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INCOME TAXES | 12 Months Ended
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Jan. 29, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of Income (loss) before provision (benefit) for income taxes were as follows:
|  | Fiscal Years Ended
|  | January 29, 2022 |  | January 30, 2021 |  | February 1, 2020
|  | (in thousands)
Domestic |  | $ | 198,173 |  |  | $ | (250,876) |  |  | $ | 36,660 |
Foreign |  | 58,857 |  |  | 39,118 |  |  | 51,757 |
Total income (loss) before provision (benefit) for income taxes |  | $ | 257,030 |  |  | $ | (211,758) |  |  | $ | 88,417 |
The components of the Company’s Provision (benefit) for income taxes consisted of the following:
|  | Fiscal Years Ended
|  | January 29, 2022 |  | January 30, 2021 |  | February 1, 2020
|  | (in thousands)
Current: |  |  |  |  |  |
Federal |  | $ | 29,406 |  | $ | (45,072) |  | $ | 1,810
State and local |  | 7,389 |  | 212 |  | 1,186
Foreign |  | 7,218 |  | 5,728 |  | 6,757
|  | 44,013 |  | (39,132) |  | 9,753
Deferred: |  |  |  |  |  |
Federal |  | 14,517 |  | (14,274) |  | 4,240
State and local |  | 8,780 |  | (15,968) |  | 1,066
Foreign |  | 2,549 |  | (2,019) |  | 58
|  | 25,846 |  | (32,261) |  | 5,364
Total provision (benefit) for income taxes |  | $ | 69,859 |  | $ | (71,393) |  | $ | 15,117
Effective tax rate |  | 27.2 | % |  | 33.7 | % |  | 17.1 | %
On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act allows net operating losses (“NOLs”) incurred in taxable years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to offset 100% of taxable income and to generate a refund of previously paid income taxes. Pursuant to the CARES Act, the Company carried back the Fiscal 2020 tax loss of approximately $150.0 million to prior years and the resulting income tax receivable of $41.1 million is included within Prepaid expenses and other current assets on the Consolidated Balance Sheets. A reconciliation between the calculated tax provision (benefit) based on the U.S. federal statutory rate of 21.0% and the effective tax rate for Fiscal 2021, Fiscal 2020, and Fiscal 2019 follows:
|  | Fiscal Years Ended
|  | January 29, 2022 |  | January 30, 2021 |  | February 1, 2020
|  | (in thousands)
Calculated income tax provision (benefit) at U.S. federal statutory rate |  | $ | 53,976 |  |  | $ | (44,471) |  |  | $ | 18,568 |
State and local income taxes, net of federal benefit |  | 14,394 |  |  | (12,447) |  |  | 1,779 |
Foreign tax rate differential (1) |  | (3,598) |  |  | (5,791) |  |  | (5,019) |
Non-deductible expenses |  | 7,301 |  |  | 2,654 |  |  | 1,491 |
Excess tax detriment (benefit) related to stock compensation |  | (293) |  |  | 2,051 |  |  | (1,914) |
Unrecognized tax benefits |  | 1,050 |  |  | 1,150 |  |  | 1,304 |
Change in valuation allowance |  | 358 |  |  | (10) |  |  | (21) |
Global intangible low-taxed income |  | 1,476 |  |  | 7,815 |  |  | 836 |
Federal tax credits |  | (2,882) |  |  | (1,422) |  |  | (1,790) |
CARES Act Carryback (2) |  | — |  |  | (20,954) |  |  | — |
Other |  | (1,923) |  |  | 32 |  |  | (117) |
Total provision (benefit) for income taxes |  | $ | 69,859 |  |  | $ | (71,393) |  |  | $ | 15,117 |
____________________________________________ (1) The Company has substantial operations in Hong Kong, which has a lower statutory income tax rate as compared to the U.S. The Company’s foreign effective tax rate for Fiscal 2021, Fiscal 2020, and Fiscal 2019 was 16.6%, 7.7%, and 13.2%, respectively. This rate fluctuates from year to year in response to changes in the mix of income by country, as well as changes in tax laws in foreign jurisdictions. (2) The CARES Act permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. The Fiscal 2020 tax loss of approximately $150.0 million was carried back to earlier tax years when the corporate tax rate was 35.0%, compared to the current corporate tax rate of 21.0%, resulting in a tax benefit of $21.0 million. The assessment of the amount of value assigned to the Company’s deferred tax assets under the applicable accounting rules is judgmental. The Company is required to consider all available positive and negative evidence in evaluating the likelihood that it will be able to realize the benefit of the Company’s 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 the Company’s deferred tax assets is dependent on generating sufficient taxable income in future periods. The Company believes that it is more likely than not that future taxable income will be sufficient to recover substantially all of the value assigned to the Company’s deferred tax assets. However, if future events cause the Company to conclude that it is not more likely than not that it will be able to recover all of the value assigned to its deferred tax assets, the valuation allowance would be adjusted accordingly. The tax effects of temporary differences which give rise to deferred tax assets and liabilities were as follows:
|  | January 29, 2022 |  | January 30, 2021
|  | (in thousands)
Operating lease liabilities |  | $ | 59,283 |  |  | $ | 86,241 |
Right-of-use assets |  | (51,617) |  |  | (75,159) |
Stock-based compensation |  | 2,863 |  |  | 843 |
Reserves |  | 12,475 |  |  | 16,302 |
Inventory |  | 4,570 |  |  | 1,880 |
Property and equipment, net |  | (6,296) |  |  | (7,406) |
Capitalized research and development, net |  | 3,569 |  |  | 2,984 |
Tradenames and customer databases, net |  | (2,200) |  |  | (1,617) |
Prepaid expenses |  | (1,481) |  |  | (817) |
Foreign and state tax on unremitted earnings |  | (1,554) |  |  | (1,554) |
Net operating loss carryforward |  | 2,900 |  |  | 11,240 |
Tax credits |  | 1,746 |  |  | 10,581 |
Charitable contributions |  | — |  |  | 2,977 |
Valuation allowance |  | (1,149) |  |  | (916) |
Total deferred tax asset, net |  | $ | 23,109 |  |  | $ | 45,579 |
The Company has state NOL carryforwards of $41.4 million which expire within four and nineteen years, foreign NOL carryforwards of $0.7 million which does not expire and $1.2 million which expires in five years. The Company also has an Alternative Minimum Tax credit (“AMT”) in Puerto Rico of $0.6 million. 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 these tax benefits 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 Cuts and Jobs Act (the “Tax Act”), which resulted in 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 required U.S. companies to pay a mandatory one-time transition tax on historical offshore earnings that had not been repatriated to the U.S. The remaining unpaid transition tax, which begins to be repaid in 2024, amounted to $14.9 million at January 29, 2022, and is shown as Long-term income taxes payable on the Consolidated Balance Sheets. While the Company is no longer permanently reinvested to the extent earnings were subject to the transition tax under the Tax Act, no additional income taxes have been provided on any earnings subsequent to the transition tax or for any additional outside basis differences inherent in the Company’s foreign subsidiaries, as these amounts continue to be permanently reinvested in foreign operations. Determining the amount of the unrecognized deferred tax liability related to any additional outside basis differences in the Company’s foreign subsidiaries (i.e., basis differences in excess of that subject to the one-time transition tax) is not practicable. The unremitted foreign earnings earned subsequent to the transition tax, which are permanently reinvested, were $178.4 million as of January 29, 2022. Uncertain Tax Benefits Tax positions are evaluated in a two-step process. First, the Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination. Second, 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:
|  | Fiscal Years Ended
|  | January 29, 2022 |  | January 30, 2021
|  | (in thousands)
Beginning Balance |  | $ | 8,060 |  |  | $ | 6,655 |
Additions for current year tax positions |  | 1,155 |  |  | 1,256 |
Additions for prior year tax positions |  | 67 |  |  | 120 |
Reductions for prior year tax positions |  | (317) |  |  | — |
Impact of foreign currency translation |  | (28) |  |  | 29 |
Ending Balance |  | $ | 8,937 |  |  | $ | 8,060 |
Unrecognized tax benefits of $8.7 million, excluding accrued interest and penalties, at January 29, 2022 would affect the Company’s effective tax rate in future periods, if recognized. The Company expects to reverse reserves for unrecognized tax benefits of approximately $6.7 million in the next 12 months as a result of settlements with taxing authorities or the expiration of statutes of limitations. The Company accrues interest and penalties related to unrecognized tax benefits as part of the provision for income taxes. At January 29, 2022 and January 30, 2021, accrued interest and penalties of $0.5 million and $0.2 million, respectively, were included in unrecognized tax benefits. Interest, penalties, and reversals thereof, net of taxes, amounted to expense of $0.3 million in Fiscal 2021 and $0.1 million in Fiscal 2020. The Company is subject to tax in the U.S. and foreign jurisdictions, including Canada and Hong Kong. The Company files a consolidated U.S. income tax return for federal income tax purposes. The Company is no longer subject to income tax examinations by U.S. federal, state and local or foreign tax authorities for tax years 2016 and prior, with the exception of Hong Kong, which is open through tax year 2013 due to an ongoing tax examination.

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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=121826272&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=122134291&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=121826272&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=122134291&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=121826272&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 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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