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Item 1. Financial Statements

2022-06-30 compared with 2022-03-31 · 174 added, 286 removed, 355 unchanged (56% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIODS ENDED FEBRUARY 26, 2022 AND FEBRUARY 27, 2021 –

FOR THE PERIODS ENDED MAY 28, 2022 AND MAY 29, 2021 –

(In thousands)

Quarter Ended

February 26, 2022

February 27, 2021

Six Months Ended

Operating activities:

$ 5,573  

$ 4,011  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

Gain on lease modification

Gain on sale of property and equipment

Gain on disposal of discontinued operations

Deferred income taxes

1 unchanged sentence

Accounts receivable

( 4,609 )  

( 3,675 )  

Other current assets

2 unchanged sentences

Accounts payable and other liabilities

( 2,194 )  

Obligations under operating leases

( 7,109 )  

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Investing activities:

Purchases of property and equipment

( 2,424 )  

Proceeds from sales of property and equipment

( 465 )  

Net cash used in investing activities

( 2,880 )  

Proceeds from the disposal of discontinued operations, net

Net cash provided by (used in) investing activities

Financing activities:

Cash dividends

( 1,374 )  

Proceeds from the exercise of stock options

Other issuance of common stock

Repurchases of common stock

( 765 )  

Taxes paid related to net share settlement of equity awards

Repayments of finance lease obligations

( 434 )  

Net cash used in financing activities

( 2,480 )  

Change in cash and cash equivalents

( 2,494 )  

Cash and cash equivalents - beginning of period

34,374  

45,799  

Cash and cash equivalents - end of period

$ 31,880  

$ 45,033  

The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

6 unchanged sentences

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.

To date we have concluded that none of our licensees represent VIEs.

We are the primary beneficiary of one VIE by virtue of our control over the activities that most significantly impact the entity’s economic performance.

This VIE was created to effect the purchase of real property in the state of Florida (see Note 12, Discontinued Operations & Assets Held for Sale –

Retail Real Estate Held for Sale).

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.

4 unchanged sentences

The sale was completed on February 28, 2022.

Accordingly, the operations of our logistical services segment are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B.

Hunt are presented in the accompanying condensed consolidated balance sheets as assets and liabilities of discontinued operations.

See Note 12, Discontinued Operations, for additional information.

Accordingly, the operations of our logistical services segment as well as the gain realized upon disposal are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B.

Hunt are presented in the accompanying condensed consolidated balance sheet as of November 27, 2021 as assets and liabilities of discontinued operations held for sale.

See Note 12, Discontinued Operations & Assets Held for Sale, for additional information.

Costs incurred by Bassett for logistical services performed for Bassett by Zenith are included in selling, general and administrative expenses.

7 unchanged sentences

We adopted ASU 2019-12 on a prospective basis and the adoption did not have a material impact upon our financial condition or results of operations.

Impact of the COVID- 19 Pandemic Upon our Financial Condition and Results of Operations

On March 11, 2020, the World Health Organization declared the coronavirus (“COVID- 19”

) outbreak to be a global pandemic.

The significant adverse economic impact of the pandemic upon our results of operations was limited to fiscal 2020, however we continue to experience the 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.

While we have begun making progress in reducing our order backlogs, pandemic-related labor shortages and supply chain disruptions are ongoing and order cancellations could result if the present delays in order fulfillment continue.

Furthermore, a resurgence in COVID- 19 cases could prompt a return to tighter restrictions on commercial and retail activity in certain areas of the country.

Therefore, uncertainty remains regarding the ongoing impact of the COVID- 19 pandemic 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.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

Certain prior year amounts have been reclassified to conform with the current year presentation.

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 26, 2022 are not necessarily indicative of results for the full fiscal year.

The results of operations for the three and six months ended May 28, 2022 are not necessarily indicative of results for the full fiscal year.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended November 27, 2021.

1 unchanged sentence

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 three months ended February 26, 2022 and February 27, 2021 of 26.3 % and 29.4 %, respectively, differ from the federal statutory rate of 21 % primarily due to the effects of state income taxes and various permanent differences, including charges of $ 135 during the three months ended February 27, 2021 related to the vesting of stock awards.

