UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 27, 2022February 25, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________________ to _______________________
Commission File No. 000-00209
BASSETT FURNITURE INDUSTRIES, INCORPORATED
(Exact name of Registrant as specified in its charter)
Virginia | 54-0135270 |
(State or other jurisdiction | (I.R.S. Employer |
of incorporation or organization) |
Identification No.) |
3525 Fairystone Park Highway
Bassett, Virginia 24055
(Address of principal executive offices)
(Zip Code)
(276) 629-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of exchange on which registered | ||
Common Stock ($5.00 par value) | BSET | NASDAQ |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☐ | Accelerated Filer | ☒ | |
Non-accelerated Filer | ☐ | Smaller Reporting Company | ||
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At September 23, 2022, 9,155,740March 24, 2023, 8,929,711 shares of common stock of the Registrant were outstanding.
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
ITEM | PAGE | ITEM | PAGE | |
PART I - FINANCIAL INFORMATION | PART I - FINANCIAL INFORMATION | PART I - FINANCIAL INFORMATION | ||
1. | Condensed Consolidated Financial Statements as of August 27, 2022 (unaudited) and November 27, 2021 and for the three and nine months ended August 27, 2022 (unaudited) and August 28, 2021 (unaudited) | Condensed Consolidated Financial Statements as of February 25, 2023 (unaudited) and November 26, 2022 and for the three months ended February 25, 2023 (unaudited) and February 26, 2022 (unaudited) |
| |
Condensed Consolidated Statements of Income | 3 | Condensed Consolidated Statements of Income | 3 | |
Condensed Consolidated Statements of Comprehensive Income | 4 | Condensed Consolidated Statements of Comprehensive Income | 4 | |
Condensed Consolidated Balance Sheets | 5 | Condensed Consolidated Balance Sheets | 5 | |
Condensed Consolidated Statements of Cash Flows | 6 | Condensed Consolidated Statements of Cash Flows | 6 | |
Notes to Condensed Consolidated Financial Statements | 7 | Notes to Condensed Consolidated Financial Statements | 7 | |
2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 23 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 21 |
3. | Quantitative and Qualitative Disclosures About Market Risk | 34 | Quantitative and Qualitative Disclosures About Market Risk | 31 |
4. | Controls and Procedures | 34 | Controls and Procedures | 32 |
PART II - OTHER INFORMATION | PART II - OTHER INFORMATION | PART II - OTHER INFORMATION | ||
1. | Legal Proceedings | 35 | Legal Proceedings | 33 |
2. | Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 35 | Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 33 |
3. | Defaults Upon Senior Securities | 35 | Defaults Upon Senior Securities | 33 |
6. | Exhibits | 35 | Exhibits | 33 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED AUGUST 27,FEBRUARY 25, 2023 AND FEBRUARY 26, 2022 AND AUGUST 28, 2021 – UNAUDITED
(In thousands except per share data)
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
Quarter Ended | ||||||||||||||||||||||||
August 27, 2022 | August 28, 2021 | August 27, 2022 | August 28, 2021 | February 25, 2023 | February 26, 2022 | |||||||||||||||||||
Net sales of furniture and accessories | $ | 118,012 | $ | 104,870 | $ | 364,582 | $ | 316,522 | $ | 107,698 | $ | 117,864 | ||||||||||||
Cost of furniture and accessories sold | 57,240 | 52,263 | 180,479 | 153,426 | 50,501 | 60,471 | ||||||||||||||||||
Gross profit | 60,772 | 52,607 | 184,103 | 163,096 | 57,197 | 57,393 | ||||||||||||||||||
Selling, general and administrative expenses | 54,695 | 47,631 | 160,536 | 145,473 | 54,495 | 50,915 | ||||||||||||||||||
Gain on sale of real estate | 4,595 | - | 4,595 | - | ||||||||||||||||||||
Income from operations | 10,672 | 4,976 | 28,162 | 17,623 | 2,702 | 6,478 | ||||||||||||||||||
Other loss, net | (594 | ) | (268 | ) | (1,850 | ) | (828 | ) | (415 | ) | (629 | ) | ||||||||||||
Income from continuing operations before income taxes | 10,078 | 4,708 | 26,312 | 16,795 | 2,287 | 5,849 | ||||||||||||||||||
Income tax expense | 2,305 | 1,267 | 6,505 | 4,579 | 842 | 1,558 | ||||||||||||||||||
Income from continuing operations | 7,773 | 3,441 | 19,807 | 12,216 | 1,445 | 4,291 | ||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||
Income (loss) from operations of logistical services | - | (565 | ) | 1,712 | 1,079 | |||||||||||||||||||
Gain on disposal (less adjustments) | (193 | ) | - | 53,061 | - | |||||||||||||||||||
Income tax expense (benefit) | (48 | ) | (140 | ) | 14,261 | 294 | ||||||||||||||||||
Income (loss) from discontinued operations | (145 | ) | (425 | ) | 40,512 | 785 | ||||||||||||||||||
Income from discontinued operations, net of tax | - | 1,282 | ||||||||||||||||||||||
Net income | $ | 7,628 | $ | 3,016 | $ | 60,319 | $ | 13,001 | $ | 1,445 | $ | 5,573 | ||||||||||||
Basic earnings per share: | ||||||||||||||||||||||||
Basic and diluted earnings per share: | ||||||||||||||||||||||||
Income from continuing operations | $ | 0.84 | $ | 0.35 | $ | 2.08 | $ | 1.24 | $ | 0.16 | $ | 0.44 | ||||||||||||
Income (loss) from discontinued operations | (0.02 | ) | (0.04 | ) | 4.26 | 0.08 | ||||||||||||||||||
Income from discontinued operations | - | 0.13 | ||||||||||||||||||||||
Basic and diluted earnings per share | $ | 0.82 | $ | 0.31 | $ | 6.34 | $ | 1.32 | $ | 0.16 | $ | 0.57 | ||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||
Income from continuing operations | $ | 0.84 | $ | 0.35 | $ | 2.08 | $ | 1.24 | ||||||||||||||||
Income (loss) from discontinued operations | (0.02 | ) | (0.04 | ) | 4.26 | 0.08 | ||||||||||||||||||
Diluted earnings per share | $ | 0.82 | $ | 0.31 | $ | 6.34 | $ | 1.32 | ||||||||||||||||
Regular dividends per share | $ | 0.16 | $ | 0.14 | $ | 0.44 | $ | 0.39 | $ | 0.16 | $ | 0.14 | ||||||||||||
Special dividend per share | $ | - | $ | - | $ | 1.50 | $ | 0.25 | $ | - | $ | - |
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
PART I – FINANCIAL INFORMATION – CONTINUED
ITEM 1. FINANCIAL STATEMENTS
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODS ENDED AUGUST 27,FEBRUARY 25, 2023 AND FEBRUARY 26, 2022 AND AUGUST 28, 2021 – UNAUDITED
(In thousands)
Quarter Ended | Nine Months Ended | Quarter Ended | ||||||||||||||||||||||
August 27, 2022 | August 28, 2021 | August 27, 2022 | August 28, 2021 | February 25, 2023 | February 26, 2022 | |||||||||||||||||||
Net income | $ | 7,628 | $ | 3,016 | $ | 60,319 | $ | 13,001 | $ | 1,445 | $ | 5,573 | ||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Amortization associated with Long Term Cash Awards (LTCA) | 33 | 36 | 99 | 108 | ||||||||||||||||||||
Foreign currency translation adjustments | (186 | ) | - | |||||||||||||||||||||
Income taxes related to foreign currency translation adjustments | 50 | - | ||||||||||||||||||||||
Amortization associated with | ||||||||||||||||||||||||
Long Term Cash Awards (LTCA) | 32 | 33 | ||||||||||||||||||||||
Income taxes related to LTCA | (8 | ) | (9 | ) | (24 | ) | (28 | ) | (8 | ) | (8 | ) | ||||||||||||
Amortization associated with supplemental executive retirement defined benefit plan (SERP) | 31 | 11 | 93 | 33 | - | 32 | ||||||||||||||||||
Income taxes related to SERP | (8 | ) | (3 | ) | (24 | ) | (9 | ) | - | (8 | ) | |||||||||||||
Other comprehensive income, net of tax | 48 | 35 | 144 | 104 | (112 | ) | 49 | |||||||||||||||||
Total comprehensive income | $ | 7,676 | $ | 3,051 | $ | 60,463 | $ | 13,105 | $ | 1,333 | $ | 5,622 |
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
PART I – FINANCIAL INFORMATION – CONTINUED
ITEM 1. FINANCIAL STATEMENTS
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 27, 2022FEBRUARY 25, 2023 AND NOVEMBER 27, 202126, 2022
(In thousands)
(Unaudited) | ||||||||||||||||
| August 27, 2022 | November 27, 2021 | (Unaudited) | |||||||||||||
Assets | February 25, 2023 | November 26, 2022 | ||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 66,870 | $ | 34,374 | $ | 54,892 | $ | 61,625 | ||||||||
Short-term investments | 17,715 | 17,715 | 17,725 | 17,715 | ||||||||||||
Accounts receivable, net | 20,950 | 20,567 | 18,308 | 17,838 | ||||||||||||
Inventories | 91,681 | 78,004 | 79,011 | 85,477 | ||||||||||||
Recoverable income taxes | 5,427 | 8,379 | 1,707 | 2,353 | ||||||||||||
Current assets of discontinued operations held for sale | - | 11,064 | ||||||||||||||
Other current assets | 11,104 | 10,181 | 12,103 | 11,487 | ||||||||||||
Total current assets | 213,747 | 180,284 | 183,746 | 196,495 | ||||||||||||
Property and equipment, net | 75,513 | 69,168 | 78,030 | 77,001 | ||||||||||||
Deferred income taxes | 6,045 | 3,189 | 5,438 | 5,528 | ||||||||||||
Goodwill and other intangible assets | 14,313 | 14,354 | 21,599 | 21,727 | ||||||||||||
Right of use assets under operating leases | 86,809 | 95,955 | 96,454 | 99,472 | ||||||||||||
Long-term assets of discontinued operations held for sale | - | 52,757 | ||||||||||||||
Other | 6,260 | 5,953 | 6,350 | 6,050 | ||||||||||||
Total long-term assets | 113,427 | 172,208 | 129,841 | 132,777 | ||||||||||||
Total assets | $ | 402,687 | $ | 421,660 | $ | 391,617 | $ | 406,273 | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable | $ | 24,189 | $ | 23,988 | $ | 17,956 | $ | 20,359 | ||||||||
Accrued compensation and benefits | 12,809 | 12,639 | 9,942 | 12,921 | ||||||||||||
Customer deposits | 40,311 | 51,492 | 31,040 | 35,963 | ||||||||||||
Current portion operating lease obligations | 19,969 | 20,235 | 18,947 | 18,819 | ||||||||||||
Current liabilities of discontinued operations held for sale | - | 16,095 | ||||||||||||||
Other current liabilites and accrued expenses | 12,746 | 9,770 | 12,695 | 12,765 | ||||||||||||
Total current liabilities | 110,024 | 134,219 | 90,580 | 100,827 | ||||||||||||
Long-term liabilities | ||||||||||||||||
Post employment benefit obligations | 13,016 | 12,968 | 10,386 | 9,954 | ||||||||||||
Long-term portion of operating lease obligations | 84,102 | 94,845 | 93,618 | 97,477 | ||||||||||||
Long-term liabilities of discontinued operations held for sale | - | 16,210 | ||||||||||||||
Other long-term liabilities | 606 | 686 | 3,173 | 2,406 | ||||||||||||
Total long-term liabilities | 97,724 | 124,709 | 107,177 | 109,837 | ||||||||||||
Stockholders’ equity | ||||||||||||||||
Common stock | 46,064 | 48,811 | 44,311 | 44,759 | ||||||||||||
Retained earnings | 150,553 | 115,631 | 149,611 | 150,800 | ||||||||||||
Additional paid-in capital | - | 113 | - | - | ||||||||||||
Accumulated other comprehensive loss | (1,678 | ) | (1,823 | ) | ||||||||||||
Accumulated other comprehensive income (loss) | (62 | ) | 50 | |||||||||||||
Total stockholders' equity | 194,939 | 162,732 | 193,860 | 195,609 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 402,687 | $ | 421,660 | $ | 391,617 | $ | 406,273 |
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
PART I – FINANCIAL INFORMATION – CONTINUED
ITEM 1. FINANCIAL STATEMENTS
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED AUGUST 27,FEBRUARY 25, 2023 AND FEBRUARY 26, 2022 AND AUGUST 28, 2021 – UNAUDITED
(In thousands)
Nine Months Ended | Three Months Ended | |||||||||||||||
August 27, 2022 | August 28, 2021 | February 25, 2023 | February 26, 2022 | |||||||||||||
Operating activities: | ||||||||||||||||
Net income | $ | 60,319 | $ | 13,001 | $ | 1,445 | $ | 5,573 | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||
Depreciation and amortization | 8,732 | 10,458 | 2,340 | 3,655 | ||||||||||||
Gain on disposal of discontinued operations | (53,061 | ) | - | |||||||||||||
Gain on sale of property and equipment | (4,603 | ) | (68 | ) | ||||||||||||
Deferred income taxes | (2,856 | ) | 1,053 | 132 | 116 | |||||||||||
Other, net | 1,425 | 478 | 852 | 770 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 57 | (4,329 | ) | (470 | ) | (4,609 | ) | |||||||||
Inventories | (13,677 | ) | (18,941 | ) | 6,466 | (3,675 | ) | |||||||||
Other current assets | 2,961 | (100 | ) | 30 | 781 | |||||||||||
Right of use assets under operating leases | 15,881 | 18,857 | 4,587 | 6,559 | ||||||||||||
Customer deposits | (11,181 | ) | 11,341 | (4,923 | ) | 2,999 | ||||||||||
Accounts payable and other liabilities | 1,227 | 2,750 | (4,596 | ) | (2,194 | ) | ||||||||||
Obligations under operating leases | (17,519 | ) | (20,823 | ) | (5,300 | ) | (7,109 | ) | ||||||||
Net cash provided by (used in) operating activities | (12,295 | ) | 13,677 | |||||||||||||
Net cash provided by operating activities | 563 | 2,866 | ||||||||||||||
Investing activities: | ||||||||||||||||
Purchases of property and equipment | (17,266 | ) | (7,141 | ) | (3,341 | ) | (2,424 | ) | ||||||||
Proceeds from sales of property and equipment | 8,226 | 101 | - | 9 | ||||||||||||
Proceeds from the disposal of discontinued operations, net | 84,534 | - | ||||||||||||||
Other | (1,428 | ) | (1,173 | ) | (563 | ) | (465 | ) | ||||||||
Net cash provided by (used in) investing activities | 74,066 | (8,213 | ) | |||||||||||||
Net cash used in investing activities | (3,904 | ) | (2,880 | ) | ||||||||||||
Financing activities: | ||||||||||||||||
Cash dividends | (18,734 | ) | (6,321 | ) | (1,421 | ) | (1,374 | ) | ||||||||
Proceeds from the exercise of stock options | - | 42 | ||||||||||||||
Other issuance of common stock | 340 | 266 | 80 | 93 | ||||||||||||
Repurchases of common stock | (10,263 | ) | (5,566 | ) | (1,844 | ) | (765 | ) | ||||||||
Taxes paid related to net share settlement of equity awards | - | (219 | ) | (109 | ) | - | ||||||||||
Repayments of finance lease obligations | (618 | ) | (854 | ) | (69 | ) | (434 | ) | ||||||||
Net cash used in financing activities | (29,275 | ) | (12,652 | ) | (3,363 | ) | (2,480 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (29 | ) | - | |||||||||||||
Change in cash and cash equivalents | 32,496 | (7,188 | ) | (6,733 | ) | (2,494 | ) | |||||||||
Cash and cash equivalents - beginning of period | 34,374 | 45,799 | 61,625 | 34,374 | ||||||||||||
. | . | |||||||||||||||
Cash and cash equivalents - end of period | $ | 66,870 | $ | 38,611 | $ | 54,892 | $ | 31,880 |
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
PART I-FINANCIAL INFORMATION-CONTINUED
1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. References to “ASC” included hereinafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative GAAP. The condensed consolidated financial statements include the accounts of Bassett Furniture Industries, Incorporated (“Bassett”, “we”, “our”, or the “Company”) and our wholly-owned subsidiaries of which we have a controlling interest. In accordance with ASC Topic 810, we have evaluated our licensees and certain other entities to determine whether they are variable interest entities (“VIEs”) of which we are the primary beneficiary and thus would require consolidation in our financial statements. To date we have concluded that none of our licensees represent VIEs. 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. On January 31, 2022, we entered into a definitive agreement to sell substantially all of the assets of our wholly-owned subsidiary, Zenith Freight Lines, LLC (“Zenith”) to J.B. Hunt Transport Services, Inc. (“J.B. Hunt”). The sale was completed on February 28, 2022. Accordingly, the operations of our logistical services segment Certain prior year amounts have been reclassified to conform 2. Interim Financial Presentation and Other Information All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. The results of operations for the three Income Taxes We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income and use that effective tax rate to record our year-to-date income tax provision. Any change in annual projections of pretax income could have a significant impact on our effective tax rate for the respective quarter. Our effective tax rate was Non-cash Investing and During the three months ended February 25, 2023 and February 26, 2022, $3,406 and $4119, respectively, of 3. Business Combinations On September 2, 2022, we acquired 100% of the capital stock of Noa Home Inc. (“Noa Home”), a mid-priced e-commerce furniture retailer headquartered in Montreal, Canada. Noa Home has operations in Canada, Australia, Singapore and the United Kingdom. The initial purchase price (denominated in Canadian dollars) of approximately C$7,700 included cash payments of C$2,000 paid to the co-founders of Noa Home and approximately C$5,700 for the Under the acquisition method of accounting, the fair value of the consideration transferred was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date with The allocation of the fair value of the acquired business has been based on a preliminary valuation. Our estimates and assumptions are subject to change as we obtain additional information for our estimates during the measurement period (up to one year from the acquisition date). The primary areas of the preliminary allocation of the fair value of consideration transferred that are not yet finalized relate to the fair values of certain tangible and intangible assets acquired and the residual goodwill. As of February 25, 2023, there have been no changes to the preliminary allocation of the purchase price (translated into U.S. dollars as of the acquisition date) which is as follows: The following is a collective summary of the purchase price allocations for those acquisitions: Cash Fair value of contingent consideration payable Total fair value of consideration paid or payable Cash Inventory Other current assets Property & equipment Intangible asset - trade name Total identifiable assets acquired Accounts payable Customer deposits Other current liabilities and accrued expenses Total liabilities assumed Net identifiable assets acquired Goodwill Total net assets acquired Goodwill was determined based on the residual difference between the fair value of the consideration transferred and the value assigned to the tangible and intangible assets and liabilities recognized in connection with A portion of the fair value of the consideration transferred in the amount of $1,929 has been assigned to the identifiable intangible asset associated with the Noa Home trade name. This intangible asset is considered to have an indefinite life. The indefinite-lived intangible asset and goodwill are not amortized but will be tested for impairment annually or between annual tests if an indicator of impairment exists. The fair values of consideration transferred and net assets acquired were determined using a combination of Level 2 and Level 3 inputs as specified in the fair value hierarchy in ASC 820, Fair Value Measurements and Disclosures. The revenues and results of operations 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 $17,725 and $17,715 at Accounts receivable consists of the following: August 27, 2022 November 27, 2021 February 25, 2023 November 26, 2022 Gross accounts receivable Allowance for doubtful accounts Accounts receivable, net We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments. The allowance for credit losses is based on a review of specifically identified accounts in addition to an overall aging analysis which is applied to accounts pooled on the basis of similar risk characteristics. Judgments are made with respect to the 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. PART I-FINANCIAL INFORMATION-CONTINUED Activity in the allowance for credit losses for the 2022 Balance at November 27, 2021 Balance at November 26, 2022 Additions charged to expense Write-offs against allowance Balance at August 27, 2022 Balance at February 25, 2023 We believe that the carrying value of our net accounts receivable approximates fair value. The inputs into these fair value estimates reflect our market assumptions and are not observable. Consequently, the inputs are considered to be Level 3 as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosures. See Note Domestic furniture inventories are valued at the lower of cost, which is determined using the last-in, first-out (LIFO) method, or market. Imported inventories and those applicable to our Lane Venture and Bassett Outdoor lines are valued at the lower of cost, which is determined using the first-in, first-out (FIFO) method, or net realizable value. Inventories were comprised of the following: August 27, 2022 November 27, 2021 February 25, 2023 November 26, 2022 Wholesale finished goods Work in process Raw materials and supplies Retail merchandise Total inventories on first-in, first-out method LIFO adjustment Reserve for excess and obsolete inventory We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand, market conditions and the respective valuations at LIFO. The need for these reserves is primarily driven by the normal product life cycle. As products mature and sales volumes decline, we rationalize our product offerings to respond to consumer tastes and keep our product lines fresh. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required. In determining reserves, we calculate separate reserves on our wholesale and retail inventories. Our wholesale inventories tend to carry the majority of the reserves for excess quantities and obsolete inventory due to the nature of our distribution model. These wholesale reserves primarily represent design and/or style obsolescence. Typically, product is not shipped to our retail warehouses until a consumer has ordered and paid a deposit for the product. We do not typically hold retail inventory for stock purposes. Consequently, floor sample inventory and inventory for delivery to customers account for the majority of our inventory at retail. Retail reserves are based on accessory and clearance floor sample inventory in our stores and any inventory that is not associated with a specific customer order in our retail warehouses. PART I-FINANCIAL INFORMATION-CONTINUED Activity in the reserves for excess quantities and obsolete inventory by segment are as follows: Wholesale Retail Segment Total Wholesale Segment Retail Segment Total Balance at November 27, 2021 Balance at November 26, 2022 Additions charged to expense Write-offs Balance at August 27, 2022 Balance at February 25, 2023 Our estimates and assumptions have been reasonably accurate in the past. We have not made any significant changes to our methodology for determining inventory reserves in Goodwill and other intangible assets consisted of the following: August 27, 2022 February 25, 2023 Gross Carrying Accumulated Intangible Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Customer relationships Trade names Goodwill Total goodwill and other intangible assets November 27, 2021 November 26, 2022 Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Intangibles subject to amortization Customer relationships Intangibles not subject to amortization: Trade names Goodwill Total goodwill and other intangible assets PART I-FINANCIAL INFORMATION-CONTINUED Original Accumulated Recorded Impairment Carrying Value Losses Amount Wholesale Retail Total goodwill Wholesale Retail Corporate & Other Total Balance as of November 26, 2022 Foreign currency translation adjustments Balance as of February 25, 2023 Amortization expense associated with intangible assets during the three Quarter Ended Nine Months Ended August 27, 2022 August 28, 2021 August 27, 2022 August 28, 2021 Intangible asset amortization expense Quarter Ended February 25, 2023 February 26, 2022 Intangible asset amortization expense Estimated future amortization expense for intangible assets that exist at Remainder of fiscal 2022 Fiscal 2023 Remainder of fiscal 2023 Fiscal 2024 Fiscal 2025 Fiscal 2026 Fiscal 2027 Fiscal 2028 Total Our bank credit facility provides for a line of credit of up to ● Consolidated fixed charge coverage ratio of not less than 1.4 times, ● Consolidated lease-adjusted leverage ratio not to exceed 3.0 times, and ● Minimum tangible net worth of $140,000. We were in compliance with these covenants at PART I-FINANCIAL INFORMATION-CONTINUED Defined Benefit Plans We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives. The liability for the Supplemental Plan was We also have the Bassett Furniture Industries, Incorporated Management Savings Plan (the “Management Savings Plan”) which was established in the second quarter of fiscal 2017. The Management Savings Plan is an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees. As part of the Management Savings Plan, we have made Long Term Cash Awards (“LTC Awards”) totaling $2,000 to certain management employees in the amount of $400 each. The liability for the LTC Awards was The combined pension liability for the Supplemental Plan and LTC Awards is recorded as follows in the condensed consolidated balance sheets: August 27, 2022 November 27, 2021 February 25, 2023 November 26, 2022 Accrued compensation and benefits Post employment benefit obligations Total pension liability Components of net periodic pension costs for our defined benefit plans for the three Quarter Ended Nine Months Ended Quarter Ended August 27, 2022 August 28, 2021 August 27, 2022 August 28, 2021 February 25, 2023 February 26, 2022 Service cost Interest cost Amortization of prior service costs Amortization of loss Net periodic pension cost The components of net periodic pension cost other than the service cost component, which is included in selling, general and administrative expenses, are included in other loss, net in our condensed consolidated statements of operations. Deferred Compensation Plans We have an unfunded deferred compensation plan that covers one current executive and certain former executives and provides for voluntary deferral of compensation. This plan has been frozen with no additional participants or deferrals permitted. Our liability under this plan was We also have an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees which was established under the Management Savings Plan. Our liability under this plan, including both accrued Company contributions and participant salary deferrals, was PART I-FINANCIAL INFORMATION-CONTINUED Our combined liability for all deferred compensation arrangements, including Company contributions and participant deferrals under the Management Savings Plan, is recorded as follows in the condensed consolidated balance sheets: August 27, 2022 November 27, 2021 February 25, 2023 November 26, 2022 Accrued compensation and benefits Post employment benefit obligations Total deferred compensation liability We recognized expense under our deferred compensation arrangements during the three Quarter Ended Nine Months Ended August 27, 2022 August 28, 2021 August 27, 2022 August 28, 2021 Deferred compensation expense (benefit) Quarter Ended February 25, 2023 February 26, 2022 Deferred compensation expense (benefit) 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. 