Income Taxes

12 Months Ended

Jan. 29, 2022

Income Taxes [Abstract]

Income Taxes

12. Income Taxes:

 Unrecognized tax benefits for uncertain tax positions, primarily recorded in Other noncurrent

liabilities, are established in accordance with ASC 740 when, despite the fact that the tax return positions

are supportable, the Company believes these positions may be challenged and the results are uncertain. 

The Company adjusts these liabilities in light of changing facts and circumstances. As of January 29,

2022, the Company had gross unrecognized tax benefits totaling approximately $5.3 million, of which

approximately $

6.4

 million (inclusive of interest) would affect the effective tax rate if recognized. The

Company had approximately $

2.0

 million, $

2.8

 million and $

3.3

 million of interest and penalties accrued

related to uncertain tax positions as of January 29, 2022, January 30, 2021 and February 1, 2020,

respectively. The Company recognizes interest and penalties related to the resolution of uncertain tax

positions as a component of income tax expense. The Company recognized $

452,000

, $

424,000

 and

$

574,000

 of interest and penalties in the Consolidated Statements of Income (Loss) and Comprehensive

Income (Loss) for the years ended January 29, 2022, January 30, 2021 and February 1, 2020, respectively. 

The Company is no longer subject to U.S. federal income tax examinations for years before 2018. In

state and local tax jurisdictions, the Company has limited exposure before 2011. During the next 12

months, various state and local taxing authorities’ statutes of limitations will expire and certain state

examinations may close, which could result in a potential reduction of unrecognized tax benefits for

which a range cannot be determined.

 A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows

(in thousands):

`

January 29,

2022

January 30,

2021

February 1,

2020

Fiscal Year Ended

Balances, beginning

$

5,946

$

7,942

$

8,485

 Additions for tax positions of the current year

1,312

286

375

 Additions for tax positions prior years

680

-

-

Reduction for tax positions of prior years for:

 Settlements during the period

-

614

2

 Lapses of applicable statutes of limitations

(2,652)

(2,896)

(920)

Balances, ending

$

5,286

$

5,946

$

7,942

The provision for income taxes consists of the following (in thousands):

`

January 29,

2022

January 30,

2021

February 1,

2020

Fiscal Year Ended

Current income taxes:

 Federal

$

2,532

$

(31,927)

$

3,321

 State

802

1,842

96

 Foreign

1,984

1,731

1,763

 Total

5,318

(28,354)

5,180

Deferred income taxes:

 Federal

(2,558)

1,905

574

 State

(639)

1,129

1,556

 Foreign

-

(3)

-

 Total

(3,197)

3,031

2,130

Total income tax expense (benefit)

$

2,121

$

(25,323)

$

7,310

Significant components of the Company’s deferred tax assets and liabilities as of January 29, 2022 and

January 30, 2021 are as follows (in thousands):

`

January 29, 2022

January 30, 2021

Deferred tax assets:

Allowance for customer credit losses

$

171

$

131

Inventory valuation

1,176

1,004

Non-deductible accrued liabilities

1,367

1,613

Other taxes

1,135

1,184

Federal benefit of uncertain tax positions

972

1,001

Equity compensation expense

3,666

4,097

Net operating losses

4,206

4,531

Charitable contribution carryover

241

394

State tax credits

1,115

1,115

Lease liabilities

42,268

47,428

Other

4,293

2,204

Total deferred tax assets before valuation allowance

60,610

64,702

Valuation allowance

(4,473)

(5,256)

Total deferred tax assets after valuation allowance

56,137

59,446

Deferred tax liabilities:

Property and equipment

-

1,480

Accrued self-insurance reserves

504

466

Right-of-Use assets

46,320

51,350

Other

-

465

Total deferred tax liabilities

46,824

53,761

Net deferred tax assets

$

9,313

$

5,685

The changes in the valuation allowance are presented below:

January 29, 2022

January 30, 2021

Valuation Allowance Beginning Balance

$

(5,256)

$

(1,079)

 Net Valuation Allowance (Additions) / Reductions

783

(4,177)

Valuation Allowance Ending Balance

$

(4,473)

$

(5,256)

As of January 29, 2022, the Company had $1.1 million of state tax credits to offset future state income tax

expense, which are set to expire by fiscal 2023. Based on the available evidence, the Company has recorded

a valuation allowance of $1.1 million.

 As of January 29, 2022, the Company had $4.2 million of state net operating loss carryforwards. The

Company assessed the likelihood that deferred tax assets related to state net operating loss carryforwards will

be realized in light of the adverse impact on the Company’s financial statements and operations due to

COVID-19. Based on this assessment, the Company concluded that it is more likely than not the Company

will not be able to realize net operating losses and, accordingly, has recorded a valuation allowance of $3.4

million for the portion it expects to not be realized.

The net change in the valuation allowance for January 29, 2022 and January 30, 2021 is for state net

operating losses.

 As of January 29, 2022, the Company’s position is that its overseas subsidiaries will not invest

undistributed earnings indefinitely. Future unremitted earnings when distributed are expected to be either

distributions of GILTI-previously taxed income or eligible for a 100% dividends received deduction. The

withholding tax rate on any unremitted earnings is zero and state income taxes on such earnings are

considered immaterial. Therefore, the Company has not provided deferred U.S. income taxes on

approximately $26.9 million of earnings from non-U.S. subsidiaries.

The reconciliation of the Company’s effective income tax rate with the statutory rate is as follows:

`

January 29,

2022

January 30,

2021

February 1,

2020

Fiscal Year Ended

Federal income tax rate

21.0

%

21.0

%

21.0

%

State income taxes

2.7

4.0

1.7

CARES ACT - Carryback differential

(5.8)

18.3

-

Global intangible low-taxed income

6.7

(5.3)

5.9

Foreign tax credit

(4.3)

-

(3.7)

Foreign rate differential

(2.8)

1.2

(2.5)

Offshore claim

(5.5)

2.5

(5.2)

Limitation on officer compensation

1.9

(0.4)

1.4

Work opportunity credit

(1.8)

0.2

(3.2)

Addback on wage related credits

0.4

-

0.7

Tax exempt interest

-

-

(0.2)

Charitable contribution of inventory

(1.1)

(0.2)

-

Uncertain tax positions

(3.5)

3.3

(1.0)

Deferred rate change

0.1

(0.1)

-

Valuation allowance

(2.1)

(5.7)

2.6

Other

(0.5)

(4.0)

(0.6)

Effective income tax rate

5.4

%

34.8

%

16.9

%