Income Taxes

12 Months Ended

Feb. 28, 2013

Income Taxes [Abstract]

Income Taxes

(12) Income Taxes

The following table represents components of the provision for income taxes for fiscal years ended (in thousands):

	2013		2012		2011
Current:
Federal	$	10,316	$	12,650	$	18,167
State and local		2,205		2,575		3,535
Foreign		168		1,985		866
Total current		12,689		17,210		22,568
Deferred:
Federal		803		794		2,085
State and local		411		18		133
Total deferred		1,214		812		2,218
Total provision for income taxes	$	13,903	$	18,022	$	24,786

The Company’s effective tax rate on earnings from operations for the year ended February 28, 2013, was 36.0%, as compared with a 36.5% and 35.7% in 2012 and 2011, respectively. The following summary reconciles the statutory U.S. Federal income tax rate to the Company’s effective tax rate for the fiscal years ended:

	2013			2012			2011
Statutory rate		35.0	%		35.0	%		35.0	%
Provision for state income taxes, net of Federal income tax benefit		3.7			3.5			3.1
Domestic production activities deduction		(2.9	)		(2.6	)		(3.0	)
Other		0.2			0.6			0.6
		36.0	%		36.5	%		35.7	%

Included in other assets on the balance sheet is approximately $2,800,000 of refund receivable related to amended Canadian tax returns for 2006-2008.

Deferred taxes are recorded to give recognition to temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The tax effects of these temporary differences are recorded as deferred tax assets and deferred tax liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in future years. Deferred tax liabilities generally represent items that have been deducted for tax purposes, but have not yet been recorded in the consolidated statements of earnings. To the extent there are deferred tax assets that are more likely than not to be realized, a valuation allowance would not be recorded. The components of deferred income tax assets and liabilities are summarized as follows (in thousands) for fiscal years ended:

	2013			2012
Current deferred tax assets related to:
Allowance for doubtful receivables	$	1,527		$	1,683
Inventories		2,522			1,952
Employee compensation and benefits		1,770			1,667
Other		1			191
	$	5,820		$	5,493
Noncurrent deferred tax (liabilities) assets related to:
Property, plant and equipment	$	(4,802	)	$	(4,362	)
Goodwill and other intangible assets		(23,451	)		(22,280	)
Pension and noncurrent employee compensation benefits		4,987			4,101
Net operating loss and foreign tax credits		201			285
Property tax		(554	)		(506	)
Currency exchange		(357	)		(633	)
Stock options exercised		798			382
Other		(6	)		(16	)
	$	(23,184	)	$	(23,029	)

The Company maintained a valuation allowance of approximately $250,000 to adjust the basis of net deferred taxes as of February 28, 2011. In fiscal year 2012, the Company determined it would be able to utilize certain credits and carry forwards and released the valuation reserve. Included in other non-current deferred tax liability (asset) are currency exchange, stock options exercised, and the valuation allowance. The Company has federal net operating loss carry forwards of approximately $562,000 and state net operating loss carry forwards of approximately $70,000 expiring in fiscal years 2025 through 2033. Based on historical earnings, management believes it will be able to fully utilize the net operating loss carry forwards.

Accounting standards require a two-step approach to determine how to recognize tax benefits in the financial statements where recognition and measurement of a tax benefit must be evaluated separately. A tax benefit will be recognized only if it meets a “more-likely-than-not” recognition threshold. For tax positions that meet this threshold, the tax benefit recognized is based on the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with the taxing authority.

Unrecognized tax benefits, including accrued interest and penalties, at fiscal year-end 2013 and 2012 of $96,000 and $337,000, respectively, related to uncertain tax positions are included in other liabilities on the consolidated balance sheets and would impact the effective rate if recognized. For fiscal year 2013, the unrecognized tax benefit includes an aggregate of $5,000 of interest expense. Approximately $30,000 of unrecognized tax benefits relate to items that are affected by expiring statutes of limitations within the next 12 months. A reconciliation of the change in the unrecognized tax benefits for fiscal years ended 2013 and 2012 is as follows (in thousands):

	2013			2012
Balance at beginning of year	$	337		$	141
Additions (reductions) based on tax positions related to the current year		(211	)		243
Reductions due to lapses of statutes of limitations		(30	)		(47	)
Balance at end of year	$	96		$	337

The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions and foreign tax jurisdictions. The Company has concluded all U.S. federal income tax matters for years through 2008. All material state and local income tax matters have been concluded for years through 2007 and foreign tax jurisdictions through 2008.

The Company recognizes interest expense on underpayments of income taxes and accrued penalties related to unrecognized non-current tax benefits as part of the income tax provision. Other than amounts included in the unrecognized tax benefits, the Company did not recognize any interest or penalties for the fiscal years ended 2013, 2012 and 2011.