Taxes on Income

12 Months Ended

Feb. 29, 2012

Taxes on Income [Abstract]

Taxes on Income

Note 9. Taxes on Income

Provision for income taxes in the consolidated statements of income consisted of the following components (in thousands):

	Fiscal Year Ended
	February 29, 2012		February 28, 2011
Current:
Federal	$	484	$	1,021
State		391		135
		875		1,156
Deferred:
Federal		781		140
State		117		21
		898		161
Total	$	1,773	$	1,317

Income before provision for taxes consisted of the following (in thousands):

	Fiscal Year Ended
	February 29, 2012		February 28, 2011
U.S. operations	$	5,350	$	3,718
Foreign operations		—		—
	$	5,350	$	3,718

The provision for income taxes differs from the amount computed by applying the federal statutory rate of 34% to income before income taxes as follows (in thousands):

	Fiscal Year Ended
	February 29, 2012			February 28, 2011
Statutory U.S. federal income tax rate	$	1,819		$	1,264
State income taxes, net of federal benefit		212			147
Research and experimentation credits		(128	)		(141	)
Deferred tax rate change		—			144
Non-deductible expenses		14			26
Domestic production activities deduction		(145	)		(102	)
Other		1			(21	)
Taxes at effective income tax rate	$	1,773		$	1,317

The effective tax rate for fiscal 2012 was 33.1% compared to 35.4% for fiscal 2011. The lower effective rate in 2012 than the effective rate in 2011 was primarily due to research and experimentation credits, the domestic production activities deduction and various other permanent items.

Deferred income taxes as of February 29, 2012 and February 28, 2011 reflect the net 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 and certain tax loss carry forwards.

The sources of the temporary differences and carry forwards, and their effect on the net deferred tax asset consisted of the following (in thousands):

	Fiscal Year Ended
	February 29, 2012			February 28, 2011
Deferred tax assets:
Uniform capitalization costs	$	410		$	427
Inventory reserves		1,203			1,889
Accrued liabilities		465			503
Allowance for doubtful accounts		65			71
Amortization of intangibles		624			651
		2,767			3,541
State net operating loss carry-forward		106			1
Foreign tax credit carry-forward		99			99
Deferred tax liabilities:
Basis difference of property, plant and equipment		(329	)		(110	)
Other		(59	)		(49	)
Net deferred tax assets	$	2,584		$	3,482
Current asset	$	1,936		$	2,659
Non-current asset		648			823
	$	2,584		$	3,482

Undistributed earnings of the Company’s foreign subsidiary have been considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the foreign country. The Company closed the foreign subsidiary and has determined the tax liability to be immaterial.