Income Taxes

12 Months Ended

Feb. 03, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 11

Income Taxes

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

	Fiscal Year
(In thousands)	2024			2023		2022
United States	$	(43,859	)	$	68,326	$	130,517
Foreign		22,085			21,747		22,474
Total Earnings (Loss) from Continuing Operations before Income Taxes	$	(21,774	)	$	90,073	$	152,991

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

	Fiscal Year
(In thousands)	2024			2023			2022
Current
U.S. federal	$	(3,672	)	$	39,095		$	48,770
International		3,419			2,984			3,555
State		744			3,805			3,798
Total Current Income Tax Expense		491			45,884			56,123
Deferred
U.S. federal		(5,060	)		(25,704	)		(22,542	)
International		1,074			748			54
State		7,438			(1,438	)		3,778
Total Deferred Income Tax Expense (Benefit)		3,452			(26,394	)		(18,710	)
Net Interest Related to Income Taxes
U.S. federal		(2,728	)		(1,662	)		583
International		—			—			—
State		66			3			48
Total Net Interest Related to Income Taxes		(2,662	)		(1,659	)		631
Tax Expense Recognized for Unrecognized Tax Benefits (“UTBS”) in the Statement of Operations
U.S. federal		—			—			—
International		—			—			—
State		573			—			—
Total Tax Expense Recognized for UTBS in the Statement of Operations		573			—			—
Total Income Tax Expense – Continuing Operations	$	1,854		$	17,831		$	38,044

Note 11

Income Taxes, Continued

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

	Fiscal Year
	2024			2023			2022
U. S. federal statutory rate of tax		21.00	%		21.00	%		21.00	%
State taxes (net of federal tax benefit)		(0.92	)		2.08			3.94
Foreign rate differential		0.76			(0.02	)		(0.11	)
Change in valuation allowance		(33.57	)		(1.12	)		1.58
Uncertain tax position		(2.63	)		—			—
Credits		4.54			(1.18	)		(0.55	)
Global intangible low-tax income		(2.34	)		—			—
Permanent items		(4.50	)		0.64			(0.05	)
IRS interest		9.90			(1.46	)		—
Other		(0.75	)		(0.14	)		(0.94	)
Effective Tax Rate		(8.51	)%		19.80	%		24.87	%

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 2024, 2023 or 2022.

We have a $56.8 million non-current prepaid income tax receivable on our Consolidated Balance Sheets as of February 3, 2024. 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 for more 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.

Note 11

Income Taxes, Continued

Deferred tax assets and liabilities are comprised of the following:

(In thousands)	February 3, 2024			January 28, 2023
Pensions	$	348		$	502
Lease obligation		127,220			139,486
Book over tax depreciation		12,976			16,430
Expense accruals		10,054			9,471
Uniform capitalization costs		7,515			8,381
Provisions for discontinued operations and restructurings		561			662
IRC Section 163 interest limitation		1,049			—
Inventory valuation		1,235			706
Tax net operating loss and credit carryforwards		24,164			23,146
Allowances for bad debts and notes		915			760
Deferred compensation and restricted stock		2,773			3,012
Identified intangibles		5,987			1,162
Other		33			33
Gross deferred tax assets		194,830			203,751
Deferred tax asset valuation allowance		(43,961	)		(36,482	)
Deferred tax asset net of valuation allowance		150,869			167,269
Identified intangibles		(5,318	)		(6,288	)
Prepaids		—			(2,045	)
Right of use asset		(119,658	)		(132,050	)
Tax over book depreciation		(2,736	)		—
Other		(555	)		(832	)
Gross deferred tax liabilities		(128,267	)		(141,215	)
Net Deferred Tax Assets	$	22,602		$	26,054

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

	As of Fiscal Year Ended
(In thousands)	2024			2023
Net non-current asset	$	26,230		$	28,563
Net non-current liability		(3,628	)		(2,509	)
Net Deferred Tax Assets	$	22,602		$	26,054

As of February 3, 2024 and January 28, 2023, we had state net operating loss carryforwards of $9.9 million and $9.0 million, respectively. We provided a valuation allowance against these attributes of $8.1 million as of February 3, 2024 and $3.2 million as of January 28, 2023. Expiration of these attributes will occur in various years through 2044.

As of each of February 3, 2024 and January 28, 2023, we had state tax credits of $0.6 million. We provided a valuation allowance against these attributes of $0.6 million as of each of February 3, 2024 and January 28, 2023. These credits expire in fiscal years 2025 through 2027.

As of February 3, 2024 and January 28, 2023, we had foreign net operating loss carryforwards of $41.4 million and $39.8 million, respectively, which have a carryforward period of at least 16 years.

Note 11

Income Taxes, Continued

As of February 3, 2024, we have provided a total valuation allowance of approximately $44.0 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 $7.5 million net increase in valuation allowance during Fiscal 2024 from the $36.5 million provided for as of January 28, 2023 relates primarily to state tax attributes. We removed $2.4 million of German deferred tax assets and an equivalent amount of valuation allowance as 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 February 3, 2024, we have provided less than $0.1 million of deferred taxes 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”). Based upon evaluation of our worldwide operations and specific plans to remit foreign earnings back to the U.S., we can no longer assert that earnings from certain foreign operations will be indefinitely reinvested.

As of February 3, 2024, foreign tax credit carryforwards of approximately $3.8 million were available to reduce possible future U.S. income taxes and 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 $2.8 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)	2024		2023		2022
Unrecognized Tax Benefit – Beginning of Period	$	178	$	178	$	178
Gross Increases – Tax Positions in a Current Period		573		—		—
Settlements		—		—		—
Lapse of Statutes of Limitations		—		—		—
Unrecognized Tax Benefit – End of Period	$	751	$	178	$	178

The amount of unrecognized tax benefits which would impact the annual effective tax rate if recognized were $0.8 million as of February 3, 2024, and $0.2 million each year as of January 28, 2023 and January 29, 2022. 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 2024, 2023 or 2022. We recorded $2.7 million and $1.7 million of interest income within income tax expense, net on the Consolidated Statements of Operations for the years ended February 3, 2024 and January 28, 2023, respectively, related to our outstanding federal refund request. We did not record any interest income within income tax expense, net for the year ended January 29, 2022.

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 January 30, 2021 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 ended January 30, 2021, we have extended the statute of limitations for our fiscal years February 1, 2020, forward through April 30, 2025.

Note 11

Income Taxes, Continued

The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% intended to be effective for our tax periods ending February 1, 2025 and forward. While the U.S. has not yet adopted the Pillar Two rules, various other governments around the world are enacting similar legislation. As currently designed, Pillar Two will ultimately apply to our worldwide operations. There remains uncertainty as to the final Pillar Two model rules. We are continuing to evaluate the Pillar Two rules and their potential impact on future periods, but we do not expect the rules to have a material impact on our effective tax rate.