Jennifer Maxwell - Director, Investor Relations Paul Varello - Chief Executive Officer Ron Ballschmiede - Chief Financial Officer

William Bremer - Maxim Tahira Afzal - KeyBanc Hamed Khorsand - BWS John Rogers - D. A. Davidson

Greetings and welcome to the Sterling Construction’s Fourth Quarter and Full-Year 2015 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to, Jennifer Maxwell, Director of Investor Relations. Thank you. You may begin.

Thanks Linda [ph], good morning everybody. Participating with me on our call today is our Chief Executive Officer, Paul Varello; our Chief Financial Officer, Ron Ballschmiede. As reminder, today's conference call includes statements to fall within the definition of forward-looking statements under the Private Securities Litigation Reform Act. Any such statements are subject to risks and uncertainties, including overall economic and market conditions; federal, state and local government funding, competitor and customer actions and weather conditions, which could cause actual results to differ materially from those anticipated, including those risks identified in the company's filings with the Securities and Exchange Commission. Accordingly, such statements should be considered in light of these risks. Any predictions by the company is only a statement of the management's beliefs at the time the prediction is made, there can be no assurance that any prediction may will continue to reflect management’s beliefs and the company does not undertake to publicly update those predictions. And now, I would like to turn the call over to CEO, Paul Varello. Paul?

Thanks Jennifer. 2015 was definitely a rebuilding year for Sterling. We accomplished many of the goals we had set for ourselves when we began executing this challenging turnaround. While we have work ahead of us, we’re confident that we will continue to improve performance throughout this year and beyond. We’ve taken a number of important steps that will allow us to maintain our earnings momentum. One of those steps was a significant strengthening of our senior management ranks. We’ve added six very experienced executives in key operating roles. With our team now firmly in place we’re committed to delivering positive earnings in 2016 and beyond. [Indiscernible] who once told me that safety performance was one of the best measures of management’s ability to manage. I firmly believe he was right. In spite of the many operational challenges we faced in 2015, we made sure that safety remains a top priority for Sterling and it paid off. I’m pleased to report that our safety performance this past year remarkably improved, specifically our lost time or quotable injuries rates were both down by more than 13% when compared to the prior year. We continue to focus on safety not only because it’s the right thing to do for our employees but also because it ultimately leads to a stronger, more disciplined company and a solid financial performance. As I’ve said on our earlier calls, this year we focused less on top-line growth and more on improving the bottom-line profitability. We tightened our procedures and controls with project selection, estimating budget execution and contract administration. As a result, we experienced improved earnings even with a decrease in revenue of approximately $49 million compared to the prior year. We also are pleased with the results of our project selection and bidding efforts which yielded average gross margins in excess of 8.8% on projects we won in the second half of the year, after our tighter controls we put into effect. Overall, our backlog at the end of 2015 plus the new awards that we won in Q3 and Q4, but not yet entered into backlog totaled a record of $958 million, combined margin of more than 7.4%. As a result, we anticipate increase in revenue and earnings improvement in 2016 and beyond. With regard to our business environment and our industry, we are greatly encouraged by the dramatic increases in spending to be made at the federal, state and municipal levels to restore our transportation infrastructure. These investments are long overdue and are critical to the economic future of our country. Of course they also create a substantial tailwind of growth opportunities for Sterling. And that allowed for us to take full advantage of those improving markets, we are exploring alternatives to further strengthen our financial position so that we can make the most of the many opportunities that lie ahead. In conclusion, our turnaround efforts in 2015 have laid a solid foundation for sustained revenue and earnings and are already starting to show meaningful results. With our return to profitability we are now confident that we can also provide guidance on forecasted earnings and revenues for this year. To be clear, we are not content that our forecasted level of earnings for this year is adequate. But the fact that the numbers are positive is an important step in the right direct. There is little doubt that Sterling is well positioned to generate improved profitability and shareholder value in the years to come. Now, I’d like to turn it over to our CFO, Ron Ballschmiede to provide a summary of our financial results. Ron?

