EXHIBIT 13
Annual Report to Shareholders for the fiscal year ended June 30, 2001. (Only
those portions expressly incorporated by reference are deemed to be filed
herewith).
14
FINANCIAL HIGHLIGHTS
TRC COMPANIES, INC. AND SUBSIDIARIES
IN THOUSANDS, EXCEPT PER SHARE DATA
June 30, 2001 2000 1999 1998 (1)
------------------------------------------------------------------------------------------------------------------
Gross revenue $ 181,473 $ 117,131 $ 78,223 $ 69,568
Net service revenue 124,202 84,808 57,333 49,708
Income from operations 15,935 8,281 4,330 2,217
Net income 8,985 4,644 2,447 925
Earnings per share - diluted $ 1.13 $ 0.65 $ 0.36 $ 0.14
Working capital $ 32,008 $ 36,128 $ 17,431 $ 20,475
Current ratio 1.9 to 1 3.2 to 1 2.0 to 1 2.8 to 1
Percentage of debt to total capitalization 18% 28% 14% 14%
Shareholders' equity $ 69,975 $ 54,448 $ 46,988 $ 44,455
Book value per share $ 9.39 $ 7.73 $ 6.91 $ 6.55
Common shares outstanding 7,453 7,046 6,799 6,782
(1) Operating results presented above for fiscal 1998 do not include the
results of the Company's instrumentation business that was sold in July
1998. The sale resulted in a gain that was not material. See Selected
Financial Data on page 5 for results as reported for fiscal 1998.
[TABULAR REPRESENTATION OF BAR CHART]
NET SERVICE INCOME FROM EARNINGS
REVENUE OPERATIONS PER SHARE
(in thousands) (in thousands)
$49,708 $57,333 $84,808 $124,202 $2,217 $4,330 $8,281 $15,935 $.014 $0.36 $0.65 $1.13
98 99 00 01 98 99 00 01 98 99 00 01
15
SELECTED FINANCIAL DATA
TRC COMPANIES, INC. AND SUBSIDIARIES
IN THOUSANDS, EXCEPT PER SHARE DATA
STATEMENTS OF OPERATIONS, YEARS ENDED JUNE 30, 2001 2000 1999 1998 (1) 1997 (1)
--------------------------------------------------------------------------------------------------------------------------
GROSS REVENUE $181,473 $117,131 $78,223 $72,570 $68,506
Less subcontractor costs and direct charges 57,271 32,323 20,890 19,861 17,718
-------- -------- ------- ------- -------
NET SERVICE REVENUE 124,202 84,808 57,333 52,709 50,788
-------- -------- ------- ------- -------
OPERATING COSTS AND EXPENSES:
Cost of services 100,587 70,619 48,073 45,120 44,270
General and administrative expenses 3,909 2,991 2,462 2,451 3,565
Depreciation and amortization 3,771 2,917 2,468 2,702 2,789
-------- -------- ------- ------- -------
108,267 76,527 53,003 50,273 50,624
-------- -------- ------- ------- -------
INCOME FROM OPERATIONS 15,935 8,281 4,330 2,436 164
Interest expense 1,541 1,024 507 725 829
-------- -------- ------- ------- -------
INCOME (LOSS) BEFORE TAXES 14,394 7,257 3,823 1,711 (665)
Federal and state income tax provision (benefit) 5,409 2,613 1,376 650 (160)
-------- -------- ------- ------- -------
NET INCOME (LOSS) $ 8,985 $ 4,644 $ 2,447 $ 1,061 $ (505)
======== ======== ======= ======= =======
EARNINGS (LOSS) PER SHARE:
Basic $ 1.24 $ 0.68 $ 0.36 $ 0.16 $ (0.07)
Diluted 1.13 0.65 0.36 0.16 (0.07)
======== ======== ======= ======= =======
AVERAGE SHARES OUTSTANDING:
Basic 7,236 6,845 6,782 6,715 6,741
Diluted 7,956 7,190 6,839 6,726 6,747
======== ======== ======= ======= =======
CASH DIVIDENDS DECLARED None None None None None
======== ======== ======= ======= =======
BALANCE SHEETS AT JUNE 30,
Total assets $127,672 $ 94,208 $66,072 $61,604 $62,290
-------- -------- ------- ------- -------
Debt 15,005 21,300 7,900 7,500 11,000
-------- -------- ------- ------- -------
Shareholders' equity 69,975 54,448 46,988 44,455 42,844
======== ======== ======= ======= =======
(1) Includes results of Company's instrumentation business that was sold in
July 1998. The sale resulted in a gain that was not material.
16
SUMMARIZED UNAUDITED QUARTERLY FINANCIAL DATA
TRC COMPANIES, INC. AND SUBSIDIARIES
IN THOUSANDS, EXCEPT PER SHARE DATA
Fiscal 2001 1st 2nd 3rd 4th Total
-------------------------------------------------------------------------------------------------------------
Gross revenue $36,887 $44,642 $47,305 $52,639 $181,473
Net service revenue 26,703 29,134 32,062 36,303 124,202
Income from operations 3,277 3,684 4,125 4,849 15,935
Income before taxes 2,792 3,275 3,782 4,545 14,394
Net income 1,759 2,063 2,345 2,818 8,985
Earnings per share (1):
Basic $ 0.25 $ 0.29 $ 0.32 $ 0.38 $ 1.24
Diluted 0.23 0.26 0.29 0.34 1.13
Market price per share:
High $ 17.75 $ 19.38 $ 33.39 $ 56.50 $ 56.50
Low 10.63 14.88 18.50 25.90 10.63
Fiscal 2000 (2) 1st 2nd 3rd 4th (3) Total
-------------------------------------------------------------------------------------------------------------
Gross revenue $25,306 $27,939 $30,348 $33,538 $117,131
Net service revenue 18,290 19,562 22,297 24,659 84,808
Income from operations 1,774 2,470 3,057 980 8,281
Income before taxes 1,579 2,242 2,794 642 7,257
Net income 1,010 1,435 1,788 411 4,644
Earnings per share:
Basic $ 0.15 $ 0.21 $ 0.26 $ 0.06 $ 0.68
Diluted 0.14 0.20 0.25 0.06 0.65
Market price per share:
High $ 7.69 $ 8.19 $ 13.25 $ 11.94 $ 13.25
Low 6.00 6.19 7.63 9.00 6.00
(1) Quarterly results may not agree to the total for the year due to
rounding.
