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þ | annual report pursuant to section 13 or 15(d) of the securities exchange act of 1934 |
o | transition report pursuant to section 13 or 15(d) of the securities exchange act of 1934 |
Delaware State or other jurisdiction of incorporation or organization | 25-1655321 (I.R.S. Employer Identification No.) |
20810 Fernbush Lane Houston, Texas (Address of principal executive offices) | 77073 (Zip Code) |
Title of each class None | Name of each exchange on which registered Not Applicable |
None
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E-1 | ||||||||
Consent of Grant Thornton LLP | ||||||||
Certification of Chief Executive Officer | ||||||||
Certification of Chief Financial Officer | ||||||||
Certification Pursuant to Section 1350 of the Chief Executive Officer and Chief Financial Officer |
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• | changes in general economic conditions or reductions in government funding for infrastructure projects; | ||
• | adverse economic conditions in our markets in Texas; | ||
• | delays or difficulties related to the completion of contracts, including additional costs, reductions in revenues or the payment of completion penalties or liquidated damages; | ||
• | actions of suppliers, subcontractors, customers, competitors and others which are beyond our control; | ||
• | the estimates inherent in our percentage-of-completion accounting policies; | ||
• | possible cost increases in fixed-price contracts; | ||
• | our dependence on a few significant customers; | ||
• | adverse weather conditions; | ||
• | the presence of competitors with greater financial resources than we have and the impact of competitive services and pricing; | ||
• | our ability to successfully identify, complete and integrate acquisitions; and | ||
• | the other factors discussed in more detail inItem 1A. —Risk Factors. |
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• | onsite conditions that differ from those assumed in the original bid; | ||
• | delays caused by weather conditions; | ||
• | later contract start dates than expected when we bid the contract; | ||
• | contract modifications creating unanticipated costs not covered by change orders; | ||
• | changes in availability, proximity and costs of materials, including steel, concrete, aggregate and other construction materials (such as stone, gravel and sand), as well as fuel and lubricants for our equipment; | ||
• | availability and skill level of workers in the geographic location of a project; | ||
• | our suppliers’ or subcontractors’ failure to perform; | ||
• | fraud or theft committed by our employees; | ||
• | mechanical problems with our machinery or equipment; | ||
• | citations issued by governmental authorities, including the Occupational Safety and Health Administration; | ||
• | difficulties in obtaining required governmental permits or approvals; | ||
• | changes in applicable laws and regulations; and | ||
• | claims or demands from third parties alleging damages arising from our work or from the project of which our work is part. |
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• | difficulties in the integration of operations and systems; | ||
• | the key personnel and customers of the acquired company may terminate their relationships with the acquired company; | ||
• | we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting; | ||
• | we may assume or be held liable for risks and liabilities (including for environmental-related costs) as a result of our acquisitions, some of which we may not discover during our due diligence; | ||
• | our ongoing business may be disrupted or receive insufficient management attention; and | ||
• | we may not be able to realize the cost savings or other financial benefits we anticipated. |
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to —
• | make distributions and dividends; | ||
• | incur liens or encumbrances; | ||
• | incur further indebtedness; | ||
• | guarantee obligations; | ||
• | dispose of a material portion of assets or otherwise engage in a merger with a third party; and | ||
• | incur negative income for two consecutive quarters. |
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Item 5. | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.. |
High | Low | |||||||
Year Ended December 31, 2005 | ||||||||
First Quarter | $ | 7.97 | $ | 5.16 | ||||
Second Quarter | $ | 9.00 | $ | 6.70 | ||||
Third Quarter | $ | 28.35 | $ | 7.25 | ||||
Fourth Quarter | $ | 26.30 | $ | 16.71 | ||||
Year Ended December 31, 2006 | ||||||||
First Quarter | $ | 23.76 | $ | 15.39 | ||||
Second Quarter | $ | 32.19 | $ | 22.00 | ||||
Third Quarter | $ | 30.13 | $ | 17.06 | ||||
Fourth Quarter | $ | 25.31 | $ | 19.54 | ||||
January 1 through March 1, 2007 | $ | 21.90 | $ | 18.82 |
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Among Sterling Construction Company, Inc, The Dow Jones US Total Market Index
And The Dow Jones US Heavy Construction Index
December | December | December | December | December | December | |||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |||||||||||||||||||||||||||
Sterling Construction Company, Inc | 100.00 | 104.17 | 269.64 | 308.93 | 1001.79 | 1295.24 | ||||||||||||||||||||||||||
Dow Jones US Total Market | 100.00 | 77.92 | 101.88 | 114.12 | 121.34 | 140.23 | ||||||||||||||||||||||||||
Dow Jones US Heavy Construction | 100.00 | 83.87 | 114.41 | 138.74 | 200.48 | 250.08 | ||||||||||||||||||||||||||
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Number of | Total Sale | |||||||
Date of Sale | Shares Sold | Price | ||||||
March 31, 2005 | 322,661 | $ | 483,991 | |||||
January 25, 2006 | 141,266 | $ | 211,899 | |||||
March 10, 2006 | 2,464 | $ | 3,696 | |||||
May 9, 2006 | 27,343 | $ | 41,014 |
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Year Ended December 31 | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(Amounts in thousands except per-share data) | ||||||||||||||||||||
Operating Results: | ||||||||||||||||||||
Revenues | $ | 249,348 | $ | 219,439 | $ | 132,478 | $ | 149,006 | $ | 111,747 | ||||||||||
�� | ||||||||||||||||||||
Income from continuing operations before income taxes | 19,204 | 13,329 | 4,109 | 8,583 | 3,523 | |||||||||||||||
Minority interest(1) | — | — | (962 | ) | (1,627 | ) | (873 | ) | ||||||||||||
Deferred income tax (expense)/benefit | (6,566 | ) | (2,788 | ) | 2,134 | (1,752 | ) | 174 | ||||||||||||
Income from continuing operations | 12,638 | 10,541 | 5,281 | 5,204 | 2,824 | |||||||||||||||
Income from discontinued operations, including gain on sale in 2006 | 682 | 559 | 372 | 215 | 528 | |||||||||||||||
Net income | $ | 13,320 | $ | 11,100 | $ | 5,653 | $ | 5,419 | $ | 3,352 | ||||||||||
Basic and diluted per share amounts: | ||||||||||||||||||||
Basic earnings per share from continuing operations | $ | 1.19 | $ | 1.36 | $ | 0.99 | $ | 1.02 | $ | 0.56 | ||||||||||
Basic earnings per share from discontinued operations | $ | 0.06 | $ | 0.07 | $ | 0.07 | $ | 0.04 | $ | 0.10 | ||||||||||
Basic earnings per share | $ | 1.25 | $ | 1.43 | $ | 1.06 | $ | 1.06 | $ | 0.66 | ||||||||||
Basic weighted average shares outstanding | 10,583 | 7,775 | 5,343 | 5,090 | 5,062 | |||||||||||||||
Diluted earnings per share from continuing operations | $ | 1.08 | $ | 1.11 | $ | 0.75 | $ | 0.80 | $ | 0.46 | ||||||||||
Diluted earnings per share from discontinued operations | $ | 0.06 | $ | 0.05 | $ | 0.05 | $ | 0.03 | $ | 0.09 | ||||||||||
Diluted earnings per share | $ | 1.14 | $ | 1.16 | $ | 0.80 | $ | 0.83 | $ | 0.55 | ||||||||||
Diluted weighted average shares outstanding | 11,714 | 9,538 | 7,028 | 6,489 | 6,102 | |||||||||||||||
Cash dividends declared | — | — | — | — | — | |||||||||||||||
Balance Sheet: | ||||||||||||||||||||
Total assets | $ | 167,772 | $ | 118,455 | $ | 89,544 | $ | 75,578 | $ | 72,757 | ||||||||||
Long-term debt | 30,659 | 14,570 | 21,979 | 19,992 | 32,784 | |||||||||||||||
Book value per share of outstanding common stock | $ | 8.37 | $ | 5.95 | $ | 4.77 | $ | 3.24 | $ | 2.14 | ||||||||||
Equity | 90,991 | 48,612 | 35,208 | 16,636 | 10,825 | |||||||||||||||
Shares outstanding | 10,875 | 8,165 | 7,379 | 5,140 | 5,056 |
(1) | Minority interest represented the 19.9% of Sterling Houston Holdings, Inc. (TSC) not owned by the Company until December 2004. |
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Name | Principal | Interest | Total Payment | |||||||||
Patrick T. Manning | $ | 318,592 | 2,867 | $ | 321,459 | |||||||
James D. Manning | $ | 1,855,349 | 16,698 | $ | 1,872,047 | |||||||
Joseph P. Harper, Sr. | $ | 2,637,422 | 23,737 | $ | 2,661,159 | |||||||
Maarten D. Hemsley | $ | 181,205 | 1,631 | $ | 182,836 | |||||||
Robert M. Davies | $ | 452,909 | 4,076 | $ | 456,985 |
Shares issued upon completion of equity offering | 2,003,263 | |||
Shares issued to selling shareholders for option/warrant exercise | 321,758 | |||
Proceeds received from sale of shares | $ | 30,049 | ||
Less: | ||||
Underwriters’ commission | ($2,103 | ) | ||
Expenses (legal, printing, etc.) | ($907 | ) | ||
Net proceeds from sale of shares | $ | 27,039 | ||
Proceeds received from exercise of options and warrants by selling shareholders | $ | 484 | ||
Total net proceeds received | $ | 27,523 | ||
Use of proceeds: | ||||
Repayment of related party 5-year 12% notes | $ | 8,449 | ||
Purchase of a drill shaft business | $ | 2,206 | ||
Purchase of other construction equipment | $ | 6,798 | ||
Total spent through December 31, 2006 | $ | 17,453 | ||
Balance retained in working capital | $ | 10,070 |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operation. |
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2006 | 2005 | % Change | ||||||||||
(Dollar amounts in thousands) | ||||||||||||
Revenues | $ | 249,348 | $ | 219,439 | 13.6 | % | ||||||
Gross profit | 28,547 | 23,756 | 20.2 | % | ||||||||
Gross margin | 11.4 | % | 10.8 | % | 5.6 | % | ||||||
General and administrative expenses, net | 10,825 | 9,375 | 15.5 | % | ||||||||
Other income | 276 | 284 | (0.03 | )% | ||||||||
Operating income | 17,998 | 14,665 | 22.7 | % | ||||||||
Operating margin | 7.2 | % | 6.7 | % | 7.5 | % | ||||||
Interest income | 1,426 | 150 | 850.6 | % | ||||||||
Interest expense | 220 | 1,486 | (85.2 | %) | ||||||||
Income from continuing operations before taxes | 19,204 | 13,329 | 44.1 | % | ||||||||
Income taxes | 6,566 | 2,788 | 135.5 | % | ||||||||
Net income from continuing operations | 12,638 | 10,541 | 19.9 | % | ||||||||
Net income from discontinued operations, including gain on sale | 682 | 559 | 22.0 | % | ||||||||
Net income | $ | 13,320 | $ | 11,100 | 20.0 | % | ||||||
Contract backlog, end of year | $ | 395,000 | $ | 307,000 | 28.7 | % |
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2006 | 2005 | |||||||
(Amounts in thousands | ||||||||
except per -share data) | ||||||||
Income from continuing operations before income taxes, as reported | $ | 19,204 | $ | 13,329 | ||||
Provision for income taxes (assuming a 34% effective rate) | 6,529 | 4,532 | ||||||
Net income from continuing operations as if a 34% rate had been applied | $ | 12,675 | $ | 8,797 | ||||
Basic income from continuing operations per common share | $ | 1.20 | $ | 1.13 | ||||
Diluted income from continuing operations per common share | $ | 1.08 | $ | 0.92 |
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2005 | 2004 | % Change | ||||||||||
(Dollar amounts in thousands) | ||||||||||||
Revenues | $ | 219,439 | $ | 132,478 | 65.6 | % | ||||||
Gross profit | 23,756 | 13,261 | 79.1 | % | ||||||||
Gross margin | 10.8 | % | 10.0 | % | 8.2 | % | ||||||
General and administrative expenses | 9,375 | 7,692 | 21.9 | % | ||||||||
Other income (expense) | 284 | (4 | ) | 720 | % | |||||||
Operating income | 14,665 | 5,565 | 163.5 | % | ||||||||
Operating margin | 6.7 | % | 4.2 | % | 59.1 | % | ||||||
Interest income | 150 | 9 | 1,567 | % | ||||||||
Interest expense | 1,486 | 1,465 | (8.2 | %) | ||||||||
Income from continuing operations, before minority interest and taxes | 13,329 | 4,109 | 224.4 | % | ||||||||
Minority interest | — | 962 | (100.0 | %) | ||||||||
Income taxes | 2,788 | (2,134 | ) | N.M. | ||||||||
Net income from continuing operations | 10,541 | 5,281 | 99.6 | % | ||||||||
Net income from discontinued operations | 559 | 372 | 50.3 | % | ||||||||
Net income | $ | 11,100 | $ | 5,653 | 96.4 | % | ||||||
Contract backlog, end of year | $ | 307,000 | $ | 232,000 | 32.3 | % |
• | a growing contract backlog, which enabled us to expand our equipment fleet and to hire more field crews, especially in the San Antonio and Austin markets; | ||
• | the continuing expansion of our construction capabilities, which allowed us to bid for and take on larger and more complex work; | ||
