The Keith Companies/TKC
PRESS RELEASE
NEWS RELEASE FOR FEBRUARY 10, 2005 AT 7:30 AM EST
Contact information:
THE KEITH COMPANIES, INC. FINANCIAL RELATIONS BOARD
19 Technology Drive Tricia Ross
Irvine, CA 92618 Investor Relations
(949) 923-6001 (617) 520-7064
(949) 923-6026 Fax
www.keithco.com
Contact: Aram Keith,
Chairman of the Board & CEO
THE KEITH COMPANIES REPORTS RECORD RESULTS FOR FISCAL YEAR 2004
o Net Revenue Increased 6.6% in 2004 to $96.8 Million
o Gross Margins Increased 190 Basis Points to 37.6% in 2004
o Income from Continuing Operations Increased 16.8% in 2004 to $8.4
Million
o Diluted Earning Per Share from Continuing Operations increased 15.4%
to $1.05
o Raised 2005 Guidance for Diluted Earnings Per Share from Continuing
Operations
o Balance Sheet Remains Strong with $42.1 Million in Cash and Securities
and No Debt
IRVINE, CA (February 10, 2005) - The Keith Companies, Inc. (Nasdaq: TKCI), an
engineering and consulting services firm, today announced financial results for
the fourth quarter and year ended December 31, 2004, which included record
annual net revenue and income from continuing operations.
FOURTH QUARTER AND YEAR END 2004 RESULTS
Net revenue for the three months ended December 31, 2004 increased 6.6% to
$24.3 million, while income from continuing operations for the same period
increased 20.7% to $2.3 million and resulted in diluted earnings per share from
continuing operations of $0.28. This compares to net revenue for the fourth
quarter of 2003 of $22.8 million, with income from continuing operations of $1.9
million and diluted earnings per share from continuing operations of $0.24. Our
strong fourth quarter results were positively impacted by $210,000, net of
income taxes, related to a business development agreement in our
energy/industrial segment entered into in early 2004 and terminated at year end.
Net revenue for the twelve months ended December 31, 2004 increased 6.6% to
a record $96.8 million, while income from continuing operations for the same
period increased 16.8% to a record $8.4 million and resulted in diluted earnings
per share from continuing operations of $1.05. This compares to net revenue for
the twelve months of 2003 of $90.7 million, with income from continuing
operations of $7.2 million and diluted earnings per share from continuing
operations of $0.91.
THE KEITH COMPANIES REPORTS RECORD RESULTS FOR FISCAL YEAR 2004
Page 2 of 7
Mainly due to stronger collections of accounts receivables, net cash from
operating activities for the year ended December 31, 2004 increased 113% to
$15.6 million, compared to $7.4 million during 2003.
"Our real estate development segment continued to drive strong net revenue
gains in the fourth quarter," said Aram Keith, Chairman and CEO of The Keith
Companies. "This segment achieved 8.9% year-over-year net revenue growth for the
fourth quarter of 2004, and 14.9% net revenue growth for the year. We exited the
year with a strong pipeline of projects in our real estate development segment.
We believe that the real estate market will continue to grow in 2005. In
addition, we are encouraged by the continued improvement in the operating income
of our public works/infrastructure segment, and continue to pursue a variety of
opportunities in this area. Infrastructure concerns are one of the biggest
issues facing state, county and local governments and we believe that we are
well positioned to capitalize on infrastructure improvement projects that
receive funding. Year-over-year, our energy/industrial segment showed an
improvement in income from operations in the fourth quarter, and as we stated
previously, we expect this segment to continue to improve partially due to
legislation extending production tax credits for power generating projects that
use renewable energy sources. We continue to see improved proposal activity in
this segment."
"Gross margins increased in all three of our business segments in 2004,
primarily as a result of improved employee utilization rate and higher fees.
This represents our second consecutive year of improved Company wide gross
margins, with this latest year improving by 190 basis points to 37.6%,"
continued Keith.
FINANCIAL POSITION
The Company's balance sheet at December 31, 2004 remained strong with cash
and securities of $42.1 million, no debt, a current ratio of 4.8:1, and
shareholders' equity of $81.9 million, or $10.34 per common share outstanding at
December 31, 2004.
DISCONTINUED OPERATIONS
During 2004, the Company made an investment in a private entity in the
energy sector and, in return, received a controlling interest in that entity. As
a result of the Company's controlling interest, the Company had consolidated the
entity's operating results with that of the Company. In December 2004, the
Company made a decision to shut down the operations of this entity primarily due
to lower than expected operating performance. In accordance with Generally
Accepted Accounting Principles, the Company has changed the presentation of its
"Consolidated Statements of Income" to reflect as discontinued operations the
results of this entity for 2004. The total loss, including the impairment charge
associated with this entity, net of income taxes, totaled $273,000 and $430,000
for the quarter and year ended December 31, 2004, respectively.
FINANCIAL GUIDANCE
In adherence with the U.S. Securities and Exchange Commission's (SEC)
Regulation Fair Disclosure, The Keith Companies provides the following guidance
for all investors and encourages all current and potential investors to review
the disclosure regarding forward-looking statements in this press release as
well as all financial documents filed with the SEC. All
THE KEITH COMPANIES REPORTS RECORD RESULTS FOR FISCAL YEAR 2004
Page 3 of 7
guidance amounts are before special items, if any, and exclude the impact of any
potential future acquisitions.
The Company is increasing its financial guidance for diluted earnings per
share for 2005. The Company estimates its full year 2005 net revenue may range
from $106.5 million to $111.5 million with estimated diluted earnings per share
from continuing operations ranging from $1.09 to $1.25 ($0.21 to $0.24 for the
first quarter; $0.28 to $0.32 for the second quarter; $0.33 to $0.38 for the
third quarter; and $0.27 to $0.31 for the fourth quarter) based upon an
estimated 8.1 million weighted average number of diluted shares outstanding for
the year. The previous annual 2005 guidance for diluted earnings per share from
continuing operations ranged from $1.04 to $1.22. Consistent with the Company's
past accounting treatment of stock options, the 2005 diluted earnings per share
amounts exclude the effect of expensing stock options. New accounting
pronouncements, however, will require the expensing of stock options effective
for the first interim period beginning after June 15, 2005. The Company has not
completed its analysis as to the effect the new pronouncement may have on its
overall 2005 financial results.
Commenting on the Company's financial guidance, Keith said, "Our revised
upward guidance for 2005 primarily reflects the on-going strength of our real
estate development segment, as well as expected improvement of our
energy/industrial segment and a lower estimated effective corporate income tax
rate of 38%. The recently opened San Diego and Bakersfield offices are fully
operational and we expect them to be contributors to the Company's performance
over the course of this year. Our robust financial position enables us to
explore various acquisition opportunities, in addition to new office openings,
that will deliver strong operational performance, as well as solid returns for
our shareholders."
CONFERENCE CALL WEBCAST
The Company will be hosting an earnings conference call, which will be
broadcast live over the Internet at 8:30 a.m. Pacific Time on February 10, 2005
and can be accessed by all interested parties at www.keithco.com or
www.viavid.net. To listen to the live call, please go to the Web site at least
fifteen minutes prior to the start of the call to register, download, and
install any necessary audio software. For those unable to participate during the
live broadcast, an online archive will be available shortly after the call. A
telephone replay will be available through February 17, 2005 by dialing (800)
405-2236 and entering passcode 11022515. A copy of this press release and a link
to the Company's quarterly conference call will be available at the Company's
website under the headings "TKC News" and "Investor Relations," respectively, at
www.keithco.com.
ABOUT THE KEITH COMPANIES
The Keith Companies, Inc. is a fully integrated, multi-disciplined
engineering and consulting services company, with offices located throughout the
Western and Midwestern United States. The Keith Companies' professionals provide
a wide spectrum of skilled resources including land planning, engineering,
surveying, mapping, environmental studies, and water and cultural resources that
are needed to effectively plan, engineer, and design state-of-the-art private
and public facilities. Additionally, the Company provides mechanical,
electrical, chemical,
THE KEITH COMPANIES REPORTS RECORD RESULTS FOR FISCAL YEAR 2004
Page 4 of 7
power/energy engineering, and other industrial engineering services to design
and improve the efficiency and reliability of automated and manufacturing
processes, production lines, and fire protection systems. The Keith Companies
benefits from a diverse public and private client base varying from residential
and commercial real estate projects to institutional, manufacturing, and
processing facilities. For more information visit the Company's website at
www.keithco.com.
