Bassett Furniture Industries Inc 10-K for FY2024
Bassett Furniture Industries Inc (BSET)
About this 10-K
Bassett Furniture Industries Inc filed this 10-K on February 10, 2025, covering the fiscal year ended November 30, 2024 (FY2024).
Headline figures
Fiscal year ended November 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $329.92M
- down 15.4% from $390.14M a year earlier
- Net loss
- $9.7M
- compared with a net loss of $3.17M a year earlier
- Diluted EPS
- -$1.11
- compared with -$0.36 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM
For the fiscal year ended
OR
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter)
|
|
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer 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:
|
Title of each class: |
Trading Symbol |
Name of each exchange on which registered |
|
|
|
|
|
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act ☐ Yes ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒
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 at least 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 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act).
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 1, 2024 was $
The number of shares of the Registrant’s common stock outstanding on January 23, 2025 was
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Bassett Furniture Industries, Incorporated definitive Proxy Statement for its 2024 Annual Meeting of Stockholders to be held March 12, 2025, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the “Proxy Statement”) are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
|
FORWARD-LOOKING STATEMENTS |
1 | |
|
PART I |
||
|
Item 1. |
Business |
2 |
|
Item 1A. |
Risk Factors |
7 |
|
Item 1B. |
Unresolved Staff Comments |
9 |
|
Item 1C. |
Cybersecurity |
9 |
|
Item 2. |
Properties |
11 |
|
Item 3. |
Legal Proceedings |
11 |
|
Item 4. |
Mine Safety Disclosures |
11 |
|
Information about our Executive Officers |
12 |
|
|
PART II |
||
|
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
13 |
|
Item 6. |
[Reserved] |
13 |
|
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 |
|
Item 7A. |
Quantitative and Qualitative Disclosures about Market Risk |
27 |
|
Item 8. |
Financial Statements and Supplementary Data |
28 |
|
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
63 |
|
Item 9A. |
Controls and Procedures |
63 |
|
Item 9B. |
Other Information |
65 |
|
Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
65 |
|
PART III |
||
|
Item 10. |
Directors, Executive Officers and Corporate Governance |
65 |
|
Item 11. |
Executive Compensation |
65 |
|
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
65 |
|
Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
65 |
|
Item 14. |
Principal Accountant Fees and Services |
65 |
|
Item 15. |
Exhibits |
66 |
|
Item 16. |
Form 10-K Summary |
67 |
|
PART IV |
||
|
SIGNATURES |
68 | |
As used herein, unless the context otherwise requires, “Bassett,” the “Company,” “we,” “us” and “our” refer to Bassett Furniture Industries, Incorporated and its subsidiaries. References to 2024, 2023 and 2022 mean the fiscal years ended November 30, 2024, November 25,2023 and November 26, 2022. Please note that fiscal 2024 contained 53 weeks while fiscal 2023 and 2022 each contained 52 weeks.
SAFE-HARBOR, FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of Bassett Furniture Industries, Incorporated and subsidiaries. Such forward-looking statements are identified by use of forward-looking words such as “anticipates”, “believes”, “plans”, “estimates”, “expects”, “aimed” and “intends” or words or phrases of similar expression. These forward-looking statements involve certain risks and uncertainties. No assurance can be given that any such matters will be realized. Important factors, which should be read in conjunction with Item 1A “Risk Factors”, that could cause actual results to differ materially from those contemplated by such forward-looking statements include:
|
● |
fluctuations in the cost and availability of raw materials, fuel, labor, delivery costs and sourced products, including those which may result from supply chain disruptions and shortages and the imposition of new or increased duties, tariffs, retaliatory tariffs and trade limitations with respect to foreign-sourced products |
|
● |
competitive conditions in the home furnishings industry |
|
● |
overall retail traffic levels in stores and on the web and consumer demand for home furnishings |
|
● |
ability of our customers and consumers to obtain affordable credit due to increased interest rates |
|
● |
the profitability of the stores (independent licensees and Company-owned retail stores) which may result in future store closings |
|
● |
the risk of additional asset impairment charges arising from the ongoing efforts to consolidate our retail warehouses |
|
● |
ability to implement our Company-owned retail strategies and realize the benefits from such strategies |
|
● |
effectiveness and security of our information technology systems and possible disruptions due to cybersecurity threats, including any impacts from a network security incident; and the sufficiency of our insurance coverage, including cybersecurity insurance |
|
● |
future tax legislation, or regulatory or judicial positions |
|
● |
ability to efficiently manage the import supply chain to minimize business interruption |
|
● |
concentration of domestic manufacturing, particularly of upholstery products, and the resulting exposure to business interruption from accidents, weather and other events and circumstances beyond our control |
You should keep in mind that any forward-looking statement made by us in this report speaks only as of the date on which such forward-looking statement is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this report after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the events described in any forward-looking statement made in this report, might not occur.
PART I
ITEM 1. BUSINESS
(dollar amounts in thousands except per share data)
General
Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. Our products are sold primarily through a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We also sell our products through our website at www.bassettfurniture.com. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 122-year history has instilled the principles of quality, value, and integrity in everything we do, while simultaneously providing us with the expertise to respond to ever-changing consumer tastes and meet the demands of a global economy.
With 87 BHF stores at November 30, 2024, we have leveraged our strong brand name in furniture into a network of Company-owned and licensed stores that focus on providing consumers with a friendly and casual environment for buying furniture and accessories. Our store program is designed to provide a single source home furnishings retail store that provides a unique combination of stylish, quality furniture and accessories with a high level of customer service. In order for the Bassett brand to reach markets that cannot be effectively served by our retail store network, we also distribute our products through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We use a network of over 30 independent sales representatives who have stated geographical territories. These sales representatives are compensated based on a standard commission rate. We believe this blended strategy provides us the greatest ability to effectively distribute our products throughout the United States and ultimately gain market share.
The BHF stores feature custom order furniture, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories. Our philosophy is based on building strong long-term relationships with each customer. Salespeople are referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their home decor. Until a rigorous training and design certification program is completed, Design Consultants are not authorized to perform in-home or virtual design services for our customers.
We consider our website to be the front door to our brand experience where customers can research our furniture and accessory offerings and subsequently buy online or engage with an in-store design consultant. We know that we are driving a significant percentage of the retail foot traffic to our store network and our open market customers through engagement with www.bassettfurniture.com. Digital outreach strategies have become the primary vehicle for brand advertising and customer acquisition. We expect to supplement the digital outreach strategies in 2025 with added direct mail and television.
We introduced a new web platform late in 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation. Since the debut of the new site, we have seen increased engagement with the brand through a greater number of page views per customer along with more time spent on the site. We have also seen an increase in average order value that has resulted in increased e-commerce revenue. Although e-commerce sales continue to be small relative to in-store sales, we are pleased that we have seen a greater than 20% e-commerce sales increase over the back half of the fiscal year. We will continue to invest in ongoing improvements to the aesthetics and user experience that we provide on our website. While we have made it easier to purchase on-line, we will not compromise our in-store experience or the quality of our in-home makeover capabilities.
During the fourth quarter of fiscal 2022 we acquired Noa Home Inc. (“Noa Home”) (see Note 3 to the Consolidated Financial Statements for additional information regarding the acquisition). A mid-priced e-commerce furniture retailer headquartered in Montreal, Canada, Noa Home had operations in Canada, Australia, Singapore and the United Kingdom. After nearly two years of operating losses, we concluded during the second quarter of 2024 that Noa Home was not likely to achieve profitability at any time in the foreseeable future and decided to cease operations by selling the inventory in an orderly fashion. As of November 30, 2024, we have substantially completed the liquidation of Noa Home’s assets and liabilities. In the second quarter of 2024 we recognized non-cash charges totaling $2,401 related to the impairment of certain long-lived assets of Noa Home and the establishment of a reserve against Noa Home’s remaining inventory at that time. Upon substantially completing the liquidation of Noa Home at the end of the fourth quarter of 2024, we recognized a charge of $962 associated with the transfer of the cumulative translation losses out of accumulated other comprehensive income.
In 2018, we added outdoor furniture to our offerings with the acquisition of the Lane Venture brand. Our strategy is to distribute these products outside of our BHF store network through independent sales representatives each of which have a stated geographic territory. Using Lane Venture as a platform, we developed the Bassett Outdoor brand that is only marketed through the BHF store network. This allows Bassett branded products to move from inside the home to outside the home to capitalize on the growing trend of outdoor living. In the second quarter of 2023, we debuted the Bassett Outdoor contract line at the HD Expo Show in Las Vegas targeting the hospitality segment.
We have factories in Newton, North Carolina that manufacture both stationary and motion upholstered furniture for inside the home along with our outdoor furniture offerings. We also have a factory in Martinsville, Virginia that assembles and finishes our custom bedroom and dining offerings. We also own a facility in Haleyville, Alabama where we manufacture aluminum frames for our outdoor furniture.
In addition to the furniture that we manufacture domestically, we source most of our formal bedroom and dining room furniture (casegoods) and certain leather upholstery offerings from several foreign plants, primarily in Vietnam. Approximately 80% of our wholesale revenues are derived from products that are manufactured in the United States using a mix of domestic and globally sourced components and raw materials.
During the first quarter of 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”), and the transaction was completed on February 28, 2022. As a result of the sale, the operations of our former logistical services segment, which consisted entirely of the operations of Zenith, are presented in this Annual Report on Form 10-K as discontinued operations.
Operating Segments
We have strategically aligned our business into two reportable segments:
|
● |
Wholesale |
|
● |
Retail—Company-owned stores |
Wholesale Segment Overview
The wholesale segment is involved principally in the design, manufacturing and sourcing of furniture products that are distributed through our BHF store network (both Company-owned and licensee-owned stores) and various independent retailers. The wholesale furniture industry is very competitive and there are a large number of manufacturers both within and outside the United States who compete in the market on the basis of product quality, price, style, delivery and service. Additionally, many retailers source imported product directly, thus bypassing domestic furniture manufacturers and wholesale importers. We believe that we can be successful in the current competitive environment because our products represent excellent value combining attractive prices, quality and styling, prompt delivery, and superior service.
Wholesale shipments by category for the last three fiscal years, excluding intercompany sales to our retail segment, are summarized below:
|
2024* |
2023 |
2022 |
||||||||||||||||||||||||||||||||||||||||||||||
|
External |
Intercompany |
Total |
External |
Intercompany |
Total |
External |
Intercompany |
Total |
||||||||||||||||||||||||||||||||||||||||
|
Bassett Custom Upholstery |
$ | 79,344 | $ | 55,168 | $ | 134,512 | 64.8 | % | $ | 89,005 | $ | 66,363 | $ | 155,368 | 62.4 | % | $ | 124,565 | $ | 82,437 | $ | 207,002 | 63.8 | % | ||||||||||||||||||||||||
|
Bassett Leather |
15,705 | 1,919 | 17,624 | 8.5 | % | 26,701 | 1,171 | 27,872 | 11.2 | % | 35,953 | 76 | 36,029 | 11.1 | % | |||||||||||||||||||||||||||||||||
|
Bassett Custom Wood |
14,075 | 16,674 | 30,749 | 14.8 | % | 17,357 | 20,070 | 37,427 | 15.0 | % | 22,534 | 24,764 | 47,298 | 14.6 | % | |||||||||||||||||||||||||||||||||
|
Bassett Casegoods |
11,317 | 13,260 | 24,577 | 11.8 | % | 12,329 | 15,915 | 28,244 | 11.3 | % | 15,628 | 18,612 | 34,240 | 10.5 | % | |||||||||||||||||||||||||||||||||
|
Total |
$ | 120,441 | $ | 87,021 | $ | 207,462 | 100.0 | % | $ | 145,392 | $ | 103,519 | $ | 248,911 | 100.0 | % | $ | 198,680 | $ | 125,889 | $ | 324,569 | 100.0 | % | ||||||||||||||||||||||||
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
Approximately 20% of our 2024 wholesale sales were of imported product compared to 22% in 2023 and 2022. We define imported product as fully finished product that is sourced. Our domestic product includes certain products that contain components which were also sourced. We continue to believe that a blended strategy including domestically produced products primarily of a custom-order nature combined with sourcing of major collections provides the best value and quality of products to our customers.
The dollar value of our wholesale backlog, representing orders received but not yet shipped to the BHF store network or independent dealers, was $21,750 at November 30, 2024 and $18,478 at November 25, 2023.
We use lumber, fabric, leather, foam and other materials in the production of wood and upholstered furniture. These components are purchased from a variety of domestic and international suppliers and are widely available. The price and availability of foam, which is highly dependent on the cost of oil and available capacity of oil refineries, can be subject to significant volatility from time to time.
Retail Segment Overview – Company-Owned Retail Stores
The retail—Company-owned stores segment consists of 58 BHF stores that provide consumers with a friendly and casual environment for buying furniture and accessories. The retail furniture industry remains very competitive and includes local furniture stores, regional furniture retailers, national department and chain stores, single-vendor branded retailers and on-line retailers. As a whole, our store network which includes 29 licensee-owned stores, ranks in the top 40 in retail furniture sales in the United States. The following table shows the number of Company-owned stores by state at November 30, 2024:
|
Number of |
Number of |
|||||
|
State |
Stores |
State |
Stores |
|||
|
Arizona |
3 |
Nevada |
1 |
|||
|
Arkansas |
1 |
New Jersey |
2 |
|||
|
California |
2 |
New York |
4 |
|||
|
Connecticut |
3 |
North Carolina |
5 |
|||
|
Delaware |
1 |
Ohio |
2 |
|||
|
Florida |
5 |
Oklahoma |
1 |
|||
|
Georgia |
3 |
Pennsylvania |
2 |
|||
|
Kentucky |
1 |
South Carolina |
1 |
|||
|
Maryland |
3 |
Tennessee |
1 |
|||
|
Massachusetts |
1 |
Texas |
11 |
|||
|
Missouri |
1 |
Virginia |
4 |
|||
|
Total |
58 |
Net sales for our Company-owned retail stores by major product category for the last three fiscal years are summarized below:
|
2024* |
2023 |
2022 |
||||||||||||||||||||||
|
Bassett Custom Upholstery |
$ | 111,943 | 54.7 | % | $ | 134,000 | 56.8 | % | $ | 163,755 | 57.4 | % | ||||||||||||
|
Bassett Leather |
4,990 | 2.4 | % | 1,951 | 0.8 | % | 1,707 | 0.6 | % | |||||||||||||||
|
Bassett Custom Wood |
32,201 | 15.7 | % | 36,732 | 15.6 | % | 43,208 | 15.2 | % | |||||||||||||||
|
Bassett Casegoods |
26,179 | 12.8 | % | 32,252 | 13.7 | % | 40,146 | 14.1 | % | |||||||||||||||
|
Accessories, mattresses & other (1) |
29,250 | 14.3 | % | 31,005 | 13.1 | % | 36,303 | 12.7 | % | |||||||||||||||
|
Total |
$ | 204,563 | 100.0 | % | $ | 235,940 | 100.0 | % | $ | 285,119 | 100.0 | % | ||||||||||||
|
(1) |
Includes sales of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans. |
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
We also continue to examine the performance of every one of our stores. Store traffic has been declining and the effect on our retail model has become increasingly challenging. We believe that on a market-by-market basis, there will be fewer stores in the future. We will continue to evaluate store-by-store performance as we seek the optimal store count in the markets in which we compete at retail. While we opened two new stores in 2024, we are currently negotiating leases for stores in two new markets with potential opening dates in late 2025 or 2026.
Corporate and Other
In addition to the two reportable segments described above, we include our remaining business activities in a reconciling category known as Corporate and other. This category 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. We consider our corporate functions to be other business activities and have aggregated them with any of our operating segments that do not meet the requirements to be reportable segments. As of and for the periods ended November 30, 2024, November 25, 2023 and November 26, 2022, the only such operating segment included in Corporate and other was Noa Home, which was acquired on September 2, 2022. All sales reported in our Corporate and other category were attributable to Noa Home, which generated substantially all of its sales outside of the United States. During the second quarter of 2024 we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and decided to cease operations by selling the inventory in an orderly fashion. As of November 30, 2024, we have substantially completed the liquidation of Noa Home.
Trademarks
Our trademarks, including “Bassett” and the names of some of our marketing divisions, products and collections, are significant to the conduct of our business. This is important due to consumer recognition of the names and identification with our broad range of products. Certain of our trademarks are licensed to independent retailers for use in full store and store gallery presentations of our products. We also own copyrights that are important in the conduct of our business.
Government Regulations
We believe that we have materially complied with all federal, state and local standards regarding safety, health and pollution and environmental controls.
We may also be affected by laws and regulations of countries from which we source goods. Labor, environmental and other laws and regulations change over time, especially in the developing countries from which we source. Changes in these areas of regulation could negatively impact the cost and availability of sourced goods. The timing and extent to which these regulations could have an adverse effect on our financial position or results of operations is difficult to predict. In addition, the imposition of new or increased duties, tariffs, retaliatory tariffs and trade limitations with respect to foreign-sourced products could negatively impact the cost of such goods. Based on the present facts, we do not believe that they will have a material adverse effect on our financial position or future results of operations.
Human Capital
We employed 1,228 people as of November 30, 2024. Our associate count represents a decrease of 161 from a year ago, 71 due to headcount reductions in our manufacturing facilities in response to business conditions and the consolidation of our two wood manufacturing facilities, 43 in our retail segment primarily attributable to the elimination of certain retail support functions and warehouse consolidation, and 47 at our corporate office related to the closure of our central customer care center and the elimination of several corporate overhead functions. Headcount by segment is as follows:
|
● |
644 in the wholesale segment |
|
● |
453 in the retail segment |
|
● |
131 in the corporate and other segment |
We approach our workplace culture by being Invested… In Each Other, the tenets of which include fostering a workplace that promotes respect for each other, investing in our associates’ well-being, providing safe and comfortable work environments, offering opportunities to develop personally and professionally, being good stewards of the environment, and giving back to the communities in which we work and live. We believe that these investments are crucial to the success of our associates and our Company.
Workplace Respect
We value the diversity of our associates as an essential component in the way we do business. It continues to be Bassett’s policy to be equitable and impartial in our relations with our associates and to base all employment-related decisions upon valid, job-related factors, without regard to race, color, religion, national origin, age, sex, gender identity and gender expression, transgender status, pregnancy, physical or mental disability, genetic information, veteran or other protected status.
We continue to maintain and enforce our policy prohibiting discrimination and harassment in our workplace. Our managers are trained in how to prevent, recognize and respond to possible inappropriate behavior. Associates have several available avenues for reporting concerns, including a confidential hotline. We promptly and carefully investigate each complaint of harassment or discrimination. More details about our commitment to preventing discrimination and harassment in our workplaces are available on our website.
Quality of Life
We continue to invest in the physical and mental well-being of our associates, their spouses and their children.
|
● |
We introduced a benefits and wellness app, free to our associates and their dependents, which assists with locating best-in-class, in terms of quality and cost, healthcare providers and facilities, along with free virtual exercise therapy for back and joint care. |
|
● |
We offer several free online mental and behavioral health resources, with unlimited access to board-certified psychiatrists and licensed therapists. |
|
● |
Our wellness programs, including onsite health clinics, personalized health coaching, mental health counseling, and incentivized healthy lifestyle choices, are designed to improve associate health and reduce healthcare costs for both the associate and the Company. |
|
● |
We provide opportunities for our associates to meet with a certified financial planner for personalized retirement planning and budget counseling. |
|
● |
We offer comprehensive benefit plans including Company subsidized health insurance, 401(k) Plan with Company matching contributions, and paid time off. We believe our benefit plans are competitive and meet the needs of most of our associates. |
Work Environment
Our investments in our facilities continue, which improve our associates’ safety and comfort, and increase efficiency. These include:
|
● |
Installed vacuum lifts, designed to reduce manual lifting, at our Martinsville facility |
|
● |
Improved air quality with the addition of a humidity-controlled air handling system and battery-operated forklifts |
|
● |
At our upholstery locations, we continued to upgrade the lighting in our manufacturing areas and warehouses, along with resurfacing floors to improve safety and aesthetics |
|
● |
Improved security with the installation of a biometric (finger scan) timekeeping system at all our manufacturing facilities. |
We installed a comprehensive human resources, benefits, payroll and timekeeping system which gives our associates the ability to view, and where applicable, update their personal information, benefits enrollments, pay history and time worked in real time.
Professional Development
We offer opportunities to our associates for educational and skill development, including:
|
● |
Tuition reimbursement for associates who desire to further their education. |
|
● |
Online training for managers, with classes completed monthly. |
|
● |
Training for customer-facing associates designed to enhance the in-store and follow up experiences for our customers. |
Environmental and Civic Responsibility
Representing our commitment to sustainably sourced hardwoods, each Arbor Day since 2021, over 30 of our associates travel to central Ohio to take part in the planting of Appalachian hardwood seedlings. This event is hosted by our BenchMade supply partners, and over 200,000 trees have been planted to date – and counting. Additionally, we remain committed to our recycling efforts. Materials recycled in 2024 include:
|
Tons |
Tons |
|||||
|
Wood dust |
1,620 |
Fabric scraps |
155 |
|||
|
Paper/cardboard |
174 |
Wood Pallets |
78 |
|||
|
Metal/electronics |
45 |
Finishing materials |
39 |
|||
|
Foam |
15,750 |
cubic feet |
||||
Our partnership with the Stephen Siller Tunnels2Towers Foundation reached the 10-year mark in 2024. To date, we have furnished over 40 smart homes built for wounded veterans and first responders. Additionally, we supported numerous other charitable and civic organizations with monetary and in-kind donations.
