INCOME TAXES

The components of income before taxes are as follows (in thousands):



	Fiscal Year Ended
	February 1, 2014		February 2, 2013		January 28, 2012
U.S.	$	36,487	$	36,948	$	47,101
Foreign	40,061		52,747		57,652
Total	$	76,548	$	89,695	$	104,753


11.	INCOME TAXES (Continued)

The components of the Company's provision for income taxes consisted of the following (in thousands):



	Fiscal Year Ended
	February 1, 2014			February 2, 2013			January 28, 2012
Current -
Federal	$	13,240		$	7,575		$	6,984
State	4,371			5,230			6,462
Foreign	9,463			11,674			14,693
Total current	27,074			24,479			28,139
Deferred -
Federal	(1,513		)	3,045			1,542
State	(731		)	(762		)	1,590
Foreign	(1,308		)	(310		)	(863		)
Total deferred	(3,552		)	1,973			2,269
Tax provision as shown on the consolidated statements of operations	$	23,522		$	26,452		$	30,408
Effective tax rate	30.7		%	29.5		%	29.0		%

A reconciliation between the calculated tax provision on income based on statutory rates in effect and the effective tax rate for is as follows (in thousands):



	Fiscal Year Ended
	February 1, 2014			February 2, 2013			January 28, 2012
Calculated income tax provision at federal statutory rate	$	26,792		$	31,393		$	36,664
State income taxes, net of federal benefit	2,366			2,904			5,234
Foreign tax rate differential	(7,224		)	(9,044		)	(7,064		)
Deemed repatriation of foreign income and reversals thereof	—			—			(870		)
Nondeductible expenses	1,792			1,611			1,373
Unrecognized tax benefit	(1,347		)	(743		)	(3,729		)
Change in valuation allowance	447			1,395			—
Other	696			(1,064		)	(1,200		)
Total tax provision	$	23,522		$	26,452		$	30,408


11.	INCOME TAXES (Continued)

The tax effects of temporary differences which give rise to deferred tax assets and liabilities are as follows (in thousands):



	February 1, 2014			February 2, 2013
Current –
Assets
Inventory	1,067			1,538
Reserves	13,256			12,376
Total current assets	14,323			13,914
Liabilities-prepaid expenses	(3,464		)	(4,200		)
Total current, net	10,859			9,714
Noncurrent –
Property and equipment	18,446			18,519
Deferred rent	14,325			13,598
Equity compensation	6,792			4,401
Reserves and other	6,243			7,160
Net operating loss carryover and other tax credits	1,842			1,395
Capital loss carryover	1,560			1,560
Total noncurrent, gross	49,208			46,633
Valuation allowance	(3,402		)	(2,955		)
Net noncurrent	45,806			43,678
Total deferred tax asset, net	$	56,665		$	53,392

The Company evaluates its permanent reinvestment assertions with respect to foreign earnings at each reporting period. During the fourth quarter of fiscal 2011 the Company changed its permanent reinvestment assertion as it related to its Hong Kong and other Asian subsidiaries, whereby the Company no longer provides deferred taxes on the undistributed earnings of these subsidiaries. After this date the Company is fully reinvested in all its foreign subsidiaries. This had the effect of reducing the Company's anticipated income tax provision by approximately $6.9 million, of which approximately $0.9 million related to prior year non-repatriated foreign income for which U.S. income taxes were provided.

As of February 1, 2014, the Company has not provided Federal taxes on approximately $201.3 million of unremitted earnings of its foreign subsidiaries. The Company intends to reinvest these earnings to fund expansion in these and other markets outside the U.S. Accordingly, the Company has not provided any provision for income tax expense in excess of foreign jurisdiction income tax requirements relative to such unremitted earnings in the accompanying financial statements. Due to the complexities associated with the hypothetical calculation, including the availability of foreign tax credits, the Company has concluded it is not practicable to determine the unrecognized deferred tax liability related to the undistributed earnings.

The Company has a capital loss carryforward (“CLC”) of approximately $3.9 million, which will expire in 2015, if unused. The Company has foreign net operating loss carryforwards of approximately $2.7 million which do not expire. The Company also has an Alternative Minimum Tax credit ("AMT") in Puerto Rico of approximately $1.2 million which does not expire.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company has concluded that it is more likely than not that certain deferred tax assets cannot be used in the foreseeable future, principally the CLC in the U.S., the foreign net operating loss carryforwards and the AMT credit in Puerto Rico. Accordingly, a valuation allowance has been established for these tax benefits. However, to the extent that tax benefits related to these are realized in the future, the reduction of the valuation allowance will reduce income tax expense accordingly.


11.	INCOME TAXES (Continued)

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 during the periods in which those temporary differences become realizable.

The Company's income taxes payable have been reduced by the tax benefits from employee stock plan awards. For stock options, the Company receives an income tax benefit calculated as the tax effect of the difference between the fair market value of the stock issued at the time of the exercise and the exercise price. For Deferred Awards and Performance Awards, the Company receives an income tax benefit upon the award's vesting equal to the tax effect of the underlying stock's fair market value.

A reconciliation of the gross amounts of unrecognized tax benefits, excluding accrued interest and penalties, is as follows (in thousands):



	February 1, 2014			February 2, 2013
Beginning Balance	$	5,919		$	6,935
Additions for current year tax positions	490			475
Additions for prior year tax positions	349			100
Reductions for prior year tax positions	(54		)	(158		)
Settlements	(851		)	(39		)
Reductions due to a lapse of the applicable statute of limitations	(1,441		)	(1,394		)
	$	4,412		$	5,919

Approximately $4.6 million of unrecognized tax benefits at February 1, 2014 would affect the Company's effective tax rate if recognized. The Company believes it is reasonably possible that there may be a reduction of approximately $1.8 million of unrecognized tax benefits in the next 12 months as a result of settlements with taxing authorities and statute of limitations expirations.

The Company accrued interest and penalties related to unrecognized tax benefits as part of the provision for income taxes. At February 1, 2014 and February 2, 2013 accrued interest and penalties included in unrecognized tax benefits were approximately $1.4 million and $1.9 million, respectively. Interest, penalties and reversals, thereof, net of taxes, was a benefit of $0.4 million, $0.2 million and $0.8 million for Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively. Included in income tax expense for Fiscal 2011, the Company recorded a benefit of approximately $3.7 million related to unrecognized tax benefits primarily as a result of settlements with taxing authorities and statute of limitations expirations.

The Company is subject to tax in the United States and foreign jurisdictions, including Canada and Hong Kong. The Company, joined by its domestic subsidiaries, files a consolidated income tax return for Federal income tax purposes. During fiscal 2009, the Company completed the U.S. Federal income tax audit for fiscal years 2008 and prior. The Company, with certain exceptions, is no longer subject to income tax examinations by state and local or foreign tax authorities for tax years before fiscal 2010.