* Net Revenue for the Quarter Increased 15.7% to a Record $28.3
Million IRVINE, Calif., Aug. 4 /PRNewswire-FirstCall/ -- 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 Six Months Ended 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 Continuing Operations $0.32 $0.56 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
http://www.keithco.com/ or http://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
http://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 http://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
http://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 http://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
http://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. Contact information: The Keith Companies, Inc. 19
Technology Drive Irvine, CA 92618 (949) 923-6001 (949) 923-6026 Fax
http://www.keithco.com/ Contact: Aram Keith, Chairman of the Board
& CEO Financial Relations Board Tricia Ross Investor Relations
(617) 520-7064 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 discontinued operations 3,064,000 3,499,000 6,211,000
5,957,000 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 DATASOURCE: The Keith Companies, Inc. CONTACT: Aram
Keith, Chairman of the Board & CEO of The Keith Companies,
Inc., +1-949-923-6001, or Fax, +1-949-923-6026; or Tricia Ross,
Investor Relations, of Financial Relations Board, +1-617-520-7064,
for The Keith Companies, Inc. Web site: http://www.keithco.com/
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