Income Taxes

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



	Fiscal 2014			Fiscal 2013			Fiscal 2012
Earnings before income taxes:
Domestic	$	90,254		$	98,476		$	63,429
Foreign	(10,134		)	(17,975		)	(12,540		)
Earnings before income taxes	$	80,120		$	80,501		$	50,889

Income taxes:
Current:
Federal	$	32,298		$	30,190		$	21,682
State	4,601			3,911			2,365
Foreign	652			423			(724		)
	37,551			34,524			23,323
Deferred—primarily Federal	(3,114		)	1,343			(3,271		)
Deferred—Foreign	(75		)	(657		)	(480		)
Income taxes	$	34,362		$	35,210		$	19,572

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



	Fiscal 2014		Fiscal 2013		Fiscal 2012
Statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes—net of federal income tax benefit	3.1	%	3.1	%	3.0	%
Impact of foreign operations (1)	1.9	%	2.6	%	3.3	%
Valuation allowance against foreign losses and other carryforwards (2)	2.8	%	4.5	%	4.1	%
Reduction in contingency reserves related to unrecognized tax benefits (3)	—	%	—	%	(3.7	)%
Change in assertion on permanent reinvestment of foreign earnings	—	%	—	%	(1.9	)%
Other, net	0.1	%	(1.5	)%	(1.3	)%
Effective tax rate for continuing operations	42.9	%	43.7	%	38.5	%

(1) Impact of foreign operations primarily reflects the rate differential between the United States and the respective foreign jurisdictions on foreign losses.

(2) Valuation allowance against foreign losses primarily reflects the valuation allowance recognized due to our inability to recognize an income tax benefit related to certain operating loss carry-forwards and deferred tax assets during the period.

(3) Fiscal 2012 included a $2.2 million reduction in income tax contingency reserves upon the expiration of the corresponding statute of limitations.

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



	January 31, 2015			February 1, 2014
Deferred Tax Assets:
Inventories	$	15,385		$	14,674
Accrued compensation and benefits	11,727			7,993
Receivable allowances and reserves	2,439			2,187
Depreciation and amortization	2,038			1,988
Deferred rent and lease obligations	3,729			3,315
Operating loss and other carry-forwards	6,907			6,730
Other, net	1,408			1,014
Deferred tax assets	43,633			37,901
Deferred Tax Liabilities:
Acquired intangible assets	(43,885		)	(43,364		)
Deferred tax liabilities	(43,885		)	(43,364		)
Valuation allowance	(8,457		)	(6,831		)
Net deferred tax liability	$	(8,709	)	$	(12,294	)

As of January 31, 2015 our operating loss and other carry-forwards primarily relate to our operations in the United Kingdom, Hong Kong and Canada, each of which provides for operating loss carry-forwards of at least 20 years. Substantially all of our valuation allowance of $8.5 million and $6.8 million relates to the foreign operating loss carry-forwards and deferred tax assets in those jurisdictions. The recent history of operating losses in these jurisdictions is considered significant negative evidence against realizability of these tax benefits. The amount of the valuation allowance considered necessary, however, could decrease in the future if our historical operating results or estimates of future taxable operating results increase, particularly if, in future years, objective negative evidence in the form of cumulative losses is no longer present.

No deferred tax liabilities related to our original investments in our foreign subsidiaries and foreign earnings, if any, were recorded at either balance sheet date, as substantially all our original investments and earnings related to our foreign subsidiaries are considered permanently reinvested outside of the United States. Further, because the financial basis in each foreign 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 in the future. As of January 31, 2015 and February 1, 2014, we had undistributed earnings of foreign subsidiaries of $5.4 million and $6.0 million, respectively, which were considered permanently reinvested. These undistributed earnings could become subject to United States taxes if they are remitted as dividends or as a result of certain other types of intercompany transactions. The amount of deferred tax liability not recognized on permanently reinvested foreign earnings that would be payable if the earnings were repatriated to the United States is $0.4 million as of January 31, 2015.

Accounting for income taxes requires that we 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):



	January 31, 2015			February 1, 2014
Assets:
Deferred tax assets	$	24,503		$	20,465
Liabilities:
Deferred tax liabilities	(33,212		)	(32,759		)
Net deferred tax liability	$	(8,709	)	$	(12,294	)

As of January 31, 2015 and February 1, 2014 and during Fiscal 2014, Fiscal 2013 and Fiscal 2012, we did not have any material unrecognized tax benefit amounts or material changes in such amounts except for the Fiscal 2012 $2.2 million reduction in uncertain tax positions reflecting the expiration of the statute of limitations for the assessment of taxes. The unrecognized tax benefits, if recognized, would reduce our annual effective rate. The net impact on our consolidated financial statements for Fiscal 2014, Fiscal 2013 and Fiscal 2012 for potential penalty and interest expense related to these unrecognized tax benefits was not material.