Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [
√
] No
|
||
Aggregate market value of the voting and non-voting common equity held by non-affiliates at June 30, 2013: $139,688,910.
|
||
At March 7, 2014, the registrant had 16,670,372 shares of common stock outstanding.
|
PART I
|
|
PART II
|
|
PART III
|
|
PART IV
|
|
|
·
|
changes in general economic conditions, including recessions, reductions in federal, state and local government funding for infrastructure services and changes in those governments’ budgets, practices, laws and regulations;
|
|
·
|
delays or difficulties related to the completion of our projects, including additional costs, reductions in revenues or the payment of liquidated damages, or delays or difficulties related to obtaining required governmental permits and approvals;
|
|
·
|
actions of suppliers, subcontractors, design engineers, joint venture partners, customers, competitors, banks, surety companies and others which are beyond our control, including suppliers’, subcontractors’ and joint venture partners’ failure to perform;
|
|
·
|
the effects of estimates inherent in our percentage-of-completion accounting policies, including onsite conditions that differ materially from those assumed in our original bid, contract modifications, mechanical problems with our machinery or equipment and effects of other risks discussed in this document;
|
|
·
|
design/build contracts which subject us to the risk of design errors and omissions;
|
|
·
|
cost escalations associated with our contracts, including changes in availability, proximity and cost of materials such as steel, cement, concrete, aggregates, oil, fuel and other construction materials, and cost escalations associated with subcontractors and labor;
|
|
·
|
our dependence on a limited number of significant customers;
|
|
·
|
adverse weather conditions; although we prepare our budgets and bid contracts based on historical rain and snowfall patterns, the incidence of rain, snow, hurricanes, etc., may differ materially from these expectations;
|
|
·
|
the presence of competitors with greater financial resources or lower margin requirements than ours, and the impact of competitive bidders on our ability to obtain new backlog at reasonable margins acceptable to us;
|
|
·
|
our ability to successfully identify, finance, complete and integrate acquisitions;
|
|
·
|
citations issued by any governmental authority, including the Occupational Safety and Health Administration;
|
|
·
|
federal, state and local environmental laws and regulations non-compliance can result in penalties and/or termination of contracts as well as civil and criminal liability;
|
|
·
|
the instability of certain financial institutions, which could cause losses on our cash and cash equivalents and short-term investments;
|
|
·
|
adverse economic conditions in our markets; and
|
|
·
|
the other factors discussed in more detail in Item 1A. —Risk Factors.
|
|
·
|
We continue to change roles and responsibilities to improve functional support and controls when needed.
|
|
·
|
We continue to develop management tools designed to improve the estimating process and increase the oversight of that process where needed and continue to refine existing tools.
|
|
·
|
We continue to implement processes designed to better identify, evaluate and quantify risks for individual projects where needed and continue to refine existing process.
|
|
·
|
We continue to improve the methodologies for allocating overhead, indirect costs and equipment costs to individual projects in order to provide more accurate job cost and future bidding estimates.
|
|
·
|
We continue to improve the timeliness and content of reporting available to operations management.
|
|
·
|
Continue to add construction capabilities: by adding capabilities that augment our core contracting and construction competencies, we are able to improve gross margin opportunities, and more effectively compete for contracts that might not otherwise be available to us.
|
|
·
|
Expand into new markets and selectively pursue opportunities and strategic acquisitions: we will continue to seek to identify attractive new markets and opportunities in select western, southwestern and southeastern U.S. areas. We will also continue to assess opportunities to extend our service capabilities and expand our markets through acquisitions.
|
|
·
|
Apply core competencies across our markets: we will seek to capitalize on opportunities to export our Texas experience constructing water infrastructure projects and our Nevada earthmoving, aggregates and asphalt paving experience into Utah markets. Similarly, we believe that RLW’s experience with design-build, construction manager and general contractor (“CM/GC”) and other alternative project delivery methods in Utah, and its development of accelerated bridge construction (“ABC”) techniques can enhance opportunities for us in our Texas, California, Arizona and Nevada markets.
|
|
·
|
Increase our market leadership in our core markets: we have a strong presence in a number of markets in Texas, Utah and Nevada and intend to expand our presence in these states as well as Arizona, California, Hawaii and other states where we believe opportunities exist.
|
|
·
|
Position our business for future infrastructure spending: currently there are considerable uncertainties surrounding federal, state and local funding in our markets; however, we believe there is awareness of the need to build, reconstruct and repair our country’s infrastructure, including transportation infrastructure, such as bridges, highways, and mass transit systems and water infrastructure, such as water, wastewater and storm drainage systems. We will continue to build our expertise to capture this infrastructure spending. We also see opportunities to make enhancements to our operations that should yield improving performance over time. These include a tighter integration of the acquisitions we have made over the past several years which should result in cost reductions and better collaboration between business units when pursuing new contract opportunities.
|
|
·
|
Continue to attract, retain and develop our employees: we believe that our employees are key to the successful implementation of our business strategy, and we will continue allocating significant resources in order to attract and retain talented managers and supervisory and field personnel.
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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 or customers or our own personnel;
|
|
·
|
mechanical problems with our machinery or equipment;
|
|
·
|
citations issued by any governmental authority, including the Occupational Safety and Health Administration;
|
|
·
|
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 production; 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 part.
|
|
·
|
difficulties in the integration of operations and systems;
|
|
·
|
difficulties applying our expertise in one market into another market;
|
|
·
|
regulatory requirements that impose restrictions on bidding for certain projects because of historical operations by Sterling or the acquired company;
|
|
·
|
the key personnel, customers and project partners of the acquired company may terminate or diminish their relationships with the acquired company;
|
|
·
|
we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting;
|
|
·
|
we may assume or be held liable for risks and liabilities (including for environmental-related costs and liabilities) as a result of our acquisitions, some of which we may not discover during our due diligence;
|
|
·
|
we may not adequately anticipate competitive and other market factors applicable to the acquired company;
|
|
·
|
our ongoing business may be disrupted or receive insufficient management attention; and
|
|
·
|
we may not be able to realize cost savings or other financial benefits we anticipated or we may not realize the anticipated benefits in the time frame that we expected.
|
|
·
|
make distributions, pay dividends and buy back shares;
|
|
·
|
incur liens or encumbrances;
|
|
·
|
incur other indebtedness;
|
|
·
|
guarantee obligations;
|
|
·
|
dispose of a material portion of assets;
|
|
·
|
engage in a merger with a third party; and
|
|
·
|
make acquisitions.
|
Name
|
Age
|
Position/Offices
|
Executive
Officer Since
|
Peter MacKenna
(1)
|
51
|
President & Chief Executive Officer
|
2012
|
Thomas R. Wright
|
50
|
Executive Vice President & Chief Financial Officer, Treasurer
|
2013
|
Brian R. Manning
|
47
|
Executive Vice President & Chief Business Development Officer
|
2010
|
Roger M. Barzun
|
72
|
Senior Vice President & General Counsel, Secretary
|
2006
|
High
|
Low
|
|||||||
Year Ended December 31, 2012
|
||||||||
First Quarter
|
$ | 12.30 | $ | 8.98 | ||||
Second Quarter
|
10.22 | 8.75 | ||||||
Third Quarter
|
10.80 | 9.64 | ||||||
Fourth Quarter
|
10.00 | 7.81 | ||||||
Year Ended December 31, 2013
|
||||||||
First Quarter
|
$ | 11.78 | $ | 9.80 | ||||
Second Quarter
|
10.97 | 8.91 | ||||||
Third Quarter
|
10.50 | 9.13 | ||||||
Fourth Quarter
|
12.17 | 8.67 |
December
2008
($)
|
December
2009
($)
|
December
2010
($)
|
December
2011
($)
|
December
2012
($)
|
December
2013
($)
|
|||||||||||||||||||
Sterling Construction Company, Inc.
|
100.00 | 103.29 | 70.37 | 58.12 | 53.64 | 63.30 | ||||||||||||||||||
Dow Jones US Total Return
|
100.00 | 128.79 | 150.24 | 152.26 | 177.11 | 235.51 | ||||||||||||||||||
Dow Jones US Heavy Construction
|
100.00 | 114.31 | 146.77 | 121.00 | 146.93 | 192.89 |
Years ended December 31,
|
||||||||||||||||||||
2013
|
2012
|
2011
|
2010
|
2009
|
||||||||||||||||
Revenues
|
$ | 556,236 | $ | 630,507 | $ | 501,156 | $ | 459,893 | $ | 390,847 | ||||||||||
Income (loss) before income taxes and earnings attributable to noncontrolling interests
|
$ | (68,804 | ) | $ | 17,133 | $ | (51,716 | ) | $ | 36,494 | $ | 37,795 | ||||||||
Income tax benefit (expense)
|
(1,222 | ) | 579 | 17,012 | (10,270 | ) | (12,267 | ) | ||||||||||||
Net income (loss)
|
(70,026 | ) | 17,712 | (34,704 | ) | 26,224 | 25,528 | |||||||||||||
Noncontrolling owners’ interests in earnings of subsidiaries
|
(3,903 | ) | (18,009 | ) | (1,196 | ) | (7,137 | ) | (1,824 | ) | ||||||||||
Net income (loss) attributable to Sterling common stockholders
|
$ | (73,929 | ) | $ | (297 | ) | $ | (35,900 | ) | $ | 19,087 | $ | 23,704 | |||||||
Net income (loss) per share attributable to Sterling common stockholders:
|
||||||||||||||||||||
Basic
|
$ | (4.91 | ) | $ | (0.26 | ) | $ | (2.24 | ) | $ | 1.15 | $ | 1.77 | |||||||
Diluted
|
$ | (4.91 | ) | $ | (0.26 | ) | $ | (2.24 | ) | $ | 1.13 | $ | 1.71 | |||||||
Weighted average number of common shares outstanding used in computing per share amounts:
|
||||||||||||||||||||
Basic
|
16,635 | 16,421 | 16,396 | 16,195 | 13,359 | |||||||||||||||
Diluted
|
16,635 | 16,421 | 16,396 | 16,563 | 13,856 | |||||||||||||||
Cash dividends declared
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Balance sheet:
|
||||||||||||||||||||
Total assets
|
$ | 273,018 | $ | 331,510 | $ | 303,831 | $ | 367,131 | $ | 385,741 | ||||||||||
Long-term debt
|
$ | 8,331 | $ | 24,201 | $ | 263 | $ | 336 | $ | 40,409 | ||||||||||
Equity attributable to Sterling common stockholders
|
$ | 128,893 | $ | 210,148 | $ | 213,311 | $ | 250,429 | $ | 230,766 | ||||||||||
Book value per share of outstanding common stock attributable to Sterling common stockholders
|
$ | 7.74 | $ | 12.74 | $ | 13.07 | $ | 15.21 | $ | 14.35 | ||||||||||
Shares outstanding
|
16,658 | 16,495 | 16,321 | 16,468 | 16,082 |
|
·
|
Revenue recognition
|
|
·
|
Contracts receivable, including retainage
|
|
·
|
Valuation of property and equipment, goodwill and other long-lived assets
|
|
·
|
Construction joint ventures
|
|
·
|
Income taxes
|
|
·
|
Segment reporting
|
|
·
|
The nature of the products and services — each of our local offices perform similar construction projects — they build, reconstruct and repair roads, highways, bridges, light rail and water, waste water and storm drainage systems.
