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Income Taxes
 12 Months Ended
Feb. 28, 2025
Income Tax Disclosure [Abstract]  
Income Taxes 12. Income Taxes
The provision for income taxes for continuing and discontinued operations for fiscal year 2025, 2024 and 2023 consisted of the following (in thousands):
Year Ended
February 28, 2025February 29, 2024February 28, 2023
Income from continuing operations before income taxes
Domestic$165,822 $123,955 $80,508 
Foreign4,861 6,148 8,167 
Income from continuing operations before income taxes170,683 130,103 88,675 
Current provision:
Federal28,660 19,839 (1,848)
Foreign1,738 2,189 2,127 
State and local3,350 1,716 5,918 
Total current provision for income taxes33,748 23,744 6,197 
Deferred provision (benefit):
Federal7,123 3,920 17,273 
Foreign(340)(316)(24)
State and local1,319 1,148 (1,110)
Total deferred provision for income taxes for continuing operations8,102 4,752 16,139 
Total provision for income taxes for continuing operations41,850 28,496 22,336 
Income taxes (benefit) on discontinued operations— — (19,544)
Total provision for income taxes$41,850 $28,496 $2,792 
A reconciliation from the federal statutory income tax rate to the effective income tax rate for continuing operations is as follows for the prior three fiscal years:
Year Ended
February 28, 2025February 29, 2024February 28, 2023
Statutory federal income tax rate21.0 %21.0 %21.0 %
Permanent differences1.0 0.5 0.6 
State income taxes, net of federal income tax benefit2.3 1.9 4.4 
Stock compensation(0.5)0.1 0.1 
Tax credits(0.2)(1.7)0.0 
Foreign tax rate differential0.2 0.2 0.4 
ASC 740-10 Uncertain tax positions0.1 (1.8)(1.5)
Management fee— — 3.2 
Outside basis - AVAIL JV— — (3.7)
Other0.6 1.7 0.7 
Effective income tax rate24.5 %21.9 %25.2 %
The provision for income taxes from continuing operations was 24.5% for fiscal 2025 compared to 21.9% for fiscal 2024. The increase in the effective tax rate is primarily attributable to favorable adjustments for fiscal 2024 related to uncertain tax positions, partially offset by higher tax deductions for stock compensation in fiscal 2025. The increase is also attributable to non-deductible items such as compensation limited by IRC Sec. 162(m) and meals & entertainment subject to the 50% limitation under IRC Sec. 274(n). The increase also relates to higher state tax expense, net of federal benefit, and lower R&D tax credits following the divestiture of the AIS business.
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 for fiscal year 2025 and 2024 (in thousands):
As of
February 28, 2025February 29, 2024
Deferred income tax assets:
Employee related items$10,867 $12,148 
Inventories5,205 5,756 
Accrued warranty1,336 1,268 
Accounts receivable1,926 2,061 
Lease liabilities6,406 6,033 
Net operating loss and other credit carryforwards5,707 4,739 
Research and experiment expenses5,046 5,688 
Interest expense limitation8,565 13,580 
Outside basis difference—AVAIL JV274 — 
Other deferred income tax assets334 281 
Total deferred income tax assets45,666 51,554 
Deferred income tax liabilities:
Depreciation methods and property basis differences$(36,671)$(42,508)
Right-of-use lease assets(6,219)(5,858)
Outside basis difference— (1,466)
Other assets and tax-deductible goodwill(41,975)(34,683)
Total deferred income tax liabilities(84,865)(84,515)
Net deferred income tax liabilities$(39,199)$(32,961)
The increase in net deferred tax liability is primarily related to an increase in book over tax basis related to goodwill, additional interest expense that was previously capitalized which is now deductible, additional payments to the pension plan, partially offset by an increase in state net operating losses, a decrease in book over tax basis related to fixed assets, and an increase in tax basis over book related to the Company's investment in the AVAIL JV.
As of February 28, 2025, the Company had pretax state NOL carry-forwards of $82.6 million which, if unused, will begin to expire in 2026 and pretax foreign NOL carry-forwards of $0.8 million, which, if unused, will begin to expire in 2044.
As of February 28, 2025 and February 29, 2024, a portion of the Company's deferred tax assets were the result of state and foreign jurisdiction NOL carry-forwards and state credit carry-forwards. We believe that it is more-likely-than-not that the benefit from certain foreign NOL carry-forwards and state credit carry-forwards will be realized. Therefore, we have not provided a valuation allowance as of February 28, 2025.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our operations. U.S. GAAP states that a tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. We may (1) record unrecognized tax benefits as liabilities in accordance with U.S. GAAP and (2) adjust these liabilities when our judgment changes because of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information becomes available.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits, which is included in "Other long-term liabilities" in the consolidated balance sheets for the years ended February 28, 2025 and February 29, 2024 is as follows (in thousands):
As of
February 28, 2025February 29, 2024
Balance at beginning of period$1,808 $3,667 
Increase for tax positions related to current periods:
Gross increases73 177 
Increase for tax positions related to prior periods:
Gross increases— 100 
Gross decreases— (1,699)
Lapse of statute of limitations(182)(437)
Balance at end of period$1,699 $1,808 
Current year decreases to our UTPs primarily relate to matters related to research and development credits.
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. Penalties and interest recorded to tax expense (benefit) for fiscal 2025 and 2024 were $0.3 million and $(0.5) million, respectively.
We have prior year tax returns currently being examined in two states and do not have any other returns currently being examined by taxing authorities. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. As the outcome of any tax audits cannot be predicted with certainty, if any issues addressed in our tax audits are resolved in a manner inconsistent with management's expectations, we could adjust our provision for income taxes in the future.
As of February 28, 2025, we have operations and taxable presence in the U.S. and Canada. The tax positions of the Company and its subsidiaries are subject to income tax audits by multiple tax jurisdictions. We currently consider U.S. federal and state and Canada, to be significant tax jurisdictions. Our U.S. federal and state tax returns since February 28, 2022 remain open to examination. Our Canada tax returns since February 28, 2021 remain open to examination. The statute of limitations for fiscal year 2022 for U.S. and fiscal year 2021 for Canada will expire in December 2025. We anticipate it is reasonably possible that a decrease of unrecognized tax benefits related to various federal, foreign and state positions of $0.2 million may be resolved in the next 12 months.
Prior to enactment of H.R. 1, formerly known as the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), we asserted that all unremitted earnings of our foreign subsidiaries were considered indefinitely reinvested. As a result of the Tax Act, we reported and paid U.S. tax on most of our previously unremitted foreign earnings. As of February 28, 2025, we continue to be indefinitely reinvested with respect to investments in its foreign subsidiaries. Additionally, we have not recorded deferred tax liabilities associated with the remaining unremitted earnings that are considered indefinitely reinvested. It is impracticable for us to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings, due to the complexities associated with the hypothetical calculation.