B A S S E T T F U R N I T U R E . C O M • B A S S E T T , V I R G I N I A • N A S D A Q : B S E T
ANNUAL R EP OR T 2018
In September, Bassett opened its newest generation store concept in Frisco, Texas.
The Design Studio gets a refresh with a
large TV design presentation area and
oversized wood finish samples.
Touch screen kiosks throughout the store
have boosted customer engagement by
allowing them to interactively design custom
furniture and explore all Bassett products.
The center room shows custom upholstery, custom dining and accessories together to allow
the customer to imagine designing a great room in their home. The Discovery Table boosted
engagement with our popular Custom Dining program in new stores.
BOARD OF DIRECTORS
ROBERT H. SPILMAN, JR.
Chairman of the Board and Chief Executive Officer
Bassett Furniture Industries, Inc.
Former President and Chief Operating Officer
JOHN R. BELK
Belk, Inc.
Private Investor
KRISTINA K. CASHMAN
Chief Financial Officer
Upward Projects, LLC
PAUL FULTON
Chairman Emeritus
Bassett Furniture Industries, Inc.
GEORGE W. HENDERSON, III
Former Chairman and Chief Executive Officer
Burlington Industries, Inc.
J. WALTER MCDOWELL
Former Chief Executive Officer
Carolinas/Virginia Banking
Wachovia Corporation
WILLIAM C. WAMPLER, JR.
Managing Member, WSWRS, LLC
Former Member, Senate of Virginia
Former Executive Vice President
Lowe’s Companies, Inc.
VIRGINIA W. HAMLET
Founder and Owner
Hamlet Vineyards, LLC
WILLIAM C. WARDEN, JR.
Lead Independent Director of Bassett Furniture Industries, Inc.
OFFICERS
ROBERT H. SPILMAN, JR.
Chairman of the Board and Chief Executive Officer
Vice President, Corporate Retail Sales
NICHOLAS C. GEE
DAVID C. BAKER
JAY R. HERVEY
Senior Vice President, Corporate Retail
Vice President, Secretary, General Counsel
JOHN E. BASSETT, III
Senior Vice President, Wood
MATTHEW S. JOHNSON
Vice President, Sales
BRUCE R. COHENOUR
KARA KELCHNER-STRONG
Senior Vice President, Sales and Merchandising
Vice President, Strategic Transformation Officer
J. MICHAEL DANIEL
MIKE R. KREIDLER
Senior Vice President and Chief Financial Officer
Vice President, Upholstery Operations
JACK L. HAWN, JR.
Senior Vice President, Bassett
President, Zenith
MARK S. JORDAN
Senior Vice President, Upholstery
EDWIN C. AVERY, JR.
Vice President, Upholstery Product Development
KEVIN D. BLANCHARD
Vice President, Chief Information Officer
ZACHARY H. BRYANT
President, Lane Venture
KENA A. COHENOUR
Vice President, Upholstery Merchandising
JAY S. MOORE
Vice President, Digital Marketing
PETER D. MORRISON
Vice President, Chief Creative Officer
LOUIS C. MOSSOTTI, JR.
Vice President, Corporate Retail – Southeast Region
J. CARTER UNDERWOOD
Vice President, Wood Operations
EDWARD H. WHITE
Vice President, Human Resources
ANN M. ZACCARIA
Vice President, Real Estate and New Store Development
To Our Shareholders
2018 can be described as a transition year for
Bassett as we are taking a number of steps to
shape the company’s capabilities for the future.
These measures are partially responsible for
the decline in our financial performance for
the year, along with the lower-than-expected
delivered sales levels in our corporate retail
division. We are making progress but still have
much work to do in creating a robust digital
journey that seamlessly integrates with our
brick and mortar Bassett Home Furnishings
store operations to provide a truly unique
consumer experience. The investments that
these efforts demand will continue to affect
our operational performance in 2019 but we
are firmly focused on improvement in the near
term and in the years ahead as we conduct this
important work.
for
the year grew
revenue
Consolidated
modestly to $457 million. Growth
in our
wholesale segment was mainly attributable to
the revenue provided by our newly-acquired
furniture division.
Lane Venture outdoor
Revenue derived from our corporate retail
division and
logistical services
segment were virtually the same as recorded in
2017. Adjusted net income, after one-time items,
declined from $15.8 million in 2017 to $10.1
million for the year ended November 24, 2018.
from our
By virtue of opening 6 new corporate and 2
new licensed stores in 2018, we grew our store
count total to 97 by year end. We also closed our
Spring, Texas location and moved up the road
to the booming community of The Woodlands.
Expansion of the store network was our intent
back in 2015 when we hired a VP of Real Estate/
Store Development and began to search the
country to sign leases in appropriate locations.
In 2019, we will open another 6 new corporate
stores, reposition another, and open a new
licensed store. By year end, our store count
should reach 104 locations – 71 corporate and
33 licensed. While we are excited to operate
a larger base of stores and enter some new
markets, we plan to significantly slow our
expansion later this year as we absorb and
manage the stores that we have opened over
the past 3 years. Furthermore, we plan to study
the nuances of our Generation 3 prototype store
that debuted in September in Frisco, Texas.
Inside, our custom furniture and interior design
capabilities are showcased through a much
larger design center, an expanded display
of accessories, and a new fixture package.
Our designers are using wall-mounted touch
screens and lightweight laptops to help our
customers design their personalized products
in every area of the store. New visualization
software has been
installed to depict the
myriad frame, fabric and trim options that are
available in much higher resolution than was
heretofore available. While we have much to
learn about the functionality of the Generation
3 store, the store’s early performance makes
us optimistic as to the potential of our new
experiential retail format. Ultimately, we plan
to pollinate our existing high-volume stores
with the key features of the Generation 3 store
once we understand the best way to implement
a retro-fit.
The evolution of our marketing strategy and
the means in which we engage the consumer
accelerated in 2018. The allocation of our
marketing dollars partially migrated away from
our traditional mix of television and direct mail
to a heavier dose of digital marketing, largely
in the form of social media. We installed new
tracking software to monitor the productivity
of the various elements of the new strategy.
initial
To offer a
engagement all the way through to post
transaction, we installed a cloud based Custom
Relationship Management platform that will
connect us with our customer throughout the
entire buying process. In August, we opened
linear experience from
a centralized customer service center
in
Martinsville, Virginia, that can digitally track
the consumer’s transaction, schedule delivery,
and communicate until the furniture is in the
home and the customer is satisfied. Due to the
associated executional risk, we have engaged
outside experts and hired new staff to manage
these transformative endeavors. These are big
steps for Bassett that we believe are necessary
to remain competitive in the real time retail
environment of today and will consume a high
percentage of management’s attention until
these competencies have been embedded into
our culture.
Some things about the furniture business have
not changed so much – namely, good product is
essential to success. In that light, we added new
programs and updated others in 2018. Clean,
contemporary styling is taking a larger portion
of market share in the industry, particularly in
metropolitan areas. After discussions with a
long time industry participant and polling our
best designers, we launched Bassett Modern in
February. We dedicated a quadrant of the store
to the effort that includes bedroom, dining,
upholstery and occasional furniture. We are
pleased with the results and are committed
to the modern sensibility as evidenced by
our upcoming expansion of the assortment
for President’s Day 2019. Our casual dining
program was embellished in 2018 with the
addition of a new finish pallet, new table base
and top materials, and new chairs. Partially
as a result of this makeover, our Martinsville
table plant enjoyed a record year of sales and
profits. Finally, our HGTV HOME Design Studio
by Bassett custom upholstery collection was
totally reinvented. After 19 years of growth, this
stalwart began to slow down in 2018, particularly
in the back half of the year. Our traditional
retail customers and our store personnel have
enthusiastically embraced “New Custom” and
we have seen encouraging retail results during
the first few weeks of January.
in bringing
this division up
We began fiscal 2018 with the acquisition of
Lane Venture (LV) in December 2017. The Lane
Venture brand has great equity with the outdoor
furniture community but had fallen on hard
times under the two previous management
teams. There has been a tremendous effort
involved
to
Bassett standards. We have opened a new
manufacturing cell, a new warehouse, two new
wholesale showrooms, hired new sales reps,
and introduced a new range of products to
revive the brand. Importantly, we have applied
Bassett’s quick
response manufacturing
paradigm to LV and we are now shipping special
order product in two weeks. Obviously, we
believe in the long term potential of LV and of
the outdoor category in general. In fact, in early
2020 we will introduce a completely separate
line of products under the Bassett Outdoor
name. These products will be sold exclusively
in Bassett stores, allowing us to further serve
the total home needs of our customers. We
sell the preponderance of our products in the
modern open plan “great rooms” so popular
today. Bassett Outdoor will allow us to provide
the solution for consumers that live “indoor/
outdoor” on the patios that are so often adjacent
to the great room. We look forward to serving the
traditional outdoor specialty store community
with Lane Venture and the Bassett customer
with Bassett Outdoor in 2019 and beyond.
treatments,
is our
Another growth avenue for Bassett
accessory business which includes area rugs,
window
lighting, mirrors, wall
mounted clocks, wall art and decorative pillows.
The core category within all of this is our area
rug program that has grown to be the catalyst
of many of our interior design projects. We are
making our accessory capabilities more obvious
in our stores with wall mounted fixtures adjacent
to the design center to highlight the whole home
assortment strategy. Also, we are architecting
a web based direct-to-home model intended
to promote more frequent interaction with our
brand. Injecting an everyday transactional layer
New Custom Upholstery
Custom Dining
to our sales mix in tandem with our proven
design makeover business is the combination
that we are building for the future.
Our Zenith Freight Lines division faced a
number of challenges that required operational
adjustments
in 2018. The well-chronicled
labor shortage that confronts the U.S. trucking
industry intensified its effect on Zenith. We
announced Zenith’s exit from the home delivery
business, driven largely by the desire to focus on
the legacy 3PL and middle mile segments for
which Zenith is highly regarded in the furniture
industry. Demand for its services in these areas
remains high and the renewed focus on these
core competencies should allow more time to
be spent on over the road driver recruitment and
refinement of the operating model. Profitability
should also improve as the competing priorities
and scheduling demands of the e-commerce
community did not mesh well with the white
glove requirements of delivering high quality
Bassett furniture to the home. Consequently,
we brought the 10 home delivery centers that
Zenith operated back into the Bassett fold to
concentrate solely on delivering a high quality
experience to our customers. We enter 2019
contemplating a renewed emphasis on our
“30 days in the home” commitment for custom
furniture and an even faster delivery promise
for simpler transactions.
Our Board of Directors has been one of our
strengths as we have navigated the shifting
sands of globalization, distribution, finance
and technological innovation since our first
foray into retail in 1997. Leading the charge
throughout this interesting journey had been
our Chairman Emeritus, Mr. Paul Fulton, who
will not be standing for re-election to the board
this year. Paul joined the Bassett board in 1994
after retiring as Dean of the Kenan Flagler
Business School at The University of North
Carolina. Prior to that, Paul had an extremely
successful career leading Hanes, Inc. as CEO
Mr. Fulton, Mr. Spilman
and as President of Sara Lee Corporation after
its acquisition of Hanes. Paul became CEO of
Bassett in 1997 and became non-executive
Chairman of the Company in 2000. He joined
the Bassett management team at a crucial time
as offshore competition was at a fever pitch and
we were in the nascent phases of opening our
retail network. Paul was not a “furniture man”
but he was (and is) an outstanding, experienced
businessman who was truly the right man at the
right time. His focus on gross margin generation
and operational accountability are part of his
legacy here at Bassett. And his mentorship of
many of us on the management team will never
be forgotten. Looking ahead, we welcomed
Ms. Virginia Hamlet to the board in the spring
of 2018. Virginia is a savvy entrepreneur who
has already been a positive contributor to our
group and we look forward to her insight in the
years ahead.
I thank my fellow associates, our Board of
Directors, our customers, and our shareholders
for their contributions and support in 2018.
Rob Spilman
Chairman/CEO
NE W S T ORE S IN 2018
The Woodlands, Texas
El Paso, Texas
Las Vegas, Nevada
Financial Summary
INCOME STATEMENT DATA
Net Sales
Income From Operations
Net Income
PER SHARE DATA
Diluted Income
Adjusted Diluted Income
Cash Dividends
Book Value
BALANCE SHEET DATA
Cash & Cash Equivalents
Investments
Total Assets
Long-Term Debt
Stockholders’ Equity
Fiscal years ended November
2018
2017
2016
2015
2014
$456,855
14,084
8,218
$452,503
27,018
18,256
$432,038
28,193
15,829
$430,927
25,989
20,433
$340,738
15,131
9,299
$ 0. 77
0.95
0. 47
18.08
$ 1.70
1.47
0.77
17.83
$ 1.46
1.44
0.68
16.85
$ 1.88
1.36
0.54
16.25
$ 0.87
0.87
0.48
14.95
$ 33,468
22,643
291,641
—
190,309
$ 53,949
23,125
293,748
329
191,460
$ 35,144
23,125
278,267
3,821
180,705
$ 36,268
23,125
282,543
8,500
177,366
$ 26,673
23,125
240,746
1,902
156,832
Dollars in thousands except per share amounts
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in thousands except share and per share data)
Overview
Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. Our products are sold primarily through
a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with
additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett
galleries or design centers. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 116-year
history has instilled the principles of quality, value, and integrity in everything we do, while simultaneously providing us
with the expertise to respond to ever-changing consumer tastes and meet the demands of a global economy.
With 97 BHF stores at November 24, 2018 we have leveraged our strong brand name in furniture into a network of Company-
owned and licensed stores that focus on providing consumers with a friendly environment for buying furniture and
accessories. Our store program is designed to provide a single source home furnishings retail store that provides a unique
combination of stylish, quality furniture and accessories with a high level of customer service. In order to reach markets that
cannot be effectively served by our retail store network, we also distribute our products through other wholesale channels
including multi-line furniture stores, many of which feature Bassett galleries or design centers. We use a network of over 30
independent sales representatives who have stated geographical territories. These sales representatives are compensated based
on a standard commission rate. We believe this blended strategy provides us the greatest ability to effectively distribute our
products throughout the United States and ultimately gain market share.
The BHF stores feature custom order furniture, free in-home design visits (“home makeovers”), and coordinated decorating
accessories. Our philosophy is based on building strong long-term relationships with each customer. Sales people are
referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their
home decor. Until a rigorous training and design certification program is completed, Design Consultants are not authorized
to perform in-home design services for our customers.
We have factories in Newton, North Carolina and Grand Prairie, Texas that manufacture custom upholstered furniture, a
factory in Martinsville, Virginia that primarily assembles and finishes our custom casual dining offerings and a factory in
Bassett, Virginia that assembles and finishes our “Bench Made” line of custom, solid hardwood furniture. Our manufacturing
team takes great pride in the breadth of its options, the precision of its craftsmanship, and the speed of its process, with custom
pieces often manufactured within two weeks of taking the order in our stores. Our logistics team then promptly ships the
product to one of our home delivery hubs or to a location specified by our licensees. In addition to the furniture that we
manufacture domestically, we source most of our formal bedroom and dining room furniture (casegoods) and certain leather
upholstery offerings from several foreign plants, primarily in Vietnam and China. Over 70% of the products we currently sell
are manufactured in the United States.
We also own Zenith Freight Lines, LLC (“Zenith”) which provides logistical services to Bassett along with other furniture
manufacturers and retailers. Zenith delivers best-of-class shipping and logistical support services that are uniquely tailored
to the needs of Bassett and the furniture industry. Approximately 65% of Zenith’s revenue is generated from services provided
to non-Bassett customers.
