Earnings Before Interest, Taxes, Depreciation, Amortization and Goodwill & Intangible Asset Impairment Q4-2015 Q4-2016 Net income applicable to TRC Companies, Inc.'s common shareholders $6.8 $5.9 Interest expense 0.0 1.1 Interest income - (0.5) Provision for income taxes 3.9 3.7 Depreciation and amortization 2.2 4.6 Net income (loss) applicable to noncontrolling interest (0.0) 0.0 Equity in earnings from unconsolidated affiliates, net of taxes - - Accretion charges on preferred stock - - Consolidated EBITDA $12.9 $14.8 Less: Acquisition and integration expenses - $2.8 Less: Goodwill impairment - ($2.5) Consolidated Adjusted EBITDA $12.9 $15.2 Gross Margin and Gross Margin % Q4-2015 Q4-2016 Net service revenue $114.6 $132.3 Cost of services 90.0 121.6 Gross Margin $24.6 $10.7 Gross Margin % 21.4% 8.1% 1
Earnings Before Interest, Taxes, Depreciation, Amortization and Goodwill & Intangible Asset Impairment YTD - 2015 YTD - 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $19.4 $0.0 Interest expense 0.1 2.7 Interest income - (0.8) Provision for income taxes 11.2 (0.7) Depreciation and amortization 9.3 14.7 Net income (loss) applicable to noncontrolling interest (0.0) 0.1 Equity in earnings from unconsolidated affiliates, net of taxes - - Accretion charges on preferred stock - - Consolidated EBITDA $40.0 $16.1 Less: Acquisition and integration expenses - $6.6 Less: Goodwill impairment - $22.0 Consolidated Adjusted EBITDA $40.0 $44.6 Gross Margin and Gross Margin % YTD - 2015 YTD - 2016 Net service revenue $408.0 $465.1 Cost of services 337.3 402.3 Gross Margin $70.7 $62.8 Gross Margin % 17.3% 13.5% 2
Free Cash Flow Q4-2015 Q4-2016 Net cash provided by operating activities $19.5 $17.7 Additions to property and equipment (1.6) (1.8) Free Cash Flow $17.9 $15.9 3
Free Cash Flow YTD - 2015 YTD - 2016 Net cash provided by operating activities $32.1 $48.1 Additions to property and equipment (6.6) (8.3) Free Cash Flow $25.5 $39.8 4
Adjusted Net Income Applicable to TRC Companies, Inc.'s Common Shareholders Q4-2015 Q4-2016 Net income applicable to TRC Companies, Inc.'s common shareholders $6.8 $5.9 Acquisition and integration Expenses - $2.8 Tax Effect of Acquisition and integration Expenses - ($1.1) Goodwill impairment - ($2.5) Tax Effect of Goodwill impairment - $1.0 Adjusted Net Income Applicable to TRC Companies, Inc's Common Shareholders $6.8 $6.1 5
Adjusted Net Income Applicable to TRC Companies, Inc.'s Common Shareholders YTD - 2015 YTD - 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $19.4 $0.0 Acquisition and integration Expenses - $6.6 Tax Effect of Acquisition and integration Expenses - ($2.4) Goodwill impairment - $22.0 Tax Effect of Goodwill impairment - ($8.5) Adjusted Net Income Applicable to TRC Companies, Inc's Common Shareholders $19.4 $17.7 6
Adjusted Operating Income Q4 2015 Q4 2016 Operating income $10.7 $10.3 Acquisition and integration Expenses - $2.8 Goodwill impairment - ($2.5) Adjusted operating income $10.7 $10.6 Adjusted Diluted Earnings per Common Share Q4 2015 Q4 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $6.8 $5.9 Acquisition and integration Expenses - $2.8 Tax Effect of Acquisition and integration Expenses - ($1.1) Goodwill impairment - ($2.5) Tax Effect of Goodwill impairment - $1.0 Adjusted net income applicable to TRC Companies, Inc's common shareholders $6.8 $6.1 Diluted shares outstanding (as disclosed) 31.2 31.4 Add back for dilutive shares - - Adjusted diluted shares outstanding 31.2 31.4 Adjusted diluted earnings per common share $0.22 $0.20 7
Adjusted Operating Income YTD 2015 YTD 2016 Operating income $30.7 $1.3 Acquisition and integration Expenses - $6.6 Goodwill impairment - $22.0 Adjusted operating income $30.7 $29.9 Adjusted Diluted Earnings per Common Share YTD 2015 YTD 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $19.4 $0.0 Acquisition and integration Expenses - $6.6 Tax Effect of Acquisition and integration Expenses - ($2.4) Goodwill impairment - $22.0 Tax Effect of Goodwill impairment - ($8.5) Adjusted net income applicable to TRC Companies, Inc's common shareholders $19.4 $17.7 Diluted shares outstanding (as disclosed) 30.7 31.4 Add back for dilutive shares - 0.0 Adjusted diluted shares outstanding 30.7 31.4 Adjusted diluted earnings per common share $0.63 $0.56 8
Definitions for Non-GAAP Measures Earnings Before Interest, Taxes, Depreciation, Amortization (EBITDA) The Company presents EBITDA because it believes that it is a useful tool for the Company, its lenders and its investors to measure the Company s ability to meet debt service, capital expenditure and working capital requirements. As used in the presentation, EBITDA is operating income plus depreciation and amortization. Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization (Adjusted EBITDA) As used in the presentation, Adjusted EBITDA is defined as EBITDA plus acquisition and integration expenses and the amount of the goodwill impairment. Gross Margin and Gross Margin % The Company presents Gross Margin and Gross Margin % to allow investors to better evaluate short-term and long-term profitability trends. 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 Company presents free cash flow, and ratios based on it, to conduct and evaluate its business because, although it is similar to cash flow from operations, the Company believes it is a useful measure of cash flows since purchases of fixed assets are a necessary component of ongoing operations. The definition of Free Cash Flow is equal to net cash provided by (used in) operating activities plus additions to property and equipment. 9
Definitions for Non-GAAP Measures Adjusted Operating Income The Company presents Adjusted Operating Income because it believes that it is a useful tool for the Company, its lenders and its investors to measure the Company s underlying operating performance. As used in the presentation, Adjusted Operating Income is defined as operating income plus acquisition and integration expenses and the amount of the goodwill impairment. Adjusted Net Income The Company presents Adjusted Net Income because it believes that it is a useful tool for the Company, its lenders and its investors to measure the Company s financial performance. As used in the presentation, Adjusted Net Income is defined as net income applicable to TRC Companies, Inc. plus the tax effected acquisition and integration expenses and the amount of the goodwill impairment. The Company utilizes its effective tax rate for the period in calculating the tax effect. Adjusted Diluted Earnings Per Share (Adjusted Diluted EPS) The Company presents Adjusted Diluted EPS because it believes that it is a useful tool for the Company, its lenders and its investors to measure the Company s financial performance. As used in the presentation, Adjusted Diluted EPS is defined as Adjusted Net Income divided by diluted weighted average shares outstanding. 10