Notes to Con
s
olidated Financial Statements
(In thousands, except share and per share data)
1.
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Description of Business
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Bassett Furniture Industries, Incorporated (together with its consolidated subsidiaries, “Bassett”, “we”, “our”, the “Company”) based in Bassett, Virginia, is a leading manufacturer, marketer and retailer of branded home furnishings. Bassett’s full range of furniture products and accessories, designed to provide quality, style and value, are sold through an exclusive nation-wide network of 90 retail stores known as Bassett Home Furnishings (referred to as “BHF”). Of the 90 stores, the Company owns and operates 59 stores (“Company-owned retail stores”) with the other 31 being independently owned (“licensee operated”). We also distribute our products through other multi-line furniture stores, many of which feature Bassett galleries or design centers, specialty stores and mass merchants.
We sourced approximately 31% of our wholesale products from various countries, with the remaining volume produced at our four domestic manufacturing facilities.
Zenith Acquisition
Prior to February 2, 2015 we held a 49% interest in Zenith Freight Lines, LLC (“Zenith”) for which we used the equity method of accounting. On February 2, 2015 we acquired the remaining 51% ownership interest (see Note 3, Business Combinations). Zenith provides over-the-road transportation of furniture, operates regional freight terminals, warehouse and distribution facilities in twelve states, and manages various home delivery facilities that service BHF stores and other clients in local markets around the United States. With the acquisition of Zenith, we established our logistical services operating segment.
2.
Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
Our fiscal year ends on the last Saturday in November, which periodically results in a 53-week year. Fiscal 2016, 2015 and 2014 each contained 52 weeks. The Consolidated Financial Statements include the accounts of Bassett Furniture Industries, Incorporated and our majority-owned subsidiaries in which we have a controlling interest. All significant intercompany balances and transactions are eliminated in consolidation. Accordingly, the results of Zenith have been consolidated with our results since the date of the acquisition. Sales of logistical services from Zenith to our wholesale and retail segments have been eliminated, and Zenith’s operating costs and expenses since the date of acquisition are included in selling, general and administrative expenses in our condensed consolidated statements of net income. The financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). Unless otherwise indicated, references in the Consolidated Financial Statements to fiscal 2016, 2015 and 2014 are to Bassett's fiscal year ended November 26, 2016, November 28, 2015 and November 29, 2014, respectively. References to the “ASC” included hereinafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board as the source of authoritative GAAP.
For comparative purposes, certain amounts in the 2015 and 2014 financial statements have been reclassified to conform to the 2016 presentation. See “Recent Accounting Pronouncements” below regarding the impact of our adoption of Accounting Standards Update 2016-09 upon the classification of excess tax benefits from stock-based compensation in our consolidated statements of cash flows.
The equity method of accounting was used for our investment in Zenith prior to the date of acquisition because we exercised significant influence but did not maintain a controlling interest. Consolidated net income includes our proportionate share of the net income or net loss of Zenith prior to the date of the acquisition.
We analyzed our licensees under the requirements for variable interest entities (“VIEs”). All of these licensees operate as BHF stores and are furniture retailers. We sell furniture to these licensees, and in some cases have extended credit beyond normal terms, made lease guarantees, guaranteed loans, or loaned directly to the licensees. We have recorded reserves for potential exposures related to these licensees. See Note 17 for disclosure of leases and lease guarantees. Based on financial projections and best available information, all licensees have sufficient equity to carry out their principal operating activities without subordinated financial support. Furthermore, we believe that the power to direct the activities that most significantly impact the licensees’ operating performance continues to lie with the ownership of the licensee dealers. Our rights to assume control over or otherwise influence the licensees’ significant activities only exist pursuant to our license and security agreements and are in the nature of protective rights as contemplated under ASC Topic 810. We completed our assessment for other potential VIEs, and concluded that there were none. We will continue to reassess the status of potential VIEs including when facts and circumstances surrounding each potential VIE change.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates include allowances for doubtful accounts, calculation of inventory reserves, valuation of income tax reserves, lease guarantees, insurance reserves and assumptions related to our post-employment benefit obligations. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized when the risks and rewards of ownership and title to the product have transferred to the buyer. This occurs upon the shipment of goods to independent dealers or, in the case of Company-owned retail stores, upon delivery to the customer. We offer terms varying from 30 to 60 days for wholesale customers. For retail sales, we typically collect a significant portion of the purchase price as a customer deposit upon order, with the balance typically collected upon delivery. These deposits are carried on our balance sheet as a current liability until delivery is fulfilled.
Estimates for returns and allowances have been recorded as a reduction to revenue. The contracts with our licensee store owners do not provide for any royalty or license fee to be paid to us. Revenue is reported net of any taxes collected. For our logistical services segment, line-haul freight revenue and home delivery revenue are recognized upon the completion of delivery to the destination. Warehousing services revenue is based upon warehouse space occupied by a customer’s goods and inventory movements in and out of a warehouse and is recognized as such services are provided.
Staff Accounting Bulletin No. 104,
Revenue Recognition
(“SAB 104”) outlines the four basic criteria for recognizing revenue as follows: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller’s price to the buyer is fixed or determinable, and (4) collectability is reasonably assured. SAB 104 further asserts that if collectability of all or a portion of the revenue is not reasonably assured, revenue recognition should be deferred until payment is received. During fiscal 2016, 2015 and 2014, there were no dealers for which these criteria were not met.
Cash Equivalents
The Company considers cash on hand, demand deposits in banks and all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. Our short-term investments, which consist of certificates of deposit, are not considered cash equivalents since they have original maturities of greater than three months.
Accounts Receivable
Substantially all of our trade accounts receivable is due from customers located within the United States. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on a review of specifically identified accounts in addition to an overall aging analysis. Judgments are made with respect to the collectibility of accounts receivable based on historical experience and current economic trends. Actual losses could differ from those estimates.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Concentrations of Credit Risk and Major Customers
Financial instruments that subject us to credit risk consist primarily of investments, accounts and notes receivable and financial guarantees. Investments are managed within established guidelines to mitigate risks. Accounts and notes receivable and financial guarantees subject us to credit risk partially due to the concentration of amounts due from and guaranteed on behalf of independent licensee customers. At November 26, 2016 and November 28, 2015, our aggregate exposure from receivables and guarantees related to customers consisted of the following:
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2016
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2015
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Accounts receivable, net of allowances (Note 5)
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$
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18,358
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$
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21,197
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Notes receivable, net of allowances
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10
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10
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Contingent obligations under lease and loan guarantees, less amounts recognized (Note 17)
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1,865
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2,441
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Total credit risk exposure related to customers
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$
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20,233
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$
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23,648
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At November 26, 2016, approximately 30% of the aggregate risk exposure, net of reserves, shown above was attributable to four customers. At November 28, 2015, approximately 26% of the aggregate risk exposure, net of reserves, shown above was attributable to three customers. In fiscal 2016, 2015 and 2014, no customer accounted for more than 10% of total consolidated net sales. However, one customer accounted for approximately 36% and 26% of our consolidated revenue from logistical services during 2016 and 2015, respectively.
We have no foreign manufacturing or retail operations. We define export sales as sales to any country or territory other than the United States or its territories or possessions. Our export sales were approximately $3,607, $4,516, and $4,774 in fiscal 2016, 2015, and 2014, respectively. All of our export sales are invoiced and settled in U.S. dollars.
Inventories
Inventories (retail merchandise, finished goods, work in process and raw materials) are stated at the lower of cost or market. Cost is determined for domestic manufactured furniture inventories using the last-in, first-out (“LIFO”) method because we believe this methodology provides better matching of revenue and expenses. The cost of imported inventories is determined on a first-in, first-out (“FIFO”) basis. Inventories accounted for under the LIFO method represented 53% and 43% of total inventory before reserves at November 26, 2016 and November 28, 2015, respectively. We estimate inventory reserves for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand and market conditions. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required.
Property and Equipment
Property and equipment is comprised of all land, buildings and leasehold improvements and machinery and equipment used in the manufacturing and warehousing of furniture, our Company-owned retail operations, our logistical services operations, and corporate administration. This property and equipment is stated at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of the respective assets utilizing the straight-line method. Buildings and improvements are generally depreciated over a period of 10 to 39 years. Machinery and equipment are generally depreciated over a period of 5 to 10 years. Leasehold improvements are amortized based on the underlying lease term, or the asset’s estimated useful life, whichever is shorter.
Retail Real Estate
Retail real estate is comprised of owned and leased properties which have been utilized by licensee operated BHF stores, including properties which are now leased or subleased to non-licensee tenants. These properties are located in high traffic, upscale locations that are normally occupied by large successful national retailers. This real estate is stated at cost less accumulated depreciation and is depreciated over the useful lives of the respective assets utilizing the straight line method. Buildings and improvements are generally depreciated over a period of 10 to 39 years. Leasehold improvements are amortized based on the underlying lease term, or the asset’s estimated useful life, whichever is shorter. As of both November 26, 2016 and November 28, 2015, the cost of retail real estate included land totaling $990 and building and leasehold improvements of $6,178. As of November 26, 2016 and November 28, 2015, accumulated depreciation of retail real estate was $4,311 and $4,160, respectively. The net book value of our retail real estate is included in other long-term assets in our consolidated balance sheets. Depreciation expense was $152, $184, and $400 in fiscal 2016, 2015, and 2014, respectively, and is included in other loss, net, in our consolidated statements of income.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
During the year ended November 28, 2015 we closed on the sale of our retail real estate investment property located in Sugarland, Texas and received cash in the amount of $2,835. During fiscal 2015 we recognized a non-cash charge of $182 to write down the carrying value of the Sugarland real estate to the selling price.
During the year ended November 29, 2014 we received proceeds from the disposition of retail real estate totaling $5,157. During the first quarter of fiscal 2014 we received $1,407 from the sale of our retail real estate investment property in Henderson, Nevada. During the third quarter of fiscal 2014 we received net proceeds in the amount of $3,750 from the sale of our retail real estate investment property located in Denver, Colorado. There were no material gains or losses associated with these dispositions during fiscal 2014.
