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INCOME TAXES | 12 Months Ended
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Feb. 03, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income before taxes are as follows:
|  | Fiscal Year Ended
|  | February 3, 2018 |  | January 28, 2017 |  | January 30, 2016
|  | (In thousands)
Domestic |  | $ | 100,288 |  |  | $ | 90,990 |  |  | $ | 46,053 |
Foreign |  | 60,915 |  |  | 56,023 |  |  | 43,329 |
Total income before provision for income taxes |  | $ | 161,203 |  |  | $ | 147,013 |  |  | $ | 89,382 |
The components of the Company's provision for income taxes consisted of the following:
|  | Fiscal Year Ended
|  | February 3, 2018 |  | January 28, 2017 |  | January 30, 2016
|  | (In thousands)
Current: |  |  |  |  |  |
Federal(1) |  | $ | 29,968 |  |  | $ | 34,056 |  |  | $ | 7,248 |
State and local(1) |  | 25 |  |  | 8,527 |  |  | 2,275 |
Foreign |  | 11,618 |  |  | 11,473 |  |  | 9,809 |
|  | 41,611 |  |  | 54,056 |  |  | 19,332 |
Deferred: |  |  |  |  |  |
Federal |  | 30,828 |  |  | (8,068 | ) |  | 9,649 |
State and local |  | 3,546 |  |  | (1,691 | ) |  | 2,548 |
Foreign |  | 520 |  |  | 380 |  |  | (31 | )
|  | 34,894 |  |  | (9,379 | ) |  | 12,166 |
Total provision for income taxes |  | $ | 76,505 |  |  | $ | 44,677 |  |  | $ | 31,498 |
Effective tax rate |  | 47.5 | % |  | 30.4 | % |  | 35.2 | %
(1) The February 3, 2018 federal, state, and local tax provision includes benefits resulting from stock-based compensation arrangements recognized under ASU 2016-09--Improvements to Employee Share Based Payment Accounting. The Company has adopted ASU 2016-09 prospectively. Accordingly, no adjustments have been made for the benefits recognized for the years ended January 28, 2017 and January 30, 2016. Such benefits were recorded in equity for the years ended January 28, 2017 and January 30, 2016. A reconciliation between the calculated tax provision on income based on a U.S. federal statutory rate of 34.3% and the effective tax rate is as follows:
|  | Fiscal Year Ended
|  | February 3, 2018 |  | January 28, 2017 |  | January 30, 2016
|  | (In thousands)
Calculated income tax provision at U.S. federal statutory rate (1) |  | $ | 55,246 |  |  | $ | 51,455 |  |  | $ | 31,284 |
State and local income taxes, net of federal benefit (2) |  | 2,347 |  |  | 4,443 |  |  | 3,052 |
Foreign tax rate differential (3) |  | (10,794 | ) |  | (10,116 | ) |  | (9,744 | )
Non-deductible expenses |  | 514 |  |  | 2,514 |  |  | 2,729 |
Excess tax benefits related to stock compensation |  | (16,610 | ) |  | — |  |  | — |
U.S. transition taxes on deemed repatriation of foreign earnings |  | 37,607 |  |  | — |  |  | — |
Revaluation of deferred tax assets and liabilities |  | 5,646 |  |  | — |  |  | — |
Foreign withholding and state tax on unremitted earnings |  | 8,530 |  |  | — |  |  | — |
Unrecognized tax benefits |  | (3,199 | ) |  | (1,673 | ) |  | 3,892 |
Change in valuation allowance |  | (28 | ) |  | 19 |  |  | 399 |
Other |  | (2,754 | ) |  | (1,965 | ) |  | (114 | )
Total provision for income taxes |  | $ | 76,505 |  |  | $ | 44,677 |  |  | $ | 31,498 |
(1) The U.S federal statutory rate for Fiscal 2017 is based on 337 days at 35% and 34 days at 21%. (2) For Fiscal 2017, state and local taxes, net of federal benefit of $1.9 million and $1.0 million, are included in excess tax benefits related to stock compensation and foreign withholding and state taxes on unremitted earnings, respectively. (3) The foreign tax rate differential is due to the Company having a lower foreign effective tax rate as compared to its U.S. federal statutory tax rate of 34.3% for Fiscal 2017 and 35% for Fiscal 2016 and Fiscal 2015. The Company has substantial operations in both Hong Kong and Canada, which have lower statutory income tax rates as compared to the U.S. The Company's foreign effective tax rates for Fiscal 2017, Fiscal 2016, and Fiscal 2015 were 19.9%, 21.2%, and 22.6%, respectively. This rate will fluctuate from year to year in response to changes in the mix of income by country as well as changes in foreign jurisdiction tax laws. The assessment of the amount of value assigned to our deferred tax assets under the applicable accounting rules is judgmental. We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of our deferred tax assets is dependent on generating sufficient taxable income in future periods. We believe that it is more likely than not that future taxable income will be sufficient to allow us to recover substantially all of the value assigned to our deferred tax assets. However, if future events cause us to conclude that it is not more likely than not that we will be able to recover all of the value assigned to our deferred tax assets, we will be required to adjust our valuation allowance accordingly. The tax effects of temporary differences which give rise to deferred tax assets and liabilities are as follows:
|  | February 3, 2018 |  | January 28, 2017
|  | (In thousands)
Noncurrent Assets (1): |  |  |  |
Deferred rent |  | $ | 8,755 |  |  | $ | 13,425 |
Stock-based compensation |  | 11,500 |  |  | 16,093 |
Reserves |  | 12,864 |  |  | 24,399 |
Inventory |  | 2,506 |  |  | 4,398 |
Property and equipment, net |  | (16,911 | ) |  | (6,900 | )
Prepaid expenses |  | (2,613 | ) |  | (3,823 | )
Foreign and state tax on unremitted earnings |  | (3,107 | ) |  | — |
Hedging transactions |  | (296 | ) |  | (354 | )
Net operating loss carryforwards and other tax credits |  | 2,284 |  |  | 2,312 |
Valuation allowance |  | (2,284 | ) |  | (2,312 | )
Total deferred tax asset, net |  | $ | 12,698 |  |  | $ | 47,238 |
(1) In November 2015, the FASB issued guidance relating to balance sheet classification of deferred taxes. This guidance simplifies the current guidance by requiring entities to classify all deferred tax assets and liabilities, together with any related valuation allowance, as noncurrent on the balance sheet. The Company adopted this guidance in the first fiscal quarter of 2017 and applied its provisions prospectively. As a result, the prior periods were not retrospectively adjusted. The Company has foreign net operating loss carryforwards of approximately $5.9 million, which do not expire. The Company also has an Alternative Minimum Tax credit ("AMT") in Puerto Rico of approximately $0.7 million which does not expire. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in assessing the need for a valuation allowance. The Company has concluded that it is more likely than not that certain deferred tax assets cannot be used in the foreseeable future, principally the foreign net operating loss carryforwards and the AMT credit in Puerto Rico. Accordingly, a valuation allowance has been established for these tax benefits. However, to the extent that tax benefits related to these are realized in the future, the reduction of the valuation allowance will reduce income tax expense accordingly. On December 22, 2017, the U.S. government passed the Tax Act. The Tax Act is comprehensive tax legislation that implements complex changes to the U.S. tax code including, but not limited to, the reduction of the corporate tax rate from 35% to 21% and a move from a global tax regime to a modified territorial regime, which requires U.S. companies to pay a mandatory one-time transition tax on historical offshore earnings that have not been repatriated to the U.S. The transition tax is payable over eight years. Due to the complexities of the Tax Act, the SEC staff issued SAB 118 that allows the company to record a provisional amount for any income tax effects of the Tax Act in accordance with ASC 740--Income Taxes, to the extent that a reasonable estimate can be made. SAB 118 allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. We have recorded provisional amounts for any items that could be reasonably estimated at this time. This includes the one-time transition tax that we have estimated to be $37.6 million, which is based on our total accumulated post-1986 prescribed foreign earnings and profits ("E&P") estimated to be $388 million, which was previously considered to be indefinitely reinvested. Accordingly, no U.S. federal and state income taxes were provided. Within our consolidated balance sheets, $3.0 million is included in current income tax payable and $34.6 million is included in long-term liabilities related to this tax. Additionally, we recorded $8.5 million of related foreign and state withholding taxes on our previously undistributed foreign earnings. Also included is the revaluation of U.S. deferred tax assets and liabilities due to the lower enacted federal income tax rate, of 21%, that was effective January 1, 2018. The Company accrued a net deferred tax expense of $5.7 million attributable to the revaluation. The final impact will not be known until the actual 2017 U.S. tax return is submitted in 2018. In the aggregate, during the fourth quarter of Fiscal 2017, the impact of the Tax Act resulted in a one-time tax expense of approximately $51.8 million. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when we finalize the calculation of accumulated post-1986 prescribed foreign E&P and finalize the amounts held in cash or other specified assets. No additional income taxes have been provided for any additional outside basis differences inherent in these entities, as these amounts continue to be provisionally indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any additional outside basis differences in these entities (i.e., basis differences in excess of that subject to the one-time transition tax) is not practicable. The Tax Act also includes provisions to tax global intangible low-taxed income (“GILTI”) and a base erosion and anti-abuse tax (“BEAT”) that imposes tax on certain foreign related-party payments. The Company is subject to the GILTI and BEAT provisions, which are effective January 1, 2018. The Company is in the process of assessing the effects of these provisions for 2018 but does not expect there will be a material impact on its consolidated financial statements. The ultimate impacts of the Tax Act may differ from the estimate above, possibly materially, due to additional guidance from the U.S. government, updates or changes in the Company’s assumptions, revision of accounting standards for income taxes or related interpretations and future information that may become available. Uncertain Tax Benefits Tax positions are evaluated in a two-step process. The Company first determines whether it is more-likely-than-not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. A reconciliation of the gross amounts of unrecognized tax benefits, excluding accrued interest and penalties, is as follows:
|  | February 3, 2018 |  | January 28, 2017
|  | (In thousands)
Beginning Balance |  | $ | 6,326 |  |  | $ | 8,381 |
Additions for current year tax positions |  | 1,154 |  |  | 688 |
Additions for prior year tax positions |  | 252 |  |  | 250 |
Reductions for prior year tax positions |  | — |  |  | (1,996 | )
Reductions related to settlements with taxing authorities |  | (3,156 | ) |  | (46 | )
Reductions due to a lapse of the applicable statute of limitations |  | (564 | ) |  | (1,141 | )
Impact of foreign currency translation |  | (107 | ) |  | 190 |
Ending Balance |  | $ | 3,905 |  |  | $ | 6,326 |
Approximately $4.0 million of unrecognized tax benefits, inclusive of accrued interest and penalties, at February 3, 2018 would affect the Company's effective tax rate if recognized. The Company believes it is reasonably possible that there may be a reduction of approximately $0.2 million of unrecognized tax benefits in the next 12 months as a result of settlements with taxing authorities and statute of limitations expirations. The Company accrued interest and penalties related to unrecognized tax benefits as part of the provision for income taxes. At February 3, 2018 and January 28, 2017, accrued interest and penalties included in unrecognized tax benefits were approximately $0.1 million and $1.0 million, respectively. Interest, penalties, and reversals, thereof, net of taxes, was a benefit of $0.9 million in Fiscal 2017, a benefit of $0.3 million in Fiscal 2016 and a benefit of $0.4 million in Fiscal 2015. The Company is subject to tax in the United States and foreign jurisdictions, including Canada and Hong Kong. The Company, joined by its domestic subsidiaries, files a consolidated income tax return for federal income tax purposes. The Company, with certain exceptions, is no longer subject to income tax examinations by U.S. federal, state, and local or foreign tax authorities for tax years fiscal 2012 and prior.

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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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