UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
|
|
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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For the quarterly period ended: March 31, 2013
Or
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from___ to ___
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Commission file number 1-31993
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STERLING CONSTRUCTION COMPANY, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
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25-1655321
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State or other jurisdiction of incorporation
or organization
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(I.R.S. Employer
Identification No.)
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20810 Fernbush Lane
Houston, Texas
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77073
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(Address of principal executive office)
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(Zip Code)
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Registrant’s telephone number, including area code (281) 821-9091
|
|
(Former name, former address and former fiscal year, if changed from last report)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
[√] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [√] Yes [ ] No
|
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
|
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Large accelerated filer [ ] Accelerated filer [√]
Non-accelerated filer [ ] Smaller reporting company [ ]
(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [√] No
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At April 30, 2013, there were 16,612,254 shares outstanding of the issuer’s common stock, par value $0.01 per share.
|
March 31,
2013
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December 31,
2012
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 4,154 | $ | 3,142 | ||||
Short-term investments
|
21,562 | 49,211 | ||||||
Contracts receivable, including retainage
|
64,391 | 70,815 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
34,331 | 20,592 | ||||||
Inventories
|
5,375 | 3,731 | ||||||
Deferred tax asset, net
|
1,786 | 1,803 | ||||||
Receivables from and equity in construction joint ventures
|
9,450 | 11,005 | ||||||
Other current assets
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8,194 | 4,459 | ||||||
Total current assets
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149,243 | 164,758 | ||||||
Property and equipment, net
|
101,902 | 102,308 | ||||||
Goodwill
|
54,820 | 54,820 | ||||||
Long-term deferred tax asset, net
|
4,355 | 2,973 | ||||||
Other assets, net
|
5,827 | 6,651 | ||||||
Total assets
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$ | 316,147 | $ | 331,510 | ||||
LIABILITIES AND EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
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$ | 54,051 | $ | 47,796 | ||||
Billings in excess of costs and estimated earnings on uncompleted contracts
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12,870 | 18,918 | ||||||
Current maturities of long-term debt
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207 | 73 | ||||||
Accrued compensation
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4,950 | 4,909 | ||||||
Current obligation for noncontrolling owners’ interest in subsidiaries and joint ventures
|
3,346 | 2,887 | ||||||
Other current liabilities
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2,700 | 2,691 | ||||||
Total current liabilities
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78,124 | 77,274 | ||||||
Long-term liabilities:
|
||||||||
Long-term debt, net of current maturities
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11,892 | 24,201 | ||||||
Other long-term liabilities
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2,625 | 2,728 | ||||||
Total long-term liabilities
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14,517 | 26,929 | ||||||
Commitments and contingencies (Note 8)
|
||||||||
Obligations for noncontrolling owners’ interests in subsidiaries and joint ventures
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17,160 | 14,721 | ||||||
Equity:
|
||||||||
Sterling stockholders’ equity:
|
||||||||
Preferred stock, par value $0.01 per share; 1,000,000 shares authorized, none issued
|
-- | -- | ||||||
Common stock, par value $0.01 per share; 19,000,000 shares authorized, 16,612,254 and 16,495,216 shares issued
|
166 | 165 | ||||||
Additional paid in capital
|
197,353 | 197,067 | ||||||
Retained earnings
|
5,786 | 12,220 | ||||||
Accumulated other comprehensive income
|
417 | 696 | ||||||
Total Sterling common stockholders’ equity
|
203,722 | 210,148 | ||||||
Noncontrolling interests
|
2,624 | 2,438 | ||||||
Total equity
|
206,346 | 212,586 | ||||||
Total liabilities and equity
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$ | 316,147 | $ | 331,510 |
Three Months Ended
March 31,
|
||||||||
2013
|
2012
|
|||||||
Revenues
|
$ | 111,035 | $ | 98,425 | ||||
Cost of revenues
|
(109,650 | ) | (96,552 | ) | ||||
Gross profit
|
1,385 | 1,873 | ||||||
General and administrative expenses
|
(9,611 | ) | (7,666 | ) | ||||
Other operating income, net
|
252 | 1,231 | ||||||
Operating loss
|
(7,974 | ) | (4,562 | ) | ||||
Gain on sale of securities and other
|
573 | 750 | ||||||
Interest income
|
281 | 416 | ||||||
Interest expense
|
(99 | ) | (385 | ) | ||||
Loss before income taxes and earnings attributable to noncontrolling owners’ interests
|
(7,219 | ) | (3,781 | ) | ||||
Income tax benefit
|
2,800 | 3,976 | ||||||
Net income (loss)
|
(4,419 | ) | 195 | |||||
Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
|
(161 | ) | (7,695 | ) | ||||
Net loss attributable to Sterling common stockholders
|
$ | (4,580 | ) | $ | (7,500 | ) | ||
