciation and amortization	733		941		98		1,772
Three months ended March 28, 2014:
Gross revenue	$	44,480	$	60,750	$	14,223	$	119,453
Net service revenue	34,632		41,939		10,403		86,974
Segment profit	7,908		7,787		1,413		17,108
Depreciation and amortization	835		633		106		1,574

	Energy		Environmental		Infrastructure		Total
Nine months ended March 27, 2015:
Gross revenue	$	122,124	$	219,960	$	53,142	$	395,226
Net service revenue	104,789		151,383		36,978		293,150
Segment profit	22,224		30,252		6,483		58,959
Depreciation and amortization	2,376		2,764		329		5,469
Nine months ended March 28, 2014:
Gross revenue	$	118,050	$	182,692	$	46,692	$	347,434
Net service revenue	98,339		124,860		34,430		257,629
Segment profit	19,313		25,898		6,238		51,449
Depreciation and amortization	2,385		2,039		318		4,742

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	Three Months Ended						Nine Months Ended
Gross revenue	March 27, 2015			March 28, 2014			March 27, 2015			March 28, 2014
Gross revenue from reportable operating segments	$	129,050		$	119,453		$	395,226		$	347,434
Reconciling items (1)	1,727			1,383			1,804			2,568
Total consolidated gross revenue	$	130,777		$	120,836		$	397,030		$	350,002
Net service revenue
Net service revenue from reportable operating segments	$	100,010		$	86,974		$	293,150		$	257,629
Reconciling items (1)	984			1,107			301			2,835
Total consolidated net service revenue	$	100,994		$	88,081		$	293,451		$	260,464
Income from operations before taxes
Segment profit from reportable operating segments	$	21,424		$	17,108		$	58,959		$	51,449
Corporate shared services (2)	(12,469		)	(12,895		)	(33,561		)	(34,131		)
Stock-based compensation expense	(1,370		)	(1,115		)	(3,746		)	(3,513		)
Unallocated depreciation and amortization	(436		)	(587		)	(1,645		)	(1,845		)
Interest expense	(73		)	(22		)	(125		)	(152		)
Total consolidated income from operations before taxes	$	7,076		$	2,489		$	19,882		$	11,808
Depreciation and amortization
Depreciation and amortization from reportable operating segments	$	1,772		$	1,574		$	5,469		$	4,742
Unallocated depreciation and amortization	436			587			1,645			1,845
Total consolidated depreciation and amortization	$	2,208		$	2,161		$	7,114		$	6,587

(1) Amounts represent certain unallocated corporate amounts not considered in the CODM's evaluation of operating segment performance.

(2) Corporate shared services consist of centrally managed functions in the following areas: accounting, treasury, information technology, legal, human resources, marketing, internal audit and executive management such as the CEO and various executives. These costs and other items of a general corporate nature are not allocated to the Company’s three operating segments.

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Note 13. Change in Estimate

In October 2013, the regulatory agency charged with oversight of one of the Company’s Exit Strategy projects issued a letter requiring the Company to evaluate modifications to its current site remedy. While it is premature to predict the outcome of this evaluation, the Company’s best estimate of the cost of such modifications is $12,439. As a result, the Company updated its estimate to complete for this project during the three months ended September 27, 2013. There were no significant changes to the estimate to complete during the three months ended March 28, 2014. This adjustment resulted in a reduction of gross revenue and NSR of $5,093 and a $7,346 charge to COS as a provision for future losses during the nine months ended March 28, 2014. Because these additional costs are expected to be covered by insurance, the Company also recorded an insurance recoverable of $12,439 during the nine months ended March 28, 2014. Therefore, this change in estimate had no impact on operating income or EPS.

In February 2014, the regulatory agency charged with oversight of another of the Company’s Exit Strategy projects requested the addition of a significant alternative remedy with respect to a supplemental feasibility study. While the Company cannot predict which alternative will ultimately be chosen by the regulatory agency, the Company’s best estimate of the cost of such alternate remedy is $4,877. As a result, the Company updated its estimate to complete for this project during the three months ended March 28, 2014. This adjustment resulted in a reduction of gross revenue and NSR of $1,855 and a $3,022 charge to COS as a provision for future losses during the three and nine months ended March 28, 2014. Because these additional costs are expected to be covered by insurance, the Company also recorded an insurance recoverable of $4,877 during the three and nine months ended March 28, 2014. Therefore, this change in estimate had no impact on operating income or EPS.

Note 14. Commitments and Contingencies

Exit Strategy Contracts

The Company has entered into a number of long-term contracts pursuant to its Exit Strategy program under which it is obligated to complete the remediation of environmental conditions at covered sites. The Company assumes the risk for remediation costs for pre-existing environmental conditions and believes that through in-depth technical analysis, comprehensive cost estimation and creative remedial approaches it is able to execute strategies which protect the Company's return on these projects. The Company's client pays a fixed price and, as additional protection, for a majority of the contracts the client also pays for a cleanup cost cap insurance policy. The policy, which includes the Company as a named or additional named insured party, provides coverage for cost increases from unknown or changed conditions up to a specified maximum amount significantly in excess of the estimated cost of remediation. The Company believes that it is adequately protected from risk on these projects and that it is not likely that it will incur material losses in excess of applicable insurance. However, because several projects are near or beyond the term or financial limits of the insurance, the Company believes it is reasonably possible that events could occur under certain circumstances which could be material to the Company's condensed consolidated financial statements. With respect to these projects, there is a wide range of potential outcomes that may result in material costs being incurred beyond the limits or term of insurance, such as: (i) greater than expected volumes of contaminants requiring remediation; (ii) treatment systems requiring operation beyond the insurance term; and (iii) greater than expected allocable share of the ultimate remedy. The Company does not believe these outcomes are likely, and the exact nature, impact and duration of any such occurrence could vary due to a number of factors. Accordingly, the Company is unable to provide an estimate of potential loss with a reasonable degree of accuracy. Nevertheless, if these events were to occur, the Company believes that it is reasonably possible that the amount of costs currently accrued, which represents the Company's best estimate, could increase by as much as $28,200, of which $4,800 would be covered by insurance.

With respect to one of the projects noted above, the regulatory agency charged with oversight of the project approved a remedial plan that is more expensive than the remedy that had been proposed by the Company. A cost allocation among the potentially responsible parties has not been finalized. However, the Company (and the party from whom it assumed site responsibility) did not contribute in any way to the site contamination, and the Company believes that it has meritorious defenses to liability and that it will not ultimately be responsible for any material remedial costs

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attributable to the more costly selected remedy. Nevertheless, due to uncertainty over the cost allocation process, it is reasonably possible that the Company's recorded estimate could change. With respect to another one of these projects, the regulatory agency charged with oversight of the project selected a remedy that is consistent with regulatory guidance and the Company’s estimates. However, until the final remedy is actually implemented, it remains reasonably possible that the volumes associated with the selected remedial alternative could change and the related costs could increase. The Company's estimated share of the potential remedial cost changes related to these two projects range from $0 to $21,200.