Major Customers
Our risk exposure related to our customers, consisting primarily of trade accounts receivable along with certain guarantees, net of recognized reserves, totaled approximately $18,281 and $15,636 at November 30, 2024 and November 25, 2023, respectively. At November 30, 2024 and November 24, 2023, approximately 43% and 35%, respectively, of the aggregate risk exposure, net of reserves, was attributable to five customers. In fiscal 2024, 2023 and 2022, no customer accounted for more than 10% of total consolidated net sales.
Available Information
We file our annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public at the SEC’s website at www.sec.gov.
Through our website, www.bassettfurniture.com, we make available free of charge as soon as reasonably practicable after electronically filing or furnishing with the SEC, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments thereto.
ITEM 1A. RISK FACTORS
The following risk factors should be read carefully in connection with evaluating our business and the forward-looking information contained in this Annual Report on Form 10-K. The risk factors below represent what we believe are the known material risk factors with respect to us and our business. Any of the following risks could materially adversely affect our business, operations, industry, financial position or future financial results.
Risks Related to Our Retail Operations
We face a volatile retail environment and changing economic conditions that may further adversely affect consumer demand and spending.
Historically, the home furnishings industry has been subject to cyclical variations in the general economy and to uncertainty regarding future economic prospects. Should current economic conditions weaken, the current rate of housing starts decline, or rising inflation persist, consumer confidence and demand for home furnishings could deteriorate which could adversely affect our business through its impact on the performance of our Company-owned stores, as well as our licensees and the ability of a number of them to meet their obligations to us.
Our retail stores face significant competition from national, regional and local retailers of home furnishings, including increasing on-line competition via the internet.
The retail market for home furnishings is highly fragmented and intensely competitive. We currently compete against a diverse group of retailers, including national department stores, regional or independent specialty stores, and dedicated franchises of furniture manufacturers. National mass merchants such as Costco also have limited product offerings. We also compete with retailers that market products through store catalogs and the internet. In addition, there are few barriers to entry into our current and contemplated markets, and new competitors may enter our current or future markets at any time. We have also seen increasing competition from retailers offering consumers the ability to purchase home furnishings via the internet for home delivery, and this trend is expected to continue. Our existing competitors or new entrants into our industry may use a number of different strategies to compete against us, including aggressive advertising, pricing and marketing, extension of credit to customers on terms more favorable than we offer, and expansion into markets where we currently operate. Competition from any of these sources could cause us to lose market share, revenues and customers, increase expenditures or reduce prices, any of which could have a material adverse effect on our results of operations.
Our licensee-owned stores may not be able to meet their obligations to us.
We have a significant amount of accounts receivable attributable to our network of licensee-owned stores. We also guarantee one lease each for two licensees. If these stores do not generate the necessary level of sales and profits, the licensees may not be able to fulfill their obligations to us resulting in additional bad debt expenses and real estate related losses
Risks Related to Our Brand and Product Offerings
Failure to successfully anticipate or respond to changes in consumer tastes and trends in a timely manner could adversely impact our business, operating results and financial condition.
Sales of our furniture are dependent upon consumer acceptance of our designs, styles, quality and price. As with all retailers, our business is susceptible to changes in consumer tastes and trends. We attempt to monitor changes in consumer tastes and home design trends through attendance at international industry events and fashion shows, internal marketing research, and communication with our retailers and design consultants who provide valuable input on consumer tendencies. However, such tastes and trends can change rapidly and any delay or failure to anticipate or respond to changing consumer tastes and trends in a timely manner could adversely impact our business, operating results and financial condition.
In addition, certain suppliers may require extensive advance notice of our requirements in order to produce products in the quantities we desire. This long lead time may require us to place orders far in advance of the time when certain products will be offered for sale, thereby exposing us to risks relating to shifts in consumer demand and trends, and any downturn in the U.S. economy.
Our success depends upon our brand, marketing and advertising efforts and pricing strategies, and if we are not able to maintain and enhance our brand, or if we are not successful in these efforts and strategies, our business and operating results could be adversely affected.
Maintaining and enhancing our brand is critical to our ability to expand our base of customers and drive increased traffic at both Company-owned and licensee-owned stores and to our website. While digital advertising and outreach continue to dominate our marketing expenditures in 2024, we plan to supplement those strategies in 2025 with added direct mail and television. We have also invested heavily in our website and e-commerce. We cannot provide assurance that our marketing, advertising and other efforts to promote and maintain awareness of our brand will not require us to incur substantial costs. If these efforts are unsuccessful or we incur substantial costs in connection with these efforts, our business, operating results and financial condition could be adversely affected.
Risks Related to Material Sourcing and Supply
Our use of foreign sources of production for a portion of our products exposes us to certain additional risks associated with international operations.
Our use of foreign sources for the supply of certain of our products exposes us to risks associated with overseas sourcing. These risks are related to government regulation, volatile ocean freight costs, delays in shipments, and extended lead time in ordering. The U.S. government as well as governments in the foreign countries where we source our products may change their laws, regulations and policies, including those related to tariffs and trade barriers, investments, taxation and exchange controls which could make it more difficult to service our customers resulting in an adverse effect on our earnings.
Fluctuations in the price, availability and quality of raw materials could result in increased costs or cause production delays which might result in a decline in sales, either of which could adversely impact our earnings.
We use various types of wood, foam, fibers, fabrics, leathers, and other raw materials in manufacturing our furniture. Certain of our raw materials, including fabrics, are purchased both abroad and domestically. Fluctuations in the price, availability and quality of raw materials could result in increased costs or a delay in manufacturing our products, which in turn could result in a delay in delivering products to our customers. For example, lumber prices fluctuate over time based on factors such as weather and demand, which in turn impact availability. There is no guarantee that we will be able to successfully pass along additional cost increases as they arise and rising inflation could have an adverse impact upon consumer demand for discretionary items such as home furnishings. Production delays or upward trends in raw material prices could result in lower sales or margins, thereby adversely impacting our earnings.
Risks Related to Electronic Data Processing and Digital Information
We rely extensively on computer systems to process transactions, summarize results and manage our business. Disruptions in both our primary and back-up systems could adversely affect our business and operating results.
Our primary and back-up computer systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, natural disasters and errors by employees. Though losses arising from some of these issues would be covered by insurance, interruptions of our critical business computer systems or failure of our back-up systems could reduce our sales or result in longer production times. If our critical business computer systems or back-up systems are damaged or cease to function properly, we may have to make a significant investment to repair or replace them. For example, we disclosed a cybersecurity incident in Item 1.05 of Current Reports on Form 8-K and 8-K/A filed on July 15, 2024 and August 6, 2024, respectively, relating to the detection of unauthorized occurrences on a portion of our information technology (IT) systems.
We have previously and may continue in the future to incur costs resulting from security risks we face in connection with our electronic processing, storage and transmission of confidential information whether on computer systems maintained on our internal network or by third parties that may host certain of our systems. We may also incur reputational harm resulting from these security risks.
We accept electronic payment cards in our stores and also gather certain personal identifiable information in the processing of our retail sales transactions. We also store and process confidential information pertaining to our employees and other third parties on our networks. We may in the future become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information. In addition, if there were a disclosure of confidential information provided by, or concerning, our employees, customers or other third parties, including through inadvertent disclosure, unapproved dissemination, or unauthorized access, our reputation could be harmed, and we could be subject to civil or criminal liability and regulatory actions. Proceedings related to theft of credit or debit card information may be brought by payment card providers, banks and credit unions that issue cards, cardholders (either individually or as part of a class action lawsuit) and federal and state regulators. Any such proceedings could distract our management from running our business and cause us to incur significant unplanned losses and expenses. Consumer perception of our brand could also be negatively affected by these events, which could further adversely affect our results and prospects.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
The Company has developed a standards-based information security program to address risks from cybersecurity threats. The program includes policies and procedures that identify how security measures and controls are developed, implemented, and maintained. The maturity and effectiveness of the security program is reviewed biennially by a reputable third party.
A risk assessment is conducted annually. The risk assessment along with risk-based analysis and judgment are used to select security controls to address risks. During this process, the following factors, among others, are considered: likelihood and severity of risk, impact on the Company and others if a risk materializes, feasibility and cost of controls, and impact of controls on operations and others. Specific controls that are used to some extent by the Company include endpoint threat detection and response (EDR), identity and access management (IAM), multi-factor authentication (MFA), firewalls and intrusion detection and prevention, and vulnerability and patch management. An internal information security audit program is in place to ensure controls remain operational and effective.
Third-party security firms are used by the Company in different capacities to provide or operate some of these controls and technology systems. Third parties are also used to conduct assessments, such as vulnerability scans and penetration testing of the Company and its systems. The Company uses a variety of processes to address cybersecurity threats related to the use of third-party technology and services.
The Company has a written incident response plan ("IRP") and conducts tabletop exercises to enhance incident response preparedness. Disaster recovery plans are used to prepare for the potential for a disruption in technology we rely on. Employees undergo security awareness training, including phishing simulation training, when hired and periodically throughout the year.
The Company’s executive leadership team meets regularly to address enterprise risks, and cybersecurity is a risk category addressed by that group. In addition to assessing major risks, management identifies and monitors such risks. At least annually, the Company’s executive leadership reviews with the Board of Directors the major risks identified in the enterprise risk management process, as well as the steps identified to mitigate such risks. Each of the business and functional leaders responsible for the management of these identified risks also regularly discuss with the Board changes in assessment of these risks and mitigation plans.
The Company (or third parties it relies on) may not be able to fully, continuously, and effectively implement security controls as intended. As described above, we utilize a risk-based approach and judgment to determine the security controls to implement and it is possible we may not implement appropriate controls if we do not recognize or underestimate a particular risk. In addition, security controls, no matter how well designed or implemented, may only mitigate and not fully eliminate risks. And events, when detected by security tools or third parties, may not always be immediately understood or acted upon.
The Company activated their incident response plan to address a security incident in 2024. The Company is not aware of additional cybersecurity threats or any material cybersecurity incidents to date that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
On July 10, 2024, we detected unauthorized occurrences on a portion of our information technology (IT) systems. Upon detecting the unauthorized occurrences, we immediately began taking steps to contain, assess and remediate the cybersecurity incident, including beginning an investigation with leading external cybersecurity specialists, activating our incident response plan, and shutting down some systems. As a result of these and other measures, we believe the threat actor was ejected from our IT systems on July 10, 2024.
After we shut down some of our systems, we experienced disruption to certain of our operations, including interrupted manufacturing at our domestic plants and delayed order fulfillment for our retail network and delay of some wholesale shipments. Within a few days of the incident, we were able to resume retail order fulfillment and caught up on fulfilling wholesale orders that were delayed as a result of the cybersecurity incident. We have fully restored the IT systems and data and our investigation has not found evidence that any of our core operating systems for manufacturing, wholesale and retail order processing and fulfillment, or financial reporting were impacted.
While we believe the impacts were not material to our financial condition and results of operations for the fiscal year, we estimate that between $1,000 and $2,000 of sales were lost due to the shutdown during the cybersecurity incident. During the third quarter of 2024, we also incurred legal and remediation costs related to the incident of approximately $98 which are included in selling, general and administrative expenses. In addition, cost of goods sold for year ended November 30, 2024 includes $609 for wages paid to hourly production employees during the work stoppage resulting from the cybersecurity incident. Because no inventory was produced during the temporary shutdown of our manufacturing operations, these wages were charged directly to expense. We are seeking reimbursement of certain costs, expenses and losses stemming from the cybersecurity incident and have submitted a claim to our cybersecurity insurer. We expect final resolution and payment of the claim during the first half of 2025.
Additionally, in Item 1A Risk Factors under the heading of "Risks Related to Electronic Data Processing and Digital Information,” forward-looking cybersecurity threats that could have a material impact on the Company are discussed. That section of Item 1A should be read in conjunction with this Item 1C.
Governance
The Chief Information Officer ("CIO") holds primary oversight responsibility for the team managing the development, operation, and maintenance of our information security program. This team also has responsibility to maintain and enhance the Company’s written cyber security incident response plan, which identifies incident severity classifications and serves as a trigger for escalation for the response team.
With over 25 years of experience across diverse IT technologies, the CIO brings extensive expertise to the role. The CIO is also a member of the Company’s executive leadership team, meeting regularly with the CEO, CFO, and other senior leaders. The CIO directly reports to the Board at least annually, addressing cybersecurity risks and strategy, and attends Board meetings to discuss cybersecurity matters as needed. The Audit Committee provides oversight of the information security program. The CIO reports to the Audit Committee annually on cybersecurity risks and related internal controls and attends quarterly meetings to provide updates and address any questions regarding cybersecurity and information technology systems.
ITEM 2. PROPERTIES
We own the following facilities, by segment:
Wholesale Segment:
|
Facility |
Location |
|
Bassett Wood Division |
Martinsville, Va. |
| Bassett Upholstery Division | Newton, N.C. |
|
Bassett Upholstery Division |
Haleyville, Alabama |
|
2 Warehouses |
Bassett, Va. |
In general, these facilities are suitable and are considered to be adequate for the continuing operations involved. All facilities are in regular use and provide adequate capacity for our manufacturing and warehousing needs. In addition to the owned properties shown above, we lease facilities in Newton, North Carolina for the manufacturing of upholstered furniture and the manufacturing and warehousing operations of Lane Venture and Bassett Outdoor.
Retail Segment:
Real estate associated with our retail segment consists of eight owned locations with an aggregate square footage of 203,465 and a net book value of $24,137. These stores are located as follows:
| Concord, North Carolina | Greensboro, North Carolina |
| Greenville, South Carolina | Fredericksburg, Virginia |
| Houston, Texas | Louisville, Kentucky |
| Knoxville, Tennessee | Tampa, Florida |
Of these locations, two are subject to land leases. Our remaining 50 store locations are leased from third parties. In addition to retail stores, we also lease eleven locations for use as regional warehouses and home delivery distribution centers.
Corporate and Other:
We own our corporate office building, which includes an annex, located in Bassett, Va.
See Note 15 to the Consolidated Financial Statements included under Item 8 of this Annual Report for more information with respect to our operating lease obligations.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
John E. Bassett III, 66, has been with the Company since 1981 and served in various wood manufacturing and product sourcing capacities, including Vice President, Wood Manufacturing; Vice-President, Global Sourcing from 2001 to 2007 and Vice President, Wood in 2008. He was appointed Senior Vice President, Wood in 2009. In 2019, he was also promoted to the position of Senior Vice President, Chief Operations Officer.
Bruce R. Cohenour, 66, has been with the Company since 2011, starting as Senior Vice President of Upholstery Merchandising. In 2013, he was promoted to Senior Vice President of Sales and Merchandising. In 2019, he was appointed Senior Vice President, Chief Sales Officer. Prior to joining Bassett, Mr. Cohenour was with Hooker Furniture Corp. from 2007 through 2010, last serving as President of the Case Goods Division.
J. Michael Daniel, 63, joined the Company in 2007 as Corporate Controller. From April 2009 through December 2009, he served as Corporate Controller and Interim Chief Financial Officer. In January 2010, he was appointed Vice President and Chief Accounting Officer. In January 2013, he was promoted to Senior Vice President and Chief Financial Officer. In 2019, he was also promoted to the position of Senior Vice President, Chief Financial and Administrative Officer.
Jay R. Hervey, Esq., 65, has served as the General Counsel, Vice President and Secretary for the Company since 1997.
Robert H. Spilman, Jr., 68, has been with the Company since 1984. Since 2000, he has served as Chief Executive Officer and President, and in 2016 also became the Chairman of the Board of Directors.
PART II
|
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information:
Bassett’s common stock trades on the NASDAQ global select market system under the symbol “BSET.” We had approximately 6,300 beneficial stockholders at January 23, 2025.
Issuer Purchases of Equity Securities:
We are authorized to repurchase Company stock under a plan which was originally announced in 1998. On March 9, 2022, the Board of Directors increased the remaining limit of the repurchase plan to $40,000. The repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of prevailing market conditions and other factors. The following table summarizes the stock repurchase activity for the three months ended November 30, 2024, and the approximate dollar value of shares that may yet be repurchased pursuant to our stock repurchase program:
|
Issuer Purchases of Equity Securities |
||||||||||||
|
(dollar amounts in thousands, except share and per share data) |
|
Total Shares Purchased |
Average Price Paid |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
|||||||||||||
|
September 1, 2024 - October 5, 2024 |
- | $ | - | - | $ | 20,696 | ||||||||||
|
October 6 - November 2, 2024 |
2,171 | $ | 14.36 | 2,171 | $ | 20,665 | ||||||||||
|
November 3, 2024 - November 30, 2024 |
17,645 | $ | 14.81 | 17,645 | $ | 20,403 | ||||||||||
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands except share and per share data)
Overview
Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. Our products are sold primarily through a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We also sell our products through our website at www.bassettfurniture.com. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 122-year history has instilled the principles of quality, value, and integrity in everything we do, while simultaneously providing us with the expertise to respond to ever-changing consumer tastes and meet the demands of a global economy.
With 87 BHF stores at November 30, 2024, we have leveraged our strong brand name in furniture into a network of Company-owned and licensed stores that focus on providing consumers with a friendly and casual environment for buying furniture and accessories. Our store program is designed to provide a single source home furnishings retail store that provides a unique combination of stylish, quality furniture and accessories with a high level of customer service. In order for the Bassett brand to reach markets that cannot be effectively served by our retail store network, we also distribute our products through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We use a network of over 30 independent sales representatives who have stated geographical territories. These sales representatives are compensated based on a standard commission rate. We believe this blended strategy provides us the greatest ability to effectively distribute our products throughout the United States and ultimately gain market share.
The BHF stores feature custom order furniture, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories. Our philosophy is based on building strong long-term relationships with each customer. Salespeople are referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their home decor. Until a rigorous training and design certification program is completed, Design Consultants are not authorized to perform in-home or virtual design services for our customers.
We consider our website to be the front door to our brand experience where customers can research our furniture and accessory offerings and subsequently buy online or engage with an in-store design consultant. We know that we are driving a significant percentage of the retail foot traffic to our store network and our open market customers through engagement with www.bassettfurniture.com. Digital outreach strategies have become the primary vehicle for brand advertising and customer acquisition. We expect to supplement the digital outreach strategies in 2025 with added direct mail and television.
We introduced a new web platform late in 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation. Since the debut of the new site, we have seen increased engagement with the brand through a greater number of page views per customer along with more time spent on the site. We have also seen an increase in average order value that has resulted in increased e-commerce revenue. Although e-commerce sales continue to be small relative to in-store sales, we are pleased that we have seen a greater than 20% e-commerce sales increase over the back half of the fiscal year. We will continue to invest in ongoing improvements to the aesthetics and user experience that we provide on our website. While we have made it easier to purchase on-line, we will not compromise our in-store experience or the quality of our in-home makeover capabilities.
During the fourth quarter of fiscal 2022 we acquired Noa Home Inc. (“Noa Home”) (see Note 3 to the Consolidated Financial Statements for additional information regarding the acquisition). A mid-priced e-commerce furniture retailer headquartered in Montreal, Canada, Noa Home had operations in Canada, Australia, Singapore and the United Kingdom. After nearly two years of operating losses, we concluded during the second quarter of 2024 that Noa Home was not likely to achieve profitability at any time in the foreseeable future and decided to cease operations by selling the inventory in an orderly fashion. As of November 30, 2024, we have substantially completed the liquidation of Noa Home’s assets and liabilities. In the second quarter of 2024 we recognized non-cash charges totaling $2,401 related to the impairment of certain long-lived assets of Noa Home and the establishment of a reserve against Noa Home’s remaining inventory at that time. Upon substantially completing the liquidation of Noa Home at the end of the fourth quarter of 2024, we recognized a charge of $962 associated with the transfer of the cumulative translation losses out of accumulated other comprehensive income.
In 2018, we added outdoor furniture to our offerings with the acquisition of the Lane Venture brand. Our strategy is to distribute these products outside of our BHF store network through independent sales representatives each of which have a stated geographic territory. Using Lane Venture as a platform, we developed the Bassett Outdoor brand that is only marketed through the BHF store network. This allows Bassett branded products to move from inside the home to outside the home to capitalize on the growing trend of outdoor living. In the second quarter of 2023, we debuted the Bassett Outdoor contract line at the HD Expo Show in Las Vegas targeting the hospitality segment.
We have factories in Newton, North Carolina that manufacture both stationary and motion upholstered furniture for inside the home along with our outdoor furniture offerings. We also have a factory in Martinsville, Virginia that assembles and finishes our custom bedroom and dining offerings. We also own a facility in Haleyville, Alabama where we manufacture aluminum frames for our outdoor furniture.
In addition to the furniture that we manufacture domestically, we source most of our formal bedroom and dining room furniture (casegoods) and certain leather upholstery offerings from several foreign plants, primarily in Vietnam. Approximately 80% of our wholesale revenues are derived from products that are manufactured in the United States using a mix of domestic and globally sourced components and raw materials.
Sale of the Assets of Zenith Freight Lines, LLC
During the first quarter of 2022, we entered into a definitive agreement to sell substantially all of the assets of our wholly-owned subsidiary, Zenith, to J.B. Hunt for $86,939 in cash (see Note 18 to the Consolidated Financial Statements for additional information regarding the sale of Zenith). On February 28, 2022 the transaction was completed with us receiving $85,521 after the payment of $418 in certain transaction costs and the funding of $1,000 held in escrow, which was released to us on the first anniversary of the sale. The final purchase price was subject to a customary post-closing working capital adjustment, which was settled in the amount of $987 resulting in a pre-tax gain of $52,534 on this transaction. As a result of the sale, the operations of our former logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income and in the following discussion as discontinued operations.
