STERLING CONSTRUCTION CO INC - FORM 8-K - EX-99.1 CHARTER - EXHIBIT 99.1 - November 10, 2011

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8-K - STERLING CONSTRUCTION COMPANY, INC. FORM 8-K - STERLING CONSTRUCTION CO INCform8k.htm
 
EXHIBIT 99.1
 
FOR IMMEDIATE RELEASE

STERLING CONSTRUCTION COMPANY, INC. REPORTS
2011 THIRD QUARTER RESULTS

HOUSTON, TX – November 8, 2011 – Sterling Construction Company, Inc. (NasdaqGS: STRL) (“Sterling” or “the Company”) today announced financial results for the third quarter and nine months ended September 30, 2011.

$ in millions
(except per share data)
  
3 Months Ended
     9/30/11                                            9/30/10
    
% Change *
    
9 Months Ended
  9/30/11                               9/30/10
    
   % Change*
  
Revenues
   $ 159.4     $ 118.9       34.1  %   $ 387.2     $ 321.9       20.3  %
Gross profit
   $ 14.8     $ 13.0       13.5  %   $ 35.9     $ 34.0       5.8  %
Gross margin
     9.3 %     10.9 %     (14.7 )%     9.3 %     10.5 %     (11.4 )%
Operating income
   $ 7.8     $ 6.2       25.8  %   $ 16.7     $ 16.4       2.2  %
Net income attributable to common stockholders
   $ 3.5     $ 3.5       (1.0 )%   $ 7.7     $ 9.7       (20.6 )%
Diluted net income per share attributable to common stockholders
   $ 0.21     $ 0.21       0.0     $ 0.47     $ 0.59       (20.3 )%

 
* The percentages and amounts shown for changes between periods in the table above and in the discussions below are based on the amounts reported in the Form 10-Q and may differ from the amounts which would have been calculated from the table above as a result of rounding.

As was the case in the first half of the year, the increase in third quarter revenues was primarily due to execution on contracts awarded in 2010 in our Texas markets and increased revenues resulting from a higher level of activity on joint ventures in which we participate, primarily in Utah.  In addition, the Company had  revenues in Arizona and California, two new markets, as a result of acquisitions completed on August 1, 2011.  With respect to Nevada, comparable third quarter revenues increased modestly, but for the first nine months declined from the prior year period due to fewer construction contracts.  The increase in third quarter revenues in Texas, as was the case in the first six months of 2011, was less than expected due to customer delays in starting two sizable contracts.  Revenues from our Texas markets for the nine month period was also impacted by severe adverse weather conditions during the first quarter of 2011.

The increase in third quarter and year to date revenues resulted in an increase in gross profit for the periods; however, gross margins for the quarter and nine month periods decreased as compared to gross margins in the 2010 periods.  As has been the case since 2008, gross margins have been negatively impacted by on-going competitive bidding pressures.  In addition, in Texas margins were impacted by higher than anticipated job costs and lower than expected activity levels resulting in under absorption of indirect costs.  Results for jobs in our Nevada market were also impacted by the lower number of construction contracts.  These decreases were partially offset by higher margins on jobs in our Utah market.

Operating income for the third quarter of 2011 was 25.8% ahead of last year’s third quarter and substantially the same for the first nine months of the current and prior years.  In addition to the improvements in gross profit discussed above, for the third quarter and nine months ended September 30, 2011, there were improvements as a result of gains on sales of equipment versus losses in the prior periods.  These improvements were offset in part by an increase in general and administrative expenses due primarily to acquisition and other legal costs as well as an increase in salaries, wages and related benefits resulting primarily from added positions. However as a percentage of revenues, G&A expenses declined to 4.4% and 5.0% for the quarter and first nine months of 2011, respectively, from 5.7% and 5.4%, respectively, for the same periods in 2010.

Our effective income tax rates for the nine months ended September 30, 2011 and 2010 were 19.4% and 27.8%, respectively, and varied from the statutory rate primarily as a result of net income attributable to the noncontrolling interest owners which is taxed to those owners rather than to Sterling.

Working capital as of September 30, 2011 approximated $106 million and includes cash, cash equivalents and short-term investments of $66 million.  We have amended our Credit Facility to extend the maturity date to September 30, 2016.  Up to $50 million in borrowings are available under the amended Credit Facility with an optional increase amount of $50 million.