The Company adjusts all of its recorded liabilities as further information develops or circumstances change. The Company is unable to accurately project the time period over which these amounts would ultimately be paid out, however the Company estimates that any potential payments could be made over a 1 to 5 year period.  

Contract Damages

The Company has entered into contracts which, among other things, require completion of the specified scope of work within a defined period of time or a defined budget. Certain of those contracts provide for the assessment of liquidated or other damages if certain project objectives are not met pursuant to the terms of the contract. At present, the Company does not believe a material assessment of such damages is reasonably possible.

Government Contracts

The Company's indirect cost rates applied to contracts with the U.S. Government and various state agencies are subject to examination and renegotiation. Contracts and other records of the Company with respect to federal contracts have been examined through June 30, 2008. The Company believes that adjustments resulting from such examination or renegotiation proceedings, if any, will not likely have a material impact on the Company's business, operating results, financial position and cash flows.

Legal Matters

The Company and its subsidiaries are subject to claims and lawsuits typical of those filed against engineering and consulting companies. The Company carries liability insurance, including professional liability insurance, against such claims subject to certain deductibles and policy limits. Except as described herein, management is of the opinion that the resolution of these claims and lawsuits will not likely have a material effect on the Company's operating results, financial position and cash flows.

TRC Environmental Corporation v. LVI Group Services, Inc., United States District Court for the Western District of Texas, Austin Division 2014.TRC was the prime contractor on a project to demolish and decommission a power plant in Austin, Texas. LVI was a subcontractor on that project, and TRC sued LVI for approximately $3,000 for breaches in connection with LVI’s work. LVI filed a number of responsive pleadings in this lawsuit including a counterclaim for approximately $9,600. TRC believes that its claims against LVI are meritorious and that LVI’s counterclaim is without merit. Nevertheless, an adverse determination on LVI’s counterclaim could have a material adverse effect on the Company’s business, operating results, financial position and cash flows.

The Company records actual or potential litigation-related losses in accordance with ASC Topic 450. As of March 27, 2015 and June 30, 2014, the Company had recorded litigation accruals of $3,337 and $5,410, respectively. The Company also had insurance recovery receivables related to the aforementioned litigation-related accruals of $2,004 and $4,098 as of March 27, 2015 and June 30, 2014, respectively.

The Company periodically adjusts the amount of such liabilities when such actual or potential liabilities are paid or otherwise discharged, new claims arise, or additional relevant information about existing or potential claims becomes available. The Company believes that it is reasonably possible that the amount of potential litigation-related liabilities could increase by as much as $12,000, of which $2,500 would be covered by insurance.

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Note 15. Subsequent Events

Effective April 30, 2015, the Company acquired all of the outstanding stock X-Line, Inc. (X-Line), based in Villa Rica, Ga. The initial purchase price consisted of a cash payment of $800 payable at closing, and a second payment of $200 placed in escrow, of which $50 is payable in six months, and the remaining balance due in 12 months. The purchase price is subject to a working capital adjustment, which is expected to be finalized within the next several months. The sellers are also entitled to up to $300 in contingent cash consideration through an earnout provision based on NSR performance of the acquired firm over the 12 month period following closing. X-Line is being integrated into the Company's Energy operating segment. Due to the limited time since the closing of the X-Line acquisition, the related acquisition accounting is incomplete at this time. As a result, the Company is unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired and resulting from the transaction. The impact of this acquisition is not expected to be material to the Company's condensed consolidated balance sheets and results of operations.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Three and Nine Months Ended March 27, 2015 and March 28, 2014

Our fiscal quarters end on the last Friday of the quarter except for the last quarter of the fiscal year which always ends on June 30. The nine months ended March 27, 2015 contained one less business day than the prior fiscal year period.

The following discussion of our results of operations and financial condition should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q and with our Annual Report on Form 10-K for the fiscal year ended June 30, 2014. This discussion contains forward-looking statements that are based upon current expectations and assumptions, and, by their nature, such forward-looking statements are subject to risks and uncertainties. We have attempted to identify such statements using words such as "may", "expects", "plans", "anticipates", "believes", "estimates", or other words of similar import. We caution the reader that there may be events in the future that management is not able to accurately predict or control which may cause actual results to differ materially from the expectations described in the forward-looking statements. The factors described in the sections captioned "Critical Accounting Policies" and "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014 as well as in this Form 10-Q provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in the forward-looking statements.

Overview

We are a firm that provides integrated engineering, consulting, and construction management services. Our project teams help our commercial and governmental clients implement environmental, energy and infrastructure projects from initial concept to delivery and operation. We provide our services almost entirely in the United States of America.

We generate revenue and cash flows from fees for professional and technical services. As a service company, we are more labor-intensive than capital-intensive. Our revenue and cash flow is driven by our ability to attract and retain qualified and productive employees, identify business opportunities, secure new and renew existing client contracts, provide outstanding service to our clients and execute projects successfully. Our income from operations is derived from our ability to generate revenue under our contracts in excess of our direct costs, subcontractor costs, other contract costs, and general and administrative ("G&A") expenses.

In the course of providing our services, we routinely subcontract services. Generally, these subcontractor costs are passed through to our clients and, in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and consistent with industry practice, are included in gross revenue. Because subcontractor services can change significantly from project to project, changes in gross revenue may not be indicative of business trends. Accordingly, we also report net service revenue ("NSR"), which is gross revenue less subcontractor costs and other direct reimbursable charges, and our discussion and analysis of financial condition and results of operations uses NSR as a primary point of reference.

Our cost of services ("COS") includes professional compensation and related benefits together with certain direct and indirect overhead costs such as rents, utilities and travel. Professional compensation represents the majority of these costs. Our G&A expenses are comprised primarily of our corporate headquarters costs related to corporate executive management, finance, accounting, information technology, administration and legal. These costs are generally unrelated to specific client projects and can vary as expenses are incurred to support corporate activities and initiatives.