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. This acquisition marks our entry into the market for outdoor
furniture and we believe that Lane Venture will provide a foundation for us to become a significant participant in this
category. We plan to distribute this brand outside of our Bassett store network with plans to introduce a Bassett-branded line
in the stores in the near future. See Note 3 to our consolidated financial statements for additional details regarding this
acquisition.
At November 24, 2018, our BHF store network included 65 Company-owned stores and 32 licensee-owned stores. During
fiscal 2018, we opened new stores in Chandler, Arizona; Summerlin, Nevada; Oklahoma City, Oklahoma; El Paso, Texas;
and Frisco, Texas and completed the repositioning of one store in the Houston, Texas market. In addition, licensees opened
new stores in La Jolla, California and Daly City, California. We also opened a new 16,000 square foot clearance center in
Middletown, New York in the third quarter of 2018. Because the nature of this store will differ significantly from the other
stores in the BHF network, offering only clearance merchandise at reduced price points and without design consulting
services, we will not include this location in our reporting of comparable store results in the future. During fiscal 2018 we
closed one underperforming store in San Antonio, Texas.
1
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
We continue to execute our strategy of growing the Company through opening new stores, repositioning stores to improved
locations within a market and closing underperforming stores. The following table shows planned store openings where leases
have been executed:
Location
New Stores:
Coral Gables, FL
Boise, ID
Columbus, OH
Tucson, AZ
Estero, FL
Sarasota, FL
Princeton, NJ
Type
Size
Sq. Ft.
Planned
Opening
Corporate
Licensed
Corporate
Corporate
Corporate
Corporate
Corporate
10,000
11,000
11,000
9,000
15,000
8,000
13,000
Q1 2019
Q1 2019
Q1 2019
Q1 2019
Q1 2019
Q2 2019
Q3 2019
Repositionings:
Friendswood, TX to Baybrook
Mall area in Friendswood, TX
Corporate
16,000
Q1 2019
Following the planned openings shown above, we expect to significantly reduce the pace of the BHF network expansion and
focus on maximizing profitable sales volume through the existing stores.
As with any retail operation, prior to opening a new store we incur such expenses as rent, training costs and other payroll
related costs. These costs generally range between $200 to $400 per store depending on the overall rent costs for the location
and the period between the time when we take physical possession of the store space and the time of the store opening.
Generally, rent payments during a buildout period between delivery of possession and opening of a new store are deferred
and therefore straight line rent expense recognized during that time does not require cash. Inherent in our retail business
model, we also incur losses in the two to three months of operation following a new store opening. Like other furniture
retailers, we do not recognize a sale until the furniture is delivered to our customer. Because our retail business model does
not involve maintaining a stock of retail inventory that would result in quick delivery and because of the custom nature of
many of our furniture offerings, delivery to our customers usually occurs about 30 days after an order is placed. We generally
require a deposit at the time of order and collect the remaining balance when the furniture is delivered, at which time the sale
is recognized. Coupled with the previously discussed store pre-opening costs, total start-up losses can range from $400 to
$600 per store. While our retail expansion is initially costly, we believe our site selection and new store presentation will
generally result in locations that operate at or above a retail break-even level within a reasonable period of time following
store opening. Factors affecting the length of time required to achieve this goal on a store-by-store basis may include the
level of brand recognition, the degree of local competition and the depth of penetration in a particular market. Even as new
stores ramp up to break-even, we do realize additional wholesale sales volume that leverages the fixed costs in our wholesale
business.
During 2018, we invested in our digital effort to improve the customers’ journey from the time they begin on our website to
the final step of delivering the goods to their homes. Today’s customers expect their digital experiences and communications
to be personalized and highly-relevant, and catered to match their specific needs and preferences. We have laid the foundation
to becoming more connected to our customers and to use the data and insights collected during the customer journey to create
a more compelling customized customer experience beginning in 2019.
In 2018, we also invested significantly in developing data driven marketing processes to fuel our future growth. In
collaboration with external specialists, we are developing an enterprise data reporting tool to support fully integrated media
optimization across broadcast, print and digital media. We also invested in implementing several new digital marketing
channels, using a methodical test, measure, optimize approach to ensure maximum return on investment. These included
social media advertising, product information optimization and syndication for shopping marketplaces, and home
furniture/décor influential partnerships.
2
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Analysis of Operations
Net sales revenue, cost of furniture and accessories sold, selling, general and administrative (“SG&A”) expense, new store
pre-opening costs, other charges, and income from operations were as follows for the years ended November 24, 2018,
November 25, 2017 and November 26, 2016:
2018
2017
2016
Dollars Percent Dollars Percent
Change from Prior Year
2018 vs 2017
2017 vs 2016
Sales Revenue:
Furniture and
accessories
Logistics
Total net sales
$ 402,469 88.1% $398,097 88.0% $377,196 87.3% $ 4,372
(20 )
54,386 11.9% 54,406 12.0% 54,842 12.7%
1.1% $20,901
(436 )
0.0%
5.5 %
-0.8 %
revenue
456,855 100.0% 452,503 100.0% 432,038 100.0% 4,352
1.0% 20,465
4.7 %
Cost of furniture and
accessories sold
SG&A
New store pre-
opening costs
Other charges
Income from
operations
179,581 39.3% 177,579 39.2% 167,519 38.8% 2,002
260,339 57.0% 245,493 54.3% 235,178 54.4% 14,846
1.1% 10,060
6.0% 10,315
6.0 %
4.4 %
2,081
770
0.5% 2,413
-
0.2%
0.5% 1,148
-
0.0%
0.4%
0.0%
(332 )
770
-13.8% 1,265 110.2 %
-
-
-
$ 14,084
3.1% $ 27,018
6.0% $ 28,193
6.5% $(12,934 )
-47.9% $ (1,175 )
-4.2 %
Our consolidated net sales by segment were as follows:
Net Sales
Wholesale
Retail
Logistical services
Inter-company eliminations:
Furniture and accessories
Logistical services
Consolidated
2018
2017
2016
Dollars Percent Dollars Percent
Change from Prior Year
2018 vs 2017
2017 vs 2016
$ 255,958 $ 249,193 $ 240,346 $ 6,765
619
268,883 268,264 254,667
(164)
82,866 83,030 83,236
2.7% $
8,847
0.2% 13,597
(206)
-0.2%
(3,012)
(122,372) (119,360) (117,817)
144
(28,480) (28,624) (28,394)
$ 456,855 $ 452,503 $ 432,038 $ 4,352
(1,543)
2.5%
(230)
-0.5%
1.0% $ 20,465
3.7%
5.3%
-0.2%
1.3%
0.8%
4.7%
Refer to the segment information which follows for a discussion of the significant factors and trends affecting our results of
operations for fiscal 2018 and 2017 as compared with the prior year periods.
Certain other items affecting comparability between periods are discussed below in “Other Items Affecting Net Income”.
3
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Segment Information
We have strategically aligned our business into three reportable segments 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 (licensee-owned stores and Company-owned
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. We eliminate the sales between our wholesale and retail segments as well as
the imbedded profit in the retail inventory for the consolidated presentation in our financial statements. Our
wholesale segment also includes our holdings of short-term investments and retail real estate previously leased as
licensee stores. The earnings and costs associated with these assets are included in other loss, net, in our consolidated
statements of income.
Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues,
expenses, assets and liabilities (including real estate) and capital expenditures directly related to these stores and the
Company-owned distribution network utilized to deliver products to our retail customers.
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, the revenue from which is eliminated upon consolidation, 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 income. Zenith’s operating costs are included in
selling, general and administrative expenses.
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 revenues for the logistical services segment for all periods presented have been
restated to no longer include the intercompany revenues and related costs for those services. 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. The impact upon segment operating income (loss) from the restatement was not
material. Zenith continues to provide other intercompany shipping and warehousing services to Bassett which are eliminated
in consolidation.
4
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
The following tables illustrate the effects of various intercompany eliminations on income (loss) from operations in the
consolidation of our segment results:
Sales revenue:
Furniture & accessories
Logistics
Total sales revenue
Cost of furniture and accessories sold
SG&A expense
New store pre-opening costs
Income (loss) from operations (5)
Wholesale Retail
Logistics
Eliminations Consolidated
Year Ended November 24, 2018
$
$
255,958 $
-
255,958
171,272
72,412
-
12,274 $
268,883 $
-
268,883
130,591
136,523
2,081
(312) $
- $
82,866
82,866
-
81,468
-
1,398 $
(122,372 ) (1) $
(28,480 ) (2)
(150,852 )
(122,282 ) (3)
(30,064 ) (4)
-
1,494
$
402,469
54,386
456,855
179,581
260,339
2,081
14,854
Sales revenue:
Furniture & accessories
Logistics
Total sales revenue
Cost of furniture and accessories sold
SG&A expense
New store pre-opening costs
Income from operations
Wholesale Retail
Logistics
Eliminations Consolidated
Year Ended November 25, 2017
$
$
249,193 $
-
249,193
164,028
66,044
-
19,121 $
268,264 $
-
268,264
132,463
129,898
2,413
3,490 $
- $
83,030
83,030
-
80,068
-
2,962 $
(119,360 ) (1) $
(28,624 ) (2)
(147,984 )
(118,912 ) (3)
(30,517 ) (4)
-
1,445
$
398,097
54,406
452,503
177,579
245,493
2,413
27,018
Sales revenue:
Furniture & accessories
Logistics
Total sales revenue
Cost of furniture and accessories sold
SG&A expense
New store pre-opening costs
Income from operations
Wholesale Retail
Logistics
Eliminations Consolidated
Year Ended November 26, 2016
$
$
240,346 $
-
240,346
156,894
64,780
-
18,672 $
254,667 $
-
254,667
128,208
120,978
1,148
4,333 $
- $
83,236
83,236
-
79,725
-
3,511 $
(117,817 ) (1) $
(28,394 ) (2)
(146,211 )
(117,583 ) (3)
(30,305 ) (4)
-
1,677
$
377,196
54,842
432,038
167,519
235,178
1,148
28,193
(1) Represents the elimination of sales from our wholesale segment to our Company-owned BHF stores.
(2) Represents the elimination of logistical services billed to our wholesale segment.
(3) Represents the elimination of purchases by our Company-owned BHF stores from our wholesale segment, as well as the
change for the period in the elimination of intercompany profit in ending retail inventory.
(4) Represents the elimination of rent paid by our retail stores occupying Company-owned real estate and logistical services
expense incurred from Zenith by our wholesale segment.
Year Ended
November 24, November 25, November 26,
2017
2018
2016
Intercompany logistical services
Intercompany rents
$
Total SG&A expense elimination
$
(28,480 ) $
(1,584 )
(30,064 ) $
(28,624 ) $
(1,893 )
(30,517 ) $
(28,394 )
(1,911 )
(30,305 )
(5) Excludes the effects of asset impairment chargesand lease exit costs which are not allocated to our segments.
5
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Wholesale Segment
Net sales, gross profit, SG&A expense and operating income from operations for our Wholesale Segment were as follows
for the years ended November 24, 2018, November 25, 2017 and November 26, 2016:
2018
2017
2016
Change from Prior Year
2018 vs 2017
Dollars Percent Dollars Percent
2017 vs 2016
Net sales
Gross profit
SG&A
Income from operations
$ 255,958 100.0% $ 249,193 100.0% $ 240,346 100.0% $ 6,765
84,686 33.1% 85,165 34.2% 83,452 34.7%
(479)
72,412 28.3% 66,044 26.5% 64,780 27.0% 6,368
7.8% $ (6,847)
4.8% $ 19,121
7.7% $ 18,672
$ 12,274
2.7% $ 8,847
-0.6% 1,713
9.6% 1,264
449
-35.8% $
3.7%
2.1%
2.0%
2.4%
Wholesale shipments by category for the last three fiscal years are summarized below:
2018
2017
2016
Change from Prior Year
2018 vs 2017
Dollars Percent Dollars Percent
2017 vs 2016
Bassett Custom
Upholstery
Bassett Leather
Bassett Custom Wood
Bassett Casegoods
Accessories
Total
8.4 % 22,528
$ 141,321 55.2 % $ 136,366 54.7 % $ 127,989 53.3% $ 4,955
(939)
21,589
46,074 18.0 % 43,793 17.6 % 36,517 15.2% 2,281
1
42,875 16.8 % 42,874 17.2 % 52,246 21.7%
467
1.1%
4,099
$ 255,958 100.0 % $ 249,193 100.0 % $ 240,346 100.0% $ 6,765
9.0 % 21,038
3,632
2,556
8.8%
1.5 %
1.6 %
3.6% $ 8,377
-4.2% 1,490
5.2% 7,276
0.0% (9,372)
12.9% 1,076
2.7% $ 8,847
6.5%
7.1%
19.9%
-17.9%
42.1%
3.7%
Fiscal 2018 as Compared to Fiscal 2017
The increase in net sales was driven by the addition of $9,546 of revenue for Lane Venture, acquired during the first quarter
of 2018, along with a 1.8% increase in furniture shipments to the open market (outside the BHF network and excluding
shipments from Lane Venture), partially offset by a 2.8% decrease in furniture shipments to the BHF network as compared
to the prior year period. A much smaller component of our wholesale revenues, shipments of wholesale accessories, increased
12.9% over the prior year period. Gross margins for the wholesale segment were 33.1% for fiscal 2018 compared to 34.2%
for the prior year. This decrease was primarily driven by lower margins in the Bassett Custom Upholstery operations,
excluding Lane Venture, due to higher materials costs coupled with lower absorption of fixed costs due to lower volumes. In
June 2018, we implemented targeted price increases to our Custom Upholstery line to mitigate the effects of the cost increases
and began seeing the benefit on margins in July 2018. Wholesale SG&A increased as a percentage of sales over the prior
year period primarily driven by planned higher digital marketing and other brand development costs, partially offset by
decreased incentive compensation. In addition, we incurred $256 of one-time acquisition costs along with other startup costs
associated with the Lane Venture operation.
Fiscal 2017 as Compared to Fiscal 2016
The sales increase in 2017 was driven by a 2.7% increase in furniture shipments to the BHF store network along with a 3.9%
increase in furniture shipments to the open market (outside the BHF store network) as compared to the prior year period. A
much smaller component of our wholesale revenues, shipments of wholesale accessories, increased 42% over the prior year
period. The decrease in gross margins from fiscal 2016 was primarily due to the $1,428 settlement of the Polyurethane Foam
Antitrust Litigation in 2016. Excluding the benefit of the settlement, the gross margin for fiscal 2016 would have been 34.1%.
This increase was primarily due to improved margins in the Bassett Custom Upholstery operations from favorable pricing
strategies and improved manufacturing efficiencies. The decrease in SG&A as a percentage of sales compared with 2016 was
primarily due to greater leverage of fixed costs from higher sales volumes, partially offset by increased spending on the
website and digital strategy development.
