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FORM 10-K
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ___ to ___
|
||
Commission File Number 1-31993
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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¨ Yes þ No
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|
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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¨ Yes þ No
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No
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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
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DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on May 6, 2020 are incorporated by reference into Part III of this Form 10-K.
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Sterling Construction Company, Inc.
Annual Report on Form 10-K
Table of Contents
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
|
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Item 4.
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||
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Item 5.
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Item 6.
|
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
|
||
Item 9A.
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Item 9B.
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||
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Item 10.
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Item 11.
|
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Item 12.
|
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Item 13.
|
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Item 14.
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||
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Item 15.
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Item 16.
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•
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factors that affect the accuracy of estimates inherent in the bidding for contracts, estimates of backlog, over time recognition accounting policies, including onsite conditions that differ materially from those assumed in the original bid, contract modifications, mechanical problems with machinery or equipment and effects of other risks discussed herein;
|
•
|
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;
|
•
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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, including changes in U.S. trade policies and retaliatory responses from other countries, and cost escalations associated with subcontractors and labor;
|
•
|
change in cost to lease, acquire or maintain our equipment;
|
•
|
our dependence on a limited number of significant customers;
|
•
|
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;
|
•
|
a shutdown of the federal government;
|
•
|
our ability to qualify as an eligible bidder under government contract criteria;
|
•
|
changes in general economic conditions, including recessions, reductions in federal, state and local government funding for infrastructure services, changes in those governments’ budgets, practices, laws and regulations and adverse economic conditions in our geographic markets;
|
•
|
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;
|
•
|
design/build contracts which subject us to the risk of design errors and omissions;
|
•
|
our ability to obtain bonding or post letters of credit;
|
•
|
our ability to raise additional capital on favorable terms;
|
•
|
our ability to attract and retain key personnel;
|
•
|
increased unionization of our workforce or labor costs and any work stoppages or slowdowns;
|
•
|
adverse weather conditions;
|
•
|
our ability to successfully identify, finance, complete and integrate acquisitions, including the Plateau Acquisition;
|
•
|
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; and
|
•
|
the other factors discussed in more detail in Item 1A. “Risk Factors.”
|
•
|
onsite conditions that differ from those assumed in the original bid or contract;
|
•
|
failure to include required materials or work in a bid, or the failure to estimate properly the quantities or costs needed to complete a lump sum contract;
|
•
|
delays caused by weather conditions;
|
•
|
contract or project modifications creating unanticipated costs not covered by change orders or contract price adjustments;
|
•
|
changes in availability, proximity and costs of materials, including steel, concrete, aggregates and other construction materials (such as stone, gravel, sand and oil for asphalt paving), as well as fuel and lubricants for our equipment;
|
•
|
higher than anticipated costs to lease, acquire and maintain equipment;
|
•
|
inability to predict the costs of accessing and producing aggregates and purchasing oil required for asphalt paving projects;
|
•
|
availability and skill level of workers in the geographic location of a project;
|
•
|
rapidly increasing labor costs;
|
•
|
failure by our suppliers, subcontractors, designers, engineers, joint venture partners or customers to perform their obligations;
|
•
|
fraud, theft or other improper activities by our suppliers, subcontractors, designers, engineers, joint venture partners, customers or our own personnel;
|
•
|
mechanical problems with our machinery or equipment;
|
•
|
citations issued by any governmental authority, including OSHA;
|
•
|
difficulties in obtaining required governmental permits or approvals;
|
•
|
changes in applicable laws and regulations;
|
•
|
delays in quickly identifying and taking measures to address issues which arise during execution of a project; and
|
•
|
claims or demands from third parties for alleged damages arising from the design, construction or use and operation of a project of which our work is a part.
|
•
|
limiting our flexibility in planning for, or reacting to, changes in the industry in which we operate;
|
•
|
increasing our vulnerability to general adverse economic and industry conditions;
|
•
|
limiting our ability to fund future working capital and capital expenditures because of the need to dedicate a substantial portion of our cash flows from operations to payments on our debt service;
|
•
|
placing us at a competitive disadvantage compared to our competitors that have less debt;
|
•
|
limiting our ability to borrow additional funds or refinance existing debt; or
|
•
|
requiring that we pledge substantial collateral, which may limit flexibility in operating our business and restrict our ability to sell assets.
|
•
|
the effect of uncertainty regarding the interest rate calculation before replacement benchmark is published regularly and gains widespread market acceptance; or
|
•
|
the risk that differences in the administration or determination methodology of the replacement benchmark may affect the amount of interest payments.
|
•
|
difficulties in the integration of operations, systems, policies and procedures;
|
•
|
enhancements in our controls and procedures including those necessary for a public company may make it more difficult to integrate operations and systems;
|
•
|
failure to implement proper overall business controls, including those required to support our growth, resulting in inconsistent operating and financial practices at companies we acquire or have acquired;
|
•
|
termination of relationships with the key personnel and customers of an acquired company;
|
•
|
additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls;
|
•
|
the incurrence of environmental and other liabilities, including liabilities arising from the operation of an acquired business or asset prior to our acquisition for which we are not indemnified or for which the indemnity is inadequate;
|
•
|
disruption of or receipt of insufficient management attention to our ongoing business; and
|
•
|
inability to realize the cost savings or other financial benefits that we anticipate.
|
•
|
lost sales and customers as a result of certain customers of the Company or Plateau deciding to terminate or reduce their business with the Company or Plateau following the Plateau Acquisition;
|
•
|
the complexities of combining multiple companies with different histories, regulatory restrictions, operating structures and markets, including geographic location and operating geography;
|
•
|
the failure to retain key employees of the Company or Plateau;
|
•
|
potential unknown liabilities and unforeseen increased expenses associated with the Plateau Acquisition; and
|
•
|
performance shortfalls at the Company or Plateau as a result of the diversion of management’s attention caused by completing the Plateau Acquisition and integrating the companies’ operations.
|
|
December 2014
|
|
December 2015
|
|
December 2016
|
|
December 2017
|
|
December 2018
|
|
December 2019
|
||||||||||||
Sterling Construction Company, Inc.
|
$
|
100.00
|
|
|
$
|
95.15
|
|
|
$
|
132.39
|
|
|
$
|
254.77
|
|
|
$
|
170.42
|
|
|
$
|
220.34
|
|
Dow Jones US Total Return Index
|
$
|
100.00
|
|
|
$
|
100.63
|
|
|
$
|
112.96
|
|
|
$
|
137.24
|
|
|
$
|
130.42
|
|
|
$
|
171.04
|
|
Dow Jones US Heavy Construction Index
|
$
|
100.00
|
|
|
$
|
88.48
|
|
|
$
|
109.14
|
|
|
$
|
115.00
|
|
|
$
|
84.97
|
|
|
$
|
113.99
|
|
Period
|
Total Number of Shares Purchased
|
Average Price Paid per Share
|
|||
October 1 – October 31, 2019
|
2,029
|
|
$
|
