Income Taxes

12 Months Ended

Feb. 29, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Earnings before income taxes consisted of the following:

(In thousands)	2020			2019			2018
United States	$	97,297		$	60,042		$	111,980
International	(17,547		)	(1,380		)	(2,100		)
Earnings before income taxes	$	79,750		$	58,662		$	109,880

The components of income tax expense (benefit) for each of the last three fiscal years was:

(In thousands)	2020			2019			2018
Current
Federal	$	8,493		$	22,746		$	22,074
State and local	2,064			(4,437		)	3,106
International	(2,720		)	(459		)	1,578
Total current	7,837			17,850			26,758
Deferred
Federal	9,513			(12,409		)	4,049
State and local	2,152			6,275			351
International	(1,202		)	628			(1,205		)
Total deferred	10,463			(5,506		)	3,195
Total non-current tax (benefit) expense	(464		)	624			439
Total income tax expense	$	17,836		$	12,968		$	30,392

Income tax payments, net of refunds, were $17.8 million, $16.5 million and $25.7 million in fiscal 2020, 2019 and 2018, respectively.

The following table provides a reconciliation of the statutory federal income tax rate to our consolidated effective tax rates:

	2020		2019		2018
Statutory federal income tax rate	21.0	%	21.0	%	32.7	%
Tax rate change revaluation	—		—		(3.7	)
Manufacturing deduction	—		—		(2.2	)
State and local income taxes, net of federal tax benefit	4.0		2.7		1.8
Foreign tax rate differential	(0.3	)	0.8		(0.7	)
Tax credits - research & development	(1.6	)	(2.7	)	(0.9	)
Other, net	(0.7	)	0.3		0.7
Consolidated effective income tax rate	22.4	%	22.1	%	27.7	%

The estimated effective tax rate for fiscal 2019 declined 5.6 percentage points from fiscal 2018 primarily due to the reduced Federal rate under the U.S. Tax Cuts and Jobs Act ("the Act"), which was enacted in December 2017.

Deferred tax assets and deferred tax liabilities at February 29, 2020 and March 2, 2019 were:

(In thousands)	2020			2019
Deferred tax assets
Accrued expenses	$	15,832		$	13,530
Deferred compensation	7,934			9,007
Liability for unrecognized tax benefits	1,941			2,547
Unearned income	5,238			4,557
Operating lease liabilities	6,640			—
Net operating losses and tax credits	11,093			9,913
Other	1,502			1,550
Total deferred tax assets	50,180			41,104
Less: valuation allowance	(8,727		)	(8,546		)
Deferred tax assets, net of valuation allowance	41,453			32,558
Deferred tax liabilities
Goodwill and other intangibles	8,166			5,151
Depreciation	32,296			24,289
Operating lease, right-of-use assets	6,666			—
Total deferred tax liabilities	47,128			29,440
Net deferred tax (liabilities) assets	$	(5,675	)	$	3,118

The Company has U.S. federal tax credits as well as state net operating loss carryforwards with a tax effect of $11.1 million. A valuation allowance of $8.7 million has been established for these net operating loss carryforwards due to the uncertainty of the use of the tax benefits in future periods.

The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, Canada, Brazil and other international jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years prior to fiscal 2017, or state and local income tax examinations for years prior to fiscal 2013. The Company is not currently under U.S. federal examination for years subsequent to fiscal year 2016, and there is very limited audit activity of the Company’s income tax returns in U.S. state jurisdictions or international jurisdictions.

The Company considers the earnings of its non-U.S. subsidiaries to be indefinitely invested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and specific plans for reinvestment of those subsidiary earnings. Should the Company decide to repatriate the foreign earnings, it would need to adjust the income tax provision in the period it was determined that the earnings will no longer be indefinitely invested outside the U.S.

If we were to prevail on all unrecognized tax benefits recorded, $2.6 million, $3.1 million and $2.4 million for fiscal 2020, 2019 and 2018, respectively, would benefit the effective tax rate. Also included in the balance of unrecognized tax benefits for fiscal 2020, 2019 and 2018, are $1.5 million, $2.0 million and $2.3 million, respectively, of tax benefits that, if recognized, would result in adjustments to deferred taxes.

Penalties and interest related to unrecognized tax benefits are recorded in income tax expense. For fiscal 2020 and 2019, we accrued penalties and interest related to unrecognized tax benefits of $0.3 million. For fiscal 2018, the accrual was $0.4 million.

The following table provides a reconciliation of the total amounts of gross unrecognized tax benefits:

(In thousands)	2020			2019			2018
Gross unrecognized tax benefits at beginning of year	$	5,111		$	4,705		$	4,075
Gross increases in tax positions for prior years	82			500			614
Gross decreases in tax positions for prior years	(1,100		)	(377		)	(122		)
Gross increases based on tax positions related to the current year	425			1,067			639
Settlements	(15		)	(303		)	—
Statute of limitations expiration	(432		)	(481		)	(519		)
Revaluation impact	—			—			18
Gross unrecognized tax benefits at end of year	$	4,071		$	5,111		$	4,705

The total liability for unrecognized tax benefits is expected to decrease by approximately $0.4 million during fiscal 2021 due to lapsing of statutes.