Our revenue, expenses and operating results may fluctuate significantly from year to year as a result of numerous factors, including:

• Unanticipated changes in contract performance that may affect profitability, particularly with contracts that are fixed-price or have funding limits;

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• Seasonality of the spending cycle, notably for state and local government entities, and the spending patterns of our commercial sector clients;

• Budget constraints experienced by our federal, state and local government clients;

• Divestitures or discontinuance of operating units;

• The timing and impact of acquisitions;

• Employee hiring, utilization and turnover rates;

• The number and significance of client contracts commenced and completed during the period;

• Creditworthiness and solvency of clients;

• The ability of our clients to terminate contracts without penalties;

• Delays incurred in connection with contracts;

• The size, scope and payment terms of contracts;

• Contract negotiations on change orders and collection of related accounts receivable;

• The timing of expenses incurred for corporate initiatives;

• Competition;

• Litigation;

• Changes in accounting rules;

• The credit markets and their effect on our customers;

• General economic or political conditions; and

• Employee expenses such as medical and other benefits.

We experience seasonal trends in our business. Our revenue is typically lower in the second and third fiscal quarters, as our business is, to some extent, dependent on field work and construction scheduling and is also affected by holidays. Our revenue is lower during these times of the year because many of our clients' employees, as well as our own employees, do not work during those holidays, resulting in fewer billable hours charged to projects and thus, lower revenue recognized. In addition to holidays, harsher weather conditions that occur in the fall and winter can cause some of our offices to close and can significantly affect our project field work. Conversely, our business generally benefits from milder weather conditions in our first and fourth fiscal quarters which allow for more productivity from our field employees.

Acquisitions

We continuously evaluate the marketplace for strategic acquisition opportunities. A fundamental component of our profitable growth strategy is to pursue acquisitions that will expand our platform in key markets. Where the impact of acquisitions is noted in discussing results, it refers to acquisitions effected within the twelve months prior to the end of the relevant period.

On September 29, 2014, we acquired all of the outstanding stock of NOVA Training Inc. and all of the outstanding membership interests of NOVA Earthworks, LLC (collectively "NOVA") based in Midland, Texas. NOVA provides safety training and environmental services as well as oil spill response, remediation and general oil field construction services to customers in the oil and gas industry. The initial purchase price consisted of (i) a cash payment of $7.2 million payable at closing, (ii) a second cash payment of $2.6 million placed into escrow, of which $0.5 million was payable in six months and the remaining $2.1 million is due in 18 months subject to withholding for various contractual issues, (iii) 50 shares of our common stock valued at $0.3 million on the closing date, and (iv) a $0.6 million net working capital adjustment. The sellers are also entitled to up to $1.5 million in contingent cash consideration through an earn-out provision based on the NSR performance of the acquired firm over the 24 month period following closing. We estimated the fair value of the contingent earn-out liability to be $0.3 million based on the projections and probabilities of reaching the performance goals through September 2016. Goodwill of $3.7 million, none of which is expected to be tax deductible, and other intangible assets of $3.6 million were recorded as a result of this acquisition. The goodwill is primarily attributable to the synergies and ancillary growth opportunities expected to arise after the acquisition. The fair values of assets and liabilities of the NOVA acquisition have been recorded in the Environmental operating segment. The impact of this acquisition was not material to our condensed consolidated balance sheets and results of operations.

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On July 1, 2014, we acquired all of the outstanding stock of Covino Environmental Associates, Inc. ("Covino"), based in Woburn, Massachusetts. Covino provides building sciences, industrial hygiene and related consulting services to private and public clients including major educational institutions. The initial purchase price of $2.0 million consisted of cash of $1.5 million payable at closing, a second cash payment of $0.3 million payable on the one-year anniversary of the closing date subject to withholding for various contractual issues, and a $0.1 million net working capital adjustment. The selling shareholder is also entitled to contingent cash consideration through an earn-out provision based on NSR performance of the acquired firm over the twelve month period following closing. We estimated the fair value of the contingent earn-out liability to be $0.1 million based on the projections and probabilities of reaching the performance goals through July 2015. Goodwill of $1.0 million, none of which is expected to be tax deductible, and other intangible assets of $0.6 million were recorded as a result of this acquisition. The goodwill is primarily attributable to the synergies and ancillary growth opportunities expected to arise after the acquisition. The fair values of assets and liabilities of the Covino acquisition have been recorded in the Environmental operating segment. The impact of this acquisition was not material to our condensed consolidated balance sheets and results of operations.

Operating Segments

We manage our business under the following three operating segments:

Energy:  The Energy operating segment provides services to a range of clients including energy companies, utilities, other commercial entities, and state and federal government agencies. Our Energy services include program management, engineer/procure/construct projects, design, and consulting. Our typical Energy projects involve upgrades, design and new construction for electric transmission and distribution systems and substations; energy efficiency program design and management; and renewable energy development and power generation.

Environmental:  The Environmental operating segment provides services to a range of clients including industrial, transportation, energy and natural resource companies, as well as federal, state and municipal agencies. The Environmental operating segment is organized to focus on key areas of demand including: environmental management of buildings and facilities; air quality measurements and modeling of potential air pollution impacts; water quality and water resource management; assessment and remediation of contaminated sites and buildings; hazardous waste management; construction monitoring, inspection and management; environmental, health and safety management and sustainability advisory services; compliance auditing and strategic due diligence; environmental licensing and permitting of a wide variety of projects; and natural and cultural resource assessment, protection and management.

Infrastructure:  The Infrastructure operating segment provides services related to the expansion of infrastructure capacity, the rehabilitation of overburdened and deteriorating infrastructure systems, and the management of risks related to security of public and private facilities. Our client base is predominantly state and municipal governments as well as select commercial developers. In addition, we provide infrastructure services on projects originating in our Energy and Environmental operating segments. Primary services include: roadway, bridge and related surface transportation design; structural design and inspection of bridges; program management; construction engineering inspection and construction management for roads and bridges; civil engineering for municipalities and public works departments; geotechnical engineering services; and security assessments, design and construction management.

Our chief operating decision maker is our Chief Executive Officer ("CEO"). Our CEO manages the business by evaluating the financial results of the three operating segments, focusing primarily on segment revenue and segment profit. We utilize segment revenue and segment profit because we believe they provide useful information for effectively allocating resources among operating segments; evaluating the health of our operating segments based on metrics that management can actively influence; and gauging our investments and our ability to service, incur or pay down debt. Specifically, our CEO evaluates segment revenue and segment profit and assesses the performance of each operating segment based on these measures, as well as, among other things, the prospects of each of the operating segments and how they fit into our overall strategy. Our CEO then decides how resources should be allocated among our operating

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segments. We do not track our assets by operating segment, and consequently, it is not practical to show assets by operating segment. Segment profit includes all operating expenses except the following: costs associated with providing corporate shared services (including certain depreciation and amortization), goodwill and intangible asset write-offs, and stock-based compensation expense. Depreciation expense is primarily allocated to operating segments based upon their respective use of total operating segment office space. Assets solely used at the Corporate level are not allocated to the operating segments. Inter-segment balances and transactions are not material. The accounting policies of the operating segments are the same as those for us as a whole except as discussed herein.

