Investments in Unconsolidated Affiliates

3 Months Ended

Aug. 31, 2012

Investments in Unconsolidated Affiliates

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. At August 31, 2012, these equity investments and the percentage interests owned consisted of: ArtiFlex (50%), ClarkDietrich (25%), Gestamp Worthington Wind Steel, LLC (the “Gestamp JV”) (50%), Samuel Steel Pickling Company (31%), Serviacero Planos, S. de R. L. de C.V. (50%), TWB Company, L.L.C. (“TWB”) (45%), Worthington Armstrong Venture (“WAVE”) (50%), Worthington Modern Steel Framing Manufacturing Co., Ltd. (“WMSFMCo.”) (40%), and Worthington Specialty Processing (“WSP”) (51%). 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 $15,286,000 during the three months ended August 31, 2012. We have received cumulative distributions from WAVE in excess of our investment balance totaling $64,801,000 and $69,165,000 at August 31 and May 31, 2012, respectively. 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.

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

(in thousands)	August 31, 2012		May 31, 2012
Current assets	$	632,088	$	626,975
Noncurrent assets		352,672		345,500
Total assets	$	984,760	$	972,475
Current liabilities	$	186,131	$	174,016
Current maturities of long-term debt		5,323		5,305
Long-term debt		275,970		289,308
Other noncurrent liabilities		20,832		21,934
Equity		496,504		481,912
Total liabilities and equity	$	984,760	$	972,475
	Three Months Ended August  31,
(in thousands)	2012		2011
Net sales	$	446,853	$	427,794
Gross margin		77,918		83,825
Operating income		51,711		57,147
Depreciation and amortization		8,990		4,834
Interest expense		2,261		876
Income tax expense		3,469		4,358
Net earnings		46,284		51,865