The fiscal 2015 and 2014 sales proceeds described above are included in proceeds from sales of property and equipment in the accompanying consolidated statements of cash flows. The fiscal 2015 impairment charges described above are included in other loss, net, in our consolidated statements of income.
Goodwill
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets and liabilities and identifiable intangible assets of businesses acquired. The acquisition of assets and liabilities and the resulting goodwill is allocated to the respective reporting unit: Wood, Upholstery, Retail or Logistical Services. We review goodwill at the reporting unit level annually for impairment or more frequently if events or circumstances indicate that assets might be impaired.
In accordance with ASC Topic 350,
Intangibles – Goodwill & Other
,
the goodwill impairment test consists of a two-step process, if necessary. However, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC Topic 350. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary and our goodwill is considered to be unimpaired. However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed with performing the two-step process.
Based on our qualitative assessment as described above, we have concluded that our goodwill is not impaired as of November 26, 2016.
The first step compares the carrying value of each reporting unit that has goodwill with the estimated fair value of the respective reporting unit. Should the carrying value of a reporting unit be in excess of the estimated fair value of that reporting unit, the second step is performed whereby we must calculate the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit. This second step represents a hypothetical application of the acquisition method of accounting as if we had acquired the reporting unit on that date. Our impairment methodology uses a discounted cash flow analysis requiring certain assumptions and estimates to be made regarding future profitability of the reporting unit and industry economic factors. While we believe such assumptions and estimates are reasonable, the actual results may differ materially from the projected amounts.
Other Intangible Assets
Intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are tested for impairment annually or between annual tests when an impairment indicator exists. The recoverability of indefinite-lived intangible assets is assessed by comparison of the carrying value of the asset to its estimated fair value. If we determine that the carrying value of the asset exceeds its estimated fair value, an impairment loss equal to the excess would be recorded.
Definite-lived intangible assets are amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We estimate the useful lives of our intangible assets and ratably amortize the value over the estimated useful lives of those assets. If the estimates of the useful lives should change, we will amortize the remaining book value over the remaining useful lives or, if an asset is deemed to be impaired, a write-down of the value of the asset may be required at such time.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Impairment of Long Lived Assets
We periodically evaluate whether events or circumstances have occurred that indicate long-lived assets may not be recoverable or that the remaining useful life may warrant revision. When such events or circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value will be recovered through the expected undiscounted future cash flows resulting from the use and eventual disposition of the asset. In the event the sum of the expected undiscounted future cash flows is less than the carrying value of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Fair value is determined based on discounted cash flows or appraised values depending on the nature of the assets. The long-term nature of these assets requires the estimation of cash inflows and outflows several years into the future.
When analyzing our real estate properties for potential impairment, we consider such qualitative factors as our experience in leasing and selling real estate properties as well as specific site and local market characteristics. Upon the closure of a Bassett Home Furnishings store, we generally write off all tenant improvements which are only suitable for use in such a store.
Income Taxes
We account for income taxes under the liability method which requires that we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Despite our belief that our liability for unrecognized tax benefits is adequate, it is often difficult to predict the final outcome or the timing of the resolution of any particular tax matters. We may adjust these liabilities as relevant circumstances evolve, such as guidance from the relevant tax authority or our tax advisors, or resolution of issues in the courts. These adjustments are recognized as a component of income tax expense in the period in which they are identified.
We evaluate our deferred income tax assets to determine if valuation allowances are required or should be adjusted. A valuation allowance is established against our deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with tax attributes expiring unused and tax planning alternatives. In making such judgments, significant weight is given to evidence that can be objectively verified. See Note 11.
New Store Pre-Opening Costs
Income (loss) from operations for fiscal 2016, 2015 and 2014 includes new store pre-opening costs of $1,148, $623 and $1,217, respectively. Such costs consist of expenses incurred at the new store location during the period prior to its opening and include, among other things, facility occupancy costs such as rent and utilities and local store personnel costs related to pre-opening activities including training. New store pre-opening costs do not include costs which are capitalized in accordance with our property and equipment capitalization policies, such as leasehold improvements and store fixtures and equipment. Such capitalized costs associated with new stores are depreciated commencing with the opening of the store. There are no pre-opening costs associated with stores acquired from licensees, as such locations were already in operation at the time of their acquisition.
Shipping and Handling Costs
Costs incurred to deliver wholesale merchandise to customers are recorded in selling, general and administrative expense and totaled $18,451, $18,624, and $16,162 for fiscal 2016, 2015 and 2014, respectively. Costs incurred to deliver retail merchandise to customers are also recorded in selling, general and administrative expense and totaled $15,946, $15,383, and $12,844 for fiscal 2016, 2015 and 2014, respectively.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Advertising
Costs incurred for producing and distributing advertising and advertising materials are expensed when incurred and are included in selling, general and administrative expenses. Advertising costs totaled $16,688, $16,228, and $15,614 in fiscal 2016, 2015, and 2014, respectively.
Insurance Reserves
We have self-funded insurance programs in place to cover workers’ compensation and health insurance. These insurance programs are subject to various stop-loss limitations. We accrue estimated losses using historical loss experience. Although we believe that the insurance reserves are adequate, the reserve estimates are based on historical experience, which may not be indicative of current and future losses. We adjust insurance reserves, as needed, in the event that future loss experience differs from historical loss patterns.
Supplemental Cash Flow Information
In connection with our acquisition of Zenith, non-cash financing activities during fiscal 2015 included the issuance of 89,485 shares of our common stock valued at $1,675, and the issuance of a note payable with a discounted fair value of $8,436. See Note 3 for additional information regarding the fair value of the consideration given for the acquisition of Zenith. There were no material non-cash investing or financing activities during fiscal 2016 or 2014.
Recent Accounting Pronouncements
Adoption of Accounting Standards Update 2016-09
In March 2016, the FASB issued Accounting Standards Update No. 2016-09,
Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
(ASU 2016-09). While the effective date of ASU 2016-09 is for fiscal years beginning after December 15, 2016, earlier adoption is permitted and we adopted the amendments in ASU 2016-09 during the second quarter of fiscal 2016. This standard simplifies or clarifies several aspects of the accounting for equity-based payment awards, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Certain of these changes are required to be applied retrospectively, while other changes are required to be applied prospectively.
The impact of early adoption resulted in the following:
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We recorded $87 of tax benefits within income tax expense for the year ended November 26, 2016 related to the excess tax benefit on stock based compensation. Prior to adoption this amount would have been recorded as additional paid-in capital. This change could create future volatility in our effective tax rate depending upon the amount of exercise or vesting activity from our stock based awards.
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We elected to recognize forfeitures as they occur. There was no cumulative effect adjustment as a result of the adoption of this amendment on a modified retrospective basis.
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We elected to apply the change in classification of cash flows resulting from excess tax benefits or deficiencies on a retrospective basis. Accordingly, $1,998 and $300 of excess tax benefits previously reported as a cash flow provided by financing activities during the years ended November 28, 2015 and November 29, 2014, respectively, has been reclassified to be included in cash flows provided by operating activities.
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We excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of our diluted earnings per share for the year ended November 26, 2016. The effect of this change on our diluted earnings per share was not significant.
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ASU 2016-09 also requires the presentation of employee taxes paid by the Company through the withholding of shares as a financing activity on the statement of cash flows, which is where we had previously reclassified these items.
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There were no other material impacts to our consolidated financial statements as a result of adopting this updated standard.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Recent Pronouncements Not Yet Adopted
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates ASC Topic 606,
Revenue from Contracts with Customers
, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers. In summary, the core principle of Topic 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Companies are allowed to select between two transition methods: (1) a full retrospective transition method with the application of the new guidance to each prior reporting period presented, or (2) a retrospective transition method that recognizes the cumulative effect on prior periods at the date of adoption together with additional footnote disclosures. In addition, during 2016 the FASB has issued ASU 2016-08, ASU 2016-10 and ASU 2016-12, all of which clarify certain implementation guidance within ASU 2014-09, and ASU 2016-11, which rescinds certain SEC guidance within the ASC effective upon an entity’s adoption of ASU 2014-09. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and early application is not permitted. Therefore the amendments in ASU 2014-09 will become effective for us as of the beginning of our 2019 fiscal year. We are currently evaluating the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements and have not made any decision on the method of adoption.
In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Inventory (Topic 330):
Simplifying the Measurement of Inventory
. ASU 2015-11 requires that inventory within the scope of this Update be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this Update do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. For all entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Early adoption is permitted. Therefore the amendments in ASU 2015-11 will become effective for us as of the beginning of our 2018 fiscal year. The adoption of this guidance is not expected to have a material impact upon our financial condition or results of operations.
In July 2015, the FASB issued Accounting Standards Update No. 2015-16, Business Combinations (Topic 805):
Simplifying the Accounting for Measurement Period Adjustments
. ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this Update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Any current period adjustments to provisional amounts that would have impacted a prior period’s earnings had they been recognized at the acquisition date are required to be presented separately on the face of the income statement or disclosed in the notes. The amendments in this Update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years.
The amendments in this Update should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this Update with earlier application permitted for financial statements that have not been issued. Therefore the amendments in ASU 2015-16 will become effective for us as of the beginning of our 2017 fiscal year. The adoption of this guidance is not expected to have a material impact upon our financial condition or results of operations.
In January 2016, the FASB issued Accounting Standards Update No. 2016-01,
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
. ASU 2016-01 requires that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) are to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Furthermore, equity investments without readily determinable fair values are to be assessed for impairment using a quantitative approach. The amendments in ASU 2016-01 should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with other amendments related specifically to equity securities without readily determinable fair values applied prospectively. The amendments in ASU 2016-01 will become effective for us as of the beginning of our 2019 fiscal year. The adoption of this guidance is not expected to have a material impact upon our financial condition or results of operations.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
In February 2016, the FASB issued Accounting Standards Update No. 2016-02,
Leases (Topic 842)
. The guidance in ASU 2016-02 requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. As with previous guidance, there continues to be a differentiation between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. Lease assets and liabilities arising from both finance and operating leases will be recognized in the statement of financial position. ASU 2016-02 leaves the accounting for leases by lessors largely unchanged from previous GAAP. The transitional guidance for adopting the requirements of ASU 2016-02 calls for a modified retrospective approach that includes a number of optional practical expedients that entities may elect to apply. The guidance in ASU 2016-02 will become effective for us as of the beginning of our 2020 fiscal year. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our consolidated financial statements, which we expect will have a material effect on our statement of financial position, and have not made any decision on the method of adoption with respect to the optional practical expedients.
