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)

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)

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)

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)

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. 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.

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 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 Pronouncements

Effective 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.

Certain prior year amounts have been reclassified to conform withto the current year presentation.presentation (see Note 13, Segments).

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 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.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

(Dollars in thousands except share and per share data)26, 2022.

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 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.

Non-cash Investing and taxFinancing Activity

During the three months ended February 25, 2023 and February 26, 2022, $3,406 and $4119, respectively, of $552lease right-of- use assets were added through the recognition of the corresponding lease obligations.

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 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.

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 non-deductible goodwill written offthe remaining unallocated amount recorded as goodwill.

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:

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 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.

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 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 Investments

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 August 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

Accounts receivable consists of the following:

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 ninethree months ended August 27, 2022February 25, 2023 was as follows:

We believe that the carrying value of our net accounts receivable approximates fair value. The inputs into these fair value estimates reflect our market assumptions and are not observable. Consequently, the inputs are considered to be Level 3 as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosures. See Note 3.4.

5.6. Inventories

Domestic furniture inventories are valued at the lower of cost, which is determined using the last-in, first-out (LIFO) method, or market. Imported inventories and those applicable to our Lane Venture and Bassett Outdoor lines are valued at the lower of cost, which is determined using the first-in, first-out (FIFO) method, or net realizable value.

Inventories were comprised of the following:

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:

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 20222023 and do not anticipate that our methodology is likely to change in the future.

6.7. Goodwill and Other Intangible Assets

Goodwill and other intangible assets consisted of the following:

PART I-FINANCIAL INFORMATION-CONTINUED

TheChanges in the carrying amounts of goodwill by reportable segment at both August 27, 2022 and November 27, 2021 arewere as follows:

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.

Amortization expense associated with intangible assets during the three and nine months ended August 27,February 25, 2023 and February 26, 2022 and August 28, 2021 was as follows:

Estimated future amortization expense for intangible assets that exist at August 27, 2022February 25, 2023 is as follows:

7.8. Bank Credit Facility

Our bank credit facility provides for a line of credit of up to $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:

We were in compliance with these covenants at 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.

PART I-FINANCIAL INFORMATION-CONTINUED

8.9. Post Employment Benefit Obligations

Defined Benefit Plans

We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives. The liability for the Supplemental Plan was $9,062$6,007 and $9,192$5,987 as of August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively.

We also have the Bassett Furniture Industries, Incorporated Management Savings Plan (the “Management Savings Plan”) which was established in the second quarter of fiscal 2017. The Management Savings Plan is an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees. As part of the Management Savings Plan, we have made Long Term Cash Awards (“LTC Awards”) totaling $2,000 to certain management employees in the amount of $400 each. The liability for the LTC Awards was $1,560$1,300 and $1,548$1,275 as of August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively.

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

Components of net periodic pension costs for our defined benefit plans for the three and nine months ended August 27,February 25, 2023 and February 26, 2022 and August 28, 2021 are as follows:

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 $1,657$1,626 and $1,648$1,616 as of August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively.

We also have an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees which was established under the Management Savings Plan. Our liability under this plan, including both accrued Company contributions and participant salary deferrals, was $1,946$2,447 and $1,789$2,070 as of August 27, 2022February 25, 2023 and November 27, 2021,26, 2022, respectively.

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:

We recognized expense under our deferred compensation arrangements during the three and nine months ended August 27,February 25, 2023 and February 26, 2022 and August 28, 2021 as follows:

9.10. Commitments and Contingencies

We are involved in various legal and environmental matters which arise in the normal course of business. Although the final outcome of these matters cannot be determined, based on the facts presently known, we believe that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.

10. Lease Guarantees

We have guaranteed certain lease obligations of licensee operators. Lease guarantees range from one to three years. We were contingently liable under 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.

In the event of default by an independent dealer under the guaranteed lease, we believe that the risk of loss is mitigated through a combination of options that include, but are not limited to, arranging for a replacement dealer or liquidating the collateral (primarily inventory). The proceeds of the above options are expected to cover the estimated amount of our future payments under the guarantee obligations,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.

PART I-FINANCIAL INFORMATION-CONTINUED

11. Earnings Per Share

The following reconciles basic and diluted earnings per share:

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

(Dollars in thousands except share and per share data)

For the three 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:

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 at which timeand through the end of fiscal 2022, we received the following net proceeds:

The sales price was subject to 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.

The operations of our logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B. Hunt are presented in the accompanying condensed consolidated balance sheet as assets and liabilities of discontinued operations held for sale as of November 27, 2021.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 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:

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.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

(Dollars in thousands except share and per share data)operations.

The following table summarizes the major classes of line items constituting income of the discontinued operations, as reported in the condensed consolidated statements of income for the three and nine months ended August 27, 2022 and August 28, 2021:February 26, 2022:

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 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.

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 ninethree months ended August 27, 2022, and $86 and $207, respectively, for the three and nine months ended August 28, 2021.February 26, 2022.

The following table summarizes the cash flows generated by discontinued operations during the ninethree months ended August 27, 2022 and August 28, 2021:February 26, 2022:

13. Retail Real Estate Transactions

During 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.

PART I-FINANCIAL INFORMATION-CONTINUED

14.13. Segment Information

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:

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: