Large accelerated filer
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[ ]
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Accelerated filer
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[√]
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Non-accelerated filer
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[ ]
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Smaller reporting company
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[ ]
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(Do not check if a smaller reporting company)
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Emerging growth company
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[ ]
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PART I. FINANCIAL INFORMATION
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PART II. OTHER INFORMATION
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September 30,
2017 |
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December 31,
2016 |
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(Unaudited)
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ASSETS
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Current assets:
|
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|
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Cash and cash equivalents
|
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$
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66,541
|
|
|
$
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42,785
|
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Contracts receivable, including retainage
|
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149,052
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84,132
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|
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Costs and estimated earnings in excess of billings on uncompleted contracts
|
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43,384
|
|
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32,705
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|
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Inventories
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2,093
|
|
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3,708
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|
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Receivables from and equity in construction joint ventures
|
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9,069
|
|
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7,130
|
|
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Other current assets
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9,654
|
|
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5,448
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Total current assets
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279,793
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175,908
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Property and equipment, net
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59,464
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68,127
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Goodwill
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85,277
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54,820
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Intangibles
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45,200
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—
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Other assets, net
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3,301
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2,968
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Total assets
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$
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473,035
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$
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301,823
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LIABILITIES AND EQUITY
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Current liabilities:
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Accounts payable
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$
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100,565
|
|
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$
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67,097
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|
Billings in excess of costs and estimated earnings on uncompleted contracts
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63,368
|
|
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64,100
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Current maturities of long-term debt
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986
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3,845
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Income taxes payable
|
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280
|
|
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78
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|
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Accrued compensation
|
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14,566
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5,322
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Other current liabilities
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15,188
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6,150
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Total current liabilities
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194,953
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146,592
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Long-term liabilities:
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Long-term debt, net of current maturities
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88,619
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1,549
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Members' interest subject to mandatory redemption and undistributed earnings
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46,329
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45,230
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Other long-term liabilities
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595
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362
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Total long-term liabilities
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135,543
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47,141
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Commitments and contingencies (Note 9)
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Equity:
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Sterling stockholders’ equity:
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Preferred stock, par value $0.01 per share; 1,000,000 shares authorized, none issued
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—
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—
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Common stock, par value $0.01 per share; 38,000,000 shares authorized, 27,023,143 and 24,987,306 shares issued
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270
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|
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250
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Additional paid in capital
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231,848
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208,922
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Retained deficit
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(93,201
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)
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(101,738
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)
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Total Sterling common stockholders’ equity
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138,917
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107,434
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Noncontrolling interests
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3,622
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|
656
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Total equity
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142,539
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108,090
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Total liabilities and equity
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$
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473,035
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$
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301,823
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||||
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2017
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2016
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2017
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2016
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||||||||
Revenues
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$
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304,219
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$
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205,629
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$
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704,047
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$
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521,778
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Cost of revenues
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(273,588
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)
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(189,007
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)
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(638,924
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)
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(486,065
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)
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Gross profit
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30,631
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16,622
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65,123
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35,713
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General and administrative expenses
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(13,129
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)
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(9,146
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)
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(36,545
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)
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(27,888
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)
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Other operating expense, net
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(4,863
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)
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(3,804
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)
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(9,371
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)
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(7,238
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)
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Operating income
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12,639
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3,672
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19,207
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|
587
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|
||||
Interest income
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|
107
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|
|
15
|
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192
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|
|
19
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|
||||
Interest expense
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(3,576
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)
|
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(491
|
)
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(6,672
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)
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(2,176
|
)
|
||||
Loss on extinguishment of debt
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—
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—
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(755
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)
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—
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Income (loss) before income taxes and earnings attributable to noncontrolling interests
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9,170
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3,196
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11,972
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(1,570
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)
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||||
Income tax expense
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(344
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)
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(41
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)
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(469
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)
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(68
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)
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Net income (loss)
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8,826
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3,155
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11,503
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(1,638
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)
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Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
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(1,694
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)
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(740
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)
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(2,966
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)
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(1,252
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)
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||||
Net income (loss) attributable to Sterling common stockholders
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$
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7,132
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$
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2,415
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$
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8,537
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$
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(2,890
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)
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||||||||
Net income (loss) per share attributable to Sterling common stockholders:
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Basic
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$
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0.27
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|
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$
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0.10
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|
|
$
|
0.33
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|
$
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(0.12
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)
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Diluted
|
|
$
|
0.26
|
|
|
$
|
0.10
|
|
|
$
|
0.33
|
|
|
$
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(0.12
|
)
|
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|
|
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||||||||
Weighted average number of common shares outstanding used in computing per share amounts:
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||||
Basic
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26,486
|
|
|
25,003
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|
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25,787
|
|
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23,915
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|
||||
Diluted
|
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26,920
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25,365
|
|
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26,260
|
|
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23,915
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STERLING CONSTRUCTION COMPANY, INC.
STOCKHOLDERS |
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|
|||||||||||||||||||
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Common Stock
|
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Additional
Paid in |
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Retained
|
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Noncon-trolling
|
|
|
|||||||||||||
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Shares
|
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Amount
|
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Capital
|
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Deficit
|
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Interests
|
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Total
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|||||||||||
Balance at January 1, 2017
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24,987
|
|
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$
|
250
|
|
|
$
|
208,922
|
|
|
$
|
(101,738
|
)
|
|
$
|
656
|
|
|
$
|
108,090
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,537
|
|
|
2,966
|
|
|
11,503
|
|
|||||
Stock-based compensation
|
|
154
|
|
|
1
|
|
|
2,533
|
|
|
—
|
|
|
—
|
|
|
2,534
|
|
|||||
Stock issued for Tealstone acquisition
|
|
1,882
|
|
|
19
|
|
|
17,042
|
|
|
—
|
|
|
—
|
|
|
17,061
|
|
|||||
Warrants issued to lenders
|
|
—
|
|
|
—
|
|
|
3,500
|
|
|
—
|
|
|
—
|
|
|
3,500
|
|
|||||
Other
|
|
—
|
|
|
—
|
|
|
(149
|
)
|
|
—
|
|
|
—
|
|
|
(149
|
)
|
|||||
Balance at September 30, 2017
|
|
27,023
|
|
|
$
|
270
|
|
|
$
|
231,848
|
|
|
$
|
(93,201
|
)
|
|
$
|
3,622
|
|
|
$
|
142,539
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||
Net income (loss) attributable to Sterling common stockholders
|
|
$
|
8,537
|
|
|
(2,890
|
)
|
|
Plus: Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
|
|
2,966
|
|
|
1,252
|
|
||
Net income (loss)
|
|
11,503
|
|
|
(1,638
|
)
|
||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
13,140
|
|
|
12,097
|
|
||
Loss (gain) on disposal of property and equipment
|
|
204
|
|
|
(255
|
)
|
||
Stock-based compensation expense
|
|
2,534
|
|
|
1,211
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||
Contracts receivable
|
|
(45,044
|
)
|
|
(23,303
|
)
|
||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
(7,735
|
)
|
|
(5,084
|
)
|
||
Inventories
|
|
2,833
|
|
|
(1,465
|
)
|
||
Receivables from and equity in construction joint ventures
|
|
(1,939
|
)
|
|
3,461
|
|
||
Other assets
|
|
(4,487
|
)
|
|
(1,246
|
)
|
||
Accounts payable
|
|
16,687
|
|
|
17,902
|
|
||
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
(1,035
|
)
|
|
31,340
|
|
||
Accrued compensation and other liabilities
|
|
5,289
|
|
|
6,662
|
|
||
Members' interest subject to mandatory redemption and undistributed earnings
|
|
1,099
|
|
|
(3,972
|
)
|
||
Net cash (used in) provided by operating activities
|
|
(6,951
|
)
|
|
35,710
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Tealstsone acquisition, net of cash acquired
|
|
(54,861
|
)
|
|
—
|
|
||
Additions to property and equipment
|
|
(8,305
|
)
|
|
(8,852
|
)
|
||
Proceeds from sale of property and equipment
|
|
5,830
|
|
|
2,187
|
|
||
Net cash used in investing activities
|
|
(57,336
|
)
|
|
(6,665
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Cash received–term loan
|
|
85,000
|
|
|
—
|
|
||
Cumulative repayments – equipment-based term loan and other
|
|
(4,449
|
)
|
|
(9,546
|
)
|
||
Cumulative drawdowns – equipment-based revolver
|
|
—
|
|
|
19,000
|
|
||
Cumulative repayments – equipment-based revolver
|
|
—
|
|
|
(19,000
|
)
|
||
Net proceeds from stock issued
|
|
—
|
|
|
19,142
|
|
||
Debt issuance costs
|
|
6,889
|
|
|
—
|
|
||
Loss on debt extinguishment
|
|
755
|
|
|
—
|
|
||
Distributions to noncontrolling interest owners
|
|
—
|
|
|
—
|
|
||
Other
|
|
(152
|
)
|
|
(46
|
)
|
||
Net cash provided by financing activities
|
|
88,043
|
|
|
9,550
|
|
||
Net increase in cash and cash equivalents
|
|
23,756
|
|
|
38,595
|
|
||
Cash and cash equivalents at beginning of period
|
|
42,785
|
|
|
4,426
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
66,541
|
|
|
$
|
43,021
|
|
1.
|
Business Summary and Significant Accounting Policies
|
•
|
revenue recognition
|
•
|
contracts receivable, including retainage
|
•
|
valuation of property and equipment, goodwill and other long-lived assets
|
•
|
income taxes
|
•
|
segment reporting
|
2.
|
Tealstone Acquisition
|
Cash
|
$
|
55,000
|
|
Common stock (1,882,058 shares)
|
17,061
|
|
|
Promissory notes
|
4,436
|
|
|
Deferred payments
|
7,153
|
|
|
Total
|
$
|
83,650
|
|
Balance at January 1, 2017
|
$
|
54,820
|
|
Additional goodwill related to acquisition
|
30,457
|
|
|
Balance at September 30, 2017
|
$
|
85,277
|
|
Cash
|
$
|
139
|
|
Accounts receivable
|
19,876
|
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
2,944
|
|
|
Inventory
|
1,218
|
|
|
Other current assets
|
54
|
|
|
Property, plant and equipment
|
565
|
|
|
Other assets, net
|
1
|
|
|
Identifiable intangible assets and Goodwill
|
77,028
|
|
|
Accounts payable
|
(16,781
|
)
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
(303
|
)
|
|
Accrued expenses
|
(823
|
)
|
|
State income tax payable
|
(268
|
)
|
|
Total Consideration
|
$
|
83,650
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Pro forma revenue
|
|
$
|
304,219
|
|
|
$
|
255,002
|
|
|
$
|
749,176
|
|
|
$
|
657,773
|
|
Pro forma net income attributable to Sterling
|
|
$
|
7,132
|
|
|
$
|
4,659
|
|
|
$
|
8,848
|
|
|
$
|
7,705
|
|
3.
|
Cash and Cash Equivalents and Restricted Cash
|
4.
|
Subsidiaries and Joint Ventures with Noncontrolling Owners’ Interests
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Members’ interest subject to mandatory redemption
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
Net accumulated earnings
|
|
6,329
|
|
|
5,230
|
|
||
Total liability
|
|
$
|
46,329
|
|
|
$
|
45,230
|
|
|
|
Nine Months Ended
September 30, |
||||||
|
|
2017
|
|
2016
|
||||
Balance, beginning of period
|
|
$
|
656
|
|
|
$
|
(91
|
)
|
Net income attributable to noncontrolling interest included in equity
|
|
2,966
|
|
|
1,252
|
|
||
Distributions to noncontrolling interest owners
|
|
—
|
|
|
—
|
|
||
Balance, end of period
|
|
$
|
3,622
|
|
|
$
|
1,161
|
|
5.
