Sterling Construction Company, Inc. (NasdaqGS:STRL) (“Sterling” or “the
Company”) today announced financial results for the first quarter ended
March 31, 2015.
First Quarter 2015 Financial Results Compared
to First Quarter 2014:
-
Revenues were $117.7 million compared to $134.5 million;
-
Gross margin was (5.8%) of revenues compared to gross margin of 5.8%;
-
General and administrative expenses as a percentage of revenues were
9.9% compared to 6.3%;
-
Operating loss was $16.7 million compared to operating income of $0.4
million;
-
Net loss attributable to Sterling common stockholders was $17.0
million compared to a net income of $0.2 million; and,
-
Net loss per diluted share attributable to common stockholders was
$0.90 compared to a net earnings per diluted share attributable to
common stockholders of $0.01.
First Quarter 2015 Backlog Highlights:
-
Total backlog at March 31, 2015 was $745 million, down 2.5% since
December 31, 2014 and down 6.8% from the backlog at March 31, 2014;
-
Total backlog at March 31, 2015 excluded $58 million of projects where
the Company was the apparent low bidder but had not yet been awarded
the contract; and,
-
We estimate that the average gross margin of our projects in backlog
is in the low 6% range.
Business Overview
Revenues for the first quarter of 2015 were 12.5% lower than the prior
year period, primarily due to downward revisions of the estimated
percent-complete of certain projects in the first quarter of 2015,
particularly in Texas, as well as the completion of certain large
projects in Texas which were ongoing in the first quarter of 2014. The
decrease in project revenue in Texas, excluding the downward
percent-complete revisions related to certain projects in Texas, was
largely offset by an increase in the number of projects currently under
construction in California.
Gross loss in the first quarter of ($6.8) million represented a gross
margin of (5.8%) reflecting downward percent-complete revisions made to
certain projects in the first quarter of 2015, largely related to
construction projects in Texas, primarily as a result of updated labor
rates due to the intense competition for craft labor in Texas, increased
costs due to rework of certain project phases caused by defective
material purchased from a supplier, unapproved change orders that after
negotiations with our customers during the quarter, are now considered
uncollectable, along with unseasonably heavy rainfall in Texas which
caused declines in productivity and unanticipated delays.
General and administrative expenses of $11.6 million in the first
quarter represented 9.9% of revenues, compared to $8.5 million, or 6.3%
of revenues in the first quarter of 2014. This increase is primarily
related to approximately $2.4 million of non-recurring employee
severance costs recognized in the first quarter of 2015.
For the first quarter of 2015, capital expenditures were $1.2 million,
compared with $2.3 million in the first quarter of 2014. The
year-over-year decrease reflects efforts to optimize utilization of the
existing equipment fleet while supplementing leased equipment during
seasonal peak operating time. Capital expenditures for 2015 are expected
to be much lower than 2014 levels.
Financial Position at March 31, 2015:
-
Working capital totaled $37.1 million, including $17.2 million of cash
and cash equivalents and there was $1.2 million of availability on the
Company’s credit facility;
-
The Company had borrowings of $30.8 million and $3.0 million of
Letters of Credit on its credit facility;
-
Tangible net worth of $69.6 million;
-
The Company is in the process of replacing its existing credit
agreement with a new credit facility with less restrictive covenants
through a new lender. The new credit facility is expected to be in
place by the end of May 2015. If the Company does not replace the
existing credit facility with other long-term financing as
anticipated, it would likely be in non-compliance with the tangible
net worth covenant of its existing agreement, which will be measured
based on financial results as of April 30, 2015.
CEO Remarks
Paul J. Varello, Sterling’s CEO, commented, “Our first quarter results
reflect the measures we took to create a stable operational and
financial foundation upon which to return our Company to profitability
and growth. In addition to changes within our senior management team and
the related non-recurring severance costs associated with those changes,
we conducted a thorough review of all of our projects and did a full
re-estimation of the majority of them, including more than 60 jobs in
Texas. As a result, we recognized revisions of estimated revenue and
cost during the quarter. With this process largely complete, we can move
forward with a focus on the timely completion of these jobs, and the
pursuit of new project opportunities where we have a high level of
confidence in our ability to execute profitably.”
Mr. Varello continued, “As CEO of Sterling for the past three months, I
have learned a great deal about our business and our ability to deliver
consistent financial performance and return value to shareholders. With
our recent leadership changes, added project management personnel,
increased utilization of technology systems, and the implementation of
more rigorous bidding standards, we expect to deliver improved results
as the year progresses.”
Mr. Varello concluded, “Looking ahead to the balance of 2015, we expect
to return to profitability by the third quarter of this year. Our
backlog remains strong and we are seeing an attractive pipeline of
opportunities, as evidenced by a recent California water infrastructure
award we announced and more than $9.4 billion of new lettings by the
Texas Department of Transportation for 2015. With our more stringent
procedures for bidding jobs and managing projects we believe that we can
deliver profitable results on a consistent basis. As of March 31, 2015,
the average gross margin of our projects in backlog was in the low 6%
range. We believe that our financial performance will improve in the
coming quarters by bidding more selectively, managing projects more
effectively and aggressively pursuing change orders and claims.
