Income Taxes (Tables)

12 Months Ended

May 31, 2020

Income Tax Disclosure [Abstract]

Components of Income Before Income Taxes

Income before income taxes for continuing operations consists of the following components for the fiscal years ended May 31:

(In thousands)	2020		2019		2018
U.S. operations	$	1,035,902	$	1,061,505	$	798,215
Foreign operations	22,389		40,894		42,786
	$	1,058,291	$	1,102,399	$	841,001

Components of Income Taxes

Income tax expense (benefit) for continuing operations consists of the following components for the fiscal years ended May 31:

(In thousands)	2020		2019		2018
Current:
Federal	$	153,736	$	134,174	$	124,861
State and local	34,502		40,949		32,322
Foreign	6,985		9,882		15,103
	195,223		185,005		172,286
Deferred	(13,292)		34,759		(115,217)
	$	181,931	$	219,764	$	57,069

Reconciliation of Income Tax Expense Using the Statutory Rate and Actual Income Tax Expense

Reconciliation of income tax expense for continuing operations using the statutory rate and actual income tax expense is as follows for the fiscal years ended May 31:

(In thousands)	2020		2019		2018
Income taxes at the U.S. federal statutory rate	$	222,258	$	231,503	$	245,322
Permanent differences (1)	(67,075)		(51,201)		(47,137)
State and local income taxes, net of federal benefit	25,294		31,687		24,783
Other (2)	1,454		6,506		(4,451)
Impact of the Tax Cuts and Jobs Act:
Deemed repatriation of non-U.S. earnings, net of foreign tax credits and other (collectively, transition tax)	—		153		9,768
Non-U.S. withholding taxes related to certain non-U.S. earnings subject to repatriation	—		690		4,363
Remeasurement of U.S. net deferred tax liabilities from 35% to 21%	—		426		(175,579)
	$	181,931	$	219,764	$	57,069

⁽¹⁾ Primarily consists of the excess tax benefits related to stock-based compensation.

(2) Primarily consists of adjustments for uncertain tax positions, tax credits and return to provision adjustments.

Components of Deferred Income Taxes

The components of deferred income taxes included on the consolidated balance sheets are as follows at May 31:

(In thousands)	2020		2019
Deferred tax assets:
Allowance for doubtful accounts	$	14,718	$	9,495
Inventory obsolescence	13,744		9,257
Insurance reserves	45,197		45,339
Stock-based compensation	78,802		77,697
Net operating loss and foreign related carry-forwards (1)	7,657		9,109
Treasury locks	39,046		5,806
Operating lease liabilities	42,191		—
Deferred compensation and other	73,562		48,922
	314,917		205,625
Valuation allowance	(6,411)		(7,308)
	308,506		198,317
Deferred tax liabilities:
Uniform and other rental items in service	189,787		194,939
Property and equipment	177,664		159,186
Service contracts and other intangible assets	207,610		210,531
Capitalized contract costs	77,741		70,228
Operating lease right-of-use assets	42,191		—
State taxes and other	2,092		1,612
	697,085		636,496
Net deferred tax liability	$	388,579	$	438,179

(1) The majority of these net operating losses and foreign related carryforwards have a five-year expiration period and generally expire in fiscal year 2021 to 2025

Summary of Valuation Allowance

The progression of the valuation allowance is as follows at May 31:

(In thousands)	2020		2019
Balance at beginning of year	$	(7,308)	$	(11,302)
Subtractions (1)	897		3,994
Balance at end of year	$	(6,411)	$	(7,308)

(1)  Primarily related to expiration of net operating loss and foreign related carryforwards.

Reconciliation of Beginning and Ending Amount of Gross Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of the gross unrecognized tax benefits (exclusive of interest and penalties) is as follows:

(In thousands)
Balance at June 1, 2018	$	36,647
Additions for tax positions of the current year	3,641
Additions for tax positions of prior years	10,239
Statute expirations	(1,812)
Balance at May 31, 2019	48,715
Additions for tax positions of the current year	3,976
Additions for tax positions of prior years	4,325
Settlements	(5,473)
Statute expirations	(6,873)
Balance at May 31, 2020	$	44,670