Stantec Inc.
TSX : STN
NYSE : STN

Stantec Inc.

November 03, 2011 09:39 ET

Stantec Reports Third Quarter 2011 Results, Growth Fueled by New Projects, Acquisitions

EDMONTON, ALBERTA--(Marketwire - Nov. 3, 2011) - Stantec Inc. (TSX:STN) (NYSE:STN)

Today, Stantec announced solid results for the third quarter of 2011, with several key areas of activity to highlight:

  • Gross revenue growth of 11.3%, driven by multiple projects for national and local clients
  • EBITDA growth of 11.9% (excluding Q3 2010 gain from equity investment sale)
  • Diluted EPS growth of 14.5% (excluding Q3 2010 after-tax gain from equity investment sale) from strong operational performance
  • Completed acquisition to enhance engineering, planning, and environmental services

Gross revenue increased 11.3% to C$430.4 million from C$386.7 million in the third quarter of 2010 while net revenue increased 11.7% to C$351.2 million from C$314.5 million. Excluding the impact of a C$7.2 million gain on the sale of equity investments in Q3 10, EBITDA increased 11.9% to C$53.5 million in Q3 11 from C$47.8 million in Q3 10. Excluding the impact of a C$5.9 million after-tax gain on the sale of equity investments in Q3 10, net income increased 13.8% to C$28.9 million in Q3 11 from C$25.4 million in Q3 10, and diluted earnings per share increased 14.5% to C$0.63 in Q3 11 from C$0.55 in Q3 10.

"We continue to show growth and every practice area has continued to win significant projects throughout North America, despite a challenging economy," says Bob Gomes, Stantec president and chief executive officer. "Through the ongoing efforts of our talented staff and valued clients, we remain on course to achieve our long-term strategic goals for growth."

Results for Q3 2011 were positively impacted by an increase in revenue due to organic growth in three of our five practice area units, acquisitions completed in 2010 and 2011 and by strong activity in the mining and oil and gas sectors. Additionally, Stantec's results were positively impacted by a reduction in administrative and marketing expenses as a percentage of net revenue from 41.3% in Q3 10 to 40.0% in Q3 11.

Projects Supporting Growth

The following is an overview of the Company's project activity in the third quarter–newly awarded and continued–as they relate to top and bottom-line strategic growth initiatives:

  • Buildings – The Buildings practice area maintained its primary focus on the healthcare and higher education sectors, among others, winning project work reflective of Stantec's global presence and local relationships. Stantec was selected to provide design service for the 22,300-square-meter (240,000-square-foot) addition to the Brockville General Hospital in Brockville, Ontario, as well as the design of a clean room research facility at Carnegie Mellon University in Pittsburgh, Pennsylvania.
  • Environment – Aligned with emerging sectors and markets, Stantec's Environment practice area secured project work resulting from heightened activity in Canada's oil and gas sector and on US shale gas development programs. Stantec is also providing a variety of environmental compliance and regulatory support services to SWN Resources Canada, Inc. in support of their shale gas seismic exploration phase in southern New Brunswick.
  • Industrial –The Industrial practice area experienced growth in sustaining and securing project work with the world's top mining companies such as BHP Billiton while winning new contracts during the past quarter with clients such as Lake Shore Gold Corp. Stantec is providing multidisciplinary work on Lake Shore Gold Corp.'s Bell Creek and Thunder Creek Mines in Ontario.
  • Transportation – Helping to fuel organic growth, our Transportation practice area has fostered long-term relationships with regional and municipal clients. During the past quarter, Stantec was selected by the Arizona Department of Transportation to provide services for the inspection of the I-10 Deck Park Tunnel in Downtown Phoenix utilizing several Stantec disciplines, including civil, structural, mechanical and electrical inspection services, as well as survey support with the use of laser scanning.
  • Urban Land – In the Urban Land practice area, Stantec's distributed North American presence enhanced the Company's ability to win residential and non-residential projects in the United States and Canada. Stantec was selected to provide civil engineering, planning, and landscape architecture for the expansion of an existing tower at the Morton Plant Hospital in Clearwater, Florida, and was also awarded a multidisciplinary urban design and engineering project to redevelop the North Mall of the Alberta Legislature grounds in Edmonton, Alberta. This includes the Annex Building, steps of the Legislature Building, and the grounds and fountains of the North Mall.

Continued Growth

  • On September 2, 2011, Stantec acquired Bonestroo, Inc. and Bonestroo Services, LLC (Bonestroo), which added approximately 275 staff. An engineering, planning, and environmental science firm with offices in Minnesota, Wisconsin, Illinois, Michigan, and North Dakota, Bonestroo extends Stantec's expertise in several disciplines in which they specialize.
  • Subsequent to the quarter, Stantec completed two acquisitions, each expanding the Company's technical talent base and geographic reach. On October 1, 2011, Stantec acquired FSC Architects and Engineers (FSC) which added approximately 85 staff. FSC is an integrated architecture and engineering firm specializing in cold climate and remote location projects. FSC has offices in Northwest Territories, Yukon, Nunavut, and Alberta. Stantec also acquired Lexington, Kentucky-based ENTRAN, Inc. on October 28, 2011, which added approximately 115 staff specializing in roadway and bridge design, transportation planning and traffic engineering, construction engineering services, and aviation services.

