Greetings, and welcome to the Sterling Construction Company Third Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Manning, Executive Vice President and Chief Development Officer for Sterling Construction Company. Please go ahead, sir.

Good morning. On behalf of Sterling Construction on this Veterans Day, we thank those who have served our country honorably, so that we may have the opportunities and freedoms we enjoy today. Sterling released its quarterly financial results on Friday because of today's holiday. Also, our thoughts and prayers go out to those affected by the typhoon in the Philippines. I'm joined today by our CEO, Peter MacKenna; and our CFO, Tom Wright. Tom joined us in September and he's taken the reins from Kevin Blair, who served as interim CFO and continues to provide continuity to Sterling in the role of Senior Vice President, Corporate Finance. I encourage you to ask questions about Tom's background in his initial assessment of Sterling Construction later in the call. Today's conference call includes statements within the definition of forward-looking statements under the Private Securities Litigation Reform Act. Such statements are subject to risks and uncertainties, including overall economic and market conditions, competitors and customers’ actions or weather conditions and other risks identified in the company's filings with the Securities and Exchange Commission, which could cause actual results to differ materially from those anticipated. Such statement should be considered in light of these risks. Any predictions by the company is only a statement of management's beliefs at the time of the prediction is made. Management's beliefs may change over time and the company does not undertake to update its predictions. And I will turn over to the call to Tom Wright, our Chief Financial Officer.

Thank you, Brian. I'm excited to be part of the Sterling Construction team and would like to discuss our third quarter financial performance. The third quarter financial results for Sterling Construction reflect a significant improvement sequentially from the second quarter of this year. Revenues for the third quarter were $185.9 million, which were 9.4% lower than the third quarter 2012 but 39.4% higher than the second quarter 2013. Revenue declines from 2012 are attributable to the completion of a few very large projects and the increase of revenues from the second quarter reflect improvements both from increased backlog and also from normal seasonality in the construction business. Gross margins for this year's third quarter were 4.5% of revenue compared to 6.9% in the third quarter last year. The third quarter gross margin results continue to be negatively impacted by projects awarded prior to 2012 but represent a significant improvement sequentially from the last 2 quarters when we reported gross margins of negative 12.5% in the second quarter and positive 1.2% in the first quarter. General and administrative expenses in the third quarter were 4.4% of revenue, compared to 5.0% in the third quarter 2012. This decrease is primarily due to onetime expenses in the 2012 third quarter. For the 9 months ended September 30, 2013, G&A was $27.3 million, representing an increase of 3.4% from 2012. This increase is due primarily to the additions to the IT team in 2012 to upgrade the company's IT infrastructure, as well as certain nonrecurring costs related to the implementation of process improvements aimed at improving operational control and efficiency and an increase in certain employee benefit termination costs. Operating income for the quarter was $1.5 million, compared to $4.2 million in the third quarter 2012 and a negative $26.1 million in the second…

Thanks, Tom, and good morning. In this short prepared remarks, I'd like take a few minutes to address some of the issues and trends that we're seeing in our business. Of course, we'll be available to answer your specific questions in a few minutes. As you know, the quarters, many of the trends highlight the positive impact of the steps managements has taken over the past few quarters to first stabilize our troubled projects and second prepare the organization for growths and sustainable earnings. We'd also like the biggest opportunity to welcome Tom to his first conference call. While Tom's only been here a few short weeks, I'd like you all to know that he's already had a significant positive impact and has proven to be a valuable business partner, not only to me but also to the company's entire management team. First and foremost, I want you to know how extremely proud I am of the nearly 1,800 men and women of Sterling. In the third quarter, they worked more than 915,000 man-hours and did so without a single lost-time accident. In fact, so far this year, the employees of our operating unit Texas Sterling have worked more than 1.6 million man-hours without a lost-time accident. This is a remarkable achievement for any construction company. But even more powerful in this case, as it is an accomplishment from what has been our most challenged operating unit. As I've said in prior calls, I believe improving safety performance is a leading indicator of improving project performance. A robust safety program such as ours requires pre-task planning and hazard analysis. When you are planning to work safely, you are also planning to work efficiently and deliberately. With respect to our third quarter reported results, once again, the positive trends in our…

