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50% OWNED SUBSIDIARY | 12 Months Ended
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Dec. 31, 2024
Noncontrolling Interest [Abstract] |
50% OWNED SUBSIDIARY |
6. | 50% OWNED SUBSIDIARY
The Company has a 50% ownership interest in Road and Highway Builders, LLC, which through December 31, 2024 was a subsidiary that the Company had fully consolidated as a result of its exercise of control over the entity. The earnings attributable to the 50% portion the Company does not own were approximately $20,900, $17,700 and $13,300 for 2024, 2023 and 2022, respectively, and were eliminated within “Other operating expense, net” in the Consolidated Statements of Operations. Any undistributed earnings were included in “Members’ interest subject to mandatory redemption and undistributed earnings” within the Consolidated Balance Sheets. The subsidiary had a mandatory redemption provision which, under circumstances outlined in the previous operating agreement, was certain to occur and obligated the Company to purchase the partner’s remaining 50% interests for $20,000. The purchase obligation was also recorded in “Members’ interest subject to mandatory redemption and undistributed earnings” on the Consolidated Balance Sheets. The liability consisted of the following at December 31, 2023:
|  |  | December 31, 2023
Members’ interest subject to mandatory redemption |  |  | $ | 20,000 |
Accumulated earnings, net of distributions |  |  | 9,108 |
Total liability |  |  | $ | 29,108 |
RHB Deconsolidation—On December 31, 2024, the RHB operating agreement was amended to ensure the continuation of this mutually beneficial relationship while addressing the evolving needs and interest of both parties. This amendment modified the way RHB would be dispositioned in the event of the death or disability of Mr. Buenting. The relationship between the Company, RHB, and Mr. Buenting as related parties existed both prior to and following the amendment, and their continued involvement with RHB is unaffected by the amendment. Under GAAP, this contractual change requires that Sterling no longer consolidate RHB’s results with its own and use equity method accounting with respect to Sterling’s interest in the entity. Beginning January 1, 2025, the Company will report RHB’s operating income as a single line item (“Other operating income (expense), net”) in the Consolidated Statements of Operations and will report its interest in RHB at December 31, 2024, and thereafter, as a single line item (“Investment in unconsolidated subsidiary”) in the Consolidated Balance Sheets. RHB’s revenue will no longer be included in Sterling’s consolidated revenue in 2025 and Sterling’s consolidated RPOs as of December 31, 2024 do not include RHB’s RPOs. As a result of the RHB deconsolidation, the Company recognized a $91,289 non-cash net gain on the transaction in accordance with GAAP, which requires the derecognition of the liability mentioned above, and the Company’s 50% retained interest in RHB to be measured and recorded at fair value on December 31, 2024. The fair value measurement utilizes level 3 inputs, which includes unobservable data, to measure the fair value of the retained non-controlling interests. The fair value determination was based on a combination of multiple valuation methods, which included an income approach, using the discounted cash flow method, and a market value approach, which incorporates estimates of future earnings and market valuation multiples for certain guideline companies. Under the income approach, the key valuation assumptions used in determining the fair value were: (a) expected cash flow for a period of five years based on our best estimate of revenue growth rates and projected operating margins; (b) terminal value based upon a terminal growth rate of 3%; and (c) a discount rate of 17.5% based on the Company’s best estimate of the weighted average cost of capital adjusted for certain risks for the Company. Of the net gain, $94,225 resulted from remeasuring our 50% retained interest to fair value. This amount represents the basis difference between the equity method investment cost and the Company's proportional share of the carrying amount of RHB’s net assets. A hypothetical purchase price allocation, performed on the remeasurement date, revealed basis differences related to equipment, intangible assets, and goodwill. The Company will track the identified basis differences and depreciate or amortize them into equity method earnings and losses, depending on the nature of the respective basis difference.

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/810/tableOfContent + Details
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