The following table presents the approximate percentage of our NSR by operating segment for the three and nine months ended March 27, 2015 and March 28, 2014:

	Three Months Ended				Nine Months Ended
	March 27, 2015		March 28, 2014		March 27, 2015		March 28, 2014
Energy	36	%	40	%	36	%	38	%
Environmental	51	%	48	%	52	%	49	%
Infrastructure	13	%	12	%	12	%	13	%
	100	%	100	%	100	%	100	%

Business Trend Analysis

Energy: The utilities in the United States are in the midst of a multi-year upgrade of the electric transmission grid to improve capacity, reliability and distribution of sources of generation. Years of underinvestment coupled with a favorable regulatory environment have provided a good business opportunity for those serving this market. According to the Edison Electric Institute, electric utilities throughout the United States will be investing over $60 billion in the performance of this work over the next several years. Economic impacts have slowed the pace of this investment, yet they do not appear to have affected the long term plan of investment. Demand for energy efficiency services continues to be supported by increasing state and federal funds targeted at energy efficiency. The American Recovery and Reinvestment Act of 2009, Regional Green House Gas Initiative and system benefit charges at the state or utility level have expanded the marketplace for energy efficiency program management services. Investment within the renewable portfolios also remains strong. We are well established in the Northeast and Mid-Atlantic regions and are growing our presence in the Southeast and in Texas and California where demand for services is the highest.

Environmental: Although there had been signs of growth in this market following a slowdown caused by general economic conditions, market demand for environmental services continues to be mixed. The last decade saw growth in nearly all aspects of this market. The fundamental market drivers remain in place, and this market also benefits from evolving regulatory developments particularly with respect to air quality, the clean power plant program and the continuing need to enhance our aging transportation and energy infrastructure. Nevertheless, recent indicators suggest that certain elements of this marketplace continue to take a cautious approach to expenditures, slowing a return to the long-term pattern of growth historically enjoyed by this operating segment. Shale gas, renewables and other energy source initiatives present important market opportunities but are linked to federal and state policy changes which will be required for the markets to commit long-term capital to projects such as pipelines and related infrastructure. Demand from oil and gas customers for midstream-related services has recently been strong.

Infrastructure: Although long-term prospects should be favorable, demand for infrastructure services is expected to continue to be flat to slightly negative. The overall infrastructure construction markets did benefit from the federal funding certainty provided by the MAP-21 federal transportation bill that was signed into law in July 2012 but that legislation expired September 30, 2014. A new $302 billion, four year transportation bill has been proposed by President Obama's administration but has not yet been adopted. As a result of increased tax revenues and improved budgets, some states are moving forward with additional funding for infrastructure improvement programs, although other states continue to experience budget challenges and are more dependent on federal or private funding mechanisms.

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The states continue to face long-term infrastructure needs, including the need for maintenance, repair and upgrade of existing critical infrastructure as well as the need to build new facilities.

Critical Accounting Policies

Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the condensed consolidated financial statements and related notes. Actual results could differ from these estimates and assumptions. We use our best judgment in the assumptions used to compile these estimates, which are based on current facts and circumstances, prior experience and other assumptions that are believed to be reasonable. Further detail regarding our critical accounting policies can be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014, as filed with the Securities Exchange Commission ("SEC") on September 10, 2014. No material changes concerning our critical accounting policies have occurred since June 30, 2014.

Results of Operations

Consolidated Results of Operations

The following table presents the dollar and percentage changes in the condensed consolidated statements of operations for the three and nine months ended March 27, 2015 and March 28, 2014:

	Three Months Ended											Nine Months Ended
	Mar. 27,			Mar. 28,			Change					Mar. 27,			Mar. 28,			Change
(Dollars in thousands)	2015			2014			$			%		2015			2014			$			%
Gross revenue	$	130,777		$	120,836		$	9,941		8.2	%	$	397,030		$	350,002		$	47,028		13.4	%
Less subcontractor costs and other direct reimbursable charges	29,783			32,755			(2,972		)	(9.1	)	103,579			89,538			14,041			15.7
Net service revenue	100,994			88,081			12,913			14.7		293,451			260,464			32,987			12.7
Interest income from contractual arrangements	23			73			(50		)	(68.5	)	67			26			41			157.7
Insurance recoverables and other income	753			5,008			(4,255		)	(85.0	)	6,238			17,613			(11,375		)	(64.6	)
Cost of services (exclusive of costs shown separately below)	83,486			80,127			3,359			4.2		247,275			234,914			12,361			5.3
General and administrative expenses	8,927			8,363			564			6.7		25,360			24,642			718			2.9
Depreciation and amortization	2,208			2,161			47			2.2		7,114			6,587			527			8.0
Operating income	7,149			2,511			4,638			184.7		20,007			11,960			8,047			67.3
Interest expense	(73		)	(22		)	(51		)	231.8		(125		)	(152		)	27			(17.8	)
Income from operations before taxes	7,076			2,489			4,587			184.3		19,882			11,808			8,074			68.4
Provision for income taxes	(1,916		)	(1,060		)	(856		)	80.8		(7,244		)	(4,830		)	(2,414		)	50.0
Net income	5,160			1,429			3,731			261.1		12,638			6,978			5,660			81.1
Net loss applicable to noncontrolling interest	5			2			3			150.0		14			36			(22		)	(61.1	)
Net income applicable to TRC Companies, Inc.	$	5,165		$	1,431		$	3,734		260.9	%	$	12,652		$	7,014		$	5,638		80.4	%

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Three Months EndedMarch 27, 2015

Gross revenue increased $9.9 million, or 8.2%, to $130.8 million for the three months ended March 27, 2015 from $120.8 million for the same period in the prior year. Organic activities accounted for $5.1 million, or 50.9%, of the growth in gross revenue, and acquisitions accounted for the remaining $4.8 million, or 49.1%, of the increase. The growth in organic gross revenue was largely driven by our Environmental operating segment, where gross revenue increased $5.1 million due to increased demand from our oil and gas clients for services primarily related to midstream activities. Organic gross revenue increased $2.5 million in our Infrastructure operating segment, primarily driven by the receipt of several large change orders in the current quarter for which costs were expended in a prior period. By contrast, current quarter organic gross revenue decreased $2.8 million in our Energy operating segment primarily due to the timing of work on larger projects.

