Note 9 - Licensee Acquisitions and Goodwill

12 Months Ended

Nov. 29, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

9. 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.

There were no acquisitions of licensee operations during fiscal 2014 and 2013. During fiscal 2012, we acquired one store located in Knoxville, Tennessee and two stores in the Orange County, California market. In both cases our licensees desired to exit those markets but continue operating in other markets. The acquisition price for the Knoxville store was $673, funded through the exchange of $485 in cash and $188 in existing accounts receivable for the net assets acquired from the licensee plus recognized goodwill of $375. The acquisition price for the two Orange County stores was $1,468, funded through the exchange of $64 in cash and $1,404 in existing accounts receivable for the net assets acquired plus recognized goodwill of $921.

Our acquisitions were accounted for in accordance with ASC Topic 805, Business Combinations. The following table summarizes the net assets acquired and consideration given in the store acquisitions which occurred in fiscal 2012:

	2012
Net assets acquired:
Inventory	$	1,480
Property and equipment/other		592
Goodwill		1,296
Customer deposits and other accrued expenses		(1,227	)
Total net assets acquired	$	2,141
Consideration given:
Accounts receivable	$	1,592
Cash		549
Total consideration	$	2,141

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 7.

The pro forma impact of the acquisitions 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 during fiscal 2012 were $1,646 and $62, respectively.

The carrying value of our goodwill, which is included in other long-term assets in the accompanying consolidated balance sheets, was $1,731 at both November 29, 2014 and November 30, 2013. Of this balance, $1,129 is allocated to our wholesale segment and $602 is allocated to our retail segment. There have been no changes in the carrying value of our goodwill subsequent to the 2012 acquisitions. We perform our annual goodwill impairment review as of the beginning of our fiscal fourth quarter. No impairment charges have been required since fiscal 2009.