Note 13 - Income Taxes

12 Months Ended

Nov. 28, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

13. Income Taxes

The components of the income tax provision are as follows:

	2020			2019			2018
Current:
Federal	$	(8,486	)	$	2,150		$	(1,137	)
State		155			892			462
Deferred:
Federal		2,457			(2,191	)		4,747
State		(491	)		(663	)		(84	)
Total	$	(6,365	)	$	188		$	3,988

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. A major provision of the CARES Act allows net operating losses from the 2018, 2019 and 2020 tax years to be carried back up to five years. As a result, for the year ended November 28, 2020 we were able to recognize tax benefits substantially in excess of the current federal statutory rate of 21% due to the effects of carrying back our current net operating loss to tax years in which the federal statutory rate was 35%.

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 became effective for fiscal years beginning on or after January 1, 2018. Therefore, we computed 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, applies to our 2019 fiscal year and thereafter. The federal rate reduction had a significant impact on our provision for income taxes for fiscal 2018 due to a discrete charge of $1,331 arising from the re-measurement of our deferred tax assets. Our accounting for the income tax effects of the Act was complete as of November 24, 2018.

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:

	2020			2019			2018
Statutory federal income tax rate		21.0	%		21.0	%		22.2	%
CARES Act benefit		21.1			-			-
Revaluation of deferred tax assets resulting from new enacted rates		-			-			10.9
State income tax, net of federal benefit		1.7			(14.0	)		4.6
Impairment of non-deductible goodwill		(2.5	)		(23.2	)		-
Excess tax benefit from stock-based compensation		(0.6	)		0.3			(1.5	)
Other		(2.8	)		5.1			(3.5	)
Effective income tax rate		37.9	%		(10.8	)%		32.7	%

Excess tax (expense) benefits in the amount of $(114), $22 and $223 were recognized as a component of income tax expense during fiscal 2020, 2019 and 2018, respectively, resulting from the exercise of stock options and the release of restricted shares. The fiscal 2020 and 2019 adjustments for impairment of non-deductible goodwill reflect the fact that there was no tax basis related to the impaired goodwill.

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 28, 2020		November 30, 2019
Deferred income tax assets:
Trade accounts receivable	$	303	$	207
Inventories		3,086		2,487
Notes receivable		44		44
Post employment benefit obligations		3,260		3,241
State net operating loss carryforwards		1,321		193
Unrealized loss from affiliates		-		81
Leases		5,850		3,753
Other		1,856		1,828
Gross deferred income tax assets		15,720		11,834
Valuation allowance		-		-
Total deferred income tax assets		15,720		11,834
Deferred income tax liabilities:
Property and equipment		8,746		4,288
Intangible assets		1,404		1,114
Prepaid expenses and other		983		688
Total deferred income tax liabilities		11,133		6,090
Net deferred income tax assets	$	4,587	$	5,744

We have state net operating loss carryforwards available to offset future taxable state income of $26,407, which expire in varying amounts between 2022 and 2027. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards.

Income taxes paid, net of refunds received, during fiscal 2020, 2019 and 2018 were $539, $1,228, and $1,431, respectively.

We regularly evaluate, assess and adjust our accrued liabilities for unrecognized tax benefits in light of changing facts and circumstances, which could cause the effective tax rate to fluctuate from period to period. Our accrued liabilities for uncertain tax benefits at November 28, 2020 and November 30, 2019 were not material.

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 2017 through 2020 for all of our major tax jurisdictions.