Note

We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.

Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than

not

to be overturned by taxing authorities (“uncertain tax positions”). We have

not

recognized a tax benefit in our financial statements for these uncertain tax positions.

The total amount of gross unrecognized tax benefits is

$399,000

and

$394,000

December 29, 2018

and

September 29, 2018,

respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to uncertain tax positions as a part of the provision for income taxes. As of

December 29, 2018

and

September 29, 2018,

respectively, the Company has

$264,000

and

$259,000

of accrued interest and penalties.

In addition to our federal tax return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax with virtually all open for examination for

three

four

years.

Net earnings for last year’s quarter benefited from a

$20.9

million gain on the remeasurement of deferred tax liabilities which was partially offset by a

$1.2

million provision for the

one

time repatriation tax, both of which resulted from the Tax Cuts and Jobs Act enacted in in

December 2017.

Excluding the deferred tax gain and the

one

time repatriation tax, our effective tax rate was

28.6%

in last year’s quarter. Net earnings in this year’s quarter benefitted by a reduction of approximately

$900,000

in tax as the provision for the

one

time repatriation tax was reduced as the amount recorded last year was an estimate. Excluding the reduction in the provision for the

one

time repatriation tax, our effective tax rate was

28.0%

in this year’s quarter.