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FORM 8-K/A
(Amendment No. 1)
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STERLING CONSTRUCTION COMPANY, INC.
|
||||
(Exact name of registrant as specified in its charter)
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||||
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DELAWARE
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001-31993
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25-1655321
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(State or other jurisdiction of incorporation
or organization)
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(Commission File Number)
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(I.R.S. Employer
Identification No.)
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1800 Hughes Landing Blvd.
The Woodlands, Texas
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77380
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (281) 214-0800
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Securities registered pursuant to Section 12(b) of the Act:
|
||
Common Stock, $0.01 par value per share
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STRL
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The NASDAQ Stock Market LLC
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(Title of Class)
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(Trading Symbol)
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(Name of each exchange on which registered)
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR § 240.12b-2 of this chapter).
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Emerging growth company
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¨
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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.
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¨
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Item 9.01
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Financial Statements and Exhibits.
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Exhibit Number
|
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Description
|
23.1
|
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99.1
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99.2
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99.3
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STERLING CONSTRUCTION COMPANY, INC.
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Date:
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October 18, 2019
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By:
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/s/ Ronald A. Ballschmiede
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Ronald A. Ballschmiede
|
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Chief Financial Officer
|
•
|
the unaudited pro forma condensed combined balance sheet as of June 30, 2019, prepared based on (i) the historical unaudited consolidated balance sheet of Sterling as of June 30, 2019 and (ii) the historical unaudited combined balance sheet of Plateau as of June 30, 2019.
|
•
|
the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2019, prepared based on (i) the historical unaudited condensed consolidated statement of operations of Sterling for the six months ended June 30, 2019 and (ii) the historical unaudited condensed combined statement of operations of Plateau for the six months ended June 30, 2019.
|
•
|
