I forget...did you ask me about Sterling Construction, Sterling
Houston Holdings, or Texas Sterling...?
Doesn't matter, they're all pretty much one and the same. I've tried
to paint the picture, below, of how Texas Sterling is set-up as a
business, and what sort of track record they have in the industry.
There's a fair bit of information on the company (or should I say
"companies"), and I've extracted the most useful information for the
answer to your question.
Before rating this answer, please let me know if there is anything on
which you'd like some follow-up information. Just post a Request for
Clarification, and I'll be happy to assist you further.
All the best...
The Sterling Construction Company is the principle owner of two
subsidiary companies: Sterling Houston Holdings Inc (TX) and Steel
City Products Inc (PA). Sterling Houston Holdings -- which
accounts for the bulk of Sterling Construction's revenues -- does
business under the name of Texas Sterling Construction.
Since Sterling Construction is a publicly-traded company on the
American Stock Exchange, there is a great deal of publicly-available
information on the firm, and consequently, there is a lot of
information available on Texas Sterling as well, although it's not
always a simple matter to keep to the various identities of the
Most of the information presented below are introductory comments
written my me, followed by direct excerpts from varions sources.
Where I've added my own comments in the midst of the excerpts, I've
included them in brackets [ ].
Let's start with a visit to the websites of Sterling Constructions and
Sterling Construction Company, Inc. is a publicly-traded Company
(AMEX: STV), which owns 80.1% of Sterling Houston Holdings, Inc., a
construction company based in Houston, Texas that in 2003 had revenues
of approximately $149.0 million, and Steel City Products, Inc., a
distribution company based in Pittsburgh, Pennsylvania, that in 2003
had revenues of approximately $20.5 million. The consolidated Company
reported net income in fiscal 2003 of $5.4 million...In the prior year
the consolidated Company reported revenues of approximately $134.3
millio...On February 12, 2004 the Company's common shares began
trading on the American Stock Exchange
[The 80.1% ownership figure is in flux, as you'll see in their SEC
reports, discussed later]
Sterling Construction discusses the relationship between it, and
Sterling Houston Holdings, aka Texas Sterling, and the nature of the
Sterling Houston Holdings, Inc.
20810 Fernbush Lane
Houston, Texas 77073
...Sterling Houston Holdings is 80.1% owned by Sterling Construction
Company. Operating as Texas Sterling Construction, it is one of the
largest regional contractors of its kind in the Houston market,
engaged in the construction of underground sanitary sewers, water
mains, storm sewers and paving. In 2001 the business was expanded to
include construction of portions of the new light rail system in the
CIty of Houston, and in September 2002 the "Kinsel" heavy highway
construction business was acquired from Insituform Technologies.
The business was founded in Michigan in 1955 by Jim and Richard Manning,
...1978 was relocated to Houston, Texas
...SHH has operated in the Dallas/Fort Worth market for several years,
and in 1999 entered the San Antonio market.
...primarily engaged in working for local and county municipalities
and agencies, and to a lesser extent, the State of
Texas...occasionally undertakes projects for private developers and
...Revenues in 2003 totaled approximately $149 million.
President: Patrick T. Manning
Treasurer: Joseph P. Harper, Sr.
Chief Financial Officer: Joseph P. Harper, Jr.
Executive Vice President: Samuel Clark
Executive Vice President: Jeffrey Manning
Executive Vice President: Terry Williamson
Vice President: Anthony Colombo
Vice President: Joseph P. Harper, Jr.
Vice President: Brian Manning
As noted above, Texas Sterling has its own website:
which is a bit flashy (but if you ask me, unappealing). Their
introductory webpage emphasizes their role in "underground utilities"
and "roads, bridges, and rail" in the Houston area.
The site strikes me as "thin", that is, not an awful lot of content to
it. Their "news" page, for instance, contains a single headline and
photo, and not much else:
A section describes the services they offer:
and another section has their client list:
This page lists their clients -- about 75 in all -- mostly cities,
counties and government utilities in Texas, although the list also
includes a few companies (e.g. Anheuser-Busch), and other entities
such as NASA and the Port of Houston. [I did not reproduce the full
list here due to copyright restrictions]
and this link:
is a photo gallery of some of their construction activities...probably
worth a look. If nothing else, you can check out their equipment.
Now, onto the nitty-gritty. Sterling Construction's reports (as a
publicly-traded company) to the SEC. Their annual report and
quarterly reports, in particular, offer a wealth of information and I
suggest you spend some time going over their recent reports in their
entirety...there are certain to be details that seemed of secondary
importance to me, but that might be of great interest to you.
