BASSETT FURNITURE INDUSTRIES INC 10-Q

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 ”, “ aims ” 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 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 tariffs, retaliatory tariffs, duties 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 Additionally, other risks that could cause actual results to differ materially from those contemplated by such forward-looking statements are set forth in Part I, Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended November 29, 2025. You should keep in mind that any forward-looking statement made by us in this report or elsewhere 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 discussion 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 or elsewhere might not occur. 19 of 31 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 28, 2026 (Dollars in thousands except share and per share data) Overview Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 124-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. Approximately 60% of our wholesale sales arise from our network of 86 Company-owned and licensee-owned Bassett Home Furnishings (“BHF”) stores. Our store program is designed to provide a single source home furnishings retail store with a unique combination of stylish, quality furniture and accessories with a high level of customer service. The stores highlight our custom furniture design and manufacturing capabilities, 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. Bassett also has a significant traditional wholesale business with more than 1,000 open market accounts. Most of the open market sales are through Bassett Design Centers and Bassett Custom Studios which function as a store within a multi-line store featuring the Company’s custom furniture capabilities. The wholesale business, including the Lane Venture outdoor brand, also services general furniture stores and a growing number of interior design firms through a network of over 30 independent sales representatives who have stated geographical territories. These sales representatives are compensated based on a standard commission rate. The Lane Venture outdoor brand was recently introduced in the Bassett Home Furnishings stores representing a new outlet for that brand. 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 been the primary vehicle for brand advertising and customer acquisition. We began supplementing the digital outreach strategy with added direct mail and television late in 2024 and expect to continue with a balanced blend of both digital and traditional direct mail and television in 2026. 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. Building on the 25% increase in web sales for fiscal 2025, written sales orders for the web increased 28% for the quarter while delivered sales increased 46%. Although e-commerce sales continue to be small relative to in-store sales, we will continue to invest in ongoing improvements to the aesthetics and user experience on our website while not compromising on our in-store experience or the quality of our in-home makeover capabilities. 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 have a factory in Martinsville, Virginia that assembles and finishes our custom bedroom and dining offerings. We also have 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. Over 75% 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. 20 of 31 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 28, 2026 (Dollars in thousands except share and per share data) Results of Operations – Period ended February 28, 2026 compared with the period ended March 1, 2025: Consolidated results of operations for the three months ended February 28, 2026 and March 1, 2025 are as follows: Quarter Ended Change February 28, 2026 March 1, 2025 Dollars Percent Net sales of furniture and accessories $ 80,340 100.0 % $ 82,162 100.0 % $ (1,822 ) -2.2 % Cost of furniture and accessories sold 35,175 43.8 % 35,332 43.0 % (157 ) -0.4 % Gross profit 45,165 56.2 % 46,830 57.0 % (1,665 ) -3.6 % SG&A expenses 43,913 54.7 % 44,375 54.0 % (462 ) -1.0 % New store pre-opening costs 95 0.1 % - 0.0 % 95 100.0 % Income from operations $ 1,157 1.4 % $ 2,455 3.0 % $ (1,298 ) -52.9 % Analysis of Quarterly Results: Total sales revenue for the three months ended February 28, 2026 decreased $1,822 or 2.2% from the prior year period primarily due to the impact of widespread winter weather disruptions in late January on store operations and retail and wholesale logistics. This consisted of a $749 or 1.4% decrease in retail sales from our Company-owned stores and a $1,073 or 3.7% decrease in sales to external wholesale customers. Gross margins for the three months ended February 28, 2026 decreased 80 basis points from the prior year period primarily due to lower margins in both the wholesale and retail business. Selling, general and administrative (“SG&A”) expenses (excluding new store pre-opening costs) as a percentage of sales for the three months ended February 28, 2026 increased 70 basis points from 2025 reflecting reduced leverage of fixed costs due to lower sales levels. Refer to the following discussions of quarterly results by segment for additional details. 21 of 31 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 28, 2026 (Dollars in thousands except share and per share data) 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 three months ended February 28, 2026 and March 1, 2025, Corporate and other included no other operating segments. 