Sterling construction company

Abiram Balasubramaian

Auzma Rashid Kakroo

Jeffery Visava

Kimaya Sadavarte

Naikaj Bhobe

Sterling Construction Company

Overview of SCC

“Safety, Quality, People and Innovation”- Form the core of the company values

1700 Employees$700 million revenue, consistent GM

ratio of >6%Transportation & Water InfrastructureGovernment highway projectsHas seamlessly acquired other

entities over the years to expand its geographic footprint

Geographic Presence in the US



Competitors

Comparison of competitors’ Revenue


$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

$1,600,000,000

J .D. A

brams

Sterlin

g Constr

uctions

Zach

ry Inc

J .D. Abrams

Sterling Constructions

Zachry Inc


Executive Compensation in 2013

2Q2013 2012 2011 2010 2009

-40

-30

-20

-10

0

10

20

30

CEO's compensation Net Income


Executive Compensation - Justified by Performance?

Title Name Salary (including Bonus)Chairman Mr. Patrick Manning $618,240.00Chief Executive Officer Mr. Peter MacKenna$1,701,641.00Executive Vice President, CFO Elizabeth Brumley$345,026.00EVP Operations Mr. Anthony F. Colombo$405,382.00Director Mr. Milton L. Scott$75,542.00Director Mr. David R A Steadman$75,542.00


Market overview

Sterling Construction relies heavily on government highway work & has been adversely affected by Congress' inability to pass the Federal Highway Bill.

In response to the uncertain outlook Sterling refocused on project execution and conservative bidding.

The Past 2 years have been difficult but Sterling has tried its best in Balance Sheet management (esp. control A/R collection days)

Simplified Balance Sheets


Balance Sheet

(All in 000,000's)

2Q2013 12/31/12 12/31/11 12/31/10 12/31/09 12/31/08 12/31/07

Assets

Cash & Short Term Investments 22.03 52.35 61.23 85.19 93.73 79.68 80.7

A/R 96.24 81.82 80.93 77.04 82.62 60.58 54.39

Inv 4.6 3.73 1.92 1.48 1.23 1.04 1.24

Pre. Exp 0 0 0 0 0 0 0

Other Current assets 34.09 26.85 19.94 12.61 11.61 9.41 6.61

PPE 97.5 102.31 83.43 74.68 80.28 80 72.39

Goodwill 54.82 54.82 54.05 114.74 114.74 57.23 57.23

Other Long Term Assets 19.79 9.62 2.33 1.38 1.53 1.67 1.95

TA 329.07 331.50 303.83 367.12 385.74 289.61 274.51

Liabilities and Shareholders Equity

A/P 55.82 47.87 34.43 35.43 32.62 26.11 27.19

W/P, I/P, T/P 6.35 4.91 7.34 8.41 4.66 0.55 1.1

Other Current Liabilities 29.28 24.57 27.52 25.21 38.02 30.94 32.49

LTD 47.11 41.56 19.71 47.65 79.67 72.9 75.02

PIC 200.45 199.67 197.83 199 198.06 150.35 147.92

R/E -9.94 12.92 17 51.42 32.71 8.76 -9.21

TL+E 329.07 331.50 303.83 367.12 385.74 289.61 274.51

Simplified Income Statements



Backlog and Revenue Trends

Financial Metrics and Ratios


2006 2007 2008 2009 2010 2011 2012 2013 2014

-10

-5

0

5

10

15

20

11 10.11

13.9113.63

7.95 7.53

-6.24

Gross Profit Ratio

Gross Profit Ratio

2006 2007 2008 2009 2010 2011 2012 2013 20140

0.5

1

1.5

2

2.5

3

2.352.62 2.51 2.55

2.372.13

1.72

Current Ratio

Current Ratio

2006 2007 2008 2009 2010 2011 2012 2013 20140

0.2

0.4

0.6

0.8

1

1.2

0.980.820000000

0000010.670000000000001

0.470.41

0.56

0.730000000000001

Debt to Equity RatioDebt to Equity Ra-tio

2006 2007 2008 2009 2010 2011 2012 2013 2014

-20

-15

-10

-5

0

5

10

15

7.659.71 9.71 9.78

-17.19

4.52

-10.36

Return on AssetsReturn on Assets


Financial Ratios

2006 2007 2008 2009 2010 2011 2012 2013 2014

-30

-20

-10

0

10

20

30

15.15 17.68 16.23 14.34

-24.31

7.05

-17.89

Return on EquityReturn on Equity

2006 2007 2008 2009 2010 2011 2012 2013 2014

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

Earnings per ShareEarnings per Share

2006 2007 2008 2009 2010 2011 2012 2013 20140

20

40

60

80

100

120

140

160

64.8353.27

77.1661.14 58.94

47.37

143.74

A/R Collection in daysA/R Collection in days

2006 2007 2008 2009 2010 2011 2012 2013 20140

102030405060708090

36.42

25.5435.38 32.56

27.24 29.97

78.47

A/P payables in DaysA/P payables in Days


Ratio Overview

Revenues declined 8.5% due to the completion of several large projects in Utah partially offset by execution on jobs in TX, CA, NV

GM impacted due to execution of several low margin contracts awarded pre-2012

SG&A increased due to long term investments in operational efficiency especially IT infrastructure, leadership team and certain non-recurring costs

Stock Prices from Semester’s Beginning


Stock Prices from Semester’s Beginning


Lowest in this semester: $8.67 on 8th October 2013Highest in this semester: $11.47 currently

Pro forma and Trends


Future Net Income Analysis

2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.50

2

4

6

8

10

12

14

16

18

3

6.5

10

13.5

17

Net Income

Net Income


Backlog

Backlog of 714 Million up from 656 Million

last year


Recommendations

Expand into new service lines & Geography Increase market leadership in core geographic

markets (UT, TX, NV) Focus on shorter duration/higher margin

projects Streamline operations through functional

integration of subsidiaries using the new IT infrastructure

Continue attracting new innovative talent to keep in line with the high revenue per employee (Revenue of 410,000$ per employee)


SO, Should we buy this stock?

YES, This is a value stock and it is the right time to buy this stock

Sterling construction company

Economy & Finance

Transcript of Sterling construction company