Income Taxes (Tables)

12 Months Ended

May 31, 2012

Earnings before Income Taxes

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

(in thousands)	2012		2011		2010
United States based operations	$	162,285	$	166,137	$	73,122
Non – United States based operations		14,972		16,393		5,035
Earnings before income taxes		177,257		182,530		78,157
Less: Net earnings attributable to noncontrolling interests*		9,758		8,968		6,266
Earnings before income taxes attributable to controlling interest	$	167,499	$	173,562	$	71,891

* Net earnings attributable to noncontrolling interest 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)	2012			2011			2010
Current
Federal	$	47,543		$	47,698		$	30,080
State and local		2,756			1,246			1,333
Foreign		830			2,070			1,347
		51,129			51,014			32,760
Deferred
Federal		67			3,950			(6,804	)
State and local		(69	)		3,599			1,399
Foreign		777			(67	)		(705	)
		775			7,482			(6,110	)
	$	51,904		$	58,496		$	26,650

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:

	2012			2011			2010
Federal statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		1.7			1.8			(1.5	)
Change in state and local valuation allowances		(0.1	)		1.0			5.0
Change in income tax accruals for resolution of tax audits		-			0.2			1.9
Non-U.S. income taxes at other than 35%		(2.2	)		(2.2	)		(1.6	)
Qualified production activities deduction		(2.8	)		(1.9	)		(2.1	)
Other		(0.6	)		(0.2	)		0.4
Effective tax rate attributable to controlling interest		31.0	%		33.7	%		37.1	%

Reconciliation of Unrecognized Tax Benefits

A tabular reconciliation of unrecognized tax benefits follows:

(In thousands)
Balance at June 1, 2011	$	5,381
Increases - tax positions taken in prior years		961
Decreases – tax positions taken in prior years		(540	)
Increases (decreases) – current tax positions		-
Settlements		(683	)
Lapse of statutes of limitations		(709	)
Balance at May 31, 2012	$	4,410

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 – 2008 and forward

U.S. State and Local – 2005 and forward

Austria – 2006 and forward

Canada – 2008 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)	2012			2011
Deferred tax assets
Accounts receivable	$	1,640		$	1,870
Inventories		5,323			5,932
Accrued expenses		30,403			29,227
Net operating and capital loss carry forwards		21,664			22,501
Tax credit carry forwards		1,044			1,265
Stock-based compensation		10,771			7,187
Derivative contracts		5,134			3,761
Other		12			7
Total deferred tax assets		75,991			71,750
Valuation allowance for deferred tax assets		(22,025	)		(22,292	)
Net deferred tax assets		53,966			49,458
Deferred tax liabilities
Property, plant and equipment		(60,373	)		(58,606	)
Undistributed earnings of unconsolidated affiliates		(45,159	)		(43,947	)
Other		(666	)		(583	)
Total deferred tax liabilities		(106,198	)		(103,136	)
Net deferred tax liabilities	$	(52,232	)	$	(53,678	)

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)	2012			2011
Current assets:
Deferred income taxes	$	20,906		$	28,297
Other assets:
Deferred income taxes		-			2,006
Current liabilities:
Other accrued items		(39	)		-
Noncurrent liabilities:
Deferred income taxes		(73,099	)		(83,981	)
Net deferred tax liabilities	$	(52,232	)	$	(53,678	)