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 March 1, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
For the transition period from _____________________________ to _______________________
Commission File No.000-00209
BASSETT FURNITURE INDUSTRIES, INCORPORATED
(Exact name of Registrant as specified in its charter)
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.
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 March 28, 2025 8,704,115 shares of common stock of the Registrant were outstanding.
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED MARCH 1, 2025 AND MARCH 2, 2024 – UNAUDITED
(In thousands except per share data)
Quarter Ended
March 1, 2025
March 2, 2024
Net sales of furniture and accessories
Cost of furniture and accessories sold
Gross profit
Selling, general and administrative expenses
Income (loss) from operations
Interest income
Other loss, net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Regular dividends per share
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
PART I – FINANCIAL INFORMATION – CONTINUED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Other comprehensive income (loss):
Foreign currency translation adjustments
Income taxes related to foreign currency translation adjustments
Amortization associated with
Long Term Cash Awards (LTCA)
Income taxes related to LTCA
Amortization associated with supplemental executive retirement defined benefit plan (SERP)
Income taxes related to SERP
Other comprehensive income (loss), net of tax
Total comprehensive income (loss)
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 1, 2025 AND NOVEMBER 30, 2024
(Unaudited)
November 30, 2024
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Recoverable income taxes
Other current assets
Total current assets
Property and equipment, net
Deferred income taxes
Goodwill and other intangible assets
Right of use assets under operating leases
Other
Total long-term assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
Accrued compensation and benefits
Customer deposits
Current portion operating lease obligations
Other current liabilites and accrued expenses
Total current liabilities
Long-term liabilities
Post employment benefit obligations
Long-term portion of operating lease obligations
Other long-term liabilities
Total long-term liabilities
Stockholders’ equity
Common stock
Retained earnings
Additional paid-in capital
Accumulated other comprehensive income
Total stockholders' equity
Total liabilities and stockholders’ equity
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
Operating activities:
Adjustments to reconcile net income (loss) to net cash provided by(used in) operating activities:
Depreciation and amortization
Other, net
Changes in operating assets and liabilities:
Accounts receivable
Accounts payable and other liabilities
Obligations under operating leases
Net cash used in operating activities
Investing activities:
Purchases of property and equipment
Net cash used in investing activities
Financing activities:
Cash dividends
Other issuance of common stock
Repurchases of common stock
Taxes paid related to net share settlement of equity awards
Repayments of finance lease obligations
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents - beginning of period
Cash and cash equivalents - end of period
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 operations net of estimates for returns and allowances.
Our fiscal year, which ends on the last Saturday of November, periodically results in a 53-week year instead of the normal 52 weeks. The prior fiscal year ended November 30, 2024 was a 53-week year, with the additional week being included in the first fiscal quarter. Accordingly, the information presented below includes 13 weeks of operations for the three months ended March 1, 2025 as compared with 14 weeks included in the three months ended March 2, 2024.
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 months ended March 1, 2025 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 30, 2024.
Income Taxes
We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income or loss and use that effective tax rate to record our year-to-date income tax provision. Any change in annual projections of pretax income or loss could have a significant impact on our effective tax rate for the respective quarter.
Our effective tax rate was 27.4% for the three months ended March 1, 2025. The effective rate for the three months ended March 1, 2025 differs from the federal statutory rate of 21% primarily due to the effects of state income taxes and various permanent differences.
Our effective tax rate was 30.0% for the three months ended March 2, 2024. The effective rate for the three months ended March 2, 2024 differs from the federal statutory rate of 21% primarily due to increases in the valuation allowance placed on deferred tax assets associated with Noa Home Inc. (“Noa Home”), the effects of state income taxes and various permanent differences.
Non-cash Investing and Financing Activity
During the three months ended March 1, 2025 and March 2, 2024, $0 and $3,044, respectively, of lease right-of-use assets were added through the recognition of the corresponding lease obligations.