Our effective tax rate was 26.0 % for both the three and six months ended May 28, 2022, and 25.8 % and 27.3 % for the three and six months ended May 29, 2021, respectively.

These effective rates differ from the federal statutory rate of 21 % primarily due to the effects of state income taxes and various permanent differences, including tax of $ 552 for the three and six months ended May 28, 2022 associated with non-deductible goodwill written off in connection with our sale of Zenith and included in income tax on discontinued operations, and tax benefits (deficiencies) of $ 18 and ($ 117 ) during the three and six months ended May 29, 2021 arising from stock-based compensation.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

(Dollars in thousands except share and per share data)

Cash paid for income taxes, net of refunds, during the six months ended May 28, 2022 was $ 14,663 , including approximately one half of the estimated tax payable on the taxable gain realized on our sale of Zenith.

Cash paid for income taxes, net of refunds, during the six months ended May 29, 2021 was $ 626 .

These cash payments for income taxes are included in cash flows from operating activities in the accompanying condensed consolidated statement of cash flows.

Net recoverable income taxes at May 28, 2022 of $ 1,724 include a federal claim for refund of $ 8,511 arising from the carryback of our fiscal 2020 net operating loss (NOL) partially offset by an accrual for the remainder of the estimated tax payable on the taxable gain realized on our sale of Zenith.

Net recoverable income taxes at November 27, 2021 of $ 8,379 consisted primarily of the federal claim for refund due to the 2020 NOL carryback.

Financial Instruments and Investments

2 unchanged sentences

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.

Our short-term investments of $ 17,715 at February 26, 2022 and November 27, 2021 consisted of CDs.

At February 26, 2022, the CDs had original terms averaging eight months, bearing interest at rates ranging from 0.05 % to 0.85 %.

At February 26, 2022, the weighted average remaining time to maturity of the CDs was approximately five months and the weighted average yield of the CDs was approximately 0.24 %.

Our short-term investments of $ 17,715 at May 28, 2022 and November 27, 2021 consisted of CDs.

At May 28, 2022, the CDs had original terms averaging eight months, bearing interest at rates ranging from 0.05 % to 1.50 %.

At May 28, 2022, the weighted average remaining time to maturity of the CDs was approximately three months and the weighted average yield of the CDs was approximately 0.26 %.

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 26, 2022 and November 27, 2021 approximates their fair value.

Due to the nature of these investments and their relatively short maturities, the carrying amount of the short-term investments at May 28, 2022 and November 27, 2021 approximates their fair value.

Accounts Receivable

Accounts receivable consists of the following:

November 27, 2021

Gross accounts receivable

$ 26,317  

$ 21,134  

Allowance for credit losses

( 714 )  

Allowance for doubtful accounts

Accounts receivable, net

$ 25,603  

$ 20,567  

We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments.

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

Activity in the allowance for credit losses for the three months ended February 26, 2022 was as follows:

Activity in the allowance for credit losses for the three and six months ended May 28, 2022 was as follows:

Balance at November 27, 2021

1 unchanged sentence

Write-offs against allowance

Balance at February 26, 2022

Balance at May 28, 2022

We believe that the carrying value of our net accounts receivable approximates fair value.

5 unchanged sentences

Wholesale finished goods

$ 42,838  

$ 40,254  

Work in process

Raw materials and supplies

21,610  

21,653  

Retail merchandise

32,303  

30,914  

Total inventories on first-in, first-out method

97,387  

93,303  

LIFO adjustment

( 10,916 )  

Reserve for excess and obsolete inventory

( 4,792 )  

$ 81,679  

$ 78,004  

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.

12 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

2 unchanged sentences

Balance at November 27, 2021

$ 3,683  

$ 1,133  

$ 4,816  

Additions charged to expense

( 360 )  

( 203 )  

Balance at February 26, 2022

$ 3,648  

$ 1,144  

$ 4,792  

Balance at May 28, 2022

Our estimates and assumptions have been reasonably accurate in the past.

