Income Taxes (Tables)

12 Months Ended

May 31, 2016

Earnings before Income Taxes

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

(in thousands)	2016		2015		2014
United States based operations	$	180,467	$	104,732	$	210,783
Non – United States based operations		36,148		8,296		6,718
Earnings before income taxes		216,615		113,028		217,501
Less: Net earnings attributable to noncontrolling interests*		13,913		10,471		8,852
Earnings before income taxes attributable to controlling interest	$	202,702	$	102,557	$	208,649

* 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)	2016			2015			2014
Current
Federal	$	42,837		$	57,511		$	73,149
State and local		2,157			2,731			3,537
Foreign		6,639			5,490			6,579
		51,633			65,732			83,265
Deferred
Federal		7,584			(37,839	)		(25,453	)
State and local		934			(754	)		(1,194	)
Foreign		(1,164	)		(1,367	)		731
		7,354			(39,960	)		(25,916	)
	$	58,987		$	25,772		$	57,349

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:

	2016			2015			2014
Federal statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		2.6			3.0			2.0
Change in state and local valuation allowances		(1.1	)		(1.1	)		(0.9	)
Non-U.S. income taxes at other than 35%		(3.5	)		(0.7	)		(1.0	)
Change in Non-U.S. valuation allowances		0.5			1.2			1.4
Qualified production activities deduction		(2.2	)		(5.9	)		(3.9	)
Acquisition of an additional 10% interest in TWB		-			-			(3.4	)
Research & development credits		(0.2	)		(0.2	)		(1.1	)
Tax write off of investment in foreign subsidiary		-			-			(1.1	)
Benefit related to foreign tax credits		-			(5.3	)		-
Excess benefit related to share-based payment awards		(1.6	)		-			-
Other		(0.4	)		(0.9	)		0.5
Effective tax rate attributable to controlling interest		29.1	%		25.1	%		27.5	%

Reconciliation of Unrecognized Tax Benefits

A tabular reconciliation of unrecognized tax benefits follows:

(In thousands)
Balance at May 31, 2015	$	3,530
Increases – tax positions taken in prior years		362
Decreases – tax positions taken in prior years		(530	)
Increases – current tax positions		687
Settlements		(755	)
Lapse of statutes of limitations		(467	)
Balance at May 31, 2016	$	2,827

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 – 2013 and forward

U.S. State and Local – 2012 and forward

Austria – 2013 and forward

Canada – 2012 and forward

Mexico – 2010 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)	2016			2015
Deferred tax assets
Accounts receivable	$	2,786		$	1,895
Inventories		6,418			8,051
Accrued expenses		34,035			33,678
Net operating and capital loss carry forwards		12,756			14,326
Tax credit carry forwards		3,127			3,688
Stock-based compensation		22,452			20,434
Derivative contracts		-			9,177
Other		210			247
Total deferred tax assets		81,784			91,496
Valuation allowance for deferred tax assets		(11,796	)		(13,036	)
Net deferred tax assets		69,988			78,460
Deferred tax liabilities
Property, plant and equipment		(35,521	)		(39,433	)
Undistributed earnings of unconsolidated affiliates		(42,967	)		(35,165	)
Derivative contracts		(6,395	)		-
Other		(2,484	)		(2,150	)
Total deferred tax liabilities		(87,367	)		(76,748	)
Net deferred tax asset (liability)	$	(17,379	)	$	1,712

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)	2016			2015
Current assets:
Deferred income taxes	$	-		$	22,034
Noncurrent assets:
Other assets		-			1,173
Noncurrent liabilities:
Deferred income taxes		(17,379	)		(21,495	)
Net deferred tax asset (liability)	$	(17,379	)	$	1,712