Note 12 - Income Taxes

12 Months Ended

Nov. 26, 2011

Income Tax Disclosure [Text Block]

12. Income Taxes

The components of the income tax provision (benefit) are as follows:

	2011			2010			2009
Current:
Federal	$	3,947		$	(10	)	$	(1,777	)
State		676			(196	)		23
Deferred:
Increase (decrease) in valuation allowance		(17,464	)		2,962			9,553
Federal		14,934			(2,195	)		(8,112	)
State		2,316			(767	)		(1,441	)
Total	$	4,409		$	(206	)	$	(1,754	)

The income tax provision for fiscal 2011 includes a benefit of $6,341 resulting from the utilization of Federal net operating loss carryforwards.

A reconciliation of the statutory federal income tax rate and the effective income tax rate, as a percentage of income before income taxes, is as follows:

	2011			2010			2009
Statutory federal income tax rate		35.0	%		(34.0	) %		(34.0	) %
Dividends received deduction		(1.8	)		(71.6	)		(5.8	)
Goodwill impairment		-			-			0.7
Change in income tax valuation allowance		(29.2	)		134.2			39.1
Change in income tax reserves		(0.1	)		(13.2	)		(0.4	)
State income tax, net of federal benefit		3.4			(20.1	)		(5.0	)
Other		-			(4.6	)		(1.7	)
Effective income tax rate		7.3	%		(9.3	) %		(7.1	) %

The income tax effects of temporary differences and carryforwards, which give rise to significant portions of the deferred income tax assets and deferred income tax liabilities, are as follows:

	November 26, 2011			November 27, 2010
Deferred income tax assets:
Trade accounts receivable	$	804		$	2,760
Inventories		2,036			1,957
Property and equipment		3,749			2,938
Notes receivable		1,592			2,528
Retirement benefits		5,162			4,706
Federal net operating loss and credit carryforwards		134			9,440
State net operating loss carryforwards		2,376			3,908
Other than temporary impairment of marketable securities		56			55
Unrealized holding loss		912			-
Unrealized loss from affiliates, net		-			4,237
Lease termination accruals		1,676			1,066
Capital loss carryforward		-			1,522
Other		2,651			2,954
Gross deferred income tax assets		21,148			38,071
Valuation allowance		(19,612	)		(36,806	)
Total deferred income tax assets		1,536			1,265
Deferred income tax liabilities:
Unrealized gains from affiliates, net		125			95
Prepaid expenses and other		169			118
Unrealized holding gains, net		81			106
Total gross deferred income tax liabilities		375			319
Net deferred income tax assets	$	1,161		$	946

Due to the losses incurred prior to fiscal 2011, we remained in a cumulative loss position for the preceding three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data.  While our long-term financial outlook remains positive, we concluded that our ability to rely on our long-term outlook and forecasts as to future taxable income was limited due to uncertainty created by the weight of the negative evidence.  As a result, we recorded a valuation allowance on certain of the deferred tax assets.  In fiscal 2011, due to the gain recognized on the sale of our interest in IHFC, we have been able to utilize net operating loss carryforwards and credits to significantly offset the taxable gain, resulting in a significant reduction of the valuation allowances. However, as the gain on the sale of IHFC does not represent a source of recurring future taxable income, we have continued to record a valuation allowance against substantially all of our deferred tax assets as of November 26, 2011. The following table represents a summary of the valuation allowances against deferred tax assets:

	2011			2010		2009
Balance, beginning of the year	$	36,806		$	33,003	$	24,430
Additions charged to expense		-			2,962		9,553
Deductions reducing expense		(17,464	)		-		-
Additions (deductions) recorded as a component of other comprehensive (income) loss		270			841		(980	)
Balance, end of the year	$	19,612		$	36,806	$	33,003

In November 2009, Congress passed the "Worker, Homeownership, and Business Assistance Act of 2009" (the Act) which, among other things, extends the general carryback period for 2008 or 2009 NOLs from two years to up to five. Eligible corporations may elect to carry back "applicable NOLs" three, four, or five years. An "applicable NOL" is an NOL that arises in a tax year either beginning or ending in 2008 or 2009. These provisions of the Act also suspend the 90% limit on the utilization of alternative tax NOLs against alternative minimum taxable income for all years in the carryback period. In the case of an election to carry back the applicable NOL to the fifth preceding year, the amount of the NOL carryback that may be applied in that fifth carryback year is limited to 50% of taxable income of that fifth preceding year. Prior to the passage of the Act, we had exhausted our availability for loss carrybacks.  As a result of applying the provisions of the Act, we recorded a tax benefit of $1,673 in 2009 associated with the additional carryback availability.

We have state net operating loss carryforwards available to offset future taxable state income of $29,815, which expire in varying amounts between 2012 and 2030.  Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards.

Net income taxes paid (net refunds received) during 2011, 2010 and 2009 were $3,651, $(1,582), and $(3,246), respectively.

As of November 26, 2011, the gross amount of unrecognized tax benefits was approximately $1,600 exclusive of interest and penalties. Of this balance, if we were to prevail on all unrecognized tax benefits recorded, approximately $440 would benefit the effective tax rate. As of November 27, 2010, the gross amount of unrecognized tax benefits was approximately $1,565, exclusive of interest and penalties. Of this balance, if we were to prevail on all unrecognized tax benefits recorded, approximately $619 would benefit the effective tax rate. We regularly evaluate, assess and adjust the related liabilities in light of changing facts and circumstances, which could cause the effective tax rate to fluctuate from period to period.

The following table summarizes the activity related to our gross unrecognized tax benefits:

	2011			2010
Balance, beginning of the year	$	1,565		$	1,580
Gross increases		214			134
Gross decreases, primarily due to the expiration of statutes		(179	)		(149	)
Balance, end of the year	$	1,600		$	1,565

We recognize interest and penalties related to unrecognized tax benefits in income tax expense.  During fiscal 2011, 2010, and 2009, we recognized $67, $(112), and $(47) of interest expense (expense recovery) and $46, $30, and $11 of penalty expense recovery, respectively, related to the unrecognized benefits noted above in our consolidated statements of operations.   At November 26, 2011 and November 27, 2010, the consolidated balance sheets include accrued interest of $226 and $159, and penalties of $97 and $143, respectively, due to unrecognized tax benefits.

Significant judgment is required in evaluating the Company's federal and state tax positions and in the determination of its tax provision. Despite our belief that the liability for unrecognized tax benefits is adequate, it is often difficult to predict the final outcome or the timing of the resolution of any particular tax matter.  We may adjust these liabilities as relevant circumstances evolve, such as guidance from the relevant tax authority, or resolution of issues in the courts. These adjustments are recognized as a component of income tax expense in the period in which they are identified.  The Company also cannot predict when or if any other future tax payments related to these tax positions may occur.

Currently, a Federal examination is in process for tax year 2008 (our fiscal year ended November 28, 2009).  We remain subject to examination for tax years 2008 through 2010 for all of our major tax jurisdictions.