UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K/A
(Amendment No. 1)

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) November 30, 2015
 
TRC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
1-9947
06-0853807
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

21 Griffin Road North, Windsor, Connecticut
06095
(Address of Principal Executive Offices)
 (Zip Code)
 
(860) 298-9692
(Registrant's telephone number, including area code)
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 







EXPLANATORY NOTE
    
On December 4, 2015, TRC Companies, Inc. filed a Current Report on Form 8-K (the “Original Form 8-K”) to report the completion of its previously announced acquisition of Willbros Professional Services from Willbros Group, Inc.  This Amendment No. 1 to the Original Form 8-K amends and supplements Item 9.01 of the Original Form 8-K to include the financial information described in Item 9.01 below which was not previously filed with the Original Form 8-K and which is permitted to be filed by amendment no later than 71 calendar days after the date on which the Original Form 8-K was required to be filed.  Except as stated in the Explanatory Note, no other information contained in the Original Form 8-K is changed.


Item 9.01.     Financial Statements and Exhibits.
(a)
Financial statements of businesses acquired.
The audited combined financial statements of Willbros Professional Services as of and for the year ended December 31, 2014 are filed herewith as Exhibit 99.1 to this Amendment No. 1.
The unaudited combined financial statements of Willbros Professional Services as of and for the nine months ended September 30, 2015 are filed herewith as Exhibit 99.2 to this Amendment No. 1.

(b)
Pro forma financial information.
The unaudited pro forma condensed combined balance sheet as of September 25, 2015 and the condensed combined statements of operations for the twelve months ended June 30, 2015, and three months ended September 25, 2015 are filed herewith as Exhibit 99.3 to this Amendment No. 1.
 
(d)
Exhibits.

23.1
Consent of PricewaterhouseCoopers LLP.
    
99.1
The audited combined financial statements of Willbros Professional Services as of and for the year ended December 31, 2014.

99.2
The unaudited combined financial statements of Willbros Professional Services as of and for the nine months ended September 30, 2015.

99.3
The unaudited pro forma condensed combined balance sheet as of September 25, 2015 and the condensed combined statements of operations for the twelve months ended June 30, 2015, and three months ended September 25, 2015.








SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: February 2, 2016            TRC Companies, Inc.

By:    /s/ Thomas W. Bennet, Jr.    
Thomas W. Bennet, Jr.
Senior Vice President and
Chief Financial Officer







EXHIBIT INDEX

Exhibit No.        Description

23.1
Consent of PricewaterhouseCoopers LLP.
    
99.1
The audited combined financial statements of Willbros Professional Services as of and for the year ended December 31, 2014.

99.2
The unaudited combined financial statements of Willbros Professional Services as of and for the nine months ended September 30, 2015.

99.3
The unaudited pro forma condensed combined balance sheet as of September 25, 2015 and the condensed combined statements of operations for the twelve months ended June 30, 2015, and three months ended September 25, 2015.





Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S‑8 (Nos. 333-186475, 333-173921, 333-153908, and 333-203991) and Form S-3 (Nos. 333-159685 and 333-170909) of TRC Companies, Inc. of our report dated December 8, 2015 relating to the financial statements of Willbros Professional Services, which appears in this Current Report on Amendment No. 1 to the Form 8‑K of TRC Companies, Inc.


/s/ PricewaterhouseCoopers LLP
Houston, TX
February 2, 2016





Exhibit 99.1






Willbros Professional Services
Combined Financial Statements
As of and for the Year Ended December 31, 2014



Willbros Professional Services
Index
December 31, 2014


Page(s)
Independent Auditor’s Report    1
Combined Financial Statements
Balance Sheet    2
Statement of Operations    3
Statement of Changes in Net Parent Investment    4
Statement of Cash Flows    5
Notes to Combined Financial Statements    6–17





Independent Auditor’s Report

To the Management of Willbros Group, Inc.

We have audited the accompanying combined financial statements of Willbros Professional Services, which comprise the combined balance sheet as of December 31, 2014, and the related combined statement of operations, changes in net parent investment and cash flows for the year then ended.

Management's Responsibility for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on the combined financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Willbros Professional Services as of December 31, 2014, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.


/s/ PricewaterhouseCoopers LLP

Houston, Texas
December 8, 2015




Willbros Professional Services
Combined Balance Sheet
December 31, 2014


(in thousands)

Assets
 
 
Current assets
 
 
 
Cash and cash equivalents
 
$
336

 
Accounts receivable, net
 
49,668

 
Contract Cost and recognized income not yet billed
 
6,323

 
Prepaid expenses and other current assets
 
4,653

 
Deferred income taxes
 
1,125

 
 
Total current assets
 
62,105

 
 
 
 
 
Property, plant and equipment, net
 
4,276

Deferred income taxes
 
550

Other assets
 
11,265

 
 
Total assets
 
$
78,196

 
 
 
 
 
Liabilities and Equity
 
 
Current liabilities
 
 
 
Accounts payable and accrued liabilities
 
$
17,612

 
Contract billings in excess of cost and recognized income
 
1,035

 
Current portion of long-term debt
 
4,014

 
 
Total current liabilities
 
22,661

 
 
 
 
 
Long-term debt
 
13,357

Other long-term liabilities
 
1,110

 
 
Total liabilities
 
37,128

 
 
 
 
 
Commitments and contingencies (Note 9)
 
 
 
 
 
 
 
Equity
 
 
 
Net parent investment
 
40,860

 
Noncontrolling interest
 
208

 
 
Total equity
 
41,068

 
 
 
 
 
 
 
Total liabilities and equity
 
$
78,196

 
 
 
 
 


The accompanying notes are an integral part of these combined financial statements.
2

Willbros Professional Services
Combined Statement of Operations
Year Ended December 31, 2014


(in thousands)

Contract revenue from third parties
 
$
203,295

Contract revenue from affiliates
 
5,777

          Total operating revenues
 
209,072

 
 
 
Operating expenses
 
 
     Contract expenses from third parties
 
165,629

     Contract expenses from affiliates
 
9,315

     General and administrative
 
27,513

          Operating income
 
6,615

 
 
 
     Interest income
 
959

     Interest expense
 
(959
)
     Other income, net
 
36

          Income before income taxes
 
6,651

 
 
 
Provision for income taxes
 
3,554

 
 
 
          Net income
 
3,097

 
 
 
Less: Income attributable to noncontrolling interest
 
(6
)
          Net income attributable to Willbros Professional Services
 
$
3,091



The accompanying notes are an integral part of these combined financial statements.
3

Willbros Professional Services
Combined Statement of Changes in Net Parent Investment
Year Ended December 31, 2014


(in thousands)

 
 
Net Parent
Investment
 
Noncontrolling
Interest
 
Total
 
 
 
 
 
 
 
Balances at January 1, 2014
 
$
7,208

 
$
237

 
$
7,445

 
 
 
 
 
 
 
Net income
 
3,091

 
6

 
3,097

Contributions (distributions) from parent, net
 
30,561

 
(35
)
 
30,526

 
 
 
 
 
 
 
Balances at December 31, 2014
 
$
40,860

 
$
208

 
$
41,068

 
 
 
 
 
 
 


The accompanying notes are an integral part of these combined financial statements.
4

Willbros Professional Services
Combined Statement of Cash Flows
Year Ended December 31, 2014


(in thousands)

Cash flows from operating activities
 
Net income
$
3,097

 
 
 
 
 
 
Adjustments to reconcile net income to cash flows used in operating activities
 
 
Deferred income tax benefit
(557
)
 
Depreciation
507

 
Stock based compensation
916

 
Provision for bad debt
391

 
Change in operational assets and liabilities
 
 
 
Accounts receivable, net
(18,109
)
 
 
Contract cost and recognized income not yet billed
(3,837
)
 
 
Prepaid expenses and other current assets
(94
)
 
 
Accounts payable and other accrued liabilities
(6,270
)
 
 
Contract billings in excess of cost and recognized in income
(7,625
)
 
 
Other assets and liabilities, net
(906
)
 
 
 
Net cash used in operating activities
(32,487
)
 
 
 
 
 
 
Cash flows from investing activities
 
Purchases of property, plant and equipment
(1,474
)
 
 
 
Net cash used in investing activities
(1,474
)
 
 
 
 
 
 
Cash flows from financing activities
 
Proceeds from long-term debt
4,500

Contributions from parent, net
29,532

 
 
 
Net cash provided by financing activities
34,032

 
 
 
Net increase in cash and cash equivalents
71

 
 
 
 
 
 
Cash and cash equivalents
 
Beginning of the year
265

End of year
$
336

 
 
 
 
 
 
Supplemental disclosures of cash flow information:
 
Accrued income taxes settled through net parent investment
$
4,111



The accompanying notes are an integral part of these combined financial statements.
5

