falsedesktopSTRL2020-09-30000087423820000120{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "STERLING CONSTRUCTION COMPANY INC.\t\n(Exact name of registrant as specified in its charter)\t\nDelaware\t25-1655321\n(State or other jurisdiction of incorporation or organization)\t(I.R.S. Employer Identification No.)\n1800 Hughes Landing Blvd. The Woodlands Texas\t77380\n(Address of principal executive offices)\t(Zip Code)\nRegistrant's telephone number including area code: (281) 214-0800\t\n", "q10k_tbl_1": "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.\t\t\t\nLarge accelerated filer\t¨\tAccelerated filer\tþ\nNon-accelerated filer\t¨\tSmaller reporting company\t☐\n\t\tEmerging growth company\t☐\nIf 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.\t\t\t¨\n", "q10k_tbl_2": "\tPage\nPART I-FINANCIAL INFORMATION\t\nItem 1. Condensed Consolidated Financial Statements\t3\nStatements of Operations\t3\nStatements of Comprehensive Income (Loss)\t4\nBalance Sheets\t5\nStatements of Cash Flows\t6\nStatements of Changes in Stockholders' Equity\t7\nNotes to the Condensed Consolidated Financial Statements\t9\nItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations\t23\nItem 3. Quantitative and Qualitative Disclosures About Market Risk\t30\nItem 4. Controls and Procedures\t31\nPART II-OTHER INFORMATION\t\nItem 1. Legal Proceedings\t31\nItem 1A. Risk Factors\t31\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds\t32\nItem 5. Other Information\t32\nItem 6. Exhibits\t33\nSignatures\t34\n", "q10k_tbl_3": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenues\t383458\t291699\t1080184\t779734\nCost of revenues\t(333542)\t(262483)\t(935424)\t(705519)\nGross profit\t49916\t29216\t144760\t74215\nGeneral and administrative expense\t(15154)\t(10239)\t(51209)\t(32302)\nIntangible asset amortization\t(2866)\t(600)\t(8569)\t(1800)\nAcquisition related costs\t(401)\t(1896)\t(1013)\t(2158)\nOther operating expense net\t(2664)\t(4366)\t(9989)\t(9936)\nOperating income\t28831\t12115\t73980\t28019\nInterest income\t23\t331\t146\t986\nInterest expense\t(7177)\t(3024)\t(22537)\t(8988)\nIncome before income taxes\t21677\t9422\t51589\t20017\nIncome tax expense\t(6280)\t(913)\t(14712)\t(1782)\nNet income\t15397\t8509\t36877\t18235\nLess: Net income attributable to noncontrolling interests\t(240)\t(552)\t(395)\t(635)\nNet income attributable to Sterling common stockholders\t15157\t7957\t36482\t17600\nNet income per share attributable to Sterling common stockholders:\t\t\t\t\nBasic\t0.54\t0.30\t1.31\t0.67\nDiluted\t0.54\t0.30\t1.30\t0.66\nWeighted average common shares outstanding:\t\t\t\t\nBasic\t28003\t26365\t27832\t26359\nDiluted\t28233\t26637\t27986\t26661\n", "q10k_tbl_4": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet income\t15397\t8509\t36877\t18235\nOther comprehensive income net of tax\t\t\t\t\nChange in interest rate swap net of tax (Note 11)\t1010\t0\t(6104)\t0\nTotal comprehensive income\t16407\t8509\t30773\t18235\nLess: Comprehensive income attributable to noncontrolling interests\t(240)\t(552)\t(395)\t(635)\nComprehensive income attributable to Sterling common stockholders\t16167\t7957\t30378\t17600\n", "q10k_tbl_5": "\tSeptember 30 2020\tDecember 31 2019\nAssets\t\t\nCurrent assets:\t\t\nCash and cash equivalents ($24009 and $7538 related to variable interest entities (\"VIEs\"))\t72593\t45733\nAccounts receivable including retainage ($37721 and $24642 related to VIEs)\t271342\t248247\nCosts and estimated earnings in excess of billings ($7213 and $8328 related to VIEs)\t55310\t42555\nReceivables from and equity in construction joint ventures ($9684 and $7406 related to VIEs)\t13802\t9196\nOther current assets ($146 and $503 related to VIEs)\t14171\t11790\nTotal current assets\t427218\t357521\nProperty and equipment net ($5944 and $5619 related to VIEs)\t121534\t116030\nOperating lease right-of-use assets ($4079 and $3817 related to VIEs)\t17250\t13979\nGoodwill ($1501 and $1501 related to VIEs)\t192014\t191892\nOther intangibles net\t247754\t256323\nDeferred tax asset net\t16589\t26012\nOther non-current assets net\t153\t183\nTotal assets\t1022512\t961940\nLiabilities and Stockholders' Equity\t\t\nCurrent liabilities:\t\t\nAccounts payable ($25276 and $18213 related to VIEs)\t127336\t137593\nBillings in excess of costs and estimated earnings ($18533 and $9649 related to VIEs)\t126986\t85011\nCurrent maturities of long-term debt ($6793 and $39 related to VIEs)\t57476\t42473\nCurrent portion of long-term lease obligations ($1716 and $1838 related to VIEs)\t7624\t7095\nIncome taxes payable\t2251\t1212\nAccrued compensation ($3582 and $1521 related to VIEs)\t24328\t13727\nOther current liabilities ($2256 and $1429 related to VIEs)\t11368\t6393\nTotal current liabilities\t357369\t293504\nLong-term debt ($37 and $2 related to VIEs)\t335237\t390627\nLong-term lease obligations ($2363 and $1979 related to VIEs)\t9668\t6976\nMembers' interest subject to mandatory redemption and undistributed earnings\t50798\t49003\nOther long-term liabilities ($1016 and $0 related to VIEs)\t10124\t619\nTotal liabilities\t763196\t740729\nCommitments and contingencies (Note 12)\t\t\nStockholders' equity:\t\t\nCommon stock par value $0.01 per share; 38000 shares authorized 28280 and 28290 shares issued 28086 and 27772 shares outstanding\t283\t283\nAdditional paid in capital\t254860\t251019\nTreasury stock at cost: 194 and 518 shares\t(2651)\t(6142)\nRetained earnings (deficit)\t11449\t(25033)\nAccumulated other comprehensive loss\t(6313)\t(209)\nTotal Sterling stockholders' equity\t257628\t219918\nNoncontrolling interests\t1688\t1293\nTotal stockholders' equity\t259316\t221211\nTotal liabilities and stockholders' equity\t1022512\t961940\n", "q10k_tbl_6": "\tNine Months Ended September 30\t\n\t2020\t2019\nCash flows from operating activities:\t\t\nNet income\t36877\t18235\nAdjustments to reconcile net income to net cash provided by operating activities:\t\t\nDepreciation and amortization\t24639\t12288\nAmortization of debt issuance costs and non-cash interest\t2489\t2375\nGain on disposal of property and equipment\t(1042)\t(466)\nDeferred taxes\t10946\t1561\nStock-based compensation expense\t7961\t2489\nChange in interest rate hedge\t251\t0\nChanges in operating assets and liabilities (Note 17)\t8828\t(28005)\nNet cash provided by operating activities\t90949\t8477\nCash flows from investing activities:\t\t\nCapital expenditures\t(22088)\t(7871)\nProceeds from sale of property and equipment\t1557\t1265\nNet cash used in investing activities\t(20531)\t(6606)\nCash flows from financing activities:\t\t\nRepayments of debt\t(52695)\t(10435)\nDistributions to noncontrolling interest owners\t0\t(5900)\nPurchase of treasury stock\t0\t(3201)\nOther borrowings\t9137\t100\nNet cash used in financing activities\t(43558)\t(19436)\nNet change in cash and cash equivalents\t26860\t(17565)\nCash and cash equivalents at beginning of period\t45733\t94095\nCash and cash equivalents at end of period\t72593\t76530\n", "q10k_tbl_7": "\tNine Months Ended September 30 2020\t\t\t\t\t\t\t\t\t\t\t\n\tCommon Stock\t\tAdditional Paid in Capital\t\tTreasury Stock\t\t\tRetained Earnings (Deficit)\tAccumulated Other Comprehensive Loss\tTotal Sterling Stockholders' Equity\tNon-controlling Interests\tTotal Stockholders' Equity\n\tShares\tAmount\t\tShares\t\tAmount\t\t\t\nBalance at December 31 2019\t27772\t283\t251019\t\t518\t\t(6142)\t(25033)\t(209)\t219918\t1293\t221211\nNet income\t0\t0\t0\t\t0\t\t0\t3115\t0\t3115\t100\t3215\nChange in interest rate swap\t0\t0\t0\t\t0\t\t0\t0\t(7061)\t(7061)\t0\t(7061)\nStock-based compensation\t0\t0\t2234\t\t0\t\t0\t0\t0\t2234\t0\t2234\nIssuance of stock\t248\t0\t(2460)\t\t(248)\t\t2563\t0\t0\t103\t0\t103\nShares withheld for taxes\t(54)\t0\t(104)\t\t46\t\t(668)\t0\t0\t(772)\t0\t(772)\nBalance at March 31 2020\t27966\t283\t250689\t\t316\t\t(4247)\t(21918)\t(7270)\t217537\t1393\t218930\nNet income\t0\t0\t0\t\t0\t\t0\t18210\t0\t18210\t55\t18265\nChange in interest rate swap\t0\t0\t0\t\t0\t\t0\t0\t(53)\t(53)\t0\t(53)\nStock-based compensation\t0\t0\t3962\t\t0\t\t0\t0\t0\t3962\t0\t3962\nIssuance of stock\t73\t0\t(740)\t\t(73)\t\t844\t0\t0\t104\t0\t104\nShares withheld for taxes\t(5)\t0\t(18)\t\t3\t\t(32)\t0\t0\t(50)\t0\t(50)\nOther\t0\t0\t(73)\t\t0\t\t0\t0\t0\t(73)\t0\t(73)\nBalance at June 30 2020\t28034\t283\t253820\t\t246\t\t(3435)\t(3708)\t(7323)\t239637\t1448\t241085\nNet income\t0\t0\t0\t\t0\t\t0\t15157\t0\t15157\t240\t15397\nChange in interest rate swap\t0\t0\t0\t\t0\t\t0\t0\t1010\t1010\t0\t1010\nStock-based compensation\t0\t0\t1765\t\t0\t\t0\t0\t0\t1765\t0\t1765\nIssuance of stock\t66\t0\t(714)\t\t(66)\t\t917\t0\t0\t203\t0\t203\nShares withheld for taxes\t(14)\t0\t0\t\t14\t\t(133)\t0\t0\t(133)\t0\t(133)\nOther\t0\t0\t(11)\t\t0\t\t0\t0\t0\t(11)\t0\t(11)\nBalance at September 30 2020\t28086\t283\t254860\t\t194\t\t(2651)\t11449\t(6313)\t257628\t1688\t259316\n", "q10k_tbl_8": "\tNine Months Ended September 30 2019\t\t\t\t\t\t\t\t\t\t\t\n\tCommon Stock\t\tAdditional Paid in