Sterling Construction Expects Pre-tax Loss In Q4; But Sees Improvement In 2014

(RTTNews) - Sterling Construction Company Inc. (STRL) announced that it expects to report pre-tax losses for the fourth-quarter and twelve months ended December 31, 2013 in the range of $36 million to $38 million, and $68 million to $70 million, respectively.

The company attributed the losses primarily to additional write-downs on three large projects booked prior to 2012 in Texas, that continued to have a negative impact on profitability.

These projects, which are expected to be substantially complete by the end of the second quarter of 2014, have been encountering unanticipated net revisions to contract "cost to complete" estimates that became apparent and quantifiable during the 2013 fourth quarter.

Despite issues with these projects, bookings have been improving, both in terms of dollar amounts and gross margins, as has been reported by Sterling in its quarterly financial results throughout 2013. As Sterling continues to work through these projects and win new awards, gross margins are expected to improve.

For the full year 2013, new contracted backlog was approximately $600 million and carried an average gross margin in the high single-digit percentage range.

Peter MacKenna, President and Chief Executive Officer of Sterling said, "The challenges associated with these three projects have been ongoing for much of 2013; however, our visibility into the extent of their financial impact did not become entirely clear until late in the fourth quarter. While we are not pleased with the bottom-line results, we believe that they represent the final resolution of a very difficult period for our Texas operations. The recognition of these losses in the final quarter of 2013, in combination with the numerous managerial and operational enhancements we've made over the past year, should translate into a significantly improved financial performance in 2014."

The company also reported that due to the fourth quarter loss, Sterling is in breach of certain financial covenants contained in its credit facility. Based upon initial conversations with its primary lender, management is confident that it will negotiate a satisfactory resolution of this matter.

The company noted that it plans to issue results for the fourth quarter and year ended December 31, 2013 on or about March 17, 2014.