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)
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification No.) |
(Address of principal executive offices)
(Zip Code)
(
(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 22, 2023,
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
| ITEM | PAGE | |
| PART I - FINANCIAL INFORMATION | ||
| 1. | Condensed Consolidated Financial Statements as of August 26, 2023 (unaudited) and November 26, 2022 and for the three and nine months ended August 26, 2023 (unaudited) and August 27, 2022 (unaudited) | |
| Condensed Consolidated Statements of Operations | 3 | |
| Condensed Consolidated Statements of Comprehensive Income (Loss) | 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 | 35 |
| 4. | Controls and Procedures | 35 |
| PART II - OTHER INFORMATION | ||
| 1. | Legal Proceedings | 36 |
| 2. | Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 36 |
| 3. | Defaults Upon Senior Securities | 36 |
| 6. | Exhibits | 36 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED AUGUST 26, 2023 AND AUGUST 27, 2022 – UNAUDITED
(In thousands except per share data)
| Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 26, 2023 |
August 27, 2022 |
August 26, 2023 |
August 27, 2022 |
|||||||||||||
|
Net sales of furniture and accessories |
$ | $ | $ | $ | ||||||||||||
|
Cost of furniture and accessories sold |
||||||||||||||||
|
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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Gain on revaluation of contingent consideration |
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Income (loss) from operations |
( |
) | ||||||||||||||
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Interest income |
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|
Other loss, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Income (loss) from continuing operations before income taxes |
( |
) | ||||||||||||||
|
Income tax expense (benefit) |
( |
) | ||||||||||||||
|
Income (loss) from continuing operations |
( |
) | ||||||||||||||
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Discontinued operations: |
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Income from operations of logistical services |
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|
Gain on disposal (less adjustments) |
( |
) | ||||||||||||||
|
Income tax expense (benefit) |
( |
) | ||||||||||||||
|
Income (loss) from discontinued operations, net of tax |
( |
) | ||||||||||||||
|
Net income (loss) |
$ | ( |
) | $ | $ | $ | ||||||||||
| Basic earnings (loss) per share: | ||||||||||||||||
|
Income (loss) from continuing operations |
$ | ( |
) | $ | $ | $ | ||||||||||
|
Income (loss) from discontinued operations |
( |
) | ||||||||||||||
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Basic earnings (loss) per share |
$ | ( |
) | $ | $ | $ | ||||||||||
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Diluted earnings (loss) per share: |
||||||||||||||||
|
Income (loss) from continuing operations |
$ | ( |
) | $ | $ | $ | ||||||||||
|
Income (loss) from discontinued operations |
( |
) | ||||||||||||||
|
Diluted earnings (loss) per share |
$ | ( |
) | $ | $ | $ | ||||||||||
|
Regular dividends per share |
$ | $ | $ | $ | ||||||||||||
|
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 (LOSS)
FOR THE PERIODS ENDED AUGUST 26, 2023 AND AUGUST 27, 2022 – UNAUDITED
(In thousands)
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 26, 2023 |
August 27, 2022 |
August 26, 2023 |
August 27, 2022 |
|||||||||||||
|
Net income (loss) |
$ | ( |
) | $ | $ | $ | ||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
|
Foreign currency translation adjustments |
( |
) | ||||||||||||||
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Income taxes related to foreign currency translation adjustments |
( |
) | ||||||||||||||
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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 (loss), net of tax |
( |
) | ||||||||||||||
|
Total comprehensive income (loss) |
$ | ( |
) | $ | $ | $ | ||||||||||
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 26, 2023 AND NOVEMBER 26, 2022
(In thousands)
|
(Unaudited) |
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August 26, 2023 |
November 26, 2022 | ||||||
| Assets | ||||||||
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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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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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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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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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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 income (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 26, 2023 AND AUGUST 27, 2022 – UNAUDITED
(In thousands)
|
Nine Months Ended |
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August 26, 2023 |
August 27, 2022 |
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Operating activities: |
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Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
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Depreciation and amortization |