(2) Fiscal 2000 quarterly results have been adjusted to properly reflect
the quarterly revenue recognized under the Company's Exit Strategy(R)
contracts. The impact of the adjustment for the first quarter was to
increase gross and net service revenue by $177, income before taxes by
$149, net income by $95, and diluted earnings per share by $.01. The
impact of the adjustment for the second quarter was to increase gross
and net service revenue by $809, income before taxes by $602, net
income by $385, and diluted earnings per share by $.05. The impact of
the adjustment for the third quarter was to increase gross and net
service revenue by $972, income before taxes by $894, net income by
$572, and diluted earnings per share by $.08. The impact of the
adjustment for the fourth quarter was to decrease gross and net
service revenue by $1,958, income before taxes by $1,645, net income
by $1,052, and diluted earnings per share by $.14. The full year 2000
totals of gross and net service revenue, income before taxes, net
income and diluted earnings per share did not change.
(3) Results for the fourth quarter of fiscal 2000 included additional
allowances for doubtful accounts of approximately $1.4 million.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the Selected
Financial Data, the Consolidated Financial Statements and related Notes to
Consolidated Financial Statements.
OVERVIEW
The Company is a leading provider of technical, financial risk management and
construction services to industry and government primarily in the United States
market. The Company's main focus is in the areas of infrastructure improvements
and expansions, environmental management and power development and conservation.
RESULTS OF OPERATIONS
In the course of providing its services, the Company routinely subcontracts
drilling, laboratory analyses, construction equipment and other services. These
costs are passed directly through to customers and, in accordance with industry
practice, are included in gross revenue. Because subcontractor costs and direct
charges can vary significantly from project to project, the Company considers
net service revenue, which is gross revenue less subcontractor costs and direct
charges, as its primary measure of revenue growth.
The following table presents the percentage relationships of items in the
consolidated statements of operations to net service revenue:
Years ended June 30, 2001 2000 1999
--------------------------------------------------------------------------------------------
NET SERVICE REVENUE 100.0% 100.0% 100.0%
------ ------ ------
OPERATING COSTS AND EXPENSES:
Cost of services 81.0 83.3 83.9
General and administrative expenses 3.2 3.5 4.3
Depreciation and amortization 3.0 3.4 4.3
------ ------ ------
INCOME FROM OPERATIONS 12.8 9.8 7.5
Interest expense 1.2 1.2 .8
------ ------ ------
INCOME BEFORE TAXES 11.6 8.6 6.7
Federal and state income tax provision 4.4 3.1 2.4
------ ------ ------
NET INCOME 7.2% 5.5% 4.3%
====== ====== ======
2001 COMPARED TO 2000
The revenue growth trend established in fiscal 1998 continued for the fourth
consecutive year. Gross revenue increased $64.3 million, or 55%, to an all time
high of $181.5 million in fiscal 2001, from $117.1 million in fiscal 2000. Net
service revenue increased $39.4 million, or 47%, to an all time high of $124.2
million in fiscal 2001, from $84.8 million in fiscal 2000. These increases were
due to a combination of internal growth arising out of increased revenue from
the Company's services including, as expected, revenue from the Exit Strategy(R)
and power markets, and the additional revenue from acquisitions made in fiscal
2001 and 2000.
18
As a percentage of net service revenue, cost of services decreased to 81% in
fiscal 2001, from 83.3% in fiscal 2000. This decrease contributed directly to an
increase in income from operations as a percentage of net service revenue
(operating margin), which increased from 9.8% last year to 12.8%. The increase
in cost of services of approximately 42% in fiscal 2001 was primarily due to
additional operating costs incurred to support the increase in net service
revenue and additional operating costs associated with the businesses acquired
in fiscal 2001 and 2000.
As a percentage of net service revenue, general and administrative expenses
decreased from 3.5% in fiscal 2000, to 3.2% in fiscal 2001. This is a result of
controlling overhead at a growth rate below that of revenue, and also
contributes directly to an increase in income from operations as a percentage of
net service revenue. The increase in general and administrative expenses of
approximately 31% in fiscal 2001 was primarily from additional costs necessary
to support the Company's internal and acquisition growth.
The decrease in depreciation and amortization expense as a percentage of net
service revenue in fiscal 2001, as compared to fiscal 2000 also contributed to a
higher operating margin. The increase in depreciation and amortization expense
of approximately 29% in fiscal 2001, as compared to fiscal 2000 was primarily
due to the additional goodwill amortization associated with businesses acquired
in fiscal 2000 and the related additional purchase price payments comprised of
cash and stock recorded in fiscal 2001 associated with those acquisitions, and
to a lesser extent, the additional depreciation expense on equipment acquired
through acquisitions.
Income from operations increased approximately 92% to $15.9 million in fiscal
2001, from $8.3 million in fiscal 2000. The continued improvement in operating
performance was primarily due to the Company's focus toward higher margin,
economically driven markets such as the Exit Strategy(R) and power sectors; and
the growth in revenue, without comparable increases in operating overhead.
Interest expense increased approximately 51% in fiscal 2001, as compared to
fiscal 2000. This increase was primarily due to higher levels of average debt
outstanding during the year to finance acquisitions completed in fiscal 2001 and
2000. The Company's percentage of debt to capitalization ratio continues to
remain low, reflecting management's conservative philosophy.
The provision for federal and state income taxes reflects an effective rate of
37.6% in fiscal 2001, compared to 36% in fiscal 2000. This increase was
primarily due to nondeductible goodwill amortization resulting from the
acquisitions completed in fiscal 2001 and 2000. The Company believes that there
will be sufficient taxable income in future periods to enable utilization of
available deferred income tax benefits.
2000 COMPARED TO 1999
The revenue growth trend established in fiscal 1998 continued. Gross revenue
increased $38.9 million, or 50%, to an all time high of $117.1 million in fiscal
2000, from $78.2 million in fiscal 1999. Net service revenue increased $27.5
million, or 48%, to an all time high of $84.8 million in fiscal 2000, from $57.3
million in fiscal 1999. These increases were due to a combination of internal
growth arising out of increased demand for the Company's services including, as
expected, revenue from the Exit Strategy program, and the additional revenue
from the acquisitions completed in fiscal 2000 and 1999.