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


1.
Description of Company and Summary of Significant Accounting Policies
Description of Company
These combined financial statements for Willbros Professional Services (“WPS” or the “Company”) include the following business operations and activities of Willbros Group, Inc. (“Willbros” or “Parent”):
Willbros Engineers (U.S.), LLC and its wholly-owned subsidiaries, Willbros Midstream Services (U.S.), LLC and Willbros Engineering California (U.S.), Inc.
Willbros Government Services (U.S.), LLC (“Government Services”) including its subsidiary, Willbros Hammer LLC of which Government Services holds a 75 percent interest and Hammer, Inc., holds a 25 percent interest.
Willbros Project Services (U.S.), LLC.
Willbros management and commercial activities incidental to its role as the Parent of WPS.
WPS is a specialty energy infrastructure contractor providing engineering, procurement and construction, project management, integrity and field services to oil, gas, refining, petrochemical and power industries and government agencies. The Company obtains its work through competitive bidding and through negotiations with prospective clients with contract values ranging from several thousand dollars to a few million dollars and contract durations range from a few weeks to close to two years. The Company’s principal market is the United States.
On November 30, 2015, pursuant to an Amended and Restated Securities Purchase Agreement, Willbros sold WPS to TRC Companies for approximately $130.0 million in cash. The closing consideration is subject to working capital and other typical post-closing adjustments.
Basis of Presentation
These combined financial statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Willbros. The combined financial statements reflect the Company’s financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The combined financial position, results of operations and cash flows of the Company may not be indicative of the Company had it been a separate stand-alone entity during the period presented, nor are the results stated herein indicative of what the Company’s financial position, results of operations and cash flows may be in the future.
These combined financial statements include all of the Company’s majority-owned subsidiaries and all of its wholly owned entities. The ownership interest of noncontrolling participants in subsidiaries that are not wholly-owned is included as a separate component of equity. The noncontrolling participants’ share of the net income is included as “Income attributable to noncontrolling interest” on the Combined Statement of Operations.
The preparation of these combined financial statements includes the use of accounting procedures, wherein Willbros’s basis in certain assets and liabilities, and the related expenses, have been recorded in the stand-alone financial statements of the Company, in accordance with GAAP.
These combined financial statements include assets and liabilities that are specifically identifiable or have been attributed to the Company. Costs directly related to the Company have been included in the accompanying combined financial statements. The Company receives service and support functions from Willbros. The costs were allocated to the Company using various allocation inputs such as the Company’s headcount and revenues relative to those of Willbros. These support functions include accounting and budgeting, information technology, treasury, payroll, human resources, risk management, marketing, executive management, tax and legal services. These allocated costs were approximately $7.7 million for the year ended December 31, 2014 and are included in operating expenses on the Combined Statement of Operations.

6

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


The Company considers the expense allocation methodology and results to be reasonable for the period presented. These allocations may not be indicative of the actual expenses the Company may have incurred as a separate stand-alone entity during the period presented nor are these costs indicative of what the Company will incur in the future.
All intercompany balances and transactions have been eliminated. All significant intercompany transactions between the Company and Willbros have been considered to be effectively settled for cash in the combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Combined Statement of Cash Flows as a financing activity reflected as contributions from parent, net and in the Combined Balance Sheet as net parent investment. Transactions among the Company and other Willbros’ entities have been identified in these combined financial statements as transactions among affiliates. See Note 10 – Related Party Transactions for additional information with regards to transactions among affiliates.
Use of Estimates
The combined financial statements are prepared in accordance with GAAP and include certain estimates and assumptions made by management of the Company in the preparation of the combined financial statements. These estimates and assumptions relate to the reported amounts of assets and liabilities at the date of the combined financial statements and the reported amounts of revenue and expense during the period. Significant items subject to such estimates and assumptions include: revenue recognition under the percentage-of-completion method of accounting, including estimates of progress toward completion and estimates of gross profit or loss accrual on contracts in progress; tax accruals and certain other accrued liabilities; quantification of amounts recorded for contingencies; valuation allowances for accounts receivable and deferred income tax assets; and the carrying amount of property, plant and equipment. The Company bases its estimates on historical experience and other assumptions that it believes relevant under the circumstances. Actual results could differ from these estimates.
Accounts Receivable
Most of the accounts receivable and contract work in progress are from clients in the oil, gas, refinery, petrochemical and power industries in North America. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Most contracts require payments as the projects progress or, in certain cases, advance payments. The Company generally does not require collateral, but in most cases can place liens against the property, plant or equipment constructed or terminate the contract if a material default occurs. The allowance for doubtful accounts is the Company’s best estimate of the probable amount of credit losses in the Company’s existing accounts receivable. A considerable amount of judgment is required in assessing the realization of receivables. Relevant assessment factors include the creditworthiness of the customer and prior collection history. Balances over 90 days past due are reviewed individually for collectability. Account balances are charged off against the allowance after all reasonable means of collection are exhausted and the potential for recovery is considered remote. The allowance requirements are based on the most current facts available and are re-evaluated and adjusted on a regular basis and as additional information is received.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is provided on the straight-line method using estimated lives as follows:
Construction equipment
 
3-20 years
Furniture and equipment
 
3-12 years
Buildings
 
20 years
Transportation equipment
 
3-17 years
Leasehold improvements are amortized on a straight-line basis over the shorter of their economic lives or the lease term. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are

7

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


removed from the accounts and any resulting gain or loss is recognized within operating expenses in the Combined Statement of Operations for the period. Normal repair and maintenance costs are charged to expense as incurred. Significant renewals and betterments are capitalized.
Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if an impairment of such asset is necessary. This requires the Company to make long-term forecasts of the future revenues and costs related to the assets subject to review. Forecasts require assumptions about demand for the Company’s products and future market conditions. Estimating future cash flows requires significant judgment, and the Company’s projections may vary from the cash flows eventually realized. Future events and unanticipated changes to assumptions could require an impairment charge in a future period. The effect of any impairment would be to expense the difference between the fair value (less selling costs) of such asset and its carrying value. Such expense would be reflected in earnings.
Fair Value Measurements
The Financial Accounting Standards Board’s (“FASB”) standard on fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This standard establishes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities.
Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of asset or liabilities.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The fair value estimates of the Company’s financial instruments have been determined using available market information and appropriate valuation methodologies and approximate carrying value.
Revenue
A number of factors relating to the Company’s business affect the recognition of contract revenue. The Company typically structures contracts as unit-price, time and materials, fixed-price or cost plus fixed fee. The Company believes that its operating results should be evaluated over a time horizon during which major contracts in progress are completed and change orders, extra work, variations in the scope of work and cost recoveries and other claims are negotiated and realized. Revenue from unit-price and time and materials contracts is recognized as earned.
Revenue for fixed-price and cost plus fixed fee contracts is recognized using the
percentage-of-completion method. Under this method, estimated contract income and resulting revenue is generally accrued based on costs incurred to date as a percentage of total estimated costs, taking into consideration physical completion. Total estimated costs, and thus contract income, are impacted by changes in productivity, scheduling, the unit cost of labor, subcontracts, materials and equipment. Additionally, external factors such as weather, client needs, client delays in providing permits and approvals, labor availability, governmental regulation and politics may affect the progress of a project’s completion and thus the estimated amount and timing of revenue recognition. Certain fixed-price and cost plus fixed fee contracts include, or are amended to include, incentive bonus amounts, contingent on accomplishing a stated milestone. Revenue attributable to incentive bonus amounts is recognized when the risk and uncertainty surrounding the achievement of the milestone have been removed. The Company does not recognize income on a fixed-price contract until the contract is approximately five to ten percent complete, depending upon the nature of the contract. If a current

8

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined.
The Company considers unapproved change orders to be contract variations on which the Company has customer approval for scope change, but not for price associated with that scope change. Costs associated with unapproved change orders are included in the estimated cost to complete the contracts and are expensed as incurred. The Company recognizes revenue equal to cost incurred on unapproved change orders when realization of price approval is probable and is estimable. Revenue recognized on unapproved change orders is included in “Contract cost and recognized income not yet billed” on the Combined Balance Sheet. Revenue recognized on unapproved change orders is subject to adjustment in subsequent periods to reflect the changes in estimates or final agreements with customers.
The Company considers claims to be amounts that the Company seeks or will seek to collect from customers or others for customer-caused changes in contract specifications or design, or other customer-related causes of unanticipated additional contract costs on which there is no agreement with customers on both scope and price changes. Revenue from claims is recognized when agreement is reached with customers as to the value of the claims, which in some instances may not occur until after completion of work under the contract. Costs associated with claims are included in the estimated costs to complete the contracts and are expensed when incurred.
Depreciation
The Company depreciates assets based on their estimated useful lives at the time of acquisition using the straight-line method. Depreciation related to operating activities is included in contract costs; and depreciation related to general and administrative activities is included in general and administrative expense in the Combined Statement of Operations. Contract costs and general and administrative expenses are included within operating expenses in the Combined Statement of Operations.

Income Taxes
The FASB standard for income taxes takes into account the differences between financial statement treatment and tax treatment of certain transactions. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

The Company’s provision for income taxes and deferred taxes have been calculated on a separate return basis as if the Company filed its own tax returns, although its operations have been included in Willbros’ U.S. federal and state tax returns. The separate return method applies the accounting guidance for income taxes to the Company’s combined financial statements as if the Company was a separate taxpayer and a stand-alone entity for the period presented. The calculation of the Company’s income taxes on a separate return basis requires a considerable amount of judgment and use of both estimates and allocations.
The Company records reserves for expected tax consequences of uncertain tax positions assuming that the taxing authorities have full knowledge of the position and all relevant facts. The income tax laws and regulations are voluminous and are often ambiguous. As such, the Company is required to make many subjective assumptions and judgments regarding its tax positions that could materially affect amounts recognized in its future Combined Balance Sheet and Statement of Operations.
Willbros files income tax returns in the U.S. federal jurisdiction and various state jurisdictions and is subject to examination for 2008 forward for the United States and the majority of the state jurisdictions.

9

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


Defined Contribution Plan
Willbros has a voluntary defined contribution retirement plan for U.S. based employees that is qualified and contributory on the part of the employees. During 2014, Willbros made discretionary contributions to the plan which were allocated to the employees making voluntary contributions (traditional 401(k) savings and retirement plan). The Company recorded approximately $1.8 million in operating expenses under this plan for the year ended December 31, 2014.
 
