Filed by Stantec Inc. pursuant to
Rule 425 under the Securities Act of 1933 and deemed
filed pursuant To Rule 14a-12 under the
Securities Exchange Act of 1934.
Subject Company: The Keith Companies, Inc.
Commission File No. 000-26561
THIS FILING CONSISTS OF AN INVESTOR PRESENTATION IN CONNECTION WITH THE PROPOSED COMBINATION OF STANTEC INC. (STANTEC) AND THE KEITH COMPANIES, INC. (TKC).
Additional Information and Where to Find It
In connection with the proposed merger, Stantec and 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 TKC are advised to read these documents and any other documents relating to the merger that are filed with the SEC when they become available because they contain important information. Shareholders of TKC may obtain copies of these documents for free, when available, at the SECs 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) 923-6000 Fax: (949) 923-6121
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 Stantecs 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 Stantecs 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 TKCs directors and executive officers is also included in its proxy statement for its 2005 Annual Meeting of Stockholders, which was filed with the SEC on or about April 12, 2005 and is available free of charge at the SECs web site at www.sec.gov or by contacting TKC at the address or telephone number set forth above.
Cautionary Note Regarding Forward Looking Statements
This document 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 document include statements about the proposed Stantec and TKC merger; including statements that: (i) the merger will allow the combined company to realize strategic goals; (ii) the merger is expected to be accretive to earnings of the combined company; (iii) the merger will allow Stantec to increase its revenues from its United States operations by approximately 70%; (iv) the combination with TKC will allow Stantec opportunities to cross sell services to TKCs client base; and (v) the TKC shareholders will realize a premium of approximately 30%. 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 US exchange or 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: global capital market activities, fluctuations in interest rates and currency values, the effects of war or terrorist activities, the effects of disease or illness on local, national, or international economies, the effects of disruptions to public infrastructure, such as transportation or communications, disruptions in power or water supply, industry and worldwide economic and political conditions, regulatory and statutory developments, the effects of competition in the geographic and business areas in which the companies operate, the actions of management, and technological changes. Actual results may differ materially from those contained in the forward-looking statements in this document.
Stantec & Keith
Investor Presentation
July 2005
Stantec, founded in 1954, provides professional design and consulting services in planning, engineering, architecture, interior design, landscape architecture, surveying, and project management. Continually striving to balance economic, environmental, and social responsibilities, we are recognized as a world-class leader and innovator in the delivery of sustainable solutions. With a roster of comprehensive services, our Company supports clients at every stage, from initial concept and financial feasibility to project completion and beyond. Our multidisciplinary practice areas serve public and private sector clients in a diverse range of markets.
In simple terms, the world of Stantec is the water we drink, the roadways we travel, the buildings we visit, the industries in which we work, and the neighborhoods we call home.
Highlights
| Established in 1954 | |||
| Publicly traded since 1994 | |||
TSX:STN | ||||
NYSE:SXC (August 5, 2005) | ||||
| 51 years of uninterrupted profitability | |||
| 50 locations in North America and the Caribbean | |||
| 4,400 employees | |||
| 18.9 Million Shares Outstanding (70% Institutional Ownership) |
|||
| $550 Million Market Cap |
Introduction to Stantec
1
Market | Client Type |
Buildings - 20% | ||||
Practice Areas: | ||||
|
Architecture & Interior Design Buildings Engineering Facilities Planning & Operations |
Environment - 21% | ||||
Practice Areas: | ||||
|
Environmental Infrastructure Environmental Management |
Industrial - 10% | ||||
Practice Areas: | ||||
|
Manufacturing/Industrial Power Resources and Chemicals Bio/Pharmaceuticals |
Transportation - 16% | ||||
Practice Areas: | ||||
|
Transportation Infrastructure Transportation Planning & Traffic Infrastructure Management & Pavement Engineering |
Urban Land - 33% | ||||
Practice Areas: | ||||
|
Planning and Landscape Architecture Urban Land Engineering Surveys/Geomatics Quality Control/Assurance |
Based on Net Revenue Q1 YTD | Introduction to Stantec 2 |
10-Year Performance
Introduction to Stantec
3
Rankings
| Ranked #50 on the Engineering New Records listing of top 150 Global Design Firms, rising from #54 in 2003. | |||
| Listed #30 on the Sector Review 2004s survey of the Worlds Top 200 Consulting Engineering and Architectural Groups. |