Thanks Paul and good morning everybody. Let me take you through our improving financial results for the fourth quarter and the year. Revenues for the fourth quarter of 2015 were $153 million essentially consistent with the fourth quarter 2014. Our full-year revenues totaled $624 million down $48 million from 2014. This year-over-year decline reflects one of our objectives on our turnaround progress, specifically being selective on our new opportunities by focusing on the right balance of risk and reward. As Paul mentioned, the improving strength of the transportation infrastructure market manifested in our strong year-end backlog which when combined with our unsigned 2015 awards totaled $958 million. This record amount of combined backlog at an average gross margin of just over 7% positions the company for continued operating performance improvements in 2016. Gross profit for the fourth quarter totaled $12.2 million or 8% compared to $4.6 million for the full year. For perhaps a more meaningful margin comparison look back at our preceding quarter, the third quarter of 2015 gross margin was 8.2%, while down slightly this was consistent with our expectations given the portion of fixed cost and ending seasonality of our revenues. The seasonality impacted decline in our revenues from the third quarter of 2015 totaled $24 million or a decrease of over 13%. While the first quarter of 2016 will experience a similar seasonality impact, we expect full-year 2016 revenues to increase significantly. Our general and administrative expense for the fourth quarter of 2015 was $9.6 million, essentially flat with the comparable quarter of 2014. Other operating expense increased significantly in the fourth quarter of 2015 to an expense of $2.6 million compared to net operating income in 2015 of $300,000. The increase was driven by the strong fourth quarter earnings from our 50% owned subsidiaries. Fourth quarter 2015 numbers interest included in the other operating expense category and totaled $3.4 million. Approximately $1 million of the fourth quarter increase was offset by a lower non-controlling owner’s interest reported below the net loss line. More about changes in our reporting for our numbers interest in a few moments. Operating income for the fourth quarter of 2015 was essentially breakeven at $72,000 compared to a loss of $5.6 million in the comparable period of 2014. Again, when compared to the 2015 prior sequential quarter, operating income was down $2.3 million essentially the impact of the $24 million seasonal decline in revenues. Net interest expense for 2015 fourth quarter was $913,000 compared to the fourth quarter of 2014 of $247,000. The increase reflects the higher interest rate of our asset based lending facility which was put in place in 2015 and changes in our average debt balance. The submission of all that resulted in fourth quarter net loss attributed to Sterling common shareholders of $1.1 million and an adjusted net loss per share of $0.06 compared to fourth quarter 2014 losses of $7.3 million or $0.39 per share. Finally, during the fourth quarter, the company amended its Myers partnership agreement which among other things obligated the company to purchase Myers’ 50% interest for $20 million upon the debt or permanent disability of one of its minority owners. This transaction resulted in the revaluation of Myers’ non-controlling interest and the reclassification of $18.8 million from an equity count to a long-term liability. While this non-cash transaction did not have an effect on the company’s reported net loss attributable to Sterling common shareholders, it did require the $18.8 million to be included as an increase in our net loss for the sole purpose of computing our fourth quarter and full-year 2015 earnings per share. The revaluation and reclassification increased our reported loss per share by $0.95 and $0.97 in each of the four afore mentioned reporting periods respectively. On the positive note to this story only on account will enjoy, prospectively all of our non-controlling interest for both our Myers and RHB subsidiaries will be resided in a same place on a consolidated statement of operations specifically as a component of operating income. Now, let’s move into 2016. We believe that we have made good progress with our turnaround activities while we have more to be accomplished in 2016 we also believe that the business has progressed efficiently to provide us with the confidence and the ability to provide 2016 guidance. As you saw in our earnings release, we expect 2016 revenues to total $700 million to $735 million representing an increase of 15% over 2015 based upon the mid-point of our 2016 revenue guidance. Additionally, we expect 2016 reported net income per share attributable to Sterling common shareholders to be in the range of $0.25 to $0.40 per share on average shares outstanding for the full year of approximately 20 million shares. With that, I’ll turn it back to Paul.

