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INCOME TAXES | 12 Months Ended
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Aug. 01, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 15—INCOME TAXES Income Tax (Benefit) Expense For the fiscal year ended August 1, 2020, (loss) income before income taxes, consists of $(340.8) million from U.S. continuing operations and $(3.6) million) from foreign continuing operations. For the fiscal year ended August 3, 2019, (loss) income before income taxes consists of $(351.6) million from U.S. continuing operations and $7.0 million from foreign continuing operations. For the fiscal year ended July 28, 2018, income before income taxes consists of $202.6 million from U.S. operations and $7.4 million from foreign operations. The total (benefit) provision for income taxes included in the Consolidated Statements of Operations consisted of the following:
(in thousands) | 2020 |  | 2019 |  | 2018
Continuing operations | $ | (90,445 | ) |  | $ | (58,936 | ) |  | $ | 47,215 |
Discontinued operations | (4,465 | ) |  | (3,723 | ) |  | — |
Total | $ | (94,910 | ) |  | $ | (62,659 | ) |  | $ | 47,215 |
The income tax expense (benefit) in continuing operations for fiscal 2020, 2019 and 2018 was allocated as follows:
(in thousands) | 2020 |  | 2019 |  | 2018
Income tax expense | $ | (90,445 | ) |  | $ | (58,936 | ) |  | $ | 47,215 |
Other comprehensive income | (45,700 | ) |  | (33,854 | ) |  | 1,561 |
Total | $ | (136,145 | ) |  | $ | (92,790 | ) |  | $ | 48,776 |
Total federal, state, and foreign income tax (benefit) expense in continuing operations consists of the following:
(in thousands) | Current |  | Deferred |  | Total
Fiscal 2020 |  |  |  |  |  |  |  |
U.S. Federal | $ | (22,681 | ) |  | $ | (45,315 | ) |  | $ | (67,996 | )
State and Local | 654 |  |  | (23,058 | ) |  | (22,404 | )
Foreign | 2,515 |  |  | (2,560 | ) |  | (45 | )
| $ | (19,512 | ) |  | $ | (70,933 | ) |  | $ | (90,445 | )
Fiscal 2019 |  |  |  |  |  |  |  |
U.S. Federal | $ | 11,402 |  |  | $ | (59,528 | ) |  | $ | (48,126 | )
State and Local | (11,049 | ) |  | (1,767 | ) |  | (12,816 | )
Foreign | 1,919 |  |  | 87 |  |  | 2,006 |
| $ | 2,272 |  |  | $ | (61,208 | ) |  | $ | (58,936 | )
Fiscal 2018 |  |  |  |  |  |  |  |
U.S. Federal | $ | 46,210 |  |  | $ | (16,508 | ) |  | $ | 29,702 |
State and Local | 13,310 |  |  | 1,878 |  |  | 15,188 |
Foreign | 2,374 |  |  | (49 | ) |  | 2,325 |
| $ | 61,894 |  |  | $ | (14,679 | ) |  | $ | 47,215 |
Total income tax expense (benefit) in continuing operations was different than the amounts computed by applying the statutory federal income tax rate to income before income taxes because of the following:
(in thousands) | 2020 |  | 2019 |  | 2018
Computed “expected” tax expense | $ | (72,335 | ) |  | $ | (70,740 | ) |  | $ | 57,499 |
State and local income tax, net of Federal income tax benefit | (19,344 | ) |  | (17,524 | ) |  | 10,501 |
Non-deductible expenses | 3,033 |  |  | 5,670 |  |  | 955 |
Tax effect of share-based compensation | 2,715 |  |  | 125 |  |  | 149 |
General business credits | (1,855 | ) |  | (1,757 | ) |  | (552 | )
Unrecognized tax benefits | (7,441 | ) |  | (8,130 | ) |  | 618 |
Nondeductible goodwill impairment | 44,226 |  |  | 32,619 |  |  | — |
Impacts related to the TCJA | — |  |  | — |  |  | (21,719 | )
Impacts related to the CARES Act | (39,497 | ) |  | — |  |  | — |
Other, net | 53 |  |  | 801 |  |  | (236 | )
Total income tax expense | $ | (90,445 | ) |  | $ | (58,936 | ) |  | $ | 47,215 |
Uncertain Tax Positions A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
(in thousands) | 2020 |  | 2019 |  | 2018
Unrecognized tax benefits at beginning of period | $ | 40,142 |  |  | $ | 1,104 |  |  | $ | 478 |
Unrecognized tax benefits added during the period | 5,950 |  |  | — |  |  | 626 |
Unrecognized tax benefits assumed in a business combination | — |  |  | 49,566 |  |  | — |
Decreases in unrecognized tax benefits due to statute expiration | (1,595 | ) |  | (10,528 | ) |  | — |
Decreases in unrecognized tax benefits due to settlements | (12,375 | ) |  | — |  |  | — |
Unrecognized tax benefits at end of period | $ | 32,122 |  |  | $ | 40,142 |  |  | $ | 1,104 |
