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Sterling Construction Company Inc Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 8, 2011 06:16AM
Sterling Construction Company Inc (STRL) filed Quarterly Report for the period ended 2011-06-30.
Highlight of Business Operations:
In 2007, the voters of the State of Texas approved $5.0 billion in bonds for highway construction to be repaid out of the State's general funds; the governor s request for the State's 2012-2013 biennium budget for highways and bridges includes $1 billion of proceeds from these bonds (“Prop 12 Bonds”) in 2012 and $1 billion in 2013.
The estimated Texas Department of Transportation (“TXDOT”) lettings (contract awards) for transportation construction projects are $4.8 billion for the state s fiscal year ending August 31, 2011, including stimulus funds and a portion of the Prop 12 Bonds discussed above versus approximately $4.2 billion of lettings in 2010 including stimulus funds and a portion of the Prop 12 Bonds. In the 2011 legislative session, the Texas legislature approved the use of the remaining $3.0 billion of the Prop 12 Bonds for highway and bridge construction, rehabilitation and maintenance in the 2012-2013 budget. TXDOT is forecasting lettings of only $2.6 billion for 2012 and $2.4 billion for 2013 before any appropriations from the Prop 12 Bonds which would increase the amount of lettings for 2012 and 2013.
Backlog is our estimate of the revenues that we expect to earn in future periods on our construction projects which are typically completed in 12 to 36 months. At June 30, 2011, our backlog was $720 million as compared to $740 million as of March 31, 2011 and $557 million at June 30, 2010. Our backlog at June 30, 2011 included approximately $185 million of expected revenues for which the contracts had not yet been officially awarded. Historically, subsequent non-awards of contracts or finalization of contract price have not materially affected our backlog, results of operations or financial condition. Backlog at June 30, 2011, includes $28 million applicable to consolidated joint ventures where we have a controlling interest, which is the entire amount of such joint ventures backlog, and $163 million where we have a noncontrolling interest, which represents our proportionate share of such joint ventures backlog. We were awarded or apparent low bidder on contracts of $104 million during the second quarter of 2011. Backlog decreased during the three months ended June 30, 2011 as a result of fewer awarded contracts in our Nevada and Utah markets.
Revenues increased $11.6 million and $24.7 million for the three and six months ended June 30, 2011, respectively, versus the comparable 2010 periods. This increase was primarily due to increased activity levels in 2011 as a result of execution on contracts awarded in our Texas markets in 2010 and increased revenues resulting from a higher level of activity on joint ventures in which we participate, primarily in Utah. Revenues for Nevada declined between the periods due to fewer contracts in progress. The increase in revenues in Texas was less than expected due to severe adverse weather conditions during the first quarter of 2011 and delays in starting two sizable contracts.
Operating income decreased $0.1 million during the second quarter of 2011 from operating income in the second quarter of 2010. For the six months ended June 30, 2011, operating income decreased by $1.2 million versus the comparable 2010 period. The decreases between periods were a result of an increase in general and administrative expenses due primarily to an increase in salaries, wages and related benefits partially offset by the increase in gross profit.
In the second quarter of 2011, we had a loss on the sale of securities and other income (loss) of $41,000 versus a gain of $547,000 in the second quarter of 2010. The six months ended June 30, 2011 included a loss incurred during the first quarter related to the sale of our position in certain exchange traded fund (“ETF”) securities, the assets of which were a crude oil commodity pool. The gains for the six months ended June 30, 2010 were primarily related to gains on the ETF securities as well as improved returns from mutual fund investments.
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