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Acquisitions | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions |
3. | ACQUISITIONS
General—On December 30, 2021 (the “Closing Date”), Sterling completed the acquisition (the “Petillo Acquisition”) of Petillo Incorporated and its related entities (collectively, “Petillo”). Petillo is a leading specialty site development contractor based in Flanders, New Jersey and serves the Northeastern and Mid-Atlantic States, providing large-scale site infrastructure improvement services, including full-service excavation, underground utility construction, environmental remediation, drainage systems for commercial construction and water management and distribution systems. The Petillo Acquisition is accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Purchase Consideration—Sterling completed the Petillo Acquisition for a purchase price of $204,563, net of cash acquired, detailed as follows:
Cash consideration transferred, net of cash acquired | $ | 175,000 |
Equity consideration transferred (759 shares at $26.87 per share(1)) | 20,406
Estimated tax basis step-up payment | 7,800
Target working capital adjustment | 1,357
Total consideration | $ | 204,563 |
(1) Sterling’s closing stock price on December 29, 2021. Additionally, as part of the Petillo Acquisition, upon the satisfaction of certain operating income thresholds attributable to Petillo during the five-year period following the Closing Date (the “earn-out period”), and subject to Michael V. Petillo’s (“Mr. Petillo”) continued employment and certain other conditions, the Company is required to make earn-out payments in an amount equal to 30% of the aggregate operating income of Petillo that is in excess of certain specified thresholds calculated as of December 31 in each of the five years following the Closing Date, which earn-out payments are payable during the fiscal year following such determination dates. The earn-out payments are capped at $20,000 in the aggregate over the earn-out period. The Company also entered into an employment agreement with Mr. Petillo. The employment agreement provides for cash retention payments in the aggregate amount of $15,000 payable in equal $3,000 installments over a five-year period commencing on the first anniversary of the Closing Date. The Company’s analysis indicates that the earn-out and retention payments are compensation as they are tied to the continuing employment of Mr. Petillo, and therefore will not be treated as additional contingent consideration. Preliminary Purchase Price Allocation—The aggregate purchase price noted above was allocated to the assets and liabilities acquired based upon their estimated fair values at the acquisition closing date, which were based, in part, upon a preliminary external appraisal and valuation of certain assets, including specifically identified intangible assets. The excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired totaling $67,777 was recorded as goodwill. The following table summarizes our purchase price allocation at the acquisition closing date, net of cash acquired:
Net tangible assets: |
Accounts receivable | $ | 45,069 |
Contract assets | 5,953 |
Other current assets | 193 |
Property and equipment, net | 48,936 |
Other non-current assets, net | 5,498 |
Accounts payable | (21,863) |
Contract liabilities | (8,585) |
Other current liabilities | (8,215) |
Total net tangible assets | 66,986 |
Identifiable intangible assets | 69,800 |
Goodwill | 67,777 |
Total consideration transferred | $ | 204,563 |
The purchase price allocation above is subject to further change when additional information is obtained. We have not finalized our assessment of the fair values primarily for intangible assets and property and equipment. We intend to finalize the purchase price allocation as soon as practicable within the measurement period, but in no event later than one year following the closing date of the Petillo Acquisition. Our final purchase price allocation may result in additional adjustments to various other assets and liabilities, including the residual amount allocated to goodwill during the measurement period. Identifiable Intangible Assets—Intangible assets identified as part of the Petillo Acquisition are reflected in the table below and are recorded at their estimated fair value, as determined by the Company’s management, based on available information which includes a preliminary valuation from external experts. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.
| Weighted Average Life (Years) |  | December 30, 2021 Fair Value
Customer Relationships | 25 |  | $ | 42,300 |
Trade Names | 25 |  | 27,500 |
Total |  |  | $ | 69,800 |
Acquired Backlog—Petillo’s backlog totaled $210,600 at the acquisition closing date. Impact of the Acquisition on the Consolidated Statement of Operations—Due to the acquisition’s proximity to year end, Petillo’s operating results had no impact on the Company’s Consolidated Statement of Operations for the year ended December 31, 2021. Supplemental Pro Forma Information (Unaudited)—The following unaudited pro forma combined financial information (“the pro forma financial information”) gives effect to the Petillo Acquisition, accounted for as a business combination using the purchase method of accounting. The pro forma financial information reflects the Petillo Acquisition and related events as if they occurred at the beginning of the period and includes adjustments to (1) include compensation expense associated with the employment agreement the Company entered into with Mr. Petillo, (2) include additional intangible asset amortization associated with the Petillo Acquisition, (3) include additional interest expense associated with the Petillo Acquisition and (4) include the pro forma results of Petillo for the years ended December 31, 2020 and 2021. This pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the pro forma events taken place on the dates indicated. Further, the pro forma financial information does not purport to project the future operating results of the combined company following the Petillo Acquisition.
| Years Ended December 31,
| 2021 |  | 2020
Pro forma revenue | $ | 1,785,133 |  |  | $ | 1,650,096 |
Pro forma net income attributable to Sterling | $ | 76,561 |  |  | $ | 58,639 |
Kimes Acquisition—On December 28, 2021, we completed our acquisition of Kimes & Stone (“Kimes”) for an all-cash purchase price of approximately $7,600. Kimes provides a diversified services offering of soil stabilization for site development on e-commerce projects such as large fulfillment and distribution centers and data centers, as well as soil stabilization for roadways and manufacturing plant construction. The transaction includes a fleet of soil stabilization equipment and working capital.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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