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 PART I-FINANCIAL INFORMATION-CONTINUED 11. Earnings Per Share The following reconciles basic and diluted earnings per share: Net Income Weighted Average Net Income For the quarter ended August 27, 2022: Basic earnings per share - continuing operations Restricted shares Diluted earnings per share - continuing operations Basic loss per share - discontinued operations Add effect of dilutive securities: Restricted shares Diluted loss per share - discontinued operations For the quarter ended August 28, 2021: Basic earnings per share - continuing operations Add effect of dilutive securities: Options and restricted shares Diluted earnings per share - continuing operations Basic loss per share - discontinued operations Add effect of dilutive securities: Options and restricted shares Diluted loss per share - discontinued operations For the nine months ended August 27, 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 nine months ended August 28, 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 Net Income Weighted Average Shares Net Income Per Share Basic earnings per share - continuing operations Restricted shares Diluted earnings per share - continuing operations Basic earnings per share - continuing operations Options and restricted shares Diluted earnings per share - continuing operations Basic loss per share - discontinued operations Options and restricted shares Diluted loss per share - discontinued operations For the three Quarter Ended Nine Months Ended August 27, 2022 August 28, 2021 August 27, 2022 August 28, 2021 Unvested shares Quarter Ended February 25, 2023 February 26, 2022 Unvested shares 12. Discontinued Operations On January 31, 2022, we entered into a definitive agreement to sell substantially all of the assets of Zenith to J.B. Hunt. The sale was completed on February 28, 2022. Subsequent to the first quarter of fiscal 2022 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 Working capital adjustment paid to buyer Net proceeds from the sale (1) The sales price was subject to 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 November 27, 2021 Accounts receivable, net Other current assets Property and equipment, net Goodwill and other intangible assets Right of use assets under operating leases Other Current assets of discontinued operations held for sale Long-term assets of discontinued operations held for sale Total assets of discontinued operations held for sale Accounts payable Accrued compensation and benefits Current portion operating lease obligations Other current liabilites and accrued expenses Long-term portion of operating lease obligations Other long-term liabilities Current liabilities of discontinued operations held for sale Long-term liabilities of discontinued operations held for sale Total liabilities of discontinued operations held for sale 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 Quarter Ended Nine Months Ended August 27, 2022 August 28, 2021 August 27, 2022 August 28, 2021 Logistical services revenue Cost of logistical services Other loss, net Income (loss) from operations of logistical services Gain on disposal (less adjustments) Pretax income of discontinued operations Income tax expense (benefit) Income (loss) from discontinued operations, net of tax Quarter Ended February 26, 2022 Logistical services revenue Cost of logistical services Other loss, net Income from operations of logistical services Income tax expense Income from discontinued operations, net of tax The amounts for revenue and costs of logistical services shown above represent the results of Zenith’s business transactions with third parties. Zenith also charged Bassett for logistical services provided to our wholesale segment in the amount of $9,121 during the Included in other loss, net, is interest arising from finance leases assumed by J.B. Hunt as part of the transaction. Such interest amounted to $78 for the The following table summarizes the cash flows generated by discontinued operations during the Nine Months Ended August 27, 2022 August 28, 2021 Cash provided by operating activities Cash used in investing activities Cash used in financing activities Net cash provided by (used in) discontinued operations February 26, 2022 Cash provided by operating activities Cash used in investing activities Cash used in financing activities Net cash provided by discontinued operations PART I-FINANCIAL INFORMATION-CONTINUED ● 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 ● Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities and capital expenditures directly related to these stores and the Company-owned distribution network utilized to deliver products to our retail customers. ● Corporate and other – Corporate and other includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefitting both wholesale and retail operations. In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs. We consider our corporate functions to be other business activities and have aggregated them with our other insignificant operating segment, the recently acquired Noa Home (see Note 3). Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores. Inter-company income elimination includes the embedded wholesale profit in the Company-owned store inventory that has not been realized. These profits will be recorded when merchandise is delivered to the retail consumer. The inter-company income elimination also includes rent paid by our retail stores occupying Company-owned real estate. Prior to the current period, the functions included in Corporate and other were included in our wholesale segment reportable segment, and Noa Home was included in our retail reportable segment for the fourth quarter of fiscal 2022 following its acquisition on September 2, 2022. We believe that the new alignment of our reporting segments provides our chief operating decision maker with clearer information with which to assess the operating results of our wholesale segment. Noa Home does not meet the requirements to be a separate reportable segment as it is below the thresholds of the revenue, income and asset tests. The segment information presented below for the three months ended February 26, 2022 and as of November 26, 2022 has been restated to reflect the new alignment of our reportable segments. Our former logistical services segment which represented the operations of Zenith is now presented as a discontinued operation in the accompanying condensed consolidated balances sheets and statements of income (see Note 12). PART I-FINANCIAL INFORMATION-CONTINUED The following table presents our segment information: Quarter Ended February 25, 2023 February 26, 2022 Wholesale sales of furniture and accessories Less: Sales to retail segment Wholesale sales to external customers Retail sales of furniture and accessories Corporate and other Consolidated net sales of furniture and accessories Wholesale Retail - Company-owned stores Net expenses - Corporate and other Inter-company elimination Consolidated Wholesale Retail - Company-owned stores Corporate and other Consolidated Wholesale Retail - Company-owned stores Corporate and other Consolidated Quarter Ended Nine Months Ended August 27, 2022 August 28, 2021 August 27, 2022 August 28, 2021 Sales Revenue Wholesale sales of furniture and accessories Less: Sales to retail segment Wholesale sales to external customers Retail sales of furniture and accessories Consolidated net sales of furniture and accessories Income from Operations Wholesale Retail - Company-owned stores Inter-company elimination Gain on sale of real estate Consolidated Depreciation and Amortization Wholesale Retail - Company-owned stores Consolidated Capital Expenditures Wholesale Retail - Company-owned stores Consolidated As of As of August 27, 2022 November 27, 2021 As of As of February 25, 2023 November 26, 2022 Wholesale Retail - Company-owned stores Discontinued Operations Corporate and other Consolidated See Note 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 Sales commissions are expensed as part of selling, general and administrative expenses at the time revenue is recognized because the amortization period would have been one year or less. Sales commissions at wholesale are accrued upon the shipment of goods. Sales commissions at retail are accrued at the time a sale is written (i.e. – when the customer’s order is placed) and are carried as prepaid commissions in other current assets until the goods are delivered and revenue is recognized. At 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 Quarter Ended August 27, 2022 August 28, 2021 Wholesale Retail Total Wholesale Retail Total Bassett Custom Upholstery Bassett Leather Bassett Custom Wood Bassett Casegoods Accessories, mattresses and other (1) Consolidated net sales of furniture and accessories Nine Months Ended Quarter Ended August 27, 2022 August 28, 2021 February 25, 2023 February 26, 2022 Wholesale Retail Total Wholesale Retail Total Wholesale Retail Corporate & Other (2) Total Wholesale Retail Corporate & Other Total Bassett Custom Upholstery Bassett Leather Bassett Custom Wood Bassett Casegoods Accessories, mattresses and other (1) Consolidated net sales of furniture and accessories (1) Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans. (2) Our Corporate and other segment for the three months ended February 25, 2023 includes the sales of Noa Home, which was acquired on September 2, 2023 (see Note 3). PART I-FINANCIAL INFORMATION-CONTINUED The following changes in our stockholders’ equity occurred during the three Quarter Ended Nine Months Ended Quarter Ended August 27, 2022 August 28, 2021 August 27, 2022 August 28, 2021 February 25, 2023 February 26, 2022 Common Stock: Beginning of period Issuance of common stock Purchase and retirement of common stock End of period Common Shares Issued and Outstanding: Beginning of period Issuance of common stock Purchase and retirement of common stock End of period Additional Paid-in Capital: Beginning of period Issuance of common stock Purchase and retirement of common stock Stock based compensation End of period Retained Earnings: Beginning of period Net income for the period Purchase and retirement of common stock Cash dividends declared End of period Accumulated Other Comprehensive Loss: Beginning of period Cumulative translation adjustments, net of tax Amortization of pension costs, net of tax End of period The balance of cumulative translation adjustments, net of tax, was a net loss of $340 and $204 at February 25, 2023 and November 26, 2022, respectively. PART I-FINANCIAL INFORMATION-CONTINUED In October 2021, the FASB issued Accounting Standards Update No. 2021-08– Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and to payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in ASU 2021-08 require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The amendments in ASU 2021-08 will become effective for us as of the beginning of our 2024 fiscal year. Early adoption is permitted, including adoption in any interim period. 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. In June 2022, the FASB issued Accounting Standards Update No. 2022-03 – Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, to clarify the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The amendments in ASU 2022-03 clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. In addition, the amendments in ASU 2022-03 require certain additional disclosures related to investments in equity securities subject to contractual sale restrictions. The amendments in ASU 2022-03 will become effective for us as of the beginning of our 2025 fiscal year. Early adoption is permitted. As of PART I-FINANCIAL INFORMATION-CONTINUED 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 • 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 credit • the profitability of the • ability to implement our Company-owned retail strategies and realize the benefits from such strategies, including our initiatives to expand and improve our digital marketing and advertising capabilities, as they are implemented • • effectiveness and security of our information • 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 • the impact of a resurgence of the COVID-19 pandemic or any other similar health emergency and any resulting supply chain disruptions upon our ability to maintain normal operations at our retail stores and manufacturing facilities, and the resulting effects any future interruption of those operations may have upon our financial condition, results of operations and liquidity, as well as the impact of the pandemic upon general economic conditions, including consumer spending and the strength of the housing market in the United States 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 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. PART I-FINANCIAL INFORMATION-CONTINUED Overview Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. Our products are sold primarily through a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We also sell our products through our website at www.bassettfurniture.com. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich With The BHF stores feature custom order furniture, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories. Our philosophy is based on building strong long-term relationships with each customer. Sales people 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. During the second quarter of fiscal 2022, we opened our first regional fulfillment center (“RFC”) in Orlando, Florida where we are stocking our best sellers for much quicker delivery. This adds an element of immediacy to our proven platform of made to order custom furniture that has driven our strategy for the past two decades. During the fourth quarter of 2022, we opened our second RFC near Baltimore, Maryland. In the first quarter of 2023, we opened three more RFCs in Conover, North Carolina, Grand Prairie, Texas and Riverside, California. We plan to In 2018, we added outdoor furniture to our offerings with the acquisition of the Lane Venture brand. Our strategy is to distribute these products outside of our BHF store network through a network of over We have factories in Newton, North Carolina that manufacture both stationary and motion upholstered furniture for inside the home along with our outdoor furniture offerings. We also have factories in Martinsville and Bassett, Virginia that assemble and finish our custom bedroom and dining offerings. Late in the third quarter of fiscal 2022, we purchased a facility which we had formerly leased in Haleyville, Alabama where we manufacture aluminum frames for our outdoor furniture. With the purchase, we also obtained two additional buildings which will allow us to expand our footprint at that facility. Our manufacturing team takes great pride in the breadth of its options, the precision of its craftsmanship, and the speed of its manufacturing process. 