Net loss per share attributable to Sterling common stockholders:
|
||||||||
Basic
|
$ | (0.39 | ) | $ | (0.44 | ) | ||
Diluted
|
$ | (0.39 | ) | $ | (0.44 | ) | ||
Weighted average number of common shares outstanding used in computing per share amounts:
|
||||||||
Basic
|
16,598,255 | 16,322,477 | ||||||
Diluted
|
16,598,255 | 16,322,477 |
Three Months Ended March 31,
|
||||||||
2013
|
2012
|
|||||||
Net loss attributable to Sterling common stockholders
|
$ | (4,580 | ) | $ | (7,500 | ) | ||
Net income (loss) attributable to noncontrolling owners’ interests included in equity
|
186 | (18 | ) | |||||
Net income (loss) attributable to noncontrolling owners’ interests included in liabilities
|
(25 | ) | 7,713 | |||||
Add /(deduct) other comprehensive income, net of tax:
|
||||||||
Realized gain from sale of available-for-sale securities
|
(307 | ) | (299 | ) | ||||
Change in unrealized holding gain on available-for-sale securities
|
-- | 180 | ||||||
Realized (gain) loss from settlement of derivatives
|
(17 | ) | 2 | |||||
Change in the effective portion of unrealized gain in fair market value of derivatives
|
45 | 159 | ||||||
Comprehensive income (loss)
|
$ | (4,698 | ) | $ | 237 |
STERLING CONSTRUCTION COMPANY, INC. STOCKHOLDERS
|
||||||||||||||||||||||||||||||||||||
Addi-
tional
|
Accu-
mulated
Other
Compre-
hensive
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Noncon- | ||||||||||||||||||||||||||||||||||
Common Stock
|
Treasury Stock
|
Paid in |
Retained
|
Income |
trolling
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|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Earnings
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(Loss)
|
Interests
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Total
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||||||||||||||||||||||||||||
Balance at January 1, 2013
|
16,495 | $ | 165 | -- | $ | -- | $ | 197,067 | $ | 12,220 | $ | 696 | $ | 2,438 | $ | 212,586 | ||||||||||||||||||||
Net income (loss)
|
-- | -- | -- | -- | -- | (4,580 | ) | -- | 186 | (4,394 | ) | |||||||||||||||||||||||||
Other comprehensive loss
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-- | -- | -- | -- | -- | -- | (279 | ) | -- | (279 | ) | |||||||||||||||||||||||||
Stock issued upon option exercises
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3 | -- | -- | -- | 9 | -- | -- | -- | 9 | |||||||||||||||||||||||||||
Tax impact from exercise of stock options
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-- | -- | -- | -- | (15 | ) | -- | -- | -- | (15 | ) | |||||||||||||||||||||||||
Issuance and amortization of restricted stock
|
114 | 1 | -- | -- | 292 | -- | -- | -- | 293 | |||||||||||||||||||||||||||
Revaluation of noncontrolling interest, net of tax
|
-- | -- | -- | -- | -- | (1,854 | ) | -- | -- | (1,854 | ) | |||||||||||||||||||||||||
Balance at March 31, 2013
|
16,612 | $ | 166 | -- | $ | -- | $ | 197,353 | $ | 5,786 | $ | 417 | $ | 2,624 | $ | 206,346 |
Three Months Ended March 31,
|
||||||||
2013
|
2012
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss attributable to Sterling common stockholders
|
$ | (4,580 | ) | $ | (7,500 | ) | ||
Plus: Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
|
161 | 7,695 | ||||||
Net income (loss)
|
(4,419 | ) | 195 | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
4,622 | 4,530 | ||||||
Gain on disposal of property and equipment
|
(100 | ) | (1,204 | ) | ||||
Deferred tax benefit
|
(139 | ) | (2,951 | ) | ||||
Interest expense accreted on discounted liabilities
|
-- | 248 | ||||||
Stock-based compensation expense
|
278 | 105 | ||||||
Gain on sale of securities and other
|
(471 | ) | (649 | ) | ||||
Tax impact from exercise of stock options
|
15 | -- | ||||||
Other
|
-- | 18 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Decrease in contracts receivable
|
6,424 | 1,982 | ||||||
Increase in costs and estimated earnings in excess of billings on uncompleted contracts
|
(13,739 | ) | (1,312 | ) | ||||
(Increase) decrease in receivables from and equity in construction joint ventures
|
1,555 | (1,489 | ) | |||||
Increase in income tax receivable
|
(2,672 | ) | (1,079 | ) | ||||
Increase in inventories, deposits and other current assets
|
(1,881 | ) | (1,906 | ) | ||||
Increase in accounts payable
|
6,246 | 4,762 | ||||||
Increase (decrease) in billings in excess of costs and estimated earnings on uncompleted contracts
|
(6,048 | ) | 2,431 | |||||
Increase (decrease) in accrued compensation and other liabilities
|
81 | (2,303 | ) | |||||
Net cash provided by (used in) operating activities
|
(10,248 | ) | 1,378 | |||||
Cash flows from investing activities:
|
||||||||
Additions to property and equipment
|
(4,898 | ) | (5,910 | ) | ||||
Proceeds from sales of property and equipment
|
813 | 3,306 | ||||||
Purchases of short-term securities, available for sale
|
(505 | ) | (9,779 | ) | ||||
Sales of short-term securities, available for sale
|
28,151 | 11,325 | ||||||
Net cash provided by (used in) investing activities
|
23,561 | (1,058 | ) | |||||
Cash flows from financing activities:
|
||||||||
Cumulative daily drawdowns – Credit Facility
|
35,888 | 1,000 | ||||||
Cumulative daily repayments – Credit Facility
|
(48,179 | ) | (1,000 | ) | ||||
Tax impact from exercise of stock options
|
(15 | ) | -- | |||||
Other
|
5 | (81 | ) | |||||
Net cash used in financing activities
|
(12,301 | ) | (81 | ) | ||||
Net increase in cash and cash equivalents
|
1,012 | 239 | ||||||
Cash and cash equivalents at beginning of period
|
3,142 | 16,371 | ||||||
Cash and cash equivalents at end of period
|
$ | 4,154 | $ | 16,610 | ||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid during the period for interest
|
$ | 182 | $ | 120 | ||||
Cash paid during the period for income taxes
|
$ | 21 | $ | 2,000 | ||||
Non-cash items:
|
||||||||
Revaluation of noncontrolling interest obligations, net of tax
|
$ | (1,854 | ) | $ | 301 |
1.
|
Summary of Business and Significant Accounting Policies
|
2.
|
Cash and Cash Equivalents and Short-term Investments
|
March 31, 2013
|
||||||||||||||||||||
Total
Fair
Value
|
Level 1
|
Level 2
|
Gross
Unrealized
Gains
(pre-tax)
|
Gross
Unrealized
Losses
(pre-tax)
|
||||||||||||||||
Mutual funds
|
$ | -- | $ | -- | $ | -- | $ | -- | $ | -- | ||||||||||
Municipal bonds
|
21,562 | -- | 21,562 | 769 | (189 | ) | ||||||||||||||
Total securities available-for-sale
|
$ | 21,562 | $ | -- | $ | 21,562 | $ | 769 | $ | (189 | ) |
December 31, 2012
|
||||||||||||||||||||
Total
Fair
Value
|
Level 1
|
Level 2
|
Gross
Unrealized
Gains
(pre-tax)
|
Gross
Unrealized
Losses
(pre-tax)
|
||||||||||||||||
Mutual funds
|
$ | 27,582 | $ | 27,582 | $ | -- | $ | 337 | $ | 9 | ||||||||||
Municipal bonds
|
21,629 | -- | 21,629 | 862 | 128 | |||||||||||||||
Total securities available-for-sale
|
$ | 49,211 | $ | 27,582 | $ | 21,629 | $ | 1,199 | $ | 137 |
3.
|
Construction Joint Ventures
|
March 31,
2013
|
December 31,
2012
|
|||||||
Total combined:
|
||||||||
Current assets
|
$ | 75,414 | $ | 92,102 | ||||
Less current liabilities
|
(45,606 | ) | (48,002 | ) | ||||
Net assets
|
$ | 29,808 | $ | 44,100 | ||||
Backlog
|
$ | 190,627 | $ | 213,924 | ||||
Sterling’s noncontrolling interest in backlog
|
$ | 68,873 | $ | 77,222 | ||||
Sterling’s receivables from and equity in net assets of construction joint ventures
|
$ | 9,450 | $ | 11,005 |
Three Months Ended
March 31,
|
||||||||
2013
|
2012
|
|||||||
Total combined:
|
||||||||
Revenues
|
$ | 24,874 | $ | 90,374 | ||||
Income before tax
|
(4,399 | ) | 8,562 | |||||
Sterling’s noncontrolling interest:
|
||||||||
Revenues
|
$ | 9,078 | $ | 15,916 | ||||
Income before tax
|
(2,216 | ) | 1,413 |
4.
|
Property and Equipment
|
March 31,
2013
|
December 31,
2012
|
|||||||
Construction equipment
|
$ | 132,363 | $ | 130,014 | ||||
Transportation equipment
|
19,550 | 19,266 | ||||||
Buildings
|
10,427 | 10,176 | ||||||
Office equipment
|
1,383 | 1,279 | ||||||
Land
|
4,916 | 4,916 | ||||||
Water rights
|
200 | 200 | ||||||
168,839 | 165,851 | |||||||
Less accumulated depreciation
|
(66,937 | ) | (63,543 | ) | ||||
$ | 101,902 | $ | 102,308 |
5.
|
Derivative Financial Instruments
|
Balance Sheet Location
|
March 31,
2013
|
December 31,
2012
|
||||||
Derivative assets:
|
||||||||
Deposits and other current assets
|
$
|
27
|
$
|
7
|
||||
Other assets, net
|
24
|
1
|
||||||
$
|
51
|
$
|
8
|
|||||
Derivative liabilities:
|
||||||||
Other current liabilities
|
$
|
--
|
$
|
--
|
||||
Other long-term liabilities
|
--
|
--
|
||||||
$
|
--
|
$
|
--
|
March 31,
2013
|
March 31,
2012
|
|||||||
Increase in fair value of derivatives included in other comprehensive income (loss) - effective portion
|
$ | 43 | $ | 249 | ||||
Realized gain (loss) included in cost of revenues - effective portion
|
26 | (3 | ) | |||||
Increase (decrease) in fair value of derivatives included in cost of revenues - ineffective portion
|
-- | -- |
6.
