Tim Talbott - President and CEO Ian Boyd - COO Stephen Entwistle - CFO

Yuri Lynk - Canaccord Genuity Frederic Bastien - Raymond James Chris Lalor - GMP Securities Michael Tupholme - TD Securities Maxim Sytchev - Dundee Capital Markets

Good morning everyone. I know it’s a holiday in some areas of the country, so I want to thank those of you that took the time and are showing an interest in Bird Construction for attending our conference call today.

As the operator said, I encourage you to ask questions at the conclusion of our formal comments concerning our 2013 third quarter and year to date financial results. With me today are Ian Boyd, our COO, and Stephen Entwistle, our CFO.

Before commencing with my formal comments, I want to remind those present that certain statement which I will make express management’s expectations or estimates of future performance and thereby constitute forward looking statements. Forward looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic, and competitive uncertainties and contingencies.

In particular, my formal comments and responses to any questions you might ask may include forward looking statements. Therefore, the company caution’s today’s participants that such forward looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual financial results, performance, or achievements of the company to be materially different from the company’s estimated future results, performance, or achievements expressed or implied by these forward looking statements.

Forward looking statements are not guarantees of future performance. The company expressly disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, events, or otherwise.

I’ll now proceed with a few opening remarks addressing our performance in 2013. We predicted that 2013 was going to be a more difficult year than 2012, during which we generated record results, and this has, in fact, proven to be the case through the end of the third quarter.

We are, however, now beginning to see a modest improvement in our operating performance in the third quarter compared with the first three quarters of 2013. In the third quarter, we reported net income of $3.6 million compared to $2.7 million in the first half of the year.

The improvement in third quarter net income is a result of higher revenue and an improvement in the gross profit relative to the results realized, [unintelligible] first two quarters. With the completion of our problem project expected later this year, and an improving work program.

We are in a position to anticipate stronger earnings in the fourth quarter of 2013 and in 2014. As I mentioned in our last conference call, the 2013 results were negatively affected because of the loss of one fixed-price construction project that has experienced execution issues and has generated this loss.

Based on our best estimates, the full loss from this project to completion is reflected in the 2013 financial results to date. If the amount of this project loss is excluded from our nine-month operating income, the income reported in 2013 is generally in line with management’s expectations for the year.

During the third quarter of 2013, the company secured $403 million of new construction contracts, including change orders on existing contracts, while putting in place work valued at $367 million, resulting in an increase in our backlog. While the changes to the value of our backlog could be lumpy and subject to timing issues, we are pleased with two consecutive quarters of growth in our backlog, considering the competitive construction marketplace.

The company has in place a backlog as of September 30 [unintelligible] $1.1 billion, of which approximately $366 million is expected to be put in place in the latest quarter of 2013, leaving $734 million to carry forward to 2014 and beyond. The $734 million of future backlog is an improvement of 75% over that projected at the end of the second quarter.

This provides us with a degree of optimism for the future, not only because of an increase in the value of our backlog but just as important is the fact that in the last quarter we were awarded several large-scale construction projects which totaled approximately $[275] million, signaling the expected improvement in this market. These projects involve both civil and building construction activities that serve the needs of our industrial client, [unintelligible] Alberta, an important market to the success of our organization.

In addition, throughout 2013 we have seen the gross profit margins embedded in our backlogs steadily increase, which will contribute to our 2014 results. On Friday, our Board of Directors declared monthly dividends for December 2013 and January and February 2014 of $0.0633 per common share, reflecting a 6% dividend yield.

I’ll now discuss the third quarter of 2013. In the third quarter of 2013, the company generated net income of $3.6 million on construction revenue of $367 million compared to $18.1 million and $396 million respectively in the same quarter of 2012.

The reduction in 2013 third quarter net income is attributable to the timing and mix of construction projects executed in the respective period, lower construction revenue, primarily due to a reduction in revenues from our industrial client, combined with a small increase in G&A expenses. In the third quarter of 2013, the company generated adjusted net income as defined in our MD&A of $4.2 million compared with $19.3 million in 2012.

Our 2013 adjusted net income was similarly adversely affected by the same factors that contributed to the reduction in 2013 net income compared to 2012. Construction revenues of just over $367 million was about $30 million or 7.4% lower than the amount reported in 2012.

This reduction is primarily due to lower construction revenues derived from our industrial clients operating in northern Alberta and eastern Canada, offset to some extent by higher construction earnings from our commercial operations across the country. Gross profit in the third quarter of 2013 totaling $21.9 million compares with $39.8 million in the year earlier.

