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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year Commission file
ended June 30, 1999 number 1-9947
TRC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-0853807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 WATERSIDE CROSSING
WINDSOR, CONNECTICUT 06095
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (860) 289-8631
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The registrant has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12)
months and has been subject to such filing requirements for the past ninety (90)
days.
The aggregate market value of the registrant's voting stock held by
non-affiliates on September 8, 1999, was approximately $36,369,000.
On September 8, 1999, there were 6,800,193 shares of Common Stock of
the registrant outstanding.
Documents incorporated by reference:
Portions of the following documents are incorporated by reference into
this Report: (1) registrant's 1999 Annual Report to Shareholders (Part II); and
(2) registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held October 22, 1999 (Part III).
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PART I
ITEM 1. BUSINESS
TRC Companies, Inc. (the Company) together with its wholly-owned subsidiaries
provides 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 information technology.
Traditionally much of the Company's work was derived from the environmental
service business and was related to satisfying local, state and federal
regulatory requirements. In early 1998, new TRC management initiated a growth
plan directed toward maintaining the traditional business, while increasing
growth by also focusing on economically driven markets in the following four
business areas:
- Environmental Services
- Infrastructure
- Information Management
- Engineered Financial Solutions
Environmental Services includes pollution control, waste management, auditing
and assessment, permitting and compliance, design and engineering and natural
and cultural resources management. This has been the Company's historic focus
and the Company has an established niche in the high growth energy
deregulation market. TRC's Infrastructure development business targets
geographic areas where rehabilitation of existing systems and population
growth lead to expansion opportunities and continued infrastructure
development. The Company provides customized data management systems
traditionally in the environmental area and serves its customers' needs to
utilize data more cost effectively. Within the Engineered Financial Solutions
business area, the Company combines financing and/or financial risk
management with technology (e.g. Exit Strategies-TM-, Brownfields
redevelopment) to optimize customer solutions. The Company is the leading
supplier of environmental remediation outsourcing through its trademarked
Exit Strategies-TM- program. This value-added outsourcing program provides
added rewards to the Company by partnering with a customer to share site
environmental risks or to transfer those risks to TRC entirely. The Company
manages its own risks through innovative problem solving, the application of
premium charges for the transfer of risks and administrative costs from the
customer to TRC and, when appropriate, insurance policy partnerships with
companies such as American International Group (AIG).
CUSTOMERS
The Company's customers include companies in the chemical, automotive,
petroleum, construction, transportation, mining, waste management and other
industries, financial institutions, public utilities, and local, state and
federal government agencies. Many of the Company's commercial customers are
major multinational corporations. The following customers represent more than
50 percent of the Company's net service revenue:
AES Enterprises Hanson PLC Southern Energy
ASARCO Lockheed Martin Corporation Tosco
Burlington Northern Santa Fe RR Meridian Gold The Trump Organization
Connecticut Resources Recovery Mobil U.S. Generating
Authority New York City U.S. Government
Consolidated Edison of New York - School Construction Authority - EPA
Duke Energy - Department of Transportation - DOD
Express Pipeline - Department of Parks - FAA
General Electric New York State Dept. of Transportation Unocal
General Motors Orange County, CA Waste Management
2
For fiscal 1999, 1998 and 1997, the federal government (principally the U.S.
Environmental Protection Agency and the U. S. Department of Defense) accounted
for 19%, 20% and 22%, respectively, of the Company's net service revenue. No
other customer represented 10% or more of the Company's net service revenue in
any of those years.
MARKETING AND SALES
The Company believes that it attracts customers primarily on the basis of its
reputation for providing cost-effective solutions to customer needs and its
ability to respond to meet customer schedules. The marketing activities for the
Company's services are generally conducted by senior professional staff members
and executives (seller-doers) who are recognized experts in our business areas
and regularly meet with existing and potential customers to obtain new business.
These activities are typically conducted through the Company's network of
offices for local customers and by business sector leaders for national
customers. In addition, corporate and subsidiary marketing departments
coordinate representation at trade shows, prepare sales literature and develop
and place advertising.
BACKLOG
At June 30, 1999, the Company's net contract backlog (excluding the estimated
costs of pass-through charges) was approximately $58 million, as compared to
approximately $36 million at June 30, 1998. The Company expects that
approximately 75% of this backlog will be completed in fiscal 2000. In addition
to this net contract backlog, the Company holds open order contracts from
various customers and government agencies. As work under these contracts is
authorized and funded, the Company includes this portion in its net contract
backlog. There can be no assurance that any work included in backlog will not be
canceled or delayed.
