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Income Taxes | 12 Months Ended
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Feb. 02, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | E. INCOME TAXES The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under ASC Topic 740, deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The accounting regulation requires current recognition of net deferred tax assets to the extent it is more likely than not such net assets will be realized. To the extent that the Company believes its net deferred tax assets will not be realized, a valuation allowance must be recorded against those assets. Since the fourth quarter of fiscal 2013, the Company has maintained a valuation allowance against its deferred tax assets. While the Company has projected it will return to profitability, generate taxable income and ultimately emerge from a three-year cumulative loss, based on operating results for fiscal 2018 and the Company’s forecast for fiscal 2019, the Company believes that a full allowance remains appropriate at this time. Realization of the Company’s deferred tax assets is dependent on generating sufficient taxable income in the near term. The 2017 Tax Act was enacted on December 22, 2017 and it reduced the U.S. federal corporate tax rate from 35% to 21%, eliminated the 20-year limit on the carryforward of post-enactment losses, and resulted in the Company remeasuring its existing deferred tax balances. In addition, the 2017 Tax Act limits the future deductibility of certain items, such as certain compensation and interest expenses, and allows qualifying capital expenditures to be deducted fully in the year of purchase. In fiscal 2017, the Company remeasured its deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. Because the Company’s valuation allowance against these deferred assets was also remeasured, there was no impact to the Company’s income tax provision in fiscal 2017, see the reconciliation table between the statutory and effective income tax rates. The 2017 Tax Act allows for the indefinite carryforward of future net operating losses and imposes an annual limitation on the utilization of future losses, based on 80% of taxable income. As of February 2, 2019, for federal income tax purposes, the Company has net operating loss carryforwards of $141.5 million, which will expire from fiscal 2022 through fiscal 2036 and net operating loss carryforwards of $19.7 million that are not subject to expiration. For state income tax purposes, the Company has $89.4 million of net operating losses that are available to offset future taxable income, which will expire from fiscal 2019 through fiscal 2038. Additionally, the Company has $3.3 million of net operating loss carryforwards related to the Company’s operations in Canada, which will expire from fiscal 2025 through fiscal 2038. The utilization of net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon having taxable income. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of net operating loss carryforwards and tax credit carryforwards, which may be used in future years. In fiscal 2017, as part of the 2017 Tax Act, the corporate alternative minimum tax (“AMT”) was repealed and the Company’s AMT credit of $2.1 million, net of the applicable sequestration rate, became refundable. Accordingly, in fiscal 2017, the Company reversed its valuation allowance against the AMT credit, recognized an income tax benefit for $2.1 million and established a receivable of $2.1 million, which will be realized over the next four fiscal years. Late in fiscal 2018, the IRS issued an announcement that federal sequestration rules would not apply to certain AMT refunds, accordingly, the Company recognized an additional income tax benefit of $0.2 million in fiscal 2018. At February 2, 2019, the balance of the AMT receivable is $2.3 million. During 2017, the Company reclassified approximately $2.1 million to accumulated deficit from accumulated other comprehensive income (loss) due to intraperiod tax allocations. Approximately $1.4 million of this pertained to years prior to FY 2017. The components of the net deferred tax assets as of February 2, 2019 and February 3, 2018 were as follows (in thousands):
|  | February 2, 2019 |  |  | February 3, 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforward |  | $ | 39,804 |  |  | $ | 38,801 |
Gain on sale-leaseback |  |  | 2,657 |  |  |  | 3,036 |
Accrued Expenses and other |  |  | 2,813 |  |  |  | 2,089 |
Lease accruals |  |  | 1,598 |  |  |  | 2,322 |
Goodwill and intangibles |  |  | 510 |  |  |  | 338 |
Unrecognized loss on pension and pension expense |  |  | 1,897 |  |  |  | 1,801 |
Capital loss carryforward |  |  | — |  |  |  | 1,996 |
Inventory reserves |  |  | 1,414 |  |  |  | 1,539 |
Foreign tax credit carryforward |  |  | 766 |  |  |  | 766 |
Federal wage tax credit carryforward |  |  | 824 |  |  |  | 824 |
Unrecognized loss on foreign exchange |  |  | 186 |  |  |  | 148 |
State tax credits |  |  | 147 |  |  |  | 147 |
Excess of tax over book depreciation/amortization |  |  | (4,073 | ) |  |  | (6,144 | )
Subtotal |  | $ | 48,543 |  |  | $ | 47,663 |
Valuation allowance |  |  | (48,543 | ) |  |  | (47,663 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
For fiscal 2018, the Company had total deferred tax assets of $52.6 million, total deferred tax liabilities of $4.1 million and a valuation allowance of $48.5 million. The provision (benefit) for income taxes consisted of the following:
|  | FISCAL YEARS ENDED |
|  | February 2, 2019 |  |  | February 3, 2018 |  |  | January 28, 2017 |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal and state |  | $ | (58 | ) |  | $ | (109 | ) |  | $ | 91 |
Foreign |  |  | 8 |  |  |  | (100 | ) |  |  | 49 |
|  |  | (50 | ) |  |  | (209 | ) |  |  | 140 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal and state |  |  | — |  |  |  | (2,363 | ) |  |  | 23 |
Foreign |  |  | — |  |  |  | — |  |  |  | 3 |
|  |  | - |  |  |  | (2,363 | ) |  |  | 26 |
Total provision (benefit) |  | $ | (50 | ) |  | $ | (2,572 | ) |  | $ | 166 |
The following is a reconciliation between the statutory and effective income tax rates in dollars for the provision (benefit) for income tax:
|  | FISCAL YEARS ENDED |
|  | February 2, 2019 |  |  | February 3, 2018 |  |  | January 28, 2017 |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Federal income tax at the statutory rate (1) |  | $ | (2,852 | ) |  | $ | (7,215 | ) |  | $ | (732 | )
State income and other taxes, net of federal tax benefit |  |  | 66 |  |  |  | (407 | ) |  |  | (1 | )
Federal rate change on deferred assets (2) |  |  | — |  |  |  | 22,796 |  |  |  | — |
Federal rate change on valuation allowance (2) |  |  | — |  |  |  | (22,796 | ) |  |  | — |
Permanent items |  |  | 353 |  |  |  | 563 |  |  |  | 225 |
Expiration of capital loss carryforward |  |  | 1,618 |  |  |  | — |  |  |  | — |
Change in uncertain tax provisions |  |  | — |  |  |  | — |  |  |  | — |
Charge for valuation allowance |  |  | 992 |  |  |  | 7,249 |  |  |  | 775 |
Refundable AMT credit |  |  | (151 | ) |  |  | (2,141 | ) |  |  | — |
Other, net |  |  | (76 | ) |  |  | (621 | ) |  |  | (101 | )
Total provision (benefit) |  | $ | (50 | ) |  | $ | (2,572 | ) |  | $ | 166 |
(1) | The federal income tax at the statutory rate for fiscal 2017 reflects a blended rate of 33.72%, based on the statutory rate decreasing from 35% to 21% on January 1, 2018. The statutory rate for fiscal 2018 is 21%.
(2) | This represents the federal rate change impact as of the end of fiscal 2017. The rate change impact on deferred assets and valuation allowance as a result of the 2017 Tax Act was $22.8 million.
As discussed in Note A, the Company’s financial statements reflect the expected future tax consequences of uncertain tax positions that the Company has taken or expects to take on a tax return, based solely on the technical merits of the tax position. The liability for unrecognized tax benefits at February 2, 2019 and February 3, 2018 was approximately $2.0 million and was associated with a prior tax position related to exiting the Company’s direct business in Europe during fiscal 2013. The amount of unrecognized tax benefits has been presented as a reduction in the reported amounts of the Company’s federal and state net operating losses carryforwards. No penalties or interest have been accrued on this liability because the carryforwards have not yet been utilized. The reversal of this liability would result in a tax benefit being recognized in the period in which the Company determines the liability is no longer necessary. For fiscal 2018, 2017 and 2016, the Company made tax payments of $0.1 million in each fiscal year.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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