19
Cost of services increased by 47% in fiscal 2000, as compared to fiscal 1999. As
a percentage of net service revenue, cost of services decreased to approximately
83%, from 84% in fiscal 1999. The increase in cost of services was primarily
attributable to the increase in revenue, higher costs for professional
compensation, the additional costs associated with acquired businesses, and
increased allowances for doubtful accounts as a result of the significant
increase in revenue year over year.
General and administrative expenses increased by 21.5% in fiscal 2000, as
compared to fiscal 1999. This increase was primarily due to additional costs to
support the Company's growth. However, as a percentage of net service revenue,
these costs decreased to approximately 3.5%, from 4.3% in fiscal 1999.
Depreciation and amortization expense increased by 18% in fiscal 2000, as
compared to fiscal 1999. This increase was primarily attributable to the
additional amortization expense of costs in excess of the net assets of acquired
businesses in fiscal 2000 and 1999 and to a lesser extent the additional
depreciation expense on equipment acquired through acquisitions.
Income from operations increased by approximately $4.0 million, or 91%, to $8.3
million in fiscal 2000, from $4.3 million in fiscal 1999. As a percentage of net
service revenue, operating income increased to approximately 10%, up from 7.5%
in fiscal 1999. The continued improvement in operating performance was primarily
attributable to the Company's focus toward higher margin, economically driven
markets largely related to the Exit Strategy (R) program; and the growth in
revenue without comparable increases in operating overhead.
Interest expense increased by approximately 102% during fiscal 2000, as compared
to fiscal 1999. This increase was primarily attributable to higher levels of
debt outstanding at higher interest rates to finance acquisitions completed
during the year and capital expenditures to support the Company's growth.
The provision for federal and state income taxes reflects an effective income
tax rate of 36% in both fiscal 2000 and fiscal 1999. The Company believes that
there will be sufficient taxable income in future periods to enable utilization
of the deferred income tax benefits.
IMPACT OF INFLATION
The Company's operations have not been materially affected by inflation or
changing prices because of the short-term nature of many of its contracts and
the fact that most contracts of a longer term are subject to adjustment or have
been priced to cover anticipated increases in labor and other costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company relies on cash provided by operations and borrowings based upon the
strength of its balance sheet to fund operations. The Company's liquidity is
assessed in terms of its overall ability to generate cash to fund its operating
and investing activities and to reduce debt. Of particular importance in the
management of liquidity are cash flows generated from operating activities,
capital expenditure levels and an adequate bank line of credit.
20
Operating activities are the principal source of cash flow for the Company,
generating approximately $19.8 million of cash flow during fiscal 2001, as
compared to using $1.4 million of cash flow last year. The increase in operating
cash flow was primarily driven by improved operating performance, the increase
in billings in advance of revenue earned and continued aggressive working
capital management, including a substantial reduction in accounts receivable in
relationship to the Company's revenue growth. The Company's operating cash flow
was also positively impacted by the income tax benefit resulting from the
exercise of employee stock options and warrants.
Investing activities used cash of approximately $14.8 million in fiscal 2001.
The acquisition of businesses completed in fiscal 2001 and additional purchase
price payments on acquisitions completed in fiscal 2000 required the use of
approximately $5 million. Expenditures during fiscal 2001 for additional
equipment and information technology systems to support business growth
increased to $5.4 million, from $3.3 million in fiscal 2000. The Company also
invested approximately $4.5 million during fiscal 2001 primarily in
unconsolidated affiliates that provide services in the demand side of the power
market. In fiscal 2002, the Company expects to make expenditures for equipment
to support continuing business growth of approximately $4 million and expects
expenditures for acquisitions to increase at a stronger pace than to fiscal
2001.
The Company relies on its bank financing arrangement to assist in funding
various operating and investing activities. The Company has a $25 million
revolving credit agreement, collateralized by accounts receivable, which expires
March 2003. Depending on the timing of the expenditures for investing activities
in fiscal 2002, the Company may request an increase in the amount available
pursuant to the revolving credit facility. Borrowings under the agreement bear
interest at the bank's base rate or the Eurodollar rate plus applicable margins.
At June 30, 2001, borrowings outstanding pursuant to the agreement were $14
million at an average interest rate of 5.6%. This level of borrowings is down
from $21 million a year earlier.
The Company expects to increase its available cash flow over the next fiscal
year, primarily from operations and further reductions in working capital
derived mainly from the collection of accounts receivable. The Company believes
that cash generated from operations, the cash on hand at June 30, 2001 and
available borrowings under the revolving credit agreement will be sufficient to
meet the Company's cash requirements for fiscal 2002.
MARKET RISKS
The Company's exposure to market risk for changes in interest rates relates
primarily to borrowings under the Company's revolving credit agreement with a
commercial bank. These borrowings bear interest at variable rates and the fair
value of this indebtedness is not significantly affected by changes in market
interest rates. An effective increase or decrease of 10% in the current
effective interest rate under the revolving credit agreement would not have a
material effect on the Company's operating results, financial condition or cash
flows.
NEW ACCOUNTING GUIDANCE
In June 2001, the Financial Accounting Standards Board approved Statements of
Financial Accounting Standards No. 141 "Business Combinations" ("SFAS 141") and
No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which are effective
for years beginning after December 15, 2001. The Company expects to early adopt
SFAS 142 for the fiscal year beginning July 1, 2001 and will implement the
provisions of SFAS 141 for acquisitions occurring after June 30, 2001. SFAS 141
requires that the purchase method of accounting be
21
used for all business combinations. Under SFAS 142, amortization of goodwill,
including goodwill recorded in past business combinations, will discontinue upon
adoption of this standard and goodwill and intangible assets will be tested for
impairment in accordance with the provisions of the Statement. The Company is
currently reviewing the provisions of SFAS 141 and SFAS 142 and assessing their
impact.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that describe the Company's
business prospects. These statements involve risks and uncertainties including,
but not limited to, regulatory uncertainty, government funding, level of demand
for the Company's services, industry-wide competitive factors and political,
economic or other conditions. Furthermore, market trends are subject to changes
that could adversely affect future results.
