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INCOME TAXES | 12 Months Ended
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Feb. 29, 2016
Income Taxes |
Income Taxes | NOTE 10 - INCOME TAXES We reorganized the Company in Bermuda in 1994 and many of its foreign subsidiaries are not directly or indirectly owned by a U.S. parent company. As such, a large portion of the Company's foreign income is not subject to U.S. taxation on a permanent basis under current law. Additionally, the Company's intellectual property is largely owned by foreign subsidiaries of the Company, resulting in proportionally higher earnings in jurisdictions with lower statutory tax rates, which decreases the Company's overall effective tax rate. The taxable income earned in each jurisdiction, whether U.S. or foreign, is determined by the subsidiary's operating results, and transfer pricing and tax regulations in the related jurisdictions. We have indefinitely reinvested $68.49 million of undistributed earnings of our foreign operations outside of our U.S. tax jurisdiction as of February 29, 2016. No deferred tax liability has been recognized for the remittance of such earnings to the U.S. since it is our intention to utilize these earnings in our foreign operations. Our components of income before income tax expense are as follows: COMPONENTS OF INCOME BEFORE TAXES (in thousands)
|  | Fiscal Years Ended the Last Day of February,
|  | 2016 |  | 2015 |  | 2014
U.S. |  | $ | 30,874 |  | $ | 34,876 |  | $ | 38,147
Non-U.S. |  |  | 88,944 |  |  | 112,338 |  |  | 68,987
Total |  | $ | 119,818 |  | $ | 147,214 |  | $ | 107,134
Our components of income tax expense (benefit) are as follows: COMPONENTS OF INCOME TAX EXPENSE (BENEFIT) (in thousands)
|  | Fiscal Years Ended the Last Day of February,
|  | 2016 |  | 2015 |  | 2014
U.S. |  |  |  |  |  |  |  |  |
Current |  | $ | 12,824 |  | $ | 18,525 |  | $ | 24,736
Deferred |  |  | (1,239) |  |  | (3,014) |  |  | (9,021)
|  |  | 11,585 |  |  | 15,511 |  |  | 15,715
Non-U.S. |  |  |  |  |  |  |  |  |
Current |  |  | 4,919 |  |  | (645) |  |  | 6,254
Deferred |  |  | 2,086 |  |  | 1,184 |  |  | (1,083)
|  |  | 7,005 |  |  | 539 |  |  | 5,171
Total |  | $ | 18,590 |  | $ | 16,050 |  | $ | 20,886
Our total income tax expense differs from the amounts computed by applying the U.S. statutory tax rate to income before income taxes. A summary of these differences are as follows: INCOME TAX RATE RECONCILIATION
|  | Fiscal Years Ended the Last Day of February, |
|  | 2016 |  | 2015 |  | 2014 |
Expected effective income tax rate at the U.S. statutory rate |  |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Impact of U.S. state income taxes |  |  | 0.5 | % |  | 0.6 | % |  | 1.7 | %
Effect of income from non-U.S. operations subject to varying rates |  |  | 4.1 | % |  | 0.9 | % |  | (0.3) | %
Effect of zero tax rate in Macau |  |  | (19.3) | % |  | (12.4) | % |  | (12.3) | %
Effect of statutory tax rate in Barbados |  |  | (6.8) | % |  | (11.7) | % |  | (8.7) | %
Effect of statutory tax rate in Switzerland |  |  | (5.7) | % |  | (2.9) | % |  | (0.9) | %
Effect of foreign exchange fluctuations |  |  | 3.3 | % |  | 0.4 | % |  | 0.3 | %
Effect of asset impairment charges |  |  | 1.1 | % |  | 1.6 | % |  | 3.9 | %
Other Items |  |  | 3.3 | % |  | (0.6) | % |  | 0.8 | %
Effective income tax rate |  |  | 15.5 | % |  | 10.9 | % |  | 19.5 | %
The Company's operation in Macau generates income from the sale of the goods that it has sourced and procured and is responsible for the sourcing and procurement of a large portion of the products that the Company sells. The Company has an indefinite tax holiday in Macau conditioned on the Company meeting certain employment and investment thresholds. We have never experienced any issues in meeting the required thresholds, and are unaware of any regulatory changes or impending circumstances that would restrict our rights to continue to benefit from the tax holiday. Because the Macau subsidiary is not directly or indirectly owned by a U.S. parent company, there is no U.S. tax liability associated with the income generated in Macau. Each year there are significant transactions or events that are incidental to our core businesses and that by a combination of their nature and jurisdiction, can have a disproportionate impact on our reported effective tax rates. Without these transactions or events, the trend in our effective tax rates would follow a more normalized pattern. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of the last day of February 2016 and 2015 are as follows: COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES (in thousands)
|  | Last Day of February,
|  | 2016 |  | 2015
Deferred tax assets, gross: |  |  |  |  |  |
Operating loss carryforwards |  | $ | 15,419 |  | $ | 17,193
Accounts receivable |  |  | 6,332 |  |  | 4,367
Inventories |  |  | 10,372 |  |  | 8,450
Accrued expenses and other |  |  | 10,783 |  |  | 17,734
Total gross deferred tax assets |  |  | 42,906 |  |  | 47,744
