STERLING INFRASTRUCTURE, INC. [STRL] Filings

10-Q 1 strl-20220930.htm 10-Q strl-20220930

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 September 30, 2022


☐						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 INFRASTRUCTURE, 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) 214-0777


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). 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	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 28, 2022 – 30,329,659

STERLING INFRASTRUCTURE, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


			Page
PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements			3

Statements of Operations			3

Statements of Comprehensive Income			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			22

Item 3. Quantitative and Qualitative Disclosures About Market Risk			29

Item 4. Controls and Procedures			29

PART II—OTHER INFORMATION

Item 1. Legal Proceedings			30

Item 1A. Risk Factors			30











Item 6. Exhibits			30

Signatures			31

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues	$	556,942	$	463,449	$	1,477,830	$	1,180,431
Cost of revenues	(474,919)		(405,645)		(1,271,284)		(1,021,348)
Gross profit	82,023		57,804		206,546		159,083
General and administrative expense	(26,466)		(19,637)		(72,962)		(52,565)
Intangible asset amortization	(3,509)		(2,866)		(10,591)		(8,598)
Acquisition related costs	(277)		—		(762)		—
Other operating expense, net	(4,085)		(3,270)		(5,186)		(10,414)
Operating income	47,686		32,031		117,045		87,506
Interest income	167		13		207		39
Interest expense	(5,134)		(3,919)		(14,201)		(15,660)
Gain on extinguishment of debt, net	—		968		2,428		2,032
Income before income taxes	42,719		29,093		105,479		73,917
Income tax expense	(12,562)		(7,336)		(29,427)		(20,275)
Net income	30,157		21,757		76,052		53,642
Less: Net income attributable to noncontrolling interests	(634)		(631)		(1,316)		(1,905)
Net income attributable to Sterling common stockholders	$	29,523	$	21,126	$	74,736	$	51,737

Net income per share attributable to Sterling common stockholders:
Basic	$	0.98	$	0.74	$	2.48	$	1.81
Diluted	$	0.97	$	0.72	$	2.46	$	1.79

Weighted average common shares outstanding:
Basic	30,278		28,710		30,156		28,527
Diluted	30,540		29,213		30,364		28,927

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

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	30,157	$	21,757	$	76,052	$	53,642
Other comprehensive income, net of tax
Change in interest rate swap, net of tax (Note 10)	(101)		718		2,301		2,341
Total comprehensive income	30,056		22,475		78,353		55,983
Less: Comprehensive income attributable to noncontrolling interests	(634)		(631)		(1,316)		(1,905)
Comprehensive income attributable to Sterling common stockholders	$	29,422	$	21,844	$	77,037	$	54,078

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

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)


	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents ($28,994 and $35,378 related to variable interest entities (“VIEs”))	$	146,479	$	81,840
Accounts receivable ($38,617 and $26,176 related to VIEs)	329,548		232,153
Contract assets ($19,458 and $10,249 related to VIEs)	153,666		83,310
Receivables from and equity in construction joint ventures ($5,530 and $7,058 related to VIEs)	16,316		16,896
Other current assets ($4,317 and $4,451 related to VIEs)	23,549		20,492
Total current assets	669,558		434,691
Property and equipment, net ($9,880 and $10,420 related to VIEs)	222,647		204,316
Operating lease right-of-use assets, net ($5,033 and $5,097 related to VIEs)	60,384		24,520
Goodwill ($1,501 and $1,501 related to VIEs)	252,887		259,791
Other intangibles, net	293,532		303,223

Other non-current assets, net	4,325		4,455
Total assets	$	1,503,333	$	1,230,996

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable ($45,728 and $23,611 related to VIEs)	$	192,902	$	144,982
Contract liabilities ($16,137 and $22,583 related to VIEs)	224,739		127,932
Current maturities of long-term debt ($0 and $4,857 related to VIEs)	29,705		28,230
Current portion of long-term lease obligations ($2,407 and $2,334 related to VIEs)	17,418		8,841

Accrued compensation ($3,383 and $2,388 related to VIEs)	37,448		22,803
Other current liabilities ($496 and $889 related to VIEs)	10,096		18,972
Total current liabilities	512,308		351,760
Long-term debt ($0 and $81 related to VIEs)	407,090		428,588
Long-term lease obligations ($2,626 and $2,763 related to VIEs)	43,121		15,831
Members’ interest subject to mandatory redemption and undistributed earnings	55,862		55,115
Deferred tax liability, net	40,311		14,656
Other long-term liabilities	4,754		4,819
Total liabilities	1,063,446		870,769
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, par value $0.01 per share; 38,000 shares authorized, 30,318 and 29,838 shares issued and outstanding	303		298
Additional paid in capital	281,576		280,274