Certain statements in this news release may include forward-looking
statements that express our expectation, prediction, belief, or projection.
These statements involve known and unknown risks, uncertainties, and other
factors that may cause the actual results, performance, and achievement of The
Keith Companies to be materially and adversely different from any future
results, performance, or achievement expressed or implied by these
forward-looking statements. Factors that may cause actual results to differ from
the forward-looking statements contained in this release and that may affect the
Company's prospects in general include, but are not limited to: changes in the
economic growth in the United States (especially in California) and other major
international economies (especially Brazil), our ability to sustain our growth
and profitability, a downturn in the real estate market, the ongoing financing
of public works and infrastructure enhancements and refurbishments, the demand
for electricity and the impact on power providers' plans for expanding
generation facilities, our failure to accurately estimate costs on fixed-price
contracts or contracts with not-to-exceed provisions, changes in the carrying
value of our goodwill and other long-term assets, our ability to implement our
acquisition strategy and to successfully close and integrate acquired companies
on a timely and cost-effective basis while maintaining their profit margins
and/or client base, our ability to attract and retain employees, the uncertain
timing of awards and contracts, outcomes of pending and future litigation,
increasing competition by domestic and foreign companies, risks inherent in
doing business outside the United States, including the difficulty of enforcing
contracts, political instability and foreign currency fluctuations and potential
exchange restrictions, the short and long-term impact of terrorist activities
and resulting political and military policies, and other factors as are
described in the Company's filings with the Securities and Exchange Commission.
The forward-looking information set forth in this press release is as of the
date indicated above and we undertake no duty to update this information.
TABLES FOLLOW
THE KEITH COMPANIES REPORTS RECORD RESULTS FOR FISCAL YEAR 2004
Page 5 of 7
THE KEITH COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
2004 2003 2004 2003
--------------------------- ---------------------------
Gross revenue $26,471,000 $25,031,000 $105,346,000 $99,950,000
Subcontractor costs 2,209,000 2,264,000 8,592,000 9,206,000
------------ ------------ ------------- ------------
Net revenue
24,262,000 22,767,000 96,754,000 90,744,000
Costs of revenue 15,162,000 14,410,000 60,363,000 58,359,000
------------ ------------ ------------- ------------
Gross profit 9,100,000 8,357,000 36,391,000 32,385,000
Selling, general and administrative
expenses 5,516,000 5,398,000 23,013,000 21,070,000
------------ ------------ ------------- ------------
Income from operations 3,584,000 2,959,000 13,378,000 11,315,000
Interest income, net 208,000 69,000 481,000 264,000
Other income, net 23,000 71,000 46,000 259,000
------------ ------------ ------------- ------------
Income before provision for income
taxes and discontinued operations 3,815,000 3,099,000 13,905,000 11,838,000
Provision for income taxes 1,532,000 1,208,000 5,468,000 4,617,000
------------ ------------ ------------- ------------
Income from continuing operations 2,283,000 1,891,000 8,437,000 7,221,000
Loss from discontinued operations, net
of income taxes 273,000 -- 430,000 --
------------ ------------ ------------- ------------
Net income $2,010,000 $ 1,891,000 $ 8,007,000 $ 7,221,000
============ ============ ============= ============
Earnings per share from continuing operations:
Basic $ 0.29 $ 0.25 $ 1.08 $ 0.95
============ ============ ============= ============
Diluted $ 0.28 $ 0.24 $ 1.05 $ 0.91
============ ============ ============= ============
Earnings (loss) per share from discontinued
operations, net of income taxes:
Basic $ (0.03) $ 0.00 $ (0.05) $ 0.00
============ ============ ============= ============
Diluted $ (0.03) $ 0.00 $ (0.05) $ 0.00
============ ============ ============= ============
Earnings per share:
Basic $ 0.26 $ 0.25 $ 1.03 $ 0.95
============ ============ ============= ============
Diluted $ 0.25 $ 0.24 $ 1.00 $ 0.91