5-Year Performance
In thousands of | ||||||||||||||||||||
dollars (C$), except per | ||||||||||||||||||||
share amounts and ratios | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||
Gross revenue |
$ | 520,879 | $ | 459,942 | $ | 428,456 | $ | 356,942 | $ | 265,568 | ||||||||||
Net revenue |
449,151 | 391,396 | 365,148 | 298,772 | 221,263 | |||||||||||||||
Income before taxes |
44,660 | 39,628 | 33,095 | 27,306 | 20,867 | |||||||||||||||
Net income |
30,190 | 25,070 | 20,192 | 15,370 | 11,226 | |||||||||||||||
Current assets |
208,755 | 177,629 | 163,261 | 121,267 | 94,183 | |||||||||||||||
Current liabilities |
126,755 | 128,506 | 99,295 | 88,487 | 68,667 | |||||||||||||||
Property and equipment |
48,262 | 67,670 | 51,747 | 41,371 | 36,938 | |||||||||||||||
Long term debt |
21,155 | 31,159 | 41,730 | 15,652 | 13,893 | |||||||||||||||
Shareholders equity |
189,056 | 160,528 | 151,426 | 107,450 | 92,233 | |||||||||||||||
Gross revenue backlog |
380,000 | 310,380 | 299,801 | 259,185 | 192,238 | |||||||||||||||
Net cash position |
37,890 | (9,808 | ) | 29,202 | (7,145 | ) | 3,426 | |||||||||||||
Earnings
per share basic |
1.63 | 1.37 | 1.12 | 0.92 | 0.78 | |||||||||||||||
Earning per share diluted |
1.59 | 1.31 | 1.07 | 0.88 | 0.76 | |||||||||||||||
Book value per share |
10.02 | 8.76 | 8.28 | 6.38 | 5.54 | |||||||||||||||
Current ratio |
1.65 | 1.38 | 1.64 | 1.37 | 1.37 | |||||||||||||||
Debt to equity ratio |
(0.02 | ) | 0.34 | 0.22 | 0.30 | 0.22 | ||||||||||||||
Price earnings ratio |
16.25 | 16.13 | 14.91 | 13.99 | 9.94 | |||||||||||||||
Weighted average number
of shares outstanding |
18,499,598 | 18,329,960 | 17,987,358 | 16,742,730 | 14,374,264 | |||||||||||||||
Shares outstanding |
18,871,085 | 18,327,284 | 18,282,720 | 16,846,340 | 16,668,340 | |||||||||||||||
Shares traded |
5,700,000 | 5,163,000 | 4,553,100 | 8,907,200 | 4,551,610 | |||||||||||||||
High |
23.39 | 23.48 | 20.50 | 14.25 | 8.00 | |||||||||||||||
Low |
20.35 | 14.50 | 12.88 | 7.25 | 5.25 | |||||||||||||||
Close |
26.48 | 22.10 | 16.70 | 12.88 | 7.75 |
Introduction to Stantec
4
Target Market
Stantec focuses on the North American market. The greater the population density, the greater the need for infrastructure such as community development, roadways, and facilities.
Opportunity
The infrastructure and facilities market generates over $50 billion in revenue in North America every year.
Fragmentation
Over 100,000 firms compete for this market, 95% of which have less than 50 employees.
Geographic Reach
Stantec has offices in five provinces, 12 states, and the Caribbean.
Positioning
Stantec has strategically positioned itself in the professional services business in infrastructure and facilities to deliver solid and consistent growth and profitability. The following operational strategies have been employed and, as a result, separate Stantec from the competition.
Project Lifecycle
| Barriers to entry are greater in planning, maintenance and decommissioning phases. | |||
| Stantec is able to follow clients through the lifecycle phases of a project cradle to grave. |
Professional Services Focus
| Exclusive fee-for-service model | |||
| No construction risk | |||
| Lower capital requirements |
Introduction to Stantec
5
Top Three Service Provider
Stantecs target is to be in the top three firms within any given region/market segment.
Top-tier firms:
| Serve the best clients | |||
| Offer best services | |||
| Attract best staff | |||
| Have more resiliency in tough economic times |
Project & Client Diversity
| Many projects translates to many clients | |||
| No single client or project more than 5% of revenue | |||
| Diversified client mix |
Project Size
Capability to services all project sizes (capital project value/fees):
| Greater than $100 million/$10 million | |||
| Between $50 and $100 million/$5 and $10 million | |||
| Less than $50 million/$5 million | |||
| 90% of Stantec projects are less than $100 million/$10 million |
Stantec Advantage
Logistical Systems
| Financial Services, IT, HR, Business Development, Marketing Resources, Communications Support, Legal Services, Risk Management & Training |
Technical Capabilities
| Light Rail Transit, Health Care, Wasterwater process design, Leadership in Energy and Environmental Design (LEED), Ecotoxicology & Ecological Risk Assessment |
Knowledge Systems
| Decision Support Tools, Business Intelligence Tools, Marketing Knowledge Center, Practices & Procedures, Project Management Systems & Client Relationship Management. |
Introduction to Stantec
6
Practice Area Specialization
Practice area diversification is achieved by focusing on 17 distinct specialist practice areas that can generally be grouped into five broad market segments:
Net Revenue | ||||
Breakdown | STN | |||
Buildings
|
20 | % | ||
Environment
|
21 | % | ||
Industrial
|
10 | % | ||
Transportation
|
16 | % | ||
Urban land
|
33 | % |
Geographic Diversification
Currently, our geographic reach includes three economic regions in North America.
Net Revenue | ||||
Breakdown | STN | |||
Canada
|
61 | % | ||
US West
|
22 | % | ||
US East
|
16 | % |
We also provide services in selected locations outside North America on a project basis (approximately 1% of revenue).