22
CONSOLIDATED STATEMENTS OF OPERATIONS
TRC COMPANIES, INC. AND SUBSIDIARIES
IN THOUSANDS, EXCEPT PER SHARE DATA
YEARS ENDED JUNE 30, 2001 2000 1999
--------------------------------------------------------------------------------------------------
GROSS REVENUE $181,473 $117,131 $78,223
Less subcontractor costs and direct charges 57,271 32,323 20,890
-------- -------- -------
NET SERVICE REVENUE 124,202 84,808 57,333
-------- -------- -------
OPERATING COSTS AND EXPENSES:
Cost of services 100,587 70,619 48,073
General and administrative expenses 3,909 2,991 2,462
Depreciation and amortization 3,771 2,917 2,468
-------- -------- -------
108,267 76,527 53,003
-------- -------- -------
INCOME FROM OPERATIONS 15,935 8,281 4,330
Interest expense 1,541 1,024 507
-------- -------- -------
INCOME BEFORE TAXES 14,394 7,257 3,823
Federal and state income tax provision 5,409 2,613 1,376
-------- -------- -------
NET INCOME $ 8,985 $ 4,644 $ 2,447
======== ======== =======
EARNINGS PER SHARE:
Basic $ 1.24 $ 0.68 $ 0.36
Diluted 1.13 0.65 0.36
======== ======== =======
AVERAGE SHARES OUTSTANDING:
Basic 7,236 6,845 6,782
Diluted 7,956 7,190 6,839
======== ======== =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
23
CONSOLIDATED BALANCE SHEETS
TRC COMPANIES, INC. AND SUBSIDIARIES
IN THOUSANDS, EXCEPT PER SHARE DATA
AS OF JUNE 30, 2001 2000
-------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash $ 851 $ 1,566
Accounts receivable, less allowance for doubtful accounts 61,090 48,855
Insurance recoverable - environmental remediation 4,055 --
Deferred income tax benefits 1,882 1,208
Prepaid expenses and other current assets 1,353 1,053
-------- -------
69,231 52,682
-------- -------
PROPERTY AND EQUIPMENT:
Furniture and equipment 26,041 21,833
Leasehold improvements 2,872 1,784
-------- -------
28,913 23,617
Less accumulated depreciation and amortization 19,075 17,361
-------- -------
9,838 6,256
-------- -------
GOODWILL, NET OF ACCUMULATED AMORTIZATION OF $8,031 AND
$6,512, RESPECTIVELY 38,943 33,512
-------- -------
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES 5,134 1,046
-------- -------
LONG-TERM ACCOUNTS RECEIVABLE 2,046 140
-------- -------
LONG-TERM INSURANCE RECOVERABLE - ENVIRONMENTAL REMEDIATION 2,011 --
-------- -------
OTHER ASSETS 469 572
-------- -------
$127,672 $94,208
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of debt $ 368 $ 100
Accounts payable 7,821 6,216
Accrued compensation and benefits 7,734 4,308
Income taxes payable 3,647 1,782
Billings in excess of revenue earned 10,752 3,160
Environmental remediation liability 5,635 --
Other accrued liabilities 1,266 988
-------- -------
37,223 16,554
-------- -------
NON-CURRENT LIABILITIES:
Long-term debt 14,637 21,200
Deferred income taxes 3,826 2,006
Long-term environmental remediation liabilty 2,011 --
-------- -------
20,474 23,206
-------- -------
COMMITMENTS AND CONTINGENCIES (NOTES 7 AND 9)
SHAREHOLDERS' EQUITY:
Capital stock:
Preferred, $.10 par value; 500,000 shares authorized, none issued -- --
Common, $.10 par value; 30,000,000 shares authorized,
8,081,978 and 7,674,329 shares issued at June 30, 2001 and
2000, respectively 808 767
Additional paid-in capital 48,012 41,511
Retained earnings 24,052 15,067
-------- -------
72,872 57,345
Less treasury stock, at cost 2,897 2,897
-------- -------
69,975 54,448
-------- -------
$127,672 $94,208
======== =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
24
CONSOLIDATED STATEMENTS OF CASH FLOWS
TRC COMPANIES, INC. AND SUBSIDIARIES
IN THOUSANDS
YEARS ENDED JUNE 30, 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,985 $ 4,644 $ 2,447
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,771 2,917 2,468
Change in deferred taxes and other non-cash items 898 119 (444)
Changes in assets and liabilities, net of effects from
acquisitions and disposition:
Accounts receivable (current and long-term) (9,433) (13,155) 277
Billings in advance of revenue earned 7,553 2,135 175
Inventories -- -- (292)
Insurance recoverable (current and long-term) 4,153 -- --
Prepaid expenses and other current assets (198) (92) (135)
Accounts payable 956 1,933 (845)
Accrued compensation and benefits 2,853 365 30
Environmental remediation liability
(current and long-term) (2,573) -- --
Income taxes payable 3,335 160 549
Other accrued liabilities (530) (391) (472)
-------- -------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 19,770 (1,365) 3,758
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (5,440) (3,323) (1,270)
Acquisition of businesses, net of cash acquired (5,038) (8,156) (4,784)
Proceeds from sale of instrumentation business -- -- 2,750
Investments in and advances to unconsolidated affiliates (4,454) (796) --
Proceeds from sale of equipment 26 252 7
Decrease in other assets, net 96 42 33
-------- -------- -------
NET CASH USED IN INVESTING ACTIVITIES (14,810) (11,981) (3,264)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (100) (3,600) (3,600)
Net borrowings (repayments) under revolving credit agreement (7,482) 17,000 3,085
Proceeds from exercise of stock options and warrants 1,907 144 10
-------- -------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (5,675) 13,544 (505)
-------- -------- -------
INCREASE (DECREASE) IN CASH (715) 198 (11)
Cash, beginning of year 1,566 1,368 1,379
-------- -------- -------
CASH, END OF YEAR $ 851 $ 1,566 $ 1,368
======== ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 1,582 $ 1,238 $ 435
Income taxes (net of refunds) 1,690 2,156 1,018
======== ======== =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
25
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
TRC COMPANIES, INC. AND SUBSIDIARIES
IN THOUSANDS, EXCEPT SHARE DATA
Common stock issued Treasury stock
----------------------- ----------------------
Additional
Number paid-in Retained Number
YEARS ENDED JUNE 30, 2001, 2000 AND 1999 of shares Amount capital earnings of shares Amount
-----------------------------------------------------------------------------------------------------------------------------
BALANCES, JUNE 30, 1998 7,410,855 $741 $38,635 $ 7,976 628,653 $(2,897)
Issuance of common stock in connection
with business acquired 14,741 2 74 -- -- --
Exercise of stock options (including tax benefits) 2,250 -- 10 -- -- --
Net income -- -- -- 2,447 -- --
--------- ---- ------- ------- ------- -------
BALANCES, JUNE 30, 1999 7,427,846 743 38,719 10,423 628,653 (2,897)
Issuance of common stock and warrants in connection