|
|
·
|
The nature of the production processes — our heavy civil construction services rendered in the construction process for each of our construction projects performed by each local office is the same — they excavate dirt, remove existing pavement and pipe, lay aggregate or concrete pavement, pipe and rail and build bridges and similar large structures in order to complete our projects.
|
|
·
|
The type or class of customer for products and services — substantially all of our customers are state departments of transportation, cities, counties, and regional water, rail and toll-road authorities. A substantial portion of the funding for the state departments of transportation to finance the projects we construct is furnished by the federal government.
|
|
·
|
The methods used to distribute products or provide services — the heavy civil construction services rendered on our projects are performed primarily with our own field work crews (laborers, equipment operators and supervisors) and equipment (backhoes, loaders, dozers, graders, cranes, pug mills, crushers, and concrete and asphalt plants).
|
|
·
|
The nature of the regulatory environment — we perform substantially all of our projects for federal, state and municipal governmental agencies, and all of the projects that we perform are subject to substantially similar regulation under U.S. and state department of transportation rules, including prevailing wage and hour laws; codes established by the federal government and municipalities regarding water and waste water systems installation; and laws and regulations relating to workplace safety and worker health of the U.S. Occupational Safety and Health Administration and to the employment of immigrants of the U.S. Department of Homeland Security.
|
2013
|
2012
|
% Change
|
||||||||||
(Dollar amounts in thousands)
|
||||||||||||
Revenues
|
$ | 556,236 | $ | 630,507 | (11.8 | )% | ||||||
Gross profit (loss)
|
$ | (29,944 | ) | $ | 47,472 |
NM
|
||||||
General and administrative expenses
|
(40,951 | ) | (35,187 | ) | 16.4 | |||||||
Unusual items
|
- | (511 | ) |
NM
|
||||||||
Other income
|
1,306 | 3,205 | (59.3 | ) | ||||||||
Operating income (loss)
|
(69,589 | ) | 14,979 |
NM
|
||||||||
Gains on sale of short-term investments
|
522 | 1,797 | (71.0 | ) | ||||||||
Interest income
|
879 | 1,301 | (32.4 | ) | ||||||||
Interest expense
|
(616 | ) | (944 | ) | (34.7 | ) | ||||||
Income (loss) before income taxes and earnings attributable to noncontrolling interests
|
(68,804 | ) | 17,133 |
NM
|
||||||||
Income tax (expense) benefit
|
(1,222 | ) | 579 |
NM
|
||||||||
Net income (loss)
|
(70,026 | ) | 17,712 |
NM
|
||||||||
Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
|
(3,903 | ) | (18,009 | ) | (78.3 | ) | ||||||
Net loss attributable to Sterling common stockholders
|
$ | (73,929 | ) | $ | (297 | ) |
NM
|
|||||
Gross margin (deficit)
|
(5.4 | )% | 7.5 | % |
NM
|
|||||||
Operating margin (deficit)
|
(12.5 | )% | 2.4 | % |
NM
|
|||||||
Contract backlog, end of year
|
$ | 687,000 | $ | 656,000 | 4.7 |
2012
|
2011
|
% Change
|
||||||||||
(Dollar amount in thousands)
|
||||||||||||
Revenues
|
$ | 630,507 | $ | 501,156 | 25.8 | % | ||||||
Gross profit
|
$ | 47,472 | $ | 39,837 | 19.2 | |||||||
General and administrative expenses
|
(35,187 | ) | (24,785 | ) | 42.6 | |||||||
Goodwill impairment
|
- | (67,000 | ) |
NM
|
||||||||
Unusual items
|
(511 | ) | (676 | ) |
NM
|
|||||||
Other income
|
3,205 | 390 |
NM
|
|||||||||
Operating income (loss)
|
14,979 | (52,234 | ) |
NM
|
||||||||
Gains on sale of short-term investments
|
1,797 | 94 |
NM
|
|||||||||
Interest income
|
1,301 | 1,655 | (21.4 | ) | ||||||||
Interest expense
|
(944 | ) | (1,231 | ) | (23.3 | ) | ||||||
Income (loss) before income taxes and earnings attributable to noncontrolling interests
|
17,133 | (51,716 | ) |
NM
|
||||||||
Income tax benefit
|
579 | 17,012 | (96.3 | ) | ||||||||
Net income (loss)
|
17,712 | (34,704 | ) |
NM
|
||||||||
Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
|
(18,009 | ) | (1,196 | ) |
NM
|
|||||||
Net loss attributable to Sterling common stockholders
|
$ | (297 | ) | $ | (35,900 | ) | (99.2 | ) | ||||
Gross margin
|
7.5 | % | 8.0 | % | (6.3 | ) | ||||||
Operating margin (deficit)
|
2.4 | % | (10.4 | )% |
NM
|
|||||||
Contract backlog, end of year
|
$ | 656,000 | $ | 616,000 | 6.5 |
Years Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Net cash provided by (used in):
|
||||||||||||
Operating activities
|
$ | (21,562 | ) | $ | 24,789 | $ | 20,988 | |||||
Capital expenditures
|
(14,900 | ) | (37,359 | ) | (23,989 | ) | ||||||
Proceeds from sale of property and equipment
|
6,787 | 12,464 | 1,296 | |||||||||
Acquisition of noncontrolling interest
|
- | (23,144 | ) | (8,205 | ) | |||||||
Net assets of acquired companies
|
- | - | (3,911 | ) | ||||||||
Net sales (purchases) of short-term securities
|
48,236 | (3,493 | ) | (7,897 | ) | |||||||
Distributions to noncontrolling interest owners
|
(3,565 | ) | (10,185 | ) | (7,809 | ) | ||||||
Purchases of treasury stock
|
- | - | (3,592 | ) | ||||||||
Net drawdowns (repayment) on the Credit Facility
|
(16,204 | ) | 24,012 | - | ||||||||
Other
|
(62 | ) | (313 | ) | 49 | |||||||
Total
|
$ | (1,270 | ) | $ | (13,229 | ) | $ | (33,070 | ) |
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Cash and cash equivalents
|
$ | 1,872 | $ | 3,142 | ||||
Working capital
|
$ | 8,686 | $ | 87,484 |
|
·
|
the impairment of goodwill of $67.0 million in 2011;
|
|
·
|
depreciation and amortization expense which was $18.7 million in 2013, $19.0 million in 2012 and $17.3 million in 2011; the decrease in depreciation expense from 2012 to 2013 is a result of less capital expenditures in 2013; the increase from 2011 to 2012 is the result of depreciation associated with JBC and Myers which were acquired in August 2011;
|
|
·
|
deferred tax expense was $5.2 million in 2013, a deferred tax benefit of $1.2 million and $18.7 million in 2012 and 2011, respectively; the deferred tax expense in 2013 was related to the valuation allowance which eliminated all of our deferred tax assets including those related to prior years; the deferred tax benefit in 2012 was primarily related to the agreement between the Company and RLW to exclude goodwill adjustments for the purpose of calculating the distributions to be made to the RLW noncontrolling interest owners which created a deferred tax asset; the deferred tax benefit for 2011 is primarily the result of recording the impairment of goodwill for financial reporting purposes whereas goodwill is amortized for tax return purposes.
|
|
·
|
contracts receivable increased by $6.4 million in 2013, decreased by $4.1 million in 2012 and $1.9 million in 2011 while the net cash flow result of billings in excess of costs and estimated earnings and costs and estimated earnings in excess of billings increased by $21.6 million in 2013, decreased by $3.7 million in 2012 and $6.5 million in 2011;
|
|
·
|
the increase in income tax receivable of $6.0 million in 2013 which is the result of the estimated benefit from the tax net operating loss forecasted for 2013;
|
|
·
|
accounts payable increased by $13.8 million in 2013, $7.7 million in 2012 and decreased by $7.9 million in 2011; and
|
|
·
|
accrued compensation and other liabilities increased by $4.6 million in 2013, decreased by $2.3 million in 2012 and increased by $1.4 million in 2011.
|
|
·
|
contract receivables and contract retentions;
|
|
·
|
costs and estimated earnings in excess of billings;
|
|
·
|
billings in excess of costs and estimated earnings;
|
|
·
|
the size and status of contract mobilization payments and progress billings; and
|
|
·
|
the amounts owed to suppliers and subcontractors.
|
Net loss
|
$ | (70,026 | ) | |
Current portion of obligation to noncontrolling interest owners of RLW
|
2,691 | |||
Depreciation and amortization
|
18,650 | |||
Deferred tax expense
|
5,150 | |||
Capital expenditures
|
(14,900 | ) | ||
Proceeds from sales of property and equipment, net of gain (loss)
|
4,950 | |||
Distributions to noncontrolling interest owners
|
(3,565 | ) | ||
Net repayments on the Credit Facility
|
(16,204 | ) | ||
Other
|
(5,544 | ) | ||
Total decrease in working capital
|
$ | (78,798 | ) |
|
·
|
Make distributions and dividends;
|
|
·
|
Incur liens and encumbrances;
|
|
·
|
Incur further indebtedness;
|
|
·
|
Guarantee obligations;
|
|
·
|
Dispose of a material portion of assets or merge with a third party;
|
|
·
|
Make acquisitions;
|
|
·
|
Make investments in securities.
|
Payments due by period
|
||||||||||||||||||||
Total
|
< 1
Year
|
1 - 3
Years
|
4 – 5
Years
|
> 5
Years
|
||||||||||||||||
(Amounts in thousands)
|
||||||||||||||||||||
Credit Facility
|
$ | 7,808 | $ | - | $ | 7,808 | $ | - | $ | - | ||||||||||
Operating leases
|
9,577 | 1,167 | 2,281 | 2,064 | 4,065 | |||||||||||||||
Mortgage
|
189 | 73 | 116 | - | - | |||||||||||||||
Notes payable for equipment
|
468 | 61 | 266 | 141 | - | |||||||||||||||
Earn-out liability to former owner of JBC
|
1,461 | 996 | 344 | 121 | - | |||||||||||||||
Member’s interest subject to mandatory redemption and undistributed earnings
*
|
23,989 | - | - | - | 23,989 | |||||||||||||||
$ | 43,492 | $ | 2,297 | $ | 10,815 | $ | 2,326 | $ | 28,054 |
*
|
Mandatory redemption is based on the death or disability of the interest holder which is not expected to occur within the next five years. Undistributed earnings can be distributed upon unanimous consent from the members. At this time we cannot predict when such distributions will be made.
|
Price Per Gallon
|
Fair Value of
Derivatives at
|
|||||||||||||||||
Beginning
|
Ending
|
Range
|
Weighted
Average
|
Remaining
Volume (gallons)
|
December 31, 2013
(in thousands)
|
|||||||||||||
January 1, 2014
|
December 31, 2014
|
$ | 2.79 – 2.93 | $ | 2.85 | 960,000 | $ | 109 | ||||||||||
January 1, 2015
|
August 31, 2015
|
$ | 2.75 – 2.79 | $ | 2.77 | 100,000 | 8 | |||||||||||
$ | 117 |
Item 10 Information
|
Location/Heading
in the Proxy Statement
|
|
Directors
|
Election of Directors (Proposal 1)
|
|
Compliance With Section 16(a) of the Exchange Act
|
Stock Ownership Information
|
|
Code of Ethics
|
The Corporate Governance & Nominating Committee
|
|
Communication with the Board; nominations; Board and committee meetings; committees of the Board; Board leadership and risk oversight; and director compensation.
