The accompanying notes to consolidated financial statements are an integral part of these statements.
The accompanying notes to consolidated financial statements are an integral part of these statements.
The accompanying notes to consolidated financial statements are an integral part of these statements.
The accompanying notes to consolidated financial statements are an integral part of these statements.
The accompanying notes to consolidated financial statements are an integral part of these statements.
Notes to Consolidated 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 103 retail stores known as Bassett Home Furnishings (referred to as “BHF”). Of the 103 stores, the Company owns and operates 70 stores (“Company-owned retail stores”) with the other 33 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 23% of our wholesale products from various foreign countries, with the remaining volume produced at our five domestic manufacturing facilities.
Lane Venture Acquisition
On December 21, 2017, we purchased certain assets and assumed certain liabilities of Lane Venture from Heritage Home Group, LLC. Lane Venture is being operated as a component of our wholesale segment (see Note 3, Business Combinations). Results of operations for the Lane Venture business are included in our consolidated statements of operations since the date of acquisition.
2.
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Significant Accounting Policies
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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 2019 contained 53 weeks while fiscal 2018 and 2017 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 Lane Venture 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 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 2019, 2018 and 2017 are to Bassett's fiscal year ended November 30, 2019, November 24, 2018 and November 25, 2017, 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.
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 16 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.
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, the valuation of our reporting units for the purpose of testing the carrying value of goodwill, 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.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Revenue Recognition
We adopted ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606 or "ASC 606") effective as of November 25, 2018, the beginning of our 2019 fiscal year. ASC 606 requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. For our wholesale and retail segments, revenue is recognized when the risks and rewards of ownership and title to the product have transferred to the buyer.
At wholesale, transfer occurs and revenue is recognized upon the shipment of goods to independent dealers and licensee-owned BHF stores. We offer payment terms varying from 30 to 60 days for wholesale customers. Estimates for returns and allowances have been recorded as a reduction of revenue based on our historical return patterns. The contracts with our licensee store owners do not provide for any royalty or license fee to be paid to us.
At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. 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 and amounted to $25,341 and $27,157 as of November 30, 2019 and November 24, 2018, respectively. Substantially all of the customer deposits held at November 24, 2018 related to performance obligations satisfied during fiscal 2019 and have therefore been recognized in revenue for the year ended November 30, 2019. Estimates for returns and allowances have been recorded as a reduction of revenue based on our historical return patterns. We also sell furniture protection plans to our retail customers on behalf of a third party which is responsible for the performance obligations under the plans. Revenue from the sale of these plans is recognized upon delivery of the goods net of amounts payable to the third party service provider.
For our logistical services segment, line-haul freight revenue is recognized as services are performed and are billed to the customer upon the completion of delivery to the destination. Because the customer receives the benefits of these services as the freight is in transit from point of origin to destination, we recognize revenue using a percentage of completion method based on our estimate of the amount of time freight has been in transit as of the reporting date compared with our estimate of the total required time for the deliveries. We recognize an asset for the amount of line-haul revenue earned but not yet billed which is included in other current assets. The balance of this asset was $441 at November 30, 2019 and $512 at the beginning of fiscal 2019 upon adoption of ASC 606. 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 and billed to the customer concurrently in the same period. All invoices for logistical services are due 30 days from invoice date.
Sales commissions are expensed as part of selling, general and administrative expenses at the time revenue is recognized because the amortization period would have been one year or less. Sales commissions at wholesale are accrued upon the shipment of goods. Sales commissions at retail are accrued at the time a sale is written (i.e. – when the customer’s order is placed) and are carried as prepaid commissions in other current assets until the goods are delivered and revenue is recognized. At November 30, 2019 and November 24, 2018, our balance of prepaid commissions included in other current assets was $2,435 and $2,739, respectively. We do not incur sales commissions in our logistical services segment.
We adopted ASC 606 using the modified retrospective method and applied the standard only to contracts that were not completed as of initial application. Results for reporting periods beginning after November 24, 2018 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting. Our adoption of ASC 606 did not have a material impact on our consolidated financial statements except for our enhanced presentation and disclosures.
Upon adoption of ASC 606, we have adopted the following policy elections and practical expedients:
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•
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We exclude from revenue amounts collected from customers for sales tax, which is consistent with our policy prior to the adoption of ASC 606.
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•
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We do not adjust the promised amount of consideration for the effects of a significant financing component since the period of time between transfer of our goods or services and the collection of consideration from the customer is less than one year.
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•
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We do not disclose the value of unsatisfied performance obligations because the transfer of goods or services is made within one year of the placement of customer orders.
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See Note 19, Segment Information, for disaggregated revenue information.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Cash Equivalents and Short-Term Investments
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 consist of certificates of deposit that have original maturities of twelve months or less but 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.
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 30, 2019 and November 24, 2018, our aggregate exposure from receivables and guarantees related to customers consisted of the following:
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2019
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2018
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Accounts receivable, net of allowances (Note 5)
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$
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21,378
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$
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19,055
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Contingent obligations under lease and loan guarantees, less amounts recognized (Note 16)
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1,751
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1,995
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Other
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168
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-
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Total credit risk exposure related to customers
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$
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23,297
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$
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21,050
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At November 30, 2019 and November 24, 2018, approximately 28% and 33%, respectively, of the aggregate risk exposure, net of reserves, shown above was attributable to five customers. In fiscal 2019, 2018 and 2017, no customer accounted for more than 10% of total consolidated net sales. However, two customers accounted for approximately 44%, 40% and 47% of our consolidated revenue from logistical services during 2019, 2018 and 2017, 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 $1,846, $1,587, and $2,288 in fiscal 2019, 2018, and 2017, 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 and Lane Venture product inventories are determined on a first-in, first-out (“FIFO”) basis. Inventories accounted for under the LIFO method represented 52% of total inventory before reserves at both November 30, 2019 and November 24, 2018. 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.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Retail Real Estate
Prior to November 30, 2019, retail real estate was comprised of owned and leased properties which have in the past been utilized by licensee operated BHF stores and are now leased or subleased to non-licensee tenants. The net book value of our retail real estate at November 24, 2018 was $1,655, included in other long-term assets in our consolidated balance sheet, and consisted of one property located near Charleston, South Carolina which was fully occupied by a tenant under a long term lease. During fiscal 2019, this property was sold to the tenant for net proceeds in the amount of $1,475, resulting in a loss of $98, included in other loss, net in our accompanying statement of operations for the year ended November 30, 2019. Depreciation expense was $94, $103, and $127 in fiscal 2019, 2018, and 2017, respectively, and is included in other loss, net, in our consolidated statements of operations.
We also own a building in Chesterfield County, Virginia that was formerly leased to a licensee for the operation of a BHF store. The building is subject to a ground lease that expires in 2020, but has additional renewal options. Since 2012, we have leased the building to another party who is, as of recently, paying less than the full amount of the lease obligation, resulting in rental income insufficient to cover our ground lease obligation. Efforts to sell our interest in the building have been unsuccessful so far. We have also concluded that absent a significant cash investment in the building the likelihood of locating another tenant for the building at a rent that would provide positive cash flow in excess of the ground lease expense is remote. In addition, we obtained an appraisal during the second quarter of fiscal 2017 which indicated that the value of the building had significantly decreased and was now minimal. Given these circumstances, we concluded in the second quarter of fiscal 2017 that we are unlikely to renew the ground lease in 2020 and would therefore likely vacate the property at that time. Consequently, we recorded a non-cash impairment charge of $1,084 during fiscal 2017 to write off the value of the building.
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, 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 quantitiative goodwill impairment test described in ASC Topic 350 (as amended by Accounting Standards Update No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which we adopted for our annual evaluation of goodwill performed as of September 1, 2019). 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 quantitative 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 quantitative evaluation process. Based on our qualitative assessment as described above, we concluded that, given declines in our income from operations, primarily resulting from operating losses incurred in our retail reporting unit, as well as in our stock price since the previous analysis in fiscal 2018, it was necessary to perform the quantitative evaluation in the current year.