Thank you Ron. Now, we’ll be happy to take your questions.

[Operator Instructions]. Our first question comes from the line of William Bremer with Maxim. Please go ahead with your questions.

Good morning, Paul, good morning Ron.

Good morning.

Good morning, Bill.

Paul, let’s first start out with the Myers transaction here. Does this transaction potentially defer a new credit facility knowing that you were sort of needed a nice run rate, a positive EBITDA?

I don’t think it does. I think with the changes that we’ve had over time with both of our 50% subsidiaries, we essentially pay out the portion of earnings to our partner that they earned during the year, slight delay but essentially pay it out. So, in reality, our cash earnings aren’t going to change, as a matter of fact they’ll be a little bit more predictable through a relatively steady distribution process rather than little bit lumpy in the past. So I would suggest that if you start with your EBITDA calculation using operating income, it probably matches the cash flow much better than when it was bit more complicated with some of the information above the line, above the operating income line and some below the operating income line.

Let me just add one other thing, when I use the term transaction only and account blew up, that’s perfectly because in this new agreement, and new agreements we have with our other JV partner and that is there is a buyout provision for a specified amount $20 million in both cases. Both of those in the event of their either debt or permanent disability are covered by insurance policies. So, in terms of the real exposure to the company, it is zero. But from an accounting standpoint again beyond my pay-grade, it has to be treated this way. So I just want to assure shareholders and investors in the market that we have not taken on the liability that we have not insured against.

And Bill, let me add one more thing that probably would be helpful for everybody on the phone to understand 2016’s information and guidance. With all of our number interest not reported as a component of other operating income or expense, there will be essentially nil of non-controlling interest below net loss. And we expect that the component and other expense next year will be somewhere in the range of $6 million to $7 million for both of our 50% subsidiaries combined. So that should help people understand our overall results as opposed to a bit above and a bit below in all 2016 forward. And of course we’ll help you with that as we progress throughout the year.

Perfect Ron, I was getting tired of using the force. My second question is on your legacy backlog. Can you give us a sense of where it stands and are you guys on track for really and truly getting a nice focusing in guiding in the first half of ‘16?

Great question, Bill, and yes we are. So, we had, as we wrapped up our, this of course all of our backlogs since our on-side works are all profitable obviously. We have for a backlog at the end of the year about $86 million of backlog on some of those legacy projects we kind of use the same $9 million with you every now and then. There is essentially nil on the gross profit side. And we would expect a substantial portion of that to be burned off in the first half.

Okay, gentlemen, thank you.

Thank you. Our next question comes from the line of Tahira Afzal with KeyBanc. Please go ahead with your questions.

Hi, Paul and Ron.

Good morning, Tahira.

Hi.

My first question is really in regards to what you qualitatively talked about really the momentum you’re seeing in the market. Given that you expect pretty healthy revenue increase this year, I’d love to get a sense of whether you think you can still grow backlog and why you’re burning so much?

Yes, it’s - we have been looking at, the good news of course is that the backlog and the revenue forecast it is up substantially. And that’s how it’s a wonderful opportunity. But with that comes a need for working capital and liquidity because we don’t want that to be any sort of a governor on our ability and continue to grow. We have room in our bonding capacity, plenty of headroom there but we want to make sure because of this record increase because these jobs start up later in the second quarter - first and second quarter is where we see these ramp ups and where we are focusing very hard in making sure that we have the liquidity. And that it doesn’t limit us from continuing to grow the company carefully and profitably I might add. Because if you grow just top-line without regard to bottom-line as we said, we could get into trouble. I will tell you that we are looking at things to make sure we can continue to take advantage of what looks like a very strong market for the next five years. We are very comfortable and we met with our board last week and had a strategy session looking at those investments then were very bullish not only the federal investments but what we’re seeing coming out of the states, with their own gas taxes and what’s happening in the municipalities. It’s all directionally very strong for us.

Another thing as you probably can drive from our award level last year when you include the unsigned, most of which is not signed. The duration of our backlog started to extend that’s a good thing, give us a little bit more predictability. Obviously even with the 15% increase in revenue means we’re going to burn reported revenues more in the average between guidance of 7% to 15%, that’s our really great. And I think the power is in the margin of that backlog particularly reflecting the earlier answer that I gave to Bill on, burning half of that low margin on new margin $80 million. But a couple of other interesting statistics, at March 31, ‘15 we had about just under $800 million of backlog in our embedded margin of 6%. Obviously we ended 2015 with just short of right around $958 million at $7.4 million and a second half load at $8.8 million. And that second half load is what we are continuing to look at and expect to experience here in 2016 forward. So the margin of this when you combine all those factors should drive some nice earnings. And I think the revenue will come with that that big backlog number.

That sounds great Ron. Ron and I guess the second question is for you in the sense, within your guidance any color on assumptions around some fairly notable claims you think you might collect somewhat on?

We haven’t factored in any or I shouldn’t say, our guidance doesn’t include any upside coming out of settlement of any claims in that specific time. And we hope to get them done and report you after that. But let me give you a few other pieces of the underpinning of our 2016 guidance that I’m sure you’ll all be interested in as you try and make sure that your model is consistent with the top-line and the bottom line we gave you some in the middle. I believe you’re all plus or minus ranges but we would expect our gross profit to be somewhere in the 7.5% margin range for the full year. That of course includes some of that $86 million of, that $86 million being burned down at zero percent. And when we do that math, it’s between 10% and 15% of our revenues. So it’s really, so the retro bid is really performing nicely. From a general and administrative cost category, we’re looking around 5.5% of revenues at the end a bit of a range around that. And then, move it down the income statement where we chatted a little bit about $6 million to $7 million of expectation of potentially our minority interest now reported above the operating income line. Our interest expense, give or take $3 million essentially no income tax for the year and finally CapEx in the magnitude of $10 million to $11 million. So what we go through those facts but hopefully that will help everybody understand patterns - where our metrics are forecasted to go through in 2016.

Ron, if only all my companies would be this helpful as well. Thank you for that. And I’ve got a couple of more questions but I’ll hop in the queue, pretty solid guidance. Thanks.

Thank you. [Operator Instructions]. Our next question comes from the line of Hamed Khorsand with BWS. Please go ahead with your questions.

Hi guys, first off, I mean this is pretty incredible where you were last year and where are you right now, so great job. If you could just provide a little bit more color on the $2.6 million other expense. So you’re saying that was essentially from your non-controlling interest is now going to be above the line included in that going forward, is that right?

That’s correct, that’s the $6.7 million total for next year, and let me give you a little reference around that. You know the geography is different than our income statement for 2015. For the full year we had charged to other operating income of just over $4 million and non-controlling interest of $3.2 million. So, in total about $7.5 million, both just had a great year and a fantastic fourth quarter that goes big portion of that in the fourth quarter.

Okay. And then next question, you had like $2.7 million in land sold in receivable collected, can you - and do you have inclination on what and what’s in the first half could be possibly sold to bring in extra cash or?

Yes, let me answer part of it and maybe you can weigh on this as well. We certainly still have some land that is non-strategic, non-core and we’ll be looking at that. You really have to match the market we don’t want to have a fire sale on those assets. But we think that there is a few more pieces but not a lot. I think the bigger opportunity continues to be in our field construction equipment. We had gone through and looked at our fleet, we are now looking at the right balance of what you should own versus what you should lease or rent. And this year is the year in which we expect to shift that balance more toward leasing or renting equipment. And that will monetize more of those assets and allow us to really gain our math. The difficulty at least in the near term is that they also represent the collateral on our lending and so you can’t be overly aggressively in selling that stuff. But I would tell you that since we’re only allowed to borrow about 65% of the value of that equipment, it’s always a good, and you’re paying 12% money, it’s always a good idea to liquidate whatever you can and use those proceeds to pay down their debt. That’s sort of one of our key objectives this year. Although you didn’t quite ask the question, I want to make sure it’s clear too that neither, Ron or I will pay 12% interest particularly in a market like this. And Ron has some plans, would you mind sharing with everybody what your thoughts are regarding how we eventually get away from this debt or existing interest rate?

Yes. And maybe I’ll step back and kind of take it in total if that makes sense. Let me just add one thing on the CapEx and related question you had. Our ‘14 and ‘13 CapEx was sort of $13 million to $14 million category. So, even with our 15% anticipated increase in revenues, our CapEx spend is going to be down from that kind of that level than ‘13 and ‘14, which I think is good and reflects of what Paul talked about. It just makes more sense and more financially attractive no matter what interest you have to rent or lease the right equipment and own those that are strategically important. And I think on, let me start from a bigger capital perspective, we certainly see a strong market for transportation infrastructure projects over the next several years. And take advantage of that improved market is we’re exploring alternatives to strengthen our financial position and capture some of these opportunities that Paul spoke to. And we look forward to take advantage of this, we’re talking about both tactical as well as strategic approach to assuring that our balance sheet is positioned and is able to support the continued backlog that we reasonable have and the growth that we expect. So, from a tactical standpoint we’re going to continue to go after and improve our management contract capital more specifically our contract revenues including retain-age and billing processes and the timing of those billings to accelerate and reduce our cost to bill and collect. We’re also going to continue to commit to review and where appropriate monetize some of the assets that were asked earlier. But strategically it is important that we increase our financial flexibility, our performance over the past several years is limited to our borrowing capacity and somewhat our bonding levels which of course limit our financial flexibilities. And while these constraints are certainly workable to continue a sustained longer term recovery plan, we want to take advantage of this market that we’re seeing and have the capital available. And so we are able to continue to invest in these opportunities. So, we’re investing in additional opportunities to accelerate our liquidity position. Some of those would be coming out of the pure cost of capital driven by both capital opportunities and debt opportunities. The reality is given our sustained losses in the last three or four years, the turnaround is in good shape. As it’s still a bit of a show-me for, so we expect certainly the second and third quarters to be pretty significant. So, about that late summer or early fall time would be when I would expect to have that demonstrated performance and more importantly to have the awards, continue at a pace that we’ve been looking at lately. And all that says, you got to have the right capital position to not only, we’re not happy in just withstanding, we need to be able to take advantage. So we’re going to be doing a lot of looking and strategy around how we go about that. So, we’re not worrying about topping out on liquidity or bonding after all those related things, but we’re going to be more aggressive at looking how to reduce our cost to capital, certainly interest in some of those, one of those items with 12% plus cost.

I was actually going to ask you about your capital structure that was going to be my next question. But, so I’m going to ask you about a macro question. Being significantly operative in Texas, and with everything that going on with the shale industry and the oil industry down there, are you seeing any benefits to cost of labor and cost of equipment or material?

I’d say personnel cost or labor really was part of a contributing factor that a few ago over their losses. Our estimates did not foretell or foresee the sort of labor escalation we unfortunately were hit with, the shale play we surely into boom cycle in folks that we would have normally hired to do our work leaving the state for the big shale plays. That has completely reversed itself. Our labor rates have stabilized in fact in the couple of cases going down slightly. So, yes, the labor situation is both plentiful broadly, they’re still unique categories of people we don’t quite have the skill-sets in large numbers we’d like. But generally the labor situation is much better. The other benefits are things like minimal equipment with both the mining and the drilling business somewhat slower. The amount of equipment that’s available for lease is considerably larger and fits our needs much better. In addition, fuel costs which were a large part of our operating cost continued to be low. And vendors are willing to cut very attractive deals to our prolonged commitments on fuels which we’re able to predict with the work we’ve done in backlog. And so, generally speaking in Texas, which by the way this year because of their other businesses have grown, Texas is about 33% of our revenue which used to be north of 48%. So, and there is nothing wrong with Texas, just the other guys there have done so well, Texas is now about a third of our revenue and is going to be an important, continued important factor going forward.