|
Board Operations
|
|
·
|
Equity Compensation Plan Information can be found in the proxy statement under the heading
Executive Compensation
.
|
|
·
|
Information regarding the ownership of the Company’s common stock can be found in the proxy statement under the heading
Stock Ownership Information
.
|
|
·
|
Information regarding any relationships between directors and officers and the Company can be found in the proxy statement under the heading
Business Relationships with Directors and Officers
.
|
|
·
|
Information about director independence can be found in the proxy statement under the heading
Election of Directors (Proposal 1)
.
|
Number
|
Exhibit Title
|
2.1.1
|
Purchase Agreement, dated as of December 3, 2009, by and among Kip Wadsworth, Ty Wadsworth, Con Wadsworth, Tod Wadsworth and Sterling Construction Company, Inc. (incorporated by reference to Exhibit 2.1 to Sterling Construction Company, Inc.'s Current Report on Form 8-K, filed on December 3, 2009 (SEC File No. 1-31993)).
|
2.1.2
|
Agreement dated December 28, 2012 by and among Kip Wadsworth, Ty Wadsworth, Con Wadsworth, Tod Wadsworth and Sterling Construction Company, Inc. relating to the exercise of the right to purchase the remaining 20% of Ralph L. Wadsworth Construction Company, LLC (incorporated by reference to Exhibit 2.1.2 to Sterling Construction Company, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 18, 2013 (SEC File No. 1-31993)).
|
3.1
|
Certificate of Incorporation of Sterling Construction Company, Inc. (incorporated by reference to Exhibit 3.0 to Sterling Construction Company, Inc.'s Quarterly Report on Form 10-Q, filed on August 10, 2009 (SEC File No. 1-31993)).
|
3.2
|
Bylaws of Sterling Construction Company, Inc. as amended through March 13, 2008 (incorporated by reference to Exhibit 3.1 to Sterling Construction Company, Inc.'s Current Report on Form 8-K, filed on March 19, 2008 (SEC File No. 1-31993)).
|
4.1
|
Form of Common Stock Certificate of Sterling Construction Company, Inc. (incorporated by reference to Exhibit 4.5 to Sterling Construction Company, Inc.'s Form 8-A, filed on January 11, 2006 (SEC File No. 1-31993)).
|
10.1.1#
|
The Sterling Construction Company, Inc. Stock Incentive Plan as amended and restated (incorporated by reference to Exhibit 10.13 to Sterling Construction Company, Inc.'s. Current Report on Form 8-K, filed on May 12, 2011 (SEC File No. 1-31993)).
|
10.1.2#
|
Amendment dated May 6, 2012 to The Sterling Construction Company, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Sterling Construction Company, Inc.'s. Current Report on Form 8-K, filed on May 11, 2012 (SEC File No. 1-31993)).
|
10.1.3#
|
Sterling Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to Sterling Construction Company, Inc.’s Current Report on Form 8-K, filed on May 14, 2013 (SEC File No. 1-31993)).
|
10.2#
|
Forms of Stock Option Agreement under the Oakhurst Company, Inc. 2001 Stock Incentive Plan (now known as The Sterling Construction Company, Inc. Stock Incentive Plan) (incorporated by reference to Exhibit 10.52 to Sterling Construction Company, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 29, 2005 (SEC File No. 1-31993)).
|
10.3#
|
Summary of standard compensation arrangements for non-employee directors of Sterling Construction Company, Inc. adopted by the Board of Directors on May 9, 2013 (incorporated by reference to Exhibit 10.1 to Sterling Construction Company, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed on August 9, 2013 (SEC File No. 1-31993)).
|
10.4.1
|
Credit Agreement by and among Sterling Construction Company, Inc., Texas Sterling Construction Co., Oakhurst Management Corporation and Comerica Bank and the other lenders from time to time party thereto, and Comerica Bank as administrative agent for the lenders, dated as of October 31, 2007 (incorporated by reference to Exhibit 10.1 to Sterling Construction Company, Inc.'s Current Report on Form 8-K, Amendment No. 1 filed on November 21, 2007 (SEC File No. 1-31993)).
|
10.4.2
|
Security Agreement by and among Sterling Construction Company, Inc., Texas Sterling Construction Co., Oakhurst Management Corporation and Comerica Bank as administrative agent for the lenders, dated as of October 31, 2007 (incorporated by reference to Exhibit F to Exhibit 10.4 to Sterling Construction Company, Inc.'s Quarterly Report on Form 10-Q, filed on November 9, 2009 (SEC File No. 1-31993)).
|
10.4.3
|
Joinder Agreement by Road and Highway Builders, LLC and Road and Highway Builders Inc. dated as of October 31, 2007 (incorporated by reference to Exhibit 10.3 to Sterling Construction Company, Inc.'s Current Report on Form 8-K, Amendment No. 1 filed on November 21, 2007 (SEC File No. 1-31993)).
|
10.4.4
|
Consent and Second Amendment to Credit Agreement by and among Sterling Construction Company, Inc., its subsidiaries, and Comerica Bank as Agent, Lender, Swing Line Lender and Issuing Lender dated as of November 8, 2011 (incorporated by reference to Exhibit 10.2 to Sterling Construction Company, Inc.'s Quarterly Report on Form 10-Q filed on November 8, 2011 (SEC File No. 1-31993)).
|
10.4.5*
|
Waiver and Third Amendment to Credit Agreement by and among Sterling Construction Company, Inc., and certain of its subsidiaries, certain of the Lenders, and Comerica Bank as administrative agent for the lenders, dated as of August 8, 2013.
|
10.4.6*
|
Waiver and Fourth Amendment to Credit Agreement dated as of March 14, 2014 by and among Sterling Construction Company, Inc., certain of its affiliates and subsidiaries, certain of the Lenders, and Comerica Bank as Administrative Agent.
|
10.5#
|
Change of Control Agreement dated as of January 1, 2011 between Sterling Construction Company, Inc. and Patrick T. Manning (incorporated by reference to Exhibit 10.2 to Sterling Construction Company, Inc.'s Current Report on Form 8-K filed on May 12, 2011 (SEC File No. 1-31993)).
|
10.6#
|
Change of Control Agreement dated as of January 1, 2011 between Sterling Construction Company, Inc. and Brian R. Manning (incorporated by reference to Exhibit 10.10 to Sterling Construction Company, Inc.'s Current Report on Form 8-K filed on May 12, 2011 (SEC File No. 1-31993)).
|
10.7#
|
Employment Agreement dated as of March 17, 2006 between Sterling Construction Company, Inc. and Roger M. Barzun (incorporated by reference to Exhibit 10.11 to Sterling Construction Company, Inc.'s Annual Report on Form 10-K/A for the year ended December 31, 2009, filed on March 18, 2010 (SEC File No. 1-31993)).
|
10.7.1#*
|
Amendment dated January 18, 2012 of the Employment Agreement dated as of March 17, 2006 between Sterling Construction Company, Inc. and Roger M. Barzun.
|
10.9#
|
Employment Agreement dated December 28, 2012 between Ralph L. Wadsworth Construction Company, LLC and Kip L. Wadsworth (incorporated by reference to Exhibit 10.13 to Sterling Construction Company, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 18, 2013 (SEC File No. 1-31993)).
|
10.10#
|
Employment Agreement dated as of September 1, 2012 between Sterling Construction Company, Inc. and Peter E. MacKenna (incorporated by reference to Exhibit 10.1 to Sterling Construction Company, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed on November 8, 2012 (SEC File No. 1-31993)).
|
23.1*
|
Consent of Grant Thornton, LLP
|
31.1*
|
Certification of Peter E. MacKenna, President & Chief Executive Officer of Sterling Construction Company, Inc.
|
31.2*
|
Certification of Thomas R. Wright, Executive Vice President & Chief Financial Officer of Sterling Construction Company, Inc.
|
32.1*
|
Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) of Peter E. MacKenna, President & Chief Executive Officer, and Thomas R. Wright, Executive Vice President & Chief Financial Officer.
|
95.1*
|
Mine Safety Disclosure
|
Date: March 17, 2014 |
By:
|
/s/ Peter E. MacKenna | |
Peter E. MacKenna, President & Chief Executive Officer | |||
(duly authorized officer)
|
Signature
|
Title
|
Date
|
||
/s/ Patrick T. Manning
|
Chairman of the Board of Directors
|
March 17, 2014
|
||
Patrick T. Manning | ||||
/s/ Peter E. MacKenna
|
President & Chief Executive Officer (principal
|
March 17, 2014
|
||
Peter E. MacKenna | executive officer), Director | |||
/s/ Thomas R. Wright
|
Executive Vice President & Chief Financial
|
March 17, 2014
|
||
Thomas R. Wright
|
Officer (principal financial officer and principal | |||
accounting officer), Treasurer | ||||
/s/ Marian M. Davenport
|
Director
|
March 17, 2014
|
||
Marian M. Davenport | ||||
/s/ Robert A. Eckels
|
Director
|
March 17, 2014
|
||
Robert A. Eckels | ||||
/s/ Joseph P. Harper, Sr.
