Income Taxes

9 Months Ended

Oct. 27, 2024

Income Taxes [Abstract]

Income Taxes

11.    INCOME TAXES

The Company’s provision for income taxes during the interim reporting periods has historically been calculated by applying an estimate of the annual effective tax rate for the full year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The effective tax rate related to controlling interest was (4.2%) and 23% for the nine months ended October 27, 2024 and October 29, 2023, respectively. The income from TRI was excluded from the calculation of the Company’s effective tax rate, as TRI is a limited liability company and not subject to income tax. The effective tax rate fluctuated significantly year over year primarily as a result of the Company recording a valuation allowance on its deferred tax assets as of October 27, 2024.

The Company regularly assesses the realizability of deferred tax assets and under the asset and liability method prescribed under ASC 740, Income Taxes, the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The realizability of deferred tax assets is assessed throughout the year and a valuation allowance is recorded, if necessary, to reduce net deferred tax assets to the amount more likely than not to be realized. The Company considers all available evidence, both positive and negative, to determine the realizability of deferred tax assets and includes historical information about results of operations for the current and preceding years as well as more subjective information about future years. In conducting this assessment, a significant piece of objective negative evidence evaluated by management was a cumulative loss over the most recent 36-month period ended October 27, 2024, which was not outweighed by available positive evidence and which limited the Company’s ability to give weight to projections of future growth for purposes of this assessment. Accordingly, as of October 27, 2024, a valuation allowance of $10.1 million was provided against the net amount of deferred tax assets. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. As of January 28, 2024, there was no valuation allowance for deferred tax assets.