THE KEITH COMPANIES/TKC
PRESS RELEASE
NEWS RELEASE FOR MAY 5, 2005 AT 7:30 AM EST
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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
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Contact: Aram Keith,
Chairman of the Board & CEO
THE KEITH COMPANIES REPORTS RECORD QUARTERLY NET REVENUE
FOR FIRST QUARTER 2005 AND NET INCOME INCREASED BY 29.8%
o Net Revenue Increased 15.3% to $25.9 Million
o Diluted Earnings Per Share Increased 26.3% to $0.24 Per Share
IRVINE, CA (May 5, 2005) - The Keith Companies, Inc. (Nasdaq: TKCI), an
engineering and consulting services firm, today announced financial results for
the first quarter ended March 31, 2005, which included record quarterly net
revenue and a 29.8% increase in net income.
FIRST QUARTER 2005 RESULTS
Net revenue for the three months ended March 31, 2005 increased 15.3% to
$25.9 million, while net income for the same period increased 29.8% to $1.9
million resulting in diluted earnings per share of $0.24. This compares to net
revenue for the first quarter of 2004 of $22.5 million, with net income of $1.5
million and diluted earnings per share of $0.19.
"All three of our business segments achieved year-over-year net revenue
growth in the first quarter, led by continued strong gains in the real estate
development segment," said Aram Keith, Chairman and CEO of The Keith Companies.
"This segment achieved an 18.4% year-over-year net revenue growth in the first
quarter, helping to drive a record level of quarterly net revenue for The Keith
Companies. We continue to see a lot of real estate activity not only in the
residential sector, which has been an area of tremendous growth for us, but also
in the commercial, office, retail and industrial sectors. Operating margins
remained strong in our real estate segment and we see no signs of demand in this
area abating. While we continue to experience reduced overall demand in the
public works/infrastructure segment, this segment experienced an increase in net
revenue over prior year mainly because we were able to partially mitigate the
impact of this reduced demand during the quarter by temporarily deploying some
of the under utilized engineers to assist in our real estate development
segment. Our energy/industrial segment delivered net revenue growth and swung
from an operating loss in the first quarter of 2004 to a profit in the same
period of 2005. Renewable energy projects are picking up as a result of the
Production Tax Credit extension and we are also seeing increased
THE KEITH COMPANIES REPORTS RECORD QUARTERLY NET REVENUE FOR FIRST QUARTER 2005
AND NET INCOME INCREASED BY 29.8%
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activity in the industrial market as well. We expect continued strength in our
overall business for the remainder of 2005."
FINANCIAL POSITION
The Company's balance sheet at March 31, 2005 remained strong with cash and
securities of $40.2 million, no debt, a current ratio of 5.3:1, and
shareholders' equity of $84.2 million, or $10.55 per common share outstanding at
March 31, 2005.
FINANCIAL GUIDANCE
Due to the pending merger with Stantec discussed below, the Company has
decided to discontinue its practice of providing financial guidance on future
operating results. Investors are cautioned not to place any reliance on the
financial guidance that the Company last provided on February 10, 2005.
MERGER WITH STANTEC INC.
The Company announced on April 14, 2005 that it entered into an agreement
with Stantec Inc. (TSX: STN) by which the two firms would combine, subject to
approval of the transaction by shareholders of The Keith Companies, and the
expiration of the waiting period under the Hart-Scott-Rodino Act and other
customary conditions.
"This is an exciting transaction for The Keith Companies' employees,
clients, and shareholders," says Aram Keith, The Keith Companies' Chairman and
CEO. "Joining Stantec will substantially accelerate our growth plans and make
The Keith Companies a part of a North American firm with a widely diversified
service offering. Our employees will have access to more service specialists,
experts, and greater technological resources while our clients will gain access
to a wider range of services," concluded Keith.