The quantitative evaluation 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, a goodwill impairment charge will be recognized in the amount by which the reporting unit’s carrying amount exceeds its fair value, but not to exceed the total goodwill assigned to the reporting unit. The determination of the fair value of our reporting units is based on a combination of a market approach, that considers benchmark company market multiples, an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosure (see Note 4), and, in the case of our retail reporting unit, a cost approach that utilizes estimates of net asset value. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill impairment testing, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units. While we believe such assumptions and estimates are reasonable, the actual results may differ materially from the projected amounts. See Note 8 for additional information regarding the results of our annual goodwill impairment test performed as of September 1, 2019.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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.
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. See Note 14.
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 14.
New Store Pre-Opening Costs
Income from operations for fiscal 2019, 2018 and 2017 includes new store pre-opening costs of $1,117, $2,081 and $2,413, 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.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Shipping and Handling Costs
Costs incurred to deliver wholesale merchandise to customers are recorded in selling, general and administrative expense and totaled $18,402, $17,511, and $18,514 for fiscal 2019, 2018 and 2017, respectively. Costs incurred to deliver retail merchandise to customers, including the cost of operating regional distribution warehouses, are also recorded in selling, general and administrative expense and totaled $23,710, $20,640, and $19,604 for fiscal 2019, 2018 and 2017, respectively.
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 $20,674, $20,922, and $18,834 in fiscal 2019, 2018, and 2017, 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
During the fourth quarter of fiscal 2019, we purchased certain fixed assets and inventory with a total purchase price of $2,225, of which $375 was paid for with the issuance of 24,590 shares if our common stock. There were no material non-cash investing or financing activities during fiscal 2018 or 2017.
Recent Accounting Pronouncements
Recently Adopted Pronouncements
Effective as of the beginning of fiscal 2019, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Refer to the preceding discussion under “Revenue Recognition” for more information regarding the impact of ASC 606 on our financial statements.
Effective as of the beginning of fiscal 2019, we adopted 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 with comparative amounts in prior period cash flow statements reclassified to conform to the current period presentation. Accordingly, for the years ended November 24, 2018 and November 25, 2017 we have reclassified investments in Company-owned life insurance (net of death benefits received) of $1,287 and $857, respectively, from cash flows from operating activities to cash flows from investing activities, and we have reclassified $78 and $184, respectively, representing the portion of a debt payment attributable to discount accretion from cash flows from financing activities to cash flows from operating activities.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Effective as of the beginning of fiscal 2019, we adopted 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 adoption of this guidance did not have a material impact upon our financial condition or results of operations.
Effective as of the beginning of fiscal 2019, we adopted Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 provides a screen to determine when an integrated set of assets and activities (collectively referred to as a “set”) does not constitute a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in ASU 2017-01 (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. During the fourth quarter of fiscal 2019, we purchased a set of production equipment for $1,966 which, upon application of the screen, did not constitute a business and was therefore accounted for as an asset purchase.
Effective as of the beginning of fiscal 2019, we adopted Accounting Standards Update No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 was issued to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Essentially, an entity will not have to account for the effects of a modification if: (1) The fair value of the modified award is the same immediately before and after the modification; (2) the vesting conditions of the modified award are the same immediately before and after the modification; and (3) the classification of the modified award as either an equity instrument or liability instrument is the same immediately before and after the modification. The adoption of this guidance did not have a material impact upon our financial condition or results of operations.
Effective for our annual test for impairment of goodwill as of the beginning of the fourth fiscal quarter of 2019, we have adopted Accounting Standards Update No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Refer to the preceding discussion under “Goodwill” for additional information regarding the results of our annual impairment test following the adoption of ASU 2017-04.
Recent Pronouncements Not Yet Adopted
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842). The guidance in ASU 2016-02 (as subsequently amended by ASU 2018-01, ASU 2018-10, ASU 2018-11 and ASU 2018-20) 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. In addition, ASU 2018-11 provides for an additional (and optional) transition method by which entities may elect to initially apply the transition requirements in Topic 842 at that Topic’s effective date with the effects of initially applying Topic 842 recognized as a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption and without retrospective application to any comparative prior periods presented. Also, ASU 2018-20 provides certain narrow-scope improvements to Topic 842 as it relates to lessors. We have substantially completed identifying the population of contracts that meet the definition of a lease under ASU 2016-02. We are in the final stage of implementing a lease accounting system and finalizing our control framework in preparation for the adoption of this standard in the first quarter of fiscal 2020. We plan to elect certain practical expedients permitted under the transition guidance, including the package of practical expedients, which allows the Company to not reassess whether existing contracts contain leases, the lease classification of existing leases, or initial direct costs for existing leases. We also plan to elect not to separate lease and non-lease components for certain classes of leased assets and not to recognize a right-of-use asset and a lease liability for leases with an initial term of twelve months or less. We will adopt the guidance of ASU 2016-02 using the optional transition method as provided by ASU 2018-11. On adoption, we will recognize additional operating liabilities, with corresponding right of use assets of the same amount adjusted for prepaid/deferred rent, unamortized lease incentives and any impairment of right of use assets based on the present value of the remaining minimum rental payments. We expect the adoption of this standard to have a material effect on our statement of financial position (refer to Note 16 for information regarding our leases currently classified as operating leases under ASC Topic 840).
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
In August 2018, the FASB issued Accounting Standards Update No. 2018-15 – Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in ASU 2018-15. The amendments in ASU 2018-15 will become effective for us as of the beginning of our 2021 fiscal year. Early adoption is permitted, including adoption in any interim period. We are currently evaluating the impact that this guidance will have upon our financial position and results of operations, if any.
In December 2019, the FASB issued Accounting Standards Update No. 2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. The amendments in ASU 2019-12 will become effective for us as of the beginning of our 2022 fiscal year. Early adoption is permitted, including adoption in any interim period. We are currently evaluating the impact that this guidance will have upon our financial position and results of operations, if any.
Reclassifications
Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the current year presentation with no effect on previously reported net income or Stockholders’ equity. See “Recently Adopted Accounting Pronouncements” above regarding the impact of our adoption of ASU 2016-15 on the statements of cash flows for fiscal 2018 and 2017.
Acquisition of Lane Venture
On December 21, 2017, we purchased certain assets and assumed certain liabilities of Lane Venture from Heritage Home Group, LLC for $15,556 in cash. Lane Venture is a manufacturer and distributor of premium outdoor furniture, and is now being operated as a component of our wholesale segment.
Under the acquisition method of accounting, the fair value of the consideration transferred was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date with the remaining unallocated amount recorded as goodwill.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
The allocation of the fair value of the acquired business was initially based on a preliminary valuation. Our estimates and assumptions were revised during 2018 as we obtained additional information for our estimates during the measurement period , which we consider to be closed as of November 24, 2018. During fiscal 2018, we recorded measurement period adjustments resulting in a net increase to the opening value of various acquired assets and assumed liabilities with an offsetting reduction of recognized goodwill of $76. The final allocation of the $15,556 all-cash purchase price to the acquired assets and liabilities of the Lane Venture business, including measurement period adjustments, is as follows:
Allocation of the fair value of consideration transferred:
|
|
|
|
|
Identifiable assets acquired:
|
|
|
|
|
|
Accounts receivable, net of reserve (Note 5)
|
|
$
|
1,507
|
|
Inventory, net of reserve (Note 6)
|
|
|
3,718
|
|
Prepaid expenses and other current assets
|
|
|
37
|
|
Intangible assets
|
|
|
7,360
|
|
Total identifiable assets acquired
|
|
|
12,622
|
|
Liabilities assumed:
|
|
|
|
|
|
Accounts payable
|
|
|
(357
|
)
|
Other accrued liabilities
|
|
|
(852
|
)
|
Total liabilities assumed
|
|
|
(1,209
|
)
|
Net identifiable assets acquired
|
|
|
11,413
|
|
Goodwill
|
|
|
4,143
|
|
Total net assets acquired
|
|
$
|
15,556
|
|
Goodwill was determined based on the residual difference between the fair value of the consideration transferred and the value assigned to the tangible and intangible assets and liabilities recognized in connection with the acquisition and is deductible for tax purposes. Among the factors that contributed to a purchase price resulting in the recognition of goodwill are the expected synergies arising from combining the Company’s manufacturing and distribution capabilities with Lane Venture’s position in the outdoor furnishings market, a segment of the market not previously served by Bassett.
