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Sterling Construction Company, Inc. Reports 2012 Third Quarter Results

Gross profit for the 2012 third quarter decreased 4.0% from the same period last year and gross margin decreased to 6.9% from 9.3%. As was the case in the first half of the year, the 2012 third quarter was impacted by downward revisions of estimated revenues and gross profit on a number of construction projects, primarily in Texas. These revisions were substantially offset by upward revisions on projects in Utah.

Operating income for the third quarter decreased 46.3% from the 2011 comparable quarter. General and administrative expenses increased $3.2 million between the quarters. This reflected general and administrative expenses from operations in Arizona and California acquired in August 2011, compensation expenses attributable to the change in CEO as well as higher professional fees.

Other Highlights

Backlog at September 30, 2012 was $704.0 million and excluded approximately $79 million of expected revenues for which contracts had not yet been officially awarded. This compares to backlog of $754 million at June 30, 2012. During the current third quarter, we were awarded contracts totaling $158 million, compared to $240 million in the same period last year bringing 2012 awards through September 30, 2012 to $512 million compared to $476 million in the same period last year. Please note that we have changed our policy with respect to projects where we are the apparent low bidder but where we have not yet been awarded a contract as of the end of the period. These awards are now excluded from our reported backlog and awards. Awards for 2012 now include $125 million of awards previously reported in 2011 which we were the apparent low bidder on in 2011 but which were officially awarded in 2012. Previously reported amounts for backlog have been restated to conform with the new policy.

For the nine months of 2012, capital expenditures were $27.8 million compared with $19.6 million in the first nine months of 2011 with the increase relating to investments to support our higher level of operations and to replace older equipment. As was the case in the first half, we continued to dispose of underutilized and aging equipment, and in the first nine months of 2012, we generated proceeds of $11.9 million from the sale of property and equipment resulting in a pre-tax gain of $3.0 million.

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