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Income Taxes
6 Months Ended
Aug. 03, 2013
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 9—INCOME TAXES

The effective tax rate was 38.44% and 3.12% for the three months ended August 3, 2013 and July 28, 2012, respectively. The effective tax rate was 38.58% and 4.30% for the six months ended August 3, 2013 and July 28, 2012, respectively. The increase in the effective tax rate for both the three and six months ended August 3, 2013 was primarily due to non-deductible stock-based compensation charges, the Company no longer recording a U.S. valuation allowance against net deferred tax assets and other non-deductible expenses.

As of the end of fiscal year 2012, the Company’s U.S. operations achieved a position of cumulative profits (adjusted for permanent differences) for the most recent three-year period. The Company concluded that this record of cumulative profitability in recent years, coupled with its business plan for profitability in future periods, provided assurance that its future tax benefits more likely than not would be realized. Accordingly, in the fourth quarter of fiscal 2012, the Company released all of its U.S. valuation allowance of $57.2 million against net deferred tax assets.

As of August 3, 2013, the Company has retained a valuation allowance of $0.3 million against deferred tax assets for its Shanghai operations.

As of both August 3, 2013 and February 2, 2013, $1.8 million of the exposures related to unrecognized tax benefits would affect the effective tax rate if realized and are included in other long-term obligations on the condensed consolidated balance sheets. These amounts are primarily associated with foreign tax exposures that would, if realized, reduce the amount of net operating losses that would ultimately be utilized. As of August 3, 2013, $0.3 million of the exposures related to unrecognized tax benefits are expected to decrease in the next 12 months due to the lapse of the statute of limitations.

Adjustments required upon adoption of accounting for uncertainty in income taxes related to deferred tax asset accounts were offset by the related valuation allowance. Future changes to the Company’s assessment of the realizability of those deferred tax assets will impact the effective tax rate. The Company accounts for interest and penalties related to exposures as a component of income tax expense. The Company has accrued $0.5 million of interest expense associated with exposures as of both August 3, 2013 and February 2, 2013.