A portion of the fair value of the consideration transferred has been assigned to identifiable intangible assets as follows:
|
|
Useful Life
|
|
|
|
|
|
Description:
|
|
In Years
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
Trade name
|
|
|
Indefinite
|
|
|
$
|
6,848
|
|
Customer relationships
|
|
|
9
|
|
|
|
512
|
|
|
|
|
|
|
|
|
|
|
Total acquired intangible assets
|
|
|
|
|
|
$
|
7,360
|
|
The finite-lived intangible asset is being amortized on a straight-line basis over its estimated useful life. The indefinite-lived intangible asset and goodwill are not amortized but will be tested for impairment annually or between annual tests if an indicator of impairment exists.
The fair values of consideration transferred and net assets acquired were determined using a combination of Level 2 and Level 3 inputs as specified in the fair value hierarchy in ASC 820, Fair Value Measurements and Disclosures. See Note 4.
Acquisition costs related to the Lane Venture acquisition totaled $256 during the year ended November 24, 2018, and are included in selling, general and administrative expenses in the consolidated statements of operations. The acquisition costs are primarily related to legal, accounting and valuation services.
The pro forma impact of the acquisition and the results of operations attributable to Lane Venture since the acquisition have not been presented because they are not material to our consolidated results of operations for the three fiscal years ended November 24, 2018.
Licensee Store Acquisition
During the first quarter of fiscal 2017, we acquired the operations of the Bassett Home Furnishings (“BHF”) store located in Columbus, Ohio for a purchase price of $655. The store had been owned and operated by a licensee that had determined that continued ownership of a BHF store was no longer consistent with its future business objectives. We believe that Columbus, Ohio represents a viable market for a BHF store.
The purchase price was allocated as follows:
Inventory
|
|
$
|
343
|
|
Goodwill
|
|
|
312
|
|
|
|
|
|
|
Purchase price
|
|
$
|
655
|
|
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
The inputs into our valuation of the acquired assets reflect our market assumptions and are not observable. Consequently, the inputs are considered to be Level 3 inputs as specified in the fair value hierarchy in ASC 820, Fair Value Measurements and Disclosures. See Note 4.
The pro forma impact of the acquisition and the results of operations for the Columbus store since the acquisition was not material to our consolidated results of operations for the year ended November 25, 2017.
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.
Investments
Our short-term investments of $17,436 and $22,643 at November 30, 2019 and November 24, 2018, respectively, consisted of certificates of deposit (CDs) with original terms of six to twelve months, bearing interest at rates ranging from 0.85% to 2.55%. At November 30, 2019, the weighted average remaining time to maturity of the CDs was approximately three months and the weighted average yield of the CDs was approximately 2.09%. 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 30, 2019 and November 24, 2018 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, goodwill impairment testing (Note 8), which involves Level 3 inputs, and asset impairments (Note 15) which utilize Level 3 inputs.
Accounts receivable consists of the following:
|
|
November 30,
2019
|
|
|
November 24,
2018
|
|
Gross accounts receivable
|
|
$
|
22,193
|
|
|
$
|
19,809
|
|
Allowance for doubtful accounts
|
|
|
(815
|
)
|
|
|
(754
|
)
|
Net accounts receivable
|
|
$
|
21,378
|
|
|
$
|
19,055
|
|
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Activity in the allowance for doubtful accounts was as follows:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of the year
|
|
$
|
754
|
|
|
$
|
617
|
|
Acquired allowance on accounts receivable (Note 3)
|
|
|
-
|
|
|
|
50
|
|
Additions charged to expense
|
|
|
61
|
|
|
|
339
|
|
Reductions to allowance, net
|
|
|
-
|
|
|
|
(252
|
)
|
Balance, end of the year
|
|
$
|
815
|
|
|
$
|
754
|
|
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.
Inventories consist of the following:
|
|
November 30,
2019
|
|
|
November 24,
2018
|
|
Wholesale finished goods
|
|
$
|
27,792
|
|
|
$
|
30,750
|
|
Work in process
|
|
|
733
|
|
|
|
432
|
|
Raw materials and supplies
|
|
|
17,293
|
|
|
|
15,503
|
|
Retail merchandise
|
|
|
31,534
|
|
|
|
27,599
|
|
Total inventories on first-in, first-out method
|
|
|
77,352
|
|
|
|
74,284
|
|
LIFO adjustment
|
|
|
(8,688
|
)
|
|
|
(8,326
|
)
|
Reserve for excess and obsolete inventory
|
|
|
(2,362
|
)
|
|
|
(1,766
|
)
|
|
|
$
|
66,302
|
|
|
$
|
64,192
|
|
We source a significant amount of our wholesale product from other countries. During 2019, 2018 and 2017, purchases from our two largest vendors located in Vietnam and China were $15,221, $24,073 and $21,977 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.
Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:
|
|
Wholesale Segment
|
|
|
Retail Segment
|
|
|
Total
|
|
Balance at November 25, 2017
|
|
$
|
1,618
|
|
|
$
|
277
|
|
|
$
|
1,895
|
|
Acquired reserve on inventory (Note 3)
|
|
|
110
|
|
|
|
-
|
|
|
|
110
|
|
Additions charged to expense
|
|
|
1,884
|
|
|
|
425
|
|
|
|
2,309
|
|
Write-offs
|
|
|
(2,112
|
)
|
|
|
(436
|
)
|
|
|
(2,548
|
)
|
Balance at November 24, 2018
|
|
|
1,500
|
|
|
|
266
|
|
|
|
1,766
|
|
Additions charged to expense
|
|
|
1,881
|
|
|
|
373
|
|
|
|
2,254
|
|
Write-offs
|
|
|
(1,327
|
)
|
|
|
(331
|
)
|
|
|
(1,658
|
)
|
Balance at November 30, 2019
|
|
$
|
2,054
|
|
|
$
|
308
|
|
|
$
|
2,362
|
|
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Additions charged to expense for our wholesale segment during the year ended November 30, 2019 includes a $390 inventory valuation charge arising from our decision to exit the juvenile furniture line of business.
7.
|
Property and Equipment
|
Property and equipment consist of the following:
|
|
November 30,
2019
|
|
|
November 24,
2018
|
|
Land
|
|
$
|
9,478
|
|
|
$
|
9,908
|
|
Buildings and leasehold improvements
|
|
|
126,085
|
|
|
|
124,449
|
|
Machinery and equipment
|
|
|
115,131
|
|
|
|
108,379
|
|
Property and equipment at cost
|
|
|
250,694
|
|
|
|
242,736
|
|
Less accumulated depreciation
|
|
|
(148,970
|
)
|
|
|
(137,873
|
)
|
Property and equipment, net
|
|
$
|
101,724
|
|
|
$
|
104,863
|
|
The net book value of our property and equipment by reportable segment is a follows:
|
|
November 30,
2019
|
|
|
November 24,
2018
|
|
Wholesale
|
|
$
|
28,993
|
|
|
$
|
26,511
|
|
Retail - Company-owned stores
|
|
|
55,625
|
|
|
|
61,380
|
|
Logistical Services
|
|
|
17,106
|
|
|
|
16,972
|
|
Total property and equipment, net
|
|
$
|
101,724
|
|
|
$
|
104,863
|
|
At November 30, 2019 we owned one retail store property located in Gulfport, Mississippi which was under contract to be sold. The net book value of the property of $1,569 at November 30, 2019 is classified as held for sale and is included in other current assets in the accompanying consolidated balance sheets at November 30, 2019. The sale of the property was completed subsequent to November 30, 2019 for net proceeds of $1,639.
