#United States #Sterling #The Woodlands, Texas #Road and Highway Builders #RHB

Sterling Infrastructure Modifies Agreement with Road and Highway Builders

On January 7, 2025, Sterling Infrastructure, Inc. (NasdaqGS: STRL), a leading force in infrastructure development, announced a significant amendment to its operating agreement with Road and Highway Builders, LLC (RHB), effective from December 31, 2024. This strategic move aims to enhance both companies' operational efficiencies and financial structures in light of evolving industry standards and stakeholder interests.

Background of the Amendment

Since 2012, Sterling has held a 50% stake in RHB, partnering with Rich Buenting, who retains the other half. The recent amendment was designed to fortify their collaboration while adapting to new challenges. The changes specifically affect how RHB's results will be reported, particularly under Generally Accepted Accounting Principles (GAAP). Importantly, this amendment will not alter RHB's long-standing contributions to Sterling’s consolidated net income, ensuring both parties continue to benefit from a robust partnership.

The amendment introduces new procedures regarding the handling of RHB in cases of potential adverse events, such as the death or disability of Mr. Buenting. Several options are laid out for how the partnership could proceed, including the possibility for either party to acquire the other's share at fair market value or even a joint sale to a third party.

Financial Reporting Changes

Before this amendment, Sterling incorporated all of RHB's assets and liabilities into its Consolidated Balance Sheets. Mr. Buenting's interest was reflected as a liability, which complicated the financial outlook for Sterling. The recent changes will allow Sterling to streamline its financial reporting, moving forward by showing its interest in RHB's balance sheet in a simplified manner. This shift indicates a significant non-cash net gain during the 2024 operational year.

From 2025 onwards, RHB's operating income will be included in a single line format within Sterling's financial statements. Revenue projections for RHB are expected to range between $230 million and $240 million for 2024, but this will no longer reflect on Sterling's consolidated revenue moving forward. Additionally, RHB's standalone backlog is predicted to be between $425 million and $475 million by the end of 2024, highlighting its substantial market presence and growth potential.

Leadership Insight

Sterling's CEO, Joe Cutillo, emphasized the strategic significance of this move, stating, “Rich Buenting is an outstanding business leader who has been a trusted joint venture partner for over ten years. RHB consistently shows strong growth and profitability, and we look forward to furthering this mutually advantageous relationship.”

This positive outlook aligns with Sterling’s commitment to operate responsibly and sustainably across its varied sectors, which include E-Infrastructure, Transportation Solutions, and Building Solutions, primarily within the USA.

Conclusion

The amendment reflects Sterling Infrastructure's proactive approach to adapting its operational strategy while safeguarding the financial interests of both partners in RHB. As the company continues its focus on infrastructure development, these changes are poised to support Sterling's long-term growth goals and innovation in the heavily involved infrastructure sector. Stakeholders can expect continued transparency and strategic maneuvers that echo the evolving needs of the marketplace coupled with Sterling's dedication to quality and sustainability in infrastructure services.