Capital\t\tTreasury Stock\t\t\tRetained Deficit\tAccumulated Other Comprehensive Loss\tTotal Sterling Stockholders' Equity\tNon-controlling Interests\tTotal Stockholders' Equity\n\tShares\tAmount\t\tShares\t\tAmount\t\t\t\nBalance at December 31 2018\t26597\t271\t233795\t\t467\t\t(4731)\t(64934)\t0\t164401\t7859\t172260\nNet income\t0\t0\t0\t\t0\t\t0\t1815\t0\t1815\t46\t1861\nStock-based compensation\t(1)\t0\t1021\t\t0\t\t0\t0\t0\t1021\t0\t1021\nDistributions to owners\t0\t0\t0\t\t0\t\t0\t0\t0\t0\t(5100)\t(5100)\nPurchase of treasury stock\t(250)\t0\t0\t\t250\t\t(3201)\t0\t0\t(3201)\t0\t(3201)\nIssuance of stock\t130\t0\t(1314)\t\t(130)\t\t1314\t0\t0\t0\t0\t0\nShares withheld for taxes\t(52)\t0\t0\t\t45\t\t(564)\t0\t0\t(564)\t0\t(564)\nBalance at March 31 2019\t26424\t271\t233502\t\t632\t\t(7182)\t(63119)\t0\t163472\t2805\t166277\nNet income\t0\t0\t0\t\t0\t\t0\t7828\t0\t7828\t37\t7865\nStock-based compensation\t0\t0\t649\t\t0\t\t0\t0\t0\t649\t0\t649\nIssuance of stock\t49\t0\t(494)\t\t(49)\t\t494\t0\t0\t0\t0\t0\nShares withheld for taxes\t(7)\t0\t(98)\t\t0\t\t0\t0\t0\t(98)\t0\t(98)\nBalance at June 30 2019\t26466\t271\t233559\t\t583\t\t(6688)\t(55291)\t0\t171851\t2842\t174693\nNet income\t0\t0\t0\t\t0\t\t0\t7957\t0\t7957\t552\t8509\nStock-based compensation\t0\t0\t819\t\t0\t\t0\t0\t0\t819\t0\t819\nDistributions to owners\t0\t0\t0\t\t0\t\t0\t0\t0\t0\t(800)\t(800)\nIssuance of stock\t13\t0\t(69)\t\t(13)\t\t139\t0\t0\t70\t0\t70\nShares withheld for taxes\t(3)\t0\t0\t\t3\t\t(32)\t0\t0\t(32)\t0\t(32)\nBalance at September 30 2019\t26476\t271\t234309\t\t573\t\t(6581)\t(47334)\t0\t180665\t2594\t183259\n", "q10k_tbl_9": "Cash consideration transferred net of $2425 of cash acquired\t375000\nTarget working capital adjustment\t21323\nEquity consideration transferred (1245 shares at $13.01 per share(1))\t16195\nNote payable to seller (See Note 9 - Debt)\t10000\nTax basis election\t5015\nTotal consideration\t427533\n", "q10k_tbl_10": "Net tangible assets:\t\nAccounts receivable including retainage\t81921\nCosts and estimated earnings in excess of billings\t974\nOther current assets\t249\nProperty and equipment net\t65492\nOther non-current assets net\t10\nAccounts payable\t(22039)\nBillings in excess of costs and estimated earnings\t(16540)\nOther current and non-current liabilities\t(7918)\nTotal net tangible assets\t102149\nIdentifiable intangible assets\t218600\nGoodwill\t106784\nTotal consideration transferred\t427533\n", "q10k_tbl_11": "\tWeighted Average Life (Years)\tOctober 2 2019 Fair Value\nCustomer relationships\t25\t191800\nTrade name\t25\t24800\nNon-compete agreements\t5\t2000\nTotal\t\t218600\n", "q10k_tbl_12": "\tThree Months Ended September 30 2019\tNine Months Ended September 30 2019\nPro forma revenue\t381721\t1012192\nPro forma net income attributable to Sterling\t29902\t58225\n", "q10k_tbl_13": "\tSeptember 30 2020\tDecember 31 2019\nHeavy Civil Backlog\t945060\t834049\nSpecialty Services Backlog\t293081\t233976\nTotal Heavy Civil and Specialty Services Backlog\t1238141\t1068025\n", "q10k_tbl_14": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\nRevenue by major end market\t2020\t2019\t2020\t2019\t\t\t\t\t\t\t\t\t\t\t\t\nHeavy Highway\t148239\t142118\t397139\t365692\t\t\t\t\t\t\t\t\t\t\t\t\nAviation\t20473\t39105\t83797\t106103\t\t\t\t\t\t\t\t\t\t\t\t\nWater Containment and Treatment\t17751\t15960\t56089\t46709\t\t\t\t\t\t\t\t\t\t\t\t\nOther\t14615\t21711\t40116\t51131\t\t\t\t\t\t\t\t\t\t\t\t\nHeavy Civil Revenue\t201078\t218894\t577141\t569635\t\t\t\t\t\t\t\t\t\t\t\t\nLand Development\t114961\t0\t296845\t0\t\t\t\t\t\t\t\t\t\t\t\t\nCommercial\t25010\t32863\t83552\t91436\t\t\t\t\t\t\t\t\t\t\t\t\nSpecialty Services Revenue\t139971\t32863\t380397\t91436\t\t\t\t\t\t\t\t\t\t\t\t\nResidential Revenue\t42409\t39942\t122646\t118663\t\t\t\t\t\t\t\t\t\t\t\t\nRevenues\t383458\t291699\t1080184\t779734\t\t\t\t\t\t\t\t\t\t\t\t\nRevenue by contract type\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nFixed-Unit Price\t187692\t207807\t631639\t534323\t\t\t\t\t\t\t\t\t\t\t\t\nLump Sum\t148463\t43959\t301025\t125096\t\t\t\t\t\t\t\t\t\t\t\t\nResidential and Other\t47303\t39933\t147520\t120315\t\t\t\t\t\t\t\t\t\t\t\t\nRevenues\t383458\t291699\t1080184\t779734\t\t\t\t\t\t\t\t\t\t\t\t\n", "q10k_tbl_15": "\tSeptember 30 2020\tDecember 31 2019\nMembers' interest subject to mandatory redemption\t40000\t40000\nNet accumulated earnings\t10798\t9003\nTotal liability\t50798\t49003\n", "q10k_tbl_16": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenues\t57566\t55111\t156292\t157189\nOperating