CONFERENCE CALL WEBCAST
The Company will be hosting an earnings conference call, which will be
broadcast live, at 11:30 a.m. Eastern (8:30 a.m. Pacific) on May 5, 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 website at least 15 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 May 12, 2005 by dialing (800) 405-2236 and entering passcode
11029519. 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
THE KEITH COMPANIES REPORTS RECORD QUARTERLY NET REVENUE FOR FIRST QUARTER 2005
AND NET INCOME INCREASED BY 29.8%
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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, 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.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed merger, Stantec, Inc. ("Stantec") and The
Keith Companies, Inc. ("TKC") will file a Registration Statement on Form F-4, a
joint proxy statement/prospectus and other related documents with the Securities
and Exchange Commission (the "SEC"). Shareholders of Stantec and TKC are advised
to read these documents when they become available because they will contain
important information. Shareholders of the companies may obtain copies of these
documents for free, when available, at the SEC's website at www.sec.gov. These
and such other documents may also be obtained for free from:
Stantec
10160-112 Street
Edmonton, Alberta, Canada, T5K 2L6
Phone: (780) 917-7000 Fax: (780) 917-7330
And from:
The Keith Companies
19 Technology Drive
Irvine, California, USA 92618-2334
Phone: (949) 923-6001 Fax: (949) 923-6026
Stantec and TKC and their respective directors, executive officers and
other members of their management and employees may be deemed to be participants
in the solicitation of proxies in connection with Stantec's proposed acquisition
of TKC. Information regarding the special interests of these directors and
executive officers in the transaction described herein will be included in the
joint proxy statement/prospectus described above. Additional information
regarding Stantec's directors and executive officers is also included in its
management information circular for its 2005 Annual Meeting of Shareholders,
which was filed with the applicable securities commissions in Canada on or about
March 31, 2005 and is available free of charge at the Canadian Securities
Administrators' web site at www.sedar.com or by contacting Stantec at the
address or telephone number set forth above. Additional information regarding
TKC's directors and executive officers is also included in its proxy statement
for its 2005 Annual Meeting of Shareholders, which was filed with the SEC on or
about April 12, 2005 and is
THE KEITH COMPANIES REPORTS RECORD QUARTERLY NET REVENUE FOR FIRST QUARTER 2005
AND NET INCOME INCREASED BY 29.8%
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available free of charge at the SEC's web site at WWW.SEC.GOV or by contacting
TKC at the address or telephone number set forth above.
This press release contains forward-looking statements. In some cases,
forward-looking statements can be identified by words such as "believe,"
"expect," "anticipate," "plan," "potential," "continue" or similar expressions.
Such forward-looking statements are based upon current expectations and beliefs
and are subject to a number of factors and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. Some of the forward-looking statements contained in this press
release include: (i) our expectation of continued growth in the real estate
development sector, (ii) our expectation that operating margins in the real
estate development sector will continue to be strong, (iii) our expectation of
continued improvement in the energy/industrial sector and (iv) our statements
regarding the proposed merger with Stantec. These statements are not guarantees
of future performance, involve certain risks, uncertainties and assumptions that
are difficult to predict, and are based upon assumptions as to future events
that may not prove accurate. Therefore, actual outcomes and results may differ
materially from what is expressed herein. For example, if TKC does not receive
required shareholder approvals, if Stantec is unable to list its stock on a
major U.S. exchange or if either party fails to satisfy other conditions to
closing, the merger will not be consummated. In addition, the combined companies
may not realize all or any of the expected benefits of the merger. The following
factors, among others, could cause actual results to differ materially from
those described in the forward-looking statements: changes in the economic
growth in the United States (especially in California) and other major
international economies, 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, our ability to successfully implement our enterprise service
automation software system, 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 SEC. 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. Actual results may differ
materially from those contained in the forward-looking statements in this press
release.