Depreciation expense associated with the property and equipment shown above was included in income from operations in our consolidated statements of operations as follows:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (wholesale segment)
|
|
$
|
1,402
|
|
|
$
|
1,264
|
|
|
$
|
989
|
|
Selling, general and adminstrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale segment
|
|
|
1,672
|
|
|
|
1,666
|
|
|
|
1,531
|
|
Retail segment
|
|
|
7,479
|
|
|
|
7,060
|
|
|
|
7,080
|
|
Logistical services segment
|
|
|
3,697
|
|
|
|
3,747
|
|
|
|
3,987
|
|
Total included in selling, general and adminstrative expenses
|
|
|
12,848
|
|
|
|
12,473
|
|
|
|
12,598
|
|
Total depreciation expense included in income from operations
|
|
$
|
14,250
|
|
|
$
|
13,737
|
|
|
$
|
13,587
|
|
Notes to Consolidated 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 30, 2019
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Intangible
Assets, Net
|
|
Intangibles subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
3,550
|
|
|
$
|
(1,088
|
)
|
|
$
|
2,462
|
|
Technology - customized applications
|
|
|
834
|
|
|
|
(575
|
)
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets subject to amortization
|
|
$
|
4,384
|
|
|
$
|
(1,663
|
)
|
|
|
2,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
|
|
|
|
|
|
|
|
9,338
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
14,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and other intangible assets
|
|
|
|
|
|
|
|
|
|
$
|
26,176
|
|
|
|
November 24, 2018
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Intangible
Assets, Net
|
|
Intangibles subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
3,550
|
|
|
$
|
(829
|
)
|
|
$
|
2,721
|
|
Technology - customized applications
|
|
|
834
|
|
|
|
(456
|
)
|
|
|
378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets subject to amortization
|
|
$
|
4,384
|
|
|
$
|
(1,285
|
)
|
|
|
3,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
|
|
|
|
|
|
|
|
9,338
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
16,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and other intangible assets
|
|
|
|
|
|
|
|
|
|
$
|
28,480
|
|
We performed our annual goodwill impairment test as of September 1, 2019. As a result of this test, we concluded that the carrying value of our retail reporting unit exceeded its fair value by an amount in excess of the goodwill previously allocated to the reporting unit. Therefore, we recognized a goodwill impairment charge of $1,926. The fair values of the other reporting units with material amounts of goodwill substantially exceeded their carrying values as of September 1, 2019.
The determination of the fair value of our reporting units is based on a combination of a market approach, that considers benchmark company market multiples, and an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosure (see Note 4). Under the income approach, we determine fair value based on the present value of the most recent cash flow projections for each reporting unit as of the date of the analysis and calculate a terminal value utilizing a terminal growth rate. The significant assumptions under this approach include, among others: income projections, which are dependent on future sales, new product introductions, customer behavior, competitor pricing, operating expenses, the discount rate, and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill impairment testing, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Changes in the carrying amounts of goodwill by reportable segment were as follows:
|
|
Wholesale
|
|
|
Retail
|
|
|
Logistics
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 25, 2017
|
|
$
|
5,045
|
|
|
$
|
1,926
|
|
|
$
|
4,929
|
|
|
$
|
11,900
|
|
Goodwill arising from Lane Venture acquisition (Note 3)
|
|
|
4,143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 24, 2018
|
|
|
9,188
|
|
|
|
1,926
|
|
|
|
4,929
|
|
|
|
16,043
|
|
Goodwill impairment
|
|
|
-
|
|
|
|
(1,926
|
)
|
|
|
-
|
|
|
|
(1,926
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 30, 2019
|
|
$
|
9,188
|
|
|
$
|
-
|
|
|
$
|
4,929
|
|
|
$
|
14,117
|
|
Accumulated impairment losses at November 30, 2019 were $1,926. There were no accumulated impairment losses on goodwill as of November 24, 2018 or November 25, 2017.
The weighted average useful lives of our finite-lived intangible assets and remaining amortization periods as of November 30, 2019 are as follows:
|
|
Useful Life
in Years
|
|
|
Remaining
Amortization
Period in
Years
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
14
|
|
|
|
10
|
|
Technology - customized applications
|
|
|
7
|
|
|
|
2
|
|
Amortization expense associated with intangible assets during fiscal 2019, 2018 and 2017 was $379, $374 and $322, respectively and is included in selling, general and administrative expense in our consolidated statement of operations. All expense arising from the amortization of intangible assets is associated with our logistical services segment except for $57 and $51 in fiscal 2019 and 2018, respectively, associated with our wholesale segment arising from Lane Venture (Note 3). Estimated future amortization expense for intangible assets that exist at November 30, 2019 is as follows:
Fiscal 2020
|
|
$
|
379
|
|
Fiscal 2021
|
|
|
379
|
|
Fiscal 2022
|
|
|
279
|
|
Fiscal 2023
|
|
|
259
|
|
Fiscal 2024
|
|
|
259
|
|
Thereafter
|
|
|
1,166
|
|
|
|
|
|
|
Total
|
|
$
|
2,721
|
|
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
9.
|
Unconsolidated Affiliated Companies
|
International Market Centers, L.P.
In connection with the sale of our interest in International Home Furnishings Center, Inc. on May 2, 2011, we acquired a minority interest in International Market Centers, L.P. (“IMC”) in exchange for $1,000. Our investment in IMC was included in other long-term assets in our consolidated balance sheet as of November 26, 2016 and was accounted for using the cost method as we did not have significant influence over IMC. During fiscal 2017 IMC was sold resulting in the redemption of our entire interest for total proceeds of $1,954 resulting in a gain of $954 which is included in gain on sale of investments in our consolidated statement of operations.
Other
In 1985, we acquired a minority interest in a privately-held, start-up provider of property and casualty insurance for $325. We have accounted for this investment on the cost method and it was included in other long-term assets in our consolidated balance sheet as of November 26, 2016. During fiscal 2017 we sold our entire interest for $3,592 in cash, resulting in a gain of $3,267 which is included in gain on sale of investments in our consolidated statement of operations.
10.
|
Notes Payable and Bank Credit Facility
|
Real Estate Notes Payable
Certain of our retail real estate properties were financed through commercial mortgages with outstanding principal totaling $292 at November 24, 2018, which was included in other current liabilities and accrued expenses in the accompanying condensed consolidated balance sheet. These obligations were paid in full during the third quarter of fiscal 2019.
Fair Value
We believe that the carrying amount of our notes payable approximated fair value at November 24, 2018. 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
Our credit facility with our bank provides for a line of credit of up to $25,000. This credit facility 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. The credit facility will mature in December 2021.
We have $2,673 outstanding under standby letters of credit against our line, leaving availability under our credit line of $22,327. In addition, we have outstanding standby letters of credit with another bank totaling $325.
Total interest paid during fiscal 2019, 2018 and 2017 was $7, $166 and $322, respectively.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
11.
|
Post-Employment Benefit Obligations
|
Management Savings Plan
On May 1, 2017, our Board of Directors, upon the recommendation of the Organization, Compensation and Nominating Committee (the “Committee”), adopted the Bassett Furniture Industries, Incorporated Management Savings Plan (the “Plan”).The Plan is an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees.
The Plan is an account-based plan under which (i) participants may defer voluntarily the payment of current compensation to future years (“participant deferrals”) and (ii) the Company may make annual awards to participants payable in future years (“Company contributions”). The Plan permits each participant to defer up to 75% of base salary and up to 100% of any incentive compensation or other bonus, which amounts would be credited to a deferral account established for the participant. Such deferrals will be fully vested at the time of the deferral. Participant deferrals will be indexed to one or more deemed investment alternatives chosen by the participant from a range of alternatives made available under the Plan. Each participant’s account will be adjusted to reflect gains and losses based on the performance of the selected investment alternatives. A participant may receive distributions from the Plan: (1) upon separation from service, in either a lump sum or annual installment payments over up to a 15 year period, as elected by the participant, (2) upon death or disability, in a lump sum, or (3) on a date or dates specified by the participant (“scheduled distributions”) with such scheduled payments made in either a lump sum or substantially equal annual installments over a period of up to five years, as elected by the participant. Participant contributions commenced during the third quarter of fiscal 2017. Company contributions will vest in full (1) on the third anniversary of the date such amounts are credited to the participant’s account, (2) the date that the participant reaches age 63 or (3) upon death or disability. Company contributions are subject to the same rules described above regarding the crediting of gains or losses from deemed investments and the timing of distributions. Expense associated with the Company contribution was $196, $102 and $55 for fiscal 2019, 2018 and 2017, respectively. Our liability for Company contributions and participant deferrals at November 30, 2019 and November 24, 2018 was $894 and $749, respectively, and is included in post-employment benefit obligations in our consolidated balance sheets.