============ ============ ============= ============
Weighted average number of shares outstanding:
Basic 7,823,874 7,637,880 7,778,661 7,615,264
============ ============ ============= ============
Diluted 8,093,006 7,963,622 8,039,457 7,957,344
============ ============ ============= ============
THE KEITH COMPANIES REPORTS RECORD RESULTS FOR FISCAL YEAR 2004
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THE KEITH COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31,
2004 2003
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 38,844,000 $ 24,277,000
Securities held-to-maturity 3,300,000 4,600,000
Contracts and trade receivables, net 16,452,000 19,844,000
Costs and estimated earnings in excess of billings 10,470,000 9,997,000
Prepaid expenses and other current assets 928,000 1,468,000
----------------- -----------------
Total current assets 69,994,000 60,186,000
Equipment and leasehold improvements, net 4,643,000 4,067,000
Goodwill, net 23,059,000 23,059,000
Other assets 273,000 224,000
----------------- -----------------
Total assets $ 97,969,000 $ 87,536,000
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 1,685,000 $ 1,640,000
Accrued employee compensation 5,445,000 4,037,000
Current portion of deferred tax liabilities 1,661,000 2,444,000
Other accrued liabilities 3,809,000 3,078,000
Billings in excess of costs and estimated earnings 1,922,000 1,571,000
----------------- -----------------
Total current liabilities 14,522,000 12,770,000
Issuable common stock -- 792,000
Deferred tax liabilities 1,125,000 1,560,000
Accrued rent 401,000 452,000
----------------- -----------------
Total liabilities 16,048,000 15,574,000
----------------- -----------------
Shareholders' equity:
Preferred stock -- --
Common stock 8,000 8,000
Additional paid-in-capital 48,114,000 45,464,000
Deferred stock compensation (867,000) (169,000)
Retained earnings 34,666,000 26,659,000
----------------- -----------------
Total shareholders' equity 81,921,000 71,962,000
----------------- -----------------
Total liabilities and shareholders' equity $ 97,969,000 87,536,000
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-MORE-
THE KEITH COMPANIES REPORTS RECORD RESULTS FOR FISCAL YEAR 2004
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THE KEITH COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED
DECEMBER 31,
-------------------------------------
2004 2003
----------------- -----------------
Cash flows from operating activities:
Net income $ 8,007,000 $ 7,221,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,978,000 2,231,000
Loss on impairment/sale of equipment 413,000 29,000
Reduction in purchase price of acquired companies -- (137,000)
Tax benefit from stock options 299,000 69,000
Deferred stock compensation expense 292,000 37,000
Changes in operating assets and liabilities:
Contracts and trade receivables, net 3,441,000 (1,269,000)
Costs and estimated earnings in excess of billings (473,000) 304,000
Prepaid expenses and other assets 475,000 (53,000)
Trade accounts payable and accrued liabilities 2,074,000 (652,000)
Billings in excess of costs and estimated earnings 351,000 298,000
Deferred tax liabilities (1,218,000) (728,000)
----------------- -----------------
Net cash provided by operating activities 15,639,000 7,350,000
----------------- -----------------
Cash flows from investing activities:
Net cash expended for acquisitions -- (722,000)
Additions to equipment and leasehold improvements (3,017,000) (1,548,000)
Proceeds from (purchases of) securities held-to-maturity 1,300,000 (1,436,000)
Proceeds from sales of equipment 50,000 57,000
----------------- -----------------
Net cash used in investing activities (1,667,000) (3,649,000)
----------------- -----------------
Cash flow from financing activities:
Principal payments on capital lease obligations -- (52,000)
Net proceeds from stock options and restricted shares 595,000 295,000
----------------- -----------------
Net cash provided by financing activities 595,000 243,000
----------------- -----------------
Net increase in cash and cash equivalents 14,567,000 3,944,000
Cash and cash equivalents, beginning of period 24,277,000 20,333,000
----------------- -----------------
Cash and cash equivalents, end of period $ 38,844,000 $ 24,277,000
================= =================
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