Sterling Construction Company, Inc. Reports 2009 Third Quarter Results

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HOUSTON--(Business Wire)--
Sterling Construction Company, Inc. (NasdaqGS: STRL) ("Sterling" or "the
Company") today announced results for the third quarter and nine months ended
September 30, 2009.

$ in millions 3 Months Over % 9 Months Over %
(except per share data)
ended
(Under)
Change
ended
(Under)
Change

09-30-09
9-30-08
09-30-09
9-30-08
Revenues $ 103.9 $ (10.2 ) (9.0 )% $ 319.2 $ 13.4 4.4 %
Gross profit $ 16.5 $ 4.0 31.6 % $ 46.9 $ 14.5 44.8 %
Gross margin 15.9 % 11.0 % 14.7 % 10.6 %
Operating income $ 13.0 $ 3.5 37.4 % $ 36.4 $ 14.1 63.2 %
Net income attributable to $ 8.1 $ 2.1 35.4 % $ 22.9 $ 8.7 61.2 %

common stockholders
Diluted net income per $ 0.59 $ 0.15 34.1 % $ 1.67 $ 0.63 60.6 %
share attributable to

common stockholders

Commenting on the results, Joe Harper, Sr., Sterling`s President and Chief
Operating Officer, said, "We are pleased with the record profitability we
achieved in the third quarter and for the nine months of 2009. Gross profit for
the quarter was well ahead of 2008 due to better productivity as a result of
generally better weather and the favorable mix in the stage of completion and
profitability of contracts. The third quarter gross margin percentage of 15.9%
is both exceptional and welcome, but is unlikely to be representative of the
margins in the final quarter of 2009 and for the fiscal year 2010."

He continued, "Through the first nine months of the year, we have already
exceeded our published guidance on profitability measures and, barring
unforeseen events, we should exceed our guidance for operating income, net
income and diluted earnings per share for 2009. However, we believe that our
full year revenues will be below the range of our previously issued guidance."

Pat Manning, Sterling`s Chairman and Chief Executive Officer added, "We closed
the current third quarter with backlog of approximately $371 million, compared
to $344 million at June 30, 2009 and $511 million at September 30, 2008. Through
the first nine months of the year, we were awarded or were the apparent low
bidder on $242 million of new contracts, including $131 million in the third
quarter of 2009. In the near-term, we are experiencing increased competition in
our markets and while we are willing to bid at lower than historical profit
margins, we will maintain our pricing discipline which could result in backlog
contraction."

Mr. Manning noted, "In general, the total state highway and bridge construction
budgets in the markets we serve appear higher in 2010 than in 2009. However, a
replacement for the SAFETEA-LU bill was not enacted upon its expiration on
September 30, 2009. Federal financial assistance to states for highways and
bridges is currently on a month-to-month basis. State contract awards for
highway and bridge construction under the economic-stimulus legislation enacted
in February of this year have to date been less than anticipated. With regard to
municipal infrastructure project budgets, funding should increase in 2010 versus
2009 in San Antonio but decline somewhat in Houston."

Discussing the outlook for 2010, Mr. Manning continued, "More than in any time
in the recent past, market and funding visibility is very limited. Based on the
factors discussed above and the more competitive bidding climate, our 2010
revenues and net income attributable to common stockholders could be below, and
may be substantially below, those expected for 2009. We have taken appropriate
action including reducing headcount, and we will continue to monitor headcount
and discretionary expenses and make adjustments as appropriate. Given the
current level of difficulty in forecasting in our industry and the funding
uncertainties in our markets, we have decided to discontinue guidance. We
believe the ranges we would have to provide in 2010 to reflect these
uncertainties would not be meaningful to investors."

Mr. Harper added, "We believe that our markets and funding sources will recover
from the current conditions and that our backlog, revenues and income will
return to levels more consistent with historical levels. However, we cannot
predict the timing of a return to more normal markets. We also believe that the
Company is in a sound financial condition and has the resources and management
experience to weather current market conditions and continue to successfully bid
for projects as they become available at acceptable profit margin levels."

Jim Allen, Sterling`s CFO, noted, "Our financial position and liquidity remain
strong, with working capital of approximately $115.8 million, including cash,
cash equivalents and short-term investments of $103.5 million at September 30,
2009. We had total assets of $308.9 million and common stockholders` equity of
$183.1 million. Year-to-date, we have paid down borrowings of approximately $15
million, and at close of the third quarter, we had approximately $33.2 million
of borrowing capacity available under our $75 million credit facility.
Continuing our current policy of keeping capital expenditures to a minimum, only
$4.4 million has been invested in the replacement of equipment and the expansion
of our office and shop facilities through September 30, 2009 compared to $17.0
million at September 30, 2008."

Conference Call and Filings

Sterling`s management will hold a conference call to discuss third quarter
results and recent corporate developments, at 11:00 am ET/ 10:00 am CT today,
Monday, November 9, 2009. The call will be hosted by Patrick Manning, Chairman
and Chief Executive Officer, Joe Harper, Sr., 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, Nevada and other states where there are
contracting opportunities. 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 Third Quarter Report on Form 10-Q with the U.S.
Securities and Exchange Commission on Monday, November 9, 2009.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except share and per share data)

(Unaudited)

Three months ended Nine months ended

September 30,
September 30,
2009 2008 2009 2008

Revenues $ 103,929 $ 114,148 $ 319,170 $ 305,802
Cost of revenues 87,387 101,576 272,238 273,389
Gross profit 16,542 12,572 46,932 32,413
General and administrative expenses (3,508 ) (3,201 ) (10,536 ) (10,090 )
Other income (expense) (70 ) 61 (30 ) (41 )
Operating income 12,964 9,432 36,366 22,282
Interest income 129 303 406 813
Interest expense (52 ) (144 ) (154 ) (426 )
Income before income taxes and earnings attributable to the noncontrolling interest 13,041 9,591 36,618 22,669
Income tax expense (4,214 ) (3,245 ) (12,154 ) (7,616 )
Net income 8,827 6,346 24,464 15,053
Less: Net income attributable to the noncontrolling interest in earnings of subsidiary (735 ) (368 ) (1,521 ) (819 )
Net income attributable to Sterling common stockholders $ 8,092 $ 5,978 $ 22,943 $ 14,234

Net income per share attributable to Sterling common stockholders:
Basic $ 0.61 $ 0.46 $ 1.73 $ 1.09
Diluted $ 0.59 $ 0.44 $ 1.67 $ 1.04

Weighted average number of common shares outstanding used in computing per share amounts:
Basic 13,275,416 13,125,671 13,229,268 13,101,766
Diluted 13,740,464 13,705,477 13,732,834 13,702,800

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

(Unaudited)

September 30, 2009 December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents $ 62,239 $ 55,305
Short-term investments 41,231 24,379
Contracts receivable, including retainage 66,387 60,582
Costs and estimated earnings in excess of billings on uncompleted contracts 6,196 7,508
Inventories 1,224 1,041
Deposits and other current assets 1,257 3,907
Total current assets 178,534 152,722
Property and equipment, net 71,681 77,993
Goodwill 57,232 57,232
Other assets, net 1,423 1,668
Total assets $ 308,871 $ 289,615
LIABILITIES AND STOCKHOLDERS` EQUITY
Current liabilities:
Accounts payable $ 27,475 $ 26,111
Billings in excess of costs and estimated earnings on uncompleted contracts 25,693 23,127
Current maturities of long-term obligations 73 73
Income taxes payable 23 547
Other accrued expenses 9,492 7,741
Total current liabilities 62,756 57,599
Long-term liabilities:
Long-term debt, net of current maturities 40,428 55,483
Deferred tax liability, net 15,051 11,117
Put liability related to and noncontrolling owner's interest in subsidiary 7,568 6,300
Total long-term liabilities 63,047 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 shares, 13,285,244 and 13,184,638 shares issued and outstanding 132 131
Additional paid-in capital 150,902 150,223
Retained earnings 32,034 8,762
Total Sterling common stockholders` equity 183,068 159,116
Total liabilities and stockholders` equity $ 308,871 $ 289,615

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

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