UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OR
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________________ to _______________________
Commission File No.
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Zip Code)
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol |
Name of exchange on which registered |
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | ☒ | |
| Non-accelerated Filer | ☐ | Smaller Reporting Company | |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
At September 23, 2022,
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
| ITEM | PAGE | |
| PART I - FINANCIAL INFORMATION | ||
| 1. | Condensed Consolidated Financial Statements as of August 27, 2022 (unaudited) and November 27, 2021 and for the three and nine months ended August 27, 2022 (unaudited) and August 28, 2021 (unaudited) | |
| Condensed Consolidated Statements of Income | 3 | |
| Condensed Consolidated Statements of Comprehensive Income | 4 | |
| Condensed Consolidated Balance Sheets | 5 | |
| Condensed Consolidated Statements of Cash Flows | 6 | |
| Notes to Condensed Consolidated Financial Statements | 7 | |
| 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 23 |
| 3. | Quantitative and Qualitative Disclosures About Market Risk | 34 |
| 4. | Controls and Procedures | 34 |
| PART II - OTHER INFORMATION | ||
| 1. | Legal Proceedings | 35 |
| 2. | Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 35 |
| 3. | Defaults Upon Senior Securities | 35 |
| 6. | Exhibits | 35 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED AUGUST 27, 2022 AND AUGUST 28, 2021 – UNAUDITED
(In thousands except per share data)
|
Quarter Ended |
Nine Months Ended |
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August 27, 2022 |
August 28, 2021 |
August 27, 2022 |
August 28, 2021 |
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Net sales of furniture and accessories |
$ | $ | $ | $ | ||||||||||||
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Cost of furniture and accessories sold |
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Gross profit |
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Selling, general and administrative expenses |
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Gain on sale of real estate |
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Income from operations |
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Other loss, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Income from continuing operations before income taxes |
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Income tax expense |
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Income from continuing operations |
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Discontinued operations: |
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Income (loss) from operations of logistical services |
( |
) | ||||||||||||||
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Gain on disposal (less adjustments) |
( |
) | ||||||||||||||
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Income tax expense (benefit) |
( |
) | ( |
) | ||||||||||||
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Income (loss) from discontinued operations |
( |
) | ( |
) | ||||||||||||
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Net income |
$ | $ | $ | $ | ||||||||||||
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Basic earnings per share: |
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Income from continuing operations |
$ | $ | $ | $ | ||||||||||||
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Income (loss) from discontinued operations |
( |
) | ( |
) | ||||||||||||
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Basic and diluted earnings per share |
$ | $ | $ | $ | ||||||||||||
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Diluted earnings per share: |
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Income from continuing operations |
$ | $ | $ | $ | ||||||||||||
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Income (loss) from discontinued operations |
( |
) | ( |
) | ||||||||||||
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Diluted earnings per share |
$ | $ | $ | $ | ||||||||||||
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Regular dividends per share |
$ | $ | $ | $ | ||||||||||||
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Special dividend per share |
$ | $ | $ | $ | ||||||||||||
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
PART I – FINANCIAL INFORMATION – CONTINUED
ITEM 1. FINANCIAL STATEMENTS
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODS ENDED AUGUST 27, 2022 AND AUGUST 28, 2021 – UNAUDITED
(In thousands)
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Quarter Ended |
Nine Months Ended |
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August 27, 2022 |
August 28, 2021 |
August 27, 2022 |
August 28, 2021 |
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Net income |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive income: | ||||||||||||||||
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Amortization associated with Long Term Cash Awards (LTCA) |
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Income taxes related to LTCA |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Amortization associated with supplemental executive retirement defined benefit plan (SERP) |
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Income taxes related to SERP |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Other comprehensive income, net of tax |
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Total comprehensive income |
$ | $ | $ | $ | ||||||||||||
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
PART I – FINANCIAL INFORMATION – CONTINUED
ITEM 1. FINANCIAL STATEMENTS
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 27, 2022 AND NOVEMBER 27, 2021
(In thousands)
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(Unaudited) |
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August 27, 2022 |
November 27, 2021 |
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| Assets | ||||||||
| Current assets | ||||||||
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Cash and cash equivalents |
$ | $ | ||||||
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Short-term investments |
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Accounts receivable, net |
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Inventories |
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Recoverable income taxes |
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Current assets of discontinued operations held for sale |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Deferred income taxes |
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Goodwill and other intangible assets |
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Right of use assets under operating leases |
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Long-term assets of discontinued operations held for sale |
