NOTE

Income Taxes:

The provision (benefit) for taxes on income includes the following:

	52 Weeks
	2016			2015
Current:
Federal	$	3,874		$	253
State		226			100
		4,100			353
Deferred:
Federal		(883	)		(6,335	)
State		(151	)		(1,342	)
		(1,034	)		(7,677	)
	$	3,066		$	(7,324	)

The total tax provision differs from the expected amount computed by applying the statutory federal income tax rate to income before income taxes as follows:

	52 Weeks
	2016			2015
Provision for federal income taxes at the applicable statutory rate	$	3,684		$	2,772
Increase in provision resulting from state income taxes, net of federal income tax benefit		49			641
Research & development tax credit		-			(3	)
Non-taxable life insurance gain		(37	)		(2	)
Domestic Production Activities Deduction		(429	)		-
Change in valuation allowance		-			(10,848	)
Other, net		(201	)		116
	$	3,066		$	(7,324	)

Deferred income taxes result from differences in the bases of assets and liabilities for tax and accounting purposes.

	2016			2015
Receivables allowance	$	7		$	58
Returns allowance		166			201
Inventory packaging reserve		100			125
Inventory overhead capitalization		524			400
Employee benefits		552			793
Other		1			1
State taxes		(655	)		(515	)
Incentive compensation		2,140			925
Pension and health care benefits		12,438			9,202
Depreciation		(837	)		(816	)
Net operating loss carry-forward and credits		96			271
Non-current tax assets, net	$	14,532		$	10,645

Accounting Standards Codification ("ASC")

740

requires that an entity's deferred tax assets be reduced by a valuation allowance to the extent its management determines that it is more likely than not that such deferred tax asset, or portion thereof, will not be realized. Management evaluated the realizability of its deferred tax assets to determine the need and appropriateness of a valuation allowance. In its determinations, Management considers items of evidence, both positive and negative, including those items outlined in ASC

740.

The Company policy outlines measurable objective criteria that must be met before a release of the valuation allowance will occur. The

three

criteria set forth in the policy must all be satisfied before the valuation allowance can be reversed. The

three

criteria were met and the valuation allowance was reversed in its entirety during fiscal year

2015.

The Company continues to measure the realizability of its deferred tax assets against the preset criteria. The criteria are as follows:

first,

the Company’s available federal tax net operating loss ("NOL") must be

zero;

second,

the prior

thirty

six

month cumulative book basis pre - tax income (loss), after considering

“one

- time” events, is positive;

third,

the Company considers its outlook of near term continued profitable operations and assesses any material negative and positive trends or events on the immediate horizon. As of

October

28,

2016,

the Company

(1)

has utilized its entire federal net operating loss,

(2)

has positive

thirty

six

month cumulative book income and

(3)

positive economic factors including lower and more stable commodity markets and current profitable operations are present. Management has concluded that the deferred tax assets are more likely than not to be realized as of

October

28,

2016.

Due to the degree of judgment involved, actual taxable income could differ materially from management's estimates, or the timing of taxable income could be such that the net operating losses could expire prior to their utilization. Management could determine in the future that the assets are unrealizable, materially decreasing net income in

one

or more periods. Following recognition, management could reinstate a full valuation allowance should operating performance decline.

As of

October

28,

2016,

all federal and state net operating loss carryforwards were fully utilized.

July

2006,

the FASB issued guidance to clarify the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This interpretation prescribed a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also discussed derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of this guidance have been incorporated into ASC

740

10.

November

2015,

the FASB issued guidance in ASU

2015

concerning the balance sheet classification of deferred taxes in an initiative to reduce complexity in accounting standards. All deferred tax liabilities and assets should now be classified as noncurrent in the statement of financial position to simplify presentation of deferred tax assets. The guidance is effective for financial statements issued for annual periods beginning after

December

15,

2016.

We have already adopted this guidance and the change is reflected as of

October

30,

2015.

As of

October

28,

2016,

we have provided a liability of

$130

for unrecognized tax benefits related to various federal and state income tax matters. A significant portion of this amount would generally reduce our effective income tax rate if recognized in future reporting periods. We have not identified any new unrecognized tax benefits.

As of

October

30,

2015,

we have provided a liability of

$112

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	52 Weeks
	2016		2015

Balance at beginning of year	$	112	$	100
Additions based on tax positions related to the current year		16		12
Additions for tax positions of prior years		2		2
Reductions for tax positions of prior years		-		(2	)
Settlements		-		-

Balance at end of year	$	130	$	112

We recognize any future accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of

October

28,

2016,

we had approximately

$12

in accrued interest and penalties which is included as a component of the

$130

unrecognized tax benefit noted above.

Our federal income tax returns are open to audit under the statute of limitations for the years ended

October

31,

2013

through

2015.

We are subject to income tax in California and various other state taxing jurisdictions. Our state income tax returns are open to audit under the statute of limitations for the fiscal years ended

October

31,

2009

through

2014.

We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next

months.