Income Taxes

12 Months Ended

Jan. 28, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 11

Income Taxes

The components of earnings from continuing operations before income taxes is comprised of the following:

	Fiscal Year
(In thousands)	2023		2022		2021
United States	$	68,326	$	130,517	$	(3,123	)
Foreign		21,747		22,474		(108,546	)
Total Earnings (Loss) from Continuing Operations before Income Taxes	$	90,073	$	152,991	$	(111,669	)

Note 11

Income Taxes, Continued

Income tax expense from continuing operations is comprised of the following:

	Fiscal Year
(In thousands)	2023			2022			2021
Current
U.S. federal	$	37,433		$	49,354		$	(106,397	)
International		2,984			3,555			1,391
State		3,808			3,845			10,223
Total Current Income Tax Expense (Benefit)		44,225			56,754			(94,783	)
Deferred
U.S. federal		(25,704	)		(22,542	)		48,511
International		748			54			2,773
State		(1,438	)		3,778			(12,142	)
Total Deferred Income Tax Expense (Benefit)		(26,394	)		(18,710	)		39,142
Total Income Tax Expense (Benefit) – Continuing Operations	$	17,831		$	38,044		$	(55,641	)

Reconciliation of the United States federal statutory rate to our effective tax rate from continuing operations is as follows:

	Fiscal Year
	2023			2022			2021
U. S. federal statutory rate of tax		21.00	%		21.00	%		21.00	%
State taxes (net of federal tax benefit)		2.08			3.94			1.35
Foreign rate differential		(0.02	)		(0.11	)		(0.25	)
Change in valuation allowance		(1.12	)		1.58			(10.70	)
Credits		(1.18	)		(0.55	)		0.44
Permanent items		0.64			(0.05	)		(0.66	)
CARES Act		—			—			41.53
Outside basis difference - IRC Section 165(g) 3		—			—			10.34
Goodwill impairment		—			—			(13.50	)
IRS interest		(1.46	)		—			—
Other		(0.14	)		(0.94	)		0.28
Effective Tax Rate		19.80	%		24.87	%		49.83	%

Note 11

Income Taxes, Continued

We are subject to a tax on global intangible low-tax income (“GILTI”). GILTI taxes foreign income in excess of deemed return on tangible assets of a foreign corporation and we elected to treat this tax as a period cost. The impact from GILTI was not material for Fiscal 2023, 2022 or 2021.

We have a $54.1 million non-current prepaid income tax receivable on our Consolidated Balance Sheets as of January 28, 2023. This receivable relates to the remaining uncollected portion of our $107.2 million carryback of our Fiscal 2021 federal tax losses to prior tax periods under the CARES Act. The Internal Revenue Service ("IRS") is currently auditing the refund claim under the requirements of the Joint Committee on Taxation refund review process. We expect the examination process to extend greater than 12 months. We concluded that all positions in the refund claim met the more-likely-than-not standard based on the technical merits of the position and we recorded the benefit under the requirements of ASC 740. In addition, we recorded a $0.2 million unrecognized tax benefit related to the claim. It is possible the IRS could challenge our interpretation of the technical merits of the positions and the actual amount of the tax benefit may differ from the original refund claim.

Deferred tax assets and liabilities are comprised of the following:

(In thousands)	January 28, 2023			January 29, 2022
Pensions	$	502		$	553
Lease obligation		139,486			159,411
Book over tax depreciation		16,430			17,369
Expense accruals		9,471			11,965
Uniform capitalization costs		8,381			4,844
Provisions for discontinued operations and restructurings		662			596
Inventory valuation		706			394
Tax net operating loss and credit carryforwards		23,146			31,646
Allowances for bad debts and notes		760			863
Deferred compensation and restricted stock		3,012			2,736
Identified intangibles		1,162			1,409
Other		33			35
Gross deferred tax assets		203,751			231,821
Deferred tax asset valuation allowance		(36,482	)		(42,195	)
Deferred tax asset net of valuation allowance		167,269			189,626
Identified intangibles		(6,288	)		(6,333	)
Prepaids		(2,045	)		(1,784	)
Right of use asset		(132,050	)		(150,554	)
Tax over book depreciation		—			(30,421	)
Other		(832	)		(1,051	)
Gross deferred tax liabilities		(141,215	)		(190,143	)
Net Deferred Tax Assets (Liabilities)	$	26,054		$	(517	)

The deferred tax balances have been classified in our Consolidated Balance Sheets as follows:

	As of Fiscal Year Ended
(In thousands)	2023			2022
Net non-current asset	$	28,563		$	1,466
Net non-current liability		(2,509	)		(1,983	)
Net Deferred Tax Assets (Liabilities)	$	26,054		$	(517	)

Note 11

Income Taxes, Continued

As of January 28, 2023 and January 29, 2022, we had state net operating loss carryforwards of $9.0 million and $13.9 million, respectively. We provided a valuation allowance against these attributes of $3.2 million as of both January 28, 2023 and January 29, 2022. The attributes expire in fiscal years 2024 through 2039.

