INCOME TAXES (Tables)

12 Months Ended

Feb. 02, 2019

Schedule of Income before Income Tax, Domestic and Foreign

Components of income taxes

Income (loss) before income taxes consisted of:



(in thousands)	Fiscal 2018		Fiscal 2017			Fiscal 2016
Domestic ⁽¹⁾	$	53,858	$	(12,326	)	$	(52,041	)
Foreign	62,509		67,487			48,563
Income (loss) before income taxes	$	116,367	$	55,161		$	(3,478	)


⁽¹⁾	Includes intercompany charges to foreign affiliates for management fees, cost-sharing, royalties and interest and excludes a portion of foreign income that is currently includable on the U.S. federal income tax return.

Schedule of Components of Income Tax Expense (Benefit)

Income tax expense (benefit) consisted of:



(in thousands)	Fiscal 2018			Fiscal 2017			Fiscal 2016
Current:
Federal	$	7,460		$	(218	)	$	(18,888	)
State	3,645			1,897			(74		)
Foreign	20,508			5,472			15,633
Total current	$	31,613		$	7,151		$	(3,329	)

Deferred:
Federal	$	5,319		$	23,620		$	(5,787	)
State	1,183			1,457			(346		)
Foreign	(556		)	12,408			(1,734		)
Total deferred	5,946			37,485			(7,867		)
Income tax expense (benefit)	$	37,559		$	44,636		$	(11,196	)

Schedule of Effective Income Tax Rate Reconciliation

Reconciliation between the statutory federal income tax rate and the effective tax rate is as follows:



	Fiscal 2018		Fiscal 2017 ⁽¹⁾		Fiscal 2016 ⁽²⁾
U.S. federal corporate income tax rate	21.0	%	33.7	%	35.0	%
State income tax, net of U.S. federal income tax effect	3.6		3.5		5.0
Foreign taxation of non-U.S. operations	(1.7	)	(25.8	)	248.9
U.S. taxation of non-U.S. operations ⁽³⁾	5.1		17.3		(212.6	)
Net change in valuation allowances	0.7		1.0		(16.5	)
Audit and other adjustments to prior years’ accruals	(0.1	)	—		(0.1	)
Statutory tax rate and law changes	(0.1	)	(0.3	)	94.3
Permanent items	1.2		3.5		91.3
Credit items	(0.6	)	(4.2	)	11.7
Tax Cuts and Jobs Act of 2017	(3.0	)	36.1		—
Tax deficit recognized on share-based compensation expense⁽⁴⁾	8.3		19.2		—
Credit for increasing research activities	(1.7	)	(2.3	)	32.1
Trust-owned life insurance policies (at cash surrender value)	(0.6	)	(1.9	)	31.0
Other items, net	0.2		1.1		1.8
Total	32.3	%	80.9	%	321.9	%


⁽¹⁾	On December 22, 2017, the Act was signed into law, which reduced the U.S. federal corporate income tax rate from 35% to 21% resulting in a blended U.S. federal income tax rate of 33.7% based on the applicable tax rates before and after January 1, 2018, and the number of days in Fiscal 2017.

⁽²⁾

Given the low level of income in absolute dollars in Fiscal 2016, effective tax rate reconciling items that may have been considered de minimis in prior years in terms of absolute dollars and on a percentage basis were amplified on a percentage basis in Fiscal 2016 even as the absolute dollar value of the reconciling items were similar to prior years. Accordingly, year over year comparability may be difficult as a result of the amplifying effect of the lower levels of income.


⁽³⁾	U.S. branch operations in Canada and Puerto Rico are subject to tax at the full U.S. tax rates. As a result, income from these operations do not create reconciling items.


⁽⁴⁾	The Company incurred discrete non-cash income tax charges of $9.6 million and 10.6 million for Fiscal 2018 and Fiscal 2017, respectively, primarily related to the expiration of certain share-based compensation awards, recognized in income tax expense (benefit) due to changes in share-based compensation accounting standards adopted by the Company in Fiscal 2017.

Schedule of Deferred Tax Assets and Liabilities

The effect of temporary differences which gives rise to deferred income tax assets (liabilities) were as follows:



(in thousands)	February 2, 2019			February 3, 2018
Deferred income tax assets:
Intangibles, foreign step-up in basis ⁽¹⁾	$	52,615		$	—
Rent	27,299			29,594
Deferred compensation	22,341			31,567
Accrued expenses and reserves	12,767			13,790
Net operating losses (NOL), tax credit and other carryforwards	8,195			5,256
Investments in subsidiaries	1,988			—
Other	1,012			1,100
Valuation allowances	(5,402		)	(3,508		)
Total deferred income tax assets	$	120,815		$	77,799

Deferred income tax liabilities:
U.S. offset to foreign step-up in basis ⁽¹⁾	$	(52,615	)	$	—
Inventory	(6,937		)	(5,206		)
Property, equipment and intangibles	(4,769		)	(2,923		)
Store supplies	(2,998		)	(3,261		)
Prepaid expenses	(2,564		)	(1,698		)
Investments in subsidiaries	—			(2,937		)
Other	(660		)	(1,532		)
Total deferred income tax liabilities	(70,543		)	(17,557		)
Net deferred income tax assets ⁽²⁾	$	50,272		$	60,242

Summary of Positions for which Significant Change in Unrecognized Tax Benefits is Reasonably Possible

The amount of uncertain tax positions as of February 2, 2019, February 3, 2018 and January 28, 2017, which would impact the Company’s effective tax rate if recognized and a reconciliation of the beginning and ending amounts of uncertain tax positions, excluding accrued interest and penalties, are as follows:



(in thousands)	Fiscal 2018			Fiscal 2017			Fiscal 2016
Uncertain tax positions, beginning of the year	$	1,113		$	1,239		$	2,455
Gross addition for tax positions of the current year	151			148			67
Gross (reduction) addition for tax positions of prior years	(3		)	(1		)	19
Reductions of tax positions of prior years for:
Lapses of applicable statutes of limitations	(218		)	(157		)	(1,211		)
Settlements during the period	(16		)	(116		)	(40		)
Changes in judgment / excess reserve	(549		)	—			(51		)
Uncertain tax positions, end of year	$	478		$	1,113		$	1,239