Income Taxes

12 Months Ended

Jan. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

U.S. Federal Income Tax Reform

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the "2017 Tax Act") was enacted in the U.S. This enactment resulted in a number of significant changes to U.S. federal income tax law for U.S. taxpayers. Changes in tax law are accounted for in the period of enactment. As such, the Company's 2017 consolidated financial statements reflected the estimated immediate tax effect of the 2017 Tax Act. The 2017 Tax Act contains a number of key provisions, including, among other items:

• The reduction of the statutory U.S. federal corporate income tax rate from 35.0% to 21.0% effective January 1, 2018;

• A one-time transition tax via a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits (the "Transition Tax");

• A deduction for Foreign Derived Intangible Income ("FDII") for tax years beginning after December 31, 2017;

• A tax on global intangible low-taxed income ("GILTI") for tax years beginning after December 31, 2017;

• A limitation on net interest expense deductions to 30% of adjusted taxable income for tax years beginning after December 31, 2017;

• Broader limitations on the deductibility of compensation of certain highly compensated employees;

• The ability to elect to accelerate tax depreciation on certain qualified assets;

• A territorial tax system providing a 100% dividends received deduction on certain qualified dividends from foreign subsidiaries for tax years beginning after December 31, 2017;

• The Base Erosion and Anti-Abuse Tax ("BEAT") for tax years beginning after December 31, 2017; and

• Changes in the application of the U.S. foreign tax credit regulations for tax years beginning after December 31, 2017.

Additionally, on December 22, 2017, the SEC issued SAB 118 to address the application of U.S. GAAP in situations when a registrant did not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. Specifically, SAB 118 provided a measurement period for companies to evaluate the impacts of the 2017 Tax Act on their financial statements. This measurement period began in the reporting period that included the enactment date and ended when an entity obtained, prepared and analyzed the information that was needed in order to complete the accounting requirements, but could not exceed one year. The Company adopted the provisions of SAB 118 with respect to the impact of the 2017 Tax Act on its 2017 consolidated financial statements.

During the year ended January 31, 2018, the Company recorded an estimated net tax expense of $146.2 million as a result of the effects of the 2017 Tax Act. The tax effects recorded included:

• Estimated tax expense of $94.8 million for the impact of the reduction in the U.S. statutory tax rate on the Company's deferred tax assets and liabilities;

• Estimated tax expense of $56.0 million for the Transition Tax; and

• A tax benefit of $4.6 million resulting from the effect of the 21% statutory income tax rate for the month of January 2018 on the Company's annual statutory income tax rate for the year ended January 31, 2018. Because the Company's fiscal year ended on January 31, 2018, the Company's statutory income tax rate for fiscal 2017 was 33.8% rather than 35.0%.

Consistent with SAB 118, the Company calculated and recorded reasonable estimates for the impact of the Transition Tax and the remeasurement of its deferred tax assets and deferred tax liabilities, as set forth above. The Company also adopted the provisions of SAB 118 as it related to the assertion of the indefinite reinvestment of foreign earnings and profits. The charges associated with the Transition Tax and the remeasurement of the Company's deferred tax assets and deferred tax liabilities, as a result of applying the 2017 Tax Act, represented provisional amounts for which the Company's analysis was incomplete but reasonable estimates could be determined and were recorded during the fourth quarter of 2017. Further, the impact of the 2017 Tax Act on the Company's assertion to indefinitely reinvest foreign earnings was incomplete as the Company was analyzing the relevant provisions of the 2017 Tax Act and related accounting guidance.

During the year ended January 31, 2019, as permitted by SAB 118, the Company completed its analyses under the 2017 Tax Act, including those related to: (i) the provisional estimate recorded during the year ended January 31, 2018 for the Transition Tax; (ii) the provisional estimate recorded during the year ended January 31, 2018 to remeasure the Company's deferred tax assets and liabilities; and (iii) the Company's assertion to indefinitely reinvest undistributed foreign earnings and profits.

As a result of completing these analyses, during the year ended January 31, 2019, the Company: (i) recorded tax benefits totaling $12.6 million to adjust the provisional estimate recorded in the year ended January 31, 2018 to remeasure the Company's deferred tax assets and liabilities; (ii) recorded tax benefits totaling $3.3 million to adjust the provisional estimate recorded in the year ended January 31, 2018 for the Transition Tax; and (iii) determined to maintain its assertion to indefinitely reinvest undistributed foreign earnings and profits.

The Company continues to maintain its assertion to indefinitely reinvest undistributed foreign earnings and profits, which amounted to approximately $1.0 billion as of January 31,2020.

Upon distribution of those foreign earnings and profits in the form of dividends or otherwise, the Company would be subject to U.S. state and local taxes, taxes on foreign currency gains and withholding taxes payable in various jurisdictions, which may be partially offset by foreign tax credits. Determination of the amount of the unrecognized deferred tax liability is not practicable because of the complexities associated with its hypothetical calculation.

