3.	RESTATEMENT

During the second quarter of fiscal 2012, in connection with an ongoing IRS examination, we determined that a deduction taken on our fiscal 2006 federal tax return was taken in error. As a result, the tax impact of the Net Operating Loss (“NOL”) carry forward from fiscal 2006 was overstated by approximately $2.1 million. The NOL from fiscal 2006 was fully utilized and the reversal of all associated valuation allowances was recorded in our results from discontinued operations during fiscal 2011. The deferred tax asset related to the NOL was fully reserved prior to the fourth quarter of fiscal 2011.

The Securities and Exchange Commission (the “SEC” or “Commission”) Staff Accounting Bulletin 108 (“SAB 108”) provides guidance on quantifying and evaluating the materiality of errors. SAB 108 requires that a company considers the “iron curtain” and the “rollover” approach when quantifying misstatement amounts. Under the rollover approach, the error is quantified as the amount by which the current year income statement is misstated. The iron curtain approach quantifies the error using both a balance sheet and an income statement approach and evaluates whether either of these approaches results in quantifying a misstatement that is material, considering all relevant quantitative and qualitative factors.

Materiality was also assessed from a qualitative perspective based on whether it was probable that the judgment of a reasonable person relying upon the report would have been changed or influenced by the inclusion or correction of the item. We do not believe the effect of this error would have changed or influenced the judgment of a reasonable person.

We performed an analysis of this error using both the rollover and iron curtain methods and concluded that this error was material to our fiscal 2012 financial statements and immaterial to our fiscal 2011 financial statements. Accordingly, we restated our fiscal 2011 consolidated statement of comprehensive income to correct the error. This error did not impact the financial statements prior to fiscal 2011, as the NOL was fully reserved prior to the fourth quarter of fiscal 2011.

During fiscal 2012, the effect on retained earnings and net income were as follows (in thousands):


	Year Ended June 2, 2012
	Effect on Retained Earnings			Effect on Net Income
Recording of prior year’s income tax expense	$	(2,126	)	$	—
Income tax effect on the above		—			—

Net SAB 108 Effect	$	(2,126	)	$	—

The understatement of income tax expense for our fiscal year ended May 28, 2011, affected our consolidated statement of comprehensive income as follows (in thousands, except per share data):


	As Reported		Restated
Income from discontinued operations, net of tax	$	88,092	$	85,966
Net Income		90,074		87,948
Income from discontinued operations per diluted share		4.84		4.72
Net Income per diluted share		4.95		4.83