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Note 8 - Income Taxes | 12 Months Ended
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Feb. 01, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
( 8 ) | Income Taxes
The Company’s income (loss) before income taxes from domestic and foreign operations (which include the U.K., Canada, China, Denmark and Ireland), is as follows (in thousands):
|  | Fiscal year ended |
|  | February 1, |  |  | February 2, |
|  | 2020 |  |  | 2019 |
Domestic |  | $ | 4,862 |  |  | $ | (4,175 | )
Foreign |  |  | (3,301 | ) |  |  | (14,332 | )
Total income (loss) before income taxes |  | $ | 1,561 |  |  | $ | (18,507 | )
The components of the income tax expense (benefit) are as follows (in thousands):
|  | Fiscal year ended |
|  | February 1, |  |  | February 2, |
|  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 1,068 |  |  | $ | (508 | )
U.S. State |  |  | 498 |  |  |  | (263 | )
Foreign |  |  | (45 | ) |  |  | (448 | )
Deferred: |  |  |  |  |  |  |  |
U.S. Federal |  |  | 31 |  |  |  | (836 | )
U.S. State |  |  | (311 | ) |  |  | 239 |
Foreign |  |  | 59 |  |  |  | 1,242 |
Income tax expense (benefit) |  | $ | 1,300 |  |  | $ | (574 | )
The provision for income taxes was $1.3 million in fiscal 2019 compared to an income tax benefit of $0.6 million in fiscal 2018. The 2019 effective rate of 83.0% differed from the statutory rate of 21% primarily due to the valuation allowance recorded in certain foreign jurisdictions and the $0.2 million negative tax impact of equity awards. The 2018 effective rate of 3.1% differed from the statutory rate of 21% primarily due to the valuation allowance recorded in certain foreign jurisdictions. As the Company has incurred a cumulative book loss in the U.K. over the three -year period ended February 2, 2019 , management evaluated the realizability of the Company’s U.K. deferred tax assets, including an analysis of all available positive and negative evidence. The three -year cumulative loss is a significant piece of negative evidence. ASC 740 requires objective historical evidence be given more weight than subjective evidence, such as forecasts of future income. Accordingly, in the fourth quarter of fiscal 2018, the Company recorded a $3.7 million valuation allowance on its U.K. deferred tax assets, in addition to a valuation allowance of $0.5 million in certain other foreign jurisdictions. In fiscal 2019, the Company recorded an additional valuation allowan ce of $0.7 million on its deferred tax assets in certain foreign jurisdictions due to cumulative losses and uncertainty about future earnings forecast. We continue to assess the realizability of our deferred tax assets and may record additional valuation allowances during 2020 due to the negative impact of the COVID- 19 pandemic. Temporary differences that gave rise to deferred tax assets and liabilities are as follows (in thousands):
|  | February 1, |  |  | February 2, |
|  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |
Operating lease liability |  | $ | 36,301 |  |  | $ | 3,740 |
Net operating loss carryforwards |  |  | 3,049 |  |  |  | 4,371 |
Deferred revenue |  |  | 2,693 |  |  |  | 2,661 |
Deferred compensation |  |  | 1,893 |  |  |  | 1,729 |
Accrued compensation |  |  | 1,340 |  |  |  | 88 |
Investment in affiliates |  |  | 1,202 |  |  |  | - |
Receivable write-offs |  |  | 664 |  |  |  | 477 |
Inventories |  |  | 593 |  |  |  | 987 |
Intangible assets |  |  | 588 |  |  |  | 1,201 |
Carryforward of tax credits |  |  | 87 |  |  |  | 861 |
Other |  |  | 853 |  |  |  | 1,056 |
Total gross deferred tax assets |  |  | 49,263 |  |  |  | 17,171 |
Less: Valuation allowance |  |  | (6,774 | ) |  |  | (5,079 | )
Total deferred tax assets, net of valuation allowance |  |  | 42,489 |  |  |  | 12,092 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Operating lease right-of-use assets |  |  | (31,062 | ) |  |  | - |
Depreciation |  |  | (3,667 | ) |  |  | (3,650 | )
Deferred revenue |  |  | (2,726 | ) |  |  | (4,088 | )
Deferred expense |  |  | (1,257 | ) |  |  | (763 | )
Other |  |  | (366 | ) |  |  | (492 | )
Total deferred tax liabilities |  |  | (39,078 | ) |  |  | (8,993 | )
Net deferred tax assets |  | $ | 3,411 |  |  | $ | 3,099 |
As of February 1, 2020 , the Company had gross net operating loss (NOL) carryforwards of approximately $15.4 million, most of which relate to the U.K. where NOLs have no expiration date. The Company continues to assert its investments in foreign subsidiaries are permanent in duration and it is not practical to estimate the income tax liability on the outside basis differences. As of February 1, 2020 , the Company had total unrecognized tax benefits of $0.2 million, of which approximately $0.2 million would favorably impact the Company’s provision for income taxes if recognized. As of February 2, 2019 , the Company had total unrecognized tax benefits of $0.4 million, of which approximately $0.2 million would favorably impact the Company’s provision for income taxes if recognized. The Company reviews its uncertain tax positions periodically and accrues interest and penalties accordingly. Accrued interest and penalties included within other liabilities in the consolidated balance sheets were less than $0.1 million for both years ended as of February 1, 2020 and February 2, 2019 . The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes within the consolidated statement of operations. For the years ended February 1, 2020 and February 2, 2019 , the Company recognized an expense of less than $0.1 million for interest and penalties for each year. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance as of December 30, 2017 (1) |  | $ | 659 |
Increases for prior year tax positions |  |  | 288 |
Decreases for prior year tax positions |  |  | (333 | )
Settlements |  |  | (183 | )
Lapse of statute of limitations |  |  | (13 | )
Balance as of February 2, 2019 |  |  | 418 |
Increases for prior year tax positions |  |  | 67 |
Decreases for prior year tax positions |  |  | (288 | )
Lapse of statute of limitations |  |  | (19 | )
Balance as of February 1, 2020 |  | $ | 178 |
( 1 ) For the five -week transition period ending February 3, 2018, there was no activity. Management estimates it is reasonably possible that the amount of unrecognized tax benefits could decrease by as much as $0.2 million in the next twelve months as a result of the resolution of audits currently in progress involving issues common to multinational corporations and the lapsing of the statute of limitations. The following tax years remain open in the Company’s major taxing jurisdictions as of February 1, 2020 :
United States (Federal) | 2016 through 2019
United Kingdom | 2017 through 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=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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