At September 30, 2011, backlog was $672 million as compared to $720 million as of June 30, 2011 and $575 million at September 30, 2010.  Backlog at September 30, 2011, includes $19 million applicable to consolidated joint ventures where we have a controlling interest, which is the entire amount of such joint ventures’ backlog, as well as $143 million where we have a noncontrolling interest, which represents Sterling’s proportionate share of such joint ventures’ backlog.  We were awarded or were the apparent low bidder on contracts of $55 million during the third quarter of 2011.  Backlog decreased during the three months ended September 30, 2011 as a result of fewer awarded contracts in our Nevada and Utah markets.  This was offset in part by approximately $36 million attributable to our August 1, 2011 acquisitions in Arizona and California.
 
 
 
 

Patrick T. Manning, Sterling’s Chairman and Chief Executive Officer commented, “While we are pleased by the nearly 34% increase in comparable third quarter revenues and 20% increase in year to date revenues, as well as by the sequential quarterly revenue increases throughout this year, we continue to expect that net income attributable to Sterling common stockholders and corresponding diluted earnings per common share will be significantly less than that of 2010.  We believe that the long term outlook for a new Federal Highway Bill is improving with both the House and the Senate beginning to work together, but nothing is expected before the March 2012 expiration date for the current extension.  The provisions of any bill that is enacted are subject to the prevailing political forces in Congress and our legislators’ views on how to manage the budget deficit as well as the struggling economy.  Reductions in spending for highway and bridge construction continue to constrain contract awards in our markets.  Municipal expenditures for road, bridge and water infrastructure construction have also declined because the property and other tax collections on which municipalities rely have been severely affected by declining home sales and high foreclosure rates.”

Mr. Manning continued, “Despite the difficult business environment in many of our markets over the past several years, we have continued to pursue and win profitable business, expand into new markets, enhance our skills and equipment portfolio, maintain a solid financial position, buy back our stock and overall, prepare for a resumption of normalized business conditions.  To that end, we spent $19.6 million in the first nine months of 2011 to purchase equipment and to expand office and shop facilities compared to $7.8 million spent in the first nine months of 2010.  We expanded our geographic footprint by the purchase on August 1, 2011 of J. Banicki Construction, Inc., a heavy civil construction business operating in Arizona, for $8 million with additional consideration of up to $5 million payable if contractual earnings requirements are met.  Also on August 1, 2011, we acquired a 50% interest in a construction limited partnership located in California for $1.3 million which was funded by available cash.”

Conference Call and Filings
Sterling’s management will hold a conference call to discuss these results and recent corporate developments, at 11:00 am ET/10:00 am CT tomorrow, Wednesday, November 9, 2011.  Interested parties may participate in the call by dialing (201) 493-6744 ten minutes before the conference call is scheduled to begin, and asking for the Sterling Construction call.

To listen to a simultaneous webcast of the call, please go to the Company’s website at www.sterlingconstructionco.com at least 15 minutes early to download and install any necessary audio software.  If you are unable to listen live, the conference call webcast will be available on the Company’s website for 30 days.  We suggest listeners use Microsoft Explorer as their web browser.

The Company filed its 2011 Third Quarter Report on Form 10-Q with the U.S. Securities and Exchange Commission on November 8, 2011.

Sterling is a leading heavy civil construction company that specializes in the building and reconstruction of transportation and water infrastructure in large markets in Texas, Utah, Nevada, Arizona, California and other states where there are construction opportunities.  Its transportation infrastructure projects include highways, roads, bridges and light rail and its water infrastructure projects include water, wastewater and storm drainage systems.
 
This press release includes certain statements that fall within the definition of "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Any such statements are subject to risks and uncertainties, including overall economic and market conditions, federal, state and local government funding, competitors' and customers' actions, and weather conditions, which could cause actual results to differ materially from those anticipated, including those risks identified in the Company's filings with the Securities and Exchange Commission. Accordingly, such statements should be considered in light of these risks. Any prediction by the Company is only a statement of management's belief at the time the prediction is made. There can be no assurance that any prediction once made will continue thereafter to reflect management's belief, and the Company does not undertake to update publicly its predictions, whether as a result of new information, future events or otherwise.
 
Contact:
Sterling Construction Company, Inc.
Investor Relations Counsel
Brian Manning
The Equity Group Inc.
EVP & Chief Business Development Officer
Linda Latman 212-836-9609
Elizabeth Brumley
Lena Cati  212-836-9611
Chief Accounting Officer & Controller
  
281-821-9091
  

 (See Accompanying Tables)

 
 
 

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Amounts in thousands, except share and per share data)
(Unaudited)

 
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 
2011
    
2010
    
2011
    
2010
  
Revenues
$
159,427
    
$
118,874
    
$
387,167
  
$
321,896
  
Cost of revenues
  
144,671
      
105,876
      
351,230
    
287,942
  
Gross profit
  
14,756
      
12,998
      
35,937
    
33,954
  
General and administrative expenses
  
(7,071
)
    
