Note 7 - Income Taxes

The provision for income taxes consisted of:

(In thousands)	2013			2012			2011

Current:
Federal	$	15,366		$	19,581		$	11,318
State		1,805			2,601			1,210
Puerto Rico		185			79			0
Total current		17,356			22,261			12,528

Deferred:
Federal		(139	)		(2,692	)		2,918
State		(138	)		(304	)		122
Puerto Rico		(444	)		(350	)		0
Total deferred		(721	)		(3,346	)		3,040

Total provision	$	16,635		$	18,915		$	15,568

We realized a tax benefit of $199,000, $1.4 million and $1.6 million in fiscal years 2013, 2012 and 2011, respectively, as a result of the exercise of stock options and the vesting of restricted stock, which is recorded in shareholders' equity.

Reconciliation between the statutory federal income tax rate and the effective income tax rate is as follows:

Fiscal years	2013			2012			2011

U.S. Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		3.8			4.8			2.1
Puerto Rico		(0.6	)		(0.6	)		0.0
Effective income tax rate		38.2	%		39.2	%		37.1	%

We recorded $346,000, $162,000 and $328,000 in federal employment related tax credits in fiscal 2013, 2012 and 2011, respectively. Each of these credits reduced our effective tax rate in the respective years. For fiscal 2012, approximately 1.3% of the increase in our effective tax rate as compared to fiscal 2011 was due to the non-deductible portion of compensation attributable to the retirement of our former President and Chief Executive Officer. Additionally, in fiscal 2011 we recognized a decrease in our state and other tax rate due to favorable settlements with certain taxing authorities.

Deferred income taxes are the result of temporary differences in the recognition of revenue and expense for tax and financial reporting purposes. The sources of these differences and the tax effect of each are as follows:

(In thousands)	February 1, 2014			February 2, 2013
Deferred tax assets:
Accrued rent	$	3,543		$	2,878
Accrued compensation		5,625			5,191
Accrued employee benefits		506			479
Inventory		411			916
Self-insurance reserves		593			494
Lease incentives		10,003			7,438
Net operating loss carry forward		449			359
Other		396			337
Total deferred tax assets		21,526			18,092

Deferred tax liabilities:
Depreciation		15,265			12,801
Capitalized costs		1,180			1,017
Puerto Rico net operating loss carry forward impact to federal taxes		444			350
Other		3			11
Total deferred tax liabilities		16,892			14,179
Net deferred tax asset		4,634			3,913
Less current deferred income tax benefit		(1,208	)		(2,914	)
Long-term deferred income taxes	$	3,426		$	999

At the end of fiscal 2013 we estimated state net operating loss carry forwards of $177,000 which expire between fiscal 2014 and fiscal 2023 and net operating loss carry forwards of $2.7 million for Puerto Rico which expire between fiscal 2022 and fiscal 2023. As of February 1, 2014, we had no available state tax credits that could be carried forward.

Our unrecognized tax liabilities presented below relate to tax years encompassing our fiscal years 1999 through 2013 for the tax years that remain subject to examination by major tax jurisdictions as of February 1, 2014. A reconciliation of the beginning and ending amount for our unrecognized tax positions, which exclude interest and penalties, is as follows:

(In thousands)	2013			2012		2011

Beginning balance	$	69		$	69	$	693
Increases - tax positions in prior period		0			0		0
Decreases - tax positions in prior period		(69	)		0		(339	)
Gross increases - current period tax positions		0			0		0
Decreases related to settlements with taxing authorities		0			0		(285	)
Ending balance	$	0		$	69	$	69

As of February 1, 2014 we have recorded no unrecognized tax liabilities or related accrued penalties or interest in Other liabilities on the Consolidated Balance Sheets. Our policy is to record interest and penalty expense related to income taxes as a component of income tax expense in the Consolidated Statements of Income.