6
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Wholesale Backlog
The dollar value of our wholesale backlog, representing orders received but not yet delivered to dealers and Company stores
as of November 24, 2018, November 25, 2017, and November 26, 2016 was as follows:
Year end wholesale backlog $
25,810 $
22,239 $
22,130
2018
2017
2016
Retail Segment – Company Owned Stores
Net sales, gross profit, SG&A expense, new store pre-opening costs and operating income for our Retail Segment were as
follows for the years ended November 24, 2018, November 25, 2017 and November 26, 2016:
2018 vs 2017
2017 vs 2016
2018 vs 2017
2017 vs 2016
2018
2017
2017
2016
Dollars Percent Dollars Percent
Change from Prior Year
$ 268,883 100.0% $ 268,264 100.0% $ 268,264 100.0% $ 254,667 100.0 % $
138,292 51.4% 135,801 50.6% 135,801 50.6% 126,459 49.7 %
619
2,491
0.2 % $ 13,597
9,342
1.8 %
5.3%
7.4%
136,523 50.8% 129,898 48.4% 129,898 48.4% 120,978 47.5 %
6,625
5.1 %
8,920
7.4%
2,081
0.8%
2,413
0.9%
2,413
0.9%
1,148
0.5 %
(332)
-13.8 %
1,265
110.2%
$
(312)
-0.1% $
3,490
1.3% $
3,490
1.3% $
4,333
1.7 % $ (3,802)
-108.9 % $
(843)
-19.5%
Net sales
Gross profit
SG&A
expense
New store
pre-opening
costs
Income from
operations
The following tables present operating results on a comparable store basis for each comparative set of periods. Table A
compares the results of the 53 stores that were open and operating for all of 2018 and 2017. Table B compares the results of
the 52 stores that were open and operating for all of 2017 and 2016.
Comparable Store Results:
Table A: 2018 vs 2017 (53 Stores)
Table B: 2017 vs 2016 (52 Stores)
2018 vs 2017
2017 vs 2016
2018
2017
2017
2016
Dollars Percent Dollars Percent
Change from Prior Year
$ 235,868 100.0% $ 239,633 100.0% $ 233,823 100.0% $ 229,530 100.0% $ (3,765)
(1,311)
121,399 51.5% 122,710 51.2% 119,546 51.1% 115,103 50.1%
-1.6% $ 4,293
-1.1% 4,443
1.9%
3.9%
115,094 48.8% 115,161 48.1% 112,428 48.1% 108,328 47.2%
(67)
-0.1% 4,100
3.8%
$
6,305
2.7% $
7,549
3.2% $
7,118
3.0% $
6,775
3.0% $ (1,244)
-16.5% $
343
5.1%
Net sales
Gross profit
SG&A
expense
Income from
operations
The following tables present operating results for all other stores which were not comparable year-over-year. Each table
includes the results of stores that either opened or closed at some point during the 24 months of each comparative set of
periods.
All Other (Non-Comparable) Store Results:
2018 vs 2017 All Other Stores
2017 vs 2016 All Other Stores
2018
2017
2017
2016
2018 vs 2017
Dollars Percent
2017 vs 2016
Dollars Percent
Change from Prior Year
$ 33,015 100.0% $ 28,631 100.0% $ 34,441 100.0% $ 25,137 100.0% $ 4,384
3,802
16,893 51.2% 13,091 45.7% 16,255 47.2% 11,356 45.2%
15.3% $ 9,304
4,899
29.0%
37.0%
43.1%
21,429 64.9% 14,737 51.5% 17,470 50.7% 12,650 50.3%
6,692
45.4%
4,820
38.1%
2,081
6.3%
2,413
8.4%
2,413
7.0%
1,148
4.6%
(332)
-13.8%
1,265
110.2%
Net sales
Gross profit
SG&A
expense
New store pre-
opening
costs
Loss from
operations
$ (6,617) -20.0% $ (4,059) -14.2% $ (3,628) -10.5% $ (2,442)
-9.7% $ (2,558)
63.0% $ (1,186)
48.6%
7
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Fiscal 2018 as Compared to Fiscal 2017
The increase in net sales for the 65 Company-owned stores over the prior year was comprised of a $4,384 increase in non-
comparable store sales partially offset by a 1.6% decrease in comparable store sales.
While we do not recognize sales until goods are delivered to the consumer, management tracks written sales (the retail dollar
value of sales orders taken, rather than delivered) as a key store performance indicator. Written sales for comparable stores
decreased by 3.6% for fiscal 2018 as compared to prior year.
The increase in comparable store gross margins to 51.5% for fiscal 2018 from 51.2% in the prior year period is primarily due
to improved pricing strategies and product mix. SG&A expenses as a percentage of sales for comparable stores increased
slightly from 2017 due to decreased leverage of fixed costs on lower sales volume and increased advertising expenses.
We incur losses in the first two to three months of operation following a store opening as sales are not recognized in the
income statement until the furniture is delivered to its customers resulting in operating expenses without the normal sales
volume. Because we do not maintain a stock of retail inventory that would result in quick delivery, and because of the custom
nature of the furniture offerings, such deliveries are generally not made until after 30 days from when the furniture is ordered
by the customer. Coupled with the pre-opening costs, total start-up losses typically amount to $400 to $600 per store. During
fiscal 2018 we incurred $1,601 of post-opening losses associated with the seven new stores and clearance center opened
during 2018 and late 2017 compared with $969 of post-opening losses during fiscal 2017. Included in the 2017 Non-
Comparable store loss was a $1,220 gain on the sale of our retail store location in Las Vegas, Nevada.
Each addition to our Company-owned store network results in incremental fixed overhead costs, primarily associated with
local store personnel, occupancy costs and warehousing expenses. The incremental SG&A expenses associated with each
new store will be ongoing.
Fiscal 2017 as Compared to Fiscal 2016
The 2017 increase in net sales for the 60 Company-owned BHF stores was comprised of a 1.9% increase in comparable store
sales along with a $9,304 increase in non-comparable store sales.
While we do not recognize sales until goods are delivered to the consumer, management tracks written sales (the retail dollar
value of sales orders taken, rather than delivered) as a key store performance indicator. Written sales for comparable stores
increased by 1.8% in fiscal 2017 over 2016.
The increase in comparable store gross margins over 2016 is primarily due to improved pricing strategies and product mix.
The increase in comparable store SG&A as a percentage of sales was primarily due to a $500 legal settlement along with
higher advertising expenses of $687 and occupancy costs of $481.
Increased losses from the non-comparable stores in fiscal 2017 included additional pre-opening costs associated with the
Garden City, New York; Culver City, California; King of Prussia, Pennsylvania; Wichita, Kansas; and Pittsburgh,
Pennsylvania stores which opened during fiscal 2017, and the new stores in Chandler, Arizona; Oklahoma City, Oklahoma;
and Summerlin, Nevada which are expected to open during the first quarter of 2018. These costs include rent, training costs
and other payroll-related costs specific to a new store location incurred during the period leading up to its opening and
generally range between $200 to $400 per store based on the overall rent costs for the location and the period between the
time when the Company takes possession of the physical store space and the time of the store opening.
We incur losses in the first two to three months of operation following a store opening as sales are not recognized in the
income statement until the furniture is delivered to its customers resulting in operating expenses without the normal sales
volume. Because we do not maintain a stock of retail inventory that would result in quick delivery, and because of the custom
nature of the furniture offerings, such deliveries are generally not made until after 30 days from when the furniture is ordered
by the customer. Coupled with the pre-opening costs, total start-up losses typically amount to $400 to $600 per store. During
fiscal 2017 we incurred $969 of post-opening losses associated with the five new stores which opened during the year. There
were post-opening losses of $482 primarily associated with two new stores during fiscal 2016.
8
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Pre- and post-opening losses for fiscal 2017 were partially offset by a gain of $1,220 from the sale of our retail store location
in Las Vegas, Nevada. The repositioning of that store to a new location in Summerlin, Nevada is expected to be completed
in early 2018.
Each addition to our Company-owned store network results in incremental fixed overhead costs, primarily associated with
local store personnel, occupancy costs and warehousing expenses. The incremental SG&A expenses associated with each
new store will be ongoing.
Retail Comparable Store Sales Trends
The following table provides year-over-year comparable store sales trends for the last three fiscal years:
Delivered
Written
Retail Backlog
2018
2017
2016
-1.6%
-3.6%
1.9%
1.8%
1.4%
1.4%
The dollar value of our retail backlog, representing orders received but not yet delivered to customers as of November 24,
2018, November 25, 2017, and November 26, 2016, was as follows:
2018
2017
2016
Year end retail backlog
$
Retail backlog per open store $
35,493 $
546 $
35,684 $
595 $
32,788
556
Logistical Services Segment
Revenues, operating expenses and income from operations for our logistical services segment were as follows for the years
ended November 24, 2018, November 25, 2017 and November 26, 2016:
Change from Prior Year
Logistics revenue
Operating expenses
$ 82,866 100.0% $ 83,030 100.0% $ 83,236 100.0% $ (164)
81,468 98.3% 80,068 96.4% 79,725 95.8% 1,400
2018
2017
2016
2017 vs 2016
2018 vs 2017
Dollars Percent Dollars Percent
-0.2%
0.4%
-0.2% $ (206)
343
1.7%
Income from operations $ 1,398 1.7% $ 2,962 3.6% $ 3,511 4.2% $ (1,564)
-52.8% $ (549)
-15.6%
Fiscal 2018 as Compared to Fiscal 2017
Zenith’s revenues were comparable year over year. Increased operating costs as a percentage of revenue were primarily due
to significantly higher fuel costs coupled with the increasing cost of hiring and retaining over-the-road drivers. Operating
costs for fiscal 2018 and 2017 include non-cash depreciation and amortization charges of $4,068 and $4,309, respectively.
Fiscal 2017 as Compared to Fiscal 2016
Zenith’s revenues were comparable year over year. Increased operating costs as a percentage of revenue were primarily due
to higher fuel costs. Operating costs for fiscal 2017 and 2016 include non-cash depreciation and amortization charges of
$4,309 and $3,936, respectively.
9
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Other Items Affecting Net Income
Other items affecting net income for fiscal 2018, 2017 and 2016 are as follows:
2018
2017
2016
$
Gain on sales of investments (1)
Interest income (2)
Interest expense (3)
Retail real estate impairment charge (4)
Net periodic pension costs (5)
Cost of company-owned life insurance (6)
Income from the Continued Dumping & Subsidy Offset Act (7)
Other investment income (8)
Other
- $
431
(57 )
-
(986 )
(598 )
7
52
(727 )
4,221 $
230
(234 )
(1,084 )
(1,049 )
(517 )
94
88
(891 )
-
120
(552 )
-
(910 )
(706 )
240
176
(784 )
Total other income (loss), net
$
(1,878 ) $
858 $
(2,416 )
(1) See Note 9 to the Consolidated Financial Statements for information related gains realized from the sale of two
investments during fiscal 2017.
(2) Consists of interest income arising from our short-term investments. See Note 4 to the Consolidated Financial
Statements for additional information regarding our investments in certificates of deposit.
(3) Our interest expense in fiscal 2018 has declined significantly from the previous two years as debt incurred or assumed
with the 2015 acquisition of Zenith has been repaid, with all remaining amounts paid off during the first quarter of
fiscal 2018. See Note 10 to the Consolidated Financial Statements for additional information regarding our
outstanding debt at November 24, 2018.
(4) See Note 2 to the Consolidated Financial Statements for information related to impairment of retail real estate during
fiscal 2017.
(5) Represents the portion of net periodic pension costs not included in income from operations. See Note 11 to the
Consolidated Financial Statements for additional information related to our defined benefit pension plans.
(6) Cost for fiscal 2018 is net of life insurance proceeds of $266 arising from the death of a former executive.
(7) These amounts represent distributions received from U.S. Customs and Boarder Protection (“Customs”) under the
Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”). These distributions primarily represent amounts
previously withheld by Customs pending the resolution of certain claims filed by other manufactures which were
dismissed in 2014. The distributions received from Customs have gradually diminished in the years subsequent to
the dismissal and are no longer expected to be significant beyond 2018.
(8) Primarily reflects gains arising from the partial liquidation of our investment in the Fortress Value Recovery Fund
I, LLC, which was fully impaired during fiscal 2012.
Provision for Income taxes
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 take effect 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, will apply to our 2019 fiscal year and thereafter.
We recorded an income tax provision of $3,988, $9,620 and $9,948 in fiscal 2018, 2017 and 2016, respectively. For fiscal
2018, our effective tax rate of 32.7% differs from the federal blended statutory rate of 22.2% primarily due to a discrete
charge of $1,331 arising from the re-measurement of our deferred tax assets. Other items impacting our effective tax rates
for fiscal 2018 include the effects of state income taxes and various permanent differences including the favorable impacts
of excess tax benefits on stock-based compensation of $223, non-taxable life insurance proceeds of $266, and the Section
199: Domestic Production Activities Deduction of $866. For fiscal 2017 and 2016, our effective tax rates of 34.5% and
10
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
38.6%, respectively, differ from the statutory rate of 35.0% primarily due to the effects of state income taxes and various
permanent differences including the favorable impact of the Section 199 manufacturing deduction. The reduction in the
effective tax rate in fiscal 2017 from 2016 was primarily due to higher excess tax benefits from stock compensation
recognized during fiscal 2017. See Note 14 to the Consolidated Financial Statements for additional information regarding
our income tax provision (benefit), as well as our net deferred tax assets and other matters.
We have net deferred tax assets of $3,266 as of November 24, 2018, which, upon utilization, are expected to reduce our cash
outlays for income taxes in future years. It will require approximately $13,000 of future taxable income to utilize our net
deferred tax assets.
Liquidity and Capital Resources
We are committed to maintaining a strong balance sheet in order to weather difficult industry conditions, to allow us to take
advantage of opportunities as market conditions improve, and to execute our long-term retail strategies.
Cash Flows
Cash provided by operations for fiscal 2018 was $28,698 compared to $36,384 for fiscal 2017, a decrease of $7,686. This
decrease is primarily due to lower operating margins and changes in working capital.
Our overall cash position decreased by $20,481 during 2018. Offsetting the cash provided by operations, we used $30,686 of
cash in investing activities, primarily consisting of our $15,556 investment in Lane Venture and capital expenditures of
$18,301 which included retail store relocations, retail store remodels, in-process spending on new stores, expanding and
upgrading our manufacturing capabilities, various technology improvements and additional material handling equipment for
our logistical services segment, partially offset by $2,463 of proceeds from the sale of our retail location in Spring, Texas
and $482 from the maturity of a portion of our CDs which were not reinvested. Net cash used in financing activities was
$18,493, including dividend payments of $8,800 and the final $3,000 installment payment on our Zenith acquisition note
payable. With cash and cash equivalents and short-term investments totaling $56,111 on hand at November 24, 2018, we
believe we have sufficient liquidity to fund operations for the foreseeable future.
Debt and Other Obligations
Effective November 15, 2018, we amended the credit facility with our bank, increasing our line of credit from $15,000 up to
$25,000. This amended credit facility, which matures in December of 2021, is unsecured and contains covenants requiring
us to maintain certain key financial ratios. We are in compliance with all covenants under the facility and expect to remain
in compliance for the foreseeable future. At November 24, 2018, we had $2,798 outstanding under standby letters of credit
against our line, leaving availability under our credit line of $22,202. In addition, we have outstanding standby letters of
credit with another bank totaling $381.
At November 24, 2018 we have outstanding principal totaling $292 under notes payable, all of which matures during fiscal
2019. See Note 10 to our consolidated financial statements for additional details regarding these notes, including collateral.
We expect to satisfy these obligations as they mature using cash flow from operations or our available cash on hand.
We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of
certain of our licensee-owned stores, and we lease land and buildings at various locations throughout the continental United
States for warehousing and distribution hubs used in our logistical services segment. We also lease tractors, trailers and local
delivery trucks used in our logistical services segment. We had obligations of $185,427 at November 24, 2018 for future
minimum lease payments under non-cancelable operating leases having remaining terms in excess of one year. We also have
guaranteed certain lease obligations of licensee operators. Remaining terms under these lease guarantees range from
approximately one to three years. We were contingently liable under licensee lease obligation guarantees in the amount of
$2,021 at November 24, 2018. See Note 16 to our consolidated financial statements for additional details regarding our leases
and lease guarantees.