• | certain water main contracts that included large diameter pipe, facilitating greater revenues to be generated by our crews; | ||
• | the increase in the proportion of state highway contracts, which generally allow greater revenue production from our equipment and work crews; and | ||
• | generally better weather during 2005 which allowed for continuous work on construction contracts, compared with one of the wettest years on record in 2004. |
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2005 | 2004 | |||||||
(Amounts in thousands | ||||||||
except per -share data) | ||||||||
Income from continuing operations before income taxes, as reported | $ | 13,329 | $ | 3,147 | ||||
Provision for income taxes (assuming a 34% effective rate) | 4,532 | 1,070 | ||||||
Net income from continuing operations as if a 34% rate had been applied | $ | 8,797 | $ | 2,077 | ||||
Basic income from continuing operations per common share | $ | 1.13 | $ | 0.39 | ||||
Diluted income from continuing operations per common share | $ | 0.92 | $ | 0.30 |
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(Amounts in thousands) | ||||||||||||
Cash and cash equivalents (at end of period) | $ | 28,466 | $ | 22,267 | $ | 3,449 | ||||||
Net cash provided by (used in) Continuing operations: | ||||||||||||
Operating activities | 23,089 | 31,266 | 4,171 | |||||||||
Investing activities | (52,358 | ) | (10,972 | ) | (5,809 | ) | ||||||
Financing activities | 35,468 | (1,476 | ) | 2,436 | ||||||||
Discontinued operations | ||||||||||||
Operating activities | 495 | (294 | ) | (977 | ) | |||||||
Investing activities | 4,739 | — | (34 | ) | ||||||||
Financing activities | (5,357 | ) | 349 | 964 | ||||||||
Supplementary information: | ||||||||||||
Capital expenditures | 24,849 | 11,392 | 3,555 | |||||||||
Working capital (at end of period) | 62,874 | 18,354 | 16,052 |
• | depreciation and amortization, which totaled $7.0 million, an increase of $2.0 million from 2005, as a result of the continued increase in the size of our construction fleet; | ||
• | tax expense, which increased by $4.0 million in 2006 due principally to the increase in operating income. In 2005 we recorded a reduction in the valuation allowance related to the deferred tax asset. Although we have the benefit of significant NOL’s which offset most of our income from federal income taxes, we are required to reflect a full tax charge in our financial statements, through an adjustment to the deferred tax asset. In addition, we accelerate the depreciation of our fixed assets for tax purposes. The significant additions to fixed assets in 2006 increased our deferred tax liability and certain other timing differences are recorded in the income statement; and | ||
• | stock based compensation expense, which increased by $644,000 from 2005, resulting from grants in 2006 issued at significantly higher exercise prices due to an increase in our stock price over the year. |
• | there was an increase of $1.0 million in costs and estimated earnings in excess of billings on uncompleted contracts in 2006 compared with a decrease of $3.7 million in 2005. These changes reflect timing differences as contracts progress; | ||
• | billings in excess of costs and estimated earnings on uncompleted contracts increased by $7.9 million in 2006, while in 2005 there was an increase of $9.2 million. These changes principally reflect fluctuations in the timing and amount of mobilization payments to assist in the start-up on certain contracts; | ||
• | trade payables decreased by $3.0 million in 2006 compared with an increase of $6.0 million in 2005, reflecting the strength of our cash position; and | ||
• | contracts receivable increased by $7.9 million in 2006 and by $8.7 million in 2005, principally reflecting the revenue increase and related level of customer retentions. |
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Payments due by Period | ||||||||||||||||||||
Less Than | 4—5 | More Than | ||||||||||||||||||
Total | One Year | 1—3 Years | Years | 5 Years | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||
Construction Business Revolver | $ | 30,000 | $ | — | $ | 30,000 | $ | — | $ | — | ||||||||||
Operating leases | 3,504 | 1,010 | 2,024 | 470 | — | |||||||||||||||
Mortgages | 782 | 123 | 248 | 146 | 265 | |||||||||||||||
$ | 34,286 | $ | 1,133 | $ | 33,272 | $ | 616 | $ | 265 | |||||||||||
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Year | ||||||||||||||
Term of | ||||||||||||||
Director | Office | |||||||||||||
Name | Position | Age | Since | Expires | ||||||||||
Patrick T. Manning | Chairman of the Board of Directors & Chief Executive Officer | 61 | 2001 | 2008 | ||||||||||
Joseph P. Harper, Sr. | President, Treasurer & Chief Operating Officer, Director | 61 | 2001 | 2008 | ||||||||||
Maarten D. Hemsley | Chief Financial Officer, Director | 57 | 1998 | 2007 | ||||||||||
John D. Abernathy | Director | 69 | 1994 | 2009 | ||||||||||
Robert W. Frickel | Director | 63 | 2001 | 2009 | ||||||||||
Donald P. Fusilli, Jr. | Director | 55 | 2007 | 2007 | ||||||||||
Milton L. Scott | Director | 50 | 2005 | 2009 | ||||||||||
Christopher H. B. Mills | Director | 54 | 2001 | 2007 | ||||||||||
David R. A. Steadman | Director | 69 | 2005 | 2008 |
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Depreciation and amortization expense for the period;
Federal and state income tax expense incurred for the period;
Any extraordinary items to the extent a negative number;
Any fees paid to non-employee directors;
All charges for overhead or similar non-operating expenses of the Company as TSC’s ultimate parent company; and
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Interest income for the period.
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Non-Equity | ||||||||||||||||||||||||
Name | Option | Incentive Plan | All Other | |||||||||||||||||||||
and | Salary | Awards(1) | Compensation(2) | Compensation | Total | |||||||||||||||||||
Principal Position | Year | ($) | ($) | ($) | ($)(3) | ($) | ||||||||||||||||||
Patrick T. Manning Chairman of the Board & Chief Executive Officer (principal executive officer) | 2006 | $ | 240,000 | $ | 82,883 | $ | 341,000 | $ | 38,950 | $ | 702,833 | |||||||||||||
Joseph P. Harper, Sr. President, Treasurer & Chief Operating Officer | 2006 | $ | 235,800 | * | $ | 82,883 | $ | 318,500 | $ | 21,150 | $ | 658,333 | ||||||||||||
Maarten D. Hemsley Chief Financial Officer (principal financial officer) | 2006 | $ | 129,808 | $ | 22,862 | $ | 117,500 | $ | 12,350 | $ | 282,520 |
* | This includes $20,800 paid to Mr. Harper for foregoing approximately five weeks of the vacation he is entitled to under his employment agreement. | |
(1) | The value of these stock option awards is the total dollar cost recognized by the Company of the award in 2006 for financial reporting purposes in accordance with FAS 123R. No amounts earned by the executive officers have been capitalized on the balance sheet for 2006. The cost does not reflect any estimates made for financial statement reporting purposes of forfeitures by the executive officer related to service-based vesting conditions. | |
The valuation of these options was made on the equity valuation assumptions described in Note 10 ofNotes to Consolidated Financial Statements. None of the awards has been forfeited. For a description of the basis on |
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which these stock options were awarded and their full grant date fair market value, see the table ofGrants of Plan-Based Awards for 2006, below. | ||
(2) | Cash incentive bonuses were calculated and approved by the Company’s Compensation Committee in March 2007. The amounts are determined in part by the application of a formula found in the employment agreement of each executive officer and in part by the Compensation Committee exercising its discretion as to the amount of additional cash incentive bonus within the range provided for in the employment agreements. For a description of the formula and its application, see footnote (1) to the table ofGrants of Plan-Based Awards for 2006, below, under the headingNon-Equity Incentive Plan Awards. | |
(3) | A breakdown of the amounts in theAll Other Compensationcolumn is set forth in the following table. The dollar amounts indicated is the cost of the item to the Company. |
Type of Other Compensation | Mr. Manning | Mr. Harper | Mr. Hemsley | |||||||||
Car allowance | $ | 8,400 | $ | 8,400 | — | |||||||
Expenses of commuting to work | $ | 2,500 | $ | 1,800 | — | |||||||
Country club dues | $ | 25,000 | $ | 4,500 | — | |||||||
Company contribution to 401(k) plan account | $ | 3,050 | $ | 6,450 | $ | 7,500 | ||||||
Long-term disability insurance premium | — | — | $ | 4,502 | ||||||||
Term life insurance premium | — | — | $ | 348 |
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All Other | ||||||||||||||||||||||||
Option | Grant | |||||||||||||||||||||||
Awards: | Exercise | Date | ||||||||||||||||||||||
Number of | or Base | Fair | ||||||||||||||||||||||
Estimated Future Payouts | Securities | Price of | Value of | |||||||||||||||||||||
Under Non-Equity Incentive | Underlying | Option | Option | |||||||||||||||||||||
Grant | Plan Awards(1)(2) | Options(3) | Awards(4) | Awards(5) | ||||||||||||||||||||
Name | Date | ($) | (#) | ($/sh) | ($) | |||||||||||||||||||
Threshold | Target | Maximum | ||||||||||||||||||||||
Patrick T. Manning | 7/18/2006 | $ | 125,000 | $24,000 to $240,000 | $ | 240,000 | 10,000 | $ | 24.96 | $ | 163,300 | |||||||||||||
8/08/2006 | 1,000 | $ | 25.21 | $ | 16,440 | |||||||||||||||||||
Joseph P. Harper, Sr. | 7/18/2006 | $ | 125,000 | $21,500 to $215,000 | $ | 215,000 | 10,000 | $ | 24.96 | $ | 163,300 | |||||||||||||
8/08/2006 | 1,000 | $ | 25.21 | $ | 16,440 | |||||||||||||||||||
Maarten D. Hemsley | 7/18/2006 | $ | 50,000 | $50,000 | $ | 125,000 | 2,800 | $ | 24.96 | $ | 45,724 | |||||||||||||
(1) | Messrs. Manning and Harper Non-Equity Incentive Plan Awards. | |
Under his employment agreement, each of Messrs. Manning and Harper is entitled to an annual bonus of $125,000 for any fiscal year during the term of the agreement in which TSC achieves 75% or more of its budgeted EBITDA. This is the Threshold listed in the table since if the 75% is not achieved, no incentive payment is earned. | ||
An additional cash incentive bonus is payable if TSC’s EBITDA for a given year exceeds the amount budgeted by at least 10%. If TSC’s EBITDA for a given year exceeds the amount budgeted by between 10% and 30%, the amount of the additional cash incentive bonus is in the discretion of the Compensation Committee of the Board of Directors, but may not be less that 10% of the executive’s base salary or more than 100% of his base salary. This is the Target listed in the table. | ||
If TSC’s EBITDA for a given year exceeds the amount budgeted by more than 30%, the maximum additional cash incentive bonus is required to be paid. This is the Maximum listed in the table. | ||
Certain officers of TSC’s general partner, Sterling General, Inc., or SGI, are entitled to cash incentive bonuses based on the same formulas described above. The employment agreements of Messrs. Manning and Harper provide that the additional cash incentive bonuses that can be paid them and to those SGI officers together cannot exceed 30% of the amount by which TSC’s EBITDA exceeds the budgeted EBITDA. | ||
(2) | Mr. Hemsley’s Non-Equity Incentive Plan Awards. Under his employment agreement, Mr. Hemsley is entitled to a bonus of $50,000 for any year during the term of his agreement in which the Company on a consolidated basis achieves 75% or more of its budgeted EBITDA. The amount of any additional cash incentive bonus up to a maximum of $75,000 is in the discretion of the Compensation Committee of the Board of Directors. In exercising their discretion, members of the Compensation Committee are to consider the Company’s consolidated financial results for the year in question, the number of non-routine business transactions to which Mr. Hemsley devoted substantial time during the year and such other matters they consider relevant. | |
(3) | Stock Option Awards.The stock option awards in this column were all granted under the Company’s 2001 Stock Incentive Plan. In addition to the vesting dates of these options described below, they vest in full if there is a change in control of the Company. | |
The July 18, 2006 Stock Option Awards. |
• | The employment agreements of the executive officers provided for the grant of these stock options on this date, which was the second anniversary of the date of the agreement. | ||
• | Each option has a five-year term and vests, or becomes exercisable, in full on July 18, 2007, which is the date that each of the employment agreements expires if it is not extended by the Company. | ||