3. 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 $20,360 at both March 1, 2025 and November 30, 2024 consisted of CDs. At March 1, 2025, the CDs had original terms averaging seven months, bearing interest at rates ranging from 0.7% to 5.15% and the weighted average remaining time to maturity was approximately five months and the weighted average yield of the CDs was approximately 3.9%. Each CD is placed with a federally insured financial institution and, except as noted below, 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 March 1, 2025 and November 30, 2024 approximates their fair value.
Our investment in CDs at March 1, 2025 and November 30, 2024 includes one CD in the amount of $2,500 which was placed with a financial institution that provides merchant services for our retail segment. This CD has been pledged as security for the merchant services agreement. The CD has a six-month term maturing in April 2025 and an interest rate of 2.0%. The requirement to maintain the pledge will be reassessed prior to the end of fiscal 2025, therefore the CD is classified as a current asset with our other CDs. This CD is in excess of the $250 Federal deposit insurance limit.
4. Accounts Receivable
Accounts receivable consists of the following:
Gross accounts receivable
Allowance for doubtful accounts
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 collectability of accounts receivable within each pool based on historical experience, current payment practices and current economic trends based on our expectations over the expected life of the receivables, which is generally ninety days or less. Actual credit losses could differ from those estimates.
Activity in the allowance for credit losses for the three months ended March 1, 2025 was as follows:
2025
Balance at November 30, 2024
Additions charged to expense
Write-offs against allowance
Balance at March 1, 2025
Substantially all of the accounts receivable written off against the reserve during the three months ended March 1, 2025 originated during fiscal 2024.
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.
5. Inventories
Domestic furniture inventories are valued at the lower of cost, which is determined using the last-in, first-out (LIFO) method, or market. Imported inventories and those applicable to our Lane Venture and Bassett Outdoor lines are valued at the lower of cost, which is determined using the first-in, first-out (FIFO) method, or net realizable value.
Inventories were comprised of the following:
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.
Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:
Wholesale
Segment
Retail Segment
Total
Write-offs
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 2025 and do not anticipate that our methodology is likely to change in the future.
6. Goodwill and Other Intangible Assets
Goodwill and other intangible assets consisted of the following:
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
There were no changes in the carrying amounts of goodwill during the three months ended March 1, 2025.
The carrying amounts of goodwill by reportable segment, including accumulated impairment losses, at both March 1, 2025 and November 30, 2024 were as follows:
Original
Accumulated
Recorded
Impairment
Carrying
Value
Losses
Amount
Retail
Corporate and other
Total goodwill
Amortization expense associated with intangible assets during the three months ended March 1, 2025 and March 2, 2024 was as follows:
Intangible asset amortization expense
Estimated future amortization expense for intangible assets that exist at March 1, 2025 is as follows:
Remainder of fiscal 2025
Fiscal 2026
Fiscal 2027
Fiscal 2028
Fiscal 2029
Fiscal 2030
7. Bank Credit Facility
On May 15, 2024, we entered into the Eighth Amended and Restated Credit Agreement with our bank (the “Credit Facility”). This Credit Facility provides for a line of credit of up to $25,000. At March 1, 2025, we had $5,682 outstanding under standby letters of credit against our line. The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.75% and is secured by our accounts receivable and inventory. Our bank charges a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the terms of the Credit Facility, Consolidated Minimum Tangible Net Worth (as defined in the Credit Facility) shall at no time be less than $120,000. In addition, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis and commencing as of the end of the first fiscal quarter after the first date that the used commitment (the sum of any outstanding advances plus standby letters of credit) equals or exceeds $8,250:
●
Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.2 times and
Consolidated Lease Adjusted Leverage to EBITDAR Ratio (as defined in the Credit Facility) not to exceed 3.35 times.