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Other |
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Total long-term assets |
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Total assets |
$ | $ | ||||||
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Liabilities and Stockholders’ Equity |
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| Current liabilities | ||||||||
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Accounts payable |
$ | $ | ||||||
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Accrued compensation and benefits |
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Customer deposits |
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Current portion operating lease obligations |
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Current liabilities of discontinued operations held for sale |
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Other current liabilites and accrued expenses |
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Total current liabilities |
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| Long-term liabilities | ||||||||
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Post employment benefit obligations |
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Long-term portion of operating lease obligations |
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Long-term liabilities of discontinued operations held for sale |
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Other long-term liabilities |
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Total long-term liabilities |
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Stockholders’ equity |
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Common stock |
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Retained earnings |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
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Total stockholders' equity |
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Total liabilities and stockholders’ equity |
$ | $ | ||||||
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
PART I – FINANCIAL INFORMATION – CONTINUED
ITEM 1. FINANCIAL STATEMENTS
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED AUGUST 27, 2022 AND AUGUST 28, 2021 – UNAUDITED
(In thousands)
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Nine Months Ended |
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August 27, 2022 |
August 28, 2021 |
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| Operating activities: | ||||||||
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Net income |
$ | $ | ||||||
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Gain on disposal of discontinued operations |
( |
) | ||||||
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Gain on sale of property and equipment |
( |
) | ( |
) | ||||
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Deferred income taxes |
( |
) | ||||||
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Other, net |
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Changes in operating assets and liabilities: |
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Accounts receivable |
( |
) | ||||||
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Inventories |
( |
) | ( |
) | ||||
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Other current assets |
( |
) | ||||||
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Right of use assets under operating leases |
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Customer deposits |
( |
) | ||||||
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Accounts payable and other liabilities |
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Obligations under operating leases |
( |
) | ( |
) | ||||
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Net cash provided by (used in) operating activities |
( |
) | ||||||
| Investing activities: | ||||||||
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Purchases of property and equipment |
( |
) | ( |
) | ||||
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Proceeds from sales of property and equipment |
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Proceeds from the disposal of discontinued operations, net |
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Other |
( |
) | ( |
) | ||||
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Net cash provided by (used in) investing activities |
( |
) | ||||||
| Financing activities: | ||||||||
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Cash dividends |
( |
) | ( |
) | ||||
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Proceeds from the exercise of stock options |
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Other issuance of common stock |
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Repurchases of common stock |
( |
) | ( |
) | ||||
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Taxes paid related to net share settlement of equity awards |
( |
) | ||||||
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Repayments of finance lease obligations |
( |
) | ( |
) | ||||
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Net cash used in financing activities |
( |
) | ( |
) | ||||
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Change in cash and cash equivalents |
( |
) | ||||||
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Cash and cash equivalents - beginning of period |
||||||||
| . | ||||||||
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Cash and cash equivalents - end of period |
$ | $ | ||||||
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.
References to “ASC” included hereinafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative GAAP.
The condensed consolidated financial statements include the accounts of Bassett Furniture Industries, Incorporated (“Bassett”, “we”, “our”, or the “Company”) and our wholly-owned subsidiaries of which we have a controlling interest. In accordance with ASC Topic 810, we have evaluated our licensees and certain other entities to determine whether they are variable interest entities (“VIEs”) of which we are the primary beneficiary and thus would require consolidation in our financial statements. To date we have concluded that none of our licensees represent VIEs. We were the primary beneficiary of one VIE by virtue of our control over the activities that most significantly impact the entity’s economic performance. This VIE was created to effect a Section 1031 like-kind exchange involving the purchase of real property in the state of Florida and the sale of real property in the state of Texas (see Note 13, Retail Real Estate Transactions). Subsequent to the completion of the exchange transactions during the third quarter of fiscal 2022, the sole equity interest in the VIE was transferred to Bassett and the entity is now consolidated as a wholly owned subsidiary.
Revenue from the sale of furniture and accessories is reported in the accompanying condensed consolidated statements of income net of estimates for returns and allowances.