Thank you, Peter. We're pleased that we have a healthy backlog and we recently announced a $38 million win in Collin County, Texas, which is additive to the $120 million that Peter spoke of as of September 30, where we are apparent low bidder. We continue to pursue over $4 billion in traditional bid-build work and $3.5 billion in alternative delivery projects. In addition to these potential projects, we are currently actively pursuing $598 million that is in the RFQ stage and $432 million, where we've been selected to compete in the RFP stage. Construction employment is picking up. According to the Associated General Contractors of America, employers added 11,000 jobs in October, which marks the 50-month high in construction employment. The government shutdown did not significantly affect this growth as construction projects were ongoing. Voters in November 5 elections continue to support state local infrastructure measures. Most notably impacts [ph] as Proposition 6 was supported by the voters, establishing a state water implementation fund, SWIFT, for Texas. The ballot initiative will utilize $2 billion from the Rainy Day Fund to provide low interest rate loans for Texas governmental agencies across Texas. This initiative could fund over $25 billion worth of projects in the foreseeable future. The account would be managed by the Texas Water Development Board. We continue to explore new market for growth and diversity. Recent examples of this geographic diversity are ongoing in new work in Colorado and Hawaii. We continue to explore favorable M&A deal opportunities to meet our strategy and objectives to expand into new geography and new service lines and that give us the opportunity to apply all of our operational competencies across our platform. Now we welcome your questions.

[Operator Instructions] Our first question comes from the line of Saagar Parikh with KeyBanc.

So first off, you guys mentioned Proposition 6 passing in Texas last week. Can you give us a better idea of what percentage of your business right now is related to water infrastructure and what really the upside is and when we can really see the flow-through of Proposition 6-related work coming in? Is that more of a '14 impact or a '15 impact?

Well if I had to guess, it's probably more of a '15 impact. Although I have always been surprised at how rapidly things move in Texas. To answer your question, the 20% of our work is in that municipal sector, which includes water and wastewater. I think that the Proposition 6 is potentially a very long-term program. And I've seen numbers that say it's as high as decades in terms of being available for funding. But $25 billion goes a long way in providing water resources. And one of the things I found fascinating was about 0.5 million people a year moved to Texas and that create huge water demand. So I think as Texas begin -- continues to increase in population and develop, these water demands are going to increase as well. I'm pretty bullish on water opportunities for us going forward in the Texas business.

And how did the margins compare on the water business versus pure civil infrastructure transportation business?

Favorably. How's that?

That works. And then second question, $118 million in legacy projects, you guys mentioned in your remarks. How much of that has 0% gross margin already? And so pretty much -- how much of that $118 million legacy projects is still coming in at normal gross margins?

That's a good question, Saagar. I'm not sure, I'm prepared to say that. There are 3 large projects in loss position in that group. And then the balance are more and more typical margin. But overall, it is substantially less, even though you do typical projects, it's substantially less than what we're seeing in the post-2011 backlog. So I think you can safely say there are 3 significant projects in a loss position.

Okay. And I mean, where I was really trying to go there is to see the risk and how much work you have in the legacy that hasn't maybe been taken down already. Outside of that, last question for me, you mentioned $120 million in low award work. How much of that is related to Caltrans?

That's a good question. I don't have that in my fingertips, Saagar, but if I had to guess, it's about 1/3 of it.

1/3 of it. Okay, that's perfect.

Your next question comes from the line of Matthew Paul with Sidoti. Matthew Paul - Sidoti & Company, LLC: I think the previous caller knocked out a bunch of them regarding Proposition 6. But could you touch upon the competitive landscape you see in the next 2 years for the pipeline that just opened up with the new funding?