Since our used commitment was less than $8,250 at March 1, 2025, we were not required to test the Consolidated Fixed Charge Coverage Ratio or the Consolidated Lease Adjusted Leverage to EBITDAR Ratio. Had we been required to test those ratios, we would not have been in full compliance. Consequently, our availability under the Credit Facility is currently limited to an additional $2,568.
8. Post Employment Benefit Obligations
Defined Benefit Plans
We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives. The liability for the Supplemental Plan was $5,600 and $5,557 as of March 1, 2025 and November 30, 2024, 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 five management employees in the amount of $400 each. We are accounting for the LTC Awards as a defined benefit pension plan. Currently, two of those employees have retired and are receiving benefits. The liability for the LTC Awards was $1,381 and $1,360 as of March 1, 2025 and November 30, 2024, respectively.
The combined pension liability for the Supplemental Plan and LTC Awards is recorded as follows in the condensed consolidated balance sheets:
Total pension liability
Components of net periodic pension costs for our defined benefit plans for the three months ended March 1, 2025 and March 2, 2024 are as follows:
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 $1,560 and $1,568 as of March 1, 2025 and November 30, 2024, 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 $3,540 and $3,486 as of March 1, 2025 and November 30, 2024, respectively.
Our combined liability for all deferred compensation arrangements, including Company contributions and participant deferrals under the Management Savings Plan, is recorded as follows in the condensed consolidated balance sheets:
Total deferred compensation liability
We recognized expense under our deferred compensation arrangements during the three months ended March 1, 2025 and March 2, 2024 as follows:
Deferred compensation expense
9. Restructuring
In the fourth quarter of fiscal 2024 we recognized a restructuring charge of $440 representing accrued severance pay for certain affected employees. At March 1, 2025 and November 30, 2024, $69 and $432, respectively, of the accrual remained in other current liabilities. The remainder is expected to be paid out by the end of the second quarter of fiscal 2025.
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.
Lease Guarantees
We were contingently liable under licensee lease obligation guarantees in the amounts of $4,885 and $5,131 at March 1, 2025 and November 30, 2024, respectively. The remaining term under these lease guarantees extends for six years.
In the event of default by the licensee, 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 licensee 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 obligation, net of recorded reserves. The fair value of these lease guarantees (an estimate of the cost to the Company to perform on the guarantee) at March 1, 2025 and November 30, 2024 was not material.
11. Earnings (Loss) Per Share
The following reconciles basic and diluted earnings (loss) per share:
Net Income
(Loss)
Weighted Average
Shares
(Loss) Per
Share
For the quarter ended March 1, 2025:
Basic earnings per share
Add effect of dilutive securities:
Restricted shares
Diluted earnings per share
For the quarter ended March 2, 2024:
Basic loss per share
Restricted shares*
Diluted loss per share
*Due to the net loss for the period, potentially dilutive securities would have been anti-dilutive and are therefore excluded.
For the three months ended March 1, 2025 and March 2, 2024, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:
Unvested shares
12. Segment Information
We have strategically aligned our business into two reportable segments as defined in ASC 280, Segment Reporting, and as described below:
Wholesale. The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (Company-owned and licensee-owned retail stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery operations, which includes Lane Venture.
Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities and capital expenditures directly related to these stores and the Company-owned distribution network utilized to deliver products to our retail customers.
In addition to the two reportable segments described above, we include our remaining business activities and assets in a reconciling category known as Corporate and other. This category includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefitting both wholesale and retail operations. In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs. We consider our corporate functions to be other business activities and have aggregated them with any of our operating segments that do not meet the requirements to be reportable segments. As of and for the period ended March 2, 2024, the only such operating segment included in Corporate and other is Noa Home, which was acquired on September 2, 2022, subsequently closed during fiscal 2024 and substantially liquidated as of November 30, 2024. All sales reported in our Corporate and other category during fiscal 2024 were attributable to Noa Home, which generated substantially all of its sales outside of the United States.
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.
