UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2021


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___


Commission File Number			1-31993


STERLING CONSTRUCTION COMPANY, INC.
(Exact name of registrant as specified in its charter)

Delaware			25-1655321
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1800 Hughes Landing Blvd. The Woodlands, Texas			77380
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (281) 214-0777


Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value per share	STRL	The NASDAQ Stock Market LLC
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. þYes ¨ No


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer	¨	Accelerated filer	þ
Non-accelerated filer	¨	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			¨


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

The number of shares outstanding of the registrant’s common stock as of ~~July 30,~~October 29, 2021 – ~~28,764,381~~28,794,510

STERLING CONSTRUCTION COMPANY, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Revenues	Revenues	$	401,666	$	400,038	$	716,982	$	696,726	Revenues	$	463,449	$	383,458	$	1,180,431	$	1,080,184
Cost of revenues	Cost of revenues	(345,419)		(340,439)		(615,703)		(601,882)		Cost of revenues	(405,645)		(333,542)		(1,021,348)		(935,424)
Gross profit	Gross profit	56,247		59,599		101,279		94,844		Gross profit	57,804		49,916		159,083		144,760
General and administrative expense	General and administrative expense	(15,829)		(18,451)		(32,928)		(36,055)		General and administrative expense	(19,637)		(15,154)		(52,565)		(51,209)
Intangible asset amortization	Intangible asset amortization	(2,866)		(2,866)		(5,732)		(5,703)		Intangible asset amortization	(2,866)		(2,866)		(8,598)		(8,569)
Acquisition related costs	Acquisition related costs	0		(139)		0		(612)		Acquisition related costs	—		(401)		—		(1,013)
Other operating expense, net	Other operating expense, net	(4,832)		(5,097)		(7,144)		(7,325)		Other operating expense, net	(3,270)		(2,664)		(10,414)		(9,989)
Operating income	Operating income	32,720		33,046		55,475		45,149		Operating income	32,031		28,831		87,506		73,980
Interest income	Interest income	12		24		26		123		Interest income	13		23		39		146
Interest expense	Interest expense	(5,737)		(7,557)		(11,741)		(15,360)		Interest expense	(3,919)		(7,177)		(15,660)		(22,537)
Gain on extinguishment of debt, net	Gain on extinguishment of debt, net	1,401		0		1,064		0		Gain on extinguishment of debt, net	968		—		2,032		—
Income before income taxes	Income before income taxes	28,396		25,513		44,824		29,912		Income before income taxes	29,093		21,677		73,917		51,589
Income tax expense	Income tax expense	(8,179)		(7,248)		(12,939)		(8,432)		Income tax expense	(7,336)		(6,280)		(20,275)		(14,712)
Net income	Net income	20,217		18,265		31,885		21,480		Net income	21,757		15,397		53,642		36,877
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	(161)		(55)		(1,274)		(155)		Less: Net income attributable to noncontrolling interests	(631)		(240)		(1,905)		(395)
Net income attributable to Sterling common stockholders	Net income attributable to Sterling common stockholders	$	20,056	$	18,210	$	30,611	$	21,325	Net income attributable to Sterling common stockholders	$	21,126	$	15,157	$	51,737	$	36,482

Net income per share attributable to Sterling common stockholders:	Net income per share attributable to Sterling common stockholders:									Net income per share attributable to Sterling common stockholders:
Basic	Basic	$	0.70	$	0.65	$	1.08	$	0.77	Basic	$	0.74	$	0.54	$	1.81	$	1.31
Diluted	Diluted	$	0.69	$	0.65	$	1.06	$	0.76	Diluted	$	0.72	$	0.54	$	1.79	$	1.30

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	28,582		27,941		28,433		27,794		Basic	28,710		28,003		28,527		27,832
Diluted	Diluted	29,054		27,957		28,878		27,887		Diluted	29,213		28,233		28,927		27,986

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net income	Net income	$	20,217	$	18,265	$	31,885	$	21,480	Net income	$	21,757	$	15,397	$	53,642	$	36,877
Other comprehensive income, net of tax	Other comprehensive income, net of tax									Other comprehensive income, net of tax
Change in interest rate swap, net of tax (Note 9)	Change in interest rate swap, net of tax (Note 9)	728		(53)		1,623		(7,114)		Change in interest rate swap, net of tax (Note 9)	718		1,010		2,341		(6,104)
Total comprehensive income	Total comprehensive income	20,945		18,212		33,508		14,366		Total comprehensive income	22,475		16,407		55,983		30,773
Less: Comprehensive income attributable to noncontrolling interests	Less: Comprehensive income attributable to noncontrolling interests	(161)		(55)		(1,274)		(155)		Less: Comprehensive income attributable to noncontrolling interests	(631)		(240)		(1,905)		(395)
Comprehensive income attributable to Sterling common stockholders	Comprehensive income attributable to Sterling common stockholders	$	20,784	$	18,157	$	32,234	$	14,211	Comprehensive income attributable to Sterling common stockholders	$	21,844	$	16,167	$	54,078	$	30,378

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents ($30,006 and $26,122 related to variable interest entities (“VIEs”))		$	93,630	$	66,185
Accounts receivable ($26,778 and $25,789 related to VIEs)		211,529		177,424
Contract assets ($11,704 and $8,370 related to VIEs)		86,184		84,975
Receivables from and equity in construction joint ventures ($6,027 and $9,708 related to VIEs)		18,011		16,653
Other current assets ($3,188 and $1,493 related to VIEs)		24,738		16,306
Cash and cash equivalents ($36,809 and $26,122 related to variable interest entities (“VIEs”))						Cash and cash equivalents ($36,809 and $26,122 related to variable interest entities (“VIEs”))	$	117,702	$	66,185
Accounts receivable ($29,761 and $25,789 related to VIEs)						Accounts receivable ($29,761 and $25,789 related to VIEs)	218,683		177,424
Contract assets ($11,655 and $8,370 related to VIEs)						Contract assets ($11,655 and $8,370 related to VIEs)	85,498		84,975
Receivables from and equity in construction joint ventures ($7,024 and $9,708 related to VIEs)						Receivables from and equity in construction joint ventures ($7,024 and $9,708 related to VIEs)	21,656		16,653
Other current assets ($3,569 and $1,493 related to VIEs)						Other current assets ($3,569 and $1,493 related to VIEs)	22,483		16,306
Total current assets	Total current assets	434,092		361,543		Total current assets	466,022		361,543
Property and equipment, net ($9,539 and $6,010 related to VIEs)		142,015		126,668
Operating lease right-of-use assets, net ($4,279 and $4,213 related to VIEs)		16,609		16,515
Property and equipment, net ($9,943 and $6,010 related to VIEs)						Property and equipment, net ($9,943 and $6,010 related to VIEs)	148,444		126,668
Operating lease right-of-use assets, net ($5,133 and $4,213 related to VIEs)						Operating lease right-of-use assets, net ($5,133 and $4,213 related to VIEs)	17,470		16,515
Goodwill ($1,501 and $1,501 related to VIEs)	Goodwill ($1,501 and $1,501 related to VIEs)	192,014		192,014		Goodwill ($1,501 and $1,501 related to VIEs)	192,014		192,014
Other intangibles, net	Other intangibles, net	239,155		244,887		Other intangibles, net	236,289		244,887
Deferred tax asset, net	Deferred tax asset, net	0		7,817		Deferred tax asset, net	—		7,817
Other non-current assets, net	Other non-current assets, net	3,305		3,250		Other non-current assets, net	4,078		3,250
Total assets	Total assets	$	1,027,190	$	952,694	Total assets	$	1,064,317	$	952,694

Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable ($26,209 and $19,505 related to VIEs)		$	137,934	$	95,201
Contract liabilities ($17,953 and $17,678 related to VIEs)		141,236		114,019
Current maturities of long-term debt ($6,793 and $6,793 related to VIEs)		23,186		77,434
Current portion of long-term lease obligations ($2,011 and $1,801 related to VIEs)		7,942		7,588
Accrued compensation ($3,608 and $2,141 related to VIEs)		27,134		18,013
Other current liabilities ($1,472 and $1,374 related to VIEs)		8,810		9,629
Accounts payable ($30,264 and $19,505 related to VIEs)						Accounts payable ($30,264 and $19,505 related to VIEs)	$	142,740	$	95,201
Contract liabilities ($23,410 and $17,678 related to VIEs)						Contract liabilities ($23,410 and $17,678 related to VIEs)	141,236		114,019
Current maturities of long-term debt ($4,857 and $6,793 related to VIEs)						Current maturities of long-term debt ($4,857 and $6,793 related to VIEs)	21,239		77,434
Current portion of long-term lease obligations ($2,253 and $1,801 related to VIEs)						Current portion of long-term lease obligations ($2,253 and $1,801 related to VIEs)	8,314		7,588
Income taxes payable						Income taxes payable	306		—
Accrued compensation ($4,235 and $2,141 related to VIEs)						Accrued compensation ($4,235 and $2,141 related to VIEs)	34,801		18,013
Other current liabilities ($1,351 and $1,374 related to VIEs)						Other current liabilities ($1,351 and $1,374 related to VIEs)	9,088		9,629
Total current liabilities	Total current liabilities	346,242		321,884		Total current liabilities	357,724		321,884
Long-term debt ($79 and $53 related to VIEs)		303,531		291,249
Long-term lease obligations ($2,268 and $2,412 related to VIEs)		8,783		8,958
Long-term debt ($69 and $53 related to VIEs)						Long-term debt ($69 and $53 related to VIEs)	299,923		291,249
Long-term lease obligations ($2,880 and $2,412 related to VIEs)						Long-term lease obligations ($2,880 and $2,412 related to VIEs)	9,306		8,958
Members’ interest subject to mandatory redemption and undistributed earnings	Members’ interest subject to mandatory redemption and undistributed earnings	56,488		51,290		Members’ interest subject to mandatory redemption and undistributed earnings	54,766		51,290
Deferred tax liability, net	Deferred tax liability, net	3,956		0		Deferred tax liability, net	10,287		—
Other long-term liabilities ($722 and $722 related to VIEs)	Other long-term liabilities ($722 and $722 related to VIEs)	9,420		10,584		Other long-term liabilities ($722 and $722 related to VIEs)	9,218		10,584
Total liabilities	Total liabilities	728,420		683,965		Total liabilities	741,224		683,965
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)	0		0		Commitments and contingencies (Note 11)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, par value $0.01 per share; 38,000 shares authorized, 28,638 and 28,279 shares issued, 28,638 and 28,184 shares outstanding		286		283
Common stock, par value $0.01 per share; 38,000 shares authorized, 28,782 and 28,279 shares issued, 28,782 and 28,184 shares outstanding						Common stock, par value $0.01 per share; 38,000 shares authorized, 28,782 and 28,279 shares issued, 28,782 and 28,184 shares outstanding	288		283
Additional paid in capital	Additional paid in capital	253,467		256,423		Additional paid in capital	255,313		256,423
Treasury stock, at cost: 0 and 95 shares	Treasury stock, at cost: 0 and 95 shares	0		(1,445)		Treasury stock, at cost: 0 and 95 shares	—		(1,445)
Retained earnings	Retained earnings	47,884		17,273		Retained earnings	69,010		17,273
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,641)		(5,264)		Accumulated other comprehensive loss	(2,923)		(5,264)
Total Sterling stockholders’ equity	Total Sterling stockholders’ equity	297,996		267,270		Total Sterling stockholders’ equity	321,688		267,270
Noncontrolling interests	Noncontrolling interests	774		1,459		Noncontrolling interests	1,405		1,459
Total stockholders’ equity	Total stockholders’ equity	298,770		268,729		Total stockholders’ equity	323,093		268,729
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,027,190	$	952,694	Total liabilities and stockholders’ equity	$	1,064,317	$	952,694

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	31,885	$	21,480	Net income	$	53,642	$	36,877
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	16,707		16,541		Depreciation and amortization	25,336		24,639
Amortization of debt issuance costs and non-cash interest	Amortization of debt issuance costs and non-cash interest	1,264		1,762		Amortization of debt issuance costs and non-cash interest	1,756		2,489
Gain on disposal of property and equipment	Gain on disposal of property and equipment	(437)		(598)		Gain on disposal of property and equipment	(1,176)		(1,042)
Gain on debt extinguishment, net	Gain on debt extinguishment, net	(1,064)		0		Gain on debt extinguishment, net	(2,032)		—
Deferred taxes	Deferred taxes	11,294		6,223		Deferred taxes	17,413		10,946
Stock-based compensation expense	Stock-based compensation expense	3,850		6,196		Stock-based compensation expense	5,690		7,961
Change in fair value of interest rate swap	Change in fair value of interest rate swap	(51)		272		Change in fair value of interest rate swap	(41)		251
Changes in operating assets and liabilities (Note 15)	Changes in operating assets and liabilities (Note 15)	28,044		451		Changes in operating assets and liabilities (Note 15)	35,154		10,134
Net cash provided by operating activities	Net cash provided by operating activities	91,492		52,327		Net cash provided by operating activities	135,742		92,255
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(22,150)		(14,574)		Capital expenditures	(39,315)		(22,088)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	690		769		Proceeds from sale of property and equipment	2,093		1,557
Net cash used in investing activities	Net cash used in investing activities	(21,460)		(13,805)		Net cash used in investing activities	(37,222)		(20,531)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Repayments of debt	Repayments of debt	(40,072)		(22,644)		Repayments of debt	(44,184)		(52,695)
Distributions to noncontrolling interest owners	Distributions to noncontrolling interest owners	(1,959)		0		Distributions to noncontrolling interest owners	(1,959)		—