income\t1889\t1861\t3093\t4142\nNet income\t1864\t1869\t3073\t4160\n", "q10k_tbl_17": "\tSeptember 30 2020\tDecember 31 2019\nCurrent assets\t120688\t92710\nCurrent liabilities\t(125294)\t(86705)\nSterling's receivables from and equity in construction joint ventures\t13802\t9196\n", "q10k_tbl_18": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenues\t58541\t40875\t128853\t127565\nIncome before tax\t7814\t3588\t14487\t14401\nSterling's noncontrolling interest:\t\t\t\t\nRevenues\t26195\t20119\t58653\t61774\nIncome before tax\t3541\t1769\t6559\t5869\n", "q10k_tbl_19": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenues\t4266\t768\t11734\t2397\nOperating income\t290\t50\t961\t162\nNet income\t292\t51\t967\t164\n", "q10k_tbl_20": "\tSeptember 30 2020\tDecember 31 2019\nConstruction and transportation equipment\t225887\t217945\nBuildings and improvements\t19275\t14641\nLand\t3891\t3891\nOffice equipment\t2762\t2767\nTotal property and equipment\t251815\t239244\nLess accumulated depreciation\t(130281)\t(123214)\nTotal property and equipment net\t121534\t116030\n", "q10k_tbl_21": "\t\tSeptember 30 2020\t\tDecember 31 2019\t\n\tWeighted Average Life\tGross Carrying Amount\tAccumulated Amortization\tGross Carrying Amount\tAccumulated Amortization\nCustomer relationships\t25 years\t232623\t(13990)\t232623\t(6911)\nTrade name\t23 years\t30107\t(2830)\t30107\t(1692)\nNon-competition agreements\t5 years\t2487\t(643)\t2487\t(291)\nTotal\t24 years\t265217\t(17463)\t265217\t(8894)\n", "q10k_tbl_22": "\tSeptember 30 2020\tDecember 31 2019\nTerm Loan Facility\t380000\t400000\nRevolving Credit Facility\t0\t20000\nCredit Facility\t380000\t420000\nNote payable to seller Plateau Acquisition\t10000\t10000\nNotes and deferred payments to sellers Tealstone Acquisition\t0\t12230\nFinance leases and other debt\t10429\t805\nTotal debt\t400429\t443035\nLess - Current maturities of long-term debt\t(57476)\t(42473)\nLess - Unamortized debt issuance costs\t(7716)\t(9935)\nTotal long-term debt\t335237\t390627\n", "q10k_tbl_23": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nOperating lease cost\t2187\t2276\t6421\t6447\nShort-term lease cost\t3311\t5363\t10337\t13375\nFinance lease cost:\t\t\t\t\nAmortization of right-of-use assets\t49\t69\t154\t140\nInterest on lease liabilities\t7\t9\t22\t12\nTotal finance lease cost\t56\t78\t176\t152\n", "q10k_tbl_24": "\tNine Months Ended September 30\t\n\t2020\t2019\nCash paid for amounts included in the measurement of lease liabilities:\t\t\nOperating cash flows from operating leases\t6281\t6277\nOperating cash flows from finance leases\t22\t12\nFinancing cash flows from finance leases\t154\t140\nRight-of-use assets obtained in exchange for lease obligations (noncash):\t\t\nOperating leases\t7679\t8138\nFinance leases\t0\t770\n", "q10k_tbl_25": "\tSeptember 30 2020\tDecember 31 2019\nOperating Leases\t\t\nOperating lease right-of-use assets\t17250\t13979\nCurrent portion of long-term lease obligations\t7624\t7095\nLong-term lease obligations\t9668\t6976\nTotal operating lease liabilities\t17292\t14071\nFinance Leases\t\t\nProperty and equipment at cost\t1479\t1479\nAccumulated depreciation\t(647)\t(482)\nProperty and equipment net\t832\t997\nCurrent maturities of long-term debt\t193\t204\nLong-term debt\t417\t560\nTotal finance lease liabilities\t610\t764\nWeighted Average Remaining Lease Term\t\t\nOperating leases\t3.4\t2.5\nFinance leases\t3.7\t4.0\nWeighted Average Discount Rate\t\t\nOperating leases\t5.7%\t6.0%\nFinance leases\t4.2%\t4.2%\n", "q10k_tbl_26": "\tOperating Leases\tFinance Leases\nYear Ending December 31\t\t\n2020 (excluding the nine months ended September 30 2020)\t1774\t56\n2021\t7231\t208\n2022\t5177\t161\n2023\t2568\t154\n2024\t1021\t77\nThereafter\t1549\t0\nTotal lease payments\t19320\t656\nLess imputed interest\t(2028)\t(46)\nTotal\t17292\t610\n", "q10k_tbl_27": "\tSeptember 30 2020\t\t\t\tDecember 31 2019\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tTotal\tLevel 1\tLevel 2\tLevel 3\tTotal\nDerivative Assets\t\t\t\t\t\t\t\t\nOther current assets\t0\t0\t0\t0\t0\t216\t0\t216\nOther non-current assets\t0\t0\t0\t0\t0\t0\t0\t0\nTotal assets at fair value\t0\t0\t0\t0\t0\t216\t0\t216\nDerivative Liabilities\t\t\t\t\t\t\t\t\nOther current liabilities\t0\t(4648)\t0\t(4648)\t0\t(61)\t0\t(61)\nOther non-current liabilities\t0\t(3722)\t0\t(3722)\t0\t(398)\t0\t(398)\nTotal liabilities at fair value\t0\t(8370)\t0\t(8370)\t0\t(459)\t0\t(459)\n", "q10k_tbl_28": "\tThree