10.

Income Taxes

The Company recorded an income tax provision of $26,125 on a pre-tax loss of $37,411 during the 13 weeks ended January 27, 2018, which represented an effective income tax rate of (69.8)%. The Company recorded an income tax provision of $56,435 on a pre-tax income of $126,711 during the 13 weeks ended January 28, 2017, which represented an effective income tax rate of 44.5%.

The Company recorded an income tax benefit of $5,165 on a pre-tax loss of $109,573 during the 39 weeks ended January 27, 2018, which represented an effective income tax rate of 4.7%. The Company recorded an income tax provision of $37,016 on a pre-tax income of $72,467 during the 39 weeks ended January 28, 2017, which represented an effective income tax rate of 51.1%. The Company’s effective tax rates for the 13 and 39 weeks ended January 27, 2018 and January 28, 2017 differ from the statutory rates due to the impact of permanent items such as meals and entertainment, non-deductible executive compensation, tax credits, changes in uncertain tax positions, state tax provision, net of federal benefit and for the 13 and 39 weeks ended January 27, 2018, the impact of the Tax Cuts and Jobs Act, goodwill impairment, and changes to valuation allowance. The change in effective tax rates for the 13 and 39 weeks ended January 27, 2018 and January 28, 2017 was due to changes in uncertain tax positions, return to provision adjustments, goodwill impairment, valuation allowance and the impact of the Tax Cuts and Jobs Act.

During the 13 and 39 weeks ended January 27, 2018 the Company recognized tax expense of $11 and $915, respectively, as a result of the adoption of ASU 2016-09, which requires all excess tax benefits or deficiencies from share-based payments to be recognized as income tax expense or benefit in the consolidated statement of operations as discrete in the reporting period in which they occur.

The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits at January 27, 2018 could decrease by approximately $863 within the next twelve months, as a result of settlement of certain tax audits or lapses of statutes of limitations, which could impact the effective tax rate.

Effects of the Tax Cuts and Jobs Act

New tax legislation, commonly referred to as the Tax Cuts and Jobs Act or Tax Reform, was enacted on December 22, 2017. Certain aspects of the new law, including the federal corporate tax rate change, have an immediate impact, while other significant provisions may not have an impact until the Company’s fiscal year end 2018 or 2019.

Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed.

SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the Tax Cuts and Jobs Act.

Items for which a reasonable estimate has been determined include the impact of the change in the corporate tax rate from 35% to 21% and the changes to the non-deductible executive compensation provisions. The Company booked a discrete benefit of $26,403 on the remeasurement of its deferred tax assets and liabilities during the 13 weeks ended January 27, 2018. A full validation of deferred tax items will be performed as part of the Company’s year-end tax provision process. During the 13 weeks ended January 27, 2018, the Company also recorded a net tax detriment as a result of the changes to the non-deductible executive compensation provisions. As the Company awaits further guidance regarding the transition rules, the tax impact recorded during the 13 weeks ended January 27, 2018 represents a provisional amount based on the guidance that is available.

Other significant provisions that did not have an impact on the interim provision but may impact income taxes at the Company’s fiscal year end or in future years include: limitation on the current deductibility of net interest expense in excess of 30 percent of adjusted taxable income, a limitation of net operating losses generated after fiscal 2018 to 80% of taxable income, 100% bonus depreciation on certain assets, and entertainment and other expense deduction limitation. The Company is not subject to any transition tax as there are no untaxed foreign earnings.

Valuation Allowance Considerations

The Company routinely performs an analysis of the realizability of its deferred tax assets and considers all evidence both positive and negative. As a result of the Company’s analysis, a valuation allowance of $34,979 was recorded during the 13 weeks ended January 27, 2018. The Company also maintains a valuation allowance against certain state items that was recorded in prior periods. The valuation allowance established in the current quarter represents a provisional amount in accordance with the Company’s preliminary computation consistent with the SAB 118 guidance.