(6,774
)
    
(19,427
)
  
(17,482
)
Other income (expense)
  
76
      
(45
)
    
226
    
(97
)
Operating income
  
7,761
      
6,179
      
16,736
    
16,375
  
Gain (loss) on sale of securities and other
  
212
      
80
      
(33
)
  
1,044
  
Interest income
  
309
      
583
      
1,252
    
1,268
  
Interest expense
  
(357
)
    
(297
)
    
(945
)
  
(891
)
Income before income taxes and earnings attributable to noncontrolling interests
  
7,925
      
6,545
      
17,010
    
17,796
  
Income tax expense
  
(1,984
)
    
(1,824
)
    
(3,295
)
  
(4,945
)
Net income
  
5,941
      
4,721
      
13,715
    
12,851
  
Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
  
(2,480
)
    
(1,225
)
    
(5,999
)
  
(3,136
)
Net income attributable to Sterling common stockholders
$
3,461
    
$
3,496
    
$
7,716
  
$
9,715
  
                             
Net income per share attributable to Sterling common stockholders:
                            
Basic
$
0.21
    
$
0.22
    
$
0.47
  
$
0.60
  
Diluted
$
0.21
    
$
0.21
    
$
0.47
  
$
0.59
  
                             
Weighted average number of common shares outstanding used in computing per share amounts:
                            
Basic
  
16,385,729
      
16,199,356
      
16,444,302
    
16,135,108
  
Diluted
  
16,440,835
      
16,549,056
      
16,558,074
    
16,548,062
  
 
 
 
 
 
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 (Amounts in thousands, except share and per share data)
 
 
September 30, 2011
    
December 31, 2010
  
 
(Unaudited)
          
ASSETS
              
Current assets:
              
Cash and cash equivalents
$
16,650   
   
$
49,441   
 
Short-term investments
  
49,824 
     
35,752 
 
Contracts receivable, including retainage
  
92,909 
     
70,301 
 
Costs and estimated earnings in excess of billings on uncompleted contracts
  
25,660 
     
10,058 
 
Inventories
  
1,910 
     
1,479 
 
Income tax receivable
  
1,366 
     
--
  
Deferred tax asset, net
  
78 
     
82 
 
Receivables from and equity in construction joint ventures
  
8,135 
     
6,744 
  
Deposits and other current assets
  
1,536 
     
2,472 
 
Total current assets
  
198,068 
     
176,329   
 
Property and equipment, net
  
83,719 
     
74,681 
 
Goodwill
  
121,010 
     
114,745 
 
Other assets, net
  
1,237 
     
1,376 
 
Total assets
$
404,034   
   
$
367,131   
 
LIABILITIES AND EQUITY
              
Current liabilities:
              
Accounts payable
$
51,379   
     
$    
37,631   
 
Billings in excess of costs and estimated earnings on uncompleted contracts
  
15,967 
     
17,807 
 
Current maturities of long-term debt
  
573 
     
73 
 
Income taxes payable
  
156 
     
1,493 
 
Accrued compensation
  
9,051 
     
6,920 
 
Liability for put exercised by noncontrolling owner
  
8,205 
     
--
  
Other current liabilities
  
6,556 
       
5,127 
 
Total current liabilities
  
91,887 
     
69,051 
 
Long-term liabilities:
              
Long-term debt, net of current maturities
  
8,281 
     
336 
 
Deferred tax liability, net
  
22,524 
     
18,591 
  
Other long-term liabilities
  
2,657 
     
--
  
Total long-term liabilities
  
33,462 
     
18,927 
 
Commitments and contingencies
              
Liability for noncontrolling owners' interests in subsidiaries and joint ventures
  
21,943 
     
28,724 
 
Equity:
              
Sterling stockholders’ equity:
              
Preferred stock, par value $0.01 per share; 1,000,000 shares authorized, none issued
  
--
      
--
  
Common stock, par value $0.01 per share; 19,000,000 shares authorized, 16,443,114 and 16,468,369 shares issued
  
164 
     
164 
 
Treasury stock, 122,002 and 3,147 shares of common stock
  
(1,432 
)   
   
--
  
Additional paid in capital
  
197,463 
     
198,849 
 
Retained earnings
  
59,101 
     
51,553 
 
Accumulated other comprehensive income (loss)
  
140 
       
(137 
)
Total Sterling common stockholders’ equity
  
255,436 
     
250,429 
 
Noncontrolling interests
  
1,306 
     
--
  
Total equity
  
256,742 
     
250,429 
 
Total liabilities and equity                                                                                   
$  $
404,034   
   
$  $
367,131   
    
 

STERLING CONSTRUCTION CO INC Reports