Stantec Inc.
TSX : STN
NYSE : STN

Stantec Inc.

November 05, 2009 09:09 ET

Stantec Announces Solid Third Quarter Operating Performance Prior to Write-Down of Goodwill

EDMONTON, ALBERTA--(Marketwire - Nov. 5, 2009) - Stantec Inc. (TSX:STN) (NYSE:STN)

The third quarter of 2009 resulted in strong operating results for Stantec as gross revenue increased 10.5% to C$384.2 million and net revenue increased 6.1% to C$306.7 million compared to the third quarter of 2008. Gross margin increased from 56.0% to 56.5% and cash from operating activities increased from C$54.6 million in the third quarter of 2008 to C$62.9 million in 2009.

During the quarter, the Company recorded a C$35.0 million goodwill impairment charge due to fluctuations and continuing uncertainty from economic conditions related to the US West operations. The goodwill impairment charge is non-cash in nature and does not affect Stantec's liquidity, cash flows from operating activities, or debt covenants, and does not impact future operations.

Excluding the impact of the goodwill impairment charges in the third quarter of 2008 and 2009, financial results improved quarter over quarter with net income increasing 8.7% to C$25.0 million compared to C$23.0 million in 2008 and diluted earnings per share increased 10.0% to C$0.55 in third quarter 2009 compared to C$0.50 one year ago.

"Despite a difficult market and continuing weakness in some of our areas we have been able to post solid third quarter results because of the strength and diversity of our business model," says Bob Gomes, Stantec president and CEO. "Although current market conditions have necessitated the write-down of a portion of our goodwill, these non-cash charges do not impact current or future operations."

Reported results for the third quarter of 2009 are as follows:

- In the third quarter of 2009 gross revenue increased 10.5% to C$384.2 million compared to C$347.6 million for the same period in 2008. Net revenue increased 6.1% to C$306.7 million compared to C$289.2 million. After a goodwill impairment charge of C$35.0 million related to Stantec's US West operations, net loss was C$10.0 million compared to a loss of C$30.0 million (after a goodwill impairment charge of C$53.0 million) in the third quarter of 2008 and diluted earnings per share were a loss of C$0.22 compared to a loss of C$0.66 in the same period last year.

- Year-to-date 2009 gross revenue increased 19.8% to C$1.18 billion compared to C$982.7 million over the first nine months of 2008. Net revenue increased 16.2% to C$968.1 million compared to C$833.1 million. Net income for 2009 was C$33.0 million compared to C$9.0 million in the first nine months of 2008. Diluted earnings per share increased to C$0.72 compared to C$0.20 for the same period in 2008.

- Stantec recently announced that it plans to acquire the assets of Granary Associates, subject to certain conditions, in early November. Granary Associates is a Philadelphia based firm, with approximately 100 staff, specializing in project management and design of healthcare facilities.

- During the third quarter Stantec announced that Rich Allen, current senior vice president of the US East region will be taking on the role of chief operating officer (COO), effective January 1, 2010, taking over from Mark Jackson who will be retiring at the end of 2009. In addition, Stantec's board of directors announced Paul Cellucci, former governor of Massachusetts and former US ambassador to Canada, was named a director of the Company.

- Complete Financial Statements, Notes to the Financial Statements, and Management's Discussion and Analysis will be filed on Sedar (www.sedar.com) and Edgar (www.sec.gov) on November 5, 2009. The documents are also available free of charge by downloading them from the Investors section on www.stantec.com or you may contact Stantec for a copy of the documents.

