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Income Taxes | 12 Months Ended
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Feb. 03, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Changes in Tax Law In December 2017, the 2017 Tax Cuts and Jobs Act in the U.S. (referred to herein as the “Tax Reform”), was enacted into law. The Tax Reform includes significant changes to the U.S. corporate income tax system, including a reduction in the U.S. federal corporate income tax rate from 35% to 21% and a one-time mandatory transition tax on accumulated foreign earnings. The Tax Reform also establishes new tax laws that will be effective for calendar 2018, including but not limited to (i) a new provision designed to tax global intangible low-taxed income (“GILTI”), (ii) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries, (iii) a limitation on deductible interest expense and (iv) limitations on the deductibility of certain executive compensation. The Securities and Exchange Commission (“SEC”) issued authoritative guidance which addresses accounting for the impact of the Tax Reform. This guidance provides a measurement period, which should not extend beyond one year from the enactment date, during which the Company may finalize the accounting for the impacts of the Tax Reform, and allows for the Company to record provisional estimates of such amounts. As a result, during fiscal 2018, the Company recorded estimated additional income tax expense of $47.9 million. This is comprised of a provisional charge of $24.9 million for the re-measurement of U.S. deferred tax assets and a provisional charge of $23.0 million for the estimated effects of the transitional tax on the deemed repatriation of foreign earnings. The income tax payable related to the transition tax is due over an eight year period beginning in calendar 2018. The amount that is payable in the next 12 months is approximately $1.9 million and has been included in accrued expenses in the Company’s consolidated balance sheet. The Company has provided for any additional tax liabilities on amounts that are estimated to be repatriated from foreign operations as a result of the Tax Reform. We have not provided for other income taxes on undistributed foreign earnings expected to be reinvested outside the U.S. If in the future we decide to repatriate such earnings, we would incur other incremental taxes. Our current plans do not indicate a need to repatriate them to fund our U.S. cash requirements. Based on the Company’s current interpretation of the Tax Reform, reasonable estimates were made to record provisional adjustments during fiscal 2018. These estimates may change, and the Company will continue to refine such amounts within the measurement period allowed. These estimates may be impacted by a number of additional considerations, including, but not limited to, the state level income tax impacts of the Tax Reform, clarifications of or changes to the Tax Reform (including the issuance of final regulations and evolving technical interpretations), additional guidance issued by the SEC or FASB, and the Company’s ongoing analysis of historical earnings and profits as well as tax pools. The Company continues to analyze the provisions of the Tax Reform, including but not limited to, the creation of a new minimum tax called the base erosion anti-abuse tax; a new provision that taxes U.S. allocated expenses (e.g. interest and general administrative expenses) as well as certain GILTI from foreign operations; a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; a new limitation on deductible interest expense; and limitations on the deductibility of certain employee compensation. Under GAAP, companies are allowed to make an accounting policy election to either treat taxes resulting from GILTI as a current-period expense when they are incurred or factor such amounts into the measurement of deferred taxes. The Company has not completed its analysis of the effects of the GILTI provisions and will further consider the accounting policy election within the measurement period allowed. During the fourth quarter of fiscal 2018, the Company also early adopted authoritative guidance which addresses certain stranded income tax effects in accumulated other comprehensive income (loss) resulting from the Tax Reform. As a result, the Company recorded a cumulative adjustment of $1.2 million to reclassify the stranded income tax effects from the Tax Reform that were included in accumulated other comprehensive income (loss) to retained earnings. Income Tax Expense Income tax expense (benefit) is summarized as follows (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 3, 2018 |  | Jan 28, 2017 |  | Jan 30, 2016
Federal: |  |  |  |  |
Current | $ | 34,181 |  |  | $ | 8,212 |  |  | $ | 23,618 |
Deferred | 21,595 |  |  | (636 | ) |  | 4,038 |
State: |  |  |  |  |
Current | 1,903 |  |  | 2,537 |  |  | 3,864 |
Deferred | 217 |  |  | (1,000 | ) |  | (296 | )
Foreign: |  |  |  |  |
Current | 7,333 |  |  | 17,055 |  |  | 14,259 |
Deferred | 8,943 |  |  | 2,044 |  |  | (3,019 | )
Total | $ | 74,172 |  |  | $ | 28,212 |  |  | $ | 42,464 |
Actual income tax expense differs from expected income tax expense obtained by applying the statutory federal income tax rate to earnings before income taxes as follows (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 3, 2018 |  | Jan 28, 2017 |  | Jan 30, 2016
Computed “expected” tax expense | $ | 23,693 |  |  | $ | 18,763 |  |  | $ | 44,547 |
State taxes, net of federal benefit | 1,675 |  |  | 999 |  |  | 2,320 |
Non-U.S. tax expense less than federal statutory tax rate (1) | (7,396 | ) |  | (1,539 | ) |  | (6,991 | )
Tax Reform - repatriation tax adjustment (2) | 23,034 |  |  | — |  |  | — |
Tax Reform - deferred tax adjustment (2) | 24,856 |  |  | — |  |  | — |
Cumulative valuation reserve (3) | — |  |  | 6,830 |  |  | — |
Valuation reserve (4) | 9,057 |  |  | 5,841 |  |  | 3,024 |
Unrecognized tax benefit | 537 |  |  | 556 |  |  | 1,123 |
Share-based compensation (5) | 1,309 |  |  | — |  |  | — |
Net tax settlements | — |  |  | 1,894 |  |  | — |
Sale of minority interest investment | — |  |  | (2,316 | ) |  | — |
Estimated exit tax charge | — |  |  | 1,911 |  |  | — |
Prior year tax adjustments | (88 | ) |  | (1,790 | ) |  | (2,944 | )
Non-deductible permanent difference | (3,224 | ) |  | (2,284 | ) |  | 1,295 |
Other | 719 |  |  | (653 | ) |  | 90 |
Total | $ | 74,172 |  |  | $ | 28,212 |  |  | $ | 42,464 |
________________________________________________________________________
(1) | The jurisdictional location of pre-tax income (loss) may represent a significant component of the Company’s effective tax rate as income tax rates outside the U.S. are generally lower than the U.S. statutory income tax rate. Furthermore, the impact of changes in the jurisdictional location of pre-tax income (loss) on the Company’s effective tax rate will be greater at lower levels of consolidated pre-tax income (loss). These amounts exclude the impact of net changes in valuation allowances, audit and other adjustments related to the Company’s non-U.S. operations, as they are reported separately in the appropriate corresponding line items in the table above. The impact on the Company’s effective tax rate was primarily related to the Company’s Swiss and Korean subsidiaries which have jurisdictional effective tax rates which range from 8% to 20% lower than the U.S. rates in effect for the periods presented.
(2) | During fiscal 2018, the Company recognized additional tax expense resulting from the enactment of the Tax Reform to account for the estimated effects of the transitional tax on the deemed repatriation of foreign earnings and reduced deferred tax assets due to lower future U.S. corporate tax rates.
(3) | Amounts represent valuation reserves resulting from jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred tax assets.
(4) | Amounts relate primarily to valuation reserves on non-cumulative net operating losses or other deferred tax assets arising during the respective period.
(5) | During fiscal 2018, the Company adopted authoritative guidance which requires all income tax effects of stock awards (resulting from an increase or decrease in the fair value of an award from grant date to the vesting date) to be recognized in the income statement when the awards vest or are settled. This is a change from previous guidance that required such activity to be recorded in paid-in capital within stockholders’ equity.
Total income tax expense (benefit) is allocated as follows (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 3, 2018 |  | Jan 28, 2017 |  | Jan 30, 2016
Operations (1) | $ | 74,172 |  |  | $ | 28,212 |  |  | $ | 42,464 |
Stockholders’ equity (1) | (3,173 | ) |  | 1,782 |  |  | 4,668 |
Total income tax expense | $ | 70,999 |  |  | $ | 29,994 |  |  | $ | 47,132 |
________________________________________________________________________
(1) | During fiscal 2018, the Company adopted authoritative guidance which requires all income tax effects of stock awards (resulting from an increase or decrease in the fair value of an award from grant date to the vesting date) to be recognized in the income statement when the awards vest or are settled. This is a change from previous guidance that required such activity to be recorded in paid-in capital within stockholders’ equity. As a result, the Company recorded tax shortfalls of approximately $1.3 million in the Company’s income tax expense during fiscal 2018.
The tax effects of the components of other comprehensive income (loss) are allocated as follows (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 3, 2018 |  | Jan 28, 2017 |  | Jan 30, 2016
Derivative financial instruments designated as cash flow hedges | $ | (2,738 | ) |  | $ | (864 | ) |  | $ | 559 |
Marketable securities | — |  |  | 6 |  |  | (7 | )
Defined benefit plans | (435 | ) |  | (21 | ) |  | 2,972 |
Total income tax expense (benefit) (1) | $ | (3,173 | ) |  | $ | (879 | ) |  | $ | 3,524 |
________________________________________________________________________
(1) | During the fourth quarter of fiscal 2018, the Company early adopted authoritative guidance which addresses certain stranded income tax effects in accumulated other comprehensive income (loss) resulting from the Tax Reform enacted in December 2017. As a result, the Company recorded a cumulative adjustment to increase retained earnings by $1.2 million with a corresponding reduction to accumulated other comprehensive income (loss) related to the Company’s Supplemental Executive Retirement Plan and its interest rate swap designated as a cash flow hedge based in the U.S. The impact from this reclassification on accumulated other comprehensive income (loss) has been excluded from the amounts provided in this table.
Total earnings before income tax expense and noncontrolling interests are comprised of the following (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 3, 2018 |  | Jan 28, 2017 |  | Jan 30, 2016
Domestic operations | $ | 39,112 |  |  | $ | 32,944 |  |  | $ | 90,141 |
Foreign operations | 31,159 |  |  | 20,666 |  |  | 37,138 |
Earnings before income tax expense and noncontrolling interests | $ | 70,271 |  |  | $ | 53,610 |  |  | $ | 127,279 |
Deferred Taxes The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities as of February 3, 2018 and January 28, 2017 are presented below (in thousands):
| Feb 3, 2018 |  | Jan 28, 2017
Deferred tax assets: |  |  |
Net operating losses | 19,859 |  |  | 13,524 |
Defined benefit plans | 13,155 |  |  | 20,642 |
Deferred compensation | 10,721 |  |  | 12,987 |
Excess of book over tax depreciation/amortization | 10,704 |  |  | 9,018 |
Rent expense | 7,651 |  |  | 13,672 |
Deferred income | 7,141 |  |  | 6,213 |
Bad debt reserve | 2,529 |  |  | 2,124 |
Lease incentives | 1,814 |  |  | 5,545 |
Uniform capitalization | 974 |  |  | 1,900 |
Other | 30,703 |  |  | 28,265 |
Total deferred tax assets | 105,251 |  |  | 113,890 |
Deferred tax liabilities: |  |  |
Goodwill amortization | (2,303 | ) |  | (3,654 | )
Excess of tax over book depreciation/amortization | (135 | ) |  | (189 | )
Other | (4,517 | ) |  | (4,544 | )
Valuation allowance | (32,601 | ) |  | (23,255 | )
Net deferred tax assets (1) | $ | 65,695 |  |  | $ | 82,248 |
__________________________________________________________________
(1) | As of February 3, 2018, amount includes net deferred tax liabilities of $2.7 million recorded in other long-term liabilities in the Company’s consolidated balance sheet. There were $0.5 million net deferred tax liabilities recorded in other long-term liabilities in the Company’s consolidated balance sheet at January 28, 2017.
Based on the historical earnings of the Company and projections of future taxable earnings in certain jurisdictions, management believes it is more likely than not that the results of operations will not generate sufficient taxable earnings to realize certain net deferred tax assets. Therefore, the Company has recorded a valuation allowance of $32.6 million, which is an in crease of $9.3 million from the prior year. As of February 3, 2018, certain of the Company’s operations had net operating loss carryforwards of $74.7 million. These are comprised of $17.1 million of operating loss carryforwards that have an unlimited carryforward life, $57.0 million of foreign operating loss carryforwards that expire between fiscal 2019 and fiscal 2038 and $0.6 million of state operating loss carryforwards that expire between fiscal 2019 and fiscal 2036. Based on the historical earnings of these operations, management believes that it is more likely than not that some of the operations will not generate sufficient earnings to utilize all of the net operating loss. As of February 3, 2018 and January 28, 2017, the Company had a valuation allowance of $20.4 million and $13.9 million, respectively, related to its net operating loss carryforwards. Unrecognized Tax Benefit The Company and its subsidiaries are subject to U.S. federal and foreign income tax as well as income tax of multiple state and foreign local jurisdictions. From time-to-time, the Company is subject to routine income tax audits on various tax matters around the world in the ordinary course of business. Although the Company has substantially concluded all U.S. federal, foreign, state and foreign local income tax matters for years through fiscal 2012, as of February 3, 2018, several income tax audits were underway in multiple jurisdictions for various periods after fiscal 2012. The Company does not believe that the resolution of open matters will have a material effect on the Company’s financial position or liquidity. The Company accrues an amount for its estimate of additional income tax liability which the Company, more likely than not, will incur as a result of the ultimate resolution of income tax audits (“uncertain tax positions”). The Company reviews and updates the estimates used in the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities, upon completion of tax audits, upon expiration of statutes of limitation, or upon occurrence of other events. A reconciliation of the beginning and ending amount of gross unrecognized tax benefit (excluding interest and penalties) is as follows (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 3, 2018 |  | Jan 28, 2017 |  | Jan 30, 2016
Beginning balance | $ | 12,983 |  |  | $ | 12,585 |  |  | $ | 13,640 |
Additions: |  |  |  |  |
Tax positions related to the prior year | 4,436 |  |  | 672 |  |  | 496 |
Tax positions related to the current year | 222 |  |  | 106 |  |  | 1,516 |
Reductions: |  |  |  |  |
Tax positions related to the prior year | (356 | ) |  | (380 | ) |  | (1,650 | )
Tax positions related to the current year | (309 | ) |  | — |  |  | (359 | )
Settlements | — |  |  | — |  |  | (505 | )
Expiration of statutes of limitation | (205 | ) |  | — |  |  | (553 | )
Ending balance | $ | 16,771 |  |  | $ | 12,983 |  |  | $ | 12,585 |
The amount of unrecognized tax benefit as of February 3, 2018 includes $17.4 million (net of federal benefit on state issues) which, if ultimately recognized, may reduce our future annual effective tax rate. As of February 3, 2018 and January 28, 2017, the Company had $19.0 million and $14.6 million, respectively, of aggregate accruals for uncertain tax positions, including penalties and interest. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company included interest and penalties related to uncertain tax positions of $0.5 million, $0.2 million and $0.6 million in net income tax expense for fiscal 2018, fiscal 2017 and fiscal 2016, respectively. Total interest and penalties related to uncertain tax positions was $2.2 million and $1.6 million for the years ended February 3, 2018 and January 28, 2017, respectively.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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