Income Taxes (Tables)

12 Months Ended

May 31, 2012

Schedule of Income before Income Tax, Domestic and Foreign

Income before income taxes is as follows:


	Year Ended May 31,
(In millions)	2012		2011		2010
Income before income taxes:
United States	$	792	$	1,084	$	699
Foreign		2,191		1,760		1,818
	$	2,983	$	2,844	$	2,517

Schedule of Components of Income Tax Expense (Benefit)

The provision for income taxes is as follows:


	Year Ended May 31,
(In millions)	2012			2011			2010
Current:
United States
Federal	$	274		$	289		$	200
State		51			57			50
Foreign		495			441			349
		820			787			599
Deferred:
United States
Federal		(54	)		(61	)		18
State		4			0			(1	)
Foreign		(10	)		(15	)		(6	)

		(60	)		(76	)		11
	$	760		$	711		$	610

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate follows:


	Year Ended May 31,
	2012			2011			2010
Federal income tax rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal benefit		1.3	%		1.3	%		1.3	%
Foreign earnings		-11.5	%		-10.5	%		-12.7	%
Other, net		0.7	%		-0.8	%		0.6	%
EFFECTIVE INCOME TAX RATE		25.5	%		25.0	%		24.2	%

Schedule of Deferred Tax Assets and Liabilities

Deferred tax assets and (liabilities) are comprised of the following:


	May 31,
(In millions)	2012			2011
Deferred tax assets:
Allowance for doubtful accounts	$	18		$	19
Inventories		40			63
Sales return reserves		85			72
Deferred compensation		177			152
Stock-based compensation		144			148
Reserves and accrued liabilities		68			66
Foreign loss carry-forwards		76			60
Foreign tax credit carry-forwards		216			236
Hedges		0			21
Undistributed earnings of foreign subsidiaries		82			0
Other		71			86
Total deferred tax assets		977			923
Valuation allowance		(81	)		(51	)
Total deferred tax assets after valuation allowance		896			872
Deferred tax liabilities:
Undistributed earnings of foreign subsidiaries		0			(40	)
Property, plant and equipment		(186	)		(151	)
Intangibles		(98	)		(97	)
Other		(21	)		(21	)
Total deferred tax liability		(305	)		(309	)
NET DEFERRED TAX ASSET	$	591		$	563

Unrecognized Tax Benefits Reconciliation

The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits, excluding interest and penalties:


	May 31,
(In millions)	2012			2011			2010
Unrecognized tax benefits, as of the beginning of the period	$	212		$	282		$	274
Gross increases related to prior period tax positions		48			13			87
Gross decreases related to prior period tax positions		(25	)		(98	)		(122	)
Gross increases related to current period tax positions		91			59			52
Gross decreases related to current period tax positions		(1	)		(6	)		0
Settlements		(20	)		(43	)		(3	)
Lapse of statute of limitations		(9	)		(8	)		(9	)
Changes due to currency translation		(11	)		13			3
UNRECOGNIZED TAX BENEFITS, AS OF THE END OF THE PERIOD	$	285		$	212		$	282

Summary of Operating Loss Carryforwards

The Company has available domestic and foreign loss carry-forwards of $247 million at May 31, 2012. Such losses, if not utilized, will expire as follows:


	Year Ending May 31,
(In millions)	2013		2014		2015		2016		2017- 2032		Indefinite		Total
Net Operating Losses	$	0		8		3		8		131		97	$	247

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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