Income Taxes

9 Months Ended

Nov. 02, 2019

Note 14 – Income Taxes

The Company’s effective tax rates for the period are as follows:


	Three Months Ended			Nine Months Ended
Fiscal 2020		(118.2	) %		5.5	%
Fiscal 2019		22.3	%		23.4	%

The Company determines its estimated annual effective tax rate at the end of each interim period based on full-year forecasted

pre-tax

income and facts known at that time. The estimated annual effective tax rate is applied to the

year-to-date

pre-tax

income at the end of each interim period with the cumulative effect of any changes in the estimated annual effective tax rate being recorded in the fiscal quarter in which the change is determined. The tax effect of significant unusual items is reflected in the period in which they occur.

During the three months ended November 2, 2019, the Company recognized an income tax

benefit

of approximately $247,000. The effective tax rate in this period was directly impacted by 1) a reduction in forecasted operating results for our fiscal 2020 as compared to operating results forecasted at the end of our

second

quarter of fiscal 2020

a $306,000

tax benefit related to the reversal of previously uncertain tax positions due to the finalization of an IRS audit and 3) an $18,000

ax benefit arising from windfall tax benefits related to the Company’s stock. During the three months ended October 27

2018, the Company recognized an income tax expense of approximately $407,000. The effective tax rate in this period was directly impacted by a $98,000 benefit arising from windfall tax benefits related to the Company’s stock.

During the nine months ended November 2, 2019, the Company recognized an income tax expense of approximately $182,000. The effective tax rate in this period was directly impacted by 1) a $359,000 tax benefit related to the

reversal of previously uncertain tax positions due to the finalization of an IRS audit and the

expiration of the statute of limitations on previously uncertain tax position

and 2) a $251,000 tax benefit arising from windfall tax benefits related to the Company’s stock. During the nine months ended October 27, 2018, the Company recognized an income tax expense of approximately $1,046,000. The effective tax rate in this period was directly impacted by a $210,000 benefit arising from windfall tax benefits related to the Company’s stock and a $78,000 tax benefit related to the expiration of the statute of limitations on a previously uncertain tax position.

The Company maintains a valuation allowance on some of its deferred tax assets in certain jurisdictions. A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized.

Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial reporting purposes. As of November 2, 2019, the Company’s cumulative unrecognized tax benefits totaled $360,000 compared to $618,000 as of January 31, 2019. Besides the expiration of the statute of limitations on a previously uncertain tax position

and finalization of an IRS audit

, there were no other developments affecting unrecognized tax benefits during the quarter ended November 2, 2019.