Income Taxes (Tables)

12 Months Ended

May 31, 2014

Income (Loss) before Income Taxes

Income (loss) before income taxes as shown in the Consolidated Statements of Income is summarized below for the periods indicated. Certain foreign operations are branches of RPM International Inc.’s subsidiaries and are therefore subject to income taxes in both the United States and the respective foreign jurisdictions. Accordingly, the provision (benefit) for income taxes by jurisdiction and the income (loss) before income taxes by jurisdiction may not be directly related.

Year Ended May 31,	2014		2013		2012
(In thousands)
United States	$	209,626	$	5,104	$	187,687
Foreign		214,861		171,787		140,602
Income Before Income Taxes	$	424,487	$	176,891	$	328,289

Provision (Benefit) for Income Tax

Provision (benefit) for income taxes consists of the following for the periods indicated:

Year Ended May 31,	2014			2013			2012
(In thousands)
Current:
U.S. Federal	$	46,846		$	56,590		$	45,547
State and local		5,660			6,694			6,836
Foreign		59,425			44,747			49,231
Total Current		111,931			108,031			101,614
Deferred:
U.S. Federal		16,747			(31,987	)		(787	)
State and local		1,292			(3,649	)		(572	)
Foreign		(11,467	)		(5,355	)		(5,729	)

Total Deferred		6,572		(40,991	)		(7,088	)
Provision for Income Taxes	$	118,503	$	67,040		$	94,526

Significant Components of Deferred Income Tax Assets and Liabilities

The significant components of deferred income tax assets and liabilities as of May 31, 2014 and 2013 were as follows:

	2014			2013
(In thousands)
Deferred income tax assets related to:
Inventories	$	6,944		$	6,795
Allowance for losses		6,410			7,584
Accrued compensation and benefits		102,579			113,394
Accrued other expenses		10,256			16,322
Other long-term liabilities		19,646			29,954
Net operating loss and credit carryforwards		71,534			70,208
Net unrealized loss on securities		19,185			21,727
Total Deferred Income Tax Assets		236,554			265,984
Less: valuation allowances		(85,719	)		(89,909	)
Net Deferred Income Tax Assets		150,835			176,075
Deferred income tax (liabilities) related to:
Depreciation		(47,639	)		(48,491	)
Pension and other postretirement benefits		(7,867	)		(12,204	)
Amortization of intangibles		(115,166	)		(125,042	)
Total Deferred Income Tax (Liabilities)		(170,672	)		(185,737	)
Deferred Income Tax Assets (Liabilities), Net	$	(19,837	)	$	(9,662	)

Reconciliation of Income Tax Expense (Benefit) Computed by Applying U.S. Statutory Federal Income Tax Rate against Income (Loss) before Income Taxes to Provision (Benefit) for Income Taxes

The following table reconciles income tax expense (benefit) computed by applying the U.S. statutory federal income tax rate against income (loss) before income taxes to the provision (benefit) for income taxes:

Year Ended May 31,	2014			2013			2012
(In thousands)
Income tax expense (benefit) at the U.S. statutory federal income tax rate	$	148,570		$	61,912		$	114,901
Impact of foreign operations		(24,874	)		(11,552	)		(32,192	)
State and local income taxes net of federal income tax benefit		4,519			1,979			4,073
Tax benefits from the domestic manufacturing deduction		(4,878	)		(4,489	)		(3,744	)
Nondeductible fines and penalties		(2,002	)		4,802			—
Nondeductible business expense		1,508			1,269			1,304
Valuation allowance		(2,998	)		14,729			9,353
Other		(1,342	)		(1,610	)		831
Provision for Income Tax Expense	$	118,503		$	67,040		$	94,526
Effective Income Tax Rate		27.9	%		37.9	%		28.8	%

Activity Related to Unrecognized Tax Benefits

Uncertain income tax positions are accounted for in accordance with ASC 740. The following table summarizes the activity related to unrecognized tax benefits:

(In millions)	2014			2013			2012
Balance at June 1	$	8.4		$	3.3		$	6.4
Additions based on tax positions related to current year		0.1			—			—
Additions for tax positions of prior years		8.9			6.0			0.5
Reductions for tax positions of prior years		(1.7	)		(0.9	)		(0.4	)
Settlements		—			—			(3.2	)
Balance at May 31	$	15.7		$	8.4		$	3.3