NSR increased $12.9 million, or 14.7%, to $101.0 million for the three months ended March 27, 2015 from $88.1 million for the same period in the prior year. Organic activities accounted for $9.6 million, or 74.0%, of the growth in NSR, and acquisitions accounted for the remaining $3.3 million, or 26.0%, of the increase. The increase in organic NSR was primarily attributable to our Environmental operating segment where NSR increased $5.9 million due to the same factors that led to the increase in gross revenue. The Infrastructure operating segment organic NSR increased $2.0 million due to the same factors that led to the increase in gross revenue. Organic NSR in our Energy operating segment increased $1.8 million primarily due to better project performance in current quarter. In the prior year quarter, particularly for our locations in the Northeast, Midwest and Mid-Atlantic regions, our project field work, within the Environmental and Infrastructure operating segments, was limited by adverse weather conditions which resulted in fewer billable hours worked on projects and, correspondingly, approximately $1.7 million less NSR.

Insurance recoverables and other income decreased $4.3 million, or 85.0%, to $0.8 million for the three months ended March 27, 2015 from $5.0 million for the same period in the prior year. In the three months ended March 28, 2014, an Exit Strategy project had estimated cost increases which were not expected to be funded by the project-specific restricted investments and, therefore, was projected to be funded by the project specific insurance policy. We did not experience the same level of estimated cost increases in the current quarter.

COS increased $3.4 million, or 4.2%, to $83.5 million for the three months ended March 27, 2015 from $80.1 million for the same period in the prior year. Acquisitions accounted for $2.9 million of the increase in COS, while organic COS increased by $0.5 million. The increase in organic COS was primarily attributable to costs incurred to support current and projected demand for our Environmental operating segment clients. These costs were offset, in large part, by lower contract and health insurance costs. As aforementioned, during the prior year quarter, we recorded estimated cost increases on an Exit Strategy contract which increased COS by $3.0 million. We did not experience the same level of estimated cost increases in the current quarter. In addition, we experienced lower health insurance costs, resulting in a $1.3 million decrease in the current quarter compared to the same period in the prior year. We are self-insured for the first $150 thousand of health claims per employee each calendar year. Consequently, employee health insurance costs can vary significantly from period to period. As a percentage of NSR, COS were 82.7% and 91.0% for the three months ended March 27, 2015 and March 28, 2014, respectively. The decrease in COS as a percentage of NSR was largely attributable to the prior year impact of the Exit Strategy and health insurance costs noted above.

G&A expenses increased $0.6 million, or 6.7%, to $8.9 million for the three months ended March 27, 2015 from $8.4 million for the same period in the prior year. The increase was primarily attributable to increased headcount to support our current and expected growth, offset in part by lower legal and litigation related costs. As a percentage of NSR, G&A expenses were 8.8% and 9.5% for the three months ended March 27, 2015 and March 28, 2014, respectively.

Our effective tax rate was approximately 27.1% for the three months ended March 27, 2015, compared to approximately 42.6% for the same period in the prior year. The primary reconciling items between the federal statutory rate of 35.0% and our overall effective tax rate for the three months ended March 27, 2015 were the effect of state income taxes offset by discrete tax benefits related to the U.S. Research and Development credit. The discrete impact of research and development credits was the result of a change in estimate resulting from the finalization of a new research and development credit study during the three months ended March 27, 2015. A tax benefit for the change in estimate was

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reflected in its entirety in the three months ended March 27, 2015. For the three months ended March 28, 2014, the primary reconciling item between the federal statutory rate of 35.0% and our overall effective tax rate was the effect of state income taxes.

Nine Months Ended March 27, 2015

Gross revenue increased $47.0 million, or 13.4%, to $397.0 million for the nine months ended March 27, 2015 from $350.0 million for the same period in the prior year. Organic activities accounted for $33.9 million, or 72.1%, of the growth in gross revenue, and acquisitions accounted for the remaining $13.1 million, or 27.9%, of the increase. The growth in organic gross revenue was largely driven by our Environmental operating segment, where gross revenue increased $26.6 million due to increased demand from our oil and gas clients for services primarily related to midstream activities. Organic gross revenue increased $6.5 million in our Infrastructure operating segment, due to increased demand from state transportation and commercial clients. For comparative purposes, during the nine months ended March 28, 2014, we recorded estimated cost increases on two Exit Strategy contracts which reduced gross revenue by approximately $6.9 million. We did not have similar adjustments in the current period.

NSR increased $33.0 million, or 12.7%, to $293.5 million for the nine months ended March 27, 2015 from $260.5 million for the same period in the prior year. Organic activities accounted for $22.5 million, or 68.1%, of the growth in NSR, and acquisitions accounted for the remaining $10.5 million, or 31.9%, of the increase. The increase in organic NSR was primarily attributable to our Environmental operating segment where NSR increased $18.4 million due to the same factors that led to the increase in gross revenue. The balance of the organic NSR growth was primarily attributable to strong current quarter performance on fixed priced projects within our Energy operating segment. As noted above, during the nine months ended March 28, 2014, we recorded estimated cost increases on two Exit Strategy contracts which reduced NSR by approximately $6.9 million. We did not experience the same level of estimated cost increases in the current quarter. As aforementioned, in the prior year quarter, particularly for our locations in the Northeast, Midwest and Mid-Atlantic regions, our project field work, within the Environmental and Infrastructure operating segments, was limited by adverse weather conditions which resulted in fewer billable hours worked on projects and, correspondingly, approximately $1.7 million less NSR.

Insurance recoverables and other income decreased $11.4 million, or 64.6%, to $6.2 million for the nine months ended March 27, 2015 from $17.6 million for the same period in the prior year. In the nine months ended March 28, 2014, two Exit Strategy projects had estimated cost increases which were not expected to be funded by the project-specific restricted investments and, therefore, were projected to be funded by the project-specific insurance policy. As a result, we increased insurance recoverables by $12.4 million in the prior year first quarter on one project, and increased insurance recoverables by $4.9 million in the prior year third quarter on another project to account for the projected recovery of the increased cost estimates. We did not experience similar contract adjustments in the current period.