|
Changes in Accumulated Other Comprehensive Income by Component
|
Three Months Ended March 31, 2013 (*)
|
||||||||||||
Unrealized
Gain and
Loss on
Available-
for-sale
Securities
|
Unrealized
Gain and
Loss on
Cash Flow
Hedges
|
Total | ||||||||||
Beginning Balance
|
$ | 691 | $ | 5 | $ | 696 | ||||||
Other comprehensive income before reclassification
|
-- | 45 | 45 | |||||||||
Amounts reclassified from accumulated other comprehensive income
|
(307 | ) | (17 | ) | (324 | ) | ||||||
Net current-period other comprehensive income
|
(307 | ) | 28 | (279 | ) | |||||||
Ending Balance
|
$ | 384 | $ | 33 | $ | 417 |
Amount Reclassified
From Accumulated
Other Comprehensive
Income (*)
|
||||||||||
Three Months Ended
March 31,
|
||||||||||
Details About Accumulated Other Comprehensive
Income (loss) Components
|
2013
|
2012
|
Statement of
Operations
Classification
|
|||||||
Realized gain and loss on available-for sale securities
|
$
|
482
|
$
|
460
|
Gain on sale of securities and other
|
|||||
Total before tax
|
482
|
460
|
||||||||
Income tax expense
|
(175
|
)
|
(161
|
)
|
Income tax expense
|
|||||
Total reclassification related to available-for-sale securities
|
$
|
307
|
$
|
299
|
Net income
|
|||||
Realized gain and loss on cash flow hedges
|
$
|
26
|
$
|
(3
|
)
|
Cost of revenues
|
||||
Total before tax
|
26
|
(3
|
)
|
|||||||
Income tax benefit (expense)
|
(9
|
)
|
1
|
Income tax expense
|
||||||
Total reclassification related to cash flow hedges
|
$
|
17
|
$
|
(2
|
)
|
Net income (loss)
|
7.
|
Income Taxes
|
Three Months Ended
March 31,
|
||||||||
2013
|
2012
|
|||||||
Current tax benefit
|
$ | (2,661 | ) | $ | (1,025 | ) | ||
Deferred tax benefit
|
(139 | ) | (2,951 | ) | ||||
Total tax benefit
|
$ | (2,800 | ) | $ | (3,976 | ) |
2013
|
2012
|
|||||||||||||||
Amount
|
%
|
Amount
|
%
|
|||||||||||||
Tax benefit at the U.S. federal statutory rate
|
$ | (2,526 | ) | 35.0 | % | $ | (1,323 | ) | 35.0 | % | ||||||
State franchise and income tax based on income, net of refunds and federal benefits
|
(115 | ) | 1.6 | (15 | ) | 0.4 | ||||||||||
Taxes on subsidiaries’ and joint ventures’ earnings allocated to noncontrolling ownership interests
|
(59 | ) | 0.8 | (2,694 | ) | 71.2 | ||||||||||
Non-taxable interest income
|
(80 | ) | 1.1 | (122 | ) | 3.2 | ||||||||||
Other permanent differences
|
(20 | ) | 0.3 | 178 | (4.6 | ) | ||||||||||
Income tax benefit
|
$ | (2,800 | ) | 38.8 | % | $ | (3,976 | ) | 105.2 | % |
8.
|
Contingencies Related to Litigation
|
9.
|
Acquisitions and Subsidiaries and Joint Ventures with Noncontrolling Owners’ Interests
|
Three Months Ended
March 31,
|
||||||||
2013
|
2012
|
|||||||
Balance, beginning of period
|
$ | 20,046 | $ | 18,375 | ||||
Net income attributable to noncontrolling interest included in liabilities
|
(25 | ) | 7,713 | |||||
Net income attributable to noncontrolling interest included in equity
|
186 | (18 | ) | |||||
Accretion of interest on RLW put/call
|
-- | 248 | ||||||
Change in fair value of RLW put/call
|
(58 | ) | (463 | ) | ||||
Change in fair value of RHB obligation
|
2,981 | -- | ||||||
Balance, end of period
|
$ | 23,130 | $ | 25,855 |
10.
|
Stockholders’ Equity
|
11.
|
Variable Interest Entities
|
March 31,
2013
|
December 31,
2012
|
|||||||
Assets:
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 3,153 | $ | 7,164 | ||||
Contracts receivable, including retainage
|
2,490 | 2,866 | ||||||
Other current assets
|
4,102 | 1,214 | ||||||
Total current assets
|
9,745 | 11,244 | ||||||
Property and equipment, net
|
4,933 | 3,041 | ||||||
Goodwill
|
1,501 | 1,501 | ||||||
Total assets
|
$ | 16,179 | $ | 15,786 | ||||
Liabilities:
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 6,521 | $ | 4,627 | ||||
Other current liabilities
|
4,414 | 6,283 | ||||||
Total current liabilities
|
10,935 | 10,910 | ||||||
Long-term liabilities:
|
||||||||
Other long-term liabilities
|
-- | -- | ||||||
Total long-term liabilities
|
-- | -- | ||||||
Total liabilities
|
$ | 10,935 | $ | 10,910 |
Three Months Ended
March 31,
|
||||||||
2013
|
2012
|
|||||||
Revenues
|
$ | 10,789 | 4,514 | |||||
Operating income (loss)
|
372 | (31 | ) | |||||
Net income (loss) attributable to Sterling common stockholders
|
121 | (12 | ) |
12.