Concentration of Credit Risk
The Company has a concentration of customers in the oil, gas, refinery, petrochemical and power industries which expose the Company to a concentration of credit risk within a single industry. One of the Company’s customers was responsible for 12.8 percent of its combined revenue for the year ended December 31, 2014. The Company seeks to obtain advance and progress payments for contract work performed on major contracts. Receivables are generally not collateralized. An allowance for doubtful accounts of $0.8 million is included within accounts receivable, net on the Combined Balance Sheet as of December 31, 2014.
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Recent Accounting Pronouncement
In May 2014, the FASB issued common guidance surrounding the recognition of revenue from contracts with customers. Under the new guidance, a company will recognize revenue when it satisfies a performance obligation by transferring a promised good or service to a customer. Revenue will be recognized at an amount that reflects the consideration it expects to receive in exchange for those goods and services. This guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This standard is effective, on either a full retrospective or a modified retrospective basis, for interim and annual periods beginning on or after December 15, 2017. In July 2015, the FASB approved a one-year deferral of the revenue recognition standard’s effective date for all entities, which will change the effectiveness to annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period once the Accounting Standards Update has been issued. The Company is currently evaluating this standard and its existing revenue recognition policies to determine which contracts in the scope of the guidance will be affected by the new requirements and what impact they would have on its combined financial statements upon adoption.
2.
Accounts Receivable
Accounts receivable, net as of December 31, 2014 was as follows:
(in thousands)
 
 
 
 
 
 
Trade
 
$
22,355

Unbilled revenue
 
28,029

Contract retention
 
49

Other receivables
 
42

 
Total accounts receivable
 
50,475

 
 
 
 
Less: Allowance for doubtful accounts
 
(807
)
 
Total accounts receivable, net
 
$
49,668


10

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


The Company expects all accounts receivable to be collected within one year. The provision for bad debt included in “General and administrative” expenses in the Combined Statement of Operations was $0.4 million for the year ended December 31, 2014.
The balances billed but not paid by customers pursuant to retainage provisions in certain contracts will be due upon completion of the contracts and acceptance by the customer. Based on the Company’s experience with similar contracts within recent years, the majority of the retention balances at each balance sheet date will be collected within the next twelve months.
3.
Contracts in Progress
Contract cost and recognized income not yet billed on uncompleted contracts arise when recorded revenues for a contract exceed the amounts billed under the terms of the contracts. Contract billings in excess of cost and recognized income arise when billed amounts exceed revenues recorded. Amounts are billable to customers upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of the contract. Also included in contract cost and recognized income not yet billed on uncompleted contracts are amounts the Company seeks to collect from customers for change orders approved in scope but not for price associated with that scope change (unapproved change orders). Revenue for these amounts is recorded equal to the lesser of the expected revenue or cost incurred when realization of price approval is probable. Recognizing revenues from unapproved change orders involves the use of estimates, and it is reasonably possible that revisions to the estimated recoverable amounts of recorded unapproved change orders may be made in the near-term. If the Company does not successfully resolve these matters, a reduction in revenues may be required to amounts that have been previously recorded.
Contract cost and recognized income not yet billed and related amounts billed as of December 31, 2014 was as follows:
(in thousands)
 
 
 
 
 
 
 
 
 
Cost incurred on contracts in progress
 
$
78,038

Recognized income
 
16,430

 
 
94,468

Progress billings and advanced payments
 
(89,180
)
 
 
$
5,288

 
 
 
Contract cost and recognized income not yet billed
 
$
6,323

Contract billings in excess of cost and recognized income
 
(1,035
)
 
 
$
5,288

Contract cost and recognized income not yet billed includes $0.1 million at December 31, 2014 on completed contracts.

11

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


4.
Property, Plant and Equipment
Property, plant and equipment, which is used to secure debt or are subject to lien, at cost, as of December 31, 2014 was as follows:
(in thousands)
 
 
 
 
 
 
Construction equipment
 
$
717

Furniture and equipment
 
5,721

Transportation equipment
 
148

Leasehold improvements
 
818

 
Total property, plant and equipment
7,404

 
 
 
Less: Accumulated depreciation
(3,128
)
 
Total property, plant and equipment, net
$
4,276

Depreciation expense included in operating expense for the year ended December 31, 2014 was $0.5 million. Repairs and maintenance expense included in operating expenses for the year ended December 31, 2014 was $0.2 million.
5.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as of December 31, 2014 was as follows:
(in thousands)
 
 
 
 
 
 
 
 
Trade accounts payable
 
 
$
3,675

Payroll and payroll liabilities
 
 
8,647

Accrued contract costs
 
 
3,150

Other accrued liabilities
 
 
2,140

 
Total accounts payable and accrued liabilities
$
17,612

6.
Debt
As of December 31, 2014, the Company has been awarded three contracts to construct certain contractor-owned, contractor-operated fueling facilities (the “Facilities”) for the federal government. As part of these contracts, the Company constructs the Facilities over an estimated six to twelve months and subsequently maintains the Facilities over the life of the contract (generally five years). Upon final acceptance of the constructed Facilities, the government pays the contract value in equal monthly payments over the life of the contract. As such, the Company has entered into financing agreements, whereby the Company receives funding from a third-party financing company to construct the Facilities. As a result, as of December 31, 2014, the Company recorded approximately $17.4 million in debt obligations of which $4.0 million is current. These obligations represent amounts due to the third-party financing company with respect to the construction component of these contracts. In addition, as of December 31, 2014, the Company has recorded approximately $15.2 million in other assets of which $4.0 million is current. These amounts represent receivables due from the government with respect to the construction component of these contracts. At the end of the construction phase, once final funding is received and the government has accepted the construction of the Facilities, assets and liabilities with respect to these Facilities will equal; the Company is guaranteed recovery of the construction component under the contract; and the Company will amortize the total amount received from the third-party financing company over

12

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


the life of the contract. The Company did not enter into financing agreements with regards to the maintenance phase of these contracts.
As of December 8, 2015, final funding has been received and the government has accepted one of the three contracts.
The Company’s debt obligations specific to the Facilities are classified within Level 2 of the fair value hierarchy with estimated fair value approximating carrying value at December 31, 2014.
Maturities
The principal amounts due under the Company’s remaining debt obligations as of December 31, 2014 for each of the next five years and thereafter is as follows:
(in thousands)
 
 
 
 
 
Fiscal years
 
 
2015
 
$
4,014

2016
 
8,547

2017
 
4,423

2018
 
387

 
 
$
17,371

7.
Income Taxes
Income before income taxes consists of the following:
(in thousands)
 
 
 
 
 
United States
 
$
6,651

 
 
$
6,651


Provision for income taxes consists of the following:
(in thousands)
 
 
 
 
 
 
 
 
Current provision:
 
 
 
 
Federal
 
$
3,466

 
State
 
645

 
 
 
 
4,111

 
 
 
 
 
Deferred tax benefit
 
 
 
 
Federal
 
(484
)
 
State
 
(73
)
 
 
 
$
(557
)
 
 
Total provision for income taxes
$
3,554


The Company’s provision for income taxes has been determined based upon the tax laws and rates in the United States in which operations are conducted and income is earned. The Company is subject to federal income tax rates up to 35 percent and varying state income tax rates and methods of computing tax liabilities.

13

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


The Company did not maintain accrued income taxes to/from Willbros and is deemed to settle the annual current tax balances immediately with the legal tax-paying entities in the respective jurisdictions. These settlements are reflected as changes in net parent investment within equity in the Combined Balance Sheet.
The Company is required to recognize in its financial statements the impact of a tax position that is more likely than not to be sustained upon examination based upon the technical merits of the position, including resolution of any appeals. Based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the combined financial statements as of December 31, 2014.
A reconciliation of the differences between the provision for income tax computed at the appropriate statutory rates and the reported provision for income taxes is as follows. For 2014, the Company was domiciled in the United States, which has a 35 percent statutory tax rate.
(in thousands)
 
 
 
 
 
 
 
 
Taxes on earnings at statutory rate in domicile parent company
 
$
2,328

Earnings taxed at rates less or greater than parent company rates:
 
 
 
State income taxes, net of U.S. federal benefit
 
387

 
Non deductibles
 
9

 
Meals and entertainment
 
202

 
Per diem
 
223

 
Deferred tax adjustments
 
(422
)
 
Transfer pricing allocation
 
843

 
Other
 
(16
)
 
     Total provision for income taxes
 
$
3,554


14

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


The principal components of the Company’s net deferred tax assets for the year ended December 31, 2014 is as follows:
(in thousands)
 
 
 
 
 
 
Deferred tax assets
 
 
Current
 
 
 
Accrued vacation
 
$
693

 
Allowance for doubtful accounts
 
309

 
Estimated loss
 
50

 
Prepaid expenses
 
375

 
Other
 
78

 
 
 
1,505

 
 
 
 
Non current
 

 
Deferred compensation
 
172

 
Other
 
16

 
     Gross deferred tax assets
 
1,693

 
 
 
 
Deferred tax liabilities
 
 
Non current
 
 
 
Depreciation
 
(18
)
 
     Gross deferred tax liabilities
 
(18
)
 
     Net deferred tax assets
 
$
1,675

Based upon existing market conditions and the Company’s earnings prospects, it is anticipated that all deferred tax assets will be realized in future years. As such, a valuation allowance is not considered necessary.
8.
Stock-Based Compensation
The Company maintains stock ownership plans at the corporate level. To the extent the Company’s employees participate in these plans, the Company was allocated a portion of the associated compensation expense based on the grant-date fair value. Stock-based compensation is included in operating expenses in the Combined Statement of Operations and was $0.9 million for the year ended December 31, 2014. However, the Combined Balance Sheet does not include outstanding equity related to stock-based compensation.
Restricted stock and restricted stock units or rights, also described collectively as restricted stock units (“RSUs”), granted to employees under these stock compensation plans vest generally over a three to four years period. For RSUs granted prior to March of 2009, certain provisions allow for accelerated vesting upon eligible retirement. Additionally, certain provisions allow for accelerated vesting in the event of involuntary termination not for cause or a change of control of the Company. During the year ended December 31, 2014, the Company recognized $0.1 million of compensation expense due to accelerated vesting of RSUs due to retirements and separation.