Cybersecurity Incident
On July 10, 2024, we detected unauthorized occurrences on a portion of our information technology (IT) systems. Upon detecting the unauthorized occurrences, we immediately began taking steps to contain, assess and remediate the cybersecurity incident, including beginning an investigation with leading external cybersecurity specialists, activating our incident response plan, and shutting down some systems. As a result of these and other measures, we believe the threat actor was ejected from our IT systems on July 10, 2024.
After we shut down some of our systems, we experienced disruption to certain of our operations, including interrupted manufacturing at our domestic plants and delayed order fulfillment for our retail network and delay of some wholesale shipments. Within a few days of the incident, we were able to resume retail order fulfillment and caught up on fulfilling wholesale orders that were delayed as a result of the cybersecurity incident. We have fully restored the IT systems and data and our investigation has not found evidence that any of our core operating systems for manufacturing, wholesale and retail order processing and fulfillment, or financial reporting were impacted.
While we believe the impacts were not material to our financial condition and results of operations for the fiscal year, we estimate that between $1,000 and $2,000 of sales were lost due to the shutdown during the cybersecurity incident. During the third quarter of 2024, we also incurred legal and remediation costs related to the incident of approximately $98 which are included in selling, general and administrative expenses. In addition, cost of goods sold for fiscal 2024 includes $609 for wages paid to hourly production employees during the work stoppage resulting from the cybersecurity incident. Because no inventory was produced during the temporary shutdown of our manufacturing operations, these wages were charged directly to expense. We are seeking reimbursement of certain costs, expenses and losses stemming from the cybersecurity incident and have submitted a claim to our cybersecurity insurer. We expect final resolution and payment of the claim during the first half of 2025.
Analysis of Continuing Operations
The following discussion provides an analysis of our results of operations and reasons for material changes therein for fiscal year 2024 as compared to fiscal year 2023. For additional analysis of the fiscal year 2023 results as compared to fiscal year 2022, see “Analysis of Operations” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2023 Annual Report on Form 10-K, filed with the SEC on January 25, 2024.
Net sales revenue, cost of furniture and accessories sold, selling, general and administrative (“SG&A”) expense, other charges, and income from operations were as follows for the years ended November 30, 2024, November 25, 2023 and November 26, 2022:
|
Comparative Change |
||||||||||||||||||||||||||||||||||||||||
|
2024 vs 2023 |
2023 vs 2022 |
|||||||||||||||||||||||||||||||||||||||
|
2024* |
2023 |
2022 |
Dollars |
Percent |
Dollars |
Percent |
||||||||||||||||||||||||||||||||||
|
Net sales of furniture and accessories |
$ | 329,923 | 100.0 | % | $ | 390,136 | 100.0 | % | $ | 485,601 | 100.0 | % | $ | (60,213 | ) | -15.4 | % | $ | (95,465 | ) | -19.7 | % | ||||||||||||||||||
|
Cost of furniture and accessories sold |
150,508 | 45.6 | % | 183,648 | 47.1 | % | 237,262 | 48.9 | % | (33,140 | ) | -18.0 | % | (53,614 | ) | -22.6 | % | |||||||||||||||||||||||
|
Gross profit |
179,415 | 54.4 | % | 206,488 | 52.9 | % | 248,339 | 51.1 | % | (27,073 | ) | -13.1 | % | (41,851 | ) | -16.9 | % | |||||||||||||||||||||||
|
SG&A |
187,527 | 56.8 | % | 205,227 | 52.6 | % | 218,069 | 44.9 | % | (17,700 | ) | -8.6 | % | (12,842 | ) | -5.9 | % | |||||||||||||||||||||||
|
Asset impairment charges |
5,515 | 1.7 | % | - | 0.0 | % | - | 0.0 | % | 5,515 | NM | - | NM | |||||||||||||||||||||||||||
|
Loss on contract abandonment |
1,240 | 0.4 | % | - | 0.0 | % | - | 0.0 | % | 1,240 | NM | - | NM | |||||||||||||||||||||||||||
|
Loss upon realization of cumulative translation adjustment |
962 | 0.3 | % | - | 0.0 | % | - | 0.0 | % | 962 | NM | - | NM | |||||||||||||||||||||||||||
|
Restructuring charges |
440 | 0.1 | % | - | 0.0 | % | - | 0.0 | % | 440 | NM | - | NM | |||||||||||||||||||||||||||
|
Goodwill impairment charge |
- | 0.0 | % | 5,409 | 1.4 | % | - | 0.0 | % | (5,409 | ) | -100.0 | % | 5,409 | NM | |||||||||||||||||||||||||
|
Gain on revaluation of contingent consideration |
- | 0.0 | % | 1,013 | 0.3 | % | - | 0.0 | % | (1,013 | ) | -100.0 | % | 1,013 | NM | |||||||||||||||||||||||||
|
Gain on sale of real estate |
- | 0.0 | % | - | 0.0 | % | 4,595 | 0.9 | % | - | 0.0 | % | (4,595 | ) | -100.0 | % | ||||||||||||||||||||||||
|
Income (loss) from continuing operations |
$ | (16,269 | ) | -2.4 | % | $ | (3,135 | ) | -0.9 | % | $ | 34,865 | 7.2 | % | $ | (13,134 | ) | 418.9 | % | $ | (38,000 | ) |
N/M |
|||||||||||||||||
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
Our consolidated net sales by segment were as follows:
|
Comparative Change |
||||||||||||||||||||||||||||
|
2023 vs 2022 |
2022 vs 2021 |
|||||||||||||||||||||||||||
|
2024* |
2023 |
2022 |
Dollars |
Percent |
Dollars |
Percent |
||||||||||||||||||||||
|
Sales Revenue |
||||||||||||||||||||||||||||
|
Wholesale sales of furniture and accessories |
$ | 207,462 | $ | 248,911 | $ | 324,569 | $ | (41,449 | ) | -16.7 | % | $ | (75,658 | ) | -23.3 | % | ||||||||||||
|
Less: Sales to retail segment |
(87,021 | ) | (103,519 | ) | (125,889 | ) | 16,498 | -15.9 | % | 22,370 | -17.8 | % | ||||||||||||||||
|
Wholesale sales to external customers |
120,441 | 145,392 | 198,680 | (24,951 | ) | -17.2 | % | (53,288 | ) | -26.8 | % | |||||||||||||||||
|
Retail sales of furniture and accessories |
204,563 | 235,940 | 285,119 | (31,377 | ) | -13.3 | % | (49,179 | ) | -17.2 | % | |||||||||||||||||
|
Corporate & Other - Noa Home |
4,919 | 8,804 | 1,802 | (3,885 | ) | -44.1 | % | 7,002 | 388.6 | % | ||||||||||||||||||
|
Consolidated net sales of furniture and accessories |
$ | 329,923 | $ | 390,136 | $ | 485,601 | $ | (60,213 | ) | -15.4 | % | $ | (95,465 | ) | -19.7 | % | ||||||||||||
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
Total sales revenue for the year ended November 30, 2024, decreased $60,213 or approximately 15% from the prior year period primarily due to decreases in wholesale shipments to both the open market and the BHF store network and decreases in retail delivered sales.
Gross margins for the year ended November 30, 2024 increased 150 basis points from 2023. Included in the current year gross margin are increased inventory valuation charges of $1,729 in the wholesale segment, $472 in the retail segment and $500 in the Noa Home operation, and unproductive labor costs of $609 incurred during the temporary shutdown resulting from the cybersecurity incident. Excluding these charges, our consolidated gross margin would have been 55.4%.
SG&A expenses as a percentage of sales for the year ended November 30, 2024 increased 420 basis points from 2023 primarily due to the deleverage of fixed costs caused by lower sales volumes.
During fiscal 2024, we recognized charges of $5,515 for asset impairments, $1,240 resulting from a contract abandonment, $962 from the realization of cumulative translation losses on Noa Home, and a restructuring charge of $440. This restructuring charge resulted from a workforce reduction which we expect will result in annual savings of approximately $2,500 beginning in 2025, mostly in SG&A expenses. See Note 14 to our consolidated financial statements for additional information regarding these charges.
During fiscal 2023, we recognized a goodwill impairment charge of $5,409 and a gain of $1,013 resulting from the write-down of our contingent consideration obligation both of which are associated with the acquisition of Noa Home. See Note 3 to the consolidated financial statements.
During the year ended November 26, 2022, we recognized a gain of $4,595 from the sale of the real estate at a former retail location in Houston, Texas.
Certain other items affecting comparability between fiscal 2024 and 2023 are discussed below in “Other Items Affecting Net Income”.
Segment Information
We have strategically aligned our business into two 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. |
In addition to the two reportable segments described above, we include our remaining business activities and assets in a reconciling category known as Corporate and other. This category 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 any of our operating segments that do not meet the requirements to be reportable segments. As of and for the periods ended November 30, 2024, November 25, 2023 and November 26, 2022, the only such operating segment included in Corporate and other is Noa Home, which was acquired on September 2, 2022. All sales reported in our Corporate and other category are attributable to Noa Home, which generated substantially all of its sales outside of the United States. During the second fiscal quarter of 2024 we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and have ceased operations as of November 30, 2024 by selling the remaining inventory in an orderly fashion over the second half of fiscal 2024.
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 presented as a discontinued operation.
Reconciliation of Segment Results to Consolidated Results of Operations
To supplement the financial measures prepared in accordance with GAAP, we present gross profit by segment inclusive of the effects of intercompany sales by our wholesale segment to our retail segment. Because these intercompany transactions are not eliminated from our segment presentations and because we do not present gross profit as a measure of segment profitability in the accompanying condensed consolidated financial statements, the presentation of gross profit by segment is considered to be a non-GAAP financial measure. In addition, certain special gains or charges that are included in consolidated income (loss) before income taxes are not included in the measures of segment profitability. The reconciliation of this non-GAAP financial measure to the most directly comparable financial measure calculated and presented in accordance with GAAP is presented below along with the effects of various other intercompany eliminations on our consolidated results of operations.
|
Year Ended November 30, 2024 |
||||||||||||||||||||||||||||||
|
GAAP |
||||||||||||||||||||||||||||||
|
Non-GAAP Presentation |
Presentation |
|||||||||||||||||||||||||||||
|
Corporate & |
Special |
Non- |
||||||||||||||||||||||||||||
|
Wholesale |
Retail |
Other |
Eliminations |
Items |
Operating |
Consolidated |
||||||||||||||||||||||||
|
Net sales of furniture and accessories |
$ | 207,462 | $ | 204,563 | $ | 4,919 | $ | (87,021 | ) |
(1) |
$ | - | $ | - | $ | 329,923 | ||||||||||||||
|
Cost of furniture and accessories sold |
139,393 | 95,728 | 2,803 | (87,416 | ) |
(2) |
- | - | 150,508 | |||||||||||||||||||||
|
Gross profit |
68,069 | 108,835 | 2,116 | 395 |
(3) |
- | - | 179,415 | ||||||||||||||||||||||
|
SG&A expense |
42,712 | 115,439 | 30,572 | (1,196 | ) |
(4) |
- | - | 187,527 | |||||||||||||||||||||
|
Asset impairment charges |
- | - | - | - | 5,515 |
(5) |
- | 5,515 | ||||||||||||||||||||||
|
Loss on contract abandonment |
- | - | - | - | 1,240 |
(6) |
- | 1,240 | ||||||||||||||||||||||
|
Loss upon realization of cumulative translation adjustment |
- | - | - | - | 962 |
(7) |
- | 962 | ||||||||||||||||||||||
|
Restructuring charges |
- | - | - | - | 440 |
(8) |
- | 440 | ||||||||||||||||||||||
|
Income (loss) from continuing operations |
25,357 | (6,604 | ) | (28,456 | ) | 1,591 | 8,157 | - | (16,269 | ) | ||||||||||||||||||||
|
Interest income |
- | - | - | - | - | 2,673 | 2,673 | |||||||||||||||||||||||
|
Interest expense |
- | - | - | - | - | (30 | ) | (30 | ) | |||||||||||||||||||||
|
Other loss, net |
- | - | - | - | - | (744 | ) | (744 | ) | |||||||||||||||||||||
|
Income (loss) from continuing operations before income taxes |
$ | 25,357 | $ | (6,604 | ) | $ | (28,456 | ) | $ | 1,591 | $ | 8,157 | $ | 1,899 | $ | (14,370 | ) | |||||||||||||
|
Year Ended November 25, 2023 |
||||||||||||||||||||||||||||||
|
GAAP |
||||||||||||||||||||||||||||||
|
Non-GAAP Presentation |
Presentation |
|||||||||||||||||||||||||||||
|
Corporate & |
Special |
Non- |
||||||||||||||||||||||||||||
|
Wholesale |
Retail |
Other |
Eliminations |
Items |
Operating |
Consolidated |
||||||||||||||||||||||||
|
Net sales of furniture and accessories |
$ | 248,911 | $ | 235,940 | $ | 8,804 | $ | (103,519 | ) |
(1) |
$ | - | $ | - | $ | 390,136 | ||||||||||||||
|
Cost of furniture and accessories sold |
171,394 | 111,769 | 4,002 | (103,517 | ) |
(2) |
- | - | 183,648 | |||||||||||||||||||||
|
Gross profit |
77,517 | 124,171 | 4,802 | (2 | ) |
(3) |
- | - | 206,488 | |||||||||||||||||||||
|
SG&A expense |
46,818 | 124,707 | 34,728 | (1,026 | ) |
(4) |
- | - | 205,227 | |||||||||||||||||||||
|
Goodwill impairment charge |
- | - | - | - | 5,409 |
(9) |
- | 5,409 | ||||||||||||||||||||||
|
Gain on revaluation of contingent consideration |
- | - | - | - | 1,013 |
(10) |
- | 1,013 | ||||||||||||||||||||||
|
Income (loss) from continuing operations |
30,699 | (536 | ) | (29,926 | ) | 1,024 | 4,396 | - | (3,135 | ) | ||||||||||||||||||||
|
Interest income |
- | - | - | - | - | 2,528 | 2,528 | |||||||||||||||||||||||
|
Interest expense |
- | - | - | - | - | (22 | ) | (22 | ) | |||||||||||||||||||||
|
Other loss, net |
- | - | - | - | - | (1,859 | ) | (1,859 | ) | |||||||||||||||||||||
|
Income (loss) from continuing operations before income taxes |
$ | 30,699 | $ | (536 | ) | $ | (29,926 | ) | $ | 1,024 | $ | 4,396 | $ | 647 | $ | (2,488 | ) | |||||||||||||
|
Year Ended November 26, 2022 |
||||||||||||||||||||||||||||||
|
GAAP |
||||||||||||||||||||||||||||||
|
Non-GAAP Presentation |
Presentation |
|||||||||||||||||||||||||||||
|
Corporate & |
Special |
Non- |
||||||||||||||||||||||||||||
|
Wholesale |
Retail |
Other |
Eliminations |
Items |
Operating |
Consolidated |
||||||||||||||||||||||||
|
Net sales of furniture and accessories |
$ | 324,569 | $ | 285,119 | $ | - | $ | (124,087 | ) |
(1) |
$ | - | $ | - | $ | 485,601 | ||||||||||||||
|
Cost of furniture and accessories sold |
225,300 | 135,699 | - | (123,737 | ) |
(2) |
- | - | 237,262 | |||||||||||||||||||||
|
Gross profit |
99,269 | 149,420 | - | (350 | ) |
(3) |
- | - | 248,339 | |||||||||||||||||||||
|
SG&A expense |
57,290 | 130,068 | 24,829 | 5,882 |
(4) |
- | - | 218,069 | ||||||||||||||||||||||
|
Gain on sale of real estate |
- | - | - | - | 4,595 | - | 4,595 | |||||||||||||||||||||||
|
Income (loss) from continuing operations |
41,979 | 19,352 | (24,829 | ) | (6,232 | ) | 4,595 |
(11) |
34,865 | |||||||||||||||||||||
|
Interest income |
- | - | - | - | - | 302 | 302 | |||||||||||||||||||||||
|
Interest expense |
- | - | - | - | - | (38 | ) | (38 | ) | |||||||||||||||||||||
|
Other loss, net |
- | - | - | - | - | (1,067 | ) | (1,067 | ) | |||||||||||||||||||||
|
Income (loss) from continuing operations before income taxes |
$ | 41,979 | $ | 19,352 | $ | (24,829 | ) | $ | (6,232 | ) | $ | 4,595 | $ | (803 | ) | $ | 34,062 | |||||||||||||
Notes to Segment Consolidation Table:
|
(1) |
Represents the elimination of sales from our wholesale segment to our Company-owned BHF stores. |
|
(2) |
Represents the elimination of purchases by our Company-owned BHF stores from our wholesale segment. |
|
(3) |
Represents the change in the elimination of intercompany profit in inventory. |
|
(4) |
Represents the elimination of rent paid by our retail stores occupying Company-owned real estate. |
|
(5) |
Represents asset impairment charges of $2,887 and $727 in our retail and wholesale segments, respectively, a $1,827 charge for the impairment of the Noa Home trade name intangible asset, and a $74 charge for the impairment of Noa Home customized software. |
|
(6) |
Represents the charge for accruing the remaining minimum payments under a contract for logistical services in Riverside, CA which is no longer utilized. |
|
(7) |
Represents a charge for the realization of Noa Home's cumulative translation losses previously recorded in accumulated other comprehensive income due to the closure and substantially complete liquidation of that business. |
|
(8) |
Represents a charge for the accrual of severance pay due to restructuring. This is expected to be paid out through the second quarter of fiscal 2025. |
|
(9) |
Represents the charge for the full impairment of the goodwill associated with Noa Home. |
|
(10) |
Represents the gain resulting from the write-down of the contingent consideration payable on the acquisition of Noa Home. |
|
(11) |
Represents the gain on the sale of the real estate at a former retail location. |
Wholesale Segment
Net sales, gross profit, SG&A expense and operating income for our Wholesale Segment were as follows for the fiscal years ended November 30, 2024, November 25, 2023 and November 26, 2022:
|
Comparative Change |
||||||||||||||||||||||||||||||||||||||||
|
2024 vs 2023 |
2023 vs 2022 |
|||||||||||||||||||||||||||||||||||||||
|
2024* |
2023 |
2022 |
Dollars |
Percent |
Dollars |
Percent |
||||||||||||||||||||||||||||||||||
|
Net sales |
$ | 207,462 | 100.0 | % | $ | 248,911 | 100.0 | % | $ | 324,569 | 100.0 | % | $ | (41,449 | ) | -16.7 | % | $ | (75,658 | ) | -23.3 | % | ||||||||||||||||||
|
Gross profit (1) |
68,069 | 32.8 | % | 77,517 | 31.1 | % | 99,269 | 30.6 | % | (9,448 | ) | -12.2 | % | (21,752 | ) | -21.9 | % | |||||||||||||||||||||||
|
SG&A |
42,712 | 20.6 | % | 46,818 | 18.8 | % | 57,290 | 17.7 | % | (4,106 | ) | -8.8 | % | (10,472 | ) | -18.3 | % | |||||||||||||||||||||||
|
Income from operations |
$ | 25,357 | 12.2 | % | $ | 30,699 | 12.3 | % | $ | 41,979 | 12.9 | % | $ | (5,342 | ) | -17.4 | % | $ | (11,280 | ) | -26.9 | % | ||||||||||||||||||
(1) Gross profit at the segment level is considered a Non-GAAP financial measure due to the included effects of intercompany transactions. Refer to the reconciliation of segment results to consolidated results of operations presented above.
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
Wholesale shipments by category for the fiscal years ended November 30, 2024, November 25, 2023 and November 26, 2022 are summarized below:
|
2024* |
2023 |
2022 |
||||||||||||||||||||||||||||||||||||||||||||||
|
External |
Intercompany |
Total |
External |
Intercompany |
Total |
External |
Intercompany |
Total |
||||||||||||||||||||||||||||||||||||||||
|
Bassett Custom Upholstery |
$ | 79,344 | $ | 55,168 | $ | 134,512 | 64.8 | % | $ | 89,005 | $ | 66,363 | $ | 155,368 | 62.4 | % | $ | 124,565 | $ | 82,437 | $ | 207,002 | 63.8 | % | ||||||||||||||||||||||||
|
Bassett Leather |
15,705 | 1,919 | 17,624 | 8.5 | % | 26,701 | 1,171 | 27,872 | 11.2 | % | 35,953 | 76 | 36,029 | 11.1 | % | |||||||||||||||||||||||||||||||||
|
Bassett Custom Wood |
14,075 | 16,674 | 30,749 | 14.8 | % | 17,357 | 20,070 | 37,427 | 15.0 | % | 22,534 | 24,764 | 47,298 | 14.6 | % | |||||||||||||||||||||||||||||||||
|
Bassett Casegoods |
11,317 | 13,260 | 24,577 | 11.8 | % | 12,329 | 15,915 | 28,244 | 11.3 | % | 15,628 | 18,612 | 34,240 | 10.5 | % | |||||||||||||||||||||||||||||||||
|
Total |
$ | 120,441 | $ | 87,021 | $ | 207,462 | 100.0 | % | $ | 145,392 | $ | 103,519 | $ | 248,911 | 100.0 | % | $ | 198,680 | $ | 125,889 | $ | 324,569 | 100.0 | % | ||||||||||||||||||||||||
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
Fiscal 2024 as Compared to Fiscal 2023
Net sales for the year ended November 30, 2024 decreased $41,449 or 17% from fiscal 2023 due primarily to a 19% decrease in shipments to the open market, a 16% decrease in shipments to our retail store network and a 3% decrease in Lane Venture shipments. Gross margins for the year ended November 30, 2024 increased 170 basis points over fiscal 2023 year primarily due to the expected improvement in the Bassett Leather business. As the Bassett Leather product line is internationally sourced with extended lead times, we received significant amounts of inventory during the second and third quarters of 2022 just as product demand was weakening due to the market downturn in home furnishings. Also, the ocean freight costs associated with the majority of the product received was at significantly higher costs than are currently being realized on current product receipts. Margins in our Bassett Casegoods business also improved as expected primarily due to shipping more product that contained lower in-bound freight costs partially offset by increased inventory valuation charges recorded in the second quarter of fiscal 2024 as we have been more aggressive in selling certain slow-moving products. These improvements were partially offset by slightly lower margins in the Bassett Custom Upholstery business due to deleverage of fixed costs from lower sales volumes. SG&A expenses as a percentage of sales increased 180 basis points primarily due to reduced leverage of fixed costs from decreased sales.