16.87
|
|
November 1 – November 30, 2019
|
1,071
|
|
$
|
14.57
|
|
December 1 – December 31, 2019
|
—
|
|
$
|
—
|
|
|
Years Ended December 31,
|
||||||||||||||||||
(In thousands, except per share data)
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Revenues
|
$
|
1,126,278
|
|
|
$
|
1,037,667
|
|
|
$
|
957,958
|
|
|
$
|
690,123
|
|
|
$
|
623,595
|
|
Acquisition related costs
|
(4,311
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Operating income
|
37,751
|
|
|
42,611
|
|
|
26,176
|
|
|
(4,279
|
)
|
|
(14,387
|
)
|
|||||
Interest expense
|
(16,686
|
)
|
|
(12,350
|
)
|
|
(9,800
|
)
|
|
(2,628
|
)
|
|
(3,012
|
)
|
|||||
Income (loss) before income taxes
|
14,479
|
|
|
31,278
|
|
|
15,935
|
|
|
(7,324
|
)
|
|
(17,179
|
)
|
|||||
Income tax benefit (expense)
|
26,216
|
|
|
(1,738
|
)
|
|
(118
|
)
|
|
(88
|
)
|
|
(7
|
)
|
|||||
Net income (loss)
|
40,695
|
|
|
29,540
|
|
|
15,817
|
|
|
(7,412
|
)
|
|
(17,186
|
)
|
|||||
Less: Net income attributable to noncontrolling interests
|
(794
|
)
|
|
(4,353
|
)
|
|
(4,200
|
)
|
|
(1,826
|
)
|
|
(3,216
|
)
|
|||||
Net income (loss) attributable to Sterling common stockholders before noncontrolling interest revaluation
|
39,901
|
|
|
25,187
|
|
|
11,617
|
|
|
(9,238
|
)
|
|
(20,402
|
)
|
|||||
Revaluation of noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,774
|
)
|
|||||
Net income (loss) attributable to Sterling common stockholders
|
$
|
39,901
|
|
|
$
|
25,187
|
|
|
$
|
11,617
|
|
|
$
|
(9,238
|
)
|
|
$
|
(39,176
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) per share attributable to Sterling common stockholders:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
1.50
|
|
|
$
|
0.94
|
|
|
$
|
0.44
|
|
|
$
|
(0.40
|
)
|
|
$
|
(2.02
|
)
|
Diluted
|
$
|
1.47
|
|
|
$
|
0.93
|
|
|
$
|
0.43
|
|
|
$
|
(0.40
|
)
|
|
$
|
(2.02
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
26,671
|
|
26,903
|
|
|
26,274
|
|
|
23,140
|
|
|
19,375
|
|
||||||
Diluted
|
27,119
|
|
27,194
|
|
|
26,712
|
|
|
23,140
|
|
|
19,375
|
|
||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance sheet:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
961,940
|
|
|
$
|
482,573
|
|
|
$
|
463,298
|
|
|
$
|
301,823
|
|
|
$
|
266,165
|
|
Long-term debt
|
$
|
390,627
|
|
|
$
|
79,117
|
|
|
$
|
86,160
|
|
|
$
|
1,549
|
|
|
$
|
15,324
|
|
Equity attributable to Sterling common stockholders
|
$
|
219,918
|
|
|
$
|
164,401
|
|
|
$
|
141,333
|
|
|
$
|
107,434
|
|
|
$
|
95,845
|
|
Shares outstanding
|
27,772
|
|
|
26,597
|
|
|
27,051
|
|
|
24,987
|
|
|
19,753
|
|
(In thousands)
|
Backlog
|
Gross Margin in Backlog
|
Fourth quarter of 2019
|
$1,068,025
|
11.5%
|
Third quarter of 2019
|
$881,428
|
9.3%
|
Second quarter of 2019
|
$909,030
|
8.8%
|
First quarter of 2019
|
$808,740
|
8.3%
|
Fourth quarter of 2018
|
$850,725
|
8.5%
|
|
Years Ended December 31,
|
|
|
|||||||
(In thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Revenues
|
$
|
1,126,278
|
|
|
$
|
1,037,667
|
|
|
8.5
|
%
|
Gross profit
|
107,794
|
|
|
110,332
|
|
|
(2.3
|
)%
|
||
General and administrative expenses
|
(49,200
|
)
|
|
(48,220
|
)
|
|
2.0
|
%
|
||
Intangible asset amortization
|
(4,695
|
)
|
|
(2,400
|
)
|
|
95.6
|
%
|
||
Acquisition related costs
|
(4,311
|
)
|
|
—
|
|
|
NM
|
|
||
Other operating expense, net
|
(11,837
|
)
|
|
(17,101
|
)
|
|
(30.8
|
)%
|
||
Operating income
|
37,751
|
|
|
42,611
|
|
|
(11.4
|
)%
|
||
Interest income
|
1,142
|
|
|
1,017
|
|
|
12.3
|
%
|
||
Interest expense
|
(16,686
|
)
|
|
(12,350
|
)
|
|
35.1
|
%
|
||
Loss on extinguishment of debt
|
(7,728
|
)
|
|
—
|
|
|
NM
|
|
||
Income before income taxes and noncontrolling interests in earnings
|
14,479
|
|
|
31,278
|
|
|
(53.7
|
)%
|
||
Income tax benefit (expense)
|
26,216
|
|
|
(1,738
|
)
|
|
NM
|
|
||
Net income
|
40,695
|
|
|
29,540
|
|
|
37.8
|
%
|
||
Noncontrolling interests in earnings
|
(794
|
)
|
|
(4,353
|
)
|
|
(81.8
|
)%
|
||
Net income attributable to Sterling common stockholders
|
$
|
39,901
|
|
|
$
|
25,187
|
|
|
58.4
|
%
|
|
|
|
|
|
|
|||||
Gross margin
|
9.6
|
%
|
|
10.6
|
%
|
|
|
|
||
|
|
|
|
|
|
|||||
Operating margin
|
3.4
|
%
|
|
4.1
|
%
|
|
|
|
||
|
|
|
|
|
|
|||||
Backlog, end of year
|
$
|
1,068,025
|
|
|
$
|
850,725
|
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||
(In thousands)
|
|
2019
|
|
% of
Revenue |
|
2018
|
|
% of
Revenue |
||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
||
Heavy Civil
|
|
$
|
760,325
|
|
|
67%
|
|
$
|
765,638
|
|
|
73%
|
Specialty Services
|
|
212,824
|
|
|
19%
|
|
120,333
|
|
|
12%
|
||
Residential
|
|
153,129
|
|
|
14%
|
|
151,696
|
|
|
15%
|
||
Total Revenue
|
|
$
|
1,126,278
|
|
|
|
|
$
|
1,037,667
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income
|
|
|
|
|
|
|
|
|
|
|
||
Heavy Civil
|
|
$
|
3,316
|
|
|
0.4%
|
|
$
|
17,044
|
|
|
2.2%
|
Specialty Services
|
|
18,207
|
|
|
8.6%
|
|
4,629
|
|
|
3.8%
|
||
Residential
|
|
20,539
|
|
|
13.4%
|
|
20,938
|
|
|
13.8%
|
||
Subtotal
|
|
42,062
|
|
|
3.7%
|
|
42,611
|
|
|
4.1%
|
||
Acquisition related costs
|
|
(4,311
|
)
|
|
|
|
—
|
|
|
|
||
Total Operating Income
|
|
$
|
37,751
|
|
|
3.4%
|
|
$
|
42,611
|
|
|
4.1%
|
|
Years Ended December 31,
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
Net cash provided by (used in):
|
|
|
|
|
|
||
Operating activities
|
$
|
41,093
|
|
|
$
|
39,474
|
|
Investing activities
|
(410,386
|
)
|
|
(11,382
|
)
|
||
Financing activities
|
320,931
|
|
|
(17,950
|
)
|
||
Net change in cash and cash equivalents
|
$
|
(48,362
|
)
|
|
$
|
10,142
|
|
|
As of December 31,
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
Cash and cash equivalents
|
$
|
45,733
|
|
|
$
|
94,095
|
|
Working capital (Current Assets Minus Current Liabilities)
|
$
|
64,017
|
|
|
$
|
123,442
|
|
|
As of December 31,
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
Generally Available
|
$
|
29,659
|
|
|
$
|
42,605
|
|
Consolidated 50% Owned Subsidiaries
|
12,004
|
|
|
31,026
|
|
||
Construction Joint Ventures
|
4,070
|
|
|
20,464
|
|
||
Total Cash
|
$
|
45,733
|
|
|
$
|
94,095
|
|
|
Changes in Components of
Contract Capital
|
||||||||||
(In thousands)
|
2019
|
|
2018
|
|
Variance
|
||||||
Costs and estimated earnings in excess of billings
|
$
|
(39
|
)
|
|
$
|
(4,430
|
)
|
|
$
|
4,391
|
|
Billings in excess of costs and estimated earnings
|
6,062
|
|
|
33
|
|
|
6,029
|
|
|||
Contracts in progress, net
|
6,023
|
|
|
(4,397
|
)
|
|
10,420
|
|
|||
Accounts receivable, including retainage
|
(21,300
|
)
|
|
(11,094
|
)
|
|
(10,206
|
)
|
|||
Receivables from and equity in construction joint ventures
|
1,524
|
|
|
659
|
|
|
865
|
|
|||
Accounts payable
|
10,987
|
|
|
1,969
|
|
|
9,018
|
|
|||
Contract Capital, net
|
$
|
(2,766
|
)
|
|
$
|
(12,863
|
)
|
|
$
|
10,097
|
|
•
|
a Total Leverage Ratio (as defined in the Credit Agreement) at the last day of each fiscal quarter not to be greater than 4.00 to 1.00 ending on December 31, 2019 through and including June 30, 2020, 3.75 to 1.00 ending on September 30, 2020, 3.50 to 1.00 ending on December 31, 2020 through and including March 31, 2021, 3.25 to 1.00 ending on June 30, 2021 through and including September 30, 2021, and 3.00 to 1.00 ending on December 31, 2021 and thereafter; and
|
•
|
a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of not less than 1.20 to 1.00 as of the last day of each fiscal quarter of the Company, commencing with the fiscal quarter ending December 31, 2019.
|
|
Payments due by period
|
||||||||||||||||||
(In thousands)
|
Total
|
|
<1
Year
|
|
1 - 3
Years
|
|
4 – 5
Years
|
|
>5
Years
|
||||||||||
Operating leases (1)
|
$
|
15,680
|
|
|
$
|
6,813
|
|
|
$
|
8,038
|
|
|
$
|
829
|
|
|
$
|
—
|
|
Credit Facility
|
420,000
|
|
|
30,000
|
|
|
100,000
|
|
|
290,000
|
|
|
—
|
|
|||||
Credit Facility interest
|
108,217
|
|
|
25,451
|
|
|
49,123
|
|
|
33,643
|
|
|
—
|
|
|||||
Notes payable to Sellers, Plateau Acquisition (inclusive of outstanding interest)
|
14,400
|
|
|
800
|
|
|
1,600
|
|
|
1,600
|
|
|
10,400
|
|
|||||
Notes and deferred payments to Sellers, Tealstone Acquisition (inclusive of outstanding interest)
|
12,600
|
|
|
12,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Notes payable for equipment
|
805
|
|
|
243
|
|
|
338
|
|
|
224
|
|
|
—
|
|
|||||
Earn-out Liability (2)
|
1,027
|
|
|
1,027
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Members' interest subject to mandatory redemption and undistributed earnings (3)
|
49,003
|
|
|
49,003
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
621,732
|
|
|
$
|
125,937
|
|
|
$
|
159,099
|
|
|
$
|
326,296
|
|
|
$
|
10,400
|
|
(1) Operating leases are stated at minimum annual rentals for all operating leases having initial non-cancelable lease terms in excess of one year.
|
(2) The Tealstone earn-out arrangement requires the Company to pay up to an aggregate of $15 million in earn-out payments on the first, second, third and fourth anniversaries of the closing date to continuing Tealstone management or their affiliates if specified financial performance levels are achieved.
|
(3) Mandatory redemption is based on the death or disability of the interest holders. Undistributed earnings can be distributed upon unanimous consent from the members and for tax distributions. At this time we cannot predict when such distributions will be made. The Company has purchased two separate $20 million death and permanent total disability insurance policies to mitigate the Company’s cash draw if such events were to occur.
