Income Taxes

The components of income before the provision for income taxes are as follows:



	Year Ended			Year Ended			Year Ended
	February 29, 2016			February 28, 2015			February 28, 2014
Domestic Operations	$	(11,499	)	$	(3,278	)	$	(27,488	)
Foreign Operations	3,701			3,974			833
	$	(7,798	)	$	696		$	(26,655	)

The (benefit) provision for income taxes is comprised of the following:



	Year Ended			Year Ended			Year Ended
	February 29, 2016			February 28, 2015			February 28, 2014
Current provision (benefit)
Federal	$	(415	)	$	(5,337	)	$	5,210
State	10			(428		)	446
Foreign	3,530			4,722			2,923
Total current provision (benefit)	$	3,125		$	(1,043	)	$	8,579
Deferred (benefit) provision
Federal	$	(5,540	)	$	2,524		$	(5,235	)
State	1,395			765			(778		)
Foreign	(715		)	(608		)	(2,624		)
Total deferred (benefit) provision	$	(4,860	)	$	2,681		$	(8,637	)
Total (benefit) provision
Federal	$	(5,955	)	$	(2,813	)	$	(25	)
State	1,405			337			(332		)
Foreign	2,815			4,114			299
Total (benefit) provision	$	(1,735	)	$	1,638		$	(58	)

The effective tax rate before income taxes varies from the current statutory U.S. federal income tax rate as follows:



	Year Ended					Year Ended					Year Ended
	February 29, 2016					February 28, 2015					February 28, 2014
Tax provision at Federal statutory rates	$	(2,729	)	35.0	%	$	243		35.0	%	$	(9,329	)	35.0	%
State income taxes, net of Federal benefit	1,100			(14.0	)	891			127.9		126			(0.5	)
Change in valuation allowance	1,344			(17.2	)	4,330			622.0		868			(3.3	)
Change in tax reserves	101			(1.3	)	(6,076		)	(872.8	)	(387		)	1.5
Non-controlling interest	1,183			(15.2	)	—			—		—			—
Bargain purchase gain	(1,638		)	21		—			—		—			—
Worthless stock deduction	—			—		—			—		(2,664		)	10.0
Impairment of non-deductible goodwill	—			—		—			—		11,257			(42.2	)
US effects of foreign operations	(309		)	3.9		1,503			215.9		(828		)	3.1
Permanent differences and other	(442		)	5.7		(1,371		)	(196.9	)	2,016			(7.6	)
Venezuela TICC devaluation	—			—		2,486			357.1		—			—
Change in tax rate	172			(2.2	)	198			28.4		(614		)	2.3
Research & development credits	(453		)	5.8		(272		)	(39.1	)	(248		)	0.9
Tax credits	(64		)	0.8		(294		)	(42.2	)	(255		)	1.0
Effective tax rate	$	(1,735	)	22.3	%	$	1,638		235.3	%	$	(58	)	0.2	%

The U.S. effects of foreign operations include differences in the statutory tax rate of the foreign countries as compared to the statutory tax rate in the U.S. and foreign operating losses for which no tax benefit has been provided.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:



	February 29, 2016			February 28, 2015
Deferred tax assets:
Accounts receivable	$	388		$	223
Inventory	3,711			2,668
Property, plant and equipment	—			2,680
Accruals and reserves	3,849			798
Deferred compensation	1,424			2,480
Warranty reserves	2,373			2,270
Unrealized gains and losses	614			1,750
Partnership investments	—			695
Foreign and state operating losses	6,440			5,202
Foreign tax credits	2,712			1,502
Other tax credits	2,393			1,200
Deferred tax assets before valuation allowance	23,904			21,468
Less: valuation allowance	(12,341		)	(11,451		)
Total deferred tax assets	11,563			10,017
Deferred tax liabilities:
Property, plant and equipment	(1		)	—
Intangible assets	(38,543		)	(40,720		)
Partnership investments	(1,678		)	—
Prepaid expenses	(1,465		)	(1,970		)
Deferred financing fees	(227		)	(274		)
Total deferred tax liabilities	(41,914		)	(42,964		)
Net deferred tax liability	$	(30,351	)	$	(32,947	)

In assessing the realizability of deferred tax assets, Management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized. We consider the level of historical taxable income, scheduled reversal of temporary differences, tax planning strategies and projected future taxable income in determining whether a valuation allowance is warranted.

During Fiscal 2016, the Company concluded it could no longer realize its U.S. deferred tax asset on a more-likely-than-not basis. The Company recorded a valuation allowance against its U.S. deferred tax assets and maintains a valuation in certain foreign jurisdictions. The Company's valuation allowance increased by $890 during the year ended February 29, 2016, or which $1,344 was recorded within the provision for income taxes in the accompanying Consolidated Statement of Operations. Any decline in the valuation allowance could have a favorable impact on our income tax provision and net income in the period in which such determination is made.

As of February 29, 2016, the Company has not provided for U.S. federal and foreign withholding taxes of approximately $15,526 on its foreign subsidiaries, cumulative undistributed earnings in Germany as such earnings are indefinitely reinvested overseas. If these future earnings are repatriated to the United States, or if the Company determines that such earnings will be remitted in the foreseeable future, additional tax provisions may be required. Due to the complexities of the tax laws and the assumptions that would have to be made, it is not practicable to estimate the amounts of income tax provisions that may be required. The amount of unrecognized deferred tax liabilities for temporary differences related to investments in undistributed earnings is not practicable to determine at this time.

The Company has U.S. federal net operating losses of $21,443, which expire in Fiscal 2036 if not utilized. The Company has foreign tax credits of $2,328 which expire in tax year 2025 and 2026. The Company has various foreign net operating loss carryforwards, state net operating loss carryforwards, and state tax credits that expire in various years and amounts through tax year 2036.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:



Balance at February 28, 2013	$	11,463
Additions based on tax positions taken in the current and prior years	4,210
Settlements	(29		)
Lapse in statute of limitations	(77		)
Recognition of excess tax benefits	(1,002		)
Balance at February 28, 2014	$	14,565
Additions based on tax positions taken in the current and prior years	7,538
Settlements	(142		)
Decreases based on tax positions taken in the prior years	(6,562		)
Other	(824		)
Balance at February 28, 2015	$	14,575
Additions based on tax positions taken in the current and prior years	1,366
Settlements	—
Decreases based on tax positions taken in prior years	(915		)
Other	(554		)
Balance at February 29, 2016	$	14,472

Of the amounts reflected in the table above at February 29, 2016, $8,940, if recognized, would reduce our effective tax rate. The Company records accrued interest and penalties related to income tax matters in the provision for income taxes in the accompanying Consolidated Statement of Operations and Comprehensive Income (Loss). For the years ended February 29, 2016, February 28, 2015 and February 28, 2014, interest and penalties on unrecognized tax benefits were $23, $(166) and $39, respectively. The balance as of February 29, 2016 and February 28, 2015 was $648 and $626, respectively. We do not expect the unrecognized tax benefits to change significantly in the next 12 months.

The Company, or one of its subsidiaries, files its tax returns in the U.S. and certain state and foreign income tax jurisdictions with varying statutes of limitations. The earliest years' tax returns filed by the Company that are still subject to examination by the tax authorities in the major jurisdictions are as follows:



Jurisdiction		Tax Year

U.S.		2013
Netherlands		2012
Germany		2010