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Income Taxes | 12 Months Ended
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Jan. 29, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 9. INCOME TAXES The Company's income (loss) before income taxes in the United States and in foreign jurisdictions is as follows:
(in thousands) |  | Fiscal 2020 |  |  | Fiscal 2019 |  |  | Fiscal 2018 |
Income before income taxes |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 173 |  |  | $ | 21,406 |  |  | $ | 16,297 |
Foreign |  |  | 12,419 |  |  |  | (44 | ) |  |  | (6,666 | )
Total income before income taxes |  | $ | 12,592 |  |  | $ | 21,362 |  |  | $ | 9,631 |
Certain foreign operations are branches of Lands’ End and are subject to U.S. as well as foreign income tax. The pretax income by location and the analysis of the income tax provision by taxing jurisdiction are not directly related. The components of the provision for (benefit from) income taxes are as follows:
(in thousands) |  | Fiscal 2020 |  |  | Fiscal 2019 |  |  | Fiscal 2018 |
United States |  | $ | 725 |  |  | $ | 2,105 |  |  | $ | (1,959 | )
Foreign |  |  | 1,031 |  |  |  | (33 | ) |  |  | — |
Total provision (benefit) |  | $ | 1,756 |  |  | $ | 2,072 |  |  | $ | (1,959 | )
(in thousands) |  | Fiscal 2020 |  |  | Fiscal 2019 |  |  | Fiscal 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 8,334 |  |  | $ | 979 |  |  | $ | (4,457 | )
State |  |  | 3,675 |  |  |  | 1,549 |  |  |  | 2,275 |
Foreign |  |  | 517 |  |  |  | — |  |  |  | — |
Total current |  |  | 12,526 |  |  |  | 2,528 |  |  |  | (2,182 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (8,413 | ) |  |  | 340 |  |  |  | 1,650 |
State |  |  | (2,871 | ) |  |  | (763 | ) |  |  | (1,427 | )
Foreign |  |  | 514 |  |  |  | (33 | ) |  |  | — |
Total deferred |  |  | (10,770 | ) |  |  | (456 | ) |  |  | 223 |
Total provision (benefit) |  | $ | 1,756 |  |  | $ | 2,072 |  |  | $ | (1,959 | )
A reconciliation of the statutory federal income tax rate to the effective income tax rate is as follows:
|  | Fiscal 2020 |  |  | Fiscal 2019 |  |  | Fiscal 2018 |  |
Tax at statutory federal tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | % |
State income taxes, net of federal tax benefit |  |  | 5.0 | % |  |  | 2.9 | % |  |  | 10.0 | % |
Foreign differential |  |  | 2.7 | % |  |  | (4.0 | )% |  |  | (4.6 | )% |
Permanent differences |  |  | 16.8 | % |  |  | 4.3 | % |  |  | 23.4 | % |
CARES Act |  |  | (24.6 | )% |  |  | — | % |  |  | — | % |
Repatriation of foreign earnings |  |  | — | % |  |  | — | % |  |  | (38.4 | )% |
Uncertain tax benefits |  |  | (1.6 | )% |  |  | (0.8 | )% |  |  | (38.6 | )% |
Change in foreign valuation allowance |  |  | (3.8 | )% |  |  | 4.2 | % |  |  | 19.2 | % |
Foreign branches |  |  | — | % |  |  | (15.9 | )% |  |  | — | % |
Other, net |  |  | (1.6 | )% |  |  | (2.0 | )% |  |  | (12.3 | )% |
Total |  |  | 13.9 | % |  |  | 9.7 | % |  |  | (20.3 | )% |
Deferred tax assets and liabilities consisted of the following:
(in thousands) |  | January 29, 2021 |  |  | January 31, 2020 |  |  | February 1, 2019 |
Deferred tax assets |  |  |  |  |  |  |  |  |  |  |  |
Deferred revenue |  | $ | 4,882 |  |  | $ | 3,797 |  |  | $ | 3,053 |
Legal accruals |  |  | 3,551 |  |  |  | 1,938 |  |  |  | 1,714 |
Deferred compensation |  |  | 16,147 |  |  |  | 12,507 |  |  |  | 10,360 |
Reserve for returns |  |  | 3,072 |  |  |  | 2,654 |  |  |  | 2,271 |
Inventory |  |  | 6,390 |  |  |  | 3,413 |  |  |  | 3,690 |
CTA investment in foreign subsidiaries |  |  | 2,987 |  |  |  | 3,453 |  |  |  | 3,505 |
Operating lease liabilities |  |  | 9,677 |  |  |  | 10,319 |  |  |  | — |
Other |  |  | 2,668 |  |  |  | 2,764 |  |  |  | 3,041 |
Net operating loss carryforward |  |  | 3,093 |  |  |  | 6,018 |  |  |  | 5,117 |
Total deferred tax assets |  |  | 52,467 |  |  |  | 46,863 |  |  |  | 32,751 |
Less valuation allowance |  |  | (3,896 | ) |  |  | (6,526 | ) |  |  | (5,079 | )
Net deferred tax assets |  | $ | 48,571 |  |  | $ | 40,337 |  |  | $ | 27,672 |
Deferred tax liabilities |  |  |  |  |  |  |  |  |  |  |  |
Intangible assets |  | $ | 62,372 |  |  | $ | 62,397 |  |  | $ | 62,959 |
LIFO reserve |  |  | 15,191 |  |  |  | 17,503 |  |  |  | 16,382 |
Property and equipment |  |  | 8,660 |  |  |  | 7,208 |  |  |  | 5,098 |
Operating lease right-of-use assets |  |  | 7,882 |  |  |  | 8,586 |  |  |  | — |
Catalog advertising |  |  | 1,812 |  |  |  | 2,294 |  |  |  | 1,903 |
