Heavy Civil Construction Combined Backlog
Reaches an all-time high of $1.2 billion
Tealstone Residential Continues to Set
Record Numbers
Reaffirms 2019 Outlook for Significant
Bottom Line Growth
Sterling Construction Company, Inc. (NasdaqGS: STRL) (“Sterling”
or “the Company”) today announced financial results for the first
quarter of 2019.
Consolidated First Quarter 2019 Financial Results Compared to
First Quarter 2018:
- Revenues were $223.9 million compared
to $222.5 million;
- Gross margin was 8.7% of revenues
compared to 8.9%;
- Net income attributable to Sterling
common stockholders was $1.8 million compared to $2.5 million;
and,
- Net income per diluted share
attributable to Sterling common stockholders was $0.07 compared to
$0.09.
Consolidated Financial Position, Liquidity and Cash Flows at
March 31, 2019:
- Cash and Cash Equivalents were $56.8
million;
- Debt totaled $77.3 million reflecting
$5.6 million of debt repayments in the first quarter 2019;
and,
- During the quarter, Sterling
repurchased 250 thousand shares of common stock for $3.2 million.
To date under the stock repurchase plan, Sterling has repurchased
717 thousand shares of common stock for $7.9 million.
Business Overview
First quarter 2019 revenues increased $1.5 million compared to
the prior year quarter. The increase in revenues over the first
quarter of 2018 was driven by a $7.5 million increase in
residential construction, partially offset by a $6.1 million
decrease in heavy civil construction, primarily related to two
large construction joint venture projects that were substantially
complete by the end of 2018. Several significant new heavy civil
projects are expected to ramp-up during the remainder of 2019.
Gross profit was $19.5 million in the first quarter of 2019, a
decrease of $0.3 million from the prior year first quarter. Gross
margin declined 19 basis points to 8.7%, which was driven by a
decrease in heavy civil construction.
General and administrative expenses were $12.5 million in the
first quarter of 2019, or 5.6% of revenues compared to $12.3
million or 5.5% of revenues in the first quarter of 2018.
Heavy Civil Construction Backlog Highlights
- Combined backlog at March 31, 2019
was $1.2 billion, an increase of 5.8% from $1.1 billion at
December 31, 2018. Combined backlog consists of $808.7 million
of backlog and $401.5 million of unsigned contracts as of
March 31, 2019 compared to $850.7 million and $292.7 million
at December 31, 2018, respectively. No residential
construction contracts are included in backlog;
- Gross margin on projects in combined
backlog as of March 31, 2019 averaged 8.6%, a decrease from
8.9% at December 31, 2018; and,
- Non-heavy highway revenues accounted
for 48.3% of first quarter of 2019 heavy civil construction
revenues compared to 42.6% of revenues in the first quarter of
2018.
CEO Remarks and Outlook
“I'm pleased with the financial results we were able to achieve
in extremely adverse conditions. Our 2019 first quarter results
reflect the typical seasonality in our Heavy Civil business and
difficult weather delays and related costs across our geographies,”
stated Joe Cutillo, Sterling’s Chief Executive Officer. “We expect
our execution on Heavy Civil projects to ramp up significantly
throughout the remainder of the year, as evidenced by the $100
million increase sequentially in Combined Backlog. We’re
particularly pleased with our continued momentum in adjacent market
expansion as we recently announced new airport and water
infrastructure awards. While a potential federal infrastructure
bill continues to dominate the narrative in our business, funding
on the state level is more than sufficient to drive end-market
demand for the foreseeable future.”
Mr. Cutillo continued, “Our residential segment continues to
excel as Tealstone delivered monumental results with a record
quarter, increasing revenue 21.3% compared to the first quarter of
2018. New home starts in our key markets of Dallas-Fort Worth,
Houston, and the surrounding areas remain robust. Also noteworthy
is the progress we made on the capital allocation front. We remain
committed to enhancing shareholder value as we repurchased 250
thousand shares and repaid $5.6 million of debt during the
quarter.”
Mr. Cutillo concluded, “Based on our first quarter results, our
current backlog, market strength and the continued mix shift
towards higher margin projects, we reaffirm our expectations for
full year 2019 revenues of between $1.075 billion and $1.095
billion and net income attributable to Sterling common stockholders
of $29 million to $32 million. The midpoint of our guidance implies
greater than 20% year-over-year growth in net income compared to
2018. In addition, we continue to expect our main residential
end-markets in the Dallas-Fort Worth Metroplex and the Houston area
to grow at low double-digit percentages. Our outlook does not
assume any major positive changes in federal government investment
in infrastructure, which would likely enhance our growth
forecast.”
Conference Call
Sterling’s management will hold a conference call to discuss
these results and recent corporate developments on Tuesday,
May 7, 2019 at 9:00 a.m. ET/8:00 a.m. CT. Interested parties
may participate in the call by dialing (201) 493-6744 or (877)
445-9755. Please call in ten minutes before the conference call is
scheduled to begin and ask for the Sterling Construction call.
Following management’s opening remarks, there will be a question
and answer session. Questions may be asked during the live call, or
alternatively, you may e-mail questions in advance to
Brigette.Wilcox@strlco.com.
To listen to a simultaneous webcast of the call, please go to
the Company’s website at www.strlco.com at least fifteen 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 thirty days.
About Sterling
Sterling is a construction company that specializes in heavy
civil infrastructure construction and infrastructure rehabilitation
as well as residential construction projects. The Company operates
primarily in Arizona, California, Colorado, Hawaii, Nevada, Texas
and Utah, as well as other states in which there are feasible
construction opportunities. Heavy civil construction projects
include highways, roads, bridges, airfields, ports, light rail,
water, wastewater and storm drainage systems, foundations for
multi-family homes, commercial concrete projects and parking
structures. Residential construction projects include concrete
foundations for single-family homes.