11
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Dividends and Share Repurchases
During fiscal 2018, we declared four quarterly dividends totaling $5,041, or $0.47 per share. Cash dividend payments to our
shareholders during fiscal 2018 totaled $8,800. During fiscal 2018, we repurchased 253,907 shares of our stock for $5,945
under our share repurchase program. The weighted-average effect of these share repurchases on both our basic and diluted
earnings per share was not significant. The approximate dollar value that may yet be purchased pursuant to our stock
repurchase program as of November 24, 2018 was $17,984.
Capital Expenditures
We currently anticipate that total capital expenditures for fiscal 2019 will be approximately $15 to $20 million which will be
used primarily for new stores and store remodeling in our retail segment and additional investments in technology. Our capital
expenditure and working capital requirements in the foreseeable future may change depending on many factors, including
but not limited to the overall performance of the new stores, our rate of growth, our operating results and any adjustments in
our operating plan needed in response to industry conditions, competition or unexpected events. We believe that our existing
cash, together with cash from operations, will be sufficient to meet our capital expenditure and working capital requirements
for the foreseeable future.
Fair Value Measurements
We account 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 mortgages and notes payable for disclosure purposes
(see Note 10 to the Consolidated Financial Statements) involves Level 3 inputs. Our primary non-recurring fair value
estimates, typically involving the valuation of business acquisitions (see Note 3 to the Consolidated Financial Statements)
and asset impairments (see Note 15 to the Consolidated Financial Statements) have utilized Level 3 inputs.
12
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Contractual Obligations and Commitments
We enter into contractual obligations and commercial commitments in the ordinary course of business (See Note 16 to the
Consolidated Financial Statements for a further discussion of these obligations). The following table summarizes our
contractual payment obligations and other commercial commitments and the fiscal year in which they are expected to be
paid.
2019
2020
2021
2022
2023
Thereafter Total
Post employment benefit
obligations (1)
Notes payable
Contractual advertising
Interest payable
Letters of credit
Operating leases (2)
Lease guarantees (3)
Other obligations &
commitments
Purchase obligations (4)
$
1,072 $
292
3,560
7
3,179
1,014 $
-
-
-
-
1,221 $
-
-
-
-
33,721 32,030 27,017 23,194 18,386
353
1,305 $
-
-
-
-
994 $
-
-
-
-
347
627
347
347
960
-
200
-
200
-
100
100
Total
$ 43,418 $ 33,591 $ 28,558 $ 24,946 $ 20,060 $
8,632 $
-
-
-
-
51,112
-
14,238
292
3,560
7
3,179
185,460
2,021
250
-
1,810
-
59,994 $ 210,567
(1) Does not reflect a reduction for the impact of any company owned life insurance proceeds to be received. Currently, we
have life insurance policies with net death benefits of $17,811 to provide funding for these obligations. See Note 11 to
the Consolidated Financial Statements for more information.
(2) Does not reflect a reduction for the impact of sublease income to be received. See Note 16 to the Consolidated Financial
Statements for more information.
(3) Lease guarantees relate to payments we would only be required to make in the event of default on the part of the
guaranteed parties.
(4) The Company is not a party to any long-term supply contracts with respect to the purchase of raw materials or finished
goods. At the end of fiscal year 2018, we had approximately $15,507 in open purchase orders, primarily for imported
inventories, which are in the ordinary course of business.
Off-Balance Sheet Arrangements
We utilize stand-by letters of credit in the procurement of certain goods in the normal course of business. We lease land and
buildings that are primarily used in the operation of BHF stores and Zenith distribution facilities. We have guaranteed certain
lease obligations of licensee operators as part of our retail strategy. See Contractual Obligations and Commitments table
above and Note 16 to the Consolidated Financial Statements, included in Item 8 of this Annual Report on Form 10-K, for
further discussion of operating leases and lease guarantees, including descriptions of the terms of such commitments and
methods used to mitigate risks associated with these arrangements.
Contingencies
We are involved in various claims and litigation as well as environmental matters, which arise in the normal course of
business. Although the final outcome of these legal and environmental 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.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) which requires that certain estimates and assumptions be made that affect the amounts
and disclosures reported in those financial statements and the related accompanying notes. Actual results could differ from
these estimates and assumptions. We use our best judgment in valuing these estimates and may, as warranted, solicit external
13
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
advice. Estimates are based on current facts and circumstances, prior experience and other assumptions believed to be
reasonable. The following critical accounting policies, some of which are impacted significantly by judgments, assumptions
and estimates, affect our consolidated financial statements.
Revenue Recognition - Revenue is recognized when the risks and rewards of ownership and title to the product have
transferred to the buyer. This generally occurs upon the shipment of goods to independent dealers or, in the case of Company-
owned retail stores, upon delivery to the customer. Our wholesale payment terms generally vary from 30 to 60 days. For
retail sales, we typically receive a significant portion of the purchase price as a customer deposit upon order, with the balance
typically collected upon delivery. An estimate for returns and allowances has been provided in recorded sales. The contracts
with our licensee store owners do not provide for any royalty or license fee to be paid to us. For our logistical services
segment, line-haul freight revenue and home delivery revenue are recognized upon delivery to the destination. Warehousing
services revenue is based upon warehouse space occupied by a customer’s goods and inventory movements in and out of a
warehouse and is recognized as such services are provided.
Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”) outlines the four basic criteria for recognizing revenue
as follows: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3)
the seller’s price to the buyer is fixed or determinable, and (4) collectibility is reasonably assured. SAB 104 further asserts
that if collectibility of all or a portion of the revenue is not reasonably assured, revenue recognition should be deferred until
payment is received. During fiscal 2018, 2017 and 2016, there were no dealers for which these criteria were not met.
Allowance for Doubtful Accounts - We maintain an allowance for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments. Our accounts receivable reserves were $754 and $617 at November
24, 2018 and November 25, 2017, respectively, representing 3.8% and 3.0% of our gross accounts receivable balances at
those dates, respectively. The allowance for doubtful accounts is based on a review of specifically identified customer
accounts in addition to an overall aging analysis. We evaluate the collectibility of our receivables from our licensees and
other customers on a quarterly basis based on factors such as their financial condition, our collateral position, potential future
plans with licensees and other similar factors. Our allowance for doubtful accounts represents our best estimate of potential
losses on our accounts and notes receivable and is adjusted accordingly based on historical experience, current developments
and present economic conditions and trends. Although actual losses have not differed materially from our previous estimates,
future losses could differ from our current estimates. Unforeseen events such as a licensee or customer bankruptcy filing
could have a material impact on our results of operations.
Inventories - Inventories are stated at the lower of cost or market. Cost is determined for domestic furniture inventories using
the last-in, first-out method. The cost of imported inventories is determined on a first-in, first-out basis. We estimate an
inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking
into account future demand and market conditions. Our reserves for excess and obsolete inventory were $1,766 and $1,895
at November 24, 2018 and November 25, 2017, respectively, representing 2.7% and 3.4%, respectively, of our inventories
on a last-in, first-out basis. If actual demand or market conditions in the future are less favorable than those estimated,
additional inventory write-downs may be required.
Goodwill – Goodwill represents the excess of the purchase price over the value assigned to tangible assets and liabilities and
identifiable intangible assets of businesses acquired. The acquisition of assets and liabilities and any resulting goodwill is
allocated to the respective reporting unit; Wood, Upholstery, Retail or Logistical Services. We review goodwill at the
reporting unit level annually for impairment or more frequently if events or circumstances indicate that assets might be
impaired.
In accordance with ASC Topic 350, Intangibles – Goodwill & Other, the goodwill impairment test consists of a two-step
process, if necessary. However, we first assess qualitative factors to determine whether it is more likely than not that the fair
value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-
step goodwill impairment test described in ASC Topic 350. The more likely than not threshold is defined as having a
likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that it is not more
likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment
test is unnecessary and our goodwill is considered to be unimpaired. However, if based on our qualitative assessment we
conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed
with performing the two-step process. Based on our qualitative assessment as described above, we have concluded that our
goodwill in the amount of $16,043 is not impaired as of November 24, 2018.
14
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
The first step compares the carrying value of each reporting unit that has goodwill with the estimated fair value of the
respective reporting unit. Should the carrying value of a reporting unit be in excess of the estimated fair value of that reporting
unit, the second step is performed whereby we must calculate the implied fair value of goodwill by deducting the fair value
of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit. This second step
represents a hypothetical purchase price allocation as if we had acquired the reporting unit on that date. Our impairment
methodology uses a discounted cash flow analysis requiring certain assumptions and estimates to be made regarding future
profitability of the reporting unit and industry economic factors. While we believe such assumptions and estimates are
reasonable, the actual results may differ materially from the projected amounts.
Other Intangible Assets – Intangible assets acquired in a business combination and determined to have an indefinite useful
life are not amortized but are tested for impairment annually or between annual tests when an impairment indicator exists.
The recoverability of indefinite-lived intangible assets is assessed by comparison of the carrying value of the asset to its
estimated fair value. If we determine that the carrying value of the asset exceeds its estimated fair value, an impairment loss
equal to the excess would be recorded. At November 24, 2018, our indefinite-lived intangible assets other than goodwill
consist of trade names acquired in the acquisitions of Zenith and Lane Venture and have a carrying value of $9,338.
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. At November 24,
2018 our definite-lived intangible assets consist of customer relationships and customized technology applications acquired
in the acquisition of Zenith and customer relationships acquired in the acquisition of Lane Venture with a total carrying value
of $3,099.
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 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. 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.
Recent Accounting Pronouncements
See note 2 to our Consolidated Financial Statements regarding the impact or potential impact of recent accounting
pronouncements upon our financial position and results of operations.
15
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in the value of foreign currencies. Substantially all of our imports purchased
outside of North America are denominated in U.S. dollars. Therefore, we believe that gains or losses resulting from changes
in the value of foreign currencies relating to foreign purchases not denominated in U.S. dollars would not be material to our
results from operations in fiscal 2018.
We are exposed to market risk from changes in the cost of raw materials used in our manufacturing processes, principally
wood, woven fabric, and foam products. An increase in the rate of in home construction could result in increases in wood
and fabric costs from current levels, and the cost of foam products, which are petroleum-based, is sensitive to changes in the
price of oil.
We are also exposed to commodity price risk related to diesel fuel prices for fuel used in our logistical services segment. We
manage our exposure to that risk primarily through the application of fuel surcharges to our customers.
We have potential exposure to market risk related to conditions in the commercial real estate market. Our retail real estate
holdings of $1,655 and $1,758 at November 24, 2018 and November 25, 2017, respectively, for stores formerly operated by
licensees as well as our holdings of $19,997 and $22,817 at November 24, 2018 and November 25, 2017, respectively, for
Company-owned stores could suffer significant impairment in value if we are forced to close additional stores and sell or
lease the related properties during periods of weakness in certain markets. Additionally, if we are required to assume
responsibility for payment under the lease obligations of $2,021 and $2,743 which we have guaranteed on behalf of licensees
as of November 24, 2018 and November 25, 2017, respectively, we may not be able to secure sufficient sub-lease income in
the current market to offset the payments required under the guarantees.
Aggregate
Net Book
Number of
Locations
Square
Footage
Value
(in thousands)
Real estate occupied by Company-owned and operated stores,
included in property and equipment, net (1)
9
223,570 $
19,997
Investment real estate leased to others
2
41,021
1,655
Total Company investment in retail real estate
11
264,591 $
21,652
(1) Includes two properties encumbered under mortgages totaling $292 at November 24, 2018.
16
As used herein, unless the context otherwise requires, “Bassett,” the “Company,” “we,” “us” and “our” refer to Bassett
Furniture Industries, Incorporated and its subsidiaries. References to 2018, 2017, 2016, 2015 and 2014 mean the fiscal years
ended November 24, 2018, November 25, 2017, November 26, 2016, November 28, 2015 and November 29, 2014.
SAFE-HARBOR, FORWARD-LOOKING STATEMENTS
This discussion contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995 with respect to the financial condition, results of operations and business of Bassett Furniture Industries,
Incorporated and subsidiaries. Such forward-looking statements are identified by use of forward-looking words such as
“anticipates”, “believes”, “plans”, “estimates”, “expects”, “aimed” and “intends” or words or phrases of similar expression.
These forward-looking statements involve certain risks and uncertainties. No assurance can be given that any such matters
will be realized. Important factors, which should be read in conjunction with Item 1A “Risk Factors” in our Form 10-K, that
could cause actual results to differ materially from those contemplated by such forward-looking statements include:
● competitive conditions in the home furnishings industry
● general economic conditions, including the strength of the housing market in the United States
● overall retail traffic levels and consumer demand for home furnishings
● ability of our customers and consumers to obtain credit
● Bassett store openings and store closings and the profitability of the stores (independent licensees and Company-
owned retail stores)
● ability to implement our Company-owned retail strategies, including our initiatives to expand and improve our
digital marketing capabilities, and realize the benefits from such strategies as they are implemented
● fluctuations in the cost and availability of raw materials, fuel, labor and sourced products, including those which
may result from the imposition of new or increased duties, tariffs, retaliatory tariffs and trade limitations with
respect to foreign-sourced products
● results of marketing and advertising campaigns
● effectiveness and security of our information technology systems
● future tax legislation, or regulatory or judicial positions
● ability to efficiently manage the import supply chain to minimize business interruption
● concentration of domestic manufacturing, particularly of upholstery products, and the resulting exposure to
business interruption from accidents, weather and other events and circumstances beyond our control
● general risks associated with providing freight transportation and other logistical services due to our acquisition of
Zenith Freight Lines, LLC
17
Consolidated Balance Sheets
Bassett Furniture Industries, Incorporated and Subsidiaries
November 24, 2018 and November 25, 2017
(In thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for doubtful accounts of $754 and $617 as of
November 24, 2018 and November 25, 2017, respectively
Inventories
Other current assets
Total current assets
Property and equipment, net
Other long-term assets
Deferred income taxes, net
Goodwill and other intangible assets
Other
Total other long-term assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
Accrued compensation and benefits
Customer deposits
Dividends payable
Current portion of long-term debt
Other accrued liabilities
Total current liabilities
Long-term liabilities
Post employment benefit obligations
Notes payable
Other long-term liabilities
Total long-term liabilities
Commitments and Contingencies
Stockholders’ equity
Common stock, $5 par value; 50,000,000 shares authorized; issued and outstanding
10,527,636 at November 24, 2018 and 10,737,952 at November 25, 2017
Retained earnings
Additional paid-in-capital
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
2018
2017
$
33,468 $
22,643
53,949
23,125
19,055
64,192
9,189
148,547
19,640
54,476
8,192
159,382
104,863
103,244
3,266
28,480
6,485
38,231
8,393
17,351
5,378
31,122
$ 291,641 $ 293,748
$
27,407 $
12,994
27,157
-
292
13,969
81,819
21,760
14,670
27,107
3,759
3,405
12,655
83,356
13,173
-
6,340
19,513
13,326
329
5,277
18,932
52,638
140,009
-
(2,338)
190,309
53,690
139,378
962
(2,570)
191,460
$ 291,641 $ 293,748
The accompanying notes to consolidated financial statements are an integral part of these statements.