Okay. My final question Paul year-over-year to of your three-year initial contract any plans to continue that or any changes?

My wife reminds me I celebrated we’ll be celebrating my 73rd Birthday in a few months. And she says old man how long are you going to do this. And I say, until god says no. So, yes, I’m having a good time. Nothing beats success. Nothing beats seeing the fruits of your effort pay off. And with the good Lord keeping me healthy, I intend to stick around for a while. In addition, I would tell you, I have surrounded myself with gigantic talent. Of the six executives that I put in yesterday or last Friday we announced, are the Chief Operating Officer, his name is Con Wadsworth. Con has been with our company for a very long time as President of our most successful subsidiary. Con is now taking over COO, that’s an important strategic move for us. And he gives us depth at the executive level. We also have added Ron with just impeccable track record and great experience. And we’ve added Joe Catello who is our Senior Vice President of Strategy Business Development. So, the depth of this whole organization is such that I hope that if my wife is right about the old man and he runs out of gas, there is enough continuity here, right. I feel good about that. The other three executives are all in line operating positions. And the bench is stronger than I think it’s ever been. So I’m comfortable but that doesn’t mean I’m bailing. Thank you.

Thank you.

Thank you. And our next question comes from the line of John Rogers with D. A. Davidson. Please go ahead with your questions.

Hi, good morning.

Hi John.

Hi John.

Couple of things, just Paul, first of all I guess maybe for Ron. What’s your assumption for interest expense this year in ‘16?

Well, right now it is for the first, majority of the three quarters of the year it’s sort of status quo running $900,000 in the fourth quarter would be a bit less as we go up and down with our line for the first part of it. And then hopefully by, expectedly by some time in Q3 we will come up with a better solution. We’d like to do it sooner maybe we’ll have chances to parcel something out. But that’s sort of what’s embedded in our assumptions at this point.

Okay. And then, the other thing is, if you look at ‘16, I mean, based on your revenue guidance, something 15% top-line growth. It sounds if though that that’s heavily weighted into the third and fourth quarter, I mean, could we be seeing 20% to 25% growth at that point? Is that what the backlog would suggest?

Yes, pretty much. I’ve not done exact math but the Q1 should look like Q4 essentially. And then of course you get the benefits of having all its new work start. So we would expect a very good Q2 and Q3. And right now the view is a profitable Q4.

But wait a minute John, let me add a little bit to it. Our work in backlog is the biggest driver of those earnings. So it’s predictable as opposed to betting on the comp. If you can’t both work by the end of the second quarter, there is very little chance you can burn most of it or generally any revenue in the third and fourth quarter. So, typically what you see in earnings doesn’t have much exposure, revenue and earnings, doesn’t have much of a bet on what we got to line to make that happen. Our jobs are over two years long on average. And so, a lot of is sitting there in the backlog. I think the bigger challenge is to make darn sharp reaction queue appropriately to the margins we’ve got, and then maybe do a little better, which I think we got to tune out to do better which is something that I’m looking forward to. But I don’t want you to live with the idea that we got to go find a lot of stuff that’s going to do much for us in terms of revenue or earnings this year. It’s pretty much in the house, not all of it but pretty much in-house.

Okay, that’s what I was trying to get to, so that’s very helpful. And then just in terms of the working capital, you’ve done a great job in sort of driving some of the cash out of that end. And I’m wondering how much is left there because this sort of earnings level that you’re talking about, I mean, it sounds like it would be about maybe slightly less than what you’re looking at in terms of CapEx. Is that right or is there more - are there other ways that you can generate cash?

Well, I think we still have some opportunities in our contract capital. And for those that don’t have a definition, as I look at our investment in contracts that includes all of our receivables including retain-age, our inventory which is not very significant as in that calculation of positions in the contracts and payables. As I look at that today, we have some subsidiaries that we explore well we have some of our larger subsidiaries that have some catch-up work to do, and certainly those legacy projects that will affect that calculation also. So, we have some room in contract capital to make it better. And I think with Con reviewing contracts and our team continuing to press on the asset side and trying to get those bills out, when we collect those bills and be a little bit more aggressive in doing that we are also have money to put on the balance sheet.

