XML 83 R19.htm IDEA: XBRL DOCUMENT
v3.20.1

Income Taxes | 12 Months Ended
--- | ---
Feb. 01, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Changes in Tax Law During calendar 2019, Switzerland implemented tax reform (“Swiss tax reform”) that is effective as of January 1, 2020. The Swiss tax reform eliminates certain preferential tax treatments and includes transitional relief measures which provides for future tax deductions. During the fourth quarter of fiscal 2020, the Company recognized a one-time income tax benefit of approximately $8.1 million related primarily to the recognition of a deferred tax asset associated with the estimated value of a tax basis step-up of the Company’s Switzerland subsidiary’s assets. 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. Any income tax payable related to the transition tax is due over an eight-year period beginning in calendar 2018. The Tax Reform also established new tax laws that were effective beginning in 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 the fourth quarter of fiscal 2018, the Company recorded estimated additional income tax expense of $47.9 million. This was 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. During the third quarter of fiscal 2019, the Company completed the preparation of its U.S. federal tax return for fiscal 2018 and concluded, based on the additional information that had become available, that no transition tax was due with respect to the Tax Reform. As a result, during the third quarter of fiscal 2019, the Company reversed a portion of provisional amounts initially recorded during the three months ended February 3, 2018 and recorded a benefit of $19.6 million. During the fourth quarter of fiscal 2019, the Company concluded, based on additional regulatory guidance issued during the quarter, related to the Tax Reform, that the Company would owe transition taxes if proposed legislation that clarifies existing tax regulation with respect to the dividends received deduction calculation is passed into law. As a result, during the fourth quarter of fiscal 2019, the Company recorded additional charges due to the Tax Reform of $25.8 million. During fiscal 2020, the Company revised its tax liability estimation and related accrual to $19.9 million (net of related offsets in other tax jurisdiction). The balance related to this transition tax included in other long-term liabilities was $19.9 million and $25.8 million as of February 1, 2020 and February 2, 2019, respectively. The Company has historically considered the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested. As a result of the Tax Reform, the Company had a substantial amount of previously taxed earnings that could be distributed to the U.S. without additional U.S. taxation. The Company continues to evaluate its plans for reinvestment or repatriation of unremitted foreign earnings and regularly reviews its cash positions and determination of permanent reinvestment of foreign earnings. If the Company determines that all or a portion of such foreign earnings are no longer indefinitely reinvested, it may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the Tax Reform’s one-time transition tax. The Company intends to indefinitely reinvest the remaining earnings from the Company’s foreign subsidiaries for which a deferred tax liability has not already been recorded. The Company is subject to a tax on global intangible low-taxed income (“GILTI”). GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the tax as a period cost if and when incurred, or factor such amounts into the measurement of deferred taxes. The Company has elected to account for GILTI as a period cost. For the years ended February 1, 2020 and February 2, 2019, the Company had no net tax provision related to GILTI tax. 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 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. Tax Settlement In connection with an income tax audit in Italy, the Italian tax authority indicated that it believed that certain dividend distributions made in fiscal 2015 and fiscal 2016 from the Company’s Italian subsidiaries to their European parent holding company should be subject to certain withholding taxes in Italy. While the Company disagreed with the position of the Italian tax authority and was prepared to vigorously defend itself in this matter, the Company continued to work with the Italian tax authority in an attempt to resolve the dispute through standard tax resolution processes. In December 2019, to avoid a potentially long and costly litigation process, the Company reached an agreement with the Italian tax authority to settle the matter for €9.9 million ($11.1 million) (including interest), to be paid in 16 equal quarterly installments starting in December 2019. As a result of the agreement, the Company recorded a charge to income tax expense of €7.0 million ($7.8 million) (net of related offsets in other tax jurisdictions) during the fourth quarter of fiscal 2020. As of February 1, 2020, the Company had recorded €1.8 million ($2.0 million) and €7.5 million ($8.3 million) in accrued expenses and other long-term liabilities, respectively, in the accompanying consolidated balance sheets. Income Tax Expense Income tax expense (benefit) is summarized as follows (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 1, 2020 |  | Feb 2, 2019 |  | Feb 3, 2018