The reduction in the amount of quarterly gross profit is attributable to the timing of construction projects executed in the respective period, combined with lower construction revenue from our industrial sector clients. General and administrative expenses of $[15.2] million in the most recent quarter were $1.4 million higher than the comparable quarter in 2012.

The increase is in part attributable to the inclusion of Nason’s G&A costs in our 2013 expenses combined with the costs associated with an increase in staff levels required to support the longer term growth objectives of the company. Finance income in the third quarter of $0.3 million is $0.9 million lower than in 2012, primarily due to a $0.5 million unrealized loss on our [unintelligible] share portfolio, lower interest and dividend income resulting from lower amounts of cash available to invest in 2013.

(Inaudible) costs of $1 million were comparable to those reported in 2012. An income tax expense of $1.4 million was $5.5 million lower than 2012, consistent with the lower 2013 pretax earnings.

In the nine months ending September 30, 2013, the company generated net income of $6.4 million on construction revenue of $968 million, compared with $33.5 million and $1.034 billion respectively in 2012. The reduction in the amount of net income in 2013 is attributable to one fixed price construction project that experienced execution issues resulting in a $12.6 million loss in the period, timing and mix of construction projects executed in the respective period, lower revenues primarily resulting from a reduction of revenues from the industrial sector and a small increase in general and administrative expenses.

In the first three quarters of 2013, the company generated adjusted net income of $8.4 million compared with $36.4 million in 2012. Our 2013 adjusted net income for this period was similarly adversely affected by the same factors which contributed to the reduction in 2013 net income.

Construction revenue in the nine months ended September 30 declined by 6.4% to $968 million compared with $1.034 billion in the comparable period in 2012. The reduction was primarily due to lower revenues from our industrial clients in 2013, offset to some extent by higher revenues from our commercial operation.

Gross profit in 2013 to date of $56 million was $32.6 million lower than the $88.6 million reported one year ago. The reduction is in part due to the $12.6 million project loss noted earlier, differences in the timing and mix of construction projects executed in the respective periods, combined with the impact of a reduction in the amount of construction revenues resulting primarily from a decline in activity in the industrial sector.

General and administrative expenses of $46.4 million compares with $43.8 million in 2012. The increase in 2013 expenses is primarily due to the inclusion of Nason’s general and administrative costs in 2013, and to a lesser extent higher staff costs needed to support the company’s long term growth strategy.

Finance income of $2.1 million was $0.9 million lower than the amount reported in 2012. The decrease is due to the recognition of an unrealized loss of $0.5 million from the company’s preferred share investment portfolio, [unintelligible] the reduction of interest and dividend income on $0.4 million due to lower amounts of cash available to invest.

Finance costs of $3.9 million were [$0.3] million lower in 2013 due to the impact of lower long term debt amounts resulting from repayment of debt and the 2013 income tax expense of [$3.5] million or $10.1 million lower than 2012, consistent with lower pretax earnings and [unintelligible] year to date. Looking ahead, as I mentioned earlier in my remarks, the company’s level of backlog improved for the second quarter in a row and was in the $1.1 billion range at the end of the most recent period.

Of this amount, we are estimating that approximately $366 million will be put in place [unintelligible] three months of 2013, meaning $734 million will be carried forward to 2014 and beyond. At this time, the company is actively pursuing a number of significant [unintelligible] opportunities that we believe we’ll be able to convert contract awards and enter into our backlog in the near future.

These projects, should they materialize, provide a positive contribution towards achieving improved earnings beyond the current year. The recent sanctioning [unintelligible] project in northern Alberta should benefit Bird.

In addition to current contracts on this project, we anticipate further work, both at the mine site and in the surrounding areas, as additional infrastructure is built to support this facility. We expect that oil sands in general is set for a resurgence and Bird is well-positioned to take advantage of the opportunities in this area.

These developments, combined with an expectation for modest overall growth in the Canadian economy, should provide for a better operating environment than the one we have experienced in the past year. We continue to expand the scope of the company, as evidenced by the opening of our new operations in St.

John’s, Newfoundland, and the continued organic growth of our self-performed industrial operations on both mine and [unintelligible] oil sands projects in northern Alberta. Both of these initiatives have achieved early successes, particularly the self-performed work in the industrial sector, which we are confident will continue.