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, Thailand and China. Over 75% of 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. Customer acquisition resulting from our digital outreach strategies has significantly increased our traffic to the website since 2019. The migration to digital brand research has caused us to comprehensively evaluate all of our American made custom products. While our Bench Made line of custom upholstery and custom bedroom and dining products continue to be our most successful offerings, most of these items must be purchased in a store as they are not conducive to web transactions due to the number of options available. Consequently, we will continue to methodically re-design each one of these important lines to best serve our customers online, in the store or wherever our customer might be. Our intent is to continue to offer the consumer custom options that will help them personalize their home but to do so in an edited fashion that will provide a better web experience in the research phase and will also allow the final purchase to be made either on the web or in the store. While we work to make it easier to purchase either in store or on-line, we will not compromise our in-store experience or the quality of our in-home makeover capabilities. We are engaged in a multi-year cross-functional digital transformation initiative with the first phase consisting of the examination and improvement of our underlying data management processes. During the second quarter of 2022, we implemented a comprehensive Product Information Management system which During the fourth quarter of fiscal 2022 we acquired Noa Home (see Note 3 to the Consolidated Financial Statements for additional information regarding the acquisition). A mid-priced e-commerce furniture retailer headquartered in Montreal, Canada, Noa Home has operations in Canada, Australia, Singapore and the United Kingdom. With a lean staffing model, the Noa Home team has built an operational blueprint that has the potential for significant growth. We believe the acquisition will provide Bassett with a greater online presence and will allow us to attract more digitally native consumers. While still in the planning phase, we expect to introduce the Noa Home brand in the United States during 2023. Company-owned Retail Stores As we continually monitor the performance of our Company-owned retail store locations, we may occasionally determine that it is necessary to close underperforming stores in certain markets. During We also may occasionally identify opportunities to enhance our presence in existing markets by relocating In 2022, we acquired a 25,000 square foot property in Tampa, Florida. We will begin upfitting the property early in April with a planned opening date in late 2023. As of Sale of the Assets of Zenith Freight Lines, LLC During the first quarter of 2022, we entered into a definitive agreement to sell substantially all of the assets of our wholly-owned subsidiary, Zenith, PART I-FINANCIAL INFORMATION-CONTINUED Results of Continuing Operations – Consolidated results of continuing operations for the three Quarter Ended Change Nine Months Ended Change Quarter Ended Change August 27, 2022 August 28, 2021 Dollars Percent August 27, 2022 August 28, 2021 Dollars Percent February 25, 2023 February 26, 2022 Dollars Percent Net sales of furniture and accessories Cost of furniture and accessories sold Gross profit SG&A expenses Gain on sale of retail real estate Income from operations Analysis of Quarterly Results: Total sales revenue for the three months ended Gross margins for the three months ended Selling, general and administrative (“SG&A”) expenses as a percentage of sales for the three months ended Segment Information ● 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 ● Corporate and other – Corporate and other includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefitting both wholesale and retail operations. We consider our corporate functions to be other business activities and have aggregated them with our other insignificant operating segment, the recently acquired Noa Home. Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores. Inter-company income elimination includes the embedded wholesale profit in the Company-owned store inventory that has not been realized. These profits will be recorded when merchandise is delivered to the retail consumer. The inter-company income elimination also includes rent paid by our retail stores occupying Company-owned real estate. Prior to the current period, the functions included in Corporate and other were included in our wholesale segment reportable segment, and Noa Home was included in our retail reportable segment for the fourth quarter of fiscal 2022 following its acquisition on September 2, 2022. We believe that the new alignment of our reporting segments provides our chief operating decision maker with clearer information with which to assess the operating results of our wholesale segment. Noa Home does not meet the requirements to be a separate reportable segment. The segment information presented below for the three months ended February 26, 2022 has been restated to reflect the new alignment of our reportable segments. Our former logistical services segment which represented the operations of Zenith is now presented as a discontinued Reconciliation of Segment Results to Consolidated Results of Operations To supplement the financial measures prepared in accordance with GAAP, we present gross profit by segment inclusive of the effects of intercompany sales by our wholesale segment to our retail segment. Because these intercompany transactions are not eliminated from our segment presentations and because we do not present gross profit as a measure of segment profitability in the accompanying condensed consolidated financial statements, the presentation of gross profit by segment is considered to be a non-GAAP financial measure. Quarter Ended August 27, 2022 Quarter Ended February 25, 2023 Non-GAAP Presentation Special GAAP Presentation Non-GAAP Presentation GAAP Presentation Wholesale Retail Eliminations Items Consolidated Wholesale Retail Corporate & Other Eliminations Consolidated Net sales of furniture and accessories Cost of furniture and accessories sold Gross profit SG&A expense Gain on sale of real estate Income from operations Quarter Ended August 28, 2021 Non-GAAP Presentation Special GAAP Presentation Wholesale Retail Eliminations Items Consolidated Net sales of furniture and accessories Cost of furniture and accessories sold Gross profit SG&A expense Income from operations Nine Months Ended August 27, 2022 Non-GAAP Presentation Special GAAP Presentation Wholesale Retail Eliminations Items Consolidated Net sales of furniture and accessories Cost of furniture and accessories sold Gross profit SG&A expense Gain on sale of real estate Income from operations Nine Months Ended August 28, 2021 Quarter Ended February 26, 2022 Non-GAAP Presentation Special GAAP Presentation Non-GAAP Presentation GAAP Presentation Wholesale Retail Eliminations Items Consolidated Wholesale Retail Corporate & Other Eliminations Consolidated Net sales of furniture and accessories Cost of furniture and accessories sold Gross profit SG&A expense Income from operations 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. PART I-FINANCIAL INFORMATION-CONTINUED Wholesale Segment Results for the wholesale segment for the periods ended Quarter Ended Change Nine Months Ended Change Quarter Ended Change August 27, 2022 August 28, 2021 Dollars Percent August 27, 2022 August 28, 2021 Dollars Percent February 25, 2023 February 26, 2022 Dollars Percent Net sales Gross profit (1) SG&A expenses Income from operations (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 Results of Operations above. Wholesale sales by major product category are as follows: Quarter Ended August 27, 2022 August 28, 2021 Total Change External Intercompany Total External Intercompany Total Dollars Percent Bassett Custom Upholstery Bassett Leather Bassett Custom Wood Bassett Casegoods Total Nine Months Ended Quarter Ended August 27, 2022 August 28, 2021 Total Change February 25, 2023 February 26, 2022 Total Change External Intercompany Total External Intercompany Total Dollars Percent External Intercompany Total External Intercompany Total Dollars Percent Bassett Custom Upholstery Bassett Leather Bassett Custom Wood Bassett Casegoods Total Analysis of Quarterly Results – Wholesale Net sales for the three months ended Wholesale Backlog Wholesale backlog at February 25, 2023 was $24,895 as compared to $35,336 at November 26, 2022 and $78,135 at February 26, 2022. While wholesale orders for the first quarter of 2023 decreased 18% against the prior year period, they were 5.6% higher than the pre-pandemic level of the first quarter of 2020. PART I-FINANCIAL INFORMATION-CONTINUED Retail – Company-owned Stores Segment Results for the retail segment for the periods ended Quarter Ended Change Nine Months Ended Change Quarter Ended Change August 27, 2022 August 28, 2021 Dollars Percent August 27, 2022 August 28, 2021 Dollars Percent February 25, 2023 February 26, 2022 Dollars Percent Net sales Gross profit (1) SG&A expenses Income (loss) from operations 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 Results of Operations above. Retail sales by major product category are as follows: Quarter Ended Change Nine Months Ended Change Quarter Ended Change August 27, 2022 August 28, 2021 Dollars Percent August 27, 2022 August 28, 2021 Dollars Percent February 25, 2023 February 26, 2022 Dollars Percent Bassett Custom Upholstery Bassett Leather Bassett Custom Wood Bassett Casegoods Accessories, mattresses and other (1) Total (1) Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans. Quarterly Analysis of Results - Retail Net sales for the three months ended Retail Backlog Corporate and Other Revenues, costs and expenses of corporate and other for the Quarter Ended Change February 25, 2023 February 26, 2022 Dollars Percent Net sales Gross profit SG&A expenses Net expenses The increases in sales and Discontinued Operations – Logistical Services Quarter Ended Change Nine Months Ended Change Quarter Ended August 27, 2022 August 28, 2021 Dollars Percent August 27, 2022 August 28, 2021 Dollars Percent February 26, 2022 Logistical services revenue Cost of logistical services Other loss, net Income from discontinued operations before tax The Zenith also charged Bassett $9,121 for logistical services provided to our wholesale segment during the Other Items Affecting Net Income Other Loss, Net Other loss, net, for the three Income Taxes We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income and use that effective tax rate to record our year-to-date income tax provision. Any change in annual projections of pretax income could have a significant impact on our effective tax rate for the respective quarter. Our effective tax rate was Liquidity and Capital Resources Cash Flows Cash Our overall cash position Debt and Other Obligations Our bank credit facility provides for a line of credit of up to $25,000. At ● Consolidated fixed charge coverage ratio of not less than 1.4 times, ● Consolidated lease-adjusted leverage ratio not to exceed 3.0 times, and ● Minimum tangible net worth of $140,000. We were in compliance with these covenants at We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of certain of our licensee-owned stores, and we lease land and buildings used in our wholesale manufacturing operations. We also lease local delivery trucks used in our retail segment. The present value of our obligations for leases with terms in excess of one year at Investment in Retail Real Estate We have a substantial investment in real estate acquired for use as retail locations and occupied by Company-owned retail stores, including a site in Tampa, Florida 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 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 Item 3. Quantitative and Qualitative Disclosure about Market Risk: We are exposed to market risk from changes in the value of foreign currencies. Substantially all of our imports purchased outside of North America are denominated in U.S. dollars. Therefore, we believe that gains or losses resulting from changes in the value of foreign currencies relating to foreign purchases not denominated in U.S. dollars would not be material to our results from operations in fiscal We are exposed to market risk from changes in the cost and availability of raw materials used in our manufacturing processes, principally wood, woven fabric, and foam products. The cost of foam products, which are petroleum-based, is sensitive to changes in the price of oil. We are also exposed to commodity price risk related to diesel fuel prices for fuel used in our retail segment for home delivery as well as through amounts we are charged for logistical services by our service providers. We manage our exposure to that risk primarily through the application of fuel surcharges to our customers. We have potential exposure to market risk related to conditions in the commercial real estate market. Our retail real estate holdings of Item 4. Controls and Procedures: The Company’s principal executive officer and principal financial officer have evaluated the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective. There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. PART II - OTHER INFORMATION BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES (Dollars in thousands except share and per share data) Item 1. Legal Proceedings None Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities The following table summarizes the stock repurchase activity by or on behalf of the Company or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act, for the three Total Average Total Number of Shares Purchased as Part of Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) May 29 - July 2, 2022 July 3 - July 30, 2022 July 31 - August 27, 2022 Total Shares Purchased Average Price Paid Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) November 27, 2022 - December 31, 2022 January 1, 2023 - January 28, 2023 January 29, 2023 - February 25, 2023 (1) The Company is authorized to repurchase Company stock under a plan which was originally announced in 1998. On March 9, 2022, the Board of Directors increased the remaining limit of the repurchase plan to $40,000. At Item 3. Defaults Upon Senior Securities None. Item 6. Exhibits a. Exhibits: Exhibit 3a – Articles of Incorporation as amended to date are incorporated herein by reference to the Exhibit to Form 10-Q for the fiscal quarter ended February 28, 1994. Exhibit 4 – Registrant hereby agrees to furnish the SEC, upon request, other instruments defining the rights of holders of long-term debt of the Registrant. Exhibit 31a – Chief Executive Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 31b – Chief Financial Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 101.INS Inline XBRL Instance Exhibit 101.SCH Inline XBRL Taxonomy Extension Schema Exhibit 101.CAL Inline XBRL Taxonomy Extension Calculation Exhibit 101.DEF Inline XBRL Taxonomy Extension Definition Exhibit 101.LAB Inline XBRL Taxonomy Extension Labels Exhibit 101.PRE Inline XBRL Taxonomy Extension Presentation Exhibit 104. Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. BASSETT FURNITURE INDUSTRIES, INCORPORATED /s/ Robert H. Spilman, Jr. Robert H. Spilman, Jr., Chairman and Chief Executive Officer /s/ J. Michael Daniel J. Michael Daniel, Senior Vice President and Chief Financial Officer AUGUST 27, 2022 We were the primary beneficiary of one VIE by virtue of our control over the activities that most significantly impact the entity’s economic performance. This VIE was created to effect a Section 1031 like-kind exchange involving the purchase of real property in the state of Florida and the sale of real property in the state of Texas (see Note 13, Retail Real Estate Transactions). Subsequent to the completion of the exchange transactions during the third quarter of fiscal 2022, the sole equity interest in the VIE was transferred to Bassett and the entity is now consolidated as a wholly owned subsidiary.as well asfor the gain realized upon disposalthree months ended February 26, 2022 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.operations. See Note 12, Discontinued Operations, for additional information. Costs incurred by Bassett for logistical services performed for Bassett by Zenith arewere included in selling, general and administrative expenses.expenses for the three months ended February 26, 2022.Recently Adopted Accounting PronouncementsEffective asOn September 2, 2022, we acquired 100% of the beginningcapital stock of fiscal 2022, we have adopted Accounting Standards Update No. 2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The amendmentsNoa Home Inc. (“Noa Home”), a mid-priced e-commerce furniture retailer headquartered in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxesMontreal, Canada. Noa Home has operations in an interim periodCanada, Australia, Singapore and the recognition of deferred tax liabilitiesUnited Kingdom. Since acquisition, Noa Home has been consolidated as a wholly-owned subsidiary. See Note 3 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 became effective for us as of the beginning of our 2022 fiscal year. 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.additional information.withto the current year presentation.presentation (see Note 13, Segments).and nine months ended August 27, 2022February 25, 2023 are not necessarily indicative of results for the full fiscal year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended November 27, 2021.Page 7 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITEDAUGUST 27, 2022(Dollars in thousands except share and per share data)26, 2022.22.8%36.8% and 25.6%26.3% for the three and nine months ended August 27,February 25, 2023 and February 26, 2022, respectively, and 27.2% and 27.3% for the three and nine months ended August 28, 2021, respectively. These effective rates differ from the federal statutory rate of 21% primarily due to increases in the valuation allowance placed on deferred tax assets associated with Noa Home, the effects of state income taxes and various permanent differences, including those associated with Company-owned life insurance,differences.taxFinancing Activity$552lease right-of- use assets were added through the recognition of the corresponding lease obligations.nine months ended August 27, 2022 associatedrepayment of existing debt owed by Noa Home. The Noa Home co-founders will also have the opportunity to receive additional cash payments totaling approximately C$1,330 per year for the three fiscal years following the year of acquisition based on established increases in net revenues and achieving certain internal EBITDA goals.non-deductible goodwill written offthe remaining unallocated amount recorded as goodwill.Fair value of consideration transferred in exchange for 100% of Noa Home: $ 5,878 1,375 $ 7,253 Allocation of the fair value of consideration transferred: Identifiable assets acquired: $ 296 1,585 317 155 1,929 4,282 Liabilities assumed: (1,227 ) (1,059 ) (458 ) (2,744 ) 1,538 5,715 $ 7,253 our salethe acquisition and is deductible for tax purposes. Among the factors that contributed to a purchase price resulting in the recognition of Zenithgoodwill are the expected synergies arising from combining the Company’s manufacturing and includeddistribution capabilities with Noa Home’s position in income tax on discontinuedthe international e-commerce market for home furnishings and accessories.and tax deficiencies of $117 duringNoa Home for the ninethree months ended August 28, 2021 arising from stock-based compensation.Cash paidFebruary 25, 2023 were not material. The pro forma impact of the acquisition has not been presented because it was not material to our consolidated results of operations for income taxes, net of refunds, during the ninethree months ended August 27, 2022 was $20,722, including the estimated tax payable on the taxable gain realized on our sale of Zenith. Cash paid for income taxes, net of refunds, during the nine months ended August 28, 2021 was $624. These cash payments for income taxes are included in cash flows from operating activities in the accompanying condensed consolidated statement of cash flows.February 26, 2022.3.4. Financial Instruments and InvestmentsAugust 27, 2022February 25, 2023 and November 27, 202126, 2022 consisted of CDs. At August 27, 2022,February 25, 2023, the CDs had original terms averaging eight months, bearing interest at rates ranging from 0.25%0.3% to 3.00%4.75%. At August 27, 2022,February 25, 2023, the weighted average remaining time to maturity of the CDs was approximately sixfive months and the weighted average yield of the CDs was approximately 2.17%4.29%. 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 August 27, 2022February 25, 2023 and November 27, 202126, 2022 approximates their fair value.4.5. Accounts Receivable $ 21,902 $ 21,134 $ 18,992 $ 19,099 (952 ) (567 ) (684 ) (1,261 ) $ 20,950 $ 20,567 $ 18,308 $ 17,838 Page 89 of 3634AUGUST 27, 2022ninethree months ended August 27, 2022February 25, 2023 was as follows: $ 567 $ 1,261 439 116 (54 ) (693 ) $ 952 $ 684 3.4.5.6. Inventories $ 50,617 $ 40,254 $ 38,142 $ 46,607 695 482 722 620 23,527 21,653 21,725 22,859 35,169 30,914 35,255 32,974 110,008 93,303 95,844 103,060 (12,407 ) (10,483 ) (12,187 ) (12,416 ) (5,920 ) (4,816 ) (4,646 ) (5,167 ) $ 91,681 $ 78,004 $ 79,011 $ 85,477 Page 910 of 3634AUGUST 27, 2022
Segment $ 3,683 $ 1,133 $ 4,816 $ 4,103 $ 1,064 $ 5,167 1,941 862 2,803 470 253 723 (982 ) (717 ) (1,699 ) (1,067 ) (177 ) (1,244 ) $ 4,642 $ 1,278 $ 5,920 $ 3,506 $ 1,140 $ 4,646 20222023 and do not anticipate that our methodology is likely to change in the future.6.7. Goodwill and Other Intangible Assets
Amount
Amortization
Assets, Net Intangibles subject to amortization $ 512 $ (264 ) $ 248 $ 512 $ (294 ) $ 218 Intangibles not subject to amortization: 6,848 8,694 7,217 12,687 $ 14,313 $ 21,599 $ 512 $ (223 ) $ 289 $ 512 $ (280 ) $ 232 6,848 8,723 7,217 12,772 $ 14,354 $ 21,727 Page 1011 of 3634AUGUST 27, 2022TheChanges in the carrying amounts of goodwill by reportable segment at both August 27, 2022 and November 27, 2021 arewere as follows: $ 9,188 $ (1,971 ) $ 7,217 1,926 (1,926 ) - $ 11,114 $ (3,897 ) $ 7,217 $ 7,217 $ - $ 5,554 $ 12,771 - - (84 ) (84 ) $ 7,217 $ - $ 5,470 $ 12,687 GoodwillAccumulated impairment losses at both February 25, 2023 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).26, 2022 were $3,897.and nine months ended August 27,February 25, 2023 and February 26, 2022 and August 28, 2021 was as follows: $ 14 $ 14 $ 42 $ 42 $ 14 $ 14 August 27, 2022February 25, 2023 is as follows: $ 15 57 $ 42 57 57 57 57 57 57 5 5 - $ 248 $ 218 7.8. Bank Credit Facility$25,000.$25,000. At August 27, 2022,February 25, 2023, we had $3,931$3,731 outstanding under standby letters of credit against our line, leaving availability under our credit line of $21,069.$21,269. In addition, we had outstanding standby letters of credit with another bank totaling $325$250 at August 27, 2022.February 25, 2023. 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 charges a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the terms of the bank credit facility, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis: August 27, 2022February 25, 2023 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 1112 of 3634AUGUST 27, 20228.9. Post Employment Benefit Obligations$9,062$6,007 and $9,192$5,987 as of August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively.$1,560$1,300 and $1,548$1,275 as of August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively. $ 913 $ 913 $ 698 $ 698 9,709 9,827 6,609 6,564 $ 10,622 $ 10,740 $ 7,307 $ 7,262 and nine months ended August 27,February 25, 2023 and February 26, 2022 and August 28, 2021 are as follows: �� $ 9 $ 31 $ 27 $ 91 $ 7 $ 9 58 48 173 146 93 58 31 31 94 94 31 31 33 15 100 45 - 33 $ 131 $ 125 $ 394 $ 376 $ 131 $ 131 $1,657$1,626 and $1,648$1,616 as of August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively.$1,946$2,447 and $1,789$2,070 as of August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively.Page 1213 of 3634AUGUST 27, 2022 $ 296 $ 296 $ 296 $ 296 3,307 3,142 3,777 3,390 $ 3,603 $ 3,438 $ 4,073 $ 3,686 and nine months ended August 27,February 25, 2023 and February 26, 2022 and August 28, 2021 as follows: $ (7 ) $ 96 $ 54 $ 451 $ 78 $ 54 9.10. Commitments and Contingencies10. Lease GuaranteesWe have guaranteed certain lease obligations of licensee operators. Lease guarantees range from one to three years. We were contingently liable under a licensee lease obligation guaranteesguarantee in the amounts of $1,871$1,889 and $1,845$1,880 at August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively. The remaining term under this lease guarantee extends for five years.obligations,obligation, net of recorded reserves. The fair value of this lease guaranteesguarantee (an estimate of the cost to the Company to perform on these guarantees)the guarantee) at August 27, 2022February 25, 2023 and November 27, 202126, 2022 was not material.Page 1314 of 3634AUGUST 27, 2022
Shares
Per Share $ 7,773 9,238,185 $ 0.84 Add effect of dilutive securities: - 28,927 - $ 7,773 9,267,112 $ 0.84 $ (145 ) 9,238,185 $ (0.02 ) - 28,927 - $ (145 ) 9,267,112 $ (0.02 ) $ 3,441 9,779,928 $ 0.35 - 5,415 - $ 3,441 9,785,343 $ 0.35 $ (425 ) 9,779,928 $ (0.04 ) - 5,415 - $ (425 ) 9,785,343 $ (0.04 ) $ 19,807 9,503,937 $ 2.08 - 5,688 - $ 19,807 9,509,625 $ 2.08 $ 40,512 9,503,937 $ 4.26 - 5,688 - $ 40,512 9,509,625 $ 4.26 $ 12,216 9,864,691 $ 1.24 - 9,329 - $ 12,216 9,874,020 $ 1.24 $ 785 9,864,691 $ 0.08 - 9,329 - $ 785 9,874,020 $ 0.08 Page 14 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITEDAUGUST 27, 2022(Dollars in thousands except share and per share data) For the quarter ended February 25, 2023: $ 1,445 8,867,881 $ 0.16 Add effect of dilutive securities: - 29,122 - $ 1,445 8,897,003 $ 0.16 For the quarter ended February 26, 2022: $ 4,291 9,750,432 $ 0.44 Add effect of dilutive securities: - 8,545 - $ 4,291 9,758,977 $ 0.44 $ 1,282 9,750,432 $ 0.13 Add effect of dilutive securities: - 8,545 - $ 1,282 9,758,977 $ 0.13 and nine months ended August 27,February 25, 2023 and February 26, 2022, and August 28, 2021, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive: 15,799 - 67,099 7,105 51,000 51,300 at which timeand through the end of fiscal 2022, we received the following net proceeds: $ 86,939 $ 86,939 Less: 1,000 1,000 418 418 987 987 (2) $ 84,534 $ 84,534 To beThis was held in escrow until the first anniversary of the sale, at which time anythe full amount not distributed or reserved for specified claims will bewas released to the Company. ThisCompany on March 2, 2023. As of February 25, 2023 and November 26, 2022, this amount is included in other current assets in the accompanying condensed consolidated balance sheet at August 27, 2022.sheets.(2)Included in cash flows from investing activities in the accompanying condensed consolidated statement of cash flows for the nine months ended August 27, 2022.a customary post-closing working capital adjustmentadjustments which waswere paid during the third quartersecond half of fiscal 2022. Including the effect of the working capital adjustment, we recognized2022 and resulted in a pre-tax gain from the sale of Zenith of $53,061.$52,534 recognized subsequent to the first quarter of fiscal 2022.