Federal: |  |  |  |  |
Current | $ | 9,270 |  |  | $ | 16,495 |  |  | $ | 34,181 |
Deferred | 2,263 |  |  | 4,543 |  |  | 21,595 |
State: |  |  |  |  |
Current | 1,622 |  |  | 1,408 |  |  | 1,903 |
Deferred | 1,699 |  |  | 1,532 |  |  | 217 |
Foreign: |  |  |  |  |
Current | 17,166 |  |  | 3,385 |  |  | 7,333 |
Deferred | (9,507 | ) |  | 2,179 |  |  | 8,943 |
Total | $ | 22,513 |  |  | $ | 29,542 |  |  | $ | 74,172 |
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:
| Year Ended |  | Year Ended |  | Year Ended
| Feb 1, 2020 |  | Feb 2, 2019 |  | Feb 3, 2018
Computed “expected” tax rate | 21.0 | % |  | 21.0 | % |  | 33.7 | %
State taxes, net of federal benefit | 3.0 | % |  | 1.1 | % |  | 2.4 | %
Non-U.S. tax expense higher (lower) than federal statutory tax rate 1 | 0.0 | % |  | 24.2 | % |  | (10.5 | %)
Tax Reform - repatriation tax adjustment 2,3 | — | % |  | (41.8 | %) |  | 32.8 | %
Tax Reform - deferred tax adjustment | — | % |  | — | % |  | 35.4 | %
Swiss tax reform 4 | (6.5 | %) |  | — | % |  | — | %
Valuation reserve | (0.2 | %) |  | 0.5 | % |  | 12.9 | %
Unrecognized tax liabilities (benefits)3 | (6.2 | %) |  | 51.3 | % |  | 0.8 | %
Share-based compensation | 0.9 | % |  | 0.2 | % |  | 1.5 | %
Net tax settlements | 9.1 | % |  | — | % |  | — | %
Prior year tax adjustments | (1.8 | %) |  | 0.3 | % |  | 0.7 | %
Non-deductible permanent differences | 0.6 | % |  | 16.5 | % |  | (4.1 | %)
Foreign derived intangible income | (3.4 | %) |  | (10.2 | %) |  | — | %
Other | 1.7 | % |  | 0.1 | % |  | — | %
Effective tax rate | 18.2 | % |  | 63.2 | % |  | 105.6 | %
______________________________________________________________________
1 | The jurisdictional location of pre-tax income (loss) may represent a significant component of the Company’s effective tax rate as earnings (loss) in foreign jurisdictions are taxed at rates that are different from 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.
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. During the third quarter of fiscal 2019, the Company completed the preparation of its U.S. federal tax return for fiscal 2018 and concluded, based on the additional information that had become available, that no transition tax was due with respect to the Tax Reform. As a result, during the third quarter of fiscal 2019, the Company reversed a portion of provisional amounts initially recorded during the three months ended February 3, 2018 and recorded a benefit of $19.6 million.
3 | During the fourth quarter of fiscal 2019, the Company concluded based on additional regulatory guidance issued during the quarter related to the Tax Reform, that the Company would owe transition taxes if proposed legislation that clarifies existing tax regulation with respect to the dividends received deduction calculation is passed into law. As a result, during the three months ended February 2, 2019, the Company recorded additional charges due to the Tax Reform of $25.8 million as an uncertain tax position. In fiscal 2020, the Company revised its tax liability estimation and related accrual to $19.9 million.
4 | During fiscal 2020, the Company recognized additional tax benefits resulting from the enactment of the Swiss tax reform. The additional tax benefits related primarily to the recognition of a deferred tax asset associated with the estimated value of a tax basis step-up of the Company’s Switzerland subsidiary’s assets.
Total income tax expense (benefit) is allocated as follows (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 1, 2020 |  | Feb 2, 2019 |  | Feb 3, 2018
Operations | $ | 22,513 |  |  | 29,542 |  |  | $ | 74,172 |
Stockholders’ equity 1 | (1,142 | ) |  | 3,006 |  |  | (3,173 | )
Total income tax expense | $ | 21,371 |  |  | $ | 32,548 |  |  | $ | 70,999 |
______________________________________________________________________
1 | In April 2019, the Company issued $300 million principal amount of 2.00% convertible senior notes due 2024 (the “Notes”) in a private offering. Paid-in capital includes $1.3 million in net deferred tax assets in connection with the related convertible note hedge transactions and debt discount associated with the Notes. Refer to Note 10 for more information on the convertible senior notes and related transactions.
