Sterling Construction Company, Inc. Reports 2009 Second Quarter Results

$ in millions               3 Months     Over       %        6 Months     Over       %
(except per share data)     ended        (Under)    Change   ended        (Under)    Change
                            06-30-09     6-30-08             06-30-09     6-30-08
Revenues                    $120.4       $13.6      13  %    $215.2       $23.6      12  %
Gross profit                $18.6        $6.8       58  %    $30.4        $10.5      53  %
Gross margin                15.4   %     4.4   %             14.1   %     3.8   %
Operating income            $14.7        $6.5       79  %    $23.4        $10.6      82  %
Net income attributable to  $9.3         $4.1       81  %    $14.9        $6.6       80  %
common stockholders
Diluted net income per      $0.68        $0.31      84  %    $1.08        $0.48      80  %
share attributable to
common stockholders

Commenting on the results, Joe Harper, Sr., Sterling's President and Chief Operating Officer, said, "The year-over-year increases in revenues for the 2009 periods were primarily due to a higher level of crew and equipment resources available in 2009 as well as better weather, which enabled our crews and equipment to work more days and make greater progress toward completion of contracts. The increases in gross profit both in terms of dollars and as a percent of revenue for the 2009 periods were due to better execution on contracts-in-progress, the increase in revenues of our Nevada operations and the mix in the stage of completion and profitability of certain contracts at June 30, 2009. The 15.4% gross margin in the second quarter of 2009 is both exceptional and welcome, but may not be representative of the margins the Company will achieve in the second half of the year and 2010."

"Although first-half 2009 revenues are running 12% ahead of the first half of 2008, we expect full year 2009 revenues will be only slightly ahead of 2008 revenues. Because of the higher gross profit in the first half of 2009, we expect net income and diluted net income per common share to be towards the higher end of our full year 2009 guidance."

Pat Manning, the Company's Chairman and Chief Executive Officer, added, "As we noted when we announced first quarter results, we have been subject to increased competition, which depressed bid prices, contract awards and backlog during the latter half of 2008 and through the first half of 2009. We closed the first half of 2009 with backlog of approximately $344 million, compared to $514 million at June 30, 2008. Through the first half of the year, we were awarded or were the apparent low bidder on $111 million of new contracts, including $79 million in the second quarter of 2009. After the second quarter closed and as previously announced, we were awarded a $28.9 million project in Harris County, Texas for the Texas Department of Transportation ("TXDOT"), which is supported by Federal stimulus funding, and were the apparent low bidder on a $32.8 million project in Hawaii for the U.S. Department of Transportation."

Discussing the outlook for the remainder of the year, Mr. Manning stated, "As was the case in the first quarter of 2009, we continue to submit bids at lower but nonetheless acceptable profit margins. The proposed budgets of TXDOT and Nevada Department of Transportation, along with proposed projects of other states, toll road authorities and municipalities make us increasingly confident that there are significant opportunities to grow backlog and generate revenues and profits; however, competition and reduced bidding margins remain significant challenges."

Jim Allen, Sterling's CFO noted, "We have maintained a cautious posture with respect to capital expenditures in light of the volume and timing of contract lettings and the competitive landscape in which we are operating. In the first half of this year, $3.9 million has been invested in the replacement of certain equipment and to expand our construction fleet and office and shop facilities, down from $11.1 million at mid-year 2008. Until business conditions improve, we will keep a tight rein on such expenditures and, for the year as a whole, we are budgeting lower capital expenditure levels than 2008 levels. Our financial position remains strong, with working capital of approximately $112.7 million, including $104.1 million in cash, cash equivalents and short-term investments, total assets of $324.2 million and Sterling common stockholders' equity of $174.4 million."

Conference Call and Filings

Sterling's management will hold a conference call to discuss second quarter results and recent corporate developments, at 11:00 am EDT/ 10:00 am CDT today, August 10, 2009. The call will be hosted by Patrick Manning, Chairman and Chief Executive Officer, Joe Harper, President and Chief Operating Officer, and James H. Allen, Jr., Chief Financial Officer. Interested parties may participate in the call by dialing 706-679-0858 ten minutes before the conference 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 archived on the Company's website for 30 days. We suggest listeners use Microsoft Explorer as their web browser.

