Note 2 - Interim Financial Presentation

9 Months Ended

Aug. 25, 2018

Notes to Financial Statements

Condensed Financial Statements [Text Block]

2

. Interim Financial Presentation

All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. The results of operations for the

three

and

nine

months ended

August 25, 2018

are

not

necessarily indicative of results for the full fiscal year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form

10

-K for the year ended

November 25, 2017.

Income Taxes and Impact of

the

Tax Cuts and Jobs Act

We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income and use that effective tax rate to record our year-to-date income tax provision. Any change in annual projections of pretax income could have a significant impact on our effective tax rate for the respective quarter.

On

December 22, 2017,

The Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act reduced the federal statutory corporate income tax rate from

35%

to

21%

effective

January 1, 2018

for all corporate taxpayers, while most other provisions of the Act take effect for fiscal years beginning on or after

January 1, 2018.

Therefore, we will compute our income tax expense for fiscal

2018

using a blended federal statutory rate of

22.2%.

The

21%

federal statutory rate, as well as certain other provisions of the Act including the elimination of the domestic manufacturing deduction and new limitations on certain business deductions, will apply to our

2019

fiscal year and thereafter.

The federal rate reduction has had a significant impact on our provision for income taxes for the

three

and

nine

months ended

August 25, 2018.

Our effective tax rates for the

three

and

nine

months ended

August 25, 2018

were

23.1%

and

40.8%,

respectively. Our effective tax rate for the

nine

months ended

August 25, 2018

differs from the fiscal

2018

blended federal statutory rate of

22.2%

primarily due to a discrete charge of

$2,032

arising from the re-measurement of our deferred tax assets. Other items impacting our effective tax rates for the

three

and

nine

months ended

August 25, 2018

include the effects of state income taxes and various permanent differences including the favorable impacts of excess tax benefits on stock-based compensation of

$26

and

$223,

respectively, non-taxable life insurance proceeds of

$266

during the

nine

months ended

August 25, 2018,

and the Section

199:

Domestic Production Activities Deduction.

Given the significance of the Act, the SEC staff issued Staff Accounting Bulletin

No.

118

(“SAB

118”

), which allows registrants to record provisional amounts during a

one

year “measurement period” similar to that used when accounting for business combinations. Per SAB

118,

the measurement period is deemed to have an earlier end date when the registrant has obtained, prepared and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the updated tax law are expected to be recorded at the time a reasonable estimate for all, or a portion, of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed.

SAB

118

states, that at each reporting period, companies must disclose the effects of the Act for areas where accounting is complete, disclose provisional amounts (or adjustments to provisional amounts) for the effects of the Act for areas where accounting is

not

complete but a reasonable estimate has been determined, and confirm areas where a reasonable estimate of the effects cannot yet be made, and therefore taxes are reflected in accordance with law prior to the enactment of the Act.

As of

August 25, 2018,

we were still assessing the overall impact that the Act will have on our financial statements and related disclosures. Therefore, the net charge for the re-measurement of our deferred tax assets was based on reasonable estimates and has been recorded as a provisional amount in accordance with SAB

118.

We

may

alter our estimates during the remainder of fiscal

2018

as we continue to process data to finalize the underlying calculations and also analyze other provisions of the Act to determine if they will impact our effective tax rate in fiscal

2018

or in the future. We will continue to refine our adjustments through the permissible measurement period as described above.

Our effective tax rates for the

three

and

nine

months ended

August 26, 2017

of

31.4%

and

32.6%,

respectively, differed from the federal statutory rate of

35%

primarily due to the effects of state income taxes and various permanent differences including the favorable impacts of excess tax benefits on stock-based compensation of

$227

and

$554

during the

three

and

nine

months ended

August 26, 2017,

respectively, and the Section

199:

Domestic Production Activities Deduction.

Adoption of Accounting Standards Update

No.

2018

-

02

The Act has also had a significant impact on the income tax effect of pension costs included in our accumulated other comprehensive loss at

November 25, 2017

due to the reduction in Federal statutory rates. Therefore we have adopted Accounting Standards Update

2018

-

02

(see Note

14,

Recent Accounting Pronouncements) effective as of the beginning of fiscal

2018

and have elected to reclassify the income tax effects of the Act from accumulated other comprehensive loss to retained earnings. Accordingly, during the

nine

months ended

August 25, 2018

we reclassified

$545

of tax benefits associated with pension costs from accumulated other comprehensive loss to retained earnings.