On January 31, 2022, we entered into a definitive agreement to sell substantially all of the assets of our wholly-owned subsidiary, Zenith Freight Lines, LLC (“Zenith”) to J.B. Hunt Transport Services, Inc. (“J.B. Hunt”). The sale was completed on February 28, 2022. Accordingly, the operations of our logistical services segment as well as the gain realized upon disposal are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B. Hunt are presented in the accompanying condensed consolidated balance sheet as of November 27, 2021 as assets and liabilities of discontinued operations held for sale. See Note 12, Discontinued Operations, for additional information. Costs incurred by Bassett for logistical services performed for Bassett by Zenith are included in selling, general and administrative expenses.
Recently Adopted Accounting Pronouncements
Effective as of the beginning of fiscal 2022, we have adopted Accounting Standards Update No. 2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. The amendments in ASU 2019-12 became effective for us as of the beginning of our 2022 fiscal year. We adopted ASU 2019-12 on a prospective basis and the adoption did not have a material impact upon our financial condition or results of operations.
Certain prior year amounts have been reclassified to conform with the current year presentation.
2. Interim Financial Presentation
All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. The results of operations for the three and nine months ended August 27, 2022 are not necessarily indicative of results for the full fiscal year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended November 27, 2021.
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
Income Taxes
We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income and use that effective tax rate to record our year-to-date income tax provision. Any change in annual projections of pretax income could have a significant impact on our effective tax rate for the respective quarter.
Our effective tax rate was
Cash paid for income taxes, net of refunds, during the nine months ended August 27, 2022 was $
3. Financial Instruments and Investments
Financial Instruments
Our financial instruments include cash and cash equivalents, short-term investments in certificates of deposit (CDs), accounts receivable, and accounts payable. Because of their short maturities, the carrying amounts of cash and cash equivalents, short-term investments in CDs, accounts receivable, and accounts payable approximate fair value.
Investments
Our short-term investments of $
4. Accounts Receivable
Accounts receivable consists of the following:
|
August 27, 2022 |
November 27, 2021 |
|||||||
|
Gross accounts receivable |
$ | $ | ||||||
|
Allowance for doubtful accounts |
( |
) | ( |
) | ||||
|
Accounts receivable, net |
$ | $ | ||||||
We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments. The allowance for credit losses is based on a review of specifically identified accounts in addition to an overall aging analysis which is applied to accounts pooled on the basis of similar risk characteristics. Judgments are made with respect to the collectibility of accounts receivable within each pool based on historical experience, current payment practices and current economic trends based on our expectations over the expected life of the receivables, which is generally ninety days or less. Actual credit losses could differ from those estimates.
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
Activity in the allowance for credit losses for the nine months ended August 27, 2022 was as follows:
|
2022 |
||||
|
Balance at November 27, 2021 |
$ | |||
|
Additions charged to expense |
||||
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Write-offs against allowance |
( |
) | ||
|
Balance at August 27, 2022 |
$ | |||
We believe that the carrying value of our net accounts receivable approximates fair value. The inputs into these fair value estimates 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 3.
5. Inventories
Domestic furniture inventories are valued at the lower of cost, which is determined using the last-in, first-out (LIFO) method, or market. Imported inventories and those applicable to our Lane Venture and Bassett Outdoor lines are valued at the lower of cost, which is determined using the first-in, first-out (FIFO) method, or net realizable value.
Inventories were comprised of the following:
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August 27, 2022 |
November 27, 2021 |
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Wholesale finished goods |
$ | $ | ||||||
|
Work in process |
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Raw materials and supplies |
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Retail merchandise |
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Total inventories on first-in, first-out method |
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|
LIFO adjustment |
( |
) | ( |
) | ||||
|
Reserve for excess and obsolete inventory |
( |
) | ( |
) | ||||
| $ | $ | |||||||
We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand, market conditions and the respective valuations at LIFO. The need for these reserves is primarily driven by the normal product life cycle. As products mature and sales volumes decline, we rationalize our product offerings to respond to consumer tastes and keep our product lines fresh. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required. In determining reserves, we calculate separate reserves on our wholesale and retail inventories. Our wholesale inventories tend to carry the majority of the reserves for excess quantities and obsolete inventory due to the nature of our distribution model. These wholesale reserves primarily represent design and/or style obsolescence. Typically, product is not shipped to our retail warehouses until a consumer has ordered and paid a deposit for the product. We do not typically hold retail inventory for stock purposes. Consequently, floor sample inventory and inventory for delivery to customers account for the majority of our inventory at retail. Retail reserves are based on accessory and clearance floor sample inventory in our stores and any inventory that is not associated with a specific customer order in our retail warehouses.
