NOTE B – 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. 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 $19,551,000 during the three months ended August 31, 2017. 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 $58,371,000 at August 31, 2017. In accordance with the applicable accounting guidance, we reclassified the negative balance 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 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 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.

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


(in thousands)	August 31, 2017		May 31, 2017
Cash	$	40,943	$	55,541
Other current assets		591,345		559,021
Noncurrent assets		366,877		361,106

Total assets	$	999,165	$	975,668

Current liabilities	$	157,932	$	156,947
Short-term borrowings		11,063		8,172
Current maturities of long-term debt		4,367		5,827
Long-term debt		268,867		268,711
Other noncurrent liabilities		24,816		21,380
Equity		532,120		514,631

Total liabilities and equity	$	999,165	$	975,668


	Three Months Ended August 31,
(in thousands)	2017		2016
Net sales	$	442,624	$	417,115
Gross margin		86,235		124,197
Operating income		57,163		94,397
Depreciation and amortization		7,193		6,820
Interest expense		2,492		2,148
Income tax expense		1,348		7,518
Net earnings		52,474		86,067