15

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


The Company’s RSU activity and related information consist of:
 
 
Shares
 
Weighted-Average
Grant-Date
Fair Value
 
 
 
 
 
Nonvested at beginning of year
 
148,308

 
$
8.39

 
 
 
 
 
Granted
 
87,132

 
11.38

Exercised
 
(54,392
)
 
9.15

Forfeited
 
(14,850
)
 
8.87

 
 
 
 
 
Nonvested at end of year
 
166,198

 
$
9.66

 
 
 
 
 
The total fair value of RSUs vested during the year ended December 31, 2014 was $0.5 million.
As of December 31, 2014, there was a total of $2.0 million of unrecognized compensation cost, net of estimated forfeitures, related to all nonvested stock-based compensation arrangements granted for Company employees under Willbros’ stock ownership plans. That cost is expected to be recognized over a weighted-average period of 2.58 years.
9.
Commitments and Contingencies
Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when the Company assesses that it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with matters relating to contingencies are expensed in the period incurred.
The Company is party to various litigation matters, investigations and proceedings in the ordinary course of business. Management does not expect the outcome of any proceedings, individually or in the aggregate, to have a materially adverse effect on the Company’s financial position or results of operations.
Operating Leases
The Company has certain operating leases for various equipment and office facilities. Rental expense for continuing operations excluding daily rentals and reimbursable rentals under cost plus contracts was $7.7 million in 2014.
Minimum lease commitments under operating leases as of December 31, 2014, totaled $27.6 million and are payable as follows: 2015, $4.8 million; 2016, $4.4 million; 2017, $4.0 million; 2018, $3.6 million; 2019, $3.6 million and thereafter, $7.2 million.
Other Circumstances
The Company has the usual liability of contractors for the completion of contracts and the warranty of its work. In addition, the Company acts as prime contractor on a majority of the projects it undertakes and is normally responsible for the performance of the entire project, including subcontract work. Management is not aware of any material exposure related thereto which has not been provided for in the accompanying combined financial statements.

16

Willbros Professional Services
Notes to Combined Financial Statements
December 31, 2014


10.
Related Party Transactions
The Company routinely conducts business with subsidiaries of Willbros. The related transactions result primarily from the sale and purchase of engineering, procurement, construction and other services. Sales to affiliates were $5.8 million and purchases from affiliates were $9.3 million for the year ended December 31, 2014.
The Company’s combined financial statements include salaries of directly dedicated personnel and related costs. Willbros charges the Company for the costs of providing centralized general and administrative services. The Company also uses a centralized treasury system such that Willbros may make disbursements on the Company’s behalf or receive proceeds on the Company’s behalf with a corresponding change in affiliate payables or receivables. Willbros also acts as the Company’s purchasing agent for construction and sustaining capital. The Company has reflected cash management and financing activities performed by Willbros as a component of net parent investment in equity in the Combined Balance Sheet and as contributions from parent, net on the Combined Statement of Changes in Net Parent Investment and Combined Statement of Cash Flows for the period presented.
11.
Subsequent Events
On November 30, 2015, pursuant to an Amended and Restated Securities Purchase Agreement, Willbros sold WPS to TRC Companies for approximately $130.0 million in cash. The closing consideration is subject to working capital and other typical post-closing adjustments.
In preparing the accompanying combined financial statements, the Company has reviewed, as necessary, events that occurred after December 31, 2014, up until the issuance of the financial statements, which occurred on December 8, 2015.

17


Exhibit 99.2

Willbros Professional Services
Unaudited Combined Financial Statements
As of and for the Nine Months Ended
September 30, 2015





Willbros Professional Services
Index


Page(s)
Unaudited Combined Financial Statements
Combined Balance Sheets
September 30, 2015 and December 31, 2014    1
Combined Statements of Operations
Nine Months Ended September 30, 2015 and 2014    2
Combined Statements of Cash Flows
Nine Months Ended September 30, 2015 and 2014    3
Notes to Combined Financial Statements    4–9




Willbros Professional Services
Combined Balance Sheets
September 30, 2015 and December 31, 2014


(unaudited)
 
 
 
 
 
 
 
 
September 30,
 
December 31,
(in thousands)
 
2015
 
2014
 
 
 
 
 
 
 
Assets
 
 
 
 
Current assets
 
 
 
 
 
Cash and cash equivalents
 
$
268

 
$
336

 
Accounts receivable, net
 
38,140

 
49,668

 
Contract Cost and recognized income not yet billed
 
3,545

 
6,323

 
Prepaid expenses and other current assets
 
7,546

 
4,653

 
Deferred income taxes
 
1,185

 
1,125

 
 
Total current assets
 
50,684

 
62,105

 
 
 
 
 
 
 
Property, plant and equipment, net
 
3,761

 
4,276

Intangible assets, net
 
364

 

Deferred income taxes
 
602

 
550

Other assets
 
18,235

 
11,265

 
 
Total assets
 
$
73,646

 
$
78,196

 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
14,976

 
$
17,612

 
Contract billings in excess of cost and recognized income
 
1,955

 
1,035

 
Current portion of long-term debt
 
6,721

 
4,014

 
 
Total current liabilities
 
23,652

 
22,661

 
 
 
 
 
 
 
Long-term debt
 
18,366

 
13,357

Other long-term liabilities
 
1,878

 
1,110

 
 
Total liabilities
 
43,896

 
37,128

 
 
 
 
 
 
 
Commitments and contingencies (Note 8)
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
Net parent investment
 
29,497

 
40,860

 
Noncontrolling interest
 
253

 
208

 
 
Total equity
 
29,750

 
41,068

 
 
 
 
 
 
 
 
 
Total liabilities and equity
 
$
73,646

 
$
78,196

 
 
 
 
 
 
 


The accompanying notes are an integral part of these combined financial statements.
1

Willbros Professional Services
Combined Statements of Operations
Nine Months Ended September 30, 2015 and 2014


(Unaudited)
 
 
 
 
 
 
Nine Months Ended September 30,
(in thousands)
 
2015
 
2014
 
 
 
 
 
Contract revenue from third parties
 
$
158,274

 
$
152,451

Contract revenue from affiliates
 
12,330

 
4,245

          Total operating revenues
 
170,604

 
156,696

 
 
 
 
 
Operating expenses
 
 
 
 
     Contract expenses from third parties
 
133,637

 
121,987

     Contract expenses from affiliates
 
10,217

 
6,769

     General and administrative
 
25,323

 
18,094

          Operating income
 
1,427

 
9,846

 
 
 
 
 
     Interest income
 
1,009

 
717

     Interest expense
 
(1,009
)
 
(717
)
     Other (expense) income, net
 
(43
)
 
23

          Income before income taxes
 
1,384

 
9,869

 
 
 
 
 
Provision for income taxes
 
912

 
5,845

 
 
 
 
 
          Net income
 
472

 
4,024

 
 
 
 
 
Less: Income attributable to noncontrolling interest
 
(100
)
 
(33
)
          Net income attributable to Willbros Professional Services
 
$
372

 
$
3,991



The accompanying notes are an integral part of these combined financial statements.
2

Willbros Professional Services
Combined Statements of Cash Flows
Nine Months Ended September 30, 2015 and 2014


(Unaudited)
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
(in thousands)
2015
 
2014
 
 
 
 
 
 
 
 
Cash flows from operating activities
 
 
 
Net income
$
472

 
$
4,024

Adjustments to reconcile net income to cash flows provided by (used) in operating activities
 
 
 
 
Deferred income tax benefit
(112
)
 
(146
)
 
Depreciation and amortization
833

 
397

 
Loss on disposal of property, plant and equipment
1,060

 

 
Stock based compensation
674

 
664

 
Provision for (recovery of) bad debt
(75
)
 
151

 
Change in operational assets and liabilities
 
 
 
 
 
Accounts receivable
11,603

 
(14,971
)
 
 
Contract cost and recognized income not yet billed
2,778

 
(3,486
)
 
 
Prepaid expenses and other current assets
(2,893
)
 
60

 
 
Accounts payable and other accrued liabilities
(2,673
)
 
(10,425
)
 
 
Contract billings in excess of cost and recognized in income
920

 
(7,821
)
 
 
Other assets and liabilities, net
(9,110
)
 
642

 
 
 
Net cash provided by (used in) operating activities
3,477

 
(30,911
)
 
 
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
Purchases of property, plant and equipment
(139
)
 
(778
)
 
 
 
Net cash used in investing activities
(139
)
 
(778
)
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
Proceeds from long-term debt
10,624

 

Contributions from (distributions to) parent, net
(14,030
)
 
31,730

 
 
 
Net cash provided by (used in) financing activities
(3,406
)
 
31,730

 
 
 
Net increase (decrease) in cash and cash equivalents
(68
)
 
41

 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
Beginning of period
336

 
265

End of period
$
268

 
$
306

 
 
 
 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Accrued income taxes settled through net parent investment
$
5,135

 
$
5,990

 
 
 
 
 
 
 
 
Supplemental non-cash investing and financing transactions:
 
 
 
Capital expenditures included in accounts payable and accrued liabilities
$
15

 
$
108

Acquisition of subsidiary through net parent investment
$
600

 
$



The accompanying notes are an integral part of these combined financial statements.
3

Willbros Professional Services
Notes to Combined Financial Statements
September 30, 2015 and December 31, 2014


1.
Organization and Operations
Description of Company
These unaudited combined financial statements for Willbros Professional Services (“WPS” or the “Company”) include the following business operations and activities of Willbros Group, Inc. (“Willbros” or “Parent”):
Willbros Engineers (U.S.), LLC and its wholly-owned subsidiaries, Willbros Midstream Services (U.S.), LLC and Willbros Engineering California (U.S.), Inc.
Willbros Government Services (U.S.), LLC (“Government Services”) including its subsidiary, Willbros Hammer LLC of which Government Services holds a 75 percent interest and Hammer, Inc., holds a 25 percent interest.
Willbros Project Services (U.S.), LLC.
Electric Field Solutions, Inc. (“EFS”), which was acquired by Willbros in January 2015.
Willbros management and commercial activities incidental to its role as the Parent of WPS.
WPS is a specialty energy infrastructure contractor providing engineering, procurement and construction, project management, integrity and field services to oil, gas, refining, petrochemical and power industries and government agencies. The Company obtains its work through competitive bidding and through negotiations with prospective clients with contract values ranging from several thousand dollars to a few million dollars and contract durations range from a few weeks to close to two years. The Company’s principal market is the United States.
On November 30, 2015, pursuant to an Amended and Restated Securities Purchase Agreement, Willbros sold WPS to TRC Companies for approximately $130.0 million in cash. The closing consideration is subject to working capital and other typical post-closing adjustments.
Basis of Presentation
These unaudited combined financial statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Willbros. The unaudited combined financial statements reflect the Company’s financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The combined financial position, results of operations and cash flows of the Company may not be indicative of the Company had it been a separate stand-alone entity during the periods presented, nor are the results stated herein indicative of what the Company’s financial position, results of operations and cash flows may be in the future.
These unaudited combined financial statements have not been audited by independent accountants. In the opinion of management, these unaudited combined financial statements reflect all adjustments necessary to fairly state the Company’s financial position at September 30, 2015 and December 31, 2014 and its results operations and cash flows for the nine months ended September 30, 2015 and 2014. All such adjustments are of a normal recurring nature. The results of interim periods are not necessarily indicative of annual results.
Certain disclosures have been omitted from these unaudited combined financial statements. Accordingly, these unaudited combined financial statements should be read in conjunction with the audited combined financial statements and related notes for the year ended December 31, 2014.
These unaudited combined financial statements include all of the Company’s majority-owned subsidiaries and all of its wholly owned entities. The ownership interest of noncontrolling participants in subsidiaries that are not wholly-owned is included as a separate component of equity. The noncontrolling participants’ share of the

4

Willbros Professional Services
Notes to Combined Financial Statements
September 30, 2015 and December 31, 2014


net income is included as “Income attributable to noncontrolling interest” on the Combined Statements of Operations.
The preparation of these unaudited combined financial statements includes the use of accounting procedures, wherein Willbros’s basis in certain assets and liabilities, and the related expenses, have been recorded in the stand-alone financial statements of the Company, in accordance with GAAP.
These unaudited combined financial statements include assets and liabilities that are specifically identifiable or have been attributed to the Company. Costs directly related to the Company have been included in the accompanying unaudited combined financial statements. The Company receives service and support functions from Willbros. These costs were allocated to the Company using various allocation inputs such as the Company’s headcount and revenues relative to those of Willbros. These support functions include accounting and budgeting, information technology, treasury, payroll, human resources, risk management, marketing, executive management, tax and legal services. These allocated costs were approximately $7.9 million and $5.3 million for the nine months ended September 30, 2015 and 2014, respectively and are included in operating expenses on the Combined Statements of Operations.
The Company considers the expense allocation methodology and results to be reasonable for the periods presented. These allocations may not be indicative of the actual expenses the Company may have incurred as a separate stand-alone entity during the periods presented nor are these costs indicative of what the Company will incur in the future.
All intercompany balances and transactions have been eliminated. All significant intercompany transactions between the Company and Willbros have been considered to be effectively settled for cash in the unaudited combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Combined Statements of Cash Flows as a financing activity reflected as contributions from (distributions to) parent, net and in the Combined Balance Sheets as net parent investment. Transactions among the Company and other Willbros’ entities have been identified in these unaudited combined financial statements as transactions among affiliates. See Note 9 – Related Party Transactions for additional information with regards to transactions among affiliates.
The Company maintains stock ownership plans at the corporate level. To the extent the Company’s employees participate in these plans, the Company was allocated a portion of the associated compensation expense based on the grant-date fair value. Stock-based compensation is included in operating expenses in the Combined Statements of Operations and was $0.7 million for the nine months ended September 30, 2015 and 2014. However, the Combined Balance Sheets do not include outstanding equity related to stock-based compensation for any periods presented.
Use of Estimates
The unaudited combined financial statements are prepared in accordance with GAAP and include certain estimates and assumptions made by management of the Company in the preparation of the unaudited combined financial statements. These estimates and assumptions relate to the reported amounts of assets and liabilities at the date of the unaudited combined financial statements and the reported amounts of revenue and expense during the period. Significant items subject to such estimates and assumptions include: revenue recognition under the percentage-of-completion method of accounting, including estimates of progress toward completion and estimates of gross profit or loss accrual on contracts in progress; tax accruals and certain other accrued liabilities; quantification of amounts recorded for contingencies; valuation allowances for accounts receivable and deferred income tax assets; and the carrying amount of property, plant and equipment. The Company bases its estimates on historical experience and other assumptions that it believes relevant under the circumstances. Actual results could differ from these estimates.

5

Willbros Professional Services
Notes to Combined Financial Statements
September 30, 2015 and December 31, 2014


Recent Accounting Pronouncement
In May 2014, the FASB issued common guidance surrounding the recognition of revenue from contracts with customers. Under the new guidance, a company will recognize revenue when it satisfies a performance obligation by transferring a promised good or service to a customer. Revenue will be recognized at an amount that reflects the consideration it expects to receive in exchange for those goods and services. This guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This standard is effective, on either a full retrospective or a modified retrospective basis, for interim and annual periods beginning on or after December 15, 2017. In July 2015, the FASB approved a one-year deferral of the revenue recognition standard’s effective date for all entities, which will change the effectiveness to annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period once the Accounting Standards Update has been issued. We are currently evaluating this standard and our existing revenue recognition policies to determine which contracts in the scope of the guidance will be affected by the new requirements and what impact they would have on our consolidated financial statements upon adoption.
  
2.
Accounts Receivable
Accounts receivable, net as of September 30, 2015 and December 31, 2014 were as follows:
 
 
 
September 30,
 
December 31,
(in thousands)
 
2015
 
2014
 
 
 
 
 
 
Trade
 
$
28,516

 
$
22,355

Unbilled revenue
 
8,479

 
28,029

Contract retention
 
1,258

 
49

Other receivables
 
23

 
42

 
Total accounts receivable
 
38,276

 
50,475

 
 
 
 
 
 
Less: Allowance for doubtful accounts
 
(136
)
 
(807
)
 
Total accounts receivable, net
 
$
38,140

 
$
49,668

The balances billed but not paid by customers pursuant to retainage provisions in certain contracts will be due upon completion of the contracts and acceptance by the customer. Based on the Company’s experience with similar contracts within recent years, the majority of the retention balances at each balance sheet date will be collected within the next twelve months.
3.
Contracts in Progress
Contract cost and recognized income not yet billed on uncompleted contracts arise when recorded revenues for a contract exceed the amounts billed under the terms of the contracts. Contract billings in excess of cost and recognized income arise when billed amounts exceed revenues recorded. Amounts are billable to customers upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of the contract. Also included in contract cost and recognized income not yet billed on uncompleted contracts are amounts the Company seeks to collect from customers for change orders approved in scope but not for price associated with that scope change (unapproved change orders). Revenue for these amounts is recorded equal to the lesser of the expected revenue or cost incurred when realization of price approval is probable. Recognizing revenues from unapproved change orders involves the use of estimates, and it is reasonably possible that revisions to the estimated recoverable amounts of recorded unapproved change orders may be made in the near-term. If the Company does not successfully resolve these matters, a reduction in revenues may be required to amounts that have been previously recorded.

6

Willbros Professional Services
Notes to Combined Financial Statements
September 30, 2015 and December 31, 2014


Contract cost and recognized income not yet billed and related amounts billed as of September 30, 2015 and December 31, 2014 were as follows:
 
 
 
 
September 30,
 
December 31,
(in thousands)
 
 
 
2015
 
2014
 
 
 
 
 
 
 
Cost incurred on contracts in progress
 
$
46,716

 
$
78,038

Recognized income
 
5,816

 
16,430

 
 
52,532

 
94,468

Progress billings and advanced payments
 
(50,942
)
 
(89,180
)
 
 
$
1,590

 
$
5,288

 
 
 
 
 
Contract cost and recognized income not yet billed
 
$
3,545

 
$
6,323

Contract billings in excess of cost and recognized income
 
(1,955
)
 
(1,035
)
 
 
$
1,590

 
$
5,288

Contract cost and recognized income not yet billed is $0.1 million at both September 30, 2015 and December 31, 2014 on completed contracts.
4.
Property, Plant and Equipment
Property, plant and equipment, which are used to secure debt or are subject to lien, at cost, as of September 30, 2015 and December 31, 2014 were as follows:
 
 
 
September 30,
 
December 31,
(in thousands)
 
2015
 
2014
 
 
 
 
 
 
Construction equipment
 
$
1,001

 
$
717

Furniture and equipment
 
5,573

 
5,721

Transportation equipment
 
148

 
148

Leasehold improvements
 
868

 
818

 
Total property, plant and equipment
7,590

 
7,404

 
 
 
 
 
Less: Accumulated depreciation
(3,829
)
 
(3,128
)
 
Total property, plant and equipment, net
$
3,761

 
$
4,276

Amounts above include $0.1 million in property, plant and equipment as of September 30, 2015 associated with EFS, which Willbros acquired in January 2015. The Company’s unaudited combined financial statements as of September 30, 2015 also include $0.4 million in intangible assets associated with EFS.