Other	Other	(602)		9,067		Other	(603)		9,137
Net cash used in financing activities	Net cash used in financing activities	(42,633)		(13,577)		Net cash used in financing activities	(46,746)		(43,558)
Net change in cash, cash equivalents, and restricted cash	Net change in cash, cash equivalents, and restricted cash	27,399		24,945		Net change in cash, cash equivalents, and restricted cash	51,774		28,166
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	72,642		50,562		Cash, cash equivalents, and restricted cash at beginning of period	72,642		50,562
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	100,041		75,507		Cash, cash equivalents, and restricted cash at end of period	124,416		78,728
Less: restricted cash (Other current assets)	Less: restricted cash (Other current assets)	(6,411)		(4,895)		Less: restricted cash (Other current assets)	(6,714)		(6,135)
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	93,630	$	70,612	Cash and cash equivalents at end of period	$	117,702	$	72,593
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:

Non-cash items:	Non-cash items:					Non-cash items:
Capital expenditures	Capital expenditures	$	4,425	$	0	Capital expenditures	$	116	$	—

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


		Six Months Ended June 30, 2021																														Nine Months Ended September 30, 2021
		Common Stock			Additional Paid in Capital				Treasury Stock						Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss					Total Sterling Stockholders’ Equity			Non-controlling Interests				Total Stockholders’ Equity			Common Stock								Additional Paid in Capital			Treasury Stock						Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Total Sterling Stockholders’ Equity			Non-controlling Interests			Total Stockholders’ Equity
		Shares	Amount				Shares			Amount											Shares						Amount							Shares				Amount
Balance at December 31, 2020	Balance at December 31, 2020	28,184	$	283			$	256,423		95			$	(1,445)					$	17,273				$	(5,264)			$	267,270			$	1,459		$	268,729	Balance at December 31, 2020		28,184			$	283		$	256,423		95			$	(1,445)		$	17,273		$	(5,264)		$	267,270		$	1,459	$	268,729
Net income	Net income	—	—		—				—		—				10,555		—					10,555			1,113				11,668		Net income	—			—						—			—			—			10,555			—			10,555			1,113			11,668
Change in interest rate swap	Change in interest rate swap	—	—		—				—		—				—		895					895			—				895		Change in interest rate swap	—			—					—			—			—			—			895			895			—			895
Stock-based compensation	Stock-based compensation	—	—		1,835				—		—				—		—					1,835			—				1,835		Stock-based compensation	—			—					1,835			—			—			—			—			1,835			—			1,835
Distributions to owners	Distributions to owners	—	—		—				—		—				—		—					0			(1,959)				(1,959)		Distributions to owners	—			—					—			—			—			—			—			—			(1,959)			(1,959)
Issuance of stock	Issuance of stock	668	5		(1,602)				(111)		1,741				—		—					144			—				144		Issuance of stock	668			5					(1,602)			(111)			1,741			—			—			144			—			144
Shares withheld for taxes	Shares withheld for taxes	(246)	(2)		(5,321)				16		(296)				—		—					(5,619)			—				(5,619)		Shares withheld for taxes	(246)			(2)					(5,321)			16			(296)			—			—			(5,619)			—			(5,619)
Balance at March 31, 2021	Balance at March 31, 2021	28,606	$	286	$	251,335			0		$	0			$	27,828	$	(4,369)				$	275,080		$	613			$	275,693	Balance at March 31, 2021	28,606			$	286				$	251,335		—			$	—		$	27,828		$	(4,369)		$	275,080		$	613		$	275,693
Net income	Net income	—	—		—				—		—				20,056		—					20,056			161				20,217		Net income	—			—					—			—			—			20,056			—			20,056			161			20,217
Change in interest rate swap	Change in interest rate swap	—	—		—				—		—				—		728					728			—				728		Change in interest rate swap	—			—					—			—			—			—			728			728			—			728
Stock-based compensation	Stock-based compensation	—	—		2,015				—		—				—		—					2,015			—				2,015		Stock-based compensation	—			—					2,015			—			—			—			—			2,015			—			2,015

Issuance of stock	Issuance of stock	32	—		120				—		—				—		—					120			—				120		Issuance of stock	32			—					120			—			—			—			—			120			—			120

Other	Other	—	—		(3)				—		—				—		—					(3)			—				(3)		Other	—			—					(3)			—			—			—			—			(3)			—			(3)
Balance at June 30, 2021	Balance at June 30, 2021	28,638	$	286	$	253,467			0		$	0			$	47,884	$	(3,641)				$	297,996		$	774			$	298,770	Balance at June 30, 2021	28,638			$	286				$	253,467		—			$	—		$	47,884		$	(3,641)		$	297,996		$	774		$	298,770

Net income																															Net income	—			—					—			—			—			21,126			—			21,126			631			21,757
Change in interest rate swap																															Change in interest rate swap	—			—					—			—			—			—			718			718			—			718
Stock-based compensation																															Stock-based compensation	—			—					1,840			—			—			—			—			1,840			—			1,840
Issuance of stock																															Issuance of stock	148			2					105			—			—			—			—			107			—			107
Shares withheld for taxes																															Shares withheld for taxes	(4)			—					(99)			—			—			—			—			(99)			—			(99)
Balance at September 30, 2021																															Balance at September 30, 2021	28,782			$	288				$	255,313		—			$	—		$	69,010		$	(2,923)		$	321,688		$	1,405		$	323,093


		Six Months Ended June 30, 2020																														Nine Months Ended September 30, 2020
		Common Stock			Additional Paid in Capital				Treasury Stock						Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss					Total Sterling Stockholders’ Equity			Non-controlling Interests				Total Stockholders’ Equity			Common Stock								Additional Paid in Capital			Treasury Stock						Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Total Sterling Stockholders’ Equity			Non-controlling Interests			Total Stockholders’ Equity
		Shares	Amount				Shares			Amount											Shares						Amount							Shares				Amount
Balance at December 31, 2019	Balance at December 31, 2019	27,772	$	283			$	251,019		518			$	(6,142)					$	(25,033)				$	(209)			$	219,918			$	1,293		$	221,211	Balance at December 31, 2019		27,772			$	283		$	251,019		518			$	(6,142)		$	(25,033)		$	(209)		$	219,918		$	1,293	$	221,211
Net income	Net income	—	—		—				—		—				3,115		—					3,115			100				3,215		Net income	—			—						—			—			—			3,115			—			3,115			100			3,215
Change in interest rate swap	Change in interest rate swap	—	—		—				—		—				—		(7,061)					(7,061)			—				(7,061)		Change in interest rate swap	—			—					—			—			—			—			(7,061)			(7,061)			—			(7,061)
Stock-based compensation	Stock-based compensation	—	—		2,234				—		—				—		—					2,234			—				2,234		Stock-based compensation	—			—					2,234			—			—			—			—			2,234			—			2,234

Issuance of stock	Issuance of stock	248	—		(2,460)				(248)		2,563				—		—					103			—				103		Issuance of stock	248			—					(2,460)			(248)			2,563			—			—			103			—			103
Shares withheld for taxes	Shares withheld for taxes	(54)	—		(104)				46		(668)				—		—					(772)			—				(772)		Shares withheld for taxes	(54)			—					(104)			46			(668)			—			—			(772)			—			(772)
Balance at March 31, 2020	Balance at March 31, 2020	27,966	$	283	$	250,689			316		$	(4,247)			$	(21,918)	$	(7,270)				$	217,537		$	1,393			$	218,930	Balance at March 31, 2020	27,966			$	283				$	250,689		316			$	(4,247)		$	(21,918)		$	(7,270)		$	217,537		$	1,393		$	218,930
Net income	Net income	—	—		—				—		—				18,210		—					18,210			55				18,265		Net income	—			—					—			—			—			18,210			—			18,210			55			18,265
Change in interest rate swap	Change in interest rate swap	—	—		—				—		—				—		(53)					(53)			—				(53)		Change in interest rate swap	—			—					—			—			—			—			(53)			(53)			—			(53)
Stock-based compensation	Stock-based compensation	—	—		3,962				—		—				—		—					3,962			—				3,962		Stock-based compensation	—			—					3,962			—			—			—			—			3,962			—			3,962

Issuance of stock	Issuance of stock	73	—		(740)				(73)		844				—		—					104			—				104		Issuance of stock	73			—					(740)			(73)			844			—			—			104			—			104
Shares withheld for taxes	Shares withheld for taxes	(5)	—		(18)				3		(32)				—		—					(50)			—				(50)		Shares withheld for taxes	(5)			—					(18)			3			(32)			—			—			(50)			—			(50)
Other	Other	—	—		(73)				—		—				—		—					(73)			—				(73)		Other	—			—					(73)			—			—			—			—			(73)			—			(73)
Balance at June 30, 2020	Balance at June 30, 2020	28,034	$	283	$	253,820			246		$	(3,435)			$	(3,708)	$	(7,323)				$	239,637		$	1,448			$	241,085	Balance at June 30, 2020	28,034			$	283				$	253,820		246			$	(3,435)		$	(3,708)		$	(7,323)		$	239,637		$	1,448		$	241,085
Net income																															Net income	—			—					—			—			—			15,157			—			15,157			240			15,397
Change in interest rate swap																															Change in interest rate swap	—			—					—			—			—			—			1,010			1,010			—			1,010
Stock-based compensation																															Stock-based compensation	—			—					1,765			—			—			—			—			1,765			—			1,765

Issuance of stock																															Issuance of stock	66			—					(714)			(66)			917			—			—			203			—			203
Shares withheld for taxes																															Shares withheld for taxes	(14)			—					—			14			(133)			—			—			(133)			—			(133)
Other																															Other	—			—					(11)			—			—			—			—			(11)			—			(11)
Balance at September 30, 2020																															Balance at September 30, 2020	28,086			$	283				$	254,860		194			$	(2,651)		$	11,449		$	(6,313)		$	257,628		$	1,688		$	259,316

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

STERLING CONSTRUCTION COMPANY, INC. & SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2021

($ and share values in thousands, except per share data)

(Unaudited)


1.			NATURE OF OPERATIONS

Business Summary

Sterling Construction Company, Inc. (“Sterling,” “the Company,” “we,” “our” or “us”), a Delaware corporation, operates through a variety of subsidiaries within three segments specializing in Heavy Civil, Specialty Services and Residential projects in the United States (the “U.S.”), primarily across the southern U.S., the Rocky Mountain States, California and Hawaii, as well as other areas with strategic construction opportunities. Heavy Civil includes infrastructure and rehabilitation projects for highways, roads, bridges, ~~airfields,~~airports, ports, light rail, water, wastewater and storm drainage systems. Specialty Services projects include ~~land~~site development activities, ~~(including site excavation and drainage, drilling and blasting for excavation),~~ foundations for multi-family homes, parking structures and other commercial concrete projects. Residential projects include concrete foundations for single-family homes. ~~From strategy to operations, we are committed to sustainability by operating responsibly to safeguard and improve society’s quality of life.~~


2.			BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Presentation Basis—The accompanying Condensed Consolidated Financial Statements are presented in accordance with accounting policies generally accepted in the United States (“GAAP”) and reflect all wholly owned subsidiaries and those entities the Company is required to consolidate. See Note 4 - Consolidated 50% Owned Subsidiaries and Note 5 - Construction Joint Ventures for further discussion of the Company’s consolidation policy for those entities that are not wholly owned. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Values presented within tables (excluding per share data) are in thousands. Reclassifications have been made to historical financial data in the Condensed Consolidated Financial Statements to conform to the current year presentation.

Estimates and Judgments—The preparation of the accompanying Condensed Consolidated Financial Statements in conformance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Company require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from construction contracts over time, the valuation of long-lived assets, goodwill and purchase accounting estimates. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.

Significant Accounting Policies

Consistent with Regulation S-X Rule 10-1(a), the Company has omitted significant accounting policies in this quarterly report that would duplicate the disclosures contained in the Company’s annual report on Form 10-K for the year ended December 31, 2020 under “Part II, Item 8. - Notes to Consolidated Financial Statements.” This quarterly report should be read in conjunction with the Company’s most recent annual report on Form 10-K.

Accounts Receivable—Receivables are generally based on amounts billed to the customer in accordance with contractual provisions. Receivables are written off based on the individual credit evaluation and specific circumstances of the customer, when such treatment is warranted. The Company performs a review of outstanding receivables, historical collection information and existing economic conditions to determine if there are potential uncollectible receivables. At ~~June~~September 30, 2021 and December 31, 2020, our allowance for our estimate of expected credit losses was 0.zero.

As is customary, we have agreed to indemnify our bonding company for all losses incurred by it in connection with bonds that are issued, and we have granted our bonding company a security interest in certain assets, including accounts receivable, as collateral for such obligations.

Contracts in Progress—For performance obligations satisfied over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Typically, Sterling bills for advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. However, the Company occasionally bills subsequent to revenue recognition, resulting in contract assets.

Many of the contracts under which the Company performs work also contain retainage provisions. Retainage refers to that portion of our billings held for payment by the customer pending satisfactory completion of the project. Unless reserved, the Company assumes that all amounts retained by customers under such provisions are fully collectible. At ~~June~~September 30, 2021 and December 31, 2020, contract assets included ~~$45,924~~$42,790 and $44,412 of retainage, respectively, and contract liabilities included ~~$39,682~~$41,925 and $33,856 of retainage, respectively. Retainage on active contracts is classified as current regardless of the term of the contract and is generally collected within one year of the completion of a contract. We anticipate collecting approximately ~~68%~~66% of our ~~June~~September 30, 2021 retainage during the next twelve months. These assets and liabilities are reported on the Condensed Consolidated Balance Sheet within “Contract assets” and “Contract liabilities” on a contract-by-contract basis at the end of each reporting period.

