6 .	Income Taxes

The company

’s effective tax rate for the

nine

months ended

February 25, 2018

and

February 26, 2017

was a benefit of

154%

and expense of

36%,

respectively. The income tax benefit was

$11.5

million for the

nine

months ended

February 25, 2018,

and income tax expense was

$4.1

million for the

nine

months ended

February 26, 2017.

The income tax benefit and discrete benefit for the

nine

months ended

February 25, 2018

is primarily due to a

$13.9

million discrete benefit that mainly reflects the impact of the re-measurement of net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate from

35%

21%

. The income tax provision for the

nine

months ended

February 26, 2017

was primarily due to state income taxes and incentive stock option expense; partially offset by the domestic manufacturing deduction and research and development credits.

December 22, 2017,

the U.S. Government enacted the reconciled tax reform bill, commonly known as

the Tax

Cuts and Jobs Act of

2017

(the “TCJA”), which became effective on

January 1, 2018.

Among other tax related changes, the Company’s federal statutory tax rate has been reduced from

%, to an average rate of

29%

for the fiscal year ended

May 27, 2018,

and then

21%

for fiscal years thereafter. The TCJA also enhances and extends through

2026

the option to claim accelerated depreciation deductions on qualified property; however, the domestic manufacturing deduction, from which the Company has historically benefitted, has been eliminated. U

nder GAAP, the Company is required to recognize the effects of changes in tax laws and tax rates on deferred tax assets and liabilities in the period in which the new legislation is enacted. At

February 25, 2018,

the Company had

not

completed its accounting for the tax effects of enactment of the TCJA; however, the Company made a reasonable estimate of the effects on its existing deferred tax balances and the

one

-time transition tax.

The changes included in the

TCJA are broad and complex and the Company does

not

have all the necessary information to analyze all income tax effects of the TCJA. The above income tax benefit amount is a provisional amount based on a reasonable estimate of the impact of the reduction in the corporate tax rate on our current and deferred tax liabilities. Changes in the estimate of the Company’s deferred tax asset and liability activity during fiscal year

2018

could impact the Company’s remeasurement of net deferred tax liabilities. The Company will continue to evaluate the TCJA and adjust the provisional amounts as additional information becomes available. The ultimate impact of the TCJA

may

differ from the provisional amounts due to changes in the Company’s interpretations and assumptions, as well as additional guidance on the interpretation of the TCJA

. The Company will continue to assess its provision for income taxes as future guidance is issued. Although

not

anticipated, revisions to the Company’s provision for income taxes will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin

No.

118.

As of

February 25, 2018

and

May 28, 2017,

the Company had unrecognized tax benefits of approximately

$472

,000

and

$537

,000,

respectively. Included in the balance of unrecognized tax benefits as of

February 25, 2018

and

May 28, 2017

is approximately

$366

,000

and

$419,000,

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 elect

ed 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

February 25, 2018

and

May 28, 2017

Due to tax attribute carryforwards, the Company is subject to examination for tax years

2015

forward for U.S. tax purposes. The Company is also subject to examination in various state jurisdictions for tax years

2012

forward,

none

of which were individually material.

Our estimated annual effective tax rate

may

be subject to further uncertainty d

ue to the recent changes in U.S. tax rates and tax laws