|
Director
|
March 17, 2014
|
||
Joseph P. Harper, Sr. | ||||
/s/Maarten D. Hemsley
|
Director
|
March 17, 2014
|
||
Maarten D. Hemsley | ||||
/s/ Charles R. Patton
|
Director
|
March 17, 2014
|
||
Charles R. Patton | ||||
/s/ Richard O. Schaum
|
Director
|
March 17, 2014
|
||
Richard O. Schaum | ||||
/s/ Milton L. Scott
|
Director
|
March 17, 2014
|
||
Milton L. Scott | ||||
/s/ Paul J. Varello
|
Director
|
March 17, 2014
|
||
Paul J. Varello
|
2013
|
2012
|
2011
|
||||||||||
Revenues
|
$ | 556,236 | $ | 630,507 | $ | 501,156 | ||||||
Cost of revenues
|
(586,180 | ) | (583,035 | ) | (461,319 | ) | ||||||
Gross profit (loss)
|
(29,944 | ) | 47,472 | 39,837 | ||||||||
General and administrative expenses
|
(40,951 | ) | (35,187 | ) | (24,785 | ) | ||||||
Direct costs of acquisitions
|
- | (202 | ) | (456 | ) | |||||||
Provision for loss on lawsuit
|
- | (309 | ) | (220 | ) | |||||||
Goodwill impairment
|
- | - | (67,000 | ) | ||||||||
Other operating income, net
|
1,306 | 3,205 | 390 | |||||||||
Operating income (loss)
|
(69,589 | ) | 14,979 | (52,234 | ) | |||||||
Gain on sale of securities and other
|
522 | 1,797 | 94 | |||||||||
Interest income
|
879 | 1,301 | 1,655 | |||||||||
Interest expense
|
(616 | ) | (944 | ) | (1,231 | ) | ||||||
Income (loss) before income taxes and earnings attributable to noncontrolling interests
|
(68,804 | ) | 17,133 | (51,716 | ) | |||||||
Income tax (expense) benefit
|
(1,222 | ) | 579 | 17,012 | ||||||||
Net income (loss)
|
(70,026 | ) | 17,712 | (34,704 | ) | |||||||
Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
|
(3,903 | ) | (18,009 | ) | (1,196 | ) | ||||||
Net loss attributable to Sterling common stockholders
|
$ | (73,929 | ) | $ | (297 | ) | $ | (35,900 | ) | |||
Net loss per share attributable to Sterling common stockholders:
|
||||||||||||
Basic
|
$ | (4.91 | ) | $ | (0.26 | ) | $ | (2.24 | ) | |||
Diluted
|
$ | (4.91 | ) | $ | (0.26 | ) | $ | (2.24 | ) | |||
Weighted average number of common shares outstanding used in computing per share amounts:
|
||||||||||||
Basic
|
16,635,179 | 16,420,886 | 16,395,739 | |||||||||
Diluted
|
16,635,179 | 16,420,886 | 16,395,739 |
2013
|
2012
|
2011
|
||||||||||
Net loss attributable to Sterling common stockholders
|
$ | (73,929 | ) | $ | (297 | ) | $ | (35,900 | ) | |||
Net income attributable to noncontrolling interest included in equity
|
1,879 | 1,068 | 261 | |||||||||
Net income attributable to noncontrolling interest included in liabilities
|
2,024 | 16,941 | 935 | |||||||||
Add /(deduct) other comprehensive income, net of tax:
|
||||||||||||
Realized gain from available-for-sale securities
|
(90 | ) | (510 | ) | (1 | ) | ||||||
Change in unrealized holding gain (loss) on available-for-sale securities
|
(601 | ) | 560 | 779 | ||||||||
Realized (gain) loss from settlement of derivatives
|
(48 | ) | 43 | 72 | ||||||||
Change in the effective portion of unrealized gain (loss) in fair market value of derivatives
|
160 | 107 | (217 | ) | ||||||||
Comprehensive income (loss)
|
$ | (70,605 | ) | $ | 17,912 | $ | (34,071 | ) |
STERLING CONSTRUCTION COMPANY, INC. STOCKHOLDERS
|
||||||||||||||||||||||||||||||||||||
Common Stock
|
Treasury Stock
|
Addi-
tional
Paid in
|
Retained
Earnings
|
Accu-
mulated
Other
Compre-
hensive
Income
|
Noncon-
trolling
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
(Deficit)
|
(Loss)
|
Interests
|
Total
|
||||||||||||||||||||||||||||
Balance at January 1, 2011
|
16,468 | $ | 164 | (3 | ) | $ | - | $ | 198,849 | $ | 51,553 | $ | (137 | ) | $ | - | $ | 250,429 | ||||||||||||||||||
Net income (loss)
|
- | - | - | - | - | (35,900 | ) | - | 261 | (35,639 | ) | |||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | - | 633 | - | 633 | |||||||||||||||||||||||||||
Purchases of treasury shares
|
- | - | (286 | ) | (3,592 | ) | - | - | - | - | (3,592 | ) | ||||||||||||||||||||||||
Cancellation of treasury shares
|
(289 | ) | (2 | ) | 289 | 3,592 | (3,422 | ) | (168 | ) | - | - | - | |||||||||||||||||||||||
Stock issued upon option and warrant exercises
|
95 | 1 | - | - | 155 | - | - | - | 156 | |||||||||||||||||||||||||||
Excess tax benefits from exercise of stock options
|
- | - | - | - | 58 | - | - | - | 58 | |||||||||||||||||||||||||||
Issuance and amortization of restricted stock
|
47 | - | - | - | 473 | - | - | - | 473 | |||||||||||||||||||||||||||
Stock-based compensation expense
|
- | - | - | - | 30 | - | - | - | 30 | |||||||||||||||||||||||||||
Revaluation of noncontrolling interest RLW put/call liability
|
- | - | - | - | - | (1,268 | ) | - | - | (1,268 | ) | |||||||||||||||||||||||||
Tax benefit related to the exercise of RHB’s put/call liability
|
- | - | - | - | - | 2,292 | - | - | 2,292 | |||||||||||||||||||||||||||
Equity attributable to noncontrolling interest in acquired companies
|
- | - | - | - | - | - | - | 1,266 | 1,266 | |||||||||||||||||||||||||||
Balance at December 31, 2011
|
16,321 | 163 | - | - | 196,143 | 16,509 | 496 | 1,527 | 214,838 | |||||||||||||||||||||||||||
Net income (loss)
|
- | - | - | - | - | (297 | ) | - | 1,068 | 771 | ||||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | - | 200 | - | 200 | |||||||||||||||||||||||||||
Stock issued upon option and warrant exercises
|
24 | - | - | - | 66 | - | - | - | 66 | |||||||||||||||||||||||||||
Tax impact from exercise of stock options
|
- | - | - | - | (79 | ) | - | - | - | (79 | ) | |||||||||||||||||||||||||
Issuance and amortization of restricted stock
|
150 | 2 | - | - | 694 | - | - | - | 696 | |||||||||||||||||||||||||||
Revaluation of noncontrolling interest liabilities and other, net of tax
|
- | - | - | - | 243 | (3,992 | ) | - | (40 | ) | (3,789 | ) | ||||||||||||||||||||||||
Distribution to owners
|
- | - | - | - | - | - | - | (117 | ) | (117 | ) | |||||||||||||||||||||||||
Balance at December 31, 2012
|
16,495 | 165 | - | - | 197,067 | 12,220 | 696 | 2,438 | 212,586 | |||||||||||||||||||||||||||
Net income (loss)
|
- | - | - | - | - | (73,929 | ) | - | 1,879 | (72,050 | ) | |||||||||||||||||||||||||
Other comprehensive loss
|
- | - | - | - | - | - | (579 | ) | - | (579 | ) | |||||||||||||||||||||||||
Stock issued upon option exercises
|
9 | - | - | - | 26 | - | - | - | 26 | |||||||||||||||||||||||||||
Tax impact from exercise of stock options
|
- | - | - | - | (15 | ) | - | - | - | (15 | ) | |||||||||||||||||||||||||
Issuance and amortization of common and restricted stock
|
154 | 2 | - | - | 926 | - | - | - | 928 | |||||||||||||||||||||||||||
Revaluation of noncontrolling interest and other, net of tax
|
- | - | - | - | (7,078 | ) | (608 | ) | - | - | (7,686 | ) | ||||||||||||||||||||||||
Distribution to owners
|
- | - | - | - | - | - | - | (416 | ) | (416 | ) | |||||||||||||||||||||||||
Balance at December 31, 2013
|
16,658 | $ | 167 | - | - | $ | 190,926 | $ | (62,317 | ) | $ | 117 | $ | 3,901 | $ | 132,794 |
2013
|
2012
|
2011
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net loss attributable to Sterling common stockholders
|
$ | (73,929 | ) | $ | (297 | ) | $ | (35,900 | ) | |||
Plus: Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures
|
3,903 | 18,009 | 1,196 | |||||||||
Net income (loss)
|
(70,026 | ) | 17,712 | (34,704 | ) | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||||||
Goodwill impairment
|
- | - | 67,000 | |||||||||
Depreciation and amortization
|
18,650 | 18,997 | 17,322 | |||||||||
Gain on disposal of property and equipment
|
(1,837 | ) | (3,184 | ) | (390 | ) | ||||||
Deferred tax expense (benefit)
|
5,150 | (1,167 | ) | (18,651 | ) | |||||||
Interest expense accreted on noncontrolling interests
|
- | 993 | 881 | |||||||||
Stock-based compensation expense
|
928 | 694 | 503 | |||||||||
Gain on sale of securities and other
|
(85 | ) | (918 | ) | (3 | ) | ||||||
Tax impact from exercise of stock options and restricted stock
|
15 | 79 | (58 | ) | ||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Contracts receivable
|
(6,430 | ) | 4,060 | 1,933 | ||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
8,908 | (4,083 | ) | (5,921 | ) | |||||||
Receivables from and equity in construction joint ventures
|
4,887 | (4,948 | ) | 687 | ||||||||
Income tax receivable
|
(6,011 | ) | - | - | ||||||||
Other current assets
|
(6,717 | ) | (9,234 | ) | (538 | ) | ||||||
Accounts payables
|
13,794 | 7,730 | (7,942 | ) | ||||||||
Billings in excess of costs and estimated earnings on uncompleted contracts
|
12,658 | 335 | (539 | ) | ||||||||
Accrued compensation and other liabilities
|
4,554 | (2,277 | ) | 1,408 | ||||||||
Net cash provided by (used in) operating activities
|
(21,562 | ) | 24,789 | 20,988 | ||||||||
Cash flows from investing activities:
|
||||||||||||
Acquisition of noncontrolling interests
|
- | (23,144 | ) | (8,205 | ) | |||||||
Net assets of acquired companies, net of cash acquired
|
- | - | (3,911 | ) | ||||||||
Additions to property and equipment
|
(14,900 | ) | (37,359 | ) | (23,989 | ) | ||||||
Proceeds from sale of property and equipment
|
6,787 | 12,464 | 1,296 | |||||||||
Purchases of short-term securities, available-for-sale
|
(1,638 | ) | (30,154 | ) | (109,312 | ) | ||||||
Sales of short-term securities, available-for-sale
|
49,874 | 26,661 | 101,415 | |||||||||
Net cash provided by (used in) investing activities
|
40,123 | (51,532 | ) | (42,706 | ) | |||||||
Cash flows from financing activities:
|
||||||||||||
Cumulative daily drawdowns – Credit Facility
|
219,026 | 75,012 | 18,500 | |||||||||
Cumulative daily repayments – Credit Facility
|
(235,230 | ) | (51,000 | ) | (18,500 | ) | ||||||
Distributions to noncontrolling interest owners
|
(3,565 | ) | (10,185 | ) | (7,809 | ) | ||||||
Purchases of treasury stock
|
- | - | (3,592 | ) | ||||||||
Issuance of common stock pursuant to warrants and options exercised
|
26 | 68 | 156 | |||||||||
Tax impact from exercise of stock options
|
(15 | ) | (79 | ) | 58 | |||||||
Other
|
(73 | ) | (302 | ) | (165 | ) | ||||||
Net cash provided by (used in) financing activities
|
(19,831 | ) | 13,514 | (11,352 | ) | |||||||
Net decrease in cash and cash equivalents
|
(1,270 | ) | (13,229 | ) | (33,070 | ) | ||||||
Cash and cash equivalents at beginning of period
|
3,142 | 16,371 | 49,441 | |||||||||
Cash and cash equivalents at end of period
|
$ | 1,872 | $ | 3,142 | $ | 16,371 | ||||||
Supplemental disclosures of cash flow information:
|
||||||||||||
Cash paid during the period for interest
|
$ | 595 | $ | 88 | $ | 299 | ||||||
Cash paid during the period for income taxes
|
$ | 170 | $ | 2,990 | $ | 1,444 | ||||||
Non-cash items:
|
||||||||||||
Reclassification of amounts payable to noncontrolling interest owner
|
$ | - | $ | - | $ | 1,054 | ||||||
Tax benefit related to the exercise of RHB’s liability
|
$ | - | $ | - | $ | 2,292 | ||||||
Net liabilities assumed in connection with acquisitions
|
$ | - | $ | - | $ | 1,961 | ||||||
Revaluation of noncontrolling interests
|
$ | (7,686 | ) | $ | 3,992 | $ | (1,268 | ) | ||||
Issuance of noncontrolling interest in RHB in exchange for net assets of acquired companies
|
$ | - | $ | 9,767 | $ | - | ||||||
Goodwill adjustments
|
$ | - | $ | 410 | $ | - |
1.