You can find their most recent quarterly report at:
I've excerpted some of their recent history and stats, below, perhaps
a bit more than you'll need, but I thought it better to err on the
side of excess:
STERLING CONSTRUCTION COMPANY, INC.
September 30, 2004
...In January 1999 the Company made a minority investment in Sterling
Houston Holdings, Inc. (?SHH? or the ?Construction Segment?), a heavy
civil construction company based in Houston, Texas that specializes in
municipal and state highway contracts for paving, bridge, water and
sewer, and light rail projects. In July 2001, the Company increased
its equity ownership of SHH from 12% to 80.1% (the ?Sterling
...Effective July 19, 2004, the individual shareholders owning the
19.9% of SHH shares not held by the Company exercised their right to
sell (?Put?) those shares to the Company pursuant to the Sterling
Transaction. The purchase price was determined by the Company in
October 2004, with the expectation that the transaction will be closed
by early 2005, following which the Company will own 100% of SHH (the
[This is what I mentioned earlier...ownership is increasing from 80.1% to 100%].
...In conjunction with the Sterling Transaction, SHH entered into a
three-year bank agreement providing for a revolving line of credit
originally with a maximum line of $17.0 million, subject to a
borrowing base (the ?SHH Revolver?). The line of credit carries
interest at prime, subject to achievement of certain financial
targets, is secured by the equipment of SHH and is subject to the
maintenance of certain financial covenants. In March 2003, SHH agreed
with its bank on a two-year extension of the line of credit, until
March 31, 2006, and at the Company?s request, reflecting strong cash
flow and expected lower borrowing requirements, the maximum amount
available was reduced to $14.0 million. At September 30, 2004, the
balance on the SHH Revolver was $11.9 million, with interest at 4.0%,
and SHH was in compliance with its covenants.
...Management believes that the SHH Revolver will provide adequate
funding for SHH?s working capital, debt service and capital
expenditure requirements, including seasonal fluctuations, for at
least the next twelve months and for the upstreaming to the Company
sufficient to satisfy cash payments for the Put and other debt.
...In June 2001, SHH completed the construction of a new headquarters
building on land adjacent to its existing equipment repair facility in
Houston. The building was financed principally through an additional
mortgage of $1.1 million on the land and facilities, at an interest
rate of 7.75% per annum, repayable over 15 years. The new mortgage is
cross-collateralized with an existing mortgage on the land and
facilities, which was obtained in 1998 in the amount of $500,000,
repayable over 15 years with an interest rate of 9.3% per annum.
...SHH measures its performance within the construction industry
through the bidding process and the number, size and expected
profitability of contracts obtained throughout the year. The Company
is subject to various risks and uncertainties. Many factors affect the
bidding climate, including, but not limited to, fluctuations in the
local economy, the amount of local, state and federal government funds
available for infrastructure upgrade and new construction, as well as
the number of bidders in the market and the prices at which they are
prepared to bid, which are in turn affected by such bidders?
profitability, financial strength and contract backlogs. Factors
outside the bidding climate include: (a) weather conditions, such as
precipitation and temperature, which can result in significant
variability in quarterly revenues and earnings, particularly in the
first and fourth quarters; (b) the availability of bonding, the
absence of which would adversely affect the Company?s ability to
obtain new contracts; (c) the price of oil products, which can
fluctuate significantly impacting operating expenses, and (d) the
availability and price of steel and of cement and other raw materials
for the production of concrete. While in fiscal 2003, the Company
reported significant growth in Construction Segment revenues and
profitability, there can be no assurance that it will be able to
continue to do so. In the first nine months of fiscal 2004 the
Construction Segment?s revenues and profitability were lower than in
the prior year period
...Contract revenues in the third quarter of fiscal 2004 increased by
$3.6 million, due to the commencement of several new projects during
the quarter, and to better weather, which allowed for more work days.
...Despite the increase in revenues compared with the prior year
period, the Construction Segment?s gross profit for the quarter was
$3.9 million, or 9.7% of contract revenues, compared with gross profit
in the third quarter last year of $5.1 million, or 14.0% of contract
revenues. The decrease in margin was attributable to differences in
the mix of contracts in progress.