On May 2, 2017, we made Long Term Cash Awards (“LTC Awards”) totaling $2,000 under the Plan to certain management employees in the amount of $400 each. The LTC Awards vest in full on the first anniversary of the date of the award if the participant has reached age 63 by that time, or, if later, on the date the participant reaches age 63, provided in either instance that the participant is still employed by the Company at that time. If not previously vested, the awards will also vest immediately upon the death or disability of the participant prior to the participant’s separation from service. The awards will be payable in 10 equal annual installments following the participant’s death, disability or separation from service. We are accounting for the LTC Awards as a defined benefit pension plan.
During fiscal 2019, 2018 and 2017, we invested $627, $900 and $431 in life insurance policies covering all participants in the Plan. At November 30, 2019, these policies have a net death benefit of $14,998 for which the Company is the sole beneficiary. These policies are intended to provide a source of funds to meet the obligations arising from the deferred compensation and LTC Awards under the Plan, and serve as an economic hedge of the financial impact of changes in the liabilities. They are held in an irrevocable trust but are subject to claims of creditors in the event of the Company’s insolvency.
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 $2,273 at November 30, 2019 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 Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Aggregated summarized information for the Supplemental Plan and the LTC Awards, measured as of the end of each year presented, is as follows:
|
|
2019
|
|
|
2018
|
|
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year
|
|
$
|
11,652
|
|
|
$
|
12,322
|
|
Service cost
|
|
|
190
|
|
|
|
196
|
|
Interest cost
|
|
|
441
|
|
|
|
418
|
|
Actuarial gains
|
|
|
(1,172
|
)
|
|
|
(616
|
)
|
Benefits paid
|
|
|
(1,021
|
)
|
|
|
(668
|
)
|
Projected benefit obligation at end of year
|
|
$
|
10,090
|
|
|
$
|
11,652
|
|
|
|
|
|
|
|
|
|
|
Accumulated Benefit Obligation
|
|
$
|
9,998
|
|
|
$
|
11,559
|
|
|
|
|
|
|
|
|
|
|
Discount rate used to value the ending benefit obligations:
|
|
|
2.75
|
%
|
|
|
4.00
|
%
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
655
|
|
|
$
|
798
|
|
Noncurrent liabilities
|
|
|
9,435
|
|
|
|
10,854
|
|
Total amounts recognized
|
|
$
|
10,090
|
|
|
$
|
11,652
|
|
Amounts recognized in accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
606
|
|
|
$
|
806
|
|
Actuarial loss
|
|
|
1,055
|
|
|
|
2,408
|
|
Net amount recognized
|
|
$
|
1,661
|
|
|
$
|
3,214
|
|
|
|
|
|
|
|
|
|
|
Total recognized in net periodic benefit cost and accumulated other comprehensive income:
|
|
$
|
(541
|
)
|
|
$
|
(2
|
)
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Pension Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
190
|
|
|
$
|
196
|
|
|
$
|
146
|
|
Interest cost
|
|
|
441
|
|
|
|
418
|
|
|
|
423
|
|
Amortization of transition obligation
|
|
|
-
|
|
|
|
42
|
|
|
|
42
|
|
Amortization of prior service cost
|
|
|
126
|
|
|
|
126
|
|
|
|
-
|
|
Amortization of other loss
|
|
|
183
|
|
|
|
262
|
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
940
|
|
|
$
|
1,044
|
|
|
$
|
934
|
|
Assumptions used to determine net periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.00
|
%
|
|
|
3.50
|
%
|
|
|
3.75
|
%
|
Increase in future compensation levels
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
Estimated Future Benefit Payments (with mortality):
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020
|
|
|
|
|
|
|
655
|
|
|
|
|
|
Fiscal 2021
|
|
|
|
|
|
|
622
|
|
|
|
|
|
Fiscal 2022
|
|
|
|
|
|
|
821
|
|
|
|
|
|
Fiscal 2023
|
|
|
|
|
|
|
779
|
|
|
|
|
|
Fiscal 2024
|
|
|
|
|
|
|
734
|
|
|
|
|
|
Fiscal 2025 through 2029
|
|
|
|
|
|
|
2,961
|
|
|
|
|
|
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Of the $1,661 recognized in accumulated other comprehensive income at November 30, 2019, amounts expected to be recognized as components of net periodic pension cost during fiscal 2020 are as follows:
Prior service cost
|
|
$
|
126
|
|
Other loss
|
|
|
7
|
|
|
|
|
|
|
Total expected to be amortized to net periodic pension cost in 2020
|
|
$
|
133
|
|
The components of net periodic pension cost other than the service cost component are included in other loss, net in our consolidated statements of operations.
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 $204, $216, and $216 in fiscal 2019, 2018, and 2017, respectively, associated with the plan. Our liability under this plan was $1,767 and $1,837 as of November 30, 2019 and November 24, 2018, 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 $1,157, $1,128 and $1,068 during fiscal 2019, 2018 and 2017, respectively.
12.
|
Accumulated Other Comprehensive Loss
|
The activity in accumulated other comprehensive loss for the fiscal years ended November 30, 2019 and November 24, 2018, which is comprised solely of post-retirement benefit costs related to our SERP and LTC Awards, is as follows:
Balance at November 25, 2017
|
|
$
|
(2,570
|
)
|
Reclassification of certain tax effects to retained earnings (1)
|
|
|
(545
|
)
|
Actuarial gains
|
|
|
616
|
|
Net pension amortization
|
|
|
|
|
reclassified from accumulated other comprehensive loss
|
|
|
430
|
|
Tax effects
|
|
|
(269
|
)
|
Balance at November 24, 2018
|
|
|
(2,338
|
)
|
Actuarial gains
|
|
|
1,172
|
|
Net pension amortization
|
|
|
|
|
reclassified from accumulated other comprehensive loss
|
|
|
308
|
|
Tax effects
|
|
|
(378
|
)
|
Balance at November 30, 2019
|
|
$
|
(1,236
|
)
|
(1) In 2018 we adopted ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Comprehensive Income. ASU 2018-02 addressed the impact of the remeasurement of deferred taxes on items in accumulated other comprehensive income due to the reduction in federal statutory rates arising from the Tax Cuts and Jobs Act of December 2017 by allowing the transfer of certain tax effects carried over from prior years to retained earnings as of the beginning of fiscal 2018.
Notes to Consolidated 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 operations for fiscal 2019, 2018 and 2017 was as follows:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense
|
|
$
|
958
|
|
|
$
|
1,133
|
|
|
$
|
1,028
|
|
Incentive Stock Compensation Plans
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 2019, 2018 or 2017.
