Income Taxes

12 Months Ended

Feb. 28, 2023

Income Tax Disclosure [Abstract]

Income Taxes

8)Income Taxes

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

	Year Ended			Year Ended			Year Ended
	February 28, 2023			February 28, 2022			February 28, 2021
Domestic Operations	$	(33,501	)	$	(26,665	)	$	24,485
Foreign Operations		2,551			826			3,153
	$	(30,950	)	$	(25,839	)	$	27,638

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

	Year Ended			Year Ended			Year Ended
	February 28, 2023			February 28, 2022			February 28, 2021
Current provision (benefit)
Federal	$	254		$	20		$	(10	)
State		242			804			1,172
Foreign		1,248			2,148			496
Total current provision	$	1,744		$	2,972		$	1,658
Deferred (benefit) provision
Federal	$	(394	)	$	(2,300	)	$	3,362
State		(271	)		1,010			(84	)
Foreign		(1,118	)		(56	)		(664	)
Total deferred (benefit) provision	$	(1,783	)	$	(1,346	)	$	2,614
Total (benefit) provision
Federal	$	(140	)	$	(2,280	)	$	3,352
State		(29	)		1,814			1,088
Foreign		130			2,092			(168	)
Total (benefit) provision	$	(39	)	$	1,626		$	4,272

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, 2023					February 28, 2022					February 28, 2021
Tax benefit at Federal statutory rates	$	(6,499	)	21.0	%	$	(5,426	)	21.0	%	$	5,804		21.0	%
State income taxes, net of Federal benefit		(711	)	2.3			(282	)	1.1			983		3.5
Change in valuation allowance		5,785		(18.7	)		7,214		(28.0	)		(3,365	)	(12.2	)
Change in tax reserves		(173	)	0.5			(227	)	0.9			(311	)	(1.1	)
Non-controlling interest		476		(1.5	)		766		(3.0	)		714		2.6
U.S. effects of foreign operations		379		(1.2	)		(2,135	)	8.3			521		1.9
Permanent differences and other		794		(2.6	)		581		(2.2	)		(192	)	(0.7	)
Foreign rate differential		402		(1.3	)		787		(3.1	)		412		1.5
Change in tax rate		39		(0.1	)		105		(0.4	)		102		0.4
Research & development credits		(531	)	1.7			243		(0.9	)		(396	)	(1.4	)
Effective tax rate	$	(39	)	0.1	%	$	1,626		(6.3	)%	$	4,272		15.5	%

The U.S. effects of foreign operations includes the US global intangible low tax income (“GILTI”) inclusion, net of the IRC Section 250 deduction and foreign derived intangible income (“FDII”) deduction, foreign tax credits, and other foreign adjustments. Permanent differences and other include nondeductible expenses, Section 162(m) limitation on executive compensation, and other adjustments.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying values 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, 2023			February 28, 2022
Deferred tax assets:
Accounts receivable	$	192		$	301
Inventory		4,196			4,356
Property, plant and equipment		2,467			1,903
IRC Section 174 - Capitalized R&D		3,735			—
Interim arbitration award		10,453			9,515
Operating lease		811			999
Accruals and reserves		6,097			5,946
Deferred compensation		268			297
Warranty reserves		1,465			692
Unrealized gains and losses		4,877			4,219
Partnership investments		3,262			3,399
Net operating losses		5,270			6,278
Foreign tax credits		1,739			2,254
Other tax credits		5,344			5,220
Deferred tax assets before valuation allowance		50,176			45,379
Less: valuation allowance		(35,421	)		(30,059	)
Total deferred tax assets		14,755			15,320
Deferred tax liabilities:
Intangible assets		(16,035	)		(17,464	)
Prepaid expenses		(1,513	)		(2,079	)
Operating lease		(798	)		(977	)
Deferred financing fees		(46	)		(60	)
Total deferred tax liabilities		(18,392	)		(20,580	)
Net deferred tax liability	$	(3,637	)	$	(5,260	)

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. Significant weight is given to positive and negative evidence that is objectively verifiable.

The Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date. Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, we establish a valuation allowance. In addition, the Company maintains a valuation allowance against deferred tax assets in certain foreign jurisdictions. The Company's valuation allowance increased by $5,362 during the year ended February 28, 2023. Any further increase or reduction in the valuation allowance could have a favorable or unfavorable impact on our income tax provision and net income in the period in which such determination is made.

Notwithstanding the U.S. taxation of the deemed repatriated foreign earnings as a result of the one-time transition tax during Fiscal 2018, the Company intends to continue to invest these earnings indefinitely outside the U.S. If these future earnings are repatriated to the U.S., or if the Company determines that such earnings will be remitted in the foreseeable future, the Company may be required to accrue U.S. deferred taxes (if any) and applicable withholding taxes. It is not practicable to estimate the tax impact of the reversal of the outside basis difference, or the repatriation of cash due to the complexity of its hypothetical calculation.

As of February 28, 2023, the Company has capital loss carryforwards of approximately $14,056 which expire in 2024 which are only available to offset capital gain income. The Company has foreign tax credits of $986 which expire in tax years 2031 through 2032. The Company has federal research and development tax credits of $3,805 which expire in tax years 2036 through 2042. 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 2042.

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

Balance at February 29, 2020	$	7,235
Additions based on tax positions taken in the current and prior years		3
Settlements		—
Decreases based on tax positions taken in the prior years		(490	)
Other		112
Balance at February 28, 2021	$	6,860
Additions based on tax positions taken in the current and prior years		140
Settlements		—
Decreases based on tax positions taken in the prior years		(563	)
Other		(172	)
Balance at February 28, 2022	$	6,265
Additions based on tax positions taken in the current and prior years		114
Settlements		—
Decreases based on tax positions taken in prior years		(484	)
Other		89
Balance at February 28, 2023	$	5,984

Of the amounts reflected in the table above at February 28, 2023, $5,984, if recognized, would reduce our effective tax rate. If recognized, $5,212 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 benefit non-current consolidated balance sheet liability, including interest and penalties, is $966. The Company records accrued interest and penalties related to income tax matters in the provision for income taxes in the accompanying Consolidated Statements of Operations and Comprehensive (Loss) Income. For the years ended February 28, 2023, February 28, 2022 and February 28, 2021, interest and penalties on unrecognized tax benefits were $(5), $(28) and $4, respectively. The balance as of February 28, 2023 and February 28, 2022 was $194 and $198, respectively. It is reasonably possible that unrecognized tax benefits will decrease by approximately $300 within 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.	2018
Netherlands	2017
Germany	2018