Income Taxes

Income (loss) from continuing operations before income taxes is derived from (in thousands):



	Year ended
	November 1, 2015			November 2, 2014			November 3, 2013
U.S. Domestic	$	(63,205	)	$	(2,148	)	$	(8,970	)
International	48,065			3,987			(851		)
Total	$	(15,140	)	$	1,839		$	(9,821	)

Income tax expense (benefit) by taxing jurisdiction consists of (in thousands):



	Year ended
	November 1, 2015			November 2, 2014			November 3, 2013
Current:
U.S. Federal	$	90		$	(36	)	$	(146	)
U.S. State and local	(1,616		)	978			(162		)
International	5,200			1,996			3,129
Total current	$	3,674		$	2,938		$	2,821
Deferred:
U.S. Federal	$	—		$	—		$	—
U.S. State and local	634			225			—
International	338			2,063			101
Total deferred	972			2,288			101
Income tax expense	$	4,646		$	5,226		$	2,922

The difference between the income tax provision on income (loss) and the amount computed at the U.S. federal statutory rate is due to (in thousands):



	Year ended
	November 1, 2015			November 2, 2014			November 3, 2013
U.S. federal statutory rate	$	(5,299	)	$	643		$	(3,437	)
U.S. State income tax, net of U.S. federal tax benefits	(1,435		)	530			(1,336		)
International permanent differences	(4,293		)	(489		)	320
International tax rate differentials	(7,046		)	345			(364		)
U.S. tax on international income	(1,118		)	1,787			554
General business credits	(3,839		)	(5,642		)	(4,977		)
Meals and entertainment	531			770			941
Other, net	942			(294		)	1,686
Change in valuation allowance for dispositions	(4,237		)	—			—
Change in valuation allowance for deferred tax assets	30,440			7,576			9,535
Total	$	4,646		$	5,226		$	2,922

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and also include operating loss carryforwards. The significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):



	November 1, 2015			November 2, 2014
Deferred tax assets:
Net operating loss carryforwards	$	58,909		$	58,708
Capital loss carryforwards	31,411			—
U.S. federal tax credit carryforwards	41,271			35,364
Purchased intangible assets	(49		)	11,152
Deferred income	—			3,482
Compensation accruals	5,653			5,995
Other, net	6,413			6,230
Total deferred tax assets	143,608			120,931
Less valuation allowance	(136,323		)	(108,403		)
Deferred tax assets, net	$	7,285		$	12,528

Deferred tax liabilities:
Unremitted earnings from foreign subsidiaries	$	4,046		$	8,714
Software development costs	2,794			175
Accelerated tax depreciation and amortization	741			2,677
Other, net	1,225			1,877
Total deferred tax liabilities	$	8,806		$	13,443
Net deferred tax asset (liability)	$	(1,521	)	$	(915	)

Balance sheet classification
Current assets	$	837		$	320
Non-current assets	1,107			2,865
Current liabilities	(240		)	(2,904		)
Non-current liabilities	(3,225		)	(1,196		)
Net deferred tax asset (liability)	$	(1,521	)	$	(915	)

Current deferred tax assets are included in Other Current Assets, non-current deferred tax assets are included in Prepaid Insurance and Other Assets and current deferred tax liabilities are included in Accrued Insurance and Other in the Consolidated Balance Sheets.

At November 1, 2015, the Company has available unused U.S. federal net operating loss ("NOL") carryforwards of $133.6 million, U.S. state NOL carryforwards of $186.1 million, international NOL carryforwards of $9.6 million and capital loss carryforwards of $82.3 million. As of November 1, 2015, the U.S. federal NOL carryforwards will expire at various dates between 2031 and 2035, the U.S. state NOL carryforwards expire at various dates between 2020 and 2035, the international NOL carryforwards expire at various dates beginning 2016 with some indefinite and capital loss carryforwards expire in 2021. At November 1, 2015, the undistributed earnings of the Company’s non-U.S. subsidiaries are not intended to be permanently invested outside of the U.S. and therefore U.S. deferred taxes have been provided.

A valuation allowance has been recognized due to the uncertainty of realization of the loss carryforwards and other deferred tax assets. Beginning in fiscal year 2010, the Company’s cumulative U.S. domestic and certain non-U.S. results for each three-year period were a loss. Accordingly, the Company recorded a full valuation allowance against its net U.S. domestic and certain net non-U.S. deferred tax assets as a non-cash charge to income tax expense. The three-year cumulative loss continued in fiscal years 2013, 2014, and 2015 so the Company maintained a full valuation allowance against its net U.S. domestic and certain net non-U.S. deferred tax assets resulting in a total valuation allowance of $136.3 million and $108.4 million for fiscal 2015 and fiscal 2014, respectively. In reaching this conclusion, the Company considered the U.S. domestic demand and recent operating losses causing the Company to be in a three-year cumulative loss position. Management believes that the remaining deferred tax assets, primarily related to international locations, are more likely than not to be realized based upon consideration of all positive and negative evidence, including scheduled reversal of deferred tax liabilities and tax planning strategies determined on a jurisdiction by jurisdiction basis.

The Company recognizes income tax benefits for tax positions determined more likely than not to be sustained upon examination based on the technical merits of the positions. The following table sets forth the change in the accrual for uncertain tax positions, excluding interest and penalties (in thousands):



	November 1, 2015			November 2, 2014
Balance, beginning of year	$	7,329		$	8,459
Decrease related to current year tax provisions	(411		)	(458		)
Settlements	(879		)	—
Lapse of statute of limitations	(824		)	(672		)
Total	$	5,215		$	7,329

Of the total unrecognized tax benefits at November 1, 2015 and November 2, 2014, approximately $1.1 million and $2.8 million, respectively, would affect the Company’s effective income tax rate, if and when recognized in future years. The amount accrued for related potential interest and penalties at November 1, 2015 and November 2, 2014 was $1.3 million and $2.2 million. The Company does not currently anticipate that its existing reserves related to uncertain tax positions as of November 1, 2015 will significantly increase or decrease in subsequent periods; however, various events could cause the Company’s current expectations to change in the future.

The Company is subject to taxation at the federal, state and local level in the U.S. and in various international jurisdictions. With few exceptions, the Company is generally no longer subject to examination by the U.S. federal, state, local or non-U.S. income tax authorities for years before fiscal 2004. The Company is currently under examination by the IRS for U.S. Federal amended income tax returns for fiscal years 2004 – 2010. The Company is currently under examination by the Canada Revenue Authority for tax years 2007-2010. These audits are not expected to result in a material impact on the Company’s financial statements.

The following describes the open tax years, by major tax jurisdiction, as of November 1, 2015:



United States - Federal	2004-present
United States - State	2004-present
Canada	2007-present
United Kingdom	2011-present