Changes in the outstanding options under our plans during the year ended November 30, 2019 were as follows:
|
|
Number of Shares
|
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
|
|
|
|
|
|
|
|
Outstanding at November 24, 2018
|
|
|
8,350
|
|
|
$
|
8.02
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(3,100
|
)
|
|
|
8.02
|
|
Forfeited/Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at November 30, 2019
|
|
|
5,250
|
|
|
|
8.02
|
|
Exercisable at November 30, 2019
|
|
|
5,250
|
|
|
$
|
8.02
|
|
All remaining options outstanding at November 30, 2019 are exercisable at $8.02 per share with a remaining contractual life of 1.6 years and an aggregate intrinsic value of $38. There were no non-vested options outstanding under our plans during the year ended November 30, 2019.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Additional information regarding activity in our stock options during fiscal 2019, 2018 and 2017 is as follows:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intrinsic value of options exercised
|
|
$
|
34
|
|
|
$
|
75
|
|
|
$
|
564
|
|
Total cash received from the exercise of options
|
|
|
25
|
|
|
|
27
|
|
|
|
310
|
|
Excess tax benefits recognized in income tax expense upon the exercise of options
|
|
|
6
|
|
|
|
16
|
|
|
|
188
|
|
Restricted Shares
Changes in the outstanding non-vested restricted shares during the year ended November 30, 2019 were as follows:
|
|
Number of Shares
|
|
|
Weighted
Average Grant
Date Fair
Value Per
Share
|
|
|
|
|
|
|
|
|
|
|
Non-vested restricted shares outstanding at November 24, 2018
|
|
|
81,036
|
|
|
$
|
32.03
|
|
Granted
|
|
|
18,153
|
|
|
|
15.81
|
|
Vested
|
|
|
(6,036
|
)
|
|
|
33.07
|
|
Forfeited
|
|
|
(3,000
|
)
|
|
|
20.97
|
|
Non-vested restricted shares outstanding at November 30, 2019
|
|
|
90,153
|
|
|
$
|
32.03
|
|
Restricted share awards granted in fiscal 2019 consisted of 9,653 restricted shares granted to our non-employee directors on March 6, 2019 which will vest on the first anniversary of the grant, and 5,000 and 3,500 restricted shares granted to employees on July 23, 2019 and October 9, 2019, respectively, which will vest on the third anniversary of each grant.
During fiscal 2019, 6,036 restricted shares were vested and released, all of which had been granted to directors. During fiscal 2018 and 2017, 19,810 shares and 21,210 shares, respectively, were withheld to cover withholding taxes of $674 and $641, respectively, arising from the vesting of restricted shares. During fiscal 2019, 2018 and 2017, excess tax benefits of $0, $207 and $366, respectively, were recognized within income tax expense upon the release of vested shares.
Additional information regarding our outstanding non-vested restricted shares at November 30, 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
Restricted
|
|
|
Share Value
|
|
|
Restriction
|
|
Grant
|
|
Shares
|
|
|
at Grant Date
|
|
|
Period
|
|
Date
|
|
Outstanding
|
|
|
Per Share
|
|
|
(Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 10, 2017
|
|
|
36,000
|
|
|
$
|
29.05
|
|
|
|
0.1
|
|
January 11, 2018
|
|
|
36,000
|
|
|
|
35.75
|
|
|
|
1.1
|
|
March 6, 2019
|
|
|
9,653
|
|
|
|
18.13
|
|
|
|
0.3
|
|
July 23, 2019
|
|
|
5,000
|
|
|
|
12.34
|
|
|
|
2.6
|
|
October 9, 2019
|
|
|
3,500
|
|
|
|
14.37
|
|
|
|
2.9
|
|
|
|
|
90,153
|
|
|
|
|
|
|
|
|
|
Unrecognized compensation cost related to these non-vested restricted shares at November 30, 2019 is $594, of which $525 is expected to be recognized in fiscal 2020 with the remainder to be recognized over the following two fiscal years.
Employee Stock Purchase Plan
In March of 2017 we adopted and implemented the 2017 Employee Stock Purchase Plan (“2017 ESPP”) that allows eligible employees to purchase a limited number of shares of our stock at 85% of market value. Under the 2017 ESPP we sold 23,460, 14,967 and 6,275 shares to employees during fiscal 2019, 2018 and 2017, respectively, which resulted in an immaterial amount of compensation expense. There are 205,298 shares remaining available for sale under the 2017 ESPP at November 30, 2019.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
The components of the income tax provision are as follows:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
2,150
|
|
|
$
|
(1,137
|
)
|
|
$
|
7,887
|
|
State
|
|
|
892
|
|
|
|
462
|
|
|
|
2,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(2,191
|
)
|
|
|
4,747
|
|
|
|
(200
|
)
|
State
|
|
|
(663
|
)
|
|
|
(84
|
)
|
|
|
(102
|
)
|
Total
|
|
$
|
188
|
|
|
$
|
3,988
|
|
|
$
|
9,620
|
|
On December 22, 2017, The Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act reduced the federal statutory corporate income tax rate from 35% to 21% effective January 1, 2018 for all corporate taxpayers, while most other provisions of the Act became effective for fiscal years beginning on or after January 1, 2018. Therefore, we computed our income tax expense for fiscal 2018 using a blended federal statutory rate of 22.2%. The 21% federal statutory rate, as well as certain other provisions of the Act including the elimination of the domestic manufacturing deduction and new limitations on certain business deductions, applies to our 2019 fiscal year and thereafter. The federal rate reduction had a significant impact on our provision for income taxes for fiscal 2018 due to a discrete charge of $1,331 arising from the re-measurement of our deferred tax assets. Our accounting for the income tax effects of the Act was complete as of November 24, 2018.
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:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Statutory federal income tax rate
|
|
|
21.0
|
%
|
|
|
22.2
|
%
|
|
|
35.0
|
%
|
Revaluation of deferred tax assets resulting from new enacted rates
|
|
|
-
|
|
|
|
10.9
|
|
|
|
-
|
|
State income tax, net of federal benefit
|
|
|
(14.0
|
)
|
|
|
4.6
|
|
|
|
3.9
|
|
Impairment of non-deductible goodwill
|
|
|
(23.2
|
)
|
|
|
-
|
|
|
|
-
|
|
Excess tax benefits from stock-based compensation
|
|
|
0.3
|
|
|
|
(1.5
|
)
|
|
|
(1.8
|
)
|
Other
|
|
|
5.1
|
|
|
|
(3.5
|
)
|
|
|
(2.6
|
)
|
Effective income tax rate
|
|
|
(10.8
|
)%
|
|
|
32.7
|
%
|
|
|
34.5
|
%
|
Excess tax benefits in the amount of $22, $223 and $554 were recognized as a component of income tax expense during fiscal 2019, 2018 and 2017, respectively, resulting from the exercise of stock options and the release of restricted shares. The fiscal 2019 adjustment for impairment of non-deductible goodwill reflects the fact that there was no tax basis related to the impaired goodwill.
Notes to Consolidated 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 30,
2019
|
|
|
November 24,
2018
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
207
|
|
|
$
|
192
|
|
Inventories
|
|
|
2,487
|
|
|
|
1,755
|
|
Notes receivable
|
|
|
44
|
|
|
|
109
|
|
Post employment benefit obligations
|
|
|
3,241
|
|
|
|
3,619
|
|
State net operating loss carryforwards
|
|
|
193
|
|
|
|
218
|
|
Unrealized loss from affiliates
|
|
|
81
|
|
|
|
15
|
|
Net deferred rents
|
|
|
3,753
|
|
|
|
3,199
|
|
Other
|
|
|
1,828
|
|
|
|
1,290
|
|
Gross deferred income tax assets
|
|
|
11,834
|
|
|
|
10,397
|
|
Valuation allowance
|
|
|
-
|
|
|
|
-
|
|
Total deferred income tax assets
|
|
|
11,834
|
|
|
|
10,397
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
4,288
|
|
|
|
5,353
|
|
Intangible assets
|
|
|
1,114
|
|
|
|
1,060
|
|
Prepaid expenses and other
|
|
|
688
|
|
|
|
718
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax liabilities
|
|
|
6,090
|
|
|
|
7,131
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax assets
|
|
$
|
5,744
|
|
|
$
|
3,266
|
|
We have state net operating loss carryforwards available to offset future taxable state income of $4,095, which expire in varying amounts between 2021 and 2027. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards.
Income taxes paid, net of refunds received, during 2019, 2018 and 2017 were $1,228, $1,431, and $7,516, respectively.
We regularly evaluate, assess and adjust our accrued liabilities for unrecognized tax benefits in light of changing facts and circumstances, which could cause the effective tax rate to fluctuate from period to period. Our accrued liabilities for uncertain tax benefits at November 30, 2019 and November 24, 2018 were 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 2016 through 2019 for all of our major tax jurisdictions.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
15.
|
Other Gains and Losses
|
Gains on Sales of Retail Store Locations
Selling, general and administrative expenses for the year ended November 24, 2018 includes a gain of $165 resulting from the sale of our retail store location in Spring, Texas for $2,463 in cash. The store was closed in October of 2018 and repositioned to a new location serving the Houston market in The Woodlands, Texas, which opened in November of 2018.
