Income Taxes (Tables)

12 Months Ended

May. 31, 2015

Earnings before Income Taxes

Earnings before income taxes for the years ended May 31 include the following components:

(in thousands)	2015		2014		2013
United States based operations	$	104,732	$	210,783	$	190,942
Non – United States based operations		8,296		6,718		10,358
Earnings before income taxes		113,028		217,501		201,300
Less: Net earnings attributable to noncontrolling interests*		10,471		8,852		393
Earnings before income taxes attributable to controlling interest	$	102,557	$	208,649	$	200,907

* Net earnings attributable to noncontrolling interests are not taxable to Worthington.

Components of Income Tax Expense (Benefit)

Significant components of income tax expense (benefit) for the years ended May 31 were as follows:

(in thousands)	2015			2014			2013
Current
Federal	$	57,511		$	73,149		$	54,427
State and local		2,731			3,537			4,109
Foreign		5,490			6,579			4,131
		65,732			83,265			62,667
Deferred
Federal		(37,839	)		(25,453	)		4,698
State and local		(754	)		(1,194	)		(2,170	)
Foreign		(1,367	)		731			(730	)
		(39,960	)		(25,916	)		1,798
	$	25,772		$	57,349		$	64,465

Reconciliation of 35% Federal Statutory Tax Rate to Total Tax Provision

A reconciliation of the 35% federal statutory tax rate to total tax provision follows:

	2015			2014			2013
Federal statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		3.0			2.0			2.3
Change in state and local valuation allowances		(1.1	)		(0.9	)		(1.3	)
Non-U.S. income taxes at other than 35%		(0.7	)		(1.0	)		(1.7	)
Change in Non-U.S. valuation allowances		1.2			1.4			1.1
Qualified production activities deduction		(5.9	)		(3.9	)		(3.0	)
Acquisition of an additional 10% interest in TWB		(0.0	)		(3.4	)		(0.0	)
Research & development credits		(0.2	)		(1.1	)		(0.1	)
Tax write off of investment in foreign subsidiary		(0.0	)		(1.1	)		(0.0	)
Benefit related to foreign tax credits		(5.3	)		(0.0	)		(0.0	)
Other		(0.9	)		0.5			(0.2	)
Effective tax rate attributable to controlling interest		25.1	%		27.5	%		32.1	%

Reconciliation of Unrecognized Tax Benefits

A tabular reconciliation of unrecognized tax benefits follows:

(In thousands)
Balance at May 31, 2014	$	4,110
Increases – tax positions taken in prior years		306
Decreases – tax positions taken in prior years		(456	)
Increases (decreases) – current tax positions		672
Settlements		(636	)
Lapse of statutes of limitations		(466	)
Balance at May 31, 2015	$	3,530

Summary of Tax Years Open to Examination by Major Tax Jurisdiction

The following is a summary of the tax years open to examination by major tax jurisdiction:

U.S. Federal – 2012 and forward

U.S. State and Local – 2010 and forward Austria – 2013 and forward

Canada – 2011 and forward

Mexico – 2009 and forward

Deferred Tax Assets and Liabilities

The components of our deferred tax assets and liabilities as of May 31 were as follows:

(in thousands)	2015			2014
Deferred tax assets
Accounts receivable	$	1,895		$	2,400
Inventories		8,051			7,210
Accrued expenses		33,678			40,873
Net operating and capital loss carry forwards		14,326			19,302
Tax credit carry forwards		3,688			203
Stock-based compensation		20,434			12,573
Derivative contracts		9,177			1,838
Other		247			541
Total deferred tax assets		91,496			84,940
Valuation allowance for deferred tax assets		(13,036	)		(21,701	)
Net deferred tax assets		78,460			63,239
Deferred tax liabilities
Property, plant and equipment		(39,433	)		(67,472	)
Undistributed earnings of unconsolidated affiliates		(35,165	)		(39,429	)
Other		(2,150	)		(3,395	)
Total deferred tax liabilities		(76,748	)		(110,296	)
Net deferred tax asset (liability)	$	1,712		$	(47,057	)

Deferred Tax Assets and Liabilities Classified in Consolidated Balance Sheet

The above amounts are classified in the consolidated balance sheets as of May 31 as follows:

(in thousands)	2015			2014
Current assets:
Deferred income taxes	$	22,034		$	24,272
Noncurrent assets:
Other assets		1,173			4
Noncurrent liabilities:
Deferred income taxes		(21,495	)		(71,333	)
Net deferred tax asset (liability)	$	1,712		$	(47,057	)