The dollar value of our wholesale backlog, representing orders received but not yet shipped to the BHF store network or independent dealers, was $21,750 at November 30, 2024 and $18,478 at November 25, 2023.
Retail Segment – Company Owned Stores
Net sales, gross profit, SG&A expense, and operating income (loss) for our retail segment were as follows for the fiscal years ended November 30, 2024, November 25, 2023 and November 26, 2022:
|
Comparative Change |
||||||||||||||||||||||||||||||||||||||||
|
2024 vs 2023 |
2023 vs 2022 |
|||||||||||||||||||||||||||||||||||||||
|
2024* |
2023 |
2022 |
Dollars |
Percent |
Dollars |
Percent |
||||||||||||||||||||||||||||||||||
|
Net sales |
$ | 204,563 | 100.0 | % | $ | 235,940 | 100.0 | % | $ | 285,119 | 100.0 | % | $ | (31,377 | ) | -13.3 | % | $ | (49,179 | ) | -17.2 | % | ||||||||||||||||||
|
Gross profit (1) |
108,835 | 53.2 | % | 124,171 | 52.6 | % | 149,420 | 52.4 | % | (15,336 | ) | -12.4 | % | (25,249 | ) | -16.9 | % | |||||||||||||||||||||||
|
SG&A |
115,439 | 56.4 | % | 124,707 | 52.9 | % | 130,068 | 45.6 | % | (9,268 | ) | -7.4 | % | (5,361 | ) | -4.1 | % | |||||||||||||||||||||||
|
Income (loss) from operations |
$ | (6,604 | ) | -3.2 | % | $ | (536 | ) | -0.2 | % | $ | 19,352 | 6.8 | % | $ | (6,068 | ) | 1132.1 | % | $ | (19,888 | ) | NM | |||||||||||||||||
|
(1) |
Gross profit at the segment level is considered a Non-GAAP financial measure due to the included effects of intercompany transactions. Refer to the reconciliation of segment results to consolidated results of operations presented above. |
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
Retail sales by major product category for the fiscal years ended November 25, 2023, November 26, 2022 and November 27, 2021were as follows:
|
2024* |
2023 |
2022 |
||||||||||||||||||||||
|
Bassett Custom Upholstery |
$ | 111,943 | 54.7 | % | $ | 134,000 | 56.8 | % | $ | 163,755 | 57.4 | % | ||||||||||||
|
Bassett Leather |
4,990 | 2.4 | % | 1,951 | 0.8 | % | 1,707 | 0.6 | % | |||||||||||||||
|
Bassett Custom Wood |
32,201 | 15.7 | % | 36,732 | 15.6 | % | 43,208 | 15.2 | % | |||||||||||||||
|
Bassett Casegoods |
26,179 | 12.8 | % | 32,252 | 13.7 | % | 40,146 | 14.1 | % | |||||||||||||||
|
Accessories, mattresses & other (1) |
29,250 | 14.3 | % | 31,005 | 13.1 | % | 36,303 | 12.7 | % | |||||||||||||||
|
Total |
$ | 204,563 | 100.0 | % | $ | 235,940 | 100.0 | % | $ | 285,119 | 100.0 | % | ||||||||||||
|
(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. |
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
Fiscal 2024 as Compared to Fiscal 2023
Net sales for the year ended November 30, 2024 decreased $31,377 or 13% from fiscal 2023. Written sales (the value of sales orders taken but not delivered) declined 2.8% from fiscal 2023. Gross margin for the year ended November 30, 2024 improved 60 basis points over fiscal 2023 primarily due to higher margins on both in-line and clearance goods partially offset by additional inventory valuation charges in the second quarter of 2024 due to our strategy to be more aggressive in selling clearance goods to better control inventory levels. SG&A expenses as a percentage of sales for the year ended November 30, 2024 increased 350 basis points primarily due to decreased leverage of fixed costs from lower sales volumes.
Retail backlog at November 30, 2024 was $37,053 compared to $30,902 at November 25, 2023.
Corporate and Other
In addition to the two reportable segments discussed above, we include our remaining business activities and assets in a reconciling category known as Corporate and other, which includes the shared costs of various corporate functions along with any operating segments that do not meet the requirements to be reportable segments. Therefore, Noa Home is included within the Corporate and other reconciling category and accounts for all of the sales and gross profit within this reconciling category. Revenues, costs and expenses of Corporate and other for the fiscal years ended November 30, 2024, November 25, 2023 and November 26, 2022 are as follows:
|
Comparative Change |
||||||||||||||||||||||||||||||||||||||||
|
2024 vs 2023 |
2023 vs 2022 |
|||||||||||||||||||||||||||||||||||||||
|
2024* |
2023 |
2022 |
Dollars |
Percent |
Dollars |
Percent |
||||||||||||||||||||||||||||||||||
|
Net sales |
$ | 4,919 | 100.0 | % | $ | 8,804 | 100.0 | % | $ | 1,802 | 100.0 | % | $ | (3,885 | ) | -44.1 | % | $ | 7,002 | 388.6 | % | |||||||||||||||||||
|
Gross profit |
2,116 | 43.0 | % | 4,802 | 54.5 | % | 830 | 46.1 | % | (2,686 | ) | -55.9 | % | 3,972 | 478.6 | % | ||||||||||||||||||||||||
|
SG&A |
30,572 | 621.5 | % | 34,728 | 394.5 | % | 31,827 | 1766.2 | % | (4,156 | ) | -12.0 | % | 2,901 | 9.1 | % | ||||||||||||||||||||||||
|
Income (loss) from operations |
$ | (28,456 | ) | -578.5 | % | $ | (29,926 | ) | -339.9 | % | $ | (30,997 | ) | -1720.1 | % | $ | 1,470 | -4.9 | % | $ | 1,071 | -3.5 | % | |||||||||||||||||
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
Fiscal 2024 as Compared to Fiscal 2023
Sales and gross profit for the year ended November 30, 2024 declined from fiscal 2023 as we concluded our wind-down of Noa Home’s operations and sold off the remaining inventory during the second half of fiscal 2024. Included in the gross profit is an inventory valuation charge of $500 recognized during the second quarter of 2024 due to our decision to cease operations at Noa Home. The $4,156 decrease in SG&A expenses was primarily due to decreased advertising and warehouse costs for Noa Home as a result of the cessation of operations and decreased corporate overhead spending from better expense management.
Discontinued Operations - Logistical Services
Revenues, operating expenses and income from operations for our logistical services segment were as follows for the fiscal years ended November 30, 2024, November 25, 2023 and November 26, 2022:
|
Comparative Change |
||||||||||||||||||||||||||||||||
|
2023 vs 2022 |
||||||||||||||||||||||||||||||||
|
2024* |
2023 |
2022 |
Dollars |
Percent |
||||||||||||||||||||||||||||
|
Logistical services revenue |
$ | - | 0.0 | % | $ | - | 0.0 | % | $ | 16,776 | 100.0 | % | $ | (16,776 | ) | -100.0 | % | |||||||||||||||
|
Cost of logistical services |
- | 0.0 | % | - | 0.0 | % | 15,001 | 89.4 | % | (15,001 | ) | -100.0 | % | |||||||||||||||||||
|
Other loss, net |
- | 0.0 | % | - | 0.0 | % | (63 | ) | -0.4 | % | 63 | -100.0 | % | |||||||||||||||||||
|
Income from discontinued operations |
$ | - | 0.0 | % | $ | - | 0.0 | % | $ | 1,712 | 10.2 | % | $ | (1,712 | ) | -100.0 | % | |||||||||||||||
Analysis of Discontinued Operations – Logistical Services
The amounts shown above represent the results of Zenith’s business transactions with third parties.
Zenith only operated as a subsidiary of the Company for the first quarter of fiscal 2022, during which period Zenith charged Bassett $9,121 for logistical services provided to our wholesale segment. These shipping and handling costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. We entered into a service agreement with J.B. Hunt for the continuation of these services for a period of seven years following the sale of Zenith. Subsequent to the sale, we incurred $22,721, $26,125 and $27,604 of expense during fiscal 2024, 2023 and 2022, respectively, for the performance of logistical services by J.B. Hunt.
Other Items Affecting Net Income (Loss)
Other items affecting net income (loss) for fiscal 2024, 2023 and 2022 are as follows:
|
2024 |
2023 |
2022 |
||||||||||
|
Interest income (1) |
$ | 2,673 | $ | 2,528 | $ | 302 | ||||||
|
Interest expense (2) |
(30 | ) | (22 | ) | (38 | ) | ||||||
|
Net periodic pension costs (3) |
(430 | ) | (496 | ) | (489 | ) | ||||||
|
Net gains (cost) of company-owned life insurance (4) |
302 | (572 | ) | 161 | ||||||||
|
Other |
(616 | ) | (791 | ) | (739 | ) | ||||||
|
Total other income (loss), net |
$ | 1,899 | $ | 647 | $ | (803 | ) | |||||
|
(1) |
Consists of interest income arising from our short-term investments and interest-bearing cash equivalents. The increase in interest income for fiscal 2024 as compared with fiscal 2023 was due primarily to higher interest rates paid on certificates of deposit. See Note 4 to the Consolidated Financial Statements for additional information regarding our investments in certificates of deposit. |
|
(2) |
Interest expense is attributable to finance leases for computer and office equipment. See Note 15 to the Consolidated Financial Statements for additional information regarding our leases. |
|
(3) |
Represents the portion of net periodic pension costs not included in income from operations. See Note 10 to the Consolidated Financial Statements for additional information related to our defined benefit pension plans. |
|
(4) |
Includes a gain arising from death benefits from Company-owned life insurance of $1,441 in fiscal 2022. |
Provision for Income taxes
We recorded an income tax benefit of $4,675 on the loss from continuing operations for 2024. In 2023, we recorded income tax expense on the loss from continuing operations of $683 and in 2022, we recorded $8,702 of income tax expense on the income from continuing operations. Our effective tax rate of 32.5% for 2024 differs from the federal statutory rate of 21.0% due to the increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home, the nondeductible impairment of the Noa Home tradename, the tax benefit recorded for the capital loss associated with the cumulative investment in Noa Home due to the shutdown of the operations, and the effects of state income taxes and various permanent differences. Our effective tax rate of (27.5%) for 2023 differs from the federal statutory rate of 21.0% due to the non-taxable goodwill impairment and non-taxable gain on revaluation of contingent consideration both of which are associated with the acquisition of Noa Home, increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home, and the effects of state income taxes and various permanent differences.
We have net deferred tax assets of $6,867 as of November 30, 2024, which, upon utilization, are expected to reduce our cash outlays for income taxes in future years. It will require approximately $31,700 of future taxable income to utilize our net deferred tax assets.
Liquidity and Capital Resources
We are committed to maintaining a strong balance sheet in order to weather difficult industry conditions, to allow us to take advantage of opportunities as market conditions improve, and to execute our long-term retail strategies.
Cash Flows
Cash provided by operations for the year ended November 30, 2024 was $4,050 compared to cash provided by operations of $18,724 for the year ended November 25, 2023, representing a decrease of $14,674 in cash flows from operations. This decrease was primarily the result of changes in working capital due to the timing impact of expenditures as a result of an additional week in the first quarter of 2024 coupled with larger net loss in fiscal 2024.
Our overall cash position declined $12,993 during fiscal 2024. During fiscal 2024, we spent $5,211 on purchases of property and equipment primarily consisting of the upfit of the new Tampa, Florida and Houston, Texas stores that opened in the first quarter of 2024, final payments on the Austin, Texas store remodel, update of the façade of the Greensboro, North Carolina store location and expenditures related to various information technology and manufacturing plant projects. During the fourth quarter of fiscal 2024 ,we purchased a $2,500 CD which has been pledged as collateral against our merchant services agreement with a bank. We also paid $6,654 in dividends during fiscal 2024. During 2024, we spent $1,420 to repurchase shares under our existing stock repurchase program as compared to $4,176 in 2023. As of November 30, 2024, $20,403 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $59,911 on hand at November 30, 2024, expected future operating cash flows and the availability under our credit line noted below, we believe we have sufficient liquidity to fund operations for the foreseeable future.
Debt and Other Obligations
Bank Credit Facility
On May 15, 2024, we entered into the Eighth Amended and Restated Credit Agreement with our bank (the “Credit Facility”). This Credit Facility provides for a line of credit of up to $25,000. At November 30, 2024, we had $6,013 outstanding under standby letters of credit against our line. The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.75% and is secured by our accounts receivable and inventory. Our bank charges a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the terms of the Credit Facility, Consolidated Minimum Tangible Net Worth (as defined in the Credit Facility) shall at no time be less than $120,000. In addition, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis and commencing as of the end of the first fiscal quarter after the first date that the used commitment (the sum of any outstanding advances plus standby letters of credit) equals or exceeds $8,250:
|
● |
Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.2 times and |
|
|
● |
Consolidated Lease Adjusted Leverage to EBITDAR Ratio (as defined in the Credit Facility) not to exceed 3.35 times. |
Since our used commitment was less than $8,250 at November 30, 2024, we were not required to test the Consolidated Fixed Charge Coverage Ratio or the Consolidated Lease Adjusted Leverage to EBITDAR Ratio. Had we been required to test those ratios, we would not have been able to achieve the required levels for either of these ratios. Consequently, our availability under the Credit Facility is currently limited to an additional $2,237.
We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of certain of our licensee-owned stores, and we lease land and buildings at various locations throughout the continental United States for warehouse space used in our retail segment. We also lease local delivery trucks used in our retail segment. The total future minimum lease payments for leases with terms in excess of one year at November 30, 2024 is $128,530 the present value of which is $106,445 and is included in our accompanying consolidated balance sheet at November 30, 2024. We were contingently liable under licensee lease obligation guarantees in the amount of $5,131 at November 30, 2024. The remaining terms under these lease guarantees range from approximately one to five years. See Note 15 to our consolidated financial statements for a schedule of future cash payments on our lease obligations and additional details regarding our leases and lease guarantees.
We provide post-employment benefits to certain current and former executives and management level employees of the Company. Included among these benefits are two defined-benefit plans with a combined projected benefit obligation of $6,917 at November 30, 2024. See Note 10 to our consolidated financial statements for a projection of future benefit payments under these plans from 2025 through 2034. We also have deferred compensation plans with a total liability of $5,055 at November 30, 2024, the current portion of which is $330. See Note 10 to our consolidated financial statements for additional information regarding these plans.
Dividends and Share Repurchases
During fiscal 2024, we declared and paid four quarterly dividends totaling $6,654, or $0.76 per share. During fiscal 2024, we repurchased 101,305 shares of our stock for $1,420 under our share repurchase program. The weighted-average effect of these share repurchases on basic earnings per share from continuing operations was less than $0.01 per share. On March 9, 2022, our Board of Directors increased the remaining limit of the repurchase plan to $40,000. The approximate dollar value that may yet be purchased pursuant to our stock repurchase program as of November 30, 2024 was $20,403.
Capital Expenditures
We currently anticipate that total capital expenditures for fiscal 2025 will be between $8 million and $12 million, which will be used for remodeling various retail stores and additional investments in information technology, including enhancements to our website. Our capital expenditure and working capital requirements in the foreseeable future may change depending on many factors, including but not limited to the overall performance of the store program, our rate of growth, our operating results and any adjustments in our operating plan needed in response to industry conditions, competition or unexpected events. We believe that our existing cash, together with cash from operations, will be sufficient to meet our capital expenditure and working capital requirements for the foreseeable future.
Fair Value Measurements
We account for items measured at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:
Level 1 Inputs– Quoted prices for identical instruments in active markets.
Level 2 Inputs– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs– Instruments with primarily unobservable value drivers.
We believe that the carrying amounts of our current assets and current liabilities approximate fair value due to the short-term nature of these items. Our primary non-recurring fair value estimates, typically involving the valuation of business acquisitions (see Note 3 to the Consolidated Financial Statements), goodwill impairments (see Note 8 to the Consolidated Financial Statements) and asset impairments (see Note 14 to the Consolidated Financial Statements) have utilized Level 3 inputs.
Off-Balance Sheet Arrangements
We utilize stand-by letters of credit in the procurement of certain goods in the normal course of business. We lease land and buildings that are primarily used in the operation of our retail BHF stores and distribution facilities as well as certain manufacturing facilities in our upholstery operations. We have guaranteed certain lease obligations of licensee operators as part of our retail strategy. See Note 15 to the Consolidated Financial Statements, included in Item 8 of this Annual Report on Form 10-K, for further discussion of lease guarantees, including descriptions of the terms of such commitments and methods used to mitigate risks associated with these arrangements.
Contingencies
We are involved in various claims and litigation as well as environmental matters, which arise in the normal course of business. Although the final outcome of these legal and environmental matters cannot be determined, based on the facts presently known, it is our opinion that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) which requires that certain estimates and assumptions be made that affect the amounts and disclosures reported in those financial statements and the related accompanying notes. Actual results could differ from these estimates and assumptions. We use our best judgment in valuing these estimates and may, as warranted, solicit external advice. Estimates are based on current facts and circumstances, prior experience and other assumptions believed to be reasonable. The following critical accounting policies, some of which are impacted significantly by judgments, assumptions and estimates, affect our consolidated financial statements.
Revenue Recognition - We recognize revenue when we transfer promised goods to our customers in an amount that reflects the consideration that we expect to receive in exchange for those goods. 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. We offer payment terms varying from 30 to 60 days for wholesale customers. Estimates for returns and allowances have been recorded as a reduction of revenue based on our historical return patterns. The contracts with our licensee store owners do not provide for any royalty or license fee to be paid to us.
At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. We typically collect a significant portion of the purchase price as a customer deposit upon order, with the balance typically collected upon delivery. These deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $25,742 and $22,788 as of November 30, 2024 and November 25, 2023, respectively. Substantially all of the customer deposits held at November 25, 2023 related to performance obligations satisfied during fiscal 2024 and have therefore been recognized in revenue for the year ended November 30, 2024. Estimates for returns and allowances have been recorded as a reduction of revenue based on our historical return patterns. We also sell furniture protection plans to our retail customers on behalf of a third party which is responsible for the performance obligations under the plans. Revenue from the sale of these plans is recognized upon delivery of the goods net of amounts payable to the third-party service provider.
Allowance for credit losses - We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments. Our accounts receivable reserves were $1,097 and $535 at November 30, 2024 and November 25, 2023, respectively, representing 7.7% and 3.7% of our gross accounts receivable balances at those dates, respectively. The allowance for credit losses is based on a review of specifically identified customer 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. Although actual losses have not differed materially from our previous estimates, future losses could differ from our current estimates. Unforeseen events such as a licensee or customer bankruptcy filing could have a material impact on our results of operations.
Inventories - Inventories accounted for under the first-in, first out (“FIFO”) method are stated at the lower of cost or net realizable value, and inventory accounted for under the last-in, first out method (“LIFO”) is stated at the lower of cost or market. Cost is determined for domestic furniture inventories, excluding outdoor furniture products, using the LIFO method. The cost of imported inventories, domestic outdoor furniture products and Noa Home product inventories is determined on a FIFO basis. We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand and market conditions. Our reserves for excess and obsolete inventory were $5,395 and $5,183 at November 30, 2024 and November 25, 2023, respectively, representing 8.9% and 7.6%, respectively, of our inventories on a LIFO basis. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required.
Goodwill – Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets and liabilities and identifiable intangible assets of businesses acquired. The acquisition of assets and liabilities and the resulting goodwill is allocated to the respective reporting unit: Wood, Upholstery, Retail – Company-Owned Stores, and Noa Home. We review goodwill at the reporting unit level annually for impairment or more frequently if events or circumstances indicate that assets might be impaired.
In accordance with ASC Topic 350, Intangibles – Goodwill & Other, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test described in ASC Topic 350 (as amended by Accounting Standards Update No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment). The more likely than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative impairment test is unnecessary and our goodwill is considered to be unimpaired. However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed with performing the quantitative evaluation process. For the annual test of goodwill performed as of the beginning of the fourth quarter of fiscal 2024, we performed the qualitative assessment as described above with respect to our upholstery reporting unit and concluded that there was no impairment of the goodwill allocated to that reporting unit as of November 30, 2024. For the annual test of the goodwill performed as of the beginning of the fourth quarter of fiscal 2023, we concluded that there was no impairment of the goodwill allocated to our upholstery reporting unit, however with respect to our Noa Home reporting unit, we proceeded to the quantitative test and concluded that the goodwill allocated to that reporting unit as of November 25, 2023 was fully impaired as the difficult environment for companies selling furniture on the web resulted in Noa Home performing well below initial projections and expectations. For the annual test of goodwill performed as of the beginning of the fourth fiscal quarter of 2022, we performed the qualitative assessment as described above and concluded that there was no impairment of our goodwill as of November 26, 2022.
The quantitative evaluation compares the carrying value of each reporting unit that has goodwill with the estimated fair value of the respective reporting unit. Should the carrying value of a reporting unit be in excess of the estimated fair value of that reporting unit, a goodwill impairment charge will be recognized in the amount by which the reporting unit’s carrying amount exceeds its fair value, but not to exceed the total goodwill assigned to the reporting unit. The determination of the fair value of our reporting units is based on a combination of a market approach, that considers benchmark company market multiples, an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosure, and, in the case of our retail reporting unit, a cost approach that utilizes estimates of net asset value. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill impairment testing, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units. While we believe such assumptions and estimates are reasonable, the actual results may differ materially from the projected amounts.