Selling, general and administrative expenses for the year ended November 25, 2017 includes a gain of $1,220 resulting from the sale of our retail store location in Las Vegas, Nevada for $4,335 in cash. The store was closed in August of 2017 in preparation for its repositioning to a new location serving the Las Vegas market, in Summerlin, Nevada, which opened in January of 2018.
Early Retirement Program
During the first quarter of fiscal 2019, we offered a voluntary early retirement package to certain eligible employees of the Company. Twenty-three employees accepted the offer, which expired on February 28, 2019. These employees are to receive pay equal to one-half their current salary plus benefits over a period of one year from the final day of each individual’s active employment. Accordingly, we recognized a charge of $835 during the year ended November 30, 2019. The unpaid obligation of $374 is included in other accrued liabilities in our consolidated balance sheet as of November 30, 2019.
Asset Impairment Charges and Lease Exit Costs
During fiscal 2019, the loss from operations included $4,431 of non-cash impairment charges recognized on the assets of six underperforming retail stores. In addition, a $149 charge was accrued for lease exit costs incurred in connection with the repositioning of a Company-owned retail store in Palm Beach, Florida to a new location within the same market.
During fiscal 2018 income from operations included $469 of non-cash asset impairment charges recognized on the assets of one underperforming retail location, and a $301 charge for the accrual of lease exit costs incurred in connection with the closing of a Company-owned retail store location in San Antonio, Texas.
There were no asset impairment charges or lease exit costs incurred against income from operations during fiscal 2017. See Note 2 regarding non-operating impairment charges incurred in connection with our investments in retail real estate.
Litigation Expense
During fiscal 2019 we accrued $700 for the estimated costs to resolve certain wage and hour violation claims that have been asserted against the Company. While the ultimate cost of resolving these claims may be substantially higher, the amount accrued represents our estimate of the most likely outcome of a mediated settlement.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
16.
|
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 retail and logistical services segments. We also lease tractors and trailers used in our logistical services segment and local delivery trucks and service vans used in our retail 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 30, 2019:
|
|
Retail Stores
|
|
|
Warehousing
& Distribution
Centers
|
|
|
Transportation
Equipment
|
|
|
All Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020
|
|
$
|
24,524
|
|
|
$
|
5,745
|
|
|
$
|
4,938
|
|
|
$
|
1,824
|
|
|
$
|
37,031
|
|
Fiscal 2021
|
|
|
22,596
|
|
|
|
5,012
|
|
|
|
3,761
|
|
|
|
1,109
|
|
|
|
32,478
|
|
Fiscal 2022
|
|
|
20,067
|
|
|
|
4,742
|
|
|
|
2,618
|
|
|
|
502
|
|
|
|
27,929
|
|
Fiscal 2023
|
|
|
18,243
|
|
|
|
3,302
|
|
|
|
1,311
|
|
|
|
57
|
|
|
|
22,913
|
|
Fiscal 2024
|
|
|
14,385
|
|
|
|
1,396
|
|
|
|
1,049
|
|
|
|
5
|
|
|
|
16,835
|
|
Thereafter
|
|
|
46,759
|
|
|
|
368
|
|
|
|
391
|
|
|
|
-
|
|
|
|
47,518
|
|
Total future minimum lease payments
|
|
$
|
146,574
|
|
|
$
|
20,565
|
|
|
$
|
14,068
|
|
|
$
|
3,497
|
|
|
$
|
184,704
|
|
Lease expense was $41,809, $38,970 and $34,372 for 2019, 2018, and 2017, respectively. Improvement allowances received from lessors at the inception of a lease are deferred and amortized over the term of the lease. The unamortized balance of such amounts was $8,050 and $6,716 at November 30, 2019 and November 24, 2018, respectively, with the non-current portion of $6,799 and $5,715, respectively, included in other liabilities in our consolidated balance sheets and the remaining current portion included in other accrued liabilities.
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 2020
|
|
$
|
1,533
|
|
Fiscal 2021
|
|
|
948
|
|
Fiscal 2022
|
|
|
602
|
|
Fiscal 2023
|
|
|
285
|
|
Fiscal 2024
|
|
|
180
|
|
Thereafter
|
|
|
120
|
|
Total minimum future rental income
|
|
$
|
3,668
|
|
Real estate rental net loss (rental income less lease costs, depreciation, insurance, and taxes), related to licensee stores and other investment real estate, was $156, $23 and $48 in 2019, 2018 and 2017, respectively, and is reflected in other loss, net in the accompanying consolidated statements of operations.
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 $1,776 and $2,021 at November 30, 2019 and November 24, 2018, 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 30, 2019 and November 24, 2018, were not material.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
We are involved in various claims and actions which arise in the normal course of business. Although the final outcome of these matters cannot be determined, based on the facts presently known, it is our opinion that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations. See Note 15 regarding litigation arising from certain wage and hour violations which have been asserted against the Company.
18.
|
Earnings (Loss) Per Share
|
The following table sets forth the computation of basic and diluted earnings (loss) per share:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,928
|
)
|
|
$
|
8,218
|
|
|
$
|
18,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic income per share - weighted average shares
|
|
|
10,285,511
|
|
|
|
10,651,351
|
|
|
|
10,649,225
|
|
Effect of dilutive securities
|
|
|
-
|
|
|
|
40,424
|
|
|
|
82,850
|
|
Denominator for diluted income per share — weighted average shares and assumed conversions
|
|
|
10,285,511
|
|
|
|
10,691,775
|
|
|
|
10,732,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share — basic
|
|
$
|
(0.19
|
)
|
|
$
|
0.77
|
|
|
$
|
1.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share — diluted
|
|
$
|
(0.19
|
)
|
|
$
|
0.77
|
|
|
$
|
1.70
|
|
For fiscal 2019, 2018 and 2017, the following potentially dilutive shares were excluded from the computations as there effect was anti-dilutive:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Unvested restricted shares
|
|
|
90,153
|
|
|
|
45,036
|
|
|
|
-
|
|
Stock options
|
|
|
5,250
|
|
|
|
-
|
|
|
|
-
|
|
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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 operations.
|
|
●
|
Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities and capital expenditures directly related to these stores and the Company-owned distribution network utilized to deliver products to our retail customers.
|
|
●
|
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 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 consolidated statement of operations. Zenith’s operating costs are included in selling, general and administrative expenses and total $78,220, $81,468 and $80,068 for fiscal 2019, 2018 and 2017, respectively.
|
During the fourth quarter of fiscal 2018, we substantially completed transferring operational control of home delivery services for BHF stores from Zenith to our retail segment, including the transfer of the assets and many of the employees used in providing that service. Accordingly, the results for the retail and logistical services segments for all periods prior to fiscal 2019 have been restated to present the depreciation and amortization, capital expenditures and identifiable assets associated with home delivery services formerly provided by Zenith to the Bassett retail segment as though they had been incurred within the retail segment, and intercompany revenues for those services are no longer included in the logistical services segment. The impact of the restatement upon the income (loss) from operations for both the logistical services and retail segments was not material. Concurrently with the transfer of home delivery operations to retail, Zenith also ceased providing such services to third party customers. Revenues from Zenith’s home delivery services formerly provided to third party customers and the associated costs thereof continue to be reported in the logistical services segment. Zenith continues to provide other intercompany shipping and warehousing services to Bassett which are eliminated in consolidation.
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 segment. 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 operations.