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:
|
Wholesale |
Retail Segment |
Total |
||||||||||
|
Balance at November 27, 2021 |
$ | $ | $ | |||||||||
|
Additions charged to expense |
||||||||||||
|
Write-offs |
( |
) | ( |
) | ( |
) | ||||||
|
Balance at August 27, 2022 |
$ | $ | $ | |||||||||
Our estimates and assumptions have been reasonably accurate in the past. We have not made any significant changes to our methodology for determining inventory reserves in 2022 and do not anticipate that our methodology is likely to change in the future.
6. Goodwill and Other Intangible Assets
Goodwill and other intangible assets consisted of the following:
|
August 27, 2022 |
||||||||||||
|
Gross Carrying |
Accumulated |
Intangible |
||||||||||
| Intangibles subject to amortization | ||||||||||||
|
Customer relationships |
$ | $ | ( |
) | $ | |||||||
| Intangibles not subject to amortization: | ||||||||||||
|
Trade names |
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|
Goodwill |
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|
Total goodwill and other intangible assets |
$ | |||||||||||
|
November 27, 2021 |
||||||||||||
|
Gross Carrying Amount |
Accumulated Amortization |
Intangible Assets, Net |
||||||||||
|
Intangibles subject to amortization |
||||||||||||
|
Customer relationships |
$ | $ | ( |
) | $ | |||||||
|
Intangibles not subject to amortization: |
||||||||||||
|
Trade names |
||||||||||||
|
Goodwill |
||||||||||||
|
Total goodwill and other intangible assets |
$ | |||||||||||
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
The carrying amounts of goodwill by reportable segment at both August 27, 2022 and November 27, 2021 are as follows:
|
Original |
Accumulated |
|||||||||||
|
Recorded |
Impairment |
Carrying |
||||||||||
|
Value |
Losses |
Amount |
||||||||||
|
Wholesale |
$ | $ | ( |
) | $ | |||||||
|
Retail |
( |
) | ||||||||||
|
Total goodwill |
$ | $ | ( |
) | $ | |||||||
Goodwill and other intangible assets associated with our logistical services segment totaling $
Amortization expense associated with intangible assets during the three and nine months ended August 27, 2022 and August 28, 2021 was as follows:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 27, 2022 |
August 28, 2021 |
August 27, 2022 |
August 28, 2021 |
|||||||||||||
|
Intangible asset amortization expense |
$ | $ | $ | $ | ||||||||||||
Estimated future amortization expense for intangible assets that exist at August 27, 2022 is as follows:
|
Remainder of fiscal 2022 |
$ | |||
|
Fiscal 2023 |
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|
Fiscal 2024 |
||||
|
Fiscal 2025 |
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|
Fiscal 2026 |
||||
|
Fiscal 2027 |
||||
|
Total |
$ |
7. Bank Credit Facility
Our bank credit facility provides for a line of credit of up to $ At August 27, 2022, we had $
|
● |
Consolidated fixed charge coverage ratio of not less than |
|
● |
Consolidated lease-adjusted leverage ratio not to exceed |
|
● |
Minimum tangible net worth of $ |
We were in compliance with these covenants at August 27, 2022 and expect to remain in compliance for the foreseeable future. The credit facility will mature on January 27, 2025, at which time any amounts outstanding under the facility will be due.
