CALERES INC Income Taxes Disclosure
6. INCOME TAXES
The components of earnings before income taxes consisted of domestic earnings before income taxes of $84.8 million, $132.5 million and $168.0 million in 2024, 2023 and 2022, respectively. The Company’s international earnings before income taxes were $50.4 million, $48.8 million and $45.0 million in 2024, 2023 and 2022, respectively.
The components of income tax provision on earnings were as follows:
($ thousands) |
| 2024 |
| 2023 |
| 2022 | |||
Federal |
|
|
|
|
|
| |||
Current | $ | 3,818 | $ | 10,849 | $ | 11,506 | |||
Deferred |
| 13,710 |
| 5,138 |
| 6,975 | |||
Total federal income tax provision |
| 17,528 |
| 15,987 |
| 18,481 | |||
State |
|
|
|
|
|
| |||
Current |
| 1,876 |
| 2,423 |
| 6,660 | |||
Deferred |
| 4,775 |
| (9,819) |
| 3,421 | |||
Total state income tax provision (benefit) |
| 6,651 |
| (7,396) |
| 10,081 | |||
International | |||||||||
Current | 5,289 | 4,879 | 4,759 | ||||||
Deferred |
| (407) |
| (3,980) |
| 18 | |||
Total international income tax provision |
| 4,882 |
| 899 |
| 4,777 | |||
Total income tax provision | $ | 29,061 | $ | 9,490 | $ | 33,339 | |||
The differences between the income tax provision reflected in the consolidated financial statements and the amounts calculated at the federal statutory income tax rate were as follows:
($ thousands) |
| 2024 |
| 2023 |
| 2022 | |||
Income taxes at statutory rate | $ | 28,383 | $ | 38,078 | $ | 44,737 | |||
State income taxes, net of federal tax benefit |
| 4,514 |
| 5,710 |
| 8,981 | |||
International earnings taxed at differing rates from U.S. statutory |
| (3,584) |
| (5,367) |
| (1,974) | |||
Share-based compensation |
| (2,647) |
| (3,106) |
| (602) | |||
Valuation allowances, net |
| (2,204) |
| (30,054) |
| (20,743) | |||
Non-deductibility of 162(m) limitations | 3,401 | 4,373 | 3,363 | ||||||
GILTI, BEAT and FDII provisions |
| 1,307 |
| 427 |
| 422 | |||
Other (1) |
| (109) |
| (571) |
| (845) | |||
Total income tax provision | $ | 29,061 | $ | 9,490 | $ | 33,339 | |||
| (1) | The other category of income tax provision principally represents the impact of expenses that are not deductible or partially deductible for federal income tax purposes and the impact of any return-to-provision adjustments. |
Significant components of the Company’s deferred income tax assets and liabilities were as follows:
($ thousands) |
| February 1, 2025 |
| February 3, 2024 | ||
Deferred Tax Assets |
|
|
|
| ||
Lease obligations | $ | 158,310 | $ | 148,242 | ||
Goodwill | 30,308 | 34,386 | ||||
Net operating loss carryforward/carryback |
| 6,551 |
| 10,107 | ||
Accrued expenses |
| 14,053 |
| 17,870 | ||
Employee benefits, compensation and insurance | 10,954 | 15,689 | ||||
Accounts receivable |
| 4,043 |
| 6,094 | ||
Inventory capitalization and inventory reserves |
| 6,532 |
| 6,623 | ||
Impairment of investment in nonconsolidated affiliate |
| 1,418 |
| 1,470 | ||
Postretirement and postemployment benefit plans |
| 201 |
| 207 | ||
Other |
| 3,444 |
| 1,605 | ||
Total deferred tax assets, before valuation allowance |
| 235,814 |
| 242,293 | ||
Valuation allowance |
| (3,406) |
| (7,153) | ||
Total deferred tax assets, net of valuation allowance | $ | 232,408 | $ | 235,140 | ||
|
|
|
| |||
Deferred Tax Liabilities |
|
|
|
| ||
Lease right-of-use assets | $ | (149,414) | $ | (138,315) | ||
Intangible assets | (15,472) | (13,659) | ||||
LIFO inventory valuation |
| (54,808) |
| (51,021) | ||
Retirement plans |
| (18,184) |
| (17,239) | ||
Capitalized software |
| (1,797) |
| (1,800) | ||
Depreciation |
| (17,100) |
| (16,822) | ||
Other |
| (2,579) |
| (3,419) | ||
Total deferred tax liabilities |
| (259,354) |
| (242,275) | ||
Net deferred tax liability | $ | (26,946) | $ | (7,135) | ||
As of February 1, 2025, the Company had various federal, state and international net operating loss (“NOL”) carryforwards with tax values totaling $6.6 million. The state NOLs totaling $2.9 million have carryforward periods ranging from to 20 years. The Company has NOLs in Canada, the United Kingdom and China of $1.8 million and $1.3 million and $0.6 million, respectively. The Canada and China NOLs have a carryforward period of 17 years and 5 years, respectively, while the United Kingdom NOLs have no expiration.
As of February 1, 2025, no deferred taxes have been provided on the accumulated unremitted earnings of the Company’s international subsidiaries that are not subject to United States income tax, beyond the amounts recorded for the one-time transition tax for the mandatory deemed repatriation of cumulative international earnings, as required by the Tax Cuts and Jobs Act. The Company periodically evaluates its international investment opportunities and plans, as well as its international working capital needs, to determine the level of investment required and, accordingly, determines the level of international earnings that is considered indefinitely reinvested. Based upon that evaluation, earnings of the Company’s international subsidiaries that are not otherwise subject to United States taxation are considered to be indefinitely reinvested, and accordingly, deferred taxes have not been provided. If changes occur in future investment opportunities and plans, those changes will be reflected when known and may result in providing residual United States deferred taxes on unremitted international earnings. If the Company’s unremitted international earnings were not considered indefinitely reinvested as of February 1, 2025, an immaterial amount of additional deferred taxes would have been provided.
Uncertain Tax Positions
ASC 740, Income Taxes, establishes a single model to address accounting for uncertain tax positions. The standard clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The standard also provides guidance on derecognition, measurement
classification, interest and penalties, accounting in interim periods, disclosure and transition. As of February 1, 2025 and February 3, 2024, the Company had no unrecognized tax benefits.
For federal purposes, the Company’s tax filings for fiscal years 2019 to 2023 remain open to examination but are not currently being examined. The Company also files tax returns in various international jurisdictions and numerous states for which various tax years are subject to examination and currently involved in audits. While the Company is involved in examinations in certain jurisdictions, it does not expect any significant changes in its liability for uncertain tax positions during the next 12 months.
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.