NOTE A — ACCOUNTING POLICIES

Interim Financial Statements and Principles of Consolidation

The accompanying interim Condensed Consolidated Financial Statements (unaudited) include the accounts of the Company, prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures included normally in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) have been condensed or omitted as permitted under such rules and regulations. However, management believes that the disclosures made are adequate to make the information not misleading when read in conjunction with the Consolidated Financial Statements and the notes thereto that were included in the Company's Annual Report on Form 10-K for the year ended June 3, 2014.

Significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (all of which were normal and recurring) necessary for a fair presentation of the accompanying unaudited Interim Condensed Consolidated Financial Statements have been made for all periods presented. Additionally, all of the dollar amounts referenced in the text of the footnotes are reported in thousands.

Reclassifications

Certain amounts reported in the prior year have been reclassified to conform to the current year presentation.

Fiscal Year / Fiscal Quarters

The current fiscal year will end on Tuesday, June 2, 2015 (Fiscal Year 2015), a period of 52 weeks. The year that ended June 3, 2014 (Fiscal Year 2014) was a 53 week year.

The First Quarter Fiscal 2015 consists of the 16 weeks ended September 23, 2014. It compares with the First Quarter Fiscal 2014, which consisted of the 16 weeks ended September 17, 2013. The first quarters of each fiscal year should not be considered indicative of results for a full year, as the last three quarters each normally consist of only 12 weeks. However, the fourth quarter of Fiscal 2014 was a period of 13 weeks, as was necessary in a 53 week year.

Rebates

Cash rebates received from vendors are recorded as a reduction of cost of sales in the periods in which they are earned. Cash received in advance of the period of recognition is recorded as a liability in the balance sheet.

Impairment of Long-Lived Assets

A non-cash impairment loss of $418 was recorded during the First Quarter Fiscal 2015. The impairment charge lowered the previous estimate of the fair value of certain real property that is not used in operations, which has been held for sale for several years. The impairment was based on the lowering of the asking price for the property in order to expedite a sale. The fair value of the property is now $799, measured as a significant unobservable input (level 3) under the fair value hierarchy.

There were no non-cash impairment losses recorded during the First Quarter Fiscal 2014.

Goodwill and Other Intangible Assets

An analysis of Goodwill and Other Intangible Assets follows:



	September 23,		June 3,
	2014		2014

	(in thousands)
Goodwill	$	741	$	741
Other intangible assets not subject to amortization		22		22
Other intangible assets subject to amortization - net		9		10
Total goodwill and other intangible assets	$	772	$	773

Income Taxes

The provision for income taxes in all periods presented is based on management’s Estimate of the Annual Effective Tax Rate (EAETR) for the entire fiscal year. The impact of discrete items is fully included in income tax expense in the quarter in which it was incurred (see the following paragraph). The EAETR was estimated at 26 percent and 30 percent, respectively, for the First Quarter Fiscal 2015 and the First Quarter Fiscal 2014. The lower EAETR for Fiscal Year 2015 is primarily due to the incorporation of the Domestic Production Activities Deduction (DPAD). The tax benefit of DPAD in Fiscal Year 2014 was not incorporated into the EAETR until the third quarter.

Included in the tax provision for the First Quarter Fiscal 2015 is a discrete tax charge of $145, principally to revalue certain state tax assets. The revaluation was the result of implementing a plan (effective June 4, 2014, the first day of Fiscal Year 2015) to restructure the Company’s consolidated subsidiaries from corporations to single member limited liability companies. While the restructuring allows these state tax assets to be fully realized, a re-valuation was necessary because the tax status change gave rise to lower apportionment factor percentages, which upon implementation, lowered the expected tax benefits.

Management periodically assesses the realization of net deferred tax assets based on historical, current and future (expected) operating results. A valuation allowance (VA) is recorded if management believes the Company's net deferred tax assets will not be ultimately realized. In addition, management monitors the realization of any VA closely and may consider its release in the future based on any positive evidence that may become available. The Company does not currently carry any valuation allowances against its deferred tax assets.

The effect of the Final Repair Regulations (issued by the Internal Revenue Service (IRS)) on the Company’s Change in Accounting Method (filed in Fiscal Year 2011) is currently estimated as an unfavorable, immaterial timing difference of under $50, which will be paid prospectively over a four year period. Once the exact amount is determined, the appropriate Forms 3115 will be filed with the IRS to conform the Company’s previous Change in Accounting Method to Final Repair Regulations.

The Company’s federal tax return for the year ended May 28, 2013 (Fiscal Year 2013, filed in February 2014) is currently being examined by the IRS. An examination by the IRS of the Company’s federal tax return for the year ended May 31, 2011 (Fiscal Year 2011) was completed in November 2013. The examination resulted in no changes.

New Accounting Pronouncements

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Carryforward Exists” in July 2013. ASU 2013-11 is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company adopted ASU 2013-11 in the First Quarter Fiscal 2015, which did not require any additional disclosures to be made in these interim Condensed Consolidated Financial Statements.

ASU 2014-09 “Revenue from Contracts with Customers” was issued by FASB in May 2014. This guidance affects an entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts are within the scope of other accounting standards. The majority of the Company’s revenue is generated from the sale of restaurant meals, which is point of sale payment and recognition, and therefore no uncertainty surrounds the timing of revenue recognition. The Company has minimal revenue that will be subject to ASU 2014-09, which will be monitored closely for appropriate revenue recognition in accordance with the guidance. ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2016, including interim periods therein.

Management reviewed all other significant newly issued accounting pronouncements and concluded that they are either not applicable to the Company’s business or that no material effect is expected on the financial statements as a result of future adoption.