|
|
Page
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues
|
$
|
1,126,278
|
|
|
$
|
1,037,667
|
|
|
$
|
957,958
|
|
Cost of revenues
|
(1,018,484
|
)
|
|
(927,335
|
)
|
|
(868,866
|
)
|
|||
Gross profit
|
107,794
|
|
|
110,332
|
|
|
89,092
|
|
|||
General and administrative expense
|
(49,200
|
)
|
|
(48,220
|
)
|
|
(46,552
|
)
|
|||
Intangible asset amortization
|
(4,695
|
)
|
|
(2,400
|
)
|
|
(1,799
|
)
|
|||
Acquisition related costs
|
(4,311
|
)
|
|
—
|
|
|
—
|
|
|||
Other operating expense, net
|
(11,837
|
)
|
|
(17,101
|
)
|
|
(14,565
|
)
|
|||
Operating income
|
37,751
|
|
|
42,611
|
|
|
26,176
|
|
|||
Interest income
|
1,142
|
|
|
1,017
|
|
|
314
|
|
|||
Interest expense
|
(16,686
|
)
|
|
(12,350
|
)
|
|
(9,800
|
)
|
|||
Loss on extinguishment of debt
|
(7,728
|
)
|
|
—
|
|
|
(755
|
)
|
|||
Income before income taxes
|
14,479
|
|
|
31,278
|
|
|
15,935
|
|
|||
Income tax benefit (expense)
|
26,216
|
|
|
(1,738
|
)
|
|
(118
|
)
|
|||
Net income
|
40,695
|
|
|
29,540
|
|
|
15,817
|
|
|||
Less: Net income attributable to noncontrolling interests
|
(794
|
)
|
|
(4,353
|
)
|
|
(4,200
|
)
|
|||
Net income attributable to Sterling common stockholders
|
$
|
39,901
|
|
|
$
|
25,187
|
|
|
$
|
11,617
|
|
|
|
|
|
|
|
||||||
Net income per share attributable to Sterling common stockholders:
|
|
|
|
|
|
|
|
|
|||
Basic
|
$
|
1.50
|
|
|
$
|
0.94
|
|
|
$
|
0.44
|
|
Diluted
|
$
|
1.47
|
|
|
$
|
0.93
|
|
|
$
|
0.43
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
26,671
|
|
|
26,903
|
|
|
26,274
|
|
|||
Diluted
|
27,119
|
|
|
27,194
|
|
|
26,712
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net income
|
$
|
40,695
|
|
|
$
|
29,540
|
|
|
$
|
15,817
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
||||||
Loss on interest rate swap
|
(209
|
)
|
|
—
|
|
|
—
|
|
|||
Total comprehensive income
|
40,486
|
|
|
29,540
|
|
|
15,817
|
|
|||
Less: Comprehensive income attributable to noncontrolling interests
|
(794
|
)
|
|
(4,353
|
)
|
|
(4,200
|
)
|
|||
Comprehensive income attributable to Sterling common stockholders
|
$
|
39,692
|
|
|
$
|
25,187
|
|
|
$
|
11,617
|
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
Assets
|
|
|
|
|
|||
Current assets:
|
|
|
|
||||
Cash and cash equivalents ($7,538 and $8,750 related to variable interest entities (“VIEs”))
|
$
|
45,733
|
|
|
$
|
94,095
|
|
Accounts receivable, including retainage ($24,642 and $24,108 related to VIEs)
|
248,247
|
|
|
145,026
|
|
||
Costs and estimated earnings in excess of billings ($8,328 and $8,180 related to VIEs)
|
42,555
|
|
|
41,542
|
|
||
Receivables from and equity in construction joint ventures ($7,406 and $6,984 related to VIEs)
|
9,196
|
|
|
10,720
|
|
||
Other current assets ($503 and $32 related to VIEs)
|
11,790
|
|
|
11,233
|
|
||
Total current assets
|
357,521
|
|
|
302,616
|
|
||
Property and equipment, net ($5,619 and $7,219 related to VIEs)
|
116,030
|
|
|
51,999
|
|
||
Operating lease right-of-use assets ($3,817 and $0 related to VIEs)
|
13,979
|
|
|
—
|
|
||
Goodwill ($1,501 and $1,501 related to VIEs)
|
191,892
|
|
|
85,231
|
|
||
Other intangibles, net
|
256,323
|
|
|
42,418
|
|
||
Deferred tax asset, net
|
26,012
|
|
|
—
|
|
||
Other non-current assets, net
|
183
|
|
|
309
|
|
||
Total assets
|
$
|
961,940
|
|
|
$
|
482,573
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|||
Current liabilities:
|
|
|
|
||||
Accounts payable ($18,213 and $22,859 related to VIEs)
|
$
|
137,593
|
|
|
$
|
99,426
|
|
Billings in excess of costs and estimated earnings ($9,649 and $6,585 related to VIEs)
|
85,011
|
|
|
62,407
|
|
||
Current maturities of long-term debt ($39 and $174 related to VIEs)
|
42,473
|
|
|
2,899
|
|
||
Current portion of long-term lease obligations ($1,838 and $0 related to VIEs)
|
7,095
|
|
|
—
|
|
||
Income taxes payable
|
1,212
|
|
|
318
|
|
||
Accrued compensation ($1,521 and $1,566 related to VIEs)
|
13,727
|
|
|
9,448
|
|
||
Other current liabilities ($1,429 and $1,485 related to VIEs)
|
6,393
|
|
|
4,676
|
|
||
Total current liabilities
|
293,504
|
|
|
179,174
|
|
||
Long-term debt ($2 and $1,976 related to VIEs)
|
390,627
|
|
|
79,117
|
|
||
Long-term lease obligations ($1,979 and $0 related to VIEs)
|
6,976
|
|
|
—
|
|
||
Members’ interest subject to mandatory redemption and undistributed earnings
|
49,003
|
|
|
49,343
|
|
||
Deferred taxes
|
—
|
|
|
1,450
|
|
||
Other long-term liabilities
|
619
|
|
|
1,229
|
|
||
Total liabilities
|
740,729
|
|
|
310,313
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
|
|||
Common stock, par value $0.01 per share; 38,000 shares authorized, 28,290 and 27,064 shares issued, 27,772 and 26,597 shares outstanding
|
283
|
|
|
271
|
|
||
Additional paid in capital
|
251,019
|
|
|
233,795
|
|
||
Treasury Stock, at cost: 518 and 467 shares
|
(6,142
|
)
|
|
(4,731
|
)
|
||
Retained deficit
|
(25,033
|
)
|
|
(64,934
|
)
|
||
Accumulated other comprehensive loss
|
(209
|
)
|
|
—
|
|
||
Total Sterling stockholders’ equity
|
219,918
|
|
|
164,401
|
|
||
Noncontrolling interests
|
1,293
|
|
|
7,859
|
|
||
Total stockholders’ equity
|
221,211
|
|
|
172,260
|
|
||
Total liabilities and stockholders’ equity
|
$
|
961,940
|
|
|
$
|
482,573
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|||
Net income
|
$
|
40,695
|
|
|
$
|
29,540
|
|
|
$
|
15,817
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|||||
Depreciation and amortization
|
20,740
|
|
|
16,770
|
|
|
16,994
|
|
|||
Amortization of deferred debt costs
|
3,393
|
|
|
3,250
|
|
|
2,563
|
|
|||
(Gain) loss on disposal of property and equipment
|
(527
|
)
|
|
(580
|
)
|
|
171
|
|
|||
Loss on debt extinguishment
|
4,334
|
|
|
—
|
|
|
755
|
|
|||
Deferred taxes
|
(27,398
|
)
|
|
1,450
|
|
|
—
|
|
|||
Stock-based compensation
|
3,788
|
|
|
3,064
|
|
|
2,843
|
|
|||
Unrealized gain on hedge
|
(30
|
)
|
|
—
|
|
|
—
|
|
|||
Changes in operating assets and liabilities (Note 18)
|
(3,902
|
)
|
|
(14,020
|
)
|
|
(14,376
|
)
|
|||
Net cash provided by operating activities
|
41,093
|
|
|
39,474
|
|
|
24,767
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
|||||
Plateau Acquisition, net of cash acquired
|
(396,323
|
)
|
|
—
|
|
|
—
|
|
|||
Tealstone Acquisition, net of cash acquired
|
—
|
|
|
—
|
|
|
(54,861
|
)
|
|||
Capital expenditures
|
(15,397
|
)
|
|
(13,171
|
)
|
|
(9,420
|
)
|
|||
Proceeds from sale of property and equipment
|
1,334
|
|
|
1,789
|
|
|
8,384
|
|
|||
Net cash used in investing activities
|
(410,386
|
)
|
|
(11,382
|
)
|
|
(55,897
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
||||
Cash received from credit facility
|
430,000
|
|
|
—
|
|
|
85,000
|
|
|||
Repayments of long-term debt
|
(87,621
|
)
|
|
(11,555
|
)
|
|
(4,710
|
)
|
|||
Distributions to noncontrolling interest owners
|
(7,360
|
)
|
|
(1,350
|
)
|
|
—
|
|
|||
Purchase of treasury stock
|
(3,201
|
)
|
|
(4,731
|
)
|
|
—
|
|
|||
Debt issuance costs
|
(10,688
|
)
|
|
—
|
|
|
(6,871
|
)
|
|||
Other
|
(199
|
)
|
|
(314
|
)
|
|
(1,121
|
)
|
|||
Net cash provided by (used in) financing activities
|
320,931
|
|
|
(17,950
|
)
|
|
72,298
|
|
|||
Net change in cash and cash equivalents
|
(48,362
|
)
|
|
10,142
|
|
|
41,168
|
|
|||
Cash and cash equivalents at beginning of period
|
94,095
|
|
|
83,953
|
|
|
42,785
|
|
|||
Cash and cash equivalents at end of period
|
$
|
45,733
|
|
|
$
|
94,095
|
|
|
$
|
83,953
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
||||||
Cash paid during the period for interest
|
$
|
11,566
|
|
|
$
|
10,829
|
|
|
$
|
9,800
|
|
Cash paid during the period for income taxes
|
$
|
94
|
|
|
$
|
276
|
|
|
$
|
279
|
|
Non-cash items:
|
|
|
|
|
|
||||||
Share consideration given for acquisitions
|
$
|
16,195
|
|
|
$
|
—
|
|
|
$
|
17,601
|
|
Notes and deferred payments to sellers
|
$
|
10,000
|
|
|
$
|
—
|
|
|
$
|
11,588
|
|
Estimated tax basis election
|
$
|
5,141
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Warrants issued to lenders (1,000 Warrants)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,500
|
|
|
STERLING CONSTRUCTION COMPANY, INC. STOCKHOLDERS
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional Paid in Capital
|
|
Treasury Stock
|
|
Retained Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Total Sterling Stockholders’ Equity
|
|
Non-controlling interests
|
|
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Total
|
|||||||||||||||||||||||
