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Income Taxes | 12 Months Ended
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Jan. 30, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Changes in Tax Law On March 27, 2020, the U.S. government enacted the CARES Act to provide economic relief from the COVID-19 pandemic. Among other provisions, the CARES Act allows for a full offset of taxable income in a five-year carryback period for net operating losses, which will reduce current period tax expense and may result in a refund of previously paid income tax amounts at higher historical tax rates. During the year ended January 30, 2021, the Company recognized a tax benefit of approximately $0.7 million related to the CARES Act. 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. The Company has a balance related to Tax Cuts and Jobs Act transition tax included in other long-term liabilities of $19.9 million (excluding related interest) for each of the years ended January 30, 2021 and February 1, 2020. 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. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation. 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 January 30, 2021 and February 1, 2020, the Company had no net tax provision related to GILTI tax. 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 January 30, 2021, the Company had recorded €2.4 million ($3.2 million) and €5.0 million ($6.1 million) in accrued expenses and other long-term liabilities, respectively, in the accompanying balance sheets. 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
| Jan 30, 2021 |  | Feb 1, 2020 |  | Feb 2, 2019
Federal: |  |  |  |  |
Current | $ | (2,390) |  |  | $ | 9,270 |  |  | $ | 16,495 |
Deferred | (5,274) |  |  | 2,263 |  |  | 4,543 |
State: |  |  |  |  |
Current | 248 |  |  | 1,622 |  |  | 1,408 |
Deferred | (598) |  |  | 1,699 |  |  | 1,532 |
Foreign: |  |  |  |  |
Current | 8,285 |  |  | 17,166 |  |  | 3,385 |
Deferred | (6,609) |  |  | (9,507) |  |  | 2,179 |
Total | $ | (6,338) |  |  | $ | 22,513 |  |  | $ | 29,542 |
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
| Jan 30, 2021 |  | Feb 1, 2020 |  | Feb 2, 2019
Computed “expected” tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal benefit | 1.2 | % |  | 3.0 | % |  | 1.1 | %
Non-U.S. tax expense higher than federal statutory tax rate 1 | 9.1 | % |  | 0.0 | % |  | 24.2 | %
Tax Reform - repatriation tax adjustment 2,3 | — | % |  | — | % |  | (41.8 | %)
SERP/TOLI | 1.9 | % |  | (1.5 | %) |  | 0.7 | %
Non-deductible participation loss | 3.6 | % |  | — | % |  | — | %
Swiss tax reform 4 | — | % |  | (6.5 | %) |  | — | %
Valuation reserve 5 | (26.9 | %) |  | (0.2 | %) |  | 0.5 | %
Unrecognized tax liabilities (benefits)3 | (6.6 | %) |  | (6.2 | %) |  | 51.3 | %
Share-based compensation | 1.8 | % |  | 0.9 | % |  | 0.2 | %
Net tax settlements | — | % |  | 9.1 | % |  | — | %
Prior year tax adjustments | 1.3 | % |  | (1.8 | %) |  | 0.3 | %
Non-deductible permanent differences | 0.4 | % |  | 2.1 | % |  | 16.3 | %
Foreign derived intangible income | — | % |  | (3.4 | %) |  | (10.2 | %)
Other | 0.5 | % |  | 1.7 | % |  | 0.1 | %
Effective tax rate | 7.3 | % |  | 18.2 | % |  | 63.7 | %
______________________________________________________________________ 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. 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 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. 5 Amounts relate primarily to valuation reserves on net operating losses, other deferred tax assets arising during the respective period and 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. Total income tax expense (benefit) is allocated as follows (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Jan 30, 2021 |  | Feb 1, 2020 |  | Feb 2, 2019
Operations | $ | (6,338) |  |  | $ | 22,513 |  |  | $ | 29,542 |
Stockholders’ equity 1 | (1,534) |  |  | (1,142) |  |  | 3,006 |
Total income tax expense (benefit) | $ | (7,872) |  |  | $ | 21,371 |  |  | $ | 32,548 |
______________________________________________________________________ 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
| Jan 30, 2021 |  | Feb 1, 2020 |  | Feb 2, 2019
Derivative financial instruments designated as cash flow hedges | $ | (1,387) |  |  | $ | 80 |  |  | $ | 2,402 |
Defined benefit plans | (147) |  |  | 68 |  |  | 604 |
Total income tax expense (benefit) | $ | (1,534) |  |  | $ | 148 |  |  | $ | 3,006 |
Total earnings (loss) before income tax expense (benefit) and noncontrolling interests are comprised of the following (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Jan 30, 2021 |  | Feb 1, 2020 |  | Feb 2, 2019
