Sterling Construction Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

strl-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___


Commission File Number			1-31993


STERLING CONSTRUCTION COMPANY, INC.
(Exact name of registrant as specified in its charter)

Delaware			25-1655321
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1800 Hughes Landing Blvd. The Woodlands, Texas			77380
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (281) 214-0800

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.01 par value per share

STRL

The NASDAQ Stock Market LLC

(Title of each class)

(Trading Symbol)

(Name of each exchange on which registered)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

The number of shares outstanding of the registrant’s common stock as of July 31, 2020 – 28,068,334

STERLING CONSTRUCTION COMPANY, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenues	$	400,038	$	264,086	$	696,726	$	488,035
Cost of revenues	(340,439)		(238,590)		(601,882)		(443,036)
Gross profit	59,599		25,496		94,844		44,999
General and administrative expense	(18,451)		(10,174)		(36,055)		(22,063)
Intangible asset amortization	(2,866)		(600)		(5,703)		(1,200)
Acquisition related costs	(139)		(262)		(612)		(262)
Other operating expense, net	(5,097)		(3,276)		(7,325)		(5,570)
Operating income	33,046		11,184		45,149		15,904
Interest income	24		291		123		655
Interest expense	(7,557)		(2,904)		(15,360)		(5,964)
Income before income taxes	25,513		8,571		29,912		10,595
Income tax expense	(7,248)		(706)		(8,432)		(869)
Net income	18,265		7,865		21,480		9,726
Less: Net income attributable to noncontrolling interests	(55)		(37)		(155)		(83)
Net income attributable to Sterling common stockholders	$	18,210	$	7,828	$	21,325	$	9,643

Net income per share attributable to Sterling common stockholders:
Basic	$	0.65	$	0.30	$	0.77	$	0.37
Diluted	$	0.65	$	0.29	$	0.76	$	0.36

Weighted average common shares outstanding:
Basic	27,941		26,338		27,794		26,357
Diluted	27,957		26,623		27,887		26,657

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income	$	18,265	$	7,865	$	21,480	$	9,726
Other comprehensive income, net of tax
Loss on interest rate swap, net of tax (Note 11)	(53)		—		(7,114)		—
Total comprehensive income	18,212		7,865		14,366		9,726
Less: Comprehensive income attributable to noncontrolling interests	(55)		(37)		(155)		(83)
Comprehensive income attributable to Sterling common stockholders	$	18,157	$	7,828	$	14,211	$	9,643

The accompanying Notes are an integral part of these Consolidated Financial Statements.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)


	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents ($15,877 and $7,538 related to variable interest entities (“VIEs”))	$	70,612	$	45,733
Accounts receivable, including retainage ($39,085 and $24,642 related to VIEs)	269,406		248,247
Costs and estimated earnings in excess of billings ($5,012 and $8,328 related to VIEs)	52,068		42,555
Receivables from and equity in construction joint ventures ($8,302 and $7,406 related to VIEs)	12,396		9,196
Other current assets ($110 and $503 related to VIEs)	11,965		11,790
Total current assets	416,447		357,521
Property and equipment, net ($6,000 and $5,619 related to VIEs)	119,596		116,030
Operating lease right-of-use assets ($3,951 and $3,817 related to VIEs)	17,076		13,979
Goodwill ($1,501 and $1,501 related to VIEs)	192,014		191,892
Other intangibles, net	250,620		256,323
Deferred tax asset, net	21,604		26,012
Other non-current assets, net	153		183
Total assets	$	1,017,510	$	961,940
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable ($21,943 and $18,213 related to VIEs)	$	131,098	$	137,593
Billings in excess of costs and estimated earnings ($15,514 and $9,649 related to VIEs)	110,934		85,011
Current maturities of long-term debt ($6,793 and $39 related to VIEs)	54,979		42,473
Current portion of long-term lease obligations ($1,792 and $1,838 related to VIEs)	7,423		7,095
Income taxes payable	3,594		1,212
Accrued compensation ($2,965 and $1,521 related to VIEs)	19,075		13,727
Other current liabilities ($1,587 and $1,429 related to VIEs)	10,589		6,393
Total current liabilities	337,692		293,504
Long-term debt ($9 and $2 related to VIEs)	367,028		390,627
Long-term lease obligations ($2,159 and $1,979 related to VIEs)	9,733		6,976
Members’ interest subject to mandatory redemption and undistributed earnings	53,751		49,003
Other long-term liabilities ($509 and $0 related to VIEs)	8,221		619
Total liabilities	776,425		740,729
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, par value $0.01 per share; 38,000 shares authorized, 28,280 and 28,290 shares issued, 28,034 and 27,772 shares outstanding	283		283
Additional paid in capital	253,820		251,019
Treasury Stock, at cost: 246 and 518 shares	(3,435)		(6,142)
Retained deficit	(3,708)		(25,033)
Accumulated other comprehensive loss	(7,323)		(209)
Total Sterling stockholders’ equity	239,637		219,918
Noncontrolling interests	1,448		1,293
Total stockholders’ equity	241,085		221,211
Total liabilities and stockholders’ equity	$	1,017,510	$	961,940

