TRC Announces First- and Second-Quarter Fiscal 2008 Financial Results

Company Reaches Mid-point of Turnaround Plan; Announces Two Major
Non-Cash Charges; Increases Net Service Revenue by 7.5%
LOWELL, Mass.--(Business Wire)--
TRC (NYSE: TRR), a recognized leader in engineering, consulting
and construction management, today announced financial results for the
first and second quarters of fiscal 2008.

First-Quarter Results

For the three months ended September 28, 2007, gross revenue
increased 21% to $123.7 million from $101.8 million for the three
months ended September 30, 2006. Net service revenue for the first
quarter of fiscal 2008 grew 13% to $71.3 million from $63.1 million
for the first quarter of fiscal 2007. The Company believes net service
revenue rather than gross revenue best reflects the value of services
provided to its customers.

As of June 30, 2007, TRC's goodwill totaled $131 million, mostly
related to companies acquired during the prior ten years. The Company
evaluates goodwill on an annual basis and more often if indicators of
impairment are present. The Company recorded an impairment charge of
$76.7 million in the first quarter of fiscal 2008 primarily based on
an evaluation of its market capitalization and discounted projected
cash flows. In addition, due to losses over the past three years and
current year performance, TRC also recorded as a component of its tax
provision a full valuation allowance against its deferred tax assets
in the amount of $12.1 million. Accordingly, the Company's results for
the first half of fiscal 2008 reflect the effect of the $88.8 million
in non-cash charges related to the goodwill impairment charge and
valuation allowance on deferred tax assets that were not previously
reserved.

Net loss applicable to common shareholders for the three months
ended September 28, 2007 was $87.7 million, or $4.75 per share,
compared with net income applicable to common shareholders of $0.2
million, or $0.01 per diluted share, for the comparable period in
fiscal 2007. Net loss for the first quarter of fiscal 2008 includes
the aforementioned $88.8 million in non-cash charges for goodwill
impairment and provision of a full valuation allowance against net
deferred tax assets. Excluding the effect of those items, TRC would
have generated net income of $1.1 million for the first quarter of
fiscal 2008.

Second-Quarter Results

For the three months ended December 28, 2007, gross revenue was
$110.9 million, compared with $113.4 million for the second quarter of
fiscal 2007. Net service revenue for the second quarter of fiscal 2008
grew 2% to $66.3 million from $64.9 million for the same period in
fiscal 2007.

Net loss applicable to common shareholders for the three months
ended December 28, 2007 was $0.4 million, or $0.02 per share, compared
with a net loss applicable to common shareholders of $1.1 million, or
$0.06 per share, for the comparable period a year earlier.

Six Months Ended December 28, 2007

For the six months ended December 28, 2007, gross revenue
increased 9% to $234.6 million from $215.2 million for the six months
ended December 31, 2006. Net service revenue for the six months ended
December 28, 2007 grew 7.5% to $137.6 million from $128.0 million for
the comparable period in 2006.

Net loss applicable to common shareholders for the first six
months of fiscal 2008 was $88.1 million, or $4.74 per share, compared
with a net loss applicable to common shareholders of $0.9 million, or
$0.05 per share, for the comparable year-earlier period. Net loss for
the first six months of fiscal 2008 included $88.8 million related to
the previously mentioned goodwill impairment charge and a tax
provision to provide a full valuation allowance against net deferred
tax assets. Excluding the effect of those non-cash charges, TRC would
have generated net income of $0.7 million for the first six months of
fiscal 2008.

Comments on Results

"Our results in the first half of fiscal 2008 reflect the ongoing
effects of a company in transition," said Chris Vincze, TRC's Chairman
and Chief Executive Officer. "While we continue to make considerable
progress, our financial results were hampered by the implementation of
turnaround activities and compounded by a company-wide system
conversion. Excluding the two non-cash charges, TRC's operations were
at breakeven for the first half of fiscal 2008."

"Net service revenue increased 7.5% from the first half of fiscal
2007 - a strong rate of growth given our internal focus on improving
the results of operations," Vincze said. "Equally as important, we
continued to work on reducing our cost structure across the
organization. Our ability to produce substantial revenue gains while
extensively restructuring the Company's operations demonstrates the
strength of the TRC brand and the vibrancy of the markets in which we
compete."

Carl Paschetag, TRC's Chief Financial Officer said, "In the first
half of fiscal 2008, we incurred approximately $1 million in
restructuring expense primarily related to severance and small office
closings. We expect to record additional restructuring charges in
future quarters as we continue to rationalize our cost structure.
During the first half of fiscal 2008, we transitioned to a new
healthcare provider. This transition will be beneficial to the Company
long-term, but it resulted in nearly $1.5 million in unanticipated
costs for the six-month period that are not expected to recur. In
addition, our results for the first six months of the fiscal year
included nearly $1 million in unanticipated costs related to
implementing Vision - our new enterprise-wide accounting software
system - that we also do not expect to recur."

"With Vision, the Company now has, for the first time, a unified
platform from which to operate," Paschetag said. "While the protracted
Vision implementation significantly delayed our financial reporting in
recent quarters, the system's encouraging early results suggest that
our start-up issues are essentially behind us. With the Vision system
almost fully implemented, we will be able to report on a timelier
basis, further decrease our cost structure, improve pricing and
increase employee utilization."

Outlook

"As we reach the mid-point of our three-year turnaround plan,
industry trends continue to work in our favor," said Vincze. "Despite
the slower U.S. economy, the majority of our target markets,
particularly energy, remain well-funded and afford us numerous
opportunities. During recent months, it has been encouraging that TRC
has won major contracts across several business lines. We continue to
expand our team of top-quality engineers to accommodate demand."

"While the third quarter is typically our weakest due to
seasonality, our backlog remains strong," Vincze said. "We also will
continue working aggressively to achieve further reductions in our
cost structure. Our goal for fiscal 2008 is to permanently eliminate
costs totaling $7 million on an annualized basis. We appreciate the
continued patience and support of our shareholders as we move toward
completion of TRC's turnaround in fiscal 2009."

Reporting Schedule

The Company changed to a fiscal quarter end from a calendar
quarter end financial reporting schedule beginning with the fiscal
period ended September 28, 2007. The Company is changing its financial
quarter end to the last Friday of each quarter. The Company will
continue to close its fiscal year end on June 30. The Company believes
that reporting on a quarterly fiscal period basis is more consistent
with its operating cycle and will improve the efficiency of the
financial close process. The Company believes that the change to a
fiscal quarter end did not materially impact the reported results of
operations.

Conference Call Information

The Company will broadcast its first-quarter and second-quarter
financial results conference call this morning at 9:00 a.m. ET. Those
who wish to listen to the conference call should visit the "Investor
Center" section of TRC's website at www.TRCsolutions.com. The call
also may be accessed by dialing (877) 407-5790 or (201) 689-8328 prior
to the start of the call. For interested individuals unable to join
the live conference call, a webcast replay will be available on the
Company's website.

About TRC

TRC creates and implements sophisticated and innovative solutions
to the challenges facing America's real estate, environmental, energy,
and infrastructure markets. The Company also is a leading provider of
technical, financial, risk management, and construction services to
commercial and government customers across the country. For more
information, visit TRC's website at www.TRCsolutions.com.

Forward-Looking Statements

Certain statements in this press release may be forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. You can
identify these statements by forward-looking words such as "may,"
"expects," "plans," "anticipates," "believes," "estimates," or other
words of similar import. You should consider statements that contain
these words carefully because they discuss our future expectations,
contain projections of our future results of operations or of our
financial condition, or state other "forward-looking" information. We
believe that it is important to communicate our future expectations to
our investors. However, there may be events in the future that we are
not able to accurately predict or control and that may cause our
actual results to differ materially from the expectations we describe
in our forward-looking statements. Investors are cautioned that all
forward-looking statements involve risks and uncertainties, and actual
results may differ materially from those discussed as a result of
various factors, including, but not limited to, the availability and
adequacy of insurance; the uncertainty of our operational and growth
strategies; regulatory uncertainty; the availability of funding for
government projects; the level of demand for our services; product
acceptance; industry-wide competitive factors; the ability to continue
to attract and retain highly skilled and qualified personnel; recent
changes in our senior management; the results of outstanding
litigation; risks arising from either failure to identify, or from
identified material weaknesses in our internal controls over financial
reporting or our inability to effectively remedy such weaknesses; our
inability to comply with the terms of our credit facility and our
lenders' future unwillingness to waive our noncompliance; and general
political or economic conditions. Furthermore, market trends are
subject to changes, which could adversely affect future results. See
additional discussion in our Annual Report on Form 10-K for the fiscal
year ended June 30, 2007, and other factors detailed from time to time
in our other filings with the Securities and Exchange Commission.

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TRC COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

Three Months Ended
-------------------
September September
28, 30,
2007 2006
--------- ---------
Gross revenue $123,654 $101,794
Less subcontractor costs and other direct
reimbursable charges 52,331 38,741
--------- ---------
Net service revenue 71,323 63,053
--------- ---------

Interest income from contractual arrangements 1,071 1,201
Insurance recoverables and other income 1,528 4,745

Operating costs and expenses:
Cost of services 59,921 57,274
General and administrative expenses 8,821 6,892
Provision for doubtful accounts 810 885
Goodwill impairment charge 76,678 -
Depreciation and amortization 2,102 1,999
--------- ---------
148,332 67,050
--------- ---------
Operating (loss) income (74,410) 1,949
Interest expense 1,023 1,133
--------- ---------
(Loss) income from continuing operations before
taxes, minority interest and equity (losses)
earnings (75,433) 816
Federal and state income tax provision 12,237 414
Minority interest 27 -
--------- ---------
(Loss) income from continuing operations before
equity (losses) earnings (87,643) 402
Equity in (losses) earnings from unconsolidated
affiliates (12) 19
--------- ---------
(Loss) income from continuing operations (87,655) 421
Discontinued operations, net of taxes - (77)
--------- ---------
Net (loss) income (87,655) 344
Dividends and accretion charges on preferred stock - 147
--------- ---------
Net (loss) income applicable to common
shareholders $(87,655) $ 197
========= =========

Basic and diluted (loss) earnings per common
share:
Continuing operations $ (4.75) $ 0.02
Discontinued operations, net of taxes - (0.01)
--------- ---------
$ (4.75) $ 0.01
========= =========

Average shares outstanding:
Basic 18,447 16,729
========= =========
Diluted 18,447 17,194
========= =========
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TRC COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)

September 28, June 30,
2007 2007
------------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 239 $ 430
Accounts receivable, less allowances for
doubtful accounts 149,149 132,879
Insurance recoverable - environmental
remediation 7,843 6,381
Deferred income tax assets - 13,894
Income taxes refundable 548 587
Restricted investment 19,706 20,830
Prepaid expenses and other current assets 8,687 11,911
------------- ---------
Total current assets 186,172 186,912
------------- ---------

Property and equipment, at cost 57,672 57,569
Less accumulated depreciation and
amortization 36,918 36,126
------------- ---------
20,754 21,443
Goodwill 54,265 130,935
Investments in and advances to unconsolidated
affiliates and construction joint ventures 1,423 5,245
Long-term restricted investment 67,762 72,651
Long-term prepaid insurance 53,567 54,395
Other assets 14,601 14,401
------------- ---------
Total assets $398,544 $485,982
============= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 30,669 $ 31,618
Accounts payable 65,821 54,976
Accrued compensation and benefits 24,174 22,134
Deferred revenue 26,585 31,494
Environmental remediation liabilities 3,402 4,629
Other accrued liabilities 22,075 24,007
------------- ---------
Total current liabilities 172,726 168,858
------------- ---------
Non-current liabilities:
Long-term debt, net of current portion 11,450 11,052
Long-term income taxes payable 698 -
Deferred income tax liabilities - 1,519
Long-term deferred revenue 129,016 134,901
Long-term environmental remediation
liabilities 8,186 7,861
------------- ---------
Total liabilities 322,076 324,191
------------- ---------

Minority interest in subsidiary 35 62
Commitments and contingencies
Shareholders' equity:
Capital stock:
Preferred, $.10 par value; 500,000 shares
authorized, no shares issued and
outstanding - -
Common, $.10 par value; 30,000,000 shares
authorized, 18,676,535 and 18,673,053
shares issued and outstanding,
respectively, at September 30, 2007, and
18,240,509 and 18,237,027 shares issued
and
outstanding, respectively, at June 30, 2007 1,868 1,824
Additional paid-in capital 150,402 147,229
(Accumulated deficit) retained earnings (76,032) 12,453
Accumulated other comprehensive income 228 256
Treasury stock, at cost (33) (33)
------------- ---------
Total shareholders' equity 76,433 161,729
------------- ---------
Total liabilities and shareholders' equity $398,544 $485,982
============= =========
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TRC COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

Three Months Ended Six Months Ended
-------------------- --------------------
December December December December
28, 31, 28, 31,
2007 2006 2007 2006
--------- ---------- --------- ----------
(As (As
restated) restated)
Gross revenue $110,932 $113,412 $234,586 $215,206
Less subcontractor costs
and other direct
reimbursable charges 44,675 48,515 97,006 87,256
--------- ---------- --------- ----------
Net service revenue 66,257 64,897 137,580 127,950
--------- ---------- --------- ----------

Interest income from
contractual arrangements 1,007 1,250 2,078 2,451
Insurance recoverables and
other income 17 71 1,545 4,816

Operating costs and
expenses:
Cost of services 56,137 55,626 116,058 112,900
General and administrative
expenses 7,830 4,624 16,651 11,516
Provision for doubtful
accounts 695 925 1,505 1,810
Goodwill impairment charge - - 76,678 -
Depreciation and
amortization 2,024 2,023 4,126 4,022
--------- ---------- --------- ----------
66,686 63,198 215,018 130,248
--------- ---------- --------- ----------
Operating income (loss) 595 3,020 (73,815) 4,969
Interest expense 971 1,147 1,994 2,280
--------- ---------- --------- ----------
(Loss) income from
continuing operations
before taxes, minority
interest and equity
earnings (losses) (376) 1,873 (75,809) 2,689
Federal and state income tax
provision 101 947 12,338 1,361
Minority interest 30 - 57 -
--------- ---------- --------- ----------
(Loss) income from
continuing operations
before equity earnings
(losses) (447) 926 (88,090) 1,328
Equity in earnings (losses)
from unconsolidated
affiliates - 18 (12) 37
--------- ---------- --------- ----------
(Loss) income from
continuing operations (447) 944 (88,102) 1,365
Discontinued operations, net
of taxes - 47 - (30)
--------- ---------- --------- ----------
Net (loss) income (447) 991 (88,102) 1,335
Dividends and accretion
charges on preferred stock - 2,086 - 2,233
--------- ---------- --------- ----------
Net loss applicable to
common shareholders $ (447) $ (1,095) $(88,102) $ (898)
========= ========== ========= ==========

Basic and diluted (loss)
earnings per common share:
Continuing operations $ (0.02) $ (0.07) $ (4.74) $ (0.05)
Discontinued operations,
net of taxes - 0.01 - -
--------- ---------- --------- ----------
$ (0.02) $ (0.06) $ (4.74) $ (0.05)
========= ========== ========= ==========

Average shares outstanding:
Basic 18,706 17,117 18,577 16,923
========= ========== ========= ==========
Diluted 18,706 17,117 18,577 16,923
========= ========== ========= ==========
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TRC COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)

December 28, June 30,
2007 2007
------------ ---------
ASSETS
Current assets:
Cash and cash equivalents $ 212 $ 430
Accounts receivable, less allowances for
doubtful accounts 136,946 132,879
Insurance recoverable - environmental
remediation 7,779 6,381
Deferred income tax assets - 13,894
Income taxes refundable 383 587
Restricted investment 14,654 20,830
Prepaid expenses and other current assets 8,069 11,911
------------ ---------
Total current assets 168,043 186,912
------------ ---------

Property and equipment, at cost 58,563 57,569
Less accumulated depreciation and
amortization 38,361 36,126
------------ ---------
20,202 21,443
Goodwill 54,452 130,935
Investments in and advances to unconsolidated
affiliates and construction joint ventures 1,545 5,245
Long-term restricted investment 67,644 72,651
Long-term prepaid insurance 52,738 54,395
Other assets 15,032 14,401
------------ ---------
Total assets $379,656 $485,982
============ =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 26,357 $ 31,618
Accounts payable 60,139 54,976
Accrued compensation and benefits 22,211 22,134
Income taxes payable - -
Deferred revenue 22,648 31,494
Environmental remediation liabilities 1,919 4,629
Other accrued liabilities 18,364 24,007
------------ ---------
Total current liabilities 151,638 168,858
------------ ---------
Non-current liabilities:
Long-term debt, net of current portion 11,414 11,052
Long-term income taxes payable 698 -
Deferred income tax liabilities - 1,519
Long-term deferred revenue 130,853 134,901
Long-term environmental remediation
liabilities 8,204 7,861
------------ ---------
Total liabilities 302,807 324,191
------------ ---------

Minority interest in subsidiary 5 62
------------ ---------
Commitments and contingencies
Shareholders' equity:
Capital stock:
Preferred, $.10 par value; 500,000 shares
authorized, no shares issued and
outstanding - -
Common, $.10 par value; 30,000,000 shares
authorized, 18,772,957 and 18,769,475
shares issued and outstanding,
respectively, at December 31, 2007, and
18,240,509 and 18,237,027 shares issued
and
outstanding, respectively, at June 30,
2007 1,877 1,824
Additional paid-in capital 151,271 147,229
(Accumulated deficit) retained earnings (76,479) 12,453
Accumulated other comprehensive income 208 256
Treasury stock, at cost (33) (33)
------------ ---------
Total shareholders' equity 76,844 161,729
------------ ---------
Total liabilities and shareholders' equity $379,656 $485,982
============ =========
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Investors:
Sharon Merrill Associates
617-542-5300
trr@investorrelations.com
or
Company:
Carl Paschetag, CFO, 978-970-5600
cpaschetag@trcsolutions.com

Copyright Business Wire 2008