Other Intangible Assets – Intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are tested for impairment annually or between annual tests when an impairment indicator exists. The recoverability of indefinite-lived intangible assets is assessed by comparison of the carrying value of the asset to its estimated fair value. If we determine that the carrying value of the asset exceeds its estimated fair value, an impairment loss equal to the excess would be recorded. During fiscal 2024, as a result of our decision to cease operations at Noa Home, we recognized a charge of $1,827 to fully impair the Noa Home trade name intangible asset. At November 30, 2024, our indefinite-lived intangible asset other than goodwill consisted of the trade name acquired in the acquisition of Lane Venture and had a carrying value of $6,848.
Definite-lived intangible assets are amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We estimate the useful lives of our intangible assets and ratably amortize the value over the estimated useful lives of those assets. If the estimates of the useful lives should change, we will amortize the remaining book value over the remaining useful lives or, if an asset is deemed to be impaired, a write-down of the value of the asset may be required at such time. At November 30, 2024 our definite-lived intangible assets consist of customer relationships acquired in the acquisition of Lane Venture with a carrying value of $120.
Impairment of Long-Lived Assets - We periodically evaluate whether events or circumstances have occurred that indicate long-lived assets may not be recoverable or that the remaining useful life may warrant revision. When such events or circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value will be recovered through the expected undiscounted future cash flows resulting from the use of the asset. In the event the sum of the expected undiscounted future cash flows is less than the carrying value of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. When analyzing our real estate properties for potential impairment, we consider such qualitative factors as our experience in leasing and selling real estate properties as well as specific site and local market characteristics. Upon the closure of a Bassett Home Furnishings store, we generally write off all tenant improvements which are only suitable for use in such a store. Right of use assets under operating leases are written down to their estimated fair value. Our estimates of the fair value of the impaired right of use assets include estimates of discounted cash flows based upon current market rents and other inputs which we consider to be Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurement and Disclosure.
Recent Accounting Pronouncements
See Note 2 to our Consolidated Financial Statements regarding the impact or potential impact of recent accounting pronouncements upon our financial position and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in the value of foreign currencies. Substantially all of our purchases outside of North America are denominated in U.S. dollars. Therefore, we believe that gains or losses resulting from changes in the value of foreign currencies relating to foreign purchases not denominated in U.S. dollars would not be material to our results from operations in fiscal 2024. We were also exposed to foreign currency market risk through our investment in Noa Home. Our investment in Noa Home was subject to changes in the value of the Canadian dollar versus the U.S. dollar. Additionally, Noa Home was exposed to other local currency fluctuation risk through its operations in Australia, Singapore, the United States and the United Kingdom. During fiscal 2024, we recognized a charge of $962 resulting from the realization of Noa Home’s cumulative translation losses that were previously carried in accumulated other comprehensive income.
We are exposed to market risk from changes in the cost of raw materials used in our manufacturing processes, principally wood, woven fabric, and foam products. The cost of foam products, which are petroleum-based, is sensitive to changes in the prices of oil and refined petroleum materials.
We are also exposed to commodity price risk related to diesel fuel prices for fuel used in our retail segment for home delivery as well as through amounts we are charged for logistical services by our service providers. We manage our exposure to that risk primarily through the application of fuel surcharges to our customers.
We have potential exposure to market risk related to conditions in the commercial real estate market. Our retail real estate holdings of $24,127 and $24,279 at November 30, 2024 and November 25, 2023, respectively, for Company-owned stores, consisting of eight locations with a total of 203,465 square feet of space, could suffer significant impairment in value if we are forced to close additional stores and sell or lease the related properties during periods of weakness in certain markets. Additionally, if we are required to assume responsibility for payment under the lease obligations of $5,131 and $1,845 which we have guaranteed on behalf of licensees as of November 30, 2024 and November 25, 2023, respectively, we may not be able to secure sufficient sub-lease income in the current market to offset the payments required under the guarantees. We are also exposed to risk related to conditions in the commercial real estate rental market with respect to the right-of-use assets we carry on our balance sheet for leased retail store locations and warehouse facilities. At November 30, 2024, the unamortized balance of such right-of-use assets totaled $93,472. Should we have to close or otherwise abandon one of these leased locations, we could incur additional impairment charges if rental market conditions do not support a fair value for the right of use asset in excess of its carrying value.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Bassett Furniture Industries, Incorporated and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Bassett Furniture Industries, Incorporated and subsidiaries (the Company) as of November 30, 2024 and November 25, 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended November 30, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at November 30, 2024 and November 25, 2023, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of November 30, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 10, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.
|
Measurement of Wholesale Reserves for Excess and Obsolete Inventories |
|
| Description of the Matter | At November 30, 2024, the Company’s inventories were $54.9 million. As discussed in Note 2 and Note 6 to the consolidated financial statements, cost for wholesale, domestic manufactured furniture inventories is determined using the last-in, first-out (“LIFO”) method and are stated at the lower of cost or market. The cost of imported inventories and domestic outdoor furniture products is determined using the first-in, first-out (“FIFO”) method and stated at the lower of cost or net realizable value. Wholesale reserves for excess and obsolete inventories are determined based upon specific identification, historical write-offs, recent and projected sales trends, and, for domestic manufactured furniture, the respective valuations at LIFO. Auditing management’s wholesale excess or obsolete inventories was complex due to the highly judgmental nature and estimation uncertainty in determining reserve percentages based on specific identification. |
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s determination of the wholesale reserves for excess and obsolete inventories. For example, we tested the control over management’s review of the calculation of wholesale reserves for excess and obsolete inventories, which included their review of the significant assumptions described above. Our audit procedures to test the reserves for wholesale excess and obsolete inventories included, among others, testing the completeness and accuracy of the underlying data used in management’s analyses, including the specific identification of inventory categories. We evaluated the reasonableness of management’s assumptions by performing a retrospective review of historical assumptions to actual activity, including write-off history and changes in on-hand inventory quantities. We also evaluated the Company’s reserve for wholesale excess and obsolete inventories as compared to the wholesale inventory valuation at LIFO. We held discussions with senior financial and operational management to determine whether any strategic or operational changes in the business would impact expected demand for or related carrying value of inventory. We also performed substantive analytical procedures designed to predict the ending inventory reserve balance using historical reserve percentages adjusted for our knowledge of current year sales and inventory levels. We searched for and evaluated information that corroborated or contradicted the Company’s assumptions. |
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2002.
Richmond, Virginia
February 10, 2025
Consolidated Balance Sheets
Bassett Furniture Industries, Incorporated and Subsidiaries
November 30, 2024 and November 25, 2023
(In thousands, except share and per share data)
|
2024 |
2023 |
|||||||
|
Assets |
||||||||
|
Current assets |
||||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Short-term investments |
||||||||
|
Accounts receivable, net of allowance for credit losses of $ |
||||||||
|
Inventories |
||||||||
|
Recoverable income taxes |
||||||||
|
Other current assets |
||||||||
|
Total current assets |
||||||||
|
Property and equipment, net |
||||||||
|
Other long-term assets |
||||||||
|
Deferred income taxes, net |
||||||||
|
Goodwill and other intangible assets |
||||||||
|
Right of use assets under operating leases |
||||||||
|
Other |
||||||||
|
Total other long-term assets |
||||||||
|
Total assets |
$ | $ | ||||||
|
Liabilities and Stockholders’ Equity |
||||||||
|
Current liabilities |
||||||||
|
Accounts payable |
$ | $ | ||||||
|
Accrued compensation and benefits |
||||||||
|
Customer deposits |
||||||||
|
Current portion of operating lease obligations |
||||||||
|
Other accrued liabilities |
||||||||
|
Total current liabilities |
||||||||
|
Long-term liabilities |
||||||||
|
Post employment benefit obligations |
||||||||
|
Long-term portion of operating lease obligations |
||||||||
|
Other long-term liabilities |
||||||||
|
Total long-term liabilities |
||||||||
|
Commitments and Contingencies |
|
|
||||||
|
Stockholders’ equity |
||||||||
|
Common stock, $ |
||||||||
|
Retained earnings |
||||||||
|
Additional paid-in-capital |
||||||||
|
Accumulated other comprehensive income |
||||||||
|
Total stockholders' equity |
||||||||
|
Total liabilities and stockholders’ equity |
$ | $ | ||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Operations
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 30, 2024, November 25, 2023, and November 26, 2022
(In thousands, except per share data)
|
2024 |
2023 |
2022 |
||||||||||
|
Net sales of furniture and accessories |
$ | $ | $ | |||||||||
|
Cost of furniture and accessories sold |
||||||||||||
|
Gross profit |
||||||||||||
|
Selling, general and administrative expenses |
||||||||||||
|
Asset impairment charges |
||||||||||||
|
Loss on contract abandonment |
||||||||||||
|
Loss upon realization of cumulative translation adjustment |
||||||||||||
|
Restructuring charges |
||||||||||||
|
Goodwill impairment charge |
||||||||||||
|
Gain on revaluation of contingent consideration |
||||||||||||
|
Gain on sale of real estate |
||||||||||||
|
Income (loss) from continuing operations |
( |
) | ( |
) | ||||||||
|
Interest income |
||||||||||||
|
Interest expense |
( |
) | ( |
) | ( |
) | ||||||
|
Other loss, net |
( |
) | ( |
) | ( |
) | ||||||
|
Income (loss) from continuing operations before income taxes |
( |
) | ( |
) | ||||||||
|
Income tax expense (benefit) |
( |
) | ||||||||||
|
Income (loss) from continuing operations |
( |
) | ( |
) | ||||||||
|
Discontinued operations: |
||||||||||||
|
Income from operations of logistical services |
||||||||||||
|
Gain on disposal |
||||||||||||
|
Income tax expense |
||||||||||||
|
Income from discontinued operations |
||||||||||||
|
Net income (loss) |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Basic earnings (loss) per share: |
||||||||||||
|
Income (loss) from continuing operations |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Income from discontinued operations |
||||||||||||
|
Basic earnings (loss) per share |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Diluted earnings (loss) per share: |
||||||||||||
|
Income (loss) from continuing operations |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Income from discontinued operations |
||||||||||||
|
Diluted earnings (loss) per share |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Dividends per share |
||||||||||||
|
Regular dividends |
$ | $ | $ | |||||||||
|
Special dividend |
$ | $ | $ | |||||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Comprehensive Income (Loss)
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 30, 2024, November 25, 2023, and November 25, 2022
(In thousands)
|
2024 |
2023 |
2022 |
||||||||||
|
Net income (loss) |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Other comprehensive income (loss): |
||||||||||||
|
Foreign currency translation adjustments |
( |
) | ( |
) | ||||||||
|
Income taxes related to foreign currency translation adjustments |
( |
) | ||||||||||
|
Actuarial adjustment to |
||||||||||||
|
Long Term Cash Awards (LTCA) |
( |
) | ||||||||||
|
Amortization associated with LTCA |
||||||||||||
|
Income taxes related to LTCA |
( |
) | ( |
) | ||||||||
|
Actuarial adjustment to supplemental executive retirement defined benefit plan (SERP) |
||||||||||||
|
Amortization associated with SERP |
( |
) | ||||||||||
|
Income taxes related to SERP |
( |
) | ( |
) | ( |
) | ||||||
|
Other comprehensive income (loss), net of tax |
||||||||||||
|
Total comprehensive income (loss) |
$ | ( |
) | $ | ( |
) | $ | |||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Cash Flows
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 30, 2024, November 25, 2023, and November 26, 2022
(In thousands)
|
2024 |
2023 |
2022 |
||||||||||
|
Operating activities: |
||||||||||||
|
Net income (loss) |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||||
|
Depreciation and amortization |
||||||||||||
|
Gain on disposal of discontinued operations |
( |
) | ||||||||||
|
Non-cash goodwill impairment charge |
||||||||||||
|
Gain on revaluation of contingent consideration |
( |
) | ||||||||||
|
Asset impairment charges |
||||||||||||
|
Net loss (gain) on disposals of property and equipment |
( |
) | ||||||||||
|
Inventory valuation charges |
||||||||||||
|
Deferred income taxes |
( |
) | ( |
) | ||||||||
|
Other, net |
( |
) | ||||||||||
|
Changes in operating assets and liabilities |
||||||||||||
|
Accounts receivable |
||||||||||||
|
Inventories |
( |
) | ||||||||||
|
Other current and long-term assets |
( |
) | ||||||||||
|
Right of use assets under operating leases |
||||||||||||
|
Customer deposits |
( |
) | ( |
) | ||||||||
|
Accounts payable and accrued 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 |
||||||||||||
|
Cash paid for business acquisitions, net of cash acquired |
( |
) | ||||||||||
|
Investment in certificates of deposit |
( |
) | ( |
) | ||||||||
|
Proceeds from the disposition of discontinued operations |
||||||||||||
|
Other |
( |
) | ( |
) | ( |
) | ||||||
|
Net cash provided by (used in) investing activities |
( |
) | ( |
) | ||||||||
|
Financing activities: |
||||||||||||
|
Cash dividends |
( |
) | ( |
) | ( |
) | ||||||
|
Issuance of common stock |
||||||||||||
|
Repurchases of common stock |
( |
) | ( |
) | ( |
) | ||||||
|
Taxes paid related to net share settlement of equity awards |
( |
) | ( |
) | ( |
) | ||||||
|
Repayment 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 year |
||||||||||||
|
Cash and cash equivalents - end of year |
$ | $ | $ | |||||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Stockholders’ Equity
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 30, 2024, November 25, 2023, and November 26, 2022
(In thousands, except share and per share data)
|
Accumulated |
||||||||||||||||||||||||
|
Additional |
other |
|||||||||||||||||||||||
|
Common Stock |
paid-in |
Retained |
comprehensive |
|||||||||||||||||||||
|
Shares |
Amount |
capital |
earnings |
income (loss) |
Total |
|||||||||||||||||||
|
Balance, November 27, 2021 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
|
Comprehensive income (loss) |
||||||||||||||||||||||||
|
Net income |
- | |||||||||||||||||||||||
|
Foreign currency translation adjustments, net of tax |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Amortization of defined benefit plan costs, net of tax |
- | |||||||||||||||||||||||
|
Actuarial adjustments to defined benefit plans, net of tax |
- | |||||||||||||||||||||||
|
Regular dividends ($ |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Special dividend ($ |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Issuance of common stock |
||||||||||||||||||||||||
|
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
|
Stock-based compensation |
- | |||||||||||||||||||||||
|
Balance, November 26, 2022 |
||||||||||||||||||||||||
|
Comprehensive income (loss) |
||||||||||||||||||||||||
|
Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Foreign currency translation adjustments, net of tax |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Amortization of defined benefit plan costs, net of tax |
- | |||||||||||||||||||||||
|
Actuarial adjustments to defined benefit plans, net of tax |
- | |||||||||||||||||||||||
|
Regular dividends ($ |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Issuance of common stock |
( |
) | ||||||||||||||||||||||
|
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
|
Stock-based compensation |
- | |||||||||||||||||||||||
|
Balance, November 25, 2023 |
||||||||||||||||||||||||
|
Comprehensive income (loss) |
||||||||||||||||||||||||
|
Net income |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Foreign currency translation adjustments, net of tax |
- | |||||||||||||||||||||||
|
Amortization of defined benefit plan costs, net of tax |
- | |||||||||||||||||||||||
|
Actuarial adjustments to defined benefit plans, net of tax |
- | |||||||||||||||||||||||
|
Regular dividends ($ |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Issuance of common stock |
( |
) | ||||||||||||||||||||||
|
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
|
Stock-based compensation |
- | |||||||||||||||||||||||
|
Balance, November 30, 2024 |
$ | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
|
1. |
Description of Business |
Bassett Furniture Industries, Incorporated (together with its consolidated subsidiaries, “Bassett”, “we”, “our”, the “Company”) based in Bassett, Virginia, is a leading manufacturer, marketer and retailer of branded home furnishings. Bassett’s full range of furniture products and accessories, designed to provide quality, style and value, are sold through an exclusive nation-wide network of
We sourced approximately
|
2. |
Significant Accounting Policies |
Basis of Presentation and Principles of Consolidation
Our fiscal year ends on the last Saturday in November, which periodically results in a 53-week year. Fiscal 2024 contained 53 weeks while fiscal 2023 and 2022 each contained 52 weeks. The Consolidated Financial Statements include the accounts of Bassett Furniture Industries, Incorporated and our majority-owned subsidiaries in which we have a controlling interest. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). Unless otherwise indicated, references in the Consolidated Financial Statements to fiscal 2024, 2023 and 2022 are to Bassett's fiscal year ended November 30, 2024, November 25, 2023 and November 26, 2022, respectively. References to the “ASC” included hereinafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board as the source of authoritative GAAP.
We analyzed our licensees under the requirements for variable interest entities (“VIEs”). All of these licensees operate as BHF stores and are furniture retailers. We sell furniture to these licensees, and in some cases have extended credit beyond normal terms, made lease guarantees, guaranteed loans, or loaned directly to the licensees. We have recorded reserves for potential exposures related to these licensees. See Note 15 for disclosure of leases and lease guarantees. Based on financial projections and best available information, all licensees have sufficient equity to carry out their principal operating activities without subordinated financial support. Furthermore, we believe that the power to direct the activities that most significantly impact the licensees’ operating performance continues to lie with the ownership of the licensee dealers. Our rights to assume control over or otherwise influence the licensees’ significant activities only exist pursuant to our license and security agreements and are in the nature of protective rights as contemplated under ASC Topic 810. We completed our assessment for other potential VIEs and concluded that there were none. We will continue to reassess the status of potential VIEs including when facts and circumstances surrounding each potential VIE change.
During the second and third quarters of fiscal 2022, we were the primary beneficiary of one VIE by virtue of our control over the activities that most significantly impacted the entity’s economic performance. This VIE was created to affect 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 14). 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.
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. See Note 18 for additional information. Costs incurred by Bassett for logistical services performed for Bassett by Zenith are included in selling, general and administrative expenses.
On September 2, 2022, we acquired
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates include allowances for doubtful accounts, calculation of inventory reserves, the valuation of our reporting units for the purpose of testing the carrying value of goodwill, and the valuation of our right of use assets. We also utilize estimates in determining the valuation of income tax reserves, insurance reserves, and assumptions related to our post-employment benefit obligations. Actual results could differ from those estimates.
Revenue Recognition
ASC Topic 606, Revenue from Contracts with Customers, requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects 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. We offer payment terms varying from
At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. We typically collect a significant portion of the purchase price as a customer deposit upon order, with the balance typically collected upon delivery. These 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 November 30, 2024 and November 25, 2023, our balance of prepaid commissions included in other current assets was $
For our accounting and reporting under ASC 606, we apply the following policy elections and practical expedients:
|
• |
We exclude from revenue amounts collected from customers for sales tax. |
|
• |
We do not adjust the promised amount of consideration for the effects of a significant financing component since the period of time between transfer of our goods or services and the collection of consideration from the customer is less than one year. |
|
• |
We do not disclose the value of unsatisfied performance obligations because the transfer of goods or services is made within one year of the placement of customer orders. |
See Note 20 for disaggregated revenue information.
Cash Equivalents and Short-Term Investments
The Company considers cash on hand, demand deposits in banks and all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. Our short-term investments consist of certificates of deposit that have original maturities of twelve months or less but greater than three months.
Accounts Receivable
Substantially all of our trade accounts receivable is due from customers located within the United States. 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.
Concentrations of Credit Risk and Major Customers
Financial instruments that subject us to credit risk consist primarily of investments, accounts and notes receivable and financial guarantees. Investments are managed within established guidelines to mitigate risks. Accounts and notes receivable and financial guarantees subject us to credit risk partially due to the concentration of amounts due from and guaranteed on behalf of independent licensee customers. At November 30, 2024 and November 25, 2023, our aggregate exposure from receivables and guarantees related to customers consisted of the following:
|
2024 |
2023 |
|||||||
|
Accounts receivable, net of allowances (Note 5) |
$ | $ | ||||||
|
Contingent obligations under lease and loan guarantees, less amounts recognized (Note 15) |
||||||||
|
Other |
||||||||
|
Total credit risk exposure related to customers |
$ | $ | ||||||
At November 30, 2024 and November 25, 2023, approximately
We have no foreign manufacturing operations. We define export sales from our wholesale segment as sales to any country or territory other than the United States or its territories or possessions. Our wholesale export sales were approximately $
Inventories
Inventories (retail merchandise, finished goods, work in process and raw materials) accounted for under the first-in, first out (“FIFO”) method are stated at the lower of cost or net realizable value or, in the case of inventory accounted for under the last-in, first out (“LIFO”) method, at the lower of cost or market. Cost is determined for domestic manufactured furniture inventories using the LIFO method because we believe this methodology provides better matching of revenue and expenses. The cost of imported inventories as well as Lane Venture, Bassett Outdoor and Noa Home product inventories are determined on a first-in, first-out (“FIFO”) basis. Inventories accounted for under the LIFO method represented
Property and Equipment
Property and equipment is comprised of all land, buildings and leasehold improvements and machinery and equipment used in the manufacturing and warehousing of furniture, our Company-owned retail operations, our logistical services operations, and corporate administration. This property and equipment is stated at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of the respective assets utilizing the straight-line method. Buildings and improvements are generally depreciated over a period of
Goodwill
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets and liabilities and identifiable intangible assets of businesses acquired. The acquisition of assets and liabilities and the resulting goodwill is allocated to the respective reporting unit: Wood, Upholstery, Retail or Noa Home. We review goodwill at the reporting unit level annually for impairment or more frequently if events or circumstances indicate that assets might be impaired.
