NOTE C – Investments in Unconsolidated Affiliates

Our investments in affiliated companies that we do not control, either through majority ownership or otherwise, are accounted for using the equity method. These include ArtiFlex Manufacturing, LLC (“ArtiFlex”) (50%), Clarkwestern Dietrich Building Systems LLC (“ClarkDietrich”) (25%), Samuel Steel Pickling Company (31.25%), Serviacero Planos, S. de R. L. de C.V. (“Serviacero”) (50%), Worthington Armstrong Venture (“WAVE”) (50%), Worthington Specialty Processing (“WSP”) (51%), and Zhejiang Nisshin Worthington Precision Specialty Steel Co., Ltd. (10%). WSP is considered to be jointly controlled and not consolidated due to substantive participating rights of the minority partner.

We received distributions from unconsolidated affiliates totaling $61,239,000 during the nine months ended February 28, 2015. We have received cumulative distributions from WAVE in excess of our investment balance totaling $63,933,000 at February 28, 2015. In accordance with the applicable accounting guidance, these excess distributions are reclassified to the liabilities section of our consolidated balance sheet. We will continue to record our equity in the net income of WAVE as a debit to the investment account, and if it becomes positive, it will again be shown as an asset on our consolidated balance sheet. If it becomes obvious that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any 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 28, 2015, we received excess distributions from ClarkDietrich of $570,000.

Combined financial information for our unconsolidated affiliates is summarized as follows:


(in thousands)	February 28, 2015		May 31, 2014
Cash	$	48,422	$	52,997
Receivable from member (1)		10,865		12,717
Other current assets		462,631		454,417
Noncurrent assets		286,170		294,001

Total assets	$	808,088	$	814,132

Current liabilities	$	131,216	$	128,595
Short-term borrowings		38,324		40,992
Current maturities of long-term debt		4,480		4,510
Long-term debt		264,982		268,350
Other noncurrent liabilities		20,407		20,217
Equity		348,679		351,468

Total liabilities and equity	$	808,088	$	814,132


	Three Months Ended February 28,				Nine Months Ended February 28,
(in thousands)	2015		2014		2015		2014
Net sales	$	356,604	$	340,645	$	1,137,866	$	1,121,362
Gross margin		67,636		73,217		232,580		239,098
Operating income		41,335		48,752		154,678		164,824
Depreciation and amortization		8,827		8,622		26,932		28,063
Interest expense		2,157		2,494		6,492		6,950
Income tax expense		2,555		2,937		8,107		8,829
Net earnings		37,859		44,018		141,789		149,801

(1)	Represents cash owed from a joint venture member as a result of centralized cash management.

The financial results of TWB have been included in the amounts presented in the tables above through July 31, 2013. On July 31, 2013, we completed the acquisition of an additional 10% interest in TWB. As a result, TWB’s results have been consolidated within Steel Processing since that date with the minority member’s portion of earnings eliminated within earnings attributable to noncontrolling interest.