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net income	$	21,480	$	9,726
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	16,541		8,473
Amortization of debt issuance costs and non-cash interest	1,762		1,602
Gain on disposal of property and equipment	(598)		(441)
Deferred taxes	6,223		761
Stock-based compensation expense	6,196		1,670
Loss on interest rate hedge	272		—
Changes in operating assets and liabilities (Note 17)	385		(26,116)
Net cash provided by (used in) operating activities	52,261		(4,325)
Cash flows from investing activities:
Capital expenditures	(14,574)		(4,854)
Proceeds from sale of property and equipment	769		802
Net cash used in investing activities	(13,805)		(4,052)
Cash flows from financing activities:

Repayments of debt	(22,644)		(5,763)
Distributions to noncontrolling interest owners	—		(5,100)
Purchase of treasury stock	—		(3,201)
Other	9,067		76
Net cash used in financing activities	(13,577)		(13,988)
Net change in cash and cash equivalents	24,879		(22,365)
Cash and cash equivalents at beginning of period	45,733		94,095
Cash and cash equivalents at end of period	$	70,612	$	71,730

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Six Months Ended June 30, 2020
	Common Stock					Additional Paid in Capital		Treasury Stock							Retained Deficit		Accumulated Other Comprehensive Loss		Total Sterling Stockholders’ Equity		Non-controlling Interests	Total Stockholders’ Equity
	Shares	Amount					Shares			Amount
Balance at December 31, 2019	27,772	$	283	$	251,019	518		$	(6,142)		$	(25,033)	$	(209)	$	219,918	$	1,293	$	221,211
Net income	—	—		—		—		—			3,115		—		3,115		100		3,215
Loss on interest rate swap	—	—		—		—		—			—		(7,061)		(7,061)		—		(7,061)
Stock-based compensation	—	—		2,234		—		—			—		—		2,234		—		2,234


Issuance of stock	248	—		(2,460)		(248)		2,563			—		—		103		—		103
Shares withheld for taxes	(54)	—		(104)		46		(668)			—		—		(772)		—		(772)
Balance at March 31, 2020	27,966	$	283	$	250,689	316		$	(4,247)		$	(21,918)	$	(7,270)	$	217,537	$	1,393	$	218,930
Net income	—	—		—		—		—			18,210		—		18,210		55		18,265
Loss on interest rate swap	—	—		—		—		—			—		(53)		(53)		—		(53)
Stock-based compensation	—	—		3,962		—		—			—		—		3,962		—		3,962

Issuance of stock	73	—		(740)		(73)		844			—		—		104		—		104
Shares withheld for taxes	(5)	—		(18)		3		(32)			—		—		(50)		—		(50)
Other	—	—		(73)		—		—			—		—		(73)		—		(73)
Balance at June 30, 2020	28,034	$	283	$	253,820	246		$	(3,435)		$	(3,708)	$	(7,323)	$	239,637	$	1,448	$	241,085


	Six Months Ended June 30, 2019
	Common Stock					Additional Paid in Capital		Treasury Stock							Retained Deficit		Accumulated Other Comprehensive Loss		Total Sterling Stockholders’ Equity		Non-controlling Interests	Total Stockholders’ Equity
	Shares	Amount					Shares			Amount
Balance at December 31, 2018	26,597	$	271	$	233,795	467		$	(4,731)		$	(64,934)	$	—	$	164,401	$	7,859	$	172,260
Net income	—	—		—		—		—			1,815		—		1,815		46		1,861
Stock-based compensation	(1)	—		1,021		—		—			—		—		1,021		—		1,021
Distributions to owners	—	—		—		—		—			—		—		—		(5,100)		(5,100)
Purchase of treasury stock	(250)	—		—		250		(3,201)			—		—		(3,201)		—		(3,201)
Issuance of stock	130	—		(1,314)		(130)		1,314			—		—		—		—		—
Shares withheld for taxes	(52)	—		—		45		(564)			—		—		(564)		—		(564)
Balance at March 31, 2019	26,424	$	271	$	233,502	632		$	(7,182)		$	(63,119)	$	—	$	163,472	$	2,805	$	166,277
Net income	—	—		—		—		—			7,828		—		7,828		37		7,865
Stock-based compensation	—	—		649		—		—			—		—		649		—		649