I would also add that John, nothing brings focus on the cash more than 12% interest. That is up until now we posted thinking that interest wasn’t incidental and maybe it was. It is not an incidental and it cost us almost $4 million a year in charges. So it’s got a gigantic amount of focus and the awareness is there today that wasn’t there a year ago when I got this job.

And maybe an important reminder on the other part of seasonality which is the cash side of seasonality. While our fourth quarter and first quarter are significantly our weakest revenues quarters, our fourth quarter is our best cash generation quarter, was this year. Because a lot of jobs are, most of that have weather issues and we had a lot of that in fourth quarter, Texas or Hawaii and then of course getting to mountains. And you have a pretty much slowdown which means you’re not spending money, you’re collecting it. Of course the flip side of that is comfortably back half of the first quarter, you start ramping up projects. So, as you look across the yield here, our most challenging maybe it’s a bad word but the outflow of capital for projects is end of Q1 and as we ramp up in early parts of Q2, then it’s flattened out and then it comes back the other way in the fourth quarter. So, with that, we were happy with ending the year with essentially only the term loan having bows under it, that’s different today as we would expect. But there is that seasonality side of the cash flow, we’ll never forget about the difference that our revenues have.

Okay. And then, last thing if I could, Paul, you mentioned 35% of your revenue was, or 33% of your revenue was in Texas. What portion of the $958 million in your book of business is Texas?

It’s about the same amount, it’s about a third. Yes, I don’t have the numbers in front of me, but I remember looking at when we had to back in, it didn’t move the needle very much in either direction. So I’d say about a third.

And so, I mean, as you look at the business over the next couple of years, you’d expect it to, I mean, the rough distribution you have now between Texas and the West?

Yes, on a somewhat different metric, Texas is growing in spite of everything that people read about, the shale play being real weeks later. Texas is growing still very strong compared to a lot of places, and population growth drives a lot of investment in infrastructure. And we’re confident that Texas will continue to be a critical part of our business going forward and a lot of spend in Texas, not only maybe in spite of the federal - lack of money at the federal level, the state has really more than compensated for as have the municipalities who need the infrastructure that’s going to allow people to grow. They need more roads, they need draining systems they need all the things that come with population growth. So, I think an important driver is looking at where the population is likely to grow. And we think we are in many, many respects exactly in the right geographic footprint not only in Texas but throughout the Southwest.

Okay, great. Thank you very much. Congratulations on the year.

Thanks John.

Thank you. And next we have a follow-up from Tahira Afzal, KeyBanc. Please go ahead with your questions.

Great. Thank you very much. So, first question is, Ron, you said that the duration of backlog is stretching a bit, which actually is great. But I guess if I look at 2015 backlog of around roughly $760 million, so it kind of compares the same level of 2014. Last year you were able to generate $623 million or so in revenue. So, with backlog now more trashed how do we get comfortable around the low revenue run rate?

Yes, I think, as Paul mentioned, the majority of our revenue comes from our backlog. I think the other element of it is as we, with these, as we have got these new awards, we’ve gotten signed awards now mostly signed in the first quarter. That doesn’t exactly translate into revenues. So there it ramps up relatively quarter less because some of these projects are some design element to it and other things like that. So, I think as we plot all these out, you’re always acceptable to seasonality and rain and all of the delays by customers, by our clients. I think with this amount of backlog and the distribution of much more sweet spot projects around in the double-digit millions, it does become more predictable simply by the law of a bunch of smaller numbers. So, we’re pretty acceptable with that burn rate.

Got it. Thank you, Ron. And I guess second question is in regards to strategy, I know you’ve kind of laid out flooring, alternative financing options, what have you. Can you talk a bit strategically about as you settled in Ron and as Paul and you have worked together, can you comment a bit on what strategy you’re looking at, what states are you looking at doing more design-builds, more partnerships?