The new funding is just a piece of the puzzle and it's really just here in Texas, which accounts for a portion of our business, but not the majority of our business. What I find fascinating is that there's a lot of conflicting information in the marketplace right now about the opportunities coming in the sort of nonbuilding sector over the next year. And some forecasts have it growing; some forecasts have it relatively flat. But with that said, our pipeline is at a record level right now in terms of opportunity. I think part of that is looking at more nontraditional work and expanding our geography. And another part is, I think just in general that the areas we focused on tend to be a little more robust and maybe not as dependent on the Highway Trust Fund and some of our traditional funding sources. So with that said, pipeline is, as I said, at record levels, it's very strong. And I'm, again, fairly optimistic with the opportunities ahead of us. You never know in a competitive bidding environment how successful we'll be, but the opportunities are there, at least right now. Matthew Paul - Sidoti & Company, LLC: Okay. Moving forward to the labor increases you've seen in the quarter, can you comment or if there's any metric to show on the quality of labor coming into your company versus the previous 2 years or so?

I mentioned on the call that the employment is at higher levels. What we're seeing is the influx of a new group into the construction market. In the areas where we work union, the consistency is and the quality is much, much greater. And where we're working on nonunion, there are significant challenges in getting these employees on-boarded, making sure that they're working safe. But we've got a robust program in place in order to do so and protect their safety and productivity.

I should mention also, part of the process is to make sure that we get very good craft labor, as Brian said, the best quality craft labor we can get. And into that end, HR has been charged with improving their recruiting program and their on-boarding program, again to make sure that we're working safe but that we're getting the right folks on board. We're still, in the Texas market anyway, still competing with oil and gas sector. And it is a challenge when they are paying substantially more than the construction trades are. And in terms of the union environment that Brian mentioned, it is more stable, although we do see some challenges in Hawaii, where even though we work union, the availability of labor is somewhat constrained. Matthew Paul - Sidoti & Company, LLC: Okay. Last question, guys. I just wanted to -- I don't think I heard anything on the call, but I wanted to see if you could touch upon any progress you have made in the Hawaiian market, if there's any larger projects in the pipeline coming through.

We've been focusing more on the smaller projects, to be honest, Matthew. Part of our strategy is to go after smaller work, not hundreds of millions, but smaller projects, where we have better visibility in terms of duration, and that allows us to look at the quality of our labor both in availability and in competency. So we're not pursuing any very large projects in Hawaii. But with that said, we are pursuing a fair number of smaller projects, and the programs tend to be smaller in Hawaii anyway.

And our next question comes from the line of Jack Kasprzak with BB&T. John F. Kasprzak - BB&T Capital Markets, Research Division: First question is just on the comment in the press release around G&A to approximate current run rate. I just want to be clear, are you referring -- does that refer to the dollar amount of run rate? Or is there a run rate as a percent of sales that we should be thinking about?

This is Tom. Our current G&A run rate's probably around 6% of revenue on an annualized basis. The quarter was lower due to some onetime factors. But a lot of the G&A that we've added is very scalable. We needed to add IT infrastructure backbone [ph] and that's very scalable as we grow going forward. So I would say and our current revenue level it's around 6%. But as we grow, we should be able to reduce that as a percent of revenue. John F. Kasprzak - BB&T Capital Markets, Research Division: Okay, great. Second question, kind of back to the conversation around funding sources and what you're seeing out there. Another funding source that various companies have talked about is TIFIA. Are you seeing any impact from TIFIA? Do you expect to? What kind of opportunity do you think that might provide you? I think Texas is one of the areas where there's some projects that are being supported with TIFIA funding.

We are seeing it, and it is supporting our program typically on some of these alternative delivery projects wherein the projects can go back to the federal government and apply for these loans based on the merits of the projects that they're working on. So a current pursuit that we are working on, 288 under a PPP public-private partnership, a percentage of that funding will come from TIFIA loans or private activity bonds.

But, Jack, I want to just mention that the vast majority of the work that is in the pipeline right now and that we are pursuing probably will not be looking at TIFIA financing. That really is sort of exclusive to the very large projects or the unique alternative delivery projects. We're still tracking billions of dollars worth of traditional more attractive work. John F. Kasprzak - BB&T Capital Markets, Research Division: Okay, great. Last question would be maybe along similar lines in terms of what you're seeing. We know the decline in private construction in recent years, severe decline in pressured bid margins on public work. Bid lists have gotten longer. Has that changed in your view recently? What are you seeing kind of in the big picture?