with businesses acquired 222,000 22 2,611 -- -- --
Exercise of stock options and warrants (including
tax benefits) 24,483 2 181 -- -- --
Net income -- -- -- 4,644 -- --
--------- ---- ------- ------- ------- -------
BALANCES, JUNE 30, 2000 7,674,329 767 41,511 15,067 628,653 (2,897)
Issuance of common stock and warrants in connection
with businesses acquired 95,912 9 2,277 -- -- --
Exercise of stock options and warrants (including
tax benefits) 311,737 32 4,224 -- -- --
Net income -- -- -- 8,985 -- --
--------- ---- ------- ------- ------- -------
BALANCES, JUNE 30, 2001 8,081,978 $808 $48,012 $24,052 628,653 $(2,897)
========= ==== ======= ======= ======= =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRC COMPANIES, INC. AND SUBSIDIARIES
IN THOUSANDS, EXCEPT SHARE DATA
Note 1. ACCOUNTING POLICIES
A. The consolidated financial statements include the Company and its
wholly-owned subsidiaries, after elimination of intercompany accounts and
transactions. Investments in affiliates in which the Company has the ability to
exercise significant influence, but not control, are accounted for by the equity
method. Certain financial statement items have been reclassified to conform to
the current year's format.
B. The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the financial statements and the reported
amounts of revenue and expenses during the reporting periods. Actual results
could differ from those estimates.
C. Property and equipment are recorded at cost, including costs to
bring the equipment into operation. Major improvements and betterments to
existing equipment are capitalized. Maintenance and repairs are charged to
expense as incurred. The Company provides for depreciation of property and
equipment utilizing the straight-line method using estimated useful lives of 3
to 10 years. Accelerated methods are used for income tax purposes.
D. Leasehold improvements are amortized over the shorter of the lives
of the various leases or the useful lives of the improvements.
E. Goodwill resulting from acquired businesses is amortized on a
straight-line basis over periods ranging from 20 to 30 years. When events and
circumstances indicate, the Company reassesses the appropriateness of both the
carrying value and remaining life of these costs. Such reassessments are
computed using forecasted cash flows on an undiscounted basis and other factors.
F. The Company records revenue on its cost type and time and material
contracts based upon direct labor costs and other direct contract costs
incurred. Revenue from fixed fee contracts is recorded using the
percentage-of-completion method of accounting. Revenue is recognized primarily
based on the ratio of labor costs incurred to total estimated labor costs. Third
party direct costs are included in revenue and contract costs in the period
incurred. Contract costs include direct labor costs, subcontractor costs and
other direct costs. Indirect costs are expensed as incurred. Exit Strategy(R)
contracts are generally segmented into two profit centers: (1) remediation and
(2) operation, maintenance and monitoring (OM&M). Costs and revenue on long-term
contracts are subject to revision throughout the lives of the contracts and any
required adjustments are made in
27
the period in which the revisions become known. Losses on contracts are recorded
in the period in which they are identified.
On contracts where billings are in advance of revenue earned, the
excess is presented on the balance sheet as a current liability.
G. Effective June 1, 1996, the Company adopted the disclosure
provisions of Statement of Financial Accounting Standards No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION ("SFAS 123"). In accordance with the provisions of
SFAS 123, the Company applies the provisions of Accounting Principles Board
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25), and related
interpretations in accounting for stock options.
H. In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVES
AND HEDGING ACTIVITIES. The Company adopted this statement effective July 1,
2001. Since the Company does not have any derivative instruments, the adoption
of this statement did not impact the Company's consolidated operating results,
financial condition or cash flows.
I. Earnings per share is computed in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE. Basic
earnings per share is based upon the weighted average common shares outstanding
during the year. Diluted earnings per share reflects the potential dilutive
effect of outstanding stock options and warrants.
There are no adjustments to net income for purposes of computing
earnings per common share for the years ended June 30, 2001, 2000 and 1999. For
purposes of computing diluted earnings per share, the weighted average number of
shares outstanding was increased by 720,137 shares, 344,946 shares and 56,278
shares in fiscal 2001, 2000 and 1999, respectively, representing the potential
dilutive effects of outstanding stock options and warrants.
J. The Company has 401(k) savings plans covering substantially all
employees. The Company's contributions to the plans were approximately $1,203,
$816 and $578 in fiscal 2001, 2000 and 1999, respectively. The Company does not
provide post-employment or other post-retirement benefits.
K. Cash, accounts receivable, accounts payable, accrued liabilities and
the Company's subordinated note as reflected in the financial statements
approximate their fair values because of the short-term maturity of those
instruments. The carrying amount of the Company's note payable pursuant to its
revolving credit agreement at June 30, 2001, approximates fair value as the
interest rate on this instrument changes with market interest rates.
L. Financial instruments which subject the Company to credit risk
consist primarily of cash, accounts receivable and unbilled costs. The Company
performs on-going credit evaluations of its customers and maintains an allowance
for potential credit losses.
28
Note 2. BUSINESS ACTIVITIES
The Company conducts its activities under one business segment which
involves providing engineering and consulting services primarily in the areas of
infrastructure improvements and expansions, environmental management and power
development and conservation. The Company's services and products are provided
to commercial organizations and government agencies primarily in the United
States market.