the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2018, prepared based on (i) the historical audited consolidated statement of operations of Sterling for the year ended December 31, 2018 and (ii) the historical audited combined statement of operations of Plateau for the year ended December 31, 2018.
|
•
|
the alignment of accounting policies and financial statement classifications of Plateau to those of Sterling;
|
•
|
application of the acquisition method of accounting in connection with the Acquisition;
|
•
|
new credit facilities in connection with the Acquisition consisting of a term loan and a revolving credit facility, the proceeds of which were used to finance the cash consideration portion of the purchase price and repay Sterling’s prior credit facilities;
|
•
|
issuance of the Shares in connection with the Acquisition;
|
•
|
issuance of the Seller Note in connection with the Acquisition; and
|
•
|
transaction costs in connection with the Acquisition and related financing.
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STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
|
|||||||||||||||||
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
|
|||||||||||||||||
AS OF JUNE 30, 2019
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|||||||||||||||||
(In thousands)
|
|||||||||||||||||
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|
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||||||||
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STERLING
|
|
PLATEAU
|
|
PRO FORMA ADJUSTMENTS
|
|
NOTE 4
|
|
PRO FORMA COMBINED
|
||||||||
Assets
|
|
|
|
|
|
|
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||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
71,730
|
|
|
$
|
6,999
|
|
|
$
|
(43,582
|
)
|
|
A
|
|
$
|
35,147
|
|
Accounts receivable, including retainage
|
157,813
|
|
|
70,618
|
|
|
—
|
|
|
|
|
228,431
|
|
||||
Costs and estimated earnings in excess of billings
|
53,896
|
|
|
2,739
|
|
|
—
|
|
|
|
|
56,635
|
|
||||
Inventory
|
3,252
|
|
|
—
|
|
|
—
|
|
|
|
|
3,252
|
|
||||
Receivables from and equity in construction joint ventures
|
14,381
|
|
|
—
|
|
|
—
|
|
|
|
|
14,381
|
|
||||
Other current assets
|
7,951
|
|
|
217
|
|
|
—
|
|
|
|
|
8,168
|
|
||||
Total current assets
|
309,023
|
|
|
80,573
|
|
|
(43,582
|
)
|
|
|
|
346,014
|
|
||||
Property and equipment, net
|
49,217
|
|
|
54,886
|
|
|
10,000
|
|
|
B
|
|
114,103
|
|
||||
Operating lease right-of-use assets
|
14,995
|
|
|
—
|
|
|
—
|
|
|
|
|
14,995
|
|
||||
Goodwill
|
85,231
|
|
|
—
|
|
|
150,162
|
|
|
C
|
|
235,393
|
|
||||
Other intangibles, net
|
41,218
|
|
|
—
|
|
|
162,675
|
|
|
D
|
|
203,893
|
|
||||
Other non-current assets, net
|
211
|
|
|
12
|
|
|
—
|
|
|
|
|
223
|
|
||||
Total assets
|
$
|
499,895
|
|
|
$
|
135,471
|
|
|
$
|
279,255
|
|
|
|
|
$
|
914,621
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||
Accounts payable
|
$
|
101,342
|
|
|
$
|
21,175
|
|
|
$
|
—
|
|
|
|
|
$
|
122,517
|
|
Billings in excess of costs and estimated earnings
|
60,571
|
|
|
16,087
|
|
|
—
|
|
|
|
|
76,658
|
|
||||
Current maturities of long-term debt
|
12,128
|
|
|
553
|
|
|
19,447
|
|
|
E
|
|
32,128
|
|
||||
Current portion of long-term lease obligations
|
7,059
|
|
|
—
|
|
|
—
|
|
|
|
|
7,059
|
|
||||
Income taxes payable
|
101
|
|
|
—
|
|
|
—
|
|
|
|
|
101
|
|
||||
Accrued compensation
|
12,148
|
|
|
—
|
|
|
—
|
|
|
|
|
12,148
|
|
||||
Other current liabilities
|
5,183
|
|
|
2,439
|
|
|
—
|
|
|
|
|
7,622
|
|
||||
Total current liabilities
|
198,532
|
|
|
40,254
|
|
|
19,447
|
|
|
|
|
258,233
|
|
||||
Long-term debt
|
66,497
|
|
|
205
|
|
|
345,585
|
|
|
E
|
|
412,287
|
|
||||
Long-term lease obligations