18
Consolidated Statements of Income
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 24, 2018, November 25, 2017, and November 26, 2016
(In thousands, except per share data)
Sales revenue:
Furniture and accessories
Logistics
Total sales revenue
2018
2017
2016
$
402,469 $
54,386
456,855
398,097 $
54,406
452,503
377,196
54,842
432,038
Cost of furniture and accessories sold
179,581
177,579
167,519
Selling, general and administrative expenses excluding new store
pre-opening costs
New store pre-opening costs
Lease exit costs
Asset impairment charges
Income from operations
Gain on sale of investments
Interest income
Interest expense
Impairment of investment in real estate
Other loss, net
Income before income taxes
Income tax expense
Net income
Net income per share
Basic income per share
Diluted income per share
Dividends per share
Regular dividends
Special dividend
260,339
2,081
301
469
245,493
2,413
-
-
235,178
1,148
-
-
14,084
27,018
28,193
-
431
(57)
-
(2,252)
4,221
230
(234)
(1,084)
(2,275)
-
120
(552)
-
(1,984)
12,206
27,876
25,777
3,988
9,620
9,948
$
8,218 $
18,256 $
15,829
$
$
$
$
0.77 $
1.71 $
1.47
0.77 $
1.70 $
1.46
0.47 $
- $
0.42 $
0.35 $
0.38
0.30
The accompanying notes to consolidated financial statements are an integral part of these statements.
19
Consolidated Statements of Comprehensive Income
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 24, 2018, November 25, 2017, and November 26, 2016
(In thousands)
Net income
Other comprehensive income (loss):
Recognize prior service cost associated with Long Term Cash Awards
(LTCA)
Amortization associated with LTCA
Income taxes related to LTCA
Actuarial adjustment to supplemental executive retirement defined
benefit plan (SERP)
Amortization associated with SERP
Income taxes related to SERP
2018
2017
2016
$
8,218 $
18,256 $
15,829
-
126
(32)
616
304
(237)
(932)
73
331
448
374
(311)
-
-
-
(165)
366
(76)
Other comprehensive income (loss), net of tax
777
(17)
125
Total comprehensive income
$
8,995 $
18,239 $
15,954
The accompanying notes to consolidated financial statements are an integral part of these statements.
20
Consolidated Statements of Cash Flows
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 24, 2018, November 25, 2017, and November 26, 2016
(In thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
2018
2017
2016
$
8,218 $
18,256 $
15,829
Depreciation and amortization
Non-cash asset impairment charges
Non-cash portion of lease exit costs
Gain on sale of investments
Net (gain) loss on sales of property and equipment
Tenant improvement allowances received from lessors
Impairment charges on retail real estate
Deferred income taxes
Other, net
Changes in operating assets and liabilities
Accounts receivable
Inventories
Other current and long-term assets
Customer deposits
Accounts payable and accrued liabilities
Net cash provided by operating activities
Investing activities:
Purchases of property and equipment
Proceeds from sales of property and equipment
Cash paid for business acquisitions, net of cash acquired
Proceeds from sales and maturities of investments
Net cash used in investing activities
Financing activities:
Cash dividends
Proceeds from exercise of stock options
Issuance of common stock
Repurchases of common stock
Taxes paid related to net share settlement of equity awards
Proceeds from equipment loan
Payments on notes and equipment loans
Net cash used in financing activities
Change in cash and cash equivalents
Cash and cash equivalents - beginning of year
13,203
469
301
-
(234)
2,462
-
4,663
1,398
1,732
(5,998)
(961)
50
3,395
28,698
13,312
-
-
(4,221)
(1,190)
1,643
1,084
(302)
1,345
(1,225)
(918)
2,477
1,926
4,197
36,384
(18,301)
2,689
(15,556)
482
(30,686)
(15,500)
4,474
(655)
5,546
(6,135)
(8,800)
27
355
(5,946)
(674)
-
(3,455)
(18,493)
(20,481)
53,949
(7,725)
310
168
(83)
(641)
-
(3,473)
(11,444)
18,805
35,144
12,249
-
-
-
(128 )
914
-
5,324
1,183
3,228
6,681
(3,929 )
1,182
(3,471 )
39,062
(21,501 )
667
-
-
(20,834 )
(6,311 )
114
182
(6,393 )
(77 )
7,384
(14,251 )
(19,352 )
(1,124 )
36,268
Cash and cash equivalents - end of year
$
33,468 $
53,949 $
35,144
The accompanying notes to consolidated financial statements are an integral part of these statements.
21
Consolidated Statements of Stockholders’ Equity
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 24, 2018, November 25, 2017, and November 26, 2016
(In thousands, except share and per share data)
Common Stock
Shares
Amount
Additional
paid-in
capital
Retained comprehensive
earnings income (loss)
Total
Accumulated
other
Balance, November 28, 2015
10,916,021 $
54,580 $
4,560 $
120,904 $
(2,678) $
177,366
Comprehensive income
Net income
Actuarial adjustment to SERP,
net of tax
Regular dividends ($0.38 per share)
Special dividend ($0.30 per share)
Issuance of common stock
Purchase and retirement of common
stock
Stock-based compensation
-
-
-
15,829
-
15,829
-
-
-
64,316
-
-
-
322
-
-
-
(25 )
-
(4,127)
(3,218)
-
(257,390)
-
(1,287)
-
(5,183 )
903
-
125
-
-
-
-
-
125
(4,127)
(3,218)
297
(6,470)
903
Balance, November 26, 2016
10,722,947
53,615
255
129,388
(2,553)
180,705
Comprehensive income
Net income
Prior service cost of LTCA, net
of tax
Actuarial adjustment to SERP,
net of tax
Regular dividends ($0.42 per share)
Special dividend ($0.35 per share)
Issuance of common stock
Purchase and retirement of common
stock
Stock-based compensation
-
-
-
-
-
39,313
-
-
-
-
-
197
-
-
-
281
-
(4,508)
(3,758)
-
(24,310)
-
(122)
-
(602 )
1,028
-
-
18,256
-
18,256
-
-
(528)
(528)
Balance, November 25, 2017
10,737,950
53,690
962
139,378
(2,570)
191,460
8,218
-
8,218
Comprehensive income
Net income
Prior service cost of LTCA, net
of tax
Actuarial adjustment to SERP,
net of tax
Reclassification of certain tax
effects
Regular dividends ($0.47 per share)
Issuance of common stock
Purchase and retirement of common
stock
Stock-based compensation
-
-
-
-
-
-
-
-
-
-
-
-
-
63,403
-
-
317
-
-
65
545
(5,041)
-
(273,717)
-
(1,369)
-
(2,160 )
1,133
(3,091)
-
511
-
-
-
-
-
511
(4,508)
(3,758)
478
(724)
1,028
94
683
(545)
-
-
-
-
94
683
-
(5,041)
382
(6,620)
1,133
Balance, November 24, 2018
10,527,636 $
52,638 $
- $
140,009 $
(2,338) $
190,309
The accompanying notes to consolidated financial statements are an integral part of these statements.
22
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
1. Description of Business
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 97 retail stores known as Bassett Home Furnishings (referred to as “BHF”). Of the 97
stores, the Company owns and operates 65 stores (“Company-owned retail stores”) with the other 32 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 27% 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 income since the date of
acquisition.
2. Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
Our fiscal year ends on the last Saturday in November, which periodically results in a 53-week year. Fiscal 2018, 2017 and
2016 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 2018, 2017 and 2016 are to Bassett's fiscal year ended November
24, 2018, November 25, 2017 and November 26, 2016, 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
23
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
reserves, valuation of income tax reserves, lease guarantees, insurance reserves and assumptions related to our post-
employment benefit obligations. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized when the risks and rewards of ownership and title to the product have transferred to the buyer. This
occurs upon the shipment of goods to independent dealers or, in the case of Company-owned retail stores, upon delivery to
the customer. We offer terms varying from 30 to 60 days for wholesale customers. For retail sales, we typically collect a
significant portion of the purchase price as a customer deposit upon order, with the balance typically collected upon delivery.
These deposits are carried on our balance sheet as a current liability until delivery is fulfilled. Estimates for returns and
allowances have been recorded as a reduction to revenue. The contracts with our licensee store owners do not provide for any
royalty or license fee to be paid to us. Revenue is reported net of any taxes collected. For our logistical services segment,
line-haul freight revenue and home delivery revenue are recognized upon the completion of delivery to the destination.
Warehousing services revenue is based upon warehouse space occupied by a customer’s goods and inventory movements in
and out of a warehouse and is recognized as such services are provided.
Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”) outlines the four basic criteria for recognizing revenue
as follows: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3)
the seller’s price to the buyer is fixed or determinable, and (4) collectability is reasonably assured. SAB 104 further asserts
that if collectability of all or a portion of the revenue is not reasonably assured, revenue recognition should be deferred until
payment is received. During fiscal 2018, 2017 and 2016, there were no sales for which these criteria were not met.
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 24, 2018 and November 25, 2017, our aggregate exposure from
receivables and guarantees related to customers consisted of the following:
Accounts receivable, net of allowances (Note 5)
Contingent obligations under lease and loan guarantees, less amounts recognized (Note 16)
Total credit risk exposure related to customers
2018
2017
$
$
19,055 $
1,995
21,050 $
19,640
2,717
22,357
At November 24, 2018 and November 25, 2017, approximately 33% and 29%, respectively, of the aggregate risk exposure,
net of reserves, shown above was attributable to five customers. In fiscal 2018, 2017 and 2016, no customer accounted for
more than 10% of total consolidated net sales. However, two customers accounted for approximately 40%, 47% and 46% of
our consolidated revenue from logistical services during 2018, 2017 and 2016, respectively.
24
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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 $1,587, $2,288, and $3,607 in fiscal
2018, 2017, and 2016, 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% and 54% of total inventory before reserves at November 24, 2018 and November 25, 2017,
respectively. We estimate inventory reserves for excess quantities and obsolete items based on specific identification and
historical write-offs, taking into account future demand and market conditions. If actual demand or market conditions in the
future are less favorable than those estimated, additional inventory write-downs may be required.
Property and Equipment
Property and equipment is comprised of all land, buildings and leasehold improvements and machinery and equipment used
in the manufacturing and warehousing of furniture, our Company-owned retail operations, our logistical services operations,
and corporate administration. This property and equipment is stated at cost less accumulated depreciation. Depreciation is
computed over the estimated useful lives of the respective assets utilizing the straight-line method. Buildings and
improvements are generally depreciated over a period of 10 to 39 years. Machinery and equipment are generally depreciated
over a period of 5 to 10 years. Leasehold improvements are amortized based on the underlying lease term, or the asset’s
estimated useful life, whichever is shorter.
Retail Real Estate
Retail real estate is comprised of owned and leased properties which have 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 and November 25, 2017 was $1,655 and $1,758, respectively, and is included in other long-term assets in our
consolidated balance sheets. This real estate is stated at cost less accumulated depreciation and is depreciated over the useful
lives of the respective assets utilizing the straight line method. Buildings and improvements are generally depreciated over a
period of 10 to 39 years. Leasehold improvements are amortized based on the underlying lease term, or the asset’s estimated
useful life, whichever is shorter. Depreciation expense was $103, $127, and $152 in fiscal 2018, 2017, and 2016, respectively,
and is included in other loss, net, in our consolidated statements of income.
The net book value of our retail real estate at November 24, 2018 consisted of one property located near Charleston, South
Carolina which is fully occupied by a tenant under a long term lease. 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.
25
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
In accordance with ASC Topic 350, Intangibles – Goodwill & Other, the goodwill impairment test consists of a two-step
process, if necessary. However, we first assess qualitative factors to determine whether it is more likely than not that the fair
value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-
step goodwill impairment test described in ASC Topic 350. The more likely than not threshold is defined as having a
likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that it is not more
likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment
test is unnecessary and our goodwill is considered to be unimpaired. However, if based on our qualitative assessment we
conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed
with performing the two-step process. Based on our qualitative assessment as described above, we have concluded that our
goodwill is not impaired as of November 24, 2018.
The first step compares the carrying value of each reporting unit that has goodwill with the estimated fair value of the
respective reporting unit. Should the carrying value of a reporting unit be in excess of the estimated fair value of that reporting
unit, the second step is performed whereby we must calculate the implied fair value of goodwill by deducting the fair value
of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit. This second step
represents a hypothetical application of the acquisition method of accounting as if we had acquired the reporting unit on that
date. Our impairment methodology uses a discounted cash flow analysis requiring certain assumptions and estimates to be
made regarding future profitability of the reporting unit and industry economic factors. While we believe such assumptions
and estimates are reasonable, the actual results may differ materially from the projected amounts.
Other Intangible Assets
Intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but
are tested for impairment annually or between annual tests when an impairment indicator exists. The recoverability of
indefinite-lived intangible assets is assessed by comparison of the carrying value of the asset to its estimated fair value. If we
determine that the carrying value of the asset exceeds its estimated fair value, an impairment loss equal to the excess would
be recorded.
Definite-lived intangible assets are amortized over their respective estimated useful lives and reviewed for impairment
whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We estimate the
useful lives of our intangible assets and ratably amortize the value over the estimated useful lives of those assets. If the
estimates of the useful lives should change, we will amortize the remaining book value over the remaining useful lives or, if
an asset is deemed to be impaired, a write-down of the value of the asset may be required at such time.
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
26
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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 2018, 2017 and 2016 includes new store pre-opening costs of $2,081, $2,413 and $1,148,
respectively. Such costs consist of expenses incurred at the new store location during the period prior to its opening and
include, among other things, facility occupancy costs such as rent and utilities and local store personnel costs related to pre-
opening activities including training. New store pre-opening costs do not include costs which are capitalized in accordance
with our property and equipment capitalization policies, such as leasehold improvements and store fixtures and equipment.
Such capitalized costs associated with new stores are depreciated commencing with the opening of the store. There are no
pre-opening costs associated with stores acquired from licensees, as such locations were already in operation at the time of
their acquisition.
Shipping and Handling Costs
Costs incurred to deliver wholesale merchandise to customers are recorded in selling, general and administrative expense and
totaled $17,511, $18,514, and $18,451 for fiscal 2018, 2017 and 2016, 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 $19,107, $18,424, and $18,094 for fiscal 2018, 2017 and 2016, 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 $20,922, $18,834, and $16,688 in fiscal
2018, 2017, and 2016, 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
There were no material non-cash investing or financing activities during fiscal 2018, 2017 or 2016.
27
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Recent Accounting Pronouncements
Recently Adopted Pronouncements
In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Inventory (Topic 330): Simplifying the
Measurement of Inventory. ASU 2015-11 requires that inventory within the scope of this Update be measured at the lower of
cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less
reasonably predictable costs of completion, disposal, and transportation. The amendments in this Update do not apply to
inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other
inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. For all entities, the
guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016.
Early adoption is permitted. Therefore the amendments in ASU 2015-11 became effective for us as of the beginning of our
2018 fiscal year. The adoption of this guidance did not have a material impact upon our financial condition or results of
operations.
In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement—Reporting
Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income. ASU 2018-02 was issued to provide narrow-scope guidance for entities that are required to apply the provisions of
Topic 220, Income Statement—Reporting Comprehensive Income, and have items of other comprehensive income for which
the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in ASU 2018-
02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects
resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from
the Act and will improve the usefulness of information reported to financial statement users. However, because the
amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance
that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected.
The amendments in ASU 2018-02 are effective for all entities for fiscal years beginning after December 15, 2018, and interim
periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any
interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued
and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance.
Because the Act has had a significant impact upon the tax effects of pension costs included in our accumulated other
comprehensive loss, we have adopted the guidance in ASU 2018-02 effective as of the beginning of the first quarter of fiscal
2018, resulting in the reclassification of $545 of tax benefits from accumulated other comprehensive loss to retained earnings
(see Note 12).