|
Construction Joint Ventures
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Total combined:
|
|
|
|
|
|
|
||
Current assets
|
|
$
|
42,129
|
|
|
$
|
32,592
|
|
Less current liabilities
|
|
(61,079
|
)
|
|
(57,598
|
)
|
||
Net liabilities
|
|
$
|
(18,950
|
)
|
|
$
|
(25,006
|
)
|
Backlog
|
|
$
|
51,110
|
|
|
$
|
107,333
|
|
|
|
|
|
|
||||
Sterling’s noncontrolling interest in backlog
|
|
$
|
26,659
|
|
|
$
|
52,992
|
|
Sterling’s receivables from and equity in construction joint ventures
|
|
$
|
9,069
|
|
|
$
|
7,130
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Total combined:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues
|
|
$
|
27,703
|
|
|
$
|
15,520
|
|
|
$
|
61,210
|
|
|
$
|
44,074
|
|
Income before tax
|
|
(6,281
|
)
|
|
1,925
|
|
|
(3,611
|
)
|
|
3,838
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Sterling’s noncontrolling interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues
|
|
$
|
13,664
|
|
|
$
|
6,103
|
|
|
$
|
28,826
|
|
|
$
|
17,567
|
|
Income before tax
|
|
(1,629
|
)
|
|
519
|
|
|
(358
|
)
|
|
1,370
|
|
6.
|
Variable Interest Entities
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Assets:
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
2,588
|
|
|
$
|
9,655
|
|
Contracts receivable, including retainage
|
|
30,134
|
|
|
15,046
|
|
||
Other current assets
|
|
13,936
|
|
|
10,208
|
|
||
Total current assets
|
|
46,658
|
|
|
34,909
|
|
||
Property and equipment, net
|
|
8,996
|
|
|
9,824
|
|
||
Goodwill
|
|
1,501
|
|
|
1,501
|
|
||
Total assets
|
|
$
|
57,155
|
|
|
$
|
46,234
|
|
Liabilities:
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
27,109
|
|
|
$
|
21,274
|
|
Other current liabilities
|
|
14,667
|
|
|
8,782
|
|
||
Total current liabilities
|
|
41,776
|
|
|
30,056
|
|
||
Long-term liabilities:
|
|
|
|
|
|
|
||
Other long-term liabilities
|
|
271
|
|
|
5,373
|
|
||
Total liabilities
|
|
$
|
42,047
|
|
|
$
|
35,429
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenues
|
|
$
|
64,266
|
|
|
$
|
50,739
|
|
|
$
|
126,333
|
|
|
$
|
121,649
|
|
Operating income
|
|
3,666
|
|
|
2,720
|
|
|
6,307
|
|
|
4,894
|
|
||||
Net income
|
|
1,834
|
|
|
1,357
|
|
|
3,149
|
|
|
2,440
|
|
7.
|
Property and Equipment
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Construction equipment
|
|
$
|
121,364
|
|
|
$
|
121,441
|
|
Transportation equipment
|
|
18,275
|
|
|
19,017
|
|
||
Buildings
|
|
9,547
|
|
|
12,771
|
|
||
Office equipment
|
|
3,339
|
|
|
3,108
|
|
||
Leasehold improvement
|
|
914
|
|
|
914
|
|
||
Construction in progress
|
|
1,432
|
|
|
313
|
|
||
Land
|
|
2,348
|
|
|
3,509
|
|
||
Water rights
|
|
200
|
|
|
200
|
|
||
|
|
157,419
|
|
|
161,273
|
|
||
Less accumulated depreciation
|
|
(97,955
|
)
|
|
(93,146
|
)
|
||
Total property and equipment, net
|
|
$
|
59,464
|
|
|
$
|
68,127
|
|
8.