2 unchanged sentences

Goodwill and other intangible assets consisted of the following:

February 26, 2022

Accumulated Amortization

1 unchanged sentence

Customer relationships

$ ( 237 )  

Intangibles not subject to amortization:

Total goodwill and other intangible assets

$ 14,340  

November 27, 2021

2 unchanged sentences

Customer relationships

$ ( 223 )  

Intangibles not subject to amortization:

Total goodwill and other intangible assets

$ 14,354  

Page 10 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

The carrying amounts of goodwill by reportable segment at both February 26, 2022 and November 27, 2021 are as follows:

$ 9,188  

$ ( 1,971 )  

$ 7,217  

( 1,926 )  

The carrying amounts of goodwill by reportable segment at both May 28, 2022 and November 27, 2021 are as follows:

Total goodwill

$ 11,114  

$ ( 3,897 )  

$ 7,217  

Goodwill and other intangible assets associated with our logistical services segment totaling $ 9,023 and $ 9,094 at February 26, 2022 and November 27, 2021, respectively, are included in assets of discontinued operations held for sale in the accompanying balance sheets (see Note 12 ).

Amortization expense associated with intangible assets during the three months ended February 26, 2022 and February 27, 2021 was as follows:

Goodwill and other intangible assets associated with our logistical services segment totaling $ 9,094 at November 27, 2021 are included in assets of discontinued operations held for sale in the accompanying balance sheet (see Note 12).

Amortization expense associated with intangible assets during the three and six months ended May 28, 2022 and May 29, 2021 was as follows:

Quarter Ended

Six Months Ended

Intangible asset amortization expense

Estimated future amortization expense for intangible assets that exist at February 26, 2022 is as follows:

Estimated future amortization expense for intangible assets that exist at May 28, 2022 is as follows:

Remainder of fiscal 2022

1 unchanged sentence

Our bank credit facility provides for a line of credit of up to $ 25,000.

At February 26, 2022, we had $ 3,931 outstanding under standby letters of credit against our line, leaving availability under our credit line of $ 21,069 .

In addition, we had outstanding standby letters of credit with another bank totaling $ 325 .

At May 28, 2022, we had $ 3,931 outstanding under standby letters of credit against our line, leaving availability under our credit line of $ 21,069.

In addition, we had outstanding standby letters of credit with another bank totaling $ 325 at May 28, 2022.

The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.5 % and is unsecured.

Our bank will charge a fee of 0.25 % on the daily unused balance of the line, payable quarterly.

Our bank charges a fee of 0.25% on the daily unused balance of the line, payable quarterly.

Under the terms of the facility, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis:

2 unchanged sentences

Minimum tangible net worth of $ 140,000 .

We were in compliance with these covenants at February 26, 2022 and expect to remain in compliance for the foreseeable future.

We were in compliance with these covenants at May 28, 2022 and expect to remain in compliance for the foreseeable future.

The credit facility will mature on January 27, 2025, at which time any amounts outstanding under the facility will be due.

Page 11 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

2 unchanged sentences

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 $ 9,149 and $ 9,192 as of February 26, 2022 and November 27, 2021, respectively.

The liability for the Supplemental Plan was $ 9,105 and $ 9,192 as of May 28, 2022 and November 27, 2021, 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.

1 unchanged sentence

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 $ 1,565 and $ 1,548 as of February 26, 2022 and November 27, 2021, respectively.

The liability for the LTC Awards was $ 1,543 and $ 1,548 as of May 28, 2022 and November 27, 2021, respectively.

The combined pension liability for the Supplemental Plan and LTC Awards is recorded as follows in the condensed consolidated balance sheets:

2 unchanged sentences

Total pension liability

$ 10,714  

$ 10,740  

Components of net periodic pension costs for our defined benefit plans for the three months ended February 26, 2022 and February 27, 2021 are as follows:

Components of net periodic pension costs for our defined benefit plans for the three and six months ended May 28, 2022 and May 29, 2021 are as follows:

Quarter Ended

Six Months Ended

Interest cost

6 unchanged sentences

This plan has been frozen with no additional participants or deferrals permitted.

Our liability under this plan was $ 1,650 and $ 1,648 as of February 26, 2022 and November 27, 2021, respectively.

