XML 59 R11.htm IDEA: XBRL DOCUMENT

Income Taxes

12 Months Ended

Nov. 01, 2019

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 4 - Income Taxes:

The provision for income taxes includes the following:

		November 1, 2019				November 2, 2018
		(52 Weeks)				(52 Weeks)
Current:
Federal		$	(177	)		$	979
State			342				377
			165				1,356
Deferred:
Federal			1,667				4,715
State			221				225
			1,888				4,940
		$	2,053			$	6,296

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:

		November 1, 2019				November 2, 2018
		(52 Weeks)				(52 Weeks)
Provision for federal income taxes at the applicable statutory rate		$	1,790			$	2,956
Increase in provision resulting from state income taxes, net of federal income tax benefit			445				463
Change in federal rate – Tax Act			-				3,059
Non-taxable life insurance gain			(140	)			(99	)
Domestic Production Activities Deduction			-				(106	)
Other, net			(42	)			23
		$	2,053			$	6,296

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

		2019				2018
Receivables allowance		$	8			$	9
Returns allowance			160				112
Inventory packaging reserve			90				35
Inventory overhead capitalization			394				305
Employee benefits			467				385
Other			25				-
State taxes			(281	)			(230	)
Incentive compensation			1,794				2,174
Pension and health care benefits			5,604				3,494
Depreciation			(6,310	)			(2,274	)
Net operating loss carry-forward and credits			2,173				77
Valuation allowance established against state NOL			(77	)			(77	)
Deferred income tax assets, net		$	4,047			$	4,010

Management is required to evaluate whether a valuation allowance should be established against its deferred tax assets based on the consideration of all available evidence using a "more likely than not" standard. Realization of deferred tax assets is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies, and reversals of existing taxable temporary differences.

As of November 1, 2019, the Company did not have any valuation allowance against its federal net deferred tax assets.

Management reevaluated the need for a valuation allowance at the end of 2019 and determined that some of its California NOL may not be utilized. Therefore, a valuation allowance of $77 has been retained for such portion of California NOL.

As of November 1, 2019, the Company had net operating loss carryforwards of approximately $9,979 for federal and $874 for state purposes. The federal loss will be carried forward indefinitely until it can be utilized against future taxable income. The state loss carryforwards will expire at various dates from 2023 through 2034.

As of November 1, 2019, we have provided a liability of $90 for unrecognized tax benefits related to various federal and state income tax matters. None of this liability will reduce our effective income tax rate if the asset is recognized in future reporting periods. We have not identified any new unrecognized tax benefits.

As of November 2, 2018, we have provided a liability of $155 for unrecognized tax benefits related to various federal and state income tax matters. None of this liability will reduce our effective income tax rate if the asset is recognized in future reporting periods. We have not identified any new unrecognized tax benefits.

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

		November 1, 2019				November 2, 2018
		(52 Weeks)				(52 Weeks)

Balance at beginning of year		$	155			$	135
Additions based on tax positions related to the current year			-				10
Additions for tax positions of prior years			-				10
Reductions for tax positions of prior years			(65	)			-
Settlements			-				-

Balance at end of year		$	90			$	155

We recognize any future accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of November 1, 2019, we had approximately $18 in accrued interest and penalties which is included as a component of the $90 unrecognized tax benefit noted above.

Our federal income tax returns are open to audit under the statute of limitations for the fiscal years 2016 through 2018.

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 2015 through 2018.

We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. tax code that affected our fiscal year ended November 2, 2018, and future periods, including, but not limited to, (1) reduced the corporate federal income tax rate from 35% to 21%, (2) bonus depreciation that allowed for full expensing of qualified property in the year placed in service, and (3) the repeal of the domestic production activity deduction beginning with our fiscal year 2019. Section 15 of the Internal Revenue Code (the “Code”) stipulates that our fiscal year ended November 2, 2018 had a blended corporate tax rate of 23.07%, which is based on the applicable tax rates before and after the Tax Act and the number of days in the year.

Under U.S. GAAP, specifically ASC Topic 740, Income Taxes, the tax effects of changes in tax laws must be recognized in the period in which the law is enacted, or December 22, 2017, for the Tax Act. ASC Topic 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Company’s deferred taxes were re-measured based upon the new tax rates.

The Company adopted ASU 2018-02, “Income Statement-Reporting Other Comprehensive Income (OCI) (Topic 220)” in year ended November 2, 2018. As a result of the remeasurement of deferred tax assets related to the Tax Act, we reclassified $2,529 from Other Comprehensive Income to Retained Earnings.