Note 6 - Notes Receivable

12 Months Ended

Nov. 24, 2012

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

6. Notes Receivable

Our notes receivable, included in other long-term assets in our consolidated balance sheets,  consist of the following:

	November 24, 2012			November 26, 2011
Notes receivable	$	4,775		$	6,017
Allowance for doubtful accounts and discounts on notes receivable		(4,139	)		(4,140	)
Notes receivable, net		636			1,877
Less: current portion of notes receivable		(35	)		(75	)
Long term notes receivable	$	601		$	1,802

Our notes receivable, which bear interest at rates ranging from 2% to 6%, consist primarily of amounts due from current or former licensees from loans made by the Company to help licensees fund their operations.  Approximately 54% and 43% of our notes receivable represent conversions of past due accounts receivable at November 24, 2012 and November 26, 2011, respectively.  We have discontinued these conversions and have no plans to resume this practice. Interest income on the notes receivable, which is included in other income (loss), net, was as follows:

	2012		2011		2010
Interest income	$	85	$	129	$	463

The initial carrying value of the notes receivable was determined using present value techniques which consider the fair market rate of interest based on the licensee’s risk profile and estimated cash flows to be received. The estimated fair value of our notes receivable portfolio approximates the carrying value of the notes at November 24, 2012 and November 26, 2011.  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 Topic 820, Fair Value Measurements and Disclosures.  See Note 8.

Substantially all of our notes receivable comprise a single portfolio segment of financing receivables consisting of notes receivable from current and former licensees. These notes receivable are evaluated in three classes – those due from current licensees, those due from former licensees which are secured by real estate, and those due from former licensees which are unsecured. We periodically examine these notes receivable for evidence of impairment.

With respect to current licensees,  we consider factors such as licensee capitalization, projected operating performance, the viability of the market in which the licensee operates and the licensee’s operating history, including our cash receipts from the licensee, licensee sales and any underlying collateral.  At November 24, 2012 and November 26, 2011, all notes due from current licensees were fully reserved, and interest income on those notes for the 2012, 2011 and 2010 fiscal years was recognized only on a cash basis.

Our evaluation of former licensees is primarily based upon payment history and an evaluation of the underlying collateral. After considering these factors, should we believe that all or a portion of the expected cash flows attributable to the note receivable will not be received, we record an impairment charge on the note by estimating future cash flows and discounting them at the effective interest rate.  At November 24, 2012 and November 26, 2011, the carrying amount of notes receivable from former licensees, net of reserves and discounts, was $583 and $1,682. One note due from a former licensee was collected in full during the fourth quarter of fiscal 2012. The remaining note is secured by a second mortgage lien on real estate.

Any difference between the estimated discounted cash flows and the carrying value of these notes is recorded as an increase to the allowance for doubtful accounts.  Notes receivable are charged off if they are deemed to be uncollectible with no recoverable collateral value. Each note is evaluated individually using the criteria described above as applicable to its respective class.

Activity in the allowance for doubtful accounts and discounts was as follows:

	2012			2011
Balance, beginning of the year	$	4,140		$	6,748
Additions charged (credited) to expense		(1	)		4,712
Write-offs		-			(7,292	)
Amortization of discounts		-			(28	)
Balance, end of the year	$	4,139		$	4,140

These notes receivable, as well as our accounts receivable, are generally secured by the filing of security statements in accordance with the Uniform Commercial Code and/or real estate owned by the maker of the note and in some cases, personal guarantees by our licensees.