Project awards during the quarter demonstrate Stantec's ability to differentiate itself in the marketplace by offering specialty services and providing services from multiple practices delivered as one team. Stantec was awarded a contract with the U.S. Department of Transportation Federal Transit Administration (FTA) to provide project management oversight services for work completed by transportation and transit agencies across the United States over the next five years. Responsibilities will include reviewing, auditing, monitoring, and reporting on project implementation plans and processes to ensure that FTA-funded projects are adequately staffed and managed and efficiently and effectively executed. Stantec also obtained a contract to complete the surveying, site and civil engineering, and geotechnical investigations required for developing vacant lots owned by the Philadelphia Housing Authority as part of the Mantua Revitalization Phases I and II project. Together, the two phases of this brownfield redevelopment, which is funded by the American Recovery and Reinvestment Act (ARRA), will contain 101 accessible rental units, including walk-up apartments, duplexes, and triplexes, for low- and moderate-income individuals and families. In addition, Stantec secured several indefinite delivery/indefinite quantity contracts to conduct multidiscipline engineering inspections of levees in Arkansas, Indiana, Kansas, Missouri, Oklahoma, West Virginia, and Kentucky for the U.S. Army Corps of Engineers (USACE). Also funded in part by the ARRA package, these long-term, multimillion-dollar contracts are part of the USACE's Levee Safety Program, which involves the independent inspection and evaluation of approximately 1,400 federally authorized levee systems. New assignments in the Buildings area showcase Stantec's expertise in the design of health care and educational facilities and in sustainable design consulting. In Toronto, Ontario, the Company is part of a team selected as the preferred proponent for Phase 1B of a redevelopment project at the Centre for Addiction and Mental Health (CAMH). Stantec is providing full integrated design services-architecture; mechanical, electrical, structural, and civil engineering; sustainable design consulting; and transportation engineering for this public-private partnership project. In the educational sector, Stantec is contributing services-mechanical, electrical, and plumbing engineering; sustainable design consulting; building simulation and modeling; and commissioning-to the development of the Student Success Building at the new "neighborhood" campus of Metro State University in Denver, Colorado. With 150,000 square feet (13,900 square metres) of administrative, student service, and classroom space, the building will be designed to LEED Platinum, zero net energy standards.

"It has been a very busy quarter, meeting staff, clients, and shareholders," adds Gomes. "While the market is still quite unpredictable, and we expect will remain that way through the rest of the year, results this quarter show that our business model and our staff continue to perform admirably in this difficult economic environment."

The third quarter Conference Call, to be held today at 4:00 PM EDT (2:00 PM MDT), will be broadcast live and archived on Stantec's web site at stantec.com in the Investor Relations section. Financial analysts who wish to participate in the earnings conference call are invited to call 866-321-8231and provide the confirmation code 4026947 to the first available operator.

Stantec provides professional consulting services in planning, engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics for infrastructure and facilities projects. We support public and private sector clients in a diverse range of markets in the infrastructure and facilities sector at every stage, from initial concept and financial feasibility to project completion and beyond. Our services are offered through approximately 10,000 employees operating out of more than 130 locations in North America. Stantec trades on the TSX and the NYSE under the symbol STN. Stantec is One Team providing Infinite Solutions.

Cautionary note regarding forward-looking statements

This press release contains information regarding "forward-looking statements" as the closing date for the acquisition of Granary Associates, Inc. has yet to occur. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that predictions, forecasts, conclusions, projections, and other forward-looking statements will not prove to be accurate. We caution readers of this press release not to place undue reliance on our forward-looking statements since a number of factors could cause actual future results, conditions, actions, or events to differ materially from the targets, expectations, estimates, or intentions expressed in these forward-looking statements. These factors include, but are not limited to, the proposed transaction not closing when expected or at all because conditions to closing are not satisfied on a timely basis or at all.

The preceding list of factors is not exhaustive. Investors and the public should carefully consider these factors, other uncertainties, and potential events as well as the inherent uncertainty of forward-looking statements when relying on these statements to make decisions with respect to our Company. The forward-looking statements contained herein represent our expectations as of November 5, 2009, and accordingly, are subject to change after such date. Except as may be required by law, we do not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time.

For more information on how other material factors and other factors could affect our results, refer to the Risk Factors section in our 2008 Financial Review and the Caution Regarding Forward-Looking Statements in our Third Quarter 2009 Report. You may obtain these documents by visiting EDGAR on the SEC website at www.sec.gov or on the CSA website at www.sedar.com.