In addition, the Company has $8.4 million paid on deposit to various governmental agencies to cover the above liability. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. For fiscal 2020, 2019 and 2018, total accrued interest and penalties was $7.0 million, $15.6 million, and $0.1 million, respectively. The Company is currently under examination in several taxing jurisdictions and remains subject to examination until the statute of limitations expires for the respective taxing jurisdiction or an agreement is reached between the taxing jurisdiction and the Company. As of August 1, 2020, the Company is no longer subject to federal income tax examinations for fiscal years before 2014 and in most states is no longer subject to state income tax examinations for fiscal years before 2008 and 2015 for Supervalu and United Natural Foods, Inc., respectively. Due to the implementation of the CARES Act, NOLs were carried back into fiscal years 2014 and 2015, which extends the federal statute of limitations on those years up to the amount of the carryback claim. Based on the possibility of the closing of pending audits and appeals, or expiration of the statute of limitations, it is reasonably possible that the amount of unrecognized tax benefits will decrease by up to $8.3 million during the next 12 months. Deferred Tax Assets and Liabilities The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets and deferred tax liabilities at August 1, 2020 and August 3, 2019 are presented below:
(in thousands) | August 1, 2020 |  | August 3, 2019
Deferred tax assets: |  |  |
Inventories, principally due to additional costs inventoried for tax purposes | $ | 78 |  |  | $ | 2 |
Compensation and benefits related | 103,312 |  |  | 100,942 |
Accounts receivable, principally due to allowances for uncollectible accounts | 12,217 |  |  | 3,355 |
Accrued expenses | 32,844 |  |  | 15,022 |
Net operating loss carryforwards | 13,464 |  |  | 44,396 |
Other tax carryforwards (interest, charitable contributions) | 6,971 |  |  | 10,143 |
Foreign tax credits | 445 |  |  | 445 |
Intangible assets | 67,226 |  |  | 5,869 |
Interest rate swap agreements | 36,949 |  |  | 20,518 |
Other deferred tax assets | 5,258 |  |  | 2,946 |
Total gross deferred tax assets | 278,764 |  |  | 203,638 |
Less valuation allowance | (3,098 | ) |  | (445 | )
Net deferred tax assets | $ | 275,666 |  |  | $ | 203,193 |
Deferred tax liabilities: |  |  |
Plant and equipment, principally due to differences in depreciation | $ | 125,463 |  |  | $ | 117,195 |
Inventories | 42,579 |  |  | 51,392 |
Intangible assets | — |  |  | 1,016 |
Other | — |  |  | 370 |
Total deferred tax liabilities | 168,042 |  |  | 169,973 |
Net deferred tax assets | $ | 107,624 |  |  | $ | 33,220 |
CARES Act The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 and contains significant business tax provision changes to the U.S. tax code, including temporary expansion to the deductibility of interest expense and the ability to treat qualified improvement property as eligible for bonus depreciation as well as the ability to carry back net operating losses. In addition, the CARES Act changed the required filing of the Company’s federal income tax return from May 2020 to July 2020, and allows remittances of employer FICA payments previously due between March 2020 and December 2020 to be deferred until December 2021 and December 2022. Prior to the application of the CARES Act, the Company had a deferred tax asset related to $203 million of federal net operating losses that were available for unlimited carryforward (but no carryback) pursuant to provisions of the 2017 Tax Cuts and Jobs Act, which permitted taxpayers to carryforward net operating losses indefinitely. The CARES Act provides the Company the ability to carry these losses back at a 35% federal tax rate during the carry back periods, as compared to the current 21% federal tax rate. This resulted in a tax benefit of approximately $39.5 million, an estimate of which the Company recorded in the third quarter of Fiscal 2020, and which was finalized during the fourth quarter of fiscal 2020. The entire tax benefit associated with the net operating loss carry back has been recorded as a current tax receivable in the Consolidated Balance Sheet as of August 1, 2020. Tax Credits and Valuation Allowances At August 1, 2020, the Company had gross deferred tax assets of approximately $278.8 million. The Company regularly reviews its deferred tax assets for recoverability to evaluate whether it is more likely than not that they will be realized. In making this