Notes to Consolidated 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:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
261,105
|
|
|
$
|
255,958
|
|
|
$
|
249,193
|
|
Retail
|
|
|
268,693
|
|
|
|
268,883
|
|
|
|
268,264
|
|
Logistical services
|
|
|
80,074
|
|
|
|
82,866
|
|
|
|
83,030
|
|
Inter-company eliminations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and accessories
|
|
|
(125,933
|
)
|
|
|
(122,372
|
)
|
|
|
(119,360
|
)
|
Logistical services
|
|
|
(31,852
|
)
|
|
|
(28,480
|
)
|
|
|
(28,624
|
)
|
Consolidated
|
|
$
|
452,087
|
|
|
$
|
456,855
|
|
|
$
|
452,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
11,456
|
|
|
$
|
12,274
|
|
|
$
|
19,121
|
|
Retail
|
|
|
(7,009
|
)
|
|
|
(312
|
)
|
|
|
3,490
|
|
Logistical services
|
|
|
1,855
|
|
|
|
1,398
|
|
|
|
2,962
|
|
Inter-company elimination
|
|
|
1,144
|
|
|
|
1,494
|
|
|
|
1,445
|
|
Asset impairment charges
|
|
|
(4,431
|
)
|
|
|
(469
|
)
|
|
|
-
|
|
Goodwill impairment charge
|
|
|
(1,926
|
)
|
|
|
-
|
|
|
|
-
|
|
Early retirement program
|
|
|
(835
|
)
|
|
|
-
|
|
|
|
-
|
|
Litigation expense
|
|
|
(700
|
)
|
|
|
-
|
|
|
|
-
|
|
Lease exit costs
|
|
|
(149
|
)
|
|
|
(301
|
)
|
|
|
-
|
|
Consolidated income from operations
|
|
$
|
(595
|
)
|
|
$
|
14,084
|
|
|
$
|
27,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
3,178
|
|
|
$
|
3,038
|
|
|
$
|
2,648
|
|
Retail
|
|
|
6,303
|
|
|
|
6,096
|
|
|
|
6,355
|
|
Logistical services
|
|
|
4,019
|
|
|
|
4,069
|
|
|
|
4,309
|
|
Consolidated
|
|
$
|
13,500
|
|
|
$
|
13,203
|
|
|
$
|
13,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
5,650
|
|
|
$
|
4,194
|
|
|
$
|
4,875
|
|
Retail
|
|
|
8,473
|
|
|
|
12,769
|
|
|
|
8,108
|
|
Logistical services
|
|
|
3,627
|
|
|
|
1,338
|
|
|
|
2,517
|
|
Consolidated
|
|
$
|
17,750
|
|
|
$
|
18,301
|
|
|
$
|
15,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
$
|
144,392
|
|
|
$
|
144,209
|
|
|
$
|
152,181
|
|
Retail
|
|
|
91,997
|
|
|
|
96,241
|
|
|
|
90,186
|
|
Logistical services
|
|
|
39,377
|
|
|
|
51,191
|
|
|
|
51,381
|
|
Consolidated
|
|
$
|
275,766
|
|
|
$
|
291,641
|
|
|
$
|
293,748
|
|
A breakdown of wholesale sales by product category for each of the last three fiscal years is provided below:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bassett Custom Upholstery
|
|
$
|
152,415
|
|
|
|
58.4
|
%
|
|
$
|
141,321
|
|
|
|
55.2
|
%
|
|
$
|
136,366
|
|
|
|
54.7
|
%
|
Bassett Leather
|
|
|
19,220
|
|
|
|
7.4
|
%
|
|
|
21,589
|
|
|
|
8.4
|
%
|
|
|
22,528
|
|
|
|
9.0
|
%
|
Bassett Custom Wood
|
|
|
46,082
|
|
|
|
17.6
|
%
|
|
|
46,074
|
|
|
|
18.0
|
%
|
|
|
43,793
|
|
|
|
17.6
|
%
|
Bassett Casegoods
|
|
|
40,920
|
|
|
|
15.7
|
%
|
|
|
42,875
|
|
|
|
16.8
|
%
|
|
|
42,874
|
|
|
|
17.2
|
%
|
Accessories (1)
|
|
|
2,468
|
|
|
|
0.9
|
%
|
|
|
4,099
|
|
|
|
1.6
|
%
|
|
|
3,632
|
|
|
|
1.5
|
%
|
Total
|
|
$
|
261,105
|
|
|
|
100.0
|
%
|
|
$
|
255,958
|
|
|
|
100.0
|
%
|
|
$
|
249,193
|
|
|
|
100.0
|
%
|
|
(1)
|
Beginning with the third quarter of fiscal 2019, our wholesale segment no longer purchases accessory items for resale to our retail segment or to third party customers such as licensees or independent furniture retailers. Our retail segment and third party customers now source their accessory items directly from the accessory vendors.
|
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
20.
|
Quarterly Results of Operations
|
|
|
2019
|
|
|
|
First
Quarter (1)
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and accessories
|
|
$
|
107,357
|
|
|
$
|
95,824
|
|
|
$
|
98,369
|
|
|
$
|
102,315
|
|
Logistics
|
|
|
13,484
|
|
|
|
12,366
|
|
|
|
11,050
|
|
|
|
11,322
|
|
Total sales revenue
|
|
|
120,841
|
|
|
|
108,190
|
|
|
|
109,419
|
|
|
|
113,637
|
|
Cost of furniture and accessories sold
|
|
|
49,177
|
|
|
|
42,530
|
|
|
|
42,246
|
|
|
|
45,291
|
|
Income (loss) from operations
|
|
|
949
|
|
|
|
701
|
|
|
|
3,400
|
|
|
|
(5,645
|
)
|
Net income (loss)
|
|
|
608
|
|
|
|
445
|
|
|
|
2,157
|
|
|
|
(5,138
|
)
|
Basic earnings (loss) per share
|
|
|
0.06
|
|
|
|
0.04
|
|
|
|
0.21
|
|
|
|
(0.50
|
)
|
Diluted earnings (loss) per share
|
|
|
0.06
|
|
|
|
0.04
|
|
|
|
0.21
|
|
|
|
(0.50
|
)
|
|
|
2018
|
|
|
|
First
Quarter (3)
|
|
|
Second
Quarter (4)
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and accessories
|
|
$
|
96,123
|
|
|
$
|
102,675
|
|
|
$
|
99,807
|
|
|
$
|
103,864
|
|
Logistics
|
|
|
14,149
|
|
|
|
14,305
|
|
|
|
13,149
|
|
|
|
12,783
|
|
Total sales revenue
|
|
|
110,272
|
|
|
|
116,980
|
|
|
|
112,956
|
|
|
|
116,647
|
|
Cost of furniture and accessories sold
|
|
|
43,269
|
|
|
|
45,660
|
|
|
|
44,821
|
|
|
|
45,831
|
|
Income from operations
|
|
|
2,050
|
|
|
|
5,663
|
|
|
|
4,324
|
|
|
|
2,047
|
|
Net income
|
|
|
(913
|
)
|
|
|
4,289
|
|
|
|
2,945
|
|
|
|
1,897
|
|
Basic earnings per share
|
|
|
(0.09
|
)
|
|
|
0.40
|
|
|
|
0.28
|
|
|
|
0.18
|
|
Diluted earnings per share
|
|
|
(0.09
|
)
|
|
|
0.40
|
|
|
|
0.28
|
|
|
|
0.18
|
|
The first quarter of fiscal 2019 included 14 weeks. All other quarters shown above for fiscal 2019 and 2018 consist of 13 week fiscal periods.
|
(1)
|
Income from operations includes a charge of $835 arising from certain eligible employees’ acceptance of voluntary early retirement package (see Note 15).
|
|
(2)
|
Loss from operations includes a charge for the impairment of goodwill of $1,926 (see Note 8) and charges of $4,431, $700 and $149 for impairment of long-lived assets, litigation costs and lease termination costs, respectively (see Note 15).
|
|
(3)
|
Net loss includes a $2,157 charge to income tax expense arising from the remeasurement of our deferred tax assets due to the reduction in the Federal statutory income tax rate included in the Tax Cuts and Jobs Act (see Note 14).
|
|
(4)
|
Income from operations includes a gain of $165 from the sale of our Spring, Texas retail store (see Note 15). Net income includes a benefit of $155 in income tax expense arising from additional adjustments to the remeasurement of our deferred tax assets resulting from the Act (see Note 14).
|
|
(5)
|
Income from operations includes a $469 asset impairment charge related to our Torrance, California retail store and a $301 charge for lease exit costs related to the closing of a store in San Antonio, Texas (see Note 15). Net income includes a $704 tax benefit arising from the final adjustment to our interim estimates of the impact of reduced federal income tax rates on the valuation of our deferred tax assets (see Note 14).
|