Consolidated Balance Sheets (Unaudited)

September 30 December 31
2009 2008
(In thousands of Canadian dollars) $ $
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ASSETS
Current
Cash and cash equivalents 14,630 103,979
Cash held in escrow - 7,392
Accounts receivable, net of allowance for
doubtful accounts of $12,412 ($11,597 - 2008) 273,495 256,243
Costs and estimated earnings in excess of
billings 105,125 75,602
Income taxes recoverable 14,416 7,647
Prepaid expenses 13,771 8,094
Future income tax assets 13,611 15,265
Other assets 4,003 6,503
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Total current assets 439,051 480,725
Property and equipment 114,097 114,410
Goodwill 464,663 446,818
Intangible assets 56,592 45,989
Future income tax assets 23,047 20,786
Other assets 45,303 36,158
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Total assets 1,142,753 1,144,886
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 182,383 198,228
Billings in excess of costs and estimated
earnings 39,851 43,845
Income taxes payable - 9,920
Current portion of long-term debt 39,356 34,096
Future income tax liabilities 18,641 13,920
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Total current liabilities 280,231 300,009
Long-term debt 230,273 215,113
Future income tax liabilities 30,440 26,492
Other liabilities 67,479 64,297
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Total liabilities 608,423 605,911
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Non-controlling interest in subsidiaries 186 -
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Commitments, contingencies, and guarantees

Shareholders' equity
Share capital 221,070 218,757
Contributed surplus 12,504 10,458
Retained earnings 341,660 308,629
Accumulated other comprehensive (loss) income (41,090) 1,131
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Total shareholders' equity 534,144 538,975
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Total liabilities and shareholders' equity 1,142,753 1,144,886
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Consolidated Statements of Income (Unaudited)

For the quarter For the three quarters
ended ended
September 30 September 30
---------------------------------------------
2009 2008 2009 2008
(In thousands of Canadian
dollars, except share and
per share amounts) $ $ $ $
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INCOME
Gross revenue 384,161 347,561 1,177,082 982,691
Less subconsultant and other
direct expenses 77,392 58,366 208,963 149,578
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Net revenue 306,769 289,195 968,119 833,113
Direct payroll costs 133,474 127,135 424,637 369,227
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Gross margin 173,295 162,060 543,482 463,886
Administrative and marketing
expenses 126,801 113,453 406,164 338,455
Depreciation of property and
equipment 6,863 6,454 20,821 18,657
Amortization of intangible
assets 3,061 2,924 11,889 8,143
Impairment of goodwill and
intangible assets 35,000 58,369 35,000 58,369
Net interest expense 2,742 1,888 9,180 5,401
Share of (income) loss from
associated companies (1,769) (83) (2,611) 77
Foreign exchange (gains)
losses (7) 520 1,964 541
Other expense (income) 127 (261) (423) (891)
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Income (loss) before income
taxes 477 (21,204) 61,498 35,134
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Income taxes
Current 7,876 14,593 28,572 32,793
Future 2,590 (5,780) (105) (6,684)
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Total income taxes 10,466 8,813 28,467 26,109
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Net income (loss) for the
period (9,989) (30,017) 33,031 9,025
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Weighted average number of
shares outstanding - basic 45,523,275 45,595,087 45,502,057 45,628,244
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Weighted average number of
shares outstanding -
diluted 45,873,933 45,971,887 45,824,756 46,103,940
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Shares outstanding, end of
the period 45,644,521 45,569,523 45,644,521 45,569,523
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Earnings (loss) per share
Basic (0.22) (0.66) 0.73 0.20
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Diluted (0.22) (0.66) 0.72 0.20
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Contact Information

  • Stantec
    Jay Averill
    Media Relations
    (780) 917-7441
    or
    Stantec
    Simon Stelfox
    Investor Relations
    (780) 917-7288
    www.stantec.com