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Income Taxes | 12 Months Ended
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Feb. 02, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 13—INCOME TAXES The United States enacted the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017, which had a significant impact to the Company’s provision for income taxes as of and for the years ended February 2, 2019 and February 3, 2018. The Tax Act included a number of changes to existing U.S. tax laws that impact the Company, including the reduction of the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. The Tax Act transitions U.S. international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on non-U.S. earnings, which has the effect of subjecting certain earnings of the Company's foreign subsidiaries to U.S. taxation. The Tax Act provided for a one-time transition tax on indefinitely reinvested foreign earnings, as well as prospective changes which impacted the Company beginning in fiscal 2018, including the elimination of certain domestic deductions, additional limitations on executive compensation deductions and taxation of global intangible low-taxed income (“GILTI”). The Company recognized the estimated income tax effects of the Tax Act in its fiscal 2017 financial statements in accordance with Staff Accounting Bulletin No. 118—Income Tax Accounting Implications of the TCJA (“SAB 118”), which provides SEC staff guidance for the application of ASC Topic 740—Income Taxes, in the reporting period in which the Tax Act was signed into law. As of February 2, 2019, the Company has completed its accounting for the tax effects of enactment of the Tax Act. The changes to U.S. tax laws as a result of the Tax Act, which had the most significant impact on the Company’s provision for income taxes are as follows: Reduction of the U.S. Corporate Income Tax Rate The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were re-measured to reflect the reduction in the U.S. corporate income tax rate from 35% to 21%, resulting in a provisional $6.0 million increase in income tax expense for the year ended February 3, 2018 and a corresponding provisional $6.0 million decrease in net deferred tax assets as of February 3, 2018. The Company completed the accounting for re-measurement of its deferred tax assets and liabilities as of February 2, 2019, and recorded $0.5 million to income tax expense and a corresponding $0.5 million decrease in net deferred tax assets as of February 2, 2019. The cumulative impact to the Company’s provision for income tax expense in fiscal year 2017 and 2018 for the re-measurement of the Company’s deferred tax assets and liabilities as result of the Tax Act was $6.5 million. Transition Tax on Foreign Earnings The Company recognized a provisional income tax expense of $1.0 million for the year ended February 3, 2018 related to the one-time transition tax on indefinitely reinvested foreign earnings. The Company completed its computation of transition tax liability in 2018 and did not recognize additional income tax expense or benefit for the year ended February 2, 2019. The cumulative impact to the Company’s provision for income tax expense for the one-time transition tax on indefinitely reinvested foreign earnings as result of the Tax Act was $1.0 million. Global Intangible Low-Taxed Income The Tax Act subjects a U.S. shareholder to tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense. Due to the fact that the Company was still evaluating the GILTI provisions as of February 3, 2018, no GILTI-related deferred amounts were recorded in fiscal 2017. After further consideration in fiscal 2018, the Company has elected to account for GILTI as a period cost in the year the tax is incurred, which did not have an impact on the Company’s fiscal 2018 results. The following is a summary of the income before income taxes (in thousands):
|  | Year Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Domestic |  | $ | 178,016 |  |  | $ | 28,859 |  |  | $ | 8,370 |
Foreign |  |  | 3,137 |  |  |  | 1,292 |  |  |  | 184 |
Total income before income taxes |  | $ | 181,153 |  |  | $ | 30,151 |  |  | $ | 8,554 |
The following is a summary of the income tax expense (benefit) (in thousands):
|  | Year Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 24,012 |  |  | $ | 18,593 |  |  | $ | 751 |
State |  |  | 6,275 |  |  |  | 2,761 |  |  |  | 2,410 |
Foreign |  |  | 1,270 |  |  |  | 933 |  |  |  | 694 |
Total current tax expense |  |  | 31,557 |  |  |  | 22,287 |  |  |  | 3,855 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (465 | ) |  |  | 6,042 |  |  |  | 2,109 |
State |  |  | (731 | ) |  |  | (355 | ) |  |  | (2,414 | )
Foreign |  |  | 153 |  |  |  | (3 | ) |  |  | (397 | )
Total deferred tax expense (benefit) |  |  | (1,043 | ) |  |  | 5,684 |  |  |  | (702 | )
Total income tax expense |  | $ | 30,514 |  |  | $ | 27,971 |  |  | $ | 3,153 |
A reconciliation of the federal statutory tax rate to the Company’s effective tax rate is as follows:
|  | Year Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Provision at federal statutory tax rate |  |  | 21.0 | % |  |  | 33.7 | % |  |  | 35.0 | %
State income taxes—net of federal tax impact |  |  | 2.1 |  |  |  | 4.8 |  |  |  | 4.8 |
Goodwill impairment |  |  | 1.6 |  |  |  | 17.9 |  |  |  | — |
Valuation allowance |  |  | 0.3 |  |  |  | 1.1 |  |  |  | 0.9 |
Meals and entertainment |  |  | 0.2 |  |  |  | 1.5 |  |  |  | 5.0 |
Other permanent items |  |  | 0.2 |  |  |  | 1.3 |  |  |  | 2.8 |
Aircraft expenses |  |  | 0.1 |  |  |  | 3.6 |  |  |  | 3.3 |
Tax rate adjustments |  |  | 0.1 |  |  |  | (0.6 | ) |  |  | (5.8 | )
Stock compensation—excess benefits |  |  | (8.8 | ) |  |  | (20.9 | ) |  |  | — |
Non-deductible stock-based compensation |  |  | — |  |  |  | 26.7 |  |  |  | — |
Federal statutory tax rate change |  |  | — |  |  |  | 20.1 |  |  |  | — |
Foreign income inclusion—transition tax |  |  | — |  |  |  | 3.3 |  |  |  | — |
Net adjustments to tax accruals and other |  |  | — |  |  |  | 1.4 |  |  |  | 1.2 |
Foreign income |  |  | — |  |  |  | (0.9 | ) |  |  | (4.2 | )
Donation of appreciated property |  |  | — |  |  |  | (0.2 | ) |  |  | (8.7 | )
Transaction costs |  |  | — |  |  |  | — |  |  |  | 2.6 |
Effective tax rate |  |  | 16.8 | % |  |  | 92.8 | % |  |  | 36.9 | %
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
|  | February 2, |  |  | February 3, |
|  | 2019 |  |  | 2018 |
Non-current deferred tax assets (liabilities) |  |  |  |  |  |  |  |
Stock-based compensation |  | $ | 22,721 |  |  | $ | 25,047 |
Deferred lease credits |  |  | 20,900 |  |  |  | 18,355 |
Accrued expense |  |  | 16,657 |  |  |  | 10,488 |
Inventory |  |  | 14,735 |  |  |  | 16,132 |
Net operating loss carryforwards |  |  | 1,654 |  |  |  | 1,584 |
Property and equipment |  |  | (27,583 | ) |  |  | (21,869 | )
Tradenames, trademarks and intangibles |  |  | (12,386 | ) |  |  | (14,991 | )
Prepaid expense and other |  |  | (4,209 | ) |  |  | (12,379 | )
State tax benefit |  |  | (2,250 | ) |  |  | (2,394 | )
Convertible senior notes |  |  | (1,054 | ) |  |  | (1,890 | )
Deferred revenue |  |  | (152 | ) |  |  | 3,313 |
Other |  |  | 2,618 |  |  |  | 3,105 |
Non-current deferred tax assets |  |  | 31,651 |  |  |  | 24,501 |
Valuation allowance |  |  | (1,618 | ) |  |  | (1,190 | )
Net non-current deferred tax assets |  | $ | 30,033 |  |  | $ | 23,311 |
A reconciliation of the valuation allowance is as follows (in thousands):
|  | Year Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at beginning of fiscal year |  | $ | 1,190 |  |  | $ | 760 |  |  | $ | 158 |
Net changes in deferred tax assets and liabilities |  |  | 428 |  |  |  | 430 |  |  |  | 602 |
Balance at end of fiscal year |  | $ | 1,618 |  |  | $ | 1,190 |  |  | $ | 760 |
The Company has recorded deferred tax assets and liabilities based upon estimates of their realizable value, such estimates are based upon likely future tax consequences. In assessing the need for a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, the Company records a valuation allowance. As of February 2, 2019 and February 3, 2018, the Company had $1.6 million and $1.2 million, respectively, in valuation allowances against deferred tax assets in certain state and foreign jurisdictions due to historical losses. As of February 2, 2019, the Company had state net operating loss carryovers of $4.0 million and foreign net operating loss carryovers of $7.7 million. The state net operating loss carryovers will begin to expire in 2022, and the foreign net operating loss carryovers have an indefinite carryforward. Internal Revenue Code Section 382 and similar state rules place a limitation on the amount of taxable income which can be offset by net operating loss carryforwards after a change in ownership (generally greater than 50% change in ownership). The Company cannot give any assurances that it will not undergo an ownership change in the future resulting in further limitations on utilization of net operating losses. A reconciliation of the exposures related to unrecognized tax benefits is as follows (in thousands):
|  | Year Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at beginning of fiscal year |  | $ | 8,152 |  |  | $ | 2,190 |  |  | $ | 921 |
Gross increases—prior period tax positions |  |  | 239 |  |  |  | 5,491 |  |  |  | 53 |
Gross increases—current period tax positions |  |  | 375 |  |  |  | 471 |  |  |  | 1,216 |
Lapses in statute of limitations |  |  | (307 | ) |  |  | — |  |  |  | — |
Balance at end of fiscal year |  | $ | 8,459 |  |  | $ | 8,152 |  |  | $ | 2,190 |
As of February 2, 2019, the Company has $8.5 million of unrecognized tax benefits, of which $7.3 million would reduce income tax expense and the effective tax rate, if recognized. The remaining unrecognized tax benefits would offset other deferred tax assets, if recognized. In October 2017, the Company filed an amended federal tax return claiming a $5.4 million refund, however, no income tax benefit was recorded during fiscal 2017 or fiscal 2018 given the technical nature and amount of the refund claim. An income tax benefit related to this refund claim could be recorded in a future period upon settlement with the respective taxing authority. As of February 2, 2019, the Company has $0.4 million of exposures related to unrecognized tax benefits that are expected to decrease in the next 12 months. The Company accounts for interest and penalties related to exposures as a component of income tax expense. The Company had interest accruals of $0.5 million associated with exposures as of both February 2, 2019, and February 3, 2018, respectively. The Company is subject to taxation in the United States and various states and foreign jurisdictions. As of February 2, 2019, the Company is subject to examination by the tax authorities for fiscal 2014 through fiscal 2017. With few exceptions, as of February 2, 2019, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before fiscal 2014.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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