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
8. Post Employment Benefit Obligations
Defined Benefit Plans
We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives. The liability for the Supplemental Plan was $
We also have the Bassett Furniture Industries, Incorporated Management Savings Plan (the “Management Savings Plan”) which was established in the second quarter of fiscal 2017. The Management Savings Plan is an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees. As part of the Management Savings Plan, we have made Long Term Cash Awards (“LTC Awards”) totaling $
The combined pension liability for the Supplemental Plan and LTC Awards is recorded as follows in the condensed consolidated balance sheets:
|
August 27, 2022 |
November 27, 2021 |
|||||||
|
Accrued compensation and benefits |
$ | $ | ||||||
|
Post employment benefit obligations |
||||||||
|
Total pension liability |
$ | $ | ||||||
Components of net periodic pension costs for our defined benefit plans for the three and nine months ended August 27, 2022 and August 28, 2021 are as follows:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 27, 2022 |
August 28, 2021 |
August 27, 2022 |
August 28, 2021 |
|||||||||||||
|
Service cost |
$ | $ | $ | $ | ||||||||||||
|
Interest cost |
||||||||||||||||
|
Amortization of prior service costs |
||||||||||||||||
|
Amortization of loss |
||||||||||||||||
|
Net periodic pension cost |
$ | $ | $ | $ | ||||||||||||
The components of net periodic pension cost other than the service cost component, which is included in selling, general and administrative expenses, are included in other loss, net in our condensed consolidated statements of operations.
Deferred Compensation Plans
We have an unfunded deferred compensation plan that covers one current executive and certain former executives and provides for voluntary deferral of compensation. This plan has been frozen with no additional participants or deferrals permitted. Our liability under this plan was $
We also have an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees which was established under the Management Savings Plan. Our liability under this plan, including both accrued Company contributions and participant salary deferrals, was $
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
Our combined liability for all deferred compensation arrangements, including Company contributions and participant deferrals under the Management Savings Plan, is recorded as follows in the condensed consolidated balance sheets:
|
August 27, 2022 |
November 27, 2021 |
|||||||
|
Accrued compensation and benefits |
$ | $ | ||||||
|
Post employment benefit obligations |
||||||||
|
Total deferred compensation liability |
$ | $ | ||||||
We recognized expense under our deferred compensation arrangements during the three and nine months ended August 27, 2022 and August 28, 2021 as follows:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 27, 2022 |
August 28, 2021 |
August 27, 2022 |
August 28, 2021 |
|||||||||||||
|
Deferred compensation expense (benefit) |
$ | ( |
) | $ | $ | $ | ||||||||||
9. Commitments and Contingencies
We are involved in various legal and environmental matters which arise in the normal course of business. Although the final outcome of these matters cannot be determined, based on the facts presently known, we believe that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.
10. Lease Guarantees
We have guaranteed certain lease obligations of licensee operators. Lease guarantees range from to years. We were contingently liable under licensee lease obligation guarantees in the amounts of $
In the event of default by an independent dealer under the guaranteed lease, we believe that the risk of loss is mitigated through a combination of options that include, but are not limited to, arranging for a replacement dealer or liquidating the collateral (primarily inventory). The proceeds of the above options are expected to cover the estimated amount of our future payments under the guarantee obligations, net of recorded reserves. The fair value of lease guarantees (an estimate of the cost to the Company to perform on these guarantees) at August 27, 2022 and November 27, 2021 was not material.
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
11. Earnings Per Share
The following reconciles basic and diluted earnings per share:
|
Net Income |
Weighted Average |
Net Income |
||||||||||
|
For the quarter ended August 27, 2022: |
||||||||||||
|
Basic earnings per share - continuing operations |
$ | $ | ||||||||||
| Add effect of dilutive securities: | ||||||||||||
|
Restricted shares |
- | - | ||||||||||
|
Diluted earnings per share - continuing operations |
$ | $ | ||||||||||
|
Basic loss per share - discontinued operations |
$ | ( |
) | $ | ( |
) | ||||||
|
Add effect of dilutive securities: |
||||||||||||
|
Restricted shares |
- | - | ||||||||||
|
Diluted loss per share - discontinued operations |
$ | ( |
) | $ | ( |
) | ||||||
|
For the quarter ended August 28, 2021: |
||||||||||||
|
Basic earnings per share - continuing operations |
$ | $ | ||||||||||
|
Add effect of dilutive securities: |
||||||||||||
|
Options and restricted shares |
- | - | ||||||||||
