Investments in affiliated companies that we do not control, either through majority ownership or otherwise, are accounted for using the equity method. At February 29, 2020, the Company held investments in the following affiliated companies: ArtiFlex Manufacturing, LLC (“ArtiFlex”) (50%), Clarkwestern Dietrich Building Systems LLC (“ClarkDietrich”) (25%), Serviacero Planos, S. de R. L. de C.V. (“Serviacero Worthington”) (50%), Worthington Armstrong Venture (“WAVE”) (50%) and the Cabs joint venture (20%).

During the first quarter of fiscal 2020, the Company began the process of exploring the potential exit of its interest in the Nisshin joint venture in China. As a result, the Company evaluated its investment for potential impairment. The Company concluded the remaining book value of the investment was fully impaired, resulting in an impairment charge of $4,236,000 within equity income during the three months ended August 31, 2019. On December 19, 2019, the Company finalized an agreement to transfer the risks and rewards related to its 10% interest to the other joint venture partners. As a result, the Company has no further rights or obligations related to the Nisshin joint venture.

During the second quarter of fiscal 2020, the Company’s exploration of strategic alternatives relating to its investment in ArtiFlex resulted in the need to evaluate this investment for potential impairment. Based on the analysis performed, the Company concluded its investment was not impaired, as then current and projected cash flows were deemed sufficient to recover the remaining book value of $54,566,000. However, it is possible the Company’s estimate of future cash flows could decline to a level that no longer supports the current book value of the investment. Factors which could have an adverse impact on the current cash flow projections, include, but are not limited to deteriorating market conditions as well as potential outcomes that may result from management’s review of strategic alternatives.

On November 1, 2019, we closed on an agreement with an affiliate of Angeles Equity Partners, LLC by which we contributed substantially all of the net assets of our Engineered Cabs business to a newly-formed joint venture, in which we retained a 20% noncontrolling interest. Immediately following the contribution, the Cabs joint venture acquired the net assets of Crenlo. Our contributions to the Cabs joint venture consisted of the net assets of its primary manufacturing facilities located in Greeneville, Tennessee and Watertown, South Dakota. Our investment in the Cabs joint venture is accounted for under the equity method, due to lack of control.

On December 31, 2019, the Company contributed the recently acquired operating net assets related to Heidtman Steel Products, Inc.’s Cleveland facility (“Heidtman”) to the Samuel joint venture in exchange for an incremental 31.75% ownership interest in the Samuel joint venture, bringing our total ownership interest to 63%. The Samuel joint venture’s results have been consolidated within Steel Processing since that date. Refer to “NOTE P – Acquisitions” for additional information.

We received distributions from unconsolidated affiliates totaling $78,321,000 during the nine months ended February 29, 2020. 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 $95,291,000 at February 29, 2020. In accordance with the applicable accounting guidance, we reclassified the negative investment 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 the investment balance 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 negative investment 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.

The following tables summarize combined financial information for our unconsolidated affiliates as of the dates, and for the periods presented:

	February 29,		May 31,
(in thousands)	2020		2019
Cash	$	33,002	$	37,471
Other current assets		611,784		594,959
Current assets for discontinued operations		-		35,793
Noncurrent assets		379,984		360,925
Total assets	$	1,024,770	$	1,029,148

Current liabilities	$	163,758	$	236,781
Current liabilities for discontinued operations		-		9,610
Short-term borrowings		3,437		15,162
Current maturities of long-term debt		2,374		33,003
Long-term debt		352,827		321,791
Other noncurrent liabilities		47,107		18,192
Equity		455,267		394,609
Total liabilities and equity	$	1,024,770	$	1,029,148

	Three Months Ended					Nine Months Ended
(in thousands)	February 29, 2020			February 28, 2019		February 29, 2020		February 28, 2019
Net sales	$	477,494		$	440,186	$	1,400,987	$	1,385,399
Gross margin		100,070			74,783		293,601		247,852
Operating income		52,429			45,387		181,067		158,475
Depreciation and amortization		8,482			6,138		23,109		19,368
Interest expense		3,667			3,529		10,173		9,836
Income tax expense (benefit)		(614	)		1,001		1,239		8,433
Net earnings from continuing operations		54,806			40,196		169,430		141,613
Net earnings from discontinued operations		-			1,001		49,770		4,713
Net earnings		54,806			41,197		219,200		146,326

The amounts presented within the discontinued operations captions in the tables above reflect the international operations of our WAVE joint venture prior to their sale on September 30, 2019. Upon closing of the transaction, the related net assets were deconsolidated resulting in a pre-tax gain within net earnings from discontinued operations of $46,238,000, which is subject to certain post-closing adjustments. The sale of these operations was closed as part of a broader transaction between the joint venture partner, Armstrong World Industries, Inc. (“AWI”), and Knauf Ceilings and Holding GmbH (“Knauf”), a family-owned manufacturer of building materials headquartered in Germany. Our portion of the net gain was $23,119,000 and has been recognized within equity in net income of unconsolidated affiliates. The Company corrected certain amounts in the above table during the quarter ended February 29, 2020, to reflect the international operations of our WAVE joint venture within discontinued operations prior to their sale on September 30, 2019. Those amounts were previously included in net sales, gross margin, operating income, and income tax expense for the three month and year-to-date periods ended February 28, 2019, August 31, 2019, and November 30, 2019. Additionally, the Company reclassified to discontinued operations $50,948,000 for the gain related to the sale of the WAVE international operations that was previously reported in net earnings from continuing operations for the three and six month periods ended November 30, 2019. The amounts reported in our consolidated financial statements were not impacted.

Worthington has invested and continues to invest in other companies which are generally pursuing innovative products. The amount invested by Worthington in these companies is generally smaller and accounted for using the cost method. One of these investments is in Nikola Corporation, a designer and manufacturer of electric and hydrogen trucks and powertrains, in which the Company owns approximately a 5-6% interest.