TABLES FOLLOW
THE KEITH COMPANIES REPORTS RECORD QUARTERLY NET REVENUE FOR FIRST QUARTER 2005
AND NET INCOME INCREASED BY 29.8%
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THE KEITH COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31,
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2005 2004
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Gross revenue $27,838,000 $24,496,000
Subcontractor costs 1,931,000 2,033,000
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Net revenue 25,907,000 22,463,000
Costs of revenue 16,117,000 14,482,000
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Gross profit 9,790,000 7,981,000
Selling, general and administrative
expenses 6,843,000 5,591,000
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Income from operations 2,947,000 2,390,0000
Interest income, net 186,000 69,000
Other income (expense), net 14,000 (1,000)
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Income before provision for income 3,147,000 2,458,000
taxes
Provision for income taxes 1,202,000 959,000
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Net income $1,945,000 $ 1,499,000
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Earnings per share:
Basic $ 0.25 $ 0.19
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Diluted $ 0.24 $ 0.19
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Weighted average number of shares
outstanding:
Basic 7,849,385 7,703,566
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Diluted 8,119,308 8,004,901
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THE KEITH COMPANIES REPORTS RECORD QUARTERLY NET REVENUE FOR FIRST QUARTER 2005
AND NET INCOME INCREASED BY 29.8%
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THE KEITH COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2005 2004
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ASSETS
Current assets:
Cash and cash equivalents $ 8,184,000 $ 7,819,000
Securities available-for-sale, at fair value 32,050,000 34,325,000
Contracts and trade receivables, net 16,354,000 16,452,000
Costs and estimated earnings in excess of billings 12,033,000 10,470,000
Prepaid expenses and other current assets 1,941,000 928,000
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Total current assets 70,562,000 69,994,000
Equipment and leasehold improvements, net 4,646,000 4,643,000
Goodwill 23,059,000 23,059,000
Other assets 741,000 273,000
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Total assets $ 99,008,000 $ 97,969,000
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 1,293,000 $ 1,685,000
Accrued employee compensation 5,151,000 5,445,000
Current portion of deferred tax liabilities 1,661,000 1,661,000
Other accrued liabilities 3,464,000 3,809,000
Billings in excess of costs and estimated earnings 1,678,000 1,922,000
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Total current liabilities 13,247,000 14,522,000
Deferred tax liabilities 1,125,000 1,125,000
Accrued rent 483,000 401,000
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Total liabilities 14,855,000 16,048,000
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Shareholders' equity:
Preferred stock -- --
Common stock 8,000 8,000
Additional paid-in-capital 48,881,000 48,114,000
Deferred stock compensation (1,347,000) (867,000)
Retained earnings 36,611,000 34,666,000
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Total shareholders' equity 84,153,000 81,921,000
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Total liabilities and shareholders' equity $ 99,008,000 $ 97,969,000
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THE KEITH COMPANIES REPORTS RECORD QUARTERLY NET REVENUE FOR FIRST QUARTER 2005
AND NET INCOME INCREASED BY 29.8%
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THE KEITH COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31,
-------------------------------------
2005 2004
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Cash flows from operating activities:
Net income $ 1,945,000 $ 1,499,000
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 498,000 502,000
Gain on sale of equipment (9,000) --
Tax benefit from exercise of stock options 38,000 118,000
Deferred stock compensation expense 140,000 33,000
Changes in operating assets and liabilities:
Contracts and trade receivables, net 134,000 4,006,000
Costs and estimated earnings in excess of billings (1,563,000) (903,000)
Prepaid expenses and other assets (1,481,000) (753,000)
Trade accounts payable and accrued liabilities (985,000) (610,000)
Billings in excess of costs and estimated earnings (244,000) (217,000)
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Net cash (used in) provided by operating activities (1,527,000) 3,675,000
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Cash flows from investing activities:
Additions to equipment and leasehold improvements (652,000) (438,000)
Proceeds from sales of securities 17,625,000 2,500,000
Purchases of securities (15,350,000) (4,500,000)
Proceeds from sales of equipment 160,000 2,000
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Net cash provided by (used in) investing activities 1,783,000 (2,436,000)
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Cash flow from financing activities:
Net proceeds from stock options and restricted shares 109,000 294,000
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Net cash provided by financing activities 109,000 294,000
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Net increase in cash and cash equivalents 365,000 1,533,000
Cash and cash equivalents, beginning of period 7,819,000 4,277,000
----------------- -----------------
Cash and cash equivalents, end of period $ 8,184,000 $ 5,810,000
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