BASSETT FURNITURE INDUSTRIES INC 10-Q/A

ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED FEBRUARY 27, 2021 AND FEBRUARY 29, 2020 – UNAUDITED (In thousands)       Quarter Ended       February 27, 2021     February 29, 2020   Operating activities:                 Net income   $ 4,011     $ 1,210   Adjustments to reconcile net income to net cash provided by (used in) operating activities:                 Depreciation and amortization     3,331       3,623   Gain on lease modification     ( 20 )     ( 152 ) Gain on sale of property and equipment     ( 4 )     ( 58 ) Deferred income taxes     826       ( 125 ) Other, net     274       321   Changes in operating assets and liabilities:                 Accounts receivable     ( 2,380 )     ( 1,873 ) Inventories     ( 8,050 )     ( 1,213 ) Other current assets     ( 768 )     ( 536 ) Right of use assets under operating leases     6,340       6,721   Customer deposits     4,912       ( 1,292 ) Accounts payable and other liabilities     3,584       ( 2,266 ) Obligations under operating leases     ( 7,072 )     ( 9,603 ) Net cash provided by (used in) operating activities     4,984       ( 5,243 )                   Investing activities:                 Purchases of property and equipment     ( 895 )     ( 1,340 ) Proceeds from sales of property and equipment     8       1,697   Purchases of investments     -       ( 241 ) Other     ( 302 )     ( 193 ) Net cash used in investing activities     ( 1,189 )     ( 77 )                   Financing activities:                 Cash dividends     ( 3,718 )     ( 1,260 ) Other issuance of common stock     83       75   Repurchases of common stock     ( 534 )     ( 766 ) Taxes paid related to net share settlement of equity awards     ( 219 )     ( 215 ) Repayments of finance lease obligations     ( 173 )     ( 12 ) Net cash used in financing activities     ( 4,561 )     ( 2,178 ) Change in cash and cash equivalents     ( 766 )     ( 7,498 ) Cash and cash equivalents - beginning of period     45,799       19,687   Cash and cash equivalents - end of period   $ 45,033     $ 12,189     The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.   7 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)     1. Basis of Presentation   The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10 -Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.   References to “ASC” included hereinafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative GAAP.   The condensed consolidated financial statements include the accounts of Bassett Furniture Industries, Incorporated (“Bassett”, “we”, “our”, or the “Company”) and our wholly-owned subsidiaries of which we have a controlling interest. In accordance with ASC Topic 810, we have evaluated our licensees and certain other entities to determine whether they are variable interest entities (“VIEs”) of which we are the primary beneficiary and thus would require consolidation in our financial statements. To date we have concluded that none of our licensees nor any other of our counterparties represent VIEs.   Revenue from the sale of furniture and accessories is reported in the accompanying condensed consolidated statements of income net of estimates for returns and allowances.   Revenues from logistical services are generated by our wholly-owned subsidiary, Zenith Freight Lines, LLC (“Zenith”). Sales of logistical services from Zenith to our wholesale and retail segments have been eliminated in consolidation, and Zenith’s operating costs and expenses are included in selling, general and administrative expenses in our condensed consolidated statements of income.   Recently Adopted Accounting Pronouncements   Effective as of the beginning of fiscal 2021, we have adopted Accounting Standards Update No. 2016 - 13, Financial Instruments – Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments (“ASU 2016 - 13” ). The guidance in ASU 2016 - 13 replaces the incurred loss impairment methodology under previous GAAP. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. We determined that the guidance in ASU 2016 - 13 applied to our trade receivables and contract assets, and that there was no material impact to our financial condition or results of operations as a result of the adoption.   Effective as of the beginning of fiscal 2021, we have adopted Accounting Standards Update No. 2018 - 15, Accounting Standards Update No. 2018 - 15 – Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350 - 40 ): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in ASU 2018 - 15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in ASU 2018 - 15. We adopted ASU 2018 - 15 on a prospective basis and the adoption did not have a material impact upon our financial position or results of operations.   Impact of the COVID- 19 Pandemic Upon our Financial Condition and Results of Operations   On March 11, 2020, the World Health Organization declared the current coronavirus (“COVID- 19” ) outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID- 19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures had a significant adverse impact upon many sectors of the economy, including non-essential retail commerce, beginning in our second fiscal quarter of 2020. Therefore, our results of operations for the quarter ended February 29, 2020 were not impacted by COVID- 19.   