| 6. | Income Taxes |
The provision for income taxes consisted of the following:
| Year ended May 31 | ||||||||||||
| (In thousands) | 2013 | 2012 | 2011 | |||||||||
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Current: |
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U.S. Taxes |
$ | 12,959 | $ | 9,520 | $ | 9,336 | ||||||
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Foreign |
854 | 587 | 811 | |||||||||
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Deferred |
287 | 1,343 | 2,253 | |||||||||
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| $ | 14,100 | $ | 11,450 | $ | 12,400 | |||||||
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Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income tax liabilities and assets are as follows:
| May 31 | ||||||||
| (In thousands) | 2013 | 2012 | ||||||
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Deferred income tax liabilities |
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Indefinite and long-lived assets |
$ | (13,953 | ) | $ | (11,238 | ) | ||
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Prepaids |
(333 | ) | (365 | ) | ||||
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| (14,286 | ) | (11,603 | ) | |||||
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Deferred income tax assets |
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Inventories and accounts receivable |
1,228 | 1,149 | ||||||
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Acquired net operating loss carry forwards |
0 | 19 | ||||||
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Accrued liabilities and other |
2,071 | 1,789 | ||||||
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| 3,299 | 2,957 | |||||||
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Net deferred income tax liabilities |
$ | (10,987 | ) | $ | (8,646 | ) | ||
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The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense is as follows:
| Year ended May 31 | ||||||||||||
| (In thousands) | 2013 | 2012 | 2011 | |||||||||
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Tax at U.S. statutory rates |
$ | 14,400 | $ | 11,900 | $ | 12,300 | ||||||
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Tax credits and other |
(980 | ) | (755 | ) | (145 | ) | ||||||
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Provisions for state income taxes, net of federal benefit |
680 | 305 | 245 | |||||||||
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| $ | 14,100 | $ | 11,450 | $ | 12,400 | |||||||
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At the end of 2011, the Company was under audit by the Internal Revenue Service for its 2009 fiscal year; in 2012 this audit was expanded to include the 2010 fiscal year as well. The audit concluded in late 2012 with a slight favorable adjustment; thus, amounts totaling $550,000 which had been reserved as uncertain tax positions were reversed in the fourth quarter of 2012, resulting in an effective tax rate of 33.7% for 2012. Absent this adjustment, the Company’s 2012 tax rate would have been 35.5%, compared to 34.3% in 2013 and 35.2% in 2011.
The Company has no significant accrual for unrecognized tax benefits at May 31, 2013. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, such accruals will be reflected within income tax accounts. For the majority of tax jurisdictions, the Company is no longer subject to U.S. Federal, State and local or non U.S. income tax examinations by tax authorities for fiscal years before 2010.