The following table presents our segment information:
Sales Revenue
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 - Noa Home
Consolidated net sales of furniture and accessories
Income (Loss) before Income Taxes:
Income (loss) from operations:
Retail - Company-owned stores
Net expenses - Corporate and other
Inter-company elimination
Consolidated income (loss) from operations
Consolidated income (loss) before income taxes
Depreciation and Amortization
Consolidated
Capital Expenditures
As of
Identifiable Assets
See Note 13, Revenue Recognition, for disaggregated revenue information regarding sales of furniture and accessories by product type for the wholesale and retail segments.
13. Revenue Recognition
We recognize revenue when we transfer promised goods or services to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. For our wholesale and retail segments, revenue is recognized when the risks and rewards of ownership and title to the product have transferred to the buyer. At wholesale, transfer occurs and revenue is recognized upon the shipment of goods to independent dealers and licensee-owned BHF stores. At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. All wholesale and retail revenues are recorded net of estimated returns and allowances based on historical patterns. We typically collect a significant portion of the purchase price from our retail customers as a deposit upon order, with the balance typically collected at the time delivery is scheduled. These customer deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $25,352 and $25,742 as of March 1, 2025 and November 30, 2024, respectively. Substantially all of the customer deposits held as of November 30, 2024 related to performance obligations that were satisfied during the current year-to-date period and have therefore been recognized in revenue for the three months ended March 1, 2025.
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 March 1, 2025 and November 30, 2024, our balance of prepaid commissions included in other current assets was $2,805 and $2,928, respectively.
We exclude from revenue all amounts collected from customers for sales tax. We do not disclose amounts allocated to remaining unsatisfied performance obligations as they are expected to be satisfied within one year or less.
Disaggregated revenue information for sales of furniture and accessories by product category for the three months ended March 1, 2025 and March 2, 2024, excluding intercompany transactions between our segments, is a follows:
Corporate
& Other
& Other (2)
Bassett Custom Upholstery
Bassett Leather
Bassett Custom Wood
Bassett Casegoods
Accessories, mattresses and other (1)
(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)
Corporate and other for the three months ended March 2, 2024 includes the sales of Noa Home, which was closed during fiscal 2024 and substantially liquidated as of November 30, 2024.
14. Changes to Stockholders’ Equity
The following changes in our stockholders’ equity occurred during the three months ended March 1, 2025 and March 2, 2024:
Common Stock:
Beginning of period
Issuance of common stock
Purchase and retirement of common stock
End of period
Common Shares Issued and Outstanding:
Additional Paid-in Capital:
Stock based compensation
Retained Earnings:
Net income (loss) for the period
Cash dividends declared
Accumulated Other Comprehensive Income (Loss):
Cumulative translation adjustments, net of tax
Amortization of pension costs, net of tax
The balance of cumulative translation adjustments, net of tax, was zero at both March 1, 2025 and November 30, 2024.
PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITEDMARCH 1, 2025(Dollars in thousands except share and per share data)
15. Recent Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update 2023-07 – Segment Reporting (Topic ASC 740) Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update require: that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”); and that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss. The amendments in ASU 2023-07 will become effective for us for our 2025 fiscal year and for interim periods beginning with our 2026 fiscal year. Early adoption is permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations.
In December 2023, the FASB issued Accounting Standards Update 2023-09 – Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 will become effective for us as of the beginning of our 2026 fiscal year. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect that this guidance will have a material impact upon our financial position and results of operations.
In November 2024, the FASB issued Accounting Standards Update 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic ASC 220-40) Disaggregation of Income Statement Expenses. The amendments in this ASU require a public business entity to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods. The objective of the disclosure requirements is to provided disaggregated information about a public business entity's expenses to help investors (a) better understand the entity's performance, (b) better assess the entity's prospects for future cash flows, and (c) compare an entity's performance over time and with that of other entities. The amendments in ASU 2024-03 will become effective for us for our 2028 fiscal year and for interim periods beginning with our 2029 fiscal year. Early adoption is permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations.
