Income Taxes

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



	Year Ended			Year Ended			Year Ended
	February 28, 2017			February 29, 2016			February 28, 2015
Domestic Operations	$	(10,956	)	$	(11,499	)	$	(3,278	)
Foreign Operations	9,513			3,701			3,974
	$	(1,443	)	$	(7,798	)	$	696

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



	Year Ended			Year Ended			Year Ended
	February 28, 2017			February 29, 2016			February 28, 2015
Current provision (benefit)
Federal	$	(2,118	)	$	(415	)	$	(5,337	)
State	238			10			(428		)
Foreign	3,520			3,530			4,722
Total current provision (benefit)	$	1,640		$	3,125		$	(1,043	)
Deferred provision (benefit)
Federal	$	658		$	(5,540	)	$	2,524
State	279			1,395			765
Foreign	(818		)	(715		)	(608		)
Total deferred provision (benefit)	$	119		$	(4,860	)	$	2,681
Total provision (benefit)
Federal	$	(1,460	)	$	(5,955	)	$	(2,813	)
State	517			1,405			337
Foreign	2,702			2,815			4,114
Total provision (benefit)	$	1,759		$	(1,735	)	$	1,638

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 28, 2017					February 29, 2016					February 28, 2015
Tax provision at Federal statutory rates	$	(504	)	35.0	%	$	(2,729	)	35.0	%	$	243		35.0	%
State income taxes, net of Federal benefit	(752		)	52.2		1,100			(14.0	)	891			127.9
Change in valuation allowance	5,895			(408.7	)	1,344			(17.2	)	4,330			622.0
Change in tax reserves	(5,974		)	414.3		101			(1.3	)	(6,076		)	(872.8	)
Non-controlling interest	2,668			(185	)	1,183			(15.2	)	—			—
Bargain purchase gain	—			—		(1,638		)	21		—			—
US effects of foreign operations	330			(22.9	)	(309		)	3.9		1,503			215.9
Permanent differences and other	274			(19.0	)	(442		)	5.7		(1,371		)	(196.9	)
NOL carryback	1,413			(98.0	)	—			—		2,486			357.1
Change in tax rate	(110		)	7.6		172			(2.2	)	198			28.4
Research & development credits	(625		)	43.3		(453		)	5.8		(272		)	(39.1	)
Tax credits	(856		)	59.3		(64		)	0.8		(294		)	(42.2	)
Effective tax rate	$	1,759		(121.9	)%	$	(1,735	)	22.3	%	$	1,638		235.3	%

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.

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 28, 2017			February 29, 2016
Deferred tax assets:
Accounts receivable	$	642		$	388
Inventory	3,757			3,711
Accruals and reserves	6,851			3,849
Deferred compensation	1,492			1,424
Warranty reserves	1,421			2,373
Unrealized gains and losses	1,740			614
Net operating losses	9,557			6,440
Foreign tax credits	2,616			2,712
Other tax credits	2,937			2,393
Deferred tax assets before valuation allowance	31,013			23,904
Less: valuation allowance	(18,199		)	(12,341		)
Total deferred tax assets	12,814			11,563
Deferred tax liabilities:
Property, plant and equipment	(445		)	(1		)
Intangible assets	(38,894		)	(38,543		)
Partnership investments	(588		)	(1,678		)
Prepaid expenses	(2,353		)	(1,465		)
Deferred financing fees	(666		)	(227		)
Total deferred tax liabilities	(42,946		)	(41,914		)
Net deferred tax liability	$	(30,132	)	$	(30,351	)

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 2017, the Company maintained a valuation allowance against its U.S. deferred tax assets and certain foreign jurisdictions. The Company's valuation allowance increased by $5,858 during the year ended February 28, 2017, of which $5,895 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 28, 2017, the Company has not provided for U.S. federal and foreign withholding taxes on approximately $54,675 of 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 $16,271, which expire in Fiscal 2035 through 2037 if not utilized. The Company has foreign tax credits of $3,024 which expire in tax year 2025 through 2027. The Company has research and development tax credits of $2,120, which expire in tax years 2024 through 2032. 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 2037.

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



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 the prior years	(915		)
Other	(554		)
Balance at February 29, 2016	$	14,472
Additions based on tax positions taken in the current and prior years	3,147
Settlements	—
Decreases based on tax positions taken in prior years	(6,470		)
Other	(305		)
Balance at February 28, 2017	$	10,844

Of the amounts reflected in the table above at February 28, 2017, $10,844, if recognized, would reduce our effective tax rate. If recognized, $8,103 of the unrecognized tax benefits are likely to attract a full valuation allowance, thereby offsetting the favorable impact to the effective tax rate. Our unrecognized tax provision non-current consolidated balance sheet liability, including interest and penalties, is $3,194. 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 28, 2017, February 29, 2016 and February 28, 2015, interest and penalties on unrecognized tax benefits were $98, $23 and $(166), respectively. The balance as of February 28, 2017 and February 29, 2016 was $746 and $648, respectively. The Company believes that it is reasonably possible that approximately $2,932 of unrecognized tax benefits may be recognized within the next 12 months as a result of a lapse of the statute of limitations.

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		2013
Germany		2013