|
Debt
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Loan
|
|
$
|
85,000
|
|
|
$
|
3,532
|
|
Less deferred loan costs and discount
|
|
(9,350
|
)
|
|
(803
|
)
|
||
Total Loan, net
|
|
75,650
|
|
|
2,729
|
|
||
Notes and deferred payments to sellers, Tealstone acquisition
|
|
12,118
|
|
|
—
|
|
||
Notes payable for transportation and construction equipment and other
|
|
1,837
|
|
|
2,665
|
|
||
|
|
89,605
|
|
|
5,394
|
|
||
|
|
|
|
|
||||
Current maturities of long-term debt
|
|
986
|
|
|
4,648
|
|
||
Less current deferred loan costs
|
|
—
|
|
|
(803
|
)
|
||
Less current maturities of long-term debt, net
|
|
(986
|
)
|
|
(3,845
|
)
|
||
Total long-term debt
|
|
$
|
88,619
|
|
|
$
|
1,549
|
|
•
|
a ratio of secured indebtedness to EBITDA of not more than
3.10
to 1.00 for four consecutive quarters, reducing to
1.80
to 1.00 by the four consecutive quarters ending September 30, 2019;
|
•
|
daily cash collateral of not less
$15,000,000
, potentially further increasing to
$18,000,000
beginning on April 4, 2018;
|
•
|
a rolling four quarter gross margin in contract backlog of not less than
$60,000,000
, increasing to
$70,000,000
by March 31, 2019;
|
•
|
the incurrence of net capital expenditures during each four consecutive fiscal quarters shall not exceed
$15,000,000
;
|
•
|
bonding capacity shall be maintained at all times in an amount not less than
$1,000,000,000
; and
|
•
|
the EBITDA of Tealstone Residential Concrete, Inc. shall not be less than
$12,000,000
during each four consecutive fiscal quarters.
|
9.
|
Commitments and Contingencies
|
10.
|
Income Taxes
|
11.
|
Stockholder’s Equity
|
|
At April 3,
2017 |
||
Current stock price
|
$
|
8.88
|
|
Exercise option price
|
$
|
10.25
|
|
Expected term of warrants (in years)
|
5
|
|
|
Expected volatility rate
|
48.29
|
%
|
|
Risk-free rate
|
1.88
|
%
|
|
Expected dividend yield
|
—
|
%
|
12.
|
Net Income (Loss) per Share Attributable to Sterling Common Stockholders
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to Sterling common stockholders
|
|
$
|
7,132
|
|
|
$
|
2,415
|
|
|
$
|
8,537
|
|
|
$
|
(2,890
|
)
|
Weighted average common shares outstanding — basic
|
|
26,486
|
|
|
25,003
|
|
|
25,787
|
|
|
23,915
|
|
||||
Shares for dilutive unvested stock and warrants
|
|
434
|
|
|
362
|
|
|
473
|
|
|
—
|
|
||||
Weighted average common shares outstanding and incremental shares assumed repurchased— diluted
|
|
26,920
|
|
|
25,365
|
|
|
26,260
|
|
|
23,915
|
|
||||
Basic income (loss) per share attributable to Sterling common stockholders
|
|
$
|
0.27
|
|
|
$
|
0.10
|
|
|
$
|
0.33
|
|
|
$
|
(0.12
|
)
|
Diluted income (loss) per share attributable to Sterling common stockholders
|
|
$
|
0.26
|
|
|
$
|
0.10
|
|
|
$
|
0.33
|
|
|
$
|
(0.12
|
)
|
13.
|
Segment Information
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Heavy Civil Construction
|
|
$
|
263,278
|
|
|
$
|
205,629
|
|
|
$
|
625,887
|
|
|
$
|
521,778
|
|
Residential Construction
|
|
40,941
|
|
|
—
|
|
|
78,160
|
|
|
—
|
|
||||
Total Revenue
|
|
$
|
304,219
|
|
|
$
|
205,629
|
|
|
$
|
704,047
|
|
|
$
|
521,778
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Heavy Civil Construction
|
|
$
|
6,960
|
|
|
$
|
3,672
|
|
|
$
|
8,627
|
|
|
$
|
587
|
|
Residential Construction
|
|
5,679
|
|
|
—
|
|
|
10,580
|
|
|
—
|
|
||||
Total Operating Income
|
|
$
|
12,639
|
|
|
$
|
3,672
|
|
|
$
|
19,207
|
|
|
$
|
587
|
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Assets
|
|
|
|
|
||||
Heavy Civil Construction
|
|
$
|
365,178
|
|
|
$
|
301,823
|
|
Residential Construction
|
|
107,857
|
|
|
—
|
|
||
Total Assets
|
|
$
|
473,035
|
|
|
$
|
301,823
|
|
•
|
changes in general economic conditions, including recessions, reductions in federal, state and local government funding for infrastructure services and changes in those governments’ budgets, practices, laws and regulations;
|
•
|
delays or difficulties related to the completion of our projects, including additional costs, reductions in revenues or the payment of liquidated damages, or delays or difficulties related to obtaining required governmental permits and approvals;
|
•
|
actions of suppliers, subcontractors, design engineers, joint venture partners, customers, competitors, banks, surety companies and others which are beyond our control, including suppliers’, subcontractors’ and joint venture partners’ failure to perform;
|
•
|
factors that affect the accuracy of estimates inherent in our bidding for contracts, estimates of backlog, percentage-of-completion accounting policies, including onsite conditions that differ materially from those assumed in our original bid, contract modifications, mechanical problems with our machinery or equipment and effects of other risks discussed in this document;
|
•
|
design/build contracts which subject us to the risk of design errors and omissions;
|
•
|
cost escalations associated with our contracts, including changes in availability, proximity and cost of materials such as steel, cement, concrete, aggregates, oil, fuel and other construction materials and cost escalations associated with subcontractors and labor;
|
•
|
our dependence on a limited number of significant customers;
|
•
|
adverse weather conditions; although we prepare our budgets and bid contracts based on historical rain and snowfall patterns, the incidence of rain, snow, hurricanes, etc., may differ materially from these expectations;
|
•
|
the presence of competitors with greater financial resources or lower margin requirements than ours and the impact of competitive bidders on our ability to obtain new backlog at reasonable margins acceptable to us;
|
•
|
our ability to successfully identify, finance, complete and integrate acquisitions;
|
•
|
citations issued by any governmental authority, including the Occupational Safety and Health Administration;
|
•
|
federal, state and local environmental laws and regulations where non-compliance can result in penalties and/or termination of contracts as well as civil and criminal liability;
|
•
|
adverse economic conditions in our markets; and
|
•
|
the other factors discussed in more detail in our Annual Report on Form 10-K for the year ended
December 31, 2016
(“
2016
Form 10-K”) under “Part I, Item 1A. Risk Factors.”
