XML 36 R10.htm IDEA: XBRL DOCUMENT
v3.7.0.1

Income Taxes | 12 Months Ended
--- | ---
Jan. 27, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The Company’s (loss) income before income taxes in the United States and in foreign jurisdictions is as follows:
(in thousands) | Fiscal 2016 |  | Fiscal 2015 |  | Fiscal 2014
(Loss) income before income taxes: |  |  |  |  |
United States | $ | (174,461 | ) |  | $ | (31,206 | ) |  | $ | 114,772 |
Foreign | (4,419 | ) |  | 1,967 |  |  | 5,785 |
Total (loss) income before income taxes | $ | (178,880 | ) |  | $ | (29,239 | ) |  | $ | 120,557 |
The components of the (benefit from) provision for income taxes are as follows:
(in thousands) | Fiscal 2016 |  | Fiscal 2015 |  | Fiscal 2014
United States | $ | (70,316 | ) |  | $ | (9,737 | ) |  | $ | 44,503 |
Foreign | 1,218 |  |  | 46 |  |  | 2,255 |
Total (benefit) provision | $ | (69,098 | ) |  | $ | (9,691 | ) |  | $ | 46,758 |
(in thousands) | Fiscal 2016 |  | Fiscal 2015 |  | Fiscal 2014
Current: |  |  |  |  |
Federal | $ | (2,834 | ) |  | $ | 10,524 |  |  | $ | 20,902 |
State | (229 | ) |  | 2,409 |  |  | 6,361 |
Foreign | 1,218 |  |  | 46 |  |  | 1,950 |
Total current | (1,845 | ) |  | 12,979 |  |  | 29,213 |
Deferred: |  |  |  |  |
Federal | (62,645 | ) |  | (20,956 | ) |  | 14,579 |
State | (4,608 | ) |  | (1,714 | ) |  | 2,661 |
Foreign | — |  |  | — |  |  | 305 |
Total deferred | (67,253 | ) |  | (22,670 | ) |  | 17,545 |
Total (benefit) provision | $ | (69,098 | ) |  | $ | (9,691 | ) |  | $ | 46,758 |
A reconciliation of the statutory federal income tax rate to the effective income tax rate is as follows:
| Fiscal 2016 |  | Fiscal 2015 |  | Fiscal 2014
Tax at statutory federal tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal tax benefit | 2.7 | % |  | (1.6 | )% |  | 2.9 | %
Other, net | 0.9 | % |  | (0.3 | )% |  | 0.9 | %
Total | 38.6 | % |  | 33.1 | % |  | 38.8 | %
Deferred tax assets and liabilities consisted of the following:
(in thousands) | January 27, 2017 |  | January 29, 2016
Deferred tax assets: |  |  |
Deferred revenue | $ | 4,903 |  |  | $ | 5,349 |
Legal and other reserves | 1,892 |  |  | 1,839 |
Deferred compensation | 4,653 |  |  | 3,199 |
Reserve for returns | 3,578 |  |  | 4,911 |
Inventory | 7,817 |  |  | 4,231 |
Currency translation adjustment - foreign subsidiaries | 6,691 |  |  | 5,053 |
Other | 8,197 |  |  | 6,935 |
Total deferred tax assets | 37,731 |  |  | 31,517 |
Deferred tax liabilities: |  |  |
Intangible assets | 96,812 |  |  | 161,503 |
LIFO reserve | 24,601 |  |  | 20,153 |
Unremitted foreign earnings | 5,208 |  |  | 5,722 |
Catalog marketing | 1,577 |  |  | 1,390 |
Total deferred tax liabilities | 128,198 |  |  | 188,768 |
Net deferred tax liability | $ | 90,467 |  |  | $ | 157,251 |
A reconciliation of the beginning and ending amount of UTBs for the fiscal years is as follows:
| Federal, State and Foreign Tax
(in thousands) | Fiscal 2016 |  | Fiscal 2015 |  | Fiscal 2014
Gross UTB balance at beginning of period | $ | 8,311 |  |  | $ | 9,082 |  |  | $ | 8,718 |
Tax positions related to the current period—gross increases | 120 |  |  | 116 |  |  | 364 |
Tax positions related to the prior periods—gross decreases | (1,530 | ) |  | (697 | ) |  | — |
Settlements | — |  |  | (190 | ) |  | — |
Gross UTB balance at end of period | $ | 6,901 |  |  | $ | 8,311 |  |  | $ | 9,082 |
As of January 27, 2017, the Company had UTBs of $6.9 million. Of this amount, $4.5 million would, if recognized, impact its effective tax rate. The Company does not expect that UTBs will fluctuate in the next 12 months for tax audit settlements and the expiration of the statute of limitations for certain jurisdictions. Pursuant to the Tax Sharing Agreement, Sears Holdings Corporation is generally responsible for all United States federal, state and local UTBs through the date of the Separation and, as such, the UTBs are recorded in Other liabilities in the Consolidated Balance Sheets, and an indemnification asset from Sears Holdings Corporation for the $6.5 million pre-Separation UTBs is recorded in Other assets in the Consolidated Balance Sheets. Prior to the Separation, the tax provision and related tax accounts represented the tax attributable to the Company as if the Company filed a separate tax return. However, the computed obligations were settled through Sears Holdings Corporation. The Company classifies interest expense and penalties related to UTBs and interest income on tax overpayments as components of income tax expense. As of January 27, 2017, the total amount of interest expense and penalties recognized on the balance sheet was $4.9 million ($3.2 million net of federal benefit). As of January 29, 2016, the total amount of interest and penalties recognized on the balance sheet was $5.7 million ($3.7 million net of federal benefit). The total amount of net interest expense recognized in the Consolidated and Combined Statements of Operations were insignificant for all periods presented. Sears Holdings and Lands' End files income tax returns in both the United States and various foreign jurisdictions. The Internal Revenue Service has completed its examination of all federal income tax returns of Sears Holdings through the 2009 return, and all matters arising from such examinations have been resolved. The Company is currently under audit by the Internal Revenue Service for the year 2014. Sears Holdings and the Company are under examination by various state income tax jurisdictions for the years 2011 to 2014. Impacts of Separation Prior to the Separation, the tax provision and related tax accounts represented the tax attributable to the Company as if the Company filed a separate tax return. However, the computed obligations were settled through Sears Holdings Corporation. Accordingly, the taxes payable and related tax payments were reflected directly in Net parent company investment in the Consolidated Balance Sheets. As a result of the Separation, the Company began filing its own income tax returns and, as a result certain tax attributes previously included in Net parent company investment were reclassified. Specifically, subsequent to the Separation the Company reclassified (i) $30.4 million of deferred tax assets related primarily to foreign tax credits; and (ii) a $13.7 million reserve for uncertain tax positions (including penalties and interest) out of Net parent company investment and into Deferred tax liabilities and Other liabilities, respectively, in the Consolidated Balance Sheets. As a result of the 2015 income tax return filed by the Company during Fiscal 2016, the Company recorded an increase in the deferred tax liabilities and a decrease in additional paid-in capital of $2.1 million related to the calculation of a deferred tax liability related to the LIFO inventory calculation that existed as of the date of the Separation. In addition, pursuant to the tax sharing agreement, a $13.7 million receivable was recorded by the Company to reflect the indemnification by Sears Holdings Corporation of the pre-Separation uncertain tax positions (including penalties and interest) for which Sears Holdings is responsible. This receivable is included in Other assets in the Consolidated Balance Sheets and was $11.4 million and $13.7 million at January 27, 2017 and January 29, 2016, 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration