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Income Taxes
 9 Months Ended
Oct. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

Income tax expense was $17.9 million during the third quarter of Fiscal 2021 compared with $15.1 million during the third quarter of Fiscal 2020. The effective tax rate for the third quarter of Fiscal 2021 was 56.8% compared with 65.3% during the third quarter of Fiscal 2020. The higher income tax rate in the prior year is primarily due to the reversal of income tax benefit recorded in the first two quarters of Fiscal 2020 related to the net operating loss carry-back as permitted under the CARES Act. The decrease in income tax rate this year was partially offset by the disallowance of certain debt extinguishment costs related to partial settlement of the Convertible Notes during the third quarter of Fiscal 2021.

Income tax expense was $79.8 million during the nine month period ended October 30, 2021, compared with income tax benefit of $253.3 million during the nine month period ended October 31, 2020. The effective tax rate for the nine month period ended October 30, 2021 was 21.7%, compared with 40.5% during the nine month period ended October 31, 2020. The decrease in the effective tax rate was primarily due to the Company’s pretax loss in the prior year and applying various provisions of the CARES Act, namely the benefit related to the carryback of federal NOLs in Fiscal 2020 to earlier tax years with higher tax rates.

Net deferred taxes are as follows:

 

 

(in thousands)

 

 

 

October 30,

 

 

January 30,

 

 

October 31,

 

 

 

2021

 

 

2021

 

 

2020

 

Deferred tax asset

 

$

4,119

 

 

$

4,422

 

 

$

4,596

 

Deferred tax liability

 

 

211,710

 

 

 

199,850

 

 

 

204,745

 

Net deferred tax liability

 

$

207,591

 

 

$

195,428

 

 

$

200,149

 

Net deferred tax assets relate to Puerto Rico deferred balances that have a future net benefit for tax purposes. Net deferred tax liabilities primarily relate to intangible assets and depreciation expense where the Company has a future obligation for tax purposes.

 

As of October 30, 2021, the Company had a deferred tax asset related to net operating losses of $26.0 million, inclusive of $25.7 million related to state net operating losses that expire at various dates between 2022 and 2040, as well as $0.3 million related to Puerto Rico net operating losses that will expire in 2025.

 

As of October 30, 2021, the Company had a deferred tax asset related to tax credit carry-forwards of $7.6 million, inclusive of $6.6 million of state tax credit carry-forwards, which will begin to expire in 2023, and $1.0 million of deferred tax assets recorded for Puerto Rico alternative minimum tax credits that have an indefinite life.

As of October 30, 2021, January 30, 2021 and October 31, 2020, valuation allowances amounted to $12.1 million, $13.0 million and $12.4 million, respectively, related to state and Puerto Rico net operating losses and state tax credit carry-forwards. The Company believes that it is more likely than not that this portion of state and Puerto Rico net operating losses and state tax credit carry-forwards will not be realized.