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||
|
|
(Dollar amounts in thousands)
|
||||||||||||||||||
Revenues
|
|
$
|
304,219
|
|
|
$
|
205,629
|
|
|
47.9%
|
|
$
|
704,047
|
|
|
$
|
521,778
|
|
|
34.9%
|
Gross profit
|
|
30,631
|
|
|
16,622
|
|
|
84.3%
|
|
$
|
65,123
|
|
|
$
|
35,713
|
|
|
82.4%
|
||
General and administrative expenses
|
|
(13,129
|
)
|
|
(9,146
|
)
|
|
43.5%
|
|
(36,545
|
)
|
|
(27,888
|
)
|
|
31.0%
|
||||
Other operating expense, net
|
|
(4,863
|
)
|
|
(3,804
|
)
|
|
27.8%
|
|
(9,371
|
)
|
|
(7,238
|
)
|
|
29.5%
|
||||
Operating income
|
|
12,639
|
|
|
3,672
|
|
|
NM
|
|
19,207
|
|
|
587
|
|
|
NM
|
||||
Interest income
|
|
107
|
|
|
15
|
|
|
NM
|
|
192
|
|
|
19
|
|
|
NM
|
||||
Interest expense
|
|
(3,576
|
)
|
|
(491
|
)
|
|
NM
|
|
(6,672
|
)
|
|
(2,176
|
)
|
|
NM
|
||||
Loss on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
NM
|
|
(755
|
)
|
|
—
|
|
|
NM
|
||||
Income (loss) before taxes and earnings attributable to noncontrolling interests
|
|
9,170
|
|
|
3,196
|
|
|
NM
|
|
11,972
|
|
|
(1,570
|
)
|
|
NM
|
||||
Income tax expense
|
|
(344
|
)
|
|
(41
|
)
|
|
NM
|
|
(469
|
)
|
|
(68
|
)
|
|
NM
|
||||
Net income (loss)
|
|
8,826
|
|
|
3,155
|
|
|
NM
|
|
11,503
|
|
|
(1,638
|
)
|
|
NM
|
||||
Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
|
|
(1,694
|
)
|
|
(740
|
)
|
|
NM
|
|
(2,966
|
)
|
|
(1,252
|
)
|
|
NM
|
||||
Net income (loss) attributable to Sterling common stockholders
|
|
$
|
7,132
|
|
|
$
|
2,415
|
|
|
NM
|
|
$
|
8,537
|
|
|
$
|
(2,890
|
)
|
|
NM
|
Gross margin
|
|
10.1
|
%
|
|
8.1
|
%
|
|
24.7%
|
|
9.2
|
%
|
|
6.8
|
%
|
|
35.3%
|
||||
Operating margin
|
|
4.2
|
%
|
|
1.8
|
%
|
|
NM
|
|
2.7
|
%
|
|
0.1
|
%
|
|
NM
|
||||
NM – Not meaningful.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||||
|
|
2017
|
|
% of
Total
|
|
2016
|
|
% of
Total
|
|
2017
|
|
% of
Total
|
|
2016
|
|
% of
Total
|
||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Heavy Civil Construction
|
|
$
|
263,278
|
|
|
87%
|
|
$
|
205,629
|
|
|
100%
|
|
$
|
625,887
|
|
|
89%
|
|
$
|
521,778
|
|
|
100%
|
Residential Construction
|
|
40,941
|
|
|
13%
|
|
—
|
|
|
—%
|
|
78,160
|
|
|
11%
|
|
—
|
|
|
—%
|
||||
Total Revenue
|
|
$
|
304,219
|
|
|
|
|
$
|
205,629
|
|
|
|
|
$
|
704,047
|
|
|
|
|
$
|
521,778
|
|
|
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Heavy Civil Construction
|
|
$
|
6,960
|
|
|
55%
|
|
$
|
3,672
|
|
|
100%
|
|
$
|
8,627
|
|
|
45%
|
|
$
|
587
|
|
|
100%
|
Residential Construction
|
|
5,679
|
|
|
45%
|
|
—
|
|
|
—%
|
|
10,580
|
|
|
55%
|
|
—
|
|
|
—%
|
||||
Total Operating Income
|
|
$
|
12,639
|
|
|
|
|
$
|
3,672
|
|
|
|
|
$
|
19,207
|
|
|
|
|
$
|
587
|
|
|
|
|
|
Nine Months Ended
September 30, |
||||||
|
|
2017
|
|
2016
|
||||
Net cash (used in) provided by:
|
|
|
|
|
|
|
||
Operating activities
|
|
$
|
(6,951
|
)
|
|
$
|
35,710
|
|
Investing activities
|
|
(57,336
|
)
|
|
(6,665
|
)
|
||
Financing activities
|
|
88,043
|
|
|
9,550
|
|
||
Total increase in cash and cash equivalents
|
|
$
|
23,756
|
|
|
$
|
38,595
|
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Cash and cash equivalents
|
|
$
|
66,541
|
|
|
$
|
42,785
|
|
Working capital
|
|
$
|
84,840
|
|
|
$
|
29,316
|
|
|
|
Changes in Components of
Contract Capital for the Period Ended
|
||||||||||
|
|
September 30, 2017
|
|
September 30, 2016
|
|
Variance
|
||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
$
|
(7,735
|
)
|
|
$
|
(5,084
|
)
|
|
$
|
(2,651
|
)
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