Retained earnings	154,654		79,918
Accumulated other comprehensive gain (loss)	578		(1,723)
Total Sterling stockholders’ equity	437,111		358,767
Noncontrolling interests	2,776		1,460
Total stockholders’ equity	439,887		360,227
Total liabilities and stockholders’ equity	$	1,503,333	$	1,230,996

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

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	76,052	$	53,642
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	38,550		25,336
Amortization of debt issuance costs and non-cash interest	1,636		1,756
Gain on disposal of property and equipment	(1,926)		(1,176)
Gain on debt extinguishment, net	(2,428)		(2,032)
Deferred taxes	24,975		17,413
Stock-based compensation	9,195		5,690
Change in fair value of interest rate swap	(320)		(41)
Changes in operating assets and liabilities (Note 16)	(15,087)		35,154
Net cash provided by operating activities	130,647		135,742
Cash flows from investing activities:
Acquisitions, net of cash acquired	(3,033)		—
Capital expenditures	(47,832)		(39,315)
Proceeds from sale of property and equipment	3,043		2,093
Net cash used in investing activities	(47,822)		(37,222)
Cash flows from financing activities:

Repayments of debt	(17,612)		(44,184)
Distributions to noncontrolling interest owners	—		(1,959)
Other	—		(603)
Net cash used in financing activities	(17,612)		(46,746)
Net change in cash, cash equivalents, and restricted cash	65,213		51,774
Cash, cash equivalents, and restricted cash at beginning of period	88,693		72,642
Cash, cash equivalents, and restricted cash at end of period	153,906		124,416
Less: restricted cash (other current assets)	(7,427)		(6,714)
Cash and cash equivalents at end of period	$	146,479	$	117,702



Non-cash items:
Capital expenditures	$	562	$	116

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

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Nine Months Ended September 30, 2022
	Common Stock			Additional Paid in Capital		Retained Earnings	Accumulated Other Comprehensive (Loss) Gain		Total Sterling Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2021	29,838	$	298	$	280,274		$	79,918	$	(1,723)	$	358,767	$	1,460	$	360,227
Net income	—	—		—			19,252		—		19,252		271		19,523
Change in interest rate swap	—	—		—			—		1,563		1,563		—		1,563
Stock-based compensation	—	—		3,521			—		—		3,521		—		3,521

Issuance of stock	688	7		185			—		—		192		—		192
Shares withheld for taxes	(263)	(3)		(7,383)			—		—		(7,386)		—		(7,386)
Balance at March 31, 2022	30,263	$	302	$	276,597		$	99,170	$	(160)	$	375,909	$	1,731	$	377,640
Net income	—	—		—			25,961		—		25,961		411		26,372
Change in interest rate swap	—	—		—			—		839		839		—		839
Stock-based compensation	—	—		2,333			—		—		2,333		—		2,333

Issuance of stock	36	1		190			—		—		191		—		191


Balance at June 30, 2022	30,299	$	303	$	279,120		$	125,131	$	679	$	405,233	$	2,142	$	407,375
Net income	—	—		—			29,523		—		29,523		634		30,157
Change in interest rate swap	—	—		—			—		(101)		(101)		—		(101)
Stock-based compensation	—	—		2,436			—		—		2,436		—		2,436


Issuance of stock	24	—		155			—		—		155		—		155
Shares withheld for taxes	(5)	—		(135)			—		—		(135)		—		(135)

Balance at September 30, 2022	30,318	$	303	$	281,576		$	154,654	$	578	$	437,111	$	2,776	$	439,887

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

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Nine Months Ended September 30, 2021
	Common Stock			Additional Paid in Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Sterling Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity
	Shares	Amount				Shares	Amount
Balance at December 31, 2020	28,184	$	283	$	256,423	95	$	(1,445)	$	17,273	$	(5,264)	$	267,270	$	1,459	$	268,729
Net income	—	—		—		—	—		10,555		—		10,555		1,113		11,668
Change in interest rate swap	—	—		—		—	—		—		895		895		—		895
Stock-based compensation	—	—		1,835		—	—		—		—		1,835		—		1,835
Distributions to owners	—	—		—		—	—		—		—		—		(1,959)		(1,959)

