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Acquisitions | 3 Months Ended
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Mar. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
Acquisitions |
3. | ACQUISITIONS
General—On December 30, 2021 (the “Closing Date”), Sterling completed the acquisition (the “Acquisition”) of Petillo LLC and its related entities (collectively, “Petillo”). The Acquisition is accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Purchase Consideration—Sterling completed the Acquisition for a purchase price of $196,763, 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
Target working capital adjustment | 1,357
Total consideration | $ | 196,763 |
(1) Sterling’s closing stock price on December 29, 2021. 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 $60,339 was recorded as goodwill. This goodwill represents the value of expected future earnings and cash flows, as well as the synergies created by the integration of the new business within our organization, including cross-selling opportunities to help strengthen our existing service offerings and expand our market position. Goodwill and intangibles of approximately $130,000 related to the Acquisition, are deductible and amortizable for tax purposes over the next 15 years. The following table summarizes our purchase price allocation at the Acquisition Closing Date, net of cash acquired:
Net tangible assets: |
Accounts receivable | $ | 45,016 |
Contract assets | 5,953 |
Other current assets | 193 |
Property and equipment, net | 48,175 |
Other non-current assets, net | 5,498 |
Accounts payable | (21,810) |
Contract liabilities | (8,585) |
Other current liabilities | (8,216) |
Total net tangible assets | 66,224 |
Identifiable intangible assets | 70,200 |
Goodwill | 60,339 |
Total consideration transferred | $ | 196,763 |
During the three months ended March 31, 2022 the total consideration and purchase price allocation changed by $7,800, primarily due to an updated estimate of the tax basis step-up payment. 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 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 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 |  | $ | 42,700 |
Trade names | 25 |  | 27,500 |
Total |  |  | $ | 70,200 |
Supplemental Pro Forma Information (Unaudited)—The following unaudited pro forma combined financial information (“the pro forma financial information”) gives effect to the Acquisition, accounted for as a business combination using the purchase method of accounting. The pro forma financial information reflects the 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 Acquisition, (3) include additional interest expense associated with the Acquisition and (4) include the pro forma results of Petillo for the period ending March 31, 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 Acquisition.
|  |  | Three Months Ended |  |
|  |  | March 31, 2021 |  |  |  |
Pro forma revenue |  |  | $ | 343,539 |  |  |  |  |
Pro forma net income attributable to Sterling |  |  | $ | 10,814 |  |  |  |  |

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- References No definition available. + Details
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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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