7

Willbros Professional Services
Notes to Combined Financial Statements
September 30, 2015 and December 31, 2014


5.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as of September 30, 2015 and December 31, 2014 were as follows:
 
 
 
 
September 30,
 
December 31,
(in thousands)
 
 
2015
 
2014
 
 
 
 
 
 
 
Trade accounts payable
 
 
$
1,754

 
$
3,675

Payroll and payroll liabilities
 
 
3,394

 
8,647

Accrued contract costs
 
 
5,858

 
3,150

Other accrued liabilities
 
 
3,970

 
2,140

 
Total accounts payable and accrued liabilities
$
14,976

 
$
17,612

6.
Debt
As of September 30, 2015, the Company has been awarded three contracts to construct certain contractor-owned, contractor-operated fueling facilities (the “Facilities”) for the federal government. As part of these contracts, the Company constructs the Facilities over an estimated six to twelve months and subsequently maintains the Facilities over the life of the contract (generally five years). Upon final acceptance of the constructed Facilities, the government pays the contract value in equal monthly payments over the life of the contract. As such, the Company has entered into financing agreements, whereby the Company receives funding from a third-party financing company to construct the Facilities. As a result, as of September 30, 2015, the Company recorded approximately $25.1 million in debt obligations of which $6.7 million is current. These obligations represent amounts due to the third-party financing company with respect to the construction component of these contracts. In addition, as of September 30, 2015, the Company has recorded approximately $25.1 million in other assets of which $6.7 million is current. These amounts represent receivables due from the government with respect to the construction component of these contracts. At the end of the construction phase, once final funding is received and the government has accepted the construction of the Facilities, assets and liabilities with respect to these Facilities will equal; the Company is guaranteed recovery of the construction component under the contract; and the Company will amortize the total amount received from the third-party financing company over the life of the contract. The Company did not enter into financing agreements with regards to the maintenance phase of these contracts.
As of December 8, 2015, final funding has been received and the government has accepted one of the three contracts.
7.
Income Taxes
The Company’s provision for income taxes and deferred taxes have been calculated on a separate return basis as if the Company filed its own tax returns, although its operations have been included in Willbros’ U.S. federal and state tax returns. The separate return method applies the accounting guidance for income taxes to the Company’s unaudited combined financial statements as if the Company was a separate taxpayer and a stand-alone entity for all periods presented.
The Company’s effective tax rate was 65.9 percent for the nine months ended September 30, 2015. Tax expense for the nine months ended September 30, 2015 was $0.9 million and is primarily composed of Federal and State income tax and discrete items primarily related to Texas Margins Tax.

8

Willbros Professional Services
Notes to Combined Financial Statements
September 30, 2015 and December 31, 2014


The Company’s effective tax rate was 59.2 percent for the nine months ended September 30, 2014. Tax expense for the nine months ended September 30, 2014 was $5.8 million and is primarily composed of Federal and State income tax and discrete items primarily related to Texas Margins Tax.
8.
Commitments and Contingencies
Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when the Company assesses that it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with matters relating to contingencies are expensed in the period incurred.
The Company is party to various litigation matters, investigations and proceedings in the ordinary course of business. Management does not expect the outcome of any proceedings, individually or in the aggregate, to have a materially adverse effect on the Company’s financial position or results of operations.
Other Circumstances
The Company has the usual liability of contractors for the completion of contracts and the warranty of its work. In addition, the Company acts as prime contractor on a majority of the projects it undertakes and is normally responsible for the performance of the entire project, including subcontract work. Management is not aware of any material exposure related thereto which has not been provided for in the accompanying unaudited combined financial statements.
9.
Related Party Transactions
The Company routinely conducts business with subsidiaries of Willbros. The related transactions result primarily from the sale and purchase of engineering, procurement, construction and other services. Sales to affiliates were $12.3 million and $4.2 million and purchases from affiliates were $10.3 million and $6.8 million for the nine months ended September 30, 2015 and 2014, respectively.
The Company’s unaudited combined financial statements include salaries of directly dedicated personnel and related costs. Willbros charges the Company for the costs of providing centralized general and administrative services. The Company also uses a centralized treasury system such that Willbros may make disbursements on the Company’s behalf or receive proceeds on the Company’s behalf with a corresponding change in affiliate payables or receivables. Willbros also acts as the Company’s purchasing agent for construction and sustaining capital. The Company has reflected cash management and financing activities performed by Willbros as a component of net parent investment in equity in the Combined Balance Sheets and as contributions from (distributions to) parent, net on the Combined Statements of Cash Flows for all periods presented.
10.
Subsequent Events
On November 30, 2015, pursuant to an Amended and Restated Securities Purchase Agreement, Willbros sold WPS to TRC Companies for approximately $130.0 million in cash. The closing consideration is subject to working capital and other typical post-closing adjustments.
In preparing the accompanying unaudited combined financial statements, the Company has reviewed, as necessary, events that occurred after September 30, 2015 up until the issuance of the financial statements, which occurred on December 8, 2015.

9


Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(Amounts in thousands except share and per share information)


On December 4, 2015, TRC Companies, Inc. (the “Company”) filed a report on Form 8-K (the "Original Form 8-K) to report the completion of the acquisition (the "Acquisition") of Willbros Professional Services ("WPS") pursuant to the terms of the Amended and Restated Securities Purchase Agreement dated as of November 30, 2015 (the "Purchase Agreement") by and among TRC Solutions, Inc., as purchaser (the “Purchaser”), the Company, Willbros United States Holdings, Inc., as seller (the “Seller”), and Willbros Group, Inc. (“Willbros”). The description of the Purchase Agreement is qualified in its entirety by reference to the full text of the Purchase Agreement which is attached as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on December 4, 2015.

The following unaudited pro forma condensed combined financial information presents the unaudited pro forma condensed combined statements of income based upon the combined historical financial statements of the Company and WPS, after giving effect to the acquisition of WPS by the Company and adjustments described in the accompanying notes. The Company's historical financial and operating data for the year ended June 30, 2015 and the three-month period ended September 25, 2015 is derived from the financial data in its audited consolidated financial statements for the year ended June 30, 2015 and from its unaudited consolidated financial statements for the three-month period ended September 25, 2015. The historical financial and operating data for WPS for the year ended June 30, 2015 is derived by adding the financial data from WPS's audited consolidated statement of operations for the year ended December 31, 2014 and WPS's unaudited condensed consolidated statement of operations for the six month period ended June 30, 2015, and subtracting WPS's unaudited condensed consolidated statement of operations for the six-month period ended June 30, 2014. The historical financial and operating data for WPS for the three-month period ended September 30, 2015 is derived by adding the financial data from WPS's unaudited condensed consolidated statements of operations for the nine-month period ended September 30, 2015 and and subtracting WPS's unaudited condensed consolidated statement of operations for the six-month period ended June 30, 2015.

The unaudited pro forma condensed combined balance sheet as of September 25, 2015 shows the combined financial position of the Company and WPS as if the acquisition of WPS had occurred on September 25, 2015. The unaudited pro forma condensed combined statements of operations for the year ended June 30, 2015 and the three months ended September 25, 2015 reflect the acquisition as if it had occurred on July 1, 2014, the beginning of the earliest period presented.

The unaudited pro forma combined condensed financial information should be read in conjunction with:

the accompanying notes to the unaudited pro forma combined condensed financial statements;

the historical audited financial statements of the Company included in our Annual report on Form 10-K for the fiscal year ended June 30, 2015 and filed with the SEC on September 9, 2015.

the historical unaudited interim financial statements of the Company included in our quarterly report on Form 10-Q for the three months ended September 25, 2015 and filed with the SEC on November 4, 2015.

the historical audited combined financial statements of Willbros Professional Services as of and for the year ended December 31, 2014 attached as Exhibit 99.1 to the Form 8-K/A to which this unaudited pro forma combined condensed financial information is attached.

the historical unaudited combined financial statements of Willbros Professional Services as of and for the nine months ended September 30, 2015 attached as Exhibit 99.2 to the Form 8-K/A to which this unaudited pro forma combined condensed financial information is attached.

This unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting and may differ from our final acquisition accounting as our final purchase price allocation is subject to post-closing adjustments pursuant to the terms of the Purchase Agreement.

The unaudited pro forma combined condensed financial information is presented for informational purposes only. It has been prepared in accordance with the regulations of the SEC and is not necessarily indicative of what our financial position or results of operations actually would have been had we completed the acquisition at the dates indicated, nor does it purport to project the future financial position or operating results of the combined company. It also does not reflect any cost savings, operating synergies or revenue enhancements that we may achieve with respect to the combined company nor the costs necessary to achieve those costs savings, operating synergies and revenue enhancements, or to integrate the operations of the Company and WPS. The unaudited pro forma condensed combined statements of income also include certain purchase accounting adjustments, including


Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(Amounts in thousands except share and per share information)


items expected to have a continuing impact on combined results, such as the effect of debt financing necessary to complete the acquisition as well as the impact of depreciation and amortization expense on acquired assets.