In August 2016, the FASB issued Accounting Standards Update No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
. ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows with the objective of reducing existing diversity in practice with respect to these items. Among the types of cash flows addressed are payments for costs related to debt prepayments or extinguishments, payments representing accreted interest on discounted debt, payments of contingent consideration after a business combination, proceeds from insurance claims and company-owned life insurance, and distributions from equity method investees, among others. The amendments in ASU 2016-15 are to be adopted retrospectively and will become effective for as at the beginning of our 2019 fiscal year. Early adoption, including adoption in an interim period, is permitted. The adoption of this guidance is not expected to have a material impact upon our presentation of cash flows.
3.
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Business Combination – Acquisition of Zenith
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Prior to February 2, 2015 we held a 49% interest in Zenith for which we used the equity method of accounting. Zenith provides domestic transportation and warehousing services primarily to furniture manufacturers and distributors and also provides home delivery services to furniture retailers. We historically have contracted with Zenith to provide substantially all of our domestic freight, transportation and warehousing needs for the wholesale business. In addition, Zenith provides home delivery services for many of our Company-owned retail stores. On February 2, 2015, we acquired the remaining 51% of Zenith in exchange for cash, Bassett common stock and a note payable with a total fair value of $19,111. The value of the Bassett common stock was based on the closing market price of our shares on the acquisition date, discounted for lack of marketability due to restrictions on the seller’s ability to transfer the shares. The restrictions on one half of the shares expired on the first anniversary of the acquisition, with the remainder expiring on the second anniversary. The note is payable in three annual installments of $3,000 each which began February 2, 2016, and has been discounted to its fair value as of the date of the acquisition based on our estimated borrowing rate.
The carrying value of our 49% interest in Zenith prior to the acquisition was $9,480 (see Note 9, Unconsolidated Affiliated Company). In connection with the acquisition, this investment was remeasured to a fair value of $16,692 resulting in the recognition of a gain of $7,212 during the year ended November 28, 2015. The impact of this gain upon our basic and diluted earnings per share for the year ended November 28, 2015 is approximately $0.41 net of the related tax expense. The remeasured fair value of our prior interest in Zenith was estimated based on the fair value of the consideration transferred to acquire the remaining 51% of Zenith less an estimated control premium.
Under the acquisition method of accounting, the fair value of the consideration transferred along with the fair value of our previous 49% interest in Zenith was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date with the remaining unallocated amount recorded as goodwill.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
The total fair value of the acquired business was determined as follows:
Fair value of consideration transferred in exchange for 51% of Zenith:
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Cash
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$
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9,000
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Bassett common stock, 89,485 shares, par value $5.00 per share, fair value at closing $18.72 per share
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1,675
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Note payable
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8,436
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Total fair value of consideration transferred to seller
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19,111
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Less effective settlement of previous amounts payable to Zenith at acquisition
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|
|
(3,622
|
)
|
Total fair value of consideration net of effective settlement
|
|
|
15,489
|
|
Fair value of Bassett's previous 49% interest in Zenith
|
|
|
16,692
|
|
|
|
|
|
|
Total fair value of acquired business
|
|
$
|
32,181
|
|
The allocation of the fair value of the acquired business is as follows:
Identifiable assets acquired:
|
|
|
|
|
Acquired cash and cash equivalents
|
|
$
|
1,677
|
|
Accounts receivable, net
|
|
|
3,399
|
|
Prepaid expenses and other current assets
|
|
|
496
|
|
Property and equipment
|
|
|
18,110
|
|
Other long-term assets
|
|
|
646
|
|
Intangible assets
|
|
|
6,362
|
|
Total identifiable assets acquired
|
|
|
30,690
|
|
Liabilities assumed:
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
(4,038
|
)
|
Notes payable
|
|
|
(4,329
|
)
|
Total liabilities assumed
|
|
|
(8,367
|
)
|
Net identifiable assets acquired
|
|
|
22,323
|
|
Goodwill
|
|
|
9,858
|
|
Total net assets acquired
|
|
$
|
32,181
|
|
Goodwill was determined based on the residual difference between the fair value of the consideration transferred and the value assigned to tangible and intangible assets and liabilities. Approximately $6,982 of the acquired goodwill is deductible for tax purposes. Among the factors that contributed to a purchase price resulting in the recognition of goodwill were Zenith’s reputation for best-in-class, fully integrated logistical services which are uniquely tailored to the needs of the furniture industry, as well as their ability to provide expedited delivery service which is increasingly in demand in the furniture industry.
A portion of the fair value of consideration transferred has been assigned to identifiable intangible assets as follows:
|
|
Useful Life
|
|
|
|
|
|
Description:
|
|
In Years
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
15
|
|
|
$
|
3,038
|
|
Trade names
|
|
Indefinite
|
|
|
|
2,490
|
|
Technology - customized applications
|
|
|
7
|
|
|
|
834
|
|
|
|
|
|
|
|
|
|
|
Total acquired intangible assets
|
|
|
|
|
|
$
|
6,362
|
|
The finite-lived intangible assets are being amortized on a straight-line basis over their useful lives. 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
. See Note 4.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Acquisition costs related to the Zenith acquisition totaled $209 during the year ended November 28, 2015 and are included in selling, general and administrative expenses in the consolidated statements of income. The acquisition costs are primarily related to legal, accounting and valuation services.
The revenue and pre-tax profit of Zenith that is included in our consolidated statements of income for the years ended November 26, 2016 and November 28, 2015 is as follows:
Net sales and operating losses generated by acquired stores subsequent to acquisition:
|
|
2016
|
|
|
|
2015 (1)
|
|
|
|
|
|
|
|
|
|
|
Zenith revenue (2)
|
|
$
|
54,842
|
|
|
$
|
43,522
|
|
Zenith pre-tax income
|
|
$
|
3,313
|
|
|
|
3,379
|
|
|
|
|
|
|
|
|
|
|
(1) From date of acquisition, February 2, 2015.
(2) Net of eliminated inter-company transactions, See Note 20.
The pro forma results of operations for the acquisition of Zenith have not been presented because they are not material to our consolidated results of operations.
4.
|
Financial Instruments, Investments and Fair Value Measurements
|
Financial Instruments
Our financial instruments include cash and cash equivalents, short-term investments in certificates of deposit, accounts receivable, cost method investments, accounts payable and long-term debt. Because of their short maturities, the carrying amounts of cash and cash equivalents, short-term investments in certificates of deposit, accounts receivable, and accounts payable approximate fair value. Our cost method investments generally involve entities for which it is not practical to determine fair values.
Investments
Our short-term investments of $23,125 at both November 26, 2016 and November 28, 2015 consisted of certificates of deposit (CDs) with original terms of twelve months, bearing interest at rates ranging from 0.28% to 1.00%. At November 26, 2016, the weighted average remaining time to maturity of the CDs was approximately seven months and the weighted average yield of the CDs was approximately 0.65%. Each CD is placed with a Federally insured financial institution and all deposits are within Federal deposit insurance limits. As the CDs mature, we expect to reinvest them in CDs of similar maturities of up to one year. Due to the nature of these investments and their relatively short maturities, the carrying amount of the short-term investments at November 26, 2016 and November 28, 2015 approximates their fair value.
Fair Value Measurement
The Company accounts for items measured at fair value in accordance with ASC Topic 820,
Fair Value Measurements and Disclosures
. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:
Level 1 Inputs
– Quoted prices for identical instruments in active markets.
Level 2 Inputs
– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs
– Instruments with primarily unobservable value drivers.
We believe that the carrying amounts of our current assets and current liabilities approximate fair value due to the short-term nature of these items. The recurring estimate of the fair value of our notes payable for disclosure purposes (see Note 10) involves Level 3 inputs. Our primary non-recurring fair value estimates typically involve business acquisitions (Note 3) which involve a combination of Level 2 and Level 3 inputs, and asset impairments (Note 15) which utilize Level 3 inputs.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
5.
Accounts Receivable
Accounts receivable consists of the following:
|
|
November 26,
2016
|
|
|
November 28,
2015
|
|
Gross accounts receivable
|
|
$
|
19,157
|
|
|
$
|
22,372
|
|
Allowance for doubtful accounts
|
|
|
(799
|
)
|
|
|
(1,175
|
)
|
Net accounts receivable
|
|
$
|
18,358
|
|
|
$
|
21,197
|
|
Activity in the allowance for doubtful accounts was as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of the year
|
|
$
|
1,175
|
|
|
$
|
1,249
|
|
Acquired allowance on accounts receivable (Note 3)
|
|
|
-
|
|
|
|
209
|
|
Reductions to allowance, net
|
|
|
(376
|
)
|
|
|
(283
|
)
|
Balance, end of the year
|
|
$
|
799
|
|
|
$
|
1,175
|
|
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 4.
6.
Inventories
Inventories consist of the following:
|
|
November 26,
2016
|
|
|
November 28,
2015
|
|
Wholesale finished goods
|
|
$
|
24,392
|
|
|
$
|
31,253
|
|
Work in process
|
|
|
369
|
|
|
|
318
|
|
Raw materials and supplies
|
|
|
11,343
|
|
|
|
9,793
|
|
Retail merchandise
|
|
|
26,265
|
|
|
|
27,680
|
|
Total inventories on first-in, first-out method
|
|
|
62,369
|
|
|
|
69,044
|
|
LIFO adjustment
|
|
|
(7,804
|
)
|
|
|
(7,751
|
)
|
Reserve for excess and obsolete inventory
|
|
|
(1,350
|
)
|
|
|
(1,397
|
)
|
|
|
$
|
53,215
|
|
|
$
|
59,896
|
|
We source a significant amount of our wholesale product from other countries. During 2016, 2015 and 2014, purchases from our two largest vendors located in Vietnam and China were $19,128, $25,190 and $26,707 respectively.