Balance at December 31, 2016
|
24,987
|
|
|
$
|
250
|
|
|
$
|
208,922
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
(101,738
|
)
|
|
$
|
—
|
|
|
$
|
107,434
|
|
|
$
|
656
|
|
|
$
|
108,090
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,617
|
|
|
—
|
|
|
11,617
|
|
|
4,200
|
|
|
15,817
|
|
||||||||
Stock-based compensation
|
248
|
|
|
3
|
|
|
2,840
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,843
|
|
|
—
|
|
|
2,843
|
|
||||||||
Stock issued for Tealstone Acquisition
|
1,882
|
|
|
19
|
|
|
17,042
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,061
|
|
|
—
|
|
|
17,061
|
|
||||||||
Distribution to owners
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Warrants issued to lenders
|
—
|
|
|
—
|
|
|
3,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,500
|
|
|
—
|
|
|
3,500
|
|
||||||||
Other
|
(66
|
)
|
|
(1
|
)
|
|
(1,121
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,122
|
)
|
|
—
|
|
|
(1,122
|
)
|
||||||||
Balance at December 31, 2017
|
27,051
|
|
|
271
|
|
|
231,183
|
|
|
—
|
|
|
—
|
|
|
(90,121
|
)
|
|
—
|
|
|
141,333
|
|
|
4,856
|
|
|
146,189
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,187
|
|
|
—
|
|
|
25,187
|
|
|
4,353
|
|
|
29,540
|
|
||||||||
Stock-based compensation
|
40
|
|
|
—
|
|
|
3,064
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,064
|
|
|
—
|
|
|
3,064
|
|
||||||||
Distribution to owners
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,350
|
)
|
|
(1,350
|
)
|
||||||||
Purchase of Treasury Stock
|
(467
|
)
|
|
—
|
|
|
—
|
|
|
467
|
|
|
(4,731
|
)
|
|
—
|
|
|
—
|
|
|
(4,731
|
)
|
|
—
|
|
|
(4,731
|
)
|
||||||||
Shares withheld for taxes
|
(27
|
)
|
|
—
|
|
|
(452
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(452
|
)
|
|
—
|
|
|
(452
|
)
|
||||||||
Balance at December 31, 2018
|
26,597
|
|
|
271
|
|
|
233,795
|
|
|
467
|
|
|
(4,731
|
)
|
|
(64,934
|
)
|
|
—
|
|
|
164,401
|
|
|
7,859
|
|
|
172,260
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,901
|
|
|
—
|
|
|
39,901
|
|
|
794
|
|
|
40,695
|
|
||||||||
Loss on interest rate swap
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(209
|
)
|
|
(209
|
)
|
|
—
|
|
|
(209
|
)
|
||||||||
Stock-based compensation
|
(1
|
)
|
|
—
|
|
|
3,788
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,788
|
|
|
—
|
|
|
3,788
|
|
||||||||
Distributions to owners
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,360
|
)
|
|
(7,360
|
)
|
||||||||
Purchase of Treasury Stock
|
(250
|
)
|
|
—
|
|
|
—
|
|
|
250
|
|
|
(3,201
|
)
|
|
—
|
|
|
—
|
|
|
(3,201
|
)
|
|
—
|
|
|
(3,201
|
)
|
||||||||
Stock issued for Plateau Acquisition
|
1,245
|
|
|
12
|
|
|
16,183
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,195
|
|
|
—
|
|
|
16,195
|
|
||||||||
Issuance of stock
|
273
|
|
|
—
|
|
|
(2,599
|
)
|
|
(273
|
)
|
|
2,751
|
|
|
—
|
|
|
—
|
|
|
152
|
|
|
—
|
|
|
152
|
|
||||||||
Shares withheld for taxes
|
(92
|
)
|
|
—
|
|
|
(148
|
)
|
|
74
|
|
|
(961
|
)
|
|
—
|
|
|
—
|
|
|
(1,109
|
)
|
|
—
|
|
|
(1,109
|
)
|
||||||||
Balance at December 31, 2019
|
27,772
|
|
|
$
|
283
|
|
|
$
|
251,019
|
|
|
518
|
|
|
$
|
(6,142
|
)
|
|
$
|
(25,033
|
)
|
|
$
|
(209
|
)
|
|
$
|
219,918
|
|
|
$
|
1,293
|
|
|
$
|
221,211
|
|
1.
|
NATURE OF OPERATIONS
|
2.
|
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
|
•
|
Performance Obligations Satisfied Over Time (Heavy Civil and Specialty Services)
|
•
|
Performance Obligations Satisfied at a Point-in-Time (Residential)
|
•
|
Operating & Finance Leases—Effective January 1, 2019, the Company determines if an arrangement is a lease at inception. The operating lease right-of-use (“ROU”) assets are included within the Company’s non-current assets and lease liabilities are included in current or non-current liabilities on the Company’s Consolidated Balance Sheets. Finance leases are included in “Property and equipment”, “Current maturities of long-term debt”, and “Long-term debt” on the Company’s Consolidated Balance Sheets. ROU assets represent the Company’s right to use, or control the use of, a specified asset
|
•
|
Capital Leases—The Company accounts for capital leases, which transfer substantially all the benefits and risks incident to the ownership of the leased property to the Company, as the acquisition of an asset and the incurrence of an obligation. Under this method of accounting, the recorded value of the leased asset is amortized principally using the straight-line method over its estimated useful life and the obligation, including interest thereon, is reduced through payments over the life of the lease. Depreciation expense on equipment subject to capital leases and the related accumulated depreciation is included with that of owned equipment. Capital leases are recorded in “Long-term debt, net of current maturities” and “Current maturities of long-term debt,” as applicable, in our Consolidated Balance Sheets.
|
3.
|
PLATEAU ACQUISITION
|
Cash consideration transferred, net of $2,425 of cash acquired
|
$
|
375,000
|
|
Target working capital adjustment
|
21,323
|
|
|
Equity consideration transferred (1,245 shares at $13.01 per share(1))
|
16,195
|
|
|
Note payable to seller (See Note 9 - Debt)
|
10,000
|
|
|
Estimated tax basis election
|
5,141
|
|
|
Total consideration
|
$
|
427,659
|
|
Net tangible assets:
|
|
||
Accounts receivable, including retainage
|
$
|
81,921
|
|
Costs and estimated earnings in excess of billings
|
974
|
|
|
Other current assets
|
249
|
|
|
Property and equipment, net
|
65,492
|
|
|
Other non-current assets, net
|
10
|
|
|
Accounts payable
|
(22,039
|
)
|
|
Billings in excess of costs and estimated earnings
|
(16,540
|
)
|
|
Other current liabilities
|
(7,669
|
)
|
|
Total net tangible assets
|
102,398
|
|
|
Preliminary identifiable intangible assets
|
218,600
|
|
|
Goodwill
|
106,661
|
|
|
Total consideration transferred
|
$
|
427,659
|
|
|
Weighted Average Life (Years)
|
|
October 2, 2019
Fair Value
|
||
Customer relationships
|
25
|
|
$
|
191,800
|
|
Trade name
|
25
|
|
24,800
|
|
|
Non-compete agreements
|
5
|
|
2,000
|
|
|
Total
|
|
|
$
|
218,600
|
|
|
Years Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Pro forma revenue
|
$
|
1,358,736
|
|
|
$
|
1,326,854
|
|
Pro forma net income attributable to Sterling
|
$
|
90,408
|
|
|
$
|
54,282
|
|
4.
|
REVENUE FROM CUSTOMERS
|
|
|
December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Heavy Civil Backlog
|
|
$
|
834,049
|
|
|
$
|
780,706
|
|
Specialty Services Backlog
|
|
233,976
|
|
|
70,019
|
|
||
Total Heavy Civil and Specialty Services Backlog
|
|
$
|
1,068,025
|
|
|
$
|
850,725
|
|
|
|
Years Ended December 31,
|
||||||||||
Revenue by major end market
|
|
2019
|
|
2018
|
|
2017
|
||||||
Heavy Highway
|
|
$
|
483,175
|
|
|
$
|
513,376
|
|
|
$
|
579,157
|
|
Aviation
|
|
141,371
|
|
|
111,824
|
|
|
77,399
|
|
|||
Water Containment and Treatment
|
|
65,795
|
|
|
66,928
|
|
|
59,593
|
|
|||
Other
|
|
69,984
|
|
|
73,510
|
|
|
85,503
|
|
|||
Heavy Civil Revenue
|
|
$
|
760,325
|
|
|
$
|
765,638
|
|
|
$
|
801,652
|
|
|
|
|
|
|
|
|
||||||
Land Development
|
|
$
|
84,637
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial
|
|
128,187
|
|
|
120,333
|
|
|
48,314
|
|
|||
Specialty Services Revenue
|
|
$
|
212,824
|
|
|
$
|
120,333
|
|
|
$
|
48,314
|
|
|
|
|
|
|
|
|
||||||
Residential Revenue
|
|
$
|
153,129
|
|
|
$
|
151,696
|
|
|
$
|
107,992
|
|
|
|
|
|
|
|
|
||||||
Revenues
|
|
$
|
1,126,278
|
|
|
$
|
1,037,667
|
|
|
$
|
957,958
|
|
|
|
|
|
|
|
|
||||||
Revenue by contract type
|
|
|
|
|
|
|
||||||
Fixed-Unit Price
|
|
$
|
708,638
|
|
|
$
|
733,047
|
|
|
$
|
755,840
|
|
Lump Sum
|
|
262,237
|
|
|
146,874
|
|
|
57,823
|
|
|||
Residential and Other
|
|
155,403
|
|
|
157,746
|
|
|
144,295
|
|
|||
Revenues
|
|
$
|
1,126,278
|
|
|
$
|
1,037,667
|
|
|
$
|
957,958
|
|
5.
|
CONSOLIDATED 50% OWNED SUBSIDIARIES
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
Members’ interest subject to mandatory redemption
|
$
|
40,000
|
|
|
$
|
40,000
|
|
Net accumulated earnings
|
9,003
|
|
|
9,343
|
|
||
Total liability
|
$
|
49,003
|
|
|
$
|
49,343
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues
|
$
|
205,615
|
|
|
$
|
193,677
|
|
|
$
|
181,589
|
|
Operating income
|
$
|
6,372
|
|
|
$
|
8,819
|
|
|
$
|
9,069
|
|
Net income attributable to Sterling common stockholders
|
$
|
3,196
|
|
|
$
|
4,415
|
|
|
$
|
4,531
|
|
6.
|
CONSTRUCTION JOINT VENTURES
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Balance, beginning of period
|
$
|
7,859
|
|
|
$
|
4,856
|
|
|
$
|
656
|
|
Net income attributable to noncontrolling interest included in equity
|
794
|
|
|
4,353
|
|
|
4,200
|
|
|||
Distributions to noncontrolling interest owners
|
(7,360
|
)
|
|
(1,350
|
)
|
|
—
|
|
|||
Balance, end of period
|
$
|
1,293
|
|
|
$
|
7,859
|
|
|
$
|
4,856
|
|
|
Year Ended December 31, 2019
|
||
Revenues
|
$
|
6,903
|
|
Operating income
|
$
|
467
|
|
Net income attributable to Sterling common stockholders
|
$
|
471
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
Current assets
|
$
|
92,710
|
|
|
$
|
64,815
|
|
Current liabilities
|
$
|
(86,705
|
)
|
|
$
|
(74,543
|
)
|
Sterling’s receivables from and equity in construction joint ventures
|
$
|
9,196
|
|
|
$
|
10,720
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues
|
$
|
158,291
|
|
|
$
|
115,441
|
|
|
$
|
93,848
|
|
Income before tax
|
$
|
20,449
|
|
|
$
|
8,097
|
|
|
$
|
7,827
|
|
Sterling’s noncontrolling interest:
|
|
|
|
|
|
||||||
Revenues
|
$
|
76,419
|
|
|
$
|
55,134
|
|
|
$
|
44,948
|
|
Income before tax
|
$
|
8,170
|
|
|
$
|
4,104
|
|
|
$
|
3,847
|
|
7.
|
PROPERTY AND EQUIPMENT
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
Construction and transportation equipment
|
$
|
217,945
|
|
|
$
|
144,630
|
|
Buildings and improvements
|
14,641
|
|
|
11,072
|
|
||
Land
|
3,891
|
|
|
2,720
|
|
||
Office equipment
|
2,767
|
|
|
2,711
|
|
||
Total property and equipment
|
239,244
|
|
|
161,133
|
|
||
Less accumulated depreciation
|
(123,214
|
)
|
|
(109,134
|
)
|
||
Total property and equipment, net
|
$
|
116,030
|
|
|
$
|
51,999
|
|
8.
|
GOODWILL AND OTHER INTANGIBLE ASSETS
|
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
Goodwill
|
|
|
|
|
||||
Heavy Civil
|
|
$
|
54,806
|
|
|
$
|
54,806
|
|
Specialty Services
|
|
106,661
|
|
|
—
|
|
||
Residential
|
|
30,425
|
|
|
30,425
|
|
||
Total Goodwill
|
|
$
|
191,892
|
|
|
$
|
85,231
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||||||
|
Weighted
Average Life (Years) |
|
Gross
Carrying Amount |
|
Accumulated Amortization |
|
Gross
Carrying Amount |
|
Accumulated Amortization |
||||||||
Customer relationships
|
25
|
|
$
|
232,623
|
|
|
$
|
(6,911
|
)
|
|
$
|
40,823
|
|
|
$
|
(3,159
|
)
|
Trade name
|
23
|
|
30,107
|
|
|
(1,692
|
)
|
|
5,307
|
|
|
(919
|
)
|
||||
Non-compete agreements
|
5
|
|
2,487
|
|
|
(291
|
)
|
|
487
|
|
|
(121
|
)
|
||||
Total
|
24
|
|
$
|
265,217
|
|
|
$
|
(8,894
|
)
|
|
$
|
46,617
|
|
|
$
|
(4,199
|
)
|
9.
|
DEBT
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
Credit Facility
|
$
|
420,000
|
|
|
$
|
—
|
|
Oaktree Facility
|
—
|
|
|
74,571
|
|
||
Note payable to seller, Plateau Acquisition
|
10,000
|
|
|
—
|
|
||
Notes and deferred payments to sellers, Tealstone Acquisition
|
12,230
|
|
|
13,572
|
|
||
Notes payable for transportation and construction equipment and other
|
805
|
|
|
612
|
|
||
Total debt
|
443,035
|
|
|
88,755
|
|
||
|
|
|
|
||||
Less - Current maturities of long-term debt
|
(42,473
|
)
|
|
(2,899
|
)
|
||
Less - Unamortized debt issuance costs
|
(9,935
|
)
|
|
(6,739
|
)
|
||
Total long-term debt
|
$
|
390,627
|
|
|
$
|
79,117
|
|
•
|
a Total Leverage Ratio (as defined in the Credit Agreement) at the last day of each fiscal quarter not to be greater than 4.00 to 1.00 ending on December 31, 2019 through and including June 30, 2020, 3.75 to 1.00 ending on September 30, 2020, 3.50 to 1.00 ending on December 31, 2020 through and including March 31, 2021, 3.25 to 1.00 ending on June 30, 2021 through and including September 30, 2021, and 3.00 to 1.00 ending on December 31, 2021 and thereafter; and
|
•
|
a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of not less than 1.20 to 1.00 as of the last day of each fiscal quarter of the Company, commencing with the fiscal quarter ending December 31, 2019.
|
10.
|
LEASE OBLIGATIONS
|
|
Twelve Months Ended December 31, 2019
|
||
Operating lease cost
|
$
|
8,594
|
|
Short-term lease cost
|
$
|
18,032
|
|
|
|
||
Finance lease cost:
|
|
||
Amortization of right-of-use assets
|
$
|
213
|
|
Interest on lease liabilities
|
20
|
|
|
Total finance lease cost
|
$
|
233
|
|
|
Twelve Months Ended December 31, 2019
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows from operating leases
|
$
|
8,127
|
|
Operating cash flows from finance leases
|
$
|
20
|
|
Financing cash flows from finance leases
|
$
|
213
|
|
|
|
||
Right-of-use assets obtained in exchange for lease obligations (non-cash):
|
|
||
Operating leases
|
$
|
8,955
|
|
Finance leases
|
$
|
816
|
|
|
December 31, 2019
|
||
Operating Leases
|
|
||
Operating lease right-of-use assets
|
$
|
13,979
|
|
|
|
||
Current portion of long-term lease obligations
|
$
|
7,095
|
|
Long-term lease obligations
|
6,976
|
|
|
Total operating lease liabilities
|
$
|
14,071
|
|
|
|
||
Finance Leases
|
|
||
Property and equipment, at cost
|
$
|
1,479
|
|
Accumulated depreciation
|
(482
|
)
|
|
Property and equipment, net
|
$
|
997
|
|
|
|
||
Current maturities of long-term debt
|
$
|
204
|
|
Long-term debt
|
560
|
|
|
Total finance lease liabilities
|
$
|
764
|
|
|
|
||
Weighted Average Remaining Lease Term
|
|
||
Operating leases
|
2.5
|
|
|
Finance leases
|
4.0
|
|
|
|
|
||
Weighted Average Discount Rate
|
|
||
Operating leases
|
6.0
|
%
|
|
Finance leases
|
4.2
|
%
|
|
Operating
Leases
|
|
Finance
Leases
|
||||
Year Ending December 31,
|
|
|
|
||||
2020
|
$
|
6,813
|
|
|
$
|
233
|
|
2021
|
5,180
|
|
|
208
|
|
||
2022
|
2,858
|
|
|
161
|
|
||
2023
|
784
|
|
|
154
|
|
||
2024
|
45
|
|
|
77
|
|
||
Thereafter
|
—
|
|
|
—
|
|
||
Total lease payments
|
$
|
15,680
|
|
|
$
|
833
|
|
Less imputed interest
|
(1,609
|
)
|
|
(69
|
)
|
||
Total
|
$
|
14,071
|
|
|
$
|
764
|
|
11.
|
FINANCIAL INSTRUMENTS
|
•
|
Level 2—Fair value is based on internally developed models that use, as their basis, readily observable market parameters. Our derivative positions are classified within level 2 of the valuation hierarchy as they are valued using quoted market prices for similar assets and liabilities in active markets. These level 2 derivatives are valued utilizing an income approach, which discounts future cash flow based on current market expectations and adjusts for credit risk.
|
•
|
Level 3—Fair value is based on internally developed models that use, as their basis, significant unobservable market parameters. The Company did not have any level 3 classifications at December 31, 2019.
|
|
|
December 31, 2019
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Derivative Assets
|
|
|
|
|
|
|
|
|
||||||||
Other current assets
|
|
$
|
—
|
|
|
$
|
216
|
|
|
$
|
—
|
|
|
$
|
216
|
|
Other non-current assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total assets at fair value
|
|
$
|
—
|
|
|
$
|
216
|
|
|
$
|
—
|
|
|
$
|
216
|
|
Derivative Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Other current liabilities
|
|
$
|
—
|
|
|
$
|
(61
|
)
|
|
$
|
—
|
|
|
$
|
(61
|
)
|
Other non-current liabilities
|
|
—
|
|
|
(398
|
)
|
|
—
|
|
|
(398
|
)
|
||||
Total liabilities at fair value
|
|
$
|
—
|
|
|
$
|
(459
|
)
|
|
$
|
—
|
|
|
$
|
(459
|
)
|
|
|
Gain (Loss) Recognized in OCI
|
|
Gain (Loss) Reclassified from AOCI into Earnings (1)
|
||
Interest rate cash flow hedge
|
|
(273
|
)
|
|
30
|
|
12.
|
COMMITMENTS AND CONTINGENCIES
|
13.