Note 3. ACCOUNTS RECEIVABLE
The current portion of accounts receivable at June 30, 2001 and 2000 is
comprised of the following:
2001 2000
-------------------------------------------------------------------------
Amounts billed $35,758 $27,863
Unbilled costs 27,677 23,111
Retainage 1,939 1,086
------- -------
65,374 52,060
Less allowance for doubtful accounts 4,284 3,205
------- -------
$61,090 $48,855
======= =======
Unbilled costs represent billable amounts recognized as revenue
primarily in the last month of the fiscal year. Management expects that
substantially all unbilled costs will be billed and collected in the subsequent
year. Retainage represents amounts billed but not paid by the customer which,
pursuant to the contract, are due at completion.
The long-term portion of accounts receivable at June 30, 2001 and 2000
of $2,046 and $140, respectively, relates to unbilled costs on Exit Strategy
contracts and represent amounts, which are not collectible within one year.
Net service revenue from contracts with U.S. Government agencies
amounted to approximately $8,758, $7,728 and $9,407 in fiscal 2001, 2000 and
1999, respectively.
Note 4. ACQUISITIONS AND DIVESTITURE
In December 2000, the Company acquired 100% of the outstanding stock of
Omni Environmental Corporation, a water quality and water resources consultant
headquartered in Princeton, New Jersey. The purchase price of $1,287 consisted
of cash of $54 (net of cash acquired), 36,000 shares of the Company's common
stock and a $400 three-year promissory note. The Company may make additional
payments if certain financial objectives are achieved in each of the years in
the three-year period ending October 31, 2003. The acquisition has been
accounted for using the purchase method of accounting.
In January 2001, the Company acquired 100% of the outstanding stock of
Imbsen & Associates, Inc., a transportation and bridge design firm headquartered
in Sacramento, California. The purchase price of $1,375 consisted of cash of
$568 (net of cash acquired), 14,032 shares of the Company's common stock and a
$405 three-year
29
promissory note. The Company may make additional payments if certain financial
objectives are achieved in each of the years in the three-year period ending
December 31, 2003. The acquisition has been accounted for using the purchase
method of accounting.
In June 2001, the Company acquired 100% of the outstanding stock of
Engineered Automation Systems, Inc., an energy and infrastructure firm
headquartered in Tustin, California. The purchase price of $2,303 consisted of
cash of $1,493 (net of cash acquired) and 12,024 shares of the Company's common
stock. The Company may make additional payments if certain financial objectives
are achieved in each of the years in the four-year period ending June 30, 2005.
The acquisition has been accounted for using the purchase method of accounting.
As a result of acquisitions completed in fiscal 2001, goodwill of
$2,821 (before contingent consideration) was recorded, which is being amortized
over 20 years on a straight-line basis.
In January 2000, the Company acquired 100% of the outstanding stock and
partnership interest of Hunter Associates, a civil engineering firm
headquartered in Dallas, Texas. The initial purchase price of $3,107 consisted
of cash of $2,775 (net of cash acquired), 25,000 shares of the Company's common
stock and a five-year warrant to purchase 20,000 shares of the Company's common
stock at $7.81 per share. Additionally, in accordance with the terms of the
agreement, the Company made an additional purchase price payment of
approximately $977 in fiscal 2001 consisting of $492 in cash and 25,000 shares
of the Company's common stock. The Company may make additional payments if
certain financial objectives are achieved in each of the years in the two-year
period ending December 31, 2002. The acquisition has been accounted for using
the purchase method of accounting.
In April 2000, the Company acquired substantially all of the business
assets and assumed certain liabilities and obligations of Triangle
Environmental, Inc., a civil engineering and environmental services firm
headquartered in Raleigh, North Carolina. The initial purchase price of $1,141
consisted of $500 in cash, 32,000 shares of the Company's common stock and a
five-year warrant to purchase 50,000 shares of the Company's common stock at
$11.25 per share. Additionally, in accordance with the terms of the agreement,
an additional purchase price payment of approximately $249 was recorded in
fiscal 2001. The Company may make additional payments if certain financial
objectives are achieved in each of the years in the three-year period ending
June 30, 2004. The acquisition has been accounted for using the purchase method
of accounting.
In May 2000, the Company acquired 100% of the outstanding stock of
Lowney Associates, a geotechnical and environmental services firm headquartered
in Mountain View, California. The initial purchase price of $5,566 consisted of
cash of $3,478 (net of cash acquired) and 165,000 shares of the Company's common
stock. Additionally, in accordance with the terms of the agreement, the Company
made an additional purchase price payment of approximately $1,931 in fiscal
2001. The Company may make additional payments if certain financial objectives
are achieved in each of the years in the two-year period ending March 31, 2003.
The acquisition has been accounted for using the purchase method of accounting.
30
As a result of the acquisitions completed in fiscal 2000, goodwill of
$6,743 (before contingent consideration) was recorded, which is being amortized
over 20 years on a straight-line basis. Additional purchase price payments are
recorded as goodwill.
In March 1999, the Company acquired 100% of the outstanding stock of
Alton Geoscience, Inc. (Alton), headquartered in Irvine, California. Alton's
primary business activities include site investigations, remediation and
monitoring services for major oil and pipeline companies. The initial purchase
price included cash of $1,562 (net of cash acquired) and a $500 holdback which
was paid in March 2000. Additionally, in accordance with the terms of the
agreement, the Company made an additional purchase price payment of
approximately $860 in fiscal 2000. The acquisition has been accounted for using
the purchase method of accounting.
In April 1999, the Company acquired 100% of the outstanding stock of
Vectre Corporation, an environmental engineering and consulting firm located in
Lafayette, New Jersey. The initial purchase price consisted of cash of $1,489
(net of cash acquired). In accordance with the terms of the agreement, the
Company may make additional purchase price payments if certain financial
objectives are achieved in each of the years in the two-year period ending June
30, 2003. No payment was made for the year ended June 30, 2001. The Company made
an additional purchase price payment of $45 in fiscal 2000. The acquisition has
been accounted for using the purchase method of accounting.
In May 1999, A & H Engineers, P.C., a transportation consulting and
engineering firm located in New York City, merged into a subsidiary of the
Company. The initial purchase price consisted of $1,733 (net of cash acquired).
In accordance with the terms of the agreement, the Company made an additional
purchase price payment of approximately $500 in fiscal 2001. The Company
recorded an adjustment to purchase price allocation in fiscal 2000 of $725
related to the final valuation of assets acquired. The acquisition has been
accounted for using the purchase method of accounting.
