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Income Taxes
 12 Months Ended
Nov. 03, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 4 - Income Taxes:

 

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

 

Schedule of Provision (Benefit) for Taxes on Income

   November 3, 2023   October 28, 2022 
   (53 Weeks)   (52 Weeks) 
Current:          
Federal  $1,660   $10,574 
State   (8)   2,264 
Current tax expense benefit   1,652    12,838 
Deferred:          
Federal   (530)   2,609 
State   (101)   894 
Deferred tax expense benefit   (631)   3,503 
Provision (benefit) for income taxes  $1,021   $16,341 

 

 

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

 

Schedule of Tax Provision Differs from Statutory Federal Income Tax Rate

   November 3, 2023   October 28, 2022 
   (53 Weeks)   (52 Weeks) 
Provision for federal income taxes at the applicable statutory rate  $944   $12,895 
(Decrease) increase in provision resulting from state income taxes, net of federal income tax benefit   (86)   2,458 
Non-taxable life insurance loss (gain)   (93)   427 
Other, net   256    561 
Provision for income taxes  $1,021   $16,341 

 

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

 

Schedule of Deferred Income Taxes Results from Differences in Bases of Assets and Liabilities

   November 3, 2023   October 28, 2022 
Receivables allowance  $64   $48 
Returns allowance   167    142 
Inventory packaging reserve   299    145 
Inventory overhead capitalization   571    628 
Employee benefits   726    848 
Other   (30)   143 
State taxes payable (receivable)   232    275 
Incentive compensation   824    733 
Pension and health care benefits   924    1,318 
Depreciation   (12,342)   (13,440)
Net operating loss carry-forward and credits   322    287 
Valuation allowance established against state NOL   (99)   (99)
Deferred income taxes, net  $(8,342)  $(8,972)

 

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.

 

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 3, 2023, 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 2022 and determined that some of its California NOL may not be utilized. Therefore, a valuation allowance of $99 has been retained for such portion of the California NOL.

 

As of November 3, 2023, the Company had net operating loss carryforwards of approximately $0 for federal and $5,000 for state purposes.

 

The state loss carryforwards will expire at various dates through 2040.

 

In 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 cumulative effect, if any, of applying this guidance is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption. The provisions of this guidance have been incorporated into ASC 740-10.

 

As of November 3, 2023, we have provided a liability of $314 to unrecognized tax benefits related to various federal and state income tax matters. $76 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 October 28, 2022, we have provided a liability of $299 to 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.

 

 

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

 

Schedule of Reconciliation of Unrecognized Tax Benefits

   November 3, 2023   October 28, 2022 
   (53 Weeks)   (52 Weeks) 
         
Balance at beginning of year  $299   $173 
Additions based on tax positions related to the current year   16    126 
Additions for tax positions of prior years   16    - 
           
Balance at end of year  $331   $299 

 

We recognize any future accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of November 3, 2023, we had approximately $40 in accrued interest and penalties which is included as a component of the $331 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, 2020, through 2022.

 

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 years ended October 31, 2019, through 2022.

 

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

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before January 1, 2021. In addition, the CARES Act allows NOLs incurred in taxable years beginning after December 31, 2017, and before January 1, 2021 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has filed a federal income tax return for tax year 2018 (fiscal year 2019) and has carried back a taxable loss of $9,919 to tax years 2014 (fiscal year 2015) and 2015 (fiscal year 2016). Furthermore, the Company also carried back $21,687 of net operating loss from 2019 (fiscal year 2020) against any remaining taxable income of tax year 2015 (fiscal year 2016) and taxable income of tax years 2016 (fiscal year 2017) and 2017 (fiscal year 2018). The carryback of net operating losses will also release $358 of research & development credits, which will become available for utilization in future years.

 

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”). Among other significant changes, the Tax Act reduced the corporate federal income tax rate from 35% to 21%. The carryback of NOLs from tax years 2018 and 2019 under the CARES Act to pre-Tax Act years has generated an income tax benefit of $3,091 due to the difference in income tax rates. The release of research and development credits has generated an income tax benefit of $358. These income tax benefits have been recorded in the income tax provision for fiscal year 2020.

 

The effective tax rate was 22.7% and 26.6% for fiscal years 2023 and 2022, respectively. The effective tax rate for fiscal year 2022 was impacted by the rate differential on NOL carryback available under the CARES Act discussed in the paragraphs above. In addition, the effective tax rates for fiscal years 2023 and 2022 were impacted by such items as non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state income taxes.