||||||||
|
Gain on disposal of discontinued operations |
( |
) | ||||||
|
Gain on sale of property and equipment |
( |
) | ||||||
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Gain on revaluation of contingent consideration |
( |
) | ||||||
|
Deferred income taxes |
( |
) | ||||||
|
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 |
||||||||
|
Customer deposits |
( |
) | ( |
) | ||||
|
Accounts payable and other liabilities |
( |
) | ||||||
|
Obligations under operating leases |
( |
) | ( |
) | ||||
|
Net cash provided by (used in) operating activities |
( |
) | ||||||
|
Investing activities: |
||||||||
|
Purchases of property and equipment |
( |
) | ( |
) | ||||
|
Proceeds from sales of property and equipment |
||||||||
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Proceeds from the disposal of discontinued operations, net |
||||||||
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Other |
( |
) | ( |
) | ||||
|
Net cash provided by (used in) investing activities |
( |
) | ||||||
|
Financing activities: |
||||||||
|
Cash dividends |
( |
) | ( |
) | ||||
|
Other issuance of common stock |
||||||||
|
Repurchases of common stock |
( |
) | ( |
) | ||||
|
Taxes paid related to net share settlement of equity awards |
( |
) | ||||||
| Repayments of finance lease obligations | ( |
) | ( |
) | ||||
|
Net cash used in financing activities |
( |
) | ( |
) | ||||
|
Effect of exchange rate changes on cash and cash equivalents |
( |
) | ||||||
|
Change in cash and cash equivalents |
( |
) | ||||||
|
Cash and cash equivalents - beginning of period |
||||||||
| . | ||||||||
|
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.
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. During the second and third fiscal quarters of 2022, 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 Tampa, Florida, for $
Revenue from the sale of furniture and accessories is reported in the accompanying condensed consolidated statements of operations 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 for the three and nine months ended August 27, 2022 are presented in the accompanying condensed consolidated statements of operations as discontinued operations. See Note 12, Discontinued Operations, for additional information. Costs incurred by Bassett for logistical services performed for Bassett by Zenith were included in selling, general and administrative expenses for the nine months ended August 27, 2022.
On September 2, 2022, we acquired
Certain prior year amounts have been reclassified to conform to the current year presentation (see Note 13, Segments).
2. Interim Financial Presentation and Other Information
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 26, 2023 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 26, 2022.
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
Non-cash Investing and Financing Activity
During the nine months ended August 26, 2023 and August 27, 2022, $
3. Business Combinations
On September 2, 2022, we acquired
Under the acquisition method of accounting, the fair value of the consideration transferred was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date with the remaining unallocated amount recorded as goodwill.
The allocation of the fair value of the acquired business has been based on a preliminary valuation. Our estimates and assumptions are subject to change as we obtain additional information for our estimates during the measurement period (up to one year from the acquisition date). The primary areas of the preliminary allocation of the fair value of consideration transferred that are not yet finalized relate to the fair values of certain tangible and intangible assets acquired and the residual goodwill. As of August 26, 2023, there have been no changes to the preliminary allocation of the purchase price (translated into U.S. dollars as of the acquisition date) which is as follows:
| Fair value of consideration given in exchange for 100% of Noa Home: | ||||
|
Cash |
$ | |||
|
Fair value of contingent consideration as of acquisition date |
||||
|
Total fair value of consideration given |
$ | |||
| Allocation of the fair value of consideration transferred: | ||||
| Identifiable assets acquired: | ||||
|
Cash |
$ | |||
|
Inventory |
||||
|
Other current assets |
||||
|
Property & equipment |
||||
|
Intangible asset - trade name |
||||
|
Total identifiable assets acquired |
||||
| Liabilities assumed: | ||||
|
Accounts payable |
( |
) | ||
|
Customer deposits |
( |
) | ||
|
Other current liabilities and accrued expenses |
( |
) | ||
|
Total liabilities assumed |
( |
) | ||
|
Net identifiable assets acquired |
||||
|
Goodwill |
||||
|
Total net assets acquired |
$ |
Goodwill was determined based on the residual difference between the fair value of the consideration transferred and the value assigned to the tangible and intangible assets and liabilities recognized in connection with the acquisition and is deductible for tax purposes. Among the factors that contributed to a purchase price resulting in the recognition of goodwill are the expected synergies arising from combining the Company’s manufacturing and distribution capabilities with Noa Home’s position in the international e-commerce market for home furnishings and accessories.