|
Diluted earnings per share - continuing operations |
$ | $ | ||||||||||
|
Basic loss per share - discontinued operations |
$ | ( |
) | $ | ( |
) | ||||||
|
Add effect of dilutive securities: |
||||||||||||
|
Options and restricted shares |
- | - | ||||||||||
|
Diluted loss per share - discontinued operations |
$ | ( |
) | $ | ( |
) | ||||||
|
For the nine months ended August 27, 2022: |
||||||||||||
|
Basic earnings per share - continuing operations |
$ | $ | ||||||||||
|
Add effect of dilutive securities: |
||||||||||||
|
Restricted shares |
- | - | ||||||||||
|
Diluted earnings per share - continuing operations |
$ | $ | ||||||||||
|
Basic earnings per share - discontinued operations |
$ | $ | ||||||||||
|
Add effect of dilutive securities: |
||||||||||||
|
Restricted shares |
- | - | ||||||||||
|
Diluted earnings per share - discontinued operations |
$ | $ | ||||||||||
|
For the nine months ended August 28, 2021: |
||||||||||||
|
Basic earnings per share - continuing operations |
$ | $ | ||||||||||
|
Add effect of dilutive securities: |
||||||||||||
|
Options and restricted shares |
- | - | ||||||||||
|
Diluted earnings per share - continuing operations |
$ | $ | ||||||||||
|
Basic earnings per share - discontinued operations |
$ | $ | ||||||||||
|
Add effect of dilutive securities: |
||||||||||||
|
Options and restricted shares |
- | - | ||||||||||
|
Diluted earnings per share - discontinued operations |
$ | $ | ||||||||||
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
For the three and nine months ended August 27, 2022 and August 28, 2021, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 27, 2022 |
August 28, 2021 |
August 27, 2022 |
August 28, 2021 |
|||||||||||||
|
Unvested shares |
||||||||||||||||
12. Discontinued Operations
On January 31, 2022, we entered into a definitive agreement to sell substantially all of the assets of Zenith to J.B. Hunt. The sale was completed on February 28, 2022, at which time we received the following net proceeds:
|
Sales price prior to post-closing working capital adjustment |
$ | |||
| Less: | ||||
|
Amount held in escrow for contingencies related to representations and warranties (1) |
||||
|
Seller expenses paid at closing |
||||
|
Working capital adjustment paid to buyer |
||||
|
Net proceeds from the sale (2) |
$ |
|
(1) |
To be held in escrow until the first anniversary of the sale, at which time any amount not distributed or reserved for specified claims will be released to the Company. This amount is included in other current assets in the accompanying condensed consolidated balance sheet at August 27, 2022. |
|
(2) |
Included in cash flows from investing activities in the accompanying condensed consolidated statement of cash flows for the nine months ended August 27, 2022. |
The sales price was subject to a customary post-closing working capital adjustment which was paid during the third quarter of fiscal 2022. Including the effect of the working capital adjustment, we recognized a pre-tax gain from the sale of Zenith of $.
The operations of our logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B. Hunt are presented in the accompanying condensed consolidated balance sheet as assets and liabilities of discontinued operations held for sale as of November 27, 2021.
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
The following table summarizes the major classes of assets and liabilities of the discontinued operations held for sale as reported in the condensed consolidated balance sheet as of November 27, 2021:
|
November 27, 2021 |
||||
| Carrying amounts of major classes of assets included as part of discontinued operations: | ||||
|
Accounts receivable, net |
$ | |||
|
Other current assets |
||||
|
Property and equipment, net |
||||
|
Goodwill and other intangible assets |
||||
|
Right of use assets under operating leases |
||||
|
Other |
||||
| $ | ||||
| Balance sheet classification: | ||||
|
Current assets of discontinued operations held for sale |
$ | |||
|
Long-term assets of discontinued operations held for sale |
||||
|
Total assets of discontinued operations held for sale |
$ | |||
| Carrying amounts of major classes of liabilities included as part of discontinued operations: | ||||
|
Accounts payable |
$ | |||
|
Accrued compensation and benefits |
||||
|
Current portion operating lease obligations |
||||
|
Other current liabilites and accrued expenses |
||||
|
Long-term portion of operating lease obligations |
||||
|
Other long-term liabilities |
||||
| $ | ||||
| Balance sheet classification: | ||||
|
Current liabilities of discontinued operations held for sale |
$ | |||
|
Long-term liabilities of discontinued operations held for sale |
||||
|
Total liabilities of discontinued operations held for sale |
$ | |||
Following the sale of Zenith, certain of Zenith’s liabilities primarily representing reserves and accrued liabilities for pre-disposal workers’ compensation, health insurance and auto liability claims were retained by Bassett. The remaining balance of these reserves and accruals total $537 at August 27, 2022 and are included in other current liabilities and accrued expenses in the accompanying condensed consolidated balance sheet.