(1,035
|
)
|
|
31,340
|
|
|
(32,375
|
)
|
|||
Contracts in progress, net
|
|
(8,770
|
)
|
|
26,256
|
|
|
(35,026
|
)
|
|||
Contracts receivable, including retainage
|
|
(45,044
|
)
|
|
(23,303
|
)
|
|
(21,741
|
)
|
|||
Receivables from and equity in construction joint ventures
|
|
(1,939
|
)
|
|
3,461
|
|
|
(5,400
|
)
|
|||
Inventories
|
|
2,833
|
|
|
(1,465
|
)
|
|
4,298
|
|
|||
Accounts payable
|
|
16,687
|
|
|
17,902
|
|
|
(1,215
|
)
|
|||
Contract Capital, net
|
|
$
|
(36,233
|
)
|
|
$
|
22,851
|
|
|
$
|
(59,084
|
)
|
•
|
a ratio of secured indebtedness to EBITDA of not more than 3.10 to 1.00 for four consecutive quarters, reducing to 1.80 to 1.00 by the four consecutive quarters ending September 30, 2019;
|
•
|
daily cash collateral of not less than $15,000,000, potentially increasing to $18,000,000 beginning on April 4, 2018;
|
•
|
a rolling four quarter gross margin in contract backlog of not less than $60,000,000, increasing to $70,000,000 by March 31, 2019;
|
•
|
the incurrence of net capital expenditures during each four consecutive fiscal quarters shall not exceed $15,000,000;
|
•
|
bonding capacity shall be maintained at all times in an amount not less than $1,000,000,000; and
|
•
|
the EBITDA of Tealstone Residential Concrete, Inc. shall not be less than $12,000,000 during each four consecutive fiscal quarters.
|
(1)
|
These shares were repurchased from employees holding shares of the Company's common stock that had been awarded to them by the Company and that were released from Company-imposed transfer restrictions. The repurchase was to enable the employees to satisfy the Company's tax withholding obligations occasioned by the release of the restrictions. The repurchase was made at the election of the employees pursuant to a procedure adopted by the Compensation Committee of the Board of Directors.
|
Exhibit No.
|
|
Description
|
10.1*
|
|
First Amendment To Loan and Security Agreement
|
31.1*
|
|
Certification of Joseph A. Cutillo, Chief Executive Officer of Sterling Construction Company, Inc.
|
31.2*
|
|
Certification of Ronald A. Ballschmiede, Chief Financial Officer of Sterling Construction Company, Inc.
|
32*
|
|
Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) of Joseph A. Cutillo, Chief Executive Officer, and Ronald A. Ballschmiede, Chief Financial Officer
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
STERLING CONSTRUCTION COMPANY, INC.
|
||
|
|
|
|
|
|
|
|
Date: October 31, 2017
|
By:
|
/s/ Joseph A. Cutillo
|
|
|
|
Joseph A. Cutillo
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
Date: October 31, 2017
|
By:
|
/s/ Ronald A. Ballschmiede
|
|
|
|
Ronald A. Ballschmiede
|
|
|
|
Chief Financial Officer
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
10.1*
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
32*
|
|
|
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Sterling Construction Company, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
By:
|
/s/ Joseph A. Cutillo
|
|
|
|
Joseph A. Cutillo
|
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Sterling Construction Company, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
By:
|
/s/ Ronald A. Ballschmiede
|
|
|
|
Ronald A. Ballschmiede
|
|
|
|
Chief Financial Officer
|
Dated: October 31, 2017
|
/s/ Joseph A. Cutillo
|
|
|
Joseph A. Cutillo
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
Dated: October 31, 2017
|
/s/ Ronald A. Ballschmiede
|
|
|
Ronald A. Ballschmiede
|
|
|
Chief Financial Officer
|
|