Sterling is a leading heavy civil construction company that specializes in the building and reconstruction of transportation and water infrastructure in large and growing markets in Texas and Nevada. 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, 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.

The Company will file its 2009 Second Quarter Report on Form 10-Q with the U.S. Securities and Exchange Commission on Monday, August 10, 2009.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
(Unaudited)
                                                                    Three months ended June 30, Six months ended June 30,
                                                                    2009          2008          2009          2008
Revenues                                                            $120,375      $106,728      $215,241      $191,654
Cost of revenues                                                    101,796       94,988        184,851       171,813
Gross profit                                                        18,579        11,740        30,390        19,841
General and administrative expenses                                 (3,814     )  (3,442     )  (7,028     )  (6,889     )
Other income (expense)                                              (47        )  (91        )  40            (102       )
Operating income                                                    14,718        8,207         23,402        12,850
Interest income                                                     118           223           277           510
Interest expense                                                    (45        )  (152       )  (104       )  (282       )
Income before income taxes and earnings attributable to the         14,791        8,278         23,575        13,078
noncontrolling interest
Income tax expense                                                  (5,021     )  (2,781     )  (7,939     )  (4,372     )
Net income                                                          9,770         5,497         15,636        8,706
Less: Net income attributable to the noncontrolling interest in     (485       )  (357       )  (786       )  (449       )
earnings of subsidiary
Net income attributable to Sterling common stockholders             $9,285        $5,140        $14,850       $8,257
Net income per share attributable to Sterling common stockholders:
Basic                                                               $0.70         $0.39         $1.12         $0.63
Diluted                                                             $0.68         $0.37         $1.08         $0.60
Weighted average number of common shares outstanding used in
computing per share amounts:
Basic                                                               13,223,165    13,110,500    13,205,812    13,089,682
Diluted                                                             13,730,182    13,783,307    13,721,776    13,695,000

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
(Unaudited)
                                                                                       June 30,  December 31,
                                                                                       2009      2008
ASSETS
Current assets:
          Cash and cash equivalents                                                    $78,571   $55,305
          Short-term investments                                                       25,487    24,379
          Contracts receivable, including retainage                                    74,802    60,582
          Costs and estimated earnings in excess of billings on uncompleted            9,059     7,508
          contracts
          Inventories                                                                  1,324     1,041
          Deposits and other current assets                                            1,602     3,907
                                           Total current assets                        190,845   152,722
Property and equipment, net                                                            74,608    77,993
Goodwill                                                                               57,232    57,232
Other assets, net                                                                      1,485     1,668
                                           Total assets                                $324,170  $289,615
                                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
          Accounts payable                                                             $38,737   $26,111
          Billings in excess of costs and estimated earnings on uncompleted            29,018    23,127
          contracts
          Current maturities of long-term obligations                                  73        73
          Income taxes payable                                                         867       547
          Other accrued expenses                                                       9,431     7,741
                                           Total current liabilities                   78,126    57,599
Long-term liabilities:
          Long-term debt, net of current maturities                                    50,446    55,483
          Deferred tax liability, net                                                  14,408    11,117
          Put liability related to and noncontrolling owner's interest in              6,781     6,300
          subsidiary
                                           Total long-term liabilities                 71,635    72,900
Commitments and contingencies
Stockholders' equity:
          Preferred stock, par value $0.01 per share; authorized 1,000,000             -         --
          shares, none issued
          Common stock, par value $0.01 per share; authorized 19,000,000               132       131
          shares, 13,260,124 and 13,184,638 shares issued and outstanding
          Additional paid-in capital                                                   150,662   150,223
          Retained earnings                                                            23,615    8,762
                                           Total Sterling common stockholders' equity  174,409   159,116
                                           Total liabilities and stockholders' equity  $324,170  $289,615

SOURCE: Sterling Construction Company, Inc.

Sterling Construction Company, Inc. 
James H. Allen, Jr., CFO 
Joseph P. Harper, Sr., Pres. & COO 
281-821-9091 
or 
Investor Relations Counsel 
The Equity Group Inc. 
Linda Latman, 212-836-9609 
Lena Cati, 212-836-9611