Income Taxes (Notes)

12 Months Ended

Feb. 28, 2015

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The provision for income taxes consists of:

		2015			2014			2013
Income before income taxes:
Domestic		$	76,434		$	83,495		$	92,334
Foreign		13,696			10,416			2,035
Income before income taxes		$	90,130		$	93,911		$	94,369
Current provision:
	Federal	$	3,770		$	28,901		$	26,330
	Foreign	3,025			1,903			(2,600		)
	State and Local	2,575			4,382			4,136
Total current provision for income taxes		$	9,370		$	35,186		$	27,866
Deferred provision (benefit):
	Federal	$	15,455		$	(2,143	)	$	2,024
	Foreign	(858		)	1,230			3,455
	State and Local	1,220			41			568
Total deferred provision for income taxes		$	15,817		$	(872	)	$	6,047
Total provision for income taxes		$	25,187		$	34,314		$	33,913

A reconciliation from the federal statutory income tax rate to the effective income tax rate is as follows:

	2015		2014		2013
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
Permanent differences	0.6		1.3		0.2
State income taxes, net of federal income tax benefit	2.7		3.0		3.1
Benefit of Section 199 of the Code, manufacturing deduction	(2.4	)	(2.2	)	(2.6	)
Valuation allowance	(3.4	)	—		—
Tax credits	(3.4	)	—		—
Foreign tax rate differential	(0.7	)	(0.6	)	0.2
Other	(0.5	)	—		—
Effective income tax rate	27.9	%	36.5	%	35.9	%

Deferred federal and state income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial accounting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income tax liability are as follows:

	2015			2014
	(In thousands)
Deferred income tax assets:
Employee related items	$	4,690		$	4,314
Inventories	1,080			839
Accrued warranty	893			504
Accounts receivable	565			2,342
Net operating loss carry forward	1,919			4,268
Other	—			606
	9,147			12,873
Less: valuation allowance	(1,588		)	(3,793		)
Total deferred income tax assets	7,559			9,080
Deferred income tax liabilities:
Depreciation methods and property basis differences	(28,611		)	(19,995		)
Other assets and tax-deductible goodwill	(26,161		)	(20,719		)
Total deferred income tax liabilities	(54,772		)	(40,714		)
Net deferred income tax liabilities	$	(47,213	)	$	(31,634	)

In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. As of fiscal year end 2015, we have not made a provision for U.S. or additional foreign withholding taxes on approximately $17.5 million of the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries.

The following table summarizes the Net Operating Loss Carry forward:

	2015		2014
	(In thousands)
Federal	$	—	$	1,089
State	$	1,919	$	1,919
Foreign	$	—	$	1,260

As of February 28, 2015, the Company had state NOL carry forwards of $31.9 millionwhich, if unused, will begin to expire in 2025.

We believe that it is more likely than not that the benefit from certain state NOL carry forwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $1.6 million on the deferred tax assets related to these state NOL carry forwards. We will review this risk within the next fiscal year and may conclude that a significant portion of the valuation allowance will no longer be needed. The tax benefits related to any reversal of the valuation allowance will be recognized as a reduction of income tax expense.

As of fiscal 2015, a portion of our deferred tax assets were the result of state NOL carry forwards. A valuation allowance of $1.6 million and $3.8 million was recorded against our gross deferred tax asset balance as of fiscal year end 2015 and 2014, respectively. For the year ended February 28, 2015, we recorded a net valuation allowance release of $2.2 million (comprising of a full-year valuation release of $1.2 million related to foreign operations, and $1.0 million related to NOLs from purchased stock of Aquilex SRO, in March 2013), on the basis of local tax authority reassessment of the amount which was realized in local tax jurisdictions and on local income tax returns.