INCOME TAXES

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



	Fiscal Year Ended
	January 31, 2015		February 1, 2014		February 2, 2013
U.S.	$	47,888	$	36,487	$	36,948
Foreign	31,987		40,061		52,747
Total	$	79,875	$	76,548	$	89,695


11.	INCOME TAXES (Continued)

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



	Fiscal Year Ended
	January 31, 2015			February 1, 2014			February 2, 2013
Current -
Federal	$	8,212		$	13,240		$	7,575
State	3,691			4,371			5,230
Foreign	5,457			9,463			11,674
Total current	17,360			27,074			24,479
Deferred -
Federal	5,260			(1,513		)	3,045
State	1,426			(731		)	(762		)
Foreign	(1,059		)	(1,308		)	(310		)
Total deferred	5,627			(3,552		)	1,973
Tax provision as shown on the consolidated statements of operations	$	22,987		$	23,522		$	26,452
Effective tax rate	28.8		%	30.7		%	29.5		%

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
	January 31, 2015			February 1, 2014			February 2, 2013
Calculated income tax provision at federal statutory rate	$	27,956		$	26,792		$	31,393
State income taxes, net of federal benefit	3,326			2,366			2,904
Foreign tax rate differential (1)	(8,849		)	(7,224		)	(9,044		)
Nondeductible expenses	1,685			1,792			1,611
Unrecognized tax benefit	807			(1,347		)	(743		)
Change in valuation allowance	(1,472		)	447			1,395
Other	(466		)	696			(1,064		)
Total tax provision	$	22,987		$	23,522		$	26,452

(1) The foreign tax rate differential is due to the Company having a lower effective tax rate as compared to its U.S. federal statutory tax rate of 35%. The Company has substantial operations in both Hong Kong and Canada which has lower statutory income tax rates as compared to the U.S. The Company's foreign effective tax rates for Fiscal 2014, Fiscal 2013 and Fiscal 2012 were 13.7%, 20.4% and 21.5%, respectively. This rate will fluctuate from year to year in response to changes in the mix of pre-tax earnings by country as well as changes in foreign jurisdiction tax laws.


11.	INCOME TAXES (Continued)

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



	January 31, 2015			February 1, 2014
Current –
Assets
Inventory	4,128			1,067
Reserves	15,169			13,256
Total current assets	19,297			14,323
Liabilities-prepaid expenses	(4,217		)	(3,464		)
Total current, net	15,080			10,859
Noncurrent –
Property and equipment	7,654			18,446
Deferred rent	14,830			14,325
Equity compensation	7,101			6,792
Reserves and other	5,995			6,243
Net operating loss carryover and other tax credits	1,930			1,842
Capital loss carryover	—			1,560
Total noncurrent, gross	37,510			49,208
Valuation allowance	(1,930		)	(3,402		)
Net noncurrent	35,580			45,806
Total deferred tax asset, net	$	50,660		$	56,665

As of January 31, 2015, the Company has not provided Federal taxes on approximately $231.2 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 foreign net operating loss carryforwards of approximately $4.1 million which do not expire. The Company also has an Alternative Minimum Tax credit ("AMT") in Puerto Rico of approximately $0.8 million which does not expire. During Fiscal 2014 the Company's U.S. capital loss carryover expired unused. This resulted in a reduction of the deferred tax asset as well as a reduction of the valuation allowance of approximately $1.6 million.

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 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.

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


11.	INCOME TAXES (Continued)

Company receives an income tax benefit upon the award's vesting equal to the tax effect of the underlying stock's fair market value.

Uncertain Tax Positions

Tax positions are evaluated in a two step process. The Company first determines whether it is more-likely-than-not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement.

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



	January 31, 2015			February 1, 2014
Beginning Balance	$	4,412		$	5,919
Additions for current year tax positions	833			490
Additions for prior year tax positions	1,070			349
Reductions for prior year tax positions	(156		)	(54		)
Settlements	(43		)	(851		)
Reductions due to a lapse of the applicable statute of limitations	(637		)	(1,441		)
	$	5,479		$	4,412

Approximately $5.3 million of unrecognized tax benefits at January 31, 2015 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 $3.6 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 January 31, 2015 and February 1, 2014 accrued interest and penalties included in unrecognized tax benefits were approximately $1.0 million and $1.4 million, respectively. Interest, penalties and reversals, thereof, net of taxes, was a benefit of $0.4 million, $0.4 million and $0.2 million for Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively.

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. The Company, with certain exceptions, is no longer subject to income tax examinations by U.S. Federal, state and local or foreign tax authorities for tax years fiscal 2010 and prior.