|
Net Income (Loss) per Share Attributable to Sterling Common Stockholders
|
Three Months
Ended March 31,
|
||||||||
2013
|
2012
|
|||||||
Numerator:
|
||||||||
Net loss attributable to Sterling common stockholders
|
$
|
(4,580
|
)
|
$
|
(7,500
|
)
|
||
Revaluation of noncontrolling interest obligations reflected in retained earnings, net of tax
|
(1,854
|
)
|
301
|
|||||
$
|
(6,434
|
)
|
$
|
(7,199
|
)
|
|||
Denominator:
|
||||||||
Weighted average common shares outstanding — basic
|
16,598
|
16,322
|
||||||
Shares for dilutive stock options and warrants
|
--
|
--
|
||||||
Weighted average common shares outstanding and assumed conversions— diluted
|
16,598
|
16,322
|
||||||
Basic loss per share attributable to Sterling common stockholders
|
$
|
(0.39
|
)
|
$
|
(0.44
|
)
|
||
Diluted loss per share attributable to Sterling common stockholders
|
$
|
(0.39
|
)
|
$
|
(0.44
|
)
|
·
|
changes in general economic conditions, including recessions, reductions in federal, state and local government funding for infrastructure services and changes in those governments’ budgets, practices, laws and regulations;
|
·
|
delays or difficulties related to the completion of our projects, including additional costs, reductions in revenues or the payment of liquidated damages, or delays or difficulties related to obtaining required governmental permits and approvals;
|
·
|
actions of suppliers, subcontractors, design engineers, joint venture partners, customers, competitors, banks, surety companies and others which are beyond our control, including suppliers’, subcontractors’, and joint venture partners’ failure to perform;
|
·
|
the effects of estimates inherent in our percentage-of-completion accounting policies, including onsite conditions that differ materially from those assumed in our original bid, contract modifications, mechanical problems with our machinery or equipment and effects of other risks discussed in this document;
|
·
|
design/build contracts which subject us to the risk of design errors and omissions;
|
·
|
cost escalations associated with our contracts, including changes in availability, proximity and cost of materials such as steel, cement, concrete, aggregates, oil, fuel and other construction materials, and cost escalations associated with subcontractors and labor;
|
·
|
our dependence on a limited number of significant customers;
|
·
|
adverse weather conditions; although we prepare our budgets and bid contracts based on historical rain and snowfall patterns, the incidence of rain, snow, hurricanes, etc., may differ materially from these expectations;
|
·
|
the presence of competitors with greater financial resources or lower margin requirements than ours, and the impact of competitive bidders on our ability to obtain new backlog at reasonable margins acceptable to us;
|
·
|
our ability to successfully identify, finance, complete and integrate acquisitions;
|
·
|
citations issued by any governmental authority, including the Occupational Safety and Health Administration;
|
·
|
federal, state and local environmental laws and regulations where non-compliance can result in penalties and/or termination of contracts as well as civil and criminal liability;
|
·
|
the instability of certain financial institutions, which could cause losses on our cash and cash equivalents and short-term investments;
|
·
|
adverse economic conditions in our markets; and
|
·
|
the other factors discussed in more detail in our Annual Report on Form 10-K for the year ended December 31, 2012 (“2012 Form 10-K”) under “Item 1A. —Risk Factors.”
|
Three Months Ended March 31,
|
||||||||||||
2013
|
2012
|
%
|
||||||||||
(Dollar amounts in thousands)
|
||||||||||||
Revenues
|
$ | 111,035 | $ | 98,425 | 12.8 | |||||||
Gross profit
|
$ | 1,385 | $ | 1,873 | (26.1 | ) | ||||||
General and administrative expenses
|
(9,611 | ) | (7,666 | ) | 25.4 | |||||||
Other operating income, net
|
252 | 1,231 | (79.5 | ) | ||||||||
Operating loss
|
(7,974 | ) | (4,562 | ) | 74.8 | |||||||
Gain on the sale of securities and other
|
573 | 750 | (23.6 | ) | ||||||||
Interest income
|
281 | 416 | (32.5 | ) | ||||||||
Interest expense
|
(99 | ) | (385 | ) | (74.3 | ) | ||||||
Loss before income taxes and earnings attributable to noncontrolling owners’ interests
|
(7,219 | ) | (3,781 | ) | 90.9 | |||||||
Income tax benefit
|
2,800 | 3,976 | (29.6 | ) | ||||||||
Net income (loss)
|
(4,419 | ) | 195 |
NM
|
||||||||
Noncontrolling owners’ interest in earnings of subsidiaries and joint ventures
|
(161 | ) | (7,695 | ) | (97.9 | ) | ||||||
Net loss attributable to Sterling common stockholders
|
$ | (4,580 | ) | $ | (7,500 | ) | (38.9 | ) | ||||
Gross margin
|
1.2 | % | 1.9 | % | (36.8 | ) | ||||||
Operating margin
|
(7.2 | )% | (4.6 | )% | 56.5 | |||||||
Amount as of
|
||||||||||||
March 31,
2013
|
December 31,
2012
|
|||||||||||
Contract backlog, end of period
|
$ | 693,000 | $ | 656,000 | ||||||||
NM – Not meaningful.
