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Investments in Unconsolidated Affiliates
6 Months Ended
Nov. 30, 2022
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. At November 30, 2022, we held noncontrolling investments in the following affiliated companies: 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%).

 

On August 3, 2022, the Company sold its 50% noncontrolling equity interest in ArtiFlex Manufacturing, LLC (“ArtiFlex”) to the unaffiliated joint venture member for approximately $42,086,000, after adjustments for closing debt and final net working capital. Approximately $6,000,000 of the total cash proceeds were attributed to real property in Wooster, Ohio, with a net book value of approximately $6,300,000. This real property was owned by Worthington and leased to ArtiFlex prior to closing of the transaction. The Company recognized a pre-tax loss of approximately $15,759,000 in equity income related to the sale of its 50% noncontrolling equity interest portion of the transaction.

 

We received distributions from unconsolidated affiliates totaling $129,766,000 during the six months ended November 30, 2022. We have received cumulative distributions from WAVE in excess of our investment balance amounting to $91,643,000, which is shown as a separate liability on our consolidated balance sheet at November 30, 2022. 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 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.

 

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

 

 

November 30,

 

 

May 31,

 

(in thousands)

2022

 

 

2022

 

Cash and cash equivalents

$

41,768

 

 

$

68,563

 

Other current assets

 

911,881

 

 

 

1,148,029

 

Noncurrent assets

 

301,027

 

 

 

369,608

 

Total assets

$

1,254,676

 

 

$

1,586,200

 

 

 

 

 

 

 

Current liabilities

 

292,303

 

 

 

345,097

 

Short-term borrowings

 

10,000

 

 

 

5,943

 

Current maturities of long-term debt

 

36,110

 

 

 

33,054

 

Long-term debt

 

304,108

 

 

 

306,814

 

Other noncurrent liabilities

 

69,667

 

 

 

76,437

 

Equity

 

542,488

 

 

 

818,855

 

Total liabilities and equity

$

1,254,676

 

 

$

1,586,200

 

 

 

Three Months Ended

 

Six Months Ended

 

 

November 30,

 

November 30,

 

(in thousands)

2022

 

 

2021

 

2022

 

 

2021

 

Net sales

$

711,665

 

 

$

858,165

 

$

1,535,607

 

 

$

1,603,160

 

Gross margin

 

147,299

 

 

 

226,502

 

 

328,704

 

 

 

416,176

 

Operating income

 

107,356

 

 

 

184,779

 

 

245,183

 

 

 

330,767

 

Depreciation and amortization

 

6,864

 

 

 

7,848

 

 

15,052

 

 

 

16,075

 

Interest expense

 

3,910

 

 

 

2,711

 

 

6,590

 

 

 

5,172

 

Income tax expense

 

1,262

 

 

 

8,565

 

 

3,372

 

 

 

16,461

 

Net earnings

 

105,183

 

 

 

173,915

 

 

238,421

 

 

 

312,803