The unaudited consolidated financial statements include the accounts of Worthington Industries, Inc. and consolidated subsidiaries (collectively, “we,” “our,” “Worthington,” or the “Company”). They have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements.

At November 30, 2019, the Company owned controlling interests in the following three joint ventures: Spartan Steel Coating, LLC (“Spartan”) (52%), TWB Company, L.L.C. (“TWB”) (55%), and Worthington Specialty Processing (“WSP”) (51%). These joint ventures are consolidated in the Company’s financial statement, and the equity owned by the other joint venture members shown as noncontrolling interests in our consolidated balance sheets, and their portions of net earnings and other comprehensive income (“OCI”) shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively. Investments in unconsolidated affiliates are accounted for using the equity method. See further discussion on unconsolidated affiliates in “NOTE C – Investments in Unconsolidated Affiliates”.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all adjustments, which are of a normal and recurring nature except those which have been disclosed elsewhere in this Quarterly Report on Form 10-Q, necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included and significant intercompany accounts and transactions have been eliminated.

Operating results for the three and six months ended November 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2020 (“fiscal 2020”). For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended May 31, 2019 (“fiscal 2019”) of Worthington Industries, Inc. (the “2019 Form 10-K”).

Deconsolidation of Engineered Cabs: On November 1, 2019, we reached an agreement with an affiliate of Angeles Equity Partners, LLC to contribute substantially all of the net assets of the Company’s Engineered Cabs business to a newly-formed joint venture, Taxi Workhorse Holdings, LLC (the “Cabs joint venture”), in which the Company retained a 20% noncontrolling interest. Immediately following the contribution, the Cabs joint venture acquired the net assets of Crenlo Cab Products, LLC (“Crenlo”), to better position the combined business to drive growth and generate value. The investment in the Cabs joint venture is accounted for under the equity method, due to lack of control as more fully described in “NOTE C – Investments in Unconsolidated Affiliates”.

The Company’s contribution to the Cabs joint venture consisted of the net assets of its two primary manufacturing facilities located in Greeneville, Tennessee and Watertown, South Dakota. In anticipation of the transaction for substantially all the net assets of the Engineered Cabs business, an impairment charge of $35,194,000 was recognized when the disposal group met the criteria as assets held for sale as of August 31, 2019. Certain non-core assets of the Engineered Cabs business, including the fabricated products facility in Stow, Ohio, and the steel packaging facility in Greensburg, Indiana, were retained. The Company is in the process of evaluating strategic alternatives for the retained assets. Refer to “NOTE E – Impairment of Long-Lived Assets” for additional information.

On November 1, 2019, the closing date, the contributed net assets were deconsolidated, resulting in a one-time net gain of $50,000 within restructuring and other expense (income), net in our consolidated statements of earnings for the three months ended November 30, 2019, as summarized below.

(in thousands)
Retained investment (at fair value)	$	13,623
Contributed net assets (at carrying value)		13,394
Gain on deconsolidation		229
Less: deal costs		(179	)
Net gain on deconsolidation	$	50

In accordance with the applicable accounting guidance, our minority ownership interest in the Cabs joint venture was recorded at fair value as of the closing date. The Company’s estimate of fair value was based on a preliminary valuation of the net assets of the Cabs joint venture. For additional information regarding the fair value of our minority ownership interest in the Cabs joint venture, refer to “NOTE R – Fair Value”.

On June 1, 2019, the Company adopted Accounting Standards Update 2016-02, Leases (“Topic 842”), which replaces most existing lease accounting guidance under U.S. GAAP. See “NOTE D – Leases” for additional information regarding the Company’s adoption of Topic 842, including newly-required disclosures.

On June 1, 2019, the Company adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“Topic 815”), which amended the existing hedge accounting guidance under U.S. GAAP. The ASU is intended to simplify and clarify the accounting and disclosure requirements for hedging activities by more closely aligning the results of cash flow and fair value hedge accounting with the underlying risk management activities. The adoption of the standard had no current or historical impact on our consolidated financial position or results of operations. See “NOTE Q – Derivative Instruments and Hedging Activities” for additional information.

In June 2016, amended accounting guidance was issued related to the measurement of credit losses on financial instruments. The amended accounting guidance changes the impairment model for most financial assets to require measurement and recognition of expected credit losses for financial assets held. The amended accounting guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are in the process of evaluating the effect this amended accounting guidance will have on our consolidated financial position and results of operations; however, we do not expect the amended accounting guidance to have a material impact on our ongoing financial reporting.

Certain prior period amounts have been reclassified within the operating section of the consolidated statements of cash flows for consistency with the current period presentation.