Revenue recognized for the three and ~~six~~nine months ended ~~June~~September 30, 2021 that was included in the contract liability balance on December 31, 2020 was ~~$141,813~~$111,887 and ~~$297,370,~~$409,257, respectively. Revenue recognized for the three and ~~six~~nine months ended ~~June~~September 30, 2020 that was included in the contract liability balance on December 31, 2019 was ~~$132,225~~$106,072 and ~~$278,491,~~$384,569, respectively.

Cash and Restricted Cash—Our cash is comprised of highly liquid investments with maturities of three months or less. Restricted cash of ~~$6,411~~$6,714 and $6,457 is included in “Other current assets” on the Condensed Consolidated Balance Sheets at ~~June~~September 30, 2021 and December 31, 2020, respectively. This primarily represents cash deposited by the Company into separate accounts and designated as collateral for standby letters of credit in the same amount in accordance with contractual agreements.


3.			REVENUE FROM CUSTOMERS

Backlog—The following table presents the Company’s backlog, by segment:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Heavy Civil Backlog	Heavy Civil Backlog	$	1,183,122	$	898,183	Heavy Civil Backlog	$	1,019,904	$	898,183
Specialty Services Backlog	Specialty Services Backlog	387,519		277,205		Specialty Services Backlog	391,443		277,205
Total Heavy Civil and Specialty Services Backlog	Total Heavy Civil and Specialty Services Backlog	$	1,570,641	$	1,175,388	Total Heavy Civil and Specialty Services Backlog	$	1,411,347	$	1,175,388

The Company expects to recognize approximately ~~59%~~64% of its backlog as revenue during the next twelve months, and the balance thereafter.

Revenue Disaggregation—The following tables present the Company’s revenue disaggregated by major end market and contract type:


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,		Nine Months Ended September 30,
Revenues by major end market	Revenues by major end market	2021		2020		2021		2020			Revenues by major end market	2021		2020		2021		2020
Heavy Highway	Heavy Highway	$	139,189	$	152,526	$	238,705	$	248,900		Heavy Highway	$	188,746	$	148,239	$	427,451	$	397,139
Aviation	Aviation	36,754		34,867		63,976		63,324			Aviation	35,840		20,473		99,816		83,797
Water Containment and Treatment	Water Containment and Treatment	16,208		16,529		30,427		38,338			Water Containment and Treatment	11,463		17,751		41,890		56,089
Other	Other	11,002		16,526		17,099		25,501			Other	13,849		14,615		30,948		40,116
Heavy Civil Revenues	Heavy Civil Revenues	203,153		220,448		350,207		376,063			Heavy Civil Revenues	249,898		201,078		600,105		577,141
Land Development		123,743		105,639		220,315		181,884
Site Development											Site Development	121,286		114,961		341,601		296,845
Commercial	Commercial	28,161		30,064		55,677		58,542			Commercial	26,970		25,010		82,647		83,552
Specialty Services Revenues	Specialty Services Revenues	151,904		135,703		275,992		240,426			Specialty Services Revenues	148,256		139,971		424,248		380,397
Residential Revenues	Residential Revenues	46,609		43,887		90,783		80,237			Residential Revenues	65,295		42,409		156,078		122,646
Total Revenues	Total Revenues	$	401,666	$	400,038	$	716,982	$	696,726		Total Revenues	$	463,449	$	383,458	$	1,180,431	$	1,080,184

Revenues by contract type	Revenues by contract type										Revenues by contract type
Fixed-Unit Price	Fixed-Unit Price	$	225,886	$	203,692	$	403,434	$	345,431		Fixed-Unit Price	$	267,093	$	187,692	$	670,526	$	631,639
Lump Sum	Lump Sum	127,416		147,460		218,571		261,712			Lump Sum	129,742		148,463		348,313		301,025
Residential and Other	Residential and Other	48,364		48,886		94,977		89,583			Residential and Other	66,614		47,303		161,592		147,520
Total Revenues	Total Revenues	$	401,666	$	400,038	$	716,982	$	696,726		Total Revenues	$	463,449	$	383,458	$	1,180,431	$	1,080,184

Each of these contract types presents advantages and disadvantages. Typically, the Company assumes more risk with lump-sum contracts. However, these types of contracts offer additional profits if the work is completed for less than originally estimated. Under fixed-unit price contracts, the Company’s profit may vary if actual labor-hour costs vary significantly from the negotiated rates. Also, because some contracts can provide little or no fee for managing material costs, the components of contract cost can impact profitability.

Variable Consideration

The Company has projects that it is in the process of negotiating, or awaiting final approval of, unapproved change orders and claims with its customers. The Company is proceeding with its contractual rights to recoup additional costs incurred from its customers based on completing work associated with change orders, including change orders with pending change order pricing, or claims related to significant changes in scope which resulted in substantial delays and additional costs in completing the work. Unapproved change order and claim information has been provided to the Company’s customers and negotiations with the customers are ongoing. If additional progress with an acceptable resolution is not reached, legal action will be taken. Based upon the Company’s review of the provisions of its contracts, specific costs incurred and other related evidence supporting the unapproved change orders and claims, together in some cases as necessary with the views of the Company’s outside claim consultants, the Company concluded it was appropriate to include in project price amounts of ~~$14,300~~$13,900 and $7,142, at ~~June~~September 30, 2021 and December 31, 2020, respectively, relating to unapproved change orders and claims. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Contract Estimates

Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognizes such profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that often span several years. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials and the performance of subcontractors. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Changes in contract estimates resulted in a net ~~increases~~decrease of ~~approximately $3,727~~$354 and ~~$12,032~~a net increase of $11,678 for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and net increases of approximately ~~$2,197~~$2,725 and ~~$2,292~~$5,017 for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, included in “Operating income” on the Condensed Consolidated Statements of Operations.


4.			CONSOLIDATED 50% OWNED SUBSIDIARIES

The Company has 50% ownership interests in 2 subsidiaries (“Myers” and “RHB”) that it fully consolidates as a result of its exercise of control over the entities. The earnings attributable to the 50% portions the Company does not own were approximately ~~$4,800~~$3,300 and ~~$6,600~~$9,900 for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and ~~$4,600~~$2,600 and ~~$6,300~~$8,900 for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, and are eliminated within “Other operating expense, net” in the Condensed Consolidated Statements of Operations. Any undistributed earnings for partners are included in “Members’ interest subject to mandatory redemption and undistributed earnings” within the Condensed Consolidated Balance Sheets and are mandatorily payable at the time of the noncontrolling owners’ death or permanent disability.

These two subsidiaries have individual mandatory redemption provisions which, under circumstances outlined in the partner agreements, are certain to occur and obligate the Company to purchase each partner’s remaining 50% interests for $20,000 ($40,000 in the aggregate). The Company has purchased 2 separate $20,000 death and permanent total disability insurance policies to mitigate the Company’s cash draw if such events were to occur. These purchase obligations are also recorded in “Members’ interest subject to mandatory redemption and undistributed earnings” on the Condensed Consolidated Balance Sheets.

The liability consists of the following:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Members’ interest subject to mandatory redemption	Members’ interest subject to mandatory redemption	$	40,000	$	40,000	Members’ interest subject to mandatory redemption	$	40,000	$	40,000
Net accumulated earnings	Net accumulated earnings	16,488		11,290		Net accumulated earnings	14,766		11,290
Total liability	Total liability	$	56,488	$	51,290	Total liability	$	54,766	$	51,290

The Company must determine whether any of its entities, including these 2 50% owned subsidiaries, in which it participates, is a VIE. The Company determined that Myers is a VIE and that the Company is the primary beneficiary because,

pursuant to the terms of the Myers Operating Agreement, the Company is exposed to the majority of potential losses of the partnership.

Summary financial information for Myers is as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Revenues	Revenues	$	43,137	$	54,364	$	71,094	$	98,726	Revenues	$	50,338	$	57,566	$	121,432	$	156,292
Operating income	Operating income	$	747	$	1,049	$	1,465	$	1,204	Operating income	$	808	$	1,889	$	2,273	$	3,093
Net income	Net income	$	366	$	526	$	717	$	605	Net income	$	1,379	$	932	$	2,096	$	1,537


5.			CONSTRUCTION JOINT VENTURES

Joint Ventures with a Controlling Interest—We consolidate any venture that is determined to be a VIE for which we are the primary beneficiary, or which we otherwise effectively control. The equity held by the remaining owners and their portions of net income (loss) are reflected in stockholders’ equity on the Condensed Consolidated Balance Sheets line item “Noncontrolling interests” and in the Condensed Consolidated Statements of Operations line item “Net income attributable to noncontrolling interests,” respectively. The Company determined that a joint venture in which the Company’s Ralph L. Wadsworth Construction subsidiary is a 51% owner is a VIE and the Company is the primary beneficiary. Summary financial information for this construction joint venture is as follows:

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenues $ 9,325 $ 3,404 $ 17,566 $ 7,468
Operating income $ 613 $ 375 $ 3,140 $ 671
Net income $ 615 $ 376 $ 3,143 $ 675


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues	$	19,846	$	4,266	$	37,412	$	11,734
Operating income	$	1,290	$	290	$	4,430	$	961
Net income	$	1,292	$	292	$	4,435	$	967

Joint Ventures with a Noncontrolling Interest—The Company accounts for unconsolidated joint ventures using a pro-rata basis in the Condensed Consolidated Statements of Operations and as a single line item (“Receivables from and equity in construction joint ventures”) in the Condensed Consolidated Balance Sheets. This method is a permissible modification of the equity method of accounting which is a common practice in the construction industry. Combined financial amounts of joint ventures in which the Company has a noncontrolling interest and the Company’s share of such amounts which are included in the Company’s Condensed Consolidated Financial Statements are shown below:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Current assets	Current assets	$	138,804	$	143,608	Current assets	$	156,479	$	143,608
Current liabilities	Current liabilities	$	(95,350)	$	(141,295)	Current liabilities	$	(103,754)	$	(141,295)
Sterling’s receivables from and equity in construction joint ventures	Sterling’s receivables from and equity in construction joint ventures	$	18,011	$	16,653	Sterling’s receivables from and equity in construction joint ventures	$	21,656	$	16,653


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Revenues	Revenues	$	62,489	$	43,466	$	111,906	$	70,312	Revenues	$	69,116	$	58,541	$	181,022	$	128,853
Income before tax	Income before tax	$	8,780	$	4,516	$	13,415	$	6,673	Income before tax	$	9,311	$	7,814	$	22,726	$	14,487
Sterling’s noncontrolling interest:	Sterling’s noncontrolling interest:									Sterling’s noncontrolling interest:
Revenues	Revenues	$	26,994	$	19,377	$	48,938	$	32,459	Revenues	$	30,326	$	26,195	$	79,264	$	58,653
Income before tax	Income before tax	$	3,676	$	1,968	$	5,811	$	3,017	Income before tax	$	4,149	$	3,541	$	9,959	$	6,559

The caption “Receivables from and equity in construction joint ventures” includes undistributed earnings and receivables owed to the Company. Undistributed earnings are typically released to the joint venture partners after the customer accepts the project as completed and the warranty period, if any, has passed.

Other—The use of joint ventures exposes us to a number of risks, including the risk that our partners may be unable or unwilling to provide their share of capital investment to fund the operations of the venture or complete their obligations to us, the venture, or ultimately, the customer. Differences in opinions or views among joint venture partners could also result in delayed decision-making or failure to agree on material issues, which could adversely affect the business and operations of the joint venture. In addition, agreement terms may subject us to joint and several liability for our venture partners, and the failure of our venture partners to perform their obligations could impose additional performance and financial obligations on us. The

aforementioned factors could result in unanticipated costs to complete the projects, liquidated damages or contract disputes, including claims against our partners.


6.			PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Construction and transportation equipment	Construction and transportation equipment	$	252,797	$	231,799	Construction and transportation equipment	$	256,444	$	231,799
Buildings and improvements	Buildings and improvements	22,493		21,025		Buildings and improvements	23,110		21,025
Land	Land	3,891		3,891		Land	3,891		3,891
Office equipment	Office equipment	3,046		3,012		Office equipment	3,147		3,012
Total property and equipment	Total property and equipment	282,227		259,727		Total property and equipment	286,592		259,727
Less accumulated depreciation	Less accumulated depreciation	(140,212)		(133,059)		Less accumulated depreciation	(138,148)		(133,059)
Total property and equipment, net	Total property and equipment, net	$	142,015	$	126,668	Total property and equipment, net	$	148,444	$	126,668

Depreciation Expense—Depreciation expense is primarily included within cost of revenues and was ~~$5,536~~$5,763 and ~~$10,975~~$16,738 for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and ~~$5,390~~$5,232 and ~~$10,838~~$16,070 for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.


7.			OTHER INTANGIBLE ASSETS

The following table presents our acquired finite-lived intangible assets, including the weighted-average useful lives for each major intangible asset category and in total:


			June 30, 2021				December 31, 2020						September 30, 2021				December 31, 2020
		Weighted Average Life (Years)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Weighted Average Life (Years)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Customer relationships	Customer relationships	25	$	232,623	$	(21,099)	$	232,623	$	(16,360)	Customer relationships	25	$	232,623	$	(23,469)	$	232,623	$	(16,360)
Trade name	Trade name	23	30,107		(3,967)		30,107		(3,209)		Trade name	23	30,107		(4,346)		30,107		(3,209)
Non-compete agreements	Non-compete agreements	5	2,487		(996)		2,487		(761)		Non-compete agreements	5	2,487		(1,113)		2,487		(761)
Total	Total	24	$	265,217	$	(26,062)	$	265,217	$	(20,330)	Total	24	$	265,217	$	(28,928)	$	265,217	$	(20,330)

The ~~Company's~~Company’s intangible amortization expense was $2,866 and ~~$5,732~~$8,598 for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and $2,866 and ~~$5,703~~$8,569 for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.


