NOTE B – 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%), and Zhejiang Nisshin Worthington Precision Specialty Steel Co., Ltd. (10%).

We received distributions from unconsolidated affiliates totaling $62,742,000 during the six months ended November 30, 2016. We have received cumulative distributions from WAVE in excess of our investment balance totaling $67,516,000 at November 30, 2016. 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 received, less distributions received in prior periods that were determined to be returns of investment, 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.

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


(in thousands)	November 30, 2016		May 31, 2016
Cash	$	59,751	$	112,122
Other current assets		523,625		446,796
Noncurrent assets		352,117		352,370

Total assets	$	935,493	$	911,288

Current liabilities	$	141,808	$	112,491
Short-term borrowings		9,210		11,398
Current maturities of long-term debt		2,807		3,297
Long-term debt		263,646		266,942
Other noncurrent liabilities		19,834		21,034
Equity		498,188		496,126

Total liabilities and equity	$	935,493	$	911,288


	Three Months Ended November 30,				Six Months Ended November 30,
(in thousands)	2016		2015		2016		2015
Net sales	$	387,192	$	389,185	$	804,307	$	793,648
Gross margin		96,541		84,767		220,738		173,785
Operating income		67,365		55,810		161,762		117,057
Depreciation and amortization		6,973		8,068		13,793		16,165
Interest expense		2,151		2,136		4,299		4,295
Income tax expense		3,545		2,164		11,063		4,723
Net earnings		63,444		71,144		149,511		134,070

The financial results of WSP have been included in the amounts presented in the tables above through March 1, 2016. Effective March 1, 2016, the Company obtained effective control over the operations of WSP. As a result, WSP’s results have been consolidated within the financial results of Steel Processing since that date with the minority member’s portion of earnings eliminated within earnings attributable to noncontrolling interests.