Introduction to Stantec
7
Life Cycle Solutions
Our business model includes the provisions of services in all five phases of the project life cycle:
| Planning | |||
| Design | |||
| Construction | |||
| Maintenance | |||
| Decommissioning |
3D Business Model Completed
The model mitigates our risks by ensuring that we are not dependent on any single geographic region, market segment or life cycle phase for our business.
Introduction to Stantec
8
Stantecs goal is to become one of the top 10 global design firms.
To achieve this goal, we will continue to pursue excellence in design and project delivery and to follow an orderly growth plan building upon our solid foundation. Stantec has a clear vision and a well conceived strategy to fulfill that vision and the track record to bear out the integrity of our strategy.
Driver
Give Stantec professionals the opportunity to work with the
- Best clients on the
- Best projects and to
- Provide the best services
Introduction to Stantec
9
Action
Augment breadth and depth of expertise, enhance ability to serve Fortune 1000, government, and institutional clients, and expand geographic coverage. Stantec grows by either:
Internal Organic Growth
| Accounts for approximately 1/3 of targeted growth | ||
| Practice Area Expansion |
Acquisition Growth
| Strategic In-filling | ||
| Geographic Expansion |
Depth
Our plan is to continue with strategic in-filling of services in all current regions with people and companies that can fill gaps in our services matrix. Achieving a complete services matrix in a region positions Stantec to reach mature market penetration.
Breadth
We have a disciplined approach to achieving our objectives by gradually increasing our market presence. Our strategy includes expansion outside our existing regions primarily through opportunities to acquire firms that provide services in our services matrix. New regions allow for further strategic in-filling to reach desired market penetration.
Introduction to Stantec
10
Financial Summary
Stantec |
Keith |
||||||||||||||||
Year-end 2004 (at December 31) |
|||||||||||||||||
in thousands of dollars, except per share amounts | $ Canadian | $ US | $ Canadian | $ US | |||||||||||||
Gross revenue*
|
520,879 | 398,378 | 137,740 | 105,346 | |||||||||||||
Net revenue*
|
449,151 | 343,519 | 126,506 | 96,754 | |||||||||||||
Income before income taxes*
|
44,660 | 34,157 | 18,181 | 13,905*** | |||||||||||||
Net income*
|
30,190 | 23,090 | 10,469 | 8,007 | |||||||||||||
Current assets**
|
208,755 | 173,673 | 84,133 | 69,994 | |||||||||||||
Current liabilities**
|
126,755 | 105,453 | 17,455 | 14,522 | |||||||||||||
Long-term debt**
|
21,155 | 17,600 | | | |||||||||||||
Shareholders equity**
|
189,056 | 157,285 | 98,469 | 81,921 | |||||||||||||
Earnings per share* |
|||||||||||||||||
Basic
|
1.63 | 1.25 | 1.35 | 1.03 | |||||||||||||
Diluted
|
1.59 | 1.22 | 1.31 | 1.00 | |||||||||||||
Weighted average number of shares |
|||||||||||||||||
Outstanding: |
|||||||||||||||||
Basic
|
18,499,598 | | | 7,778,661 | |||||||||||||
Diluted
|
19,007,289 | | | 8,039,457 |
* C$1.00 = US$1.3075 (average exchange rate for 2004)
** C$1.00 = US$1.2020 (exchange rate at Dec. 31 2004)
*** Before discontinued operations (discontinued operations = US$430,000)
Practice Area Specialization
The Keith companies will no longer be dependent on the real estate market to determine the success of their overall efforts. Stantec provides 5 key market segments that both compliment and augment the overall service offering.
Net Revenue | ||||||||
Breakdown | STN* | STN+TKC** | ||||||
Buildings |
20 | % | 16 | % | ||||
Environment |
21 | % | 19 | % | ||||
Industrial |
10 | % | 10 | % | ||||
Transportation |
16 | % | 13 | % | ||||
Urban Land |
33 | % | 43 | % |
*Q1 YTD Numbers
**Expected split once combined
Introduction to Stantec
11
Geographic Diversification
Stantec and Keith combination will augment the companys footprint in the North American Market. Stantec will now have access to the southern California market, one of the greatest areas of opportunity for Stantec to cross sell its professional services. The jointed firm will employ over 5,000 employees.
The Keith transaction will solidify a presence in California and will increase Stantecs US operations by 70%.
Net Revenue | ||||||||
Breakdown | STN* | STN+TKC** | ||||||
Canada |
61% | 48% | ||||||
US West |
22% | 39% | ||||||
US East |
16% | 12% |
*Q1 YTD Numbers
**Expected split once combined
Introduction to Stantec
12
Tony Franceschini, P.Eng.
President & CEO
Ph: (780) 917-7077
apf@stantec.com
Don
Wilson, CA
Vice President & CFO
Ph: (780) 917-7269
dwilson@stantec.com
Simon Stelfox, B.Sc.
Investor Relations
Ph: (780) 917-7288
sstelfox@stantec.com
Stantec Inc.
10160 - 112 Street
Edmonton AB T5K 2L6
Ph: (780) 917-7000
Fax: (780) 917-7330
stantec.com
ir@stantec.com
TSX:STN
Q1 2005