Issuance of stock	668	5		(1,602)		(111)	1,741		—		—		144		—		144
Shares withheld for taxes	(246)	(2)		(5,321)		16	(296)		—		—		(5,619)		—		(5,619)
Balance at March 31, 2021	28,606	$	286	$	251,335	—	$	—	$	27,828	$	(4,369)	$	275,080	$	613	$	275,693
Net income	—	—		—		—	—		20,056		—		20,056		161		20,217
Change in interest rate swap	—	—		—		—	—		—		728		728		—		728
Stock-based compensation	—	—		2,015		—	—		—		—		2,015		—		2,015


Issuance of stock	32	—		120		—	—		—		—		120		—		120

Other	—	—		(3)		—	—		—		—		(3)		—		(3)
Balance at June 30, 2021	28,638	$	286	$	253,467	—	$	—	$	47,884	$	(3,641)	$	297,996	$	774	$	298,770
Net income	—	—		—		—	—		21,126		—		21,126		631		21,757
Change in interest rate swap	—	—		—		—	—		—		718		718		—		718
Stock-based compensation	—	—		1,840		—	—		—		—		1,840		—		1,840


Issuance of stock	148	2		105		—	—		—		—		107		—		107
Shares withheld for taxes	(4)	—		(99)		—	—		—		—		(99)		—		(99)

Balance at September 30, 2021	28,782	$	288	$	255,313	—	$	—	$	69,010	$	(2,923)	$	321,688	$	1,405	$	323,093

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

STERLING INFRASTRUCTURE, INC. & SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

($ and share values in thousands, except per share data)

(Unaudited)


1.			NATURE OF OPERATIONS

Business Summary

Sterling Infrastructure, Inc. (“Sterling,” “the Company,” “we,” “our” or “us”), a Delaware corporation, operates through a variety of subsidiaries within three segments specializing in E-Infrastructure, Transportation and Building Solutions in the United States (the “U.S.”), primarily across the Southern, Northeastern, Mid-Atlantic and the Rocky Mountain States, California and Hawaii, as well as other areas with strategic construction opportunities. E-Infrastructure Solutions projects develop advanced, large-scale site development systems and services for data centers, e-commerce distribution centers, warehousing, transportation, energy and more. Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, light rail, water, wastewater and storm drainage systems. Building Solutions projects include residential and commercial concrete foundations for single-family and multi-family homes, parking structures, elevated slabs and other concrete work. From strategy to operations, we are committed to sustainability by operating responsibly to safeguard and improve society’s quality of life. Caring for our people and our communities, our customers and our investors – that is The Sterling Way.


2.			BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Presentation Basis—The accompanying Condensed Consolidated 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 Note 5 - Consolidated 50% Owned Subsidiaries and Note 6 - Construction Joint Ventures 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 to conform to the current period presentation.

Estimates and Judgments—The preparation of the accompanying Condensed Consolidated Financial Statements in conformance 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 and purchase accounting estimates. 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, 2021 under “Part II, Item 8. - Notes to Consolidated Financial Statements.” This quarterly report should be read in conjunction with the Company’s most recent annual report on Form 10-K.

Accounts Receivable—Receivables are generally based on amounts billed to the customer in accordance with contractual provisions. Receivables are written off based on the 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 September 30, 2022 and December 31, 2021, our allowance for our estimate of expected credit losses was zero.

Contracts in Progress—For performance obligations satisfied over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Typically, Sterling bills for advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. However, the Company occasionally bills subsequent to revenue recognition, resulting in contract assets.

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. At September 30, 2022 and December 31, 2021, contract assets included $85,900 and $47,308 of retainage, respectively, and contract liabilities included $44,987 and $46,882 of retainage, respectively. Retainage on active contracts is classified as current regardless of the term of the contract and is generally collected within one year of the completion of a contract. We anticipate collecting approximately 64% of our September 30, 2022 retainage during the next twelve months. These assets and liabilities are reported on the Condensed Consolidated Balance Sheet within “Contract assets” and “Contract liabilities” on a contract-by-contract basis at the end of each reporting period.

Revenue recognized for the three and nine months ended September 30, 2022 that was included in the contract liability balance on December 31, 2021 was $45,315 and $517,579, respectively. Revenue recognized for the three and nine months ended September 30, 2021 that was included in the contract liability balance on December 31, 2020 was $111,887 and $409,257, respectively.

Cash and Restricted Cash—Our cash is comprised of highly liquid investments with maturities of three months or less. Restricted cash of $7,427 and $6,853 is included in “Other current assets” on the Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021, 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.


3.			ACQUISITIONS

General—On December 30, 2021 (the “Closing Date”), Sterling completed the acquisition (the “Acquisition”) of Petillo LLC and its related entities (collectively, “Petillo”). The Acquisition is accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations.

