Investments in Unconsolidated Affiliates

12 Months Ended

May 31, 2024

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Affiliates

Note D – Investments in Unconsolidated Affiliates

Investments in joint ventures that we do not control, either through majority ownership or otherwise, are unconsolidated and accounted for using the equity method. At May 31, 2024, we held investments in the following joint ventures: ClarkDietrich (25%); Sustainable Energy Solutions (49%); WAVE (50%); and Workhorse (20%).

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.

On May 29, 2024, we entered into a joint venture agreement with Hexagon and contributed the net assets of our former Sustainable Energy Solutions business to a newly-formed joint venture in which we retained a 49% noncontrolling interest. Hexagon acquired a 49% stake in the joint venture and the remaining 2% is held by members of the existing management team of the joint venture. Our investment in the Sustainable Energy Solutions joint venture is accounted for under the equity method due to lack of control.

We received distributions from unconsolidated affiliates totaling $187,258, $228,357, and $97,558 in fiscal 2024, fiscal 2023 and fiscal 2022, respectively. We have received cumulative distributions from WAVE in excess of our investment balance, which resulted in a negative asset balance of $111,905 and $117,297 at May 31, 2024 and 2023, respectively. In accordance with the applicable accounting guidance, we reclassified the negative balances to distributions in excess of investment in unconsolidated affiliate within 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 it 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 immediately recognize any balance classified as a liability as income.

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. In fiscal 2024, we classified $1,085 of excess dividends received from WAVE as an investing activity.

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

	2024		2023
Cash and cash equivalents	$	36,163	$	36,988
Other current assets		605,043		661,700
Noncurrent assets		360,261		335,567
Total assets	$	1,001,467	$	1,034,255
Current liabilities	$	264,963	$	176,959
Current maturities of long-term debt		13,450		36,936
Long-term debt		349,431		349,215
Other noncurrent liabilities		146,984		139,228
Equity		226,639		331,917
Total liabilities and equity	$	1,001,467	$	1,034,255

The following tables presents summarized financial information for our unconsolidated affiliates as of, and for the fiscal years ended May 31.

	2024		2023		2022
Net sales
WAVE	$	479,153	$	447,369	$	452,368
ClarkDietrich		1,308,517		1,451,665		1,695,808
Workhorse		317,185		364,396		313,265
ArtiFlex		-		52,641		187,089
Total net sales	$	2,104,855	$	2,316,071	$	2,648,530

	2024		2023		2022
Gross profit
WAVE	$	286,228	$	242,257	$	238,523
ClarkDietrich		326,616		403,569		431,070
Workhorse		36,648		17,628		11,455
ArtiFlex		-		8,589		30,633
Total gross profit	$	649,492	$	672,043	$	711,681

	2024		2023		2022
Operating income (loss)
WAVE	$	225,202	$	184,882	$	183,545
ClarkDietrich		236,575		318,914		351,583
Workhorse		26,881		7,507		(2,024	)
ArtiFlex		-		4,911		15,778
Total operating income	$	488,658	$	516,214	$	548,882

	2024		2023		2022
Depreciation and amortization
WAVE	$	4,926	$	4,679	$	4,554
ClarkDietrich		15,075		13,717		10,946
Workhorse		8,974		10,386		6,586
ArtiFlex		-		1,444		5,708
Total depreciation and amortization	$	28,975	$	30,226	$	27,794

	2024		2023		2022
Interest expense
WAVE	$	17,288	$	13,024	$	8,386
ClarkDietrich		171		524		308
Workhorse		2,417		2,507		1,228
ArtiFlex		-		134		340
Total interest expense	$	19,876	$	16,189	$	10,262

	2024		2023		2022
Income tax expense
WAVE	$	267	$	222	$	158
ClarkDietrich		2,250		1,924		-
Workhorse		744		1,802		1,244
ArtiFlex		-		59		258
Total income tax expense	$	3,261	$	4,007	$	1,660

	2024		2023		2022
Net earnings (loss)
WAVE	$	205,976	$	171,687	$	175,154
ClarkDietrich		239,309		321,977		356,288
Workhorse		22,952		2,673		(1,170	)
ArtiFlex		-		4,717		15,180
Total net earnings	$	468,237	$	501,054	$	545,452

At May 31, 2024 and 2023, $37,398 and $69,008, respectively, of our consolidated retained earnings represented undistributed earnings of our unconsolidated affiliates, net of tax.