Important Information for Investors and Stockholders
Cautionary Statement Regarding Forward-Looking Statements
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.
STERLING CONSTRUCTION COMPANY, INC.
& SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share
data)
(Unaudited)
Three Months EndedMarch 31, 2019
2018 Revenues $ 223,949 $ 222,492 Cost of revenues
(204,446 ) (202,658 ) Gross profit 19,503 19,834 General and
administrative expenses (12,489 ) (12,340 ) Other operating
expense, net (2,294 ) (815 ) Operating income 4,720 6,679 Interest
income 364 129 Interest expense (3,060 ) (3,087 ) Income before
income taxes 2,024 3,721 Income tax expense (163 ) (41 ) Net income
1,861 3,680 Less: Net income attributable to
noncontrolling interests (46 ) (1,191 ) Net income attributable to
Sterling common stockholders $ 1,815 $ 2,489
Net income per share attributable to Sterling common stockholders:
Basic $ 0.07 $ 0.09 Diluted $ 0.07 $ 0.09 Weighted average
number of common shares outstanding used in computing per share
amounts: Basic 26,377 26,854 Diluted 26,723 27,078
STERLING CONSTRUCTION COMPANY, INC.
& SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three Months Ended March 31,
2019 % of
Total
2018 % of
Total
Revenue Heavy Civil Construction $ 181,184 81 % $ 187,241 84
% Residential Construction 42,765 19 % 35,251
16 % Total Revenue $ 223,949 $ 222,492
Operating Income Heavy Civil Construction $ (847 ) (18 )% $
1,945 29 % Residential Construction 5,567 118 %
4,734 71 % Total Operating Income $ 4,720 $
6,679
STERLING CONSTRUCTION COMPANY, INC.
& SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except per share
data)
March 31,2019 December
31,2018 Assets (Unaudited) Current assets:
Cash and cash equivalents $ 56,764 $ 94,095 Receivables, including
retainage 147,001 145,026 Costs and estimated earnings in excess of
billings on uncompleted contracts 44,133 41,542 Inventories 2,699
3,159 Receivables from and equity in construction joint ventures
11,625 10,720 Other current assets 6,696 8,074
Total current assets
268,918 302,616 Property and equipment, net 52,011 51,999 Operating
lease right-of-use assets 15,290 — Goodwill 85,231 85,231
Intangibles, net 41,818 42,418 Other assets, net 246
309 Total assets $ 463,514 $ 482,573
Liabilities and Stockholders’ Equity Current liabilities:
Accounts payable $ 81,870 $ 99,426 Billings in excess of costs and
estimated earnings on uncompleted contracts 55,598 62,407 Current
maturities of long-term debt 393 2,899 Current portion of long-term
lease obligations 7,009 — Income taxes payable 340 318 Accrued
compensation 10,500 9,448 Other current liabilities 6,300
4,676 Total current liabilities 162,010
179,174 Long-term debt, net of current
maturities 76,923 79,117 Long-term lease obligations 8,466 —
Members’ interest subject to mandatory redemption and undistributed
earnings 47,132 49,343 Deferred taxes 1,591 1,450 Other long-term
liabilities 1,115 1,229 Total
liabilities 297,237 310,313
Stockholders’ equity: Preferred stock, par value $0.01 per share;
1,000 shares authorized, none issued — — Common stock, par value
$0.01 per share; 38,000 shares authorized, 27,056 and 27,064 shares
issued, 26,424 and 26,597 shares outstanding 271 271 Additional
paid in capital 233,502 233,795 Treasury Stock, at cost: 632 and
467 shares (7,182 ) (4,731 ) Retained deficit (63,119 )
(64,934 ) Total Sterling stockholders’ equity 163,472
164,401 Noncontrolling interests 2,805 7,859
Total stockholders’ equity 166,277
172,260 Total liabilities and stockholders’ equity $ 463,514
$ 482,573
STERLING CONSTRUCTION COMPANY, INC.
& SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Three Months EndedMarch 31,
2019 2018 Cash flows from operating
activities: Net income 1,861 3,680 Adjustments to reconcile net
income to net cash used in operating activities: Depreciation and
amortization 4,389 4,124 Amortization of deferred loan costs 833
801 Gain on disposal of property and equipment (38 ) (250 )
Deferred tax expense 141 — Stock-based compensation expense 1,021
617 Changes in operating assets and liabilities (27,449 ) (31,464 )
Net cash used in operating activities (19,242 ) (22,492 ) Cash
flows from investing activities: Additions to property and
equipment (3,814 ) (1,897 ) Proceeds from sale of property and
equipment 137 886 Net cash used in investing
activities (3,677 ) (1,011 ) Cash flows from financing activities:
Repayments on long-term debt (5,610 ) (4,679 ) Distributions to
noncontrolling interest owners (5,100 ) — Purchase of treasury
stock (3,201 ) — Other (501 ) (309 ) Net cash used in financing
activities (14,412 ) (4,988 ) Net decrease in cash and cash
equivalents (37,331 ) (28,491 ) Cash and cash equivalents at
beginning of period 94,095 83,953 Cash and cash
equivalents at end of period $ 56,764 $ 55,462
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190506005695/en/
Sterling Construction Company, Inc.Ron Ballschmiede, Chief
Financial Officer281-214-0800Investor Relations Counsel:The
Equity Group Inc.Fred Buonocore, CFA 212-836-9607Kevin Towle
212-836-9620
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