...Operating profit at the Construction Segment for the third quarter
totaled $1.9 million, a decrease of $1.5 million, principally due to
the lower gross profits and to increases in administrative expenses,
including the hiring of additional project managers in the current
Nine months ended September 30, 2004 compared with nine months ended
September 30, 2003
Contract revenues in the nine months of fiscal 2004 reflected a
decrease compared with the prior year of $21.0 million, due to
particularly poor weather in the second quarter, which significantly
reduced the days available for construction on many of the Segment?s
contracts. Favorable weather in the prior year first six months had
allowed the Construction Segment to complete contracts more quickly
Construction Segment gross profit for the first nine months was
$11.1 million, or 11.8% of contract revenues, compared with gross
profit in the prior year period of $13.4 million, or 11.6% of contract
revenues. Although gross profit decreased by approximately $2.3
million due to the reduction in revenues and higher fixed cost
absorption rates, margins remained relatively unchanged due to
favorable results on a number of contracts in the second quarter of
the current year.
Operating profit at the Construction Segment decreased by $3.0
million, principally due to the lower gross profits compared with the
prior year and to increases in administrative expenses, including the
addition of personnel and increases in employee benefit expenses.
Item 3. Qualitative and Quantitative Disclosure about Market Risk
The Company is exposed to certain market risks from transactions
that are entered into during the normal course of business. Sterling?s
primary market risk exposure is related to interest rate risk. The
Company manages its interest rate risk by balancing in part its
exposure between fixed and variable rates while attempting to minimize
its interest costs.
Financial derivatives are used as part of the overall risk
management strategy. These instruments are used to manage risk related
to changes in interest rates. The portfolio of derivative financial
instruments consists of interest rate swap agreements, which are used
to modify variable rate obligations to fixed rate obligations, thereby
reducing the exposure to higher interest rates. Amounts paid or
received under interest rate swap agreements are accrued as interest
rates change with the offset recorded in interest expense.
An increase of 1% in the market rate of interest would have
increased the Company?s net interest expense for the nine months ended
September 30, 2004 by approximately $22,000.
There are no material legal proceedings outstanding against the Company.
[The legal proceedings section of a company's report can be very
revealing. I find it a bit unusual for a company in the construction
business -- where lawsuits are certainly not uncommon -- to have no
"material" legal proceedings to report, but perhaps Texas Sterling is
unusual in that respect (or perhaps I'm being unfair to the
Their annual report adds some additional details and persepctive -- my
apologies for some of the redundancy:
STERLING CONSTRUCTION COMPANY, INC.
December 31, 2003
In September 2002, a wholly owned subsidiary of SHH, Texas Sterling
Construction, L.P. (?TSC?) acquired the Kinsel Heavy Highway
construction business (the ?Kinsel Business?) from a subsidiary of
Insituform Technologies, Inc. (?ITI?). The acquisition included the
purchase of construction equipment at its appraised value of
approximately $4.4 million, and the assumption by TSC of equipment
operating leases with a future obligation of approximately $1.4
million. Certain unstarted construction contracts with revenues
estimated at $38 million, subject to post-closing adjustments, were
assigned to TSC. TSC was engaged to manage the completion of certain
other contracts in return for a management fee, and hired most of
Kinsel?s construction crews together with project managers and other
supervisory personnel. The consideration of $4.4 million for the
Kinsel Business was financed by TSC through the issuance to ITI of two
unsecured two-year notes aggregating $1.5 million, with the balance
paid in cash funded through additional borrowings under the SHH
revolving line of credit.
At the time the Kinsel Business was acquired, the size of the
transaction and the amount of assets acquired were not material in
relation to the Company?s overall business. No goodwill was recognized
in the Kinsel Business transaction.
Most of the revenues of SHH are generated through the Houston
municipal market, which includes the City of Houston, the Houston
Metropolitan Transit Authority and Harris County. The Company also has
smaller operations in the Dallas/Fort Worth and San Antonio markets.
In 1999, SHH entered the state highway business, a market that has
benefited from growth in federal highway spending.
Operations of SHH can be materially affected by poor weather
conditions, so that generally less construction business is completed
in the winter months. In particular, significant rainfall can cause
construction delays adversely affecting revenues and margins on
contracts in progress.
SHH principally bids for contracts offered by local, city and
county municipalities and agencies, including the City of Houston, the
Houston Metropolitan Transit Authority, Harris County and the State of
Texas. Major customers also include the cities of San Antonio, Fort
Worth and Dallas, and suburban communities in these regions. Except
for a limited amount of private work, most contracts are subject to a
competitive public tender process.
There are no foreign sales.
Fiscal year ended
December 31, 2003
% of revenues from:
City of Houston
39.2 % in 2003....23.3% in 2002
Texas Department of Transportation
19.1 % ....[less than 10%]
Houston Metropolitan Transit Authority
At December 31, 2003, the backlog at SHH totaled approximately
$141 million. Of this amount, approximately $107 million is scheduled
to be completed within fiscal 2004, and approximately $34 million in
fiscal 2005 and beyond. SHH expects to add further contracts during
2004 for construction during the year and in the future.
The typical public contract selection process is by sealed bid
with the lowest bidder winning in a public selection process. SHH
undertakes a significant due diligence process in preparing each bid.
Participants must post bid bonds for up to 10% of the amount bid, and
on successful bids must post performance bonds for 100% of the
contract amount. Contracts are priced for labor, sub-contracting and
materials against detailed specifications provided by the customer.
SHH?s competitors include large national and regional
construction companies as well as smaller contractors. Management is
unable to determine the relative size of most competitors, which are
privately-owned, but believes that SHH is one of the larger
participants in its marketplace, and the largest non state-highway
contractor in Houston that is engaged in municipal civil construction
SHH?s size relative to its many smaller competitors in the
municipal construction market gives it several advantages, including
greater flexibility to manage its backlog to maximize its manpower and
equipment resources, and the cost effective purchasing of materials,
insurance and bonds. Since SHH owns most of the equipment required for
its contracts and has the experienced manpower to handle many types of
municipal civil construction, it is able to bid competitively on many
categories of contracts, especially complex multi-task projects. In
state highway work, SHH has encountered some difficulty in penetrating
the market, where most competitors are large, regional contractors,
due to the larger size of individual contracts and the different range
of specialized skills required as compared with its traditional
municipal contracts. However, with the acquisition of the Kinsel
Business in September 2002, SHH added over 100 employees, including
several key personnel with specialized skills and over 150 pieces of
construction equipment that enable SHH to compete on a more equal
footing in the State Highway market.
[NOTE from pafalafa-ga -- Texas Sterling is non-union, according to
the description to follow...thought you might like to know]
At December 31, 2003, SHH employed approximately 650 persons, of
whom 29 were employed in the headquarters in Houston. Most of the
others are field personnel. No SHH employees are represented by a
labor union. Senior executives, including James Manning (founder of
the business), Patrick T. Manning (also Chief Executive Officer of
Sterling), Joseph P. Harper, Sr. (also President of Sterling), Terry
Williamson and Anthony Colombo have many years of service with SHH and
are employed under long-term contracts.
Executive Officers of the Company
Patrick T. Manning. Mr. Manning joined SHH in 1971 and led its move
into the Houston market in 1978. He is currently SHH?s President and
Chief Executive Officer. Mr. Manning has served on a variety of
construction industry committees, including the Gulf Coast Trenchless
Association and the Houston Contractors? Association, where he served
as a member of the Board of Directors and as President from 1987 to
1993. He attended Michigan State University from 1969 to 1972. Mr.
Manning was elected Chairman of the Board and Chief Executive Officer
of Sterling on July 23, 2001.
Joseph P. Harper, Sr. Mr. Harper has been employed by SHH since 1972.
Mr. Harper performs both estimating and project manager functions as
well as his primary role as SHH?s Chief Financial Officer. In July
2001 the Company increased its equity investment in SHH to 80.1% (the
?Sterling Transaction?) at which time Mr. Harper was elected to his
current positions with the Company and as a director of SCPI.
[This section of the annual report that follows gives a financial
history of the company, eventually leading to its ownership of
SHH--Texas Sterling. It may not be of interest, but I just wanted to
point out it's existence]
Item 7. Management?s Discussion and Analysis of Financial Condition
and Results of Operations
The corporate structure resulting from the 1991 merger, whereby
Steel City Products, Inc. (?SCPI?) became a special, limited purpose,
majority-owned subsidiary of Oakhurst Company, Inc. (?Oakhurst?),
since renamed Sterling Construction Company, Inc. (hereinafter
referred to as ?Sterling?) was designed to facilitate capital
formation by Sterling while permitting the filing of consolidated tax
returns so as to maximize existing tax benefits, including
approximately $88 million of net operating loss carry-forwards at
December 31, 2003.
Summary Compensation Table
Patrick T. Manning
Joseph P. Harper, Sr
[There are also stock option arrangements which are detailed as well
in the annual report]
There are other sources of information beyond the annual report,
though nothing quite as comprehensive.
Here is a list of current construction jobs in the city of Houston
(these are city projects, but do not include county or state):
Texas Sterling is the key contractor on the following jobs:
48" Water Line Along Wickchester Lane
Almeda Genoa Paving
Kirby Drive Reconstruction From IH-610 to Brays Bayou
Kirby Storm Sewer Relief Project
Neighborhood Street Reconstruction 436A - Briargrove Subdivision
Briargrove Phase II
I can't be certain this is a complete list of projects that Texas
Sterling is involved in for the city. There are more than 100
mentions of the company on the city's website:
though many of these are simply agenda items at city council meetings,
and the like. You might want to scan this search results page (and
perhaps examine some of the links of interest) as it gives a good,
quick overview of the projects Texas Sterling has been involved in for
the past few years for the city of Houston.
[You'll probably notice some links that refer to Texas Sterling as
"prohibited persons"!!! This is just in reference to the fact that
they're prohibited from making political campaign contributions while
involved in city work]
A list of all of Sterling Construction's recent awards (which are most
likely awards to Texas Sterling) can be seen at their weibsite:
In particular, there's a very recent mention:
December 15, 2004
STERLING CONSTRUCTION COMPANY, INC. AWARDED TWO
CONTRACTS WITH AGGREGATE VALUE OF $38.2 MILLION
For Houston?s Harris County Toll Road Authority, Sterling will be
building the on/off ramp to connect
one of the toll roads to Beltway 8. Sterling expects to begin the
project the first part of January and
complete it within a year. The second job was awarded by the Texas
Department of Transportation and
calls for roadwork in the greater Dallas area. Work on the Dallas
project is scheduled to begin in March
?05 and should last for about 15 months.
Pat Manning, Sterling?s Chairman, noted, ?These two jobs further
enhance our backlog, which at
September 30, 2004 was running 80% ahead of one year earlier. With
these two projects, we will enter
2005 with the highest backlog in our history, adding to our confidence
that 2005 will be a year of
significant revenue growth, and in all likelihood, corresponding
improvements in profitability.?
An article in Texas Construction magazine describes some work in
Houston, and mentions Texas Sterling in a bit of detail:
Transportation Story- October 2004
This list from the Texas DOT includes Texas Sterling as a
[There's nothing much about Texas Sterling at this link, but I just
wanted you to be aware of its existence]
Texas Construction magazine ranked the top contractor's in the state
in their April 1, 2004 issue. Sterling Texas ranked 27th in the state
with their contracts broken out as: Transportation 57%, Water Supply
25%, Waste Disposal 18%.
Texas Sterling was ranked #5 in the Transportation Sector with
contracts worth $85.5 million:
The top 4 tranportation sector contractors were:
1. Austin Industries
2. Williams Brothers
3. Zachry Construction
4. JD Abrams
There is not much in anything that I saw that details problems the
company might have had (or is having)...they seem to have a fairly
clean track record. However, a couple of things did crop up:
This article reports on a leaky pipe problem contaminating drinking
water during a construction project -- Texas Sterling was held
responsible for finding a fix
A worker was killed in 1998 at a Texas Sterling consturction site in
Houston, due to the complete absence of shoring in a trench. The OSHA
report is here:
Texas Sterling was also caught in the middle of a legal spat between
the Houston City Council and the Metro transit authority back in 2001
regarding who has the authority to do what in the city, but the case
is not online, and it really didn't seem worth reviewing here --
however, if you want details, just let me know.
Texas Sterling is challenging an award to a competitor -- there isn't
an online link to this article:
February 12, 2004
Lamar Boulevard project faces a snag// Contractor that stands to lose
the bid plans to appeal, causing delay
The Lamar Boulevard overhaul downtown, prospectively a perfect storm
of traffic misery, has run into delays before the first drill could
hit the pavement.
...recommendation to award the job to Capital Excavation Co. Inc. of Austin.
...However, the losing company, San Antonio-based Texas Sterling
Construction, has protested the city's decision to call its bid
"nonresponsive," triggering an appeals process that could hold the
backhoes at bay indefinitely..
[NOTE: I did not see any more recent articles to update the status of
Well...that's it. I hope I presented all this clearly, and made some
good choices about what information to extract and present.
As I mentioned above, please let me know if there's anything else you need.
All the best this holiday season, and for the new year...
search strategy -- Searched Google and several news, business and
legal databases such as Lexis-Nexis and Factiva on the terms [ Texas
Sterling OR Sterling Construction OR Sterling Houston ]