Investments in Unconsolidated Affiliates

3 Months Ended

Aug. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Affiliates

Note C – Investments in Unconsolidated Affiliates

Investments in affiliated companies that we do not control, either through majority ownership or otherwise, are accounted for using the equity method and included the following at August 31, 2023: Clarkwestern Dietrich Building Systems LLC (“ClarkDietrich”) (25%); Serviacero Planos, S. de R. L. de C.V. (“Serviacero Worthington”) (50%); Taxi Workhorse Holdings, LLC (“Workhorse”) (20%); and Worthington Armstrong Venture (“WAVE”) (50%).

We also held a 50% noncontrolling equity interest in ArtiFlex Manufacturing, LLC (“ArtiFlex”), on a historical basis, through August 3, 2022, when it was purchased by the unrelated joint venture partner. In connection with this transaction, we received net cash proceeds of approximately $36,095 and realized a pre-tax loss of $15,759 within equity income, representing the amount by which the book value of our investment exceeded the net cash proceeds.

We received distributions from unconsolidated affiliates totaling $64,606 during the three months ended August 31, 2023. We have received cumulative distributions from WAVE in excess of our investment balance amounting to $116,377 and $117,297, respectively, at August 31, 2023 and May 31, 2023, which are presented separately within long-term liabilities in our consolidated balance sheets. In accordance with the applicable accounting guidance, we have reclassified the negative investment balance to the liabilities section of our consolidated balance sheets. We will continue to record our equity in the net income of WAVE as a debit to the investment account, and if the investment balance becomes positive, it will again be shown as an asset on our consolidated balance sheets. If it becomes probable that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any negative investment balance classified as a liability as income immediately.

We use the “cumulative earnings” approach for determining cash flow presentation of distributions from our unconsolidated joint ventures. Distributions received are included in our consolidated statements of cash flows as operating activities, unless the cumulative distributions exceed our portion of the cumulative equity in the net earnings of the joint venture, in which case the excess distributions are deemed to be returns of the investment and are classified as investing activities in our consolidated statements of cash flows.

The following tables summarize combined financial information for our unconsolidated affiliates as of the dates, and for the periods presented:

	August 31,		May 31,
(In thousands)	2023		2023
Cash and cash equivalents	$	45,766	$	49,185
Other current assets		862,913		899,913
Noncurrent assets		390,681		394,468
Total assets	$	1,299,360	$	1,343,566
Current liabilities		309,692		247,796
Current maturities of long-term debt		32,151		36,936
Long-term debt		348,269		349,215
Other noncurrent liabilities		141,328		144,649
Equity		467,920		564,970
Total liabilities and equity	$	1,299,360	$	1,343,566

	Three Months Ended
	August 31,
(In thousands)	2023		2022
Net sales	$	720,433	$	823,942
Gross margin		194,308		181,405
Operating income		149,409		137,827
Depreciation and amortization		8,643		8,188
Interest expense		5,739		2,680
Income tax expense		1,646		2,110
Net earnings		143,566		133,238