• | The exercise or purchase price of the shares subject to these stock options was the fair market value of the common stock on the closing price of the common stock on the Nasdaq National Market on the trading day immediately preceding the date of grant, the custom and practice of the Company for many years. The |
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executives’ employment agreements are described in detail under the headingEmployment Agreements of Named Executive Officers, below. | |||
• | If the executive officer’s employment is terminated by the Company for cause, which is defined in the stock option agreement, or for good cause, which is defined in his employment agreement, all of his options immediately terminate. | ||
• | If the executive officer’s employment terminates for any other reason, the officer, his personal representative or a permitted transferee of the officer (depending on the circumstances of his termination) may exercise the option from the date it becomes exercisable through its expiration date. |
The August 8, 2006 Stock Option Awards. |
• | These stock options were awarded by the Compensation Committee in the exercise of its discretion on the date that stock options were awarded to other officers and employees of the Company. | ||
• | Each option has a sixty-one-month term and vests, or becomes exercisable, in five substantially equal installments on each of the first five anniversaries of the date of the grant. | ||
• | The exercise or purchase price of the shares subject to these stock options is the closing price of the Company’s common stock on August 8, 2006, which was the date of the meeting of the Compensation Committee at which the stock options were approved. | ||
• | If the officer’s employment terminates by reason of his permanent disability or death, or if he dies within three months after he ceases to be an employee, then the officer, his legal representative, his estate, or his beneficiaries (depending on the circumstances of the termination) may exercise the option for a period of one year or until the option’s expiration date, whichever comes first, but only for the number of shares that had become exercisable on the date his employment terminated. | ||
• | If the officer’s employment is terminated for cause, which is defined in the option agreement, or for good cause, which is defined in his employment agreement, all of his options immediately terminate. | ||
• | If the officer’s employment terminates for any other reason, he may exercise the option for a period of ninety days after his employment terminates or until the expiration date of the option, whichever comes first, but only for the number of shares that had become exercisable on the date his employment terminated. |
(4) | Establishing the Option Exercise Price. Before August 2006, the Company as a matter of custom and practice used the closing price of its common stock on the trading day immediately preceding the date an option was approved as the grant date market value. Granting a stock option with an exercise price equal to the fair market value on the date of grant is required if the option holder is to receive the tax benefits of Section 422 of the Internal Revenue Code. Using the closing price immediately preceding the approval date of the grant satisfied this requirement. | |
Had the Company used the closing price of the common stock on July 18, 2006 as the fair market value rather than the closing price on the immediately preceding trading day, the exercise price would have been twenty-four cents per share more. | ||
In view of the recently heightened sensitivity of the investing public to the establishment of the exercise price of employee stock options, since July 2006, the Company’s policy has been to use the closing price of the common stock on the date of the meeting at which a stock option award is approved as the option’s per-share exercise price. | ||
(5) | The grant date fair value is the value computed for financial reporting purposes in accordance with FAS 123R. The valuation was made on the equity valuation assumptions described in Note 10 ofNotes to Consolidated Financial Statements. |
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Mr. Manning | Mr. Harper | Mr. Hemsley | |||||||
Base Salary | $ | 240,000 | $ | 215,000 | $ | 135,000 | |||
Threshold Cash Incentive Bonus(1) | $ | 125,000 | $ | 125,000 | $ | 50,000 | |||
Maximum Additional Cash Incentive Bonus(1) | $ | 240,000 | $ | 215,000 | $ | 75,000 | |||
Annual Option Grant(Shares) (2) | 10,000 | 10,000 | 2,800 | ||||||
Vacation Time | 8 weeks | 18 weeks* | Not specified | ||||||
Benefits Paid by the Company(3) | |||||||||
Car Allowance | $ | 700/month | $ | 700/month | No | ||||
Country Club Dues | Yes | Yes | No | ||||||
Payment of Commuting Expenses | Yes | Yes | No | ||||||
Company-Paid Long-Term Disability Insurance | No | No | $ | 7,500/month benefit | |||||
Company-Paid Term Life Insurance | No | No | $ | 100,000 death benefit |
* | Mr. Harper is entitled to take 18 weeks of vacation each year. He may take additional vacation by forfeiting salary at the rate of $4,000 per week and he may forfeit his vacation time and be paid for it at the rate of $4,000 per week. In 2006, Mr. Harper took approximately thirteen weeks of vacation and was paid $20,800 for the approximately five weeks not taken. That amount is included as part of his 2006 salary in theSummary Compensation Table for 2006, above. | |
(1) | This cash incentive bonus is based on the financial performance of the Company. The calculation of the cash incentive bonus and the additional cash incentive bonus is described in detail in footnote (1) to the table ofGrants of Plan-Based Awards for 2006,above, in this Item 11. The cash incentive bonus plan is also discussed above in this Item 11, under the headingCompensation Discussion and Analysis — Cash Incentive Bonus Plan. | |
(2) | The terms of these stock options, which each have a July 18 grant date, are described above in this Item 11 in footnote (3) to the table ofGrants of Plan-Based Awards for 2006. Option grants are also discussed above in this Item 11, under the headingCompensation Discussion and Analysis — Equity Incentive Plan. | |
(3) | For the cost of these benefits in 2006, see footnote (3) of theSummary Compensation Table for 2006, above. |
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Option Awards | ||||||||||||||||||||||||
Number of | Number of | |||||||||||||||||||||||
Securities | Securities | |||||||||||||||||||||||
Underlying | Underlying | |||||||||||||||||||||||
Unexercised | Unexercised | Option | ||||||||||||||||||||||
Options | Options | Exercise | Option | Option | Vesting | |||||||||||||||||||
(#) | (#) | Price/Share | Grant | Expiration | Date | |||||||||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | Date | Footnotes | ||||||||||||||||||
Patrick T. Manning | — | 1,000 | $ | 25.21 | 8/08/2006 | 9/08/2011 | (1) | |||||||||||||||||
— | 10,000 | $ | 24.96 | 7/18/2006 | 7/18/2011 | (2) | ||||||||||||||||||
300 | 1,200 | $ | 16.78 | 8/12/2005 | 9/12/2010 | (1) | ||||||||||||||||||
— | 10,000 | $ | 9.69 | 7/18/2005 | 7/18/2010 | (2) | ||||||||||||||||||
1,400 | 2,100 | $ | 3.10 | 8/12/2004 | 8/12/2014 | (1) | ||||||||||||||||||
— | 10,000 | $ | 3.10 | 8/12/2004 | 8/12/2009 | (2) | ||||||||||||||||||
2,100 | 1,400 | $ | 3.05 | 8/20/2003 | 8/20/2013 | (1) | ||||||||||||||||||
2,800 | 700 | $ | 1.725 | 7/24/2002 | 7/24/2012 | (1) | ||||||||||||||||||
3,700 | — | $ | 1.50 | 7/23/2001 | 7/23/2011 | (1) | ||||||||||||||||||
Joseph P. Harper, Sr. | — | 1,000 | $ | 25.21 | 8/08/2006 | 9/08/2011 | (1) | |||||||||||||||||
— | 10,000 | $ | 24.96 | 7/18/2006 | 7/18/2011 | (2) | ||||||||||||||||||
300 | 1,200 | $ | 16.78 | 8/12/2005 | 9/12/2010 | (1) | ||||||||||||||||||
— | 10,000 | $ | 9.69 | 7/18/2005 | 7/18/2010 | (2) | ||||||||||||||||||
2,334 | 1,166 | $ | 3.10 | 8/12/2004 | 8/12/2014 | (3) | ||||||||||||||||||
— | 10,000 | $ | 3.10 | 8/12/2004 | 8/12/2009 | (2) | ||||||||||||||||||
3,500 | — | $ | 3.05 | 8/20/2003 | 8/20/2013 | (3) | ||||||||||||||||||
3,500 | — | $ | 1.725 | 7/24/2002 | 7/24/2012 | (3) | ||||||||||||||||||
3,700 | — | $ | 1.50 | 7/23/2001 | 7/23/2011 | (1) | ||||||||||||||||||
Maarten D. Hemsley | — | 2,800 | $ | 24.96 | 7/18/2006 | 7/18/2011 | (2) | |||||||||||||||||
— | 2,800 | $ | 9.69 | 7/18/2005 | 7/18/2010 | (2) | ||||||||||||||||||
3,750 | 1,250 | $ | 3.10 | 8/12/2004 | 8/12/2014 | (4) | ||||||||||||||||||
75,000 | — | $ | 0.875 | 1/13/1998 | 10/27/2013 | (5) | ||||||||||||||||||
100,000 | — | $ | 2.75 | 4/29/1994 | 2/11/2010 | (6) | ||||||||||||||||||
28,424 | — | $ | 2.75 | 6/29/1991 | 6/13/2007 | (7) | ||||||||||||||||||
(1) | This option vests in equal installments on the first five anniversaries of its grant date. | |
(2) | This option vests in a single installment on July 18, 2007. | |
(3) | This option vests in equal installments on the first three anniversaries of its grant date. | |
(4) | This option vests in equal installments on the grant date and the first three anniversaries of its grant date. | |
(5) | This option vested in a single installment on December 18, 1998. | |
(6) | This option vested in equal installments on the grant date and the first four anniversaries of its grant date. | |
(7) | This option vested in a single installment on its grant date. |
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Option Awards | ||||||||
Number of Shares Acquired | Value Realized Upon | |||||||
on Exercise | Exercise(1) | |||||||
Name | (#) | ($) | ||||||
Patrick T. Manning | — | — | ||||||
Joseph P. Harper, Sr. | — | — | ||||||
Maarten D. Hemsley | 233,000 | $ | 5,246,480 |
(1) | SEC regulations define the “Value Realized Upon Exercise” is the difference between the market price of the shares on the date of the purchase, and the exercise or purchase price of the option shares, whether or not the shares are sold, or if they are sold, whether or not the sale occurred on the date of the exercise. |
Event | Payment and/or Other Obligations* | |||
Termination by the Companywithout good cause(1) | The Company must — | |||
• | Give the executive 180 days notice of termination. | |||
• | Continue to pay the executive his base salary(2) for the balance of the term of his employment agreement or for one year, whichever period is longer. | |||
• | Pay the executive an additional $1,000 per month for one year. | |||
The executive may — | ||||
• | accept the additional $1,000/month payment, in which case he may not compete with the Company or solicit its customers or employees during the one-year period, or | |||
• | decline any post employment payments by the Company, in which case he is not prohibited from competing with the Company or soliciting its customers or employees. | |||
• | The executive’s options continue to be exercisable for varying periods depending on the terms of the option agreement. | |||
Termination by the Companyfor good cause(1) | The executive is prohibited from competing with the Company or soliciting its customers or employees for two years, during which period the Company must pay the executive $1,000 a month. All of the executive’s stock options terminate. | |||
Termination by the executivefor good reason(1) | The Company must — | |||
• | Continue to pay the executive his base salary for the |
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Event | Payment and/or Other Obligations* | |||
remaining term of his agreement, but in no event for less than twelve additional months. | ||||
• | Pay the executive an additional $1,000 per month for one year, during which time he is prohibited from competing with the Company or soliciting its customers or employees. | |||
Termination by the executivewithout good reason(1) | The Company is only obligated to pay the executive $1,000 a month for two years during which period he is prohibited from competing with the Company or soliciting its customers or employees. | |||
A change in control of the Company or the execution by the Company of any agreement that will result in a change in control that is not consented to in writing by the executive before the change in control is completed. | All the executive’s stock options become exercisable in full. The executive may elect by written notice to the Company to terminate his employment agreement and his employment. If he does so, the executive is not thereafter prohibited from competing with the Company or soliciting its customers or employees and the Company is not required to make any monthly payment to him. The Company is obligated to pay the executive any bonus earned but not yet paid. |
* | In all events, the Company is required to pay the executive his accrued but unpaid salary through the date of termination, as required by law. | |
