Income Taxes

12 Months Ended

Jan. 28, 2017

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 4. Income Taxes

Income tax expense (benefit) consists of the following:

	Fiscal Year
	2016			2015		2014
	($ in thousands)
Federal – current	$	—		$	—		($46	)
State – current		215			181		162
Deferred		($6,988	)		—		—
Income tax expense (benefit)		($6,773	)	$	181	$	116

A reconciliation of the Company’s effective income tax rate with the federal statutory rate is as follows:

	Fiscal Year
	2016			2015			2014
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax effect		(6.0	%)		4.1	%		5.6	%
Change in valuation allowance		(57.2	%)		(39.0	%)		(25.8	%)
Cash surrender value – insurance/ benefit programs		4.0	%		5.3	%		(7.6	%)
Contingent consideration		19.1	%		—			—
Deferred tax benefit – acquisition		196.1	%		—			—
Other		(0.90	%)		.9	%		(1.1	%)
Effective income tax rate		190.1	%		6.3	%		6.1	%

The Other category is comprised of various items, including the impacts of non-deductible meals, dues, penalties, amortization and graduated tax brackets.

Significant components of the Company’s deferred tax assets are as follows:

	January 28,			January 30,
	2017			2016
	($ in thousands)
DEFERRED TAX ASSETS
Accrued expenses	$	400		$	393
Inventory		347			311
Retirement and compensation related accruals		9,063			9,393
Fixed assets		1,718			5,830
Federal and state net operating loss and credit carryforwards		83,221			74,516
Real estate leases, including deferred rent		4,141			2,724
Losses on investments		1,268			1,226
Other		901			916
Gross deferred tax assets before valuation allowance		101,059			95,309
Less: valuation allowance		(89,443	)		(95,309	)
Total deferred tax assets	$	11,616		$	—
DEFERRED TAX LIABILITIES
Intangibles		(11,616	)		—
NET DEFERRED TAX ASSET	$	—		$	—

The Company has a net operating loss carryforward of $181.4 million for federal income tax purposes and approximately $242.5 million for state income tax purposes as of the end of fiscal 2017 that expire at various times through 2036 and are subject to certain limitations and statutory expiration periods.  The state net operating loss carryforwards are subject to various business apportionment factors and multiple jurisdictional requirements when utilized. The Company has federal tax credit carryforwards of $1.2 million, of which $0.5 million will expire in 2026, with the remainder available indefinitely. The Company has state tax credit carryforwards of $1.1 million, of which $0.2 million will expire in 2027.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.  Management considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. Based on the available objective evidence, management concluded that a full valuation allowance should be recorded against its deferred tax assets. As of January 28, 2017, the valuation allowance decreased to $89.4 million from $95.3 million at January 30, 2016. The decrease in the Company’s deferred tax assets was caused primarily by changes in certain deductible temporary differences to offset income before income taxes earned in fiscal 2016. Management will continue to assess the valuation allowance against the gross deferred assets.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the respective years is provided below. Amounts presented excluded interest and penalties, where applicable, on unrecognized tax benefits:

			Fiscal
	2016		2015		2014
	($ in thousands)
Unrecognized tax benefits at beginning of the year	$	1,930	$	1,930	$	2,018
Increases in tax positions from prior years		—		—		—
Decreases in tax positions from prior years		—		—		—
Increases in tax positions for current year		—		—		—
Settlements		—		—		—
Lapse of applicable statute of limitations		—		—		(88	)
Unrecognized tax benefits at end of the year	$	1,930	$	1,930	$	1,930

As of January 28, 2017, the Company had $1.9 million of gross unrecognized tax benefits, $1.5 million of which would affect the Company’s tax rate if recognized. While it is reasonably possible that the amount of unrecognized tax benefits will increase or decrease within the next twelve months, the Company does not expect the change to have a significant impact on its results of operations or financial position. The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company has substantially concluded all federal income tax matters and all material state and local income tax matters through fiscal 2012.

The Company’s practice is to recognize interest and penalties associated with its unrecognized tax benefits as a component of income tax expense in the Company’s Consolidated Statements of Income. During fiscal 2016, the Company accrued a provision for interest expense of $0.2 million. As of January 28, 2017, the liability for uncertain tax positions reflected in the Company’s Consolidated Balance Sheets was $2.9 million, including accrued interest and penalties of $2.1 million.