8.			DEBT

The Company’s outstanding debt was as follows:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Term Loan Facility	Term Loan Facility	$	315,000	$	355,000	Term Loan Facility	$	310,944	$	355,000
Revolving Credit Facility	Revolving Credit Facility	0		0		Revolving Credit Facility	—		—
Credit Facility	Credit Facility	315,000		355,000		Credit Facility	310,944		355,000

Other debt	Other debt	17,335		20,397		Other debt	15,342		20,397
Total debt	Total debt	332,335		375,397		Total debt	326,286		375,397
Less - Current maturities of long-term debt	Less - Current maturities of long-term debt	(23,186)		(77,434)		Less - Current maturities of long-term debt	(21,239)		(77,434)
Less - Unamortized debt issuance costs	Less - Unamortized debt issuance costs	(5,618)		(6,714)		Less - Unamortized debt issuance costs	(5,124)		(6,714)
Total long-term debt	Total long-term debt	$	303,531	$	291,249	Total long-term debt	$	299,923	$	291,249

Credit Facility—Our amended credit agreement (the “Credit Agreement”) provides the Company with senior secured debt financing in an amount up to $475,000 in the aggregate, consisting of (i) a senior secured first lien term loan facility (the “Term Loan Facility”) in the amount of $400,000 (collectively, the “Credit Facility”) and (ii) a senior secured first lien revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $75,000 (with a $75,000 limit for the issuance of letters of credit and a $15,000 sublimit for swing line loans). The obligations under the Credit Facility are secured by substantially all assets of the Company and the subsidiary guarantors, subject to certain permitted liens and interests of other parties. The Credit Facility will mature on October 2, 2024.

On June 28, 2021, the Credit Agreement was further amended to (i) decrease the applicable margins with respect to the rates per annum applicable to Base Rate Loans (as defined in the Credit Agreement), Eurodollar Loans (as defined in the Credit Agreement), Letter of Credit (as defined in the Credit Agreement) fees and the commitment fee payable under the Revolving Credit Facility and Term Loan Facility; (ii) reduce the applicable percentages of excess cash flow required for application to mandatory prepayments of the Credit Facility; and (iii) decrease the amounts of the scheduled quarterly principal payments due under the Term Loan Facility.

The Term Loan Facility bears interest at either the base rate plus a margin, or at a one-, two-, three-, six- or, if available, twelve-month LIBOR rate plus a margin, at the Company’s election. At ~~June~~September 30, 2021, the Company calculated interest using a one-month LIBOR rate and an applicable margin of ~~0.095%~~0.084% and 2.50% per annum, respectively. We continue to utilize an interest rate swap to hedge against $275,000 of the outstanding Term Loan Facility, which resulted in a weighted average interest rate of approximately ~~5.49%~~5.15% per annum during the ~~six~~nine months ended ~~June~~September 30, 2021. Scheduled principal payments on the Term Loan Facility are made quarterly and total $24,700, $16,200, $22,300 and $18,300 for each of the years ending 2021, 2022, 2023 and 2024, respectively. The Company is required to make mandatory prepayments on the Credit Facility with proceeds received from issuances of debt, events of loss and certain dispositions. The Company also is required to prepay the Credit Facility with its excess cash flow within 5 days after receipt of its annual audited financial statements. For the ~~six~~nine months ended ~~June~~September 30, 2021, the ~~company~~Company made scheduled term loan payments of ~~$16,556,~~$20,612, an excess cash flow payment of $18,000

and an optional prepayment of $5,444. A final payment of all principal and interest then outstanding on the Term Loan Facility is due on October 2, 2024.

The Revolving Credit Facility bears interest at the same rate options as the Term Loan Facility. In addition to interest on debt borrowings, we are assessed quarterly commitment fees on the unutilized portion of the facility as well as letter of credit fees on outstanding instruments. At ~~June~~September 30, 2021, we had 0no outstanding borrowings under the $75,000 Revolving Credit ~~Facility, providing $75,000 of available capacity.~~Facility.

Debt Issuance Costs—The costs associated with the Term Loan Facility and Revolving Credit Facility are reflected on the Condensed Consolidated Balance Sheets as a direct reduction from the related debt liability and amortized over the terms of the respective facilities. Amortization of debt issuance costs was ~~$604~~$492 and ~~$1,264~~$1,756 for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and ~~$740~~$727 and ~~$1,492~~$2,219 for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, and was recorded as interest expense. Additionally, due to early payments of $18,000 and $5,444 on the Term Loan Facility in the first and second quarters of 2021, respectively, we recorded losses on debt extinguishment of ~~$94~~$0 and $431 for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020,~~2021, respectively, related to debt issuance costs.

Other Debt—During the second quarter of 2020, the Company’s 2 50% owned subsidiaries received 3 short-term Paycheck Protection Program loans (the “PPP Loans”) totaling approximately $9,800. During the ~~second~~third quarter of 2021, the Small Business Administration (“SBA”) forgave 1 of the PPP Loans of approximately ~~$3,000,~~$2,000, of which the Company recorded a gain on debt extinguishment of ~~$1,495~~$968 for its 50% portion of the gain. For the nine months ended September 30, 2021, the SBA forgave 2 of the PPP Loans totaling approximately $5,000, of which the Company recorded a gain on debt extinguishment of $2,463 for its 50% portion of the gain. The remaining 2 PPP ~~Loans are~~Loan is classified as short-term debt under “Current Liabilities” on the Consolidated Balance Sheets at ~~June~~September 30, 2021, as we expect to receive a forgiveness determination by the SBA within the next ~~twelve~~six months.

Compliance and Other—The Credit Agreement contains various affirmative and negative covenants that may, subject to certain exceptions, restrict the ability of us and our subsidiaries to, among other things, grant liens, incur additional indebtedness, make loans, advances or other investments, make non-ordinary course asset sales, declare or pay dividends or make other distributions with respect to equity interests, purchase, redeem or otherwise acquire or retire capital stock or other equity interests, or merge or consolidate with any other person, among various other things. In addition, the Company is required to maintain certain financial covenants. As of ~~June~~September 30, 2021, we were in compliance with all of our restrictive and financial covenants. The Company’s debt is recorded at its carrying amount in the Condensed Consolidated Balance Sheets. At ~~June~~September 30, 2021 and December 31, 2020, the carrying values of our debt outstanding approximated the fair values.


9.			FINANCIAL INSTRUMENTS

Interest Rate Derivative—We continue to utilize a swap arrangement to hedge against interest rate variability associated with $275,000 of the ~~$315,000~~$310,944 outstanding under the Term Loan Facility. The Company has designated its interest rate swap agreement as a cash flow hedging derivative. To the extent the derivative instrument is effective and the documentation requirements have been met, changes in fair value are recognized in other comprehensive income (loss) (“OCI”) until the underlying hedged item is recognized in earnings. At ~~June~~September 30, 2021, the fair value of the swap recorded in accumulated other comprehensive income (loss) (“AOCI”) was a net loss of ~~$4,719.~~$3,790.

Derivatives Disclosures

Fair Value—Financial instruments are required to be categorized within a valuation hierarchy based upon the lowest level of input that is significant to the fair value measurement. The three levels of the valuation hierarchy are as follows:

•Level 1—Fair value is based on quoted prices in active markets.

•Level 2—Fair value is based on internally developed models that use, as their basis, readily observable market parameters. Our derivative positions are classified within level 2 of the valuation hierarchy as they are valued using quoted market prices for similar assets and liabilities in active markets. These level 2 derivatives are valued utilizing an income approach, which discounts future cash flow based on current market expectations and adjusts for credit risk.

•Level 3—Fair value is based on internally developed models that use, as their basis, significant unobservable market parameters. The Company did not have any level 3 classifications at ~~June~~September 30, 2021 or December 31, 2020.

The following table presents the fair value of the interest rate derivative by valuation hierarchy and balance sheet classification:


		June 30, 2021								December 31, 2020									September 30, 2021								December 31, 2020
		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Other current liabilities	Other current liabilities	$	0	$	(3,794)	$	0	$	(3,794)	$	0	$	(4,427)	$	0	$	(4,427)	Other current liabilities	$	—	$	(3,529)	$	—	$	(3,529)	$	—	$	(4,427)	$	—	$	(4,427)
Other non-current liabilities	Other non-current liabilities	0		(1,108)		0		(1,108)		0		(2,629)		0		(2,629)		Other non-current liabilities	—		(455)		—		(455)		—		(2,629)		—		(2,629)
Total liabilities at fair value	Total liabilities at fair value	$	0	$	(4,902)	$	0	$	(4,902)	$	0	$	(7,056)	$	0	$	(7,056)	Total liabilities at fair value	$	—	$	(3,984)	$	—	$	(3,984)	$	—	$	(7,056)	$	—	$	(7,056)

OCI—The following table presents the total value recognized in OCI and reclassified from AOCI into earnings during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 for derivatives designated as cash flow hedges:


																Three Months Ended						Nine Months Ended
		Three Months Ended June 30, 2021						Six Months Ended June 30, 2021						September 30, 2021				September 30, 2021
		Before Tax		Tax		Net of Tax		Before Tax		Tax		Net of Tax				Before Tax		Tax		Net of Tax		Before Tax		Tax		Net of Tax
Net gain (loss) recognized in OCI	Net gain (loss) recognized in OCI	$	(82)	$	19	$	(63)	$	44	$	(10)	$	34		Net gain (loss) recognized in OCI	$	(111)	$	25	$	(86)	$	(67)	$	15	$	(52)
Net amount reclassified from AOCI into earnings(1)	Net amount reclassified from AOCI into earnings(1)	1,024		(233)		791		2,058		(469)		1,589			Net amount reclassified from AOCI into earnings(1)	1,041		(237)		804		3,099		(706)		2,393
Change in other comprehensive income	Change in other comprehensive income	$	942	$	(214)	$	728	$	2,102	$	(479)	$	1,623		Change in other comprehensive income	$	930	$	(212)	$	718	$	3,032	$	(691)	$	2,341


															Three Months Ended						Nine Months Ended
		Three Months Ended June 30, 2020						Six Months Ended June 30, 2020							September 30, 2020						September 30, 2020
		Before Tax		Tax		Net of Tax		Before Tax		Tax		Net of Tax			Before Tax		Tax		Net of Tax		Before Tax		Tax		Net of Tax
Net gain (loss) recognized in OCI	Net gain (loss) recognized in OCI	$	(1,031)	$	232	$	(799)	$	(10,205)	$	2,296	$	(7,909)	Net gain (loss) recognized in OCI	$	50	$	(11)	$	39	$	(10,155)	$	2,285	$	(7,870)
Net amount reclassified from AOCI into earnings	Net amount reclassified from AOCI into earnings	963		(217)		746		1,026		(231)		795		Net amount reclassified from AOCI into earnings	1,253		(282)		971		2,279		(513)		1,766
Change in other comprehensive income	Change in other comprehensive income	$	(68)	$	15	$	(53)	$	(9,179)	$	2,065	$	(7,114)	Change in other comprehensive income	$	1,303	$	(293)	$	1,010	$	(7,876)	$	1,772	$	(6,104)

(1) Net unrealized losses totaling ~~$3,611~~$3,335 are anticipated to be reclassified from AOCI into earnings during the next 12 months due to settlement of the associated underlying obligations.


10.			LEASE OBLIGATIONS

The Company has operating and finance leases primarily for construction and transportation equipment, as well as office space. The Company’s leases have remaining lease terms of one month to seven years, some of which include options to extend the leases for up to ten years.

