Note 11 - Income Taxes

12 Months Ended

Nov. 29, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

11. Income Taxes   

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

	2014			2013		2012
Current:
Federal	$	4,168		$	759	$	1,611
State		596			50		(487	)
Deferred:
Increase (decrease) in valuation allowance		(974	)		136		(18,704	)
Federalf		221			1,970		2,458
State		1,297			176		423
Total	$	5,308		$	3,091	$	(14,699	)

 
Excess tax benefits in the amount of $300 and $313 were recognized as additional paid-in capital during fiscal 2014 and fiscal 2013, respectively, resulting from the exercise of stock options and the release of restricted shares.

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:

	2014			2013			2012
Statutory federal income tax rate		35.0	%		34.0	%		35.0	%
Adjustments to state net operating loss carryforwards		3.3			-			-
Change in income tax valuation allowance		(3.7	)		1.7			(155.6	)
Change in income tax reserves		(1.7	)		0.1			(3.3	)
State income tax, net of federal benefit		4.9			3.7			1.5
Other		(1.5	)		(1.7	)		0.1
Effective income tax rate		36.3	%		37.8	%		(122.3	)%

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 29, 2014			November 30, 2013
Deferred income tax assets:
Trade accounts receivable	$	483		$	618
Inventories		2,384			2,277
Property and equipment		-			756
Notes receivable		1,599			1,592
Retirement benefits		6,093			5,626
State net operating loss carryforwards		1,141			2,482
Unrealized loss from affiliates		595			988
Lease termination accruals		167			349
Net deferred rents		2,251			1,256
Other		1,699			1,142
Gross deferred income tax assets		16,412			17,086
Valuation allowance		(70	)		(1,044	)
Total deferred income tax assets		16,342			16,042
Deferred income tax liabilities:
Unrealized gains from affiliates		963			755
Property and equipment		282			-
Prepaid expenses and other		128			135
Total deferred income tax liabilities		1,373			890
Net deferred income tax assets	$	14,969		$	15,152

 
Due to the losses incurred prior to fiscal 2011, we were in a cumulative loss position for the three years preceding fiscal 2011which 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 remained 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 previously 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 were able to utilize net operating loss carryforwards and credits to significantly offset the taxable gain, resulting in a $17,464 reduction of the valuation allowance. However, as the gain on the sale of IHFC did not represent a source of recurring future taxable income, we continued to record a valuation allowance against substantially all of our deferred tax assets as of November 26, 2011. Due to our positive earnings during fiscal 2012, and the absence of any significant negative evidence to the contrary, we concluded that we could rely on our positive long-term outlook and forecasts as to future taxable income in evaluating our ability to realize our deferred tax assets. Accordingly, the reserve against the majority of our deferred tax assets was removed in fiscal 2012, resulting in a credit to income of $18,704, or $1.70 and $1.69 per basic and diluted share, respectively, which is included in our net income tax benefit for that year. The valuation allowance of $1,044 at November 30, 2013 was primarily related to state net operating loss carryforwards for which it was considered to be more likely than not that they would not be utilized prior to their expiration. During fiscal 2014 we reduced our valuation allowance related to adjustments to state net operating loss carryforwards primarily due to state tax law changes resulting in a credit to income of $974, or $0.09 per basic and diluted share. The remaining balance in the valuation allowance at November 29, 2014 was $70.

The following table represents a summary of the valuation allowances against deferred tax assets:

	2014			2013		2012
Balance, beginning of the year	$	1,044		$	908	$	19,612
Additions charged to expense		-			136		-
Deductions reducing expense		(974	)		-		(18,704	)
Balance, end of the year	$	70		$	1,044	$	908

We have state net operating loss carryforwards available to offset future taxable state income of $22,439, which expire in varying amounts between 2015 and 2030. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards.

Income taxes paid, net of refunds received, during 2014, 2013 and 2012 were $2,367, $2,723, and $2,010, respectively.

As of November 29, 2014, the gross amount of unrecognized tax benefits was approximately $1,236 exclusive of interest and penalties. Of this balance, none would benefit the effective tax rate if we were to prevail on all unrecognized tax benefits recorded. As of November 30, 2013, the gross amount of unrecognized tax benefits was approximately $1,497, exclusive of interest and penalties. Of this balance, if we were to prevail on all unrecognized tax benefits recorded, approximately $239 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:

	2014			2013			2012
Balance, beginning of the year	$	1,497		$	1,228		$	1,502
Gross increases		-			401			10
Gross decreases due to settlements		(221	)		-			-
Gross decreases primarily due to the expiration of statutes		(40	)		(132	)		(284	)
Balance, end of the year	$	1,236		$	1,497		$	1,228

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. During fiscal 2014, 2013, and 2012, we recognized $7, $23, and $63 of interest expense recovery and $10, $31, and $57 of penalty expense recovery, respectively, related to the unrecognized benefits noted above in our consolidated statements of income. At November 29, 2014 and November 30, 2013, the consolidated balance sheets include accrued interest of $134 and $140, and penalties of $0 and $10, respectively, due to unrecognized tax benefits. At November 29, 2014,$1,370 representing the entire amount of our gross unrecognized tax benefits along with the accrued interest and penalties thereon is included in other accrued liabilities in our consolidated balance sheet as we believe it is likely these uncertain positions will be resolved in 2015. The corresponding balance as November 30, 2013 of $1,647 was included in other long-term liabilities.

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.

We remain subject to examination for tax years 2011 through 2013 for all of our major tax jurisdictions. The Company’s fiscal 2012 and 2013 income tax returns are currently under examination by the IRS.

The IRS released the final and re-proposed tangible property regulations in September of 2013. While the regulations are now final, they are effective for tax years beginning on or after January 1, 2014, which for the Company will be fiscal 2015. We have begun to evaluate the changes necessary to comply with the regulations and the related administrative procedures and the new regulations are not expected to have a significant impact on our financial statements.