Income Taxes (Tables)

12 Months Ended

May 31, 2017

Earnings before Income Taxes

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

(in thousands)	2017		2016		2015
United States based operations	$	266,222	$	180,467	$	104,732
Non – United States based operations		30,905		36,148		8,296
Earnings before income taxes		297,127		216,615		113,028
Less: Net earnings attributable to noncontrolling interests*		13,422		13,913		10,471
Earnings before income taxes attributable to controlling interest	$	283,705	$	202,702	$	102,557

* 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 fiscal years ended May 31 were as follows:

(in thousands)	2017			2016			2015
Current
Federal	$	50,200		$	42,837		$	57,511
State and local		2,954			2,157			2,731
Foreign		7,593			6,639			5,490
		60,747			51,633			65,732
Deferred
Federal		18,177			7,584			(37,839	)
State and local		476			934			(754	)
Foreign		(210	)		(1,164	)		(1,367	)
		18,443			7,354			(39,960	)
	$	79,190		$	58,987		$	25,772

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:

	2017			2016			2015
Federal statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		1.8			2.6			3.0
Change in state and local valuation allowances		(0.3	)		(1.1	)		(1.1	)
Non-U.S. income taxes at other than 35%		(2.1	)		(3.5	)		(0.7	)
Change in Non-U.S. valuation allowances		0.7			0.5			1.2
Qualified production activities deduction		(1.9	)		(2.2	)		(5.9	)
Research & development credits		(0.1	)		(0.2	)		(0.2	)
Benefit related to foreign tax credits		(0.5	)		-			(5.3	)
Excess benefit related to share-based payment awards		(5.7	)		(1.6	)		-
Other		1.0			(0.4	)		(0.9	)
Effective tax rate attributable to controlling interest		27.9	%		29.1	%		25.1	%

Reconciliation of Unrecognized Tax Benefits

A tabular reconciliation of unrecognized tax benefits follows:

(In thousands)
Balance at May 31, 2016	$	2,827
Decreases – tax positions taken in prior years		(206	)
Increases – current tax positions		617
Settlements		(227	)
Lapse of statutes of limitations		(36	)
Balance at May 31, 2017	$	2,975

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 –2014 and forward

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

Canada – 2013 and forward

Mexico – 2011 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)	2017			2016
Deferred tax assets
Accounts receivable	$	2,157		$	2,786
Inventories		6,624			6,418
Accrued expenses		30,065			34,035
Net operating loss carry forwards		13,256			12,756
Tax credit carry forwards		3,206			3,127
Stock-based compensation		17,668			22,452
Other		205			210
Total deferred tax assets		73,181			81,784
Valuation allowance for deferred tax assets		(12,987	)		(11,796	)
Net deferred tax assets		60,194			69,988
Deferred tax liabilities
Property, plant and equipment		(42,599	)		(35,521	)
Investment in affiliated companies, principally due to undistributed earnings		(46,001	)		(42,967	)
Derivative contracts		(1,745	)		(6,395	)
Other		(4,149	)		(2,484	)
Total deferred tax liabilities		(94,494	)		(87,367	)
Net deferred tax liability	$	(34,300	)	$	(17,379	)