The components of lease expense are as follows:

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Operating lease cost $ 1,510 $ 2,075 $ 3,022 $ 4,234
Short-term lease cost $ 2,911 $ 3,745 $ 5,035 $ 7,026
Finance lease cost:
Amortization of right-of-use assets $ 46 $ 49 $ 96 $ 105
Interest on lease liabilities 5 7 11 15
Total finance lease cost $ 51 $ 56 $ 107 $ 120


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating lease cost	$	1,672	$	2,187	$	4,694	$	6,421
Short-term lease cost	$	3,813	$	3,311	$	8,848	$	10,337
Finance lease cost:
Amortization of right-of-use assets	$	46	$	49	$	151	$	154
Interest on lease liabilities	5		7		16		22
Total finance lease cost	$	51	$	56	$	167	$	176

Supplemental cash flow information related to leases is as follows:


		Six Months Ended June 30,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	2,980	$	4,336	Operating cash flows from operating leases	$	4,627	$	6,281
Operating cash flows from finance leases	Operating cash flows from finance leases	$	11	$	15	Operating cash flows from finance leases	$	16	$	22
Financing cash flows from finance leases	Financing cash flows from finance leases	$	96	$	105	Financing cash flows from finance leases	$	151	$	154

Right-of-use assets obtained in exchange for lease obligations (noncash):
Right-of-use assets obtained in exchange for lease obligations (non-cash):						Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases	Operating leases	$	3,496	$	5,633	Operating leases	$	6,221	$	7,679
Finance leases	Finance leases	$	0	$	0	Finance leases	$	—	$	—

Supplemental balance sheet information related to leases is as follows:


		June 30, 2021			December 31, 2020				September 30, 2021			December 31, 2020
Operating Leases	Operating Leases							Operating Leases
Operating lease right-of-use assets	Operating lease right-of-use assets	$	16,609		$	16,515		Operating lease right-of-use assets	$	17,470		$	16,515

Current portion of long-term lease obligations	Current portion of long-term lease obligations	$	7,942		$	7,588		Current portion of long-term lease obligations	$	8,314		$	7,588
Long-term lease obligations	Long-term lease obligations	8,783			8,958			Long-term lease obligations	9,306			8,958
Total operating lease liabilities	Total operating lease liabilities	$	16,725		$	16,546		Total operating lease liabilities	$	17,620		$	16,546
Finance Leases	Finance Leases							Finance Leases
Property and equipment, at cost	Property and equipment, at cost	$	1,479		$	1,479		Property and equipment, at cost	$	1,479		$	1,479
Accumulated depreciation	Accumulated depreciation	(806)			(702)			Accumulated depreciation	(857)			(702)
Property and equipment, net	Property and equipment, net	$	673		$	777		Property and equipment, net	$	622		$	777

Current maturities of long-term debt	Current maturities of long-term debt	$	168		$	188		Current maturities of long-term debt	$	157		$	188
Long-term debt	Long-term debt	295			372			Long-term debt	260			372
Total finance lease liabilities	Total finance lease liabilities	$	463		$	560		Total finance lease liabilities	$	417		$	560
Weighted Average Remaining Lease Term	Weighted Average Remaining Lease Term							Weighted Average Remaining Lease Term
Operating leases	Operating leases	3.4			3.2			Operating leases	3.4			3.2
Finance leases	Finance leases	2.9			3.2			Finance leases	2.7			3.2
Weighted Average Discount Rate	Weighted Average Discount Rate							Weighted Average Discount Rate
Operating leases	Operating leases	5.5		%	5.7		%	Operating leases	5.4		%	5.7		%
Finance leases	Finance leases	4.2		%	4.2		%	Finance leases	4.2		%	4.2		%

Maturities of lease liabilities are as follows:


		Operating Leases		Finance Leases			Operating Leases		Finance Leases
Year Ending December 31,	Year Ending December 31,					Year Ending December 31,
2021 (excluding the six months ended June 30, 2021)		$	3,715	$	101
2021 (excluding the nine months ended September 30, 2021)						2021 (excluding the nine months ended September 30, 2021)	$	1,742	$	49
2022	2022	6,510		161		2022	7,377		161
2023	2023	3,866		154		2023	4,773		155
2024	2024	1,820		77		2024	2,558		77
2025	2025	1,002		0		2025	1,293		—
2026	2026	928		0		2026	1,005		—
Thereafter	Thereafter	628		0		Thereafter	629		—
Total lease payments	Total lease payments	$	18,469	$	493	Total lease payments	$	19,377	$	442
Less imputed interest	Less imputed interest	(1,744)		(30)		Less imputed interest	(1,757)		(25)
Total	Total	$	16,725	$	463	Total	$	17,620	$	417


11.			COMMITMENTS AND CONTINGENCIES

The Company is required by its insurance providers to obtain and hold standby letters of credit. These letters of credit serve as a guarantee by the banking institution to pay the Company’s insurance providers the incurred claim costs attributable to its general liability, workers compensation and automobile liability claims, up to the amount stated in the standby letters of credit, in the event that these claims were not paid by the Company. These letters of credit are cash collateralized, resulting in the cash being designated as restricted.

The Company, including its construction joint ventures and its consolidated 50% owned subsidiaries, is now and may in the future be involved as a party to various legal proceedings that are incidental to the ordinary course of business. Management, after consultation with legal counsel, does not believe that the outcome of these actions will have a material impact on the Condensed Consolidated Financial Statements of the Company.


12.			INCOME TAXES

The Company and its subsidiaries are based in the U.S. and file federal and various state income tax returns. The components of the provision for income taxes were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Current tax expense	Current tax expense	$	1,027	$	1,938	$	1,645	$	2,209	Current tax expense	$	1,216	$	1,557	$	2,862	$	3,766
Deferred tax expense	Deferred tax expense	7,152		5,310		11,294		6,223		Deferred tax expense	6,120		4,723		17,413		10,946
Income tax expense	Income tax expense	$	8,179	$	7,248	$	12,939	$	8,432	Income tax expense	$	7,336	$	6,280	$	20,275	$	14,712

Cash paid for income taxes	Cash paid for income taxes	$	1,700	$	0	$	1,700	$	44	Cash paid for income taxes	$	485	$	2,900	$	2,167	$	2,944

The 2021 effective income tax rate varied from the statutory rate primarily as a result of state income taxes, nondeductible compensation and other permanent differences.

Due to net operating loss carryforwards, the Company expects no cash payments for federal income taxes for 2021 or 2020. The Company makes cash payments for state income taxes in states in which the Company does not have net operating loss carry forwards.

At December 31, 2020 the Company had federal and state net operating loss (“NOL”) carryforwards of $58,719 and $36,381, respectively, which expire at various dates in the next 18 years for U.S. federal income tax and in the next 7 to 18 years for the various state jurisdictions where we operate. Such NOL carryforwards expire beginning in 2028 through 2039.

As a result of the Company’s analysis, management has determined that the Company does not have any material uncertain tax positions.


13.			STOCK INCENTIVE PLAN AND OTHER EQUITY ACTIVITY

General—The Company has a stock incentive plan (the “Stock Incentive Plan”) and an employee stock purchase plan (the “ESPP”) that are administered by the Compensation and Talent Development Committee of the Board of Directors. Under the Stock Incentive Plan, the Company can issue shares to employees and directors in the form of restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance share units (“PSUs”). Changes in common stock, additional paid in capital and treasury stock during the ~~six~~nine months ended ~~June~~September 30, 2021 primarily relate to activity associated with the Stock Incentive Plan, the ESPP and shares withheld for taxes.

Share Grants—During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company granted the following awards under the Stock Incentive Plan:

Shares Weighted Average Grant-Date Fair Value per Share
RSAs 26 $ 23.22
RSUs 108 $ 20.55
PSUs (at target) 139 $ 20.54
Total shares granted 273


	Shares	Weighted Average Grant-Date Fair Value per Share
RSAs	29	$	23.19
RSUs	108	$	20.55
PSUs (at target)	139	$	20.54
Total shares granted	276

Share Issuances—During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company issued the following shares under the Stock Incentive Plan and the ESPP:


						Shares
RSAs (issued upon grant)						2629
RSUs (issued upon vesting)						4055
PSUs (issued upon vesting)						621
ESPP (issued upon sale)						1318
Total shares issued						~~700~~723

Stock-Based Compensation Expense—During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recognized ~~$2,015~~$1,840 and ~~$3,850,~~$5,690, respectively, of stock-based compensation expense, and during the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company recognized ~~$3,962~~$1,765 and ~~$6,196~~$7,961 of stock-based compensation expense, respectively, primarily within general and administrative expenses. The Company recognizes forfeitures as they occur, rather than estimating expected forfeitures. Included within total stock-based compensation expense for the three and ~~six~~nine months ended ~~June~~September 30, 2021 is ~~$22~~$19 and ~~$47,~~$66, respectively, of expense related to the ESPP, and during the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company recognized $18 and ~~$36,~~$54, respectively, of expense related to the ESPP.

Shares Withheld for Taxes—The Company withheld 04 and ~~246~~250 shares for taxes on RSU/PSU stock-based compensation vestings for $0$99 and ~~$5,619~~$5,718 during the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

AOCI—During the three and ~~six~~nine months ended ~~June~~September 30, 2021, changes in AOCI were a result of net gains (losses) recognized in OCI and amounts reclassified from AOCI into earnings related to our interest rate derivative. See Note 9 - Financial Instruments for further discussion.

Warrants—During the three and nine months ended September 30, 2021, certain holders of warrants elected the cashless exercise option and the Company issued 125 common shares on the exercise of 230 warrants with a market value of $2,812.


14.			EARNINGS PER SHARE

The following table reconciles the numerators and denominators of the basic and diluted earnings per share computations for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Numerator:	Numerator:									Numerator:
Net income attributable to Sterling common stockholders	Net income attributable to Sterling common stockholders	$	20,056	$	18,210	$	30,611	$	21,325	Net income attributable to Sterling common stockholders	$	21,126	$	15,157	$	51,737	$	36,482
Denominator:	Denominator:									Denominator:
Weighted average common shares outstanding — basic	Weighted average common shares outstanding — basic	28,582		27,941		28,433		27,794		Weighted average common shares outstanding — basic	28,710		28,003		28,527		27,832
Shares for dilutive unvested stock and warrants	Shares for dilutive unvested stock and warrants	472		16		445		93		Shares for dilutive unvested stock and warrants	503		230		400		154
Weighted average common shares outstanding — diluted	Weighted average common shares outstanding — diluted	29,054		27,957		28,878		27,887		Weighted average common shares outstanding — diluted	29,213		28,233		28,927		27,986
Basic net income per share attributable to Sterling common stockholders	Basic net income per share attributable to Sterling common stockholders	$	0.70	$	0.65	$	1.08	$	0.77	Basic net income per share attributable to Sterling common stockholders	$	0.74	$	0.54	$	1.81	$	1.31
Diluted net income per share attributable to Sterling common stockholders	Diluted net income per share attributable to Sterling common stockholders	$	0.69	$	0.65	$	1.06	$	0.76	Diluted net income per share attributable to Sterling common stockholders	$	0.72	$	0.54	$	1.79	$	1.30


15.			SUPPLEMENTAL CASH FLOW INFORMATION

Operating Assets and Liabilities—The following table summarizes the changes in the components of operating assets and liabilities:


		Six Months Ended June 30,					Nine Months Ended September 30,
		2021		2020			2021		2020
Accounts receivable	Accounts receivable	$	(34,105)	$	(27,713)	Accounts receivable	$	(41,259)	$	(24,153)
Contracts in progress, net	Contracts in progress, net	26,008		22,964		Contracts in progress, net	26,694		30,278
Receivables from and equity in construction joint ventures	Receivables from and equity in construction joint ventures	(1,358)		(3,200)		Receivables from and equity in construction joint ventures	(5,003)		(4,606)
Other current and non-current assets	Other current and non-current assets	(8,448)		(306)		Other current and non-current assets	(6,630)		(1,314)
Accounts payable	Accounts payable	38,308		(6,495)		Accounts payable	47,423		(10,257)
Accrued compensation and other liabilities	Accrued compensation and other liabilities	3,936		10,453		Accrued compensation and other liabilities	12,916		18,391
Members' interest subject to mandatory redemption and undistributed earnings	Members' interest subject to mandatory redemption and undistributed earnings	3,703		4,748		Members' interest subject to mandatory redemption and undistributed earnings	1,013		1,795
Changes in operating assets and liabilities	Changes in operating assets and liabilities	$	28,044	$	451	Changes in operating assets and liabilities	$	35,154	$	10,134


16.			SEGMENT INFORMATION

The Company’s internal and public segment reporting are aligned based upon the services offered by its operating segments. The Company’s operations consist of 3 reportable segments: Heavy Civil, Specialty Services and Residential. The Company’s Chief Operating Decision Maker evaluates the performance of the operating segment based upon revenue and income from operations. Each segment’s income from operations reflects corporate costs, allocated based primarily upon revenue.

The following table presents total revenue and income from operations by reportable segment for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Revenues	Revenues									Revenues
Heavy Civil	Heavy Civil	$	203,153	$	220,448	$	350,207	$	376,063	Heavy Civil	$	249,898	$	201,078	$	600,105	$	577,141
Specialty Services	Specialty Services	151,904		135,703		275,992		240,426		Specialty Services	148,256		139,971		424,248		380,397
Residential	Residential	46,609		43,887		90,783		80,237		Residential	65,295		42,409		156,078		122,646
Total Revenues	Total Revenues	$	401,666	$	400,038	$	716,982	$	696,726	Total Revenues	$	463,449	$	383,458	$	1,180,431	$	1,080,184

Operating Income	Operating Income									Operating Income
Heavy Civil	Heavy Civil	$	4,404	$	3,896	$	5,494	$	274	Heavy Civil	$	7,174	$	2,405	$	12,668	$	2,679
Specialty Services	Specialty Services	22,907		23,246		39,084		34,360		Specialty Services	17,932		21,474		57,016		55,834
Residential	Residential	5,409		6,043		10,897		11,127		Residential	6,925		5,353		17,822		16,480
Subtotal	Subtotal	32,720		33,185		55,475		45,761		Subtotal	32,031		29,232		87,506		74,993
Acquisition related costs	Acquisition related costs	0		(139)		0		(612)		Acquisition related costs	—		(401)		—		(1,013)
Total Operating Income	Total Operating Income	$	32,720	$	33,046	$	55,475	$	45,149	Total Operating Income	$	32,031	$	28,831	$	87,506	$	73,980

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report on Form 10-Q (“Report”) contains statements that are, or may be considered to be, “forward-looking statements” regarding the Company which represent our expectations and beliefs concerning future events. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995 as set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The forward-looking statements included herein relate to matters that are predictive in nature, such as our industry outlook, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information, and may use or contain words such as “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases.

Forward-looking statements reflect our current expectations as of the date of this Report regarding future events, results or outcomes. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, that could result in our expectations not being realized or otherwise could materially affect our financial condition, results of operations and cash flows.

