Note 10 - Licensee Acquisitions and Goodwill

12 Months Ended

Nov. 26, 2011

Business Combination Disclosure [Text Block]

10. Licensee Acquisitions and Goodwill

As we continually monitor business relationships with our licensees, we may determine from time to time that it is in our best interest to acquire a licensee’s operations in order to mitigate certain risks associated with the poor performance or potential failure of a licensee.  Such risks include loss of receivables or underlying collateral, potential impairment of the value of our investments in real estate used by a licensee or exposure to contingent liabilities under lease guarantees, and potential harm to our market share and brand integrity within a licensee’s market. In addition, we are sometimes approached by our licensees to acquire all or certain stores operated by the licensee.  We evaluate such opportunities considering, among other things, the viability of the market and our participation in the store real estate.

During fiscal 2011, we acquired 100% controlling interests in nine retail stores operated by 4 licensees in Nevada, Virginia, Ohio, Kentucky and Connecticut. These stores were acquired pursuant to strict foreclosure and settlement agreements on the underlying assets subject to the terms of our security agreements with the licensees.  These acquisitions were funded through the exchange of existing accounts receivable for the net assets acquired from the licensee.

The fiscal 2011 and 2010 acquisitions were accounted for in accordance with ASC Topic 805, Business Combinations, which we adopted effective as of the beginning of 2010. Acquisitions prior to fiscal 2010 were accounted for in accordance with FASB Statement No, 141, Business Combinations.  The following table summarizes the net assets acquired and consideration given in the store acquisitions:

	2011			2010			2009
Net assets acquired:
Inventory	$	3,618		$	3,319		$	2,798
Property and equipment/other		1,293			3,113			841
Goodwill		-			435			-
Customer deposits and other accrued expenses		(2,613	)		(3,738	)		(1,225	)
Total net assets acquired	$	2,298		$	3,129		$	2,414
Consideration given:
Accounts receivable	$	2,298		$	2,751		$	1,933
Cash		-			378			481
Total consideration	$	2,298		$	3,129		$	2,414

The assets acquired and liabilities assumed were measured at fair value in accordance with ASC 805.  Acquired inventory is valued at expected retail sales price less an allowance for direct selling costs and profit thereon. Acquired property and equipment are valued based upon our estimate of replacement cost less an allowance for age and condition at the time of acquisition.  Customer deposits and accrued expenses are expected to be settled at face value within a short period following acquisition; therefore face value is assumed to approximate fair value. The inputs into these fair value calculations reflect our market assumptions and are not observable. Consequently, the inputs are considered to be Level 3 as specified in the fair value hierarchy in ASC 820, Fair Value Measurements and Disclosures. See Note 8.

The pro forma impact of the acquisitions on current and prior periods is not presented as we believe it is impractical to do so. We were not able to compile what we believed to be complete, accurate and reliable accounting information to use as a basis for pro forma presentations without an unreasonable effort.  Net sales and operating losses generated by these stores subsequent to their acquisition for the year in which they were acquired were as follows:

	2011			2010			2009
Net sales	$	11,264		$	16,507		$	11,841
Operating losses		(874	)		(1,972	)		(1,588	)

The carrying value of our goodwill, which is included in other long-term assets in the accompanying consolidated balance sheets, by reporting unit and the activity for fiscal 2011 and 2010 is as follows:

	Wholesale		Retail		Total
Balance as of November 28, 2009	$	-	$	-	$	-
Goodwill from store acquisition		276		159		435
Impairment charge		-		-		-
Balance as of November 27, 2010		276		159		-
Goodwill from store acquisition		-		-		-
Impairment charge		-		-		-
Balance as of November 26, 2011	$	276	$	159	$	435

We perform our annual goodwill impairment review as of the beginning of our fiscal fourth quarter.  In fiscal 2009, due to the sharp decline in our market capitalization and the effects of the severe recessionary environment which existed at that time, we concluded that our goodwill acquired prior to 2009 was impaired and recorded a charge of $532 for fiscal 2009.  The impairment charge is included in restructuring and impairment charges in our consolidated statement of operations.  See Note 16.