8 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)   During fiscal 2020, in response to the restrictive measures imposed by governmental authorities and for the protection of our employees and customers, we temporarily closed our dedicated stores, our manufacturing locations and many of our warehouses for several weeks primarily during the second fiscal quarter. This extended period of suspended operations had a material adverse impact upon our results of operations during the second fiscal quarter and resulted in a significant net loss for the year ended November 28, 2020. However, since restarting our manufacturing operations and reopening stores, we have seen a significant improvement in business conditions which allowed us to return to overall profitability for the third and fourth fiscal quarters of 2020 continuing into the first quarter of fiscal 2021. Tempering these improvements are the continuing logistical challenges faced by the entire home furnishings industry resulting from COVID-related labor shortages and supply chain disruptions creating significant delays in order fulfillment and increasing backlogs.   Whereas most state and local governments have eased restrictions on commercial retail activity and mass vaccination programs in the U.S. are underway, it is nevertheless possible that a resurgence in COVID- 19 cases could prompt a return to tighter restrictions in certain areas of the country. Furthermore, while the home furnishings industry has fared much better during the pandemic than certain other sectors of the economy, continued economic weakness may eventually have an adverse impact upon our business, and order cancellations could result if the present delays in order fulfillment continue for an extended period of time. Therefore, significant uncertainty remains regarding the ongoing impact of the COVID- 19 outbreak upon our financial condition and future results of operations, as well as upon the significant estimates and assumptions we utilize in reporting certain assets and liabilities.       2. Interim Financial Presentation   All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. The results of operations for the three months ended February 27, 2021 are not necessarily indicative of results for the full fiscal year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10 -K for the year ended November 28, 2020.   Income Taxes   We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income and use that effective tax rate to record our year-to-date income tax provision.  Any change in annual projections of pretax income could have a significant impact on our effective tax rate for the respective quarter.   Our effective tax rates for the quarters ended February 27, 2021 and February 29, 2020 of 29.4 % and 34.5 %, respectively, differ from the federal statutory rate of 21 % primarily due to the effects of state income taxes and various permanent differences, including tax deficiencies of $ 135 and $ 114 during the quarters ended February 27, 2021 and February 29, 2020, respectively, arising from stock-based compensation.       3. Financial Instruments and Fair Value Measurements   Financial Instruments   Our financial instruments include cash and cash equivalents, short-term investments in certificates of deposit (CDs), accounts receivable, and accounts payable. Because of their short maturities, the carrying amounts of cash and cash equivalents, short-term investments in CDs, accounts receivable, and accounts payable approximate fair value.   Investments   Our short-term investments of $ 17,715 at February 27, 2021 and November 28, 2020 consisted of CDs. At February 27, 2021, the CDs had original terms averaging eight months, bearing interest at rates ranging from 0.05 % to 1.20 %. At February 27, 2021, the weighted average remaining time to maturity of the CDs was approximately five months and the weighted average yield of the CDs was approximately 0.12 %. Each CD is placed with a federally insured financial institution and all deposits are within federal deposit insurance limits. Due to the nature of these investments and their relatively short maturities, the carrying amount of the short-term investments at February 27, 2021 and November 28, 2020 approximates their fair value.   9 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)   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 business acquisitions or the impairment of long-lived assets which involve a combination of Level 2 and Level 3 inputs.     4. Accounts Receivable   Accounts receivable consists of the following:       February 27, 2021     November 28, 2020   Gross accounts receivable   $ 25,914     $ 23,551   Allowance for doubtful accounts     ( 1,194 )     ( 1,211 ) Accounts receivable, net   $ 24,720     $ 22,340     We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts 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.   Activity in the allowance for doubtful accounts for the three months ended February 27, 2021 was as follows:   Balance at November 28, 2020   $ 1,211   Additions charged to expense     53   Write-offs against allowance     ( 70 ) Balance at February 27, 2021   $ 1,194     We believe that the carrying value of our net accounts receivable approximates fair value. The inputs into these fair value estimates reflect our market assumptions and are not observable. Consequently, the inputs are considered to be Level 3 as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosures . See Note 3.   