Recent Pronouncements Not Yet Adopted
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates ASC Topic 606,
Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue
Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the
Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition—
Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs—
Contracts with Customers. In summary, the core principle of Topic 606 is to recognize revenue when promised goods or
services are transferred to customers in an amount that reflects the consideration that is expected to be received for those
goods or services. Companies are allowed to select between two transition methods: (1) a full retrospective transition method
with the application of the new guidance to each prior reporting period presented, or (2) a retrospective transition method that
recognizes the cumulative effect on prior periods at the date of adoption together with additional footnote disclosures. In
addition, during 2016 the FASB has issued ASU 2016-08, ASU 2016-10 and ASU 2016-12, all of which clarify certain
implementation guidance within ASU 2014-09, and ASU 2016-11, which rescinds certain SEC guidance within the ASC
effective upon an entity’s adoption of ASU 2014-09. The amendments in ASU 2014-09 are effective for annual reporting
periods beginning after December 15, 2017, including interim periods within that reporting period, and early application is
not permitted. Therefore the amendments in ASU 2014-09 will become effective for us as of the beginning of our 2019 fiscal
year. In order to evaluate the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements,
we have conducted a comprehensive review of the significant revenue streams across our wholesale, retail and logistical
services reportable segments. The focus of this review included, among other things, the identification of the significant
contracts and other arrangements we have with our customers to identify significant performance obligations, factors affecting
the determination of transaction price, such as variable consideration, and factors affecting the classification of receipts as
28
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
revenue, such as principal versus agent considerations. Our findings from the review were then analyzed based on the five-
step model described in the new standard. We are currently finalizing our assessment of the impact that adoption will have
on our consolidated financial statements. While we have not yet made a final determination as to the impact on our financial
position or results of operations, we do anticipate incorporating additional disclosures, primarily related to disaggregation of
revenue. We are also in the process of implementing the necessary changes to our accounting policies, procedures and controls
with respect to these contracts and arrangements as required by the adoption of ASU 2014-09. We will adopt this standard as
of the beginning of our 2019 fiscal year using the modified retrospective method of adoption. We do not expect the adoption
of this standard to have a material impact on our financial position or results of operations.
In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 requires that equity
investments (except those accounted for under the equity method of accounting or those that result in consolidation of the
investee) are to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose
to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or
minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the
same issuer. Furthermore, equity investments without readily determinable fair values are to be assessed for impairment using
a quantitative approach. The amendments in ASU 2016-01 should be applied by means of a cumulative-effect adjustment to
the balance sheet as of the beginning of the fiscal year of adoption, with other amendments related specifically to equity
securities without readily determinable fair values applied prospectively. The amendments in ASU 2016-01 will become
effective for us as of the beginning of our 2019 fiscal year. The adoption of this guidance is not expected to have a material
impact upon our financial condition or results of operations.
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. The guidance in ASU 2016-02 will become effective for us as of the
beginning of our 2020 fiscal year. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our
consolidated financial statements, which we expect will have a material effect on our statement of financial position (refer to
Note 16 for information regarding our leases currently classified as operating leases under ASC Topic 840). We currently
anticipate that we will adopt the guidance of ASU 2016-02 as of the beginning of our 2020 fiscal year using the optional
transition method as provided by ASU 2018-11.
In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses how certain cash receipts and cash
payments are presented and classified in the statement of cash flows with the objective of reducing existing diversity in
practice with respect to these items. Among the types of cash flows addressed are payments for costs related to debt
prepayments or extinguishments, payments representing accreted interest on discounted debt, payments of contingent
consideration after a business combination, proceeds from insurance claims and company-owned life insurance, and
distributions from equity method investees, among others. The amendments in ASU 2016-15 are to be adopted retrospectively
and will become effective for as at the beginning of our 2019 fiscal year. Early adoption, including adoption in an interim
period, is permitted. The adoption of this guidance is not expected to have a material impact upon our presentation of cash
flows.
29
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
In January 2017, the FASB issued 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. The amendments in ASU 2017-01
shall apply prospectively and will become effective for as at the beginning of our 2019 fiscal year. The adoption of this
guidance is not expected to have a material impact upon our financial condition or results of operations.
In January 2017, the FASB issued 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.
The amendments in ASU 2017-04 will become effective for us as of the beginning of our 2021 fiscal year. Early adoption is
permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of
this guidance is not expected to have a material impact upon our financial condition or results of operations.
In May 2017, the FASB issued 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 amendments in ASU 2017-
09 will become effective for us as of the beginning of our 2019 fiscal year. Early adoption is permitted, including adoption
in any interim period. The adoption of this guidance is not expected to have a material impact upon our financial condition
or results of operations.
In August 2018, the FASB issued Accounting Standards Update No. 2018-15, 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.
Reclassifications
Certain prior year amounts in the consolidated financial statements have been reclassified to conform to current year
presentation with no effect on previously reported net income, stockholders' equity or cash flows.
30
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
3. Business Combinations
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.
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)
Inventory, net of reserve (Note 6)
Prepaid expenses and other current assets
Intangible assets
Total identifiable assets acquired
Liabilities assumed:
Accounts payable
Other accrued liabilities
Total liabilities assumed
Net identifiable assets acquired
Goodwill
Total net assets acquired
$
$
1,507
3,718
37
7,360
12,622
(357)
(852)
(1,209)
11,413
4,143
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:
Description:
Useful Life
In Years
Fair Value
Trade name
Customer relationships
Indefinite $
9
6,848
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.
31
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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 income. 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
Goodwill
Purchase price
$
$
343
312
655
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 $22,643 and $23,125 at November 24, 2018 and November 25, 2017, respectively, consisted
of certificates of deposit (CDs) with original terms of six to twelve months, bearing interest at rates ranging from 0.85% to
2.70%. At November 24, 2018, the weighted average remaining time to maturity of the CDs was approximately six months
and the weighted average yield of the CDs was approximately 2.3%. 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 24, 2018 and November 25, 2017 approximates their fair value.
32
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Fair Value Measurement
The Company accounts for items measured at fair value in accordance with ASC Topic 820, Fair Value Measurements and
Disclosures. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect
readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820
classifies these inputs into the following hierarchy:
Level 1 Inputs– Quoted prices for identical instruments in active markets.
Level 2 Inputs– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are
observable.
Level 3 Inputs– Instruments with primarily unobservable value drivers.
We believe that the carrying amounts of our current assets and current liabilities approximate fair value due to the short-term
nature of these items. The recurring estimate of the fair value of our notes payable for disclosure purposes (see Note 10)
involves Level 3 inputs. Our primary non-recurring fair value estimates typically involve business acquisitions (Note 3) which
involve a combination of Level 2 and Level 3 inputs, and asset impairments (Note 15) which utilize Level 3 inputs.
5. Accounts Receivable
Accounts receivable consists of the following:
Gross accounts receivable
Allowance for doubtful accounts
Net accounts receivable
Activity in the allowance for doubtful accounts was as follows:
November 24,
2018
November 25,
2017
$
$
19,809 $
(754)
19,055 $
20,257
(617)
19,640
2018
2017
Balance, beginning of the year
Acquired allowance on accounts receivable (Note 3)
Additions charged to expense (recoveries)
Reductions to allowance, net
Balance, end of the year
$
$
617 $
50
339
(252)
754 $
799
-
(59)
(123)
617
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.
33
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
6. Inventories
Inventories consist of the following:
Wholesale finished goods
Work in process
Raw materials and supplies
Retail merchandise
Total inventories on first-in, first-out method
LIFO adjustment
Reserve for excess and obsolete inventory
November 24,
2018
November 25,
2017
$
$
30,750 $
432
15,503
27,599
74,284
(8,326 )
(1,766 )
64,192 $
26,145
388
11,808
26,173
64,514
(8,143)
(1,895)
54,476
We source a significant amount of our wholesale product from other countries. During 2018, 2017 and 2016, purchases from
our two largest vendors located in Vietnam and China were $24,073, $21,977and $19,128 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 prduct
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 26, 2016
Additions charged to expense
Write-offs
Balance at November 25, 2017
Acquired reserve on inventory (Note 3)
Additions charged to expense
Write-offs
Balance at November 24, 2018
$
$
1,061 $
1,757
(1,200)
1,618
110
1,884
(2,112)
1,500 $
289 $
475
(487)
277
-
425
(436)
266 $
1,350
2,232
(1,687)
1,895
110
2,309
(2,548)
1,766
34
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
7. Property and Equipment
Property and equipment consist of the following:
Land
Buildings and leasehold improvements
Machinery and equipment
Property and equipment at cost
Less accumulated depreciation
Property and equipment, net
November 24,
2018
November 25,
2017
$
$
9,908 $
124,449
108,379
242,736
(137,873 )
104,863 $
10,908
117,185
102,619
230,712
(127,468)
103,244
The net book value of our property and equipment by reportable segment is a follows:
Wholesale
Retail - Company-owned stores
Logistical Services
Total property and equipment, net
November 24,
2018
November 25,
2017
$
$
26,511 $
61,380
16,972
104,863 $
25,277
58,454
19,513
103,244
Depreciation expense associated with the property and equipment shown above was included in income from operations in
our consolidated statements of income as follows:
Cost of goods sold (wholesale segment)
Selling, general and adminstrative expenses:
2018
2017
2016
$
1,264 $
989 $
748
Wholesale segment
Retail segment
Logistical services segment
Total included in selling, general and adminstrative expenses
Total depreciation expense included in income from operations $
1,666
7,060
3,747
12,473
13,737 $
1,531
7,080
3,987
12,598
13,587 $
1,154
6,880
3,614
11,648
12,396
35
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:
Intangibles subject to amortization:
Customer relationships
Technology - customized applications
November 24, 2018
Gross
Carrying
Amount
Accumulated
Amortization
Intangible
Assets, Net
$
3,550 $
834
(829 ) $
(456 )
2,721
378
Total intangible assets subject to amortization
4,384
(1,285 )
3,099
Intangibles not subject to amortization:
Trade names
Goodwill
9,338
16,043
-
-
9,338
16,043
Total goodwill and other intangible assets
$
29,765 $
(1,285 ) $
28,480
Intangibles subject to amortization:
Customer relationships
Technology - customized applications
November 25, 2017
Gross
Carrying
Amount
Accumulated
Amortization
Intangible
Assets, Net
$
3,038 $
834
(574 ) $
(337 )
2,464
497
Total intangible assets subject to amortization
3,872
(911 )
2,961
Intangibles not subject to amortization:
Trade names
Goodwill
2,490
11,900
-
-
2,490
11,900
Total goodwill and other intangible assets
$
18,262 $
(911 ) $
17,351
Changes in the carrying amounts of goodwill by reportable segment were as follows:
Wholesale Retail
Logistics Total
Balance as of November 26, 2016
Goodwill arising from store acquisition (Note 3)
$
4,839 $
206
1,820 $
106
4,929 $
-
11,588
312
Balance as of November 25, 2017
Goodwill arising from Lane Venture acquisition (Note 3)
5,045
4,143
1,926
-
4,929
-
11,900
4,143
Balance as of November 24, 2018
$
9,188 $
1,926 $
4,929 $
16,043
There were no accumulated impairment losses on goodwill as of November 24, 2018, November 25, 2017 or November 26,
2016.
36
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
The weighted average useful lives of our finite-lived intangible assets and remaining amortization periods as of November
24, 2018 are as follows:
Remaining
Amortization
Period in
Years
Useful
Life in Years
Customer relationships
Technology - customized applications
14
7
11
3
Amortization expense associated with intangible assets during fiscal 2018, 2017 and 2016 was $374, $322 and $322,
respectively and is included in selling, general and administrative expense in our consolidated statement of income. All
expense arising from the amortization of intangible assets is associated with our logistical services segment except for $51 in
fiscal 2018 associated with our wholesale segment arising from Lane Venture (Note 3). Estimated future amortization expense
for intangible assets that exist at November 24, 2018 is as follows:
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Thereafter
$
379
379
379
279
259
1,424
Total
$
3,099
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 income.
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 income.
37
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
10. Notes Payable and Bank Credit Facility
Our notes payable consist of the following:
November 24,
2018
Real estate notes payable
Less current portion
$
Total long-term notes payable
$
292
(292)
-
November 25, 2017
Principal
Balance
Unamortized
Discount
Net
Carrying
Amount
Zenith acquisition note payable
Real estate notes payable
$
3,000 $
747
Total notes payable
Less current portion
3,747
(3,418)
(13) $
-
(13)
13
2,987
747
3,734
(3,405)
Total long-term notes payable
$
329 $
- $
329
All remaining principal outstanding at November 24, 2018 will mature during fiscal 2019.
Zenith Acquisition Note Payable
The final installment of the Zenith acquisition note was paid in full on February 2, 2018. Interest expense resulting from the
amortization of the discount was $13, $95 and $204 for fiscal 2018, 2017 and 2016, respectively.
Real Estate Notes Payable
Two of our retail real estate properties have been financed through commercial mortgages with interest rates of 6.73%. These
mortgages are collateralized by the respective properties with net book values totaling approximately $5,599 and $5,727 at
November 24, 2018 and November 25, 2017, respectively. The total balance outstanding under these mortgages was $293
and $747 at November 24, 2018 and November 25, 2017, respectively. The current portion of these mortgages due within
one year was $293 and $418 as of November 24, 2018 and November 25, 2017, respectively.
Fair Value
We believe that the carrying amount of our notes payable approximates fair value at both November 24, 2018 and November
25, 2017. In estimating the fair value, we utilize current market interest rates for similar instruments. The inputs into these
fair value calculations reflect our market assumptions and are not observable. Consequently, the inputs are considered to be
Level 3 as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosures. See Note 4.
Bank Credit Facility
Effective November 15, 2018, we amended the credit facility with our bank, increasing line of credit of up to $25,000. This
amended credit facility, which matures in December of 2021, is unsecured and contains covenants requiring us to maintain
certain key financial ratios. We are in compliance with all covenants under the facility and expect to remain in compliance
for the foreseeable future.
38
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
We have $2,798 outstanding under standby letters of credit against our line, leaving availability under our credit line of
$22,202. In addition, we have outstanding standby letters of credit with another bank totaling $381.
Total interest paid during fiscal 2018, 2017 and 2016 was $88, $139 and $353, respectively.
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 $102 and $55 for fiscal 2018 and 2017, respectively. Our liability for Company contributions and participant
deferrals at November 24, 2018 and November 25, 2017 was $749 and $55, 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 2018 and 2017, we invested $900 and $431 in life insurance policies covering all participants in the Plan. At
November 24, 2018, 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 $2,813 at November
39
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
24, 2018 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.
Aggregated summarized information for the Supplemental Plan and the LTC Awards, measured as of the end of each year
presented, is as follows:
Change in Benefit Obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Projected benefit obligation at end of year
Accumulated Benefit Obligation
Discount rate used to value the ending benefit obligations:
Amounts recognized in the consolidated balance sheet:
Current liabilities
Noncurrent liabilities
Total amounts recognized
Amounts recognized in accumulated other comprehensive income:
Transition obligation
Prior service cost
Actuarial loss
Net amount recognized
Total recognized in net periodic benefit cost and accumulated other
comprehensive income:
2018
2017
12,322 $
196
418
(616)
(668)
11,652 $
11,863
1,117
449
(447)
(660)
12,322
11,559 $
11,531
4.00%
3.50%
798 $
10,854
11,652 $
- $
806
2,408
3,214 $
778
11,544
12,322
42
858
3,286
4,186
(2) $
1,119
$
$
$
$
$
$
$
$
40
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
2018
2017
2016
Components of Net Periodic Pension Cost:
Service cost
Interest cost
Amortization of transition obligation
Amortization of prior service cost
Amortization of other loss
$
196 $
418
42
126
262
146 $
423
42
-
323
Net periodic pension cost
$
1,044 $
934 $
105
374
42
-
195
716
Assumptions used to determine net periodic pension cost:
Discount rate
Increase in future compensation levels
Estimated Future Benefit Payments (with mortality):
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024 through 2028
3.50%
3.00%
3.75%
3.00%
3.75%
3.00%
798
748
698
1,003
948
3,935
Of the $3,214 recognized in accumulated other comprehensive income at November 24, 2018, amounts expected to be
recognized as components of net periodic pension cost during fiscal 2019 are as follows:
Prior service cost
Other loss
$
Total expected to be amortized to net periodic pension cost in 2019 $
126
184
310
The components of net periodic pension cost other than the service cost component are included in other loss, net in our
consolidated statements of income.
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 $216, $216, and $228 in fiscal 2018, 2017, and 2016, respectively, associated with the plan. Our
liability under this plan was $1,837 and $1,916 as of November 24, 2018 and November 25, 2017, 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
$1,128, $1,068 and $865 during fiscal 2018, 2017 and 2016, respectively. The increase in contribution expense for fiscal
2018 over fiscal 2017 was largely due to a larger contribution base due to general compensation level increases. The increase
in contribution expense for fiscal 2017 over fiscal 2016 was largely due to a larger contribution base due to increased incentive
compensation.
41
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
12. Accumulated Other Comprehensive Loss
The activity in accumulated other comprehensive loss for the fiscal years ended November 24, 2018 and November 25, 2017,
which is comprised solely of post-retirement benefit costs related to our SERP and LTC Awards, is as follows:
Balance at November 26, 2016
Recognition of prior service cost
Actuarial gains
Net pension amortization reclassified from accumulated other comprehensive loss
Tax effects
Balance at November 25, 2017
Reclassification of certain tax effects to retained earnings (1)
Actuarial gains
Net pension amortization reclassified from accumulated other comprehensive loss
Tax effects
Balance at November 24, 2018
$
$
(2,553)
(932)
448
447
20
(2,570)
(545)
616
430
(269)
(2,338)
(1) See Note 2 regarding the adoption of ASU 2018-02 which resulted in the transfer of certain tax
effects carried over from prior years to retained earnings as of the beginning of fiscal 2018.
13. Capital Stock and Stock Compensation
We account for our stock-based employee and director compensation plans in accordance with ASC 718, Compensation –
Stock Compensation. ASC 718 requires recognition of the cost of employee services received in exchange for an award of
equity instruments in the financial statements over the period the employee is required to perform the services in exchange
for the award (presumptively the vesting period) which we recognize on a straight-line basis. Compensation expense related
to restricted stock and stock options included in selling, general and administrative expenses in our consolidated statements
of income for fiscal 2018, 2017 and 2016 was as follows:
Stock-based compensation expense $
1,133 $
1,028 $
903
2018
2017
2016
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.
42
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Stock Options
There were no new grants of options made in 2018, 2017 or 2016.
Changes in the outstanding options under our plans during the year ended November 24, 2018 were as follows:
Weighted
Average
Exercise Price
Per Share
Number of
Shares
Outstanding at November 25, 2017
Granted
Exercised
Forfeited/Expired
Outstanding at November 24, 2018
Exercisable at November 24, 2018
11,750 $
-
(3,400)
-
8,350
8,350 $
8.02
-
8.02
-
8.02
8.02
All remaining options outstanding at November 24, 2018 are exercisable at $8.02 per share with a remaining contractual life
of 2.6 years and an aggregate intrinsic value of $102. There were no non-vested options outstanding under our plans during
the year ended November 24, 2018.
Additional information regarding activity in our stock options during fiscal 2018, 2017 and 2016 is as follows:
2018
2017
2016
Total intrinsic value of options exercised
Total cash received from the exercise of options
Excess tax benefits recognized in income tax expense upon the exercise of options
$
75 $
27
16
564 $
310
188
124
114
41
Restricted Shares
Changes in the outstanding non-vested restricted shares during the year ended November 24, 2018 were as follows:
Non-vested restricted shares outstanding at November 25, 2017
Granted
Vested
Forfeited
Non-vested restricted shares outstanding at November 24, 2018
Number of
Shares
Weighted
Average Grant
Date Fair
Value Per Share
99,138 $
45,036
(63,138)
-
81,036 $
23.87
34.41
20.92
-
32.03
Restricted share awards granted in fiscal 2018 included the grant of 36,000 shares on January 11, 2018 which were subject
to a performance condition as well as a service condition. The performance condition was based on a measure of the
Company’s operating cash flow for 2018 and has now been satisfied. The awards will remain subject to an additional two-
year service requirement and will vest on the third anniversary of the grant. The remaining grants for 2018 consisted of 6,036
restricted shares granted to our non-employee directors on March 8, 2018 which will vest on the first anniversary of the grant,
and 3,000 restricted shares granted to an employee on October 2, 2018 which will vest on the third anniversary of the grant.
During fiscal 2018, 63,138 restricted shares were vested and released, of which 56,600 shares had been granted to employees
and 6,538 shares to directors. Of the shares released to employees, 19,810 shares were withheld by the Company to cover
withholding taxes of $674. During fiscal 2017 and 2016, 21,210 shares and 2,940 shares, respectively, were withheld to cover
43
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
withholding taxes of $641 and $77, respectively, arising from the vesting of restricted shares. During fiscal 2018, 2017 and
2016, excess tax benefits of $207, $366 and $46, respectively, were recognized within income tax expense upon the release
of vested shares.
Additional information regarding our outstanding non-vested restricted shares at November 24, 2018 is as follows:
Grant
Date
Restricted
Shares
Outstanding
Share Value
at Grant Date
Per Share
Remaining
Restriction
Period
(Years)
January 10, 2017
January 11, 2018
March 8, 2018
October 2, 2018
36,000 $
36,000
6,036
3,000
81,036
29.05
35.75
33.07
20.97
1.1
2.1
0.3
2.9
Unrecognized compensation cost related to these non-vested restricted shares at November 24, 2018 is $1,627, substantially
all of which is expected to be recognized over approximately a two year period.
Employee Stock Purchase Plan
In 2000, we adopted and implemented an Employee Stock Purchase Plan (“2000 ESPP”) that allows eligible employees to
purchase a limited number of shares of our stock at 85% of market value. Under the 2000 ESPP we sold 8,502 shares to
employees in fiscal 2016, which resulted in an immaterial amount of compensation expense. The 2000 ESPP reached the
cumulative number of shares authorized for purchase under the plan during the third quarter of fiscal 2016.
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 14,967
and 6,275 shares to employees during fiscal 2018 and 2017, respectively, which resulted in an immaterial amount of
compensation expense. There are 228,758 shares remaining available for sale under the 2017 ESPP at November 24, 2018.
14. Income Taxes
The components of the income tax provision are as follows:
Current:
Federal
State
Deferred:
Federal
State
Total
2018
2017
2016
$
(1,137 ) $
462
7,887 $
2,035
3,728
896
4,747
(84 )
3,988 $
(200)
(102)
9,620 $
4,559
765
9,948
$
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 take effect 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, will apply 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
44
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
deferred tax assets. We believe that our accounting for the income tax effects of the Act is 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:
Statutory federal income tax rate
Revaluation of deferred tax assets resulting from new enacted rates
State income tax, net of federal benefit
Excess tax benefits from stock-based compensation
Other
Effective income tax rate
22.2%
10.9
4.6
(1.5)
(3.5)
32.7%
35.0%
-
3.9
(1.8)
(2.6)
34.5%
35.0%
-
4.2
(0.3)
(0.3)
38.6%
2018
2017
2016
Excess tax benefits in the amount of $223, $554 and $87 were recognized as a component of income tax expense during fiscal
2018, 2017 and 2016, respectively, resulting from the exercise of stock options and the release of restricted shares.
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:
Deferred income tax assets:
Trade accounts receivable
Inventories
Notes receivable
Post employment benefit obligations
State net operating loss carryforwards
Unrealized loss from affiliates
Net deferred rents
Other
Gross deferred income tax assets
Valuation allowance
Total deferred income tax assets
Deferred income tax liabilities:
Property and equipment
Intangible assets
Prepaid expenses and other
November 24,
2018
November 25,
2017
$
192 $
1,755
109
3,619
218
15
3,199
1,290
10,397
-
10,397
5,353
1,060
718
239
2,606
550
5,555
583
69
3,906
1,878
15,386
-
15,386
5,426
1,185
382
Total deferred income tax liabilities
7,131
6,993
Net deferred income tax assets
$
3,266 $
8,393
We have state net operating loss carryforwards available to offset future taxable state income of $4,647, 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 2018, 2017 and 2016 were $1,431, $7,516, and $9,949, 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 24, 2018 and November 25, 2017 were not material.
45
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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 2015 through 2018 for all of our major tax jurisdictions.
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.
Income from Antitrust Litigation Settlement
Cost of furniture and accessories sold for the year ended November 26, 2016 includes the benefit of $1,428 of income we
received from the settlement of class action litigation. This benefit is included in our wholesale segment. We were a member
of the certified class of consumers that were plaintiffs in the Polyurethane Foam Antitrust Litigation against various producers
of flexible polyurethane foam. The litigation alleged a price-fixing conspiracy in the flexible polyurethane foam industry that
caused indirect purchasers to pay higher prices for products that contain flexible polyurethane foam. In 2015 a settlement was
reached with several of the producers, though other producers named in the suit filed appeals blocking distribution of the
settlement. In June of 2016 the final producer appeal was dismissed and we received $1,428 in cash representing our share
of the settlement, which is included in cash provided by operating activities in our statement of cash flows for the year ended
November 26, 2016.
Asset Impairment Charges and Lease Exit Costs
During fiscal 2018 income from operations included $469 of non-cash asset impairment charges recognized on the assets of
an underperforming retail location in Torrance, California, 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 at the end of fiscal 2018.
There were no asset impairment charges or lease exit costs incurred against income from operations during fiscal 2017 or
2016. See Note 2 regarding non-operating impairment charges incurred in connection with our investments in retail real
estate.
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
46
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
schedule shows future minimum lease payments under non-cancellable operating leases with terms in excess of one year as
of November 24, 2018:
Warehousing
&
Distribution
Centers
Retail
Stores
Transportation
Equipment
All Other Total
$
23,631 $
23,073
20,597
18,166
15,964
50,117
$ 151,548 $
4,999 $
4,127
3,274
3,097
1,785
437
17,719 $
3,398 $
3,193
2,176
1,444
637
558
11,406 $
1,693 $
1,637
970
487
-
-
33,721
32,030
27,017
23,194
18,386
51,112
4,787 $ 185,460
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Thereafter
Total future minimum lease payments
Lease expense was $38,970, $34,372 and $31,867 for 2018, 2017, and 2016, respectively. Lease expense for leases with
escalating minimum payments over the lease term is recognized on a straight-line basis. Our liability for accrued straight-line
rent expense was $5,844 and $4,821 at November 24, 2018 and November 25, 2017, respectively, and is included in other
accrued liabilities in our consolidated balance sheets. 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 $6,716 and $5,264
at November 24, 2018 and November 25, 2017, respectively, with the non-current portion of $5,715 and $4,504, 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 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Thereafter
$
Total minimum future rental income
$
1,765
1,632
781
422
105
-
4,705
Real estate rental net loss (rental income less lease costs, depreciation, insurance, and taxes), related to licensee stores and
other investment real estate, was $23, $48 and $59 in 2018, 2017 and 2016, respectively, and is reflected in other loss, net in
the accompanying consolidated statements of income.
Guarantees
As part of the strategy for our store program, we have guaranteed certain lease obligations of licensee operators. Lease
guarantees range from one to three years. We were contingently liable under licensee lease obligation guarantees in the
amount of $2,021 and $2,743 at November 24, 2018 and November 25, 2017, 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 24, 2018 and
November 25, 2017, were not material.
47
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
17. Contingencies
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.
18. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
Numerator:
Net income
Denominator:
Denominator for basic income per share - weighted average shares
Effect of dilutive securities
Denominator for diluted income per share — weighted average
2018
2017
2016
$
8,218 $
18,256 $
15,829
10,651,351 10,649,225 10,732,217
130,204
82,850
40,424
shares and assumed conversions
10,691,775 10,732,075 10,862,421
Basic income per share:
Net income per share — basic
Diluted income per share:
Net income per share — diluted
$
0.77 $
1.71 $
1.47
$
0.77 $
1.70 $
1.46
For fiscal 2018, 2017 and 2016, the following potentially dilutive shares were excluded from the computations as there effect
was anti-dilutive:
Unvested restricted shares
45,036
-
7,814
2018
2017
2016
19. Segment Information
We have strategically aligned our business into three reportable segments as defined in ASC 280, Segment Reporting, and as
described below:
● Wholesale. The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing,
sale and distribution of furniture products to a network of Bassett stores (Company-owned and licensee-owned stores
retail stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery
operations as well as all corporate selling, general and administrative expenses, including those corporate expenses
related to both Company- and licensee-owned stores. Our wholesale segment also includes our holdings of short-
term investments and retail real estate previously leased as licensee stores. The earnings and costs associated with
these assets are included in other loss, net, in our consolidated statements of income.
● Retail – Company-owned 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 income. Zenith’s operating costs are included in selling, general and administrative expenses and total $81,468,
$80,068 and $79,725 for fiscal 2018, 2017 and 2016, respectively.
48
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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 presented 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.
The following table presents segment information for each of the last three fiscal years:
Net Sales
Wholesale
Retail
Logistical services
Inter-company eliminations:
Furniture and accessories
Logistical services
Consolidated
Income (loss) from Operations
Wholesale
Retail
Logistical services
Inter-company elimination
Lease exit costs
Asset impairment charges
Consolidated income from operations
Depreciation and Amortization
Wholesale
Retail
Logistical services
Consolidated
Capital Expenditures
Wholesale
Retail
Logistical services
Consolidated
Identifiable Assets
Wholesale
Retail
Logistical services
Consolidated
2018
2017
2016
$
255,958 $
268,883
82,866
249,193 $
268,264
83,030
240,346
254,667
83,236
(122,372)
(28,480)
456,855 $
(119,360)
(28,624)
452,503 $
(117,817)
(28,394)
432,038
12,274 $
(312)
1,398
1,494
(301)
(469)
14,084 $
19,121 $
3,490
2,962
1,445
-
-
27,018 $
18,672
4,333
3,511
1,677
-
-
28,193
3,038 $
6,096
4,069
13,203 $
2,648 $
6,355
4,309
13,312 $
2,053
6,260
3,936
12,249
4,194 $
12,769
1,338
18,301 $
4,875 $
8,108
2,517
15,500 $
7,232
5,932
8,337
21,501
144,209 $
96,241
51,191
291,641 $
152,181 $
90,186
51,381
293,748 $
139,477
90,091
48,699
278,267
$
$
$
$
$
$
$
$
$
49
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
A breakdown of wholesale sales by product category for each of the last three fiscal years is provided below:
Wood
Upholstery
2018
2017
2016
35%
65%
100%
35%
65%
100%
37%
63%
100%
20. Quarterly Results of Operations
Sales revenue:
Furniture and accessories
Logistics
Total sales revenue
Cost of furniture and accessories sold
Income from operations
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Sales revenue:
Furniture and accessories
Logistics
Total sales revenue
Cost of furniture and accessories sold
Income from operations
Net income
Basic earnings per share
Diluted earnings per share
2018
First
Quarter (1)
Second
Quarter (2)
Third
Quarter
Fourth
Quarter (3)
$
$
96,123 $
14,149
110,272
43,269
2,050
(913)
(0.09)
(0.09)
102,675 $
14,305
116,980
45,660
5,663
4,289
0.40
0.40
2017
99,807 $
13,149
112,956
44,821
4,324
2,945
0.28
0.28
103,864
12,783
116,647
45,831
2,047
1,897
0.18
0.18
First
Quarter
Second
Quarter (4)
Third
Quarter (5)
Fourth
Quarter (6)
93,698 $
12,194
105,892
41,898
4,664
2,861
0.27
0.27
100,294 $
13,831
114,125
44,981
7,600
5,842
0.55
0.54
100,152 $
14,109
114,261
45,320
7,260
4,579
0.43
0.43
103,953
14,272
118,225
45,380
7,494
4,974
0.46
0.46
All quarters shown above for fiscal 2018 and 2017 consist of 13 week fiscal periods.