|
Summary of Business and Significant Accounting Policies
|
Buildings (years)
|
39
|
|
|
Construction equipment (years)
|
5 | - |
15
|
Land improvements (years)
|
5 | - |
15
|
Office furniture and fixtures (years)
|
3 | - |
10
|
Leasehold improvements (years or lease period, if shorter)
|
3 | - |
10
|
Transportation equipment (years)
|
5
|
|
|
·
|
The nature of the products and services — each of our local offices perform similar construction projects — they build, reconstruct and repair roads, highways, bridges, light rail and water, waste water and storm drainage systems.
|
|
·
|
The nature of the production processes — our heavy civil construction services rendered in the construction process for each of our construction projects performed by each local office is the same — they excavate dirt, remove existing pavement and pipe, lay aggregate or concrete pavement, pipe and rail and build bridges and similar large structures in order to complete our projects.
|
|
·
|
The type or class of customer for products and services — substantially all of our customers are federal and state departments of transportation, cities, counties, and regional water, rail and toll-road authorities. A substantial portion of the funding for the state departments of transportation to finance the projects we construct is furnished by the federal government.
|
|
·
|
The methods used to distribute products or provide services — the heavy civil construction services rendered on our projects are performed primarily with our own field work crews (laborers, equipment operators and supervisors) and equipment (backhoes, loaders, dozers, graders, cranes, pug mills, crushers, and concrete and asphalt plants).
|
|
·
|
The nature of the regulatory environment — we perform substantially all of our projects for federal, state and municipal governmental agencies, and all of the projects that we perform are subject to substantially similar regulation under U.S. and state department of transportation rules, including prevailing wage and hour laws; codes established by the federal government and municipalities regarding water and waste water systems installation; and laws and regulations relating to workplace safety and worker health of the U.S. Occupational Safety and Health Administration and to the employment of immigrants of the U.S. Department of Homeland Security.
|
Years Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Numerator:
|
||||||||||||
Net loss attributable to Sterling common stockholders
|
$ | (73,929 | ) | $ | (297 | ) | $ | (35,900 | ) | |||
Revaluation of noncontrolling interest put/call liability reflected in additional paid in capital or retained earnings, net of tax
|
(7,686 | ) | (3,992 | ) | (824 | ) | ||||||
$ | (81,615 | ) | $ | (4,289 | ) | $ | (36,724 | ) | ||||
Denominator:
|
||||||||||||
Weighted average common shares outstanding — basic
|
16,635 | 16,421 | 16,396 | |||||||||
Shares for dilutive stock options and warrants
|
- | - | - | |||||||||
Weighted average common shares outstanding and assumed
conversions— diluted
|
16,635 | 16,421 | 16,396 | |||||||||
Basic net loss per share attributable to Sterling common stockholders
|
$ | (4.91 | ) | $ | (0.26 | ) | $ | (2.24 | ) | |||
Diluted net loss per share attributable to Sterling common stockholders
|
$ | (4.91 | ) | $ | (0.26 | ) | $ | (2.24 | ) |
2.
|
Acquisitions and Subsidiaries and Joint Ventures with Noncontrolling Owners’ Interests
|
Years Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Member’s interest subject to mandatory redemption
|
$ | 20,000 | $ | - | ||||
Undistributed earnings attributable to this interest
|
3,989 | - | ||||||
Total liability
|
$ | 23,989 | $ | - |
Assets acquired and liabilities assumed:
|
||||
Current assets, including cash of $654
|
$ | 3,207 | ||
Current liabilities
|
(2,464 | ) | ||
Working capital acquired
|
743 | |||
Property and equipment
|
708 | |||
Debt due to noncontrolling interest owner
|
(500 | ) | ||
Total tangible net assets acquired at fair value
|
951 | |||
Goodwill
|
1,502 | |||
Total consideration
|
2,453 | |||
Fair value of noncontrolling owners’ interest in Myers
|
(1,226 | ) | ||
Cash paid
|
$ | 1,227 |
Years Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Balance, beginning of period
|
$ | 20,046 | $ | 18,375 | $ | 28,724 | ||||||
Net income attributable to noncontrolling interest included in liabilities
|
2,024 | 16,941 | 935 | |||||||||
Net income attributable to noncontrolling interest included in equity
|
1,879 | 1,068 | 261 | |||||||||
Accretion of interest on puts
|
- | 993 | 881 | |||||||||
Change in fair value of RLW put/call
|
(59 | ) | 3,797 | 1,268 | ||||||||
Change in fair value of RHB put/call
|
1,875 | 2,473 | 1,054 | |||||||||
Change due to the RHB amendment
|
(18,103 | ) | - | - | ||||||||
Acquisition by Sterling of RHB noncontrolling interest
|
- | - | (8,205 | ) | ||||||||
Noncontrolling interest associated with Myers acquisition
|
- | - | 1,227 | |||||||||
Issuance of noncontrolling interest in RHB in exchange for net assets of acquired companies
|
- | 9,767 | - | |||||||||
Distributions to noncontrolling interests owners
|
(3,056 | ) | (10,185 | ) | (7,809 | ) | ||||||
Acquisition of RLW noncontrolling interest
|
(509 | ) | (23,144 | ) | - | |||||||
Other
|
- | (39 | ) | 39 | ||||||||
Balance, end of period
|
$ | 4,097 | $ | 20,046 | $ | 18,375 |
3.
|
Variable Interest Entities
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Assets:
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 566 | $ | 7,164 | ||||
Contracts receivable, including retainage
|
6,475 | 2,866 | ||||||
Other current assets
|
7,964 | 1,214 | ||||||
Total current assets
|
15,005 | 11,244 | ||||||
Property and equipment, net
|
6,869 | 3,041 | ||||||
Other assets, net
|
5 | - | ||||||
Goodwill
|
1,501 | 1,501 | ||||||
Total assets
|
$ | 23,380 | $ | 15,786 | ||||
Liabilities:
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 8,361 | $ | 4,627 | ||||
Other current liabilities
|
7,080 | 6,283 | ||||||
Total current liabilities
|
15,441 | 10,910 | ||||||
Long-term liabilities:
|
||||||||
Other long-term liabilities
|
137 | - | ||||||
Total long-term liabilities
|
137 | - | ||||||
Total liabilities
|
$ | 15,578 | $ | 10,910 |
Year Ended
December 31,
2013
|
Year Ended
December 31,
2012
|
Period from
August 1, 2011
(the acquisition
date) to
December 31,
2011
|
||||||||||
Revenues
|
$ | 82,421 | $ | 84,877 | $ | 7,153 | ||||||
Operating income
|
3,764 | 2,152 | 531 | |||||||||
Net income attributable to Sterling common stockholders
|
1,879 | 694 | 170 |
4.
|
Cash and Cash Equivalents and Short-term Investments
|
As of December 31, 2012
|
||||||||||||||||||||
Total Fair
Value
|
Level 1
|
Level 2
|
Gross
Unrealized
Gains
(pre-tax)
|
Gross
Unrealized
Losses
(pre-tax)
|
||||||||||||||||
Mutual funds
|
$ | 27,582 | $ | 27,582 | $ | - | $ | 337 | $ | 9 | ||||||||||
Municipal bonds
|
21,629 | - | 21,629 | 862 | 128 | |||||||||||||||
Total securities available-for-sale
|
$ | 49,211 | $ | 27,582 | $ | 21,629 | $ | 1,199 | $ | 137 |
5.
|
Costs and Estimated Earnings and Billings on Uncompleted Contracts
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
$ | 11,684 | $ | 20,592 | ||||
Billings in excess of costs and estimated earnings
on uncompleted contracts
|
(31,576 | ) | (18,918 | ) | ||||
Net amount of costs and estimated earnings on uncompleted contracts above (below) billings
|
$ | (19,892 | ) | $ | 1,674 |
6.
|
Construction Joint Ventures
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Total combined:
|
||||||||
Current assets
|
$ | 51,329 | $ | 92,102 | ||||
Less current liabilities
|
(64,531 | ) | (48,002 | ) | ||||
Net assets
|
$ | (13,202 | ) | $ | 44,100 | |||
Backlog
|
$ | 101,014 | $ | 213,924 |
Years Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Total combined:
|
||||||||||||
Revenues
|
$ | 135,699 | $ | 438,756 | $ | 440,085 | ||||||
Income before tax
|
$ | (20,758 | ) | $ | 95,765 | $ | 46,683 | |||||
Sterling’s noncontrolling interest:
|
||||||||||||
Share of revenues
|
$ | 54,096 | $ | 82,519 | $ | 62,763 | ||||||
Share of income before tax
|
$ | (11,088 | ) | $ | 12,424 | $ | 6,417 |
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Sterling’s noncontrolling interest in backlog
|
$ | 30,652 | $ | 77,222 | ||||
Sterling’s receivables from and equity in construction joint ventures
|
$ | 6,118 | $ | 11,005 |
7.
|
Property and Equipment
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Construction equipment
|
$ | 127,199 | $ | 130,014 | ||||
Transportation equipment
|
19,132 | 19,266 | ||||||
Buildings
|
10,512 | 10,176 | ||||||
Office equipment
|
2,025 | 1,279 | ||||||
Leasehold Improvement
|
816 | - | ||||||
Land
|
5,309 | 4,916 | ||||||
Water rights
|
200 | 200 | ||||||
165,193 | 165,851 | |||||||
Less accumulated depreciation
|
(71,510 | ) | (63,543 | ) | ||||
$ | 93,683 | $ | 102,308 |
8.
|
Goodwill
|
Balance at January 1, 2011
|
$ | 114,745 | ||
Additional goodwill related to 2011 acquisitions
|
6,305 | |||
Goodwill impairment in 2011
|
(67,000 | ) | ||
Balance at December 31, 2011
|
54,050 | |||
Additional goodwill related to acquisitions
|
360 | |||
Goodwill adjustments
|
410 | |||
Balance at December 31, 2012 and 2013
|
$ | 54,820 |
9.
|
Derivative Financial Instruments
|
As of December 31,
|
||||||||
Balance Sheet Location
|
2013
|
2012
|
||||||
Derivative assets:
|
||||||||
Deposits and other current assets
|
$ | 109 | $ | 7 | ||||
Other assets, net
|
8 | 1 | ||||||
$ | 117 | $ | 8 |
10.
|
Changes in Accumulated Other Comprehensive Income by Component
|
Twelve Months Ended December 31, 2013 (*)
|
||||||||||||
Unrealized
Gain and
Loss on
Available-
for-sale
Securities
|
Unrealized
Gain and
Loss on
Cash Flow
Hedges
|
Total
|
||||||||||
Beginning Balance
|
$ | 691 | $ | 5 | $ | 696 | ||||||
Other comprehensive loss before reclassification
|
(601 | ) | 157 | (444 | ) | |||||||
Amounts reclassified from accumulated other comprehensive income
|
(90 | ) | (48 | ) | (138 | ) | ||||||
Tax valuation allowance
|
- | 3 | 3 | |||||||||
Net current-period other comprehensive loss
|
(691 | ) | 112 | (579 | ) | |||||||
Ending Balance
|
$ | - | $ | 117 | $ | 117 |
Amount Reclassified From
Accumulated Other
Comprehensive Income (*)
|
|||||||||||||
Twelve Months Ended December 31,
|
|||||||||||||
Details About Accumulated Other
Comprehensive Income Components
|
2013
|
2012
|
2011
|
Statement of
Operations
Classification
|
|||||||||
Realized gains on available-for sale securities
|
$ | 90 | $ | 785 | $ | 44 |
Gain on sale of securities and other
|
||||||
Less: Income tax expense
|
(33 | ) | (275 | ) | (15 | ) |
Income tax (expense) benefit
|
||||||
Tax valuation allowance
|
33 | - | - | ||||||||||
Total reclassification related to available-for-sale securities
|
$ | 90 | $ | 510 | $ | 29 |
Net income (loss)
|
||||||
Realized gains (losses) on cash flow hedges
|
$ | 48 | $ | (66 | ) | $ | (111 | ) |
Cost of revenues
|
||||
Less: Income tax (expense) benefit
|
(17 | ) | 23 | 39 |
Income tax (expense) benefit
|
||||||||
Tax valuation allowance
|
17 | - | - | ||||||||||
Total reclassification related to cash flow hedges
|
$ | 48 | $ | (43 | ) | $ | (72 | ) |
Net income (loss)
|
11.
|
Line of Credit and Long-Term Debt
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Credit facility
|
$ | 7,808 | $ | 24,012 | ||||
Mortgage due monthly through June 2016
|
189 | 262 | ||||||
Notes payable for transportation and construction equipment
|
468 | - | ||||||
8,465 | 24,274 | |||||||
Less current maturities of long-term debt
|
(134 | ) | (73 | ) | ||||
Total long-term debt
|
$ | 8,331 | $ | 24,201 |
|
·
|
Make distributions and dividends;
|
|
·
|
Incur liens and encumbrances;
|
|
·
|
Incur further indebtedness;
|
|
·
|
Guarantee obligations;
|
|
·
|
Dispose of a material portion of assets or merge with a third party;
|
|
·
|
Make acquisitions;
|
|
·
|
Make investments in securities.
|
Years Ending December 31,
|
Amount | |||
2014
|
$ | 134 | ||
2015
|
264 | |||
2016
|
7,926 | |||
2017
|
69 | |||
2018
|
72 | |||
Thereafter
|
- | |||
$ | 8,465 |
12.
|
Income Taxes and Deferred Tax Asset/Liability
|
Years Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Current tax expense (benefit)
|
$ | (3,928 | ) | $ | 588 | $ | 1,639 | |||||
Deferred tax expense (benefit)
|
5,150 | (1,167 | ) | (18,651 | ) | |||||||
Total tax expense (benefit)
|
$ | 1,222 | $ | (579 | ) | $ | (17,012 | ) |
As of December 31,
|
||||||||||||||||
2013
|
2012
|
|||||||||||||||
Current
|
Long Term
|
Current
|
Long Term
|
|||||||||||||
Assets related to:
|
||||||||||||||||
Accrued compensation and other
|
$ | 265 | $ | 451 | $ | 1,803 | $ | - | ||||||||
Amortization and impairment of goodwill
|
- | 11,108 | - | 13,181 | ||||||||||||
Accreted interest to put
|
- | 985 | - | 939 | ||||||||||||
Contingency on lawsuit
|
- | 106 | - | 130 | ||||||||||||
Noncontrolling interest
|
- | 1,439 | - | 915 | ||||||||||||
Deferred revenue
|
6,993 | - | - | - | ||||||||||||
Revaluation of put/call liabilities
|
- | 5,127 | - | 2,194 | ||||||||||||
Net operating loss carryforwards
|
- | 18,302 | - | - | ||||||||||||
Valuation allowance for deferred tax assets
|
(7,258 | ) | (23,773 | ) | - | - | ||||||||||
Liabilities related to:
|
||||||||||||||||
Depreciation of property and equipment
|
- | (12,669 | ) | - | (13,615 | ) | ||||||||||
Noncontrolling interest
|
- | - | - | - | ||||||||||||
Other
|
- | (1,076 | ) | - | (771 | ) | ||||||||||
Net asset
|
$ | - | $ | - | $ | 1,803 | $ | 2,973 |
Years Ended December 31,
|
||||||||||||||||||||||||
2013
|
2012
|
2011
|
||||||||||||||||||||||
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||||||||
Tax expense (benefit) at the U.S. federal statutory rate
|
$ | (24,081 | ) | 35.0 | % | $ | 5,997 | 35.0 | % | $ | (18,101 | ) | 35.0 | % | ||||||||||
State tax based on income, net of refunds and federal benefits
|
(1,280 | ) | 1.8 | (58 | ) | (0.3 | ) | (573 | ) | 1.1 | ||||||||||||||
Taxes on subsidiaries’ and joint ventures’ earnings allocated to noncontrolling interests owners
|
(1,375 | ) | 2.0 | (5,938 | ) | (34.7 | ) | (444 | ) | 0.9 | ||||||||||||||
Tax benefits of Domestic Production Activities Deduction
|
- | - | (84 | ) | (0.5 | ) | (202 | ) | 0.4 | |||||||||||||||
Impairment associated with goodwill that is not amortizable for tax
|
- | - | - | - | 2,603 | (5.0 | ) | |||||||||||||||||
Valuation Allowance
|
28,215 | (41.0 | ) | - | - | - | - | |||||||||||||||||
Non-taxable interest income
|
(195 | ) | 0.3 | (529 | ) | (3.1 | ) | (376 | ) | 0.7 | ||||||||||||||
Other permanent differences
|
(62 | ) | 0.1 | 33 | 0.2 | 81 | (0.2 | ) | ||||||||||||||||
Income tax expense (benefit)
|
$ | 1,222 | (1.8 | )% | $ | (579 | ) | (3.4 | )% | $ | (17,012 | ) | 32.9 | % |
Year
|
Amount
|
|||
2020
|
$ | 963 | ||
2028
|
14,141 | |||
2033
|
62,686 | |||
Total
|
$ | 77,790 |
13.
|
Commitments and Contingencies
|
|
·
|
Specific excess reinsurance coverage for medical and prescription drug claims per insured person in excess of $55,000 for RLW and JBC, and $95,000 for all other entities within a plan year.
|
|
·
|
Aggregate reinsurance coverage for medical and prescription drug claims within a plan year with a maximum of $1.0 million in excess of an aggregate deductible of $2.5 million.
|
14.
|
Operating Leases
|
Years Ending December 31,
|
Amount | |||
2014
|
$ | 1,167 | ||
2015
|
1,219 | |||
2016
|
1,062 | |||
2017
|
1,008 | |||
2018
|
1,056 | |||
Thereafter
|
4,065 | |||
Total future minimum rental payments
|
$ | 9,577 |
15.
|
Stockholders’ Equity
|
Years Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Shares awarded to each non-employee director
|
4,975 | 5,155 | 3,418 | |||||||||
Total shares awarded
|
34,825 | 30,930 | 20,508 | |||||||||
Average grant-date market price per share
|
$ | 10.06 | $ | 9.70 | $ | 14.46 | ||||||
Total compensation cost attributable to shares awarded
|
$ | 350,000 | $ | 300,000 | $ | 297,000 | ||||||
Compensation cost recognized related to current and prior year awards
|
$ | 333,499 | $ | 283,333 | $ | 194,667 |
2001 Plan
|
||||||||
Shares
|
Weighted
Average
Exercise
Price
|
|||||||
Outstanding at December 31, 2011
|
53,900 | $ | 3.77 | |||||
Exercised
|
(24,400 | ) | 3.04 | |||||
Expired/forfeited
|
(7,300 | ) | 9.35 | |||||
Outstanding at December 31, 2012
|
22,200 | 3.08 | ||||||
Exercised
|
(8,500 | ) | 3.08 | |||||
Expired/forfeited
|
(6,200 | ) | 3.07 | |||||
Outstanding at December 31, 2013
|
7,500 | 3.10 |
Options Outstanding
|
Options Exercisable
|
|||||||||||||
Range of Exercise Price per Share
|
Number of Shares
|
Weighted Average Remaining Contractual Life (Yrs.)
|
Weighted
Average Exercise Price per Share
|
Number of Shares
|
Weighted
Average Exercise Price per Share
|
|||||||||
$
|
3.10
|
7,500
|
0.61
|
$
|
3.10
|
7,500
|
$
|
3.10
|
Number of
Shares
|
Aggregate
Intrinsic Value
|
|||||||
Total outstanding and vested in-the-money options at December 31, 2013
|
7,500 | $ | 53,879 | |||||
Total options exercised during 2013
|
8,500 | $ | 56,600 |
Warrants Exercised
|
||||||||||||
Shares
|
Company’s
Proceeds
from
Exercise
|
Year-End
Warrant
Share
Balance
|
||||||||||
Warrants exercised in 2011
|
75,431 | $ | 113,147 | - | ||||||||
Warrants exercised in 2012 and 2013
|
- | $ | - | - |
16.
|
Employee Benefit Plans
|
|
·
|
Assets contributed to the multiemployer 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 multiemployer 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 Trust Fund
|
Pension Plan Employer Identification Number
|
Pension Protection Act (“PPA”) Certified Zone Status
1
|
FIP / RP Status Pending / Implemented
2
|
Contributions
|
Surcharge Imposed
|
Expiration Date of Collective Bargaining Agreement
3
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
2011
|
|||||||||||||||||
Pension Trust Fund for Operating Engineers Pension Plan
|
94-6090764
|
Red
|
Orange
|
Yes
|
$
|
1,654
|
$
|
508
|
$
|
246
|
No
|
6/30/2014
|
|||||||||
Carpenter Funds Administrative Office
|
94-6050970
|
Red
|
Red
|
Yes
|
759
|
47
|
-
|
No
|
6/30/2014
|
||||||||||||
Laborers Pension Trust for Northern California
|
94-6277608
|
Yellow
|
Yellow
|
Yes
|
897
|
431
|
64
|
No
|
6/30/2014
|
||||||||||||
Cement Mason Pension Trust Fund For Northern California
|
94-6277669
|
Yellow
|
Yellow
|
Yes
|
517
|
265
|
46
|
No
|
6/30/2014
|
||||||||||||
All other funds (84)
4
|
2,608
|
4,290
|
2,186
|
Various
|
|||||||||||||||||
Total Contributions:
|
$ |
6,435
|
$ |
5,541
|
$ |
2,542
|
|
1
The most recent PPA zone status available in 2013 and 2012 is for the plan’s year-end during 2012 and 2011, 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 multiemployer plans for pensions and other employee benefits. The total individually insignificant multiemployer pension costs contributed were $603,000, $466,000 and $299,000 for 2013, 2012 and 2011, 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. Due to our 2011 acquisitions (Refer to Note 2) there has been an increase in the number of Sterling employees that participate in multiemployer plans affecting the comparability between 2013, 2012 and 2011 years. The acquisitions occurred August 1, 2011 and resulted in five months of pension and other retirement expenses in that year. During 2012, the Company incurred the entire year of expenses.
|
17.
|
Customers
|
18.
|
Related Party Transactions
|
19.