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. 22 of 31 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 28, 2026 (Dollars in thousands except share and per share data) Reconciliation of Segment Results to Consolidated Income (Loss) Before Income Taxes 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 as well as non-operating income and expenses 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. Quarter Ended February 28, 2026 Non-GAAP Presentation GAAP Presentation Wholesale Retail Corporate & Other Eliminations Special Items Non-Operating Consolidated Net sales of furniture and accessories $ 52,961 $ 52,545 $ - $ (25,166 ) (1) $ - $ - $ 80,340 Cost of furniture and accessories sold 34,467 25,477 - (24,769 ) (2) - - 35,175 Gross profit 18,494 27,068 - (397 ) - - 45,165 SG&A expense 10,099 28,007 6,118 (311 ) (3) - - 43,913 New store pre-opening costs - 95 - - - 95 Income (loss) from operations 8,395 (1,034 ) (6,118 ) (86 ) - - 1,157 Interest income - - - - - 553 553 Other loss, net - - - - - (192 ) (192 ) Income (loss) before income taxes $ 8,395 $ (1,034 ) $ (6,118 ) $ (86 ) $ - $ 361 $ 1,518 Quarter Ended March 1, 2025 Non-GAAP Presentation GAAP Presentation Wholesale Retail Corporate & Other Eliminations Special Items Non-Operating Consolidated Net sales of furniture and accessories $ 52,927 $ 53,294 $ - $ (24,059 ) (1) $ - $ - $ 82,162 Cost of furniture and accessories sold 34,191 24,937 - (23,796 ) (2) - - 35,332 Gross profit 18,736 28,357 - (263 ) - - 46,830 SG&A expense 10,051 28,405 6,226 (307 ) (3) - - 44,375 Income (loss) from operations 8,685 (48 ) (6,226 ) 44 - - 2,455 Interest income - - - - - 559 559 Other loss, net - - - - - (459 ) (459 ) Income (loss) before income taxes $ 8,685 $ (48 ) $ (6,226 ) $ 44 $ - $ 100 $ 2,555 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, as well as the change for the period in the elimination of intercompany profit in ending retail inventory. (3) Represents the elimination of rent paid by our retail stores occupying Company-owned real estate. 23 of 31 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 28, 2026 (Dollars in thousands except share and per share data) Wholesale Segment Results for the wholesale segment for the three months ended February 28, 2026 and March 1, 2025 are as follows: Quarter Ended Change February 28, 2026 March 1, 2025 Dollars Percent Net sales $ 52,961 100.0 % $ 52,927 100.0 % $ 34 0.1 % Gross profit (1) 18,494 34.9 % 18,736 35.4 % (242 ) -1.3 % SG&A expenses 10,099 19.1 % 10,051 19.0 % 48 0.5 % Income from operations $ 8,395 15.9 % $ 8,685 16.4 % $ (290 ) -3.3 % (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 gross profit by segment to consolidated gross profit presented under the Reconciliation of Segment Results to Consolidated Income (Loss) Before Income Taxes above. Wholesale sales by major product category are as follows: Quarter Ended February 28, 2026 March 1, 2025 (1) Total Change External Intercompany Total External Intercompany Total Dollars Percent Bassett Custom Upholstery $ 17,979 $ 15,444 $ 33,423 63.1 % $ 18,849 $ 15,560 $ 34,409 65.0 % $ (986 ) -2.9 % Bassett Leather Imports 4,089 975 5,064 9.6 % 4,112 632 4,744 9.0 % 320 6.7 % Bassett Custom Wood 2,822 4,134 6,956 13.1 % 3,160 3,990 7,150 13.5 % (194 ) -2.7 % Bassett Casegoods 2,905 4,613 7,518 14.2 % 2,747 3,877 6,624 12.5 % 894 13.5 % Total $ 27,795 $ 25,166 $ 52,961 100.0 % $ 28,868 $ 24,059 $ 52,927 100.0 % $ 34 0.1 % (1) Certain amounts within the Bassett Custom Wood and Bassett Casegoods categories have been reclassified to conform with the 2026 presentation. Analysis of Quarterly Results – Wholesale Net sales for the three months ended February 28, 2026 increased $34 or 0.1% over the prior year, consisting of a 0.6% increase in shipments to our retail store network and a 2.6% increase in Lane Venture shipments to wholesale customers partially offset by a 5.3% decrease in shipments to the open market. As previously mentioned, we introduced the Lane Venture brand in the Bassett Home Furnishings stores during the first quarter of 2026 and have included those shipments in the above change in shipments to the retail store network. Including those shipments in the total Lane Venture brand, shipments of that brand increased 32%. Shipments were negatively impacted by winter weather as our major distribution centers were closed for multiple days during the quarter. Gross margins for the three months ended February 28, 2026 decreased 50 basis points from the prior year period as margin decreases in the Bassett Custom Upholstery operations due to reduced leverage on fixed costs were partially offset by improved margins in the Bassett Casegoods operations due to improved pricing strategies. SG&A expenses as a percentage of sales were essentially flat compared with the prior year period. Wholesale Backlog Wholesale backlog at February 28, 2026 was $16,745 as compared to $19,519 at November 29, 2025 and $19,515 at March 1, 2025. 