Sterling Construction Company, Inc. (NasdaqGS: STRL) (“Sterling” or “the Company”) today announced that it expects to report a net loss for the three months ended June 30, 2013 in the range of between $1.07 and $1.13 per diluted share. The Company attributed the net loss primarily to two legacy projects, one in Texas and the other in Arizona, which encountered unanticipated costs in excess of initial project estimates. The net revisions to contract cost estimates were the result of site-specific conditions affecting the two contracts that became apparent during the 2013 second quarter. As previously reported, the Company will issue its results for the second quarter before the opening of the stock market on August 9 th and hold a conference call later that morning.
As discussed in the release announcing first quarter 2013 financial results, despite the issues with legacy projects – defined as older projects booked prior to 2012 but which are still having a negative impact on 2013 profitability – there has been continuing improvement in bookings, both in terms of contract amounts and gross margins. As Sterling continues to work through these operationally challenged legacy projects and to win new awards, gross margins are expected to improve. For the second quarter of 2013, new contracted backlog was approximately $127 million with a first half total of $248 million. The blended gross margin of projects booked in 2013 is approximately 8.1%. Further, an additional $148 million with blended gross margin of 8.5% has not yet been added to backlog in accordance with our policy of not including unsigned contracts in the backlog calculation.
Peter MacKenna, President and Chief Executive Officer of Sterling Construction said, “Unfortunately, while these two projects were between 60% to 80% complete, unanticipated operating issues unfolded at quarter-end, taking them from breakeven or better, to a substantial loss position. Despite these near-term issues, we remain enthusiastic and confident in our ability to deliver profitable growth in the coming quarters and years, driven by a combination of the many management and operating improvements we are making internally, coupled with strengthening end markets.”
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