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, 2013, these equity investments and the percentage interests owned consisted of: ArtiFlex Manufacturing, LLC (“ArtiFlex”) (50%), ClarkDietrich (25%), Gestamp Worthington Wind Steel, LLC (the “Gestamp JV”) (50%), Samuel Steel Pickling Company (31.25%), Serviacero Planos, S. de R. L. de C.V. (50%), 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.

Due to the volatile political environment in the United States, particularly in regards to the Federal Production Tax Credit, the Company is in the process of dissolving the Gestamp JV.

We received distributions from unconsolidated affiliates totaling $26,591,000 during the three months ended August 31, 2013. We have received cumulative distributions from WAVE in excess of our investment balance totaling $61,745,000 and $63,187,000 at August 31, 2013 and May 31, 2013, 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. During the three months ended August 31, 2013, we received excess distributions from ClarkDietrich of $5,555,000.

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


(in thousands)	August 31, 2013		May 31, 2013
Cash	$	55,310	$	70,380
Receivable from partner (1)		4,069		69,706
Other current assets		426,039		518,262
Noncurrent assets		302,187		350,681

Total assets	$	787,605	$	1,009,029

Current liabilities	$	113,229	$	181,111
Short-term borrowings		14,293		21,369
Current maturities of long-term debt		5,265		5,442
Long-term debt		272,574		274,750
Other noncurrent liabilities		18,613		18,345
Equity		363,631		508,012

Total liabilities and equity	$	787,605	$	1,009,029


	Three Months Ended August 31,
(in thousands)	2013		2012
Net sales	$	423,481	$	446,853
Gross margin		89,814		74,513
Operating income		64,540		51,711
Depreciation and amortization		10,337		8,990
Interest expense		2,223		2,261
Income tax expense		3,030		3,469
Net earnings		59,634		46,284

(1)	Represents cash owed from a joint venture partner as a result of centralized cash management.