Our liability under this plan was $ 1,652 and $ 1,648 as of May 28, 2022 and November 27, 2021, 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 $ 2,155 and $ 1,789 as of February 26, 2022 and November 27, 2021, respectively.

Our liability under this plan, including both accrued Company contributions and participant salary deferrals, was $ 1,964 and $ 1,789 as of May 28, 2022 and November 27, 2021, respectively.

Page 12 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

3 unchanged sentences

Total deferred compensation liability

$ 3,805  

$ 2,927  

We recognized expense under our deferred compensation arrangements during the three months ended February 26, 2022 and February 27, 2021 as follows:

We recognized expense under our deferred compensation arrangements during the three and six months ended May 28, 2022 and May 29, 2021 as follows:

Quarter Ended

February 26, 2022

February 27, 2021

Six Months Ended

Deferred compensation expense

5 unchanged sentences

Lease guarantees range from one to three years.

We were contingently liable under licensee lease obligation guarantees in the amounts of $ 1,854 and $ 1,845 at February 26, 2022 and November 27, 2021, respectively.

We were contingently liable under licensee lease obligation guarantees in the amounts of $ 1,863 and $ 1,845 at May 28, 2022 and November 27, 2021, 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 26, 2022 and November 27, 2021 was not material.

The fair value of lease guarantees (an estimate of the cost to the Company to perform on these guarantees) at May 28, 2022 and November 27, 2021 was not material.

Page 13 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

2 unchanged sentences

Weighted Average

For the quarter ended February 26, 2022:

For the quarter ended May 28, 2022:

Basic earnings per share - continuing operations

$ 4,291  

9,750,432  

$ 0.44  

Add effect of dilutive securities:

1 unchanged sentence

Diluted earnings per share - continuing operations

$ 4,291  

9,758,977  

$ 0.44  

Basic earnings per share - discontinued operations

$ 1,282  

9,750,432  

$ 0.13  

Add effect of dilutive securities:

1 unchanged sentence

Diluted earnings per share - discontinued operations

$ 1,282  

9,758,977  

$ 0.13  

For the quarter ended February 27, 2021:

For the quarter ended May 29, 2021:

Basic earnings per share - continuing operations

$ 3,698  

9,919,518  

$ 0.37  

Add effect of dilutive securities:

Options and restricted shares

20,287  

Diluted earnings per share - continuing operations

$ 3,698  

9,939,805  

$ 0.37  

Basic earnings per share - discontinued operations

9,919,518  

$ 0.03  

Add effect of dilutive securities:

Options and restricted shares

20,287  

Diluted earnings per share - discontinued operations

9,939,805  

$ 0.03  

For the three months ended February 26, 2022 and February 27, 2021, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:

For the six months ended May 28, 2022:

Basic earnings per share - continuing operations

Add effect of dilutive securities:

Restricted shares

Diluted earnings per share - continuing operations

Basic earnings per share - discontinued operations

Add effect of dilutive securities:

Restricted shares

Diluted earnings per share - discontinued operations

For the six months ended May 29, 2021:

Basic earnings per share - continuing operations

Add effect of dilutive securities:

Options and restricted shares

Diluted earnings per share - continuing operations

Basic earnings per share - discontinued operations

Add effect of dilutive securities:

Options and restricted shares

Diluted earnings per share - discontinued operations

Page 14 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

(Dollars in thousands except share and per share data)

For the three and six months ended May 28, 2022 and May 29, 2021, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:

Quarter Ended

Six Months Ended

Unvested shares

51,300  

Discontinued Operations & Assets Held for Sale

Discontinued Operations

On January 31, 2022, we entered into a definitive agreement to sell substantially all of the assets of Zenith to J.B.

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

Amount held in escrow for contingencies related to representations and warranties (1)

Seller expenses paid at closing

Net proceeds from the sale (2)

To be held in escrow until the first anniversary of the sale, at which time any amount not distributed or reserved for specified claims will be released to the Company.

This amount is included in other current assets in the accompanying condensed consolidated balance sheet at May 28, 2022.

Included in cash flows from investing activities in the accompanying condensed consolidated statement of cash flows for the six months ended May 28, 2022.