EMPLOYEES
As of June 30, 1999, the Company had approximately 800 full and part-time
employees. Approximately 85% of these employees are primarily engaged in
performing environmental engineering and consulting, process and civil
engineering, construction management and information management services for
customers. Many of these employees have master's degrees or their equivalent and
a number have Ph.D. degrees. The Company's professional staff includes
registered professional engineers, geologists, hydrologists, hydrogeologists,
meteorologists, toxicologists, chemists, industrial hygienists, archaeologists,
biologists, construction specialists, computer programmers, systems analysts and
others with degrees and experience that enables the Company to provide a full
range of services. The balance of the Company's employees are engaged primarily
in executive, administrative and support activities. None of the Company's
employees are represented by a union. The Company considers its relations with
its employees to be very good.
COMPETITION
The markets for many of the Company's services are highly competitive. There are
numerous professional architectural, engineering and consulting firms and other
organizations which offer many of the services offered by the Company. The
Company is subject to direct competition with respect to the services it
provides from many other firms, ranging from small local firms to large national
firms having substantially greater financial, management and marketing resources
than the Company. Competitive factors include reputation, performance, price,
geographic location and availability of technically skilled personnel.
The Company focuses on market areas where the Company can be a leading provider
due to staff skills, reputation, financial strength and/or geographic presence.
For example, the Company believes that it is one of the top 2 or 3 providers of
permitting services for the rapidly growing deregulated energy business.
Further, the Company appears to be the market leader in providing complete
outsourcing of site remediation services through its Exit Strategy-TM- program.
3
REGULATORY MATTERS
The Company's businesses are subject to various rules and regulations at the
federal, state and local government levels. The Company believes that it is in
compliance with these rules and regulations. On occasion, the Company has not
bid on projects in certain jurisdictions due to licensing requirements. In
addition, some projects are not bid due to bonding or insurance requirements
which the Company elects not to meet. While the Company has not experienced any
significant limitations on its business as a result of regulatory, bonding or
insurance requirements, there can be no assurance that future changes in law or
changes in industry practice will not impose conditions to bidding on certain
projects which the Company may not be able to satisfy.
PATENTS, TRADEMARKS AND LICENSES
The Company has a number of trademarks, service marks, copyrights and licenses,
none of which are considered material to the Company's business as a whole.
RESEARCH AND DEVELOPMENT
Historically, research and development costs were charged to operations as
incurred by the Company's instrumentation subsidiary, which was sold in July
1998, and amounted to approximately $187,000 and $190,000 in fiscal 1998 and
1997, respectively.
ENVIRONMENTAL AND OTHER CONSIDERATIONS
The Company does not believe that its own compliance with federal, state and
local laws and regulations relating to the protection of the environment will
have any material effect on capital expenditures, earnings or competitive
position.
ITEM 2. PROPERTIES
The Company provides its services through a network of 24 offices located
nationwide and offices in Lima, Peru and Santiago, Chile. The Company does not
own any real estate and leases approximately 248,000 square feet of office and
laboratory space to support these operations. The Company owns substantially all
of the analytical, chemical monitoring, emissions testing and other specialized
equipment required to render its various services. In addition, the Company
leases certain computers and office equipment.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are not a party to any pending legal
proceedings in which an adverse decision, in the opinion of the Company, would
have a material adverse effect upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information on "Market for the Registrant's Common Equity and Related
Stockholder Matters" is contained on page 20 of the Company's 1999 Annual Report
to Shareholders and such information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information on "Selected Financial Data" is contained on page 4 of the Company's
1999 Annual Report to Shareholders and such information is incorporated herein
by reference.
4
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" is contained on pages 6 through 8 of the Company's 1999 Annual Report
to Shareholders and such information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements of TRC Companies, Inc. and
Report of Independent Accountants set forth on pages 9 through 20 of the
Company's 1999 Annual Report to Shareholders are incorporated herein by
reference:
Consolidated Statements of Operations, Cash Flows and Changes in
Shareholders' Equity - Years ended June 30, 1999, 1998 and
1997
Consolidated Balance Sheets - June 30, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Independent Accountants, dated August 4, 1999
The supplementary data regarding quarterly results of operations is contained on
page 5 of the Company's 1999 Annual Report to Shareholders and such information
is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
5
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the Company's Directors and Executive Officers is contained on
pages 3 through 9 of the Company's Proxy Statement for its 1999 Annual Meeting
of Shareholders to be held October 22, 1999, and such information is
incorporated herein by reference.
The following table presents the name and age of each of the Company's executive
officers, their present positions with the Company and date of appointment
thereto, and other positions held during the past five years, including
positions held with other companies and with subsidiaries of the Company:
Present Position and Other Positions Held
Name and Age Date of Appointment During Last Five Years
Richard D. Ellison.........(60) Chairman, President and Chief Senior Vice President and Chief Engineer
Executive Officer (April 1997)
Richard J. McGuire, Jr.....(55) Director of the Company (April 1997) President, TRC Environmental Corporation
and President, TRC Mariah Associates,
Inc. (May 1994)
John H. Claussen...........(50) Senior Vice President, TRC Companies, Senior Vice President and General
Inc. and President, TRC Environmental Counsel
Corporation (February 1997)
Miro Knezevic..............(49) Senior Vice President, TRC Companies,
Inc. (August 1998) Executive Vice
President, TRC Environmental
Solutions, Inc. (March 1994)
Glenn E. Harkness..........(51) Senior Vice President, TRC Vice President, TRC Environmental
Environmental Corporation Corporation
(September 1997)
Harold C. Elston, Jr.......(55) Senior Vice President (March 1998), Vice President and Treasurer
Chief Financial Officer (May 1999)
and Secretary (March 1998)
NO FAMILY RELATIONSHIP EXISTS BETWEEN ANY OF THE INDIVIDUALS NAMED ABOVE.
ITEM 11. EXECUTIVE COMPENSATION
Information on "Executive Compensation" is contained on pages 6 through 9 of the
Company's Proxy Statement for its Annual Meeting of Shareholders to be held
October 22, 1999, and such information is incorporated herein by reference.
6
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information on "Security Ownership of Certain Beneficial Owners and Management"
is contained on pages 2 through 5 of the Company's Proxy Statement for its
Annual Meeting of Shareholders to be held October 22, 1999, and such information
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on "Certain Relationships and Related Transactions" is contained on
page 12 of the Company's Proxy Statement for its Annual Meeting of Shareholders
to be held October 22, 1999 and such information is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND SCHEDULE
1. The Consolidated Financial Statements and Report of Independent
Accountants set forth on pages 9 through 20 of the Company's 1999
Annual Report to Shareholders are incorporated by reference into
this report by Item 8 herein.
2. The Consolidated Financial Statement Schedule and Report of
Independent Accountants on such schedule are included in this
report on the pages indicated.
Page
Report of Independent Accountants on
Financial Statement Schedule 10
Schedule II - Valuation and Qualifying
Accounts 12
All other schedules are omitted because they are not applicable,
not required or the information required is included in the
financial statements or notes thereto.
(b) REPORTS ON FORM 8-K
The Company did not file any reports of Form 8-K for the fourth quarter
of fiscal 1999.
(c) EXHIBITS
3.1 Restated Certificate of Incorporation, dated November 18,
1994, incorporated by reference to the Company's Form 10-K for
the fiscal year ended June 30, 1995.
3.2 Bylaws of the Company, as amended, incorporated by reference
to the Company's Form S-1 as filed on April 16, 1986,
Registration No. 33-4896.
10.1 Restated Stock Option Plan, dated May 6, 1998, incorporated by
reference to the Company's Form 10-K for the year ended June
30, 1998
10.2.1 Termination Policy for Members of TRC Key Person Group, as
adopted on December 1, 1998.
10.2.2 TRC Key Person Bonus Plan for Fiscal Years 1999 - 2003, as
adopted on March 22, 1999.
10.3 Third Amended and Restated Revolving Credit Agreement, by and
among TRC Companies, Inc. and its subsidiaries and BankBoston,
N.A., dated July 10, 1998, incorporated by reference to the
Company's Form 10-K for the year ended June 30, 1998.
7
10.3.1 Amendment No. 1 to the Third Amended and Restated Revolving
Credit Agreement, by and among TRC Companies, Inc. and its
subsidiaries and BankBoston, N.A. dated July 1, 1999
10.4 Asset Purchase Agreement, dated March 21, 1994, by and among
TRC Companies, Inc., Environmental Solutions, Inc., Richard D.
Ellison and Miro Knezevic; Registration Rights Agreement among
TRC Companies, Inc. and Environmental Solutions, Inc., dated
March 21, 1994; and 5.75% Subordinated Note, due March 21,
1997, incorporated by reference to the Company's Form 8-K,
dated April 1, 1994.
10.4.1 Amendment, dated July 1, 1997, to Subordinated Note, by and
among TRC Companies, Inc., R & M Corporation, Richard D.