|
INCOME TAXES
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Current tax expense
|
$
|
1,182
|
|
|
$
|
288
|
|
|
$
|
118
|
|
Deferred tax (benefit) expense
|
(27,398
|
)
|
|
1,450
|
|
|
—
|
|
|||
Income tax (benefit) expense
|
$
|
(26,216
|
)
|
|
$
|
1,738
|
|
|
$
|
118
|
|
|
Years Ended December 31,
|
|||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||||
Tax expense (recovery) at the U.S. federal statutory rate
|
$
|
3,041
|
|
|
21.0
|
%
|
|
$
|
6,568
|
|
|
21.0
|
%
|
|
$
|
5,577
|
|
|
35.0
|
%
|
State tax based on income, net of refunds and federal benefits
|
1,670
|
|
|
11.5
|
|
|
364
|
|
|
1.2
|
|
|
(264
|
)
|
|
(1.7
|
)
|
|||
Taxes on subsidiaries’ and joint ventures’ earnings allocated to noncontrolling interests owners
|
(2,241
|
)
|
|
(15.5
|
)
|
|
(4,097
|
)
|
|
(13.1
|
)
|
|
(5,504
|
)
|
|
(34.5
|
)
|
|||
Valuation allowance
|
(29,375
|
)
|
|
(202.9
|
)
|
|
(1,013
|
)
|
|
(3.3
|
)
|
|
(18,006
|
)
|
|
(113.0
|
)
|
|||
Tax credits
|
(397
|
)
|
|
(2.7
|
)
|
|
(286
|
)
|
|
(0.9
|
)
|
|
(349
|
)
|
|
(2.2
|
)
|
|||
Tax rate change
|
—
|
|
|
—
|
|
|
(281
|
)
|
|
(0.9
|
)
|
|
19,545
|
|
|
122.7
|
|
|||
Return to provision
|
48
|
|
|
0.3
|
|
|
21
|
|
|
0.1
|
|
|
(62
|
)
|
|
(0.4
|
)
|
|||
Earn-out liability
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
460
|
|
|
2.9
|
|
|||
Equity compensation
|
805
|
|
|
5.6
|
|
|
26
|
|
|
0.1
|
|
|
(1,371
|
)
|
|
(8.6
|
)
|
|||
Other permanent differences
|
233
|
|
|
1.6
|
|
|
436
|
|
|
1.4
|
|
|
92
|
|
|
0.6
|
|
|||
Income tax (benefit) expense
|
$
|
(26,216
|
)
|
|
(181.1
|
)%
|
|
$
|
1,738
|
|
|
5.6
|
%
|
|
$
|
118
|
|
|
0.8
|
%
|
|
Long Term
|
||||||
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
Assets related to:
|
|
|
|
||||
Accrued compensation and other
|
$
|
3,981
|
|
|
$
|
3,707
|
|
Goodwill
|
—
|
|
|
—
|
|
||
Noncontrolling interests
|
1,812
|
|
|
1,687
|
|
||
Deferred revenue
|
922
|
|
|
232
|
|
||
Members interest liabilities
|
11,328
|
|
|
11,570
|
|
||
Right of use liabilities
|
3,253
|
|
|
—
|
|
||
Net operating loss carryforwards
|
19,801
|
|
|
22,818
|
|
||
Total deferred tax assets
|
41,097
|
|
|
40,014
|
|
||
Valuation allowance for deferred tax assets
|
—
|
|
|
(31,718
|
)
|
||
Net deferred tax assets
|
$
|
41,097
|
|
|
$
|
8,296
|
|
|
|
|
|
||||
Liabilities related to:
|
|
|
|
||||
Depreciation of property and equipment
|
(7,911
|
)
|
|
(7,709
|
)
|
||
Right of use assets
|
(3,232
|
)
|
|
—
|
|
||
Amortization of tax basis goodwill
|
(3,091
|
)
|
|
(1,450
|
)
|
||
Other
|
(851
|
)
|
|
(587
|
)
|
||
Net deferred tax liabilities
|
$
|
(15,085
|
)
|
|
$
|
(9,746
|
)
|
|
|
|
|
||||
Net total deferred tax asset (liability)
|
$
|
26,012
|
|
|
$
|
(1,450
|
)
|
14.
|
STOCKHOLDERS' EQUITY
|
|
Unrealized Fair Value of Swap (Cash Flow Hedge)
|
||
Balance at December 31, 2018
|
$
|
—
|
|
OCI before reclassifications
|
(186
|
)
|
|
Amounts reclassified from AOCI
|
(23
|
)
|
|
Net OCI
|
(209
|
)
|
|
Balance at December 31, 2019
|
$
|
(209
|
)
|
|
Amount Reclassified from AOCI (1)
|
||
Interest rate derivatives (interest expense)
|
$
|
(30
|
)
|
Tax
|
7
|
|
|
Total net of tax
|
$
|
(23
|
)
|
15.
|
STOCK INCENTIVE PLAN
|
|
Number of Shares
|
|
Weighted Average
Fair Value Per Share |
|||
Employee’s RSAs
|
|
|
|
|||
Balance at December 31, 2018
|
147
|
|
|
11.16
|
|
|
Granted
|
52
|
|
|
12.06
|
|
|
Vested
|
(114
|
)
|
|
11.04
|
|
|
Forfeited
|
(2
|
)
|
|
9.64
|
|
|
Balance at December 31, 2019
|
83
|
|
|
11.91
|
|
|
Director’s RSAs
|
|
|
|
|||
Balance at December 31, 2018
|
42
|
|
|
11.67
|
|
|
Granted
|
52
|
|
|
12.06
|
|
|
Vested
|
(52
|
)
|
|
$
|
11.69
|
|
Forfeited
|
—
|
|
|
—
|
|
|
Balance at December 31, 2019
|
42
|
|
|
12.12
|
|
|
Number of Shares
|
|
Weighted Average
Fair Value Per Share |
||
Nonvested RSUs
|
|
|
|
||
Balance at December 31, 2018
|
217
|
|
|
12.40
|
|
Granted
|
261
|
|
|
12.14
|
|
Vested
|
(120
|
)
|
|
14.30
|
|
Forfeited
|
(14
|
)
|
|
16.14
|
|
Balance at December 31, 2019
|
344
|
|
|
13.78
|
|
|
April 3, 2017
|
||
Stock price at grant date
|
$
|
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
|
—
|
%
|
|
Total fair value
|
$
|
3,500
|
|
16.
|
EARNINGS PER SHARE
|
|
Years Ended December 31,
|
||||||||||
Numerator:
|
2019
|
|
2018
|
|
2017
|
||||||
Net income attributable to Sterling common stockholders
|
$
|
39,901
|
|
|
$
|
25,187
|
|
|
$
|
11,617
|
|
Denominator:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding — basic
|
26,671
|
|
|
26,903
|
|
|
26,274
|
|
|||
Shares for dilutive unvested stock
|
448
|
|
|
291
|
|
|
438
|
|
|||
Weighted average common shares outstanding and assumed conversions— diluted
|
27,119
|
|
|
27,194
|
|
|
26,712
|
|
|||
Basic net income per share attributable to Sterling common stockholders
|
$
|
1.50
|
|
|
$
|
0.94
|
|
|
$
|
0.44
|
|
Diluted net income per share attributable to Sterling common stockholders
|
$
|
1.47
|
|
|
$
|
0.93
|
|
|
$
|
0.43
|
|
17.
|
RETIREMENT BENEFITS
|
•
|
Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
|
•
|
If the Company chooses to stop participating in some of its multi-employer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
|
|
Pension Plan Employer
|
|
Pension Protection Act (“PPA”) Certified Zone Status (1)
|
|
FIP / RP Status Pending/Implemented (2)
|
|
Contributions
|
|
Surcharge
Imposed
|
|
Expiration Date of Collective Bargaining Agreement (3)
|
||||||||||||
Pension Trust
Fund
|
Identification Number
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|||||||||
Pension Trust Fund for Operating Engineers Pension Plan
|
94-6090764
|
|
Yellow
|
|
Red
|
|
Yes
|
|
$
|
2,314
|
|
|
$
|
1,932
|
|
|
$
|
2,477
|
|
|
No
|
|
Various
|
Laborers Pension Trust for Northern California
|
94-6277608
|
|
Green
|
|
Yellow
|
|
Yes
|
|
857
|
|
|
880
|
|
|
953
|
|
|
No
|
|
Various
|
|||
Carpenter Funds Administrative Office
|
94-6050970
|
|
Red
|
|
Red
|
|
Yes
|
|
547
|
|
|
748
|
|
|
727
|
|
|
No
|
|
Various
|
|||
Cement Mason Pension Trust Fund For Northern California
|
94-6277669
|
|
Yellow
|
|
Yellow
|
|
Yes
|
|
320
|
|
|
504
|
|
|
423
|
|
|
No
|
|
Various
|
|||
All other funds (4)
|
|
|
|
|
|
|
|
|
7,144
|
|
|
7,283
|
|
|
8,006
|
|
|
|
|
|
|||
|
|
|
|
|
Total Contributions:
|
|
$
|
11,182
|
|
|
$
|
11,347
|
|
|
$
|
12,586
|
|
|
|
|
|
(1)
|
The most recent PPA zone status available in 2019 and 2018 is for the plan’s year-end during 2018 and 2017, respectively. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the orange zone are less than 80 percent funded and have an Accumulated Funding Deficiency in the current year or projected into the next six years, plans in the yellow zone are less than 80 percent funded and plans in the green zone are at least 80 percent funded.
|
(2)
|
Indicates whether the plan has a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) which is either pending or has been implemented.
|
(3)
|
Lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject.
|
(4)
|
These funds include multi-employer plans for pensions and other employee benefits. The total individually insignificant multi-employer pension costs contributed were $829, $1,300 and $1,500 for 2019, 2018 and 2017, respectively, and are included in the contributions to all other funds along with contributions to other types of benefit plans. Other employee benefits include certain coverage for medical, prescription drug, dental, vision, life and accidental death and dismemberment, disability and other benefit costs.
|
18.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
Twelve Months Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Accounts receivable, including retainage
|
$
|
(21,300
|
)
|
|
$
|
(11,094
|
)
|
|
$
|
(29,923
|
)
|
Contracts in progress, net
|
6,023
|
|
|
(4,397
|
)
|
|
(3,492
|
)
|
|||
Receivables from and equity in construction joint ventures
|
1,524
|
|
|
659
|
|
|
(4,250
|
)
|
|||
Other current and non-current assets
|
43
|
|
|
924
|
|
|
929
|
|
|||
Accounts payable
|
10,987
|
|
|
1,969
|
|
|
13,579
|
|
|||
Accrued compensation and other liabilities
|
(839
|
)
|
|
(4,038
|
)
|
|
6,625
|
|
|||
Members' interest subject to mandatory redemption and undistributed earnings
|
(340
|
)
|
|
1,957
|
|
|
2,156
|
|
|||
Changes in operating assets and liabilities
|
$
|
(3,902
|
)
|
|
$
|
(14,020
|
)
|
|
$
|
(14,376
|
)
|
19.
|
CONCENTRATION OF RISK AND ENTERPRISE WIDE DISCLOSURES
|
|
|
Years Ended December 31,
|
|||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|||||||||||||||
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||||
Utah Department of Transportation (“UDOT”)
|
|
$
|
135,496
|
|
|
12.0
|
%
|
|
$
|
153,276
|
|
|
14.8
|
%
|
|
$
|
140,529
|
|
|
14.7
|
%
|
Texas Department of Transportation (“TXDOT”)
|
|
*
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|
103,236
|
|
|
10.8
|
%
|
20.
|
RELATED PARTY TRANSACTIONS
|
21.