Months Ended September 30\t\t\tNine Months Ended September 30\t\t\n\tBefore Tax Amount\tTax Amount\tNet of Tax Amount\tBefore Tax Amount\tTax Amount\tNet of Tax Amount\nNet gain (loss) recognized in OCI\t50\t(11)\t39\t(10155)\t2285\t(7870)\nNet amount reclassified from AOCI into earnings(1)\t1253\t(282)\t971\t2279\t(513)\t1766\nChange in other comprehensive income\t1303\t(293)\t1010\t(7876)\t1772\t(6104)\n", "q10k_tbl_29": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nCurrent tax expense\t1557\t113\t3766\t221\nDeferred tax expense\t4723\t800\t10946\t1561\nIncome tax expense\t6280\t913\t14712\t1782\nCash paid for income taxes\t2900\t323\t2944\t323\n", "q10k_tbl_30": "\tShares\tWeighted Average Grant-Date Fair Value per Share\nRSAs\t51\t8.73\nRSUs\t160\t13.72\nPSUs (at target)\t176\t14.06\nTotal shares granted\t387\t\n", "q10k_tbl_31": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNumerator:\t\t\t\t\nNet income attributable to Sterling common stockholders\t15157\t7957\t36482\t17600\nDenominator:\t\t\t\t\nWeighted average common shares outstanding - basic\t28003\t26365\t27832\t26359\nShares for dilutive unvested stock and warrants\t230\t272\t154\t302\nWeighted average common shares outstanding - diluted\t28233\t26637\t27986\t26661\nBasic net income per share attributable to Sterling common stockholders\t0.54\t0.30\t1.31\t0.67\nDiluted net income per share attributable to Sterling common stockholders\t0.54\t0.30\t1.30\t0.66\n", "q10k_tbl_32": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenue\t\t\t\t\nHeavy Civil\t201078\t218894\t577141\t569635\nSpecialty Services\t139971\t32863\t380397\t91436\nResidential\t42409\t39942\t122646\t118663\nTotal Revenue\t383458\t291699\t1080184\t779734\nOperating Income\t\t\t\t\nHeavy Civil\t2405\t7420\t2679\t11020\nSpecialty Services\t21474\t1371\t55834\t3284\nResidential\t5353\t5220\t16480\t15873\nSubtotal\t29232\t14011\t74993\t30177\nAcquisition related costs\t(401)\t(1896)\t(1013)\t(2158)\nTotal Operating Income\t28831\t12115\t73980\t28019\n", "q10k_tbl_33": "\tNine Months Ended September 30\t\n\t2020\t2019\nAccounts receivable including retainage\t(23095)\t(15486)\nContracts in progress net\t29220\t(26934)\nReceivables from and equity in construction joint ventures\t(4606)\t(3931)\nOther current and non-current assets\t(5579)\t(2111)\nAccounts payable\t(10257)\t11198\nAccrued compensation and other liabilities\t21350\t7330\nMembers' interest subject to mandatory redemption and undistributed earnings\t1795\t1929\nChanges in operating assets and liabilities\t8828\t(28005)\n", "q10k_tbl_34": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n(In thousands)\t2020\t2019\t2020\t2019\nRevenues\t383458\t291699\t1080184\t779734\nGross profit\t49916\t29216\t144760\t74215\nGeneral and administrative expenses\t(15154)\t(10239)\t(51209)\t(32302)\nIntangible asset amortization\t(2866)\t(600)\t(8569)\t(1800)\nAcquisition related costs\t(401)\t(1896)\t(1013)\t(2158)\nOther operating expense net\t(2664)\t(4366)\t(9989)\t(9936)\nOperating income\t28831\t12115\t73980\t28019\nInterest net\t(7154)\t(2693)\t(22391)\t(8002)\nIncome before income taxes\t21677\t9422\t51589\t20017\nIncome tax expense\t(6280)\t(913)\t(14712)\t(1782)\nLess: Net income attributable to noncontrolling interests\t(240)\t(552)\t(395)\t(635)\nNet income attributable to Sterling common stockholders\t15157\t7957\t36482\t17600\nGross margin\t13.0%\t10.0%\t13.4%\t9.5%\n", "q10k_tbl_35": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(In thousands)\t2020\t% of Revenue\t2019\t% of Revenue\t2020\t% of Revenue\t2019\t% of Revenue\nRevenue\t\t\t\t\t\t\t\t\nHeavy Civil\t201078\t52%\t218894\t75%\t577141\t54%\t569635\t73%\nSpecialty Services\t139971\t37%\t32863\t11%\t380397\t35%\t91436\t12%\nResidential\t42409\t11%\t39942\t14%\t122646\t11%\t118663\t15%\nTotal Revenue\t383458\t\t291699\t\t1080184\t\t779734\t\nOperating Income\t\t\t\t\t\t\t\t\nHeavy Civil\t2405\t1.2%\t7420\t3.4%\t2679\t0.5%\t11020\t1.9%\nSpecialty Services\t21474\t15.3%\t1371\t4.2%\t55834\t14.7%\t3284\t3.6%\nResidential\t5353\t12.6%\t5220\t13.1%\t16480\t13.4%\t15873\t13.4%\nSubtotal\t29232\t7.6%\t14011\t4.8%\t74993\t6.9%\t30177\t3.9%\nAcquisition related costs\t(401)\t\t(1896)\t\t(1013)\t\t(2158)\t\nTotal Operating Income\t28831\t7.5%\t12115\t4.2%\t73980\t6.8%\t28019\t3.6%\n", "q10k_tbl_36": "(In thousands)\tSeptember 30 2020\tDecember 31 2019\nGenerally Available\t35083\t29659\nConsolidated 50% Owned Subsidiaries\t30658\t12004\nConstruction Joint Ventures\t6852\t4070\nTotal Cash\t72593\t45733\n", "q10k_tbl_37": "\tNine Months Ended September 30\t\n(In thousands)\t2020\t2019\nNet cash provided by (used in):\t\t\nOperating activities\t90949\t8477\nInvesting activities\t(20531)\t(6606)\nFinancing activities\t(43558)\t(19436)\nNet change in cash and cash equivalents\t26860\t(17565)\n", "q10k_tbl_38": "\tNine Months Ended September 30\t\n(In thousands)\t2020\t2019\nCosts and estimated earnings in excess of billings\t(12755)\t(26060)\nBillings in excess of costs and estimated earnings\t41975\t(874)\nContracts in progress net\t29220\t(26934)\nAccounts receivable including retainage\t(23095)\t(15486)\nReceivables from and equity in construction joint ventures\t(4606)\t(3931)\nAccounts payable\t(10257)\t11198\nChange in Contract Capital net\t(8738)\t(35153)\n", "q10k_tbl_39": "Period\tTotal Number of Shares Purchased\tAverage Price Paid Per Share\nJuly 1 - July 31 2020\t2954\t9.60\nAugust 1 - August 31 2020\t0\t0\nSeptember 1 - September 30 2020\t0\t0\nTotal\t2954\t9.60\n", "q10k_tbl_40": "Exhibit No.\tExhibit Title\n3.1 (1)\tCertificate of Incorporation of Sterling Construction Company Inc. as amended through April 28 2017 (incorporated by reference to Exhibit 3 to Sterling Construction Company Inc.'s Current Report on Form 8-K filed on May 3 2017 (SEC File No. 1-31993)).\n3.2 (1)\tAmended and Restated Bylaws of Sterling Construction Company Inc. (incorporated by reference to Exhibit 3.1 to Sterling Construction Company Inc.'s Current Report on Form 8-K filed on March 8 2018 (SEC File No. 1-31993)).\n31.1 (2)\tCertification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)\n31.2 (2)\tCertification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)\n32.1 (3)\tCertification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350\n32.2 (3)\tCertification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350\n101.INS\tInline XBRL Instance Document-The instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document\n101.SCH\tInline XBRL Taxonomy Extension Schema Document\n101.CAL\tInline XBRL Taxonomy Extension Calculation Linkbase Document\n101.DEF\tInline XBRL Taxonomy Extension Definition Linkbase Document\n101.LAB\tInline XBRL Taxonomy Extension Label Linkbase Document\n101.PRE\tInline XBRL Taxonomy Extension Presentation Linkbase Document\n104\tCover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)\n"}{"bs": "q10k_tbl_5", "is": "q10k_tbl_3", "cf": "q10k_tbl_6"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
☐
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. þYes¨ 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). þYes¨ 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
þ
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 October 30, 2020 – 28,101,317
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Revenues
$
383,458
$
291,699
$
1,080,184
$
779,734
Cost of revenues
(333,542)
(262,483)
(935,424)
(705,519)
Gross profit
49,916
29,216
144,760
74,215
General and administrative expense
(15,154)
(10,239)
(51,209)
(32,302)
Intangible asset amortization
(2,866)
(600)
(8,569)
(1,800)
Acquisition related costs
(401)
(1,896)
(1,013)
(2,158)
Other operating expense, net
(2,664)
(4,366)
(9,989)
(9,936)
Operating income
28,831
12,115
73,980
28,019
Interest income
23
331
146
986
Interest expense
(7,177)
(3,024)
(22,537)
(8,988)
Income before income taxes
21,677
9,422
51,589
20,017
Income tax expense
(6,280)
(913)
(14,712)
(1,782)
Net income
15,397
8,509
36,877
18,235
Less: Net income attributable to noncontrolling interests
(240)
(552)
(395)
(635)
Net income attributable to Sterling common stockholders
$
15,157
$
7,957
$
36,482
$
17,600
Net income per share attributable to Sterling common stockholders:
Basic
$
0.54
$
0.30
$
1.31
$
0.67
Diluted
$
0.54
$
0.30
$
1.30
$
0.66
Weighted average common shares outstanding:
Basic
28,003
26,365
27,832
26,359
Diluted
28,233
26,637
27,986
26,661
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
3
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Net income
$
15,397
$
8,509
$
36,877
$
18,235
Other comprehensive income, net of tax
Change in interest rate swap, net of tax (Note 11)
1,010
—
(6,104)
—
Total comprehensive income
16,407
8,509
30,773
18,235
Less: Comprehensive income attributable to noncontrolling interests
(240)
(552)
(395)
(635)
Comprehensive income attributable to Sterling common stockholders
$
16,167
$
7,957
$
30,378
$
17,600
The accompanying Notes are an integral part of these Consolidated Financial Statements.