(1) | The terms good reason and good cause are defined in the agreement and generally mean either a breach of the terms of the agreement or what is commonly referred to as cause in employment matters, such as gross negligence, dishonesty, insubordination, inadequate performance of responsibilities after notice and the like. | |
(2) | Any obligation of the Company to continue to pay the executive his base salary after termination of his employment ceases if the executive breaches his obligation under the agreement not to disclose confidential information of the Company or any obligation he has under the terms of the termination not to compete with the Company or solicit its customers or employees. The executives’ base salaries are set forth above under the headingEmployment Agreements of Named Executive Officers. |
Fees Earned | ||||||||||||
or Paid in | Stock | |||||||||||
Cash(1) | Awards(1)(2)(3) | Total(1) 4) | ||||||||||
Name | ($) | ($) | ($) | |||||||||
John D. Abernathy (Lead director) | $ | 32,300 | $ | 23,333 | $ | 55,633 | ||||||
Chairman of the Audit Committee Member of the Compensation Committee Member of the Corporate Governance & Nominating Committee | ||||||||||||
Robert W. Frickel | $ | 18,800 | $ | 23,333 | $ | 42,133 | ||||||
Chairman of the Compensation Committee | ||||||||||||
Donald P. Fusilli, Jr.* | — | — | — | |||||||||
Christopher H. B. Mills | $ | 11,750 | $ | 23,333 | $ | 35,083 |
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Fees Earned | ||||||||||||
or Paid in | Stock | |||||||||||
Cash(1) | Awards(1)(2)(3) | Total(1) 4) | ||||||||||
Name | ($) | ($) | ($) | |||||||||
Milton L. Scott | $ | 19,800 | $ | 23,333 | $ | 43,133 | ||||||
Member of the Audit Committee Member of the Compensation Committee Member of the Corporate Governance & Nominating Committee | ||||||||||||
David R. A. Steadman | $ | 25,500 | $ | 23,333 | $ | 48,833 | ||||||
Chairman of the Corporate Governance & Nominating Committee Member of the Audit Committee |
* | Mr. Fusilli was elected to the Board on March 14, 2007 as the third Class I director and therefore earned no fees in 2006. | |
(1) | The fees and awards for 2006 are based on the standard compensation arrangements for directors adopted by the Corporate Governance & Nominating Committee on May 10, 2006 and are as follows: |
Annual Fees | ||||
Annual Fees | Each Non-Employee Director | |||
$7,500 | ||||
An award (on the date of each Annual Meeting of Stockholders) of restricted stock that has an accounting income charge under FAS 123R limited to $35,000 per grant.* | ||||
Additional Annual Fees for Committee Chairmen | ||||
Chairman of the Audit Committee | $ | 7,500 | ||
Chairman of the Compensation Committee | $ | 2,500 | ||
Chairman of the Corporate Governance & Nominating Committee | $ | 2,500 |
Meeting Fees | ||||
In-Person Meetings | Per Director Per Meeting | |||
Board Meetings | $ | 1,500 | ||
Committee Meetings | ||||
Audit Committee Meetings | ||||
on the same day as a Board meeting | $ | 1,000 | ||
on a day other than a Board meeting day | $ | 1,500 | ||
Other Committee Meetings | ||||
on the same day as a Board meeting | $ | 500 | ||
on a day other than a Board meeting day | $ | 750 | ||
Telephonic Meetings(Board & committee meetings) | ||||
One hour or longer | $ | 1,000 | ||
Less than one hour | $ | 300 |
* | The shares awarded are restricted because they may not be sold, assigned, transferred, pledged or otherwise disposed of until the restrictions expire. The restrictions for the May 10, 2006 grant expire on the day before the 2007 Annual Meeting of Stockholders, but earlier if the director dies or becomes disabled or if there is a change in control of the Company. The shares are forfeited if before the restrictions expire, the director ceases to be a director other than because of his death or disability. | |
(2) | The value of these stock awards is the total dollar cost recognized from the award in 2006 for financial reporting purposes in accordance with FAS 123R. No amounts earned by a director have been capitalized on the |
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balance sheet for 2006. The cost does not reflect any estimates made for financial statement reporting purposes of future forfeitures by the executive officer related to service-based vesting conditions. The valuation of these options was made on the equity valuation assumptions described in Note 10 ofNotes to Consolidated Financial Statements. None of the awards has been forfeited. | ||
(3) | The following table shows for each non-employee director the grant date fair value of each stock award that has been expensed, the aggregate number of shares of stock awarded and the number of shares underlying stock options that were outstanding on December 31, 2006. |
Securities Underlying | Grant Date Fair | |||||||||||||||
Option Awards | Aggregate Stock | Value of Stock | ||||||||||||||
Outstanding | Awards Outstanding | and | ||||||||||||||
at December 31, 2006 | at December 31, 2006 | Option Awards | ||||||||||||||
Name | Grant Date | (#) | (#) | ($) | ||||||||||||
John D. Abernathy | 5/1/1997 | 3,000 | † | |||||||||||||
1/13/1998 | 65,000 | † | ||||||||||||||
5/1/1998 | 3,000 | † | ||||||||||||||
5/1/1999 | 3,000 | † | ||||||||||||||
5/1/2000 | 3,000 | † | ||||||||||||||
5/1/2001 | 1,666 | † | ||||||||||||||
7/23/2001 | 12,000 | 57,600 | ||||||||||||||
5/19/2005 | 5,000 | 27,950 | ||||||||||||||
5/10/2006 | 1,207 | 34,991 | ||||||||||||||
Total | 95,166 | 1,207 | N/A | |||||||||||||
Robert W. Frickel | 7/23/2001 | 12,000 | 57,600 | |||||||||||||
5/19/2005 | 5,000 | 27,950 | ||||||||||||||
5/10/2006 | 1,207 | 34,991 | ||||||||||||||
Total | 17,000 | 1,207 | 120,541 | |||||||||||||
Donald P. Fusilli, Jr. | — | — | — | — | ||||||||||||
Christopher H. B. Mills | 5/19/2005 | 5,000 | 27,950 | |||||||||||||
5/10/2006 | 1,207 | 34,991 | ||||||||||||||
Total | 62,941 | |||||||||||||||
Milton L. Scott | 5/10/2006 | 1,207 | 34,991 | |||||||||||||
David R. A. Steadman | 5/19/2005 | 5,000 | 27,950 | |||||||||||||
5/10/2006 | 1,207 | 34,991 | ||||||||||||||
Total | 62,941 | |||||||||||||||
† | These options were not expensed. | |
(4) | During 2006, none of the non-employee directors received any other compensation for any service provided to the Company. All directors are reimbursed for their reasonable out-of-pocket expenses incurred in attending meetings of the Board and Board committees. Directors living outside of North America, currently only Mr. Mills, have the option of attending regularly-scheduled in-person meetings by telephone, and if they choose to do so, they are paid an attendance fee as if they had attended in person. |
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John D. Abernathy
Milton L. Scott
Number of securities | ||||||||||||
remaining available for | ||||||||||||
future issuance under | ||||||||||||
Number of Securities to | Weighted-average | equity compensation | ||||||||||
be issued upon exercise | exercise price of | plans, excluding | ||||||||||
of outstanding options, | outstanding options, | securities reflected in | ||||||||||
Plan Category | warrants and rights | warrants and rights | column (a) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plansapprovedby security holders: | 752,454 | $ | 5.87 | 442,545 | ||||||||
Equity compensation plansnot approvedby security holders: | 28,424 | (1) | $ | 2.75 | - 0 - | |||||||
Total: | 1,223,423 | $ | 5.61 | 442,545 | ||||||||
(1) | These shares are subject to purchase under a currently outstanding individual stock option grant that is one of a total of eight stock option grants made in August 1991 to certain persons who were then directors of the Company. The grants were not approved by stockholders. This stock option is fully exercisable at $2.75 per share and expires on June 13, 2007. The holder of this stock option remains a director of the Company. |
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Number of | ||||||||||||||||
Outstanding | ||||||||||||||||
Shares of | Shares Subject | Total | ||||||||||||||
Common Stock | to | Beneficial | Percent | |||||||||||||
Name and Address of Beneficial Owner | Owned | Purchase* | Ownership | of Class | ||||||||||||
North Atlantic Smaller Companies Investment Trust plc (or NASCIT) c/o North Atlantic Value LLP, Ryder Court, 14 Ryder Street, London SW1Y 6QB, England | 681,400 | (1) | — | 681,400 | 6.23 | % | ||||||||||
North Atlantic Value LLP (or NAV) Court, 14 Ryder Street, London SW1Y 6QB, England | 681,400 | (1) | — | 681,400 | 6.23 | % | ||||||||||
Dreman Value Management, LLC Harborside Financial Center Plaza 10, Suite 800 Jersey City, New Jersey 07311 | 934,183 | (2) | — | 934,183 | 8.54 | % | ||||||||||
Deutsche Bank AG Taunusanlage 12 D-60325 Frankfurt am Main Federal Republic of Germany | 648,900 | (3) | — | 648,900 | 5.93 | % | ||||||||||
John D. Abernathy | 10,203 | (4) | 45,166 | 55,369 | † | |||||||||||
Robert W. Frickel | 63,207 | (4) | 17,000 | 80,207 | † | |||||||||||
Donald P. Fusilli, Jr. | — | — | — | — | ||||||||||||
Joseph P. Harper, Sr. | 585,140 | (5) | 140,908 | 726,048 | 6.55 | % | ||||||||||
Maarten D. Hemsley | 114,888 | 207,174 | 322,062 | 2.89 | % | |||||||||||
Patrick T. Manning | 149,000 | 32,520 | 181,520 | 1.65 | % | |||||||||||
Christopher H. B. Mills c/o North Atlantic Value LLP, Ryder Court, 14 Ryder Street, London SW1Y 6QB, England | 694,607 | (1)(4)(6) | 5,000 | 699,607 | 6.39 | % | ||||||||||
Milton L. Scott | 1,207 | (4) | — | 1,207 | † | |||||||||||
David R. A. Steadman | 15,207 | (4) | 5,000 | 20,207 | † | |||||||||||
All directors and executive officers as a group (10 persons) | 1,655,620 | (7) | 463,248 | (7) | 2,118,868 | (7) | 18.59 | % |
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* | These are shares that the entity or person could acquire within sixty days of March 1, 2007. | |
† | Less than one percent. | |
(1) | According to a Form 13G/A (Amendment No. 3) filed with the Securities and Exchange Commission on February 6, 2007, each of NASCIT, Mr. Mills and NAV claims shared voting and investment power over these shares. | |
(2) | According to a Form 13G filed with the Securities and Exchange Commission on February 14, 2007, Dreman Value Management, LLC is an investment adviser with sole voting and dispositive power over these shares. | |
(3) | According to a Form 13G filed with the Securities and Exchange Commission on February 2, 2007, Deutsche Bank AG has sole voting and dispositive power over these shares. Deutsche Bank AG further states in the filing: “In accordance with Securities Exchange Act Release No. 39538 (January 12, 1998), this filing reflects the securities beneficially owned by the Corporate and Investment Banking business group and the Corporate Investments business group (collectively, “CIB”) of Deutsche Bank AG and its subsidiaries and affiliates (collectively, “DBAG”). This filing does not reflect securities, if any, beneficially owned by any other business group of DBAG. Consistent with Rule 13d-4 under the Securities Exchange Act of 1934 (“Act”), this filing shall not be construed as an admission that CIB is, for purposes of Section 13(d) under the Act, the beneficial owner of any securities covered by the filing. Furthermore, CIB disclaims beneficial ownership of the securities beneficially owned by (i) any client accounts with respect to which CIB or its employees have voting or investment discretion, or both, and (ii) certain investment entities, of which CIB is the general partner, managing general partner, or other manager, to the extent interests in such entities are held by persons other than CIB.” | |
(4) | This number includes, or in the case of Mr. Scott, consists entirely of, 1,207 shares subject to restrictions that expire on the day preceding the 2007 Annual Meeting of Stockholders, but earlier if the director dies or becomes disabled or if there is a change in control of the Company. The shares are forfeited before the expiration of the restrictions if the director ceases to be a director other than because of his death or disability. | |
(5) | This number includes 8,000 shares held by Mr. Harper as custodian for his grandchildren. | |
(6) | This number consists of the 681,400 shares owned by NASCIT; 12,000 shares owned by Mr. Mills personally over which he claims sole voting and investment power; and 1,207 shares owned by Mr. Mills that are subject to the same restrictions as are described in footnote (2), above. | |
(7) | See the footnotes above for a description of certain of the shares included in this total. |
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Name | Amount | |||
Patrick T. Manning | $ | 321,459 | ||
James D. Manning | $ | 1,872,047 | ||
Joseph P. Harper, Sr. | $ | 2,661,159 | ||
Maarten D. Hemsley | $ | 182,836 | ||
Joseph P. Harper, Jr. | $ | 118,750 |
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Name | Committee Assignment | |
