Income Taxes (Tables)

12 Months Ended

May 31, 2016

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,	2016		2015		2014
(In thousands)
United States	$	310,695	$	273,278	$	209,626
Foreign		172,771		179,975		214,861
Income Before Income Taxes	$	483,466	$	453,253	$	424,487

Provision (Benefit) for Income Tax

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

Year Ended May 31,	2016			2015			2014
(In thousands)
Current:
U.S. Federal	$	75,200		$	77,374		$	46,846
State and local		6,230			4,876			5,660
Foreign		35,179			45,173			59,425
Total Current		116,609			127,423			111,931
Deferred:
U.S. Federal		17,625			97,112			16,747
State and local		1,907			1,494			1,292
Foreign		(10,133	)		(1,104	)		(11,467	)
Total Deferred		9,399			97,502			6,572
Provision for Income Taxes	$	126,008		$	224,925		$	118,503

Significant Components of Deferred Income Tax Assets and Liabilities

The significant components of deferred income tax assets and liabilities as of May 31, 2016 and 2015 were as follows:

	2016			2015
(In thousands)
Deferred income tax assets related to:
Inventories	$	12,894		$	8,530
Allowance for losses		11,014			8,575
Bankruptcy note liability		118,551			117,263
Accrued compensation and benefits		132,707			111,843
Accrued other expenses		20,310			15,932
Other long-term liabilities		20,570			21,911
Net operating loss and credit carryforwards		66,438			87,595
Net unrealized loss on securities		27,540			21,562
Total Deferred Income Tax Assets		410,024			393,211
Less: valuation allowances		(60,103	)		(68,043	)
Net Deferred Income Tax Assets		349,921			325,168
Deferred income tax (liabilities) related to:
Depreciation		(64,506	)		(56,636	)
Pension and other postretirement benefits		(17,975	)		(16,256	)
Amortization of intangibles		(198,940	)		(198,872	)
Unremitted foreign earnings		(98,520	)		(108,508	)
Total Deferred Income Tax (Liabilities)		(379,941	)		(380,272	)
Deferred Income Tax Assets (Liabilities), Net	$	(30,020	)	$	(55,104	)

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,	2016			2015			2014
(In thousands)
Income tax expense (benefit) at the U.S. statutory federal income tax rate	$	169,213		$	158,638		$	148,570
Impact of foreign operations		(29,969	)		(32,706	)		(27,374	)
State and local income taxes, net of federal income tax benefit		4,310			4,140			4,519
Tax benefits from the domestic manufacturing deduction		(8,030	)		-			(4,878	)
Nondeductible business expense		2,224			1,782			1,508
Valuation allowance		(3,357	)		(10,455	)		(2,998	)
Unremitted foreign earnings		(3,712	)		106,227			2,500
Non-taxable gain from joint venture remeasurement		(2,790	)		-			-
Other		(1,881	)		(2,701	)		(3,344	)
Provision for Income Tax Expense	$	126,008		$	224,925		$	118,503
Effective Income Tax Rate		26.1	%		49.6	%		27.9	%

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)	2016			2015			2014
Balance at June 1	$	12.9		$	15.7		$	8.4
Additions based on tax positions related to current year		0.3			-			0.1
Additions for tax positions of prior years		2.6			0.9			9.0
Reductions for tax positions of prior years		(1.4	)		(1.5	)		(1.3	)
Foreign currency translation		(0.7	)		(2.2	)		(0.5	)
Balance at May 31	$	13.7		$	12.9		$	15.7