PART I-FINANCIAL INFORMATION-CONTINUEDBASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIESMARCH 1, 2025(Dollars in thousands except share and per share data)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Safe-harbor, forward-looking statements:
This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of Bassett Furniture Industries, Incorporated and subsidiaries. Such forward-looking statements are identified by use of forward-looking words such as “anticipates”, “believes”, “plans”, “estimates”, “expects”, “aims” and “intends” or words or phrases of similar expression. These forward-looking statements involve certain risks and uncertainties. No assurance can be given that any such matters will be realized. Important factors that could cause actual results to differ materially from those contemplated by such forward-looking statements include:
•
fluctuations in the cost and availability of raw materials, fuel, labor, delivery costs and sourced products, including those which may result from supply chain disruptions and shortages and the imposition of new or increased tariffs, retaliatory tariffs, duties and trade limitations with respect to foreign-sourced products
competitive conditions in the home furnishings industry
overall retail traffic levels in stores and on the web and consumer demand for home furnishings
ability of our customers and consumers to obtain affordable credit due to increased interest rates
the profitability of the stores (independent licensees and Company-owned retail stores) which may result in future store closings
the risk of additional asset impairment charges arising from the ongoing efforts to consolidate our retail warehouses.
ability to implement our Company-owned retail strategies and realize the benefits from such strategies
effectiveness and security of our information technology systems and possible disruptions due to cybersecurity threats, including any impacts from a network security incident; and the sufficiency of our insurance coverage, including cybersecurity insurance
future tax legislation, or regulatory or judicial positions
ability to efficiently manage the import supply chain to minimize business interruption
concentration of domestic manufacturing, particularly of upholstery products, and the resulting exposure to business interruption from accidents, weather and other events and circumstances beyond our control
Additionally, other risks that could cause actual results to differ materially from those contemplated by such forward-looking statements are set forth in Part I, Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2024.
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.
Our fiscal year, which ends on the last Saturday of November, periodically results in a 53-week year instead of the normal 52 weeks. The prior fiscal year ending November 30, 2024 was a 53-week year, with the additional week being included in the first fiscal quarter. Accordingly, the information presented below includes 13 weeks of operations for the quarter ended March 1, 2025 as compared to 14 weeks included in the quarter ended March 2, 2024.
Overview
Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 123-year history has instilled the principles of quality, value, and integrity in everything we do, while simultaneously providing us with the expertise to respond to ever-changing consumer tastes and meet the demands of a global economy.
Approximately 60% of our wholesale sales arise from our network of 87 Company-owned and licensee-owned Bassett Home Furnishings (“BHF”) stores. Our store program is designed to provide a single source home furnishings retail store with a unique combination of stylish, quality furniture and accessories with a high level of customer service. The stores highlight our custom furniture design and manufacturing capabilities, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories. Our philosophy is based on building strong long-term relationships with each customer. Salespeople are referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their home decor. Until a rigorous training and design certification program is completed, Design Consultants are not authorized to perform in-home or virtual design services for our customers.
Bassett also has a significant traditional wholesale business with more than 1,000 open market accounts. Most of the open market sales are through Bassett Design Centers and Bassett Custom Studios which function as a store within a multi-line store featuring the Company’s custom furniture capabilities. The wholesale business, including the Lane Venture outdoor brand, also services general furniture stores and a growing number of interior design firms through network of over 30 independent sales representatives who have stated geographical territories. These sales representatives are compensated based on a standard commission rate.
We consider our website to be the front door to our brand experience where customers can research our furniture and accessory offerings and subsequently buy online or engage with an in-store design consultant. We introduced a new web platform late in 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation. We know that we are driving a significant percentage of the retail foot traffic to our store network and our open market customers through engagement with www.bassettfurniture.com. Although e-commerce sales continue to be small in relation to in-store sales, we are pleased that we have seen a greater than 20% e-commerce sales increase since the middle of 2024. We will continue to invest in ongoing improvements to the aesthetics and user experience that we provide on our website.
