Income Taxes

3 Months Ended

Apr. 29, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our interim income tax provisions are based on the effective income tax rate expected to be applicable for the full fiscal year, adjusted for specific items that are required to be recognized in the period in which they occur. Deferred tax assets and liabilities are based on the enacted tax rate that will apply in future periods when such assets and liabilities are expected to be settled or realized.

Our effective income tax rate was 22.1% and 3.4% for the three months ended April 29, 2023 and April 30, 2022, respectively. The effective tax rate differs from the statutory rate primarily due to the difference in income tax rates from state to state where work was performed, the impact of the vesting and exercise of share-based awards, tax credits recognized, and variances in non-deductible and non-taxable items. During the three months ended April 29, 2023 and April 30, 2022, the Company realized approximately $2.7 million and $2.5 million of net excess tax benefits, respectively, related to the vesting and exercise of share-based awards. Additionally, the three months ended April 30, 2022 includes approximately $1.7 million of incremental tax benefit for tax credits related to a tax filing for a prior year. Other fluctuations in our effective income tax rate from the statutory rate each period are mainly attributable to changes in unrecognized tax benefits and tax law changes.

We are currently under IRS audit for fiscal year 2020 and an audit by Canadian taxation authorities for fiscal years 2017 through 2020. We believe our provision for income taxes is adequate; however, any assessment may affect our results of operations and cash flows.