Income Taxes

3 Months Ended

Apr. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

Income tax expense was $1.5 million during the first quarter of Fiscal 2022 compared with $40.6 million during the first quarter of Fiscal 2021. The effective tax rate for the first quarter of Fiscal 2022 was 8.7% compared with 19.2% during the first quarter of Fiscal 2021. The decrease in income tax expense in the current year was a result of lower pre-tax income. The decrease in effective tax rate is due to favorable permanent items having a greater impact as a result of the lower pretax income compared to the prior year.

Net deferred taxes are as follows:

	(in thousands)
	April 30,		January 29,		May 1,
	2022		2022		2021
Deferred tax asset	$	3,824	$	3,959	$	4,332
Deferred tax liability		232,863		220,023		171,619
Net deferred tax liability	$	229,039	$	216,064	$	167,287

Net deferred tax assets relate to Puerto Rico deferred balances that have a future net benefit for tax purposes. Net deferred tax liabilities primarily relate to intangible assets and depreciation expense where the Company has a future obligation for tax purposes.

As of April 30, 2022, the Company had a deferred tax asset related to net operating losses of $22.2 million, inclusive of $21.9 million related to state net operating losses that expire at various dates between 2023 and 2041, as well as $0.3 million related to Puerto Rico net operating losses that will expire in 2025.

As of April 30, 2022, the Company had a deferred tax asset related to tax credit carry-forwards of $8.6 million, inclusive of $7.8 million of state tax credit carry-forwards, which will begin to expire in 2023, and $0.8 million of deferred tax assets recorded for Puerto Rico alternative minimum tax credits that have an indefinite life.

As of April 30, 2022, January 29, 2022 and May 1, 2021, valuation allowances amounted to $12.9 million, $12.9 million and $13.7 million, respectively, related to state and Puerto Rico net operating losses and state tax credit carry-forwards. The Company believes that it is more likely than not that this portion of state and Puerto Rico net operating losses and state tax credit carry-forwards will not be realized.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed into law, which provided emergency economic assistance for American workers, families and businesses affected by the COVID-19 pandemic. As of April 30, 2022, the Company received a portion of its one-time tax refund from the carryback of federal net operating losses (NOLs) as a result of the CARES Act in the amount of $177.4 million. The remaining amount of the refund to be received as of April 30, 2022 is $68.1 million, which is included in the line item “Prepaid and other current assets” on the Company’s Condensed Consolidated Balance Sheet.