COS increased $12.4 million, or 5.3%, to $247.3 million for the nine months ended March 27, 2015 from $234.9 million for the same period in the prior year. Acquisitions accounted for $8.7 million of the increase in COS, while organic COS increased by $3.7 million. The increase in organic COS was primarily attributable to costs incurred to support current and projected demand from our Environmental operating segment clients. These costs were offset, in part, by the aforementioned estimated cost increases on two Exit Strategy contracts which increased COS by $10.4 million for the nine months ended March 28, 2014. We did not experience the same level of estimated cost increases in the current period. As a percentage of NSR, COS were 84.3% and 90.2% for the nine months ended March 27, 2015 and March 28, 2014, respectively. The decrease in COS as a percentage of NSR was largely attributable to the prior year impact of the Exit Strategy adjustments noted above.

G&A expenses increased $0.7 million, or 2.9%, to $25.4 million for the nine months ended March 27, 2015 from $24.6 million for the same period in the prior year. The increase was primarily attributable to increased headcount to support our current and expected growth, offset in part by lower legal and litigation related costs. As a percentage of NSR, G&A expenses decreased to 8.6% for the nine months ended March 27, 2015 compared to 9.5% for the nine months ended March 28, 2014.

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Our effective tax rate was approximately 36.4% for the nine months ended March 27, 2015, compared to approximately 40.8% for the same period in the prior year. The primary reconciling items between the federal statutory rate of 35.0% and our overall effective tax rate were the effect of state income taxes offset by discrete tax benefits related to research and development tax credits for the nine months ended March 27, 2015, as well as the effect of state income taxes for nine months ended March 28, 2014.

Costs and Expenses as a Percentage of NSR

The following table presents the percentage relationships of items in the condensed consolidated statements of operations to NSR for the three and nine months ended March 27, 2015 and March 28, 2014:    

	Three Months Ended				Nine Months Ended
	March 27, 2015		March 28, 2014		March 27, 2015		March 28, 2014
Net service revenue	100.0	%	100.0	%	100.0	%	100.0	%
Interest income from contractual arrangements	—		0.1		—		—
Insurance recoverables and other income	0.7		5.7		2.1		6.8
Operating costs and expenses:
Cost of services (exclusive of costs shown separately below)	82.7		91.0		84.3		90.2
General and administrative expenses	8.8		9.5		8.6		9.5
Depreciation and amortization	2.2		2.5		2.4		2.5
Total operating costs and expenses	93.7		102.9		95.3		102.2
Operating income	7.1		2.9		6.8		4.6
Interest expense	(0.1	)	—		—		(0.1	)
Income from operations before taxes	7.0		2.8		6.8		4.5
Provision for income taxes	(1.9	)	(1.2	)	(2.5	)	(1.9	)
Net income	5.1		1.6		4.3		2.7
Net loss applicable to noncontrolling interest	—		—		—		—
Net income applicable to TRC Companies, Inc.	5.1	%	1.6	%	4.3	%	2.7	%

Additional Information by Reportable Operating Segment

Energy Operating Segment Results

	Three Months Ended									Nine Months Ended
	March 27,		March 28,		Change					March 27,		March 28,		Change
(Dollars in thousands)	2015		2014		$			%		2015		2014		$		%
Gross revenue	$	41,643	$	44,480	$	(2,837	)	(6.4	)%	$	122,124	$	118,050	$	4,074	3.5	%
Net service revenue	$	36,413	$	34,632	$	1,781		5.1	%	$	104,789	$	98,339	$	6,450	6.6	%
Segment profit	$	8,676	$	7,908	$	768		9.7	%	$	22,224	$	19,313	$	2,911	15.1	%

Gross revenue decreased $2.8 million, or 6.4%, and increased $4.1 million, or 3.5%, for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. Acquisitions provided $2.5 million of gross revenue for the nine months ended March 27, 2015, and had no impact to the current year quarter. Organic gross revenue decreased $2.8 million and increased $1.6 million for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. The decrease in organic gross revenue during the three

33

months ended March 27, 2015 was primarily attributable to the timing of work on larger projects. Specifically, in the prior year quarter we had a large number of projects in the capital phase which resulted in significant subcontractor and procurement activities and generated higher levels of gross revenue. In the current quarter, we had a larger number of projects in the engineering phase, which resulted in higher levels of self-performance and generated lower gross revenue yet higher NSR. The growth in organic gross revenue for the nine months ended March 27, 2015 was primarily attributable to better performance on fixed priced projects and increased demand for services from existing clients due to their continued investment in electric transmission and distribution offset, in part, by the timing of work, as noted above.

NSR increased $1.8 million, or 5.1%, and $6.5 million, or 6.6%, for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. Acquisitions provided $0.0 million and $2.4 million of NSR growth while organic NSR increased $1.8 million and $4.0 million during the three and nine months ended March 27, 2015 compared to the same period in the prior year. The increase in organic NSR during the three months ended March 27, 2015 was primarily due to strong current quarter performance on large fixed priced projects. The increase in organic NSR for the nine months ended March 27, 2015 was primarily due to the same factors that led to the increase in organic gross revenue.

The Energy operating segment's profit increased $0.8 million, or 9.7%, and $2.9 million, or 15.1%, for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. Organic segment profit increased $0.8 million and $2.8 million while acquisitions provided $0.0 million and $0.1 million of segment profit growth for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. The increase in organic segment profit for the three and nine months ended March 27, 2015 largely corresponded to the increase NSR. As a percentage of NSR, the Energy operating segment's profit increased to 23.8% from 22.8% and to 21.2% from 19.6% for the three and nine months ended March 27, 2015 compared to the same periods of the prior year. These increases were primarily related to improved labor utilization and performance on fixed fee projects.

Environmental Operating Segment Results

	Three Months Ended								Nine Months Ended
	March 27,		March 28,		Change				March 27,		March 28,		Change
(Dollars in thousands)	2015		2014		$		%		2015		2014		$		%
Gross revenue	$	70,711	$	60,750	$	9,961	16.4	%	$	219,960	$	182,692	$	37,268	20.4	%
Net service revenue	$	51,172	$	41,939	$	9,233	22.0	%	$	151,383	$	124,860	$	26,523	21.2	%
Segment profit	$	9,942	$	7,787	$	2,155	27.7	%	$	30,252	$	25,898	$	4,354	16.8	%

Gross revenue increased $10.0 million, or 16.4%, and $37.3 million, or 20.4%, for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. Organic gross revenue increased $5.1 million and $26.6 million while acquisitions provided $4.9 million and $10.6 million of gross revenue growth for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. The increase in organic gross revenue for the three and nine months ended March 27, 2015 was due to increased demand from our oil and gas clients for services primarily related to midstream activities, and, in particular, pipeline permitting services. Additionally, during the first and third quarter of fiscal 2014, we recorded adjustments to the estimate at completion on two Exit Strategy contracts which reduced gross revenue by approximately $5.1 million and $1.8 million, respectively.