As a result of acquisitions completed in fiscal 1999, goodwill of
$2,528 (before contingent consideration) was recorded, which is being amortized
over 30 years on a straight-line basis. Additional purchase price payments are
recorded as goodwill.
In July 1998, the Company sold its instrumentation business for $2,750
in cash resulting in a gain that was not material.
Note 5. DEBT
Debt at June 30, 2001 and 2000 is comprised of the following:
2001 2000
-----------------------------------------------------------------------------
Note payable - revolving credit agreement $14,000 $21,000
6 3/4% - 7 3/4% subordinated notes 1,005 300
------- -------
15,005 21,300
Less current portion 368 100
------- -------
Long-term debt $14,637 $21,200
======= =======
31
The Company has a $25,000 revolving credit agreement with a bank to
support its working capital and acquisition needs. Borrowings under the
agreement are collateralized by accounts receivable and are due and payable in
March 2003 when the credit agreement expires. Borrowings under the agreement
bear interest at the bank's base rate or the Eurodollar rate plus applicable
margins. The weighted average interest rate on outstanding borrowings at June
30, 2001 was 5.6%. The Company also pays a commitment fee of 1/4% on the unused
portion of the agreement. During the year ended June 30, 2001, the Company did
not meet certain financial and non-financial covenants contained in the
agreement, which were subsequently waived by the bank.
Maturities of the subordinated notes during each of the fiscal years
ending June 30, 2002 through June 30, 2004 are $368, $368 and $269,
respectively.
Note 6. FEDERAL AND STATE INCOME TAXES
The federal and state income tax provision for fiscal 2001, 2000 and
1999 consists of the following:
YEARS ENDED JUNE 30, 2001 2000 1999
-----------------------------------------------------------------------------------
Current:
Federal $4,484 $2,359 $1,427
State 609 226 103
Deferred:
Federal 302 24 (45)
State 14 4 (109)
------ ------ ------
$5,409 $2,613 $1,376
====== ====== ======
Deferred income taxes represent the tax effect of transactions that are
reported in different periods for financial and tax reporting purposes.
Temporary differences and carryforwards that give rise to a significant portion
of deferred income tax benefits (liabilities) are as follows:
AS OF JUNE 30, 2001 2000
----------------------------------------------------------------------------------
Current deferred income tax benefits:
Doubtful accounts and other accruals $ 1,426 $ 920
Vacation pay accrual 450 307
Other, net 6 (19)
------- -------
$ 1,882 $ 1,208
------- -------
Long-term deferred income tax liabilities:
Depreciation and amortization $(2,693) $(1,880)
Cash to accrual from acquisitions (1,717) (742)
Loss carryforwards from acquisitions 509 459
Other, net 75 157
------- -------
$(3,826) $(2,006)
======= =======
32
A reconciliation of the U. S. federal statutory income tax rate and the
Company's consolidated effective income tax rate follows:
YEARS ENDED JUNE 30, 2001 2000 1999
-------------------------------------------------------------------
U.S. federal statutory income tax rate 34.0% 34.0% 34.0%
State income taxes (net of federal benefit) 2.9 2.1 1.8
Adjustment of deferred income taxes due to
state income tax rate changes - - (2.8)
Other, net 0.7 (0.1) 3.0
---- ---- ----
Effective income tax rate 37.6% 36.0% 36.0%
==== ==== ====
At June 30, 2001, the Company had approximately $1,497 of operating
loss carryforwards available to reduce future federal taxable income. These loss
carryforwards relate to certain acquisitions and expire in years 2008 through
2020. Although utilization of these carryforwards is subject to certain
limitations, the Company believes that all of the carryforwards will be utilized
prior to their expiration. In fiscal 2000, the Company received a tax benefit of
$226 as a result of the utilization of previously limited acquired operating
loss carryforwards. The benefit was recorded as a reduction to goodwill.
Note 7. LEASE COMMITMENTS
The Company has commitments at June 30, 2001 under noncancelable
operating leases for office facilities and equipment. Rental payments, net of
sublease receipts, charged to operations in fiscal 2001, 2000 and 1999 were
approximately $5,900, $4,887 and $4,189, respectively. Certain leases for office
facilities require payments for expenses under escalation clauses.
Minimum future operating lease obligations payable in future fiscal
years are as follows:
YEARS ENDING JUNE 30,
----------------------------------------------------
2002 $ 5,761
2003 5,268
2004 4,628
2005 3,102
2006 2,680
2007 and thereafter 5,772
--------
$ 27,211
========
Note 8. STOCK OPTIONS
The Company's non-qualified stock option plan for employees and
directors, as amended, authorizes the granting of options, including
performance-based options, with exercise prices at no less than the fair market
value of the common stock on the date such options are granted. The option term
is fixed by the Board of Directors at the time of grant, but cannot exceed ten
years and generally begins within a specified period after the
33
date of grant. No accounting recognition is given to stock options until they
are exercised, at which time the proceeds are credited to the capital accounts.
The Company receives a tax benefit upon exercise of these options in an amount
equal to the difference between the option price and the fair market value of
the common stock at that date. Tax benefits related to the exercise of stock
options are credited to additional paid-in capital when realized for financial
reporting purposes.
A summary of stock option activity for the three years ended June 30,
2001 follows:
2001 2000 1999
------------------------------------------------------------------------------
Average Average Average
Options Price Options Price Options Price
--------------------------------------------------------------------------------------------------------------------------
Outstanding options, beginning of year 1,334,988 $ 6.03 886,230 $ 4.71 688,677 $ 5.04
Granted 364,650 16.12 484,684 8.45 254,000 4.29
Exercised (296,637) 6.11 (22,283) 5.83 (2,250) 4.33
Canceled (40,910) 9.38 (13,643) 6.36 (54,197) 6.99
------------------------------------------------------------------------------
Outstanding options, end of year 1,362,091 $ 8.61 1,334,988 $ 6.03 886,230 $ 4.71
==============================================================================
Options exercisable at end of year 1,028,917 $ 6.97 887,874 $ 5.02 457,333 $ 4.99
==============================================================================
Options available for future grants 604,908 178,648 649,689
================ ================= ============
The following table summarizes information about outstanding stock
options at June 30, 2001:
Options Outstanding Options Exercisable
------------------------------------------ ------------------------------
Average
Average Term Average
Exercise price Shares Price (Years) Shares Price
----------------------------------------------------------------------------------------------------------------
$3.50 - $4.25 195,892 $ 4.11 6.1 195,892 $ 4.11
$4.50 - $6.00 408,792 4.53 6.9 408,792 4.53
$6.25 - $9.56 233,140 6.62 8.1 168,010 6.71
$10.13 - $11.56 200,133 10.69 8.9 148,911 10.81
$13.19 - $46.10 324,134 16.64 9.3 107,312 16.61
------------------------- ------------------------------
1,362,091 $ 8.61 1,028,917 $ 6.97
========================= ==============================
Grants in fiscal 2000 include 141,334 options granted to certain senior
managers in exchange for a reduction in cash compensation to the grantees over a
one-year period, with the individual's receiving one option for every $3.75 of
salary reduction.