Yes, I’d say we have recently in anticipation of our strategic planning structure which we had at the board just last week, we did gigantic amount of drill-down on where have we been making our money. And what are the kinds of work we do, what are our sweet-spots and how do we maximize those kinds of returns. And I think Ron, having been here now just a little over a year was pleasantly surprised by how much we have discovered and that about where we make our money in doing. Surely this makes sense, really more of that unless there are things where we don’t do well or lose money is sort of a, one of our fundamental strategy. Do more of the good stuff and less of the bad stuff or none of the bad stuff. But I will tell you that the design-build projects tend to be better margins, they are little slower ramping up because you got to design before you can really move to the field. But they always hold better margins that allow us to influence their design to meet the unit cost. So in many, many respects we like those kinds of jobs. We have relationships with some of the design houses in the various areas where we work and in the various places we work. We like the airport work, the port work it’s always got good margins. And then we still believe within roads and highways, particularly bridges, we do well. If we can be disciplined in where we select the projects we want to bid instead of simply chase everything that moves. We’ve always said for ourselves minimum margins we will not allow ourselves to get caught up in desperation bidding. So we are setting margins that are quite high in order to drive the market where we want it to go. We actually made a few more jobs but so be it. Give me jobs with better returns and fewer of them as long as I make it at the bottom line I’m comfortable with that. So, directionally we know where we have to go. We have the kind of businesses we have to get and the geographies and we’re going to be pursuing those with great vigor this year.

Thank you, Paul and Ron.

Thank you.

Thank you. And next we have follow-up questions from William Bremer with Maxim. Please go ahead with your questions.

Yes, gentlemen. Just adding on to the last question, I wanted to go into your bridge work as well as if you could give us an update on your water infrastructure projects what you’re seeing out there. And maybe what makes your capacity on that front?

Well, first of all, the bridge work, as I said earlier, our large work business, it’s probably the strongest preeminent bridge builders that’s maybe possibly in the country because I’m the CEO of this company. But certainly the strongest within our company and with Con now as, Con Wadsworth now as our COO, he’s newly met skill-set across all of our subsidiaries so that we actually keep bridges which are good margins effectively using our know-how that we mostly have developed in Wadsworth, not exclusively but mostly. Second, on the water works, the kind of projects we’re seeing are really flood control here in Texas, Texas as many of you know particularly this part of Texas, here in Houston, its flat as a billiard table. And so, if you get about more than four inches of rain, you can count on local flooding. And part of that is the infrastructure is not kept up flood control, and infrastructure is not kept up with the population growth which has paved over a lot of natural areas that are used to absorb the rainfall. So, 50 years ago, we had a lot more forest and open spaces, today it’s paved over with shopping malls and housing. And as a result, it’s considerably more run-off. That is one of our sweet-spots, where frankly the way we grow our business here in Texas 27 years ago, was [indiscernible] work, it’s probably our strongest capability and we’re exactly in the spot we want to be. Knowing what our top-side is Bill on capacity, I think the limiting factors might be bonding. Although today we are, we still have several hundred million dollars of capacity we have a great partner in travelers as our bonding surety company. And they’ve been tremendously supportive as we’ve grown and come back to profitability. So, it’s one of the limiting factors, the other one Ron has already addresses, is making darn sure that we have the balance sheet and the working capital to take advantage of that. But I’m very comfortable to have the opportunities to what we do well are really coming as we’re seeing in big measure.

Okay, Paul. Thank you.

Thank you. And it seems that we have no further questions at this time. I’d like to turn the call back to Paul Varello for closing remarks.

Brenda, thank you very much. And everybody on the phone, thank you very much. I’d like to again remind you that if you have follow-on questions, you can reach out to Jennifer Maxwell, our Director of Investor Relations here at Sterling or our partners at the equity group to schedule a follow-on call with us. Their information, the contact information could be found at the bottom of our press release. I’d also like to thank you for joining us on our call today. And we do look forward to reporting our progress in the future. Thanks a lot.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. And thank you for your participation.