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Income Taxes | 12 Months Ended
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Feb. 02, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 14. Income Taxes On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code including reducing the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, and implementing a one-time transition tax on undistributed earnings of foreign subsidiaries. The Tax Act also adopts elements of a modified territorial tax system, revises the rules governing foreign tax credits, and permits certain capital expenditures to be expensed immediately, as well as modifying or repealing many deductions and credits. Certain changes became effective for Fiscal 2017, while others became effective for Fiscal 2018. As a result of the Tax Act, the Company recorded an estimated tax benefit of $12.1 million in the fourth quarter of Fiscal 2017 consisting of:
| • | a $3.5 million charge on previously undistributed foreign earnings as of December 31, 2017, net of estimated tax credits
| • | a $12.1 million benefit on the re-measurement of deferred tax assets and liabilities and tax reserves to the lower base federal corporate tax rate of 21%
| • | a $3.5 million benefit of a lower blended U.S. corporate tax rate as reflected in the starting point of the effective tax rate reconciliation table below
In December 2017, the Securities and Exchange Commission (“SEC”) issued interpretive guidance under SAB 118 that allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The estimated tax impacts of the one-time transition tax, re-measurement of deferred tax assets and liabilities, and other items are recorded as provisional amounts in accordance with SAB 118. During the fourth quarter of 2018, the Company completed its accounting for the tax effects of the Tax Act with no material net changes to the provisional amounts recorded for the one-time transition tax and the re-measurement of deferred tax assets and liabilities as of February 3, 2018. Amounts recorded during Fiscal 2018 and Fiscal 2017 are reflected within the respective provision for income taxes in the Consolidated Statements of Income. Additionally, the Tax Act includes a provision designed to currently tax global intangible low-taxed income (“GILTI”) earned by non-U.S. corporate subsidiaries of large U.S. shareholders starting in 2018. The Company has elected, as permitted in FASB Staff Q&A - Topic 740 - No. 5, to treat any future GILTI tax liabilities as period costs and will expense those liabilities in the period incurred. The Company therefore will not record deferred taxes associated with the GILTI provision of the Tax Act. The components of income before income taxes from continuing operations were:
|  | For the Years Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
(In thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
U.S. |  | $ | 308,424 |  |  | $ | 255,621 |  |  | $ | 315,199 |
Foreign |  |  | 36,676 |  |  |  | 31,552 |  |  |  | 20,063 |
Total |  | $ | 345,100 |  |  | $ | 287,173 |  |  | $ | 335,262 |
The significant components of the Company’s deferred tax assets and liabilities were as follows:
|  | February 2, |  |  | February 3, |
(In thousands) |  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Rent |  | $ | 21,649 |  |  | $ | 20,753 |
Employee compensation and benefits |  |  | 12,476 |  |  |  | 1,599 |
Inventories |  |  | 9,276 |  |  |  | 8,900 |
Deferred compensation |  |  | 8,874 |  |  |  | 7,698 |
Net operating loss |  |  | 8,757 |  |  |  | 9,232 |
Accruals not currently deductible |  |  | 7,675 |  |  |  | 5,631 |
State tax credits |  |  | 7,216 |  |  |  | 7,492 |
Foreign tax credits |  |  | 564 |  |  |  | 3,123 |
Other |  |  | 5,000 |  |  |  | 4,936 |
Gross deferred tax assets |  |  | 81,487 |  |  |  | 69,364 |
Valuation allowance |  |  | (6,992 | ) |  |  | (7,096 | )
Total deferred tax assets |  | $ | 74,495 |  |  | $ | 62,268 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property and equipment |  | $ | (53,774 | ) |  | $ | (46,165 | )
Prepaid Expenses |  | $ | (4,128 | ) |  | $ | (3,736 | )
Other |  |  | (2,531 | ) |  |  | (3,023 | )
Total deferred tax liabilities |  | $ | (60,433 | ) |  | $ | (52,924 | )
Total deferred tax assets, net |  | $ | 14,062 |  |  | $ | 9,344 |
The net increase in deferred tax assets and liabilities was primarily due to increases in employee compensation and benefits, partially offset by an increase in the deferred tax liability for property and equipment basis differences. As of February 2, 2019, the Company had deferred tax assets related to state and foreign net operating loss carryovers of $2.6 million and $6.2 million, respectively that could be utilized to reduce future years’ tax liabilities. A portion of these net operating loss carryovers began expiring in the year 2018 and some have an indefinite carryforward period. Management believes it is more likely than not that the foreign net operating loss carryovers will not reduce future years’ tax liabilities in certain jurisdictions. As such a valuation allowance of $5.2 million has been recorded on the deferred tax assets related to the cumulative foreign net operating loss carryovers. We also provided for a valuation allowance of approximately $0.7 million related to other foreign deferred tax assets. The Company had foreign tax credit carryovers in the amount of $0.6 million and $3.1 million as of February 2, 2019 and February 3, 2018, respectively. The foreign tax credit carryovers begin to expire in Fiscal 2028 to the extent not utilized. Management believes it is more likely than not that the foreign tax credit carryover will not reduce future years’ tax liabilities in certain jurisdictions. As such a valuation allowance of $0.6 million has been recorded on the deferred tax assets related to the foreign tax credit carryovers. The Company had state income tax credit carryforwards of $7.2 million (net of federal tax) and $7.5 million (net of federal tax) as of February 2, 2019 and February 3, 2018, respectively. These income tax credits can be utilized to offset future state income taxes and have a carryforward period of 10 to 16 years. They will begin to expire in Fiscal 2023. Management believes it is more likely than not that a portion of the state income tax credit carryovers will not reduce future years’ tax liabilities in certain jurisdictions. As such a valuation allowance of $0.5 million has been recorded on the deferred tax assets related to the cumulative state income tax credit carryovers. Significant components of the provision for income taxes from continuing operations were as follows:
