TKCI Turnkey Capital Inc (PK)

The Keith Companies Reports Record Quarterly Net Revenue for First Quarter 2005 and Net Income Increased by 29.8% - Net Revenue Increased 15.3% to $25.9 Million IRVINE, Calif., May 5 /PRNewswire-FirstCall/ -- 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 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 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 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 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") 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 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 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 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, 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. Contact information: Aram Keith FINANCIAL RELATIONS BOARD Chairman of the Board & CEO Tricia Ross The Keith Companies, Inc. Investor Relations 19 Technology Drive (617) 520-7064 Irvine, CA 92618 (949) 923-6001 (949) 923-6026 Fax http://www.keithco.com/ The Keith Companies, Inc. and Subsidiaries Condensed Consolidated Statements of Income Three Months Ended March 31, 2005 2004 Gross revenue $27,838,000 $24,496,000 Subcontractor costs 1,931,000 2,033,000 Net revenue 25,907,000 22,463,000 Costs of revenue 16,117,000 14,482,000 Gross profit 9,790,000 7,981,000 Selling, general and administrative expenses 6,843,000 5,591,000 Income from operations 2,947,000 2,390,0000 Interest income, net 186,000 69,000 Other income (expense), net 14,000 (1,000) Income before provision for income taxes 3,147,000 2,458,000 Provision for income taxes 1,202,000 959,000 Net income $1,945,000 $1,499,000 Earnings per share: Basic $0.25 $0.19 Diluted $0.24 $0.19 Weighted average number of shares outstanding: Basic 7,849,385 7,703,566 Diluted 8,119,308 8,004,901 The Keith Companies, Inc. and Subsidiaries Condensed Consolidated Balance Sheets March 31, December 31, 2005 2004 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 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 Total assets $99,008,000 $97,969,000 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 Total current liabilities 13,247,000 14,522,000 Deferred tax liabilities 1,125,000 1,125,000 Accrued rent 483,000 401,000 Total liabilities 14,855,000 16,048,000 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 Total shareholders' equity 84,153,000 81,921,000 Total liabilities and shareholders' equity $99,008,000 $97,969,000 The Keith Companies, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2005 2004 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) Net cash (used in) provided by operating activities (1,527,000) 3,675,000 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 Net cash provided by (used in) investing activities 1,783,000 (2,436,000) Cash flow from financing activities: Net proceeds from stock options and restricted shares 109,000 294,000 Net cash provided by financing activities 109,000 294,000 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 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, Financial Relations Board, +1-617-520-7064, for The Keith Companies, Inc. Web site: http://www.keithco.com/

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