NSR increased $9.2 million, or 22.0%, and $26.5 million, or 21.2%, for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. Organic NSR increased $5.9 million and $18.4 million while acquisitions provided $3.3 million and $8.1 million of NSR growth for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. The increase in organic NSR was primarily due to the same factors that led to the increase in gross revenue. Moreover, organic NSR was also adversely impacted in the prior year quarter due to the severe weather conditions which limited our ability to access project work

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sites. We estimate the weather related impact to NSR was approximately $1.4 million for the three and nine months ended March 28, 2014.

The Environmental operating segment's profit increased $2.2 million, or 27.7%, and $4.4 million, or 16.8%, for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. Organic segment profit increased $2.1 million and $3.6 million while acquisitions provided $0.1 million and $0.8 million of segment profit growth for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. The increase in organic segment profit was primarily attributable to the same factors that led to the increase in NSR, with the increase in the three months ended March 27, 2015 also benefiting from improved performance on fixed fee projects. As a percentage of NSR, the Environmental operating segment's profit increased to 19.4% from 18.6% and decreased slightly to 20.0% from 20.7% for the three and nine months ended March 27, 2015, respectively, compared to the same periods of the prior year.

Infrastructure Operating Segment Results

	Three Months Ended								Nine Months Ended
	March 27,		March 28,		Change				March 27,		March 28,		Change
(Dollars in thousands)	2015		2014		$		%		2015		2014		$		%
Gross revenue	$	16,696	$	14,223	$	2,473	17.4	%	$	53,142	$	46,692	$	6,450	13.8	%
Net service revenue	$	12,425	$	10,403	$	2,022	19.4	%	$	36,978	$	34,430	$	2,548	7.4	%
Segment profit	$	2,806	$	1,413	$	1,393	98.6	%	$	6,483	$	6,238	$	245	3.9	%

Gross revenue increased $2.5 million, or 17.4%, and $6.5 million, or 13.8%, for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. The increase in gross revenue in the three months ended March 27, 2015 was primarily due to the receipt of several large change orders for which costs were expensed in prior periods, as well as an adjustment to an estimate at completion on a large fixed price contract which reduced gross revenue by approximately $0.6 million in the prior year quarter. The increase in gross revenue in the nine months ended March 27, 2015 was primarily driven by increased demand from state transportation and commercial clients.

NSR increased $2.0 million, or 19.4%, and increased $2.5 million, or 7.4%, for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. The increases in NSR were largely attributable to the same factors that led to the increases in gross revenue. In addition, severe winter weather in the prior year quarter resulted in a loss of billable production and correspondingly less NSR. We estimate the weather related impact to NSR was approximately $0.3 million in the three and nine months ended March 28, 2014.

The Infrastructure operating segment's profit increased $1.4 million, or 98.6%, and $0.2 million, or 3.9%, for the three and nine months ended March 27, 2015, respectively, compared to the same periods in the prior year. As a percentage of NSR, the Infrastructure operating segment's profit increased to 22.6% from 13.6% and decreased to 17.5% from 18.1% for the three and nine months ended March 27, 2015, respectively, compared to the same periods of the prior year. The increase during the three months ending March 27, 2015 was primarily attributable to the receipt of change orders as aforementioned.

Backlog by Operating Segment

As of March 27, 2015, our contract backlog based on gross revenue was approximately $435 million, compared to approximately $379 million as of March 28, 2014. Our contract backlog based on NSR was approximately $289 million as of March 27, 2015, compared to approximately $245 million as of March 28, 2014. Typically about 60% of backlog is completed in one year. In addition to this contract backlog, we hold open-order contracts from various commercial clients and government agencies. As work under these contracts is authorized and funded, we include this portion in our contract backlog. While most contracts contain cancellation provisions, we are unaware of any material work included in backlog that will be canceled or delayed.

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The following table sets forth the gross revenue and NSR contract backlog amounts of our operating segments at March 27, 2015 and March 28, 2014 (in millions):

	Gross Revenue Backlog								NSR Backlog
	March 27,		March 28,		Change				March 27,		March 28,		Change
(Dollars in millions)	2015		2014		$		%		2015		2014		$		%
Energy	$	97	$	88	$	9	10.2	%	$	86	$	74	$	12	16.2	%
Environmental	235		216		19		8.8	%	133		126		7		5.6	%
Infrastructure	103		75		28		37.3	%	70		45		25		55.6	%
Total	$	435	$	379	$	56	14.8	%	$	289	$	245	$	44	18.0	%

Revisions in Estimates

We have numerous contracts in progress at any time, all of which are at various stages of completion. Our recognition of profit is dependent upon the accuracy of a variety of estimates including engineering progress, materials quantities, achievement of milestones and other incentives, liquidated-damages provisions, labor productivity and cost estimates. Such estimates are based on various judgments we make with respect to those factors and can be difficult to accurately determine until the project is significantly underway. Due to uncertainties inherent in the estimation process, actual completion costs often vary from estimates. If estimated total costs on any contract indicate a loss, we charge the entire estimated loss to operations in the period the loss first becomes known. If actual costs exceed the original fixed contract price, recognition of any additional revenue will be pursuant to a change order, contract modification, or claim.

The following table summarizes the number of projects that experienced estimated contract profit revisions relating to the revaluation of work performed in prior periods:

		Three Months Ended					Nine Months Ended
		March 27,		March 28,			March 27,			March 28,
(Dollars in thousands)		2015		2014			2015			2014
Number of projects		1,243		1,644			1,688			1,673
Net (reduction) increase in project profitability		$	3,943	$	(878	)	$	(205	)	$	42
Net (reduction) increase in project profitability by operating segment:
Energy		$	1,130	$	(1,374	)	$	(857	)	$	(2,911	)
Environmental		1,145		771			837			2,616
Infrastructure		1,668		(275		)	(185		)	337
	Total	$	3,943	$	(878	)	$	(205	)	$	42

Impact of Inflation

Our operations have not been materially affected by inflation or changing prices because most contracts of a longer term are subject to adjustment or have been priced to cover anticipated increases in labor and other costs, and the remaining contracts are short term in nature.

Liquidity and Capital Resources

We primarily rely on cash from operations and financing activities, including borrowings under our revolving credit facility, to fund our operations. Our liquidity is assessed in terms of our overall ability to generate cash to fund our

36

operating and investing activities and to service debt. We believe that our available cash, cash flows from operations and borrowing capacity under our revolving credit facility, discussed under "Revolving Credit Facility" below, will be sufficient to fund our operations for at least the next twelve months.