We're seeing an uptick in private construction so some of the players, the smaller players that have entered our markets have gone back to subdivision development and paving. And we all have seen another trend in some of the larger players, in particular, international players entering the market on dollar values over $100 million, large highway projects over $100 million. So there's a couple of different dynamics going on in the industry, but in the areas where we typically play, we have seen a lightening of competition.

And just add to that, while we still see some projects with 6 and 7 bidders, we're also seeing projects with 3 and 4 bidders. And in the year and couple of months that I've been here, it does seem to be a trend that we're seeing fewer bidders. So I think Brian is right on with that, that some of the smaller guys are moving back to their traditional market.

[Operator Instructions] Our next question comes from the line of John Rogers with D.A. Davidson. John B. Rogers - D.A. Davidson & Co., Research Division: First of all, I guess, Peter, in the last couple of quarters, you've given us your average or total margins within the backlog. Where -- what is that in aggregate at the end of the third quarter?

Tom's going to dig it up quick. We've been breaking it apart, because it actually helps us to break it apart.

John, I totaled up to 3 pieces, the -- there's $261 million at 6.3%, $340 million at 8.3% and then the rest is just the legacy backlog at 1.8%.

We'll leave it to you to do the math. John B. Rogers - D.A. Davidson & Co., Research Division: Yes, that's what I was trying to get to, is the 1.8% [ph]. Yes, perfect. And then the other questions I have, what -- can you give us a sense of what your revenue mix is and I know you've got seasonal factors in here, but Texas versus Utah versus Nevada versus California?

I'd rather not break that out, Jack -- John. We don't report quite like that. What we are saying is that about 80% of our revenue is in the heavy highway sector and the balance is in the private development or utilities. And we are doing more private development work, especially the Utah operation in terms of parking structures. It's something that they been really good at and have exported it both to Arizona and Colorado, as well being in Utah -- and Idaho, sorry. And also working with some of the heavy railroads in that part of the world, as well in the intermountain states. We have multiple ongoing projects with Union Pacific and these are bridge reconstructions on their right of way. A lot of them in the northern tier but they're relatively small jobs but they are good jobs. And again, that's in the private space. So we're seeing more of that -- but I'd rather not break out by the operating units, if you don't mind. John B. Rogers - D.A. Davidson & Co., Research Division: Okay. No, I understand and actually that was my next question, what the nonpublic work was. But I just want to be clear, Peter, you did say that Texas is less than half your market now in your prepared comments?

I think that's right. That's fair. John B. Rogers - D.A. Davidson & Co., Research Division: Okay. Perfect. And then lastly, as you look into 2014, what are the larger project opportunities that are out there and that we should be mindful of?

The larger project opportunities really as far as geography is concerned are spread across the areas that we serve from Texas going across the southern states up along the coast of California, so that's where the major -- we're seeing some of the major, specifically alternative delivery in excess of 100 million projects. In California, in particular, we're seeing it, but not necessarily -- we're not necessarily playing in every case as a JV partner. We're a strategic sub to some to the teams that are pursuing the projects and in Texas in particular we are pursuing -- there are several rather large jobs that are being put out by the Texas Department of Transportation and those projects are relatively large. So we are evaluating each of them for our participation on them whether that's a JV partner or a dedicated subcontractor. John B. Rogers - D.A. Davidson & Co., Research Division: Okay. And, Brian, are these toll roads or large freeway projects, light rail, color there?

It's a mix of all of those things. Tolling is a key factor in helping with the financing of the projects. So tolling is an aspect of it. It may be managed lanes or tolling because in a lot of areas, you have the free lanes that need to be maintained and then you're adding tolling to those -- to that alignment.

And it seems we have no further questions at this time. I'd like to turn the floor back over for any closing comments.

Thank you, Brenda. Again, welcome to Tom for joining the team, his first conference call. We encourage you, if you have questions to reach out for management in the future and we'll try to accommodate your questions as best we can. Wish you all a wonderful Veterans Day and look forward to our next conference call. Thank you very much.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.