John D. Abernathy | Audit Committee (Chairman) | |
Compensation Committee | ||
Corporate Governance & Nominating Committee | ||
Robert W. Frickel | Compensation Committee (Chairman) | |
Christopher H. B. Mills | ||
Milton L. Scott | Audit Committee | |
Compensation Committee | ||
Corporate Governance & Nominating Committee | ||
David R. A. Steadman | Corporate Governance & Nominating Committee (Chairman) | |
Audit Committee |
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Percentage | Percentage | |||||||||||||||
Approved by the | Approved by the | |||||||||||||||
Fee Category | 2006 | Audit Committee | 2005 | Audit Committee | ||||||||||||
Audit Fees: | $ | 529,300 | 100 | % | $ | 208,000 | 100 | % | ||||||||
Audit-Related Fees: | $ | 110,300 | 100 | % | $ | 259,300 | 100 | % | ||||||||
Tax Fees: | — | NA | — | NA | ||||||||||||
All Other Fees: | — | NA | — | NA |
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Number | Exhibit Title | |
1.1 | Form of Underwriting Agreement dated as of January 19, 2006 between Sterling Construction Company, Inc. and the underwriters and other parties named therein (incorporated by reference to Exhibit 1.1 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 13, 2006 (SEC File number 333-129780)). | |
2.1 | Asset Purchase Agreement, dated September 23, 2002, by and among Texas Sterling Construction, L.P., Kinsel Industries, Inc. and Tracks of Texas, Inc. (incorporated by reference to Exhibit 10.4 to Sterling Construction Company, Inc.’s quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2002, filed on November 14, 2002 (SEC File No. 000-19450)). | |
3.1 | Restated and Amended Certificate of Incorporation of Oakhurst Company, Inc., dated as of September 25, 1995 (incorporated by reference to Exhibit 3.1 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
3.2 | Certificate of Amendment of the Certificate of Incorporation of Oakhurst Company, Inc., dated as of November 12, 2001 (incorporated by reference to Exhibit 3.2 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
3.3 | Bylaws of Oakhurst Company, Inc. (incorporated by reference to Exhibit 3.2 to its Annual Report on Form 10-K for the fiscal year ended February 28, 1998, filed on May 29, 1998 (SEC File No. 000-19450)). | |
4.1 | Certificate of Designations of Oakhurst Company, Inc.’s Series A Junior Participating Preferred Stock, dated as of February 10, 1998 (incorporated by reference to Exhibit 4.2 to its Annual Report on Form 10-K, filed on May 29, 1998 (SEC File No. 000-19450)). | |
4.3 | Rights Agreement, dated as of December 29, 1998, by and between Oakhurst Company, Inc. and American Stock Transfer & Trust Company, including the form of Series A Certificate of Designation, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B and C, respectively (incorporated by reference to Exhibit 99.1 to Oakhurst Company, Inc.’s Registration Statement on Form 8-A, filed on January 5, 1999 (SEC File No. 000-19450)). | |
4.4 | Form of Common Stock Certificate of Sterling Construction Company, Inc. (incorporated by reference to Exhibit 4.5 to its Form 8-A, filed on January 11, 2006 (SEC File No. 011-31993)). | |
10.1# | Oakhurst Capital, Inc. 1994 Omnibus Stock Plan, with form of option agreement (incorporated by reference to Exhibit 10.1 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.2# | Oakhurst Capital, Inc. 1994 Omnibus Stock Plan, as amended through December 18, 1998, (incorporated by reference to Exhibit 10.21 to Oakhurst Company, Inc.’s Annual Report on Form 10-K, filed on June 1, 1999 (SEC File No. 000-19450)). | |
10.3# | Oakhurst Capital, Inc. 1994 Non-Employee Director Stock Option Plan, with form of option agreement (incorporated by reference to Exhibit 10.3 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.4# | Oakhurst Company, Inc. 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). |
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Number | Exhibit Title | |
10.5# | Form of Stock Incentive Agreements under Oakhurst Company, Inc.’s 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.51 to Sterling Construction Company, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 29, 2005 (SEC File No. 001-31993)). | |
10.6# | Oakhurst Company, Inc. 2001 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.7# | Forms of Stock Option Agreement under the Oakhurst Company, Inc. 2001 Stock Incentive Plan (incorporated by reference to Exhibit 10.51 to Sterling Construction Company, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 29, 2005 (SEC File No. 001-31993)). | |
10.8# | Form of Employee Stock Option Agreement, dated as of August 29, 1991, by and between Hallwood Holdings Incorporated and certain of its directors and officers (incorporated by reference to Exhibit 10.8 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.12# | Employment Agreement, dated as of July 18, 2004, by and between Patrick T. Manning, Sterling Construction Company, Inc. and Sterling Houston Holdings, Inc. (incorporated by reference to Exhibit 99.1 to Sterling Construction Company, Inc.’s Current Report on Form 8-K, dated as of March 23, 2005, filed on March 28, 2005 (SEC File No. 001-31993)). | |
10.13# | Employment Agreement, dated as of July 18, 2004, by and between Joseph P. Harper, Sr., Sterling Construction Company, Inc. and Sterling Houston Holdings, Inc. (incorporated by reference to Exhibit 99.2 to Sterling Construction Company, Inc.’s Current Report on Form 8-K, dated as of March 23, 2005, filed on March 28, 2005 (SEC File No. 001-31993)). | |
10.14# | Employment Agreement, dated as of July 13, 2005, by and between Maarten D. Hemsley and Sterling Construction Company, Inc. (incorporated by reference to Exhibit 10.1 to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on November 7, 2005 (SEC File No. 001-31993)). | |
10.15# | Summary of Compensation for Non Employee Directors of Sterling Construction Company, Inc. (incorporated by reference to Exhibit 10.15 to its Registration Statement on Form S | |
10.26 | Oakhurst Group Tax Sharing Agreement, dated as of July 18, 2001, by and among Oakhurst Company, Inc., Sterling Construction Company, Steel City Products, Inc. and such other companies as are set forth on Schedule A thereto (incorporated by reference to Exhibit 10.28 to Sterling Construction Company, Inc.’s Transition Report on Form 10-K for the ten months ended December 31, 2001, filed on April 8, 2002 (SEC File No. 000-19450)). | |
10.27 | Fourth Amended and Restated Revolving Credit Loan Agreement, dated as of May 10, 2006, by and between Comerica Bank, Sterling Construction Company, Inc., Sterling General, Inc., Sterling Houston Holdings, Inc. Texas Sterling Construction, L.P. (incorporated by reference to Exhibit 10.1 (and referred to as “Amended Revolving Line of Credit Agreement with Comerica Bank”) to Sterling Construction Company, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2006, filed on November 13, 2006 (SEC File No. 001-31993)). | |
10.28 | Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.1 to Oakhurst Company, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2001, filed on August 16, 2001 (SEC File No. 000-19450)). |
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Number | Exhibit Title | |
10.29 | Amendment, dated as of September 12, 2001, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.3 to Oakhurst Company, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2001, filed on October 22, 2001 (SEC File No. 000-19450)). | |
10.30 | Second Amendment, dated as of December 13, 2001, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.35 to Sterling Construction Company, Inc.’s Transition Report on Form 10-K for the ten months ended December 31, 2002, filed on April 8, 2002 (SEC File No. 000-19450)). | |
10.31 | Third Amendment, dated as of June 27, 2002, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.31 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.32 | Fourth Amendment, dated as of September 25, 2002, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.32 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.33 | Fifth Amendment, dated as of November 30, 2002, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.33 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.34 | Sixth Amendment, dated as of January 15, 2003, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.34 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.35 | Seventh Amendment to Credit Agreement and Waiver, dated as of November 6, 2003, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.35 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.36 | Eighth Amendment to Credit Agreement, dated as of September 17, 2004, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.36 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.37 | Ninth Amendment to Credit Agreement, dated as of December 21, 2004, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.37 Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.38 | Tenth Amendment to Credit Agreement, dated as of April 18, 2005, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.38 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.39 | Eleventh Amendment to Credit Agreement and Note, dated as of June 3, 2005, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.39 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). |
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Number | Exhibit Title | |
10.40 | Twelfth Amendment to Credit Agreement, dated as of September 14, 2005, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.40 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.42# | Amendment No. 1 to Executive Employment Agreement, dated November 2, 2005, by and between Patrick T. Manning, Sterling Construction Company, Inc., Sterling General, Inc. and Sterling Houston Holdings, Inc. (incorporated by reference to Exhibit 10.36 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.43# | Amendment No. 1 to Executive Employment Agreement, dated November 2, 2005, by and between Joseph P. Harper, Sr., Sterling Construction Company, Inc., Sterling General, Inc. and Sterling Houston Holdings, Inc. (incorporated by reference to Exhibit 10.37 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.45# | Note Prepayment Agreement, dated as of December 27, 2005, by and between SCC and certain of its noteholders named therein (incorporated by reference to Exhibit 10.1 to SCC’s Current Report on Form 8-K, dated as of December 27, 2005, filed on December 27, 2005 (SEC File No. 001-31993)). | |
10.46# | [Note Prepayment] Termination Agreement, dated as of December 30, 2005, by and between Sterling Construction Company, Inc. and certain of its noteholders named therein (incorporated by reference to Exhibit 10.1 to SCC’s Current Report on Form 8-K, dated as of December 30, 2005, filed on January 3, 2006 (SEC File No. 001-31993)). | |
21 | Subsidiaries of Sterling Construction Company, Inc. (incorporated by reference to Exhibit 21 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
23.1* | Consent of Grant Thornton LLP. | |
31.1* | Certification of Patrick T. Manning, Chief Executive Officer of Sterling Construction Company, Inc. | |
31.2* | Certification of Maarten D. Hemsley, Chief Financial Officer of Sterling Construction Company, Inc. | |
32.0* | Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) of Patrick T. Manning, Chief Executive Officer, and Maarten D. Hemsley, Chief Financial Officer. |
# | Management contract or compensatory plan or arrangement. | |
* | Filed herewith. |
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Sterling Construction Company, Inc. | ||||
Dated: March 14, 2007 | By: | /s/ Patrick T. Manning | ||
Patrick T. Manning, Chief Executive Officer | ||||
(duly authorized officer) | ||||
Signature | Title | Date | ||
/s/ Patrick T. Manning | Chairman of the Board of Directors; Chief Executive Officer (principal executive officer) | March 14, 2007 | ||
/s/ Joseph P. Harper, Sr. | President, Treasurer & Chief Operating Officer; Director | March 14, 2007 | ||
/s/ Maarten D. Hemsley | Chief Financial Officer; Director (principal financial officer) | March 14, 2007 | ||
/s/ Karen A. Stempinski | Vice President, Controller & Chief Accounting Officer (principal accounting officer) | March 14, 2007 | ||
/s/ John D. Abernathy | Director | March14, 2007 | ||
Director | March 14, 2007 | |||
/s/ Robert W. Frickel | Director | March 14, 2007 | ||
/s/ Christopher H. B. Mills | Director | March 14, 2007 | ||
/s/ Milton L. Scott | Director | March 14, 2007 | ||
/s/ David R. A. Steadman | Director | March 14, 2007 |
Page 66
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Sterling Construction Company, Inc.
March 14, 2007
F1
Table of Contents
Sterling Construction Company, Inc.