24 of 31 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 28, 2026 (Dollars in thousands except share and per share data) Retail – Company-owned Stores Segment Results for the retail segment for the periods ended February 28, 2026 and March 1, 2025 are as follows: Quarter Ended Change February 28, 2026 March 1, 2025 Dollars Percent Net sales $ 52,545 100.0 % $ 53,294 100.0 % $ (749 ) -1.4 % Gross profit (1) 27,068 51.5 % 28,357 53.2 % (1,289 ) -4.5 % SG&A expenses 28,007 53.3 % 28,405 53.3 % (398 ) -1.4 % New store pre-opening costs 95 0.2 % - 0.0 % 95 100.0 % Loss from operations $ (1,034 ) -2.0 % $ (48 ) -0.1 % $ (986 ) N/M (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 gross profit by segment to consolidated gross profit presented under the Reconciliation of Segment Results to Consolidated Income (Loss) Before Income Taxes above. Retail sales by major product category are as follows: Quarter Ended Change February 28, 2026 March 1, 2025 (1) Dollars Percent Bassett Custom Upholstery $ 28,663 54.5 % $ 31,187 58.5 % $ (2,524 ) -8.1 % Bassett Leather Imports 1,208 2.3 % 234 0.4 % 974 416.2 % Bassett Custom Wood 8,141 15.5 % 7,706 14.5 % 435 5.6 % Bassett Casegoods 7,727 14.7 % 6,652 12.5 % 1,075 16.2 % Accessories, mattresses and other (2) 6,806 13.0 % 7,515 14.1 % (709 ) -9.4 % Total $ 52,545 100.0 % $ 53,294 100.0 % $ (749 ) -1.4 % (1) Certain amounts within Bassett Custom Upholstery and Bassett Leather Imports have been reclassified to conform to the 2026 presentation. (2) Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans. Analysis of Quarterly Results - Retail Net sales for the three months ended February 28, 2026 decreased $749 or 1.4% from the prior year period due primarily to the previously mentioned winter weather disruptions during the last two weeks of January. Written sales (the value of sales orders taken but not delivered) decreased 0.2% from the first quarter of 2025. Gross margin for the three months ended February 28, 2026 declined 170 basis points from the prior period primarily due to lower margins on in-line goods as we did not institute a price increase related to the increased tariff costs until mid-January of 2026. SG&A expenses (excluding new store pre-opening costs) as a percentage of sales for the three months ended February 28, 2026 were unchanged from the prior year period as reduced leverage of fixed costs due to lower sales levels was substantially offset by improved efficiency in the warehouse and delivery operation. During the three months ended February 28, 2026, we incurred $95 of new store pre-opening costs associated with new stores in the Cincinnati, Ohio and Orlando, Florida markets, expected to open by the end of the second and third quarters of fiscal 2026, respectively. Prior to opening a new store we incur such expenses as rent, training costs and other payroll-related costs. These costs generally range between $200 to $400 per store depending on the overall rent costs for the location and the period between the time when we take physical possession of the store space and the time of the store opening. Generally, rent payments during a buildout period between delivery of possession and opening of a new store are deferred and therefore straight-line rent expense recognized during that time does not require cash. Inherent in our retail business model, we also incur losses in the two to three months of operation following a new store opening. Like other furniture retailers, we do not recognize a sale until the furniture is delivered to our customer. Because our retail business model does not involve maintaining a stock of retail inventory that would result in quick delivery and because of the custom nature of many of our furniture offerings, delivery to our customers usually occurs about 30 to 45 days after an order is placed. We generally require a deposit at the time of order and collect the remaining balance when the furniture is delivered, at which time the sale is recognized. Coupled with the previously discussed store pre-opening costs, total start-up losses can range from $400 to $600 per store. We generally expect that new stores will operate at or above a retail break-even level within a reasonable period of time following store opening. Factors affecting the length of time required to achieve this goal on a store-by-store basis may include the level of brand recognition, the degree of local competition and the depth of penetration in a particular market. Even as new stores ramp up to break even, we do realize additional wholesale sales volume that leverages the fixed costs in our wholesale business. 25 of 31 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 28, 2026 (Dollars in thousands except share and per share data) Retail Backlog Retail backlog at February 28, 2026 was $34,247 compared to $34,402 at November 29, 2025 and $36,143 at March 1, 2025. 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. SG&A expenses of Corporate and other for the periods ended February 28, 2026 and March 1, 2025 are as follows: Quarter Ended Change February 28, 2026 March 1, 2025 Dollars Percent SG&A expenses $ (6,118 ) $ (6,226 ) $ 108 -1.7 % Analysis of Results – Corporate and Other SG&A expenses included in Corporate and other decreased $108 or 1.7% from the prior year primarily due to decreased corporate overhead spending from better expense management. Other Items Affecting Net Income (Loss) Interest Income Interest income for the three months ended February 28, 2026 and March 1, 2025 was $553 and $559, respectively, a decrease of $6. Lower interest income on CDs and interest-bearing cash equivalents was largely offset by $99 of interest received as a Federal income tax refund during the first quarter of fiscal 2026. Other