Ellison and Miro Knezevic, incorporated by reference to the
Form 10-K for the fiscal year ended June 30, 1997.
10.5 Stock Purchase Agreement, dated May 27, 1994, by and among TRC
Companies, Inc., Richard J. McGuire, Jr., W. Thomas Turner and
Stephen B. Goppert; Registration Rights Agreement, dated May
27, 1994, by and among TRC Companies, Inc., Richard J.
McGuire, Jr., W. Thomas Turner and Stephen B. Goppert,
incorporated by reference to the Company's Form 8-K, dated
June 10, 1994.
13 Annual Report to Shareholders for the fiscal year ended June
30, 1999. (Only those portions expressly incorporated by
reference are deemed to be filed herewith.)
21 Subsidiaries of the Registrant.
27 Financial Data Schedule (for SEC purposes only).
As to any security holder requesting a copy of this Form 10-K, the Company will
furnish any exhibit indicated above as being filed with the Form 10-K upon
payment to the Company of its expenses in furnishing such exhibit.
8
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRC COMPANIES, INC.
Dated: September 28, 1999 By: /s/ Richard D. Ellison
-------------------------------
Richard D. Ellison, Ph.D., P.E.
Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
/s/ Richard D. Ellison Chairman, President and September 28, 1999
- -------------------------------- Chief Executive Officer
Richard D. Ellison
/s/ Edward G. Jepsen Director September 28, 1999
- --------------------------------
Edward G. Jepsen
/s/ Richard J. McGuire, Jr. Director September 28, 1999
- --------------------------------
Richard J. McGuire, Jr.
/s/ Edward W. Large Director September 28, 1999
- --------------------------------
Edward W. Large
/s/ J. Jeffrey McNealey Director September 28, 1999
- --------------------------------
J. Jeffrey McNealey
/s/ Harold C. Elston, Jr. Senior Vice President, Chief Financial September 28, 1999
- -------------------------------- Officer and Secretary
Harold C. Elston, Jr.
9
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of TRC Companies, Inc.
Our audits of the consolidated financial statements referred to in our report
dated August 4, 1999, appearing in the Annual Report to Shareholders of TRC
Companies, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the financial statement schedule listed in Item 14(a)(2) of this
Form 10-K. In our opinion, this financial statement schedule presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/PRICEWATERHOUSECOOPERS LLP
Hartford, Connecticut
August 4, 1999
10
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 33-84660) and in the Registration Statements on
Form S-8 (Nos. 2-66247, 2-77690, 33-18771, 33-26748, 33-38810, 33-45169,
33-70662, 33-87446, 33-87448 and 333-57463) of TRC Companies, Inc. of our
report dated August 4, 1999 relating to the financial statements, which
appear in the Annual Report to Shareholders which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference
of our report dated August 4, 1999 relating to the financial statement
schedule, which appears in this Form 10-K.
/s/PRICEWATERHOUSECOOPERS LLP
Hartford, Connecticut
September 28, 1999
11
TRC Companies, Inc.
Schedule II - Valuation and Qualifying Accounts
For the Years Ended June 30, 1999, 1998 and 1997
(in thousands)
Balance at Charged to Allowances Balance at
beginning costs and from acquired end of
Description of period expenses businesses Deductions* period
- --------------------------------- ------------ ------------- --------------- --------------- -------------
1999
Allowance for doubtful accounts $ 2,375 $ 725 $ 200 $ (754) $ 2,546
------------ ------------- --------------- --------------- -------------
1998
Allowance for doubtful accounts 2,300 1,129 25 (1,079) 2,375
------------ ------------- --------------- --------------- -------------
1997
Allowance for doubtful accounts 2,500 999 73 (1,272) 2,300
------------ ------------- --------------- --------------- -------------
* Uncollectable accounts written off, net of recoveries.
12
TRC Companies, Inc.
Form 10-K Exhibit Index
Fiscal Year Ended June 30, 1999
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
10.2.1 Termination Policy for Members of TRC Key Person 14
Group, as adopted on December 1, 1998
10.2.2 TRC Key Person Bonus Plan for Fiscal Years 15-16
1999 - 2003, as adopted on March 22, 1999
10.3.1 Amendment No. 1 to Third Amended and Restated 17-23
Revolving Credit Agreement, by and among TRC
Companies, Inc. and its subsidiaries and BankBoston,
N.A., dated July 1, 1999
13 Annual Report to Shareholders for the fiscal year 24-46
ended June 30, 1999
21 Subsidiaries of the Registrant 47
27 Financial Data Schedule (for SEC purposes only)
13