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
The following table summarizes the major classes of line items constituting income of the discontinued operations, as reported in the condensed consolidated statements of income for the three and nine months ended August 27, 2022 and August 28, 2021:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 27, 2022 |
August 28, 2021 |
August 27, 2022 |
August 28, 2021 |
|||||||||||||
| Major line items constituting pretax income of discontinued operations: | ||||||||||||||||
|
Logistical services revenue |
$ | $ | $ | $ | ||||||||||||
|
Cost of logistical services |
||||||||||||||||
|
Other loss, net |
( |
) | ( |
) | ( |
) | ||||||||||
|
Income (loss) from operations of logistical services |
( |
) | ||||||||||||||
|
Gain on disposal (less adjustments) |
( |
) | ||||||||||||||
|
Pretax income of discontinued operations |
( |
) | ( |
) | ||||||||||||
|
Income tax expense (benefit) |
( |
) | ( |
) | ||||||||||||
|
Income (loss) from discontinued operations, net of tax |
$ | ( |
) | $ | ( |
) | $ | $ | ||||||||
The amounts for revenue and costs of logistical services shown above represent the results of Zenith’s business transactions with third parties. Zenith also charged Bassett for logistical services provided to our wholesale segment in the amount of $
Included in other loss, net, is interest arising from finance leases assumed by J.B. Hunt as part of the transaction. Such interest amounted to $
The following table summarizes the cash flows generated by discontinued operations during the nine months ended August 27, 2022 and August 28, 2021:
|
Nine Months Ended |
||||||||
|
August 27, 2022 |
August 28, 2021 |
|||||||
|
Cash provided by operating activities |
$ | $ | ||||||
|
Cash used in investing activities |
( |
) | ( |
) | ||||
|
Cash used in financing activities |
( |
) | ( |
) | ||||
|
Net cash provided by (used in) discontinued operations |
$ | $ | ( |
) | ||||
13. Retail Real Estate Transactions
During the third quarter of fiscal 2022, we sold one of our Company-owned store locations in Houston, Texas for $
This sale, together with our recent purchase of real property in Tampa, Florida for $
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
14. Segment Information
We have strategically aligned our business into reportable segments as defined in ASC 280, Segment Reporting, and as described below:
|
● |
Wholesale. The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (Company-owned and licensee-owned retail stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery operations, which include Lane Venture, as well as all corporate selling, general and administrative expenses, including those corporate expenses related to both Company- and licensee-owned stores. Our wholesale segment also includes our holdings of short-term investments and retail real estate previously leased as licensee stores. The earnings and costs associated with these assets are included in other loss, net, in our condensed consolidated statements of operations. |
|
● |
Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities and capital expenditures directly related to these stores and the Company-owned distribution network utilized to deliver products to our retail customers. |
Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores. Inter-company income elimination includes the embedded wholesale profit in the Company-owned store inventory that has not been realized. These profits will be recorded when merchandise is delivered to the retail consumer. The inter-company income elimination also includes rent paid by our retail stores occupying Company-owned real estate.
Our former logistical services segment which represented the operations of Zenith is now presented as a discontinued operation in the accompanying condensed consolidated balances sheets and statements of income (see Note 12).
