Note 14 - Financial Instruments and Fair Value Measurements

9 Months Ended

Aug. 27, 2011

Fair Value Disclosures [Text Block]

14. Financial Instruments and Fair Value Measurements

Our financial instruments include cash and cash equivalents, accounts receivable, notes receivable, investment securities, cost and equity method investments, accounts payable, loan and lease guarantees, and long-term debt. Because of their short maturity, the carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value. Our cost and equity method investments generally involve entities for which it is not practical to determine fair values.

Our investments consist of our investment in the Fortress Value Recovery Fund I, LLC (“Fortress”) with a value of $832 and a portfolio of marketable securities with a value of $3,149 at August 27, 2011.  At November 27, 2010, our investments included our investment in Fortress of $832 and $14,279 in our marketable securities portfolio.  Collectively, these were included in investments in the accompanying condensed consolidated balance sheets at November 27, 2010.

Historically, our marketable securities have been held by two different money managers and consisted of a combination of equity and fixed income securities, including money market funds.  During the second quarter of 2009, we liquidated our equity holdings with one of the managers and reinvested the proceeds in various money market funds, individual bonds and bond funds.  During the first quarter of 2010, we liquidated the equity holdings with the other manager and reinvested those funds in money market accounts.

We classify our marketable securities as available-for-sale, which are reported at fair value. Unrealized holding gains and losses, net of the related income tax effect, on available-for-sale securities are excluded from income and are reported as other comprehensive income in stockholders’ equity. Realized gains and losses from securities classified as available-for-sale are included in income.  We measure the fair value of our marketable securities based on quoted prices for identical securities in active markets in accordance withASC Topic 820, Fair Value Measurements and Disclosures.

Previously, our marketable securities, including money market shares, had been pledged as collateral under our former revolving credit facility (see Note 8). Although we had the ability to buy and sell the individual marketable securities, we were required to maintain a certain dollar amount in those brokerage accounts subject to the Securities Account Control Agreement as part of the revolving credit facility, and securities or proceeds from the sale thereof were not available for our general use.  Accordingly, they were classified as non-current assets in our balance sheet. As of July 5, 2011, these securities are no longer required to be pledged as security under our credit agreement. Due to the termination of the collateral pledge, we now include the balance of our investment in money market shares in cash and cash equivalents in the accompanying condensed consolidated balance sheet as of August 27, 2011, with the remaining available-for-sale securities classified as marketable securities in current assets. As of August 27, 2011, available-for-sale securities consisted of the following:

	Cost		Gross Unrealized				Market
	Basis		Gains		Losses		Value
Bond mutual fund shares	$	1,175	$	192	$	-	$	1,367
Government agency obligations		853		45		-		898
US Treasury obligations		863		21		-		884
	$	2,891	$	258	$	-	$	3,149

As of November 27, 2010, available-for-sale securities consisted of the following:

	Cost		Gross Unrealized				Market
	Basis		Gains		Losses		Value
Money market shares	$	11,368	$	-	$	-	$	11,368
Bond mutual fund shares		990		224		-		1,214
Government agency obligations		761		45		-		806
US Treasury obligations		876		15		-		891
	$	13,995	$	284	$	-	$	14,279

The realized earnings from our marketable securities portfolio include realized gains and losses, based upon specific identification, and dividend and interest income.  Realized earnings were $26 and $33 for the three months ended August 27, 2011 and August 28, 2010, respectively, and $137 and $2,246 for the nine months ended August 27, 2011 and August 28, 2010, respectively.  Realized earnings for the nine months ended August 27, 2011 include $28 of gains previously recorded in other comprehensive income. Realized earnings for the nine months ended August 28, 2010, include $1,913 of gains and $21 of losses previously recorded in other comprehensive income. These amounts are recorded in other income (loss), net in our condensed consolidated statements of operations and retained earnings.  Of the $1,782 in fixed income securities, $749 matures in less than five years with the remainder being long-term and maturing in greater than 20 years.

In accordance with ASC Topic 320, Investments – Debt and Equity Securities, we review our marketable securities to determine whether a decline in fair value of a security below the cost basis is other than temporary.   Should the decline be considered other than temporary, we write down the cost basis of the security and include the loss in current earnings as opposed to an unrealized holding loss.    No losses for other than temporary impairments were recognized during the three and nine months ended August 27, 2011 and August 28, 2010.

The Company accounts for items measured at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures.  ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:

Level 1 Inputs– Quoted prices for identical instruments in active markets.

Level 2 Inputs– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs– Instruments with primarily unobservable value drivers.

Our investment in Fortress is valued at fair value primarily based on the net asset values which are determined by the fund manager, less a discount for illiquidity.

Fortress is in the process of liquidating all of its underlying investments to wind down the fund.  Once this fund is fully liquidated, which is not expected in the near term, we will be paid our pro rata share of the proceeds.  We will continue to monitor the progress of the fund liquidation and adjust our valuation as necessary.

The fair values of our marketable securities and our investment in Fortress based on the level of inputs are summarized below:

	Level 1		Level 2		Level 3		Fair Value
Assets
Marketable securities	$	3,149	$	-	$	-	$	3,149
Investment in Fortress		-		-		832		832
Total Assets	$	3,149	$	-	$	832	$	3,981

There have been no material changes to the assets measured at fair value on a recurring basis which use Level 3 or significant unobservable inputs for the nine months ended August 27, 2011.

The carrying values and approximate fair values of certain financial instruments were as follows:

	August 27, 2011				November 27, 2010
	Carrying		Fair		Carrying		Fair
	value		value		value		value
Assets:
Cash and cash equivalents	$	68,889	$	68,889	$	11,071	$	11,071
Accounts receivable, net		16,504		16,504		31,621		31,621
Notes receivable, net		1,959		1,959		8,166		8,212
Investments		832		832		15,111		15,111
Liabilities:
Accounts payable	$	15,637		15,637	$	24,893	$	24,893
Real estate notes payable		6,136		5,836		13,816		13,556
Lease/loan guarantee reserves		799		799		2,304		2,304