March 14, 2007
F2
Table of Contents
December 31, 2006 and 2005
(Amounts in thousands, except per share data)
2006 | 2005 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 28,466 | $ | 22,267 | ||||
Short-term investments | 26,169 | — | ||||||
Accounts receivable, other | 276 | — | ||||||
Contracts receivable | 42,805 | 34,912 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 3,157 | 2,199 | ||||||
Inventories | 965 | — | ||||||
Deferred tax asset | 4,297 | 4,224 | ||||||
Assets of discontinued operations held for sale | — | 8,969 | ||||||
Note receivable, current | 300 | — | ||||||
Other | 973 | 1,056 | ||||||
Total current assets | 107,408 | 73,627 | ||||||
Property and equipment, net | 46,617 | 27,271 | ||||||
Goodwill | 12,735 | 12,735 | ||||||
Deferred tax asset, net | — | 4,288 | ||||||
Note receivable, long term | 325 | — | ||||||
Other assets | 687 | 534 | ||||||
13,747 | 17,557 | |||||||
Total assets | $ | 167,772 | $ | 118,455 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 17,373 | $ | 20,416 | ||||
Billings in excess of cost and estimated earnings on uncompleted contracts | 21,536 | 13,635 | ||||||
Short-term debt, related parties | — | 8,449 | ||||||
Current maturities of long term obligations | 123 | 123 | ||||||
Liabilities of discontinued operations held for sale | — | 8,385 | ||||||
Other accrued expenses | 5,502 | 4,265 | ||||||
Total current liabilities | 44,534 | 55,273 | ||||||
Long-term obligations: | ||||||||
Long-term debt, net of current maturities | 30,659 | 14,570 | ||||||
Deferred tax liability, net | 1,588 | — | ||||||
32,247 | 14,570 | |||||||
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 14,000,000 shares, 10,875,438 and 8,165,123 shares issued | 109 | 82 | ||||||
Additional paid in capital | 114,630 | 82,822 | ||||||
Accumulated deficit | (23,748 | ) | (34,292 | ) | ||||
Total stockholders’ equity | 90,991 | 48,612 | ||||||
Total liabilities and stockholders’ equity | $ | 167,772 | $ | 118,455 | ||||
F3
Table of Contents
December 31, 2006, 2005 and 2004
(Amounts in thousands, except share and per share data)
2006 | 2005 | 2004 | ||||||||||
Revenues | $ | 249,348 | $ | 219,439 | $ | 132,478 | ||||||
Cost of revenues | 220,801 | 195,683 | 119,217 | |||||||||
Gross profit | 28,547 | 23,756 | 13,261 | |||||||||
General and administrative expenses | 10,825 | 9,375 | 7,692 | |||||||||
Other income (loss) | 276 | 284 | (4 | ) | ||||||||
Operating income | 17,998 | 14,665 | 5,565 | |||||||||
Interest income | 1,426 | 150 | 9 | |||||||||
Interest expense | 220 | 1,486 | 1,465 | |||||||||
Income from continuing operations before minority interest and income taxes | 19,204 | 13,329 | 4,109 | |||||||||
Minority interest | — | — | 962 | |||||||||
Income from continuing operations before income taxes | 19,204 | 13,329 | 3,147 | |||||||||
Income tax expense (benefit): | ||||||||||||
Current | 310 | 257 | 169 | |||||||||
Deferred | 6,256 | 2,531 | (2,303 | ) | ||||||||
Total income tax expense (benefit) | 6,566 | 2,788 | (2,134 | ) | ||||||||
Net income from continuing operations | 12,638 | 10,541 | 5,281 | |||||||||
Income from discontinued operations, including gain on disposal of $121, net of income taxes of $308, $313 and $216 | 682 | 559 | 372 | |||||||||
Net income | $ | 13,320 | $ | 11,100 | $ | 5,653 | ||||||
Basic net income per share: | ||||||||||||
Net income from continuing operations | $ | 1.19 | $ | 1.36 | $ | 0.99 | ||||||
Net income from discontinued operations | $ | 0.06 | $ | 0.07 | $ | 0.07 | ||||||
Net income | $ | 1.25 | $ | 1.43 | $ | 1.06 | ||||||
Weighted average number of shares outstanding used in computing basic per share amounts | 10,582,730 | 7,775,476 | 5,342,847 | |||||||||
Diluted net income per share: | ||||||||||||
Net income from continuing operations | $ | 1.08 | $ | 1.11 | $ | 0.75 | ||||||
Net income from discontinued operations | $ | 0.06 | $ | 0.05 | $ | 0.05 | ||||||
Net income | $ | 1.14 | $ | 1.16 | $ | 0.80 | ||||||
Weighted average number of shares outstanding used in computing diluted per share amounts | 11,714,310 | 9,537,923 | 7,027,682 | |||||||||
F4
Table of Contents
For the years ended December 31, 2006, 2005 and 2004
(Amounts in thousands)
Additional | ||||||||||||||||||||||||
Common stock | paid in | Accumulated | Treasury | |||||||||||||||||||||
Shares | Amount | capital | deficit | stock | Total | |||||||||||||||||||
Balance at December 31, 2003 | 5,140 | $ | 51 | $ | 67,631 | $ | (51,045 | ) | $ | (1 | ) | $ | 16,636 | |||||||||||
Stock issued upon option exercise | 220 | 2 | 403 | 405 | ||||||||||||||||||||
Stock based compensation expense | 381 | 381 | ||||||||||||||||||||||
Conversion of debt to stock | 450 | 5 | 1,714 | 1,719 | ||||||||||||||||||||
Shares issued upon settlement of Put | 1,569 | 16 | 8,051 | 8,067 | ||||||||||||||||||||
Purchase of minority interest of SCPL | (49 | ) | (49 | ) | ||||||||||||||||||||
Reduction of valuation allowance deferred tax asset | 2,396 | 2,396 | ||||||||||||||||||||||
Net income | 5,653 | 5,653 | ||||||||||||||||||||||
Balance at December 31, 2004 | 7,379 | 74 | 80,527 | (45,392 | ) | (1 | ) | 35,208 | ||||||||||||||||
Stock issued upon option exercise | 786 | 8 | 819 | 827 | ||||||||||||||||||||
Stock based compensation expense | 463 | 463 | ||||||||||||||||||||||
Tax benefit of stock option exercise | 1,013 | 1,013 | ||||||||||||||||||||||
Cancellation of treasury stock of SCPL | 1 | 1 | ||||||||||||||||||||||
Net income | 11,100 | 11,100 | ||||||||||||||||||||||
Balance at December 31, 2005 | 8,165 | 82 | 82,822 | (34,292 | ) | — | 48,612 | |||||||||||||||||
Stock issued upon option/warrant exercise | 701 | 7 | 906 | 913 | ||||||||||||||||||||
Stock based compensation expense | 991 | 991 | ||||||||||||||||||||||
Stock issued in equity offering, net of expenses | 2,003 | 20 | 27,019 | 27,039 | ||||||||||||||||||||
Issuance of restricted stock | 6 | — | 117 | 117 | ||||||||||||||||||||
Available excess tax benefits from exercise of stock options | 2,775 | (2,775 | ) | — | ||||||||||||||||||||
Net income | 13,320 | 13,320 | ||||||||||||||||||||||
Balance at December 31, 2006 | 10,875 | $ | 109 | $ | 114,630 | $ | (23,748 | ) | $ | — | $ | 90,991 | ||||||||||||
F5
Table of Contents
For the years ended December 31, 2006, 2005 and 2004
(Amounts in thousands, except share data)
2006 | 2005 | 2004 | ||||||||||
Net income | $ | 13,320 | $ | 11,100 | $ | 5,653 | ||||||
Net income from discontinued operations | 682 | 559 | 372 | |||||||||
Net income from continuing operations | 12,638 | 10,541 | 5,281 | |||||||||
Adjustments to reconcile income from continuing operations to net cash provided by continuing operating activities: | ||||||||||||
Depreciation and amortization | 7,011 | 5,064 | 4,545 | |||||||||
(Gain) loss on sale of property and equipment | (276 | ) | (279 | ) | 4 | |||||||
Deferred tax expense (benefit) | 6,256 | 2,531 | (2,303 | ) | ||||||||
Stock based compensation expense | 1,108 | 463 | 381 | |||||||||
Minority interest in net earnings of subsidiary | — | — | 962 | |||||||||
Fair value of induced conversion of debt to equity | — | — | 257 | |||||||||
Other changes in operating assets and liabilities: | ||||||||||||
(Increase) decrease in contracts receivable | (7,893 | ) | (8,662 | ) | 254 | |||||||
(Increase) decrease in costs and estimated earnings in excess of billings on uncompleted contracts | (958 | ) | 3,685 | (4,603 | ) | |||||||
Increase in inventories | (965 | ) | — | — | ||||||||
(Increase) decrease in prepaid expenses and other assets | (46 | ) | 730 | 370 | ||||||||
(Decrease) increase in trade payables | (3,043 | ) | 6,034 | 4,487 | ||||||||
Increase (decrease) in billings in excess of costs and estimated earnings on uncompleted contracts | 7,901 | 9,158 | (5,265 | ) | ||||||||
Increase (decrease) in accrued compensation and other liabilities | 1,356 | 2,001 | (199 | ) | ||||||||
Net cash provided by continuing operating activities | 23,089 | 31,266 | 4,171 | |||||||||
Cash flows from continuing operations investing activities: | ||||||||||||
Purchase of certain assets of RDI | (2,206 | ) | — | — | ||||||||
Net cash paid upon acquisition of TSC minority interest | — | — | (2,446 | ) | ||||||||
Additions to property and equipment | (24,849 | ) | (11,392 | ) | (3,555 | ) | ||||||
Proceeds from sale of property and equipment | 866 | 420 | 192 | |||||||||
Purchases of short-term securities, available for sale | (144,192 | ) | — | — | ||||||||
Sales of short-term securities, available for sale | 118,023 | — | — | |||||||||
Net cash used in continuing operations investing activities | (52,358 | ) | (10,972 | ) | (5,809 | ) | ||||||
Cash flows from continuing operations financing activities: | ||||||||||||
Cumulative daily drawdowns- revolver | 106,025 | 139,593 | 102,531 | |||||||||
Cumulative daily reductions — revolver | (89,813 | ) | (139,134 | ) | (95,770 | ) | ||||||
Repayments under related party long term debt | (8,449 | ) | (2,649 | ) | (3,995 | ) | ||||||
Repayments under long-term obligations | (123 | ) | (113 | ) | (735 | ) | ||||||
Increase in deferred loan costs | (123 | ) | — | — | ||||||||
Issuance of common stock pursuant to warrants and options | 913 | 827 | 405 | |||||||||
Net proceeds from sale of common stock | 27,039 | — | — | |||||||||
Net cash provided by (used in) continuing operations financing activities | 35,468 | (1,476 | ) | 2,436 | ||||||||
Net increase in cash and cash equivalents from continuing operations | 6,199 | 18,818 | 798 | |||||||||
Cash provided by (used in) discontinued operating activities | 495 | (294 | ) | (977 | ) | |||||||
Cash used in discontinued operations investing activities | 4,739 | — | (34 | ) | ||||||||
Cash (used in) provided by discontinued operations financing activities | (5,357 | ) | 349 | 964 | ||||||||
F6
Table of Contents
2006 | 2005 | 2004 | ||||||||||
Net cash (used in) provided by discontinued operations | (123 | ) | 55 | (47 | ) | |||||||
Cash and cash equivalents at beginning of period | 22,267 | 3,449 | 2,651 | |||||||||
Cash and cash equivalents at end of period | $ | 28,466 | $ | 22,267 | $ | 3,449 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid during the period for interest | $ | 521 | $ | 1,916 | $ | 2,097 | ||||||
Cash paid during the period for taxes | $ | 300 | $ | 355 | $ | 14 | ||||||
Supplemental disclosure of non-cash financing activities: | ||||||||||||
Capital lease obligations for new equipment | — | $ | 83 | $ | 26 |
F7
Table of Contents
F8
Table of Contents
• | Persuasive evidence of an arrangement existed | ||
• | Delivery had occurred or service was rendered | ||
• | Distribution’s price to the buyer had been fixed or was determinable, and | ||
• | Collectibility was reasonably assured. |
F9
Table of Contents
Building | 39 years | |||||
Construction equipment | 5-15 years | |||||
Land improvements | 5-15 years | |||||
Office furniture and fixtures | 3-10 years | |||||
Transportation equipment | 5 years | |||||
Leasehold improvements* | 3-10 years, depending on lease term | |||||
Warehouse equipment* | 3-10 years |
* | All leasehold improvements and warehouse equipment were owned by SCPL, which was sold on October 27, 2006. |
F10
Table of Contents
F11
Table of Contents
F12
Table of Contents
Fiscal Year | Fiscal Year | |||||||
Ended | Ended | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
Net income from continuing operations, as reported | $ | 10,541 | $ | 5,281 | ||||
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects | 463 | 381 | ||||||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects | (418 | ) | (117 | ) | ||||
Proforma net income from continuing operations | 10,586 | 5,545 | ||||||
Net income from discontinued operations | 559 | 372 | ||||||
Proforma net income | $ | 11,145 | $ | 5,917 | ||||
Basic and diluted net income per share: | ||||||||
From continuing operations: | ||||||||
Basic, as reported | $ | 1.36 | $ | 0.99 | ||||
Diluted, as reported | $ | 1.11 | $ | 0.75 | ||||
Proforma, basic | $ | 1.36 | $ | 1.03 | ||||
Proforma, diluted | $ | 1.11 | $ | 0.79 | ||||
From discontinued operations: | ||||||||
Basic, as reported | $ | 0.07 | $ | 0.07 | ||||
Diluted, as reported | $ | 0.05 | $ | 0.05 | ||||
Proforma, basic | $ | 0.07 | $ | 0.07 | ||||
Proforma, diluted | $ | 0.05 | $ | 0.05 | ||||
Total: | ||||||||
Basic, as reported | $ | 1.43 | $ | 1.06 | ||||
Diluted, as reported | $ | 1.16 | $ | 0.80 | ||||
Proforma, basic | $ | 1.43 | $ | 1.10 | ||||
Proforma, diluted | $ | 1.16 | $ | 0.84 |
2006 | 2005 | 2004 | ||||||||||
Numerator: | ||||||||||||
Net income from continuing operations, as reported | $ | 12,638 | $ | 10,541 | $ | 5,281 | ||||||
Interest on convertible debt, net of tax | — | — | 44 | |||||||||
Net income from continuing operations before interest on convertible debt | 12,638 | 10,541 | 5,325 | |||||||||
