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Note 8 - Income Taxes | 12 Months Ended
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Jan. 28, 2023
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
(8) | Income Taxes
The Company’s income before income taxes from domestic and foreign operations (which include the U.K., Canada, Ireland, China, and Denmark (prior to its closing in January 2021)), is as follows (in thousands):
|  | Fiscal year ended |
|  | January 28, |  |  | January 29, |
|  | 2023 |  |  | 2022 |
Domestic |  | $ | 57,595 |  |  | $ | 46,473 |
Foreign |  |  | 4,329 |  |  |  | 4,237 |
Total income (loss) before income taxes |  | $ | 61,924 |  |  | $ | 50,710 |
The components of the income tax expense are as follows (in thousands):
|  | Fiscal year ended |
|  | January 28, |  |  | January 29, |
|  | 2023 |  |  | 2022 |
Current: |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 10,190 |  |  | $ | 8,921 |
U.S. State |  |  | 2,617 |  |  |  | 2,017 |
Foreign |  |  | 30 |  |  |  | 128 |
Deferred: |  |  |  |  |  |  |  |
U.S. Federal |  |  | 368 |  |  |  | (4,870 | )
U.S. State |  |  | 285 |  |  |  | (2,140 | )
Foreign |  |  | 449 |  |  |  | (611 | )
Income tax expense |  | $ | 13,939 |  |  | $ | 3,445 |
The provision for income taxes was $13.9 million in fiscal 2022 compared to $3.4 million in fiscal 2021. The 2022 effective rate of 22.5% differed from the statutory rate of 21% primarily due to state income tax expense. The 2021 effective rate of 6.8% differed from the statutory rate of 21% primarily due to the tax benefit resulting from the reversal of the $7.8 million valuation allowance in North America. Temporary differences that gave rise to deferred tax assets and liabilities are as follows (in thousands):
|  | January 28, |  |  | January 29, |
|  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |  |  |
Operating lease liability |  | $ | 21,877 |  |  | $ | 27,504 |
Deferred revenue |  |  | 3,116 |  |  |  | 3,228 |
Accrued compensation |  |  | 2,941 |  |  |  | 2,678 |
Net operating loss carryforwards |  |  | 2,776 |  |  |  | 3,496 |
Depreciation |  |  | 1,581 |  |  |  | 1,636 |
Investment in affiliates |  |  | 1,576 |  |  |  | 1,583 |
Accrued expenses |  |  | 1,213 |  |  |  | 820 |
Deferred compensation |  |  | 962 |  |  |  | 1,149 |
Inventories |  |  | 842 |  |  |  | 634 |
Receivables write-offs |  |  | 563 |  |  |  | 704 |
Carryforward of tax credits |  |  | 311 |  |  |  | 227 |
Intangible assets |  |  | 240 |  |  |  | 321 |
Other |  |  | 404 |  |  |  | 920 |
Total gross deferred tax assets |  |  | 38,402 |  |  |  | 44,900 |
Less: Valuation allowance |  |  | (8,000 | ) |  |  | (9,795 | )
Total deferred tax assets, net of valuation allowance |  |  | 30,402 |  |  |  | 35,105 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Operating lease right-of-use assets |  |  | (17,828 | ) |  |  | (21,395 | )
Depreciation |  |  | (3,634 | ) |  |  | (4,369 | )
Deferred expense |  |  | (1,402 | ) |  |  | (1,708 | )
Inventories |  |  | (928 | ) |  |  | - |
Other |  |  | (18 | ) |  |  | (20 | )
Total deferred tax liabilities |  |  | (23,810 | ) |  |  | (27,492 | )
Net deferred tax assets |  | $ | 6,592 |  |  | $ | 7,613 |
As of January 28, 2023, the Company had gross net operating loss (NOL) carryforwards of approximately $11.1 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 January 28, 2023, the Company had total unrecognized tax benefits of $0.1 million, of which approximately $0.1 million would favorably impact the Company’s provision for income taxes if recognized. As of January 29, 2022, the Company had total unrecognized tax benefits of $0.3 million, of which approximately $0.3 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 January 28, 2023 and January 29, 2022. 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 January 28, 2023 and January 29, 2022, the Company recognized a benefit of less than $0.1 million for interest and penalties. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|  | January 28, |  |  | January 29, |
|  | 2023 |  |  | 2022 |
Balance at beginning of year |  |  | 334 |  |  |  | 170 |
Increases for prior year tax positions |  |  | - |  |  |  | 164 |
Settlements |  |  | (268 | ) |  |  | - |
Balance at end of year |  |  | 66 |  |  |  | 334 |
Management estimates it is reasonably possible that the amount of unrecognized tax benefits could decrease by as much as $0.1 million in the next twelve months as a result of the resolution of audits currently in progress involving issues common to multinational corporations. The following tax years remain open in the Company’s major taxing jurisdictions as of January 28, 2023:
United States (Federal) | 2018 through 2021
United Kingdom | 2017 through 2021
The Company also files tax returns in various other international jurisdictions and numerous states for which various tax years are subject to examination and currently involved in audits.

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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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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