The sales price is subject to a customary post-closing working capital adjustment which will be paid during the third quarter of fiscal 2022.

Including the estimated effect of the working capital adjustment, we recognized a pre-tax gain from the sale of Zenith of $ 53,254.

The operations of our logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B.

Hunt are presented in the accompanying condensed consolidated balance sheet as assets and liabilities of discontinued operations held for sale as of November 27, 2021.

Page 15 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

Discontinued Operations

On January 31, 2022, we entered into a definitive agreement to sell substantially all of the assets of Zenith Freight Lines, LLC (“Zenith”) to J.B.

Hunt Transport Services, Inc.

(“J.B.

Hunt”) for approximately $ 86,900 in cash subject to a customary post-closing working capital adjustment.

The sale was completed on February 28, 2022.

Accordingly, the operations of our logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B.

Hunt are presented in the accompanying condensed consolidated balance sheets as assets and liabilities of discontinued operations held for sale.

The following table summarizes the major classes of assets and liabilities of the discontinued operations, as reported in the condensed consolidated balance sheets as of February 26, 2022 and November 27, 2021:

The following table summarizes the major classes of assets and liabilities of the discontinued operations held for sale as reported in the condensed consolidated balance sheet as of November 27, 2021:

November 27, 2021

Carrying amounts of major classes of assets included as part of discontinued operations:

Accounts receivable, net

$ 7,174  

$ 7,601  

Other current assets

Property and equipment, net

23,891  

24,898  

Goodwill and other intangible assets

Right of use assets under operating leases

17,729  

18,193  

$ 61,888  

$ 63,821  

Balance sheet classification:

Current assets of discontinued operations held for sale

$ 61,888  

$ 11,064  

Long-term assets of discontinued operations held for sale

52,757  

Total assets of discontinued operations held for sale

$ 61,888  

$ 63,821  

Carrying amounts of major classes of liabilities included as part of discontinued operations:

Accounts payable

$ 3,575  

$ 4,336  

Accrued compensation and benefits

2 unchanged sentences

Long-term portion of operating lease obligations

10,332  

10,996  

Other long-term liabilities

$ 29,892  

$ 32,305  

Balance sheet classification:

Current liabilities of discontinued operations held for sale

$ 29,892  

$ 16,095  

Long-term liabilities of discontinued operations held for sale

16,210  

Total liabilities of discontinued operations held for sale

$ 29,892  

$ 32,305  

Following the sale of Zenith, certain of Zenith’s liabilities primarily representing reserves and accrued liabilities for pre-disposal workers’

compensation, health insurance, auto liability claims and certain accrued compensation and benefits were retained by Bassett.

These reserves and accruals total $ 1,390 at May 28, 2022 and are included in other current liabilities and accrued expenses in the accompanying condensed consolidated balance sheet.

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PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

The following table summarizes the major classes of line items constituting income of the discontinued operations, as reported in the condensed consolidated statements of income for the three months ended February 26, 2022 and February 27, 2021:

The following table summarizes the major classes of line items constituting income of the discontinued operations, as reported in the condensed consolidated statements of income for the three and six months ended May 28, 2022 and May 29, 2021:

Quarter Ended

Six Months Ended

Major line items constituting pretax income of discontinued operations:

Logistical services revenue

$ 16,776  

$ 12,018  

Cost of logistical services

15,001  

11,558  

Other loss, net

( 63 )  

Income from operations of logistical services

Gain on disposal

Pretax income of discontinued operations

Income tax expense

Income from discontinued operations

$ 1,282  

The amounts shown above represent the results of Zenith’s business transactions with third parties.

During the three months ended February 26, 2022 and February 27, 2021, Zenith also charged Bassett $ 9,121 and $ 8,063 , respectively, for logistical services provided to our wholesale segment.

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 $ 9,121 during the six months ended May 28, 2022, and $ 8,182 and $ 16,245, respectively, for the three and six months ended May 29, 2021.

We have 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.

Other loss, net, of discontinued operations for the three months ended February 26, 2022 and February 27, 2021 includes interest in the amount of $ 78 and $ 43 , respectively, arising from finance leases assumed by J.B.