Excluding non-recurring expenses in the first quarter, our 2015 SG&A
run-rate is expected to be reduced to 5.5% of sales as a result of our
recent cost cutting efforts. Capital expenditures should be well below
those of 2014 since our current construction equipment fleet provides us
with adequate capacity to execute on our backlog and support future
growth. Finally, we have selected a new lender to replace our existing
credit facility and we look forward to sharing more details by the end
of this month.”
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,
today, Monday, May 11, 2015. 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)
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2015
|
|
|
2014
|
|
Revenues
|
|
$
|
117,682
|
|
|
$
|
134,538
|
|
Cost of revenues
|
|
|
(124,518
|
)
|
|
|
(126,669
|
)
|
Gross (loss) profit
|
|
|
(6,836
|
)
|
|
|
7,869
|
|
General and administrative expenses
|
|
|
(11,603
|
)
|
|
|
(8,484
|
)
|
Other operating income, net
|
|
|
1,761
|
|
|
|
1,056
|
|
Operating (loss) income
|
|
|
(16,678
|
)
|
|
|
441
|
|
Interest income
|
|
|
363
|
|
|
|
358
|
|
Interest expense
|
|
|
(382
|
)
|
|
|
(319
|
)
|
(Loss) income before income taxes and earnings attributable to
noncontrolling owners’ interests
|
|
|
(16,697
|
)
|
|
|
480
|
|
Income tax expense
|
|
|
(3
|
)
|
|
|
--
|
|
Net (loss) income
|
|
|
(16,700
|
)
|
|
|
480
|
|
Noncontrolling owners’ interests in earnings of subsidiaries
|
|
|
(292
|
)
|
|
|
(275
|
)
|
Net (loss) income attributable to Sterling common stockholders
|
|
$
|
(16,992
|
)
|
|
$
|
205
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings per share attributable to Sterling common
stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.90
|
)
|
|
$
|
0.01
|
|
Diluted
|
|
$
|
(0.90
|
)
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding used in
computing per share amounts:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
18,901,739
|
|
|
|
16,667,939
|
|
Diluted
|
|
|
18,901,739
|
|
|
|
16,855,173
|
|
|
|
|
|
|
|
|
|
|
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
March 31,
2015
|
|
|
December 31,
2014
|
|
|
|
(Unaudited)
|
|
|
0
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
17,196
|
|
|
$
|
22,843
|
|
Contracts receivable, including retainage
|
|
|
94,608
|
|
|
|
78,896
|
|
Costs and estimated earnings in excess of billings on uncompleted
contracts
|
|
|
25,827
|
|
|
|
33,403
|
|
Inventories
|
|
|
5,515
|
|
|
|
7,401
|
|
Receivables from and equity in construction joint ventures
|
|
|
9,698
|
|
|
|
9,153
|
|
Other current assets
|
|
|
4,451
|
|
|
|
5,278
|
|
Total current assets
|
|
|
157,295
|
|
|
|
156,974
|
|
Property and equipment, net
|
|
|
82,541
|
|
|
|
87,098
|
|
Goodwill
|
|
|
54,820
|
|
|
|
54,820
|
|
Other assets, net
|
|
|
6,345
|
|
|
|
7,559
|
|
Total assets
|
|
$
|
301,001
|
|
|
$
|
306,451
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
71,462
|
|
|
$
|
66,792
|
|
Billings in excess of costs and estimated earnings on uncompleted
contracts
|
|
|
34,359
|
|
|
|
25,649
|
|
Current maturities of long-term debt
|
|
|
966
|
|
|
|
965
|
|
Income taxes payable
|
|
|
--
|
|
|
|
1,868
|
|
Accrued compensation
|
|
|
8,728
|
|
|
|
5,169
|
|
Other current liabilities
|
|
|
4,727
|
|
|
|
4,207
|
|
Total current liabilities
|
|
|
120,242
|
|
|
|
104,650
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt, net of current maturities
|
|
|
33,477
|
|
|
|
37,021
|
|
Member’s interest subject to mandatory redemption and undistributed
earnings
|
|
|
22,200
|
|
|
|
22,879
|
|
Other long-term liabilities
|
|
|
616
|
|
|
|
753
|
|
Total long-term liabilities
|
|
|
56,293
|
|
|
|
60,653
|
|
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; 28,000,000 shares
authorized, 18,894,183 and 18,802,679 shares issued
|
|
|
189
|
|
|
|
188
|
|
Additional paid in capital
|
|
|
205,672
|
|
|
|
205,697
|
|
Retained deficit
|
|
|
(89,090
|
)
|
|
|
(72,098
|
)
|
Accumulated other comprehensive loss
|
|
|
(59
|
)
|
|
|
(101
|
)
|
Total Sterling common stockholders’ equity
|
|
|
116,712
|
|
|
|
133,686
|
|
Noncontrolling interests
|
|
|
7,754
|
|
|
|
7,462
|
|
Total equity
|
|
|
124,466
|
|
|
|
141,148
|
|
Total liabilities and equity
|
|
$
|
301,001
|
|
|
$
|
306,451
|
|
|
|
|
|
|
|
|
|
|
Copyright Business Wire 2015