

5.	Consolidated 50% Owned Subsidiaries, including Variable Interest Entities ("VIE")

The Company has a 50% interest in two subsidiaries (Myers and RHB); both subsidiaries have individual provisions which obligate the Company to purchase each partner's 50% interests for $20.0 million ($40.0 million in the aggregate), due to circumstances outlined in the partner agreements that are certain to occur. Therefore, the Company has consolidated these two entities and classified these obligations as mandatorily redeemable and has recorded a liability in “Members' interest subject to mandatory redemption and undistributed earnings” on the condensed consolidated balance sheets. In addition, all undistributed earnings at the time of the noncontrolling owners’ death or permanent disability are also mandatorily payable. In the event of either Mr. Buenting’s or Mr. Myers's death, the Company purchased two separate $20.0 million death and permanent total disability insurance policies to mitigate the Company’s cash draw if such events were to occur.

The liability consists of the following (amounts in thousands):



	March 31, 2018		December 31, 2017
Members’ interest subject to mandatory redemption	$	40,000	$	40,000
Net accumulated earnings	3,923		7,386
Total liability	$	43,923	$	47,386

Fifty percent of the earnings of these consolidated 50% owned subsidiaries for the three months ended March 31, 2018 and March 31, 2017 was $0.6 million and $0.0 million. These amounts were included in “Other operating expense, net” on the Company’s condensed consolidated statements of operations.

The Company must determine whether each entity, including these two 50% owned subsidiaries, in which it participates, is a VIE. This determination focuses on identifying which owner or entity 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 the Company to consolidate the entity in which we have a noncontrolling variable interest. The Company determined Myers is a VIE and we are the primary beneficiary as pursuant to the terms of the Myers Operating Agreement we are exposed to the majority of potential losses of the partnership. As such, the following table presents the condensed financial information of Myers, which is reflected in the Company’s condensed consolidated balance sheets and statements of operations, as follows (amounts in thousands):



	March 31, 2018		December 31, 2017
Assets:
Current assets:
Cash and cash equivalents	$	2,061	$	8,590
Contracts receivable, including retainage	21,507		26,844
Other current assets	13,634		15,672
Total current assets	37,202		51,106
Property and equipment, net	8,528		9,001
Goodwill	1,501		1,501
Total assets	$	47,231	$	61,608
Liabilities:
Current liabilities:
Accounts payable	$	20,478	$	28,448
Other current liabilities	9,557		11,798
Total current liabilities	30,035		40,246
Long-term liabilities:
Other long-term liabilities	160		3,491
Total liabilities	$	30,195	$	43,737



	Three Months Ended March 31,
	2018		2017
Revenues	$	40,175	$	23,285
Operating income	1,107		394
Net income attributable to Sterling common stockholders	554		195