4
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
September 30, 2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents ($24,009 and $7,538 related to variable interest entities (“VIEs”))
$
72,593
$
45,733
Accounts receivable, including retainage ($37,721 and $24,642 related to VIEs)
271,342
248,247
Costs and estimated earnings in excess of billings ($7,213 and $8,328 related to VIEs)
55,310
42,555
Receivables from and equity in construction joint ventures ($9,684 and $7,406 related to VIEs)
13,802
9,196
Other current assets ($146 and $503 related to VIEs)
14,171
11,790
Total current assets
427,218
357,521
Property and equipment, net ($5,944 and $5,619 related to VIEs)
121,534
116,030
Operating lease right-of-use assets ($4,079 and $3,817 related to VIEs)
17,250
13,979
Goodwill ($1,501 and $1,501 related to VIEs)
192,014
191,892
Other intangibles, net
247,754
256,323
Deferred tax asset, net
16,589
26,012
Other non-current assets, net
153
183
Total assets
$
1,022,512
$
961,940
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable ($25,276 and $18,213 related to VIEs)
$
127,336
$
137,593
Billings in excess of costs and estimated earnings ($18,533 and $9,649 related to VIEs)
126,986
85,011
Current maturities of long-term debt ($6,793 and $39 related to VIEs)
57,476
42,473
Current portion of long-term lease obligations ($1,716 and $1,838 related to VIEs)
7,624
7,095
Income taxes payable
2,251
1,212
Accrued compensation ($3,582 and $1,521 related to VIEs)
24,328
13,727
Other current liabilities ($2,256 and $1,429 related to VIEs)
11,368
6,393
Total current liabilities
357,369
293,504
Long-term debt ($37 and $2 related to VIEs)
335,237
390,627
Long-term lease obligations ($2,363 and $1,979 related to VIEs)
9,668
6,976
Members’ interest subject to mandatory redemption and undistributed earnings
50,798
49,003
Other long-term liabilities ($1,016 and $0 related to VIEs)
10,124
619
Total liabilities
763,196
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, 28,086 and 27,772 shares outstanding
283
283
Additional paid in capital
254,860
251,019
Treasury stock, at cost: 194 and 518 shares
(2,651)
(6,142)
Retained earnings (deficit)
11,449
(25,033)
Accumulated other comprehensive loss
(6,313)
(209)
Total Sterling stockholders’ equity
257,628
219,918
Noncontrolling interests
1,688
1,293
Total stockholders’ equity
259,316
221,211
Total liabilities and stockholders’ equity
$
1,022,512
$
961,940
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
5
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2020
2019
Cash flows from operating activities:
Net income
$
36,877
$
18,235
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
24,639
12,288
Amortization of debt issuance costs and non-cash interest
2,489
2,375
Gain on disposal of property and equipment
(1,042)
(466)
Deferred taxes
10,946
1,561
Stock-based compensation expense
7,961
2,489
Change in interest rate hedge
251
—
Changes in operating assets and liabilities (Note 17)
8,828
(28,005)
Net cash provided by operating activities
90,949
8,477
Cash flows from investing activities:
Capital expenditures
(22,088)
(7,871)
Proceeds from sale of property and equipment
1,557
1,265
Net cash used in investing activities
(20,531)
(6,606)
Cash flows from financing activities:
Repayments of debt
(52,695)
(10,435)
Distributions to noncontrolling interest owners
—
(5,900)
Purchase of treasury stock
—
(3,201)
Other borrowings
9,137
100
Net cash used in financing activities
(43,558)
(19,436)
Net change in cash and cash equivalents
26,860
(17,565)
Cash and cash equivalents at beginning of period
45,733
94,095
Cash and cash equivalents at end of period
$
72,593
$
76,530
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
6
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Nine Months Ended September 30, 2020
Common Stock
Additional Paid in Capital
Treasury Stock
Retained Earnings (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
Change in 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
Change in 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
Net income
—
—
—
—
—
15,157
—
15,157
240
15,397
Change in interest rate swap
—
—
—
—
—
—
1,010
1,010
—
1,010
Stock-based compensation
—
—
1,765
—
—
—
—
1,765
—
1,765
Issuance of stock
66
—
(714)
(66)
917
—
—
203
—
203
Shares withheld for taxes
(14)
—
—
14
(133)
—
—
(133)
—
(133)
Other
—
—
(11)
—
—
—
—
(11)
—
(11)
Balance at September 30, 2020
28,086
$
283
$
254,860
194
$
(2,651)
$
11,449
$
(6,313)
$
257,628
$
1,688
$
259,316
7
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Nine Months Ended September 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
(7)
—
(98)
—
—
—
—
(98)
—
(98)
Balance at June 30, 2019
26,466
$
271
$
233,559
583
$
(6,688)
$
(55,291)
$
—
$
171,851
$
2,842
$
174,693
Net income
—
—
—
—
—
7,957
—
7,957
552
8,509
Stock-based compensation
—
—
819
—
—
—
—
819
—
819
Distributions to owners
—
—
—
—
—
—
—
—
(800)
(800)
Issuance of stock
13
—
(69)
(13)
139
—
—
70
—
70
Shares withheld for taxes
(3)
—
—
3
(32)
—
—
(32)
—
(32)
Balance at September 30, 2019
26,476
$
271
$
234,309
573
$
(6,581)
$
(47,334)
$
—
$
180,665
$
2,594
$
183,259
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
8
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
($ and share values in thousands, except per share data)
(Unaudited)
1.