Loss, Net Other loss, net, for the three months ended February 28, 2026 and March 1, 2025 was $192 and $459, respectively, a decline of $267 from the prior year period. The net change from the prior year quarter and year to date was primarily due to lower net costs associated with Company-owned life insurance partially offset by increased interest expense from finance leases compared to the prior year period. Income Taxes We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income or loss and use that effective tax rate to record our year-to-date income tax provision. Any change in annual projections of pretax income or loss could have a significant impact on our effective tax rate for the respective quarter. Our effective tax rate was 26.5% for the three months ended February 28, 2026. The effective rate differs from the federal statutory rate of 21% primarily due to the effects of state income taxes and various permanent differences. Our effective tax rate was 27.4% for the three months ended March 1, 2025. The effective rate differs from the federal statutory rate of 21% primarily due to the effects of state income taxes and various permanent differences. 26 of 31 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 28, 2026 (Dollars in thousands except share and per share data) Liquidity and Capital Resources Cash Flows Cash used in operating activities for the first three months of fiscal 2026 was $5,468 compared to cash used in operations of $52 for the first three months of fiscal 2025, representing a decline of $5,416 in cash flows from operations. This decrease was primarily the result of lower income levels and negative changes in working capital which had been expected. Our overall cash position declined $8,288 during the first three months of 2026. During the first three months of fiscal 2026, we spent $863 on purchases of property and equipment. We also paid $1,730 in dividends during the first three months of 2026. We repurchased $147 of shares under our stock repurchase program during the first three months of 2026 compared to repurchases of $721 in the prior year period. We expect capital expenditures for the full year to range from $8 million to $12 million. As of February 28, 2026, $18,106 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $50,952 on hand at February 28, 2026, 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 On May 15, 2024, we entered into the Credit Facility with our bank. This Credit Facility provides for a line of credit of up to $25,000. At February 28, 2026, we had $5,866 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 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 of not less than 1.2 times and ● Consolidated Lease Adjusted Leverage to EBITDAR Ratio not to exceed 3.35 times. At February 28, 2026, we were in compliance with the Consolidated Minimum Tangible Net Worth requirement. Since our used commitment was less than $8,250 at February 28, 2026, we were not required to test the Consolidated Fixed Charge Coverage Ratio or the Consolidated Lease Adjusted Leverage to EBITDAR Ratio. However, had we been required to test those ratios, we would have been in full compliance. Our availability under the Credit Facility is currently $19,134. On January 9, 2026, the Credit Facility was amended to extend the expiration date to January 31, 2029. We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of one of our licensee-owned stores, and we lease land and buildings used in our wholesale manufacturing operations. We also lease certain personal property such as lift trucks, office equipment and local delivery trucks. The present value of our obligations for leases with terms in excess of one year at February 28, 2026 is $85,791 and is included in our accompanying condensed consolidated balance sheet at February 28, 2026. We were contingently liable under licensee lease obligation guarantees in the amount of $3,902 at February 28, 2026. The remaining terms under these lease guarantees extend for six years. See Note 10 to our condensed consolidated financial statements for additional details regarding our 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 $7,010 at February 28, 2026, the current portion of which is $815. We also have deferred compensation plans with a total liability of $5,764 at February 28, 2026, the current portion of which is $330. See Note 9 to our condensed consolidated financial statements for additional information regarding these plans. 27 of 31 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES FEBRUARY 28, 2026 (Dollars in thousands except share and per share data) Critical Accounting Policies and Estimates There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our Annual Report on Form 10-K for the fiscal year ended November 29, 2025. Off-Balance Sheet Arrangements We utilize stand-by letters of credit in the procurement of certain goods in the normal course of business. In addition, we have guaranteed certain lease obligations of licensee operators for some of their store locations. See Note 10 to our condensed consolidated financial statements 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 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, 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. See Note 10 to our condensed consolidated financial statements for further information regarding certain contingencies as of February 28, 2026.