The securements we achieved in the past quarter in the industrial sector provide a degree of optimism for development of other larger scale projects in northern Alberta. While we waited for the larger projects to materialize, we have been successful in securing a number of small to medium sized projects to keep our resources busy.

We further plan to continue pursuing the larger-scale self-performed heavy civil opportunity in Canada’s resource and hydro power markets. However, continued volatility in the commodity pricing and other client concerns has caused some of our industrial clients in the mining sector to reexamine their project plans, which to date have led to uncertainty in [unintelligible] future construction projects.

The institutional sector, driven in part by Bird’s construction of [triple P] projects, has been a reliable and important contributor to the company’s results for the past few years. However, results in 2013 will be less than those produced in 2012, as we have been unable to replicate the revenues and gross profits realized in 2012 thus far in 2013.

We continue to believe that institutional spending in 2014 will [unintelligible] as all levels of government remain under pressure to deal with budget cuts. While opportunities will continue to come to market, competition for these projects will remain tense.

The company will maintain our presence in the broad institutional sector, more specifically the triple P segments, where we will continue to submit proposals for projects of this nature in the coming years. The company recently submitted on the [unintelligible] facility in [unintelligible], and is currently working on a North Islands hospital in British Columbia.

We are also short listed on other projects that will enter into the proposal stage in early 2014. Bird is a viable player and sought-after partner in this market, and we will aggressively pursue our share of institutional work, which will contribute to the earnings of the company.

In 2013, the company expectations revenue profit derived from the retail and commercial sector to increase compared with 2012, as a result of increased success in the [unintelligible] of work in this market last year and to date in 2013. As we mentioned, the increase in our commercial volumes this year has somewhat offset the reduction in our industrial work program.

Unfortunately, as previously noted, commercial work has not produced the same level of gross profit as industrial work, and has thus contributed to the reduced results this year because of our sector mix. In conclusion, while we did anticipate reduced results in 2013 compared to the prior year, we are disappointed with the outcome that has materialized to date.

We are well aware of the circumstances that gave rise to the execution issues on the [unintelligible] project and we are now seeing our project mix start to shift to the industrial sector as we had earlier predicted. The [unintelligible] noted improvements in our [unintelligible] program and a more positive outlook should be able to produce improved earnings for 2014.

With that, I will now turn the call back to the conference call operator, who will take your questions in turn.

I was just wondering if you could give me some more color on the margins in the quarter. Excluding the problem project, they were a little bit weaker than what I was looking for, and sequentially, they were lower, if you take the problem project out of both Q2 and Q3.

So is that a reflection of the commercial work, or was there something else in the quarter that went on that we didn’t see?

No, you basically hit the nail on the head. As I mentioned in the remarks, the industrial sector, which is our higher producing margin work, has declined, and it’s been replaced to a certain extent by the commercial work, but the margins in the commercial sector - which I’m using that term broadly to incorporate both our retail and commercial and institutional work - are not as robust as the industrial sector.

So that’s exactly it. It’s the mix, which we are seeing signs now in our backlog that it’s starting to trend back towards a more traditional, if I can frame it that way, but more heavily weighted towards the industrial sector.

And I know that the timing of projects is always difficult to predict, so would you anticipate that we’ll start to see some of that shift in the fourth quarter?

Barely. Some of the awards we got in the third quarter that we reported, they’re just getting underway.

And unfortunately the fourth quarter is impacted by Christmas, so December you sort of get half a month. We expect we will see some in the fourth quarter, but not to any significant amount.

2014 is where we really expect to start hopefully moving in a more positive direction.

And I guess on the outlook for ’14, you did mention the margins and the backlog have increased throughout the year. That’s not just a reflection of having some of those problem projects in backlog.

That’s on a like-for-like basis you’re seeing margins pick up, I guess to reflect the mix shift?

Just wondering, of the $275 million of oil sands work that you secured in the third quarter, what would be the split between SAGD and mining work?

Well, first of all the $275 wasn’t all oil sands. It was predominantly industrial work, but there was a little bit of other stuff.

SAGD mining, probably more on the mining side.

More?

Yeah, becase they were bigger jobs that were awarded. In the announcement, the stuff that’s contained in there was more mining work than SAGD.

Any percentage you could provide?

Greater than 50%.

And you mentioned you had a little bit of work in the backlog that’s related to Fort Hills. What’s that related to?

Is that clearing work, foundation work?

That’s civil work, so it’s excavation, foundations, preparatory work for the buildings package, which will be awarded in the next couple of months, we are told.

And presumably the work that you’re still vying for is significantly larger than what you’ve been awarded?

Yes, in some cases it is. Yes.

The other question I have for you is regarding the [P3] (ph)projects, how many do you have that are left to complete on your books, and how many have you been shortlisted for?

Two left to complete, Thunder Bay and Restigouche. Thunder Bay will wrap up late this year, maybe a month into next year, and Restigouche is middle of next year, if I recall, I think middle of next year, middle of 2014, and it maybe a little bit further out, maybe third quarter of ’14.

And shortlisted, now we are shortlisted for [Erin Oaks], working on North Island, and [East Rail] is gone in, we’re waiting for [unintelligible] to be announced, probably later this year. And there’s another little one in Fort St.

John that we’re shortlisted on.

Wondering if you could just talk a bit about the O’Connell performance in the quarter and outlook for this segment next year.

First of all, we don’t split O’Connell out. O’Connell is incorporated into our industrial segment, so we don’t give specific results with respect to O’Connell separately.

But as I did note in my remarks, the mining area that O’Connell works in [out east] has been depressed this year. So we had a bang-up year last year in the mining sector and the industrial sector out on the east coast, and that won’t be repeated this year.

So that’s sort of a general synopsis of the work program available to us out there. O’Connell’s wrapping up the lower Churchill project, just as we speak right now.

We should be offsite by probably the end of this month. And then we’ve got some work going in a bunch of other areas out there that will [unintelligible] through the winter, they’ll go into next year.

And there’s a lot of opportunities that we’re pursuing. So that’s a general overview, but we don’t give specific numbers related to the O’Connell business segment.

And just with regard to the problem project, can you just confirm the amount that it did impact gross margin in the quarter?

Well, if you do the math, it works out to $2.6 million.

The challenged project is to wrap up in the fourth quarter, correct?

Yes.

And can you just let us know what the percentage completion was at at the end of the third quarter? b

Around 90%, I’d say.

And I heard your comments that you believe you’ve fully provided for that and so I appreciate that. Given that it’s been a challenge, obviously, and you still have a little ways to go, can you just talk about the risks that would remain on a project like that?

Again, I realize you think you’ve fully provided for it, but are there still risks that could come into play?

I mean, any of these projects, it’s a combination of issues that arise. And when you’ve still got time to go, it’s possible that they still pop up.

I mean, probably the biggest one is that we don’t get finished on time. If this happens to go beyond Christmas into next year, we haven’t planned on that right now.

We might have a little bit of extra contingency in there, but we don’t have anything big if this thing happens. Well, the problem you have with these jobs that are wrapping up at this time of year is if you don’t get them done basically by about December 15, you’re probably not getting it done until January 30, right?

Because everybody goes away for the holidays. By the time you get them back there and get them back up and invigorated and get the turkey out of their system and everything else, it takes a while.

So that’s probably the biggest risk, is just time. And all the other issues that I mentioned on the last call, that could arise in the projects of this nature, it’s possible for some more little tidbits to flow out.

So those are the risks. To the best of our ability, we believe that we’ve accounted for all of these in the numbers that we produced for the third quarter.

And then just one last one. It sounds like with the pickup in the industrial work that you’ve been securing, and not only would that help mix, but also it sounds like the margins on that work have been getting better relative to what they would have been.

Just wondering in terms of sort of the ramp up of that work, I think you spoke to Q4 suggesting that it’s early days on those jobs at this point, but will they be up and going at a good pace in Q1? Or is this sort of more as we get into the middle of the year they really hit their stride?

The big detriment or possible holdup in Q1 would be weather, right? If it turns to -40 up there for weeks on end, things go relatively slowly, but if we have decent weather, no, they should wrap up fairly straight line in Q1.

And obviously as we go into Q2, Q3, then they’ll be going really full-bore.

Just a quick question for you. It looks like the LNG dynamic, this is something very much top of investors’ mind right now.

Is this the market that you are thinking about obviously addressing and is there a timeframe that you think is realistic that you can start thinking about stuff like that?

LNG is on our radar, but I think there’s a lot of hurdles that LNG has to go for before it becomes realistic. I mean, personally this is just me speaking.

My guess is that it’s years out, maybe even three or four years out. But by the time they go through regulatory and the government’s quit their fighting over it, the proponents actually decide what they can build, they get financing… Don’t forget, in order to operate one of these facilities, you need a whole bunch of power, so [unintelligible] project in DC, has to go.