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 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.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:
|
|
Wholesale Segment
|
|
|
Retail Segment
|
|
|
Total
|
|
Balance at November 29, 2014
|
|
$
|
1,060
|
|
|
$
|
352
|
|
|
$
|
1,412
|
|
Additions charged to expense
|
|
|
2,442
|
|
|
|
430
|
|
|
|
2,872
|
|
Write-offs
|
|
|
(2,415
|
)
|
|
|
(472
|
)
|
|
|
(2,887
|
)
|
Balance at November 28, 2015
|
|
|
1,087
|
|
|
|
310
|
|
|
|
1,397
|
|
Additions charged to expense
|
|
|
1,994
|
|
|
|
475
|
|
|
|
2,469
|
|
Write-offs
|
|
|
(2,020
|
)
|
|
|
(496
|
)
|
|
|
(2,516
|
)
|
Balance at November 26, 2016
|
|
$
|
1,061
|
|
|
$
|
289
|
|
|
$
|
1,350
|
|
7.
Property and Equipment
Property and equipment consist of the following:
Properting and equipment were comprised of the following:
|
|
November 26,
2016
|
|
|
November 28,
2015
|
|
Land
|
|
$
|
12,311
|
|
|
$
|
12,311
|
|
Buildings and leasehold improvements
|
|
|
109,728
|
|
|
|
104,265
|
|
Machinery and equipment
|
|
|
99,067
|
|
|
|
85,490
|
|
Property and equipment at cost
|
|
|
221,106
|
|
|
|
202,066
|
|
Less accumulated depreciation
|
|
|
(116,451
|
)
|
|
|
(105,962
|
)
|
Property and equipment, net
|
|
$
|
104,655
|
|
|
$
|
96,104
|
|
The net book value of our property and equipment by reportable segment is a follows:
Net book value of PP&E by segment:
|
|
November 26,
2016
|
|
|
November 28,
2015
|
|
Wholesale
|
|
$
|
22,984
|
|
|
$
|
17,763
|
|
Retail - Company-owned stores
|
|
|
59,347
|
|
|
|
60,810
|
|
Logistical Services
|
|
|
22,324
|
|
|
|
17,531
|
|
Total property and equipment, net
|
|
$
|
104,655
|
|
|
$
|
96,104
|
|
Depreciation expense associated with the property and equipment shown above was included in income from operations in our consolidated statements of income as follows:
Location of Depreciation Expense:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (1)
|
|
$
|
748
|
|
|
$
|
599
|
|
|
$
|
542
|
|
Selling, general and adminstrative expenses (2)
|
|
|
11,648
|
|
|
|
9,627
|
|
|
|
6,814
|
|
Total depreciation expense included in income from operations
|
|
$
|
12,396
|
|
|
$
|
10,226
|
|
|
$
|
7,356
|
|
(1) All associated with our wholesale segment for fiscal 2016, 2015 and 2014.
(2) Includes depreciation associated with our retail segment of $6,612, $5,970 and $5,782 for
fiscal 2016, 2015 and 2014, respectively. Fiscal 2016 and 2015 includes depreciation associated
with our logistical services segment of $3,882 and $2,366, respectively.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
8.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets consisted of the following:
|
|
November 26, 2016
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Intangible
Assets, Net
|
|
Intangibles subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
3,038
|
|
|
$
|
(371
|
)
|
|
$
|
2,667
|
|
Technology - customized applications
|
|
|
834
|
|
|
|
(219
|
)
|
|
|
615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets subject to amortization
|
|
|
3,872
|
|
|
|
(590
|
)
|
|
|
3,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
2,490
|
|
|
|
-
|
|
|
|
2,490
|
|
Goodwill
|
|
|
11,588
|
|
|
|
-
|
|
|
|
11,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and other intangible assets
|
|
$
|
17,950
|
|
|
$
|
(590
|
)
|
|
$
|
17,360
|
|
|
|
November 28, 2015
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Intangible
Assets, Net
|
|
Intangibles subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
3,038
|
|
|
$
|
(169
|
)
|
|
$
|
2,869
|
|
Technology - customized applications
|
|
|
834
|
|
|
|
(99
|
)
|
|
|
735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets subject to amortization
|
|
|
3,872
|
|
|
|
(268
|
)
|
|
|
3,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
2,490
|
|
|
|
-
|
|
|
|
2,490
|
|
Goodwill
|
|
|
11,588
|
|
|
|
-
|
|
|
|
11,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and other intangible assets
|
|
$
|
17,950
|
|
|
$
|
(268
|
)
|
|
$
|
17,682
|
|
Changes in the carrying amounts of goodwill by reportable segment were as follows:
|
|
Wholesale
|
|
|
Retail
|
|
|
Logistics
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 29, 2014
|
|
$
|
1,128
|
|
|
$
|
602
|
|
|
$
|
-
|
|
|
$
|
1,730
|
|
Goodwill arising from acquisition of Zenith
|
|
|
3,711
|
|
|
|
1,218
|
|
|
|
4,929
|
|
|
|
9,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 28, 2015
|
|
|
4,839
|
|
|
|
1,820
|
|
|
|
4,929
|
|
|
|
11,588
|
|
Changes during fiscal 2016 (none)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 26, 2016
|
|
$
|
4,839
|
|
|
$
|
1,820
|
|
|
$
|
4,929
|
|
|
$
|
11,588
|
|
There were no changes in the carrying value of our goodwill during fiscal 2016, and there were no accumulated impairment losses on goodwill as of November 26, 2016, November 28, 2015 or November 29, 2014.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Amortization expense associated with intangible assets during fiscal 2016 and 2015 was $322 and $268, respectively and is included in selling, general and administrative expense in our consolidated statement of income. All expense arising from the amortization of intangible assets is associated with our logistical services segment. There was no amortization expense recognized during fiscal 2014. Estimated future amortization expense for intangible assets that exist at November 26, 2016 is as follows:
Future amortization of intangible assets:
Fiscal 2017
|
|
$
|
322
|
|
Fiscal 2018
|
|
|
322
|
|
Fiscal 2019
|
|
|
322
|
|
Fiscal 2020
|
|
|
322
|
|
Fiscal 2021
|
|
|
322
|
|
Thereafter
|
|
|
1,672
|
|
|
|
|
|
|
Total
|
|
$
|
3,282
|
|
9.
Unconsolidated Affiliated Companies
Zenith Freight Lines, LLC
Prior to February 2, 2015 we owned 49% of Zenith and accounted for our investment under the equity method. Our investment in Zenith at November 29, 2014 was $7,915 and is included in other assets in our condensed consolidated balance sheet. The balance of our investment in Zenith was adjusted for our equity in the earnings of Zenith through February 2, 2015 of $220, and increased by $1,345 representing our 49% share of a $2,745 capital contribution made to Zenith, a portion of which was used for retirement of certain of Zenith’s debt prior to the acquisition. This activity resulted in a carrying value for our investment in Zenith of $9,480 on the date of acquisition. See Note 3 regarding the remeasurement of this carrying value to fair value in connection with the acquisition and the resulting gain.
Prior to the acquisition on February 2, 2015, we recorded the following income from Zenith in our consolidated statements of income:
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Earnings recognized
|
|
$
|
220
|
|
|
$
|
661
|
|
|
$
|
770
|
|
Prior to the acquisition, we paid Zenith approximately $6,863 and $31,308 for freight expense and logistical services in fiscal 2015 and 2014, respectively.
International Home Furnishings Center
In connection with the sale of our interest in International Home Furnishings Center, Inc. (“IHFC”) on May 2, 2011, to International Market Centers, L.P. (“IMC”), $6,106 of the sales proceeds were placed in escrow at the time of the sale to cover various contingencies. At various times during fiscal 2012, 2013 and 2014, the contingencies were satisfied without loss to the Company and the funds were released to us. During fiscal 2014 we received the final payment of sales proceeds in the amount of $2,348 which is included in cash flows from investing activities in our consolidated statements of cash flows.
In addition to the proceeds described above, at the time of the sale we acquired a minority interest in IMC in exchange for $1,000. IMC is majority owned by funds managed by Bain Capital Partners and a subsidiary of certain investment funds managed by Oaktree Capital Management, L.P. Our investment in IMC is included in other long-term assets in the accompanying consolidated balance sheets and is accounted for using the cost method as we do not have significant influence over IMC.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
10.
Notes Payable and Bank Credit Facility
Our notes payable consist of the following:
|
|
November 26, 2016
|
|
|
|
Principal
Balance
|
|
|
Unamortized
Discount
|
|
|
Net Carrying
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zenith acquisition note payable
|
|
$
|
6,000
|
|
|
$
|
(108
|
)
|
|
$
|
5,892
|
|
Transportation equipment notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Real estate notes payable
|
|
|
1,219
|
|
|
|
-
|
|
|
|
1,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
7,219
|
|
|
|
(108
|
)
|
|
|
7,111
|
|
Less current portion
|
|
|
(3,385
|
)
|
|
|
95
|
|
|
|
(3,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
3,834
|
|
|
$
|
(13
|
)
|
|
$
|
3,821
|
|
|
|
November 28, 2015
|
|
|
|
Principal
Balance
|
|
|
Unamortized
Discount
|
|
|
Net Carrying
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zenith acquisition note payable
|
|
$
|
9,000
|
|
|
$
|
(312
|
)
|
|
$
|
8,688
|
|
Transportation equipment notes payable
|
|
|
2,152
|
|
|
|
-
|
|
|
|
2,152
|
|
Real estate notes payable
|
|
|
2,933
|
|
|
|
-
|
|
|
|
2,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
14,085
|
|
|
|
(312
|
)
|
|
|
13,773
|
|
Less current portion
|
|
|
(5,477
|
)
|
|
|
204
|
|
|
|
(5,273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
8,608
|
|
|
$
|
(108
|
)
|
|
$
|
8,500
|
|
The future maturities of our notes payable are as follows:
Fiscal 2017
|
|
$
|
3,385
|
|
Fiscal 2018
|
|
|
3,412
|
|
Fiscal 2019
|
|
|
422
|
|
|
|
$
|
7,219
|
|
Zenith Acquisition Note Payable
As part of the consideration given for our acquisition of Zenith on February 2, 2015, we issued an unsecured note payable to the former owner in the amount of $9,000, payable in three annual installments of $3,000 due on each anniversary of the note, the first installment having been paid on February 2, 2016. Interest is payable annually at the one year LIBOR rate, which was established at 0.62% on February 2, 2015 and resets on each anniversary of the note, having reset to the current rate of 1.14% on February 2, 2016. The note was recorded at its fair value in connection with the acquisition resulting in a debt discount that is amortized to the principal amount through the recognition of non-cash interest expense over the term of the note. Interest expense resulting from the amortization of the discount was $204 and $252 for fiscal 2016 and 2015, respectively. The current portion of the note due within one year, including unamortized discount, was $2,904 and $2,796 at November 26, 2016 and November 28, 2015, respectively.
