5. INCOME TAXES

Earnings before income taxes (in thousands):

	Fiscal Year

	2013		2012		2011
United States	$	82,061	$	143,215	$	133,405
Foreign		44,747		54,457		51,005


Total	$	126,808	$	197,672	$	184,410

The provision for income taxes consists of the following (in thousands):

	Fiscal Year

	2013		2012			2011
Current tax expense:
Federal	$	27,438	$	41,107		$	24,087
State		3,434		5,430			4,780
Foreign		9,447		13,892			5,649
Deferred tax expense (benefit):
Federal and state		961		5,739			20,864
Foreign		1,311		(559	)		8,564


Total	$	42,591	$	65,609		$	63,944

No provision for U.S. income taxes or Canadian withholding taxes has been made on the cumulative undistributed earnings of foreign companies (approximately $249.3 million at February 1, 2014) because we intend to reinvest permanently outside of the U.S. The potential deferred tax liability associated with these earnings, net of foreign tax credits associated with the earnings, is estimated to be $44.9 million.

A reconciliation of the statutory federal income tax rate to our effective tax rate is as follows:

	Fiscal Year

	2013			2012			2011
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		2.7			2.9			3.1
Net change in tax accruals		0.1			(0.2	)		(0.2	)
Foreign tax rate differential		(3.2	)		(2.3	)		(1.5	)
Amortizable tax goodwill		(1.4	)		(0.9	)		(1.0	)
Valuation allowance		0.4			0.3			—
Other		—			(1.6	)		(0.7	)


		33.6	%		33.2	%		34.7	%

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 deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income, and projections for future taxable income over the periods for which the deferred tax assets are deductible, management believes, as of February 1, 2014, it is more likely than not that we will realize the benefits of the deferred tax assets, except as discussed below.

At February 1, 2014, we had net deferred tax liabilities of $14.4 million with $33.1 million classified as other current assets, $0.6 million classified as other non-current assets, and $48.1 million classified as other non-current liabilities. At February 2, 2013, we had net deferred tax liabilities of $7.0 million with $26.6 million classified as other current assets, $1.8 million classified as other non-current assets, and $35.4 million classified as other non-current liabilities. A valuation allowance of $1.2 million included in net deferred tax assets at February 1, 2014 is based on our assumptions about our ability to utilize foreign tax credits carryforwards and state net operating loss ("NOL") carryforwards before such carryforwards expire.

Total deferred tax assets and liabilities and the related temporary differences as of February 1, 2014 and February 2, 2013 were as follows (in thousands):

	February 1, 2014			February 2, 2013

Deferred tax assets:
Accrued rent and other expenses	$	43,731		$	37,314
Accrued compensation		21,457			20,602
Accrued inventory markdowns		2,471			2,541
Deferred intercompany profits		—			918
Other		2,013			38
Tax loss and other carryforwards		12,093			13,938


Total deferred tax assets		81,765			75,351
Valuation allowance		(1,177	)		(555	)


Net deferred tax assets		80,588			74,796


Deferred tax liabilities:
Property and equipment		(73,401	)		(62,939	)
Capitalized inventory costs		(4,557	)		(4,819	)
Intangibles		(17,073	)		(14,021	)


Total deferred tax liabilities		(95,031	)		(81,779	)


Net deferred tax liabilities	$	(14,443	)	$	(6,983	)

In accordance with the guidance regarding accounting for uncertainty in income taxes, we classify uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year and recognize interest and/or penalties related to income tax matters in income tax expense. As of February 1, 2014 and February 2, 2013, the total amount of accrued interest related to uncertain tax positions was $0.7 million and $0.9 million, respectively. Amounts charged to income tax expense for interest and/or penalties related to income tax matters were $0.1 million, $0.2 million and $0.3 million in fiscal 2013, 2012 and 2011, respectively.

The following table summarizes the activity related to our unrecognized tax benefits (in thousands):

	February 1, 2014			February 2, 2013

Gross unrecognized tax benefits, beginning balance	$	3,917		$	4,346
Increase in tax positions for prior years		245			621
Decrease in tax positions for prior years		(7	)		(417	)
Increase in tax positions for current year		212			539
Decrease in tax positions for current year		—			—
Settlements		(1,052	)		(358	)
Lapse from statute of limitations		(385	)		(814	)


Gross unrecognized tax benefits, ending balance	$	2,930		$	3,917

Of the $2.9 million in unrecognized tax benefits as of February 1, 2014, $2.5 million, if recognized, would reduce our income tax expense and effective tax rate. We do not expect material changes in the total amount of unrecognized tax benefits within the next 12 months, but the outcome of tax matters is uncertain and unforeseen results can occur.

We are subject to routine compliance examinations on tax matters by various tax jurisdictions in the ordinary course of business. Tax years 2007 through 2013 are open to such examinations. Our tax jurisdictions include the United States, Canada, the United Kingdom, The Netherlands and France as well as their states, provinces and other political subdivisions. A U.S. federal examination and a number of U.S. state examinations are ongoing.

At February 1, 2014, we had federal, state and foreign NOL carryforwards of approximately $25.5 million, $16.8 million and $6.2 million, respectively. The federal and state NOLs will expire between fiscal 2016 and 2032; the $6.2 million of foreign NOLs can be carried forward indefinitely. We also had $0.8 million of foreign tax credit carryforwards at February 1, 2014 which will expire in 2019.