|
SEGMENT INFORMATION
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue
|
|
|
|
|
|
|
||||||
Heavy Civil
|
|
$
|
760,325
|
|
|
$
|
765,638
|
|
|
$
|
801,652
|
|
Specialty Services
|
|
212,824
|
|
|
120,333
|
|
|
48,314
|
|
|||
Residential
|
|
153,129
|
|
|
151,696
|
|
|
107,992
|
|
|||
Total Revenue
|
|
$
|
1,126,278
|
|
|
$
|
1,037,667
|
|
|
$
|
957,958
|
|
|
|
|
|
|
|
|
||||||
Depreciation and Amortization
|
|
|
|
|
|
|
||||||
Heavy Civil
|
|
$
|
12,839
|
|
|
$
|
13,492
|
|
|
$
|
14,789
|
|
Specialty Services
|
|
6,059
|
|
|
1,439
|
|
|
815
|
|
|||
Residential
|
|
1,842
|
|
|
1,839
|
|
|
1,390
|
|
|||
Total Depreciation and Amortization
|
|
$
|
20,740
|
|
|
$
|
16,770
|
|
|
$
|
16,994
|
|
|
|
|
|
|
|
|
||||||
Operating Income
|
|
|
|
|
|
|
|
|
||||
Heavy Civil
|
|
$
|
3,316
|
|
|
$
|
17,044
|
|
|
$
|
8,246
|
|
Specialty Services
|
|
18,207
|
|
|
4,629
|
|
|
2,284
|
|
|||
Residential
|
|
20,539
|
|
|
20,938
|
|
|
15,646
|
|
|||
Subtotal
|
|
42,062
|
|
|
42,611
|
|
|
26,176
|
|
|||
Acquisition related costs
|
|
(4,311
|
)
|
|
—
|
|
|
—
|
|
|||
Total Operating Income
|
|
$
|
37,751
|
|
|
$
|
42,611
|
|
|
$
|
26,176
|
|
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
Assets
|
|
|
|
|
||||
Heavy Civil
|
|
$
|
287,779
|
|
|
$
|
318,586
|
|
Specialty Services
|
|
587,642
|
|
|
76,170
|
|
||
Residential
|
|
86,519
|
|
|
87,817
|
|
||
Total Assets
|
|
$
|
961,940
|
|
|
$
|
482,573
|
|
22.
|
QUARTERLY FINANCIAL INFORMATION
|
|
2019 Quarters Ended (unaudited)
|
||||||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Revenues
|
$
|
223,949
|
|
|
$
|
264,086
|
|
|
$
|
291,699
|
|
|
$
|
346,544
|
|
Gross profit
|
19,503
|
|
|
25,496
|
|
|
29,216
|
|
|
33,579
|
|
||||
Income (loss) before income taxes
|
2,024
|
|
|
8,571
|
|
|
9,422
|
|
|
(5,538
|
)
|
||||
Net income attributable to Sterling common stockholders
|
$
|
1,815
|
|
|
$
|
7,828
|
|
|
$
|
7,957
|
|
|
$
|
22,301
|
|
Net income per share attributable to Sterling common stockholders:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.07
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.81
|
|
Diluted
|
$
|
0.07
|
|
|
$
|
0.29
|
|
|
$
|
0.30
|
|
|
$
|
0.79
|
|
|
2018 Quarters Ended (unaudited)
|
||||||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Revenues
|
$
|
222,492
|
|
|
$
|
268,734
|
|
|
$
|
291,266
|
|
|
$
|
255,175
|
|
Gross profit
|
$
|
19,834
|
|
|
$
|
31,046
|
|
|
$
|
31,279
|
|
|
$
|
28,173
|
|
Income before income taxes
|
$
|
3,721
|
|
|
$
|
9,238
|
|
|
$
|
11,581
|
|
|
$
|
6,738
|
|
Net income attributable to Sterling common stockholders
|
$
|
2,489
|
|
|
$
|
8,174
|
|
|
$
|
8,917
|
|
|
$
|
5,607
|
|
Net income per share attributable to Sterling common stockholders:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.09
|
|
|
$
|
0.30
|
|
|
$
|
0.33
|
|
|
$
|
0.22
|
|
Diluted
|
$
|
0.09
|
|
|
$
|
0.30
|
|
|
$
|
0.33
|
|
|
$
|
0.21
|
|
|
2019 Quarters Ended (unaudited)
|
|
|
||||||||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
Total
|
||||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
||||||||||
Heavy Civil
|
$
|
150,505
|
|
|
$
|
200,236
|
|
|
$
|
218,894
|
|
|
$
|
190,690
|
|
|
$
|
760,325
|
|
Specialty Services
|
30,679
|
|
|
27,894
|
|
|
32,863
|
|
|
121,388
|
|
|
212,824
|
|
|||||
Residential
|
42,765
|
|
|
35,956
|
|
|
39,942
|
|
|
34,466
|
|
|
153,129
|
|
|||||
Total Revenue
|
$
|
223,949
|
|
|
$
|
264,086
|
|
|
$
|
291,699
|
|
|
$
|
346,544
|
|
|
$
|
1,126,278
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Income
|
|
|
|
|
|
|
|
|
|
||||||||||
Heavy Civil
|
$
|
(2,147
|
)
|
|
$
|
5,747
|
|
|
$
|
7,420
|
|
|
$
|
(7,704
|
)
|
|
$
|
3,316
|
|
Specialty Services
|
1,048
|
|
|
865
|
|
|
1,371
|
|
|
14,923
|
|
|
18,207
|
|
|||||
Residential
|
5,819
|
|
|
4,834
|
|
|
5,220
|
|
|
4,666
|
|
|
20,539
|
|
|||||
Subtotal
|
4,720
|
|
|
11,446
|
|
|
14,011
|
|
|
11,885
|
|
|
42,062
|
|
|||||
Acquisition related costs
|
—
|
|
|
(262
|
)
|
|
(1,896
|
)
|
|
(2,153
|
)
|
|
(4,311
|
)
|
|||||
Total Operating Income
|
$
|
4,720
|
|
|
$
|
11,184
|
|
|
$
|
12,115
|
|
|
$
|
9,732
|
|
|
$
|
37,751
|
|
|
2018 Quarters Ended (unaudited)
|
|
|
||||||||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
Total
|
||||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
||||||||||
Heavy Civil
|
$
|
158,722
|
|
|
$
|
194,174
|
|
|
$
|
222,299
|
|
|
$
|
190,443
|
|
|
$
|
765,638
|
|
Specialty Services
|
28,519
|
|
|
29,109
|
|
|
32,245
|
|
|
30,460
|
|
|
120,333
|
|
|||||
Residential
|
35,251
|
|
|
45,451
|
|
|
36,722
|
|
|
34,272
|
|
|
151,696
|
|
|||||
Total Revenue
|
$
|
222,492
|
|
|
$
|
268,734
|
|
|
$
|
291,266
|
|
|
$
|
255,175
|
|
|
$
|
1,037,667
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Income
|
|
|
|
|
|
|
|
|
|
||||||||||
Heavy Civil
|
$
|
1,092
|
|
|
$
|
4,322
|
|
|
$
|
7,385
|
|
|
$
|
4,245
|
|
|
$
|
17,044
|
|
Specialty Services
|
519
|
|
|
1,480
|
|
|
1,647
|
|
|
983
|
|
|
4,629
|
|
|||||
Residential
|
5,068
|
|
|
6,347
|
|
|
5,341
|
|
|
4,182
|
|
|
20,938
|
|
|||||
Total Operating Income
|
$
|
6,679
|
|
|
$
|
12,149
|
|
|
$
|
14,373
|
|
|
$
|
9,410
|
|
|
$
|
42,611
|
|
10.7.3(1)
|
|||
10.7.4(1)
|
|||
10.7.5(1)
|
|||
10.8(1)
|
|||
10.9(1)(2)
|
|||
10.10
|
|||
10.11(2)
|
|||
21.1(2)
|
|||
23.1(2)
|
|||
31.1(2)
|
|||
31.2(2)
|
|||
32.1(3)
|
|||
32.2(3)
|
|||
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.
|
|
|
|
|
By:
|
/s/ Joseph A. Cutillo
|
|
|
Joseph A. Cutillo, Chief Executive Officer
|
|
|
(Duly Authorized Officer)
|
Signature
|
|
Title
|
/s/ Joseph A. Cutillo
|
|
Chief Executive Officer (Principal Executive Officer)
|
Joseph A. Cutillo
|
|
Director
|
|
|
|
/s/ Ronald A. Ballschmiede
|
|
Executive Vice President, Chief Financial Officer, Chief Accounting Officer, and Treasurer (Principal Financial Officer and Principal Accounting Officer)
|
Ronald A. Ballschmiede
|
|
|
|
|
|
/s/Thomas M. White
|
|
Director and Non-Executive Chairman
|
Thomas M. White
|
|
|
|
|
|
/s/ Roger Cregg
|
|
Director
|
Roger Cregg
|
|
|
|
|
|
/s/ Marian M. Davenport
|
|
Director
|
Marian M. Davenport
|
|
|
|
|
|
/s/ Raymond F. Messer
|
|
Director
|
Raymond F. Messer
|
|
|
|
|
|
/s/ Dana C. O’Brien
|
|
Director
|
Dana C. O’Brien
|
|
|
|
|
|
/s/ Charles R. Patton
|
|
Director
|
Charles R. Patton
|
|
|
•
|
restricting dividends on the common stock;
|
•
|
diluting the voting power of the common stock;
|
•
|
impairing the liquidation rights of the common stock; or
|
•
|
delaying or preventing a change in control without further action by holders of the preferred stock.
|
1.
|
The 2019 Long-Term Incentive. On January 16, 2019, the Compensation & Talent Development Committee of the Board of Directors of the Company (the "Committee") established the 2019 Senior Executive Incentive Compensation Plan, to be effective January 1, 2019, which includes a Long-Term Incentive (the "LTI") which gives you and other participants the opportunity to earn shares of common stock of the Company. References in this Agreement to "common stock" mean the Company's common stock, $0.01 par value per share. The LTI is a stock award that vests over a three-year period. Each three-year period, which begins on January 1st and ends on December 31st is referred to in this Agreement as the "Program Cycle." The LTI consists of two awards made as part of the Program Cycle, as follows:
|
(a)
|
Restricted Stock Units. The Company hereby awards to you under the terms and conditions of this Agreement [#,###] Time-Based Restricted Share Units. These shares are referred to in this Agreement as (“RSUs”). Each of the RSUs is an unfunded and unsecured, non-transferable promise, subject to the vesting and other terms and conditions of this Agreement, to issue to you one share of common stock if the RSU vests.
