Note 3 - Variable Interest Entities

12 Months Ended

Dec. 31, 2014

Variable Interest Entities [Abstract]

3.	Variable Interest Entities

Under GAAP, the Company must determine whether each entity, including joint ventures in which it participates, is a variable interest entity (“VIE”). This determination focuses on identifying which owner or joint venture partner, if any, has the power to direct the activities of the entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity disproportionate to its interest in the entity, which could have the effect of requiring us to consolidate the entity in which we have a noncontrolling variable interest. Where the Company has determined that it is appropriate to consolidate a VIE which it owns a 50% or less interest, the equity held by the remaining owners and their portions of net income (loss) are reflected in the balance sheet line item “Noncontrolling interests” in “Equity” and the statement of operations line item “Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures.”

On August 1, 2011, the Company purchased a 50% limited partner interest in Myers. Myers is a construction limited partnership located in California and was acquired in order to expand the geographic scope of the Company’s operations into California. The Company has determined that Myers is a VIE for which the Company is the primary beneficiary and has consolidated Myers into these financial statements.

The determination that Myers is a VIE and that the Company is the primary beneficiary is primarily due to the following factors. The partnership agreement requires that Sterling provide a $3 million line of credit to the limited partnership. In addition the partnership is relying on the Company’s surety bonding capacity in order to bid and perform large construction jobs resulting in the Company having joint and several liability for completion of such jobs, and the Company will provide management to the partnership to oversee bidding and management of larger projects. Although the Company will receive 50% of the income from the partnership, it may suffer more than 50% of any losses as a result of its obligation to provide the $3 million line of credit and its obligations under the surety bonds. Because the Company exercises primary control over activities of the partnership and it is exposed to the majority of potential losses of the partnership, the Company consolidated Myers within the Company’s financial statements from August 1, 2011, the date of acquisition.

The financial information of Myers which is reflected in our consolidated balance sheets and statements of operations is as follows (amounts in thousands):

	As of December 31,
	2014		2013
Assets:
Current assets:
Cash and cash equivalents	$	148	$	566
Contracts receivable, including retainage		21,327		6,475
Other current assets		7,656		7,964
Total current assets		29,131		15,005
Property and equipment, net		9,303		6,869
Other assets, net		-		5
Goodwill		1,501		1,501
Total assets	$	39,935	$	23,380
Liabilities:
Current liabilities:
Accounts payable	$	15,795	$	8,361
Other current liabilities		9,000		7,080
Total current liabilities		24,795		15,441
Long-term liabilities:
Other long-term liabilities		16		137
Total liabilities	$	24,811	$	15,578

	Year Ended December 31,
	2014		2013		2012
Revenues	$	144,837	$	82,421	$	84,877
Operating income		9,319		3,764		2,152
Net income attributable to Sterling common stockholders		4,657		1,879		694