A portion of the fair value of the consideration transferred in the amount of $
The fair values of consideration transferred and net assets acquired were determined using a combination of Level 2 and Level 3 inputs as specified in the fair value hierarchy in ASC 820, Fair Value Measurements and Disclosures.
Subsequent to the acquisition date, the parties concluded that the targets originally set forth by which the Noa Home co-founders were to earn the contingent consideration would likely not be met within the initially anticipated time frame. Therefore, we have agreed to replace the contingent consideration with two fixed payments of C$
The revenues and results of operations of Noa Home for the three and nine months ended August 26, 2023 were not material. The pro forma impact of the acquisition has not been presented because it was not material to our consolidated results of operations for the three and nine months ended August 27, 2022.
4. 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 $
5. Accounts Receivable
Accounts receivable consists of the following:
|
August 26, 2023 |
November 26, 2022 |
|||||||
|
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 collectability 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.
Activity in the allowance for credit losses for the nine months ended August 26, 2023 was as follows:
|
Balance at November 26, 2022 |
$ | |||
|
Additions charged to expense |
||||
|
Write-offs against allowance |
( |
) | ||
|
Balance at August 26, 2023 |
$ |
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 4.
6. 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:
|
August 26, 2023 |
November 26, 2022 |
|||||||
|
Wholesale finished goods |
$ | $ | ||||||
|
Work in process |
||||||||
|
Raw materials and supplies |
||||||||
|
Retail merchandise |
||||||||
|
Total inventories on first-in, first-out method |
||||||||
|
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.
Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:
|
Wholesale Segment |
Retail Segment |
Total |
||||||||||
|
Balance at November 26, 2022 |
$ | $ | $ | |||||||||
|
Additions charged to expense |
||||||||||||
|
Write-offs |
( |
) | ( |
) | ( |
) | ||||||
|
Balance at August 26, 2023 |
$ | $ | $ | |||||||||
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 2023 and do not anticipate that our methodology is likely to change in the future.
7. Goodwill and Other Intangible Assets
Goodwill and other intangible assets consisted of the following:
|
August 26, 2023 |
||||||||||||
|
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 |
$ | |||||||||||
|
November 26, 2022 |
||||||||||||
|
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 |
$ | |||||||||||
Changes in the carrying amounts of goodwill by reportable segment were as follows:
|
Wholesale |
Retail |
Corporate & Other |
Total |
|||||||||||||
|
Balance as of November 26, 2022 |
$ | $ | $ | $ | ||||||||||||
|
Foreign currency translation adjustments |
( |
) | ( |
) | ||||||||||||
|
Balance as of August 26, 2023 |
$ | $ | $ | $ | ||||||||||||
Accumulated impairment losses at both August 26, 2023 and November 26, 2022 were $
Due to the decline in the share price of our common stock through the end of the third quarter of 2023, we performed a qualitative analysis of our goodwill as of August 26, 2023 and concluded that it was not more likely than not that the carrying value of our reporting units with goodwill exceeded their fair values.
Amortization expense associated with intangible assets during the three and nine months ended August 26, 2023 and August 27, 2022 was as follows:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 26, 2023 |
August 27, 2022 |
August 26, 2023 |
August 27, 2022 |
|||||||||||||
|
Intangible asset amortization expense |
$ | $ | $ | $ | ||||||||||||
Estimated future amortization expense for intangible assets that exist at August 26, 2023 is as follows:
|
Remainder of fiscal 2023 |
$ | |||
|
Fiscal 2024 |
||||
|
Fiscal 2025 |
||||
|
Fiscal 2026 |
||||
|
Fiscal 2027 |
||||
|
Fiscal 2028 |
||||
|
Total |
$ |
8. Bank Credit Facility
Our bank credit facility provides for a line of credit of up to $
|
● |
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 26, 2023. The credit facility will mature on January 27, 2025, at which time any amounts outstanding under the facility will be due.