Income from discontinued operations, net of taxes | 682 | 559 | 372 | |||||||||
Net income before interest on convertible debt | $ | 13,320 | $ | 11,100 | $ | 5,697 | ||||||
Denominator: | ||||||||||||
Weighted average common shares outstanding — basic | 10,583 | 7,775 | 5,343 |
F13
Table of Contents
2006 | 2005 | 2004 | ||||||||||
Shares for dilutive stock options and warrants | 1,131 | 1,763 | 1,685 | |||||||||
Weighted average common shares outstanding and assumed conversions — diluted | 11,714 | 9,538 | 7,028 | |||||||||
Basic earnings per common share: | ||||||||||||
Net income from continuing operations | $ | 1.19 | $ | 1.36 | $ | 0.99 | ||||||
Net income from discontinued operations | $ | 0.06 | $ | 0.07 | $ | 0.07 | ||||||
Net income | $ | 1.25 | $ | 1.43 | $ | 1.06 | ||||||
Diluted earnings per common share: | ||||||||||||
Net income from continuing operations | $ | 1.08 | $ | 1.11 | $ | 0.75 | ||||||
Net income from discontinued operations | $ | 0.06 | $ | 0.05 | $ | 0.05 | ||||||
Net income | $ | 1.14 | $ | 1.16 | $ | 0.80 | ||||||
F14
Table of Contents
F15
Table of Contents
2006* | 2005 | 2004 | ||||||||||
Net sales | $ | 17,661 | $ | 22,029 | $ | 21,700 | ||||||
Income before income taxes | 741 | 872 | 588 | |||||||||
Income taxes | 180 | 313 | 216 | |||||||||
Gain on disposal, net of tax of $128 | 121 | — | — | |||||||||
Net income from discontinued operations | $ | 682 | $ | 559 | $ | 372 | ||||||
* | through the date of sale, October 27, 2006 |
December 31, | ||||
2005 | ||||
Assets | ||||
Current assets | $ | 8,286 | ||
Deferred tax asset, current | 312 | |||
Total current assets | 8,598 | |||
Property, plant and equipment, net | 210 | |||
Goodwill | 128 | |||
Deferred tax asset, long-term | 30 | |||
Other assets | 3 | |||
$ | 8,969 | |||
Liabilities | ||||
Current liabilities* | $ | 8,326 | ||
Long-term obligations, net of current portion | 59 | |||
$ | 8,385 | |||
Net assets | $ | 584 | ||
* | The SCPL revolver is included in current liabilities. |
F16
Table of Contents
December 31, 2006 | December 31, 2005 | |||||||
Construction equipment | $ | 56,406 | $ | 35,663 | ||||
Transportation equipment | 7,685 | 5,204 | ||||||
Buildings | 1,488 | 1,488 | ||||||
Office equipment | 435 | 490 | ||||||
Construction in progress | 259 | — | ||||||
Land | 1,204 | 182 | ||||||
67,477 | 43,027 | |||||||
Less accumulated depreciation | (20,860 | ) | (15,756 | ) | ||||
$ | 46,617 | $ | 27,271 | |||||
F17
Table of Contents
December 31, 2006 | December 31, 2005 | |||||||
TSC Revolving Credit Agreement, due May 2009 | $ | 30,000 | $ | 13,788 | ||||
SCPL Revolving Credit Agreement, due May 2007 | — | 4,261 | ||||||
TSC mortgages due monthly through June 2016 | 782 | 905 | ||||||
Management/Director Notes | — | 2,279 | ||||||
Management Notes | — | 6,170 | ||||||
Other | — | 83 | ||||||
30,782 | 27,486 | |||||||
Less current maturities of long-term obligations | (123 | ) | (123 | ) | ||||
Less short-term debt, related parties | — | (8,449 | ) | |||||
Amounts included in discontinued operations | — | (4,344 | ) | |||||
$ | 30,659 | $ | 14,570 | |||||
F18
Table of Contents
• | Make distributions and dividends; | ||
• | Incur liens and encumbrances; | ||
• | Incur further indebtedness; | ||
• | Guarantee obligations; | ||
• | Dispose of a material portion of assets or merge with a third party; | ||
• | Incur negative income for two consecutive quarters. |
F19
Table of Contents
F20
Table of Contents
Fiscal Year | ||||
2007 | $ | 123 | ||
2008 | 102 | |||
2009 | 30,073 | |||
2010 | 73 | |||
2011 | 73 | |||
Thereafter | 338 | |||
$ | 30,782 | |||
F21
Table of Contents
December 31, 2006 | December 31, 2005 | |||||||||||||||
Current | Long Term | Current | Long Term | |||||||||||||
Assets related to: | ||||||||||||||||
Net operating loss carryforwards | $ | 3,346 | $ | — | $ | 3,311 | $ | 5,738 | ||||||||
Accrued compensation | 974 | 162 | 913 | 129 | ||||||||||||
AMT carryforward | — | 1,289 | — | — | ||||||||||||
Other | 64 | — | — | 14 | ||||||||||||
4,384 | 1,451 | 4,224 | 5,881 | |||||||||||||
Liabilities related to: | ||||||||||||||||
Contract accounting | (87 | ) | ||||||||||||||
Depreciation of property and equipment | — | (3,039 | ) | — | (1,593 | ) | ||||||||||
Net asset | $ | 4,297 | $ | (1,588 | ) | $ | 4,224 | $ | 4,288 | |||||||
F22
Table of Contents
Fiscal Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2005 | 2004 | ||||||||||
Tax expense at the U.S. federal statutory rate | $ | 6,787 | $ | 4,829 | $ | 1,270 | ||||||
State income tax expense, net of refunds and federal benefits | — | — | 17 | |||||||||
Decrease in deferred tax asset valuation allowance | — | (1,390 | ) | (3,787 | ) | |||||||
Adjustment to value of net operating loss carryforward | — | (364 | ) | — | ||||||||
Non-deductible costs | 86 | 98 | 558 | |||||||||
Other | — | (70 | ) | 24 | ||||||||
Income tax expense (benefit) | $ | 6,874 | $ | 3,104 | $ | (1,918 | ) | |||||
Income tax on discontinued operations including taxes on the gain on sale in 2006 | 308 | 315 | 216 | |||||||||
Income tax on continuing operations | $ | 6,566 | $ | 2,788 | $ | (2,134 | ) | |||||
Fiscal Year Ended | Fiscal Year Ended | |||||||
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
Costs incurred and estimated earnings on uncompleted contracts | $ | 222,170 | $ | 156,916 | ||||
Billings on uncompleted contracts | (240,549 | ) | (168,352 | ) | ||||
$ | (18,379 | ) | $ | (11,436 | ) | |||
Fiscal Year Ended | Fiscal Year Ended | |||||||
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 3,157 | $ | 2,199 | ||||
Billings in excess of costs and estimated earnings on uncompleted contracts | (21,536 | ) | (13,635 | ) | ||||
$ | (18,379 | ) | $ | (11,436 | ) | |||
F23
Table of Contents
F24
Table of Contents
1991 Plan | Director Plan | 1994 Omnibus Plan | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Shares | Exercise Price | Shares | Exercise Price | Shares | Exercise Price | |||||||||||||||||||
Outstanding at December 31, 2003: | 84,420 | $ | 2.75 | 87,502 | $ | 1.77 | 770,384 | $ | 1.48 | |||||||||||||||
Granted | — | — | — | |||||||||||||||||||||
Exercised | — | $ | 2.75 | (37,170 | ) | $ | 1.77 | (162,192 | ) | $ | 1.95 | |||||||||||||
Expired/forfeited | — | (3,000 | ) | (29,996 | ) | $ | 2.42 | |||||||||||||||||
Outstanding at December 31, 2004: | 84,420 | $ | 2.75 | 47,332 | $ | 1.67 | 578,196 | $ | 1.29 | |||||||||||||||
Granted | — | — | — | |||||||||||||||||||||
Exercised | — | $ | 2.75 | (3,000 | ) | $ | 1.83 | (154,000 | ) | $ | 0.99 | |||||||||||||
Expired/forfeited | — | (13,166 | ) | $ | 2.75 | — | $ | 2.42 | ||||||||||||||||
Outstanding at December 31, 2005: | 84,420 | $ | 2.75 | 31,166 | $ | 1.58 | 424,196 | $ | 1.40 | |||||||||||||||
Granted | — | — | — | |||||||||||||||||||||
Exercised | (55,996 | ) | $ | 2.75 | (18,000 | ) | $ | 2.05 | (166,016 | ) | $ | 1.08 | ||||||||||||
Expired/forfeited | — | $ | 2.75 | — | — | |||||||||||||||||||
Outstanding at December 31, 2006: | 28,424 | $ | 2.75 | 13,166 | $ | 0.94 | 258,180 | $ | 1.60 | |||||||||||||||
1998 Plan | 2001 Plan | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Shares | Price | Shares | Price | |||||||||||||
Outstanding at December 31, 2003: | 540,500 | $ | 0.56 | 214,100 | $ | 1.58 | ||||||||||
Granted | — | 157,800 | $ | 3.10 | ||||||||||||
Exercised | (20,375 | ) | $ | 1.05 | (420 | ) | $ | 2.04 | ||||||||
Expired/forfeited | (1,500 | ) | $ | 1.00 | (7,180 | ) | $ | 1.82 | ||||||||
Outstanding at December 31, 2004: | 518,625 | $ | 0.54 | 364,300 | $ | 2.48 | ||||||||||
Granted | — | 117,600 | $ | 10.88 | ||||||||||||
Exercised | (289,500 | ) | $ | 0.50 | (17,540 | ) | $ | 2.06 | ||||||||
Expired/forfeited | — | (7,200 | ) | $ | 2.43 | |||||||||||
Outstanding at December 31, 2005: | 229,125 | $ | 0.58 | 457,160 | $ | 4.66 | ||||||||||
Granted | — | 81,500 | $ | 16.36 | ||||||||||||
Exercised | (225,875 | ) | $ | 0.57 | (64,057 | ) | $ | 2.46 | ||||||||
Expired/forfeited | — | (4,400 | ) | $ | 7.83 | |||||||||||
Outstanding at December 31, 2006: | 3,250 | $ | 1.00 | 470,203 | $ | 8.35 | ||||||||||
F25
Table of Contents
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted Average | Weighted Average | Weighted Average | ||||||||||||||||||
Number of | Remaining Contractual Life | Exercise Price Per | Number of | Exercise Price Per | ||||||||||||||||
Range of Exercise Price Per Share | Shares | (years) | Share | Shares | Share | |||||||||||||||
$0.50 — $0.88 | 165,346 | 3.40 | $ | 0.88 | 165,346 | $ | 0.88 | |||||||||||||
$1.00 — $1.50 | 62,050 | 4.06 | $ | 1.43 | 62,050 | $ | 1.43 | |||||||||||||
$1.73 — $2.00 | 40,100 | 5.57 | $ | 1.73 | 30,900 | $ | 1.73 | |||||||||||||
$2.75 — $3.38 | 313,087 | 4.32 | $ | 2.95 | 188,208 | $ | 2.85 | |||||||||||||
$6.87 | 20,000 | 8.39 | $ | 6.87 | 20,000 | $ | 6.87 | |||||||||||||
$9.69 | 62,800 | 3.55 | $ | 9.69 | — | $ | 0.00 | |||||||||||||
$16.87 | 28,540 | 3.70 | $ | 16.87 | 5,660 | $ | 16.87 | |||||||||||||
$24.96 | 62,800 | 4.55 | $ | 24.96 | — | $ | 0.00 | |||||||||||||
$25.21 | 18,500 | 4.69 | $ | 25.21 | — | $ | 0.00 | |||||||||||||
773,223 | $ | 5.80 | 472,164 | $ | 2.24 | |||||||||||||||
Aggregate intrinsic value | ||||||||
Total outstanding in-the-money options at 12/31/06 | 691,923 | $ | 12,605,000 | |||||
Total vested in-the-money options at 12/31/06 | 472,164 | $ | 9,217,000 | |||||
Total options exercised during 2006 | 529,944 | $ | 12,636,000 |
Fiscal 2006 | Fiscal 2005 | Fiscal 2004 | ||||||||||
Risk free interest rate | 4.9 | % | 4.2 | % | 4.0 | % | ||||||
Expected volatility | 76.3 | % | 77.8 | % | 78.0 | % | ||||||
Expected life of option | 5.0 years | 6.0 years | 10.0 years | |||||||||
Expected dividends | None | None | None |
F26
Table of Contents
Fiscal Year | ||||
2007 | 1,010 | |||
2008 | 776 | |||
2009 | 624 | |||
2010 | 624 | |||
2011 | 468 | |||
Thereafter | — | |||
Total future minimum rental payments | $ | 3,502 | ||
F27
Table of Contents
December 31, | December 31, | December 31, | ||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
Contract | % of | Contract | % of | Contract | % of | |||||||||||||||||||
Revenues | Revenues | Revenues | Revenues | Revenues | Revenues | |||||||||||||||||||
Texas State Department of Transportation | $ | 166,333 | 67.1 | % | $ | 84,827 | 38.8 | % | $ | 44,461 | 33.6 | % | ||||||||||||
City of Houston | $ | 29,848 | 12.1 | % | $ | 49,437 | 22.6 | % | $ | 16,512 | 12.5 | % | ||||||||||||
Harris County | * | * | $ | 29,796 | 13.6 | % | * | * |
* | represents less than 10% of revenues |
Name | Principal | Interest | Total payment | |||||||||
Patrick T. Manning | $ | 318,592 | 2,867 | $ | 321,459 | |||||||
James D. Manning | $ | 1,855,349 | 16,698 | $ | 1,872,047 | |||||||
Joseph P. Harper, Sr | $ | 2,637,422 | 23,737 | $ | 2,661,159 | |||||||
Maarten D. Hemsley | $ | 181,205 | 1,631 | $ | 182,836 | |||||||
Robert M. Davies | $ | 452,909 | 4,076 | $ | 456,985 |
F28
Table of Contents
• | Specific excess reinsurance coverage for medical and prescription drug claims in excess of $60,000 for each insured person with a maximum lifetime reimbursable of $2,000,000. | ||
• | Aggregate reinsurance coverage for medical and prescription drug claims with a plan year maximum of approximately $1.1 million which is the estimated maximum claims and fixed cost based on the number of employees. |
F29
Table of Contents
F30
Table of Contents
Name | Cash | Shares | Five-year Notes | |||||||||
Patrick T. Manning | $ | 460,458 | 135,474 | $ | 365,831 | |||||||
James D. Manning | $ | 660,649 | 218,357 | $ | 2,124,633 | |||||||
Joseph P. Harper, Sr. | $ | 1,045,764 | 345,437 | $ | 3,020,201 | |||||||
Maarten D. Hemsley | $ | 208,397 | — | $ | 207,504 | |||||||
Robert M. Davies | $ | 166,876 | — | $ | 518,641 |
F31
Table of Contents
F32
Table of Contents
(Unaudited)
Fiscal 2006 Quarter Ended | ||||||||||||||||||||
March 31 | June 30 | September 30 | December 31 | Total | ||||||||||||||||
(Dollar amounts in thousands, except per share data) | ||||||||||||||||||||
Revenues | $ | 56,480 | $ | 60,010 | $ | 68,743 | $ | 64,115 | $ | 249,348 | ||||||||||
Gross profit | 6,686 | 7,310 | 7,878 | �� | 6,673 | 28,547 | ||||||||||||||
Pre-tax income from continuing operations | 4,563 | 4,832 | 5,354 | 4,455 | 19,204 | |||||||||||||||
Net income from continuing operations | 3,022 | 3,156 | 3,545 | 2,915 | 12,638 | |||||||||||||||
Net income from discontinued operations, including gain on sale of $121 in 2006 | 171 | 208 | 65 | 238 | 682 | |||||||||||||||
Net income | $ | 3,193 | $ | 3,364 | $ | 3,610 | $ | 3,153 | $ | 13,320 | ||||||||||
Basic income per share: | ||||||||||||||||||||
From continuing operations: | $ | 0.30 | $ | 0.30 | $ | 0.33 | $ | 0.26 | $ | 1.19 | ||||||||||