Issuance of stock	49	—		(494)		(49)		494			—		—		—		—		—
Shares withheld for taxes	(

Price	13.18	EPS	1
Shares	27	P/E	19
MCap	351	P/FCF	41
Net Debt	3	EBIT	20
TEV	355	TEV/EBIT	18
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-04
10-Q	2020-03-31	Filed 2020-05-05
10-K	2019-12-31	Filed 2020-03-03
10-Q	2019-09-30	Filed 2019-11-05
10-Q	2019-06-30	Filed 2019-08-06
10-Q	2019-03-31	Filed 2019-05-07
10-K	2018-12-31	Filed 2019-03-05
10-Q	2018-09-30	Filed 2018-11-06
10-Q	2018-06-30	Filed 2018-08-02
10-Q	2018-03-31	Filed 2018-05-08
10-K	2017-12-31	Filed 2018-03-06
10-Q	2017-09-30	Filed 2017-10-31
10-Q	2017-06-30	Filed 2017-08-02
10-Q	2017-03-31	Filed 2017-05-03
10-K	2016-12-31	Filed 2017-03-09
10-Q	2016-09-30	Filed 2016-10-31
10-Q	2016-06-30	Filed 2016-08-01
10-Q	2016-03-31	Filed 2016-05-02
10-K	2015-12-31	Filed 2016-03-14
10-Q	2015-09-30	Filed 2015-11-09
10-Q	2015-06-30	Filed 2015-08-10
10-Q	2015-03-31	Filed 2015-05-11
10-K	2014-12-31	Filed 2015-03-16
10-Q	2014-09-30	Filed 2014-11-10
10-Q	2014-06-30	Filed 2014-08-11
10-Q	2014-03-31	Filed 2014-05-12
10-K	2013-12-31	Filed 2014-03-17
10-Q	2013-09-30	Filed 2013-11-08
10-Q	2013-06-30	Filed 2013-08-09
10-Q	2013-03-31	Filed 2013-05-10
10-K	2012-12-31	Filed 2013-03-18
10-Q	2012-09-30	Filed 2012-11-08
10-Q	2012-06-30	Filed 2012-08-08
10-Q	2012-03-31	Filed 2012-05-09
10-K	2011-12-31	Filed 2012-03-15
10-Q	2011-09-30	Filed 2011-11-08
10-Q	2011-06-30	Filed 2011-08-08
10-Q	2011-03-31	Filed 2011-05-10
10-K	2010-12-31	Filed 2011-03-16
10-Q	2010-09-30	Filed 2010-11-09
10-Q	2010-06-30	Filed 2010-08-09
10-Q	2010-03-31	Filed 2010-05-10
10-K	2009-12-31	Filed 2010-03-15

8-K	2020-09-01	Officers, Exhibits
8-K	2020-08-04	Earnings, Exhibits
8-K	2020-08-03	Earnings, Regulation FD, Exhibits
8-K	2020-06-02
8-K	2020-05-06
8-K	2020-05-05
8-K	2020-05-05
8-K	2020-05-04
8-K	2020-04-01
8-K	2020-03-03
8-K	2020-03-03
8-K	2020-03-02
8-K	2019-12-08
8-K	2019-11-05
8-K	2019-11-04
8-K	2019-10-02
8-K	2019-09-06
8-K	2019-08-13
8-K	2019-08-13
8-K	2019-08-06
8-K	2019-08-05
8-K	2019-05-29
8-K	2019-05-08
8-K	2019-05-07
8-K	2019-05-06
8-K	2019-03-18
8-K	2019-03-06
8-K	2018-12-18
8-K	2018-12-18
8-K	2018-12-18
8-K	2018-11-14
8-K	2018-11-05
8-K	2018-08-09
8-K	2018-08-06
8-K	2018-05-31
8-K	2018-05-08
8-K	2018-05-07
8-K	2018-05-02
8-K	2018-03-08
8-K	2018-03-05

EX-31.1	a2020063010-qexhibit311.htm
EX-31.2	a2020063010-qexhibit312.htm
EX-32.1	a2020063010-qexhibit321.htm
EX-32.2	a2020063010-qexhibit322.htm


			Page
PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements			3

Statements of Operations			3

Statements of Comprehensive Income (Loss)			4

Balance Sheets			5

Statements of Cash Flows			6

Statements of Changes in Stockholders’ Equity			7

Notes to the Condensed Consolidated Financial Statements			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23

Item 3. Quantitative and Qualitative Disclosures About Market Risk			30

Item 4. Controls and Procedures			31

PART II—OTHER INFORMATION

Item 1. Legal Proceedings			31

Item 1A. Risk Factors			31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32







Item 6. Exhibits			33

Signatures			34

STRL 10Q Quarterly Report

Sterling Construction Earnings 2020-06-30