|
Three Months Ended
March 31,
|
||||||||
2013
|
2012
|
|||||||
Net cash provided by (used in):
|
||||||||
Operating activities
|
$ | (10,248 | ) | $ | 1,378 | |||
Capital expenditures
|
(4,898 | ) | (5,910 | ) | ||||
Proceeds from sales of property and equipment, net of gain
|
813 | 3,306 | ||||||
Net sales of short-term securities
|
27,646 | 1,546 | ||||||
Net repayments on the Credit Facility
|
(12,291 | ) | -- | |||||
Other
|
(10 | ) | (81 | ) | ||||
Total
|
$ | 1,012 | $ | 239 |
Amount as of
|
||||||||
March 31,
2013
|
December 31,
2012
|
|||||||
Cash and cash equivalents
|
$ | 4,154 | $ | 3,142 | ||||
Working capital
|
$ | 71,119 | $ | 87,484 |
·
|
depreciation and amortization was comparable between the Current and Prior Quarters; and
|
·
|
deferred tax benefit of $139,000 in the Current Quarter is primarily attributable to the impact of lower tax depreciation than book depreciation offset by the impact of the amortization of goodwill for tax purposes; deferred tax expense of $3.0 million in the Prior Quarter is primarily the result of the impact of the additional earnings to noncontrolling interest owners of $6.7 million discussed in Note 9.
|
·
|
contracts receivable decreased by $6.4 million in the Current Quarter and $2.0 million in the Prior Quarter while the total costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings increased by $19.8 million and the excess of billings over costs incurred and estimated earnings increased by $1.1 million in the Prior Quarter;
|
·
|
the increase in income tax receivable of $2.7 million and $1.1 million in the Current Quarter and Prior Quarter is the result of the estimated benefit from the tax net operating loss forecasted for 2013 and 2012, respectively;
|
·
|
accounts payable increased by $6.3 million in the Current Quarter and increased by $4.8 million in the Prior Quarter; and
|
·
|
accrued compensation and other liabilities decreased by $81,000 in the Current Quarter and decreased by $2.3 million in the Prior Quarter.
|
·
|
customer receivables and contract retentions;
|
·
|
costs and estimated earnings in excess of billings;
|
·
|
billings in excess of costs and estimated earnings;
|
·
|
investments in our unconsolidated construction joint ventures;
|
·
|
the size and status of contract mobilization payments and progress billings; and
|
·
|
the amounts owed to suppliers and subcontractors.
|
Net loss
|
$ | (4,419 | ) | |
Current portion of obligation to noncontrolling interest owners
|
(459 | ) | ||
Depreciation and amortization
|
4,622 | |||
Deferred tax benefit
|
(139 | ) | ||
Capital expenditures
|
(4,898 | ) | ||
Proceeds from sales of property and equipment, net of gain
|
713 | |||
Net repayments on the Credit Facility
|
(12,291 | ) | ||
Other
|
506 | |||
Total decrease in working capital
|
$ | (16,365 | ) |
·
|
Make distributions or pay dividends;
|
·
|
Incur liens and encumbrances;
|
·
|
Incur further indebtedness;
|
·
|
Guarantee obligations;
|
·
|
Dispose of a material portion of assets or merge with a third party; and
|
·
|
Make investments in securities.
|
Price Per Gallon
|
Fair Value of
Derivatives at
|
||||||||||||||||
Beginning
|
Ending
|
Range |
Weighted
Average
|
Remaining
Volume
(gallons)
|
March 31,
2012
(amounts in
thousands)
|
||||||||||||
April 1, 2013
|
December 31, 2013
|
$2.80 – 3.24 | $ | 2.95 | 605,000 | $ | 26 | ||||||||||
January 1, 2014
|
December 31, 2014
|
$2.79 – 2.93 | $ | 2.84 | 360,000 | 25 | |||||||||||
$ | 51 |
Exhibit No. | Description | |
31.1*
|
Certification of Peter E. MacKenna, Chief Executive Officer of Sterling Construction Company, Inc.
|
|
31.2*
|
Certification of Elizabeth D. Brumley, Chief Financial Officer of Sterling Construction Company, Inc.
|
|
32*
|
Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) of Peter E. MacKenna, Chief Executive Officer, and Elizabeth D. Brumley, Chief Financial Officer
|
|
95.1*
|
Mine Safety Disclosure
|
|
101.INS**
|
XBRL Instance Document
|
|
101.SCH**
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith.
|
**
|
Submitted electronically herewith.
|
STERLING CONSTRUCTION COMPANY, INC.
|
||
Date: May 10, 2013 | By: | /s/ Peter E. MacKenna |
Peter E. MacKenna
President and Chief Executive Officer
|
||
Date: May 10, 2013 | By: | /s/ Elizabeth D. Brumley |
Elizabeth D. Brumley
Chief Financial Officer
|
||
Exhibit No.