As of January 28, 2023 and January 29, 2022, we had state tax credits of $0.6 million and $0.5 million, respectively. These credits expire in fiscal years 2024 through 2026.

As of January 28, 2023 and January 29, 2022, we had foreign net operating loss carryforwards of $39.8 million and $50.6 million, respectively, which have a carryforward period at least 17 years.

As of January 28, 2023, we have provided a total valuation allowance of approximately $36.5 million on deferred tax assets associated primarily with foreign and state net operating losses for which management has determined it is more likely than not that the deferred tax assets will not be realized. The $5.7 million net decrease in valuation allowance during Fiscal 2023 from the $42.2 million provided for as of January 29, 2022 relates primarily to foreign tax attributes. We removed $2.4 million of German deferred tax assets and an equivalent amount of valuation allowance and our entity operating in Germany was merged out of existence in the period ended January 28, 2023. Management believes that it is more likely than not that the remaining deferred tax assets will be fully realized.

As of January 28, 2023, no deferred taxes have been provided on the accumulated undistributed earnings of our foreign operations beyond the amounts recorded for deemed repatriation of such earnings, as required in the Tax Cuts and Jobs Act (the "Act"). An actual repatriation of earnings from our foreign operations could still be subject to additional foreign withholding and U.S. state taxes. Based upon evaluation of our foreign operations, undistributed earnings are intended to remain permanently reinvested to finance anticipated future growth and expansion, and accordingly, deferred taxes have not been provided. If undistributed earnings of our foreign operations were not considered permanently reinvested as of January 28, 2023, an immaterial amount of additional deferred taxes would have been provided.

As of January 28, 2023, foreign tax credit carryforwards of approximately $4.0 million were available to reduce possible future U.S. income taxes and which expire from 2028 to 2031. As a result of the Act, we may no longer utilize certain U.S. foreign tax credit carryforwards. A valuation allowance of $3.8 million has been established against these credits.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits.

	Fiscal Year
(In thousands)	2023		2022		2021
Unrecognized Tax Benefit – Beginning of Period	$	178	$	178	$	178
Gross Increases (Decreases) – Tax Positions in a Current Period		—		—		—
Settlements		—		—		—
Lapse of Statutes of Limitations		—		—		—
Unrecognized Tax Benefit – End of Period	$	178	$	178	$	178

Note 11

Income Taxes, Continued

The amount of unrecognized tax benefits as of January 28, 2023, January 29, 2022 and January 30, 2021, which would impact the annual effective rate if recognized were $0.2 million each year. The amount of unrecognized tax benefits may change during the next twelve months but we do not believe the change, if any, will be material to our consolidated financial position or results of operations.

We recognize interest expense and penalties related to the above unrecognized tax benefits within income tax expense on the Consolidated Statements of Operations and it was not material for Fiscal 2023, 2022 or 2021. We recorded $1.7 million of interest income within income tax expense, net on the Consolidated Statements of Operations for the year ended January 28, 2023 related to our outstanding federal refund request.

We file income tax returns in federal and in many state and local jurisdictions as well as foreign jurisdictions. With few exceptions, our state and local income tax returns for fiscal years ended February 1, 2020 and beyond remain subject to examination. In addition, we have subsidiaries in various foreign jurisdictions that have statutes of limitation generally ranging from two to six years. As part of the IRS audit of our federal income tax return for the fiscal year end January 30, 2021, we have extended the statute of limitations for our fiscal years February 1, 2020, forward.

The CHIPS and Science Act of 2022 ("CHIPS") and the Inflation Reduction Act of 2022 ("IRA") were signed into law on August 9, 2022 and August 16, 2022, respectively. The legislation introduces new options for monetizing certain credits, a corporate alternative minimum tax and a stock repurchase excise tax. The stock repurchase excise tax is the principal provision that may be applicable to us and was effective for stock repurchases after December 31, 2022. We did not make any stock repurchases from January 1, 2023 to our fiscal year-end on January 28, 2023. We are still evaluating the overall impact of the CHIPS and IRA laws, but reported no impact from the new legislation for our fiscal year ended January 28, 2023.