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 $102,015,000, $86,513,000, and $78,297,000 in fiscal 2017, fiscal 2016 and fiscal 2015, respectively. We have received cumulative distributions from WAVE in excess of our investment balance, which resulted in an amount recorded within other liabilities on our consolidated balance sheets of $63,038,000 and $52,983,000 at May 31, 2017 and 2016, respectively. In accordance with the applicable accounting guidance, we reclassified the negative balance to the liability 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 probable 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.

The following table presents combined information regarding the financial position of our unconsolidated affiliates accounted for using the equity method as of May 31, 2017 and 2016:


(in thousands)	2017		2016
Cash	$	55,541	$	112,122
Other current assets		559,021		446,796
Noncurrent assets		361,106		352,370

Total assets	$	975,668	$	911,288

Current liabilities	$	156,947	$	112,491
Short-term borrowings		8,172		11,398
Current maturities of long-term debt		5,827		3,297
Long-term debt		268,711		266,942
Other noncurrent liabilities		21,380		21,034
Equity		514,631		496,126

Total liabilities and equity	$	975,668	$	911,288

The following table presents summarized financial information for our four largest unconsolidated affiliates as of, and for the fiscal years ended May 31. All other unconsolidated affiliates are combined and presented in the Other category, including WSP through March 1, 2016. On March 1, 2016, the Company obtained effective control over the operations of WSP and, as a result, began consolidating its financial results within Steel Processing. For additional information, refer to “Note O – Acquisitions.”


(in thousands)	2017			2016			2015
Net sales
WAVE	$	400,987		$	393,718		$	382,451
ClarkDietrich		711,735			615,609			576,171
Serviacero		275,315			260,337			277,385
ArtiFlex		208,922			219,510			183,029
Other		17,784			74,214			91,144

Total net sales	$	1,614,743		$	1,563,388		$	1,510,180

Gross margin
WAVE	$	207,035		$	207,143		$	181,102
ClarkDietrich		128,098			95,427			65,530
Serviacero		37,080			15,328			17,028
ArtiFlex		22,829			30,181			24,145
Other		(4,313	)		13,142			14,201

Total gross margin	$	390,729		$	361,221		$	302,006

Operating income (loss)
WAVE	$	167,157		$	172,721		$	147,603
ClarkDietrich		68,696			33,897			10,436
Serviacero		29,975			11,110			14,036
ArtiFlex		15,519			22,612			16,476
Other		(8,407	)		6,910			4,980

Total operating income	$	272,940		$	247,250		$	193,531

Depreciation and amortization
WAVE	$	4,871		$	4,120		$	4,150
ClarkDietrich		12,718			14,289			16,638
Serviacero		3,862			3,508			3,462
ArtiFlex		5,850			6,105			7,258
Other		698			3,081			4,154

Total depreciation and amortization	$	27,999		$	31,103		$	35,662

Interest expense (income)
WAVE	$	7,183		$	6,635		$	6,412
ClarkDietrich		20			80			138
Serviacero		89			114			201
ArtiFlex		1,429			1,650			1,973
Other		—			(10	)		(29	)

Total interest expense	$	8,721		$	8,469		$	8,695

Income tax expense (benefit)
WAVE	$	5,626		$	2,449		$	2,539
ClarkDietrich		—			—			—
Serviacero		11,740			6,249			7,844
ArtiFlex		(2	)		289			105
Other		(2	)		53			—

Total income tax expense	$	17,362		$	9,040		$	10,488

Net earnings (loss)
WAVE	$	154,866		$	164,132		$	138,670
ClarkDietrich		69,122			58,539			11,799
Serviacero		18,140			6,246			8,429
ArtiFlex		14,092			20,673			14,398
Other		(5,472	)		8,516			4,806

Total net earnings	$	250,748		$	258,106		$	178,102

At May 31, 2017, $28,803,000 of our consolidated retained earnings represented undistributed earnings of our unconsolidated affiliates, net of tax.