Transportation Equipment Notes Payable
Certain of the transportation equipment operated in our logistical services segment was financed by notes payable in the amount of $2,152 at November 28, 2015. The current portion of these notes due within one year at November 28, 2015 was $901, and the notes were secured by tractors, trailers and local delivery trucks with a total net book value of $3,796 at November 28, 2015. Over the course of fiscal 2016, all of the outstanding transportation equipment notes were paid in full.
Real Estate Notes Payable
Two of our retail real estate properties have been financed through commercial mortgages with interest rates of 6.73%. These mortgages are collateralized by the respective properties with net book values totaling approximately $5,858 and $5,993 at November 26, 2016 and November 28, 2015, respectively. The total balance outstanding under these mortgages was $1,219 and $1,709 at November 26, 2016 and November 28, 2015, respectively. The current portion of these mortgages due within one year was $385 and $351 as of November 26, 2016 and November 28, 2015, respectively.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Certain of the real estate located in Conover, NC and operated in our logistical services segment had been subject to a note payable in the amount of $1,224 at November 28, 2015, all of which had been included in the current portion of notes payable. The note was secured by land and buildings with a total net book value of $6,226 at November 28, 2015. The entire outstanding balance due under this note was paid in full during fiscal 2016.
Fair Value
We believe that the carrying amount of our notes payable approximates fair value at both November 26, 2016 and November 28, 2015. In estimating the fair value, we utilize current market interest rates for similar instruments. The inputs into these fair value calculations 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 4.
Bank Credit Facility
Effective December 5, 2015, we entered into a new credit facility with our bank which provides for a line of credit of up to $15,000. This credit facility, which matures in December of 2018, is unsecured and contains covenants requiring us to maintain certain key financial ratios. We are in compliance with all covenants under the agreement and expect to remain in compliance for the foreseeable future.
We have $1,972 outstanding under standby letters of credit against our line, leaving availability under our credit line of $13,028. In addition, we have outstanding standby letters of credit with another bank totaling $456.
Total interest paid during fiscal 2016, 2015 and 2014 was $353, 277 and $176, respectively.
11.
Post-Employment Benefit Obligations
Supplemental Retirement Income Plan
We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives. Upon retirement, the Supplemental Plan provides for lifetime monthly payments in an amount equal to 65% of the participant’s final average compensation as defined in the Supplemental Plan, which is reduced by certain social security benefits to be received and other benefits provided by us. The Supplemental Plan also provides a death benefit that is calculated as (a) prior to retirement death, which pays the beneficiary 50% of final average annual compensation for a period of 120 months, or (b) post-retirement death, which pays the beneficiary 200% of final average compensation in a single payment. We own life insurance policies on these executives with a current net death benefit of $3,022 at November 26, 2016 and we expect to substantially fund this death benefit through the proceeds received upon the death of the executive. Funding for the remaining cash flows is expected to be provided through operations. There are no benefits payable as a result of a termination of employment for any reason other than death or retirement, other than a change of control provision which provides for the immediate vesting and payment of the retirement benefit under the Supplemental Plan in the event of an employment termination resulting from a change of control.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Summarized information for the plan measured as of the end of each year presented, is as follows:
|
|
2016
|
|
|
|
2015
|
|
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year
|
|
$
|
11,678
|
|
|
|
$
|
10,376
|
|
Service cost
|
|
|
146
|
|
|
|
|
105
|
|
Interest cost
|
|
|
423
|
|
|
|
|
374
|
|
Actuarial losses
|
|
|
165
|
|
|
|
|
1,372
|
|
Benefits paid
|
|
|
(549
|
)
|
|
|
|
(549
|
)
|
Projected benefit obligation at end of year
|
|
$
|
11,863
|
|
|
|
$
|
11,678
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Benefit Obligation
|
|
$
|
11,138
|
|
|
|
$
|
10,967
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate used to value the ending benefit obligations:
|
|
|
3.75
|
%
|
|
|
|
3.75
|
%
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
776
|
|
|
|
$
|
749
|
|
Noncurrent liabilities
|
|
|
11,087
|
|
|
|
|
10,929
|
|
Total amounts recognized
|
|
$
|
11,863
|
|
|
|
$
|
11,678
|
|
Amounts recognized in accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Transition obligation
|
|
$
|
85
|
|
|
|
$
|
127
|
|
Actuarial loss
|
|
|
4,065
|
|
|
|
|
4,223
|
|
Net amount recognized
|
|
$
|
4,150
|
|
|
|
$
|
4,350
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in net periodic benefit cost and accumulated
other comprehensive income:
|
|
$
|
734
|
|
|
|
$
|
1,851
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Pension Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
146
|
|
|
$
|
105
|
|
|
$
|
78
|
|
Interest cost
|
|
|
423
|
|
|
|
374
|
|
|
|
373
|
|
Amortization of transition obligation
|
|
|
42
|
|
|
|
42
|
|
|
|
42
|
|
Amortization of other loss
|
|
|
323
|
|
|
|
195
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
934
|
|
|
$
|
716
|
|
|
$
|
616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions used to determine net periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
3.75
|
%
|
|
|
3.75
|
%
|
|
|
3.75
|
%
|
Increase in future compensation levels
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Benefit Payments (with mortality):
|
|
|
|
|
Fiscal 2017
|
|
|
776
|
|
Fiscal 2018
|
|
|
738
|
|
Fiscal 2019
|
|
|
700
|
|
Fiscal 2020
|
|
|
662
|
|
Fiscal 2021
|
|
|
624
|
|
Fiscal 2022 through 2026
|
|
|
4,606
|
|
Of the $4,150 recognized in accumulated other comprehensive income at November 26, 2016, $42 of net transition obligation and $332 of net loss are expected to be recognized as components of net periodic pension cost during fiscal 2017.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Deferred Compensation Plan
We have an unfunded Deferred Compensation Plan that covers one current and certain former executives and provides for voluntary deferral of compensation. This plan has been frozen with no additional participants or benefits permitted. We recognized expense of $228, $248, and $134 in fiscal 2016, 2015, and 2014, respectively, associated with the plan. The expense for fiscal 2014 is net of a credit to income of $124 due to a change in our estimate of the future obligation of a former employee. Our liability under this plan was $1,969 and $2,085 as of November 26, 2016 and November 28, 2015, respectively. The non-current portion of this obligation is included in post-employment benefit obligations in our consolidated balance sheets, with the current portion included in accrued compensation and benefits.
Defined Contribution Plan
We have a qualified defined contribution plan (Employee Savings/Retirement Plan) that covers substantially all employees who elect to participate and have fulfilled the necessary service requirements. Employee contributions to the Plan are matched at the rate of 25% of up to 8% of gross pay, regardless of years of service. Expense for employer matching contributions was $865, $662 and $397 during fiscal 2016, 2015 and 2014, respectively. The increase in contribution expense for fiscal 2016 over fiscal 2015 was largely due to an increase in the matching rate from 20% in 2015 to 25% in 2016. The increase in contribution expense for fiscal 2015 over fiscal 2014 was largely due to an increase in the matching rate from 15% in 2014 to 20% in 2015, as well as the acquisition of Zenith.
12.
Accumulated Other Comprehensive Loss
The activity in accumulated other comprehensive loss for the fiscal years ended November 26, 2016 and November 28, 2015, which is comprised solely of post-retirement benefit costs related to our SERP, is as follows:
Balance at November 29, 2014
|
|
$
|
(1,974
|
)
|
Actuarial losses
|
|
|
(1,372
|
)
|
Net pension amortization reclassified from accumulated other comprehensive loss
|
|
|
237
|
|
Tax effects
|
|
|
431
|
|
Balance at November 28, 2015
|
|
|
(2,678
|
)
|
Actuarial losses
|
|
|
(165
|
)
|
Net pension amortization reclassified from accumulated other comprehensive loss
|
|
|
366
|
|
Tax effects
|
|
|
(76
|
)
|
Balance at November 26, 2016
|
|
$
|
(2,553
|
)
|
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
13.
Capital Stock and Stock Compensation
We account for our stock-based employee and director compensation plans in accordance with ASC 718,
Compensation – Stock Compensation
. ASC 718 requires recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period) which we recognize on a straight-line basis. Compensation expense related to restricted stock and stock options included in selling, general and administrative expenses in our consolidated statements of income for fiscal 2016, 2015 and 2014 was as follows:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense
|
|
$
|
903
|
|
|
$
|
894
|
|
|
$
|
951
|
|
Incentive Stock Compensation Plans
In 1997, we adopted an Employee Stock Plan (the “1997 Plan”), and reserved for issuance 950,000 shares of common stock. An additional 500,000 shares of common stock were authorized for issuance in 2000. In addition, the terms of the 1997 Plan allow for the re-issuance of any stock options which have been forfeited before being exercised. Options granted under the 1997 Plan may be for such terms and exercised at such times as determined by the Organization, Compensation, and Nominating Committee of the Board of Directors. There are no shares available for grant under the 1997 Plan at November 26, 2016.