(1) Net income 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).
(2) Income from operations includes a gain of $165 from the sale of our Spring, Texas retail store Isee 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).
(3) 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).
(4) Net income includes a gain of $2,026 from the sale of an investment, net of related income tax effects of approximately $1,241
(see Note 9), and a loss of $672, net of related income tax effects of approximately $412, resulting from the impairment of retail
real estate (see Note 2).
(5) Income from operations included a gain of $1,220 from the sale of our Las Vegas, Nevada retail store (see Note 15).
(6) Net income includes a gain of $591 from the disposition of our interest in IMC, net of related income tax effects of approximately
$363 (see Note 9).
50
SELECTED FINANCIAL DATA
The selected financial data set forth below for the fiscal years indicated were derived from our audited consolidated financial
statements. The information should be read in conjunction with our consolidated financial statements (including the notes
thereto) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere
in, or incorporated by reference into, this report.
(In thousands)
2018
2017
2016
2015
2014
Net sales
Operating income
Other income (loss), net
Income before income taxes
Income tax expense
Net income
Diluted earnings per share
Cash dividends declared
Cash dividends per share
Total assets
Long-term debt
Current ratio
Book value per share
$ 456,855 (1) $
14,084 (2) $
$
$
(1,878)
$
27,876
12,206
$
$
9,620
3,988 (5) $
$
18,256
$
8,218
$
1.70
$
0.77
$
8,266
$
5,041
$
0.77
$
$
0.47
293,748
$
$ 291,641
$
$
329
-
1.91 to 1
1.82 to 1
17.83
$
18.08
$
430,927 (1) $ 340,738
432,038 (1) $
452,503 (1) $
15,131
25,989 (2) $
28,193 (2) $
27,018 (2) $
(524)
5,879 (4) $
(2,416)(4) $
858 (3) $
14,607
$
31,868
$
25,777
$
5,308
$
11,435
$
9,948
$
9,299
$
20,433
$
15,829
$
0.87
$
1.88
$
1.46
$
5,085
$
5,868
$
7,345
$
$
0.54
0.48
$
0.68
$
$ 240,746
282,543
$
278,267
$
$
$
$
1,902
8,500
3,821
1.95 to 1
1.84 to 1
1.83 to 1
14.95
$
16.25
$
16.85
$
(1) Fiscal 2018, 2017, 2016 and 2015 included logistical services revenue from Zenith in the amount of $54,386,
$54,406, $54,842 and $43,522, respectively, since the acquisition of Zenith on February 2, 2015.
(2) Fiscal 2018 operating income includes restructuring and asset impairment charges and lease exit costs totaling $770.
Fiscal 2017 operating income includes a gain of $1,220 resulting from the sale of our retail store in Las Vegas,
Nevada. Fiscal 2016 operating income includes the benefit of a $1,428 award received from the settlement of class
action litigation. Fiscal 2015 included restructuring and asset impairment charges and lease exit costs totaling $974.
See Note 15 to the Consolidated Financial Statements for additional information related to each of these items.
(3) Fiscal 2017 includes $4,221 of gains resulting from the sale of investments (see Note 9 to the Consolidated Financial
Statements), an impairment charge of $1,084 retail real estate held for investment (see Note 2 to the Consolidated
Financial Statements).
(4) Fiscal 2015 includes a remeasurement gain of $7,212 arising from our acquisition of Zenith. Fiscal 2015 and 2014
include $240 and $1,156 of income received from the Continued Dumping and Subsidy Offset Act (“CDSOA”),
respectively.
(5) Fiscal 2018 income tax expense includes a charge of $1,331 resulting from the remeasurement of our deferred tax
assets following the reduction of federal income tax rates with the enactment of the Tax Cuts and Jobs Act (see Note
14 to the Consolidated Financial Statements).
51
Bassett Furniture Industries, Incorporated
Schedule II
Analysis of Valuation and Qualifying Accounts
For the Years Ended November 24, 2018, November 25, 2017 and November 26, 2016
(amounts in thousands)
Additions
Charged
to Cost
and
Expenses
Balance
Beginning
of Period
Deductions
(1)
Other
Balance
End of
Period
For the Year Ended November 26, 2016:
Reserve deducted from assets to which it applies
Allowance for doubtful accounts
$
1,175 $
(390) $
14 $
-
$
799
Notes receivable valuation reserves
$
4,646 $
- $
(3,192) $
-
$
1,454
For the Year Ended November 25, 2017:
Reserve deducted from assets to which it applies
Allowance for doubtful accounts
$
799 $
(59) $
(123) $
-
$
617
Notes receivable valuation reserves
$
1,454 $
- $
- $
-
$
1,454
For the Year Ended November 24, 2018:
Reserve deducted from assets to which it applies
Allowance for doubtful accounts
$
617 $
339 $
(252) $
50 (2) $
754
Notes receivable valuation reserves
$
1,454 $
- $
(1,077) $
-
$
377
(1) Deductions are for the purpose for which the reserve was created.
(2) Represents reserves of acquired business at date of acquisition.
52
STOCKHOLDER RETURN PERFORMANCE GRAPH
Presented below is a line graph comparing the yearly percentage change in the cumulative total stockholder return on the
Company’s Common Stock against the cumulative total return of the Standard & Poor’s 500 Index and the Company’s peer
group. The Company’s peer group consists of the following:
American Woodmark, Inc.
Culp, Inc.
The Dixie Group, Inc.
Ethan Allen Interiors, Inc.
Flexsteel Industries, Inc. Haverty
Furniture Companies, Inc.
Hooker Furniture Corporation
Kimball International, Inc.
Kirkland’s, Inc.
La-Z-Boy Incorporated
Nautilus, Inc.
Tile Shop Holdings, Inc.
This graph assumes that $100 was invested on November 30, 2013 in the Company’s Common Stock, the S&P Index and the
peer group and that any dividends paid were invested.
Assumes $100 Invested on November 30, 2013
Assumes Dividends Reinvested
53
Management’s Report of Internal Control over Financial Reporting
As of the end of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal
financial officer have evaluated the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”).
Disclosure Controls, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
are procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed
under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed with the
objective of ensuring that such information is accumulated and communicated to our management, including the CEO and
CFO, as appropriate to allow timely decisions regarding required disclosure. Our management, including the CEO and CFO,
does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can
occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions.
Based upon their controls evaluation, our CEO and CFO have concluded that our Disclosure Controls are effective at a
reasonable assurance level.
We are responsible for establishing and maintaining adequate internal control over financial reporting in accordance with
Exchange Act Rule 13a-15. With the participation of our CEO and CFO, our management conducted an evaluation of the
effectiveness of our internal control over financial reporting as of November 24, 2018 based on the criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective
as of November 24, 2018, based on those criteria. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected.
Ernst & Young LLP, the Company’s independent registered public accounting firm, has issued an attestation report on the
effectiveness of the Company’s internal control over financial reporting.
Bassett Furniture Industries, Inc.
Bassett, Virginia
January 17, 2019
54
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Bassett Furniture Industries, Incorporated and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Bassett Furniture Industries, Incorporated and Subsidiaries
(the Company) as of November 24, 2018 and November 25, 2017, and the related consolidated statements of income,
comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended November 24,
2018, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2). (collectively referred to as
the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at November 24, 2018 and November 25, 2017, and the results of its
operations and its cash flows for each of the three years in the period ended November 24, 2018, in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of November 24, 2018, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated January 17, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2002.
Richmond, Virginia
January 17, 2019
55
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Bassett Furniture Industries, Incorporated and Subsidiaries
Opinion on Internal Control over Financial Reporting
We have audited Bassett Furniture Industries, Incorporated and Subsidiaries’ internal control over financial reporting as of
November 24, 2018, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Bassett
Furniture Industries, Incorporated and Subsidiaries (the Company) maintained, in all material respects, effective internal
control over financial reporting as of November 24, 2018, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of November 24, 2018 and November 25, 2017, and the related
consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in
the period ended November 24, 2018, and the related notes and schedule for each of the three years in the period ended
November 24, 2018 and our report dated January 17, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Richmond, Virginia
January 17, 2019
56
T H I S P A G E I N T E N T I O N A L L Y L E F T B L A N K
INVESTOR INFORMATION
Internet Site
Corporate Information and Investor Inquiries
Our site on the Internet has been updated recently and is
Our annual report and proxy statement together
filled with information about Bassett Furniture, including
contain much of the information presented in the
this annual report, detailed financial information and
Form 10-K report filed with the Securities and Exchange
updates, information about our home furnishings
Commission. Individuals who wish to receive the
products, and a dealer locator of Bassett stores and other
Form 10-K or other corporate literature should visit our
stores that feature Bassett products. Visit us at
website at bassettfurniture.com or contact Investor Relations,
bassettfurniture.com.
at 276.629.6000.
Forward Looking Statements
Transfer Agent - Stockholder Inquiries
This Annual Report contains forward-looking statements
Stockholders with inquiries relating to stockholder
as defined in the Private Securities Litigation and Reform
records, stock transfers, change of ownership, change of
Act of 1995 and within the meaning of Sections 27A of
address or dividend payments should write to:
the Securities Exchange Act of 1933, as amended, and
American Stock Transfer & Trust Company, LLC
Section 21E of the Securities Exchange Act of 1934, as
Operations Center https://www.google.com/
amended. When used in this Annual Report the words
6201 15th Avenue
“hope,” “believe,” “expect,” “plan” or “planned,” “intend,”
Brooklyn, NY 11219
“anticipate,” “potential” and similar expressions are
Toll free: (800) 937-5449
intended to identify forward-looking statements. Readers
Local & International: (718) 921-8124
are cautioned against placing undue reliance on these
Email: info@astfinancial.com
statements. Such statements, including but not limited to
Web site: www.astfinancial.com
those regarding increases in sales, growth in the number
of Bassett stores, improving gross margins, growth in
Annual Meeting
earnings per share, and the operating performance of licensed
The Bassett Annual Meeting of Shareholders will be held
Bassett stores are based upon management’s beliefs, as well
Wednesday, March 6, 2019 at 10 a.m. EST at the
as assumptions made by and information currently available to
Company’s headquarters in Bassett, VA.
management, and involve various risks and uncertainties, certain
of which are beyond the Company’s control. The Company’s
Market and Dividend Information
actual results could differ materially from those expressed in any
Bassett’s common stock trades on the NASDAQ national
forward-looking statement made by or on behalf of the Company.
market system under the symbol “BSET.” We had 3,200
beneficial stockholders as of January 10, 2019. The range
If the Company does not attain its goals, its business and
of per share amounts for the high and low market
results of operations might be adversely affected. For
prices and dividends declared for the last two fiscal years
a discussion of factors that may impair the Company’s
are listed below:
ability to achieve its goals, please see the cautionary
statements in the Management’s Discussion and Analysis
section of this Annual Report.
MARKET PRICES OF
COMMON STOCK
DIVIDENDS
DECLARED
Quarter
2018
2017
2018
2017
HIGH
LOW
HIGH
LOW
First
$40.30
$31.30
$31.65
$25.75
Second
34.35
27.48
31.60
24.95
Third
30.05
22.45
39.85
29.50
Fourth
23.40
18.86
41.30
34.60
$0.11
0.11
0.125
0.125
$0.10
$0.10
$0.1 1
$0.46
In September, Bassett opened it newest generation store concept in Frisco, Texas.
The Design Studio gets a refresh with a
large TV design presentation area and
oversized wood finish samples.
Touch screen kiosks throughout the store
has boosted customer engagement by
allowing them to interactively design custom
furniture and explore all Bassett products.
The center room shows custom upholstery, custom dining and accessories
together to allow the customer to imagine designing a great room in their
home. The Discovery Table boosted engagement with our popular
Custom Dining program in new stores.
BOARD OF DIRECTORS
ROBERT H. SPILMAN, JR.
Chairman of the Board and Chief Executive Officer
Bassett Furniture Industries, Inc.
JOHN R. BELK
Former President and Chief Operating Officer
Belk, Inc.
Private Investor
KRISTINA K. CASHMAN
Chief Financial Officer
Upward Projects, LLC
PAUL FULTON
Chairman Emeritus
Bassett Furniture Industries, Inc.
GEORGE W. HENDERSON, III
Former Chairman and Chief Executive Officer
Burlington Industries, Inc.
OFFICERS
J. WALTER MCDOWELL
Former Chief Executive Officer
Carolinas/Virginia Banking
Wachovia Corporation
WILLIAM C. WAMPLER, JR.
Managing Member, WSWRS, LLC
Former Member, Senate of Virginia
WILLIAM C. WARDEN, JR.
Lead Independent Director of Bassett Furniture Industries, Inc.
Former Executive Vice President
Lowe’s Companies, Inc.
VIRGINIA W. HAMLET
Founder and Owner
Hamlet Vineyards, LLC
ROBERT H. SPILMAN, JR.
Chairman of the Board and Chief Executive Officer
NICHOLAS C. GEE
Vice President, Corporate Retail Sales
DAVID C. BAKER
Senior Vice President, Corporate Retail
JAY R. HERVEY
Vice President, Secretary, General Counsel
JOHN E. BASSETT, III
Senior Vice President, Wood
MATTHEW S. JOHNSON
Vice President, Sales
BRUCE R. COHENOUR
Senior Vice President, Sales and Merchandising
KARA KELCHNER-STRONG
Vice President, Strategic Transformation Officer
J. MICHAEL DANIEL
Senior Vice President and Chief Financial Officer
MIKE R. KREIDLER
Vice President, Upholstery Operations
JACK L. HAWN, JR.
Senior Vice President, Bassett
President, Zenith
MARK S. JORDAN
Senior Vice President, Upholstery
EDWIN C. AVERY, JR.
Vice President, Upholstery Product Development
KEVIN D. BLANCHARD
Vice President, Chief Information Officer
ZACHARY H. BRYANT
President, Lane Venture
KENA A. COHENOUR
Vice President, Upholstery Merchandising
JAY S. MOORE
Vice President, Digital Marketing
PETER D. MORRISON
Vice President, Chief Creative Officer
LOUIS C. MOSSOTTI, JR.
Vice President, Corporate Retail – Southeast Region
J. CARTER UNDERWOOD
Vice President, Wood Operations
EDWARD H. WHITE
Vice President, Human Resources
ANN M. ZACCARIA
Vice President, Real Estate and New Store Development
B A S S E T T F U R N I T U R E . C O M • B A S S E T T , V I R G I N I A • N A S D A Q : B S E T
ANN UAL R EP OR T 2018