During the fourth quarter of fiscal 2022 we acquired Noa Home Inc. (“Noa Home”). A mid-priced e-commerce furniture retailer headquartered in Montreal, Canada, Noa Home had operations in Canada, Australia, Singapore and the United Kingdom. After nearly two years of operating losses, we concluded during the second quarter of 2024 that Noa Home was not likely to achieve profitability at any time in the foreseeable future and decided to cease operations by selling the inventory in an orderly fashion. As of November 30, 2024, we had substantially completed the liquidation of Noa Home’s assets and liabilities.
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 a factory in Martinsville, Virginia that assembles and finishes our custom bedroom and dining offerings. We also own a facility in Haleyville, Alabama where we manufacture aluminum frames for our outdoor furniture.
In addition to the furniture that we manufacture domestically, we source most of our formal bedroom and dining room furniture (casegoods) and certain leather upholstery offerings from several foreign plants, primarily in Vietnam. Approximately 80% of our wholesale revenues are derived from products that are manufactured in the United States using a mix of domestic and globally sourced components and raw materials.
Results of Operations – Period ended March 1, 2025 compared with the period ended March 2, 2024:
Consolidated results of operations for the three months ended March 1, 2025 and March 2, 2024 are as follows:
Quarter Ended*
Change
Dollars
Percent
SG&A expenses
N/M
*13 weeks for fiscal 2025 as compared with 14 weeks for fiscal 2024.
Analysis of Quarterly Results:
Total sales revenue for the three months ended March 1, 2025 decreased $4,392 or 5.1% from the prior year period due primarily to the additional week in the prior year quarter. Normalizing the first fiscal quarter of 2024 to adjust for the additional week, sales revenue for the first quarter of fiscal 2025 increased $1,790 or 2.2%.
Gross margins for the three months ended March 1, 2025 increased 170 basis points over the prior year period primarily due to improved margins in the wholesale segment.
Selling, general and administrative (“SG&A”) expenses as a percentage of sales for the three months ended March 1, 2025 decreased 150 basis points from 2024 primarily due to the benefit of cost reductions implemented during the second half of fiscal 2024.
Segment Information
Reconciliation of Segment Results to Consolidated Income (Loss) Before Income Taxes
To supplement the financial measures prepared in accordance with GAAP, we present gross profit by segment inclusive of the effects of intercompany sales by our wholesale segment to our retail segment. Because these intercompany transactions are not eliminated from our segment presentations and because we do not present gross profit as a measure of segment profitability in the accompanying condensed consolidated financial statements, the presentation of gross profit by segment is considered to be a non-GAAP financial measure. In addition, certain special gains or charges as well as non-operating income and expenses are included in consolidated income (loss) before income taxes are not included in the measures of segment profitability. The reconciliation of this non-GAAP financial measure to the most directly comparable financial measure calculated and presented in accordance with GAAP is presented below along with the effects of various other intercompany eliminations on our consolidated results of operations.
Quarter Ended March 1, 2025
Non-GAAP Presentation
GAAP Presentation
Corporate &
Eliminations
Special
Items
Non-Operating
SG&A expense
Quarter Ended March 2, 2024
Notes to segment consolidation table:
Represents the elimination of sales from our wholesale segment to our Company-owned BHF stores.
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.
