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Income Taxes
 6 Months Ended
Jul. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 9. Income Taxes

The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full fiscal year.

The provision for income taxes was $1,298 for the three months ended July 31, 2021 and primarily reflects the impact of an increase in the Company’s estimated effective tax rate for the full fiscal year. The effective tax rate was 183.3% for the three months ended July 31, 2021 and differs from the U.S. statutory rate of 21% primarily due to the increase in deferred tax liabilities attributable to indefinite-lived goodwill and intangible assets as described below and the impact of the valuation allowance established against additional deferred tax assets. The provision for income taxes was $28 and the effective tax rate was 0.2% for the three months ended August 1, 2020. The Company’s effective tax rate differs from the U.S. statutory rate of 21% for the three months ended August 1, 2020 primarily due to the impact of the valuation allowance established against additional deferred tax assets partly offset by state and foreign taxes.

The provision for income taxes was $3,941 for the six months ended July 31, 2021 and primarily represents the non-cash deferred tax expense created by the current period amortization of indefinite-lived goodwill and intangible assets for tax but not for

 

book purposes. A portion of these deferred tax liabilities cannot be used as a source to support the realization of certain deferred tax assets related to the Company’s net operating losses which results in tax expense to record these deferred tax liabilities. Additionally, the provision for income taxes for the six months ended July 31, 2021 included a correction of an error of $882 related to the state tax impact of the non-cash deferred tax expense created by the amortization of indefinite-lived goodwill and intangible assets as previously recorded in the fourth quarter of fiscal 2020. The effective tax rate was 47.6% for the six months ended July 31, 2021 and differs from the U.S. statutory rate primarily due to the increase in deferred tax liabilities attributable to indefinite-lived goodwill and intangible assets as described above and the impact of the valuation allowance established against additional deferred tax assets. The provision for income taxes was $70 and the effective tax rate was 0.1% for the six months ended August 1, 2020. The Company’s effective tax rate differs from the U.S. statutory rate for the six months ended August 1, 2020 primarily due to the impact of the valuation allowance established against additional deferred tax assets partly offset by state and foreign taxes.

Each reporting period, the Company evaluates the realizability of its deferred tax assets and has maintained a full valuation allowance against its deferred tax assets. These valuation allowances will be maintained until there is sufficient positive evidence to conclude that it is more likely than not that these other deferred tax assets will be realized.