Actual events, results and outcomes may differ materially from those anticipated, projected or assumed in the forward-looking statements due to a variety of factors. Although it is not possible to identify all of these factors, they include, among others, the following:

•potential risks and uncertainties relating to the ongoing COVID-19 pandemic, including the duration of the COVID-19 pandemic (including new and emerging strains and variants), additional actions that may be taken by governmental authorities to contain the COVID-19 pandemic or to address its impact, including the distribution, effectiveness and acceptance of vaccines, and the imposition of any proposed vaccine mandates or testing requirements, and the potential ongoing or further negative impact of the COVID-19 pandemic on the ~~global economy and financial markets;~~U.S. economy;

•factors that affect the accuracy of estimates inherent in the bidding for contracts, estimates of backlog, and over time revenue recognition accounting policies, including onsite conditions that differ materially from those assumed in the original bid, contract modifications, mechanical problems with machinery or equipment and effects of other risks referenced below;

•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;

•cost escalations associated with our contracts, including changes in availability, proximity and cost of materials such as steel, cement, concrete, aggregates, oil, fuel and other construction materials, including changes in U.S. trade policies and retaliatory responses from other countries, and cost escalations associated with subcontractors and labor;

•changes in costs to lease, acquire or maintain our equipment;

•our dependence on a limited number of significant customers;

•the presence of competitors with greater financial resources or lower margin requirements than ours, and the impact of competitive bidders on our ability to obtain new backlog at reasonable margins acceptable to us;

•any prolonged shutdown of the federal government;

•our ability to qualify as an eligible bidder under government contract criteria;

•changes in general economic conditions, including ~~a prolonged recession,~~ reductions in federal, state and local government funding for infrastructure services, changes in those governments’ budgets, practices, laws and regulations and adverse economic conditions in our geographic markets, such as those caused by the ongoing COVID-19 pandemic;

•delays or difficulties related to the completion of our projects, including additional costs, reductions in revenues or the payment of liquidated damages, or delays or difficulties related to obtaining required governmental permits and approvals;

•design/build contracts which subject us to the risk of design errors and omissions;

•our ability to obtain bonding or post letters of credit;

•our ability to raise additional capital on favorable terms;

•our ability to attract and retain key personnel;

•increased unionization of our workforce or labor costs and any work stoppages or slowdowns;

•adverse weather conditions;

•our ability to successfully identify, finance, complete and integrate acquisitions;

•citations issued by any governmental authority, including the Occupational Safety and Health Administration;

•federal, state and local environmental laws and regulations where non-compliance can result in penalties and/or termination of contracts as well as civil and criminal liability; and

•the other factors discussed in more detail in the Company’s annual report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) under “Part I, Item 1A. Risk Factors.”

In reading this Report, you should consider these factors carefully in evaluating any forward-looking statements and you are cautioned not to place undue reliance on any forward-looking statements. Additional factors or risks that we currently deem immaterial, that are not presently known to us or that arise in the future could also cause our actual results to differ materially from our expected results. Given these uncertainties, investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the date the forward-looking statements are made. Further, we may make changes to our business plans that could affect our results. Although we believe that our plans, intentions and expectations reflected in, or suggested by, the forward-looking statements that we make in this Report are reasonable, we can provide no assurance that they will be achieved.

The forward-looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements for any reason, whether as a result of new information, future events or developments, changed circumstances, or otherwise, and notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes.

OVERVIEW

General—Sterling Construction Company, Inc. (“Sterling” or “the Company”), operates through a variety of subsidiaries within three segments specializing in Heavy Civil, Specialty Services and Residential projects in the United States (the “U.S.”), primarily across the southern U.S., the Rocky Mountain States, California and Hawaii, as well as other areas with strategic construction opportunities. Heavy Civil includes infrastructure and rehabilitation projects for highways, roads, bridges, ~~airfields,~~airports, ports, light rail, water, wastewater and storm drainage systems. Specialty Services projects include ~~land~~site development activities, ~~(including site excavation and drainage, drilling and blasting for excavation),~~ foundations for multi-family homes, parking structures and other commercial concrete projects. Residential projects include concrete foundations for single-family homes. From strategy to operations, we are committed to sustainability by operating responsibly to safeguard and improve society’s quality of life. Caring for our people, our investors, our customers and our communities – that is The Sterling Way. This is why we use recycled materials, reclaim water and stockpile the aggregate from our projects. Moreover, from water delivery systems and transportation systems to community service initiatives, like facilitating the construction of homes for disabled veterans, Sterling always puts people first.

Impact of COVID-19—The Company continues to monitor closely the actual and expected impacts of the COVID-19 pandemic ~~(including new and emerging strains and variants)~~ on our business, financial condition and results of operations. Sterling’s business has been identified as a component of “Essential Critical Infrastructure” per the National Cybersecurity and Infrastructure Agency, and to date, we have not experienced significant shutdowns of project sites or operational interruptions. Consistent with governmental orders and public health guidelines, the Company has continued to operate across its footprint. While the Company has not incurred significant disruptions thus far from the COVID-19 pandemic, the pandemic may impact our business, condensed consolidated results of operations and financial condition in the future. ~~However,~~On September 9, 2021, President Biden directed the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”) to craft regulations that would require all employers with at least 100 employees to require all employees to either be vaccinated or undergo weekly COVID-19 testing. On October 12, 2021, OSHA delivered to the White House’s Office of Information and Regulatory Affairs for review an emergency regulation to carry out this directive, which review was completed on November 1, 2021. Following this review, OSHA is expected to publish the emergency regulation, which would take effect immediately upon such publication. Complying with either a vaccine mandate or weekly testing requirements may be costly and it may be difficult to obtain test results on a weekly basis should the new regulation go into effect. Furthermore, it is possible that some employees may choose to leave employment over a vaccine or testing requirement, resulting in a potential labor shortage. The significance of the impact on our operations going forward is not yet certain and depends on numerous evolving factors as discussed in more detail in ~~the Company’s annual~~this quarterly report on ~~the 2020~~ Form ~~10-K~~10-Q under “Part I,II, Item 1A. Risk Factors.”

MARKET OUTLOOK AND TRENDS

Heavy Civil—Sterling’s Heavy Civil business is primarily driven by federal, state and municipal funding. Federal funds, on average, provide 50% of annual State Department of Transportation capital outlays for highway and bridge projects. Several of the states in Sterling’s key markets have instituted actions to further increase annual spending. In October 2018, the Federal Aviation Administration reauthorized $3.35 billion annually through 2023. This reauthorization also includes more than $1 billion a year for airport infrastructure grants and about $1.7 billion for disaster relief. In November 2020, various state and local transportation measures were passed securing, and in some cases increasing, funding of major initiatives in Texas ($7.5 billion) and California ($520 million). In addition to the state locally funded actions, the $305 billion 2015 federally funded Fixing America’s Surface Transportation (“FAST”) Act increased the annual federal highway investment by 15.1% over a five-year period from 2016 to 2020. In September 2020, Congress passed a one-year extension of the FAST Act which added an additional $13.6 billion to the Highway Trust Fund. InOn September 30, 2021, the one-year extension of the FAST Act expired and a 30-day short-term extension was granted to extend the expiration to October ~~2018,~~31, 2021. This extension also serves as a new target for the ~~Federal Aviation Administration reauthorized $3.35 billion annually through 2023. This~~House to pass the Infrastructure Investments and Jobs Act (“IIJA”) that provides a new five-year reauthorization ~~also includes more than $1 billion a year for airport infrastructure grants~~of highway and ~~about $1.7~~public transportation programs with historic investment increases of $284 billion for ~~disaster relief.~~all modes of transportation. With the passing of the IIJA, additional funding is reserved for transportation infrastructure with $110 billion reserved for roads and bridges, $66 billion for rail and $25 billion for airports. Multiple infrastructure proposals are currently underway in both the federal House and the Senate. If passed, these bills could add additional multi-year funding for highways, rail and airports starting in late 2021 or early 2022.

Specialty Services—Sterling’s Specialty Services business is primarily driven by investments from end users and developers. Key end users, including Amazon, Facebook and Home Depot, have continued implementing publicly announced multi-year capital infrastructure campaigns. In our primary market in the southeastern United States, and specifically Georgia, the warehouse availability rate is at ~~6.5%~~4.6% and for ~~ten~~eleven consecutive quarters over 20 million square feet of new construction has commenced. The outlook for the multi-family market continues to decline, as developers face economic concerns due to the COVID-19 pandemic and the availability and affordability of starter single family homes continues to rise.

Residential—The continued revenue growth of the Company’s Residential business is directly related to the growth of new home starts in its key ~~markets~~market of Dallas-Fort Worth and ~~Houston.~~continued expansion into the Houston and Phoenix markets. The Company’s core customer base is primarily made up of leading national home builders as well as regional and custom home builders. ~~The Company has continued its expansion of the residential business into the Houston market and surrounding areas. Additionally, over~~Over the last several quarters, the residential market has experienced significant price volatility and availability for key materials including concrete, ~~lumber~~steel and ~~steel,~~lumber, as well as increases in subcontractor labor cost. ~~Generally, we~~While the Company has worked with customers to pass on the increases in material and labor cost, the Company may not be successful in recouping these additional costs ~~onto the Company’s customers, however, there is often a delay~~ in the ~~ability to recoup the full impact.~~future.

BACKLOG

~~At June 30, 2021, our~~Our backlog (“Backlog”) of construction projects, made up of our Heavy Civil and Specialty Services segments, ~~was $1.57 billion,~~is the remaining amount of contracts that we expect to recognize as ~~compared to $1.18 billion at December 31, 2020.~~revenue in future periods. The contracts in Backlog are typically completed in 6 to 36 months. ~~Contracts in which we are the apparent low bidder for projects~~Our unsigned low-bid awards (“Unsigned Low-bid Awards”) are excluded from Backlog until the contract is executed by our customer. We refer to the combination of our Backlog and Unsigned Low-bid Awards as “Combined Backlog”. Our book-to-burn ratio, a non-GAAP measure, is determined by taking our additions to Backlog and dividing it by revenue for the applicable period. This metric allows management to monitor the Company’s business development efforts to ensure we grow our Backlog and our business over time, and management believes that this measure is useful to investors for the same reason.

At September 30, 2021, our Backlog was $1.41 billion, as compared to $1.18 billion at December 31, 2020, with a book-to-burn ratio of 1.2X for the nine months ended September 30, 2021. Unsigned Low-bid Awards were ~~$75.4~~$115.0 million at ~~June~~September 30, 2021 and $356.9 million at December 31, 2020. ~~The combination of our~~Combined Backlog ~~and Unsigned Low-bid Awards, which we refer to as “Combined Backlog”,~~ totaled ~~$1.65 billion and~~ $1.53 billion ~~as of June~~at both September 30, 2021 and December 31, 2020, ~~respectively.~~

with a book-to-burn ratio of 1.0X for the nine months ended September 30, 2021.

The Company’s margin in Backlog has increased from 12.0% at December 31, 2020 to ~~12.4%~~12.3% at ~~June~~September 30, 2021 and the Combined Backlog margin increased from 11.8% at December 31, 2020 to ~~12.2%~~12.1% at ~~June~~September 30, 2021, driven by a greater mix of Specialty Services awards.

RESULTS OF OPERATIONS

Consolidated Results

Summary—For the ~~second~~third quarter of 2021, the Company had operating income of ~~$32.7~~$32.0 million, income before income taxes of ~~$28.4~~$29.1 million, net income attributable to Sterling common stockholders of ~~$20.1~~$21.1 million and net income per diluted share attributable to Sterling common stockholders of ~~$0.69.~~$0.72.

Consolidated financial highlights for the three and ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020 are as follows:


		Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	(In thousands)	2021			2020				2021			2020			(In thousands)	2021		2020			2021		2020
Revenues	Revenues	$	401,666		$	400,038			$	716,982		$	696,726		Revenues	$	463,449	$	383,458		$	1,180,431	$	1,080,184
Gross profit	Gross profit	56,247			59,599				101,279			94,844			Gross profit	57,804		49,916			159,083		144,760
General and administrative expenses	General and administrative expenses	(15,829)			(18,451)				(32,928)			(36,055)			General and administrative expenses	(19,637)		(15,154)			(52,565)		(51,209)
Intangible asset amortization	Intangible asset amortization	(2,866)			(2,866)				(5,732)			(5,703)			Intangible asset amortization	(2,866)		(2,866)			(8,598)		(8,569)
Acquisition related costs	Acquisition related costs	—			(139)				—			(612)			Acquisition related costs	—		(401)			—		(1,013)
Other operating expense, net	Other operating expense, net	(4,832)			(5,097)				(7,144)			(7,325)			Other operating expense, net	(3,270)		(2,664)			(10,414)		(9,989)
Operating income	Operating income	32,720			33,046				55,475			45,149			Operating income	32,031		28,831			87,506		73,980
Interest, net	Interest, net	(5,725)			(7,533)				(11,715)			(15,237)			Interest, net	(3,906)		(7,154)			(15,621)		(22,391)
Gain on extinguishment of debt, net	Gain on extinguishment of debt, net	1,401			—				1,064			—			Gain on extinguishment of debt, net	968		—			2,032		—
Income before income taxes and noncontrolling interests	Income before income taxes and noncontrolling interests	28,396			25,513				44,824			29,912			Income before income taxes and noncontrolling interests	29,093		21,677			73,917		51,589
Income tax expense	Income tax expense	(8,179)			(7,248)				(12,939)			(8,432)			Income tax expense	(7,336)		(6,280)			(20,275)		(14,712)
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	(161)			(55)				(1,274)			(155)			Less: Net income attributable to noncontrolling interests	(631)		(240)			(1,905)		(395)
Net income attributable to Sterling common stockholders	Net income attributable to Sterling common stockholders	$	20,056		$	18,210			$	30,611		$	21,325		Net income attributable to Sterling common stockholders	$	21,126	$	15,157		$	51,737	$	36,482

Gross margin		14.0		%	14.9		%		14.1		%	13.6		%


Gross margin			12.5		%				13.0		%										13.5		%				13.4		%

Revenues—Revenues were ~~$401.7~~$463.4 million for the ~~second~~third quarter of 2021, an increase of ~~$1.6~~$80.0 million or ~~0.4%~~20.9% compared with the ~~second~~third quarter of 2020. The increase in the ~~second~~third quarter of 2021 was driven by a ~~$16.2~~$48.8 million increase in Heavy Civil, a $22.9 million increase in Residential and an $8.3 million increase in Specialty ~~Services and a $2.7 million increase in Residential, partly offset by a $17.3 million decrease in Heavy Civil.~~Services. Revenues were ~~$717.0 million~~$1.2 billion for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$20.3~~$100.3 million or 3%9.3% compared with the ~~six~~nine months ended ~~June~~September 30, 2020. The increase in the ~~six~~nine months ended ~~June~~September 30, 2021 was driven by a ~~$35.6~~$43.9 million increase in Specialty Services, ~~and~~ a ~~$10.5~~$33.4 million increase in Residential ~~partly offset by~~and a ~~$25.8~~$23.0 million ~~decrease~~increase in Heavy Civil.

