Income Taxes

12 Months Ended

Jan. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 14 - INCOME TAXES

Income/(loss) before provision/(benefit) for income taxes for the fiscal year ended January 31, 2023, 2022 and 2021 on a legal entity basis consists of the following (in thousands):

	2023		2022		2021
U.S. income/(loss) before taxes	$	25,214	$	39,920	$	(121,302	)
Non-U.S. income/(loss) before taxes		96,691		77,413		(21,080	)
Income/(loss) before income taxes	$	121,905	$	117,333	$	(142,382	)

Cash paid for income taxes during fiscal 2023, 2022 and 2021 was $29.0 million, $25.3 million and $6.1 million respectively.

The provision/(benefit) for income taxes for the fiscal years ended January 31, 2023, 2022 and 2021 consists of the following components (in thousands):

	2023			2022			2021
Current:
U.S. Federal	$	5,408		$	9,249		$	(21,657	)
U.S. State and Local		2,099			1,179			(703	)
Non-U.S.		18,087			14,555			9,464
		25,594			24,983			(12,896	)
Deferred:
U.S. Federal		99			(2,145	)		(11,139	)
U.S. State and Local		151			2,000			(6,321	)
Non-U.S.		(962	)		(64	)		(832	)
		(712	)		(209	)		(18,292	)
Provision/(benefit) for income taxes	$	24,882		$	24,774		$	(31,188	)

Significant components of the Company’s deferred income tax assets and liabilities for the fiscal years ended January 31, 2023 and 2022 are as follows (in thousands):

	2023 Deferred Taxes					2022 Deferred Taxes
	Assets			Liabilities		Assets			Liabilities
Net operating loss carryforwards	$	6,370		$	—	$	9,479		$	—
Inventory		1,925			—		—			377
Unprocessed returns		1,379			—		1,178			—
Receivables allowances		695			—		765			—
Deferred compensation		16,672			—		15,764			—
Depreciation/amortization		15,358			—		16,545			—
Other provisions/accruals		1,696			—		2,087			—
Deferred occupancy costs		17,199			15,228		16,024			14,072
Miscellaneous		774			—		722			—
		62,068			15,228		62,564			14,449
Valuation allowance		(4,041	)		—		(7,022	)		—
Total deferred tax assets and liabilities	$	58,027		$	15,228	$	55,542		$	14,449

As of January 31, 2023, the Company had U.S. state and foreign net operating loss carryforwards of $0.7 million and $5.6 million, respectively, with expiration dates ranging from 1-10 years and, with respect to some foreign jurisdictions, an indefinite carryforward period. Of the foreign net operating losses, $3.2 million is related to China, $1.3 million is related to Germany and the remaining is related to other foreign countries.

A valuation allowance is required to be established unless management determines it is more likely than not that the Company will ultimately utilize the tax benefit associated with a deferred tax asset. The Company has foreign valuation allowances of $4.0 million, which are primarily related to net operating loss carryforwards.

Management will continue to evaluate the appropriate level of valuation allowance on all deferred tax assets considering such factors as prior earnings history, expected future earnings, carryback and carryforward periods and tax and business strategies that could potentially enhance the likelihood of realization of the deferred tax assets.

The Company elected to account for the tax on Global Intangible Low-Taxed Income ("GILTI") as a period cost and therefore has not recorded deferred taxes related to GILTI.

The provision/(benefit) for income taxes for the fiscal years ended January 31, 2023, 2022 and 2021 differs from the U.S. federal statutory rate due to the following (in thousands):

	Fiscal Year Ended January 31, (1)
	2023			2022			2021
Provision/(benefit) for income taxes at the U.S. statutory rate	$	25,600		$	24,640		$	(29,900	)
Lower effective non-U.S. income tax rate		(2,143	)		(1,366	)		(74	)
State and local taxes, net of federal benefit		1,777			2,511			(5,549	)
Change in valuation allowance		(1,671	)		727			1,035
Impairment of goodwill and intangible assets		—			—			11,694
Impact of CARES Act		—			(1,532	)		(10,231	)
Compensation and benefits		545			1,130			976
Other permanent differences		(217	)		(132	)		173
Other, net		991			(1,204	)		688
Total provision/(benefit) for income taxes	$	24,882		$	24,774		$	(31,188	)

[1] Prior periods have been reclassified to conform to the current year presentation.

The effective tax rate for fiscal 2023 was 20.4% and differed from the U.S. statutory tax rate of 21.0% primarily due to foreign profits being taxed in lower taxing jurisdictions and the release of certain foreign valuation allowances, partially offset by U.S. state and local taxes, net of the federal benefit. The effective tax rate for fiscal 2022 was 21.1% and differed from the U.S. statutory tax rate of 21.0% primarily due to U.S. state and local taxes, net of the federal benefit, partially offset by the CARES Act NOL Carryback Provision and related tax effects and foreign profits being taxed in lower taxing jurisdictions. The CARES Act NOL Carryback Provision was part of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") which was passed in 2020, and allowed U.S. net operating losses generated in fiscal 2019, 2020 and 2021 to be carried back up to five years to prior taxable years with a statutory tax rate of 35.0% and to offset 100% of regular taxable income in such years.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act (“IRA”), which implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases, and several tax incentives to promote clean energy. This legislation did not have a material impact on the Company’s Consolidated Financial Statements.

The Company conducts business globally and, as a result, is subject to income taxes in the U.S. federal, state, local and foreign jurisdictions. In the normal course of business, the Company is subject to examinations by taxing authorities in many countries, such as Germany, Hong Kong, Switzerland and the United States. The Company is no longer subject to income tax examination for years ended prior to January 31, 2019, with few exceptions.

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (exclusive of interest) for the fiscal years ended January 31, 2023, 2022 and 2021 are as follows (in thousands):

	2023			2022			2021
Beginning balance	$	876		$	901		$	826
Tax positions taken in the current year		—			159			204
Tax positions taken in prior years		205			—			(26	)
Lapse of statute of limitations		(168	)		(166	)		(119	)
Settlements		(331	)		—			—
Non-U.S. currency exchange fluctuations		(13	)		(18	)		16
Ending balance	$	569		$	876		$	901

Included in the balances at January 31, 2023, January 31, 2022 and January 31, 2021 are $0.5 million, $0.8 million and $0.8 million, of unrecognized tax benefits which would impact the Company’s effective tax rate, if recognized. As of January 31, 2023, January 31, 2022 and January 31, 2021, the Company had $0.2 million, $0.3 million and $0.4 million, respectively, of accrued interest (net of tax benefit) and penalties related to unrecognized tax benefits. Interest (net of tax benefit) and penalties accrued in fiscal years 2023, 2022 and 2021 were immaterial. The Company does not anticipate any significant increases or decreases to unrecognized tax benefits during the next twelve months.

At January 31, 2023, the Company had no deferred tax liability for substantially all of the undistributed foreign earnings of approximately $246.6 million because the Company intends to permanently reinvest such earnings in its foreign operations. It is not practicable to estimate the tax liability related to a future distribution of these permanently reinvested foreign earnings.