Sterling Construction Company, Inc. (NasdaqGS:STRL) (“Sterling” or “the
Company”) today announced financial results for the second quarter ended
June 30, 2014.
Second Quarter 2014 Financial Results Compared
to Second Quarter 2013:
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Revenues were $194.8 million compared to $133.4 million;
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Gross margin increased to 6.4% of revenues from a gross deficit of
12.5%;
-
General and administrative expenses as a percentage of revenues
declined to 4.9% compared to 7.1%;
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Operating income was $2.5 million compared to an operating loss of
$26.0 million;
-
Net income attributable to Sterling common stockholders was $1.2
million compared to a net loss of $17.0 million; and,
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Net earnings per diluted share attributable to common stockholders was
$0.07 compared to a net loss per diluted share attributable to common
stockholders of $0.93.
Of note, financial results for the second quarter of 2013 were depressed
by a net pre-tax charge of $18.0 million, of which $13.9 million was the
result of site-specific conditions affecting three projects, two in
Texas and one in Arizona, that encountered unanticipated costs in excess
of initial project estimates. The remaining $4.1 million loss was
primarily related to less significant estimated losses on jobs awarded
prior to 2012. On an after-tax basis, the total charge accounted for
$11.6 million or $0.70 per diluted share of the net loss attributable to
common stockholders in 2013.
Second Quarter 2014 Bookings and Backlog
Highlights:
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Bookings during the quarter were $167 million, representing a
book-to-bill ratio of 0.86:1;
-
Total backlog at June 30, 2014 was $727 million, up from $687 million
at December 31, 2013 and $714 million at June 30, 2013;
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Total backlog at June 30, 2014 excluded $116 million of projects where
the Company was the apparent low bidder, but had not yet been awarded
the contract; and,
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We estimate that the average gross margin of our projects in backlog
is comparable to the gross margin reported for the second quarter of
2014.
Business Overview
Revenues for the second quarter of 2014 increased 46.1% compared to the
second quarter of 2013 reflecting the substantial completion of the
three aforementioned problem contracts along with an increased number of
projects in progress and increased productivity, particularly in our
Texas and California markets.
Gross profit in the second quarter was $12.5 million and represented a
gross margin of 6.4%, up from a gross loss of $16.6 million, with a
gross deficit of 12.5% in the second quarter of 2013, due to the
improved overall profitability of projects. Projects in 2013 were
impacted by downward revisions on several large jobs, particularly in
the Texas market.
General and administrative expenses in the second quarter of 2014 were
flat with the prior year period at $9.5 million. As a percent of
revenues, general and administrative expenses declined to 4.9% from 7.1%
in the second quarter of 2013, reflecting the increase in revenues in
the current quarter and the associated leverage on the Company’s
corporate infrastructure.
Capital expenditures for the second quarter and first half of 2014 were
$5.4 million and $7.7 million, respectively, compared with $1.8 million
and $6.7 million, for the respective periods in 2013. Capital
expenditures for 2014 are expected to be consistent with 2013 levels of
approximately $15 million.
Financial Position at June 30, 2014:
-
Working capital totaled $41.2 million, including $14.3 million of cash
and cash equivalents;
-
The Company had borrowings of $18.6 million on its credit facility and
availability of $18.4 million;
-
Tangible net worth was $94.3 million; and,
-
Early in the 2014 second quarter, the Company completed an equity
offering that generated approximately $14.0 million in net proceeds
which was used to strengthen the Company’s balance sheet.
CEO Remarks
Peter MacKenna, President & Chief Executive Officer of Sterling
commented, “As expected, our results continued to improve materially in
the second quarter. Revenues grew 46% compared to the prior year period
as a result of our solid performance on an increasing number of jobs,
particularly in Texas and California. Gross margins increased to a
mid-single digit level from a deficit last year, as the three large
projects that had weighed on our results throughout 2013 were
substantially completed. Overall, we are very pleased by the progress we
are making with our turnaround.”
Outlook
Mr. MacKenna said, “We anticipate continued strong year-over-year growth
in revenues for the second half of 2014 as we execute on the projects in
our backlog, and on those jobs we expect to be awarded. We expect gross
margins comparable to those reported for the second quarter of 2014,
representing a substantial increase over 2013 due to the much improved
margin profile of our backlog. This improvement in profitability has
recently been constrained by what we believe are signs of an overheating
in the marketplace, especially in our Texas operations. Specifically,
spot shortages of commodities, over-stretched sub-contractors and
vendors, and heavy competition for craft labor have prompted us to take
various steps to mitigate these external forces, and we will continue to
monitor the situation closely. We forecast general and administrative
expenses to remain below 6% of revenues as investments we have been
making to bolster our corporate infrastructure platform are largely
complete. Capital expenditures should be essentially the same as those
in 2013 as our current fleet of equipment, supplemented by leased assets
as needed, provide us with more than adequate capacity to support our
expansion. Finally, we are grateful to our bank and bonding company for
their continued support, which has provided us with the financial
flexibility to move ahead with our growth strategy.”