Since the Company applies the provisions of APB 25 and related
interpretations in accounting for stock options and warrants, no compensation
cost has been recognized in the Company's consolidated statements of operations
for the stock option and warrant plans. Had compensation cost for the stock
option and warrant plans been determined based on the fair value at the grant
date for awards under those plans, consistent with the requirements of Statement
of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, the Company's pro forma net income and earnings per share for the
years ended June 30, 2001, 2000 and 1999 would have been as follows:
34
YEARS ENDED JUNE 30, 2001 2000 1999
----------------------------------------------------------------------------------------------------------
Net income, as reported $ 8,985 $ 4,644 $ 2,447
Net income, pro forma 7,363 3,507 1,647
Earnings per share, as reported:
Basic $ 1.24 $ 0.68 $ 0.36
Diluted 1.13 0.65 0.36
Earnings per share, pro forma:
Basic $ 1.02 $ 0.51 $ 0.24
Diluted 0.93 0.49 0.24
In arriving at the pro forma amounts, the fair value of each option and
warrant grant was estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:
YEARS ENDED JUNE 30, 2001 2000 1999
---------------------------------------------------------------------------------------------------------
Risk-free interest rate 5.8% 6.4% 4.7%
Expected life 5 years 7.5 years 7.5 years
Expected volatility 45% 47% 49%
Expected dividend yield None None None
The weighted average fair value of options and warrants granted during
fiscal 2001, 2000 and 1999 was $7.61, $5.06 and $2.50, respectively.
Note 9. CONTINGENCIES
The Company has entered into several long-term contracts under its Exit
Strategy program under which the Company is obligated to complete the
remediation of environmental conditions at a site for a fixed fee. The Company
assumes the risk for all remediation costs for preexisting site environmental
conditions and believes that through in-depth technical analysis, comprehensive
cost estimation and creative remedial approaches it is able to execute pricing
strategies which protect the Company's return on these projects. As additional
protection, the Company obtains remediation cost cap insurance from rated
insurance companies (e.g., American International Group) which provides coverage
for cost increases arising from unknown or changed conditions up to a specified
maximum amount significantly in excess of the estimated cost of remediation. The
Company receives the fixed fee contract price upon signing of the contract which
is deposited in a restricted account held by the insurance company and the
Company is reimbursed as it performs under the contract. The Company believes
that it is adequately protected from risks on these projects and that adverse
developments, if any, will not have a material impact on the Company's
consolidated operating results, financial condition or cash flows.
One Exit Strategy contract entered into by the Company also involved
the Company entering into a consent decree with government authorities and
assuming the obligation for the settling responsible parties' environmental
remediation liability for the site. The Company's expected remediation cost is
fully funded by the contract price
35
received and is fully insured by an environmental remediation cost cap
policy. The Company recorded as a non-cash transaction the environmental
remediation liability it had assumed and a corresponding insurance
recoverable.
The Company's contracts with the U.S. Government are subject to
examination and renegotiation. Contracts and other records of the Company have
been examined through June 30, 1996. The Company believes that adjustments
resulting from such examination or renegotiation proceedings, if any, will not
have a material impact on the Company's operating results, financial condition
or cash flows.
36
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of TRC Companies, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' equity, and
of cash flows present fairly, in all material respects, the financial position
of TRC Companies, Inc. and its subsidiaries at June 30, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 2001 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
October 9, 2001
37
DIRECTORS AND OFFICERS
DIRECTORS
Richard D. Ellison
Chairman, President and Chief Executive Officer
TRC Companies, Inc.
Edward W. Large *
Formerly Executive Vice President and Director of
United Technologies Corporation
J. Jeffrey McNealey *
Partner in the law firm of
Porter, Wright, Morris & Arthur
Edward G. Jepsen *
Executive Vice President and
Chief Financial Officer of
Amphenol Corporation
* Audit Committee Member
OFFICERS
Richard D. Ellison
Chairman, President and Chief Executive Officer
Harold C. Elston, Jr.
Senior Vice President and Chief Financial Officer
John H. Claussen
Senior Vice President
Miro Knezevic
Senior Vice President
Michael C. Salmon
Senior Vice President
Catharine M. deLacy
Senior Vice President
Martin H. Dodd
Vice President and General Counsel
Ronald D. Reed
Vice President
38
CORPORATE INFORMATION
EXECUTIVE OFFICES
TRC Companies, Inc.
5 Waterside Crossing
Windsor, CT 06095
(860) 298-9692
Fax: (860) 298-6291
www.trcsolutions.com
--------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 Pearl Street
Hartford, CT 06103
ANNUAL MEETING
The 2001 annual meeting of shareholders will be held on Wednesday,
November 14, 2001, at 10:00 a.m., at the Company's executive offices.
FORM 10-K
A copy of the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission, Washington, D.C., is available without
charge by writing to:
TRC Companies, Inc.
5 Waterside Crossing
Windsor, CT 06095
Attn: Investor Relations
STOCK EXCHANGE, DIVIDEND AND MARKET INFORMATION
The Company's common stock is traded on the New York Stock Exchange
under the symbol "TRR".
To date the Company has not paid any cash dividends. The payment of
dividends in the future will be subject to the financial condition, capital
requirements and earnings of the Company. However, future earnings are expected
to be used for expansion of the Company's operations, and cash dividends are not
likely for the foreseeable future.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10005
Shareholders may call the agent's Shareholder Services Department directly
concerning stock certificates and address changes at (800) 937-5449.
39