Note 5 - Income Taxes

6 Months Ended

Nov. 29, 2015

5.	Income Taxes

The provision for income taxes for the three and six months ended November 29, 2015 was $1.1 million and $2.8 million, respectively. The effective tax rate for the six months ended November 29, 2015 and November 30, 2014 was 36%.

The effective tax rate for the first six months of fiscal year 2016 was higher than the statutory federal income tax rate of 35% primarily due to state taxes and non-deductible stock-based compensation expense; partially offset by the domestic manufacturing deduction and state research and development credits.

As of November 29, 2015 and May 31, 2015, the Company had unrecognized tax benefits of approximately $864,000 and $1.0 million, respectively. Included in the balance of unrecognized tax benefits as of November 29, 2015 and May 31, 2015 is approximately $720,000 and $800,000, respectively, of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate.

The Company does not expect its unrecognized tax benefits to change significantly within the next twelve months.

The Company has elected to classify interest and penalties related to uncertain tax positions as a component of its provision for income taxes. The Company has accrued an insignificant amount of interest and penalties relating to the income tax on the unrecognized tax benefits as of November 29, 2015 and May 31, 2015.

Due to tax attribute carryforwards, the Company is subject to examination for tax years 1997 forward for U.S. tax purposes. The Company is also subject to examination in various state jurisdictions for tax years 1998 and forward, none of which were individually significant.