Gross profit—Gross profit was ~~$56.2~~$57.8 million for the ~~second~~third quarter of 2021, ~~a decrease~~an increase of ~~$3.4~~$7.9 million or 6%15.8% compared to the ~~second~~third quarter of 2020. The Company’s gross margin as a percent of revenue decreased to ~~14.0%~~12.5% in the ~~second~~third quarter of 2021, as compared to ~~14.9%~~13.0% in the ~~second~~third quarter of 2020. The ~~decrease~~increase in gross profit and decrease in margin as a percent of revenue was primarily driven by ~~significant~~higher volume, partly offset by continued headwinds from ~~weather,~~ inflation, labor and material supply issues in Specialty Services and Residential. ~~In addition, Specialty Services and Residential had an exceptionally strong second quarter of 2020 due to a shift in productivity from the first quarter as a result of inclement weather.~~ Gross profit was ~~$101.3~~$159.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$6.4~~$14.3 million or 7%9.9% compared to the ~~six~~nine months ended ~~June~~September 30, 2020. The Company’s gross margin as a percent of revenue increased to ~~14.1%~~13.5% in the ~~six~~nine months ended ~~June~~September 30, 2021, as compared to ~~13.6%~~13.4% in the ~~six~~nine months ended ~~June~~September 30, 2020. ~~The increase in~~Despite the ongoing headwinds, gross profit ~~was primarily~~increased for the nine months ended September 30, 2021, driven by higher volume ~~from Specialty Services~~ and the ramp up of construction on large design-build joint venture projects as we continue to reduce the lower margin low-bid heavy highway revenues for Heavy Civil. ~~The increase in gross margin as a percent of revenue was primarily driven by the aforementioned large design-build joint venture projects for Heavy Civil.~~

Contracts in progress which were not substantially completed totaled approximately ~~216~~202 and ~~210~~215 at ~~June~~September 30, 2021 and 2020, respectively. These contracts are of various sizes, of different expected profitability and in various stages of completion. The nearer a contract progresses toward completion, the more visibility the Company has in refining its estimate of total revenues (including incentives, delay penalties and change orders), costs and gross profit. Thus, gross profit as a percent of

revenues can increase or decrease from comparable and subsequent quarters due to variations among contracts and depending upon the stage of completion of contracts.

General and administrative expenses—General and administrative expenses were ~~$15.8~~$19.6 million, or 4.2% of revenue, for the ~~second~~third quarter of 2021, ~~a decrease of $2.6 million~~ compared to $15.2 million, or 4.0% of revenue, for the ~~second~~third quarter of ~~2020~~2020. General and administrative expenses were $52.6 million, or 4.5% of revenue, for the nine months ended September 30, 2021, compared to $51.2 million, or 4.7% of revenue, for the nine months ended September 30, 2020. The Company has begun to see an impact to general and administrative expenses ~~were $32.9 million~~due to inflation and supply-chain issues; however, the Company anticipates that these expenses will remain at approximately 4.8% of revenue for the six months ended June 30, 2021 a decrease of $3.1 million compared to the six months ended June 30, 2020. The decreases were primarily due to lower stock compensation and other corporate related costs. Stock compensation expense was $2.0 million for the second quarter of 2021, a decrease of $1.9 million compared to the second quarter of 2020 and stock compensation expense was $3.9 million for the six months ended June 30, 2021, a decrease of $2.3 million compared to the six months ended June 30, 2020.full year 2021.

Interest expense—Interest expense was ~~$5.7~~$3.9 million for the ~~second~~third quarter of 2021 compared to ~~$7.6~~$7.2 million for the ~~second~~third quarter of 2020 and interest expense was ~~$11.7~~$15.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to ~~$15.4~~$22.5 million for the ~~six~~nine months ended ~~June~~September 30, 2020. The decrease is in part due to the Company’s declining debt, as the Company has paid down ~~$95~~$69 million of its Credit Facility balance since the ~~second~~third quarter of ~~2020. In addition~~2020, and in part due to ~~a declining debt balance, the Company expects pre-tax interest expense to decline by approximately $1.6 million per quarter for the balance of 2021 based on~~ a 2% lower applicable interest rate provided under the Credit Agreement, as amended ~~Credit Agreement.~~in the second quarter of 2021. See Note 8 - Debt for more information.

Income taxes—The effective income tax rate was ~~approximately 29%~~25.2% for ~~both~~ the ~~second~~third quarter of 2021 and 27.4% for the ~~six~~nine months ended ~~June~~September 30, 2021. The effective income tax rates for third quarter of 2021 and for the nine months ended September 30, 2021 benefited primarily from the non-taxed PPP loan forgiveness. See Note 8 - Debt for more information. The Company ~~expects~~anticipates an effective income tax rate for the full year 2021 of ~~29.5%~~27.5% to ~~30%~~28%. Due to its net operating loss carryforwards, the Company expects no cash payments for federal income taxes for 2021 or 2020. See Note 12 - Income Taxes for more information.

Segment Results


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	(In thousands)	2021		% of Revenue	2020		% of Revenue	2021		% of Revenue	2020		% of Revenue	(In thousands)	2021		% of Revenue	2020		% of Revenue	2021		% of Revenue	2020		% of Revenue
Revenues	Revenues													Revenues
Heavy Civil	Heavy Civil	$	203,153	50%	$	220,448	55%	$	350,207	49%	$	376,063	53%	Heavy Civil	$	249,898	54%	$	201,078	52%	$	600,105	51%	$	577,141	54%
Specialty Services	Specialty Services	151,904		38%	135,703		34%	275,992		38%	240,426		35%	Specialty Services	148,256		32%	139,971		37%	424,248		36%	380,397		35%
Residential	Residential	46,609		12%	43,887		11%	90,783		13%	80,237		12%	Residential	65,295		14%	42,409		11%	156,078		13%	122,646		11%
Total Revenues	Total Revenues	$	401,666		$	400,038		$	716,982		$	696,726		Total Revenues	$	463,449		$	383,458		$	1,180,431		$	1,080,184

Operating Income	Operating Income													Operating Income
Heavy Civil	Heavy Civil	$	4,404	2.2%	$	3,896	1.8%	$	5,494	1.6%	$	274	0.1%	Heavy Civil	$	7,174	2.9%	$	2,405	1.2%	$	12,668	2.1%	$	2,679	0.5%
Specialty Services	Specialty Services	22,907		15.1%	23,246		17.1%	39,084		14.2%	34,360		14.3%	Specialty Services	17,932		12.1%	21,474		15.3%	57,016		13.4%	55,834		14.7%
Residential	Residential	5,409		11.6%	6,043		13.8%	10,897		12.0%	11,127		13.9%	Residential	6,925		10.6%	5,353		12.6%	17,822		11.4%	16,480		13.4%
Subtotal	Subtotal	32,720		8.1%	33,185		8.3%	55,475		7.7%	45,761		6.6%	Subtotal	32,031		6.9%	29,232		7.6%	87,506		7.4%	74,993		6.9%
Acquisition related costs	Acquisition related costs	—			(139)			—			(612)			Acquisition related costs	—			(401)			—			(1,013)
Total Operating Income	Total Operating Income	$	32,720	8.1%	$	33,046	8.3%	$	55,475	7.7%	$	45,149	6.5%	Total Operating Income	$	32,031	6.9%	$	28,831	7.5%	$	87,506	7.4%	$	73,980	6.8%

Heavy Civil

Revenues—Revenues were ~~$203.2~~$249.9 million for the ~~second~~third quarter of 2021, ~~a decrease~~an increase of ~~$17.3~~$48.8 million or ~~7.8%~~24.3% compared to the ~~second~~third quarter of 2020, and revenues were ~~$350.2~~$600.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021, ~~a decrease~~an increase of ~~$25.9~~$23.0 million or ~~6.9%~~4.0% compared to the ~~six~~nine months ended ~~June~~September 30, 2020. The ~~decreases~~increases were primarily driven by ~~lower~~higher heavy highway and aviation revenue, partly offset by lower water containment and treatment revenue. The ~~decrease~~increase in heavy highway revenue was primarily due to ~~inclement weather in Texas in~~ the ~~second quarter~~ramp up of ~~2021 and our continued progress reducing our low-bid heavy highway revenue.~~construction on large design-build joint venture projects. During the ~~second~~third quarter of 2021, our low-bid heavy highway revenue decreased by ~~$43.3~~$3.0 million, which was ~~partially~~ offset by an increase of ~~$30~~$43.5 million from heavy highway design build and other revenues compared to the ~~second~~third quarter of 2020. During the ~~six~~nine months ended ~~June~~September 30, 2021, our low-bid heavy highway revenue decreased by ~~$62.9~~$65.9 million, which was ~~partially~~ offset by an increase of ~~$52.7~~$96.2 million from heavy highway design build and other revenues compared to the ~~six~~nine months ended ~~June~~September 30, 2020.

Operating Income—Operating income was ~~$4.4~~$7.2 million for the ~~second~~third quarter of 2021, an increase of ~~$0.5~~$4.8 million, compared to the ~~second~~third quarter of 2020, and operating income was ~~$5.5~~$12.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$5.2~~$10.0 million, compared to the ~~six~~nine months ended ~~June~~September 30, 2020. The increases were the result of improved margin

mix with the ramp up of construction on large design-build joint venture projects and the continuation of our planned revenue reduction from lower margin low-bid heavy highway work.

Specialty Services

Revenues—Revenues were ~~$151.9~~$148.3 million for the ~~second~~third quarter of 2021, an increase of ~~$16.2~~$8.3 million or ~~11.9%~~5.9% compared to the ~~second~~third quarter of 2020, and revenues were ~~$276.0~~$424.2 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$35.6~~$43.9 million or ~~14.8%~~11.5% compared to the ~~six~~nine months ended ~~June~~September 30, 2020. The increases were primarily driven by higher volume from ~~land development, partly offset by a decrease in commercial revenues.~~site development.

Operating income—Operating income was ~~$22.9~~$17.9 million for the ~~second~~third quarter of 2021, a decrease of ~~$0.3~~$3.5 million, compared to the ~~second~~third quarter of 2020. The decrease was driven by the ~~aforementioned~~continued headwinds from supply chain issues and ~~exceptionally strong second quarter of 2020,~~the related impact on productivity and efficiency, as well as lower project margin mix in the ~~second~~third quarter of 2021. Operating income was ~~$39.1~~$57.0 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$4.7~~$1.2 million, compared to the ~~six~~nine months ended ~~June~~September 30, 2020. The increase was driven by higher volume from ~~land~~site development, ~~in the first and second quarters of 2021,~~ partly offset by the aforementioned ~~second quarter impacts.~~headwinds.

Residential

Revenues—Revenues were ~~$46.6~~$65.3 million for the ~~second~~third quarter of 2021, an increase of ~~$2.7~~$22.9 million or ~~6.2%~~54.0%, compared to the third quarter of 2020. The Company’s revenue increased due to a record number of slabs poured in the third quarter, primarily as a result of the completion of a large amount of uncompleted slabs which shifted from the second quarter of ~~2020, and revenues~~2021 due to weather related delays. Revenues were ~~$90.8~~$156.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$10.5~~$33.4 million or ~~13.1%~~27.3%, compared to the ~~second quarter of~~nine months ended September 30, 2020. Despite inclement weather in Texas in the ~~second quarter~~

first half of 2021, the Company’s revenue increased due to a record number of slabs poured in each of the first ~~and second~~three quarters of 2021. We continue to see strong demand for new housing in our Texas ~~footprint.~~footprint and our expansion into the Arizona market.

Operating income—Operating income was ~~$5.4~~$6.9 million for the ~~second~~third quarter of 2021, ~~a decrease~~an increase of ~~$0.6~~$1.6 million, compared to the ~~second~~third quarter of 2020 and operating income was ~~$10.9~~$17.8 million for the ~~six~~nine months ended ~~June~~September 30, 2021, ~~a decrease~~an increase of ~~$0.2~~$1.3 million, compared to the ~~six~~nine months ended ~~June~~September 30, 2020. The ~~decreases~~increases were driven by the aforementioned higher volume; however, operating margins declined due to higher material costs for concrete, ~~lumber~~steel and ~~steel,~~lumber, and the lack of consistent availability of these materials, as well as labor shortages and increased subcontractor labor ~~costs, partly offset by the aforementioned higher volume increases.~~costs. While the Company has ~~been successful at increasing its prices~~worked with customers to ~~recoup~~pass on the increases in material and labor cost, ~~there continues to~~the Company may not be ~~a timing delay~~successful in ~~obtaining price increases that correspond with~~recouping these additional costs in the ~~timing and volatility of the increases in cost. The Company has and will continue to work with Residential customers to recoup increases in material and labor cost.~~future.