Wholesale Segment
Results for the wholesale segment for the three months ended March 1, 2025 and March 2, 2024 are as follows:
Net sales
Gross profit (1)
Income from operations
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:
Total Change
External
Intercompany
Analysis of Quarterly Results – Wholesale
Net sales for the three months ended March 1, 2025 decreased $1,773 or 3.2% from the prior year period due primarily to the additional week in the prior year quarter. Normalizing the first fiscal quarter of 2024 to adjust for the additional week, sales revenue for the first quarter of fiscal 2025 increased $2,134 or 4.2%, consisting of a 6.1% increase in shipments to our retail store network, a 2.2% decrease in shipments to the open market, and an 11% increase in Lane Venture shipments. Gross margins for the three months ended March 1, 2025 increased 250 basis points over the prior year due primarily to improved margins in our Bassett Custom Upholstery business from manufacturing efficiency gains, increased margins in our Lane Venture operations due to improved customer mix and improved margins in the Bassett Leather business. SG&A expenses as a percentage of sales decreased 150 basis points primarily due to the benefit of cost reductions implemented during the second half of fiscal 2024.
Wholesale Backlog
Wholesale backlog at March 1, 2025 was $19,515 as compared to $21,750 at November 30, 2024 and $19,491 at March 2, 2024.
Retail – Company-owned Stores Segment
Results for the retail segment for the periods ended March 1, 2025 and March 2, 2024 are as follows:
Loss from operations
Retail sales by major product category are as follows:
*13 weeks for fiscal 2025 as compared with 14 weeks for fiscal 2023.
Analysis of Quarterly Results - Retail
Net sales for the three months ended March 1, 2025 decreased $460 or 0.9% from the prior year period. Written sales (the value of sales orders taken but not delivered) declined 2.1% from the first quarter of 2024. Normalizing the first fiscal quarter of 2024 to adjust for the additional week, sales revenue for the first quarter of fiscal 2025 increased $3,380 or 6.8% over the prior year period while written sales increased 5.4%. Gross margin for the three months ended March 1, 2025 declined 80 basis points over the prior period due to lower margins for both in-line and clearance goods as we have become slightly more aggressive in cycling through unproductive inventory. SG&A expenses as a percentage of sales for the three months ended March 1, 2025 decreased 370 basis points primarily due to the benefit of cost reductions implemented during the second half of fiscal 2024 coupled with lower advertising and marketing costs and efficiency gains in our warehouse and delivery operation.
Retail Backlog
Retail backlog at March 1, 2025 was $36,143 compared to $37,053 at November 30, 2024 and $31,307 at March 2, 2024.
Corporate and Other
In addition to the two reportable segments discussed above, we include our remaining business activities and assets in a reconciling category known as Corporate and other, which includes the shared costs of various corporate functions along with any operating segments that do not meet the requirements to be reportable segments. Therefore, prior to fiscal 2025, Noa Home was included within the Corporate and other reconciling category and accounted for all of the sales and gross profit within this reconciling category. Revenues, costs and expenses of Corporate and other for the periods ended March 1, 2025 and March 2, 2024 are as follows:
Net expenses
*40 weeks for fiscal 2024 as compared with 39 weeks for fiscal 2023.
Analysis of Quarterly Results – Corporate and Other
Sales and gross profit declined from the prior year period due to the closure and liquidation of Noa Home during fiscal 2024. The $2,422 decrease in SG&A expenses was primarily due to closure of Noa Home and decreased corporate overhead spending from better expense management, including the benefit of cost reductions implemented during the second half of fiscal 2024.
Other Items Affecting Net Income (Loss)
Interest Income
Interest income for the three months ended March 1, 2025 was $559 compared to $756 for the three months ended March 2, 2024. The decline from the prior year period is primarily due to lower balances of interest-bearing cash and cash equivalents, as well as lower average rates earned on our cash and cash equivalents and investments in CDs compared to the preceding year.
Other Loss, Net
Other loss, net, for the three months ended March 1, 2025 was $459 compared to $104 for the three months ended March 2, 2024. The net change from the prior year period was primarily due to higher costs associated with Company-owned life insurance.
Our effective tax rate was 30.0% for the three months ended March 2, 2024. The effective rate for the three months ended March 2, 2024 differs 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.