Conference Call
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,
Monday, August 11, 2014. Interested parties may participate in the call
by dialing (201) 493-6744 or (877) 445-9755 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.strlco.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 archived on the Company’s website for 30 days.
Sterling is a leading heavy civil construction company that specializes
in the building and reconstruction of transportation and water
infrastructure projects in Texas, Utah, Nevada, Arizona, California,
Hawaii, 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 or to make voluntary additional
disclosures of nonpublic information, whether as a result of new
information, future events or otherwise.
(See Accompanying Tables)
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STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
(Unaudited)
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Three Months Ended June 30,
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Six Months Ended June 30,
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2014
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2013
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2014
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2013
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Revenues
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$
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194,806
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$
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133,350
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$
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329,343
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$
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244,385
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Cost of revenues
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(182,307
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)
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(149,985
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)
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(308,974
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)
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(259,632
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)
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Gross profit (loss)
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12,499
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(16,635
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)
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20,369
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(15,247
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)
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General and administrative expenses
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(9,507
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)
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(9,486
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)
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(17,991
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)
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(19,097
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)
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Other operating income (expense), net
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(457
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)
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108
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599
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450
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Operating income (loss)
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2,535
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(26,013
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)
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2,977
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(33,894
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)
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Gain on sale of securities
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--
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--
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--
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483
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Interest income
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189
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255
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531
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536
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Interest expense
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(251
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)
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(209
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)
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(554
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)
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(308
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)
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Income (loss) before income taxes and earnings attributable to
noncontrolling interests
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2,473
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(25,967
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)
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2,954
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(33,183
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)
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Income tax (expense) benefit
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(28
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)
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9,747
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(28
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)
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12,547
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Net income (loss)
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2,445
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(16,220
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)
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2,926
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(20,636
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Noncontrolling owners’ interests in earnings of subsidiaries and
joint ventures
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(1,245
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)
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(805
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(1,520
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)
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(966
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)
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Net income (loss) attributable to Sterling common stockholders
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$
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1,200
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$
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(17,025
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$
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1,406
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$
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(21,602
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)
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Net earnings (loss) per share attributable to Sterling common
stockholders:
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Basic
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$
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0.07
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$
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(0.93
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)
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$
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0.08
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$
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(1.32
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)
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Diluted
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$
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0.07
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$
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(0.93
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$
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0.08
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$
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(1.32
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Weighted average number of common shares outstanding used in
computing per share amounts:
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Basic
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17,942,124
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16,629,630
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17,308,551
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16,612,924
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Diluted
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18,110,025
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16,629,630
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17,464,229
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16,612,924
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STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
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June 30, 2014
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December 31, 2013
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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14,281
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$
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1,872
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Contracts receivable, including retainage
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104,609
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77,245
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Costs and estimated earnings in excess of billings on uncompleted
contracts
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31,985
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11,684
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Inventories
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5,587
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6,189
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Receivables from and equity in construction joint ventures
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8,817
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6,118
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Other current assets
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11,769
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11,377
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Total current assets
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177,048
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114,485
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Property and equipment, net
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88,925
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93,683
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Goodwill
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54,820
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54,820
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Other assets, net
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8,921
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10,030
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Total assets
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$
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329,714
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$
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273,018
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LIABILITIES AND EQUITY
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Current liabilities:
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Accounts payable
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$
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90,157
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$
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61,599
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Billings in excess of costs and estimated earnings on uncompleted
contracts
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30,247
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31,576
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Current maturities of long-term debt
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478
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134
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Income taxes payable
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2,036
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2,035
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Accrued compensation
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8,943
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5,755
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Current obligation for noncontrolling owners’ interest in
subsidiaries and joint ventures
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--
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196
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Other current liabilities
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4,015
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4,504
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Total current liabilities
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135,876
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105,799
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Long-term liabilities:
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Long-term debt, net of current maturities
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19,622
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8,331
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Member’s interest subject to mandatory redemption and undistributed
earnings
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24,299
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23,989
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Other long-term liabilities
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812
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2,105
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Total long-term liabilities
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44,733
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34,425
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Commitments and contingencies
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Equity:
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Sterling stockholders’ equity:
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Preferred stock, par value $0.01 per share; 1,000,000 shares
authorized, none issued
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--
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--
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Common stock, par value $0.01 per share; 28,000,000 shares
authorized, 18,807,389 and 16,657,754 shares issued
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188
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|
167
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Additional paid in capital
|
|
|
|
205,343
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|
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190,926
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Retained deficit
|
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|
|
(60,911
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)
|
|
|
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(62,317
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)
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Accumulated other comprehensive income
|
|
|
|
58
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|
|
|
117
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Total Sterling common stockholders’ equity
|
|
|
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144,678
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128,893
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Noncontrolling interests
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4,427
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|
|
|
|
3,901
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Total equity
|
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149,105
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|
|
|
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132,794
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Total liabilities and equity
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|
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$
|
329,714
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|
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$
|
273,018
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Copyright Business Wire 2014