|
Description
|
|
31.1*
|
Certification of Peter E. MacKenna, Chief Executive Officer of Sterling Construction Company, Inc.
|
|
31.2*
|
Certification of Elizabeth D. Brumley, Chief Financial Officer of Sterling Construction Company, Inc.
|
|
32*
|
Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) of Peter E. MacKenna, Chief Executive Officer, and Elizabeth D. Brumley, Chief Financial Officer.
|
|
95.1*
|
Mine Safety Disclosure
|
|
101.INS**
|
XBRL Instance Document
|
|
101.SCH**
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith.
|
**
|
Submitted electronically herewith.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Sterling Construction Company, Inc. for the three months ended March 31, 2013;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Sterling Construction Company, Inc. for the three months ended March 31, 2013;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated: | May 10, 2013 | /s/ Peter E. MacKenna |
Peter E. MacKenna
Chief Executive Officer
|
||
Dated:
|
May 10, 2013 | /s/ Elizabeth D. Brumley |
Elizabeth D. Brumley
Chief Financial Officer
|
||
1.
|
Portable Crusher #1001 – MSHA ID #2602669
|
2.
|
Portable Crusher #1002 – MSHA ID #2601858
|
3.
|
Portable Crusher #1003 – MSHA ID #2601920
|
4.
|
Portable Crusher #1005 – MSHA ID #2602199
|
5.
|
Portable Crusher #1006 – MSHA ID #2602200
|
•
|
MSHA did not identify any flagrant violations under Section 110(b)(2) of the Mine Act.
|
•
|
MSHA did not issue any imminent danger orders requiring immediate withdrawal from the affected areas under Section 107(a) of the Mine Act.
|
•
|
MSHA did not propose any assessments under the Mine Act.
|
•
|
We did not experience any mining-related fatalities.
|
•
|
We did not receive written notice of a pattern of violations of mandatory health or safety standards from MSHA under Section 104(e) of the Mine Act or written notice of the potential to have a pattern of violations of mandatory health or safety standards from MSHA.
|
Note 6 - Changes in Accumulated Other Comprehensive Income by Component (Detail) - The changes in the balances of each component of accumulated other comprehensive income, net of tax: (USD $)
In Thousands, unless otherwise specified |
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Beginning Balance | $ 696 |
Net current-period other comprehensive income | (279) |
Ending Balance | 417 |
Other comprehensive income before reclassification | 45 |
Amounts reclassified from accumulated other comprehensive income | (324) |
Unrealized Gains And Losses Available For Sale Securities [Member]
|
|
Beginning Balance | 691 |
Net current-period other comprehensive income | (307) |
Ending Balance | 384 |
Amounts reclassified from accumulated other comprehensive income | (307) |
Unrealized Gains And Losses On Cash Flow Hedges [Member]
|
|
Beginning Balance | 5 |
Net current-period other comprehensive income | 28 |
Ending Balance | 33 |
Other comprehensive income before reclassification | 45 |
Amounts reclassified from accumulated other comprehensive income | $ (17) |
Note 11 - Variable Interest Entities (Detail) - Summary financial information of Myers included int consolidated balance sheet: (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
Mar. 31, 2012
|
Dec. 31, 2011
|
---|---|---|---|---|
Current assets: | ||||
Cash and cash equivalents | $ 4,154 | $ 3,142 | $ 16,610 | $ 16,371 |
Contracts receivable, including retainage | 64,391 | 70,815 | ||
Other current assets | 8,194 | 4,459 | ||
Total current assets | 149,243 | 164,758 | ||
Property and equipment, net | 101,902 | 102,308 | ||
Goodwill | 54,820 | 54,820 | ||
Total assets | 316,147 | 331,510 | ||
Current liabilities: | ||||
Accounts payable | 54,051 | 47,796 | ||
Total current liabilities | 2,700 | 2,691 | ||
Variable Interest Entity, Primary Beneficiary [Member]
|
||||
Current assets: | ||||
Cash and cash equivalents | 3,153 | 7,164 | ||
Contracts receivable, including retainage | 2,490 | 2,866 | ||
Other current assets | 4,102 | 1,214 | ||
Total current assets | 9,745 | 11,244 | ||
Property and equipment, net | 4,933 | 3,041 | ||
Goodwill | 1,501 | 1,501 | ||
Total assets | 16,179 | 15,786 | ||
Current liabilities: | ||||
Accounts payable | 6,521 | 4,627 | ||
Other current liabilities | 4,414 | 6,283 | ||
Total current liabilities | 10,935 | 10,910 | ||
Long-term liabilities: | ||||
Total liabilities | $ 10,935 | $ 10,910 |
Note 10 - Stockholders' Equity (Detail) (USD $)
|
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
|
Mar. 30, 2012
|
Mar. 31, 2012
|
|
Allocated Share-based Compensation Expense | $ 278,000 | $ 105,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares) | 100,000 | ||
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Share-based Awards Other than Options | 2,200,000 | ||
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition | 3 years 146 days | ||
Proceeds from Stock Options Exercised | $ 9,150 | $ 5,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number (in Shares) | 288,178 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period (in Shares) | 19,200 |
Note 3 - Construction Joint Ventures (Detail) - Summary of joint venture condensed balance sheet information included as part of consolidated financial statements: (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Total combined: | ||
Current assets | $ 149,243 | $ 164,758 |
Less current liabilities | 78,124 | 77,274 |