The tax effects of the components of other comprehensive income (loss) are allocated as follows (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 1, 2020 |  | Feb 2, 2019 |  | Feb 3, 2018
Derivative financial instruments designated as cash flow hedges | $ | 80 |  |  | $ | 2,402 |  |  | $ | (2,738 | )
Defined benefit plans | 68 |  |  | 604 |  |  | (435 | )
Total income tax expense (benefit)1 | $ | 148 |  |  | $ | 3,006 |  |  | $ | (3,173 | )
______________________________________________________________________
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 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 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 1, 2020 |  | Feb 2, 2019 |  | Feb 3, 2018
Domestic operations | $ | 91,008 |  |  | $ | 97,885 |  |  | $ | 39,112 |
Foreign operations | 32,734 |  |  | (51,177 | ) |  | 31,159 |
Earnings before income tax expense and noncontrolling interests | $ | 123,742 |  |  | $ | 46,708 |  |  | $ | 70,271 |
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 1, 2020 and February 2, 2019 are presented below (in thousands):
| Feb 1, 2020 |  | Feb 2, 2019
Deferred tax assets: |  |  |  |
Operating lease liabilities | $ | 187,981 |  |  | $ | — |
Net operating losses | 24,156 |  |  | 23,212 |
Defined benefit plans | 12,539 |  |  | 12,883 |
Convertible senior notes hedge transactions | 12,284 |  |  | — |
Deferred compensation | 9,282 |  |  | 9,823 |
Goodwill amortization | 7,301 |  |  | — |
Deferred income | 5,568 |  |  | 4,373 |
Inventory valuation | 3,378 |  |  | 1,339 |
Lease incentives | 3,272 |  |  | 1,337 |
Account receivable reserve | 2,043 |  |  | 2,009 |
Accrued bonus | 1,993 |  |  | 2,208 |
Sales return and other reserves | 1,981 |  |  | 1,933 |
Uniform capitalization | 890 |  |  | 1,419 |
Rent expense | — |  |  | 7,114 |
Excess of book over tax depreciation/amortization | — |  |  | 6,638 |
Other | 14,296 |  |  | 18,883 |
Total deferred tax assets | 286,964 |  |  | 93,171 |
Deferred tax liabilities: |  |  |
Operating right-of-use assets | (175,370 | ) |  | — |
Convertible senior notes debt discount | (11,167 | ) |  | — |
Goodwill amortization | — |  |  | (2,267 | )
Other | (6,112 | ) |  | (870 | )
Valuation allowance | (30,760 | ) |  | (32,810 | )
Net deferred tax assets | $ | 63,555 |  |  | $ | 57,224 |
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 $30.8 million, which is a de crease of $2.1 million from the prior year. As of February 1, 2020, certain of the Company’s operations had net operating loss carryforwards of $166.6 million, including state/provincial net operating loss carryforwards. These are comprised of $17.6 million of operating loss carryforwards that have an unlimited carryforward life, $80.2 million of foreign operating loss carryforwards that expire between fiscal 2021 and fiscal 2040 and $68.8 million of state/provincial operating loss carryforwards that expire between fiscal 2023 and fiscal 2040. 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 1, 2020 and February 2, 2019, the Company had a valuation allowance of $21.8 million and $22.9 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 and other 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 1, 2020, several income tax audits were underway in multiple jurisdictions for various periods after fiscal 2012. These audits could conclude with an assessment of additional tax liability for the Company. These assessments could arise as the result of timing or permanent differences and could be material to the Company’s net income or future cash flows. In the event the Company disagrees with an assessment from a taxing authority, the Company may elect to appeal, litigate, pursue settlement or take other actions. 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 appropriate, as more definitive information or interpretations become available from taxing authorities, upon completion of tax audits, upon receipt of assessments, 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 1, 2020 |  | Feb 2, 2019 |  | Feb 3, 2018
Beginning balance | $ | 38,751 |  |  | $ | 16,771 |  |  | $ | 12,983 |
Additions: |  |  |  |  |
Tax positions related to the prior year | 3,074 |  |  | 25,822 |  |  | 3,129 |
Tax positions related to the current year | 264 |  |  | 267 |  |  | 222 |
Reductions: |  |  |  |  |
Tax positions related to the prior year | (12,658 | ) |  | (2,934 | ) |  | (355 | )
Tax positions related to the current year | — |  |  | (449 | ) |  | (303 | )
Expiration of statutes of limitations | — |  |  | — |  |  | (206 | )
Foreign currency translation | (248 | ) |  | (726 | ) |  | 1,301 |
Ending balance | $ | 29,183 |  |  | $ | 38,751 |  |  | $ | 16,771 |
The amount of unrecognized tax benefit as of February 1, 2020 includes $28.7 million (net of federal benefit on state issues) which, if ultimately recognized, may reduce our future annual effective tax rate. As of February 1, 2020 and February 2, 2019, the Company had $34.0 million and $41.4 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 $2.2 million, $0.5 million and $0.5 million in income tax expense for fiscal 2020, fiscal 2019 and fiscal 2018, respectively. Total interest and penalties related to uncertain tax positions was $4.8 million and $2.6 million for the years ended February 1, 2020 and February 2, 2019, respectively.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration