Income Taxes

The Company’s effective tax rate differs from the statutory federal income tax rate of 35% due primarily to regional mix of income, valuation allowances in the U.S., and certain undistributed foreign earnings for which no U.S. taxes are provided because such earnings are intended to be indefinitely reinvested outside of the U.S.

The Company uses a two-step approach to recognize and measure uncertain tax positions ("UTP"). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:



(in thousands)
Balance at January 29, 2017	$	11,452
Additions based on tax positions related to the current year	57
Balance as of July 30, 2017	$	11,509

Included in the balance of gross unrecognized tax benefits at July 30, 2017 and January 29, 2017, are $9.3 million and $9.3 million of net tax benefits (after federal impact of state items), respectively, that, if recognized, would impact the effective tax rate, prior to consideration of any required valuation allowance.

The liability for UTP is reflected within the Balance Sheets as follows:



(in thousands)	July 30, 2017		January 29, 2017
Deferred tax assets - non-current	$	9,313	$	9,309
Other long-term liabilities	2,196		2,143
Total accrued taxes	$	11,509	$	11,452

The Company’s policy is to include net interest and penalties related to unrecognized tax benefits within the provision for taxes within the Statements of Income. The Company had approximately $0.3 million of net interest and penalties accrued at both July 30, 2017 and January 29, 2017, respectively.

Tax years prior to 2012 (the Company’s fiscal year 2013) are generally not subject to examination by the U.S. Internal Revenue Service ("IRS") except for items involving tax attributes that have been carried forward to tax years whose statute of limitations remains open. For state returns, the Company is generally not subject to income tax examinations for years prior to 2012 (the Company’s fiscal year 2013). The Company has a significant tax presence in Switzerland for which Swiss tax filings have been examined through fiscal year 2016. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates.

The Company’s regional income (loss) from continuing operations before income taxes is as follows:



	Three Months Ended						Six Months Ended
(in thousands)	July 30, 2017			July 31, 2016			July 30, 2017			July 31, 2016
Domestic	$	(4,863	)	$	(6,440	)	$	(9,030	)	$	(13,985	)
Foreign	21,522			20,694			41,267			39,532
Total	$	16,659		$	14,254		$	32,237		$	25,547