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 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITEDAUGUST 27, 2022(Dollars in thousands except share and per share data)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: Carrying amounts of major classes of assets included as part of discontinued operations: $ 7,601 3,463 24,898 9,094 18,193 572 $ 63,821 Balance sheet classification: $ 11,064 52,757 $ 63,821 Carrying amounts of major classes of liabilities included as part of discontinued operations: $ 4,336 3,295 7,458 1,006 10,996 5,214 $ 32,305 Balance sheet classification: $ 16,095 16,210 $ 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 and auto liability claims were retained by Bassett. The remaining balance of these reserves and accruals total $537 at August 27, 2022 and are included in other current liabilities and accrued expenses in the accompanying condensed consolidated balance sheet.Page 16 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITEDAUGUST 27, 2022(Dollars in thousands except share and per share data)operations.and nine months ended August 27, 2022 and August 28, 2021:February 26, 2022: Major line items constituting pretax income of discontinued operations: $ - $ 14,036 $ 16,776 $ 40,116 - 14,522 15,001 38,849 - (79 ) (63 ) (188 ) - (565 ) 1,712 1,079 (193 ) - 53,061 - (193 ) (565 ) 54,773 1,079 (48 ) (140 ) 14,261 294 $ (145 ) $ (425 ) $ 40,512 $ 785 Major line items constituting pretax income of discontinued operations: $ 16,776 15,001 (63 ) 1,712 430 $ 1,282 ninethree months ended August 27, 2022, and $7,164 and $23,409, respectively, forFebruary 26, 2022. Upon the three and nine months ended August 28, 2021. We havesale of Zenith we entered into a service agreement with J.B. Hunt for the continuation of these services for a period of seven years following the sale of Zenith. Subsequent to the sale, we years. We incurred $10,307 and $19,852$8,434 of expense during the three and nine months ended August 27, 2022, respectively,February 25, 2023 for the performance of logistical services of which $17,818 had been paid in cash as of August 27, 2022.performed by J.B. Hunt.ninethree months ended August 27, 2022, and $86 and $207, respectively, for the three and nine months ended August 28, 2021.February 26, 2022.ninethree months ended August 27, 2022 and August 28, 2021:February 26, 2022: $ 1,681 $ 3,231 (81 ) (2,706 ) (371 ) (834 ) $ 1,229 $ (309 ) 13. Retail Real Estate TransactionsDuring the third quarter of fiscal 2022, we sold one of our Company-owned store locations in Houston, Texas for $8,217 net of closing costs, resulting in a gain of $4,595 during the three and nine months ended August 27, 2022. The sale closed on June 24, 2022, and we expect to vacate the premises during the fourth 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 approximately $4,300 of the taxable gain 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 was the primary beneficiary by virtue of our control over the activities that most significantly impact the entity's economic performance. Subsequent to the completion of the exchange transactions during the third quarter of fiscal 2022, the sole equity interest in the VIE was transferred to Bassett and the entity is now consolidated as a wholly owned subsidiary We plan to remodel the Tampa property and open as a Company-owned store in the second quarter of fiscal 2023. Three Months Ended $ 1,681 (81 ) (371 ) $ 1,229 Page 1716 of 3634AUGUST 27, 202214.13. Segment InformationWeBeginning with the three months ended February 25, 2023, we have strategically aligned our business into twothree reportable segments as defined in ASC 280, Segment Reporting, and as described below: includeincludes 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 loss, net, in our condensed consolidated statements of operations.Venture. Page 1817 of 3634AUGUST 27, 2022 Sales Revenue $ 69,884 $ 83,485 (30,099 ) (29,728 ) 39,785 53,757 64,962 64,107 2,951 - $ 107,698 $ 117,864 Income from Operations $ 8,994 $ 10,202 1,530 2,622 (7,771 ) (6,245 ) (51 ) (101 ) $ 2,702 $ 6,478 Depreciation and Amortization $ 606 $ 570 1,299 1,495 435 324 $ 2,340 $ 2,389 Capital Expenditures $ 637 $ 1,103 1,282 116 1,422 1,124 $ 3,341 $ 2,343 $ 78,959 $ 73,073 $ 249,945 $ 219,371 (31,833 ) (26,779 ) (95,976 ) (84,303 ) 47,126 46,294 153,969 135,068 70,886 58,576 210,613 181,454 $ 118,012 $ 104,870 $ 364,582 $ 316,522 $ 1,611 $ 4,466 $ 8,430 $ 14,622 4,529 917 15,754 3,663 (63 ) (407 ) (617 ) (662 ) 4,595 - 4,595 - $ 10,672 $ 4,976 $ 28,162 $ 17,623 $ 1,213 $ 835 $ 3,038 $ 2,456 1,455 1,528 �� 4,429 4,625 $ 2,668 $ 2,363 $ 7,467 $ 7,081 $ 3,160 $ 2,078 $ 15,065 $ 4,244 1,468 54 2,201 191 $ 4,628 $ 2,132 $ 17,266 $ 4,435 Identifiable Assets $ 243,046 $ 196,853 $ 116,694 $ 125,433 159,641 160,986 162,232 162,222 - 63,821 112,691 118,618 $ 402,687 $ 421,660 $ 391,617 $ 406,273 15,14, Revenue Recognition, for disaggregated revenue information regarding sales of furniture and accessories by product type for the wholesale and retail segments.15.14. Revenue Recognition$40,311$31,040 and $51,492$35,963 as of August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively. Substantially allApproximately 81% of the customer deposits held at November 27, 202126, 2022 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 nine months ended August 27, 2022.February 25, 2023.August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, our balance of prepaid commissions included in other current assets was $4,357$3,145 and $6,221,$3,768, respectively.Page 19 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITEDAUGUST 27, 2022(Dollars in thousands except share and per share data)and nine months ended August 27,February 25, 2023 and February 26, 2022, and August 28, 2021, excluding intercompany transactions between our segments, is a follows: $ 30,885 $ 39,054 $ 69,939 $ 26,276 $ 32,362 $ 58,638 6,290 867 7,157 9,142 302 9,444 5,564 11,357 16,921 5,745 7,674 13,419 4,387 10,404 14,791 5,131 10,394 15,525 - 9,204 9,204 - 7,844 7,844 $ 47,126 $ 70,886 $ 118,012 $ 46,294 $ 58,576 $ 104,870 $ 96,636 $ 122,248 $ 218,884 $ 77,134 $ 102,201 $ 179,335 $ 24,506 $ 36,159 $ - $ 60,665 $ 31,929 $ 37,818 $ - $ 69,747 29,111 1,399 30,510 26,898 782 27,680 6,805 494 - 7,299 12,939 240 - 13,179 17,207 32,001 49,208 17,921 20,756 38,677 4,876 9,669 - 14,545 5,980 9,407 - 15,387 11,015 27,884 38,899 13,115 32,175 45,290 3,598 10,050 - 13,648 2,909 8,292 - 11,201 - 27,081 27,081 - 25,540 25,540 - 8,590 2,951 11,541 - 8,350 - 8,350 $ 153,969 $ 210,613 $ 364,582 $ 135,068 $ 181,454 $ 316,522 $ 39,785 $ 64,962 $ 2,951 $ 107,698 $ 53,757 $ 64,107 $ - $ 117,864 Page 2019 of 3634AUGUST 27, 202216.15. Changes to Stockholders’ Equityand nine months ended August 27, 2022February 25, 2023 and August 28, 2021:February 26, 2022: $ 46,396 $ 49,262 $ 48,811 $ 49,714 $ 44,759 $ 48,811 98 23 222 143 92 54 (430 ) (506 ) (2,969 ) (1,078 ) (540 ) (225 ) $ 46,064 $ 48,779 $ 46,064 $ 48,779 $ 44,311 $ 48,640 9,279,268 9,852,359 9,762,125 9,942,787 8,951,839 9,762,125 19,568 4,587 44,544 28,623 18,381 10,796 (86,096 ) (101,100 ) (593,929 ) (215,564 ) (108,083 ) (44,989 ) 9,212,740 9,755,846 9,212,740 9,755,846 8,862,137 9,727,932 $ - $ - $ 113 $ - $ - $ 113 65 71 117 165 (12 ) 39 (207 ) (119 ) (629 ) (275 ) (200 ) (267 ) 142 48 399 110 212 115 $ - $ - $ - $ - $ - $ - $ 145,471 $ 112,325 $ 115,631 $ 109,710 $ 150,800 $ 115,631 7,628 3,016 60,319 13,001 1,445 5,573 (982 ) (2,017 ) (6,663 ) (4,432 ) (1,213 ) (273 ) (1,564 ) (1,366 ) (18,734 ) (6,321 ) (1,421 ) (1,374 ) $ 150,553 $ 111,958 $ 150,553 $ 111,958 $ 149,611 $ 119,557 $ (1,726 ) $ (1,325 ) $ (1,823 ) $ (1,394 ) $ 50 $ (1,823 ) (136 ) - 48 35 145 104 24 49 $ (1,678 ) $ (1,290 ) $ (1,678 ) $ (1,290 ) $ (62 ) $ (1,774 ) Page 2120 of 3634AUGUST 27, 202217.16. Recent Accounting PronouncementsAugust 27, 2022February 25, 2023 we do not hold any investments in equity securities, therefore we do not currently expect that this guidance will have a material impact upon our financial position and results of operations.18. Subsequent EventsOn September 2, 2022, we acquired the capital stockNoa Home Inc. (“Noa”), a mid-priced e-commerce furniture retailer headquartered in Montreal, Canada. Noa has operations in Canada, Australia, Singapore and the United Kingdom and had net revenues of approximately $15,300 (approximately C$19,100) for its most recent fiscal year ended February 28, 2022. The initial purchase price of approximately $5,900 (approximately C$7,700) included cash payments of approximately $1,500 (approximately C$2,000) paid to the co-founders of Noa and approximately $4,300 (approximately C$5,700) for the repayment of existing debt. The Noa co-founders will also have the opportunity to receive additional annual cash payments totaling approximately $1,000 per year (approximately C$1,330 per year) for the following three fiscal years based on established increases in net revenues and achieving certain internal EBITDA goals.Page 22 of 3634AUGUST 27, 2022general price inflation, supply chain disruptions and shortages and the imposition of new or increased duties, tariffs, retaliatory tariffs and trade limitations with respect to foreign-sourced productsBassett stores (independent licensees and Company-owned retail stores) which may result in future store closingsresultsthe risk that we may not achieve the strategic benefits of marketing and advertising campaignsour acquisition of Noa Home Inc. and 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 insurance27, 2021.26, 2022.Page 2322 of 3634AUGUST 27, 2022120-year121-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.9592 BHF stores at August 27, 2022,February 25, 2023, we have leveraged our strong brand name in furniture into a network of Company-owned and licensed stores that focus on providing consumers with a friendly and casual environment for buying furniture and accessories. Our store program is designed to provide a single source home furnishings retail store that provides a unique combination of stylish, quality furniture and accessories with a high level of customer service. In order for the Bassett brand to reach markets that cannot be effectively served by our retail store network, we also distribute our products through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We use a network of over 30 independent sales representatives who have stated geographical territories. These sales representatives are compensated based on a standard commission rate. We believe this blended strategy provides us the greatest ability to effectively distribute our products throughout the United States and ultimately gain market share. roll this out nationwide overevaluate the near term and our next center recently opened near Baltimore, Maryland subsequent to the third quarterperformance of fiscal 2022.these five RFCs before considering any additional locations.1510 independent sales representatives. Using Lane Venture as a platform, we developed the Bassett Outdoor brand that is only marketed through the BHF store network. This allows Bassett branded product to move from inside the home to outside the home to capitalize on the growing trend of outdoor living.theour wholesale revenues are derived from products we currently sellthat are manufactured in the United States.States using a mix of domestic and globally sourced components and raw materials.Page 24 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESAUGUST 27, 2022(Dollars in thousands except share and per share data)will allowallows us to enhance and standardize our product development and data management and governance processes during the second half of 2022.processes. This will resultresults in more consistent data that our merchandizing and sales teams can use in analyzing various product and sales trends in order to make better informed decisions. We are also in the process of implementing a new eCommerce platform that we plan to introduce in the second half of 2023. The new web platform will leverage world class features including enhanced customer research capabilities and streamlined navigation that we believe will result in increased web traffic and sales. We expect to spend between $3,000 and $4,000 this fiscal yearapproximately $2,000 on these efforts.efforts in 2023.the first quarter of fiscal 2022, we closed three stores with the operations of one retailthose stores being consolidated into another store in Ontario, California, and we closed our store in Wichita, Kansas, during the third quarter of fiscal 2022. During the fourth quarter of fiscal 2022 we closed our store in Farmingdale, New York and consolidated its operations with our existing store in nearby Westbury, New York.same market. All of the above-mentioned closures occurred at or near the lease expirations.During the second quarter of 2022, we acquired a 25,000 square foot store property in Tampa, Florida for $7,668. We are currently in the process of developing plans for store buildout and upfit with a planned opening date in the second quarter of 2023.existing stores to better locations within the same market. During the third quarter of fiscal 2022, we sold the store property of one of our Houston, Texas locations for $8,217, net of closing costs, which resulted in a gain of $4,595. For tax purposes, the sale of the Houston store and the purchase of the Tampa store will be treated as a 1031 exchange where the majority of the tax on the gain will be deferred. The store closure sale was completed early in the fourth quarter of fiscal 2022 at which time the store was officially closed. We expect to openleased a new leased9,600 square foot store property in a more upscale shopping area in the vicinity of the closed storeformer location. We are in the second quarterprocess of upfitting the store and expect to open in late 2023. During the fourth quarter of fiscallate 2022 at the end of the lease term, we expect to closeclosed our Dallas, Texas store located at the intersection of McKinney and Knox streets. We plan to openopened a replacementnew 11,600 square foot store in the nearby iconic Inwood Village shopping center during the fourthfirst quarter of 2022.2023.August 27, 2022,February 25, 2023, we had 6159 Corporate-owned stores operating and expect to end fiscal 2022 with 59 stores.operating.Freight Lines, LLC (“Zenith”) to J.B. Hunt Transport Services, Inc. (“J.B. Hunt”) for $86,939 in cash. On February 28, 2022and the transaction was completed with us receiving $85,521 afterat the paymentbeginning of $418 in certain transaction costs and the funding of $1,000 held in escrow. The final purchase price was subject to a customary post-closing working capital adjustment, which was settled in the amount of $987 and paid back to J.B. Hunt during the thirdsecond quarter of fiscal 2022. During the nine months ended August 27, 2022, we recognized a pre-tax gain of $53,061 on this transaction. As a result of the sale, the operations of our former logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income and in the following discussion as discontinued operations.operations (see Note 12 to the Condensed Consolidated Statements of Income).Page 2524 of 3634AUGUST 27, 2022Recent Development – Acquisition of Noa Home, Inc.On September 2, 2022, we acquired the capital stock of Noa Home Inc. (“Noa”), a mid-priced e-commerce furniture retailer headquartered in Montreal, Canada. Noa has operations in Canada, Australia, Singapore and the United Kingdom and had net revenues of approximately $15,300 (approximately C$19,100) for its most recent fiscal year ended February 28, 2022. The initial purchase price of approximately $5,900 (approximately C$7,700) included cash payments of approximately $1,500 (approximately C$2,000) paid to the co-founders of Noa and approximately $4,300 (approximately C$5,700) for the repayment of existing debt. The Noa co-founders will also have the opportunity to receive additional annual cash payments totaling approximately $1,000 per year (approximately C$1,330 per year) for the following three fiscal years based on established increases in net revenues and achieving