Item 1. BUSINESS
TRC Companies, Inc. (the Company) together with its wholly-owned subsidiaries, provides a full range of environmental engineering and consulting services and specialized pollution control measurement instrumentation to industry and government.
Significant recent events in the development of the Company's business include: (i) the acquisition in March 1994 of the business assets, liabilities and obligations of Environmental Solutions, Inc. of Irvine, California, a firm providing a broad range of solid and hazardous waste engineering and consulting services, specializing in remedial design and construction management; and (ii) the acquisition in May 1994 of the capital stock of Mariah Associates, Inc. (Mariah) of Laramie, Wyoming, a full-service environmental consulting firm serving primarily the western United States with a focus on cultural resource consulting and environmental impact statements. The acquisition of Environmental Solutions, Inc. was treated as a purchase for accounting purposes and Mariah was accounted for as a pooling-of-interests. Accordingly, the Company's consolidated financial statements have been restated to include the financial results of Mariah.
Environmental Engineering and Consulting Services
Environmental engineering and consulting services are provided by the Company's wholly-owned subsidiaries, TRC Environmental Corporation, TRC Environmental Solutions, Inc., TRC Mariah Associates, Inc. and TRC Process Engineering Inc., through a network of offices across the United States.
TRC Environmental Corporation is an international environmental services company with expertise in all areas of air quality and hazardous waste management, regulatory compliance and permitting, environmental consulting and pollution control engineering. The company's air quality services incorporate all technical aspects of facility permitting, control engineering, regulatory compliance and air quality analyses and measurement. Hazardous waste management services include all aspects of site evaluation, permitting, and soil and groundwater remediation engineering.
The company also provides risk management services that assess toxicological, exposure and clinical data to protect human health and determine risk-based controls. Additionally, the company's industrial hygienists and asbestos engineers address indoor environment problems and assist in managing workplace risks. The company also develops, organizes and assesses major databases used by government agencies and industry to make strategic decisions. A subsidiary of the company provides weather modification services to water districts, municipalities, irrigation companies and other organizations that utilize water.
TRC Environmental Solutions, Inc. provides a broad range of solid and hazardous waste engineering and management services, specializing in all aspects of planning, design, permitting and construction for all classes of landfills and solid waste disposal facilities, including RI/FS investigations, risk assessments, remedial designs and construction management of on-site remediation facilities.
TRC Mariah Associates, Inc. is a full-service environmental services company with a unique focus on cultural and natural resource management, permitting and environmental impact statements.
TRC Process Engineering Inc. is a multi-disciplinary engineering firm assisting industrial, utility and public sector clients to maximize the performance and minimize the cost of manufacturing, energy generation and waste treatment processes through pollution prevention and engineered solutions. A division of the company also provides site/civil and transportation/traffic engineering services that include the analyses of traffic conditions and development of highway improvements.
Specialized Air Pollution Measurement Instruments
The Company's wholly-owned subsidiary, MIE, Inc. (MIE), develops, manufactures and markets a line of specialized pollution control measurement instruments that provide real-time measurement of airborne dust, smoke, fumes and asbestos fibers. These instruments have diverse applications including worker's health protection, asbestos remediation monitoring, energy conservation and hazardous waste site dust monitoring.
Clients
The Company's clients include companies in the chemical, automotive, petroleum, construction, transportation, mining, waste management and other industries, financial institutions, public utilities, and state and federal government agencies. Over 80% of the Company's annual revenue in fiscal 1996 was derived from repeat business with existing clients.
For fiscal 1996, 1995 and 1994, the federal government (principally the U.S. Environmental Protection Agency) accounted for 17%, 15% and 31%, respectively, of the Company's net service revenue. No other client represented 10% or more of the Company's net service revenue in any of those years.
Marketing and Sales
The Company believes that it attracts clients primarily on the basis of its reputation for quality work and the ability to respond quickly to client needs. The marketing activities for the Company's service businesses are conducted by senior professional staff members and executives who regularly meet with existing and potential clients to solicit new business. These activities are typically conducted through the Company's network of offices. In addition, corporate and subsidiary marketing departments coordinate representation at trade shows, prepare sales literature and develop and place advertising. MIE sells its instruments through its direct sales force and a network of manufacturer's representatives in the United States, Europe and Asia.
Backlog
At June 30, 1996, the Company's net contract backlog (excluding the estimated costs of pass-through charges) was approximately $70 million, as compared to approximately $75 million at June 30, 1995. The Company expects that approximately 70% of this backlog will be completed in fiscal 1997. In addition to this net contract backlog, the Company holds open order contracts from various clients and government agencies. As work under these contracts is authorized and funded, the Company includes this portion in its net contract backlog. There can be no assurance that any work included in backlog will not be canceled or delayed.
Employees
As of June 30, 1996, the Company had a total of 665 full and part-time employees. Approximately 80% of these employees are engaged primarily in performing environmental engineering and consulting, and process and civil engineering services for clients. Many of these employees have master's degrees or their equivalent and a number have Ph.D. degrees. The Company's professional staff includes registered professional engineers, civil, environmental and chemical engineers, meteorologists, geologists, hydrologists, hydrogeologists, toxicologists, chemists, industrial hygienists, archaeologists, biologists and others with degrees and experience that enable them to provide a full range of services. The balance of the Company's employees are engaged primarily in executive, administrative and support activities. None of the Company's employees are represented by a union. The Company considers its relations with its employees to be very good.
Competition
The markets for the Company's services are highly competitive. There are numerous professional architectural, engineering and consulting firms and other organizations which offer many of the services offered by the Company. The Company is subject to direct competition with respect to the services it provides from many other firms, ranging from small local firms to large national firms having substantially greater financial, management and marketing resources than the Company. Competitive factors include reputation, performance, price, geographic location and availability of technically skilled personnel.
MIE's products have few direct competitors; however, MIE often competes with firms which offer alternative technologies. Such competition is based on price, performance and regulatory requirements.
Regulatory Matters
The Company's businesses are subject to various rules and regulations at the federal, state and local government levels. The Company believes that it is in compliance with these rules and regulations. On occasion, the Company has not bid on projects in certain jurisdictions due to licensing requirements. In addition, some projects are not bid due to bonding or insurance requirements which the Company elects not to meet. While the Company has not experienced any significant limitations on its business as a result of regulatory, bonding or insurance requirements, there can be no assurance that future changes in law or changes in industry practice will not impose conditions to bidding on certain projects which the Company may not be able to satisfy.
Patents, Trademarks and Licenses
The Company has a number of patents, trademarks, service marks, copyrights and licenses, none of which are considered material to the Company's business as a whole.
Research and Development
During the past year the Company continued work both on programs relating to its hazardous and toxic waste services and on development of new products for monitoring airborne contaminants. Research and development costs are charged to operations as incurred and amounted to approximately $283,000 in fiscal 1996, as compared to approximately $204,000 in fiscal 1995 and $338,000 in fiscal 1994.
Environmental and Other Considerations
The Company does not believe that its own compliance with federal, state and local laws and regulations relating to the protection of the environment will have any material effect on capital expenditures, earnings or competitive position. The Company's business is not seasonal to any significant extent.
Item 2.
Item 2. Properties
The Company provides its services through a network of twenty offices located nationwide. The Company does not own any real estate and leases approximately 245,000 square feet of office and laboratory space to support these operations. The Company owns substantially all of the analytical, chemical monitoring, emissions testing and other specialized equipment required to render its various services. In addition, the Company leases certain computers and office equipment. The Company also leases approximately 15,000 square feet of space in Billerica, Massachusetts for MIE's manufacturing operation.
Item 3.
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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Information on "Market for the Registrant's Common Equity and Related Stockholder Matters" is contained on page 28 of the Company's 1996 Annual Report to Shareholders and such information is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data
Information on "Selected Financial Data" is contained on page 14 of the Company's 1996 Annual Report to Shareholders and such information is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
"Management's Discussion and Analysis of Results of Operations and Financial Condition" is contained on pages 15 through 17 of the Company's 1996 Annual Report to Shareholders and such information is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data
The following Consolidated Financial Statements of TRC Companies, Inc. and Report of Independent Accountants set forth on pages 18 through 27 of the Company's 1996 Annual Report to Shareholders are incorporated herein by reference:
Consolidated Statements of Operations, Cash Flows and Changes in Shareholders' Equity - Years ended June 30, 1996, 1995 and 1994
Consolidated Balance Sheets - June 30, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Accountants, dated August 6, 1996
The supplementary data regarding quarterly results of operations is contained on page 14 of the Company's 1996 Annual Report to Shareholders and such information is incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Information on the Company's Directors and Executive Officers is contained on pages 3 through 10 of the Company's Proxy Statement for its 1996 Annual Meeting of Shareholders to be held October 25, 1996, and such information is incorporated herein by reference.
The following table sets forth the name, age and capacity of the executive officers of the Company and its subsidiaries:
No family relationship exists between any of the individuals named above.
Item 11.
Item 11. Executive Compensation
Information on "Executive Compensation" is contained on pages 6 through 10 of the Company's Proxy Statement for its Annual Meeting of Shareholders to be held October 25, 1996, and such information is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information on "Security Ownership of Certain Beneficial Owners and Management" is contained on pages 2 through 5 of the Company's Proxy Statement for its Annual Meeting of Shareholders to be held October 25, 1996, and such information is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
Information on "Certain Relationships and Related Transactions" is contained on page 12 of the Company's Proxy Statement for its Annual Meeting of Shareholders to be held October 25, 1996 and such information is incorporated herein by reference.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) Financial Statements and Schedules
1. The Consolidated Financial Statements and Report of Independent Accountants set forth on pages 18 through 27 of the Company's 1996 Annual Report to Shareholders are incorporated by reference into this report by Item 8 herein.
2. The Consolidated Financial Statement Schedule and Report of Independent Accountants on such schedule are included in this report on the pages indicated.
All other schedules are omitted because they are not applicable, not required or the information required is included in the financial statements or notes thereto.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourth quarter of fiscal 1996.
(c) Exhibits
3.1 Restated Certificate of Incorporation, dated November 18, 1994, incorporated by reference to the Company's Form 10-K for the fiscal year ended June 30, 1995.
3.2 Bylaws of the Company, as amended, incorporated by reference to the Company's Form S-1 as filed on April 16, 1986, Registration No. 33-4896.
10.1 Stock Option Plan for Key Employees of the Company, as amended, incorporated by reference to the Company's Form S-1 as filed on April 16, 1986, Registration No. 33-4896.
10.1.1 Amendment, dated June 23, 1994, to the Stock Option Plan for Key Employees of the Company, incorporated by reference to the Company's Form 10-K for the fiscal year ended June 30, 1994.
10.2 Outside Directors Stock Option Plan, as adopted May 29, 1992, incorporated by reference to the Company's Form 10-K for the fiscal year ended June 30, 1992.
10.3 Amended and Restated Revolving Credit and Term Loan Agreement, by and among TRC Companies, Inc. and its subsidiaries and The First National Bank of Boston, dated March 15, 1995, incorporated by reference to the Company's Form 10-Q for the quarterly period ended March 31, 1995.
10.3.1 Amendment, dated August 6, 1996, to the Amended and Restated Revolving Credit and Term Loan Agreement, by and among TRC Companies, Inc. and its subsidiaries, The First National Bank of Boston and BayBank, N.A.
10.4 Asset Purchase Agreement, dated March 21, 1994, by and among TRC Companies, Inc., Environmental Solutions, Inc., Richard D. Ellison and Miro Knezevic; Registration Rights Agreement among TRC Companies, Inc. and Environmental Solutions, Inc., dated March 21, 1994; and 5.75% Subordinated Note, due March 21, 1997, incorporated by reference to the Company's Form 8-K, dated April 1, 1994.
10.5 Stock Purchase Agreement, dated May 27, 1994, by and among TRC Companies, Inc., Richard J. McGuire, Jr., W. Thomas Turner and Stephen B. Goppert; Registration Rights Agreement, dated May 27, 1994, by and among TRC Companies, Inc., Richard J. McGuire, Jr., W. Thomas Turner and Stephen B. Goppert, incorporated by reference to the Company's Form 8-K, dated June 10, 1994.
10.6 Severance Agreements between the Company and Vincent A. Rocco and Bruce D. Cowen, dated August 19, 1994, incorporated by reference to the Company's Form 10-K for the fiscal year ended June 30, 1994.
10.7 Employment Agreement between Environmental Solutions, Inc. and Richard D. Ellison, dated March 21, 1994, incorporated by reference to the Company's Form 10-K for the fiscal year ended June 30, 1994.
10.8 Executive Incentive Compensation Plan, as adopted June 20, 1988, incorporated by reference to the Company's Form 10-K for the fiscal year ended June 30, 1988.
10.8.1 Amendment, dated June 19, 1996, to the Executive Incentive Compensation Plan.
13 Annual Report to Shareholders for the fiscal year ended June 30, 1996. (Only those portions expressly incorporated by reference are deemed to be filed herewith.)
21 Subsidiaries of the Registrant.
27 Financial Data Schedule (for SEC purposes only).
As to any security holder requesting a copy of this Form 10-K, the Company will furnish any exhibit indicated above as being filed with the Form 10-K upon payment to the Company of its expenses in furnishing such exhibit.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRC COMPANIES, INC.
Dated: September 25, 1996 By: /s/Vincent A. Rocco ---------------------------------- Vincent A. Rocco Chairman and Chief Executive Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Report of Independent Accountants on Financial Statement Schedule
To the Shareholders and Board of Directors of TRC Companies, Inc.
Our audits of the consolidated financial statements referred to in our report dated August 6, 1996, appearing on page 27 of the 1996 Annual Report to Shareholders of TRC Companies, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Hartford, Connecticut August 6, 1996
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 2-66247, 2-77690, 33-18771, 33-26748, 33-38810, 33- 45169, 33-70662, 33-87446 and 33-87448) and in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-84660) of TRC Companies, Inc. and its subsidiaries of our report dated August 6, 1996 appearing on page 27 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 11 of this Form 10-K.
PRICE WATERHOUSE LLP
Hartford, Connecticut September 25, 1996
TRC Companies, Inc. Schedule II - Valuation and Qualifying Accounts For the Years Ended June 30, 1996, 1995 and 1994
* Uncollectible accounts written off, net of recoveries.
TRC Companies, Inc. Form 10-K Exhibit Index Fiscal Year Ended June 30, 1996