12.

Income Taxes

The Company recorded an income tax provision of $8,925 on a pre-tax income of $75,855 during the 13 weeks ended January 26, 2019, which represented an effective income tax rate of 11.8%. 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 $3,712 on a pre-tax income of $26,210 during the 39 weeks ended January 26, 2019, which represented an effective income tax rate of 14.2%. 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’s effective tax rates for the 13 and 39 weeks ended January 26, 2019 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, expected changes in valuation allowance based on forecasted full year income and state tax provision, net of federal benefit. The Company’s effective tax rates for the 13 and 39 weeks ended January 27, 2018 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, the impact of the Tax Cuts and Jobs Act, goodwill impairment, changes to valuation allowance and state tax provision, net of federal benefit.

During the 13 weeks ended January 26, 2019 and January 27, 2018 and the 39 weeks ended January 26, 2019 and January 27, 2018, the Company recognized tax expense of $8, $11, $722 and $915, respectively, in accordance with ASU 2016-09, Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting, 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 approximately $477 of the remaining unrecognized tax benefits may be recognized 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, were recorded in the Company’s financial statements during fiscal year end 2018 as a provisional estimate under the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allowed registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations.

Items for which a reasonable estimate was 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 recorded a benefit of $27,128 on the remeasurement of its deferred tax assets and liabilities during fiscal 2018. During fiscal 2018, the Company also recorded a net tax detriment as a result of the changes to the non-deductible executive compensation provisions. The IRS issued Notice 2018-68 during the second quarter of fiscal 2019, which clarified the transition rule. As a result, there have been no significant changes. During the third quarter of fiscal 2019, the Company completed its analysis of the provisional amounts recorded during fiscal 2018 and recorded an additional provision of $170. The Company was not subject to the transition tax as there were no untaxed foreign earnings.

Valuation Allowance Considerations

The Company routinely performs an analysis of its deferred tax assets and considers all evidence both positive and negative to determine realizability of these assets. As a result of the Company’s analysis, $3,894 of previously established valuation allowance against definite lived net operating losses was released through retained earnings as a direct result of the Company’s adoption of Topic 606 during the first quarter of fiscal 2019. The Company still maintains a valuation allowance against certain state items and definite lived net operating losses that was recorded in prior periods.