|
8,030
|
|
|
—
|
|
|
—
|
|
|
|
|
8,030
|
|
||||
Members’ interest subject to mandatory redemption and undistributed earnings
|
48,831
|
|
|
—
|
|
|
—
|
|
|
|
|
48,831
|
|
||||
Deferred taxes
|
2,211
|
|
|
—
|
|
|
3,474
|
|
|
K
|
|
5,685
|
|
||||
Other long-term liabilities
|
1,101
|
|
|
—
|
|
|
—
|
|
|
|
|
1,101
|
|
||||
Total liabilities
|
325,202
|
|
|
40,459
|
|
|
368,506
|
|
|
|
|
734,167
|
|
||||
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
||||||||
Preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||||
Common stock
|
271
|
|
|
—
|
|
|
12
|
|
|
F
|
|
283
|
|
||||
Additional paid in capital
|
233,559
|
|
|
—
|
|
|
16,183
|
|
|
F
|
|
249,742
|
|
||||
Treasury stock
|
(6,688
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(6,688
|
)
|
||||
Plateau's equity
|
—
|
|
|
95,012
|
|
|
(95,012
|
)
|
|
F
|
|
—
|
|
||||
Retained (deficit) earnings
|
(55,291
|
)
|
|
—
|
|
|
(10,434
|
)
|
|
F
|
|
(65,725
|
)
|
||||
Total stockholders’ equity
|
171,851
|
|
|
95,012
|
|
|
(89,251
|
)
|
|
|
|
177,612
|
|
||||
Noncontrolling interests
|
2,842
|
|
|
—
|
|
|
—
|
|
|
|
|
2,842
|
|
||||
Total stockholders’ equity
|
174,693
|
|
|
95,012
|
|
|
(89,251
|
)
|
|
|
|
180,454
|
|
||||
Total liabilities and stockholders’ equity
|
$
|
499,895
|
|
|
$
|
135,471
|
|
|
$
|
279,255
|
|
|
|
|
$
|
914,621
|
|
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
|
|||||||||||||||||
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
|
|||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, 2019
|
|||||||||||||||||
(In thousands, except per share data)
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
STERLING
|
|
PLATEAU
|
|
PRO FORMA ADJUSTMENTS
|
|
NOTE 4
|
|
PRO FORMA COMBINED
|
||||||||
Revenues
|
$
|
488,035
|
|
|
$
|
142,436
|
|
|
$
|
—
|
|
|
|
|
$
|
630,471
|
|
Cost of revenues
|
(443,036
|
)
|
|
(99,973
|
)
|
|
(337
|
)
|
|
G, I
|
|
(543,346
|
)
|
||||
Gross profit
|
44,999
|
|
|
42,463
|
|
|
(337
|
)
|
|
|
|
87,125
|
|
||||
General and administrative expense
|
(23,263
|
)
|
|
(5,470
|
)
|
|
(4,067
|
)
|
|
D
|
|
(32,800
|
)
|
||||
Other operating (expense) income, net
|
(5,832
|
)
|
|
994
|
|
|
(764
|
)
|
|
H, I
|
|
(5,602
|
)
|
||||
Operating income
|
15,904
|
|
|
37,987
|
|
|
(5,168
|
)
|
|
|
|
48,723
|
|
||||
Interest income
|
655
|
|
|
—
|
|
|
—
|
|
|
|
|
655
|
|
||||
Interest expense
|
(5,964
|
)
|
|
—
|
|
|
(7,907
|
)
|
|
J
|
|
(13,871
|
)
|
||||
Income before income taxes
|
10,595
|
|
|
37,987
|
|
|
(13,075
|
)
|
|
|
|
35,507
|
|
||||
Income tax expense
|
(869
|
)
|
|
—
|
|
|
(3,216
|
)
|
|
K
|
|
(4,085
|
)
|
||||
Net income
|
9,726
|
|
|
37,987
|
|
|
(16,291
|
)
|
|
|
|
31,422
|
|
||||
Less: Net income attributable to noncontrolling interests
|
(83
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(83
|
)
|
||||
Net income attributable to Sterling common stockholders
|
$
|
9,643
|
|
|
$
|
37,987
|
|
|
$
|
(16,291
|
)
|
|
|
|
$
|
31,339
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share attributable to Sterling common stockholders:
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.37
|
|
|
|
|
|
|
|
|
$
|
1.14
|
|
||||
Diluted
|
$
|
0.36
|
|
|
|
|
|
|
|
|
$
|
1.12
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
26,357
|
|
|
|
|
1,245
|
|
|
L
|
|
27,602
|
|
|||||
Diluted
|
26,657
|
|
|
|
|
1,245
|
|
|
L
|
|
27,902
|
|
STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES
|
|||||||||||||||||
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
|
|||||||||||||||||
FOR THE YEAR ENDED DECEMBER 31, 2018
|
|||||||||||||||||
(In thousands, except per share data)
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
