Trc q2 2014 earnings slides final

Q2 Fiscal 2014 Investor Review

February 5, 2014

T R R

Chris Vincze Tom Bennet Chairman & CEO Chief Financial Officer

Safe Harbor Statement

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Certain statements in this presentation 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 TRC’s future expectations, contain projections of the Company’s future results of

operations or of its financial condition, or state other "forward-looking" information. TRC believes that it is important to communicate

its future expectations to its investors. However, there may be events in the future that the Company is not able to accurately predict

or control and that may cause its actual results to differ materially from the expectations described in its 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 uncertainty of TRC’s operational and growth

strategies; circumstances which could create large cash outflows, such as contract losses, litigation, uncollectible receivables and

income tax assessments; regulatory uncertainty; the availability of funding for government projects; the level of demand for TRC’s

services; product acceptance; industry-wide competitive factors; the ability to continue to attract and retain highly skilled and qualified

personnel; the availability and adequacy of insurance; and general political or economic conditions. Furthermore, market trends are

subject to changes, which could adversely affect future results. See the risk factors and additional discussion in TRC’s Annual Report on

Form 10-K for the fiscal year ended June 30, 2013, Quarterly Reports on Form 10-Q, and other factors detailed from time to time in the

Company’s other filings with the Securities and Exchange Commission.

These slides are intended as a visual aid to TRC’s commentary on the Second Quarter Fiscal Year 2014 Financial Results Conference

Call. As such they should be considered in the full context of that commentary, the transcript of that conference call and TRC’s second

quarter Form 10-Q and Financial Results Press Release. Also, this presentation contains references to non-GAAP metrics such as

EBITDA, gross margin, adjusted EPS and free cash flow. A reconciliation of GAAP to non-GAAP metrics can be found on slide 18.

Q2 Fiscal 2014 Highlights

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NSR(1) increased 21% YOY to $91.1M

EBITDA increased 24% YOY to $7.4M

Operating income increased 18% YOY to $5.2M

(1) TRC believes net service revenue (gross revenue less subcontractor costs and other direct reimbursable charges) best reflects the value of services provided to its customers and is the most meaningful indicator of its revenue performance.

NSR backlog increased 4% YOY to $233.9M

Revenue growth in all three segments

TRC’s Diversified Business Model

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$34.9M

$44.6M

$11.4M

Q2 2014 Net Service Revenue by Segment

Infrastructure 13%

Environmental 49%

Energy 38%

Envi

ronm

enta

l Seg

men

t

5

$39.5 $44.6

Q2 2013 Q2 2014

Net Service Revenue (in millions)

$7.8 $8.8

Q2 2013 Q2 2014

Segment Profit (in millions)

Segment Drivers Greater permitting and power

plant decommissioning activities

Greenhouse gas rules Continued development of

upstream, midstream and downstream oil & gas markets

Re-emergence of industrials and related capital spend

Segment Challenges Finding talent Ongoing uncertainties with

energy policy and environmental regulations

Pricing pressures Federal and overall public

sector funding remains down

+13%

+12%

Ener

gy S

egm

ent

6

$25.9

$34.9

Q2 2013 Q2 2014

Net Service Revenue (in millions)

$5.6

$7.3

Q2 2013 Q2 2014

Segment Profit (in millions)

Segment Drivers Expanding utility capital spend

programs on aging transmission and distribution infrastructure

Greenhouse gas rule Dynamic revolution in domestic

fuel supplies driving shifts in use of utility assets (e.g. Coal ↓, Natural Gas ↑, Renewables ↑, Efficiency ↑)

Segment Challenges Pricing pressures and aggressive

terms and conditions by utilities Uncertainty related to use of

utility capital Client capacity and strategy to

manage projects Migration of larger competitors

into market Finding talent

+29%

+35%

Infr

astr

uctu

re S

egm

ent

7

$9.7

$11.4

Q2 2013 Q2 2014

Net Service Revenue (in millions)

$1.4

$2.0

Q2 2013 Q2 2014

Segment Profit (in millions)

Segment Drivers Healthy State budgets

providing for more transportation funding

State and regional policies prioritizing transportation across the country

Need to upgrade and repair aging infrastructure, especially bridges and roadways

Expansion of transportation services

Segment Challenges Significant competition Lack of long-term federal

policy and funding - MAP21 expires in 2014

+18%

+49%

$50 $46

$53 $65

$122 $123

$0

$50

$100

$150

$200

$250

Q2 2013 Q2 2014

Segment NSR Backlog

NSR Backlog & New Project Wins

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(in millions)

Energy • Public Service of NH • PPL Electric Utilities

Environmental • Pacific Gas and Electric • CSX • Kinder Morgan

Infrastructure • City of Lancaster, CA • Penn DOT – Numerous

Awards

$225 $234 +4%

New Project Wins

9

Growth Strategy

0%

5%

10%

15%

20%

25%

Q3 2013 Q4 2013 Q1 2014 Q2 2014

Total

Organic

Total & Organic NSR Growth Recent Acquisitions

• EMCOR Energy Services, Inc. (EES)

• Utility Support Systems, Inc. (USS)

• Ocampo Esta Corp. (Covina operations)

• GE’s Air Emissions Testing business

• Heschong Mahone Group, Inc.

