Note 7 - Unconsolidated Affiliated Companies

9 Months Ended

Aug. 27, 2011

Equity Method Investments Disclosure [Text Block]

7. Unconsolidated Affiliated Companies

On May 2, 2011 we sold our 46.9% interest in International Home Furnishings Center, Inc. (“IHFC”) to International Market Centers, L.P. (“IMC”). Consideration received, the balance of our investment in IHFC at the time of sale, and the resulting gain from the sale are as follows:

Consideration received:
Cash	$	69,152
Tax escrow receivable (1)		1,413
Indemnifcation escrow receivable (2)		4,695
Investment in IMC (2)		1,000

Total consideration received	$	76,260

Investment in IHFC:
Distributions in excess of affiliate earnings		9,282

Gain on sale of affiliate	$	85,542

(1) Included in other current assets in the accompanying condensed consolidated balance sheet
at August 27, 2011.
(2) Included in other assets in the accompanying condensed consolidated balance sheet at
August 27, 2011.

The tax escrow receivable represents the portion of escrowed sales proceeds expected to be released to us after the settlement of certain outstanding IHFC tax obligations. In addition, $4,695 of proceeds were placed in escrow to indemnify the purchaser with respect to various contingencies. Any unused portions of these escrowed funds will be released to us over a three year period. Also in connection with the sale, we acquired a minority equity stake in IMC in exchange for $1,000. IMC is majority owned by funds managed by Bain Capital Partners and a subsidiary of certain investment funds managed by Oaktree Capital Management, L.P. Our investment in IMC is accounted for using the cost method as we do not have significant influence over IMC.

IHFC owned and leased out floor space in a showroom facility in High Point, North Carolina. Prior to the sale of our investment in IHFC, we accounted for the investment using the equity method since we did not maintain operating control of IHFC. At November 27, 2010, our investment reflected a credit balance of $7,356 which is presented in the liabilities section in the accompanying condensed consolidated balance sheets as “distributions in excess of affiliate earnings”. The negative book value resulted from IHFC’s previous refinancing of its real estate based on the market value of the property and using the proceeds to pay a special dividend to its owners. We recorded income and received dividends from IHFC as follows:

	Quarter Ended				Nine Months Ended
	August 27, 2011		August 28, 2010		August 27, 2011		August 28, 2010
Income recorded	$	-	$	998	$	1,832	$	3,134
Dividends received		-		-		3,756		937

The income is included in other income (loss), net in our condensed consolidated statements of operations and retained earnings.

Summarized unaudited income statement information for IHFC for its first five months of fiscal 2011 up to the sale of our investment and nine months of 2010 is as follows:

	2011		2010
	(five months)		(nine months)
Revenue	$	15,875	$	27,803
Operating income		9,876		14,885
Net income		3,908		6,689

We own 49% of Zenith Freight Lines, LLC, (“Zenith”) which provides domestic transportation and warehousing services primarily to furniture manufacturers and distributors and also provides home delivery services to furniture retailers. We have contracted with Zenith to provide for substantially all of our domestic freight, transportation and warehousing needs for the wholesale business. In addition, Zenith provides home delivery services for several of our Company-owned retail stores. Our investment in Zenith was $6,079 and $5,147 at August 27, 2011 and November 27, 2010, respectively. During the second quarter of 2011, we made an additional cash investment of $980, which represented our 49% share of a total $2,000 equity contribution to Zenith to partially fund their acquisition of a warehouse facility.

We recorded the following income from Zenith in other income (loss), net in our condensed consolidated statements of operations and retained earnings:

	Quarter Ended						Nine Months Ended
	August 27, 2011			August 28, 2010			August 27, 2011			August 28, 2010
Income (loss)	$	(139	)	$	(4	)	$	(48	)	$	27
Dividends received		-			-			-			-

- Definition

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

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