Income Taxes (Tables)

12 Months Ended

May 31, 2014

Earnings before Income Taxes

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

(in thousands)	2014		2013		2012
United States based operations	$	210,783	$	190,942	$	162,285
Non – United States based operations		6,718		10,358		14,972
Earnings before income taxes		217,501		201,300		177,257
Less: Net earnings attributable to non-controlling interests*		8,852		393		9,758
Earnings before income taxes attributable to controlling interest	$	208,649	$	200,907	$	167,499

* Net earnings attributable to non-controlling 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)	2014			2013			2012
Current
Federal		73,149		$	54,427		$	47,543
State and local		3,537			4,109			2,756
Foreign		6,579			4,131			830
		83,265			62,667			51,129
Deferred
Federal		(25,453	)		4,698			67
State and local		(1,194	)		(2,170	)		(69	)
Foreign		731			(730	)		777
		(25,916	)		1,798			775
	$	57,349		$	64,465		$	51,904

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:

	2014			2013			2012
Federal statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		2.0			2.3			1.7
Change in state and local valuation allowances		(0.9	)		(1.3	)		(0.1	)
Non-U.S. income taxes at other than 35%		(1.0	)		(1.7	)		(2.4	)
Change in Non-U.S. valuation allowances		1.4			1.1			0.2
Qualified production activities deduction		(3.9	)		(3.0	)		(2.8	)
Acquisition of an additional 10% interest in TWB		(3.4	)		(0.0	)		(0.0	)
Research & development credits		(1.1	)		(0.1	)		(0.0	)
Tax write-off of investment in foreign subsidiary		(1.1	)		(0.0	)		(0.0	)
Other		0.5			(0.2	)		(0.6	)
Effective tax rate attributable to controlling interest		27.5	%		32.1	%		31.0	%

Reconciliation of Unrecognized Tax Benefits

A tabular reconciliation of unrecognized tax benefits follows:

(In thousands)
Balance at June 1, 2013	$	3,705
Increases – tax positions taken in prior years		609
Increases – current tax positions		635
Settlements		(346	)
Lapse of statutes of limitations		(493	)
Balance at May 31, 2014	$	4,110

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 – 2011 and forward

U.S. State and Local – 2008 and forward

Austria – 2009 and forward

Canada – 2010 and forward

Mexico – 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)	2014			2013
Deferred tax assets
Accounts receivable	$	2,400		$	1,602
Inventories		7,210			4,840
Accrued expenses		40,873			36,547
Net operating and capital loss carry forwards		19,302			20,369
Tax credit carry forwards		203			1,595
Stock-based compensation		12,573			10,405
Derivative contracts		1,838			3,047
Other		541			7
Total deferred tax assets		84,940			78,412
Valuation allowance for deferred tax assets		(21,701	)		(21,863	)
Net deferred tax assets		63,239			56,549
Deferred tax liabilities
Property, plant and equipment		(67,472	)		(76,079	)
Undistributed earnings of unconsolidated affiliates		(39,429	)		(47,606	)
Other		(3,395	)		(61	)
Total deferred tax liabilities		(110,296	)		(123,746	)
Net deferred tax liabilities	$	(47,057	)	$	(67,197	)

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)	2014			2013
Current assets:
Deferred income taxes	$	24,272		$	21,928
Noncurrent assets:
Other assets		4			276
Noncurrent liabilities:
Deferred income taxes		(71,333	)		(89,401	)
Net deferred tax liabilities	$	(47,057	)	$	(67,197	)