THE KEITH COMPANIES/TKC
PRESS RELEASE
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 THE SECOND QUARTER 2005
o Net Revenue for the Quarter Increased 15.7% to a Record $28.3 Million
o Gross Profit for the Quarter Increased 17.1% to a Record $10.8 Million
o Income from Continuing Operations for the Quarter of $1.6 Million
o Adjusted Income from Continuing Operations for the Quarter Increased
Over 23% Year-Over-Year
o Diluted Earnings Per Share from Continuing Operations for the Quarter
of $0.19
o Adjusted Diluted Earnings Per Share from Continuing Operations for the
Quarter was $0.32, an Increase of Over 18% Year-Over-Year
IRVINE, CA (August 4, 2005) - The Keith Companies, Inc. (Nasdaq: TKCI), an
engineering and consulting services firm, today announced financial results for
the second quarter and six months ended June 30, 2005, which included record
quarterly net revenue and gross profit.
SECOND QUARTER AND YEAR TO DATE 2005 RESULTS
Net revenue for the three months ended June 30, 2005 increased 15.7% to
$28.3 million, while income from continuing operations for the same period
decreased by 25.7% to $1.6 million resulting in diluted earnings per share from
continuing operations of $0.19. This compares to net revenue for the second
quarter of 2004 of $24.5 million, income from continuing operations of $2.1
million and diluted earnings per share from continuing operations of $0.27. The
decrease in both income from continuing operations and earnings per share from
continuing operations resulted primarily from merger-related costs, which are
discussed below.
Net revenue for the six months ended June 30, 2005 increased 15.5% to $54.2
million, while income from continuing operations for the same period decreased
by 2.8% to $3.5 million resulting in diluted earnings per share from continuing
operations of $0.43. This compares to net revenue for the same period in 2004 of
$46.9 million, income from continuing operations of $3.6 million and diluted
earnings per share from continuing operations of $0.45. The decrease in both
income from continuing operations and earnings per share from continuing
operations resulted primarily from merger-related costs, which are discussed
below.
"All three of our business segments once again achieved year-over-year net
revenue growth helping to drive record net revenue for the Company in the second
quarter," said Aram Keith, Chairman and CEO of The Keith Companies. "Our
business continued to be positively impacted by the same factors that propelled
record net revenue last quarter. Residential real estate remains strong with no
signs of disruption in demand. In terms of our public works/infrastructure
segment, most of the year-over-year growth was due to our continued ability to
temporarily deploy the talent of some of our under-utilized engineers to provide
services in support of our real estate development segment. Our ability to
cross-utilize our employees in this way is an advantage for us given the tight
market for talented engineers. Our energy/industrial segment delivered net
revenue growth of over 32% this quarter as compared to the prior year. We see
particular strength in areas unrelated to conventional energy projects including
wind power projects and general industrial projects. In addition to the net
revenue growth in the quarter, I'm particularly pleased that we were able to
deliver over a 17% increase to our gross profit during the quarter."
As noted above, the financial results for the three and six months ended
June 30, 2005 were negatively impacted by merger-related costs incurred in
connection with the proposed merger with Stantec Inc., as previously announced
on April 14, 2005. The Company incurred approximately $1.2 million of
merger-related costs in the second quarter of 2005, which are not deductible for
income tax purposes. Excluding such merger-related costs, adjusted income from
continuing operations would have been $2.6 million and $4.6 million for the
three and six months ended June 30, 2005, respectively, which represents 23.7%
and 26.2% increases for the quarter and six months, respectively, when compared
to the respective prior year periods. Excluding such merger-related costs would
have resulted in adjusted diluted earnings per share from continuing operations
of $0.32 and $0.56 for the three and six months ended June 30, 2005,
respectively. Adjusted diluted earnings per share from continuing operations
increased over 18% and 24% for the quarter and six months ending June 30, 2005,
respectively, over the corresponding prior year periods.
NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPAL ("GAAP") FINANCIAL MEASURES
The Keith Companies believes investors' understanding of the Company's
total performance is enhanced by disclosing adjusted income from continuing
operations and adjusted diluted earnings per share from continuing operations
for certain non-recurring items, such as its merger-related costs that were
incurred during the second quarter of 2005. The Company defines adjusted income
from continuing operations as the reported items, adjusted to exclude
merger-related costs and the related income tax effects. Adjusted diluted
earnings per common share from continuing operations represents adjusted income
from continuing operations divided by diluted common shares outstanding.