In accordance with ASC Topic 350, Intangibles – Goodwill & Other, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test described in ASC Topic 350. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative impairment test is unnecessary and our goodwill is considered to be unimpaired. However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed with performing the quantitative evaluation process. For the annual test of goodwill performed as of the beginning of the fourth quarter of fiscal 2024, we performed the qualitative assessment as described above with respect to our upholstery reporting unit and concluded that there was no impairment of goodwill. For the annual test of goodwill performed as of the beginning of the fourth quarter of fiscal 2023, we performed the qualitative assessment as described above with respect to our upholstery reporting unit and concluded that there was no impairment of the goodwill allocated to that reporting unit as of November 25, 2023. However, with respect to our Noa Home reporting unit, we proceeded to the quantitative test and concluded that the goodwill allocated to that reporting unit as of November 25, 2023 was fully impaired. For the annual test of goodwill performed as of the beginning of the fourth fiscal quarter of 2022, we performed the qualitative assessment as described above and concluded that there was no impairment of our goodwill as of November 26, 2022.
The quantitative evaluation compares the carrying value of each reporting unit that has goodwill with the estimated fair value of the respective reporting unit. Should the carrying value of a reporting unit be in excess of the estimated fair value of that reporting unit, a goodwill impairment charge will be recognized in the amount by which the reporting unit’s carrying amount exceeds its fair value, but not to exceed the total goodwill assigned to the reporting unit. The determination of the fair value of our reporting units is based on a combination of a market approach, that considers benchmark company market multiples, an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosure (see Note 4), and, in the case of our retail reporting unit, a cost approach that utilizes estimates of net asset value. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill impairment testing, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units. While we believe such assumptions and estimates are reasonable, the actual results may differ materially from the projected amounts. See Note 8 for additional information regarding the results of our goodwill impairment test performed as of the beginning of the fourth quarter of fiscal 2023.
Leases
Effective as of the beginning of fiscal 2020, we adopted ASU 2016-02, Leases (Topic 842) and all related amendments. The guidance requires lessees to recognize substantially all leases on their balance sheet as a right-of-use (“ROU”) asset and a lease liability.
We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of certain of our licensee-owned stores, and we lease land and buildings at various locations throughout the continental United States for warehouse space used in our retail segment. We also lease local delivery trucks used in our retail segment. We determine if a contract contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially all of the economic benefits from the use of that identified asset. Our real estate lease terms range from to
Most of our leases do not have an interest rate implicit in the lease. As a result, for purposes of measuring our ROU asset and lease liability, we determine our incremental borrowing rate by applying a spread above the U.S. Treasury borrowing rates. In the case an interest rate is implicit in a lease we will use that rate as the discount rate for that lease. Some of our leases contain variable rent payments based on a Consumer Price Index or percentage of sales. Due to the variable nature of these costs, they are not included in the measurement of the ROU asset and lease liability.
We adopted the standard utilizing the transition election to not restate comparative periods for the impact of adopting the standard and recognizing the cumulative impact of adoption in the opening balance of retained earnings. We elected the package of transition expedients available for expired or existing contracts, which allowed the carry-forward of historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, we have elected the practical expedient to not separate lease and non-lease components when determining the ROU asset and lease liability and have elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. We have also elected the hindsight practical expedient to determine the lease term for existing leases. In our application of hindsight, we evaluated the performance of the leased stores and the associated markets in relation to our overall real estate strategies, which resulted in the determination that most renewal options would not be reasonably certain in determining the expected lease term. We have made an accounting policy election to not recognize ROU assets and lease liabilities on the balance sheet for those leases with initial terms of one year or less and instead such lease obligations will be expensed on a straight-line basis over the lease term.
See Note 15 for additional information regarding our leases.
Other Intangible Assets
Intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are tested for impairment annually or between annual tests when an impairment indicator exists. The recoverability of indefinite-lived intangible assets is assessed by comparison of the carrying value of the asset to its estimated fair value. If we determine that the carrying value of the asset exceeds its estimated fair value, an impairment loss equal to the excess would be recorded. During the second quarter of fiscal 2024, in conjunction with our decision to close Noa Home and cease operations by the end of fiscal 2024, we fully impaired the carrying value of the intangible asset for the Noa Home trade name.
Definite-lived intangible assets are amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We estimate the useful lives of our intangible assets and ratably amortize the value over the estimated useful lives of those assets. If the estimates of the useful lives should change, we will amortize the remaining book value over the remaining useful lives or, if an asset is deemed to be impaired, a write-down of the value of the asset may be required at such time.
Impairment of Long Lived Assets
We periodically evaluate whether events or circumstances have occurred that indicate long-lived assets may not be recoverable or that the remaining useful life may warrant revision. When such events or circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value will be recovered through the expected undiscounted future cash flows resulting from the use and eventual disposition of the asset. In the event the sum of the expected undiscounted future cash flows is less than the carrying value of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Fair value is determined based on discounted cash flows or appraised values depending on the nature of the assets. The long-term nature of these assets requires the estimation of cash inflows and outflows several years into the future.
When analyzing our real estate properties for potential impairment, we consider such qualitative factors as our experience in leasing and selling real estate properties as well as specific site and local market characteristics. Upon the closure of a Bassett Home Furnishings store, we generally write off all tenant improvements which are only suitable for use in such a store. ROU assets under operating leases are written down to their estimated fair value. Our estimates of the fair value of the impaired ROU assets included estimates of discounted cash flows based upon current market rents and other inputs which we consider to be Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurement and Disclosure (see Note 4).
Income Taxes
We account for income taxes under the liability method which requires that we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Despite our belief that our liability for unrecognized tax benefits is adequate, it is often difficult to predict the final outcome or the timing of the resolution of any particular tax matters. We may adjust these liabilities as relevant circumstances evolve, such as guidance from the relevant tax authority or our tax advisors, or resolution of issues in the courts. These adjustments are recognized as a component of income tax expense in the period in which they are identified.
We evaluate our deferred income tax assets to determine if valuation allowances are required or should be adjusted. A valuation allowance is established against our deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward or carryback periods, our experience with tax attributes expiring unused and tax planning alternatives. In making such judgments, significant weight is given to evidence that can be objectively verified. See Note 13 for additional information regarding our income taxes.
Shipping and Handling Costs
Costs incurred to deliver wholesale merchandise to customers are recorded in selling, general and administrative expense and totaled $
Advertising
Costs incurred for producing and distributing advertising and advertising materials are expensed when incurred and are included in selling, general and administrative expenses. Advertising costs totaled $
Insurance Reserves
We have self-funded insurance programs in place to cover workers’ compensation and health insurance. These insurance programs are subject to various stop-loss limitations. We accrue estimated losses using historical loss experience. Although we believe that the insurance reserves are adequate, the reserve estimates are based on historical experience, which may not be indicative of current and future losses. We adjust insurance reserves, as needed, in the event that future loss experience differs from historical loss patterns.
Supplemental Cash Flow Information
Refer to the supplemental lease disclosures in Note 15 for cash flow impacts of leasing transactions during fiscal 2024, 2023 and 2022. At November 30, 2024, $
Recent Accounting Pronouncements
Recent Pronouncements Not Yet Adopted
In June 2022, the FASB issued Accounting Standards Update No. 2022-03 – Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, to clarify the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The amendments in ASU 2022-03 clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. In addition, the amendments in ASU 2022-03 require certain additional disclosures related to investments in equity securities subject to contractual sale restrictions. The amendments in ASU 2022-03 will become effective for us as of the beginning of our 2025 fiscal year. Early adoption is permitted. As of November 30, 2024 we do not hold any investments in equity securities, therefore we do not currently expect that this guidance will have a material impact upon our financial position and results of operations.
In November 2023, the FASB issued Accounting Standards Update 2023-07 – Segment Reporting (Topic ASC 740) Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update require: that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”); and that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss. The amendments in ASU 2023-07 will become effective for us for our 2025 fiscal year and for interim periods beginning with our 2026 fiscal year. Early adoption is permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations.
In December 2023, the FASB issued Accounting Standards Update 2023-09 – Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 will become effective for us as of the beginning of our 2026 fiscal year. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect that this guidance will have a material impact upon our financial position and results of operations.
In November 2024, the FASB issued Accounting Standards Update 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic ASC 220-40) Disaggregation of Income Statement Expenses. The amendments in this ASU require a public business entity to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods. The objective of the disclosure requirements is to provided disaggregated information about a public business entity's expenses to help investors (a) better understand the entity's performance, (b) better assess the entity's prospects for future cash flows, and (c) compare an entity's performance over time and with that of other entities. The amendments in ASU 2024-03 will become effective for us for our 2028 fiscal year and for interim periods beginning with our 2029 fiscal year. Early adoption is permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations.
|
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 purchase price (translated into U.S. dollars as of the acquisition date) is as follows:
|
Fair value of consideration transferred in exchange for 100% of Noa Home: |
||||
|
Cash |
$ | |||
|
Fair value of contingent consideration payable |
||||
|
Total fair value of consideration paid or payable |
$ | |||
|
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 US tax purposes. Among the factors that contributed to a purchase price resulting in the recognition of goodwill were 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. As part of our annual test for impairment of goodwill as of the beginning of the fourth quarter of fiscal 2023, all of the goodwill recognized at acquisition was fully impaired. See Note 8 for additional information regarding the impairment.
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. See Note 4.
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 pro forma impact of the acquisition has not been presented because it was not material to our consolidated results of operations for the fiscal year ended November 26, 2022.
|
4. |
Financial Instruments, Investments and Fair Value Measurements |
Financial Instruments
Our financial instruments include cash and cash equivalents, short-term investments in certificates of deposit, accounts receivable, and accounts payable. Because of their short maturities, the carrying amounts of cash and cash equivalents, short-term investments in certificates of deposit, accounts receivable, and accounts payable approximate fair value.
Investments
Our short-term investments of $
Our investment in CDs at November 30, 2024 includes one CD in the amount of $
Fair Value Measurement
The Company accounts for items measured at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:
Level 1 Inputs– Quoted prices for identical instruments in active markets.
Level 2 Inputs– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs– Instruments with primarily unobservable value drivers.
We believe that the carrying amounts of our current assets and current liabilities approximate fair value due to the short-term nature of these items. Our primary non-recurring fair value estimates typically involve the following: business acquisitions (Note 3) which involve a combination of Level 2 and Level 3 inputs to determine the fair value of contingent consideration and net assets acquired, including identified intangible assets; goodwill impairment testing (Note 8), which involves Level 3 inputs; and asset impairments (Note 14) which utilize Level 3 inputs.
5. Accounts Receivable
Accounts receivable consist of the following:
| November 30, 2024 | November 25, 2023 | |||||||
|
Gross accounts receivable |
$ | $ | ||||||
|
Allowance for credit losses |
( |
) | ( |
) | ||||
|
Net accounts receivable |
$ | $ | ||||||
Activity in the allowance for credit losses was as follows:
|
2024 |
2023 |
|||||||
|
Balance, beginning of the year |
$ | $ | ||||||
|
Additions (recoveries) charged to expense |
||||||||
|
Reductions to allowance, net |
( |
) | ( |
) | ||||
|
Balance, end of the year |
$ | $ | ||||||
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
Inventories consist of the following:
|
November 30, 2024 |
November 25, 2023 |
|||||||
|
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 source a significant amount of our wholesale product from other countries. During 2024, 2023 and 2022, purchases from our three largest vendors primarily located in Vietnam were $
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 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 November 25, 2023 |
||||||||||||
|
Additions charged to expense |
||||||||||||
|
Write-offs |
( |
) | ( |
) | ( |
) | ||||||
|
Balance at November 30, 2024 |
$ | $ | $ | |||||||||
7. Property and Equipment
Property and equipment consist of the following:
|
November 30, 2024 |
November 25, 2023 |
|||||||
|
Land |
$ | $ | ||||||
|
Buildings and leasehold improvements |
||||||||
|
Machinery and equipment |
||||||||
|
Property and equipment at cost |
||||||||
|
Less accumulated depreciation |
( |
) | ( |
) | ||||
|
Property and equipment, net |
$ | $ | ||||||
The net book value of our property and equipment by reportable segment is a follows:
|
November 30, 2024 |
November 25, 2023 |
|||||||
|
Wholesale |
$ | $ | ||||||
|
Retail - Company-owned stores |
||||||||
|
Corporate and other |
||||||||
|
Total property and equipment, net |
$ | $ | ||||||
Depreciation expense associated with the property and equipment shown above was included in income from operations in our consolidated statements of operations as follows:
|
2024 |
2023 |
2022 |
||||||||||
|
Cost of goods sold (wholesale segment) |
$ | $ | $ | |||||||||
|
Selling, general and administrative expenses: |
||||||||||||
|
Wholesale segment |
||||||||||||
|
Retail segment |
||||||||||||
|
Corporate and Other |
||||||||||||
|
Total included in selling, general and administrative expenses |
||||||||||||
|
Total depreciation expense included in income from operations |
$ | $ | $ | |||||||||
8. Goodwill and Other Intangible Assets
Goodwill and other intangible assets consisted of the following:
|
November 30, 2024 |
||||||||||||
|
Gross Carrying Amount |
Accumulated Amortization |
Intangible Assets, Net |
||||||||||
|
Intangibles subject to amortization: |
||||||||||||
|
Customer relationships |
$ | $ | ( |
) | $ | |||||||
|
Intangibles not subject to amortization: |
||||||||||||
|
Trade name |
||||||||||||
|
Goodwill |
||||||||||||
|
Total goodwill and other intangible assets |
$ | |||||||||||
|
November 25, 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 |
$ | |||||||||||
We performed the annual test for impairment of the carrying value of our goodwill as of the beginning of the fourth quarter of fiscal 2024. Based on the initial qualitative analysis performed under ASC Topic 350, we concluded that is was not more likely than not that the carrying value of our upholstery reporting unit within our wholesale segment exceeded its fair value. We performed the annual test for impairment of the carrying value of our goodwill as of the beginning of the fourth quarter of fiscal 2023. Based on the initial qualitative analysis performed under ASC Topic 350, we concluded that it was not more likely than not that the carrying value of our upholstery reporting unit within our wholesale segment exceeded its fair value. However, due to the actual and expected future underperformance of our Noa Home reporting unit relative to management's original expectations, we performed a strategic review of the operations as of the beginning of the fourth quarter and concluded that Noa Home should exit the Australian market and focus more on the North American market. Coupled with the financial underperformance and the exit of Australia, we performed a quantitative test of the carrying value of the goodwill recognized as part of the 2022 acquisition of Noa Home and concluded that it was necessary to fully impair the carrying value of the Noa Home goodwill, resulting in a non-cash impairment charge of $5,409 in fiscal 2023.
The determination of the fair value of our reporting units is based on a combination of a market approach, that considers benchmark company market multiples and comparable transactions occurring within the last two years and an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosure (see Note 4) The valuation of the Noa Home reporting unit was primarily based on the market approach due to significant uncertainty in the future cash flows of Noa Home. Under the income approach, we determine fair value based on the present value of the most recent cash flow projections for each reporting unit as of the date of the analysis and calculate a terminal value utilizing a terminal growth rate. The significant assumptions under this approach include, among others: income projections, which are dependent on future sales, new product introductions, customer behavior, competitor pricing, operating expenses, the discount rate, and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill impairment testing, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units.
Changes in the carrying amounts of goodwill by reportable segment were as follows:
|
Wholesale |
Retail |
Corporate and Other |
Total |
|||||||||||||
|
Balance as of November 26, 2022 |
$ | $ | $ | $ | ||||||||||||
|
Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||||||
|
Full impairment of Noa Home goodwill |
( |
) | ( |
) | ||||||||||||
|
Balance as of November 25, 2023 |
||||||||||||||||
|
No changes in fiscal 2024 |
||||||||||||||||
|
Balance as of November 30, 2024 |
$ | $ | $ | $ | ||||||||||||
Accumulated impairment losses were $
The weighted average useful lives of our finite-lived intangible assets and remaining amortization periods as of November 30, 2024 are as follows:
|
Useful Life in Years |
Remaining Amortization Period in Years |
|||||||
|
Customer relationships |
||||||||
Our trade name intangible asset at November 30, 2024 is associated with Lane Venture. Because it is our intention to maintain and grow this brand, it is considered to be an indefinite-lived intangible asset. At November 25, 2023 our trade name intangible assets also included an asset for the Noa Home trade name which had been considered an indefinite-lived intangible asset upon acquisition in 2022. However, in connection with our decision to cease operations at Noa Home and liquidate its assets, the carrying value of the Noa Home trade name was fully impaired during the second quarter of fiscal 2024. The amortization expense associated with finite-lived intangible assets during fiscal 2024, 2023 and 2022 was $
|
Fiscal 2025 |
||||
|
Fiscal 2026 |
||||
|
Fiscal 2027 |
||||
|
Fiscal 2028 |
||||
|
Fiscal 2029 |
||||
|
Total |
$ |
9. Bank Credit Facility
On May 15, 2024, we entered into the Eighth Amended and Restated Credit Agreement with our bank (the “Credit Facility”). This Credit Facility provides for a line of credit of up to $
|
● |
Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than |
|
● |
Consolidated Lease Adjusted Leverage to EBITDAR Ratio (as defined in the Credit Facility) not to exceed |
Since our used commitment was less than $
Interest paid during fiscal 2024, 2023 and 2022 was not material.
10. Post-Employment Benefit Obligations
Management Savings Plan
On May 1, 2017, our Board of Directors, upon the recommendation of the Organization, Compensation and Nominating Committee (the “Committee”), adopted the Bassett Furniture Industries, Incorporated Management Savings Plan (the “Plan”). The Plan is an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees.
The Plan is an account-based plan under which (i) participants may defer voluntarily the payment of current compensation to future years (“participant deferrals”) and (ii) the Company may make annual awards to participants payable in future years (“Company contributions”). The Plan permits each participant to defer up to
On May 2, 2017, we made Long Term Cash Awards (“LTC Awards”) totaling $
Supplemental Retirement Income Plan
We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives. Upon retirement, the Supplemental Plan provides for lifetime monthly payments in an amount equal to 65% of the participant’s final average compensation as defined in the Supplemental Plan, which is reduced by certain social security benefits to be received and other benefits provided by us. The Supplemental Plan also provides a death benefit that is calculated as (a) prior to retirement death, which pays the beneficiary 50% of final average annual compensation for a period of 120 months, or (b) post-retirement death, which pays the beneficiary 200% of final average compensation in a single payment. We own life insurance policies on these executives with a current net death benefit of $1,587 at November 30, 2024. We expect that any death benefit payable out of the plan would be substantially offset by the proceeds received from our life insurance policy upon the death of the executive. Funding for the remaining cash flows is expected to be provided through operations. There are no benefits payable as a result of a termination of employment for any reason other than death or retirement, other than a change of control provision which provides for the immediate vesting and payment of the retirement benefit under the Supplemental Plan in the event of an employment termination resulting from a change of control.
Aggregated summarized information for the Supplemental Plan and the LTC Awards, measured as of the end of each year presented, is as follows:
|
` |
2024 |
2023 |
||||||
|
Change in Benefit Obligation: |
||||||||
|
Projected benefit obligation at beginning of year |
$ | $ | ||||||
|
Service cost |
||||||||
|
|
||||||||
|
Actuarial (gains) and losses |
( |
) | ( |
) | ||||
|
Benefits paid |
( |
) | ( |
) | ||||
|
Projected benefit obligation at end of year |
$ | $ | ||||||
|
Accumulated Benefit Obligation |
$ | $ | ||||||
|
Discount rate used to value the ending benefit obligations: |
% | % | ||||||
|
Amounts recognized in the consolidated balance sheet: |
||||||||
|
Current liabilities |
$ | $ | ||||||
|
Noncurrent liabilities |
||||||||
|
Total amounts recognized |
$ | $ | ||||||
|
Amounts recognized in accumulated other comprehensive income: before income tax effects: |
||||||||
|
Prior service cost |
$ | $ | ||||||
|
Actuarial (gain) loss |
( |
) | ( |
) | ||||
|
Net amount recognized |
$ | ( |
) | $ | ( |
) | ||
|
Total recognized in net periodic benefit cost and accumulated other comprehensive income: |
$ | $ | ( |
) | ||||
|
2024 |
2023 |
2022 |
||||||||||
|
Components of Net Periodic Pension Cost: |
||||||||||||
|
Service cost |
$ | $ | $ | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
|
( |
) | ||||||||||
|
Net periodic pension cost |
$ | $ | $ | |||||||||
|
Assumptions used to determine net periodic pension cost: |
||||||||||||
|
Discount rate |
% | % | % | |||||||||
|
Increase in future compensation levels |
% | % | % |
|
Estimated Future Benefit Payments (with mortality): |
||||
|
Fiscal 2025 |
$ | |||
|
Fiscal 2026 |
||||
|
Fiscal 2027 |
||||
|
Fiscal 2028 |
||||
|
Fiscal 2029 |
||||
|
Fiscal 2030 through 2034 |
Of the $
The components of net periodic pension cost other than the service cost component are included in other loss, net in our consolidated statements of operations.
