Investments in Unconsolidated Affiliates

9 Months Ended

Feb. 29, 2024

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Affiliates

Note D – 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 February 29, 2024: ClarkDietrich (25%); WAVE (50%); and Workhorse (20%). We held a 50% non-controlling interest in Serviacero prior to the Separation. Equity Income and the related investment have been presented as discontinued operations for all periods presented.

We also held a 50% noncontrolling equity interest in ArtiFlex, 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 $35,795 and realized a pre-tax loss of $16,059 within Equity Income, representing the amount by which the book value of our investment exceeded the net cash proceeds.

During the second quarter of fiscal 2024, we recognized a pre-tax gain of $2,780 within Equity Income in connection with the sale of Workhorse’s operations in Brazil.

We received distributions from unconsolidated affiliates totaling $144,317 during the nine months ended February 29, 2024. We have received cumulative distributions from WAVE in excess of our investment balance amounting to $116,775 and $117,297, respectively, at February 29, 2024 and May 31, 2023, which are presented separately within long-term liabilities in 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 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. During the nine months ended February 29, 2024, we classified $1,085 of “excess” dividends received from WAVE as an investing activity.

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

	February 29,		May 31,
(In thousands)	2024		2023
Cash and cash equivalents	$	86,533	$	36,988
Other current assets		574,099		661,700
Non-current assets		324,793		335,567
Total assets	$	985,425	$	1,034,255
Current liabilities		312,235		176,959
Current maturities of long-term debt		20,500		36,936
Long-term debt		349,377		349,215
Other non-current liabilities		137,275		139,228
Equity		166,038		331,917
Total liabilities and equity	$	985,425	$	1,034,255

	Three Months Ended				Nine Months Ended
	February 29,		February 28,		February 29,		February 28,
(In thousands)	2024		2023		2024		2023
Net sales	$	497,938	$	511,663	$	1,579,992	$	1,727,225
Gross profit		171,497		154,980		492,812		467,664
Operating income		126,377		115,286		376,782		349,925
Depreciation and amortization		6,936		5,662		21,737		18,559
Interest expense		4,943		4,476		15,220		10,920
Income tax expense		549		791		1,900		1,604
Net earnings		119,982		111,505		360,748		342,574