STERLING
|
|
PLATEAU
|
|
PRO FORMA ADJUSTMENTS
|
|
NOTE 4
|
|
PRO FORMA COMBINED
|
||||||||
Revenues
|
$
|
1,037,667
|
|
|
$
|
289,187
|
|
|
$
|
—
|
|
|
|
|
$
|
1,326,854
|
|
Cost of revenues
|
(927,335
|
)
|
|
(209,708
|
)
|
|
(716
|
)
|
|
G, I
|
|
(1,137,759
|
)
|
||||
Gross profit
|
110,332
|
|
|
79,479
|
|
|
(716
|
)
|
|
|
|
189,095
|
|
||||
General and administrative expense
|
(50,620
|
)
|
|
(13,934
|
)
|
|
(8,134
|
)
|
|
D
|
|
(72,688
|
)
|
||||
Other operating expense, net
|
(17,101
|
)
|
|
1,901
|
|
|
(1,901
|
)
|
|
I
|
|
(17,101
|
)
|
||||
Operating income
|
42,611
|
|
|
67,446
|
|
|
(10,751
|
)
|
|
|
|
99,306
|
|
||||
Interest income
|
1,017
|
|
|
—
|
|
|
—
|
|
|
|
|
1,017
|
|
||||
Interest expense
|
(12,350
|
)
|
|
—
|
|
|
(16,334
|
)
|
|
J
|
|
(28,684
|
)
|
||||
Income before income taxes
|
31,278
|
|
|
67,446
|
|
|
(27,085
|
)
|
|
|
|
71,639
|
|
||||
Income tax expense
|
(1,738
|
)
|
|
(441
|
)
|
|
(5,537
|
)
|
|
K
|
|
(7,716
|
)
|
||||
Net income
|
29,540
|
|
|
67,005
|
|
|
(32,622
|
)
|
|
|
|
63,923
|
|
||||
Less: Net income attributable to noncontrolling interests
|
(4,353
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(4,353
|
)
|
||||
Net income attributable to Sterling common stockholders
|
$
|
25,187
|
|
|
$
|
67,005
|
|
|
$
|
(32,622
|
)
|
|
|
|
$
|
59,570
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share attributable to Sterling common stockholders:
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.94
|
|
|
|
|
|
|
|
|
$
|
2.12
|
|
||||
Diluted
|
$
|
0.93
|
|
|
|
|
|
|
|
|
$
|
2.09
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
26,903
|
|
|
|
1,245
|
|
L
|
|
28,148
|
||||||||
Diluted
|
27,194
|
|
|
|
1,245
|
|
L
|
|
28,439
|
NOTE 1 - BASIS OF PRESENTATION
|
NOTE 2 - PURCHASE CONSIDERATION AND PRELIMINARY PURCHASE PRICE ALLOCATION
|
Sterling shares transferred
|
1,244,813
|
|
|
Sterling closing stock price on October 1, 2019
|
$
|
13.01
|
|
Equity consideration transferred
|
$
|
16,195
|
|
Cash consideration transferred
|
375,000
|
|
|
Seller note
|
10,000
|
|
|
Preliminary target working capital adjustment
|
10,413
|
|
|
Total consideration transferred
|
$
|
411,608
|
|
|
June 30, 2019
|
||
Net tangible assets:
|
|
||
Accounts receivable, including retainage
|
$
|
70,618
|
|
Costs and estimated earnings in excess of billings
|
2,739
|
|
|
Other current assets
|
217
|
|
|
Property and equipment, net
|
64,886
|
|
|
Other non-current assets, net
|
12
|
|
|
Accounts payable
|
(21,175
|
)
|
|
Billings in excess of costs and estimated earnings
|
(16,087
|
)
|
|
Other current liabilities
|
(2,439
|
)
|
|
Total net tangible assets
|
98,771
|
|
|
Preliminary identifiable intangible assets
|
162,675
|
|
|
Goodwill
|
150,162
|
|
|
Total consideration transferred
|
$
|
411,608
|
|
NOTE 3 - FINANCING TRANSACTIONS
|
NOTE 4 - PRO FORMA ADJUSTMENTS
|
(A)
|
To record the net decrease in cash resulting from the following:
|
Borrowings under the new Credit Facility
|
$
|
430,000
|
|
Less:
|
|
||
Cash portion of the purchase price
|
(375,000
|
)
|
|
Oaktree payoff (principal & interest)
|
(67,128
|
)
|
|
Cash portion of Credit Facility costs
|
(10,688
|
)
|
|
Preliminary target working capital adjustment
|
(10,413
|
)
|
|
Plateau's excluded cash
|
(6,999
|
)
|
|
Oaktree prepayment fee
|
(3,354
|
)
|
|
Total net decrease in cash
|
$
|
(43,582
|
)
|
(B)
|
To record the estimated fair value of Plateau’s property and equipment.
|
(C)
|
To record goodwill associated with the Acquisition (see Note 2).
|
(D)
|
To record identified intangible assets associated with the Acquisition.