certain internal EBITDA goals.PeriodsPeriod ended August 27, 2022February 25, 2023 compared with the periodsperiod ended August 28, 2021:February 26, 2022:and nine months ended August 27,February 25, 2023 and February 26, 2022 and August 28, 2021 are as follows: $ 118,012 100.0 % $ 104,870 100.0 % $ 13,142 12.5 % $ 364,582 100.0 % $ 316,522 100.0 % $ 48,060 15.2 % $ 107,698 100.0 % $ 117,864 100.0 % $ (10,166 ) -8.6 % 57,240 48.5 % 52,263 49.8 % 4,977 9.5 % 180,479 49.5 % 153,426 48.5 % 27,053 17.6 % 50,501 46.9 % 60,471 51.3 % (9,970 ) -16.5 % 60,772 51.5 % 52,607 50.2 % 8,165 15.5 % 184,103 50.5 % 163,096 51.5 % 21,007 12.9 % 57,197 53.1 % 57,393 48.7 % (196 ) -0.3 % 54,695 46.3 % 47,631 45.4 % 7,064 14.8 % 160,536 44.0 % 145,473 46.0 % 15,063 10.4 % 54,495 50.6 % 50,915 43.2 % 3,580 7.0 % 4,595 3.9 % - 0.0 % 4,595 100.0 % 4,595 1.3 % - 0.0 % 4,595 100.0 % $ 10,672 9.0 % $ 4,976 4.7 % $ 5,696 114.5 % $ 28,162 7.7 % $ 17,623 5.5 % $ 10,539 59.8 % $ 2,702 2.5 % $ 6,478 5.5 % $ (3,776 ) -58.3 % August 27, 2022 increased $13,142February 25, 2023 decreased $10,166 or 12.5%8.6% from the prior year period primarily due to a 21%16% decline in wholesale sales partially offset by a 1.3% increase in retail sales through the Company-owned stores and a 6% increasethe addition of Noa Home in wholesale shipments to the licensee store network.2023.August 27, 2022February 25, 2023 increased 130440 basis points from 20212022 primarily due to higher margins in the wholesale segment along with a greater portion of total sales coming from the Corporate retail segment,segment. These increases were partially offset by lower margins in the retail segment due to increased clearance activity from four store closure sales during the quarter.segment.August 27, 2022February 25, 2023 increased 90740 basis points from 20212022 primarily due to increaseda greater portion of total sales and marketing expenses and increased logistics and warehouse costs, partially offset by greater leveragecoming from the Corporate retail segment along with the deleverage of fixed costs from increasedcaused by lower sales volumes.During the third quarter of fiscal 2022, we also recognized a gain of $4,595 from the sale of the real estate at a former retail location in Houston, Texas.Analysis of Year-to-Date Results:Total sales revenue for the nine months ended August 27, 2022 increased $48,060 or 15% from the prior year period primarily due to increases in wholesale shipments to both the open market and the BHF store network, along with a 16% increase in retail sales.Gross margins for the nine months ended August 27, 2022 decreased 100 basis points from 2021 primarily due to rising raw material and inbound freight costs, including the impact of rising fuel prices, partially offset by greater fixed cost leverage from increased sales. While these rising costs have been somewhat mitigated by price increases implemented since the first quarter of 2021, the increase in order backlogs and order fulfillment times limited our ability to match revised pricing to manufacturing costs. Although no increases are currently being contemplated, we will continue to monitor our costs to determine if additional increases are warranted.Page 26 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESAUGUST 27, 2022(Dollars in thousands except share and per share data)SG&A expenses as a percentage of sales for the nine months ended August 27, 2022 decreased 200 basis points from 2021 primarily due to improved leverage of fixed costs through higher sales levels.During the first nine months of fiscal 2022, we also recognized a gain of $4,595 from the sale of the real estate at a former retail location in Houston, Texas.WeBeginning with the three months ended February 25, 2023, we have strategically aligned our business into twothree 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. We eliminate the sales between our wholesale and retail segments as well as the imbedded profit in the retail inventory for the consolidated presentation in our financial statements. Also included in our wholesale segment are our short-term investments and our holdings of retail real estate previously leased as licensee stores. The earnings and costs associated with these assets are included in other loss, net, in our condensed consolidated statements of operations. (including real estate) and capital expenditures directly related to these stores and the Company-owned distribution network utilized to deliver products to our retail customers.operations.Page 27 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESAUGUST 27, 2022(Dollars in thousands except share and per share data)operation.In addition, certain special gains or charges are included in consolidated income from operations 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. $ 78,959 $ 70,886 $ (31,833 ) (1) $ - $ 118,012 $ 69,884 $ 64,962 $ 2,951 $ (30,099 ) (1) $ 107,698 54,501 34,166 (31,427 ) (2) - 57,240 48,278 30,586 1,433 (29,796 ) (2) 50,501 24,458 36,720 (406 ) - 60,772 21,606 34,376 1,518 (303 ) 57,197 22,847 32,191 (343 ) (3) - 54,695 12,612 32,846 9,289 (252 ) (3) 54,495 - - - 4,595 (4) 4,595 $ 1,611 $ 4,529 $ (63 ) $ 4,595 $ 10,672 $ 8,994 $ 1,530 $ (7,771 ) $ (51 ) $ 2,702 $ 73,073 $ 58,576 $ (26,779 ) (1) $ - $ 104,870 50,493 27,815 (26,045 ) (2) - 52,263 22,580 30,761 (734 ) - 52,607 18,114 29,844 (327 ) (3) - 47,631 $ 4,466 $ 917 $ (407 ) $ - $ 4,976 $ 249,945 $ 210,613 $ (95,976 ) (1) $ - $ 364,582 175,293 99,556 (94,370 ) (2) - 180,479 74,652 111,057 (1,606 ) - 184,103 66,222 95,303 (989 ) (3) - 160,536 - - - 4,595 (4) 4,595 $ 8,430 $ 15,754 $ (617 ) $ 4,595 $ 28,162 $ 219,371 $ 181,454 $ (84,303 ) (1) $ - $ 316,522 $ 83,485 $ 64,107 $ - $ (29,728 ) (1) $ 117,864 148,640 87,444 (82,658 ) (2) - 153,426 59,601 30,170 - (29,300 ) (2) 60,471 70,731 94,010 (1,645 ) - 163,096 23,884 33,937 - (428 ) 57,393 56,109 90,347 (983 ) (3) - 145,473 13,682 31,315 6,245 (327 ) (3) 50,915 $ 14,622 $ 3,663 $ (662 ) $ - $ 17,623 $ 10,202 $ 2,622 $ (6,245 ) $ (101 ) $ 6,478 the elimination of logisitcal services charged by Zenith to Bassett's wholesale segment as follows:(4) Represents the gain on the sale of the real estate at a former retail location.Page 2826 of 3634AUGUST 27, 2022August 27,February 25, 2023 and February 26, 2022 and August 28, 2021 are as follows: $ 78,959 100.0 % $ 73,073 100.0 % $ 5,886 8.1 % $ 249,945 100.0 % $ 219,371 100.0 % $ 30,574 13.9 % $ 69,884 100.0 % $ 83,485 100.0 % $ (13,601 ) -16.3 % 24,458 31.0 % 22,580 30.9 % 1,878 8.3 % 74,652 29.9 % 70,731 32.2 % 3,921 5.5 % 21,606 30.9 % 23,884 28.6 % (2,278 ) -9.5 % 22,847 28.9 % 18,114 24.8 % 4,733 26.1 % 66,222 26.5 % 56,109 25.6 % 10,113 18.0 % 12,612 18.0 % 13,682 16.4 % (1,070 ) -7.8 % $ 1,611 2.0 % $ 4,466 6.1 % $ (2,855 ) -63.9 % $ 8,430 3.4 % $ 14,622 6.7 % $ (6,192 ) -42.3 % $ 8,994 12.9 % $ 10,202 12.2 % $ (1,208 ) -11.8 % $ 30,885 $ 20,641 $ 51,526 65.3 % $ 26,276 $ 16,572 $ 42,848 58.6 % $ 8,678 20.3 % 6,290 24 6,314 8.0 % 9,142 5 9,147 12.5 % (2,833 ) -31.0 % 5,564 5,995 11,559 14.6 % 5,745 5,440 11,185 15.3 % 374 3.3 % 4,387 5,173 9,560 12.1 % 5,131 4,762 9,893 13.5 % (333 ) -3.4 % $ 47,126 $ 31,833 $ 78,959 100.0 % $ 46,294 $ 26,779 $ 73,073 100.0 % $ 5,886 8.1 % $ 96,636 $ 64,075 $ 160,711 64.3 % $ 77,134 $ 52,102 $ 129,236 58.9 % $ 31,475 24.4 % $ 24,506 $ 19,344 $ 43,850 62.7 % $ 31,929 $ 20,096 $ 52,025 62.3 % $ (8,175 ) -15.7 % 29,111 48 29,159 11.7 % 26,898 47 26,945 12.3 % 2,214 8.2 % 6,805 18 6,823 9.8 % 12,939 12 12,951 15.5 % (6,128 ) -47.3 % 17,207 18,927 36,134 14.5 % 17,921 18,117 36,038 16.4 % 96 0.3 % 4,876 5,940 10,816 15.5 % 5,980 6,261 12,241 14.7 % (1,425 ) -11.6 % 11,015 12,926 23,941 9.6 % 13,115 14,037 27,152 12.4 % (3,211 ) -11.8 % 3,598 4,797 8,395 12.0 % 2,909 3,359 6,268 7.5 % 2,127 33.9 % $ 153,969 $ 95,976 $ 249,945 100.0 % $ 135,068 $ 84,303 $ 219,371 100.0 % $ 30,574 13.9 % $ 39,785 $ 30,099 $ 69,884 100.0 % $ 53,757 $ 29,728 $ 83,485 100.0 % $ (13,601 ) -16.3 % August 27, 2022 increased $5,886February 25, 2023 decreased $13,601 or 8.1%16% from the prior year period due primarily to a 17% increase29% decrease in shipments to the BHF store network andopen market, a 16% increase20% decrease in Lane Venture shipments. Shipmentsshipments and a 3.4% decrease in shipments to the open market were flat.our retail store network. Gross margins for the three months ended August 27, 2022 were comparable toFebruary 25, 2023 improved 230 basis points over the prior year with a 10 basis point increase as we were able to recognize a greater portion of previously implemented price increases in current period sales. This was offset by lower margins in the Bassett Leather product line due to product discounting. As this product line is internationally sourced with extended lead times, we received significant amounts of inventory during the second and third quarters of 2022 just as product demand was weakening due to the market downturn in home furnishings. Also, the ocean freight costs associated with the majority of the product received was at significantly higher costs than are currently being realized on current product receipts. We expect reduced margins on this product line to continue overthrough the next two quartersthird quarter of 2023 as we reduce the inventory to a more normal level. SG&A expenses as a percentage of sales increased 410160 basis points primarily due to increased sales and marketing expenses, employee compensation costs and logistics and warehouse costs partially offset by greaterreduced leverage of fixed costs from increaseddecreased sales volumes.along with higher warehousing and shipping costs.Page 2927 of 3634AUGUST 27, 2022Analysis of Year-to-Date Results - WholesaleNet sales for the nine months ended August 27, 2022 increased $30,574 or 14% from the prior year period due primarily to increases in shipments of 13% and 12% to both the BHF store network and to the open market, respectively. Gross margins for the nine months ended August 27, 2022 declined 230 basis points compared to the prior year period as we experienced significant increases in material and other production costs, partially offset by greater leverage of fixed costs due to higher sales volumes. SG&A expenses as a percentage of sales increased 90 basis points primarily due to increased sales and marketing expenses, employee compensation costs and logistics and warehouse costs partially offset by greater leverage of fixed costs from increased sales volumes.Wholesale BacklogSince the beginning of the COVID pandemic in early 2020, Bassett and most of the home furnishings industry have been faced with logistical challenges from COVID-related labor shortages and supply chain disruptions creating significant delays in order fulfillment and increased backlogs. Many of these issues have subsided due to the industry slowdown in demand for home furnishings that started during the second quarter of 2022. As a result of the slowdown, our incoming order rates have decreased resulting in decreases in our wholesale backlogs. While wholesale orders for the third quarter of 2022 decreased 22% against the prior year period, they were comparable to the pre-pandemic level of the third quarter of 2019. At August 27, 2022, the wholesale backlog totaled $41,693 as compared to $60,134 at May 28, 2022, $78,135 at February 26, 2022, $90,057 at November 27, 2021, and 92,839 at August 28, 2021. At February 29, 2020, the end of our last fiscal quarter prior to the impact of the COVID pandemic upon our operations and the overall economy, our wholesale backlog was $14,617.August 27,February 25, 2023 and February 26, 2022 and August 28, 2021 are as follows: $ 70,886 100.0 % $ 58,576 100.0 % $ 12,310 21.0 % $ 210,613 100.0 % $ 181,454 100.0 % $ 29,159 16.1 % $ 64,962 100.0 % $ 64,107 100.0 % $ 855 1.3 % 36,720 51.8 % 30,761 52.5 % 5,959 19.4 % 111,057 52.7 % 94,010 51.8 % 17,047 18.1 % 34,376 52.9 % 33,937 52.9 % 439 1.3 % 32,191 45.4 % 29,844 50.9 % 2,347 7.9 % 95,303 45.3 % 90,347 49.8 % 4,956 5.5 % 32,846 50.6 % 31,315 48.8 % 1,531 4.9 % $ 4,529 6.4 % $ 917 1.6 % $ 3,612 $ 15,754 7.5 % $ 3,663 2.0 % $ 12,091 330.1 % $ 1,530 2.4 % $ 2,622 4.1 % $ (1,092 ) -41.6 % $ 39,054 55.1 % $ 32,362 55.2 % $ 6,692 20.7 % $ 122,248 58.0 % $ 102,201 56.3 % $ 20,047 19.6 % $ 36,159 55.7 % $ 37,818 59.0 % $ (1,659 ) -4.4 % 867 1.2 % 302 0.5 % 565 187.1 % 1,399 0.7 % 782 0.4 % 617 78.9 % 494 0.8 % 240 0.4 % 254 105.8 % 11,357 16.0 % 7,674 13.1 % 3,683 48.0 % 32,001 15.2 % 20,756 11.4 % 11,245 54.2 % 9,669 14.9 % 9,407 14.7 % 262 2.8 % 10,404 14.7 % 10,394 17.7 % 10 0.1 % 27,884 13.2 % 32,175 17.7 % (4,291 ) -13.3 % 10,050 15.5 % 8,292 12.9 % 1,758 21.2 % 9,204 13.0 % 7,844 13.4 % 1,360 17.3 % 27,081 12.9 % 25,540 14.1 % 1,541 6.0 % 8,590 13.2 % 8,350 13.0 % 240 2.9 % $ 70,886 100.0 % $ 58,576 100.0 % $ 12,310 21.0 % $ 210,613 100.0 % $ 181,454 100.0 % $ 29,159 16.1 % $ 64,962 100.0 % $ 64,107 100.0 % $ 855 1.3 % Page 30 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESAUGUST 27, 2022(Dollars in thousands except share and per share data)August 27, 2022February 25, 2023 increased $12,310$855 or 21%1.3% from the prior year period. Written sales (the value of sales orders taken but not delivered) declined 9.4%16% from the thirdfirst quarter of 2021.2022. Gross margins for the three months ended August 27, 2022 decreased by 70 basis points asFebruary 25, 2023 were flat compared to the prior year period primarily due toas increased clearancepromotional activity from four store closure sales duringin the quarter.current quarter coupled with higher in-bound freight costs were offset by lower unit costs as measured on a last-in, first-out basis. Selling, general and administrative expenses as a percentage of sales for the three months ended August 27, 2022 decreased 550February 25, 2023 increased 180 basis points primarily due to greater leverage on fixedincreased advertising costs to drive more customer engagement, higher consumer financing costs from higher sales volumes.Year-to-Date Analysis of Results - RetailNet sales for the nine months ended August 27, 2022interest rates and increased $29,159 or 16% from the prior year period. Written sales (the value of sales orders taken but not delivered) declined 8.4% from