LIQUIDITY AND SOURCES OF CAPITAL

Cash—Cash at ~~June~~September 30, 2021, was ~~$93.6~~$117.7 million, and includes the following components:


(In thousands)	(In thousands)	June 30, 2021		December 31, 2020		(In thousands)	September 30, 2021		December 31, 2020
Generally Available	Generally Available	$	31,365	$	26,419	Generally Available	$	57,086	$	26,419
Consolidated 50% Owned Subsidiaries	Consolidated 50% Owned Subsidiaries	45,091		30,354		Consolidated 50% Owned Subsidiaries	42,965		30,354
Construction Joint Ventures	Construction Joint Ventures	17,174		9,412		Construction Joint Ventures	17,651		9,412
Total Cash	Total Cash	$	93,630	$	66,185	Total Cash	$	117,702	$	66,185

The following tables set forth information about our cash flows and liquidity:


		Six Months Ended June 30,					Nine Months Ended September 30,
(In thousands)	(In thousands)	2021		2020		(In thousands)	2021		2020
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	$	91,492	$	52,327	Operating activities	$	135,742	$	92,255
Investing activities	Investing activities	(21,460)		(13,805)		Investing activities	(37,222)		(20,531)
Financing activities	Financing activities	(42,633)		(13,577)		Financing activities	(46,746)		(43,558)
Net change in cash, cash equivalents, and restricted cash	Net change in cash, cash equivalents, and restricted cash	$	27,399	$	24,945	Net change in cash, cash equivalents, and restricted cash	$	51,774	$	28,166

Operating Activities—During the ~~six~~nine months ended ~~June~~September 30, 2021, net cash provided by operating activities was ~~$91.5~~$135.7 million compared to net cash provided by operating activities of ~~$52.3~~$92.3 million in the ~~six~~nine months ended ~~June~~September 30, 2020. Cash flows provided by operating activities were driven by net income, adjusted for various non-cash items and changes in accounts receivable, net contracts in progress and accounts payable balances (collectively, “Contract Capital”), as discussed below, and other accrued liabilities.

Changes in Contract Capital—The change in operating assets and liabilities varies due to fluctuations in operating activities and investments in Contract Capital. The changes in the components of Contract Capital during the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 were as follows:


		Six Months Ended June 30,					Nine Months Ended September 30,
(In thousands)	(In thousands)	2021		2020		(In thousands)	2021		2020

Contracts in progress, net	Contracts in progress, net	$	26,008	$	22,964	Contracts in progress, net	$	26,694	$	30,278
Accounts receivable	Accounts receivable	(34,105)		(27,713)		Accounts receivable	(41,259)		(24,153)
Receivables from and equity in construction joint ventures	Receivables from and equity in construction joint ventures	(1,358)		(3,200)		Receivables from and equity in construction joint ventures	(5,003)		(4,606)
Accounts payable	Accounts payable	38,308		(6,495)		Accounts payable	47,423		(10,257)
Change in Contract Capital, net	Change in Contract Capital, net	$	28,853	$	(14,444)	Change in Contract Capital, net	$	27,855	$	(8,738)

During the ~~six~~nine months ended ~~June~~September 30, 2021, the change in Contract Capital increased liquidity by ~~$28.9~~$27.9 million. The Company’s Contract Capital fluctuations are impacted by the mix of projects in Backlog, seasonality, the timing of new awards, and related payments for work performed and the contract billings to the customer as projects are completed. Contract Capital is also impacted at period-end by the timing of accounts receivable collections and accounts payable payments for projects.

Investing Activities—During the ~~six~~nine months ended ~~June~~September 30, 2021, net cash used in investing activities was ~~$21.5~~$37.2 million, compared to net cash used of ~~$13.8~~$20.5 million in the ~~six~~nine months ended ~~June~~September 30, 2020. The use of cash was driven by purchases of capital equipment and buildings and improvements. Capital equipment is acquired as needed to support ~~changing~~increasing levels of production activities and to replace retiring equipment, particularly within our Specialty Services segment.

Financing Activities—During the ~~six~~nine months ended ~~June~~September 30, 2021, net cash used in financing activities was ~~$42.6~~$46.7 million, compared to net cash used of ~~$13.6~~$43.6 million in the prior year. The financing cash outflow was driven by ~~$40.1~~$44.2 million of repayments on the Term Loan Facility and $2.0 million in distributions to noncontrolling interest owners.

Capital Strategy—The Company will continue to explore additional revenue growth and capital alternatives to improve leverage and strengthen its financial position in order to take advantage of trends in the civil infrastructure and specialty services markets. The Company expects to pursue strategic uses of its cash, such as, strategic acquisitions ~~in its existing segments, or adding a new segment,~~ of businesses that meet ~~its~~our gross margin targets and overall profitability, and managing its debt balances.

Inflation—~~Inflation~~For the past several years, inflation generally has not had a material impact on our financial ~~results; however, from time to time and~~results. However, beginning in ~~recent times,~~2021, supply chain ~~issues have caused~~volatility has resulted in price increases in oil, fuel, lumber, concrete and steel ~~prices~~ which have ~~affected~~increased our cost of ~~operations.~~operations, and inflation has increased our general and administrative expense. Anticipated cost increases ~~and reductions~~ are considered in our bids to ~~customers~~customers; however, inflation has had, and may continue to have, a negative impact on ~~proposed new construction projects.~~the Company’s financial results.

JOINT VENTURES

We participate in various construction joint venture partnerships in order to share expertise, risk and resources for certain highly complex projects. The joint venture’s contract with the project owner typically requires joint and several liability among the joint venture partners. Although our agreements with our joint venture partners provide that each party will assume and fund its share of any losses resulting from a project, if one of our partners was unable to pay its share, we would be fully liable for such share under our contract with the project owner. Circumstances that could lead to a loss under these guarantee arrangements include a partner’s inability to contribute additional funds to the venture in the event that the project incurred a loss or additional costs that we could incur should the partner fail to provide the services and resources toward project completion that had been committed to in the joint venture agreement. See the 2020 Form 10-K under “Part I, Item 1A. Risk Factors.”

At ~~June~~September 30, 2021, there was approximately ~~$415.2~~$354.1 million of construction work to be completed on unconsolidated construction joint venture contracts, of which ~~$179.5~~$152.6 million represented our proportionate share. Due to the joint and several liability under our joint venture arrangements, if one of our joint venture partners fails to perform, we and the remaining joint venture partners would be responsible for completion of the outstanding work. As of ~~June~~September 30, 2021, we are not aware of any situation that would require us to fulfill responsibilities of our joint venture partners pursuant to the joint and several liability under our contracts.

NEW ACCOUNTING STANDARDS

There have been no material changes to the Company’s discussion of new accounting standards from those described in Note 2 - Basis of Presentation and Significant Accounting Policies of our annual report on Form 10-K for the year ended December 31, 2020.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to the Company’s discussion of critical accounting estimates from those described in Item 7 of our annual report on Form 10-K for the year ended December 31, 2020.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We continue to utilize a swap arrangement to hedge against interest rate variability associated with $275 million of the ~~$315~~$311 million outstanding under the Term Loan Facility. The Company has designated its interest rate swap agreement as a cash flow hedging derivative. To the extent the derivative instrument is effective and the documentation requirements have been met, changes in fair value are recognized in other comprehensive income (loss) until the underlying hedged item is recognized in earnings. The total fair value of the contract was a net loss of approximately ~~$4.7~~$3.8 million at ~~June~~September 30, 2021. For the ~~$40~~$36 million remaining portion of the Term Loan Facility not associated with the interest rate swap hedge, at ~~June~~September 30, 2021 a 100-basis point (or 1%) increase or decrease in the interest rate would increase or decrease interest expense by approximately ~~$400~~$359 thousand per year.

Other

The carrying values of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair values because of the short-term nature of these instruments. At ~~June~~September 30, 2021, the fair value of the term loan, based upon the current market rates for debt with similar credit risk and maturities, approximated its carrying value as interest is based on LIBOR plus an applicable margin.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures include, but are not limited to, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s principal executive officer and principal financial officer reviewed and evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of ~~June~~September 30, 2021. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective at ~~June~~September 30, 2021 to ensure that the information required to be disclosed by the Company in this Report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to the Company’s management including the principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended ~~June~~September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Internal control over financial reporting may not prevent or detect all errors and all fraud. Also, projections of any evaluation of effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The Company, including its construction joint ventures and its consolidated 50% owned subsidiaries, is now and may in the future be involved as a party to various legal proceedings that are incidental to the ordinary course of business. The Company regularly analyzes current information about these proceedings and, as necessary, provides accruals for probable liabilities on the eventual disposition of these matters.

In the opinion of management, after consultation with legal counsel, there are currently no threatened or pending legal matters that would reasonably be expected to have a material adverse impact on the Company’s Consolidated Results of Operations, Financial Position or Cash Flows.

Item 1A. Risk Factors

There have not been any material changes from the risk factors previously disclosed in “Part I, Item 1A. Risk Factors” of the 2020 Form 10-K, except as provided below. The below discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Report and the 2020 Form 10-K. The below information should be read in conjunction with the risk factors previously disclosed in “Part I, Item 1A. Risk Factors” of the 2020 Form 10-K, and with the other portions of this Report, including “Cautionary Statement Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I and the Condensed Consolidated Financial Statements and related notes in Item 1 of Part I. You should carefully consider such risk factors, which could materially affect the business, financial condition or future results.

Risks Relating to Our Business

The Federal government’s proposed workplace vaccine mandate or weekly testing requirement, if and when effective, could disrupt the Company’s operations, increase costs and adversely affect its business, results of operations, and financial condition.

On September 9, 2021, President Biden directed OSHA to craft regulations that would require all employers with at least 100 employees to require all employees to either be vaccinated or undergo weekly COVID-19 testing. On October 12, 2021, OSHA delivered to the White House’s Office of Information and Regulatory Affairs for review an emergency regulation to carry out this directive, which review was completed on November 1, 2021. Following this review, OSHA is expected to publish the emergency regulation, which would take effect immediately upon such publication. Complying with either a vaccine mandate or weekly testing requirements may be costly and it may be difficult to obtain test results on a weekly basis should the new regulation go into effect. Furthermore, it is possible that some employees may choose to leave employment over a vaccine or testing requirement, resulting in a potential labor shortage. Additional uncertainty could be caused by competing and potentially conflicting laws and regulations, such as the recent executive order issued by the governor of Texas prohibiting vaccine mandates. While the Company has not incurred significant disruptions thus far from the COVID-19 pandemic, the Federal government’s proposed workplace vaccine mandate or weekly testing requirement may impact our business, results of operations and financial condition in the future.

A prolonged government shutdown may adversely affect our Heavy Civil business.

We derive a significant portion of our Heavy Civil revenue from governmental agencies and programs. A prolonged government shutdown could impact inspections, regulatory review and certifications, grants, approvals, or cause other situations that could result in our incurring substantial labor or other costs without reimbursement under government contracts, or the delay or cancellation of key government programs in which we are involved, all of which could have a material adverse effect on our business and results of operations.

Item 6. Exhibits

The following exhibits are filed with this Report:


Exhibit No.			Exhibit Title
3.1 (1)			Certificate of Incorporation of Sterling Construction Company, Inc. as amended through April 28, 2017 (incorporated by reference to Exhibit 3 to Sterling Construction Company, Inc.'s Current Report on Form 8-K, filed on May 3, 2017 (SEC File No. 1-31993)).
3.2 (1)			Amended and Restated Bylaws of Sterling Construction Company, Inc. (incorporated by reference to Exhibit 3.1 to Sterling Construction Company, Inc.’s Current Report on Form 8-K, filed on March 8, 2018 (SEC File No. 1-31993)).



~~10.1~~ ~~(1)~~			Sterling Construction Company, Inc. Amended and Restated 2018 Stock Incentive Plan (incorporated by reference to Exhibit 99.1 to Sterling Construction Company, Inc.’s Registration Statement on Form S-8, filed on May 5, 2021 (SEC File No. 1-31993)).
~~10.2~~ ~~(1)~~			Second Amendment to Credit Agreement, dated June 28, 2021, by and among Sterling Construction Company, Inc., the subsidiaries of the Company party thereto as Guarantors, the Lenders party thereto and BMO Harris Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Sterling Construction Company, Inc.’s Current Report on Form 8-K, filed on June 30, 2021 (SEC File No. 1-31993)).
~~10.3~~ ~~(2)~~			~~Form of Senior Executive Incentive Compensation Program - Program Description.~~
~~10.4~~ ~~(2)~~			~~Form of SEICP Long-Term Incentive Award Agreement.~~
31.1 (2)			Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2 (2)			Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1 (3)			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2 (3)			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS			Inline XBRL Instance Document—The instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

(1) Incorporated by reference to the filing indicated

(2) Filed herewith

(3) Furnished herewith

2829

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	STERLING CONSTRUCTION COMPANY, INC.

Date: ~~August~~November 3, 2021	By:	/s/ Ronald A. Ballschmiede
		Ronald A. Ballschmiede
		Chief Financial Officer and Duly Authorized Officer

2930


			Page
PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements			3

Statements of Operations			3

Statements of Comprehensive Income			4

Balance Sheets			5

Statements of Cash Flows			6

Statements of Changes in Stockholders’ Equity			7

Notes to the Condensed Consolidated Financial Statements			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21

Item 3. Quantitative and Qualitative Disclosures About Market Risk			27

Item 4. Controls and Procedures			2728

PART II—OTHER INFORMATION

Item 1. Legal Proceedings			28

Item 1A. Risk Factors			28











Item 6. Exhibits			2829

Signatures			2930