|
|
Estimated Fair Value
|
|
Estimated Useful Life in Years
|
|
Year ended December 31, 2018 Amortization Expense
|
|
Six months ended June 30, 2019 Amortization Expense
|
|||||||
Trade Names
|
$
|
54,225
|
|
|
20
|
|
|
$
|
2,711
|
|
|
$
|
1,356
|
|
Customer Relationships
|
108,450
|
|
|
20
|
|
|
5,423
|
|
|
2,711
|
|
|||
Total
|
$
|
162,675
|
|
|
|
|
$
|
8,134
|
|
|
$
|
4,067
|
|
(E)
|
To record the changes in financing arrangements resulting from the Acquisition. The net increase in debt includes:
|
Issuance of new term debt
|
$
|
400,000
|
|
Issuance of new revolver
|
30,000
|
|
|
Estimated fair value of seller notes
|
10,000
|
|
|
Removal of Plateau's existing debt
|
(758
|
)
|
|
Capitalization of new debt issuance costs
|
(10,688
|
)
|
|
Extinguishment of Sterling's existing debt, including debt issuance costs of approximately $3,600
|
(63,522
|
)
|
|
Total pro forma adjustments to debt
|
$
|
365,032
|
|
Less: Pro forma adjustments to current maturities of long-term debt
|
(19,447
|
)
|
|
Pro forma adjustments to long-term debt
|
$
|
345,585
|
|
(F)
|
To record changes in equity resulting from the Acquisition as follows:
|
|
Common Stock
|
|
Additional Paid in Capital
|
|
Plateau’s Equity
|
|
Retained Deficit
|
||||||||
Issuance of 1,244,813 shares of common stock
|
$
|
12
|
|
|
$
|
16,183
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Elimination of historical equity of Plateau
|
—
|
|
|
—
|
|
|
(95,012
|
)
|
|
—
|
|
||||
Write off of Sterling debt issuance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,606
|
)
|
||||
Tax adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,474
|
)
|
||||
Oaktree prepayment fee
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,354
|
)
|
||||
Pro forma adjustments
|
$
|
12
|
|
|
$
|
16,183
|
|
|
$
|
(95,012
|
)
|
|
$
|
(10,434
|
)
|
(G)
|
To record the amortization of the $10,000 adjustment to property and equipment based on a seven year estimated useful life.
|
(H)
|
To record the elimination of transaction costs of $230 related to the Acquisition.
|
(I)
|
To conform Plateau’s accounting policies to be consistent with those of Sterling’s, the Company recorded other operating income adjustments of $994 and $1,901 for the six months ended June 30, 2019 and the year ended December 31, 2018, respectively, of which $616 and $1,188, respectively, are adjustments to exclude business activities not acquired, and $378 and $713, respectively, are reclassifications to cost of revenues.
|
(J)
|
To record the net increase in interest expense due to changes in financing arrangements resulting from the Acquisition as follows:
|
|
Year ended December 31, 2018
|
|
Six months ended June 30, 2019
|
||||
Interest expense on Credit Facility – Libor + 3.5%
|
$
|
(23,995
|
)
|
|
$
|
(11,625
|
)
|
Seller note interest – 8%
|
(800
|
)
|
|
(400
|
)
|
||
Amortization of new debt issuance costs
|
(2,138
|
)
|
|
(1,069
|
)
|
||
Removal of prior Oaktree interest & debt issuance costs
|
10,599
|
|
|
5,187
|
|
||
Pro forma adjustments
|
$
|
(16,334
|
)
|
|
$
|
(7,907
|
)
|
(K)
|
To record pro forma adjustments to the June 30, 2019 unaudited pro forma condensed combined balance sheet for:
|
•
|
Deferred tax liability related to the excess of book over tax basis in indefinite lived assets
|
•
|
Additional Plateau state income tax using historical apportionment ratios and state tax rates
|
•
|
Deferred tax expense related to the excess of book over tax basis in indefinite lived assets
|
(L)
|
To record the increase in the weighted average shares in connection with the issuance of 1,244,813 common shares to finance the Acquisition.
|