Valuation allowance |  |  | (16,223) |  |  | (16,982)
Deferred tax liabilities: |  |  |  |  |  |
Depreciation and amortization |  |  | (51,562) |  |  | (54,788)
Total deferred tax liabilities, net |  | $ | (24,879) |  | $ | (24,026)
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We consider the scheduled reversal of deferred tax liabilities, expected future taxable income and tax planning strategies in assessing the ultimate realization of deferred tax assets. If recovery is not likely, we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not be recoverable. In fiscal year 2016, the $0.76 million net decrease in our valuation allowance was principally due to changes in estimates regarding the value of operating loss carryforwards to be used in the future. As of February 29, 2016 and February 28, 2015, we have remaining tax-deductible goodwill of $133.12 million and $119.78 million, respectively, resulting from acquisitions. The amortization of this goodwill is deductible over various periods ranging up to 13 years. The tax deduction for goodwill for fiscal year 2017 is expected to be approximately $20.17 million. The schedule below shows the composition of our operating loss carryforwards and the approximate future taxable income we will need to generate in order to utilize all carryforwards prior to their expiration: SUMMARY OF OPERATING LOSS CARRYFORWARDS (in thousands)
|  | Balances at February 29, 2016
|  | Tax Year |  | Deferred |  | Operating
|  | Expiration |  | Tax |  | Loss
|  | Date Range |  | Assets |  | Carryforward
U.S. state operating loss carryforward |  | 2017 - 2035 |  | $ | 300 |  | $ | 7,184
Non-U.S. operating loss carryforwards with definite carryover periods |  | 2017 - 2026 |  |  | 1,339 |  |  | 7,271
Non-U.S. operating loss carryforwards with indefinite carryover periods |  | Indefinite |  |  | 13,780 |  |  | 46,599
Subtotals |  |  |  |  | 15,419 |  | $ | 61,054
Less portion of valuation allowance established for operating loss carryforwards |  |  |  |  | (14,054) |  |  |
Total |  |  |  | $ | 1,365 |  |  |
Any future amount of deferred tax asset considered realizable could be reduced in the near term if estimates of future taxable income during any carryforward periods are reduced. During fiscal years 2016 and 2015, changes in the total amount of unrecognized tax benefits were as follows: UNRECOGNIZED TAX BENEFITS (in thousands)
|  | Fiscal Years Ended
|  | the Last Day of February,
|  | 2016 |  | 2015
Total unrecognized tax benefits, beginning balance |  | $ | 10,295 |  | $ | 13,924
Tax positions taken during the current period |  |  | - |  |  | 341
Changes in tax positions taken during a prior period |  |  | 278 |  |  | (1,802)
Lapse in statute of limitations |  |  | (1,375) |  |  | (523)
Impact of foreign currency re-measurement |  |  | (421) |  |  | (882)
Settlements |  |  | (40) |  |  | (763)
Total unrecognized tax benefits, ending balance |  |  | 8,737 |  |  | 10,295
Less current unrecognized tax benefits |  |  | (536) |  |  | -
Noncurrent unrecognized tax benefits |  | $ | 8,201 |  | $ | 10,295
Included in the balance of unrecognized tax benefits at the end of fiscal year 2016 were $8.74 million of tax benefits, which, if recognized, would affect our effective tax rate. We do not expect any significant changes to our existing unrecognized tax benefits during the next twelve months resulting from any issues currently pending with tax authorities. We classify all interest and penalties on uncertain tax positions as income tax expense. As of February 29, 2016 and February 28, 2015, the liability for tax-related interest and penalties included in unrecognized tax benefits was $2.26 million and $1.72 million, respectively. Additionally, during the fiscal years ended in 2016, 2015 and 2014, we recognized $0.54, $0.23 and $0.56 million, respectively. We file income tax returns in the U.S. federal jurisdiction and in various states and foreign jurisdictions. We do not expect that any proposed adjustments from these tax jurisdictions will have a material impact on our results of operations or financial position. As of February 29, 2016, tax years under examination or still subject to examination by material tax jurisdictions are as follows:
Jurisdiction |  | Tax Years Under Examination |  | Open Tax Years
Mexico |  | - None - |  | 2010 | - | 2015
United Kingdom |  | - None - |  | 2015 | - | 2016
United States * |  | 2003, 2007, 2008 |  | 2003, 2007, 2008, 2013 - 2016
Switzerland |  | - None - |  | 2009 | - | 2016
Hong Kong |  | 2014 |  | 2009 | - | 2016
Hungary |  | 2009 |  | 2009, 2011 - 2016
* Kaz, Inc. and its U.S. subsidiaries are under examination for the 2003, 2007 and 2008 tax years. In February 2016, the examination of Helen of Troy Texas Corporation and its subsidiaries for the 2011 and 2012 tax years was comp leted with no impact to tax expense.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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