Note 12 - Income Taxes

12 Months Ended

Nov. 24, 2012

Income Tax Disclosure [Text Block]

12. Income Taxes

The components of the income tax provision (benefit) are as follows:

	2012			2011			2010
Current:
Federal	$	1,611		$	3,947		$	(10	)
State		(487	)		676			(196	)
Deferred:
Increase (decrease) in valuation allowance		(18,704	)		(17,464	)		2,962
Federal		2,458			14,934			(2,195	)
State		423			2,316			(767	)
Total	$	(14,699	)	$	4,409		$	(206	)

The income tax provision for fiscal 2011 includes a benefit of $6,341 resulting from the utilization of Federal net operating loss carryforwards.

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:

	2012		2011		2010
Statutory federal income tax rate	35.0	%	35.0	%	(34.0	)%
Dividends received deduction	-		(1.8	)	(71.6	)
Change in income tax valuation allowance	(155.6	)	(29.2	)	134.2
Change in income tax reserves	(3.3	)	(0.1	)	(13.2	)
State income tax, net of federal benefit	1.5		3.4		(20.1	)
Other	0.1		-		(4.6	)
Effective income tax rate	(122.3	)%	7.3	%	(9.3	)%

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 24, 2012			November 26, 2011
Deferred income tax assets:
Trade accounts receivable	$	688		$	804
Inventories		1,946			2,036
Property and equipment		1,688			3,749
Notes receivable		1,592			1,592
Retirement benefits		5,547			5,162
Federal net operating loss and credit carryforwards		-			134
State net operating loss carryforwards		2,309			2,376
Unrealized holding loss		1,069			912
Lease termination accruals		1,005			1,676
Other		2,580			2,707
Gross deferred income tax assets		18,424			21,148
Valuation allowance		(908	)		(19,612	)
Total deferred income tax assets		17,516			1,536
Deferred income tax liabilities:
Unrealized gains from affiliates, net		78			125
Prepaid expenses and other		121			169
Unrealized holding gains, net		-			81
Total deferred income tax liabilities		199			375
Net deferred income tax assets	$	17,317		$	1,161

Due to the losses incurred prior to fiscal 2011, we were in a cumulative loss position for the three years preceding fiscal 2011which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data.  While our long-term financial outlook remained positive, we concluded that our ability to rely on our long-term outlook and forecasts as to future taxable income was limited due to uncertainty created by the weight of the negative evidence.  As a result, we previously recorded a valuation allowance on certain of the deferred tax assets.  In fiscal 2011, due to the gain recognized on the sale of our interest in IHFC, we were able to utilize net operating loss carryforwards and credits to significantly offset the taxable gain, resulting in a significant reduction of the valuation allowances. However, as the gain on the sale of IHFC did not represent a source of recurring future taxable income, we continued to record a valuation allowance against substantially all of our deferred tax assets as of November 26, 2011. Due to our positive earnings during fiscal 2012, and the absence of any significant negative evidence to the contrary, we have concluded that we can rely on our positive long-term outlook and forecasts as to future taxable income in evaluating our ability to realize our deferred tax assets. Accordingly, the reserve against the majority of our deferred tax assets was removed in fiscal 2012, resulting in a credit to income of $18,704, or $1.70 and $1.69 per basic and diluted share, respectively, which is included in our net income tax benefit for the year. The remaining valuation allowance of $908 is primarily related to state net operating loss carryforwards for which it is currently considered to be more likely than not that they will not be utilized prior to their expiration.

The following table represents a summary of the valuation allowances against deferred tax assets:

	2012			2011			2010
Balance, beginning of the year	$	19,612		$	36,806		$	33,003
Additions charged to expense		-			-			2,962
Deductions reducing expense		(18,704	)		(17,464	)		-
Additions (deductions) recorded as a component of other comprehensive (income) loss		-			270			841
Balance, end of the year	$	908		$	19,612		$	36,806

We have state net operating loss carryforwards available to offset future taxable state income of $29,059, which expire in varying amounts between 2013 and 2030.  Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards.

Net income taxes paid (net refunds received) during 2012, 2011 and 2010 were $2,010, $3,651, and $(1,582), respectively.

As of November 24, 2012, the gross amount of unrecognized tax benefits was approximately $1,228 exclusive of interest and penalties. Of this balance, if we were to prevail on all unrecognized tax benefits recorded, approximately $175 would benefit the effective tax rate. As of November 26, 2011, the gross amount of unrecognized tax benefits was approximately $1,502, exclusive of interest and penalties. Of this balance, if we were to prevail on all unrecognized tax benefits recorded, approximately $440 would benefit the effective tax rate. We regularly evaluate, assess and adjust the related liabilities in light of changing facts and circumstances, which could cause the effective tax rate to fluctuate from period to period.

The following table summarizes the activity related to our gross unrecognized tax benefits:

	2012			2011
Balance, beginning of the year	$	1,502		$	1,565
Gross increases		10			183
Gross decreases, primarily due to the expiration of statutes		(284	)		(246	)
Balance, end of the year	$	1,228		$	1,502

We recognize interest and penalties related to unrecognized tax benefits in income tax expense.  During fiscal 2012, 2011, and 2010, we recognized $(63), $67, and $(112) of interest expense (expense recovery) and $57, $46, and $30 of penalty expense recovery, respectively, related to the unrecognized benefits noted above in our consolidated statements of operations.   At November 24, 2012 and November 26, 2011, the consolidated balance sheets include accrued interest of $164 and $226, and penalties of $40 and $97, respectively, due to unrecognized tax benefits.

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 2009 through 2011 for all of our major tax jurisdictions.