From discontinued operations: | $ | 0.02 | $ | 0.02 | $ | 0.01 | $ | 0.01 | $ | 0.06 | ||||||||||
Net income per share, basic: | $ | 0.32 | $ | 0.32 | $ | 0.34 | $ | 0.27 | $ | 1.25 | ||||||||||
Diluted income per share: | ||||||||||||||||||||
From continuing operations | $ | 0.27 | $ | 0.27 | $ | 0.30 | $ | 0.24 | $ | 1.08 | ||||||||||
From discontinued operations | $ | 0.01 | $ | 0.02 | $ | 0.01 | $ | 0.01 | $ | 0.06 | ||||||||||
Net income per share, diluted: | $ | 0.28 | $ | 0.29 | $ | 0.31 | $ | 0.25 | $ | 1.14 | ||||||||||
Fiscal 2005 Quarter Ended | ||||||||||||||||||||
March 31 | June 30 | September 30 | December 31 | Total | ||||||||||||||||
(Dollar amounts in thousands, except per share data) | ||||||||||||||||||||
Revenues | $ | 39,413 | $ | 57,228 | $ | 61,163 | $ | 61,635 | $ | 219,439 | ||||||||||
Gross profit | 3,358 | 6,005 | 6,902 | 7,491 | 23,756 | |||||||||||||||
Pre-tax income from continuing operations | 903 | 3,266 | 4,126 | 5,034 | 13,329 | |||||||||||||||
Net income from continuing operations | 596 | 2,156 | 2,723 | 5,066 | 10,541 | |||||||||||||||
Net income from discontinued operations | 231 | 245 | 57 | 26 | 559 | |||||||||||||||
Net income | $ | 827 | $ | 2,401 | $ | 2,780 | $ | 5,092 | $ | 11,100 | ||||||||||
Basic income per share: | ||||||||||||||||||||
From continuing operations: | $ | 0.08 | $ | 0.28 | $ | 0.35 | $ | 0.65 | $ | 1.36 | ||||||||||
From discontinued operations: | $ | 0.03 | $ | 0.03 | $ | 0.01 | $ | 0.00 | $ | 0.07 | ||||||||||
Net income per share, basic: | $ | 0.11 | $ | 0.31 | $ | 0.36 | $ | 0.65 | $ | 1.43 | ||||||||||
Diluted income per share: | ||||||||||||||||||||
From continuing operations | $ | 0.06 | $ | 0.23 | $ | 0.29 | $ | 0.53 | $ | 1.11 | ||||||||||
From discontinued operations | $ | 0.02 | $ | 0.03 | $ | 0.00 | $ | 0.00 | $ | 0.05 | ||||||||||
Net income per share, diluted: | $ | 0.08 | $ | 0.26 | $ | 0.29 | $ | 0.53 | $ | 1.16 | ||||||||||
F33
Table of Contents
Number | Exhibit Title | |
1.1 | Form of Underwriting Agreement dated as of January 19, 2006 between Sterling Construction Company, Inc. and the underwriters and other parties named therein (incorporated by reference to Exhibit 1.1 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 13, 2006 (SEC File number 333-129780)). | |
2.1 | Asset Purchase Agreement, dated September 23, 2002, by and among Texas Sterling Construction, L.P., Kinsel Industries, Inc. and Tracks of Texas, Inc. (incorporated by reference to Exhibit 10.4 to Sterling Construction Company, Inc.’s quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2002, filed on November 14, 2002 (SEC File No. 000-19450)). | |
3.1 | Restated and Amended Certificate of Incorporation of Oakhurst Company, Inc., dated as of September 25, 1995 (incorporated by reference to Exhibit 3.1 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
3.2 | Certificate of Amendment of the Certificate of Incorporation of Oakhurst Company, Inc., dated as of November 12, 2001 (incorporated by reference to Exhibit 3.2 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
3.3 | Bylaws of Oakhurst Company, Inc. (incorporated by reference to Exhibit 3.2 to its Annual Report on Form 10-K for the fiscal year ended February 28, 1998, filed on May 29, 1998 (SEC File No. 000-19450)). | |
4.1 | Certificate of Designations of Oakhurst Company, Inc.’s Series A Junior Participating Preferred Stock, dated as of February 10, 1998 (incorporated by reference to Exhibit 4.2 to its Annual Report on Form 10-K, filed on May 29, 1998 (SEC File No. 000-19450)). | |
4.3 | Rights Agreement, dated as of December 29, 1998, by and between Oakhurst Company, Inc. and American Stock Transfer & Trust Company, including the form of Series A Certificate of Designation, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B and C, respectively (incorporated by reference to Exhibit 99.1 to Oakhurst Company, Inc.’s Registration Statement on Form 8-A, filed on January 5, 1999 (SEC File No. 000-19450)). | |
4.4 | Form of Common Stock Certificate of Sterling Construction Company, Inc. (incorporated by reference to Exhibit 4.5 to its Form 8-A, filed on January 11, 2006 (SEC File No. 011-31993)). | |
10.1# | Oakhurst Capital, Inc. 1994 Omnibus Stock Plan, with form of option agreement (incorporated by reference to Exhibit 10.1 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.2# | Oakhurst Capital, Inc. 1994 Omnibus Stock Plan, as amended through December 18, 1998, (incorporated by reference to Exhibit 10.21 to Oakhurst Company, Inc.’s Annual Report on Form 10-K, filed on June 1, 1999 (SEC File No. 000-19450)). | |
10.3# | Oakhurst Capital, Inc. 1994 Non-Employee Director Stock Option Plan, with form of option agreement (incorporated by reference to Exhibit 10.3 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.4# | Oakhurst Company, Inc. 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). |
E-1
Table of Contents
Number | Exhibit Title | |
10.5# | Form of Stock Incentive Agreements under Oakhurst Company, Inc.’s 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.51 to Sterling Construction Company, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 29, 2005 (SEC File No. 001-31993)). | |
10.6# | Oakhurst Company, Inc. 2001 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.7# | Forms of Stock Option Agreement under the Oakhurst Company, Inc. 2001 Stock Incentive Plan (incorporated by reference to Exhibit 10.51 to Sterling Construction Company, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 29, 2005 (SEC File No. 001-31993)). | |
10.8# | Form of Employee Stock Option Agreement, dated as of August 29, 1991, by and between Hallwood Holdings Incorporated and certain of its directors and officers (incorporated by reference to Exhibit 10.8 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.12# | Employment Agreement, dated as of July 18, 2004, by and between Patrick T. Manning, Sterling Construction Company, Inc. and Sterling Houston Holdings, Inc. (incorporated by reference to Exhibit 99.1 to Sterling Construction Company, Inc.’s Current Report on Form 8-K, dated as of March 23, 2005, filed on March 28, 2005 (SEC File No. 001-31993)). | |
10.13# | Employment Agreement, dated as of July 18, 2004, by and between Joseph P. Harper, Sr., Sterling Construction Company, Inc. and Sterling Houston Holdings, Inc. (incorporated by reference to Exhibit 99.2 to Sterling Construction Company, Inc.’s Current Report on Form 8-K, dated as of March 23, 2005, filed on March 28, 2005 (SEC File No. 001-31993)). | |
10.14# | Employment Agreement, dated as of July 13, 2005, by and between Maarten D. Hemsley and Sterling Construction Company, Inc. (incorporated by reference to Exhibit 10.1 to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on November 7, 2005 (SEC File No. 001-31993)). | |
10.15# | Summary of Compensation for Non Employee Directors of Sterling Construction Company, Inc. (incorporated by reference to Exhibit 10.15 to its Registration Statement on Form S | |
10.26 | Oakhurst Group Tax Sharing Agreement, dated as of July 18, 2001, by and among Oakhurst Company, Inc., Sterling Construction Company, Steel City Products, Inc. and such other companies as are set forth on Schedule A thereto (incorporated by reference to Exhibit 10.28 to Sterling Construction Company, Inc.’s Transition Report on Form 10-K for the ten months ended December 31, 2001, filed on April 8, 2002 (SEC File No. 000-19450)). | |
10.27 | Fourth Amended and Restated Revolving Credit Loan Agreement, dated as of May 10, 2006, by and between Comerica Bank, Sterling Construction Company, Inc., Sterling General, Inc., Sterling Houston Holdings, Inc. Texas Sterling Construction, L.P. (incorporated by reference to Exhibit 10.1 (and referred to as “Amended Revolving Line of Credit Agreement with Comerica Bank”) to Sterling Construction Company, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2006, filed on November 13, 2006 (SEC File No. 001-31993)). | |
10.28 | Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.1 to Oakhurst Company, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2001, filed on August 16, 2001 (SEC File No. 000-19450)). |
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Number | Exhibit Title | |
10.29 | Amendment, dated as of September 12, 2001, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.3 to Oakhurst Company, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2001, filed on October 22, 2001 (SEC File No. 000-19450)). | |
10.30 | Second Amendment, dated as of December 13, 2001, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.35 to Sterling Construction Company, Inc.’s Transition Report on Form 10-K for the ten months ended December 31, 2002, filed on April 8, 2002 (SEC File No. 000-19450)). | |
10.31 | Third Amendment, dated as of June 27, 2002, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.31 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.32 | Fourth Amendment, dated as of September 25, 2002, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.32 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.33 | Fifth Amendment, dated as of November 30, 2002, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.33 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.34 | Sixth Amendment, dated as of January 15, 2003, to Credit Agreement, dated as of July 13, 2001, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.34 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.35 | Seventh Amendment to Credit Agreement and Waiver, dated as of November 6, 2003, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.35 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.36 | Eighth Amendment to Credit Agreement, dated as of September 17, 2004, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.36 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.37 | Ninth Amendment to Credit Agreement, dated as of December 21, 2004, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.37 Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.38 | Tenth Amendment to Credit Agreement, dated as of April 18, 2005, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.38 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.39 | Eleventh Amendment to Credit Agreement and Note, dated as of June 3, 2005, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.39 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). |
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Table of Contents
Number | Exhibit Title | |
10.40 | Twelfth Amendment to Credit Agreement, dated as of September 14, 2005, by and between National City Bank of Pennsylvania and Steel City Products, Inc. (incorporated by reference to Exhibit 10.40 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
10.42# | Amendment No. 1 to Executive Employment Agreement, dated November 2, 2005, by and between Patrick T. Manning, Sterling Construction Company, Inc., Sterling General, Inc. and Sterling Houston Holdings, Inc. (incorporated by reference to Exhibit 10.36 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.43# | Amendment No. 1 to Executive Employment Agreement, dated November 2, 2005, by and between Joseph P. Harper, Sr., Sterling Construction Company, Inc., Sterling General, Inc. and Sterling Houston Holdings, Inc. (incorporated by reference to Exhibit 10.37 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1, filed on November 17, 2005 (SEC File number 333-129780)). | |
10.45# | Note Prepayment Agreement, dated as of December 27, 2005, by and between SCC and certain of its noteholders named therein (incorporated by reference to Exhibit 10.1 to SCC’s Current Report on Form 8-K, dated as of December 27, 2005, filed on December 27, 2005 (SEC File No. 001-31993)). | |
10.46# | [Note Prepayment] Termination Agreement, dated as of December 30, 2005, by and between Sterling Construction Company, Inc. and certain of its noteholders named therein (incorporated by reference to Exhibit 10.1 to SCC’s Current Report on Form 8-K, dated as of December 30, 2005, filed on January 3, 2006 (SEC File No. 001-31993)). | |
21 | Subsidiaries of Sterling Construction Company, Inc. (incorporated by reference to Exhibit 21 to Sterling Construction Company, Inc.’s Registration Statement on Form S-1A, filed on January 3, 2006 (SEC File number 333-129780)). | |
23.1* | Consent of Grant Thornton LLP. | |
31.1* | Certification of Patrick T. Manning, Chief Executive Officer of Sterling Construction Company, Inc. | |
31.2* | Certification of Maarten D. Hemsley, Chief Financial Officer of Sterling Construction Company, Inc. | |
32.0* | Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) of Patrick T. Manning, Chief Executive Officer, and Maarten D. Hemsley, Chief Financial Officer. |
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