In reviewing the Company's financial performance for the second quarter and
six months ended June 30, 2005, management focused on adjusted income from
continuing operations and adjusted diluted earnings per share from continuing
operations, among other items, as they exclude the effect of non-recurring
merger-related costs that management believes are not representative of the
Company's core operations for the periods presented. As a result, these non-GAAP
financial measures should help to provide meaningful comparisons of The Keith
Companies' overall performance from one reporting period to another.
There is a material limitation associated with the use of these non-GAAP
financial measures. Adjusted income from continuing operations excludes the
impact of significant items (in this case, merger-related costs) on current
performance and adjusted diluted earnings per share from continuing operations
does not depict the actual amount earned per diluted share.
To compensate for the limitations in the non-GAAP financial measures
discussed above, the Company has reconciled the GAAP financial measures to the
non-GAAP financial measures in the table below.
Reconciliation of Income from Continuing Operations & Diluted Earnings per Share from Continuing
Operations to Adjusted Income from Continuing Operations & Adjusted Diluted Earnings Per Share
from Continuing Operations
Three Months Ended Six Months Ended
June 30, 2005 June 30, 2005
---------------------- -----------------------
Income from Continuing Operations, GAAP $ 1,586,000 $ 3,531,000
Merger-related costs, net of income tax
effect 1,055,000 1,055,000
---------------------- -----------------------
Adjusted Income from Continuing Operations $ 2,641,000 $ 4,586,000
====================== =======================
Diluted earnings per share from Continuing
Operations, GAAP $ 0.19 $ 0.43
Diluted earnings per share for merger costs,
net of income tax effect $ 0.13 $ 0.13
---------------------- -----------------------
Adjusted diluted earnings per share from $ 0.32 $ 0.56
Continuing Operations
====================== =======================
Weighted average number of diluted shares
outstanding 8,195,164 8,157,316
====================== =======================
FINANCIAL POSITION
The Company's balance sheet at June 30, 2005 remained strong with cash and
cash equivalents of $43.9 million, no debt, a current ratio of 4.8:1, and
shareholders' equity of $86.0 million, or $10.75 per common share outstanding at
June 30, 2005.
FINANCIAL GUIDANCE
Consistent with its practice when it reported financial results for the
first quarter 2005, the Company has discontinued providing financial guidance on
future operating results due to the pending merger with Stantec Inc. 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.
On April 14, 2005, we announced that we entered into an agreement with
Stantec Inc. (TSX: STN) by which the two firms would combine, subject to
approval of the transaction by our shareholders and certain other conditions.
"We remain very excited about this transaction," said Aram Keith. "As I
have stated before, joining Stantec will substantially accelerate our growth
plans and make The Keith Companies a part of a North American firm with widely
diversified service offerings. 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 August 4, 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 August 11, 2005 by dialing (800) 405-2236 and entering
passcode 11035107. 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, 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") have filed 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 because they contain important information. Shareholders
of the companies may obtain copies of these documents for free 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 are 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 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, 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, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ----------------------------------
2005 2004 2005 2004
-------------- --------------- --------------- -- ---------------
Gross revenue $ 30,275,000 $ 26,808,000 $ 58,113,000 $ 51,304,000
Subcontractor costs 1,941,000 2,328,000 3,871,000 4,361,000
-------------- --------------- --------------- ---------------
Net revenue 28,334,000 24,480,000 54,242,000 46,943,000
Costs of revenue 17,533,000 15,255,000 33,650,000 29,737,000
-------------- --------------- --------------- ---------------
Gross profit 10,801,000 9,225,000 20,592,000 17,206,000
Selling, general and administrative expenses 8,022,000 5,833,000 14,865,000 11,424,000
-------------- --------------- --------------- ---------------
Income from operations 2,779,000 3,392,000 5,727,000 5,782,000
Interest income, net 270,000 81,000 455,000 150,000
Other income, net 15,000 26,000 29,000 25,000
-------------- --------------- --------------- ---------------
Income before provision for income taxes and 3,064,000 3,499,000 6,211,000 5,957,000
discontinued operations
Provision for income taxes 1,478,000 1,364,000 2,680,000 2,323,000
-------------- --------------- --------------- ---------------
Income from continuing operations 1,586,000 2,135,000 3,531,000 3,634,000
Loss from discontinued operations, net of income taxes -- 47,000 -- 47,000
-------------- --------------- --------------- ---------------
Net income $ 1,586,000 $ 2,088,000 $ 3,531,000 $ 3,587,000
============== =============== =============== ===============
Earnings per share from continuing operations:
Basic $ 0.20 0.27 0.45 0.47
============== =============== =============== ===============
Diluted $ 0.19 $ 0.27 $ 0.43 $ 0.45
============== =============== =============== ===============
Earnings (loss) per share from discontinued
operations, net of income taxes:
Basic -- (0.01) -- (0.01)
============== =============== =============== ===============
Diluted $ -- (0.01) -- (0.01)
============== =============== =============== ===============
Earnings per share:
Basic $ 0.20 0.27 0.45 0.46
============== =============== =============== ===============
Diluted $ 0.19 0.26 0.43 0.45
============== =============== =============== ===============
Weighted average number of shares outstanding:
Basic 7,878,250 7,782,149 7,863,898 7,742,858
============== =============== =============== ===============
Diluted 8,195,164 8,020,844 8,157,316 8,012,873
============== =============== =============== ===============
THE KEITH COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2005 2004
-------------------- --------------------
ASSETS
Current assets:
Cash and cash equivalents $ 43,923,000 $ 7,819,000
Securities available-for-sale, at fair value -- 34,325,000
Contracts and trade receivables, net 16,743,000 16,452,000
Costs and estimated earnings in excess of billings 12,993,000 10,470,000
Prepaid expenses and other current assets 1,275,000 928,000
-------------------- --------------------
Total current assets 74,934,000 69,994,000
Equipment and leasehold improvements, net 4,640,000 4,643,000
Goodwill 23,059,000 23,059,000
Other assets 727,000 273,000
-------------------- --------------------
Total assets $ 103,360,000 $ 97,969,000
==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 1,575,000 $ 1,685,000
Accrued employee compensation 7,059,000 5,445,000
Current portion of deferred tax liabilities 1,661,000 1,661,000
Other accrued liabilities 3,724,000 3,809,000
Billings in excess of costs and estimated earnings 1,732,000 1,922,000
-------------------- --------------------
Total current liabilities 15,751,000 14,522,000
Deferred tax liabilities 1,125,000 1,125,000
Accrued rent 514,000 401,000
-------------------- --------------------
Total liabilities 17,390,000 16,048,000
-------------------- --------------------
Shareholders' equity:
Preferred stock -- --
Common stock 8,000 8,000
Additional paid-in-capital 49,080,000 48,114,000
Deferred stock compensation (1,315,000) (867,000)
Retained earnings 38,197,000 34,666,000
-------------------- --------------------
Total shareholders' equity 85,970,000 81,921,000
-------------------- --------------------
Total liabilities and shareholders' equity $ 103,360,000 $ 97,969,000
==================== ====================
THE KEITH COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30,
--------------------------------------------
2005 2004
-------------------- --------------------
Cash flows from operating activities:
Net income $ 3,531,000 $ 3,587,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,011,000 991,000
Gain on sale of equipment (11,000) (11,000)
Tax benefit from exercise of stock options 102,000 197,000
Deferred stock compensation expense 303,000 92,000
Changes in operating assets and liabilities:
Contracts and trade receivables, net (255,000) 3,829,000
Costs and estimated earnings in excess of billings (2,523,000) (2,357,000)
Prepaid expenses and other assets (801,000) (260,000)
Trade accounts payable and accrued liabilities 1,496,000 161,000
Billings in excess of costs and estimated earnings (190,000) 35,000
-------------------- --------------------
Net cash provided by operating activities 2,663,000 6,264,000
-------------------- --------------------
Cash flows from investing activities:
Additions to equipment and leasehold improvements (1,159,000) (1,652,000)
Proceeds from sales of securities 59,925,000 6,100,000
Purchases of securities (25,600,000) (9,850,000)
Proceeds from sales of equipment 162,000 16,000
-------------------- --------------------
Net cash provided by (used) in investing activities 33,328,000 (5,386,000)
-------------------- --------------------
Cash flow from financing activities:
Net proceeds from stock options and restricted shares 113,000 377,000
-------------------- --------------------
Net cash provided by financing activities 113,000 377,000
-------------------- --------------------
Net increase in cash and cash equivalents 36,104,000 1,255,000
Cash and cash equivalents, beginning of period 7,819,000 4,277,000
-------------------- --------------------
Cash and cash equivalents, end of period $ 43,923,000 $ 5,532,000
==================== ====================