|
(i)
|
Vesting. If you are an employee of the Company on each December 31st of the Program Cycle, the Restrictions with respect to one-third of the RSUs will expire, and such RSUs will be converted on a one-to-one basis to vested shares of Common Stock. If you terminate employment prior to December 31st, your unvested RSUs will be automatically forfeited except as otherwise provided below in Section 3 of this Agreement.
|
(ii)
|
Restrictions on Transfer and Right to Shares. You may not sell, assign, transfer, pledge or otherwise dispose of, or encumber any of the RSUs, or any of your rights or interests in them except by your will or according to the laws of descent and distribution (the "Restrictions"). You shall not have any right in, to or with respect to any of the shares of Common Stock (including any voting rights or rights with respect to cash dividends paid on the Common Stock) issuable under the Award until RSUs are converted into shares.
|
(b)
|
Performance Share Units. The Company hereby also awards to you under the terms and conditions of this Agreement [#,###] Performance-Based Restricted Share Units ("PSUs"), which amount represents the target award (the “Target PSUs”). Each of the PSUs is an unfunded and unsecured, non-transferable promise, subject to the vesting and other terms
|
(i)
|
Restrictions on Transfer and Right to Shares. The PSUs are subject to the same restrictions on transfer and rights to shares as are described above in Section 1(a)(ii) for the RSUs.
|
(ii)
|
Vesting — Performance Levels.
|
(A)
|
One-third of the Target PSUs are eligible to be converted into shares of common stock and vest depending on the Company achieving its Earnings Per Share goal (the “EPS Goal”) at each December 31st during the Program Cycle.
|
(B)
|
In determining achievement of the EPS Goal, the Company will disregard certain events including the following: (i) any change in the Company’s accounting methodology or its non-cash accounting for Federal and state net operating losses, in either case resulting in a positive or negative impact on the earnings-per-share calculation; (ii) any costs associated with restructuring of the Company’s debt or a Board-approved strategic acquisition or disposition whether or not consummated; or (iii) any other one-time events specified by the Committee in its discretion; provided however that the impact of any Board-approved acquisition or disposition consummated during the relevant calendar year on the Company’s earnings-per-share shall be all events taken into account for purposes of determining the EPS Goal.
|
(C)
|
The following table shows the percentage of one-third of the Target PSUs that would vest if the Company achieves its EPS Goal during each year in the Program Cycle. Payouts for performance that fall between two levels will be determined by linear interpolation. Any fractional share that results from the calculations will be rounded up to the next whole share. As can be seen in the table, it is possible on the one hand for more PSUs to vest than the number of Target PSUs, and at the other extreme, it is possible for none of the Target PSUs to vest. One-third of the Target PSUs will vest (subject to attainment of the applicable EPS Goal) in the year following the end of each calendar year in the Program Cycle upon the Company’s public release of earnings for the applicable calendar year setting forth the EPS results as of December 31st,. The Company shall calculate the resulting payout percentage based on the EPS results, and any earned shares of Common Stock will be issued to you within [ten] days after vesting. If the applicable threshold EPS Goal is not achieved for a given calendar year in the Program Cycle, one-third of the Target PSUs will terminate and be forfeited.
|
2.
|
Forfeiture.
|
(a)
|
Any RSUs or PSUs that do not vest are automatically forfeited, canceled, and cease to be subject to vesting.
|
(b)
|
No compensation will be paid to you for any of your RSUs or PSUs that are forfeited.
|
3.
|
Termination of Employment. In the event your employment with the Company terminates before the end of the Program Cycle, your RSUs and PSUs will be treated as follows:
|
(a)
|
Cause & Permanent Disability. For purposes of this Agreement —
|
(i)
|
The term Cause and the terms permanent disability or permanently disabled will have the meanings set forth in any employment agreement between you and the Company that is in effect when your employment terminates.
|
(ii)
|
If there is no employment agreement between you and the Company then in effect, or if there is an employment agreement in effect, but either or both of those terms are not defined in the agreement —
|
(A)
|
Whether you have become permanently disabled will be determined in the good faith judgement of the Compensation Committee; and
|
(B)
|
The word Cause will mean the termination of your employment for one or more of the following reasons:
|
•
|
You failed to perform your duties and/or responsibilities in a satisfactory manner after being given written notice of the failure and a reasonable period of time in which to cure the failure.
|
•
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You were grossly negligent in the performance of your duties and/or responsibilities.
|
•
|
You refused to perform your duties and/or responsibilities.
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•
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You committed any act of theft or other dishonesty, including, but not limited to any intentional misapplication of the Company's or its affiliates' funds or other property.
|
•
|
You were convicted of any other criminal activity (other than a traffic violation or a minor misdemeanor.)
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•
|
You participated in any activity involving moral turpitude that is or could reasonably be expected to be injurious to the business or reputation of the Company.
|
•
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You used alcohol immoderately and/or used non-prescribed narcotics that had the effect of adversely and materially affecting your performance of your duties and/or responsibilities.
|
•
|
You committed a material breach of a Company policy.
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4.
|
Issuance of RSUs & Converted PSU's.
|
(a)
|
Your RSUs, as well as any PSUs that vest are converted into shares of common stock, and will in each case be issued to you as a "book entry" in an account in your name at the Company's transfer agent. You will be advised of the issuance.
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(b)
|
When the shares are no longer subject to the Restrictions, you may leave them in your account at the transfer agent; you may have them electronically transferred to your brokerage account; or on written request to the Company’s General Counsel, you may have them delivered to you in the form of a paper stock certificate.
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5.
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Other Terms and Conditions.
|
(a)
|
Continuing Restrictions. Vested RSUs and shares of common stock issued for vested PSUs remain subject to all restrictions imposed on them by federal and state securities laws, rules and regulations, and by the Company's policies and rules relating to common stock.
|
(b)
|
Claw-Backs. All RSUs, PSUs and shares of common stock awarded and/or issued under this Agreement are subject to recovery by the Company under the terms of the Company's Incentive Compensation and Claw-Back Policy. A copy of the policy is attached as Appendix B to the Plan Description.
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(c)
|
Adjustments Any additional shares of common stock that are issued during the Program Cycle as a result of stock dividends, stock splits or recapitalizations (whether by way of mergers, consolidations, combinations or exchanges of shares or the like) will be subject to the terms and conditions of this Agreement, and are deemed included in the definition of the terms “RSU” and “PSU”. In the event of any stock dividend, stock split or recapitalization, the number of your remaining unvested RSUs or PSUs will be adjusted appropriately to reflect the event.
|
(d)
|
Securities & Other Laws. The Company may require as a pre-condition to the delivery to you of any shares of common stock that they have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company's common stock is then listed or quoted; and that either (i) a registration statement under the Securities Act of 1933 (the "Act") relating to the shares is in effect; or (ii) in the opinion of counsel to the Company, the issuance of the shares is exempt from registration under the Act. You agree to make the undertakings and agreements with the Company that the Company may reasonably require, and to take such other steps, if any, as
|
(e)
|
Taxes. You are responsible for any and all taxes that become payable by you by reason of the award and/or vesting of RSUs and PSUs. Prior to the Company issuing shares, you agree to pay to the Company or to make provision satisfactory to the Company for the payment of any taxes required by law to be paid by you, or that are required to be withheld from you by the Company relating to the shares, no later than the date of the event creating the tax liability. To the extent permitted by law, the Company has the right to retain from shares issuable under this Agreement or from salary or any other amounts payable to you, a value sufficient to satisfy any tax-withholding obligation.
|
(f)
|
Compliance with Section 409A of the Code. The Company intends that this Agreement either (a) complies with Section 409A of the Internal Revenue Code of 1986, as amended, and the guidance thereunder; or (b) is excepted from the provisions of Section 409A. As a result, the Company has the right to amend this Agreement and the Plan Description, or both, in order to cause them to be in compliance with Section 409A, or to qualify for being excepted from the provisions of Section 409A, and to take any other actions under the Plan Description and this Agreement to achieve that compliance or exception.
|
(g)
|
Decisions by the Committee. Any dispute or disagreement that arises under, or as a result of, or relating to, this Agreement will be resolved by the Committee in its sole and absolute discretion, and any resolution or any other determination by the Committee, and any interpretation by the Committee of the terms and conditions of this Agreement will be final, binding, and conclusive on all persons affected by it.
|
(h)
|
When used in this Agreement, the word "will" is either predictive or is synonymous with the word "shall", meaning "required"; and the word "may" means "permitted."
|
(i)
|
Governing Law. The provisions of the 2019 Long-Term Incentive and all awards made under this Agreement are governed by, and will be interpreted in accordance with, the laws of the State of Delaware, without regard to any of its conflicts of law provisions.
|
Subsidiaries of the registrant
|
|
|
|
|
|
Name
|
|
State of Incorporation or Organization
|
Texas Sterling Construction Co.
|
|
Delaware
|
Texas Sterling – Banicki, JV LLC
|
|
Texas
|
Road and Highway Builders, LLC
|
|
Nevada
|
Road and Highway Builders Inc.
|
|
Nevada
|
RHB Properties, LLC
|
|
Nevada
|
Road and Highway Builders of California, Inc.
|
|
California
|
Sterling Hawaii Asphalt, LLC
|
|
Hawaii
|
Ralph L. Wadsworth Construction Company, LLC
|
|
Utah
|
Ralph L. Wadsworth Construction Co. LP
|
|
California
|
J. Banicki Construction, Inc.
|
|
Arizona
|
Myers & Sons Construction, L.P.
|
|
California
|
Myers & Sons Construction, LLC
|
|
California
|
Tealstone Commercial, Inc.
|
|
Texas
|
Tealstone Residential Concrete, Inc.
|
|
Texas
|
Plateau Excavation, Inc.
|
|
Georgia
|
DeWitt Excavation, LLC
|
|
Florida
|
LK Gregory Construction, Inc.
|
|
Tennessee
|
1.
|
I have reviewed this Annual Report on Form 10-K 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 Annual Report on Form 10-K 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: March 3, 2020
|
/s/ Joseph A. Cutillo
|
|
|
Joseph A. Cutillo
|
|
|
Chief Executive Officer
|
Dated: March 3, 2020
|
/s/ Ronald A. Ballschmiede
|
|
|
Ronald A. Ballschmiede
|
|
|
Chief Financial Officer
|
|