Sterling’s receivables from and equity in net assets of construction joint ventures | 9,450 | 11,005 |
Corporate Joint Venture [Member]
|
||
Total combined: | ||
Current assets | 75,414 | 92,102 |
Less current liabilities | (45,606) | (48,002) |
Net assets | 29,808 | 44,100 |
Backlog | 190,627 | 213,924 |
Sterling’s noncontrolling interest in backlog | 68,873 | 77,222 |
Sterling’s receivables from and equity in net assets of construction joint ventures | $ 9,450 | $ 11,005 |
Note 6 - Changes in Accumulated Other Comprehensive Income by Component (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block] |
|
Note 12 - Net Income (Loss) per Share Attributable to Sterling Common Stockholders (Detail)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 135,879 | 59,444 |
Three Months Ended [Member]
|
||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 2,800 |
Note 7 - Income Taxes (Detail) - The income tax expense in the accompanying condensed consolidated financial statements consists of the following: (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Current tax benefit | $ (2,661) | $ (1,025) |
Deferred tax benefit | (139) | (2,951) |
Total tax benefit | $ (2,800) | $ (3,976) |
Note 5 - Derivative Financial Instruments (Detail) - Summary of derivative instruments: (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Derivative assets: | ||
Deposits and other current assets | $ 27 | $ 7 |
Other assets, net | 24 | 1 |
$ 51 | $ 8 |
Note 11 - Variable Interest Entities (Detail)
|
1 Months Ended | 3 Months Ended |
---|---|---|
Aug. 31, 2011
|
Mar. 31, 2013
Myers [Member]
|
|
Variable Interest Entity, Qualitative or Quantitative Information, Ownership Percentage | 80.00% | 50.00% |
Note 2 - Cash and Cash Equivalents and Short-term Investments
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents, and Short-term Investments [Text Block] |
The
Company considers all highly liquid investments with original
or remaining maturities of three months or less at the time
of purchase to be cash equivalents. At March 31,
2013, approximately $4.0 million of cash and cash equivalents
were fully insured by the FDIC under its standard maximum
deposit insurance amount guidelines. At March 31,
2013, cash and cash equivalents included $542,000 belonging
to majority-owned joint ventures that are consolidated in
these financial statements which generally cannot be used for
purposes outside such joint ventures.
Short-term
investments include mutual funds and government bonds which
are considered available-for-sale
securities. Government bonds have maturity dates
of 2013-2050. At March 31, 2013 and December 31,
2012, the Company had short-term investments as follows
(amounts in thousands):
The
amortized cost basis of the above securities at March 31,
2013 and December 31, 2012 was $20.5 million and $48.1
million, respectively. Municipal bond securities
are the only securities held by the Company where fair value
does not equal amortized cost. The amortized cost
for municipal bond securities was $20.5 million at March 31,
2013 and December 31, 2012, respectively.
The
valuation inputs for Levels 1, 2 and 3 are as
follows:
Level
1 Inputs –Based upon quoted prices for identical assets
in active markets that the Company has the ability to access
at the measurement date.
Level
2 Inputs – Based upon quoted prices (other than Level
1) in active markets for similar assets, quoted prices for
identical or similar assets in markets that are not active,
inputs other than quoted prices that are observable for the
asset such as interest rates, yield curves, volatilities and
default rates and inputs that are derived principally from or
corroborated by observable market data.
Level
3 Inputs – Based on unobservable inputs reflecting the
Company’s own assumptions about the assumptions that
market participants would use in pricing the asset based on
the best information available.
The
Company had no short-term investments valued with Level 3
inputs at either of the balance sheet dates.
Gains
and losses realized on short-term investment securities are
included in “Gain on sale of securities and
other” in the accompanying statements of
operations. Unrealized gains (losses) on
short-term investments are included in accumulated other
comprehensive income (loss) in stockholders’ equity,
net of tax, as the gains and losses may be
temporary. For the three months ended March 31,
2013 and 2012, total proceeds from sales of short-term
investments were $28.2 million and $11.3 million with gross
realized gains of $486,000 and $460,000 and gross realized
losses of $4,000 and $0,
respectively. Accumulated other comprehensive
income (loss) at March 31, 2013 included unrealized gains
(losses) on short-term investments of $580,000 less the
associated taxes of $209,000. Upon the sale of
short-term investments, the cost basis used to determine
the gain or loss is based on the specific identification of
the security sold. All items included in
accumulated other comprehensive income (loss) are at the
corporate level, and no portion is attributable to
noncontrolling interests.
For
the three months ended March 31, 2013 and 2012, the Company
earned interest income of $229,000 and $353,000,
respectively. These amounts are recorded in
interest income in our condensed consolidated statement of
operations.
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