Unaudited Pro Forma Condensed Combined Balance Sheet
(In thousands, except share data)

 
 
 
 
Historical
 
 
 
 
 
 
 
As of
 
 
 
 
As of
 
As of
 
 
 
 
 
 
 
September 25,
 
 
 
 
September 25,
 
September 30,
 
 
 
 
 
 
 
2015
 
 
 
 
2015
 
2015
 
Reclassification
 
Pro-Forma
 
 
 
Pro-Forma
 
 
 
 
TRC
 
WPS
 
Adjustments 2(i)
 
Adjustments
 
Notes
 
Combined
ASSETS
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
53,149

 
$
268

 
$

 
$
(22,524
)
 
2(a)
 
$
30,893

 
Restricted cash
 

 

 

 

 
 
 

 
Accounts receivable, less allowance for doubtful accounts
 
135,141

 
38,140

 
3,545

 

 
 
 
176,826

 
Contract cost and recognized income not yet billed
 

 
3,545

 
(3,545
)
 

 
 
 

 
Insurance recoverable - environmental remediation
 
40,919

 

 

 

 
 
 
40,919

 
Restricted investments
 
6,382

 

 

 

 
 
 
6,382

 
Deferred income tax assets
 
16,281

 
1,185

 

 

 
 
 
17,466

 
Income taxes refundable
 
497

 

 

 

 
 
 
497

 
Prepaid expenses and other current assets
 
14,330

 
7,546

 

 
1,276

 
2(b)
 
23,152

 
 
Total current assets
 
266,699

 
50,684

 

 
(21,248
)
 
 
 
$
296,135

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
18,380

 
3,761

 

 

 
 
 
22,141

Goodwill
 
37,024

 

 

 
51,818

 
2(c)
 
88,842

Intangible assets, net
 

 
364

 
8,464

 
44,136

 
2(c)
 
52,964

Long-term deferred income tax assets
 
2,813

 
602

 

 

 
 
 
3,415

Long-term restricted investments
 
18,374

 

 

 

 
 
 
18,374

Long-term prepaid insurance
 
25,366

 

 

 

 
 
 
25,366

Other assets
 
9,255

 
18,235

 
(8,464
)
 
2,082

 
2(d)
 
21,108

 
 
Total assets
 
$
377,911

 
$
73,646

 
$

 
$
76,788

 
 
 
$
528,345

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
 
$
4,641

 
$
6,721

 
$

 
$
11,640

 
2(e)
 
$
23,002

 
Current portion of capital lease obligations
 
92

 

 

 

 
 
 
92

 
Accounts payable
 
31,280

 
1,754

 

 
1,538

 
2(f)
 
34,572

 
Accrued compensation and benefits
 
55,412

 
3,394

 

 

 
 
 
58,806

 
Contract billings in excess of cost and recognized income
 

 
1,955

 
(1,955
)
 

 
 
 

 
Deferred revenue
 
12,404

 

 
1,955

 

 
 
 
14,359

 
Environmental remediation liabilities
 
8,680

 

 

 

 
 
 
8,680

 
Income taxes payable
 
1,794

 

 

 

 
 
 
1,794

 
Other accrued liabilities
 
41,599

 
9,828

 

 

 
 
 
51,427

 
 
Total current liabilities
 
155,902

 
23,652

 

 
13,178

 
 
 
192,732

Non-current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, net of current portion
 
51

 
18,366

 

 
96,528

 
2(e)
 
114,945

 
Income taxes payable and deferred income tax liabilities
 
1,695

 

 

 

 
 
 
1,695

 
Deferred revenue
 
67,121

 

 

 

 
 
 
67,121

 
Environmental remediation liabilities
 
482

 

 

 

 
 
 
482

 
Other long-term liabilities
 

 
1,878

 

 
(1,751
)
 
2(g)
 
127

 
 
Total liabilities
 
225,251

 
43,896

 

 
107,955

 
 
 
377,102

Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
 
3,083

 

 

 

 
 
 
3,083

 
Additional paid-in capital
 
191,536

 

 

 

 
 
 
191,536

 
Accumulated deficit / Net parent investment
 
(41,447
)
 
29,497

 

 
(30,914
)
 
2(f), 2(h)
 
(42,864
)
 
Accumulated other comprehensive loss
 
(80
)
 

 

 

 
 
 
(80
)
 
Treasury stock, at cost
 
(33
)
 

 

 

 
 
 
(33
)
 
 
Total shareholders' equity applicable to TRC/WPS
 
153,059

 
29,497

 

 
(30,914
)
 
 
 
151,642

 
Noncontrolling interest
 
(399
)
 
253

 

 
(253
)
 
2(c)
 
(399
)
 
 
Total equity
 
152,660

 
29,750

 

 
(31,167
)
 
 
 
151,243

 
 
Total liabilities and equity
 
$
377,911

 
$
73,646

 
$

 
$
76,788

 
 
 
$
528,345


The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed combined financial information.


Unaudited Pro Forma Condensed Combined Statement of Operations
For the Twelve Months Ended June 30, 2015
(In thousands, except per share data)

 
 
 
 
Historical
 
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
 
 
 
 
 
 
Twelve Months Ended
 
 
 
 
June 30,
 
June 30,
 
Reclassification
 
 
 
 
 
June 30,
 
 
 
 
2015
 
2015
 
Adjustments
 
Pro-Forma
 
 
 
2015
 
 
 
 
TRC
 
WPS
 
3(d)
 
Adjustments
 
Notes
 
Pro-Forma Combined
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross revenue
 
$
546,117

 
$
226,511

 
$

 
$

 
 
 
$
772,628

 
Less subcontractor costs and other direct reimbursable charges
 
138,099

 

 
72,088

 

 
 
 
210,187

Net service revenue
 
408,018

 
226,511

 
(72,088
)
 

 
 
 
562,441

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income from contractual arrangements
 
97

 

 

 

 
 
 
97

Insurance recoverables and other income
 
6,533

 

 

 

 
 
 
6,533

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of costs shown separately below)
 
337,291

 
192,730

 
(72,654
)
 

 
 
 
457,367

 
General and administrative expenses
 
36,982

 
33,823

 
(326
)
 

 
 
 
70,479

 
Provision for doubtful accounts
 
349

 

 
121

 

 
 
 
470

 
Depreciation and amortization
 
9,316

 

 
771

 
3,592

 
3(a)
 
13,679

Total operating costs and expenses
 
383,938

 
226,553

 
(72,088
)
 
3,592

 
 
 
541,995

Operating income (loss)
 
30,710

 
(42
)
 

 
(3,592
)
 
 
 
27,076

Interest income
 

 
1,068

 

 

 
 
 
1,068

Interest expense
 
(134
)
 
(1,068
)
 

 
(3,010
)
 
3(b)
 
(4,212
)
Other income (expense)
 

 
(12
)
 

 

 
 
 
(12
)
Income (loss) from operations before taxes
 
30,576

 
(54
)
 

 
(6,602
)
 
 
 
23,920

Income tax (provision) benefit
 
(11,180
)
 
328

 

 
2,641

 
3(c)
 
(8,211
)
Net income (loss)
 
19,396

 
274

 

 
(3,961
)
 
 
 
15,709

Net loss (income) applicable to noncontrolling interest
 
19

 
(54
)
 

 

 
 
 
(35
)
Net income applicable to TRC/WPS
 
$
19,415

 
$
220

 
$

 
$
(3,961
)
 
 
 
$
15,674

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
0.64

 
$

 
$

 
$

 
 
 
$
0.52

Diluted earnings per common share
 
$
0.63

 
$

 
$

 
$

 
 
 
$
0.51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
30,291

 

 

 

 
 
 
30,291

 
Diluted
 
30,724

 

 

 

 
 
 
30,724




The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed combined financial information.


Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended September 25, 2015
(In thousands, except per share data)


 
 
 
 
Historical
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
Period
 
 
 
 
 
Three Months Ended
 
 
 
 
September 25,
 
September 30,
 
Reclassification
 
Alignment
 
 
 
 
 
September 25,
 
 
 
 
2015
 
2015
 
Adjustments
 
Adjustments
 
Pro-Forma
 
 
 
2015
 
 
 
 
TRC
 
WPS
 
3(d)
 
3(e)
 
Adjustments
 
Notes
 
Pro-Forma Combined
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross revenue
 
$
135,459

 
$
50,963

 
$

 
$
(2,389
)
 
$

 
 
 
$
184,033

 
Less subcontractor costs and other direct reimbursable charges
 
35,296

 

 
17,865

 
(837
)
 

 
 
 
52,324

Net service revenue
 
100,163

 
50,963

 
(17,865
)
 
(1,552
)
 

 
 
 
131,709

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income from contractual arrangements
 
15

 

 

 

 

 
 
 
15

Insurance recoverables and other income
 
742

 

 

 

 

 
 
 
742

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of costs shown separately below)
 
82,984

 
42,942

 
(18,085
)
 
(1,165
)
 

 
 
 
106,676

 
General and administrative expenses
 
7,999

 
7,962

 
(125
)
 
(367
)
 

 
 
 
15,469

 
Provision for doubtful accounts
 

 

 
47

 

 

 
 
 
47

 
Depreciation and amortization
 
2,264

 

 
298

 
(14
)
 
981

 
3(a)
 
3,529

Total operating costs and expenses
 
93,247

 
50,904

 
(17,865
)
 
(1,546
)
 
981

 
 
 
125,721

Operating income
 
7,673

 
59

 

 
(6
)
 
(981
)
 
 
 
6,745

Interest income
 

 
408

 

 
(19
)
 

 
 
 
389

Interest expense
 
(28
)
 
(408
)
 

 
19

 
(716
)
 
3(b)
 
(1,133
)
Other income (expense)
 

 
(5
)
 

 

 

 
 
 
(5
)
Income from operations before taxes
 
7,645

 
54

 

 
(6
)
 
(1,697
)
 
 
 
5,996

Income tax (provision) benefit
 
(3,157
)
 
(36
)
 

 
2

 
679

 
3(c)
 
(2,512
)
Net income
 
4,488

 
18

 

 
(4
)
 
(1,018
)
 
 
 
3,484

Net loss (income) applicable to noncontrolling interest
 
4

 
(52
)
 

 
2

 

 
 
 
(46
)
Net income applicable to TRC/WPS
 
$
4,492

 
$
(34
)
 
$

 
$
(2
)
 
$
(1,018
)
 
 
 
$
3,438

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
0.15

 
$

 
$

 
$

 
$

 
 
 
$
0.11

Diluted earnings per common share
 
$
0.14

 
$

 
$

 
$

 
$

 
 
 
$
0.11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
30,635

 

 

 

 

 
 
 
30,635

 
Diluted
 
31,318

 

 

 

 

 
 
 
31,318



The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed combined financial information.



