4.	Income Taxes

The income tax provision includes the following:

	Fiscal Year
	2017			2016			2015

Current:
Federal	$	(532	)	$	10,118		$	-
State and local		(40	)		(120	)		(39	)
Foreign		3,083			3,883			5,601
		2,511			13,881			5,562

Deferred:
Federal		(369	)		(11,273	)		(2,238	)
State and local		(590	)		(205	)		(290	)
Foreign		(574	)		66			(287	)
		(1,533	)		(11,412	)		(2,815	)
	$	978		$	2,469		$	2,747

State income tax benefits from loss carryforwards to future years were recognized as deferred tax assets in the

2017,

2016

and

2015

fiscal years.

The Company continuously evaluates the liquidity and capital requirements of its operations in the United States and of its foreign subsidiaries. As a result of such evaluations, the Company repatriated

$6,800,

$61,000

and

in cash from Nelco Products Pte Ltd. in the

2017,

2016

and

2015

fiscal years, respectively.

The Company’s pre-tax earnings from the United States and foreign locations are as follows:

	Fiscal Year
	2017			2016			2015

United States	$	(4,742	)	$	(3,331	)	$	(6,704	)
Foreign		15,003			23,829			29,494
Earnings before income taxes	$	10,261		$	20,498		$	22,790

The Company’s effective income tax rate differs from the statutory U.S. Federal income tax rate as a result of the following:

	Fiscal Year
	2017			2016			2015

Statutory U.S. Federal tax rate		34.0	%		35.0	%		34.0	%
State and local taxes, net of Federal benefit		2.4	%		1.2	%		(1.1	%)
Foreign tax rate differentials		(24.4	%)		(21.0	%)		(22.2	%)
Valuation allowance on deferred tax assets		(5.3	%)		(0.2	%)		0.6	%
Adjustment on tax accruals		6.8	%		3.3	%		1.3	%
Foreign tax credits		(3.3	%)		(1.1	%)		(0.5	%)
Deferred tax liability on undistributed foreign earnings		(3.4	%)		(4.5	%)		-
Permanent differences and other		2.7	%		(0.7	%)		-
		9.5	%		12.0	%		12.1	%

The Company had federal net operating loss carryforwards of

in the

2017

and

2016

fiscal years, state net operating loss carryforwards of approximately

$16,343

and

$10,083

in the

2017

and

2016

fiscal years, respectively, and total net foreign operating loss carryforwards of approximately

$30,647

and

$30,871

in the

2017

and

2016

fiscal years, respectively. The foreign net operating loss carryforwards were not utilized in the

2016

fiscal year and the Company has set up a valuation allowance for such carryforwards. The state net operating loss carryforwards will expire in

2018

through

2037.

The Company had foreign tax credit carryforwards of

$258

and

$524

February

26,

2017

and

February

28,

2016,

respectively, which expire in

2027.

As of

February

26,

2017

and

February

28,

2016,

research and development and other credits were

$47

and

$0,

respectively.

The Company had New York State investment tax credit carryforwards of

and

$478

in the

2017

and

2016

fiscal years, respectively. The New York State investment tax credits expired in fiscal year

2017.

The Company had Kansas tax credits of

$225

in both fiscal years

2017

and

2016,

for which no benefit has been provided. The Company does not believe that realization of the principal portion of the Kansas tax credit or the investment tax credit carryforward is more likely than not. The Kansas credits do not have expiration dates. The Company had Arizona tax credits of

$135

in both fiscal years

2017

and

2016,

for which no benefit has been provided.

The deferred tax asset valuation allowance of

$10,571

as of

February

26,

2017

relates to foreign net operating losses and state tax credit carryforwards for which the Company does not expect to realize any tax benefit. During the

2017

fiscal year, the valuation allowance decreased by

$544

primarily due to the expiration of the New York State investment tax credit carryforwards for which no tax benefit was recognized. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

Significant components of the Company's deferred tax assets and liabilities as of

February

26,

2017

and

February

28,

2016

were as follows:

	February 26,			February 28,
	2017			2016

Deferred tax assets:
Depreciation and amortization	$	3,740		$	3,761
Net operating loss carryforwards		11,049			10,800
Tax credits carryforward		677			1,363
Stock options		1,865			1,925
Other, net		282			578
		17,613			18,427
Valuation allowance on deferred tax assets		(10,571	)		(11,115	)
Total deferred tax assets, net of valuation allowance		7,042			7,312
Deferred tax liabilities:
Depreciation		(572	)		(526	)
Undistributed earnings		(47,509	)		(48,865	)
Other		(781	)		(1,281	)
Total deferred tax liabilities		(48,862	)		(50,672	)
Net deferred tax liability	$	(41,820	)	$	(43,360	)

On the Consolidated Balance Sheets, the deferred tax asset, net of valuation allowance, of

$268

February

26,

2017

was included in other assets and the deferred tax asset, net of valuation allowance, of

$584

February

28,

2016

was included in prepaid expenses and other current assets.

February

26,

2017

and

February

28,

2016,

the Company had gross unrecognized tax benefits of

$1,041

and

$1,295,

respectively, included in other liabilities. If any portion of the unrecognized tax benefits at

February

26,

2017

were recognized, the Company’s effective tax rate would change.

As discussed in Note

16,

February

28,

2016

the Company early adopted Accounting Standards Update

2015

Income Taxes (Topic

740):

Balance Sheet Classification of Deferred Taxes

on a prospective basis. The early adoption of this guidance did not impact the Company’s results of operations, cash flows or financial condition.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	Unrecognized Tax Benefits
	February 26,			February 28,			March 1,
	2017			2016			2015

Balance, beginning of year	$	1,255		$	1,135		$	276
Gross decreases-tax positions in prior period		(293	)		-			(21	)
Gross increases-current period tax positions		274			271			880
Audit settlements		(42	)		(57	)		-
Lapse of statute of limitations		(170	)		(94	)		-
Balance, end of year	$	1,024		$	1,255		$	1,135

The amount of unrecognized tax benefits

may

increase or decrease in the future for various reasons, including adding or subtracting amounts for current year tax positions, expiration of statutes of limitations on open income tax years, changes in the Company’s judgment about the level of uncertainty, status of tax examinations, and legislative changes. Changes in prior period tax positions are the result of a re-evaluation of the probability of realizing the benefit of a particular tax position based on new information. It is reasonably possible that none of the unrecognized tax benefits will be recognized in the

2018

fiscal year upon the expiration of statutes of limitations.

A list of open tax years by major jurisdiction follows:

California	2014	-	2017
New York	2012	-	2017
France	2014	-	2017
Singapore	2013	-	2017

The Company had approximately

$16

and

$51

of accrued interest and penalties as of

February

26,

2017

and

February

28,

2016,

respectively. The Company’s policy is to include applicable interest and penalties related to unrecognized tax benefits as a component of current income tax expense.

The New York State Department of Taxation is examining the Company’s tax returns for the

2012,

2013,

2014

and

2015

fiscal years.