Total deferred tax liabilities |  |  | 95,917 |  |  |  | 97,988 |  |  |  | 86,342 |
Net deferred tax liability |  | $ | 47,346 |  |  | $ | 57,651 |  |  | $ | 58,670 |
As of January 29, 2021, the Company had $8.5 million of state net operating loss (“NOL”) carryforwards (generating a $0.6 million deferred tax asset) available to offset future taxable income. The state NOL carryforwards generally expire between 2022 and 2038 with certain state NOLs generated after 2017 having indefinite carryforward. The Company’s foreign subsidiaries had $8.9 million of NOL carryforwards (generating a $2.5 million deferred tax asset) available to offset future taxable income. These foreign NOLs can be carried forward indefinitely, however, a valuation allowance was established since the future utilization of these NOLs is uncertain. A reconciliation of the beginning and ending amount of UTBs is as follows:
|  | Fiscal 2020 |  |  | Fiscal 2019 |  |  | Fiscal 2018 |
Gross UTB balance at beginning of period |  | $ | 1,202 |  |  | $ | 1,458 |  |  | $ | 4,531 |
Tax positions related to the prior periods - gross decreases |  |  | (190 | ) |  |  | (179 | ) |  |  | (2,588 | )
Settlements |  |  | — |  |  |  | (77 | ) |  |  | (485 | )
Gross UTB balance at end of period |  | $ | 1,012 |  |  | $ | 1,202 |  |  | $ | 1,458 |
As of January 29, 2021, the Company had UTBs of $1.0 million. Of this amount, $0.8 million would, if recognized, impact its effective tax rate. The Company does not expect that UTBs will fluctuate significantly in the next 12 months for tax audit settlements and the expiration of the statute of limitations for certain jurisdictions. Tax years 2015 through 2019 remain open for examination by the Internal Revenue Service as well as various state and foreign jurisdictions. 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 29, 2021, the total amount of interest expense and penalties recognized on the balance sheet was $0.6 million ($0.5 million net of federal benefit). As of January 31, 2020, the total amount of interest and penalties recognized on the balance sheet was $0.7 million ($0.6 million net of federal benefit). The total amount of net interest expense recognized in the Consolidated Statements of Operations was insignificant for all periods presented. The Company files income tax returns in both the United States and various foreign jurisdictions. Impacts of the Tax Act On December 22, 2017, the Tax Act was signed into law. The Tax Act contains significant changes to corporate taxation, including (i) the reduction of the corporate income tax rate to 21%, (ii) the acceleration of expensing for certain business assets, (iii) the nonrecurring transition tax related to the transition of U.S. international tax from a worldwide tax system to a territorial tax system, (iv) the repeal of the domestic production deduction, (v) additional limitations on the deductibility of interest expense, and (vi) expanded limitations on the deductibility of executive compensation. In December 2017, the SEC staff issued Staff Accounting Bulletin (SAB) 118 to provide guidance for companies that had not completed their accounting for the income tax effects of the Tax Act. Due to the complexities involved in accounting for the enactment of the Tax Act, SAB 118 allowed for a provisional estimate of the impacts of the Tax Act in the Company’s earnings for the year ended February 2, 2018, as well as up to a one-year measurement period that ended on December 22, 2018, for any subsequent adjustments to such provisional estimate. Pursuant to SAB 118, the Company completed its analysis of the impacts of the Tax Act, including analyzing the effects of any Internal Revenue Service (IRS) and U.S. Treasury guidance issued, and state tax law changes enacted, within the maximum one-year measurement period resulting in an additional $3.7 million benefit in Fiscal 2018. Impacts of the CARES Act In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020. The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of employer side social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. In Fiscal 2020, the Company recorded a $3.1 million benefit related to the technical corrections aspect of the CARES Act related to carryback of net operating losses in years beginning in 2017.

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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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