INCOME TAXES (Tables)

12 Months Ended

Feb. 01, 2020

Schedule of Income before Income Tax, Domestic and Foreign

Components of income taxes

Income (loss) before income taxes consisted of:



(in thousands)	Fiscal 2019		Fiscal 2018		Fiscal 2017
Domestic ⁽¹⁾	$	17,590	$	53,858	$	(12,326	)
Foreign	44,741		62,509		67,487
Income before income taxes	$	62,331	$	116,367	$	55,161


⁽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 consisted of:



(in thousands)	Fiscal 2019			Fiscal 2018			Fiscal 2017
Current:
Federal	$	(2,193	)	$	7,460		$	(218	)
State	1,893			3,645			1,897
Foreign	8,521			20,508			5,472
Total current	$	8,221		$	31,613		$	7,151

Deferred:
Federal ⁽¹⁾	$	29,012		$	5,319		$	23,620
State	(107		)	1,183			1,457
Foreign ⁽¹⁾	(19,755		)	(556		)	12,408
Total deferred	9,150			5,946			37,485
Income tax expense	$	17,371		$	37,559		$	44,636

Schedule of Effective Income Tax Rate Reconciliation

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



	Fiscal 2019		Fiscal 2018		Fiscal 2017 ⁽¹⁾
U.S. federal corporate income tax rate	21.0	%	21.0	%	33.7	%
Net change in valuation allowances	8.2		0.7		1.0
Foreign taxation of non-U.S. operations ⁽²⁾	5.5		(0.9	)	(23.7	)
Write-off of stock basis in subsidiary	3.2		—		—
Internal Revenue Code Section 162(m)	2.2		1.0		—
State income tax, net of U.S. federal income tax effect	1.9		3.6		3.5
Audit and other adjustments to prior years’ accruals, net	0.8		(0.1	)	—
Permanent items	0.3		0.2		3.5
Statutory tax rate and law changes due to Swiss Tax Reform	(4.6	)	—		—
Credit for increasing research activities	(3.6	)	(1.7	)	(2.3	)
Net income attributable to noncontrolling interests	(1.9	)	(0.8	)	(2.1	)
Additional U.S. taxation of non-U.S. operations	(1.4	)	5.1		17.3
Trust-owned life insurance policies (at cash surrender value)	(1.1	)	(0.6	)	(1.9	)
Other statutory tax rate and law changes	(0.9	)	(0.1	)	(0.3	)
Tax expense (benefit) recognized on share-based compensation expense⁽³⁾	(0.9	)	8.3		19.2
Credit items	(0.8	)	(0.6	)	(4.2	)
Tax Cuts and Jobs Act of 2017	—		(3.0	)	36.1
Other items, net	—		0.2		1.1
Total	27.9	%	32.3	%	80.9	%


⁽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⁾	Prior to 2019, U.S. branch operations in Canada and Puerto Rico were subject to tax at the full U.S. tax rates. As a result, income from these operations do not create reconciling items. Effective in 2019, only Puerto Rico continues to be a branch of the U.S.

⁽³⁾

Refer to Note 14, “SHARE-BASED COMPENSATION,” for details on discrete income tax benefits and charges related to share-based compensation awards during Fiscal 2019, Fiscal 2018, and 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 1, 2020			February 2, 2019
Deferred income tax assets:
Operating lease liabilities ⁽¹⁾	$	370,068		$	—
Intangibles, foreign step-up in basis ⁽²⁾	77,565			52,615
Deferred compensation	19,849			22,341
Accrued expenses and reserves	13,571			12,767
Net operating losses (NOL), tax credit and other carryforwards	13,204			8,195
Rent	2,727			27,299
Prepaid expenses	1,246			—
Investments in subsidiaries	—			1,988
Other	3,613			1,012
Valuation allowances	(8,916		)	(5,402		)
Total deferred income tax assets	$	492,927		$	120,815

Deferred income tax liabilities:
Operating lease right-of-use assets ⁽¹⁾	$	(319,005	)	$	—
U.S. offset to foreign step-up in basis ⁽²⁾	(77,565		)	(52,615		)
Property, equipment and intangibles	(17,236		)	(4,769		)
Inventory	(3,537		)	(6,937		)
Store supplies	(2,843		)	(2,998		)
U.S. offset to foreign deferred tax assets, excluding intangibles, foreign step-up in basis ⁽²⁾	(1,654		)	—
Prepaid expenses	—			(2,564		)
Undistributed profits of non-U.S. subsidiaries	(587		)	—
Other	(488		)	(660		)
Total deferred income tax liabilities	$	(422,915	)	$	(70,543	)
Net deferred income tax assets ⁽³⁾	$	70,012		$	50,272

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

The amount of uncertain tax positions as of February 1, 2020, February 2, 2019 and February 3, 2018, 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 2019			Fiscal 2018			Fiscal 2017
Uncertain tax positions, beginning of the year	$	478		$	1,113		$	1,239
Gross addition for tax positions of the current year	131			151			148
Gross addition (reduction) for tax positions of prior years	1,349			(3		)	(1		)
Reductions of tax positions of prior years for:
Lapses of applicable statutes of limitations	(151		)	(218		)	(157		)
Settlements during the period	(13		)	(16		)	(116		)
Changes in judgment / excess reserve	—			(549		)	—
Uncertain tax positions, end of year	$	1,794		$	478		$	1,113