9. 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 26, 2023 |
November 26, 2022 | |||||||
|
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 26, 2023 and August 27, 2022 are as follows:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 26, 2023 |
August 27, 2022 |
August 26, 2023 |
August 27, 2022 |
|||||||||||||
|
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 $
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 26, 2023 |
November 26, 2022 | |||||||
|
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 26, 2023 and August 27, 2022 as follows:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 26, 2023 |
August 27, 2022 |
August 26, 2023 |
August 27, 2022 |
|||||||||||||
|
Deferred compensation expense (benefit) |
$ | $ | ( |
) | $ | $ | ||||||||||
10. 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.
Lease Guarantees
We were contingently liable under a licensee lease obligation guarantee 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 obligation, net of recorded reserves. The fair value of this lease guarantee (an estimate of the cost to the Company to perform on the guarantee) at August 26, 2023 and November 26, 2022 was not material.
11. Earnings (Loss) Per Share
The following reconciles basic and diluted earnings (loss) per share:
|
Net Income (Loss) |
Weighted Average Shares |
Net Income (Loss) Per Share |
||||||||||
|
For the quarter ended August 26, 2023: |
||||||||||||
|
Basic loss per share - continuing operations |
$ | ( |
) | $ | ( |
) | ||||||
| Add effect of dilutive securities: | ||||||||||||
|
Restricted shares* |
- | - | ||||||||||
|
Diluted loss per share - continuing operations |
$ | ( |
) | $ | ( |
) | ||||||
|
For the quarter ended August 27, 2022: |
||||||||||||
|
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 26, 2023: |
||||||||||||
|
Basic earnings per share - continuing operations |
$ | $ | ||||||||||
|
Add effect of dilutive securities: |
||||||||||||
|
Restricted shares |
- | - | ||||||||||
|
Diluted earnings per share - continuing operations |
$ | $ | ||||||||||
|
For the nine months ended August 27, 2022: |
||||||||||||
|
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 |
$ | $ | ||||||||||
*Due to the net loss for the period, potentially dilutive securities would have been anti-dilutive and are therefore excluded.
For the three and nine months ended August 26, 2023 and August 27, 2022, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 26, 2023 |
August 27, 2022 |
August 26, 2023 |
August 27, 2022 |
|||||||||||||
|
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. During the second quarter of fiscal 2022, 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 |
$ |
|
(1) |
|
The sales price was subject to customary post-closing working capital adjustments. For the three and nine months ended August 27, 2022 we recognized a pre-tax gain (less post-closing adjustments) on the sale of $ and $
The operations of our logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of operations as discontinued operations.
The following table summarizes the major classes of line items constituting income of the discontinued operations, as reported in the condensed consolidated statements of operations for the three and nine months ended August 27, 2022:
|
Quarter Ended |
Nine Months Ended |
|||||||
|
August 27, 2022 |
August 27, 2022 |
|||||||
|
Major line items constituting pretax income of discontinued operations: |
||||||||
|
Logistical services revenue |
$ | $ | ||||||
|
Cost of logistical services |
||||||||
|
Other loss, net |
( |
) | ||||||
|
Income from operations of logistical services |
||||||||
|
Gain on disposal (less adjustments) |
( |
) | ||||||
|
Pretax income (loss) 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:
| Nine Months Ended | ||||
|
August 27, 2022 |
||||
|
Cash provided by operating activities |
$ | |||
|
Cash used in investing activities |
( |
) | ||
|
Cash used in financing activities |
( |
) | ||
|
Net cash provided by discontinued operations |
$ | |||
13. Segment Information
As of the beginning of fiscal 2023 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 includes Lane Venture. |
|
● |
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. |
|
● |
Corporate and other – Corporate and other includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefitting both wholesale and retail operations. In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs. We consider our corporate functions to be other business activities and have aggregated them with our other insignificant operating segment, the recently acquired Noa Home (see Note 3). |
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.
Prior to the beginning of fiscal 2023, the functions included in Corporate and other were included in our wholesale reportable segment, and Noa Home was included in our retail reportable segment for the fourth quarter of fiscal 2022 following its acquisition on September 2, 2022. We believe that the new alignment of our reporting segments provides our chief operating decision maker with clearer information with which to assess the operating results of our wholesale segment. Noa Home does not meet the requirements to be a separate reportable segment as it is below the thresholds of the revenue, income and asset tests. The segment information presented below for the three and nine months ended August 27, 2022 and as of November 26, 2022 has been restated to reflect the new alignment of our reportable segments.