The following table provides summarized information with respect to our cash balances and cash flows as of and for the nine months ended March 27, 2015 and March 28, 2014 (in thousands):

	Nine Months Ended
	March 27,			March 28,			Change
(Dollars in thousands)	2015			2014			$			%
Net cash provided by operating activities	$	12,580		$	3,177		$	9,403		296.0	%
Net cash used in investing activities	(15,285		)	(6,278		)	9,007			143.5	%
Net cash used in financing activities	(3,549		)	(3,634		)	(85		)	(2.3	)%

As of March 27, 2015, cash and cash equivalents decreased by $6.3 million, or 22.7%, to $21.3 million, compared to the fiscal year ended June 30, 2014. The decrease was primarily due to net cash used in investing activities for the acquisitions of businesses and property and equipment.

Net cash provided by operating activities increased by $9.4 million, or 296.0%, to $12.6 million for the nine months ended March 27, 2015, compared to $3.2 million of cash provided for the same period of the prior year. The increase was due to higher income, adjusted for non-cash charges, in the nine months ended March 27, 2015 compared to the same period of the prior year, as well as the favorable impact in fiscal 2015 from changes in our working capital accounts.

Accounts receivable include both: (1) billed receivables associated with invoices submitted for work performed and (2) unbilled receivables (work in progress). The unbilled receivables are primarily related to work performed in the last month of the quarter. The efficiency of the billing and collection process is commonly evaluated as days sales outstanding ("DSO"), which we calculate by dividing accounts receivable by the most recent three-month average of daily gross revenue. DSO, which measures the collections turnover of both billed and unbilled receivables, increased to 90 days as of March 27, 2015 from 84 days as of June 30, 2014, and decreased from 92 days when compared to March 28, 2014. Our goal is to maintain DSO at less than 80 days.

Net cash used in investing activities increased by $9.0 million, or 143.5%, to $15.3 million for the nine months ended March 27, 2015, compared to $6.3 million of cash used for the same period of the prior year. The increase was primarily attributable to a $7.4 million increase in cash paid for acquisitions.

Net cash used in financing activities decreased by $0.1 million, or 2.3%, to $3.5 million for the nine months ended March 27, 2015, compared to $3.6 million of cash used for the same period of the prior year. The decrease was primarily due to a $3.8 million decline in payments made on long-term debt and capital lease obligations, and $0.5 million of cash paid to settle tax withholding obligations relating to shares repurchased; offset by a $3.1 million decline in excess tax benefits from stock-based awards, and an increase of $1.8 million in payments related to prior acquisitions.

Long-Term Debt

Revolving Credit Facility

See a discussion of our revolving credit facility (the "Credit Agreement"), other notes payable and capital lease obligations in Note 9 - Long-Term Debt and Capital Lease Obligations, under Part I, Item 1, Notes to Condensed Consolidated Financial Statements.

Management presents Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and Consolidated Adjusted EBITDA, which are non-U.S. GAAP measures, because we believe they are useful tools for us, our lenders and our investors to measure our ability to meet debt service, capital expenditure and working capital

37

requirements. Consolidated EBITDA and Consolidated Adjusted EBITDA, as presented, may not be comparable to similarly titled measures reported by other companies, because not all companies calculate EBITDA in an identical manner. Consolidated EBITDA and Consolidated Adjusted EBITDA are not intended to represent cash flows for the period or funds available for management's discretionary use, nor are they represented as an alternative to operating income as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP. Our Consolidated EBITDA and Consolidated Adjusted EBITDA should be evaluated in conjunction with U.S. GAAP measures such as operating income, net income, cash flows from operations and other measures of equal or greater importance. Consolidated EBITDA is presented below based on both the definition used in our Credit Agreement (Consolidated Adjusted EBITDA) as well as a more typical calculation method. Set forth below is a reconciliation of Net Income applicable to TRC Companies, Inc. to Consolidated EBITDA and Consolidated Adjusted EBITDA, as calculated under the Credit Agreement, for the trailing twelve-month period ended March 27, 2015 (in thousands):

		Trailing Twelve-Months Ended
(Dollars in thousands)		March 27, 2015			March 28, 2014
Net income applicable to TRC Companies, Inc.		$	17,689		$	31,793
	Interest expense	142			219
	Provision (benefit) for income taxes	11,156			(13,836		)
	Depreciation and amortization	9,327			8,531
	Net loss applicable to noncontrolling interest	(19		)	(52		)
Consolidated EBITDA		38,295			26,655
	Less: Interest expense on excluded indebtedness	(61		)	(76		)
	Less: Interest and penalties on income taxes	11			(42		)
	Add: Non-cash losses and expenses - Stock-Based Compensation Expense	4,891			4,560
Consolidated Adjusted EBITDA under the Credit Agreement		$	43,136		$	31,097

The actual results as compared to the covenant requirements under the Credit Agreement as of March 27, 2015 for the measurement periods described below are as follows (in thousands):

(Dollars in thousands)	Measurement Period	Actual		Required
Minimum consolidated adjusted EBITDA	Trailing 12 months	$	43,136	Must exceed	$	20,000
Maximum leverage ratio	Trailing 12 months	0.07 to 1.00		Not to exceed	2.00 to 1.00
Minimum fixed charge coverage ratio	Trailing 12 months	43.03 to 1.00		Must exceed	1.25 to 1.00

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We do not currently utilize derivative financial instruments. While we currently do not have any borrowings outstanding under our Credit Agreement, to the extent we have borrowings, we would be exposed to interest rate risk under that agreement. Our credit facility provides for borrowings at the Base Rate (as defined, generally the prime rate) plus a margin of 1.00% to 1.50% or at LIBOR plus a margin of 2.00% to 2.50%, based on the ratio of consolidated total debt to EBITDA measured over a trailing four-quarter period.

Borrowings at these rates have no designated term and may be repaid without penalty any time prior to the credit facility's maturity date. Our credit facility has a maturity date of April 16, 2018, or earlier at our discretion, upon payment in full of loans and other obligations.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company has evaluated, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the effectiveness of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of March 27, 2015. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of March 27, 2015.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the Company's quarter ended March 27, 2015 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

See Legal Matters in Note 14 - Commitments and Contingencies, under Part I, Item 1, Financial Information.

Item 1A. Risk Factors

No material changes.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

Not Applicable.

Item 5.Other Information

None.

Item 6.Exhibits

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

40

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		TRC COMPANIES, INC.
May 6, 2015	By:	/s/ Thomas W. Bennet, Jr.
		Thomas W. Bennet, Jr.
		Senior Vice President and Chief Financial Officer
		(Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer)

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