Additional Company Activity

  • During the quarter, Douglas Ammerman and Delores Etter were appointed to Stantec's board of directors. A former partner with KPMG, Mr. Ammerman brings nearly 40 years of fiscal and organizational leadership experience. Dr. Etter brings more than 35 years of technical leadership in both the academic and government sectors, including a tenure serving as the assistant secretary of the United States Navy for Research, Development, and Acquisition.
  • Stantec recently reached an agreement to amend its existing $350 million revolving credit facility and extend the maturity date to August 2015. As outlined in the MD&A, the credit facility is available for future acquisitions, working capital needs, and general corporate purposes.
  • During the quarter Stantec repurchased 334,600 of its shares for C$7.6 million under the Company's normal course issuer bid with the Toronto Stock Exchange. Stantec believes that, at times, the market price of its common shares does not fully reflect the value of the business or future business prospects and that, at such times, the purchase of its shares represents an attractive, appropriate, and desirable use of available funds.

Conference Call and Company Information
Stantec's third quarter conference call, being held today at 2:00 PM MDT (4:00 PM EDT), will be broadcast live and archived in the Investors section of www.stantec.com. Financial analysts who wish to participate in the earnings conference call are invited to call 1-800-820-0231 and provide the confirmation code 5804124 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 at every stage, from the initial conceptualization and financial feasibility study to project completion and beyond. Our services are provided on projects around the world through approximately 11,000 employees operating out of more than 170 locations in North America and 4 locations internationally. Stantec is One Team providing Integrated Solutions.

Cautionary statements
Stantec's gross revenue, net revenue, and EBITDA are non-GAAP measures. For a definition and explanation of non-GAAP measures, refer to the Critical Accounting Estimates, Developments, and Measures section of the Company's 2010 Financial Review.

This press release contains forward-looking statements concerning Stantec's future financial performance and future growth. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. 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 to differ materially from the expectations expressed in these forward-looking statements. These factors include, but are not limited to the risk of an economic downturn, changing market conditions for Stantec's services, disruptions in government funding and the risk that Stantec will not meet its growth targets. 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.

For more information on how other material factors and other factors could affect our results, refer to the Risk Factors section in our 2010 Financial Review and the Caution Regarding Forward-Looking Statements in our 2011 Third Quarter 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 Statements of Financial Position
(Unaudited)
September 30 December 31
2011 2010
(In thousands of Canadian dollars) $ $
ASSETS
Current
Cash and short-term deposits 17,074 62,731
Trade and other receivables 321,188 295,740
Unbilled revenue 152,943 104,696
Income taxes recoverable 11,838 12,313
Prepaid expenses 15,566 10,699
Other financial assets 12,950 10,589
Other assets 4,039 4,176
Total current assets 535,598 500,944
Non-current
Property and equipment 110,410 113,689
Goodwill 592,338 548,272
Intangible assets 69,516 72,136
Investments in associates 2,041 2,831
Deferred tax assets 50,080 40,912
Other financial assets 62,261 57,235
Other assets 1,812 1,339
Total assets 1,424,056 1,337,358
LIABILITIES AND EQUITY
Current
Bank indebtedness 6,616 -
Trade and other payables 201,372 186,287
Billings in excess of costs 45,384 56,741
Income taxes payable - 4,595
Current portion of long-term debt 50,973 46,394
Provisions 17,237 17,297
Other financial liabilities 6,340 9,365
Other liabilities 5,129 3,313
Total current liabilities 333,051 323,992
Non-current
Long-term debt 247,548 275,636
Provisions 44,645 39,143
Deferred tax liabilities 56,054 47,780
Other financial liabilities 2,577 5,789
Other liabilities 35,825 29,330
Total liabilities 719,700 721,670
Shareholders' equity
Share capital 224,402 225,158
Contributed surplus 14,851 13,340
Retained earnings 463,630 393,844
Accumulated other comprehensive income (loss) 1,370 (16,757 )
Total equity attributable to equity holders of the Company 704,253 615,585
Non-controlling interests 103 103
Total equity 704,356 615,688
Total liabilities and equity 1,424,056 1,337,358
Consolidated Statements of Income
(Unaudited)
For the quarter ended September 30 For the three quarters ended September 30
2011 2010 2011 2010
(In thousands of Canadian dollars, except per share amounts) $ $ $ $
Gross revenue 430,354 386,683 1,251,357 1,129,412
Less subconsultant and other direct expenses 79,156 72,153 221,010 214,276
Net revenue 351,198 314,530 1,030,347 915,136
Direct payroll costs 156,313 137,802 458,882 404,317
Gross margin 194,885 176,728 571,465 510,819
Administrative and marketing expenses 140,346 130,008 420,797 376,973
Depreciation of property and equipment 7,173 6,622 20,521 18,448
Amortization of intangible assets 4,150 4,375 13,481 12,090
Net interest expense 2,537 2,076 7,510 5,551
Other net finance expense (income) 696 (12 ) 2,099 (777 )
Share of income from associates (104 ) (731 ) (452 ) (1,944 )
Gain on sale of equity investments - (7,183 ) - (7,183 )
Foreign exchange loss (gain) 482 (350 ) 90 645
Other (income) expense - 45 (41 ) 307
Income before income taxes 39,605 41,878 107,460 106,709
Income taxes
Current 8,946 12,539 25,979 27,263
Deferred 1,748 (2,014 ) 3,036 8,043
Total income taxes 10,694 10,525 29,015 35,306
Net income for the period 28,911 31,353 78,445 71,403
Weighted average number of shares outstanding
– basic 45,662,087 45,591,437 45,703,009 45,685,152
Weighted average number of shares outstanding
– diluted 45,726,931 45,846,003 45,812,925 45,932,366
Shares outstanding, end of the period 45,380,252 45,666,920 45,380,252 45,666,920
Earnings per share
Basic 0.63 0.69 1.72 1.56
Diluted 0.63 0.68 1.71 1.55

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