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Income Taxes | 12 Months Ended
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Jan. 29, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | 15. Income Taxes On December 22, 2017, the U.S. government enacted comprehensive tax legislation in the form of the Tax Cuts and Jobs Act (“the Tax Act”). The Tax Act significantly changed U.S. international tax laws for tax years beginning after December 31, 2017 and included a provision designed to currently tax global intangible low-taxed income (“GILTI”) earned by non-U.S. corporate subsidiaries of large U.S. shareholders. The Company has elected to treat GILTI as a period expense, and the effect of the GILTI inclusion for Fiscal 2021 is not material. In addition, on March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to address the COVID-19 pandemic. The CARES Act allows net operating losses (“NOL”) generated within tax years 2018 through 2020 to be carried back up to five years, including years in which the U.S. federal corporate income tax rate was 35%, as opposed to the current U.S federal corporate income tax rate of 21%. The CARES Act contains other key income and payroll tax provisions, including the immediate write-off of qualified improvement property. The components of income (loss) before income taxes are:
|  | For the Years Ended |
|  | January 29, |  |  | January 30, |  |  | February 1, |
(In thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
U.S. |  | $ | 520,952 |  |  | $ | (294,208 | ) |  | $ | 229,906 |
Foreign |  |  | 37,970 |  |  |  | 1,935 |  |  |  | 15,372 |
Total |  | $ | 558,922 |  |  | $ | (292,273 | ) |  | $ | 245,278 |
The significant components of the Company’s deferred tax assets and liabilities are as follows:
|  | January 29, |  |  | January 30, |
(in thousands) |  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |
Operating lease ROU assets |  | $ | 380,117 |  |  | $ | 389,604 |
Net Operating Loss |  |  | 27,643 |  |  |  | 10,160 |
Employee compensation and benefits |  |  | 20,521 |  |  |  | 3,124 |
Accruals not currently deductible |  |  | 11,645 |  |  |  | 8,538 |
Deferred compensation |  |  | 8,429 |  |  |  | 7,400 |
Other long term assets |  |  | 8,208 |  |  |  | — |
State tax credits |  |  | 7,546 |  |  |  | 7,407 |
Inventories |  |  | 5,220 |  |  |  | 3,267 |
Capital Loss |  |  | 4,213 |  |  |  | 4,471 |
Allowance for Doubtful Accounts |  |  | 3,201 |  |  |  | 750 |
Foreign tax credits |  |  | 2,982 |  |  |  | 943 |
Other |  |  | 5,757 |  |  |  | 2,093 |
Gross deferred tax assets |  |  | 485,482 |  |  |  | 437,757 |
Valuation allowance |  |  | (25,628 | ) |  |  | (12,263 | )
Total deferred tax assets |  |  | 459,854 |  |  |  | 425,494 |
Deferred tax liabilities: |  |  |  |  |  |
Operating lease liabilities |  | $ | (308,299 | ) |  | $ | (310,888 | )
Property and equipment |  |  | (87,192 | ) |  |  | (56,487 | )
Convertible Senior Note |  |  | (15,384 | ) |  |  | (20,589 | )
Prepaid expenses |  |  | (2,215 | ) |  |  | (2,294 | )
Other |  |  | (2,597 | ) |  |  | (2,191 | )
Total deferred tax liabilities |  | $ | (415,687 | ) |  | $ | (392,449 | )
Total deferred tax assets, net |  | $ | 44,167 |  |  | $ | 33,045 |
The increase in net deferred tax assets was primarily due to an increase in federal net operating loss carryovers related to the acquisition of Quiet Logistics, Inc. and employee compensation and benefits, partially offset by an increase in property and equipment. As of January 29, 2022, the Company had deferred tax assets related to federal, state and foreign net operating loss carryovers of $15.3 million, $6.1 million and $6.2 million, respectively that could be utilized to reduce future years’ tax liabilities. A portion of these net operating loss carryovers expire in future years and some have an indefinite carryforward period. Management believes it is more likely than not that a portion of state net operating loss and the foreign net operating loss carryovers will not reduce future years’ tax liabilities in certain jurisdictions. As such, a valuation allowance of $2.7 million has been recorded on the deferred tax assets related to a portion of the state net operating loss carryovers as of January 29, 2022. Further, valuation allowances of $6.1 million and $4.3 million have been recorded on the deferred tax assets related to the cumulative foreign net operating loss carryovers as of January 29, 2022 and January 30, 2021 respectively. We also provided for valuation allowances of approximately $1.6 million and $0.8 million related to other foreign deferred tax assets as of January 29, 2022 and January 30, 2021, respectively. The Company had foreign tax credit carryovers in the amount of $3.0 million and $0.9 million as of January 29, 2022 and January 30, 2021, 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 a certain category of foreign tax credit carryover will not reduce future years’ tax liabilities. As such, valuation allowances of $1.0 million and $0.9 million have been recorded on the deferred tax assets related to the foreign tax credit carryovers as of January 29, 2022 and January 30, 2021, respectively. The Company had state income tax credit carryforwards of $7.5 million (net of federal tax) and $7.4 million (net of federal tax) as of January 29, 2022 and January 30, 2021, respectively. These income tax credits can be utilized to offset future state income taxes, with the majority having a carryforward period of 16 years. They will begin to expire in Fiscal 2024. 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, valuation allowances of $1.8 million and $1.8 million have been recorded on the deferred tax assets related to the cumulative state income tax credit carryovers as of January 29, 2022 and January 30, 2021, respectively. The Company had U.S. and state capital losses carryforwards of $4.2 million and $4.5 million as of January 29, 2022 and January 30, 2021, respectively. Generally, the capital losses have a carryforward period of 5 years. The Company has recorded a valuation allowance for $4.2 million and $4.5 million as of January 29, 2022 and January 30, 2021, respectively, on the deferred tax asset attributable to these capital losses. In Fiscal 2021, the Company recorded a deferred tax asset of $8.2 million for other long term assets related to the acquisition of Quiet Logistics, Inc. and certain other strategic investments. Management believes it is more likely than not that these other long term assets will not reduce future years’ tax liabilities. As such, the Company recorded a valuation allowance for $8.2 million as of January 29, 2022 for the deferred tax asset attributable to these assets. Significant components of the provision (benefit) for income taxes are as follows:
|  | For the Years Ended |
|  | January 29, |  |  | January 30, |  |  | February 1, |
(In thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 107,493 |  |  | $ | (59,080 | ) |  | $ | 25,745 |
Foreign taxes |  |  | 19,671 |  |  |  | 7,443 |  |  |  | 8,137 |
State |  |  | 24,979 |  |  |  | 3,528 |  |  |  | 13,598 |
Total current |  |  | 152,143 |  |  |  | (48,109 | ) |  |  | 47,480 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  | $ | (12,637 | ) |  | $ | (17,286 | ) |  | $ | 12,289 |
Foreign taxes |  |  | (1,284 | ) |  |  | (4,622 | ) |  |  | (1,213 | )
State |  |  | 1,071 |  |  |  | (12,982 | ) |  |  | (4,535 | )
Total deferred |  |  | (12,850 | ) |  |  | (34,890 | ) |  |  | 6,541 |
(Benefit) Provision for income taxes |  | $ | 139,293 |  |  | $ | (82,999 | ) |  | $ | 54,021 |
As of January 29, 2022, the undistributed earnings of the Company’s foreign subsidiaries were approximately $87.8 million. The Company intends to permanently reinvest a portion of its earnings outside of the United States for the foreseeable future. On the remaining earnings, the Company has no t recognized deferred tax expense because we expect any potential distribution to be made from previously taxed earnings, or qualify for the 100 percent dividends received deduction, along with negligible foreign withholding taxes. The following table summarizes the activity related to our unrecognized tax benefits:
|  | For the Years Ended |
|  | January 29, |  |  | January 30, |  | February 1, |
(In thousands) |  | 2022 |  |  | 2021 |  | 2020 |
Unrecognized tax benefits, beginning of the year balance |  | $ | 2,563 |  |  | $ | 2,781 |  | $ | 6,534 |
Increases in current period tax positions |  |  | 251 |  |  |  | 602 |  |  | 422 |
Increases in tax positions of prior periods |  |  | 688 |  |  |  | 1 |  |  | 151 |
Settlements |  |  | 0 |  |  |  | (450 | ) |  | (2,223 | )
Lapse of statute of limitations |  |  | (93 | ) |  |  | (289 | ) |  | (720 | )
Decreases in tax positions of prior periods |  |  | (150 | ) |  |  | (82 | ) |  | (1,383 | )
Unrecognized tax benefits, end of the year balance |  | $ | 3,259 |  |  | $ | 2,563 |  | $ | 2,781 |
As of January 29, 2022, the gross amount of unrecognized tax benefits was $3.3 million, of which $2.6 million would affect the effective income tax rate if recognized. The gross amount of unrecognized tax benefits as of January 30, 2021 was $2.6 million, of which $2.0 million would affect the effective income tax rate if recognized. Unrecognized tax benefits increased by $0.7 million during Fiscal 2021, decreased by $0.2 million during Fiscal 2020, and increased by $3.8 million during Fiscal 2019. Over the next twelve months, the Company believes it is reasonably possible that the unrecognized tax benefits could decrease by as much as $1.0 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 Sheets were $0.9 million and $0.7 million as of January 29, 2022 and January 30, 2021, respectively. An immaterial amount of interest and penalties was recognized in the provision (benefit) for income taxes during Fiscal 2021, Fiscal 2020, and Fiscal 2019. The Company and its subsidiaries file income tax returns in the U.S. federal and various state and foreign jurisdictions. The IRS has completed examinations through February 1, 2020. 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 Fiscal 2016 (ended January 28, 2017). 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 follows:
|  | For the Years Ended |
|  | January 29, |  |  | January 30, |  |  | February 1, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Federal income tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State income taxes, net of federal income tax effect |  |  | 4.1 |  |  |  | 3.1 |  |  |  | 3.6 |
Foreign rate differential |  |  | 0.6 |  |  |  | 0.3 |  |  |  | (0.6 | )
International provisions of Tax Act |  |  | (0.5 | ) |  |  | 0.0 |  |  |  | (2.1 | )
Rate differential on CARES Act NOL carryback |  |  | 0.0 |  |  |  | 8.1 |  |  |  | 0.0 |
Valuation allowance changes, net |  |  | 0.2 |  |  |  | (2.6 | ) |  |  | 0.3 |
Non-deductible executive compensation |  |  | 1.3 |  |  |  | (2.1 | ) |  |  | 0.6 |
Change in unrecognized tax benefits |  |  | 0.1 |  |  |  | (0.1 | ) |  |  | 0.1 |
Share Based Payments |  |  | (0.8 | ) |  |  | 0.4 |  |  |  | (0.5 | )
Other |  |  | (1.1 | ) |  |  | 0.3 |  |  |  | (0.4 | )
|  |  | 24.9 | % |  |  | 28.4 | % |  |  | 22.0 | %
The Company recorded income tax expense of $139.3 million (an effective tax rate of 24.9%) in Fiscal 2021, compared to an income tax benefit of $83.0 million (an effective tax benefit rate of 28.4%) in Fiscal 2020, and income tax expense of $54.0 million (an effective tax rate of 22.0%) in Fiscal 2019.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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