NATURE OF OPERATIONS
Business Summary
Sterling Construction Company, Inc., (“Sterling,” “the Company,” “we,” “our” or “us”), a Delaware corporation, is a construction company that has been involved in the construction industry since its founding in 1955. The Company operates through a variety of subsidiaries within three segments specializing in Heavy Civil, Specialty Services and Residential projects in the United States (the “U.S.”), primarily across the southern U.S., the Rocky Mountain States, California and Hawaii, as well as other areas with strategic construction opportunities. Heavy Civil includes infrastructure and rehabilitation projects for highways, roads, bridges, airfields, ports, light rail, water, wastewater and storm drainage systems. Specialty Services projects include construction site excavation and drainage, drilling and blasting for excavation, foundations for multi-family homes, parking structures and other commercial concrete projects. Residential projects include concrete foundations for single-family homes.
2.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Presentation Basis—The accompanying Condensed Financial Statements are presented in accordance with accounting policies generally accepted in the United States (“GAAP”) and reflect all wholly owned subsidiaries and those entities the Company is required to consolidate. See the “Consolidated 50% Owned Subsidiaries” and “Construction Joint Ventures” section of the Notes for further discussion of the Company’s consolidation policy for those entities that are not wholly owned. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Values presented within tables (excluding per share data) are in thousands. Reclassifications have been made to historical financial data in the Condensed Consolidated Financial Statements to conform to the current year presentation.
Estimates and Judgments—The preparation of the accompanying Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Company require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from construction contracts over time, the valuation of long-lived assets, goodwill, income taxes and purchase accounting estimates, including goodwill and other intangible assets. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.
Significant Accounting Policies
Consistent with Regulation S-X Rule 10-1(a), the Company has omitted significant accounting policies in this quarterly report that would duplicate the disclosures contained in the Company’s annual report on Form 10-K for the year ended December 31, 2019 under “Part II, Item 8. - Notes to Consolidated Financial Statements.”
Receivables, including Retainage—Receivables are generally based on amounts billed to the customer in accordance with contractual provisions. Many of the contracts under which the Company performs work also contain retainage provisions. Retainage refers to that portion of our billings held for payment by the customer pending satisfactory completion of the project. Unless reserved, the Company assumes that all amounts retained by customers under such provisions are fully collectible. Retainage on active contracts is classified as a current asset regardless of the term of the contract and is generally collected within one year of the completion of a contract. At September 30, 2020 and December 31, 2019, receivables included $78,300 and $79,400 of retainage (contract asset), respectively.
Receivables are written off based on individual credit evaluation and specific circumstances of the customer, when such treatment is warranted. The Company performs a review of outstanding receivables, historical collection information and existing economic conditions to determine if there are potential uncollectible receivables. At both September 30, 2020 and December 31, 2019, our allowance for doubtful accounts against contracts receivable was zero.
9
Cash and Restricted cash—Our cash is comprised of highly liquid investments with maturities of three months or less. Restricted cash of approximately $6,100 and $4,800 is included in “Other current assets” on the Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019, respectively. This primarily represents cash deposited by the Company into separate accounts and designated as collateral for standby letters of credit in the same amount in accordance with contractual agreements.
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13 to add the guidance in ASC 326 on the impairment of financial instruments. The ASU introduces an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce the complexity of GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. The amendments in the ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2020 and noted no material impact to the Company’s Condensed Consolidated Financial Statements.
3.
PLATEAU ACQUISITION
General—On October 2, 2019, Sterling consummated the acquisition (the “Plateau Acquisition”) of all of the issued and outstanding shares of capital stock of LK Gregory Construction, Inc. and Plateau Excavation, Inc., and all of the issued and outstanding equity interests in DeWitt Excavation, LLC. The Plateau Acquisition was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.
Purchase Consideration—Sterling completed the Plateau Acquisition for a purchase price of $427,533, net of cash acquired, detailed as follows:
Cash consideration transferred, net of $2,425 of cash acquired
$
375,000
Target working capital adjustment
21,323
Equity consideration transferred (1,245 shares at $13.01 per share(1))
16,195
Note payable to seller (See Note 9 - Debt)
10,000
Tax basis election
5,015
Total consideration
$
427,533
(1) Sterling’s closing stock price on October 1, 2019
Purchase Price Allocation—The aggregate purchase price noted above was allocated to the assets and liabilities acquired based upon their estimated fair values at the acquisition closing date, which were based, in part, upon an external appraisal and valuation of certain assets, including specifically identified intangible assets. The excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired totaling $106,784 was recorded as goodwill.
The following table summarizes our purchase price allocation at the acquisition closing date, net of cash acquired:
Net tangible assets:
Accounts receivable, including retainage
$
81,921
Costs and estimated earnings in excess of billings
974
Other current assets
249
Property and equipment, net
65,492
Other non-current assets, net
10
Accounts payable
(22,039)
Billings in excess of costs and estimated earnings
(16,540)
Other current and non-current liabilities
(7,918)
Total net tangible assets
102,149
Identifiable intangible assets
218,600
Goodwill
106,784
Total consideration transferred
$
427,533
10
Identifiable Intangible Assets—Intangible assets identified as part of the Plateau Acquisition are reflected in the table below and are recorded at their estimated fair value, as determined by the Company’s management, based on available information which includes a valuation from external experts. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.