|
Quarterly Financial Information (amounts in thousands, except per share data)
|
2013 Quarters Ended (unaudited)
|
||||||||||||||||||||
March 31
|
June 30
|
September 30
|
December 31
|
Total
|
||||||||||||||||
Revenues
|
$ | 111,035 | $ | 133,350 | $ | 185,935 | $ | 125,916 | $ | 556,236 | ||||||||||
Gross profit (loss)
|
1,385 | (16,635 | ) | 8,359 | (23,053 | ) | (29,944 | ) | ||||||||||||
Income (loss) before income taxes and earnings attributable to noncontrolling interests
|
(7,219 | ) | (25,967 | ) | 1,715 | (37,333 | ) | (68,804 | ) | |||||||||||
Net loss attributable to Sterling common stockholders
|
(4,580 | ) | (17,025 | ) | (189 | ) | (52,135 | ) | (73,929 | ) | ||||||||||
Net loss per share attributable to Sterling common stockholders:
|
||||||||||||||||||||
Basic
|
$ | (0.39 | ) | $ | (0.93 | ) | $ | (0.06 | ) | $ | (3.52 | ) | $ | (4.91 | ) | |||||
Diluted
|
(0.39 | ) | (0.93 | ) | (0.06 | ) | (3.52 | ) | (4.91 | ) |
2012 Quarters Ended (unaudited)
|
||||||||||||||||||||
March 31
|
June 30
|
September 30
|
December 31
|
Total
|
||||||||||||||||
Revenues
|
$ | 98,425 | $ | 168,709 | $ | 205,284 | $ | 158,089 | $ | 630,507 | ||||||||||
Gross profit
|
1,873 | 15,159 | 14,170 | 16,270 | 47,472 | |||||||||||||||
Income (loss) before income taxes and earnings attributable to noncontrolling interests
|
(3,781 | ) | 8,652 | 4,915 | 7,347 | 17,133 | ||||||||||||||
Net income (loss) attributable to Sterling common stockholders
|
(7,500 | ) | 3,287 | 990 | 2,926 | (297 | ) | |||||||||||||
Net income (loss) per share attributable to Sterling common stockholders:
|
||||||||||||||||||||
Basic
|
$ | (0.44 | ) | $ | 0.15 | $ | 0.01 | $ | 0.01 | $ | (0.26 | ) | ||||||||
Diluted
|
(0.44 | ) | 0.15 | 0.01 | 0.01 | (0.26 | ) |
1.
|
Amendments to Section 1.1
.
|
2.
|
Amendment of Section 2.9
. Section 2.9 of the Credit Agreement is hereby deleted in its entirety and the following is inserted in its place:
|
3.
|
Amendment of Section 2.10(b)
. Section 2.10(b) of the Credit Agreement is deleted in its entirety and the following is inserted in its place:
|
4.
|
Amendment of Section 7.1(b)
. Section 7.1(b) of the Credit Agreement is deleted in its entirety and the following is inserted in its place:
|
5.
|
Amendment of Section 7.2(a)
. Section 7.2(a) of the Credit Agreement is deleted in its entirety and the following is inserted in its place:
|
6.
|
Amendment of Section 7.2(h)
. Section 7.2(h) of the Credit Agreement is deleted in its entirety and the following is inserted in its place:
|
7.
|
Amendment of Section 7.6(b)
. Section 7.6(b) of the Credit Agreement is deleted in its entirety and the following is inserted in its place:
|
8.
|
Amendment of Section 7.9
. Section 7.9 of the Credit Agreement is deleted in its entirety and the following is inserted in its place:
|
|
(a)
|
Commencing March 31, 2014, maintain as of the end of each fiscal month a Leverage Ratio of Sterling and its Consolidated Subsidiaries of not more than 2.00 to 1.00;
|
|
(b)
|
Commencing March 31, 2014, maintain at all times a Tangible Net Worth of Sterling and its Consolidated Subsidiaries in an amount at least equal to the Tangible Net Worth of Sterling and its Consolidated Subsidiaries as reported in the draft audited financial statements prepared by Grant Thornton and delivered to the Agent prior to March 13, 2014 for the Fiscal Year ending December 31, 2013 minus $1,784,000 plus 100% of the positive Net Income of Sterling and its Consolidated Subsidiaries for the fiscal month ending January 31, 2014 and each subsequent fiscal month, in each case without reduction for losses;
|
|
(c)
|
Commencing March 31, 2014, maintain as of the end of each fiscal month an Asset Coverage Ratio of Sterling and its Consolidated Subsidiaries of at least 2.00 to 1.00; and
|
|
(d)
|
As of the end of each fiscal quarter, commencing with the quarter ending March 31, 2014, Sterling and its Consolidated Subsidiaries shall not have a loss greater than $1,000,000 for such quarter.”
|
9.
|
Amendment of Section 8.3
. Section 8.3 of the Credit Agreement is deleted in its entirety and the following is inserted in its place:
|
10.
|
Amendment of Sections 8.4(c), (d), (e) and (f)
. Sections 8.4(c), (d), (e) and (f) of the Credit Agreement are deleted in their entireties and the following are inserted in their respective places:
|
11.
|
Amendment of Section 8.5
. Section 8.5 of the Credit Agreement is hereby deleted in its entirety and the following is inserted in its place:
|
|
(a)
|
each Credit Party may pay cash Distributions to Sterling or any other Borrower which is a wholly-owned Subsidiary of Sterling;
|
|
(b)
|
each Credit Party may declare and make Distributions payable in the Equity Interests of such Credit Party, provided that the issuance of such Equity Interests does not otherwise violate the terms of this Agreement and no Default or Event of Default has occurred and is continuing at the time of making such Distribution or would result from the making of such Distribution; and
|
|
(c)
|
provided that no Default or Event of Default has occurred and is continuing or could reasonably be expected to result therefrom and so long as each of RHBL, Myers and SHA is taxed as a partnership or disregarded as an entity for tax purposes, such Credit Party may distribute on or about fifteen days prior to the due date for any tax return (including quarterly tax estimates) to Mr. Richard Buenting, Mr. Clinton W. Myers and Mr. Clinton C. Myers, an amount sufficient to enable each such holder to discharge any federal, state and local income tax attributable to his ownership of RHBL, Myers and/or SHA, as applicable, taking into account the character of any income, gain or loss recognized and the deducting of state taxes for federal income tax purposes.”
|
12.
|
Amendment of Section 8.7(d), (g) and (h)
. Sections 8.7(d), (g) and (h) are hereby deleted in their entireties and the following are inserted in their respective places:
|
13.
|
Amendment of Section 9.1(j)
. Section 9.1(j) is hereby deleted in its entirety and the following is inserted in its place:
|
14.
|
Revolving Credit Unused Fee
. In each place in which it appears in the Credit Agreement or any other Loan Document, the term “Revolving Credit Facility Fee” is hereby deleted and the words “Revolving Credit Unused Fee” are hereby inserted in their place.
|
15.
|
Base Rate Only
. Notwithstanding any of the provisions of the Credit Agreement or any other Loan Document, as of the date hereof, the Borrowers may only elect the Base Rate as the Applicable Interest Rate for any Advances made from time to time under the Credit Agreement and the Lenders will extend Advances which bear interest at the Base Rate.
|
16.
|
Amendment to Schedules and Exhibits
. Schedule 1.1 to the Credit Agreement is hereby deleted and the Schedule 1.1 attached hereto as Annex A is hereby inserted in its place. Exhibit A to the Credit Agreement is hereby deleted and Exhibit A attached hereto as Annex B is hereby inserted in its place. Exhibit B to the Credit Agreement is hereby deleted and Exhibit B attached hereto as Annex C is hereby inserted in its place. Exhibit J to the Credit Agreement is hereby deleted and Exhibit J attached hereto as Annex D is hereby inserted in its place.
|
17.
|
Additional Covenants.
|
|
(a)
|
No later than March 15, 2014, Sterling shall engage a third party financial consultant (the “Consultant”) acceptable to the Agent to examine, among other matters, the Credit Parties’ Texas operations and the Credit Parties’ forecasting process.
|
|
(b)
|
Within thirty (30) days of the engagement of the Consultant, Sterling shall cause such Consultant to provide a draft report in form acceptable to the Agent.
|
|
(c)
|
Within fifteen (15) days of the date of this Fourth Amendment, the Credit Parties shall provide a Perfection Certificate in form and substance acceptable to the Agent;
|
|
(d)
|
Within thirty (30) days of the date of this Fourth Amendment, Sterling shall or shall cause the applicable Credit Party to provide a Mortgage, in form and substance acceptable to the Agent, over those certain premises located at 3475 High River Road, Fort Worth, Texas, together with such amendments and/or amendments and restatements of the existing Mortgages as the Agent may deem necessary or appropriate;
|
|
(e)
|
On and after the date of this Amendment, neither Sterling nor any other Credit Party shall provide collateral (including but not limited to cash on deposit) to any Person (other than to the Agent for the benefit of the Lenders) in support of any hedging transactions of any kind;
|
|
(f)
|
Sterling shall have raised at least Twenty Million Dollars ($20,000,000) in aggregate amount of new equity capital on terms and conditions satisfactory to the Agent no later than September 30, 2014;
|
|
(g)
|
Promptly upon the request of the Agent, Sterling and each other Credit Party shall provide (a) such additional documentation as the Agent may deem necessary or appropriate to evidence the first priority and perfection of its lien over the Collateral, including but not limited to the recordation of the Agent’s lien on the titles of any motor vehicles, (b) a Mortgage over any real estate owned by Sterling or any other Credit Party not otherwise required to be pledged pursuant to the terms of the Credit Agreement and (c) environmental reports, a title policy, survey and such other documentation as the Agent may request with regard to any owned real estate of Sterling or any other Credit Party;
|
|
(h)
|
Within ten (10) days of the date hereof, Agent shall have received insurance certificates for each Borrower who has not previously delivered an insurance certificate to Agent in form and substance satisfactory to the Agent and evidencing Agent’s status as Additional Insured and Lender Loss Payee;
|
|
(i)
|
Within ten (10) days of the date hereof, deliver all stock certificates of J. Banicki Construction, Inc. to the Agent accompanied by blank stock powers in form and substance acceptable to the Agent; and
|
|
(j)
|
Within fifteen (15) days of the date hereof, execute and deliver a modification to that certain previously executed term note payable to Comerica Bank increasing the applicable interest rate margin thereunder to Comerica Bank’s prime rate plus one hundred and fifty (150) basis points.
|
18.
|
Waiver
. The Agent and Lenders hereby waive the Events of Default set forth on Schedule I attached hereto.
|
19.
|
Effectiveness
. This Fourth Amendment shall become effective (according to the terms hereof) on the date that the following conditions have been fully satisfied:
|
|
(a)
|
Agent shall have received counterpart copies, with originals to follow of this Fourth Amendment, duly executed and delivered by the Borrowers, the Agent and the requisite Lenders (as applicable) and in form and substance satisfactory to Agent.
|
|
(b)
|
Agent shall have received the original Second Amended and Restated Revolving Credit Note, duly executed and delivered by the Borrowers and in form and substance satisfactory to Agent;
|
|
(c)
|
Agent shall have received that certain Joinder to and Reaffirmation of Credit Agreement duly executed and delivered by the Borrowers and in form and substance satisfactory to Agent (the “Credit Agreement Joinder”);
|
|
(d)
|
Agent shall have received that certain Joinder to, Amendment to and Reaffirmation of Security Agreement duly executed and delivered by the Borrowers and in form and substance satisfactory to Agent (the “Security Agreement Joinder” and together with the Credit Agreement Joinder, the “Joinder Agreements”);
|
|
(e)
|
Agent shall have received an Amended and Restated Intercompany Note duly executed and delivered by the Borrowers and in form and substance satisfactory to Agent;
|
|
(f)
|
Agent shall have received secretary’s certificates, containing resolutions, corporate documentation, good-standings and incumbencies for each Borrower each in form and substance satisfactory to the Agent, accompanied by, in the case of those Borrowers who are not wholly-owned Subsidiaries of Sterling, evidence of the consent of the third party holders of the Equity Interests of such Borrowers (the “Non-Sterling Equity Holders”) to this Fourth Amendment, the Note and the related Loan Documents;
|
|
(g)
|
Agent shall have received fully executed agreements for each of the non-wholly owned Borrowers evidencing the consent of Sterling and the Non-Sterling Equity Holders to the grant of lien to Comerica over the Equity Interests in such entities owned by Sterling;
|
|
(h)
|
Agent shall have received that certain Amended and Restated Agreement re: No Oral Agreements duly executed and delivered by the Borrowers and in form and substance satisfactory to the Agent; and
|
|
(i)
|
Agent shall have received, for distribution to the Lenders, a closing fee equal to fifty (50) basis points of the Revolving Credit Aggregate Commitment after giving effect to this Fourth Amendment.
|
20.
|
Representations and Warranties.