Liquidity and Capital Resources
Cash Flows
Cash used in operations for the first quarter of fiscal 2025 was $52 compared to cash used in operations of $7,739 for the first quarter of fiscal 2024, representing an improvement of $7,687 in cash flows from operations. This increase was primarily the result of improved operating income and changes in working capital due to the timing impact of expenditures as a result of an additional week in the first quarter of 2024.
Our overall cash position declined $3,489 during the first quarter of 2025. During the first quarter of fiscal 2025, we spent $871 on purchases of property and equipment. We also paid $1,734 in dividends during the first quarter of 2025. We repurchased $721 of shares under our stock repurchase program during the first quarter of 2025 compared to no repurchases in the prior year period. We expect capital expenditures for the full year to range from $8 million to $12 million. As of March 1, 2025, $19,682 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $56,422 on hand at March 1, 2025, expected future operating cash flows and the availability under our credit line noted below, we believe we have sufficient liquidity to fund operations for the foreseeable future.
Debt and Other Obligations
On May 15, 2024, we entered into the Credit Facility with our bank. This Credit Facility provides for a line of credit of up to $25,000. At March 1, 2025, we had $5,682 outstanding under standby letters of credit against our line. The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.75% and is secured by our accounts receivable and inventory. Our bank charges a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the terms of the Credit Facility, Consolidated Minimum Tangible Net Worth shall at no time be less than $120,000. In addition, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis and commencing as of the end of the first fiscal quarter after the first date that the used commitment (the sum of any outstanding advances plus standby letters of credit) equals or exceeds $8,250:
Consolidated Fixed Charge Coverage Ratio of not less than 1.2 times and
Consolidated Lease Adjusted Leverage to EBITDAR Ratio not to exceed 3.35 times.
We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of one of our licensee-owned stores, and we lease land and buildings used in our wholesale manufacturing operations. We also lease local delivery trucks used in our retail segment. The present value of our obligations for leases with terms in excess of one year at March 1, 2025 is $101,742 and is included in our accompanying condensed consolidated balance sheet at March 1, 2025. We were contingently liable under licensee lease obligation guarantees in the amount of $4,885 at March 1, 2025. The remaining terms under these lease guarantees extend for six years. See Note 10 to our condensed consolidated financial statements for additional details regarding our lease guarantees.
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. 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 $23,969 at March 1, 2025.
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 30, 2024.
Off-Balance Sheet Arrangements
We utilize stand-by letters of credit in the procurement of certain goods in the normal course of business. In addition, we have guaranteed certain lease obligations of licensee operators for some of their store locations. See Note 10 to our condensed consolidated financial statements for further discussion of lease guarantees, including descriptions of the terms of such commitments and methods used to mitigate risks associated with these arrangements.
Contingencies
We are involved in various legal and environmental matters which arise in the normal course of business. Although the final outcome of these matters cannot be determined, based on the facts presently known, it is our opinion that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations. See Note 10 to our condensed consolidated financial statements for further information regarding certain contingencies as of March 1, 2025.
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 2025.
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 $23,969 at March 1, 2025 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 $4,885 which we have guaranteed on behalf of certain licensees as of March 1, 2025 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 March 1, 2025, the unamortized balance of such right-of-use assets used in continuing operations totaled $89,307. 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.
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 INFORMATIONBASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIESMARCH 1, 2025(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 months ended March 1, 2025 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:
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
December 1, 2024 - January 4, 2025
January 5, 2025 - February 1, 2025
February 2, 2025 - March 1, 2025
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 March 1, 2025, $19,682 remained available for share repurchases under the plan.
Item 3. Defaults Upon Senior Securities
None.
Item 5. Other Information
(c)
During the fiscal quarter ended March 1, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K) for the purchase or sale of the Company’s securities.
Item 6. Exhibits
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.
/s/
Robert H. Spilman, Jr.
Robert H. Spilman, Jr., Chairman and Chief Executive Officer
April 3, 2025
J. Michael Daniel
J. Michael Daniel, Senior Vice President and Chief Financial Officer