• Invest in high-margin organic growth opportunities focused on: • Utility/Power • Oil & Gas • Infrastructure

• Pursue strategic acquisitions to enhance service offerings and geographic footprint of all three segments

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EMCOR Energy Services, Inc. (EES)

• Acquired in Q3 FY 2014

• Diversifies TRC’s service offering to the energy efficiency markets

• Expands core program management and consulting capabilities with additional engineering resource services for utility clients

• Enhances footprint and technical capabilities in a key California growth market

• Approximately 25 employees

• Revenue for the calendar year 2013 approximately $4.4 million

• Based in San Francisco, CA (with additional location in Santa Ana, CA)

Markets Outlook

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Energy – Solid short-, medium-, and long-term outlook

• Aging and inefficient transmission and distribution systems will require long term capital investments, estimated at $50B over next few years 1

• New regulatory drivers, e.g., NERC and FERC 1000 will drive additional investments

• Environmental regulations surrounding air, water, effluents, etc. will provide continued uncertainty on capital spend direction

• Energy Efficiency markets estimated to grow > 10%/year over the next decade 2

Environmental – Improving short-term and solid medium- and long-term outlook

• Energy and Industrial segment market conditions improving

• Federal and Public markets still declining

• Decommissioning expenditures will double over next few years as 150+ power plants are listed for closure3

• New regulations which set strict limits on carbon emissions by new US power plants will require significant investment

• US Non-federal environmental markets expected to grow between 4-5% per year over next few years 4

Infrastructure – Improving short-term and solid medium- and long-term outlook

• State Infrastructure funding expected to grow 4-5% per year based on improving local economies 5

• $3.6 Trillion required for state of good repair 6

• Increasing use of Public Private Partnerships to support funding gaps

• Potential for National Infrastructure Bank

1 + 2 Source: EIA/EPRI Spring 2013 Report 3 Navigant Research letter published Q3 2013 4 Source: Environmental Business Journal (2013) 5 Source: National Association of State Budget Office (NASBO) (Spring 2013) 6 Source: American Society of Civil Engineers 2013 Report on Americas Infrastructure

CEO Summary

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• Attractive markets offer opportunity for profitable near- and long-term growth

• Internal investments are delivering returns

• Balanced strategy to grow organically and through

acquisitions

• Strong balance sheet and cash position

• Continuing to build backlog

$75.3

$91.1

Q2 2013 Q2 2014

Net Service Revenue (in millions)

Quarterly Financial Results Overview

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$6.0

$7.4

Q2 2013 Q2 2014

EBITDA (in millions)

$4.4

$5.2

Q2 2013 Q2 2014

Operating Income (in millions)

$0.14

$0.10 $0.09

$0.10

Q2 2013 Q2 2014

Diluted EPS

GAAP EPS Adjusted EPS

+21%

+18%

+24%

(1) Prior period was affected by a deferred tax asset valuation allowance which substantially reduced the effective tax rate. Adjusted EPS shows, for comparative purposes, prior period results as if they were affected by TRC’s current annual estimated tax rate. See page 18 for reconciliation.

1

Q2 2013

$75.3

$0.9

$64.6

14.2%

$5.7

$4.4

$6.0

8.0%

$(0.2)

41.0%

$4.1

$0.14

$0.09

14

Net service revenue

Insurance recoverables and other income

Cost of services (COS)

Gross margin %

General and administrative expenses

Operating income

EBITDA

EBITDA as a % of NSR

Federal and state income tax provision

Adjusted effective tax rate1

Net income

Diluted earnings per common share

Adjusted diluted earnings per common share

Q2 2014

$91.1

$0.3

$76.4

16.2%

$7.5

$5.2

$7.4

8.2%

$(2.1)

40.0%

$3.1

$0.10

$0.10

(In millions, except per share data)

Quarterly Income Statement Highlights

$75.3

$91.1

85.8% 83.8%

Q2 2013 Q2 2014

Cost of Services as % of NSR

$75.3

$91.1

7.6% 8.2%

Q2 2013 Q2 2014

G&A Expenses as % of NSR

(1) Prior period was affected by a deferred tax asset valuation allowance which substantially reduced the effective tax rate. Adjusted EPS shows, for comparative purposes, prior period results as if they were affected by TRC’s current annual estimated tax rate. See page 18 for reconciliation.

$150.5 $172.4

YTD 2013 YTD 2014

Net Service Revenue (in millions)

YTD Financial Results Overview

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$12.1 $13.9

YTD 2013 YTD 2014

EBITDA (in millions)

$9.0 $9.4

YTD 2013 YTD 2014

Operating Income (in millions)

$0.28

$0.19 $0.18 $0.19

YTD 2013 YTD 2014

Diluted EPS

GAAP EPS Adjusted EPS

+15%

+5%

+14%

1

(1) Prior period was affected by a deferred tax asset valuation allowance which substantially reduced the effective tax rate. Adjusted EPS shows, for comparative purposes, prior period results as if they were affected by TRC’s current annual estimated tax rate. See page 18 for reconciliation.

YTD 2013

$150.5

$2.7

$128.3

14.8%

$12.9

$9.0

$12.1

8.1%

$(0.4)

40.9%

$8.4

$0.28

$0.18

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Net service revenue

Insurance recoverables and other income

Cost of services (COS)

Gross margin %

General and administrative expenses

Operating income

EBITDA

EBITDA as a % of NSR

Federal and state income tax provision

Adjusted effective tax rate1

Net income

Diluted earnings per common share

Adjusted diluted earnings per common share

YTD 2014

$172.4

$12.6

$154.8

10.2%

$16.3

$9.4

$13.9

8.1%

$(3.8)

40.3%

$5.6

$0.19

$0.19

(In millions, except per share data)

YTD Income Statement Highlights

$150.5

$172.4

85.2%

89.8%

YTD 2013 YTD 2014

Cost of Services as % of NSR

$150.5

$172.4

8.6%

9.4%

YTD 2013 YTD 2014

G&A Expenses as % of NSR

Exit Strategy Change in Estimate in Q1 2014

Net Service Revenue $ (5.1)

Insurance Recoverables 12.4

Cost of Services 7.3

Operating Income $ -

(1) Prior period was affected by a deferred tax asset valuation allowance which substantially reduced the effective tax rate. Adjusted EPS shows, for comparative purposes, prior period results as if they were affected by TRC’s current annual estimated tax rate. See page 18 for reconciliation.

17

Balance Sheet Highlights

Cash and cash equivalents

Days sales outstanding (DSO)

Cash Flow Highlights

Cash flow from operations

Capital expenditures

Free cash flow

YTD 2013

$10.8

86 days

$(4.5)

$(1.8)

$(6.3)

YTD 2014

$8.5

86 days

$(5.5)

$(2.8)

$(8.3)

(In millions)

Balance Sheet and Cash Flow Highlights

Q2 2013

$(0.7)

$(1.1)

$(1.8)

Q2 2014

$(6.5)

$(1.3)

$(7.8)

Reconciliation of Non-GAAP Measures

18

In millions

Q2 - 2013 Q2 - 2014 YTD - 2013 YTD - 2014

Net income applicable to TRC Companies, Inc.'s common shareholders $4.1 $3.1 $8.4 $5.6

Interest expense 0.1 0.0 0.2 0.1

Federal and state income tax provision 0.2 2.1 0.4 3.8

Depreciation and amortization 1.6 2.2 3.1 4.4

Net loss applicable to noncontrolling interest (0.0) (0.0) (0.0) (0.0)

Consolidated EBITDA $6.0 $7.4 $12.1 $13.9

In millions

Q2 - 2013 Q2 - 2014 YTD - 2013 YTD - 2014

Net service revenue $75.3 $91.1 $150.5 $172.4

Cost of services 64.6 76.4 128.3 154.8

Gross Margin $10.7 $14.7 $22.2 $17.6

Gross Margin % 14.2% 16.2% 14.8% 10.2%

Q2 - 2013 Q2 - 2014 YTD - 2013 YTD - 2014

Reported diluted earnings per common share $0.14 $0.10 $0.28 $0.19

Less: Adjustment to normalize effective tax rate (eliminate tax valuation allowance) (0.05) - (0.10) -

Adjusted diluted earnings per common share $0.09 $0.10 $0.18 $0.19

Weighted-average common shares outstanding 29,471 30,069 29,477 30,049

In millions

Q2 - 2013 Q2 - 2014 YTD - 2013 YTD - 2014

Cash flow from operations $(0.7) $(6.5) $(4.5) $(5.5)

Additions to property and equipment (1.1) (1.3) (1.8) (2.8)

Free Cash Flow $(1.8) $(7.8) $(6.3) $(8.3)

Earnings Before Interest, Taxes, Depreciation, Amortization

Gross Margin and Gross Margin %

Free Cash Flow

Adjusted EPS

18

Definitions for Non-GAAP Measures

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Earnings Before Interest, Taxes, Depreciation, Amortization and Goodwill & Intangible Asset Impairment The definition of Consolidated Adjusted EBITDA in the Company's revolving credit facility excludes interest expense on excluded indebtedness and adds back interest.

Gross Margin and Gross Margin % The definition of Gross Margin is equal to Net Service revenue less Cost of Services. Gross Margin % is equal to Gross Margin Divided by Net service revenue.

Free Cash Flow The definition of Free Cash Flow is equal to Net cash provided by (used in) operating activities plus Additions to property and equipment.

Adjusted Diluted Earnings Per Common Share Adjusted Diluted Earnings Per Common Share is defined as reported earnings per common share excluding the tax impact of the reversal of a portion of the valuation allowance. We do not believe that this excluded item is indicative of our ongoing operating results, and it is not considered when we are forecasting our future results. We believe Adjusted Diluted Earnings Per Common Share is of value to our current and potential investors when comparing our results from past, present and future periods.