Each Borrower hereby represents and warrants that, after giving effect to the amendments contained herein (a) execution and delivery of this Fourth Amendment, the Joinder Agreements, the Note and any other Loan Documents required to be delivered hereunder, and the performance by each Borrower of its obligations under the Credit Agreement as amended hereby and as amended prior to the date hereof (herein, as so amended, the “Amended Credit Agreement”) are within each Borrower’s corporate powers, have been duly authorized, are not in contravention of law or the terms of its articles of incorporation or bylaws or other organic documents of the parties thereto, as applicable, and except as have been previously obtained do not require the consent or approval, material to the amendments contemplated in this Fourth Amendment or the Amended Credit Agreement, of any governmental body, agency or authority, and this Fourth Amendment, the Amended Credit Agreement, the Joinder Agreements, the Note and any other Loan Documents required to be delivered hereunder, will constitute the valid and binding obligations of the Borrowers enforceable in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, reorganization, insolvency, moratorium, ERISA or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether enforcement is sought in a proceeding in equity or at law), (b) the representations and warranties set forth in this Fourth Amendment, the Amended Credit Agreement, the Joinder Agreements, the Note and any other Loan Documents required to be delivered hereunder are true and correct on and as of the date hereof (except to the extent such representations specifically relate to an earlier date), and such representations and warranties are and shall remain continuing representations and warranties during the entire life of the Fourth Amendment, the Amended Credit Agreement, the Joinder Agreements, the Note and any other Loan Documents required to be delivered hereunder and (c) as of the date hereof (after giving effect to the waiver contained in Section 2 hereof), no Default or Event of Default shall have occurred and be continuing.
|
21.
|
No Waiver.
Except as specifically set forth above, this Fourth Amendment shall not be deemed to amend or alter in any respect the terms and conditions of the Credit Agreement, any of the Notes issued thereunder or any of the other Loan Documents, or to constitute a waiver by the Agent or any Lender of any right or remedy under or a consent to any transaction not meeting the terms and conditions of the Credit Agreement, any of the Notes issued thereunder or any of the other Loan Documents.
|
22.
|
No Course of Dealing.
Each Borrower hereby acknowledges and agrees that this Fourth Amendment and the amendments and waivers contained herein do not constitute any course of dealing or other basis for altering any obligation of such Borrower or any other party or any rights, privilege or remedy of the Agent or any Lender under the Credit Agreement, any other Loan Document, any other agreement or document, or any contract or instrument.
|
23.
|
Capitalized Terms.
Unless otherwise defined to the contrary herein, all capitalized terms used in this Fourth Amendment shall have the meaning set forth in the Credit Agreement.
|
24.
|
Counterparts; Signatures.
This Fourth Amendment may be executed in counterpart in accordance with Section 13.9 of the Credit Agreement. Delivery of a signature page to this Fourth Amendment, the Joinder Agreements, the Note or any other Loan Document by telecopy or other electronic means shall be effective (for all purposes) as delivery of a manually executed counterpart of this Fourth Amendment, the Joinder Agreements, the Note or any other Loan Document.
|
25.
|
No Claims
. Each Borrower hereby acknowledges that: (a) it has no defenses, claims or set-offs to the enforcement by any Lender or the Agent of such Borrower’s liabilities, obligations and agreements on the date hereof; (b) to its knowledge, each Lender and the Agent have fully performed all undertakings and obligations owed to it as of the date hereof; and (c) except to the limited extent expressly set forth in this Fourth Amendment, each Lender and the Agent do not waive, diminish or limit any term or condition contained in the Credit Agreement or any of the other Loan Documents. Each Borrower hereby remises, releases, acquits, satisfies and forever discharges the Lenders and the Agent, their agents, employees, officers, directors, predecessors, attorneys and all others acting or purporting to act on behalf of or at the direction of the Lenders and the Agent (“Releasees”), of and from any and all manner of actions, causes of action, suit, debts, accounts, covenants, contracts, controversies, agreements, variances, damages, judgments, claims and demands whatsoever, in law or in equity, which any of such parties ever had, now has or, to the extent arising from or in connection with any act, omission or state of facts taken or existing on or prior to the date hereof, may have after the date hereof against the Releasees, for, upon or by reason of any matter, cause or thing whatsoever through the date hereof. Without limiting the generality of the foregoing, each Borrower waives and affirmatively agrees not to allege or otherwise pursue any defenses, affirmative defenses, counterclaims, claims, causes of action, setoffs or other rights they do, shall or may have as of the date hereof, including, but not limited to, the rights to contest: (a) the right of the Agent and each Lender to exercise its rights and remedies described in this Fourth Amendment or any of the other Loan Documents; (b) any provision of this Fourth Amendment or any of the other the Loan Documents; or (c) any conduct of the Lenders or other Releasees relating to or arising out of the Credit Agreement or the other Loan Documents on or prior to the date hereof.
|
26.
|
Laws of Texas.
This Fourth Amendment shall be construed in accordance with and governed by the laws of the State of Texas (without giving effect to principles of conflict of laws).
|
27.
|
No Oral Agreements
. Each of the undersigned parties hereby covenant and agree as follows:
|
Basis for Pricing
|
Applicable Margin
|
Revolving Credit Base Rate Margin
|
150.00
|
Revolving Credit Unused Fee
|
75.00
|
Letter of Credit Fees (exclusive of facing fees)
|
475.00
|
No. __________________________ | Dated: ________, _____ |
RE:
|
Credit Agreement made as of October 31, 2007, (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”), Arranger, Syndication Agent and Documentation Agent, Sterling Construction Company, Inc. (“Sterling”) and certain Subsidiaries and Affiliates of Sterling (together with Sterling, the “Borrowers” and each of them a “Borrower”).
|
(A)
|
Date of Advance:
_____________________________
|
(C)
|
Type of Advance:
|
(D)
|
Amount of Advance:
|
$40,000,000 | March __, 2014 |
1.
|
Leverage Ratio (Section 7.9(a))
. On the Computation Date, the Leverage Ratio, which is required to be not more than 2.00 to 1.00 was _____ to 1.00, as computed in the supporting documents attached hereto as Schedule 1.
|
2.
|
Minimum Tangible Net Worth (Section 7.9(b))
. On the Computation Date, the Minimum Tangible Net Worth, which is required to be not less than $__________ was $__________, as computed in the supporting documents attached hereto as Schedule 2.
|
3.
|
Asset Coverage Ratio (7.9(c))
. On the Computation Date, the Asset Coverage Ratio, which is required to be not less than 2.00 to 1.00 was ______ to 1.00, as computed in the supporting documents attached hereto as Schedule 3.
|
4.
|
Losses (7.9(d))
. As of each applicable fiscal quarter end, Sterling and its Consolidated Subsidiaries have [no losses/losses of $_______], which losses, if any, are not to be in excess of $1,000,000.
|
|
"•
|
Pay to you your Salary then in effect in at least bi-weekly installments for a period of twelve (12) full calendar months following the effective date of the termination of your employment."
|
/s/ Patrick T. Manning | |
Patrick T. Manning
Chairman & Chief Executive Officer
|
|
Accepted and Agreed
:
|
|
/s/ Roger M. Barzun | |
Roger M. Barzun
|
|
/S/ GRANT THORNTON LLP
|
|
Houston, Texas
|
|
March 17, 2014
|
|
Exhibit 31.1
|
1.
|
I have reviewed this Annual Report on Form 10-K of Sterling Construction Company, Inc. for the fiscal year ended December 31, 2013;
|
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.
|
Date: March 17, 2014
|
/s/ Peter E. MacKenna
|
|
Peter E. MacKenna
|
|
Chief Executive Officer
|
|
Exhibit 31.2
|
1.
|
I have reviewed this Annual Report on Form 10-K of Sterling Construction Company, Inc. for the fiscal year ended December 31, 2013;
|
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.
|
Dated: March 17, 2014
|
/s/ Thomas R. Wright
|
|
Thomas R. Wright
|
|
Chief Financial Officer
|
Dated: March 17, 2014
|
/s/ Peter E. MacKenna
|
|
Peter E. MacKenna
|
|
Chief Executive Officer
|
Dated: March 17, 2014
|
/s/ Thomas R. Wright
|
|
Thomas R. Wright
|
|
Chief Financial Officer
|
1.
|
Portable Crusher #1001 – MSHA ID #2602669
|
2.
|
Portable Crusher #1006 – MSHA ID #2602200
|
•
|
MSHA issued one
citations for health or safety standards that could significantly and substantially contribute to a serious injury if left unabated under §104 of the Mine Act. The citation related to the lack of a guardrail on the road leading to the pit which would protect mobile equipment from falling off the ledge. The road has a ledge with a 16-18 foot drop. Guardrails were immediately built to remedy this citation.
|
•
|
MSHA did not issue any orders requiring persons to be withdrawn from the areas affected by any alleged violations of mandatory health or safety standards under Section 104(b) of the Mine Act.
|
•
|
MSHA did not issue any citations and orders for an alleged unwarrantable failure of the mine operator to comply with mandatory health or safety standards under Section 104(d) of the Mine Act.
|
•
|
MSHA did not identify any flagrant violations under Section 110(b)(2) of the Mine Act.
|
•
|
MSHA did not issue any imminent danger orders requiring immediate withdrawal from the affected areas under Section 107(a) of the Mine Act.
|
•
|
MSHA proposed an assessment under the Mine Act related to the citation mention above. The assessment resulted in a penalty of $243.00 which was paid during the quarter.
|
•
|
We did not experience any mining-related fatalities.
|
•
|
We did not receive written notice of a pattern of violations of mandatory health or safety standards from MSHA under Section 104(e) of the Mine Act or written notice of the potential to have a pattern of violations of mandatory health or safety standards from MSHA.
|