We also have to come up with some other means of powering one of these plants up, so I think there’s a lot of issues that need to be resolved before this becomes a reality. Is it on our radar screen?

Yes. Basically, all the proponents that are talking about building an LNG plant are clients of ours, and we have had contact with each and every one of them.

How this will materialize in the months and years to come is anybody’s guess. Sometimes I have trouble predicting what’s going to happen in the next quarter, so to predict what’s going to happen three or four years out is really difficult.

But we will stay close to the development of the LNG in northern BC, and depending on our resource availability and how it plays out with everything else that’s going on in the market, will be deciding factor as to how we actually participate in the construction if it actually happens in a few years.

So it’s hard to say, I guess, right now, in terms of resource development that you’re focusing on. I mean, oil sands is by far the most addressable market for you, right?

Well, I mean, that’s the place where stuff is actually being built. LNG is just being talked about.

So there’s not shovels in the ground. They’re not even close to shovels in the ground.

There might be a little bit of peripheral work, you know, some of the off-plant sites, getting well heads going and roads, maybe some of that. So we’ll keep our eye on that.

And quite frankly, to me, I think that’s the more lucrative stuff. The actual plant sites can be very, very challenging, with the politics and the [unintelligible].

Sometimes it’s the stuff that’s on the fringes or just outside it. You get in, you get out.

You know, less attention paid to it, and definitely more profitable. So we’ll watch it all, either through partnerships, or maybe a loan, depending on what the scope of work is, that will be brought into our evaluations as to how we participate in the market.

But you are right. Right now it’s the oil sands and related work pipeline [unintelligible] in northern Alberta where we’re keeping our industrial resources busy at this point in time.

And we expect that to continue for two to three years now. Just as we’ve said, we said that 2013 was going to be a setup year for future years.

It came a little bit slower than what we had anticipated. We thought it was going to happen earlier in the year, but I think we’ve been pretty darn close to accurately forecasting how this would turn around in northern Alberta.

And just a very quick question to circle back to the problematic project, I know that you never identified or even qualitatively sort of ascertained in terms of what was going on there, but can you provide any color in relation to what was potentially something that you can do differently on a going forward basis to avoid those types of issues, or you think this was very much a one-off and just sort of bad luck in terms of timing?

You can always learn, even from successful projects you can always learn. And that’s what we want to do here [unintelligible].

There’s no doubt about it that jobs that go bad, they seem to garner more attention, as this one has, and rightfully so. And we will dissect it and look at what happened on it, and try and improve in the future.

There are some things that I guess you could say are not bad luck, it’s the way we executed. There are things are bad luck, if I can frame it that way.

For example, the spikes, which probably had one of the greater impacts on the project, if not the largest impact on the project, which is totally out of our control, but certainly has a significant ripple effect on the impact they can have to a project. So yes, we will look at it, and learn from it.

We know it was isolated. We do not see any systemic problems that are permeating our organization with similar issues that arose in this project.

And so in terms of what you have right now in your backlog, you feel quite comfortable that what you’re telegraphing right now in relation to the embedded margins and so forth, that a potential repeat of something like this, it’s probably minimal, given where you’re sitting right now? Just in terms of the contracts that you have at hand, you’re not sort of observing similar types of dynamics that might arise for the projects that you have already booked in your backlog?

Correct.

Just a housekeeping issue. For the fourth quarter, usually we see a $4 million to $5 million sequential uptick in SG&A.

Any help with modeling SG&A for the fourth quarter?

Where have you seen that?

Last year and the year before.

Really? $4 million to $5 million uptick against G&A?

I guess we shouldn’t expect that. [laughter] Okay, so that’s probably not going to happen this year by the sound of it.

And any initial thoughts just on capex for 2014?

Capex for 2014. Quite frankly it depends on the workflow.

The maintenance capex will probably be in the $10 million to $15 million, as a fairly broad range. And if we happen to pick up a big dam or something, it will shoot up substantially.

But that will all be project related. So maintenance capex in the $10 million to $12 million to $15 million range.

The rest will be project related, project driven.

Just wanted to express again my thanks to everybody for joining on the call. Like I said, I know it’s a holiday in most places, and appreciate your interest in our company.

If you have any further questions, do not hesitate to give me a shout at the office at your convenience, and we’ll get back to you when we can. Thank you again, and we’ll talk to you all soon.