Purchase Consideration—Sterling completed the Acquisition for a purchase price of $196,763, net of cash acquired, detailed as follows:


Cash consideration transferred, net of cash acquired	$	175,000
Equity consideration transferred (759 shares at $26.87 per share(1))	20,406

Target working capital adjustment	1,357
Total consideration	$	196,763

(1) Sterling’s closing stock price on December 29, 2021.

Preliminary 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 a preliminary 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 $60,873 was recorded as goodwill. This goodwill represents the value of expected future earnings and cash flows, as well as the synergies created by the integration of the new business within our organization, including cross-selling opportunities to help strengthen our existing service offerings and expand our market position. Goodwill and intangibles of approximately $132,000 related to the Acquisition, are deductible and amortizable for tax purposes over the next 15 years.

The following table summarizes our purchase price allocation at the Acquisition Closing Date, net of cash acquired:


Net tangible assets:
Accounts receivable	$	45,016
Contract assets	5,953
Other current assets	193
Property and equipment, net	47,141
Other non-current assets, net	5,498
Accounts payable	(21,810)
Contract liabilities	(8,585)
Other current liabilities	(8,216)
Total net tangible assets	65,190
Identifiable intangible assets	70,700
Goodwill	60,873
Total consideration transferred	$	196,763

During the nine months ended September 30, 2022, the total consideration and purchase price allocation (goodwill) changed by $7,800, primarily due to an updated estimate of the tax basis step-up payment. The purchase price allocation above is subject to further change when additional information is obtained. We have not finalized our assessment of the fair values primarily for intangible assets and property and equipment. We intend to finalize the purchase price allocation as soon as practicable within the measurement period, but in no event later than one year following the Closing Date of the Acquisition. Our final purchase price allocation may result in additional adjustments to various other assets and liabilities, including the residual amount allocated to goodwill during the measurement period.

Identifiable Intangible Assets—Intangible assets identified as part of the 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 preliminary 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.


	Weighted Average Life (Years)	December 30, 2021 Fair Value
Customer relationships	25	$	43,200
Trade names	25	27,500
Total		$	70,700

Supplemental Pro Forma Information (Unaudited)—The following unaudited pro forma combined financial information (“the pro forma financial information”) gives effect to the Acquisition, accounted for as a business combination using the purchase method of accounting. The pro forma financial information reflects the Acquisition and related events as if they occurred at the beginning of the period and includes adjustments to (1) include compensation expense associated with the employment agreement the Company entered into with Mr. Petillo, (2) include additional intangible asset amortization associated with the Acquisition, (3) include additional interest expense associated with the Acquisition and (4) include the pro forma results of Petillo for the three and nine months ended September 30, 2021. This pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the pro forma events taken place on the dates indicated. Further, the pro forma financial information does not purport to project the future operating results of the combined company following the Acquisition.


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Pro forma revenue	$	524,405	$	1,323,771
Pro forma net income attributable to Sterling	$	27,985	$	62,330


4.			REVENUE FROM CUSTOMERS

Backlog—The following table presents the Company’s backlog, by segment:


	September 30, 2022		December 31, 2021
E-Infrastructure Solutions Backlog	$	584,279	$	432,613
Transportation Solutions Backlog	965,546		963,267
Building Solutions Backlog - Commercial	115,518		97,235
Total Backlog	$	1,665,343	$	1,493,115

The Company expects to recognize approximately 70% of its backlog as revenue during the next twelve months, and the balance thereafter.

Revenue Disaggregation—The following tables present the Company’s revenue disaggregated by major end market and contract type:


	Three Months Ended September 30,				Nine Months Ended September 30,
Revenues by major end market	2022		2021		2022		2021
E-Infrastructure Solutions Revenues	$	255,530	$	121,286	$	658,005	$	341,601
Heavy Highway	155,847		188,746		408,216		427,451
Aviation	25,463		35,840		61,980		99,816
Water Containment and Treatment	23,373		11,463		60,377		41,890
Other	16,443		13,849		42,433		30,948
Transportation Solutions Revenues	221,126		249,898		573,006		600,105
Residential	51,304		65,295		166,045		156,078
Commercial	28,982		26,970		80,774		82,647
Building Solutions Revenues	80,286		92,265		246,819		238,725
Total Revenues	$	556,942	$	463,449	$	1,477,830	$	1,180,431

Revenues by contract type
Fixed-Unit Price	$	217,296	$	267,092	$	554,014	$	670,526
Lump-Sum	287,472		129,742		752,614		348,313
Residential and Other	52,174		66,615		171,202		161,592
Total Revenues	$	556,942	$	463,449	$	1,477,830	$	1,180,431

Each of these contract types presents advantages and disadvantages. Typically, the Company assumes more risk with lump-sum contracts; however, these types of contracts offer additional profits if the work is completed for less than originally estimated. Under fixed-unit price contracts, the Company’s profit may vary if actual labor-hour costs vary significantly from the negotiated rates. Also, because some contracts can provide little or no fee for managing material costs, the components of contract cost can impact profitability.

Variable Consideration

The Company has projects that it is in the process of negotiating, or awaiting final approval of, unapproved change orders and claims with its customers. The Company is proceeding with its contractual rights to recoup additional costs incurred from its customers based on completing work associated with change orders, including change orders with pending change order pricing, or claims related to significant changes in scope which resulted in substantial delays and additional costs in completing the work. Unapproved change order and claim information has been provided to the Company’s customers and negotiations with the customers are ongoing. If additional progress with an acceptable resolution is not reached, legal action will be taken. Based upon the Company’s review of the provisions of its contracts, specific costs incurred and other related evidence supporting the unapproved change orders and claims, together in some cases as necessary with the views of the Company’s outside claim consultants, the Company concluded it was appropriate to include in project price amounts of $14,680 and $13,905, at September 30, 2022 and December 31, 2021, respectively, relating to unapproved change orders and claims. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Contract Estimates

Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognizes such profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that often span several years. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials and the performance of subcontractors. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Changes in contract estimates and variations in project scope of work resulted in net increases of approximately $13,400 and $39,400 for the three and nine months ended September 30, 2022, respectively, and in a net decrease of approximately $360 and a net increase of $11,700 for the three and nine months ended September 30, 2021, respectively, included in “Operating income” on the Condensed Consolidated Statements of Operations.


5.			CONSOLIDATED 50% OWNED SUBSIDIARIES

The Company has 50% ownership interests in two subsidiaries (“Myers” and “RHB”) that it fully consolidates as a result of its exercise of control over the entities. The earnings attributable to the 50% portions the Company does not own were approximately $4,100 and $5,200 for the three and nine months ended September 30, 2022, respectively, and were approximately $3,300 and $9,900 for the three and nine months ended September 30, 2021, respectively, and are eliminated within “Other operating expense, net” in the Condensed Consolidated Statements of Operations. Any undistributed earnings for partners are included in “Members’ interest subject to mandatory redemption and undistributed earnings” within the Condensed Consolidated Balance Sheets and are mandatorily payable at the time of the noncontrolling owners’ death or permanent disability.

These two subsidiaries have individual mandatory redemption provisions which, under circumstances outlined in the partner agreements, are certain to occur and obligate the Company to purchase each partner’s remaining 50% interests for $20,000 ($40,000 in the aggregate). The Company has purchased two separate $20,000 death and permanent total disability insurance policies to mitigate the Company’s cash draw if such events were to occur. These purchase obligations are also recorded in “Members’ interest subject to mandatory redemption and undistributed earnings” on the Condensed Consolidated Balance Sheets.

The liability consists of the following:


	September 30, 2022		December 31, 2021
Members’ interest subject to mandatory redemption	$	40,000	$	40,000
Net accumulated earnings	15,862		15,115
Total liability	$	55,862	$	55,115

The Company must determine whether any of its entities, including these two 50% owned subsidiaries, in which it participates, is a VIE. The Company determined that Myers is a VIE and that the Company is the primary beneficiary because, pursuant to the terms of the Myers Operating Agreement, the Company is exposed to the majority of potential losses of the partnership.

Summary financial information on an unconsolidated basis for Myers is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues	$	63,902	$	50,338	$	157,001	$	121,432
Operating (loss) income	$	(128)	$	808	$	(6,184)	$	2,273
Net (loss) income	$	(126)	$	2,757	$	(1,261)	$	4,192


6.			CONSTRUCTION JOINT VENTURES

Joint Ventures with a Controlling Interest—We consolidate any venture that is determined to be a VIE for which we are the primary beneficiary, or which we otherwise effectively control. The equity held by the remaining owners and their portions of net income (loss) are reflected in stockholders’ equity on the Condensed Consolidated Balance Sheets line item “Noncontrolling interests” and in the Condensed Consolidated Statements of Operations line item “Net income attributable to noncontrolling interests,” respectively. The Company determined that a joint venture in which the Company’s Ralph L.

Wadsworth Construction subsidiary is a 51% owner is a VIE and the Company is the primary beneficiary. Summary financial information for this construction joint venture is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues	$	16,544	$	19,846	$	37,006	$	37,412
Operating income	$	1,285	$	1,290	$