Note 14 - Financial Instruments and Fair Value Measurements

9 Months Ended

Aug. 25, 2012

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 values. Our cost and equity method investments generally involve entities for which it is not practical to determine fair values.

We classify our marketable securities, which are reported at fair value, as available-for-sale. Unrealized holding gains and losses, net of the related income tax effect, if any, 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.  As of August 25, 2012, available-for-sale securities consisted of the following:

	Cost		Gross Unrealized				Market
	Basis		Gains		Losses		Value
Bond mutual fund shares	$	1,249	$	273	$	-	$	1,522
Government agency obligations		1,059		34		-		1,093
US Treasury obligations		573		18		-		591
	$	2,881	$	325	$	-	$	3,206

As of November 26, 2011, available-for-sale securities consisted of the following:

	Cost		Gross Unrealized					Market
	Basis		Gains		Losses			Value
Bond mutual fund shares	$	1,175	$	149	$	(4	)	$	1,320
Government agency obligations		908		38		-			946
US Treasury obligations		648		26		(1	)		673
	$	2,731	$	213	$	(5	)	$	2,939

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 $21 and $33 for the three months ended August 25, 2012 and August 27, 2011, respectively, and $116 and $137 for the nine months ended August 25, 2012 and August 27, 2011, respectively.  Realized earnings for the nine months ended August 25, 2012 and August 27, 2011 include $33 and $28, respectively, of gains previously recorded in other comprehensive income. These amounts are recorded in other income (loss), net in our condensed consolidated statements of income and retained earnings.  Future maturities of the $1,684 in fixed income securities at August 25, 2012 are as follows:

Less than 5 years	$	-
5-10 years		561
11-20 years		29
Over 20 years		1,094
	$	1,684

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 in our marketable securities portfolio were recognized during the three and nine months ended August 25, 2012 or August 27, 2011.

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 the Fortress Value Recovery Fund I, LLC (“Fortress”) has been valued at fair value primarily based on the net asset values which are determined by the fund manager, less a discount for illiquidity.  Due to significant declines in net asset values during the first quarter of 2012, the highly illiquid nature of the investment, and the high degree of uncertainty regarding our ability to recover our investment in the foreseeable future, we have fully impaired the carrying amount of this investment resulting in a charge of $806 during the nine months ended August 25, 2012, which is included in other loss, net, in the condensed consolidated statements of income and retained earnings.

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

	Level 1		Level 2		Level 3		Fair Value
Assets
Marketable securities	$	3,206	$	-	$	-	$	3,206
Total Assets	$	3,206	$	-	$	-	$	3,206

The 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 25, 2012 were as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3 Inputs)
	Investment in Fortress
Balance at November 26, 2011	$	806
Total losses included in earnings related to change in underlying net assets		(806	)
Balance August 25, 2012	$	-

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

	August 25, 2012				November 26, 2011
	Carrying value		Fair value		Carrying value		Fair value
Assets:
Cash and cash equivalents	$	57,967	$	57,967	$	69,601	$	69,601
Accounts receivable, net		14,468		14,468		14,756		14,756
Notes receivable, net		1,778		1,778		1,877		1,877
Investments		3,206		3,206		3,745		3,745
Liabilities:
Accounts payable	$	19,170		19,170	$	18,821	$	18,821
Real estate notes payable		3,714		3,720		3,864		3,804
Lease/loan guarantee reserves		602		602		508		508