The Company expects to continue to account for the tax on GILTI as a period cost and therefore has not adjusted any of the deferred tax assets and liabilities of its foreign subsidiaries in connection with the 2017 Tax Act.

Income Taxes

Earnings from operations before income taxes consisted of the following:

	Years Ended January 31,
(in millions)	2020		2019		2018
United States	$	520.1	$	584.5	$	597.1
Foreign	170.2		159.0		163.4
	$	690.3	$	743.5	$	760.5

Components of the provision for income taxes were as follows:

	Years Ended January 31,
(in millions)	2020			2019			2018
Current:
Federal	$	79.7		$	112.5		$	227.9
State	11.7			18.2			16.7
Foreign	51.2			47.7			49.0
	142.6			178.4			293.6
Deferred:
Federal	10.9			(23.2		)	94.1
State	0.6			(2.0		)	1.1
Foreign	(4.9		)	3.9			1.6
	6.6			(21.3		)	96.8
	$	149.2		$	157.1		$	390.4

Reconciliations of the provision for income taxes at the statutory Federal income tax rate to the Company's effective income tax rate were as follows:

	Years Ended January 31,
	2020		2019		2018
Statutory Federal income tax rate	21.0	%	21.0	%	33.8	%
State income taxes, net of Federal benefit	1.4		1.5		1.5
Foreign losses with no tax benefit	—		—		0.2
Effect of Foreign Operations	1.8		1.1		(1.4	)
Net change in uncertain tax positions	1.1		(0.4	)	0.2
Domestic manufacturing deduction	—		—		(1.8	)
Foreign Derived Intangible Income deduction	(4.0	)	(2.6	)	—
Impact of the 2017 Tax Act	—		1.3		19.8
Other	0.3		(0.8	)	(1.0	)
	21.6	%	21.1	%	51.3	%

Deferred tax assets (liabilities) consisted of the following:

	January 31,
(in millions)	2020			2019
Deferred tax assets:
Operating lease liabilities	$	293.7		$	—
Pension/postretirement benefits	101.9			82.1
Accrued expenses	21.7			31.3
Share-based compensation	5.7			7.9
Depreciation and amortization	54.7			18.1
Foreign and state net operating losses	6.5			7.0
Sale-leasebacks	—			13.1
Inventory	33.3			42.5
Unearned income	7.9			7.2
Other	22.2			28.8
	547.6			238.0
Valuation allowance	(10.9		)	(8.5		)
	536.7			229.5
Deferred tax liabilities:
Operating lease right-of-use assets	(301.2		)	—
Foreign tax credit and other tax liabilities	(12.3		)	(21.5		)
Net deferred tax asset	$	223.2		$	208.0

The Company has recorded a valuation allowance against certain deferred tax assets related to foreign net operating loss carryforwards where management has determined it is more likely than not that deferred tax assets will not be realized in the future. The overall valuation allowance relates to tax loss carryforwards and temporary differences for which no benefit is expected to be realized. Tax loss carryforwards of $21.8 million exist in certain foreign jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at various times from 2020 through 2036.

The following table reconciles the unrecognized tax benefits:

	Years ended January 31,
(in millions)	2020			2019			2018
Unrecognized tax benefits at beginning of year	$	17.3		$	10.1		$	7.2
Gross increases – tax positions in prior period	6.3			8.0			3.2
Gross decreases – tax positions in prior period	(0.7		)	—			(0.9		)
Gross increases – tax positions in current period	1.9			1.3			0.6
Settlements	(5.2		)	—			—
Lapse of statute of limitations	0.1			(2.1		)	—
Unrecognized tax benefits at end of year	$	19.7		$	17.3		$	10.1

The amount of tax benefits included in the balance of unrecognized tax benefits at January 31, 2020 that, if recognized, would affect the effective income tax rate was $18.5 million.

The Company recognizes expense for interest and penalties related to unrecognized tax benefits within the provision for income taxes. The Company recognized a benefit of $1.3 million in 2019, a benefit of $6.2 million in 2018 and

expense of $2.0 million in 2017 for interest and penalties. Accrued interest and penalties, which amounted to $2.9 million and $4.2 million at January 31, 2020 and 2019, respectively, is included within Accounts payable and accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets.

The Company conducts business globally and, as a result, is subject to taxation in the U.S. and various state and foreign jurisdictions. As a matter of course, tax authorities regularly audit the Company. The Company's tax filings are currently being examined by a number of tax authorities, both in the U.S. and in foreign jurisdictions. Ongoing audits where subsidiaries have a material presence include New York City (tax years 2011–2015) and New York State (tax years 2012–2018). Tax years from 2010–present are open to examination in the U.S. Federal jurisdiction and 2006–present are open in various state, local and foreign jurisdictions. As part of these audits, the Company engages in discussions with taxing authorities regarding tax positions. As of January 31, 2020, unrecognized tax benefits are not expected to change materially in the next 12 months. Future developments may result in a change in this assessment.