Note 5 - Income Taxes

6 Months Ended

Nov. 27, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

5. Income Taxes

The provision for income taxes for the

three

months ended

November

27,

2016

and

November

29,

2015

was

$693,000

and

$1.1

million, respectively. The provision for income taxes for the

six

months ended

November

27,

2016

and

November

29,

2015

was

$2.6

million and

$2.8

million, respectively. The effective tax rate for the

three

months ended

November

27,

2016

was

34%.

The effective tax rate for the

three

months ended

November

27,

2016

was lower than the statutory federal income tax rate of

35%

primarily

  due to the domestic manufacturing deduction and research and development credits; partially offset by state taxes and non - deductible stock - based compensation expense. The effective tax rate for the

six

months ended

November

27,

2016

and the

three

and

six

months ended

November

29,

2015

was

36%.

The effective tax rate for the

six

months ended

November

27,

2016

and the

three

and

six

months ended

November

29,

2015

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 research and development credits.

As of

November

27,

2016

and

May

29,

2016,

the Company had unrecognized tax benefits of approximately

$904,000

and

$842,000,

respectively.

  Included in the balance of unrecognized tax benefits as of

November

27,

2016

and

May

29,

2016

is approximately

$764,000

and

$715,000,

respectively, of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate. In the

twelve

months following

November

27,

2016,

it is reasonably possible that approximately

$300,000

of other unrecognized tax benefits

may

be recognized.

During the

six

months ended

November

27,

2016,

excess tax deficiencies related to stock - based compensation of

$59,000

were reflected in the consolidated statements of comprehensive income as a component of income tax expense as a result of the early adoption of ASU

2016

-

09,

specifically related to the prospective application of excess tax benefits and tax deficiencies related to stock - based compensation. See Note

1

– Organization, Basis of Presentation, and Summary of Significant Accounting Policies for further discussion regarding the adoption of ASU

2016

-

09.

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

27,

2016

and

May

29,

2016.

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

forward, none of which were individually material.