On April 14, 2010, our shareholders approved the Bassett Furniture Industries, Incorporated 2010 Stock Incentive Plan which was amended and restated effective January 13, 2016 (the “2010 Plan”). All present and future non-employee directors, key employees and outside consultants for the Company are eligible to receive incentive awards under the 2010 Plan. Our Organization, Compensation and Nominating Committee (the “Compensation Committee”) selects eligible key employees and outside consultants to receive awards under the 2010 Plan in its discretion. Our Board of Directors or any committee designated by the Board of Directors selects eligible non-employee directors to receive awards under the 2010 Plan in its discretion. 1,250,000 shares of common stock are reserved for issuance under the 2010 Plan as amended. Participants may receive the following types of incentive awards under the 2010 Plan: stock options, stock appreciation rights, payment shares, restricted stock, restricted stock units and performance shares. Stock options may be incentive stock options or non-qualified stock options. Stock appreciation rights may be granted in tandem with stock options or as a freestanding award. Non-employee directors and outside consultants are eligible to receive restricted stock and restricted stock units only. We expect to issue new common stock upon the exercise of options.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The risk free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the average long-term implied volatilities of peer companies, the expected life is based on the estimated average of the life of options using the simplified method. Forfeitures are recognized as they occur. We utilize the simplified method to determine the expected life of our options due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns.
Stock Options
There were no new grants of options made in 2016, 2015 or 2014.
Changes in the outstanding options under our plans during the year ended November 26, 2016 were as follows:
|
|
Number of Shares
|
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
|
|
|
|
|
|
|
|
Outstanding at November 28, 2015
|
|
|
84,250
|
|
|
$
|
11.42
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(8,000
|
)
|
|
|
14.31
|
|
Forfeited/Expired
|
|
|
(10,000
|
)
|
|
|
14.73
|
|
Outstanding at November 26, 2016
|
|
|
66,250
|
|
|
|
10.57
|
|
Exercisable at November 26, 2016
|
|
|
66,250
|
|
|
$
|
10.57
|
|
There were no non-vested options outstanding under our plans during the year ended November 26, 2016.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Additional information regarding our outstanding stock options at November 26, 2016 is as follows:
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
Options Exercisable
|
|
Range of
Exercise Prices
|
|
|
Shares
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Weighted
Average
Exercise Price
|
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
$3.23
|
-
|
$6.45
|
|
|
|
1,000
|
|
|
|
3.6
|
|
|
$
|
4.38
|
|
|
|
1,000
|
|
|
$
|
4.38
|
|
|
$6.45
|
-
|
$9.67
|
|
|
|
22,250
|
|
|
|
4.6
|
|
|
|
8.02
|
|
|
|
22,250
|
|
|
|
8.02
|
|
|
$9.68
|
-
|
$12.90
|
|
|
|
28,000
|
|
|
|
0.9
|
|
|
|
10.60
|
|
|
|
28,000
|
|
|
|
10.60
|
|
|
$12.91
|
-
|
$16.13
|
|
|
|
15,000
|
|
|
|
0.4
|
|
|
|
14.73
|
|
|
|
15,000
|
|
|
|
14.73
|
|
|
|
|
|
|
|
|
66,250
|
|
|
|
|
|
|
|
|
|
|
|
66,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate intrinsic value
|
|
|
$
|
1,257
|
|
|
|
|
|
|
|
|
|
|
$
|
1,257
|
|
|
|
|
|
Additional information regarding activity in our stock options during fiscal 2016, 2015 and 2014 is as follows:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intrinsic value of options exercised
|
|
$
|
124
|
|
|
$
|
5,934
|
|
|
$
|
236
|
|
Total fair value of options vested
|
|
|
-
|
|
|
|
87
|
|
|
|
200
|
|
Total cash received from the exercise of options
|
|
|
114
|
|
|
|
4,031
|
|
|
|
382
|
|
Excess tax benefits recognized as additional paid-in capital upon the exercise of options (1)
|
|
|
-
|
|
|
|
1,899
|
|
|
|
72
|
|
(1) Prior to the adoption of ASU 2016-09 in fiscal 2016. See Note 2.
Restricted Shares
Changes in the outstanding non-vested restricted shares during the year ended November 26, 2016 were as follows:
|
|
Number of Shares
|
|
|
Weighted
Average Grant
Date Fair
Value Per
Share
|
|
|
|
|
|
|
|
|
|
|
Non-vested restricted shares outstanding at November 28, 2015
|
|
|
134,154
|
|
|
$
|
17.68
|
|
Granted
|
|
|
7,814
|
|
|
|
29.66
|
|
Vested
|
|
|
(18,954
|
)
|
|
|
20.56
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Non-vested restricted shares outstanding at November 26, 2016
|
|
|
123,014
|
|
|
$
|
17.99
|
|
The grants for 2016 consisted of 5,814 restricted shares granted to our non-employee directors on April 1, 2016 which will vest on the first anniversary of the grant, and 2,000 shares granted to an employee on July 12, 2016 which will vest on the second anniversary of the grant.
During fiscal 2016, 18,954 restricted shares were vested and released, of which 12,600 shares had been granted to employees and 6,354 shares to directors. Of the shares released to employees, 2,940 shares were withheld by the Company to cover withholding taxes of $77. During fiscal 2015 and 2014, 4,836 shares and 31,234 shares, respectively, were withheld to cover withholding taxes of $154 and $489, respectively, arising from the vesting of restricted shares. During fiscal 2016, $87 of excess tax benefits were recognized within income tax expense. Prior to the adoption of ASU 2016-09, excess tax benefits of $99 and $228 were recognized during fiscal 2015 and 2014, respectively, as additional paid-in capital upon the release of vested shares.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
Additional information regarding our outstanding non-vested restricted shares at November 26, 2016 is as follows:
Restricted stock:
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
Restricted
|
|
|
Share Value
|
|
|
Restriction
|
|
Grant
|
|
Shares
|
|
|
at Grant Date
|
|
|
Period
|
|
Date
|
|
Outstanding
|
|
|
Per Share
|
|
|
(Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 17, 2013
|
|
|
25,200
|
|
|
$
|
16.64
|
|
|
|
1.6
|
|
January 15, 2014
|
|
|
48,000
|
|
|
|
14.12
|
|
|
|
0.1
|
|
January 14, 2015
|
|
|
40,000
|
|
|
|
20.21
|
|
|
|
1.1
|
|
July 14, 2015
|
|
|
2,000
|
|
|
|
38.02
|
|
|
|
1.6
|
|
April 1, 2016
|
|
|
5,814
|
|
|
|
30.96
|
|
|
|
0.3
|
|
July 12, 2016
|
|
|
2,000
|
|
|
|
25.88
|
|
|
|
1.6
|
|
|
|
|
123,014
|
|
|
|
|
|
|
|
|
|
Unrecognized compensation cost related to these non-vested restricted shares at November 26, 2016 is $748, expected to be recognized over approximately a two year period.
Employee Stock Purchase Plan
In 2000, we adopted and implemented an Employee Stock Purchase Plan (“ESPP”) that allows eligible employees to purchase a limited number of shares of our stock at 85% of market value. Under the ESPP we sold 8,502, 19,053 and 25,677 shares to employees in fiscal 2016, 2015 and 2014, respectively, which resulted in an immaterial amount of compensation expense. The ESPP reached the cumulative number of shares authorized for purchase under the plan during the third quarter of fiscal 2016.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
14.
Income Taxes
The components of the income tax provision are as follows:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
3,728
|
|
|
$
|
7,972
|
|
|
$
|
4,168
|
|
State
|
|
|
896
|
|
|
|
1,533
|
|
|
|
596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in valuation allowance
|
|
|
-
|
|
|
|
(70
|
)
|
|
|
(974
|
)
|
Federal
|
|
|
4,559
|
|
|
|
1,520
|
|
|
|
221
|
|
State
|
|
|
765
|
|
|
|
480
|
|
|
|
1,297
|
|
Total
|
|
$
|
9,948
|
|
|
$
|
11,435
|
|
|
$
|
5,308
|
|
A reconciliation of the statutory federal income tax rate and the effective income tax rate, as a percentage of income before income taxes, is as follows:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Statutory federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Adjustments to state net operating loss carryforwards
|
|
|
-
|
|
|
|
-
|
|
|
|
3.3
|
|
Change in income tax valuation allowance
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
(3.7
|
)
|
Change in income tax reserves
|
|
|
-
|
|
|
|
0.1
|
|
|
|
(1.7
|
)
|
State income tax, net of federal benefit
|
|
|
4.2
|
|
|
|
4.4
|
|
|
|
4.9
|
|
Benefit of goodwill basis difference
|
|
|
-
|
|
|
|
(3.2
|
)
|
|
|
-
|
|
Excess tax benefits from stock-based compensation
|
|
|
(0.3
|
)
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
(1.5
|
)
|
Effective income tax rate
|
|
|
38.6
|
%
|
|
|
35.9
|
%
|
|
|
36.3
|
%
|
Excess tax benefits in the amount of $1,998 and $300 were recognized as additional paid-in capital during fiscal 2015 and 2014, respectively, resulting from the exercise of stock options and the release of restricted shares. Subsequent to the adoption of ASU 2016-09 in fiscal 2016 (see Note 2), excess tax benefits of $87 were recognized as a component of income tax expense.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
The income tax effects of temporary differences and carryforwards, which give rise to significant portions of the deferred income tax assets and deferred income tax liabilities, are as follows:
|
|
November 26, 2016
|
|
|
November 28, 2015
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
307
|
|
|
$
|
506
|
|
Inventories
|
|
|
2,407
|
|
|
|
2,420
|
|
Notes receivable
|
|
|
562
|
|
|
|
1,795
|
|
Post employment benefit obligations
|
|
|
5,338
|
|
|
|
6,992
|
|
State net operating loss carryforwards
|
|
|
731
|
|
|
|
927
|
|
Unrealized loss from affiliates
|
|
|
217
|
|
|
|
356
|
|
Net deferred rents
|
|
|
3,112
|
|
|
|
2,674
|
|
Other
|
|
|
2,005
|
|
|
|
2,165
|
|
Gross deferred income tax assets
|
|
|
14,679
|
|
|
|
17,835
|
|
Valuation allowance
|
|
|
-
|
|
|
|
-
|
|
Total deferred income tax assets
|
|
|
14,679
|
|
|
|
17,835
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
5,179
|
|
|
|
3,093
|
|
Intangible assets
|
|
|
1,012
|
|
|
|
860
|
|
Prepaid expenses and other
|
|
|
417
|
|
|
|
411
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax liabilities
|
|
|
6,608
|
|
|
|
4,364
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax assets
|
|
$
|
8,071
|
|
|
$
|
13,471
|
|
At the beginning of fiscal 2014 we carried a valuation allowance of $1,044 which was primarily related to state net operating loss carryforwards for which it was considered to be more likely than not that they would not be utilized prior to their expiration. During fiscal 2014 we reduced our valuation allowance related to adjustments to state net operating loss carryforwards primarily due to state tax law changes resulting in a credit to income of $974, or $0.09 per basic and diluted share. The remaining balance in the valuation allowance was $0 at both November 26, 2016 and November 28, 2015.
The following table represents a summary of the valuation allowances against deferred tax assets:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of the year
|
|
$
|
-
|
|
|
$
|
70
|
|
|
$
|
1,044
|
|
Additions charged to expense
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Deductions reducing expense
|
|
|
-
|
|
|
|
(70
|
)
|
|
|
(974
|
)
|
Balance, end of the year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
70
|
|
We have state net operating loss carryforwards available to offset future taxable state income of $9,057, which expire in varying amounts between 2017 and 2030. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards.
Income taxes paid, net of refunds received, during 2016, 2015 and 2014 were $9,949, $5,906, and $2,367, respectively.
As of November 29, 2014, the gross amount of unrecognized tax benefits was approximately $1,236, exclusive of interest and penalties. Substantially all of this balance, along with additional amounts recognized during fiscal 2015, was effectively settled as of November 28, 2015. We regularly evaluate, assess and adjust the related liabilities in light of changing facts and circumstances, which could cause the effective tax rate to fluctuate from period to period.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
The following table summarizes the activity related to our gross unrecognized tax benefits:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Balance, beginning of the year
|
|
$
|
12
|
|
|
$
|
1,236
|
|
|
$
|
1,497
|
|
Gross increases
|
|
|
43
|
|
|
|
12
|
|
|
|
-
|
|
Gross decreases due to settlements
|
|
|
-
|
|
|
|
(1,236
|
)
|
|
|
(221
|
)
|
Gross decreases primarily due to the expiration of statutes
|
|
|
-
|
|
|
|
-
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of the year
|
|
$
|
55
|
|
|
$
|
12
|
|
|
$
|
1,236
|
|
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. During fiscal 2016, 2015, and 2014, we recognized $15, $(144), and $7 of interest expense (recovery) and $10, $3, and $10 of penalty expense, respectively, related to the unrecognized benefits noted above in our consolidated statements of income. At November 26, 2016 and November 28, 2015, the balance of accrued interest and penalties associated with unrecognized tax benefits was not material.
Significant judgment is required in evaluating the Company's federal and state tax positions and in the determination of its tax provision. Despite our belief that the liability for unrecognized tax benefits is adequate, it is often difficult to predict the final outcome or the timing of the resolution of any particular tax matter. We may adjust these liabilities as relevant circumstances evolve, such as guidance from the relevant tax authority, or resolution of issues in the courts. These adjustments are recognized as a component of income tax expense in the period in which they are identified. The Company also cannot predict when or if any other future tax payments related to these tax positions may occur.
We remain subject to examination for tax years 2013 through 2015 for all of our major tax jurisdictions.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
15.
Litigation Gain
,
A
sset
I
mpairment, and
O
ther
C
harges
Income from Antitrust Litigation Settlement
Cost of furniture and accessories sold for the year ended November 26, 2016 includes the benefit of $1,428 of income we received from the settlement of class action litigation. This benefit is included in our wholesale segment. We were a member of the certified class of consumers that were plaintiffs in the Polyurethane Foam Antitrust Litigation against various producers of flexible polyurethane foam. The litigation alleged a price-fixing conspiracy in the flexible polyurethane foam industry that caused indirect purchasers to pay higher prices for products that contain flexible polyurethane foam. In 2015 a settlement was reached with several of the producers, though other producers named in the suit filed appeals blocking distribution of the settlement. In June of 2016 the final producer appeal was dismissed and we received $1,428 in cash representing our share of the settlement, which is included in cash provided by operating activities in our statement of cash flows for the year ended November 26, 2016.
Asset Impairment Charges and Lease Exit Costs
During fiscal 2015 income from operations included $106 of non-cash asset impairment charges and a $419 charge for the accrual of lease exit costs, both incurred in connection with the closing of our Company-owned retail store location in Memphis, Tennessee.
There were no asset impairment charges or lease exit costs incurred against income from operations during fiscal 2016 or 2014. See Note 2 regarding non-operating impairment charges incurred in connection with our investments in retail real estate.
Management Restructuring Costs
During the year ended November 28, 2015, we recognized $449 of expense related to severance payable to a former executive, who left the Company in April, 2015. As of November 28, 2015, all required payments of severance had been disbursed. These management restructuring costs were incurred within our wholesale segment. There were no restructuring charges incurred in fiscal 2016 or 2014.
The following table summarizes the activity related to our accrued lease exit costs:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of the year
|
|
$
|
566
|
|
|
$
|
433
|
|
Provisions associated with Company-owned retail stores
|
|
|
-
|
|
|
|
419
|
|
Provisions made to adjust previous estimates
|
|
|
156
|
|
|
|
111
|
|
Payments on unexpired leases, net of sublease rent received
|
|
|
(517
|
)
|
|
|
(410
|
)
|
Accretion of interest on obligations
|
|
|
9
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
Balance, end of the year
|
|
$
|
214
|
|
|
$
|
566
|
|
|
|
|
|
|
|
|
|
|
Current portion included in other accrued liabilities
|
|
$
|
105
|
|
|
$
|
351
|
|
Long-term portion included in other long-term liabilities
|
|
|
109
|
|
|
|
215
|
|
Total accrued lease exit costs at November 26, 2016
|
|
$
|
214
|
|
|
$
|
566
|
|
16.
Income from the Continued Dumping and Subsidy Offset Act
During the years ended November 26, 2016 and November 28, 2015, we recognized income of $240 and $1,156, respectively, arising from distributions received from U.S. Customs and Border Protection (“Customs”) under the Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”). These distributions primarily represent amounts previously withheld by Customs pending the resolution of claims filed by certain manufacturers who did not support the antidumping petition (“Non-Supporting Producers”) challenging certain provisions of the CDSOA and seeking to share in the distributions. The Non-Supporting Producers’ claims were dismissed by the courts and all appeals were exhausted in 2014. While it is possible that we may receive additional distributions from Customs, we cannot estimate the likelihood or amount of any future distributions.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
17.
Leases
and
Lease Guarantees
Leases
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 at various locations throughout the continental United States for warehousing and distribution hubs used in our logistical services segment. We also lease tractors, trailers and local delivery trucks used in our logistical services segment. Our real estate lease terms range from one to 15 years and generally have renewal options of between five and 15 years. Some store leases contain contingent rental provisions based upon sales volume. Our transportation equipment leases have terms ranging from two to seven years with fixed monthly rental payments plus variable charges based upon mileage. The following schedule shows future minimum lease payments under non-cancellable operating leases with terms in excess of one year as of November 26, 2016:
|
|
Retail Stores
|
|
|
Distribution
Centers
|
|
|
Transportation
Equipment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2017
|
|
$
|
20,587
|
|
|
$
|
4,249
|
|
|
$
|
3,296
|
|
|
$
|
28,132
|
|
Fiscal 2018
|
|
|
18,559
|
|
|
|
3,015
|
|
|
|
2,010
|
|
|
|
23,584
|
|
Fiscal 2019
|
|
|
16,710
|
|
|
|
2,002
|
|
|
|
1,808
|
|
|
|
20,520
|
|
Fiscal 2020
|
|
|
15,415
|
|
|
|
1,301
|
|
|
|
1,743
|
|
|
|
18,459
|
|
Fiscal 2021
|
|
|
13,137
|
|
|
|
1,254
|
|
|
|
1,169
|
|
|
|
15,560
|
|
Thereafter
|
|
|
38,765
|
|
|
|
3,022
|
|
|
|
1,217
|
|
|
|
43,004
|
|
Total future minimum lease payments
|
|
$
|
123,173
|
|
|
$
|
14,843
|
|
|
$
|
11,243
|
|
|
$
|
149,259
|
|
Lease expense was $31,867, $26,382 and $19,903 for 2016, 2015, and 2014, respectively.
In addition to subleasing certain of these properties, we own retail real estate which we in turn lease to licensee operators of BHF stores. We also own real estate for closed stores which we lease to non-licensees. The following schedule shows minimum future rental income related to pass-through rental expense on subleased property as well as rental income on real estate owned by Bassett.
Fiscal 2017
|
|
$
|
1,863
|
|
Fiscal 2018
|
|
|
1,337
|
|
Fiscal 2019
|
|
|
1,247
|
|
Fiscal 2020
|
|
|
1,194
|
|
Fiscal 2021
|
|
|
359
|
|
Thereafter
|
|
|
-
|
|
Total minimum future rental income
|
|
$
|
6,000
|
|
Real estate rental income (loss), net of expense (including lease costs, depreciation, insurance, and taxes), related to licensee stores and other investment real estate, was $(59), $(181) and $(248) in 2016, 2015 and 2014, respectively, and is reflected in other expense, net in the accompanying consolidated statements of income.
Guarantees
As part of the strategy for our store program, we have guaranteed certain lease obligations of licensee operators. Lease guarantees range from one to three years. We were contingently liable under licensee lease obligation guarantees in the amount of $1,868 and $2,494 at November 26, 2016 and November 28, 2015, respectively.
In the event of default by an independent dealer under the guaranteed lease, we believe that the risk of loss is mitigated through a combination of options that include, but are not limited to, arranging for a replacement dealer, liquidating the collateral, and pursuing payment under the personal guarantees of the independent dealer. The proceeds of the above options are estimated to cover the maximum amount of our future payments under the guarantee obligations, net of reserves. The fair value of lease guarantees (an estimate of the cost to the Company to perform on these guarantees) at November 26, 2016 and November 28, 2015, were not material.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
18.
Contingencies
We are involved in various claims and actions, including 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.
19.
Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
15,829
|
|
|
$
|
20,433
|
|
|
$
|
9,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic income per share - weighted average shares
|
|
|
10,732,217
|
|
|
|
10,701,829
|
|
|
|
10,552,462
|
|
Effect of dilutive securities
|
|
|
130,204
|
|
|
|
141,198
|
|
|
|
140,569
|
|
Denominator for diluted income per share — weighted average shares and assumed conversions
|
|
|
10,862,421
|
|
|
|
10,843,027
|
|
|
|
10,693,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share — basic
|
|
$
|
1.47
|
|
|
$
|
1.91
|
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share — diluted
|
|
$
|
1.46
|
|
|
$
|
1.88
|
|
|
$
|
0.87
|
|
For fiscal 2016, 2015 and 2014, the following potentially dilutive shares were excluded from the computations as there effect was anti-dilutive:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
150,000
|
|
Unvested restricted shares
|
|
|
7,814
|
|
|
|
8,354
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total anti-dilutive securities
|
|
|
7,814
|
|
|
|
8,354
|
|
|
|
150,000
|
|
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
20.
Segment Information
We have strategically aligned our business into three 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 stores retail stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery operations 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 consolidated statements of income.
|
|
●
|
Retail – Company-owned
s
tores.
Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities and capital expenditures directly related to these stores.
|
|
●
|
Logistical services
.
With our acquisition of Zenith on February 2, 2015, we created the logistical services operating segment which reflects the operations of Zenith. In addition to providing shipping, delivery and warehousing services for the Company, Zenith also provides similar services to other customers, primarily in the furniture industry. Revenue from the performance of these services to other customers is included in logistics revenue in our condensed consolidated statement of income. Zenith’s operating costs are included in selling, general and administrative expenses and total $92,196 for the year ended November 26, 2016 and $73,722 from the date of acquisition through November 28, 2015. Amounts charged by Zenith to the Company for logistical services prior to the date of acquisition are included in selling, general and administrative expenses, and our equity in the earnings of Zenith prior to the date of acquisition is included in other loss, net, in the accompanying statements of income.
|
Inter-company sales elimination represents the elimination of wholesale sales to our Company-owned stores and the elimination of Zenith logistics revenue from our wholesale and retail segments. 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, and the elimination of shipping and handling charges from Zenith for services provided to our wholesale and retail operations.
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
The following table presents segment information for each of the last three fiscal years:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
240,346
|
|
|
$
|
252,180
|
|
|
$
|
223,993
|
|
Retail
|
|
|
254,667
|
|
|
|
249,379
|
|
|
|
216,631
|
|
Logistical services
|
|
|
95,707
|
|
|
|
77,250
|
|
|
|
-
|
|
Inter-company eliminations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and accessories
|
|
|
(117,817
|
)
|
|
|
(114,154
|
)
|
|
|
(99,886
|
)
|
Logistical services
|
|
|
(40,865
|
)
|
|
|
(33,728
|
)
|
|
|
-
|
|
Consolidated
|
|
$
|
432,038
|
|
|
$
|
430,927
|
|
|
$
|
340,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
18,672
|
|
|
$
|
15,618
|
|
|
$
|
14,120
|
|
Retail
|
|
|
4,333
|
|
|
|
6,170
|
|
|
|
(528
|
)
|
Logistical services
|
|
|
3,511
|
|
|
|
3,528
|
|
|
|
-
|
|
Inter-company elimination
|
|
|
1,677
|
|
|
|
1,647
|
|
|
|
1,539
|
|
Lease exit costs
|
|
|
-
|
|
|
|
(419
|
)
|
|
|
-
|
|
Asset impairment charges
|
|
|
-
|
|
|
|
(106
|
)
|
|
|
-
|
|
Management restructuring costs
|
|
|
-
|
|
|
|
(449
|
)
|
|
|
-
|
|
Consolidated income from operations
|
|
$
|
28,193
|
|
|
$
|
25,989
|
|
|
$
|
15,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
2,053
|
|
|
$
|
2,075
|
|
|
$
|
1,972
|
|
Retail
|
|
|
5,992
|
|
|
|
5,428
|
|
|
|
5,344
|
|
Logistical services
|
|
|
4,204
|
|
|
|
2,634
|
|
|
|
-
|
|
Consolidated
|
|
$
|
12,249
|
|
|
$
|
10,137
|
|
|
$
|
7,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
7,232
|
|
|
$
|
4,898
|
|
|
$
|
4,527
|
|
Retail
|
|
|
5,115
|
|
|
|
7,077
|
|
|
|
13,836
|
|
Logistical services
|
|
|
9,154
|
|
|
|
1,999
|
|
|
|
-
|
|
Consolidated
|
|
$
|
21,501
|
|
|
$
|
13,974
|
|
|
$
|
18,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
139,477
|
|
|
$
|
146,878
|
|
|
$
|
154,275
|
|
Retail
|
|
|
88,855
|
|
|
|
88,878
|
|
|
|
86,471
|
|
Logistical services
|
|
|
49,935
|
|
|
|
46,787
|
|
|
|
-
|
|
Consolidated
|
|
$
|
278,267
|
|
|
$
|
282,543
|
|
|
$
|
240,746
|
|
A breakdown of wholesale sales by product category for each of the last three fiscal years is provided below:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wood
|
|
|
37
|
%
|
|
|
37
|
%
|
|
|
39
|
%
|
Upholstery
|
|
|
63
|
%
|
|
|
63
|
%
|
|
|
61
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Notes to Con
s
olidated Financial Statements
-Continued
(In thousands, except share and per share data)
21.
Quarterly Results of Operations
|
|
2016
|
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter (1)
|
|
|
Fourth
Quarter (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and accessories
|
|
$
|
92,402
|
|
|
$
|
92,990
|
|
|
$
|
91,465
|
|
|
$
|
100,339
|
|
Logistics
|
|
|
14,471
|
|
|
|
13,677
|
|
|
|
13,247
|
|
|
|
13,447
|
|
Total sales revenue
|
|
|
106,873
|
|
|
|
106,667
|
|
|
|
104,712
|
|
|
|
113,786
|
|
Cost of furniture and accessories sold
|
|
|
41,986
|
|
|
|
42,419
|
|
|
|
40,091
|
|
|
|
43,023
|
|
Income from operations
|
|
|
5,791
|
|
|
|
5,853
|
|
|
|
7,540
|
|
|
|
9,009
|
|
Net income
|
|
|
3,234
|
|
|
|
3,385
|
|
|
|
4,165
|
|
|
|
5,045
|
|
Basic earnings per share
|
|
|
0.30
|
|
|
|
0.31
|
|
|
|
0.39
|
|
|
|
0.47
|
|
Diluted earnings per share
|
|
|
0.30
|
|
|
|
0.31
|
|
|
|
0.38
|
|
|
|
0.47
|
|
|
|
2015
|
|
|
|
First
Quarter (3)
|
|
|
Second Quarter (4)
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and accessories
|
|
$
|
89,548
|
|
|
$
|
99,467
|
|
|
$
|
97,107
|
|
|
$
|
101,283
|
|
Logistics
|
|
|
3,259
|
|
|
|
12,086
|
|
|
|
13,904
|
|
|
|
14,273
|
|
Total sales revenue
|
|
|
92,807
|
|
|
|
111,553
|
|
|
|
111,011
|
|
|
|
115,556
|
|
Cost of furniture and accessories sold
|
|
|
41,930
|
|
|
|
46,921
|
|
|
|
44,824
|
|
|
|
45,616
|
|
Income from operations
|
|
|
2,877
|
|
|
|
6,714
|
|
|
|
7,692
|
|
|
|
8,706
|
|
Net income
|
|
|
5,956
|
|
|
|
4,529
|
|
|
|
4,266
|
|
|
|
5,682
|
|
Basic earnings per share
|
|
|
0.57
|
|
|
|
0.42
|
|
|
|
0.39
|
|
|
|
0.53
|
|
Diluted earnings per share
|
|
|
0.56
|
|
|
|
0.42
|
|
|
|
0.39
|
|
|
|
0.52
|
|
All quarters shown above for fiscal 2016 and 2015 consist of 13 week fiscal periods.
Sales revenue from logistics is recognized from the date of our acquisition of Zenith, February 2, 2015. Prior to the acquisition of Zenith, net income included our 49% equity in the earnings of Zenith, which is included in other loss, net in our consolidated statements of income.
|
(1)
|
Income from operations includes the benefit of a $1,428 award received from the settlement of class action litigation (see Note 15).
|
|
(2)
|
Net income includes income of $148 from the CDSOA, net of related income tax effects of approximately $92 (see Note 16).
|
|
(3)
|
Income from operations includes asset impairment charges and lease exit costs totaling $525 (see Note 15). Net income includes a gain of $7,212, net of income tax effects of approximately $2,777, resulting from the remeasurement of our prior ownership interest in Zenith upon acquisition (see Note 3).
|
|
(4)
|
Income from operations includes management restructuring charges of $449 (see Note 15). Net income includes income of $1,066 from the CDSOA, net of related income tax effects of approximately $410 (see Note 16).
|
|
(5)
|
Net income includes the effect of a $1,111 tax benefit arising from purchase accounting adjustments relating to the gain recorded on the remeasurement of our prior ownership in Zenith.
|