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 operations (see Note 12).
The following table presents our segment information:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 26, 2023 |
August 27, 2022 |
August 26, 2023 |
August 27, 2022 |
|||||||||||||
|
Sales Revenue |
||||||||||||||||
|
Wholesale sales of furniture and accessories |
$ | $ | $ | $ | ||||||||||||
|
Less: Sales to retail segment |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Wholesale sales to external customers |
||||||||||||||||
|
Retail sales of furniture and accessories |
||||||||||||||||
|
Corporate and other |
||||||||||||||||
|
Consolidated net sales of furniture and accessories |
$ | $ | $ | $ | ||||||||||||
|
Income (Loss) from Operations |
||||||||||||||||
|
Wholesale |
$ | $ | $ | $ | ||||||||||||
|
Retail - Company-owned stores |
( |
) | ( |
) | ||||||||||||
|
Net expenses - Corporate and other |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Inter-company elimination |
( |
) | ||||||||||||||
|
Gain on revaluation of contingent consideration |
||||||||||||||||
|
Gain on sale of real estate |
||||||||||||||||
|
Consolidated |
$ | ( |
) | $ | $ | $ | ||||||||||
|
Depreciation and Amortization |
||||||||||||||||
|
Wholesale |
$ | $ | $ | $ | ||||||||||||
|
Retail - Company-owned stores |
||||||||||||||||
|
Corporate and other |
||||||||||||||||
|
Consolidated |
$ | $ | $ | $ | ||||||||||||
|
Capital Expenditures |
||||||||||||||||
|
Wholesale |
$ | $ | $ | $ | ||||||||||||
|
Retail - Company-owned stores |
||||||||||||||||
|
Corporate and other |
||||||||||||||||
|
Consolidated |
$ | $ | $ | $ | ||||||||||||
|
As of |
As of |
|||||||
|
August 26, 2023 |
November 26, 2022 |
|||||||
| Identifiable Assets | ||||||||
|
Wholesale |
$ | $ | ||||||
|
Retail - Company-owned stores |
||||||||
|
Corporate and other |
||||||||
|
Consolidated |
$ | $ | ||||||
See Note 14, Revenue Recognition, for disaggregated revenue information regarding sales of furniture and accessories by product type for the wholesale and retail segments.
14. 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 at the time delivery is scheduled. 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 26, 2023 and November 26, 2022, our balance of prepaid commissions included in other current assets was $
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 26, 2023 and August 27, 2022, excluding intercompany transactions between our segments, is a follows:
|
Quarter Ended |
||||||||||||||||||||||||||||||||
|
August 26, 2023 |
August 27, 2022 |
|||||||||||||||||||||||||||||||
|
Wholesale |
Retail |
Corporate & Other (2) |
Total |
Wholesale |
Retail |
Corporate & Other |
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 26, 2023 |
August 27, 2022 |
|||||||||||||||||||||||||||||||
|
Wholesale |
Retail |
Corporate & Other (2) |
Total |
Wholesale |
Retail |
Corporate & Other |
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. |
|
(2) Our Corporate and other segment for the three and nine months ended August 26, 2023 includes the sales of Noa Home, which was acquired on September 2, 2022 (see Note 3). |
15. Changes to Stockholders’ Equity
The following changes in our stockholders’ equity occurred during the three and nine months ended August 26, 2023 and August 27, 2022:
|
Quarter Ended |
Nine Months Ended |
|||||||||||||||
|
August 26, 2023 |
August 27, 2022 |
August 26, 2023 |
August 27, 2022 |
|||||||||||||
|
Common Stock: |
||||||||||||||||
|
Beginning of period |
$ | $ | $ | $ | ||||||||||||
|
Issuance of common stock |
||||||||||||||||
|
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
End of period |
$ | $ | $ | $ | ||||||||||||
|
Common Shares Issued and Outstanding: |
||||||||||||||||
|
Beginning of period |
||||||||||||||||
|
Issuance of common stock |
||||||||||||||||
|
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
End of period |
||||||||||||||||
|
Additional Paid-in Capital: |
||||||||||||||||
|
Beginning of period |
$ | $ | $ | $ | ||||||||||||
|
Issuance of common stock |
( |
) | ( |
) | ||||||||||||