Deferred Compensation Plan
We have an unfunded Deferred Compensation Plan that covers one current and certain former executives and provides for voluntary deferral of compensation. This plan has been frozen with no additional participants or benefits permitted. We recognized expense of $
Defined Contribution Plan
We have a qualified defined contribution plan (Employee Savings/Retirement Plan) that covers substantially all employees who elect to participate and have fulfilled the necessary service requirements. Employee contributions to the Plan are matched at the rate of
11. Accumulated Other Comprehensive Income (Loss)
The activity in accumulated other comprehensive income (loss) for the fiscal years ended November 30, 2024 and November 25, 2023, which is comprised of post-retirement benefit costs related to our SERP and LTC Awards as well as cumulative translation adjustments arising from our investment in Noa Home, is as follows:
|
Balance at November 26, 2022 |
$ | |||
|
Actuarial gains |
||||
|
Net pension amortization reclassified from accumulated other comprehensive loss |
||||
|
Foreign currency translation adjustment |
( |
) | ||
|
Tax effects |
( |
) | ||
|
Balance at November 25, 2023 |
||||
|
Actuarial gains |
||||
|
Net pension amortization reclassified from accumulated other comprehensive loss |
||||
|
Foreign currency translation adjustment (1) |
||||
|
Tax effects |
( |
) | ||
|
Balance at November 30, 2024 |
$ |
|
(1) |
|
12. Capital Stock and Stock Compensation
We account for our stock-based employee and director compensation plans in accordance with ASC 718, Compensation – Stock Compensation. ASC 718 requires recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period) which we recognize on a straight-line basis. Compensation expense related to restricted stock and stock options included in selling, general and administrative expenses in our consolidated statements of operations for fiscal 2024, 2023 and 2022 was as follows:
|
2024 |
2023 |
2022 |
||||||||||
|
Stock based compensation expense |
$ | $ | $ | |||||||||
Incentive Stock Compensation Plans
2021 Plan
On March 10, 2021, our shareholders approved the Bassett Furniture Industries, Incorporated 2021 Stock Incentive Plan (the “2021 Plan”). All present and future non-employee directors, key employees and outside consultants for the Company are eligible to receive incentive awards under the 2021 Plan. Our Organization, Compensation and Nominating Committee (the “OCN Committee”) selects eligible key employees and outside consultants to receive awards under the 2021 Plan in its discretion. Our Board of Directors or any committee designated by the Board of Directors selects eligible non-employee directors to receive awards under the 2021 Plan in its discretion. Five hundred thousand shares of common stock are reserved for issuance under the 2021 Plan. Participants may receive the following types of incentive awards under the 2021 Plan: stock options, stock appreciation rights, payment shares, restricted stock, restricted stock units and performance shares. Stock options may be incentive stock options or non-qualified stock options. Stock appreciation rights may be granted in tandem with stock options or as a freestanding award. Non-employee directors and outside consultants are eligible to receive restricted stock and restricted stock units only. The full terms of the 2021 Plan have been filed as an exhibit to our Schedule 14A filed with the United States Securities and Exchange Commission on February 8, 2021.
We have elected to account for forfeitures as they occur. Compensation cost for awards with graded vesting schedules are accounted for on a straight-line basis.
Restricted Shares
Changes in the outstanding non-vested restricted shares during the year ended November 30, 2024 were as follows:
|
Number of Shares |
Weighted Average Grant Date Fair Value Per Share |
|||||||
|
Non-vested restricted shares outstanding at November 25, 2023 |
$ | |||||||
|
Granted |
||||||||
|
Vested |
( |
) | ||||||
|
Non-vested restricted shares outstanding at November 30, 2024 |
$ | |||||||
During fiscal 2024,
Additional information regarding our outstanding non-vested restricted shares, which are all subject to service conditions, at November 30, 2024 is as follows:
|
Original |
Remaining |
|||||||||||||||
|
Restricted |
Share Value |
Vesting |
Restriction |
|||||||||||||
|
Grant |
Shares |
at Grant Date |
Period |
Period |
||||||||||||
|
Date |
Outstanding |
Per Share |
(Years) |
(Years) |
||||||||||||
|
January 12, 2022 |
$ | |||||||||||||||
|
January 11, 2023 |
||||||||||||||||
|
March 6, 2024 |
||||||||||||||||
|
October 29, 2024 |
||||||||||||||||
Unrecognized compensation cost related to these non-vested restricted shares at November 30, 2024 is $
Employee Stock Purchase Plan
In March of 2017 we adopted and implemented the 2017 Employee Stock Purchase Plan (“2017 ESPP”) that allows eligible employees to purchase a limited number of shares of our stock at
13. Income Taxes
The components of the income tax provision from continuing operations are as follows:
|
2024 |
2023 |
2022 |
||||||||||
|
Current: |
||||||||||||
|
Federal |
$ | ( |
) | $ | ( |
) | $ | |||||
|
State |
( |
) | ( |
) | ||||||||
|
Deferred: |
||||||||||||
|
Federal |
( |
) | ||||||||||
|
State |
( |
) | ||||||||||
|
Total |
$ | ( |
) | $ | $ | |||||||
A reconciliation of the statutory federal income tax rate and the effective income tax rate, as a percentage of income before income taxes, is as follows:
|
2024 |
2023 |
2022 |
||||||||||
|
Statutory federal income tax rate |
% |
% |
% |
|||||||||
|
State income tax, net of federal benefit |
||||||||||||
|
Nondeductible goodwill, restructuring and other charges |
( |
) | ( |
) | ||||||||
|
Nontaxable gain on revaluation of contingent consideration |
||||||||||||
|
Capital loss carryback |
||||||||||||
|
Other |
( |
) | ||||||||||
|
Change in valuation allowance |
( |
) | ( |
) | ||||||||
|
Effective income tax rate |
% | ( |
)% |
% |
||||||||
Excess tax benefits in the amount of $
The income tax effects of temporary differences and carryforwards, which give rise to significant portions of the deferred income tax assets and deferred income tax liabilities, are as follows:
|
November 30, 2024 |
November 25, 2023 |
|||||||
|
Deferred income tax assets: |
||||||||
|
Trade accounts receivable |
$ | $ | ||||||
|
Inventories |
||||||||
|
Post employment benefit obligations |
||||||||
|
Federal net operating loss and credit carryforwards |
||||||||
|
State net operating loss carryforwards |
||||||||
|
Foreign net operating loss carryforwards |
||||||||
|
Operating lease liabilities |
||||||||
|
Other |
||||||||
|
Gross deferred income tax assets |
||||||||
|
Valuation allowance |
( |
) | ( |
) | ||||
|
Total deferred income tax assets |
||||||||
|
Deferred income tax liabilities: |
||||||||
|
Property and equipment |
||||||||
|
Intangible assets |
||||||||
|
Operating lease assets |
||||||||
|
Prepaid expenses and other |
||||||||
|
Total deferred income tax liabilities |
||||||||
|
Net deferred income tax assets |
$ | $ | ||||||
We have foreign net operating loss carryforwards attributable to Noa Home (see Note 3) of $
Income tax refunds received, net of taxes paid, during fiscal 2024 and 2023 were $
We regularly evaluate, assess and adjust our accrued liabilities for unrecognized tax benefits in light of changing facts and circumstances, which could cause the effective tax rate to fluctuate from period to period. Our liabilities for uncertain tax positions are not material.
Significant judgment is required in evaluating the Company's federal and state tax positions and in the determination of its tax provision. Despite our belief that the liability for unrecognized tax benefits is adequate, it is often difficult to predict the final outcome or the timing of the resolution of any particular tax matter. We may adjust these liabilities as relevant circumstances evolve, such as guidance from the relevant tax authority, or resolution of issues in the courts. These adjustments are recognized as a component of income tax expense in the period in which they are identified. The Company also cannot predict when or if any other future tax payments related to these tax positions may occur.
We remain subject to examination for tax years through 2024 for all of our major tax jurisdictions.
14. Other Gains and Losses
Asset Impairment Charges
During fiscal 2024, we recognized non-cash charges for asset impairments totaling $
|
● |
$ |
|
● |
$ |
|
● |
$ |
Our estimates of the fair value of the impaired right-of-use assets included estimates of discounted cash flows based upon current market rents and other inputs which we consider to be Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurement and Disclosure.
Loss on Contract Abandonment
During fiscal 2024, we recognized a charge of $
Loss Upon Realization of Cumulative Translation Adjustment
In connection with the liquidation of the Noa Home business, we recognized a pre-tax charge of $
Restructuring Charges
In the fourth quarter of fiscal 2024 we recognized a restructuring charge of $
Goodwill Impairment Charge
See Note 8 regarding the $
Gain on Revaluation of Contingent Consideration
See Note 3 regarding a $
Gains on Dispositions of Retail Store Locations
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 purchase of real property in Tampa, Florida for $
Other loss, net for the fiscal 2022 includes a gain of $
15. Leases and Lease Guarantees
Leases
See “Leases” under Note 2 for a discussion of our accounting policies and elections under Topic 842.
Supplemental balance sheet information related to our leases as of November 30, 2024 and November 25, 2023 is as follows:
|
November 30, 2024 |
November 25, 2023 |
|||||||
|
Operating leases: |
||||||||
|
Right of use assets |
$ | $ | ||||||
|
Lease liabilities, short-term |
||||||||
|
Lease liabilities, long-term |
||||||||
|
Finance leases: |
||||||||
|
|
$ | $ | ||||||
|
|
||||||||
|
|
||||||||
|
(1) |
|
|
(2) |
|
|
(3) |
|
Our right-of-use assets under operating leases by segment as of November 30, 2024 and November 25, 2023 are as follows:
|
November 30, 2024 |
November 25, 2023 |
|||||||
|
Wholesale |
$ | $ | ||||||
|
Retail |
||||||||
|
Corporate & other |
||||||||
|
Total right of use assets |
$ | $ | ||||||
The components of our lease cost for 2024, 2023 and 2022 were as follows:
|
2024 |
2023 |
2022 |
||||||||||
|
Lease cost: |
||||||||||||
|
Operating lease cost |
$ | $ | $ | |||||||||
|
Financing lease cost: |
||||||||||||
|
Amortization of right-of-use assets |
||||||||||||
|
Interest on lease liabilities |
||||||||||||
|
Short-term lease cost |
||||||||||||
|
Variable lease cost (net of abatements received) |
||||||||||||
|
Sublease income |
( |
) | ( |
) | ( |
) | ||||||
|
Total lease cost |
$ | $ | $ | |||||||||
Supplemental lease disclosures as of November 30, 2024, November 25, 2023 and November 26, 2022 and for the fiscal years then ended are as follows:
|
Operating |
Financing |
|||||||
|
For the year ended November 26, 2022: |
||||||||
|
Cash paid for amounts included in the measurements of lease liabilities |
||||||||
|
Lease liabilities arising from new right-of-use assets |
||||||||
|
For the year ended November 25, 2023: |
||||||||
|
Cash paid for amounts included in the measurements of lease liabilities |
||||||||
|
Lease liabilities arising from new right-of-use assets |
||||||||
|
For the year ended November 30, 2024: |
||||||||
|
Cash paid for amounts included in the measurements of lease liabilities |
||||||||
|
Lease liabilities arising from new right-of-use assets |
||||||||
|
As of November 26, 2022: |
||||||||
|
Weighted average remaining lease terms (years) |
||||||||
|
Weighted average discount rates |
% | % | ||||||
|
As of November 25, 2023: |
||||||||
|
Weighted average remaining lease terms (years) |
||||||||
|
Weighted average discount rates |
% | % | ||||||
|
As of November 30, 2024: |
||||||||
|
Weighted average remaining lease terms (years) |
||||||||
|
Weighted average discount rates |
% | % | ||||||
Future payments under our leases and the present value of the obligations as of November 30, 2024 are as follows:
|
Operating Leases |
Financing Leases |
|||||||
|
Fiscal 2025 |
$ | $ | ||||||
|
Fiscal 2026 |
||||||||
|
Fiscal 2027 |
||||||||
|
Fiscal 2028 |
||||||||
|
Fiscal 2029 |
||||||||
|
Thereafter |
||||||||
|
Total lease payments |
||||||||
|
Less: interest |
||||||||
|
Total lease obligations |
$ | $ | ||||||
We sublease a small number of our leased locations to certain of our licensees for operation as BHF network stores. The terms of these leases generally match those of the lease we have with the lessor. In addition, we sublease space in certain closed store locations that are still under lease. Minimum future lease payments due to us under these subleases are as follows:
|
Fiscal 2025 |
$ | |||
|
Fiscal 2026 |
||||
|
Fiscal 2027 |
||||
|
Fiscal 2028 |
||||
|
Fiscal 2029 |
||||
|
Thereafter |
||||
|
Total minimum future rental income |
$ |
Guarantees
As part of the strategy for our store program, we have guaranteed certain lease obligations of licensee operators. The remaining term under these lease guarantees extends for six years. We were contingently liable under licensee lease obligation guarantees in the amount 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, liquidating the collateral, and pursuing payment under the personal guarantees of the independent dealer. The proceeds of the above options are estimated to cover the maximum amount of our future payments under the guarantee obligations, net of reserves. The fair value of lease guarantees (an estimate of the cost to the Company to perform on these guarantees) at November 30, 2024 and November 25, 2023, were not material.
16. Contingencies
We are involved in various claims and actions which arise in the normal course of business. Although the final outcome of these matters cannot be determined, based on the facts presently known, it is our opinion that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.
17. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings (loss) per share:
|
2024 |
2023 |
2022 |
||||||||||
|
Earnings (loss) per share - continuing operations: |
||||||||||||
|
Numerator: |
||||||||||||
|
Net income (loss) from continuing operations |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Denominator: |
||||||||||||
|
Denominator for basic income per share - weighted average shares |
||||||||||||
|
Effect of dilutive securities* |
||||||||||||
|
Denominator for diluted income per share — weighted average shares and assumed conversions |
||||||||||||
|
Basic income (loss) per share - continuing operations: |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Diluted income (loss) per share - continuing operations |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Earnings per share - discontinued operations: |
||||||||||||
|
Numerator: |
||||||||||||
|
Net income from discontinued operations |
$ | $ | $ | |||||||||
|
Denominator: |
||||||||||||
|
Denominator for basic income per share - weighted average shares |
||||||||||||
|
Effect of dilutive securities* |
||||||||||||
|
Denominator for diluted income per share — weighted average shares and assumed conversions |
||||||||||||
|
Basic income per share - discontinued operations |
$ | $ | $ | |||||||||
|
Diluted income per share - discontinued operations |
$ | $ | $ | |||||||||
|
|
* |
For fiscal 2024, 2023 and 2022, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:
|
2024 |
2023 |
2022 |
||||||||||
|
Unvested restricted shares |
||||||||||||
18. 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 |
$ |
|
(1) |
|
The sales price was subject to customary post-closing working capital adjustments which were paid during the second half of fiscal 2022 and resulted in 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 consolidated statements of operations as discontinued operations.
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 totaled $
The following table summarizes the major classes of line items constituting income of the discontinued operations, as reported in the consolidated statements of operations for fiscal 2022 (there was no income from discontinued operations in 2024 or 2023):
|
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 |
||||
|
Pretax income of discontinued operations |
||||
|
Income tax expense |
||||
|
Income 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 $
The following table summarizes the cash flows generated by discontinued operations during 2022 (there were no cash flows from discontinued operation in 2024 or 2023):
|
2022 (1) |
||||
|
Cash provided by operating activities |
$ | |||
|
Cash used in investing activities |
( |
) | ||
|
Cash used in financing activities |
( |
) | ||
|
Net cash provided by (used in) discontinued operations |
$ | |||
|
(1) |
|
19. 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 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. |
In addition to the two reportable segments described above, we include our remaining business activities and assets in a reconciling category known as Corporate and other. This category 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 any of our operating segments that do not meet the requirements to be reportable segments. As of and for the periods ended November 30, 2024, November 25, 2023 and November 26, 2022, the only such operating segment included in Corporate and other is Noa Home, which was acquired on September 2, 2022. All sales reported in our Corporate and other category are attributable to Noa Home, which generated substantially all of its sales outside of the United States. During the second fiscal quarter of 2024 we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and have ceased operations as of November 30, 2024 by selling the remaining inventory in an orderly fashion over the second half of fiscal 2024.
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 presented as a discontinued operation in the accompanying condensed consolidated statements of operations (see Note 18).
The following table presents segment information for each of the last three fiscal years:
|
2024 |
2023 |
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 & Other - Noa Home |
||||||||||||
|
Consolidated net sales of furniture and accessories |
$ | $ | $ | |||||||||
|
Income (loss) from Continuing Operations before Income Taxes |
||||||||||||
|
Income (loss) from Continuing Operations |
||||||||||||
|
Wholesale |
$ | $ | $ | |||||||||
|
Retail |
( |
) | ( |
) | ||||||||
|
Net expenses - Corporate and other |
( |
) | ( |
) | ( |
) | ||||||
|
Inter-company elimination |
( |
) | ||||||||||
|
Asset impairment charges |
( |
) | ||||||||||
|
Loss on contract abandonment |
( |
) | ||||||||||
|
Loss upon realization of cumulative translation adjustment |
( |
) | ||||||||||
|
Restructuring charges |
( |
) | ||||||||||
|
Gain on revaluation of contingent consideration |
||||||||||||
|
Goodwill impairment charge |
( |
) | ||||||||||
|
Gain on sale of real estate |
||||||||||||
|
Consolidated income (loss) from continuing operations |
( |
) | ( |
) | ||||||||
|
Interest income |
||||||||||||
|
Interest expense |
( |
) | ( |
) | ( |
) | ||||||
|
Other loss, net |
( |
) | ( |
) | ( |
) | ||||||
|
Consolidated income (loss) from continuing operations before income taxes |
$ | ( |
) | $ | ( |
) | $ | |||||
|
Depreciation and Amortization |
||||||||||||
|
Wholesale |
$ | $ | $ | |||||||||
|
Retail |
||||||||||||
|
Corporate and other |
||||||||||||
|
Discontinued operations |
||||||||||||
|
Consolidated |
$ | $ | $ | |||||||||
|
Capital Expenditures |
||||||||||||
|
Wholesale |
$ | $ | $ | |||||||||
|
Retail |
||||||||||||
|
Corporate and other |
||||||||||||
|
Consolidated |
$ | $ | $ | |||||||||
|
Identifiable Assets |
||||||||||||
|
Wholesale |
$ | $ | $ | |||||||||
|
Retail |
||||||||||||
|
Corporate and Other |
||||||||||||
|
Consolidated |
$ | $ | $ | |||||||||
See Note 20 for disaggregated revenue information regarding sales of furniture and accessories by product type for the wholesale and retail segments.
20. Revenue Recognition
Disaggregated revenue information for sales of furniture and accessories by product category for fiscal years 2024, 2023 and 2022, excluding intercompany transactions between our segments, is as follows:
|
2024 |
2023 |
2022 |
||||||||||||||||||||||||||||||||||||||||||||||
|
Wholesale |
Retail |
Corporate & Other (2) |
Total |
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 Furniture and Accessories revenue |
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
|
(1) |
|
|
(2) |
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
As of the end of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal financial officer have evaluated the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our management, including the CEO and CFO, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based upon their controls evaluation, our CEO and CFO have concluded that our Disclosure Controls are effective at a reasonable assurance level.
We are responsible for establishing and maintaining adequate internal control over financial reporting in accordance with Exchange Act Rule 13a-15. With the participation of our CEO and CFO, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of November 30, 2024 based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of November 30, 2024, based on those criteria. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Ernst & Young LLP, the Company’s independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting.
Changes in internal control over financial reporting.
There have been no changes in our internal controls over financial reporting during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Bassett Furniture Industries, Incorporated and Subsidiaries
Opinion on Internal Control over Financial Reporting
We have audited Bassett Furniture Industries, Incorporated and subsidiaries’ internal control over financial reporting as of November 30, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Bassett Furniture Industries, Incorporated and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of November 30, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of November 30, 2024 and November 25, 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended November 30, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 10, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/
February 10, 2025
ITEM 9B. OTHER INFORMATION
.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information to be contained in the Proxy Statement under the captions “Election of Directors” and “Board and Board Committee Information,” is incorporated herein by reference thereto. Please see section entitled “Information about our Executive Officers” in Item 4B of Part I of this report for information concerning executive officers.
The Registrant has a code of ethics that applies to all of its employees, officers and directors. The code of ethics is available on the Registrant’s website at www.bassettfurniture.com and the Registrant will post any amendments to, or waivers, from, the code of ethics on that website.
We have adopted an insider trading policy governing the purchase, sale, and other dispositions of the registrant's securities by directors, senior management, and employees. A copy of the insider trading policy is filed as an exhibit to this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
The information to be contained in the Proxy Statement under the captions “Organization, Compensation and Nominating Committee Report,” “Compensation Discussion and Analysis,” “Executive Compensation,” and “Director Compensation” is incorporated herein by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information to be contained in the Proxy Statement under the headings “Principal Stockholders and Holdings of Management” and “Equity Compensation Plan Information” is incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information to be contained in the Proxy Statement under the captions “Board and Board Committee Information” and “Other Transactions” is incorporated herein by reference thereto.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information to be contained in the Proxy Statement under the caption “Audit and Other Fees” is incorporated herein by reference thereto.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
(a) |
(1) |
Bassett Furniture Industries, Incorporated and Subsidiaries Audited Consolidated Financial Statements for the years ended November 30, 2024, November 25, 2023 and November 26, 2022; Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID |
||
|
(2) |
Financial Statement Schedule: |
|||
|
Schedule II- Analysis of Valuation and Qualifying Accounts for the years ended November 30, 2024, November 25, 2023 and November 26, 2022 |
||||
|
(3) |
Listing of Exhibits |
|||
|
|
3A. |
Articles of Incorporation as amended are incorporated herein by reference to Form 10-Q for the fiscal quarter ended February 28, 1994. |
||
|
|
3B. | |||
|
|
4A. | |||
|
|
4B. | |||
|
|
10A. | |||
|
|
*10B. | |||
|
|
*10C. | |||
|
|
*10K. | |||
|
|
*10L. | |||
|
|
*10M. | |||
|
|
*10N. | |||
|
|
*10O. | |||
|
|
*10P. | |||
|
|
*10Q. | |||
|
|
19. | |||
|
|
21. | |||
|
|
23A. | |||
|
|
31A. | |||
|
|
31B. | |||
|
|
32A. | |||
|
|
32B. | |||
|
|
97. |
|
|
101.INS |
Inline XBRL Instance |
||
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema |
||
|
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation |
||
|
|
101.DEF |
Inline XBRL Taxonomy Extension Definition |
||
|
|
101.LAB |
Inline XBRL Taxonomy Extension Labels |
||
|
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation |
||
|
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Management contract or compensatory plan or arrangement of the Company.
ITEM 16. FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BASSETT FURNITURE INDUSTRIES, INCORPORATED (Registrant)
|
By: |
/s/ Robert H. Spilman, Jr. |
Date: February 10, 2025 |
|
|
Robert H. Spilman, Jr. President and Chief Executive Officer Chairman of the Board of Directors |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
By: |
/s/ Emma S. Battle |
Date: February 10, 2025 |
|
|
Emma S. Battle Director |
|
|
|
|
|
|
By: |
/s/ John R. Belk |
Date: February 10, 2025 |
|
John R. Belk Director |
||
|
By: |
/s/ Kristina K. Cashman |
Date: February 10, 2025 |
|
|
Kristina K. Cashman Director |
|
|
|
|
|
|
By: |
/s/ Virginia W. Hamlet |
Date: February 10, 2025 |
|
|
Virginia W. Hamlet Director |
|
|
|
|
|
|
By: |
/s/ J. Walter McDowell |
Date: February 10, 2025 |
|
|
J. Walter McDowell Director |
|
|
|
|
|
|
By: |
/s/ William C. Wampler, Jr. |
Date: February 10, 2025 |
|
|
William C. Wampler, Jr. Director |
|
|
|
|
|
|
By: |
/s/ William C. Warden, Jr. |
Date: February 10, 2025 |
|
|
William C. Warden, Jr. Director, Lead Independent Director |
|
|
|
|
|
|
By: |
/s/ J. Michael Daniel |
Date: February 10, 2025 |
|
|
J. Michael Daniel Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
|
Bassett Furniture Industries, Incorporated
Schedule II
Analysis of Valuation and Qualifying Accounts
For the Years Ended November 30, 2024, November 25, 2023 and November 26, 2022
(amounts in thousands)
|
Balance Beginning of Period |
Additions Charged to Cost and Expenses |
Deductions (1) |
Other |
Balance End of Period |
||||||||||||||||
|
For the Year Ended November 26, 2022: |
||||||||||||||||||||
|
Reserve deducted from assets to which it applies |
||||||||||||||||||||
|
Allowance for doubtful accounts |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||
|
Notes receivable valuation reserves |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||
|
Income tax valuation allowance |
$ | $ | $ | $ | $ | |||||||||||||||
|
For the Year Ended November 25, 2023: |
||||||||||||||||||||
|
Reserve deducted from assets to which it applies |
||||||||||||||||||||
|
Allowance for doubtful accounts |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||
|
Income tax valuation allowance |
$ | $ | $ | $ | $ | |||||||||||||||
|
For the Year Ended November 30, 2024: |
||||||||||||||||||||
|
Reserve deducted from assets to which it applies |
||||||||||||||||||||
|
Allowance for doubtful accounts |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||
|
Income tax valuation allowance |
$ | $ | $ | $ | $ | |||||||||||||||
|
(1) |
||||||||||||||||||||
Exhibit 19
INSIDER TRADING POLICY
Adopted as of October 2, 2023
This Insider Trading Policy (this “Policy”) of Bassett Furniture Industries, Incorporated (the “Company”) is presented in the following four sections:
|
● |
Section I – Summary: provides an overview of the Policy; |
|
● |
Section II – Statement of Policies Prohibiting Insider Trading: sets forth the policies of the Company prohibiting insider trading; |
|
● |
Section III – Explanation of Insider Trading: explains insider trading; and |
|
● |
Section IV – Statement of Procedures Preventing Insider Trading: consists of various procedures which have been put in place by the Company to prevent insider trading. |
|
I. |
Summary |
Preventing insider trading is necessary to comply with securities law and to preserve the reputation and integrity of the Company as well as that of all persons affiliated with it. “Insider trading” occurs when any person purchases or sells a security while in possession of inside information relating to the security.
This Policy applies to all members of the Board of Directors of the Company (“directors”), all officers of the Company, and all other management personnel of the Company (collectively, the “Covered Persons” and each, a “Covered Person”), and extends to all activities within and outside an individual’s duties at the Company. Every Covered Person must review this Policy. This Policy also applies to transactions by each Covered Person’s (i) spouse, children or other relatives living in the same household as such Covered Person (“family members”); (ii) corporations or other business entities controlled by the Covered Person or his family members; (iii) corporations or other business entities controlled by the Company; and (iv) trusts in which the Covered Person or any family member acts as trustee or otherwise has investment control. Questions regarding the Policy should be directed to the General Counsel of the Company (the “GC”).
|
II. |
Statement of Policies Prohibiting Insider Trading |
|
A. |
General Insider Trading Policy |
No Covered Person shall purchase or sell any type of security while in possession of material, non-public information relating to the security, whether the issuer of such security is the Company or any other company. To provide assistance in preventing inadvertent violations of applicable securities laws and to avoid the appearance of impropriety in connection with the purchase and sale of the Company securities, all transactions in Company securities (including without limitation, acquisitions and dispositions of Company common stock by purchase, sale or gift, the “cashless” exercise of options and the sale of Company common stock issued upon exercise of options) by Covered Persons must be precleared by the GC.
Additionally, except for the exercise of options that does not involve the sale of the Company’s securities (e.g., a cashless exercise of an option involving the sale of Company securities therefore would not qualify under this exception) or transactions pursuant to a valid 10b5-1 Plan (defined below) entered into on a day on which a Covered Person may otherwise purchase or sell a security, no Covered Person may purchase, sell or make a gift of any security of the Company during the period beginning one week before the end of any fiscal quarter and ending one full trading day after the public release of the Company’s financial results for such fiscal quarter.
No Covered Person shall directly or indirectly tip material, non-public information to anyone who may trade while in possession of such information. In addition, material, non-public information generally should not be communicated to anyone outside the Company, or to anyone within the Company other than on a need-to-know basis.
|
B. |
Exception for Affirmative Defenses under Securities Exchange Act Rule 10b5-1 |
The federal securities laws provide for an affirmative defense to certain insider trading violations when a transaction in securities is consummated in accordance with a contract, instruction or plan satisfying the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934 (the “1934 Act”). Notwithstanding the trading preclearance requirement stated above (Section II.A.), a Covered Person shall not be required to preclear a transaction in Company securities if such transaction is executed pursuant to a valid contract, instruction or plan that provides an affirmative defense (a “10b5-1 Plan”) pursuant to Rule 10b5-1 under the 1934 Act and such transaction is lawful under any applicable state securities laws.
However, a 10b5-1 Plan cannot be entered into or adopted by a Covered Person when the Covered Person is in possession of material, non-public information related to the security, whether the issuer of such security is the Company or any other company. To provide assistance in preventing inadvertent violations of applicable securities laws and to avoid the appearance of impropriety in connection with the adoption of a 10b5-1 Plan, the adoption of any 10b5-1 Plan providing for transactions in the securities of the Company (including without limitation, acquisitions and dispositions of Company common stock, the exercise of options and the sale of Company common stock issued upon exercise of options) must be precleared by the GC to confirm the absence of material non-public information at the time of such adoption.
In addition, any proposed amendment to, alteration of or deviation from an established 10b5-1 Plan will be treated as the adoption of a new 10b5-1 Plan, which must be precleared by the GC. In connection with this preclearance, the Covered Person shall provide the GC with a copy of the 10b5-1 Plan proposed to be entered into or adopted by the Covered Person, including the Covered Person’s representation certifying that, on the date of the adoption or modification of the plan: (i) the Covered Person is not aware of any material nonpublic information about the Company’s securities or the Company; and (ii) the Covered Person is adopting the plan in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the 1934 Act.
Additionally, no Covered Person may enter into or adopt a 10b5-1 Plan during the period beginning one week before the end of any fiscal quarter and ending one full trading day after the public release of earnings data for such fiscal quarter. A Covered Person may not have multiple Approved 10b5-1 Plans in place that cover the same period of time, except under certain conditions specified in Rule 10b5-1 or entered into prior to the adoption of this Policy. Such plans must also include a mandatory cooling-off period before trading can commence for Covered Persons that are directors or officers of the Company that expires on the later of (i) 90 days following such plan adoption or modification or (ii) two business days following the disclosure in the Company’s SEC-filed reports of its financial results for the fiscal quarter in which the plan was adopted or modified (but not to exceed 120 days following plan adoption or modification). The plans must also include a mandatory cooling-off period before trading can commence of 30 days for persons other than the Company or officers and directors.
|
III. |
Explanation of Insider Trading |
As noted above, “insider trading” refers to the purchase or sale, or gift, of a security while in possession of “material” “non-public” information relating to the security. “Securities” include common stock of the Company, units, bonds, notes, debentures, options, warrants and similar instruments. “Purchase” and “sale” are defined broadly under the federal securities laws. “Purchase” includes the actual purchase of a security and any contract to purchase or otherwise acquire a security. “Sale” includes the actual sale of a security and any contract to sell or otherwise dispose of a security. “Gift” includes the bona fide gift of securities for no consideration. These definitions extend to a broad range of transactions including conventional cash-for-equity transactions, conversions, and acquisitions and exercises of warrants or puts, calls or other options related to a security. It is generally understood that insider trading includes the following:
|
● |
trading by insiders while in possession of material, non-public information; |
|
● |
trading by persons other than insiders while in possession of material, non-public information where the information either was given in breach of an insider’s duty to keep it confidential or was misappropriated; or |
|
● |
communicating or tipping material, non-public information to others, including recommending the purchase or sale of a security while in possession of such information. |
|
A. |
What Facts are Material |
The materiality of a fact depends upon the circumstances. A fact is considered “material” if there is a substantial likelihood that a reasonable investor would consider it important in making a decision to buy, sell or hold a security or where the fact is likely to have a significant effect on the market price of the security. Material information can be positive or negative and can relate to virtually any aspect of a company’s business or to any type of security, debt or equity.
Examples of material information include (but are not limited to) facts concerning: distributions; earnings or earnings forecasts; mergers or acquisitions; major litigation; significant borrowings or financings; defaults on borrowings; important business developments such as major contract awards or cancellations; management or control changes; regulatory action; and bankruptcies. Moreover, material information does not have to be related to a company’s business. For example, the contents of a forthcoming newspaper column that is expected to affect the market price of a security can be material.
A good general rule of thumb: when in doubt, do not trade.
|
B. |
What is Non-public? |
Information is “non-public” if it is not available to the general public. In order for information to be considered public, it must be widely disseminated in a manner making it generally available to investors through such media as Dow Jones, Reuters, The Wall Street Journal, Associated Press or United Press International, a broadcast on widely available radio or television programs, publication in a widely available newspaper, magazine or news web site, a Regulation FD-compliant conference call, or public disclosure documents filed with the SEC that are available on the SEC’s website. The circulation of rumors, even if accurate and reported in the media, does not constitute effective public dissemination.
In addition, even after a public announcement, a reasonable period of time must lapse in order for the market to react to the information. Generally, one should allow approximately 48 hours following publication as a reasonable waiting period before such information is deemed to be public.
|
C. |
Who is an Insider? |
“Insiders” include officers, directors, and employees of a company and anyone else who has material inside information about a company. Insiders have duties to their company and its securityholders not to trade on material, non-public information relating to the company’s securities. All officers, directors and employees of the Company should consider themselves insiders with respect to material, non-public information about business, activities and securities. Officers, directors and employees may not trade the Company’s securities while in possession of material, non-public information relating to the Company nor tip (or communicate except on a need-to-know basis) such information to others.
It should be noted that trading by members of an officer’s, director’s or employee’s household can be the responsibility of such officer, director or employee under certain circumstances and could give rise to legal and Company-imposed sanctions.
|
D. |
Trading by Persons Other than Insiders |
Insiders may be liable for communicating or tipping material, non-public information to a third party (“tippee”), and insider trading violations are not limited to trading or tipping by insiders. Persons other than insiders also can be liable for insider trading, including tippees who trade on material, non-public information tipped to them or individuals who trade on material, non-public information that has been misappropriated.
Tippees inherit an insider’s duties and are liable for trading on material, non-public information illegally tipped to them by an insider. Similarly, just as insiders are liable for the insider trading of their tippees, so are tippees who pass the information along to others who trade. In other words, a tippee’s liability for insider trading is no different from that of an insider. Tippees can obtain material, non-public information by receiving overt tips from others or through, among other things, conversations at social, business, or other gatherings.
|
E. |
Penalties for Engaging in Insider Trading |
Penalties for trading on or tipping material, non-public information can extend significantly beyond any profits made or losses avoided, both for individuals engaging in such unlawful conduct and their employers. The Securities and Exchange Commission (“SEC”) and Department of Justice have made the civil and criminal prosecution of insider trading violations a top priority. Enforcement remedies available to the government or private plaintiffs under the federal securities laws include SEC administrative sanctions, securities industry sanctions, civil injunctions, damage awards, disgorgement of profits, civil fines, criminal fines and jail sentences. In addition, insider trading could result in serious sanctions by the Company, including dismissal. Insider trading violations are not limited to violations of the federal securities laws: other federal and state civil or criminal laws, such as the laws prohibiting mail and wire fraud and the Racketeer Influenced and Corrupt Organizations Act (RICO), also may be violated upon the occurrence of insider trading.
|
F. |
Size of Transaction and Reason for Transaction Do Not Matter |
The size of the transaction or the amount of profit received does not have to be significant to result in prosecution. The SEC has the ability to monitor even the smallest trades, and the SEC performs routine market surveillance. Brokers or dealers are required by law to inform the SEC of any possible violations by people who may have material, non-public information. The SEC aggressively investigates even small insider trading violations.
|
IV. |
Statement of Procedures Preventing Insider Trading |
The following procedures have been established, and will be maintained and enforced, by the Company to prevent insider trading. Every Covered Person is required to follow these procedures.
|
A. |
Pre-Clearance of Trades in Company Securities by All Covered Persons |
To provide assistance in preventing inadvertent violations of applicable securities laws and to avoid the appearance of impropriety in connection with the purchase and sale of Company securities, all transactions in Company securities (including without limitation, acquisitions and dispositions of Company common stock by purchase, sale or gift, the “cashless” exercise of options and the sale of Company common stock issued upon exercise of options) by Covered Persons must be precleared by the GC. If after consultation with the GC it is determined that the Company and/or such Covered Person is in possession of material, non-public information, there may be no trading in Company securities.
Additionally, except for the exercise of options that does not involve the sale of Company securities or transactions pursuant to a valid 10b5-1 Plan, no Covered Persons shall purchase or sell any security of the Company except during an open trading window period for the Company. Investments of 401(k) plan Company contributions in a Company stock fund in accordance with the terms of the Company's 401(k) plan or investing in the Employee Stock Purchase Plan do not require preclearance. However, any sale of Company stock in such plans and any change in your investment election regarding Company stock in such plans are subject to trading restrictions under this Policy.
Approval by the GC of any transaction does not constitute legal advice, nor is it a guarantee that a transaction will not be subject to challenge by third parties.
|
B. |
Transactions Pursuant to 10b5-1 Plans and Pre-Clearance of 10b5-1 Plans |
Notwithstanding the trading preclearance requirement stated above (Section IV.A.), a Covered Person shall not be required to preclear a transaction in Company securities if such transaction is executed pursuant to a valid contract, instruction or plan that provides an affirmative defense (a 10b5-1 Plan) pursuant to Rule 10b5-1 under the 1934 Act and such transaction is lawful under any applicable state securities laws.
However, a 10b5-1 Plan cannot be entered into or adopted by a Covered Person when the Covered Person is in possession of material, non-public information related to the security, whether the issuer of such security is the Company or any other company. To provide assistance in preventing inadvertent violations of applicable securities laws and to avoid the appearance of impropriety in connection with the adoption of a 10b5-1 Plan, the adoption of any 10b5-1 Plan providing for transactions in the securities of the Company (including without limitation, acquisitions and dispositions of Company common stock, the exercise of options and the sale of Company common stock issued upon exercise of options) must be precleared by the GC to confirm the absence of material non-public information at the time of such adoption. The GC will not otherwise pass upon the conformity of the 10b5-1 Plan or its execution to the requirements of Rule 10b5-1 or any applicable state law, which shall be solely the responsibility of the Covered Person. In addition, any proposed amendment to, alteration of or deviation from an established 10b5-1 Plan will be treated as the adoption of a new 10b5-1 Plan, which must be precleared by the GC. In connection with this preclearance, the Covered Person shall provide the GC with a copy of the 10b5-1 Plan proposed to be entered into or adopted by the Covered Person, including the Covered Person’s representation certifying that, on the date of the adoption or modification of the plan: (i) the Covered Person is not aware of any material nonpublic information about the Company’s securities or the Company; and (ii) the Covered Person is adopting the plan in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the 1934 Act. If after consultation with the GC it is determined that the Company and/or such Covered Person is in possession of material, non-public information, the Covered Person may not enter into, amend, modify or adopt the 10b5-1 Plan at such time.
Additionally, no Covered Person may enter into or adopt a 10b5-1 Plan during the period beginning one week before the end of any fiscal quarter and ending one full trading day after the public release of earnings data for such fiscal quarter. A Covered Person may not have multiple Approved 10b5-1 Plans in place that cover the same period of time, except under certain conditions specified in Rule 10b5-1 or entered into prior to the adoption of this Policy. Such plans must also include a mandatory cooling-off period before trading can commence for Covered Persons that are directors or officers of the Company that expires on the later of (i) 90 days following such plan adoption or modification or (ii) two business days following the disclosure in the Company’s SEC-filed reports of its financial results for the fiscal quarter in which the plan was adopted or modified (but not to exceed 120 days following plan adoption or modification). The plans must also include a mandatory cooling-off period before trading can commence of 30 days for persons other than the Company or officers and directors.
EXHIBIT 21 - LIST OF SUBSIDIARIES*
|
(a) |
Bassett Furniture Industries of North Carolina, LLC (North Carolina limited liability company) |
|
(b) |
The E.B. Malone Corporation (Delaware corporation) |
|
(c) |
Bassett Direct Stores, LLC (Virginia limited liability company) |
|
(d) |
Bassett Direct NC, LLC (Virginia limited liability company) |
|
(e) |
Bassett Direct SC, LLC (Virginia limited liability company) |
|
(f) |
LRG Furniture, LLC (Virginia limited liability company) |
|
(g) |
BFD-Atlanta, LLC (Virginia limited liability company) |
|
(h) |
BD Boston, LLC (Virginia limited liability company) |
|
(i) |
BDU NY, LLC (Virginia limited liability company) |
|
(j) |
JMD Freight Lines, LLC (North Carolina limited liability company) |
|
(k) |
9473-8408 Quebec Inc. |
|
(l) |
Noa Home Inc. |
|
(m) |
Noa Australia Pty Ltd. |
|
(n) |
Noa Home Singapore Pte Ltd. |
|
(o) |
Noa Home UK Limited |
|
(p) |
JMD Tampa, LLC |
*All subsidiaries are wholly-owned unless otherwise noted.
EXHIBIT 23A
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
|
(1) |
Registration Statement (Form S-8 No 333-217072) pertaining to the Bassett Furniture Industries, Incorporated 2017 Employee Stock Purchase Plan , and |
|
(2) |
Registration Statement (Form S-8 No 333-254104) pertaining to the Bassett Furniture Industries, Incorporated 2021 Stock Incentive Plan |
of our reports dated February 10, 2025 with respect to the consolidated financial statements and schedule of Bassett Furniture Industries, Incorporated and Subsidiaries and the effectiveness of internal control over financial reporting of Bassett Furniture Industries, Incorporated and Subsidiaries included in this Annual Report (Form 10-K) of Bassett Furniture Industries, Incorporated and Subsidiaries for the year ended November 30, 2024.
/s/ Ernst & Young LLP
Richmond, Virginia
February 10, 2025
Exhibit 31A
CERTIFICATIONS
I, Robert H. Spilman, Jr., certify that:
|
1. |
I have reviewed this annual report on Form 10-K of Bassett Furniture Industries, Incorporated; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
February 10, 2025
/s/Robert H. Spilman, Jr.
Robert H. Spilman, Jr.
President and Chief Executive Officer
Exhibit 31B
CERTIFICATIONS
I, J. Michael Daniel, certify that:
|
1. |
I have reviewed this annual report on Form 10-K of Bassett Furniture Industries, Incorporated; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
February 10, 2025
/s/__J. Michael Daniel
J. Michael Daniel
Senior Vice President and Chief Financial Officer
Exhibit 32A
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Bassett Furniture Industries, Incorporated (the “Company”) on Form 10-K for the period ended November 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert H. Spilman, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:
|
1. |
The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
February 10, 2025
/s/__Robert H. Spilman, Jr.
Robert H. Spilman, Jr.
President and Chief Executive Officer
A signed original of this written statement required by Section 906 has been provided to Bassett Furniture Industries, Incorporated and will be retained by Bassett Furniture Industries, Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32B
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Bassett Furniture Industries, Incorporated (the “Company”) on Form 10-K for the period ended November 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Michael Daniel, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:
|
1. |
The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
February 10, 2025
/s/_J. Michael Daniel
J. Michael Daniel
Senior Vice President and Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to Bassett Furniture Industries, Incorporated and will be retained by Bassett Furniture Industries, Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.