Income Taxes

The following table summarizes our distribution between domestic and foreign earnings (loss) from continuing operations before income taxes and the provision (benefit) for income taxes related to continuing operations (in thousands):



	Fiscal 2013			Fiscal 2012			Fiscal 2011
Earnings before income taxes:
Domestic	$	98,476		$	63,429		$	39,880
Foreign	(17,975		)	(12,540		)	3,644
Earnings before income taxes	$	80,501		$	50,889		$	43,524
Current:
Federal	$	30,190		$	21,682		$	8,306
State	3,911			2,365			652
Foreign	423			(724		)	285
	34,524			23,323			9,243
Deferred—primarily Federal	1,343			(3,271		)	5,385
Deferred—Foreign	(657		)	(480		)	(347		)
Income taxes	$	35,210		$	19,572		$	14,281

Reconciliations of the United States federal statutory income tax rates and our effective tax rates are summarized as follows:



	Fiscal 2013		Fiscal 2012		Fiscal 2011
Statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes—net of federal income tax benefit	3.1	%	3.0	%	2.3	%
Impact of foreign operations	2.6	%	3.3	%	(1.9	)%
Valuation allowance against foreign losses and other carryforwards	4.5	%	4.1	%	(0.1	)%
Change in contingency reserves related to unrecognized tax benefits	—	%	(3.7	)%	(1.2	)%
Change in assertion on permanent reinvestment of foreign earnings	—	%	(1.9	)%	—	%
Other, net	(1.5	)%	(1.3	)%	(1.3	)%
Effective tax rate for continuing operations	43.7	%	38.5	%	32.8	%

Deferred tax assets and liabilities included in our consolidated balance sheets are comprised of the following (in thousands):



	February 1, 2014			February 2, 2013
Deferred Tax Assets:
Inventories	$	14,674		$	13,592
Accrued compensation and benefits	7,993			9,868
Receivable allowances and reserves	2,187			2,727
Depreciation and amortization	951			1,328
Non-current liabilities	609			706
Deferred rent and lease obligations	3,315			2,093
Operating loss and other carryforwards	6,730			3,934
Other, net	1,442			787
Deferred tax assets	37,901			35,035
Deferred Tax Liabilities:
Acquired intangible assets	(43,364		)	(42,827		)
Deferred tax liabilities	(43,364		)	(42,827		)
Valuation allowance	(6,831		)	(3,641		)
Net deferred tax liability	$	(12,294	)	$	(11,433	)

The valuation allowance of $6.8 million and $3.6 million primarily relates to foreign operating losses for which a valuation allowance has been determined appropriate based on historical operating results in those foreign jurisdictions. As of February 1, 2014 and February 2, 2013, we had undistributed earnings of foreign subsidiaries of $6.0 million and $6.1 million, respectively. No deferred tax liability related to these foreign earnings, if any, was recorded at either balance sheet date, as the earnings of our foreign subsidiaries are considered permanently reinvested outside of the United States. The amount of deferred tax liability not recognized on permanently reinvested earnings that would be payable if the earnings were repatriated to the United States is $0.5 million. We also consider the original investment in our foreign subsidiaries to be permanently reinvested outside the United States as of February 1, 2014. Because the financial basis in each entity does not exceed the tax basis by an amount exceeding undistributed earnings, no additional United States tax would be due if the original investment were to be repatriated.

Accounting for income taxes requires that individual tax-paying entities offset all current deferred tax liabilities and assets within each particular tax jurisdiction and present them as a single amount in our consolidated balance sheets. A similar procedure is followed for all non-current deferred tax liabilities and assets. Amounts in different tax jurisdictions cannot be offset against each other. The amounts of deferred income taxes included in the following line items in our consolidated balance sheets are as follows (in thousands):



	February 1, 2014			February 2, 2013
Assets:
Deferred tax assets	$	20,465		$	22,952
Liabilities:
Deferred tax liabilities	(32,759		)	(34,385		)
Net deferred tax liability	$	(12,294	)	$	(11,433	)

A summary of unrecognized tax benefits for the most recent three years is as follows (in thousands):



	Fiscal 2013			Fiscal 2012			Fiscal 2011
Balance at beginning of year	$	351		$	2,461		$	2,921
Additions for current year tax positions	17			245			13
Expiration of the statute of limitation for the assessment of taxes	(23		)	(2,195		)	(604		)
Additions for tax positions of prior year	6			5			133
Reductions for tax positions of prior year	—			(138		)	(2		)
Settlements	—			(27		)	—
Balance at end of year	$	351		$	351		$	2,461

The unrecognized tax benefits, if recognized, would reduce our annual effective rate. The net impact on our consolidated statements of earnings for potential penalty and interest expense related to these unrecognized tax benefits was not material in Fiscal 2013, Fiscal 2012 or Fiscal 2011. As of February 1, 2014 and February 2, 2013, no material amounts of liabilities for potential penalties and interest related to uncertain tax positions have been recognized in our consolidated balance sheets.