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
The following table presents our segment information:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 27, 2022 |
August 28, 2021 |
August 27, 2022 |
August 28, 2021 |
|||||||||||||
|
Sales Revenue |
||||||||||||||||
|
Wholesale sales of furniture and accessories |
$ | $ | $ | $ | ||||||||||||
|
Less: Sales to retail segment |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Wholesale sales to external customers |
||||||||||||||||
|
Retail sales of furniture and accessories |
||||||||||||||||
|
Consolidated net sales of furniture and accessories |
$ | $ | $ | $ | ||||||||||||
|
Income from Operations |
||||||||||||||||
|
Wholesale |
$ | $ | $ | $ | ||||||||||||
|
Retail - Company-owned stores |
||||||||||||||||
|
Inter-company elimination |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Gain on sale of real estate |
||||||||||||||||
|
Consolidated |
$ | $ | $ | $ | ||||||||||||
|
Depreciation and Amortization |
||||||||||||||||
|
Wholesale |
$ | $ | $ | $ | ||||||||||||
|
Retail - Company-owned stores |
||||||||||||||||
|
Consolidated |
$ | $ | $ | $ | ||||||||||||
|
Capital Expenditures |
||||||||||||||||
|
Wholesale |
$ | $ | $ | $ | ||||||||||||
|
Retail - Company-owned stores |
||||||||||||||||
|
Consolidated |
$ | $ | $ | $ | ||||||||||||
|
As of |
As of |
|||||||
|
|
August 27, 2022 |
November 27, 2021 |
||||||
| Identifiable Assets | ||||||||
|
Wholesale |
$ | $ | ||||||
|
Retail - Company-owned stores |
||||||||
|
Discontinued Operations |
||||||||
|
Consolidated |
$ | $ | ||||||
See Note 15, Revenue Recognition, for disaggregated revenue information regarding sales of furniture and accessories by product type for the wholesale and retail segments.
15. Revenue Recognition
We recognize revenue when we transfer promised goods or services to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. For our wholesale and retail segments, revenue is recognized when the risks and rewards of ownership and title to the product have transferred to the buyer. At wholesale, transfer occurs and revenue is recognized upon the shipment of goods to independent dealers and licensee-owned BHF stores. At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. All wholesale and retail revenues are recorded net of estimated returns and allowances based on historical patterns. We typically collect a significant portion of the purchase price from our retail customers as a deposit upon order, with the balance typically collected upon delivery. These customer deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $
Sales commissions are expensed as part of selling, general and administrative expenses at the time revenue is recognized because the amortization period would have been one year or less. Sales commissions at wholesale are accrued upon the shipment of goods. Sales commissions at retail are accrued at the time a sale is written (i.e. – when the customer’s order is placed) and are carried as prepaid commissions in other current assets until the goods are delivered and revenue is recognized. At August 27, 2022 and November 27, 2021, our balance of prepaid commissions included in other current assets was $
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
We exclude from revenue all amounts collected from customers for sales tax. We do not disclose amounts allocated to remaining unsatisfied performance obligations as they are expected to be satisfied within one year or less.
Disaggregated revenue information for sales of furniture and accessories by product category for the three and nine months ended August 27, 2022 and August 28, 2021, excluding intercompany transactions between our segments, is a follows:
|
Quarter Ended |
||||||||||||||||||||||||
|
August 27, 2022 |
August 28, 2021 |
|||||||||||||||||||||||
|
Wholesale |
Retail |
Total |
Wholesale |
Retail |
Total |
|||||||||||||||||||
|
Bassett Custom Upholstery |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Bassett Leather |
||||||||||||||||||||||||
|
Bassett Custom Wood |
||||||||||||||||||||||||
|
Bassett Casegoods |
||||||||||||||||||||||||
|
Accessories, mattresses and other (1) |
||||||||||||||||||||||||
|
Consolidated net sales of furniture and accessories |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Nine Months Ended |
||||||||||||||||||||||||
|
August 27, 2022 |
August 28, 2021 |
|||||||||||||||||||||||
|
Wholesale |
Retail |
Total |
Wholesale |
Retail |
Total |
|||||||||||||||||||
|
Bassett Custom Upholstery |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Bassett Leather |
||||||||||||||||||||||||
|
Bassett Custom Wood |
||||||||||||||||||||||||
|
Bassett Casegoods |
||||||||||||||||||||||||
|
Accessories, mattresses and other (1) |
||||||||||||||||||||||||
|
Consolidated net sales of furniture and accessories |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| (1) |
Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans. |
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
AUGUST 27, 2022
(Dollars in thousands except share and per share data)
16. Changes to Stockholders’ Equity
The following changes in our stockholders’ equity occurred during the three and nine months ended August 27, 2022 and August 28, 2021:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 27, 2022 |
August 28, 2021 |
August 27, 2022 |
August 28, 2021 |
|||||||||||||
|
Common Stock: |
||||||||||||||||
|
Beginning of period |
$ | $ | $ | $ | ||||||||||||
|
Issuance of common stock |
||||||||||||||||
|
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
End of period |
$ | $ | $ | $ | ||||||||||||