evaluation, the Company considers the statutory recovery periods for the assets, along with available sources of future taxable income, including reversals of existing taxable temporary differences, tax planning strategies, history of taxable income, and projections of future income. The Company gives more significance to objectively verifiable evidence, such as the existence of deferred tax liabilities that are forecast to generate taxable income within the relevant carryover periods, and a history of earnings. A valuation allowance is provided when the Company concludes, based on all available evidence, that it is more likely than not that the deferred tax assets will not be realized during the applicable recovery period. The Company has reviewed these factors in evaluating the recoverability of its deferred tax assets. As of August 1, 2020, the Company anticipates sufficient future taxable income to realize all of its deferred tax assets within the applicable recovery periods with the exception of certain foreign tax credits and state net operating losses. Accordingly, the Company has established valuation allowances against that portion of its state net operating losses and foreign tax credits that, in the Company’ s judgment, are not likely to be realized within the applicable recovery periods. At August 1, 2020, the Company had net operating loss carryforwards of approximately $4.1 million for federal income tax purposes. Of this amount, approximately $2.3 million of the federal carryforwards are subject to an annual limitation of approximately $0.3 million under Internal Revenue Code Section 382. These Section 382-limited carryforwards expire at various times between fiscal years 2021 and 2027. As of August 1, 2020, the Company anticipates sufficient future taxable income over the periods in which the net operating losses can be utilized. The Company also has the availability of future reversals of taxable temporary differences that are expected to generate taxable income in the future. Therefore, the ultimate realization of net operating losses for federal purposes appears more likely than not at August 1, 2020 and correspondingly no valuation allowance has been established. At August 1, 2020, the Company had disallowed charitable contribution carryforwards of approximately $26.7 million that are available for carryforward over five years. As of August 1, 2020, the Company anticipates sufficient future taxable income to fully utilize the charitable contribution carryovers within the applicable five-year carryforward period and correspondingly, no valuation allowance has been established. The retained earnings of the Company’s non-U.S. subsidiary were subject to deemed U.S. repatriation and taxation during fiscal 2017 pursuant to the TCJA, and existing foreign tax credits were utilized to offset the resulting liability. We have established a deferred tax asset for the remaining U.S. foreign tax credits of $0.4 million. Such credits are offset by a valuation allowance. Effective Tax Rate Our effective income tax rate for continuing operations was a benefit rate of 26.3% and 17.1% on pre-tax losses for fiscal 2020 and 2019 respectively and an expense rate of 22.1% on pre-tax income for fiscal 2018. The increase in the benefit rate for fiscal 2020 was primarily driven by the NOL carryback provisions of the CARES Act. Other Under ASU 2016-09, the Company accounts for excess tax benefits or tax deficiencies related to share-based payments in its provision for income taxes as opposed to additional paid-in capital. The Company recognized income tax expense of $4.2 million related to tax deficiencies for share-based payments for fiscal 2020, $1.6 million of income tax expense related to tax deficiencies for share-based payments for fiscal 2019 and $1.1 million of income tax expense related to tax deficiencies for share-based payments for fiscal 2018.

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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=84230637&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=116825942&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=84230637&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=116825942&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=84230637&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 + Details
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