|  | For the Years Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
(In thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 60,453 |  |  | $ | 31,763 |  |  | $ | 93,961 |
Foreign taxes |  |  | 7,343 |  |  |  | 3,404 |  |  |  | 3,168 |
State |  |  | 19,815 |  |  |  | 9,600 |  |  |  | 11,137 |
Total current |  |  | 87,611 |  |  |  | 44,767 |  |  |  | 108,266 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (148 | ) |  | $ | 36,345 |  |  | $ | 12,057 |
Foreign taxes |  |  | (2,367 | ) |  |  | (1,130 | ) |  |  | (268 | )
State |  |  | (1,898 | ) |  |  | 3,028 |  |  |  | 2,758 |
Total deferred |  |  | (4,413 | ) |  |  | 38,243 |  |  |  | 14,547 |
Provision for income taxes |  | $ | 83,198 |  |  | $ | 83,010 |  |  | $ | 122,813 |
As of February 2, 2019, the undistributed earnings of the Company’s foreign subsidiaries were approximately $63.0 million (USD). Earnings of $42.9 million were previously subject to tax due to the one-time transition tax on undistributed foreign earnings required by the Tax Act. The Company intends to continue to permanently reinvest earnings outside of the United States for the foreseeable future and, therefore, has not recognized additional tax expense (e.g., foreign withholding taxes due upon repatriation) on these earnings beyond the one-time transition tax. The following table summarizes the activity related to our unrecognized tax benefits:
|  | For the Years Ended |
(In thousands) |  | February 2, 2019 |  |  | February 3, 2018 |  |  | January 28, 2017 |
Unrecognized tax benefits, beginning of the year balance |  | $ | 7,286 |  |  | $ | 7,093 |  |  | $ | 5,748 |
Increases in current period tax positions |  |  | 565 |  |  |  | 1,913 |  |  |  | 1,884 |
Increases in tax positions of prior periods |  |  | 2,279 |  |  |  | 624 |  |  |  | 464 |
Settlements |  |  | (1,397 | ) |  |  | (744 | ) |  |  | — |
Lapse of statute of limitations |  |  | (545 | ) |  |  | (517 | ) |  |  | (362 | )
Decreases in tax positions of prior periods |  |  | (1,654 | ) |  |  | (1,083 | ) |  |  | (641 | )
Unrecognized tax benefits, end of the year balance |  | $ | 6,534 |  |  | $ | 7,286 |  |  | $ | 7,093 |
As of February 2, 2019, the gross amount of unrecognized tax benefits was $6.5 million, of which $6.0 million would affect the effective income tax rate if recognized. The gross amount of unrecognized tax benefits as of February 3, 2018 was $7.3 million, of which $6.6 million would affect the effective income tax rate if recognized. Unrecognized tax benefits decreased by $0.8 million during Fiscal 2018, increased by $0.2 million during Fiscal 2017 and increased by $1.3 million during Fiscal 2016. Over the next twelve months the Company believes it is reasonably possible the unrecognized tax benefits could decrease by as much as $4.6 million as a result of federal and state tax settlements, statute of limitations lapses, and other changes to the reserves. The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense. Accrued interest and penalties related to unrecognized tax benefits included in the Consolidated Balance Sheet were $0.9 million and $1.0 million as of February 2, 2019 and February 3, 2018, respectively. An immaterial amount of interest and penalties were recognized in the provision for income taxes during Fiscal 2018, Fiscal 2017 and Fiscal 2016. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company participates in the Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”). The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The company participates in the Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”). As part of the CAP, tax years are audited on a real-time basis so that all or most issues are resolved prior to the filing of the federal tax return. The IRS has completed examinations under CAP through February 3, 2018, for which the majority of the issues have been resolved. The Company does not anticipate that any adjustments will result in a material change to its financial position, results of operations or cash flows. With respect to state and local jurisdictions and countries outside of the United States, with limited exceptions, generally, the Company and its subsidiaries are no longer subject to income tax audits for tax years before 2012. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that are expected to result from these years. A reconciliation between the statutory federal income tax rate and the effective income tax rate from continuing operations follows:
|  | For the Years Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Federal income tax rate |  |  | 21.0 | % |  |  | 33.7 | % |  |  | 35.0 | %
State income taxes, net of federal income tax effect |  |  | 3.8 |  |  |  | 2.9 |  |  |  | 2.8 |
Foreign rate differential |  |  | (0.7 | ) |  |  | (1.9 | ) |  |  | (1.7 | )
Impact of Tax Cuts and Jobs Act |  |  | 0.1 |  |  |  | (3.0 | ) |  |  | 0.0 |
Valuation allowance changes, net |  |  | 0.4 |  |  |  | (0.2 | ) |  |  | 0.4 |
Change in unrecognized tax benefits |  |  | (0.2 | ) |  |  | 0.3 |  |  |  | 0.4 |
Other |  |  | (0.3 | ) |  |  | (2.9 | ) |  |  | (0.3 | )
|  |  | 24.1 | % |  |  | 28.9 | % |  |  | 36.6 | %

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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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