10 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)     5. Inventories   Domestic furniture inventories are valued at the lower of cost, which is determined using the last-in, first -out (LIFO) method, or market. Imported inventories and those applicable to our Lane Venture and Bassett Outdoor lines are valued at the lower of cost, which is determined using the first -in, first -out (FIFO) method, or net realizable value.   Inventories were comprised of the following:       February 27, 2021     November 28, 2020   Wholesale finished goods   $ 29,620     $ 25,001   Work in process     650       516   Raw materials and supplies     17,188       14,836   Retail merchandise     29,040       27,946   Total inventories on first-in, first-out method     76,498       68,299   LIFO adjustment     ( 9,084 )     ( 8,891 ) Reserve for excess and obsolete inventory     ( 4,478 )     ( 4,522 )     $ 62,936     $ 54,886     We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand, market conditions and the respective valuations at LIFO. The need for these reserves is primarily driven by the normal product life cycle. As products mature and sales volumes decline, we rationalize our product offerings to respond to consumer tastes and keep our product lines fresh. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required. In determining reserves, we calculate separate reserves on our wholesale and retail inventories. Our wholesale inventories tend to carry the majority of the reserves for excess quantities and obsolete inventory due to the nature of our distribution model. These wholesale reserves primarily represent design and/or style obsolescence. Typically, product is not shipped to our retail warehouses until a consumer has ordered and paid a deposit for the product. We do not typically hold retail inventory for stock purposes. Consequently, floor sample inventory and inventory for delivery to customers account for the majority of our inventory at retail. Retail reserves are based on accessory and clearance floor sample inventory in our stores and any inventory that is not associated with a specific customer order in our retail warehouses.   Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:       Wholesale Segment     Retail Segment     Total                             Balance at November 28, 2020   $ 3,421     $ 1,101     $ 4,522   Additions charged to expense     309       286       595   Write-offs     ( 364 )     ( 275 )     ( 639 ) Balance at February 27, 2021   $ 3,366     $ 1,112     $ 4,478     Our estimates and assumptions have been reasonably accurate in the past. We have not made any significant changes to our methodology for determining inventory reserves in 2021 and do not anticipate that our methodology is likely to change in the future.   11 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)     6. Goodwill and Other Intangible Assets   Goodwill and other intangible assets consisted of the following:       February 27, 2021       Gross Carrying Amount     Accumulated Amortization     Intangible Assets, Net   Intangibles subject to amortization                         Customer relationships   $ 3,550     $ ( 1,411 )   $ 2,139   Technology - customized applications     834       ( 725 )     109                             Total intangible assets subject to amortization   $ 4,384     $ ( 2,136 )     2,248                             Intangibles not subject to amortization:                         Trade names                     9,338   Goodwill                     12,146                             Total goodwill and other intangible assets                   $ 23,732         November 28, 2020       Gross Carrying Amount     Accumulated Amortization     Intangible Assets, Net   Intangibles subject to amortization                         Customer relationships   $ 3,550     $ ( 1,346 )   $ 2,204   Technology - customized applications     834       ( 695 )     139                             Total intangible assets subject to amortization   $ 4,384     $ ( 2,041 )     2,343                             Intangibles not subject to amortization:                         Trade names                     9,338   Goodwill                     12,146                             Total goodwill and other intangible assets                   $ 23,827     The carrying amounts of goodwill by reportable segment at both February 27, 2021 and November 28, 2020 are as follows:       Original     Accumulated               Recorded     Impairment     Carrying       Value     Losses     Amount                             Wholesale   $ 9,188     $ ( 1,971 )   $ 7,217   Retail     1,926       ( 1,926 )     -   Logistical services     4,929       -       4,929                             Total goodwill   $ 16,043     $ ( 3,897 )   $ 12,146     12 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)   Amortization expense associated with intangible assets during the three months ended February 27, 2021 and February 29, 2020 was as follows:       Quarter Ended       February 27, 2021     February 29, 2020                     Intangible asset amortization expense   $ 95     $ 95     Estimated future amortization expense for intangible assets that exist at February 27, 2021 is as follows:   Remainder of fiscal 2021   $ 284   Fiscal 2022     279   Fiscal 2023     259   Fiscal 2024     259   Fiscal 2025     259   Fiscal 2026     259   Thereafter     649   Total   $ 2,248         7. Bank Credit Facility   Our bank credit facility provides for a line of credit of up to $ 25,000 . At February 27, 2021, we had $ 3,181 outstanding under standby letters of credit against our line, leaving availability under our credit line of $ 21,819 . In addition, we have outstanding standby letters of credit with another bank totaling $ 325 . The line bears interest at the rate of LIBOR plus 1.9 %, with a fee of 0.25 % charged for the unused portion of the line and is secured by a general lien on our accounts receivable and inventory. We were in compliance with all covenants under the agreement as of February 27, 2021 and expect to remain in compliance through the end of fiscal 2021. The credit facility matures on January 31, 2022.       8. Post Employment Benefit Obligations   Defined Benefit Plans   We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives. The liability for the Supplemental Plan was $ 8,525 and $ 8,565 as of February 27, 2021 and November 28, 2020, respectively.   We also have the Bassett Furniture Industries, Incorporated Management Savings Plan (the “Management Savings Plan”) which was established in the second quarter of fiscal 2017. The Management Savings Plan is an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees. As part of the Management Savings Plan, we have made Long Term Cash Awards (“LTC Awards”) totaling $ 2,000 to certain management employees in the amount of $ 400 each. The liability for the LTC Awards was $ 1,533 and $ 1,506 as of February 27, 2021 and November 28, 2020, respectively.   13 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)   The combined pension liability for the Supplemental Plan and LTC Awards is recorded as follows in the condensed consolidated balance sheets:       February 27, 2021     November 28, 2020   Accrued compensation and benefits   $ 613     $ 613   Post employment benefit obligations     9,445       9,458                     Total pension liability   $ 10,058     $ 10,071     Components of net periodic pension costs for our defined benefit plans for the three months ended February 27, 2021 and February 29, 2020 are as follows:       Quarter Ended       February 27, 2021     February 29, 2020   Service cost   $ 31     $ 43   Interest cost     48       67   Amortization of prior service costs     31       31   Amortization of loss     15       1                     Net periodic pension cost   $ 125     $ 142     The components of net periodic pension cost other than the service cost component are included in other loss, net in our condensed consolidated statements of income.   Deferred Compensation Plans   We have an unfunded deferred compensation plan that covers one current executive and certain former executives and provides for voluntary deferral of compensation. This plan has been frozen with no additional participants or deferrals permitted. Our liability under this plan was $ 1,664 and $ 1,677 as of February 27, 2021 and November 28, 2020, respectively.   We also have an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees which was established under the Management Savings Plan. Our liability under this plan, including both accrued Company contributions and participant salary deferrals, was $ 1,533 and $ 1,250 as of February 27, 2021 and November 28, 2020, respectively.   Our combined liability for all deferred compensation arrangements, including Company contributions and participant deferrals under the Management Savings Plan, is recorded as follows in the condensed consolidated balance sheets:       February 27, 2021     November 28, 2020   Accrued compensation and benefits   $ 296     $ 296   Post employment benefit obligations     2,901       2,631                     Total deferred compensation liability   $ 3,197     $ 2,927     14 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)   We recognized expense under our deferred compensation arrangements during the three months ended February 27, 2021 and February 29, 2020 as follows:       Quarter Ended       February 27, 2021     February 29, 2020   Deferred compensation expense   $ 153     $ 96         9. Commitments and Contingencies   We are involved in various legal and environmental matters, which arise in the normal course of business. Although the final outcome of these matters cannot be determined, based on the facts presently known, we believe that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.       10. Lease Guarantees   We have guaranteed certain lease obligations of licensee operators. Lease guarantees range from one to three years. We were contingently liable under licensee lease obligation guarantees in the amounts of $ 2,064 and $ 1,811 at February 27, 2021 and November 28, 2020, respectively.   In the event of default by an independent dealer under the guaranteed lease, we believe that the risk of loss is mitigated through a combination of options that include, but are not limited to, arranging for a replacement dealer or liquidating the collateral (primarily inventory). The proceeds of the above options are expected to cover the estimated amount of our future payments under the guarantee obligations, net of recorded reserves. The fair value of lease guarantees (an estimate of the cost to the Company to perform on these guarantees) at February 27, 2021 and November 28, 2020 was not material.       11. Earnings Per Share   The following reconciles basic and diluted earnings per share:       Net Income     Weighted Average Shares     Net Income Per Share   For the quarter ended February 27, 2021:                                                   Basic earnings per share   $ 4,011       9,919,518     $ 0.40   Add effect of dilutive securities:                         Options and restricted shares     -       20,287       -   Diluted earnings per share   $ 4,011       9,939,805     $ 0.40                             For the quarter ended February 29, 2020:                                                   Basic earnings per share   $ 1,210       10,027,227     $ 0.12   Add effect of dilutive securities:                         Options and restricted shares     -       25,969       -   Diluted earnings per share   $ 1,210       10,053,196     $ 0.12     15 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)   For the three months ended February 27, 2021 and February 29, 2020, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:       Quarter Ended       February 27, 2021     February 29, 2020                     Unvested shares     -       34,000       12. Segment Information   We have strategically aligned our business into three reportable segments as defined in ASC 280, Segment Reporting , and as described below:     ● Wholesale. The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (Company-owned and licensee-owned retail stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery operations, which include Lane Venture, as well as all corporate selling, general and administrative expenses, including those corporate expenses related to both Company- and licensee-owned stores. Our wholesale segment also includes our holdings of short-term investments and retail real estate previously leased as licensee stores. The earnings and costs associated with these assets are included in other income (loss), net, in our condensed consolidated statements of income.     ● 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.     ● Logistical services. Our logistical services segment reflects the operations of Zenith. In addition to providing shipping and warehousing services for the Company, Zenith also provides similar services to other customers, primarily in the furniture industry. Revenue from the performance of these services to other customers is included in logistical services revenue in our condensed consolidated statements of income. Zenith’s total operating costs, including those associated with providing logistical services to the Company as well as to third -party customers, are included in selling, general and administrative expenses and were $ 19,621 and $ 20,480 for the three months ended February 27, 2021 and February 29, 2020, respectively.   Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores and the elimination of Zenith logistics revenue from our wholesale and retail segments. 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, and the elimination of shipping and handling charges from Zenith for services provided to our wholesale and retail operations.   16 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)   The following table presents our segment information:       Quarter Ended       February 27, 2021     February 29, 2020   Sales Revenue                 Wholesale   $ 70,264     $ 65,017   Retail - Company-owned stores     60,395       65,846   Logistical services     20,081       21,315   Inter-company eliminations:                 Furniture and accessories     ( 29,004 )     ( 31,921 ) Logistical services     ( 8,063 )     ( 8,137 ) Consolidated   $ 113,673     $ 112,120                     Income (Loss) from Operations                 Wholesale   $ 4,797     $ 2,713   Retail - Company-owned stores     1,094       ( 1,249 ) Logistical services     459       835   Inter-company elimination     ( 329 )     ( 89 ) Consolidated   $ 6,021     $ 2,210                     Depreciation and Amortization                 Wholesale   $ 798     $ 809   Retail - Company-owned stores     1,516       1,730   Logistical services     1,017       1,084   Consolidated   $ 3,331     $ 3,623                     Capital Expenditures                 Wholesale   $ 757     $ 422   Retail - Company-owned stores     18       561   Logistical services     120       357   Consolidated   $ 895     $ 1,340         As of     As of   Identifiable Assets   February 27, 2021     November 28, 2020   Wholesale   $ 177,204     $ 176,243   Retail - Company-owned stores     168,840       169,105   Logistical services     62,917       57,201   Consolidated   $ 408,961     $ 402,549     Wholesale shipments by type       Quarter Ended       February 27, 2021     February 29, 2020                                     Bassett Custom Upholstery   $ 43,348       61.7 %   $ 40,033       61.6 % Bassett Leather     7,587       10.8 %     4,700       7.2 % Bassett Custom Wood     11,543       16.4 %     11,290       17.4 % Bassett Casegoods     7,786       11.1 %     8,994       13.8 % Total   $ 70,264       100.0 %   $ 65,017       100.0 %   17 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)     13. Revenue Recognition   We recognize revenue when we transfer promised goods or services to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. For our wholesale and retail segments, revenue is recognized when the risks and rewards of ownership and title to the product have transferred to the buyer. At wholesale, transfer occurs and revenue is recognized upon the shipment of goods to independent dealers and licensee-owned BHF stores. At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. All wholesale and retail revenues are recorded net of estimated returns and allowances based on historical patterns. We typically collect a significant portion of the purchase price from our retail customers as a deposit upon order, with the balance typically collected upon delivery. These customer deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $ 44,674 and $ 39,762 as of February 27, 2021 and November 28, 2020, respectively. Approximately 76 % of the customer deposits held at November 28, 2020 related to performance obligations that were satisfied during the current year-to-date period and have therefore been recognized in revenue for the quarter ended February 27, 2021.   For our logistical services segment, line-haul freight revenue is recognized as services are performed and are billed to the customer upon the completion of delivery to the destination. Because the customer receives the benefits of these services as the freight is in transit from point of origin to destination, we recognize revenue using a percentage of completion method based on our estimate of the amount of time freight has been in transit as of the reporting date compared with our estimate of the total required time for the deliveries. The balances of assets recognized for shipping revenues earned but not billed as of February 27, 2021 and November 28, 2020 were not material. Warehousing services revenue is based upon warehouse space occupied by a customer’s goods and inventory movements in and out of a warehouse and is recognized as such services are provided and billed to the customer concurrently in the same period.   We exclude from revenue all amounts collected from customers for sales tax. We do not disclose amounts allocated to remaining unsatisfied performance obligations as they are expected to be satisfied within one year or less.   See Note 12, Segment Information, for disaggregated revenue information.   18 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)     14. Changes to Stockholders ’ Equity   The following changes in our stockholders’ equity occurred during the three months ended February 27, 2021 and February 29, 2020:       February 27, 2021     February 29, 2020   Common Stock:                                   Beginning of period   $ 49,714     $ 50,581   Issuance of common stock     31       29   Forfeited shares     -       ( 35 ) Purchase and retirement of common stock     ( 178 )     ( 402 ) End of period   $ 49,567     $ 50,173                     Common Shares Issued and Outstanding:                                   Beginning of period     9,942,787       10,116,291   Issuance of common stock     6,221       5,743   Forfeited shares     -       ( 7,000 ) Purchase and retirement of common stock     ( 35,512 )     ( 80,443 ) End of period     9,913,496       10,034,591                     Additional Paid-in Capital:                                   Beginning of period   $ -     $ 195   Issuance of common stock     52       46   Forfeited shares     -       35   Purchase and retirement of common stock     ( 66 )     ( 361 ) Stock based compensation     14       85   End of period   $ -     $ -                     Retained Earnings:                                   Beginning of period   $ 109,710     $ 129,130   Cumulative effect of a change in accounting principal     -       ( 3,785 ) Net income for the period     4,011       1,210   Purchase and retirement of common stock     ( 509 )     ( 217 ) Cash dividends declared     ( 3,719 )     ( 1,260 ) End of period   $ 109,493     $ 125,078                     Accumulated Other Comprehensive Loss:                                   Beginning of period   $ ( 1,394 )   $ ( 1,236 ) Amortization of pension costs, net of tax     35       25   End of period   $ ( 1,359 )   $ ( 1,211 )   19 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)     15. Recent Accounting Pronouncements   In December 2019, the FASB issued Accounting Standards Update No. 2019 - 12 – Income Taxes (Topic 740 ) Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019 - 12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019 - 12 also clarifies and simplifies other aspects of the accounting for income taxes. The amendments in ASU 2019 - 12 will become effective for us as of the beginning of our 2022 fiscal year. Early adoption is permitted, including adoption in any interim period. We are currently evaluating the impact that this guidance will have upon our financial position and results of operations, if any.   20 of 33     PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 27, 2021 (Dollars in thousands except share and per share data)