INCOME TAXES

12 Months Ended

Jan. 28, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 5 — INCOME TAXES

The provision (benefit) for income taxes consists of the following for the years ended January 28, 2017, January 30, 2016 and January 30, 2015:

(dollars in thousands)	2016			2015			2014
Current
Federal	$	(3,978	)	$	(4,649	)	$	(6,746	)
State		895			1,021			68
		(3,083	)		(3,628	)		(6,678	)
Deferred
Federal		(10,808	)		(824	)		(11,061	)
State		3,408			(7	)		(2,273	)
		(7,400	)		(831	)		(13,334	)
	$	(10,483	)	$	(4,459	)	$	(20,012	)

The income tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities as of year-end are presented below:

(dollars in thousands)	2016			2015
Deferred income tax assets:
Accrual for incentive compensation	$	5,446		$	1,076
Allowance for doubtful accounts		763			1,166
Insurance accruals		2,117			1,651
Other accruals		1,016			82
Net operating loss carryforwards		20,705			6,157
Deferred Revenue		583			523
Federal benefit on state reserves		91			90
WOTC Credit Carryforward		3,896			2,631
Amortization of intangibles		18,448			16,527
Contribution Carryforward		424			101
Total deferred income tax assets		53,489			30,004
Less: Valuation allowance		22,183			2,549
Deferred income tax assets, net of valuation allowance		31,306			27,455
Deferred income tax liabilities:
Postretirement benefits		(43	)		(47	)
Property, plant and equipment		(12,358	)		(11,104	)
Inventory valuation		(19,557	)		(25,813	)
Prepaid expenses		(1,322	)		(215	)
Total deferred income tax liabilities		(33,280	)		(37,179	)
Net deferred income tax liabilities	$	(1,974	)	$	(9,724	)

The net operating loss carryforwards are available to reduce federal and state income taxes in future years. The federal carryforward is approximately $34.0 million and will expire in 2037. Carryforwards total approximately $203.1 million for state income tax purposes and expire at various times during the fiscal years 2017 through 2037. Federal income tax credits total approximately $3.9 million and begin to expire in 2036.

We maintain a valuation allowance for federal and state net operating losses and tax credits that we do not expect to utilize prior to their expiration. During 2016, the valuation allowance increased $19.6 million, and during 2015, the valuation allowance increased $0.3 million. Based upon expected future income and the reversal of deferred tax liabilities, management believes that it is more likely than not that the results of operations will generate sufficient taxable income to realize the deferred income tax asset after giving consideration to the valuation allowance.

A reconciliation of the statutory federal income tax rate to the effective income tax rate is as follows:

	2016			2015			2014
Income tax provision at statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		4.6			0.3			4.5
Tax credits, principally jobs		1.0			10.4			2.6
Uncertain tax provisions		-			-			0.1
Change in valuation allowance		(26.4	)		(9.1	)		(0.4	)
Other		0.1			0.3			(0.4	)
Permanent differences		(0.7	)		0.8			(0.5	)
Effective income tax rate		13.6	%		37.7	%		40.9	%

A reconciliation of the beginning and ending amount of the unrecognized tax benefits is as follows:

(in millions)	2016		2015		2014
Beginning balance	$	0.4	$	0.4	$	1.3
Additions for tax positions of prior years		-		-		0.1
Reductions for settlements of prior year tax positions		-		-		(1.0	)
Ending balance	$	0.4	$	0.4	$	0.4

As of January 28, 2017, our liability for unrecognized tax benefits totaled $0.4 million and is recorded in our Consolidated Balance Sheet within “Other noncurrent liabilities,” all of which, if recognized, would affect our effective tax rate. Examinations by the state jurisdictions are expected to be completed within the next 12 months which could result in a change to our unrecognized tax benefits, but we are unable to estimate the amounts.

FASB ASC 740 further requires that interest and penalties required to be paid by the tax law on the underpayment of taxes should be accrued on the difference between the amount claimed or expected to be claimed on the tax return and the tax benefit recognized in the financial statements. The Company includes potential interest and penalties recognized in accordance with FASB ASC 740 in the financial statements as a component of income tax expense. As of January 28, 2017, accrued interest and penalties related to our unrecognized tax benefits totaled $0.1 million and $0.1 million, respectively. As of January 30, 2016, accrued interest and penalties related to our unrecognized tax benefits totaled $0.1 million and $0.1 million, respectively. Both accrued interest and penalties are recorded in the Consolidated Balance Sheet within “Other noncurrent liabilities.”

The Company files numerous consolidated and separate company income tax returns in the U.S. federal jurisdiction and in many U.S. state jurisdictions. With few exceptions, we are subject to U.S. federal, state, and local income tax examinations by tax authorities for years 2013-2015. However, tax authorities have the ability to review years prior to these to the extent we utilized tax attributes carried forward from those prior years.