Note 1. Basis of Presentation

The accompanying unaudited pro forma combined financial statements present the pro forma combined financial position and results of operations of the combined company based upon the historical financial statements of TRC Companies, Inc. (the “Company”) and Willbros Professional Services ("WPS"), after giving effect to the acquisition and adjustments described in these footnotes, and are intended to reflect the impact of the acquisition on the Company.

The accompanying unaudited pro forma combined financial statements are presented for illustrative purposes only and do not give effect to any cost savings, operating synergies or revenue enhancements that we may achieve with respect to the combined company nor the costs necessary to achieve those costs savings, operating synergies and revenue enhancements, or to integrate the operations of the Company and WPS.

The unaudited pro forma combined balance sheet reflects the acquisition as if it has been consummated on September 25, 2015 and includes pro forma adjustments for our preliminary valuations of certain intangible assets. The unaudited pro forma combined statements of operations for the three months ended September 25, 2015 and for the year ended June 30, 2015, reflect the acquisition as if it had occurred on July 1, 2014. Our fiscal quarters end on the last Friday of the quarter except for the last quarter of the fiscal year which always ends on June 30.

The pro forma combined balance sheet has been adjusted to reflect the allocation of the purchase price to identifiable net assets acquired and to goodwill. The preliminary consideration is as presented in the following table.

(in thousands)
 
 
Current and other assets
 
$
50,684

Property and equipment, net
 
3,761

Goodwill
 
51,818

Intangible Assets
 
44,500

Other non-current assets
 
18,837

     Total assets
 
169,600

 
 
 
Current liabilities other than current portion of long-term debt
 
(16,931
)
Current portion of long-term debt
 
(6,721
)
Other long term liabilities
 
(127
)
Long-term debt
 
(18,366
)
     Total liabilities
 
(42,145
)
     Estimated purchase price
 
$
127,455


The preliminary identifiable intangible assets in the pro forma financial statements consist of anticipated intangibles derived from customer relationships, acquired backlog, and internally developed software. The amortization related to these amortizable identifiable intangible assets is reflected as a pro forma adjustment to the pro forma statements of income, as further described in Note 4. The identifiable intangible assets and related amortization are preliminary and are based on management's estimates. As discussed above, the amount that will ultimately be allocated to identifiable intangible assets and liabilities, and the related amount of amortization, may differ materially from this preliminary allocation. In addition, the periods the amortization impacts will ultimately be based upon the periods in which the associated economic benefits or detriments are expected to be derived, or where appropriate, based on the use of a straight-line method. Therefore, the amount of amortization following the transaction may differ significantly between periods based upon the final value assigned, and amortization methodology used, for each identifiable intangible asset.

Note 2. Notes to Unaudited Pro Forma Condensed Combined Balance Sheet

a.
Represents the use of existing Company cash to fund a portion of the estimated purchase price as described in Note 1, Company transaction and financing costs, and certain historical Company financing costs paid prior to, or concurrent with, closing the acquisition, including transaction costs and debt financing fees. Company financing fees are capitalized as deferred debt issuance costs.




(in thousands)
 
 
Cash proceeds of new debt
 
$
102,000

Cash consideration paid
 
(119,955
)
Debt financing fees paid
 
(3,022
)
Transaction costs paid
 
(47
)
Pre-funded benefits
 
(1,500
)
 
 
$
(22,524
)

b.
Represents $1.5 million in employee health benefits pre-funded by the Company to Willbros Group, Inc. through December 31, 2015, net of $0.2 million in previously deferred debt issuance costs reclassified to other assets and $0.1 million in previously deferred debt issuance costs expensed.

c.
Represents the acquisition method of accounting based on the estimated fair value of the assets and liabilities of WPS as discussed in Note 1 above. Additional information regarding the fair value of intangible assets acquired is discussed in Note 4 below.

d.
Represents $0.2 million in previously deferred debt issuance costs reclassified from prepaid and other current assets, and $1.9 million of additional deferred debt issuance costs incurred with respect to the Company's revolving credit facility.

e.
Represents adjustments to current and long-term debt for borrowings made to fund the acquisition, net of deferred debt issuance costs incurred. Additionally, $7.5 million in purchase price being held by the Company until the earlier of certain contract novations and consents pursuant to the Purchase Agreement, or March 15, 2016, are also presented as current debt. The adjustments to current and long-term debt are as follows:    
(in thousands)
 
 
Current portion of term loan borrowings
 
$
4,140

Deferred purchase price payable
 
7,500

Increase to short-term debt
 
$
11,640

 
 
 
Revolving credit facility
 
$
27,000

Term loan borrowings, net of current portion
 
70,860

Deferred term loan debt issuance costs and discounts, non-current
 
(1,332
)
     Increase to long-term debt
 
$
96,528


f.
Represents the recording of $1.5 million in estimated remaining transaction costs to be incurred by the Company in connection with the Acquisition. In accordance with U.S. GAAP, acquisition related transaction costs are not included as a component of purchase price but are required to be expensed as incurred. The unaudited pro-forma condensed combined balance sheet reflects the $1.5 million of costs as an increase to accounts payable with a corresponding increase in accumulated deficit.

g.
Represents the elimination of WPS's deferred rent liability of $1.8 million as a purchase accounting adjustment.

h.
Represents the elimination of WPS's net parent investment, as well as historical deferred debt financing fees expensed and additional transaction fees incurred. The adjustment in retained earnings / net parent investment is as follows:
(in thousands)
 
 
Elimination of WPS net parent investment
 
$
(29,497
)
Adjustment for Company deferred debt financing fees and discounts
 
121

Adjustment for Company transaction costs
 
(1,538
)
     Adjustment to retained earnings / WPS net parent investment
 
$
(30,914
)

i.
To reclassify certain WPS balances to conform with the Company's financial statement presentation as well as reclassify the Company's net intangible assets for presentation outside of other assets.



Note 3. Notes to Unaudited Pro Forma Condensed Combined Statements of Operations

a.
Represents adjustments to record amortization expense related to other identifiable intangible assets calculated on a basis approximating the economic value derived from those assets. See Note 4 for additional information on the amortization lives of the intangible assets expected to be recognized.

The adjustment to amortization expense is as follows:
(in thousands)
 
Pro Forma Three Months Ended September 25, 2015
 
Pro Forma Twelve Months Ended June 30, 2015
Customer relationships
 
$
951

 
$
2,527

Backlog
 

 
900

Internally developed software
 
50

 
200

 
 
1,001

 
3,627

Less: WPS historical intangible asset amortization
 
(20
)
 
(35
)
Total additional intangibles amortization expense
 
$
981

 
$
3,592


b.
Represents the net impact to interest expense resulting from the reversal of historical Company interest expense and historical amortization of deferred debt issuance costs, and to record estimated interest expense and amortization of deferred debt issuance costs associated with the new borrowings incurred. The interest expense incurred on the new borrowings utilizes an interest rate of 2.318%, which represents the interest rate incurred on the date of borrowing.
(in thousands)
 
Pro Forma Three Months Ended September 25, 2015
 
Pro Forma Twelve Months Ended June 30, 2015
Interest expense on revolving facility
 
$
156

 
$
626

Interest expense on term-loan facility
 
406

 
1,698

Amortization of revolving facility debt issuance costs
 
104

 
416

Amortization of term-loan facility debt issuance costs
 
74

 
308

Expensing of historical deferred issuance costs incurred
 

 
58

Reversal of the Company's interest expense and amortization of deferred issuance costs
 
(24
)
 
(96
)
 
 
$
716

 
$
3,010


c.
Represents adjustments to income tax expense as a result of the tax impact on the pro forma adjustments. An estimated combined Federal and State statutory rate of 40% was utilized to compute the income tax expense related to each pro forma condensed combined statement of operations.

d.
To reclassify certain WPS balances to conform with the Company's financial statement presentation.

e.
To reflect the adjustment of WPS's operating results by pro-rating from 64 operating days to 61 operating days to conform with the Company's fiscal reporting calendar ended September 25, 2015 from WPS's calendar period ended September 30, 2015.





Note 4. Intangible Assets

The significant intangible assets identified in the preliminary purchase price allocation discussed above include customer relationships, backlog, and internally developed software. The table below indicates the estimated fair value of each of the intangibles identified and the approximate useful lives of each:

(in thousands)
 
 
 
 
Intangible Asset
 
Approximate Fair Value
 
Estimated Weighted Average Useful Life
Customer relationships
 
$
42,600

 
6.0 years
Backlog
 
900

 
0.5 years
Internally developed software
 
1,000

 
3.0 years
Total
 
$
44,500

 
 

The determination of fair value for the customer relationships and backlog assets was primarily based upon the expected discounted cash flows. The fair value of the internally developed software was based upon the estimated costs to re-create. The determination of useful life was based upon historical experience, economic factors, and projected future cash flows of the combined Company. The customer relationship intangible assets are being amortized on a basis approximating the economic value derived from those assets. The backlog and internally developed software are being amortized on a straight-line basis over their estimated useful lives.

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