the first nine months of 2021. Gross margins for the nine months ended August 27, 2022 increased by 90 basis points as compared to the prior year period, primarily driven by improved pricing strategieswarehousing and lower levels of promotional activity, partially offset by increased clearance activity from five store closing events during the year. Selling, general and administrative expenses for the nine months ended August 27, 2022 as a percentage of sales decreased by 450 basis points as compared to the first nine months of 2021 primarily due to greater leverage on fixed costs from higher sales volumes.delivery costs.As previously discussed, sinceRetail backlog at February 25, 2023 was $41,763 compared to $51,041 at November 26, 2022 and $84,645 at February 26, 2022. Although the beginningretail backlog continues to be elevated as compared to pre-pandemic levels, we expect a more normalized and sustainable level by the end of the COVID pandemic in early 2020, Bassett and most of the home furnishings industry have been faced with logistical challenges from COVID-related labor shortages and supply chain disruptions creating significant delays in order fulfillment and increased backlogs. Many of these issues have subsided due to the industry slowdown in demand for home furnishings that started during the second quarter of 2022. As a result2023.the slowdown, our written sales34secondthree months ended February 25, 2023 and third quarters decreased by 13%February 22, 2022 are as follows: $ 2,951 $ - $ 2,951 100.0 % 1,518 - 1,518 100.0 % 9,289 6,245 3,044 48.7 % $ (7,771 ) $ (6,245 ) $ (1,526 ) 24.4 % 8.4%, respectively, as comparedgross profit over the prior year period were due to the corresponding periodsacquisition of 2021. Written sales for the second and third quarters of 2022 are comparableNoa Home on September 2, 2022. The $3,044 increase in SG&A expenses was primarily due to the corresponding periodsaddition of Noa Home coupled with increased corporate marketing and information technology expenses primarily in 2019. At August 27, 2022, retail backlog totaled $59,981 as compared to $71,073 at May 28, 2022, $84,685 at February 26, 2022, $82,894 at November 27, 2021, and $73,489 at August 28, 2021. At February 29, 2020, the end ofconnection with our last fiscal quarter prior to the impact of the COVID pandemic upon our operations and the overall economy, our retail backlog was $29,775.digital transformation initiatives.Results for the operations of Zenith, which was sold to J.B. Hunt at the beginning of the second quarter, for the periods ended August 27, 2022 and August 28, 2021 are as follows: $ - 0.0 % $ 14,036 100.0 % $ (14,036 ) -100.0 % $ 16,776 100.0 % $ 40,116 100.0 % $ (23,340 ) -58.2 % $ 16,776 100.0 % - 0.0 % 14,522 103.5 % (14,522 ) -100.0 % 15,001 89.4 % 38,849 96.8 % (23,848 ) -61.4 % 15,001 89.4 % - 0.0 % (79 ) -0.6 % 79 -100.0 % (63 ) (188 ) (63 ) -0.4 % $ - 0.0 % $ (565 ) -4.0 % $ 565 -100.0 % $ 1,712 10.2 % $ 1,079 2.7 % $ 633 58.7 % $ 1,712 10.2 % amounts shown above represent the results of Zenith’s business transactions with third parties. Because the sale of Zenith was closed on the first business day of the second fiscal quarter of 2022 operating results for thatwas the final period are insignificant.during which Zenith operated as a consolidated subsidiary of Bassett. During the three months ended February 26, 2022, Zenith generated a pre-tax profit of $1,712 on sales to third party customers of $16,776.ninethree months ended August 27, 2022, and $7,164 and $23,409 for the three and nine months ended August 28, 2021.February 26, 2022. These shipping and handling costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. We haveUpon the sale of Zenith, we entered into a service agreement with J.B. Hunt for the continuation of these services for a period of seven years following the sale of Zenith. Subsequent to the sale, we haveyears. We incurred $10,307 and $19,852$8,434 of expense during the three and nine months ended August 27, 2022, respectively,February 25, 2023 for the performance of logistical services performed by J.B. Hunt.Page 31 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESAUGUST 27, 2022(Dollars in thousands except share and per share data)and nine months ended August 27,February 25, 2023 and February 26, 2022 was $594$415 and $1,850,$629, respectively, compared to $268 and $828 for the three and nine months ended August 28, 2021, a net increasedecrease of $336 over$214 from the prior year quarter and $1,022 over the prior year to date.period. The net change was primarily due to higher net costsinterest income on our investment in certificates of Company-owned life insurance.deposit.22.8%36.8% and 25.6%26.3% for the three and nine months ended August 27,February 25, 2023 and February 26, 2022, respectively, and 27.2% and 27.3% for the three and nine months ended August 28, 2021, respectively. These effective rates differ from the federal statutory rate of 21% primarily due to increases in the valuation allowance placed on deferred tax assets associated with Noa Home, the effects of state income taxes and various permanent differences, including those associated with Company-owned life insurance,differences.tax of $550 for the nine months ended August 27, 2022 associated with non-deductible goodwill written off in connection with our sale of Zenith, and tax deficiencies of $117 during the nine months ended August 28, 2021 arising from stock-based compensation.per share data)used inprovided by operations for the first nine monthsquarter of fiscal 20222023 was $12,295$563 compared to cash provided by operations of $13,677$2,866 for the first nine monthsquarter of fiscal 2021,2022, representing a decrease of $25,972$2,303 in cash flows from operations. Cash provided by the operating activities of our discontinued operations was $1,681 for the first nine months of fiscal 2022 compared to $3,231 for the prior year period, a decline of $1,550 as Zenith only operated during the first quarter of fiscal 2022. Excluding the decline in operating cash flow from discontinued operations, cash flows from continuing operations declined $24,422$622 for the first quarter of fiscal 2023 from the prior year period. Cash flowsThis decline was primarily the result of lower income from operating activities during the first nine months of fiscal 2022 included the payment of $20,722 in estimated taxes (net of refunds) compared with only $626 for the prior year period, the increase primarily related to the taxable gain on the sale of Zenith. In addition, cash flows from the collection of retailcontinuing operations and reduced customer deposits declined $22,522 compared to the first nine months of 2021 as the pace offrom lower written orders has slowed compared to the prior year and we continue to reduce our retail order backlog. Changes in working capital for the first nine months of fiscal 2022 were favorably impactedsales, partially offset by slower growth in ourreduced investment in inventory as compared to the prior year period.inventory.increaseddecreased by $32,496$6,733 during the first nine monthsquarter of fiscal 2022,2023, compared to a decline of $7,188$2,484 during the first nine monthsquarter of fiscal 2021,2022, an increaseincreased net use of $39,684$4,239 from the prior year period. Excluding the overall cash flow from discontinued operations, overall cash flow from continuing operations increased $38,146 overdecreased $3,074 from the prior year period. OffsettingIn addition to the decline in cash flows from operations, net cash flows fromused in investing activities during the first nine monthsquarter of fiscal 20222023 increased $82,279$1,024 to $74,066 of cash provided by investing activities$3,904 compared to net cash used in investing activities of $8,213$2,880 for the prior year period. This increase was primarily due to net proceeds of $84,534 received from the sale of Zenith and net proceeds of $8,217 received from the sale of retail real estate in Houston, Texas, partially offset by a $10,125 increase inhigher capital expenditures over the prior year includingprimarily consisting of expenditures related to our purchasedigital transformation project, upfit of our new retailthe recently opened Inwood store site in Tampa, Florida.Dallas, TX and the remodel of two other stores in the Dallas, TX market. We expect capital expenditures for the full year to range from $17 million to $20 million. Net cash used in financing activities during the first nine monthsquarter of 2022 increased $16,623$883 to a net use of $29,275$3,363 as compared to a net use of $12,652$2,480 for the prior year period, primarily due to a special dividend of $14,494 declared and paid during the second quarter of 2022 and a $4,697$1,079 increase in share repurchases to $10,263$1,844 during the first nine monthsquarter of fiscal 20222023 as compared to $5,566$765 repurchased during the first nine monthsquarter of fiscal 2021. On March 9, 2022, our Board2022. As of Directors increased the amount authorized under our existing share repurchase plan to $40,000, of which $30,857February 25, 2023, $24,154 remains available for future purchases as of August 27, 2022.under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $84,585$72,617 on hand at August 27, 2022,February 25, 2023, 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.Page 32 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESAUGUST 27, 2022(Dollars in thousands except share and per share data)August 27, 2022,February 25, 2023, we had $3,931$3,731 outstanding under standby letters of credit against our line, leaving availability under our credit line of $21,069.$21,269. In addition, we had outstanding standby letters of credit with another bank totaling $325$250 at August 27, 2022.February 25, 2023. 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 charges a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the terms of the bank credit facility, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis: August 27, 2022February 25, 2023 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.August 27, 2022February 25, 2023 is $104,899$113,120 and is included in our accompanying condensed consolidated balance sheet at August 27, 2022.February 25, 2023. We were contingently liable under a licensee lease obligation guaranteesguarantee in the amount of $1,871$1,889 at August 27, 2022. Remaining termsFebruary 25, 2023. The remaining term under thesethis lease guarantees range from approximately one to threeguarantee extends for five years. See Note 10 to our condensed consolidated financial statements for additional details regarding our lease guarantees.recently purchased for $7,668 which is expected to open for business during the second quarter ofacquired in 2022 with a planned opening late in fiscal 2023. Such real estate is included in property and equipment, net, in the accompanying condensed consolidated balance sheets and consists of eight properties with an aggregate square footage of 203,465 and a net book value of $21,168$21,164 at August 27, 2022.February 25, 2023.During the third quarterfiscal 2022, sold one of our Company-owned store locations34Houston, Texas for $8,217 net of closing costs. The sale closed on June 24, 2022,thousands except share and we expect to vacate the premises early in the fourth quarter of fiscal 2022. This sale, together with our recent purchase of real property in Tampa, Florida, 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 taxable gain of approximately $4,300 arising from the sale of the Houston property.per share data)27, 2021.26, 2022.910 to our condensed consolidated financial statements for further information regarding certain contingencies as of August 27, 2022.Page 33 of 36PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESAUGUST 27, 2022(Dollars in thousands except share and per share data)February 25, 2023.2022.2023. We are also exposed to foreign currency market risk through our investment in Noa Home. Our investment in Noa Home is subject to changes in the value of the Canadian dollar versus the U.S. dollar. Additionally, Noa Home is exposed to other local currency fluctuation risk through its operations in Australia, Singapore and the United Kingdom. The impact of currency fluctuations on our financial position and results of operations since the acquisition of Noa Home on September 2, 2022 has not been significant.$21,168$21,164 at August 27, 2022February 25, 2023 for Company-owned stores could suffer significant impairment in value if we are forced to close additional stores and sell or lease the related properties during periods of weakness in certain markets. Additionally, if we are required to assume responsibility for payment under the lease obligations of $1,871$1,889 which we have guaranteed on behalf of licensees as of August 27, 2022February 25, 2023 we may not be able to secure sufficient sub-lease income in the current market to offset the payments required under the guarantees. We are also exposed to risk related to conditions in the commercial real estate rental market with respect to the right-of-use assets we carry on our balance sheet for leased retail store locations, manufacturing and warehouse facilities. At August 27, 2022,February 25, 2023, the unamortized balance of such right-of-use assets used in continuing operations totaled $86,053.$95,966. Should we have to close or otherwise abandon one of these leased locations, we could incur additional impairment charges if rental market conditions do not support a fair value for the right of use asset in excess of its carrying value.Page32 of 34 of 36AUGUST 27, 2022FEBRUARY 25, 2023and nine months ended August 27, 2022February 25, 2023 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:
Shares
Purchased
Price Paid
Publicly Announced Plans
or Programs (1) 32,096 $ 15.92 32,096 $ 31,967 - $ - - $ 31,967 54,000 $ 20.54 54,000 $ 30,857 60,000 $ 17.87 60,000 $ 24,927 34,785 $ 18.07 28,800 $ 24,407 13,298 $ 19.01 13,298 $ 24,154 August 27, 2022, $30,857February 25, 2023, $24,154 remained available for share repurchases under the plan.Page 3533 of 3634 September 29, 2022March 30, 2023 September 29, 2022March 30, 2023Page 3634 of 3634