Domestic operations | $ | (27,984) |  |  | $ | 91,008 |  |  | $ | 97,885 |
Foreign operations | (59,095) |  |  | 32,734 |  |  | (51,177) |
Earnings (loss) before income tax expense (benefit) and noncontrolling interests | $ | (87,079) |  |  | $ | 123,742 |  |  | $ | 46,708 |
Deferred Taxes The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities as of January 30, 2021 and February 1, 2020 are presented below (in thousands):
| Jan 30, 2021 |  | Feb 1, 2020
Deferred tax assets: |  |  |
Operating lease liabilities | $ | 193,789 |  |  | $ | 187,981 |
Net operating losses | 38,117 |  |  | 24,156 |
Defined benefit plans | 12,596 |  |  | 12,539 |
Convertible senior notes hedge transactions | 9,697 |  |  | 12,284 |
Deferred compensation | 7,877 |  |  | 9,282 |
Goodwill amortization | 6,542 |  |  | 7,301 |
Deferred income | 6,258 |  |  | 5,568 |
Excess of book over tax depreciation/amortization 1 | 6,183 |  |  | — |
Inventory valuation | 4,788 |  |  | 3,378 |
Account receivable reserve | 2,520 |  |  | 2,043 |
Lease incentives | 2,187 |  |  | 3,272 |
Sales return and other reserves | 1,988 |  |  | 1,981 |
Accrued bonus | 984 |  |  | 1,993 |
Uniform capitalization | 756 |  |  | 890 |
Other | 13,538 |  |  | 14,296 |
Total deferred tax assets | 307,820 |  |  | 286,964 |
Deferred tax liabilities: |  |  |
Operating right-of-use assets | (172,496) |  |  | (175,370) |
Convertible senior notes debt discount | (8,776) |  |  | (11,167) |
Other | — |  |  | (6,112) |
Valuation allowance | (54,131) |  |  | (30,760) |
Net deferred tax assets | $ | 72,417 |  |  | $ | 63,555 |
______________________________________________________________________ 1 Property and equipment for the year ended February 1, 2020 was originally included within other deferred tax liabilities and is now presented on a standalone basis. 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 $54.1 million, which is an increase of $23.4 million from the prior year. As of January 30, 2021, certain of the Company’s operations had net operating loss carryforwards of $45.7 million (tax effected, not net of uncertain tax position), including state/provincial net operating loss carryforwards. These are comprised of $13.2 million (tax effected, not net of uncertain tax position) of net operating loss carryforwards with an unlimited carryforward life, $28.1 million (tax effected, not net of uncertain tax position) of foreign net operating loss carryforwards expiring between fiscal 2022 and fiscal 2041 and $4.6 million (tax effected) of state/provincial net operating loss carryforwards expiring between fiscal 2022 and fiscal 2041. Based on the historical earnings of these operations, management believes it is more likely than not that some of the operations will not generate sufficient earnings to utilize these net operating losses. As of January 30, 2021 and February 1, 2020, the Company had a valuation allowance of $35.8 million and $21.8 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. Tax years ending on or after January 30, 2016 are subject to examination in the U.S., Switzerland and Italy. 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
| Jan 30, 2021 |  | Feb 1, 2020 |  | Feb 2, 2019
Beginning balance | $ | 29,183 |  |  | $ | 38,751 |  |  | $ | 16,771 |
Additions: |  |  |  |  |
Tax positions related to the prior year | 110 |  |  | 3,074 |  |  | 25,822 |
Tax positions related to the current year | 8,204 |  |  | 264 |  |  | 267 |
Reductions: |  |  |  |  |
Tax positions related to the prior year | (3,251) |  |  | (12,658) |  |  | (2,934) |
Tax positions related to the current year | — |  |  | — |  |  | (449) |
Foreign currency translation | — |  |  | (248) |  |  | (726) |
Ending balance | $ | 34,246 |  |  | $ | 29,183 |  |  | $ | 38,751 |
The amount of unrecognized tax benefit as of January 30, 2021 and February 1, 2020 includes $33.7 million and $28.7 million (net of federal benefit on state issues), respectively, which, if ultimately recognized, may reduce our future annual effective tax rate. As of January 30, 2021 and February 1, 2020, the Company had $40.0 million and $34.0 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 $0.9 million, $2.2 million and $0.5 million in income tax expense for fiscal 2021, fiscal 2020 and fiscal 2019, respectively. Total interest and penalties related to uncertain tax positions was $5.7 million and $4.8 million for the years ended January 30, 2021 and February 1, 2020, 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/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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