Subsequent to the sale, we incurred $ 9,546 of expense during the three months ended May 28, 2022 for the performance of logistical services of which $7,893 had been paid in cash as of May 28, 2022.

Included in other loss, net, is interest arising from finance leases assumed by J.B.

Hunt as part of the transaction.

The following table summarizes the cash flows generated by discontinued operations during the three months ended February 26, 2022 and February 27, 2021:

Quarter Ended

Such interest amounted to $ 78 for the six months ended May 28, 2022, and $ 78 and $ 121, respectively, for the three and six months ended May 29, 2021.

The following table summarizes the cash flows generated by discontinued operations during the six months ended May 28, 2022 and May 29, 2021:

Six Months Ended

Cash provided by operating activities

$ 1,681  

$ 2,841  

Cash used in investing activities

( 81 )  

Cash used in financing activities

( 371 )  

Net cash provided by discontinued operations

$ 1,229  

$ 2,548  

Retail Real Estate Held for Sale

During the second quarter of fiscal 2022, we entered into a contract to sell one of our Company-owned store locations in Houston, Texas for approximately $ 8,200 net of closing costs.

Accordingly, the $ 3,623 carrying value of the real property at that location is classified as retail real estate held for sale in the accompanying condensed consolidated balance sheet as of May 28, 2022.

The sale closed on June 24, 2022, and we expect to vacate the premises by the end of the third quarter of fiscal 2022.

This store will be relocated to a new leased store in the Houston market that we expect to open during the second quarter of fiscal 2023.

This sale, together with our recent purchase of real property in Tampa, Florida for $ 7,668 in cash during the second quarter of fiscal 2022 will be treated as an exchange of like-kind property under Section 1031 of the Internal Revenue Code of 1986, as amended, for the purpose of deferring the majority of the taxable gain of approximately $ 4,800 arising from the sale of the Houston property.

A VIE was established during the second quarter of fiscal 2022 for purposes of acquiring the Tampa, Florida property, of which the Company is the primary beneficiary by virtue of our control over the activities that most significantly impact the entity's economic performance.

We plan to remodel the Tampa property and open as a Company-owned store in the second quarter of fiscal 2023.

Page 17 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

(Dollars in thousands except share and per share data)

Segment Information

4 unchanged sentences

The earnings and costs associated with these assets are included in other loss, net, in our condensed consolidated statements of operations.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

Retail –

6 unchanged sentences

Our former logistical services segment which represented the operations of Zenith is now presented as a discontinued operation in the accompanying condensed consolidated balances sheets and statements of income (see Note 12).

Page 18 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

(Dollars in thousands except share and per share data)

The following table presents our segment information:

Quarter Ended

Six Months Ended

Sales Revenue

Wholesale sales of furniture and accessories

$ 83,485  

$ 70,264  

Sales to retail segment

( 29,728 )  

Wholesale sales to external customers

53,757  

41,260  

Retail sales of furniture and accessories

64,107  

60,395  

Consolidated net sales of furniture and accessories

$ 117,864  

$ 101,655  

Income from Operations

$ 3,385  

$ 4,797  

Retail - Company-owned stores

Inter-company elimination

( 257 )  

$ 6,478  

$ 5,561  

Depreciation and Amortization

Retail - Company-owned stores

$ 2,389  

$ 2,314  

Capital Expenditures

$ 2,327  

Retail - Company-owned stores

$ 2,343  

Identifiable Assets  

$ 201,388  

$ 196,853  

Identifiable Assets

Retail - Company-owned stores

160,781  

160,986  

Discontinued Operations

61,888  

63,821  

$ 424,057  

$ 421,660  

See Note 14, Revenue Recognition, for disaggregated revenue information regarding sales of furniture and accessories by product type for the wholesale and retail segments.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

Revenue Recognition

5 unchanged sentences

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 $ 54,491 and $ 51,492 as of February 26, 2022 and November 27, 2021, respectively.

Approximately 60 % of the customer deposits held at November 27, 2021 related to performance obligations that were satisfied during the current year-to-date period and have therefore been recognized in revenue for the three months ended February 26, 2022.

These customer deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $ 46,391 and $ 51,492 as of May 28, 2022 and November 27, 2021, respectively.

Approximately 90 % of the customer deposits held at November 27, 2021 related to performance obligations that were satisfied during the current year-to-date period and have therefore been recognized in revenue for the three and six months ended May 28, 2022.

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.

2 unchanged sentences

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 February 26, 2022 and November 27, 2021, our balance of prepaid commissions included in other current assets was $ 6,330 and $ 6,221 , respectively.

At May 28, 2022 and November 27, 2021, our balance of prepaid commissions included in other current assets was $ 5,258 and $ 6,221, respectively.

Page 19 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

(Dollars in thousands except share and per share data)

We exclude from revenue all amounts collected from customers for sales tax.

We do not disclose amounts allocated to remaining unsatisfied performance obligations as they are expected to be satisfied within one year or less.

Disaggregated revenue information for sales of furniture and accessories by product category for the three months ended February 26, 2022 and February 27, 2021, excluding intercompany transactions between our segments, is a follows:

Disaggregated revenue information for sales of furniture and accessories by product category for the three and six months ended May 28, 2022 and May 29, 2021, excluding intercompany transactions between our segments, is a follows:

Quarter Ended

February 26, 2022

February 27, 2021

Bassett Custom Upholstery

$ 31,929  

$ 37,818  

$ 69,747  

$ 24,884  

$ 34,461  

$ 59,345  

Bassett Leather

12,939  

13,179  

Bassett Custom Wood

15,387  

10,799  

Bassett Casegoods

11,201  

11,077  

14,554  

Accessories, mattresses and other (1)

Consolidated net sales of furniture and accessories

$ 53,757  

$ 64,107  

$ 117,864  

$ 41,260  

$ 60,395  

$ 101,655  

Six Months Ended

Bassett Custom Upholstery

Bassett Leather

Bassett Custom Wood

Bassett Casegoods

Accessories, mattresses and other (1)

Consolidated net sales of furniture and accessories

Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans.

Page 20 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

1 unchanged sentence

The following changes in our stockholders’

equity occurred during the three months ended February 26, 2022 and February 27, 2021:

equity occurred during the three and six months ended May 28, 2022 and May 29, 2021:

Quarter Ended

Six Months Ended

Common Stock:

Beginning of period

$ 48,811  

$ 49,714  

Issuance of common stock

Purchase and retirement of common stock

( 225 )  

End of period

$ 48,640  

$ 49,567  

Common Shares Issued and Outstanding:

Beginning of period

9,762,125  

9,942,787  

Issuance of common stock

10,796  

Purchase and retirement of common stock

( 44,989 )  

End of period

9,727,932  

9,913,496  

Additional Paid-in Capital:

2 unchanged sentences

Purchase and retirement of common stock

( 267 )  

Stock based compensation

2 unchanged sentences

Beginning of period

$ 115,631  

$ 109,710  

Net income for the period

Purchase and retirement of common stock

( 273 )  

Cash dividends declared

( 1,374 )  

End of period

$ 119,557  

$ 109,493  

Accumulated Other Comprehensive Loss:

Beginning of period

$ ( 1,823 )  

Amortization of pension costs, net of tax

End of period

$ ( 1,774 )  

Page 21 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

8 unchanged sentences

We do not expect that this guidance will have a material impact upon our financial position and results of operations.

In March 2022, the FASB issued Accounting Standards Update No.

2022-02 –

Financial Instruments –

Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures, to address certain concerns identified in the Post-Implementation Review process for ASU Topic 326.

The amendments in ASU 2022-02 eliminate the accounting guidance for troubled debt restructurings by creditors in ASC Subtopic 310-40, Receivables –

Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

In addition, for public business entities, the amendments in ASU 2022-02 require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC Subtopic 326-20, Financial Instruments –

Credit Losses –

Measured at Amortized Cost.

The amendments in ASU 2022-02 will become effective for us as of the beginning of our 2024 fiscal year.

Early adoption is permitted.

We expect that the adoption of this standard will primarily impact our disclosures but do not expect that this guidance will have a material impact upon our financial position and results of operations.

Page 22 of 37

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

FEBRUARY 26, 2022

(Dollars in thousands except share and per share data)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements